Regardless of how much money you have, making informed decisions is one of the best ways to keep on top of your financial situation. But staying in control of your finances can be a tricky business. At best, it can all be a bit boring and at worst it can feel overwhelming and confusing.
That's why we've teamed up with an expert. Meet Erik, Head of Adult & Industry Programmes at The Money Charity.
After clocking up over 20 years of experience working in banking across the world, he made the move to start helping those in financial difficulty with their finances. He helps countless people develop the skills, behaviours and confidence to make the most of their money, so he really knows his stuff. But he also knows what it's really like to struggle with your finances, having overcoming £40,000 of credit card debt himself.
We've picked his brain to find out how people across the country really feel about their finances and to get his expert help with developing better money habits and feeling more in control of your finances.
Hi Erik, thanks for chatting with us. You rarely get taught how to manage your finances so why should people take the time to get a better understanding of their finances?
Oh there are so many reasons…
But I feel like the most crucial one is all about control. If you truly understand your finances it allows you to make more informed choices and it can give you the confidence to get through tricky situations like the loss of a job or an unexpected expense.
Being in control doesn’t mean you won’t make mistakes and you may make a decision that you later question. Nobody's perfect after all. But I believe for most people, it’s easier to reconcile making a regretful decision yourself vs. feeling like you were forced into something. There's nothing worse than feeling like you could have prevented a bad money situation if only you'd known how.
That's why the work we do at The Money Charity is so important. The Money Charity works with people of all ages to build financial capability. We do this via our money workshops in schools and in the community, workplace financial education, consulting with organisations, and influencing public policy. Helping people to be savvy consumers, avoid being a target, and get the most out of life no matter how much money they have, has become one of my true passions in life!
It's good to learn from your mistakes, but to help our users avoid them in the first place, what are the biggest money mistakes you see people make?
I think a big one is just not taking the time to really figure out what works for you.
Most of us are a product of our upbringing so we tend to make the decisions our parents made. Ask yourself, how did I choose my current account? Most people will answer, ‘my parents banked with X’ or ‘they gave me a free railcard as a student’ or ‘it was the closest branch to my house.’ So the result is the account we use the most and depend on day-to-day is the one we’ve probably thought about the least.
What are the main obstacles you think people face when it comes to achieving their financial goals? How can our users avoid them to better reach their own goals?
There are the usual obstacles like not having enough money, too much information, lack of choice or understanding of products, and many others but from all my experience I believe the number one obstacle is simply not knowing what makes you happy.
Many people set financial goals based on what they think they should be doing or what society has told them they should want. Most of us are confronted daily with too many offers and we're always feeling the pressure to keep up with others.
If you step back and think about what makes you happy and what you need to achieve happiness you may find that you don’t need millions of pounds in the bank. It's all about balance and trying to be. If you get happiness from taking a holiday with your family then prioritise money for that experience instead of eating out 3 times a week or regular shopping trips.
It’s also okay to make your own way in the world. It may go against everything you've ever been told, but you don’t have to be a homeowner. There is nothing wrong with renting if that works for you and gives you a lifestyle that makes you happy.
So many of us are making decisions just because we think we should or we’ve had things like home ownership drilled into us from a young age.
You and your team are chatting with a huge range of people every day in your money workshops - but we'd love to know if you've learnt any lessons from them?
I've learnt so much about how people from all different walks of life feel about their finances.
One thing that's clear, and that we hope will change, is that there is still a stigma around talking about money. So much has been done to help people gain confidence to talk about other areas of their life such as mental health, relationships, and sexuality, but you probably won’t find anyone down the pub talking about money (unless they have lots of it and are trying to show off).
It's a hard topic to bring up, but if you are ever struggling or even just a bit confused about your finances I'd really recommend talking to someone. This could be a friend or a family member, or there are a number of charities out there too. If you're worried about being judged, just think, if someone came to you with this problem would you judge them as harshly as you judge yourself? The answer is probably no, right? When it comes to money we're often our own harshest critics.
Talking it through can help you get some perspective, and chances are that the people around you have probably been through similar situations. In fact, this is one of my biggest learnings. You can’t assume anything about another person’s financial situation. They may have millions but still be unhappy, equally they could be the poorest person you know but also be the happiest. It doesn’t matter what job you do or what level you are, it's all about making your finances work for you.
What’s the one thing you wish you’d known about your own finances when you were younger?
I wish I’d known the cost of what I perceived at that time to be ‘fun’. I had a group of friends who all had much more money than I did. I always felt I needed to keep up with them and woke up one day when I was about 26 with £40,000 in credit card debt. Thankfully that’s all paid off now but I had to learn the hard way. Although most people probably didn’t realise it at the time, it really impacted my decision making and well-being.