As Travie McCoy and Bruno Mars so eloquently put it in their 2010 hit, “I want to be a billionaire so freakin’ bad”. Sadly, for the majority of us, we’re not going to have enough money to be considered millionaires, let alone billionaires. Instead, we’ll be stuck in a cycle of working hard to earn money which is then instantly sucked up by boring, responsible adult things like mortgage, bills and food. Boo!
Despite my bleak – but pretty accurate – view of life, there’s not a lot that can be done about it. Money is fundamental to how we live, and without it, things can go south pretty quickly. It’s not until you get older – perhaps you get married, perhaps you have kids – that you realise just how important money is and how hard it is to get it.
You want the best life for your family, and sadly, that best life is related to money. Days out, holidays, toys, technology, clothes bla bla bla – it all costs. Sure, people say things like “there’s more to life than money” or “money can’t buy you happiness” – that might be true, but happiness also can’t buy a new pair of school shoes, pay for gymnastics lessons or take your kids to soft play hell.
I’m purposefully being facetious, but I’m being so to introduce a serious point – family finances. Money and finances is a really important topic, regardless of age. As a single, early twenty something, you might not give much thought to the future, but ten years later, you could find yourself with a wife and kids, ruing the time you ticked the ‘opt out’ button on your company’s pension form or when you spent your student loan on alcohol.
As part of getting families to think more about their finances and what they may need to do to get them in order, Aviva recently got in touch with me and asked me to share how we organise our finances. I’m no financial guru so please don’t take what I say as gospel, but what we do works for us and I like to think we’re on the ball.
Ultimately, if the below gets you thinking about your finances, and even better, makes you do something about them – be it taking out life insurance, switching your savings account to a higher interest rate or starting to track your expenditure – then my job here is done!
How do we manage our family finances?
The missus and I have always shared our finances. It’s not ‘her money’ and ‘my money’ – it’s a pot of ‘joint money’. It’s our family fund which we see as 50/50 regardless of who has contributed what over the 12 or so years of being together. It’s there to be used for the benefit of our family, rather than as individuals.
In fact, all of our finances are tied. We have a joint current account, we are additional cardholders on each other’s credit cards, we are jointly named on most bills, the mortgage is in both our names and we’re beneficiaries of each other’s pensions and life insurance. We even take advantage of the Marriage Tax Allowance, by which I transfer part of my Personal Allowance to her so that she pays less tax and we benefit from the tax saving as a family.
We both have a saver mentality, which makes it easier as we share the same outlook. Although we like to save, we’re also happy to spend – however, this is often done after careful consideration, joint discussions and finding a discount code(!) as opposed to going out and buying something because we want it. Getting ‘value for money’ is pretty important in whatever we do as this helps our money go further.
Having savings is key for us. It gives us reassurance and safety, particularly as I’m freelance which means my income can be varied. It’s also meant that we’ve been able to take opportunities that others haven’t. For instance, a focus on saving money allowed us both to be around when the missus was on maternity leave with L and Beetle – we basically lived on Statutory Maternity Pay and dipped into our savings to allow us to be together as a family.
For as long as I can remember, we’ve always had a good grasp of our finances and regularly track and update our financial position. This probably stems from my former life as a business consultant and love of a good ol’ Excel spreadsheet! This isn’t anything fancy, but it basically consists of having all assets and liabilities in one place.
For instance, this spreadsheet shows everywhere we have money (current accounts, savings accounts, ISAs, PayPal, pensions etc), as well as everywhere we owe money (credit cards, Student Loans, mortgage, loans from parents etc). It even covers those things that can be easily forgotten about which have monetary value, such as gift cards, random cash in the house or Tesco Clubcard vouchers and Nectar points.
This has numerous benefits for us. Firstly, it gives us an overall position of our finances and means we can easily see everything in one place. Secondly, it means we never lose track of a financial product, for instance, that rogue savings account from 12 years ago. Thirdly, it means we can be active, rather than passive, when it comes to our money. Rather than just letting it sit there, we’re able to make sure our money is working as hard as possible.
For example, we have a regular savings account which will mature next year, so we already know which regular saver we’ll open when this happens. Similarly, an ISA we’ve had for multiple years has just seen its interest rate drop, so we’ve been able to switch this to another provider with a higher interest rate straight away.
Something we’ve also been doing over the last year or so is looking at our finances on a monthly basis. With the missus being on maternity leave for most of 2018 and then me taking a step back from work to look after the kids, money has been tighter than it ever has. Therefore, we’ve chosen to properly track our income and expenditure – again, with a trusty spreadsheet!
This isn’t necessarily a tool to budget for the upcoming month, although it’s useful to have an idea of what regular payments we make. It’s more used to look at our cash flow for the previous month and then see the longer trend as to whether we’re losing money, making money or breaking even. Based on what’s happening, we can then do something about it, e.g. cut expenditure or increase income.
Thinking long term is important too. By the time we’re of retirement age, we should get a state pension – however, at the current £164.35 per week, that’s not going to go far! We’ve therefore always saved for the future by contributing towards a private pension through our employers, which hopefully will mean a nice payout in the future – although, just to remind you, the value of your pension can go up as well as down and you may get back less than you’ve paid in.
And, of course, there’s life insurance. If the worst does happen, you need to ensure that your family will be OK financially if / when you’re gone. For us, the missus has Life Insurance cover through work, whilst I have a private one I pay a few quid for every month. Hopefully it’ll never be needed, but it’s just there as a safety net.
When it comes to the kids, we’ve wanted to think about and plan for their future from an early age. We have no idea what life will look like when they’re older, but we know that money isn’t going to lose its importance. As soon as both kids were born, we opened bank accounts for them to ensure their money is separate from ours and not viewed as part of the same pot.
This has consisted of a high interest kids’ savings account and a high interest kids’ regular savings account. The former allows any money given to them (birthday, Christmas etc) to be squirrelled away for the future, whilst the latter allows us to pay in £50 a month from our own money.
By starting young and saving small regular amounts in high interest savings accounts, hopefully they’ll be in a decent position financially when that money is needed. We don’t have it earmarked for anything in particular as those choices and decision will be made with the kids as they get older, but it’s nice knowing they each have a steadily growing nest egg.
So that’s how our family finances are organised and managed. Ultimately, I don’t think there’s a right way or a wrong way, you just need to do what works for you. The most important thing though is actually doing something about it – life has a habit of kicking you in the balls when you least expect it, so it’s important to do what you can to get everything in order.
How do you manage your family finances? Is there anything you do that works particularly well? Is there anything you need to do that you’ve been putting off? Let me know below!
Disclosure: This is a commissioned post in collaboration with Aviva.