Budgeting Tips for your twenties

 

Skint new world

It’s a hard world out there right now, with new graduates bearing the brunt of the world’s economic misery. You might think that because you’ve left university, your days of scrimping are over, but let’s revisit some student habits that are actually good for your wallet’s health.

Don’t buy a new car
Don’t get sucked into the hype that you need and deserve a new car. You might feel you deserve one, but you don’t need one! They cost a fortune and you’re entering into a big credit agreement. Once you get behind on payments, you’re two months away from having no wheels. Car loans can be a big, never-ending drain on your income. While a quick loan, like the ones offered by companies such as Peachy, can help you get back on your feet once in a while, having a recurring car payment for 8+ years is a real drain.

It’s better to look at the figure you’d spend on your car loan every month, then buying a monthly travel pass and putting the difference (or some of it) into a savings account. Over time, you’ll have enough for your first – used – car.

Eternal student

You can also carry on eating and dressing like a student, while making your first real money. All this means is looking out for BOGOF offers in the supermarket, using leftovers and becoming a charity shop king or queen for a day (or a month, or a year….).

A lot of twentysomethings have student loans, with the average UK graduate debt being £40,000. The repayments are manageable, and the interest rates are relatively low, but if possible, make overpayments to clear your debt faster. Of course if you have other debts to pay that attract more interest, prioritise these, especially if you’ve had to take out a payday loan, as these loans are designed to be paid within days, not years!

Good old fashioned funds

An emergency fund isn’t just for oldsters! Your not-so-new car might need fixing, or you might need to pay a deposit and rent in advance if you make a sudden relocation. You might only save a few tens of pounds each month, but every month your cushion gets a bit bigger.

Use extra money wisely

When you get a windfall, be it an inheritance, a lump sum from reclaiming ppi on your first mortgage, or start earning money on the side from your day job, be wise. This is unexpected money, that you do not need to pay your bills and cover day to day expenses, so try to save it for later, when you want to buy a big ticket item. Those amounts add up quickly if you make it a habit to bank them instead of spending them.

 

Start thinking about your pension. Yes, really! OK, it’s probably 50 years away, but that’s exactly why you should start preparing now. Even if you can only put away a tenner a month for now, the magic of compound interest will do its stuff and you’ll have a nice little nest egg and no worries about your old age.

When you’re young, you should be having fun, but fun is expensive. Or is it? Allow yourself one splurge night a month – a club, a meal out, a cinema trip with popcorn and cola. The rest of the time, see how much fun you can have without spending a lot. Invite friends round to watch a film and make your own popcorn, take turns to host a dinner party – use your imagination.