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Money Management for twenty-somethings

Money Management for twenty-somethings

So you want to be a Baller

Getting a first class education and a coveted position at a large company means little if you are up to your eyeballs in debt and can’t enjoy the lifestyle all of your hard work SHOULD afford you. For most people, not knowing where their money goes is at the root of the reason their pay never seems to stretch as far as it should. Not knowing what is “within you means” can quickly lead you to be one of the millions of people who are only one or two paychecks away from financial ruin.

So, how does one gain control? Below are the top ten money and career management skills you should perfect to avoid the stress of living paycheck to paycheck, regardless of how sizeable that paycheck may be.

1. Develop your marketable skills. What you have learned has gotten you this far, but the Competencies, Skills and Motivations (CSM) necessary to stay competitive are constantly changing. You need to evolve with the market. When significant employers in a region closes down, many workers are left with nowhere to go. The demise of the steel industry (Scrunthorpe, Tata Steel, May 2016) is just one example of this. After years working in the same company, many workers didn’t have a skill set that was sufficiently flexible and transferable to keep them competitive. Chances are you won’t be in the same job, or even the same company, five years from now. Make the most of this opportunity, learn everything you can and create opportunities for growth. Invest in new skills to stay marketable.

2. Plan your career. You could just leave your next promotion to chance, waiting around to see what opens up and then putting in your application. But, you stand a much better chance of getting the position you want and having the take home pay that you deserve, if you have a definite target and a plan of action. Millionaires don’t just become millionaires. They have specific goals that they set for themselves, and then they do the work necessary to achieve them. They know the value of their skills and constantly work to make themselves more valuable to the market. If you want the top spot and the lifestyle that goes with it, you need to create a career plan and build a support network to help keep you on track.

3. Learn the difference between needs and wants. It seems like this should be a very straightforward concept, but many people struggle with it. A need is something you have to have, something you can't do without; a want is something you would like to have. It is not necessary, but it would be a good thing to have. It is common place to inflate a want to a need, e.g., is cable television subscription a need! Spending £200 every weekend going out and about in London could make it more difficult to build savings, pay an unexpected bill, or move out of your parents’ home. Take a hard look at your life and decide what things you cannot get by without, and what you can afford to downsize. Make your needs your priority and pay for them first.

4. Establish a realistic budget. This skill seems like another no-brainer. A realistic idea of what you make and how much your lifestyle is costing you is a must if you are trying to avoid that “broke at the end of every month” feeling. You should be realistic. How expensive is your living accommodation? Do you have a monthly entertainment budget? Don’t forget to invest in your career by updating your skills and competencies and acquiring new ones. One trick is to divide your salary into four: needs, career, savings and wants. Withdraw your “spending money - wants” and keeps it in a jar in the kitchen. When the jar is empty, you are done spending until next payday.

5. Start saving seriously. The easiest way to do this is to have a portion of your salary deposited directly into your savings account. You don’t miss money you don’t ever see. Choose a reasonable amount and put it away for a rainy day...because it WILL rain. You won’t always be healthy. You won’t always be able to find a new job immediately. Develop a savings plan, yes a plan, and stick to it.

6. Start a retirement fund. Another thing we never think about while we are young and healthy is the fact that one day we will be neither. On that day, you will thank your younger self for participating in your company’s retirement plan, or starting an individual investment account. Preparing for that day just a few years earlier can be the difference between the retirement you dreamed of and just scraping by in your twilight years.

7. Create a debt repayment plan. Yes, another plan. Factor in all of your student loans, credit card debt and any outstanding bills you may have accumulated, and come up with a monthly payment that you can live with and will reduce your debt. Pay more than “minimum monthly payments” even if it is only by a small amount. An extra £10 paid monthly on a high-interest loan can save you hundreds later on. Treat debt like a ball and chain around your ankles. Make living debt free your priority. Get rid of high-interest credit cards and buy on credit sparingly. Avoid payday loans and other forms of predatory lending.

8. Use your tech savvy. Need help to stick to your budget? There’s an app for that. Need help saving money for Christmas? There’s an app for that too. Online banking, automatic bill pay, dedicated banking apps, and low balance alerts are just a few of the tech tools out there to help you stay on top of your financial situation. Use them.

9. Choose assets over liabilities. Most of the purchases that we make are disposable items; things that have little or no value after we buy them. The cars, clothes, jewelry, etc. that we buy have minimal value outside of the way they make us feel. While there is nothing wrong with investing in a nice wardrobe or a few creature comforts, it is important to remember that security comes from wealth. And wealth comes from things that appreciate in value over time. There are those of us who willingly spend £500 for a new smartphone. Over time the phone proves to be a liability. It needs a protective case, a call plan, and data plan, and if you are smart, you will get a protection plan as well. The £500 phone could end up running you closer to £1500 plus by the end of the year. But, if you had spent £100 on a phone and put the rest into a decent stock your outgoing cash would be the same, but you would have acquired a decent phone and an asset.

10. Insurance. If you don’t have any, get some. And not just critical health and life insurance but also home owner’s/renter’s insurance. Why? Because calamity doesn’t care how old you are, it just strikes. And when it does, the insured weather the storm much better than those who are uninsured.

Your education is an investment you made in yourself to ensure a brighter and more secure future. Don’t lose that return on investment by ignoring simple money and career management skills that could assist the development of your career, save you from debt and help you to accrue wealth.

Jameka Neil
Director of Communications

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