There are actually 4 things to do with your money. Most people think of - 1. Save, by putting it away in your piggy bank. 2. Spending, on lollies, or chocolates, and toys. 3. Invest, we have described invest in further detail in the 'How can my money grow' tab. The 4th thing to do with your money is 'Donate'. Donating part of your money to the homeless or to the ill will help them a lot, and will be greatly appreciated.
Spend:
You can spend your money on a variety of things. As seen above lollies, chocolates, and toys, but there are more, usually your parents spend their money on this, but you could also spend your money on clothes if you really want a particular outfit.
When you spend your money, you may lose track of how much you have spent and how much you have left. If you are spending more money than you are earning, this is mainly directed at people with a job but this may also affect people who are only getting pocket money, by spending more than you are earning I mean that if you get around $50 a week for your job, and you are spending about $60 a week on average - because you are going out to see lots of movies, or going out for lunch all of the time, or even just buying lots of toys or clothes all of the time - then you will end up with no money as you have to pay $10 out of your savings every week. But we want to end up with lots of money, right?
To stop this from happening you could create a budget. This can help you a lot, you might be spending more than you are getting from pocket money or a job because you just don’t keep track of your money. But making a budget would help you keep track of your money: therefore, you will not have this problem. 
If you do this on paper make sure to write the numbers in pencil so that you can rub them out for next month and draw the lines in pen so that they will not rub out. But you could also make a table in excel or word on your phone so that you can change the numbers easily.
GST
This is an Australian sales tax, which is a part of most things that you would buy. It stands for Goods and Services Tax, and everyone would pay it, as it is not like normal taxes where it is calculated based on your income. You would also pay GST when someone does something for you, for example getting a plumber to come into your house and fix a leaky tap. So the goods in the name is referring to products, and service is referring to someone doing something for you.
Let me tell you a bit of history around GST, in 1991 Dr John Hewson revived an old idea of coming up with a new sales taxing system. During a famous interview, he had trouble explaining how this new system would work, that interview is below.
This interview led to Hewson losing the next election, allowing John Howard to become Prime Minister. Although John Howard started out not believing in this taxing system and vowed to never implement it, he did eventually implement it, it came into effect at the start of the financial year of 2001 (the financial year is taken from July of the year prior until June of the year: so it came into effect in July of 2000).
At the same time as this was implemented, personal income and company tax was reduced slightly to compensate for the new GST system.
GST only applies to certain things, so some things would not include GST. The basic things that you would not pay it on would be basic foods, medical or health-related items, educational courses, childcare and a few other things. A full list of the things that do include GST can be found here.
GST is calculated as an extra 10% of the price that you paid for your item/service. When you buy something in Australia, it will usually already have GST included into the price, meaning when you buy the product you are paying 110% of the price. 100% being the product, and 10% being the GST. You can find out the original price of the product/service by dividing the price by 1.1.
Once you have paid GST to the person or company, they will pay the government the total amount of GST paid by everyone every month to a couple of months. The government will then just add that money to their total income for that financial year with all of the other taxes that they collect. They would then use all of the money they collect to fund projects such as roads and highways, public transport, or better infrastructure to combat things such as bushfires or droughts.
Supply and Demand
Supply and demand go together, if one went up or down, it would have an effect on the other. Supply is talking about the quantity of a product that is available to consumers, and demand is the number of consumers currently looking to buy that product.
Let’s say the supply of houses in a suburb or town was at 30 houses, and there were also 30 people looking to buy a house, this is called equilibrium, where the supply of a product and the demand for that product are equal. This would change if one of these went up or down, for example, if the supply went up, and there were suddenly 20 more houses put on the market while still only having 30 people looking for houses this would affect the value of each house. There would be fewer people looking at each individual house, so it would end up selling for less than before (than when there were only 30 houses) but also, some houses would end up with no one to buy them. This would have the opposite effect if instead, the demand went up: if there were still 30 houses but now 50 people looking to buy those houses, because now people would have to fight harder to be able to receive a house, meaning houses could sell for much higher than anticipated just due to people trying to put in offers that would be higher than everyone else. This would also come with the opposite side effect as before, people would end up with no houses to buy in that suburb/town.
This yin and yang effect was seen in Sydney a while ago, lots of people needed housing, but were having trouble finding them, then a lot of people saw this as an opportunity to build apartment buildings and then make lots of quick money selling the apartments. The problem started when too many people saw this opportunity at the same time, now there are hundreds of apartments empty, and the price of houses have gone up because there are now less of them. This was also amplified through COVID as there were less people moving to Sydney, and more people moved further away from the city as people started working from home more often, and therefore didn’t need to live as close to the city.
In summary, if there are more people wanting to buy a product than the amount of product available, then the price will rise, and if there is an excess amount of the product, then the price will fall. And equilibrium is if there is the same amount of product as consumers, and the price will be stable.
Save:
Saving money can be putting it in your piggy bank or putting it under the bed. You can save in whatever way suits you, it might be only to save up to get the new and cool game, but if you get into the habit of at least saving a dollar of your pocket money then after a while you will have a hundred dollars just sitting in your piggy bank not in your belly if you bought lollies, or broken if you got a cheap toy or beaten if you got a video game. Another idea I think you should try is that when you get paid you should pay yourself/put money aside before you do anything else. Then you need to pay for all your fixed expenses: phone bill, opal card, food, morgage/rent and any other expenses you may have. You will then have money left over to either put more into savings or use it to go out with friends, watch a movie or eat out.
Inflation
Saving money can also lose you money! This is due to inflation, in layman's terms this is the rise of prices, and therefore the downfall in the value of a single dollar.
A more in-depth definition of inflation would be the increase in the price of objects or services, and therefore the decrease in the value of money. It changes the ratio of how much money is needed to purchase the same products or services. This is the concept people are referring to when they say that $200 thousand in 1980 is worth around the same as a million now.
Each year the average price of an item would go up by a few percent, between 2011 and 2020 the average price rise has been fluctuating between 0.7 and 3% year on year. The percent rise is based on the CPI (Consumer Price Index) of the currency. The Consumer Price Index is calculated as a measure of the weighted average of prices of a basket of consumer goods and services: these may include transport costs, food costs and medical care costs.
It is calculated by taking the price changes for each of the items that are in the predetermined basket of goods and averaging them. After finding the current CPI, and for the same time last year, you can divide the current CPI by the one for last year, subtract one, and convert your answer to a percent by multiplying by 100 to find the inflation over the last year.
If in 2010 you bought something that cost you $100, it could cost you $123 if you were to buy it now: due to inflation.
Inflation affects many different things, sometimes at different rates. Another implication of inflation would be on any property that you may own, if you do nothing to the property, and compare what you would get for the property now if you sold it to the cost of the property when you bought it you would most likely see an increase. There are a lot of things that could influence the inflation in property prices though, it is dependent on the quality of the property, whether there is anything wrong with it, as well as how many people want to live in that area at that point in time.
Inflation doesn’t always have to be positive, the price of things could go down overall, due to one or more of many different things, this would be called deflation.
Donate:
Donating is giving your money to the less fortunate, that may be the poor, the homeless, or the sick. These people need the money more than you do. Be grateful that you are healthy, you have a roof over your head, and that you are educated.
Invest:
To learn about investing go to the tab 'Can my money grow?' Or click here.
Net Worth
At the end of the day, once you have worked out what you want to do with all of your money, you can work out how much you are worth by adding together everything that is worth money and taking away your debt. Before I tell you how to calculate your net worth, I will tell you what assets and liabilities are.
Assets
An asset is anything that is worth money, it could be physical cash that you have lying around, money you have in a bank account, or objects. Anything that you own would have a value, usually calculated by what the original price was, how long you have had it and what condition it is in. This also includes a car if you have one, your house if you are the owner, an investment property that you may have, and the value of all of the shares that you own. Another thing that you may forget, is that your superannuation is also counted as an asset.
So, assets can be either physical or liquid. Physical assets are literally physical objects, you may be able to figure out what an example would be, an object in your room, a vehicle you may own, or even a property.
The definition of a liquid asset is something that can quickly be turned into cash. Examples include cash itself, either physical notes or money in a bank account, and shares that you may own. Your superannuation acts as a liquid asset once you are eligible to use the money from it, which is usually after you retire.
Liabilities
To figure out your total liabilities, you would add up any debt that you have. This would include the total amount of any loans that you have, which you would find by getting the total amount that you borrowed as a loan, and subtracting the amount that you have already paid off that loan. This also includes other things such as student debt, which is the monry that you would have to pay your university to go there, and anything you owe on a credit card. Another liability would be any taxes or bills that you have not yet fully paid.
Misconceptions around debt
1. Debt didn’t originate with money: it started with trade.
Debt is the word given to you owing someone something. Before money came around, you may ask someone for a cow now, in return for giving them 3 pigs in return next year. Until you have fulfilled the debt of the 3 pigs, you would be in debt, still owing that person something. You would have heard from movies that people would say that they are in debt to someone if the other person had saved them from a tricky situation, such as taking the blame for something, or saving them from a life-or-death situation. The modern interpretation of the word debt would be that you owe someone money, usually in return for them lending you money, in the form of a loan, or this could be through the new concept of buy now, pay later: you could purchase something in the moment, but the total price of the object would need to be paid over 3 months, so until you have fully paid for the item, you would be in debt to that buy now, pay later company.
2. There are actually different types of debt
There are 4 categories that most cases of debt would fall under: secured, unsecured, revolving, and mortgage.
Secured debt is a debt that has collateral, something that you could sell to be able to pay off the debt in the case that you don’t have enough to pay for it. This could be a property, but also things such as a vehicle, including boats, cars, or any other vehicles you may have, you could also put down an investment as collateral. Secured debts usually require a financial examination to verify how trustworthy you will be with being able to pay the repayments, called a credit profile, they would also assess the collateral and give it a more accurate value. This is in addition to the standard review of your income and employment status.
Unsecured debt is a debt that doesn’t require collateral, that is, there is no asset to secure the debt against. Unsecured debts also require a financial examination to verify how trustworthy you will be with paying the repayments. Since there is no collateral, your credit profile is the main factor used in determining whether your loan would be approved or denied. Examples of unsecured debts include some credit cards, some business loans, and student loans. How much you are allowed to borrow is based on your financial position, including your income, how much cash is in your bank accounts, and your employment status.
Revolving debt is a debt that is continuously in place, until either you, or the borrower stops it. For example, this could be a credit card, you can spend up to let’s say $5000 of the bank’s money, but until you pay some of that back to the bank, you will not be able to use any more money: if you pay the bank $500 back, you can then go out and use that $500 on other things.
Mortgage debt is pretty simple to understand, as most people have heard the term mortgage before. It is a loan that you would take out to purchase a property. Mortgage debt is a type of secured debt, although the collateral is the property itself, so it is classified as a different type. To have an application for a mortgage approved, the lender would have to use your credit profile and the other key things about your income as mentioned for the other types of debts. The minimum requirements vary depending on the type of mortgage, for example, whether it is used for your PPR (or your principal place of residence), or whether it is an investment property. The requirements also vary depending on how big the loan is, or how much money you want as a loan. A mortgage is most likely the largest debt that you would encounter, other than perhaps your student loans. Mortgages are usually paid back over many years, depending on the size it could be between 15 and 30 years to pay them off.
3. All debt isn’t bad: it can be good or bad.
I heard in a video that debt can’t be a fully bad thing, or else big companies such as Apple wouldn’t have billions of dollars of it. A good way to differentiate whether it is good or bad would be to look at what you are using the money for: bad debt would be if you are being lent money to pay for something that will go down in value, this would be a car loan, a personal loan, or a credit card, whether good debt is money that is being used to help you buy your own house or an investment property, or it could also be a student loan, as going to university isn’t a physical object, but it helps you a lot for most of your life. Good debt allows us to do things that would not otherwise possible, such as buying a house. This is because the amount that you would be able to save up each year to buy a property without a loan, might take 20 years! This is due to both not having much money left over each year after all of your expenses and paying taxes and also due to property prices rising over time due to inflation. A lot of the time, the property will go up in value faster than you can actually save the money.
Calculating your Net Worth
The reason that you need to understand what assets and liabilities are is that they are the only things that make up your net worth. Calculating it is just a simple calculation of adding things up, then subtracting your total liabilities from your total assets.