What women need to know about money transcript
Kia: Hey, it's Kia. When it comes to finances, it can sometimes feel like a really negative space for women. Legal & General research last year found that the average pension pot of a woman at retirement was found to be less than half of that of a man at the same retirement stage. So there's a gender pension gap and a gender pay gap. There's the expense of childcare and a conversation to be had about flexible working.
There's a ton to talk about, but there is hope. I'm joined today by Emilie Bellet. Emilie is passionate about helping women improve their financial lives. She's the host of her podcast, The Wallet, and the founder of Vestpod, a community with a mission to help people, especially women, achieve financial independence. She's also wrote the book, You're Not Broke, You're Pre- Rich, which feels very on- brand for a little bit richer. So let's dive in. Emilie, what are some of the challenges that women face in the financial space?
Emilie: So if you think about our lives, women tend to live longer, so we should be the one taking extra care of retirement and planning ahead. But I feel there's a lot of hurdles and challenges along the way. So let's think about first the gender pay gap. Women are going to be paid less than men, then we tend to have a working life that's not as linear. So we may take breaks because we take care of our children, but it's also taking care of elderly parents, taking care of families, of communities.
Women are still the primary carers, so taking time off means less money being saved, less money being saved for the short term, but also for the long term. And also women tend to invest less than men. So because they're not taking this extra risk with their money, they're not necessarily getting this extra reward and building pension pots over the long term.
So there's this motherhood penalty, good daughter penalty. I hate having all these penalties on women's life, but it's really important to think about the long term. Another statistic is that 34% of women say that their financial situation keep them up at night. So I think because we didn't necessarily have these conversations about money, don't have the education, and this is men and women, we never received any financial education.
There's also a lack of confidence when it comes to finances. So even if women are really good savers, they're not actually always investing for the long- term and putting money into their retirement. When you look at pension pots, women will have pension pots that are half the size of men at retirement, and this comes from habits that will come from much earlier in their working lives.
Kia: I mean, as a woman myself, I can definitely attest to the things that you said, right? When it comes to being a woman, as you so lovingly put it, I mean there are penalties for ... You go through life, you want to have children, now you've got that penalty there. And I think it is so important as women, I think, I can't remember the exact number, but there is a stat out there that shows that women are better savers, they save more than men, but maybe they didn't take as much risk on their money. So they didn't put it in investments to help it grow. So I think there is that. But speaking about investment then, what is this investment gap? So can you describe what it is and what can be done about it?
Emilie: Yeah. So the investment gap is the difference between the number of women investing and the number of men actually investing money. And in the UK there's a £ 15 billion investing gap between men and women. So of course, that's going to make a huge difference in terms of wealth building because women, as you said, are great savers, but not all women are actually investing money.
So they're losing out because by making your money work for you and putting your money at work. In the stock market, you may expect higher return over the longer time. But of course, this comes with a notion of risk and risk is very difficult to comprehend. So when we look at the younger generation, you think about maybe the financial crisis in 2008, people may be worried about the stock market. There's a lot of misconception when we think about in culture and movies, we think about the Wolf of Wall Street.
So investing seems really scary and seems something that's not for everyone. So we sort of miss this education from a very young age about delayed ratification and budgeting and how to put your money at work to generate more return with your money and building wealth. And these are very important concepts. But if you don't start, then you may not have the confidence. You may feel a bit worried about asking for help, knowing where to go when you need financial advice.
There's also a financial advice gap in the UK to add to our gaps where most people are not going to have access to a financial advisor maybe because they don't have enough money. So there's a lot of responsibility and personal responsibility to get started managing your money and investing your money because this is going to be really important to build financial security and financial independence.
It's not about having more money, it's about having more money to be able to achieve your goals, to live the life you want. So I feel this investing piece is really where I want to help women to just get started on a very small scale. Now, there's a lot of platforms on the market where you can invest your spare change, you can start investing with £ 50 amounts. So it's getting started into this habit and trying to understand risk and see risk not necessarily as something that is bad but risk more as an opportunity. And when you invest in the stock market and if you have a pension, your money is invested.
So most people don't actually know that through your workplace pension, you're contributing towards your future, but your money is going to be invested in a collection of different companies. It's trying to understand a little bit more about how the stock market work, build up this confidence, understand risk, and feel a little bit more comfortable with this term of investing.
And it's the same as investing in your personal career, in your personal development where you do a lot of things for yourself to feel better, but you can do also some of these things with your finances. And it's starting from maybe learning a little bit more about money, investing a little bit. So starting on a very small scale actually works and it compounds over time, and that's one of the greatest lessons in investing.
Kia: Absolutely. I think like you mentioned, when it comes to investing, you mentioned the Wolf of Wall Street, when you think about investing, you think about men on the trading floor doing all this. It feels so far away from what you could do, especially as a woman. But I think alongside all the things that you mentioned there, it's about representation as well. So we've mentioned there are a lot of gaps, there are a lot of gaps for women out there, but as a woman, what can you do to be better prepared when it comes to your finances?
Emilie: Yeah. So I think it takes a little bit more planning and also thinking about what does money mean to you. When we think about money, finances, investing, that can be quite scary and overwhelming and you don't know where to start. So it is just trying to start with the basics. And often when we run our courses and boot camps, we try to have these conversations about money.
There's still such a big taboo around money because they have this lack of education and money being the thing where it's quite, I mean, I've always been taught that it's quite impolite to talk about money, that girls shouldn't talk about money. When you look at the statistics, girls actually receive 20% less pocket money than boys. And our money habits come from a very young age, from age three to 7 years old. So we sort of grow up with these beliefs around money.
So I think doing a little bit of work on your money mindset by having a conversation, trying to write your money story, maybe seeing a money coach also financial advisors can also help you. But really doing the work for yourself. And then it's organizing your finances, not being worried about checking your bank accounts. And I know that's quite scary for people who never look at their finances. But on the morning, try to check your bank account once a day, you'll feel empowered, you know exactly how much you have. And the same is going to go for debts, trying to understand how much debt do you have, how much savings do you have, and try to understand your basic numbers. So having a little spending plan, trying to check for the past months, or for the past three months, how have you been spending your money? So this is the first part.
And then thinking more broadly about wealth, we all should think about wealth. And of course, here we're talking financial wealth, but knowing a few numbers. So maybe trying to calculate your net worth, which is the sum of all your assets, minus the sum of your liabilities. If you're quite early in your working life, and if you have a lot of student debt, you will have a negative net worth.
But that's okay. It's just a matter of improving this number over time, knowing how much savings you have. So really knowing these numbers, also your credit score and writing them down and having maybe a little date with yourself on your money once a month.
And I'm sure you talk about that also with your friends and communities, but it's having this regular catch- up with money, I think is really helpful. And not judging yourself really, sort of detaching your self- worth from these numbers. They don't define you, the amount of money you earn, the amount of debt you have, they're not your personality. So trying to separate the two, I think is quite important.
But be very realistic about how much money you have, how much money you don't have, and what are your goals going forward.
Kia: I love that, especially when you mentioned about net worth. I remember I checked my net worth when I was in my first year of uni at 18, and I don't think I've seen a minor sign as big as that when I looked at my net worth. Thankfully it's gone up since then, but I find that quite funny. But I love the point where you mentioned actually talking to people. I think we have this culture in society where we don't talk, so things become taboo. And you never know if you see your colleagues are any more than you because we don't talk about it.
And I've made it a thing of my own friendship group that us as girls will come together and we'll just talk about money. Sometimes it's like, " We want to go out here, but girls, I haven't got the money this month. So let's be mindful of the budget." And having those open conversations make things easier. You can bring up, you know what, I'm going to go through this pay rise. It just makes that conversation a lot easier to have with people.
So I think it's definitely a good thing to try and incorporate for people. So Emilie, when it comes to the cost of kids specifically, because that can be a very big cost for a lot of parents. How can women and partners financially prepare for this?
Emilie: Yeah. So I think what I see very often, and I have three young kids. So for me, building a business, having kids, living the corporate world, that was a lot. And it takes a little bit of planning instead of reacting. So when women are pregnant, they usually think about, " Okay, what's going to happen to my salary? I will have to pay for childcare." Childcare in the UK is one of the most expensive in the world. And when we have conversation about childcare, women tend to compare their salary with the cost of childcare.
But actually, maybe they have a partner and they can share this cost with their partner. So I think it's trying to plan with your partner, cost of childcare, what do you want to do? Do you want to go back to work? How much is it going to cost us? And try to see this cost of childcare as an investment that will allow you if you want to to stay in the workforce, if you want to take some time off, can you also plan for this time off understanding that you will not earn any money?
So there's also no money that's going to be put into your savings and into your investment plan. And a conversation you can have with your partner is around pensions. So if you're taking time out of work and that you can have a few kids and then very easily you're five years out of the workforce or 10 years and you haven't saved any money. So making sure maybe your partner knows about that and is helping you and paying into your pension, or you can help your partner.
So having this thing where you work as a team and collectively to make sure you build up financial independence together for your household, but also independently, making sure you have your own money, you have your own pension pots because you never know what can happen. And also when you start having children is how do you talk about money in the family and how you start educating your children because as we know early education will have such a big impact later on in life.
So involving them in basic money decisions, and that can be budgeting, delayed gratification, saving for something you really like. Also, when it comes to raising kids, there's important conversations to have around flexible work and shared parental leave. So it's important for both partners to maybe be able to take some time off to spend time with the kids to make sure the other partner can also stay the workforce. And the last thing is for parents, for young parents, when you have children, you should apply and potentially claim for child benefits. So if you are out the workforce, you may not be entitled to actually receive a payment, but you can check that on HMRC, on the governance website. But actually, can you get your national insurance contribution to make sure you're not losing out in terms of your state pension?
Kia: I think that's really good. A lot of good valuable information there for people who are parents or becoming parents very soon. Emilie, I want to end with the same question that I ask every single week. What three tips can you give to help people get a little bit richer?
Emilie: So my first tip is about money mindset. Really try to understand what does money mean to you, what you can do for your finances, because we may have so many limiting beliefs around money. The second one is around investing. Start investing even on a small scale. And if you have a pension, check your pension, make sure you're contributing. If you don't have a pension yet, it's maybe the time to start figuring out how you can save for your older self and try to connect with your future self.
And my third tip is learn more about money, become more financially confident. You can start again on a very small scale with maybe books, video, courses, podcasts like this one, and slowly learn the tips, find some guidance, and become more financially confident.
Kia: Emilie, thank you so much. You have shared so much useful information for all of our listeners. And hopefully, this can be the starting point, close that gap that we see with women to become more empowered with their finances. So thank you so much for coming on. Next week I'll be chatting with digital nomad Claire Rhodes. Make sure to catch the episode to hear all about the exciting prospect of traveling while managing work in the UK. In the meantime, follow the podcast, leave us a review, and tell a mate. See you next week.
Get the right money mindset transcript
Kia: Hey, it's Kia, and welcome to the first episode of A Little Bit Richer. If you're here, you probably know the score. For the next few months, I'm going to be bringing you bite- sized financial tips. You know, the stuff that we never got taught at school. What comes out of my salary? How can I get my own place, or a bigger one? What do I need a bank account for? Okay, the last one is a bad joke, but you get the picture. We're all in this together. It's you, me, and a different guest each and every episode. Up first, I want to kick things off with Laura Ann Moore. Laura's a money and mindset coach. She's all about demystifying personal finance in a simple and judgment- free way. She also has our own podcast. My kind of woman. We're going to be chatting about why all this stuff is so important. Okay, let's get into it.
So, Laura, it's really tough out there at the moment. Everything's going up in price and salaries just aren't keeping up. Everyone's stretched and it is stressful. Do you have any suggestions on how people can cope with this pressure?
Laura: Yeah, I think first of all, I would say it's really important to identify where the stress is coming from. I think it's so easy to go into this panic of, " I feel overwhelmed, I feel anxious, I feel stressed," but sometimes we don't know where that feeling is coming from. So, the first thing I would say is really try to understand and identify it first, because it might be a practical thing, but it might also be an emotional thing. So, on a practical basis, I would say make a plan, make a tangible plan where you can say, " What is my next step?" Because it's that classic thing, isn't it? Where you go, " Oh my God, I need to kind of do everything in one go." And that's the overwhelming part.
Kia: Yes, it's true. I do that all the time. All the time.
Laura: Yeah, and it's so easy to do. So, actually going, " Where is my money at right now? What is one small step that I can take today with this week that I know that's going to alleviate a little bit of pressure?" It could literally be as simple as checking my bank account, making a better budget, paying someone that I owe, something little like that. And then on an emotional level, I would say really to ask yourself what stories you're telling yourself.
Kia: It's a big one.
Laura: It's a big one, because that's what we do. Our brains will tell ourselves stories about a situation. So, we might read something in the news that makes us scared, makes us feel overwhelmed, and then we tell ourselves we need to be worried, we're in a bad place, but actually, it's more your relationship with money or your money mindset that's causing you to feel that anxiety. So yeah, on an emotional level, really starting to just see how you're talking to yourself, see things that keep coming up, and identifying whether they're actually true or whether your brain is telling you a lie.
Kia: I think that's a good one, Laura. I think sometimes we spin these narratives, like you said, that just aren't true. You can sit there and say, " I'm bad with money," and you're going to start believing that because you've said it. And I think it is just being aware and conscious of what we're telling ourselves and maybe what impact that has on how we view things, like you said.
So, there's been some Legal & General research done recently that calls your 20s the lost decade, and that's because it's a key time to build money for the longer term, yet it's often not made use of. So, what are your top recommendations, Laura, for someone trying to make the most out of their money?
Laura: I think when it comes to money, you want to think about the step before and really asking yourself, " Why do I want money? What role do I want money to play in my life?" So, first off, creating some goals. Financial goals, like, " I want to save X amount, I want to invest X amount," but also some life goals. What is the reason of you working and making money? So that you're not just chasing the money for money's sake, you're going, " I'm going to get the money so that I can travel, so that I can build a business, so that I can buy a farm and raise some ducks." I don't know.
Kia: Whatever floats your boat.
Laura: Yeah, whatever floats your boat, and really starting to connect with what your why is. So, creating these goals. Also, understanding what your values are. For me, three of my values are travel, education, and health. So, that really helps me when it comes to spending, saving and investing, because I can ask myself is the way that I'm managing and growing my money right now in alignment with my goals and with my values? And I think they're, on an emotional level, a really great way to start to make the most out of your money like the step before. Because I think people jump into trying to make the most of their money on a practical basis, and then you're like, " Why am I actually doing this?" and you don't have the motivation. So, I think understanding the motivation is key first.
Kia: That is, like you said, you hit the nail on the head, that is a key one to keep you going. I think quite often you'll hear people say that they want to save, and there's no real target or reason. But when you have that reason, like you said, it could be to have your duck farm, it could be to travel and see the world, whatever that reason is, it helps you. So when things maybe aren't as fun or things just feel a little bit hard, you can always circle back to that and say, " Right, I know why I'm here. I know why I'm doing this for my finances, or I know why I'm working." Like you said, to keep you on track, because that was often the hard bit.
Laura: Yeah. Like I recently released an episode on my podcast about achieving my big happy goal, because I've been running my business and I've been keeping the business afloat, but I'm like, " What do I actually want this money for?" And then when I tapped in, connected with myself, I was like, " I do really want to travel more." So, now that's kind of like my north star, and it might be for the next five years maybe, and it's given me the motivation to rejig the way that I'm spending and saving. And like you say, when times get hard and maybe you do have to cut back for a short period of time or whatever that looks like, you actually know why you're doing it. So, it feels like it's coming from a place of your motivation is towards pleasure as opposed to away from pain.
Kia: Yes. I love that, I love that. Laura, we're coming onto a big topic now always on people's minds, property. So, it feels like that everyone is currently in a race to buy their first home, especially when you're on social media. That's all we're kind of seeing right now, and it is so easy to compare yourself to everyone else's journey. So, do you have any advice for our listeners who are wondering whether or not they should be saving for a deposit right now?
Laura: I think the house deposit one is a really interesting topic, because there's so many stats out there that shows people or house prices versus wages now, there's such a bigger gap between it or a disparity between it versus 20, 30, 40 years ago. Our parents and our grandparents, it was so easy for them to say, " I need financial security for the future. I'll buy a house." And it was so much more accessible. Whereas now, for young people, I think in general it's like the go- to, especially in the UK, is, " I should buy a house." So, what's happening is we have this generation of young people wanting to buy a house but not really knowing why or if that's something that they want.
So, my first thing is always really understand what your why is. Do you really want to buy a house? What is your motivation there? Is it because all you've ever dreamed of is having a beautiful home that you can make your own, you can raise a family in, or are you just doing it because society tells you to do it, your parents are telling you to do, it's what your friends are doing? So, asking yourself if it's actually what you want first.
Laura: Do you know what I mean?
Kia: That's a big one, that's a big one.
Kia: I think it's a massive financial undertaking, and I don't think that should be minimized. I'm going to touch on property more in this podcast, but it's such a big thing to purchase. It's probably likely to be the biggest thing you'll purchase in your life, that you need to understand, like you said, why are you doing it? Are you doing it because you want a property or because everyone else is doing it? And I think once you understand that, then you can decide, is it for me, should I do it? Like you said.
Laura: Yeah, exactly. And I think, so when you ask yourself, " Why is it I'm asking myself should I be saving for a house deposit?" I always think when the word should is in there, you've got to question what's going on. So, if that is how you feel, if you say, " The reason why I want to buy a house is financial security," maybe just ask yourself are there other more accessible ways that I can look to build wealth for the future that allow me to create that financial security and that wealth for the future that don't require me to save 30, 40, 50 grand for a house that maybe is going to take me however long to save, giving this anxiety around doing that? So, when you understand your why, that's definitely kind of key. Then I would also say it's okay to save for a house deposit and then you change your mind. Right?
Kia: Yes, that's a big one as well. Yes.
Laura: Because goals can change. When I was 19, I saved 15 grand to go to drama school, and then at the very last minute, two weeks before I was due to start, I ended up going traveling, so that I had that money there saved, but the purpose of it completely changed. So, if you right now can't decide, you could go, " Okay, well, maybe I'll put a bit away. I'll start building that pot up." We're always going to need money for something, whatever that thing is, and if your life changes, your goals change, at least you have a nest egg that could be then maybe put into a lump sum for investing, or maybe you do something that's investing in yourself like travel, or whatever that looks like. So, it's like don't be afraid of putting money away for a goal that might change.
Laura: And then the final one I think is speak to your friends or family that are homeowners, or people that have gone through the house buying process within the last few years.
Kia: Yes. They will definitely give you the truths and the realities of that journey, and I think sometimes you need to hear that and say, "Is this something I want to undertake myself, or can I give it a pass for the minute?"
Laura: Yeah. A lot of people that I've spoken to always say there are a lot of hidden costs. I haven't gone through the process myself. It's just from people that I've chatted with. And that's not to say, not everybody regrets it. Some people will say, " There's loads of hidden costs, but I wouldn't change it for the world," or, " There's loads of hidden costs, I wish I didn't do it." So, I think just chatting with people in your community, and if you don't have any friends or if you're the first one in your group that are maybe planning to buy a house, get online and have a look, socials, different pages, different forums, and try and find people in that community that can share that knowledge.
Kia: I love that. Get informed, get informed. That can definitely help you. Right. So, I've got another Legal & General factoid for you. They're doing a lot of research into this thing called the Bank of Family, and it's the idea that if you don't have relatives helping you to get on a property ladder, it's very hard to achieve. Laura, does that reflect what you're currently seeing at the moment?
Laura: A hundred percent. I think in my community of people who I chat with in the DMs, different clients and stuff like that, or people that I meet at events, there is definitely a large portion of people that I know have got on the property ladder because their parents have been able to pass down money in whatever form. But there's also a lot of people really aware that that is a privilege. Like people being like, " Oh, my mom and dad have helped me out here, but I'm really grateful for it." And I always say to them, don't feel guilty for it. If you are in that lucky position, absolutely grab it with both hands and go for it. But if you are someone who isn't in that position, that's like me, my parents couldn't pass down any money for a house, that's also okay, and that's where it's worth looking at other ways that you can start to build wealth. But yeah, I've definitely had a lot of conversations with people who say, " Yeah, probably a large portion of this money has come from not me."
Kia: Yes, yes, it's true. And I think it is, like you said, it's acknowledging that, that if you have that help, it does make the journey a lot easier, and if you don't, it is going to be a lot harder. But I think once you understand that and you decide on that, that's a good process for you. Laura, we're getting into an exciting bit because I'm going to ask this question every single time, and you have the honour of being the first person to give your answer.
Kia: So, Laura, what are your top three tips to help our listeners get a little bit richer?
Laura: So, to get a little bit richer, tip number one is to improve your money mindset, your relationship with money. And the great thing about that is it's free, because you can just start by acknowledging, " How do I feel about money? How would I like to feel about money?" and start to change your language around it. So, that's tip number one. Tip number two is around money management and really getting to know your numbers. Really having a non- judgmental, unbiased approach towards your money and saying, " What's coming in, what's going out?" Because that's just data that can help you then make decisions. And then the third one is about, whilst it's important to enjoy your money in the now, starting now to invest and prepare for the future is going to make you a little bit richer. So, they're my top three tips.
Kia: Laura, thank you so much for being the first guest on A Little Bit Richer. You've shared so many gems that are going to be so impactful to our audience. So, thank you so much.
Laura: Thank you for having me.
Kia: Laura was a great first guest, but there's lots more to come, so be sure to follow this podcast, tell all of your mates. I don't want to leave anyone behind here. Next episode, I'm going to be taking your payslip apart and making it all make sense. See you then.
Learn to Love your payslip transcript
Kia: Hey, it's Kia, and welcome back to A Little Bit Richer.
Okay, cast your mind back. We all remember starting that first full- time job, getting excited to get paid, and then come payday, wondering where the hell a third of our money had gone. The answers all lie in your payslip and I want to make that little bit of paper make sense. How hard can it be?
Asesh Sarkar is going to join me to help rip apart those payslips. Not literally. They're mostly digital now anyway. Anyway, Asesh is the global CEO and co- founder of Salary Finance, a leading employee financial wellness platform. He's also the chair of trustees of MyBnk, which runs financial education programs for five to 25 year olds. He knows his stuff.
Asesh, let's start with the basics. You get your payslip and there's a lot of deductions. What are the main ones and what are they for?
Asesh: So if we take it right from the beginning, so you get your payslip, a recent survey showed that one in four people don't actually look at their payslip, and another one in four people do look at it but don't really understand it. So one in two people aren't really getting much value from their payslip. So a payslip I think of a little bit as a book or a story. A story has a beginning, it has a middle, and it has an end. And so on every payslip you have a beginning, which is your gross pay. And what that means is that's the amount of money you earn, the top line.
So if you work, if you're hourly paid, and let's say you earn 10 pounds an hour, if in the month you've done 10 hours, then your gross pay is a £100 for that month. Or if you get a salary and let's say you earn £ 12,000, £1,000 a month, then your gross pay is £1,000 for that month. So that's the beginning of the story. Like you say, there's deductions and other things.
The middle of the story is then these deductions, so things which come out. And so there are universal deductions, things which everyone has to pay over a certain level of income, and other deductions which are specific to your employer and any benefits you may have taken up. And then once those deductions are taken, you get to the end of the story, which is your net pay, and that is how much you take into your bank account at the end.
Like with most stories, most happens in the middle, and so if I maybe pick on two of the common deductions and two of the big ones. So that's tax, one of those taxes is income tax and the other is national insurance. So income tax is typically a big chunk. Income tax is collected by the government, or by HMRC, and they use that money for public services. So whether it's funding schools, hospitals, roads, other emerging service, that's how the country is funded. And when calculating income tax, it depends what your tax code is and how much you earn.
So on your payslip you'll see a tax code, some digits, and some letters usually. And what that tells you is what's called your personal allowance, which means how much you can earn without having to pay any tax. For most people, if you earn less than a £100,000, that is about £12,700, and so that's your tax- free amount. So if you earn under that, you don't have to pay any tax. If you earn above that, then you are a taxpayer and then you pay one of three rates of tax, a basic amount, a higher amount, or an additional amount. That's the first chunk.
The second chunk is national insurance. And so again, this goes to the government, but this money the government uses to fund, if you're ever unemployed, if you're ill, retirement, and they use this money to fund those. As it happens, I'm going to visit my mom later, I need to take her to hospital, and so sometimes people can view deductions and taxes are negative, but equally we're fortunate to live in a country with great services, and so the money does go towards that. And national insurance is a little bit like income tax in a calculation.
You have an amount of income below which you don't have to pay anything. I think that's around again about 12, 500. If you earn below that, then you don't have to pay anything. £12,500 to around £50,000, you pay 12% of what you earn. And above £50, 000, it then drops down to 2% for that incremental income. And so they're the two big universal deductions.
Overall, that's the story of a payslip. You start with your gross pay, what comes in, you have your deductions that come out, then you have your net pay at the end.
Kia: I think that was a great breakdown. I've got a payslip here, so we have a good example to have a look at.
Kia: So you mentioned tax, so often that's referred as PAYE, in your payslip.
Asesh: That's right. Yeah, pay as you earn. That's right.
Kia: So that is the tax that you mentioned first, and then we've got national insurance, which is also on there. So I think it's really good, like you said, even the tax code. I think a lot of people don't realize that the tax code is important, like you said, it denotes your personal allowance amount, but it's also important to make sure you're on the right tax code. I think that often happens to a lot of people who move jobs. I know that happened to me when I went to one of my jobs, I was on the wrong tax code, got taxed a large amount.
But it's always good to keep on top of that. That's why, if you're part of the one in two, hopefully from listening to this episode, you will change that.
So you touched on the fact that there are other deductions, so let's go into that a little bit. What other deductions could you also see on your payslip?
Asesh: Yeah, so other deductions tend to be employer specific things which your employer offer, and then what you choose to take up from your employer. So one of those is pensions. Actually, all employers in the UK now offer a pension. And so if you choose to do that, then you'll see that on your payslip as well, and so that leaves your payslip and then you'll see that money going into a pension pot somewhere. Another example is employers quite often offer employee benefit. So something like cycle to work is quite common in the UK, and so that's where essentially your company gives you a loan to buy a bike. That amount you don't have any tax on, so you're essentially saving on that a tax amount, and then you repay that with a monthly fee until the bike is paid off.
Or about 5 million employees in the UK can access what my company offers, which is called salary financing. That is if you take a loan, we can collect the repayments on payroll to allow you to get a low interest rate. Equally, we allow you to save directly from your salary as well.
And there are a host of other things. If you have any student loans, that could come off it as well. But it is always really worth taking a look at that deductions line, whether it's tax, whether it's something else, just to make sure you are not overpaying, because these things happen every payslip and if you are overpaying even a little bit every payslip, then it can start to add up.
Kia: Exactly, exactly that. So I think when it comes to talking about our money and having a look and seeing how much money we've got, I find that payday is a really good day to budget. That's definitely what I do anyway with my money. So it's a good time to put away money into different pots, whether it's going out, saving money, all those kinds of things. And bills. Do you have any advice for our listeners when it comes to budgeting and almost the best practices for that?
Asesh: Yeah, sure. So I think it's important to remember the world we live in is a world in which billions of pounds is spent enticing us to spend our money. And unfortunately, to live in a great world where there's pretty cool things to buy, endless very cool things to buy, and so every day you're being enticed, whether it's you are watching a Reel, watching TV, you're on your computer looking at an ad, everything you look, whether it's people talking, there is just this constant opportunity to buy very cool things.
Like I say, unless you budget and unless you take the time to budget, you'll just continually spend, and then are out of control of your finances and it becomes quite challenging. I think the process of budgeting is really important, and like you say, the payday is a really good time to reflect on how the last month has gone, or whatever frequency you get paid on, and then what you want to do in the next month as well.
Personally, I was born in a city, not a huge amount of wealth. My parents are first generation migrants. I've done reasonably well, and so I have more money now. So I've seen people across the income spectrum and it's definitely not the case that money equals happiness. You could be happy with any level of money. But what tends to be the case is if you are in control of your finances, you do have a level of peace and a level of happiness. And if you're not in control, no matter how much money you have, you don't have that. So always recommend, regardless of your income and your position, being in control is independent of that.
And so in terms of (inaudible) , a lot of financial planners recommends, which makes a lot of sense, I follow as well, if you look at your expenses and your budget, you put it into three categories. Things you have to spend, you need to spend, and so you need a roof over your head, you need food, you need to pay your bills. There's then things you want. And so maybe you like some nice clothes, you've got a nice holiday, that's fine as well. And then there's also saving for your goals, because as you get older, you are going to want to progress in life. You are going to want to deposit on a house and other things.
And the general rule of thumb is that you have 50% of your income which goes on your needs. You have 30% of your income which goes on your wants, and that's quite a decent amount on things which you enjoy. And 20% on your future goals to allow you to be progressing in life as well. And then different people have different preferences and you can allocate, but just being thoughtful about that, I think, is quite helpful. It just allows you to have some balance.
Kia: No, I agree. I think it's good to have a baseline. I think sometimes if you are coming to it for the first time, you don't know where to start. I think it is good to, like you say, put it down 50, 30, 20. It's a good way to look at your money. But right now where we are, for many of us, especially at the moment, it's a struggle to make ends meet. And with the money that's left over in deductions, it can be a bit hard. So it's time for the question I'm asking everyone, you've got your pay, money's in your account, but what are the three things that you can do to try and get yourself a little bit richer?
Asesh: So number one is budgeting. Really important. Very few people do it. Life is definitely very tough at the moment. It gets even harder without a budget. So I think number one is you're looking at your expenses, categorize them, and just making sure you're more going to make sense. Number two is pay yourself first. And so rather than saving at the end of the month in case there's any money left over, save at the beginning and let the rest of your pay cover your expenses.
And number three, employers offer really great benefits, discounts sometimes, whether it's a loan or savings direct from your salary, it's really worth taking maximum advantage of that because whilst we're all one person, the benefit of an employer is they have lots of people working there so they can negotiate better rates and you may as well take advantage of it. So I think definitely have a budget say first to give yourself a buffer, and then to take advantage of all of the benefits your employer has.
Kia: That's some amazing tips and I completely agree, especially on the employer element, because I've definitely managed to get some good tickets to go to the theme parks, with a good discount.
Kia: But to Asesh, thank you so much. You have given so much insightful knowledge to our listeners, so thank you for coming on.
Asesh: Thank you for having me.
Kia: Now then, you heard Asesh and I chatting about pensions, student loans and all that stuff, but we're on a clock and I know you're busy. These episodes have to be short. So I'm going to dig deeper into all of this. Episode three is about pensions. It's easy to think that they're only for people in their late thirties, but that couldn't be further from the truth. You'll see. In the meantime, if you're enjoying the podcast, hit follow and tell your friends. It's two things that will really help.
Okay, next week, pensions. See you later.
Why Workplace Pensions Matter So Much transcript
Kia: Hey, hey, it's Kia and you're listening to A Little Bit Richer. Pensions - we all know it's good to save into one, but it's so tempting to put it off until retirement's closer. It's understandable, but if you're wanting to get A Little Bit Richer, you've got to think about your long-term financial journey too. Let's get into this more. Today, I'm talking to Kim Brown, Legal & General's Pension Scheme Director. She's going to explain more about workplace pensions. But just before we get into this, it's worth saying that you're likely to have a workplace pension if you're working for a company. If you're working for yourself, you can save into a personal pension and we'll cover this topic in a later episode. Okay, Kim, let's break it down. What's the difference between a state pension and your own pension savings, and why is it important to have both?
Kim Brown: So the state pension's paid for by the government when you reach, currently, age 66. Research we've done on 22 to 32 year old shows that 22% of that group are looking to rely solely on their state pension at retirement. Now, the state pension is 10, 000 pounds a year, provided you've had 35 years or more in national insurance contributions. So provided you're willing to wait until age 66 to start and provided 10, 000 sounds enough for you to live on, then the state pension should give you that basics. If you think that actually that isn't quite sufficient for your needs or what you picture your retirement to be, you might want to look at what you can save for additionally through things like workplace or personal pensions.
Kia: Okay, that's brilliant. So let's touch on workplace pensions then. So how exactly do those work?
Kim Brown: So if you are 22 years of age or older and earning 10,000 pounds a year, your employer will automatically put you into a workplace pension. So we call that automatic enrolment. You can choose to join even if you don't meet that criteria and ask to be automatically enrolled. So why, I guess, workplace pensions and I think there's two big selling points of workplace pensions. In addition to the already great thing you're doing, which is putting money away for retirement, you get the benefit of employer contributions into your pension scheme. So currently, your employer has to pay 3% of your salary into your pension for you each year on your behalf. You also get money from the government. So if you're a basic taxpayer and you want to put a hundred pound a month into your pension, only 80 quid will be taken from your salary. The other 20 pound is paid for by the government under what's called tax relief. So the difference I think with pensions above things like ISAs, which are other good saving vehicles, is that two key additional sort of free money for you as an individual.
Kia: I think when it comes to workplace pensions, let's just dive into employee contributions a little bit more I think. So when you contribute let's just say 5% to your pension, how does that work from your employer, their contribution into it?
Kim Brown: Yeah, so if you're paying 5%, which is the AE minimum, your employer pays 3% in your salary. A number of employers will pay additional amounts. So you can think about increasing your contribution and seeing if your employer will match that.
Kia: So that's just extra money from your employer, almost like, I think the way I like to see it is like a deferred pay rise or deferred money that you're getting from your employer that you're going to have, maybe not right now into your bank account, but you'll have it at later date, I think is a good way to look at it.
Kim Brown: Yeah, I love that. That's the key thing about workplace pensions. You've said it better than me. Free money from your employer and free money from the government a s tax relief.
Kia: I mean, what's better than free money? Right? What's better than that? Right, so as we've mentioned, pensions are important, however, most people don't start taking notice of their pension and their pension savings until they get older. So what's the best thing someone who's younger and listening can do to help keep track and remain on track when it comes to their pension savings?
Kim Brown: So I think it's about saving as early as you can, as much as you can. If you start saving in your early twenties and even in your early thirties, you are benefiting from the magic of compounding. So that can make a huge difference on the ultimate pension that you'll end up with. So if I give you an example of how that works, I'm going to use our names.
Kia: Go for it.
Kim Brown: So if we've got a Kia and a Kim.
Kim Brown: If Kia and her employer together are contributing to 2, 000 pounds a year to her pension and has done so from the age of 19 to 30, we project that that will give her an outcome on retirement of 243, 000.
Kia: That's a good amount.
Kim Brown: That's an all right amount.
Kim Brown: That's a good amount.
Kia: I think Kia's happy with that.
Kim Brown: If you take Kim, similar details, her and employer pay in 2, 000 pound a year, but she starts at 30, but she saves all the way up to 65. So Kim's been saving for 35 years as opposed to Kia's 11, but her outcomes is expected to be 10,000 pounds less so 236, 000 at retirement. So that just shows you that impact of starting early and what the compounding does to your eventual pension outcome.
Kia: I think that's a key thing. I think compounding is often this word that is mixed up with investing isn't really explained. I think the way you've put it is so useful to everyone that the earlier you start, the more of an impact it can have and it almost makes it a bit easier to keep going in your savings and stay on track with your savings, I think.
Kim Brown: Exactly that. And your example earlier of free money, if we come back to that, that 2, 000 pound a year, Kia and Kim, they've both only paid a thousand each. The additional 250 from the government top up the tax relief and the 750 from the employer. So you're doubling the money and by investing it earlier, it's also then working for you.
Kia: We love that, don't we? We love that, we do. So let's come to where we are right now. So right now, money is unfortunately really tight and it's easy to be tempted to reduce how much people save into their pensions. I know it's definitely a toss up. Do you take the money now or do you still keep saving the amount that you have been? So what would you say to someone who's considering reducing the amount that they contribute to their pension?
Kim Brown: I think everyone is going to have different circumstances and I think my key thing would be make sure it's a considered ask, so understand what you'd be getting in your pocket today and that point I just made on what that could look like over time. Now, if you need your money in your pocket today, you need your money in your pocket today, but it is a good deal and so you need to be considering what it could be impacting you in the future.
Kia: I think that's a really good point. I think it's important to always just sit down and review your finances. And like you said, see if you reduce it by a certain amount, how much does that leave you with, if it's something that can help you or should you keep your pension contributions the same amount. It is a very unique decision to make and it's one that should be well thought through as you said. So I completely agree with you. Now, let's look on the flip side. Is it worth, Kim, paying more into your pension if you have the option?
Kim Brown: Yeah, so I think many of us dream about what that retirement could look like. We talk about every day is a weekend when you retire, but I don't know about you, but weekends can be quite expensive.
Kia: Oh, they can. They can.
Kim Brown: For me.
Kia: Depending on what you do, they can.
Kim Brown: So the research I referred to at the start, the expectations of 22 to 32 year olds and many are looking to retire age 60, and the earlier you retire, the more your pension has to do for you, the longer you're going to be relying on it. So there's things you can do as you go. So if you're getting a pay increase, think about is this a part of that you can add to your pension contributions, that you won't perhaps miss in your pocket yet today, but can go and look for saving for your future. Same with bonuses, part or some or all of your bonus can go into your pension and that'll be tax- free. I'd also think about it in particular life events. So career breaks can have a huge impact on your pension outcomes. We experience what we call the gender pensions gap, which is that women are walking away at retirement with half the pension pot of men. Some of the factors of that include cost of childcare, breaks for maternity, the increased likelihood of being a carer and also potentially walking away from work earlier due to symptoms of menopause. So I think it's about understanding and planning for particular life events, whether that's maternity or paternity leave. I know as a mum of a two- year- old, it's not top of your list, pensions, when you're doing some of these big things, but it should be on your list.
Kia: Just touching on what you said there then, obviously there is that pensions gap. So if we're speaking directly to women then, what can women do to almost help their pension contributions and their savings?
Kim Brown: So I think there's a lot as individuals women can do. So they can plan, they can continue to pay maternity contribution, they can talk to their partner at a household level. The reason we have gender pension gaps or in fact pension gaps across a number of different minority criteria is multifaceted. So we need solutions across legislative change, we need employer policy review all in the support of producing more equality at pension outcomes.
Kia: I completely agree and I think it's important for people to know the different ways that they can contribute, especially women, and even the fact that your partner can contribute on your behalf. I think a lot of people don't realize that and there's different things that can help boost those savings even when you just take time off and you do have other responsibilities that require you and may not be your pension so much. So I want to ask you a question as well. When it comes to pensions, a lot of people don't know how much they should have in their savings. What does that look like? As you mentioned in the beginning, the state pension is around 10,000 pounds per year. How can someone, even if it's just like an estimate, how can someone get a good understanding of how much they should aim to have in their pension pot?
Kim Brown: There are different tools out there that can help you look at that. Most pension providers will have things like calculators online. You can look at what sort of age you're looking at, the type of experience you want to have at retirement. So whether that looks like one holiday a year, whether that looks like a holiday in the UK or abroad, the type of lifestyle you're looking at. And then it'll help you calculate what you need to be contributing today and you can consider if that's sufficient, based on who you are, what wider savings you have and what kind of retirement you're looking for.
Kia: That's really useful. Have a look at pension calculators, have a look at some of the stats to kind of give you a good baseline and guideline for how much you should have saved. Love that. So Kim, pensions are also a form of investment and I know when you think of it like that, sometimes it can be so overwhelming because the world of investing just seems so scary. So what is something that our listeners should consider on that side when it comes to pensions?
Kim Brown: So I think that's a really good point. So pensions, like any investment, can go up and down and there is the risk that you could end up getting less than you put in. So that's something to be mindful of, but I don't think because it's investing people should just focus on the more daunting aspects of investment. Investment, I think, is really exciting and really interesting and you as a person saving to a pension, your contributions are being invested and you can choose to make decisions about that if you want to. If you want to move away from the fund you're being put into, you can pick a fund that's higher risk, but potentially with higher reward if that's something you're interested. You can also pick funds suited to your particular beliefs, whether that's religious beliefs or looking at funds that are more focused on ethical, responsible, sustainable investing.
Kia: I think that's great. I think it's good to be able to know that you can adapt things like your pension to suit your morals and your views and ultimately the risks that you want to save your money with, whether you want to be really high risk, like you said, maybe you're someone who's younger, for example. I know I'm a high risk person, I don't mind, let's go for it. Or you want to be low risk. It's completely up to you and it's tailored to you. So I think that's a great point to make as well. Okay, Kim, we're going to wrap things up now. What are the three quick things that you can recommend someone does if they're wanting to use their pension to get a little bit richer?
Kim Brown: So I think it's about keeping track of your pension. We don't have jobs for lives anymore. When you are moving jobs, keep track, you can also pull those pots together, that's your preference, under what we call consolidation. It's about looking at all those things we've talked about, about ways to get additional money in. So talk to your employer, see if there is contribution matching, if you can put any additional aside, particularly in earlier years. And then I think it's about saving as much as you can for as early as you can so that your pension can start working for you.
Kia: Amazing. Kim, this has been such a great episode to learn more about pensions. And hopefully everyone listening knows that we can start early and get those pension savings rolling. We've been looking ahead to retirement, but let's bring things back into the present day a bit more. There's so many hacks to make sure you're getting the most out of working life, and that's what the next episode's all about, the world of workplace benefits. And it's not just work from home and free lunches, there's so much more. That's out next week. But while you wait, if this stuff is working for you, then hit follow, tell your friends and come back next time. Until then, have a good week and go stick some money in your pension.
Make the most of your work perks transcript
Kia: Kia here, and this episode we're chatting about all things work. It's so easy to think that workplace benefits start and end with your salary, but if you're lucky, sometimes there's much more to it than that. You might be sitting on a huge pile of benefits that you had no idea about.
This is getting a bit clickbaity, so I'm going to jump right into the episode. Joining me is Rebecca Moore from Liaise, a healthcare and specialist support service. So let's do it. I feel like I'm missing out here. What are some of the common benefits you might get if you're working for a company, Rebecca?
Rebecca: Workplace benefits go beyond salary, so you should really do your research into what's on offer. Things to look out for, things like health insurance, pension schemes, paid leave. Some companies go the extra mile to offer extra perks like flexible working programs, opportunities for professional development and wellbeing programs. So you've got your employee assistance programs and even flexible pay and things like that.
Kia: Should our listeners be looking at more than just a salary when they change jobs, because people are looking at different jobs - is it just the money? Or if not, what other things should people be looking at?
Rebecca: Yeah, absolutely, salary's just one piece of the puzzle. That's not the be all and end all, especially in this day and age where we can feel the pinch in lots of different areas. When evaluating job offers, you need to look at the other things that are on offer as well. Things like healthcare coverage, life assurance, staff discounts. These all compound towards your financial wellbeing, so you should make sure you're taking advantage of all those things and research what the company's got on offer for you, because you can absolutely save a lot of money over time. Even things like free car parking, it all adds up.
Kia: That's a big one. It definitely does help.
Rebecca: Yeah, yeah.
Kia: So when it comes to factoring in benefits, what would you say would be important? I know for me, when I was working and had one of my first jobs, healthcare was not something that I knew was important to me, but having access to people who could help me, doctors on tap, and being able to access things like counselling or things that I didn't realize were good benefits, but what should people really have a look and consider? What would be some key ones that you'd say, make sure that a company has X, Y, and Z. What would you say?
Rebecca: I think when you talk about that, about those benefits to do with healthcare and counselling, most companies offer something called an employee assistance program. It's probably one of the main benefits that people tend to offer.
On that, you normally get a few free counselling sessions, and it's good to have access to those things, because sometimes the NHS can be a bit slow. You want to talk to someone straight away. Normally with your EAP, you've got someone on hand 24/ 7 that you can call them, have a chat - it's not just about mental health and things like that, but also financial counselling.
Sometimes they put you in touch with people that might give you just a bit more of an insight into where you need to go, pinpoint you in the right direction. You can even call them to ask for... like if you've got something going on at home, like legal problems or something, you could maybe get some advice and they'll point you in the right direction there. So that's really a good thing to have for employees.
Kia: I think that's a key one. I think even just sitting down with your manager at work and saying, " What is available to me?" I know I've definitely done this a fair few times and said, " There's so much out there, what exactly is available to me as an employee?" And then you can have a look at that list and figure out what's going to work for you.
Rebecca: There's some other ones which are really good to have where you can have access to a GP online where you can ask them questions. It's difficult to get a GP appointment when you want one sometimes, so it's good to have that on hand where if you're just a bit worried about something, you can have a little chat with them. But that's a really good benefit to have. Not all companies would offer that, but it's definitely something to look out and ask for.
Kia: I completely agree. Let's talk about a few other benefits. We covered some of the main big ones, but what maybe perhaps smaller ones are available to employees maybe when it comes to their finances or things that they can have a look at to make maybe the financial burden a little bit easier if they're feeling that pressure?
Rebecca: Something very high up on the employee benefits agenda at the moment, and something that I'm definitely looking at for my colleagues at my company, is having access to flexible pay.
And I think probably for the younger generation as well, having access to your earned wages before payday, can sometimes ease that financial burden. If you've had something emergency come up that you need a bit of extra cash for, it's good to be able to access your earned wages before payday, and it stops you going to things like loan sharks and things like that where they're going to give you massive interest rates, so that's a good benefit to look out for.
For the company I work for at the moment, we've introduced something called Wage Dream where colleagues can go onto an app - they have good visibility of the wages that they've earned so far, and also if they do overtime or something like that, they can have access to that money quicker than having to wait till payday. So if they wanted to go out next week, maybe they'll pick up a few extra hours this week and then they can access those funds to get that money quicker without having to wait.
Kia: I think that's a good thing to have access to, especially as an employee. It's a good oversight and it feeds into that money management. We tend to focus on budgeting when it comes to the final stage once it gets paid into your account and what am I going to budget my money for? But if you know during the month how much you've currently earned, and maybe I'm going to do a few more hours, like you said, to be able to have a bit of extra money, it's a good way to keep on top of your money. I think that's a good point you made there.
Rebecca: Yeah. One good thing about these apps as well is sometimes they allow you to put money away before you get the money into your bank account. So you don't really notice it as much when you're trying to save that 50 pounds or 10 pounds you might put away every month that you won't even realize that's come out. When you look in your saving pot, then it grows quite quickly. You don't even notice it.
Kia: I think that's great. Exactly. Anything that we can do to make everything feel a little bit easier, but we're still planning for our finances, is a win in my books. That's what I think, for sure. So Rebecca, are there any traps to be aware of when it comes to taking advantage of workplace benefits? Like for example, is there something that's likely to be cheaper elsewhere?
Rebecca: Yeah, that's a good question actually. While workplace benefits do offer convenience, it's important to compare cost and coverage. I'd definitely say that. So maybe healthcare benefits might not cover everything, and you might need to just assess if it's cost- effective, compared to maybe getting private cover. And then just make sure you're looking at potential tax implications for benefits like healthcare, because sometimes that might add onto that. It might not make it beneficial for you. So it's worthwhile doing your research around those points.
Kia: Completely agree. I think it's worthwhile just understanding and knowing what could come up, and just having a good overview over everything.
Rebecca: Yeah. Some companies do things like cycle to work schemes, parking's paid for, or the development programs for professional development. Maybe they've got apprenticeships you can go on and advance your career that way, and then obviously you are not having to pay for those things yourself, and that will be better financially for you in the long run, because you've managed to get a qualification.
Also, you need to look at flexible working arrangements, other things they have an offer, like the employee assistance programs, maybe they've got an app where you can go on and get discounts from high street stores and things, and all those little bits mount up.
Kia: They all mount up. And I think what you mentioned about the employee development program, I definitely did that at one of my jobs. I used that and took advantage of it to another language, which is always useful. It's something I always wanted to do, and it's even better when my employee wants to pay me to learn a language.
Rebecca: Yeah, absolutely.
Kia: So that's a very key point you made there.
Rebecca: That's a great benefit.
Kia: So for anyone listening, if you have listened to this podcast before, you'll know what's coming next. So Rebecca, I'm going to ask you a question. What are the three easy ways that people can use when it comes to workplace benefits to help them get a little bit richer?
Rebecca: Number one, I'd definitely say maximize pension contributions, especially the employer matched ones. Number two, utilize your wellbeing programs, gym discounts, things like that. It all adds up and contributes to your health overall. So definitely go for that. And then number three, explore your employee share purchase plans. They're a really smart investment opportunity, and I think I would definitely encourage that.
Kia: I completely echo that. I've definitely taken advantages of all of those that you've mentioned when I've been in different jobs before. So thank you so much, Rebecca. These have been some amazing gems that you've given to all of our listeners here, and it's been incredible. So thank you so much. Some great tips for saving money there, and you're going to need them, because next week I'm talking about a big one.
It's something that's on a lot of people's minds a lot of the time, and that's a buying a house. Is it a pipe dream if you're a Gen Z or millennial? Come back next week to find out. And if this podcast has connected with you, then you know the score by now - hit follow, tell your friends, and keep on getting to grips with your money.
Make your property dreams come true transcript
Kia: Kia here, welcome back to A Little Bit Richer. Property is such a big thing for Brits. It can be so difficult to get on the property ladder, but sometimes it feels like everyone else is moving into their beautiful new home - well, judging by their Instagram posts anyway. But, if you don't own your own home, are you actually behind in your financial journey? Is it a good time to buy right now? And what are some of the things that you can do to help make the buying process a little easier? With me to discuss all of this and more is Tayo Oguntonada, a mortgage broker, property expert, investor, and influencer. Okay, so Tayo, property prices are high and mortgage rates have really rocketed. So is buying a house now still a good idea?
Tayo: Have to chuckle at first right! And it's so funny when you were doing the intro saying all of those questions, right, it literally felt like you were reading my DMs. Those are all of the questions I get. So it's great to be addressing that today. I think the first thing to acknowledge is that it's incredibly difficult for all aspiring first time buyers right now. I mean, we look at the last three years or so right, the beginning of the pandemic, you could put down a 5% deposit. All of a sudden, in a matter of days, that was tripled to 15%. When they actually went back to 5% again, all of a sudden, house prices were shooting up because they introduce stamp duty holiday, mortgage payment holiday, and things like that. And then when house prices actually started slowing down, up to today, we saw that mortgage rates were increasing rapidly as well. So it's really, really been a tough time and it feels like they've been pulled from pillar to post. And I guess the first thing to acknowledge is that, yes, it is a very, very difficult time for first time buyers right now. But I would say that if it is your goal to own your own property, and buy your first property, you can still buy right now, it is still possible. And I always say that you shouldn't try and time the market. If you can afford it, and what I mean by afford it is afford to buy the house and afford the monthly payments on a long term basis, and it is one of your goals - definitely go ahead, in my opinion.
Kia: I think that's a really good point that you make. I think it is... If you try and time it, it's always not quite the right time. So it is just like you said, get in there if you're ready and you can afford it, jumping in and doing it.
Kia: So there's been some research done recently by Legal and General that has found that, this year, financial support is more important than ever. Over two thirds of London homeowners received financial support from family or friends. So I'm going to ask you, is it impossible if you don't have any financial help from friends or family?
Tayo: It's not impossible. However, we cannot ignore the numbers and the research, right. I love numbers. I love any kind of research because numbers have no opinion. So you just have to acknowledge them and we have to take them for what they are, basically. And those numbers are basically saying that there's a reason why so many people are leaning on family or leaning on siblings or friends or colleagues and buying with someone or getting financial assistance from someone. And that's because it is becoming increasingly more difficult. Because I guess if you buy by yourself, a lot of the time first time buyers feel that they do have to sacrifice something and I'll come on that. But what I would say is that whenever people think about financial assistance, a lot of the time, they do often think about the bank of Mum and Dad. And when people think about the bank of Mum and Dad, they always think that look, they've come from a ultra wealthy family, but that's not often the case. And this is why platforms like Bricks With Tips are made and platforms like this podcast, right, because education is key, right. And a lot of people are using that financial assistance, but it stems from education. So if I paint a scenario, there might be somebody who has a job and they earn £30,000 and they're working towards a promotion that will pay them £40,000. However, they know that they're going to get that promotion in maybe the next two or three years effectively, and they've been doing research on what it takes to buy a property. They know that even at £40,000, they still won't be able to afford the property that they want to buy, effectively, because they know that lenders will lend a certain amount times their income. Also, by being educated, what they do know is that - hold on, my sister earns 30K as well. If we combine our salaries, it's £60,000, and that education allows people to act early, basically. What we're kind of experiencing at the moment is that a lot of people just don't know. So they kind of just like pull the wool over their eyes and they're like, it's difficult, they listen to the media, it's impossible, and they don't take any action. And then just to touch on what you said about 'is it impossible?' right. It is still possible to do it without financial assistance, but there are things that you may have to sacrifice. So maybe that's moving a little bit further out. Maybe that is opting for a two bedroom flat rather than your dream of a three bedroom house, effectively. So yeah, I definitely do think that is still possible, but in some cases there may be an element of sacrifice.
Kia: I think I love the point that you made about just learning and understanding. I think it is, yeah. Knowing what can you do with the money that I've got, the money that I'm on, the money that I've saved. What can I realistically afford? I think that's the key word - realistically.
Kia: Because like you said, I think everyone dreams about their first home being a mansion somewhere, but realistically your budget may not stretch to that. So I think that is a key point. I want to go off the back of something that you said. Let's talk about maybe buying with someone then, because I've spoken to people who have bought with family and I think that's probably a bit more common, but what about people buying friends? What would you say - is that a good way to look at? Maybe people rally their friends together and say, let's buy property together? Or people will look at siblings?
Tayo: Yeah, I definitely do think it's a good way to go, but you have to put things in place, right? I think that a lot of people are scared of it because buying a property is a long term commitment. However, in this day and age, renting is a long term commitment, especially if you're renting in places like London, because a lot of times you can't just jump around because renting in London is incredibly expensive and every single time you change where you're renting, there is a cost attached to that as well, effectively. So I do think that that is something to consider. I guess when you are buying, you are building equity over time, whether that's you paying down your mortgage or, depending on the market, the property increasing in value effectively. And there are pros and cons of buying and renting that we can balance against each other. But in the main, biased I will, buying is probably what you want to do just to ensure that you're building equity and you've got more freedom to do what you want with your property. So buying with friends, buying with siblings, I am in support of it. I think it can allow people to achieve the goal that they're looking at.
Kia: Okay. Well, we never know, might have some siblings, some friends after hearing this, banding together to buy a house, which would be lovely to hear, wouldn't it? Right. So we're going to come on to - let's assume that our listeners have decided that buying a house is what's right for them, that's the right decision for them. What options/schemes are available to make that goal more achievable for them?
Tayo: Right. So there are quite a few options and schemes and some that people know about, and some that people don't know about. The ones that people probably know about the most are government schemes. So for example, some of the two most popular ones are shared ownership. So I always give the example, shared ownership is effectively you buying a share of a property and renting the rest of the property. So a really easy scenario is that in London, there's a flat that's £400,000, you can buy a 25% share of that flat, which means that you buy 100K of that flat effectively and you rent the remaining free quarters of that flat effectively. The reason why it's popular is because it's got really, really low start up cost, you don't need to pay a huge amount down, because in actual fact when you're buying that 25% share at 100K, you can put down a deposit as low as 5%, which means that you could put down £5,000 to live in a 400K flat. So naturally that's going to get a lot of attention. Another scheme that a lot people know about is right to buy. That's when you can buy the council flat that you live in, if you've lived in there for three years or more effectively. There are some government schemes that are lesser known. For example, there's one called First Home Scheme, where you can get between 30 and 50% off your first home. There's another one called Help to Build because Help To Buy no longer exists. So help to build can actually help you finance the land and the build of a self-build property, which is really, really interesting. And then another one that a lot of people don't know is that there are actually some schemes that are offered by lenders, first of all, and definitely have a look and check those out, and also home builders as well, because there is an incentive for them to sell their homes.
Kia: That's really good to hear you share all those different schemes, because I think sometimes as a first time buyer - it is overwhelming anyway for anyone trying to buy a property, but especially if you're trying to understand what's going to work for you, knowing that there's so many options out there, it's just finding the right one for you. Maybe it's shared ownership, maybe it's first homes, maybe it's something else. But I think it is good to know. And I think one of my favorite schemes, which isn't necessarily for buying, but do you know what I'm going to say, what scheme?
Tayo: I know what you're going to say
Kia: What am I going to say?
Tayo: Well it begins with L...
Kia: It does!
Tayo: And ends with ISA!
Kia: You got it bang on! My favorite scheme is the Lifetime ISA, because it's just a great savings vehicle.
Kia: So for anyone who doesn't know, the Lifetime ISA is a savings vehicle and it superseded Help To Buy ISA, which closed I think in 2019.
Kia: And you can use that to save for your first house. So you put money in there up to £4,000 per tax year and you can keep saving that money, the government will put 25% on top of anything that you save up until that amount, and you can use that towards your deposit. It's also important to note you have to have it open for at least a year before you can use it. But it is a great way to save money and get free money. That's always my my thing. Anytime we can get some extra money.
Kia: Towards our financial goals.
Kia: I'm all for it. And the Lifetime ISA is a great way to do that from the government. So I think all of those schemes combined, there is a lot of hope.
Kia: For anyone listening when it comes to buying a first property.
Tayo: Absolutely. And to add to what you said about the Lifetime ISA, the difference between the Lifetime ISA and all of those are the schemes is that, with the Lifetime ISA it can be applied to property.
Kia: To any property.
Tayo: Exactly. So that's really, really nice, the flexibility of that.
Kia: Yeah, I love that. Right. So to wrap up then, with property in mind, I'm going to ask you the question I ask all of our guests. What are the three quick tips that you'd recommend to our listeners to help them get A Little Bit Richer?
Tayo: With property in mind? Getting A Little Bit Richer? Okay, cool. I'm big on education, right? Knowing what you are doing is key, effectively. So my first tip is speak to a mortgage broker. In the property space, a lot of things aren't free, right? Getting a survey done isn't free, getting a valuation - that isn't free. Getting a quote from an architect isn't free. However, a mortgage broker will actually speak to you for free. And it's very, very rare that you can get such a tailored and 1 to 1 service for free in any other industry. A mortgage broker will assess your current situation and tell you what you can and can't do. My second tip - go on viewings. Whether they're virtual viewings or viewings in person. I think that one mistake that a lot of people make is that they fix their credit, they save their money and they get their salary up, and then they've been doing that for two or three years. And then the problem is that they spend nine months after that working out what type of property they want, and while they're working that out, their budget is going all over the place as well. Find out what you like in a property, find out what you love, find out what you hate, find out what you're willing to compromise on. That way, you know exactly how much money you need because you know the type of property you want in your area. It goes to education as well, right? Wherever you consume any of your content, whether you're on Twitter, whether you're on Instagram, whether you use YouTube or maybe you read print, just curate everything you do and make it property focused, effectively. You'll pick up new tips, you'll pick up new ways to overcome challenges that you will actually facing. Because one of the key things is, and you alluded to it a bit earlier when we were speaking is that, once you know about all of these different schemes, the key thing is that you can now apply it to your personal situation.
Kia: You gave some great tips and I think the key takeaways that I pull from this episode is, one, education is key.
Kia: So make sure you research, you understand what you're looking to get into when it comes to buying a property. And two, that there is hope. You know, it may seem a bit bleak. Things are going up in price and not seeming to come down, but there is still hope. And if you want to get a provider that isn't as impossible as it may seem. So thank you so much for coming on. This has been a great episode. So that's A Little Bit Richer's first foray into the huge topic that is property. I'll be back to this a little bit later in the series too. It's worth noting that, as with all things to do with interest rates and house buying, it's always worth double checking if things have changed before you make any big decisions. This episode is all about taking control of your property buying journey, but unfortunately, financial freedom isn't always a given. So next week is a particularly important episode as I'll be exploring what financial abuse is, and how to recognise the signs of it around you. Be sure to check back next week for that, and in the meantime, follow the podcast if you aren't already. Bye!
Spotting the signs of financial abuse transcript
Kia: Hi. It's Kia. Financial abuse is a phrase that is becoming more and more widely used in modern society, partly thanks to high profile cases such as Britney Spears's controversial conservatorship where her family were in control of her earnings for many years. So it's a particularly important topic this week: how to recognize different forms of economic abuse and what you can do to help friends or family who might be experiencing this.
With me today is Katie Binns, an award- winning journalist who investigates financial abuse. Before we get into the episode, I just want to note that we'll be speaking about topics including domestic and economic abuse and coercive control, just flagging in case that's a trigger. We'll be including some places to go to for support in the show notes too. Okay, let's get into it. So Katie, financial abuse is a topic we're all becoming more aware of, partly due to celebrities such as Britney Spears, Mel B, and Kesha going public about having been subjected to it. Could you start by explaining more about what financial abuse is, please?
Katie: Yes. Financial abuse is something that is more common than you might think. One statistic that always shocks me and that I think is worth knowing is that 6 million people in the UK will experience financial abuse at some point in their lives. Shocking, isn't it?
Kia: 6 million?
Katie: Yeah, 6 million. That's what the latest research shows. And it involves someone, and this someone can be an abusive partner, an abusive friend, an abusive carer, an abusive family member, essentially denying you access to your finances and things that you own. And sadly, it doesn't exist in isolation. It doesn't happen in isolation. It happens alongside other forms of domestic abuse. And it can be someone controlling how you spend money, denying you access to work, running up debt in your name, refusing to pay joint bills, giving you a weekly allowance.
And I'm really glad that you mentioned Britney, Mel B, and Kesha, because they show us that financial abuse can happen to anyone. It doesn't matter how rich you are, how famous you are, how connected you are. Anyone can become a victim of financial abuse. I know that in the case of Britney, even though she was earning millions from her Las Vegas residency, she was given a weekly allowance. She didn't have access to her credit card. When I interviewed Mel B years ago, she told me how, when she left her husband, she didn't have access to her bank account. She didn't have a debit card. She didn't even have the money to put down for a deposit for a rental property.
Katie: Yeah. Really wow, wow, wow. And in the case of Kesha, there's allegations of her being forced to work against her will with an abusive music executive. So three different women, three different situations, but they all really hammer the point that anyone can be a victim of financial abuse.
Kia: I think, like you said, when you see it not just from a normal person's perspective but from a celebrity's, it really just does show-
Kia: ... how prevalent it is.
Kia: And that it can happen to absolutely anyone. And the amount of power you have doesn't exclude you from that happening-
Katie: Doesn't matter.
Kia: ... to you.
Kia: I think wow. That's really powerful. So Katie, what are the signs of economic abuse then?
Katie: So economic abuse looks different in different situations. And actually, it can be really difficult to identify. Every person I've ever interviewed about their experience of financial abuse always says to me, " It started so gradually. And I thought they were so caring the way they offered to help me with my finances. And I thought it was really sensible that what they were suggesting." And so it starts gradually. That's one of the key things about financial abuse. And it can be sabotaging your access to income.
So we're talking about someone limiting the hours you work, maybe limiting your access to education and training so that you can work or maybe earn more money. It can be restricting your access to your finances. So someone essentially controlling how you spend or making you justify your spending, making you go through your receipts to justify your spending. Maybe giving you a weekly allowance, making you ask for money. Maybe gaining access to your benefits, restricting your use of your car, restricting your use of a mobile phone to apply for a job or something.
It can be exploiting your finances. So this is where we're talking about someone stealing your money, taking out debt in your name, which is truly devastating. It can be someone refusing to pay their part of the joint bills. It can be someone damaging your property, which obviously causes you financial harm. It looks different in different situations. And of course, this might make people really nervous about the idea of joint finances. And I'd hate that because joint finances are a brilliant way to manage your finances in a couple. Billions of couples benefit from joint finances, myself included. So joint finances are certainly a brilliant way to manage your finances and not to be scared of it just because of what we're discussing now.
Kia: I think it's such a wide spectrum-
Kia: ... of signs that you mentioned there that even just listening to you detail some of those, I'm like, sometimes you have friends who confide in you about things about their partners. I can almost identify certain situations where that could have led to that. It hasn't-
Kia: ... fortunately, from anyone that I know personally. But it opens up to your mind to what it could look like-
Katie: Yes, yes.
Kia: ... and begin to move into, which I think is just very key for people to be aware of.
Kia: So we can see how devastating economic abuse can be for people. Like you said, we've read so many stories about people that it's happened to. So is it classified as a crime now then?
Katie: So economic abuse is recognized by the law. Since 2021 it's included in the definition of domestic abuse in the Domestic Abuse Act. However, this doesn't make economic abuse a crime in its own right. What this inclusion in the Domestic Abuse Act means is that police and other agencies should be aware of the issue of financial abuse and they should be more likely to recognize a pattern of financially abusive behaviors as coercive and controlling behavior.
And this is the really important part because financially abusive behaviors are recognized and prosecuted under the coercive or controlling behavior offense. And people have been prosecuted and sentenced to prison for financially abusive behaviors under the Controlling or Coercive Behavior Act.
Kia: I think that's good to know that there is that out there. So if someone is experiencing that, you can pursue a legal route and see where that does take you. So I think it is good to know that that is there. How can we take action? So whether it's someone who is experiencing economic abuse themselves or whether we know someone close to us that-
Kia: ... we believe experiencing that themselves?
Katie: There is help available. There are things that you can do. So if you are a victim, there is a hardship fund that you can apply to via the wonderful charity Women's Aid. I think you can apply for up to 500 pounds. Your bank may be able to help you. TSB, for example, has an emergency flee fund. HSBC has its safe spaces in all of its branches. Interestingly, your employer may be able to help you. Just a few days ago, I saw in the news that Kellogg's has put together an employee benefits package essentially for its employees who find themselves in domestic situations and that they want to help.
So your employer might be able to help you. If you have a joint current account with your partner and you want to deal with it, then you must speak to your bank about that. That's something you can do now.
It used to be that to close a joint bank account down, you'd have to have the two parties put in writing that wish. Now because of Domestic Abuse Act, that rule has been eased. So if you need to deal with a joint account, you must speak to your bank or building society. Another interesting one is the credit reference agencies. So Experian, TransUnion, they've set up a password system so that if your abuser tries to take out credit in your name, the password will stop them.
And so obviously that's a brilliant system to have in place. There's also the charity Surviving Economic Abuse, which is an excellent source of support for victims. They have a telephone support line, they have a survivor's forum.
If you are in that unfortunate position where you are watching a loved one who is in that position, what can you do? Well, again, there are things. It's about being there for them, telling them that you're concerned, telling them that you're there for them, that help is available, some of the help that I've just mentioned, for example. And to keep checking in with them because, more often than not, it takes people time to make a decision or to act.
I think be careful what you say around their abuser and be careful what you put in messages because their abuser might be reading them. That's another big one. Always have information about domestic abuse to hand so that you're ready for them whenever they're ready. Obviously it's a no- brainer if you're in a position to help them, lend them money, offer them a spare room. And I think emotional support is a big one that you can offer. De- linking in your finances from someone can be a lengthy process, so emotional support is a big one.
Kia: That's some amazing advice that you've given there. And I think even hearing how much building societies and banks and credit reference agencies are actually putting in place to help victims, I think, is stuff that even I didn't know was there. But it's really good for people to know about whether they're in that situation now or maybe they're not, but maybe that does happen later down the line just to know that you can-
Kia: ... do those things. And if you are someone who is observant, it happens to a loved one-
Kia: Then everything that you mentioned there is just really key and crucial. Thank you so much for your thoughts on this, Katie. As we all learn more about financial abuse, are there ways that the situation is getting more positive? For example, are there three things that are giving you hope?
Katie: Definitely, Kia. I think the first that the law recognizes economic abuse, the fact that people have been prosecuted and sentenced to time in prison for financially abusive behaviors. That's something that we can take heart from. I think the fact that banks and building societies are equipped to help you, they have specially trained staff. And increasingly, other companies and sectors and industries are training their staff to recognize the signs of financial abuse.
And I suppose the most positive thing I've encountered over the last five years of writing about financial abuse is the charity Surviving Economic Abuse. They are a brilliant charity and they have campaigned and advocated and supported victim survivors for something like six or seven years now. And we can take heart from everything that they're doing. They're really changing things.
Kia: Thank you so much, Katie, for coming on to the podcast to talk about this really important topic. I think it's something that isn't spoken about enough, but it's something that's very important. And you've shared so much insight and so much advice for people who are either in that situation or may have friends or family or loved ones who could potentially be in that to know where to go for help and just have a better understanding of what people could be going through.
Thank you to Katie for coming onto the podcast and for all of her work on this important issue. If you are affected by anything we've spoken about today, there are links in a description to relevant resources and charities who can help. If you enjoyed the episode, then you know the drill. Follow the podcast, tell all of your friends, and come back next week where I'll be talking about all things investing. See you then.
Take your first investment steps transcript
Kia: Hey. It is Kia. The world of investments can sometimes seem like a really murky, confusing place. There's a lot of loud voices on the internet talking about stuff like Bitcoin and NFTs, and it can really make investments seem like an extremely risky thing, that's only for the chosen few. If you have some money that you'd like to see grow, then this episode should be able to help you understand what to consider and be wary of.
There are different levels of risk and you don't have to be a tech bro to get investing. With me to get into all of this is Timi Merriman-Johnson. Timi is the founder of Mr MoneyJar, a financial education company, and he's also a podcast star and author. So Timi, let's get into it. Can you give me a very entry level explanation on what investing actually is and what is and isn't considered an investment?
Timi: Sure thing. And thanks for having me here. I like to think of investing as a long- term form of saving where we set aside money today in expectation of a return in the future. If we don't expect the return, then we might be gambling or speculating, and if we expect the return right away, then we're trading. So it's just very important to know the difference between those three things.
Kia: I think that's very key. I think sometimes when you think about investing, you think about people with those charts, like you said, the trading, but I think that breakdown really just makes it simple for people to understand. So really and truly, anyone who has something like a workplace pension is already an investor, right?
Timi: Yeah, absolutely. So in the UK at the moment, if you work for a company and you earn more than 10, 000 pounds per tax year and you're age over 22, you'll be auto-enrolled into a pension. And this money isn't saved in cash. It's actually invested for you, albeit very much happening in the background over the course of your career so that when you come to retire you have a pot of money to either stop working or to work a bit less. So yes, if you pay into workplace pension, you're already an investor, which is a fantastic thing.
Kia: So let's bring it back then. So if we're talking someone who's brand new to investing, what are the products that they should consider looking at?
Timi: So there's a few different types of investing accounts you can use. There are stocks and shares ISAs. There are lifetime stocks and shares ISAs, and there are also pension accounts, which we just mentioned, they're also a type of investment account. But if you're a beginner, you may want to start investing into a fund in a stocks and shares ISA as that lends itself well to people who are investing for the first time.
Kia: So how does that work? Is it, you just put money into that and that gets invested on your behalf if you put your money to a fund?
Timi: When you open a stocks and shares ISA with an investment platform, you have to nominate a bank account that you're going to top up that stocks and shares ISA with and then you can choose which fund you want to put that money into, so it's a two-step process.
Kia: But it makes that process a lot easier. You don't have to figure out what to actually invest into, specific stocks. It just makes it beginner- friendly. You put your money in there and I guess, invest on your behalf.
Timi: And then as we just said, pension accounts are also a type of investment account as well. They are called self-invested personal pensions or SIPS for short, and they have their own annual allowance of 60,000. If you pay into stocks and shares ISA, let's say you max out at 20,000 pounds and your investment grows, you get to keep that additional tax- free. You don't pay any capital gains tax or any tax on the income that you make through dividends and that sort of thing.
Kia: I mean, anytime I hear things are tax- free and we get money, to me it always-
Timi: We want to get money.
Kia: ... puts a smile on my face. It makes me happy if we can bring home some extra money, we don't have to give it to taxes. That's always a good thing, isn't it?
Kia: I remember when it comes to investing, I remember I started investing at 20 and I did what you just explained. I downloaded a platform and I signed up, and I remember at 20 I'm in university and I remember thinking, " Wow, this is all brand new." But it was so exciting to start to learn. I mean, I didn't start investing straight away. I did what you just mentioned. I researched on all of them and found the best one for me. But I think you breaking it down just shows that it isn't scary as people may seem. It is quite accessible, I think it is.
Timi: It's accessible and it's arguably the most accessible it's ever been because of the number of different platforms available. And I must say it's really great that you got started when you're 20. I got started investing when I was in my mid 20s and I wish I could have started sooner because a key component of investing is compounding. So the great thing about the fact that you started so early is that even starting with just small stems and investing regularly gives your investments a longer period of time to grow and compound over time. And compounding is basically where you get growth on top of the growth that you already have.
There's a exercise I like to do when I give talks. I'll say to people, " What would you much rather have 10 million pounds today or one pound coin that doubles every day for 30 days?" And people can tell that it's a trick question. So they'll go for the one pound coin and I'm like, " Yeah, you're quite right. If you take the 10 million pounds today, fair enough, you're a multimillionaire. But if you double one pound 30 times, then you're a billionaire because that's how compounding works with each additional day, your money is doubling and it can grow exponentially."
Kia: Compounding is the way. Let your money grow, put your money in, the growth can be on top of that growth. We love that. I think we've been talking about investing and I think it's also worthwhile mentioning that some employees are actually now offering workplace ISAs. So the benefits of these is that they're convenience. You can paint to them through salary deductions, that's through regular payments or through a lump sum, and the service charges on them are usually better than they would be if you set it up independently.
It's available for people through their employers, so it's also worth additional consideration for people to have a look at. Now, Timi, I want to talk about something. I want to talk about risk. So when we talk about investing, we know there's obviously higher risk attached to investing than let's say putting money in a savings account, but what kind of housekeeping should our listeners do to prepare for this additional risk?
Timi: Risk and understanding your attitude to risk is very, very important when it comes to investing because it must be said from the very beginning that there's no such thing as a 100% risk- free investment. You're always taking on a degree of risk when you set that money aside in the expectation of that future return. But the reason why we invest is because, and we can see at the moment with the rising cost of living is that cash tends to lose its value over time due to inflation.
And so we invest so that hopefully our cash can grow at a rate faster than inflation and we can see that that's happening in the UK at the moment. But as you said, there are some very important housekeeping things to do before we invest. Number one is to look at paying down high interest consumer debt. We know from the data that the average interest rate on an overdraft is about 40%.
We know the average interest rate on a credit card is about 20%, and to get a 20% return on an investment year in year out would make you one of the best investors in the world. It'd make you a Warren Buffet level investor. And so if you have high interest consumer debt, it's worth looking at either taking that to 0% or paying it down because that's money that you're losing.
The other thing to look at is, so we said investing is a long- term form of saving, but short-term savings are important too. And so the very first place to start is your emergency fund. So the way to think about your emergency fund is if you were to lose your primary source of income or an emergency was to happen, do you have enough money to get yourself through that without having to rely upon debt?
Saving an emergency fund before you invest means that should your investments fluctuate in value, which they will do from time to time, you have a pot of cash in cash that you can draw upon. The other thing to look at is things you'd like to do or have in the next year or two. As we said, investing’s for the long term, we tend to think of it in terms of years and decades rather than in weeks or months.
So if you're looking at the next one to two years and you have things that you'd like to do or have, this could be buying Christmas presents, going on holiday, saving for a house deposit will be a big financial milestone for a lot of people. Making sure that you're saving towards those goals as well is very important. Then anything over and above that can go into investments. That's money that you don't need today and that's going to work for you going forwards.
Kia: I think that's good points that you've made about understanding risk and preparing for it. And I think I'm very big on emergency funds because we never know what's going to happen. It's so key to have a pot of money saved there just in case things happen.
Timi: And I'm really pleased to say that I think the pandemic has actually changed a lot of our attitudes-
Kia: It has.
Timi: ... to risk as well. Earlier on in my career, the idea of having a pot of money set aside for seemingly no reason at all seemed very arbitrary to me. It's not something that I necessarily wanted to do, but I think the pandemic has shown a lot of us that you can lose your primary source of income and things can happen, your situation can change, particularly for younger savers. They're actually really thinking about it and doing it in a very sophisticated way. So even though we're saying it on this podcast, I speak to lots of people that are doing this already and I think it's great.
Kia: Timi, what advice would you give to our listeners who are deciding, " Yes, I want to start investing," but they're trying to figure out what is the right investment for them?
Timi: That's a really good question. I think there'll be lots of different things to look at. Knowing how long you want to invest for will be a really key thing. Like we were talking about risk, yes, you can invest into individual stocks, for example, but that's actually the riskiest way to own company shares, so you may want to look at funds for example. We know that there's a growing appetite for ethical investments, and so if you want to invest in a way that doesn't invest in arms or tobacco or that sort of thing, then that might be a investment that's right for you.
But also people with particular values like religious values, you may want to invest in like Shariah funds or Halal funds, that's another way that you can look at it. But I think the most important thing when it comes to investing and deciding what investment is correct for you is investing in something that you fundamentally understand.
So if you're investing into something because you've seen a hot stock tip on social media or your mate's doing it or you've seen something in the news, that's probably not the way that you want to go about investing. You want to have a sense of why you're investing into it, whether it aligns with your values for how long you're investing into it so that should the value of the investment come down as it sometimes happens, you're not panicking because you haven't made a decision copying someone else. You've actually done your own research into that investment.
Kia: I agree with you, and I think it's also worthwhile adding on to what you said that personal finance and investing is just that. It is personal.
Timi: Personal finance is personal.
Kia: Exactly. So what you might do versus what I might do versus what your mom might do are probably going to be three different things going on. So it's all about finding and deciding what's best for you and sticking to that. So to run off this episode then, Timi, I'm going to ask you the question that I always ask at the end of the episode. What are the three tips that you'd give to our listeners to help them get a little bit richer?
Timi: I think the first thing, and we touched upon this earlier on in the episode, is to try to stay away from high interest consumer debt. And if you have it, try to see if you can pay it down or get it to a lower interest rate. The second thing is to save up that emergency fund. The future is uncertain, but you'll know that if something comes up, you'll be able to put yourself through that. And then to set aside small amounts of money every month, invest regularly for the long- term and you should be financially better off at the end of that.
Kia: Timi, thank you so much. You always give such amazing gems and that was no different, so thank you so much for coming onto this episode. This has been great. So a couple of things to say about all this, please don't put money into high risk investments that you cannot afford to lose. I know it sounds obvious, but it's always worth keeping in mind. Once you're up and running, investment can be a great way to take more control over your finances and so can self- employment, which I'm going to be exploring next week.
But while you wait, be sure to follow and tell your mates about the podcast. Well, that's if you have time after you've sorted your investment portfolio, of course. Bye.
Become your own boss transcript
Kia: Hey, everyone, it's Kia. Do you ever feel like the classic nine- to- five office job working for someone else just isn't quite right for you? Well, there are lots of other options out there. Self- employment could be a really empowering option, and it's getting more and more accessible, but you do need to wear many hats as well as your main hustle. You have to be the HR department, finance, marketing, sales, and digital teams.
I'm chatting with Georgina Merckel about the opportunities self- employment has given her, as well as the financial stuff you need to keep in mind when you're working for yourself. Georgina is 27. She's the founder of TOPA, a small business and nonprofit consultancy. She's also won a Young Freelancer of the Year Award in 2022, so she's definitely the right person to be speaking to. So, Georgina, can you start by talking us through your self- employment journey? Because we want to know how that's looked like for you.
Georgina: So, I came out of university, I did a master's, and I just got an admin job working for somebody else, and I started that, and it was a couple of weeks before the pandemic actually, I decided to make some extra money online. I Googled, " How can you make more money online?" And virtual assistant came up, and I was like, " I can do that. I'm doing HR, admin." And I joined a freelancing platform, and so I just put myself online, got some clients, started doing the work, and then we went into lockdown, and I just went from being in the office to working from home, so I could do eight till four in my job and then four till eight in my self- employed stuff.
It really grew from there. So, by six months in, I decided to do part- time work, so I cut my hours down to three days a week and did my freelancing work two days a week, and the weekends and the evenings. And then eventually, about nine months after I started in March, I went fully self- employed, and my business just evolved. I moved away from admin into consulting and operations, and then it's just grown from there really.
Kia: So, Georgina, what are some of the things that you love when it comes to being self- employed?
Georgina: The freedom that self- employment gives you is out of this world. So, I pretty much work from my sofa with my dogs every day. I take random walks in the middle of the day. I get to choose who I work with and when. Last week, there was one day where I worked from 5: 00 PM to 11:00 PM. I did all- day cleaning. There's just so much you can do. I've worked with clients that just don't really vibe, and at some point you can just say, " This is not going to work for me." And then you can just move on and find clients that serve you better. And tomorrow I could be like, " I don't like the direction of my business, so I'm going to start marketing myself somewhere else."
But you can do everything all- in- one job, and that's the best bit. I think it's the right choice for me and for so many people out there, and we just don't get the exposure to being why you should be self- employed or why you can be self- employed because there's a whole world of self- employment and community and people who are literally targeting the same audiences. But we're all so different. I have so many friends who do similar things, but one client might not be for me or for my friend, but they'll vibe with someone else we know, and there's no competition. So, I just really love being in that freelancer community and really just setting my own life and my own plans, and there's no restrictions.
Kia: You're selling it to me, and I'm already there. It sounds amazing. It sounds great. I mean, having a sofa office, being able to do all that work when you want.
Georgina: Yeah. I mean, I call it the soft office.
Georgina: That's basically where I work all the time. It's not good for your back, though. I do have a desk. I do try and I do the whole standing, sitting desk situation, but most of the time I'm just sat on the sofa with the dogs with a blanket work from my laptop. I've worked in the car. I travel, and I'll just be sat on my laptop in a service station typing, drinking Starbucks, and filming myself for reels.
Kia: Sounds like a dream. Where do I sign up? You've already sold me. I want to sign on the dotted line now and join the self- employment route. Self- employment is such a big leap, especially the way that you did it. You did it a really smart way, having your nine to five and then your five to nine, as people call it, working on your side hustle effectively until it became your main hustle. But what was it that gave you that confidence to say, " I'm going to leave my skew nine to five and actually take the plunge and the leap into my side hustle (inaudible) "?
Georgina: It took me such a long time, and I could have done it a lot sooner if I'd had the confidence to do it, but it got to the point where I just couldn't juggle both, and I was reaching the point of burnout, and I was just working all the time. And at some point, I knew that had to change. So, it took a lot longer than I would've wanted it to. If I could go back in time now, maybe it would've left after six months. But what was great is I started building clients and my job, so I started matching my salary, and by the time I could match my take- home monthly, I decided that was probably the right time to leave because I wasn't going to take this big drop in income.
Kia: Of course.
Georgina: I was just going to go straight into the same salary, but on my terms, and then I could just take it from there and see what happens after that. But it took a lot of guts in the end really to get there because I didn't know anyone self- employed. I just did it. A lot of the people I'm around are all employed people with secure jobs, and they didn't know what to say either. I kept saying, " I think I'm going to leave my job." And they were like, " Whoa, you're making that decision? That's a bit scary, isn't it? You've got this job."
And by that time, I'd fallen out of love with it because I fell in love with working for myself. I just couldn't do both. So, at some point, I had to give, and I'm so glad I did. The pandemic definitely was the reason why that took off because everyone, all my clients, needed virtual support, didn't care whether you were in an office or at home, on your sofa wherever you were, but were just ready. And so it just really was all those things at the right place at the right time.
Kia: That's amazing that it's all just falling into place, and I mean, your journey is a testament to everything. So, that is amazing. Now we're going to move on to more the money side. So, the financial side of things. So, when it comes to self- employment, I've been self- employed, I am self- employed right now. And I myself know how finances can take you aback, and especially when you've come from something so stable as a nine to five to being self- employed, there are things that can change your finances and some things that may take you by surprise. So what, when it comes to the financial side of being self- employed, took you by surprise?
Georgina: I didn't have any kind of insight into what I needed to do. I had no plans, I didn't take any advice. I just went self- employed, and that included the financial aspects. So, I knew about tax; I knew I'd have to pay it a different way to how I'd been doing it in a payslip, but I just thought, " Well, that happens in January, and I'll work it out then." And then I did get an accountant, who I just didn't educate myself well enough on, the right person to work with and to get the right advice, and I never even asked how much he cost until I got the bill at the end. And he was like four times the price of my current accountant.
Kia: Oh my gosh.
Georgina: And I was shocked. I was shocked at how much tax I had to pay, and I didn't know I had to pay a year and a half, basically, of tax. You had to pay payments on account, and I didn't know about that, even though I think I did in the back of my head and I just hadn't thought about it, prepared. But then there's so much more. There's income protection and your pension. I paid into a pension when I had a job, but I never realized you had to do that as a self- employed person. I never thought about what happens if I get called for jury duty tomorrow or have an accident, or what if my business closes.
What am I going to do? And so I had not made any of those plans. Now I'm so grateful I have got those things in place, but I didn't read enough. It was like a year in, and suddenly I started to realize I had to learn this stuff quickly.
Kia: I think a lot of people will share the same story as you do. I know I definitely do. You kind of jump into self- employment, and it's great. You get to be your own boss, you get to do things that you want to do in your own time, and then the financial side comes, you're like, " Wow." Because I know for me, income protection was, again, something I didn't have. I wasn't fully aware of when I first started my journey. Also, having an emergency fund-
Kia: For your business was something that I hadn't factored in until I'd gotten to a point where I'm like, " I should really have a pot of money just sitting there in case I need to cover things in case things..." As you know, income comes and it ebbs and flows; some months are great, some other months are just lower. And those are things that I had to learn on the go, and it's only because I have an accountant and I have all of that.
But if you don't know, there's all things that you'd never know to consider until you're in that situation that's typically too late. So, Georgina, knowing what you know about your journey, what do you wish that you would've known or would've done differently/ again recommended to others who were about to embark on their self- employment journey?
Georgina: I think get really good advice. I mean, it's never too early to get an accountant. First of all, they know what they're doing. They are experts. Now I have an amazing small business accountant who works with people just like me. And so you get proper advice about your taxes, what you can claim, whether you should be a limited company or a sole trader, what you should be paying into. I didn't know that if you've got a limited company, they can pay your pension on your behalf, but if you're a sole trader, you pay yourself. So, there's a tax difference there.
And if you get that good advice and also get the fees upfront, so you know, on budget ahead of time, that will really help. I wish now if I could go back in time. I had a checklist of things to do from day one, things to do from six months in, and I'm now a member of IPSE, and they have a package where you get jury service cover and income protection.
There's some life assurance and contract dispute cover, and those things come together; you don't have to think about them separately. So, if you get the proper advice and you look at what your options are, clearly you can make those decisions well in advance and be prepared for them.
Kia: I completely agree with the advice that you've given, I think is so key. What would you say then to someone who's on the fence about becoming self- employed? Because it is a big jump. You and I have both done it, and I'm sure we can both agree that it is a big leap. It's one that I'm happy that I've done.
Kia: However, I do understand it is a big change. So, what would you say to someone who is on the fence about that?
Georgina: I think if you're thinking about it, it's probably the right decision for you. If you're on the fence, start taking it seriously and start thinking about it. I would start doing both your paid job and the self- employment thing at the same time to build up that income because once... It's like a momentum thing; once you start getting clients or bringing in money, it carries on from there. So, it's really simple to keep doing it, but personally, I would do it. The freedom I get from being self- employed is just way above anything else in terms of any other benefits I could get. I wouldn't change it for the world. And I think if you're thinking about it, you're probably on the path already there.
Kia: I love that. I think, yeah, like you said, if it's rooted in your mind, it's probably something that you do want to do. So, Georgina, let's talk about pensions. Okay, so in episode three of A Little Ritual, we cover the importance of having a pension when you're in a workplace, but when you're self- employed, we know that workplace pensions don't actually apply here. Just a little summary to our listeners. A pension is a pot that you contribute to that will essentially fund your lifestyle once you reach retirement age. There are many benefits to contributing to a pension, especially from a younger age, as you're able to benefit from government top- ups and certain tax exemptions. But a question I want to ask you, Georgina, is how can someone who's self- employed go about setting up a pension, and why is it so important to have one?
Georgina: It's important because at some point you're not going to want to work anymore, or at least the level that you're doing right now. So, you have to be able to pay for your life. So, you need to start doing that. And the earlier you do it, the better it is. About a year into my self- employed journey, I just set up a pension using an app and started paying two pound a week into it. And in my head, I was like, I've ticked the box of setting up the pension, and I'm going to come back to it in three months time and work out what I should be putting in there.
And that step for me was really helpful because I'd done the admin bit and I'd got over that hump. Then I started working out what actually I need to save between now and 50 or 60 whenever I want to step away from my business. What am I going to need to live on to make the same money I can make now? So, it's really important that you start thinking about it. The earlier, the better.
Kia: Even though you contributed two pounds a week, it's the action of starting it.
Kia: That is what's going to trigger you to, at some point, sit down with it and say, " Actually," like you said, " how much do I need to have in there? What amount am I trying to get to?" And then work backwards to start actually putting money into there. So, we mentioned how it's important, but how can someone actually start actually saving into a pension? How did you do it, for example?
Georgina: So I literally Googled self- employed pensions, and there are loads of options out there. I just signed up with an app where I put my details in, you do the admin bit, and then you just set up a regular amount or a lump sum. It's up to you.
Kia: And I think that's so key. As somebody who's self- employed, being able to control how much you put in, being in control of that is what you need.
Kia: So, I completely agree with you on that. I want to run off the episode as we always do, Georgina, and I'm going to ask you. What are your three tips to help our listeners get a little bit richer?
Georgina: So, if you're thinking about self- employment, start now. Start earning money or building that momentum. It's hard work, but it will pay off in the long run because then the drop or the change will be less dramatic. Start the pension early, like day one. You can do it if you're employed, right? You can just set up a private pension.
There's nothing stopping you. And I think the third thing is look into what packages are available. Can you get a group insurance that'll cover multiple things? Because it's better for you in the long run. Work out what the best options are, but get started sooner rather than later. The earlier you start sacrificing that income, you'll be better off in the long run, and it'll all just flow.
Kia: Thank you so much, Georgina. You've shared so many amazing insights and gems for us on this episode.
Georgina: Thank you.
Kia: That has made self- employment not seem as daunting for anyone who wants to get into it. So, thank you so much for joining us. It's been great to hear Georgina talk about her experiences of self- employment. Next week, we're continuing the conversation about the different career journeys that are out there. Where we look at the freedom your finances can give you. Want to retire early, travel, work part- time? Take a listen to hear what might be possible. In the meantime, be sure to follow the podcast and tell your friends. Bye.
Finding financial freedom transcript
Kia: Hey, it's Kia. Throughout this series, we've been exploring different ways to save and grow your money. In this episode, I want to focus on what your money can actually get you.
Everything's changing. It used to be you'd work one job all your life and then retire, but these days there are so many different approaches to work and leisure. So today, I'm talking to Jenny Hazan, Director of Customer Value Management at Legal & General, about all the different choices out there, and the freedom our finances bring us to make these choices.
So, Jenny, there are many different approaches to work and finances out there. People are doing FIRE, they're taking sabbaticals, they're having portfolio careers. Can you talk me through a few of these different options?
Jenny: Yeah, totally, Kia.
So as you said, that distinction between working life and retirement used to be really clear. In fact, we worked at one organization, probably stayed in the same industry, maybe even at the same company for all of our career. And then on a set date, we suddenly became retired, and hopefully by that point the kids have moved out, you paid off the mortgage, and now was the time that you got to enjoy life. And I think people are looking for more financial freedom, flexibility and choice, and they're looking for different options.
Even just friends of mine actually, that have taken on new ways of doing this. So a portfolio career, for example, is where you may choose to be freelance, you may choose to work on a number of projects that are related or unrelated, working for companies and organizations that are interesting to you, that you're passionate about.
I also have a friend that's recently taken a sabbatical. So a sabbatical is a period of time where you will agree with your company to take unpaid, usually unpaid, time off, so maybe three months or six months, to focus on other passions or things like travel.
And then in addition to that, because of the pandemic and because of our ability to connect with the working world from lots of different places, lots of people are choosing to be digital nomads, work from wherever they are, abroad. And I think people are really looking for opportunities to do things a little bit differently. So there's definitely a push for people to think about, " Well, can I work for a certain period of time? And then only work if I need to work?"
And we mentioned FIRE, so FIRE stands for financial independence, retire early, and that's a movement that started off in the US and became popular probably from about 2010 onwards. And the main principles are about saving as much as you possibly can, investing as much as you can, living off less of the world's resources, but living well. But people that are taking on the FIRE movement, are tending to save a lot more than what most people can usually save. So up to 70% of their income. And they're usually aiming to get around about 25 times their living expenses, so that they can invest that money and live off the investment returns.
Now that might seem a little bit extreme and it does mean a lot of sacrifice, but I think what this shows is that people are looking for different options for themselves. I know for me personally, travel's really important, and so I want to be able to have a lifestyle that over time my working life will allow me to do that.
Kia: It is great hearing the different ways that people are actually taking charge of their finances and taking charge of how they work. It is so key, because this generation is very much thinking about the future and thinking about different ways, like you mentioned, our parents or our grandparents, their generation was like you said, one job, work till you retire, retire, then that's it. And now we're kind of saying, " No, I actually want a bit more freedom. What can I do to get more freedom?" So I want to ask you then, how can our finances help us to access these different choices that we've got?
Jenny: Yeah, so I think the principles, even if we talk about FIRE where we say, " Oh gosh, that's quite extreme," but the principles of it still stand strong, which is save as much as you can as early as you can. And the reason for that is because the earlier you save, the more time that money has to potentially grow.
And I think with so many different choices available to us now, it can be quite difficult to think ahead to the things that you might want to do. So actually setting out some goals, whether those be long- term, medium, or short- term, so that could be anything from having flexibility around your career, to saving up a deposit, to just being able to afford some nicer little luxuries in life, is really, really important.
But that takes budgeting, that takes saving, and also working towards a goal. I think sometimes it can be quite hard to think about starting these sorts of things, so one of the things about thinking about these goals, and actually starting to picture them in your head, is that you then have a much clearer motivation for doing the work that you need to do in order to plan for this.
Kia: I love goals so much. I'm glad you touched on it, because I think when you come to your finances and you come to planning, or saving, or anything to do with your finances, and you're almost saving aimlessly, it can feel like, " Why am I doing this?" But when you have a goal in mind, that can help. And I'm someone who's very visual, so I put my goals down on a vision board-
Kia: ... so I know... (inaudible) . ... so I know at the foot of my bed or wherever I choose to place it at my house, I can wake up, and when you have those days like, " Oh, I just want to spend my money on... I just don't want to do this," you can kind of look at your vision board, and see, actually, I know I'm saving, because I want to get to this or I'm investing for this reason. And it helps to keep you on track, which is so good. And I'm so glad you mentioned goals, because it's just really, really important.
Now, you touched on it a little bit just now, but what can our listeners be doing with their finances now, that can give them as much freedom as possible in the future with their finances?
Jenny: Once you're clear about your goals and what those goals might look like, what sort of money you might need to afford those goals, the first thing is really to have a look at your finances. So what have you got coming in, what have you got going out. How much do you think that you could save. And I think a lot of people sort of struggle with the concept of, " I don't even know how much to start with," or, " I haven't got much flexibility."
So a general rule is the 50, 30, 20 rule. So 50% of your income would be spent on your essentials. So the needs. 30% on your wants or the fun stuff. And then 20% saving for the future. So you can start there, and it will be different for different people, but what you want to be thinking about is, " How do I build towards financial resilience?" So what that means is, " Can I weather the storm if something comes out of the blue?" all the way through to financial freedom, which is where you get more flexibility with your choices over the long- term.
So to start off with, make a budget, try and stick to it, and keep going, be consistent. If you have a month that's tough, don't give up, keep going.
The second thing is you need to think about emergency savings. So thinking about your living expenses and trying to put away three months to six months of savings that are in an easily accessible cash account, high interest if possible, that you can gain access to.
So these are for the things that might go wrong in life. You know, your MOT just came through and your car's failed, or that you unfortunately lose your job, or maybe the washing machine broke down. So these are things, emergencies, that you need money for. And if you haven't got three months saved away and you're thinking, " My God, how do I do that?" start with one month, start with one week, step- by- step.
The second thing that you can do once you've got an emergency savings budget is start to work on something that the industry sometimes like to call the FU fund. And that is really about having power and having choice. So this is the ability to walk away in situations where they're not serving you anymore. So that might be a job that you really hate, that's really impacting your mental health. It might be to walk away from a relationship. It might be to walk away from that awful flatmate that has not washed the dishes since the day they moved in. And over time you can continue to build that fund. So I think that's a really important one to think about.
After that, you can start thinking about those savings goals. So the short- term, the medium- term, and the long- term, and think about what sort of money you will need for those goals, and at what point in your life, because that has an impact on where you want to invest that money. So I think from a longer term perspective, obviously a pension is a great place to start thinking about long- term saving. Pensions can be really tax- efficient, so if you wanted to put a hundred pounds into your pension, £ 80 of that would come from you, £ 20 would come from the government. And also, your employer will, if you've got a workplace pension, will also be making contributions as well. And I think it's worthwhile mentioning that some employers will put more money in, they'll match your contributions. And if you're not going to that level, you're actually leaving free money on the table, and no one wants to do that.
Kia: I love the fact that you mentioned that fund, the FU fund. I'm from a Caribbean household, so in my background we call that like the vexed fund.
Jenny: The vexed fund. Love it.
Kia: So when you're, like you said, when you're annoyed, just having that pot of money, but I think it is about making your finances or making your money a point to give you freedom. So like you said, freedom of choice, to decide to leave a job that you don't like, all the things that you mentioned, or freedom to cover your income if you happen to lose it for a period of time, or freedom to decide that I want to retire at 45, but I'm going to put my money aside to be able to do that. I think that's the main key here. We're just trying to get our money to work for us so it can give us more freedom.
We have been talking about this and it sounds great, but I want to ask you, are there any disadvantages to all of this? Is it maybe too much to focus on so much of this for the future? Are we putting too much emphasis and too much pressure on a lot of things at once for the future?
Jenny: I think that's a great question. I think it's all about balance, and that balance is going to be really different depending on your own financial circumstances and what you're trying to achieve. And the worst thing that you could do is stretch yourself so far that you end up running up credit card bills whilst you're cleverly saving away, but actually you might have something that's a high interest rate debt, and you don't want to do that. You want to pay that down. So I think this is where it comes back to really sitting down with your finances, getting really clear about what it is that you really want. And I don't necessarily mean " things" in that sense. It will be, what experiences do you want? What sort of lifestyle would you like to have? How can you build up to that gradually? The plus point is if you're younger, then you've got a lot more time to do that if you start early.
And I think sometimes we worry about whether or not we're saving enough, whether or not we're on track, and there's lots of tools that can help you with that. But I think the important bit is not overstretching yourself, making sure that you remain balanced. And if you align your savings to your goals and to your ambitions, then it becomes a lot easier to say, " Do you know what? I probably could've made my lunch at home rather than buying it out. I probably don't need that other coffee. Do I need those new trainers?" and still give yourself a little bit of flexibility to reward yourself. We talked about the 30% of income on fun, because life should be fun.
Kia: Life should be fun. Absolutely. I agree with you. As someone who's in their 20s, I know how important it is to balance your finances. Obviously it is very important to make sure that your money's working for you and you're planning for the future, but also, I want to make memories. I want to have fun. So it is about striking that right balance where you're not, like I said, just spending tons of money on things. That maybe if you sat down you're probably just like, "I could've done without that." But equally, you're not saving everything or investing everything, so that you can't go out with your friends one weekend and have a good time, or you can't go on that trip that you wanted to go on. It's finding that right balance, like you said.
Jenny, I always end these episodes with the same questions, so I'm going to ask you, what are your three pieces of advice to help our listeners get a little bit richer?
Jenny: So we talk about money here, but actually it's about what it can allow you to do. So get really, really deep with yourself in terms of what you want your life to look like, what's important to you, what your values are, because developing your goals based around this will make it a lot easier to have the motivation to save.
The second one is save as much as you can as early as you can, because it really does make a big difference to the amount that you can save over time, and you get the awesome impact of compound growth as well.
And then the third thing is have fun with it. So I think sometimes we are at risk of not enjoying the saving that we do, because we see it as something to sacrifice. That we're sacrificing things in the now for things in the future. But actually, make it fun. Make it a game. Think about the rewards that you can offer yourself, and feel empowered. At the moment it can feel really stretched, particularly with rents increasing, mortgage rates increasing, the cost of just living is increasing, and so it can feel really difficult to think about saving. But ultimately, we can always start small, one step at a time.
Kia: Jenny, thank you so much. This has been just a great episode for people to kind of have some food for thought, to figure out what they want their money to be doing for them. And like we keep emphasizing, striking the right balance, and also enjoying life as well. That's the important bit. So thank you so much for coming on to the episode. This has been amazing.
Some great tips for planning for the future there, and that's really key. You just never know what might happen. Which is why, next week, I'm focusing on how unexpected life events, like illness, can impact your finances. It's important stuff. So if this is resonating with you, then follow the podcast and tell your friends. See you next week.
What if an illness disrupts your career transcript
Kia: Hey, guys. It's Kia. We've been talking about how to hyper- focus your finances in order to get a little bit richer, but sometimes life just gets in the way. So this episode I'm talking about the impact physical and mental illnesses can have on our money.
Joining me is Koren Byrne, a PR manager at Legal & General. Koren joined Legal & General this year, but before this, she worked at our company who reviewed and rated financial products where her work involved promoting insurance protection.
Koren is 33 and one awful day last year, she suddenly went numb from the waist down. Following this, she was diagnosed with multiple sclerosis and has spent the last year adjusting to some big changes in terms of her personal life, work life, and finances. Koren's done an excellent job adapting to all of this, and she's joining me today to talk through her story, how this has impacted her life, and what she'd do differently if she could go back.
So Koren, to kick things off, please could you talk me through the story of your diagnosis?
Koren: Yeah, I can. One day I was having brunch with the girls, time of my life, and the next day, literally overnight, I woke up and I was completely numb from the waist down-
Kia: Oh, wow.
Koren: ... both legs. It's like straightaway was like, " That's not quite normal," and it was like pins and needles. My feet felt dead.
So as soon as I could, I got hold of my GP and I was really, really lucky that I had access to private healthcare through work. I was really lucky I got diagnosed very, very quickly. It was a long, hard process. You find out what's wrong and it feels like a bit of a journey and you don't really know what's going on.
And then you get your diagnosis and you sit in the office and they go, " It's multiple sclerosis." He looked at me really odd because I was like, " Okay, fine," because I was expecting it.
Koren: And then I got in the car and my mum was there luckily and she was like, "Are you okay?" I was like, "No."
Kia: No, no. I mean...
Koren: No, I'm not. Because that's where the journey really starts and that's when the reality of the situation because you're still kind of hoping that maybe I'm being dramatic. So that was kind of the start of all the changes was when I got that diagnosis and I realized quite quickly how much of an effect, not just feeling physically unwell, but the mental strain of having a diagnosis of an incurable disease.
Like I've been sick, but I've never been sick to be told that you're not going to get better from, like this is with you for life. So it was dealing with the implications of that is kind of what came next and was the fun part, so to speak. The challenging part, challenging.
Kia: The challenging part. So I can imagine that was a massive worry that you had to undertake.
But how did this impact you financially? Were there changes that you had to make to your finances?
Koren: Yeah. So it's one of those ones like you deal with the health. At this point, I'm still very much going through the motions of being numb from the waist down. It lasted about sort of I think in total I had the numbness and the pain like for six months, but it was that impact then that it had on work.
So I'd worked really hard throughout my 20s to get to the point that I was in my career. I'd gone from like an internship earning like no money, all the way through to earning, like I was comfortable. I had a comfortable salary. I was starting to look at whether or not I wanted to buy a property, like start putting savings away and all of that.
I just felt like I'd hit a brick wall and that whole perspective of just like I always felt like I was soaring and then, all of a sudden, I was like-
Kia: Oh, no, I can imagine.
Koren: ... coming back down to earth with like a big bang, right?
And financially, I had some savings, but I was like living my best life so I was enjoying the disposable income that I had. So I had some money saved. I had like the bog standard three months of salary, like monthly salary saved up.
But I very quickly realised I'm not well. I don't know how long I'm going to be unwell for. I don't know what recovery looks like. I'm very fortunate that I did get the function back in my lower body and I went into remission quite well, but I could have had really lasting effects and disability and at some points I was walking with a stick. That could have been something that I carried on and continued to do.
So when it came to work, I just didn't know what that looked like, whether I needed to take time off. I also had to have a real sit- down with myself and can I continue to do the job that I'm doing?
Because one of the things that you get with multiple sclerosis is fatigue, which comes with it brain fog, and it just meant that I was really suffering at work. I couldn't find words in meetings and things like that. So where I'd gone from, well, I mean I thought I was all right in my job before and, all of a sudden, I wasn't able to do the things that I could do before.
The disease was new to me so I didn't know whether this was a permanent feature or whether that was just how I was going to be functioning moving forward.
Luckily, it sort of eased and the brain fog and I still get fatigue, but it comes in waves. So I was worried that I wouldn't have an income from work, and I was worried that if I went on sick, if it was long- term, whether I could live off statutory sick pay or how far my sick pay would stretch from work.
But I was really lucky at the time that I worked for a really, really good company that made some adjustments for me that helped me work and keep the salary.
And I was also extremely lucky with work that as part of the workplace benefits, I had a critical illness cover, which is a type of insurance against things like cancer and multiple sclerosis is one of the critical illnesses that is covered. So I got a lump payment from them.
Kia: That's really good. Really useful, I'm sure.
Koren: Yeah, and I think what that did was that kind of financial worry and that fear of the unknown of what that future looked like, it gave me a really good buffer so that I could continue to work and continue to forge that career path once I felt better.
But in an ideal situation because I had to work because I didn't have anything else other than that workplace benefit, I didn't have income protection so that I could have something where I could take six months off work and realistically that's what I should have done, because I had the physical side of things and then the mental health side of things that came with the diagnosis, not just the fatigue, but also I was not in a great place mentally because my whole world had just been turned upside down.
So I had some things in place. I had an extremely good employer that sort of really helped, and the critical illness really helped. But realistically, I wish I'd had a bit more there to sort of help and support me, take the time that I needed to sort of recover and work out what my next steps were going to be as well.
Kia: So Koren, I just want to ask you, what were you doing for work before you had your diagnosis, and how was that impacted after you received your diagnosis?
Koren: So I just started working in financial services and I'd been with the company for four years- ish. And I was like getting to that point where I was starting to look at what the next opportunities were going to be. I was really, really career- minded and focused on sort of climbing that career ladder as well.
And then you get hit with that diagnosis and, all of a sudden, that five- year plan is like ripped up. At some points I thought that I'd have to leave my job completely, change career, do something part- time, do something easier just so that I could focus on my health, physical and mental health.
And when I went to work and they were really supportive and I was able to access the critical illness cover and sort of have that money and that backing, it actually gave me the confidence to keep going full steam ahead. So let's stick to the five- year plan that I had for my career.
I felt more financially secure because I thought if it all goes wrong when I do need to quit or I do need to go or I need to take a job that's less money, I kind of knew that I had a bit of like a financial buffer there that I wouldn't have had without the critical illness.
And I started looking for jobs and I think this is where my outlook changed a little bit. I'd sort of chased a salary and sort of gravitas and things like that with the jobs that I'd gone for before, quite normal things. But I wanted something that served with a bit more purpose and that resonated with me.
That's where I saw the job with Legal & General, PR manager. I was like, tick, that's what I do. It's in financial services, tick.
And then the part that I really liked was it was specifically working with protection insurance. And I felt so passionately through my experience and being able to access the cover that I had and also passionate about the fact that I could have had way more cover in place. I could have provided myself so much more support had I understood that those products were for me at that age in my 20s. It wasn't just life insurance and it's not just about like the worst, worst thing happening, but also supporting your lifestyle as you go along.
The role really resonated with me and I was like, I absolutely want to do something because I feel like I've got a bit of a purpose. I'm on a bit of a soapbox with this.
Kia: Well, I think that's amazing. I think, like you said, it's something that young people should know about. It isn't covered very often.
So off the back of that then, what took you by surprise? What's the thing that you don't realize until you're in this type of situation?
Koren: I never thought that it would happen to me. And it sounds silly because my mum's got MS, but it's not hereditary. So really, I didn't think it was going to happen to me, like-
Kia: Yeah, of course.
Koren: ... and you think that sickness and these kinds of things are for people that are like older than you, right? I was building my life. I wasn't expecting it to be shattered overnight. I'd gone through my 20s thinking I was invincible, having a great time with all my friends, socializing, climbing the career ladder, doing everything that you're meant to do during those years.
And I didn't think that I would get to like 30, 31 and that would be, potentially could be the end of that kind of climb. And I hadn't and I don't know many people that do, especially when I talk to my friends. They don't think about what they would do if they got unwell or they weren't well enough to work.
And it's not a comfortable thing to think about, the unexpected and planning for the worst. But me, personally, I wish I had given that more thought. I was lucky, but if it had happened at any other point, or I was working for a different employer, the outcome could have been really, really different for me and I could have been really, really stuck.
And having three months' salary saved up is great, but it doesn't stretch very far when you've got bills and rent and also just like life to pay for as well.
Kia: That's the thing. I think there's so many things to consider, like you've mentioned, that it's almost hard, as you said, to see yourself in that situation.
Koren: Yeah, you can't. Until you're in it, you can't.
But I think that's the challenge you have to do with yourself, right? I think you do have to take that time to take stock and just say, " Okay, carpet gets pulled out from underneath me. What is my plan? What do I have in place to protect the lifestyle that I have today?" And that accommodates and accounts for everything, not just financially, but like your mental health, your physical health. Like what do you have in place and what support systems do you have in place today that can support you if the worst happens?
So start building some good habits with like putting some money away and take stock of that. Don't just save the three months' salary and leave it-
Koren: ... because, as well, I'd based it on three months' salary before I'd had like pay rises and things like that.
So my lifestyle had moved on, but my savings were sort of stuck. So I was like, " That's done. I've got this little pocket. I can carry on." And I never took stock, and I never did things to continue to protect the life and the lifestyle that I was building. And you do it in the hope that you'll never have to use it.
But I think if you can get these really good habits to think in those terms and while things are up, don't wait until like I did where you are in that crisis point, and then start thinking about these things because it is a little bit too late. So do it while things are good, and just like explore what products could help you protect your income and protect your lifestyle as well.
Kia: So for you, you're in your early 30s and when you're young, it's really hard, like you said, to see yourself in any situation and to think that that could happen to you. So how would you like to see people's mindsets change here? Because I know your current line of work lines up with this.
Koren: Most people are really, really comfortable with insuring your things. Like you get a phone, you have insurance. Obviously legal requirement to have insurance. We are so comfortable with insuring things, it's second nature.
But for some reason when it comes to ourselves, our body, our health, it's boring and we don't want to talk about it. I don't know whether or not, especially when you talk about like life insurance, obviously that's like the very worst and you don't want to talk about that because it feels morbid. But it's like what we were saying earlier about protecting the lifestyle that you're building and the life that you're building out for yourself.
So I'd like to see that change. I'd like to see more conversation about how we protect ourselves and our lives against the unexpected happening. And a lot of these products when you're younger are a bit cheaper as well because sort of the risks are lower. I mean, there'll always be like one person like me that's like, " It happened to me, pick me." But no, I just really want that mindset to change, that it's not too expensive, it's not too difficult to have these conversations, and we are worth protecting and our lives are worth protecting.
Kia: Like you said, that is very key. We insure our products, but ourselves, it's very important so I think that's a great point.
But I want to run off this episode, though, the way that I always do. So I'm going to ask you, what are three tips that you'd give to our listeners to help them get a little bit richer?
Koren: I think start habits, good financial habits early, even when you're not earning a huge amount, start making savings, putting things away, and planning for the unexpected. Not just like rainy day funds, but actually worst case scenario planning as well.
And also look into insuring yourself in keeping your lifestyle going and look into things like income protection and critical illness cover. And I was really lucky that I had some workplace benefits, but check, really do look. It's great to have pizzas every Friday, it's great to finish at four o'clock every Friday, but actually look at the more boring benefits.
Have a look at your pension, have a look at sort of what life insurance is involved and also if there are any other benefits that come with that. Because a lot of the time you'll have access to things like counselling, again, like private diagnostics and private GPs and things.
Have a look at like that boring paperwork pack that you get when you start a new job and you're really excited and just take stock of what you've got in place and what might be missing from that as well. So you're not just relying on the workplace benefits, but what can you do and what products can you access on a personal level as well.
So just be mindful of all of your financial products, I think, is key from early on, so you build those habits.
Kia: Early on, that habit. That's a key point.
Koren, thank you so much for sharing your story. It's been very Insightful when you've shared some amazing tips so thank you so much.
Whether you are in a similar position to Koren or not, I hope that this episode resonated with you. If it did, then please be sure to follow the podcast, leave us a review and tell others who you think would be interested.
Next week, I'll be looking at student loans, the different types, how they can affect your finances and if you should repay them. See you then.
Take control of your student loan transcript
Kia: It's Kia, this is A Little Bit Richer. And today I'm taking a deep dive into the world of student loans. Student loans are one of those things that it's so easy to just take a passive approach to. You go to uni, you get the loan, your repayments start, and you more or less forget about it. But this podcast is all about taking back control of all of your finances. And the first step to getting that control is to understand it.
With me today, to help us get to grips with all this, is Abigail Foster. Abigail is a chartered accountant and she's a founder of Elent, a financial education hub for students, employees, and parents. As part of this, she runs workshops all about student loans, so I knew I had to get her on to learn more.
Abigail, people listening to this can have all sorts of different student loan repayment plans. It's changed a lot. So let's begin. Could you talk me through all the different plans?
Abigail: Okay. Yes, there's been many different plans. We'll talk about the undergrad modern plans, so one, two, and five. So one was if you went to university pre- 2012, I think it was post- 1998, but pre- 2012, you would've been paying the tuition loan at about 3K, very, very nice amount of money, I wish I'd paid that.
Then you had plan two, which came in from 2012. So any students that went to university from 2012 to 2023, you were on plan two. And then any university student that goes to university from this year, so from 2023 onwards, they are now on plan five.
Kia: Wow. Okay. So how do all of these loans work? I mean, if you think about a loan, we think about interest rates, right? So you might take out a credit card at a certain amount of interest rate and you now what you're going to pay. Is that the same when it comes to student loans?
Abigail: The interest rates on all three plans frustratingly all different. Like to make it nice and complicated. So plan one is either RPI, which stands for Retail Price Index, better known as inflation; or the Bank of England base rate plus 1%. So often what's happened with plan one is the interest rate has been lower because it's that Bank of England base rate plus 1%.
Then for plan two, they had the interest rate set at RPI plus 3%, so Retail Price Index also known as inflation plus 3%. So when inflation got crazy high last year and we saw those 11. 9% numbers of inflation, we saw huge interest on the student loans.
Plan five, they decided as their nicety for changing the plan, was they basically introduced interest and cut it back to just RPI, so just inflation. So there is a common misconception that the loan doesn't increase over time, but that's not really true because it does, it does increase by RPI. But they then assume that that RPI means it's just increased with inflation therefore the real value of the loan hasn't increased, but it definitely does increase over time.
Kia: Okay. That's good to know that. So we need to have a look and see, depending on what plan you're on, that depends on what interest rate you are obviously going to have on your student loan. So when it comes to repaying then, because I know when I was in university not too long ago, I know I've still got my baby face, not too long ago, but when I was in university it was always this thing where I had friends say, " I've taken out X amount, now I'm going to have to pay it straight away." I've graduated and it's almost like the next day after graduation you're going to have to pay it back. But I want to ask you, what salary do you normally have to be on before you start paying off your student loan?
Abigail: Okay, with the student loan, again, let's go through one, two, and five. So with plan one you have to be earning over £22, 015, if we're getting specific. With plan two, it's 27,295. And then with the new plan five, you need to earn more than 25 grand a year. So this is your yearly salary.
So let's say you are on 25K, then you wouldn't pay anything back on this new plan yet until you earn over 25K. So, you only pay back 9% over those thresholds.
Something to be careful though is that what tends to happen is they'll take your yearly salary, divide it by 12 and then look at your monthly payslip. So if you don't always earn the same every month, you might be overpaying the student loan. And that's something to look out for because it's worked out on a yearly basis, but on your payslip can often be then brought back to that monthly amount. So yeah.
Kia: That makes sense. I think it's good to know that. I've seen people online have decided to take control of their student loans and log in and see if they're overpaying and have been able to actually make those claims back. But I just want to kind of go back to what you said. So when you earn over a certain threshold, you mentioned it's any income over that.
I think people sometimes get confused if it's, like you said, the new plan, it's when you earn over £25, 000, some people think that they're going to pay back 9% of everything, but it's only the income over, right?
Abigail: It is only the income over the threshold across all the plans. So if you are earning 30K, you are paying 9%, on that plan five, you're paying 9% on 5K. So the difference between your 30,000 salary and that 25K threshold, 9% on that. But it does add up. Obviously the more you start earning, that 9% is quite a large chunk, which is why we commonly call it a university tax as opposed to a loan because you pay more the more you earn.
Kia: Yeah, absolutely. But I think yeah, that was good for you to explain that because I think sometimes ... I know I've spoken to people who have almost avoided taking out, especially maintenance loans, and that's obviously the loan when you're in university that will help you live. And I used that because I moved away from home. And have avoided taking out more money because they're like, " No, it's a loan and I've got to pay it back and I don't want to graduate and have to pay it all back. Let me just live within my means and maybe make it harder for myself."
But I think, yeah, the way you explained it that definitely does help. We mentioned student loan. Now that operative word loan, will that affect people's ability in the future when it comes to getting a mortgage or any other type of loan having a student loan out?
Abigail: It can do, so especially with a mortgage because there is a rule which is that the student loan doesn't impact your credit score, which then commonly misconstrued as therefore it doesn't impact your mortgage. That's not true. So it doesn't impact your credit score in the terms it doesn't get ... it's not information that filters into your credit rating agencies, which then provide you with a credit score.
But it can affect how much mortgage you get. Because if you went to a mortgage provider or you went to a mortgage advisor, et cetera and said, " Right, this is my income." They would say to you, " Okay, what are your outgoings?" And they will look at your outgoings, one being your student loan. So if you are earning over that threshold and you've got quite a large chunk coming out for student loans, that can affect how much you can borrow. So that's where it can affect your mortgage.
There is discussions around if it can stop you getting a mortgage, it shouldn't be able to stop you, it's not like a bad note on your credit score. It is just something to be aware of that it can reduce how much mortgage you can get.
Kia: I think that's good to know. So it is just part of the affordability checks that the mortgage providers do. It is part of what are you paying, what are your outgoings, and that's just one of them if you don't earn over that. I think that's good to know.
Now there's a big question, and one I know a lot of people want to know, should we, as in former students who've now graduated, should we prioritize paying off our student loans or should we just carry on as we are?
Abigail: When it comes to paying off your student loan, you need to put yourself in one of two camps. So one, if you are not earning enough that you are noticing it on your payslip, leave it. Just leave it be. Because once you pay off that student loan, if you've voluntarily chosen to, you can't go back to the Student Loans Company and get that money back. And that money is gone. So whilst you might be taking down the loans, but you will end up with less money. And obviously less money in your pocket, which you could have used for better things.
If you fall into the other bracket where you are noticing a huge amount of money going out of your payslip for student deductions, then it's time to look into whether you should be paying off early. Because like I said at the beginning, those interest rates are not to be laughed at. They are really hefty. And by paying off large chunks, you can obviously reduce the time left you've got to pay. Because if you know you're going to be paying it off in full obviously, and you have that disposal income to do so.
Do not bankrupt yourself trying to pay off your student loan. That is really important. I think a lot of people say, " Oh, well, I'll go to my parents and ask for money or I'll take out another loan to pay off my student loan." Please don't do that because it's a really flexible loan you're not going to find anywhere else. And that's why we call it, like I say, university tax as opposed to a loan.
But yeah, there's two camps there really, and it very much depends on how it impacts you and your monthly earnings.
Kia: That's really good to know I think. Yeah, so it all depends on what your income and outgoings look like. Because like I said I have conversations even with my friends who say, " Oh, I need to pay off my student loan." But I think it is a very personal decision. It is how much does it actually impact your income as to whether or not you should.
Abigail: It's so personal because also obviously some parents really struggle with it because our parents didn't have this or particularly my parents never went to uni, so they don't quite understand how ... they don't get why it's such a big amount of money, but I'm not worried about it. So the older generation looked at our generation and just can't imagine why we're not paying this off quickly. But it's because it's not really the same.
Kia: Yeah, yeah. It's not how they view maybe mortgages where they may overpay their mortgages, it's different like you said.
So if there's people who have children now or are thinking about having kids in the future, what could they be doing to think about their kids going to university before they hit 18 to make that all easier when it comes around?
Abigail: In terms of funding it, I suppose setting up pots for them for the future. We all know compound interest is king or queen. And therefore the earlier you start the better you can build that pot up. So things like junior ISAs or junior bank accounts for young people are really great ways to just put little bits of money away now. And hopefully when they get to it at 18 or whenever they choose to go to university, it's a nice pot for them there that can help them with maintenance or even other things to do with uni.
Kia: Exactly, exactly. So Abigail, before we go, what three things would you recommend to someone that they can do to help them get a little bit richer?
Abigail: So, first thing would definitely be check that you're paying the right amount of student loan. So throughout the year, checking in on your student loan website and that you're paying the right amount.
Secondly, would be looking to how many years you've got left to pay, because there might be a possibility that you might not pay the entire student loan back. So with plan one, that's after 25 years, it gets wiped. With plan two, after 30. And with plan five, it's actually 40 years. But if you're in that plan two area and you've only got so many years left, you might not need to repay over if you are never going to repay in full.
And then third and finally would be education. Please keep your education up to date and your knowledge because the plans have changed. We know that, we've just discussed it today. But a lot of people don't realize that the plan has changed. And this reflects everything within finance and money right now. Everything's changing. So yeah, keep your education up to date.
Kia: Thank you so much. This has been a very insightful episode.
It's Black Friday next week, which means Christmas will be here before we know it. So in the next episode, I want to see if there's such a thing as a cost- effective Christmas. Until then, be sure to hit follow and leave us a review. Thank you for listening.
Cost of christmas transcript
Kia: Hey, it's Kia and welcome to A Little Bit Richer's very own Christmas special. I know, I know it's still November and I'm mentioning the C word, but part of the secret to a cost- effective Christmas or Hanukkah or just December in general is starting to plan early. It can be the most expensive month of the year. So how do we have a great December while still getting a little bit richer?
With me to unpack it all is Megan Micklewright. Megan was recently named Financial Influencer of the Year 2023, and is the founder of The Savvy Spender, a platform dedicated to financial positivity.
Megan, traditionally there's been a lot of pressure to spend at this time of the year, but we are starting to see people approach this differently. How's that?
Megan: I think a lot of people are approaching it differently, especially with the cost of living now, being more open with their boundaries, setting limits, thinking outside the box, getting creative with presents, making things homemade, doing more Secret Santa. Instead of buying everybody a gift in the family, they're passing it forward to charities instead. I was recently just having, well, say recently, earlier, about an hour ago having a conversation with someone about how my partner's family is so big that they don't end up doing presents because it will cost them an absolute fortune.
There's about 30, 40 of them and instead they just do a Secret Santa. So instead of one person buying 39 presents, it's one person buying one present and it's just so much easier on the pocket, isn't it, getting creative with the way you're doing presents instead of just that generic buy- in for everybody?
Kia: Absolutely. I think, especially with me and my friends, I think for the past five years we do our own separate Christmas celebrations, but we also do Secret Santa because I think when we were younger we used to think, " Okay, got to buy this person, that person." That list just gets longer and longer.
Megan: The list goes on.
Kia: And the price just keeps increasing. But now we decide, right, we're going to do the Secret Santa and you get whoever you get and we have a budget, which is very key because you never know who's earning what. So we just all agree a budget and we all stick to that budget and I think it makes things a lot easier and that way you're almost forced to think more about the gift that you're giving. Especially we've done it where it's only £ 10 pounds is the budget. So now I'm thinking about the person I've got, what would they love that I can buy for them that is within budget or I can make?
My friend made me a lovely notebook that I still use to this day. So I think it really does get you thinking whilst also not breaking the bank, which is really important.
So I want to ask you then, Megan, do you have any advice for those who are having a difficult conversations with friends and family and if those people may have different approaches to the holiday season?
Megan: I think that a conversation doesn't have to be difficult unless you make it difficult. If you go in and feel awkward about it, it's automatically going to be awkward. Tell people, " I've only got this much to spend," or, " I don't want to spend a lot this Christmas, I've got other priorities." At the end of the day, nobody can tell you what your priorities should or shouldn't be. So being clear about it, make sure everyone is on the same page and everyone can respect each other's decisions really.
I was speaking to somebody the other day about Christmas and just saying that even with family members that are very traditional in setting their ways, this is how we do things, it's good to open their mind up to new ways and it's not about saying this is the way it's done and that's the way we're doing it this year. Have a discussion, what do you want to do? What do I want to do? And come into compromises and that way you're all happy.
Kia: I love that. I think this has been a running theme on the podcast about having conversations. I think that's the big thing. We don't always talk about money, so sometimes it can feel as though it's hard to tell people, " You know what? I haven't got the money this year. Or actually, can we change what we do this year?" But I think, like you said, open, honest conversations and it's not as hard as you think it is. It's just as hard as you make it.
Kia: I love that when you said that.
Megan: I think with the cost of living as well, the stigma around money conversations is slowly dying because people that never thought they'd be struggling are actually struggling and that's where the stigma's being lost because more and more people are talking about money, which is brilliant really because there should never be a stigma around it.
Kia: Exactly. I completely agree with you. Is there a way to have the best of both worlds? So when I say that, I mean is there a way to have a great Christmas while still sticking to your financial goals?
Megan: 100%, absolutely. You can always have the best of both worlds when it comes to spending money and Christmas. Make sure you've got them budgets in place and stick to them. Talk to yourself, write down in your notes, your notebook, wherever. What's important to you this Christmas? What do you want to tick off? What do you want to do?
Do you really need to go out to eat once a week? Make sure that you're doing what you want to do, ticking them off and your money's going to the important places. That way you are having the best of both worlds. And you can also make sure you're saving money when you are doing those things. Make sure you're using cash back. Make sure you're budgeting for them, book in advance, schedule what you're doing so you can get the most for your money.
Kia: I love that. And I especially love when you said reviewing how you're spending. So do you need to go out and eat every week? Because it's something that my friends and I have also been fully aware of because I think you find when you go to meet people, quite often you meet up with friends and then you're going out and before you know it you've spent £ 40 on your bill. Whereas if you're more aware of it because you want to stick to your financial goals, maybe you say, " You know what?
I want to meet up with you, but let's go for a coffee or let's go for a walk instead." And I think that's some of the changes that a lot of people are making. So it's like you don't have to compromise. You can still have, like you said, the good Christmas, but we can also still 100% stick to our financial goals. You don't have to compromise anything.
Megan: Definitely. And when you're going out, you don't always have to go to these fancy places. You can go to somewhere that's cheap, that's cheerful, it's good for everybody. And if people are drinking and you're not or they want to have a starter, main, dessert, just open up your separate tab. You don't have to split the bill.
And it doesn't have to be an awkward conversation about splitting the bill. Just say, " Look, I'm not drinking today or I'm only having a small starter so I'm going to open up my own tab." It doesn't have to be a big thing at the end of the meal where you're like, " Oh, someone's getting out the calculator." That bit that everybody dreads. Say at the beginning of the meal, " Right, I'm going to open up my own tab because I'm not drinking tonight." It doesn't have to be an awkward conversation. It can be really easy, really simple, and that's the best way to keep it.
Kia: Yep. I'm 100% behind you on that because I'm someone very much so sometimes we go out and I'm happy to split. Sometimes I'm not hungry and I'll tell my friends or whoever I'm with, " Guys, I'm just going to pay for my one thing because I'm only getting one thing." And I don't feel bad about having that conversation. At least people know now, okay, that's how we're going to split the bill. Kia's not a part of that. So whatever I get now, I split between whoever's agreed upon it and it makes things easier.
Megan: I went for a meal once and I don't drink and everybody was ordering cocktails and it was in a really nice restaurant. They were like £ 12 each. And someone ordered lobster, which of course is very expensive. And I was thinking, I'm not drinking. I had a really cheap main. I am not splitting this bill. And I just said, " I'm going to open up my own tab because I've had a really cheap main, I'm not drinking." It was like fine.
And I think as long as you keep it simple, don't beat around the bush with it. It's absolutely fine, but it's about the conversations you're having and the people you're around. You don't need to spend loads to have a good time.
Kia: Exactly. I love Christmas. It brings the spirit. You get to be with your loved ones.
Megan: That's it.
Kia: My favourite time of the year. Not lying. I love it.
Megan: Get out the games, that's what I love.
Kia: Yeah. I love the games and the food.
Megan: And the food.
Kia: All of that. I'm getting excited now. See, I'm getting ahead of myself. Okay, so let's talk about the environment. What is the environmental impact of all of this? How does pulling back on consumerism help?
Megan: It helps in so many different ways. The sustainability aspect of it, the amount of things that end up in landfill, the amount of things that end up just cluttering your own house without talking about the environmental impact. We all end up with so much stuff and we say, " We haven't used that," or, " Why did they buy me that?" I think we've all got a present where we're like, " What am I going to do with this?" And it's being more mindful and thoughtful about the things that you're buying people as well, like you mentioned.
If you've got them budgets, thinking about what does that person really want? And if we're more mindful about it, then we end up buying things that are actually going to be used, which has an impact on our wallets, on the environment, on other people's clutter and decluttering. So it has major impacts in so many different areas.
Kia: Absolutely. I think one thing that I also do is I ask people, " What is it that you actually want?" Because think of how many times, I'm sure you've had it, I definitely have had it, where you've received the gift and you're like, " I cannot stand this. What am I going to do with this?" The person didn't even think about what this gift is, and now you're probably thinking about regifting it or you never use it and it does just kind of clutter up. But I think when you do have that conversation with someone, I mean it's not spoiling it.
You can get people to write on a list. You can pick from that list, so it's still got an air of surprise to it, but then at least you're buying something that that person's going to use or value. Let's talk about gifting then. Does expensive always mean better or are there other approaches that people can take when it comes to gift giving?
Megan: Expensive doesn't always mean better. I guess it depends what you're buying, but there's so many alternatives out there now. There's never just one of one product. There's so many different jewelry brands, phone brands, that sort of thing. And there's dupes as well out there now. You can always get a cheaper alternative.
So expensive doesn't always mean better. It's different if someone's asked for a specific brand or something like that. But always make sure you're shopping around, never just take the first price you see because nine times out of 10 it's not the best. And making sure you're looking for discount codes and that sort of stuff, using cashback where possible because if you are making an expensive purchase, you can still get some money back that way.
Kia: I love that. Cashback, discount codes, all of those things. So, Megan, it's Black Friday this week and that's a time where some people may be thinking, " I'm going to get all of my Christmas presents on that day because so many deals coming out." So I want to ask you, is it actually a good deal? Should people spend their money and use Black Friday as an opportunity or should people maybe hold back a bit?
Megan: I don't think you should hold back, but I also don't think you should rely on it. You've got to remember that these days are put out there for people to spend. They're not there for people to save. They're there for people to spend and it is a good day to check deals, but purely to check deals and make sure you actually are getting a good deal because sometimes the prices are hiked up in the weeks upcoming so they can be pulled down on that day and actually everyone thinks they're getting a good deal, but it's not a good deal. So make sure you are shopping around, look and see if you are actually getting a good deal.
And also remember it's not a saving if you didn't need it anyway. You're actually just spending. So make sure you stick to your list. Don't just get pulled in to all of these good deals and offers that you're seeing. Get rid of the triggers if you need to, unsubscribe from them emails, unfollow people on Instagram if you need to. If you're struggling for money especially and you know that you're going to be triggered by Black Friday, get rid of any triggers. You don't need to spend if there's something that you don't need.
Kia: I absolutely agree with you. When it comes to Black Friday, I mean, I very rarely shop on those days anyway. Cyber Monday, those kind of days. But when it comes to Black Friday or the lead- up to it, I use price trackers. So certain websites will have a tracker, the big websites, and you can actually say, right, I'm looking at this product and it will track the price of it.
And you can also look at historical prices so you can see was it hiked up like you said the week before and now it's just come back to the original price or is there actually a saving if I wanted to buy it? If you get into that habit, you can definitely make sure you're getting the best price for anything you're buying, 100%. Finally, Megan, what three tips do you have for our listeners as they look ahead to Christmas to help them get a little bit richer.
Megan: I've mentioned it so many times, but the first one is definitely being open and honest. Having them conversations with people around you. Nobody's going to know unless you tell them. You've got to be open and honest. The second one will be never take that first price you see, shop around, make it a habit. Get into the habit of looking for cashback, looking for discount codes, having a look on even Facebook groups and things like that.
And the third one is get a little bit creative. Mine Nan, for example, she's got everything that she needs, absolutely everything that she needs. And I know that whatever I buy her, she's not going to use. So I get creative. I make her hampers. I buy her experiences instead. And that can be a lot more thoughtful for the person that you're buying for, but also be a bit easier on your pocket as well.
Kia: I love that. That is so thoughtful. Yeah, it makes you really think about what the person would value. Megan, thank you so much. This has been a great episode and really gotten us into the Christmas spirit.
Megan: I'm feeling Christmassy.
Kia: I'm feeling Christmassy. I'm ready. I'm ready for Christmas.
Megan: I'm ready to go Christmas shopping now.
Kia: I'm ready for everything. I'm ready to look at the food, everything.
Megan: I'm ready for the food.
Kia: We're getting too excited. We're getting too excited.
Megan: Let's not buy presents and let's just buy food.
Kia: Buy food. I'm with you on that, honestly. Thank you so much.
Megan: Thank you.
Kia: This has been a great episode.
Next week I'm returning to a topic we looked at earlier in the series, house buying. I want to focus specifically on the cost of buying your first home and how to save. And don't worry, the words avocado on toast are officially banned. I promise. But while you wait, you know the drill, hit follow and leave a review. Happy Christmas.
Saving To Buy Your First Home transcript
Kia Commodore: Kia again, and this week I'm returning to one of A Little Bit Richer's most important topics, buying your first home. We've talked about the different schemes to help you get on the ladder, but it doesn't change the fact that it's still likely to be a lot of money.
So I'm talking to Hazel Johnston from Legal and General. Hazel was previously a mortgage advisor, and now helps other advisors grow their business, so she knows a thing or two about the cost of getting on a property ladder. So Hazel, let's kick things off about talking amounts. When we talk about saving up to buy a house, just how much are we talking here?
Hazel Johnston: It really depends where you're in the country. As a starter it varies so much, but I'd say it can be a lot of money. You can tell by my accent I'm based up in Edinburgh, Scotland. If I use Scotland as an example, we're looking about 34, 000 pounds roughly as an average compared to London, that jumps up quite a bit.
Kia Commodore: Poor London, that number is always a lot higher, isn't it?
Hazel Johnston: It is, 144,000 pounds on average. So, it can be really tough to get yourself into a position to have those savings for that deposit. And I think as we look at generations gone past, some of our friends were maybe buying properties when rates were a bit better and property prices were lower.
So we are in probably quite a different space to what we were a few years ago when looking at the same sort of properties.
Kia Commodore: Absolutely. I think I make it a point because I'm in the process of saving up for my first house.
Hazel Johnston: Congratulations.
Kia Commodore: Thank you. And I make it a point to have a look at different areas I want to live in. I mean London, as you mentioned, that number is very hefty, so not necessarily feasible for me, but any areas I do look at, I like to go on property search websites and have a look at the sold listings because then you know, it gives you a good understanding of what properties in that area have actually sold for.
Because I mean we can look at what's currently listed, but that doesn't mean it's going to sell for that. So that's kind of a little habit I've got myself into whilst I'm saving so I kind of have a good understanding of how much that's going to cost me, but it is a lot of money. But there are a lot of things that come into it.
So let's talk about mortgages. Maybe you can give us a quick explainer. So Hazel, what is a mortgage, and what are different options that are available to people?
Hazel Johnston: Yeah, so a mortgage essentially is just like a loan that a bank or building society will give you to be able to fund your purchase. Because I think we'd all love to have a couple of hundred thousand sat in the bank to buy these properties, but it's not the case for most of us. So yeah, banks, building societies will lend that money in the form of a loan.
There are lots of options though, so it's not just a case of if you're looking for that set property, you can adjust things on that mortgage to make it affordable for you, such as the length of time, as one example. So that's called your " mortgage term." So you could have a mortgage that's slightly shorter, that will mean that your monthly payments are higher, and you'll pay less back to that lender.
Or you can have lower monthly payments each month for that mortgage by extending it right out and taking it over longer periods of time. So there are different options depending on what your circumstances are and the budget that you want. The good thing with mortgages as well is you can get advice on them.
So, if that's something that you are looking at and you want to have a think about what's affordable for you, then absolutely you can speak to a mortgage advisor and they will be able to tailor your monthly payments to that budget as well.
Kia Commodore: I think it's always good to know that you can get advice. I think things like this, buying a property is such a big purchase that you want to make sure that you are going down the right path for you and you're picking the right options for your situation. So I want to ask you, when it comes to mortgages, how does that actually impact your deposit?
Hazel Johnston: Yeah, so your deposit can vary and that really depends on how much you're wanting to buy that property for. So obviously the more expense of the property depends on area, it's repair, actually the desirability of that home, you are going to probably need a bigger deposit than maybe a property that needs a bit of work or somewhere that's in an area slightly out of a main town.
The more you can afford to put in, then the smaller your mortgage is going to be. And that's always going to mean you can potentially obtain better interest rates in that lender and have a lower monthly payment. But that's not achievable for everyone. We've just seen how much deposits are on average.
So what I would say is sometimes that's where we do see people opting to look at Bank of Mum and Dad. I mean if you look at our Bank of Family research that was recently done, about 47% of buyers under 55 years old had to get support from their relatives to help them get on the ladder.
So it's a hard one. I mean it is hard to save up for that deposit, but what I would say is there are different options out there for people if needed.
Kia Commodore: Absolutely. I mean like I said, as someone who's currently saving it is very difficult, especially when you have this massive number that you're trying to reach, right? Whether it's 20,000, 30, whatever your number is, it's a massive number. So if you have that help from Bank of Mum and Dad or family members or even friends you want to help pitch in, that's great.
But what if you don't have access to that kind of family support? Do those people risk being locked out of the property market?
Hazel Johnston: I'm really interested you used the word " overwhelming," because it can be so easy to feel so overwhelmed looking at the amount, and I was a first- time buyer actually not that long ago, and I felt the exact same. I felt like I was saving forever to get that property. But what I'd say, it probably comes to three things. I'd say first of all, no, you're not locked out that market.
If we're talking about savings and actually being able to financially get there, I'd say if you're anything like me and you've got a pot of money saved up, you want to try and keep that there. And it's so easy to dip into that or be tempted to if your friends, I don't know, make a trip or something.
So I would always say try and save on the side. So have your property savings either in an ISA, or whichever way that you choose to do that. But then there are some apps and tools that can help make saving on the side for your little luxuries really easy. I know for example with my bank it will round up automatically the spare change to the nearest pound, and then that's my little fun fund.
Because that actually builds up-
Kia Commodore: It does.
Hazel Johnston: ... quite a bit over time.
Kia Commodore: It does.
Hazel Johnston: And so I would definitely say trying to utilize little tools and techniques like that can help without it then feeling like a chore, trying to get those savings up. Thirdly, and the more practical part really, if you really can't afford to save, or get to the savings that you want to are all the schemes that are available.
So Skipton Building Society have launched a new mortgage product to really help renters get on that property ladder. So it's a no- deposit mortgage, there's lots and lots of details which I'm sure mortgage advisors could help you with on that, but that's a great incentive in terms of that no deposit option.
And then you've also got Lifetime ISA, essentially getting free money. If you put a thousand pounds in, they'll give you a thousand pounds for every 4, 000 pounds you save. So it's 25% of your savings up to 4,000 pounds each year. And I just think people need to be more aware of that.
And then finally, as I said, I'm up in Scotland. Scotland's actually the only area that still have this, I was speaking to one of my friends who's a mortgage advisor the other day, is the lift scheme. That's something that people forget about and that's run by the Scottish government where they'll give you a percentage of funds towards that deposit in that home.
So it's not just about buyers and purchasers having to do all these different things to try and get into the industry. A lot of big industry names are also supporting new and innovative initiatives. So, one being generation home, that's a startup mortgage company, so there's lots and lots going on to try and make it easier for people to get on that property ladder.
So, that really can help people out and we just don't often realize all that's out there.
Kia Commodore: I love that, I think it's so important. I want to talk about then, we've mentioned obviously mortgages, you mentioned deposits, but there are lots of other fees associated too with the home- buying processes, I'm sure you know, having been through it yourself. So what else should people consider financially when it comes to buying a property that isn't just a deposit?
Hazel Johnston: Yeah, so you've got quite a few different fees to consider as part of the buying process. I would say as a kind of first port of call, standard ones like your solicitor fees, potential surveys, and anything maybe that you want to put aside if you want to do up that property. The only way I could afford mine was to buy a property that needed everything done and I had to then factor in, I need some funds to do that property up and make it liveable.
Another expense could be stamp duty, always worth checking because if you're a first time buyer you may not need to pay it, but for certain property values and if you're a home mover moving for a second, third, fourth time, then absolutely it's worth checking how much that stamp duty is. It's dictated by property price and can also be dictated, depends on if you've got secondary properties running in the background.
So it's always worth going on your government website depending on where you're based in the country. And you can type in the " property value" and it will tell you based on your situation how much stamp duty is payable. So I'd say they're your key ones and part of the buy- in process, you potentially need to consider lender product fees as well, depending on which mortgage products you're going to look at.
But again, as I said, mortgage advisors will keep you right. So definitely I speak to them, they'll keep you in the know. And sometimes you can add them onto the loan as well. So you've got options there. But then you've got to think about your more practical living costs as well.
So in terms of the property, you may find there are, if it's a leasehold property, you've got your ground rent service charges up in Scotland, that would be your factor fees. And we're talking about a lot of first time buyers here, but actually any home mover, if you are moving to a new area, it's really worth considering that your commute, nursery, childcare, all these other elements that may change in your life from that change of vocation as well.
And then I would just say if you're looking to save for a deposit to get to that point, it's really, really valuable to think about your finances now and what commitments you're getting into now such as car loans, Klarna's a biggie. It's again, another very big temptation out there-
Kia Commodore: I love the fact that you mentioned thinking about your finances now. Because I mean home buying often isn't, I decided to stay, I want to buy a house, I buy it tomorrow. It is a long- term process, but you've got to factor in, like you said, what commitments financially are you making now that could impact if you did take out car financing that could impact maybe your affordability or just anything that you're committing to that could maybe detract from you being able to get on a property ladder or make it harder for you once you move into that property.
Hazel Johnston: Yeah.
Kia Commodore: Like you said, I mean, who moves into a property and wants to sit on the floor for six months?
Hazel Johnston: No.
Kia Commodore: You want to make sure that you've got money-
Hazel Johnston: Exactly.
Kia Commodore: ... to be able to furnish it. So that's something that you've got to think about now as well as think about future finances as well.
Hazel Johnston: Yeah, and they'll impact your affordability with that lender too. So it's not even just about your own budget and being able to have your lifestyle and at home. If you go on lender websites, there's usually affordability calculators. So if you are thinking of a certain car finance or loan or whatever it may be, just check it, and you can do that on the lender website. It's really easy quite often.
Kia Commodore: I love that, that's really, really good point that you made there. So Hazel, I always end our episodes with the same question, which I'm going to ask you now. What three tips do you have to help people get a little bit richer?
Hazel Johnston: My first one would be talking about that comparison piece. So I don't think you'll ever feel richer if you're always competing to others. There'll be people that aspire to be where you're at and you'll probably also always be aspiring sometimes to where other people are. So I'd say that first one is just celebrate the small wins, even if you've managed to save a 10er, that's a 10er more than what you did yesterday, so celebrate those.
Secondly, I would say think about stabilizing your income. We do sometimes see people suffer illnesses or have to take time off work. COVID was a massive time for that. And what you don't want to have to do is to dip into those savings you've worked really, really hard for. Take out things like products, like income protection policies and it's a little bit of a safety net just in case you fall ill, you don't want to have to touch those savings that you've really worked hard for.
And then the third one is seek industry help. Take advice from experts, whether that's estate agents, mortgage advisors, solicitors, ask around because everybody's been there for the first time at some point if they want a property. And I would just say, always ask.
Kia Commodore: Hazel, thank you so much. That has been really, really good tips, especially celebrating the small wins. I think sometimes we always have a big goal, but you can celebrate the small milestones as we get there. So like you said, I'm going to celebrate the fact that I'm saving.
Hazel Johnston: Yes, please do.
Kia Commodore: That's what I'm going to take home, I'm going to let all my friends know I'm saving. This is the small goal I want to celebrate. And I think that'll keep you motivated as you keep going.
Hazel Johnston: Definitely it does.
Kia Commodore: So thank you so much-
Hazel Johnston: Thank you.
Kia Commodore: ... for coming on. This has been such a great episode. So thank you so much. Next week I'm taking a look at things women specifically need to know about money. If you're not a woman, don't hit " skip." There'll still be some highly tips for you too. I promise. Don't forget to follow and review the podcast and I'll catch you next week.