4 tips for getting off to a flying start to financial freedom as a young adult

flying start to financial freedom

4 tips for getting off to a flying start to financial freedom as a young adult

If there’s a young adult in your life, these tips could be just what they need to get them on the right track for financial freedom.

1. Set goals for financial freedom

  • Think about how you want life to look in the areas of your career, lifestyle, life partnerships, and finances.
  • Plan the short-, medium- and long-term actions you need to take to maximise the likelihood of achieving these outcomes.
  • Learn to budget, and practise living within your means. It’s a skill!

2. Make investing routine, immediately

  • Start now, even if the amounts are small. Compounded returns are a young investor’s friend – every cent counts.
  • Compartmentalise and prioritise:
    • Allocate greater weighting to short-term requirements than long term: life is for living, not deferring.
    • At the same time, remember that feedback drives action, so keep your long-term goals visible.
    • Revisit your long-term investment progress yearly, by appointment; it’s easy to ignore it, but the adverse effects of neglect are difficult to rectify later.
  • Maintain flexibility because life happens. Your desired outcomes, marriage, career, health, the economy… they all have a bearing on your investment strategies and financial freedom. You should be able to adapt or amend your investment choices without incurring unnecessary costs.

3. Avoid debt

Remember that credit card debt is one of the most expensive ways to borrow money, so avoid it like the plague. Make it a habit to pay cash so you only purchase what you can afford.

However, a favourable credit score is an asset when applying for a mortgage or car finance, so consider using a credit card for monthly expenses, but settling the balance in full each month (before any interest accrues). Alternatively, if your bank is reluctant to issue you with a credit card, use a store card account and settle the balance monthly for 12 months to show that you can manage your finances responsibly.

4. Systematise a process to tick your first financial boxes

  • Have an emergency cash-stash: the rule of thumb for this is 6 x your monthly salary.
  • Get medical aid: at the minimum, cover the high costs of hospital stays or procedures.
  • Use tax-efficient saving methods: ideally use these for long-term assets so that the tax saving is compounded in your favour.
  • Save for your first property deposit: depositing a lump sum reduces the monthly bond cost and makes bond procurement smoother.
  • Draft a will: especially if you have a spouse, life partner or dependants, leave instructions for what happens
    to your estate after you die.
  • Get disability cover: we all think we’re bulletproof when we’re young, but what would happen if you had an accident and couldn’t work anymore?
  • Register with SARS: find out if you’re required by law to submit returns.
  • Measure your progress: make an annual appointment to celebrate your progress and revisit your financial plan.
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