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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Louise* is a 25-year-old social care worker living in Staffordshire. She’s paying her mortgage alone after a break-up, and worries the financial responsibility means she’s missing out on enjoying her 20s. This is her money month…
I’ve been a social worker for four years and work in an adult social care team in the NHS – because of this I haven’t had any breaks in working due to Covid. I love my job despite the stress and know that I’m lucky to have been employed throughout the pandemic.
I became single after the start of the first lockdown while my ex and I were buying a house together. I had to back out of the sale but luckily was still in the position where I could buy something on my own and ended up buying a two-bed terraced house in October last year.
As I’m on my own (other than my two cats), most of my income goes on mortgage and bills. The last few months have also been expensive as I’ve had to buy things like washing machines, tumble dryers and lawn mowers. My car has cost me a lot over the last year or so in repairs and I have to have a reliable car for work so will need to purchase a new one in the next few months. My savings don’t allow me to buy anything reliable outright and I’m really worried about going into a finance deal as it will take even more of my monthly income.
Although I’ve made sensible decisions financially up till now, I’m worried I’m not enjoying my 20s enough and I am jealous of friends who go on fantastic holidays – which I can’t afford. Am I worrying too much? How can I make sure that all my essentials are covered but still have enough money to feel like I can enjoy life?
MY ACCOUNTS
Current account: Roughly £500
Savings account: £4,500
MY INCOMINGS
Annual salary: £31,365 pre-tax; £22,050 post tax and deductions
Monthly wage: £2,613.75 pre-tax; £1,837.26 post tax and deductions
Any other incoming payments: None
MY OUTGOINGS
Mortgage: £440
Bills: Approx £310 per month on council tax and utilities. £30 a month for my contact lenses. £15 a month for pet insurance. £12 a month for phone bill (contract only as I own the phone). £60 a month car insurance. I have these all go into a separate current account the day after pay day so I can’t spend them.
Other: £10 Netflix, £10 on Spotify. £60-£80 on fuel for personal mileage (I can claim work mileage).
I also put £280 a month into savings.
Splurges: I spend quite a lot on self-care things like facemasks/bath bombs and on makeup – probably around £60 a month but I am trying to cut back on this.
Weekly budget: I don’t really have a weekly budget I just spend what’s left over after my bills, mortgage have been paid and I put into my savings account.
What I spent this month: £250 so far at about half way through the month (excluding mortgage, bills and savings pot)
MY DEBTS
I have a credit card, but try not to use it often and pay it off each month if I do. My only debts are my student loan (which is just under £40 a month automatically deducted from my salary) and my mortgage.
MY MONEY THOUGHTS
What I want to save for: A car is the main priority. I’d also really likely to go on a nice holiday next year with my friends, which I feel I deserve after working through the pandemic and going through a break up!
How I want to plan my money for the future: I want to feel like I have a cushion of savings in case things go wrong at any point. I’ve got a good pension plan so that’s not a concern. I like the idea of having investments but don’t really know where to start.
My worst money habit: As I’m often stressed from work I find I spend more for convenience – eg ordering things online and paying delivery or using things like Hello Fresh for my food to save time.
My biggest money worry: I’m beginning to feel like all my wages are spent on ‘living’ and sensible decisions with not a massive amount of disposable income rather than enjoying life and I am worried that that’s always going to be the case.
Current money mood: 😔 😞 🤯
WHAT OUR MONEY EXPERT ALICE TAPPER SAYS
To own your new car: If the new wheels are the big priority and your current car really has had its day, then let’s tackle this question first. Buying in cash is obviously the cheapest option but if this really isn’t possible and you want to own the car outright at the end then you’ve got two options (Be warned: this is about as dry as personal finance gets) A) Buying on a 0% credit card. Some dealers will accept credit cards but if you do go down this route, it’s vital that you can afford to pay off the entire amount within the 0% period (at the moment, this is 20 months max) B) A personal loan. You’ll have more time to pay it off (up to 7 years) and may be able to borrow more than with a credit card. Given you’ve got some decent savings, you could reduce what you pay by putting down a larger deposit but just make sure you’ve still got a decent emergency fund in place. Finally, you’ve got hire purchase where the loan is secured against the car and arranged by the dealer. You agree to a repayment plan, put down a deposit (usually 10%+) and you only own the car when the last payment is made. Something to consider is whether you want to buy new or not. You’ll always pay a premium for new cars and with hire purchase, you’re less likely to get a competitive deal on one.
To not own your new car: If owning outright isn’t important to you, you’ve got options like personal contract purchase (PCP). PCP is similar to hire purchase but instead of borrowing money on the full cost of the car, it’s a loan for the difference between its new price and the estimated value at the end of the agreement. These are tempting as they allow you to get a shiny new car every few years and the monthly repayments are lower but overall you can end up paying more than with hire purchase. You still need a deposit and some people get caught out by the balloon payment which you will need to pay at the end of the term if you want to keep the car. There are usually mileage limits to consider too which is an important factor for you. Whatever you choose, make sure you can afford your payments, possible charges and any future balloon payments you might choose to make.
Spending audit: Once you’ve made the call on what to do about the car, it’s time to evaluate your outgoings. You’ll need to break down your spending into two figures: the amount you spend on the essentials (mortgage, utilities) and then there’s what’s left. The first question is, could you be doing better on that first figure? For example, check you’re getting the best deal on your utilities with comparison sites such as U-Switch or use an auto-switching service like Look After My Bills which will do all the hard work for you. Cancel any unused subscriptions whilst you’re at it.
Opportunity cost: With the essentials budgeted for and minimised, you can turn to what’s left. By my calculations, this should be around £1000 to spend on everything from groceries, to holidays to face masks. (Bear in mind, any future car payment will be coming out of this amount also, so use this exercise to think about what you can actually afford to pay each month.) This is where you need to ask yourself: What do you care about and therefore what are your priorities? It sucks, but the harsh reality that most of us (unless we’re very fortunate) have to accept is that we can’t have it all. There’s a tradeoff in literally every financial choice we make. Is spending £60 a month on make-up and bath bombs a lifeline for you or would you rather have £720 a year for a holiday? Does the convenience of HelloFresh make your Monday evenings just a bit more bearable or would you rather invest that £25 a month? There’s no right or wrong here but you need to find the answers for yourself.
Comparison cure: What makes this whole thing even harder is that everyone else appears to have it all. Yes, they might have the holiday, boyfriend AND new car but I guarantee that many of your friends will be desperately envious of you as a 25-year-old homeowner. It’s also unlikely that buying a house is something you’ll regret down the line. It sounds like the biggest barrier between you and enjoying your twenties is less a financial issue and more a question of working out your priorities. If you want to save for a holiday are there things you’re currently spending money on that you could sacrifice? A final word: feel proud of and enjoy what you have; a home, decent emergency fund and good saving habits. I think you’re in a better place than you know.
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.