Tuesday, 23 October 2012

Increasing our income

I have always been a collector of household tips and wisdom.  Remember Heloise? I have been reading her books since I was a child. (Weird, right?)  I was a natural follower of 'frugal living' blogs, and I guess I figured that was enough - my husband was looking after the salary and I was looking after the house. I will write more on saving money in future posts, I'm sure. 

But after the wake-up call, I began to focus on the big picture rather than just the little picture.  I quickly came upon Ramit Sethi's I Will Teach You To Be Rich blog.  This blog is full of great advice and the thing I latched onto right away was the need to earn more

We have various sources of income in our family.  

  • My husband has a regular salaried job that brings in the lion's share of our income, for which I am increasingly grateful.  He also wrote a book several years ago which still generates some royalties, and occasionally can do a little consultancy on the side. 

  • We receive occasional monetary gifts from my husband's family. 

  • We have also had windfalls from time to time (the sale of a company my husband founded, selling a car which we didn't need to replace, etc.).  We did not save or invest these at the time (unlike Mr Money Mustache), so they are unfortunately gone (which makes me feel a bit sick now). 

And then there is my income.  

One piece of advice that looms large in the blogosphere is the idea of a side hustle.  I am already extremely pressed for time but I would consider this.  I am the primary carer for our two school age children, but unfortunately this doesn't pay very well  <cue bitter, bitter laughter>.  

I also used to sing in a band, still do occasional complementary therapy treatments, have blogged a little and have aspirations to write a couple of books.  These are all nice ideas, but even when I have had the time and opportunity to take them forward, I have not turned any of them into a going concern.  One day, maybe I will, but I suspect they will not pay very well.  Maybe I'm wrong. 

On the other hand, I am also a freelance consultant in a specialist field, and have been for a number of years.  My consultancy work is very well-paid but I only do it part-time in order to be able to look after the children.  

I have always treated my work as a secondary employment - both in terms of second to my husband's (highly demanding) job and second to looking after the children and the house.  When I have needed a project, I have made a call and something suitable has landed on my desk within a couple of weeks.

But after the wake-up call, I realised that professionalising my freelance work and increasing my billable hours was the quickest way to ensuring greater financial security.   

So what I needed was not a side-hustle but more of my main hustle.  More on this in the next post. 

Friday, 19 October 2012

Pocket money - a better approach

So we made some mistakes with pocket money the first time we tried it.

When I decided my son WAS old enough for pocket money (i.e. could add well and was much better at making decisions and then living with the choice - about age 7 for him), I wanted to read up a little on it first to get my approach straight.

I can thoroughly recommend the following book:

 The Pocket Money Plan by Julie Hedges. I'm sure Ms Hedges doesn't want me to reveal her system, so I'll just say that this is a book that will be helpful to us for a number of years as the children grow. I found it full of sensible, realistic, age-differentiated advice that we have applied for several months now.

After getting used to the new system, we have now got it largely right.  The children have successfully saved for larger toys they wanted, whilst also having money to put into charity boxes and spending money for sweets and small toys on a weekly basis. The main problems lie with us - making sure we remember to give it to them on Saturdays and making sure we have enough change for them both. And remembering to make time for shopping occasionally.

One point I would just make is that I also thought I'd better do something for both children, despite the difference in their ages and capacities, otherwise I would struggle with the question of fairness. Basically, I didn't want to have to deal with little sister moaning every week about not getting pocket money.  In retrospect, I should have been stronger.  Little sister (age 5) can't add very well and can't make decisions easily, so the question of money is actually a little stressful for her.  I could have treated pocket money as a thing older children get and left it at that.  Learn from my mistakes, people!

Thursday, 18 October 2012

Pocket money - how not to do it

I think letting my kids practice handling money is good for many, many reasons. But I got it wrong the first time we tried it.

When my son was about 5, we started giving pocket money for chores. We gave a penny for this, five pence for that, and so on.  We had about three things he was supposed to do every day, and a couple of weekly things.

Don't do this, is my advice.

  • First, we should have waited until he could add properly and consistently.  Kids can't always add up brilliantly at age 5.  This makes the whole concept of money just hard for them.

  • Also, at age 5 some children find it hard to make decisions and then live with the consequences.  Yes, pocket money will teach them this skill, but it would have made it all a lot less stressful if we had just waited until he was more able to make choices.  

  • The whole 'rewarding children for chores they should be doing anyway' is a fraught area. We should have avoided it by just not linking them (but, honestly, we do help them learn good household habits in other ways). 

  • When they are little, sometimes they can't do their chores for lots of reasons that are not in their control.  They might be sick, we might have all got up late and be in a rush, or we might not have time at the weekend to let him wipe the windows or run the hoover round because we have something fun planned.  Helping children with these chores takes time, and adding this in as an expectation every day or every week, because of the link with pocket money, was a mistake for us.  

So, we had to let that go after a while.   Find out tomorrow how we saved the situation.

Wednesday, 17 October 2012

Communicating with our children about money

I am determined that my husband and I will communicate well with our own children about money, partly because my own parents did not do this.

I started considering this before the wake-up call about our own finances, partly because my son (age 7) is completely obsessed with business and money (and Star Wars, of course).   My daughter (age 5) is completely uninterested in money except in play, but she will learn.

One thing we do, is just make sure to talk openly about the fact that although we might want lots of things, we don't always buy them. This is because we are being careful with our money and want to make sure we spend it on the most important things.  I think it is important to talk about the feelings of wanting something and yet deciding not to have it. We acknowledge that this is hard for everyone and is not something that goes away.

I also got a few books about money for the kids to read.

Show Me the Money by Alvin Hall. My son loves it.  It not only covers some personal finance questions but also has lots of interesting chapters on economics, business, and currencies.  It is colourful and engaging,, and dips into lots of areas.  He will probably get more out of it when he is a little older, but we chat about it together sometimes and I help explain difficult concepts to him.

The Everything Kids Money Book by J.D. Brette McWhorter Sember.  He's enjoyed this too although I haven't spent much time looking at it with him yet as it is a newer purchase.

It's Not What You've Got by Dr Wayne M. Dyer.  This is a little flaky in some ways, and the rhyming is awful and often doesn't scan, but it raises the emotional and social side of money in a way that the other books don't.  I want my children to keep money matters in perspective, to realise that money is not the most important thing in the world, and to recognise that other people are less fortunate than we are.

This conversation is not over. There are a lot of life-skills around money that have to be taught over a number of years, changing as the child grows.  But this is a good start.

Tuesday, 16 October 2012

Weekly family finance meeting

One of the first things we introduced after my wake-up call was a weekly family finance meeting.  I had been incredibly reluctant to suggest this to my husband, partly because I knew he would take me up on it.

Don't get me wrong, I hate the idea.  Viscerally.

I don't want to face our finances every week.

I don't want to be told every week that I had to stop spending so much and work more. 

I don't want to be held to account. 

And I certainly don't want to have to spend time talking about money when I could be watching Modern Family (or, yes, Battlestar Galactica).

But, I have to reluctantly admit that the weekly meeting has proven to be a good idea for lots of reasons.

  • Instead of having a big panic about money every few weeks, I now have a  medium-sized panic about money every single week. Facing this issue every single week means I am more likely to make lasting changes to my behaviour than if I confront it on an ad-hoc basis. (For the same reason, I weigh myself every day and log my weight using the Libra app.)

  • If we don't manage to talk about everything we need to before we succumb to the lure of the goggle box, we have next week. My husband keeps an agenda going on Google Drive and we keep a record of what we want to talk about. 

  • My husband also keeps a spreadsheet of our finances on Google Drive, which includes forecasts for the next couple of years.  During the meeting, we revisit the assumptions on that spreadsheet, check out our future, see what has to happen to keep us in the black, and decide what aspect we want to focus on.  We also try to use the Money Manager feature on LloydsTSB although it is kind of flaky.

  • We do actually do the things that we decide in the meeting, because we know we'll have another meeting next week and we know the other person will ask us about the thing we said we'd do.  We are both professionals, so we don't want to be embarrassed by not delivering or letting it slide. So we do actually look into getting better mortgage deals, changing our utilities, rewriting our wills or whatever we decide needs attention.  

It is quite likely that we will never stop having to talk about money.  BORING.  But necessary.

Why? Because people who have a lot of money have to actively manage it (to a certain extent at least).  We don't presently have a lot of financial security but we hope to one day, and so we have to be people who will actively manage our money. And on the flip side, if we DON'T manage to get ourselves on a more secure footing, we will definitely have to keep talking about money. So either way, it is here for keeps.

This meeting system will help us to communicate better about money in general and stand us in good stead for years to come. I hope. 

Monday, 15 October 2012

Wake-up call and attitudes to money

I began to realise we had a money problem that was going to need attention earlier this year.

For various reasons, things had changed financially.  My husband had got a new job (for slightly less pay) and we had to get a second car to make things work.  I am a freelancer, and one project that I was working on wasn't providing quite as many days as hoped, plus I had been ill.

I wasn't keeping up with how this affected us financially.  My husband would say every few weeks, "I think we are going to go overdrawn this month - how many days have you invoiced for? How many days will you work next month?"  I would then stress and panic about money, a few weeks would go by, I would assume everything was back on track and then we'd have the same conversation again.  I would lurch from feeling like everything was fine to feeling like we were about to lose the house.

So after a few iterations of this unhelpful pattern, I decided to take a more strategic approach to this issue and first of all address the question of how my husband and I communicate about money.

I prepared myself.  I got a couple of books from the library about personal finance, including Alvin Hall's Plan Now, Retire Happy (and a couple of less mainstream ones that seemed to involve a lot of risk).  I looked at a few blogs for some advice and came upon a couple of great reads, namely Mr (and Mrs) Money Mustache on talking about money, and Ramit Sethi of I Will Teach You To Be Rich on Money and Gender.

I began to think about my own attitude towards money. Fortunately, I am able to take a reflective attitude towards my own motivations and thought processes and can usually get down to what is really going on for me, even if it is rather unpleasant and shows me up in a bad light.  After considerable reflection, I came to realise a few things:
  • I was carrying a somewhat puritan attitude towards money - both "I don't want to be rich because I don't deserve it" and (in a breathtaking example of doublethink) "Only awful people are rich anyway." 
  • I believed that thinking about money was "grubby" and that I should "set my mind on higher things". 
  • I thought (think?) "I don't want very much stuff, so anything I do want must be okay." 
  • I also realised I had never had proper conversations with my parents about money management, and they were poor role models for managing money.  
I opened up to my husband about some of my unconscious attitudes, attitudes set a long time ago but continuing to inform our relationship today.  He understood that I was talking about this because I wanted these attitudes to change.  He shared a few of his own attitudes towards money and we discussed it for a while.   This was only the first step but it was and remains absolutely critical.

Saturday, 13 October 2012

Financial security

My husband and I have been very fortunate throughout our lives together.  We went to a good university, have had well-paid jobs and live in a nice house.  But we have no savings, minimal investments, and virtually no pension... and 2 children.  We are in our late thirties, and living paycheque to paycheque, which is shocking given how many opportunities we have had in the past to build up savings.

I have had the wake-up call this past few months that something has to change, and this blog is setting out to document our journey towards financial security.