Financial wisdom and starting your first full-time job

Ever contemplated the financial advice you’d share with your 21-year-old self if given the chance for a quick chat? Let’s be honest, as we age, we tend to get savvier about money matters. Sadly, without a time-travelling DeLorean at our disposal, revisiting the past is off the table. Nevertheless, we can pass on our financial wisdom to the next generation, particularly anyone on the brink of starting their first full-time job.

No matter your age or financial situation, hindsight often holds lessons we wish we’d known earlier. At First Financial, we assist clients in making sound financial decisions, whether approaching retirement or just getting started. If you’ve recently landed your first full-time job or have a child entering the workforce, having a substantial income for the first time can be exhilarating. However, here are some key insights for those who don’t want to learn the hard way.

Newfound financial success can sometimes lead to overindulgence in non-essentials like clothes, dining out and holidays. While there’s nothing wrong with embracing this new phase of life, it’s prudent to strike a balance between enjoyment and managing your cashflow wisely.

“When I was 21 and got my first full-time job, I tried to operate everything out of one bank account,” says First Financial Principal James Wrigley. “The crazy thing is, when I was a teenager working part-time at Kmart, I had an ordinary bank account for spending and one for saving. I didn’t spend much because I was saving for my first car, so I put every dollar I could into that savings account. But for some reason, things changed when I got my first full-time job. I never got into credit card debt or anything particularly terrible like that, but I didn’t really accomplish anything great financially in my earlier years. I did spend a lot on frivolous things and often wonder if I’d be in an even better position now had I set up some structure managing my cashflow properly back then.”

Having a structured cashflow is essential for financial stability and goal achievement. It enables you to track your spending, prioritise essentials and allocate funds for savings and investments. It also prevents unnecessary debt and facilitates informed financial decision-making.

Getting started on your investment journey isn’t just about the numbers. It’s about instilling good financial habits from the start. Regular contributions to your portfolio, no matter how modest, cultivate discipline and lay the groundwork for lasting success. With life naturally becoming more complex as you age, marked by mortgages, relationships and families, starting early increases the likelihood of maintaining this discipline when you need it most.

In today’s digital age, the investing world is more accessible than ever. Micro-investing apps let beginners start with minimal amounts, offering convenience with user-friendly interfaces and automated features. These apps streamline the investment process, empowering young investors to gradually grow their wealth. Ideally, each pay cheque, set aside a small, affordable amount into investments you plan to leave untouched.

Compound interest is one of the most potent forces in wealth accumulation. Starting early is key because as your investments generate returns those returns themselves begin to earn returns. Over time, this compounding effect can significantly multiply your original investment.

Sometimes, in our youth, a sense of invincibility can lead to neglecting crucial financial considerations such as securing adequate insurance and building an emergency fund. With increased earnings comes added responsibilities – be it a car or home loan, caring for pets, venturing into business or starting a family.

Insurance is a key element – whether for life, health or total and permanent disability. Underestimating its importance can leave you vulnerable to unexpected setbacks. Even the young may encounter unforeseen life events; hence, being prepared with comprehensive coverage is essential.

Similarly, building an emergency fund provides financial security when life takes an unexpected turn. This reserve prevents tapping into investments or accumulated wealth for emergencies. Regardless of age or the novelty of your first full-time job, prioritising the establishment of a safety net is fundamental for safeguarding long-term financial well-being.

Many young Australians view real estate ownership as the epitome of financial success and adulthood, having internalised the notion that “rent money is dead money.” This ingrained belief can lead to hasty decisions to purchase the first available and affordable property. However, it’s crucial to acknowledge that such decisions may not always be the most prudent financial strategy. James Wrigley’s own experience sheds light on the potential pitfalls of real estate.

“The biggest piece of advice I’d love to give to my 21-year-old self is: DO NOT buy that apartment. In my mid-to-late 20s, it was time to move out of home, and I was convinced I shouldn’t be paying rent. I bought an off-the-plan apartment.

Looking back, I know I could have rented that apartment or something similar to maintain the lifestyle I wanted and enjoyed while investing in a house in the suburb I currently live in. As it turns out, the house’s value would’ve more than doubled over the years, whereas the apartment’s value stagnated and I ended up selling it years ago for less than the purchase price. Even today, it still isn’t worth much more than what I paid for it.”

As you embark on your full-time work journey with a full-time income, exploring real estate purchases is a prudent consideration, but exercise caution. Reflect on your long-term goals and dreams, seeking advice from both financial professionals and experts in the real estate field.

Life is an ever-evolving journey of learning and growth. Prioritise continuous financial education as a cornerstone of this journey. Stay informed about economic trends, investment strategies and personal finance matters. Attend workshops, read books and seek guidance from suitable friends, family members and industry experts.

You’re never too young or inexperienced to enlist the services of a financial adviser to help you navigate this terrain. A financial adviser provides personalised guidance aligned with your goals and aspirations. Regular consultations ensure your investment strategy stays current and responsive to market changes.

If your education before reaching this financial and life milestone lacked financial components, it’s time to broaden your horizons. It’s essential to understand concepts such as tax planning, estate management and risk mitigation for comprehensive financial literacy. A more expansive perspective provides you with the tools to effectively manage your financial future.

Whether you’re just starting your career in your early 20s or you’ve traversed long past that stage and wish you could go back and give yourself some solid advice, the experienced team at First Financial can help you make well-informed decisions moving forward.

Our extensive experience with clients across different life stages has given us insights into a range of financial journeys.

Some reflect on past choices, while others navigate current challenges. Regardless, our commitment is unwavering—to guide everyone toward their retirement goals.

To take the first step on the pathway to wealth today, contact a member of our team.

Read more financial planning articles.