How to Stop Money from Being Stressful

[00:00:00] Rachel: When was the last time that you took a good hard look at your finances? Now, I’m not asking this to guilt or shame you, but actually to see if we could take money off our stress list. As doctors, we really aren’t taught about managing our finances or what things like national insurance contributions are, let alone how we can look after our finances wisely.

[00:00:21] Rachel: In this episode, I’m joined once again by Dr. Tommy Perkins, co-host of the Medics Money podcast, and this week we are talking about how you can understand what you are worth, so you can start saving and even growing your wealth so that you have one less thing to worry about.

[00:00:38] Rachel: Tommy’s got real practical advice and he’s provided a handy one pager, which he’ll talk about later, and you’ll find in the show notes. So if you are ready to rip that plaster off and start taking a good look at your money so that you can spend more on things that bring you joy and enhance your wellbeing, then you’ll really enjoy my conversation with Dr. Tommy Perkins.

[00:00:58] Rachel: If you’re in a high stress, high stakes, still blank medicine, and you’re feeling stressed or overwhelmed, burning out or getting out are not your only options. I’m Dr. Rachel Morris, and welcome to You Are Not a Frog.

[00:01:15] Tommy: My name’s Tommy Perkins and I’m a GP partner and based on my own financial struggles, I also co-founded Medics Money with my colleague Ed, and we help doctors, dentists, and all healthcare professionals make better financial decisions.

[00:01:29] Rachel: It’s brilliant to have you back on the podcast Tommy, thank you so much for coming and Medics Money is just a fantastic organization. So, uh, you know, first thing I’d say to people is check them out. Check out the website. But Tommy, we’ve had you on before talking about financial wellbeing, ’cause obviously we talk a lot about wellbeing, mental wellbeing, physical wellbeing. Not many people talk about financial wellbeing, do they? Why is that?

[00:01:52] Tommy: Yeah, I think it’s a really good point that, uh, you know, it’s great that we’re talking about mental wellbeing and physical wellbeing, but still, still, we’re not talking about money. And I think maybe it’s a kind of societal thing that we don’t talk about money, and especially amongst doctors. I think there’s this idea that It’s a vocation and goodwill somehow pays your mortgage and other bills, and therefore doctors and other healthcare professionals probably shouldn’t talk about money. But I’m hoping to convince your listeners that we do need to talk about money. And if we don’t talk about money, uh, our financial wellbeing is gonna take a big hit.

[00:02:28] Tommy: And, and we know, the effects of, you know, poor mental wellbeing or physical wellbeing. Um, but there’s also lots of data out there to show that financial wellbeing has a massive effect on individuals and also their capacity to function in society. So lots of research showing that if you have financial concerns or worries, you are less productive at work, you take more sick days and you have higher rates of depression and anxiety. Uh, and also you are much more likely to leave your current employer.

[00:03:00] Tommy: And so the NHS is a huge employer, as you know. Um, and they’ve actually, NHS England modeled the effect of poor financial wellbeing on the workforce. And they, they estimate that it’s costing the NHS £500,000,000 across the whole workforce every year, just the effect of poor financial wellbeing, you know, people not understanding their finances, not understanding their payslip, not understanding the tax they pay and how to grow their wealth over time and, and ultimately not being in control of their money.

[00:03:29] Tommy: Uh, and they obviously, uh, there’s lots of, uh, NHS long-term plans, but the, the last NHS long-term plan, um, specifically outlined that all organizations include financial wellbeing, support as part of improving employee wellbeing, and I dunno about you or your listeners in their organization, but we haven’t seen much evidence of that happening at all, which is why we keep going with Medics Money.

[00:03:53] Rachel: that’s an incredible figure. 500 million. I mean, my first thought was well. What if they just put that money into providing a pay rise for everybody? Then my second thought was, I bet that wouldn’t help though, would it? Because I’m presuming that financial issues is, is probably not so much about how much you’re earning, but more about what you’re doing with the money that you’ve got?

[00:04:12] Tommy: Yeah, absolutely. So first thing I would say is that I would welcome a pay rise for all NHS workers. Um, if we talk about doctors in particular, um, over the last 10 years, they’ve had a 30% real terms pay cut that’s adjusted for inflation, okay? So. And that that’s affecting all NHS staff, not just, I’m just using doctors ’cause that’s the stats that I have to hand.

[00:04:33] Tommy: Um, so, so NHS staff are being paid less. Um, and the key thing is that adjusted for inflation because, you know, we’ve had pay rises of, you know, 1%, 2%, but if you get a 1% pay rise and inflation is 6%, you are still 5% worse off. So they say you get a pay rise But actually any. Pay rise that is below the level of inflation is a real terms pay cut. And they’ve done a great job of convincing us that we’re getting pay rises whilst we’re all slowly noticing that we feel like we’re getting poorer and maybe we’re doing something wrong with our money. So I would welcome increased pay.

[00:05:05] Tommy: Um, but you’re right. In some respects, increased pay is only part of the problem. You need to understand how to get the most out of the money that you’re getting. Um, and that is where financial wellbeing comes in. You know, thinking about your money, feeling in control of your money, you know, no longer worrying about your money and able to deal with unexpected life events, which happen to everybody, um, but not having to worry about them happening for a financial reason.

[00:05:32] Tommy: So for me, financial wellbeing is just about feeling secure and in control of your money. And if we go back to like absolute basics, you know, Maslow’s hierarchy of needs, you know, feeling secure and security, whether that be, you know, in your home or your financial finances, it’s absolutely fundamental. Um, and yet. Not many people talk about it.

[00:05:52] Tommy: And I guess like a little, the little backstory of how medics money started is probably relevant here because I am the first person in my family to go to medical school. I just came from a normal working class family. And as a result, when I graduated from medical school, I had terrible debts. So of course I had a student loan, uh, and everyone does these days. Um, but I also had credit card debt. I had a bank loan and I also owed my mum £2,000, and £2,000 is a lot to my mum.

[00:06:19] Tommy: And, and when I graduated, I had absolutely no idea about like my taxes, or I just knew nothing about money because I’d never been taught anything about it. And in our family, nobody knew anything about money. Uh, and then when I got my first payslip, uh, I looked at like what was left after all these strange deductions, like tax and NI, like what even is NI? And then I looked at how much I needed to pay my debts and I was like, damn, I thought doctors were supposed to be well paid, like what is, what’s going on here?

[00:06:44] Tommy: And so that was my kind of experience of poor financial wellbeing. And to be honest, it took me many, many years to get out of that scenario. And yeah, now my financial wellbeing is great, but at the start it was very, very bad. And that’s kind of why we started Medics Money because we recognized that it wasn’t just me that had this problem. And in fact, lots of people have this problem.

[00:07:06] Tommy: And because of the aforementioned pay cuts that I’ve mentioned, in a way, I think NHS staff from a working class background like myself are like the canaries in the coal mine. Uh, we’ve, I felt this 15 years ago, but even now, everyone’s feeling it no matter their financial background. So we all gotta get educated. We’ve all gotta understand how our finances work so that we can get them under control.

[00:07:28] Rachel: And I think it’s something that we don’t talk about enough in the resilience, sort of burnout world. We always talk about the stress of the job. We talk about the stress of working with other people, the overwhelming workload, all that sort of stuff. But we never mention the impact that money worries have on us. And perhaps that’s because it’s the sort of secondary concern, but it is, I think the thing that actually stops us from limiting our work, is that nagging feeling well, if I don’t work, if I don’t do all these sessions, or if we don’t get the income in, if I’m a partner, whatever. I’m not going to be able to pay my mortgage.

[00:08:04] Rachel: So not many people tell me that the thing that stops them setting boundaries around their work is a financial consideration, but I think it, it really, really is. If you are in a one-to-one coaching session, it often comes out much quicker than it will do in a sort of group training session, but it is a massive reason why we fail to limit our work and our workload or, or we end up just doing extra stuff to earn that extra bit of money that we need.

[00:08:33] Rachel: And I don’t really have much of an answer to that, but I know you guys do. I think that people can use it as an excuse, however, it’s a very, very real concern. What do you think people get wrong when they’re thinking about their financial health? Do you think people put too much emphasis on one type of financial health and not enough emphasis on the other things that, that you need to be able to do?

[00:08:59] Tommy: I think the big learning for me was that, you know, how do you improve your finances? It’s not some kind of mystical thing. It’s not playing the lottery. It’s not working incredibly hard. It’s not even, you know, becoming a consultant and earning tons of money. So financial wellbeing doesn’t correlate directly with your earnings, yeah? I’ve seen people that are earning insane amounts of money, but they have no idea about the tax they pay. They have no idea how much they spend each month. They have no plan to grow their wealth over time, despite earning a ton of money. So. it it doesn’t, it is not correlated directly with the amount that you, that you earn.

[00:09:33] Tommy: Um, so, so what I would say is that, you know, if you are struggling with burnout or other mental health problems, you know, working less is one possible solution to that. But I bet the first thing that comes into your mind when I say working less is like, well, how am I gonna pay my bills, right? And so that is directly related.

[00:09:51] Tommy: And, and, and, you know, do you even know, like how much would you effectively lose in your paycheck if you dropped five hours a week or something? And if you actually back it out and look at the tax and everything, and especially if you’re one of the tax traps that we talk about, um, which maybe we’ll get into a bit later, the amount that you lose by dropping five hours can be a surprisingly small amount of money, you know, take home thanks to all the deductions. So I think it does underpin all of these things.

[00:10:17] Tommy: You know, a lot of my patients, when they get ill, I say, you know, you’re gonna have to have six, eight weeks off. And they’re like, nah, self-employed. I can do a week off max. And, and you’re like yeah, I get it. Like I’ve been there and I understand how that feels. So I think it’s a massive part of it.

[00:10:33] Tommy: But, but fixing it is quite a big task. You know, we need to learn about our finances, learn about the taxes that we pay, and how to avoid these tax traps, learn how to grow our wealth over time by investing. And we’re just not taught this at school.

[00:10:47] Tommy: And I guess my kind of naivety was that I just thought because I went to crummy state schools, um, it was just something that we weren’t taught at crummy state schools. But, you know, a lot of colleagues that I work with went to some of the best schools in the country and they didn’t get taught either. Like, no, no one’s teaching us these things.

[00:11:03] Tommy: We do like maths and algebra, and my daughter is doing her SATs at the moment, so I’m having to relearn, uh, maths for SATs, which has been an interesting experience. There’s nothing in there about money or financial wellbeing or anything. It’s all just like, translate this shape from here to here, and I’m like hmm, maybe we could talk about compound interest and how that works, or why cash in the bank historically has been a terrible investment, you know, and has eroded due to inflation. Or why a 5% inflation and a 1% paywise is a 4% pay cut. Like, let’s talk about that instead, but it’s not happening.

[00:11:35] Rachel: No, it’s not. You know, you are very good at, um, quadratic equations, but then not much else. It is madness, isn’t it? It’s like, it’s like none of us are ever taught how to give difficult feedback to a colleague or anything like that. We just sort of taught about how to break bad news for patients. It’s weird, isn’t it? Massive. Massive blind spot.

[00:11:51] Rachel: So where would you start then, if someone was like, oh, I don’t really have a handle on my finances. I would love to work a bit less, I think that would be really helpful for my mental health but I’ve just got no idea, what’s the low hanging fruit?

[00:12:03] Tommy: Yeah, definitely. And I think there’s an analogy of medicine here is that, you know, managing your finances is really not complicated. It is significantly easier than being a nurse, a doctor, a physio, a dentist, any of that. It, it’s easy, but you just need to get access to the right information, uh, from authoritative sources.

[00:12:18] Tommy: And of course, that’s why we started Medics Money because there’s a lot of good finance. It’s a bit like health education, isn’t it? Online, there’s some great health education and there’s some terrible health education. And if you are a health education expert like you or I, we spot the terrible stuff and we’re like, ha, that’s obviously a scam. But if you don’t know that information and you’re not a health education expert, you’re like, wow, maybe that pill will make me more muscly and, you know, regrow my hair and trim my body fat to 5% or whatever. Like, it seems unlikely, uh, but I’ll give it a go.

[00:12:45] Tommy: But, but for doctors, you know, we are financially a lot of us naive, and so we fall for these, the financial equivalent of the one pill, you know, magic solution. Um, so it is about getting access to good quality information.

[00:12:59] Tommy: Um, so, so let’s just say you’re sat there and you’re thinking, right, this is me. I need to do something. Step one for me would be to calculate something called your net worth. And in some ways I love net worth, and in some ways I hate net worth. The reason I love net worth is because net worth is simply everything that you own minus everything that you owe, okay? So you just literally write it down everything that you own that has a value. So if you own your own house, write down the value of your house. Your house is £200,000, write down that, okay? And then everything that you own, let’s say your house is 200, um, but you have a hundred mortgage, okay? So that’s, that comes off what you owe, okay?

[00:13:34] Tommy: So you write it all down and eventually that will give you a number. Okay? And that is your net worth. And net worth is basically a measure of how rich you are. And that’s why I hate it because, you know, you might feel rich with a net worth of £1,000,000. Someone else might feel rich with a net worth of £10,000. It’s subjective and it’s personal. And comparing yourself to others, especially financially, is just a terrible, terrible way to go about it because everybody’s different.

[00:14:05] Tommy: But the reason I love net worth is that it just gets you listed out everything that you own, everything that you owe, uh, and and have a look at it like that. And then you look at the everything that you owe section and think, you know, what is, what do I not need in that section that is dragging down my wealth, okay? Because everything that you owe is effectively reducing your net worth or your wealth.

[00:14:24] Tommy: Um, so you could just literally get one column, owe, own, write them down on a piece of paper and off you go. And, and it is that simple. And then the reason I also like that is over time, you know, there’s no quick fixes here, um, despite what the scams online will tell you, this is gonna take, you know, a lifetime of changing your financial habits. Um, but if you track your net worth maybe once a year and you’re making all these changes, you’ll see that it’s slowly but surely improves.

[00:14:50] Tommy: And when I left medical school. My net worth was -£85,000, okay? Because I owned absolutely nothing and I owed £85,000. So my net worth was actually a minus number, and that was quite depressing really for quite a number of years. I was working super hard, doing loads of locums and everything that you could imagine, uh, back in the day, and then my net worth was still a negative number, but it was getting less negative.

[00:15:14] Tommy: And I, I kind of remember when it got to zero and I was worth zero, and I was like, this is amazing. I’m worth zero. Like I’ve had an amazing result. Um, and now of course the net worth is significantly more than that, but in some ways. I still remember that feeling of getting back to zero. And if you can get from -85 to 0, you can easily get from zero to a hundred or million or or wherever you want to go. So that’s why I like net worth. So that’d be my step one.

[00:15:40] Tommy: This is the kind of thing that we cover on Medics Money and on our courses. Uh, by the way, we are mentioning a ton of resources here, so. In the show notes or at the URL medicsmoney.co.uk/frog, I’ve made a special little, one pager for your listeners so that they can get access to all of the stuff that we’re talking about, so they can just sit back and listen where, wherever they are, wherever they’re on a nice walk or on a run, or watching their kids play sport, uh, which is what I seem to do a lot these days. So don’t worry. Just go to medicsmoney.co.uk/frog.

[00:16:10] Tommy: So yeah, you’ve done that first step. Um, pension comes into it in various ways. We choose on our courses to exclude the value of the NHS pension from your net worth because the value of your NHS pension is quite complicated to work out, and it largely depends on how long you live for in retirement. If you live longer, your pension will be worth, effectively more, and that’s because it’s what we call a defined benefit scheme, which pays you the same amount every single year in retirement. Uh, amazing scheme to have. But valuing it is very, very difficult.

[00:16:42] Tommy: And I guess as long as you’re consistent in your approach, you know, all we need is a consistent measure. Of your net worth. So if you want to include the NHS pension in your calculations, fine. If you don’t, I think that’s also fine. And private pensions, we would include the value of those because they are something that you can get to.

[00:17:02] Tommy: And really what we’re trying to get to with net worth is just something to track over time. Uh, and ultimately at retirement, you know, you’re gonna do different calculations to work out, can I retire? So, yeah, that’s what we do with pension.

[00:17:13] Rachel: So once you’ve done your back of envelope calculation of your net worth, what would you do next?

[00:17:18] Tommy: More calculations, I’m afraid, but don’t worry. Um, because the next thing that we need to talk about is you are thinking, okay, I need more money. Do you earn more? So go to go to work more, or could you spend less okay? And the answer is probably a balance of the two, but we prefer to focus on spending first of all, because we find out, like you said, what’s the low hanging fruit? We need some easy wins that are gonna take the financial pressure off us and start allowing us to steadily, but surely increasing our net worth.

[00:17:49] Tommy: And lots and lots of people, you know, it’s really easy to lose track of how much you spend. Uh, and if you can save £1 of money that you would’ve spent, okay, that’s one pound in your pocket because that one pound has already been taxed. So if you’ve got a pound in your pocket and instead of uh, spending at Starbucks, uh, you keep that pound in your pocket, you have got a pound in your pocket.

[00:18:09] Tommy: Now, I did mention the tax traps, which is something that we talk about a lot of medics money, but I. Thanks to ridiculous marginal rates of tax traps, you could go to work and earn an extra pound, okay? And that could end up with just 16 pence in your pocket, okay, thanks to some ridiculous, marginal rates of taxation. So one pound saved is one pound in your pocket. One pound earned could be just 16 p in your pocket.

[00:18:30] Tommy: So earning more is not always the answer. We’ve gotta work out where our money’s going and how we can make the most of it in the future. So what I’m coming around to saying is a dirty word, which is you need a budget.

[00:18:42] Tommy: And often when people think about the word budget, they think, oh my goodness, I’m gonna have to spend less. I’m gonna have to cut back on everything that I like. Uh, you know, it is gonna be miserable. I’m gonna have to fill in 20 different spreadsheets. I’m gonna have to track every single transaction that I do.

[00:18:57] Tommy: Now in the course of turning around my own net worth, I tried every way possible of budgeting and just tracking every single bit of spending. Hated it. It felt like one of those diets where you, you can’t eat anything and at the end of the day you’re about to fasts out ’cause you’re so hungry. Um, I tried all the apps, you know, my bank even has this thing, which shows your,, my spending goes, none of that really worked for me. And instead, I just use a super simple technique, which is called pay yourself first.

[00:19:23] Tommy: Before we talk about pay yourself first, I just wanted to talk about the effect that spending could have. So at Medics Money, we talk about the £139,000 hospital lunch, and we always ask people, could you be spending £139,000 on lunch at the hospital every day? And you’re thinking, no way, not £139,000 on lunch. But if you spend £9 a day on lunch, at the hospital, which unfortunately with inflation is not unrealistic

[00:19:52] Rachel: M&S, it’s very easy to spend nine quid on lunch, can I just say?

[00:19:56] Tommy: Oh man, when I, I lived in a flat, just down the road from an M&S once, and, uh, we’d come back on the way from work. You know, the fridge is empty. You just pop in there like dinner for two, you’re 30 quid down.

[00:20:06] Rachel: And the nibbles.

[00:20:06] Tommy: It was ruinous. Uh, this podcast is not sponsored by M&S.

[00:20:10] Rachel: this is not Everyday podcast. This is an M&S podcast. Anyway,

[00:20:14] Tommy: I completely lost what I was talking about. Yeah. So,

[00:20:16] Rachel: Lunch.

[00:20:17] Tommy: Smaller Yeah. Small amounts of spending add up, right? So you’re spending £9 a day on, on lunch, okay? Instead of spending £9 a day, you can reduce that to one pound 50 a day. Why one pound 50? Well, you gotta have some lunch, okay? And it’s gonna, so, so bringing in a packed lunch.

[00:20:31] Tommy: Over a 30 year career, that saves you £166 a month, over 12 months of the year. and a 30 year career, that gives you £59,760 in savings, okay, for not buying, not very nice lunches at the hospital unless there’s NMS sorry, hospital. Okay, so that’s 59,760 if you just saved it in cash.

[00:20:51] Tommy: And then leading to what we’re gonna talk about a bit later, about growing your wealth, if you were to invest that £59,760 that you saved on lunch. Over 30 years using, you know, really easy investing techniques that anybody can learn with the right information and teaching that 59,000 will turn into £139,000, okay?

[00:21:12] Tommy: So it is very easy to spend £139,000 on lunch at the hospital. And really, finance you would think would be about numbers, like spreadsheets and everything, but actually. It is more about behavior and small changes in habits over time can compound into absolutely massive, massive amounts. Okay?

[00:21:32] Tommy: So bringing a packed lunch for your whole career could get you £139,000, which is an insane amount of money. And yeah, those lunches at M&S, they’re nice, but are they worth 139 grand?

[00:21:44] Rachel: And buying yourself a, a coffee cup, and making your own coffee right at home. Bringing that around with you or just filling it, be filling it with, with tea, that’s gonna save you. If you could spend save 20 quid a week on that, that’s another,

[00:21:55] Tommy: Yeah. And some of you might be saying, look, I love my M&S lunches. It’s the highlight of my day. And that’s cool, right? I don’t have a problem with that because we’re talking about conscious spending on things that you like and enjoy, and not unconscious spending on things that you like, oh my goodness, I spend 50 pounds, uh, you know, a week in M&S and I don’t even like the food. Um, so, so that’s your choice. But in order to make an informed choice, you need to look at the numbers.

[00:22:16] Tommy: So you need a budget. So what you need to do is just write down what you spend and what you earn every month and look at the difference between what you, what’s going out and what’s going in. And if that’s a positive number, great, you have, you know, spare money each month and if it’s a negative number, you’re getting in debt. So you need to look at your spending and adjust it.

[00:22:35] Tommy: And so what I said, we didn’t use spreadsheets or anything, but initially you do need to write down everything that you spend over, let’s say a three month period. And then work out what you can reduce. And I particularly focus on subscriptions because, you know, 12.99 a month seems like you know not much for something, but over time that really, really builds up.

[00:22:53] Tommy: And then what you’re aiming to do here is just get a little surplus each month, a tiny amount of money where you have money spare each month. And then that money, you can, you know that it’s there and you just use, what I said was pay yourself first, where you set up a direct debit each month, and as your pay ar arrives into your bank account, you pay your mortgage or your rent, okay, that goes out by a direct debit. You pay your other fixed costs, like your heating and light and stuff, and then you pay yourself first. So you just put £50, for example, uh, into a separate account, a separate direct debit. You are paying yourself first, and then what’s left is what your budget is here for M&S or coffee for the for the month.

[00:23:34] Tommy: And the reason that I like that is that the reason I, I sort of got into this is I’d, I’d do a locum shifts or loads of locum shifts when I was getting out of debt. And then I would just be, feel pressure to force all that money into repaying my debt. And I was like, oh, I didn’t even get to enjoy any of that money. And actually what I realized was that if I just put 80% of it into paying off my debts, uh, paying myself first, okay, by paying off my debts and increasing my net worth, that leads me 20% of like fund money, okay? Because if we go too restrictive and too. Hard on this, it’s just not gonna work in my experience.

[00:24:05] Tommy: So step two, get a budget. Write down everything you spend, everything that’s coming in. Can you reduce any items of spending? Um, do you even need to reduce it or do you have a massive excess each month? And then work out what your average kind of excess is, divert that into a separate account, and then either use that spare money to pay down bad debts if you have them like credit cards and things like that. And if you don’t have any bad debts, congratulations, you can move onto the sort of growing your wealth phase, which is where we take that money that we saving every month and learn how to grow it over time using super simple investing strategies that are well within the reach of anyone listening to this podcast.

[00:24:44] Rachel: And don’t wanna go too much into investing strategies. ’cause I know like you’ve got loads of information on that. But would you suggest people do that themselves or they get help from a financial advisor or something like that?

[00:24:54] Tommy: Great question. And it is, it just depends on, like, everyone’s different. If you go on the internet, you know, everyone’s saying, you know, never use a financial advisor, they’re all terrible. You should invest yourself and then. A tiny market fluctuation happens because of the orange man in the White House, um, and everyone’s panicking and making ridiculous investment mistakes because they didn’t do their own research or take advice.

[00:25:15] Tommy: So I would say that, what do we know about that? We know from something called Vanguard’s Advisor Alpha Study, which is 30 pages if any of your listeners have got insomnia and want to read it. Um, but what that shows is that if you use a financial advisor, over the long term, you end up 3% better off, okay? And 3% doesn’t sound much, but 3% is a huge amount.

[00:25:34] Tommy: But then when you drill into the details of that, you don’t get that 3% extra from the financial advisor because financial advisors know that the orange man in the White House is gonna do something stupid, um, or, or that they can predict the future. They basically get that from the financial advisors, help you to. Optimize your tax position and they also manage your investing behavior so that, for example, when the orange man in the White House does something crazy, you don’t panic and sell. You just know what to do and, and go from there.

[00:26:01] Tommy: So. so the baseline is that you’ll be 3% better off, uh, using a financial advisor. But then the other side of the coin is that if your finances are really simple and you are confident with, with money and you’re prepared to invest some of your own time and your own money in learning how to invest, um, then it’s perfectly possible to invest yourself. And it’s actually easier than ever today to start investing.

[00:26:25] Tommy: You know, back when I started investing. It was really hard. There was like high minimums that you needed to have each month, and I didn’t have that. There was hardly any online do it yourself kind of brokers. Um, now there’s tons of them. Uh, and in Bal on balance, I think that’s a good thing, but it also means that if something’s super easy, you have a lot of people who aren’t quite sure what they’re doing, and then the first market downturn comes along like we may or may not be experiencing at the time this podcast goes out and everyone panics and does the wrong thing.

[00:26:51] Tommy: So. There isn’t a binary answer. Um, but just think about if you are prepared to do legwork and your finances are simple, it is possible to invest yourself. But just to remember that on average if you use a financial advisor, you end up 3% better off.

[00:27:05] Tommy: And I guess that takes us to a bit of a tangent about one reason we started Medics Money was to educate, uh, healthcare workers on their finances. But the second was that we noticed that there were excellent financial advisors out there, and then there were less excellent financial advisors out there, should we say? And some of these less excellent financial advisors are promoted by organizations that claim to be interested in helping doctors and helping doctors’ welfare. Um, yet the financial advisors they promote, I wouldn’t recommend to my worst enemy.

[00:27:36] Tommy: So at Medics Money, using our unique skillset, we have all the best independent, and that’s key to be independent financial advisors out there. And you can get matched to one that helps you. And we’ve matched over 20,000 doctors to a financial advisor now as well. So have a think about that.

[00:27:54] Rachel: Yeah. So it’s interesting. So I know financial advisors, they do take a percentage of the money that you invest and there’s a fee, but if overall they manage your behavior and you’re not gonna be knee jerking and all that and helping you with your, your. Your tax position as well, that’s, that’s really helpful.

[00:28:09] Rachel: Um, so I would encourage people, you know, I always think, and one of the things I’ve learned in sort of running my own organization is who not how. So when I’m like, oh, there’s this thing, maybe a techie thing or an online thing, course thing, I’m like, no idea how to do that. So I could spend. A long time learning how to do it. And I think we can learn anything like, you know, medics, people work in healthcare are pretty bright. It’s like, do you wanna spend two days learning about that thing in order to do it, or do you just wanna pay an expert a bit who can get it done in half an hour?

[00:28:37] Rachel: And believe me, honestly, we’ve had team members spending 25 hours trying to do something. We found the right expert, they sorted it in an hour’s time. And I guess sometimes with finances it is a little bit like that. It is really worth getting the experts in when you need to.

[00:28:50] Tommy: Yeah, I would agree with that, but I’d also say is that, you know, we as, as doctors, we kind of know when we need help with our own health because we have that baseline level of knowledge. And if you can get that baseline level of, even if you’re thinking, wow, I’m gonna go straight to Medics Money and hire a financial advisor, okay, cool, but if you’ve got that baseline level of knowledge, then you can think, well, do I need a financial advisor to help me make a budget and calculate my net worth? I’d argue not. Um, I have a complex pension problem, or I’ve just inherited a million pounds. I need to know how to invest it. Do I need a financial advisor? Almost certainly, yes.

[00:29:20] Tommy: So just by having that baseline level of knowledge, you can triage your own financial needs and think, okay, I can probably do my net worth, I can probably do my budget and I could do, if I tax affairs are simple, I can probably manage that myself. But once I become, you know, more senior or I get more complicated tax affairs, at that point I would benefit from advice. So, yeah.

[00:29:39] Rachel: So Topmmy, I’d like to sort of go into something a little bit more perhaps philosophical, because I think it’s really important to, to actually know the numbers. And I really take your point on, actually it’s better to spend less than bust a gut trying to earn more. And for me, in terms of burnout and resilience, it, it seems much better to limit the work you’re doing rather and limit what you’re spending rather than working all hours God sends.

[00:30:03] Rachel: Do you think, and I know this is very personal for people, but what are things that big ticket items that people spend a lot of money on that they don’t really need to, that don’t bring them so much joy and wellbeing as they think they were going to? What, what are the sort of big ticket offenders that you think US medics fall into the trap of spending our money on that we really don’t need to?

[00:30:25] Tommy: Absolutely right. Like, you know, saving one pound on your coffee, et cetera, like over time, that’s really cool. Um, but there are like big ticket items, which maybe we have a blind spot to, um, and that don’t, don’t help us. Um, but what I would also say is that. It is totally subjective and totally personal. Um, I’m happy to share with the podcast listeners and hopefully my wife isn’t listening. I just spent £120 on two new tyres for my bike. That is extortion in some people’s eyes. I can see Rachel’s face is judging me right now. Um But that’s a personal decision that I’ve made having, you know, I know where my money’s going. I know that my, my pay myself first budget has, has been salted this month, okay? So I’m gonna be growing my wealth this month, whatever happens. Uh, and I haven’t bought any lunch this month. Um, so I’ve chosen to spend that money on those bike tyres.

[00:31:17] Tommy: Are those bike tyres gonna make me money? No. Are those bike tyres an an investment in the pure monetary sense of the word? Um, no. Uh, but are those bike tyres gonna allow me to ride my bike around with my brother this summer and have an amazing time? Uh, yes. Um, so it is personal, so I don’t like to judge anyone’s spending.

[00:31:37] Tommy: But in terms of big ticket items, I think the number one thing, which, uh, I have an objection to you is cars. So what we really need to think about when we’re spending money is, and we, and if you want to grow your wealth is, are you buying an asset or are you buying a liability?

[00:31:53] Tommy: So an asset is something that value increases over time, um, and or pays you money every month, okay? So that’s spitting out money. And the reason why buying assets is important is that, you know, you mentioned burnout and working less. If you wanna work less, you either need to live on less money or you need to have assets in the background that are churning out money whether you are sleeping, working, or going on a bike, ride on your insanely expensive new bike tyres, okay?

[00:32:21] Tommy: So buying assets, not liabilities is like one of the core traits of people who grow their wealth successfully over time, okay? And liabilities as a kind of, just to finish the definition is something which costs you money.

[00:32:36] Tommy: So if you look at a car, I see people driving around in really, really nice cars, and, you know, if you love cars, like I love bike tyres, um, great, knock yourself out as long as you know how much it’s costing you. Um, but really cars are not an asset, um, they’re not an investment. In fact, they’re a terrible investment. And, and if you actually sit down and work out how much a brand new shiny car devalues in the first couple of years of its life, it’s absolutely shocking. And yet I see so many people doing it, like driving around in insanely expensive cars. So I think cars would be a great example of a liability and not, um, an asset

[00:33:13] Tommy: . The next one might get a few people a bit riled up, but your own home that you live in. I don’t think it’s as amazing investment as we’ve led to believe. And if you actually crunch the numbers on this, at best, your home is an investment that keeps up with inflation just about. Um, now you do get the benefit of living in it and stuff, um, but if you actually factor in inflation, you know, say like, oh, my granny bought a house for £50,000 in 1950 and now it’s worth 600, hasn’t she done so well? Well. If you actually look at that in terms of inflation and all the other costs that your house costs, you like, uh, repairs and council tax and everything, and you actually think about it in terms of a financial decision, which is, you know, is this an asset or a liability? Your own home in general is not a great investment.

[00:34:01] Tommy: Now it’s someone where you live, uh, and things like that. Um, so it’s got other benefits. Um, and I’m distinguishing this from other property, right? You know, buy to lets, or investing in commercial property. But your own home in general. Not as an amazing investment as we think. And yet a lot of us kind of go to the very financial ruin in order to afford, you know, a house, um, and it’s probably not as great an investment as you think.

[00:34:26] Tommy: Um, and then I guess the third category of things which really kind of dent your net worth, uh, or I’m actually gonna have to do four, um, would be like small things. So I talked about habits, you know, just spending habits. Um, so I talked about lunch or the hospital, but imagine, you know, not lunch or the hospital, but that, that’s your kind of spending mentality where you don’t actually know how much you’re spending on small things. And small amounts of spending over a long period of time. Remember, just lunch at the hospital adds up to £139,000, so just thinking about that would be, um, really, really important.

[00:34:55] Tommy: And the fourth thing, which we definitely need to talk about and I wanna talk about is debt. And some of your listeners might be thinking, oh, doctors don’t have debt. You know, doctors are well paid. Uh, unfortunately at Medics Money, we get to see tons and tons of doctors who, for whatever reason are in terrible debt. And like I said at the start, I had some terrible debts like bank loan and credit cards, not good. Loan to my mum, not good. Student loan, not terrible.

[00:35:18] Tommy: Um, so if you have debt. Bad debt. I mean, credit cards, I mean expensive loans. You need to pay that off as an absolute priority, so you don’t wanna be buying yourself a brand new shiny car if you’ve got a credit card debt, for example.

[00:35:30] Rachel: And I guess when you’ve got that debt hanging over you, then it really, really is very hard to cut down your work and, and a little bit less if you know you’ve got that pressure and that financial worry. And I think it, it is a really big contributor to some people’s stress and burnout, isn’t it?

[00:35:46] Tommy: Yeah, definitely. I mean, for me, like debt was terrible, like, and that’s basically what spurred me into sorting out my own finances and doing Medics Money. And even now. It’s a, it is a sort of psychological thing for us as a family.

[00:35:58] Tommy: So, you know, we were thi, we were doing some house renovations and we could have borrowed some more money to finance them or we could have used our actual money. And, you know, back when we were gonna do the borrowing, we could have borrowed that money at like 1.5% or something. You know, good debt and it’s not bad debt.

[00:36:14] Tommy: But actually we decided not to do that and we decided to pay for it in another way without incurring debt. And that. That was actually a bad financial decision. It made much more sense to borrow the money. But because of our previous experiences with debt as a family, we were like, no, like no more debts. Like we, we know what it’s like to be in debt and we know now what it’s like to have no debts and it’s amazing.

[00:36:35] Tommy: So even though it didn’t make sense for the numbers, we didn’t borrow the money and we paid for it another way. And that’s just a way that your psychological experiences of money, usually, actually, when you’re quite young, the evidence suggests influence your behavior going forward.

[00:36:51] Tommy: And I think as long as you know that you are, if you understand about finances, uh, and then you can understand that your psychological weaknesses regarding money, like for me it’s debt, I hate debt, um, but not all debt is bad. Like there are great debts. Um, but as long as you know that and you’re making an informed decision about it, like we made an informed decision about not getting into debt to do our house, then that’s fine. I think where it is not informed, that’s the problem, and that all just goes back to our basics of education.

[00:37:16] Rachel: Yeah. And I think a lot of people just don’t know how much they’ve got coming in, how much they’ve got going out, and then you end up making these decisions on, oh, well I, yeah, we can go on that massive holiday, but I can’t drop a session from my, from my work, and they actually cost the same. And I always think, well, that that’s like a two week gain compared to a a 12 month gain.

[00:37:37] Rachel: And we often sort of res respond to those, you know, I deserve this. I’m working so hard, I’m so knackered, I need to have that extra massage, that extra thing, thing, thing, thing, thing. Whereas actually, if we use that, all that money we’re spending on trying to make ourselves feel better, just relieving some of the pressure that that might help, right?.

[00:37:53] Tommy: Yeah, definitely. Like, you know, just feeling no financial pressure is, is a luxury. And if you’re in that position like I am now, like well done. Like that is a luxury. But if you’re not in that position, you gotta do something about it because it’s just eating away at you. Um, no doubt.

[00:38:08] Rachel: Is there anything else then, Towa, you would just add in anything that’s been surprising to you in the last couple years as you’ve been developing your sort of financial wellbeing course?

[00:38:18] Tommy: Yeah, I think that, you know, we’ve covered the absolute basics. We didn’t even talk about tax today because Ed is not here. And as you know, Ed’s a doctor like us, but also a chartered accountant, chartered tax advisor. Um, but tax is your biggest expense, you know, in life. Um, so it makes sense to make sure that you’re paying the right amount of it, okay?

[00:38:35] Tommy: And that’s just another way where you don’t have to work any harder. But if you can optimize your tax position, then you can save significant sums. And again, the basics. You know, making sure you’re claiming everything that you can, making sure your national insurance is being paid correctly, et cetera, et cetera, totally possible to do yourself at the more, uh, extreme end, you know, you probably would benefit from advice. And in the middle ground you can look at Medics Money and all the resources that we have on, on the URL, um, medicsmoney.co.uk/frog, and and that will help you. So, so don’t forget about tax.

[00:39:06] Tommy: Um, and ultimately, as I said at the start. I have no financial qualifications. and yet it is perfectly possible to do this. Um, but it won’t happen itself. Like no one is gonna do this for you. You have to do it yourself. And I think if we think about, you know, doctors 30 years ago versus now, you know, we’ve had a 30% real terms pay cut in the last 10 years. Um, houses are, and, and other things that doctors need to survive in are way more expensive. So back in 1997, you could get a house for 3.5 times your income. Now it’s 8.2 times. So that is a massive extra expense.

[00:39:43] Tommy: And I think the other thing that everyone with an NHS pension needs to be aware of is that, yes, the NHS pension is still an amazing deal. Um, but back in the day, you retired at a fixed retirement age of 55 or 60. Now, uh, for all of us in the 2015 scheme, our retirement age is linked to state retirement age, so it’s no longer fixed. So state retirement age goes up, you are retiring later, you don’t have control over that.

[00:40:06] Tommy: So. If you, if you’re hearing that and thinking, oh my goodness, that’s terrible news, i’m gonna leave the NHS pension and buy a load of Bitcoin or gold or whatever, uh, don’t, don’t do that. No advice, but don’t panic. Just think about, okay, my NHS pension has these pros, um, but has these negatives and how can I adapt my financial plan to take into account of the negatives, um, that it has.

[00:40:26] Rachel: And get advice. Get advice, get someone who knows what they’re talking about to do that. That’s really helpful, Tommy. So you’ve got that website you’ll, you’ll put up for us in the show notes so people can find out. And I just would encourage people, this is something I think that is very easy just to shove into the corner and not look at, because it just feels painful.

[00:40:46] Rachel: And I always, uh, talk about the stress list. I’ve got things on my stress list. Like one of them is they keep saying to me, you need to log onto the pension website and do something or other ’cause, you know, and it’s so painful every time I do that because they never have the right information. And that’s on my stress list and I’ve just been, it’s over there in the corner and I don’t wanna look at it.

[00:41:02] Rachel: But sometimes you just have to rip the plaster off, don’t you? Go right. Okay. Let’s just spend an afternoon getting everything that I can, printing out all my statements and just going through them. And you probably feel a lot better when you’ve done it

[00:41:13] Tommy: Yeah, definitely. And I think once you’ve taken the time to learn the basics and you’ve got the right systems and automations, like, you know, pay yourself first is, is an automation. It’s just sort of direct debit that goes out of our account every month and straight into our investment account. I don’t have to do anything. It happens automatically. Once you’ve got this all set up, you don’t need to spend a lot of time doing this.

[00:41:31] Tommy: You know, like I probably, I say as a family, we probably spend about three hours max a year managing our finances. We, we catch up about our finances together and go through our spreadsheets and look at our investments and our debts and everything. But once you’ve got it all set up and automated, it’s not like a full-time job and you’ve already got a full-time job, you don’t wanna spend hours and hours doing this. So just think about getting good habits, reinforcing those habits, and getting some automations for our direct debit.

[00:41:58] Rachel: and once you know what you need, then you can make much better decisions about how you’re gonna live to maximize your mental wellbeing, you know, and your physical wellbeing as well.

[00:42:06] Rachel: And we’ll chat again soon. Everyone check out the resources. They’re absolutely fabulous. Let’s stop ignoring our finances ’cause they are such a big part in our, um, sort of sustainability and resilience. So thank you so much for being here.

[00:42:19] Tommy: Thanks for having me on, and thanks for everyone for listening. And thanks for doing your podcast. Like I also produce a weekly podcast like yourself and I know how much work it is. So thank you for doing it. Like I always get a lot of benefit from listening to your podcast. So on behalf of your listeners like me. thanks for doing it.

[00:42:34] Rachel: Thanks for listening. Don’t forget, you can get extra bonus episodes and audio courses along with unlimited access to our library of videos and CPD workbooks by joining FrogXtra and FrogXtra Gold, our memberships to help busy professionals like you beat burnout and work happier. Find out more at youarenotafrog.com/members.