If you were to travel back in time and speak words of advice to an 18-year-old you, what would you say? What would your older and wiser self reveal? Most of us have things we wish we knew when we turned 18. These things probably touch on relationships, career, and life in general. Money is no different. However, the earlier we learn the key tricks to managing our money the easier life can be.
Organise your money
“I wish someone had taught me how to budget, manage my bills and save”
This is many people’s greatest regret, and it’s easy to see why. It is important to start learning good habits in money management early rather than later. Instead of splurging on needless things, learn to double the money you make.
First, be smart with your money by spending within your means, meaning spend less than what you earn. The best way to do this is to start a budget. Draft a monthly budget to cover your expenditure and to cushion you from frivolous spending.
Another important tip is to avoid spending using credit. That’s right; stay out of debt. Don’t buy into the misleading “everyone’s got debt” type of mentality. Instead, shop with cash and focus on saving for what you want.
Take superannuation seriously – take it very, very seriously!
You are an 18-year-old, and you’re lucky to have just entered the workforce, which simply means you are going to be financially independent soon. The furthest thing in your mind at that particular time is saving for your retirement. However, superannuation is the most powerful vehicle for saving for retirement and the benefits of compounding apply. The bigger and earlier you can get your superannuation balance, the more comfortable you will be in retirement.
Save a buffer
Apart from monitoring your spending habits and cutting unnecessary expenses, practice smart money saving tips as a way of meeting your short-term and long-term financial goals. Having a financial buffer is a practical way of being prepared for life’s unexpected turns. Make decisions that help you achieve this buffer whether it be living in a modest unit, being frugal or taking out a second job.
A good goal is to have 3 months wages saved. This provides a buffer for the unexpected things in life like a sudden loss of employment.
Practical tips for being “frugal”
We have all heard reduce, reuse, recycle when it comes to the environment. The same can be said when it comes to your money. Reduce your spending, reduce costly food waste, reuse the things you already own and recycle your possessions.
- Make a weekly “money date” whereby, once per week, you sit down with all your money and update your budget, review your accounts and track the progress towards your goals.
- Plan your meals for the week – you plan when to cook at home, what to eat and when to head out to the supermarket. This will help reduce costly food waste.
- Make your favourite coffee at home – this is for those of us who can’t go a day without a hot cup of espresso.
- For clothes and other outfits, buy in the end of season sales or even look for bargains at the local op shop.
- Focus on your life and goals, don’t try and keep up with those around you.
Invest for the long term – use Compound Interest to your advantage
When investing, one of the biggest lessons you learn is that it is “time in the market, not timing the market”. This means the earlier you start the better. Looking at investing as a long-term thing helps even out the spikes and falls of the market. Regardless of what choice you go with, just be sure to focus on the “time factor” and give your interest an ample time to continue growing.
Like with most positive things in life the earlier you start the better. Money is no different. The earlier you start saving – the better. The earlier you cut out credit cards – the better. The earlier you focus on your goals – the better. Focusing on your circumstances, your money and your goals will ultimately help make your life easier. If you need help getting started making a financial plan for your future contact Certified Financial Planner Elliot Watson at Elliot Watson Financial Planning 02 4038 1623.
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