You’ll hear a lot of things that you need to learn, experience and get done in your 20’s. And contrarily you may hear that the only thing you really need to do, is enjoy what is meant to be the best time of your life. ‘Your 20’s are the longest part of your life, they’re the best part, and they fly by.’ Yes, we know this, thanks.
But what nobody cared to tell you about your 20’s is how to navigate your finances. And let’s be real, what we learnt about budgeting in school does not even begin to cover the financial minefield we find ourselves in when we leave the nest, start our first jobs, quit our first jobs, buy our first car and go to the doctor or go on vacation by ourselves for the first time.
Suddenly you’re able to pay your own bills (maybe just barely) and then just as suddenly you’re broker than the homeless person asking you for R5.
These tips may not make you rich, but they’re a good basis to continue building your finances on, and they’re things you can actually implement (and understand) whatever your budget.
GET OUT OF DEBT FIRST
You’ve heard it: ‘save, save, save’. But scrap that idea completely if you have any debt in your name. It’s much too early to get yourself blacklisted (if ever there was a good time for that). Having a bad credit rating can affect your ability to get a lease, a cellphone contract or *gasp* a WiFi line. Bad credit is serious.
You’ve fallen prey to a store or credit card. It’s okay. If your monthly payments have built to an amount you cannot manage then don’t waste time- call the company and ask to negotiate your monthly payment. Many will agree to negotiate a more manageable amount (by prolonging the repayment period), as long as you are willing to make the commitment to plan how to repay your debt. If this is not an option, then pay what you can towards your monthly amount.
TIP: Don’t bother saving or investing unless your debts are settled. You will lose money faster than you can save.
It is important to remember that no matter the amount you owe, the longer you do nothing about it, the more interest will be charged on it, and the bigger it will become. Yes this is overwhelming, but it is not impossible if you are proactive about it. Start somewhere, just start.
TIP: Prioritize paying your debts, and any spare cash, by the the highest installment or interest rate.
And then, in an ideal world, cut up your cards. Or at least be more discerning when you buy something on credit in future.
NOT ALL CREDIT IS BAD
Conversely, a good credit rating is a great thing to have indeed. No credit rating also makes it hard to do the things being blacklisted stops you from doing. A basic store account, like with Edgars (which allows you to buy from Edgars, Legit, Boardmans, CNA ,Mango airlines and more), is a good place to start when building a good credit rating. Just make sure that you are able to repay the monthly instalment. If you not, refer to the above paragraph.
WARNING: Most store accounts will offer you a higher spending amount when you make timely payments, as a way to boost your spending (and reward you for your punctuality). Don’t accept it, unless you are sure you can pay the higher monthly instalment that comes with it.
BUT YOU WANT ALL THE THINGS
This is where savings come in. Yes, the s-word. Sorry, not sorry. Saving is easy, you just need to start. How and what you save for is up to you. But I suggest opening a seperate savings account- if interest is not a concern- for things you are saving for (i.e: those shoes you’ve been dreaming about or that holiday you really fucking deserve), and to save in a fixed deposit or money market account if you want to receive substantial interest.
NOTE: It is important to have back up funds for medical emergencies or times when you need something to fall on. It is important this stays separate from your income and is the first thing that should come off of it. Once it’s out of sight, you will forget about it- until you need it- and you will be very grateful you did.
Your bank charges and monthly account fees add up. Plus, certain banks offer better interest than others. Shop around when choosing your bank, or make the effort to swap banks if you find one with better rates. Personally I’ve found Capitec to be the most convenient and cheapest.
BUDGET LIKE A BEAST
A good guideline if you have a monthly salary is the 50/20/10 plan. Give 50% of your income to essentials (And don’t forget to incorporate things like data and Ubers). 20% to leisure (lunchdates, coffees- YES that’s a luxury- shopping, etc). 30% to priorities (debts or saving).
Tracking your spending is hard (especially when you earn bit by bit), but apps – like 22seven that link to your account to track spending or Mint that create a personalized budget for you – are somewhere to start. Once you know how much you spend, you can discern how much you need from it, and what you simply want (and can maybe live without once in a while. Like those monthly R700 Xbox games).
If you do not have that much to go around, or don’t earn a regular salary then start small saving but start somewhere. The general rule is to put something away, even if it starts off as simply R100 a week. Transfer it to savings, or put it in a jar that’s out of sight. Key word: out of sight.
It definitely helps if you have a goal that you can save towards to motivate yourself, whether that be long-term (pension) or short-term (destroying the Winter sales come Summer).
Taking control of your finances means that money will have less weight on you and that means you can spend without guilt- and actually enjoy your money (and sleep better) (and worry about your career or partner instead) (or contemplate your purpose and future even more).