Turning the big three-o is often considered one big step in life.
Today, you’ll find a lot less scrutiny and expectations when it comes to turning 30 (compared to, let’s say, 20 years ago), and that’s definitely a good thing!
While 30 may be the new 21, there is one milestone that definitely still deserves putting a timeline for yourself to master before 30.
Call it financial literacy. Call it financial planning. Call it whatever you like, as long as it’s about how you earn, save, invest and spend money for the remainder of your adulthood.
At BigPay, we like to call it managing your money smarter.
In our previous article from the #LetsTalkMoney series, you would have picked up some serious money-saving skills for your first house. This time, we’ll explore the path of mastering 4 money-managing skills and how they set yourself up for future success!
1. Identify Your Main Method Of Earning Money
While it’s wise to heed Warren Buffet’s advice of finding ways of diversifying your income, the reality is that most of us will have one main source of income that dwarfs all others, especially if you’re still in your 20s.
For most of us salaried employees, that isn’t hard to guess - it will be your regular 9-5 job. But this isn’t just about chasing promotions and yearly salary increments.
Money management is all about the future - once you’ve identified your main source of income, a smart move would be to have a clear career progression plan to beat the salary ceiling.
For example, a graphic designer might hit a salary ceiling 10 years into the job - most companies simply won’t fork out 5 figures monthly for a designer!
How will you then ensure your earning potential doesn’t remain stagnant after 10 or 20 years?
He/she could also sharpen their skills and experience to start their own design studio, or take up high-value freelance projects using the recognition of their previous work.
At the end of the day, taking steps to ensure that you’re always earning more money than before just makes brilliant financial sense, and is something everyone should master early.
2. Manage Your Savings And Spendings Wisely
Saving money isn’t just about simply dumping your cash into a bank deposit account either - did you know that the money you have right now is constantly worth less and less?
You don’t need a degree in finance to get started, because being smart with your money can simply mean putting your money to work - so consider putting your money into a risk-free term deposit, for example.
Of course, with the mention of savings, we’ll have to address the topic of spending.
Mastering the skill of spending your money wisely deserves an article on its own - but to put it briefly, half the battle of spending wisely can be won by avoiding the trap of lifestyle upgrades.
The key to mastering how you spend money? Always find value on what you spend on. For example, buying your mentor a nice meal solidifies your friendship and opens opportunities (while enjoying the meal, of course).
This far outweighs buying a round of drinks to people you barely know at the club, don’t you think so?
3. Know The Difference Between Borrowing Wisely And Dangerous Debt
If you ask any money-savvy person about whether debt is a good or bad thing for your financial health, you’ll likely hear this answer from the vast majority - it depends.
You see, to the money-savvy, debt isn’t the all-dirty word that many might have in mind. Some forms of debt can cripple your finances for decades, while well-calculated debt can be a starting point of financial success.
We’ve covered good debt vs bad debt extensively before, and we think it’s fair to say that knowing this difference between them separates smart money managers from everyone else!
All said and done, taking on debt with wisely-calculated risks can significantly increase your earning capacity (as mentioned above!).
You can also provide yourself with a stable roof over your head as well as an appreciating asset - this goes a long way to ensure your retirement is truly the golden years of your life!
And speaking of retirement...
4. Envision And Protect Your Life After Retirement
Last but not least, thinking about life after 55 before reaching 30 is a good measure of your money management skills.
This might sound strange, or it might be low on your priority list, but picturing your retirement in detail is a healthy step for your financial future!
To get started, picture your day-to-day life upon retiring 30 years from now.
What would your monthly spending budget be? Is your current retirement fund and its growth rate sufficient when it's time to retire?
You should also take inflation into perspective too. Ask yourself this - can the same RM5 today buy yourself a plate of nasi lemak in 15 years time?
If you have the same doubts, you can imagine facing a similar situation when you turn 70 after retiring at 55.
Furthermore, there will be unforeseen situations that might take money away from your nest egg, from medical bills to family situations.
The truth is, learning how to manage your retirement money is the hardest to master as we are trying to foresee.
But a rough plan is better than no plan at all!
At the end of the day, managing your retirement money starts with higher earnings, is driven by consistent savings, supported by smarter spendings and leapfrogged by wise investments!
We hope this article inspires you to master your money management skill, no matter your age! As always, we are happy to share and talk to you more about smarter money decisions.
Let us know what you’d like to read more about in the comments below for our next piece on BigPay’s #LetsTalkMoney series!
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