Leona*, 27, is a professional currently working from home in London, and planning to move in with her boyfriend. Here’s how she manages her money…
I’ve been lucky working in the banking industry not to be impacted by the pandemic. I still feel insecure and worried daily regarding my job security, as with everyone else, and want to take this opportunity to truly save some money – which is difficult when you’re moving into a new place in London.
My parents have always instilled the ‘work hard’ mentality and I have always had a job since I was about 16. I was fairly sensible money-wise previously, but saving was never really widely talked about. Our household pretty much had a ‘pay now, worry later’ approach to spending, which was not sustainable in hindsight. I was able to work and save post-university for an amazing gap year, but decided to move to London on a whim, sans job, and this rapidly depleted my savings.
My first job in a new city with new friends led to some irresponsible money decisions, resulting in two defaulted accounts two years ago. I still feel very ashamed of this, but since moving on from my first job, I have been lucky enough to start earning fairly well for my age/experience. It also helps that my close friends are great with money and my boyfriend is also financially responsible – they have all inspired me to be better and take full responsibility for my financial actions.
I am moving in with my boyfriend next month, which is exciting. He has the right balance when it comes to money of treating yourself in moderation (nice meals, drinks, nice clothes/art), but still being sensible. I am definitely more frugal now and more into ‘deals’ than he is, but I am hoping our attitudes to money complement each other and we’ll still be able to save a fair amount each month.
MY ACCOUNTS
Current account: £839. 08
Savings: £3,497. 56
Lifetime ISA: £1,005. 27
Other: £1,315 in various Monzo ‘pots’: £480 for a holiday that may not happen; £35 for a wedding which has been cancelled, but I bought an item that still needs to be paid (pre-ordered but the shop is still yet to open); £150 for my boyfriend’s gift and meal at home; £650 for my new place’s first month’s rent.
MY INCOMINGS
Wage pre-Covid-19: £25k, just over £2,000 per month
Wage post-Covid-19: Same
Other incomings: none
MY OUTGOINGS
Bills: ~£650. I am lucky that my rent is only around £550, which is almost unheard of in the area I am living in in London.
Other: £9. 99 for Spotify Premium subscription, £10 donation to Shelter, £31 phone bill, £80 in bank loan repayments when I first moved to London, £5 for overdraft fees, £137 for a monthly Oyster card and £75 for the gym (both of which I’m not having to pay during lockdown). £10 for a weekly veg box.
Splurges: At the start of the lockdown, I equipped myself with some decent quality gym equipment, a new sports bra, some art materials and a nice puzzle from an artist I admire which was £90, but my justification for this spending is that these things will assist in my personal development and are long-term purchases rather than single-use splurges. I am also known to splurge on nice ingredients and wine (bottles for £20-25 every fortnight or so), but nothing too bank-breaking.
Weekly budget: Normally, I would budget £400-£500 depending on the month and whether there’s a big occasion happening like a birthday or trip away. During the lockdown, I’ve managed to spend just £250 a month and this has included ‘nice’ treats such as a new book or a nice bottle of wine. I was lucky to have had some meals provided for at work, and I also curbed my fast-fashion habit a couple of years back, so I never have the urge to online shop anymore.
What I spent this month: £1,465. 13
What I was left with: £0 – the rest of my paycheque have gone onto my savings, paid off some of my overdraft and onto my Monzo pots. I thought I would have over £200 left, but since we managed to find a property to move into next month, I paid for my half of the holding deposit (£150) and bought a couple of homeware pieces as housewarming presents to us.
Overdraft: I am currently in my £1,000 overdraft. While I do have the means to pay this off immediately, I believe it’s more sensible currently to stash my cash for a rainy day, especially as the interest only costs me £5 a month.
Bank loans: £80 a month repayments for a postgraduate loan from my bank. My friends and family don’t know that I took out a loan (£3,000+) to subsidise my move to London, and tide me over before I finally secured my full-time job.
MY MONEY MOOD
What I want to save for: Short-term I want to put away three months worth of expenses this year as an emergency fund, and put the rest of my savings onto my ISA/high-rate (as high as would go at the moment) savings account. Then I’d like to up my emergency fund to six months worth next year.
How I want to plan for my money in the future: Once I have my emergency funds in place, I want to keep contributing to my ISA, look into upping my pension contributions massively and start investing. I would use my LISA to hopefully buy a property by the sea in the future.
My worst money habit: I do prefer ‘premium’ brands as do believe in quality vs quantity. This can sometimes be a hindrance when trying to save money (i. e. choosing premium washing-up liquid as opposed to the store’s own brand – unnecessary at the best of times).
My biggest money worry: Not being able to buy a house when I am able to (financially and mentally) due to the two defaults I have under my name. I won’t be looking to buy for another three-four years and the defaults were on my account two years ago, so hoping that will be enough time for it to be cleared.
Current money mood: ? ? ? ? ? ? ? ?
WHAT OUR EXPERT SAYS
Prerna Khemlani, founder of This Girl Invests
1. Reduce your overdraft fees If you plan to pay your overdraft fees within the year, consider transferring to an account with 12 month interest-free arranged overdraft. For example, Nationwide’s FlexDirect account which offers a year’s 0% overdraft (provided you haven’t had a FlexDirect account before). This will help you save the monthly cost which you could use elsewhere. Alternatively, banks are offering a £500 interest-free buffer during COVID-19 so might be worth asking your bank if this is available to you.
2. Investigate money transfer cards I don’t have all the details of your postgraduate loan but consider clearing it off if the interest is high. It might be worth looking at a money transfer credit card which will pay cash into your bank account which you can use to pay the debt. You will then owe the credit card company that money with a period of time where you pay 0% interest.
However, beware as you pay a tiny fee for this and it is only useful if you pay the money back in the given period and avoid the interest rate hike. This is known as the ‘money transfer’ method and is useful if your loan is under £5,000.
3. Check your credit rating You are right in thinking that the longer a default has been on your credit record, the lower the chance it will impact your mortgage application. Defaults tend to stay in credit records for six years after default, after which you can think of ways to improve your credit rating. Even if you know you have defaults, you should still check your credit rating to ensure there isn’t anything else on your file which might adversely affect your chances of being approved for a mortgage in the future. It is always helpful to know where you stand with your credit rating so you can work towards improving it. Find ways to improve your credit rating in the Money Advice Service’s website.
4. Speak to a mortgage advisor There are several mortgage lenders who approve mortgages for borrowers with defaults. Mortgage advisors know the lenders with favourable rates and terms for borrowers with your circumstances. Therefore, working with a mortgage advisor can help you locate these lenders quicker, without the hassle of having to speak to many high-street banks or researching online. Even if you’re not buying right now, it is worth chatting to a mortgage advisor to find out what is available and how much deposit you would need.
5. Consider investing You’re clearly considerate with your expenses given you use ‘deals’ and have curbed your shopping habit in order to save – maybe it’s time to consider investing for your future too. The savings you have lose value year on year to inflation and interest rates at the moment are very low. Once you’ve saved your desired amount for your emergency fund (three-six months), you can start investing the rest. Usually if you don’t need the money within the next five years, it is worth investing it. Join us at one of This Girl Invests’ Sunday Sessions to find out more.
