Investing
Financial investments can be complex and carry high risk, as you can’t guarantee returns. This doesn’t deter financial institutions from offering products or building funds that they believe will perform better than a competitor’s. Some of these investments will generate returns but they come at a cost and there isn’t a commercially created consistent performer.
What has proven to be consistent is the long-term reliable growth of equities. As such, a simple index tracker provides, in my view, the safest option for a low cost, diversified, lower-risk investment over ten, twenty or more years.
A final comment on investing and one tied to the primary objective of paying off your debts: however good an investment looks, never borrow to invest. There’s always a risk, however small, that an investment fails, or more likely, doesn’t perform well. There’s too much at stake to take that risk.
What can you do?
Having read our story, you might be feeling a little overwhelmed and wondering how on earth you’re going to do all of this. Fortunately, all of the elements are independent of each other, so you don’t have to do everything, or do them all at once. You might already be driving a second-hand Škoda or be a great cook who enjoys preparing meals from scratch. Equally, some of the insights into investing or branding may be new to you and take some time to buy into. You can do as little or as much as you want or feel able to. Just by having a better insight how finance works may be sufficient for you, or that you start thinking about having a personal plan rather than drifting along and living life as it happens.
There’s another element and that is personal choice, having the courage not to be influenced by peer pressure and being confident in your decisions. I chose to drive a five-year-old diesel Vauxhall Insignia and Lou a ten-year-old Ford Fiesta when colleagues were leasing a new Audis and Mercedes. Lou chose to wear a new pair of Dune boots from Vinted at half price when a friend bought a similar pair at full retail price. It was my choice to buy the previous model Android mobile when a close mate always has the latest iPhone on contract.
We have, of course, had some good fortune along the way – one being our marriage and finding a soulmate with the same ideals and mindset about money. Buying our house with some land was a bit of a gamble, not to mention a stretch on the mortgage, but securing planning permission was a step-change in being able to build a cottage to rent and cheaper than buying a second property. Some of our jobs have opened up opportunities for training and working abroad and allowed us to progress our careers. While we’re not what you’d ever call athletic or particularly sporty, we have enjoyed good health. You may have different opportunities; you don’t have to replicate ours.
Equally, it’s not all been plain sailing and we’ve faced lots of financial challenges. Being made redundant and out of work for nearly a year; the gearbox failing on Lou’s car and costing nearly £3,000 to fix just before we were planning to sell it; the oil tank splitting last year and needing replacement which, together with refilling with oil, cost £6,000 that year on top of the electricity bill.
I was chatting recently with a good friend who’s spent her life in the nursing profession, with a particular interest in nutrition. While we discussed whether you really could oversimplify topics like these, we agreed that there were some analogies with the approach we’ve taken to that of dieting and weight loss. ‘Spend less than you earn’ is a similar concept to ‘eat less and exercise more’. Of course, it’s easy to say and harder to do; I’m still a little overweight and eat and drink a bit more than I should but it’s the same approach to making it work. Understand the basics, set yourself a plan, monitor the results and find an approach that works for you. Just as you might hate the idea of going to the gym, you may find cycling a better alternative. The more you ride, the easier it becomes and you start to see the improvement in your stamina and distance.
It’s the same with our finances. As we’ve progressed along our journey, we’ve been able to build in a buffer and have that ‘rainy day’ money that covered the unexpected expenses. The focus on spending on functionality, not brand, has also helped us to be avoid struggling to put food on the table or pay the bills. I know that we’re fortunate to be in this position but it’s the result of the way we’ve approached our spending and saving over many years. We also believe it’s not rocket science and you could benefit too.
To summarise, below are my ten key points to help you gain money confidence for a more secure financial future:
Know what you’re spending. Look at your bank statements and understand where all your money is going. Challenge yourself – do you really need to spend that much? It’s not necessarily about cutting things out – it’s about whether or not you’re getting value for money and how much you’ll use what you’ve bought.
Think about your job: what can you do to move up in your current company or gain skills that will get you a higher paid role elsewhere?
What can you do to generate some extra income or savings? Think about tax breaks, loyalty schemes or selling off things you don’t need.
Don’t ignore your pension. Enrol in your company scheme and find out where your old pensions are. Consider consolidating old ones into a SIPP in a simple tracker or packaged pension fund with low costs.
If you have a mortgage, understand the true cost and how much you’re paying in interest. Focus on the rate at which the capital balance is repaid and aim to overpay.
Talk to friends or family. Try to overcome any awkwardness about financial conversations and never feel ashamed that you don’t know as much as you think you should. You’re likely to find that others are in the same boat.
Think about your retirement now. What would you like to do in later life? Understand what a plan to achieve this might look like.
Set aside some time on a regular basis (monthly is a good start) to check how your plan is doing. If you’re confident with Excel, track it on a simple graph to better visualise your progress. Schedule a couple of annual tasks such as checking your State Pension forecast and your credit rating.
Don’t get spooked if your plan wobbles a little. Understand that you’re doing this for the long term and that blips will smooth out over time.
Don’t forget to enjoy life. While extreme saving and frugal living is a way to build wealth, you also need to treat yourself once in a while – but don’t let it become an expensive habit.
While it’s a constant frustration for us to hear people say ‘It’s easy for you, you’re rich’, it’s simply not true. Hopefully this book will dispel that idea and explain what our approach has been and how we’ve done it. I’m aware that there are other approaches to finance, particularly in relation to FIRE, building a BTL portfolio backed by mortgage debt, or the fees some investment platforms charge. Some of those views are expressed quite vocally on social media forums and vigorously defended when challenged. I’m happy with our approach as I know it has worked for us but accept that others may think differently. I’m not inclined to argue – just present our case and let the results speak for themselves. For those who do take a different approach, they’re entitled to their thoughts and welcome to their views. In a couple of months’ time, my view will be one of palm trees and blue sea in the Caribbean and I know which one I prefer.
I sincerely hope that some of the ideas in this book have resonated with you and will help you to start taking a few more confident steps to a more financially stable future.
Epilogue
Having completed my first book and re-reading through the final draft, I do understand that our financial freedom might feel like an impossible dream to many and that we were just plain lucky in what we’ve achieved. Thinking this through, I wanted to share where we were 20-odd years ago and have one last roll of the dice to persuade you that it’s not impossible to change your approach to money and build your financial confidence for a more stable future.
Early in 2003, we were planning our wedding – there were lots of choices, discussions and decisions, not least as we were funding most of it ourselves. Of course we wanted it to be a special day but didn’t have a huge amount to spend, and therefore made some untraditional choices. Unsurprisingly, we spent about a third of the average budget for a wedding at the time. We bought our wedding outfits in the closing down sale at a local department store (a £99 suit for me, a £90 dress for Lou). We were getting married in a small manor house, which was registered for marriages but also had a small chapel in the grounds for a ceremony and a marquee for a reception, so we negotiated a bulk rate at a local hotel for guests and hired a minibus for the day in place of the traditional wedding car. This meant none of our guests had to drive or had the hassle of finding a taxi.
We chose a navy (my suit) and gold/cream (Lou’s dress) colour theme for our wedding and asked all guests to wear similar colours so that our photographs looked coordinated. We asked a friend to take three formal photos – one group picture with everyone, a close family one, and the pair of us with the cake. We also provided disposable cameras on tables to capture guests enjoying themselves. The photo on our mantlepiece is one taken by a relative, a candid shot of us walking into the reception. We decorated the reception with a bulk order of lilies (Lou’s favourite) from the local florist and hired a helium canister for navy and gold balloons. Inflating balloons with helium the day before the wedding was one of the funniest times we’ve had and definitely got rid of any pre-wedding nerves.
We talked about the honeymoon and decided we could have a ‘big holiday’ at any time in the future, so instead we booked two £14 flights to Edinburgh and a five-star hotel for a week from a late bookings website at £100 a night. We didn’t go to the Caribbean but we celebrated our 21st anniversary in Barbados – the first time for both of us.
We also got married on a Friday (cheaper than a Saturday), the day after the Iraq war broke out, when stock markets dived. We were lucky to have some financial gifts from family, which we invested and our first lesson in investment was seeing them rebound a few years later.
So although at times it feels like a lifetime, in reality 20 years ago we were just two fairly plain people with ordinary jobs and a large mortgage. We’ve talked and learned along the way, weren’t too extravagant and made choices based on getting true value for money, making things last and continually drip-feeding whatever we could into investments. We’ve had our ups and downs but still found time for some fun along the way but with our own twist. Lou is fascinated by sharks, so for her 50th birthday we went on a shark-feeding day trip; not in some exotic location but at Birmingham Sea Life centre, followed by dinner with friends. Memories don’t need to cost a fortune and you have to be willing to take bold decisions that might feel uncomfortable or against the accepted norm but financial freedom is achievable and worth it.
So now it’s over to you. Good luck!
Resources
Introduction
Direct Line (5 January 2023) ‘Less than a month to hardship for over six million households’. URL: directlinegroup.co.uk/en/news/brand-news/2023/05012022.
Marcus by Goldman Sachs and the Myers-Briggs Company (26 January 2021) ‘What’s your financial personality?’ URL: marcus.com/us/en/resources/lifestyle/discover-your-financial-personality
Chapter 1
The Deming Institute ‘14 Points for Management’. URL: deming.org/explore/fourteen-points
Green, N (2023) ‘What is a SERPS pension & can I cash it in?’. Hargreaves Lansdown. URL: unbiased.co.uk/discover/pensions-retirement/managing-a-pension/what-is-a-serps-pension
Chapter 2
