Foundations of a wealthy lifestyle

A study conducted by the Australian Stock Exchange reported that nearly 25% of investors over the past two years were aged 18 to 24.

These young Australians were found to be knowledge seekers, keen to take on life and begin their journey towards financial security.

If this describes you, congratulations! You get it, you really do. You’re Next Generation Investors who know that building financial independence starts early. However, according to the same study, Next Generation Investors, aware of their inexperience, are uncomfortable making financial decisions. If this is also you, here are our tips for laying the foundations for a wealthy future.

Avoid unnecessary debt

If there’s one thing guaranteed to keep you awake at night it’s debt. Naturally, some debt can’t be avoided and is considered ‘good’ debt, like when you borrow to buy a house. But ‘bad’ debt is sometimes unnecessary and often comes with high interest; best avoided where possible. You know we’re talking about credit cards, right? Credit cards can fast-track you into debt-strife, particularly as tap-and-go transactions are just so quick and so easy. Additionally, while those buy-now-pay-later schemes can be useful for emergencies if, say, your fridge packs up, they’re a trap if you don’t stay in control. Sure, online shopping and bill-paying means using cards but you can avoid using credit. Functioning the same as credit cards, debit cards use your money instead of the bank’s. They can be linked to your bank account, or loaded with cash which is handy for keeping track of your spending, as you can only spend as much as you’ve loaded. If you do end up with debt, be accountable. Pretending it’s not there won’t make it go away. Further, unpaid bills can grow through late fees and penalties. Read the fine print on contracts and understand what you’ve signed up for. Late payments and loan defaults can result in legal action, even bankruptcy, destroying your credit rating for years!

Pay down debt as soon as you can by:

• making additional payments where possible.
• paying above the minimum monthly amount.
• consolidating debts, and negotiating a better deal.
• prioritising debts with the highest interest rate.

Track spending

On the topic of spending, get into the habit of tracking yours. Using a simple spreadsheet, or an app from your bank, log your purchases and reconcile spending with receipts. You’ll see exactly where your money is going and spot any areas of unnecessary spending, like those items you really don’t need but are the coolest ‘must-haves’. Don’t fall for it; ‘must-have’ is a marketing term. True must-haves are basics like food, shelter, transport and medical – not the latest trends and gadgets. We’re not saying don’t treat yourself occasionally, but to pause and consider whether the item is really worth burdening yourself.

Superannuation

Think you’re too young to worry about superannuation? Prefer to put your money toward something for now rather than later? You may be right, but don’t dismiss super altogether. Here are some things you can do that won’t impact your current finances:

Ensure your employer is contributing the correct amount of super. If you are earning more than $450, pre-tax in any calendar month, your employer must contribute 10% to a super fund on your behalf. These contributions are Superannuation Guarantee Contributions (SGC) and they are compulsory.

Low-income earners may qualify for Government Co-contributions where the government contributes up to $500 to your super fund. When you lodge your tax return, your eligibility is automatically assessed, and if you qualify the government deposits directly into your super account.