S1E2: Here's how anyone can get rich

0:28Right then, T, time to record the Money Week advert. it summarises the biggest news stories that you need to know about, from pensions to investing, tax to the budget, or even what to do with the£1 coins while you're sat on the toilet. Along with their own analysis, they pulled together pieces from the top publications, like the FT, Economist and Wall Street Journal, to give you a balanced look at what's going on. If you want to give Money Week a try, you can get six issues in print and on the app for free by visiting moneyweek.com forward slash money. After your trial, you'll save an extra£5 on a quarterly subscription, exclusive to Making Money listeners, so that's moneyweek.com forward slash m-o-n-e-y there's a link in the description true financial literacy effective financial literacy is like a silver bullet andrew craig is author of personal finance bestseller how to own the world the stock market is for rich people gets correlation and causality the wrong way around when i was 20 years old i had loads of debt i wanted to get myself out of that hole and you know actually start growing my wealth.

1:26But there's always this voice in the back of my head saying, it's not going to happen, Damien. We've equipped people really badly through the education system for so long. I said, well, we're going to take you on a journey to grow your wealth. And you might be thinking, like I did, that that isn't possible. But Andrew's here to tell us why it is. Just to do the nuts and bolts and get your finances basically right is no harder than learning how to drive a car. The plan of the podcast really is to take people on a journey through their finances, you know, and help them understand that they can build wealth and put the steps in front of them that show them potentially how to do that.

2:02I think for many, including myself, you are probably the person that put those steps in front of me. I honestly believe that. I think your book is, it features on the top list of most and it's the third edition now. It is, yeah. Self-published as well. No, the first edition was, the first and second editions were self-published and the third edition was with a massive publisher. The day I got that call was like, it was quite a nice afternoon obviously like chance the rapper putting out an album and getting a grammy i mean you did pretty well off uh being self-published but that book convinced a lot of people that was it called how to own the world yeah at least i i didn't say sorry i put it's like i almost assumed because i i know it so well yeah how to own the world yeah in the book you deal with the concept of being rich and i think that's where i want to start today because rich is this very big abstract term what is your definition of rich because it's different to other people's i can't remember whether i actually wrote it in the book but my basic idea is that you get to a point i think i did say this a bit where you can you can live on your money on your capital rather than on your labor on your work and you know the how i unpack that is obviously we've had a system actually since sort of basically in the uk since 1909 that's when we invented the pension and you know most people are vaguely familiar with what the idea of a pension is but the idea of a pension is that you're now living on your capital, so you don't have to work anymore, so you can retire.

3:24And the big picture, if you take a step back from that and sort of think about it more deeply, I guess rather than just think about a pension, that's actually being wealthy, especially if you're able to achieve that by say, you know, your 30s or your 40s or your 50s rather than say your 60s or 70s. And even more importantly, you need to achieve it because, you know, you don't want to be 85 and still having to work. And so that was a big part of what informed me wanted to write the book was that it's really important to people to think about wealth as just being that just being free to live on your capital not on having to work and then okay so then the next question is what steps do you take in order to get to that point right yeah and i think the pension point as well there's been a shift even in our lifetimes where there's almost a reliance on the state yeah and then it was well my company will provide and now it's actually no the book is with you like it's your responsibility to save your retirement and the there isn't it the state pension is almost a nice to have now versus what it was in the past which was almost guaranteed quality of life for years and the other point there is the demographic change is that so in 1909 when we created the pension system average life expectancy in the uk was 47 yeah and it was for people over the age of 70 and now most scientists are telling us that you know if you go to a classroom today and talk to a group of kids most of those kids will live to 100 yeah or past 100 but if they want to stop working at 55 or 60 i mean that implies they've got 40 years to fund.

4:50And so at the same time, the actions of governments and central banks for the last kind of 50 years or so have caused all this inflation that's now coming home to roost. And without wanting to sound too smug, if you read the book, you know that I was writing about that 10 years ago. And it's now all beginning to, the cracks are beginning to appear in that system. And it's partly because of that demographic bulge. It's the fact that, you know, people, the actions of governments have meant that inflation is much higher, interest rates have have been kept too low for too long. But what does that actually mean for people?

5:19It means, yeah, you really need to sort out the fact that you might want to fund yourself for like 40 or 50 years if you want to retire at 60 and live to like 110, which you might be able to. It's like the realization of you're going to be out of work longer than you were in it, but you're not saving half your income. So how do you expect to maintain this quality of life now out of work essentially? So in the book, I describe that as the bad news, right? But the countervailing good news, which hopefully we come on to or whatever, and certainly it's a big part of the book, is that for a couple of really key structural reasons, there are ways of beating that reality.

5:54And maybe we come on to the power of compound interest. So I use this example of if somebody can put£5 ,000 into an account the day a child is born, like if you're lucky enough to have a great Aunt Agatha or whatever, if that can return 10 % per annum from the day the child is born to when they're 55 years old, which in the UK is the first time you can legally retire, with no further investment, just a one-off investment of£5 ,000, they'll have 945 grand on their 55th birthday. Because after year one, it's£5 ,500 and after year two, it's£6 ,050 and on and on and on. So I just had a kid. What would I have to put that into?

6:30That sounds pretty good. Yeah. So, well, the next question is, come on, mate, interest rates are nothing. How's it going to get? How on earth are you going to make 10 %? And the very simple answer to that is since January the 1st, 1872, not 1972, 1872, to the end of last year, the return of equities, of shares of the US stock market was just over 9%. So, okay, I'm using 10 % as an example, just mathematically it's easier. But broadly, if you'd invested in American shares consistently from the time your kid is born to the time your kid's 55, that's the sort of return they're going to achieve. Now, the next challenge that is, okay, well, the first challenge is nobody can make 9%.

7:11Well, that's just wrong because you can by investing in shares. And the next challenge is, okay, but if inflation is 10%, you're actually losing real wealth. So it kind of doesn't matter. It's a one-off shock though. Exactly. So my broad point is that over a lifetime, and let's call a lifetime 0-55 just for the sake of argument. there'll be times where inflation is really high, there'll be times where inflation is lower, you can't really legislate for that. But it just means that you really have to be doing something to be making a real return. So a return that's above inflation. And so if you've got a kid, yeah, you can use a junior ISA where you can shelter about£9 ,000 from any capital gains tax.

7:47So all the profits your kid makes, you get to keep and then just invest in the stock market or a stock market. What about people who aren't as lucky as my kid who aren't going to have 5 ,000 from the day they're born? Someone like me, 35 years old, say I haven't invested anything. I have a little bit, but say I haven't invested anything. How am I going to make it to retirement without being homeless and broke and have no heating in the winter? Well, yeah, I mean, it's a really tough quote. And one of the hardest things I have is I have, you know, a lot of really kind people sending me lovely messages saying, I really enjoyed your book.

8:17But there's not much I can do when a 70-year-old sends me a message saying, oh, my God, I wish I'd read this like 50 years ago. What am I going to do? And it's tough, you know, because we've equipped people really badly through the education system for so long. Like nobody talks about it. Most people with economics degrees, let alone maths teachers at a primary school, have a really fundamental solid grasp of how to do this stuff. You know, and that's part of our mission. But I mean, I guess the answer is if you have got to that, sadly, the harsh reality is you're going to have to figure out how to earn more.

8:49And you're going to have to really be on a crash course about financial affairs and figuring out. But, you know, what we and hopefully your audience, you know, hopefully most of our audience, people who might watch this will be young enough to kind of make a difference. Because I always say basically, if you've got at least 20 years and you start getting the pieces in place and doing a good job, that is more than enough to do a really good job. And that's good news. But also to like, you know, a positive spin on that, if you're living longer, you can work longer into retirement, can't you? So if you are 55 thinking, oh God, you might just go, well, actually, I just push it back a little bit.

9:20A 75-year-old scientist who's still really got their wits about them has had 50 years of like study and reading and, you know, scientific work and everything else. So in many ways, you know, as the world hopefully improves, I mean, the other big thesis you might know that I'm all about is actually the world's the best it's ever been and it's getting better. and I think you can evidence that quite empirically and it's a real tragedy. One of the biggest kind of, if you like, the bigger pandemic for me today is a pandemic of negativity. Yeah. Is that everyone's looking at the world going. Yeah, and the UK is terrible for that.

9:49Exactly. Actually, you know, on every measure that matters, peace, wealth, longevity, you know, leisure, travel, the fact that you can go, there are football stadiums and beach bars. I mean, it sounds a bit spurious, but the world is so much better than how grindingly cold and dangerous it was in like 1900 or 1800 or 1700. And I think as the world changes and improves, there's a chance that we have sort of new economic models where, you know, engineers and biotech entrepreneurs and writers and scientists or whatever, actually the best years of your life in terms of your earnings power might be from 70 to 90.

10:22If you're still fit and healthy, that could make a difference. So I guess to the answer to your question, you know, if you're 50 and you haven't quite sorted out, well, just try and keep healthy and fit and add value. How do you end up saving when like everything is getting more expensive and wages aren't going up in the same rate as every cost of living? Well, I mean, our very simple shtick is if you save and invest 10 % of what you earn every month from the minute you earn it, whether you're working in a bar on your 22 or you've just been paid a huge bonus and you're 60 and a lawyer or, you know, whatever, and all points in between.

10:52If everybody just saves, learns enough about financial services and investment basics of capital markets to feel, because crucially to feel confident. like they're not scared the reason that people don't do this because they feel scared they'll lose it and then there's that misunderstanding yeah but once you have a certain understanding of comfort and the spectrum of financial products and how you can use you know if you spread your assets sensibly and you just and also the merits of investing every month if you do that over time right right now is a tricky time for sure anybody's been doing that for 10 years is in a much much better position than somebody who hasn't right but equally because as i said it doesn't i don't want it to sound too trite if you haven't okay so at the moment you know you just have to batten down put your head down try and find some savings we can perhaps you can't save although i would say we always go back to the fact that a lot of the stockbroking platforms in the uk let you invest 25 quid a month that's kind of your entry ticket right now there are um online robo advisor type outfits that are even lower numbers than that but they then they're quite expensive as a percentage of what you're investing.

11:53But basically, you know, if you can just keep the habit going of like 25 quid a month or 50 quid a month through times like this into sensible investments, just ignore it, comes off the top of whatever you're earning every month. When things get better and the economy is better, then you can do a bit better than that. And then over time through, and again, I go back to this over a lifetime of investing, sometimes, you know, the markets will be great and the economy will be great and employment prospects will be great sometimes. And the other thing is, it's all about the long term. But I think, you know, the record of at least two centuries is that if you just keep, if you kind of put your fingers in your end, shut your eyes and just try and save and invest a bit every month in a global sensible way, over a lifetime, it will work.

12:42But a lot of people think it's like a rich, poor thing. They're like, oh, I don't have enough money to invest. It's only for like wealthy people. Yeah. What would you say about that? Because I know some rich people who are terrible with investment. Yeah, yeah, 100%. My parents never told me about investing. Like lots of people in that generation, they just put the money in the bank. So how do you like? So the first thing to say, so that is a classic sort of, oh, the stock market is for rich people. Yeah. Gets correlation and causality the wrong way around. No, the people who know about the stock market are far more likely to be rich.

13:15So there's a great book called The Millionaire Next Door. which basically most, empirically most of the millionaires in America are normal people who just invested in the stock market. They drive a Prius, I think is the most common car. Well, yeah, but even that, some of them will drive a Mercedes, right? But the difference between them and the man next door or woman next door is just that they are making 1 % a month or whatever over 30 or 40 years. And by the time they're sick, it's like the Microsoft secretaries. It's a slightly easy to take out, but you know, a secretary who just got a bit of Microsoft stock and 40 years later, they're a millionaire.

13:43there. And it's like, it's about people who are just sensible at property, save and invest 10 % each month. They're sensible about getting into the stock market and they let it run for years and years and years. And so it's really, it's not for rich people. It's that if you learn about, and never more so than today where the market doesn't care who you are, what you're educational about, and the market just does not care, right? All it cares about is that you're willing to get a little bit of knowledge to kind of get stuff sorted. I worked for a debt management company and I would speak to people all the time that were earning a lot of money that were skint.

14:16Footballers that would call in earning 20, 30 grand a week and be like paycheck to paycheck because they'd taken out so much unsecured debt because there was no influence in their bubble. It's like you could have given them more and more money and they would have still had the same problem. Whereas every example you've given, there's like a positive influence there that kind of steers it the right way. And I guess is that why you wrote your book in a way? Yeah, it's definitely, we're very mission driven. I mean, I see true financial literacy, effective financial literacy as like a silver bullet is how to describe it for individuals because every individual who sorts it out, it's life changing.

14:53It makes life so much easier, right? But it's actually much more than that because I think one of our biggest problems as a society is this because it causes untold misery. It causes violence. It causes divorce. It causes, you know, crime, right? I mean, you've never had it so good in terms of your access to online, you know, apps and online training accounts and you can do it yourself. And then the next question is, okay, but it seems really daunting and scary. But, you know, my book's not the only book that will get you from sort of A to B, but it does a half decent job. I think at the time it was written, it was one of the only books that spoke in a modern language.

15:29You know, that's why I think it was so powerful for people at the time. Well, it's still, you know, I'm British. I'm like, thank you very much. But no, but it's still lovely to hear. But I guess, you know, yeah, it's a very politically incorrect thing to say, but I was thinking about it this morning. So people say, oh, finance is really scary and complicated and stuff. But the average British man, as a state, I reckon if you went and empirically interrogated this, the average British man knows probably 100, if not 1 ,000 times more data points about the Premier League than he does about like what is the S &P 500 or the...

16:08And it's like, you know, learning about finance is no harder than having that sort of encyclopedic knowledge about football or whatever, you know. But people have a mental block. They're like, oh no, that's got to be harder because it's finance. And we always talk about it being no harder to do... Like to become a massively successful hedge fund manager is different, right? But just to do the nuts and bolts and get your finances basically right is no harder than learning how to drive a car. The only other thing I'd say about that is what we're all about or I'm all about is it's just that 10%. It's the sort of step one because there's tons of other stuff you can do as you get older and wealthier and learn more and get more interested.

16:44But just, you know, whether it's crypto or whatever else it is, but there's the step one that too few people do. And if I may just unpack that a bit. And that's investing, not trading. Yeah. And that's another really important distinction. I think so much of the zeitgeist online, TikTok influencers and all this stuff is very focused on trading. Like, oh, I finally learned about the stock market and now I'm going to be a stock market trader or I'm going to trade FX. I'm not talking about that. I'm talking about investing, which is, you know, same thing every month. It's got a 200-year track record of working.

17:17It's how most people in the world who are rich became rich. Trading is an inappropriate activity for most people. It's much harder. And they're two completely different things. So just to be very clear, everything I'm saying is about investing, which is slow, repetitive. And that's that. Learning how to become a trader is probably a degree's worth of knowledge to reliably do it well. Learning how to do the investing bit is no harder than learning how to drive a car. Yeah, I get traders messaging me on LinkedIn every day saying, do you want to make£700 a day working from home? I can help you learn how to trade by my course or I'll teach you.

17:53The immediate question is, if you're such a good trader, why do you need to charge me 700 quid? And why are you messaging me? Yeah, exactly. You need to be trading. But that's the, but you know, I would like, I flatter myself saying most people who read my book will never fall for that nonsense. Yeah. That like, because they'll be like, what? You know, but that having been said, just to sort of set the record straight on that, I mean, there are some very, very talented, good people who are trading professionals, who are teaching bona fide skills. the trouble is disargoning who are those ones and who you know they're very rare they're very rare right but even those people one of the biggest problems with them is one the methodologies they teach they'll say oh you can learn how to do this in five minutes a day you might be able to do it five minutes a day if you've already been doing it for five years like anything else right if you're starting out it's not going to take you five minutes a day it's gonna take you hours and hours a day until you figure it all out and you know how to do charts you know you know there's a lot to learn like as i said like a degree's worth um and the other thing is oh you can start with as little as 100 quid if you to spend hours of your time every week looking at charts and doing all this stuff and make it actually worth your while in absolute terms and absolute amounts of money you need quite a lot of money to begin with because otherwise you're going to be risking too much capital so this idea you know it's one of the biggest rookie errors i see all the time is like somebody with two grand going right i've got two grand i've just paid somebody 1500 quid to teach me how to become a great trader.

19:20Now I'm going to invest the other 500 and become a millionaire. It's like, no, that's just like completely the wrong approach. And sadly, I mean, well, I feel about self-conscious saying that because quite a few people watching this might have done that. Yeah, we have to learn, don't we? Yeah, yeah, exactly. Can't make an omelette without breaking a few eggs. Yeah, well, that's it. Couldn't someone say though, yeah, but you worked as a finance professional. You're just half stock broker, half not as you said when you came. Couldn't they point to that and go, well, you're from a different world.

19:47Is there a time in your life before you are who you are today where you say you've got that financial education or? I think, yeah, I mean, yes, to be honest, because I'm a weird geek. My dad used to make me read The Economist when I was like 10. Did he? I hope he doesn't watch this. He'd be like, I'm telling people that. I mean, no, no, we were weird. A 10 year old could grasp it. Yeah, well, yeah, you know, it was certainly, I used to find a lot of it very boring, right? And gradually it got more interesting, but as I got older, but I don't know. I think if you'd given me my book when I was 17, if somebody else had written and given it to me when I was 17, I wouldn't have been able to assimilate that and use it.

20:25I agree, but people are always pointing towards, well, you're different or this is different. I get it. I'm from the north of England and people will still say, oh, you come from a different world to me. Now that I'm a big YouTuber. That's what they say. They're like, oh, you don't get it. You probably earn 10x what we do. And everybody always overestimates what everybody earns anyway. Yeah, yeah. And when I was putting 50 quid a month into an index fund in my 20s, that's what's got me to here. Right, right. Yeah, yeah. And it did, right? And it worked for you. That's exactly what's got me to here.

20:54When you're saying, do it for 10 years and you'll change your life, that's completely what I did. Do you know what? Honestly, I love hearing, because at times like this, even I lose the faith a bit, right? You know, the market's down. No, you've got to stick. But it's just always great to hear that it's actually worth people. No, hugely. I mean, obviously the market was kind over the last 10 years, but I didn't know that as such as a beginner. You know, I didn't know like this is the best bull market at the time. Tamay, do you want to hear a fun fact about tax? Don't get me excited. I'm all about tax facts.

21:24Are you? I love a bit of tax. This is new to me. Well, okay. So in 1970, the tax code was around 1 ,500 pages. Now, today, 2025, it's 22 ,000 pages. Hefty. Very. So there's around 10 million words. and there's more written about tax than any other type of law or legislation in the whole of the UK. It's one of the most complicated tax systems on the planet. We know how complicated tax can be, but we've got a tool that can help. TaxApp. TaxApp make it really easy to file your self-assessment. And if you're one of the 12 million people that needs to do that, the deadline is coming up on January 31st.

22:03With TaxApp, you don't need to have a lengthy back and forth with an accountant. And you don't need to navigate the complexities of HMRC on your own. You just sign up, add your info, and they'll guide you through it. So you can submit your tax return in as little as 15 minutes. We've left a link in the description. Prices start from£49, but if you use the code MONEY10, you get 10 % off your first tax filing. That's M-O-N-E-Y-1-0. There's also a QR code on screen if you want to use that. Okay, T, talk to me about your attitudes towards risk. I mean, I like a bit of risk in my investments, but I definitely would say since the podcast, I've toned it down a little bit, not quite as gung-ho and carefree as I was in risk.

22:43Yeah, shooting from the hip all the time, weren't you? Yeah. I think personally that you should take risks, but it should always be in areas where you have a unique skill set, an edge, expertise, like your job, things like this. One area that I wouldn't take any risks is compliance. Yeah, the risk changes you grow in business and you need to be on top of it, which is why we partner with Vanta. Vanta automates a lot of risk processes and helps you see your risks in a centralized platform so you know what really needs your attention. Besides risk, the main thing Vanta does is automate compliance with security protocols you need to scale, like GDPR, HIPAA, ISO 27001 and SOC 2.

23:22The beauty of Vanta is they make it easy to prove you're compliant with these standards, saving you up to 90 % of the time it takes, and on average half a million dollars. If you know what these acronyms like SOC2 are, you probably need Vanta. You can book in a demo at vanta.com forward slash making money. There's a link in the description. That's the other insight. Monthly, every month, without fail. It's the same thing to the long side. So it's easy, you sleep at night, and it's got a massive track record of probabilistically increasing your returns. And that's one of the most problematic things at the moment, particularly because of the crypto.

23:58the fact that crypto is unregulated means that any Muppet can get up in lights and go do this do that in crypto right when they ask him to check out his socks check out his socks yeah yeah you get them on cover right now look at this look at the state of that but but the point look crypto isn't necessarily an unalloyed bad let's be clear I mean and you know it is and then there's blockchains interesting things but but my point is just that because it's unregulated where you know If I stand up and say, you must invest in this thing, you'll make 100 % a year, I can go to prison as an FCA regulated person.

24:33I am massive fine and spend seven years in jail, right? And all my stuff's recorded and six years from now, the FCA could knock on my door and go, that conversation you had on that date in March 2019, pull the tapes, we want to hear what you said. The oversight is intense. Nobody in crypto, to protect people, exactly. Exactly. Nobody in crypto has that oversight, which means that people in crypto can say ridiculous, dishonest things. And I'm not saying everyone in cryptos does, but a lot of people in cryptos do because all they care about is they're making a lot of money. My friend just lost a lot of money in FTX.

25:06Right. Yeah. And that was like meant to be finished retirement. He was doing that, like we say, every month, putting in a lot though. Right. And he was looking forward to like having that when he retires. And it's all gone. FTX is like, was one of the roles, right? Yeah, they were too big to fail. They were the Goldman Sachs of crypto. until they weren't. More like Bernie Madoff. Well, yeah. But the fact that they've been able to do that means that you've seen a generation of people who are finally getting interested in finance, which is great. And then they're going straight past all the stuff that's worked for 200 years that you've just, you're yet another person saying, it works.

25:41Like, all your personal experience works. And they're saying, no, no, I don't want to do that. I want to trade crypto. I want to be in crypto groups on Facebook every day and buy this in the morning and sell that in the afternoon. That is a tragedy. But you know why? because in school, no one taught us about investing or taxes or any of the important things they teach about geography and stuff, which is useful. But like, yeah, what's more important, geography or investing? And then, but crypto, you see on YouTube, you see on Instagram, people, oh, I've made loads, this is how you do it. And then you're getting the education that we really should have got in school with investing.

26:11A hundred percent. You're seeing people make money in crypto and you think, oh, it must be easy because this 20 year old has done it, this guy's done it and this guy's done it and then you get in and you don't know what you're doing and you lose all your money. It does blow my mind that like an average return of 9 % for 200 years is not sexy enough for people. You know, the broader point is if you want to sleep at night, you don't need to make sleep. That 9 % you just alluded to, like that will get you a really good result. I mean, I'm from a council estate in Birmingham, single mother family.