Listener Questions and Answers - BOD031

0:00Pete:And coffee while working in a cafe, I'd say 100 % not. No. Nice try, Caddy. I like the thinking, but no. I like the thinking, for sure. Okay, let's just sort of breathe a little bit and sort of come down off the precipice because we were about to sort of arm ourselves and head to wherever Maggie lives. Find this accountant. So mad. Hi, and welcome to the Bank of Dad podcast. I'm Kate, and this is my dad, Pete. Hello. And we're here to teach you the money lessons we were never taught at school. There's no judgment, no jargon, just real talk about how to handle your money. But there is a little bit of natural light this week.

0:32Yes, we're spicing it up.

0:34Pete:Well, yeah, it seems a shame, doesn't it? Because obviously in the studio we kind of block out all natural light so we can control the lighting. But it's quite nice and you've got a bit of a halo effect behind you. Yes, well I am angelic. I know different. Ben would probably say. I know different. Yeah, and you. Yeah, right. Well, this week we've got another Q &A episode. It's not bad, what are we? This is number 30, isn't it? 31. 31. Yeah. Okay, so yeah. That's exciting. Enough questions in 30 episodes? Well, more like 15, because we've already done one. Mm-hmm. 10, actually, because Q &A was episode 20 and episode 21.

1:08Pete:Oh, we did over two episodes. We did indeed. And there's some quite long questions in this one, so we should probably crack on. Yes, we'll see how we get on. I'm going to skip Wanky Word of the Week. Yeah, we're deeply heartbroken about it, but there isn't really a theme to any of these questions. No, no, no. Sorry. Yeah, we'll drop it this week and it'll return next week in all its glory. I know. We'll really celebrate the jingle. Right, do you know what? Let's get straight into it because, like you said, there's quite a lot of questions and quite a lot of long ones. First one is anonymous. First one is anonymous.

1:34Yep, they wish to remain anonymous in their email.

1:37Pete:You going to read it? Yeah, otherwise I have nothing to do in this episode. That's true. I think we just said that last time. Yeah, if you read them and answer them, I'll just be quiet. Yeah, good point. Otherwise I don't really have much to do. So I am going to read them. One of them, you also get to answer them. I hope you've prepared. Oh, I have not. So cool. I don't remember that. I wrote this. Anyway, right. Number one from Anonymous. Hi there. Just wanted to say that I'm glad you've started this pod. It is a crime that these sorts of things that I assume you'll go on to cover are not taught at school.

2:08Financial literacy is a vital life skill. Oxbow lakes, equilateral triangles, etc. Not so much in my humble opinion. I agree. Thank you as well. In my childhood, money was always a source of stress and worry, which made me very cautious with it through my 20s and 30s, always choosing regular saving accounts over investment products. It has only been since the increase of UK YouTubers talking about the subject of investing that has opened my eyes to it all and made me realize the risks are so much less than I'd imagined, providing you follow a few simple rules, of course. and the difference to my personal wealth if I had known what I know now 10 to 15 years ago would be staggering.

2:48Pete:Yeah, well, not just. But you know it now. Yeah. My question is, with the government's push towards investing, changing ISA allowance, we'll go back into that, and the nation's default financial advisor, Martin Lewis, finally taking talking about the subject on primetime TV, do you foresee younger generations actually partaking in investing more or do you feel the older generations and their families, who were never taught about it, will discourage them. I fear unless this is taught at school level, even 20-somethings may have an aversion to investing built in. To change the UK's attitude to investing will surely take decades.

3:27You guys give me hope that the younger generations can be reached at that formative time and plant a seed that will positively affect their entire lives. More power to you. Good luck with the podcast. You're doing a good thing. Kind regards. Lovely. Thank you.

3:42Pete:thank you anonymous um shows just the power of language didn't it yeah it's in because and uh sort of parental influence source of stress and worries growing up impacted really get hold of this all the way to 20s and 30s impacted yeah i thought this was quite a nice one to ease us in because it's not like technical it's kind of like what do you think yeah the technical one sometimes messes up um no it's if they do that's a damning indictment yeah right it's gonna say 30 years of my career um yeah do you know it it is important and you know for the next generation growing up so you know no rush into this of course but when you have kids uh this will be uh something to you know be aware of the language around oh money security uh abundance all that sort of stuff you got to be really careful because kids listen to everything um and they pick up on unspoken things as well i was gonna say they really pick up on things like that i think it's important to protect children and then eventually get to the point where it's in you know it's not a taboo subject um but you still should guard what you give to children and what you say to them and not be sort of loose with it you need to be as with all things intentional and and think it through because you can do a lot of damage very easily the amount of things when i worked in a primary school that i would hear children say that based on how i knew that child would be verbatim from their parents yeah so that makes no sense coming from your mouth no no for sure so anonymous's question is it's not so much a question but sort of is it going to take decades for for um kind of attitudes to change i don't know about decades but i think it'll take a long time i mean if you think uh december 2005 youtube was made available to the public right so it's just over 20 years really 20 and a half years um and how the world has changed since then Oh, my days.

5:31Pete:I mean, YouTube is just a start now. We've got, you know, obviously TikTok and a million different platforms. Easier ways of learning. You've got things like Skillshare and Udemy and, you know, easy ways to learn. And it's literally anything. Yes, it's paid for, but super cheap. Literally anything, you know, from coding to budgeting. And then also now you've got the rise of AI, which is going to be incredibly helpful. It's far from perfect yet, but it's going to be amazingly helpful. almost as a thinking partner for people maybe wondering about investing. You know, dear chat GPT, I'm thinking about investing, but I'm really worried about the risks because all my parents talked about was how stock market is a gambling den sort of thing.

6:16Pete:And, you know, using... No, definitely not. But, you know, using AI as a thinking partner and to challenge ourselves, I think is one of the higher uses of it. So, and I think that just the pace of change is going to continue to increase. So I'm really positive. and because it's easier now to access good information of course the flip side to that is there's a lot of information as well but i mean it's interesting this um the fca which is the financial regulator in the uk financial conduct authority held a survey called financial lives in may 2024 they identified that 90 percent of uk adults had some level of cash savings cash savings yeah so savings of any kind so money put aside oh so that could be like an iso or something like that.

6:57Pete:Yeah, it could be like 100 quid per side. It's not to say it's sort of 10 grand or anything like that. But only 35%, one in three roughly, held investments. Ah, interesting. And among people with£10 ,000 or more of investable assets, so more than 10 grand set aside, 61 % of people held at least three quarters of it in cash. So it's a huge skew towards cash in this country because it's known, it's understandable and it's safe. Well, yeah, it's not going to change. It's there. No, no, it's there. But of course, What most people don't know is obviously the ravages of inflation. Yes. So roughly 35 % of UK adults hold investments.

7:34Pete:It's 62 % in the US. That's interesting. Yeah, yeah. So 62 % of Americans own stocks, only 35%. So nearly twice as many people as a percentage. I don't know why. I do wonder if it's the sort of American dream, you know, you can start by flipping burgers, but if you work hard, you can end up owning a franchise. Yeah, maybe. Or the fact that obviously so many of the world's great companies are based in the US. Also, yeah. Pretty much all. Yeah, a lot of them. Many of them. So I don't know what the answer to that is, but it will come from education. It will come from unwinding a lot of the prejudices from previous generations for sure.

8:14Pete:But look, I'm positive about the future of investing. I also think it's easier than it's ever been to invest. literally 20, 25 years ago, you would have had to have filled in a paper application form, which you got from a financial advisor or direct through the post from an investment company. Send off a check. Oh, I'm already bored. I know, right? Whereas now it's like, you know, brilliant user interfaces, done for you portfolios, guided investments. There's so much that makes it easier than it's ever been. I'm really positive. So we just need to keep going. We do. Keep spreading the word. I love this next one barreling on to the next one this is from Caddy I just love that name I love the Welsh names you do love the name particularly Welsh ladies names yeah that is a lovely name Caddy is a lovely name hi both thank you so much for this podcast super simple but comprehensive I'm very much in your target audience early 20s beginning full time work hoping to set myself up for the long term well Caddy you're doing great already this question topic may be its own episode we'll decide that I work freelance in the theatre industry can we be friends which comes with a whole host of financial questions last year was my first year as a freelancer i get to battle hmrc's tax return forms so she's kind of got two points here any further tips for budgeting when your income can massively vary throughout the year i assume a larger emergency fund do you want to answer that first or should i do no let's just go through and the other one was what can you claim on your tax returns what counts as purchases being made for work petrol rent a new phone even coffees when working at my laptop at a coffee shop um do and good questions also it turns out that caddy actually knows go on after you want yeah read it yes i hope this isn't too weird but i think my dad and your dad know each other apparently dad might pete played piano at my parents wedding um marcus and julia davidge back in 1997 at in cross keys thank you so much keep doing what you're doing i did i think i've known julie or even longer than Marcus actually.

10:14Really?

10:15Pete:Yeah, yeah, yeah. It's all from university days in Cardiff. Marcus. And he played at their wedding. Yeah, man, that's going back a bit. Played piano. Well, yeah, 1997 they got married. Same year me and your mum got married, so. Oh. Yeah, yeah, there we go. The year of love. Okay. That's why I went northern there. No, no. So budgeting first. Yes. Any further tips if your income varies? Because she's working freelance, so it's not, she doesn't know, I guess, roughly what she's going to have every month. Yeah, I think like the arts is kind of the mother load of varying income yeah right you know it could be nothing to potentially very high income if things go very well but then you could have three months of absolutely nothing so yes definitely a larger emergency fund uh where that's possible because that will act both as an emergency fund but also as a kind of a smoothing fund potentially because you need to dip into it in sort of lower months and probably more regularly than other people would use an emergency fund.

11:09Pete:It is hard. I would try to work, if at all possible, I would try to work a budget to like a kind of a lower monthly but the same amount if at all possible. So let's say you can get some money behind you, right? Yeah. And you can budget to, I don't know, 1200 quid a month, right? And if like a good month is two and a half grand and a bad month is 500 quid. Then you know you can survive off 1200 quid. Yeah, and the key is to continue with that lower amount, even in the really good months, and use the good months to top up your buffer. When the buffer gets to a point where, you know, you're comfortable with it, then maybe you can then stretch things a bit and say, I'm going to go up to 1 ,500 quid a month because now I've got 10 grand in my buffer account.

11:57Pete:So I would actually, if possible, I would actually separate the emergency fund from the buffer thing. but it's sometimes it's like i'm gonna work my ass off doing as many jobs as i can to build that buffer when i'm not theatering i'm working at mackie d's or i'm doing waitressing or whatever delivery driving or whatever whatever it is to get the money in because then you have your baseline yeah and you have the buffer behind you and say right well actually now my career is starting i can identify what a sort of bad month is and what a really good month is it may not even be that predictable but then try to live on an amount which is considerably lower than a good month so that then you've got the yeah you've got the freedom it was like what my sister's doing she works in a restaurant to make up any income because she works in a charity so it's not yeah not brilliantly paid brilliantly paid so yeah maybe you might just need to build a bit of a buffer but i quite like the idea of having a different like two funds emergency fund for real emergencies yeah and then yeah a buffer fund or a smoothing fund or something just to be like okay it's a low month but it's all right because i've got five grand in it yeah help me through sit behind yeah and and yeah i think that's really the only thing you can do yeah same applies if you're on shifts or if you're on uh in a job where there's perhaps commissions which fluctuates on like a state agency that used to be the case i don't know if it still is but it was when i was in it um and so you'd have good months and bad months and the problem is if you live always to the good months you're going to really suffer the bad months and you're getting into debt so you need to set your sort of baseline spending quite a bit lower than what a good month would be, ideally, and then push it as general in earnings rise.

13:36And Caddy's other question was, what can you claim with your tax return?

13:39Pete:Yeah, this is a beauty. I mean, this is why accountants have jobs. I mean, among other reasons. Oh my God, you've got so many answers. Well, I'm not ashamed to admit that even I went to GPT on this because I'm not an accountant, right? So there is a kind of golden rule, Caddy, that if you are claiming for something, and by that, for those who don't know, simply we mean if let's say you earned a thousand pounds but it costs you say 200 pounds to earn that thousand. So let's say you had to travel somewhere to earn that or you had to buy something in order to get that job to earn that thousand quid.

14:16Pete:You can offset one against the other. But the golden rule is that you can only offset stuff which is wholly for the purposes of the business. Yes. So I think there's an example about can she buy coffee? Like coffee while she's working? No. Yeah. Well, so a bunch of things. Keep really good records. All right. So we've talked before about having a separate business bank account from your personal bank account. So get paid into one account. That's your kind of working account. And then kind of draw a salary off that again at the lower amount that we've been talking about um ask yourself would i have incurred this cost that i'm thinking of claiming would i have incurred it for the business so you know if you're buying theater specific equipment or materials professional subscriptions yeah you know you're not going to do a professional subscription for something theater related unless you're in the theater so it's fairly easy to claim that as yeah so for example when i was like if i mean this isn't a bulletproof example but i we have final cut pro which is our editing software that is a paid thing paid subscription yeah when i was house of color using that for making content yeah i could claim that back yes because that was for because it was marketing yeah so if caddy gets headshots or if she has a personal website built for herself yeah it's easy to argue that that's wholly for the purposes of her doing work yeah um phone and internet well yeah but only if chances are if you've got a mobile phone you're using it for personal stuff as well as business so if you have a work phone yes if you have a use it for both to prove it well you just would only be able to claim part in which case how do you define that how often do you spend doing work stuff yeah that's already like who phones people these days it used to be it's like well i could go through the phone lists and who does that right so you might just say well okay i'm going to claim a reasonable percentage like 15 or 20 to be work related and the rest i will cover as a personal petrol likewise you can't claim for travel to your normal place of work.

16:18No but if you're at work and then commute somewhere for work

16:22Pete:then that's fine. It's like if you're at the theatre and then you have to go to I don't know a different theatre that journey could be alright if you're freelance obviously there's no boss to cover your mileage. No but that's what we're saying you can claim it back. Yeah so you can claim it back if you know what you can't do both because that would be great you can't claim it off your boss and the riff. No. That'd be quite nice um but obviously in the theater chances are you don't have a normal place of work you might be working at one theater for two weeks and then somewhere else and in which case that would probably be okay you driving to that place of work would be okay it's not a normal place of work um if you work from home a little bit you know if you are doing some work on your career but in the house potentially you can claim an element of some of your household costs all right but you you need to be able to prove it.

17:12Pete:Yeah. Because if the revenue is saying, can you just justify why you've put 90 % of your, you know, your electricity bill through the business and turned it off your income tax, right? Laptops, likewise, same as phones, really. Coffee while working in a cafe, I'd say 100 % not. No. Nice try, Caddy. I like the thinking, but no. I like the thinking, for sure. You know, it's, yeah, I certainly know I'm working while I'm drinking coffee, hence I'll claim the coffee. You're probably on a bit of a sticky wicket there. And honestly, it's not so much about obsessing about the little bits. I think it's about getting the big bits right.

17:47Pete:As we're going to come to in a minute with another question, there is currently they are bringing in something called making tax digital for income tax. So for quite a while now, the government's been on this thing called MTD, making tax digital, started with companies. So that simply means that instead of the for income tax bit means that instead of doing an annual income tax return once a year. They're doing more regular ones, aren't they? Annual once a year. Yeah, nice. It is they will instead ask you to do quarterly submissions and you'll need software to do it. So you either need an accountant who's going to run that software for you.

18:29Who you have to pay.

18:30Pete:Who you have to pay, of course, or you have to get very savvy with the software yourself. and so there's a lot of work for self-employed people. Currently, it's only if you're earning over 50 ,000 self-employed earnings that you have to do that but from next April 2027, it's between 30 and 50 ,000 and after that, we don't yet know. It's not laid down yet. So honestly, Caddy, it's getting harder and harder to be freelance so you either need to suck it up and pay a good accountant who really gets your field and there will be specialist accountants in the theatre world, no doubt about that. Or you have to get good at software and understand what you're going for.

19:07You're young. I believe in you. Yeah, yeah, for sure. Thank you for your question, Caddy. Yeah, we need to keep going.

19:11Pete:And much love to mum and dad. Yes. All right, question three is from Tom. Dear Kate and Pete, I love the podcast and I think it's wonderful what you're doing. Thank you. I am not your target audience but enjoy listening in any case. I am, in fact, the person you referred to in one of your pension episodes of that guy at work who you could go and ask some opinions of. I take an active role at work of trying to bring together three or four hundred people together to try and impart information, education and encourage investing for their long term future. Well, Tom, you're doing brilliant things.

19:41Pete:I should say so. Amazing. I was wondering if either of you had any tips for trying to convince the younger people in the office to take it seriously. While Kate, I know you must have had the importance of financial acumen instilled in you from an early age. Maybe the same is not true of your friends. Do you get objections like investing is not for me or I'll think about pensions later, I'm going to opt out of my workplace pension now or similar? What resonated with them that changed their viewpoint? While in my workplace, those over 40 pay careful attention, I feel I'm not convincing to the younger generation.

20:16I wonder if it is my own age that hinders this as who wants to listen to the old man saying, I wish I'd done what I'm telling you now when I was younger. if you had a killer line or fact that gives younger folks their light bulb moment i'd be

20:31Pete:very grateful thanks tom killer line i wish yeah right silver bullet so and you've had conversation with peers yeah i think with this question and the first i think we can be a little bit more uh i can't think of the word um i think people are more interested than a lot of older generations think yes yeah we need not to assume yeah sounds like tom's speaking from experience though yeah true i think i think it's not coming from a place of condescension no it's nothing worse it just makes me hate you i'm sorry like sorry tom no tom you sound like a really lovely guy but like if i'm speaking on behalf of all mid 20 year olds which obviously i can't but let's say that i can as soon as it comes from a well you wouldn't know about this but it's like well stop stop assuming that i'm stupid and little when you're breaking through into that working industry you are doing everything to prove to yourself and prove to others that you are an adult and you are worthy of being there you have been hired just like your older peers you are worthy of being there and as soon as it comes from a well let me tell you what you won't know yeah no it's an immediate turn off isn't it and even if it's for coming from a good place so i think if it's a hey come to me if you want giving them the autonomy yeah yeah hey i have learned a load about finance that i think could be really useful to you if you want come grab me whenever yeah exactly made a lot of stupid mistakes when i was 20 which i wish i'd somebody had told me at the point not going to ram it down your throat but if i can help you come chat immediately i'm like oh okay probably wouldn't come to you straight away but i would then have a question on my pay slip or i have something and especially if i didn't have like a parental figure or you know another trusted adult that i felt i could talk to i'd be like well tom did say i could speak to maybe i'll speak to tom yeah and immediately you've opened the door rather than like forced it down them yeah yeah nobody wants that is it i wonder if there's like a mechanism it sounds like it's a pretty big employer.

22:38Right, yeah, three to four hundred people.

22:39Pete:I wonder if this is kind of an intranet or some kind of internal system where Tom could start writing stuff. Yeah. Or creating some kind of content, little videos or whatever. You know, just from his point of view and knowledge of his company pension scheme. Yeah. Is he the employer, do we think? I don't think, I don't know, actually. I didn't read it as he did. No, I didn't read it as him being the employer, just a keen and interested senior employee. Yeah. um so i mean i think that would be great because then it's sort of can be passively consumed but in the in a sort of slightly more micro way of what i've done with meaningful money just by getting tons of information out there when people then have questions they go actually let me just search that guy on the internet again that i saw and and ask a question or whatever with an age I mean you're figuring everything out when you're in your early 20s I think you're always figuring stuff out regardless of your age but especially so when you're in your early 20s and I think it can be as warm and welcoming and lovely as you sound Tom it can be a bit embarrassing to ask so by giving them almost the barrier, not the barrier but giving them a separation oh there's a lot of videos here if you want to watch it they don't have to tell you if they've watched it no no but if they're really interested they will and it's quite nice they don't they don't have to come to you and ask yeah as well you've opened the door to them if you want if they want to but you also have given them the chance to do it in their own time yeah you know and different things appeal to different people so you know some people in your kind of target audience their tone will be really driven by numbers so you could bang on about compounding and the you know the magic of what happens with the money you put away in your 20s and all that others will be more about sort of security and safety and what you could build for yourself at really very small amounts every month and what it could turn into and the security that that would bring um and then obviously you can talk about emergency funds and budgeting and all that stuff as well so you know i think the motivation is obviously pure and as kate said it's about kind of meeting younger adults where they are and not lecturing or condescending to them which i'm sure is not not the intention um and then just finding a way to help them potentially consume it passively and then they will come to you yeah because who else are they going to go to i think the other thing i was going to say as well is making taking it out of the abstract yeah so whenever i've had whenever i've talked to people about it it's whenever friends have come up to me when there's been a very deliberate thing coming up so like i'm applying for student loans help or Kate how the hell have you bought a house with Ben he saw the numbers he saw my ICES and he went what the hell have you done that and then that it hooked him you know just like see this issue that you might be having this is how you fix it I think not just here's where you can have an emergency fund it's like 250 quid on tyres I had to spend the other week didn't cripple me no no I didn't buy an island because you had the money aside so I think yeah that would be my other thing taking it out of the abstract this is the real world you know obviously you don't have to share your finances Tom but like no no any personal stories and anecdotes probably help them connect as well yeah I agree with that keep up the good work Tom really important yeah you sound like a really good human top bloke alright so this one is from Sean it's really long and I'll try and whip through it it was actually sent to Meaningful Money but the wonderful Nick who kind of runs the Meaningful Money inbox and then some.

26:20Pete:Much more besides. Yeah, right. But in this sense, this is part of his job. He contacted Sean and said, hey, this is more of a bang of dad question. Can I ask them? And he went, yes. So Sean, this is for you. So hi, Roger and Pete. Hello, Roger. Hello, Roger. That's me. I am Roger. Yes. I've been listening to the podcast Meaningful Money for just under a year now on my way to work. And I think I finally caught up with every episode. If that's true, that's astonishing because there are 630 episodes. Maybe it's the Q &As. Maybe. Yeah. But I'm saying that, there's only 53 Q &As currently? Might be 58.

26:58Pete:58, I think. 58. So he could easily do that. Anyway, Sean, you're insane. So I've just skipped through a couple of things about how he says all wonderful things about Pete and Rog, but I don't want to read that. No, no, I skipped that. A bit of background. Here we go. I'm 22 and have been working for just under a year after graduating from university with a degree that has absolutely nothing to do with my current job. Lots of people in that boat. I'm still living at home, which means no rent, no bills and free food. Nice. The plan is to move out in around 18 months once I've completed the professional qualification for my job.

27:32The downside is that I'm earning close to minimum wage after struggling to find a graduate role. So I want to make sure I'm making the most of what I do earn. I recently cashed in premium bonds I've had since birth because I felt the money could be working harder. I used£16 ,000 to fill my stocks and shares ISA with accumulating global equity index funds. Lovely. Lovely. Oh. And invested around the same amount into a GIA, general investment account, with the same investment strategy. My parents also contribute four grand each year into my lifetime ISA.

28:08Pete:Good, good. My current plan is to invest one grand into the GIA each month, cover my spending and put anything left over into a high interest savings account as my emergency fund, while also retaining a few premium bonds for the love of the game. At the end of each tax year, I plan to bed and ice her as much of the GIA as possible, rinse and repeat and pray I don't end up with a capital gains tax bill. There's a lot to go through here. It doesn't matter if you do. It's fine. Carry on. I also have a sip that my parents started for me. It's currently invested 80 % in equity ETFs and 20 % in bonds, although I'm planning to switch it to 100 % equities given my age.

28:45I've also changed my workplace pension from the default fund into a global equity index fund, but I'm only making the minimum contributions at the moment. So my questions are, does my overall approach seem sensible?