E51: How to resist lifestyle creep with Clare Seal, Edoardo Moreni, and Alex Langley

The following is a transcript of a bonus podcast episode of The Pension Confident Podcast. Listen to the episode or scroll on to read the conversation.

Takeaways from this episode

• The subscription trap adds up faster than you think - the average Brit spends £696 a year on subscriptions, and Spotify, Netflix and Amazon Prime alone come to £419 a year between them.
• A comfortable retirement costs more than most people plan for - the Retirement Living Standards put a comfortable retirement for a single person at £43,900 a year.
• Lifestyle creep comes at a real pension cost - redirecting just £200 a month into your pension instead, topped up to £250 with basic rate tax relief, could add around £200,000 to your pot over 30 years.

PHILIPPA: Welcome back. Quick question for you: are you earning more than you were five years ago? Now here’s a thornier one: if you are, do you actually feel better off? There’s a sneaky phenomenon that can quietly hoover up every pay rise, every bonus, every step up the career ladder. It’s called ‘lifestyle creep’, and it might just be the single biggest obstacle between you and the comfortable financial future you’re actually working towards. So, how can you keep that destructive phenomenon at bay? That’s what we’re talking about today.

I’m Philippa Lamb, and if you haven’t subscribed to The Pension Confident Podcast yet, do it now. That way you’ll never miss an episode.

So, here to help us spot, stop, and maybe even reverse lifestyle creep, we’ve three guests who know all about it.

Edoardo Moreni is the Co-Founder and CEO of Emma, the personal finance app that helps over a million people track their spending, subscriptions, and their net worth. He’s seen firsthand what happens to people’s money when they don’t keep an eye on it.

Content Creator Clare Seal is one of the UK’s most trusted personal finance voices. She’s chronicled her own journey out of debt, and she’s written books on the psychology and practicalities of spending. She’s, in her own words, a recovering lifestyle creeper.

From PensionBee, this time Alex Langley, Head of Customer Success, and back for his second appearance on the podcast. He spends his days talking to PensionBee customers about their money, so he’s seen what lifestyle creep can do to people’s finances, including his own.

Hello everyone.

ALL: Hello.

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What is lifestyle creep?

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PHILIPPA: Lifestyle creep is essentially spending, well, more as you earn more and falling into that trap of just never really feeling any wealthier. Obviously, it can be about big purchases. My feeling is that it’s about the small stuff for a lot of us. I was thinking about this this very morning. I came into King’s Cross Station; I spent £4.50 on a white Americano. I looked at it. I thought about the podcast. I thought, this is [a] ridiculous amount of money to spend. But I do it. I do it often. What do you guys do? I bet you’ve got similar stuff.

CLARE: Oh, for me, lifestyle - like keeping lifestyle creep at bay is like playing whack-a-mole, honestly, because it’s, I think I’ve got youngish children, so they’re, age three to 11 [years old] and one in the middle. And so, it’s so easy to spend more on them because as you’ve more money, you just sort of think, why not, when they ask for things. And you’ve to really rein yourself in. But also, about things to fix myself. I’m 36 [years old], so I’m not even that old, but I’m just being advertised like collagen and creatine and all of these things.

PHILIPPA: Oh yeah. Edoardo, what is it for you?

EDOARDO: I think my new lifestyle creep since last year has been clothes.

PHILIPPA: Oh, really?

EDOARDO: Really bad.

PHILIPPA: I think we really need to know why this has suddenly arrived in your life.

EDOARDO: I think, because I am 33 [years old] and up until the age of 32, I was hanging on like these sort of like Christmas gifts, birthday gifts, and that was my sort of look. And after that, I just, I decided, “OK, no, now we need a reset” and I start buying. And it’s a disease, it’s like in every sense. You know?

PHILIPPA: Yeah, I know, there’s no answer. Alex, what’s it for you?

ALEX: Mine is a lot of beauty stuff. Very vain, very shallow. Because, you go to Holland and Barrett or you go to Boots and you think, “This purchase is going to change my life. It’s going to change everything. Once I’ve got this cream, everything’s going to be better”. And then of course you inevitably use it, and it doesn’t solve all of your problems.

PHILIPPA: But are you buying more expensive stuff as you earn more?

ALEX: This is the thing. I’ll buy more and then it sorts of builds. And now I’ve got into like, I get Botox as well. And so, it all sort of builds up over time.

PHILIPPA: Well, I think, we’ll get onto ‘the what’, more about the what, but ‘the why’, ‘the why’ is interesting to me. I mean, we’ve talked a bit about slipping into it and there’s age and there’s kids and things, but what do we think?

CLARE: I think what I see happening is that you have your current means and your life where it’s, it’s like one circle, and then outside of that there’s like a bigger circle of what you’d like your life to be like. And honestly, I think that as your means grow, as long as that circle, the outside circle, is really intentional and it’s stuff that you value and it’s stuff that’s going to bring joy or security or something, it’s going to bring something to your life, then I actually think that expanding out into that circle is fine.

So, if that’s as you earn more, you haven’t been on holiday for years, so you’d like to add in a holiday because it’s going to bring some value. Or even for so many people, like more regular trips to the dentist or swimming lessons for your children or some education. I think that’s absolutely fine. But what we quite often happen is that as your actual circle of means expands, that external circle keeps expanding as well. So, you keep sucking more things into that. The goalposts just continue to move as you achieve the things that you want to achieve.

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Trigger points and the psychology of spending more

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PHILIPPA: I think there’s trigger points as well, aren’t there? Things like, even your first salary, your first job. I mean, we all spent when we got our first pay packet, right? And it creeps up on you, but promotion, maybe you’re moving in with a partner, buying a home. All these things feel like justification, don’t they, to spend more? But as you say, it’s that thing about it being intentional rather than just luring you on.

EDOARDO: But, I think, as long as you don’t spend more than what you make and savings and investments are counted in, there’s no problem with that.

CLARE: I think it’s about having some boundaries, but not in terms of [being] really strict with yourself. I think for me, sometimes it comes down to keeping a level of respect for your future self, making sure that you’re just holding your future self in regard and taking them into account. And this is from someone who also orders a lot, like too much Deliveroo.

PHILIPPA: I mean, we all do.

CLARE: It’s so exhausting, isn’t it?

PHILIPPA: I do. I tell you where I think the difficulty arises for a lot of people who work. So, I’m freelance and the series producer of this podcast, she’s freelance too, and we’ve talked about this. All that’s great if you’re on a regular income. If you’re freelance or self-employed, your income often isn’t like that. There’s [a] real feast and famine. And you might go through months and months where you’re really, really reining everything in. And the temptation when things happen, you get a new contract or, your rates go up or more money suddenly arrives, to really splurge, because you do feel you deserve it. There are some things you definitely do need. That you haven’t got. And then before you know it, that’s the new normal, you know? So, the predictability of your income is a factor, I think, isn’t it?

CLARE: I think you’re so right. And I think that an emotion that’s really underestimated when it comes to things like emotional spending and lifestyle creep and all of that is relief. Sometimes if you’re feeling the pinch a bit, like you said, if you’ve just gone through a period where it’s more famine than feast. Or if you’ve been working in a job, maybe you’re training and you’re on a lower wage, but then you get a promotion. Sometimes that feeling of relief is really dangerous because you’re like, “Oh, I can finally let go,” and you just let go too much. That’s definitely happened to me many times in the past.

PHILIPPA: I mean, it’s other people, isn’t it? It’s the general expectation of people, friends, family, what - how they’re spending, how they’re living. You know, you’re spending time with them, It’s weird if you’re penny-pinching all the time. I find that drags your spending higher, don’t you find? Because obviously incomes vary radically. You might have friends who’re working in the city earning a load of money and people who’re working in jobs where it’s really, really low pay, but you’re still all friends. You’re still seeing each other.

EDOARDO: I mean, you don’t have to spend it if you can’t afford it. You know, like I go back to that point that you don’t have to go out, you don’t have to entertain yourself if you can’t stay at home.

PHILIPPA: Oh, sounds a bit dull.

EDOARDO: Yeah. But no, but like, that’s the whole point is like, why do people overspend? Because they’re not in control. And, there’s no, having a humble life in control is like a valuable life.

CLARE: I think I’d always fall in the middle ground of that. I really feel like you can embrace some joy in the in-between of that. And I think one of the things you’re talking about, like staying at home by yourself and not doing very much versus going out and spending a load of money. But I think in the in-between there, have people over to your house. And I always say this, like one of the most generous things that you can do is invite people into your home. Tell them to bring something so that you’re sharing the cost. Like someone brings a bottle, someone brings a dessert. Whatever it might be. But like, please, please have people round to your house even when it doesn’t look like a show home, even when it’s not super tidy, because then it gives other people permission to invite you and their other friends and family to their house even if it doesn’t look perfect.

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Supermarket upgrades and the subscription trap

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PHILIPPA: Food.

CLARE: Yeah.

PHILIPPA: Is a big one. Where you buy food.

CLARE: Mm-hmm.

PHILIPPA: So, you start out at the cheap supermarkets, right?

EDOARDO: Exactly.

PHILIPPA: And then as time goes on, as you earn more, creep up the chain, don’t you? And you end up at Waitrose.

CLARE: I’m an Ocado girl through and through.

PHILIPPA: Oh, me too.

CLARE: Yeah.

PHILIPPA: You know what I’m talking about here.

EDOARDO: That’s a quite interesting point. You know, when I started the company, my starting salary was like £25,000 for the first two years. And I wasn’t going to Waitrose, buying the burrata from Waitrose was like -

PHILIPPA: absolutely not -

EDOARDO: just terrifying, right? I still remember that feeling.

PHILIPPA: Advertising has a lot to answer for here, doesn’t it? Because, all the stuff like meal kits, this whole thing of you are time poor, what you need are meal kits delivered to your home. They’re very expensive. We can agree on that, can’t we?

CLARE: After that initial offer that they drag you in with that’s like really good value, and then they just trust that - it’s like any subscription. They just sort of trust that you’ll forget to cancel.

PHILIPPA: Yeah, subscriptions though. I mean, you mentioned subscription. We talked about meal kit subscriptions. Let’s talk about other subscriptions, Alex. Because I’ve heard that you’ve got a lot of them.

ALEX: Oh God, it’s terrible, isn’t it? I’m one of those people that signs up for the free one-month trial. And because in my life, like I’d say at work, I’m quite organised and I think I organise myself out.

PHILIPPA: Yeah.

ALEX: It’s like the ability to be organised, it’s been used up. And so, in my normal life, everything just is very burying my head in the sand. Oh, I’ll pay a one-month free subscription and then end up paying it for a long time. So, there’s like -

PHILIPPA: how many do you’ve?

ALEX: There are so many and I might even miss some.

PHILIPPA: We have time.

ALEX: I’ve the standard ones. So, I have Spotify, I have Amazon Prime, and I also have Netflix. And actually, just those three combined costs £419 a year. On average, if you’ve sort of a standard package. But those aren’t the only ones I’ve. So, I also -

PHILIPPA: the others are? I don’t want to drag this out of that. Is it just me feeling like I’m having to drag it out?

ALEX: I also have Disney Plus, I have Hulu, I have Sky. I also once was paying for Mario Kart on the phone. You can pay to get the different skins, and I wanted all the different ones, so I paid like a small subscription for that, and it wasn’t a lot, but that’s the point. You sign up to it and it’s £7.99, but that £7.99 adds on to the £8.99 over here, and it all adds up. And I found -

EDOARDO: times 12.

ALEX: Yeah, I had a lot of them.

PHILIPPA: Edoardo, you’ve got data, haven’t you, on this? How much the average person spends?

EDOARDO: A lot of money. I think Emma is famous for tracking all your subscriptions in one place, and it’s almost like one-in-two people that download the app, they see duplicate subscriptions running through their bank account.

PHILIPPA: And do you know what the average Brit spends every year? Take a guess on subscriptions.

CLARE: £500?

PHILIPPA: £696. This is the average Brit. You know, that’s £58 a month. But there are going to be people, looking at you Alex, who’re at the other end of the scale spending a lot more. And people like Edoardo, I presume, not spending anything. Do you’ve any subscriptions at all?

EDOARDO: Actually, I can show you because I’ve got them here in my pocket. I think I’ve got probably like 15 of them.

PHILIPPA: But it’s a thing, isn’t it? And there’s more and more and more of them and they all feel like things you have to have.

ALEX: I mean, one of the problems is that I’m paying to essentially rent things, I’m not actually - where is that money going? Am I actually purchasing anything? Not really.

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Being intentional and auditing your spending

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EDOARDO: But, like, because we talk about a lot of subscriptions as they’re like a bad thing. But, we forget that a pint in London costs like £7.70.

PHILIPPA: Oh, yeah.

EDOARDO: So sometimes it’s not even about the subscriptions, it’s about how you spend your money and how you live your life. The £9.99 can sound a lot, but the two pints at the pub is two months of a Netflix subscription, you know? So -

PHILIPPA: And this loops us back to that thing that Clare was saying about, you need to be intentional about it, which means you need to know that you’re doing it. So, I’m guessing the advice would be [to] audit what you’re spending, right?

EDOARDO: Of course.

CLARE: But if - I always say to people, if that coffee is what makes the difference, like if that’s the thing that you look forward to every day on your way to work and it makes the commute bearable and you savour every mouthful of it, then that’s - that spending is fine. If you can afford it, that spending’s fine.

If it’s just a habit and you pick it up and you often throw half of it away and you’re just doing it on autopilot, then that’s a waste. So, I think it’s about - you have to interrogate every one because what’s valuable to me isn’t going to be what’s valuable to you.

So, I think it’s about that. I wanted to go back to subscriptions just for one second. It was a really quick win that people can do, is that if you’ve got a partner, and I mean, this is, it’s really good to talk to your partner about money anyway, but please, please sit down and make sure that you’re not both subscribed to the same thing -

PHILIPPA: oh yeah -

CLARE: because me and my husband, like, we both had Netflix subscriptions. And at one point I think we both had like a Disney+ subscription and we have Sky, which includes Disney+. So, we were paying for it three times. So, I think if you can just sit down, that can be a really good, inciting conversation for a broader conversation about your finances. Obviously, we all know that people don’t really talk to their partner enough about money.

PHILIPPA: I already know I’ve got duplicate subscriptions with my husband, particularly things like Amazon Prime, because, and I just haven’t done anything about it. It’s like you saying, Alex, super organised at work and then your own personal life, somehow part of being in downtime is that you’re not quite as on it as you would be at work and stuff. But I’ve got better. I mean, do you not diarise when you do free trials with streaming services? You don’t stick it in your calendar because I do now, the cancellation date before I’ve to pay anymore.

ALEX: Oh, I completely overestimate my abilities to remember to shut something down for sure.

CLARE: But the other thing is that if you’re subscribing through Apple, so if it’s like an app subscription, you actually can cancel it immediately. So, you can subscribe and then cancel it immediately and you still get the full free trial.

PHILIPPA: Yes.

CLARE: So that’s a tip that I always give to people as well is just do it all in one motion. Subscribe, cancel, and then you just get the free trial, and you won’t get stuck in that subscription.

PHILIPPA: That’s a very good tip.

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The real pension cost of lifestyle creep

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PHILIPPA: It’s all very well, we’re laughing about this and saying, these are small sums. And as Clare rightly says, and as Edoardo rightly says, if they’re bringing you joy, for the price of a pint in London, then actually how bad is that? But the audit thing is important, isn’t it? Because if you’re thinking it doesn’t matter, it really, really does, doesn’t it? Because you talk to people all the time who’ve - this has got out of control. And all the money that’s leaching out of their budget into this could be feeding into savings and investments and of course pensions, couldn’t it?

ALEX: For sure. And I think at the moment with [the] cost-of-living crisis that we’re having, the fact that we’re all potentially spending money on things that if we’re not getting the benefit out of it, it’s worrying and it’s coming out every month and people will forget about it.

PHILIPPA: But say, I mean, if we put some numbers on it, say if we had someone in their 30s, And we’re going to be conservative here and say they’re just spending an extra £200 a month on what we might call ‘lifestyle creep’ or ‘lifestyle inflation’ rather than saving or investing it. Are we able to count that forward and see what that actually would cost them in terms of by the time they get to retire?

ALEX: Yeah. So, every personal contribution you make [as a basic rate taxpayer], the government tops it up by 25%, which is amazing. So, if you were to spend that money into your pension, you would get £50 tax relief on top of the £200, and over 30 years, let’s imagine you’ve got 8% growth. Let’s take some inflation off of 2.5%, and let’s say that you’re paying 0.7% in fees. It’d be around £200,000 extra in your pension, or £7,900 per year, and that breaks down to £660 per month in your retirement income.

PHILIPPA: I mean, it’s quite surprising, isn’t it, how those numbers stack up, because we’re only talking about extra £200 a month of discretionary spending you don’t need to do. And I think we’ve already established [that] a lot of us are doing more than that.

CLARE: One of the things that always really helps people to make good moves financially is making it really tangible. I think so much of this tends to be abstract. It tends to be this kind of, “Oh, I spend way too much on subscriptions,” or, “I can feel my lifestyle inflating”. But if you can make it really tangible. So doing direct swaps, and so this is how I incrementally started paying more into my pension, is I literally took the thing and cancelled the thing and immediately set up the direct debit straight into my pension. So, a direct swap of this thing that I’m not getting value out of versus this thing that I’m going to get so much value out of. You know, as you walk past the coffee shop, put the £4.50 straight into your savings or your investments or your pensions. Honestly.

EDOARDO: I’d be on the opposite spectrum of you.

CLARE: Really?

EDOARDO: Like if you don’t have an emergency fund, you shouldn’t spend your money. Set up savings, set up investing, then what’s left, you spend it. And if there’s nothing left, live a very humble life.

ALEX: It’s just a mindset though, isn’t it? I think it’s hard for people. I’d struggle to do that. Yeah, I’d find that really hard.

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How to cut back without making life miserable

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PHILIPPA: I mean, this is the point, isn’t it? Because I do want to talk about [it], I think we’ve all agreed it would be good to stop this, or at least rein it in. But how do you do that without making your life feel really horrible? Because Edoardo is obviously someone with a huge amount of self-discipline, probably more than the rest of us. But we don’t want to make our lives a misery. I mean, I take your point, Edoardo. If you can’t afford to spend, don’t spend. The last thing you want is debt. And Clare knows all about this. She’s talked about it in the past.

EDOARDO: It goes back into priorities, right? Because what’s important to my life? Groceries, personal care, [a] tiny bit of entertainment. But eating out, doing takeaways, buying alcohol - these are all things that I think you can cut by 50% tomorrow if you want to.

CLARE: I disagree that those things are useless. So, I did, like you said, I had £27,000 worth of debt. And to put that into context, that was almost exactly my annual pre-tax salary at that point. Let’s not talk about how that was able to happen. That’s a whole other show, but -

PHILIPPA: But you were there, but it was -

CLARE: I was there and I paid it off over two years and I didn’t completely deprive myself and my family of all of those extras because always in the back of my mind was like, “I could get hit by a bus. I could make myself miserable, to pay off this debt in the minimal amount of time. And then I could get hit by a bus”.

And so, I trod a middle ground, and I ring-fenced some spending that was going to enable me to like to take my kids to Legoland while they were still little enough to enjoy it. And my eldest is 11 [years old]. He’s on his school’s residential [trip] at the moment and I can feel him slipping away. I can feel him slipping away towards his friends. And so, I’m really glad. I don’t care that it took me maybe three months longer to pay that off, and I didn’t care that it took me six months longer to fully fund my emergency fund. Like, I think you’ve to live your life.

PHILIPPA: A lifelong joy of that connection.

CLARE: Exactly.

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Building resilience and talking about money

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EDOARDO: We live in very unpredictable times. You know, you’ll lose your job, the rent might increase. There are so many things that might happen that if you’re already in a very bad situation, it’s better to sacrifice six months of your life to be back on track and then restart over than finding a middle ground. What if you get fired and you lose your job and you’re like £20,000 in debt? What’s going to happen?

CLARE: What insulates me from that fear is the fact that I’ve been through all of those things. I did have to leave my job when I was deeply in debt. My husband got made redundant when I was seven months pregnant. And we’re resilient, and we found a way through all of that, and, and we’re fine. So, I think [you should] absolutely do everything that you can. I’m not diminishing the importance of an emergency fund. That would, that would go against everything that I believe in.

I just think that find a way to ring-fence some stuff. And it might be a really small amount. It might be like your child’s swimming lessons, or it might be like enough to go for an ice cream every week. It doesn’t have to be like a big thing. I certainly wouldn’t be advocating for [things] like, “Go on the holiday of a lifetime because you’ll never get that time back”.

PHILIPPA: Sure.

CLARE: Also, crucially, they can make the difference between getting to the end of that journey of paying off your debt or building your emergency fund, or making yourself so miserable that you give up and you swing back in the other direction and you fall completely off the wagon. So, some of it isn’t even emotional or desirable or sentimental. Some of it’s just purely practical. There are a lot of people who just wouldn’t be able to carry on with that level of discipline.

PHILIPPA: Yeah, it has to be sustainable, doesn’t it? I mean, Alex, you talk to people all the time. I mean, I’m guessing quite a lot of them have a wake-up moment like Clare had when she suddenly thought, OK, things need to change. What do they tend to be?

ALEX: For sure, we see sometimes people needing to withdraw in order to make purchases rather than to live on, which is worrying at the moment, yeah. And something that, you should try to make sure your pension is there for you to live on after you retire rather than to allow you to supplement an income currently.

PHILIPPA: Clare, you talked a bit about recovering from this debt mountain that you had. Did you do the basic things? I’m guessing you did, like, you reined back on where you bought your groceries and the things we’ve talked about earlier on.

CLARE: We did like a full, full audit and we did shop at a cheaper supermarket. We renegotiated any contract. We kept our old phones and went SIM-only, all of those things that we could. We cut out a lot of waste.

PHILIPPA: Did life feel grey and hard?

CLARE: No, I’d say, I think because I was documenting it, people knew that we were doing it, so it wasn’t -

PHILIPPA: Well, that brings me to the next thing, actually, that whole idea we talked about, other people can drag your spending up. But other people can also help you in this journey to reining it in, can’t they? Because it’s all about having conversations and the transparency can be really helpful. Yeah. I mean, you’ve got features, Edoardo, haven’t you, on your app about to help people have those conversations?

EDOARDO: I think so. But that’s one of the main problems with personal finance. People don’t like to talk about it.

PHILIPPA: Feels embarrassing, doesn’t it?

EDOARDO: Yeah, it feels a bit embarrassing. But obviously for couples, for example, we’ve got features where you can share each other’s bank accounts within the product. So essentially you can move both partners’ accounts in a single, like we call it ‘Space’, that you can access. And so, you can track each other’s spending. So, the problem of like double paying the Netflix at the same time, it goes away because you would see duplicate subscriptions right away, so -

PHILIPPA: so we need to really wrap this up now, but I’m going to, I’m going to say budgeting apps. These, I mean, everyone should be using these, right? I bet you don’t, Alex. You’re looking at me like a man who doesn’t use budgeting apps.

ALEX: No, I don’t.

PHILIPPA: Even tempted? By that help you rein stuff in.

ALEX: I think I just need to be more organised generally, just like outside.

PHILIPPA: They do it for you, don’t they?

ALEX: Yeah, that’s probably what I need, something that just organises it for me. The thing is, you get to the end of the day, and you just want to sit on the sofa. And this is why I spend all this money on all of these streaming services so I can sit on the sofa and enjoy them.

PHILIPPA: I mean, yeah, I get it. I do. I mean, there’s kind of, there’s a very, even if you don’t like technology, you don’t want to use apps, there’s basic frameworks.

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Budgeting frameworks and tools that work

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PHILIPPA: So, there’s the ‘50/30/20 rule’ Clare, talk us through it, how it works.

CLARE: Yeah, so the ‘50/30/20 rule’ dictates that 50% of your spending is on essentials, 30% on enjoyment, 20% on building your net worth. So, whether that’s paying off debt or whether it’s savings and investments, I’d say that the 50/30/20 rule is completely inappropriate for most people within this cost-of-living crisis. I think that most people’s essential bills are way higher than 50% of their income. But I do think that it’s a useful framework to work to that you can adapt.

PHILIPPA: So, if you play with the percentages.

CLARE: Yeah, exactly. So, let’s say your bills - and work from your essentials - so, let’s say that your bills are 70% of your income, then you maybe look at 15% and 15% or 20% and 10%. But I do think that’s very theoretical. You have to pair that with something like a budgeting app. I always say that budgeting, two-step process. There’s the plan and then there’s the tracking and monitoring. And most people never make it past the planning stage. So, they lay out this beautiful budget that really works on paper and then they don’t tie their budget to their actual spending.

EDOARDO: Interesting point. Obviously, I’m pro using budgeting apps, but the way that I budget is actually quite different from most of the people in the sense that I don’t set specific budgets. I simply look at the income and then the spend per month, and if I know that there is like a positive difference in between, I’m saving.

CLARE: Yeah.

EDOARDO: So, if the income is like, I don’t know, £2,000 net and the spend is £1,000 or £1,500, there’s £500 saved every month.

PHILIPPA: So, you’re not believing targets? You don’t want to -

EDOARDO: wow, you’re going to spend hours setting targets, you’re going to do all of that, and then you’re not going to follow through. So, it’s like, that’s eventually what happens to everyone, right?

PHILIPPA: Well, you say that, but I mean, I use tech to move money around so that it takes the decision part away. So, I set up my bank account so that a certain amount automatically disappears into my potential tax pot, [and] a certain amount disappears into other pots. And then the balance I see is the balance I can spend because the rest of it’s gone to those pots. I find that really helpful.

EDOARDO: And I think that’s the right way to do it.

ALEX: Yeah.

CLARE: And what you’re doing with that intentionally or not, is that you’re treating all of those things like saving for tax, saving for your pension, all of those, you’re treating them like another bill. And it’s kind of like, you know the Julia Donaldson book ‘A Squash and a Squeeze’?

So, it’s based [on] an old proverb, but it’s [a] farmer goes to whoever it’s, a local wise guy, and says, “Oh, my house is too small”. And he’s like, “OK, bring your chickens in, and then bring your cow in”. And then at the end he’s like, “Oh, it still just feels really small, but there’s loads of animals in here.” And he’s like, “OK, so now just take them all out”. And suddenly his house feels enormous. And I think that if you do that, where you get yourself used to that lower amount of spending and that lower limit that you’ve, then if you do then want to increase it a little bit, you really feel the benefit of it.

PHILIPPA: Mind games.

CLARE: Yeah, exactly. Sometimes you’ve to gamify it for yourself.

PHILIPPA: Thanks everyone. I really love these episodes where we end up with a bunch of things people can do, don’t you? You know, the practical stuff you could actually take away.

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Next month we’re going to be discussing marriage. Is tying the knot actually worth doing from a money standpoint? We’re going to dig into the legal and financial ins and outs of saying I do or I don’t.

And here’s the disclaimer before we finish: please remember, anything discussed on the podcast shouldn’t be regarded as financial advice or as legal advice, and when investing, your capital is at risk. Thanks for being with us.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.