For 19-25 year-olds: Four things I wish I'd learnt about money sooner
It wasn't THAT long ago that I fell into the 19-25 age bracket, but it feels like a lifetime in terms of what I've experienced and learnt since then.
When I got my first 'proper' job (ie not bar work), as an editorial assistant at a national newspaper, I was so excited just to be busy and contributing.
The job market wasn't great then, and I was well aware of how fortunate I was to have a job after months of searching and doing bits of freelance work for them - even more so when I was tasked with compiling a weekly "recession watch" update for the paper!
Obviously, a significant reason for my excitement was I was getting PAID - not loads, but it definitely made my bank balance look a bit different.
It also moved me from increasing debts to starting to pay off my student loan... overnight. I was happy to see the loan deductions on my payslip, even if the total debt amount seemed too big to think about. Something was happening in the right direction.
But there are money mistakes I made at university and after entering the workforce and I hope you can learn from them through this checklist. They're pretty commonplace, so listen up...
1. Learn how to budget
The word "budget" is here. Sorry. It might make you think of all the things you can't or shouldn't do, it might sound like work, but really budgeting is about getting you where you want to be in the future. It's simply knowing what is coming in, what is going out, and having a plan.
Fortunately there are plenty of apps to help with keeping track of our spending habits these days, so whatever your plan (getting out of debt, saving for a holiday or festival, starting a business...) keep tabs on how you're getting on.
I've learnt, for me, it is much easier to stick to my financial priorities if I can visualise where my money is, how much I need to forgo per week or month to get to my goal and how long it's going to take me to get there.
More than 450 millennial FT readers (18-36) recently discussed what they spent their money on as part of the publication's Millennial Moments series. The five most popular essentials will not come as a surprise: rent, food, transportation, mortgage, and bills. It found respondents mostly spent their disposable income on eating out and travel.
The five most popular non-essentials were eating out/restaurants, travel/holidays, health and fitness (mainly gym subscriptions and workout classes), bars/pubs/going out, and clothes.
If you don't know what your own idea of overspending is, you're likely to be overspending! Your own budget is the foundation for all your money decisions.
2. Talk to someone if you're anxious about debt
More than 8 million people in the UK are struggling with debt and those in debt are three times more likely to have a mental health problem, according to research. Talk to friends or family if you are struggling - it may help you face your financial fears before they escalate and you'll feel better with a plan in place.
"Space From Money Worries", a new computer program to support people fighting cash flow problems, will be available on the NHS soon.
The technology will use "cognitive behavioural therapy" techniques whereby people will learn about the relationship their thoughts, feelings, behaviours and emotions have on their own financial vicious cycles.
Clinical psychologist Dr Thomas Richardson said: "Research shows that financial difficulties and mental health problems are linked by psychological factors.
"As a psychologist I can't get rid of their debt, but I can tackle the rumination hopelessness which turns debt into depression.
"This is what Space from Money Worries aims to do: break the psychological links which keep people trapped... so they can feel more in control... be more balanced in their thinking when they are catastrophising about what might happen because they overspent."
3. Compare financial products and switch to the best
With thousands of financial products on the market, it can be a little overwhelming.
The Personal Finance Society (the professional body for financial advisers) has pulled together some of the resources which allow you to compare financial products here.
In the last 12 months, almost one million bank switches took place, according to the latest figures - a 6% increase on the previous 12 months.
However, this is still only a fraction of UK current account customers.
The process of switching banks has been simplified and many banks offer rewards for switchers, including cash, vouchers, student rail cards and gadgets. It pays to shop around for what's going to suit your needs. But watch out for gimmicks designed to lure young people in the hope they will become customers for life.
This goes for switching utilities too. The more you understand about the options out there, the better your chances of getting a good deal.
4. Understand the power of compound interest
Compound interest, which earns interest on interest, can rapidly multiply returns on your investments, such as a pension once you’re working. A quote attributed to Albert Einstein, perhaps apocryphally, described compound interest as the “eighth wonder of the world”.
At its simplest, you invest £100 and earn an annual return of 10% for three years. It grows to £133.10 (not £130) because £100 becomes £110, which grows to £121 with 10% added. It reaches £133.10 after a final 10% is added. The wonder of interest on interest…
A lot of people wish they’d understood this when they were younger. It’s the reason why your first 10 years of saving could be more powerful than the next 40 combined. There is massive power in starting your pension early. Start the savings habit as soon as you can, even if you can’t afford to put away much.
Overall, I would say ignore what your friends are doing and stick to your own goals. Be wary of subscriptions, loans or credit cards you don’t need. Be firm with friends or housemates who owe you money.
With online shopping at our fingertips, contactless payments, our bank details saved in tempting apps such as Uber, clothes chains or with takeaway services, it is not hard to go off track.
In the UK, we’re officially overspending. It’s not your fault there was a financial crisis, that young people face higher rents, staggering property prices, student debt and less stable jobs, but we can all be positive about the future and give ourselves the best chance we can for a more prosperous tomorrow.
Now's your opportunity to be able to one day look back and congratulate yourself on the things you got right.