Mrs MummyPenny Talks is back for Season Five.
This season I’ll be joined by Faith Archer of ‘Much More With Less’ and our seven episodes will focus on practical advice for dealing with the Cost-of-Living Crisis.
We’re grateful to our sponsors, PensionBee, who are on a mission to make pensions simple. To find out more and or sign up to PensionBee you can use this referral code where both of us will get a £50 credit to our pensions
Episode 7 is THE FUTURE. Here are the transcribed show notes
Hi, and welcome to Mrs MummyPenny Talks Cost of Living with Much More With Less. This is the final episode of the season, kindly sponsored by our friends at PensionBee. It is about the future, so emergency savings and pensions. I’m just going to handover to myself to talk to you a little bit about the PensionBee podcast. So, we get it, pensions can be complicated, but PensionBee’s on a mission to make them simple with its podcast. So, whether you’re just starting on your savings journey, nearing retirement, or somewhere in between the Pensions Competent Podcast can help you to get the best out of your pension. I joined them for Episode Five to discuss the cost-of-living crisis, why it’s happening and when it will all be over. You can find this and other episodes of the Pension Confident Podcast on all major podcast platforms, which are available to listen to today. So, Faith, the future, what lies in the future?
I think it can be hard to think about the future. We spent the rest of this series talking about coping with day-to-day bills and trying to make some extra cash to cope with the bills that are happening right now. But, if you’re struggling to make ends meet now, what on earth you’re going to do in the future to change that if you don’t want to always be struggling? So, this is really focused on trying to think about how you can scrape together any savings to put yourself in a better financial position. That’s not just savings that might help in the next few months, few years, but also looking ahead to retirement. One thing I should make very clear, Lynn and I have been writing and talking about money for many years, but we are not financial advisors. You should not take this as concrete financial advice. But hopefully we can offer some pointers about what to think about and how to get started.
Absolutely. I may be an accountant, but I am not a financial advisor. Those are exams I’m not going to take.
I think that whatever you are; accountant, personal finance expert, whatever you do – in an ideal world, we need some emergency savings.
The previous episode was talking about debt. So I have a little bit of a strategy about emergency savings whilst you’re paying off debt. What was really important for me, and this is more of a thing that helped my mental health whilst I was paying off my debt, was that I also built up a small emergency fund. Do you remember I had about one or two grand set aside into an emergency savings pot. Because if something like the washing machine died, and my washing machine did die this year, you’ve got that little pot. II don’t mean £1,000 or £2,000 is a little pot because the size of the pot is different for every person. But I had just some money sat there that I didn’t have to stick on a credit card.
So that you knew you weren’t going to send your credit card balance rocketing outwards again. And that was good for your mental health.
It made me feel better, but it sort of depends how you feel yourself. How the journey works with money is if you have debt, you pay off your debt, then once you’ve paid off your debt, you then start putting chunks of money into your emergency funds for various things. Let’s start with short-term things that we need to save some money for. So, one off events that happen say once a year? Maybe talk about them first and then emergency money, do you think? Or emergency savings first? What’s more important?
Let’s just flag the emergency savings. This is the money that is not earmarked for something else. This isn’t your holiday fund; this isn’t paying for Christmas. This is genuinely that you leave it untouched, you know ‘break glass in front in case of emergency’ situation. What can be frustrating is that I know that experts can recommend that you set aside enough to cover from three to six months’ living costs. I know that is ideal if you can work towards that. Obviously, that can be massively helpful if you have some kind of big event in your life, which means you can’t cover your living costs. But remember, if you don’t have any savings at all, it’s all relative. So being able to set aside even £100, as Lynn just said it made a big difference to your mental health when you could set aside £1k-£2k. Don’t get put off by the size of emergency savings that are suggested in the ideal world.
We’re not in an ideal world.
We’re not, we’re dealing with what we can do right now. Even that £100, or even that £1,000, stashing it away and putting aside small amounts, they will build up. If you can afford it, my top tip if you want to save is actually get on with it. Don’t wait until the end of the month to try and save what’s left. Try to treat it like a bill. Set up a standing order that goes straight out of to payday, even if it’s only £10 or £20 a month, it will add up. If you’re concerned about affording those kinds of amounts, maybe look into one of the auto-saving apps. There’s one I like called Chip, Lynn prefers Plum. But also some of the newer bank accounts, the digital-only bank accounts like Starling or Chase, they will do things like round-ups. So, any time you spend some money, if you spent say £1.75, they’ll round it up to the nearest pound, and transfer that extra 25 pay into savings. It’s the kind of money that will build you up a little bit of a buffer without you even noticing.
I’m a big fan of the round-up and automated savings. That’s how I paid for spending money on holiday this year.
I think personally, it’s really important to have some money set aside for emergencies, almost as soon as possible. It’s practical things, isn’t it? Because money is not all about the numbers, it’s much more about what’s going on in your head. If you can set up your emergency savings in a different bank account, for example, so that you’re not looking at that balance every time you see it or dipping into it, you are much less likely to spend it. Now, you were talking about big events, so leaving aside the emergencies, you’ve started building some money for that. Those things that happen once a year – Christmas is not an emergency, nor is it unexpected. Again, ideal world, things like Christmas birthdays, those annual expenses, your boiler service, your car MOT, tax bills if you’re self-employed, they actually need to be in your budget. If you’re just focusing on the money that’s going out this week and next week, then it is going to hit you like a bolt out of the blue. Again, ideal world, set aside money for that as you go along each month, rather than it being an enormous financial shock or a massive addition to your debt.
Absolutely. I know quite a few people where they’ve got a little side hustle. And they put their side hustle money aside to pay for Christmas, which is quite a nice idea. What does Christmas cost? I don’t think it’s going to cost as much this year because people simply can’t afford it.
That’s the thing. It’s trying to be realistic about what you can actually afford. We’re now in October, there is still going to be time to let people know if you’ve got to put the brakes on for Christmas. If you only want to do presents for the kids and not for the adults speak to the rest of your family now. If you need to set your children’s expectations about what you can actually afford for Christmas, rather than running up massive debts or spending any savings you do have, Set those expectations now.
That’s a really good shout. While we’re on that note, it’s slightly off topic, but talking to our children about money, as in managing their expectations around birthdays and Christmas. Something I like to do is set a limit. I’m all about parity in that my three children have the same amount spent on each of them. This year, that limit might be £50 each or £100 each whatever is within your budget. I know it sounds really coarse, is that right word? To talk about money like that. But it’s being open and honest. If you can’t afford it, you can’t afford it. I think it’s good to have that conversation with your kids that things are tough this year, not saying warts and all.
I think there can be a lot of discussion. Some people feel it’s best to protect children by not talking about money. Personally, I’ve always talked about my children to my children about money. So far, I’ve tried to do it in an age-appropriate way. I don’t want to burden them with stresses at the times when we’ve had next to nothing coming in. But on the other hand, I think it’s fine to have an honest conversation. You know, we can afford to do this, but perhaps we can’t afford to do that. Or that would be a lovely present, but it’s not going to be possible this year, so we’ll put it on the list, let’s think about what else we can do. Even with really young children, you can have conversations about money. And you can help set their expectations.
Children form their financial views and mindset at the age of seven. Cambridge University did a study about it. That’s young.
Setting a good example, so practicing what you preach, trying to instill good money habits, and leading by example. We’re talking in this episode about planning for the future, we’ve talked about creating emergency savings, we’ve talked about planning for other expenses, like Christmas. What I would say is that if your budget is really, really tight, if you’re strapped for cash, if you’re trying to cut everything; my suggestion is put your own oxygen mask on first. I know that loads of us would like to save for our children. I certainly used to have times when money was really tight and regular charity donations they just had to go. It doesn’t have to be forever. But if money is really tight, you need to protect yourself and get your family on a solid financial footing first. Then you can reintroduce some of the other expenditure.
Absolutely. Retirement. I don’t like that word, retirement.
How about holiday of a lifetime?
Spending the inheritance?
Thinking about the future. For many of us, I know, retirement can seem a really long way away. Depending on your age, retirement may seem a long way away. One of the things I often say to people is if you stopped working tomorrow, how would you pay your bills? If you couldn’t pay your bills tomorrow, or you could only meet some of them, what are you doing now that is going to change that situation in future? What are you doing so you will be able to ever afford to retire?
I think we’ve talked about the fact in this series that the state pension currently, even if you get the full new basic state pension, it is just under £10,000 a year, which to me is not a very comfortable retirement. So, one of the things that happens now, if you have a job is that if you earn over a certain amount of money, your boss is compelled to sign you up for a pension plan, unless you choose to opt out. We’re facing a massive cost of living crisis. I know that for many people, it will be very tempting to cancel those pension payments. If you’ve got massive debts, if you can’t even afford to put food on the table, you probably won’t want to see that money going out of your paycheck. But I would say think about it very hard. Because those small sums now add up over multiple years towards your retirement savings. And if you’re paying into a pension, you get free money. You will not only get employee contributions from your boss if you’re an employee, but the government will top it up with tax relief. So really think about what you’re going to miss out in the future, if you have to stop your pension contributions right now.
So little story of experience. Let’s throw it in there, because Faith is towing the party line to keep your pension contributions going, but I stopped mine. I was I was in my 20s and retirement was years and years away. Also, my parents had died at 58 and 63. They put all this money into their pension, and then they died. So, I was almost, live for the moment, rather than living for the future. And now I’m older, I’m more of the mindset that you need to have fun now, but also put some money aside for the future. I’m all about living for the moment. But also, you know, balance.
But I think you’d also like to live it up in retirement. You don’t want to be choosing between the heating and eating them.
Exactly. So, I didn’t put any money into my pension until I was 30, which is very frustrating because I didn’t have kids in my 20s. I had disposable income. I could have afforded to put money into my pension, and it was a DB pension at Tescos. And I opted out.
I should say DB is Defined Benefit. And that is the Holy Grail of pensions, because the payout is based on what you earned – you’re guaranteed to get certain amount. Nowadays you chuck money in your pension and it’s in the lap of the gods to a certain extent. It’s how the markets perform as to what your money does. There are things you can do to influence and improve your outcomes. But it would be nice to be in a defined benefit pension scheme!
So, it’s very frustrating that I opted out. Anyway, the past is the past.
But it is also the reality. I mean, I’ve had times when I’ve had to stop pension saving because I just did not have the money. I’m thinking of back when I had my kids, I went on maternity leave, I chose not to go back to my office job, I kind of did a bit of freelance work around the childcare. I could only really ramp up my self-employed business when they went full-time school. I definitely had years when I was paying way less into my pension, I still tried to pay a bit in but it’s the motherhood penalty that women pay.
It’s the gender inequality of pensions, as well as gender inequality of pay. Pensions inequality is a big one, isn’t it? Not just women, before dads all shout at me, but a lot of women take time out to have babies. I’ve lost three years of my career being pregnant or bringing up babies. We often are the ones who care for our parents, so there’s another time where we might drop our hours to part time, and then our pension contributions go down. Even though in our 20s, women tend to have bigger pension pots than men. Then as soon as you get into your 30s, when we tend to move into having kids.
I think they’re certainly on par in 20s and then women’s pensions pots drop once we start having kids. The good news is there is stuff that you can do to improve your pension prospects. Make the most of the money that you’ve got now. I know a lot of us, when we get the pensions paperwork, it just goes into the drawer or goes into a folder and you never think about it, but it is worth looking at. In particular, check your charges. This particularly applies for example, if you’ve got any private pensions outside work, or you’ve got workplaces that you’ve left pensions behind. Aim to have lower charges, because over the many years that you have a pension, those extra charges will really eat away at your fund.
Also, check where you are invested. Most of us just end up in the default fund, which is probably fine. But if you’ve got many years to go to retirement, you can actually afford to take higher risk because you can ride out those peaks and troughs of the stock market. So, you might want to be in something with a high proportion of shares. That’s investments in companies rather than in bonds, which are types of loans. The shares are the things that are really going to light the fire under your pension returns. Also have a think, I know this is close to your heart Lynn, about what your money is doing and where it’s invested. You can nowadays choose more ethical and environmentally friendly options.
Yes. My entire pension pot, which isn’t as big as it needs to be, I’ve written extensively about this it’s no secret, I’ve put my money into the fossil fuel free funds with PensionBee. I am really happy with my ethical reasoning behind that, and I feel like it’s the most powerful thing I can do with my money to be environmentally aware. I’ve got a pot of £100,000 in my pension at the moment and I’m very grateful to have that much money. But again, it’s not enough, it’s nowhere near enough. But it’s not going anywhere near oil companies. There’s an argument isn’t there, that if you invest money in oil companies, you’ve got a say in what they’re doing, but in reality, really have you? My money isn’t in tobacco companies or weapons of mass destruction. I think that makes more of a difference than being a vegan. I mean, it’s so much hassle being a vegan, sorry vegans! I’m going to going to get attacked for saying that. I do sometimes eat vegan, maybe like two days a week.
Perhaps, especially if you’re vegan or vegetarian, you might want to look at where your pension money is invested and if it’s going into companies that you believe in and support. Much like we were talking about with your bills, if you’re not getting the internet service you want or the payment plan you want with your mobile phone provider, then you can switch pension companies. So, if you want to go for lower charges, if you want to choose different investment options, then it is possible to choose a new pension company and switch your pension money. You might want to check, they’re not giving up valuable benefits. Some older pensions in particular can have things like guaranteed annuity rates, or special provisions, maybe you can retire earlier. But that’s actually a relatively low proportion of pensions. Make sure you don’t miss out. But you could amp up your pension pot by swapping to somewhere with lower charges and different investment options.
Just to reiterate, we are not financial advisors. This is our view and our view only. And this podcast is in collaboration with PensionBee. We need to make that really obvious.
If you do want serious personal advice on your pension, consider paying for it. Go to an independent financial advisor/planner, it could be the best money that you spend. You will need to pay somebody if you want to have personal advice. That is actually ‘you need to be paying this much into this fund with this company’. But if you are over 50, you can go for a free appointment with Pension Wise, who will at least explain the theory behind it and what your options are. So, I guess that’s my plea. I appreciate that if you cannot even afford your essential bills, you may not be able to pay into pensions right now. But if you possibly can for the future, think about maintaining them and grabbing that free money that you get from the government and your employer.
Wonderful. I think that was a lovely summary at the end. So, I’m going to close off the entire season. That’s the end of episode seven, which was talking about the future. The crystal ball that is our future. Very uncertain at the moment, I think is the summary. I do not know what’s going to happen tomorrow, let alone next year. We can just offer our views and our guidance.
And hopefully, by putting into practice some of the loads and loads of tips and tricks that we’ve shared, you can put yourself onto a better financial footing, and be better prepared to cope with whatever the future throws at us.
Absolutely. As I’ve said before, in previous episodes each of these seven episodes will be transcribed. There will be a blog version, YouTube version, podcast versions, so you can choose how you consume your data. Whenever we’ve mentioned things, there will be links and show notes. We will link to articles, newspaper articles, things of use, other people we’ve mentioned, other companies we’ve mentioned. Just another reminder, we are not financial advisors. This this whole season, and the whole of Mrs MummyPenny talks, it’s just my view.
It’s just practical tips.
And we’re mums. I’m a mum who’s struggled and you’re a mum who struggled. Thank you ever so much to our wonderful sponsors PensionBee. We so appreciate you putting us into a fancy studio in London for the day. We have recorded seven episodes in one day, we are exhausted! That’s the reality. I’m ill with my shoulder. And I’m tired,
But people can find you in a better state of health at…
My Instagram account, @MrsMummyPennyUK, or my website, which is MrsMummyPenny.co.uk
And I’m muchmorewithless.co.uk and also on Instagram at Twitter at @muchmore_less
You can follow our friends @PensionBee across all social media. I think that’s it. Have I forgotten anything?
That will be for the next series.
Thank you ever so much for listening, watching and reading. We really appreciate it. Bye bye