When it comes to personal savings, from little acorns do mighty oaks grow.
There is no doubt that life becomes that much easier to enjoy when you develop good financial skills to maximize your personal wealth. Money management is something that most high schools and colleges still don’t incorporate into their curriculum, which leaves most financial advisors baffled.
What so many young adults aren’t aware of is that they can make their personal finances work harder for them, with little effort on their part. If you want to know how to boost your income potential and accumulate more in the bank for the future, then read on for our six simple strategies to manage your money and improve your general financial habits.
Adopt a Cash-Only Diet if Necessary
Are you someone that consistently gets to the end of the month and is left scratching your head wondering how you’ve spent all your money? We hear you. You’re not alone, that’s for sure. Fortunately, there is a simple remedy for this: adopting a cash-only diet. Start by withdrawing your monthly wage from the nearest ATM.
Since it’s all too easy with contactless cards and chip-and-pin debit cards to spend at will, without thinking too deeply of the consequences until it’s too late, physically having the money in your wallet or purse will help you to keep a lid on spending. Living with cash keeps you honest always.
Get Rid of Your Overdraft Protection
The safety blanket of an overdraft might seem like a positive, but it’s not as beneficial as you may think. It’s another way for your bank to entice you into overspending before charging you for the privilege of using an overdraft. Worse still, some people end up using their overdraft as if it’s their money.
It’s not at all. If you end up getting stuck in a rut of living in your overdraft from payday to payday, then you’ll incur hefty bank charges along the way and find it virtually impossible to save money. Think of it as one of those bad habits you need to break, for good!
Allocate a Fifth of Your Monthly Income Toward the Future
It’s crucial to split your monthly income between funds you need to pay the bills, unbudgeted “lifestyle” spending and saving for the future. A good habit to get into is to set aside a fifth of your monthly income to invest either in a savings account such as an ISA, pay off existing debts or add to your public or private pension pot.
Once you become accustomed to setting 20 percent of your monthly income aside, it won’t take many months to get used to living without it.
Put a Ceiling on Unbudgeted Outgoings
Speaking of unbudgeted spending: Don’t let your lifestyle prevent you from looking to the future, too. Much like an iGamer does when visiting an online casino, they implement a bankroll management strategy that ensures they don’t go a cent over what they need to spend to achieve the desired outcome. You can do that with your lifestyle spending.
Set aside no more than a third of your monthly wage to spend on everything from clothes and food shopping to going to live music gigs and eating out at restaurants with family and friends. The 30 percent rule ensures you can spend enough of what you earn to have a good time while saving for a rainy day, too.
The Importance of Valuing Your Pension at an Early Age
Acknowledging the importance of a public or private pension at an early age will stand you in good stead for the future. Compound growth is your biggest friend when it comes to building your pension. By starting as early as possible and reinvesting into your pension pot over time, you’ll not only generate returns on your initial investment, but the additional investment will snowball over time, too.
If you start a pension aged 18, then you’ll only need to put in 9 percent of your pre-tax income annually, compared with those who would have to put in 20 percent of their pre-tax income annually to achieve the same returns by age 40.
As You Begin to Earn More, Save More
Last but by no means least, as your career grows, and you work your way up the professional ladder, the temptation is to spend more of your pay rise. Far from it. If you start to earn more, then you should save more, too.
Think of the 20 percent rule on a sliding scale and increase your pension contributions at the same time as you increase the 30 percent of your unbudgeted spending.