Written by Ben Nash, financial adviser and the founder of Pivot Wealth, a money management company for young professionals.

It’s common not to think too much about money other than the next thing you want to buy, where you’re going for your next holiday, or whether you’ll have enough to pay off your credit card at the end of the month. But for most people, there comes a time when you make the choice to get your adult on with money. You still WANT to spend every dollar you earn, but you realise you should probably be a responsible human and start doing something to set up your future. But making this decision is only half the battle…

A big part of being smart with money is to know what things you need to do and what order to do them in. I’ve outlined the six key steps you need to follow to make smart choices and ‘get your adult on’ with money.

Step 1 - Sort out your spending and savings

I get it, spending money is way more fun than saving it. But how much you save has the biggest impact on how quickly you get ahead (or fall behind). Your savings also drive all other money strategies; investing, paying down debt, buying property, or just when you can take your next holiday.

I’m going to bust a common myth here. Getting smart with your savings doesn’t have to mean making huge sacrifices or counting every dollar. It simply means prioritising the things that are most important. When you’re young you want it all; the baller overseas trip each year, eating out at epic new restaurants, the hottest fashion, and of course you still want enough money to tell your boss to stick it and launch your own business.

But it’s rarely possible to do everything you want and STILL save enough money to cover your future ‘wants’. You need to think through which ‘wants’ are non-negotiable, which are important, which can be delayed, and which aren’t that important and can be removed. It’s about priorities, and laying everything out allows you to prioritise with open eyes.

Once you’re happy with your spending and savings, you need to have a good banking process to make your plan actually work. Automate your transfers and set your savings to happen BEFORE you start spending. This will make savings success your ‘default’ result. A good banking system will make it easier to save and reduce the time you spend managing your money. Check out this guide to learn how to set this up.

Step 2 - Eliminate Debt

If you have personal (not mortgage) debt, eliminating this should be one of the first things on your hit list. Interest payments on personal debt are dead money, and high interest rates mean unless you make aggressive repayments, it takes ages to reduce the amount you owe. Your repayments also reduce how much leftover income you have to save or spend on other things. Use cascading debt repayments to pay off your debt faster.

Paying standard interest rates on personal debt means you’re probably paying thousands of dollars more than you have to. Most banks have ‘balance transfer’ offers where you can transfer an existing debt to a low or no interest rate for 6-12 months. When you eliminate interest, every dollar you repay will reduce the amount you owe, so this could help you repay your debt faster. Websites like GetCreditScore.com.au can show you the best balance transfer deals and help you choose the right one for you.

Step 3 - Invest

The power of time and money is a beautiful thing. The longer you invest, the better results you’ll get, and you don’t need a huge pile of cash to get started. For example, if you started with $0 and invested $10 per day ($3,650 per year) into the Aussie share market for the last 20 years, your investment would be worth around $175k, a solid result for only the cost of a couple of coffees each day. But if you started 10 years sooner (30 years in total) your investment would be worth more than double at around $460k. 10 years sooner again (40 years in total) and your investment would be worth over $1.1m.

The best time to start investing was 40 years ago. The second-best time is today. What happened in the past doesn’t dictate the future, but you can see from this example the impact of getting started and being consistent.

If you don’t know a lot about investing, it’s natural to be concerned about choosing investments that fail and lose money. This ‘analysis paralysis’ results in delayed action and missing the opportunity to start getting ahead. You can conquer this fear by educating yourself, so you can make a rational and informed choice about whether investing is right for you. Understand how investing works, what your options are, and how to manage risk. This will empower you to make smarter investment choices and push through inaction to get started sooner.

Step 4 - Understand Credit

As great as investing is, at some point you’ll probably want to borrow money to buy a home or investment property, start a business, or build your investments further. Your credit score is one indicator of your credit risk and with recent and upcoming changes to credit reporting, it’s more important than ever to understand your credit score so that when you are looking to borrow you can negotiate from a position of knowledge.

It can take some time to improve your credit score, so you should start now, even if it’s well before you want or need to borrow. The first step is to understand your credit score, which you can find out for free with GetCreditScore.com.au. They will give you a report on your score and help you learn what you can do to improve it over time.

Step 5 - If you want to buy property, do it the right way

I want to note here that buying property is a choice, and one that’s not right for everyone. But if property is important to you, and you buy smart, it’s something that can make you a bunch of money.

Buying property is a big commitment, and with recent price rises around Australia, it’s a choice that needs solid planning and attention. A good property strategy means you can afford the place you want without sacrificing the things important to you. You should understand the property buying process to avoid property mistakes and get the right outcomes if and when you buy.

Step 6 - Be accountable

There is a common stigma around talking about money. Most people think being money smart should be easy and that you should be able to do this yourself. But, just because you CAN do something doesn't mean you SHOULD do it. With limited spare time, if something isn't your absolute passion or area of expertise, you might not be the best person to make this happen.

With anything important, often the worst person to be accountable to is yourself because there are no consequences for stuffing up other than you kicking yourself for a brief moment (which is quickly forgotten when you start playing with your new iPad or take that splurge trip). With an ‘accountability buddy’, you know an uncomfortable conversation is coming if you haven’t done what you said you would.

Your buddy could be a friend, partner, or financial adviser. The person needs to understand what’s important to you and be able to have tough conversations when they’re needed.

Your Next Steps

Being successful with money doesn’t require huge sacrifices. Or drastic action. You don’t have to give up your Foxtel subscription, next holiday, or weekly mani-pedi. But it won’t just happen! Unless you want to deliver your future self a second-rate life, you need to take action.

It’s so easy and common to spend most of your time doing things that are (or seem) urgent, but aren’t important. Money is something that’s rarely urgent but is truly important, so you need to make your money success a priority.

Take action. Now. Start small, be consistent, and make it happen. Don’t fall into the inaction trap that’s so common, or a year from now you’ll wish you started today.


Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.