People say you learn more from your mistakes than your successes. This is certainly true of my financial errors.
Take the time I renovated a flat, hoping to turn a nice profit. I over-scoped, went massively over budget and barely covered my costs when I sold it. I may not have earned anything from the property, but I learned a lot: how to tile, decorate and do basic plumbing repairs. In fact, I should think these skills have saved me many thousands of pounds subsequently.
There are two other financial mistakes that spring to mind: the first was quitting London to spend 10 years in Australia. Without the support of an employer, you get a pretty brutal financial haircut selling nearly everything you own — other than what fits in a suitcase — to move abroad.
My wife and I built a great life Down Under, including owning a beautiful four-bedroom house overlooking the sea. We then went to the same financial barber when we decided to sell everything again so that we could spend a year mountain-biking around the world. It was our thing.
Add up all the transaction costs of those house and belongings sales, along with missing much of the rise in UK house prices and the impact on salary of the erratic career path, and you would cry.
It’s hard to put a figure on it – back of the envelope we are talking at least a couple of hundred thousand pounds. Yet I would not swap it for anything.
As a financial planner, it makes me much more encouraging of clients who are restless for adventure — and more willing to gently challenge whether those who have achieved financial security are getting the most benefit from it.
Currently, I hear a lot about the FIRE movement – a programme of extreme saving that allows followers to achieve Financial Independence and Retire Early. To me it seems miserable: too much about living a life of hard work and frugality so you can quit work and live a life of even greater frugality.
Perhaps that is harsh. Our cycling adventure taught us that living simply can be enjoyable. But research last year from Penn and Princeton universities demonstrates how having more money does generally make most people happier. It certainly reduces stress about the car breaking down, the boiler thudding to a halt and the roof leaking.
Our need for financial security is not to be sneered at. Nor is the desire to do things in a bit more comfort – especially as you get older. Having money allows you to eat well and travel further in greater comfort.
But what surprises me, is how many people I meet who are financially secure and want to live more adventurously — and do not.
There is always something to stop them – the kids, the grandkids, giving up a career and worrying about starting again. They are fearful. And too often the relentless pace of life leaves little space to explore brave thoughts.
When clients are restless for change and some excitement, there are three things I often suggest to help them think through the financial aspects.
1. You can practice change
Change need not be permanent. You do not have to retire early or derail your career. Try to negotiate a sabbatical with your boss – a grown-up gap year. Lots of those who got their A-level results this summer will be planning one — why not choose to take a break later in life? You could take time to travel or write a book – whatever your dream is. It’s not a new idea. The origins of a sabbatical can be found in Leviticus, where it advises you to sow your field for six years, prune your vineyard and gather its fruit for six years and then give the land a year of solemn rest.
At the end of your sabbatical you may go back to your old life. A surprising number of us love our jobs. I was glad to return to England and get back to mine, albeit with a different employer. I returned refreshed and energised and with experiences that I hope make me better at my job. That long break continues to sustain me today.
The sabbatical concept – whether for a couple of months or a year – appeals far more to me than FIRE, which requires putting off too much enjoyment now to achieve a permanent future change that may prove not to be what you wanted anyway. That feels a higher-risk strategy.
2. Let your finances liberate you
Even people who would be considered extremely wealthy can be surprisingly nervous about running out of money. They worry about tax changes and inflation. Consequently, they live within their means, and dream accordingly.
I find that mapping someone’s financial landscape, working out how much they need, what they have got and where – how much it can generate and how that can be improved – can bring both reassurance and liberation. Sometimes when you explain the positive results of the cashflow analysis it feels like giving someone permission to have fun. In fact, this is where I get most satisfaction from my job.
If they have a sabbatical in mind, we can work through the likely costs, what a sensible contingency budget looks like and the implications for their earnings and pension contributions of stopping work for a time. This leaves little doubt about the affordability and can often swing the decision.
3. Don’t just count the financial cost
I have a client whose bucket list includes travelling on the Orient Express to Venice, but he worries that he and his wife will spend the whole trip shuddering over the price. I tell him to think about a portfolio of experiences on that trip and judge the value in aggregate. If you make sure to savour the free experiences, you might feel freer to savour the costly ones.
My memories of mountain-biking around the world taught me that sometimes what looks like financial folly need not be foolish. My financial mistakes made me who I am. Do not be afraid to make some of your own.
*Featured on the Financial Times website on 15th August 2024: Can you afford to take a grown-up gap year?.
Nathan Valbonesi is a Chartered Fellow of the CISI and leads the investment and wealth advice team at Weatherbys Private Bank