I wish I knew… Managing Money & Investment Advice to my younger self

January 05, 2021 |
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Today I am going to talk about 3 things that I would have told my younger self on how to manage money….and I’ll also tell you about a fourth one which is far better than stashing your savings in a bank account, but just as secure, so make sure you read until the end – and yes, once again I’m touching on the topic of money because between money and mental health, those are 2 topics that seem to be quite taboo to talk about.

I’ll be making these types of things more of a regular occurrence on my YouTube channel and blog to try and encourage others to be a bit more open. Please do subscribe to the channel if you want to see more, and if you’re new and wondering who the flip this guy is – Hi, my name is Pete and I’m here to talk tech and to help anyone either starting or running their own business by sharing my experience of running my own business, although with that said, this specific post applies to everybody…

Firstly, before I start off – I’ll state the obvious… I’m not a financial adviser, I’m not telling you what you should do, so please don’t read this, go and lose a tonne of money and then tell your other half that some guy called Pete Matheson told you to roll the dice….

Right… Money (SHOW ME THE MONEY!)

There are 3 things that I would tell my younger self. Thing 1, Thing 2 and Thing 3…

Thing #1 – Your Pension

This is something that the business owner in me will hate, but it is to make the fullest use of your company pension. Not a single other thing exists where you pay money into a savings pot, and then someone else will pay in more for you – for free!

From 2020, this means that if you pay in 5% of your monthly salary into a pension, the business will then pay in at least a further 3% – for free, maybe even higher depending on their own policies!

For business owners, paying into your pension will also reduce your corporation tax bill, so that’s a big bonus and is well worth doing before the end of your financial year to avoid paying corporation tax. This of course sucks for business owners, because that 3% that the company pays in to your employees pensions? Yep – that’s all you.

And this may be obvious to most these days, but you need to make sure that you are factoring in pension payments into the costs of employing people. Things like Pension, PAYE, National Insurance – they all add up over and beyond what a basic salary costs you. Either way, with money now in your pension, it will then be invested to grow your pension pot and give you more money later in life, which admittedly is the downside – you can’t touch that money until you turn 65. In fact the age will probably be pushed back even further by the time you come to claim it, but sit pretty with the fact that you will be comfortable later in life, the earlier you start paying in.

Thing #2 – Profit First

I go on about this thing all the time in my posts – but if you are not doing a process called Profit First on both your personal and business financial lives, then you are missing something.

For your personal life, it helps you pay off your mortgage quicker, puts funds away for a rainy day, lets you splash out on meals out and generally stops you from being one of those people who just racks up a tonne of credit card debt, with no chance of ever paying it off.

In business it’s the same, but without going on about that now, I’ll just say that you should watch the video linked here which talks about that in way more detail. But please please watch it, whether you’re single and living on your own, married, running a business, whatever – it changed the way we looked at our own finances for the better.

Thing #3 – Investments

Pete, oh young Pete. All you need to do is put your life savings into Bitcoin and you will be set for life…. haha! If only it was that easy, in some sort of back to the future, Biff cheating on bets kind of way…

No, We met with a financial adviser after selling the business who suggested how we should divvy up our money. And when I said that I wasn’t ready to hand a chunk over to let someone else invest in the stock market he looked at me like I was crazy. Because guess what’s happened to the stock market recently? It suffered a dramatic crash in March when Covid-19 struck, and it’s also been seeing a similar second round of downturn more recently due to reported second-waves of Covid-19 across the world.

So, guess what’s happened with my ‘investor managed’ pension fund? Diddly squat with all the Covid-19 crashes. In fact I’ve only just gone back into the green by a whopping £104. But what has happened with my own stocks, shares and cryptocurrency that I’ve been able to time across at least one of the crashes? I’ve made around a very decent return on them so far – providing the stock market doesn’t crash for a third time, which it’s quite likely to do still, but hey!

When I say that I should have started investing when I was much younger, I literally mean – as soon as I was old enough to open a bank account, I should have started seriously investing, and leaving my money there. Open up an account with Trading 212, then younger me will get a free share, and full disclosure – future me will also get one too. But you’ll get a free share, which you can then sell and buy whatever you want instead.

Going back to my younger self, I dabbled over the years, I invested in Apple stocks when I was a lot younger and that helped towards my first house deposit.  I was also a very early bitcoin user in the days when 1 bitcoin was around £1… I’m actually certain I have a bitcoin wallet somewhere that has at least 20 bitcoins in it, which by today’s worth would now be over £150k! But it’s unfortunately lost to the graveyard of my old beige computers, when you stored cryptocurrency on your actual PC instead of in online digital banks.

Anyway…

Each month, you should deposit a small percentage of your earnings – something you can afford, the higher the investment of course, the higher the potential returns – but I will say one thing here, investing in stocks can quickly turn into gambling as you try to time the stock market. And there’s an age old saying, it’s not about timing the market, it’s the time in the market that counts.

Each month, buy more shares in whatever companies you think will perform, and put some into cryptocurrency – something like bitcoin, etherium, ripple – there are so many out there to chose from. If you aren’t sure what to invest in – go with the blue chip stocks. What are blue chip stocks I hear you ask? They’re the giants – Microsoft, Apple, IBM… stable stocks that just continue up every single year without skipping a beat, and who are pretty guaranteed to give you a far better return on your money than just leaving it in a bank to get.. .what, 0.5% interest?

If you spend a little more time and can deal with investing in more riskier stocks… Tesla – my God what an incredible ride up and down that has and continues to be – and also an incredible amount of opportunity that stock has to do things that this world hasn’t seen before. If anybody knows me… then they know my love for Tesla. I’d say Tesla is along the lines of Bitcoin as it has the ability to dramatically increase and decrease in price, very quickly.

But continuing on the investments angle, there is also something that has really interested me through all of this learning, and it’s something called Dividend Investing. In short, Dividend Investing is where you buy shares in companies who then pay dividends out to people who own shares. Apple, AT&T, Microsoft – plenty of them do.

For those wondering what a dividend is – it’s basically when a company pays some of it’s profits to their investors. Last month? Coca-Cola paid me £14.75 in dividends. And through all of my investments, I get paid every month by one of those dividend paying stocks. Basically – a “dividend investor” will build up a carefully selected portfolio of companies who pay good, safe and regular dividend payments, and over time your portfolio grows, both from you investing more, but also from the stocks going up in value, but you also get paid more dividends every year.

What this leaves you with is something that all of us would drool at the thought of… reaching retirement with a million pounds in share value… but also being paid anywhere from 20-40k per year in dividend payments. This means that when you retire, you could still be earning a £40k salary, AND have a million pounds in shares AND not have to work.

What else is cool? They’re not locked in like a pension – you could decide to take it all out tomorrow, or next year… the decision is all down to you. So my advice here, to myself… is to buy shares, and don’t ever sell them. Go buy 1 Microsoft, 1 Apple and maybe 1 Tesla stock per month, maybe some bitcoin too, every month, for the rest of your life, and see where you end up.

And lastly…

 

Thing #4…

If you think that all of this sounds too risky and you’re worried that you might lose it all (because there is a chance of it) but you don’t want your money just sat in the bank doing nothing – then have a look at Premium Bonds. Premium Bonds are something which I thought only old people did, but – I guess I’m old now…

They’re like a lottery ticket. You buy one Premium Bond for £25, and in return you are entered into a monthly prize draw, and could win a milliion quid. BUT, Premium Bonds also work kind of like a bank account… because you can take that £25 back, guaranteed. So it’s not like stocks and shares where you put £25 in, and then 2 hours later it could be worth £20, or maybe even £5 because the stock market has dipped. And it’s not like buying a lottery ticket, because you buy 1 ticket for £25, but you also keep that £25!

You can invest a maximum of £50,000 per person in premium bonds, and if you have kids, then you can also open accounts for your kids too. So if you have money that is sat there doing nothing at all in your bank, but you’re too worried about losing it all in the stock market, then go and buy all the premium bonds you can afford, then at least you are in the running once a month to win the lottery.

If you want the money back, just go and withdraw it back to your bank account – no issues!

So yeah, there’s 4 tips that I wish I could tell my younger self, which if I listened to myself would have set me up for life financially. And that is where I come to the end of my lecture to myself…

To those who did want to know more – ask any question in the comments below, don’t forget to use this link to get a free share on Trading 212, and check out this video to learn more about how I use profit first. If you want to learn more about dividend investing – then probably best to listen to someone that knows way more than I do… head over to Andre Jikhs channel where he can make finance video’s actually interesting and bareable to watch!

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My name is Pete and from 2011, I started and grew an IT Support and Services Company from £0 to over £1m in turnover before selling the business in 2020. New video’s on our channel every week! I upload vlogs, tech reviews, how-to / behind the scenes technology videos. 📈 Business Enquiries 📈 Website: www.petematheson.co.uk Patreon: www.patreon.com/petematheson

Disclosures: All opinions are my own. Some links in the descriptions are affiliate links that if you click on, I’ll receive a commission at no additional cost to you.