Our Savings Product Manager Jon Sweeting provides an insight into one of his first experiences of making a significant decision with his finances and what it taught him… take a read below.
Part of my role is attending networking events. The one overarching theme I have observed in nearly 20 years of attending these events, is how humble some of the most successful people have been and not been scared to discuss things that, with the power of hindsight, they would have done differently. This is, for me, the most engaging part of these sessions.
When I was asked to create a theme of TED talks, I’d name them ‘mucked up evenings’, where people can openly discuss some of the decisions they have made which, in hindsight, they wish they had done differently. Never being scared to lead by example, one of the examples I would discuss would be that of my trusty Ford Escort and what it taught me.
When I left University, I had less than £1000 to my name. This had been saved up from various sources such as part time jobs, and the occasional sob story to Dad (sadly no longer with us) to try and scrounge more money out of his already stretched budget.
I needed a set of wheels, and quickly! Low and behold, a local garage had taken a Ford Escort in part exchange, and they wanted rid! It was perfect, freedom at last to take me to the seaside and (hopefully) on dates!
I liked the car a lot, but it wasn’t exactly what I wanted as I had purchased what I could afford, not what I desired. What I really wanted was a Golf GTI or a BMW- but they were too expensive and a lot to insure. So, in a rare moment of financial prudence I kept my old Escort (called flossy), promising myself that with my burgeoning career as a trainee independent financial advisor, I’ll soon earn enough for something better.
Then I noticed something that was quite important to me at the time. The chaps with the better cars went on my more dates- my ford escort cruising up Sidmouth Seafront just wasn’t cutting the mustard. I needed something faster, sportier looking and sexier. To my surprise I was offered a jet-black Saab convertible for a bargain price of £5995. This was a sporty looking car and fitted the bill perfectly. The only snag in this otherwise great plan was that I didn’t have £5995.
In the early(ish) days of easy credit, I secured a loan for £5995. The problem was, on inspection, the car was not exactly what I had been promised. After consideration, I decided not to proceed in purchasing it.
With this decision made, the money I had secured was there burning a hole in my pocket. With little responsibility, I was out most nights with friends and on a few holidays with the lads! The money previously burning a hole soon rapidly departed from my bank account. It would be remiss of me to say that I didn’t enjoy spending the money (the memories will last a lifetime), but I found myself on the wrong side of a debt for the first time in my life and had nothing to show for it.
With retrospect this would be the first mistake I wish I could rectify. I wanted something and didn’t have the willpower to delay my gratification and save up for it. I took the easy option and got into debt. I went to buy something I couldn’t afford to impress others.
Then I had to pay the money back with interest. So, I didn’t really spend £5995 on enjoying myself and a couple of holidays, after interest it was probably nearer £10k.
How crazy is that? We want something, agree on a price but actually pay way over what we agree because we can’t afford what we want so pay interest. And to top it all, we end up working harder to earn more money to pay the debt off.
What I should have done was be grateful for what I had, then made a plan to earn the money to buy what I wanted… hindsight is a wonderful thing.
If only I had opened sub accounts with my bank, and ‘coffee potted’ my income with:
- An account for investing to make my money make more money!
- An account for a big ticket item- such as a new car!
- An account for spending money to practice some fiscal responsibility while out on the tiles
- An account for bills / food etc to maintain a lifestyle where I always spent less than I earned.
If I had done that in my early 20’s I would have grown a lot quicker than my bank balance did. I would be a lot more educated, and my earning potential would have increased a lot quicker than it did. So if you are still reading this and thinking of getting into debt to buy something to impress someone, think again.
Getting into debt is easy, getting out of it is hard.
Make your money work for you instead. Delay the gratification and save up. Allocate your money as I do above and watch it grow,
Your future self will definitely thank you for it.
Jon Sweeting
Savings Product Manager