Building Rich Relationships

Developing good relationships can help you on your path to a rich life

In this post we are going to look at Tom Corley’s fifth habit – ‘I will seek to build strong relationships with other success-minded people’, but before we do that let me remind you of my previous posts about his book.

a recap

Do you remember Tom Corley’s ‘Rich Habits’? I introduced you to him back in March. He did a study looking at the differences between rich and poor people and has summarised his findings in his book ‘Rich Habits Poor Habits’.

So far we have looked at the following habits:

Number Ten – being master of your emotions. I advised that in order to do this you may want to try meditation, which I have found to be helpful in enabling me to remain calm and take the problems that life throws at me in my stride.

Number Fourexercising and eating healthily – if you are a regular reader of ‘A Simple Life’ you will know that this is one of the things that I try to promote. Tom Corley found that this is also a priority for the rich people in his study.

Number One – how to assess your habits and turn poor habits into rich habits. Before you make any changes you need to spend time assessing your habits and then think how you can change your bad habits into good habits.

Number Twodefining dreams and creating goals around those dreams – this is basic goal setting. Taking a long term goal and breaking it down into daily habits in order to achieve that goal.

Number Threeinvesting in yourself– increasing your skills and knowledge – this is what you are doing now by reading this blog, as well as other activities such as reading and listening to podcasts.

We tend to seek out those who share our habits
choosing who to spend time with

Tom Corley believes that rich relationships help lift you up in life, whereas toxic relationships drag you down. Unfortunately, we seek out others who share our habits. Therefore a quick way to try to change our habits is to spend time with those who already have the good habits which we’d like to adopt. By spending time with that group of people they will influence and support you to adopt better habits through the process of peer pressure.

Networking can help you on the road to success, but you have to put in the time and work. You have to be prepared to do things for others even when there is nothing in it for you. You have to make the effort to remember people’s names, learn what is important to them and nurture your relationships. Tom Corley suggests doing this in a very structured and planned way by keeping notes on each of your contacts and reviewing them before you meet up. In some ways this feels quite calculated, but he says that unless you have a very good memory you are not going to remember all of the important things about someone.  

the number seven on an orange background
I would certainly recommend ‘The Seven Habits of Highly Effective People’
finding like-minded people

Reading this I was reminded of the advice of Stephen Covey in his ‘The Seven Habits of Highly Effective People’. He talks about the emotional bank account. Like a financial bank account we make deposits into a relationship and build up a reserve from which we can make withdrawals when we need to. How do you make deposits in your emotional bank account? By being courteous, kind, honest and keeping commitments that you make to people.

This all sounds like good ideas to me, but I am not sure where to find all of these like-minded individuals. The only place that I am truly successful with this is in the blogging world, which is not quite the same as having friends who you can meet up with for lunch. I would therefore welcome any suggestions that you have. Are there people in your circle of friends whose habits you aspire to adopt? How would you go about building your relationship with them? I would love to hear your ideas.

Planning for Partial Early Retirement

a pile of books, sunglasses, on a beach
Could you enjoy more of this whilst working part-time in your fifties?
Is early retirement realistic?

I started this site when I discovered the financial independence/retire early movement, which has gained in popularity in the UK over the past few years. At my age the likelihood of me being able to accrue a large enough portfolio to fund my living expenses before I reach traditional retirement age isn’t truly realistic. I’ve started too late. I am unlikely to be able to save enough money to stop work completely over the next ten years.

gold number four on a blue background
If you are going to receive a pension at 60 or 65 you can withdraw more than 4% from your portfolio
variations of fi/re

Whilst listening to an episode of the Choose FI Canada podcast about the 4% rule (i.e. you need to save 25 times your annual expenses and then can draw down 4% of that every year to live on without ever running out of money) I realised that there are many types of early retirement. They talked about lots of different ways that you can achieve financial independence. If you are nearing traditional retirement age then you should consider what your pension will provide when you get there. Unlike those in their twenties and thirties your savings don’t need to last for the rest of your life. You also don’t need to ‘retire’. You could work part time or change your job to something more rewarding, but which doesn’t pay as much.

the word money on a white background
Do you know how much money your pension is going to provide you to live on?
know your pension

I am lucky enough to have a ‘defined benefit’ pension. This means that I know exactly how much money I will receive when I retire. Nowadays most pension schemes are ‘defined contribution’. You put in a set amount, but what you will receive depends on how the market performs.

Do you know what type of pension you have? In the UK you are automatically enrolled into your company pension scheme and you should get a statement every year. Dig it out and take a look at it. How much will you have to live off once you reach traditional retirement age? Is that realistic for you or will you need to have some money in savings to live off as well? It may be that you’re lucky enough that your predicted pension will provide you with a great standard of living. If so, you won’t need a lot of savings in the bank pay for a new car or that luxury cruise.

arched stone bridge over a river
Could you use interest on your savings to pay some of your bills for a few years?
will your Savings bridge the gap?

Unlike typical FI/RE, partial early retirement allows you to use your savings to pay a part of your day to day living expenses. For example, in five years’ time I am hoping to have saved £71,000. This is nothing compared to the portfolios that those thirty-somethings need to accrue to live on, but it may be enough to pay some of my expenses so that I can work part time. If we apply the 4% ‘assumption’ i.e. draw 4% every year, that would be £2840 per year. Then divide this by 12 and we get £236. This would go quite a way to paying my half of the bills e.g. gas and electricity

Would like to reduce your working hours or move to a more rewarding job? How much money would you need to have saved to meet the shortfall between your currently salary and what you will receive once you’ve made that change? It may be that your living expenses will be less in the future. For example, you may be working hard to pay off your mortgage now, but decide once it reaches a certain level just to make the minimum monthly payment rather than overpaying.

the number seven on an orange background
Maybe you could draw down more money and reduce your nest egg over time
Could you draw down More than 4%?

The figure of 4% is chosen as it is believed that at that rate, the capital will last and still increase in value for many years to come. When you are you are approaching traditional retirement age, you don’t need to worry about this. It doesn’t matter if you reduce your savings pot a bit, as long as what you have left, along with your pension, will be enough to provide you with a comfortable life in the future.

make some extra money

Under this plan it seems very likely that I could work part time from aged 55, but ideally I would like to have paid off the mortgage by this point. If you want to reduce the daily living expenses that your savings’ interest will have to cover you will need to think about ways of earning more money. Those of us who have discovered FI/RE late in life may have certain advantages which enable us to do this. For example, one possibility is to do Airbnb or rent out a room. You can earn £7,500 a year doing this before having to pay any tax.

Are you aiming for complete financial independence or are you just hoping to work a little less in the future? I would love to know your plans for the future.

How to Sleep Well

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A couple of weeks ago week I introduced to you Dr Rangan Chatterjee, a GP and author of ‘The Four Pillar Plan’. I talked about how to relax and hopefully that’s given you some good ideas. This week I want to tell you what he says about how to get a good night’s sleep.

According to him, waking up feeling refreshed is a good general barometer of overall health, but I know that many people struggle with this. He believes that waking up at the same time, give or take 30 minutes, without an alarm, is a good indicator that your body’s intrinsic biological rhythms are working well. I am lucky as this happens to me, but Mr Simple complains as he likes to sleep in. Unfortunately I feel like death warmed up when I do that. Most days I get up and go and make a cup of tea. This helps to get Mr Simple going in the morning.

Not being able to drop off within thirty minutes of trying means that there is likely to be something in your lifestyle that is un-training your body’s own natural ability to sleep. I think Mr Simple is jealous of my ability to fall asleep almost as soon as my head hits the pillow. He would say that he struggles to get to sleep, because as soon as I do so, I start snoring and he can’t get to sleep due to the noise level.

What then are Dr Chatterjee’s tips for a better night’s sleep. Firstly…

Create an environment of absolute darkness

Try to keep your bedroom completely dark and free of televisions or e-devices. One of the worst things you can do in the hour or two before bed is look at your smartphone or tablet. What goes for e-devices also goes for television. Turn it off at least 30 minutes before you go to bed. I’ve never really understood the idea of having a TV in the bedroom. Maybe it’s because I’m a bit of a bookworm and so bed is for reading and not watching TV.

Embrace morning light

Spend at least twenty minutes outside every morning. Even on the dullest days we’re still exposing ourselves to light at a higher amount outdoors than if we were inside. This is not something that I am good at. My excuse is always that if the weather was better I would do so. Also, our patio area at the back of the house is a bit tatty at the moment and not a pleasant place to sit. Once it is looking better I will have no excuse.

Have a cup of tea outside in the morning

Tips to help you embrace morning light:

Have your morning tea or coffee in the garden or next to a window

Don’t get your newspaper delivered; collect it on foot.  My frugal streak would say not to buy a paper at all, but just go for a walk. My grandfather used to go to the local shop every morning to buy his paper. Whenever we stayed with my grandparents we would go out with him to the shop in the morning.

If you must drive in the morning, leave the car a ten-minute walk away from your destination.

If you shop in the morning park as far as possible from the supermarket entrance.

Get off the bus half a mile from your destination and walk the remaining distance.

Consider getting a dog and taking it for a walk every morning. This is lovely on a summer’s morning, but I’m writing this on a particularly wet day in July and the thought of having to take a dog out in that is not something that I would look forward to. I do know though that when we looked after a friend’s dog for a week last August I went out twice a day no matter what the weather.

Try to take a morning break and go for a short walk outside. This obviously depends on where you work. Some offices are not in particularly good locations for walking, but if yours is, try to spend a few minutes outside.

Create a bedtime routine

No matter how late you go to bed, no matter if the next day is a Monday or a Sunday, always get up at the same time. If you did stay up late the night before and are still feeling tired in the morning, it is worth trying to catch up a with a nap later on in the day.

Dr Chatterjee’s ideal night time routine

Make sure that all vigorous exercise is done by 6.30pm.

By 8.30pm turn off your computer and mobile phone.

Watch a bit of TV, but make sure it’s relaxing and do some light stretching at the same time. I watched the film ‘Everest’ a few months ago; a true story about a climbing accident and couldn’t sleep as a result of thinking about the trip leader who had to say goodbye to his pregnant wife as he was going to die on the mountain.

Alternatively, sit and listen to relaxing music or do some deep breathing in silence.

Drinks should be non-caffeinated.

Go to bed around 9.30pm. Mr Simple thinks that this is super early, but it’s when I think about going upstairs. It takes time to brush my teeth, wash my face and then I have half an hour or so to read, so lights out is not until after 10pm.

Have the bedroom window open a little. Central heating can make the bedroom too warm. It is better to have a cool bedroom and snuggle under a duvet.

Read next to a dim light until ready to fall asleep. I have a sunrise/sunset lamp which I absolutely love, mainly for the mornings as it gradually increases the amount of light in the room over 30 minutes. It is so long since I was woken by the alarm in a pitch black room and had to tell Mr Simple to cover his eyes as I switched on the bedside lamp and blinded us both. I have also used it at night when Mr Simple is away as I can go to sleep next to a dim light rather than in darkness, worrying about who might be breaking in to murder me.

Manage your commotion

Minimise any activity that will raise emotional tension before bed. Make it a cast-iron rule that you do not discuss emotive subjects in the evenings or crack into a new work task.

Tips to manage your commotion

Don’t watch the news, a thriller or any similar commotion-causing programme before bed.

Don’t discuss financial or stressful family matters

Make it a rule not to check work emails in the ninety minutes before bed. In an ideal world I would say don’t check work emails after 5pm.

Focus on relaxing exercise in the evening such as yoga or light stretching.

Meditation before bed can help you quieten your mind.

Educate your family and friends about your evening routine.

Make an entry into a gratitude journal before bed.

Enjoy your caffeine before noon

Ensure that any caffeine you do choose to consume is taken before lunchtime. When I started taking a flask of coffee with me to the office in order to save money, as there was usually some left in the afternoon, I was drinking it and had several sleepless nights as a result.

Tips to reduce your caffeine intake

Drink non-caffeinated herbal tea to get you past your 3pm slump.

Avoid decaffeinated coffee as many brands still contain trace amounts.

Drink sparkling water in place of your caffeinated beverage. Not sure I agree – just drink tap water -it’s cheaper.

Reduce your sugar intake. This will actually give you more energy and reduce the likelihood of craving a caffeine pick-me-up in the afternoon.

Drink camomile tea in the evening. This can be a great caffeine-replacement as well as promoting relaxation before sleep.

So that’s it. How do you sleep? Could you try some of these tips to help you feel more refreshed when you wake up in the morning? Do you have any other advice for how to get a good night’s sleep? I would love to know them. If you want to find out more don’t forget to check out Dr Chatterjee’s book.

Five ways to be frugal

I thought that this week instead of just giving you examples of how I have been frugal I would provide some ideas for how you could start to think about being more frugal. About how to make it part of your everyday thinking. Here are five questions to ask yourself:

Do you really need these or is it that you just want them?

Do I need it?

The best advice I can give you before you buy anything is to question whether you need it. I wrote recently about making saving automatic, but I think that instead of having that good habit we have a tendency to spend automatically. Something is looking a bit worn and we just buy another one. We fancy something to read on the train so we buy a magazine – nowadays that can cost us £5. Before you put your hand in your pocket or wave your card at that machine, stop and think, will this really make me happier, will it really enhance my life, could I do without it and either spend the money on something I value more or save it towards one of my goals.

Can I find something else cheaper that would do the job just as well?

A few months ago, at the beginning of this frugal journey, I went to clean my glasses using the bottle of spray on my dressing table and wondered to myself whether I could find a recipe on the internet for making my own spray. How stupid did I feel later on when I read that the alternative to using spray is to clean spectacles with soap and water. In fact, I used to do this years ago and for some reason was persuaded that that instead I should spend £6 a time on a bottle of spray to do it. Now I just wash them under the tap with a bit of liquid soap, dry them on a towel and polish them with a microfibre cloth.

How can I make sure that I don’t waste anything?

One example of this is making sure that you get every last scrap out of a bottle of say a suntan lotion or a tube of cream. You may want to cut open tubes of cream and scrape out what’s left. Stand bottles of shower gel upside down so you can squeeze out the last drop. Try not to waste food. We had a few bananas going very brown on the windowsill this week. I cut them up and put them in the freezer to keep for smoothie making.

Can I make it last longer?

This means looking after things. I am not always brilliant at this. Mr Simple is much better. Earlier today he was removing all of my long hair from of the vacuum head brush. Other examples are having your car serviced regularly, which will save money in the long run. Look out for wear and tear when you clean so that any problems can be nipped in the bud before they develop into expensive bills

Learning to mend things can save you a lot of money

Can I mend it?

The other morning Mr Simple told me that the sheet had ripped. It seems that it has worn thin. I’ve had it for about 15 years so it’s probably not surprising. My first thought was not, ‘I need to buy a new sheet’, but ‘How could I mend it?’ I am not great at sewing. I did cookery at school. It was my sister who did needlework. My mum is also good at sewing, but lives 160 miles away so I’m not going to be able to get her to do it. I googled it and discovered that you can buy iron on patches for repair. I’m yet to try this, but I’m thinking about it. It is probably cheaper than a new sheet.

So there we are, my principles for frugality. It’s just about trying to change your thinking in a world where nothing is built to last and we all too easily throw something away and buy a new one.

What are your frugal rules? I’d love to know. Don’t forget to check out the other posts by Cass, Emma and Becky.

Financial Lessons from David Bach

You may remember that back in May I told you about an interview on Afford Anything with David Bach, when he introduced us to his new financial book, ‘The Latte Factor’. At the time I was hesitant about buying it, but after having some money left over at the end of that month I splashed out. So especially for Dr FIRE, who commented that he would be interested to read my thoughts, here they are….

If you can afford one of these every day, you can afford to save for your future

This post contains affiliate links for David Bach’s books. Please see here for more information about my use of affiliate links.

The Story

Through the fictional narrative in ‘The Latte Factor’ David Bach explains his simple formula for accumulating wealth slowly. The main character of the book is twenty-something Zoey, who begins to ask her herself what she is doing with her life. Although she works for a large publishing company she has never been outside of the United States. One day she sees a photograph of a boat on a beach, hanging on the wall of a coffee shop. Although she would love to buy the picture she tells her boss, Barbara, that she can’t afford it, as she isn’t good with money. Barbara advises her to speak to Henry, at the coffee shop, who ‘sees things differently’.

Over a period of a few days Zoey makes several trips to the coffee and chats with Henry, who provides her with the financial advice of David Bach. His comments include:

If can afford the latte you can afford this photograph’ i.e. the ‘Latte Factor’.

Slowly David Bach discloses information about Henry and Barbara, who have followed his lessons. By the end of the book Zoey is on a sabbatical on a Greek island, writing travel articles for her magazine and paying regularly into her pension.

Learn David Bach’s three financial lessons

The Lessons

Henry teaches Zoey the three steps to financial freedom:

  1. Pay yourself first – save the first hour of each day’s income into a pension. He shows her how much she would save, with compound interest, over forty years. He tells her to go and enrol in her workplace pension. According to in the UK you are now automatically enrolled on to a pension scheme by your employer if you are over 22 and earn more than £10,000. You pay 5% and your employer pays 3% as a minimum. Therefore to a certain extent the government has already put this in place for you, although it may not be as much as he would recommend.
  2. Don’t budget – make it automatic. He recommends having the money paid into your pension before your wages hit your current account. He doesn’t agree with budgets, which he believes people have trouble sticking to. He says deduct your savings automatically and spend the rest however you wish.
  3. Live Rich Now – I don’t think that I am completely clear what he means by this. I think for Zoey, being young, she has plenty of years for her money to compound, so she can set up her regular payments and still have enough money to live a nice life as long as she gives up those unnecessary items such as the latte and muffin each morning. For those of us who have come to FI/RE late in life it might not be as easy to ‘Live Rich Now’. It also appears to be linked to having accounts where you save for your dreams. Once again this is automatic, saving money into an account for short term goals e.g. buying a house or a special holiday.

Barbara tells Zoey the three ‘Myths of Money’

  1. Make more money and you’ll be rich – most people think they have an income problem. They don’t. They have a spending problem.
  2. It takes money to make money – you don’t need a huge chunk of money to build wealth.
  3. Someone else will take care of you. They won’t, so you need to take care of yourself.

Some more wise words from Barbara are that the wealthy spend their money on things that truly matter to them. The ‘unwealthy’ spend money on frivolous things.

David Bach’s books are USA-focused

Who is this book for?

Almost immediately after finishing this book I bought ‘The Automatic Millionaire‘, also by David Bach, which is in effect a non-fiction version of ‘The Latte Factor’. I thought that it would give me more detail of how to put his recommendations into practice and that would have been the case  had I been an American citizen. It gives a great deal of practical advice, referencing websites and government institutions, but if you don’t live in the United States its usefulness is limited. The same is true of ‘Start Late, Finish Rich’. As someone who has ‘started late’ I thought that this might be the David Bach book for me. In some ways it was, as it gives guidance about supercharging your savings and increasing your income in order to ‘catch up’, if you are middle-aged. Unfortunately, again much of the practical advice is only relevant to an American readership.

On reflection, I therefore think that even though it is a short novel, ‘The Latte Factor’ was enough for me to understand David Bach’s financial advice and consider how I could put it into practice in my own life. For those of you who are reading this article because you are already an avid follower of the FI/RE movement, ‘The Latte Factor’ probably isn’t going to tell you anything new, but if you have a friend or young relative who is struggling with their money, it might be just the thing to make them start thinking how things could be different. For something that you can read in a couple of hours the book isn’t cheap – currently £14 for a paper copy and £8.99 for the Kindle Edition. It also isn’t really a novel about FI/RE, as he talks about retiring in your fifties or sixties. That is slightly early, but this is not a formula for saving hard for five or ten years and ‘retiring’ in your thirties.

If you are reading this and you’re American David Bach’s books will be a lot more relevant to your situation. I would recommend reading ‘The Automatic Millionaire’ if you want and plan to implement his practical advice, particularly if you are in your twenties. If, like me, you’re further on if your ‘life journey’ then try ‘Start Late, Finish Rich’.

Let me know how you get on and what you think.