I’m often asked to recommend a book about personal finance, and one that I’m pointing people towards just now is a new book by Jason Butler called Money Moments: Simple Steps to Financial Wellbeing. Jason was one of the founders of the London-based financial planning firm Bloomsbury Wealth. He now divides his times between writing, public speaking and advising disruptive start-ups in the financial sector.
Although the book is aimed mainly at young adults, there’s plenty in it for people of all ages. In this interview, Jason discusses his aims in writing the book, and explains, among other things, his dislike of credit cards, the importance of living with your means, the benefits of low-cost indexing and why everyone should have a financial plan.
RP: Jason, there are so many books out there on personal finance. Why did you decide to write this one?
JB: I wanted to create a book that was engaging and accessible by people who might not be avid readers, and which focused on the belief, habits and behaviours that affect how we manage our finances.
RP: The book is particularly relevant to people in early adulthood. It can be tough for those in their 20s and early 30s, given the burden of student debt and the cost of housing. Do you sympathise?
JB: Yes, I have a lot of sympathy for the financial challenges that young people face today, but I balance this with optimism for the opportunities they have available to them — longer life, better health, exciting new business models and the flexibility afforded by new technology.
RP: More and more young people are choosing to avoid the cost of university and go straight into the world of work. We’re all different, and for many that’s an excellent idea, but does this trend concern you?
JB: I’m more concerned that young people see vocation training as a viable alternative and that they have access to high quality training provision. I would also like to see young people being much more discerning about whether to do a degree and the quality of the university they study at. I also disagree that student financing is a bad way of funding higher education. Those who earn more from a good degree should pay more in the form of a graduate tax, towards the cost.
RP: Getting a foot on the housing ladder is extremely difficult. If you were in your 20s now, would you be looking to buy or to rent?
JB: It would depend on a number of personal factors. Over the long term it makes financial sense to buy rather than rent. This is because you need somewhere to live and rent is dead money and you’ll have to pay it throughout life if you don’t buy. Buying a house funded with a mortgage will mean you eventually own the home and over time should end up costing you less than renting. It might make sense to rent when young to give you flexibility to move around with employment and invest in yourself to improve your earnings.It might make sense to buy if you are settled in an area and could obtain some financial help from family.
RP: Much has been said about young people living beyond their means, and spending too much money on fripperies like lattes and avocado toast. Do you agree that it’s a problem?
JB: I think it’s very dangerous to make sweeping generalisations about an entire generation. It is certainly true that many young people do fritter away their money on day to day things that they don’t really need, but which have become part of their habits and routine. The important thing for young people (or anyone for that matter) is to have a clear idea of what they are spending their money on, draw up a realistic budget and monitor their spending against that budget. It takes some effort and discipline but the reward is you’ll feel more in control.
RP: Most of us go through phases when we’re not very good at controlling our spending. What advice would you give to those who are struggling to to live within their means?
JB: Don’t be hard on yourself by reinforcing negative self beliefs like “I’m useless with money”, or “I never seem to be able to get ahead”. The key is to realise that we all deviate from the right path now and then. The key is to get back on the path and good habits and behaviours. I talk about the power of positive belief in the book that you can, will and are able to be good with money. That would be a good thing to start with every day.
RP: You’re not a fan of credit cards. Why do you feel so strongly about them and, if we’re serious about financial wellbeing, is there a case for avoiding them altogether?
JB: When I was a young adult and stretched on my home purchase I ran up a credit card balance that stuck with me for a few years. In today’s terms it wasn’t a large amount of money but it made me feel terrible because I was chucking money down the drain serving the interest. Over the years I’ve counselled a number of vulnerable people who got themselves in terrible problems using cards to plug gaps in their income or savings. Bad debt, as I call it, is like a dead weight on your back. Like the best way to give up smoking is never to start, the best way to deal with bad debt is never to accrue it in the first place.
RP: In the book you talk about the importance of being able to absorb a financial shock. As a minimum, what should people do to protect themselves?
JB: Well, assuming you’ve stopped accruing bad debt and have repaid that, you need to build a cash reserves for emergencies, ensure your income would continue if you got ill, and your investment strategy matches your risk profile.
RP: You’ve been a staunch advocate of low-cost, passively managed funds for many years. In a nutshell, what are the main reasons for indexing?
JB: There are four main reasons. 1) Low costs (costs are certain but returns are not) so you keep more of the returns that come along; 2) you get close to the “market” return and that is what you need to achieve your goals, not market outperformance; 3) simplicity; and 4) diversification (not having all your eggs in one basket).
RP: Finally, you’re also a big believer in the value of proper financial planning. Indeed you use financial planner for yourself. Explain why that is.
JB: Planning is about working out what you want out of life and the rôle that money plays in that. Having an overall strategy in the form of a simple written lifetime plan (which can be as high level as you wish), with clear milestones and action points, helps you to make daily decisions in context. For example, if I spend more now and save less I’ll need to work X more years, or take more investment risk. It’s this constant checking in with your future self that helps you do what is in your best interests rather than your self interest. Having someone who can help work all this out, hold you to account and also make sure that all the necessary financial “stuff” gets done, is well worth paying for.
You can find out more about Jason’s book, Money Moments, and order it here.
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