Financial Advisor for Young Adults
Entering adulthood brings a lot of new responsibilities, and one of the most significant is managing your finances. Unfortunately, financial literacy is often overlooked in traditional education, leaving many young adults not prepared and learning by themselves over time through life experiences which often results in mistakes and missed opportunities.
In this blog post, we will explore practical financial tools for young adults, helping to build a solid foundation for a secure financial future.
At the core of financial stability is the practice of following a spending plan. Creating and sticking to a budget/spending planner is essential for managing expenses, saving for the future, and avoiding bad debt. To start, track your income and expenses which will help you understand where your money is going. There are a range of free online budgeting tools or a simple Excel spreadsheet works ok. Online budget tools may come with categories for housing, transport, groceries, utilities, and entertainment. Once you have calculated your income and expenses, look for outliers or areas that can be improved. A budget is a flexible tool, it requires regular review and adjustments as your situation evolves.
In addition to understanding your spending, it’s important to recognise the emotional aspects of spending. Many young people face social pressure to spend on luxury items, social outings, travel, and the latest tech. It’s easy to get caught up in the FOMO mentality, which can lead to unnecessary spending. Understanding your financial values and learning to avoid social pressure can go a long way to maintaining financial stability.
As life is unpredictable, unexpected expenses can arise at any time. By building an emergency fund it provides a safety net and can help to prevent you from going into debt. As a starting point, set aside a small portion of each payment from work into a separate bank account until you reach your target. The emergency account should be viewed as off-limits and only when you need it. As a general rule, we aim for 3-6 months of living expenses for an emergency fund. This financial buffer can provide peace of mind, allowing you to focus on other financial goals with the knowledge that you’re prepared for the unexpected.
Income Increases
As a young adult, we often see sudden increases in pay which may be a tradie finishing their apprenticeship and moving to a fully qualified role or a person finishing their university degree and moving into full-time work. We will hopefully see continual increases in pay as you work through the initial stages of your career. During this time, it is normal and tempting to increase your lifestyle and expenses as your salary increases. This is an easy trap to fall into, instead of increasing your spending, it is beneficial to stick to a similar lifestyle regardless of income changes to a degree.
One effective strategy to manage lifestyle inflation is to increase your savings whenever your income rises. By directing more of your income to savings it helps to maintain good habits and then these funds can be allocated towards your goals.
Managing Debt
Some levels of debt are unavoidable, such as HECS-HELP or a mortgage. Avoiding high-interest debt like credit card debt or buy now, pay later where possible, as it can spiral and hinder your financial progress. If you have existing debt, seeking advice on how to repay this sooner is beneficial and can assist in reducing your interest expenses.
Working with a financial advisor to customise a debt repayment plan can further ensure you’re on the right path to financial freedom.
Prioritize Financial Goals
Setting clear financial goals can provide direction and motivation for your money management. Whether it’s saving for your first home, paying off education debt, traveling, or investing, prioritise your goals based on their importance to you and a timeline. Break down the larger goals into smaller, achievable milestones to track your progress and celebrate success along the way. Flexibility and willingness to adjust your goals will help as your circumstances will change over time.
When setting financial goals it’s also important to think long-term. Retirement may seem like a long time away, but starting to save and invest early can have a huge impact on your financial future. Even a small amount can have a big impact as it will benefit from the effects of compounding over the years.
The key pillars of a financial team include an accountant, financial advisor, mortgage broker, and solicitor. These key people don’t need to be utilised all at the same time, however as you progress in your financial journey, building a solid team of professionals that are working for you is key.
It’s important to choose professionals who understand your unique needs and financial goals. An advisor who is experienced in working with young adults can offer guidance tailored to your stage of life, helping you make informed decisions. Regularly reviewing your financial strategies with your team can also ensure that you’re staying on track and adjusting your approach as your life changes.
At Unified Wealth, our team is highly experienced and provides goal-based advice and solutions for a range of advice strategies. We understand the unique financial challenges that young adults face and are here to support you every step of the way.
After working as an advisor for a decade, Joel founded Unified Wealth.
Unified Wealth specialises in helping clients who are facing life’s big decisions.
Whether you’re contemplating your first property, growing your family or starting your investment journey we can help you focus on the simple steps to help you make your goals reality.
Our priority is making sure you have all the right information available to make the best possible decisions for you and those you love.
Our company values are:
Unity - We are most effective when we work together as a team
Trust - We are trustworthy and act in your best interests
Transparency - We are honest and communicate openly
Education - We are committed to lifelong education
At Unified Wealth our team is highly experienced and provides goal-based advice and solutions for a range of advice strategies.