Master Financial Literacy in 54 Minutes: Everything They Never Taught You About Money!

I spent nine years in investment banking understanding how the top one percent manage their money. I studied finance university and trained as a professional accountant and after all of that I discovered you don't need to be rich, you don't need a finance degree and you definitely don't need to love numbers to manage your money like the wealthy do. You just need a simple roadmap and the commitment to follow it. So in this video I'm pulling back the curtain on everything I learned in the last decade and the exact strategies the top one percent use to manage their finances. This is the only video you need to start building wealth regardless of your starting point. So here's what we're going to cover. First we're going to get brutally honest about where you stand right now, your real net worth, your true income and your spending and whether you're actually building wealth or slowly bleeding money without realizing it. We'll also come up with a very clear plan to tackle any debt that you have. Next we'll get really clear about your financial goals. This is all about the life that you want to build. No restrictions, no holding yourself back. We're going to get really clear and really specific. From there we'll build an action plan around your goals. We'll cover a 12-month plan and also a month-by-month check-in to make sure you're on track. We will then talk about where you can keep your money so that it pushes you towards your life goals faster because let's be honest if it's just sitting in a dead savings account right now then you're moving further away from your goals instead of towards them. We'll then move on to investing because every year you delay is a year you lose freedom. I'll show you when to start, how to know you're ready and why it matters more than you think. And then we'll move on to two of the biggest traps most people fall into. Car buying which is the hidden wealth killer that wipes out savings and I'll show you how to avoid getting ripped off. And finally we'll put the endless rent versus buy debate to bed. How to decide whether buying a house makes sense for you or whether renting will set you freer faster. And it's one thing to listen but it's another to actually apply everything that I'm saying to your own finances. So as we go through I'll share examples, mini quizzes and practical tools to help you put everything into action. If you want to explore any of the templates or the guides that I mentioned they're all part of my financial well-being toolkit which gives you all the tools that you need to manage your money like the one percent. I've left the details in the video description if you want to check it out. By the end of this video you can consider yourself financially literate and you'll have the exact roadmap to build a secure financial base. Okay let's get into it starting with section one understanding your financial now. This is incredibly incredibly important and the very first thing that you have to do. There's a quote that I love if you do not know where you come from then you don't know where you are and if you don't know where you are then you don't know where you're going. And this couldn't be more true when it comes to your finances yet most people ignore this step. Before you can make any real progress you have to know exactly where you're standing today. This is about taking a clear honest snapshot of your money, your income, your spending, your net worth and most importantly the gap between them. I'm going to put some numbers and a tracker on the screen. There are a lot of trackers and tools out there. Use whatever works for you but the key here, absolutely key, is to keep it ridiculously simple. That's the only way you will actually stay on track with this and it won't feel like a chore. So there are three numbers that should live roam free in your head. Your net income per year, your expenses per year and your income surplus or deficit for the year. And you might be wondering why are we doing this on a It captures everything from the one-off expenses, the surprise bills and all those little things that would slip through the cracks if you only looked at this month on month. It's the most honest accurate way to do this. Start with your net income, that's the money actually coming in after taxes, what lands in your bank account. Include salary, any side hustles, dividends, freelancing work, rental income, interest, add it all up across the year. So if you're on a salary take your monthly number and multiply it by 12. Then look at your yearly expenses. You can use an app or just scroll through your bank statements. Look at both the regular bills and the irregular spending you usually forget about. Now subtract that spending from your income. That number you get, that is everything. It essentially tells you whether you're moving forward or you're staying stuck. If it's negative, you're an income deficit, meaning you're spending more than you're earning. Over time that will chip away at your savings, it will increase your debt and it'll pull you further from financial freedom. If it's positive, that's your income surplus. That's the money you have left over. And one thing to add, when it comes to savings and investments, although they're not technically expenses, treating them this way for this exercise and for this step helps you stay consistent with savings because it builds a good habit as you know what you're capable of. And then for the coming months you can aim for more than that. That is essentially your baseline. We'll come on to this in more detail when we're looking at the future 12 months in the forecast. So here in this example we have $4,851 as the income surplus. That's money left over. And the bigger that surplus, the bigger the gap between your income and your spending, the faster you can save, the faster you can invest, the faster you can buy back time, options, freedom, independence. We'll go into all of that in more detail in the coming sections. Now onto your net worth. Net worth, really simple, is everything you own, i.e. your assets, minus everything that you own, i.e. your liabilities. Assets are things that you own that have value, like savings, investments, property. List down all of the major purchases and the value of that asset. Liabilities, on the other hand, are debts and obligations that take money out of your pocket. So think mortgage, think car loans, credit card balances, personal loans. The difference is your net worth. And over time, you want your net worth number to increase and have an upward trend. You want to keep using your income to buy assets because whilst your income is important, income is the thing that buys you your lifestyle, but it's net worth that buys you your freedom. That's why this is super important. It doesn't matter where you're starting today. What matters is that from this point forward, your net worth is just moving in the right direction. Later in this video, when we talk about investing, when we talk about buying a home, buying a car, you'll see this pattern sharp again and again. Every financial decision you make either builds your assets or it builds your liabilities. Understanding the difference properly is one of the fastest ways to start building real wealth instead of just feeling busy with money. And it all starts right here by taking a really honest snapshot of where you are today. Now, one more thing I wanted to include here, which often gets ignored, is your money personality. The way you view life and view situations has a huge impact, whether you realize it or not, on how you save, what you spend on, how you invest, and even what feels safe or exciting when it comes to money. And the more you understand it, the easier it is to build a money strategy that fits around you and that actually lasts and doesn't feel hard to keep up with. There are loads of quizzes online and they'll give you an idea of what your personality traits are. Most of them also suggest action points on what to look out for and things to be cautious of to make sure you're taking the path of least resistance when it comes to managing your money. Here's one that's included. It'll ask you 20 questions and based on the way you answer it, it'll bucket you into one of five money personalities. At a high level, you have the contemporary. This person loves living in the moment. They enjoy spending. They're generous with their money. Then you have the enterpriser, highly goal-oriented, calculated with your spending and always planning ahead. You have the minimalist, which values simplicity and security. They're cautious with money and very laser-focused on building a really strong and stable future. You have the realist, which is practical and they are practical to the core. They prefer safe, steady financial choices that keep them really grounded and protected. Then you have the socialite. They love the finer things. They love making memories with others and for them, money is best spent on things like experiences, celebrations, and pretty much just living life to the fullest. Let me know which one you think you are closest to. It turns out that I'm the enterpriser, which honestly, it made a lot of sense. The quick follow-up advice it gave me based on my result, and these might get you thinking about your own habits too. It was firstly, look ahead with your numbers to make sure you're actually on track for the lifestyle that you want. This is something that I'm actually going to walk you through how to do in one of the upcoming sections. It also said, unpack the details behind all of the financial products. You may be used to doing it all on your own, but bouncing ideas off an expert can't hurt either, which is pretty accurate, I'd say. This specific one is part of my financial wellbeing toolkit. You could also find plenty of other ones online as well. Moving on to section two, having a plan for your debt. This is super important. If you have any debt, then a bit of structure and a bit of strategy can make all the difference. That's exactly what we're going to put into place now. The first thing to get your head around is that not all debt is bad. Some kind of debt can actually build your future if you manage them well. Think about a student loan that lifts your earning potential or a loan that helps you own an asset likely to appreciate over time. These kinds of debts, they can work in your favor and can make you more money. Then other debts work in the opposite way. They cost you money. I'm talking about things like credit card debt, payday loans, short-term finance deals. They all seem harmless at first, but the costs really stack up behind the scenes. Knowing the difference helps you prioritize. If you've got multiple debts, you need to know what's helping you and what's hurting you. Step one, get all the information in one place. Use a spreadsheet, use a notebook, an app. It doesn't matter what you use as long as you're using something to track it. For every debt that you have, jot down the total amount you owe, the interest rate, the minimum payment, the due date, and whether there's any flexibility on that credit card or on that loan like 0% offers or payment holidays. Once everything's laid out in front of you, you can actually see it. You Two main ones. First is the debt avalanche. For the avalanche method, what you're doing is you're taking your debts and you're ranking them from highest to lowest in terms of interest rate. If I click here, you can see how the order of the debts are reshuffled. It's ranking it from highest to lowest based on interest rates. What you do is you put as much money as you can towards the top one that is charging the most whilst you're paying the minimum on the others. Then you work your way down. The avalanche method is the most mathematically efficient way out. It will save you the most amount of money. The second option you have is a debt snowball. For this, you take your loans and you pay off in terms of smallest to largest in terms of loan size. If I click this, you'll see how the order has reshuffled. This is how it goes in practice. You start by paying off your smallest debt first, ignoring the interest rate, and you get a quick win by paying that smaller amount off quicker than you would a larger amount. Then you roll your payments over to the next one and the next one, and that's the order it works. It's a more emotional approach, but it works because it's building confidence by seeing you knock off the loans one by one in order of debt size. If you're sitting there thinking, which one should I pick? Honestly, the one that helps you stick with it. Snowball, if you need motivation. Avalanche, if you want to save money. I personally am all about the mathematically efficient one, especially with high interest rate debt. If it means you end up not taking action, I'd rather you go for the debt snowball. Both are better than doing nothing. And one more practical tip whilst we're here. If you have credit card debt, look into a balance transfer card. This lets you move your existing debt to a new card with 0% interest for a very limited period. It doesn't erase your debt, but it just gives you more breathing room and you can stop interest from piling up whilst you're paying it off. Be mindful of any transfer fees. Just make sure you've got a really clear plan to clear it before the 0% period ends. And finally, to wrap up this section, I wanted to mention debit and credit cards, because how you use them really shapes your financial habits over time. So a debit card spends your own money. It pulls cash straight from your account. And once that money's gone, it's gone. A credit card spends the bank's money. They're essentially lending you money. And if you don't pay it back on time, they're going to charge you for that privilege. If you use this wisely, the credit card, you pay it back on time in full at the end of every single month or your payment period. Credit cards can be a really smart tool because they offer points, they offer cash back, they offer travel rewards, basically free stuff for spending money you were going to spend anyway. So if you're buying your weekly groceries or your train ticket or your recurring phone bill and you already have the money, then using a credit card and then paying it off immediately is a really good move. But, and this is key, if you can't afford to pay for something outright in cash, you probably shouldn't be buying it with debt either. There are very few exceptions in my view, and they are the big pillars. Property, healthcare, education, and anything else that is going to make you more money. Everything else, save first, spend later. Okay, so if you've gone through these sections, you now have an incredibly crystal clear view of where you stand. And now you can look ahead with confidence and a clear direction. Okay, so moving on to the bit that puts everything else into place. It's section three, setting your financial goals. This is unbelievably important because if you don't know what you're aiming for or what you're working towards, it's almost impossible to make the right decisions with your money. That's the first thing. And second thing, where you put your money, whether it's in savings or in investments, it depends entirely on when you need it. So before we dive into savings accounts, investment platforms, stocks, bonds, I want you to hit pause for a moment and take five minutes, grab a pen and paper, your phone, a spreadsheet, whatever you like, and write down your goals. Every single goal that you have for yourself, write it down. Even the ones that feel impossible, the ones that other people are telling you are unrealistic, ones that you might be doubting if you could achieve them, write it all down and don't let anything deter you at the moment. Pause this video if you want to pause it whilst you do it right now. And then next to each goal, jot down a rough idea of when you want to achieve it, a timeframe. This might sound like a small step, but it's everything because the when of your goal changes the how of how you should manage your money. And this timeline matters so much because the longer the timeframe, the more powerful your money becomes. So let's say one of your goals is 20 years away. Maybe it's retirement. Maybe it's funding your kids' university years down the line. For long-term goals like that, you've got one of the most powerful forces on your side, and that is time. And this is backed by a century of financial history. Over the last 100 years, anyone who invested their money into the S&P 500 and held their investments for a minimum of 20 years never lost money. Not once. In every 20-year stretch, the market delivered a positive return. And even in the weakest period, the return was still over 4%, except for one unusual case where if someone sold their investment in 1948 and bought in 1928, they would have returned 2.86% rather than the minimum 4% they would have got in any of the other 20-year periods. 79% of the time, the returns were 8% or higher, and 59% of the time, they were 10% or higher. Why am I saying this? Let's translate those numbers into real life. So if you had invested $100,000 and left it alone for 20 years, a 4.4% return would have turned that $100,000 into $219,000. An 8% return would have turned it into $460,000. And a 10% return would have turned that $100,000, your $100,000, into $670,000. That's nearly 7x your savings. It's about making your money work hard for you and letting the market do what it's historically done to get you to your goals faster. And say, okay, if you don't have 20 years to save that money and invest it, what if the goal that you have is 10 years away, like moving into a bigger place or starting your own business? The data still holds solid. Most 10-year periods in the market delivered really strong positive returns, and in most cases, double digits. There were a few exceptions. If you, for instance, invested in 1998 and sold in 2008, so you held it for that 10-year period, you sold just after the 2008 financial crisis, that would have been a small loss, around 1.4%. But those kind of cases, they're outliers. They're the norm. Now compare that to a one-year holding period. Say you'd invested for any one year. This shows a completely different story. If you're in the market for any one year, you can see the returns are unpredictable, and you really don't know what it will be in any given year. You can make a lot. You can lose a lot. You just don't know. So if you've got a short-term goal, something happening in the next year or two years, the market probably isn't the right place for that money. And then that circles us back to why setting a clear timeline matters. Because once you know when you want something to happen, you can pick the right strategy for that goal. So short-term goals, anything that's happening in the next five years. So this is your emergency fund. This is that holiday that you've been dreaming about coming up. This is Christmas presents, maybe a house deposit that you want to pull together soon. This is all short-term money, and it needs to be in a place that's very safe and accessible, not at the mercy of stock market swings. Then you have medium-term goals. And this is for anything that you're planning or any goals that you've written down that are between five to 15 years away. So maybe a bigger home, school fees, starting your own business. That maybe one day dream that you actually want to turn into a plan. This is where you want your money working a little bit harder. And your chances of riding out the ups and downs of the market improve massively. Your chances of beating inflation, protecting your money's future value, they get a lot stronger during this timeline. So for goals during this period, you want to start looking into investment accounts that match your country's tax rules and your personal comfort with risk. And we'll go into that in one of the sections coming up as well. And then there's long-term goals. So this is anything 15 years and beyond. This is retirement. This is building wealth for your future. This is giving your money the time and space to grow in a serious way. When you're planning this far out, you just have to be investing your money. You're leaving a lot of money on the table if you're not. So for now, for this section, all I want you to do is have your goals written out, all the goals that you want to achieve, the time frame, how many years to get there, and just right next to it, whether it's a short-term, medium, or long-term goal based on the outline I just gave you. Okay, so now we're moving on to one of my favorite sections because we're turning everything that we had planned into reality now. And this is where it all starts to feel real. Up to now, or up until now, we figured out where you stand and what you want. Now we turn that into a practical plan, one that actually helps you build the life you're aiming for. Welcome to budgeting. I know the word alone can sound tedious, it sounds restrictive, but when you really understand why you're doing it, budgeting can actually be one of the most freeing things you can do with your money. And the best way to explain this and to convince you of this is to use a car analogy. So you've just outlined your goals. Think of all those goals that you'd outlined as different destinations. These are the places that you want to reach. Now we're going to prepare a 12-month forecast looking forward. And essentially, that's the road that you're on that will get you to those goals. That forces you to look beyond the next week or the next month. When you can see your whole year ahead, the next 12 months, you start to notice patterns and opportunities that you'd otherwise miss. You spot the bumps in the road before you hit them, like your annual insurance renewal, like holiday spending, or that wedding you've got coming up in August that is abroad. What we'll also have is monthly check-ins. Those are like the dashboard inside your car telling you how fast you're going, whether you've got enough fuel, if you're drifting off course. Without a map, a road, and a dashboard, you're just driving aimlessly. You're hoping you'll end up somewhere good. And we've all seen how that works with money. It usually doesn't. So how do we go about this? The first is creating your baseline. Essentially, this is your what happens if I keep going like this plan. You take what you know from the last 12 months, your income, your spending, your habits, and you project it forward into the next 12 months. Once you know what your year looks like, you can then start doing something about it. So now we're going to split the savings and investments off separately. We're doing the savings and investments first. This way, you can tweak the forecast until all of your surplus that you may have had before is allocated ahead of time. It isn't something that just happens as an afterthought. And once you've done that, you ask yourself the strategic questions. This is where you ask your questions like can I shift more money into savings or debt repayments? Can I cut back spending on areas that I know are coming up so that I can save more? Which spending categories specifically for the things I know I'll have to pay can I reduce? You want to, in this exercise, focus mostly on the things that you know you have to pay. Your needs, essentially. Your essential living costs. Because everything else will fluctuate massively month on month. These are the expenses that you know you can reduce and will have a really big impact over the course of 12 months. And I want to go into more detail for a second about some easy wins that can make a huge difference. So one of them, utilities, cell phone, home internet. Everyone has to pay them. You definitely need these things. But what you can do is just compare the same packages with other providers and use that to negotiate your package to make sure you are getting the absolute best deal on the market. If you call them up and ask, they are very likely going to do something for you because they'd rather keep you as a customer than have you leave for a competitor. Another category, easy win, groceries. You can decrease your spending by looking at different stores around you. Seeing if you can buy things at different places. Buying staples when there are discounts. Swapping your waitrose shop for an Audi or a Lidl shop. It may not seem like a huge difference but if it's something you use regularly, it will stack up over time. The good thing about making these adjustments now after you've done your forecast is that they're very targeted because now you've got a reason. You know exactly what needs to shift and then when we move on to one of the next parts, which is how much you need to invest, then you could come back here again and keep tweaking this until you're happy with balancing the short term, i.e. the next 12 months spending, with your long-term goals. Okay, so once you've mapped out your yearly forecast, the next step is moving on to monthly check-ins. It's these monthly check-ins where you spot little changes. A higher electricity bill, a subscription that you forgot about, a little overspend on dinners out and then you catch them and course correct whilst it's still easy to fix. So what I'm going to share now on the screen is a very simple budgeting framework that I use. You can use whatever makes sense for you but what's really important is just keeping this super simple. So I love the 50-30-20 rule because it helps you visualise your spending by categorising your income or your take-home pay into three buckets. Essentially what the 50-30-20 rule is, is that 50% of your take-home pay should be going towards your fundamental needs. So things like groceries, rent, transportation, everything that you need for your basic living. 30% into your planned spending, things that are nice to have but not necessary like going out to eat, going to the movies, any social plans and then finally 20% should go towards the future you. So this is savings, investments and extra debt repayments. That 50-30-20 allocation is not a hard and fast rule, it's just a benchmark. You can tweak it completely to match your lifestyle but I want to show you how it works with the monthly check-in. Let's say in this instance you put all your numbers into a spreadsheet and you find that your fundamentals add up to 59% of your take-home pay but your target was 50%, your fund spending is 30% and your future you is at 11% but your target was 20%. Now you know compared to your target goals that you have that there are some adjustments that you need to make to stay closer to your goals. Maybe this is the first month tracking and you'll need to tweak the percentages to make them more sustainable for you or maybe you'll find areas where you can tighten your discretionary spending. When it comes to monthly check-ins the three questions I recommend asking yourself when you're doing these monthly budgets is going through your fund and your fundamental needs categories and through every line item asking yourself do I need this? If I do need it can I live with less of it and can I get the same thing for less? When you combine your 12-month forecast with your regular monthly check-ins you're creating a very practical roadmap that guides you constantly towards your financial goals. By the way if you are someone who does not have the time or the energy to build the spreadsheets or the systems from scratch then you can use the ones that I have. They are ready to use and they all come with the financial well-being toolkit. This is an online toolkit designed to give you everything you need from the step-by-step guides, the calculators, the tools, the spreadsheets to take your finances from chaos to complete 100% crystal clarity. What you've seen or the glimpses that you've seen so far is about 5% of what is included in the toolkit. Inside there's a full roadmap that takes you through goal setting, through saving plans, through debt strategies, through investing foundations, everything step by step and it's designed to give you total clarity without all the overwhelm. This is the kind of thing that I would have killed to have when I was figuring out my finances. It's super frustrating that to create a financial plan for yourself or from a financial advisor it's really expensive. So I wanted to build something that takes you through the process where you can create your own financial plan, understand your own finances at literally a fraction of the investment of what it usually would cost. So I hope you love it. If you want to check it out there is a link in the description or you can head to nisha.me forward slash plan and you will see an early bird access code on the website at the moment. The first 500 people will be able to use that code and get a huge chunk off of their toolkit. Moving on to the next section where to save your money. Now let's talk about banks because when it comes to saving your money most people look at it in the wrong way. When you keep your money in a bank account they're not just storing it safely for you in some vault in the basement with your name on it. They're using it. They take out that money and they lend it out. They lend it out to someone buying a house. They lend it out to someone starting a business, someone financing a car and they charge a lot more in interest than what they're paying you to leave it sitting there. The difference, the gap between what they charge borrowers and what they pay savers is called the net interest margin. Just fancy term for something very simple which is just their profit. So when you're earning one percent on your savings and then that money is being lent out to someone who's paying six percent on a loan that five percent margin is essentially the bank's payday and if you're not shopping around essentially for the best rates, if you're just leaving your money wherever it happens to land then you're basically handing them that extra margin for free. You want to keep as much of that as you can. The first thing to do is compare rates. Use independent comparison sites, real ones not just whatever your current bank's marketing page is telling you and when you're comparing think about what you actually need. If you want access to your money at any time look at easy access saving accounts. If you're happy to lock away your money for a little while look at notice accounts where you agree to give say 60 or 90 days notice before you take it out in exchange for a slightly better rate. If you're in the US you might look at certificates of deposit, CDs which also tends to offer better rates as well but remember that money is usually locked in for a fixed period so while it may not be right for your emergency fund it could be ideal if you've got a future expense coming up in the next year or two like a tax bill as well coming up in the next couple of months. My number one tip here don't just look at traditional banks. Online banks and investment platforms as well they're increasingly offering competitive cash accounts. I know that sounds a bit odd using an investment platform to save your money but especially in Europe where traditional bank rates are painfully low these newer platforms can offer much more attractive returns on your savings so we're talking three to four percent interest compared to the one percent you might get from a high street bank. There are fewer overheads for these online banks so they can pass on more of their margin to you as a customer. So that is the savings what to look out for where to keep your savings. At what point do you stop saving and start investing? Section six when to invest but when should I actually start investing? This is the million dollar question sometimes quite literally and I'm going to give you a clear roadmap that balances protection and growth. So step one first up save up to one month's worth of your living expenses before anything else save one month. Think of this as your financial breathing room just enough to help you sleep at night while you tackle the next steps. This isn't your fully funded emergency fund yet but it's just your first line of defense. Then move on to step two and that is paying off the high interest rate debt. Target any debt with interest rates above eight percent that's what I mean by high interest rate debt. Why eight percent? Because mathematically it's very difficult for your investments to consistently outperform this rate after also taking into account inflation. That 20% credit card debt it's literally draining your wealth faster than you can build it. Those high interest personal loans same thing. So paying these off is essentially giving yourself a guaranteed return equal to the interest rate. That's a deal that you won't find in any investment market. And then step three build and invest simultaneously. Here's where things can start happening at multiple fronts. So once you've got that first month's worth of your living expenses saved and you've got your high interest rate debt handled you could then start moving on to multiple fronts. Continue building your emergency fund towards your target and that's usually three to six months worth of your living expenses and you can start investing for your long-term goals at the same time. This approach is so much more motivating than just finishing one thing completely before starting another method because you get to see your progress in different areas of your financial life simultaneously. So maybe 70% of your surplus goes towards finishing your emergency fund while 30% goes towards working for your investments. The exact split depends on your comfort level and timeline but you want to as much as possible keep trying to move forward and that's why I recommend doing them simultaneously after getting to a point you're comfortable with. Now moving on to the next part where we put the money we have in our life towards our life goals and this is section seven. So let's get real about those big dreams you're saving for. Whether it's buying a home, sending your kids to college or sipping margaritas on the beach during early retirement. How much realistically should you actually be putting aside to reach those goals? The trick here is to work backwards. Ask yourself three simple questions. First, what's my goal? We've already gone through this so whether that's a new home, world travel, financial freedom, what is that goal? Secondly, how much will it cost? Put a number next to it. And third, when do you need it by? Five years, 10 years, 20 or 30 years? If you're not sure about that second question, how much that dream or that goal will cost, use an online calculator or even an AI assistant chat GPT to calculate a ballpark figure for you. That's good enough to get started with. Now let's break this down with a real example. So imagine you want to buy a home in 10 years and you need 50,000 for the down payment. How do we figure out therefore what to invest to get you there? Let's play around with some numbers. If you invest 300 monthly for 10 years at a conservative 7% return, you'll contribute 36,000 of your own money over time. But the amount you have available, i.e your investment pot at the end of it, will grow to approximately 50,000. You don't need a lump sum investment today at all to reach that goal. But what if your budget only allows for 200 a month? Then, as you can see here, you need to invest about 7,500 upfront to still reach that 50,000 goal because you're investing less on a monthly basis so you need to put in more upfront if you have that money. And what about if you could only budget for 100 a month? Then, as you can see, you need an even larger initial investment to stay on track to start with. What I'm doing here is just playing out scenarios on how much I need to invest lump sum or monthly based on the rate of return I'm expecting, the goal amount, and the number of years I have to reach that goal amount. And then the beauty here is flexibility. So let's say your big goal is you want to reach 1 million with the same 7% return. The calculator says you need to wait. Your budget from section one that you've done shows you only have 300 a month available to invest. That difference between what your 500 that you need to invest and the 300 that you actually have available, that's your investment gap. Ideal investment amount, 500 a month. That's what you need to hit your goal. Your realistic investment amount, the 300 a month, which is what you can actually afford right now. And then your investment gap, which is the difference, that's 200 a month. That is very normal. There's investment gap in most cases and recognising it shouldn't be discouraging. It's actually a huge step forward because now instead of just saving aimlessly in the hope that you'll get there, you now have concrete numbers to work with and so many ways to actually bridge that gap. You can now think about potentially extending that timeline. So could you reach your goal in 32 or 35 years instead of 30? You could also think about optimising your return. So could you consider investments with slightly higher potential returns whilst keeping your risk appropriate? And we're going to talk about that in the next section. What about start with a higher initial lump sum if you have that available? Or maybe it's just something or a situation where you're gradually going to increase your contributions over time as your income grows. So you're going to direct more towards closing this gap over the years. Potentially you might even be looking at ways to increase your salary. What matters most is that you've transformed a very vague financial goal that maybe you just thought of today and you and now you can track your progress towards that goal. You can adjust and you can eventually achieve that goal. What you'll also need to do is remember to look up the tax rules for the country that you live in and start matching your investments with those rules. I have a video right here. It's another topic in itself about how to pay less tax which you can check out as well after this video. These can significantly boost your progress towards closing that gap because the pay away the more you get to keep. The bottom line here is when you know your numbers your dreams then can become plans and plans have a funny way of becoming reality. Now let's move on to the different investment strategies you can explore to optimize that rate of return for you and your personality. And here's the thing, main thing that I want you to take away. You should not be investing the same throughout your entire life. Your priorities will change, your risk will change and your investment strategy should change with them. For instance when you're in your 20s or 30s and you're decades away from retirement time is your greatest asset. You can afford therefore to take more risk because even if the market drops you have years to recover before you need that money. But as you get older and you get closer to retirement which is when you're going to need that money especially if you're saving predominantly to retire on it the focus starts to shift. You're not just trying to grow your money anymore you're trying to protect it and that's where wealth preservation becomes more important than wealth accumulation i.e wealth growth. So how do you decide what of your portfolio should be preservation and what part should be growth? So here's a very basic way to look at it. Take your age and round it up to the nearest five so it will end in something with a five or something that ends in a zero. Now you're going to take that number and you're going to subtract 10 from it. That is the percentage of your portfolio that should be in bonds and everything else should be in equities. So say I'm 32 that rounds up to 35. 35 minus 10 is 25. So 20% of my portfolio should be in bonds and the remaining 75% should be in equities. If I'm 58 that rounds up to 60. 60 minus 10 half of my portfolio should be in bonds and the other half should be in stocks equities. Then as you age you gradually shift more of your portfolio towards the preservation to protect the wealth that you've then grown and accumulated over your working years. So that's one way to look at it. It's not perfect but it's a very helpful baseline. Personally I wouldn't stop there. Your comfort with risk and your ability to essentially sleep at night when markets get volatile matters just as much. Some people who are in their 30s get anxious with a 20% market drop while some people in their 50s handle it completely fine and with ease. So this is why understanding your own risk tolerance is also really important for building a strategy that you'll actually stick to and not feel like you need to sell when things get bumpy. Additionally on this note one of the biggest dangers I see is concentration risk which is essentially when someone's portfolio gets so heavy on one thing without them realizing. And a big risk here is actually company stock options. So if your company's giving you stock has given you stock as part of your conversation do ask yourself is this becoming too large of a percentage of my overall portfolio and do I truly believe in the company's long-term prospects. Because sometimes if it's too heavily based on that you might want to de-risk i.e. sell a little bit of that and then transfer that money into other investments that make more sense for you. But again this is all about understanding your own risk and your own appetite. Personal finance it's personal. There is no one-size-fits-all answers but you do want to understand what your risks are, how close you are to retirement and your risk appetite and ultimately that will determine how your portfolio looks and what the percentages need to be. This helps you build a sustainable portfolio that makes sure that you're going to be fine no matter what happens in the market. Okay moving on to section nine car buying and how much can you actually afford. With the average person spending 15 to 20 percent of their annual income on their car transportation falls into one of the top three expenses in our daily life with the average person spending between 15 to 20 percent of their annual income on it. Transportation is also one of the biggest wealth drainers so I wanted to make sure we cover this off in the video and we're going to go through what is the most efficient way to buy a car and what guidelines can we follow to make sure we're not paying more than we can actually afford. So let's go firstly through the main rules or the main guidelines when it comes to buying a car and how much you should spend depending on your salary. The first guideline here is a 25 to 35 approach. This method is all about balancing your love for cars if you have one with your other financial needs. If you're more frugal and buying a car doesn't you don't really care what car you drive and you're also on the start of your car ownership journey then according to this approach the lower end the 25 percent of your pre-tax annual salary should be your target for a car purchase. On the other hand if buying a car sits up high in your priorities you're willing to trim down on other areas of your life to accommodate for an additional or higher expense for a car because you love cars or whatever other reason then you may be able to push that budget up to 35 percent of your annual income. So what do those numbers mean in practice? If you're bringing let's say then you're looking at a price tag ranging between 15,000 and 21,000 for your car. If you're on a salary of 100,000 a year then the sweet spot for a new car purchase lies between 25,000 and 35,000 depending on which part of the 25 to 35 percent you fall into. This isn't a hard and fast rule but it's a guideline to keep you from overdoing it. The next guideline you can consider is the 24 10 approach which is a very simple yet really effective strategy when making a wise car purchase. So the 20 that represents the down payment you should be making on your car. So let's say you're eyeing up a 30,000 car that means 6,000 of that should be your down payment 20 percent of 30,000. If you're not able to afford 6,000 then you want to look for a car that's cheaper below that bracket so that you can afford to put down 20 percent of the car price. Next the 4 that represents the term of the car loan. So simply put you should aim to pay off your car loan in no more than four years i.e 48 months. This helps you to reduce the amount of interest that you'll pay over the term of the loan and it also helps make sure you don't end up underwater on your loan i.e owing more on your car than it's actually worth. And then the final the 10 that's the portion of your total monthly income that should be allocated to car expenses. This includes not only your monthly car payment but also things like maintenance and insurance. So say you earn 60,000 a year or 5,000 a month following that 24 10 approach your car related expenses shouldn't go over 500 a month. That's the 10. So to illustrate how all of this works in practice let's consider two approaches. One is a common approach that people often do and then the other one follows a very strict 24 10 guideline. So scenario one let's say you find a car that you love then it's priced at 25,000. You don't make a down payment so you actually finance the entire amount. Your loan has an interest rate i'm assuming of just under eight percent but instead of sticking to a four-year term loan you decide to stretch out that term loan to five years 60 months. So this means your monthly car payments would be just over 500 a month bringing in the total cost of the car the amount that you're paying over the five years to over 30,000 and over 5,000 of that is paid in interest alone. Now let's look at scenario two and for this one you're following the 24 10 rule. So for this you buy the same 25,000 car and this time you make a 20% down payment so you put down 5,000. The interest rate we're assuming is the same so we're comparing side by side assuming an eight percent interest rate but you decide to stick to a four-year term loan 48 months. So your monthly payments will now actually be lower around 488 a month. Not only that the total cost that you pay in interest over the loan drops so instead of 5,400 it's about 3,400 that's almost 2,000 less. If we look at the total impact the total cost of the car using the 24 10 rule it is just under 28,500 compared to 30,000 if you weren't using the rule. So that's the saving you would have and how it would work if you simply followed the 24 10 rule or even a variation of it and then you have the cash approach and that leads me to the third strategy. One of the benefits of buying a car outright is that you completely eliminate the need for financing saving you from paying any interest whatsoever. It sounds simple but depending on the car that you're buying this approach requires a lot of money up front which can conversely derail your emergency fund or any other saving goals that you have planned and secondly the reality is a lot of people don't have a large chunk like 25,000 just sitting in their bank account ready to be spent on a car. So there's a middle ground and this follows the principles of fiscal prudence. One alternative is to buy a second-hand car outright using what you would have spent on a down payment of a new car. So referring back to the previous scenario this would mean spending 5,000 on a car outright. Yes the car you get for 5,000 might not be anything special at all or the latest model in anything but this is about trade-offs and the benefit of delayed gratification because if you look at the second-hand car approach over the four-year term so the same period we were looking at for if you had been paying 488 a month for a new car over four years that amounts to 28,000 in total but instead if you use 5,000 of that to buy a car outright and let's assume for simplicity you save the rest then by the end of year four you would have saved up enough to potentially afford to buy a 23,000 car outright in cash after four years. Again eliminating the need for any financing. So essentially by spending less now you have the potential to afford more in the future whilst also paying less in interest and minimizing your exposure to debt. That is the benefit of delayed gratification and this is the route that I'm currently taking but ultimately these are all guidelines ultimately it comes down to how important is car ownership for you how it fits into your overall budget and overall lifestyle as well. And one more thing to add if you're buying for a car dealership they will do everything they can to fit your monthly payment into your budget without showing you the total cost of what you're paying for a car. It's extremely important when buying a car to always calculate the total cost of ownership all the interest fees the interest the hidden costs. I've got a full video on calculating the true cost of ownership and what to look out for. I'll link it here so you can make a decision when it comes to the financial side of your car with complete confidence. And finally moving on to the last section which is should you buy or rent a home. This is one of the most important questions of your financial life. It is one of the biggest financial commitments you are going to make. So let's cover everything you need to consider to make your decision. We're going to start with the financial things to consider and then we're going to move on to the psychological aspects. And bear in mind this is a huge topic with so many variants and I've tried to keep it as simple as possible to cover the things that you need to consider and how to go about thinking when it comes to this decision. So first off let's talk about the sunk costs. When people think I'm buying a 400,000 home they usually think it's just 400,000 but actually there's so many one-off costs that you pay for the house that you don't get any money back from. There are four main hidden costs or sunk costs when buying a house. The first is property taxes. This depends on your country. In the UK it's stamp duty, in the US it's state-based tax. Second thing is legal fees. You'll need to pay a solicitor to handle things like transferring the ownership, checking documents, sorting out planning permissions. The third is a valuation fee. This is what you pay your mortgage lender to assess the value of the home and then based on that the mortgage provider will decide how much they will lend you. And then there are other small fees which I'll just bucket into miscellaneous which think about mortgage arrangement fees, surveyor fees and these all also add up. So these transaction costs, they're one-off costs, you don't get any money back from them and they could add up to thousands that you would never recover regardless of how your property investment performs. And most people forget about them or they don't really add it up into the total cost but you really need to consider this because it impacts the break-even timeline when comparing buying versus renting. Now if you're renting the sunk costs are so much simpler. You've got your monthly rent so let's say you're paying 1,500 for a one bed in London, that is your sunk cost. You're paying for living but you're not getting money back from it. And then you might have if you're relocating the cost of relocation that's another sunk cost. The next financial cost to consider are maintenance costs. How does it compare between buying and renting? A rule of thumb when it comes to owning a home, take one percent of your home's value and that is the amount that you can spend on maintenance every year. So if your home value is 400,000 then assume 4,000 towards maintenance on an annual basis depending on the age and the condition of your home. Whereas if you rent you are not on the hook for maintenance that is the landlord's responsibility. Sure you need to pay a security deposit up front and that can potentially be held back from you depending on the condition. You return the flat in but you are not actually paying for the ongoing maintenance. Another big thing to consider is the opportunity costs. Before we get into that I want to explain how this works. When you're buying a home there are two big financial costs that you need to wrap your head around. The first is the down payment. That's a chunk of the purchase price that you pay up front straight from your bank account and it's usually around 20 percent of your home's value. So if you're buying a 400,000 home you need to pay 80,000 up front. That's the first one. The second cost is the mortgage repayment. So this is the money you need to borrow from the bank to cover the remaining 80 percent of the purchase price. So in this case the remaining 80 percent of that 400,000 home is 320,000 and then you pay that back over time with interest. So let's say your mortgage rate is five percent and you plan to pay off over 20 years. That means your monthly payment would be roughly 2,100 per month and over 20 years you'd end up repaying around 506,000 in total of which 320,000 is the principal and that's the amount you borrowed and then the remaining 186,000 that's the interest. That's the interest that you're paying to the bank for lending you money. Okay so now I've explained that let's look at the opportunity cost. On the plus side in most cities the value of your home will appreciate. So let's say the value of your 400,000 home grows at three percent per year. After 10 years that house would be worth about 537,000. So you've gained roughly 137,000 in value from appreciation. But on the flip side you had to spend the 80,000 up front for the down payment and you committed to monthly mortgage payments and you could have spent that money somewhere else instead. For instance you could have put that amount that 80,000 deposit and the remaining mortgage repayments you could have invested that same money into the stock market or another investment. If you put it into the stock market assuming it grows at seven percent per year which is the historical average for the taking into account inflation then you would have 157,000 which is a profit of 77,000. But you do still have to think about where you're going to live. What are you going to rent? Because you still have to live somewhere and that's another cost that you have to take into account. Whereas when you're buying you don't have to think about rent because your mortgage is paying off the principal as well which is gradually adding to your net worth as we spoke about in the assets and liability section of this video. So if you're weighing up the opportunity costs from renting versus buying the main question we really want to ask ourselves is what would I be doing with that money if I didn't put it towards a down payment for a house? And secondly what would leave me with more wealth in two years five years or ten years time? This has so many moving parts to it. There's so many costs to consider and I know you've probably heard this so much but this really is so specific to what you're going to do with that money and where you're going to invest it and what house and whatever you buy. Now those are the financial things to consider. There are also psychological things because buying gives you stability and you cannot put a price on that. You won't be asked to leave by a landlord. You can do whatever you want to the house. You can convert the loft. You could drill holes in the wall and you don't have to ask your landlord specifically at least for permission. You can't do that with renting and for a lot of people just the psychological comfort of having a house way exceeds the financial costs or the one-off costs that come with it. Feeling like you have a place to yourself and you won't have to keep moving around and relocating. On the other hand renting offers a huge amount of flexibility. You can move to a bigger place. You can move to a smaller place. You could test out new areas. You could relocate easily and you don't have to worry about fixing anything or the maintenance because that's looked after by the landlord. People might just believe that buying is always better than renting because from our parents generation that usually was always the case but unfortunately it's not the case in this generation. Markets change. Interest rates fluctuate. What worked in the past may not be the optimal strategy today. So if you're deciding between buying and renting hopefully that gives you a framework to think about. Consider your specific financial situation, the market conditions, the lifestyle needs and the long-term goals rather than simply following conventional wisdom. So that is it. That covers pretty much everything you need to know to get started and to build your foundations with financial literacy. You can come back anytime and watch this video again. It will stay on this channel. If you do want to check out any of the tools, the guides, the calculators that were featured in this video they are part of my financial well-being toolkit. This is a toolkit designed to help you manage your money like the top 1% and what you saw today, the templates that you saw, it's about 5% of what's actually included. You get your financial dashboard to keep you on track with your progress including your income, your spending, your monthly check-ins, your debt, your goals, your investments. It's all in one place. You also get access to 10 interactive workbooks that you can tackle at your own pace. The idea is to take your finances from complete chaos to complete clarity. They're filled with quizzes, with self-assessments, with calculators at the end of each section. In there you will find everything you need to build a really solid financial plan that will help you turn your dreams into reality. You can find more information on nisha.me forward slash plan for all of the details or there's a link in the video description as well and there is currently an early access code for the first 500 people. Thank you for watching.