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Your twenties can be a strange time. School seems like a distant memory and you’re thrust into adulthood, fresh out of education. It seems like everyone else around you has it all together and you’re the only one trying to figure out your next steps. I’ve felt exactly the same and do you know what I learnt? Everyone is winging it. From the people who seem to have their feet firmly in their career to those who have taken the plunge to become their own boss.

Want to know something else? ‘Winging it’ doesn’t stop in your 20s. Pretty much everyone is winging it and just hoping for the best. Now, although there may not be a blueprint for the steps you should take to reach your desired level of success in your life, there are some key tips that you can take to ace your finances along that journey. Here are five ways to master your money in your 20s with ease.

Pensions: it pays to start early

Pensions. Whenever I say this word to someone under 30, the response I always hear back is, ‘Aren’t those for old people?’ My answer? Not at all! A pension is a pot of money that you contribute to throughout your working life that enables you to live comfortably once you reach retirement age. The current pension age in the UK is 66 years old but, with people living longer, is likely to be around 68 or older once we twenty-somethings reach that point.

In the UK, everyone qualifies for a state pension providing they have been making National Insurance contributions for at least 15 years (e.g. working and paying taxes for 15 years). Providing you contribute for 15 years; you could qualify for payments from the government of just under £200 a week. Doesn’t sound like a lot of money to enjoy retirement with, does it? You’re right, it’s not. That’s why it’s super-important to set up your own savings.

Once you turn 22 and earn over £10,000 per year, you will be automatically enrolled into your workplace’s pension scheme. Workplace pensions are great as not only do you make contributions, your employer does too. How much they contribute varies from workplace to workplace. Your employer could contribute a percentage of money alongside your contribution e.g. You contribute 5% of your salary, your employer contributes an additional 2%. They could also choose to match your pension contributions e.g.: you contribute 5% of your salary and your employer matches that to contribute an additional 5%.

If you’re self-employed or looking to top up your pension savings, you can also open a private pension. This is where you make contributions to your own pension pot, separate to your workplace and state pension. According to Retirement Living Standards, if you wanted to live a luxury retirement, you should be looking to have a pension pot of around £495,000.

Now, let’s do the maths:

If you started saving at 20:
Monthly pension contributions = £440 Pension
Pot at 68 = £495,278*

If you started saving at 30:
Monthly pension contributions = £647 Pension
Pot at 68 = £495,581*

* all figures are estimates and have taken into account inflation. (Vanguard Pension Calculator)

The maths says it all - the earlier you start to think and save for your future, the less you’ll have to set aside every month. It’s a no brainer!

Capsule wardrobe > Fast fashion

Got a party coming up? Going out for brunch on the weekend? It can be very tempting to purchase a new outfit especially for the occasion. Well, did you know that it is estimated that almost two tonnes of clothes are purchased in the UK every minute? This produces the same amount of carbon emissions as driving 162,000 miles in a car (Oxfam UK).

Knowing how much of an effect fast fashion has on the environment, it’s good to start to look towards creating your own capsule wardrobe. A capsule wardrobe is where you buy a number of staple pieces that you can interchange to make new outfits. You may want to invest in a few pairs of quality jeans, a nice blazer, a nice skirt, and some tailored trousers. You could also purchase a go-to pair of trainers and heels that can go with pretty much any outfit. This helps to reduce the harm that fast fashion does to the environment whilst saving you money in the long run.

Have any items that you no longer wear? Why not pop them on Depop Link opens in a new window or eBay Link opens in a new window to generate some extra cash and help to build someone else’s capsule wardrobe!

Shopping around > Impulse purchasing

We’ve all done it. We’ve all seen something that we’ve liked and bought it without hesitation or second thought. Now, although you may feel great in that moment, that feeling may soon fade if you later on find out that you could’ve bought that same item for half the price elsewhere. That’s why you should always aim to shop around before making any purchases.

You can use websites like VoucherCodes Link opens in a new window to search for discounts at your favourite retailer or install the extension Honey to your Chrome browser to let it do it for you. If you’re always shopping on Amazon, be sure to use the website CamelCamelCamel Link opens in a new window. The prices of products on Amazon fluctuate multiple times a day and this website alerts you any time your desired products reach your ideal price point.

Habit stacking > Saving/Budgeting

Learning a new habit can be difficult to stick by unless you’re extremely disciplined. One way to make this easier is through the process of habit stacking. Habit stacking means taking an existing habit and stacking a new habit on top of it. For example, if you wanted to create the habit of going for a 15-minute walk every day you might decide ‘after my morning coffee, I will go for a 15-minute walk around my area’. You’re taking your existing habit, your morning coffee, and stacking your new habit on top.

This is great, especially if you’re looking to implement new financial habits into your lifestyle. You might decide that after your morning shower, you will transfer a daily amount into your savings. This method helps you to stay on track and develop your new habit. Remember, it takes 21 days to develop a habit and 90 days for it to become a part of your lifestyle!

The Virgin Money Mobile Banking App has some amazing features to help make your new budgeting/saving habit that much easier. You’re able to track your spending, view your budget and save towards your savings goals in specific pots all within the app. It couldn’t be easier!

Don’t fall for lifestyle inflation

As you see an increase in your income, it can be very easy to spend more than when you were on a lower income. This is known as ‘lifestyle inflation’. When you experience an increase in your income whether that’s from a new job or a promotion, you should try not to increase the amount you spend.

The likelihood is that you’re comfortable on the amount of income that you were earning previously so any additional income you may receive could be used for something that could benefit you in the long run such as saving or investing. Be smart with your income and don’t fall for the trap of spending more when you earn more!

Your twenties are the best time to lay the foundation for your finances in the future so try to implement some of the tips in this article to help you to master your money like a pro!

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