Not everyone has the same financial goals in life. That is fine. But in life we will always face financial decisions, big and small. Making financial decisions with minimal preparation, will be overwhelming and stressful, which can lead to solutions that don’t benefit you. I am focussing on the finances involved with living as an adult, whether you rent, move, or buy. I am still learning about the additional financial costs, and I assume others wouldn’t know them either. You don’t have to do them the same as me, but it can be food for thought. And you can tailor your finances to prioritise what you want.
This is the second of a few posts expanding on financial decisions to consider, and my examples/experiences with them. Also, I’ll share the accounts that I use and manage, and provide areas to further enhance your research. I am not a financial advisor though, I am reading up on these topics just like you. So as always, do some more research to tailor things to your situation.
Financial decision #2: Consider your future location
Do you see yourself moving in the future? Or are you staying in this place forever? Either way you need to think about the financial impact that can have on you. If you choose to stay where you are, then there is possible maintenance and upgrading to consider. Your plants will need new pots, you might like a new rug. But don’t think that since you’re not moving that you don’t need to consider location expenses. If you do see yourself moving, those expenses are disgusting. Unless you already own a moving van or have a lifetime supply of fuel, moving is going to cost you. Don’t get me started if you decided to buy a house rather than rent. Regardless of your situation there 3 things to consider.
If you’re happy with where you are
Maybe you are in your dream location, and all you want to do is make it your own. Decorating a place is expensive, have you seen the price of paint? Having a little bit saved up on the side, for when you find the perfect painting or other home décor, makes it even more exciting. Furniture is not cheap, especially if you want it to work with your aesthetic. Instead of going on finance, you could have a pot of money already building on the side for it. It took me a while to be brave enough to go on finance for anything, so I would normally save up and then spend.
For this you only need an easy access savings account, that you top up regularly. This will allow your cash to earn interest whilst you decide on where to spend it. Don’t forget, a HYSA will offer higher interest that normal easy access accounts. To take yourself to the next level, you could use a credit card to purchase your item, and use the money you saved, to pay off the balance. This allows you to build credit, and get other benefits from the credit card. You just need to remember to pay that balance off. Using a credit card also provides protection from your purchase should anything go wrong.
If you see yourself moving
I’m not saying the first situation is impossible, but I don’t know many people who start their adult life and live in the same place forever. You will eventually move out of your parents place, or relocate for a job. Do you know how expensive moving is? Very. Hiring a van with or without a driver in the UK is nothing less than £150. And sometimes they charge per mile- damn! Maybe you have to do a little house work. Remove those nails, or add an extra coat of paint. Those sample pots are no longer free.
Again, a simple easy access account will suffice, which your own bank can provide. A HYSA could also work too. I wish I had known how much it cost to move house. I talked about this in my post last year, when I moved house for the first time with large furniture. It wasn’t fun, but the cost to move is inevitable, so probably worth saving.
You see yourself buying some day
Now this is a big one. Property prices are not fun, and the money you save is also meant to cover a bunch of other add-on fees. Solicitor fees, surveyor fees, mortgage fees and valuation fees to name a few. The money you save for the deposit has to stretch a little further, which is something I am still learning. There number of extra fees can be overwhelming, but there are ways to get support on building them up.
In the UK they have a Lifetime Individual Savings Account (LISA). This is for a house deposit or retirement. You have a limit of depositing £4000 per tax year, and the government will give you an extra £1000 for achieving that. So, if you max it out every year, within 4 years you will have £20k, guaranteed. This is approximately £334 per month to put in.
Now the catch. You can only use this to buy your first house that is your main residence or for retirement, without being penalised. The house can’t be more than £450k. You have to have deposited cash for at least 12 months before buying. And you need to get a traditional mortgage and use a conveyancer or solicitor to represent you. You also have to be 18 – 39 years of age, to use this account. Penalty: if you withdraw cash for any other reason that’s not stated above, then you will lose 25% of the amount you withdraw. Which sucks.
The thing is with LISA money it gets transferred to your mortgage provider, so with regards to the other fees it’s best to save those on the side, in a HYSA. This means you can access them when needed without going through the 25 % penalisation of withdrawing from your LISA.
I use Moneybox to set up my LISA, but there are plenty of other providers. They all do the same thing, so once you find one that you’re happy with go for it. They sometimes do competitions and fun initiatives, which I have never won, but it encourages me to put in cash. All whilst contributing to my deposit goals.
Living as an adult is so much hassle
Well, that’s a lot of hassle, but I guess when it comes to having a place to live, it’s necessary. There are quite a few hidden costs, that you may not have considered, and they always add up somehow. Hopefully this brings awareness on living as an adult.
Moral of my story:
- A HYSA is essential – The interest can really help, and it’s free money
- Furniture is expensive – It is, even second hand. (This is from my perspective; someone might not think £250 is that much). Prepare for this expense.
- Moving is expensive – Consider the moving van, and the cleaning. You don’t need to do an extreme clean, but if you don’t have the appropriate cleaning supplies, then you need to consider that.
- Buying house? Use a LISA – Free money at 25% of what you put in.
- Watch out for penalties on any fees – They tend to be in the small print, and not obvious so…
- Do your research – I can’t stress it anymore, do some reading, and check those terms for hidden fees.
