A chat with the author of Today and tomorrow, Simon Phippen.
Simon trained as an accountant and worked in a variety of industries before starting his own financial planning firm in 2014.
He saw at first hand the immense value to his clients of financial modelling and planning which led him to ask the seemingly simple question;
Why doesn’t everyone have a Plan?
Here he reflects on his quest to make the benefits of a financial plan more available and affordable by creating a tool that meets the needs of the majority of people who have relatively simple financial affairs as well as, amongst other things, the similarities he sees between the solution he created and Ikea’s “Billy” Bookcase!
“Most of our financial decisions involve a trade-off, conscious or unconscious, between Today and tomorrow. If there wasn’t a tomorrow, then managing your money would be easy, just spend everything as quickly as you can Today!
“Every time we spend money on Today we are also making a decision about how much we are not spending and therefore saving for tomorrow, whether that is for a large item such as a car or a house or for the time in later life when we are likely to need an income from our savings.
“The capital “T” in Today is the “big brother” of the small “t” in tomorrow as a reminder that the temptation of Today is usually stronger and louder than that of tomorrow, so that we have an ongoing battle with ourselves to keep looking after tomorrow.
“But how do we decide how to split our income between Today and tomorrow? How can we amplify the voice of our future-self calling from tomorrow so that it is adequately represented in the financial decisions we are taking for Today?
“Without some sort of Plan we can only guess and trust to good fortune that we are balancing the conflicting needs of Today and tomorrow in a way that suits us best. In the worst case scenario we spend lavishly to enjoy Today but can only feel guilty as we know that it comes at the expense of tomorrow.”
“So many things we do start with a plan that we then put into action, adapting as and when the theory inevitable varies from the reality. Think of planning a holiday or a birthday party. We all have a need to make the most of our money and work towards targets and objectives. Think of this as the project that first needs a plan to guide us as we then go out and hopefully make it happen.
“Don’t think of a Plan as trying to find the right answer. Of course the future is unknowable and therefore there is no right answer. The real value lies in the process of planning and the questions you ask yourself as you make your Choices and build your Plan. There’s a great quote that says;
‘When building a Plan don’t obsess about the middle, because it will look different when you get there. Just look for a strong beginning and a strong ending and then get moving in the right direction.’
“Another quote I enjoy says;
‘Build your plans in sand but do your planning in layers of stone.’
A plan will be out of date as soon as you have done it so it should be disposable and not some coffee table tome. If you don’t like the Plan you did last week and it is quick, easy and cheap to change then tear it up and make another one. The process you are going through each time you update your Plan, the questions you are asking and the conversations you are having are like geological layers that build over time into a deep understanding of what you want to achieve with your life and your money.”
“Historically this has been the case but how crazy is it that we only think about a plan when we are about to retire? Do we decide where to go on holiday when we get to the airport? Apologies for another quote but how about the one that says;
‘It’s never too late to build a plan, but the sooner you start the more choices you will have.’
“If you are just starting out and understandably don’t want to think decades ahead then you can plan for say the next ten years or until you achieve an objective such as buying a property or even just a car. Building a plan for just a few years will help to show you how your money works and hopefully start the long-term habit of planning.
“A younger person will get the benefits of learning about the Big picture of their money, the choices they have and how it all fits together. As we get older and our life comes more into focus then the benefits from a Plan become more predictive as we start to paint a picture of what our financial future might actually look like.”
“I don’t like to define likely T&t users by age or income, it is rather a question of financial maturity. People decide at very different ages when to stop guessing and hoping for the best, some never get there. We have all known very financially mature 20 year olds and financially immature 60 year olds!
“I would say however that there are people with a level of wealth and complexity of financial affairs who should always seek specialist advice and a “do it for you” service. It doesn’t make sense to complicate T&t for every user trying to meet the needs of people who in all probability would not use it anyway. We set out clearly in the beginning what T&t doesn’t do and recommend that people with those specialist needs look elsewhere.
“That said, there is nothing to stop anyone building and playing with a Plan if it helps them to better understand their money before looking for additional help. T&t doesn’t pretend to have all the answers, sometimes it’s just a way of finding the right questions and pointing the way to where the answers should be.”
“I summarise it as the “4As”, Awareness Availability, Affordability & Apathy, expressed as;
‘I don’t know what a financial plan is or what it could do for me. Even if I did, I wouldn’t know where to find one and, even if I did, then I wouldn’t be able to afford someone to do it for me and anyway, I have other more important things to do Today, I’ll think about it tomorrow.’
“It is still quite normal for somebody to have little or no visibility about their financial future. As we become increasingly responsible for our own finances and need that money to support us through longer lives, will it still be socially responsible just to shrug our shoulders and hope for the best? We expect every driver today to have car insurance, maybe it will become the norm that everyone has a plan for their money so that they know where they are going and they can take care of themselves.
“By offering the service online we can target the barriers of availability and affordability. The cost of building a T&t Plan yourself will always be just a tiny fraction of the traditional cost of asking someone else to do it for you.”
“Talking T&t is a chance for anyone to discuss a wide range of topics arising from their work with T&t and ensure that they are maximising the benefit they are getting from the whole T&t experience.
“Everyone has a unique set of financial challenges and will choose to use T&t in their own particular way. I have counted more than 30 ways in which someone could benefit from creating and regularly updating their own Plan.
“Some people will quickly master the process of building one or more plans and feel that they have done all they need to. Others however might have questions about the features and functions of the model and how to make the most of them.
“Someone might master the “numbers” of their Plan but feel the need to discuss the “words” such as the questions that they have been required to consider during the plan building process. Where are they going, what do they really want, have they got enough or maybe too much and what should they do next?
“The worst plan you can have is the only one you make which is then filed and forgotten. A plan needs to be brough to life, regularly updated and reviewed and talked about to identify the actions that are required to translate the theory into reality.”
“We tend to think of our money as “islands”. We manage our ISAs, mortgages, salary, investments etc. in isolation from each other like fighting one battle at a time and losing sight of the war.
“Imagery and simplification are two fundamentals of T&t. It is very true that a picture paints a thousand words and if you can use a picture to simplify the complex then it helps the user to take a huge step forward in their understanding and engagement.
“The Big picture is when you can see all of your money joined up in the same place and it is built around a fundamental simplicity that you can only do three things with your total income which is spend it on Today, save it for tomorrow or pay it in tax.
“I use the imagery of water flowing between the money islands. The two places where money “leaks” from the system are spending and tax. The user can see all of the imagery of the Big picture replicated in their Plan as the results are presented using the same logic and with the structure of income, spending, saving and tax.”
“When providing any service or product, you can think in terms of it being offered as either “do it for you”, “do it with you” or “do it yourself”. Financial Plans have traditionally been offered as a “do it for you” service and there have always been some people who prefer a DIY approach.
“There has been very little offered to people in the middle who would prefer a “do it with you” service in the same way as Ikea sell their furniture with all the preparatory work done leaving you just the task of assembly.
“A T&t Plan comes in a “box” with all the parts ready for assembly and a set of instructions. Just like the “Billy” bookcase it requires a small investment of time to understand what is required and there might be a few frustrating moments during the build but there is great satisfaction and a significant cost saving in completing the job yourself.”
“At the heart of T&t is a financial model which, to state the obvious, is numerical. Despite the complexity of the model it was in fact the easiest part of the more than two years that it took to create the whole concept.
“More difficult was building the narrative around the model and anticipating the psychology of how it might be used. Imagining how someone could use the tool was like constructing a plot line for a novel. There was also a large amount of content required for the help screens and supporting documents. By the end it felt as though I had written a book rather than created a website.
“I love being creative but having to imagine everything about T&t tested my love of new ideas! I had a feeling however that my rather strange mix of skills with numbers and words was ideally suited to the project. Even my double entry book-keeping and accounting skills learned many years ago came in useful to ensure the accuracy and integrity of the model.”
“It’s ironic, but how do you sell a service that everyone needs but nobody wants? People tend to be unaware and/or sceptical about plans and planning because no one has explained what it can do for them. They also tend to hate thinking or talking about their money!
“I know from experience that those people who have the courage to face up to their financial challenges can reap huge rewards, maybe the biggest being that they can then spend less time thinking and talking about money!
“T&t has been built so that everyone can choose their own level of engagement and the time they wish to invest with it. It is important that someone can create their first plan in just a few minutes so that they can quickly own something that they will then be motivated to improve and personalise.
“There are other areas that anticipate the user’s psychology such as Lifestyle Spending where there is a choice to work at either a detailed or summary level. Some people will get value from adding up their dry cleaning receipts, other people will be more than happy to work, at least initially, with just a single annual figure for their everyday spending.
“I am not underestimating the cultural challenge we have in demonstrating the benefits and overcoming a general reluctance to discuss our money, but society is changing very fast and I don’t think how we have managed our money in the past is a good predictor of how and why it will be done in the future.”
“Numerous surveys have shown that there are more than 10 million people in the UK who are fortunate enough to have choices they can make with their money and who feel that they need some assistance in making those choices but don’t know where to go or who to trust. I hope that T&t will play its part in the technologically driven revolution that is now starting to offer solutions to those people.”
It’s never too late to make a Plan, but the sooner you start the more Choices you will have.
Move from the theory of a Plan to the lifetime habit of Planning that delivers real changes and benefits and puts you in control of your money.
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Any questions, comments or suggestions?
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