On ‘personal finance’, coffee bars and wasps

Lately a bit of discontent has been building up inside me. You see, when I started my financial transformation – and a bit later this blog to help me cope with obsession and keep me focused – I felt really excited. Every new book on personal finance, every new blog sparked connections, generated ideas and generally made me feel like ‘the cat that’s got the cream’. I was LEARNING!

Now, things have got into a bit of a routine. I find that more and more often I will read a book or a blog article and think: ‘Competent; well written (not always); but I have read this stuff many times before’. And a bit of boredom starts setting in. Because, I don’t feel I am learning.

So today I was sitting with John, my beloved argument sparring partner and editor, in my favourite coffee bar in Sofia. It is in a garden, near the National Theatre, with loads of flowers, trees, a water feature running. We were discussing this post – I was saying that there is a broad agreement on the fundamental rules of financial health and prosperity. Apart from this, the rules are simplicity itself: a combination between very basic arithmetic and a small dose of common sense. In a nutshell the rules are eight (well the number can vary and some rules are more importantly than others).

  • Make sure that you earn more than you spend;
  • Regularly stash the difference away;
  • If you have ‘negative wealth’ make sure this is paid off;
  • Make sure that you have some reserves (savings) to offset unforeseen lean times in the future (and for peace of mind);
  • Make your surplus work for you and invest;
  • Never ‘play’ the stock-market; make long term investments; keep informed and hope for the best (if I only had bought some shares in Apple in 1995);
  • Buy bonds – lending to governments (some governments) is possibly safe;
  • Don’t forget to live.

Simple! Then why, according to data from the Audit Office, was the UK consumer debt at the end of June, 2011 over £1 trillion?  Now, this is a large number; it doesn’t get any better when chunked down. Average household debt negative wealth in the UK (including mortgages) stands at close to £60,000. More importantly, one person is declared insolvent every minute of every working day and every fourteen minutes a property is repossessed. Don’t these people know that they ‘should spend less than they earn’? Of course they do! It is a bit like asking ‘don’t these overweight people know that they should eat less and exercise more?’

‘I agree’ – John said – ‘but what is your point, exactly? What is your post about?’

Next second I was screaming in pain and my little finger was ballooning by the second. Yep – a wasp. In the next several minutes John was pulling on my finger trying to squeeze the sting out, waiters were running towards me with glasses full of ice (which felt nice, really) and I had an AHA. Not a big one and I won’t be surprised if it is not very unique. It is the following:

Personal finance is not about finance. It is about:

  • motivation;
  • ingenuity;
  • choices and decisions;
  • learning and growth;
  • persistence; and
  • daring to be different.

Personal finance is not about the personal; it is about one’s position in the wider world. It is about one’s skills and competencies, one’s unique gifts and talents, about one’s cultural background, about their relationship(s) with different institutions (banks, employers, family etc.).

This is why achieving financial health and prosperity is not about knowing and comprehending the simple and agreed rules mentioned above. It is about their implementation which is highly individual. No-one can give you the rules of motivation and ingenuity or make you persistent. Guidance is available but each of us has to work hard to develop these qualities. It is likely that your position in the wider world is rather unique – you are the one to work it out.

My finger really hurts! Blasted wasp!

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