What have we learned? - BOD022

0:00And there was a Porsche 911 Targa, beautiful, bottle green, convertible, worth£126 more than the house I've just bought. I was like, what? Every time I spend money now, I'm like, this is the last croissant I can buy at.

0:14Pete:Yes, for 40 years. For a billion years. 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. Did somebody tell you that they were amused by the way I said hello? Yeah, they wanted a compilation of all of them. Hello, hello, hello. And then one time it was, hey. That was like 20 minutes lost, wasn't it? And an ab workout. I don't think I've laughed that hard in years. And also, upon watching it back, wasn't that funny?

0:52Pete:No, it never is, is it? What was funny was our reactions. because I remember getting the whole of the office to watch the clip of us just falling apart. And then I'd be like, look, 10 minutes later, still going. Another eight minutes, still going. Yes, such a waste of time. Anyway, what are we talking about this week? This week, we are doing a little summary of what we've learned so far. Now, this was your idea. Yeah. What are we doing this week, Kate? I know exactly what we're doing. Because you were the one who thought this was a good idea. Well, I just thought it might be good to take stock because actually, as we will discover, I feel like, honestly, the first 19, 20 episodes, you almost could stop there because it's all that most...

1:39Pete:We're not going to. It's like, worry not, Bank of Dad viewers, Bod Podders or whatever. We need to come up with a fan name. Okay, go for it. Not now. I was going to say it. Yeah, on the spot. I need to consult ChatGPT for that. Yeah, clearly. Jeremy, I think, honestly, you could... because I'm convinced and hopefully we're making it obvious that really understanding personal finance isn't the difficult bit. We've given folks everything pretty much that they need to know and do in the last 20 episodes. But obviously the doing of it is the tricky bit. And over the next sort of few weeks, we're going to look at behaviour, why we do what we do and why we don't do what we should do and all that sort of stuff.

2:17You just look properly into Meaningful Money then. You're like, we've given everyone everything they need, what they need to know and what they need to do. Yes, well, it's the theme of my life.

2:25Pete:So I just thought it might be good to recap, and then also we'll talk about where we're going from here. Yeah, perfect. House update. I don't know if anything's happened since we recorded last, because we recorded on Thursday. Well, I've collated a metric ton of paperwork and sort of information for your mortgage broker, Gary. Yeah, I think we'd had instructed solicitors last time that we... We had or we hadn't? had because I did that on the Friday of the Royal Cornwall show and that wasn't the weekend just gone. Okay. That was the weekend before. So my side of things is largely done thus far.

3:03I'm on step three of like 16 of the legal process. But today's pissed off moment.

3:09Pete:Oh yeah, go on then. I'll just take a drink and zone out while you do that. So, right. I understand legal fees are a necessary part of the house moving process. I understand it. And yet, I have been... I don't know what the word is. Ripped off. I'm going to go for. Because I am 23 and don't earn millions. So I've gone... You know this. I've got a JBSP mortgage. So that's where mum and dad are on the mortgage. So that their... How much I can borrow is based on their income, not mine. If I had a buzzer, I'd press it. JBSP? Pardon? If I had a buzzer, I would press it. JBSP? Joint borrower, sole proprietor.

3:54Pete:Okay, so essentially mum and I are on your mortgage for a bit. Yeah, just to prove. Yeah. Just to make it easier. I can buy more, right? I'm buying an affordable house because in Cornwall, the disparity between wages and house buying, not your fault. You pay my wages. I didn't think it was. Oh, right, okay. White house price is my fault now. Okay, carry on. Understood. Also, hi. so this is like a first time buy local scheme. It's great. And I'm very gratefully receiving some help in the form of gifts. So, you know, all of that paints a picture of can't afford to do it on our own, really. And yet.

4:32And yet. I have had 700 odd pounds extra of legal fees for all the things, like it was using my lifetime ISA, 50 quid plus VAT.

4:43Pete:How does that make any freaking difference? I have no idea. having gifters i.e. you mum it was£100 plus VAT gifters ID checks £25 plus VAT per person you've got four because your granny and granddad are helping you out a bit as well yes affordable housing £100 plus VAT how can it make any sense to charge somebody more when they're buying an affordable house it's a valid crash out isn't it is there that much more work do you know what I mean it can't be over£700 no but extra fees because it's an affordable house. I feel like I've missed one of them in the list there. But either way... Yeah, a bit annoying.

5:22I was royally ticked off when that email came through, which is a shame because Lorraine was so nice. Yeah. My solicitor, and then she royally pissed me off.

5:29Pete:Step three of 16, it actually is 16 steps, isn't it? They've sent you... I've had a list, yeah. You are here. It's just like, oh. Okay. So far to go. So when you said you were, you know, that was pretty much it. Well, unlike the last time we were recording, it felt like all I was doing every night was gathering documents, sending forms or doing that. I haven't had any tasks in my solicitor's portal for a while. Anyways, that's my house tick-off of the week. Update. Okay, cool. So I think before we get into the main meat of the show, it's time for Wanky Word of the Week. It's time for Wanky Word of the Week.

6:11Pete:There we go. Absolute banger. Because we thought it was quiet, didn't we? It's just quite in our ears. It is quite in our ears, but when I edited it, it was absolutely fine. I didn't even need to adjust it. So that's good news. So what is this week's Wanky Word of the Week, Kate? I actually wrote the word ew after this in the notes because when Dad gave it to me, I recoiled. It was our Wanky Word of the Week for this week is spaced repetition. Given that we are sort of doing a recap, spaced repetition is not to do with finance, but it's a learning tool. I know. I remember my teachers banging on about it at school.

6:46Pete:So it's a sort of process of regularly reminding you of stuff. Because, you know, they reckon the fall-off rate of retention is pretty steep. So you learn something and you, like, lose retention of... Do you lose retention? You lose access to it in your brain, like something like two-thirds of it within a day or something like that. And then another half of what's left in another day. And so the idea of spaced repetition is that within the first 24 hours, you should remind yourself of it, bring your retention right back up, and then same in another 24 hours, and then 48 or 72 hours, and then eventually you only need to sort of, do you remember, it should be embedded.

7:24I had an online like science app at school, Tassami, and it did that, and see, the theory was great, it would bring in a new topic, and you'd have like a five minute lesson, and then it would be added to your daily quiz, and then obviously they started off, they were on every quiz, and then as you got it right more and more, it spaced it out and would bring it up to you more infrequently. Except they never rearranged the answers, so I remembered the pattern, not the content. It just didn't help me in my exams. But hey, I've still got an A star and an A inside, so suck it, Tassamai.

8:01Pete:So we're doing a little bit of spaced repetition today, just reminding you, we don't want to go over a lot of ground in a death, but just, I meant what I said in that pretty much if you could master what we've gone over in the first 20 uh episodes and you know implement it repeatedly and consistently over time you will be fine uh so i think it's worth just uh covering things over which we've kind of got into what four sections okay let's go for it um so the first section being spending and budgeting which i think is a pretty the pretty big one that we covered well it's the baseline remember we covered it as a foundation of everything people you know i said people all the time if you had to distill financial good practice down to a single sentence it would be spend less than you earn yeah everything else comes from that right because if you spend more than he's coming in you've got nothing to work with and actually you're going deeper into debt if you spend less than he's coming in then you have something to work with and you can put it away and they said sock it away then but you know we can put it away for our future learning your weird innuendos so you know learning that you can um build for the future if you spend less than you earn two bits of that of course you can spend less and earn more side hustles and all that so yeah two levers to pull potentially so everything started there in the uk no we call it lever dear god wash your mouth out right lever and big bang theory scene in it before we decide we have to but we do anything else we have to decide whether we're calling it a lever or lever whether we're calling it lever or lever and the sooner we decide it's lever the sooner we can roll up our sleeves not slabs and get to work so your spending really is the foundation of everything which I suppose leads us into the first main topic of spending less than you earn, the opposite of that is spending more than you earn, which leads you in into debt genius segway skills I think genius is over-egging it.

10:04Pete:It was reasonable. So, yes, if you consistently spend more than these coming in, there's only one way that'll end up, and that is you'll get deeper into debt, whether it's overdraft. Yes. So that was a decent segue. So good debt and bad debt, remember? Yes. Good debt is what? Good debt, oh, hell, is where, hang on, I can do this. I know this. Good debt is where you buy something that for, I've got it, it's all about interest rate, you buy something for a low interest rate and something goes up in value. Yes, whereas bad debt is? Something that you buy for a high interest rate and it goes down in value.

10:45Pete:Yeah, generally speaking, right? So a house and a mortgage on a house is good debt because house prices generally rise and interest rates on mortgages are generally low. Whereas, you know, buying a TV on an overdraft of 30 % interest or credit card or whatever, or Klarna or whatever, these things, other buy now, pay later schemes are available and they're all hideous. Yeah, they are available, but don't use them. You know, your TV is going to be worthless the second you take it out of the box, essentially, and you've borrowed a high interest rate to buy it. So, you know, debt is good and bad debt, but bad debt we want to get rid of as soon as possible.

11:25Pete:and we do that by creating a budget or a spending plan. Yeah. And do you remember like the golden rule? It's a bit of a vague question. The golden rule for what? Are you trying to lead me into the debt snowball? No, no, I'm trying to lead you into pay yourself first. Oh, yeah, I was nowhere near going. No, it wasn't a great question. So paying yourself first is improving your financial situation before you do everything else. So that's either by paying down debt or saving. Yes, I'm with you. And you do that only by deciding to do it and do it in a spending plan. Yeah. And I, yeah, that, I was, the debt snowball was the minimum payments on everything else and then take your lowest credit card, wasn't it?

12:05Pete:Yeah, so, yeah. Was it the credit card with the lowest interest or the credit card with the lowest amount? Lowest amount. Wasn't there a version that's lowest interest? Yeah, how much? But that's less quickly rewarding, maybe? To be clear, the debt snowball is, if you've got, say, I don't know, three, four, five or more different debts, list them in order with the smallest amount owing first. Pay minimum payments on everything else and as much as you can on the smallest one. Then you get a quick win. You pay off the smallest one quickly and then everything you were paying to that you start paying into the next smallest one maintaining minimum payments on everything else.

12:43Pete:And the amount you are paying against your smallest debt each time increases and snowball. Increases because you've got fewer debts to pay. And so by the end of it you've got your last one and everything that you've assigned for debt repayment is going against that. So the snowball gets bigger. The avalanches, you list them in terms of interest rate and you pay off the highest interest first. Financially, that can make more sense, but we are humans and I think a quick win of the snowball makes more sense. Okay, so... You know, we talked about where to get help. Yes, we did. So again, we'll link them.

13:15We have loads of charities. If it's bad. If it's bad, bad, yeah. Like collectors knocking on your door kind of thing. I think the main part of that debt episode was realising just how much that debt like lenders are obliged to help you, that was something I had no idea about.

13:31Pete:Yeah it's really true there's lots of protections and you know as soon as you sort of say you're in trouble they very often will freeze your interest and you know do everything they can to help you They'll work out a plan but there's also mediators who can help you with that. Yes exactly which the charities will help you with. And that was like Christians Against Poverty Yeah Step Change The debt change for the main two. So debt, to sum up, we talked about how there was good and bad debt, there was where to get help, and knowing that to avoid debt was through, oh, we didn't say emergency funds, actually, just said it to be.

14:01Not just them, but yeah. Spending plans or budget, whatever you want to call it, emergency funds. We covered debt.

14:07Pete:Yeah, sort of basic foundation of good spending. So we did a whole episode on pay slips because it's understanding what's coming in and where your money's going. I think mine, like I influenced that after having the world's most complicated pace. Even though I've seen nothing like what your teaching assistant pace was. Bizarre. And I had two because I technically had two job roles. They were both on the same pace, they were. And it was bonkers. Yeah, exactly. And it was split into half. And then there was like genuinely 12 full tables that I had no idea what they did. And even you will have. Even I.

14:41Pete:It was the hardest thing I've ever, hardest pace that I've ever seen to decipher. Like, I remember opening it and just being like, what? I couldn't even just look in the bottom right corner and look for the number. Like, none of it made sense. So, we pay slips. Obviously, we talked about, like, tax and national insurance. We need to do more on tax and stuff, which I know sounds gripping, but it's quite important, you understand. So, we looked at, you know, that is a deduction. It comes off and what that sort of is for. Workplace pensions as well. you should be in the pension and you'll see a deduction for that if you've got student loans and if you earn enough uh you'll see a deduction for that we're going to talk about that next week we are indeed right um and you know when and how to check your payslip really because it's so easy to just sort of get it and and why to check it yeah you know because there you know can be mistakes either from you or by the employer um but yeah that was a good episode i think because it kind of, it took a topic, I think it encapsulated Bank of Dad.

15:45Pete:Yeah. It's like, everyone goes, oh, everybody can read a paper. Well, actually. It's like all that matters is the net pay, isn't it? Well, no. No, there is not to it. Well, yes, in theory, but you need to understand the rest. Yeah, so that you can make sure it's right and, you know, what the deductions are for. Otherwise, you'll resent them. I mean, everybody resents tax and national insurance. Yeah, nobody goes, woohoo, I have less. But at least I think if you understand what the point is and why it's done and what it all goes to, then it makes a bit more sense at least. And then we whipped into a mini-series of our credit cards, The Enemy.

16:18Pete:Yeah. So having sort of looked at budgeting and emergency funds and good and bad debt and all that. Yeah. Yeah, a couple of episodes on credit cards. That was your instigation when you were planning out the first 20 episodes or so. It ended up being two weeks. I mean credit cards it's funny I was listening to a podcast earlier on today and a friend of mine sort of financial planning industry giant called Jason Butler he's absolutely emphatic he said I don't have a credit card my daughters don't have credit cards they've both bought houses you know that's interesting yeah I mean we talked remember in the context of like credit score and credit rating and could it help you and the answer to that is yes but it doesn't necessarily do you any harm if you don't have them either not significant harm no but my score has gone up since having one.

17:04Pete:So there you go. But he's very much sort of, you know, again, it's a gateway drug. You've got to be really careful. But she's not wrong. We're not wrong. But if you're educated about how to use them, I think they can be incredibly beneficial. Well, they're useful. No doubt about that. And we did talk about how to use them safely. Exactly. We talked about, yes, they can be the enemy if you use them incorrectly, but they can also be a tool. Just got to remember, it's not your money. Yeah, don't ever treat it as such. So I think we sort of give spending, budgeting, debt, getting out of debt, credit, pay slips, tax, national insurance, across a few episodes.

17:38Yeah. Pretty good thrashing. Was that the first 10?

17:41Pete:Yeah, those weren't all in order, but yeah, pretty much. That's basically the first 10, yeah. Okay. So that was spending and budgeting. And then we did a little bit on insurance, which was you were really driving that, and it made me realise I needed a few more insurances. Yeah, I needed to talk about it, yeah, and particularly now with buying a house. Oh, yeah. We talked about three risks with insurance. or at least three kinds of cover you can have. So one was his life assurance, so dying early. Assurance. Assurance, yeah. Can you remember the difference between assurance and insurance? That was your fault, you brought it up.

18:16Can you let my brain work on it for a little bit?

18:19Pete:So three risks. So dying too early, so you cover that with life assurance. Critical illness. Ah, I've worked, I've remembered what it is. Okay, cool. Isn't assurance something you can't replace? Yes, that's right. Whereas insurance is something you can. Thank you. I just needed a bit of time for my cogs to turn. Because if it's life insurance, you can't replace a life. Obviously, you're providing financial relief for those left behind. But it's not like phone insurance where you can just get a new phone. Just get a new phone. And even critical insurance, critical illness insurance, you can't replace your health, but it's not something that you've...

18:56Pete:It's not like a life. You're not dead, right? Income protection insurance, you can replace your income. Yes. Right. So those are the three things. Life, critical illness, which means it's something nasty, but it's probably not going to kill you, but might require you to take some time to recover or whatever. And there was a set list, weren't there? Yeah, it was a basic list. And then each insurer has a kind of an enhanced list. And with critical illness, you should really understand the definitions of these things. but it's basically cancer, heart attack, stroke, motor neurone disease, multiple sclerosis, all those nasties, losing a limb, right?

19:30Pete:Loss of sight, loss of hearing, all these sorts of things. So these are critical illnesses. And then just not being able to work. So you can take out insurance, which replaces most of your income if you are unable to work. And there were different definitions of what it means to be unable to work. Actually, yeah, because I think I only said there were three. Technically, there's four, but it doesn't really matter. What's the fourth? So there's own occupation, so it'll pay out if you can't do your job. Yeah, if you're a brain surgeon who suddenly loses his sight, you can still work in other occupations, but you can't do brain surgery.

19:58Pete:Well, there's suited occupation, which is I think probably the one I missed. So suited occupation means it'll pay out if you can't do a job that you are suited to. Right? So I'm going to think of an example. You know, if you had like an engineer, they might not be able to do like on-site work. Right? So own occupation would pay out. As long as you can't do your job, it'll pay you. suited occupation will pay out if you can't do your job or really anything that's suitable for you any occupation basically you have to not be able to work pretty much at all yeah and then it'll pay out and then you've got activities of daily living which is like you can't feed yourself you can't dress yourself you did mention suited I don't think you called it that but you definitely referred to that yeah because you used the example of an engineer can't work as an engineer but could be a receptionist I've trotted these same examples out for years so I think you did but I don't remember you calling it suited but ultimately income protection insurance pays out to replace most of your income if you can't work subject to those definitions so it's I remember we said your income is your most important asset that's just what I was going to say because the analogy that stuck out to me was you said if you managed to make a machine that legally printed money in your basement you would do everything you could to protect it you'd fortify it you'd lock the door, you'd do everything to stop it.

21:23Pete:And you'd certainly take out insurance. And you'd certainly take on insurance. And yet you are the machine that makes the money for you. So you need to look after it and protect it. Yeah, credit for that analogy to a good friend, Roger Weeks, co-host of Meaningful Money, but I'm sure he nicked it from somebody else. So let's not give him too much credit. Don't give him too much credit. I didn't know Roger said that. So insurance is part of your foundation as well, because it's protecting against stuff you can't control. So much in finances, so much in life is not in our control. But the last thing you want is to have like really good spending controls and you've paid down your debt and all that.

21:57Pete:And then something that you can't control comes along and screws everything else for you. I think, not to be depressing, the main message as well, the other main thing that I learned from that was that just because I'm young doesn't mean I'm infallible. No, or immortal. So, I used infallible in the right context, didn't I? so you know it's not lame or too old or I'm too young to think about insurance in fact it's very smart it's gonna kind of suck because it's money that you're losing in inverted commas but if you have to claim it you'll be really glad it's there it's true of all insurance you never want to claim it but you're really glad it's there if you do absolutely and you know yeah exactly you almost need to reframe it it's like if I haven't claimed then flipping brilliant yeah I've kept my health and I haven't died.

22:47It's not a bad result. No, exactly. There was a comment on one of them, if memory serves, and it was a comment that you said is often thrown about when insurance says, well, the insurance companies don't want to pay us.