Managing the Money You Have
Today, I’m going to tell you about Zara and while her story is of course, personal, you might find some of it relates to you, if you are in, or have been in, a similar situation.
Now Zara’s story wasn’t a unique situation and I’d seen it before, but I managed to change her life for the better with a really positive outcome, ensuring that she enjoyed life to the full.
I’ve known Zara for 25 years. When I first met her, she was living alone having recently divorced. She was finding it tough to manage her home and bring up her only child. Zara was working at a school that was 20 miles away meaning a long commute, but it was thankfully, a job she loved. However, the constant commuting and being a single mother left her completely exhausted and she was struggling to manage her money. In fact one of her bigger problems was getting to work because her car was old and needed repairs, but she couldn’t afford them.
Managing cashflow isn’t always an easy task for so many people and whenever I hear about these types of stories, I think about the character Mr Micawber from Dickens’ ovel David Copperfield who rightly says, “Annual income twenty pounds, annual expenditure nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.” It doesn’t matter what you’re earning, if your expenditure is less than what you earn, you’re happy but if it’s more – you’re not!
The other positive about Mr Micawber was that he was a positive chap who thought that there would always be something that turned up. Zara unfortunately didn’t share that enthusiasm! In fact, when we first met, she actually apologised to me – before we started our meeting – because she was sure she would be wasting my time and I wouldn’t be able to help her! She was wrong – I was her “something” that turned up and I had a solution!
A Money Management System
The first thing I did was show Zara an easy-to-use money management system and it’s the same one I still use today and use for so many of my clients. Years ago, it was on paper, nowadays, simple spreadsheets work. I gathered all of her expenditure and showed her how to easily analyse her income and outgoings. I also opened a bank account for her with Robert Fleming and they sent me her bank statement copies monthly so I could keep an eye on her expenditure. Also, there was no debit card attached to the account so that removed temptation. There was a cheque book, but I disposed of that carefully!
The next job was to direct her income to her new bank account and set up monthly direct debits for regular bills. Bills such as her mortgage, water, gas, electricity, insurance etc. Anything that could be paid by direct debit. Then, I arranged one standing order of a fixed amount to be sent to her Lloyds bank account – this was her monthly spending money.
Why two bank accounts? Well, it made sure that her bills were paid for one and Zara could manage her fixed amount better from the other bank account without worrying about bills.
Remaining in Control
So I had Zara in control and it’s what I do for many clients and within a few months, Zara was more relaxed about her finances as she knew she could pay her bills and what money she had left over for the rest of the month. There was no overdraft and no interest charges incurred. She also didn’t have any of those nasty letters from banks saying she hadn’t paid a bill because she was over her overdraft. Zara was living within her means, finally.
A Little Extra
Now, I am a financial planner and life planner as you know. I had also (without telling Zara) organised a little surplus money that was going into her new bank account every month. One day, I received a phone call from Zara panicking because her car had broken down and she didn’t know what to do about paying for the repair. Because I’d been secretly saving for her, she had several hundred pounds in her Robert Fleming bank account ready for this type of mishap! I had planned for it you see, so she didn’t need to worry!
The point is that the core of financial planning is knowing how to manage money and it has to be there at the very start.
When I analyse client expenditure, I always find direct debits that have been set up years before and are no longer required! In fact, with one client, I found payments to both the AA and the RAC for emergency breakdown. Worse still, the client had given up driving some years back. What a waste of money!
What makes me cross is that the FCA seems obsessed with whether a client is being charged a few pounds for their investments – yet the client is usually wasting hundreds, perhaps even thousands on poor money management.
Life Planning for Zara
There’s more to Zara’s story.
Once we had Zara’s money under control, I asked her what she dreamt about doing in life. She had small goals to begin with, like not having to commute miles too and from work every day. So, I suggested she start looking for another job closer to home, so she didn’t have that long commute. The other thing that Zara longed for was a life partner. Now, that’s something I often hear from clients and it’s an important part of living a happy life.
For me, it’s about encouraging people to look for what they want. I did that with Zara, and she met her partner a year later, Myles. They’re well-suited and it wasn’t long before they became my clients as a couple.
They had a goal too – to up sticks and move to an area they wanted to be in. So I was there to help them achieve this goal with careful life planning. It took a few years, but they eventually moved to the seaside in Norfolk next to the beach, where they longed to be!
Forming Lifelong Habits
Even today, Zara and Myles use careful financial management thanks to the habits I taught them. Now, we’re discussing their retirement and thanks to that careful money management, I know they’re going to really enjoy their lifestyle and have a wonderful future ahead.
A few years ago, Zara said to me, “Don’t you ever go anywhere, because if you do, I will find you and beat down your door! I would never have the wonderful life that I have without you!”
You too deserve a wonderful life! Taking control of your money is the first step to a happy, fruitful future!