By Emily Parker
We’re unwittingly making basic money mistakes and the founder of Millennial Money Guide is here to put us right.
It’s no secret that our generation is finding it harder to manage money than any before us. Rules our parents swore by, like “your rent should never be more than 30 per cent of your monthly income”, just don’t apply. We'd be lying if we said we hadn’t popped food from catered work meetings into our bags for later. And we’ve certainly all leeched off an ex’s subscription service for longer than is really acceptable. With more of us affected by COVID-19 job loses than any other group, times are looking tough for quarterlifers.
With most of us working entry-level jobs - expected to bide our time on rubbish salaries for the “experience” - salary negotiations aren’t the easiest of conversations. Some of us have been furloughed and are questioning our job security. Others have sadly lost their jobs all together. Luckily, there are ways we can all be smarter with money to make it go further and even make it feel like we’ve had a raise when we're still earning peanuts. Ayana Campbell Smith, money coach, educator, and founder of Millennial Money Guide, is an expert in saving sums even in tight times. I caught up with her to beg, borrow and steal her top tips for living debt free and actually saving (!) in your 20s.
How did the Millennial Money Guide begin?
I knew how important money was to me, and could see it impacting the lives and relationships of everyone around me. But I also knew that despite how important financial literacy is, far too many millennials around me had zero clue what to do when it came to their own money. I think that’s definitely still the case today.
So then my business began with me making a list of money topics I thought would be worth sharing with others - a combination of things I wished I’d known about money when I was younger. Some were things I’d read, others were pieces of valuable advice I’d heard. The list quickly grew to 30+ topics so I knew it wasn’t something I should sit on, and that it was valuable information for people my age who might be struggling to figure things out.
The next day, I started drafting newsletters and figuring out what it would take to make this random idea I had become a reality and a helping hand in 20-somethings’ lives. And the rest is history.
What do you think is the biggest mistake or struggle us 20-somethings face when it comes to handling our money?
I think far too many young people fall into the trap of thinking time will always be on their side.
Because of this, they don’t make developing good money habits a priority and they assume it’s something they can worry about in the future when they “grow up”.
In my opinion, how you handle money in your younger years can make or break your financial future. I wish I’d known what I know about money now even five or ten years ago. I’d be much further along!
That’s why I’m so passionate about sharing this knowledge with fellow millennials and hopefully even generations after us. This is all so important. If sharing the knowledge I’ve gained from my experiences can help just one person, it’ll all be worth it.
What are the biggest, simplest changes people reading this can make to their lives and the way they handle their money?
It’s tough, I have so many tips about saving money, but if I had to pick them, these would be my top three:
Make saving a priority by paying yourself first. This simply means devoting a portion of every pay-check you receive toward your savings goals. The timing is important though. This should be done before paying for anything else, including bills. This method is a great way to make saving a habit instead of a chore.
Set realistic savings goals and create actionable plans to make them a reality. For example, if you want to save £1000 in the next six months, do the maths and figure out exactly how much you’d need to set aside each day or week or pay packet to meet your goal. Don’t be disheartened if your saving target feels small, and don’t use that as a reason or an excuse not to save.
Open separate savings accounts for each of your savings goals and give each account a name that aligns with the goal. It's much more motivating to send money to an account called "TRAVEL FUND" or "FUTURE HOUSE" than a random jumble of numbers. I’ve done this myself. Trust me. It works!
Saving is definitely great advice, but living on an already small budget and saving on top of that can be tough. Do you have any tips for 20-somethings living on a budget?
My #1 tip is to create a budget that works for you and not base it solely on what financial experts say. I think many people get the notion that budgets are restrictive because they make them that way. But remember, personal finance should be personal. And budgets shouldn’t make you feel less free, they should allow you to feel more free. There are misconceptions and negative connotations around the word ‘budget’ - it sounds like it’s going to suck all the fun out of your life, but it really isn’t about that at all.
At its core, a budget is simply a plan for how your money will be spent. If you’re the kind of person that loves going out and trying new restaurants, put a line item for that into your budget. Just keep in mind that putting more money towards one area may mean you’ll have to cut back in other spots. It’s all about balance. And if you have this plan to stick to, there is nothing for you to worry about, and this peace of mind is a great reward for the discipline.
And in terms of how to budget, I’d say prioritise your needs first, then account for your wants, and always make room for fun if your income allows. If you need help creating a budget, take a look at my five-step guide designed to be a useful resource for young people starting to budget. It’s not a difficult thing to do, but this tool makes it even easier.
What biggest lifestyle change do you think we could make to help us feel the pinch less?
It’s all about learning to distinguish needs from wants. Asking, “do I really need this?” and then, if not, “do I really want this?” We often know the answer, but too often we don’t ask the question.
I don’t think we realise how much money we spend on impulsive purchases for things we don’t really need and how much ends up going to waste.
This translates to lots and lots of wasted hard earned money.
I’m not a minimalist by any means but I think there is a lot that can be learned from adopting that sort of mentality.
Are there any money-handling secrets that could help us find wealth in the future?
I think we need to look at money and finance and wealth differently than we currently do. It’s really just a skill that we need to work at and develop over the years. Above all, it’s a set of good habits that shouldn’t impact your life in the negative way a lot of people assume they will. I think there are four rules of personal finance:
Spend less than you earn. Always.
Budget and track your expenses.
Save, save, save, and then save some more.
Prepare financially for emergencies.
And it comes to building up future wealth and preparing for retirement, I think education is key. Take time to learn as much as you can about the topic. Read books, watch videos on YouTube, and seek advice from people who’ve gotten where you want to be. Personal finance is an awkward thing to ask people about and there’s still a lot of taboo around it, but handling money is like anything else in life - it’s a skill that can be developed, a set of rules that can be learned and followed, and there are many people who have done it before that we can learn from.
Our unwillingness to ask and talk about money means the secrets to wealth and feeling wealthy are held onto and not passed on as readily as they should be. So let’s start talking about it more and sharing any tips we pick up along the way.
And finally, how can we be more money-savvy to protect ourselves from the financial uncertainty brought by coronavirus?
Start building your emergency fund. As we’ve all seen recently, life is unpredictable.
Having an emergency fund provides a level of security in an uncertain world. Aim for saving an emergency fund of AT LEAST one-two months worth of expenses to start. If you have the means to save more, do it.
You also need to eliminate unnecessary spending.
Reining in extra spending now frees up more money for unexpected expenses and saving. Creating a non-essentials list is a massive help. Uncertain times may call for eliminating certain expenses.
Create a list of your non-essentials now so there’s no question about what needs to be cut if it comes down to it.
Then my final piece of advice for these times would be to re-evaluate your debt-free journey. If you are currently putting in the work to pay down debt, take time to evaluate. Situation permitting, consider scaling back to make sure you’re still meeting your minimum payments. Then, divert any extra payments you might’ve be making toward increasing your emergency savings, stocking up on food and other essentials, or helping others in need.
You can follow Ayana’s Millennial Money Guide on Instagram here.