John Lowe of MoneyDoctors.ie gives his prescriptions on taking stock of your personal finances, plus curing financial ills, taking the medicine and more.
READ THIS IF YOU DON’T ENJOY DEALING WITH MONEY
Research shows that there are individuals, prepare yourself, who actually enjoy dealing with their personal finances. It brings them unadulterated pleasure to find a cheaper mortgage, stick to a budget or (shudder, shudder) balance their chequebook if they even have a chequebook at this stage ! As the only statistic I can ever remember is that if all the people who fell asleep on trains were laid end to end they would be more comfortable, I can’t tell you what percentage of people are thus afflicted. But I can say, with some authority, that it is tiny. A far greater percentage, and I am going to take a wild guess here and claim that it is the vast majority of the population, does not find money management, in all its many guises, to its taste.
WHY YOUR FEELINGS ARE LOGICAL
There are lots of reasons why one could have an aversion to dealing with money. Ironically, not having enough is the first that springs to mind. After all, if you are always struggling to make ends meet it can be hard to think of money in a positive way. Others include the idea that it is boring, complicated, frightening and/or mysterious. Another thing: you don’t have to believe that Elvis is still alive or that the Americans never landed on the Moon to suspect that everyone involved in financial services from the most humble of insurance salesmen to the mightiest of politicians is conspiring against you. They (no self-respecting conspiracy theory is complete without a they) want you to remain financially ignorant. That way, they can sell you things you don’t need, overcharge you and (in the case of the government) overtax you. Quite possibly, they have you fooled into thinking that personal finance is complex and tedious, a little like legal jargon. As it happens, it isn’t. That’s not the point. The point is that, while there may be no actual plot, the financial services industry is not bending over backwards to help make money management easier for its customers. Plus, our school system doesn’t provide much in the way of financial education. Hence why I am allowing over 60,000 transition year students to download my ebook Money Doctors 2022 for free next September at the start of their academic year.
THE NEWS IS FAR FROM BEING BAD
Does it matter if you don’t pay attention to your personal finances? I doubt you would be reading this article if you weren’t convinced that it did. How easy is it to overcome an inability, whatever the cause, to get to grips with money management? This is a tougher question to answer. If I were the sort of ghastly human being who called every problem an opportunity and practised positive thinking, I might try to persuade you that developing fantastic money habits is a breeze. I am, however, a realist. If it were that easy to deal with money, there wouldn’t be so many people (a) facing one sort of a financial dilemma or other and (b) suffering endless worry over it. The news is, however, far from being bad. If you are willing to put in a very, very small amount of time – I’m talking a few hours a month – then I can promise you fantastic results.
DON’T ATTEMPT ANYTHING TOO DRASTIC
As someone who has wrestled with all sorts of enjoyable but essentially unhealthy habits in the past, primarily a fondness for food, drink and the good life, I am only too aware of how tricky it is to alter one’s behaviour. Trying to change money habits is not unlike trying to lose weight. In the same way that crash diets invariably fail, so too will anything drastic on the financial front. What will work is making small but meaningful improvements over time and sticking to them.
REMEMBER YOU ARE IN GOOD COMPANY
Errol Flynn, one of Hollywood’s leading men, famously remarked that it was impossible to reconcile his gross habits with his net income. e. e. cummings, the poet who reviled capital letters, said that he was living so far beyond his income that they might almost be said to be living apart. Oscar Wilde, the writer and wit who could resist anything but temptation, claimed that he didn’t want money, because the only people who wanted money paid their bills, and he never paid his. Take comfort from the fact that you are not alone. Many people find money difficult to deal with. Don’t give yourself a hard time about it.
THE SINGLE MOST USEFUL THING YOU CAN DO IS READ
The easiest and most effective way to improve your whole approach to money, and as a consequence your personal finances, is to read about it. Why? This is definitely an area where knowledge is power. I will eat my hat (a particularly indigestible golfing cap that my family would be only too pleased to see the back of – I have many golf hats ) if as you learn more about managing money you don’t find it easier and easier to take control of your finances.
KNOW THY MONEY SELF
Interestingly, human attitudes to money and the way money influences our behaviour are not subjects that seem to receive much attention. There are hundreds of ‘how to’ books on personal finance and investment but not a single popular or scientific study on what I would call the ‘psychology’ of money. This is a shame, because it is harder to change any sort of behaviour if you don’t understand what causes it.
THERE IS ONLY ONE BORING THING ABOUT MONEY
Trainspotting, mountain-climbing, stamp collecting, flower arrangement, nightclubbing – anything one isn’t into – is tedious in the extreme. The only exception to this, in my humble opinion, is money. Why? If you have money, you can do what you want, go where you want and buy what you want. Money is a passport to an easier and more comfortable life. Money means freedom, and there is nothing dull about that. In fact, the only boring thing about money is not having enough of it.
MONEY IS N’T REALLY THAT COMPLICATED
Everything, and I mean everything, you need to know about personal finance falls into one of the following five straightforward categories:
- Saving: tucking money away for future expenses and/or a rainy day. You should have 3 to 6 months joint net annual income in an accessible account for emergencies, sudden loss of income or that investment opportunity.
- Investment: using your money to make more money over the medium to long term. This includes buying your home, pensions and alternative investment – art, rock ‘n roll memorabilia, numismatics, philately and even wine investment !
- Borrowing: hardly needs an explanation.
- Insurance: protecting yourself, your dependents and your possessions against financial misfortune.
- Day-to-day money management: banking, credit cards, paying bills, etc.
You would wonder why such a fuss is made about it when you consider how simple it is.
It is not at all unreasonable to find dealing with money difficult. If you want to change your behaviour, don’t attempt anything too drastic but simply put in a bit of time into your finances. Two hours a month, that’s all it takes. If this doesn’t produce the results you want, come round for a cup of tea and let’s chat about it !