Lisa Conway-Hughes M O N E Y LE S S O N S How to Manage Your Finances to Get the Life You Want Introduction Get Budgeting! Demolishing Debt Cash Savings Getting on the Ladder What Comes Next? Planning for the Unexpected Money and Relationships: The Good, the Bad and the Ugly Passing It On Once in a Lifetime What Now? Resources Acknowledgements Index About the Author Lisa Conway-Hughes is a qualified Financial Advisor with fifteen years’ experience and a Fellow of the Personal Finance Society She also blogs and speaks publicly on financial issues To date, she has appeared in the Guardian, Financial Times, Telegraph, Independent, Glamour and Citywire as well as on BBC News, discussing subjects such as The Budget She gives regular corporate talks and has recently started a podcast called ‘She’s On The Money’ I dedicate this book to my children – Jago & Kiki xx What’s the Point of Being Financially Savvy? We can always find excuses not to make positive financial choices Life tempts us with one-click shopping, a taxi is only a few taps away and our lives are so hectic that popping out to buy lunch over taking a packed lunch has become the norm In addition, life seems to continually give us signals that money is a taboo subject British society teaches us that it is bad to talk about money at home, in the workplace and even with our closest friends It’s also acceptable (even funny) to admit that you are bad at maths Maths and money are so often filed in the same mental compartment that it then somehow also feels okay to be bad with money Added to all this is the fact that the financial industry is notorious for using mind-boggling jargon and making things complicated, so that when it comes to our money we often find ourselves making choices that actually leave us worse off than before The purpose behind this book is to help you take your first steps towards being financially in control The short-term consequences of good money habits are rewarding and hopefully liberating However, the long-term impact of financial savviness is life-changing It’s the difference between living a life where you use money to achieve the things that are important to you – that make you happy – rather than money dictating the type of life that you lead If you look up ‘savvy’ in the dictionary it is described as: ‘Shrewd and knowledgeable; having common sense and good judgement’ When it comes to money, no matter your age, the majority of people wouldn’t count themselves as being ‘financially savvy’ In fact, most people make financial decisions on a day-to-day basis as questions about spending present themselves, and stick their head in the sand when it comes to thinking about longer-term finances However, if you stop for just a moment and ask your brain to think about money, what are the questions that pop into your mind? Perhaps they go something like this: – ‘Will I ever be out of debt?’ – ‘How am I ever going to buy a house?’ – ‘Will I ever be able to retire?’ – ‘Am I stuck in this job for ever?’ If these questions leave you feeling stressed, or with a feeling of dread in your stomach, you aren’t alone For many people, money worries are the last thing that they think about at night So how we get from being financially scared to financially savvy? For me, the definition of being financially savvy is having freedom from money worries Not just living hand to mouth, being in debt and having very little in the way of savings It’s the freedom that comes with having the knowledge and confidence to make sound financial decisions that can help you to build (over time) your dream life It’s feeling comfortable talking, thinking and doing when it comes to money, having confidence in your own abilities to manage your finances This is good financial wellbeing When I have the discussion with my clients about their financial wellbeing, very often they haven’t given it a thought The reason why is because it is not something that we are used to doing School and sometimes family background teaches us to get our head down and work hard regardless of whether we’re heading towards the destination we actually want How many people take the first graduate job going on a meagre salary, only to realize ten years later that they are in an industry that doesn’t interest them and their income hasn’t grown the way they thought? How many have followed the financial choices and career paths that would please their parents but not them? How many don’t know their own worth when it comes to the money they should be earning? If you don’t know your own worth and the value of your time (after all, we only have a finite amount of it), how will you build the life that you deserve? If you are wasting the money you earn on unnecessary things or even indulging in the excesses of modern life, will you ever keep up with yourself? Not just financially (debt is very draining) but also in your career: will you become trapped in a job you hate because of the salary? The need to assign time to focus on self-care and personal development has become a given How does the time you spend on taking care of yourself compare with the time you spend on your financial wellbeing? When so much of our mental wellbeing is tied up with our money, should we all be doing more? If you spent an hour a month nurturing your finances for the next twelve months, how would you feel this time next year? What would be different? This book is your opportunity to take a step back and spend some time mapping out the future you want, identifying what will make you happy and how your finances can enable you to this This point is really important as most people look at it the other way round Their finances dictate their life and their happiness – which to me just doesn’t make sense Money should be the tool that you use to achieve your dreams – not the thing that holds you back from reaching them As time goes by, your aims in life and the things that are important to you will change, and so too will your financial plan, so it’s important to make sure you enjoy the process along the way! Setting Financial Goals Setting long-term goals when it comes to money is scary in itself, especially if you haven’t done anything like it before The key to good goal-setting is to chunk it into realistic and obtainable mini goals if you are initially struggling to ‘think big’ This will help the goal to instantly feel more achievable and will help you to meet this goal in the short term Remember: just because a goal has been set, it doesn’t mean that it is set in stone Goals need to be flexible so that as your life changes and your priorities change over time, you can also adapt your goals For example, when I was in my late twenties I presumed that by my mid-thirties I would be feeling grown-up and that moving out of London would be important to me Now that I am in my late thirties, I realize that staying in London is actually very important to me and so I have had to change my goals about the type of home I wanted to buy accordingly The first thing when it comes to setting goals is not to listen to those niggling doubts in the back of your mind: ‘That’s never going to happen’, ‘I don’t know anyone my age who’s done that before’ or ‘Why bother, I won’t stick to it.’ Goals are there to stretch you, to motivate you and, most importantly, to change your life Therefore you need to be brave and even step out of your comfort zone in order to consider what you actually want out of life On p you will find a table that I fill out with all of my clients when we first start working together It will help you to focus on what you want at each stage of your life You then review this annually and track your progress along the way – ticking off those milestones as you achieve them Believe me, it will be so rewarding to look back in ten years’ time and reflect on how you have smashed your goals! To help with identifying your goals, write down the following: Five things that make you happy How many of these are you doing already? Now fill in the goals table while holding these answers in mind Before you file this goal-setting task as ‘mentally done’, take time to reflect Perhaps sleep on it to ensure that it is really what you want to achieve It is so important to get this right as this exercise will help you to shape the direction of your financial plan Are any of the goals in there because they are what you feel you ‘should do’ or because they would impress certain people? Do these goals help you to work towards your definition of happy? I love meeting people who have really gone against the grain and carved out the life that they want, irrespective of what society says For example, I have a friend who loves the sun and took the plunge to change her life and her business Rather than waiting to retire to the sun, she bought a place in Portugal She changed her coaching business to be remote, and clients even started flying out to see her She downsized her house to a flat really close to Heathrow and every month now spends two weeks in London and two weeks abroad She has made the life she wanted for herself The page references in this index correspond to the print edition from which this ebook was created, and clicking on them will take you to the the location in the ebook where the equivalent print page would begin To find a specific word or phrase from the index, please use the search feature of your ebook reader AER (Annual Equivalent Rate) 94 ageing 215 paying for care homes and specialist housing 217–18 paying for a funeral 218–19 paying for health care 215–17 paying for social care 217 Agreement in Principle (AIP) 131 airports 48–9 annual allowance 180 annuity 180 APR (annual percentage rate) 79, 131 arrangement fee 131 arrears 79 ATM Hunter 35 Automatic Millionaire, The (Bach) 33 Bach, David 33 bank accounts overdrafts 64 separating 42–3 tidying up 52, 53 Bank of England base rate 131 bankruptcy 79 bonus account 94 budgeting asking for a pay rise 50–51 bank accounts 52, 53 clearing debt 73 derailed 183–7 financial paperwork 52–9 setting your ideal budget 21–33 spending 33–41 sticking to your budget 42–4 sticking to your budget whilst on holiday 44–9 buildings insurance 131 buy to let 128–9, 131 stamp duty 114 capital gains tax 18–19 capped and collared rates 131–2 care homes 217–18 cash savings see savings cashback apps 36 Child Benefit 152 childcare 153–6 children 148, 149 child benefit 152 childcare options 153–6 maternity/paternity leave 151–2 the right time financially 148–50 Chip 58 Christmas 193 commodities 241 compounding 171 consolidation loan 79 Consumer Price Index (CPI) 86 contractors, pensions 169, 170 conveyancing 132 corporate bonds 239 County Court Judgement (CCJ) 79, 132 credit 79–80 credit cards 64–6, 80 holidays 47 credit report 80 reporting or fixing mistakes 102, 103, 105 credit score 100–102 cleaning up 102–103 Rental Exchange scheme 104 useful websites 250 critical illness cover 189 death and debt 215 funerals 218–19 inheritance tax 214–15 making a will 213 When I’m Dead file 211–12 debit 80 debit card 80 debt 61–2, 63 assets ‘on finance’ 72 credit cards 64–6 and death 215 family loans 71–2 getting into debt 63 getting on top of debt 72–6 jargon buster 79–81 overdrafts 64 and relationships 200–202 student loans 66–71 supporting yourself 76–8 useful websites 249 debt management plan 80 Defined Benefit pension 164–5, 180 Defined Contribution pension 165–7, 180 deposit 105–6, 132 bank of mum and dad 107–108 budgeting for 106–107 buy-to-let property 128 Help to Buy Equity Loan 110–11 Help to Buy ISA 108 Lifetime ISA 109–20 and mortgage 118–19 digital assets 212 DINKY (Double Income No Kids Yet) 147–8 direct debits 57–8 Disabled Facilities Grant 217 discounted rate mortgages 132 dividends tax 16–17 divorce 207 dream holiday 221–4 dynamic currency conversion 47–8 early repayment charges/ penalties 132 easy access account 94 emergency cash buffer 73, 84–5 employment asking for a pay rise 50–51 maternity/paternity leave 151–2 retraining or changing careers 224–5 workplace pensions 164–7 see also part-time employment endowment mortgage 132–3 entrepreneurship 225–31 equities 238 equity 133 equity release 133, 173 European Health Insurance Card (EHIC) 48 expensive moments 193–5 see also weddings family loans 71–2 property deposit 107–108 family offset mortgages 133 Faster Payment Service 94 finances automating 57–9 being savvy 1–5 budgeting 21–59 paperwork 52–9 planning for the unexpected 183–95 reviewing 245–7 setting goals 5–13 summary spreadsheet 56, 190–91 FIRE (Financial Independence Retire Early) 30–31 fixed rate mortgage 133 fixed rate savings account 94 flexi-access drawdown 180 flexible mortgage 133–4 flight delays 49 food shopping 40–41 freehold 134 ‘F*ck You’ Money 88–9 funerals 218–9 gazumping 134 gilt 239 Gnessen, Simonne 84 goal-setting 5–13 gold 240–41 government bonds 238–9 gross interest 94 guarantor 134 gym membership 41 health care 215–17 see also illness hedge funds 240 Help to Buy 134 Help to Buy Equity Loan 110–11 Help to Buy ISA 108, 134 hire purchase agreements 72, 80 holidays 44–6 at the airport 48–9 dream holiday 221–4 flight delays 49 insurance 48 spending money 47–8 Home Reversion 173 Homebuyer Surveys 117, 126–7 house-buying see property illness 187 critical illness cover 189 income protection insurance 188–9 private medical insurance 215–17 income asking for a pay rise 50–51 budgeting 23, 24 net income 23 and relationships 202–204 income protection insurance 188–9 income tax 14–16 index linked bonds 241 inflation 85–6 inheritance tax 19, 214–15 insurance buildings insurance 131 critical illness cover 189 holidays 48 home insurance 39 income protection insurance 188–9 life cover 189, 192–3, 211 private medical insurance 216–17 interest only mortgage 134 interest rates 86, 94 useful websites 250 investing 85, 233–4 buy to let 128–9 different types 237–41 passive versus active 241–2 performance 176 pound cost averaging 242–3 risk tolerance 176–7, 234, 244 and saving 234–5 scams 235–6 staying on track 243–4 useful websites 250 volatility 236–7 when not to invest 235 ISAs (Individual Savings Accounts) 87, 90–91, 94, 240, 243 Help to Buy ISA 108, 134 Lifetime ISA 109–20 joint tenants 134–5 Junior ISA 94 key worker schemes 135 Land and Buildings Transaction Tax (LBTT) 114 land registry 135 Land Transaction Tax (LTT) 112–14 leasehold 135 life cover 189, 192–3, 211 lifetime allowance 180 Lifetime ISA 109–20 Lifetime Mortgages 173 limited company 230 loan to value (LTV) 135 loans family loans 71–2 student loans 66–71 Love Food Hate Waste 40–41 magazines 251 maintenance loans 66 marriage divorce 207 weddings 141–7 and wills 213 maternity leave 151–2 maturity 95 millionaires 232 Money Dashboard 58–9 money mindfulness 11–13 money purchase annual allowance 180 Money Saving Expert Energy Club 37, 39 money vision board 9–11 Moneybox 59 Moneyhub 58–9 Monzo 59 mortgage term 135 mortgages 118–19 brokers 119–20 buy-to-let property 129 jargon buster 131–7 overpaying 122–3 rates and terms 120–22 useful websites 249 MySupermarket 36 negative equity 135 no nup agreements 205–6 notice account 95 offset mortgage 135–6 Olio 41 online banking 42 outgoings see spending overdrafts 64, 81 paperwork 52–9 how long to keep 55 step-by-step filing system 54, 56 part-time employment, pensions 169, 170 partnership (entrepreneurs) 230 paternity leave 151–2 pay rise 50–51 peer pressure 39–40 Pension Commencement Lump Sum (PCLS) 162, 181 pensions 159–60, 174 compounding 171 how much you should pay into 162–3 jargon buster 180–81 and non-earners 169 part-time/contract/self-employed 169–72 personal pensions 167–9 state pension 163–4 unclaimed 178–9 useful websites 250 why pay into 160–62 workplace pensions 164–7 personal allowance 14 Personal Expenses Allowance 218 personal pensions 167–9 Personal Savings Allowance 87, 95 pets 139–41 podcasts 250–51 portable mortgage 136 pound cost averaging 242–3 Premium Bonds 91–3 private equity 240 property 97–8 buy to let 128–9 buying goals 98–100 buying process 123–30 credit score 100–105 deposit 105–11 doing up your new home 117–18 investing 238 miscellaneous costs 117 mortgages 118–23, 131–7 as pension 173 and relationship breakdown 208–10 shared ownership 111–12 stamp duty 112–7 surveys 126–7 radio 250 refinancing 81 relationships 197 break down 204–10 no nup agreements 205–6 talking to a partner about money 197–204 see also marriage remortgaging 136 Rental Exchange scheme 104 repayment mortgage 136 Retail Price Index (RPI) 86 retirement and long-term planning 156–9, 174–7 alternatives to pensions 172–4 how much you need 159 pensions 159–72, 178–9, 180–81 see also ageing Right to Buy 136 risk tolerance 176–7, 234, 244 savings 43–4, 83–4 emergency cash buffer 73, 84–5 ‘F*ck You’ Money 88–9 Help to Buy ISA 108 how much 84–5 and investing 234–5 ISAs 87, 90–91 jargon buster 94–5 Lifetime ISA 109–20 Premium Bonds 91–3 rates 85–7 Savings Goals 59 Scotland, Land and Buildings Transaction Tax (LBTT) 112, 114 secured loans 81 self-employment maternity/paternity leave 151–2 pensions 169, 172 starting your own business 225–31 service charge 136 shared ownership 111–12, 136–7 sickness see illness SIPPs 168–9 slush fund 73, 84–5 social care 217 sole trader 230 solicitors 126 spending 33–4 avoiding debt 76–8 bargains 36–7 budgeting 22–3, 24–7 food shopping 40–41 getting creative 41 gym membership 41 holidays 44–9 peer pressure 39–40 reducing direct debits 37–9 shopping around 35–6 splashing out 193–5 Squirrel 59 stakeholder pensions 167–8 stamp duty 112–17, 129, 137 standard variable rate (SVR) 137 state pension 163–4, 180 Stocard 35 store cards 81 apps 35 student loans 66–71 subprime lending 81 subprime mortgage 137 switching providers 37–9 tax 14 buy-to-let property 129 capital gains tax 18–19 and childcare 153–4, 155, 156 dividends tax 16–17 income tax 14–16 inheritance tax 19, 214–5 and pensions 160–62 in retirement 172–4 on savings interest 87, 90–91 stamp duty 112–17 tax return 185–6 tax-free lump sum 162, 181 tenants in common 137 Too Good To Go 35 tracker mortgage 137 trustnet 176, 243 tuition loans 66 valuation survey 137 variable interest 95 variable rate mortgage 137 vision boards 9–11 voucher apps 35 Wales, Land Transaction Tax (LTT) 112–14 weddings 141–3 planning and budgeting 143–7 When I’m Dead file 211–12 wills 213 Working Tax Credit 156 workplace pensions 164–7 wrap pensions 168 yield 137 Yolt 58–9 THE BEGINNING Let the conversation begin … Follow the Penguin 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applicable copyright law Any unauthorized distribution or use of this text may be a direct infringement of the author’s and publisher’s rights and those responsible may be liable in law accordingly Getting on the Ladder Correct at June 2018 ... O N S How to Manage Your Finances to Get the Life You Want Introduction Get Budgeting! Demolishing Debt Cash Savings Getting on the Ladder What Comes Next? Planning for the Unexpected Money and... etc.) to your budget planner on p 24, then delete them from your spreadsheet The remaining things you have spent money on then need to be categorized into the groups that you will find on the budget... time you get a pay rise you should save more So what are your goals? How much you need per annum to live the life you want? Once you know this you can then work out what amount of money/ assets you