Starting your first job is a big step for all young people as you are now ‘making money’. Everyone remembers their first day and their first payslip, but how to you take good care of your new found wealth?
The Five Core Tips
- Start saving! Yes, pretty obvious but read on to find out how
- Avoid getting into debt for purchases that fall in value
- Challenge yourself – Set some ambitious saving and investment goals
- Education – Don’t stop learning
- Protect your most important asset
Now, let’s investigate each one in some more detail.
1. Start Saving
Kind of obvious but you’ll be surprised how many young people don’t start saving because spending seems is a lot more fun. Best way to start saving is ‘Save First, Spend Later’. Effectively, make sure you deposit a part of your pay into a savings account before you get a chance to spend it. If you remember nothing else, this tip will get you off to a great start.
2. Avoid getting into debt for purchases that fall in value
Taking out loans for material things like cars, gadgets and the latest fashions is a sure way of digging a financial hole for yourself. A car will lose money from the day you buy it, adding the cost of interest repayments to the purchase just makes it worse. Same goes for fashions and gadgets and what makes these even worse than cars, is they are often bough on credit cards with interest rates up around 20%.
The best option is to save for your purchases. This way you’ll have time to consider your purchase and it won’t come with a ridiculous interest rate charge.
3. Challenge yourself – Set ambitious saving and investment goals
Set some ambitious yet realistic saving targets and have a real go in achieving them. Three key steps for financial goals
- Start with the end goal in mind – You need and end goal but also have a few smaller goals (milestones) to celebrate along the way. The Savings Goal Calculator is the first place to start.
- Know where you are today – Understand what you expenses are, work out what expenses you can cut out, and the expenses can be reduced
- Start a plan of action – Starting is the difficult step; the easiest way to overcome this difficulty is just start! The plan will include reviewing your progress, finding new ways to save and progressing your opportunities to earn and make more money.
4. Education – Don’t stop learning
Become a savvy saver and investor. Take a very active interest in the finance news, become a creature of research when you decide to invest. Learn from others who have been successful and not successful (learn about the financial traps so you don’t get caught). And don’t be afraid to seek professional personal advice from a suitably qualified financial adviser.
5. Protect your most important asset
Most people will look to protect their bigger purchases such as a car and house and this is good practice, but many people forget protecting the means of affording the purchases in the first place. This is of course your ability to earn an income. This ability to work and generate an income is your biggest asset. Protect yourself through a good insurance plan will give you peace of mind and secondly, it is usually easier to obtain insurance when you are young.