Now- if you know me, you may know I am notoriously awful with money. If you don’t know me- I’m notoriously awful with money.
I really can’t explain where my bad spending habits came from as my family have never been well off, and growing up I certainly never had cash just going spare to spend recklessly… but somehow, I became a serial spender nonetheless.
I think ‘shit got real’ when I went to University, and received my student loan and maintenance grant, but was still living at home with my parents, where honestly, and shamefully, I contributed very little to the household. So all of a sudden I was 18 years old with a tonne of money in my bank account, and not a lot to spend it on. (Yes- I know what you’re thinking: ‘but Sophie, surely you spent your money on books and University supplies?’ no, as well as being terrible with money, I was a terrible student, too.)
So, I would have all this money in my bank account, and on top of that I had a free overdraft of £1,400! Free money– woohoo!
Every month I must have spent in excess of £400 on clothes, a lot of money on meals out and Costa’s, and just all sorts of other stuff that I didn’t need! And though I am broaching this topic from a humorous angle, it really was, and has been until quite recently, a serious issue. Schools teach you all sorts of very valuable stuff, but I think the thing that’s lacking are the life skills that pupils go on to need, and leaving school I had absolutely no idea how to manage money, nor the realisation that it would ever become a problem.
Fast forward a few years, to my first proper paid job, and oh wow- I have a quite large monthly income! I’m still living at home, but rent only equates to a small amount of that monthly income, so the rest is just an absolute joy to spend! New clothes, expensive trainers, Domino’s forever…
Then I decided I wanted a new car so, with my ever expensive taste, got my heart set on owning a BMW. A very big financial decision occurred, and I walked away with a BMW. I am still paying my nearly 10 year old car off for another 2 years, and it’s a whopping amount, not even counting insurance.
Christmas approached and with rent, car finance, car insurance, and all the other things I’d been foolishly purchasing, I decided a credit card would be a fantastic idea! With barely any hassle at all, I was granted a brand new shiny credit card, with a £3,000 limit. Again- free money, woohoo!! I quickly spent the whole amount and then had to extend the limit to £5000, and did the same again!
Basically, my spending habits were absolutely awful. Money had started to become a real worry for me, and when Oli and I decided we really wanted to buy a house together, I realised it was about time I made every effort to sort myself out.
So after much work and discipline, I am now in a position where I am gradually paying my credit card off, I am never in my overdraft (where I previously was every month), and I (sometimes) have money to spare, too.
Before we go into this *disclaimer* I am by no means qualified to give ANYONE money advice… in fact, in ordinary circumstances I warn people to not be influenced by me when it comes to money. However, now I’m in a much better place with my finances, I thought I’d share my top 5 tips on not making a total mess out of you finances (basically giving you an opportunity to learn from my mistakes.) Here goes…
1. Don’t get a credit card – it’s NOT free money!
I really didn’t take much persuading to get a credit card… if I could summarise the process of me getting credit card it would be:
Sophie needed more money quick
Sophie found out about credit cards
100 people told Sophie not to get a credit card because they knew how bad she was with money
1 person told Sophie credit cards are good because they give you a good credit score
Sophie got a credit card with a mega limit
The thing about credit cards is: yes, they’re great! They’re a great way to borrow small amounts of money, and give you a good credit score- IF you can pay it back each month without getting yourself into debt.
When I applied for a credit card they instantly granted my request and gave me a limit of just under 3x my monthly income, which at the time, I thought was great. What I should have done was lowered the limit to around £200, maybe £300, so that I knew that no matter if I spent that whole amount, I would be able to pay the whole amount off the next month.
Basically, I didn’t inform myself well enough, and I just spent and spent and spent, only paying the minimum payments, which they keep strategically low. In barely no time at all I was in a massive mess, knowing I couldn’t afford to pay off my credit card. In a hope to rescue the situation, I started transferring my whole months’ salary onto my credit card, with the plan to only spend £200 every month on all the things I needed, therefore paying off the card really quickly whilst still spending on it- needless to say- that didn’t work.
The situation now is: bit by bit, the debt is going down. I always make more than the minimum payment required, but never so much that I’m having to resort back to using the card- which I now don’t use at all.
If you are a sensible and frugal person, a credit card may be the way forward for you. People told me in the past to get a card and only use it for petrol every month and then pay it straight back- bumping up your credit score but not really doing much else in terms of helping you out with money or getting you in debt. However, if you are someone who finds managing your money difficult- AVOID credit cards. There are other ways you can get a good credit score, e.g. phone contracts, car finance, furniture finance, etc. that are less likely to send your further down the rabbit hole of huge amounts of borrowed money!
2. Speak to your bank!
Later down the line in my months of worrying about money, I got so upset that I decided to just call my bank and tell them ‘HEY- BANK! I SUCK AT MONEY! HELP ME!’ and it was a fantastic thing to do.
The bank I have my current account with spoke to me, reassured me whilst I was crying down the phone to them like a bloody big baby, and said we’d come to some sort of arrangement to help me through this time. They asked me how long I thought I needed to get myself on track so I wasn’t living out of my overdraft, and I said 3-4 months. So they wiped my overdraft fee for 3-4 months, and put me through to their money experts who gave me some tips on budgeting.
My credit card provider was equally as reassuring; but they couldn’t really do a lot for me, as my credit card was already 0% interest, and as I had been making more than the minimum payments, on paper it all looked fantastic. This really made me feel not as consumed as I was feeling.
Now I’m not that naïve that I think the banks just felt sorry for me and did their best to help me for that reason. I know that at the end of the day, when you use a bank you are their customer, and they will want to make sure you remain their customer. So if you’re having any problems or concerns- just call them and tell them because they might be able to help you out a little, for the sake of keeping you on board.
3. Meal plan
Starting to plan our meals is one of the BEST things that ever happened to my bank account! And, learning to cook properly. Mapping out what we were going to eat each day, writing down the quantities and ingredients, and writing out a proper shopping list just worked wonders. Buying fresh ingredients for proper meals may have cost me a few more pence than buying oven food, but home baking a lasagne that I enjoyed, was healthier, and fed us for the week in the form of packed lunches, was a great money saver in the long run.
Before I meal planned, I would just walk about a certain supermarket that rhymes with lanesbury’s, and put anything in my trolley at random. Once I meal planned I only got whatever was on my shopping list; and that cut the cost down by a considerable amount. So whereas before, I would spend anywhere between £80-120 on a shop, and probably end up going back in the week for more, I was spending around £40-50 instead. I then went that step further and started shopping at Aldi, and now my weekly shop for 2 people is around £20-25! So much money saved by just planning some meals and swapping supermarkets.
4. Create a monthly financial forecast
So, this is something I started doing recently, and I don’t know how I ever survived without doing it!
I use Microsoft Excel (because I’m posh like that), and forecast what my monthly salary will be spent on, by budgeting set amounts of money, for set items/area, which I categorise. For example:
Credit card: £___
To see on paper where my money is going, really helps. I have to think really carefully before allocating money into each areas, on what areas are the most important, and how I can manage everything I need to buy, without going into my overdraft. I use formulas on the spreadsheet to ensure columns are linked with other columns and cells, etc. and can take away or add up sums, so that it all automatically shows me how much I have left after I assign a certain amount to a certain area. So if it shows minus, I have to go back and re-allocate different amounts, and that’s where I realise I either need to cut back on something that month, or I have extra that month. It SOUNDS complicated, but if you don’t know how to do it- just google it, or look for some YouTube tutorials- it’s actually pretty easy to figure out. Having it written down, and working hard on it means I do my absolute best to stick with it. And on the same document, I have my spending list, which leads me onto…
5. Write it down!
What I mean by this, is basically writing yourself a manual bank statement each month.
Next to your forecast, create some more columns and write down:
- What/where you have spent your money (e.g. Selfridges),
- The amount you have spent (e.g. £23)
- The date you have spent it (e.g. 20/11/17)
- The category this would fall under (e.g. Extra/ Make-up/ Birthday)
Create a few more columns next to this, do some excel magic, and every time you input how much you’ve spent and in what category, excel will instantly take that away from your budget of that category, so that you can see how much you have left to spend in that area each month.
I do this every day, and it’s a great way to see when I’m coming close to nearly using up all my budget for a certain category, and this really helps me keep a track of the amount I’m spending, and what I’m spending it on.
And there you have it! Those are my 5 top tips!
Again, I am by no means a financial expert, but as someone who has, and does, find money a really difficult area, I have found these 5 things really useful in getting myself out of the red and into the black, and feeling more confident about my spending habits. I now have quite a large pot of savings, and the ability to say ‘no’ to myself when I want something I can’t afford!
So I hope this helps someone out there! My favourite money-related-saying used to be ‘whoever said you can’t buy happiness doesn’t know where to shop’, now I’ve definitely got a deeper understanding for that saying ‘money is the root of all evil’!
Let me know your top tips too 🙂