Experts look back on financial lessons learned
By Marianne Curphey
Nobody is born with money skills. We all learn as we go -- and some of us learn the hard way, through trial and much error. We asked financial experts how they learned some of the most valuable lessons in their toolkit, and what they advise to those just starting their credit journey.
1. Know the exact terms of repayment
Wilma Allan, of The Money Midwife, recalls setting up an account with a well-known high street retailer -- but didn't know what kind of account it was.
"I didn't realise I had set up a credit account," she says. "Thinking it was a bill that could wait, I didn't pay it. So, as I discovered, failing to pay the bill on time immediately affects your credit rating -- and this stays on the record for six years. It was a very nasty shock. So it really pays to understand exactly what you are setting up."
Even if you know when your bill is due, make sure you understand how interest works. For instance, some credit cards offer 0% interest periods. But if you don't know the repayment terms and don't pay off your balance before that period is over, you'll be hit with high interest.
"[Credit card companies] make money from people who don't do this, and judging by the number of available offers, they must do pretty well out of it," says Yvonne Goodwin, of Yvonne Goodwin Wealth Management. "[Credit card companies are] not charities, they are money maximisers -- never forget this!"
2. There's no such
thing as free money
"My dad taught me to earn my pocket money," says Goodwin. "He had me doing the payroll for one of his clients (he was an accountant) from the age of 13. This taught me a number of lessons: one, how your hard-earned money gets subjected to tax and national insurance; two, the importance of not making a mistake with your calculations; and three, that you have to earn your money -- don't expect it handed on a plate."
Philip Pearson, of P&P Invest in Southampton, agrees with the latter.
"If you want anything in life then earn, save and make it happen. Set a date and start planning today to meet that target," says Pearson. "Don't rely on your parents for everything you want. Get a part-time job and start to enjoy the fruits of your labour."
3. Not all debt is bad
"There is a tendency to think that debt is bad," says Allan. "Unplanned, unmanaged debt isn't a good idea and can have a lot of emotion and guilt attached to it. However, debt is neutral. You can choose to go into debt for a good, sound reason and it can remain a good decision as long as you have a debt pay-off plan and stick to it. Assets put money in your pocket and allow your money to grow. Anything that loses value or takes money out of your pocket is a liability."
4. Don't be afraid to make positive life changes if you feel stuck
"Too many people stay in a job they don't enjoy, earning insufficient income and not progressing or being promoted. They get into debt because their job is not paying enough. It takes courage and a certain mindset, but if you are in that situation, you need to change jobs or change careers," says Pearson.
Deciding to take on a whole new career path may shove you out of your comfort zone, but, hopefully, you will benefit financially.
"When I was 21, I realised that my income would never be
enough for me to buy a house on my own," says Pearson. "I was a cartographer
drawing maps for the Ordnance Survey, and I realised that I was not earning
enough money in that job, so I completely retrained as a financial adviser."
5. Don't take good money
advice for granted
Financial know-how is taught in UK schools today, but that wasn't always the case.
"Many of us must remember a time in a school maths class when some person who hated algebra asked the teacher to ‘tell us about something useful, like money', and a number of other children would nod in agreement," says Steve Rees, a former teacher and now managing director of debt consultant Vincent Bond & Co.
We all face money maths on a daily basis, Rees points out, and we work at it with varying degrees of success.
"This is largely down to the fact that many of us have little confidence when it comes to something more complicated than pounds and pence at the till, because we have never been given the opportunity to learn about how financial products work," he says.
Goodwin says that while she did take economics when she did her A levels back in the mid-70s, she wishes she had a better economics teacher so she would have paid more attention to a subject that she then found so tedious.
"Now, I absolutely get economics and how important it is to understand the world around you financially," she says. "Having just finished doing a degree at the grand old age of 53 in financial services, planning and management at Manchester Met where the economics element was delivered by a superb lecturer, I bemoan the fact that I didn't get this when I was teenager!"
6. Understand the root of your money problems
"Often, our relationship with debt and credit is a reflection of deeper issues that we have going on inside," says Sarah Hennigan, of Money Clarity. "Many people have a tendency to make emotion- and anxiety-based financial choices, which create self-sabotaging behaviours resulting in a cycle of debt: incurring debt, repaying the debt and then incurring more debt."
Hennigan says the most important lesson she's learned from experience and from years of providing financial advice, is that it is important to get a handle on your emotional relationship with money.
And don't be afraid to ask for help sorting your problems out.
Bev Budsworth, of the Debt Advisor, says the best lesson she ever learned was to not procrastinate -- always deal with the issue. "Never put things off, no matter how tough things appear, as it will only get worse. If you can't face something alone, always get the best help you can," she says.
Published: 8 May 2014
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