Welcome to How I Made It Work — Bustle UK's financial series which aims to demystify money and the process of achieving financial stability. This time HIMIW hears from a 33-year-old financial coach who owns a house in Brighton and recently took a significant pay cut in order to reposition herself in her career. Read on to find out how she made it work.
Occupation: Financial coach
How would you describe your current financial status?
I became self-employed at the start of this year to focus on my financial coaching business. Previously, I was earning a very attractive salary working for an investment management company for 10 years. In terms of income, I am currently earning the lowest I ever have since leaving university in 2008, but this was a planned and conscious decision that I was financially prepared for. I am therefore comfortable with my financial status and I am very excited to see how it progresses from here.
What is your current salary and how long have you been earning this amount?
I was earning £71,000 per annum plus bonus until December 2018. My first graduate job was £35,000 per annum plus bonus in 2008 and it gradually increased over ten years. I went freelance in January this year and earned £2,000 in my first month.
Do you receive regular financial help from friends, family, or a partner? If yes or no, how do you think this has impacted your relationship with money?
I do not receive regular financial help from friends, family, or a partner. My parents helped me fund a bathroom renovation a couple of years ago, but we agreed a repayment plan before they loaned me the money. Money is a source of independence for me so the ability to earn it and manage it myself is important. I was also very conscious throughout my twenties that I was earning significantly higher than average and I therefore tried to be generous with my money as well. This set a good foundation for having space in my budget to give to charity and temporarily help friends with money if they needed it. I have experienced money being a source of tension in relationships so I consciously try to talk about it openly and honestly with friends and family.
When I first moved to London and I was earning a good salary, money meant "status" and "fun."
How would you describe your relationship to money?
I have a positive relationship with money, but it has taken me a while to get there. I have spent a lot of time reflecting on what money means to me and what emotions I have attached to money at different times of my life. When I first moved to London and I was earning a good salary, money meant "status" and "fun." I spent a lot on nice clothes, cocktails and lunches out every day. I didn’t go into debt, but I didn’t save either. When I wasn’t enjoying my job, money meant "treats," and I bought expensive things because I told myself I deserved them for working so hard at something I didn’t enjoy.
As work became busier, money became "convenience." I spent more on travel because I was always late, I bought every meal out because I was never at home to cook, and I paid for a personal trainer because I didn’t have time to go to the gym. The emotions I was attaching to money weren’t serving me. I was embarrassed about how I was spending and I wasn’t getting closer to achieving my longer term financial goals.
How did you achieve financial stability?
I had a high salary for 10 years and saved/invested a lot during this time. I knew that I didn’t want to work in financial services for my whole career, and that was strong motivation to save while I could. I automated my savings and set clear goals on how much I would save and where I would save it, so it was easy to track progress and hold myself to account. I paid attention to how much interest I was earning on my savings and I switched accounts if there was a better deal. And I invested my longer term savings in the stock market (money that I knew I was going to save for five years or more). I also bought a flat with a second room that I could rent out as a second passive income.
I have had part-time jobs since the age of 16
If you feel financially stable, has this been the case for most of your life, a few years, or is it a very recent thing?
I have felt financially stable since leaving university. At times this has been because I had a good salary and at other times because I was saving towards my goals. I didn’t feel financially stable during university because I was living off my student loan, so I worked in the holidays to earn some money. I have had part-time jobs since the age of 16 and I was always taught by my parents to earn enough and save enough but to make sure I enjoy spending money on things I love too. Otherwise what’s the point? My parents didn’t come from well-off families, but they worked really hard to build a comfortable life for my sister and I. This is where my good work ethic and independent streak comes from.
Do you own any properties?
Yes, I own a two-bed flat (leasehold) in Brighton. I saved for this myself and bought it at the age of 29 in 2015.
How did you come to own your home?
I didn’t receive any help. I saved enough for a 10% deposit plus all other costs (stamp duty, legal fees etc) myself. There was a "save as you earn" scheme at work that really helped to boost my savings. My employer invested a set amount of my salary straight out of my pay check each month into shares in the company, at a discounted price. Then after three years, you could sell the shares at the current market price (or receive your money back if the share price had gone down). I saved into this scheme, plus I had a direct debit into my ISA at the start of each month. And on the day before pay day, I asked my bank to transfer any money leftover in my current account into a savings account. These three techniques were easy because they were automated and required no effort from me each month.
I also lived more frugally when I was saving for the house. For example, I didn’t stretch my budget when it came to renting in London and I learnt to love walking and taking the bus to reduce TFL costs.
In terms of choosing which property to buy, I looked at places that were likely to hold their value (good location, period features, outdoor space, lots of tourism). I also didn’t take the maximum mortgage a bank would offer me. I only looked at properties that required a mortgage I was confident I could afford, even if I reduced my salary over time — I was determined not to be trapped in a job I didn’t love because I had to pay my mortgage. And I chose a property that I could afford on my own but that also had a spare room I could rent out for additional income. I also factored in renovation and decoration costs into my budget before I committed to buying the house.
I am consciously thinking about the impact my money is having from a sustainability perspective
What does financial stability look like to you?
Financial stability to me means being able to live life on my terms without being constrained by money. It means knowing how much money is "enough" for me and the lifestyle I want today and in the future. It means being able to choose how I spend my time: maximising how much time I spend doing what l love and minimising how much time I spend just earning money. Combining the two and earning money by doing what I love is the ultimate goal. For me, this means travelling in my converted camper van making money through my financial coaching, helping others to feel better about money. Financial stability doesn’t mean being rich, making lots of money or being able to retire at 45 (although that would be amazing!) It also means having a stable and healthy relationship with money and feeling positive and proud of how money comes into and out of your life.
Increasingly, I am thinking about financial stability in the wider context of the planet and society too, and I am consciously thinking about the impact my money is having from a sustainability perspective (both where I spend it and where I save it).
What advice would you give to younger women who are worried about achieving financial stability?
- Be very clear on what financial stability means to you. If we are always striving for more then what we have will never be enough. Celebrate the progress you are making along the way.
- Set very specific financial goals. e.g. instead of "I want to save more this year," say "I want to save £1800 this year by transferring £150 on the first of the month to my savings account. This will go towards my house deposit or my holiday travelling fund."
- Engage with your finances. Set time aside each week to review your finances and your financial goals.
- Don't be afraid to talk to your bank or bill suppliers or seek out financial coaches/advisers. It really helps to talk to professionals about how to be better with money, just like we would talk to doctors, nutritionists or personal trainers about our health.
- Small actions make a big difference. I’m not talking about skipping your daily coffee, I mean cancelling an old direct debit, or negotiating a lower bill, or switching banks for a £150 bonus, or setting up an automated savings transfer each month. One action like this every couple of weeks really will be game changing.
- Take responsibility for understanding all the ways your employer can help you. Be clear on how the pension offer works and any other financial benefits that are on offer.
- Find a book, podcast, website or social media account on personal finances that you like and actively follow the tips and tricks.