Managing your money in your 20’s can be hard, usually due to moving out, university, car insurance and those weekly nights out. But according to research by ClearScore, 31 is the most expensive age for Brits.
The average Brit spends £43,000 during their 31st year because of major life events like getting married, having kids and buying a house. Some of which can add to your yearly bill throughout your 30’s and beyond.
Here are our top tips to managing money...
Split up your savings
Dipping into your savings to pay for unexpected bills is something we’ve all done at some point. But 60% of people rely on their savings to pay for those big milestones too.
Your savings can be a good option when it comes to paying for expensive events but with so many milestones usually occurring in your 30’s you can be left with next to nothing by the end of it.
Splitting up your savings or having multiple pots for your wedding, mortgage deposit and holiday can help you budget for these events. It can also help you to visualise where you are in relation to any saving goals you set yourself.
It can be very easy to get wrapped up in the moment by planning multiple events in the same year and investing in your future. The next thing you know you’re paying out for a new car, mortgage, wedding, honeymoon, 30th birthday and a summer holiday.
Sometime though we need to remember to take a step back and rethink our spending and our priorities.
If you can go without a big birthday bash or a summer holiday then you can focus your saving and budgeting on the bigger things that take priority in your life.
It’s not just big purchases but small ones as well. Cutting back on those non-essentials or switching them for cheaper alternatives will help you in the long run.
Don’t give into debt
When you have a lot of things to pay for it can be tempting to turn to other finance options such as taking on debt, dipping into your overdraft or taking on credit.
In fact, 1 in 5 under 34 year old’s turn to credit to fund big purchases.
Being able to pay something off in instalments or not have to pay anything at all for several months sounds like a great idea.
But when you’ve bought a TV, games console, laptop and coffee machine on finance it all soon starts to add up each month.
Saving up the money for 6 months to pay for these items can be very different to paying for the items over the course of 6 months on a finance option.
Although taking on credit options means that you will have the item straight away, it also means that your income is tied up in paying off that debt every month. You may also have to pay interest which can make a big difference to the total amount you pay!
Where as if you are saving up for the item and you get an unexpected bill you can use the money you’re saving to pay for it.
You can also reduce your savings if you have an expensive month, where as there’s rarely any wiggle room with credit.
Try not to give into debt. If you don’t need it then don’t buy it.
If you have to use credit options, then make sure you’re able to pay back the instalments every month.
Think of the bigger picture
Prioritising your finances for the next 5 years is great, but don’t forget about the bigger picture.
There are things you need to start thinking about now, even though they might not be happening for another 10 or 20 years from now.
Retirement is something you should definitely be thinking about in your 30’s. If you haven’t already done so in your 20’s make sure you’re putting money aside each month to go towards your pension.
If you want to help your children finance their education, first car and first home then you need to think about this as well. Lump sum payments are easier to finance when you’ve planned for them in advance.
Nobody likes to think about the possibility of getting sick but getting life insurance in your 30’s is something worth thinking about.
Getting life insurance whilst your young and healthy is most likely going to be the easiest time to get approved for a life insurance plan.
Although you might not think you need life insurance it’s always worth looking into, especially if you have dependents. Whether it’s children, a partner or if you care for someone. You’ve now got to think about other people as well as yourself.
Increase your cash buffer
Everyone should try and have a cash buffer.
Then if you ever get an unexpected bill you have a 3 months worth of rent and outgoings saved up to help you out.
But as you get older your outgoings may increase so it’s important to make sure that your cash buffer increases to cover any additional costs.
It might be particularly difficult to keep this sum aside in your 30s as you are likely to have more outgoings, but it can be even more important. You might have a mortgage, finance or credit payments and dependants that rely on your income.
Work out what you’d need to live on for three months and then you might decide to put some extra away to cover any upcoming purchases you might have.
Your 30’s don’t have to be a financial burden. Just make sure you’re prepared for the future and the major life events you have coming up.