Baby Boomer John 65, looks back on a lifetime of financial decisions to provide some valuable tips to future generations.
Remember when you spent a small fortune on that trip to Hobart after the Wrest Point Casino opened? The holiday pay lasted barely one hour on those roulette tables! Four decades on and I’m pleased to report that trip didn’t set you on a path to financial ruin.
Without completely giving the game away, let me share some of what’s happened to our world over the past 40 years. Firstly, you survived! Those teenage years didn’t cause any irreparable damage although your knees and hips are paying the price for your Kamikaze approach to footy.
Our country has flourished – almost twice as many people call Australia home today than in 1973, most people earn in a month what you earnt in a year and the average price of a house and land package in the early 70s (approximately $20,000) wouldn’t cover the deposit of an average home loan.
Many of the headlines you read in the morning paper in 1973 are just as relevant today – “Crisis in the Middle East”, “Prime Minister Under Pressure” and “Petrol Prices Soar”.
It’s a similar story when it comes to finances. The fundamentals of 1973 remain the same today but as you think about the future, let me share some of the wisdom I’ve gathered over the past 40 years:
Live within your means: This seems fairly obvious but credit facilities will become easier to access as you enter your 30s. Even your grandkids have credit cards! Cleaning up the mess of easy credit debt can put your long-term plans back many years.
Minimise debt: The loan from your father to buy that mint-condition Ford Falcon GTHO may have made sense at the time but it would drag on for years before you paid it off. And let’s not even start on the financial commitment to purchase that first colour TV in 1977! Keep your debt to a minimum and make paying it off a priority.
Develop a savings plan: Remember the old State Bank savings book for which Nanna would give you 20¢ to deposit each week? It was the one successful financial decision made for you in the first 20 years of your life. Consider the money that goes into a savings account an essential part of your budget. There’ll be plenty of rainy days, and any leftover will provide a solid foundation for that retirement nest egg.
Start investing: Don’t expect me to share the previous 40 winners of the Melbourne Cup or share tips that could make you a billionaire. Start to think about how best to invest those savings – the earlier you start, the more you’ll have when you retire. Don’t forget to manage the risk too. It’s ok to put some in shares, but also look to spread it around via term deposits, property or managed funds.
Protect what’s most important: “Life insurance? What do I need life insurance for?” It may seem far-fetched now but insurance will pay for itself many times over. Hospital expenses, the odd minor car crash and a couple of ‘life episodes’ are sure to arise; when they do the peace of mind provided by insurance is invaluable. Speaking of health, stay out of the sun and watch that expanding waistline and try to lay off the bacon and eggs once in a while!
Establish credit: It is vitally important to start establishing credit while in your 20s. A clean credit report will make life much easier in the future, especially when your partner starts dropping hints that she’d much prefer to send Junior 1 and Junior 2 to the local Grammar School and you’ll need a loan to get started. And let’s not even start on Junior 3, 4, 5 etc … just kidding!
Choose your life partner carefully: Yes, you’ll meet a nice girl of boy and settle down, but it’ll be touch and go there for a while. For plenty of the boys from your school years, things won’t end quite as happily. While you don’t have to see eye to eye on every financial issue, someone with similar goals and values as you will make life much easier. If you plan on combining your finances with your spouse, communication and honesty are especially important.
One last tip – enjoy life! Money is supposed to be used, in part, for your enjoyment. Travel, entertain, take some regular golf trips, splurge here and there; you can do it all. But don’t wait. Life is here and now, and you’ll be amazed how quickly the next 40 years will fly by.
This information is provided by Charter Financial Planning Limited (Charter FP) ABN 35 002 976 294, an Australian Financial Services Licensee, Licence No. 234665, a wholly owned subsidiary of AMP and a member of the AMP Group. It is believed to be correct at the time of publication, however, no representation or warranty is given as to its accuracy. No liability is accepted by any company within AMP or their respective employees or directors for any statement or opinion or any error or omission or for any loss arising from reliance on the information contained in this document. Investments may only proceed by completing the relevant application form attached to a current Product Disclosure Statement (PDS). Fund managers will receive fees for their services out of which authorised representatives of Charter FP may be paid commission. Neither the return of capital nor the investment performance of any investment is guaranteed by Charter FP. Past performance is not indicative of future performance. Any advice given in this document has not been prepared taking into account your particular investment objectives, financial situation or needs. Any case studies in this publication are hypothetical are not meant to illustrate the circumstances of any particular individual. You should assess your particular investment circumstances prior to making any financial decisions. This taxation information is based on the continuation of present laws and their interpretation and is a general statement only. Individual circumstances may vary. From time to time we may bring to your attention products, services and other information that may be relevant to you. If at any time you no longer wish to receive information, you may opt out by contacting our office.