Gen Y. We are the generation that doesn’t settle, who love to travel and are all about finding and pursuing our passion.
Switching careers, starting a business, studying, and travelling the globe are what we value most and prioritise. We choose to spend our money living in the moment and accumulating experiences, rather than planning for the future. As a result, maintaining our financial security or having solid investments like a house, a car, shares or savings can often pale in comparison to our immediate ambitions.
But dedicating a few thoughts to your financial situation is not as scary as it seems. There are multiple ways to become more financially grounded, without spending all of your spare time drowning in spreadsheets or sacrificing nights out with friends.
Most of us would rather hit ourselves in the face with a giant red ball than think about superannuation.
The letters come in the mail on an infuriatingly regular basis informing you of changes to your account balance. If you have changed jobs more than once, it’s also likely that you have multiple accounts with different funds and with differing balances.
If you are with more than one super fund, now is the time to merge all that money into one fund. By consolidating, or rolling over your super, you are avoiding unnecessary fees from multiple funds, and are in a better position to track how your super is growing.
To consolidate your accounts, use the ATO’s handy SuperSeeker tool to search for any lost or unclaimed super. AusFund is another way to track down unclaimed super. If you are on a break from the workforce and not receiving contributions, or planning to be overseas for an extended period, AusFund is also a great place to park your superannuation.
If you are unsure about which fund to choose, CanStar compare and rate the best super funds including options, services, and performance based on your age bracket and super balance. Industry Super and ASIC Money Smart are also good places to start.
While your employer contributes an amount from your salary towards your super, making additional contributions (for example, an extra $20 per week) can quickly accumulate and really pay off in the long run.
The government also makes co-contributions from time to time to help save for your retirement. This scheme applies to low and middle-income earners who make personal contributions to superannuation. In this situation, the government contributes up to $500 per year. The amount the government contributes to your super fund depends on how much you contribute and your annual income.
Budgeting And Saving
Budgeting and saving are a lot like the administrative component of your study life or job – painful but necessary.
Saving is a trial for everyone. The voice in your head relentlessly pesters you “I need to save for a house…no wait…a car…. no…a holiday.” This creates conflicting priorities and means that the easiest option is usually just to continue with your original spending habits.
Setting a budget and savings goal is essential to acquiring important assets, having the freedom to do what you want with your life, and is also crucial for emergency situations. The best way to get started is to set a weekly, monthly or yearly goal. You may want to save 75% of your pay packet after expenses like rent, utilities, petrol and social activities. Or you may commit $100 per week to your savings account. Another highly effective method of saving is to dig out your good old piggy bank. Even if you’re just collecting some loose change, it all adds up!
Save a lot, quickly
One of the best ways to save a lot quickly is to commit to paying off your monthly expenses and splitting the remaining amount in half (one-half for everyday expenses like sales, petrol, transport, lunches and drinks; the second-half for your savings account). It does mean paring back your monthly ‘unconscious’ spending on ‘want’ rather than ‘need’ items but in the long run can get you on the next adventure holiday months sooner and without needing to go into serious credit.
Say you have approximately $500 left over each pay day after expenses. If you set up an automatic transfer of $250 to a high-interest savings account, you will be making regular and consistent savings of $500 per month (assuming you are paid on a fortnightly basis) which adds up to $6,000 per year.
Save a moderate amount, consistently
If you are not in a position to save a large lump sum every month, make sure that you set a realistic saving goal and stick with it. No matter what your salary, you can aim to save 10% of that fortnightly income. Once it is in your savings account, make a rule not to touch it unless it is for emergencies.
You may feel like you have no idea what you are doing with your money, but it really is never too early to start investing, whether in the property market or some low-risk shares.
Consider making an appointment with a financial adviser to explore options based on your income and circumstances and for guidance on how to start saving for a deposit on a house or apartment.
If the prospect of investing in stocks and shares makes you jumpy, consider an alternative and lower risk option and set up a managed fund.
With time and patience, any goal is achievable.
Achieving financial stability in your 20s and 30s takes time, patience and dedication. If you regularly evaluate the above areas, it eventually becomes easier to manage and you will start to see real rewards for your efforts.
The Australian Securities and Investments Commission (ASIC) has a handy ‘Money Health Check’ Quiz to help track your overall financial health.