Simon and Alan are joined by Barney Whiter, otherwise known as the Finance blogger The Escape Artist to chat on how to manage your cash during the current climate and learning points from the crisis. RECORDED LIVE: 14th April 2020 The Escape Artist: https://theescapeartist.me/
Note: This transcription has been generated with AI and there may be errors present.
Exciting, Alan. Because Barney is here. Barney almost wasn’t here, which is, it’s more exciting to hear that Barney wasn’t going to be here. And then he is definitely here. And we weren’t expecting to see him because everybody Barney’s Wi Fi broadband electricity. I think also the moon in his part of the world collapsed about 15 minutes before we were due to come on, but I don’t know what he’s done. He’s got magician skills. And, Bonnie, it’s great to see you.
Yeah, I made it, I electrician is now dead. But that’s just collateral damage, we have to live with that.
Hopefully, you use him or her to join the fuses together. The reason why you’re alive
is the body’s just conducting the electricity, it’s fine. As long as no one moves the corpse.
I love this, right. So I’m just gonna waffle DISTR a few seconds to make sure that we’re working because we had a few technical challenges with Brad on Thursday, and it made him a bit grumpy. But luckily, we were able to do it. And then he was happy again. So let’s just make sure that we’re all up and running. If you’re seeing this post right now, please, can you interact with the post, if you do that Facebook likes the algorithm. And that means that we can get our help to more people. And one of the things that we’re going to be discussing this evening is something that we haven’t done yet on these live streams, which is to focus on the money stuff in depth. And we are hugely privileged. And you feel very lucky and grateful that that Barney whiter the escape artist himself, has escaped family life for 60 minutes to spend it with us. And I know that your days are busy, because I think you’ve got three kids as well, Bonnie, haven’t you? We need to swap notes on this. Yeah. And
I can tell you one or two of them if you want. Yeah.
I was just about to say the same thing. Right. Okay, we can have some sort of CompTIA deal here. So now, actually, what a brilliant idea we could send our kids to Alan, no. Alan’s the fun one. He shoots my kids with Nerf guns. Look, the question I wanted to ask you guys, and we’re gonna come on to this. But I know what’s going to be super interesting to people. How do you make your personal finances, bombproof. And at a time when money is so important to all of us, right now, we’re all talking about, you know, especially those of us with businesses, what our cash runway is, we’re talking about how to manage our personal finances and our small business finances. And we’re going to cover all of these topics. And I’m fascinated to dive into this with, with Barney and Alan. And both of them have got lots of experience of this mysterious world called financial independence. And this idea that you don’t actually have to be trapped by your finances, that financial independence gives you some freedom and some choices and so on. And just whilst you guys are liking and sharing this stuff, please continue to do that. Thank you. I’m just going to read you a little bit from Barney’s website just to set the scene. And then then we’re going to get into this and I think the thing that really grabbed me at Barneys first sentence, I am the escape artists that I’m here to help you. And if you want to find out more, we’ll post the link to to Barney’s blog in the comments. If you’re in debt, or working a job you don’t like then you are a prisoner. But I can help you escape from the financial prison camp that so many of us are trapped in without even knowing it. What an intro that is. And that really, I think that together with the sentence beyond the barbed wire and the watchtowers and guard dogs like our goals, the tree line of freedom, and the rail station of happiness. I love this. The Great Escape is one of my top five movies of all time, you’ve even got a picture of James Garner for me, so I’m hooked Barney, absolutely hooked. And of course, we’ve got the legendary Alan Donegan, and we were just discussing that Alan complained about my boss, he wrote a three page handwritten letter of complaint to my boss, and then some years later bribed me with a dodgy Asian buffet from somewhere in starkest Milton Keynes. And that changed the course of both of our lives forever. And I know both of you guys have got so much to share. And both of you are blogging in this space, so much to share about money and our relationship with money. So I’m going to shut up for a second the question I wanted to ask Barney was Barney when life was in inverted commas normal in when you were in the real world and behind the barbed wire and guard dogs? When did you realise that your relationship with money could change? What was the catalyst what was going on for you?
Well, it’s it’s times like the times we’re currently going through where we learn right? I’m where we were, we’re forced to make some changes. And so this is kind of an incredible learning opportunity, he says putting a positive spin on it. Because the time that my attitude to money kind of changed the most was about 17 years ago, back in 2000, to 2003. And I had a, like a personal financial crisis. At that time, I was in a job that I hated. And it was pretty obvious to me that it wasn’t gonna work out, and that I was going to be unemployed if I couldn’t find another job. Unfortunately, there was a downturn going on in my industry in finance. At that time, it was the, it was the second Iraq War. And so people weren’t hiring, so I couldn’t get myself another job. And so I kind of realised I was a little bit screwed. And back then my wife was pregnant with our second child. So I was the kind of the sole breadwinner, and it kind of felt like everything was on my shoulders. And what what that what that period of time taught me was how it’s possible to cut out so much waste from your life from your spending, when your back’s really against the wall. And, you know, I kind of got through that period, I kind of carried on going to work for kind of for long enough to find myself another job. I we kind of scrimped and saved as much as we possibly could. And, you know, slowly, but surely things got better. I moved in, I moved to another job. But those lessons kind of stayed with me forever. And from that point onwards, I carried on saving as much as I possibly could. And so, you know, the lesson from that is that it’s, it’s in crises that we we make changes, it’s in crises that we learn. For some reason humans need to kind of learn from our mistakes, we don’t seem to learn from other people’s mistakes. And this current time, these times that we’re going through, will, they’ll, they’ll, they’ll challenge a lot of people, but a lot of people will learn and improve from it.
You’re on mute Simon,
I knew I was just making sure that someone was listening.
Who made you the host of this show? Back then know how to
work this? Can technology? Can someone get me someone with technology? I’m
I’m quite young Alan, as you know, let’s not get into that, because you’re catching me up. Listen, let’s go to real when the real world was happening for you, Alan, I know that we have to go quite a long way back for that, because you’ve been challenging the status quo for a long time. But I guess what I think, you know, I’ve known you since about 2008, something like that. And I think your relationship with money has changed. In the time that I’ve known you and your attitudes to money changed a few years ago? What was your realisation? What was the moment when you thought actually, there might be another way of doing money. And we’re going to get into the detail of this, by the way?
Well, I think it happened over many different situations, I had a bad relationship with money because of what my parents had done and how they operated with finance. And I think I started reading the self development books, which you all know, I am a self development junkie, and I was reading the books started going on the courses, the courses started talking about the beliefs that your family give you. And like one of them, ones that my mum repeated to me was money doesn’t grow on trees. And then later on, I discovered money was made out of paper, which is literally what trees are. And that, like money is the root of all evil, money is bad. There’s all these beliefs that are handed down to you. And I suddenly became aware of the bad training and bad beliefs that I’ve got, which actually was stopping me having a good relationship with money. And I think there’s so many analogies between your relationship with money and your relationship with food, and how you act with those two. And I think developing a positive relationship over the years. Through those courses through those CD sets. I went to Barney for coaching. So I drove out to his house to meet the escape artists. I sat in his room. He told me I was an idiot for my what I was planning, and we completely changed our plans. And I’ve just been hungry to learn from people who are good at this ever since I started that’s what’s made the difference.
So I know I’ve learned an awful lot from you, Alan, and as we’ve built this business you’ve sort of dragged me into the world of financial independence kicking and screaming? Well, not really. I mean, I think I was, I think we’re gonna talk about investing in a minute. But I think one of the things that that I found really tough, you know, with, with finances pretty tight, you know, like you were saying, Barney, you know, the, the challenge of being the breadwinner, which needs in for many families, it works that way. And it can’t work any other way. You know, thinking about financial independence, it felt like I understood some of the content concepts of it. It’s a little bit like me walking past to a really nice Ferrari, which might be a bad analogy to use for you to guys, but I look at the Ferrari and go, that would be a really nice car to drive. But there’s absolutely no way I’m going to own one of those. And I think my relationship in the early days with, with getting financially independent, felt like it was an unachievable goal, because of I think, partly because of debt that I had at the time. And partly because it didn’t feel to me like there was any spare money left over at the end of each month, because we’re kind of going from, you know, it’s an expensive time, it’s an expensive place that even us relocating to the Midlands, from the south, it didn’t seem to free up that much cash. So, you know, what do you say to someone that goes, like, I want to change, I want to be financially independent, I want to be free of the shackles of cash. But you know, I’m stuck, because I don’t have any spare money. How do we help folks like that? What advice did you give to these guys?
So I wouldn’t even talk about financial independence in those, you know, kind of in those terms, it’s like talking about what it’s like at the top of Everest, and you know, what it’s like to go from, you know, Camp seven to the summit of Everest, you know, that’s a long way away. Right? And so, the, for most people, you know, we should be talking about how do you get to Basecamp. Right, and so Basecamp is not financial independence, it’s financial stability. And so, you know, and some degree of financial literacy. So, you know, at times like this, the, the kind of beauty of times like these, is it forces us to go back to basics and go and look at, from first principles, you know, what’s important. And, you know, the most you know, that, if you go back to kind of first principles, in terms of personal finance, you know, the most important thing is, you know, have an emergency fund. So, get a job, or get a side hustle or get some sort of income coming in. But as soon as you’ve done that, kind of step two, is just have some cash in an emergency fund, and put aside and so, you know, for, for those people, there’s no point talking about, you know, kind of the stock market, there’s no point talking about foreign exchange or equity options, or kind of complex hedging strategies, we should just be talking about, have you got three to six months of your monthly spending, your kind of monthly base spending, you know, what you spend on utility bills, food, rent, etc? Have you got that in a high street bank in an instant access savings account? Because that’s if you haven’t got that there’s no point talking about financial independence.
I love that. So you’re saying that that’s the step one is to go, okay, yeah, I need some sort of income, whatever that looks like, plus a side hustle even better. But step, step one, once you’ve got money coming in three to six months worth of money in a bank account that you can access easily. That’s your emergency fund. Yeah. I bet there’s a whole bunch of people wishing that we’d had this podcast about a year ago. That’s, for me, I’m already going. This makes perfect sense. It’s common sense. But at the same time, it’s tough. It’s tough for a lot of people, there are so many competing challenges with money, it’s difficult to know where to start, right? Well, that’s the whole
economy is set up to beam, very attractive looking alternatives to an emergency fund, and put those in front of our face. So you can go to Ibiza for you know, 100 quid on EasyJet or, you know, buy one, get one free or you know, buy this sofa, no money down for 12 months. That’s what kind of that’s what the market economy does. It puts all these temptations in front of us and that’s that’s fine. But it’s a distraction. If you haven’t got your foundation in place. You haven’t got that cash emergency fund. And you’re absolutely right. Really, we should have been talking about this like a year ago or two years ago. The problem is in the good yet. In the good times. No one wants to talk about X it’s a bit boring.
We need to work on we need to work on sexing this topic, and then we can have the conversation when we need to have it. I love this stuff. And Alan, I’m gonna come to you for this next little bit. First, I’m going to make a really bad joke complex hedging strategies, you were in landscape gardening? And Weren’t you? What are your strategies?
Actually, it was to cut Bush as quickly as I could.
But it’s not as complex as it needed to be. Alan, what was your step one?
It was definitely, as Barney said, was the emergency fund and having cash in your pocket. And what I think is fascinating is that when you have an emergency fund, you don’t need it. And I think when you don’t have an emergency fund, there’s an emergency every other month. And that’s definitely what I discovered was washing machines break down, cars break down, stuff goes wrong. And when you don’t have the money, it seems to go wrong twice as fast as when you do have the money. And when suddenly you’ve got some cash saved up like something goes wrong, and it’s no longer emergency. It’s just, it’s not even a thought. So I think, and I know you’ve experienced this, Simon, I think that if you’ve got that money saved, and no matter what situation you are now it’s about starting to build that right now. So that you’re ready. Because one of the things we always talk about is, there is always a recession coming, we just don’t know when there’s always a change in the market coming, we just don’t know when. And actually we’re going through one now. It’ll bounce. And maybe it’ll be 10 years before the next one. But you need to be prepared for the next one, because it is coming. And starting to save that money each month starting to do it is going to really help you. And there was one, there’s a comment in the comments from Teresa Allen, saying My family used to joke about me being tight, because I like to save and spend wisely on things I really want. Now, we’re in interesting times, and I think I’m having the last laugh. And I think there is an element that if you want to do this, you’re going to have to stand up to what society tells you to do. Society tells you to get a bigger car, spend your money, go out of restaurants, stop being tight, be generous, do this do that. They tell you to spend your money, you’re gonna have to fight that if you want to create financial, like stability, financial stability brief,
yes. So having an emergency fund is the difference between something being a bump in the road, and a disaster. So if you have a job, and your car breaks down, and you just don’t have the cash flow to get it fixed, so you can go to work again, you can lose your job, if you lose your job, you lose your income, you can’t pay the mortgage, they take the house away from it, you see the spiral and the knock on effect. Whereas if you just had that kind of buffer in place, it’s just a mild irritation to get the park replaced on your on your car. So, you know, we don’t have an emergency fund, you know, for the things that we know are going to happen. We have it for the things that we don’t know are gonna happen. And you know that what what’s happening with the Coronavirus at the moment, it is something that was unexpected for most people. And so I didn’t have an emergency fund because there might be this virus from Russia from China rather, that would have these these this kind of infection, right? I just had one because I know that stuff happens and stuff goes wrong.
I guess there’s one thing that’s predictable at the moment. And that’s that nothing’s predictable. That’s the only thing that we can predict, isn’t it? And I love this. I love this sense of, of shoring up the roof. Whilst the sun is shining, I guess is what we’re saying how but I guess we are where we are. I want to invite people that are watching the live stream. We’ve got some of our usual faces and some new faces too, which is brilliant. Hello to chat to Lisa William Joanne Cary. And Russell Justin’s asked the question about regarding investments about whether to invest now whether it’s a hold off, I think we’ll come on to that in a bit for sure. But it’s great to see some people here that are interested in money and the freedom that it can give us and what we’re going to be talking about over the next few minutes up until 10. We’re going to be talking about how to keep your personal finances bombproof, how to look after your money for small business. And that binary I guess, you know, you’re a small business yourself. I’m really interested to hear your perspective on what are the what are the learning points and turning points for small businesses at the moment? How have you approached the lockdown and how you’re going about it?
Well, so one of the things that I took Which people in coaching is just how to think of different buckets or different silos of money. Okay, so for me, me and my wife have a joint bank account, and all of this kind of the bills, the food shopping, etc, washes through that, that that joint bank account. So that’s the household expenditure account, then I have a separate bank account at a separate bank for my own little business. So I do I do some coaching, I have some kind of affiliate income, if someone clicks on one of my Amazon links, etc, I do some, I’ve got some other little sources of income, all of that income flows into my Lloyds account, not into the NatWest account, which is our household expenses. And the beauty of that is that Lloyds account, essentially, is my accounting system, for my own business, because everything that comes in is income. And everything that goes out is a business expense. And so if I buy something that’s related to my, my business, my coaching business, or my blogging, or whatever, that goes through that Lloyd’s account, and so I can tell I’ve got this record of how profitable that businesses, and I always know where it stands. And then I’ve got a separate other account, which is labelled tax. And so if, let’s say I earn money, in the, in my business account with Lloyds, if I if I want to take it out of there, I will always put, say, 25% of the amount I’m taking out into the tax account, and then the remaining 75% will go into my household spending account. And that way, I always know that I’m never going to be surprised by a nasty tax bill at the end of the year, because every time I’m taking money out of the business account, to spend it on whatever 25% say goes into the tax bucket. And so just right there, but just by having those three separate bank accounts, I’m ensuring that I know how much the business makes, I’m ensuring that I have kind of clarity on whether that’s making money. And it’s not, I’m not intermingling, I’m not muddying the waters by mixing up kind of business expenditure with personal household expenditure. And so that way I have clarity, I have visibility, it kind of acts like an its own accounting system, and I never get caught short by a tax demand.
Very nice. Alan, just before I asked you, your your take on the different buckets of things. Please ask any questions that you have money related questions. We’ve got Bonnie, the escape artist, we’ve got the mighty Alan Donegan. We’ve got lots of knowledge and experience to share about money related issues. And it’s all about helping us work towards being in a stronger financial position, both in our personal lives and in our businesses as well. And if you ask a question, please put just tag the location. I think it’ll be fascinating for people to scroll down the thread and see we’ve got people in the USA, we’ve got the amazing John from from Namibia. Good evening, Pastor, great to see you on here as well. And there’s people from across the UK and other parts of America. So please let us know where you are. And please ask any questions that you have about money and we’ll endeavour to get these, these, these answer for you. So Alan buckets, arranging your cash in buckets. This is something you’ve been doing for a while as well as what are your experiences of managing your money in this way?
I think I do very similar to Barney, I think the biggest tip he said which I repeat every pop up Business School is having an account marked tax man’s money, because it’s not your money is the tax man’s money. And the biggest killer of small business is cashflow, and that we’ve had a few events sponsored by Santander and it always amazes me Santander say their biggest time when they have people asking for loans is at the end of the quarter. When people have to pay their VAT bill. And people approach them and say I’ve got a big vat bill I wasn’t expecting it. It’s like how can you not expecting it? You knew you sold that? You knew you even wrote the invoice where you had to write the amount of VAT did you not put it to one side? And I think that advice of taking the tax, putting it to one side is so critical. And I’m sorry. No,
I was just gonna say just picking up on your point, Alan that about cash flow is the number one thing that tips small business over into administration or bankruptcy cashflow is the number one thing that tips large business as well into administration or bankruptcy. So I actually worked in restructuring for five years, and during the global financial crisis as well. And so I saw some big big companies go bust. And it’s always cashflow. It’s always, always always cash flow. And I, you know, in 2008 2009, I saw, I saw businesses that actually had almost no debt. And were had been very profitable, but because they’re kind of, they got the working capital wrong, they got the cash management wrong. They just didn’t have the leeway to survive, and they tipped over into administration. So it’s such a cliche, isn’t it, to say cash flow is king. But it really, really is. And just to give you a little kind of example, of what’s possible in times like this, so today, I was approached by, you know, a reasonably sized company, saying, Could I do a seminar to a number of their of their workers. And in normal times, I would deliver the seminar, I would raise an invoice, it would kind of go into their check, run, and maybe like one or two months later, you know, if I’m lucky, it’ll get paid as probably unfair, they would pay me. But but because we’re in the times that we’re in, I said, Fine, I will, I’ll do the seminar. But I’m going to raise the invoice the same day I deliver the seminar and I want to be paid the next day. And so, you know, they may say no to that, but not asking is an automatic No, right? If you don’t ask, you certainly won’t get that. And that’s what I’ve asked for. And it comes back to this point about having a solid financial base in place. If you’ve got that solid financial foundation, you can be a bit braver, you can be a bit cheeky, or you can make requests like I made to this bigger company, because they know that you’re not desperate for the work. And you can you can ask them to change their normal terms and to change your cash flow in a way that that suits you and protects you from credit risk in a downturn.
Yes, yes. And I just love to build on the emergency fund, Rob Lowry said is that just in a standard account and a pop up we opened a separate savings account had a slightly higher interest rate. So that we were we’re earning interest whilst we wait, waited to be paid, waited to pay the government, so we just syphoned it off and put it in a separate account. We never invested it. We never risked it, because it’s not our money. It was just in a high interest, cash account or waiting. I would never ever risk the money that’s not yours. So we just left it there sitting and waiting.
So I mean, I’m going to spell it out. So I would put that money in an instant access account at Lloyds. HSBC, Barclays, you know, one of the big high street banks, it would not go in the stock market, it would not go into peer to peer lending, you know, it would not, I would not even put it within one of those big banks in a you know, in a kind of term account where you can’t, you have to give them three months notice to get to get your hands on it. You know, you need an emergency account, quickly, you know, you need to get your hands on that cash immediately. It’s like it’s like a fire extinguisher. You need the fire extinguisher somewhere where you can get your hands on it quickly. And when you use it, you deploy it and you spray it everywhere. You’re not shy in how you use it.
I love this. You don’t want the fire extinguisher behind three locked doors, and you have to fill in some forms before we were. Exactly, exactly very nice. So this thing about cash is king just reminded me the principles of that in business is kind of what you’re saying in our personal lives as well. Right? You’re saying that you need to be able to get your hands on cash. Is that would you draw that analogy or is it feel slightly different to you?
Know, it’s so that this exactly the same principles apply in your personal life and your business life. So in your personal life? You need to know Know what your burn rate is. In other words, you need to know what your kind of roughly what you spend each month on the essentials. So if you spend 2000 pounds a month on kind of food, rent, etc, then you need three to six times 2000. So what three times 2000 is 6000 pounds, that’s your minimum, right? So you need to know your burn rate in your personal life. But it’s the same in your if you’ve got a small business, you need to know your burn rate in the business. So let’s say you know, there’s a virus or whatever, and you can’t earn any money for two months, you medical hypothetical, you need to know what you’re out what your kind of your base level of overhead is, on a monthly basis, so that you know, kind of how long you can hold your breath for,
which is exactly what we’ve been planning for and thinking about for years. And with the number of staff we have pop up and the number of team, our burn rate is about 25 grand a month if we do nothing, which is quite a scary figure when you think about it. Yeah. And suddenly, all of our business vanished, evaporated, we’re an events company, and all of our events were cancelled. And we’ve still got to spend that every month. And we actually had the choice do we furlough staff? Do we keep them working? What do we do, at least the government is giving us support in this time, which has never really happened before. In this way. This is something I’ve never seen, never experienced. But we I am so glad we applied the personal finance principles to the business as well. And we had an emergency fund at the business. And we had a roughly a year we can survive without going under. And like we’re spending our emergency fund right now. Because it is an emergency. We are firing that fire extinguisher everywhere and trying to make sure the fire goes out. Yes. But if we hadn’t had that, if we were a normal business that lived month to month on cash flow, we’d be dead already. Yeah,
we’ve got a few questions that I want to dive into. I think we’ve got some, some financial independence, kind of followers of the movement here because some of their questions I’m going to have to Google to understand them. But we’ll go there in a second. But a more broader question to start with. I know that this is one of your favourite topics. But debt isn’t all bad. Is it? Is that a bad thing? What do you think?
Well, you can probably sense my response. Robert Kiyosaki in his book, Rich Dad, Poor Dad spoke about good debt, bad debt. Good debt is where you’re leveraged on an asset. Bad debt is debt you have on a car that is not earning any money. Me personally, I don’t think debt in general is a good thing. I have a small amount of debt in terms of a mortgage, which we’ve yet to pay off. But we’ve been investing instead because it’s quite low interest rates. But I avoid debt at all costs, is specially commercial. Not commercial debt. What’s the word consumer debt that I’m looking for? consumer debt, credit card debt, overdrafts, that stuff is to be avoided like the plague. And we had a I don’t know if you remember, we had a member of staff come to us, Simon. And he said, Can I have a pay rise? And I thought, why do you want to pay rise? You’re 18 And you live at home? What do you want to pay rise for? He said, Well, I’ve got bills, man. Like, what bills have you got? You’re 18 And you live at home and he showed me his bills. He bought a new X Box or sorry, a new Playstation, new laptop, new phone and he brought it on their service called very.co.uk. And monthly bills. Do you know what the interest rate was Barney? No. percent? Yeah.
Well, but just on that just on that, so my, my credit card provider wrote to me and told me that the interest rate on my credit card if I don’t pay it off automatically every month is 23%. The overdraft rate that most banks now are charging is about 40%. And so the only kind of valid use of your money that I would accept for not building a cash emergency fund is I’m paying off credit card debt or I’m paying off over draft debt that I’m being charged 40% APR on or 25% APR and that that is a that is a an emergency to get rid of that debt. There is no Why on God’s earth that is anything other than a disaster? Yes, that is just an absolute King disaster.
Steve Collins from down in ferrum, friend of mine, Steve from way back says he’s personally avoiding debt like the plague, and apologises for the corona reference that was buried in his question. I think the there’s a question that’s come through from Steven Murray, I love this question and is where I wanted to take us next. emergency funds and setting adequate amounts aside for taxes is less about knowledge and more about behaviour? What would you guys recommend about making these behaviours more automatic and more of a go to default?
Yeah, great question. So essentially, let’s say you’re kind of in a, you’re currently in a bad place, like I was back in 2003, I was forced into good habits by my situation, because my back was against the wall. So essentially, what I did is I just stopped all discretionary spending. And so one, one tool for doing that is just to track everything that you spent, you know, kind of write it down in a notebook or track it in an app, and just kind of hold yourself to account that way. Another powerful tool is the concept of paying yourself first. So like when you do get paid, immediately, you take x percent away from temptation out of harm’s way, and create an artificial environment of scarcity in your in your current account, because we naturally tend to kind of spend up or spend down to what’s in our current account. And so by tracking your spending, and paying yourself first, those those things are not glamorous, they’re not, they’re often actually not much fun when you’re doing it, but what you’re actually doing there is creating a new set of habits. And if you rinse and repeat those good habits for long enough, they cease to be painful, they just become automatic. And, you know, you just you just you just automatically accumulate money when those habits are kind of deeply embedded in you.
Alan, you stopped going to you stop going to Starbucks, and other cafes and cafes are also available. I remember when you were enforcing new habits in your personal lives. You in Katy stopped a lot of the fun stuff. And when really hardcore on the habits, what did you learn from that experience?
I learned that you can go too far. It’s very possible to go too far. And the biggest example of that was my car. I needed a new car. I brought a Citron, it was a 1.3, diesel, purple, sparkly granny mobiel it was hideous, it had a dead spot in first gear. And my wife constantly thought we were going to die every time we pulled onto a roundabout because it just wouldn’t go anywhere. And then all of a sudden would take off. And I fell too far. And actually, then when I came back up, and I bought a tiny one litre Skoda Citigo, that worked. I love that car.
And I can I can I just dive in there with an example. So in 2003, I cut everything and I went too far, one of the things that I, I got rid of my mobile phone. And that was a really, really stupid thing to do. Because you just need a mobile phone in the modern world to earn money to function as a kind of as a as a high performing employee, you just have to have a mobile phone, right? So you can go too far. But the only way you kind of find out is by starting to cut stuff out. And guess what, if you if you go too far, you can always kind of reintroduce it back in again.
Yes, absolutely. And one of the things Katie and I do every month we use money dashboard to track our finances. And then we just tag the categories that they’re in so that we can see what we spend each month, once a month. This is actually one of Katie’s favourite times of the month. She loves numbers. We do a Spending Review and we ask where did we spend money that didn’t add value to our lives? And we list out the stuff that just wasn’t useful. And then we ask where did where did we need to spend more money? Where were we too tight and it actually caused us pain and I think reviewing it really helps you each month,
but right now oh my god, what a great time to go into what I call monk mode and cut unnecessary expenditure, there has never been a time with less temptation, less peer pressure, less friends saying Come on, let’s go to the pub, let’s go down this go to this restaurant, let’s go to the cinema. You just can’t do it at the moment. So money, oh my god, what a time to readjust your spending habits, what a time to kind of recalibrate and just kind of tilt the dial away from consumption towards production and productivity.
And poor Rachel flack she said this a couple of times to us on these live streams. Her phone is actually being held hostage in one of the mobile phone shops because the shop was locked down with her phone in it. And now she’s presumably she’s on a laptop or something engaging with us. So she’s not spending money on our phone right now. But I’m sure that wasn’t intentional. Clive, Clive, I’m not going to say that out loud, just in case we get sponsored by cetera. And at some point in the future, but I love your thinking. Chad’s talking about a financial spending sabbatical, which is quite a nice way of summing up what you guys just said, Yes, I think that thing about habits is really interesting. So, you know, I guess you guys are in in a really great position that, that your partners are on the same page as you with this stuff? That I guess I’m just making a broad assumption, what what would be what would be your tips, so this thing about habits, like if you’re, if you’re, if your partner is someone that isn’t on the same page of you, in terms of dialling back on the on the spending and stuff like that, if you’ve got any tips, from your experiences, to how to have the conversation,
it doesn’t happen overnight, and expect arguments. But that’s fine, right? That’s fine. Like you have to a problem that a lot of people fall into is they say, Oh, I don’t want to bring that up, because it will, it will create, you know, tension or create an argument. And so they just bury their head in the sand, and they never ever kind of get to it. And that’s, you know, that’s a tragedy. Because, you know, my experience was, you know, I was coming at this from a more kind of urgent perspective than my wife, because it was, you know, back in the time I was talking about earlier, it was me that was doing the job that I I was hating at the time. So, to me, it felt very urgent. And my wife’s like, what, you know, why you can’t say why you suddenly got so tight, you know, why? Why are we cutting all our spending, you know, which is a perfectly reasonable view, for her to have, but you just got to have the discussions and not expect them, you can’t expect kind of instant conversion, it’s just about patiently explaining how you see the world, understanding how they see the world, and kind of comparing what I call money blueprints. So, you know, like, Alan was talking about you get all these beliefs about money from your parents? Well, you know, I got a bunch of beliefs about money from my parents, and my wife obviously got different beliefs about money from her parents. And so essentially, having these discussions, you’re, you’re identifying those differences in the beliefs, you’re kind of putting shining a spotlight on it. And often, when you kind of explain the reasons for your background, you know, the background reasons that you feel so passionately about it, you know, your your other half kind of can see your point of view, and gradually you reach an accommodation.
I think you’re absolutely right, Barney, I would add two pieces. One is as a couple, having a joint target, or a joint goal that you’re working towards can bring you both together. That was something that brought Katie and I together was having we are heading here as a couple. It took us actually a couple of years to get to that goal and studying finance, studying what we’re doing. But pulling together towards that same thing, made it a lot easier to have the conversations of what type of car are we going to buy? And do we actually need this food? Do we actually need this thing made it far easier if we’re both pulling in the same direction? Which I think for a lot of couples, including us at the start, we were pulling in different directions, which then you’re just pulling each other apart?
So we’ve got a question, which we’ve sort of answered part of it. Lisa’s asked the question, you know, what happens if you’re starting at rock bottom? And I guess you know, my head’s gone to where you either got to make more money or spend less money however that happens. And you could look at Those two things in turn, if you if you were looking at someone’s finances, and you know, you’ve got someone sat in front of you for some of your coaching sessions, Barney, as you look down people’s expenditure, where in your experience, do your eyes go? In thinking, you know, what things could we either remove or get down? You know, where would you begin if you’re if you’re helping someone who’s right at the start of this journey.
So let’s get granular, you know, when, you know, as I said, like, all of our household expenses go through one, bank account, one joint bank accounts. So it’s a pretty easy exercise at the end of each month, just to download those transactions into a spreadsheet, and see where where all the money went. And what what, what I used to do was rank it from the biggest item to the smallest, and then just start at the top. Because it kind of makes sense to start with the big wins and the quick wins. So for most people, their biggest outgoing is their mortgage payment, or their rental payment, in other words, their housing cost. And so that automatically begs the question, well, when did I last remortgage? When we did we last kind of check the market? Check, we’re on the best rate, you know, remortgage, etc. So that automatically begs that question, or if you’re a renter, it’s like, well, when did we last compare, where we’re living with kind of other rental opportunities and kind of see if we’re maybe overpaying or maybe we could kind of move to a smaller place, perhaps without kind of sacrificing too much quality of life, and then you just work down the list. And so the second item might be, you know, for a lot of people, their their car finance payment, you know, in which case, the obvious question is, you know, why are you paying, you know, do you need that car, is that the most kind of value for money. You know, cars are money incineration units, so most people would just be better off kind of giving, giving the leased car back at the next kind of break point. And, you know, getting themselves secondhand, secondhand car, paying cash for it, and so on down the list, you know, and that’s, that’s what we, that’s what I did when I was at rock bottom, go through the list and just cut out everything that I could.
I love that there. And I never used to look at what I was spending. You know, my attitude was that as long as I had enough money in the account, I didn’t know it wasn’t something I ever had to worry about. until it became something that I had to worry about and actually looking at, I think it was probably Alan that made me do this. Or maybe it was Katie. They they got the nails out and nailed my wrists to the desk, and wouldn’t let me move until I knew what I’d spent over the last six months. And that awareness piece is such an important step. And you know, my own eyes widened. You know, because there are so many transactions, of course that go through our current accounts, you know, with, you know, online shopping and a coffee here in a grocery shop there and so on. There’s there’s a whole awakening process is one of the
first things you can do is just look at all the direct debits and this kind of amounts just going out every month. And often you won’t even recognise half of them. It’s like oh, did is that a magazine that I kind of signed up to, like 12 months ago. And I never told them my forwarding address stuff, like most people have got a bunch of stuff going out on direct debit, that they’re not even using, you know, classic, like classically the gym membership or that or whatever, the cable TV or the Netflix subscription. So, you know, the way I would sum it up is what gets measured gets managed. So if you don’t know it’s flowing out of your account, then you’re not going to do anything about it. You’ve got to shine a light on it. First, you got to measure it before you manage it.
So one of the things that Clive has said is that his biggest outgoing at the moment is refunding deposits. Clive runs a food business in Wales and I know he’s he’s pivoted his food business. We’re trying to get postponements instead of cancellations. But that’s not always an easy thing to do. Is it? You? But Barney, I guess if you are if you’re in a position where you’re not writing for a living, and it wasn’t the blogs and the the affiliate links on your website, which is the escape artists that got me, you know, how would you be approaching it if you had to pivot?
So something I would be doing in in your situation and I’m sure you’ve kind of know this but that if I was selling a product for an event, I would just look for ways to make it really easy for for people to just defer it. So You know, for example, if I was running pop up business schools, and I had one in June, I would say to the local authority, why don’t we just run it in June 2021. And everything stays the same as them. We just we just rolled it forward exactly one year, because those, those people tend to work on kind of calendar years. And so if it was, on the 20th of June this year, there’s probably a good reason for that, and it will still work next year. Do you see what I mean? So it might be easier for the customer just to roll it forward one year than to kind of jiggle it around and try and do it in August or September? I don’t know. So, in other words, can you reduce friction for deferral rather than cancellation and refunds? And that’s what all the airlines are doing at the moment. If you if you booked a flight with an airline, as we did, like we we had a flight booked, what that what the airlines are trying to do at the moment is encourage you orientate the whole user experience online, so that you that you just roll forward that expenditure that trip, rather than ask for your money back. And so there’s a there’s a million little ways that you change the layout of your website and the user experience to encourage that.
That’s exactly what they’ve done to me, Barney. So I, I had to cancel my nomadic adventures and return back to England, because I was worried I was going to be trapped in the States when my visa ran out. And we got an early flight back, the flight with Norwegian has been cancelled, and the email they sent was big bold writing will give you 20% Extra in cash credits, if you take a credit that you can use up to a year later, yeah, they’re actually trying to bribe me not to have my cash back. And then way down an email in very small writing is we know we’ve cancelled this will give you a refund if we have to.
Exactly, exactly. So let’s see. Here’s another example. Let’s say I ran a small local restaurant, I would be trying like hell to sell gift tokens gift vouchers at the moment. So I would be like hitting my mailing list hitting all my subscription list. You know, if I’m doing any advertising, still, it would be all around. Have you got a relative Have you got a loved one who’s got a birthday or an anniversary coming up, buy them a gift token so that when locked down ends, they can choose when to spend the money and and it’s good for you know, 18 months or two years or whatever, there’s going to be a hell of a lot of people have pent up demand. So as soon as lockdown lifts, a bunch of people are going to be really keen to get out get drunk, go to bars, spend money, travel, do all the stuff that people used to do. So make it easy as possible, you know, sell them bits of paper that they can trade for that when they’re ready.
Yes, I cannot wait to escape this stuff. I’m just going to go into the street and hug everyone that I walked past. Yeah. I’m coming to Farnham
I think you’re quite close. So let’s go back. Danny Phantom will put out an all ports warning about that, Adam? Yeah, I’ll
come to the Midlands, with you, Simon.
As I think I’m I think I’m busy that day. Thanks. Anyway,
you talking about? Like,
there’s a couple of questions I want to get to, we’re getting really close to 10. If we’ve got time, I want to talk about saving money on groceries. Because you know, I’ve got this five people in my house. My children go through the cupboards and fridge like a plague of biblical locusts. And, you know, being smart with money around groceries is something that you both got a view on, I know. But I wanted to get to the investing thing, because it’s been a few questions that are in the thread about, you know, people kind of asking about portfolio if you’ve made any different decisions as a result of the virus if you’re doing anything differently. And I guess the the $6 million question is, you know, is now the time to invest in the stock markets and so on, you know, we may not have time to go into lots and lots of depth, but, you know, what’s your sort of gut feel on how you might answer that question to help some of the people watching
only if you’ve got the foundations in place, right. So have you got Have you got an emergency fund? Have you got a job Have you got Have you got out of all have you cleared all your expensive debt, you know, if if you kind of ticked all those boxes there Fine, you know, carry on your kind of regular investing programme. And you know, one thing I always say is never leave free money on the table. So for people that have still got a job, and they’ve got an employee, that the employer makes contributions into a workplace pension for them, well, it absolutely makes sense to keep contributing to that, to take advantage of the matching provided by your employer. So I really think that, you know, if you’re gonna, if you’ve got that firm foundation in place, it’s kind of business as usual, when it comes to investing.
Yes, and I will just add that investing is definitely not gambling. So you should not be finding money you don’t have to throw into the stock market at this stage. This is not the time to read the kids piggy banks, find all the cash and dirt in Barney’s. Exactly right, have that secure base. Then once you’ve got that, it’s absolutely right. Stocks and shares are on sale right now. And we had a little bit of spare cash, which we invested into our Sep into our pension. And we bought Vanguard Index Fund a low cost index fund, and we’ve invested for the long term, but stocks and shares are on sale at the moment.
Simon could I just throw in a contribution. And before, before we go, I’m given that we’re kind of in monk mode at the moment. Here’s three books that I would just recommend. Everyone read. Okay. So one is The Millionaire Next Door. And that’s by Stanley and Danko. And that’s the classic study of how rich Americans got rich and, and it’s often just kind of have a have a small business, and live frugally, and kind of rinse and repeat, funnel the money, the surplus into property, or stocks and shares. That’s a personal finance classic. The other personal finance Classic is your money or your life. And now’s a great time to kind of wean yourself off consumerism, and that is the kind of classic anti consumerism Bible. And then the third suggestion would be the lean startup for anyone with a small business, who’s struggling to think about the uncertainty of the current situation. The Lean Startup is the classic Silicon Valley manual for CEOs, venture capitalists, who who fund startups for you know how to how to build a flexible business without debt, and one that’s resilient and can pivot when conditions change. So those are very recommendations.
I’m going to ask Alan, what his recommendations might be. But just to mention that if you wanted to read a little bit more about those books before deciding which one that is a giant list of book recommendations on Barney’s website, which we put the link at the bottom of the thread, the escape artists.me. And if you click on the Books page, there’s a whole giant list of stuff there. And the book The three books that Barney’s mentioned in that list, Alan, what What books would you recommend that help people to think differently about money?
I think I love the reading. And I would just add that most people know what to do. They know to spend less, and they know to work on ending more, earning more. And actually, there’s a an element of just get the on with it. We just need to work on this stuff is not rocket science. There is some brains behind it, there is some math, but it’s not rocket science, we just need to do it. And for every person on this call, I would challenge you to have a monthly finance meeting with your family. You know, Bring together your partner Bring together your kids bring together whoever it is, if you don’t have a partner, find one a friend doesn’t really matter who it is, you silently need someone to do it with. But have a monthly finance meeting where you look at what you spend, you look at what you earn and have a conversation about how to improve your situation. And I guarantee if you do that once a month and focus on it, you will make progress over the next year. I love that
brilliant. It’s times like this where because a lot of people have their back to the wall that they will finally take action because they got kind of no choice. So this you know these few months will be the making of quite a few successful people in maybe 10 years time.
Beautiful so I think intercessory style. This Facebook Live has been brought to you by the letter M, which is what gets measured gets managed. And we’re in monk mode with Barney Weiser and Adam Dugan guys, it’s been absolutely brilliant. Thank you for demystifying some of this stuff. And I think, you know, let’s take Alan’s challenge everybody that’s watching this live stream, take Alan’s challenge, and take some action, and do something. And please tell us what action you take, whether it’s the monthly finance meeting, which by the way, that’s the action I’m going to take. I think that’s an absolutely genius idea. And I’ve always been frustrated at the kids leaving the lights on and I follow them around the house switching the lights off, but perhaps if I can start involving them more in the decisions and where the money goes, and they can see a direct correlation with their behaviour to the impact on our family. I think that’d be really cool. Whether it’s, you know, organising your money in buckets, finding that savings account, and just putting a pound in it. And starting that first step towards having an emergency fund, whatever the action is the right action for you. Take some action, let us know what you do. Tell us in this thread, send Barney a message, sign up to his mailing list. Thank you, everybody, for watching. And we look forward to seeing you on Thursday. And a quick announcement about Thursday, is we’ve got a special guest coming someone that’s a friend of the public business school. Any closing thoughts from Barney or Alan before I talk about what’s happening on Thursday?
Stay safe. All the best everyone?
Yes. No closing thoughts and then keep performing yoga at home. It’s important.
Okay, that’s unexpected, but good advice. I suppose it sort of fits with monk mode
doesn’t? It? Absolutely. does. It absolutely does. So the one thing that you can do right now is eat clean. Get your sleep, get some sunshine, get outside, if yoga is your thing, do do yoga runnings, your thing go for a run. But you can always like focus on the asset focus on you keep yourself healthy. Yes.
Some lovely comments of appreciation. I know you guys read them afterwards. So Thursday, Thursday is how to make your business famous. We’ve got John card who does the PR for the polar business school. He’s got us on the telly. He’s got us in the national newspapers. And he’s also gonna talk about writing and publishing his own book and he’s got lots of experience to share. So if you want to help make your company famous, if you want to get on the radio, on the telly in the papers, or maybe you’re thinking now’s the time to write the book that you’ve always wanted to write. John’s gonna help us do that on Thursday. We’ll see you at 9pm British Summer Time, which is 4pm Eastern time. And thank you everybody for watching. Goodbye. from me. Sesame Street.