Your starter guide to managing money

Thinking about the current state of the economy is enough to make anyone crawl back into bed. Interest rates are rising, along with food and energy prices, and the rental market is in complete crisis.

While none of us has control over structural economic challenges, we do have control over our own financial decisions. Whether you’re saving up to buy a car, or filing a tax return, or just trying to get by, arming yourself with financial knowledge will help you to make smarter decisions and reduce your stress levels in the long run.

This article will cover:

Managing your money

Spending your money

Moving out of home for the first time

Know your rights and entitlements at work

Managing your money

Work out your money goals

A financial goal is a target to aim for when managing your money. It can be a short-term, mid-term or long-term goal and involve saving, spending, earning or even investing money. Saving money is an important financial goal, as it provides security in your life while also enabling you to enjoy it. If you know that you have a certain amount of money saved for times of need, it will give you peace of mind and you’ll be able to spend the money you’ve intentionally set aside for more indulgent purchases without feeling guilty.

Remember to make your goals specific and measurable, and give yourself a deadline. For example, ‘My goal is to track my daily spending for three months’ (a short-term goal) or ‘My goal is to save $X in my emergency fund each month for the next year’ (a long-term goal).

Use the next couple of tips to start thinking about your own money goals, and don’t forget to write them down.

Track your spending and identify your ‘wants’ vs ‘needs’

Knowing exactly where your money is going will help you to take control of your spending and saving habits. Start by downloading copies of your monthly bank statement for the last three months and identify your expenses. You might discover that there’s a subscription you never use, or realise that you’re spending a lot more on food than you thought.

A good way to start changing your spending habits is by identifying your financial needs and wants.

  • A financial need is an expense that is essential to maintaining your physical and mental health, such as rent, utilities bills and groceries. For some people, this can also include things like a gym membership, as it’s important for their physical and mental health. Financial needs are different for each person.

  • A financial want is an expense that helps you to live more comfortably, such as taking a holiday or going to gigs.

From the list of expenses you’ve identified from your bank statement, highlight your ‘financial needs’ and then review the ‘financial wants’ that are left. Ask yourself if there’s anything you could cut back on to help you save.

Discover more tips on how to track your spending here.

Learn how to budget

Once you’ve tracked your spending, you can start to budget where you need and want your money to go based on how much you’re earning. Having a budget will guide you to spend only what you can afford.

  • Income: Start by making a list of all the money you receive from different sources, including your wages, government benefits or investments.

  • Expenses: Add up all your essential living expenses such as rent, bills, transport and medical costs.

  • Save: Once you’ve deducted your essential expenses from your income, the amount left is how much money you have available either to save towards your money goals or to spend.

  • Spend: Once you’ve worked out the amount to save, you can choose to spend what’s left on your ‘wants’ (e.g. eating out and travelling).

Use a tool like this one to start your budget and learn more about budgeting here.

The Money Hacks Challenge: Budget Better

We asked three young people to keep a personal budget and tell us how it works, how it can help, and how to keep yourself on top of your money.

This is a skill you’re going to have for the rest of your life. You’re going to need to know how to budget whether you’re rich or you’re poor. Budget the way that works for you, and make your budget work for you.

Start an emergency fund

An emergency fund is money saved to cover urgent or unplanned costs such as emergency home repairs or medical costs. Even if you can only put $20 a week into your emergency fund, you’ll have $1,040 put aside by the end of the year. A good financial goal is to have enough in your emergency fund to cover three months’ worth of essential expenses.

Saving money in an emergency fund on a regular basis will gradually develop into a good money habit. You’ll stop treating saving as optional and start treating it as a required expense.

Learn more about emergency funds here.

Spending your money

It’s really common for young people to use credit cards and ‘buy now, pay later’ services. These services create debt, so it’s important to spend only what you can afford to pay back.

Understand how credit cards work

Before you decide to apply for a credit card, it’s a good idea to think about how you’ll use it and pay it off. If you only spend what you can afford and pay your credit card bill on time each month, then credit cards might be an option to consider. However, avoid using credit cards if you’re struggling to pay off any existing debt, as it may worsen the situation.

Credit cards allow us to borrow money from a bank to pay for goods and services (unlike a debit card, which uses money you already have in your bank account). When you pay for things using a credit card, you build up debt that you need to pay back. As borrowing money from the bank is a service, most banks will charge an annual service fee.

Each month, you will get a credit card bill and have the following payment options:

  • If you pay off the balance in full and on time, no interest will be charged.

  • If you pay the minimum repayment, usually a small percentage of what you owe (e.g. 2%), interest will be charged on anything left owing. (This is the main way banks make money from credit cards.)

  • If you miss the repayment date or pay less than the minimum repayment amount, a late fee will be charged, plus interest on everything owing.

If you’re considering applying for a credit card or currently use one, have a think about why you feel you need it. If you decide it’s a good option for you, remember to pay your balance in full and on time when your monthly bill arrives.The longer someone takes to repay their bill, the more interest they’re likely to pay back overall. Missing repayment dates will also negatively impact your credit history, which can affect your ability to take out a personal or home loan in the future.

Learn more about credit cards here.

Understand how ‘buy now, pay later’ services work

It’s common to see ‘buy now, pay later’ payment options such as Afterpay, Klarna and Zip Pay when we’re online shopping. These services allow you to buy a product and pay off your purchase over a few weeks or longer. Similar to a credit card, when you use a ‘buy now, pay later’ service to buy something, you build up debt that you need to pay back over time. Although if you don’t pay interest on the purchase, you may be charged fees – such as late payment fees and bill transaction fees on BPAY payments – and these add up quickly.

‘Buy now, pay later’ services are convenient, but they also make it easier to spend more than you can afford. If you’re thinking about using these services, make sure you understand the risks, set and stick to a spending limit, use only one service at a time, and budget for payments.

Learn more about ‘buy now, pay later’ services here.

Moving out of home for the first time

Moving out of home is an exciting time, but it can also be stressful if you haven’t made a proper budget. Before you move out, work out what ongoing costs you’ll need to cover, such as rent and utility bills, as well as one-off costs – for example, a security bond and WiFi connection set-up fees.

If you’re sharing a place with a partner or housemate, make sure you agree upfront on everyone’s financial responsibilities. Talking about money with your housemates doesn’t have to be an awkward or confrontational experience. Organise a casual, in-person catch-up over a coffee and discuss how each person will pay for their share of the rent, utility bills and groceries, and what will happen with the lease if one of you moves out. It’s a good idea to schedule regular catch-ups to get on top of any financial issues that arise before they become bigger problems. The more conversations about money you have, the easier they’ll become.

Find more moving out of home money tips here.

Know your rights and entitlements at work

When you start a job, it’s important to make sure you understand things like your pay and superannuation entitlements, as well as your tax responsibilities. Your type of employment will determine your pay, conditions and entitlements. For example, a permanent worker will work set hours each week, get paid regularly and have leave entitlements. In comparison, if you are a casual worker, your hours may differ each week, you’ll be paid by the hour, and you won’t be entitled to paid sick leave or annual leave. Learn more about your work rights here.

  • Pay slips: Regardless of your type of employment, you’ll receive a pay slip each time you get paid. Your pay slip includes how much you earned; how much your employer put into your super account; any money taken out for tax; your gross pay (how much you earned before tax); and your net pay (how much goes into your bank account after tax is taken out). It’s important to check your pay slips to make sure that what you’re paid is correct and that the right amount is being put into your super account and taken out for tax.

  • Income tax: A Tax File Number (TFN) is assigned to you by the Australian Taxation Office (ATO). It’s used to manage your tax and super, and you can apply for a TFN on the ATO’s website. If you earn an income, then you need to pay income tax. The amount of income tax you pay will depend on how much you earn. (The more you earn, the more income tax you have to pay.) Your employer will usually deduct tax from your pay and send it to the ATO on your behalf. This is known as Pay As You Go (PAYG) withholding and will appear on your pay slip. Find out more about income tax here.

  • Superannuation: This is money you save for retirement. Your employer must put a minimum of 10.5 per cent of your pay into a super account, in addition to your normal pay. You get super as a full-time, part-time or casual worker and can select which super fund to put the money into. Find out more about how super works here.

Learning how to manage your finances takes time and lots of practice. But if you start getting into good money habits and learning about your finances early, you’ll be able to save and plan for a more comfortable and secure future. And no matter what economic doom and gloom we’re facing, it will hopefully make crawling out of bed to face your day that little bit easier.

What can I do now?

  • Get some practical ways to save money on food, bills and entertainment.

  • If you're feeling stressed out by finances, learn how to cope here.

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