How to Make Your Money Work: Decide what you want, plan to get there

INTRODUCTION

Why write another book?

My first book, How to Be Good with Money, was a tour of your finances: it was the concepts, the ideas and stuff you needed to know. Many of you who read it got so much from it, but when I finished it, I knew I needed to add more. The first book was all about how to be good with your money; this book is about your interactions with your money. Not only the practical steps to be taken in what you do with it, but also about what may be underpinning your deeper relationship with money – the why behind the things you do with it.

I wanted to write a book that lets you into the mind of a financial planner, that allows you to understand how we think and why we do things differently for different clients. I wanted to do this in the hope that you could read the book, learn from others and decide how you need to take action with your own finances.

And I want it to be the right action. So many of us look at what others are doing with their money and try to do the same. But, inevitably, we get different results. Why is that? It’s because what works for one person may not work for another. When dealing with a client’s finances we often apply different strategies, and it’s no different for you: what works for your best mate may not work for you. There is more than one way of getting ahead with your finances and creating wealth.

This book aims to help you find your way – the specific financial path that works for you. If How to Be Good with Money was the what to do, How to Make Your Money Work is the how to do – and why we do it.

What I’ve learned from the people I meet

Since I wrote my first book, my life has changed in many ways. For one, the book has been a phenomenal success; for another, I have finished three series of the TV show How to Be Good with Money and, as I write, series four has just been given the go-ahead. I have broken through my 20-year professional milestone of advising clients – and have also broken the 40-year age barrier.

I’m still constantly learning from the world around me. What I love about what I do is that there is so much I have yet to learn, and I’m delighted with the fact that this will always be the case.

I learn from my clients, from people on the TV show, people who ask me questions on radio and now I also learn so much from my interactions with people on Instagram. In Ireland, we are not good at talking to each other about money. I feel as though I’m doing everything I can through the TV show, the books and both traditional and social media to get people talking about money – or at the very least to talk to me about it. It seems to be working. I do it because I love it, but I also do it because I learn from it.

For example, I was doing an Insta Live recently. If you’re not familiar with this, it basically means turning on my camera and broadcasting live to my followers, who in turn join me live with their followers. It’s like a mini interactive live TV show.

Others who have lots of followers think I’m mad (‘Sure you could have anybody join you’, ‘You have no control over what might be said’, ‘What if they ask you something you don’t know the answer to?’). My response to this is always the same: ‘That’s why I enjoy it so much.’ It’s the privilege of being let into somebody’s home. Somebody’s life. They can open up a bit and really give everyone watching this mini TV show an insight not just into their finances, but into their lives.

During an Insta Live, people can also throw up questions or comments for everyone to see, and to me this is where the real value and learning comes from. I had somebody who wanted to buy a house recently. It was a dream home; the price was good and it was in the right location. But there was a problem: the seller wanted to delay the sale for six or eight months. Their solicitor was advising them to pull out, as it was ‘just too risky’. I was on the spot. My suggestion was to drag things out, keep looking at other houses and see how far they could hold off before pulling out. Yet I felt for the seller, as I was suggesting that the buyer lead them along, but I also felt that the buyer was being put in a crappy position.

That’s when the magic happened. Someone suggested that the person buy the house and rent it to the current owners for the few months they needed. And what was really weird is that this is something I have done before with a client – but in this moment I had gone a different route with my suggestion. This is the power of collaboration. Yes, this option is not without its faults, and the bank in particular may have an issue, but it was an option to at least explore.

We all need to learn from this: there is usually more than one option and it’s about deciding which is the right one for you, while also acknowledging that the right answer for somebody else may not be your answer.

I’ve added an FAQ section at the back of the book so that you can see the kind of questions that come up over and over again. I’m privileged in that I get to look at lots of different scenarios for lots of different clients. I learn about lots of different people’s lives, situations and problems, and then I take that knowledge and use it to help others.

I’m always learning: I’m always reading books, listening to podcasts or watching documentaries to try and make sure I can give better solutions to my clients and the people I engage with through social and traditional media. But without doubt my greatest asset is the people I engage with.

Lessons from lockdown

It’s not just my world that has changed since my first book came out; the whole world has changed. We’ve experienced a global pandemic and our perspective on life has been turned upside down as a result. As we went from lockdown to lockdown, we began to realise that there were things we really missed.

I really got into Instagram during the lockdowns and the feedback I received from polls has given me a great insight into people’s minds. When I asked people what they were missing during lockdown, one answer kept coming up over and over again: people were missing people. Some expanded on this and said going to restaurants with people, going to a bar with people, spending time with people, staying in hotels with people, travelling with people.

When we were stripped of our ability to engage with the world, what we missed most was each other. We tried to replace it with things like Zoom drinks, but that only lasted so long. Zoom dating had some, but limited, success. People, not things – and definitely not money – were what we craved and what we missed.

As my Insta journey unfolded throughout lockdown, I also got to partake in the evolution of people’s relationship with their finances. While people were missing their friends and family, they also realised there were things they were not missing at all. Whatever about deciding there are people you don’t want back in your life, that is your own decision, but finally recognising that there is stuff in your life you don’t need was a eureka moment for me.

For years now I have been fighting against the pre-conceived idea that financial planners are ‘tight’. Let me dispel that myth right now. Financial planners are not penny-pinchers, they are not tight, they do not scrimp and scrape and they do not sacrifice today for the benefit of some far-off future financial euphoria that may never come.

Good financial planning is about not spending money on things that add no value to your life in order to have more money for the things that do.

The eureka moment – for not just Ireland, but for the entire western world – that arrived during lockdown was that there is whole pile of stuff we spend our money on that adds absolutely no value to our lives. I have previously described this as subconscious spending. Lockdown meant if we wanted to spend money, we had to do it very consciously. Even if we went to essential shops like the supermarket, it was a chore: there were queues, and we were concerned about getting in and out as quickly as possible. Cutting our subconscious spending had a major impact on all our household finances. Yes, there were also other factors such as not commuting to work or not going out to eat or drink, but the impact was significant.

In a typical non-pandemic month, the people of Ireland save an average of €443 million. In the month of April 2020 – the first full month of lockdown – we saved €3,000 million. That’s €3 billion. In one month we saved almost seven times as much as we usually do.

If you saved more that month than you usually do, I’d suggest you didn’t land at the end of the month feeling like you had missed anything tangible. I know this from my Instagram polls: we didn’t miss tangibles in lockdown. We missed our friends, our family and the people we love.

This figure is even more incredible when you consider unemployment figures during April 2020. The total workforce of Ireland is approximately 2.32 million people. Just over 200,000 were on the live register in April 2020 and another one million were either on the Pandemic Unemployment Payment or on the wage subsidy scheme. Yet we saved seven times as much as we usually do. Think about it: we saved as much in one month as we usually save in almost seven months, yet 1.2 million people were either out of work or on some type of government support.

There are other figures that, when you look further at them, suggest there are two million people in Ireland who are financially better off as a result of Covid. Their wage stayed the same (including via PUP or wage subsidy), yet their expenses and subconscious spending fell through the floor. These are the savers.

How to use this book

If you’ve read my first book then you know it’s full of tips, hints and recommendations about how to engage with your money. You’ll also know that I say you can jump in and out of it and just read the bits that are relevant to you; I do recommend that you read it cover to cover, but that was an option if you were short on time.

This one could potentially also be read in bitesize chunks – but you’ll miss a trick. Money is intertwined into different areas of your life, so what you do with one area of your finances will have an impact on others. You need the full picture. Or as any politician would say, you need to have joined-up thinking when tackling something.

So do yourself a favour and read this book cover to cover. After all, you don’t know what you don’t know yet.

WHY IS MONEY IMPORTANT?

Right, first things first. Money is important because when we have some it allows us to do the stuff that we want to do. It allows us to spend time with family and friends, it allows us to buy nice things, have experiences and enjoy financial security.

This is a really interesting question. Why is money important to you? Some people say, ‘It’s is not important to me, I’m not materialistic.’ If this is you, and if you believe that money is not important to you, then ask yourself – why haven’t you given all your money to charity? Why hold on to it if it’s not important to you?

You might answer that you need it for food and a roof over your head, nothing more, and therefore it’s not important to you. Saying it’s not important, however, is the same as saying eating isn’t important: it is. So is money. We need money for essentials, therefore it is important. I find it fascinating to think back to a time when money did not exist, when we actually didn’t need it. We didn’t need it because we foraged or hunted just enough to feed ourselves and our family, tribe or community. As the available food in an area disappeared, we simply travelled on to the next area and kept looking for food.

But then we started to travel more, and the size of the population increased. People became skilled. Somebody began growing food but needed the tools to carry out the work required. In stepped the craftspeople, who made tools and equipment and traded their products for food.

Now, if the world only had craftsmen and farmers in it, then our need for money would never have developed. You see, trading between two people or two communities can be done very easily when each person has something the other person wants. The reason for this is twofold. The first is basic need. I’m hungry and you want my tools. Simple. But the second is that it’s only my perception of the value of your item that is important to me. So my judgement is the most important. If I perceive that my tools are worth two bags of grain, then I’ll give you the tools. If I don’t, I won’t – and we barter until we are both happy.

Where it starts to get more complicated is when I’m selling you my tools and in return you’re going to give me a bag of grain. But if I don’t want the grain and intend to use it to barter with the baker in the village, now it’s not just my opinion of the value of the grain that matters – I need to consider what value the baker will put on it. The baker is not here, so I have to guess. I could guess right or wrong.

But what if I had a system where I could get something for my tools that nobody questioned the value of, where there was a universal value to it? Something that was trusted. Something like money. Then I wouldn’t need to worry about my perception of how the baker might feel about two bags of grain this week.

But for money to be acceptable to all, it needs to be trusted by all. Notice I said it needs to be trusted by all, not just some people. So in years gone by, the king or ruler or whoever it was who reigned over a region would issue coins with their mark on them, effectively providing a ‘government’ guarantee of their value. It meant I could accept coins for my tools and use those coins in the bakery, safe in the knowledge that the king was standing over its value. The baker knew that too and so the baker could go off and buy grain or whatever else was needed.

In its simplest form, money meant three-, four- or even five-way transactions were possible. But it needed somebody standing over it saying, ‘It’s okay to trust these coins.’ The modern-day version of this is our regulators such as the European Central Bank and the US Federal Reserve.

Right now, though, we’re living in an era where this is being challenged. I genuinely have no idea where, for example, cryptocurrencies will go. In ten years from now – or even by the time you read this book – they could be totally established as an accepted form of currency everywhere. Or, in the same period of time, they could have become useless. At the time of writing, cryptocurrencies are on a rollercoaster of a ride; for now, all I’ll say is that my one major concern about current cryptocurrencies is that, in order to become fully mainstream, they will need to have the trust of everyone. In all likelihood, this means being regulated. And if a central bank or regulator is going to do that, why would they not simply create their own cryptocurrency, rather than trust one created by someone else? So it’s possible that crypto may become a thing of the future – but it may not be the one you’re currently holding.

What money can do for us

Having asked thousands of people the question ‘Why is money important to you?’ over the years, I have come to the conclusion that money is important because when we have some it allows us to do stuff we want to do. It allows us time with family and friends, it allows us buy nice things, have experiences and enjoy financial security. It allows us to provide for our children and it allows us to make decisions that we wouldn’t be able to make if we had none.

When we get new clients into the private practice who have just won the lotto, sold their business, inherited money or in some other way come into a large, life-changing amount of money, we try to get one message across to them. That message is: the things that made you happy before are the things that are going to make you happy in the future, the difference now is you have more time to enjoy those things.

We can always earn more money. We can never make more time.

Money is important because it gives us time. Time to spend with family or friends, time to experience nice things, places and events. Time away from worrying about money. Having money does not make you happy, but it does give you more time to do the things that do make you happy, and having lots of money means you might do things with your time in a more comfortable way, in nicer restaurants, hotels or via better seats on the plane. But only if they are important to you. Managing the money you have is all about a mixture of balance and trade-offs.

I’m a financial planner. An accountant looks backwards at your finances and tells you where you are today. A financial planner views where you are today and then looks forward. When I sit with a client for the first time, I show them what their financial future was going to be like before they sought financial advice. For many clients, this is the first time they see with real clarity where they are going financially. But more importantly than seeing where you were going, you can also see where you could go if you make changes. You get to see the long-term impact of the financial decisions you’re making today.

This can be really powerful: it helps you avoid the situation where you wake up 10 years from now and wonder to yourself, If I had done that differently would it have worked out differently? You can see now what your financial future looks like, based on the decisions you’re about to make.

A good financial plan means that you can enjoy today more, safe in the knowledge that your financial future is secure. A good financial planner, however, does more than generate a good financial plan. A good financial planner will delve deeper, will understand what is important to you so that they can build a financial plan that has your money working hard to support the life you want to live.

Yes, it’s about financial security in retirement and yes, changes may need to be made, but these changes are not sacrifices. Suggesting you’re sacrificing something suggests you’re at a loss. But proper financial planning means you don’t sacrifice – you trade off to achieve balance.

You decide to save a little more now so that you can spend a little more later on, or you trade off the pay rise and increased responsibilities at work in order to keep your work-life balance right. You don’t move house but instead extend, because you realise that moving house means you’ll have to work for three extra years to cover the cost of it, while the extension means you’ll only have to work