97. Journey to Riches: How To Build Wealth in Your 20s and 30s

Ready to take charge of your financial future and build generational wealth? Sharing my personal journey, this episode is packed with actionable steps for those in their 20s, 30s, and beyond. 

Discussing methods to build your wealth, how to set clear financial goals as well as how to approach saving and investing for the long-term. This is the podcast that you need to listen to if you want to grow your assets!

• Budget Spreadsheet - https://www.penniestopounds.co.uk/product/budget-spreadsheet

*This episode is not financial advice*

Transcript

Speaker 1: 0:00

Hey everyone and welcome back to the Penny Spam podcast with your host, keir, and this is a podcast we're into to spoil your myths, simplify difficult financial jargon and rectify your own personal problems. Happy Monday, everyone. I hope you've had an amazing weekend. We are back with another episode. There's only 56 days, if you listen to this in real time, until the end of 2023. So with that, we have a very exciting announcement.

Speaker 1: 0:24

Before we get to this episode, we are having our final in-person event in London to close off 2023. It's called New Year, wealthier you, and we're gonna be covering all of the topics that you need to know to make sure that you are excelling and succeeding with your finances in 2024. We're covering money management, budgeting, financial wellbeing, using credit responsibly, increasing your income, side hustles and everything in between. Tickets are out now. Early Bird is almost sold out. We're about a ticket or two away before it's selling out as I record this episode. If you wanna come and you're in London, please do come along.

Speaker 1: 1:03

But without further ado, let's get straight into your episode. So this episode is talking all about how to build your wealth and grow your wealth in your 20s and 30s. Now I recognize if you're listening to this and you do not fall within that age range. You are not aged out from this episode. This applies to everyone. But I know that if you're in the age of the 20s and 30s, you're probably sitting there thinking I really do want to build up my wealth. Maybe you have family members who have different assets that they've got and they've started building up their wealth. Maybe you've seen your parents are with family members who didn't get a chance to do so, so you wanna make sure that you can do it for yourself. If any of those apply to you, then you are listening to the right episode, because I wanna talk you through everything that you need to do, break it down step by step, and also talk you through some of my journey, because I started doing that as well my wealth building journey.

Speaker 1: 1:52

I started building wealth actively, I'd say, because I did it passively as and without realizing it, but actively when I turned 20. That was when I started looking up how to invest. What does investing mean, the different methods of investing. The last episode, I broke down how to actually begin investing, if you haven't already started, for beginners. So I have a listen to that If you want to start investing. I haven't begun yet, but that was when I really took a keen interest in investing. But I'd say I was passively doing so.

Speaker 1: 2:20

When I was in secondary school, I was really big on saving, really big on putting my money away. I didn't really have a goal for it. I was so young, I didn't really have a plan for that money, but I knew that it was important to have money put away for a rainy day. So we're talking about building wealth. We're talking about not only just building out your savings, but building up your assets things that you can rely on and things that can pay you in the long run. That means maybe you don't have to work as long. You know. Some people's dream is to retire early. Maybe it is that you're able to work less as you get older. That's what you want to do. You want to build up assets that you can draw down on as you get older. And also the big key thing is generational wealth Assets that you are building to actually be able to pass it on to your kids and their kids and keep going down that generation.

Speaker 1: 3:05

I love beginner stats because it really just puts things into perspective. If you're a GenZer, then you are doing really well, because a report done by the Royal Mint. They did a GenZer report last year, in 2022. And it showed that eight in 10 GenZers are actively investing and 57% of those people are putting away around 200 pounds a month into investing. Now that is one part of wealth building, but I think it's really cool. I mean, we've come from a place where investing was almost just for the people who had loads of money over on Wall Street, and if we didn't have less than 100K, you didn't know how to invest and you weren't kind of brought into that world. Now it's become so much more mainstream, so much more accessible, that people can get into investing. But let's start with what we need to do the basics, because we don't jump into investing straight away.

Speaker 1: 3:51

Number one when it comes to building up your wealth, you need to start with a budget. Now, if you're not new here, you know we talk about budgeting all the time, and the reason is that wherever you want to achieve, you need to have a core budget in place, because when it comes to building wealth, it begins with knowing where your money is going. Creating a budget helps you to track your income and expenses and also identify opportunities where you're actually able to maybe put away some more money into saving or investing and do that a bit more effectively. So, number one if you haven't already, make sure you are budgeting. Use a budget spreadsheet. Use apps like Emma. Whatever means you want to do, make sure you're doing that to actually create your budget.

Speaker 1: 4:31

Number two eliminate high interest debt. Now, when we talk about debt, the third thing that comes to a lot of people's minds if you went to university is student loans. Now, I'm not talking about student loans. Student loans is completely different. We released a TikTok and Instagram reel recently talking about student loans and that being a debt, and I think the easiest way to explain student loans is just to see it as a student tax, in a sense of. In America it's quite different. You take out a student loan and that is physically a loan that you need to figure out a way to pay back and that goes with you for the entirety of your life until you pay that off, right. But in the UK we are fortunate enough that it's almost like a tax. So once you start earning over a certain amount after you've graduated, you only pay back 9%. What depends on what plan you're on? You only pay back a percentage over that income and after 30 years or 40 years, depending on what plan you're on that gets completely wiped and written off. So student loans are the kind of debt we're talking about here.

Speaker 1: 5:26

We're talking about other debts. So we're talking about overdrafts. We're talking about credit cards. We're talking about loans Anything that you taken out on credit. You wanna try your best to cut that down and eliminate any high interest debt, because anything that's high interest means it's gonna cost you more money in the long run to pay back. Because if I have a credit card and I've maxed it out to 3000 pounds, for example that's my limit and I've got a 49% interest rate, that is just a hell of a lot more money that I'm gonna pay back in the long run and it's not worth it. So if you can try your best to pay more than the minimum whenever you're repaying your debts and try and cut down anything that is really high interest. Number three if you are not new here, you will know emergency funds are very key because when it comes to building wealth, you want to make sure that you've got a financial cushion to fall back on, because life is so unpredictable, we never know what's around the corner.

Speaker 1: 6:20

I recently had it I think I mentioned in the last episode where my car broke down. I was driving down, I was coming back from Liverpool, I was doing a talk in Liverpool and I was driving home. It was about four and a half hours and an hour and a half into my journey. My breaks, my car breaks just completely gave up on the motorway, the most dangerous place for it to happen. Thankfully I made it back safely, but that was something that I just did not plan for. My car was completely fine and then it just gave up on the motorway. Having an emergency fund meant that as soon as I got back home I was able to book my car into the garage and lean on my emergency fund financially to be able to pay for that repair and night expense.

Speaker 1: 6:55

When it comes to build up an emergency fund, you want to have at least three to six months worth of living expenses. People say wages. I think it's good to actually put it down to living expenses. So how much do you actually need to survive? If you were to lose your income tomorrow? How much do you need? How much do your bills, how much your outgoings? How much do you need just to live and feed yourself, work that out and try to have three to six months worth of that amount into there, and it also means you won't have to dip into any investments that you have built up, because we wanna try and build up our investments for the long run. So your emergency fund should be that liquid pot of cash that you can lean on and things like what happened to me your car breaks down you can lean into that and not have to cash in on any investments. You can leave that to grow and compound over time. Now we're getting to the meats and the bones of it.

Speaker 1: 7:39

Next thing you want to save and invest regularly. Now the key component and the key word here is regularly. I want everyone, as you're listening, to figure out what is your regular amount. How frequently do you want to save and invest? For some people, it is daily. They want to save daily, right? You'll know if you follow Penny's Pound on social media that we have monthly saving challenges and those usually mean that you put away a daily amount into savings. We do that to help you to build up the habit of saving, but for some people, putting away a pound every day is the way that they like to save. For others, like myself, I like to do monthly. Whenever I get paid on, payday is the best day for me I will figure out how much money I'm putting away into saving and investing. Some people it's quarterly, some people it's annually. Whatever your regular timeframe you want to use, you need to figure that out and stick to it, because that is the only way that you're going to grow your wealth.

Speaker 1: 8:34

A really good way that I do it as well is I automate my processes. So when it comes to saving, when I was in my first job at 16, I set up a selling order and that is basically where you tell your bank so your current account, for example a set of instructions for it to move money from one place to another. So I told my current account to move five pounds every Friday from my main account into my savings account, and that has been going. I'm now 25, so it's been nine years that has been on. Five pounds moves for every Friday into my savings account. Obviously, I save on top of that as well, but again, it's automated in that process. I've forgotten it's there, but because it's so seamless, I've left it on. That's automated it for me when it comes to my investments now. So I invest into many different places, but I have investment funds, which you've covered in the previous episode. But with my investment funds, I put in an amount every single month and that is done without me. I set it up once and I completely forget it and it comes out of my accounts and goes into my investment, so that way, I'm able to still grow my wealth, invest, build my savings up, without me having to physically be there and say, oh okay, I need to remember today to save and invest, because we're human. Things come up and you're gonna forget, but you wanna try and grow your wealth or to make it, or to make your savings and investments.

Speaker 1: 9:50

Next step is when it comes to actually investing we touched on this in the previous episode as well is to diversify your investments. So, with the rise of social media, investing has become more mainstream, like I mentioned, and you will see people so laser focused on one thing we saw during lockdown there was this rise in cryptocurrency and everyone was putting all their money into cryptocurrency and some people became millionaires lucky them but then others unfortunately lost all of their money. Now the reason is they took so much risk putting all their money into one investment asset. If they had diversified their money so, for example, they put a little bit into cryptocurrency, a little bit into investment funds, a little bit somewhere else even if the cryptocurrency that they invested in did tank, they wouldn't have lost all of their savings because they would have diversified their investments into different places. So the easiest way to put it is you want to put your eggs into different baskets. Now, the baskets that you pick are completely up to you, because it depends on your risk level. What I can tell you is how I like to do it. I think that's probably an easier way to see.

Speaker 1: 10:55

So my investing. I started off investing in an investment fund when I was 20, I put 20 pounds in there and I was investing in an investment fund. Now, investment fund is a fund that you put money into and it gets invested into companies on your behalf. The companies that it gets invested into depends on whatever funds you pick. So, for example, I might pick the tech fund and I pick that, and it'll show you your risk level. It'll show you what companies fall within that tech fund, and then your money gets split up and invested into those companies on your behalf. I'm also sitting there picking and invested into Microsoft and Apple and Amazon. My money goes into that fund and then I get split across all these companies, so I'm investing that way. So I invest in investment fund. I also have an investment ISO, which is going to get into a little bit of a stocks and shares ISO, which is also how I invest through. I also invest into Individual stocks and shares, so there are platforms that like to invest in just one company, so I mentioned there. You know the different companies there, so you might want to invest in just Amazon. You want to buy a few Amazon shares. That's how you would do it. I use a lap called free trade to do that, but there's many different apps like that, like well for five trading two, one, two that like to buy Individual stocks and shares and certain companies.

Speaker 1: 12:08

When it comes to doing that, though, I would say you need to have some sort of prior knowledge into the companies that you're investing into. Maybe it's you work in a certain industry, so you have a bit more knowledge about the companies within that industry. So, for example, prior to starting pennies of pounds, I was working in tech. I was working at Apple, so the tech world felt more comfortable to me because that was just what I knew, whereas you might work in hospitality, your health care, so that industry might be a bit more knowledgeable for you. So you want to pick a segment and a sector that you're familiar with if you're going to invest, or, alternatively, you might want to invest based on your morals and what you're believing, because there are different companies out there who maybe are environmentally friendly and have different causes behind them, and that might be why you want to invest your money into this company.

Speaker 1: 12:54

I also invest into a few bonds, which I think I've mentioned in the previous episode. So bonds are basically like an IOU. So, to put it simply, let's just use a British government, for example. So the UK government might say, really, to raise money to do that, we're gonna put out some bonds. We're gonna put out I don't know a ten pound bond many different ones, by the way but we're gonna put on a series of ten pound bonds so they don't who buys this bond. They're essentially loaning us ten pounds and on that bond it will state a time frame and an interest rate. So they might say we're gonna put out this ten pound bond for two years and interest rate of two percent. So that is the UK government basically saying to you I owe you, you're gonna give us this ten pounds and in two years time I'll give you back with ten pounds plus two percent on top. It's slightly lower risk because it tends to be a safer place to put your money. But again, all investing is risky. Just to preface that, anything you invest in is risky, because your investments can go up as well as down and you may not get back what you initially put in. So it's worth noting that. But again, it's just looking at different places to put your money and put it different places. If one place goes down, you've got other things to fall back on. So it's really important to diversify your investment.

Speaker 1: 14:03

Next one is to take advantage of tax efficient accounts. In the UK, I think the most tax efficient account that we have are ISAs. So ISR stands for individual savings account, and this is a savings account where any money that you get put into it Whether you're saving or investing through an ISR any of the interest that you earn is completely tax-free, and that is tax-free up to the amount of twenty thousand pounds per tax year. That twenty thousand pounds allowance is spread across all ISAs that you hold. So let's say, for example, I may have a lifetime ISR, I may have a cash ISR and I may have a junior ISR. So all of them have different limits, but I'm able to use a twenty thousand pounds across all of my ISAs. So it might be four thousand pounds on my junior ISR, four thousand pounds on my lifetime ISR, and then they have a twelve thousand pounds on my cash ISR, for example. But any money up until that amount, any interest I earn on that money, is completely tax-free. Now it's very important to use that to boost your savings and investments.

Speaker 1: 15:07

Have a look into the different types of ISAs. Have a look into what's going to best suit you and your financial journey. You know, if you're looking to get your first property, the lifetime ISR is almost a no-brainer. It's a place to put your money up to four thousand pounds per tax year and you get a 25% government bonus on top Towards the Perture Welfare property. It's just a no-brainer. If you want to invest, a stocks and shares is also a good way to do it. You're investing into an investment fund and any interest or gains that you earn on your investments again are completely tax-free up until that limit. There's cash ices for regular savings. There's junior ices for kids and young people. There are so many ices out there. You need to go and have a look and see what's going to best suit you and just take advantage of what is there.

Speaker 1: 15:50

Next step is to be patient. I think the key thing when it comes to building up wealth is that you need to stay the course. Everyone wants to be a millionaire overnight. I promise you, if it was that easy, we would have way more millionaires than we actually do. That just tells you how hard it is to build wealth. It is a journey and it's going to be a long one, but it's a worthwhile one. I'm definitely someone who's very big on generational wealth. I really do want to give that to my kids and my kids' kids. I want my legacy to live on beyond me on this earth. So I know that I have to start from now building up my wealth and staying that course.

Speaker 1: 16:29

Don't let anything short-term deter you. You may see investments fall a bit and dip a bit. That is just how the market works. You may even see your savings go down a bit because interest rates fluctuate up and down, and then what's going on in the economy at that time. Don't let any of that distract you from what you're trying to build. Think about the long-term goals, think about staying in the course and think about being consistent.

Speaker 1: 16:51

Next, I then say would be to set clear financial goals. With anything in this life, having a purpose makes it easier for us to stay the course. I know, if I had to start saving tomorrow, someone said, right, here's an amount and you've got to save it every single month. I will probably do it for a period of time. But if I had no goal I think at some point I'm human I probably would dip into it and say I'm just going to spend it a bit because I have no clear focus. I'm just going to spend it for the now because I'm not really thinking about the long term. There is nothing long term that I'm working towards. However, if someone gave me an amount to save every month, I said here you go, kia, here's money to save every month and your savings towards your first property. Now I've got that clear vision as to what that money is for. I'm going to be more disciplined and say no, I'm not touching that money. I know what it's for and I want to keep growing those savings For you.

Speaker 1: 17:42

Make sure you're setting clear financial goals. Your goals don't need to be massive. I feel like we always talk about massive goals and I know I definitely emphasise it. You want to buy your first property, you want to get a nice car, but your goals could be small. They could be just reaching a certain amount. It could be. I just want to have I don't know £1,000 invested. That's what I want to have.

Speaker 1: 18:05

Whatever your goal is, just have that clear financial goal, and I think the good thing about goals is that the goalposts can always move Once you've hit it. If your goal was to have one thousand pounds invested and you reach it after a year and a half, you can move that to now having three thousand pounds invested and then five thousand and ten thousand. The goalposts can always move. However, having a goal keep you on track and keep you disciplined. Discipline is always the big thing when it comes to finances. It is about putting money away and not being tempted to touch it. Your investments can't grow and compound. Your savings can't earn interest if you are constantly removing it and taking away. It needs to stay in and stay the course. So you need to do the same, and financial goals will help you to get there.

Speaker 1: 18:45

Next step is to plan For your retirement now. Everyone's Retirement dream is different. You know the age you want to retire and what you want your retirement to look like. It's all gonna be different, but regardless your age you're only 20s and 30s. I want you to listen to this and have a think about what your retirement looks like after this podcast. Sit down with yourself and say you know what. What does that look like for me? Because in the UK, the current retirement age is 68, but if you are within that remit, like I said, 20s and 30s, I'd like you to be a lot Higher and older for us once we get there, right, but right now, 68. Think about it. Is that the age you want to retire? And when you do retire, how do you want your retirement to look? Are you someone who's going to travel a lot when you reach that age? Are you someone who wants to be mortgage-free? Do you want to be able to help your kids and your grandkids financially? What does your retirement look like? Because that's all going to shape what you do and how you invest from now, because investing early means that you can put in less now, but I say with the compound and grow over the long run. But I know I've had a very big think about my retirement, and I say this whenever I do talks Is that my retirement is going to be me on a beach somewhere sipping peanut collarders and just enjoying my life. I definitely don't want to retire at 68. I want to retire a lot earlier than that. But that now means that me, at 25, I need to work Harder and have more goals in mind to make sure that I can reach that earlier retirement. So if earlier retirement is something that appeals to you, if you want to actually enjoy a bit more of your life and I have to work as long you might want to think about that now, because I will again factor into what you do, your finances, where you invest and how long you invest for then.

Speaker 1: 20:27

Lastly, my last tip would be if you need help, please do seek it. Seek professional advice right. Listen to this podcast is great and I'm so happy that you've all listened to it and hope you've taken some gems and some tips that you can use. But if you want something specifically tailored towards you you have some questions about your finances do seek financial advice. There are people out there. There are financial advisors and people who can just help you to get a better understanding of your money. And as your wealth grows, you know, you may get to a certain point and you may say, wow, I've got a lot more money now Saved or invested. I don't know if what I'm currently doing is the best thing for my money. That is where financial advisor can step in and help you out, so they're not as expensive as they used to be. There are people who are quite budget friendly, I'd say, and we'll be able to give you a better insight Into your money. So really do seek financial advice if you need it.

Speaker 1: 21:22

Building wealth is so crucial when you're in your 20s and 30s and beyond, not just in that age group, because it's the time where you probably have the least amount of responsibilities, so you can do a lot more with your finances. I also want to say that this shouldn't mean that you now completely stop doing everything that you enjoy right now, just for the sake of Future. You right, I'm not saying don't ever go out, don't ever party, don't ever go in restaurants, because I definitely do. I believe in enjoying your youth and enjoying your time whilst we're here, but also being smart with our finances in the future so we can still continue that enjoyment. So it's all about finding that balance for yourself.

Speaker 1: 22:05

I hope you have enjoyed this episode and it's been full of some gems and insights. If you have, please do make sure you share the podcast with a friend. We will be back with guests very soon, very soon. I'm not sure if I've said it before, but we're currently setting up our studio, our own studio, so we're in a process of getting it already, but I've been ill twice between that, so that is delayed recordings and finishing the studio. But back with guests very soon and I've got some good guests lined up, so I'm very good guests. You don't want to miss that. So make sure you are subscribed to the podcast, share with friend and leave a review if you enjoyed it. Thank you so much, guys. I hope you have an amazing rest of your week. We're back again next week for another episode. Bye.