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: £588
Savings account: £700
MY INCOMINGS
Annual salary pre-tax: £47,000
Annual salary post-tax: £37,198
Monthly wage pre-tax: £3916.67
Monthly wage post-tax: £2579.20
Other incoming payments: £0
MY OUTGOINGS
Rent/mortgage: £325
Bills: £462
Splurges: £185
Other: £120
Any student loan/credit cards/overdrafts etc: £201 per month on a student loan.
MY MONEY THOUGHTS
My worst money habit: Overspending at the start of each month and being caught short at the end.
My biggest money worry: Not having enough savings for when we're ready to have a child and how I'll be able to take one year off on maternity leave on one salary (with a bigger mortgage!)
My financial hopes for the future: Having a larger property for a growing family, but with healthy savings and plenty of disposable income to be able to treat ourselves and have a good quality of life.
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.
Additional space is always appealing when considering starting a family. However, there are a few factors you need to understand when planning on upsizing, such as:
Working out what you can borrow
Buying a larger home to start a new family may be doable but will heavily depend on how much you can afford. Most lenders would lend an average of 4.5 times your annual income (subject to credit scoring and financial commitments such as debts). In your case, 4.5 times would likely mean you could borrow £213,750 based on your annual income. If you combine your income with your husband, you will likely get a bigger mortgage. Once you have worked out how much you can borrow, this will give you a better price guide when looking for properties.
Sourcing a deposit
Given the current climate, lenders will generally look for a minimum of a 10% deposit. As you don’t have much in savings, what you can afford will depend on your income and how much equity you have in your home. A simple way to determine equity is to work out the value of your property, then minus your remaining outstanding mortgage. You can easily explore recent properties sold on your street or speak with an estate agent to get a realistic property valuation. Remember that depending on the market, you may not get your existing home's asking price, so consider the minimum you can afford to accept.
Managing monthly mortgage payments
When considering upsizing, you want to know your monthly costs. Using a mortgage calculator, you can determine your likely monthly mortgage payment. Remember, interest rates may change, and the length of the mortgage term will have an impact. For example, a repayment mortgage over 30 years instead of 25 years will lower your monthly mortgage payments but add more interest over a longer term. If your mortgage payment is too high, it can put you at risk of getting into debt and falling behind, so affordability is crucial.
Controlling spending habits
Living from paycheck to paycheck is a cycle many people find themselves in, but if you want to get into lenders' good books, budgeting is key to gaining better control of your money. Figures show that you currently have a disposable income of £1,286.20 per month (£2,579.20 net income minus £1,293 expenses). Therefore, before your mortgage increases in six months, you have options of overpaying on your mortgage to build equity in your home more quickly and potentially lower your monthly payments or save a comfortable amount to build some savings towards a deposit or starting a family. It helps to set up a standing order from your current account straight into your savings to avoid dipping into the money and shopping around to get the best rate on your savings.
Seeking advice
Starting a family can be one of the most rewarding feelings, but it's a big step; you'll want to feel prepared emotionally and financially. This will likely mean changing how you manage your money now to enjoy the lifestyle you desire in future. I recommend seeking advice to help you find the right mortgage for you and your family and create a financial plan for your future. Financial planning will help you set goals for your future and provide a source of motivation and commitment. It also has emotional and financial well-being benefits to improve future financial outcomes. Best of luck.
Further Links
Baby costs calculator | MoneyHelper
Mortgage affordability calculator | How much can you borrow? | MoneyHelper
Home Valuation Form (zoopla.co.uk)
Welcome to Mortgage Advice Bureau | Mortgage Advice Bureau
Let's talk about money.
