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Saving Money When You’re Young

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Saving Money When You’re Young, young as in being born between the 1980 and 1997 is a challenge. Times are harder for young people today more than they have ever been with rising global competition for jobs, high costs of living in the UK and stagnant wages. What we want to do in this article is to explore how to budget money when you are in your twenties and early thirties so you can start to plan for a better future.

How to Budget Money

We are only young once and when we are young, we want to make the most of our time enjoying all that youth has to offer. We don’t give much thought to being in our 40’s, 50’s or heaven forbid 60’s. Those years seem so far away that they may as well be on the moon. But time will surely pass, and no one wants to end up in a position where they are having to count the pennies in their later years because they did not plan and instead decided to live for the moment.

When considering when is the best time to start budgeting and saving money for the future the answer is always better now than tomorrow and tomorrow better than next week. The sooner you start planning the quicker you can start building up a nice comfortable cushion of money to fall back on when you need it.

This might sound boring to the younger generation who might rather focus their attentions to living a hedonistic life while they can, but it does not need to be. Starting now to build up a cushion of money to be used to invest can be a way to finance a comfortable life for longer instead of having to rely of loans to be able to pay the bills.

The idea is to get into the mindset that budgeting is a way in helping your future self. Would you turn down the chance to help your future self if you had the chance? Most of us if not all of us would of course help our future selves and one immediate way in which you can do this is defer immediate gratification by not spending money which you cannot afford.

When as a young person you receive your first pay cheque it can seem like you have won the lottery. You may have never held so much cash in your hands in one go and the temptation to spend it all on new clothes, going out and generally waste it knowing that next month you will get another pay cheque is great. A lot of people happen to never shake off this habit of earn and spend, sometimes spending more than they earn by taking out credit in the form of credit cards, personal loans and payday loans to cover expenses to the end of the month.

If you live like this, were you go from pay cheque to pay cheque how can you look forward to your retirement with no money in the bank to call your own.

Best Way to Save

The best way to save money is to set yourself a goal. Having a target in mind will really focus your mind in trying to achieve it. Make the goal something worth saving for. For instance, set yourself the goal to save up for a deposit on buying a property of your own. This might take you a few years to achieve but those years will pass by regardless of whether you save or not. You can look at it like this, if you start to save now in 5 years you will have enough money to put down as a deposit to buy your own place or in 5 years you will have nothing but regrets that you did not start 5 years ago.

The best way to save money is to open a bank account into which you will deposit a fixed percentage of your wages into each month and not touch that money for any reason. The remaining percentage you will use to live off.

For instance, say you earn 25k per year. You will want to take no less than 10% of your wages and put that into your savings account. At the end of the first year you will have 2.5k. After 5 years you are looking at 12.5k in your savings account and this is if you save just 10% of your wages. Imagine what you can achieve if you were to cut down on nights out. takeaways and reduce any and all frivolous spending. It is for sure you could double that amount and bring it closer to 25k which is enough for a deposit on a place of your own.

Better still purchase a buy-to-let property which you can rent out and start building up another cash reserve to buy another property in a few years’ time and you keep on acquiring assets until you can stop working and have your assets work for you.

All these ideas sound ideal and straight forward on paper, and they do require a lot of focus and discipline on your part to ensure that you stick to the plan. There are so many temptations out there to part you from your hard-saved cash. There are all the latest gadgets, holidays, new cars. But you will want to avoid all these unnecessary expenses and learn to defer gratification until after your assets start to produce an income which will more than pay for your luxuries in years to come.

These assets will continue to produce for you an income for the rest of your life when other people are still having to get out of bed in the early morning for the daily commute and daily grind. Your assets are producing income while you are on your 3rd holiday of the year because you learnt the power of deferred gratification.

Pay yourself first

If you have debts, then you should break down your income in such a way that you can pay down your debts whilst being able to save and live.

As mentioned above you want to put at least 10% towards your savings. If you have debts you want to pay them down so another 20% at least ought to go towards paying down your debts, the final 70% is for you to live on. You must stick to this plan. The 10% you put towards your savings must never be touched until you have enough to put down as a deposit for a property, not even to pay off any debts. The rich understand the first rule of being rich and that is that they pay themselves first and everyone else second. The middle class and the less well off pay themselves last with whatever money are left over. This makes no sense at all. Why would you pay yourself last?

Taking the approach of paying yourself first ensures that you will always have money and everyone else will have to make do with the remaining funds.

Take on a second Job

One great way to start building up your cash reserves is to start a second job or start an online business if you can. An online business does not need to be anything extravagant. It could be as simple as selling unwanted items on eBay. An eBay account is easy to setup and you could be earning extra money in hours of listing unwanted items. Use that cash to pay down your debts and payday loans and start growing your financial cushion.

Taking on a second job is also another great way to accelerate the growth of your bank balance. There are many weekend and evening jobs you could do close to home. This second job does not need to be for many hours. Even working weekends will be more than enough to bring in an additional £500 each month. That’s an extra £6,000 per year towards building up your assets.

Buy luxuries last

There are so many things nowadays we can spend our money on. Latest mobile phones, new car, another holiday, more clothes. The list goes on and on it’s no wonder that many people turn to short-term loans to see them to the end of the month. Credit cards groan under the weight of all the debt they carry just so we can get a hit of dopamine from buying something. This hit of dopamine is so short lived that we tend to regret our decision to purchase something almost as soon as we get home. Buyer’s remorse is the high of spending money wearing off and the realisation that we now have something we cannot afford hanging in the cupboard or parked in the drive.

Another secret of the rich is that they buy their luxuries last. When you see someone driving a very expensive sports car you can be sure that they were able to buy that with the income generated by their assets and not on borrowed money.

Before you go out to the shops understand that there is no need to spend money for the sake of spending money. Every pound you spend could one day be used to buy your own assets which will make money for you. Each pound you spend is delaying your road to financial freedom.

So, do you need the latest mobile phone? Is it necessary to spend £4k on a holiday or get yourself into debt just so you can drive a car which you cannot really afford just to show off? Buy luxuries last, let the other guys get into debt for the sake of their ego.

Map out your spending

At the start of each month you will want to plan exactly how you will spend your money. You will need to budget for food and bills. Consider if you need to be spending money on expensive nights out or on takeaways and if there is another way to entertain yourself with your friends. It is very likely that they too have money worries. Why not get together and work out how you can save money together. Saving even £10 per week is better than not saving anything at all. Your £10 per week will at the end of they year equal £520. This is the average payday loan amount.

Make efforts to reduce your debt If you have credit cards with outstanding balances, you will want to minimise them as much as possible. Here are some ideas on how you can work towards paying off those debts fast.  

Work out how much money you owe: Many people keep ignoring their financial problems in the hope they will go away. But the best way to deal with debts is to confront them as soon as possible. Make a list of all your outstanding debts so that you have a real understanding of how much you owe.

Prioritise your debts: Once you have a list of all the debts you have and the amounts which are owed the next thing to do is to prioritise your debts with the most important ones to be paid off first. Initially these will be the high interest debts.

Consolidate your loans: One large debt is easier to keep track of than lots of smaller debts. One way to reduce the burden of management is to take out one large loan to pay off all the smaller loans. This way you can clear down the credit card balances, overdrafts and short-term loans into one easy to manage payment and most likely a lower interest rate too.

Balance Transfer: If you do have credit card debts one easy way to reduce the amount of interest that you are paying is to apply for a credit card which allows interest free balance transfers. When you take out one of these cards simply transfer the balances from all your cards to the 0% interest card. This way you are no longer paying interest on the balance for the interest free period. Be sure to pay off the balance before the interest free period ends.

Debt management agencies are regulated by The Financial Conduct Authority

Many people in the U.K struggle with debts and many do not know how to start to repay them speaking to a debt advisor is one of the best things you will do along with taking action yourself by speaking directly with your creditors.

https://www.nationaldebtline.org/ and https://www.moneyadviceservice.org.uk

You should always seek professional advice when handling debt problems. Cashute are not licensed debt advisers and any information contained in this article should not be taken as legal advice. It is your Responsibility to seek out correct legal advice

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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk