Study, travel, your first time living away from home ... life at 20 offers many new and exciting experiences. Independent financial adviser Tony Sandercock takes you through the questions to ask yourself as you negotiate your newfound independence.
This article originally appeared in the "Slice Of Life".
What Are My Life Goals?
You may have heard people say, ‘Live in the present moment,’ but when it comes to your finances, it’s important to also give your future some thought. Now is the time to get some perspective on what you want for yourself in life, and what you need to do to achieve those goals.
‘Life is full of tough choices,’ says Sandercock, ‘and it’s hard to have it all, but the best advice is to determine as early as you can what’s really important ... because when you’ve got a goal, you’ve got focus and enthusiasm to achieve things.’
Do I Have A Career Plan In Place?
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Few of us can move forward to achieve our goals without its careful consideration. Your career is one of your biggest assets. Sandercock says a person who earns an average wage with modest increases over a lifetime can earn 8 to 10 million dollars. Wow! We’re all potential millionaires at 20. So, what calls to you and how do you plan to achieve your career goals?
Sandercock also suggests you consider income protection insurance. ‘Your ability to work is one of your most important assets. Insuring your income should be a priority for anyone who is employed,’ says Sandercock.
Have I Developed Good Money habits?
Sandercock suggests people at 20 decide whether they want to be savers or spenders, and work to develop good financial habits. ‘The habits you get into early continue for a lifetime,’ says Sandercock. ‘Develop good savings habits and you create a great foundation for your future.’
Am I Living Within My Means?
‘People tend to spend 110% of what they earn, and if you can’t measure your spending, you are not in control of your financial situation,’ says Sandercock. ‘If you build your life around the 70-10-10-10 rule [70% to the money you need to live, 10% to debt repayment, 10% to the future and 10% to you], you’ll pop out the other end in really good shape.’
To help you keep track of what you spend and get in the good habit of following Sandercock’s 70-10-10-10 rule, try MoneySmart’s TrackMySPEND app .
What Do I Know About Super?
‘Young people have the advantage now of getting 9.5% of their income paid into super ... it’s a great place for young people to start when planning for their future.’
Which super fund are you with? How much do you have in it? Some super funds include Total Permanent Disability (TPD) insurance, life insurance and income insurance. Know what you’re covered for and keep in mind how much you’re covered for.
Sandercock says it’s not a good idea to think your super fund covers all your insurance needs. It’s important to consider if you’re individual circumstances require more specific insurance cover.
Should I Move In With My Girlfriend/Boyfriend?
Sandercock suggests you talk about money before you move in together. ‘Discussions such as rent, how to pay bills, what to contribute to the kitty need to be had before you walk through the door. I would suggest for young people to keep their money separate beyond that.’
What Will Happen To My Financial Situation If I Choose To Travel And Work Overseas?
‘Your biggest friend from a savings and investment perspective is time, and the more time you have, the more that can be accomplished. This is the miracle of compound interest. Living and/or working overseas is not a bad thing, but it may mean you start to build wealth later in life.’
Sandercock does stress, however, that there are consequences to all decisions in life; if you make your choices carefully and consciously, you’ll make the right ones to suit you.
Should I Get A Credit Card?
‘There aren’t many guarantees when it comes to money,’ says Sandercock, ‘but I can guarantee you this, credit cards have caused more problems than they’ve ever solved. I don’t believe anyone needs one, except perhaps as a cash reserve. Problem with a credit card in your pocket is it’s really easy to flip out. I suggest people with a credit card put it in a glass of water and freeze it so they’re not tempted to use it, except in an emergency.’
Do I Have A Money Mentor?
At 20 a money mentor can be the kick up the proverbial you need to ensure you meet your financial goals.
‘I think that [financial] information is everywhere, but ultimately it’s pretty useless, because it’s only when you act upon the information that there is any value. A mentor can help you put those ideas into action, and you only get results through action.’
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