This was my philosophy for managing my finances before I started working full time: spend. everything. In my first year of university I’d end up blowing (maybe too much) money at clubs, in my second year my flat and I were ripped off by our estate agent and thus I spent the year swimming in my overdraft and in my third year I traveled to Rome, Miami, The Algarve and Malta using my student budget and internship money. Would I recommend it? Well, it really depends. Some people think ahead and start saving as soon as any money hits their account; but I was personally told to do the above, i.e. blow it all and start worrying about finances when I had a regular, stable income. Once I started working, of course I had to rethink my philosophy. I had to start “adulting”. Managing finances is something we all do differently and something a lot of people want to know about, so I thought I’d share a few major rules I (try) to stick to, to make sure I’m “adulting” as effectively as possible.
Bola Sol said this in a recent YouTube video and I couldn’t agree more. The first thing I do when I get paid is put some money away in my savings account – I pay myself first. I typically try to save 1/3rd of my monthly income, c. 1/3rd (maybe just under) covers rent and related expenses, and the final 1/3rd is spent on living, shopping, eating out, ubers, etc, etc. When bonus day comes – I’ll treat myself with something special, and deposit the rest away into my savings. Why do I save? Well, one of the more obvious reasons is to get myself on the property ladder. At the moment I rent, which is nice, but there really isn’t anything quite like owning your own property. My parents currently own two (the other being our childhood home), and through them I’ve learned a lot about the value this brings. Of course times have changed since our parents’ day and I really don’t expect an appreciation in house prices the same way they would do way back when, but regardless, it’s still an aim of mine to jump on the ladder. I also save for security – you never know what life could throw at you or when sh*t can hit the fan and if you have a nice cushion to fall back on, that without a doubt can help you feel more secure.
Although I put a lot of weight on my savings I’m not really an advocate of letting that stop you from generally living your life. For example, if I have to dip into my savings to pay for an impulse holiday, I will. If it’s cold outside and 12am, I will order an uber vs. public transport just for sheer comfort. And ya’ll know I love food – so I’ll fork out a bit extra sometimes for a yummy treat. Of course, I live within my means – you don’t want to spend recklessly and have an empty account with no savings (unless that floats your boat) – but the truth is that we’re young. I’m 22 years old – no kids, no mortgage, no real responsibilities, no nothing. This is one of the freest I’m ever going to be and I plan to utilise that rather than look back when I’m older with regrets. If that decreases my planned savings one month or delays that golden mortgage a little bit, I’m okay with that. For example, I know some people that didn’t quite agree with my choice to move out when I can indeed commute to work from my family home in just over an hour; but a number of factors (poor transport links, long hours, enjoying a life in the city, independence) led me to deciding to move out and rent, and I have never regretted that choice. But again as I said above – it’s about living within your means. I knew moving out wouldn’t have a tremendous negative impact on me… so I did it! Another little tip: there are a few little ways to save extra pennies, for example, I also use website such as Dealsqueen to find voucher codes for clothing, accessories etc, before I go ahead with any purchases.
Mutual funds, ISAs, and even the now very glamorous cryptocurrencies – your money in your savings account is not doing anything, so you might as well put it somewhere where you can gain at least a bit of interest. This is an area I started building up knowledge in when I finally had a solid base of savings (and I’m still seeking to learn more everyday), but a good ‘success’ story in this specific area has actually been my boyfriend Levi. He started investing in cryptocurrencies almost a year ago now after researching into the value prospects, and also as he was looking for a more passive source of income, and the percentage returns on this idea were definitely way more than would have been the case if the money had been sat in his Nationwide savings account. With this stuff, it’s all about your own personal risk profile. Cryptocurrencies may not be everyone’s cut of tea (it is a very risky investment and not a money making machine – as you may have noticed these past few days!), a lifetime ISA could offer a better risk return reward for your profile.
At the moment I earn the bulk of my income from working in banking and next in line comes incoming money from my blog. One of my New Year’s Resolutions was to work harder at both growing and diversifying my sources of income. Some people do this through freelancing, selling guides, starting up side hustles, investing (see above) and a multitude of other things. Definitely this is a point that helps i) with general self development and ii) with pushing along the path to more financial independence. Without a doubt, this is definitely one of my focuses of the year.