The Only Financial Advice You’ll Need for 2025

Hi Reader,

Welcome to The Money Series and if you are new here, thank you for signing up. Personal Finance can feel ambiguous and overwhelming, but I am here to help simplify the journey.

Happy New Year!🥳 I hope you got some downtime to recharge, reflect and dream big for 2025. My wish for you this year is simple: a financially successful and stress-free 2025!

If there’s one golden nugget of advice I could offer to guide you through this year, it’s this:

‘Live below your means and invest the difference’

I know, I know—it sounds like something you’ve heard a thousand times. But let’s really dig into what it means for you.

What Does “Living Below Your Means” Actually Mean?

To live below your means, you have to be aware of what ‘living below your means’ means for you in particular. It’s a relative concept and depends on your earnings and lifestyle. Living below your means doesn’t mean that you are cheap or that you sacrifice all your joy, it simply means that you are spending less than you earn and enjoying the peace that comes with having room to breathe financially.

Tips to help you live below your means:

You should be aware of your current situation - your actual income, your expenses, assets, debt, dependents, your emergency fund level, inheritance, etc. This is important because even if you earn the same amount as your closest colleague, your particular situation can be very different from theirs. For instance, your colleague may not have the same responsibilities as you, may earn extra income from investments, and have financial goals may be very different from yours. For your income, consider your net pay (after tax and other statutory deductions) as well as income from other sources - side hustles, investments, allowance, etc. In essence, have a clear picture of your financial situation.

Focus on the three big expenses - Rent, Transportation, and Food. These typically constitutes the biggest part of your expenses.

• Rent (or Mortgage): Aim to keep this at of 30% of your income. If you live in a high-cost-of-living city and the 30% threshold seems unrealistic, consider sharing with a roommate or move to a smaller apartment.

• Transport: Choose a car whose maintenance you can afford, go for ride-hailing options or shared rides when possible.

• Food: A tricky one. You can reduce food wastage and dinning out as well as consider meal-prepping.

Other necessities - utilities - should also be kept in line with your income.

Commit to saving a specified amount of your income regularly. You should be saving at least 10% of your income. Anything less and you might be living above your means. If you struggle with remembering to save or only saving what’s left after spending, automating your savings is the way to go. Frequently visualize what you are saving for - a house, a dream vacation, financial freedom or retirement. Keeping that goal in focus will make saving less of a chore and more of an investment in your happiness.

Plan for what-ifs because life happens. This is where your emergency fund comes in as your superhero. Your emergency fund can be the bridge between you and an overdraft/selling your assets when the unexpected strikes.

Forget external validation. If you want nice things and can afford it, then go ahead get them. What you should not do is get an expensive gadget, a nice car or a big house because you want approval from others. Nobody really cares about your fancy car or designer bag as much as you think they do. Most people are too busy worrying about their own stuff.

Level up - Increase your income. As you increase your income, you are able to live a good quality of life while maintaining an optimal savings rate. You can comfortably live below your means with a higher income. You can increase your income by:

• Negotiating a raise

• Upskilling or moving to a higher-paying role

• Starting a side hustle or a business

Although it is easier said than done, increasing your income is the ‘easiest’ way to live below your means without reducing your desired quality of life.

Invest the Difference

Saving money is great but investing is where the magic happens. Inflation will erode the value of your money if you simply leave it in a savings account. Investing helps your money grow and gives you the benefits of compound interest.

Reflect on This:

• Are you currently living below or above your means?

Till next week, I am rooting for you, money-ly!

Dee

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