A friend asked me what financial advice I would give a young person just starting out in the world or work. With my eldest leaving university this year, this is a topic I have given some thought to, so here are 10 tips and a reminder to the rest of us of how to stay financially healthy.
- Understand your income and expenditure patterns and then budget (spreadsheets are great for this)
- Establish an emergency fund of 3-6 months’ expenses, in cash in the bank (this will protect you against unexpected loss of income)
- Adopt the principle of paying yourself first by saving at least 20% of your income every month (this will reduce the amount you need to borrow from banks)
- Once the emergency fund has been established save in tax efficient investments;
- Join any employer sponsored pension scheme and make additional contributions (especially if your employer matches your contributions)
- Consider Critical Illness Cover (like life assurance but pays on diagnosis of serious illness like cancer) and is useful for single people
- Consider Income Protection, pays a regular income to you if you suffer from any illness which prevents you from working (bills will still need to be paid)
- If you are married or have young children make sure you have adequate life assurance or assets to support them in the event of your death
- Write a Will
- Always pay off your credit cards in full every month, if you can’t then don’t buy it.
I hope the above is useful.
As always let me know if you have any questions or comments. Let me know what you would have found useful when you started work.