It’s never too early or late, for that matter of fact, to become financially responsible. While all of us make have small financial hiccups or make several missteps on their journey, overcoming them through better financial education is a life goal all of us should have. To avoid the downfalls of poor money management skills, a team of experts gathered to offer rookies a set of tips and tricks for better financial abilities.
Start Saving Now
A common mistake many young people do is they never consider saving money. Young or old, a savings’ account will help you achieve higher financial security and stability levels. And once they realize that their savings accounts are empty, they think it’s too late to start saving now.
Truth is, you can be as old as you like, but you’re never too old to start putting money aside each month for emergency expenses or potential investments. You only have to start saving. The 50-30-20 method seems to work best in all people’s cases. Try to implement it yourself and you will notice how monthly, your savings account balance increases.
Save your first 100, 1,000, 10,000. There is not an upper limit to how much to save. Just do it.
Only Buy What You Need
In the consumerist age, it’s hard to distinguish between things that we need and the things that we want. Buying things that we don’t need becomes tempting especially when you receive a raise or an unexpected amount of money. Instead of spending that money, save it! You wouldn’t normally spend it because, obviously, you wouldn’t have it, so why spend it now? Clothing jewellery and holidays can wait. Your savings account, can’t.
Avoid Lifestyle Inflation
Whenever you start earning more, it’s important to increase your savings rate. According to financial planners and advisors, this way you increase your net worth. You should save one-third of every pay raise to avoid lifestyle inflation. Start doing this no matter how little you win on a monthly basis. This will offer you a good start on your financial journey, but it will also help you pick up healthy financial habits.
When you successfully avoid lifestyle inflation, you ensure that you pay off existing debts faster and easier as well. Otherwise, you would only spend money on things that won’t fulfil or bring you joy in a matter of years.
Stop Trying to Impress People
What you want is different than what you need, financially. And while you might want to impress your peers with your latest acquisitions, for now, it will hurt your finances in the future. Expensive gadgets or vehicles, an expensive rental, these all might look good on the outside, but at their core, they prevent you from flourishing financially later. Save money for the long run and enjoy all the perks of a healthy budget when you achieve it. For now, however, restrict your expenses.
Learn How to Manage Debt
We all face debt at one point or another. In some cases, it can accumulate and damage our long-term well-being. Learn how to properly manage it, make sure that you get familiar with alternative debt management solutions.
Some flexible solutions involve personalised repayment plans with fixed monthly fees for a predetermined period of time. When the time runs out, your remaining debt will be written off. Also, for the period of your agreement, debtors, collectors and so on, are prohibited from getting in touch with you. These agreements are usually named Individual Voluntary Agreements, and they can bring the beneficiary a series of advantages.
- No interest and charges;
- Generous allowances;
- Collectors won’t harass you anymore;
- Finish off your debt sooner than ever expected.
For more insightful information on IVAs, click here.
Don’t Fear the Stock Market
If you contemplate starting investing your money, the stock market might look like a scary place. Rookie investors can start off with small investments in the stock market until they get a good grasp of the whole process. This way, they prepare a successful investment future for themselves. Keep in mind that you should only invest in the stock market out of your savings account. Taking on a loan for similar purposes has been proven to have negative effects on one’s financial stability.
Start Saving for a Retirement Plan Now
When you’re young, you don’t necessarily think about investing in a retirement plan. After all, you still have decades to tackle this. But think about it. UK citizens have so little in their retirement accounts, that it will only last a few years after retirement. This is a scary prospect and you should start saving up money for your retirement even if you’re in your 20s.
Gaining financial stability for when you get older is an overlooked thing by young people. However, struggling with money at an age when additional income sources will be impossible to find should be concerning enough to motivate you to save money for retirement.
Invest in Yourself
Besides being financially responsible an investing in different ways that could generate you more money, it’s important to also invest in yourself. Learn everything that you can about personal finance, even if this means enrolling in a specialised training program. This will offer you new prospects and will open new investment opportunities.
Also, you want to ensure that you invest in your own personal and professional development in as many possible ways. Get additional training in domains that seem to grow in popularity. You want to become skilled in multiple fields so you become more employable and valuable to your current employer. Also, in the prospect of starting your own business, all those skills will come in handy.
Managing your finances in a healthy and mindful way even at a young age will help you thrive and grow. Be wise when using money, be wise with your debt and choose the solutions that suit you best when trying to manage it more effectively. Also, never stop learning and investing in yourself.