Rainy Days

Where does all your money go? A guide to getting a grip on it

Clearing credit cards and a touch of long-term planning – expert advice to help you set out a plan.

This article is part of our Change Generation project, supported by KBC. To read more click here.

“I MEET A LOT of clients in their late 30s and early 40s who wonder where all the money went over the last decade,” says David Quinn, financial planner with Investwise.

“In my experience, there tends to be a lot of waste and overspending among those that don’t have a financial plan in place,” he told

Your 30s, say the experts, is the time when you need to get serious about saving for the future, getting a ‘rainy day’ fund in place, and clearing expensive debt.

However when you find yourself handing over most of your money for rent, mortgage repayments, childcare costs or whatever else fits into your household expenditure, saving for something that might never happen may not be high on your list of priorities.

Identifying spending habits

Before drawing up a financial plan the first step is to determine exactly how much you have and where it goes.

Quinn tells his clients to pore over their last six months of bank statements in great detail to identify their spending habits.

Once spending habits have been defined, then the individual can move towards establishing a plan and setting out the best course of action for the future.

Brenda Rogan, Managing Director of Wealth Alliance, told that once a person knows what it is they want to achieve and how they want to live their life now and into the future, a plan can be made for how they wish, “to achieve and maintain their desired lifestyle”.

Rainy day fund

Part of that plan must be a ‘rainy day’ fund, say the experts, and it should hold the equivalent of around six months’ worth of expenditure to tide you over when times get tough.

Brenda Rogan says the ‘what if’ fund should be a priority of any financial plan at this stage of life and should be considered, “before exploring any longer term planning requirements such as pensions.”

Planning for short-term emergencies like illness, death or being unable to work through sickness or disability, says Rogan, will be what keeps a roof over head in the event of such a crisis.

Quinn agrees and says an appropriate ‘rainy day’ fund is crucial to ensure stable family finances. Planning it well should mean that an individual can avoid having to rely on, “a credit card or borrowing at high short term interest rates in order to pay for a broken boiler, a change of car or to pay for holidays,” he says.

Once you have that fund in place, it’s time to start thinking of the medium to long term goals: weddings, house deposit, children’s education, or paying off expensive debt.

Clearing existing debt

Saving for the future while paying off debt can be achieved with careful planning, says Richard Morton of Moneywise. However it is heavily dependent on the type of debt involved.

If it is primarily on credit cards, getting rid of this must be a priority before saving a penny says Morton:

Credit card debt is incredibly expensive with interest rates as high as 22% per annum. If anyone has an outstanding balance on a credit card, this should be eliminated as soon as is possible before anything else.

Quinn agrees and says he always recommends that his clients pay off expensive debt quickly, even if it means not saving at all, while “longer term debt such as a mortgage can be delayed somewhat in order to prioritise building up a ‘rainy day’ fund, or starting a pension.”

Long-term goals

Once children are involved their education needs to be factored into the long term part of a financial plan. Rogan says:

If house purchase has already been done, and they have young children, then some sort of long term education fund should be considered. Even if college fees remain as they are now, sending a child to college for four years is an expensive exercise.

“Life is not a rehearsal,” says Rogan who agrees that planning for your children’s education, along with your own retirement, should also be part of a financial plan in your thirties.

Quinn says once you have your expensive debts in order and your ‘rainy day’ fund in place, it is worth thinking about a pension so you can ensure that you avail of, “the long term compound growth benefits”.

But there’s plenty of time for all that…right?

Everyone in their 30s and 40s should be planning for the future, says Richard Morton, “regardless of circumstances, be they single, married, have children, have a mortgage or are mortgage free.

No-one knows what the future holds and having a kitty which can be used for unforeseen circumstances is always advisable.

Rogan says starting early is more cost effective in the long term, with pensions and investments benefiting from compound interest avoiding the effect of playing ‘catch up’ in later life.

No regrets in ten years’ time – that’s the big pay-off, says Quinn. The hardest part of the process is cutting back on the luxuries so you can plan for the ‘what ifs’: “A good financial plan involves some initial sacrifice, for long term gains.”

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