20191117

THE 20-SOMETHING'S GUIDE TO GETTING GOOD WITH MONEY



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If there’s one thing 20-somethings are collectively concerned about, it’s money! Those of us in our mid-to-late 20s kind of thought we’d just do well at school, get a degree from a good university, get on some grad scheme, buy a house a few years later and we’d be all good financially. But it hasn’t really turned out that way for a lot of people... After spending my early 20s fumbling around, making silly financial mistakes, I’ve learnt a few useful tips and techniques over the past couple of years that have helped me become more savvy. Obviously these are just ideas for you to go away and research to see if they work for your personal circumstances, but speaking to my older, more experienced colleagues in recent years, I began to notice a lot of people seemed to have second properties they were renting out, didn't have a mortgage or were taking early retirement. Whilst the scales have somewhat shifted; I decided to take their advice in the hopes that doing some of the things to the extent I could might allow me some of these luxuries in the future. If you’re in your 20s and feel as though the world of finance is some mystical thing you’ll never understand, hopefully some of these ideas might appeal to you!

Your salary isn’t your only compensation

This definitely depends what line of work you’re in; from my own personal experience, I’m fully aware that if you work in retail - outside of your hourly rate the most you’ll get is a bit of holiday and a staff discount - but it’s worth looking into. I’ve been at my current workplace 6 months and only just realised I get free private healthcare! It’s also really common to have the option of dental cover for NHS treatments through salary sacrifice, so you aren’t paying the tax you would be by purchasing it yourself or doing things out of pocket, it’s usually a few pounds a month, covering checkups as well as any resultant treatments.

I know most of us aren’t thinking about our pensions yet, but we should be! Have a look into whether your pension is contributory (so you have to pay into it for your company to pay in) or non-contributory (whereby your company will pay in regardless of whether you do or not). Also see if they match your contributions, and to what percentage, to ensure you’re getting the most out of it. If you don’t contribute to your pension then you’re paying tax and student loan repayments (if you have one) on that extra money in your bank account every month, whereas your pension contributions go directly into that pot, however it really depends on your personal circumstances. I have always just paid in as much as my employer would match and have never missed the money because I’ve never known what it was like to have an extra few hundred pounds a month, however if you have a non-contributory pension, you’re still in your mid-20s and live somewhere expensive - like London - you might just need the cash. If you don’t pay in but you’d like to start, I’d consider waiting until your annual pay review and - assuming you get an increase - begin contributing then, so your take-home salary isn't noticeably impacted.

Get an ISA, like, now

The main inspiration for writing this post right is was that the Help to Buy ISA programme is ending on 30/11/19 and I just wanted to say: EVEN IF YOU’RE NOT THINKING OF BUYING A HOUSE, IF YOU DON’T FEEL LIKE IT’S GOING TO HAPPEN FOR YOU; IF THERE’S ONE THING YOU CAN DO TODAY FOR YOUR FINANCIAL FUTURE, IT’S THIS! Phew, ok... An ISA offers you a tax-free allowance and interest rates you aren’t going to get on any standard savings account, so even if you only have £250 in savings, you’re still going to make money by sticking it in an ISA. Whilst you can deposit a lump sum when you first open it and only £200 a month after that - even if you can’t afford to put the £1,200 in for your first deposit, it's still well worth getting started. Even if you can only put in £30 a month, you’re still making money. Not only that but if you withdraw your money to buy your first home - even if it’s years and years into the future and you aren’t even conceptualising that right now - you’ll get more free money! The government will top up your savings by 25% up to £3000. You’d just be mad not to, so if you aren’t all over this then get on it before you miss your chance!

Invest

I had honestly never realised that I was the sort of person who had money to invest until I saw on my workplace’s benefits that you could buy shares through salary sacrifice (so there was no tax paid if you held them for 5 years) and if you bought 3 shares, they’d give you a 4th one for free. Not only that, but you only paid the price of the shares at their lowest point during the past 12 months! Not all share schemes are that lucrative, but don’t assume you’re not the sort of person who can invest and see if where you workplace has any sort of scheme that gives you shares at a cheaper cost than market price.

There are also websites out there that demystify stocks by creating a portfolio for you based on how much risk you want to take on and how long you’re happy to have your money tied up for. Simply put £250 + into a risky, safe or mixed portfolio and you might make some money. The only con is that the riskier the portfolio, the more money you could make and the longer you should keep your money in, so you need to only invest what you can happily live without (not your entire life savings or money you need access to in the next couple of years!) Obviously share prices can go up and down too, so really consider what you can afford to put into investments if you think this could be an option for you.

Budget and track your expenses

This is where I was going wrong for a really long time; I just wasn't thinking about what I was spending and as a result I slightly overspent every single month and couldn't really see where I was messing up. Incredibly stupid, I know! What helped me was separating my daily expenses from my direct debits. I recommend either using a credit card or - if you're uncomfortable with that - a pre-payment card (that you top up to spend on) for your daily expenses. Instead of only seeing what you have left in your account, you'll be able to see what you've spent and even get analytics on whether it's groceries, entertainment, shopping, transport or whatever else where you may need to reign it in a bit. 

Further reading and handy tools

Finally I thought I'd share some app and website recommendations for helping you manage your money, as well as some resources I've found really helpful...

Plum - an automatic saving app, siphoning off what you can afford based on your outgoings every month into a savings account. You can invest this amount if you so wish

Yolt - an app that brings all of your accounts into one place and provides analytics

Moneybox - rounds up your spending to the nearest £1 and saves / invests the spare change (you can pick the risk level of your investments)

Revolut - prepayment card with an app that you can use abroad at competitive exchange rates and it provides spending analytics

Monzo - prepayment card with an app that provides excellent spending analytics

Hargreaves Lansdown - there are a ton of these websites out there, this just happens to be the one I've used upon a recommendation from a colleague. They create portfolios that are ready-made and you can choose how much risk you'd like to take with your investments

Money Supermarket / Compare the Market - comparison sites aren't just for insurance, they can also be helpful in searching for the right credit card (for example; you may want to consolidate debts from a number of credit cards, in which case you'd search for one that allows free balance transfers with a long interest-free period in order to give you a set amount of time to pay the money off in manageable chunks)

Money Saving Expert - Martin Lewis's website full of tips and tricks for saving money on everyday things, as well as big purchases

The Financial Diet - a Youtube channel I find gives really helpful down-to-earth money advice for your average 20-something

Bad with Money - a podcast I think will be really helpful and relatable for those who are in debt or generally struggling with work and making money


I'm by no means 'there' when it comes to being good with money but I think that together we can demystify this stuff! Do you have any tips or knowledge to share on money matters? Please leave it in the comments!


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