So, I’m turning 27 in August which basically means I’m turning 30 in 5 minutes and it’s never been more clear to me that I’m well and truly on the bus to grown up town. For one thing, in my new workplace, I’m no longer the youngest employee in the department. I’ve worked full time in office environments for over 7 years, and I’ve always interacted with older employees only. This was something I tried to hide at first, starting out as an 18 year old and keen to earn the respect of those around me, and then entering my early twenties it was something I embraced. But now there are at least 3-4 people I interact with who are my age or younger, I’m finally amidst my generation in the workforce and it’s making me realise that we’re all well and truly ‘adulting‘. Another example of this is meeting with a financial planner who was my age. Call me an age-ist but we were both sitting in this meeting room having a professional conversation and in the back of my mind I was thinking, ‘wow, it’s like we’re both pretending to be grown ups, but he’s my age, he knows that I’m not!‘.
I don’t know about you, but I and the majority of friends my age don’t feel like we’re bona fide adults yet. There are things in life that shouldn’t have to change with age if you don’t want them to. For example, how much fun you have, how passionate you are about what you do, your hobbies and the time you spend with family and friends. However, the looming prospect of 30 does motivate me to get the boring and basics of being a responsible adult in order. Here’s my guide to feeling like a responsible adult who has their shit together.
Money isn’t everything….when you have enough of it to survive. But when you don’t have enough of your own funds to buy food, to pay for an unexpected medical bill or to help a family member in need, then yes, it can feel like everything. I’ve kept a very simple budget since I was in my early twenties and I couldn’t live without one now. It’s not a cumbersome exercise at all, I simply have a list of regular payments which I make sure I attend to as soon as my paycheck comes in. The payments are divided into three categories, needs (mortgage payment, bills, petrol, etc), wants (discretionary spend, charity donations, etc) and savings (a fixed amount each pay period). The three categories each make up a proportion of my net pay, and anything left over goes into discretionary spend. This simple budgeting technique ensures that I have reserved enough funds for my responsibilities, both current and future (i.e. savings) before spending money on non-essentials. As your life changes and grows, your budget changes and grows with you. The rule of thumb I like to follow is that spending on needs should represent no more than 50% of net pay whereas savings should always represent at least 25%. By 30, I recommend having made a deliberate decision about whether you plan to rent or buy a home. If you do plan to buy, saving a house deposit should be a high priority.
As a twenty something, my goal was to have 1 to 3 months worth of my net pay saved as an emergency fund. The purpose of the emergency fund is to cover unexpected expenses such as vehicle repairs, a laptop purchase or unemployment, without having to incur debt. My goal by 30 is to have at least 6 months saved in an online savings account. In my late teens and early twenties, I lived from paycheck to paycheck. I recall travelling and being down to my last $50.00, had I missed a flight or had a rental car company surprised me by asking for a larger deposit, I would have been in trouble. Things like that did happen from time to time, I would find the funds somewhere or figure out a work around, but that doesn’t sound appealing to me at all now. There’s something about having a decent amount of savings to deal with life’s surprises that does make me feel like an adult, and I like it.
I have to admit, I’m all over the budgeting and saving as a twenty-something, but am very new to the investing thing. Investing is about putting your excess funds to work for you, so that you are earning a return on it that at the very least ensures your funds are growing at a rate higher than inflation. There are many ways of investing, however to me it has always been a daunting and complicated thing. Now is the time to read up on options such as investing in shares, mutual funds, the property market etc, to see what will work for you. There are plenty of forums, blogs and books you can read in relation to these subjects. If, like myself, at this stage in your life you don’t have a burning passion to learn the ins and outs of optimal investing, consult an independent and reputable financial planner.
Personally, I think that the simplest way to start with investing is by managing your superannuation, since your employer is required to pay it anyway. People my age can be reluctant to bother with superannuation because retirement seems so far away. At some point we are statistically more likely to reach retirement age than not, and by the time we actually start realising retirement is imminent, we would have lost so much time. Start with consolidating all of your superannuation accounts, keeping track of your current balance and bench-marking against the balance that you will need to comfortably retire to see if you are on track. One source states that the average super balance for a 30-34 year old is around $28,000.00. Consider salary sacrificing additional amounts into your superannuation to reap the rewards of compound interest and tax savings. Start by salary sacrificing an amount that you won’t miss from your paycheck, and as you receive pay increases, increase the amount. This is a great way of ensuring that you pay yourself first, and that you aren’t spending all pay increases on frivolous and temporary things. You should also consider the way that your superannuation is invested, generally the rule of thumb is that twenty-somethings should opt for a riskier asset allocation as they have plenty of decades left to ride out the market’s ups and downs.
4. Giving back
In my early twenties, I always thought about donating more to charity or volunteering and whilst I did a little here and there, life got in the way. Now that I’m in my late twenties, my priorities have changed and I have a more stable view of my finances and discretionary spend to be able to make regular charity donations. To me, part of growing up is finding meaning in life and one of the ways I do that is through giving back in ways that I can. This may mean volunteering time and effort or donating money. It makes me feel more connected and engaged with my community and like I exist for more than tending to my own needs.
5. Looking after your health
Approaching thirty is when the lucky majority realise we’re not immortal or invincible. Having regular health checks gives us the best chance of picking up on any problems early as well as maintaining and hopefully preventing avoidable health issues. To automate these boring and often unpleasant errands, book them all in in advance. I’m talking regular trips to the dentist, mole checks, pap smears, eye checks and anything else you may require, such as trips to the chiropractor or physiotherapist. In addition to this, and I do feel very hypocritical writing this because I’m not quite there yet, exercise regularly and be mindful of eating healthy food. Make the most of the wealth of statistical information out there and read up on health problems that average men or women in their thirties experience, and start doing what you can to mitigate or prevent these occurrences now.
6. Understanding the types of insurance available to you
Health insurance is the obvious type and in Australia, if you take out private health insurance after 30 you are actually penalised by the lifetime health cover loading. In addition, if you earn over a certain amount and don’t have health insurance, you are required to pay the Medicare Levy Surcharge. On top of health insurance, there is income insurance, trauma insurance, home and contents insurance, etc. Read up on the different types of insurances and determine which ones you would actually derive benefit from and which you don’t. For example, I am happy to take the risk on not having home contents insurance, funeral insurance, etc because I feel comfortable with paying expenses out of my savings. My employer covers my income insurance for up to a two year period if I’m unable to work. As I approach thirty, i will consider taking out trauma insurance which pays you a lump sum payment in the event that you are diagnosed with a specified illness including (but not limited to) things like cancer, heart attack, stroke etc. Apparently it is the most claimed upon insurance, understandably, and if you take out cover at an early age you can lock it in for a lower amount than if you took it out at a riskier age. Lastly, approaching thirty means thinking about starting a family, so I will have to have a conversation with my private health insurance provider about how I will need to tweak my cover.
7. Decluttering and looking after what you do have
This may include pets, plants, vehicles and your home. On the weekends, I like to clean the apartment and get rid of or give away anything I don’t need, keeping on top of clutter and setting my home environment up for another week. My partner is all over ensuring that our vehicles are regularly serviced and maintained, which gives me peace of mind that we’re looking after our significant assets and mitigating the risk of potential expenses. Having a decluttered closet saves me time because I’m not rummaging through things that I never wear in order to scrape together an outfit everyday.
8. Learning first aid
You just never know when someone is going to need help and what if you’re the only person there? Signing up to a first aid course to learn the basics is a great investment and could help you avoid potential regrets down the track.
9. Learning how to cook
You don’t need to be a master chef but knowing the basics of cooking sets you up to being an independent functioning adult who doesn’t need to rely on others for a meal. Aim to know how to make 5 quick and easy meals, such as stir fries, stews, pastas, roasts and risotto. If you know the basics, you can swap the vegetables and proteins in order to broaden your repertoire. Cooking saves money, takes the burden off (or impresses) your partner and helps you to eat healthily.
10. Meeting your obligations
There are a few things that go hand in hand with being an adult as boring as they may be. This includes mandatory legal obligations such as submitting your tax return, voting at elections and paying parking fines. It also includes showing up when you say you are going to show up, and following through when you agree to things. If you don’t actually want to do something, don’t commit to it and then let others down. Being late with payments, being in trouble with the law, being late to events, having people chasing you up for things – these things are stressful yet avoidable if you keep organised and on top of your responsibilities. Keeping a to-do list or calendar is very helpful in this regard.
11. Having ‘grown up conversations’
If you have a significant other who you plan to spend the foreseeable rest of your life with, it is important that their values or at the very least, general direction in life is aligned to yours. Being able to have discussions about children, finances, religion, living arrangements and family obligations avoids surprises down the track and helps you and your partner plan a compatible life together. The ability to successfully navigate an uncomfortable or confrontational argument is a skill that extends to many adult tasks. For example, negotiating with sales people, standing up for yourself when you have been wronged, negotiating a pay increase or resigning.
12. Career planning
Personally, my twenties were a time for setting a broad foundation for my career and experimenting with different roles to work out what I enjoy and what motivates me. I have specialised in a few functions however have also invested in my career in a broad sense, through building up soft skills and starting the MBA. The majority of job changes made in my twenties were motivated largely by salary. The job that I currently have is the first one where I took a pay-cut, giving intrinsic motivations greater weighting than salary.
By thirty, I would like to have a definitive idea of the industry and type of work I would like to be doing for the next 5 years. Whether that is to start my own business, become a partner or make a further career change. I have always been motivated to think about my career and I think it’s even more important approaching 30, to have career goals which guide me from day to day.
13. Tending to your priorities and taking stock
What will you regret on your death bed? With all these boring adulting responsibilities, you may neglect the things that are truly important to you such as spending time with friends, family and travelling. It’s important to regularly check in with yourself to see if you’re becoming the person you want to become, or perhaps you’ve lost sight of it. For example, that over worked, stressed, aggressive law firm partner who treats everybody with disdain? That’s somebody I definitely don’t want to be. They probably didn’t start out wanting to be that person either, it just happened as time went on through the little choices they made, and the experiences they had everyday throughout their lives. I may not know where I want to head definitively career wise, but I have an idea of the person I want to be. This helps guide me when I’m making those little choices everyday that will ultimately define the rest of my adult life.
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