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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Olivia* is 26, works in banking investment and lives at home with family in Dublin. She’s saving up to buy a property and to pay for her tuition fees for a masters degree. Here is her money month…
I work as a custodian in banking investment for the past four years now. I’m lucky to have been employed throughout the pandemic and I still live at home with family. I like my job and it’s secured, I’ve been working from home throughout the pandemic so I’m not impacted by the lockdown.
I’m saving up to hopefully buy my first home this year. At the same time I’m also saving for my masters degree tuition fees, which are €9,000. I don’t want to apply for a loan to pay for this, I want to pay it in cash.
I’m a good saver. I started to save for my house deposit when I was 20 years old. But I feel like I save so much money and I’m not enjoying my life as much as other people my age. I feel like I have left out and that I don’t have a social life. Should I still be saving more for the house deposit or build up my emergency fund first?
Also, I would like to invest more, but I don’t know how. I feel like I have more cash sitting in my savings account, which has a low interest rate. And I contribute 3% towards my pension, but wonder do I need to add more?
Current account: €440
Savings account: €49,000 house deposit
Emergency fund: €2,000
Annual salary: €50,000 (approx £43,400); €36,600 post-tax & deductions (approx £31,800)
Monthly wage: €4,167 pre-tax (approx £3,620); €3,050 post-tax & deductions (approx £2,650)
Any other incoming payments: none
Rent: €250 contribution to my parents every month
Bills: Electricity, €100; I also pay €100 every two months for house bills; broadband/phone, €100; groceries, approx €100
Other: I save about €2,500 a month (€2,000 into my house deposit pot, €400 for emergency fund and €100 invested in stocks)
Weekly budget: I always do my budget every month when I get paid
What I spent this month: About €150 (excluding bills and house contribution)
I don’t have any debts. No student loan and no credit card
MY MONEY THOUGHTS
What I want to save for: I want to save more for my house deposit since I need to have about €60k. I want also to save for my masters degree tuition fees. And I want to be able to live my life like other people my age. Every time I get paid I save about 80% of my income, so I feel like I don’t have enough money left to treat myself.
How I want to plan my money for the future: I want to have enough money for the house deposit and also for my tuition fees. I contribute about 3% into my pension, but I want to bring this up and invest more into shares.
My worst money habit: I’m obsessed with buying luxury bags, but since first lockdown I haven’t purchased anything and I’m sticking with my budget
My biggest money worry: I feel like I will never be able to reach my financial goals. It’s so hard to buy a home solo.
Current money mood: 🏠 🎓 🤞
1. Save less
You’re winning at the savings game, you’ve got a house deposit in the making, but it sounds like what you’re really needing is permission to save less and enjoy life more. So here you go: money isn’t everything. Think of it instead as the oil that makes the wheels of life go around a bit easier; oftentimes that means keeping your hands off it, delaying gratification so you can have better things later on (a house, university etc.).
You’ve got that bit down, but what good savers often forget is that life isn’t just to be enjoyed in the future. Spending and looking after yourself today should be your priority. At a fundamental level, this means making sure we have a roof over a head, food in the fridge, but there are other ways we need money to look after ourselves too; spending on your friendships and just having fun aren’t frivolous extras. If we’ve learned anything this year, it’s that they’re vital to our happiness.
The question then comes, so what should I save and what should I spend? There’s no correct answer here, but I’d suggest revisiting what you currently save and rebalancing what goes where. You should have five categories: house deposit pot, emergency fund, investments, tuition fund and enjoyment fund. Take the €2,500 you’re currently saving and distribute it among those four categories each month. With your monthly budget routine already in place, use that time to plan fun activities, get in touch with mates etc.
3. Saving monster
You’re right that sitting on a bunch of cash isn’t a great financial move. While it feels good, with interest rates so low, you could be losing money. Inflation is a % rise in prices and it chomps through your savings like there’s no tomorrow. If the rate of inflation is higher than your savings rate, your money will be able to buy you less stuff in one year, two years and so on…
4. Save or invest?
Which brings me onto investing. While this can be a way to beat inflation (if things move in the right direction, remember you can lose money too…), it’s advisable to invest for the long term, usually five years. This means that if buying a house is on the cards quite soon, investing might be too risky as you won’t have time to ride out bumps in the market. That being said, if you’re happy to put aside money that isn’t necessarily for your house deposit, this might still be an option. If not, try to look at saving products that beat or match the rate of inflation.
5. Pension power-up
Pensions are basically super-charged investing pots, marketed poorly. As unsexy as paying into your pension feels, it’s actually a fantastic way to get invested and prepare for your future. You’re only 26, but if your employer offers generous perks like matching whatever you pay into your pension, up to a certain %, make the very most of it. This pension masterclass is a good place to start.
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.