Tuesday, 30 June 2015

Advice on Spending Your Money in Your 20s-30s

Just an observation from Google Analytics, most of my viewers are between the ages of 25-34 (>40%) based on the over 50% of session recorded (and also predominantly, >75%, male, but that's beside the point). So, I've decided to write a post on some ideas and advice by others on how to spend your money in your 20s and 30s, hope this will be helpful to you.

(Image source: http://um-insight.net/blogs/morgan-guyton/budgeting-as-an-act-of-social-justice/)

One of my favourite ideas on how to split your money is by Li Ka Shing to young people (this sharing first appeared on e27 website early last year). So here is the basic idea, assuming that you earn a $2000 salary, split it into 5 groups, the first $600, second $400, third $300, fourth $200 and the fifth $500, if you make more, just scale the amounts accordingly.

The first set of funds is to be used for living expenses, maybe just a simple way of living with around $20 a day. While your body is young it is still able to take this way of living for a few years, he gave the example of having a daily breakfast of vermicelli, an egg and a cup of milk, for lunch, a simple set lunch, a snack and a fruit, for dinner, cook two vegetable dishes and a glass of milk before bed.

The second set of funds is to expand you social circle. This will go to your phone bills, buying people lunches, especially those who are more knowledgeable, richer or people who have helped you in your career. This will help grow your circle of friends as well as your reputation, which can provide many benefits for you in the future.

The third set of funds is to buy books (or can borrow from library) and to improve yourself. Make sure that you are able to thoroughly understand the book and understand its lessons before moving on to the next one. This will allow you to teach the lessons to others, increasing your credibility. To improve yourself, you can attend training and as your income grows, go for more advanced or specialized training.

The fourth set of funds is for holidays overseas. This grows your experience when travelling to other countries and helps to recharge yourself so you'll continue to have passion in your work.

The fifth and last set of funds is for you to invest and grow, possibly invest in starting your own business. He also shares advice such as going to wholesalers and look for products to sell, where your loss will not be too great. As you make more, you can buy long-term investment plans and get long-term security your your financial well-being.

As you start to make more money, remember to allocate your funds in these five categories accordingly. And he also includes other good advice which can be found here: Li Ka Shing teaches you to buy a car & house in 5 years

I find this quite a useful guide especially for people who are in their 20s and 30s. It plans for holidays, expansion of social circle as well as buying books, which though seem like an unnecessary expense now, are very useful towards building ourselves up for future success in our career or our own business. The key of course is keeping to the allocation of funds as our income grows instead of taking part in income inflation, where our first set and fourth set of funds grow disproportionately in relation to our income.

Though it may seem hard to live on $20 a day in Singapore, with the high cost of almost everything, utilities, food, housing, etc. there are still ways to be able to hit that amount so long as we live frugally and really watch our wallets. This reminds me of the $5 challenge so for any of you that succeeded, that can be a good framework. Just one quote to motivate you: Don't live like a king for a little bit and live like a prince forever.

Our 20s and 30s are some of the most important times in deciding our financial future. The magic of compounding, career progression, gaining of knowledge and influence, are influenced by the years just after we step into the workforce. It is also a promising time where almost anything is possible so long as we strive for it.

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  1. Hi JST,

    This is very interesting article. Particularly applicable to me is 2nd set of fund to expand your social circle and interact with people better than you. Subconsciously, i always do that and so far, it has helped not only in my career but my life as a whole. Sometimes my company subsidise for the meal treat due to my work nature, therefore it is even greater.

    1. Hi Rolf Suey,

      Thanks for the comment :)

      Having our company subsidise such meals helps us get a meal at a discount while expanding our social circle, killing two birds with one stone!.

      Just Some Thoughts