When Mellisa Ma and her friend Mariam Mohammed graduated from uni in 2019, they both wanted to learn more about managing their finances once they started earning full-time salaries – but they didn’t find much in the way of advice.

“We realised there weren’t any good resources out there for young people to really understand money, especially in the Australian landscape, tailored to our age group,” Ma says.

Spying a gap in the market, the pair set up MoneyGirl, a financial education start-up focused on improving financial literacy among women and young people, in particular. Two years on, MoneyGirl has developed a personal financial management course that it delivers through corporate and not-for-profit organisations.

Ma recently sat down with Broadsheet to discuss the basics of personal finance.

Understanding your money story

A moment of self-reflection is a good place to start for anyone who wants to better engage with their finances. At MoneyGirl workshops, participants begin by articulating their “money story” – how money figured in their upbringing and the ingrained values and behaviours they have around it today. Some people realise they don’t take money seriously, while others might find it stressful. “Unless you dive into what your beliefs are around money, you can’t change anything,” Ma says.

The next step is to establish a clear picture of your cash flow – “everything that comes in and go out,” Ma says. The cardinal rule of saving is “income minus expenses” – if you can see exactly where your money is going, you can set a savings goal and, if necessary, make decisions to curb spending.

Saving for a rainy day (even if it’s a small amount)

Everyone should strive to have an emergency fund, says Ma. So that if you encounter unexpected expenses – say, your car breaks down or you need to see a specialist – “you’ll be able to cover it without going into debt”.

The idea of saving might feel out of reach to many people (Ma suggests a savings goal of “three to six months of your living expenses” which may seem daunting). How much you save in your rainy-day fund depends on your circumstances. Even putting aside a small amount – perhaps the price of a coffee – every pay cycle will make a difference. If you need some tips, see our article on saving when you’re not earning a lot.

Thinking about debt

‘Debt’ is a scary concept, but instead of ignoring it you can try to reframe it as an opportunity to be more mindful (where possible) of your spending.

According to Ma, this comes down to the distinction between “good debt” and “bad debt”. In the financial sector, good debt is generally categorised by borrowing money in order to boost your finances later - like getting into the property market or going to university. Bad debt is said to be “the sort of debt that’s going to negatively impact you over the long term and doesn’t provide you any positive benefits,” says Ma, using the example of buying expensive clothing or gadgets that you can’t really afford. This doesn’t mean that you’re ‘bad’ if you’ve ever splurged, it’s just a way to think about how you’re spending the money you do (and don’t) have.

Ma is not opposed to credit cards when managed prudently. “I have a credit card, but I make sure that I pay my balance in full every statement cycle,” she says. She advises using the same caution with Buy Now Pay Later services as they often make people “feel like they’re spending a lot less”.

Get serious about superannuation

Saving for retirement hardly feels like a priority when you’re young; however, making an effort to properly set up your super at the start of your career pays dividends later on.

“A lot of young people feel like we don’t need to think about our future because it’s so far away,” says Ma. “Why should we worry about something that’s going to happen in 50 or 60 years’ time?”

Ma says part of the problem is a lack of education about superannuation. “We don’t learn about super in the education system, even though it’s a compulsory payment coming from our salary every pay cycle. The first thing I encourage people to do is look into their super and make sure they know what they’re investing in.”

Choosing the right fund and portfolio for your stage of life is critical. Switching to a better performing fund can equate to far greater savings for retirement, says Ma. In your research, make sure you compare like-for-like portfolios – high-growth, for example – and consider total fees charged. “Once you map those out, you can do a comparison between super funds,” Ma says.

This article is produced by Broadsheet in partnership with Bankwest. See Bankwest’s online money management guides for more ideas to get the most out of your money. The information in this article is of a general and educational nature only. You should consider your own financial position and requirements before making a financial decision.