I turned 25 last week. Nothing major changes legally at 25, but entering your mid-twenties feels like a big step. A lot has changed in the past year, both globally and personally. It’s also been the year I developed my interest in personal finance. So, I decided to come up with 25 financial lessons to learn at 25.

This list of 25 financial lessons to learn focuses on easy tips, that will help keep your finances in check and start becoming more organised for the future. Perhaps not the most original idea, but hopefully at least some of the tips will help you on your financial journey.

In no particular order the list of 25 financial lessons to learn at 25 is as follows:

Never live beyond your means

This is crucial. If you spend more than you earn, you will find yourself in a cycle of debt. It’s difficult, particularly at the moment when many are on reduced incomes, but spending less than you earn is the simplest and most effective way to take control of your finances.

Think twice before you buy

I only started doing this recently, but it’s already saved me a lot of money. The idea is to avoid impulse buying and instead only purchase what you really need and/or want.

Mark Mulvey recommends putting the URL of what you want to buy into his google calendar a month ahead. By the time the ‘appointment’ comes around, you usually don’t want to buy the item anymore.

Save what you can

It doesn’t actually matter how much you save at this stage. The idea is to build the habit of saving. This way, as your income hopefully increases as your career progresses, you will still look to save and can increase the amount you put aside each month.

Even as little as £20 a month will make a difference and can forge the habit for later life.

Avoid lifestyle inflation

Try to avoid getting into the mindset of spending your whole paycheque. As your salary increases, of course treat yourself or spend a little more. But, also use this as an opportunity to save more.

If you’re happy doing your weekly food shop in Aldi, there’s no need to suddenly switch to M&S because you got a pay rise! In the long run, you’ll be better off investing the difference. You’re also never above looking for freebies or discounts!

Start investing

There’s a well know quote along the lines of: ‘The best time to plant a tree was 20 years ago….the second best time is today.’

Even investing a small amount will help you learn about the process and, again, help forge habits for later life.

Compound interest

Compound interest is very important. Described by Albert Einstein as the eighth wonder of the world, the basic principal is the longer you hold investments or savings for, the greater returns you stand to achieve.

Investing now will leave you with far more money in 50 years, than waiting and investing the same amount in 30 years’ time.

Make sure you have a healthy relationship with your money.

Mike from Average Joe Finances, says you should treat your money like an employee that you are going to put to work for you for the rest of your life.

Value your money, but equally make sure it is working as hard as you work to earn it.

Don’t pay too much in banking fees

Michelle from Boomer Eco Crusader warned of losing money by paying too much in fees.  This is a particular issue with investment accounts.

However, this doesn’t mean you should avoid paying for advice when necessary. Financial advice can be an invaluable tool for many.

Buy only what you can afford twice

Euan, who runs a great YouTube channel, recommends this tip. The idea is to avoid creating unnecessary financial risk and leaving you with too little money to avoid paying for essentials.

It also covers you in the event of price increases or unexpected expenses.

Pensions

Sort out your pension. As a minimum, you should be paying into your workplace pension scheme. You can also choose to up your contributions to this if you want to save more.

For more tips on pensions check out this post.

Have a growth mindset

Skilled Finances talk a lot about this on their blog.  They recommend learning new skills and building your knowledge. This will allow you to demand a higher salary and/or make extra money via a side hustle.

Know your value and be confident in asking for what you’re worth

Similar to the above, it’s important to be able to ask for pay rises when necessary and to negotiate contracts and salaries as required.

I wouldn’t necessarily recommend doing this straight away in your career, it’s important to learn the ropes and gain experience first, so you’ll be able to ask for more later on.

Keep on top of interest rates to make sure you are getting the most value for your money

Interest rates are frustratingly low everywhere at the moment, but this doesn’t mean you shouldn’t still look for the best rates.

You can find some of the best available online interest rates currently on offer here.

If an investment looks too good to be true – it is

From time to time, you’ll come across investment opportunities offering ‘guaranteed’ returns or similarly improbable benefits. These should always be avoided as there are nearly always scams and you will end up losing your money.

Own your finances – don’t bury your head & ignore them

Fire and Wide are strong believers in paying attention to your finances. However bad you may think they are, it’s always better to address them and know what you’re dealing with, rather than ignoring them. They won’t go away.

Invest in Life Insurance and Critical Illness cover while you’re young and premiums are cheap

This is something most people ignore until they are older, but the longer you leave it, the more the price will increase.

Additionally, if you are unfortunate enough to develop any illnesses or injuries before you take out cover, they may not be covered by your provider.

Learn about ISAs

ISAs are great saving and investment vehicles for anyone in the UK. Additionally, you can save £20,000 a year without paying tax on any gains.

Some ISAs, like the LISA, have additional benefits. You can read more about the benefits here.

Automate your savings by using direct debits

This is a similar idea to paying yourself first. If you struggle to save, set up direct debits to your saving accounts straight after pay day. It’s much harder to spend money if it’s not sitting in your current account.

Treat your credit card like cash – don’t use it if you can’t pay the bill in full every month

Credit can be a really useful tool, but should only be used responsibly. Using a credit card, can offer rewards and help build your credit rating. But, you should only use your credit card to buy what you can genuinely afford.

PS – as a bonus, avoid Buy Now Pay Later schemes like Klarna. They advertise it to make it look safe and fun, but it isn’t. You could lose your home if you can’t keep up with the repayments.

Create multiple streams of income

I’m still working on this one, but it can be really useful to have money coming in from multiple sources. Covid-19 has demonstrated how vulnerable even many ‘safe’ jobs are. Not relying solely on your main job for income will help protect you if you suddenly find yourself out of work.

Build an emergency fund

Much like having multiple streams of income, an emergency fund is designed to protect you in case you suddenly lose your income.

Some recommend having 3 months of expenses saved, others as much as 6 months. Whatever you can save, will go a long way towards protecting you in case of an emergency.

Learn about tax and tax planning

Make sure you’re paying the correct amount of tax and filing correctly. If you earn more than £1,000 outside of your main job, you must complete a Self-Assessment tax return and pay any tax owed.

Tax planning can also be useful. For example, if you invest, use an ISA. Each year you can invest £20,000 tax free.

Wills

If you don’t have a Will already, you need one. Even if you don’t think you have much worth passing on, or your bank balance is near zero, you should still have a Will. This post explains why they are so important.

Set your future goals

It’s much easier to save money and spend responsibly if you have a clear goal. This can be anything from getting out of debt, to buying a house or even going on holiday. Whatever it is, make sure you keep it in focus whenever you’re struggling to manage your money.

Don’t try and ‘keep up with the Joneses’ – just do you

A final thought – your money is yours, no one else’s, so spend it (or save it) how you choose. It can be easy to get caught up scrolling through Instagram and seeing people on lavish holidays or with the latest iPhones or designer clothes. If you value these things and can afford them, then great – go for it! If not, don’t let other people’s actions distract you from your goals and plans.

Conclusion

So there you have it, 25 financial lessons to learn before you turn 25. It sounds like a lot, but even just thinking about these things will help. Of course, there’s no financial rulebook and your finances are personal. Therefore, use this list as a guide and starting point rather than a definitive answer to your finances.

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If you found this post interesting, please like it and share across social media or send it to your friends. I’d also love to hear your thoughts and experiences, so please leave a comment! Do you have any financial lessons you think everyone should know by the time they turn 25? What would make your list of 25 financial lessons to learn?