Love Is Not Enough: A Smart Woman’s Guide to Money
Merryn Somerset Webb
Merryn Somerset Webb, star of Channel 4's hit series ‘Superscrimpers’, shows you how to face the future with both money and confidence in this financial bible for sassy women.Money may not buy you love but it certainly helps with life's other little luxuries. From shopping sprees to pension plans, ISAs to investments, money plays a crucial role in our present and future comfort. We may not like to admit it, but diamonds – or cold, hard cash – really can be a girl's best friend.So why, when women have much to celebrate, are we reluctant to talk about it? Why, when we have more wealth in our own names than ever before, do women take less interest in money than men? And why do we still feel that demonstrating an interest in finance is somehow…unfeminine? Because let's face it – for most of us, Prince Charming and his bank balance just aren't coming. If we want to secure our futures we're going to have to do it ourselves.The good news is that it's not hard to do. Dealing with our personal finances is much, much easier than the financial industry would have us believe. Women tend to make better investors than men too – our instincts, so to speak, are on the money. All we need is a bit of know-how and the confidence to put it into practice.Combining years of financial expertise with a healthy dose of scepticism and an easy sense of humour, Merryn Somerset Webb's sharp, witty and appealing guide to personal wealth for sassy women provides the answers. Whether you're drowning in debt, negotiating a higher salary or tackling the thorny issue of a pre-nup, just one read through and you'll be in a position to sort your finances out for good, transforming them from a constant worry into a source of peace of mind.
Love Is
Not
Enough
The Smart Woman’s Guide to Making
(and Keeping) Money
Dedication (#ulink_ad39fd71-c6e6-5f46-889c-1219e186d063)
Love Is Not Enough is in large part the result of hundreds of conversations with women about their finances. My thanks to all those women for their openess. In particular I’d like to thank my sisters, mother and grandmother all of whom spent a great deal more time than I know they would have liked talking to me about their money and their happiness. Other vital contributions came from Gillian Tett, Riko Sakurai, James Ferguson, Tim Somerset Webb, Ashe Peacock, Caroline Bennett, Katy Light, Gabrielle Jourdan, Caroline Law, Heather McGregor, Naomi Caine, Suzette Field, Pheobe Crawsahw, Charlotte de Panafieu, Verity Williams and most often of all from my husband Sandy Cross. I’d also like to thank Nick Reid, Euan Stuart and Craig Davidson for checking for mistakes (although any that remain are of course still my responsibility).
Contents
Title Page (#uc11b46cb-6b77-5bb7-9080-1daf681913c7)
Dedication (#uef59ec32-bc33-5b3b-9510-783311d35ead)
Introduction
Section 1: Finding the Money
1 Maximizing Your Income
2 Spend Less, Have More
3 Debt
Section 2: Using the Money
4 Saving
5 Investing
6 Pensions
7 Buying a House
8 Marriage
9 Children
10 Divorce
Section 4: Beyond the Money
11 Money
53 Money-Saving Tips
The Final Checklist
Useful Websites
Index
About the Author
Copyright
About the Publisher
Introduction
For most of my twenties, when I thought about my future, I imagined all sorts of delightful things. Country houses and sunshine, long weekends by the Italian lakes, Christmas in the Caribbean, happy children riding brand-new bicycles, lazy mornings drinking coffee in cafés and sparkling-glassed conservatories, a wardrobe full of high-heeled shoes and cashmere jerseys, sports cars and speedboats. But the one thing I never thought about was the path from my current life to this new one.
How was this splendid future lifestyle to be financed? Would I inherit a few million from a distant relative? Win the lottery? Suddenly see my good career change to a great one as I started and quickly sold a fabulous small business or was promoted so far so fast that my salary and million-pound bonuses would take care of it? Or was I perhaps hoping for another kind of facilitator of the future? I think that a part of me – despite a strongly feminist upbringing – couldn’t help but assume that my fantasies would be paid for by someone else. By my very own Prince Charming. My truth is that deep down, despite love of my own career and pride in my financial independence, I long thought of the day when I would meet the man I intended to stay with for ever, the one who would be the father of my children, as the day most of my problems would end. Not only would my emotional burdens be shared but I would no longer have to worry about pensions, the housing ladder, savings, the stock market, bills and the like. I’d keep working and earning of course, but my Prince Charming would take all those boring things off my plate and chuck in a shopping allowance as a bonus. Yes, as far as I was concerned money was a man thing.
So I didn’t really worry about it that much. I made good money and did the bare minimum to look after it – I tried to keep out of debt, made sure I saved a little money and got the cheapest mortgage I could find when I bought my flat – but long-term planning? None. In my twenties I earned a generous salary at an investment bank. But when I resigned at 29 I had almost nothing to show for it (except for many, many pairs of shoes, long-term sleep deprivation and a heroic tolerance for alcohol). While I was working I wasn’t leveraging my earnings into long-term financial independence. I was effectively starting my financial life from scratch each month. Sound familiar?
Prince Charming isn’t coming
I’m not alone in having spent much of my adult life hoping for, worse, planning for, a let-out clause. A survey of all my (many) sisters and my friends, independent career women every one, shows that almost all of them, loath as they are to admit it, feel the same. They all know how they’re paying for their next holiday but very few of them have any idea how their retirement might be financed. Why? Because they assume that they won’t be financing it themselves. Someone else will. A recent survey by National Savings and Investments showed that 45% of women say that a healthy bank balance is their top priority when looking for a partner. Only 22% of men said the same. The women also said that a man didn’t become desirable until he was earning £50,000; they expected men to have hefty stashes of cash for them to spend – they assumed that potential partners would have an average of £24,000 in savings. The men surveyed expected partners to have only around £15,000 saved up.
There is nothing wrong with hoping for a financial let-out clause, be it a lottery win or a rich husband (neither are intrinsically bad things, in fact they are both rather good things). The problem comes when we put too much faith – consciously or subconsciously – in the idea that our financial futures will be sorted out by this kind of external force. Because the odds are they won’t be.
Let’s look at the lottery. Imagine a huge room filled to the top with 10,000 books. In one book, on one page, inside one O in the middle of a sentence somewhere, is a tiny dot. You have a pin. You must choose a random book. Then you must close your eyes, open the book and stick the pin in it. It is about as likely that you will hit the dot as it is that you will win the lottery in any one week. Indeed the odds of you winning the lottery are so low that they are pretty much the same whether you buy a ticket or not. That’s not really something to depend on.
And nor for that matter is Prince Charming. He may well turn up – many, maybe most, of us find real love in our lives in the end – but when he does he probably won’t be quite what you had in mind. Your PC could be poor himself. He could be a high earner who is useless with money. He could be only a short-term PC – you could leave him or he could leave you. Let’s not forget that nearly 50% of UK marriages end in divorce. Either way you can’t rely on either his arrival or his long-term support. Love is a wonderful thing but rare is the woman who finds that it comes with a full cheque book.
Even if it does, you do need to ask yourself if you really want to leave yourself dependent on a man for money for ever. I used to think that it would be just fine, but I don’t any more. I’ve been working and taking care of myself for over a decade and I don’t think I could be happy constantly having to ask someone else for money. When I was on honeymoon my debit card suddenly stopped working for no apparent reason, leaving me totally without cash and dependent on my husband for the two weeks we were away. The honeymoon was a gift from him to me so being cashless presented no major problems. It did, however, give me a hint of what it might be like to be dependent in less romantic conditions. When you’ve only been married a few weeks it isn’t hard to ask your husband to give you money to buy some postcards but would you really want still to be doing it after ten years of marriage? I get the feeling that once you’ve earned your own money you’ll find that for the rest of your life you’d prefer to make it than to take it. That means that even after you have married you still have to have an eye to your independence: you need your own savings and your own source of income to fall back on.
Face it: you aren’t going to win the lottery and the lottery of love is never going to pay out to your full satisfaction. You’ve got to look after yourself.
Times are tough
Unfortunately for women, the time when we have no choice but to confront our own finances and plan for our own futures has coincided with a period when things are pretty tough. All the things our parents seemed to take for granted – being able to buy a house, support as many children as they got around to having and then retire in reasonable comfort – seem far out of reach today I met a man a few weeks ago who had joined the BBC as a graduate trainee 50 years ago on a starting salary of £500 a year. It wasn’t much, he said, but he and his wife still managed to buy a flat in London’s South Kensington in which to start their lives together. ‘South Kensington,’ I said, ‘how much was that?’ ‘Five hundred pounds,’ he said. Now South Kensington wasn’t as smart 50 years ago as it is now, but just imagine being able to buy a flat in central London for the same as a graduate trainee’s salary (around £20,000) today. How much easier would that make life?
The same man has – like most of his generation – a final salary pension scheme. He has never really had to worry much about his retirement, his company did that for him and now they pay him a nice pension every year. That won’t happen to our generation: current state pensions are tiny and by the time we retire they are going to be even tinier – if they exist at all. These days if you want to survive in any style in your old age you are going to have to come up with the cash for it yourself. You are going to have to work harder than your parents and probably retire later. At the same time, taxes have recently risen enormously – you pay tax on almost everything. On your clothes, your food, your shoes, your alcohol, your petrol, your car, your aeroplane flights, your insurance and on all your investments. Overall, 40% of the nation’s wealth disappears into the deep pockets of the state. Nobody really knows where it goes after that but one thing is certain: it won’t be around to bail you out when you can’t pay your bills in your seventies.
Oh, and don’t expect to inherit enough money to make it all OK either. Not only is the government intent on making sure that inheritance tax eventually hits everyone with two pennies to rub together but your parents are now likely to be living well into their eighties. That cash you had your eye on? The odds are they’ll still be spending it when you’re in your sixties. The fact is that young people today are at a serious disadvantage financially compared to previous generations. We are, says think tank Reform, the IPOD generation – insecure, pressured, overtaxed and debt-ridden.
But just as the serious demands on your money – housing, pensions, tax and so on – have become more intense so has the pressure to consume non-essentials. As most of us have everything we need the only way for companies to grow their profits is to sell us stuff we don’t need. And that’s exactly what they do – with enormous skill. So successful has the advertising and marketing industry been that half of us appear genuinely to think that we need £20 scrubbing lotions to get clean and £500 handbags to look acceptable when we go out for dinner. We’ve got too many obligations – or we think we have too many obligations – and not enough cash. How, we think, can we possibly live a reasonable lifestyle and still save enough so that we aren’t living off dog food in our old age?
The answer is that we can do so if we take control of our money rather than letting it control us. That means understanding it, talking about it and making it work for us. It also means being comfortable with it – knowing that using money well is neither embarrassing nor intimidating. Too many women still think money is a dirty word, still think that being rubbish with money is somehow feminine and still refuse to have proper conversations about it. In the last 100 years we have made huge leaps both in the workplace (I don’t think there are many who would still claim that men are necessarily better lawyers, managers or doctors than women) and outside the workplace (men still don’t do as much housework or childcare as we do but the fact that they should is pretty firmly established), but there is one more step to take before we can say we have tried properly to create real equality with men – we have to start sorting out our own finances.
Back in the 1970s feminists got very worked up about the ongoing passivity among women when it came to money. We could cope with going out into the workplace and making the money, but investing it? Buying houses with it? Arranging pensions with it? In the 1970s we thought that all those things should be dealt with by men. But the really absurd thing is that 30-odd years on nothing has changed: many of us – in our heart of hearts – still do. We see a brown envelope in the post and we either ignore it or hand it on to someone else.
When was the last time you had a conversation about money with a girlfriend? For many of us the answer is never. Men talk about money, they exchange stock and fund tips, they compare mortgage deals and the cost of new cars and boast to each other about their financial successes. But the closest most of us ever get to a proper chat about personal finances is when we lie to each other over coffee about how much our new clothes cost. We have to get over this passivity. And, given how important financial security is to our long-term contentment, we have to do it soon. We have to give managing our money the same level of attention as we give our diets, our houses, our health and our jobs, because no one else is going to do it for us.
You can do it
The good news is that you can both live well and prepare for the future, and much more easily than you think, as long as you are prepared to put a bit of work into it. There are two things to note here. First, the financial world is much simpler than the financial professionals would like you to think it is – this book explains everything you need to know to sort out a whole lifetime of money in three hundred straightforward pages. Second, and more importantly, there is little doubt that once they put their minds to it, women are just as good with money as men and in some ways often better.
There is evidence that women who do invest are better at it than men, for example: research from Digital Look shows that over more or less every time period, female investors have outperformed male investors. In 2003, for example, the average woman’s portfolio rose by 10% a year. The FTSE index (which measures the performance of the UK stock market as a whole) rose by 7% and the average man’s portfolio by 6%. And even in the year to the end of October 2002 when the FTSE fell by 22% the average female portfolio rose by 2%. So much for the idea that women are useless with money; in fact once we overcome our passivity and get started we are actually pretty good with it.
All this makes complete sense to me. Not everyone likes to admit it but in lots of ways the very nature of women makes us better suited to long-term money management. Thanks to social and biological roles as nurturers and carers, women are in general more cautious, patient and questioning than men. They don’t mind admitting ignorance and asking for things to be explained. They know that money doesn’t grow overnight and that investing and saving, like bringing up children, is a long-term job that requires substantial amounts of planning. And they know that when it comes to money the small things matter as much as the big things. All in all (and this is a huge generalization but not an unfair one), we have a much better temperament for dealing with money than many men. What we need is the knowledge and the will to take advantage of it and this is where we too often fall down.
Taking charge
I’ve been through a lot of the financial journey this book travels myself. I’ve been a student, I’ve done years of unpaid or underpaid work experience, I’ve had and left badly paid jobs in television and journalism as well as a few highly paid jobs in the City, I’ve worked full-time, part-time and freelance as well as in London and in Tokyo, I’ve participated in the setting up of a new business and most recently, in rather quicker succession than I initially intended, I’ve married and had a baby. I’ve been grossly financially irresponsible during a lot of this but I’ve also now managed to pull myself together and emerge in a relatively stable position.
A few years ago I realized that while I liked to think I had my finances under control, I simply didn’t. I had no pension arrangements and no plan in place for paying off my mortgage. I had various bits and bobs of savings but no real plan as to how they worked together. Then something happened to jolt me into action. I met my husband and he moved into my flat and took over half the mortgage. He was interested to see that it was an interest-only mortgage. How are you saving to pay it off at the end of the term? he asked. I confessed I wasn’t. He was horrified and I was embarrassed. But I was also prompted by his surprise, as well as his unwillingness to sort it all out for me (as he says, if he has to do half the housework, I can sort out my own bank accounts), to take charge of my own money. So I’ve sorted out my pension arrangements, I’ve started saving regularly and doing so in a tax-efficient way, I’ve switched the mortgage to the cheapest repayment mortgage I could find, I’ve reviewed my income and made sure it matches my skills and the work I put in, I’ve made sure we are paying the lowest possible prices for all our utilities and I’ve put a check on some (not all) of my unnecessary spending. It’s taken some time and been a reasonable amount of effort, but it feels very good indeed.
The point of this book is to show you that you too can use your natural skills to take control of your finances at every stage of your life. The first section looks at how to increase the amount of money you have every month. Your income is the most important factor when it comes to controlling your finances. Once you know that you are getting paid as much as you can for what you do you can settle down to working out how to turn that income into wealth. So the fact that most of us aren’t maximizing our incomes, aren’t paid what we are really worth, or as much as the man at the next desk, is a fundamental problem that we need to sort out as fast as we can. The section then considers spending (which isn’t all bad) and at debt (which also isn’t all bad).
The second section looks at how you can grow your assets – at saving, investing, pensions and property. Here we’ll go through the financial options on the market and explain which ones offer value and which ones are simply complicated vehicles invented by the financial industry to rip you off. I want to be the richest pensioner on my road when I retire and I want the same for you (as long as you live on a different road).
The next section considers what happens when you need to share your money. How will you pay for a wedding and how will you organize your finances within your marriage? How does the money work if you don’t marry but live with a long-term partner? What about children? How much will they cost and how will you pay for them to get what you want them to have? How can you possibly maintain your financial independence if you stop working to look after children? What are your legal rights as a working mother? And what if your marriage doesn’t work out? We look at how to deal with the financial shocks divorce throws at women.
Finally, in the last section we look at how money can make you happy – and how it can’t. Happiness isn’t all about money but financial clarity in your life will bring you a peace of mind that is hard to beat. I hope that by the time you get to the end of the book your finances will no longer be a source of blushes or stress but a source of that peace of mind.
Section 1:
Finding the Money
“Make your money and buy your freedom.”
Tamara Mellon, owner of Jimmy Choo
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