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How to manage your money when you are in your 20s and 30s

The ultimate guide for people in their 20s and 30s looking to master their financial skills and make the most of their money.

A changing time for you and your financial plans

At times, life can feel overwhelming in your 20s and 30s as things get annoyingly complex. Your job seems to change more than you realise, some might be starting their own business or maybe you are buying your first home. Decisions about whether you do or don’t get married are at the forefront of conversations and then the parents start asking when the family is going to arrive. Many of us might not even want to get married or have children!

Our personal situations and the change we go through in our 20s and 30s impacts on what money you need and how much you have. Sitting down and making monetary plans can feel so boring when you could be spending the small amount of time you have available, on yourself. Then you start researching how to plan your finances, everything you read is about the importance of understanding your objectives. Let’s face it, right now you might not even know what you want your future to look like, some of you do. It is no wonder people put off saving. Well, Unividual help people in their 20s and 30s manage their money  and plan for the future, even if they don’t quite know what it looks like yet. After all, we know how you feel because the people running our business are in their 30s too!  So, what if we told you that there are some pretty simple foundations that you can put in place now, which could set you up for the rest of your life? Also, that financial planning can actually feel pretty easy when you have the right support.

How to create a budget that you can stick to

Starting to plan early means you will make quicker progress on earning, growing and maintaining your wealth compared to your peers. It can be easier than you think to get a handle on money. Here are our five things that can help to get you started

  1. Track expenditure: There are hundreds of apps out there that can help you identify your fixed and variable spending. If you have set up online banking through an app it is likely your bank too has an ability to track this. Once you have an understanding of what and where you are spending, you can often notice trends and find expenditure wastage that you can put a stop on. A great example of this is buying lunches at work. If you spend £10 every lunch time, for 195 working days of the year that is just shy of £2,000.
  2. Implement spending ground rules: Once you have established which expenditure can go you can set some ground rules and change some of your habits. Question is, do you have the discipline to stick to those rules?
  3. Understand the value of what you buy: For those of us who don’t have the discipline to stick to rules, instead think about how much enjoyment your expenditure provides versus long-term value.  For example, take a look at your clothing expenditure, sometimes a really expensive pair of shoes that lasts for years can provide better value than a cheaper pair from your normal high street retailer. You might have to set aside a bit of money from each wage packet and plan in advance when you need to buy certain more expensive items that might provide better long term value.
  4. Shop around: Find unique ways to save money on the things you enjoy in life. There are so many ideas from utilising dining club cards, through to vouchers, purchasing big ticket items during the sales or changing your supermarket. Then you can take a look at insurance products and subscriptions, which all seem to mount up. Don’t be afraid to do these checks annually to ensure you have the best possible value from every area of your expenditure.
  5. Don’t give yourself access to all your disposable income: Once you have worked out your costs and what you should and shouldn’t be spending you can then look at balancing these with income. You might be surprised to see how much disposable income you actually have and then you start to think where does it go every month? Most people will feel short before pay day because we tend to spend the money we have. So why not think about proactively transferring money out of your current account so you are left with an allowance of what you think you should be spending.

 

PRO TIP: Save first then spend, Cherie-Anne Baxter, Unividual’s Marketing Director (36)
“The only thing that helps me save is not having the cash in the first place to spend. When I got my first job I started off with a £20 monthly direct debit in to a savings account. Every pay rise or bonus I earnt, I split the difference and put half of it in to my savings. This is how I bought my first property at the age of 24”.

Saving for your first home

It can be quite tempting, year on year, to spend a lot of our disposable income on holidays and enjoying ourselves. We should still do that, we don’t work all these hours for nothing after all. But it might frighten you to learn that the average age of a first-time buyer in the UK is 34 years. The sooner we start saving up for a pot of money that can go towards our first property the better. Unless you are a cash buyer, before viewing properties you need a deposit and a loan. Analysis from property experts has revealed that the average solo first-time buyer will need to raise a deposit of almost £75,000 to get on the ladder.  A deposit needs to be around 10-20% of the cost of the home you want to buy, and as a guide first time buyers who got on the property ladder in 2021 paid an average £281,900. House prices will vary according to where you live in the UK and the type and size of property you are hoping to purchase. It is good to get on to sites like Rightmove or Zoopla to understand about the local property market and how much homes are being sold for. The next step is to understand what loan you could get with a mortgage affordability calculator.

Don’t forget to budget for additional costs for the move too like solicitor’s fees, removals, insurance and valuation fees.  All of this feels complicated and overwhelming but work though it step by step. You can get mortgage advice from your bank or a mortgage adviser. But if it feels a bit too much or you just don’t have the time to plan everything there are many financial advisers who offer mortgage advice, like Unividual does. For a very similar price to mortgage advice, one of our Chartered Financial Planners will help you with:

1. Affordability to ensure you can take on the level of mortgage you are applying for

2. Identify your savings targets and put a plan in place for your objectives

3. Provide the mortgage advice when your ready to make an offer on a property

4. Give you access to the whole of the mortgage market, including some exclusive rates available through our network Quilter Financial Planning

5. Manage the mortgage process as it is time consuming and arduous

6. Ensure your purchase fits in with your other financial objectives

7. Help you protect your new purchase should you fall ill and can’t work and as a result can’t afford mortgage repayments

First time buyer statistics by Finder

Managing debt: good debt vs bad debt

Rightly so debt gets a bad rep. However, borrowing money and taking on debt is the only way many of us can buy some of the more expensive items in our lives. This might be a mobile phone, a car to get us to work, then there is university, your first home and so on. When managing your finances there is “good debt” and “bad debt”. Good debt can increase your net worth such as buying a house. Bad debt is borrowing money to purchase depreciating assets like a car or spending on credit cards that can easily mount up. You have to pay your debt back so never borrow more than you can afford, taking in to account your living costs and savings.  If you take on debt make sure you fully understand the contract, repayment structure and seek advice from someone else who understands how debt works.

If you don’t budget for your debt repayments it will impact on your credit score rating which will create problems further on down the line. A credit report gives lenders an insight in to your finances. Credit agencies provide each person with a credit score ranging from 0 to 1000. Lenders can use it to identify you and gain information on your borrowing accounts and whether you are up to-date with payments. Lenders will use the report and score to decide whether you are a reliable borrower. This is crucial when applying for a mortgage, car or any type of credit to pay for things.  There are credit agencies who offer you the ability to check your score and print off a report for free. You can also use this report to see if someone has taken credit out in your name fraudulently. The three main credit reference agencies are Experian, Equifax and TransUnion. Some of them provide upgraded services for additional services like regular alerts to changes in your credit score.

A word from the team: Andy Lei, Chartered Financial Planner

“If you don’t have a high enough credit score you will find it more difficult to secure loans for things like a mortgage. Not paying bills on time or not having a history of paying credit back are some of the things that effect your credit score. A good score is all about being organised and having good relationships with your banks and your lenders. Also make sure that mistakes on your report are corrected and removed. Ofcourse, if you reduce things like credit card or overdraft debt this too should improve your credit score.”

 

Find out more about Andy Lei

Should I be investing?

If you are interested in saving more money there are different places you can keep that money. Personal savings and investing are different things. When you save you put money away for a car or holiday. Saving is shorter term and you won’t want to take on any risk of your money falling in value. However, if you have more time on your hands and you want to make some money from your savings this is when you need to consider investing your money. For example you might be years and years away from purchasing a new home and each month you can put some money in to an investment which will grow over time to make up your deposit. So, if you want to make your money work harder, investments are the way to go. You can choose to speak to an investment planning adviser, or try your hand at DIY investing. To find out more about investments why not check out our investment planning guide.

Investment Planning Guide

Meet Charlotte and Guy: Financial planning is for for rich people, right?

Charlotte and Guy first approached Unividual when they were looking to a buy their first home: “The idea of consulting a financial adviser had never crossed my mind and always seemed like something rich people or businesses do. Not for someone like me, a first-time buyer. However, my fiancé and I were recommended Unividual when looking to buy our first house and from the first correspondence Unividual was very friendly, clear, meticulous and readily available, all key ingredients when someone is working with your money.

Our adviser, dealt with our mortgage for our first house and walked us through each step clearly and concisely. He travelled all the way from Bristol to Birmingham on numerous occasions to help us out by explaining any processes, forms, fees, give general advice and sort out any queries we had – every time with patience. Both my partner and I have busy lives, so having him to liaise with solicitors, mortgage companies, estate agents, etc. alleviated a lot of pressure by taking it all off our hands and saved us an unbelievable amount of time. Unividual are always available on the phone and/or by email, whichever was our preference for that day or week, making the whole procedure run smoothly.

We’ve both had bad news recently with family illnesses and such, we decided to take out life assurance and critical care insurance, which meant we didn’t end up paying Unividual directly for their services. Furthermore, at no point did we feel pressured to take out extra services or products that we didn’t need, want or ask for. Our adviser was extremely dedicated and surpassed all our expectations, and, more importantly, we always felt like we were his main priority. In fact, we are so impressed we have decided to continue to work with Unividual in future money saving/making ventures.”

Am I too young to get financial advice?

Very few people wake up randomly one day and think “I need a financial planner”.  Some assume a financial adviser is costly without actually knowing how affordable it is. You might need a mortgage, want to plan for retirement or advice on critical monetary decisions, there are various resources you can use like price comparison websites, government-run advice services, product providers, banks, etc. If though you’ve realised you don’t have the time or knowledge to manage your finances or you are worried about making the wrong decisions it could be a good time to get in touch with a financial adviser. You are never too young or old, skint or wealthy to start, and it might just be for a one off piece of advice to start with. If you want to understand what a financial adviser is and what we do head over to our financial planning section.

Find out a bit more about financial planning

Useful investment resources

If you’ve found this guide useful, please do share it with others you know and if you have any questions, you know where we are – just get in touch

Guide Updated: 7th August 2024

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