What money tips would you give your 21-year-old self?
If there was one knock-out tip you could give your younger self, what would it be?
It’s hard, yeah. Now try and imagine what financial tips you would give to a young you. Impossible, right?
Well, we were recently at a conference for “next gen” financial planners (which is their name, not ours) and it gave us the idea to put some on the spot.
They are, after all, the next generation of advisers, and many specialise in helping young investors.
These are the answers they came up with.
Natalie Wright is a chartered financial planner in the Leeds office of Mazars Financial Planning and a Fellow of the Personal Finance Society. She also blogs for mmbmagazine.co.uk, a working parents website, is on the board of governors at a junior and infant school, and volunteers at a Prince's Trust workshop. Natalie featured on New Model Adviser's Top 35 Next Generation Advisers 2017. Natalie said:
"Have intentional saving plans. If somebody says to you: "Can you save 20% of your retirement income," you'd say; "actually no, 20% is too much". But then if you said: "Can you live from 80% of it?," actually most of us would say yes. You can save that 20%, it's just how you phrase it.
"And thinking back... when you're 21 you're really short-sighted, aren't you? Because a year feels like a lifetime. Whereas when you're 35, a year feels like absolutely nothing. So have intentional saving habits, think about return and setting up savings more as having it as an expenditure. If you get paid at the start of the month, start saving at that point.
"Have a regular savings plan. If I'd done that I would have got into better spending and saving habits earlier. I've never been bad. I got my first house when I was 20, so I've made some okay decisions. But I think saving was always one where I never intentionally saved over a period of time. I do that now, but I've actually done it more since becoming a parent because I think a lot longer term, and I never did that previously."
Andy Butcher is a chartered financial planner and branch principle at Raymond James in Hampstead, London, and a Fellow of the Personal Finance Society. He featured on New Model Adviser's Top 35 Next Generation Advisers 2017 and runs the Hampstead branch, which is focused on private wealth management, with his colleague Ed Froggatt. The former EY accountant wants it to be a "next generation" company embracing new ideas and technology. Andy said:
"My main advice to myself would be to budget properly and try and save little bits here and there when possible.
"As a post grad, sticking to a budget would probably be my number one piece of advice. At 21 it was easy just to spend whatever came in (it still is now...), but I had no real structure to what I was spending on, so couldn't plan around saving anything up for a rainy day.
"I would also advise myself to invest any savings I could make sensibly. At 21 I would dabble a bit in buying shares of companies I had read a review on, without doing proper due diligence that I now know is imperative to making good investment decisions. Although I got lucky on a few (and unlucky on a few more), I would advise myself to buy funds, or even investment trusts, rather than speculate on single companies - especially companies I had no real in-depth knowledge of!
"The fund managers can then make the investment decisions for me.
"I would advise myself to invest regularly, even if it was a few pounds a month, as this would have helped with the savings discipline and potentially stopped me raiding my savings every time I needed funds for a night out!"
Josh Butten is a certified financial planner and chartered financial planner at Myers Davison Ginger in Aylesbury, Buckinghamshire. He claims to be the youngest individual to hold the financial planning industry's top four qualifications, as a certified financial planner, chartered financial planner, Fellow of the Personal Finance Society and chartered wealth manager. He became authorised just after his 24th birthday, so he can advise clients such as MDG in his own right. He featured on New Model Adviser's Top 25 Next Generation Advisers 2017. Josh said:
"Financial advice for myself as a 21-year-old, and others in that age bracket, would be to focus on growing your monthly income surplus.
"You learn the importance of income and accruing assets but very rarely are we taught the importance of controlling expenditure. Someone earning £100k net of tax but spending £95k on their lifestyle will be far poorer than someone earning £40k and spending £25k - and not just because they have saved just 33% of what the lower earner has accrued.
The bigger issue is that (in simple terms) it's going to take the high earner 19 years of savings to fund one year of their lifestyle whereas the lower earned would have saved enough over the same period to fund their lifestyle for over seven years.
This is an exaggerated example to illustrate the principle but those with a small income surplus should be aware of how much harder this makes their retirement planning.
"This is one of the cornerstones of long term financial planning and a lesson that we coach to all of our clients."