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7 smart money moves to make in your 20s and 30s

May 2023

Key takeaways

• Setting a budget, creating financial goals and starting to save for retirement early can help set you up for financial security later in life.
• Creating an emergency fund can help protect you from unexpected and unforeseen financial circumstances in life.
• Additional contributions to your super on a regular basis can offer tax benefits in addition to improving your future retirement lifestyle.

Making smart financial choices in your 20s and 30s can help set you up for long-term financial wellbeing. That's why it's important to work on building healthy financial habits early in life so that you can reap the rewards later.

Whether you want to buy a house, build up your retirement nest egg or spend time travelling the globe, these 7 financial tips will help set you up for a better financial future.

1. Develop good budgeting habits, and stick to them

Yes, the dreaded 'b' word. Budgeting isn't very exciting but creating a budget allows you to take control over your money. The process can help you pinpoint lifestyle changes you need to make in order to grow your savings and become more financially stable.

After you create a budget, it's important that you stick to it. Regularly check-in with your budgeting goals so you don't spend more than you can afford to repay. The key is to live within your means and calculate how much you could save on a weekly, monthly or yearly basis. Not sure where to start? Moneysmart's budget planner is a quick and easy budgeting tool that can help you get set in the right direction.

2. Set financial goals

Now is a great time to set financial goals. By setting short-term, mid-term and long-term financial goals, you'll be one step closer to being financially secure. A long-term goal, for example, might be saving for retirement. A mid-term goal could be saving to buy a house. These are all big goals you'll want to plan for financially.

Getting a sense for when you might want to reach each goal can help you make choices about how to use money you've already saved and how to continue saving and growing your money to help meet those goals.

Start by estimating how much money you'll need to meet each of your goals and align these with your budget. One key to achieving these goals is to assign them specific dollar amounts and the date by which you want to achieve it.

3. Set up an emergency savings fund

A great step to take in your 20s and 30s is to establish an emergency savings fund to cover any unexpected costs that may arise. Ideally, you want to have enough stashed away to cover all your daily expenses for a few months.

4. Pay off high-interest debt

Debt can hold you back from doing many things with your money. When it comes to high-interest debt, you can lose a lot of money by making payments that go toward interest, so it's best to pay-off that debt sooner rather than later.

Credit cards are a great way to build your credit when used properly. But they can sometimes lead you to spend more than you earn and get into credit card debt.

Check your credit card statement for the due date and make sure you pay on or before that date. By doing this, you'll avoid paying extra interest or late fees and also help keep your credit score healthy. And if you can make higher repayments each month, you will pay off the debt faster and save money.

Similarly, many popular Buy Now Pay Later (BNPL) services are often advertised as 'interest free' or '0% interest'. But they charge fees that can add up quickly. They may charge:

• late fees - if you miss a payment or pay late, around $5 to $15
• monthly account-keeping fees - a fixed monthly fee, up to $10 a month
• payment processing fees - some charge an extra fee of around $3 each time you make a payment
• establishment fees - a fee to set up the account. For some there are no establishment fees, for others these fees can be up to $110.

To compare fees charged by different providers, see buy now pay later fees on the Australian Finance Industry (AFIA) website.

5. Start saving for retirement

When you're in your 20s and 30s, retirement may seem like light years away. However, now is the best time to start saving for the retirement lifestyle you want. Why? Because the power of compounding - time is truly on your side. Some small simple steps now can boost your super and make a big difference later.

One way to grow your nest egg is to negotiate with your employer to increase super contributions by salary sacrificing. These contributions are on top of compulsory contributions made by your employer (currently, your employer must contribute 10.5% of your salary into super).

Salary sacrificing into super is an agreement between you and your employer to pay some of your pre-tax salary as contributions into super. Doing this can also be tax effective. Salary sacrificed amounts to super are concessional contributions. The amount you contribute to super is taxed at up to 15% (and up to 30% if your income is over $250,000 per annum) rather than your marginal tax rate, which might be up to 47%. Keep reading to discover more ways to grow your super.

6. Invest in yourself

As you begin a career and find your place in the workforce, take advantage of personal growth opportunities, professional development courses and skills training. Work with your employer on a career pathway, working on moving up and establishing steady income growth.

Where do you want to be in five years? Ten years? Start there and work backward. How will you get there? Taking steps to prepare yourself for a great career can help increase your earning potential for decades to come.

7. And finally, seek advice

The best time to start planning for your future is as early as possible. Establishing healthy financial habits in your 20s and 30s can help you design the lifestyle you want to live and help to unlock financial wellbeing in retirement.

If this is something you’re looking for, we suggest seeking help from a qualified financial adviser. You can look for a financial adviser on the moneysmart.gov.au website or through an industry association such as the Association of Financial Advisers (AFA) or the Financial Planning Association (FPA).