a Financial Hot Girl's guide to money: 100, 1,000 and 10,000
POV: you have money, you just don't know what to do with it
When it comes to having money, the problem a lot of us face is the decision fatigue with what comes next. And personally, I think there are different steps to take depending on what financial milestones you hit. As a Chartered Accountant and Certified Financial Hottie, the way I’d think about what to do with £100, £1,000 and £10,000 differs based on local tax implications, goals and the Financial Hot Girl framework.
Let’s get into it. Please remember that the contents of this article contain financial education, as always this is not financial advice.
The first thing to understand is that you can earn interest on your savings in the UK, depending on where you put these savings—what bank and with what kind of account. However, you’re also subject to paying tax (as if it’s income) on the interest you earn from your savings, specifically above a Personal Savings Allowance which varies depending on what tax bracket you’re in.
The allowance is £1,000 for basic rate taxpayers, £500 for higher rate and £0 for additional rate. This means if you’re a basic rate taxpayer and earn between £12,571 and £50,270, and you earn more than £1,000 of interest on your savings, you will be taxed on the amount over £1,000 as if it’s your income.
Now let me explain how I’d use this information to my advantage if I were saving based on this sliding scale of £100 - £10,000.
Your first £100
This is a great milestone to reach, especially if you’re coming from a place of spending everything you earn. Trust me, I’ve been there. Having breathing room, even if it’s £100, is a massive sign to yourself that you can actually create breathing room. Saving your first £100 often comes from making different choices in your life, but not changing much. Maybe you planned your food shop, or audited your spending habits and decided to shop for clothes less. The first £100 is a matter of controlling your expenses. These are variables that we can adjust without friction, as it all depends on our willpower, our discipline and our habits.
Looking at the Earn, Keep Grow framework as a Financial Hot Girl, being able to control your cashflow in such a way that you can keep £100 over and over again is you mastering your Keep season. More on this here:
What to do with it
The first thing to do is think about your upcoming expenses. Things that are guaranteed and necessary to spend on. Examples:
insurance
birthdays
Christmas
car/motor expenses
social events
bills/utilities (if not already coming out)
If you have an idea of what you will 100% be spending on in the short-term, you can create a sinking fund: a fund (pot of money) that will sink (be spent). If you use an ebank like Starling or Monzo, you can create a sinking fund by create a ‘pot’ or a ‘saving space’ and labelling it by its objective.
Your first £100 should go toward one of these expenses. I think it’s a great idea to not immediately save this and instead train the muscle of being proactive about your expenses and spending with intention.
£100 put away for future spending is £100 less to ‘find’ when that time to spend comes. If you build this as a strong habit with £100, you create a lot more financial flexibility in the future when you have £1,000s.
One of my first major sinking funds was for a hen do in Dubai for a friend. I saved up £2,200 over 9-10 months. When the trip came, I was able to spend up to £2,200 without actually impacting my bank account or savings at the time. Financially, it looked like the trip never happened. I didn’t have to dip into my overdraft or scramble for the money because it was already there.