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HOW TO RETIRE EARLY
MONEY DECISIONS IN YOUR 20's FOR EARLY RETIREMENT IN YOUR 40's.
4 Financially Immature Choices People Make in their 20s
Posted on: 14 / 12 / 2017
No matter how diligently your parents may have taught you to save money and budget when given a little bit of financial freedom, everyone makes mistakes in their first decade out of the nest. 

What’s most important is that the decisions you make today don’t end up costing you money next month, next year or even next decade! If you’re seriously considering any of the following poor financial choices, you’d best check yourself before you wreck your wealth!
1. Buying a Pet on a Whim
For many of us, owning a furry friend has been a dream since childhood.
  
When you’re on a stable income and your housing situation allows for the presence of a puppy, kitten or scaly friend, it can be tough to resist the temptation to buy a pet – especially when you see happy snaps of your friends and family’s animals on social media every day.
However, just because you can get a pet doesn’t mean you should.

It’s no secret that animal shelters are overwhelmed with the number of cats and dogs brought to them by owners who don’t want the commitment that comes with companionship.
Before you buy a pet, ask yourself these hard questions:
How much will this cost me?
If I asked you to spend $25,000 on a new car that has no warranty, no roadworthy certificate and no return policy, you’d probably baulk at the suggestion. The risk to return ratio would be too high, especially for the purchase of a depreciating asset. Many people don’t realise that $25,000 is the average lifetime cost of buying a new dog. Sit down and calculate how much it will cost you in the long term to own an animal. If you can’t justify spending that much on any other purchase, you can’t justify spending it on a pet either.

What am I willing to spend on healthcare?
Everybody knows that veterinarian bills are expensive, but most people tell themselves that their pet will be healthy for its entire life. No one thinks that their pet will need surgery, a special diet or expensive medication. However, being financially responsible means preparing yourself for the worst, which is why you need to ask yourself at what point you will draw the line and decide it’s too expensive to keep your pet alive. Thinking about having an animal put down is not pleasant, but you need to be realistic about your financial limitations well before you get emotionally attached to a pet.

Why do I want a pet?
It’s important to honestly ask yourself why you want a furry friend. An animal’s companionship can enhance your life, but have you considered how you will contribute to your future pet’s happiness? Chances are, if you haven’t thought about how often you’ll be home, how willing you are to spend your free time exercising and playing with your pet, or how happy your pet will be living in your home or apartment, you are purchasing an animal for selfish and ultimately irresponsible reasons.
2. Getting Payday Loans
It’s no secret that lenders who offer short-term personal loans (payday loans) have a reputation for preying on financially vulnerable people who, being in the lowest economic bracket, are unlikely to be able to afford the steep interest rates attached to repayments.
  
The reasons that people get a payday loan are, by contrast, far more complicated than the what you might imagine. Rather than needing to fund a drug habit or out of control spending problem, many people who get payday loans are using them for legitimate and often unexpected expenses such as family funerals or to replace broken down essential happliances like washing machines and fridges.

If you don’t qualify for a bank loan, however, these types of loans should always be at the very bottom of your list of emergency finance options. Before you even think about signing up for a payday loan, look into the other options out there. These include:

Contacting charities about NILS: The government’s No Interest Loan Scheme (NILS) provides up to $1500 in interest-free loans to those with a Health Care Card or individuals earning less than $45,000 a year after tax. The loans take two or more days to process, and can’t be used for bond, rent, debts, holidays or bills, but may be used for essential household items, medical and dental expenses, educational essentials and some other items. A charity like the Salvation Army can help you fill in your application, and they may also be able to provide assistance with groceries.
  
Apply for hardship: If you need a payday loan because your bills are consuming your entire income, there are ways to put those bills on the back burner and forget about the loan. Most major electricity retailers, banks, phone and internet companies, water suppliers and schools have hardship programs that will allow you to freeze interest on loans, pay your debts in instalments, unlock lower rates or even write off part of your debt if you can pay a substantial amount at the time you call. Large electricity bills, in particular, are a major problem from Australians, and if you have a hardship status applied to your account, you may also be eligible for the government’s Home Energy Emergency Assistance Scheme.

Enquire about emergency payments: Whether you’re employed, or you are collecting welfare, you may be able to access emergency payments that will get you through a hard time. If you’re a full or part-time employee, talk to your employer about whether your circumstances allow for them to pay your annual leave, sick leave or carer’s leave out. If you are on Centrelink, you may be eligible for a one-off immediate crisis payment.
3. Getting Credit Cards for Overseas Holidays
Credit cards are viewed as an essential item for every international traveller these days. After all – what if something goes wrong? The last thing you want is to be stranded in a foreign country with no money!
  
But, what starts as a ‘just in case’ financial backup often descends into spending madness, with travellers returning from their vacations with massive debts and even bigger regrets.
Despite what banks, airlines, and loyalty programs will say, you do not need a credit card for international travel.

Instead, put a little time and effort into organising wiser ways to access your money and prepare yourself for an emergency:
Order foreign currency before you leave: Research which banks or currency sellers offer the best exchange rates and purchase some cash in advance. Having cash on hand will help you with initial expenses like airport taxis, buying foreign SIM cards for data usage and food.
  
Use prepaid Visa cards: Purchase prepaid Visa cards for the various expenses you’ll incur overseas. For example, have one card for accommodation, another for souvenirs, and another for transport. By splitting your budget between multiple cards and keeping track of the card numbers, you can protect yourself if your wallet gets lost or stolen, and you avoid having to pay credit card interest.

Get travel insurance: Travel insurance, not a credit card, should be your backup plan for an international emergency. It can cover everything from the costs of medical treatment for unexpected illness or injuries, to travel mishaps that require you to cancel flights or accommodation, through to theft of your belongings. When comparing travel insurance policies, make sure that you know what is and what isn’t covered as well as how long an insurer will take to approve a claim and release funds.
4. Going “All In” on an Investment
Any financial planner worth their salt will tell you that the key to not just making money but keeping it too is to diversify your investment portfolio. Diversification doesn’t mean you won’t lose money on a venture; it just means you won’t lose all of your money by sinking it into one investment that goes pear-shaped.
  
If you’ve been diligently saving and what looks like an excellent investment opportunity comes along, you should always get professional advice on how much of your savings you can reasonably invest in a business or project.

When working out how you’ll lay out your money, you need to remember to:
Diversify your asset classes: This simply means investing in a mix of both high-risk, high-return assets (known as growth investments) and low-risk, low-return assets (known as defensive investments).
  
Invest in different markets and industries: You can safeguard yourself against losing a large percentage of your worth due to a downturn in a particular sector or country by making sure you have other investments across different industries, markets and countries.

Reduce your timing risk: According to ASIC, “'Timing risk' is the chance that your investments will suffer because of when you buy or sell your investments. For example, you buy an investment just before a big price drop, or sell just before the price goes up.” You can lower this risk by investing at regular intervals and selling investments in stages instead of in large one-off transactions.

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