- Bola Sol coaches clients on managing money and wrote the personal-finance book “How to Save It.”
- She recommended strict monthly budgeting and being proactive about investing.
- Sol suggested those who are wary about investing start with small amounts and try using index funds.
This as-told-to essay is based on a transcribed conversation with Bola Sol, a 31-year-old personal-finance coach from London. It has been edited for length and clarity.
I work a nine-to-five as a business analyst in financial services. I’m a personal-finance coach on top of that. I have private clients and I’ve written a book about finance.
I’ve always been good at managing my own money. I didn’t really know it until after university when I found out that everybody I knew had used their bank overdraft, but I’d never used mine.
I budget with the money I have. Some seasons, I spend quite a bit, and some seasons, I really save and invest. It varies.
When I meet clients, I first get them to fill out a questionnaire asking about their credit score and whether they’re in debt. Everyone’s financial situation is different, but generally, this is what I suggest people do.
1. Set a budget for the month ahead and go through your bank account
It all starts with budgeting. Plan what you think you’re going to spend in the month ahead. If you know that number, you can see when you are going over budget. It helps you stay on track earlier in the month.
Go through your bank statement and transactions with a fine-tooth comb.
No matter what you earn, you need to check your accounts.
If you’re struggling, have an honest conversation about what you can and can’t do with what you earn.
See if there are any ways you can cut back. I’ve signed up to more supermarket-reward schemes. Right now, I want to meet up with friends, but it’s not a great time financially, so I suggest a call instead. Hopefully if things get better, we can do dinner and drinks.
2. Invest your money, even if it’s small amounts
Start investing as soon as you can in life. Retirement may seem far away for many, but investing on top of having a pension can ensure you have the money you need to get through your retirement years without worrying.
People don’t always understand investing. Remember that you’re not going to know everything you want to know straight away. But you should try to get your foot in the door and invest regularly.
I’m not talking about making a phenomenal profit. I’m talking about investments that can help keep you chugging along.
If you’re scared, start small. People start with as little as £1, or about $1.23. Then maybe you will get £1.50, or about $1.85. Next time, you might invest £2, or about $2.47. You’ll only get the hang of it if you start somewhere and build it up.
3. Diversify your investments and think carefully about risk
Invest in different funds. With funds, it’s not just one company that you’re investing in. It could be that one company in the fund is not doing well, but another is. That helps you diversify your portfolio. I love the website Motley Fool, which helps with investing in funds. It’s a great resource.
I tell people to look into index funds and exchange-traded funds because the average person does not have time to keep looking at what the stock market is doing. These types of funds essentially track the performance of particular companies within that fund. That is steadier as opposed to ones that make you go, “Oh my gosh, this stock is hot right now.”
What you invest in might depend on your age and your attitude to risk — what some people do at age 20 may be different from what they do at age 30.
Don’t get caught up in what everyone else is doing — even if it seems like people are making crazy, stupid profits, like with cryptocurrency. You might get FOMO and invest in a stock that’s super popular, but by the time you invest in it, it’s already at the highest price, and when it goes down, you will lose money.
You have to look at your personal situation and think about whether you have time to study and understand what you’re doing.
4. Don’t get a credit card if you’re always going over your budget
A lot of people come to me and say they ignore debt. Don’t ignore it. The long-term ramifications aren’t worth it, especially if your income is fixed. You end up paying all this credit-card interest on top of your bills.
But don’t close old credit-card accounts. I closed two when I was younger, and it didn’t play well with my credit score. There’s nothing wrong with simply cutting up your credit card.
I get a lot of questions about credit cards. Some people just quickly apply for them and get approved. But they don’t know about 0% balance transfers, for example. You need to have a good sense of financial knowledge and discipline before getting a credit card.