The Importance of Being Economical

Do poor people or rich people think more about money? Certainly someone who is on Jobseeker’s Allowance, has debts and doesn’t know how he is going to manage through the month will have a very precise understanding of where his money goes. Likewise, someone who has multiple investments across the world and gets taxed at the top rate will also have a precise understanding of how much they have going out each month. You may think that the rich person already has so much money that they wouldn’t keep their eye on exactly how much they were spending but, from what I have seen, that is not the case. Farmers have an excellent understanding of expenses and businesses are always looking for cheaper alternatives.

The richest young man I know did months of research on Autotrader before he decided which sports car he would buy. He was absolutely certain that his money was spent well and he is now applying he same diligence in looking for a portfolio of flats in Glasgow. However, there are people who do not scrutinise their balance sheet closely enough. Some of those people are rich and some are poor. This failure to understand their own finances can lead to catastrophic results through overspending and getting into tremendous debts.

I think that my own interest in money comes from growing up with a cash-strapped, humble lifestyle. My father had a good job and my mother stayed at home to care for the children. However my parents’ decision to send their children to private schools put a strain on our family’s budget and we did count our money very carefully at times. I still remember walking with my mother to the Jobcentre on many occasions just so that my mother could apply for yet more minimum wage jobs. However, my father’s entrepreneurialism provided well for all of us. Perhaps I will explain that more in later posts.

Until recently I have not had access to much cash at all and that experience has shaped my current spending habits. This was partly due to other responsibilities that kept me out of the part-time work market but mostly because of my own lack of ambition. I did not consider my long-term future until I was 25. At one point I showed Rory that I had a grand total of £6 in my current account! So it won’t come as a surprise to anyone that I’m used to not spending money. That means:

  • Not buying alcohol or paying to get into clubs
  • Mending clothes and avoiding buying new clothes
  • Never going on foreign holidays
  • Always walking or getting public transport
  • Following a simple diet
  • Buying relatively cheap presents as gifts
  • Living at home

These were all necessities when I had very few financial options. I still think that they were preferable to going into debt as so many of my generation have done. In particular living at home was the most effective method of saving money. In contrast, my friends were spending hundreds of pounds a month on renting somewhere that they would leave within a few years. The only arguments I heard in favour of leaving home were all to do with ‘being a man’ and becoming independent; however no one would say that my development has been stunted by staying at home, and my finances are much better now than they would have been otherwise.

Now, what will I do in the future to improve my financial situation? Well, I have moved to a relatively cheap area and I can afford all of my living expenses from my salary. In case you are wondering, teachers do not earn megabucks.

 

Point (years worked) Current Salary (£)
1 26895
2 28491
3 30111
4 31860
5 33876
6 35763

 

I am currently on Point 1 and it will take five years before I get to earn the top (unpromoted) salary. After that I could get promoted but I assume that I will not get there before I turn 33.

However, I could always increase my income in other ways. For instance I could follow Rory’s advice and gain a passive income through investing in ISAs and other things. I could take lodgers into my current house or rent it out for holiday makers (a similar house to mine charges about £350 for seven nights). I could also do more work by becoming a private tutor in my specialist subject (£25 per hour) by advertising my services on gumtree or elsewhere. I could even take up a new job altogether such as becoming a taxi driver, barman or a security/doorman so that I could work at night and at weekends.

Additionally, I probably could move house and save money overall by reducing my transport costs. At the moment I have a long driving commute of 55 minutes each way. My car is very fuel-efficient but, nonetheless, I am spending around £260 a month on petrol and the expenses of running a large house are considerable (although I could always turn off the heating and electricity). Yet I could rent a 1-bedroom flat in the town where I work for £350 a month and get rid of the car.

But I plan to stay in the big house and save money by growing my own food. Currently I have about 4 acres of fertile land that I could use for agriculture. It’s too early to say how much money I would save by growing my own potatoes and carrots but it is potentially a lot.

I will keep you informed about my progress!

Will

Hello. I am a teacher living in Scotland with interests in self-improvement and financial planning. My knowledge of doctors and their lives comes from conversations with friends, who are medics of various stripes, and acquaintances who work in the profession. I have found it surprising that doctors branch off into their own specialties and rarely talk about life to their colleagues from different specialties. This is a shame and something that I think could be changed. I’d like to view myself as a messenger between medics who can add in helpful information from the outside world.

I was brought onto the ‘ukdoctoronfire’ team by Rory, one of those medical friends, to give a generalist’s perspective on the life issues affecting doctors in the UK. These issues fall nicely into the motivation and finance categories. In my own life I’ve put a lot of effort into self-improvement and developing my financial situation with a view to retiring early. It is my pleasure to spread the word to others.