Being young, dumb, and broke is only fun for so long. Eventually, you feel a little lost, bad habits catch up to you, and you start to realise that you’ve got nothing in your bank account to help deal with emergencies. There are plenty of other areas in life that you typically don’t think about until it’s too late, whether it’s health, relationships, career, or even personal goals. While we won’t be teaching you how to cook basic meals or change a tyre in this article, we’ll look at financial skills that will help you set yourself up for success, whether you’re in your teens or twenties.
It’s no secret that anything to do with personal finance isn’t exactly riveting, but learning the ins and outs of saving, investing, and budgeting will help you have more disposable income at the end of the day. That means more money to travel, create lifetime experiences, and spend at online casinos that you can choose based on withdrawal speeds.
Ready to start building habits that will pay off in the future? We’re going over five essential financial skills to get you on the right path.
Budget and Save
Before you dive into anything more complicated, you’ll want to learn how to budget your earnings. Budgeting doesn’t mean depriving yourself of nights out or sweet treats. Rather, it’s about making sure you live within your means and don’t dig yourself into a deep financial hole. It’s often about finding a balance between enjoying the moment and planning for the unexpected. The best way to do this is to use an app like You Need a Budget (YNAB) or a basic Excel sheet. Meanwhile, actively saving is about building a safety net. You might have heard the term emergency fund quite a bit, but what does this actually entail? An emergency fund is a stash of money set aside for any unexpected moments in life, like losing your job or home repairs. The rule of thumb is to have money to cover three to six months of living expenses. This should include rent, groceries, transportation, and other essentials.
Invest Your Money
The entire premise of investing is to grow your money over time. You might choose to purchase real estate, invest in stocks, or put your money into a high-interest savings account (HISA). Over time, your property will increase in value, you can sell stocks for more than you paid, and the money in your HISA will have grown. It’s a much smarter option than having money just sit there and collect dust. After all, with inflation, the value of your money actually decreases as time goes on. The cost of a Greggs sausage roll, for example, increased by 30% since 2022! Essentially, the earlier you start investing, the better. This doesn’t mean putting money into random stocks but instead learning the tricks of the trade first, like how to assess risk and diversify (spreading money across different investments so you’re not putting all your eggs in one basket).
Build Your Credit Score
Your credit score is an indicator of how reliable you are as a borrower. A high credit score can make the process smooth when you want to get a loan, rent an apartment, purchase a house, or even take advantage of buy-now-pay-later payment deals. However, if you have a less-than-favourable credit score, you’ll set off alarm bells for businesses, meaning they’ll be much more wary. A solid credit score takes time to build, which means you should start early. Get a basic credit card that doesn’t incur a monthly cost, keep your monthly credit usage low (under 30%), make payments on time, and keep an eye on your credit report. Avoid hard inquiries (which usually happen when applying for loans or credit cards), as they can leave an unsavoury mark on your report.
Live a Financially-Savvy Lifestyle
It’s one thing to live within your means, but it’s another to do an overhaul of your lifestyle. Especially if you’re noticing that your spending habits are spiralling out of control or you’re feeling anxious about your future, it’s worth making thoughtful changes for the better. For example, maybe you want to embrace frugality by shopping at thrift stores and learning to cook more fulfilling meals at home. Maybe you want to join a peer-to-peer website to sell items that no longer spark joy for you. Or perhaps it’s more of a complete mindset change, where you want to prioritise funnelling money into whatever hobby you’re most passionate about or want to be more intentional about your spending. Not only can these changes lessen the load on your bank account, but they can even promote a healthier mindset.
Create Multiple Streams of Income
While you should always do things in life because they simply make you happy, there’s also ample opportunity to create more than one income stream, especially if you consider yourself particularly knowledgeable in a certain field or talented at a specific skill. You might feel like you have the creativity to start a store on Etsy and sell crocheted items or the personality to start your own YouTube channel and entertain the masses. There are a variety of ways you can create passive, side, or residual income that will offer you security in case you’re made redundant or aren’t offered enough shifts at work. Just like with investing, the key is to diversify, giving you a cushion to fall back on.
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