Hi Tammy, my kids are in their early 20’s, finishing up their education and now moving into full-time work. What tips do you have for someone just getting started? John, Manly
Hi John,
Great question! When I look back and reflect, there are many things I wish I had started in my early 20s. With the wisdom of hindsight, I have a few tips I plan to pass on to my own children.
Have a plan. Document a financial plan and review it regularly. Cover personal and financial goals for the short, medium, and long term. This may include buying a car, overseas travel, or saving a deposit. Importantly though, it should include building a cash reserve, building passive income and saving for retirement.
Save first when doing a budget. Preparing a budget is a great tool to track and control your spending, however we often start with the spending items first and only save what’s left over. Determine how much you need to save to achieve your goals. What is left over then determines your spending.
Stop lifestyle inflation. As your salary increases over time, it is easy to let your spending creep up to match. As you get pay increases or bonuses, allocate these to saving. It is much easier to stop your spending from creeping up than it is to reduce it.
Commit and be consistent. The Federal Government mandates that 11 per cent of our salary (growing to 12 per cent in 2025) goes to Superannuation to fund our retirement. A great discipline is to mandate an additional percentage of your salary that will, without fail, be directed to saving and investment. Set this up as a regular transfer or investment plan so it happens automatically.
No amount is too small. Don’t delay investing because you are waiting to have enough money to get started. If you invest $1 a day from age 20, you will have an additional $104,320 when you retire at age 65.*
Start early. The magic of compounding returns should not be underestimated. The longer you are invested, the greater the impact on your wealth. If you delay starting until age 30, you will need to invest $2.07 per day to accumulate $104,320 at age 65. At 40, this increases to $4.52 per day. By age 50, you will need to save $11.37 per day to achieve the same outcome.*
* $1 initial investment, earning 7 per cent per annum (net of fees and taxes), with earnings reinvested.
Insure your greatest asset. People spend thousands of dollars a year to insure the replacement value of their car, but don’t insure the replacement value of the driver. Your greatest asset is your future income. Take out quality income replacement cover in your 20s and lock in a level premium.
Get advice. There is a wealth of information this generation can tap into via websites, podcasts and social media ‘finfluencers,’ but information is not a substitute for personalised financial advice and coaching. A session with an adviser is a good investment.
Quick Tips: It is never too late to start. If you invest $1 a day from age 40, you will have an additional $104,320 at age 85.*
Feel free to call me on 8376 0350 if you have any further questions or need assistance.
Regards, Tammy
Financial planner Tammy Marshman of Up Wealth Management is an Authorised Representative of Consultum Financial Advisers Pty Ltd, AFSL 230323. Phone 8376 0350 or visit upwealthmanagement.com.au.
This is general information only, as in preparing it we did not take into account your personal objectives, financial situation or needs. Before acting on this information, you should consider whether it is appropriate for your personal circumstances. Although the information is considered reliable, we do not guarantee that it is accurate or complete and you should not rely upon it.
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