Bitcoin, emergency accounts, freedom funds. Sure, these are the buzzy terms used to help you make the most out of your pay cheque. But you could argue, if your basic spending and saving principles aren’t intact, your finances will simply lead to a state of debt (no matter how many bank accounts you have.)
Owning your money seems like a simple idea, right? But with statistics from Money Smart showing that on average, Australians have around $4,000 debt each, you could argue that most of us aren’t really owning our money choices.
Financial adviser and co-founder of Honest Money, Jacqui Park is passionate about empowering women with their financial knowledge. Sharing a mutual passion for financial inclusion, we asked Park to give us the basic principles she wishes she could tell every millennial woman about their hard-earned cash.
From the danger of lifestyle debt, to the basics of compound interest, grab a notepad, you’re going to want to take notes.
#1: Own your money
"You wouldn’t let someone else control your career or your health. Just like that, you should never let someone else control your finances. I say this because being on top of your money is necessary for being in control of your life and your direction. That doesn’t mean you have to be a financial expert.
You can always ask others for advice. It just means you need to have a good idea of what’s going on, and be your own decision-maker. In case you need convincing, here’s a not-so-fun fact: 90 percent of single Australian women retire in poverty. And we all know the divorce stats. A man is not a financial plan."
#2: Reset your money mindset
"It’s easy to spend mindlessly everyday, and let money fall to the bottom of the priority list. But, you can completely change your future by being more purposeful with your money. The best place to start is by defining what money means to you. It might be freedom to choose your life path, or, the comfort of knowing you can provide for a loved one.
Next, set clear, measurable financial goals for the short and long term. Don’t set too many, try focusing on a handful is much more effective. Commit to these.
Finally, learn about your money habits. What’s likely to get you into a spending spiral? Are you feeling tired, stressed or sad? By identifying those triggers, you can start being aware of them as they happen, then eliminate them step-by-step."
#3: Put your money to work
"One of the most important concepts in money is compound interest. (#1 is the habit of saving). This is because your money can make money just by sitting in an investment. How? Because the interest you earn on an investment can earn more interest on itself.
Getting started sooner is smart. But it’s never too late to start and be smart. Typically, women are less likely to invest, which means we’re missing out. Keeping your money at the bank is a bit like putting it under the mattress. The only place it’s going to go is nowhere. You need to invest for your money to grow. The counterbalance to this is that there is no such thing as a get rich quick scheme. If it sounds too good to be true then it probably is."
#4: Invest in yourself
"This is probably the most profitable investment you can ever make. By upskilling or learning something completely new, you can make a huge impact to your current and future earning power. Even if the robots don’t come for our jobs, work will inevitably change. You can’t control the world at large, but you can control what you do.
Having a job you enjoy is one of the best retirement plans as well because if you love your work, you might find you don’t want to quit, even if you’re 100."
#5: Eliminate and avoid lifestyle debt
"Using credit cards and personal loans to help pay for your lifestyle, from holidays to haircuts, is a total freedom killer. For a start, anything you borrow today by paying for it on your credit card, means you’re taking from your pay cheque tomorrow."
What’s worse is you’re paying the bank every month (a.k.a interest) to take from your future self. That interest tends to be very expensive. If you have lifestyle debt, prioritise paying it off before anything else, but do it systematically and sustainably."
#6: Don’t compare your wealth
"Today people spend their lives strangled by the choke-hold of keeping up, Just check out your Instagram feed. It might start with clothes, then become cars, holidays and houses as we get older. But living that way is a never-ending hamster wheel. So many people bankroll their lives today by taking from their futures, using credit cards or loans to get the latest shiny thing. That’s their choice. Run your own race. You’ll never be free if you don’t stop comparing."
#7 Spend for happiness, not pleasure
"We live in a world of instant gratification, one that encourages pleasure over happiness. And, thanks to paypass and social media, we’re primed to focus on the short term. But those bursts of pleasure from a new bag or playsuit bring a blink-and-it’s-gone feeling. On the other hand we have happiness, the deep, enduring contentment that doesn’t come and go with an impulse. The ongoing feeling you get from strong relationships or meaningful causes. There’s a place for both. But over time the best use of money is for happiness. Pleasure is just a sugar hit that’s gone before you know it."