After a full two years of being paid monthly, I still haven’t figured out the knack of budgeting without spending two weeks in what I call ‘treat yo’self mode’ then the next two weeks in ‘can beans on toast for dinner’ mode. I recently read a blog post on financial books that didn’t sound like ‘an hour with the accountant’ and have finally decided to take control of my financial life.
I haven’t finished the book yet (I’m still halfway through and trying to navigate myself through American finance terms – what the fuck is a 401k?!), but I thought I’d save you the effort of actually reading the book and give you a nice summary in a handy bulletted list (aren’t I nice?). So here some handy tips, which to be honest, seem kind of common-sensical, but really aren’t as well practiced as I thought (you’re not alone!).
- The first handy dandy finance tip does seem pretty obvious, but relates to the fact that millennials are kinda lazy: shop around! I chose my bank account truthfully because my dad was with that bank and any payments he made would be instant (yes, classic #bankofdad millennial story). I opened my savings account with a different bank because my grandfather used that bank. These are okay reasons to go with a bank, but don’t really give you any insight into bank fees, interest gained or how a bank can help you achieve your finance goals (do you have finance goals?). Moral of the story here – take the time to do your research. Don’t go with a bank because they have a cute app, or hand out free elephants when you sign up for a new account. Find out what it can do for you and go from there.
- The credit card. I got a credit card for 100% the wrong reasons (although I told my parents it was too make small purchases and pay them back). At the time, I thought I was being amazingly savvy. I’d read up on how credit cards can help you build credit (if you don’t max them out and pay them back on time…) and I even took the time to read the boring terms and conditions. Except, I had no idea what they meant or really what a credit card is for. So going back to the previous point on shopping around, take the time to find a credit card that will actually do things for you: your credit card should make you money, not cost you in fees. And it shouldn’t be used as a day-to-day transaction card.
- Saving. So it seems that saving for Fiji, or shoes, or a new laptop aren’t supposed to be the same account as your ‘I’m going to get old one day or need a house or something when they run out of avocado’ fund. I’ve read a couple of things on saving recently. Obviously, save as much money as you can but most places seem to say 20-25% of your income is a pretty reasonable amount. Remember what you’re saving for. You should have a separate holiday fund, house fund and around $1000 minimum saved for ‘a rainy day’ – basically when you find out that your car needs an entire new set of tires to pass its WOF. Throwback to an earlier post – I recommend opening a bank account with a separate branch as an online-only account for serious savings. Remember to shop around for the best interest rate (there are helpful websites for this like this one)
- Budgeting. The bane of my existence. There are many tools and apps out there designed to help you manage your money better. Or better yet, you can go with a bank like BNZ that has a cute app where you can drag money across (but definitely don’t choose a bank because you can set a cat as your savings account icon). I still budget the old fashioned way with a good old excel spreadsheet and what’s called a ‘zero sum‘ budget – where I allocate every dollar of my paycheck to a certain category. This is a good way to do it if you’re a Finance 101 student such as myself and helps to ensure you always have money for rent and food. If you’re a bit more proficient with money you can loosely allocate money to things, but chances are, if you’re reading this you’re probably not… Another thing to try (this is on my to do list) is the cash entertainment budget. Each week you get out the money allocated to entertainment in cash and that’s your limit for the week. Try and see what works for you.
So, halfway through the book, these are my top tips so far. Basically the main point is to do your research and not blindly enter in to bank contracts because they put you in the draw for a Samsung TV. Finances might not be the most exciting topic in the world, but they’re an essential part of life, you may as well get savvy now. And buy all the avocados.