You wake up one day and somehow your age has a "3" at its beginning. Everyone’s life trajectories are different but for a lot of Australians, life in your thirties becomes embedded in three big-ticket M’s: Marriage, Mortgage and Munchkins. All of these will be costly for many years to come, so you’ll need to get some financial fitness for the money management marathon ahead.
Australians tying the knot in their early thirties are well advised to invest in their marriage, not their wedding. Even modest weddings can gouge a big chunk from your savings and few debts are more prone to regret. The memories of your swooning, romantic affirmation of true love will dull quickly when unbridled bills begin to appear.
According to 2012 research, the average Australian wedding costs a whopping $36,200 and over 60 per cent of couples get a loan or use credit cards to pay for their wedding. Financial stress is a prime trigger of marital breakdown – when poverty comes in the door, love flies out of the window.
There are around 120,000 weddings a year, Australian Bureau of Statistics figures show, and about one in three will end in divorce. And if you thought the wedding was expensive, wait until you cop the hip-pocket body-blow of separation and divorce.
Tight budgets can be hard to defend when cultural expectations and traditions dictate the size and style of your wedding.
The outlook is not all bleak though – as couples marry later, the divorce rate is slowing down and marriages are lasting longer. Try a little tenderness and add a little luck and a lot of good money management, and you won’t be paying off the wedding bill post-divorce.
Tight budgets can be hard to defend when cultural expectations and traditions dictate the size and style of your wedding. Tying the knot in different cultures can come with a laundry list of unique traditions and rituals that go well beyond the dress.
In the last decade, the number of Indian-born people living in Australia has doubled making it the fourth largest migrant community in Australia. There’s also a growing trend for young Indian Australians to return to India in search of a suitable culturally-matched spouse. Marriage is customarily seen as a ceremony with implications far beyond the couple, and family links play a critical role. In India, traditional weddings continue for days that are filled with celebrations and ceremonial customs. Hosting 10,000 guests is not unheard of and there’s an expectation that no expense be spared. An extravagant Indian wedding can run up a huge cost and take years to pay off.
If your wedding dreams are driven by Hollywood, not Bollywood, don’t fall for the showy and extravagant displays of recent celebrity weddings, without the celebrity bank balance to match.
Banks work out how much they’ll lend you based on some pretty simple calculations, which don’t always include the other expenses and obligations that often come with home ownership.
The best house to buy is the one you can afford – this includes not only initial property costs but also on-going maintenance and repair, rates and utilities.
There’s often pressure to go for the most expensive property the banks will allow you to buy, but don’t succumb. Start with a small affordable property - don't over-commit to an unserviceable debt. If you’re living on a financial precipice, one of life’s unexpected curve-balls can quickly tip you over the edge.
Going into debt to buy property is a necessary burden for most people, but check first whether that debt will help you get ahead or hold you back. Shop around for a mortgage supplier that can tailor a loan to suit you.
Before you borrow make sure you understand the impact that even a small change in rates can make.
If you’ve got two incomes, take the opportunity to get ahead on your home loan by paying well in excess of your minimum repayments – down the track you may have to revert back to a single income and being in front will help safeguard against future financial stress.
Anticipate that interest rates will change throughout the course of your loan. Know where rates are at in their cycle. Before you borrow make sure you understand the impact that even a small change in rates can make – it could be the tipping point between being able to pay off your loan and being out on the street.
Approached sensibly, mortgages are generally safe as houses because the value of your home will rise over time. But in Australia, household debt continues to rise steeply in the face of current low interest rates. A National Centre for Social and Economic Modelling (NATSEM) report says that after adjusting for inflation, Australia’s household debt is four times what it was 27 years ago and the ratio of household debt to disposable income has almost tripled since 1988, from 64 to 185 per cent.
Be careful not to over-capitalise on home improvements inspired by "reality" TV and try to save well over the minimum down payment before entering the property market.
"Many young Australian couples from multicultural backgrounds are given family financial support when buying a new home," says Vivi Koutsounadis, executive director of the Ethnic Community Services Co-operative in Marrickville, NSW. "This tradition not only helps young families get ahead in a very expensive property market but it also helps tighten and strengthen family bonds. Young people can then pay off their homes quicker and also invest in their children's education."
Babies, like puppies or kittens grow up. Kids cost money, and the cost of supporting them grows remarkably over time. Having kids also impacts on your ability to earn and the long-term impact of migrating from a double-income household to living on one income, even short-term, can be a tricky challenge for many families – particularly when returning to work post-baby comes with the spiralling cost of child care.
A recent report on child care affordability in Australia notes that sky-rocketing child care costs (44.2 per cent increase in the last five years) are often a key decider in whether both parents return to work. Long day care can cost as much as $170 a day, prompting many couples to stay on one income until their kids start school.
For those fortunate to have extended family support, returning to work can be much easier – and there are benefits beyond the financial. "Aside from the obvious financial advantages of using extended family for child care, grandparents are transmitters of traditional culture and language," says Koutsounadis.
"Grandchildren can be educated and nurtured in their cultural heritage. It also helps hugely with inter-generational support and harmony."
Consider the long-term impact of where you choose to live. Moving to an area that has good state schools and public transport can save you a fortune in private schooling, especially if you have more than one child. If school fees are inevitable, do your research and budget carefully – and in advance, or you’ll be faced with mounting debts.
"Aside from the obvious financial advantages of using extended family for child care, grandparents are transmitters of traditional culture and language."
There are also plenty of extra expenses on top of private school fees, with uniforms, textbooks, expensive excursions, sports fees and technology costs all adding up. Have a plan for covering the total cost of private education over your child’s whole schooling.
The trick is to strike a healthy balance between work and family life. Remember it’s not always about how much money you make — it's how you use it to better your life and the life of your family.
Continue to build your career
Your thirties are the time to capitalise on the foundations you laid down in your twenties so you can improve your ability to earn. Carve out a niche skills set that commands a high price, get some extra skills and train up in management expertise. Consider other means to bring in more income through entrepreneurial activities, or through investments with good returns – there are other ways to bring in money than just wages.
Watch for the impact of technological change on your profession and choose strategies to safeguard against redundancy. A 2015 Committee for Economic Development of Australia ("CEDA") report predicts that almost "five million jobs face a high probability of being replaced in the next decade or two". By 2016, CEDA advised that in a technologically rapid changing environment, people should "treat their career as a business, take on more responsibility for their own education and invest in skills and professional development to keep adapting their skills to match industry needs".
Revisit your budget
As life changes, prepare to rethink your budget and re-evaluate your priorities - what matters to you?
Most people find their income increases in their thirties. But beware the spending curve – make sure your savings increase proportionally too. The money you spend consuming conspicuously on life’s little luxuries will serve you better in the long run in a high interest savings account or an astute investment. View income increases as an opportunity to save more too.
You may feel like you’re just out of your twenties but have you started thinking about your retirement? It’s important to plan for the long game as well as the short. Keep paying off your loans but also budget to set aside regular savings and investment for your twilight years.
Prepare for the worst
Now is the time to raise your insurance cover. If you’re self-employed, own a small business or a professional, it’s sensible to have income protection insurance. You’ll also need to boost your emergency fund so you can cope when things go bad, as well as capitalise when opportunities arise.
Get your accounts, investments and important financial arrangements in order, well documented and stored in a safe place. Work with your partner to get your wills up-to-date. Should tragedy strike, don’t leave your grieving loved ones with the legacy of a confused accounting mess.
"Facebook envy" can tempt you to that exotic holiday, huge house or lavish lifestyle you can’t pay for: don’t fall into the trap of benchmarking yourself to others.
Final word: Do not lust for what you cannot afford.
By the time you’re in your thirties, you’ll have a pretty good sense of who you are. Perhaps you’re a financial high-flyer, though statistically you’re more likely to earn close to the median income.
Accept that different professions attract different incomes. Focus on your own financial objectives and budget. "Facebook envy" can tempt you to that exotic holiday, huge house or lavish lifestyle you can’t pay for: don’t fall into the trap of benchmarking yourself to others. Navigate your own life knowing what you can and cannot afford. Lashing yourself to an unserviceable debt or credit card is a sure way to run aground financially.
While there is a lot to be said for having a job that rakes in truckloads of money, rewards that come from following your heart are just as important. The world needs teachers, historians and poets too.
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