Being in your 20’s and 30’s is an exciting time in your life. It is when you begin to build the life that you want and a time when you are probably still on the lookout for new experiences which will teach you more about yourself and your overall goals.
It is during this time that we expect to learn new things and grow and we do this through experimenting with new jobs and careers. However, many of us forget to explore and control a crucial part of building the life that we want – our finances. This means we fail to have a safety net in place for our future. We will advise you of some of the mistakes that you want to therefore avoid before you turn 30:
- No Budget
Earning money is great and spending it is even better. Often, we end up spending too much and usually we spend until it is all gone. Although a budget may seem restrictive, it actually works in the opposite way and enables you to have more freedom as it prevents you from overspending in areas that are not important and a budget means you then have money to spend on what is important. For example, a budget helps you to work out where to economise i.e. buying a used vehicle rather than a new one using vehicle asset finance which can also help you to spread out your costs.
- No Credit Rating
Often when we are just starting out we have low or no credit rating (e.g. always using parent’s credit cards.) If you have a low credit score, costs for things such as mortgage rates, loans, car financing and insurance will be higher. If you build good credit now by getting a credit card in your own name and paying it off properly, this will help you to establish a good credit rating which will put you in a good position in the long run.
- Relying on Credit Cards
Credit cards can be saviours and especially the ones that give you loyalty points. Make sure that you use your credit cards as a clever way to keep a track of what you spend. The trick is to avoid spending money that you do not actually have. If you pay your credit cards off each month you will stay within your budget as well as prevent credit card charges. Another positive is that you will build a better credit rating for the future should you need to borrow money.
- No Emergency Fund
When you are young it is hard to imagine ever needing an emergency fund but no one knows what the future holds. Something as simple as a pet falling ill can create an unexpected challenge if your budget it restricted. A good idea would be to contribute to an emergency fund so that you are prepared should you ever need it in the future. Try using an emergency fund calculator to determine how much to save.
- No Health Insurance
When you are young you think you can skimp or avoid local Hamilton health insurance, for example. Although you may be fit and healthy, you are not protected against episodes of flu, appendicitis, sports injuries or evens something like a car accident. One cause of personal bankruptcy is high medical bills. It is always worth investing in the best possible cover than you can afford as it will soon pay for itself. Look up multiple insurance quotes before choosing the right provider for you.
- Not Having any Financial Goals
Something to consider is where you would like to be in one year, five years and in twenty years and aim to always be on this path. Achievable financial goals such as ‘I want to save X dollars each month’ or more difficult ones such as ‘I would like to own my own business and live by the coast’ all start with awareness and making small steps slowly. Decide on a few goals, these can always be changed at a later date of needed. If you do not have any goals in mind you can end up just drifting and not aware of where you are actually heading. Eventually, you might be in a place to make even more advanced goals, like looking at your Kiwisaver investment options, for example.
- Seek Financial Advice
It is never too late to get your finances in order. The internet is great for tips and ideas and there are many sites online that can help you to get your finances organised. Before you jump ahead and apply for finance online, it would be worth contacting a financial adviser to guide you. Just make sure that the advisor you use is someone who is legally obligated to recommend only those things that are in your interest. Additionally, contact an income tax agent to ensure that your tax is in order and this can be done via cloud accounting services.
- No Savings Plan
Before you do anything, you should consider creating a saving plan and pay yourself before you go out and spend money on luxuries such as expensive gadgets and holidays. You need to include savings for an emergency fund, short term goals as well as savings for your retirement. Although retirement may seem like a long way away, the earlier your start saving, the more you gain in compound interest.
- Get Life Insurance
Without sounding too morbid, one day we will all meet our demise. Therefore, there is no time like the present to make plans regarding your estate and these include purchasing life insurance and making a will. An important thing to consider is that the younger you buy life insurance, the cheaper the policy is. The healthier you are, the easier and cheaper it is to get cover. If you plan this into your life now, you will have the peace of mind later knowing that those who you love will be looked after under difficult circumstances.
If you follow the advice that we have provided we are sure that you will enjoy your 20’s and 30’s even more as you know that you are building a solid future for yourself.