How to Manage Money in Your 20s

How to Manage Money in Your 20s

How to Manage Money in Your 20s

I’ve been reading a lot of books on finance over the last few months, and I thought I would share some of the advice I’ve learnt in a how to manage money in your 20s post.

How to manage money in your 20s

If you’re looking to save some money, pay your bills without panicking or simply learn how to better manage your finances, these are my top tips.

Put your pensions in one pot

A bit of a ‘that’s a bit early’ advice, but put all your pensions in one pot. I don’t know about you but I’ve had four serious roles since I was twenty and all four of those roles had a different pension provider. When I was reading On the Money by Charlotte Burns she recommended putting all your pensions in one pot so you can better understand how much you’ve saved for your retirement and it stops you from forgetting or having to organise it later down the line.

It took me about thirty minutes and most of that was finding which pension providers I used to be with, and finding the paperwork. Once I found the paperwork I chose my preferred provider and followed their simple instructions online to ‘request movement of my pension’ to one pot.

Five days later I got confirmation that all the money had been moved and I got to see, for the first time, how much I currently have in my pension pot after eight years of full-time work.

Up your pension payments

Following on from organising your pension pots, it’s time to up your pension payments. It’s theorised that we’re going to need a minimum of £250,000 in our pension in order to sustain our retirement. We’re living longer and prices are rising so it’s likely that that will be more by the time we’re retired so… it’s time to up those pension payments!

Every time you get a pay rise or your salary increases with inflation if that extra pot of cash is not needed then up your pension payments by 1%. You won’t even notice the difference, but it can make all the difference down the line.

How to manage money in your 20s

Set up a savings account or a lifetime ISA

Whether you’re saving for a mortgage – ha! – a holiday or just want to have a financial cushion, you need to open a savings account or set up a lifetime ISA. I recommend a separate account from your debit or credit account because this is a bank account you don’t want to touch except for the item you’re saving for, or in emergencies.

If you want to be able to access your savings whenever you like, you need to find a savings account, but shop around. Some savings accounts offer great cashback schemes, some have strong interests rate which means you earn ‘free money’ if you leave your money in the account to accumulate, and some offer great reward schemes.

A lifetime ISA or lifetime individual savings account is slightly more complicated compared to a savings account. Most lifetime ISAs will offer a 25% interest rate every year, so if you put in £1000 in 2023 you’ll get £250 added to your account at the start of 2024. However, if you withdraw your money – excluding a mortgage deposit or when you retire – you’ll lose the 25% increase. There are some ISAs that allow you to withdraw 2 to 3 times a year, but your interest rate will reduce with each withdrawal.

If you’re looking to save for a mortgage you should get a lifetime ISA to get the ‘free money’ that comes with the 25% interest scheme. But if you’re looking to save for other reasons you need a standard savings account.

Track your spending

Whether you have a budget journal or an excel spreadsheet or you use your Monzo account to track your spending, you need to be aware of where your money is going. I personally use an excel spreadsheet as I like having to sit down and really review my spending and forecast how much money I’m going to have for the next few weeks to months.

Visually seeing where your money is going and how much you have left will help you curb your spending, stop impulse buys and to get into a saving mindset.

How to manage money in your 20s

Cut unnecessary direct debits or standing orders

How many paid subscriptions do you have at the moment? Do you need them? In 2020 I realised I was subscribed to about 30 platforms, 20 of which I didn’t need. I managed to cut down on most of them – only keeping the platforms I use daily – and I managed to cut down on £150 per month.

How many of us have bought a gym membership and then only used it twice? How many streaming services do we really need to be subscribed to? Is it worth paying just to cut out ads?

Make sure all the direct debits and standing orders you have are worth it.

Stop using Buy Now, Pay Later schemes

I’m guilty of relying on Klarna for a lot of my recent purchases, but I realised I wasn’t saving money when one month I had 7 payments in the process – that was an expensive month! – It may feel like you’re saving money initially but you’re still spending the money and really, you’re taking away financial opportunities from future-you.

Klarna or Clearpay is worth using if you need something urgently and spreading the cost will be better for your mental health and/or short-term financial security. But this should be a once-in-a-blue-moon rather than every month or for every little thing.

So those are my top tips to manage money in your 20s. What are your top tips for young people when it comes to money? Let me know in the comments below.

Love Ellie x

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How to Manage Money in Your 20s


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