How to Stop Your Finances Controlling Your Career

Tommy Perkins: The expectations that people have, obviously affects their financial decisions. And I think that’s where I feel incredibly lucky, because the person who puts the most expectations on me is myself. And I’ve got those expectations under control and I’m really happy. And yeah, I do drive a 17-year old van. I’m happy with that choice.

I get to pick my kids up from school, and drop them off two days a week. And that’s a choice that I’ve made. And I’m not saying it’s the right choice. It’s just a choice. And that’s a great thing. If you’re making informed choices. I think that’s the key to feeling happier. But if you are trapped in that kind of position, you got to do something about it.

Rachel Morris: Would you love to make some changes in your life, like cutting down on work to get more free time, or changes in your career, like taking some time off to do more study or develop these skills, but feel you can’t because your finances constrain you? Or perhaps you feel trapped in a job you hate. And the main thing stopping you exploring alternatives is that it pays really, really well?

Most of us have experienced at least one of these dilemmas, if not all three. So I invited Medics Money’s Tommy Perkins back onto the podcast to talk about this.

Tommy is a GP and talks about how his own journey of getting out of a huge amount of debt after university has shaped his thinking around money. And he shares some really practical advice about how we can take control of our finances, and use them to give us options, instead of limiting them. Anything we can do to give ourselves more control over our lives and careers, is one step towards feeling calmer, and finding happiness at work.

So listen to this episode to find out why it might be more financially viable to wash your own car than to do some overtime. Why being better off financially is rarely about doing more work and quite often about doing less. And some simple strategies to take control of your finances and create a buffer, which will make you feel less stressed and less anxious.

Welcome to you are not a frog, the podcast for doctors and other busy professionals in high stress, high stakes jobs. I’m Dr. Rachel Norris, a former GP now working as a coach, trainer and speaker like frogs in a pan of slowly boiling water.

Many of us don’t notice how bad the stress and exhaustion have become until it’s too late. But you are not a frog burning out or getting out and not to your only options. In this podcast, I’ll be talking to friends, colleagues and experts and inviting you to make a deliberate choice about how you live and work so that you can beat stress and work happier. Do you worry about money? Are you paying too much tax? And do you understand your NHS pension?

I’ve worried about all of this until I discovered the Medics Money podcast hosted by today’s guest, Dr. Tommy Perkins, a GP partner and Dr. Ed cancelo. A GP but also a chartered accountant. The Medics Money podcast gives doctors, dentists and other professionals the financial education they need to make better financial decisions.

My favorite episodes are Episode 96: The Big 4.0 Financial Things to do Before you Turn 40 and Episode 112: Don’t Get Stung by the Marginal Rate Tax Trap. What I learned how to value my time and work out how much I get paid for any extra work. You can find the Medics Money podcast on Apple Spotify, or wherever you get your podcasts.

Rachel: It’s wonderful to have with me back on the podcast, Dr Tommy Perkins. Hi, Tommy.

Tommy: Hi, Rachel. How you doing?

Rachel: I’m very well. Thank you. Now, Tommy is a GP partner. He’s the co-founder of Medics Money, and the host of the Medics Money podcast. So an old hand at podcasting, right?

Tommy: I hope so. But I do feel a bit of pressure today, because you’ve been on our podcast a few times, and you always deliver such wonderful insights to our audience. So I do feel a bit of pressure today. And I’ve also got the builders in the background, but hopefully, they’re gonna be nice for the duration of this.

Rachel: So we might hear a little bit of banging, but hopefully not too much. And yes, they told me, I will be keeping a tally of insights per minute. All right, so I want to hit at least three.

Tommy: I do feel the pressure.

Rachel: Well, listen. It’s really good to have you on because we are going to talk about a bit about the psychology of money. And I think this is a really, really important topic for our listeners, because the work that I do is all around, inviting people to make a deliberate choice about how they’ll work, how they’ll live, so that they can be happy in life and work. And a lot of people feel really quite trapped at the moment.

And so we get a lot of questioning back saying, “Yeah, but I can’t just do that. I can’t just do that because I have to have this sort of job. I have to achieve this particular income,” because of the commitments they have, the financial commitments they have. And so often, finances are one of the huge blockers in people being able to make some of the changes that they feel that they need to make in order to thrive in work in life.

And is that something that you’ve encountered with the people that you talked to as well?

Tommy: Yeah, absolutely. And it’s something that I’ve encountered myself. I suppose people don’t come to you and say, “Rachel, I’m on the edge of burnout. I just need to do a bit more work.” Yeah. Most doctors and professionals that I come across are working insanely long hours. And as you say, they want to cut back down, but they don’t know how, and that is the economic reality of life. If you’re going to cut down work, you are going to possibly earn less money, but we’ll talk about that.

But, I think, on our podcast, we talk about more technical aspects of actually how to do things, but we rarely talk about the psychology of those decisions and how our own experiences shaped the decisions that we make in life and in finances. It is something that, I think, is really underrated and under reported.

And I’ve been looking– I’ve observed this many, many times in myself, and also other people, that sometimes they make very unusual decisions with their finances and you’re trying to understand why. And back in 2006, a couple of American economists looked at something called the 50-years survey of consumer finances, which is basically a look of what Americans do with their money.

In theory, money should be– most money decisions should be about the numbers. Does it make financial sense? But that is not what they found. Because they found that what people do with their money is actually heavily anchored to experiences that they’ve had, and, especially, experiences early in their adult life.

For example, if you grew up when the stock market was booming, then you invested more of your money in the stock market in later life. And conversely, if you lived through the Great Depression in America in the late 20s; a terrible, terrible time, an actual depression or recession.

It didn’t really matter to you that by the 1970s, the stock market was absolutely booming. Those early experiences when you were in your early 20s made you forever sceptical of the stock market. And even though you’ve looked at the numbers and saw that it was booming, you wouldn’t invest because of those early experiences.

Then conversely, if you were in your 20s, during the 1980s and 1990s, when the American stock market was incredibly strong, you are more likely to invest in stocks even though during 2000 to 2013, the American stock market was essentially– didn’t do anything. It’s called the Lost Decade. But those early life experiences shaped your decisions.

Essentially, the conclusion was that the most important factor that determines what a person does with their money is the set of experiences that they’ve lived through, especially in their early formative years. And then that got me kind of thinking about things that I had done, or continue to do, based on experiences that I had when I was younger.

Rachel: I’m quite surprised, actually, Tommy. I would have thought that the decisions you made about your finances are based on when you were a child and when you’re growing up because whenever I listen to podcasts, with entrepreneurs about, “how I built this company, how I did that company.”

They all say, “Oh, I had absolutely no money when I was a kid. We literally were starving, hungry. We didn’t know where our clothes were coming from. Therefore, I knew I had to build this business to make all this money.” And it seems like that the really young experiences really, really shaped people. But you’re saying, actually, it’s the young adult ones as well, right?

Tommy: Yeah. Maybe this is what I thought about it, is when maybe when you’re a kid, like 10 years old or something, you’re not aware of your struggles, shall we say. And it’s only when you’re sort of 15, 20 that you sort of suddenly start to realise, and you’re exposed to a different point of view, that you’re aware of that.

This is something that definitely happened to me because I just grew up in, what I would say, a normal working class family, which is in medicine. That makes you a bit of an outlier, but just a normal family. We weren’t like hard up or anything, but to give you an example, if I came home from school, and which was just a normal, fairly rough state school, and said, “We’ve got a school trip next week. I need £7.” My brother came home and he ripped a knee out of his trousers.

My other brother came over, “So I got hole in my shoe.” My mom would be like,”Right. I’m gonna go do some extra work this weekend to pay for the school trip. We’re going to iron on one of those cool–” I don’t think I still have them. They’re quite cool little patches that you iron on and it kind of like seals over the hole in the trousers. And then fix the shoes. And we weren’t struggling.

But then when I got to university, I kind of sort of found a whole new world of– and then you kind of look back and think, “Oh, yeah. It was quite actually quite tough if you think about it.” And this actually kind of impacted like one of my major money traumas, shall we say, and that is– I know that I have a weakness in this area, and I know that I constantly make irrational decisions around debt. But that is because of my own experiences of debt.

Because as I said, I grew up working class, went to med school, which was hideously expensive. And I graduated with £85,000 worth of debt. And these days, unfortunately, that’s not an outlier. But back then, nobody had that amount of debt. And unfortunately, although some of my debt was on student loan, some was on a bank loan. And even worse, some was on a credit card.

Probably the worst debt of all was to my mom, because I’d have five grand, and five grand was a tremendous amount of money to her. So when I graduated, this kind of sound wonderfully naive, but I didn’t really know what the starting salary was for a doctor. But all I did know is that– I’d say I went to a normal state school, which was pretty rough. And when we moved to secondary school, one of my friends was her doctor; her dad was a doctor. And the school was super rough.

She got parachuted out to private school and never saw her again. And I thought, “Wow. Doctors must be really rich.” I didn’t know anyone who went to private school, and we didn’t know any doctors. So when I got my first, sort of, idea of what the salary was, then I looked at my debt, and worked out what I needed to repay per month, I was just in a blind panic, because I was just looking at this 85 grand and I was in total panic.

Basically, right there is where Medics Money started, because I had no financial education throughout med school, didn’t get anything from my family in terms of education. And so I just sort of educated myself about finances, and eventually, I kind of worked out that there’s good debt, and there’s bad debt. And so broadly, I would define good debt as low interest rate debt that is used to buy an asset that appreciates and so your mortgage would be an example of this.

In general, good debt– you can repay slowly in general, and none of this is of course, financial advice. We have to say that, and then there’s bad debt. And bad debt is high interest rate debt that is historically used to purchase an asset that depreciates. So a store card which you use to buy clothes, which are going to just depreciate, get less worth over time. Most forms of car finance, I would classify as bad debt. And bad debt needs to be repaid as an absolute urgent priority.

Going back to my own scenario, I looked at my debts. I worked out that my credit card debt was bad debt. So I paid that off first, then this is where the psychology comes in, because the next logical thing would have been to pay down the bank loan, which it wasn’t terrible debt actually. But it wasn’t great. But like I said, I owe my mum five grand and that the interest rate on that debt was 0%. But I know that it was a lot of money to her. So I pay down that debt.

Then eventually, after about 10 years, I’d paid down the whole lot. And I just remember that first day when I was like debt-free and I wasn’t looking at the deductions coming out of my account, and I felt amazing. And then for about 18 months, I was completely debt-free, and it just felt amazing. And then somebody– I’m a GP partner, so somebody offered me a GP partnership, which is something that I was definitely interested in, but I had to buy into the practice and partners will know about this.

But for those that don’t, generally, you have to buy into the business. So that could be a six figure amount to buy into the building and the current account. And I was just really scared, even though I really want to be a partner, and it was a great practice. I just didn’t want to do it.

I looked at the numbers and the numbers look great. It was a great investment by numbers. But those early experiences and that panic that I felt when I first graduated as a doctor, I just didn’t want to do it. I was so close to turning that opportunity down. And thankfully, a combination of looking at the numbers and just thinking about it more deeply. And I did decide to take the partnership, and that was five years ago, and I’ve never ever regretted it.

But that was just an example where I nearly made a very, very silly decision based on my early experiences with debt. And I think lots of your listeners might be able to relate to that. I don’t know, what do you think?

Rachel: Oh, definitely. I think the listeners, I’m sure have an absolute range of financial stuff going on from debt from university, from debt from personal stuff, that from, I guess, relationship breakdown. But also, I think a lot of the listeners are sort of in the middle of their careers. And it is this feeling of financial commitment that they have.

They might have children in private school, which is a freaking, huge, huge bill, when you actually add what you’ve actually got before taxes to pay the private school bill. And when it comes to your family, you don’t mind going– I don’t mind not having that lovely pair of shoes, or that new jacket, or that amazing car. But when it comes to sort of what feels like letting your family down. And that’s another thing.

People feel trapped in their jobs that they maybe don’t want, or they maybe want to drop a session or two or not do quite as much out of hours. But they feel that they’re not able to do that. But I do think there’s also another side of things that we do get ourselves into financial debt through just maybe some emotional decisions around money, like, “I really deserve that amazingly wonderful car, because I’ve worked so hard.”

And I know that money isn’t just a transaction of time, which essentially, that’s all money is, isn’t it? It’s a payment for the time. It’s something you’ve exchanged for time. But there’s a lot of emotions attached to it as well, particularly, when we’re talking about possessions or houses or where you live or where you’ll send your children to school or when you go on holiday. I mean, do you find that that is a huge factor in people’s choices as well?

Tommy: Yeah, definitely. And I think everybody has their own wants, desires, and expectations. And that kind of leads me neatly onto the next thing I was going to talk about, which is: spend less or earn more, or how to avoid lifestyle creep. And so, lifestyle creep is basically you’re earning a decent wage, maybe you’ve reaching the sort of top of your career pay scale, and you’ve had quite a few pay rises since in the last 10 years.

Yet, you don’t feel any wealthier. And at the end of the month, your bank account is still empty, and you still have little in the way of savings and investments. And you don’t have what’s called an emergency fund, which is a sort of pot of money, broadly, three to six months of your outgoings saved up in case of emergencies. And you might start to feel really guilty or annoyed because you’re like, where is that money going?

Let’s think about it in those terms. If that is you, should you spend less or earn more? So I said I wasn’t going to talk too much about numbers today, but I am going to throw some numbers in here because I think it’s relevant and it might help some of your listeners to understand, what if they are in that position, what they can do about it. So let’s say you are a consultant, and you are earning £100,000. That is a good amount of salary.

Nobody’s saying it’s not. And you want somebody to wash your car. Okay? So, should you do a waiting list initiative for £100 an hour? Or should you wash your own car? Which would make more financial sense? So if we look at the numbers, let’s say the carwash costs £20 for 20 minutes, okay? So the carwash will cost you one pound per minute to pay somebody to wash your car, not a lot of money.

You’re the consultant and you go to do a waiting list initiative and you get £100 an hour. The problem you’ve got is that that gap between 100 and 125,000 of income is subject to what’s called a marginal rate. And we have a whole podcast on marginal rates. So I don’t want to go into the details.

But essentially, you get your £100, you take off £40 for income tax, because it’s the marginal rate. You take off another £20 for your income tax, the loss of your personal allowance. You take off national insurance at £2. And who knows what that’s going to change to at the moment with all the turmoil and new turns that are going on.

But at the moment, at the time of recording, national insurance, £2. So that gives you a take home pay from that £100, I’ve actually £38 an hour. So that’s still a good amount. But remember, the carwash cost £1 a minute, and your take home pay £38 per hour is only 63 p per minute. So it makes more financial sense for you to stay at home and wash your car than it does to go and do a waiting list initiative.

Actually, the £38 out of 100 that you get is actually possibly a best case scenario. Because if you have a plan to student loan, which lots and lots and lots of consultants do now and, thankfully, I did had a plan one student loan, you probably still going to lose another 9% of that as well. And if that work is pensionable, you lose another 12 and a half percent, so that, actually, that £100 an hour could actually go down to less than £17 per hour in your pocket.

At that point, you’ve got a choice. If you hate washing your car, and you love going to work, then fine. Go to work and just accept that it doesn’t make financial sense. But if you’re feeling hard, working harder and harder, and you’re not feeling any richer, and you don’t want to do any more work, unfortunately, it’s time to look at your spending. And budget is probably the most boring word in personal finance, but you do need a budget.

It’s really, really simple, really, because if you save £100, so you trim £100 off of your expenses, that will be £100 in your pocket, you will feel £100 richer. But I’ve just demonstrated to you that if you earn £100, you might get £38 or less. So save £100, it is £100 in your pocket. Go to work for £100, it’s 38 or less in your pocket.

I don’t know what you think about that, Rachel, because there’s definitely a balance here between like, doing everything, but then also working less. What do you think?

Rachel: I think it’s a really difficult balance. But I mean, to me, when you put it like that, it’s pretty, it’s pretty obvious that you can stay home, because what you’re not featuring in is how much it costs you to drive to work, to park to do that thing. You’re factoring time away from your family, as well. Whereas actually, you could wash your car with your kids or, more to the point, give one of them a fiver to wash the car. They think they’re getting pocket money. They love you for it.

Your car might not be that clean. But, it’s really interesting. And I know we’ve talked about this before, and it has really made me think that actually saving money is better than earning more. It’s funny in my son the other day, it’s always like, “Can we get a takeaway mum?” And I thought, “Well, for the three of you,” for takeaway, they always like to get these posh burgers that’s like 45 quid, just for an evening. That actually represents earning of what can’t seem about 60 or 70 quid, right?

So an hour’s worth of work just for a takeaway, we had some burgers in the freezer. So you can actually, you know, you make your own burgers. But I think we don’t like feeling that we are being restricted in our spending, particularly, when we feel we are working so so hard. You think, “Well, then why shouldn’t I have nice things? Why shouldn’t I be able to spend my money? Surely, one of the perks of working this hard is to feel like I can have a few luxuries.”

But actually, what you’re saying is, you’re gonna feel a lot freer in terms of not feeling trapped into the work, if you can, maybe ditch some of that spend and save it, and then the time that you get back will probably be worth more to you than having that nice pair of shoes.

Tommy: Well, this is again, something that digging myself out of that 85 grand debt hole. Basically, I just did it by being smart, about getting educated with finances, making the right decisions, but also being ridiculously frugal. And I used to frame things. If I wanted to buy something, I would frame it in terms of how many hours doing something that I hated. So I don’t know about you, but after the night shift when you do the post-state ward round, and you just want to go to bed, you’re basically asleep.

You’ve been up all night, and they’re going on and on and on about the patients and it’s clocking around towards 10 am and you just want to go to bed. Capture that feeling and then work out how many hours of that that you’d have to do to buy the thing that you want to buy. And when you frame it like that, trust me, it’s an amazing way to save a ton of money. And if you’re struggling to save money, just think about it in those terms, think about something that you hate doing.

Like a post state ward round after night. Work out how much you actually get, not what the headline rate; if it’s £20 an hour, run it backwards. Run the numbers backwards. It’s not difficult to do. And then think about it in those terms. And don’t overdo it, because I’ve definitely ever done it. And just being honest, my financial situation has changed dramatically since I left med school because I’ve worked incredibly hard and made the right financial decisions.

Probably, I haven’t quite adapted to that yet. And my frugalness is still there in the background. And if you are struggling to save, there’s a really nice little, again, this is a psychological trick that can help you to save money. And that’s something called Pay Yourself First. I don’t know if you’ve heard about that, Rachel.

Rachel: I have. I’ve heard about it. People in the group I was in were absolutely raving about it. I never quite understood what it was, though.

Tommy: Yeah. Hopefully I can explain it because it is reasonably straightforward. So let’s say, you have a debt, and you need to pay £200 per month off of that debt. So what you would do is your salary would come into your separate bank account. One that you don’t often touch. And from that bank account, automatically, the £200 would be paid out to cover the debt, okay.

Then after that, the rest of the money would go into your spending account, your current account, and that would be your money for the month. And the reason that I like that is two-fold, really. One, once you get into that habit, you just don’t even notice the loss of that £200, because you learn to live with less you look at your bank account. You go, “Oh, this is what I’ve got in my bank account for the month. Thanks very much.”

You don’t even see that £200 being filtered off because you’ve paid yourself first. And so that basically is how I pay down my debts. But the great thing about Pay Yourself First is it carries on working, going forward. Because once you’ve paid down all your debts, you might consider investing. So I invest an amount every month automatically, and it comes off my wages automatically, I never see it.

I just get used to living on less, and then I’m automatically investing every month. And lots of personal finance is just about repeating good habits for 20 or 30 years because, essentially, something called compound interest, which we met we might talk about in a bit. But yeah, Pay Yourself First, I just love it. It just works. It just works so well, because you never really notice that the money’s not there. And the other way that some people do is to set a budget.

But I don’t do well with budgets. I don’t do well with dieting, because I just get miserable that I can’t eat what I want. And I don’t do well with budgeting because I feel like I’m consciously having to watch everything. But if I’ve got that amount in my account, and I know it’s got to last me a month and all my other debts or investments are taken care of, it just works quite well for me. So it’s quite a neat little psychological trick to just save up a ton of money, basically. Pay yourself first.

Rachel: I really like that. And you’ve mentioned also the emergency stash as well. So that I know a lot of people are so worried about, “Well, what if I do have to go off sick with stress?” Or do you reduce? But if you’ve thought about it before and built up that buffer, I really like the idea of buffers. I talked about buffers before, I think, not just not just financial buffers, but time buffers. Why do I always leave to that appointment ten minutes away, with nine minutes to spare.

Why wouldn’t I leave with fifteen minutes to spare? So I’m not stressed, et cetera. Same with money, right? What do you recommend having as that emergency buffer?

Tommy: I think it’s a really good point. So that this will come under the sort of umbrella of protection really, or protecting yourself from disaster because you’ve probably worked incredibly hard to get where you are in your chosen profession, wherever that’d be a doctor or a manager or professional or all the other types of people that listen to you amazing podcast. And you need to protect that position.

A lot of personal finance is about minimising, what I would call, the downside risk. If the worst happened, are you protected? So step number one there is as you said, an emergency fund. An emergency fund is really simple.

It’s just a pot of money, which you keep aside. Generally, people sort of say three to six months. So when I was a locum GP, my work pattern was erratic. I had a young family. So I had six months saved up. Now that I’m a partner, work part is still erratic but income, more stable, and hopefully not gonna get fired or might lose my contracts tomorrow like you could as a locum.

Just have three months of emergency funds saved up and it’s just a fund that you have exactly the scenario that you just mentioned. A lot of doctors say to me, “Well, I could get a high interest, or I could get a low cost credit card, if I needed it.” And that is actually a real red flag for me because taking on bad debt, like a credit card, at the very moment that your earnings stop, because you’re off work sick, is just an absolute recipe for disaster. ‘Cause that’s like the basics.

Then at a slightly more advanced level, you got to think about, “If I get ill, how will I pay my bills?” And there’s ways you can do that with something called income protection insurance, which essentially pays you an income if you were to get sick and not be able to work and especially important for self employed GPs and GP partners, because often, we don’t get any sick pay at all, like check your contract.

But in general, you have a critical illness, which pays out a sum, if you get one of the list of predefined critical illnesses. And of course, if you die, there’s something called life insurance, which would pay out then. So that’s a core of, well, in summary, of how to protect yourself against disaster, but I think it’s a really good point. And the emergency fund is the basics of that.

If you don’t have an emergency fund, right now, just work out what you need; three months of your outgoings. Set up a direct debit into a separate account using Pay Yourself First, and I guarantee, you will just learn to live on that money. And then once you’ve saved up the emergency fund, divert that extra money that you no longer need to paying down bad debt, like credit cards and store cards. If you don’t have any of those. Think about investing.

Rachel: That’s such good advice. Because I think sometimes the stress that people feel is because “What if? What if? What if?” And so they delay, particularly, if they’re really, really stressed, and they know they need some time off work. They just delay it because they think “Oh, I can’t possibly afford this.” If they’ve got that emergency fund, might encourage them to take the time off that they need earlier, or maybe drop a session or two.

They could do that maybe for six months and go to their employers or their partnership and go, “You know what? Literally, unless I have this extra day for six months, I’m gonna burn out.” That will probably prevent a whole heap of pain. And then you get to assess it.Then you’ve got that buffer. So I think that’s absolutely brilliant advice. And I think people that think, “Well, I’m not going to burn out, that’s fine.”

Well, fine, okay. You might not think you’re gonna burn out, that’s great. But what if you– in a car accident, you break your leg or something like that. These dreadful things do just happen to us out of the blue, and you can’t predict it. So really important. That’s really helpful. And to me, I’m just coming to this realisation that I always say to people, pay for ways to get back your time. So for me having a cleaner is just a no brainer, because my time-off is so precious.

Also, I love the fact that I can support my cleaner as well and her family, and she’s wonderful. But I always thought, “Okay, so you work so that you can then pay to have experiences. Get some of your time back because we are time-poor, cash-rich.” But actually, you give me a completely different mindset that if you’re time-poor, then rather than working extra, which actually makes no sense, does it? Extra to get the money to get people to do the stuff you don’t want to do. Actually spend less to get the money.

The way you spend less is not by scrimping on those time saving things like maybe having a cleaner and stuff, because that doesn’t add to your quality of life. But I think it’s get less stuff, right? Get less stuff. We’ve all got too much stuff, and maybe go on less expensive holidays. I think stuff and holidays. The thing’s, well, when I look at our spending, it seems to be stuff and holidays. I don’t know if that’s normal. That’s what you see with people.

Tommy: Yeah, definitely. And by the way, I think the truth lies somewhere between my point of view and your point of view, because I’ve already said, been completely honest, I’ve definitely overdone it, and I haven’t really adapted to my situation. But that is what worked for me when I was getting out of that financial hole. But I think your point is a really good one about buying back your time by getting a cleaner etc. And yeah, it might make no financial sense to get a cleaner.

But if you can afford it, and you’re aware of what the cost is, and you know what the cost is, and you’ve made that conscious decision. I guess like a lot of personal finance is a bit like when we can send our patients. We just want to make them make an informed decision. So get all the info and sometimes the personal finances. Unfortunately the information is numbers, but they’re not hard to work out. Take all that and then you know, talk about it with your family and make an informed choice.

Every one of us will make a different informed choice based on that. And in terms of breaking it down. I like to keep things really simple. So I just break it down into discretionary spending and non-discretionary. So get your non-discretionary. That’d be like your mortgage, your energy bills, your broadband bills. I hate paying too much money for those because your boiler doesn’t know wherever it’s burning the most expensive gas on the market, or the cheapest.

It all burns the same. So I always get shop around, set a reminder on your phone for when your deal expires. So you don’t roll over onto the deal where they just start punishing you for your loyalty. And if you can just chase down your non discretionary bills, that’s great. And then get into your discretionary stuff. And that’s where it becomes more of a choice, because you think, “Okay, well, that holiday is gonna cost us that. I might have to work that many hours for it.”

But what did we get out of it as a family? And what was the value of it? And so, the non discretionary stuff is pretty easy. That’s discretionary stuff. It’s harder.

Rachel: I think it is harder. But I’m just wondering if some of the discretionary stuff, we make the wrong decisions about often. Hang on, there’s no such thing as a wrong decision. But I think we make, perhaps, slightly unwise decisions, because we get stuff based on comparison with other people. Particularly I think, when it comes to things like cars. Perhaps when it comes to schools.

I mean, I think schools is quite an interesting one, because I think that is discretionary at the point where you choose where your children are going to go. And I think many people knee jerk, perhaps straight into paying for education. When you tie yourself into years and years and years and years and years of school fees, which are a huge pressure, aren’t they?

Tommy: I think you’re right, the expectations that people have, obviously affects their financial decisions. And I think that’s where I feel incredibly lucky, because there was basically zero expectations on me. And the person who puts the most expectations on me is myself. And I’ve got those expectations under control and I’m really happy. And yeah, I do drive a 17-year old van. I’m happy with that choice.

I get to pick my kids up from school, and drop them off two days a week. I took my daughter to gym yesterday at five o’clock in the evening. And that’s a choice that I’ve made. And I’m not saying it’s the right choice. It’s just a choice. And that’s a great thing. If you’re making informed choices. I think that’s the key to feeling happier. But if you are trapped in that kind of position, you got to do something about it.

Rachel: What are the warning signs for people that they are making an unwise choice about some of these things? If you’re looking at a car, and think well, “I’d really like to have that one.” How do you know whether you’re actually really making a good sound financial decision, or whether you’re just being swayed by your emotions and comparison with other people and things like that? What would be the warning signs?

Tommy: Yeah, so wrong person to ask about cars, because I’m really not into them at all.

Rachel: What would work for you? Surfboards?

Tommy: Surfboards? Yeah. Surfboards. Okay. That’s basically my weakness. I know a lot of people do, but I’ve never had a car on finance. And some people say, “Oh, I’ve got a great deal on my car on finance.” And I look at the numbers in detail. And yeah, you might have gotten an okay deal based on buying a brand new car at full retail price. But actually, if you look at– say, you’re going to spend £200 a year, a month, sorry, on a car and you’re gonna do that for 30 years.

Because most of the time, you never own these cars, you’re just leasing them. You’re renting them. So if you’d instead put that £200 a month for 30 years, you would have spent £72,000 on a car that essentially you wouldn’t own after 30 years. So that’s bad, right? In my opinion. But if you want to spend £76,000 to drive a car for 30 years, and not own it at the end, that’s fine.

If you took that £72,000 and invested it in something that returned 6%. Over those 30 years, you would turn that £72,000 into £202,000. And this is where you come into something called opportunity cost, which is basically a way of saying, “If I didn’t do that thing, buy a car, brand new car and finance, what could I do with the money instead? And how would that improve my life?” And so that is an example of opportunity cost.

Do you want to pay £202,000 over the next thirty years to drive a car that you don’t own? Or could you buy a three to five year old car, run it until it’s ten years old? Generally, very reliable. I’m not advocating a seventeen year old car but I’ve just got a bit slack on my car buying habits recently. But yeah, I think that’s the way to think about that.

Rachel: That’s interesting because even if you took maybe half of that £72,000, 35, and bought one car for £10,000 and then run that a bit and then bought another one, you can invest the rest, and you would still own that car and over 30 years of spending 30, 40 grand on the car, you probably get some pretty decent cars, right?

Tommy: I think as well, something that we haven’t talked about is having the financial safety net, and we did talk about it a bit earlier and having an emergency fund and stuff. And this is something that I know, we didn’t have as a family when I was growing up. And it’s something that I’ve been really conscious to work hard on. So I know that if I die right now, then my family will be very well protected.

I’ve got all of the insurances necessary, and they will be able to continue that lifestyle. The feeling of having a financial safety net is just invaluable to me. And especially with having a young family.

Rachel: Well, Tommy, we’ve gone through some really helpful stuff. I loved that Pay Yourself First idea, and then invest that. Then having an emergency fund, so you don’t have that acute pressure of, “I have to keep carrying on even if I’m unwell.” The looking at actually saving money rather than working more to get more money.

Then looking at the difference between your discretionary and non discretionary stuff. What would you say to someone who felt really, really trapped, and felt that they couldn’t work happier because their financial commitments? Probably family, probably home, probably all sorts of things meant that they absolutely had to maintain a certain income. What would be the very first thing that you would suggest to them?

Tommy: Yeah, so I think in all of this, I’ve kind of perhaps– I’ve assumed that your listeners are not on the poverty line, and they are earning an okay amount of money, it’s just not delivering them the lifestyle that they wanted. But I think it’s important to acknowledge with the current financial pressure is that there are going to be lots of people. They are going to be making the choice between heating and eating.

That’s terrible, but this, what I’m about to say is not really for them. It’s for people that are, as I say, earning an okay amount of money but do you feel trapped, as you described. And I think one really, really simple thing to do is, of course, firstly, acknowledge that you’ve got the problem. And then secondly, just think, “Okay, do I have capacity to do more work?” And run the numbers, like I said. And if you don’t have capacity to do more work, you are going to have to cut something out.

So I like to do this as a family, because if one person is leading a budget-slashing, cost-cutting exercise, it can become a bit resentful. So when we do this, as a family, we all sit down as a family. We go through the last three months of our bank statements, and we just look at where our money is going.

Then we think, “Okay, what do we not need off of that list? What could we cut out?” And like I said, every time you cut something out, every time you save £100 spending, is £100 in your pocket. It’s not rocket science. So yeah, just get your bank statements out for last three months with your partner or your family or wherever and say, “Look, guys I need to work less so we’re gonna have to cut some stuff out, what can we cut out?”

I think you’ll be amazed at the amount of things that are just on there, which you don’t need, you don’t want, and are not more important than your own mental health, which is essentially what you’re saying here, isn’t that?

Rachel: Oh totally. And I think I would just put a bit of a health warning around that question, do I have the capacity to do more work? So I think when people ask themselves that they often ask themselves, “Do I have the time to do more work?” And probably the answer is, well, yeah, you could always fill your entire weekend up with work and the evenings that we’ve worked with, if you do have that time, where maybe one evening you go and play squash or something like that, but that is not what capacity means.

I will say the mental capacity, the mental energy to do that. And I love that suggestion of sitting down with your kids and your family and looking at it together. Because I think one quite toxic mindset we have, particularly at the moment, is that we have to give our kids everything that they want. And certainly, though, I grew up in the 1980s, my dad was a GP. And well, we went out for dinner once a year.

I think it was once a year, we really did. And then it was to a little chef. It was diabolical. We had a black and white TV for a long time followed by one colour TV. We had very little and I know the 1980s were completely different beasts. But nowadays, my kids moan if they don’t have the latest iPhone. They moan if iPhone’s a little bit low on the battery or they seem to want absolutely everything at the drop of a hat.

New this, new that, new trainers to go on every single trip. To be able to go out in the school holidays and have lunch in town every single day. To be able to just get Ubers places. All those sorts of things that we wouldn’t even considered even when we were at university. And one of my children quite often said, “Look, why can’t I have a higher allowance? It’s not fair. You can afford it.”

Her answer to him is, “Yes. Of course, we can afford it darling. But that’s not the reason why your allowance is at a certain amounts.” And then, so the oldest one is gone and got herself job. And that’s actually been really good for her to have a bit of experience of real life, the real world. All those sorts of things.

I think this idea that we’re depriving our children if we are not meeting that every wants with the latest iPhone, or clothes, or meals out, whatever. Actually, we need to get ourselves out of that mindset. It’s actually quite good for them to have to budget, to have to save, to have to experience what lots of people– let’s face it, can’t eat out all the time. Is that making sense?

Tommy: Yeah, definitely. And it’s something that we didn’t really talk about today. But something that I’ve been working on quite hard with my kids is teaching them about money. So they’re a bit younger than yours. My oldest is eight, and then six, and two. And yeah, I think my main strategy has been to try to teach them the value of money. So they like to buy these like magazines with like, Lego or something on the front. They’re about £5.

I don’t give them an allowance. I say, “Okay, you want to buy the magazine, go wash my car, which definitely isn’t- I’m not paying someone to wash. And as you say, they do a terrible job on it. But the point is, they’re learning the value of money. So that’s one thing that I try to instil upon them that, “Okay, you want to buy that thing? Well, here’s how much work you’ve got to go to do it.”

Rachel: Then of course, there’s the whole thing around around giving your money and being generous to others, and charitable giving. I think we should pack something for another episode. We know that giving us one of the ways to well-being. And I think that’s a really important part of people’s financial management, as well, is that every month, they were regular, giving to charity.

I know there’s lots of organisations that are talking about 10% of your income, et cetera. And I think in today’s world, we really need to be giving. We are high earners. We need to be giving our money away, and modelling that to the kids and showing how you do that. So anyway, that’s my bit of a soapbox about that. But Tommy, we’ve talked a long time. Any final thoughts about any of this?

Tommy: I think if you are struggling, and you are earning an okay amount, attack the problem as a family. And then if everybody understands the problem, and understands why cutbacks need to be made, then everyone’s going to be on board with it. And at the end of the day, personal finance is incredibly simple.

You simply spend less than you earn, invest the difference to grow your wealth over time, and protect your most valuable asset — which is you — using those insurances we talked about. So spend less than you earn, that’s the difference, protect yourself. Job done.

Rachel: Brilliant. Brilliant. And if people are wondering how they do that, getting into the technicalities of investment and stuff like that, you guys have got a wealth of information, haven’t you on your Medics Money site?

Tommy: Yeah, we do. So we have, obviously, our podcast, which is pretty popular. So you can find that just by searching Medics Money podcast. We’ve got over 100 episodes now. So we made an ebook, which just guides you through the basics. So that is at medicsmoney.co.uk/ebook. Completely free to download and it can signpost you to the most valuable episodes and you don’t have to listen to all 100.

Rachel: Brilliant. Well, thank you so much. So we’re gonna have to get you back again, because there’s so much more to explore in all of this. But we’ll put all those links in the show notes. Thank you so much for being here. Will you come back again?

Tommy: Definitely, we’re so grateful for having your expertise on our partnership course. And so anything we can do to reciprocate the amazing value that you always offer to our listeners. It was such a pleasure and the builders stay pretty quiet, which is amazing.

Rachel: I have just realised that I’m recording on the completely the wrong microphone. It’s not picking up my lovely big podcast mic. Hopefully, the sound won’t have been too bad. But thanks for being here, Tommy. See you soon.

Tommy: Take care.