How to master money... in your 20's
Ladies, here’s how to set yourself up for long-term wealth and take control of your money in your 20s.
They say your 20s are some of the best years of your life. It’s true that, for many of us, it’s a decade filled with freedom, new people and places, and plenty of mistakes so much so that sitting down to master your money is not high on the priority list. But it should be. Learning to master money in your 20s is so important to ensure long term wealth and, it’s never too early to start taking control of your money!
Whether you’re working part-time while studying, have started to climb the ladder to your dream job, or are expecting your first bub, we’ve created your ultimate guide to setting sustainable money goals, mastering your cash flow, understanding the basics of investing and how to future proof your wealth with a healthy super balance.
Ready to take control of your money? Let’s do this!
Why is mastering your money in your 20s important?
We like to think about getting on top of your money like getting a gym membership. For most of us, we don’t sign up to the gym after we’ve built up killer core strength and can run 5kms without breaking a sweat. We’re joining a gym to get fit.
The same thing applies when it comes to money. We shouldn’t start caring about our bank balance and creating budgets only after we’ve scored an amazing salary or steady job. If we don’t create good money habits early, no matter how much we earn, we’ll always find ourselves living paycheck to paycheck and pulling out the credit card when we’re short on cash.
Figuring out your financial priorities and goals in your 20s is crucial to taking control of your income and setting yourself up for wealth now and into the future. By understanding what’s most important to you, you’ll be able to make smarter money decisions to help you hit those long term goals such as buying a home, living overseas, traveling the globe, donating to causes you care about or starting a family. Plus, with time on your side, you can supercharge your wealth by learning about your investment options as a 20.
Setting money goals in your 20s
The first step to mastering money in your 20s is to identify what’s most important to you. Do you want to pack up your life and chase your dreams of living in London or Bangkok or Buenos Aires? Maybe the security of owning your own property is a big deal to you? Or perhaps you want to set yourself up for an early retirement? By clarifying your big picture money goals you’ll be able to better pick and choose where you spend the money you do have.
The next step is to break down these long term goals into smaller, actionable steps with measurable outcomes. Basically, what do you have to do each day, each week and each month to keep you on track to hit these goals? Saving a deposit for a mortgage or starting your own company doesn’t happen overnight, so figure out how much you need to set aside on a regular basis to get you there.
Savings and cash flow in your 20s
Holding out for payday? Looking under couch cushions for spare change? Eating two-minute noodles? We see you. Living paycheck to paycheck is a good indicator that you might have lost track of where your money is going. And let’s face it, no one wants to live their life hoping every transaction won’t be declined.
When it comes to managing your cash flow - what’s coming in versus what’s going out - there’s a simple mantra we like to follow → Spend less than you earn and invest regularly.
Review your recent transaction history to see what you’re spending your hard-earned cash on.
Identify your spending habits and categorise your transactions (i.e. friends, self-care, essentials, food)
Figure out the gap between what you earn (weekly, fortnightly or monthly) and what you spend on
Check-in to see if these are aligned with your long term goals and how much you can comfortably afford to invest.
Here’s the thing → if travel is something you really value, budgeting for an overseas trip every year might be reasonable. But if you’re spending $5,000 a year on last-minute getaways (when you really want to be saving for a house deposit), it might be time to readjust your spending habits. If travel is a must, then it can be a good idea to have one savings account for travel and one for long term savings and set a weekly or monthly goal for each.
The other golden rule when it comes to saving? Pay yourself FIRST. This one is crucial, ladies. By ‘pay yourself’, we mean - pay into your savings first. Set up automatic direct debits between your spending and savings accounts to make sure you don’t overspend on a weekly basis and find yourself short on cash to transfer into your savings account at the end of your pay cycle. Game changer!
Investing in your 20s
One of the best ways to build long term wealth and master money in your 20s is to understand your options when it comes to investing. Even on an entry-level or part-time salary, you can still start small and get your foot into the investment door. In fact, the sooner you start the better off you’ll be in the long run. In a nutshell, start investing early ladies!
So, why should you start investing in your 20s? Well, we’re glad you asked! It’s all about compound interest. Remember that from maths class? No, us either. Essentially, once you earn a profit on the money you’ve invested, you can reinvest these profits to earn further returns. The sooner you start, the longer you’ll have to earn profit and that beautiful compound interest. Now that’s how to get your money to work for you!
When it comes to where and what to invest in, there’s plenty of choice for 20-somethings. Purchasing shares from the stock market is one of the most common options, which involves purchasing shares in a company and receiving a profit from ‘dividends’ (basically, a portion of the company’s profits). You don’t need $5000 or even $1000 to start invest in shares - in fact, one of the best ways to start is to take advantage of micro-investing platforms such as Raiz, Goodments, Stockspot, and a whole heap of others, which enables you to start investing with as little as $5.
Aside from shares, other investment options include: property, high-interest savings accounts and fixed interest investments (such as term deposits, government bonds and corporate bonds). Do your research and consider what investment option might be right for your current situation. When in doubt, book in to speak with a trained financial adviser who will be able to help you map out the best path to investment success for you.
Superannuation in your 20s (yes, it matters!)
We know retirement feels so far away in your 20s, but if we do the hard work early we’ll be so much better off in the long term because of our friend #compoundinterest again! When it comes to super in your 20s, it’s all about ensuring you’ve consolidated your super funds and that you check your employers are actually making contributions on your behalf.
The first step is to figure out where the heck your super is and consolidate it into a single account. Think about all the jobs you’ve ever had from that weekend job at the grocery store in high school to the retail job at the sneaker store in your hometown over summer? Chances are, each of these jobs set you up with a unique super fund (unless you nominated a specific account), each with its own set of fees and insurance. The myGov website has a handy tool that enables you to track down all your super accounts, enabling you to close and consolidate inactive accounts. Plus, make sure to let your current and future employers know about which super account you’d like them to use moving forward to maximise your long term wealth. Who knows what lost super you might be able to find.
While you’re at it, make sure to check your super balance is trending upwards quarterly to ensure your employers (past and present) have been making contributions on your behalf. Remember ladies, your super is YOUR MONEY! You wouldn’t let an employer get away with underpaying you, so why let them skip paying your super contributions?
Got any other tips to share with your fellow 20 something ladies? Get in touch with us → hello@ladiestalkmoney.com.au and help a sister out mastering her money!
The finance info discussed in this seriously fab article is general advice only. You should consider your personal circumstances or reach out if you’d like to discuss your individual needs.