A young person's guide to managing money
03 December 2018
As of March 2017, 40 per cent of young Australians had no idea how much they had saved in super, according to research by The Association of Superannuation Funds of Australia (ASFA). This suggests that when we first start earning money, retirement planning probably isn't our top priority. However, establishing a good bedrock for later life is easier if you start managing your finances at an early stage.
This may sound complicated, so here are a few tips to make it easier:
Managing your finances from an early age is key.
1. Pay off your debts
With so much to think about, it can be easy to add paying off debts to tomorrow's list of problems. Don't.
If you've ever taken out a loan, or racked up credit card debt, the key is to pay it off as soon as possible so you don't end up with a stack of interest on top of the original repayments.
Another note on credit cards is to never use them to buy anything you wouldn't otherwise be able to afford. This is an easy way to start yourself on a debt spiral which can be tricky to escape.
2. Think about those big buys
Like your retirement, your first house, or even first car, might seem a dot on the horizon right now, but your future self will be grateful if you start putting money aside now.
Drawing up a comprehensive budget, and tracking how you spend money, is integral to saving effectively, and keeping yourself on track.
As well as building up a nest egg to pay for these landmark purchases, it's also a good idea to have a separate savings account for those moments when life throws you a curve ball. You never know when you'll need to shell out for something unexpected, but this way you can do your best to budget for nasty surprises.
Create a comprehensive budget to help plan for larger investments such as housing or a car.
3. Start saving for your super
It's never too early to start thinking about how you will support yourself when working life is over, and super is a big part of this. Whilst the ASFA data shows that young Australians don't know how much super they have, it also suggests that the majority of this demographic have more in their super than they do in their everyday bank account.
This is good news, but once your super is set up, be sure to make the most of it by:
- Making sure your employer is contributing - If you're earning more than $450 per calendar month, your employer has to make contributions at a rate of 9.5% of your standard salary (for those under 18, this only applies if you work more than 30 hours in a week).
- Consolidating your super - Most employers will offer the option of paying super contributions to your nominated account, or one of their own.
Consolidating this money in one place will make it easier to manage, and reduce the chances of some of it going missing. If you’re an LGS members, it only takes a few clicks to search and consolidate your super accounts.
4. Do your research and get advice
It's important to shop around and do your research before making any financial decisions. Look into the small print. For example, have you compared the fees that come with different super accounts, and what insurance cover is available to you?
All this can seem a bit daunting, so don't be afraid to reach out for professional support. Financial planners are obliged to put your best interests first when giving advice, and can help put your mind at ease.
If you're a young Australian looking into setting up a super account, or finding better ways to manage your finances, LGS is here to help. Get in touch with our team to find out more.
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