What random guys on YouTube taught me about personal finance
Three lessons that shaped my money philosophy
I was born and brought up in a South Asian household. I was lucky that my parents were very financially literate. They always had a plan and were very risk-averse. I learned living beyond our means, the importance of being debt-free, and saving for the future from them.
When I migrated to the UK, the story was different. I was following the same advice and pattern that I followed back home. But this time it was different. Back in Sri Lanka, stock market investing was not very common and considered extremely risky. The most popular way the middle class tried to grow their money was through high-interest fixed deposits. Believe me when I say the interest was crazy. They were sometimes even higher than 15%.
When I got my first few salaries in the UK I wanted to do the same. It didn’t take that much time for me to realize that the savings accounts in the UK are not what I am used to and have extremely low interest and returns, even if you lock down your money for a couple of years. Naive as I was, I accepted this and started putting my savings in these low-interest accounts. I didn’t even try to search which account gave the highest interest, I just went with the savings account in the same bank my current account was.
After a few years and buying one house later I realized that it was time to focus more on my finances as my finance mindset was not compatible with the UK. So I turned to YouTube and books to learn about investments which looking back was a very risky move on my part, but I feel lucky that I have an objective mindset to not take anything anyone says as holy grail.
The following are the top lessons that shaped my personal finance philosophy. Please note that I am not a financial advisor and take these as a grain of salt.
Research and learning is key
We don’t get taught personal finance in school. You have to learn everything related to personal finance by yourself. Today we live in an information era where any information you seek is readily available. But the problem with this is that this information is not always right. Even the good information can sometimes be bad for you as everything depends on personal circumstances. So you have to be very careful when consuming anything that is coming out of the internet.
You also have to do research and shop around. Don’t just chuck your money in your bank’s low-interest savings account. Look for savings accounts across the country to see which savings accounts will give you a higher yield. Do your research before you commit to anything, personal finance or not.
Don’t sacrifice your today’s life to your future life
This can sound controversial. But you also have to consider the context of a high-income earner with no debt. If you don’t take that dream vacation that you could afford now and instead save or invest that money, yes of course they will give you a greater return long term in a few years, but is it worth it? I am not advocating spending all your money and not saving for the future. But always balance it out such that you don’t miss your present in favor of your future.
Don’t put all your eggs in one basket
This is the most sane advice that you can apply to anything starting from your income to how you spend that income.
If you already have multiple income sources, good for you! If you don’t, think about what happens if you get laid off or simply lose that income source. The best way to be ready for such an event is to diversify your income. It can be a passive income like a rental income or an active income like a part-time job.
If you are saving and investing, have a short-term emergency fund in an easy-access savings account with your stock portfolio. You don’t always know when emergencies happen. You can put all your money into your stocks, but in an emergency and a worse case in a time when the stock market has gone down, you have to sell a large portion of your portfolio to fund your emergency.
Even inside your portfolio, instead of investing in a single stock, you can diversify by choosing an index fund or at least multiple stocks across multiple industries and regions. So that the impact will be lower when one company or industry goes down.
Closing
What are your top lessons on personal finance, let me know in the comments. Do you agree with mine? or have different ones? Who are your favorite finance YouTubers? Share yours and I will share mine.
