When Emily Jensen* arrived home from work a few months ago, she found her housemate gone, along with all his possessions. When she checked her bank account shortly after, she found he owed her more than $2000 in rent and bills. "I was just in total shock," she says. "I feel a bit foolish for not noticing but I just trusted him."
Jensen, 27, eventually got the money back but she lost two friends in the process. She has since downloaded an app called easyshare, which collects housemates' shares of the rent and pays them directly to the landlord. It can also be used for household bills in the same way. "The app is such a good idea, because everyone has a story about someone not paying rent, or not paying for toilet paper," Jensen says.
Moving out of home is an important step in the path to financial independence, but it is also a time when young people are vulnerable to needlessly losing money. It takes practice to know how to balance your budget, especially if you have a low or sporadic income, and experience to know how to deal with exploitative employers or freeloading - or just plain forgetful - friends. Increasingly, young people are using fintech to navigate their way through the choppy financial waters.
Nicholas Phillpott, 23, has used easyshare since he moved into a share house with a group of friends around one year ago. "It made things really smooth in the moving process," he says.
Phillpott finds the app creates a more positive household because it removes the need for potentially uncomfortable conversations about money and notifies everyone in the house when their housemates have paid upcoming bills or rent. "You have clarity and peace of mind that all your housemates are paying on time," he says.
The app is free to use if your payment method is bank transfer but incurs a surcharge on credit cards. It also has an "IOU" function for tracking money your housemates owe you for things like groceries or even dinner and drinks. Housemates still need to authorise to pay each other back, but it makes splitting the tab at the end of dinner or drinks easier, Phillpott says.
Phillpott moved to a new share house Sydney's CBD about six weeks ago and has introduced the app to a new group of people. The verdict? "They love it."
IOU between friends
If that IOU function sounds like it could be good just with your group of friends rather than housemates, there's an app for that too. Finch and Splitwise both market themselves as the financial organisers of your social life, with functions such as bill-splitting and reminders sent to your friends to pay you back.
On Finch, all you need is your friend's phone number - and their willingness to set the app up for themselves - to organise for them to pay you back, and you can set up a running tab with friends you regularly split money with or for an ongoing expense such as a holiday and settle it later. While the kinds of payments you might settle up through these apps are likely to be small, over time they add up.
However, Tracey Sofra, a certified financial planner with Sofcorp Financial Services, says she wouldn't part with the money in the first place. "You can't continuously pay for people and expect to be paid back. That's a sure-fire way to lose friendships."
Sofra believes managing money is as simple as mastering your cash flow - that is, what's going in and out of your account. She recommends you "pay yourself first", by siphoning 10 to 30 per cent of your income out of your main account and putting it away as savings. "You adjust to your new level of income after that's taken out," she says. It's true many people with low incomes would find that difficult but it's a good skill to practise.
If keeping track of your cash flow seems complicated, fintech is way ahead of you. Finch is rolling out a free feature called Finsights in January designed to show you where and when you spend "social money", such as at bars and restaurants.
Another app, Pocketbook, syncs with your bank account, showing your spending and allowing you to budget by category. However, it's worth remembering that banks tend to frown on you giving over your online banking password. An alternative is to use apps that require you to input your spending manually, such as ASIC's very simple TrackMySPEND app or Good Budget, which uses the "envelope" budgeting system.
Carole Tozer, the chief executive of Bridging the Gap Sydney West, says she often sees young people wind up in financial strife because of mobile phone contracts and unpaid fines; for example, from public transport fare evasion or traffic infringements. Fines can also escalate, as failing to pay them results in enforcement fees being added to the original amount.
If cash flow is an issue, it's even more important to avoid debt, because it can grow rapidly and destroy your credit rating if you don't pay it back on time. Credit card interest rates can be as much as 20 per cent, while payday loans are even worse.
Payday loans, whether available through a shop front or an online provider such as Nimble, advertise to instantly transfer money, often thousands of dollars, without a credit check. Tozer says the immediacy of such loans makes them very tempting to young people, especially as they may not be able to access credit cards because of their income. Tozer says services like hers, and Good Shepherd, offer no-interest loans to people with the capability to pay them back for use on certain expenses such as home appliances, but often young people don't know about them.
*Name has been changed for legal reasons.