A money guide, just for you (us)!
Hopefully you’ve spent every cent during your 20s, partied every night, traveled around Australia and even did a couple of overseas trips. Now, it’s time to start thinking about the future – as well as enjoying life! If this description sounds like you, it’s not too late to build solid financial foundations for the future. Here’s your “to do” list for the decade.
- Get the basics right
30’s is definitely the new 20’s! This doesn’t mean that you extend the ‘party time’ for another 10 years – it’s just that we are at a different stage of our lives to the last generations’ 30 (something) year olds. Some things, however, remained the same – Mortgages tend to be one of them but under different circumstances; It’s now normal for a single 30 (something) year old, to buy a house on his / her own and live in it. This means getting an understanding about debts, mortgages and budgets. Being single and in your 30’s give you the perfect opportunity to establish the rest of your life to be easier and overturn the way your parents and their parents lived their life. i.e. spent most of their lives raising their children, battling to make ends meet with all the costs, and then anxiously waiting for retirement so they can start enjoying their life. Then, only to find out that they got old. If you get the basics right in your 30’s, the rest of your life should provide you with a certain degree of financial freedom.
- Get Debt – buy a house!
It’s the biggest debt that most of us will ever (fortunately) own – use methods to pay off as much of your mortgage as quickly as possible as it’s non deductible debt. (bad debt) There are different strategies for getting on top of it – number one is to offset your salary with your mortgage, or at the very least pay fortnightly rather than monthly (it means extra payments you don’t even notice), but adding even $20 a week extra to your payment can make a huge difference to your interest bill.
- Don’t spend the next 25 years paying off your mortgage before creating wealth – invest as soon as you can afford it.
- Do something – do anything, but do something!
- Don’t be stupid and invest in something which is said to make you rich in a couple of years – invest in property, shares or managed funds – don’t gamble your money.
- Let time erode the value of your mortgage. Additional contributions into your mortgage after you have invested are also advised.
- Surround yourself with experts.
- Knowledge is power – especially with wealth creation
- Hear as many opinions as possible but make your own informed decisions.
- Count as part of your close friends an accountant, financial advisor, mortgage broker, real estate agent and stock broker.
- Balance immediate needs and long-term goals
‘Live for today and tomorrow.’ Being single and in your 30’s is the time to establish your career. Work hard, put in the extra hours, climb the corporate ladder or establish your business now that you are single – it only gets harder later on.
- Start saving for your children’s school today
The sooner you start putting a bit aside now; the easier it will be down the track. If you plan on ever having children, buying properties now, investing in shares or looking at investment options you can ‘cash in’ when you need the money is a great way to plan for your future.
- Get serious about tax
Technically, your 30s are a period in which your earning capacity is high. It makes sense, therefore, to ensure that your tax management is efficient. Non-deductible debt (that mortgage again) should be reduced and tax-effective ways of earning more cash put into place if possible. If I told you that for $130 per week you can buy a $370,000 investment house in the suburbs, would you consider doing it? That is possible, by having the correct depreciation schedule, gearing and good tax advice.
- Time is still on your side
One of the biggest financial pluses of being in your 30s is the fact that there is still time to change spending habits and adopt better financial strategies. Moreover, you are still in an employable age group, which means that seeking out a higher-paid job remains a possibility. Make the most of it!
- Salary sacrifice for super gains
Given the ageing population, there is little doubt that most of us will need to be self-supporting in our old age. Salary sacrificing now (out of pre-tax dollars) will mean that the amounts required to ‘top up’ your super as you get older will be (hopefully) more manageable. “A person can be looking at 25-30 years of retirement!” This is if you are very conservative – you may want to look at purchasing properties or investing in shares to balance your ‘retirement’ fund.
- In case of emergency
Above and beyond the mortgage payments, grocery bills, holiday savings, school fees and all the other sundry expenses of life, have an ’emergency fund’. The amount will depend on what you earn, but the aim remains the same – “have enough in it to cover those unexpected expenses that always occur when you own a home,”. That way, the $1000 you need when the hot-water tank blows up doesn’t need to come out of the holiday fund. Don’t leave the money in a savings account, offset it against your mortgage and have it always working for you.
Above all – don’t forget that ‘life is for living.’ Don’t delay enjoying your life for that imaginary time in the future. We don’t know what the future holds – only what is today. Spend your time wisely and have no regrets in doing this! The above opinions are purely my opinions as a 30 something year old and do not constitute advice of any nature. For specific and tailored advice to suit your situation, please consult a financial advisor, accountant or a lawyer.