Jay Z’s latest album, 4:44, touches on something which has been on my mind as of late. This is something that many people feel very uncomfortable to talks about. Hello, Financial freedom
I think that as young people, one of the things we are yet to master is how to manage our finances. And I truly believe it is something we must spend our 20’s doing otherwise, we will be paying for it in our 30’s.
Too many of us do not live according to our means but in excess- this means we end up living paycheck to paycheck, at best. We live in the era of instagram and that has resulted in so much stunting. Stunting has led to the rise in fraud boys (midlands boys, I am talking to you). It’s quite sad to watch really.
However, It is very possible as young people to make smart decisions when it comes to our finances. Here are some tips that I try to live by when it comes to my savings.
Too many of us live according to the 911 rule. This is 90% of our income is spent. 10% might go into savings. And the extra 10% is the excess expenditure by the end of the month. This is obviously not a healthy way to live. It also leaves room to amount debt. As university students know, debt does not care whether you are young or old.
Instead a way in which we can turn that around is living according to the 811 rule: 80% spend, 10% tithe (If you are a christian, try as much as possible to incorporate the tithe money into your finances, that way, you can avoid spending the tithe money- we are all guilty, even me. the final 10% goes towards a savings account. Some may see the 10% savings as very small, however, it is a good way to start saving money if it is something you don’t usually do. Once you master that, you can decide to reduce how much you spend and rather increase how much you money you save.
2. Savings account
One of the biggest mistake you can do is keep your saving in the same account as your current account. It will not work. You will end up dipping into the money bit by bit and before you know it, the money has been spent. Trust me, especially in London, it is very easy to spend cash. If it is not going to tfl (and we all know how much transport costs- a moment of silence as we all reminice on the 16-18 oyster card), it will go to food or the sales that happen to come just when you have said you don’t want to spend anymore. Find a bank with some good rates and keep your money with them. Make an appointment with a bank and talk through these things, especially ones that have a good rapport with young people.
Moreover, there are short term savings and long term savings. Therefore, decide for yourself how much money goes into your long-term savings for bigger goals such as a deposit for a house or even your dream car etc. Short term savings are for things such as holidays, shopping sprees and the little things that may occur and need seeing to immediately. Decide if you want separate accounts for that- you probably should if you are serious about the financial goals you want to set.
3. Bonds and Shares
Now I must admit, this is something that I myself am still educating myself on. Having bond or shares is a way of increasing the amount of income you make. Ofcourse in order to make a smart decision, it requires educating yourself on the sector in which you want to in. There is a lot of money to be tapped into but there are also a lot of mistakes to be made if one rushes into this too fast.
- Shares (also known as equities) are like tiny fractions of a company. If you own one, you own a little bit of the company and a proportion of the company’s value. Shares are bought and sold on the stock market. By owning stocks, you are able to vote on the direction of the company in which you have bought shares in. If you choose to buy shares without a middle man, you handle the proceedings yourself. However, if you choose to handle the shares through a middle man, then you can sit back and relax.
- Investment Bonds are different- You want to invest a lump sum – usually at least £5,000. With Bonds, you have to expect that you can also lose money as well as make money, therefore it must be considered a great deal before buying one. It is easy to see how bonds may seem more complicated to a young person, especially as we don’t havethat lump sum to pay (such is life as a working class)
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4.What can you cut out of your daily expenditure?
What things can you cut back or completely eliminate that will save you tons if money a year down the line?
What I mean by this is the little things that end up taking our change. Canned drinks, a bottle of water, sweets, a coffee in the morning, or caramel frappuchino (I cannot help myself). All these little things add up in the long run. So instead what can you do?
If you feel that you really need the coffee in the morning, which most of us do then try putting aside money for it during the week. Add the costs into your bugeting plan so that you know where miney is going.
When it comes to buying water when I go out, this is something I hate because I have packs of costco water at home. I should have just taken one. Buy water in bulk if you can and recycle the bottles if you have to ( wash the lids though because the germs will get into your body). Learn to buy necessities in bulk to save. I use this rule for gum too.
Now I will be honest with myself and say a caramel frap is a luxury to me. But since I love it too much to cut out entirely, I buy it once a week instead of the everyday after work: baby steps.🤗
What i do with my change (1p, 2ps) is that I have an old paint can that I toss them in. At the end of the year, I book an appointment with my bank to count them all and put them into my savings account. You will be suprised how much money loose change adds up to when you keep them.
Ultimately, the goal is to be financially secure even with the little we have. So these are my tips. Try them and let me know how it goes for you. And I shall add to this post as I learn and try new ways to be finacially free. 💕