Welcome to Money Matters: GLAMOUR’s weekly dive into the world of finance – your finance. These uncertain times have reminded us just how much understanding our money matters and yet… how little we talk about it and how much it’s shrouded in secrecy.
This stops now.
Keen to break that money taboo, we’re chatting all things personal finance from money saving tips to ISAs and pensions. Each week, a woman in a unique situation will give us an honest breakdown of her finances, and our expert will tell her easy tips on exactly how to tackle it. So, grab a cuppa, take a seat, and let’s talk about money…
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Mia* 25 is a PA living at home with her family in London. She’s looking to save for a rental deposit so she can move out, and wants to build her savings while paying off her debts. This is her money diary…
I’m living at home with my mum, dad and younger sister. We mostly get on and it’s been great financially as it means I’ve been able to start paying off my debts, but I am SO ready to leave home! A friend of mine is thinking of moving out of her house share in a few months’ time, so we’re hoping to find a two-bed flat to rent together after that.
My goal right now is to save for a deposit and pay off my debts. I feel so stupid for taking out two payday loans in the first place, it seemed like an easy fix at the time but I feel really guilty now to have been so irresponsible with money, having wasted a lot on going out and shopping. I’m determined never to do it again, and it feels good to be paying them off now, a couple of years on. I’d really like to have them both cleared by the time I move out, and I cannot wait to make that last payment.
I’ve been in my job for three years, the team is nice and I mostly enjoy it. I managed to avoid furlough when lockdown hit, although I did have to take on more work. I’ve been working really hard and have gotten good feedback from my boss, so I’m hoping to ask for a promotion once we’re out of lockdown.
I’m also planning to sell some of my clothes and bags online, a friend of mine has sold some stuff on Depop so I’m thinking that could be a good way of making some more money before moving out.
Now that the end is in sight for paying off my debts, my main priority is getting into good financial habits and building my savings properly, but I don’t really know where to start. Every payday I start off with great intentions and put money aside straight away, but I usually end up dipping into savings towards the end of the month, so I’m finding it really hard to build them up. I don’t want to end up in a vicious cycle of taking out loans again. I feel so clueless about money and want to learn to be smarter with it!
Current account: £210
Savings account: £1,554
Annual salary: £23,500 pre-tax; £19,644 post-tax and deductions
Monthly wage: £1,958 pre-tax; £1,637 post-tax and deductions
Any other incoming payments: £0
Rent: £300 contribution to family
Bills: Around £200 including phone bill, gym, Netflix, charity donation, food shopping etc
Other: I *aim* to put £300 into savings every month… it doesn’t always happen.
Splurges: I treated myself to a mani-pedi after lockdown, and went for a couple of pub lunches with friends.
Weekly budget: I don’t have one
What I spent this month: £490
Student debt: £55,475, it’s such a huge sum I feel a bit sick whenever I see it, and feel like I’ll never pay it off.
Other debts: I pay £60 and £75 a month towards two payday loan debts, which have £360 and £500 remaining.
MY MONEY THOUGHTS
What I want to save for: A deposit so I can rent a flat with my friend, I reckon I need around £2,000, plus extra to pay for furnishings etc. I probably need a buffer/emergency fund too.
How I want to plan my money for the future: I would also love to go on holidays with my friends this year, and eventually save to buy my own home. It feels a long way off, but if I can start to build my savings now at least I’ll feel like I’m working towards it.
My worst money habit: Discipline! Dipping into savings when I run out of money at the end of the month.
My biggest money worry: That I’ll be living with my parents forever
Current money mood: 😬 🥴 🆘
1. Cut yourself some slack
I know you feel bad about the payday loans but trust me, we’ve all made financial mistakes. Just let it go and laugh. You did your best with the information you had at the time. Facing your financial problems and debts is the first step towards financial responsibility and that’s exactly what you’re doing. Rather than dwelling in the past, let’s focus on your bright future. Of course, there’s always room for improvement but first, please cut yourself some slack.
2. 3 goals, 3 steps
You’ve got three big goals: Pay off your debt, build an emergency fund and save for rental deposit. The key to making these goals a reality is in three steps: prioritise, make a plan and build a financial routine. In terms of your priorities, it almost certainly makes sense for you to put your debts first; I’m assuming you’re paying a pretty high interest rate and given you’ve got a guaranteed roof over your head, a big emergency fund isn’t as vital. If I’m correct and there aren’t any penalties for paying early, it’s probably worth using your savings to pay off your debt in one go. I know it can be tempting to save and pay down debt at once but this rarely makes sense if you’re paying very high rates of interest and have a low chance of facing a big financial emergency. Pay off your debt, you’ll have a few hundred spare and potentially save a chunk in interest too.
3. The plan
Once you’re debt free, you can move your attention to the fun stuff: saving an emergency fund and making house moves. This is where your planning and budget comes in handy. With your debt paid off and post lockdown life underway, how much do you need and want to spend each month and how much can you realistically put away? Is your £300 figure really achievable? Can you save more? Only you can find out the answers; take some time to go through your monthly expenditure and also consider the big one off expenses you’ll face throughout the year (holidays, phone, you get the picture.) Use these figures to estimate a monthly budget for your goals (savings for rental deposit), needs (groceries, rent) and wants (pub lunches, new clothes). In terms of what you put towards your emergency fund and rental deposit, this is a question of timing and lifestyle; when do you want to move out of your parents’ place and how much do you need to set aside to cover any emergencies? It’s also important to remember that they’ll inevitably be some one-off costs to moving, from furniture to transport.
4. Money checklist
With the budget and plan decided, it’s time to get it up and running with a financial routine. The key to really winning at the savings game is to build yourself a checklist of important financial actions that happen on pay day and throughout the month. You can read more about it here but one part of this is paying yourself first. This means setting up a standing order to automatically transfer what you save into your emergency fund or deposit fund, shortly after it hits your current account. Open up an easy access savings account (or a separate ‘pot’, if you’re using a challenger bank) to store your emergency fund.
5. It’s an intervention
If you find yourself dipping into your savings for non-essentials, then there are a few methods to inject a bit of self-control:
- Option A) an accountability partner; Ask a friend or relative to check in with you monthly to monitor your savings and keep you on track.
- Option B) The 72 hour rule: limit impulse purchases by always leaving 72 hours between wanting something and buying it.
- Option C) A spending diary – everything you buy has to be written down. This can also be a useful way to monitor any triggers (e.g. PMS, Sunday evenings) and mitigate accordingly.
Alice Tapper is the author and founder of Go Fund Yourself.
This column offers guidance, not financial advice. For personal investment advice, it’s always best to speak with a financial advisor.
*Name has been changed.