What money advice would you give your 20 year old self?
Was there one big money mistake you made in your twenties that makes you wish you could turn back the clock?
Or are you in your twenties now and want to know what money decisions you should be making now?
Whatever your situation, nothing beats some expert advice when it comes to an area where most Australian’s feel a little lost, their personal finances.
RateCity talked to five of Australia’s leading money experts to get their advice on what they would have done differently in their twenties now that they’re older and wiser.
Don’t put all your eggs in one basket
Don’t let your youthful enthusiasm get the better of you when it comes to investmenting warns Mark Bouris, Executive Chairman of Yellow Brick Road Wealth Management.
“I made a big investment mistake in my 20’s,” says Bouris, “a stockbroker friend of mine put me onto a ‘hot stock’ and I put a lot of money on it.
“It tripled in price quickly and then crashed to 0.3¢. My friend was bemused that I’d left all my money in when the share price rose so fast.
“He – like other professional investors – sold down parcels of the shares as they took-off, so some gains were locked in as the shares increased.”
Although with every mistake comes a lesson and Bouris says the experience was definitely a learning curve.
“There were many lessons that I learned from this episode that I wish I’d been told before such as you get returns from time and risk. If you want sustained returns from investments, over long periods, you must diversify.”
“Shares, property, fixed interest and your own business may all be good investments, just don’t put all your money into one of them,” he warns.
Retirement is closer than you think
It seems that even the experts let their immediate pleasure get in the way of future gains when they first started out their working life.
“I wish I’d salary sacrificed at the age of 20,” says Effie Zahos, Editor at Money Magazine.
“A lot of young people just put it in the basket of retirement is so far away, I don’t care or it’s not my problem but there’s an interesting story that I always remember.
“When I graduated from uni…I was taken as a graduate trainee for Westpac, and my mate Darren and I were sitting next to each other and were going for the same job. We got it and the financial advisor came around and said look, you should be salary sacrificing some of your income.
“I was like no way but my friend Darren said yeah I will and I think of the top of my head it was $50 he was putting in per pay and we were paid fortnightly,” recalls Zahos.
By her calculations, if Darren had continued with the same salary sacrifice scheme to this day, he would be retiring about 2.4 years ahead of her.
“I’m salary sacrificing now right up to the max but I’m older and wiser and it’s not too late but it would have been a lot easier had I put even just $10 away when I got my first job.”
Save for a rainy day
Zoe Lamont, CEO and Founder of 10thousandgirl.com.au, also advises to jump on the savings bandwagon early.
“Start squirrelling, even little bits of money away as soon as you start earning it,” she advises, because there’s never a better time than in your twenties to go on an adventure.
“I know I had this when I was in my 20s, sometimes all of a sudden you realise you hate your job, and feel like you don’t know what you want to do with your life.
“I think because I had some buckets of money saved all of a sudden you can go overseas for a year or do some study or work in a job where you’re not as well paid but you’re surrounded by awesome people and learning lots and building a career you love.”
It’s the savings that you tuck away early on that allow you these freedoms says Lamont but it’s not only about the short term.
“Small regular saving and investing now with compound interest can mean magic down the track,” Lamont says.
“Say when you turn 20 you start putting $50 a week into a managed fund earning 8% returns, when you retire at say 65, you’ll have an extra $1.1 million - that’s on top of your super and any other investments you may have.
“Most importantly, if you’re doing these things you’re practicing and instilling key money habits that will set you up for life.”
Put down the credit card
For Marie Mortimer, Managing Director at Loans.com.au, learning to live within your means during your twenties is key to coming out financially unscathed.
“Your early 20s are generally a costly time of your life, although not necessarily an expensive one,” says Mortimer.
“Usually, people making the step from their teens to their 20s are studying, working part time, doing apprenticeships, and otherwise just not earning all that much.
“Often, if they are still living at home or in a share house, their living expenses wouldn’t be that high, but add in running a car, phone and internet contracts, gym fees, and a fair slice of nightlife, the money doesn’t go that far, particularly when there’s not a lot of it to begin with.”
This, she warns, is the equivalent of a personal finance danger zone.
“It is easy at this stage of life to rack up a high-interest credit card debt, including store cards, whether out of necessity or being impulsive.
“A lack of financial knowledge can lead to a debt that takes years to pay back and any defaults go on your credit history. Spend less, and if you must have it, layby it.”
While it’s great to learn to do it yourself, sometimes all you need is some inspiration in the form of a money mentor says Michael Yardney, Director at Metropole Property Strategists.
“Find a mentor, find a model, somebody who has done what you want to do and stand on their shoulders and look above them to see where you can go rather than trying to invent yourself.”
Also, when starting to invest in the property market, keep in mind that even the best laid plans can come undone.
“There’s always an x-factor, something out of the blue that you weren’t prepared for. The one last year that surprised a lot of people was two interest rate drops that actually pushed the property markets up,” says Yardney.
“Sometimes the factor is positive but sometimes they’re negative. There are also local things or sometimes things like international terrorism that come out of the blue or the Global Financial Crisis.
“So always be prepared for something out of the blue that makes your best laid plans suddenly run into challenges.”