Have you every thought about things that you know now and wished you had known when you were 18? As time passes, lessons about personal relationships, life in general , work or money are learnt : these would have been a valuable tool for our future, had they been available at that young age. Unfortunately everyone has had to experience negative situations and learn and grow from them into the person they have become now.
Not long ago, my brother and I had a serious talk about finances. Talking with loved ones about how to handle money is difficult but essential.
The result of this dialogue was that handling money is tough and perplexing and at times not very rational. It lead me to revisit what the last 10 years of work and studies in the financial and planning industry brought or taught me. I then wondered what advice I would give my 18 years old me taking into account the knowledge of the past 10 years.
1. Get your wage first
Open a savings account and pay yourself the same amount each week/fortnight. It has to be an amount that will test you, not to the point that you cannot afford to pay your invoices, but that maybe you have to give up outings like restaurants by the end of the month.
You may have to put some measures in place so that you cannot access your account easily such as not having a debit or credit card for this account but having to physically go in the bank to withdraw some money. An idea could be to ask the bank for an account that gives you some interest for regularly depositing funds and not withdrawing any (check the interest rate). As time passes, it becomes increasingly difficult to save because of added monetary obligations, so start saving from the beginning.
2. Put 3 months of earnings aside
What is a good amount to save? It is a personal point of view but I regret that no one told when I finished high school that 3 months of wages would be a solid starting point for saving. Once you have this sum in your savings account, make sure that you do not go under in any circumstances unless emergency (Not holidays!) and consider this to be your $0 balance.
3. Maintain easy finances
With time money matters get more and more intricate . Appreciate the ease of few monetary commitments whilst you are a teenager and a young adult and carry that through your financial life. Keep and eye on and check your regular subscriptions ensuring that they are still needed. This will allow you to check your bank balance regularly (every fortnight). Remember scams happen and you need to keep being aware.
4. Debts that will not bring you any income in return are bad
These debts consist of car loans, personal loans and credit cards. Make sure to keep your credit cards to only the minimum amount required by YOU not the bank. Don’t let the banks determine the maximum limit and don’t accept any rise. These debts should only be used for radical or emergency situations. It is so much more satisfying to have a vacation or to buy a new car with money that you have saved up with.
5. Earnings should come from varied sources
In our present society, there is a variety of means to increase your revenues. Don’t depend on a single income source from your paid job. Become original and have a a variety of incomes. The best sort of returns are from passive income – the ones that “happen’ by themselves automatically such as interests on savings accounts, rent from investment properties, bonuses on stocks, creating a new app or an online business, etc.
6. Know how your superannuation works
It may seem far away now but your super will be your 2nd biggest possession in life after properties. Ask your fund how it works and what you should do to grow it as it will determine when you can retire and how well you can live from then on. So take care of it!
If all the above is too much, another option is to think of consulting a financial adviser who will advise and lead you to the right path with your financial goals.
When all is said and done your financial situation is reliant on you. By creating your own wealth you will be in a position to take pleasure and live your life the way you want.