Whenever my income falls a bit short, I get a loan or, more often, a grant from The Bank of Gary - aka my husband. This provides a financial safety net, but it is contrary to the advice many wise mothers give to their daughters: have your own money and don't rely on a man. Should women be especially cautious about relying financially on their partners?
A new book by independent financial adviser Mary Waring, called The Wealthy Woman - A Man Is Not A Financial Plan, suggests that women should consider their finances carefully and put a strategy in place to increase their income. Since this isn't the 1950s, it seems odd that some women are still happy to be in the dark when it comes to knowing their net worth or where their money goes.
She advocates following a simple seven-step plan in order to shed some light on your finances (see below). Many marriage counsellors cite finances as one of the top reasons that couples run into trouble. Often we shy away from talking about money but, in an open and loving partnership, it is a key concern. If you have different financial styles, it can lead to resentment and conflict. Waring suggests this solution: 'If one partner is a spendthrift and the other a careful saver, the option of paying money into a joint account for household expense works well. The partner who likes spending will then have a pot of money left in their own bank account which they could spend and the saver could save more of what's in their bank account. The transfer into the joint account could also include a certain amount for their joint long term saving so that each partner is contributing.'
Here is Mary's seven-step financial review for you to try:
1. Calculate your starting point
Work out the value of everything you own, (your house, car, investments, pensions etc) and deduct the value of everything you owe (your mortgage, credit card balances, HP etc.). The difference is your net worth.
This will be your staring point and base calculation. Now set a target for what you want this to increase to over the next six months or 12 months.
2. Control your debt
If you have large balances on your credit card and only pay off the minimum each month you are paying a huge amount of interest which can mean a purchase will cost 3-4 times the original amount. (If you are worried about the level of your existing debt or are finding it hard to keep up your repayments, speak to the debt charity Stepchange.)
3. Save before you spend
If you plan to save what balance you have left in your bank account at the end of the month, invariably there won't be anything left. A better option is to have a standing order each month that goes out of your account as soon as your income comes in.
4. Save regularly even if it's only a small amount
For example, if you were to invest your child benefit (i.e. £20.30 per week) from the day your child is born until they are aged 18 and get a 10% return each year, at the age of 18 that would be worth over £53,000.
That's enough to fund university, provide a deposit on a property, fund a gap year etc.
5. Monitor your spending
If you think you don't have enough money to save, keep a detailed record of all that you spend, including cash, over a three month period.
When you have completed the three month exercise, review each item on the list and consider "how can I reduce it?"
6 Review everything regularly
Doing the above exercises is not a one-off. Over time bad habits can creep back in. So repeat all this on a regular basis to ensure your money is working hard for you.
7. Enjoy your money
Don't be fearful of dealing with your finances. If you approach each of the exercise with the attitude that it won't work or you'll hate doing it, then that's exactly what you'll get. So find a way to make the process enjoyable and rewarding.
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