How to become wealthy - Secret Leaders X Making Money

0:00I've got something very special for you today. We at Kindling Media think there's a big problem in this country. Very few people know how to build long-term wealth because we're not taught about it. Why that's the case is beyond me, but we think there's an opportunity to give people the financial education they wish they'd had. So we're launching a new podcast called Making Money to give you exactly that. We want to take you on a journey to help you build wealth so you can live the life you want. The first step on this journey is figuring out your relationship with money. This is our episode one, which is what I'm going to play for you now.

0:39If you like it and want more, please hit subscribe to Making Money in your podcast app because this is the secret leader's feed you won't see the next episode. We hope this podcast helps you create a better financial future. So I've got a question for you. Would you like to be wealthier? I mean, I'm sure we all would, right? But how do you get there? what are the steps you should take? Money is such an emotionally complicated but also jargon-filled area. This is Making Money from Kindling Media. I'm Damo. I quit my job in finance to start a YouTube channel teaching people about money and now I'm starting this podcast with my mate T.

1:22This is my I don't know what's going on buzzer so if there's any... He's going to be hitting that lock. I would be smashing that whenever we're talking about anything technical. The premise is simple. me and T will be joined most weeks by a guest, everyone from financial experts, the Bank of England and every so often a celebrity, to talk about the big things from mortgages, pensions, even getting pay rises, all the way down to the psychology of money. People have a mental block they're like oh no that's got to be harder because it's finance but just to do the nuts and bolts is no harder than learning how to drive a car.

1:51Get out of the mindset that you have to be rich to invest. Using their experience, we're going to lay out in front of you the steps you need to take to build long-term wealth. I honestly think it isn't that complicated, but because of a lack of education, many of us feel that money is just this intimidating topic. I know from first-hand experience how damaging that can be for your life. This is the financial education I wish I'd had. And really, the only thing standing between you and being that person who is good with money is what's between your ears. Yeah, and you, as, which I think your refreshing message is you were one of those people, you know.

2:28Yeah. Now you work for the Financial Times, do you know what I mean? They might find out. So where do we start? Look, I know it's not an easy thing to do, but we need to be honest about our relationship with money. So for episode one, we're speaking to the person you just heard making us laugh. The consumer editor at the Financial Times and author of the book, What They Don't Teach You About Money, Claire Barrett. we see this as the starting point and we think you're probably one of the most qualified people in the country to have that conversation wow i mean well if we i'm flattered if we look at your resume you're a editor at the ft you're the host of the money clinic on the ft podcast and you're part of the lorraine saber squad yeah yeah i mean that has been amazing i've been doing that for about a year now um i'm on itv lorraine every wednesday morning with lorraine and everyone always asks what's Lorraine really like she's exactly the same she's exactly the same maybe possibly slightly more Glaswegian off camera but no she's she's a really wonderful caring person and I think that that's why they want to do more finance because they know that everyone who is watching is just terrified by the cost of living crisis people who've never been in trouble financially before all of a sudden are finding that they can't make ends meet.

3:50Well, I think you're always on the pulse. I always think your content's really timely. And as a YouTuber, I'm always looking for what's going on. And I find that you hit that quite well. And it's always reassuring content. Why do you think we have this issue with money? Because what you're essentially saying is there's a middle class here that have been dragged into the cost of living crisis and now they're struggling and they're unprepared for that. Why do you think we're unprepared? Well, they might not necessarily be middle class. They could be middle earners of any kind. And I think the classic thing is, is that you've had your salary every month.

4:23You haven't really had to formally budget or look at things. You've kind of had this sense of like, I know where I am. But I think if there was one silver lining of the pandemic, although I kind of hesitate to call it that, is that it has forced everyone to look a lot more closely at their finances where I think we've been very blasé in the past, not just about day-to-day spending, but the bigger questions like pensions. Everyone hears the word pensions and just goes, or goals, savings goals, achieving the milestones that you want to in the future, buying a property. Lots of people have just abandoned that because house prices have just got so out of control.

5:03But if we can get a positive out of this and say, okay, A, times are tough at the moment, but we're going to learn to focus more on our finance. We're going to give ourselves some time to educate ourselves about money, using all of the amazing, free, useful resources that there are to do that and get to a better place. When things do start to get better, when the economy turns around, please God, it will. Then hopefully we'll carry that knowledge forward for the rest of our lives and it will really transform our future. Yeah. So, you know, getting started, as you say, and it could be this silver lining in the future where it's inspired a lot of people to address an issue that if we kept going would be bad in terms of pension savings and the statistics there.

5:51So your book, the one thing that I love about it is you, because I think we think of money and we think of it as like a math problem. you you talk about it as a personality kind of problem not a problem but you you talk about the human element which i think is that's the place to start isn't it it's kind of like what personality am i what is my relationship with money because we all have different relationships can i ask you what what's your money personality you know okay well i feel like i should issue a small a small caveat so i'm not the first person to come up with this idea of a financial personality And I kind of hesitated a bit before putting it in the book, but I just find it such a useful way of being able to talk objectively about maybe bad habits or faults or things that we think we could improve without kind of turning the spotlight too far on ourselves.

6:42So of the different money personalities I list in the book, I do say it's a bit of a Venn diagram. I reckon I'm probably about 70 % goblin, which is the classic kind of hoarder of money. I grew up in a situation where, despite what my voice might sound like, there wasn't much money around when I was growing up. And when money came in, it had to be eked out. It was not there to be wasted. And certainly, when I started to earn my own money as a teenager, I realised quite quickly that it doesn't go very far. So I've definitely got that kind of hoarder mentality in the past that's led me to keep far too much money in cash savings.

7:30Everyone needs an emergency fund, but there's a limit to how much emergency cash you need. And I was very scared of taking risks with that money. So I was late to investing. Very much a fan of investing now and feel good about it because I know if I look at my cash flow, I look at the money I've got coming in every month. I look at how the investments are building up over time. I'm comfortable with the fact that the stock market can go up and down and that my cash isn't just being eaten away by inflation, which is what's happening to lots of goblins at the moment. That's quite an uncomfortable feeling because you think that you're not taking risks by keeping a lot of money in cash, but in fact, that in itself, if you've got too much cash, is a big risk.

8:15That's one of the financial personalities. controversially one of the other financial personalities I feel is probably at least um 20-25 percent of my makeup is the spendy wendy now I've spent ages trying to find a man's name that rhymed with or that ended with endy um it's it's pretty hard yeah I guess I'm a spendy wendy then Spencer so yeah a spenny spencer that's great so the classic thing with somebody who is a spender is that their desire to own a particular object, it's not based on their needs, it's based on their wants. And crucially, when they get that object, whether it's trainers or a dress or a handbag, a new outfit, whatever the thing is, it doesn't really scratch that itch for them.

9:12They quickly move on to the next thing. It's all about the instance of spending the money, making themselves feel good, but that feeling is very fleeting. But the one lever that we can pull is getting in touch with emotionally. What is it that is driving us to spend? Is it a status thing? Is it a social anxiety thing? Is it that we're buying gifts and being a person who gives lavish gifts, when that's something that's going to get us into debt. All kinds of reasons might be behind this. One of the personality traits of the goblin is that, you know, they do hold onto their money too tightly as Vicky Raynell, who's the psychologist who I interviewed for the book says.

9:56And like for some people, as bizarre as it may sound, not being able to spend money is a problem. And you might think like, who are these people? But maybe they've had like a trauma in their life. Maybe they've been brought up in a household environment where they've been told, you know, it's wrong to spend money on yourself. You know, you shouldn't treat yourself to certain things. And it's really, really difficult to break out of these habits and behaviors that have kind of been locked into our minds by our parents or the people who've brought us up, especially. A really shocking fact, it's in my book, it's in lots of other books as well, is that your attitude to money as an adult is largely set by the age of seven years old.

10:43It's absolutely terrifying. And that's why on Money Clinic podcast, one of the things that we ask most of the guests is, what's your earliest money memory? Because often asking someone that can tell you an awful lot about their attitude to finances now. I mean, I don't know about it. What's yours? We'll do it. Watching my mum and dad, like I used to sneak downstairs and peer through the banisters and watch them because I knew that they were like up to something in the kitchen. And they had all of the kind of budget out and the money. I mean, this was like the early 80s. So there was cash. They were counting out cash into envelopes, which is a method of budgeting that's like making a massive comeback.

11:25Cash stuffing, they call it now. but it was just watching them carefully dealing with their finances together and the fact it was all of my dad's money because he worked and my mum was a housewife as they were called back then and so she was very much having an equal say even though it was the money that he had earned and where it was going and it was all being put into one below so some for the holiday some for this some for the bills and stuffed into the pages of this huge like cookery book that she used to keep on the shelf. So I knew where the money was. And the question that everyone always asked me was like, did you ever steal any?

12:01The answer was no, I would never have been far too scared. And she would have known, you know, as my mum was like on it, that something was missing. But maybe that memory has instilled into me that being careful with money is something that you've got to make time for. It's something that you've got to share the burden with, with your partner. And also that you've got to feel comfortable making decisions equally. I mean, I earn a lot more money than my partner does. This is something that I discuss in the book. It's quite common. You know, you're never going to get two people who are exactly the same financially.

12:40One might come from a wealthier background. And it changes over time. Exactly. You know, family circumstances can change in a heartbeat. So you've got to, you know, I've always strived to have that, you know, in, in my relationships, whether with friends or with romantic partners, that there is this degree of, of, of honesty and acceptance rather than a sort of show-offy status, flashy, I've got a better car than you have, that kind of stuff. So, and I think that really kind of informs how I'm grounded financially as a, as a person. Sorry, that was a very long answer. what's your first money memory come on um my parents were always like you need to know the value of money so if i wanted to buy something from like a young age they're always like in the summer do work experience don't just play around so you can know the value of money or do chores like wash the dishes clean the car set the table slippery slope paying children for chores yeah but my first actual memory was probably going to like summer camp okay like you know go to like sports camp for like two or three weeks in the summer and obviously you get like uh lunch money every day so i think my dad the first day my dad gave me 20 pounds and i was like wait so i spent the whole thing and then the next day i was like dad i'm going back to camp i need some more money he's like i gave you 20 pounds yesterday what happened i'm like i spent always like well you don't get any more today and i was like but he's like you can take some food from home and obviously there's like ice cream there's sweets there's like burgers so i wanted all the stuff at the camp so then the whole like it was five pounds a day i was meant to have but i spent the whole 20 pounds on the first day so i learned after like every the next three days i had to take my own packed lunch i was really sad so then i was like okay next week i'm gonna spit out and that's kind of when i first learned about budgeting and then when i started getting paid i took none of that on board we're going out so yeah i'm still i'm still working on budgeting but that was my first memory i started how i meant to go and spend it all quickly and then worry about it later mine so i used to because my mom was a single parent so i would go to work with her when i was off school and they used to pay me to be quiet they call them sponsored silences a sponsored silence this is something about the age of three or four so they're basically paying me a quid to shut up for an hour because funnily enough i like to talk well yeah i don't know what i take from that but all i'm going to say is i now earn money from talking about money so look at me now yeah it's better than you it's coming from the circle a sponsored silence yeah sponsored silence i remember sponsored silences from a young age it's pretty brutal really thinking about it you think people can change personalities oh god yes i feel like i definitely did because i used to have a credit card and then I went off in the deep end and then once I paid off I said never again I don't care if it's good for your credit rating I said I just can't be trusted with a credit card I don't want to be I have no overdraft no credit card and I think from that day my life finance is drastically improved it's already really good for you to have that bit of trauma experience it was in university yeah and then after university I graduated never again will I have overdraft or credit card I decided so I think everyone makes mistakes sometimes we make the same mistake again and again and again, you know, in life with money, relationships, whatever.

15:46But the key thing is, is that you learn from it and you move on. And also you forgive yourself because there's so much shame attached to money. And that's one of the reasons we don't talk about it because we don't want to admit that we don't know. We don't want to admit that we're a bit kind of lacking in knowledge or that we've been a bit silly and we've spent too much money on stuff. We feel like idiots. So we just bottle it all up. And I think that's why it's so wonderful that, you know, you're on YouTube. There are places where people can go on social media, like on their own to learn about this without having to talk to someone, because that could be the precursor to a real life conversation where they say, you know, to their best friend or their mom, or maybe even a, you know, a counselor, you know what, I need some help because that's totally okay.

16:31And money is such a emotionally complicated, but also jargon filled area. We are intimidated and we do need a bit of a helping hand and there's nothing wrong with asking that. And it's absolutely possible for the leopard to change their spots. And, you know, the spendy Wendy could become a spreadsheet slave, which is one of the other personalities, somebody who's really on it with budgeting, but equally you don't want to be a hundred percent spreadsheet slave because then you wouldn't have any fun so you have to take and decide what to take and decide what to leave from from from each of these and when you're in a position where you feel like you can use your money as a tool and be rational and be effective and not let your emotions force you into making decisions where you're in a situation you don't really know what you're doing I can empathize with all of that so much because when I came at uni I would say that I was money focused I think the money script would be that I was a worshiper of money so I always thought that more money would make me happier you know that that was the answer those kind of people have a tendency to then get into revolving credit card debt because they use money short term that they don't have so I then had to deal with this the emotion of I see myself as someone who is driven towards money but I've actually got myself into a real mess and then I went over to a spreadsheet slave as a result of that which was probably a positive but then probably spent the next decade not to do living my life because I was so obsessed with never being like that again so it's like I swung the other way and it's only now that I'm finding balance and I think you have to really be honest with yourself about your consumption of money and how you approach it and the things you've done wrong to be able to kind of hone in your own personality, if that makes sense.

18:18Yeah. You have to forgive yourself and think this is a lesson. I've learned it the hard way, but nevertheless, I've learned it. And some people said to me, why would you admit in this book that you make mistakes? Because I talk about a lot of mistakes. I went through a period of several months when I'd finished uni and I was looking for a job where I just stopped opening the post because I had what I called a good job a get out of debt job um so i was doing fairly soulless um admin for a local council i was trying to get a break in journalism which is really really hard um it doesn't matter how good or how talented you might be like there's only so many jobs getting an opening um a lot of the time you've got to work for free and i just you know i had to work i couldn't afford to just work for free somewhere as an intern for three months fortunately that seems to be changing a lot more now.

19:18But I was just in denial about the financial situation I was in. And the easiest thing to do was just to not open the post. And then I ended up getting a letter from a debt collector because I'd taken my eye off the ball. The full story is in the book. But I think it's really important for people who are perceived as money experts to admit that we have made mistakes because everyone makes mistakes. Social media is brilliant for democratising finance and getting good ideas out there and inspiring people, but it also makes us compare ourselves to others. And that can be really self-defeatist. I'll never be as good with my money as he is, or I'll never have as cool trainers, or I must buy this in order to be more like that person who's clearly a success.

20:05So I think it's really important for us to admit that yeah, we're human beings. We get stuff wrong, but we can also change and get stuff right. And it's not a bad thing to ask for help. I think it's a sign of strength rather than a sign of weakness to ask for help. One of the saddest statistics in the whole book is about the time when I spent a day listening in to calls and working with people in a debt advice centre. And I found out from that that people typically wait well over a year when they're in problem debt before they actually pick up the phone and say, I need help. They'll wait until the walls are at the door.

20:50There's like literally nowhere else to turn. And I think, okay, it's bad enough now. I can phone those people because I don't have any other option. Whereas if they had phoned at the beginning of their debt problems, they could have had a much better set of options and avoided a year of just living with like that mental health overload of stress from not knowing how they're going to claw their way out of a situation and that is just something that's really chilling i went for i went for a debt service for five years and i can tell you this that happens at scale everyone only calls when they're like you say the wolves are at the door and they're really desperate but seeking the advice early on means you can you can combat that and address the behaviors as well like the spending behaviors and stuff i really do love this message of like own up to your failures look at them and say like this is what i've done wrong in the past that's okay we can fix that going forwards you call it sorting your financial shit out which i think is a beautiful way of putting it yeah penguin or a bit kind of like yeah put it in the book that guy's you know the art of not giving an f he yeah he sold a lot of books with a swear word on didn't he yeah on the cover so i think it's No, there's an asterisk.

22:00I think in the audio book version, they've put in a bleep. Really? It's only an S-bomb. It's not that F-bomb. Well, yeah. But the thing is, it is how I talk and it is what I say. And one of the things, I think it is in the book, one of the things that helped me sort out my finances was having nice stationery. And that is a really girly thing to admit. But if you're going to be surrounded by numbers and bills, having a Hello Kitty folder that you put it all in, it might make you feel bit more kind of like, oh, this is something I can do. And like, I don't have a hello kissy one anymore. I've got various different sort of coloured fruits and things.

22:37I've got like dragon fruit for my stocks and shares ISA. It's really, really silly. And, you know, and post-it notes and to-do lists and just, you know, any way that you can think of to organise yourself. self because like organization really is the the big the big rule of this so i've also got a really big um box file with like hanging files in it for what i've labeled on the outside financial shit did you believe and for each of my stepchildren i've got a little file for them like kelly's financial shit jack's financial shit gabriel's financial shit yeah he's got my two-month-old financial shit yeah i know and the thing is the financial shit it kind of accumulates throughout your life like the older you get but there could be um savings um accounts documents tax records um all of these things that you don't want to lose track of and i think a lot of people have got like a lot of bits of paper floating around their house or in this age of email a lot of pdfs that have never been downloaded they don't have like a system um for going through things and I'm a big believer in trying to stay on top of the paperwork, having a list of financial shit to sort and just kind of taking that sort of roll up the sleeves approach to dealing with things.

24:03But it can be a really scary thing to do. So whatever you need to do to make it easy for yourself, whether that's having nice stationery or treating yourself to a coffee after you've done an hour of financial shit on a Saturday. Make it part of your routine and make time for finance. We make time for all kinds of other appointments, like getting our nails done, going to the hairdressers, going to the gym. Schedule it in. Say, right, I'm going to do, doesn't need to be long. It could be half an hour a week. It could be one hour a month. Whatever you need, however simple or complicated your finances are, and just stay on top of it.

24:40I think it becomes a pleasure over time. What was really scary for me when I had loads of unsecured debt with, you know, priority debts as well, was that it was terrifying to face up to it. Like you said, you wouldn't open the mail. But then you kind of, you get through that, you get through the negative. And now it's investing, it's these other positive things. And I love it. It's the best part of my month is getting paid, sitting down, firing all my money everywhere. So because you've been through this journey of negativity to a positive side, I think it's really good. And also I feel calm after I've done it.

25:12Like sometimes I think like, oh, I need to reconcile a load of payments and work out who's paying me and who hasn't, you know, the life of a freelancer. But once it's done, it's like, oh. You've decluttered your life. Yeah, you've decluttered your life. Yeah. So speaking, the decluttering of the life. So you have the seven like steps. And the first one is setting a goal, which I think is, you know, the personality, then it's a goal. How do people know what kind of goal to set? it's really, really hard, isn't it? If you go and see a financial planner, that's the first question they'll ask you, what are your goals in life?

25:46And it stumps people because we never think about tomorrow, next month, next year. 10 years, 20 years. Yeah, exactly. In that kind of way. And especially in the moment, because we're just firefighting with money, with bills. Somebody asked me the other day, where do you see your career in five years time? Which is a classic kind of job interview question. As a freelancer, you're like, I just want to get paid next week. It's kind of like, oh, I don't really know. But we do need to take the time out to think about that and also to recognise that we're not going to come up with the answers all in one go.

26:20It's a process. So when you're thinking about setting a goal, I think what's really helpful is to sort of think of lots of mini goals. Not think like, you know, what's the ultimate? I want to be a billionaire, you know, live in a hotel and have all of these supercars at my display. So it's got to be realistic. It's got to be something you can work towards. But also it doesn't necessarily just concern money. It could also concern other aspects of self-improvement. Like you might have a really great job in the city earning a six-figure salary, but you might hate it. And you might think, well, actually my goal is to become a teacher.

27:09You might think, well, actually my goal is to get out of the city. I think that hybrid working has opened up all kinds of possibilities for people, has made it easier in some cases for people to buy a house because they could conceivably go much further out of big cities like London and Manchester. And if they've only got to commute in once a week or once a fortnight, that's a kind of financial game changer for them. And it's all about what you want to spend your time doing. I do a little equation on one page and encourage people to work out what their hourly rate is. Like if you're trading your time for money in a job, what are you getting back?

27:53And then once you know your number, how are you then going to feel about spending it? Like if you're working out that you're earning£75 a day after taxes, say, if you go out after work one night and blow£75 with a spendy Wendy friend on a nice dinner or some drinks or something, you know, was it worth working the whole day in order to blow it on that? And it might have been. Or you could have been buying them out for dinner or something. Yeah. It makes you frame the decision from a time perspective and an effort rather than... And then where the goal comes in is if you're thinking, right, so you've worked out what your big picture is, and then you've got to work out how you want to get there.

28:35And it might be that you don't know what you want to spend the money on, but you think that you can probably save, let's say,£200 a month into a stocks and shares ISA, £200 a month into your workplace pension, whatever. And so then you've got what you're left with. If you then get to the end of the month and you're thinking, oh, I'm going to have to raid the savings here if I want to go out with the spendy Wendy's. Because you've got the goal there and you're thinking, no, actually the reason why I'm doing this ISA is because when I get to the age of 40, I want there to be enough money in there for me to hopefully buy a home or I'm saving up to go travelling for a year.

29:11You've defined an alternative to just sort of spending it willy-nilly on stuff. And I think for so many of us, you know, we're just stuck in this sort of doom loop of getting through the day, finishing work late, getting a takeaway because we're on our way home and we don't have any food in or being rinsed in those supermarkets. You're telling her about my life. Oh yeah, I've got to, I've got to. My partner's always telling me stop buying takeaways, but anytime she's busy, I'm just like ordering. Like I think I do like three or four a week and I'm like, it's a special occasion, it's Monday. It's a special occasion, it's Wednesday.

29:45But then at the end of the week, I'm like, I've just bought four takeaways. I could have just gone to Sainsbury's and cooked food. But because I'm working, I'm like, let me just finish this and then I'll just order the food so I don't have to stop. Yeah. But it adds up. It's the price of convenience. Yeah, the price of convenience. Those supermarkets in railway stations, and they're like 20 % more expensive than the normal supermarket. You know, there are so many traps that we fall into. I mean, I have to say, I hold my hands up. Many, many, many takeaways were consumed as a result of writing this book because I was working full time.

30:17I was doing LBC. I was doing ITV. That's about knowing your hourly rate again. You're probably framing that then from a perspective of there is a convenience element here. So, you know, I'm so busy with work and my hourly rate is X that I can actually justify this takeaway because I'm writing a book on top of that, which is earning money. Because the price of the convenience is worth it. And if you are going to spend money on something, you know, then make sure you enjoy it. But if you're just doing it - Oh, I enjoy my takeaway. I do enjoy my takeaway. I'm thinking about one right now, actually.

30:48It's because I just had a kid, And so literally since he's been born - It's an excuse for everything. Yeah. It's great. Since he's been born, like my takeaways have definitely gone up like 100 % because it's like, oh, we've got to go shopping. You just don't have time anymore. Well, you've lost time in your day. So you're like, oh, well, let's not go shopping. You've got to look after the baby. I'll just order takeaways. The firefight. And it makes it harder to plan. And it makes it harder because then you've got to pay for the baby as well. So it's just more expenses. You need a budget. I do.

31:12I do. I really need a budget. You know, if the goal is the dream, the budget is the tool to get there in a way, isn't it? Definitely. Yeah. Do you think there's a good way of budgeting? I think that there are as many ways of budgeting as there are people. The good news is there are so many free or nearly free digital tools out there that will suit your kind of style of budgeting. Now, I can tell you about what I do to kick off with. So I give myself a certain amount of money per month and I load it onto a separate, I put it into a separate bank account. I've got it on a Starling card if we're allowed to mention them, but they are, I do really like their app because it breaks down everything that you've spent the money on.

31:55So you can look at it. It's on the first of the month, the money goes in and yes, sometimes I do go over and I have to transfer a bit more, but it's like a break on my spending. I know I've got this much. I can look at the balance every day. That's something that I struggled with as well for a long time, looking at my bank balance when I was younger. And it just makes me think, I'm not going to go to Pret. I'm going to have the free coffee in the FT's office. It means I've got to get there five minutes earlier because there's always a long queue because it's free. But you know what? It's just a little nudge in the right direction.