If I was 25 again, I would…

We asked ourselves “if I was 25 again what would I do differently?” We hope these insights help create good habits from a young age.

…pay more attention to my super.

I would recognise the importance of my superannuation and view it as my responsibility, rather than a concern for the elderly.

The first action I would take is to unify all my superannuation accounts into a single entity, in order to sidestep multiple fees. I would also scrutinise the details of any insurance attached to my super, questioning whether it’s currently necessary, and if it offers a competitive deal on income protection insurance. Professional advice would be sought to evaluate the investment allocation and ascertain if it aligns with my future savings aspirations.

Despite the range of other pursuits that I’d engage in before considering retirement, I would continually monitor my contributions over the years. I’d ensure my employer is accurately contributing their fair share and observe as the balance grows into a sufficient retirement fund that could potentially offer me financial autonomy when I finally decide to retire – that is, if I ever choose to do so!

…exercise caution with investment trends.

The current hype is around cryptocurrencies like Bitcoin. In 2000, it was all about technology stocks. In 1987, shares were the craze, and way back in the 17th century, tulip bulbs were causing a frenzy among investors.

With investments, trends typically arise when asset prices are inflated due to irrational enthusiasm, avarice, and the pervasive ‘FOMO’ – the fear of missing out. Traditional principles of investment valuation are thrown aside, and speculative trading takes centre stage as masses are swept up in the hysteria, only to face an inevitable crash.

Whilst the allure to partake in these trends can be compelling, I would instead commit my resources to investments I thoroughly comprehend; ones that derive their worth from a realistic potential to yield long-term income and/or capital growth. I wouldn’t entirely discount the occasional small punt on a ‘speculative’ investment, but it would be accounted for within my entertainment budget, rather than forming a part of my core investment portfolio.

…opt for a second-hand car.

The moment you steer that gleaming new car out of the dealership, its value plummets by several thousand dollars. It’s not immediately perceptible, but that’s tangible money washed away. This is why a widely endorsed financial advice is to purchase the most affordable car your ego permits.

Modern cars are significantly more dependable than their predecessors, and the balance of the new car warranty, which can extend up to seven years, often passes on to the subsequent owner. A substantial proportion of a new car’s value depreciation happens within the first three years.

Choosing a vehicle with some kilometres already on the speedometer could save me thousands. I would also make it a point to research the service costs associated with the car I’m considering, as these expenses vary greatly depending on the car’s make and can accumulate considerably over time.

…buy less stuff and seek more experiences

It’s undeniable that we all need to purchase things, especially in our 20s when we’re establishing our lives beyond the familial home. However, the thrill of acquiring new items often proves fleeting. Fashions change, causing clothes to become outdated. Shiny new cars gradually lose their lustre. The latest tech gadgets soon fall by the wayside.

Contrarily, cherished memories from unforgettable experiences can remain with us for a lifetime. That breathtaking Santorini sunset, the electrifying excitement of the Grand Prix, or the serene magic of gliding in a hot air balloon over a renowned city. And these experiences don’t necessarily need to break the bank. Why not be the first to witness a sunrise from a local summit, or offer your time to a charity food van?

There are countless ways to create memories that will nourish our spirits, just as effectively as our future savings and material belongings will.

…allocate extra payments towards my mortgage.

Imagine finding an extra $100 each month – less than the daily cost of your habitual coffee – and directing this towards the repayment of a $300,000 mortgage with an annual interest rate of 3.75% over a 25-year period. This approach would result in an interest saving of $17,466, while also trimming more than two years off the loan term.

Should regular extra payments prove challenging, I’d aim to use any unexpected financial gains to reduce the loan. An additional payment of $1,000 at the beginning of the same mortgage would lead to an impressive interest saving of $19,795 over the loan term!

One practical method to achieve this would be through a mortgage offset account, ensuring all of my savings, inclusive of the occasional extra amounts, contribute to diminishing my overall interest payment. The advantage of this approach will only amplify if interest rates rise in the future.

…settle my credit card balance in full each month.

Credit cards, despite their convenience, can be a serious snare. The simplicity of contactless payment technology can lead to unthinking expenditure, resulting in a mounting debt pile. If the balance isn’t cleared within the interest-free period each month, the carried-over debt starts accruing interest at rates often exceeding 10% per annum, sometimes even reaching 20%. This exacerbates the debt, making repayment more challenging.

To counter this, I would utilise that interest-free period to my benefit. Paying all my expenses with the same card would allow me to retain my cash in a high-interest account or mortgage offset account, thereby accruing (or saving) significant interest until the credit card payment is due. Alternatively, if I were susceptible to overspending, I might consider reducing my credit limit or switching to a debit card to ensure my expenditure doesn’t exceed my affordability. My credit rating would certainly appreciate this approach!

…embrace budgeting!

I wouldn’t shy away from the ‘B word’ – budgeting. Rather, I’d treat it like an engaging challenge, monitoring the sources of my income and decoding the enigma of my expenditures. While my income might be relatively fixed, I’d devote my attention to controlling my spending; understanding my obligatory expenses and identifying what falls under ‘discretionary’. The odds are high that I’d be surprised by my findings – expenditures on unnecessary or undesired items, and insufficient allocation towards matters of importance to me.

I would also establish short-term goals, such as saving for an international trip, securing a home deposit, or contributing to a worthy cause, while simultaneously preserving space for present-day enjoyment. While maintaining flexibility, these goals would aid in prioritizing my discretionary spending, facilitating a strategic savings plan, and ultimately enabling me to derive greater pleasure from life.

What now?

I hope you’ve found these reflections and insights valuable in guiding your financial journey. The beauty of hindsight is that we can learn from it, and there’s no better time than now to start creating habits that can lead to a secure financial future.

If you have any further questions, or would like to explore how we at Stream Financial can help guide your financial path, don’t hesitate to get in touch. We believe in empowering you with the knowledge and strategies you need to make informed decisions for your financial well-being. Take the first step today. Contact us for a no-obligation chat about your goals and aspirations. We look forward to helping you build a financially secure future.