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August 2019

The Pros & Cons of Joining Your Finances

By | Money Tips

If you are reading this article about joint finances and have just gotten married, then first of all – congratulations! Money is a hugely important topic in any relationship, and this article aims to help you approach this subject more clearly to find a solution which works for you.

As professional financial advisers here at WMM, we see many clients with a range of financial arrangements and ways of managing money with their spouse or partner. Here is just a brief snapshot of this diversity:

● In one couple, one person (i.e. the breadwinner) might hold the majority of the couple’s bank accounts (in their own name). There might not even be a shared bank account between the two people. The other person (i.e. the home-maker) might not even have their own account, but simply keep money in a purse/wallet, which they can spend and top up from the other person when they need to. This is arguably a more “traditional” model of managing a couple’s finances, and it works for some people.
● On the other side of the spectrum, there are couples where there is no joint bank account at all. Rather, each person has their own account (or set of accounts) in their own name. If this couple lives together, then quite often the bills will be “split” between them. Perhaps one person pays for the mortgage, for instance, whilst the other covers the food and other household bills. This is often labelled a more “millennial” or “modern” approach to couple’s finances, and again, it works for certain couples.

Other couples adopt a “hybrid” approach. Some choose to set up a joint account when they move in together and then shut down their individual accounts when all of their money is merged. Others open a joint account but keep separate bank accounts. In this case, the former could be used to cover the couple’s household bills, whilst the latter can be used for each person’s leisure spending.

So, which model is best? There isn’t a universal answer to this question, but there are certain advantages and disadvantages to merging your finances which you should be aware of. We’ll be covering some of those below. Please note that this content is for information and inspiration purposes only, and should not be taken as financial advice.

Pros of Merging Finances

● A sense of “togetherness”. Bringing yours and your spouse’s/partner’s money together into one account is arguably a good way to show commitment and trust towards one another. It also can create a stronger sense of “being a team” in life together, using your combined resources to solve joint financial problems.
Even playing field. If there is a wide income disparity between both of you, then bringing your money together can allow both of you to live more comfortably – rather than one of you struggling to keep up with the other.
Joint liability management. If you live together, then you will share various expenses to do with household costs (e.g. bills, utilities and mortgage). You might also be jointly responsible for children, which brings other expenses. Managing these costs from a joint bank account can simplify paying for these things.
Easy access during a tragedy. It isn’t nice to think about, but if one person in the couple were to die then having money in a shared account makes it easier for the surviving partner/spouse to access funds which they might urgently need (e.g. to help cover funeral costs).

Cons of Merging Finances

Separation. Again, this isn’t a nice scenario to think about – but it’s important. Should you and your partner/spouse one day split up, then having all of your money in one joint account can make things difficult. If you do not have your own bank account, then you will need to open one to eventually move money across into it. In some sad cases, one person has withdrawn all of the money out of spite – leaving the other person in a perilous financial position. These dangers can be mitigated somewhat if both people keep an individual bank account with some backup savings in them. In this case, however, it’s important to consider how you want to approach this topic with your spouse/partner due to its sensitivity.
Financial vulnerability. If you share money with your spouse/partner, then their financial decisions can sometimes have a greater impact on you. For instance, if one person is a big “spender” and the other a “saver”, then this can create tension or arguments as both people watch the other person’s spending behaviour on the joint account.
Lost independence. When you share an account, then both of you can see every purchase and withdrawal that each person makes. This can create a sense of “losing control” of your personal spending decisions since you might feel that you have to justify your spending more often to the other person.

Final thoughts

On balance, we would argue that for many people it is a good idea to consider opening a joint account once your relationship has reached a high degree of trust and commitment.

It can particularly make sense for lots of couples when they move in together and have to manage shared expenses regularly. In many cases, it can be a good idea for such couples to have a joint account for these purposes, but keep individual accounts for personal and leisure spending.

However, each couple is different in their financial goals and circumstances and it’s important, therefore, to not be too prescriptive. There are indeed cases where it makes little sense for a joint account to be opened, and that’s fine (e.g. certain couples which do not live together).

5 Books to Read on Social Impact Investing

By | Investment Planning

Ethical investing has become more mainstream in recent years, particularly with the rise of millennial investors – many of whom are concerned about how their finances impact the planet.

Here at WMM, some of our own clients have approached us to ask if there are any good books, resources or articles which could help them educate themselves further on the topic of “Social Impact Investing”. In this post, we intend to offer some suggestions.

Please note that this content is for information and inspiration purposes only, and should not be taken as financial advice. To receive regulated, personalised financial advice into your own financial affairs and goals, please consult an independent financial adviser.


#1 Impact Investing: Transforming How We Make Money While Making a Difference (2011)

If you’re interested in knowing more about the history and evolution of social impact investing, then this book by Bugg-Levine and Emerson comes generally well-recommended. The language is not too laden with jargon, allowing it to be fairly accessible to readers who perhaps are not so confident with investment terminology.

Moreover, the book is broken up quite nicely into quite manageable chunks, which helps make it enjoyable to read (as you feel that you are progressing through it). There are also some fascinating topics within the book which are very much worth looking at, including “Impact Investing and International Development” and “How Will We Save The Forest And The Trees?”.


#2 Investing with Impact: Why Finance is a Force for Good (2015)

This work by Jeremy Balkin takes a slightly different line to the one above. Rather than focusing on the history of social impact investing, it rather addresses, head-on, the common popular perception of the financial sector as a primarily negative force when it comes to social, ethical and environmental change.

Standing at around 136 pages, this book is quite quick to read and is nicely broken up into 6 short chapters – each with a compelling title such as “The Blame Game” and “Reimagining Prosperity”. If you are interested in finding out more about how money can be used positively to impact the world, then this is a good resource to consider.


#3 The Impact Investor: Lessons in Leadership and Strategy for Collaborative Capitalism (2014)

If you’re looking for something much more “meaty” and academic on the subject of social impact investing, then this book by Clark, Emerson and Thornley might be worth a look. Be aware, however, that with 291 pages of fairly technical writing, this is not for the faint of heart!

This book puts more of its attention on the strategy and organisation of companies, funds and investment managers who work in the field of social impact investing – suggesting ways to make improvements to the overall system. It is split into three main sections: “Part I: Key Practices and Drivers Underlying Impact Investing”; “Part II: Four Key Elements to Social Impact Investing”; and “Part III: Looking Ahead: Trends and Challenges”.


#4 Invest for Good: A Healthier World and a Wealthier You (2019)

If you’re looking for a book about social impact investing which contain more stories, dialogue and experiences of investors actively working in this field, then this book by Mobius, Hardenberg and Konieczny is quite an entertaining read.

The book contains many anecdotes which can, at times, be amusing whilst also revealing some compelling points about ESG investing. One interesting theme throughout is the authors’ notion that the future of all investing, they argue, lies in socially-responsible investing. So if you’re on board with that idea, this book might be for you!


#5 Building Social Business: The New Kind of Capitalism that Serves Humanity’s Most Pressing Needs (2011)

Muhammad Yunus (the author of this book) is a fascinating person in his own right. A social entrepreneur from Bangladesh, he received the Nobel Peace Prize for his work in establishing the Grameen Bank – a microfinance initiative which issues small business loans to people in Bangladesh, without demanding collateral (e.g. securing against the borrower’s house).

This work is a fascinating and inspiring vision of what the world could be like if capitalism was reformed to focus on the idea of “social business”. This vision outlines a way to build enterprises which are profitable and which produce economic growth, on the one hand, whilst meeting essential human needs on the other.

Standing at just under 200 pages and written in quite an accessible style from a first-person narrative perspective, this offers a unique and interesting read. We’d love to hear your thoughts on it if you decide to read it!


Final thoughts

ESG and social impact investing are fascinating subjects, containing much to explore from a range of different angles. It’s worth stating that we do not necessarily endorse everything contained in the books we’ve suggested to you above, but believe they can help inform and inspire you as you develop your own thinking on these fascinating subjects.

As always, here at WMM we would love to speak with you if you are interested in social impact investing, whether that’s starting a new investment portfolio or developing an existing one which you already possess. If you’d like to get in touch, then contact us via phone or via this website to arrange a free, no-commitment financial consultation with a member of our team today.


How to Start Your Own Financial Education: A Short Guide

By | Financial Planning

There is a quote by Natasha Munson which goes: “Money, like emotions, is something you must control to keep your life on the right track”.

As financial advisers here in Oxford, we can attest that this is true. Your attitude and behaviour towards wealth – just like emotions – has a huge impact on your quality and course of life.

One of the keys to bringing more control to your financial future is to try and understand more about money, wealth and financial planning. Think about the comparison with emotions, again, and consider anger as an example. The more you understand about the nature and roots of your anger, the more you can control it. Similarly, the more you understand about financial planning, pensions, mortgages and investments, for instance, the more prepared you will be to leverage money and wealth positively towards your goals.

Although we, of course, exist to advise clients on financial matters, we do not believe you should solely rely on anyone else when it comes to managing your money. It’s important to have a good grasp of at least basic financial concepts (e.g. capital gains, dividends, investment management fees etc.) to ensure that you understand what your adviser is telling you!

This means committing to your own financial education, learning about some of these important financial planning topics for yourself to get the most out of your financial adviser. That does not mean enrolling on a professional financial planning course or taking the equivalent of an undergraduate degree in economics. It simply means using the resources at your disposal to increase your understanding of important financial matters which directly affect you.

In this short guide, we’re going to suggest a few areas where we recommend starting your own financial education – as well as offering some ideas about where you can find the resources you need to find out more on those topics. We hope you find this helpful, and invite you to contact our team here at WMM if you need any further information.


#1 Start at Home

One of the best ways to start understanding more about money and wealth is to look at your own situation, and ask: “What do I earn, and what do I spend?”

This naturally leads you to look at your banking transactions, payslips and perhaps other documents pertaining to your income/expenses (e.g. income you make from Airbnb). You’ll likely notice important information such as your tax code on your payslip, as well as your pension contributions and student loan deductions.

Ask yourself: “What do I know about these things?” For instance, are you aware of the various tax codes out there, and are you sure that you’re on the right one? Do you understand how your student loan payments are calculated, and how your monthly payments might change if your wage increased/decreased? Do you know where all these pension contributions are going, and where all the money is being stored?

Similar questions can be gleaned from your expenses. For instance, how much are your mortgage payments and how is this worked out? What would happen to this monthly figure if you perhaps moved to a better deal (i.e. remortgaging)? Similar questions could be asked of your utilities and other bills.

In other words, starting your financial education “at home” in this way can really be a great motivator to get you going. After all, the more you can understand these specific things, the more chance you have of being able to make improvements to your finances which could have an immediate, positive impact on your quality of life.

Some great resources to get you started on these sorts of topics include the Which? online resources, and the blogs, articles and guides by Martin Lewis on MoneySavingExpert.


#2 Move Out

In our experience, the above process typically leads people to engage in their own, personal process of educating themselves about their own finances (e.g. mortgages, income tax, ISAs etc.). However, at a certain point, the time comes to also look beyond the things which seem more “immediately relevant” to other subjects which might seem more distant – but which are nonetheless still crucially important.

Examples of these sorts of topics might include inheritance tax and estate planning. After all, it’s great knowing more about your current financial situation, but what happens to your money and wealth in perhaps 30 or 40 years, when it might be time to hand this over to either the tax man or your loved ones?

Another important topic is investing. For example, if you want to build up a sizeable pot of retirement money one day, then it’s important to understand how to make money “grow” through investments. This will involve understanding, say, the difference between “saving” and “investing”; what kinds of investments are available (e.g. stocks and bonds); what an investment “portfolio” is and how various factors can influence how your portfolio is put together (e.g. risk tolerance and personal investment goals).

For this stage, we recommend you follow our own blog here at WMM and other helpful resources such as dedicated investment columns in newspapers such as The Daily Telegraph.


Final Thoughts

Finances, money and wealth are vast and fascinating topics. As financial advisers, we have spent many years learning about these areas and serving clients, yet we admit that even financial advisers need to learn continually. This is especially the case since the financial world rarely sits still, and new developments arrive which need to be understood and then communicated to clients when these changes affect them.

We encourage you to not be discouraged as you engage in your own financial education. There is a lot of jargon and much of the language concerns intangible things which can be difficult to grasp (e.g. final salary pension transfers). However, the payoff you get from understanding these things can be considerable when you later can leverage your knowledge to get a better deal on your pension, for instance, or on your mortgage.

If you would like to discuss your financial planning situation with a member of our team, then we invite you to get in touch to arrange a free, no-commitment pension consultation today.


Investing & Inflation: A Short Guide

By | Investment Planning

This content is for information and inspiration purposes only. It should not be taken as financial advice. To receive tailored, regulated financial advice into your own financial affairs and goals, please consult an independent financial adviser.

Inflation is generally understood to refer to the overall rise in prices, over time, within a given economy. If something (e.g. a dress) costs you £100 in 2019 and inflation rises by 2% twelve months later, then it would cost you £102.

In other words, the same amount of money (e.g. £100) gradually loses its “spending power” over time, with rising inflation. This is important when it comes to investing, as inflation can potentially eat away at the returns you are getting on your savings or investments.

Indeed, this quite often happens without many people realising. For instance, at the time of writing, Which? did some research to show that you would be lucky to get a bank account (unlimited-withdrawals) with a 1.5% interest rate. Yet UK inflation in June 2019 stood at 2%.

What that means is, you might commit, say, £1,000 to an account like this believing it would eventually grow to £1,015 by next year (i.e. 1.5% growth). In real terms, however, your £1,000 would be losing its spending power since inflation (2%) is 0.5% higher than your interest rate.

This isn’t to say that you shouldn’t have an instant-access savings account, with unlimited withdrawals. This can be a useful way to store emergency or short-term savings, for instance, which you might need to access quickly.

However, it does highlight the hidden eroding power of inflation on our savings and investments. In particular, if you want the money in your investment portfolio to grow over time, then you need to ensure that your investment strategy factors inflation into the picture.

After all, if you can regularly generate investment returns which beat inflation, then your money is not only going to grow on paper – but also in real terms. If inflation is 2%, for instance, and your investments grow by 8%, then your money has ‘real’ growth of an impressive 6%.


Investing to Beat Inflation

Of course, your primary goal when investing should be to beat inflation – but it’s typically an important “pillar” within your overall plan. If your main goal is to grow your wealth, then naturally, regularly beating inflation will be crucial. On the other hand, if your main goal is to preserve the wealth you have accumulated, then you will likely still want your money to at least hold its value as much as possible over time, and not be eroded by inflation.

The challenge is, it’s not possible to accurately predict what the level of future inflation is going to be. When you look back over recent UK history, there has been quite a lot of variation:

  • 2% in June 2019
  • 5% towards the end of 2011
  • 2% at the beginning of 2008
  • 2.96% in 2000
  • 9.46% in 1990
  • 17.99% in 1980 (largely due to a recession)
  • 6.4% in 1970

It’s worth stating that the Bank of England was set up primarily to keep inflation low. So there is a strong reason to assume that we will not see inflation skyrocket to some of the figures seen above, any time soon. However, this is not guaranteed and certain events (e.g. a major change in the economy or government policy) could lead to a rise.

One of the main ways investors try to beat inflation with their investments is to incorporate some “Higher-Risk; Higher-Return” assets into their portfolio. These assets tend to pose a greater risk of generating a negative return on your original investment, but also possess the potential to generate a higher return which can beat the rate of inflation.

Investing in companies (either directly or via funds) is a good example of this approach. This is because many businesses (e.g. infrastructure and energy companies) can raise their prices in line with inflation to cover their costs. Theoretically, this can allow them to continue growing even as inflation rises.

This forms an important reason behind why even the most “defensive” or “conservative” investment portfolios (tailored to preserve wealth) often incorporate a degree of equities, rather than simply relying on fixed-interest assets such as bonds. This is because the interest you generate on a bond may not keep up with rising inflation, even though many bonds (i.e. “IOUs” issued by governments and companies) are generally seen as “lower risk” than equities.


Final Thoughts

There is no universally-agreed answer to the question of why inflation rises at different speeds over time. Yet it is generally accepted that a sound investment strategy should incorporate assets and tactics to mitigate inflation, and even attempt to beat it. It is very important to know the level of investment risk you feel comfortable with, but equally important to know as well is the level of investment return you need to meet your lifetime goals. People often overlook the risk of not reaching or having to compromise on their goals, because they avoided some level of investment risk.

If you are interested in discussing your own financial plan with us in light of the above discussion, then we’d be delighted to hear from you. Please get in touch to arrange a free, no-commitment financial consultation with a member of our team here at WMM.