Ah, the joy of being a 20-something. Schools out and you have a lifetime of adventures ahead of you.
But you’re going to need some dough to pay for those adventures and unfortunately, the bank of Mum and Dad is closed. It’s time to get your own finances in shape. Let us give you a kick-start with our financial checklist for 20-somethings. Don’t worry if you’re a bit older, we’ll be running a series of checklists for various life stages over the coming months and in the meantime, you can read through the list wishing you’d done all of this earlier or, if you’re really lucky, feeling smug that you did!
- See an Independent Financial Advisor for a check-up. If you already have money to invest, it’s never too early to find yourself a good IFA. They often pay for themselves many times over during your lifetime. Find out how to pick a good ‘un.
- Look at your current and savings account. There are some really great deals out there so don’t let your money languish at 0.1%.
- Pay off your debts. Easier said than done, we know! Focus on clearing debts before saving and investing as debts usually cost more than savings earn. This doesn’t apply to student loans taken out in 1998-2012 though – you can generally earn more in savings than the loan costs.
- Start a savings habit. Read a bit about the magic of compounding interest and it will become a lot easier to stop yourself buying that daily latte and save the money instead. The younger you start saving, the better.
- Reduce spending. Don’t throw money away on things you don’t really need. That money can work really hard for you. Have a read through some of the musings of Mr Money Mustache for an extreme example of living frugally to retire early.
- Know your credit score. Your credit score is a number that tells lenders how likely you are to repay debts and has a major influence on whether you can get a mortgage. You can sign up to a free 30 day trial with Experian, the UK’s largest credit agency to see how you measure up (don’t forget to cancel during the trial if you don’t want to pay).
- Apply for a credit card. This might seem counter-intuitive but a credit card contributes to your credit score and builds your payment history. The caveat is that you must pay the entire balance each month.
- Create an emergency fund. Life happens. You need to make sure you’re ready for it. How much of a cushion you need to cover unexpected emergencies will depend on your circumstances but, as a rule of thumb, 3 months of your usual wages is a good guide.
- Start a pension. Woah there. I’ve only just started working. Isn’t it a bit early to think about retiring? We hear you. But the earlier you start contributing, even a small amount, the more you can save thanks to our friend, compound interest. Make sure you’re in your employer’s pension scheme and you’re contributing as much as you can. Alternatively, consider starting your own personal pension.
- Get insurance. It’s boring but necessary. Protect your possessions, home and car and you’ll sleep easier.
- Consider your investing options. Investing may seem complex and baffling, but it can be lucrative. The best investments and strategies build over time so you need to be in it for the long term. This helps you ride out the ups and downs of the markets. A stocks and shares ISA can be a good place to start. Do some research and if you’re unsure what’s right for you, always get professional advice (back to point one on our checklist).
This article is for general use only and is not intended to address your particular requirements. It should not be relied upon in its entirety and shall not be deemed to be or constitute advice. The value of your investments can go down as well as up, so you could get back less than you invested.
GreenSky Wealth Limited is authorised and regulated by the Financial Conduct Authority. FCA No. 629624. Registered Office as above. Registered in England and Wales, Company No. 07103441.