Building foundations for a wealthy lifestyle can come back to the basics and we explore what you can do with your personal situation to make that happen.
A study conducted by the Australian Stock Exchange(ASX) reported that nearly 25% of investors over the past two years were aged 18 to 24.
These young Australians were found to be knowledge seekers, keen to take on life and begin their journey towards financial security and invest for their future.
If this describes you, congratulations! You get it, you really do. You’re Next Generation Investors who know that building financial independence starts early and creating good habits that will last you for a lifetime.
However, according to the same study, Next Generation Investors, aware of their inexperience, are uncomfortable making financial decisions and are unsure how to build the right starting foundations.
If this is also you, here are our tips for laying the foundations for a wealthy and successful future!
Avoid unnecessary debt
If there’s one thing guaranteed to keep you awake at night it’s debt. Naturally, some debt can’t be avoided and is considered ‘good’ debt, like when you borrow to buy a house or that debt works for you building wealth.
But ‘bad’ debt is sometimes unnecessary and often comes with high interest and is best avoided where possible. You know we’re talking about credit cards, personal loans for holidays, Buy-now-pay-later services right?
Credit cards can fast-track you into debt-strife, particularly as tap-and-go transactions are just so quick and so easy to use these days.
Additionally, while those buy-now-pay-later schemes can be useful for emergencies if, say, your fridge packs up, they’re a trap if you don’t stay in control and continue funding expenses this way.
Sure, online shopping and bill-paying means using cards but you can avoid using credit or be practical about when to pay this off at the end of every month.
Functioning the same as credit cards, debit cards use your money instead of the bank’s. They can be linked to your bank account, or loaded with cash which is handy for keeping track of your spending, as you can only spend as much as you’ve loaded so you avoid paying unnecessary interest.
If you do end up with debt, be accountable. Pretending it’s not there won’t make it go away. Further, unpaid bills can grow through late fees and penalties.
Read the fine print on contracts and understand what you’ve signed up for. Late payments and loan defaults can result in legal action, even bankruptcy, destroying your credit rating for years!
Pay down debt as soon as you can by:
On the topic of spending, get into the habit of tracking yours. Using a simple spreadsheet, or an app from your bank, log your purchases and reconcile spending with receipts. You can start by using a simple budgeting spreadsheet from Moneysmart
You’ll see exactly where your money is going and spot any areas of unnecessary spending, like those items you really don’t need but are the coolest ‘must-haves’.
Don’t fall for it; ‘must-have’ is a marketing term. True must-haves are basics like food, shelter, transport and medical – not the latest trends and gadgets.
We’re not saying don’t treat yourself occasionally, but to pause and consider whether the item is really worth burdening yourself with. Check your monthly debits and if you are still using these services eg. old gym membership, streaming services, online subscriptions.
Think you’re too young to worry about superannuation? Prefer to put your money toward something for now rather than later?
You may be right, but don’t dismiss super altogether. Here are some things you can do that won’t impact your current finances:
Save Vs Spend
You’re entitled to live, and you’re entitled to a social life. We’re not saying save or spend, we’re suggesting you can do a bit of both. Laying good foundations for your future, also means creating the right habits.
This is how it works:
|Scenario 1||Scenario 2||Scenario 3|
|Interest Rate||2% PA||2% PA||2% PA|
|Regular Deposit||N/A||$50 per month||$100 per month|
The chart below shows the result of the above scenarios after ten years.
Each scenario is based on a $1,000 initial deposit with 2% PA interest calculated monthly. In Scenario 1 no further deposits are made. Scenario 2: shows $50 monthly deposits, and Scenario 3: $100 monthly deposits.
Adjust the figures to suit your personal budget and commit to saving a small amount each pay while still enjoying a life. Have the amount automatically deducted from your account and soon you won’t even miss it! There are also some great micro-investment apps out there where you can accelerate the growth of your funds by allocating a portion to investment markets depending on how comfortable you are.
Regular savings accounts and micro investing apps are available from banks and other financial institutions, and offer a variety of arrangements. For example:
Do your research, particularly websites providing independent product comparisons.
A professional financial planner can tailor a plan specifically for you. They will consider your debt, income, goals and much more, and work with you to structure a strategy for now while laying the right foundations, and incorporate the future – you may even be surprised at how inexpensive good advice can be.
So, there you are! The future is laid before you and it’s loaded with potential; all you need to do now is get on with it set the right foundations. You can contact us at our Oran Park office. We also now have an office in Baulkham Hills as well as servicing Macarthur, Penrith, Campbelltown, Parramatta, Blue Mountains, Silverdale, Fairfield, and Greater Western Sydney.
The information in this website and the links has been prepared for general information purposes only and does not take into account your personal objectives, financial situation or needs. It is not intended to provide commercial, financial, investment, accounting, tax or legal advice. You should, before you make any decision regarding any information, strategies, or products mentioned on this website, consult a professional financial advisor or seek assistance to consider whether it is suitable and appropriate for you and your personal needs and circumstances.
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