Midlife Finances - Making Decisions During The Cost of Living Crisis an interview with Pete Matthew

The Restless Midlifer : Episode68

In this timely episode, Dave is once again joined by Pete Matthew, all round top bloke, Meaningful Money podcast host and CEO Jackson Wealth. Pete has joined the show twice before so do check out those episodes as they provide a useful foundation for today's discussion (ep's 32 & 48). Given the so-called 'cost of living crisis and talk of a recession, how should we go about making sound decisions when it comes to life and finances? Do we wait, panic, go all in?

Pete Matthew is a very content husband to Jo and father of two grown-up daughters. He's a Chartered Financial Planner and CEO of Jacksons Wealth Management in Penzance. In 2010 he set up a video camera and decided to start teaching the world about how money works. Over 1000 videos and podcast episodes later and that project - Meaningful Money - has become a business in its own right and has reached hundreds of thousands of people to help them manage their own finances. He's a keyboard player and drummer, a fan of the Canadian prog-rock trio Rush and owns a Jack Russel called Maisy who he loves more than his kids.

Links:

Website: Meaningful Money – Making sense of Money with Pete Matthew | Financial FAQ

Courses: Landing Pages – Welcome to Meaningful Academy

Book: The Meaningful Money Handbook - Meaningful Money – Making sense of Money with Pete Matthew | Financial FAQ

YouTube: Meaningful Money

Podcast: Meaningful Money Podcast – Meaningful Money with Pete Matthew

Ultimate guides: https://meaningfulmoney.tv/?s=ultimate&cat=1842

Power of checklists season: https://meaningfulmoney.tv/?s=checklist&cat=1842

Facebook group - https://www.facebook.com/groups/meaningfulmoney

Retiring in a recession - https://youtu.be/g5GqEuHFR6g

Pete’s previous appearance on the podcast:

Episode 32 - https://www.midlifereshape.com/podcast/episode32

Episode 48 - https://www.midlifereshape.com/podcast/episode48

Dave Algeo is a Restless Midlifer, searching for answers and adventure. His mission, should you choose to join him, is to seek out ways to get life back on his terms, heading in a more fulfilling direction and enhancing his health in the process. Dave is a writer, coach, and constantly curious person, striving to encourage others to live big - by identifying the small but significant things that can transform the life we are living. Join Dave as he explores how to regain the spirit of adventure and childlike curiosity whilst managing the "grown-up" responsibilities of life.

Dave's approach to making changes in life, health and direction, is rooted in his 'sprout sweater philosophy. Check out his 'Crackerjack' video here https://youtu.be/OZM4ObMSu6U to learn more about the basic metaphor. Check out episodes 30 and 31 to learn more about Dave's approach.

Visit https://www.midlifereshape.com/podcast or search for 'Restless Midlifer' in your favourite podcast feed. To find out more about the podcast, and episode show notes visit https://www.midlifereshape.com/podcast Drop Dave a line at dave@restlessmidlifer.com to ask questions, offer feedback or suggestions for future podcast content.

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Transcript (AI Generated)

[00:03] Dave: The Restless Midlife of podcast get health, weight and life back on your terms. Hi and welcome to episode 68 of The Restless Midlife a podcast. And this is in the new format. Another interview you and it's the return of one of my favorite guests, Pete Matthew. Pete is the CEO of Jackson well financial adviser and the horse of the awesome Meaningful Money podcast. And it's really worth probably checking out the previous two episodes that Pete and I, the Peter, peers on because we build up and in the first episode we look at getting to grips with with our midlife finance. The second episode, more diving into things like investment pensions, that kind of thing. And this one, the Three Peaks, as Peter called it, the Third Appearance of Pete. We really tap into the current climate and how as a midlife who may be making some decisions. May have set about working on getting our finances in check. Paying down debt. Making some key decision perhaps about the hours we work. Whether early retirement might be on the cost. Those kinds of things. Those decisions and following our goals can be quite challenging at any time. But particularly when we feel as if we're in a climate and at times recording. This is July 2022. There is such a lot going on in the world. And talk of recession, inflation, all sorts of things, cost of living, electric, gas, petrol, that kind of thing. So it's a really tiny one and some great thoughts from Peter around that. So I'll let the interview take care of that itself. Certainly really worth listening into before I do. Quick update, because I did say last week I give you an update on my operation to your move and a couple of quick, so it's worth checking that out if you missed that, particularly the interview that follows with Elaine Hudson, a former client of mine. Brilliant, inspirational interview last week. I talked about the bumps in the road, I guess, with Operations Deemed and how I'm getting back on track and I'll talk about that a little bit more and keep the updates over the coming weeks. But one of the things I did highlight, the two questions that I think are really useful as reflective questions when we're trying to sort of get the grips of what's going wrong here, rather than falling into the old stories of beating ourselves up and telling themselves we're useless or just getting cooler and harder on ourselves. And those two questions were, well, I put the second one first because I talked about that last week. What could this be the symptom of? So I talked about that last week. If perhaps you've kind of lost your mortgage or you feel like things are just unraveling, you're just not getting into the groove with things or being as compliant on your plans, et cetera, then that question of what could this be a symptom of? Could be a great way to divert you away from not doing it into what may be some of the underlying issues or challenges. And I explained what mine were and what my reflections were last week. I think that could be really useful. The first question that I asked, which I'm developing today, is, what is it about the framing and the framework of the habit rituals and routines that I'm trying to maintain or embed or introduce that needs perhaps tweaking? Because one of the things that I think is really challenging is when we're introducing new habits and then trying to stick to them, because compliance really execution. Sweating the sprouts daily, daily sweating of the sprouts that we've chosen, the sprout sized habits. Doing that daily is actually the best way to achieve any particular goal. But the challenge is, when we're introducing a number of them, we're maintaining them. Sometimes we don't get quite right, we don't plug it in quite right into a particular time of day, or it doesn't hook into a pre existing, well embedded habit enough. It just jars or doesn't work. And that's really worth exploring. So thinking about the things that you struggle with. Whether it's might be getting out for that walk. It might be doing that meditation. It might be sticking to some sort of attending the gym or doing some fitness at home. Or cooking an evening meal or time. Restrictive eating. Whatever the habits are. Look at what it is that it fits into in terms of the architecture of your day. I'll give you an example for mine. My 60 till I'm 60 commitment. The burpees that I do every day till I'm turned 60. So I've committed two years ago, New Year's Day, hungover to doing 60 burpees a day every day until I turned 60. Check out previous episodes from that to find out more about that madness. There was some logic and reason behind that, but what I found is that it had become patchy. And even as I started to track, I had a good first three months of 2022 100% clamp compliance. But then things changed and drifted. Partly that was due to my reflections on what is it a symptom of? So check out last week's episode if you want to sort of get my thoughts on that. But it was also because that particular habit, the 60 Burbies a day, had become almost dependent and pretty dependent on the context and the location of where I carried them out. So my typical routine would be I dropped Rosie off at school when she was at school, and there's it in lies probably the challenge. And the issue is, I would go straight round to the CrossFit Gym and before the class start at 930, I'd knock off my 60 birdies over a period with some stretching and that kind of thing. And it became the thing I did. People in the gym, you know what I'm doing, encourage me, that kind of thing. But the smell of the gym, the floor, the picking up, the band, they're putting my bag down, all triggered me to just get on and do them. Now, you can probably see there straight away, very strong habit in the location and the context of where I was and what I was doing at that time. So it works. But what about Saturday, Sunday? What about the days and times when Rosie wasn't at school half term, that kind of thing? That's where it struggled. Now, yeah, okay, I managed Hit or Missy, but that's where the problem was. And that, I think, could be the problem with some habits. It can be really useful in getting going. But how do you keep going if the context, the location is patchy, if you're not there every day, if it's not something you do every day? And this is a challenge I have when I coach people around, sleep, particularly if you're a shift worker, because you're not going to bed at the same time, waking up at the same time, that's a story for another day, I guess. So what I've done is I've introduced my own new habit, which touch wood at the moment, seems to be starting to embed nicely. And I find now that what I do is I put it right at the beginning of my day. I've always wanted to get it into the habit of just getting up on the Snooze, on at 630, the alarm Snoozes and Snoozes, and I grabbed those extra few minutes because I know there's no value. And what I would typically do is get up, go down, make a coffee, come up. Potter about what I realized was there's an opportunity there. Get up. That's one. Routine ritual. I do make the coffee. That's another could I put in between the routine of the burpees and when I introduced this might sound a bit silly, but it just seems to work, is I now get up at 630, go down straight into the garage on my bike, which is on a turbo trainer, and I do 30 minutes on the bike. Very easy cycle. And it's meant to wake me up. It's not meant to be a workout. But what I do is I cycle for five minutes and then I'll do twelve burpees. Another five minutes and twelve burpees, and within half an hour, I've done the 60 burpees. I'm nicely warm. I'm walking up and I'm breathing a little bit heavier and I haven't done anything overly strenuous. And then I go on and get on with the coffee. So here's where I have taken the habit and put it in between two things that happen every day, the getting up at 630 and the making of the coffee and put it in there in a way that's quite novel, because novelty around that the novelty of getting on the bike it's wearing now, but the habit is now embedded. But at the time, it was something new and different, and I felt like it was really valuable. So I have to think about the routines and the architecture, the structures around your habits to see whether there's any tweaking or changes that could be done there. So that's my food for thought today. We're on with the interview with Pete. Again, just Pete's take on where we are. The overall theme is don't panic. Just like The Hitchhiker's Guide to the Galaxy front of the first words is don't panic. I think it's easier said than done, but I also think it's important to do that. And we explore this a lot. How can we practically make decisions with the things we can control versus the things we can't in these challenging times and and still move in the direction of the goals that we want to work towards? So I hope you enjoy it. Give me some feedback a day about risksmidliker.com and take care for now, welcome back to I think you might even Qualify as Cohost now, pete on risks of midlife podcast. It's great to have you back. How are you doing?

[08:38] Pete: I'm doing okay, mate, thank you. Yeah, good to be back. I've already called on somebody else's podcast and something comes past. Comes on the show for the third time. They call it a threepeat three peat, which we should probably promptly forget because it's hideous. But there we go. Three peak guests. Great to be here. Thank you for having me.

[08:57] Dave: Great. Yeah. Well, it's great to catch up and as well as having great conversations, it's a chance to sort of tap into the times that we find ourselves in because things feel a little bit different in terms of the mood of the country and the way things are. So I thought I'd tap into that just to sort of pick your brains from that aspect. Things like the increases in prices, the utilities, the potential for a recession, those kinds of things, they're kind of buzzing around on them a lot. So it's just to tap into that, but also just have a bit crack. I think the first two podcasts have been really well received and because of your approach and your style, really Downworth and really make sense. So it's really great to sort of tap into that.

[09:43] Pete: Very well. Thank you to everybody that's listened. I'm glad it's coming over. All right.

[09:47] Dave: Yeah, great. And yes, and hopefully you picked up a few lists making money as we go, so yeah, great. I guess the first podcast we talked about, how do we start to get in shape with the finances? You are perhaps thinking about some decisions about reducing hours, leaving a job, that kind of thing. What do we need to think about for the financial side, the basics? And then the second one was building on that, really looking at things like investing and things I didn't know about in relation to pension types and what have you, which is really useful. So no doubt we'll sort of cover and cut half back to those, but it will be worth listening to those Eversource listeners if you haven't checked them out as yet. I will put the details and the links in the short notes. So I guess, really, it feels like, although it hasn't been that long since we spoke on that podcast, it feels like such a lot has happened. And it's almost like a build up of that feeling of anticipation, of this frustration of the cost of petrol, increasing gas, the electric bills, rising cost of food, the feeling about that. And then people talking about this recession, or is there a recession coming? Type of thing. So I don't know. Any particular thoughts or sort of what you've picked up in your world and then we'll dig in a little bit into it.

[11:06] Pete: Yeah, in my world, I tend to deal with pretty wealthy people, right, for whom recession is a largely abstract thought, particularly if they're retired because they've got a job, they might lose. Right. So that's one thing where times like this, with relentless negativity and not without good reason, right. It's not easy the minute at all. There's lots of things going on which we'll get into, but I tend to get queries about what stock markets are doing, what investments are doing, so that's one part of it. But for a lot of people, the sharp end of where they're suffering at the minute is in the cost of living. And that is probably the factor. There's other stuff going on, clearly, but we got Putin's aggression in Ukraine and supply chain issues, so goods not moving around the world as easily, not least because of rising fuel costs. It costs an awful lot more to send a ship around the planet now than it is a year and a half ago, or whatever, so all that kind of feeds in. So your kind of overall thing on top of all of that is inflation. Inflation, of course, is simply rising prices. Or to put it another way, your pound buys you less now than it did a year ago. So I think we need to understand what inflation is, so that's the sort of definition stuff gets more expensive and generally speaking, you want some inflation, right, because that's the sort of sign of a healthy economy. But what you don't want is runaway inflation. Those of us of a certain age, and even my kids learned about interwar Germany, and that's called hyperinflation, where by the time you take your biscuit tin full of deutsch marks from your house to the baker, they've lost after value and it costs like a trillion marks to buy a loaf of bread or something. Clearly, we're not in that stage and we're not going to get to that stage, right? But inflation, when it's too hot, when prices are rising too fast, and when prices rise in excess of how much people's wages are rising. That's when we have a problem. Now, you want some inflation, but not too much, right. But the problem is that ordinary people can't do a **** thing about inflation. It's not something we can impact at all. All we can do is react to it and look at what we can do practically. So this is going to be probably fairly sprawling, wideranging conversation, paper, right, and sort of formulating thoughts as we go. But for most people, it's in the pocket, right? It's in the wallet of the purse that they're really hurting right now. And depending on how you earn a living, if you're self employed, you may be able to take on more work, you may be able to work more hours to earn more income to go with the cost of living. You may not. But if you're working in the public sector and you're getting a pay rise of 1% if you're lucky, that's a long way below what prices are rising at currently. One thing I think I want to mention fairly early on is that we need to treat inflammatory headlines with the respect they don't deserve. Right. Because remember, news outlets are only there to get eyeballs, and so they're far more likely to talk about eye watering inflation. Then they have to give the reasons why it's the case in a kind of measured way. So, very simply, the headline figure that's going around right now as we record this, is about 9%. Inflation is running at 9%. What does that even mean? Well, inflation is measured by a government set basket of goods, which is deemed to be sort of representative of the sort of stuff Brits spend money on. Everything from package holidays to getting a will written to your iPad to Netflix subscriptions or whatever. And that changes based on the sort of stuff we're spending money on. Right. So Netflix subscription was not in the basket of goods ten years ago? Wasn't the thing? Probably. So that sort of basket of goods, the prices of those things are measured every month and compared with the same stuff a year ago, basically. And the difference in prices are inflation figures. The one that matters is CPI Consumer Price Inflation, and that's the one that gets quiet most of the time. And right now, that's running at 9%, which means that basket of goods is 9% more expensive than it was a year ago. And that's big, right? We haven't seen a number like that for 40 years. I'm 47. So we're talking back to the early 80s that we haven't seen inflation figures like this. But if you think about it, if inflation is the difference in prices from a year ago to today, well, in a year's time, the starting point is today. Right? So those of you that are watching this, are you recording a video on this or not? This will be a podcast, so I need not to wave my hands around.

[16:24] Dave: May well be on YouTube at some point. Feel free to use your hands.

[16:28] Pete: I'm waving my hands. This means nothing to you if you're currently listening to this on your iPhone. So if it's the change in prices over the course of the year from a year ago to today, well, next year's inflation figure will take today as a starting point. And so we have to think, is inflation likely to still be rising at 9% next year? And pretty much every economist thinks not. So inflation will fall. So the scary headline figures are expected to fall by early middle next year, right? But they will fall probably to a rate which is higher than we've known over the past 48 years. So the bank of Income target is 2% inflation. That's the kind of healthy number. Most central banks around the world use that as their target. It'll set up probably bit higher than that, but shouldn't be catastrophically high, right? So the problem with any pain, right, is that you can kind of get used to it. Now, I don't want to be flippant here because I know a lot of people are hurting and I know it's difficult, right, but very often you can get used to discomfort. Doesn't mean you want to, but what you do is you try and make that discomfort as manageable as possible for you. So in practical terms, what this means is we have to go right back to basics, right? If our costs are now higher than they were, what gets squeezed is your discretionary spending, right? If you've got to pay your mortgage, which we have, and if you've got to pay your electric and gas bill, which you have, you start to look at what don't you have to spend money on? Now, if your minimum monthly get by expenses, literally just to eat, keep the lights on is more than it's coming in, then you've got a serious problem. But that's essentially, we're talking about poverty line stuff now, right? That's probably not the target of this show, but if that's you, there are resources that can help. You really need to try hard not to get into debt just to meet your day to day expenses. But that's going to be difficult for some people. For most of us, if I dare say that we've got a bit of fat in our budget, like we've got some stuff we spend money on which we don't need to, we just want to. And so maybe for a time, we just need to raise some of that stuff back. So, for instance, I turned off our Disney Plus subscription. It's like seven, eight, nine or something like that, but we're not really using it. It's a discretionary expense, so I canceled it. It's stuff like that. Maybe if you're only using your gym membership twice a week, twice a month, maybe you cancel it and go for everyone or whatever stuff you don't need to spend time we don't need to live like monks, we don't need to start whipping ourselves, right, and sort of try and force ourselves to be miserable. We need to just do what we can. That's the grown up thing to do if circumstances are against us a little bit. Stuff we can't control, we need to focus on the stuff we can control. Classic stoic principle, right? And so the main sort of the sharp end of that for most of us is our budget. So I think inflation is the overarching story at the minute where it really hits the road for most people is in the wallets and the thing we can do most about that right now is in our budget, what can we trim? Where can we find a bit more rope? And remember with the budget it's about spending less and or earning more so can we add a bit of extra income side hustle or something? If we can, maybe we look at that we come at it from movement, from second incoming and dropping expenses as well. So just some sort of stuff that we need to think about in these current difficult times.

[20:16] Dave: Yeah and thanks for the explanation as well around and also linking it to the headlines as well because I think there can be that feeling and that can often prompt us to perhaps feel more this challenge happens more negative and catastrophize it more than perhaps we need to which then can lead to that more sort of extreme behaviors or panic type behaviors, I think. So if we try to just get that understanding and then as you said, let's look at where we can trim those areas I think that's a very pragmatic approach.

[20:55] Pete: Yeah I think it's far more useful than letting the media dictate your response because it's too easy to freak out and do just knee jerk over reactions then so we know what the media is saying. You know your bank account, right? If you're getting sort of down towards zero about a little bit earlier in the month then you know it's biting. That's where we all measure how we're doing, right? If you are having maybe if you're saving into an isolate or pension or whatever regularly and that's starting to become a little bit more painful you can dial it back for six months or a year or whatever and then revisit it. So yeah, don't let your decisions be driven by the media and us particularly when it comes to investing which I'm sure we'll talk about in a bit. Sorry about the bus going past my window, it's very noisy responses predicted by the media we end up just overreacting and that's particularly with investing is very dangerous.

[21:56] Dave: Yeah now there's a couple of things there because I can't help my head but go to I know we've had conversations about it, go to analogies and I think about a similar way to sort of illustrate it through the analogy to something else can be useful. But I think about in terms of coming to a point in life where you think, I've got to lose a lot of weight, for example, there can be that emotional response where it's like all or nothing, let's just go for it. And we can engage in something that just isn't sustainable. And I can't I heard this great sort of approach or way of looking at that side of it is that we have two systems, really, that we can work out with in terms of managing weird down, because it's the calorie balance or the energy balance. Energy in versus energy out, money in versus money out. We can look at stressing one system to its limit, I. E. Diet, for example, or exercise, or we can stress each one lesser or use each one less system and you don't put pressure on either system in that way, if that makes sense. I kind of like that because it's quite logical. We are thinking about it, although different actually in action. But to not stress one system to its extreme means that you've got space capacity, but also you're not pushing yourself, your emotional self in the case of diets and your physical tiredness, all of that kind of thing. In terms of money, it strikes me from what you're saying that it's a similar approach. If we can park the headlines, let's get our head back to the budget. Let's look at where the two key ones are. Where can I reduce my spending? Not to an extreme that's going to snap back or causes major problems and where can I perhaps increase my income, but again, not burn myself out.

[23:42] Pete: No, exactly.

[23:43] Dave: Yeah. So if we can kind of find those wins in small ways, that really makes sense to me.

[23:51] Pete: For most of us, it's not going to be a case of finding hundreds of pounds extra a month, probably the margins are a lot smaller than the headlines make us think, particularly if we've got discretionary income, we've got disposable income, if you like, because that's our buffer, right? Yeah. It'll be a bit **** if we have to dial down the holiday this year or skip it for a year or whatever, but you're probably not going to die as a result of that. It is okay. And it's the grown up thing to do, right? You don't just keep powering through. I was reading the thing on the BBC this morning, on the BBC News app. It's like, I owe my mom six grand, but I can't stop spending. Well, I mean, that's compulsive behavior. That's an addiction thing. Most of us are not in that space. Most of us can say, right, actually, I need to do something here, do it calm and measured. What can I do? Actually, I can pick up an extra shift maybe once a fortnight. Won't kill me. Right. I can ask them to look after the kids, right? I can do that. It'll be an extra 50 quid a month or an extra 150 quid a month.

[24:52] Dave: Absolutely.

[24:52] Pete: That can make a huge difference. It means I can still go on holiday, so I'll do that. But at the same time, we're not really watching Netflix. Maybe I'll dial that back or maybe I'll switch my mobile phone contract onto Simonly or something. Maybe I don't upgrade my iPhone this year, right. And dial back the contract to 23 periods instead of 50. So there's always stuff we can do. And I think a measured approach to me, that's like an overarching golden rule, particularly finance and many others, many other spheres of life, over reaction, kneejerk, fight or flight type stuff tends to be counterproductive for the most part.

[25:29] Dave: Yeah, I'm reminded of the phrase that you used in the first podcast of Lifestyle Drift where you just add on the Disney Plus and that's human nature. Perhaps now is an opportunity to just check in on our Lifestyle Drift and just check that and also question things like our utility bill. Just for example, my utility bills have gone up consistently last few months. And put it down to that's. Just the way the energy is. Then I sat and thought, they are quite significant. So I rang them and actually the smart meter hadn't been connected up. So sometimes it is worth just questioning, isn't it, and challenge it or saying, look, sky, whoever can just knock that one off at. So I really love that approach. Let's look at where we can and it does mount up. It's the sprout sweater approach me. A few small sprout size changes can mount and be something quite significantly.

[26:22] Pete: They really can.

[26:23] Dave: And I guess there's two questions that really jump out for me as potentially the restless midlife or who we've talked about somebody who wanted to make a change. Perhaps they're looking to free some hours up in order to develop that idea of a side hustle or reduce ours to have more time with. This is perhaps a time where you might be thinking it's the wrong time and that kind of thing.

[26:51] Pete: Yeah, that's a great question. I'm getting that all the time, right? Because I spend a lot of my time at this sort of at retirement space. Most people come to a financial planner like me about retirement. That's their thing. And they either sort of get to their early forty s and thinking, okay, I really haven't taken this seriously up to now. What do I need to do to catch up? Or mostly there are folks in their early to mid fifty s and they see the finish line coming over the horizon. Now it's like, okay, right now I really need to decide what I need to do. But a lot of people are saying, actually I plan to retire on January 1, but my pension fund. Is down by 15%. All the numbers I've based my calculations on being able to retire on are now looking a bit more sketchy. I always say the finances need not to be the primary driver, right. They're not the only reason you're thinking about retiring. It's not like this financial finish line. As long as you get over that, then you're fine, because it might seem now that the finish line has been pushed a bit further back and you've got a bit further to run. Now, that is an option. I did a video recently about retiring in a recession, or not technically in a recession yet, and you've got other things you can do. You can dial back your expectations. Most of us feel like we want to take a big holiday when we retire, or take the family away, or change the car by a camper van. Big sort of thing, almost like a reward for hitting the finish line, right? And that's entirely legitimate. Those things will still have power. If we do them a year down the line, maybe we just hold off. Or maybe we think, well, actually, for the first couple of years, we'll only have 1 hour a year instead of two that we hoped for. Won't kill us. I'll spend my time in the garden. Or the second holiday will be UK rather than abroad. Probably more expensive if it is, actually, do you know what I mean? So there's always stuff and it's the same thing, but what I always counsel my clients is, don't be dictated by the numbers. That's a miserable existence, right? You could probably still retire if you've got your heart set on not working again from January the first. You will still be able to do that unless you put all your retirement funding bitcoin, which would have been a monumentally stupid thing to do, but if you did, then you're probably knackered, but most people don't. They've got more conventional pensions and stuff like that. Those things are not catastrophically down. They're a bit distressed at the minute. But that is the nature of investing. Markets fall 25% of the time and rise 75% of the time on average. So we're in the 25% of the time where markets are falling right now. If you've got money to invest, now is a lot better time to do it than six months ago, because markets are lower, shares and stuff are on sale, but it's still pretty hairy and it's very volatile. So do you put your retirement back? Not based on the numbers, not if you can help it. Maybe there's some other stuff you can do. So you can still retire, still dial back your hours, if that's what you're thinking of doing, and make up the difference elsewhere. There's plenty of levers we can pull, usually more than we think, which we've been talking about.

[30:07] Dave: I think that's such a good that's a really good way to think about it. Obviously, you've got to look at your finance, you've got to make those rational decisions, but you've got other things going on. Your heart is involved, isn't it? The points that I've had, having left the police twice in my time, escaped once they got me back, that kind of thing. But it was around the finances. And I know how heartbreaking it can be when you've got plans and what have you and reality hits. And in that case, I probably had other choices, but I made what was probably the most pragmatic decision at the time, but I still had to deal with that emotion. And I think part of this can be, again, responding from emotion of like, just forget it, I'll just have to work on or I'm just sort of going to do it. But if we can just park the emotion a bit and have a look at it and then allow that emotion back in type of thing to say, well, you know what? We can still do. It doesn't have to be all or nothing. I love that idea. It doesn't have to be the big celebration. It still do these things.

[31:15] Pete: It's about being intentional and rather than being swayed by, I think you should listen to your heart. The longer I do my job, man, I asked some phenomenally wealthy people who are really not happy because they're still working and they don't need to, and no matter how long I bang on at them to just quit, for God's sake, but they did. Oh, no. Perhaps if I can literally in some cases, like just another half a million and I might be all right, I forgot sake, do you know what I mean? Don't make yourself miserable for an extra five grand. It's just not worth it, let alone half million, period. But that's sometimes the world I live in. Listen to your heart. Your wellbeing, your emotional and psychological wellbeing is infinitely more important than the numbers on your bank balance, right? So you can make the money work, but suffering in work that you're not happy or the amount of work you're doing that you're not fully engaged with is totally not worth it.

[32:18] Dave: Yeah, you're right. And I know from those past experience of mine, and also, obviously, no doubt with some of those clients, is that there are other things that are probably driving that in terms of the stories that we tell ourselves. And maybe the work is not so much on the financial at all. It's actually on those stories. And actually, what is it? Am I really hooked into this job for other reasons, this rule, this status or whatever? Am I really wanting to change or am I wanting both? I'm wanting to not let go of the status, but not really acknowledging it versus really wanting to follow my heart. And those are the kinds of challenges that I guess I worked through with clients and had to do myself and that's the interesting stuff, actually, because once you get an awakening realization there, it brings it into full light, doesn't it? Think? And then you can move on with that. Don't forget, if you're finding that your health has taken a backseat whilst you work to achieve greatness in other areas of your life, the Reshape Academy, my coaching and programs are here to help you continue to achieve that success with, and not at the expense of your health. Find out more@midlifereeshape.com. That's brilliant. Worth two questions. One of them, it obviously portrays my complete lack of knowledge around this, but you mentioned somebody retired at such and such a point. Pension funds are down 25%. Their pension might be affected by 25 or 15, I can't remember, but they're down. They're going to have less at that point. Is that like that's it from when they retire or as the markets recover?

[34:01] Pete: Their markets will recover, and unless they're planning to spend their entire pension fund in the first year of retirement, then actually that money is going to be invested probably for another 30 or 40 years. And that's perspective, right? So the way I build retirement plans for people is we identify what money they're going to spend when. So, ideally, one of the golden rules of finance is you don't invest money you need to spend in the very short term. So what we try to do is work with people as they approach their magic retirement date. If it's a hard stop or when they get to the point where they finally stop, is that they have a couple of years worth of their costs in the bank in cash. Now, that's being ravaged by inflation, right? So we probably need to hold a bit more than what we expect our two years expenses to be, but it's better that than having that money significantly reduced by market movements, right? So holding money in cash, even though it's at the mercy of inflation, the buying power of that cash is being reduced by inflation right now. It's better than it actually falling in value because the markets are tanking when you need the money, right? So we tend to say the first couple of years of costs should be held in cash. The reason why it's a couple of years is because for any sort of blended portfolio that's got a bit of all sorts in, it shares, bonds, property, all that sort of stuff, even the worst markets, they usually recover fully within two years. Usually it's not the cases for a balanced portfolio. So if you got two years in cash, you shouldn't have to touch distressed assets. When you get to the end of the two years and you spend all your cash, if markets are still down, well, you're going to have to drip a bit of money out so that as much money is left in to recover as possible. The markets always recover, right. The declines are temporary, the advance is permanent. I do not believe we're in some kind of epochal change that the world will be massively different going forward. I think it's just a classic economic tremor which has happened every few years for the last 500. Right. I don't think it's any different. I might be wrong. I mean, if Putin starts lobbing nukes around, that's a different conversation, right. Which is part of people's fear. I don't think we'll get to that. I don't think even he's that stupid, but we don't know. I think that will be a cataclysmic event, but I still think we'll recover. It will just take longer in that case. So if your pension funds down to get it back to practicalities and away from scare mongering, then probably not going to touch most of it for quite a while. If you were planning to take a bunch of tax free cash out of your pension to pay a mortgage off, maybe you might need to defer that decision for a while. You might need to keep paying your mortgage for a bit because you don't like your pension from recover. So these are the practical sort of individual decisions that people need to make. Take advice if you're not sure, but most people, in my experience, when they get to retirement, they're not dependent on a big lump of cash to pay a lot of stuff off. Right. They've usually paid their mortgage off by the time they retire. Everybody's different. So again, remember that retirement actually isn't a one and done decision, it's just the start of a whole new phase of life where your money is going to remain invested for most of it.

[37:25] Dave: Yeah, it's interesting, obviously. It just shows my lack of knowledge of the whole area. If somebody was I guess somebody was thinking I'm ridges mouth or even thinking of looking into early retirement at a time like this, that might be an option for them in terms of their work. Again. Any thoughts on that?

[37:45] Pete: Or sort of yeah, start with income. Right. So most of us, when we're approaching retirement, we have certain levels of income that we're going to be able to rely on. So maybe it's the state pension, which would be 67, 68. If you're imminently retiring, it might still be 65, 66. So that's a guaranteed income from the state forever. Those who are our age, maybe a little bit older, may have what are called defined benefit pension schemes or final salary sometimes called, which are guaranteed incomes maybe from age 60, maybe from 65. So you need to start with your income sources. Maybe you've got a rental property and there's five months of rent coming in. That's your sort of baseline income. Does that meet or exceed your sort of basic expenses? If not, you're going to need capital to draw from. If your income from your various sources are 1000 quid a month, but your cost of 1500, you're going to need to draw off capital to the tune of 500 a month. So where are you going to take that from? Is it from ISIS? Is it from cash in the bank? If you got premium bonds, is it from pension funds? That's basically what I do for a living. So you're looking for tax efficiency there. You're looking for not drawing off distressed assets, shares and stuff which are down, if you can help it. I think it's just worth mentioning, the reason why it's an unusual circumstance at the moment is because most people, if they're invested, they own a bit of all sorts, so they'll own some shares even not necessarily direct shares in companies, but they'll be in a fun inside their pension, right? And they'll have probably some shares, they'll have some bonds which are just another kind of investment, basically. I ous to governments and to companies, they might have a bit of commodities that stuff that humans consume, like oil, gas, wheat, metals. They might even have a bit of property fund in their pension, say. The reason why you do that is because you spread it around, it reduces the risk, because each of those major asset classes usually behave slightly different, particularly equities and bonds, which are the primary that will make up most people's pension funds and stuff. Usually when equities are tanking, bonds will hold up a bit. What's unusual at the minute is that they've both been battered recently because bonds are usually the safer assets. But what a bond is, we call them the sort of technical word phrase that people like me tend to use it they're called fixed interest instruments. So if interest is fixed, it's an IOU, right? So the government owes you money, essentially, and they say, we're going to pay you five quid a month for as long as the IO is in existence. That piece of paper, if it's fixed interest and inflation is high, that fixed interest is going to become worth less, isn't it, into the future, particularly if it's an IOU that lasts 20 years, current inflation rates, that income is going to be next to worthless by the end of the bond, right? And because that bond is going to see its income stream in real terms become worth less in the future, the capital price of those bonds falls. Fewer people buy them, more people sell them, price falls. At the same time, when you've got high inflation and you've got central banks using pretty blunt instruments like interest rates to try and fix that, you've got the threat of recession. Companies start to suffer and so shares start to suffer, investors bail out, they sell out. And so you've got both shares and bonds falling. So US Treasuries, which are deemed rock solid assets, really, that's loans to the US government, they're down about 15% year to date. That's not unheard of, but rare, right. Usually they're a safe asset. That's why people's pensions are looking a bit sick now, but six months from now, we'll know a little bit more about how it's starting to pan out, how inflation is settling down, what the central banks have had to do. British economy grew much more than they thought last month. Economists were surprised. We had no idea what's going to happen. So even though there are reasons why things are a bit sick and it's unusual, I've seen that maybe once or twice in my 25 year career, the sort of correlation of assets. But it ain't unprecedented. You've just got to stick with it, because in the vast majority of cases, it will recover. It always has done in the past. Otherwise we'd still be trading carrots and chickens with our neighbors. We still got a functioning economic system, despite some pretty major cataclysms, like a global pandemic. So it ain't as bad, I don't think, as the headlines will say. You just got to stick with it. That was a bit rambling, sorry.

[42:34] Dave: It's fascinating, isn't it? There is so much to it and again, it's coming back to let's not get carried away with the headlines. It gives us a little bit of check in and let's do the basics and if we need some particular advice, speak to somebody who knows what they're talking about, rather than definitely true.

[42:55] Pete: I have no clue about that, particularly at retirement. I think I spend my life preaching that people don't need to see an adviser like me, which is counterintuitive. But the one point at which professional advice can pay for itself many times over is at retirement, there are lots of moving parts, but you cannot control inflation, you can't control central bank response, you can't control what Elon Musk decides to do with Twitter, you can't control what Putin's bizarre brain is doing. All those things are completely external to us. What we can do is look at our bank account and say, right, what can I shave off here? Or Let me ask my boss if I can pick up an extra shift or do something on the weekend or something, and do what we can control and forget the rest of it because it'll happen with or without you.

[43:42] Dave: Yes. So with that, then, a couple of other things that pop into mind here is savings based on, say, the last conversations we've had. I've looked at my finances and I'm managing to find that bit every month now, rather than splashing out on or getting a new car. Hold on, the car managing to find it now, but things are getting squeezed now, I'm finding, so I'm tempted not to save versus to keep the bank balance, if you like, or the ins and outs. Any thoughts around that idea?

[44:19] Pete: Yeah, great question. Give yourself a break. Right. It would be easy for me as a financial adviser to come and say, no, you must continue saving, but maybe you just need a break. Whatever you do, don't leave your company pension. Reason being is because your employer, if you're employed and you got a company pension, they are paying in for you, right? So it's free money. It doesn't make any sense to dial back pension contributions if your employer is doubling them. You need to find something else to do. But that aside, if you are putting under credit and that's a bit pinchy right now, dial it back to 50 for a bit, or dial it back to zero for a bit. But set a reminder in your calendar. The easy thing is to get four years down the line and think, I really ought to look at that again. And then it's three years after that that you finally do something about it. So do it for three months and set a reminder and say, actually, could I now start to dial up even if it's not at the previous level? If you were 100 quid a month and you go down to zero, maybe after three months, you dial it up to 40 quid a month. Set a reminder three months hence. This is about being intentional with finance, right? God, I see all the time people who started paying 50 quid a month into their pension 20 years ago and are still putting 50 quid a month into the pension. Well, 50 quid a month was a lot of money 20 years ago. Now they spend three times out on a night out, so it's completely disproportionate. And the only reason it's still like that, because they haven't thought about it since. Nobody achieves anything by default. You've got to work at it, right? So we've got to be intentional with it and that's the key way to do it.

[46:05] Dave: That is such an important point, I think really important. Yes, you may dial things back or down or next few months. I'll not say because but life happens, doesn't it? And again, I'm finding sort of analogies or comparisons in other areas. I thought to a group the other day about we were talking about the things you do when things are going well in terms of your health and those things and how life proof of those things when the tough times happen, because you can then get very hard on yourself when they all fall away. I don't get out from the run every other day now because we start beating ourselves up, but life just turned itself on its head there. They're suddenly working all hours because we got a major situation on at work and yet they're still feeling guilty about not going for the run. So how can we life proof it to say, well, okay, you may not then you may be managing 20 miles a week in the running as an example on the good times, but what's your minimum effective dose during the tough times? If that's the case? Just even put a pin in the habit. I often talk about that with habits that if you're trying to form new habits we can often put too much in them. Like I'm going to do half an hour meditation every day or I'm going to go for a walk or run and we make them too big to even start. We start small but there are dies when you can't even get that. So I often say put a pin in it, just go and stand at the door, look at the sky, be present for a minute if it's mindful as you do it, step outside for a moment. You put a pin in the habit so that the habit is still space somewhere for the habit so that on the other days you can come back to it. And it strikes me similar there with the financial aspect is that you might dial it down to whatever you need to get to survive. How do you put the pin in it to make sure you come back? So those reminders are really important.

[48:03] Pete: I like that. I might need that. Yes, there's minimal effective dose. It's just pragmatic, right? It's just real life. Saving and investing is spending money for the future. It's putting money away so you can spend it in the future. It's better way of putting it but it doesn't make any sense to really suffer now. I don't think for that. If it's the difference between you being able to send your kid on a school trip for God's sake, send a kid on a school trip and just dial back your savings. That's real life. Any sane rational person would do that. I know I would. Right? I live a lot for today while still saving for tomorrow but if I had to choose I would list it today but most of us don't have to choose in ordinary times it's about just shifting the balance a bit. It's not binary. Right. So I think that's smart. It's just real life. Let's just be kind to ourselves a bit but not be soft on ourselves. Too much difference between kindness and being soft, right?

[49:13] Dave: Yeah, absolutely. And I think that's always a bit of a balance but the way to do it is, as you've said, is approach it with let's get down and look at the figures, let's not buy into the headlines and let's just look. Right, okay. It's going to be tough. Few months practically. What's the minimum effective door? Put in a pin in a version of that to then get back and how do I make sure that I check in every so often and review? Yeah, I think that's a really important approach. I guess the other side of this, the question I had was what about debt as a result of the or less conversations I'm actually doing okay, I've put that 1000 pound away into the bank as me cushion. I'm starting to make headway with my debt but here we are.

[49:57] Pete: Yeah, that's when it can be really depressing and hard. It's easy if you've got a bit disposable income, if you don't have people breathing down your neck to pay them back. The first thing to say is that if debt is becoming a problem, we need to speak to your creditors, so to speak, to the people that you owe money to, because there is an awful lot of protection for you as a borrower. And lenders have to be supportive, right, and they have to really bend over backwards to help you. So you may be able to take like a three month break from your mortgage. Say you may be able to potentially consolidate debt onto a lower interest rates. Always something worth considering. Don't pay too much to do that. Sometimes you can get it on a lower rate, but I pay 4% for the privilege of shifting it. So, again, look at what you can do. But if it's really becoming a problem, then you can always speak to your lenders. But you could in the same way as you could sort of dial back your savings. If that's becoming a problem, you could briefly shift back to minimum payments. What you said is that I'm starting to make some headway with it. Well, maybe just give yourself a break for three months and go back to minimum payments, right? Obviously it'll set your program back a bit, but that's all right. So debt reduction is always a priority, but not the cost of eating, right? So you've got to look at your own situation and just try to say, okay, can I pick up that extra shift so I can keep the program of paying down the debt aggressively? Or do I just need to take a breather? And if you do, then take a breather. But if it's a problem, first thing you need to do is to talk to your creditor and put a marker. So I talked to you on such and such a day. I told you I was struggling. What can you do to help me? And they have responsibility under law to help you as much as they can. And if it's really bad, there are charities and accounts and stuff that can help you. So there's some great outfits there.

[52:07] Dave: Yeah, I think, again, it's a great way to approach it because that can have a lot. We talked about the psychological weight of these things and sometimes I think this is the same. Again, it goes back to the goals. If you're doing well and say, losing weight or something like that, and then you hit the roadblocks or you hit a period of life where it just gets tough, we can start to then get very hard on ourselves, are very defeated. But if we can just think, what practically and pragmatically can I do in this? Firstly, give myself a break, be more patient and compassionate with myself. And then let's look, as you say, there's a range of options there to help us through that period, to when we're on more solid ground, I guess, to then build backup, so I love that. Yeah, well, there's no there isn't a lot of ground.

[52:55] Pete: Yeah. I think the thing about finances is by definition a long term game, and tough times are usually short term, particularly stuff we can't control. Right. And market declines feel pretty grim at the moment. I mean, I remember the great financial crisis. 20 07 20 08 in March 2009, there were headlines to say markets were already down 40% at that point, some of them 50%. So we're talking half of people's money gone, potentially. And there were still headlines at the time saying it's going to go down another 50% 50% of the remaining 50% 75% overall. I mean, that's tough now, as it turns out, it was the bottom, but you only know that in hindsight. So those who invested around then cleaned up over the next ten years. Right, but that was tough, but that was the worst. I don't think we're anywhere near as bad as it was then. It might get worse. Yeah, I don't know, but I don't think we're in as bad a shape as we were then, but it didn't last. And this too shall pass. And if we are investing money for saving, and if we're going to be retired for 34 years, hopefully, God willing, we have our health and all that sort of stuff, then we need not to pay too much mind to the short term and certainly don't let our decisions be driven by them. We got to think longer term, inevitably. What can we do now in light of a long term approach and what should we not do now? Need your reactions with our investments, which might have a very long term implication. That's the biggest issue. People bailing out of their portfolios because they're scared. I get it, but that's when the damage is done. Remember, if you're looking at your pension fund, it's down. You haven't lost a penny until you sell it, until you sell your shares and move into cash inside your pension. It's only theoretical, it's obvious that, but it isn't for a lot of people. If you bought your house at 250 grand three years ago and you've done a bit of work to it and you're sort of idly interested as to what your house might be worth. And so you spent 250 grand on it three years ago. You asked an estate agent to come around and value it. And they say.

[55:13] Dave: Well.

[55:13] Pete: I'm really sorry. But there's a crack den in the next street over and there's a real problem with crime. So actually your property is only worth 225 now. Have you lost anything? Well, not yet, not until you sell it. And so if you don't need to sell, if you don't need to adjust your investments in your pension fund, then don't. This is a. Terrible time to be making changes in your investments. So just forget about it and let it run and it will recover. Always does.

[55:37] Dave: I think that's a good way to sort of probably wrap up the conversation in that that's really positive, what feels at times that we're in a tough time. Yes, I suppose, really, I can totally relate to this, because I know that I set my business up in 2006, 2007. I had no idea how to run a business anyway, let's be honest. But I happened to step into a market that was then flooded by people, lots of people, being made redundant and becoming trainers, consultants, that kind of thing. And because of those clueless, all of those things, I made some short term decisions. I cast in a few sort of short, these ten year kind of plans that were rolling, casting a few of those just to survive. Those kinds of things that at the time were driven by panic and emotion and just not knowing what to do. I can't go back to that kind of thing. And yet, inevitably, I had to sit down and come to the Pragmatic decision. But the point is, I got through it.

[56:40] Pete: Yeah, exactly. Still here. Right. The overarching message, I think, needs to be that it won't always be as bad as this. It feels bad. It is pretty unpleasant right now, but it won't always be like this. And so don't hamstring the future by making the jerk reactions now. Take your time, be intentional things. Stuff through, concentrate on the levers you can pull and not the stuff you can't control. There is zero point in wasting any mental energy worrying about what Putin might do or what central banks might do, or what inflation is going to be in your time. Just look at your bank statements. So what can I change here that will make things a bit more comfortable for me right now and my family? And that's where to focus your energy. Yeah.

[57:21] Dave: And I think that's a really good parting message, to be fair, because you're right, we've still got our future hopes and dreams we might dial back, change time scales. There are still things we can work on, but maybe in a smaller way now, we can still do these things, but focus on what you can do rather than you can't do or can't call petrol. I love that. Well, thank you. It's been a great conversation and I've got lords out of it, but I'm sure to listen as well as well. Any parting thoughts before I let you know?

[57:54] Pete: Yeah, just that don't panic, it will be all right eventually. Look after yourself and be kind to yourself in difficult circumstances. Brilliant.

[58:06] Dave: Just like it says on the hitchhikers guard of the Galaxy, don't panic. I love that.

[58:09] Pete: Exactly.

[58:11] Dave: Brilliant. Well, thank you for your time again, Peter. It's been brilliant. And as always, links will be in show notes and any feedback questions, not just for me, but possibly for Peter, then drop me a line. Peter may as well be peter.

[58:28] Pete: Me up an email address if you want.

[58:30] Dave: Yeah, Dave@restlessmedlife.com and I'll certainly feed those back, but thanks for your time. Peace, magic.

[58:37] Pete: Absolute pleasure, mate. Thanks for having me.

[58:38] Dave: Once again, thank you for listening. You'll find all show notes, links and resources mentioned at midlifereshaped. Compodcast. And it means so much if you could spread the word to your fellow restless Midlifers, share the show and links. And if you aren't already subscribe to the show and your podcast feed of choice. And one more thing if you enjoy the show, it would be great if you could read it by visiting midlifereshape. Comreview. It would mean so much and I may even give you a shout out in return. And a quick final thanks to production assistant Karen North of North BA, and for the music, which is called Silverstar by the awesome Logan Nicholson of Musicformakers@musicformakers.com Care for now. And don't forget, you really can reshape your midlife health and rekindle that spirit of adventure.

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