What can readers expect from your book, Taming the Pound?
A way to think about finance that puts the reader at the centre of things. Commonly, financial books suggest that money is important and complicated, and people are ignored while the "experts" talk about tax, financial instruments and complex theories to make themselves look clever and make the reader feel stupid. For me, the important and complicated thing is the reader - the money is just there as a tool to achieve what the reader wants.
How important do you feel it is to be able to discuss money with your partner?
Vital. You don't have to have all joint accounts, or know every penny one another spend, but you need to know what is going on - what is a reasonable "impulse spend", what is spent for both of you and what is a treat for only one, who is responsible for the regular bills and in what proportions and - particularly if you have children or a mortgage - what happens if one of you is ill or injured and can't work, or dies, how does the healthy one or the survivor pay for things and what do they do with only half the money coming in?
Why did you want to write to help people with this matter, is it derived from personal experience?
I was asked by a charity to do a video for teenagers about how to handle money. I realised that things I thought were obvious about money were a closed book to most people. Then I read one book about human instincts (Gut Feelings) and one about happiness (Happiness: a guide to developing life's most important skill). I realised that most people are scared of money or in awe of it, don't really understand their own thinking and are either too frightened or too confused to work out what they really want. I wanted to help people to work out what they want, how to have their own plan for a happy life and to use the money as a tool, not to spend their life desperately chasing money and ending up the slave of the money instead of its master.
What is the biggest obstacle we all face with regards to managing our money?
Thinking the money is important and complicated, and belittling our own real values and our complexity. We're the important bit. The human brain is the most complex thing we know of in the universe. Compared to us, money is dead simple, and very trivial - if we all decided tomorrow money was worth nothing, it would be worth nothing. But we all forget that the money is a human invention, it's not the goal of life, it's just a sophisticated version of a piece of flint, a tool.
Do you beleive that people generally are not aware of their spending habits?
Most people don't have a clue. That's what Gut Feelings taught me, and the more I researched the area, the more I realised how little of our thinking, our decisions, our actions we actually control. There was a BBC documentary in mid March called "Out of control" that gave some lovely illustrations of the fact that we go through most of our lives on auto-pilot. That's one of the ideas in the book, to make people aware of how money can leak away so it isn't there when you have a good use for it, and to suggest ways to become more aware and in control of your life and your money.
How would you respond to someone saying that the credit crunch is just an excuse for bad money management?
It is to a large extent, on a grand scale. It shows how the "experts" are misguided, they think the money is important and think that by studying economics and all sorts of arcane things like Quantitive Easing and so on, they will get it right - of course they still get it wrong. It demonstrates that this is the wrong course. First, you need to work out what you want and why you want it, then you can prioritise what you need to know about the money. Nationally and internationally, people still haven't learned, they are still trying to play around with theories of money supply, etc. instead of working out what they want the money to do. For example, they could use 40 years or so of research into happiness and develop the "happiness index" idea to look at what people need and then arrange the tax, benefits etc. systems around that. It would put the people and their happiness at the centre and use money as a tool to achieve it. But until they do, the book is a way for people to do it for themselves.
Was this as big of a problem even before the credit crunch?
Yes, but people didn't know it. Everybody assumed that house prices would carry on going up, wages would rise, nothing would ever fall. So it was easy to deal with debt, you just got another credit card, extended the mortgage, assumed that your pay rise will deal with it and there will always be more equity in the house to cover the debts. The focus was on money for its own sake, have lots of money and your problems don't exist. But at some point you have to pay it back. The crunch just meant that people couldn't put off repaying the debts, they couldn't get credit, they couldn't borrow against the house because it didn't have any equity, they couldn't count on a pay-rise because their job was at risk and pay was frozen. The good side is that at the moment they "only" have relatively small debts, if it had gone on another ten years the debts would have been double or treble the amount and when they came to retire they would find they had a mortgage worth as much as the house, no way to earn any money and debt interest that used their whole pension.
What is the quickest and easiest step to get started with handling your money better?
Realise that money is a tool, not an objective. Work out what it is that you really want in life - go through times you've been really happy, imagine yourself interviewed on TV and think about what you'd tell the interviewer about the accomplishments or moments in your life that you're proudest of, that give you the greatest satisfaction. Then, whether those are about family, relationships with friends, voluntary work, sporting achievements, entrepreneurial skills or whatever, work out what it is about them that gives you the good feelings. Work out ways to do more of those things that give you (and your family) good experiences, a feeling of value as a person - then start to think of your money as a tool to spend your life doing things that are going to make you happy, make you feel alive and productive. If you've got that as a motivation, then all the boring stuff like ticking off credit card receipts, not going for retail therapy when you know you shouldn't etc. all become much easier because you're doing them for a purpose - you're doing the hard stuff because it will give you the life that you want.
Interview by Lucy Walton