Credit, finance tips for Brits in their 20s

By Marianne Curphey

When you are in your 20s, you most likely are finishing your education or starting your career. It's a time to learn about managing your money as you move out from the family home and start paying bills yourself.

Setting up healthy money habits now will set you in good shape for the rest of your financial life. Here's how to get started:

1. Use your credit card carefully.
Managing your credit wisely now can count in your favour years and even decades down the road.  And even if you used a card irresponsibly as a student, you can still get on the right credit track so your credit score recovers.

One way to do this is to make sure you make your payments on time. It's the biggest factor in your credit score.young-credit-finance-advice

Paying off your card each month now shows future potential lenders in the future -- such as mortgage companies -- that you can handle credit responsibly.

"Set up a direct debt to pay at least the minimum amount or, if you can, the full amount each month on your credit or store card," says Yvonne Goodwin, founder of financial advice website Yvonne Goodwin Wealth Management.

"You want to try to avoid missed payments at all costs because they end up on your credit record and that can have all sorts of future repercussions," she says. "When you are busy working, it is easy to forget about it and miss a payment, and then there is a penalty to pay."

If you do not want to set up a direct debit, set up an alert on your smartphone to remind you a few days before the bill is due. Or go old school and write the due date in your diary or planner -- anywhere that you will see it -- so you'll be sure to make a payment before it's due.

2. Get your student loans -- and any other debt -- under control.
Investing in your education can do you wonders in the long run, but students sometimes don't take their loans seriously and don't think about the fact that they will have to eventually pay that money back. When that time comes, you may also find yourself loaded down with credit card and other loan debt as well.

It's easy to feel overwhelmed by it all.

"People ignore debt because they don't think about the long-term consequences -- how it can inhibit you from achieving some of the things you want in life, such as saving up for your first home or planning your wedding," says Philip Pearson, independent financial adviser with P&P Invest in Southampton.

Instead of burying your head in the sand, Pearson suggests crafting a plan to deal with your bills. Figuring out how to make your student loan payments and pay down any other debt will give you financial freedom. And wiping your debt slate clean will mean that your credit rating won't be adversely affected by bills you owed from the early part of your career.

"Debt needs to be taken seriously, otherwise it will get in the way of your aspirations," Pearson says. "Amongst the young, there is the culture of credit never being repaid. It's endemic in young people, but it's important to realise the consequences."

3. Live within your means.
Budgeting carefully and having a spending plan are good habits to get into when you first start working, says Pearson. What you don't want to do is get "into a default mode of spending and not saving," he says.

When you start working, you may get excited at the amount of money suddenly hitting your bank account every other week. You  may even think you'll never spend more than you make, so there's no need to keep a close eye on spending -- but you do.

Write up a budget that includes necessities, then wants. Make sure the essentials are taken care of, then savings, then discretionary spending. Before you go out and charge a large TV and weekly nights out on the town, make sure you'll be able to pay off all of it at the end of the month.

If you are struggling financially, look for ways to increase your income, either by changing jobs, or as Jasmine Birtles, founder of financial website Money Magpie, suggests, generating some extra income.

Simple jobs young adults could do include "dog walking, which pays £15 per hour per dog, or being a film extra, which is around £100 a day," she says.

Birtles also suggests trying to "get some things for free -- like signing up for mystery shopping where you get a free meal and a small payment." And when you're going through all of your expenses, such as insurance, look for ways you can pay less for them.

4. Pay your (future) self first
Make savings simple by arranging to have a direct debit going straight from your current account to a savings account on payday, says Goodwin. If you start doing this from your first pay slip, you'll lay the groundwork for a good habit for the rest of your life, she says.

"You should be able to do this and not really notice that the money as gone, and if you save little and often, the amounts will start to build up," Goodwin says.

"If you are not in control of your spending, it will be in control of you, and you will become a slave to your money," Pearson says. "Think ahead -- consider what your life will look like in three, five or 10 years' time and plan for it. It's about having aspirations and planning how to achieve them financially."

See related: Avoiding credit-builder card pitfalls, Clearing up confusion over credit reports, scores, What are millennials' real attitudes toward debt?

Published: 12 August 2016