7 Embarrassing Financial Mistakes I Made in My 20s
I’m embarrassed that I’m discovering the power of personal finance (saving accounts, investing, ISAs, etc) only now in my mid-30s 🙈
Things I didn’t know in my 20s but should have:
Example 1 – UK government contributes up to £1000 per year to help you buy your 1st property
For years I saved money to buy property in London without knowing that there is a government-backed scheme called Lifetime ISA that will add 25% to your savings to help you buy your first property before age 40.
You can put in up to £4,000 each year into LISA before you’re 50. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
Imagine saving for a property for 10 years, that’s £10,000 free money from the government.
It’s basically like a free loan that you will never have to pay back!
Why didn’t I hear about it before? 😫
Example 2: You can earn good interest on your rainy fund savings while still having instant access to it
I used to think that a good interest on savings can only be earned when you lock your money away for a certain period.
I was wrong.
You can earn an average of 2.5% of interest on your rainy fund savings and still access it any time if you just put your money into a high-yield savings account 🤯
For years I had my money in my standard savings account earning 0.4% per year on my savings. I just didn’t know I could make my money work harder. That mistake cost me about £700 of free cash over few years – the money I could have potentially earned by doing absolutely nothing (well, except putting my savings into a different savings account, which takes about 5 min)
Check out savingscalculator.org to quickly figure out how much money you will have saved up if you put your money into a high-yield savings account. This calculator is in USD, but the calculation for figuring compound savings is the same everywhere in the world, so if you are based in the UK, don’t let the $ confuse you.
Example 3: Start a side hustle, diversify your income stream
I hate relying on 1 income stream, so I have always had several. Read more about my philosophy on income.
I believe what you do on the side will create your next job or promotion. I think the future is about multiplying your skills and streams of income, not focusing on just one.
If you’re reasonably intelligent, being employed in one role is one of the worst things you can do to support yourself.
Apart from running 2 blogs, I also started a vintage clothes reselling business online this year. The reseller industry is great because it has low startup costs, it’s fun, and can be lucrative. I have already made over £1000+ profit in the first 6 months.
Example 4: You can have as many current bank and savings account as you like to make the most of the offers
I used to think you have to choose one bank account, but you can have as many banks and saving accounts as your heart desires.
Many banks have intro offers and bonuses for joining them. I recently switched banks and earned £200 intro offer at Nationwide. I also transferred £1000 into a Nationwide savings account to earn 5% interest, that’s another £50.
NB! When you switch bank accounts, you don’t really have to say goodbye to your old bank. Once you get your bonus and a new bank account, you can just reapply to your old bank again and continue to enjoy the benefits of both bank accounts.
For example, my old bank account had free European travel cover, so I wanted to keep that account, too.
Example 5: Changing employers can add up to 20K to your yearly income
Maybe in your 20s, you stayed in a dead-end job for too long because you were told it would look good on your résumé to stay in one place for many years.
Now that you’re in your 30s, you’ve been able to grow your skills and your salary so much faster by changing jobs more frequently 😉
Example 6: Make money by just using credit cards
Credit cards are your friends.
You can get cashback on some credit cards if you pay your balances on time – that’s basically free money!
+ Having a credit card will help you build a credit score, which will help you with borrowing at some point in your life. Read about credit scores here.
Example 7: You can earn tax-free interest on up to £20,000 in savings by using ISAs
Unlike investments and standard savings accounts, where you have to pay tax on your savings interest, putting money into ISA accounts is completely tax-free for up to £20,000 per year.
Types of ISA accounts:
Cash ISAs – these are usually offered by banks and building societies, and they can only hold cash investments. The interest rate you get will be guaranteed and set by your Cash ISA provider. There are two types of interest rates: fixed rates, and variable rates.
Fixed-Interest Cash ISAs:
- Will have a set term, ranging from one to five years
- Guaranteed interest rates for this period
- Higher interest rates than variable rates
- You are locked into the term, meaning that you will be charged for withdrawing early
Variable-Interest Cash ISAs:
- Interest rates will fluctuate over time
- Interest rates are generally lower than fixed-term products
- You can withdraw funds at any time, free of charge (easy access)
Lifetime ISAs – if you are saving for your first house purchase, then look into LISA, as HMRC will add 25% free to your contributions.
Stocks and Shares ISAs – these allow you to invest in the stock market. This gives you access to greater potential investment growth and investment income, but your investments will be at risk of losing money.
There are many investments you can hold within a Stocks and Shares ISA, and we have created a list of the most popular products:
- Managed Funds (OEICs, Unit Trusts and Investment Trusts)
- ETFs (Exchange Traded Funds)
- Corporate & Government Bonds
- Managed Portfolios