I don’t know about you, but I just hear the words “finance”, “superannuation” and “stock market” and my eyes glaze over. However, as WordPress consultants, this is just not something that we can ignore- we need to be smart with our finances so that we are actually able to retire one day!
In this week’s episode, Mike speaks to Andrew Craig from Plain English Finance and the author of “How to Own the World”. Andrew talks to us about the essential ingredients for taking control of your own finance and money while allowing us to save, invest and even build a pension as WordPress consultants. According to Andrew, it doesn’t even need to be complicated! This is important one peeps, so listen in!
Andrew started out in banking in the late 90’s, but after 15 years he realised that he had become an angry young man. It became clear to him when he would talk to people out and about, that there were so many myths out there about finance and he saw so many people that couldn’t manage their own financial affairs. So, he set up a website in 2011 and published a lot of free information which he was able to compile into his best-selling book “How to Own the World”. He describes the book as “an idiots guide to finance with a sophisticated overlay”.
With your own business, your income can have an uncertainty to it. You have times when the money is coming in and times when things are slow. However, if you learn about finance and make sensible investments, it won’t be long until you can build a nest egg which can throw off returns itself.
Andrew says that The Richest Man in Babylon, by George Clason, is an odd book but the one thing he took away from it was “Always put 10% of everything you earn into investments”. Sometimes you obviously can’t do this, especially when you are starting out, but as soon as you have income, put 10% of whatever you have made that month either into an investment account or into sensible investments. Having your own business puts you at risk of an impoverished retirement unless you apply this strategy.
He explains it like this – if Great Aunt Agatha put $5,000 into a tax-free account (like an ISA) for your newborn baby and you were able to achieve 10% interest rate, how much would that child have on their 55th birthday when they can legally retire? $945,000! So really your biggest ally in investment is time. Securing something like this early on in your life = winning!
People tell Andrew that “pension funds are shit” on a regular basis! However, he says that this isn’t true. A pension is a tax-sheltered account in which you can do thousands of things. The first thing people may do when they realise that they need to put money away is open a savings account, but keep in mind that if that savings account has an interest rate that is lower than inflation then you are actually losing money.
If you are conservative and worried, at least just let your cash build up. Although, you may want to listen in at the 21-minute mark to hear why Andrew believes investing is the right option (and he provides more tips on how to do it safely). One thing that might reassure you is that when you are investing for a nest egg and long-term pension fund over many years, it is completely different to day trading and much less risky.
It’s All About the Fundamentals
Mike talks about the fact that there are many books these days that are actually easy to read and can help you understand the fundamentals of finance. Some examples are David Lynch’s “Beating the Market” and Warren Buffet’s books which explain that you don’t need to be a rocket scientist to invest. What you do need to know is:
“If you’re looking to educate yourself about finances, seek out stuff about the fundamentals not about what the latest stock is or the latest fad is”.
Andrew has a list on his website “The Top 8 best Finance Books of all Time”. If you want to learn the fundamentals, he recommends “The Ascent of Money” by Niall Ferguson. This book asks “what is money?”. The more knowledge you have on finance, the more interesting it becomes!
Mike talks about the huge amount of fear around money that we have in the freelance and entrepreneurial world simply because we are not educated on it. I hear you though – who has the time?! But Andrew talks about the importance of not parking this. If you can invest wisely then you have the ability to make the same amount of money from your savings and investments as you made from your business. Get a savings habit and “it’s remarkable how quickly your pot fills”. For those who are interested, there is an app called “Money Box” which Mike and Andrew recommend to help you stick to a savings plan.
Tune in to find out more on the history of finance and the trends of the stock market. As I said, this is an important podcast! Andrew talks about ISA accounts which are available in the UK, but we would love to know who you use in your country and any other finance tips that have worked for you.