Episode Details

Episode 61 – Have your 20's set you up for financial failure?

Habits.

Human brains love them!

Any time we can go on auto-pilot, we jump at it.

Author Samuel Johnson observed, "The chains of habit are too weak to be felt until they are too strong to be broken".

I also like a quote from Agatha Christie on the subject "Curious things, habits. People themselves never knew they had them".

In your financial life, many of your significant habits are formed in your 20's. And often you don't realise it until much later. So today's post highlights some of the habits you might have inadvertently picked up, and suggests some ways that you can create new habits to put you in a stronger financial position into the future.

Whilst my 20's are now quite a while back, they're not so distant that I can't recall the enormous transformation that occurred from the beginning of that decade in my life, until I came out at the other end.

Uni and work – I studied part-time at night over 6 years and worked during the day. From living at home with the parents, through a few share houses, to buying my first property.

And of course the normal relationship ups and downs, including an engagement that never made it to the big day. I also met the lady who is now my wife, and I must have done something right in my 20's, because only a few weeks after turning 30, our first child was born.

What is clear when I think about my 20's, and those of my friends, is that they were such an important decade, laying down many of the foundations for our lives. It's a big call perhaps, but I wonder if your 20's aren't perhaps the most important in your life.

But that doesn't mean the trajectory that you set for yourself in your 20's is locked in for the remainder of your days. So let's look at some potential bad habits that you may have picked up, and see if we can't get you onto a better path.

The number 1 financial problem for Australian's is spending too much, which is most often facilitated by credit cards. Habits are tough to break. If you get used to just slapping everything on the credit card in your 20's, there's a good chance you'll continue with that approach in 30's and 40's.

And if you move from your 20's and into your 30's carrying unproductive debt such as credit cards and personal loans, you might never be able to break into the housing market, an important financial foundation for very many of us.

But if you find yourself in that position, it's never too late to change.

The first step if you've gotten yourself into a spending induced hole is to stop digging! Take the credit card out of your purse or wallet, reduce the limit, and if you've got multiple cards, cancel all bar one.

Personal debt such as credit cards are a symptom of spending beyond your means. To solve this problem, you need a budget, and as mentioned in past episodes, with the advent of internet banking, it's never been easier. I've spoken about creating a budget in several previous episodes, so I won't go through it again, but if you're interested in more info on budgeting, check out episode 27 – Attaining financial independence doesn't need to be hard, and episode 16 – Getting your debt under control doesn't need to be difficult.

So you've created your budget. When you get paid, you put money to debt reduction, some aside in your bills accou