With our Instagram feeds urging us to ‘live life to the full’ and the tattoos on our friends’ wrists demanding we ‘carpe diem’, we’re constantly being told to focus on the present moment rather than worry about the future.
But could this YOLO attitude to money be damaging in the long run? As important as it is to make the most of the time we have now, it’s equally vital to plan ahead so that we can set ourselves up for a strong future financially. So how can you get your financial shit together?
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Start saving for retirement
Unless you want to spend your old age ‘wombling’ out of sheer desperation or picking up half-smoked fags outside the local Wetherspoons, you’d be smart to start saving for retirement.
The best type of pension tends to be a workplace one. If your employer offers to match your pension contributions, snap this right up like young Butch snatches that pocket watch in Pulp Fiction.
Employer pension not an option? Don’t sit around feeling sorry for yourself. Be the independent go-getter you were born to be by opening a personal pension, saving in a high interest savings account, or investing your cash for the long term.
The Lifetime ISA could also prove useful when it’s introduced in April 2017. For every £4,000 you save towards a home or retirement, the government will give you £1,000. Until then, why not start squirrelling money away into a high interest savings account?
Save an emergency fund
What would you do if you lost your job tomorrow? Would you still be able to pay rent and put food on the table? If this thought fills you with dread, it’s time to start building an emergency fund. Not only can this savings stash protect you in the event of job loss, it could also fund other nasty surprises.
A good emergency fund should include between 3 and 6 months’ living expenses but it will of course take time for you to reach this amount. Open a high interest savings or current account and start moving money into it from your main account every pay day. Set up an automatic transfer so that you don’t have to think about it.
Make use of the Help to Buy ISA if you’re a first time buyer
If you’ve never owned a home before, the Help to Buy ISA could prove to be a Godsend. For every £200 your place in the account, the government will top it up with another £50. You’ll also benefit from interest on your savings.
Take a look at my Help to Buy ISA guide to learn more and find out why you should get a Help to Buy ISA even if you don’t know whether you’ll buy a home or not.
Write down everything you spend for a month
Struggling to find spare cash to put in your emergency fund, Help to Buy ISA, and pension pot? It’s time to write down everything you spend for a month. You might already feel pretty sensible with your cash but you may be surprised to learn exactly where your money goes.
I kept track of everything I buy in April and it was eye-opening to say the least.
Ask for a pay rise
Think of asking for a pay rise as a right of passage for your twenties. It might sound like the scariest thing ever but it’s something that’s gotta be done. What’s the worst they could say…’no’?! If they say no, you start dusting off your CV and looking for a job where your time and expertise is valued!
Once you’ve asked for a pay rise and got one, you’ll be counting down the days until you can ask for another. You’ll feel super empowered. Here’s my guide to asking your boss for more money.
Find ways to reduce your essential living costs
Regardless of the number of lattes or mojitos you buy each week, chances are your biggest monthly outgoings involve rent, bills, and food. Look for ways you can reduce these costs.
- Can you move to a flat in a cheaper area?
- Can you call your utility providers and haggle a better deal?
- Can you shop at a cheaper supermarket?
Moving in with your parents in your twenties may sound like the exact opposite of getting your financial shit together, but hear me out. By moving back home for a few months you could potentially save thousands of pounds for the future and give yourself a head start on your savings. How much do you spend on rent, bills, council tax and food right now? Imagine if you could put that towards a house, emergency fund or wedding? That’d be amazing!
If moving in with mum and dad isn’t an option, thankfully there are plenty of ways to reduce your rent without moving in with your parents. Also take a look at this guide to saving money on everything from household bills to travel expenses.
Switch bank accounts for a better deal
Research suggests that we’re likely to stick with our banks for longer than we stick with our husbands and wives. The typical Brit is believed to stick with their bank for 17 years and their spouse for just 11 and a half. Obviously in a perfect world our marriages would last longer but let’s be realists here and be banking sluts instead. Switching banks is quick, easy, and gives you an instant feeling of satisfaction.
In fact, switching bank accounts can often open up a world of opportunities such as cash bonuses, better interest rates and perks such as cashback, cinema tickets or free magazine subscriptions.
Many people avoid switching banks due to the misconception that it’s a long-winded process. In reality, it can take just a few minutes of your time and your new bank will do most of the hard work for you within 7 days.
If you already get a great deal from your current bank, consider opening an additional account to maximise your savings. If you’re not saving in one of these accounts, you’re missing out on free money.
Make a plan to pay off debt
Although having savings is important, if you’re in debt you may be best paying this off before you start saving for the future. After all, you’re likely to pay more interest on your debts than you’ll earn on savings.
Martin Lewis says: “[An emergency fund] is a must-do aim for the debt-free, but for anyone with expensive debts – particularly on credit cards – it’s silly. The right thing to do is still pay off your debts with savings, including your emergency fund.”
Think of it this way: Being in debt is an emergency. So if you’ve already got a wad of cash to hand, this could be a financially sensible time to use it.
Need help paying off your debts? I’d recommend checking out Debt Camel. This is a great resource for anyone looking to get out of the red and get their financial shit together.