In short
Podcast Notes: The Diary Of A CEO with Steven Bartlett
Episode Title
Most Replayed Moment: Stressed About Money? Nischa's Step-by-Step Guide To Financial Security
Guest Introduction
- Nischa Shah: Former investment banker and chartered accountant.
- Specializes in helping people build financial security with clarity and intention.
Key Discussion Points
The Current Financial Landscape
- Many individuals live paycheck to paycheck, even those with high incomes.
- The importance of having a reliable method to grow money amidst rising living costs.
Nischa's Step-by-Step Guide to Financial Security
- Build a Peace of Mind Fund
- Purpose: Psychological reassurance rather than purely financial.
- How to Calculate: Review past 30 days of bank statements and total living expenses (rent/mortgage, utilities, bills).
- Goal: Save a fund equal to one month of living expenses.
- Impact: Puts individuals ahead of 59% of Americans and 30% of people in the UK who can't cover unexpected expenses.
- Cut Financial Bleeding
- Focus: Prioritize paying off high-interest debt.
- Method: List debts by interest rate; make minimum payments on lower-interest debts while paying off high-interest debts aggressively.
- Credit Cards: Use them wisely by paying off balances each month to avoid interest.
- Build Your Emergency Buffer
- Calculation: Save three months of living expenses if single; six months if you have dependents or unpredictable income.
- Benefits: Provides security against job loss or health issues; contributes to mental well-being and productivity.
- Know When to Start Investing
- Context: Saving beyond emergency and peace of mind funds can be counterproductive due to inflation.
- Investing Timing: Begin investing after securing emergency funds (three to six months of expenses).
- Investment Options:
- Employer-sponsored retirement accounts.
- Individual tax-advantaged accounts (e.g., ISAs in the UK, Roth IRAs in the US).
Investing Insights
- Investment Strategies:
- Invest via employer-sponsored plans for tax advantages.
- Use individual accounts for personal investment; focus on index funds and target-date retirement funds.
- Investment Behavior:
- Start investing early and regularly to benefit from compound growth.
- Avoid over-saving; instead, direct excess funds toward increasing income.
Income Growth Strategies
- Asking for a Pay Raise:
- Prepare a case based on your contributions and market averages.
- Switching Jobs:
- Job changes can result in significant income increases compared to staying with the same employer.
Conclusion
- Understanding personal goals is crucial for financial decisions.
- Financial choices should align with individual values and long-term objectives.
Resources
- Full Episode Links:
- [Listen on Spotify](https://g2ul0.app.link/6O48GqqCC0b)
- [Listen on Apple](https://g2ul0.app.link/EkemE5sCC0b)
- [Watch on YouTube](https://www.youtube.com/c/%20TheDiaryOfACEO/videos)
- Nischa's YouTube Channel: [Watch Nischa](https://www.youtube.com/@nischa)
Final Thoughts
- This episode emphasizes the significance of financial literacy and strategic financial planning for achieving long-term security and peace of mind.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOEstablishing a Peace of Mind Fund
0:56 to 3:08
Discover the importance of building a peace of mind fund for financial stability.
“They're not being intentional with their money.”
Cutting Financial Bleeding: Pay Off Debt
3:08 to 6:28
Learn how to manage and pay off high-interest debt effectively.
“Step two, this is where we do move into the mathematical optimal thing.”
Building Your Emergency Buffer
6:28 to 8:23
Understand how to create a financial buffer for emergencies.
“Yeah, three to six months of breathing room in your bank account.”
Investing Wisely After Saving
8:23 to 10:34
Learn when and how to start investing after ensuring financial security.
“A lot of people just save, save, save, save, save.”
Understanding Financial Trade-Offs
10:34 to 14:00
Explore the trade-offs between immediate gratification and long-term financial freedom.
“Because of the way when you start investing with small recurring amounts, it just compounds over time.”
Understanding Life Choices and Financial Trade-Offs
14:00 to 28:00
Discusses the importance of making informed financial decisions that align with personal values and happiness.
“He bought what he wanted, which was early retirement, freedom, time, choice.”
Transcript
Automatic transcript. May contain errors.0:00Steven Bartlett:With markets changing and living costs rising, finding a reliable place to grow your money matters now more than ever. In the Wealthfront Cash account, your uninvested cash can earn up to 3.95 % APY. That's a 0.65 % boost over an already high rate for three months, just for being a new client. There are no monthly account fees or minimums, and you get free instant withdrawals to eligible accounts 24-7, so you always have access to your money when you need it. And when you're ready to invest, you can transfer your cash to one of Wealthfront's expert built portfolios in just minutes. More than 1 million people already use Wealthfront to save and build wealth with confidence.
0:36Steven Bartlett:Get started today at Wealthfront.com.
0:55Steven Bartlett:Advisory service is provided by Wealthfront Advisors, LLC and SEC registered investment advisor.
1:04Nischa Shah:So if someone's listening to this right now and they resonate with this idea of they're slightly avoidant, they don't really have a plan, they're kind of just they get paid, they answer their bills and then they wait till the next payday. They're not being intentional with their money. Is there a step one in taking back control?
1:20Steven Bartlett:The very first thing, number one, that I'll say to do is build a peace of mind fund.
1:26Nischa Shah:A peace of mind fund.
1:29Steven Bartlett:This is not about maths. It's not the mathematically optimal thing to do. But it is the psychological. Because as we've discussed, money is as much about emotions as it is about numbers. So what I'll say is go through the last 30 days of your bank statements and calculate exactly how much it costs for one month of your living. So mortgage, rent, utilities, bills, minimum debt payments, car payments, whatever that total is, that's the amount that you want to save up for your peace of mind fund. Okay, so I go through my last 30 days of my bills.
2:08Nischa Shah:I find out that it's cost me, let's say$1 ,000.
2:11Steven Bartlett:Okay, that's one month of your core living expenses.
2:15Nischa Shah:Yeah, so I need to save$1 ,000. You don't need to invest it.
2:19Steven Bartlett:You don't need to save it. You don't need to, it's not for a holiday. The reason why you want to save this is because when life does what it does best, which is throw curveballs, you want to make sure that you have it handled. If a boiler breaks, your car dies on a Monday morning, the last thing you want on top of the stress of dealing with that thing is the financial stress of how you're going to pay for it. That's what this thing covers. It tells you, I've got peace of mind. Whatever life throws at me, I can handle it. And saving that one month of living costs puts you ahead of 59 % of Americans and 30 % of people living in the UK.
2:56Steven Bartlett:59 % of Americans, unfortunately, can't pay for a$1 ,000 expense. And 30 % of people in the UK can't cover one month of their living expenses if something happened.
3:07Nischa Shah:What is step two in that regard?
3:09Steven Bartlett:Step two, this is where we do move into the mathematical optimal thing. This is you cut the financial bleeding. okay and what i mean by that is i get so many so many times people ask me nisha i have four thousand five thousand sitting in my bank account what should i do with it and my first question back to them is do you have any high interest rate debt because if you have savings of two thousand dollars earning four percent but you also have credit card debt at twenty percent you're leaking money more than you're making it it's like pouring water into a bucket with holes in it and wondering why it's not going to fill up.
3:45Steven Bartlett:So what you want to do is you want to take all of your debt that you have, rank it from highest to lowest.
3:50Nischa Shah:In terms of interest?
3:51Steven Bartlett:In terms of interest rate. And then everything above 8%, you want to make minimum payments across everything first. And everything above 8%, you want to throw your extra savings into the highest interest rate first, to the debt with the highest interest rate, and then move down in that order.
4:06Nischa Shah:And interest rate, is that paid monthly or yearly?
4:08Steven Bartlett:It's paid monthly.
4:09Nischa Shah:It's paid monthly. So if I have a£1 ,000 loan on a credit card and the interest rate is 10%, I'm paying£100.
4:17Steven Bartlett:Paid monthly. Over the year, they're going to pay£100. But that's split out into monthly payments, assuming that they're not drawing down more on that credit card.
4:25Nischa Shah:Are you against credit cards?
4:28Steven Bartlett:Credit cards are good if you're using them the right way. Really good if you're using them in the right way. And that means the points that you're using, the rewards that you get for it, the bonuses that you get from it, all really helpful. only if you're paying them off in full every single month. If you're not using that or if you're not doing it in that way, which is kind of what they want you to do because they want you to miss these payments because that's how credit card companies make money, are your missed payments. If you're not doing that, then the benefits just don't weigh up. It doesn't make sense.
4:56Steven Bartlett:Use credit cards, but use it in a way that stacks up in your favor, not in the credit card company's favor.
5:01Nischa Shah:It's almost paradoxical that you'd use a credit card, but only if you can afford to use a credit card.
5:05Steven Bartlett:Yeah, that's exactly. Yeah, you've got to think about it. Can I pay for this thing outright in cash? If I can, then I can ship it on my credit card. And the anomaly is property, if you're using it to make money, healthcare, education, but for anything else, unless it's making you money, yeah, that's the way you want to think about it, because it does encourage extra spending otherwise.
5:26Nischa Shah:Okay, so I'm going to pay off my high interest debts first with any spare cash that I have.
5:31Steven Bartlett:Yeah.
5:32Nischa Shah:What's number three?
5:33Steven Bartlett:Number three is build your emergency buffer.
5:37Nischa Shah:Okay.
5:38Steven Bartlett:So this is your core living expenses that we've already calculated in step one. And you want to times that by three if you are single, you have predictable income. Or you want to times it by six if you are head of household, you have a mortgage, you have unpredictable income. That's your emergency cushion. And it protects you from the bigger life things. It's the third thing you want to do. It protects you if you lose your job, if you have a health scare, if there are dependents that you need to care for. This kind of buys you that time. But there's really interesting research from Vanguard that actually showed saving three to six months of your living expenses does more for your emotional well-being than earning over 200k.
6:25Nischa Shah:So just the peace of mind again.
6:27Steven Bartlett:It's that breathing room. Yeah, three to six months of breathing room in your bank account. It just moves the needle. It's the peace of mind. It's the security. It's the stability. One of the core human needs. And it's interesting because we're kind of looking at making more money and earning more and we're chasing the next number. And actually the thing that's going to have the biggest impact or move the needle on our financial well-being is at this stage having that three to six months of living expenses saved up.
6:53Nischa Shah:It's all relative, right? At the end of the day. And it's incredibly stressful. And I've been there when you don't know if you can pay this month's rent, if you don't know if you can feed yourself. But also the sort of back of the mind knowledge that if something were to happen, you'd be screwed. It's an incredibly stressful way to live. And you might not even realise the stress consciously, but you might just feel it. It might just be an angst in your life.
7:17Steven Bartlett:Yeah, and this applies at any income level, even people earning six figures who are living paycheck to paycheck, who don't have that emergency buffer in place. They have that anxiety. And also that same report showed that having that three to six months with the people that they surveyed, their productivity at work was better just from knowing that they didn't have that financial stress.
7:37Nischa Shah:I know millionaires, people that have a lot of money that are in a similar position in the sense of they are stressed and anxious because their overheads are also in the millions every month. And there's a lot of money coming in, but there's a lot of money going out. So they're still sometimes just one or two months away from being at zero. Yeah. it's a different type of stress because their sort of subjective experience and lifestyle is better on a day-to-day but it's interesting that it's it's really relative to your your outgoing exactly what's the what's the fourth point then so I've got so far I've got have a peace of mind fund which is one month's expenses number two is pay off high interest rate debt number three is build an emergency fund which is three times your monthly expenses if you're single and six times if you're in a relationship and there's people depending on you?
8:22Steven Bartlett:Yeah. Most people actually stay here. Okay. A lot of people just save, save, save, save, save. And I just want to, before we move on to step four, I want to say that if you're saving, you only want to save for one of two things. The emergency fund and the peace fund, managed fund that we spoke about. And the second thing is for any goals that you have for the next five years, whether that's a house deposit, car deposit. Other than that, you don't want to be saving that money. it's going to be the value is going to be eaten away quicker with inflation if you're just keeping it saved in a bank account so that's when you want to move on to step four and that is investing
8:58Nischa Shah:okay so you don't want to save you don't want to over save you don't want to over save know when to stop saving and start investing and when does one start investing and stop saving after they've
9:09Steven Bartlett:saved the three to six months of the living expenses okay that's the third step at that point. Once they've done step one, two, three, this is the point. And the reason why I say this, Stephen, is because if you start investing before you've got from steps one, two, three, and you don't have your savings set aside, and the market goes down and you have an emergency, you're going to have to pull that money out at a loss. Or you're going to have to go into debt, which is why that was step two, cut the financial bleeding. So it's really important to have steps one, two, three done before you even think about investing.
Read the full transcript
9:39Steven Bartlett:Those three to six months, It's your core living expenses. So it's, forget all your spending on the things that you love or the things that might make life good. It's just the things that you need to absolutely survive. Because if you do lose your job, you're not going to be out partying and spending loads of money. You're going to think, okay, how do I pay my bills for the next three months? How do I survive for the next month? That's the thing that's going to cover that off.
10:04Nischa Shah:Okay, right.
10:05Steven Bartlett:Yeah.
10:05Nischa Shah:So it's not like the season ticket at Manchester United or the Louis Vuitton jackets.
10:09Steven Bartlett:No, no.
10:09Nischa Shah:It's just your heating, your bills, your food, survival.
10:13Steven Bartlett:Yeah.
10:14Nischa Shah:So number four is investing?
10:16Steven Bartlett:Number four is investing. For a while, we've heard of the phrase save for retirement.
10:22Nischa Shah:Yeah.
10:23Steven Bartlett:Saving for retirement. You cannot save your way to retirement. With the way cost of living is going, with the way inflation is going, with the price of retirement is going to cost by the time you get there, saving is just not enough. You have to be investing your money. and there are two main ways that you can invest but before I even say that most people know that they should be investing but they don't do it they say I'll do it tomorrow or next week or next year or when I'm rich or when I'm rich and then by the time they do start they missed out on the most powerful lever that they had going for them which is time that is one of the most important things when it comes to investing.
11:02Steven Bartlett:Because of the way when you start investing with small recurring amounts, it just compounds over time. So early, often when it comes to investing, there's two avenues to invest through. The first is through your employer-sponsored retirement account. And the second is through your own individual tax-advantaged account.
11:22Nischa Shah:What are those two things?
11:24Steven Bartlett:The first is done through your employer. So what they do is they invest on behalf of you. In the UK, you're automatically enrolled into it. In the US, you'll have to check with your HR and get yourself enrolled into it. And what this does is your company, before it pays you or puts money into your bank account, it takes a small percentage, you could decide how much, and it puts it towards investments for you, on behalf of you, pre-tax. So you're not paying tax on that amount, you're putting it into an investment account and then that money is compounding for you pre-tax.
11:54Nischa Shah:Do all employers do this?
11:55Steven Bartlett:Most employers do it, not all employers do it. And some employers have a match, which means if you put some money in, they will also match that amount that you're putting in.
12:05Nischa Shah:So how do I know if my employee does this?
12:06Steven Bartlett:Check with your HR.
12:07Nischa Shah:And is there a cap?
12:08Steven Bartlett:There is a cap to how much they will match.
12:10Nischa Shah:Yeah.
12:11Steven Bartlett:So say if they match up to 3%, then you want to put in the 3%. But then you could keep going. But at this stage, you don't even need to go over the match at this point of the steps. You just want to put in enough to meet that match because you're getting the tax benefit. and then you're also getting free money from your sponsored plan on top of that. You don't want to leave that on the table.
12:31Nischa Shah:And when can I pull that money out?
12:33Steven Bartlett:When you retire, retirement. So this is for your retirement. You're looking after your future self. It's today's you planting seeds for future you. That's what this is about.
12:42Nischa Shah:What about people that say, listen, retirement's a long way away.
12:45Steven Bartlett:Yeah.
12:45Nischa Shah:You know, I'm going to be, what, 65, 75? It's just a long way away. I want to live a good, I want to live it up now, Nisha. I don't want to be putting money in a box I can't open for 50 years.
12:57Steven Bartlett:And you want to spend the money now to live the good life?
12:59Nischa Shah:Yeah.
13:02Steven Bartlett:The most important thing when it comes to money is understanding what you want and then making sure your money backs those decisions. And I say this because when I was in the graduate scheme, there were two very different people who worked in my team. And the first person who sat opposite me on the bank of seats in front of me, He used to come in in his Ferrari. And he, on Monday morning, when we were talking about what we did over our weekend, what we did on the weekend, he would talk about the Michelin star restaurants he tried, the last minute trip to Italy, and his computer screen was the next car that he wanted.
13:33Steven Bartlett:And on my left was Phil, who later became my mentor. And he came in with his packed lunch. He wore the same shirt tie combo that I could probably remember and sketch it from memory. And he had his holidays. he had his vacations but he was a lot more selective about them and I didn't see it at the time but now it's so clear to me that they were chasing very different things the person opposite me he was chasing this good life the stories the status the memories and that was important to him and he went for it but Phil and I visited him just before I came to LA him his wife his two kids, dogs, in their countryside home, and he was enjoying the retired life.
14:17He was loving life.
14:20Steven Bartlett:He bought what he wanted, which was early retirement, freedom, time, choice. Neither path is wrong, but both paths, both people required taking a series of trade-offs. Both had to make some sacrifices. And I think that's the thing that people miss. Sometimes it's so easy to say yes to the thing right in front of you because the benefit is there. The benefit is immediate. You don't realize what you're going to miss out on later on in life.
14:47Nischa Shah:So the guy that was that opposite you with the Ferrari, what was the trade-offs he was making? He was probably going to end up working until he had retirement money to spend.
14:57Steven Bartlett:He was going to spend his life at banking, but he was going to live it big, but he wouldn't have the freedom, the choice, the time, because his spending and his income matched each other. And so what I want to just say is for anyone saying, oh, I just want to live it big. I want to enjoy the money. Find out what is the thing that's most important to you and make sure your money choices stack that decision because the wrong choice isn't choosing the wrong path. It's just not knowing that you even had a choice in this whole thing.
15:26Nischa Shah:Do you think the guy that's opposite you with the Ferrari was in any way insecure? Was there an element of seeking validation?
15:35Steven Bartlett:There might have been. Yeah, there might have been. That might have been what made him happy. But I think it's also not having the self-awareness to, if that made him happy, then by all means. But if it didn't make him happy, and a lot of people do this, me included, I've gone through this, I've done it. When you don't know what makes you happy, you end up just doing things that gets you that external validation. And for some people, it might mean, okay, you know what, I actually do enjoy this new car does bring me happiness but for others it might just be a facade and later on they and later on in life they just realize that actually no one really cared the only person who cared was me and although I did it for other people it's uh now I realize that all the trade-offs I
16:15Nischa Shah:had to make as a result of it because happiness and external validation they're like cousins yeah but they're not the same guy do you know what I mean they're like they look they're kind of like of the same family but one of them's the like dysfunctional sibling but they kind of look the same you know you look at that guy in his in his ferrari you go on must be happy and he comes in he's probably got a smile on his face because he's talking about his ferrari yeah yeah that's what he's built himself on i guess but i don't know if that's happiness you know the guy without the ferrari might be i think universally most people what they want is the freedom and the
16:52Steven Bartlett:choice than the time. I think more people are after that. And that can make more people happier than any status symbol. Because when you do end up going down the route of buying something to make you happy, you're on a hedonic treadmill. You're then buying the next thing and the next thing and the next thing. And you get those spikes of happiness. There never is really long-lasting, fulfilling happiness.
17:15Nischa Shah:So investing strategy number one is asking your employer about their investment scheme?
17:20Steven Bartlett:Finding out if your employer has, yeah, a retirement plan and making sure that you're invested into it enough to cover the match that they offer.
17:28Nischa Shah:What's strategy number two?
17:30Steven Bartlett:The strategy number two is your own individual tax-advantaged investment account. This is an ISA in the UK. And this is where you put your own money after tax into an investment account. and then the money grows over time tax-free. So when you pull it out at the end, you could, with the UK, you could pull it out in five years and 10 years or in retirement, then you could withdraw that money tax-free. So both of them have tax advantages. One is when you put the money in, you're getting the tax advantages. The other one's when you draw the money out, but they both have tax advantages. And so you're putting the money in and it's growing tax-free.
18:07Steven Bartlett:That's really a big deal. That's huge. That's money that's compounding for you and you're not paying tax on that.
18:12Nischa Shah:But there's a limit.
18:14Steven Bartlett:There's a limit. Annually, it's$20 ,000.
18:17Nischa Shah:In the UK and the US?
18:18Steven Bartlett:It changes year on year. At the moment, I believe at$7 ,000. But with a quick Google search, you can stay on top of whatever the current limit is for the account or the taxable advantage account that you're investing in.
18:29Nischa Shah:So I get paid, I put it into my, in the UK, it's called an ISA. Yeah. And the limit is 20K. So if I put 20K in, let's say, if it goes to 100K because the investments go really well, is the whole 100k tax rate.
18:44Steven Bartlett:Yeah, you're not paying capital gains tax. You're not paying interest, sorry, dividends tax.
18:49Nischa Shah:So pretty much that's the first place everyone should really be investing if they want an alternative to investing in their pension. Yeah, that's the first thing
18:56Steven Bartlett:you want to cap out because of the taxable benefits that come with it.
19:00Nischa Shah:Is it called a Roth IRA in the US?
19:02Steven Bartlett:Yeah, that's right.
19:03Nischa Shah:It says max contribution is$7 ,000 to$8 ,000 a year if you're 50 or older.
19:10Steven Bartlett:Yeah, the specific amounts depending on who you are.
19:14Nischa Shah:Standard employee contribution limit of$23 ,000. Interesting.
19:17Steven Bartlett:Whereas in UK, it's just a flat. $20 ,000 is the current.
19:22Nischa Shah:And with my ISA, this tax-free ISA that everyone is eligible to invest in, do I then have to pick the things it invests in?
19:30Steven Bartlett:Yes.
19:31Nischa Shah:Okay.
19:32Steven Bartlett:This is the next. We could talk about this now, actually. Yeah. So when you are deciding what to invest in, This is with the employer-sponsored account, the employer-sponsored retirement account, you actually just choose what risk profile you have and it will do that investing for you.
19:46Nischa Shah:So you'll say, I feel really risky or I'm not very risky at all. Yeah. And it does it for you.
19:50Steven Bartlett:And it does. It will invest on behalf of you.
19:52Nischa Shah:Yeah.
19:53Steven Bartlett:And so most people don't even realize that they're investing, but they are investing through their company if they have that employer-sponsored plan. Then the individual account is you doing the investing yourself. You're picking what to invest in. Yeah.
20:06Nischa Shah:And what shall I invest in?
20:08Steven Bartlett:My principle with investing is very, very simple. And it's just keep it simple and do it for the long term. So I say index funds and target date retirement funds is what you want to invest in.
20:18Nischa Shah:What's that?
20:19Steven Bartlett:An index fund, let's put out an index, think of it as a list of companies. So the S &P 500 is a list of the largest, the top 500 companies, to keep this really simple. FTSE 100 is the top 100 companies on the London Stock Exchange. the fund is a pot of money that invests in the companies on that list. So by investing in an S &P 500, you've invested in a small piece of the top 500 companies in the US. That's what an index fund is. And so even if one company goes down, you're diversified. And so there'll be another company that will, and the other companies will bring it back up again.
21:03Nischa Shah:And what kind of performance can I expect from investing in the S &P 500?
21:07Steven Bartlett:Historically speaking, the long-term average has been 8 % to 10 % per year, depending on the years and the timeframe that you're looking at. That is different to a one-year holding period. It could go up, it could go down, you just don't know. So the longer you invest for, the chances of you getting that 8 % to 10 % on average increase.
21:29Nischa Shah:Is 8 % to 10 % going to make me rich though, Nisha?
21:32Steven Bartlett:how long are you doing it for?
21:34Nischa Shah:You tell me.
21:36Steven Bartlett:If you have a lump sum amount that you're like, okay, you know what? I have 2 ,000 that I want to invest. What should I do with it? It's taken me five years to invest this. I would say 1 ,900 of that. Don't invest it. 100 of it, invest. I'll say why I'm saying this. 100, I want you to invest it for anyone listening. I want you to listen. I want you to invest that because I want you to see and feel the emotions when you see your money go up over time. Sure, it's going to be small. It's not going to make you rich investing that, but you're going to instill that good habit early on and you're going to remember that because the remaining amount, you're going to put that towards increasing your income.
22:19Steven Bartlett:That's the first thing you're going to do. Think of your income as a river and your specific milestones, life milestones as buckets across the river. So you have retirement, you have your house deposit, you have your car payment that you're all saving up for. Those buckets will fill up faster the quicker and wider that river is. That is your income that's coming through. If you don't have much of an income coming through, those buckets are going to take ages to fill up. That's why I say if it's taken you a long time to save that amount, I actually would recommend you putting that money towards increasing your income first before investing it.
22:56Steven Bartlett:If, however, you have disposable income, you have a reoccurring amount that you can invest monthly, use that to your advantage, harness the power of long-term compounding growth because that is the thing that is going to make you rich. Sure, it will take 25, 30 years, but that is leverage that you don't get through your day job. It's your money working for you without you having to be there.
23:19Nischa Shah:So you would suggest if you're really at that early level to focus on increasing your income, investing in increasing your income?
23:26Steven Bartlett:Yeah, that's the first thing. If you're figuring out, okay, I need to increase my income, it's taken me a while to earn this amount and I only have a lump sum of 2 ,000, 5 ,000, focus on increasing your income. Yeah, that's what I would say.
23:39Nischa Shah:And how does one focus on increasing their income?
23:41Steven Bartlett:There are a couple of ways to do this. So the easiest way to increase your income is asking for a pay rise, increasing your responsibility, the work that you do, your contributions and saying to your boss or your manager, this is the value that I've bought. This is the responsibility that I've taken on. This is what the market is paying for a similar role. And this is why a pay rise is fair. The other option...
24:09Nischa Shah:Did you ever ask for a pay rise?
24:10Steven Bartlett:Multiple times. Multiple, multiple times.
24:13Nischa Shah:When you're in investment banking?
24:14Steven Bartlett:Yeah. It's one of those things where if you don't ask, you don't get. Of course you'll get, but you sitting there and thinking the hard work is going to show without you asking for it, it's unlikely. You're going to have to build a case and say, okay, these are the things that I've done. This is the things that we said we were going to do, or I wanted to work on in my performance review, which is what I had. It got to the end of the performance review and these are the things that I actually did and this is where I went above and beyond.
24:44Nischa Shah:So if I'm your boss, Nisha, if we just replay one of those conversations you had, you were sat in a performance review and what did you say to me?
24:54Steven Bartlett:I would say, hey, Stephen.
24:56Nischa Shah:Hey. Three months ago, or six months ago,
24:59Steven Bartlett:we spoke about the things that I needed to do to get promoted or to get a pay rise. And we mentioned X, Y, Z. And I've done all of those things here. And here is the feedback that I've got. Here is where I've gone above and beyond. and this is some extra things that other people, the 360 feedback that I've done and that this is what it says. Yeah, and that's when I'll say, do you think that this is the bracket that we discussed? Do you think that's fair? Research shows that women are much less likely to ask for a pay rise
25:35Nischa Shah:and when they do, they are less likely to get one compared to men. Is that kind of what you found?
25:42Steven Bartlett:Yeah, I've seen those facts and I think it's really such a shame that when a woman asks for a pay rise, it may not be seen in the same way as when a male counterpart asks for the pay rise. And the factors that we can control are the being prepared, having the book of all the things that you've done. But I recommend, and this is things that I've done when I was in an organization and when I felt like even I was being paid less than my male counterpart, is speaking, firstly, if there's a HR team in your department, speaking to them and asking, am I online or am I aligned to the average for my department and for what my role is?
26:23Steven Bartlett:They can give you a really good guideline as to whether you are underpaid or whether you deserve a bump to be more aligned to the general pay in that role. And the second thing is have an ally or have someone in your workplace that you'd always speak to, whether it's a mentor, whether it's a colleague, and it's worth always speaking to other people about money. It's such a taboo topic. We hate it. We hate talking to someone else about their salary, what they're making. But the more financial transparency that we encourage, the more we can learn from each other. Openly ask the person next to you, hey, this is what you get paid.
27:03Steven Bartlett:As hard as that is, open up that conversation. But the other way to increase your income is actually through switching jobs, switching companies. Because there's so much research that's been done. And the most popular one is actually one cited by Forbes that says people who stay at the same company for two years or more, on average, earn 50 % less over their lifetime. And I've made a video on my salary year by year over the last over the nine years I spent in banking. And the biggest pay jumps that I saw were from switching companies. So those are the two ways that I would actually say, yeah, increase your income by asking for more or by switching.
27:53Nischa Shah:What you just listened to was a most replayed moment from a previous episode. If you want to listen to that full episode, I've linked it down below. Check the description. Thank you.
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From the publisher
Nischa Shah is a former investment banker and chartered accountant who helps people build financial security with clarity and intention. In this moment, she explains why so many people live paycheque to paycheque, even at higher incomes, and the first practical steps to taking back control of your money. Nischa outlines a clear framework that you can start today to build long-term financial stability.
Listen to the full episode here:
Spotify: https://g2ul0.app.link/6O48GqqCC0b
Apple: https://g2ul0.app.link/EkemE5sCC0b
Watch the Episodes On YouTube:
https://www.youtube.com/c/%20TheDiaryOfACEO/videos
Watch Nischa On YouTube: https://www.youtube.com/@nischa
