ARCHIVE: The New Rules For Building Wealth

30:07And he's always like, property, man, I can see it, I can touch it. And I was like, there's my portfolio. I just get my phone out and put it there. And I was like, I could sell that right now and have all the cash. How long is it going to take you to sell your 10 terraced houses? I think there's pluses and minuses, isn't there? But I think people should challenge the logic of bricks and mortar is everything. I want to... That's your favourite. We'll get to that in a second. I want to first of all challenge another kind of maybe contradictory or what you say about budgeting i think will make some people go oh god this guy's mental or maybe you just got so much money it doesn't matter but you say that you don't think budgeting is is something that people should do not for everyone i've there again it's offering an alternative like for all this stuff there's loads of advice you can pick and choose what you want to pay attention to and for many people again budgeting will be something that they want to do or have to do.

30:56If it makes you, if you feel like you need to do it, if money is like that ultra tight, which it is for many people, you should probably be budgeting. If budgeting makes you feel better and it makes you feel in control and it helps you, then do it. But I think there are people who don't find the helpful. It definitely, it locks you into a sense of scarcity. And that scarcity is obviously true, but sometimes it's helpful not to overly focus on it. um and so another way of approaching it is i sort of take i i used to be a budgeter and then i went into a stage of i just tracked everything that i spent and it's and i found that if i just wrote down everything that i spent each day i found myself spending less just because i had that awareness of it and before spending something like i'm not going to feel good about writing this down in a few minutes time and it made a big difference and it's the same reason that like if you if you want to lose weight you need a big pound and pound we did an episode on budgeting and i'm like yeah i'm gonna take this all on board and then i got home and i did not take anything just wasting money so yeah i think that's really really yeah that's like very actionable for most people especially if you're like compulsive spender like me or very impulsive if you write that if you know you're going to write it down and look at it at the end of the day like did i really need like that triple cheeseburger i could have got a double and that's why it can't be automated like you can obviously hook up your your bank and whatever and it'll categorize everything for you because you've got to write it down yourself or otherwise it doesn't work so i don't do that now but but i think it's a great way of like bringing your bringing yourself under control a little bit if you want to need to it's like if you if you want to lose weight if you just start tracking your calories you will lose weight even if you just weigh yourself every morning yeah even if you're not trying to lose weight it just will happen and it's exactly the same theory that which measure is measured grows or whatever yeah so i i was a budgeter um when i when i was in debt and skin like you said and it really helped me and then it became a tool of kind of i just made it made me feel bad about myself because i never stuck to it if that makes sense once i got more money uh what i tend to do now is is budget the fixed costs as in i know exactly what the amount i need to take out my business is every month to pay my fixed bills i then have an amount on a card and it's like once you once that's gone david it's gone yeah it's invariably always gone yeah But, you know, I don't say, oh, I'm going to spend X amount on haircuts and this and this.

33:14I can tell. Thanks, mate. Yeah, so you were waiting for that. I know. You had that loaded, didn't you? You had that locked and loaded, mate. So, yeah, I can see how over time it transitions. And I do think it's important to say that you can't offer a structure to every single person in every single setting. And I think a lot of what you do talk about is for people that have got a bit of cash that are just wondering what's the best way to do it. That's it. I feel like so much of what you see out there is just like the same thing over and over again. And it's like, that's great. Most of it probably makes sense.

33:46But if you chuck in some new ideas, maybe some of them will make sense to you. Some of them won't. And that's okay. But you might as well give it a try. And I really think like most people only have so much time and energy and mental focus to give to the money side of things. Like we choose to be here talking about it today. So we're a bit weird. but most people have got things they'd rather be doing. So maybe if budgeting is taking up all your money headspace, that's probably a waste of energy when you could go and deploy that with earning more or whatever and end up coming out far further ahead.

34:16Yeah, that was a lesson that I had to learn for myself in terms of, I think if I said to people, I spend hardly any time thinking about finance and investing, they might be like, what? You do that for a living. What I think about is how to make content on those topics because that's the activity that drives the results in my life. And the actual, my personal finances are super boring. They're automated and just invest. My favourite one was the early retirement myth because this is a story that I told myself for 10 odd years, probably 15, that I'm just going to retire early and I'll be happy. And my missus, my partner was just like, you ain't never stopping working.

34:53You get up on Christmas Day and you're in your studio like this. And I have to tell you, I did that on my birthday. poured 43 000 peas over myself petty pois you know yeah yeah for it was like representation of property growth and and you know expected returns and my missus was like it's your birthday what are you doing she's like you're never retiring and i think you know this whole thing of like i'll be happy when it's kind of an extension of that isn't it you need to find a time to to be happy now yeah totally i think that's it like there's a whole there's a big movement about early retirement and i think lots of it is really helpful but i do think that if you are the kind of person who's able to retire early you almost by definition won't enjoy being retired early yeah because you got yourself to that position yeah do you think that's a bit of an outdated concept like it was because i mean i know when i was younger i was like i'm gonna retire by the time i'm 40 and become a philanthropist and just how's that going yeah i know i've got bills

35:54i'll come for your soul i'd be crying in the corner yeah but i thought i was going to retire 40 travel the world but like now i'm like i would just get bored like i'm very i've got too much energy i want to do something like even if it's working from home or like being a philanthropist running a business like i will always be doing something even in my 70s like yeah so and now we can because we've got working from home and like cameras and remote work and zoom and all these things so it's a bit easier to work later in life if you enjoy what you're doing and i think that's the key it's enjoying what you're doing because like you don't want to be in a position where you have to work forever you want to be in a you know you're in a position where you don't you don't have to but you choose to because you enjoy doing it and so chances are you're going to want to do it anyway most people are going to have to work for longer than they'd really like to anyway like the whole the whole thing about like retiring at 65 or whatever it's like i think the average age the most common age of death for a woman in the uk is 89 so you could end if you work it out you could end up spending a third of your life in retirement and that's based on people that were born decades ago yeah so current like the current generation fast forward 40 years it might be 90 95 exactly you know and i think when we're talking about changing dynamics i think changes around retirement and what retirement are is a crucial conversation that people need to have with themselves in terms of i might be retired as long as i worked so yeah unless i save up a lot of money I probably need to work in some way.

37:14Exactly. Can you save up enough in 30 years of working to sustain you for 40 years without working? Probably not. Your investment returns would have to be insane. But the great thing is, like you said, we've got the flexibility now where you can work in a more flexible way. So if you can find something you enjoy doing, find a way that you can add value in a flexible way so it's not taking up all your time, it's not something where you're missing your grandchildren growing up or whatever then great i just think most people if you can find most people like being most people like doing stuff that's useful and that they're good at that doesn't mean they necessarily like working but if you but if you can find something that you like that's useful to the world and that you're good at and find a way of doing that forever you're probably going to be happier for longer as long as you can balance that out with other parts of your life but it shouldn't be like all work and then all leisure just like in the coal minds for 60 years and then just like chilling for like 20 30 years i think the issue was when work was hard labor most people were broken by the time they retired right and then they died 10 years later whereas now it's if you're a doctor or a finance professional or a content creator by the time you're 70 you've got such a wealth of experience that you're so valuable as a consultant or whatever that's it's that kind of it's it's work of the brain rather than work of the hands obviously there's lots of people who do work with their hands though what would you say to someone that's a builder who goes i'm going to be shot at 65 i think there's still i i don't have any knowledge of that side of things but i assume there's going to be lots of opportunities to pass that knowledge on right because if i from doing it for that long you're going to have this all this this knowledge and education about that there'll be ways away maybe you're not there like laying the bricks yourself by my clothes yeah exactly or start a business yeah like a building company and then hire people start a business train people do whatever there's always going to be ways.

38:59But I think that's why it's important to start having this awareness early so you don't get to whatever age and then go like, right, now what? I don't want to do this anymore, but what do I do next? If you can start thinking about that 10, 20 years earlier, then that's helpful. You outline an eight-step plan that people can implement to maximise what they're putting into their buckets and to take control of their finances. The first one you start with is making easy cuts to your spending. What do you mean by that? so we've talked about spending already it's like people i've and the reason for like saying you don't have to do budgeting if that doesn't work for you is spending is like the least powerful tool you have like if you have you have to do it like you have to be spending less than you're making otherwise nothing works but you can't cut back to zero so it's like there's only so far you can go so that's why i talk about making easy cuts to your spending in terms of like you know cutting the subscriptions you're not using getting sort of doing whatever you need to do to get your everyday spending under control but just get it to do the stuff that doesn't feel hard because there's also this whole thing about like you need to look after the future but you need to live for today as well and there's some certain experiences you can only have at certain stages of life so it's like not worth having no holidays and like missing out on going going on holiday with your friends in your 20s and 30s because you might not be able to do that in the future so So just do the stuff that's easy.

40:23And then you can flip onto the, like rather than like cutting off back another 20%, can you find a way to earn more? Because then the upside of that is unlimited. So you've got to do the spending, but not give it more focus than it deserves. Yeah, I remember when I was speaking to you and you were saying, I don't want to do a budget and all of this. And I was like, a budget is actually a tool where you get to decide how you live your life rather than your money just happening. And I think when people are in that early stage where they need to say, this is the life I want to live for me it's I want to spend time with my son I know and I'll spend good money on that and I want to spend time with my friends and I'll spend good money on that anything outside of that really probably shouldn't be taking that much money out of me because it's not important to me yeah it's not priority that's it I've got this whole concept of mindful spending which is basically just like think about it and like think honestly like you have about what makes you happy because I think lots of us have got ideas about what makes us happy sometimes you've got those ideas from other people maybe it's things that used to make us happy but they don't anymore if we just stop to think about it so i think everyone no one's going to have perfectly optimized spending like it's just impossible but everyone can get closer so i'm just like we'll get get closer and then move on to something else where the upside is higher yeah like my car doesn't make me happy and i don't really care but i've got mates who really do and i might judge them my car makes me very but i always wanted my car since i was a little where is it right now it's in the garage yeah where are you yeah it's broke it's broken like you I hate it yeah no shouldn't have come for my hair mate I know he took it personally I'm gonna get it for the rest of the week that was a misstep yeah yeah you're getting sacked we've got a co-host slot opening up if you want it he's putting his t-shirt that I bought for him wow not letting off the leash now yeah yeah something that Tomei might need to do after his impending sacking is the number one is getting protections in place i think this is often not talked about enough we did an episode on it and people were grateful but there was another area that were like oh this is i'm being sold insurance kind of things and the protections is that the kind of protection you mean or do you mean yeah so you've got your classic emergency fund like that's that's a bit of financial advice that's never going to be wrong like you've got to have that um and insurance can be a part of that it's not something i know so much about um and then your home if you want it to be because like your your home is is protection but as we've talked about it's not necessarily for everyone but i do put i do put that in the protection bucket rather than this is going to make me rich bucket but but i'd put that i'd put all that stuff in place and then figure how much of that you want and then move on from there yeah i think the thing about protections are you need them when you have nothing and i think once you're at a point where you're 50 60 you might not need an emergency fund you might not need insurances but when you're 20 and you're just starting out a pop tire can rock you and two months off work can bankrupt you so these are the times that you you probably think about those things yeah i i've got cash in the business now that i don't necessarily need to have an emergency fund but then every something comes up every month and i'm always like why don't i have a couple of grand outside the business because now i've got It's a taxable event.

43:32Yeah, but it's also about what makes you feel comfortable. And if you look at what billionaires do with their money, they're all completely different. So even if you go down for billionaires, just look at people who've just got tens of millions. So in any reasonable world, they'd never have to work again. Some of them have millions of pounds of cash on hand, even though they know it's losing money to inflation. They don't care that it's losing money to inflation because it makes them feel good to know that that's there. and so you could look at that and go well that's wrong but it's not wrong if it makes you happy right i run super lean on the bank account to the point sometimes where it when i'm about to go to a shop i have to check that i've got enough money to pay i do that all the time but i because if i leave money in my bank account stop look you're not getting a lift in my car for the rest of the year now your car ain't here me your car is broken it will be fine temporary little hiccup um but Yeah, like if I leave money in my bank account, like on payday, Damo taught me this though, on payday, I move all my money out of my current account because if I leave it there within a week, I'm just going to spend it.

44:34I'll go on a night out and like, I'll spend 100 quid tonight. And then in the morning, I'll be like, how do I spend 500 quid? So I'll walk through Westfield and someone will be like, do you want to buy this? And I'll be like, well, I can, so why not? So now I just like invest it as soon as I get paid, pay my rent, invest it, just spread it out and then like don't have any in the current. So like when I check Revolut, every time I go in the shop, I'm like, all right let me move move a bit of money over so i don't decline at the counter but um i think that's it yeah people find that stressful but i find it kind of like it just keeps me because i am i i know about myself that i'm reckless and if i have 10 000 pounds in my bank account i i spend differently i'm more frivolous and it adds up um and i'm not at the point where i can just completely not care you know so that's what's so important like knowing knowing yourself knowing what you're like and knowing what makes you happy is the foundation of all of this which is really hard like that's harder than just like following a rule about like where to put your money knowing yourself is super hard but it's if you don't if you don't get that right if you don't know what makes you happy if you don't know like what you're like how you behave then you can't quite you can't get it right so it's that self-knowledge yeah being really intentional about it and maybe even sitting down and going you know at the start of the year these are the things that i value these are the things in my day-to-day life that make me happy yeah and these are the things that are worth spending money on and also being honest with yourself that if you're a nutter on a night out take a hundred pound in cash and that's it do you know i mean you can leave your cards at home yeah damien are going out after this and i've i've got cash on me because i'm like if i bring my card it's going to get out of control yeah yeah or demo campaign yeah it's a business expense it's okay um the next one you've got is decide about your home i think we i think we've already spoken about this let's separate home from investment now yeah big time so home home like where you live and so So if you want to do that, it's about figuring out, well, how much do you want to do it?

46:20Do you want to do that? Because again, you have to make choices. If you could afford to do everything, you would. And so if you want to do that, then do you want to get there super quick and prioritise over everything? Or do you want any money you've got split that between saving up for a deposit and putting money into investments? And again, it's just different things from everyone. But I think the reason I put it in there is it is a choice to make. It's not a default. that you have to be doing the home thing. Are these in any order? I think these are flowing through the order. You cut the spending, you have the protection, you decide on what you're going to do with your home.

46:56Am I going to make that a focus? I'm going to buy one, I'm going to rent one. Because some people will just go all in, won't they? And in London, that could take you a decade, even all in. And then 10 years later, you go, oh, I'm in the house now, but I have no other assets or I've not been anywhere. So make that decision. Next, you have your bucket, calculating the bucket sizes. which i think we've done you have the personal choices what do you mean by audit your maintain bucket so i think the we haven't talked much about um that whole that whole kind of the whole maintenance like let it compound over time so i think we haven't talked about that much but i think by audit it i mean just like is it like how are you doing whatever the right thing for you is which may be it's the whole thing like should you be 100 in stocks should you be having more diversification in there figure out what is the right thing for you to be doing because like you'll get people who are probably like too heavily in stocks where they should be you'll also get people who are not enough heavily heavily enough in stocks where they should be so i've got a whole chapter about figuring out like what how much diversification you need what what level of risk is appropriate and so like really getting your head around all that and so you are you're taking on enough risk to get the return but you also understand that however you slice it there are going to be painful drawdowns and i think that's something that again like we had 2022 where just like everything performed really badly all at the same time and there are people who like pulled everything out of the market to that point because it's like i can't take this i can't take this it's gone down too far it went up by the same amount the previous year they weren't complaining then but it's just like i think you need to like come you need to either go like i can deal with that i can like i know you when when the markets crashed in 2020 i think it was like you put more in it's like great the market's on sale yeah and so like if you are like that that's your mentality fantastic but if it's not if you if you might panic if things drop by 15 then you need to be looking at that because you because the whole point of compounding is you just have to leave it yeah that's what when you said order i was like so are you saying we should tinker with it because you yeah you should just leave it but you should just and how often should you order because obviously tinkering with it's going to affect your returns and the compounding yeah and a how often should you be auditing i'd say it's most mostly just like do once then leave it so like it's maybe maybe it's maybe it's fine now but i think a lot of people will have be invested but may like so like you ought to get a lot of people who are they invested in an index fund, but the index fund is the US stock market, it's the S &P.

49:33Maybe that's okay, but I'd look at that as if the whole purpose of this bucket is I get more diversification, I want to be diversified beyond the US because it's been the winner for the last however many decades. Is it going to continue being forever? Probably not. Will you be able to pick the next one? Probably not. So I would actually, if the whole point of that bucket is diversification, I'd want more diversification. Yeah. And just before we move on from this, I think we can all sit here and go, you know, just keep going, keep going. We interviewed a lady called Amy, and she was amazing. And she said that she understood all of that.

50:06But then when the crap hit the fan, she bottled it. She couldn't take it, and she pulled out. Have you been through a major decline in asset values, be it property or stocks? And how did you weather that? Yeah, so I had that in 2020. And then to a lesser extent in 2007, 2008, I didn't have as much back then. but it's still just like it's still scary to to see it happen and but i think that's why it's really easy to just go oh yeah be greedy when others are fearful but when it happens it's a different story and so i'm fearful exactly yeah yeah so just like you just you absolutely can't like pull out at like when things are down so you need to go okay like how much risk can i actually can i actually actually live with and like the more you can educate yourself about it and have realistic expectations, the better.

50:56The market having a year when they're down 15 % should not be a shock. It happens. And so it's like, you need to get to come to terms with that. Don't have the broker's app on your phone, if necessary, give your password to someone else who you trust. But you need to protect yourself from yourself when it comes to all that. Having a realistic expectation of what returns looks like is crucial, because we quote the average return of, say, 10%, 9%. If you actually look at 100 years of returns, it's more likely that the year does a minus 20 than it does 10. Yeah. Because there's only actually one or two years that have hit the average.

51:27Exactly. It's more up 20, down 20. You know, the swings are, there's volatility, right? Yeah, but that's normal. But it just, I don't think it feels normal to people. And so you've got to, you've just got to accept that. And again, it's about knowing yourself. So is that part of the audit of saying, okay, at some point in this journey to retirement or to whenever I want to take, take out all this compounding, it will be down. You're auditing yourself. You're auditing yourself and your portfolio or just really yourself and your mental approach to it. All of it. So there's lots of different ways of putting together a portfolio.

51:57So one from quite a long time ago is called the permanent portfolio. And that's like ultra safe. So you've got like 25 % of cash, 25 % in gold. And the idea is it like, it really limits your downside, but it limits your upside as well. And so you'll find that maybe if your normal portfolio would have made 9 % before inflation over the years, that would only make you 6%. Over 30 years, that's a giant difference. So you'd rather have none. But again, maybe you wouldn't want to go that far in terms of reducing your risk. But it's like, well, that would probably, I think the worst year that portfolio has had has been down 9%, 11%, something like that.

52:33There's no way of getting lower than that. And so you need to be at least okay with that. And if you're going to go more aggressive than that, you need to be okay with bigger swings. So if you're very anxious invested, that would be good for you. Because you're like, I know I can't take more than 9%, otherwise I'm going to sell it all. So at least this way I can leave it and let it run. so it depends on your appetite. I think having this conversation is one of the most valuable things an investor can do because it leads to other habits such as getting out of default funds inside of pensions. You might go, oh, actually, I don't mind a bit of risk.

53:01I understand that the market can drop 20 % and then you go look at your auto-enrolment pension fund and you go, this thing's really cautious. And that movement out of the default into a more aggressive or risky fund can produce exceptionally more returns if markets perform like they have in the past. Yeah, and in the other direction, because if you're closer to actually wanting to live off those funds, then you can deal with a lot less risk. You might want to get out of the fund that they're in and be more cautious. Yeah, exactly. I don't think people, what's your risk appetite? No one actually sits down and works that out.

53:35I think Morningstar do a risk appetite calculator that is almost industry standard. I know a lot of financial advisors use that, so we'll link that below. Someone will. Not me. And it won't be me. You do. Stop by a joke. Yeah, yeah. But I think, you know, because people say calculate your risk. And then what do you mean? But everyone will life themselves anyway. Like, you know, it's very, oh, yeah, I can deal with it. But then when it comes to it, you can't. You don't really know that until you've been through it. So going through a financial disaster early in life is kind of a good thing. It kind of teaches you what you like.

54:07Forges the steel. Yeah, I guess that Damien was talking about Amy. She said she was watching. It was, you know, so positive, negative, red and green. And it was green. And it was just going down and down towards breakeven. and she bottled it so i was thinking oh it was in the red but she just sold before it got to break even yeah so like some people they don't even want to see the red whereas i've lived in the red many times i'm familiar with the education but you just don't you just don't want to be looking at this if the point is you don't touch it for decades then you just then what it's worth is irrelevant today or tomorrow but you just need to not look otherwise it will and that's that's why it's just like if that's the point of that bucket then just set it up and forget it is even there because is looking is not going to help.

54:46What action are you going to take? Fiddling around with it is likely to make things worse rather than better. Exactly, yeah. That's why property is so good, I guess, because there's no live market. There's no one screaming at you what the price is. I bet if there was, property prices would be fluctuating by the second, right? Yeah, exactly. Why do people succeed in property? There will be structural reasons for it, but I think a lot of the fact is it forces you to buy and hold. Yeah, you can't do much. You don't have much flexibility. Even if you wanted to sell in an instant, you can't because you've got to get a mortgage advisor.

55:13you've got to list it and you've got to wait for an offer and exchange contract. By then you'd be like, I'm not panicking now. Exactly. So the illiquidity of it, like for your friend who took three years to sell, that's a problem. But as an investment, it's like, well, this is great. I've had times when I've been just like, this has happened, that's happened. I can't be honest with this anymore. I just want to sell it. If I could have done it in that moment, maybe I would have done, but I couldn't. Yeah, hard to panic for three years. Exactly. Okay, you say, I don't want to skip any, but you say the compounding machine, you just outlined what you mean by that.

55:43This is the maintained bucket that you just set it up, you leave it to run, and you know that long-term, at least you'll be okay. You'll get to a point where your wealth from assets can replace your income, most likely. In your book, you say that the ability for compounding to dramatically transform our lives has been dangerously oversold. I misquoted you, but it was there or thereabouts. More or less, yeah. What do you mean by that? Yeah, I think the whole put money into the market, let it compound for a long period of time. And obviously, that's a good thing to do. I'm not saying it's not, but what it's not going to do is change your life anytime soon.

56:18Like if you look at how long it takes, like we talked about the hockey stick thing, right? It's like, and it takes probably like 30 years at least just for that to really get going. Like in the early days of compounding, you're putting in the vast majority of yourself and the amount that you're getting in terms of compound returns is tiny. And obviously over time that increases. So if you've got 40 years, then that's fantastic. But I think so much personal finance advice that you see is just start doing this in your 20s and in your 60s, you'll be fine. It's like, cool, but what if you're not in your 20s?

56:48Like, you can't go back in time. So what are you going to do? And even if you do start in your 20s, after 20 years, if you're forced to stop work or you want to stop work or whatever, 20 years isn't enough. It's not going to make that much of a difference. If you left it for another 20, it would be. But if you interrupt compounding at that point, it doesn't really work anymore. so i'm not saying don't do it but i'm saying it's not going to be maybe it's something to do for the future but if you want to make a big change to your life anytime soon it's not going to do that much for you off the back of that another another well quoted thing when it comes to compounding is people always quote the average return of the market and they say in the last 100 years we've done nine percent so extrapolate that out yeah do you think that that that is a good assumption to make?

57:34I think it's a risky assumption to make if you're relying on that, because you see people talking about 9%, 10%. But if you look at what that's based on, that's based on the US market over the last 100 years or whatever. That happens to be the time when the US has dominated the world. It's been the best performing market in the world for that time. So the best performing market is 10%. So if you then put everything into the US, maybe you could expect that in the future. But is the US going to continue to dominate for the next 100 years? It's highly unlikely If you look back at the history of the world, it's just like that tends to be not how things work.

58:08So then you need to go and pick what the next best is going to be. So if you do that, maybe you'll get 10 % if you manage to pick the next best performing economy for the next 100 years. Are you going to be able to do that? Probably not. So you're going to want to diversify. You'll want to put some in the US, some in Europe, some in Japan, whatever. Spread your bets. But if you're doing that, then you're obviously not going to get the return of the best anymore. You're going to get more of an average. So maybe that pulls your 10 down to a 7. And then that is all before inflation. So say inflation is 2%, which is what it's supposed to be, then like real, that's taking you down to 5%.

58:39What if inflation is higher? So quite soon, you kind of go from this amazing sounding headline number down to something that's less exciting. So again, it's not saying, oh, this is all pointless, but it's saying, don't do your sums on the basis of everything on this incredible run from the best in the world, where for the last however many years, everything's been structurally pushing up the value of everything. stress test to the downside and so when you stress test to the upside with mortgages you might go what if it was five percent real or what if it was four percent what would that look like and would i be saving enough exactly so the next one you've got is work on earning more uh can you talk to us about how people would realistically do that yeah and i what i really want to get across is that that doesn't mean go start your own business because i feel that that can come across as the advice a lot of the time and like as you know starting your own business can be an amazing thing to do, but it's not for everyone and it's not for everyone at every stage of their life.

59:36Definitely not quick either. No, exactly. So, but it doesn't have to be that. Like it can just be getting a qualification that allows you to sort of go and get a job doing that pays you more. It can be switching industry with the same skills you've got. You could go and apply those skills in an industry that just structurally pays more. Or it can be not necessarily working harder, putting in more hours, but just working in a way where you put in more effort in the same time and work, maybe work a bit more intentionally. It's like something that we've seen in our business. And we talk about a lot is that it's, if someone is just like, you don't have to be twice as good as everyone else.

1:00:17If you're just like 10%, 20 % best than everyone else, it's super noticeable and you get all the opportunities. The people in our business who've like risen up and like getting paid more than anyone else who are like at the top, they're the ones who just like came in and weren't just like, this is the most incredible person i've seen in my life but they were just consistently doing well having ideas picking up things and figuring them out on the fly and just by doing that it can make a radical difference and so earning more doesn't have to mean making massive life changes it doesn't have to mean like working all hours but if you can just find a way of earning more then for a start like there is no risk to it like you if you get paid more that is that is a good thing there's no risk of it going wrong.

1:00:59It's not reliant on anyone else. And also, it's going to have such a higher impact than anything you can do with your investments. Any time that you're spending messing around with your investment portfolio, maybe it'll make a tiny difference. It could make things worse. If you apply the same amount of time and focus to your career, to a side gig, to whatever else, it's going to pay off far more. Yeah, there was something that someone said to me, they were like look around where you work and see what the ceiling is and ask am i happy with that and then maybe just sidestep into a different kind of industry where people get paid a higher ceiling yeah so if you work in hr for a charity there's a ceiling if you go and do the same for hr for goldman sachs you'll probably get paid 10 times more to do the exact same job just because that sector that industry has higher wages and higher profits and all of that kind of stuff yeah exactly and i think most most people see their career as something that happens to them to an extent like they're waiting for opportunities or like maybe they maybe they get a pay rise maybe they don't maybe there's an opportunity maybe there's not and i think you're whether you like it or not you're putting so many of your hours and so much of your life energy into it you might as well be intentional about it and believe that you have control over it obviously you don't have full control over it but just believing that you do just will make you see these opportunities like the ones you talked about maybe maybe you don't want to go and work for an investment bank and you'd actually hate it in which case fine don't do it but it's worth knowing that the opportunities are there and that the people that are doing those jobs that are getting paid more than you are no they're no different to you they're often doing the exact same job yeah it's just that they just so happen to be in the right location to to get that opportunity yeah the most most people like fell into what they're doing like it's very rare i think for like you go and see your careers advisor and they say do this oh okay yeah that's a great idea and then it's just like most people just that's like random it's a random chance they got you to where you are and so like maybe it's the best thing but there's a good chance that it's also not because it's just random and if you intentionally just sit down and go wait where am i next randomly going to fall maybe you'll get a better outcome than just bobbing around exactly you then have research improving improve research improve investments so that this so like if you decide that making any kind of investment appropriately sized is the way for you then the way i say research it rather than do it is because I think that's where it should start.

1:03:20It's the difference between taking a calculated risk with some proportion of your wealth versus just like going and having a punt on something. So then that research process could go on for years before you're even in a position to have the funds to do it. And if the thought of doing any of that is just like no fun at all, like you can't bring yourself to start researching it, that's probably a sign that you shouldn't be doing it at all. and you should just focus on something else, maybe earning more. So you're putting more into the compounding side of things. And so that will get you to where you want to be.

1:03:52I can't not have you here and not talk about property investment. Because, you know, do you still think property is a good long-term investment? Yeah, totally. Done.

1:04:04Easy question. Next one. Only with finance. Yeah. So I think that's a really interesting area because I do think if you look at the long-term returns of property and the stock market, they're roundabout equivalent. You can slice it in different ways depending on time periods and stuff, but it's more or less the same, in which case you go like, well, why would I even bother with property then? Because it's so much more hassle. It's so much more lumpy and illiquid and all the rest of it. But it's the leverage aspect that boosts your returns. And so I don't particularly... A lot of people get into property investment going like, I want to invest in property because I like it, I understand it, but I want to do it with cash because I don't like debt.

1:04:43But I think debt is largely the point of it. And you've got to use it in a sensible way and control it and all the rest of it. And it does involve risk, which is why it's in that improved bucket. But if you're not using the debt, then you're taking on quite a lot of extra work for not really any extra return. And I think in the past, because property prices in the main just rose, it was okay to buy cash because you would know you would get a return on that. But now, let's say property prices stay flat in real terms or they could fall backwards. If you're buying cash, your asset is declining in value or staying flat.

1:05:16Whereas with the leverage and you put a tenant in that pays off the leverage, you essentially make that as the gain, don't you? Yeah. And the whole point about having inflation being baked into the system, then it's like, well, if you've got a debt which is fixed, you borrow£100 ,000, that's always going to be£100 ,000. But the value of that£100 ,000 is going to shrink relative to the value of the asset, which go up in line with inflation over the long term. With the income stream, the rent will go up in line with inflation over the long term, and probably your earning power as well. So whatever it is that you're using to pay the debt off, or whatever you're looking at it relative to, the debt is shrinking at quite a pace.

1:05:53So you don't care about yield on day one necessarily. I mean, it'll be there, but you're not thinking, oh, this is a 5 % gross yield for life. You're thinking actually in 20 years, it'll probably be 15 % on the cash I put in. This is it. And you've got to be careful when you talk about it, because you definitely don't want to be saying like, oh, you know, just buy anything. It's all about the capital growth or whatever. No, like you've got to be, you've got to be covering your costs and then some, but you have all the protections in place. But yeah, I think, again, it's like people obsess about small differences, like, oh, well, I get a 6 % or a 7 % return on day one.

1:06:24It's like, in 10 years, it's not going to matter, because the amount that you bought it for and your debt is fixed. And you know that over time, the value of it will go up, even if it's just in line with inflation. And the rent will go up, even if only in line with inflation. So you don't need to have a property boom. You don't need rents to go up at like 10 % a year or whatever they were until about six months ago. It's actually better if they don't. If everything just carries on nice and easy, then over time, it gets you there. And the key bit is you've accessed that increase in inflation-adjusted rentals through 25 % of the purchase price of the property.

1:07:02You get to control the whole asset and all of the upside with a chunk in and you use the bank's money. Yeah. So if you say, this is a way oversimplified example, but if you say that inflation is 2 % a year and property goes up by 2 % per year in line with that on average, then if you put in 25 % of the money, then that's 8 % on your money. if you see what I mean. Because it's a four times multiplier. Exactly. And there's lots of reasons why that's not quite true and there's costs and stuff like that. But that's the general logic. So even though the purchasing power in real terms of the money hasn't increased, you've got, because you've only used a quarter of the money, you've got all, you've actually increased in purchasing power.

1:07:41Exactly that. What, I just want to, I know what comments will say, they'll say, but there's interest rates on mortgages. So there is, it's not fixed because they're applying an interest. What do you say to that? Well, the funny thing about that is that so, that's so much less risky than it was a couple of years ago, because when you could borrow for like sub 2%, you knew that wasn't going to be the case forever. But when was it going to stop being the case? You didn't really know. But now rates are back to close to their long-term average. Obviously, if you already owned a property and your interest rate's gone way up, that's a problem.

1:08:11But if you're just coming into it now, then it's like, okay, well, what's the interest rates went up by like 250 % or whatever before like two to five. What's the chance of that happening again? Almost nothing, because everything in the world would collapse. So it's just like there's so much less risk around that than there was. You still need to have the headroom built in. All mortgage lenders will stress test you to make sure you can deal with it. But yeah, obviously it's a risk. You can't fix forever like you can in the US, but it's a lot less risky than it was a couple of years ago. Yeah. Do you turn away deals in the past that were next to nothing rates because you knew that if the rates went up, they weren't viable?

1:08:47Yeah. we always always tested things against a a higher rate because you just can't you can't assume that it's going to be there forever plenty of people did plenty of people did yeah um because yeah it's it's hard because like there was a a like a bbc calculator that's been up on the internet for like at least 20 years i can just remember it being there and it was always like your interest rate now is this but what would it be if it was 12 and like and at the time because this was like in the in the early 2000s, that was like a realistic thing that you could look at and go, it could happen. Yeah.

1:09:22And because of where interest rates were at the time, when rates were like zero, you look at this 12 % going like, what are you talking about? And now it's just like, well, now it feels a bit more like, well, that's only a doubling. So like, okay, maybe you could see it. But I still fail to see how rates can get there. Because people go, oh, yeah, interest rates were 15 % or whatever. And they were, but they weren't for long. And they were when everyone's debt was way way way lower yeah for me now the introduction of leverage to my portfolio is is the the high risk thing i'm chasing because i have my equities bucket and i know that they can do a certain amount and i have a cash flow in business that i can get money out of what i don't have is leverage we spend a lot of time talking about how everything is changing and the world is is a different place and i think that can be quite scary and intimidating to people who especially just just starting they might think i've i've kind of missed out here do you have anything to say to them.

1:10:13Yeah, it's funny because I wrote my last book, The Price of Money, was like the whole thing was like laying out how the financial system worked and how it's like structurally definitely going to collapse at some point in the future. And then at the end, it's like, but try not to worry about it. Because ultimately, like, you can't do anything about that. You've just got to control what you can control. And what I try to get across in this book is you can control more than you might think. And the things that have the best potential for like making serious changes are the things you have most control over.

1:10:43So I bang on about earning because that's the thing that you can control the most. And it's the thing that makes a far bigger difference than whether you're making 6 % or 7 % in your Vanguard account or whatever. So that's something you control. If you do want to go and make these riskier bets that have a chance of paying off, if you're doing that the right way rather than taking a gamble, then that's something you have control over as well because you're using your own knowledge and your own skills and your own time. So you can have control over all the stuff that matters. And I think that's, I want this to come across as a hopeful book, because I think it really is.

1:11:17I think there's so much guilt and fear and weirdness around money that people have. Like, we're all weird about money in different ways. And it's a lot of people just put it in the too scary box or whatever and just rather not think about it. But actually, I think there's loads you can do that will, regardless of what the markets do or whatever else, whatever happens with the national debt, you can make your life better by doing things a bit differently. This episode was made possible by Vanta. If you're building a business and you need to prove that you're compliant with security standards like GDPR or SOC 2, then Vanta can save you a lot of time and money.

1:11:54You can book a demo using the link in the description.

1:12:00Normally, this is where we'd say this isn't financial advice, and it really isn't. But if If you want to speak to a good financial advisor, then we might be able to help. We've partnered with a few advisors to offer a range of services, from one-off flat fee guidance to ongoing advice. I'm actually using the guidance service to sort out my finances. If you'd like to understand your options, there's a link in the description where you can answer a few questions and then book a free call with my colleague, Will, so you can figure out what might be right for you. This episode was produced by Ruth Edwards, and it was filmed and edited by Ben and Jack at Flowspire.

1:12:31See you next week.