Why Are We So Rubbish With Money?

The guys explore why our brains are just not wired to deal with our finances. So . . . what can we do about this? Have no fear, they also have some helpful tips alongside numerous #tightasstommo money saving tips! How many do you already use?

Welcomes & Introductions

Featuring tech issues, Ovation Finance and the real talent behind this podcast: Tammy Devonald

No Shizzle Sherlock

What is comfortable is rarely profitable

Robert Arnott

Everybody has different risk levels – for more information, check out Episode 36 – Understanding Our Attitude to Risk with Neil Bage

#TightAssTommo

• Featuring – going out to save money and roll on deodorant samples!
• Chris Budd shares 5 top tips – do you already use any of these? Let us know on Twitter – @ovationbristol
• Thank you to Rich Ellis for the top tip – click on this link to find out more about the Split Wise App

Todays Topic – Why are we rubbish with money?

Ovation clients are a lot less rubbish

Putting what we talk about in this podcast into practice

New Financial Wellbeing theory – our brains are not wired to deal with money

Quick recap – self-determination theory:

• Ep 38 – Keeping It Fuzzy with Greg Davies
• Ep 77 – Self-Determination Theory
• Ep 83 – Social Comparison with Neil Bage

Recent history:

• The lack of financial education in the UK
• Thatcher & changes to our finances, we became responsible for our own finances
• 1991 Robert Maxwell incident led to further protections with unintended consequences

We don’t have competence because it has only been in the last couple of decades we have needed to manage our own pensions

Autonomy:

Lack of education

Society > we are steered towards thinking we never have enough money

Relatedness:

Difficult to think of our future selves

We are not wires to think this way

We are not motivated to do things for our future selves

Financial wellbeing = financial options for your future self

Conclusions from the guys

So . . . is there anything I can do about this?

Education – listen to this podcast, and others such as Pete Matthews

Word of warning, financial education can often be leading you to buy something, so be careful

Engage a financial planner who looks at cashflow planning. Someone who will manage money now and in your future. An adviser who is not just advising you on your money.

 

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If you would like to purchase a copy of The Financial Wellbeing Book please click on this link to visit Penny Brohn UK shop

If you would like to get in touch with Ovation, email enquiries@ovationfinance.co.uk or call on 0117 942 4333

 

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Episode Transcribe:

David Lloyd: Well, hello, everybody.

David Lloyd: And after some technical shenanigans behind the scenes that I won’t go into now, but it’s basically meant it’s taken us ages to get this thing up and running, but we are now up and running.

David Lloyd: So welcome to another one of our Financial Wellbeing podcasts, where I get together and pretend I know stuff about money, but then I talk to other people who do know stuff about money and we all learn things together.

David Lloyd: And who are those people?

David Lloyd: Chris Budd?

David Lloyd: Who are you?

Chris Budd: Who are you?

Chris Budd: Morning, everybody.

Chris Budd: David, I love the way that you’ve managed to make it look like it was all of us that had technical issues, not just you.

David Lloyd: Technical issues experienced by all of us emanating from me.

Chris Budd: Who am I?

Chris Budd: I am Chris Budd.

Chris Budd: I wrote the Financial Wellbeing book, founder of Ovation Finance Limited, who kindly pay for the recording of this.

Chris Budd: And I’m also someone who’s just coming to the end of writing a second book about money and happiness, actually.

Chris Budd: So my brain is full of this stuff at the minute.

Chris Budd: I got some really exciting ideas to share with people.

David Lloyd: Excellent.

David Lloyd: Well, we look forward to those.

David Lloyd: And I think somewhere lurking just off my screen, I can’t see him, but I know he’s there.

David Lloyd: I sense his financial well being presence.

David Lloyd: Tom Morris.

Producer Tommo: Hi, everybody.

Producer Tommo: Yes, this is very weird, being recorded video wise.

Producer Tommo: You actually get to see me, you poor things.

Producer Tommo: Yeah.

Producer Tommo: Tom Morris, director and charter financial planner with a company called Ovation Finance, which you should have heard of because we’ve mentioned them enough on this podcast and they kindly support all of this.

Producer Tommo: Yeah, that’s me.

David Lloyd: Fantastic.

David Lloyd: And also, I think we have to mention, we have mentioned many times in the past, the silent partner in this enterprise, Tammy Devonald, our producer, the one that actually does all of the hard work while we waffle about.

David Lloyd: And she’s actually here.

David Lloyd: So tell me, I know you’re on mute.

David Lloyd: Unmute yourself and say hello.

David Lloyd: Introduce yourself to the lovely listeners.

Editor Tammy: Hello.

David Lloyd: And that’s why she’s in the background, because she’s lovely, she’s capable, she’s hard working, but she’s terribly shy.

Producer Tommo: She is the one with the real talent.

David Lloyd: That’s true, that’s true.

David Lloyd: And I think we need to make sure to her story right, that’s got the waffling out of the way.

David Lloyd: What’s on today’s podcast, Chris?

Chris Budd: Well, today, David, I am going to be sharing the answer to the question why we are actually also rubbish with money.

Chris Budd: Because we are rubbish with money because that’s how we’re wired.

Chris Budd: So if anybody’s ever thought to themselves, why can’t I get better at this thing called money, we’re going to give them the answers.

Chris Budd: And of course, in doing so, it’s things that you can do to get better.

David Lloyd: Well, that’s very interesting.

David Lloyd: That assertion, that knowledge, that realisation, that we are all rubbish of money is, of course, it has to be true.

David Lloyd: Otherwise people like you, too wouldn’t exist, you wouldn’t have jobs if you weren’t there to tell us how we can be better with our money.

David Lloyd: Exactly.

Chris Budd: So, not sure what else to say.

David Lloyd: Our collective uselessness gives you all work and I think we should all be glad about that.

David Lloyd: However, we are here to inform and entertain.

David Lloyd: But before we do that, I think we need to go to one of our regular features, no Chisel, Sherlock, in which we listen to some accepted words of wisdom about investing and wonder whether this is indeed the sort of advice that every investor should follow, or whether it is, in fact as plain as a large area of flat land with few trees.

David Lloyd: So, Chris, what’s today’s investment wisdom?

Chris Budd: One of the thing I love about this little slot that we have is that I get to just throw a curveball at Tomo, because Tomo is our investment man, among many other things, and I can just put in a line and then just hand it to him to comment.

Chris Budd: Great, I love it.

Chris Budd: So there’s an American investor called Robert Arnott, and the quote that we’re going to ask Thomas’opinion on today is, in investing, what is comfortable is rarely profitable.

David Lloyd: Well, just before Tom comes in, I think that’s very interesting because that definitely rings true with me.

David Lloyd: Ideally, we’d all like to be able to sit down and go, you know what, I’ve just invested all my money there and I don’t even need to think about it.

David Lloyd: Here we are, six months later.

David Lloyd: I’m a rich man.

David Lloyd: Sometimes that works.

David Lloyd: My experience with Evasion, looking after my finances, means that often that is the case, but not always.

David Lloyd: And sometimes we like a little bit of a free song, I believe.

David Lloyd: I think we like a little bit of a danger.

David Lloyd: And when I sat down with Tomorrow to assess my attitude to risk in terms of my investing, I didn’t want to go for just plain sailing all the time.

David Lloyd: I wanted them to be a little bit of danger.

David Lloyd: I wanted them to be a little bit of a threat to my financial.

David Lloyd: Wellbeing, in a way, because that way the risks are greater, but the reward that’s my view, anyway.

Chris Budd: I think that’s very true, that risk reward is at the heart of a lot of this stuff.

Chris Budd: My one comment on this is that there is a suggestion that you have to be uncomfortable if you’re going to invest.

Chris Budd: I don’t think that’s necessarily the case.

Chris Budd: It depends on your circumstances.

Chris Budd: But anyway, let’s not get in the way of the expert.

David Lloyd: What do you reference?

Producer Tommo: I’m not an expert.

Producer Tommo: This is an interesting one.

Producer Tommo: It’s a very catchall that I think misses the point slightly, that everybody is different and their comfort levels are very different and the way they react to things are very different.

Producer Tommo: Risk investing, comfortable.

Producer Tommo: What we’re really talking about there is somebody’s ability to see things fluctuate in value and neil Beggars talked about this before, that on average, we as human beings feel losses three times more than we feel gains, so that’s something we need to be aware of.

Producer Tommo: But if you never want to see anything drop in value, and I’m thinking very much about investing here, the only place you can go and hide your money is in cash.

Producer Tommo: But that is long term a bit of a disaster, actually, because inflation, as we all know at the moment, if you’re listening to this, around the time that this is being recorded, it’s hovering around 10%.

Producer Tommo: So we know for a while that your cash, that’s earning very little in the bank is actually reducing in value, but you feel comfortable because you’re not actually seeing the pounds and pens drop.

Producer Tommo: But how do we actually say, okay, we can bring some comfort to invest in, but we can make it more comfortable?

Producer Tommo: But we can’t make it completely comfortable.

Producer Tommo: I think it’s the way, I would say this, but the way we can do that is invest to a plan.

Producer Tommo: If you actually have a plan in place as to why you are investing, you’re going to feel far more comfortable with seeing the fluctuations that come along.

Producer Tommo: If you diversify as much as possible means that the risk of it all going pop is reduced significantly.

Producer Tommo: And also if we look at things with longer term gaze, then actually short term things fluctuate in value longer term, if you’re investing, you tend to see that there is growth to be had.

Producer Tommo: So I’m just bringing some principles to this because the question is, in investing, what is comfortable is rarely profitable.

Producer Tommo: There’s some truth in that, but I think we can bring certain things in that make it more comfortable.

David Lloyd: Excellent, isn’t he?

David Lloyd: He’s very wise.

David Lloyd: He’s very wise, but he’s kind of sitting on the fence a little bit there.

David Lloyd: I said we all are.

David Lloyd: Is it no shoes or Sherlock?

David Lloyd: Is it not very good advice at all?

David Lloyd: Or is it somewhere in the middle?

David Lloyd: Come on, Tomo, you’ve got to give us a definitive answer.

Producer Tommo: Well, I think it’s wise.

Producer Tommo: I think what he’s saying is true.

Producer Tommo: If you’re investing, what is comfortable is rarely profitable.

Producer Tommo: You need to be able to be comfortable with some things that are going to feel a little bit you’re going to feel some discomfort in order to have longer term gains.

Producer Tommo: There’s no such thing as a free lunch when it comes to getting investment growth.

Producer Tommo: That is beyond what you do if you stuck it in the bank or what you’d have if you stuck it in the bank.

David Lloyd: So we need to be uncomfortable in order to be comfortable, that’s what you’re saying.

Chris Budd: David, I’m going to be very disappointed if you don’t take that queue of no such thing as a free lunch to introduce the next segment.

David Lloyd: Well, talking of no such thing as.

Chris Budd: A free lunch, that’s brilliantly done.

David Lloyd: Let’s move on to the next section.

David Lloyd: Our most popular feature, buy a Country Mile.

David Lloyd: Titus Tomo.

David Lloyd: And again, every so often, I don’t do in every podcast, but every so often I like to remind people where the legend Titus Tomo was born.

David Lloyd: He was born in a restaurant somewhere in Bristol five or six years ago now.

David Lloyd: Good time ago, where he took Chris and another colleague out to lunch and said, have whatever you want, guys, as long as it’s the chicken.

David Lloyd: They had the chicken, they all enjoyed it.

David Lloyd: It was a lovely meal.

David Lloyd: It turned out that Tomo had a voucher and therefore he was able to pay for everything with the voucher, no money changed hands at all.

David Lloyd: And that’s how we learned that Tomo is always on the lookout for a way of not spending money.

David Lloyd: And that’s why in every single podcast since then, he’s given us a title as Tomo Tip.

David Lloyd: But before he gives us today’s, Chris, have you got one?

Chris Budd: Well, I’ve got a few, actually.

Chris Budd: A few quickies.

Chris Budd: I’ve got some from a website called Skintad Co UK, and they just made me laugh.

Chris Budd: So I’ve got five they’re real quickies, and I don’t think anybody will ever actually do any of these, but I just thought they were really funny.

Chris Budd: So, first of all, brush your teeth while showering.

Chris Budd: To cut down on water, use number two, rub pine needles under your armpits instead of using deodorant.

Chris Budd: Number three, when you go out, save on your electricity bills by turning your doorbell off, as you won’t be hearing it anyway, which actually makes a lot of sense, I think that one.

Chris Budd: Number four, go to the IMDb website, read up on the film to find out what happened so you don’t need to pay to go to the cinema.

Chris Budd: And then finally, my personal favourite, don’t buy binoculars, just stand closer to the thing you want to see.

David Lloyd: Excellent.

David Lloyd: Good advice there.

David Lloyd: Now I’m just going to take one of those and turn into something a little bit more serious.

David Lloyd: Still slightly slipper this whole notion about you, then switch it all off when you go out.

David Lloyd: Well, we’re also consumed now with our energy consumption.

David Lloyd: We’re all really concerned about switching things off and the cost of everything and shooting up all over the place.

David Lloyd: Well, I’ve now got an app that tells me how much I’m using in terms of electricity and gas on an hourly basis, my phone, and I can look at yesterday and go, okay, I use that much then, that much then.

David Lloyd: And you therefore get to learn what was we doing?

David Lloyd: We were cooking then.

David Lloyd: So that’s why it’s a lot.

David Lloyd: And it’s very interesting.

David Lloyd: It’s the times when usage goes right off is the time when we’re not in.

David Lloyd: So the key to successful energy usage is just don’t be in your house at all.

David Lloyd: Out in the house all of the time.

David Lloyd: Switch everything off and go out and you’ll save yourself a fortune.

David Lloyd: Right, Tomo, can you top that?

Producer Tommo: Well, I’ll let you be the judge of this.

Producer Tommo: I want to bring back one that I mentioned previously and bring in a new one, and it all centres around at the time of recording this.

Producer Tommo: Last week, I came back from a lovely couple of weeks off and one of those weeks I got on the plane for the first time since Covet and took my family away to Croatia.

Producer Tommo: Lovely country, beautiful.

Producer Tommo: But some of you may remember, long time listeners, that there was a particular tip that I took advantage of and that was not to spray any of my own aftershave before I left the door, went for duty free, found the after shave.

Producer Tommo: I, like, used that instead.

David Lloyd: So you didn’t buy it, you just used a free sample?

Producer Tommo: Absolutely, yeah, absolutely.

Producer Tommo: And I’m trying to remind myself we might have talked about I know I talked about this before.

Producer Tommo: Yeah, episode 51, I think it was.

Producer Tommo: I talked about this being a tip and it’s been the first time in a while I’ve been able to use it.

Producer Tommo: So that was my rather silly one.

Producer Tommo: But I’ve actually got a really sensible one to go with it as well.

Chris Budd: Because I work with roll on deodorants as well.

Chris Budd: Can you get those?

Producer Tommo: Can you imagine that?

Producer Tommo: A sample roll on deodorant.

Producer Tommo: And especially people who have just been travelling as well out.

David Lloyd: Yeah, lovely.

Producer Tommo: Anyway, there’s my throwback to a previous tight as tomato tip, but this one, I think is really useful.

Producer Tommo: I think some people could get a lot of use out of this next one.

Producer Tommo: So I took a couple of weeks off, I had a week in Devon and a week in Croatia, and on both occasions we went with another family, which was fantastic.

Producer Tommo: But what tends to happen is when you go away with another family, somebody might buy around a coffee, somebody might say, oh, I’ll cover this shopping bill, I’ll cover this meal out, rather than splitting everything up at the time.

Producer Tommo: And you try and keep a track of who spent what and then you split it at the end of the trip.

Producer Tommo: A bit like a kitty approach, I guess.

Producer Tommo: But I was introduced to an app, a friend of mine and a friend of Chris Rich Ellis, said, why don’t you try an app called Split Wise?

Producer Tommo: All one word split.

Producer Tommo: Wise.

Producer Tommo: And it is fantastic.

Producer Tommo: You can set it up, put it on your phone, invite a friend into a group, name it the Croatia trip.

Producer Tommo: And each time that you spend, all the other person spends money you get to put in there.

Producer Tommo: Who paid for it and how should it be split?

Producer Tommo: So a lot of the time I put right, I’ve just spent £70 on the shopping and split it 50 50.

Producer Tommo: And what it does is it has this running total.

Producer Tommo: Interesting enough, the first week we went away, the amount that I owed the other family was two pound 50.

Producer Tommo: So just goes to show out these things, even out.

Producer Tommo: But it’s fantastic.

Producer Tommo: And it just means that it takes all the hassle away from worrying about who paid for what.

Producer Tommo: Just do it.

Producer Tommo: Every time you paid for something, pop it in.

Producer Tommo: It’s fair, everybody’s happy.

Producer Tommo: Splitwise.

Producer Tommo: Highly recommend for those of you who are trying to budget with others.

David Lloyd: That sounds brilliant.

David Lloyd: Do you know what I’ve just come back from?

David Lloyd: Well, we have a family house down in Cornwall, and my partner and I went down there just for the weekend, but other members of the family had been there for two weeks, so people were coming and going all the time.

David Lloyd: And my sister in law kept a running tab of what people had spent.

David Lloyd: And then at the end, recently, she sent us all a bill, proportionate bill, based on how long we’ve been there and what money we put in.

David Lloyd: So very much about what you said, but I think this app would have been absolutely fantastic.

David Lloyd: So I’m going to look that one up.

Producer Tommo: Cheers, Tom.

David Lloyd: Thanks very much.

David Lloyd: A great tight a** tip, that one.

David Lloyd: Right, okay, enough of that.

David Lloyd: Enough of other people’s armpits.

David Lloyd: Let’s get on with today’s topic.

David Lloyd: Why are we rubbish with money?

David Lloyd: Now, I have to say, am I rubbish with money?

David Lloyd: I think I have it within me to be rubbish with money.

David Lloyd: And also, if I may keep out a little bit of praise here on Chris and Tomo, since I became a client of Evasion Finance, I’m definitely a lot less rubbish with money, partly because I listen to the advice that I get from Tommo.

David Lloyd: Also, since I’ve been involved in this podcast as well, I’ve learned an awful lot about money.

David Lloyd: I’ve learned a lot about my behaviours around money and I think I’ve actually listened to some of them and put them into Practise.

David Lloyd: However, as we discussed right at the very start of this podcast, generally speaking, I think we are all a little bit rubbish with money.

Chris Budd: Chris, let’s just say we can always be a bit better.

Chris Budd: Even if we’re not rubbish, we can always be a bit better, can’t we?

Chris Budd: So I’ve mentioned before, I’m finishing off writing the book about money and happiness, kind of like a financial wellbeing book, too.

Chris Budd: And I’ve been looking at a lot of different aspects of our relationship to money, going back to history, looking for all the reasons why we aren’t very good with money.

Chris Budd: And as I was doing this, I had a bit of a revelation, something that brings together all of these different aspects of money to one explanation.

Chris Budd: So I share this new theory of mine with you both and obviously with our listeners, going to need to do a little bit of recapping of stuff that we’ve covered in previous podcasts.

Chris Budd: So, to start off with, let’s just remind ourselves of self determination theory.

David Lloyd: Now, I believe this is the psychological explanation for what motivates us to do things.

Producer Tommo: Indeed it is.

Producer Tommo: Eloquently put, as always, if you want to remind yourself, we did a full explanation episode that was number 77, so we get all the detail on what we’re going to talk about.

Chris Budd: Now, to give you a quick summary, self determination means theory says that in order to be motivated to do something, three things need to be in place competence, autonomy and relatedness.

David Lloyd: So I’m guessing competence is fairly obvious.

David Lloyd: It means being able to do the thing in question.

Producer Tommo: Yeah, that’s right.

Producer Tommo: That’s absolutely right.

Producer Tommo: And autonomy means being allowed to do it.

Producer Tommo: Having a feeling that you’re in control.

Chris Budd: And relatedness means seeing how the thing that you want to do is going to affect other people.

Chris Budd: So, in other words, understanding its purpose.

Chris Budd: And if those three things are in place, we will be motivated to do things.

David Lloyd: Okay, so being able, being allowed and understanding.

David Lloyd: So if we don’t have these things, then we’re not going to be motivated to do something.

Chris Budd: Exactly.

Chris Budd: Although it’s not binary, it’s not on and off.

Chris Budd: The more we have of those three things, the more motivated we’re likely to be.

David Lloyd: Right.

David Lloyd: Okay.

David Lloyd: Consider me and our listeners hopefully caught up now on self determination theory.

David Lloyd: So what’s the next part, Chris, of your big theory?

Chris Budd: Hey, Chris, what’s the big idea?

Chris Budd: But it’s the fact that our brains are not wired to make good financial decisions.

Producer Tommo: Yeah.

Producer Tommo: And again, long time listeners would have noticed that we’ve spoken about this before.

Producer Tommo: We had Greg Davies talking about this in podcast 38.

Producer Tommo: It’s brilliant on this, plus several podcasts we’ve had with Neil Beige.

Producer Tommo: If we think about recently episode 83, where he talked about social comparison being something that is quite tricky for us.

Chris Budd: So this is maybe familiar with something called System One and System Two thinking.

Chris Budd: When we use financial sorry, when we make financial decisions, we should use what is called System Two, which means the system we use when we make thoughtful, considered decisions.

Chris Budd: But actually we use System One gut decisions, which come from a different part of our brains.

Chris Budd: Another way of putting this is that we use fight or flight type decision making when it comes to money, which are decisions driven by fear.

Chris Budd: We therefore cannot have competence when it comes to money decisions because we’re using System One, fight or flight type decisions when it comes to money.

David Lloyd: Now, I think I see where this is going.

David Lloyd: So we’re going to be demonstrating why we don’t have the three parts of self determination theory, which is why we’re not very good with money.

Chris Budd: You see, that’s why you get the big bucks, David.

Chris Budd: Isn’t it way ahead of me?

David Lloyd: Well, they’re not that big, actually, but they’re bucks.

Producer Tommo: It gets me thinking on this topic of competence.

Producer Tommo: We don’t have much in the way of financial education in schools.

Producer Tommo: No one teaches you how to be a parent and no one teaches you how to be good with money.

Producer Tommo: So that must be another reason why we don’t have competence.

Chris Budd: Yeah, and then there’s the fact that we haven’t needed to think about money.

Chris Budd: Certainly not financial planning.

Chris Budd: And long term, until extremely recently, financial planning is just not something we’ve ever needed to do.

David Lloyd: Well, I guess historically, going back hundreds of years, not that many people even live beyond the working age.

Producer Tommo: Well, let’s be honest, if you’re even lucky enough to live that old, you probably still shared a home with your family, who would then take care of you.

Chris Budd: If you go back through most of human history, then that’s absolutely the case.

Chris Budd: And even when you move into the last couple of centuries, and with the advent of capitalism, retirement was very often been taken care of for us by our employers.

David Lloyd: So you mean company pension schemes?

Chris Budd: Yeah, exactly.

Chris Budd: The first company pension scheme actually started in the middle of the 19th century.

Chris Budd: State pension schemes only came in in the UK just after the Second World War.

David Lloyd: So we still didn’t need to worry about income once we stopped working because the state or an employer would provide.

David Lloyd: So when did that begin to change?

Producer Tommo: Like most things financial in this country, a big moment must have been when Margaret Thatcher introduced personal pensions in the 1980s.

Producer Tommo: I’m far too young to remember that, so I’m kind of just.

David Lloyd: Those of us that do remember the witch hag that was satchel.

Producer Tommo: I’m too young to even have too much of a care.

Producer Tommo: For all of this topic.

David Lloyd: You’Re talking.

Producer Tommo: To more than just one section of society, david out there.

Producer Tommo: I’ve just given david.

David Lloyd: Let me just put that in a different way, then.

David Lloyd: Margaret Thatcher certainly revolutionised the way in which we looked at society and the way in which we looked at personal choices that we made.

Chris Budd: Yeah, the personal pension gave the ability for individuals to manage their own pension investments.

David Lloyd: Yeah, or another way of putting that could be that it handed responsibility to individuals.

David Lloyd: As Mrs.

David Lloyd: Thatcher so famously said, there is no such thing as society.

David Lloyd: She put the onus on people taking responsibility for their own things, which I kind of get, but then I would argue, at the same time landed us in the collective mess that we’re in now.

David Lloyd: But that’s for another podcast.

Chris Budd: Probably not this particular, but it’s true.

Chris Budd: It gave responsibility to us to manage our own money, but that’s really the first time that that happened throughout human history.

Chris Budd: So some company pension schemes started to also do a similar shift.

Chris Budd: They moved from what’s called defined benefit, then called final salary schemes, to define contribution.

Chris Budd: That also started a shift of responsibility from the employer to the employee.

Chris Budd: And then the other big thing that happened was in 1991, robert Maxwell fell off his boat.

Chris Budd: Yes.

David Lloyd: Cap and Bob, right?

David Lloyd: So for the benefit of Tom and our other young listeners, he was, among many other things, the owner of the Mirror newspaper Group.

David Lloyd: And when he drowned, they discovered that he’d been pilfering the Mirror Group company pension scheme, leaving many pensioners without their retirement income.

Producer Tommo: All of this led to the government bringing lots of protection and rules to stop this happen again, which is great, and it’s still built in now and people have protections.

Producer Tommo: But it did bring with it unintended consequences.

Producer Tommo: One of them being that most of those final salary pension schemes will shut down.

Chris Budd: So there are hardly any of those schemes left.

Chris Budd: Now, certainly in the private sector, in the public sector, you’re a civil servant, teacher, nurse, police, et cetera, you can still get those free gold plated pension schemes, but most people now don’t have access to that pension.

Chris Budd: So for most people, we now have to manage our own investment funds and our pension.

Chris Budd: And this is a really big reason why we don’t have competence with financial planning aspect of money.

Chris Budd: We haven’t had to do it before throughout history, literally, if you think of the entire human history, only in the last few decades have most people been expected to fund for their own retirement.

David Lloyd: That’s really interesting.

David Lloyd: I’ve never seen it in that way before.

David Lloyd: So we’re not used to having to do it, we have no experience of doing it and we’ve no education in doing it.

David Lloyd: But I guess with life expectancy getting older and older, it’s becoming more and more important that we do do it.

David Lloyd: And it’s hardly surprising that we don’t have competence with that money.

David Lloyd: So what about autonomy then and being allowed to get on to do it?

Chris Budd: There’s a couple of things here.

Chris Budd: Lack of education and competence contributes to that feeling that we’re not able to deal with.

Chris Budd: We’re not free to deal with financial matters or to me means that you left alone to get on with something and that you have agency.

Chris Budd: That might be a word for it, but if you can’t do it, you’ve got no education, then you’re going to struggle to do that.

Chris Budd: But there’s also the emphasis in life, in society and media, that money is to be accumulated, that success is money and money is success.

Chris Budd: As a society we’re taught that we can never have enough money, which means we can never be in control because we’re always chasing more autonomy.

Chris Budd: When it comes to money, therefore is always going to be limited.

Producer Tommo: It is something that we try and address in these podcasts as best as possible and get the message out there that money isn’t about just being accumulated for the sake of it being accumulated.

David Lloyd: Yeah, so autonomy is present because we’re free to deal with our money if we want to, but it’s limited, I guess, for that very reason, that lack of knowledge that we have.

David Lloyd: So what about relatedness then?

David Lloyd: Chris?

Chris Budd: The issue here, this is really interesting is how difficult it is to think of ourselves in the future tense, to take action now that benefits our future selves.

Chris Budd: Now this is really cool.

Chris Budd: I’m fairly new to this one.

Chris Budd: It turns out that when we try and picture our future selves, neuroscientists have discovered that we use a different part of the brain than when we think of ourselves now.

Chris Budd: And the part of the brain that we use when thinking about our future selves is actually the same part that we use when thinking about other people.

Chris Budd: So we are literally not wired to connect with our future self.

Producer Tommo: I guess this would explain why it’s really hard for people to not only create longer term financial plans, but actually stick to them.

Producer Tommo: I’m going to go with it.

Producer Tommo: It’s a shameless plug.

Producer Tommo: This is why we really benefit from third party assistance when we deal with longer term financial planning, it’s having somebody there to hold us to account, to force ourselves to put away money for the benefit of somebody else.

Producer Tommo: Are you that future person?

Producer Tommo: Given the lack of connection with our future sales, we’re therefore going to see relatedness being very low as we have little competence, autonomy or relatedness when it comes to money and financial planning, we’re not motivated to do an awful lot about it.

Producer Tommo: In particular the longer term stuff, that.

Chris Budd: Connection with our future sales bit.

Chris Budd: I had a message from somebody yesterday who I’ve known for a long time and Tomo has done an amazing job helping this client.

Chris Budd: I’m just going to share.

Chris Budd: It embarrassed Tomo because this guy was working high up in a professional services firm, earning lot of money, highly pressured job managing partner.

Chris Budd: And Tomo helped him to see his future self because you need that third party help Thomas just mentioned and he decided he wanted to be a teacher.

Chris Budd: Actually, that’s where he wanted to be spending his life and he wasn’t happy.

Chris Budd: And we just had a message from him yesterday.

Chris Budd: He’s just starting his new job as a teacher after about two or three years.

Chris Budd: I can’t not sure how long of Tomo working with this guy, helping him work out what his future self might look like and then planning to get there and he’s now there.

Chris Budd: I just could not be proud of the process and of Tomo for helping that time.

David Lloyd: Brilliant.

David Lloyd: Well done, Tomo.

David Lloyd: And there’s another thing as well that I’d like to add in at this point when we talk about our future sales.

David Lloyd: Now, I’ll relate it back to me and my recent experiences.

David Lloyd: So I’ve got a decent pot of money that they should look after for me and they look after it very well.

David Lloyd: And over the last few years, I’ve taken bits out here and there to fund lifestyle choices and it’s been really quite nice.

David Lloyd: And then beginning of this year, Thomas said.

David Lloyd: To me, do you know what?

David Lloyd: I think you should probably just leave that alone now.

David Lloyd: Just leave that alone.

David Lloyd: Let it build up again a little bit.

David Lloyd: And so I have I’ve not taken any more money out and it has built up.

David Lloyd: It’s built up quite nicely.

David Lloyd: It took a bit of a nose dive when we had all of the war in Ukraine, but it’s going up quite nicely.

David Lloyd: But then recently, rather sadly, last week, my father in law died and he’s been there for a long time.

David Lloyd: It was not unexpected, but we had spent a lot of time visiting him in the care home that he was in.

David Lloyd: And also my mother in law as well, is also very ill in the care home.

David Lloyd: And it’s also, quite frankly, not too far away from the end.

David Lloyd: And it’s when you look at people who you’ve known as being younger and healthier people, and you see how suddenly they turn into completely different people, and you realise the amount of care and the expense of that care can cost in terms of keeping them protected and happy.

David Lloyd: And it certainly made me think now about my pot of money, not just in terms of something I can raid whenever I want to have a good time.

David Lloyd: Now I’m thinking, oh, do you know what?

David Lloyd: I probably need to be keeping as much of that as I possibly can.

David Lloyd: Because, sadly, in 20 years time, or whenever, it might be sooner, it might be later, I don’t know.

David Lloyd: There’s a very good chance that I will be that old failed person in a care home and I’m going to need some money to make me as comfortable as I possibly can.

David Lloyd: But it’s not always easy to project forward in that way.

David Lloyd: Probably in a month or two, when this current crisis that we’ve been going through goes, I’ll probably forget all about it.

David Lloyd: And then next year we’ll go, we want to have that really nice holiday.

David Lloyd: I’ll go, Tomo, can I take some money out of my pension?

David Lloyd: And you’ll go, yeah, go on.

Producer Tommo: All right, we’re going to listen to episode nine and give you the timestamp of your monologue there.

David Lloyd: Thank you.

David Lloyd: Okay, so it’s now on record.

Producer Tommo: I’d just like to add in just another layer to this really briefly.

Producer Tommo: You just touch on something that could or could not happen.

Producer Tommo: But I think an important part of financial well being and we talk about is one of the pillars.

Producer Tommo: One of the five pillars is having financial options.

Producer Tommo: It’s actually sometimes that Future South feels quite vague, but perhaps just creating financial options for that person feels a far fuzzier and easier way to think about that person, because financial options and make a world of difference.

Producer Tommo: When you come to that point, you have choice.

David Lloyd: Excellent.

David Lloyd: Well, on this podcast, we don’t like to leave people hanging and not have a solution.

David Lloyd: So I have to therefore ask the inevitable question.

David Lloyd: We’ve kind of established that I do my best with money, but ultimately I’m perhaps not that brilliant about it without the advice that you’re giving me.

David Lloyd: So is there anything I can do about it?

Chris Budd: Good news is, yes, lots in those three areas of competence, autonomy and relatedness.

Chris Budd: Taking the points in turn, financial education, we said there’s a reason that people aren’t confident.

Chris Budd: Well, this is why the podcast exists.

Chris Budd: The very fact that we’ve got 5000 episode listening to this podcast or something that’s going to be helping them to get better with their money.

Producer Tommo: Yeah, absolutely.

Producer Tommo: And I will say also, just because he’s a friend of the podcast, I think he’s fantastic helping people educate them on their finances.

Producer Tommo: Pete Matthews meaningful Money podcast is excellent as well.

Producer Tommo: So do go cheque that out, and I think some of us do.

Producer Tommo: But one word of warning here, there’s a lot of financial education out there and it’s actually designed perhaps to get you to buy more stuff.

Producer Tommo: So keep listening to this podcast, listen to pets as well, and just bear in mind that with all of this financial education and what we’re trying to provide you is intended to make you happier, not just wealthier.

David Lloyd: Nice use of a catheterse there, young Tomo.

Chris Budd: So another way of gaining competence is, as we’ve just discussed, as a financial adviser.

Chris Budd: But just to build on Tomo’s point, make sure that you engage with someone who’s doing financial planning, okay.

Chris Budd: Cash flow forecasting we’ve talked about before, not just someone who’s looking after your investments and getting tax advice.

Chris Budd: They’re probably doing a very good job.

Chris Budd: But if you’re trying to gain competence from an advisor about your longterm future, you want someone who’s going to be not just managing the money now, but somebody who is going to be doing cash flow and doing proper financial planning.

Producer Tommo: I think I’ve got a phrase for this.

Producer Tommo: It’s not going to be a catchphrase, I don’t think, but a phrase.

David Lloyd: We could make it one.

Producer Tommo: You want to use an adviser who is advising you, not just your money.

David Lloyd: Yeah.

David Lloyd: And certainly that’s been and again, I’m going to blow your trumpet now, Tom.

David Lloyd: Can I say that on the podcast?

Chris Budd: But you can as long as you don’t make reference to money.

David Lloyd: This is true.

David Lloyd: You advise me not about money, but you advise me about other aspects of my life that impinge on my money.

David Lloyd: And I think that it’s very important to accept that the relationship between an adviser and a client is really important.

David Lloyd: What about this autonomy point?

David Lloyd: How can we increase our autonomy when it comes to money?

Chris Budd: Well, I’d say the autonomy is already there.

Chris Budd: It’s just not enabled.

Chris Budd: Giving somebody the tools to use perhaps through a financial advisor who understands financial well being approach, then the person can change their relationship to money.

Chris Budd: It’s an awareness thing.

Chris Budd: I think by becoming more aware that money is your slave, not your master, you will begin to feel more in control and autonomy will result.

David Lloyd: Yeah, I get that.

David Lloyd: And so finally tomorrow relatedness yeah, I.

Producer Tommo: Think it’s appropriate that a third party is involved in this.

Producer Tommo: Using a financial adviser who has training and coaching skills hello, I do.

Producer Tommo: Can help you connect with your future self.

Producer Tommo: Creating that cash flow forecast also helps envision that future self and that future you could have, all of which will have an impact on being able to relate to your financial plans.

Chris Budd: Connecting with money to a purpose, living a life with meaning and purpose, using your money and time, of course, to live a life with meaning and purpose is going to help increase relatedness with money.

Chris Budd: So the intrinsic motivations we talked about before in this podcast yes.

David Lloyd: So we pulled a lot of things together here to come up at the same time with something that is a little bit new.

David Lloyd: And I’m liking this new theory of your Chris.

David Lloyd: It explains why people tend to be rubbish with their own money.

David Lloyd: Hopefully it helps you to understand that it’s not your fault.

David Lloyd: And we’ve actually provided lots of ways to help people get better.

David Lloyd: We’ve also discussed Reusable Deodorants and aftershave the Witch Hag that is Thatcher, and lots of other interesting points of view.

David Lloyd: And I hope we’ve added a little bit of spice and knowledge to your life.

David Lloyd: And I hope also that you’ll join us the next time on another one of our Financial Wellbeing podcasts.

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