Here Are The Things You Should Know About Your Finances In Your 20s

I was asked a very interesting question at work recently. Someone asked, “which superannuation provider are you with and how much do you put aside?” That is an unexpected question, I thought. Cogs in my brain turned slowly like steamrollers as I attempted to grasp at what knowledge I had about super.

Chances are, you’re like me and a bit clueless when it comes to these things. Thinking about retirement or your financial future is probably not the number one priority for someone in their 20s.

However, there are a bunch of things you can do now to get ahead of the game, which will provide huge gains for you in the future (even if that’s so far ahead that you can’t yet imagine it).

Debt management, aka payback time

Chances are, you’re not a financial blank slate. You’ve worked a little, you’ve made some money and spent some money. We hit up financial planner Penny Collicoat from Edge Financial Planning for the advice she commonly gives 20-somethings. According to Penny, before we can even think about saving or investing, we need to think about managing debt.

Getting rid of credit card debt is absolutely the first thing you should be doing,” she says. “If you’ve got credit card debt and you think you’re saving, you’re definitely not because you’ve got to pay a credit card interest.”

Many of us decide to take out a car loan or get a credit card in our 20s. If that’s you, it’s important to be mindful of interest, and pay more than just the minimum repayment – otherwise that car you bought for $20,000 might cost you $40,000.

Think about when you would like to be debt free. If it’s by the end of the year, sit down and make a plan on how you will get there. Try making extra payments to your credit card debt by transferring a certain amount of money each week or month and stick to that. Lower your limit on your card so that you don’t make any rash decisions to put a holiday on your card just because there are early-bird flights to Europe.

Once you are debt free, you can start focusing on the next most important thing, which is saving.

Budgeting, or figuring out where all your money went

“There are a couple of ways we can budget,” says Penny. “One is a spreadsheet and the other way is using a good app.” Spreadsheets are a great way for us to understand where we might be over-spending without realising. Write down all of your expenses including bills, rent, and total salary. Then think about your other expenses, like how much you spend on takeaway, on shopping, going out or the gym.

Try to be realistic about what you need to spend money on. Are you eating Uber Eats more than half of your week? Do you spend a couple of hundred dollars going out over the weekend? Try to restrict your unnecessary spending and write it down in your spreadsheet as you go, to keep yourself accountable.”

“People don’t even realise what they’re spending money on and it’s a good way to see that you might be spending a lot of money each year on just takeaway or shopping!” states Penny.

If you’re not an Excel wizard, there are plenty of apps to use to also help you track your spending.

Remember, awareness is key—by recognising where your money is going, you can adjust and make changes to start putting more of your pretty dollar bills towards setting yourself up for the future.

Superannuation (or, sipping cocktails on a beach in your 70s)

The government talked about it in the budget and your employer asked about it when you started working with them, but what on earth does it actually mean and why is it important to be aware of now?

“Superannuation is 9.5% on top of your salary towards a future pension that your employer needs to pay into a super account,” says Penny. “You get to choose where it’s invested and you can choose how the super money is invested.”

Superannuation is more than money for when you retire, it’s actually managed funds and shares. According to Penny, most people will have about $400,000 in their super in their lifetime, and many people during their 20s are not thinking about where they choose to put that money.

“Imagine if someone said, ‘here’s $400,000’ and you said, ‘I don’t care how to invest it or where it sits’. That’s pretty much what the majority of people in their 20s do. If you invest wisely over the long-term, it will make a huge difference.”

The earlier that we can get onto understanding our super, the bigger the difference it makes in the end game.

Remember that everyone has different monetary needs and goals and the best advice is to go and seek personal advice. Now is the most powerful time to be thinking about these things to ensure that we can develop the best saving skills and habits for the rest of our lives. It’s never too early to be smart about the future.

Sam is a freelance writer passionate about sub-cultures, oddballs of the world and music. She runs a Melbourne music website and writers banter for VICE, The LAD Bible, and other websites. You can find her on Twitter at @hamsoward.

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