Young, single, and on a budget? Skip the mistakes that others make
You’re young, single and on a budget. It’s hard being a ‘yadult’ sometimes. But life’s a lot more fun if you’re not stressing about the power being cut off. Take some tips from others’ mistakes and skip the ‘shoulda known better’ stage of your financial future. Here’s how:
Have a spending plan. That’s a budget, but if you think of it as spending plan it doesn’t feel like a torture device. The idea is that you get a pen and paper or spreadsheet out, start with what you earn and divvy it up into important categories such as rent, food, transport, utilities, insurance and saving. Then split what’s left into nice-to-have categories. Track your actual spend each week and put your cards away as soon as a category is empty.
Spend within your means. Try to live in a ‘less is more’ way. Cherish a few nice things, but don’t feel the need to buy everything. Consider purchasing quality over quantity – but beware of using this as an excuse to buy something you don’t need.
Set financial goals. You don’t need to be thinking about what you’ll do when you’re 50. Instead set baby steps such as a date when you want to be debt free, for example, and work back from that.
Start saving now. We know you think you earn nothing. Ten per cent of nothing is nothing. So at least put that away. Put three per cent in a savings account you can’t touch so you have a ready-made home deposit when you want it. The other seven percent should go into an emergency fund first and then short and medium term savings. The reason for the emergency fund is so that you’re not paying 19.99% interest on top of grudge purchases such as fixing the car.
Pay all your bills. Rent, power, phone, water, and other utilities are essentials in life. Why not pay it before they’re due to save the stress and help your credit record. The opposite can make it difficult to get credit when you really need to.
Remember the consequences of student debt. How much of your available cash as a student was spent on booze and/or partying? It’s very easy to borrow money for ‘living expenses’ that really are for non-essentials. Yes it’s fun to party. But set yourself limits so that you don’t have to waste years of your life paying it back.
Know the difference between good debt and ‘dumb’ debt. Put simply, good debt is debt that gets you ahead financially. That’s debt such as a student loan providing your degree really will help you earn more, a business loan, a mortgage, and if you really do need a car to get to work the smallest car loan possible. Bad debt is the debt owed on the partying element of your student days, and money spent on anything that goes down in value such as TVs, mag wheels, the latest smartphone, and so on. By all means buy these things. But pay for them from short-term savings.
Rent less house. Can you share with others? Is there a cheaper option? Rent is dead money. The sooner you can save and buy a modest flat or apartment the better. Where there’s a will there is a way.
Get insurance. The reality is that most insurance companies do make a profit out of you, but they pay the vast majority of claims. Having no contents and car insurance in particular is a no-no because you could easily lose everything you’ve ever saved for in one fell swoop. It just takes an earthquake, fire, or smashing into an expensive car to do it.
Think big on the career front. Just like your money, set yourself a career plan. Find a mentor who can help you work through what a future in your industry looks like and have a strategy for how you’re going to get to the next step .
Watch out for STDs – that’s sexually transmitted debts. You should know your partner’s finances as well as you know your own. Joint finances can mean joint debts. Be very wary of who you hook up with before it’s too late.
As a final word: you can do it. Choose the positive path and start by making one change at a time.