Saturday 6 June 2015

My mama used to say...

I'm trying to raise three responsible savers and spenders!

Well actually it was probably my Dad that used to say 'Michelle, don't go getting yourself in debt, only buy what you can afford. There is no use living a life that is beyond your means' and you know what? It sure took me a long time to learn that.

Now at the ripe old age of 41 I know he is right and that living in constant debt and therefore worry is no fun at all. Of course we all have debts - mortgages, loans and credit cards but the challenge is to keep them in check and to make sure they do not spiral out of control. I'm in the lucky of position of living in a borrowed house right now, which means we do not have a mortgage and on the one hand this is fabulous and eases my mind but on the other I then have the worry that we are not currently investing in our future. Luckily I have my eyes firmly fixed on God and that means I can let Him be concerned about the years to come and I just need to focus on being obedient and loving right now.

I often have conversations with my children about money and they all have their own bank accounts and savings accounts as we felt it was important to help their understanding of the value of money from an early age. My husband is a real advocate of the save more than you spend philosophy and this is the polar opposite of how I was when we met, so he had lots of educating to do with me!

Thankfully I have bought into the wisdom of having savings and despite being incredibly low earners right now we still put money away for our children each month. I thought it might be useful to share some of the principles we are trying to pass on to our children as they grow older. Here are our golden nuggets of advice  -

  1. You can only spend it once, so make an informed decision to spend your money on lots of small things (fritter it away my husband would say) or save it for the bigger thing, chances are you can't afford to have both.
  2. Save up for the big things. It is far too easy in this day and age to just buy things on credit and not to worry about how they will be paid for but if you put some money away each month and actively save you will probably really cherish that new sofa or luxury holiday when it comes.
  3. Having said that though, sometimes it is good to use credit when buying a large item. Even when we have the money to pay outright we sometimes take credit (if it is interest free) so we can leave our money in the bank earning interest and working for us.
  4. The other plus point of taking credit is that you start to establish a credit history and this is so important when you want to make a very large purchase like a house.
  5. If you are in a position where you have some good savings either consult an independent financial adviser or investigate the market yourself but make sure you find the best deal for your money depending on how risk adverse you are.
  6. Use your credit cards wisely. Personally my husband and I just have one joint credit card and we do all our spending on this. Every month we pay off our bill and we do not incur any charges but we do collect loads of clubcard points and this means each quarter we can get restaurant, cinema and days out vouchers that mean our family can enjoy some nice extras.
  7. You may think you will never need an overdraft but my advice would be to set one up on your current account  as then you will not incur a charge if you slip into it by a few pence (which has happened to me before). I don't mind paying the small amount of interest if I slip into overdraft but I hate the thought of paying a fee as I went into unauthorised overdraft.
  8. Of course it is important to actively manage your money. Don't just be passive, keep receipts and see what you are spending on different types of things and then make sure the money deducts from your bank account and the cheques come out as they should. There is nothing worse that thinking you are on top of your spending and then finding there are still cheques to come out for the month before payday!
  9. Set up all your regular bills to come out of your bank account by direct debit, that way nothing gets forgotten and you make all your payments on time.
  10. Set yourself up to manage your account online. I find it so much easier that I can do everything from my lounge at midnight as that is when suits me. 
I hope you have found this advice helpful, do let me know if you have any other tips for successful money management.

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