Leaving aside tier 1 items, as these are placed at the luxury end and not really considered everyday nor frequent purchases, the concept of ‘shifting down a brand’ is often cited as a way of saving money (swapping your regular purchase to a ‘lower brand’ but getting a product of very similar quality and greater value) and I wouldn’t disagree with this. It’s particularly true in relation to supermarket or large retailer brands or those companies with multiple, duplicate brands.

A value or brand choice?

Early in our careers, when Lou and I worked for the same company, we were both offered a company car at the same time. We had different jobs but were at the same level and had the same budget. Lou chose a 1.6 petrol VW Golf hatchback and I chose a 2.0 diesel Škoda Octavia estate. Comparing the two cars, mine had the higher specification: climate control over air conditioning, leather over cloth seats and a more powerful and economical engine. But inside the car, aside from the badge and a few minor details, it was exactly the same – the same door handles, dashboard dials and switchgear. You’d be hard pressed to spot the difference, yet the perception of the brands was very different and I got a lot of stick from friends and colleagues for driving a Škoda. At the same time, one of the account managers chose an Audi A4 saloon from the same price bracket. Although perceived as a higher quality brand, he had to contend with wind-up windows and couldn’t afford metallic paint or alloy wheels! As a side note, when I left the company and handed back the car, they ran it as a pool car for a further six years. Proof, if needed, that it was a value for money decision.

With an understanding of how brands are marketed as well as downshifting brands, I’d also recommend shopping in the middle tiers (3 to 6). I’d avoid the ‘unknown brand’ unless the frequency/price ratio is low enough that you’d consider it a throwaway item rather than something you’d want to last for a reasonable period of time. This frequency of use is related to an earlier concept in the previous chapter, or £/use as a mechanism of evaluating the cost of an item against how many times you’re going to use it. In this case, the argument is that if you’re going to use something often, then it’s worth buying a better quality product rather than something cheap and cheerful that might not last as long. However, don’t confuse better quality with higher price; seek to understand the underlying quality of the product, not what the marketing hype is telling you.

Raw material cost, performance and product quality

So how do I know that less well-known brands are often just as good as other, better-known brands? It comes from spending many years working in manufacturing and distribution/retail where I learned how contract manufacturing operates. Some of you might be familiar with the ‘biscuit argument’. Most supermarkets sell an own brand version of, say, Rich Tea biscuits, so there are maybe a dozen variations. They’re often made in the same factory, perhaps with a small tweak to the ingredients and of course the outer wrapper. But the production line, the ovens, the temperature control, hygiene standards, mixing bowls, quality checks, packing and storage are all the same, leading to very similar end products. While many will argue that you can’t beat the original McVitie’s or Waitrose Rich Tea, in taste tests there’s often little difference to those from Tesco or Aldi. Added to this, there’s always personal taste and a preference for one over another, so there will never be a universally agreed ‘best product’.

Now we get onto the technical make-up of products – the core ingredients and how they influence performance. One company I worked for had an own brand range of maintenance aerosols (lubricating oils, degreasers, cleaners, etc) and one year we decided to relaunch it with a new can design so that the sales team had a ‘new, improved’ product to sell. We were already using a contract manufacturer, so we agreed a funky new can design and had meetings to discuss what we could change in the formulae to be able to claim the products were indeed ‘new and improved’. One product was a graphite spray (a lubricant), which we tweaked a little and sent samples out to the sales team for customers to test. The feedback was universal – it was rubbish and worse than the old one. We hadn’t changed much and couldn’t understand the reaction but after a discussion with the manufacturer, they pointed out that the new product was clear and suggested that some people might not associate this with graphite. We tweaked it a little more and sent out the new samples, only to get a similar universal response, albeit a totally different one, which was ‘excellent’ and ‘so much better than the last lot’. What had we done? We’d added some black dye to the product. It was technically no different (in terms of lubrication) but the customer perception was that this was a good quality graphite spray and we even managed to increase the price of this new, improved version.

With aerosols, it’s sometimes not just the active ingredients, it’s what else makes the product work – this time, brake cleaner. To understand this, you need to know how aerosols work; there’s the can (obviously), the active ingredients, compressed air and a product known as the carrier or propellant – generally a liquified gas that the active ingredients are mixed with to make the product spray out of the nozzle without clogging. Typically, a good brake cleaner has a powerful spray that gets the active ingredient onto the surface you’re trying to clean, so for this product we increased the percentage of compressed air and propellant, the two cheapest ingredients. Again, we received excellent feedback that the new product was ‘way better’ than the old version and ‘literally blasted away brake dust’, when all we’d done was effectively reduce the amount of active ingredient in the product to reduce the cost. This time, we kept the selling price the same but increased our margins as well as increasing overall sales volume since it was seen as a top-performing product.

I’m sharing these two examples to demonstrate that product quality isn’t defined solely by the brand or the manufacturer and that often an unbranded (or a brand with a lower perceived quality) product might well be just as good. It goes back to the basic concept that any company is in business to make money; it buys or makes a product for a certain cost and has to sell it to the customer at a higher price to make a profit and thus sustain its business. If a company is spending a lot on marketing, it must either sell it at a higher price for the same ‘quality’ of product, or make it at a lower cost, at the risk of lower product quality. So when you’re buying a higher branded product, you need to think about how much of that purchase price you’re prepared to pay for the actual product and how much of it is purely funding the marketing or celebrity endorsement.

Brand reputation

At the other end of the scale, there are the completely unknown and unrecognisable brands, typically seen listed in online marketplaces and often at the lowest price against comparable products. I’m not a fan of these unless you’re making a disposable one-off purchase. Despite what I’ve said above about managing product cost, there’s a limit to how far you can trim cost and margin without compromising product quality. The adage ‘if it sounds too good to be true, it probably is’ fits here. Plus, there’s often no reputation behind the brand and no guarantee of longevity of supply. I believe it’s important to buy from a trusted retailer or a brand you know because you’ll have additional recourse if the product fails. A larger brand will more likely support you with better aftercare – and this is true of all those middle brands from the list above; it’s just the complete unknowns I’d steer clear of, despite the lure of a cheap price.

Of course, I’m not infallible and also get tempted by a bargain. I was looking for a carry-on rucksack for a flight and didn’t want to spend a huge amount as I wasn’t a regular flyer. I chose cheap – two for £16 online; they looked OK when they arrived and we duly set off on holiday. While walking through Tenerife airport, one of the straps tore away, so I went back online to see that the product was ‘no longer available’ so it wouldn’t have been much help to others to leave a review of what I’d experienced. When I contacted customer services, the seller was a distribution company that at least offered a partial refund. After all, the strap could be re-sewn and Lou’s was still intact. Although the retailer covered the poor quality, I was annoyed with myself that I’d fallen into the trap of buying ‘too cheap’. As the saying goes, ‘buy cheap, buy twice’ and this is true of the bottom end of the market.

Technology

There’s one product category that you also need to be careful with and that’s technology. Primarily this is down to Moore’s Law, which states that the number of transistors on a microchip doubles every two years, which in layman’s terms means we can expect the speed and capability of our computers to increase every two years, yet we’ll pay less for them. The challenge here is that product lifespan is getting ever shorter and we’re being encouraged to buy the latest version each time it’s launched, when the existing model is still doing a reasonable job. Part of the marketing approach here is to include an element of built-in obsolescence (typically by not providing technical support for older models) and part is down to Moore’s Law itself: for example, if you have 25 apps installed on your phone, it might start off being well within the available storage. As apps are developed, more functionalities generally require more space and as these are updated you may find that, after a year or two, the storage required by your 25 apps now exceeds what’s available. It’s good practice to keep apps updated rather than saving space by not updating them, so you end up needing a new phone with more capacity just to stand still.

While I love technology, I do have a challenge with this shorter lifespan and the near constant push to replace perfectly serviceable products ever more frequently. Coming back to financial management, if you fall into the trap of investing in too much technology too often it’s a potentially huge drain on your personal finances. It would be unrealistic of me to try to convince you to shun all technology but as with other themes in this book, if you want to take control of your finances, you need to challenge yourself with the question, ‘Do I really need this?’

Twenty years ago, Lou bought me a watch as a wedding present – a Seiko Kinetic (self-winding) – for about £150, which tells me the date and time. I’ve worn it every day and had it serviced once to replace the internal battery, so in today’s terms, it’s an investment of approximately £300. Looking online today, a series 8 Apple iWatch is around £400 and I’d put money on whoever buys one will not be wearing it in three to four years’ time, let alone 20. Of course, it’s your money to spend however you like but I’m hoping to give you some insight into how to value your money (and your spending) so that you have more confidence in planning a more stable financial future.

That’s not to say I’m immune to making decisions that don’t work out, at least from a financial perspective. About ten years ago, I bought a digital SLR camera. It cost about £400 and I’ve taken some great pictures with it but my phone (at around £200) now takes better photos and, more to the point, is always with me and fits in my pocket. Looking on eBay, I’d struggle to sell the camera for £50. Frustrating as this is, we can’t all be perfect at predicting how technology will develop. I just try not to let it happen too often and, more often than not, I’m not an early adopter of any new technology, preferring to wait until it matures.

Behavioural biases and quality perceptions

To wrap up this section on marketing and value I’d like to share a couple of examples to show how positioning a price (or discount) can influence our decision to buy, separate from product ‘quality’. I’m not going into detail about all the various pricing strategies but Figure 6 demonstrates a couple of examples of behavioural biases from Dan White of Smart Marketing; they nicely demonstrate how positioning the price of a product influences how we perceive its ‘value’ and therefore whether we’re prepared (or convinced) to buy it. I remember an old sitcom from my childhood, Terry and June, where the hapless Terry bought a new TV because it had 50% off. He tried to reason with his wife that the discount meant he’d saved £20. And since the TV now only cost £20, it was effectively free. We might laugh at the absurdity of this logic but as the table demonstrates, our brains can be misled.

The power of free: people don’t like ‘cheap’ but they love ‘free’

Two bars of chocolate; priced at 1p and 15p – 73% will choose the 15p bar. The penny bar is considered inferior.

Same two bars, dropped in price by a penny, 69% now choose the free bar over the 14p one.

Rule of 100: we perceive discounts differently on products costing more or less than £100

On a £1,000 TV, £200 off sounds more attractive than 20% off, yet it’s the same amount.

While on a £10 shirt, 20% off is more attractive than £2 off.

Framing effects: highlighting a positive attribute makes a product more attractive

75% lean minced beef is seen more positively than advertising 25% fat.

Rather than quoting a vehicle’s poor 20mpg economy, say that it’s best in its class.

Figure 6: Behavioural biases (source: Dan White, smartmarketing.me)

So what am I really saying about marketing? You might think I don’t hold that profession in particularly high regard; while I love some of the creativity, I’m not keen on the underlying idea of trying to sell you something that you don’t really need. Making your buying decision purely based on function would in many cases reduce what you spend. Due to the way manufacturing technology has advanced and the development of larger, global supply chains, what used to be considered a premium, high-quality, low-volume product has become mainstream. Brands have retained their premium tag but they are now more mass market. For example, when I was growing up, the best-selling car was the Ford Cortina, which sold millions. Much less common was the BMW 3-series, with the early two-door models giving 1970s junior management ‘a chance to enjoy a prestigious badge and a touch of exclusivity’. For the price of a Cortina 2.0 Ghia in 1977 (around £4,000) you could have had an entry-level BMW 316 – a car that was smaller, more basic and less powerful. About ten years ago, I drove a Mondeo, the successor to the Cortina, and at the time, more people drove a BMW 3-series than a Mondeo; I was now driving the ‘rarer’ car, while the BMW had become mainstream. I’m not saying it’s not a great car – it is, and I have one – but it has now lost that ‘premium exclusivity’ that it once had, while retaining the price premium.

There’s also a variance between perceived and actual quality. What Car? magazine regularly lists the most unreliable cars, usually peppered with premium brands such as Porsche, Audi and Range Rover, so I’d contend that many are not basing a buying decision on functionality and true quality. When I took in my BMW for its first MOT, I was told my three-year manufacturer’s warranty had expired. My previous Vauxhall Insignia came with a lifetime 100,000 warranty, and I ran the car for six years and 125,000 miles. The BMW is arguably perceived as the ‘better quality’ brand but the warranty the manufacturer provides suggests otherwise. (For the record, the only thing replaced under warranty on the Vauxhall was a boot strut, so I can confirm it was solidly built.)

Go on, treat yourself

Finally, buying things that give you a bit of a ‘high’ and make you feel good about yourself are often associated with certain brands, and this can’t be ignored. But it’s independent of what you’re actually buying, so you have to acknowledge this impact if you’re reflecting on your shopping behaviours and habits. Psychotherapist Pamela Roberts (from the Priory Group) sums this up better than I can: ‘Society promotes the positive effects of shopping as beneficial – “give yourself a treat”, “what you need is some retail therapy”. We are exposed to highly sophisticated marketing techniques. It is easy to see how this, together with the very real, if short lived, psychological benefit and “easing” from stress or emotional pain that making a purchase can bring, is for some akin to the short-term benefits of substances.’

Ultimately, by understanding and managing your ‘brand spending’, you can spend less. If you then use those extra savings to invest in your future by paying a bit more off your mortgage or investing a little more in your pension, you’ll have started on the journey to making better decisions that will put you in a more stable financial position. Not only this, but by overcoming the marketing and peer pressure to buy more expensive brands, it will give you the confidence to be your own person, make your own decisions and ultimately have more confidence that you’re spending your money wisely.

Let me share one final example that shows how the perception of value can vary. Many years ago, a friend of mine ran a rally car as a hobby and I helped with servicing the car at events. One Christmas, as a thank you, he gave me a Snap-on ratchet screwdriver. It’s a well-known brand with a great reputation and became my go-to tool whenever I was doing DIY. I’d go as far as to say I loved it and yes, using it made me feel good! Last year, the ratchet mechanism broke and while I was looking to replace it, I recalled that Snap-on tools had a lifetime warranty. So I sent a message via the US website, explained the problem and waited. To be honest, I wasn’t expecting much. Two days later the local agent phoned me and arranged to pick it up. They repaired it and returned it to me two days later – at no cost. The customer service was fantastic and I didn’t hold back on sharing how excellent the brand was, even on social media. However, an old colleague commented that it was a £100 screwdriver and it had broken, so was it really that good? They fixed it for free but perhaps you’d have expected it not to break in the first place. There’s no right or wrong answer here. Would I have spent £100 on a screwdriver in the first place? Probably not. So I’ll admit, it’s complicated.

Key takeaways

Marketing exists to get us to buy something – whether we need it or not.

Think about function and specification – what do you actually need and what attributes of the product do you actually value?

What used to be premium has become mainstream. This doesn’t mean premium brands have dumbed down; mainstream products have generally upped their game across the board but without the price hike.

Don’t ever feel ashamed of what you buy. People really don’t notice or care as much as you think they might. Be confident in your spending.

By all means treat yourself every so often and buy whatever ‘luxury’ brand you want but keep it as an infrequent treat, not the norm.

"What can I do?"

Chapter 5

How to earn more

There are a number of ways to earn money alongside your main employment. When you think of earning more, consider it as ‘gaining wealth’ – in which case you can include pensions, investments, income from property or doing something else that generates income. This final option is often referred to as a ‘side hustle’ and is commonly misreported in the media and various internet platforms as a miracle ‘get rich quick’ scheme but, like so many things you read online, the reality is far from the truth. There are no guaranteed, highly paid side hustles that work for everyone (or even work for most people) but there are some things you can do to generate additional income. I’ll highlight a couple and explain why I don’t think they should be your main focus. From a career perspective I will cover those in full-time employment on PAYE (pay as you earn) taxed income, as my experience is mostly with this model. I’ll touch on the self-employed model but it’s not my area of expertise. However, much of the advice about your career is transferable to self-employment, contract or other fields of work.

When I was a student, I remember having a chat with one of my friends who’d finished university and was then a graduate accountant. His advice has stuck with me ever since: ‘Aim to earn £1,000 for every year of your life.’ Therefore, at 25, aim to earn £25k; at 40, £40k, and so on. I’m not sure if this stacks up with inflation but like all good metrics, it’s simple and long lasting. I’ve used it throughout my career and even though I didn’t always meet the criteria, the ethos was there. Whether it was via a bonus or pay rise, promotion or moving jobs, it gave me a focus of ‘continual improvement’ in salary that has helped our financial stability. It was an aspirational metric as well, because when I started my working life at 22 I was earning around £10,000, so I clearly had a lot of catching up to do! This ethos instils the concept of career progression – how to help you get a pay rise, what you can for the best chance of promotion or, if you’ve hit a ceiling at your current company, how you can secure a new job and a step-change in salary. If I’m honest, I haven’t followed this as aggressively as you might think, as I’m naturally a little lazy and much prefer the status quo. Most of my job changes have been forced upon me but the concept was always in the back of my mind and it’s helped me to manage my career upwards.

Later on, I also took advice from my sister (who has been considerably better paid than me) after I told her I’d received a £1,000 bonus that year and was clearly very happy with it. She was less impressed and told me to focus on increasing my base salary, as that was a year-on-year increase, not a one-off. Thinking of your salary as a pizza and your pay rise as a slice, if you’re always going to get the same percentage slice, aim to increase the size of the pizza! While I didn’t always achieve this, the idea to continually increase my base salary was there.

Before we start, I need to dispel the idea that I’ve had a stellar career, regular bonuses or pay rises and was highly paid. While researching this book, I realised I only had a pay rise about every other year and even then, only 1–2% or sometimes less than that. I’ve had a few bonus payments but that’s all. Yes, I’ve been paid well, but not as much as many of my peers. Of course, a great salary and a regular pay rise would be fantastic but realistically this isn’t always going to happen, as some companies have rigid structures and pay scales. The right mindset is to start to think about the options you have to increase your salary and then work towards them. It might be an additional qualification, taking on more responsibility or a larger team, changing companies, or even changing career.

Some career advice