Your twenties are some of the greatest years of your life. You’re at a stage where you can learn, explore, make mistakes, change your mind and be as free or focused as you like.
You may not have any commitments or anyone who depends on you, but your twenties are one of the most important periods when it comes to building your long-term wealth. It’s the first time in your life you can take control of your finances and plan for the future.
If you need a hand understanding where your finances should be at this stage of your life, check out these goals you can aim for – while having fun of course!
If you’ve done further study since high school, you’ve probably taken out HECS-HELP loans from the government to fund your studies. You won’t need to start paying back until you earn over $53,000 a year, but to avoid accruing interest, it’s a good idea to begin paying off your debts even if you don’t earn that much yet.
Once you reach the threshold, the ATO will automatically deduct a portion of your pay to go towards you HECS-HELP debt. Before then, you can make voluntary payments directly to your university online, over the phone, or in person. If you have a salary of $40,000 and a debt of $25,000 for example, you can aim to put $50 a week towards your debt. That means you’ll pay off some 10% of your debt each year. Talk to your university or higher education institution for the best ways to pay off your education.
You may feel invincible in your twenties, travelling and having fun, but there’s no benefits in living pay check to pay check if you have an emergency. The unexpected is just that, unexpected; but preparing for it can minimise the damage.
What if you have a car accident and have to pay the excess to your insurer? This is only one of the many situations that may arise, and without an emergency savings fund you might be caught short, or looking elsewhere for a loan. Aim to have around $3000 or more in a separate bank account which you can only use for emergencies to keep you going in case of an unexpected expense.
If you’re savvy, treat your emergency fund as your long-term saving fund, and make regular contributions to the account. This will help you prepare for big life purchases such as a car or a house. Set yourself a yearly goal for how much you want to save and calculate how much you need to put away each pay period to achieve this goal.
If you earn $1400 a fortnight after tax, budget so you’re living off $1000 over the fortnight to cover rent, bills, food and other living expenses, and put the remainder straight into savings. Each year you’ll be putting away $10,600. Keep it up and within five years you’ll have enough for a deposit on a house.
Of course, buying a house won’t be everyone’s primary goal. But think about your aims over the next five and calculate how much you need to save each fortnight to get there.
Throughout school and university, you’ve probably worked a few different part-time jobs which would have been making super contributions for you – but the question is to where?
Often when we’re young and starting a new job, we fill out the forms given to us but may not realise that each time we’re opening a new super account it’s charging us fees. If you’ve had three different jobs you might have three different superfunds. Now’s the time to research, find your lost super and compile it all into the one fund you plan on keeping for the rest of your career.
Make sure you spend time considering funds and choose the one that’s right for you. Give your employer your superfund’s details so they know where to make the contributions. If you change funds, make sure you tell your employer so all money is transferred into the one account.
While it’s depressing to think about your own mortality, your twenties are the perfect time to set up your insurance and protect yourself now and in the future. Life Insurance premiums will be at their lowest when you’re young and healthy and investing in Life Cover, Trauma Insurance, and Income Protection will save you and your family the financial heartache if the unexpected happened.
For more on why Life Insurance is so important in your twenties, check out this blog post.
Read More:- 6 FINANCIAL GOALS TO HELP YOU BUILD YOUR WEALTH IN YOUR 30S
Have fun and enjoy your life! There’s no better time than the twenties to explore life and make mistakes, spend a ridiculous amount of money on something you really want but don’t really need, and find out who you are and what you want from life (if you haven’t figured this out on your thirtieth birthday you’re not the only one – It’s true when they say you never stop learning!).
But while you’re at it, make sure that in the back of your mind you’re working towards long-term goals, and developing lasting beneficial money habits.