Let's Talk Finance
Often a topic that is swept under the carpet, our personal finances is simply something we don’t want to talk about! To what extent can you blame people? When your finances are under scrutiny it’s very easy to judge someone based on how they handle their money, however, sometimes a lack of discussion can be the very reason people are struggling in the first place.
The importance of an open an honest discussion on finances and savings is more relevant now than ever. With student fees through the roof, uncertainty in the job market and a pressure to “look good” for social media as well as rising living costs, it’s no wonder people are struggling financially. I’m not suggesting that everyone has financial problems, however, many people struggle with the foundations of budgeting and are suffering the consequences with no-one to turn to.
For many of us, we are taught to keep the discussion of money to ourselves, yet there is little education on how we should manage our finances and expand our income. Those who do want to better their finances and try to reach out will have heard “ooh you can’t ask that!” or “you’re being rude” which are often the remarks that surround financial conversations.
But why not? Although I understand that this is private information, it’s clearly something we must discuss and talk about since many people (particularly students and recent graduates) are finding that their credit scores are plummeting due to poor money management. I wonder how we live in a world where we are able to disclose financial burdens when in need but can’t ask for advice from those who are wiser with their money because of the fear of pride. If we can hit up friends and family to borrow money, we should also feel a sense of safety in discussing how to finance better in the same breath without fear of judgment. I appreciate that this is an ideal world for some, but I believe it’s more of a fear and assumption that is hindering others from seeking help. The only person suffering is your bank balance.
Now I’m not saying we should all start asking intrusive questions like “how much do you have in your account right now?” or “how much do you earn?” - those are questions that the individual should be comfortable to talk about, and one for tighter friendship/family circles, if that. However, there are questions that we can ask that may help us gauge an understanding into how to save or manage our finances, especially if it’s something we’re struggling with personally.
Digging deeper
Many financial problems could have been avoided if behaviour had been corrected earlier, yet the signs are sadly brushed aside until the problem is too big to run from. This is why access to general information can be very helpful and can prevent an individual from feeling lost in the financial world. An idea of the average saving percentage of income per month can really let others know if they are on the right tracks and put their finances into perspective (or be that kick-up-the-butt that is so desperately needed). Others may want to know what to do with their money or seek guidance on how to flip their coin. Although Google is our best friend, advice from someone we know in a similar position or people we look up to can be far more valuable. Besides, even Google is prudish with this information so individuals may leave feeling even more lost.
I can’t say I've ever had a problem with my finances and have always been way ahead of the game in that respects. My only issue has been wanting more money, though I’m sure it’s an issue many can relate to! From a young age, I have learnt to budget and live within my means. It wasn’t something that was necessarily drilled into my head but from a young age, I was always aware of the value of money. My parents worked tirelessly to provide us with (pricey) extra-curriculum activities, and once multiplied by four, the costs certainly added up! This meant that there was little left over for the “fun” things and the latest gadgets. Thankfully, technology had not developed properly so the demand for the latest iPad was not something my parents had to face.
What I did learn fairly quickly was that if you didn’t watch how you spent, these things could have detrimental consequences later on. I’m not sure if this is just an African thing, but my mother would never get anything unless she paid it in full. Things weren't bought on the assumption that “more money is coming” so anything we wanted, we had to save until we could afford it. This deterred me from any sort of “borrowing” as I had already associated it with “debt” and insufficient funds. It was embedded in my head that if it was not something that I could comfortably afford, it was not something I needed.
Having watched people struggle to meet payments, particularly when they had all the materialistic things would baffle me as a child. How can one have everything yet be asking for money? It never occurred to me at the time that people were simply not saving and never thought about the future, but rather lived in the moment. The way I saw it was that just because you may be able to cover the total price, it doesn’t mean you can afford it. What do I mean by this? Well, if I wanted to book a luxury holiday for £2000 but only had £2100 left, I can technically buy it, but I would have nearly nothing to live from. This is an irresponsible purchase.
I know it sounds like common sense, but you’ll be surprised how reckless people are willing to move for something they know they can’t afford right then, and the stigma of saying “I’m broke” for fear of rejection or exclusion is something I’ve personally witnessed many times. As a result, you see people taking out loans, credit cards or borrowing from others just to keep up with the lifestyle. This only leads to more debt (and possible friendship breakdowns) as the loan becomes increasingly difficult to pay back and a possible black mark next to your name. The bottom line. It just isn’t worth it in the long run!
For any purchases (big ones in particular), I tell myself that if I can’t afford it three, maybe four times over, it is something that is not within MY budget. This doesn’t mean that I don’t have the money, it just means that I don’t have the disposable income I desire at the time to purchase whatever it is I want. In this day and age, “image culture” is often the downfall of people as they try and keep up with current trends despite their bank balances screaming out for help. There are too many people taking high financial risks by purchasing luxuries they really can’t budget for and then wonder why their finances are in shambles. Believe me when I say I will look at you straight in the eye and claim that I am broke knowing full well I have money sitting in my account. It’s also things like that which will make others think that we're all in this together (cue High School Musical), but my friend, please believe that one person’s “broke” may not be your “broke”.
The best tip I can give anyone here is to set themselves a “minimum” balance which you have mentally decided you will not fall below (consider this the “broke” thresh-hold). Whether that’s £500, £1k, £5K or £10K etc, make sure you set your limit and stick to it. Having a limit will drastically help you manage any emergency costs and help you sieve out unnecessary costs.
Putting it to the test
I decided to see how difficult the “money talk” really was and asked 16 contacts from different backgrounds, ages and incomes about their finances. In total, I got 13 replies (some in detail) and we were able to have an open discussion about what we wish we could have changed and what we would do differently. My question was slightly abrupt but to the point: “If you could go back in time, how would you manage your finances better? What would you have done differently?” This was followed by a secondary question: “Were you taught about managing your finances at a young age or did you have to learn the hard way? What age do you think we should be taught about finances and savings?”
Contrary to popular belief, I was pleasantly surprised by the response. I found that people were more willing to discuss finances than I had first anticipated. Could that mean that this taboo is in our head? It seemed that my friends were willing to discuss issues of money management and were willing to share with me their experiences, whilst also sharing lessons they had learnt from poor decisions or missed opportunities regarding saving, investment and spending habits.
The friends I asked ranged from the early twenties, into the early forties, from students to graduates, to those deep into their careers and those who are near retirement. I tried to reach out to a varied range of people including, those hardly earning or who have struggled with money (and live cheque by cheque) to those who lived comfortably and were at the peak of their career or have a large disposable income. I tried to gather a range of people to see if there was a common denominator and to see if we could identify problematic traits across the board.
Although I didn’t get an in-depth response from everyone (I didn’t tell them why I asked at first), those that did gave me valuable insight and confirmed things that I had found in my own experiences, helping me identify a trend. I also learnt one or two things I didn’t know regarding investment, and these were all things I learnt through reaching out to those around me.
The results
“If you could go back in time, how would you manage your finances better? What would you have done differently?”
With question one, my main response was to “spend more wisely” and change the way they viewed temporary thrills such as going out and partying. What it really whittled down to was an overall agreement to “save more” and not spend so much on things like relationships (from both sexes before you make noise), takeaways and opening a savings account (to help put money aside). The rest were happy with the way they managed their finances and felt like they had approached it in the right way, however they felt like they could have utilised with different streams of income through side hustles (eg some sold cookies/sweets/drinks at school, others sold hair, clothes and other goods. Other examples were utilising on skills they had such as doing hair or makeup, just to name a few).
Would you have changed anything? In response to this, most said invest! Whether this was in property, businesses or shares. This is also known as passive income and is a great way to grow more money with little effort. For this, you really need to research into the market of your field(s) (whether that’s A.I, Stock markets, Housing or Small businesses), research is key and can be highly rewarding. A male friend commented on how he had the opportunity to invest in a beauty business. He turned down the opportunity thinking that it was not of interest and not worth anything only to later find that it would have generated him hundreds of thousands in pounds. Sometimes investment isn't about what we are interested in (although that helps with knowledge), but rather investing and researching into what can generate the best returns.
Of course, investment comes with high risk, but if you’re smart and well researched, you can reap the benefits. I’ve personally invested a little but never took major risks. I’ve also invested in small businesses and in people that I believe will become successful in the future. The greater the investment, the greater the risk of loss, so if gambling your income is not something you’re comfortable with, I’d stick to savings and look into things like ISA’s etc (talk to your bank).
Were you taught about managing your finances at a young age or did you have to learn the hard way? What age do you think we should be taught about finances and savings?
Many of the responses echoed the same thing: that finances weren’t explicitly taught but parents had made them aware of “saving” even if they didn't get told how. Those from richer backgrounds found that they didn’t start thinking about saving and money until later on since it was never an issue and wasn’t something they had to think about whilst others saw the struggle from their parents and vowed to save from early to avoid the same situation. Although I never got given pocket-money myself, those that did said that it helped them save and is something they will implement for their children. Say they got £10 a week, their parents would encourage them to hold onto the money until they could afford whatever it was they were after.
In teaching this, they learnt that if they saved their money, they could get what they wanted without having to ask and felt financially free. A few, like myself, commented on the fact that they liked to save and watch their savings grow and it was this (lowkey) addiction to saving that kept them grounded. By having savings, you enable yourself to do things when you want and can prepare for a rainy day without feeling the hit on your pocket. A common response to the second part of the question was that finance should be taught at school, perhaps alongside math, and should also be taught upon the introduction of money (eg getting pocket money). Others suggested later on in life, such as during university or slightly after, to allow the individual to get their spending and “fun” out of the way before knuckling down and saving for the future.
Overall, the results confirmed that although people had been generally OK with their habits, there was a need for guidance from an early age - ideally in schools. Many people save because that’s what they were told to do but never know what they were spending or where to put their money in the first place. Although stacking and saving seems to be the best thing to do, a balance is definitely needed so that you don’t feel like you’re missing out later on in life. Another form of investment could also be in yourselves, through travelling, or simply learning a new skill which may help you in your future career or help with making money on the side (eg beauty, PT courses, website builders etc). Some responses said that regardless of whether they managed their finances well at an early age, making mistakes from a young age also helped them appreciate the value of money later on in life.
Financial freedom
One of my biggest goals is financial freedom, which means the ability to do as I please without financial constraints. I touched on this briefly in the responses above but this is often the reason that I am able to book flights on a whim or agree to last-minute motives. Financial freedom does not correlate to income (which is often misunderstood) and many individuals on big incomes may still find themselves in debts. I have personally been asked to borrow money to people on greater incomes than me so what does this really whittle down to? This is mainly down to two reasons: The first, an inability to save sufficiently.
As income is coming in, it’s easy to splash excessively on the finer things instead of putting money aside for another day. This means that by payday, money has already left the account faster than it had entered and so begins the cycle of living pay cheque to pay cheque. What once was a very healthy salary, is reduced to nearly nothing, after spending, nights out and bills. This leads me to my second point: a greater income means greater spending. As individuals find they have more disposable income, their taste becomes richer and the need to save is not something at the forefront of their mind as they’re used to a constant flow of cash. Those that have suddenly become exposed to an increase in income often fall victim as a result, and often tend to squander their money without realising. As one becomes more accustomed to their new lifestyle, it can be difficult to stand back and assess if their finances are in check.
Students often fall victim to this when student finance drops, as a large sum of money is being deposited at one time. In circumstances as this, many students fall into the trap of spending it all and forgetting to transfer money over for costs later on in the months. As a result they end up in their overdrafts and find themselves paying for it the hard way in their postgraduate years. The best thing I’ve found for myself is sending over 50% of my income into savings straight away and then transferring what I need when I need it. In doing this, you are less likely to spend any disposable income as it is hidden in a different account. When you look at your account and see that it’s nothing special, you’ll be less likely to splash out and will find managing your money a lot easier. Putting money aside for different purposes will also help you distribute your savings better and maintain it in the long term. If you’re someone who likes to travel, setting up a “travel fund” will allow you to book your flights with the knowledge that you’re not compromising your income. Similarly, you can do this with other things such as a rainy day, emergency funds, medical bills, the latest gadgets or a new car. Whatever your reason, sometimes having a purpose to your saving will allow you to say “no” to things that don’t serve your purpose.
Having an open and honest discussion about money and finance is something we must bring to the forefront of conversations. These are things that we must teach schools and implement from an early age but with REAL information on what to do or where to go. In our younger years we have less financial responsibility and dependencies so this is a crucial time to save any income. This will greatly help in preventing unnecessary use of credit cards (except when building credit) and will prevent a lot of problems in the future when it really matters.
With the greatness of technology, there are many mediums that we can seek to gain more knowledge, insight or training. There are a few blogs which focus on money management as well as Podcast and books. Social media also offer great platforms for people to help others. Dr Tayo Oyedeji is a brilliant person to follow on Twitter. I only stumbled across him recently but he drops some serious gems and talks in detailed threads about finance and money management. Check out his timeline for a thorough discussion on personal finance and investment and give the guy a follow. He’s not someone I personally know, however his content is consistent and very insightful at times! Dan Lok is also one to follow on Instagram and gives insight into different streams of income, amongst other things. Of course, there are plenty more I haven’t mentioned but quick research into a particular area will help you broaden your knowledge and increase your income and savings.
So what can I do to manage my money better?
My personal tips are as follows:
Live beneath your means - It doesn’t mean you have to live in a bad state, but living beneath your means not only focuses you in your habits but allows you to live comfortably whilst also giving you an opportunity to save on the side and help you become financially free.
Save monthly - Whether it’s 5% or 50%, make sure you put some money to the side where you can. I know this is easier said than done at times but following tip one should help you achieve this goal. It also means that should you lose your job or circumstances changes, you are able to dip into your savings without taking out a costly loan (aim to save at least 6 month’s worth of your living expenses).
Budget your finances - This can be a little tricky for some, however, budgeting is key to staying on track and achieving your goals. Once organised, you won’t even realise you are saving! Thankfully people such as Toni Tone have created budgeting templates to make life a little easier! You can check out her cheap and helpful budgeting template and use it to better your budgeting.
Plan ahead - This goes alongside saving monthly. If you are aware of something in the near or far future (maybe a holiday, birthday or wedding), planning ahead will allow you to manage your finances better and avoid any last minute surprises!
Find multiple streams of income - Never rely on one line of income if you can help it. Try and utilise any skill you have and see if you can monetise on that! This means that should your main line of income stop, you are still able to stay afloat through side hustles. I know the economy is tight, so utilising on a skill you may have or investing in new ones can really make a difference.
Do your research - I can’t stress this enough! You may have the money to invest or save and then fumble your bag by investing in the wrong things or putting your money into the wrong savings account. It always pays off to do your research and look into the market, or set up a financial review with your bank to point you in the right direction. Whatever it is you choose to do with your money, make sure you are well informed!
If you have any questions or want to discuss more on anything I’ve raised, please feel free to message me or contact me on my socials! I hope this information has been valuable to you and wish you all the success in your finances. Keep your eyes peeled for more discussions on #MoneyTalks and how to build credit / what side hustles to look into! Stay tuned…
Liz x
Photo credits: Josèmaria Muendo