How to finance as an adult

This is a genuine question, how do you finance?

Whilst I wait for someone to respond to my burning question (respond to my IG), I will tell you how I currently finance.

So, I had enough money to pay for my deposit for my rental place. It was a lot of money and I still had 1 week until payday after I moved in, so I made a big mistake and used my credit card to live for that week. I used more than ¾ of my limit. Bearing in mind this was my first credit card, I got it during placement year, because I was earning money and Barclays offers really good interest rates (not sponsored). So, my mistake was using the card that much, to add some small furnishings like small coffee tables and a fridge; and using your credit card over 30% of the limit, can affect your credit score for about 6 months, so that meant I couldn’t increase my limit or apply for a new credit card for 6 months.

So proud of my fridge

I mentioned I had created a simple budget template in a previous post. It’s useful. It allows me every month to evaluate my finances and as depressing as it is seeing how much money leaves my account after payday, the blow is easier, because when I budget, I already know that money has come out, so it’s not a surprise. I even budget for random things, which I put a side about £200 a month, for any random purchase/mini emergency. So, it’s hard to make myself go over budget, and I’ll admit, bar the first month, I have been very good with my money.

I made friends who are looking at similar financial goals to me, and we talk and educate each other when we find something new. This was great, I didn’t feel stressed or alone, and we support each other. One of my friends, we keep each other motivated to our finances. Every month we have a Money date. I heard the term from a respectable Instagram account (I don’t know if I can mention them here, but message me on IG and I’ll send you their way). It’s a really good way to check in and understand your spending habits, and it disciplines me, and I love it. It helps me feel comfortable acknowledging my finances, talking about money, overcoming those financial barriers, and doesn’t make me feel overwhelmed at the future, because I’m planning for it now!

So, I’m 22, this is my first full-time job out of university, I needed to be responsible with my first pay check. I made sure that the first thing I did, was pay off my credit card, then I opened up a few accounts:

  • 2 high-yield savings accounts. One I can access after 12 months with a higher interest rate, and the other I can access instantly (24 hours for the money to get to my account) for emergencies.
  • I opened a Lifetime ISA (Instant Savings Account), this allows me £4k a year to put towards my first house (as a non-house owner right now).
  • A Stocks and Shares ISA (£16k limit), to get involved in long-term investments, alongside the company pension scheme.
  • Lastly 1 more current account

I made sure to divide a little over a ¼ of each pay check into these other accounts. It’s not a lot but it’s a start, especially on a graduate salary. The rest is all on expenses, and since the country has been in a gas crisis since summer 2021, it’s not been fun paying those bills on this house. The other current account meant that I could have a specific card to spend on, so I couldn’t accidentally spend my rent money. My rent comes out 8 days before my next pay day, so that means I have to hold onto enough money to pay it. It’s easier for me to have that other account, than risk missing a rent payment.

My way of financing is not the only way. I have changed as time goes on, but this is the method I currently follow. However, I didn’t have all these accounts for the first 3 months of working, and I’m sure I’ll keep changing and adapting the method as things change. One thing’s for sure, setting up standing orders and direct debits where you can, can save you having to micro manage every transaction. Also, set warnings on your account, so they can tell you every time you spend money (also helps if there is suspicious activity on your account) – it helps to guilt trick you into thinking whether keeping a subscription service is necessary.

Moral of my story:

  • Credit card– Very handy to have, I’d recommend getting one if you can, just watch out for that 30%
  • Have a budget– It’s very handy, and can really help with understanding your finances
  • Finance plan– Make it your own, whatever works for you and your financial goals, but standing orders, direct debits and transaction warnings are very helpful
  • Make friends with like-minded people– You can help motivate each other and enjoy your financial growth together
  • Money date– Do it😊