The irony of having disposable income when you’re in your twenties or even thirties and not disposing of it wisely becomes apparent when you hit your forties. For many people at that time of their life there is a family to feed and educate, mortgages and bills to pay, and retirement to plan for.
They quite often rue the days of spending their wage on partying, shopping and holidays and wish they had been a little more strategic with their spending. We see it quite often. People hit the big four-oh (!) and realise their finances are hurting them rather than serving them.
So we thought we’d put a list together of ten tasks you can complete in your twenties and thirties to minimise the likelihood of a mid-life money crisis.
1. Pay off bad debt
Credit card debt, personal loans, store credit, HECS loans – whatever the debt is, get into the habit of paying off bad debt completely. Don’t get sucked into the interest only vortex. You’ll end up with a debt headache at age 40, the very time you need that money for things like school fees and kids dental bills.
2. Set up an emergency fund
This is so simple to do. Set up a separate savings account and direct debit a percentage of your income into it regularly. Only touch it in emergencies. This helps you to stop relying on credit card (more bad debt) to get you out of tight and unexpected financial situations.
3. Pay debts and bills on time
Many people are surprised by how a bill paid late here or a missed loan payment there can end up on a credit blacklist. When you’re ready to plunge into a big loan such as a mortgage you want your credit and payment history to be squeaky clean.
4. Teach yourself to invest
Don’t put your head in the sand. Get savvy with stocks, shares, savings and investments. Chat to a financial planner, pick up a magazine such as Smart Money, talk to other investors or take a course on personal finance to understand how to get your money working for you.
5. Where there’s a will
If you have children and own assets such as property, a business or shares, write a will. Now. Make an appointment to see a solicitor and protect yourself and your family from any unforeseen circumstances.
6. Get smart with super
Financial demands are much less in your twenties than when you are in your forties. Use that time and extra disposable income wisely and top up your super. Check out our blog on compounding to see how it can make a BIG difference to your retirement.
7. Awaken the accountant within
Knowing the ins and outs of the tax system will help you get a bigger refund at the end of the financial year. Educating yourself about deductions and credits and being tax-savvy all year round will pay off.
8. Ask about an EAP
Many employers have Employee Assistance Programs (EAP) that offer up extra benefits to their employees. They could be health and wellbeing benefits that could help save money on medical visits, reimbursement for studying, financial planning and more. Ask your employer about it. You’ll be surprised what is included.
9. Get insured
There is a level of perceived indestructibility that comes with being in your twenties. You never think that something that could damage your health, physical mobility or mental health will happen. But it can. And it does. Many superannuation accounts have life insurance or inability to work insurances attached to them. Double check and if you don’t have a current policy, get one.
10. Speak to a financial planner
Yes of course we’d say that! But the reason why we DO say it is because we’ve seen many forty and fifty-somethings come through our door in a right old financial pickle because they never got any expert help before. Financial planners will help you take two steps forward and NO steps back.
Speak with a Financial Planner about creating some good money habits to avoid a mid-life financial crisis today. Click here.