Being able to handle money is a critical life skill. If you’re just embarking on a career, then learning the basics can help you to enjoy a much higher quality of life. You’ll avoid the stress and uncertainty that come with chaotic finances, and you’ll be able to invest in the things that matter to you.
But exactly how do you deal with financial matters as a young professional? The answer will tend to depend on your circumstances. Let’s consider a few worthwhile tips and tricks.
Establish a Solid Budgeting Foundation
Learning the budget is vital. This will allow you to see how much you’re earning, and how much you’re spending. More crucially, it’ll allow you to see how much extra you could be putting aside to spend more mindfully on your priorities. If you get to the end of a year and realise you’ve spent more than a thousand pounds on streaming media, you might decide you can readjust your spending without really noticing a difference in your life.
Budgeting can be done easily with the help of the right tools and apps. You might take a particular approach to finances. For example, the 50/30/20 rule suggests allocating 50% of your income to needs, 30% to wants, and the remainder to savings and debt repayment.
The cost of essential things like utilities and income tax might fall into the first category – but this needn’t imply that you can’t review these things, and change providers to get a better deal. For instance, you should choose a car insurance policy that suits your lifestyle and location, instead of opting for the first choice you come across.
Prioritise Debt Repayment
For most young professionals, settling debts as quickly as possible should be a priority. This applies in particular to high-interest debts that can be costly if allowed to linger. Specific methods for debt repayment might be useful, here. The ‘avalanche’ method, for example, focuses on those high-interest debts first. It will help to slash your payments in the long run.
You might also consider consolidating debts using a special loan, in order to limit your interest payments, and simplify your financial life in the process.
Build an Emergency Fund
Being able to cope with a short-term financial emergency, of the kind that might result from job loss or medical expenses, can be critical. If you’re self-employed in an industry where work is inconsistent, this might matter even more.
To help you survive those lean months, it’s a good idea to have enough spare cash to live without support for several months. This will help you to avoid financial insecurity, and embolden you to take the kinds of risk that might advance your career in the long term.
Invest for the Future
Certain kinds of investments make a great deal of sense for young people. These include Individual Savings Accounts (ISAs) and workplace pensions. The earlier you start saving, the more you’ll benefit from compound interest over time. In some cases, the government might even boost your savings, too.
Stay Informed About Financial Changes
The world of finance and the rules that apply to it are constantly changing. New announcements by the Treasury, like the Autumn Budget, might make it wiser to change your investment strategy. Changes to the National Minimum Wage, for example, might allow you to earn more at the very bottom of the economic ladder.
