If you’re anything like me, reading blogs on financial literacy or wellness can bring up the question ‘why?’ As with many things, it’s helpful to know why you’re embarking on a new journey or setting yourself a new goal, especially if you want to be able to sustain your momentum for a long time. So, today, we’ll be looking at some common financial habits or advice and answering the question: ‘Why should we bother?
- Do we really need to start thinking about money now?
Honestly, yes and no. Whilst I don’t think it’s necessary to have 5 savings accounts and investments in 3 asset classes by the age of 17, our repeated actions become our habits and this is where it’s important to think about your finances. If you get in the habit of ordering a takeaway every day at university, it will require intentional effort to break this habit and start one that benefits you. Therefore, as a young person you have a huge advantage in that you can start to choose which financial habits you want to adopt and bit by bit, start practising those. If for example, you want to develop a habit of donating regularly to a particular cause or a different charity every quarter, you can start small and set yourself an achievable goal each month. Starting this habit early on means that it’ll become an instinctive action for you as you continue.
Whichever habits you want to develop with regards to your finances, identifying them now and building them up will definitely be an advantage so yes, we should start thinking about money now. (not incessantly, however)
2. Savings, Budgeting, what’s the deal?
Budgeting is one of those words that can feel extremely restrictive however, in the words of Dave Ramsay: ‘A budget is telling your money where to go instead of wondering where it went.’ The purpose of a budget isn’t to ensure that you never have fun, it’s to allow you the means to be able to spend money on what you want to spend money on or invest in the things you want to see grow. For example, if you wanted to take a beginners dance class which costs £30 a month but you find that you spend around £40 on snacks every month, you might decide to reduce the amount you spend on snacks in order to afford the thing you really want: the dance class.
During our SMART money goals webinar, one of the speakers mentioned shifting your perspective on this from ‘budget’ to ‘spending plan’ if the former seems to restrictive. Every month or every week (or however often you prefer), make a ‘spending plan’ for yourself that details how, where and perhaps even when you want to spend money.
Likewise, you might want to save up for a big purchase or a new pair of shoes for example and allocating your money intentionally is one way of ensuring that you can save up enough money to afford that item or hit your longer term financial goals.
- What if I don’t work or have a part-time job?
No problem! If you have the time, start educating yourself on financial concepts such as budgeting and use this opportunity to think about your goals. Do you have any long-term financial goals? How will you work towards them? Do you have any short-medium financial goals? What are the habits that you want to develop when it comes to looking after your financial wellness? Start to identify where you are and where you want to improve and learn more by reading, watching, listening or speaking to others around you.
I hope this post has been useful to anyone else out there who thinks ‘Why exactly are we doing all of this’? It’s an extremely important question to ask and answer for yourself so I would encourage you to take some time to think about what your answer would be. Perhaps you want to be able to self-fund your living costs at university or go on a nice holiday with your friends. Always remember to keep the ‘why’ in mind, especially when these habits seem harder to keep up.