Welcome to Money Matters: GLAMOUR’s weekly dive into the world of finance – your finance. These uncertain times have reminded us just how much understanding our money matters and yet… how little we talk about it and how much it’s shrouded in secrecy.
This stops now.
Keen to break that money taboo, we’re chatting all things personal finance from money saving tips to ISAs and pensions. Each week, a woman in a unique situation will give us an honest breakdown of her finances, and our expert will tell her easy tips on exactly how to tackle it. So, grab a cuppa, take a seat, and let’s talk about money…
I’m a recruitment consultant on £25k, about to make a career switch that means a pay cut. How will I manage on a lower salary?
Caitlyn* is 22 and living with family in Yorkshire after recently graduating from university. She’s taking a gap year to hopefully travel after the pandemic and do work experience to build up her career prospects. She hopes to find a part time job so she doesn’t deplete her savings. Here’s her money diary.
I recently graduated from Edinburgh University, and now I’m taking a gap year in order to hopefully do some travel as well as gain valuable work experience/internship opportunities to build up my CV.
I moved back home to live with my family after university, but I’m looking to gain work experience elsewhere so I am open to moving. I’m hoping to find a part-time job throughout my gap year to help fund my travel and internship costs.
I’ll have no substantial income over the next year and no student loans to keep me going, so I’m concerned about my gap year costing me a lot of money and significantly depleting my savings pot, which is from some inheritance.
I am happy for this year to cost me because I know it’s what I want to do and I will structure it in a way so it improves my future work prospects but want to ensure I don’t spend unnecessarily/completely deplete my savings.
How do I maintain my savings while funding a productive and enjoyable gap year?
How to keep tabs on your money for better financial wellbeing, if you feel like you’re not in control of your money
MY ACCOUNTS
Current account: Currently in my student overdraft
Savings account: £30,000 – mostly from inheritance
MY INCOMINGS
Annual salary: N/A – Hoping to get a part-time job, but haven’t found one yet
Monthly wage: N/A
Any other incoming payments: £0
MY OUTGOINGS
Rent/mortgage: £0
Bills: £0
Splurges: I’m keeping my outgoings low to conserve my savings, apart from the odd online shopping splurge.
Weekly budget: I don’t have one
MY DEBTS
Four years of university student and maintenance loans
MY MONEY THOUGHTS
My worst money habit: Online shopping.
My biggest money worry: Depleting my savings account during my gap year.
My financial hopes for the future: To earn enough to have a good standard of living and not have to worry unnecessarily about money. I would like to be able to afford to travel.
My money mood: ? ? ?
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Step 1
While the ‘gap yah’ clichés are all about spontaneity, running out of money in the middle of some Venezuelan backwater is also not the one. Planning is key. Grab a piece of paper and make three columns. In the first, list all the experiences you’d like to have and places you’d like to go that will cost you money. Beside each, estimate roughly how much you think that will cost you and how much time it will take. For example, ‘Travel around South America – £7,500 – 3 months’ or ‘Work experience for a local charity – £500 (living costs) – 1 month’. Put an asterisk next to the experiences that are non-negotiable, must-not-miss. With this, you can work out a cost estimate for your gap-year activities.
Step 2
Next, take a second piece of paper and in one column list all of the activities you could do and would like to do that would earn you money. I appreciate that knowing how much you’ll get paid is a difficult one so use the minimum or Living Wage as a starting point. This could be anything from an internship to bar work. Use these figures as a guide to estimate the quantity and kind of work you’d like to do to fund your gap year. If there’s a shortfall, you can either shorten or cut your ideal plans or look to work a few more hours.
Other costs
Your living costs are enviable but suspiciously low… while living at home will be saving you a chunk in rent, bills etc, unless you’ve got some very generous parents don’t forget the unavoidable costs like your phone bill, drinks with mates and transport. When planning your year, factor these into your estimated costs.
A word on unpaid internships
When completing the second exercise, you’ll be confronted with the strangely controversial question of whether you should work for free. My personal view is that you need to be paid for your time. If you’re adding value, even if that’s just administrative work, you should be paid the minimum wage. It’s also the law. Generally speaking, unless you are shadowing a person, the work is part of a higher education course or it’s for a charity, you need to be paid.
The £30,000
One way to stop yourself from dipping into your savings is to put it out of reach. Keeping it in a next-to-nothing-% interest account isn’t doing your financial future any favours. Technically, you’re actually losing money thanks to inflation. If you’ve got time on your hands (at least five years before you need the money) you could invest it. It’s not without risk (with investing your capital is at risk), but the longer you leave it in the market the better chance of making a decent return. Historically, the average long-term investor in a diversified portfolio, makes money. If you want to DIY, your best bet is to invest in an index fund or if that’s not for you, have a look at Robo-advisors who do all the deciding for you. Here’s a handy investment masterclass for more.
Alice Tapper is the author and founder of Go Fund Yourself. For more money guidance and tips, follow her @gofundyourself.
This column offers guidance, not financial advice. For personal investment advice, it’s always best to speak with a financial advisor.
*Name has been changed.
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