Why I think you can change your money habits over time, based on my own experience.
So I was watching this YouTube video…
Ever heard of the channel Diary of a CEO? It’s a YouTube channel that appeared on my suggestions feed one day by a guy called Steven Bartlett.
Steven is allegedly an entrepreneur and self-made millionaire/ rich guy. I haven’t vetted his background and I have no idea if that’s true.
However, he managed to interview Morgan Housell – yes, The Psychology of Money Morgan Housell – so I thought I’d listen through his interview while doing chores around the house and making falafel.
Rock and roll.
To save you searching, I’ve embedded the video right here. I warn you though – it’s a long one, about two hours.
Yeah, so?
There’s a really cool bit where Morgan and Steven get into a debate about whether money habits change over time.
Morgan reckons that there are:
- savers
- people who can’t save
- people who don’t think they need to save money.
Well, something like that. The idea is that someone is either naturally disposed to saving, spending or just not caring either way.
Our lad Steven steps in and says that he’s been all three at different times in his life.
Interestingly, Morgan is sceptical. He quotes the investor Charlie Munger’s opinion that people either get money or they don’t, and declares that money habits are 70-80% nature, and that people generally don’t change their nature over time.
Which would be depressing if it was true
Right? Because what’s the point in learning to budget effectively – if it came naturally, you wouldn’t need to, since you wouldn’t commit all your resources at any given time anyway.
I’ve definitely changed my own attitudes
If things were about nature, then I would’ve screwed up a long time ago.
Lessons from childhood: use it or lose it
Before we start psychoanalysing my own experience, I want to make something clear up front: my parents were pretty good.
They have lots of cool skills and things I’m proud of: they’re tenacious, both of them are completely resilient and unafraid of physical hardship, my mum has more talents and skills than I can count and my dad works like ten men.
But both of them completely suck with money.
Sorry mum!
Mum’s doesn’t go out to blow all her money, but she’s not a spendthrift by any means.
I wouldn’t say she was in the category of doesn’t think she needs to save, she’s definitely a saver of a sort. She just didn’t believe she could amass any kind of wealth.
I’d say she kind of saved to a point, then went on spending sprees from that point onwards.
Not for herself, mind you, but she spent most of it on gifts for us as kids. Her childhood had been pretty hard, home wasn’t great, and I think what drove her was trying to give us a better childhood than she’d had. It was entirely out of love, expressed by buying us stuff at Christmas.
A couple of years ago I introduced her to the idea of paying herself first, and set up £200 a month into a SIPP. It blew her mind that she wouldn’t miss the money and that she quite quickly built a nice little pot in there. I really hope she kept that up.
Anyway, mum’s attitude when we were growing up was to enjoy money while it lasted, because money is fleeting and soon gets taken from you. You shouldn’t put yourself at risk of being broke, you need a rainy day pot, but overall it’s better to enjoy things while you can.
This isn’t a bad attitude to money. It’s quite logical and would suit most people who simply intend to work until retirement. There’s risk involved when you scrutinise it, but it seems so sensible on the face of it.
Dad is actually bad
My old man is good at many things, but he is the absolute worst spender I’ve ever met. I’ve pretty much told him so – we have that kind of relationship.
I remember him once telling me that “image is everything”. We were in a shopping centre, having been reluctantly dragged out shopping (as parents do to their kids). I think the lesson was supposed to be that if you looked the part, you’d be able to attract opportunities.
He also struggles to understand the concept of “good debt” and “bad debt”, stating that a car purchase is “good debt” because you use the car to go to work.
Sure dude – but you could’ve gone to work in a used Ford, why the BMW with the M3 kit?
He’s definitely in the non-saver bucket. No question.
Oh yeah: and there were four kids
So you can imagine the competition for resources.
Actually, I won’t say a bad word against my siblings. In hindsight, it was pretty cool being one of four.
Anyway, the point is that we lived in an environment where we believed money was temporary, fleeting and soon to be taken from you. You were better off looking the part and trying to attract opportunity than trying to put your money to work for the long term.
I didn’t do any better on my own
I must have internalised these attitudes, because I took them to university.
At my lowest, I’ve been absolutely harassed by debt collectors.
Having decided not to worry about money and “live in the now”, I messed up a direct debit that went to an old bank account. It bounced, obviously, but I didn’t check to see that the account had generated an unauthorised overdraft due to the failed direct debit fees.
£500 later, I was getting harassed by a new debt collection agent each week. Students in 2007 didn’t have a spare £500, and it’s probably still true today.
To be honest, I’m still raging at NatWest about how they handled that, it was predatory banking behaviour at its worst – deliberately generating a debt then trying to enforce it.
Fuck those guys.
However, it’s ultimately my fault for being so reckless with money.
When I eventually got a job with the military, I was living hand-to-mouth for the first three years. Those first wage payments pretty much went the same week they came in, I was so reckless, but I did get out of my debts from university and I still avoided too much credit.
With one exception: I bought a motorbike on finance, so that I could get a new one rather than an old one. At £7,000 (at the time!) and 3% interest, this wasn’t a massive sin – but there’s something in that. Apparently I was happy to use debt to buy things I wanted, but not too much of it. It’s like being irresponsible with money but not too bad.
Which is dumb. Apparently 26-year-old me didn’t believe that he could be “good” with money instead.
Bit of an aside: this is what makes you suspicious of institutions
My experience of being broke was pretty horrendous as learning opportunities go.
You know what’s on your mind every time you go to the shop to buy food, meet up with your friends, discuss your future plans?
Debt.
Have you ever walked into a bank and been ashamed when you speak to the cashier? I have. When they patronisingly switch to a false-empathetic tone, and say “the cases for people like you get transferred to our Birmingham collections office”, you just want to curl up.
In contrast, ten years later, Lady SierraWhiskyMike walked into a branch of the same bank and they basically saw her wage slip and fell over themselves trying to offer her better deals and reward accounts.
Dude, no-one helps you when you’re broke. People think there’s lots of support and benefits out there, and there are, but they’re for single mums and only kick in after months of them getting by on a tin of beans a day. Don’t know what else to tell you. I hear all sorts of stories of people cheating the system, but it wasn’t my experience of it at all.
Instead, you live in a weird place between worlds. You’re afraid that one wrong move will wipe out your budget for the next month, while also in disparity at your situation trying to party hard on cheap alcohol to forget about your problems for the night.
It sucked balls.
But things do change
Little by little, I started getting my act together.
Saving for my wedding changed my perspective
I’ve always been a planner, so looking back it amazes me that I didn’t plan my financial future until my mid-20s. I guess hindsight really does come in HD.
After proposing to Lady SierraWhiskyMike, we realised that we needed to take a deliberate approach to saving for our wedding. This needed commitment.
I think we started by saving £500 a month between us as the target. Within six months, that had increased to something like £700 a month as we realised that “wedding” stuff is the same as “event” stuff but with a zero added to the end. It’s pricey.
Anyway, having something so clearly defined and working out what was important for our budget and where we would happily cut corners paid off. We had a great day, loads of family and friends in attendance, and an awesome party at the end. It wasn’t cheap, but we’d made it happen.
The penny dropped
Once we’d achieved that, we decided to keep up the saving habit. After all, maybe we could buy a house of something at this rate?
Which, ultimately, we did – but that’s another story for another time.
If I could put a pin in the defining moment that turned me into a saver, it would have to be the wedding.
It was a huge commitment, a massive project, and we didn’t accept any financial help for it – well, very little.
Having nice things is great and all, but being able to pick up most of the bar tab for your nearest and dearest and run a party for them your way was an amazing feeling. We had a great time, there were loads of eccentric touches (because when you’re paying for it, it’s your vision – no-one else gets a vote!), we even befriended the wedding planner after we gave him a timing sheet and sensible plan that was easy for the staff.
So what we learned here was: save for what you want, spend it on things deliberately instead of recklessly, make big things happen.
Where is all your money going?!
A buddy of mine visited our married quarters. He was serving too, and we’d trained together and been promoted roughly at the same time.
Military people are generally honest and direct with their friends. Anyway, after a few beers and pizza, he just asked:
“…I can’t work it out. You’re a tight bastard, you’re getting paid well but you’re both driving that one tired Ford Fiesta. Where is all your money going?”
Oh, Dan. You had no idea.
It took a year to save for a house deposit
We squirrelled away cash and optimised everything after the wedding.
The plan was actually to buy a buy-to-let, because we were in military accommodation for now but when I eventually left or got kicked out we’d need somewhere to go.
Things changed.
An opportunity to do a Ph.D came up for Lady SierraWhiskyMike, sponsored and paid (albeit poorly). If we were willing to take the risk and relocate, I was able to live on base during the week and commute on the weekends.
Thing is, we had a dog. Not easy to get a rental.
In the end, we bought a complete doer-upper house in what was at the time an “up and coming” area of Southampton. It’s actually now a desirable location and we managed to renovate the house, but the first year we were broke.
You ever showered under a hose outside in winter?
We have.
I’m not kidding: we had to pretty much do everything in that house. New bathroom, kitchen, rip out old floor screed downstairs, boiler… everything.
If you save aggressively for a year, you can put 10% down on a renovation project. That’s it.
Christmas Day that first year involved me changing out the kitchen ring mains.
Don’t worry, I got a real electrician to inspect and certify my work, but doing things like that saved us a ton of labour charges. The local tradesmen were often happy to come along for an easy job of inspecting our work, pointing out bits we should redo and having a free cup of tea. £200 of work often turned into £30 of inspecting and testing.
Basically, we didn’t have capital, so we put in sweat equity. It was a hard time, living long term in a few rooms of the house with bare brickwork while also studying, career changing, paying off a mortgage and building an emergency fund, but we did it.
But we still saved – and invested!
About two years into the project I left the military, started my legal career – and started the Financial Independence Campaign blog!
We’d learned from the wedding and the house that:
- If you have capital, you have choices and control – so save some and magically you’ll have more control over your life
- Doing hard things tends to pay off…
- … and don’t worry: hard things are generally not as hard as they seem
- Nothing comes for free – but if you don’t have capital, you can use sweat equity to build it
- No-one will ever understand your financial plans until you show them the results.
This didn’t just benefit me
As I became a better saver, learned to invest and got more proficient, I became able to pass that knowledge back to my family.
My mum used it and got a SIPP started.
One of my brothers talks about investing. The other is talking about getting himself a deposit for a flat, and working out how he can do that while budgeting for travel and emergencies.
My sister already has this nailed, for different reasons. I’m not responsible there.
We became more comfortable talking about money once we’d gotten our act together. I’ve now had friends ask me about how I set my affairs up, what I do and what ideas they could pinch and look into for themselves.
Which brings me back to my conclusion,
Sorry Morgan, I disagree!
I’ve run the full circle from not thinking I need to save, to not saving, and now I’m a habitual saver.
In fact, I’m an automatic and largely obsessive saver. I’d like to think I have a healthy level of obsession, but scholars disagree.
As soon as I started sharing my experiences with my nearest and dearest, their attitudes seemed to change, too.
Which is actually what led me to writing this blog. My growth and learning about investing started with things like Rich Dad Poor Dad and The Humble Penny YouTube channel.
Having learned to become a saver through my experiences, discovering the world of finance through books, blogs and YouTube changed my whole trajectory and set me up on the financial independence campaign.
My biggest hope is that one day someone writes to me: “your blog inspired me to change my attitude to money, too.”
In the meantime, I’ll keep writing for fun.
