In your 20s, you might be saving for an overseas trip, eyeing a new car, looking for your own pad, or simply trying to keep your wardrobe up-to-date, and have cash left over for Saturday night.
While you mull things over, it’s worth giving some thought to how what you spend today could also impact you later on—especially with one in four Aussie households experiencing financial stress.1
Misdemeanours worth avoiding
Going without a budget
Budgeting might sound too much like hard work, but knowing what you earn, owe and spend can give you control over your money, and let you quickly identify areas where you could be saving.
Using your credit card for everything
Credit cards can be convenient but they’re often more expensive than other forms of credit as they usually have higher interest rates2. Plus, people tend to spend more than if they’re just taking out cash.
Whenever you don’t pay your balance in full for the month, interest is also payable—and that includes when you only pay the minimum amount owing. For more info, check out our article - Are hefty interest charges costing you your social life?
Keeping up with the Joneses
The pressure to stay up-to-date with your peers and even celebrity icons can be a subconscious motivation behind a number of poor financial decisions.
Try to live within your means and stick to realistic goals.
Borrowing money from friends and family
When you’re in a bind, while you may be tempted to ask for a hand-out, it can put strain on relationships, particularly if it becomes a regular occurrence.
The person may need the money back quickly, begin judging your spending habits, or worse—end the friendship if they don’t get the money back.
Buying an expensive car
The average household in Australia is currently juggling car debt of $19,500.3 The purchase price of a new car is one thing, but the added costs are another.
ASIC’s new mobile phone app MoneySmart Cars can help you work out the overall costs.
Pursuing higher education without a plan
According to AMP.NATSEM research, estimated lifetime earnings for those with degrees are, on average, higher than those who don’t go beyond year 11.
However, if you’re considering further education, ask yourself whether the field you want to enter is the right one for you. The average debt for a tertiary student in Australia is about $19,100.4
Quitting your job on a whim
You may not like where you work but if you’re planning your exit march, it’s wise to have another gig lined up as it could be months before you find another opportunity and have cash coming in.
If it’s your current pay cheque that’s got you twisted, consider whether you've earned a pay rise and how you might go about asking for one.
Not prioritising your goals
The benefits of thinking long term when it comes to your goals are pretty clear. For instance, buying a car, going on holiday and moving into a new apartment all within a six month period mightn’t be financially viable. Our online tool can help you prioritise and create your own goals timeline so you can map things out accordingly.
Foregoing an emergency fund
One in eight Australians don’t have enough money set aside to cover even a $100 emergency.5 And, you don’t want a busted phone or car tyre leaving you financially stranded.
An emergency fund can give you peace of mind and reduce the need to rely on high interest borrowing options. See our pointers on how to set one up.
Avoiding the money talk with your partner
It’s not nice to think about, but disagreements about money is a major cause of divorce in Australia.6
So, before you set up joint accounts or move in together, address how you’ll both contribute. If you are moving in together, it’s also worth knowing what happens to your finances if you split with a de facto.
Spending a fortune on the wedding
The average Australian wedding today costs around $36,200, and 35% blow their budget.7
To avoid a wedding budget blowout, start saving, talk to your partner—and parents if they’re involved—write down what you can afford, get quotes, and look at how many and who’ll be on your guest list early on.
Being blasé about insurance
It’s estimated that at least one in five Australian families will suffer from an insurable event.8
While you may choose to go without insurance to save money, for many Australians insurance is affordable and can be paid via monthly premiums or your super, which is where more than 70% of Australian life insurance policies are held.9
Choosing a property that's not within your means
Whether you’re renting or buying it’s important to think about the upfront and ongoing costs involved, and the location you’re looking at as different suburbs come with different price tags.
If home ownership is on the cards, get a full run-down of the costs you’re likely to come across.
Not caring about your super
It might seem like a lifetime away but with many Australians looking at a retirement of 30 years or more—and the Age Pension alone unlikely to be enough10, putting money into super is worth thinking about while you still have time on your side.
There’s a lot to think about when it comes to the short and long term, but the good thing is doing a little bit now can make a big difference down the track. For more tips, follow us on Facebook.
1 AMP.NATSEM - Buy now, pay later: Household debt in Australia
2 MoneySmart - Credit cards
3 ASIC - Consumer watchdog launches new mobile app to highlight the real cost of buying a car
4 Australian Government - Higher Education Loan Program and other student loans: a quick guide
5 Finder - How a $500 emergency could spell financial ruin for millions of cash-strapped Aussies
6 Relationships Australia - Impact of financial problems on relationships
7 MoneySmart - How much can a wedding cost
8 Finder - The impact of underinsurance in Australia
9 Rice Warner - Insurance through superannuation
10 ASFA - Retirement Standard
More cash on hand often comes down to a bigger salary, but sometimes it also comes down to money smarts.