Welcome to Money Matters: GLAMOUR’s weekly dive into the world of finance. We’re chatting all things personal finance, from contracting rights in the workplace to expert mortgage advice and saving for your first home, to ISAs and dealing with debt, to help empower you to make better choices. Now more than ever, it's important to understand our money, but so many of us feel as if we don't have a handle on it – or worse, feel anxious and scared about money.
So each week, a woman in a unique situation will give us an honest breakdown of her finances, and our expert will give her easy tips on exactly how to tackle it.
To submit your own anonymous money diary and get top expert tips tailored to you, simply submit your entry here. And don’t forget to join GLAMOUR’s Facebook group, Money Matters, for more exclusive finance content.
MY ACCOUNTS
Current account: £450
Savings account: £0
MY INCOMINGS
Annual salary pre-tax: £43,500
Annual salary post-tax: £29,192
Monthly wage pre-tax: £3,493
Monthly wage post-tax: £2,432
Other incoming payments: £0
MY OUTGOINGS
Rent/mortgage: £875
Bills: £50
Splurges: £200
Other: £500
Any student loan/credit cards/overdrafts etc: £17,517 student loan and £800 overdraft.
MY MONEY THOUGHTS
My worst money habit: Nights out, eating out, takeaways.
My biggest money worry: Not saving money/blowing savings and therefore no option to buy
My financial hopes for the future: To buy a property, pay for my wedding, invest extra money for retirement, and have enough money to have children.
Current money mood: 💀🤓🙈
Let's talk money.
WHAT MONEY EXPERT MAKALA GREEN SAYS:
Makala Green is a multi-award-winning Chartered Financial Adviser at Schroders Personal Wealth and has over 18 years of experience in the financial industry. She understands managing money can be complicated and confusing, which is why she is passionate about making financial planning more accessible for all. She is also the Author of The Money Edit; a no shame no blame guide to taking control of your money.
Renting vs buying
When deciding to buy or continue renting, there's no simple answer. There's a lot to consider – your personal circumstances, goals, finances, credit standing and future plans. As you live in London, renting may be cheaper than buying outright due to property prices, deposit, taxes, and monthly mortgage payments. However, this can vary depending on interest rates and rental price changes.
The obvious issue with renting long-term is you're paying towards a property you'll never own outright, whereas if you buy, you reap all the benefits of the equity from paying down on your mortgage and house price increases. Over time your monthly payments will also reduce until you hopefully pay off completely. In London, the average rent is £2,193 (Rightmove) compared to the average house price for a first-time buyer, of £471,891 (statistics); this would mean saving a deposit of £47,189.10 (10% deposit) and paying an average monthly payment of £2,555.05 (based on a 5.29% repayment mortgage over 25 years). I would recommend seeking mortgage advice regarding your best option from a qualified mortgage adviser.
Shared ownership
Also referred to as part-buy part-rent, it offers an alternative route to homeownership for first-time buyers who cannot buy a property outright. You can purchase a share of a home – usually between 25% and 75% (percentages can vary), meaning you pay a mortgage on the share you own and rent (below-market-value) on the remainder to a housing association, alongside any service charge and ground rent.
It's important to weigh the pros and cons and seek professional advice before exploring a shared ownership route; here are some things to consider. The pros are you can get onto the property ladder without overstretching, as deposits are lower than buying outright and stamp duty land tax is normally exempt. Mortgages are also more likely accessible even for those with lower income or credit impairment, and in the future, you can staircase (purchase a larger share) up to 100% owning the property outright, meaning rent is no longer required.
The cons are not all lenders offer mortgages for Shared Ownership, there may be restrictions on home improvements, such as structural alterations, and you must pay 100% ground rent and service charge regardless of the share you own.
Let's talk money.
Get serious about saving.
If you're struggling to save, it's time to get a savings plan. Start by allocating all your expenses into categories right to the last pound. Ideally, your broad categories should include essentials, savings, and enjoyable expenses, and if you're passionate about achieving your future goals, savings should be a priority.
As you aim to buy a property, you want to maximise all opportunities, and a Lifetime ISA can help. You can contribute a maximum of £4,000 per year (£333/month) and receive a government-backed 25% bonus – so if you save £4,000, you'll receive a £1,000 bonus. If you and your boyfriend maximise your LISAs, you can build up £10,000 in a year (£8,000 savings and £2,000 bonus).
An engagement is a perfect time to start planning and saving for a wedding. The best way to start is to create a wedding fund (separate savings account just for your wedding) that you contribute to regularly. According to Nimble, the average cost of a UK wedding stands close to £20,000 but can reach up to £30,000, so setting a realistic, workable budget is key. Once you are comfortable with saving for your short-term goals, you can consider financial planning for your long-term future goals.
Control your credit
Over 18 million Brits have so-called bad credit, so you are not alone, but it's great to hear your money management has improved. Building up a healthy credit score/rating is a must, especially when buying a property because it can impact your ability to borrow money. Here are a few things you can do to improve your credit. Firstly, lenders need to verify your identity and address, so it's vital to be registered on the electoral roll. You want to show lenders you're a responsible borrower by paying bills in full on time each month, keeping debt low and avoiding too much credit. Aim to keep track of expenses by setting up direct debits or standing orders to automate payments. Lastly, check your credit report regularly; you never know what errors can affect your credit score.
Put a stopwatch on spending.
If you want to keep your spending under control and avoid overspending or dipping into the overdraft, create a spending plan. The simple strategy is to specify how much you can afford to set aside for enjoyable monthly expenses. Start by listing the most important things in your life. Then rank them in order of priority; this will help work out where your money should be going. Remember, the less money you spend, the more you can save towards your most cherished pursuits, such as buying your property, getting married and retiring comfortably. Sacrificing the odd night out may be okay if you can reach your goals quicker. The key is to remain committed even at Christmas and Birthdays. Instead of buying loads of presents that can be costly, seek cheaper alternatives and be honest with your family and friends about your goals. Surprisingly (or not surprisingly), some may feel the same way you do. Overtime spending plans will help you adopt better spending habits, so it's a win-win!
Let's talk about money.
