This week during my studies we looked at finances. It got me thinking a lot about this and how I’ve noticed how differently money is valued by people today compared to how it was valued back in the 80’s and 90’s.
In just 40 years the shift has gone from saving up for the things you wanted to borrowing for the things you wanted or, being handed it on a plate! Privilege is becoming more common amongst youngsters today as they are not being sufficiently educated on finances.
I’m quite lucky when it comes to my finances as I’ve always been pretty good with money. When I was a child, I got £1 a week spending money (I was an 80’s child so this obviously got me more than it would these days, granted). With this I might go to the shop for sweets or a magazine and once it was all spent that was it until pocket money day came around. If I wanted something more expensive I’d save up or, use my birthday/Christmas money for it.
I also had a school bank account that had £1 a week paid into it. I loved seeing the figures rise, especially when the annual interest was added. It was like getting a financial gift for nothing and I’ve always liked to have a savings account behind me for emergencies.
As a single parent, I had to learn to budget. At the time, in 1996, I got £60 a week to live on so I had a routine, I would go to the post office every Thursday to cash my benefits (yes, I was a single teenage mother on benefits … a statistic). With my weekly money in front of me I would make weekly payments to all my bills whilst still in the post office before heading to the supermarket to get the weekly shop. If we had any money left then great but if we didn’t we had a roof over our head, our bills were paid and we had food in our cupboards.
Yet my friend, who was also a single mother, was the complete opposite. She’d cash her benefits and use them to go out at the weekend as her children were with their father. When Monday came she’d be running out of electric on her pay as you go meter and be worrying how she would feed her children.
Fast forward to 2020, and what I’ve noticed more and more is the amount of debt people are in. The Money Charity recently identified that the typical UK household (in September 2020) has an average total debt of £60,449 (inc. mortgage payments) and the average credit card debt per household during this same period was £2,204.
I see parents who will buy their children anything they want, who will get themselves in debt to have a towering pile of presents under the Christmas tree, without teaching their children the value of money. It’s something I address all the time with my partner, and other parents I know who are from split families. What is often seen is ‘guilt’ spending, buying the children everything they want out of guilt for not being around full time. Instead it would be more beneficial to educate the children that they can’t have everything as ‘things’ cost money.
I also see people who are wanting to live the ‘influencer lifestyle’ that they see plastered all over social media; the fancy handbags, the lip and cheek fillers, the hair extensions, the glamorous holidays. People are trying to replicate the extra-ordinary because they feel their life isn’t good enough as it is but they don’t see the non-glamourous side because no-one posts that!
But all this debt that gets accumulated trying to do this comes at a cost to your health; the stress and worry about making repayments on mortgages and bills (especially with the impact of Covid that has virtually crippled our economy this year). What is more worrying is the fact that every day in the UK, 280 people are being declared insolvent or bankrupt in England and Wales (figures from August to October 2020, The Money Charity).
Getting your finances in order is one of the best things you can do both for financial security and your personal wellbeing. So here are my tips on how to start taking responsibility for your finances:
Sometimes it’s scary to admit how bad things have got so instead you bury your head in the sand and hope it goes away. Take a deep breath, maybe another one, and then start to total up the money you owe. Once you have a total, tell someone you feel saf talking to because getting the words said out loud can make you feel like a huge weight has been lifted off your shoulders.
Ask for Support
Asking for support doesn’t mean asking someone to bail you out, it just means asking someone to help you go through it all and help you establish a route forward. The National Debtline is a great starting point if your debt has become unmanageable.
Calculate Your Income vs Expenditure
Budgeting sounds so boring but you need to take charge of your finances and understand the position you are in right now. You can do this on a piece of paper or, if you’re a bit of a techie, on a spreadsheet that you can update and review each month.
You need two columns; one for your income and one for your expenses.
Your income will include all the money you have coming in on a regular basis; your salary/benefits, child maintenance, any other money you have coming in.
Your expenses will include all of your bills, childcare costs, rent/mortgage, those daily lattes, travel costs … everything you pay out!
You then deduct your expenses from your income to determine if you are overspending or if you are spending within your limits.
Review Your Spending
With the exception of our rent/mortgage and bills, the things we spend our money on should bring us some level of happiness. In this exercise you can determine things you spend your money on that make you feel ‘meh’ or that you may regret having purchased so you can evaluate whether this is something you really want to spend your money on it again.
Grab a print-out of your bank statement and a highlighter. Going through your statement highlight anything on there that didn’t bring happiness into your life. £60 on dinner out with ‘friends’ who don’t make you feel at your best could be £60 better spent elsewhere!
Start a Savings Account
Even if you can only commit to £5 a month, start up a savings account and put money into it regularly. This could be a savings pot for Christmas gifts, a holiday, or a pamper session. Getting into the habit of saving is a great practice for having that ‘rainy day’ fund.
Think Before You Buy
A great way to really think about a purchase, especially for an expensive luxury item (think of the handbags, shoes, etc) is to decide how many hours work you have to do to get it and if it’s really worth it.
For example, you’ve seen those Jimmy Choo shoes on sale at £300 and you really want them, but you only earn £9 per hour at work. £300 divided by £9 = 33.33 which means you’d need to work 33 1/3 hours to pay for the shoes … are they still worth the time and financial investment? Will buying them knowing how hard you’ve had to work for them still make you happy or is it a whole weeks wages that could be spent on other things?