How to Manage Your Finances as a 20-Something Year Old.
It’s 2018, and this year, I’m looking to become financially secure. As a complete novice in financial management (I’ve never ventured beyond the one-entry-level-debit-card-connected-to-a-measly-savings-account model my mum taught me when I was 16), I decided to research ways I can give myself the best chance to feed my overindulgent vinyl record collecting habit when the next financial crisis hits (in 6–12 months, anyone?). Here are four relatively easy steps I’ve taken:
Disclaimer: please do further research before taking any of this advice. I’m figuring this out as I go, and I eat $5 falafel sandwiches for dinner occasionally, out of necessity.
- Make sure you have a savings account with at least six months of wages in it. This is the most important box to check before you try anything else. Emergency fund for a rainy day, y’all!
- Set up a retirement fund that earns at least 6% of your salary per month. 6% is a random number, but it’s what I was paying at my previous job, where someone much smarter than me set up the account, so I’ll stick with it. As a 28 year old with 30 or so years of saving left to do (hmmf), I chose the least risky investment portfolio. I think the general rule is: the younger you are, the more time you have to save, hence, the safer you can be.
- Make a small investment in a cryptocurrency (I bought $100 worth of Ethereum, but I’m aiming to also invest a little in other cryptocurrencies like ripple, IOTA, and bitcoin cash, in the near future, to hedge my bets). This is a big-risk, big-reward investment. But, does it upset you that you didn’t jump on the Bitcoin bandwagon and become a billionaire like a Winkelvoss twin? Yeah, me too! Set up a free Coinbase account and buy whatever amount you’re comfortable with. There’s no minimum investment.
- Buy stocks in large companies like Apple, Amazon, Netflix etc. This was my most recent finding, after I saw an article about Kanye buying Kim $200k worth of stocks for Christmas (it’s important to research a wide variety of sources). There are many ways to do this—setting up a brokerage account seems to be the most common—but I’ve gone for what I perceive to be the easiest and most painless option, which is setting up an Acorns account. Acorns rounds up any purchases you make on your credit card to the nearest dollar, and invests the difference in a portfolio of stocks and bonds. It usually amounts to ~ $30 per month. I opted to choose a more aggressive investment strategy with Acorns (a higher percentage of stocks in large companies and a lower percentage of government bonds) as I think it balances out my overall strategy (Crypto — risky, Acorns — somewhat risky, Retirement fund — not risky, Savings — no risk).
So, there you have it… financial management advice from a complete noob. Please feel free to leave a comment and school me in each and every point above.
Good day to you.