A guide to start OWNING finances in your 20s

There’s no denying that things are financially tough for our generation. Despite the ever-growing cost of living crisis, there are some things we can do to take control of our finances.

We often get told that there’s no way of getting out of debt, and that we won’t be able to afford to move out. The reality is that studies show our age group is worse off when it comes to money.

Gen-Z have had to battle through a multitude of events; a pandemic, multiple lockdowns, skyrocketing house prices, but are now expected to enter the financial world unscathed.

To help, Financial Advisor Chris Fox sheds light on how to gain control of your bank, whilst still being able to enjoy life in your twenties.

Avoiding overspending your finances 

How many times have you checked your bank account and there’s suddenly a gaping financial hole that wasn’t there before, suspiciously after an expensive meal or an unexpected night out?

Lifestyle Planning Financial Advisor, Chris Fox, 50, has worked in the industry for four years. He hasn’t always found it so easy.

“Money is a very emotive subject and lots of people will blindly be scared to look at their account,” Fox said. ”I always work on that, and I was, as a 20 year old, absolutely terrible.”

 “But I think the first golden principle of any form of good behaviour when it comes to finances, is budgeting effectively.”

It doesn’t have to be overly complicated, he said: “The benefit of sitting down once a week and just sense checking what’s in your bank account, is it about where you thought you’d be, that then allows you to take proactive steps about what you’re going to do the week ahead.”

“Don’t be afraid to cut a night short or just do something differently with your friends, to avoid getting into that trap of unnecessarily spending money,” Chris said. “If you know that you’ve got a big period coming up with parties and things, you look to save for that in advance, if you can.”

With multiple online banking apps, it has never been easier to track spending.

Yet for many, learning to manage their finances will be a new and confusing experience.

They’re not alone in this; a study by Compare the Market found that a worrying 61% of young adults in the UK did not recall receiving financial education during their time at school.

Mathew Gay, 27, runs a social media enterprise called The Quid Squid, which educates people on how to manage their money better.

@thequidsquid Here's the full breakdown ⬇️ Average person 👨‍🔧 Salary – £35,404 Take-home – £27,594 (5% pension) Bills – £16,756 Left – £10,838 25% reduction – £8,129/£677 a month saved 💰 How close are you to these? 🤔 #budget #budgetuk #save #saveuk #personalfinance #personalfinanceuk #salary #salaryuk ♬ original sound – Mat 🪙 Personal Finance

“The way I stopped overspending is, I set a goal that when I finished my apprenticeship, I wanted to buy my house,” Gay said.

“So setting that goal really made me get more enjoyment out of saving, because I could see my savings going up and when you see your savings going up and closer to that goal, it’s easy to look at it on a spreadsheet.”

“I’m a big fan of creating your own budget because that means you really look into your finances, but there are loads of free apps out there that you can use,” he said, “the one I use is Snoop, there’s one called Emma and also Money Box.”

Mat’s free budgeting spreadsheet is available to anyone on his website.

Why Klarna is worse than you think

Klarna is the latest way to buy your ASOS package in instalments, rather than doing it all in one.

It offers a “buy now, pay later” where customers can pay towards a purchase, rather than upfront, with the option to pay it back in 30 or 90 days.

Now available on over 20,000 retailer websites, it can be very easy to get sucked into the security that people think it might offer.

At first glance, the idea sounds great. Why not buy something in instalments rather than fully up front with no interest attached?

“There’s a bad habit being formed with that approach, and that habit very much is around the philosophy that you buy now, then pay later,” said Chris Fox. “The reality is someone’s going to make money out of that, and it won’t be you.”

“The habit that you’ve got to try to form, is only spend what you’ve got. Because you’ve then got a debt that’s been accrued that you need to pay, regardless of whether you’re paying interest on that or not.”

The small print on the Klarna website also states that any purchases using the 30 and 90 payback method are unregulated credit agreements, meaning they’re not protected by any financial authority, potentially leaving your money at risk.

Mat urges people to only use zero percent finance for bigger purchases: “Klarna is a way to get people into the finance mindset, without the benefits of it.”

 “Finance should be used for big purchases, not for your Domino’s on the weekend, and if you miss those payments you are going to get stung with interest, it’s a nightmare,” he said.

“Klarna, in my eyes, is a tamer version of a payday loan, it’s a slippery slope.”

Choosing the right savings account for you

The base of good financial decision making is always saving money. But once you’ve decided to do that, where do you put it?

When it comes to choosing a savings account, it isn’t a one size fits all policy. There are now so many different banks with various offerings.

Individual saving accounts (ISA’s) allow you to hold money without paying tax, with up to £20,000 in one account.

Both Mat and Chris highlight the importance of utilising these, especially with the state of the housing market.

They urge potential buyers to look into a lifetime ISA, which allows those saving for a house to gain 25% from the government each year, with a cap of £4,000.

Even if you don’t see yourself buying soon, these accounts can be used until you’re 50, so it might be worth starting now.

@thequidsquid 6 accounts that YOU SHOULD HAVE! 1. Debit account with benefits ✅ This is an account that your income comes into and your main bills come out of 2. 2nd account for intermittent switching and bill splitting 🔀 This is for separating your important bills from your fun expenses, so a shopping spree on this account won't affect you paying your rent. 3. Instant access high interest account. 💰 This is where your emergency fund of 3-6 months of monthly outgoing should be. 4. Pension 🧓 If you're over 22 then you are auto enrolled into a workplace pension, but make sure you have access to this and you know what it's doing. 5. Credit Account 💳 This can be used to help build your credit score, and it can be a great way to earn rewards on your spending, however they can be dangerous if not used properly. 6. Travel card 🏖️ Everyone needs to go on holiday, so travel cards which charge no fees on transactions and have good exchange rates are a must. Now these 3 accounts are only for specific people 3️⃣ 7.S&S ISA📈 These are for anyone looking to start investing as if you don't go through an ISA, you won't be able to utilise the 20,000 tax free on deposits into this account 8.LISA 🏡 This is for anyone buying a house, as this account will give you a 25% free government bonus for any money you put in. However there are criteria to getting this, so be careful. 9. Premium bonds. 🪙 If you're a lottery player, stop, and instead put money into premium bonds. #budget #budgetuk #save #saveuk #bank #bankuk #personalfinance #personalfinanceuk #LISA #PERMIUMBONDS #INVESTING #investinguk ♬ original sound – Mat 🪙 Personal Finance

For more specific advice on savings accounts, Chris recommends “Money Facts Compare” and Martin Lewis’ website.

“You want the money now, but when you’re 50 years old, you’ll be kicking yourself saying, why didn’t you do something sooner?” Mat said, “However, on the flip side of that, budget for short-term goals, like going on a nice holiday, going to Bali or Vietnam, wherever you want to go.”

His message of hope is simple: “It’s bleak out there at the moment. There are lots of things to worry about. However, it is manageable. It might take you sitting down with someone. You can talk to people you trust, you can talk to your friends about your finances. You shouldn’t feel embarrassed about it.”

As previously said, there is so much pressure placed on us to be our best selves at all times. This just isn’t an achievable reality.

At the end of the day, you have to live your life and indulge sometimes. Just think of your future financial self every once in a while.

You only get to experience your twenties once. It’s okay to be Messy.

You can read more about managing your finances with Messy here.

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