Start as you mean to go on

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Setting up good financial habits early in life will pay dividends later in life.

How many times do we hear the words – “you should have done this or you should have done that”?

This always happens after the event, so you have no way of going back and changing it. The same could be said for our finances.  It’s easy to look back and see the mistakes we have made, but wouldn’t it be good to have a few tips on what to do so we can put ourselves in a better financial position?

This list is for someone just starting out in their 20s but there will be something in it for all of us.

Spending money on personal items generally make us feel good. If you are having a bad day, a quick trip to the shops to buy a new outfit will certainly make you feel better but this doesn’t really help your finances.

All you will do is wake up the next day with a hole in your bank account. It sounds a bit boring, but you will get more satisfaction out of saving these funds rather than blowing them on a short term item.

Credit card debt can be crippling for many young people. I recall a conversation I had with an acquaintance one day when we discussing credit cards. She was quite proud of the fact that she had $1,000 left until she hit her credit card limit.

Her comment to me was: “I’ve got heaps of money to spend, I’m not even up to my limit.” Ouch. Credit cards are unfortunately a necessity, but they can spiral out of control and send you broke.

If you have a credit card, make sure you pay it off at the end of the month so you don’t incur interest. If you need to carry a credit card debt look around for a low rate card which has a better interest rate than rewards-style cards.

Many people early on in life don’t set any long-term goals. OK, a trip to Bali in six months time may sound like a long-term goal, but it really isn’t. I’m not talking about retirement yet, but long-term goals like buying a house or buying a car for cash.  You need to work out what your goals are and then work out how you are going to get there. Simple things such as setting up a savings plan can go a long way to help you on your way. A small amount of savings each week can add up to a significant nest egg over the long term.

Saving too much, however, can be just as bad as not saving at all. Before you dismiss this as crazy talk, have a think about it.

If you are so disciplined about saving and you forego all your fun in life then life becomes very boring. It will be OK for a while but then something will crack and you will be tempted to blow all your hard earned savings.

Make sure you have some balance to your life by saving some but also having enough left over to actually have a life.

Buying the latest gadgets will guarantee you an depleted bank account each week. Do you really need the latest phone at $100 a month or will last year’s model do pretty much the same thing? While it’s always fun to have the latest and greatest, these do come at a significant cost. Work out whether is a true need or just a nice-to-have need. This could be said of phones, cars and many consumer goods.

The most important thing to consider in all of this is to make sure you have some balance in your spending habits.

Sure, enjoy spending your money, but make sure you do it wisely and start some good savings habits now.

Then hopefully you will not be looking back in 10 or 20 years time asking yourself ‘what if?’

About peardrealestate

Peard Real Estate is an award winning network of boutique offices throughout Western Australia delivering innovative property solutions, services and results for home owners, landlords and investors.
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