Young and in love, the infatuated couple floats past the rest of us, lost in each other’s eyes. Sound like someone you know? It is not all that unusual for young lovers to get married early, despite general consensus to the contrary in this new millennium.
New to the adult world, they are only just discovering the complexity of life and choices in a grown up world. Together the newlyweds struggle through the normal emotions and practicalities of leaving the nest and cleaving to another person. Money is the least of the many worries as they gaze at their beloved, but it has the potential to become a make or break factor in the relationship.
The magic doesn’t have to die young if money is put in its place early on. There are some key elements to assist young adults come to grips with the new load of financial responsibility. Here are seven tips for finding your financial groove when you first step out into the world:
It is not a cliche. It really works. Budgeting helps provide a clear and continuous picture of your income and expense situation.
Budgets don’t need to be inflexible or tedious, but it is advisable to sit down together at least once a year to form a spending, saving and investment strategy; and once a quarter to assess the progress. Talk about where you want the money to take you and do the nitty gritty calculations of how you plan to get there. Here are Ten Tips For Building a Budget.
Money is essential to fulfilling life goals and reaching impossible dreams. To reach this point, there needs to be something extra available than just a monthly income. Saving for emergencies is one thing, but real wealth potential starts with making a meaningful plan to put away money and being committed to it each and every month, no matter what.
When spending starts it is easy to overlook the saving aspect of your financial strategy. Saving, therefore,should be done before any spending takes place. In other words, disposable income should exclude the saving portion agreed upon in the initial budget.
The other side of the saving coin is the choice of where to keep the money. Making it work for you at the maximum possible return will help achieve those life goals sooner. The options are vast and varied.
It is best to sit down with a financial advisor, banker, broker or trusted parent to discuss possibilities. Investment opportunities could be in the form of government bonds, shares in the stock exchange or savings accounts, for example. Whether you choose to invest long term or short term depends on your anticipated financial needs.
The main question is one of risk; and this is unique to each individual. As young adults, you are often willing to invest in a higher risk portfolio to reach for higher returns. The younger you are, the better your chances for recovery of financial loss over a lifetime.
A pensioner, however, may not feel confident putting any life savings on the line simply for the possibility of higher returns. Pensioners tend to stay with a safer, lower risk investment; or even leave it in the low interest bank account. However you choose to invest, it will be a balance of risk and reward, access to cash (liquidity), personal preference, time of life and anticipated financial needs.
How do you know how much insurance to take, or whether to take it at all? consider your assets and personal needs. The rule of thumb is if you can’t afford to replace it with the money you currently have available, you need insurance. This applies to essential household goods, vehicles, homes, medical care, life and disability cover.
Depending on your asset holding, car or household insurance may be a negligible consideration. Medical or life insurance and dread disease or disability cover seems more important once you have a spouse or children relying on you financially. The amount of cover will be largely determined by your ability to pay monthly premiums, lifestyle choices and the needs of your dependents.
Remember, there is no such thing as a free lunch. As a young adult you will need to weigh the costs of insurance carefully. The premiums and excess requirements of vehicle insurance, for example, will be higher for under 25s based on perceived risk to the insurer of inexperienced drivers. For each claim made, premiums and excess may increase. Also, if there is never a need to claim, effectively the money disappears into the insurers pocket.
This is a huge commitment for a young adult. Whether it is a short-term loan, a study loan or a home loan, the loan repayments are money redirected from other opportunities to make money. Sometimes debt is necessary, but often it is avoidable or adaptable.
A student loan may be the reason a person now has a job and is able to provide for a family. A perpetually overdue retail account, however, may also be the reason the same person is blacklisted by the credit bureau. Stay as debt-free as possible and consider trying other avenues to finance projects and dreams. It may mean exercising the principle of delayed gratification until enough money is saved, or an investment pays out.
6. Impulse Purchases
Money disappears into impulse purchases like a slow-dripping tap. Before you know it, the tank is empty and there is nothing left for necessities. Online shopping, window displays and clever marketing campaigns effectively draw in the unprepared consumers.
If savings, investment and careful budgeting are part of your life, impulse spending will only derail progress. It will probably leave you feeling demotivated and keep moving your goal posts further away. Rather set aside an amount for miscellaneous spending each month and don’t exceed this. Each purchase is a conscious decision. It is your choice, your money.
7. Bargain Hunting
Searching for buried treasure is a fun and lucrative pastime, especially when starting out in the world. Discounts, vouchers, 3 for 2 specials and demo models are all viable options when trying to save money. There is no shame in being careful with every cent you spend if it means another brick laid for sustainable future wealth.
Keep in mind your personal budget strategy. Don’t buy it if you don’t need it. Don’t buy ten if you don’t need ten.
Be sure to try online bargain hunting, too. Websites like Takealot, One Day Deals, Daddy’s Deals and Bid or Buy are all South African favorites when it comes to value for money. Be wise though and research the validity of each ‘deal’ by knowing the value of similar products from other retailers. Have a realistic price range in mind, based on actual research, before making any bargain purchase.
TIP: Take care not to fall for bargain shopping myths like ‘It’s always cheaper to buy in bulk.’
On the one hand getting married young is a leap of faith often advised against by wizened couples who have faced it all. One or both of you are uninformed, a little naive and inexperienced about practical matters others take for granted. On the other hand it allows you to love each other longer, grow up with your children, dive into responsibility with someone you trust and add a few extra adventures to the memory bank. Why not?