Making the most of your money when you’re young
When you’re in your twenties, life can be pretty exciting. After years of studying you may at last be earning some decent money. You may be saving to travel or to buy a car. You may be going flatting for the first time – or even thinking about buying a place of your own.
4 April 2005
To make the most of your hard-earned income, and to give you a better chance of achieving your goals, you need to know how to manage your money. Below are some tips to help you get sorted on money matters.
Do a budget. Doing a personal budget is the best way to get control over your money. You work out how much you’ll earn in the next year, then decide how much you want to save and spend, and on what. If you use the budget calculator on Sorted, doing a budget can be quick and easy.
Doing a flat budget also can also be helpful. This will help everyone understand roughly how much they must contribute towards things like gas and electricity, and may help avoid problems with flatmates when the bills arrive.
Deal to your student loan. By paying off your student loan faster, you can save yourself a lot of money in interest payments. Sorted’s student loan calculator will show you the savings you make in interest when you increase your repayment levels above the minimum amount. Remember, the more you save on interest, the more money you’ll eventually have to spend on other things.
Control your credit card. Try to clear the balance on your credit cards every month. If you don’t, you will pay interest at a relatively high rate. And you will keep paying interest every day until the money is repaid. Paying interest makes the things you buy with your credit card more expensive. It sucks money away from you, and stops you achieving other financial goals. If you do have to extend your balance, it’s better (cheaper) to have a bank overdraft than a balance owing on your credit card.
Save for your goals. Many people in their twenties are saving to travel or for a house. By using Sorted’s goal machine you can work out how much you need to save to reach a specific savings goal. It’s important to make this goal realistic, otherwise you may be disappointed and give up.
Sorted’s regular savings calculator will show you how a savings programme and the power of compound interest can turn a little into a lot over time. But before you start saving, be aware that you will generally be better off first repaying debts, particularly high interest debts like credit cards and hire purchase. The reason is that the interest you pay on debts is usually a lot higher than the interest you can earn on savings.
Starting a modest medium to long-term saving scheme when you are young can also get you into the saving habit. That may make it easier for you to get serious about saving when you are older.
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