Start­ing out:

Steph Nash

Money Magazine Australia - - CONTENTS - PS: If you miss me you can catch me on Twit­ter at @StephCherieNash.

Af­ter 18 months of writ­ing this col­umn, it’s time to wrap it up. I’m no longer start­ing out. I’ve worked in a full-time ca­pac­ity for al­most three years, I’ve been liv­ing in­de­pen­dently for al­most five (two of those in a stu­dio all by my­self!) and my part­ner and I have saved enough money to put a de­posit on a prop­erty. Happy days! And I owe it all to every­thing I’ve learnt at Money.

Here are the top three things I’ve learnt on the job:

1Live within your means

Life is ex­pen­sive. Health in­surance and elec­tric­ity costs in­crease al­most ev­ery year but wages growth con­tin­ues to wane. Un­like our par­ents’ sit­u­a­tion did when they were our age, we’ve now got to fit monthly broad­band and mo­bile data costs into the bud­get. Yes, your money is worth a lot more now than it was 20 years ago – if you had $1 back in March 1998 it would now be worth an ex­tra 64¢. But if you hap­pen to live in Syd­ney, that ex­tra 64¢ doesn’t mean much con­sid­er­ing the me­dian house price has bal­looned by al­most 400% over the past 20 years. So rent and mort­gage costs now take up a re­ally large chunk of the bud­get.

A credit card can help you pay your bills on time and cover un­ex­pected large costs. But it can also be a gate­way to spend­ing more than you earn. Avoid­ing temp­ta­tion is hard, and if you can’t pay off your debts within the in­ter­est-free pe­riod you’re just go­ing to ac­crue more debt, mak­ing it harder to get ahead.

It sounds pre­his­toric but bud­get­ing re­ally is the best way to avoid drown­ing in debt. Set your­self a spend­ing limit for the week, which is eas­ier now with apps such as Pock­et­book. Check your bank­ing app of­ten and set re­minders for bill pay­ments in your cal­en­dar. Bud­gets don’t mean you can’t live a lit­tle. START­ING OUT Put aside a set amount of spend­ing money for your­self each week. If you don’t have much wrig­gle room or have debt that needs im­me­di­ate at­ten­tion, you’ll have to be strict with your­self.

2Sav­ing isn’t im­pos­si­ble

You’ve got to have self-dis­ci­pline. I haven’t back­packed through Europe but a lot of my friends have. There are pros and cons. The ex­pe­ri­ence of trav­el­ling when you’re young can give you wisdom and per­spec­tive. And if you’ve got no sav­ings goals you’ve got noth­ing to lose. But if you can’t af­ford it, it’s prob­a­bly a bad idea. A friend once put an en­tire trip to Europe on her credit card, and then went to In­dia on credit the next year. When she set­tled down her debt was so bad that she had to move back in with her par­ents and get a sec­ond job to pay it off. When you’re in your mid-20s and try­ing to start your life, to me this is not an en­vi­able po­si­tion to be in.

Over the past two years I’ve learnt there are bet­ter, more re­al­is­tic ways of sav­ing than eat­ing 80¢ mee goreng packet noo­dles for din­ner. Ex­change traded funds are great for grow­ing sav­ings. They’re lower-cost in­vest­ments com­pared with man­aged funds and they pull off bet­ter re­turns than term de­posits or sav­ings ac­count. Bet­ter still, if you need the money you can sell your shares at any time – maybe even for a profit! You can in­vest in an ASX-listed ETF through an on­line bro­ker, or you can in­vest via an on­line plat­form such as Acorns, which has its own port­fo­lio of ETFs. I’ve writ­ten a lot about ETFs be­fore but if you need more in­for­ma­tion on how to in­vest head to mon­ey­mag.com.au.

3Don’t ne­glect your su­per

Give your­self a su­per check-up at the start of ev­ery fi­nan­cial year. Look at how your fund per­formed, check how much you spent in fees and make sure your level of re­turn is ap­pro­pri­ate for your sit­u­a­tion. Last year I made the call to axe my in­sur­ances within su­per. I’ve got no de­pen­dants or any large out­stand­ing debts that may bur­den my part­ner, so I got rid of my life in­surance and saved a few hun­dred dol­lars this year. This isn’t al­ways fool­proof – you could al­ways get sick and re­gret not keep­ing your cover. Seek your own ad­vice here. But it’s a re­ally easy way to cut down on fees.

And if you’ve got more than one fund, please sort that out. It’s so easy to con­sol­i­date your ac­counts – just head to the MyGov web­site and do it be­fore you lose any more of your hard-earned money to fees.

It sounds pre­his­toric but a bud­get re­ally is the best way to avoid drown­ing in debt

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