How did this happen?!?
I write a lot about the importance of saving and investing. For retirement, for buying a home, for a rainy day.
Sometimes I feel a bit sanctimonious. The truth is, maintaining savings over a long-time period is VERY HARD.
I know this from personal experience.
Embarrassing disclosure alert: my own wealth, as measured by balances in savings accounts, is WAY down on what it was 10 years ago.
Over my adult life, my savings balance has resembled the Nemesis at Alton Towers, with more dizzying ups and downs than I can remember.
There have been highs: small windfalls that have dutifully been deposited into savings, then too easily misspent. Like the time I won £7,000 in a competition at 22 (it paid off my credit card and overdraft from university, went towards a deposit for my first London rental flat – and clothes), and the time I took voluntary redundancy at age 29 – a lovely £25,000 that disappeared all too quickly on two nice holidays, super furniture for our flat, some of the costs of buying our first home, the early expenses of our first child – and a hefty additional tax bill.
There have been lows: notably at university, when I was unable to take on more part-time hours at work and my tuition fees and rent-related debts were rising, I used to attend events where I knew there would be free food (desperate) and had to borrow off family for key expenses.
Then there was the more recent experience of having children and making ends meet on a much lower joint income, at a time when outgoings, mostly because of childcare, were exceptionally high. This was possibly the worst time ever – and at a time when I thought life would be sorted.
My bank balance continues to bear the scars from this period and probably will for two or three years yet (my youngest son is still in paid for childcare at around £1,000 a month).
And buying a house just sucks up all your savings, then any spare cash you once had in things as mundane as broken door handles, carpets, LED spotlights, not to mention the bigger stuff, like boilers, windows and the rest of it. Things renters don’t have to think about (which may be the ONE advantage of renting).
With money, change is the only constant
But this is a life in money. Lows of unexpected expenses, job losses, divorces, healthcare…. highs, if you are lucky, of salary increases, bonuses and sudden windfalls.
Change, said Heraclitus, the Greek philosopher, is the only constant. Sometimes this is quoted as “no man can step into the same river twice”. My bank balance is that river, mirroring the ebbs and flows of life.
Older, not wealthier
And this is why it is the case that I have less in savings now than when I was 25. When I was 25, I could afford 5-star holidays. When I was 25, I ate out in restaurants 2 or 3 nights a week. When I was 25, I lived in central London in a pretty nice flat.
Now, ten years later, that life seems decadent. Now, I do have a house, which I could only dream of back then, and I do have two wonderful, beautiful boys to be thankful for everyday, but I also have a NEGATIVE bank balance most of the month, a huge mortgage and outgoings that make for a 3-page monthly bank statement.
Right now, I’m in the rapids. I know there’s a calm bit further down the river. But like life, your money goes through phases.
Unless you are incredibly well off for your whole life thanks to family money, to the point where you can live off interest and never have to touch the capital; or unless you are basically always on the breadline, then your money-life will go through up and down phases, too.
I guess what I know now that I didn’t know at 25, is that your money situation is not on a constantly upward trajectory, particularly if you are a woman. I would tell my 25-year old self this – that things will actually get worse, you will have less disposable income and huge outgoings, and tell myself to maybe spend a bit less – go easy on the fashion and furniture, because harder times are coming.
I didn’t know that then. Perhaps I wouldn’t have believed it. I thought my salary would just rise in line with experience and I had no understanding of what having kids would do to my money. I might have prepared a bit better if I had. But then, I might have done nothing differently at all.
Baz Luhrmann, in that great song, “Everybody’s free”, talks about the power and beauty of your youth. He’s right – you have to enjoy them. But there’s also something to be said for making hay when the sun shines. The problem for so many of us is working out whether the sun is shining.
If you are a twenty-something reading this, one who is going on five-star holidays, buying designer clothes and clubbing once a week, not using credit but with no idea how you will finance your own home or retirement, I promise you, the sun is shining now. Could you be making some hay? Just a little? I promise you – your 35-year old self will thank you. So will the 45-year old one. The 85-year old one will be pretty chuffed too. Check out PensionBee for pension saving, Nutmeg, Moneyfarm or EQ Investors for easy “robo advice” investing, Abundance, Crowd2Fund, Crowdstacker or The Lending Works for more interesting, direct IFISA savings. Or for a traditional stocks and shares or junior ISA, there is always Hargreaves Lansdown, a large investment platform, or Selftrade. If you really want to get to grips with it, read our Good Guide to Hipster Money.