This is Money has launched a ‘money diaries’ series to reveal the spending habits, along with financial goals and worries, of ordinary people aged 18-35.
We will look under the financial bonnet and analyse spending habits over the course of a typical month, followed by tips on what they can do to achieve a brighter financial future.
The series is written by Grace Gausden, who offers tips and general guidance to our readers that draw on the rest of the This is Money team’s knowledge and experience. We will also speak to financial experts to ask their professional advice when we feel it is needed.
In the first of our series, we speak to a 28-year-old from London, working as a junior specialist at an auction house, on a decent salary but struggling to save for a home.
She reveals her worries about not being able to fully enjoy living in a city, what her biggest financial fears are, and what she hopes she can achieve in the future.
This is Money Diaries: Our new series looks at how much those aged 18-35 spend each month and tips to help people achieve their goals
Occupation: Junior specialist at a London auction house
Salary: £25,000 per annum (paid on the 28th of each month, or the closest day to this if it falls on a weekend/bank holiday)
Take home pay: £1,469 (after tax, student loan and pension)
Outstanding debts/loans and what are they:
– Credit card debt: £1,279.73 on a 0 per cent interest card until end of 2019
– Student loan debt: £32,262.45
Bank balance before pay day: £288.97 (current account). I normally get paid on the 28th of each month, but as it was Christmas we were paid early on the 21 December so normally I would have a lot less in my current account the day before pay day.
A lot of the time I have to transfer money back from my savings to get me through to the end of the month.
– £2,516 in a stocks and shares Isa (4/10 risk level, annual return of 1.3 per cent on 28 January 2019)
– £146.39 in a Lifetime Isa.
– £5,600.57 in my savings account (with an interest rate of 0.1 per cent).
– I currently pay £50 a month into my pension, the minimum amount, as my workplace will only match this sum.
Financial goal short-term (what would you like to achieve in a year’s time): I need to pay off my credit card debt before the end of 2019 to avoid paying any interest, so I will be increasing my payments near the end of the year.
I also want to have at least £11,000 in savings combined across my savings account and stocks and shares Isa.
I would also like to increase my Lifetime Isa payments as I am concerned about not having enough for my pension when I’m older.
I need to also understand how to use my investment app, it has quite a complicated interface and it is a little confusing to know what kind of funds you’ve bought.
Financial goal long-term (what would you like to have achieved in 5-10 years): To have saved enough for a deposit on a house of at least £20,000 to combine with whatever my boyfriend is able to save.
The £20,000 goal is based on saving at least £300 per month for the next five years.
My boyfriend and I are aiming to be able to move out of London to a more rural area and maximise our deposit.
Ideally, I’d like to be able to put a deposit on a house in less than five years, but as my salary is not competitive and quite low it could be hard to do so in a lesser amount of time.
By putting more money into a Lifetime Isa, it can be quicker to save for a deposit on a house
Financial concern, what is the single biggest financial concern month-by-month: I am very budget conscious as I know I don’t have much to spend. I don’t drink, smoke or go out partying.
Whenever I make a purchase I feel an immense amount of guilt and will agonise over spending money on things – asking myself over and over: do I really need it?
It would be nice to be able to afford to go out to more things like the theatre, ballet, or cinema seeing as I am living in one of the most culturally happening cities in the world.
Whenever I do make a purchase, I feel an immense amount of guilt and will also agonise over spending money on things, asking myself over and over again if I do really need it.
In hand with this, I worry about not saving enough to secure a good future for myself, asking questions such as will I have enough for a family, house and retirement.
I constantly feel like I am spinning financial plates and at any moment one could fall and smash.
|Expenses from joint account||Total Cost||My contributions|
|Water (Thames Water)||£46||£23|
|Council Tax (Lewisham)||£97||£48.50|
|Internet (Virgin Media)||£41.98||£21|
Summary: I have taken a look through your monthly statement – and your monthly spend for the big items is listed above and comes out of a joint account with your partner.
There was one noticeable expenditure when looking through your spending – and that was on fresh fish.
Money spent in current account in week one: £533.85
Week two: £415.12
Week three: £30.03
Week four: £10.78
Over the course of the month, £46.39 was spent from your account on fish – which equates to 3.16 per cent of your monthly salary.
You also spent another £23.40 at a cheesemonger over the month which has worked out at a total of 1.6 per cent of your monthly salary.
As this was spent from your joint account and you say you split that equally with your partner, this means overall you are spending £34.90 a month on this – which is money that could be saved elsewhere.
It is also worth noting that you and your partner are paying £41 for your internet, which seems high.
Otherwise, it would seem that you are very frugal with your spending and only spend on going out for the occasional dinner and cinema trip.
Expensive: It can be difficult to save money when in London due to the high cost of living
Tips: While it is good to hear that you are keen on saving as much money as possible for your future, it is also wise to take care of your finances for the here and now.
It’s good to support local businesses such as cheese and fishmongers, but if you can find a way to cut down on this, you could potentially save up to almost £1,000 a year, which could be diverted into an Isa or other savings account, meaning you are one step closer to achieving your goal of getting a property.
It may be worth using a price comparison website to see if you can cut down on your internet bill, as paying £41 a month seems quite high.
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For example, by switching to Now Broadband, you could be paying just £18 a month, meaning for the whole year you will be paying £240.99 – after including the £24.99 activation fee.
This could save you £262.77 a year – just by switching provider – which means this money can be put towards your Lifetime Isa or savings account instead.
It could also be worth checking to see if you could save any money on your gas and electricity, although the £38 you already spend seems reasonable.
You have also said that you need to pay off your credit card by the end of the year to avoid paying any interest.
You have two choices here: up the amount you are paying off to get rid of it quicker, or continue to chip away at it and shift it another zero per cent card, giving you extra time to pay it off.
|Wage (after tax, student loan & pension)||£1,469|
|Rent bills and food||£790||transferred each month to the joint bank account|
|Phone||£7.50||paid out of current account|
|Credit Card||£50||paid out of current account|
|Gym||£24||paid out of current account|
|Stocks & Shares Isa||£200||paid out of current account into Stocks & Shares Isa account|
|Lifetime Isa||£25||paid out of current account into Lifetime Isa account|
If you are determined to save up to buy a house in the next couple of years, it could be worth upping the payments you make into your Lifetime Isa, as this bags you a government-backed bonus and you can withdraw the money tax-free when buying a home.
You are currently only paying in £25 a month into your Lifetime Isa – as opposed to the £200 you are paying into your stocks and shares Isa.
It could be worth focusing on the Lifetime Isa over the stocks and shares Isa. You are guaranteed a 25 per cent return from the government’s uplift, via a Lifetime Isa – and if you are solely looking to put it towards a home, it is worth having.
It can be a challenge to save money whilst also enjoying living in a city that can cost so much
The Government promises to top up 25 per cent of whatever you put in to your Lifetime Isa, up to £4,000 per year.
So, if you put in £4,000, drip-fed over the year, you’d get a £1,000 bonus at the end of it.
You say you can save roughly £300 a month towards buying a home – £4,000 split over 12 months is £333.
With the savings from switching internet, cutting down on fancy cheese and diverting some of your current savings, you can hit this target.
And your partner could use their Lifetime Isa too. So £8,000 saved between the two of you in a year turns into £10,000. Then, £16,000 saved in two years turns into £20,000. Just make sure you drip feed this accounts and stick with it.
The Lifetime Isa comes with a caveat though, you can only withdraw the money in it with your bonus intact if you are either buying your first home, or over 60. If you don’t meet those criteria, you will lose 25 per cent of the amount you have withdrawn.
Lifetime Isas come into two forms, cash and investment, similar to your existing stocks and shares Isa.
Investing into one of these Isas can be a good idea if you can think long-term and already have a solid rainy day fund safe in cash savings, as the stock market has historically offered the best chance of inflation-beating returns. You must be aware though that investing involves risk and if markets fall or investments go wrong, you may end up with less than you put in.
You already have £5,600 in your savings account and £2,516 in your stocks and shares Isa so that means you already have £8,116 – nearly half of what you need for your deposit.
Understandably, it can be difficult to save as much as you would like when living in London, as everything is so expensive, but continuing to put a portion of your monthly wage into savings is the best way to start.
You say you pay in £50 per month into your pension, with your employer matching it.
This may not sound much, but it actually works out at £112.50 per month, as your employer matches your £50 and you get £12.50 from the 25 per cent uplift of basic rate pension tax relief. Essentially, that’s a £62.50 free money boost per month.
Hopefully you’ll have pay rises in the near future which help boost your contributions further – time is on your side.
It can be helpful to use our pension calculator to give you a rough indication as to how much your pot will grow over the years, allowing for inflation and wage increases, or our long-term saving and investing calculator.
It’s worth remembering that if you increase your pension contributions by just one per cent, for instance from three per cent of your salary each year to four per cent, you can expect to have a 33 per cent bigger pension pot by the time you retire, figures show.
You should switch savings account – 0.1 per cent is far too low. You can get a rate of two per cent or more simply by fixing for a year, earning potentially hundreds more in interest. Even the best easy access deals pay 1.5 per cent.
Take a look at our independent best buy tables for inspiration.
Stocks & shares Isa
Having a stocks and shares Isa with a low risk factor can be a good product to hold.
It might be worth diverting some of your savings into it, especially while your rate is just 0.1 per cent – but remember, the Lifetime Isa is essentially offering you a 25 per cent guaranteed baseline return, so as mentioned above it may be worth filling that first.
You mention you find it difficult to understand how to use your stocks and shares Isa app.
If continuing to use this investment platform, it would be worth speaking to your investment company and ask for some advice about exactly how to navigate it so that you are completely sure what you are doing.
You need to do some more digging to find out exactly what you are invested in and whether it suits you.
By balancing these payments, you should find that you are saving more towards your immediate goals i.e. buying a house.
The above is not financial advice, but some tips for what our diary writer could do to achieve the goals mentioned.