I’m approaching 30 and I can safely say I have had my fair share of financial mishaps throughout my 20s.
Whether it was racking up a huge credit card bill – repeatedly – or believing I could get rich quickly, it has taken me years to claw my way out of the hole I so graciously dug for myself.
In this blog post I am sharing four things I have learned about money that I would have loved to have known when I was 20. I hope you find them useful, too.
Get financially literate
I am still not quite sure why financial education is not a part of the school curriculum in the UK, but it is no coincidence that we, as a nation, have little-to-no savings and piles of debt.
Truthfully, you cannot do better until you know better and this is why financial literacy is so important.
Once you take the time to educate yourself on the importance of saving, how and why to avoid debt, and the power of compound interest via long-term investing, it is much easier to work towards financial security.
Thankfully, we live in a digital era where there are innumerable free and easily accessible resources to get the financial know-how.
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‘Pay yourself first’ is more than a cliché statement
You may have heard this statement before and thought it was overdone, but it is vitally important that every single month you make sure you put something aside for your future.
That may be putting money into your savings each month, topping up your investment account, or even investing money into courses or books that help with self-development.
Living for the here and now feels good but in the long-term it’ll keep you in the rat race of life, living pay cheque to cheque, dreading the next emergency. Always pay yourself first — you are worth it.
Avoid the ‘Buy Now, Pay Later’ trap
In my opinion, there is nothing worse than paying today for a purchase you made months or even years ago, especially if you’re not frequently making good use of that purchase.
With the ‘Buy Now, Pay Later’ option becoming more readily available across the UK, it is becoming increasingly difficult to not fall prey to the debt lifestyle. We have to keep in the forefront of our minds that it is ok and normal to not be able to buy something at the drop of the hat.
You may need to save for a few months in order to buy that new bag or new gadget, but once you get it at least you know it is paid for in full.
Avoid excessive lifestyle inflation
Lifestyle inflation is when one increases their expenditure to match an increase in income. I know about this all too well – when I earned more money, I increased my spending to match my new income.
The better approach is to consider each promotion, pay rise, or bonus, as a time to enjoy some extra cash and an opportunity to top up your savings and investments. It is simple, but it works.