5 Spending Habits to Start in Your 20s
For many students, your twenties are the years in which your finances are the most strained. Not only is it likely you’re starting to think about transitioning into the workforce full-time, but you might also be trying to save for a house, a trip overseas or a new car. Yet saving can sometimes be hard when you have to juggle studying, bills, and a social life on casual wages.
Regardless of how busy or broke you are, there are a few simple spending habits you can start now to ensure you’re financially secure in the future.
Sort out your super
Having multiple super accounts open could see you lose thousands of dollars in fees. If you’ve worked casual jobs throughout high school up until now, chances are you went with the employer’s preferred super fund (unless you specified a preference). That means you might have a couple of different funds open.
What many people don’t realise is that if there’s no money coming in, there’s a high chance your hard-earned super is getting eaten up by fees. To avoid your retirement savings being gobbled up, it’s a wise decision to consolidate all your super accounts into the one fund as early on as possible. If you’re not sure where to start, the ATO has a tracking tool you can use to hunt down any lost super.
Stop leaning on the bank of mum and dad
As a student, it’s normal to fall short financially from time to time. Unexpected costs such as a broken laptop, damaged car, or parking fine can pop up out of nowhere, and it can be hard to front the cash immediately.
Though you may be fortunate enough to have parents who can help you out when this happens, you shouldn’t be relying on them as a long-term plan. Continuously asking your parents for financial help in your twenties sets a bad precedent for the future. Instead, set up an emergency savings account that you don’t touch. That way when an unexpected cost arises, you’ll be prepared.
Pay your bills on time
Keeping on top of your repayments is extremely important in your twenties. You need to pay your Internet and phone bills, Afterpay installments and credit card bills on time to avoid negatively impacting your credit score.
A “good” credit score ranges between 622 and 725. An “excellent” score sits between 833 and 1,200. A decade of bad spending will put you in the “poor” score bracket (500 – 600).
Banks and lenders will check your score and use it to determine how risky you are to loan money to. Though buying a house may seem like a far-off prospect as a student, you don’t want the financial behaviour of your twenties to impact your thirties. Not sure what your credit score is? You can find out for free here.
Don’t be afraid to say no
This is often the hardest part about saving! It’s tempting to splash out on dinner and drinks with friends, on a new pair of sneakers, or on a night out. But just how much do you really need it? If you’re constantly dipping into your savings to fund your social life, this can be a good indicator that you need to rein it in a little. There’s nothing wrong with fun, but it’s bad money management to spend your entire earnings without putting anything away.
Try and allocate a portion of your pay each fortnight for “fun” and don’t exceed it. You’ll need to be more selective about what you attend, but watching your savings grow means you’ll be able to reach your financial goals sooner.
Create a workable budget
Having a realistic budget in place is the key to good money management. If you’re living pay cheque to pay cheque, creating a budget will allow you to take control of your money and identify any areas where you might be overspending. Budgeting helps you build up your savings and keep out of debt. But remember to be realistic about the costs of living as a student. There are plenty of free budgeting apps available that you can use to track your finances.
Managing your money in your twenties is always going to be slightly challenging, particularly if you are still settling into your career. But a handful of small changes to your spending could be the difference between financial security and living pay cheque to pay cheque down the track.
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