Let’s Talk About Money

ISBN 978-1-915483-35-5 (paperback)

eISBN 978-1-915483-36-2

Published in 2024 by Right Book Press

Printed in the UK

© Harry Torrance 2024

The right of Harry Torrance to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988.

A CIP record of this book is available from the British Library.

All rights reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the copyright holder.

Foreword

By Sarah Megginson, personal finance expert, media commentator and columnist

Harry says he was lucky enough to be able to ‘retire at 50’, but there’s really nothing lucky about it. His financial success didn’t happen in a vacuum – there was strategy, commitment, sacrifice and follow-through, all essential ingredients to reach his goal.

And what a goal it was! Retiring from the rat race with enough wealth and health to actually enjoy yourself – well, that’s the dream, isn’t it? What I love about Harry and his approach to financial freedom is that he’s (quite literally) an open book. It’s full of practical, real-world advice and it’s achievable, without being very heavy on the maths. He’s happy to share his secrets and strategies and show you what’s actually possible for you, too.

He lays it all out in plain English, which is powerful. The words and the language we use are so very important. Just this week, for instance, I was reading an article in a respected financial newspaper that outlined a wealth creation strategy for a healthy retirement. The article cited two example incomes – both six figures. It mentioned that by taking advantage of a clever tax technique, you could boost your retirement fund ‘while taking only a £2,975 hit to your annual take-home pay’. Only? You’re in a special band of income when almost £3,000 is considered ‘only’ a small amount!

For many people, a sum far smaller than this can be make or break. For them, the idea of giving up hundreds of pounds each month in your take-home pay – even if sacrificing £3,000 now means a significantly wealthier future – is a pure impossibility. So, the advice offered in that article was designed for the fortunate few who earn high incomes.

That’s often how it goes with wealth planning and with money conversations in general; it’s inaccessible to everyday people. Paying for financial planning advice is expensive, and people can gatekeep the secrets to their own success – sometimes because they don’t want to share, but more often because money is so taboo to talk about.

That’s the really powerful thing about Harry’s journey. He’s starting a conversation and showing you what’s possible. Importantly, he’s demonstrating that what he did (and I mean this with utmost respect) wasn’t special. In his own words, it was ordinary, and Harry believes virtually anyone can achieve a similar outcome.

You might have to challenge some of your long-held beliefs. You may have to look at things a little differently. But in reading this book, you’ll gain a good, basic understanding of personal finance, alongside the tools and strategies you need to work towards a more financially secure future.

Harry and his wife are simply a regular couple who’ve done it: they’ve lived and learned that the secret to financial success is to spend less than you earn, and invest the rest wisely. And now, you can too.

Sarah Megginson brings over two decades of experience in property and finance journalism to her role as a personal finance expert with global financial comparison site Finder. A mother of three, Sarah is deeply committed to educating the next generation on earning, investing and managing money effectively. www.sarahmegginson.com

Prologue

Alex, 28 (friend and former colleague)

On a chilly December night back in 2018, I stepped into the bustling world of Amazon as a fresh-faced graduate. There, in Stoke-on-Trent, England, I found myself as the night shift manager, a role that felt dauntingly grand for my novice shoulders. It was in those early days (well, nights) that I first met Harry, not just a colleague but soon to become a mentor and a friend, perceptive enough to see my hesitations without me uttering a word. With a mix of humour and wisdom, he urged me to embrace the challenge, saying, ‘This is your new playground – go be a cowboy.’ It was the encouragement I needed to transform trepidation into determination.

Our relationship evolved over the years, filled with countless conversations about work, life, and aspirations. Harry, with his unique blend of realism and ambition, shared his personal goal of retiring early – a dream that deeply resonated with me. When he announced his retirement at the ripe old age of 52, I was both amazed and inspired. Probing him for tips, I found no shortcuts or easy paths. Instead, he offered honest, hard-earned insights.

Guided by our conversations, I started to carve my own path. Today, as I write this from Sydney, Australia, poised to invest in my second property, I realise how Harry’s mentorship has been instrumental in shaping my journey. He didn’t just help me devise a plan for my career, finances and personal life, he instilled in me the confidence to pursue it.

Now, as Harry turns his wealth of experience and insights into the pages of this book, I feel privileged to pen this prologue as a taster of what you can achieve. For those about to embark on this read, you’re in for a treat. His pragmatic wisdom, peppered with his (often) quirky view of life, is not just enlightening but also deeply relatable. It’s a guide from someone who’s walked the path and is generous enough to share the map.

Happy reading, and may you find your own way to ‘be a cowboy’ in your life’s endeavours, just as Harry inspired me to do in mine.

Introduction

In March 2022, a few months after my wife Lou had stopped working full time, I did the same. Since then, I’ve taken on a couple of (very) short-term contracting jobs but otherwise we have effectively ‘retired’ – and we’re both in our mid-fifties. We have a financial plan that allows us to spend our time doing pretty much exactly what we want. I’m reaping the benefits of that new life: I’m sleeping better, eating more healthily, taking more exercise, have lost a stone in weight over the course of a year and rarely get stressed, least of all about money.

Sounds great, doesn’t it? Well, it is – but that’s not the point of this book. As we got closer to leaving our jobs and sharing our plans with others, the most common question was ‘How?’ And there were lots of variations, including: ‘How did you do it?’, ‘How do you know you have enough money?’ and ‘How did you start?’ As I started explaining it to friends and colleagues, it dawned on me that there were many different elements to our plan, several common themes, and it’s been a long time in the planning. This also fed into a passion of mine for mentoring and how I could share our approach with other people so that they too might have a more secure financial plan, which in turn could lead to a more comfortable life.

But let’s be clear, there’s no quick fix or shortcut and some of the choices are hard, particularly when your long-held beliefs are challenged. And I’m not going to promise that you can replicate our plan to the letter and simply ‘retire at 50’. Why? Because everyone is different and we all have different aspirations, situations, skills and hobbies. However, I can walk you through the approach to life and finance that allowed us to achieve this and would argue that you can apply many of the techniques in this book and build your own plan to a more secure financial future. I can also guarantee you that these approaches are ‘real world achievable’; in researching this book, I’ve read countless articles for background information and trawled the internet for similar content, each time sense-checking that what I’m saying holds water.

One popular blog had a little gem hidden in a post: ‘My wife and I moved state and changed jobs, doubling our salaries.’ Really? This is fantasy-land for most people and totally unrealistic. Just to set the record straight, I’ve not had a pay rise for probably half the years I’ve worked and when I have it’s generally been in the low single digits as a percentage. I’ve had some step-changes in salary when changing jobs but nowhere near double. Also, much of this internet-based content is US-centric and the fiscal examples aren’t applicable over here, so that’s another reason why I wanted to write this book – specifically to target a local audience.

As I write, here in the UK we’re in the middle of some challenging economic times. We’ve come through the Covid-19 pandemic but many businesses haven’t fully recovered; the war in Ukraine continues, contributing to higher fuel and food prices; we have experienced stubborn inflation and have had a pretty unstable government throughout. This has hit everyone hard. Research from insurance group Direct Line in January 2023 suggested that almost a third (32%) have stopped adding to their savings due to the rising cost of living, a quarter of households (25%) don’t have any savings at all, and more than a fifth (22%) of households wouldn’t last a month before getting into financial difficulties if the main breadwinner was unable to work.

Researching and writing this book has taken about two years, so it certainly isn’t a knee-jerk reaction to the cost of living crisis or about making a quick buck. As I’ve said before, there are very few quick wins and it takes time, but even in these circumstances I can explain some tools and approaches for you to build a plan to make your future more financially secure. I think it’s fair to say that many people are simply not very good at managing their finances and they’re not very good at admitting it either. If this sounds a little like you, then that’s OK – I want to help. The good news is that you don’t have to be great at maths to follow the methods in this book; you just need to understand the basic principles of finance and how to make financial decisions that are right for you.

I hated maths at school and wasn’t particularly good at it – I struggled to get a ‘D’ at A-level and only then because it was a requirement for an engineering degree. So rest assured that this isn’t going to be a textbook full of number crunching; I’ll just show you some examples to help you understand the principles. This is partly because I’m still no good at maths – if you asked me on the spot to work out the compound interest at 5% on £10,000 over 10 years I probably couldn’t but I know the effect is good and when it would be applicable to your finances.

The final aspect of this ‘knowledge gap’ is that not only are many people not very good at admitting they don’t understand their finances, they’re also slightly embarrassed and therefore don’t talk about it. You might be one of these people. I don’t care who you talk to – your mum, your partner, your friends or your kids – but not talking about it perpetuates the myth that it’s hugely difficult, meaning you might bury your head in the sand rather than try to figure it out. How many times have you been chatting to someone who’s just bought a new car on finance and somewhere in the conversation you’ll hear the line ‘Oh yeah, I got a really great deal’, without them knowing whether 3% over five years with a 20% deposit would have been better than 4% over three years with a 25% deposit? I couldn’t tell you off the top of my head which is better either, but I can explain how to approach that discussion before signing the deal and which questions to ask so that you’ll be more comfortable that you’ve got the deal that works for you.

A good tool to benchmark your approach to money, or determine your ‘financial personality’, is one developed by the Myers-Briggs Company and Goldman Sachs. It’s a free, ten-question online quiz (see the link in the Resources section at the end of the book) and is a great starting point to better understand your relationship with finance and how you make financial decisions. Irrespective of the result, it will ask the sort of probing questions that will help you start to understand your relationship with money and finances.

I’d like to say that this book is aimed at everyone as we all have to manage our money, but there’s a time in your life when money or finances begin to have a greater impact and you start to feel a little out of your depth or don’t have the confidence to share that you’re not fully in control. This might be when you start your first job, when you move away from home or when you start a family – but it’s certainly that point when you realise you have to take financial decisions seriously. You could be in your twenties, thirties or even forties but you’ll have started making bigger and more important financial decisions. If you’re under 20, even better, as the longer you have, the more effective your plan will be. Don’t worry about when you start, as long as you start – and today is as good a day as any. There’s an old Chinese proverb which demonstrates this point:

When is the best time to plant a tree? Twenty years ago.

When is the second best time to plant a tree? Today.

Talking of time frames, I grew up in the 1970s and 1980s when life was very different. When I was at school, we had one phone and it was attached to the wall with a curly cable. Our information was sourced from books in the library and we only had four TV channels (and they stopped broadcasting at midnight). Only cameras took photographs and you had to wait until you’d taken 24 or 36 before sending the film away for a week to be printed. Since then, I’ve seen the birth of home computers, laptops, digital cameras, mobiles, smartphones, email and the internet, and the rise and fall of video, then CDs. Set against these technological advances is the way finance has developed. First, the general principles of economics have stayed the same: companies make things, buy and sell or provide a service and create a profit by increasing their customer base or margin. As they grow, so a company’s value increases. Although what they make or sell or how they deliver that service has changed dramatically with technology, the way those companies are valued is the same, and that provides a stable base for a long-term financial plan. Where technology, in my view, has destabilised personal finance is in the range and availability of credit (of the ‘buy now, pay later’ variety), the complexity of financial products (such as cryptocurrencies or the way debt can be packaged, restructured and sold to another institution, several times over) and the ability to create duplicate (or copycat) products that look and feel like a well-known item but are cheaper and lower quality. These all contribute to a society where many things are proportionally cheaper and more readily available, leading to a risk of spending your money more freely than we did 10 or 20 years ago.

The reason for mentioning this bit of history is that it has influenced much of the way I think and formed the basis of my approach to finance. There was no online marketplace, next-day delivery or instant download of the latest film; if you couldn’t afford it, you had to save up for it, and if it wasn’t available in your local shop, you had to wait 28 days for delivery, if you could get it delivered at all. Don’t get me wrong; I love the current world we live in, with all the benefits technology and progress have brought, but the mindset of waiting and thinking about a purchase and valuing that purchase is, to my mind, quite different to that of many today. This understanding of how we think about spending the money we have is half of the plan, the other half being how to earn more in the first place.

In this book, I’ll be covering the key principles of financial planning, together with an overview of the different types of finance and investment. I promise this won’t be too technical but it will show you how to evaluate the true benefit (to you) of a financial decision and how to differentiate between several competing options. Then I’ll dive into linked concepts of spending less and earning more. This is where you’ll be challenged to put in some effort, as failing to grasp these two things can seriously damage your plan. The next section will be on marketing, value and debunking some ‘get rich quick’ schemes, as it’s important to understand that very few businesses are ‘on your side’ – they exist to make money out of you. But there are also several eye openers that can help reduce your spending. I’ll also talk about relationships – many of you will be in them but unfortunately they don’t all end ‘happily ever after’. However, now’s the time to stand up and take ownership of how you’re going to manage yourself and your finances, whether it’s on your own, as a couple or as a family. Don’t worry too much about your starting point – the plan is adaptable. As long as you understand the basics, you can build one that works for you.

And finally, I’m sorry to tell you but, at some point, you’re going to die. It’s an often overlooked aspect of financial planning and one that people only start thinking about in their sixties or seventies – and that’s too late. So let’s put it on the table and build it into your plan from the start. To finish, I’ll cover how to monitor your plan and ensure that you keep tabs on whether or not you’re on track. Again, this won’t be too complicated – it involves a bit of spreadsheet work and some examples of some of the technology that makes this bit even easier. If you do want more detail, turn to the Resources section at the back of the book. So grab yourself a cup of tea and start learning how to unravel the mysteries of personal finance, taking those first steps towards creating a plan that will increase your money confidence and give you financial freedom.

"Where did you learn all this?"

Chapter 1

My background and worldview

My wife and I fund our lifestyle through our savings, property and pension investments, which we’ve built up over the long term but consolidated into an early retirement plan over the past ten years. It’s not strictly true that we’ve given up work altogether; it’s more accurate to say that we’ve given up paid work as we volunteer with a number of local charitable organisations. This was always part of the plan – to give something back to society while having the freedom to do what we want the rest of the time. Yes, we have been and still are frugal but we’ll also spend money on having fun. For example, last year we bought a BMW Z4 convertible and have booked first-class flights to Barbados in the spring. But the car is a ten-year-old model bought at auction and 80% of the cost of the flights was covered by points built up on a credit card over the past four years. It’s really about the mindset you have about money and financial decision making, how you value what you buy and how you think about long-term saving. That’s been a key part of what we’ve done. It’s the confidence we have in making those decisions that allows us to be stress free about the way we live now.