In today's episode we discuss how you can discover extra money you didn't know existed. Make sure to tune in to find out about the D.E.B.I.T.S model and how it can help you.
In recent episodes Kevin and Christian have been discussing how to discover extra money in your life you didn’t know existed using the D.E.B.I.T.S model. In this episode they look at 7 simple first steps which you can take to begin putting the extra money you have managed to save each month and start making it work harder for you, and begin the Wealth-Building process.
Links and a full transcription of this episode can be found at www.wealthbuilders.co.uk/wealthtalk
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Chris Rodwell: Hello, welcome to another episode of Wealth Talk. My name is Christian Rodwell and I am joined by Mr. Kevin Whelan, founder of Wealth Builders.
Kevin Whelan: Hello Chris, episode 10 I believe, right?
Chris Rodwell: Yeah, here we are.
Kevin Whelan: Tenth episode, tenth country.
Chris Rodwell: That's correct. Yes.
Kevin Whelan: In 10 countries now.
Chris Rodwell: We are indeed. Spreading across the world.
Kevin Whelan: I hope so.
Chris Rodwell: Yes. So Kevin, this episode we're going to start looking at some of the ways that you can begin building wealth if you're at an early stage, so just at the beginning.
Kevin Whelan: Right.
Chris Rodwell: But I think probably relevant as well for people maybe even a bit further down the line. They can look at some of these ideas and perhaps bring them into their wealth building plan.
Kevin Whelan: Sure I mean, when you're in the foundation, which is really trying to apply some of the principles we explained in a previous episode on debits and you find money, then you can immediately put that money to work no matter where you are in your wealth level and you can accelerate your journey literally no matter where you are.
Kevin Whelan: But I know we seem to get a lot of questions from people at the beginning Chris, when they're just trying to get that gravity, that momentum going. Didn't we have question recently from one of our Facebook members?
Chris Rodwell: We have had a wonderful post actually in the Wealth Builders Facebook group this week from Adrian [Coger 00:01:25]. And shout out to you, Adrian, if you're listening, which I know you will be, and Adrian posted that he had listened to the podcast episode on debits that we did, which was episode four. If you haven't checked that out have a listen to that after this episode.
Chris Rodwell: And also we've been sending out a lot of blog posts over the last few weeks which have also gone into more detail around the debits model.
Kevin Whelan: Right.
Chris Rodwell: Debits is all about finding money and what I've-
Kevin Whelan: Finding money, it's the creation stage. And also at Wealth Builders we create, we build, we protect. And this is about the creation stage for people who sometimes would hold back, they'll say “You know, I'm never going to get to this place of financial independence because I don't have enough.”
Kevin Whelan: You don't need to have enough, you just need to get started. It all starts like a kid with baby steps. And I think we can show them seven baby steps today can't we?
Chris Rodwell: We will do. We will do.
Chris Rodwell: So Adrian posted and following the debits model not only managed to reduce the car renewal by about three hundred pounds annually, but is now saving an extra hundred pounds a month just by going through and finding little things here and there that he was paying for which he no longer needs.
Chris Rodwell: So things like pipe and drainage cover.
Kevin Whelan: People buy insurance in all sorts of different places and they often get added on. Like the washing machine insurance, the iPhone insurance, the extra insurance on this or that and when you find out you're over covered, well you just really don't value it. It's something you can quite confidently eliminate as long as you find something else that you'd rather spend the money on.
Kevin Whelan: Adrian's not just done a good job of looking into it but made it an assessment of what's important to him and that's just as important of all process.
Chris Rodwell: Yeah. That's it. And I think it's always interesting just to hear some of the savings other people are making 'cause it might just ring true in your own mind of like a magazine subscription or something that you used to use which you no longer use and that money can certainly be reapplied in wealth building ways.
Chris Rodwell: And if anyone wants to perhaps leave a question, so Adrian's posted in the Facebook group, but we also now have the ability to record any questions that people might have that they want to ask us from the WealthBuilders website. So wealthbuilders.co.uk/wealthtalk. Not only can you review all of the episodes and all of the transcriptions, if you prefer to read, but you can click a button there, a bit of software that we've put on the page called SpeakPipe.
Chris Rodwell: When you go to wealthbuilders.co.uk/wealthtalk you will see an orange button, and you'll be able to click that and leave us a question. And I know a couple people are mobile recently have said it's a bit tricky, so just to be clear, if you're on mobile, and the button doesn't allow you to record you just need to go into your settings for your web browser, whether it's Safari or-
Kevin Whelan: Safari on an iPhone-
Chris Rodwell: Safari often on an iPhone and then just enable the microphone and then it will let you leave the question.
Kevin Whelan: Got it. There you go, well let's hope for more questions, but of course the benefit of sharing the question on the WealthBuilder Facebook group is so that people get to see the question and interact with you which is a great place of sharing anyway. But just in case you get that burning question, fire it off and give us permission if it's a great question, to share it with others too.
Kevin Whelan: SpeakPipe, right?
Chris Rodwell: SpeakPipe, that's the one.
Chris Rodwell: So I guess the question is, once you've gone through debits and you've got this extra money in your life like Adrian, few hundred pounds now-
Kevin Whelan: A hundred pounds.
Chris Rodwell: What do you do?
Kevin Whelan: Well whether it's a hundred pounds or whether it's 50 pounds or whether it's 25 pounds, a hundred quid is a good job so hat's off Adrian, you've done a good job.
Kevin Whelan: There are many things that should be done, or could be done to enable the feeling of progress as far as your wealth building journey is concerned.
Kevin Whelan: Now remember we're trying to accelerate people to move forward from one level to the next. So once they've identified their level, say it's financial security for example, and they want to move forward towards financial security, then one of the ways to do that is to stop going in reverse.
Kevin Whelan: If we give seven examples, number one would be reduce or eliminate your debt. And while you go through the debits, the point of the D is to identify your debt, but to isn't always possible to eliminate the money, or eliminate the debt or reduce the debt, unless you found money to so do.
Kevin Whelan: One of the ways to do that is if you've got credit card debt for example, is there's a process we use called marshaling the forces. One of the secrets in my earlier book Save a Fortune goes into that in some detail, and I guess you could post link to that.
Chris Rodwell: Yeah, we've actually done a book post as well so we mentioned that.
Kevin Whelan: Right, okay, cool.
Chris Rodwell: I'll put that in the show notes.
Kevin Whelan: So that just helps you to almost accelerate the way any kind of credit cards can be moved from the highest cost debt, get rid of that one, then get rid of the next one, and get rid of the next one. And what that does is two things.
Kevin Whelan: One, it gives you a feeling of momentum, and two it's starting to reduce the monthly cost of that total debt, so you feel like you're making some progress.
Kevin Whelan: And also some people are a bit worried about the size of their mortgage, Brexit, or many other things, so you can even send, if you take a hundred pounds, that's reasonable sum of money. You could parcel that up into different things and say, I'll pay 50 pounds a month off my debt, off my mortgage, off my credit cards, and I'll build the 50 pounds by using that money to grow something.
Kevin Whelan: And one of the easiest things to recognize, especially for those at the very beginning of that journey is to build some form of emergency fund.
Chris Rodwell: Right. And this is number two.
Kevin Whelan: It's number two. So getting an emergency fund is really important if you're at the beginning of your journey so that if something goes backwards again, whether it's a big bill that comes through your door which you can't eliminate, you might shop around to get it cheaper, but your boiler breaks down, okay, shop around and get the best price, but if it breaks down you've got to pay for it.
Kevin Whelan: So building an emergency fund is a really good thing to do if you haven't done that. And usually we'd suggest somewhere around three to six months worth of your normal expenses would be a good place to have. And don't worry too much about what the interest rate is, don't worry too much about making that as a way of building wealth, just use that as a sum of money as a cushion, as a safety blanket, something to fall back on so you feel like that's locked in, and then anything over and above that, if you save a hundred quid a month and you need a thousand pounds, build a thousand pounds and then once you've done that, go off and build to the next level.
Chris Rodwell: What would be the third in our list, Kevin?
Kevin Whelan: Well the third one is a point made by Adrian actually, it's that sometimes when people get to a place where they've taken on a new mortgage or they've done some things they don't always realize that while they may have eliminated the insurance on their pipes and drains, right? Well what about the life cover for themselves.
Kevin Whelan: If they've got debt or they've got a young family with kids and a wife or the other way round, it might be important to get that life cover in place and it can be only a few pounds a month. So someone who's got a hundred pounds a month, a few pounds a month to protect themselves so that if anything happens to them, either through illness or death, then their income is maintained, then that could be a really valuable thing to do.
Kevin Whelan: And bear in mind also, Chris, that most of our WealthBuilder students are on their way to creating some form of business. And once you're a business owner of course, you can buy that life cover as I mentioned on a previous episode, with tax relief.
Kevin Whelan: So you're just getting a double bubble there. You're getting a reduction in price for tax relief and also you're protecting your family. And as you build your wealth of course you would use the cover so that it's never a permanent thing. Insurance is always something to review.
Chris Rodwell: And that's called relevant life insurance.
Kevin Whelan: That's called relevant life, yeah. And that's definitely one of the things that I would recommend anybody looking to either with our team or anywhere else where they're getting advice in order to get that cover, get it in place, protect themselves and where possible get that tax relief if it's appropriate. Sometimes it isn't and that's fine, but when you become a business owner, which we want everybody to be at some point, I think we'll talk next episode maybe about business and about the leverage of business, then business ownership is a key objective at some level when you're building your wealth.
Chris Rodwell: Yep. We always talk about the wheel of wealth, it always begins with education, doesn't it? So it's always about understanding what's possible.
Kevin Whelan: Yeah. I mean, I suppose number four we could say then if you have recognized the desire to build wealth now and you're just beginning to get a feeling for what asset is the appropriate one, then you could just simply start investing some of that money in yourself. And use that to build and education, just picking up on your point there.
Chris Rodwell: Right.
Kevin Whelan: And that education would then equip you to create more wealth in the future. So we know that the wheel of wealth begins with education, it always starts there. So you have to get your education from somewhere. Now sometimes you can use other assets to pay for it, but if you don't have any other assets, well you've got a few hundred pounds a month, or a hundred pounds a month you could probably get access to some good education for a fraction of that if you're looking for it in the right places. We're well connected any of the different assets people could use to build their wealth ad that would be good place to start to let us know what you're interested in, and we'll try and help you find that education at the lowest possible cost.
Chris Rodwell: Yeah. And the WealthBuilders Facebook group is a great place just to post and say hey, I'm interested in this, does anyone have any experience or knowledge? And I'm sure many, many people will be able to reach out.
Kevin Whelan: Yup.
Chris Rodwell: So point number five.
Kevin Whelan: Yep, point number five I would say, one of the obvious places to begin thinking about building some wealth is to make some kind of an investment.
Kevin Whelan: And while on a previous podcast we talked about some of the risks that people take in investments, being sure to understand the risk they're taking. An easy place to start, Chris, is with some form of index tracker fund. And the reason why I suggest index trackers is because, number one you're investing in the market generally.
Kevin Whelan: Number two, trackers are very, very low cost. Particularly if you use something called ETFs.
Chris Rodwell: Mm-hmm (affirmative).
Kevin Whelan: Now ETF sounds funny, it sounds an odd bit of a wealth language thing, exchange traded funds. Exchange traded funds. It's just a way to be able to buy access to the world of investing, usually at a fraction of the price it costs when you're buying it through conventional funds.
Chris Rodwell: And you don't need a broker. You can just go online-
Kevin Whelan: You can go online and do that, and there's a whole host of web sites where you can use online. Actually some interesting news coming, not for now, is we're on the verge of creating our own platform to allow our own investors to invest so, so cheaply, in way that just gives them access to incredible value. But watch this space-
Chris Rodwell: Wow, breaking news.
Kevin Whelan: Breaking news, yeah. I'm close to doing that but not quite yet, but certainly wouldn't matter. Look to invest money in low cost, in trackers or ETFs.
Kevin Whelan: The other value of course in investing in regularly, monthly, for example, whether it's a hundred pounds a month or a fraction of that, doesn't have to be the whole sum as I said, is you participating in something called pound cost averaging. America they call it dollar cost averaging. The principle there is the risk in the market is always. as I said on a previous episode, markets tend to rise very slowly and then fall very quickly.
Kevin Whelan: When you're buying monthly, then you're buying the units in the fund or the units in the ETF at different prices each month. So if the market falls, you end up buying lots more units so if the price of a share, let's say, was a pound, and you invested a pound in that share, you buy one share.
Chris Rodwell: Mm-hmm (affirmative)-
Kevin Whelan: If it falls to 50p, you might go oh no, woe is me, 50p, I've halved the money but no, if you're buying every month then you're buying twice as many units the following month and then you carry those units forward when the markets change again.
Kevin Whelan: So while it's not a fool-proof method of building wealth because remember you're parking your money in a market, you're not really in control of that but the long-term value is that the markets will generally produce a positive return and more so than inflation. So, if you're in doubt just buy a low cost set of trackers.
Chris Rodwell: Yeah, and very liquid, you can get your money out.
Kevin Whelan: Yeah that's the other point of course you should always think about investments for the long term, but there is some liquidity there because you can buy and sell instantly, there's a whole market for that.
Kevin Whelan: But just bear in mind that if you're trying to think about that as a savings' vehicle it's probably not ideal. Probably more suited to something, probably not the lottery tickets, but maybe the equivalent of the lottery. How about Chris, if I could tell you, you can invest your money in the lottery but if you don't win I'll give you your money back. Does that sound good?
Chris Rodwell: Sounds like good deal.
Kevin Whelan: Well that sir, is called a premium bond.
Chris Rodwell: Right.
Kevin Whelan: Right, and now the premium bond access has come down from one hundred pounds to buy into premium bond, to 25 pounds. Then it means for 25 pounds a month you can buy a premium bond which while it's not really a growth maker, it's not a wealth builder, but it's a place to park emergency money, it's underwritten by the government so as far as we know we would call that gilt-edged, or your money's safe and of course you're participating in a prize draw where you can win a million pounds so that would definitely be wealth building if you got a million quid in one go. However, you don't ever lost your stake. So if you want to get your money back you give a months notice.
Chris Rodwell: Right.
Kevin Whelan: So relatively easy access. No risk at all, assuming governments don't go bust, but then we're all in trouble, but you're getting participation in a draw. And for some people they love the little pleasure of the 25 quid win here and a 50 quid there and a hundred quid. When then I have to say I've got premium bonds myself, I quite like them. My wife loves them. So it's all good fun.
Chris Rodwell: I was going to say, could you then put the emergency fund money in there but I guess if you've got to wait month then perhaps it's not quite as accessible as you may need it?
Kevin Whelan: Well, it's a great point Chris, but remember most emergencies you have in your life don't need to be responded to instantaneously. And you can get your money, if it takes a month, well if the boiler broke down, you could still probably pay for it on the credit card but then use the premium bonds to pay for the credit cards.
Chris Rodwell: Good idea.
Kevin Whelan: So it's an interesting perspective to be able to do that.
Kevin Whelan: So we've got get the wheels going forward so we're not going in reverse, get rid of the debt. Build an emergency fund, protect yourself and because you're the machine that cranks the engine that turn out the money, if you're a job owner and therefore being sure that that money keeps coming if something happen to you is quite an important thing, invest in trackers maybe, certainly get an education, if in doubt use the lottery ticket, no use the premium bond.
Chris Rodwell: Yeah.
Kevin Whelan: But there is one more, Chris, which is, I would say that one of the ways you can build wealth is to get the leverage of the relationship with somebody else whose values you share, whose products you recognize and appreciate, where you could make some money by being a referrer.
Chris Rodwell: Mm-hmm (affirmative)-
Kevin Whelan: And we call that an affiliate program. And there are many affiliate programs out there, you might have to pay a few hundred pounds to be trained or to be signed up to those sorts of things but if you truly resonate with something and it provides great value, then why not look into affiliate programs. Lots of people do this with online.
Chris Rodwell: It's such a common model now, even Uber you can share with someone else and you get a free ride, that's an affiliate program so people are using it without even realizing sometimes.
Kevin Whelan: Oh, okay. So signing up for some sort of affiliate program if that works for you and fits in with your lifestyle and it fits in with your wealth dynamic, if you're really well connected, then an affiliate program could certainly serve people who are highly connected. [inaudible 00:18:57] and Blaze Energy for example.
Kevin Whelan: And I know we offer an affiliate program ourselves for those who are really keen and want to be connected to us and maybe more about that in another episode. But lots of things out there that can start then creating a bit of income every month.
Chris Rodwell: Yeah.
Kevin Whelan: And that's further helping you, And one of the ways I like to think about this is you're moving through as we're imagining that our podcast today is really aimed at he beginners in their wealth journey, is they have got a set of expenses they've calculated to be this is what I need to cover my basic expenses. So if you reduce that by looking at your debits, in this case a hundred pounds a month, that's great, but if you're then building some wealth using any of these examples and then say you build a hundred pounds a month in income, then you're taking care of some of your bills.
Kevin Whelan: And you do the next one and you're taking care of more of your bills so you're stair casing your way from insecurity to security to then free you to get involved much more into the bigger sources of leverage where you can massively accelerate and that's when you're getting into different programs, different investments, property and some of the other investment pillars that we've talked about on previous episodes.
Chris Rodwell: Yeah. Yeah you can almost turn it into a bit of a game, can't you? And say well how can I create an extra couple of hundred pounds a month and then that's going to pay off this area-
Kevin Whelan: Exactly. It should be a game because that way you're participating in the game, you're not thinking oh, this is all too hard. So I would encourage anybody to get started. It'd be great to hear that some people have posted something to say that they've done something with their debt, they've invested some money somewhere and they're getting a good return or they're becoming affiliate and they're getting a good return. Be great to hear some news from people as well as questions.
Chris Rodwell: Yeah. So please, if you do have some good news, you saved a few pounds here or there, from following the debit method then please, leave us a message and a question on the Wealthbuilders website and we'll read hat out in a future episode.
Kevin Whelan: Yeah, absolutely, yeah.
Chris Rodwell: Great. That was really good. Thanks, Kevin.
Kevin Whelan: Was an interesting one, wasn't it?
Chris Rodwell: That is so. Next episode, what are we going to look at?
Kevin Whelan: Well I think we talked about leverage, and I think in Wealthbuilder process we talk about F-I-R-S-T, or FIRST, the six ways you can really get some powerful leverage going in your life. Why don't we do that?
Chris Rodwell: Let's do that one. Alright. See you next time.
Kevin Whelan: See ya.