049 - Alan Donegan The Escape Artist

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0 - 40 Hey Guys welcome to the show. We have a absolutely fantastic episode planned for you today we're bringing Alan Donegan on. And then for the first time on the ChooseFI podcast The Escape Artist I kid you not when I say that this is probably the best financial independence blog that you haven't heard of. Especially to our American audience. I have been just poring through the escape artist content over the last several weeks and it is incredibly good stuff. So this is an episode that I think is going to hold a lot of appeal. But I wanted to set the stage and say that we're doing this episode because we got a request from a listener and I will play that request right after this. Hi Guys welcome back to start this episode. We're going to play a voicemail that we got from Sarah.
40 - 127 Hi. I know that you're from America. I'm sure you have lots of readers all over the world. My name's Sarah I'm from England. Just outside of London I wondered if maybe you could get in contact with like a specialist finance FI kind of person in England and do an interview with him about how to achieve FI their country in our country. Because I still think it would be really interesting for those people in America who are interested in maybe moving abroad for tax reasons and for FI reasons for living costs and things like that. And to get an overview of what it would be like to live in different countries tax reasons especially. And I was thinking that that would be really interesting. Also a pod cast that we have here. It's quite good. It's meaningful money. Pete Matthews he's a bit English so he's probably a little bit boring if you listen to him but not for boring English people. We don't really. We're not so happy when we do podcasts But although he's not FI he's certainly still down to earth and he knows everything about the financial situation in England and that would be really helpful so there you are that's my suggestion.
127 - 176 So Brad and I got this voicemail and we were so blown away and excited and we had to look at each other and say I don't know any FI experts that could help us do this UK path to FI except Alan Donegan who is not a stranger to this podcast we reached out to Alan and he agreed to join us to help share his perspective on what this path would actually look like. But he had a suggestion. He said I am actually friends with the escape artist who has a blog over it the escape artist dot me and I was new to Barney who also has the moniker The Escape Artist. I was new to his blog but it blew me away and so we knew after looking into that that yes we wanted Allen to come on the show but we had to have the escape artist come on as well and so we have made the introductions we made that happen. We've coordinated it and now Allen and Barney are here today to share their story and I am incredibly excited for this episode.
176 - 182 Yes so Sara asked in her voice mail for an expert and we have to and with that. Welcome Barney and Alan. to the podcast.
182 - 184 I'm looking forward to this.
184 - 186 Hi guys. It's an absolute pleasure.
186 - 188 So Alan is there any interesting story on how you met Barney.
188 - 223 Yes I was introduced to Barney's Blog by a friend who sent us a link to it as an English resource. And my wife read the whole thing from beginning to end and we got very excited about it. And then Barney actually offers some coaching in England to people who want to get to FI. My wife and I looked at it. He lives not far from where we live so we booked an hour's coaching we went to Bonnie's house. He made us coffee and we sat there talking for an hour and a half about how we could get to FI. And that really helped my wife and I's journey on doing that.
223 - 241 What's so amazing Barney about your blog is. Honestly I had no idea that it existed. And then when I found it as a result of that conversation. This is the first time in a long time that I've done this but I started with the first article and I just started reading my way through it and I couldn't stop it. It was that awesome.
241 - 242 Fantastic that's good to hear.
242 - 247 And you've been even writing this since at least for the last two years maybe three years is that right.
247 - 341 Yeah. I started just over three years ago and I started in my notice period. So when I started the blog I had just recently got to financial independence and I handed my notice in. So I was still sad at work but with not much to do. So one of the ways that I kept myself occupied and amused during my notice period was to start producing some of those blog articles. And you know in those early days the content just tumbled out of my head and onto the paper I was writing an article almost every day at one point because it was essentially 20 years of knowledge 20 years of discovery 20 years of pain 20 years of frustration kind of tumbling down onto the paper or onto my keyboard. And so for writing the blog was just very cathartic. It was a way of kind of organizing my thoughts. It was a way of me transitioning well helping myself to transition from a full on job in finance to to being financially independent. And so it was free therapy for myself and also by sticking it out there into the world. I did have the hope that some other people might benefit from it along the way. It always struck me as amazing that there were these incredible resources this this community this subculture in the USA and almost nothing in the UK as regards financial independence so I guess my blog was just an attempt to try and redress that a bit.
341 - 356 And redress that you did. I am curious how did what was that moment for you when did you actually discovered this subculture and was there any sort of transition in how you are managing your finances or were you already kind of on the path just without knowing it.
356 - 477 I was on that path for years and years and years without even knowing that financial independence was a thing I'd never heard of your money or your life or the Millionaire Next Door. No I was just blithely working earning saving. Learning about investing and being this kind of sort of strange person doing it without an example. Now in about somewhere around 2000 I stumbled across in a bookshop across an obscure book called Invest in yourself and I just picked it up in the bookshop and I started reading it and it was talking about you know how much is enough and can you cut your expenses and the wonders of compound interest. But it wasn't really a full on financial independence book. Alla Your Money or Your Life For example. But those concepts they grab me and I pick that book. I took it home I read it again and again and put some of those lessons into my life. I also a couple of years later had a job where I wasn't happy at all. And that really forced me to think about you know how long did I want to do all this. And it forced me to get serious about my personal finances and saving and I got my expenses way down and I got my savings right way up and just carried on like that for a number of years until in 2003 I stumbled across the moneyvator blog in the UK which is all about investing and with a kind of subframe of financial independence. But it's an investing led blog. The authors produce a very useful weekly roundup of links to other sites and they introduced me to the magic of Mr. Money Mustache and I found that blog. And I devoured it. You know I must have driven the page views stats on that day because I just read and read and read and was absolutely kind of captivated by.
477 - 479 What year did you find mmm.
479 - 480 2013.
480 - 517 OK Barney I'm curious if you could go back to the start. So you've been talking about being a little bit different for 20 years or at least going back to 2000 when you found that book but could you just for the audience compare and contrast yourself with the average citizen of England or the UK or or Europe or wherever you know like what sets you apart. You know we all know that people listening know what keeping up with the Joneses is like here in the U.S. where you see your neighbor getting an expensive house an expensive car and the people try to keep up with that. What is it like in the U.K. What is the savings rate like just just give us a background of that and then what sets you apart.
517 - 800 OK. So it's a great question. And let me go back to the start you know I was brought up in the middle of nowhere can a tiny little village in rural England in East Anglia and in a county called Cambridge and nothing ever happen there and because it was a rural area there wasn't actually that much keeping up with the Joneses. There wasn't that much consumerism. It was kind of a really sort of low key place but I did notice in those kind of early years that my parents they both were salaried middle class professionals so my mother was a teacher. My dad worked for a building company. He was a surveyor and they worked hard. They commuted they had long commutes each day and they often came home late tired with all these kind of war stories about what had gone on in the office. And they were very conventional So they did the classic thing of getting up the property ladder. So they bought the biggest house that they could afford. They stretched themselves on the mortgage. And you know in 1981 we moved and they took on a bigger mortgage and shortly after that happened interest rates were raised to 17 percent by the government to try and tackle inflation at the time and my parents had to seriously tighten their belts they essentially canceled the newspapers. My dad stopped buying beer started to brew his own beer. Our holidays got cancelled and that if you like was a kind of an early lesson for me in a couple of things one is kind of the evils of excessive debt and you know the fact that ultimately if you don't keep up those those mortgage payments they can take the house away from you. And also it was a salutary example that if push comes to shove if you really kind of put yourself into it it's amazing how much you can take out of your cost base how much you can take out of your spending. If you've got a compelling enough reason to do so. So that was a very kind of salient lesson salient example for me. But also at the same time I'd seen in my you know my childhood in this village that I lived in that there was there was this rich family. And they again I'd never heard of the idea of financial independence but they had a huge house and they had lots of farmland. They had antique paintings. You know they had investments they had stocks and they didn't need to go to work. You know they just ran that farm and they were if you like the first example I'd seen of people that were rich and didn't need to go to an office that didn't need to commute they didn't need to answer to anyone they didn't need to take any nonsense from a boss. And so the I was always kind of fascinated by that example. Then later on I went to school I went to college and at college I lived very frugally as as everyone does at university in the UK so I lived on about 3000 pounds a year. And then when I got a job as an accountant in London my first proper job it was this weird thing happened so my income went up from say 3000 pounds a year to 12000 pounds a year. And I was broker. You know I was more broke when I was working than I was when I was a student because you know living in London getting your own place you know the temptations that brings you to kind of go out and all these all these kind of leisure opportunities that are suddenly available to you and your you know you're spending kind of goes through the roof. And so again that was a really early taste of lifestyle inflation for me. And so that was my job as an accountant. So I guess that makes me slightly unusual. I don't claim to be a normal kind of representative member of the public. You know most people are just not that interested in money. And I've always been interested in money. I've always had this kind of fear of ending up poor or homeless or having my house taken away from me probably because of that example I saw my parents when they were over leveraged. And so I've always had this kind of fascination and this fear of poverty but also this interest in. Could you get to a point where you no longer had to commute you no longer had to answer to a boss and you no longer had any money worries. That to me was kind of my Nirvana my kind of dream but I had no role model no no example to show me that that was possible and that that's what we've really lacked here in the UK.
accountant, college, families, stocks, teacher
800 - 812 Both of you guys have made some somewhat unconventional choices in your late 30s early 40s and Alan I'd be curious to hear your take on what Barney was just telling us and whether or not you have a different perspective on that.
812 - 860 So there was a study done by one of the big insurance companies in england about eight months ago and they found that one in four UK families have less than £95 pounds in savings which to put that into context that's about $120 in the bank. The average person doesn't particularly save in this country and I think the culture is you get a job you inflate your lifestyle and you buy a nicer car you buy a nice house. I don't think people understand why I still live in a two bed flat. Even my family in law said when are you going to move into a proper house and that culture of spending more money is definitely strong here keeping up with the Joneses spending more money having nicer cars and people just don't get why you wouldn't spend money and what you're doing with it.
families, insurance, savings
860 - 881 So Allan your family had they been made aware you just said I guess your wife Katie's parents are wondering when you're going to move into a proper house. Do you talk to them about financial independence. Has this ever come up. Talk us through the conversation of what that's like when you speak to your family to your friends about financial independence is it do people look at you like you're crazy even still.
881 - 972 Yes. So it's really quite challenging. They don't get it. And actually like a really recent example of this. My wife has just finished contracting and way kind of getting there. And actually she decided to finish working and she's going to some stuff she loves she's going to learn a bit of data science she's going to help me with my business. And she's decided to keep fit by doing a bit of deliveroo delivering. So sharing food around the place and going cycling to make £6 an hour. And when we told the family that they didn't get it the questions were unbelievable. And even one of the statements was they were saying to Katie what a waste of a good education and that it's not a waste of a good education we're doing exactly what we want to do in life which is to learn keep fit. Have an incredible life talking to amazing people traveling we're doing exactly what we want to do in life. But it is not understood. It really isn't understood and if you're not at work something's wrong. And I think dealing with that and those family communications and how people look at you is really tough. My family don't particularly get me. I think my brother does. He kind of understands. But he lives the total opposite lifestyle and it's really tough. It's really tough. And actually I hang out more with the FI community because I'm hanging out with a lot of people who get me. And you can have open conversations about what you want to do other than what's your next promotion or where is your next holiday.
families, travel
972 - 982 Is there a thriving community that you have locally or anywhere in the UK that that you can actually get together with people you know face to face.
982 - 1012 There is. So for me there is an F I London group on Facebook. I don't really connect with them because after putting on the UK Chataqua this year I shared it in the FI London group and I got a lot of abuse because it was reasonably expensive and mainly it's been a few friends like meeting Barney and like meeting a couple of other people in the UK that I hang out with but I've not found a really strong community to connect with. Barney might have a completely different opinion to that.
1012 - 1090 So there is not a strong financial independence movement or culture or really community in the UK. Now I'm out aliments the London FI Facebook group that that's a relatively recent creation. I think it's a positive step. There's some good guys and girls in that group and I've I have actually gone to a few of the meet ups and there are some really lovely people there and it's kind of a breath of fresh to have those conversations and have those meet ups which are modeled on the Mr. Money Mustache type meetup so that has been positive. But it's tiny. You know we're talking about tiny numbers of people so in that Facebook group there's I think there's 500 members and there's 10 million people live in London there are 17 million people in the U.K. and there's 500 members of that of that Facebook group. So it really gives you a sense for how small the movement is. And for example there are no UK equivalent books to your money or your life. There's no UK equivalent books to the Millionaire Next Door. The culture doesn't really exist over here other than a handful of blogs that have a pretty narrow readership base.
1090 - 1097 That to me sounds like an opportunity. And right now I think I know someone who has popup business school who can maybe help with a startup right.
1097 - 1129 Well it's funny when I stumbled across the Mr. Money Mustache site. I actually wrote a guest post for Pete and sent it to him email. It kind of unsolicited saying look here's an article about financial independence outside of the US and in the UK and kind of the differences between them and he emailed back and he was kind enough to say you should definitely you should definitely start a blog in the UK. It's probably a great opportunity. So I kind of took that advice and that that's part of the reason I did what I did.
1129 - 1194 You know we referred to fi's the subculture but honestly the Strand I see in our community is what if everybody ends up doing this does this still work. And the reason for that is because it's such a commonsense choice. You know when you think about the traditional model of what life should actually look like and you break it down the first 30 percent of your life is basically set aside for the educational process and that's going to more or less remain static across the board. I mean there's probably some progressive people out there that have figured out how to tweak it at the margins but more or less that's kind of locked in. But what's so interesting about our community is really focus on the second leg of the journey. We focus on the working career. How long do you need to be tied to your 9-5 for and while the traditional model says the next 50 some odd percent of your life is going to be tied to your job and then you're allowed to have this small sliver at the end to do with what you want to enjoy to enjoy the quote unquote golden years. FI just flips that on its head and says No let's jack up the savings rate let's shrink that work period into a much smaller window of time and then obviously that's going to open up this post-work period of time to really pursue the things that you get excited about. That would be the deck that I would want to choose from.
career, savings
1194 - 1218 Yes and actually like you might minimize down the working period but there's no reason why you can't we'll enjoy that as well. You spend 30 percent education you really enjoy your 20 percent working and then you're free as well. So I think there's no reason to put off having fun until retirement. You might as well enjoy life along the way. And if you get it if you've got an infinite choice of jobs and things to do you choose one that you enjoy.
1218 - 1225 And what I love about having both of you on the phone is that Alan you talk about doing the work you love and Barney you call it the prison camp.
1225 - 1371 Yeah. So these are two different approaches and they look very different and conflicting at First glance. But I actually think they're more similar than they first appear. So I think you know if I was giving someone advice in terms of choosing a career you can essentially go one of two ways you can either choose a job that you love or you can choose a job that pays really really well. Either of those to my mind are rational choices with the former. You in some ways don't need to get to financial independence ever if you genuinely have a job that you love and you'd kind of almost do it unpaid but you get paid for it. That's great. You've solved the puzzle. Unfortunately the percentage of the population that has a job like that is somewhere around maybe 10 percent. If you look at surveys of employee satisfaction the number of people that truly love their work is that a small minority. So the alternative is to do what I did which is to choose a well-paid job so I didn't end up working in finance by accident. I was like the bank robber when the bank robber is asked you know why do you rob banks. They say well that's where the money is. And I worked in finance because that was where the money was. So for me I chose a slightly different path. I chose a path that would pay me well. But even then I was still interested in the work I was still interested in money. I was interested in. I was interested in corporate finance. I was interested in company strategy. I was interested in the valuation of companies. I couldn't have done what I did. I couldn't have groundout a job for 20 years if I'd hated every minute of it. It just would not have been sustainable. So I mean although I label it the prison camp and you know it's kind of tongue in cheek there were lots of things that I didn't like about my job I didn't like the fact that it was kind of relentless. It was full on. You had to accept really that when you were being very well-paid the company essentially you know owns your time and at any moment you can be asked to drop what you're doing and get on a plane or go back into the office on a weekend. And I had to deal with that. That was the price of the salary that I earned. But I'm a great believer that for some people that makes sense because they're well-paid and they can stomach and maybe even enjoy that sort of work.
1371 - 1391 But I I'm a great fan of what Alan's doing you know which is helping people create a business that provides them with challenge meaning purpose and may over time lead to much greater earnings. But right now it can provide them with something to do with that structure with that challenge and with money.
1391 - 1417 It crosses my mind that practically the opposite of a job that you love is not so much a job you hate but that a job that you tolerate. And I think that's where a lot of us find we find a job that pays well that we can tolerate. I think that's probably the course that many people end up choosing. But then if that's where you find yourself isn't it a tragedy to have nothing to show for just tolerating that job if you're paycheck to paycheck in a job that you merely tolerate. What a tragedy.
1417 - 1466 I completely agree with that. So for me I talked about those two different routes that made sense so get a low paid job that you love so ok. Be a nurse be a teacher be kind of struggling actor. You love it. You know you don't get paid well perhaps but you're getting that joy that fulfillment that meaning that purpose that makes sense to me that makes perfect sense to me equally. Working in finance and pulling down a big salary and banking those bonuses because you know that there's an end in sight. That's a rational strategy to me What's insane is that middle ground where you just get kind of an office job that you can tolerate and it slowly eats away at your soul, but there's no escape route from it. There's no end in sight and there's nothing to show for it. That's madness.
banking, teacher
1466 - 1500 Bernie I love the way your mind works it's almost identical to how I think about it which is the strategic standpoint and both of those you're absolutely right there. They are perfectly rational. I Chose certainly the latter. Where I found a job that paid pretty well and I could tolerate it but it was with the goal of getting out as soon as I could. So I think in a perfect world scenario I would love my job. But yeah unfortunately that wasn't to be. But now it's in the past and dad was a rational strategy for me. So it worked out quite well. And then I'd love to hear your thoughts on this topic as well.
1500 - 1561 So I guess my thoughts are it makes perfect sense to go and get a job that earns you lots of money. So I don't think it's always mutually exclusive. I do think you can find work that you love that does pay well. There are people who do it it's just not the norm. I do think a lot of people just settle they settle for these are they only jobs that are around me. Well these are the only jobs that I can find and there's always other options such as creating your own work. Moving to a different place finding a company that truly believes in stuff you find. I don't think they're totally mutually exclusive. I think it's rarer than finding a job you can tolerate and making lots of money. I do think it is possible to make money doing something you actually enjoy and I think it's out and if you work towards it and you search for it and what you and Barney have both said is totally logical and there are times where if you want to be a zookeeper you know you're going to take a pay cut. You know you're not going to earn that much money but you love what you do. You don't care.
1561 - 1569 Alan is my UK spirit brother. We're the eternal optimists. You can just hear it coming through everything is awesome.
1569 - 1633 it's interesting because I did what I did. I worked for 20 years and in finance that was often quite challenging quite stressful. You know that's why I kind of label at the prison camp. That was my reality. And so I just was not aware of really that the world of entrepreneurship the world of flexible working the world of freelancing the world of you know interim employment the world of kind of mini retirements or gap years that just wasn't my reality. I was very much head down focused on making bank and investing that money. So for me it's just been a really fun interesting fascinating journey in the three years since financial independence. To learn some of the stuff that Alan teaches about how it is possible to create a job for yourself a mini business for yourself that not only provides you with fun and meeting people and interaction and a reason to get up in the morning but also some money as well. So for me that is just something that I'm learning about more recently. But it's absolutely fascinating.
1633 - 1678 And Barney I think I me and you operate from the same place and that we want to know what is that fixed path. My lack of creativity in my case prevents me from seeing all the infinite number of possibilities to produce income that can allow me to achieve or at least in the past achieve financial independence. But I think there's still room for us logical forward thinkers in this space especially once you get closer to FI or once you're at FI. You can actually start giving that creative place in your mind a little bit more room to breathe because you have that freedom to fail right. You can now imagine. OK let's say I take the less optimized path and I pursue this entrepreneurial passion project potentially zero upshot if it doesn't work out. Even if it goes south because I tolerated my high paying gig for long enough I'm still going to be good to go.
1678 - 1822 That is spot on. So for for my 20 years as an accountant I think it's fair to say that I was not famed for creativity. And so I didn't exercise my creativity muscle I didn't. Creative Writing was not something I did. Podcasting was not something I did kind of thinking about you know how to tell a story and marketing those were not the primary focus of my job. You know there was some part of that in winning plans. But my point is that I would have said to you maybe five years ago I'm not a creative person because that was not what I was focusing on at work. And so I underestimated what was possible. When you have time and headspace as you just mentioned is absolutely right. You know when you have more head space than your creativity can kind of flourish. You can develop that latent skill. creativity flourishes from a place of being you know relaxed well-rested kind of engaged with the world happy with yourself happy with what you're doing. If you have those things down you will find that you're capable of much more creativity than you realized. And for me one of the things that inhibited my creativity was this fear this fear of failure this fear of poverty this fear of kind of silly fear of you know ending up being homeless if that fear is taken away if you've addressed that point. OK. You know that you're not ever going to be homeless. Right. You've paid your mortgage off. They can't take the house from you. So OK we've addressed that point. If you then have a base level of passive income that's paying your grocery bill. Well now I'm not going to be homeless and now I'm not going to starve to death. OK, with that knowledge. You have the freedom to spend the time take the risks that are involved in moving job, taking a big big pay cut, or starting a business from scratch. So kind of the analogy I use is like rock climbing. I mean if you learned rock climbing without a safety harness, is a very dangerous occupation and you can kill yourself. But rock climbing with a safety harness frees you to relax to learn to take chances and tackle more difficult slopes because you've got that safety harness and so you can just push yourself so much more.
accountant, passiveincome, podcaster
1822 - 1898 Bernie you just said one of the most important things I've heard on the 60 odd episodes of this podcast I really want to take a second to highlight it. You said I underestimated what was possible and I really want the audience to take that in because you're talking about those limiting beliefs. Right. You were sitting in this job and fear held you back. You had the worry of going back to your childhood of not having a house and you didn't know what creativity was inside of you. And I've used almost the exact same words I'd said I was the least likely entrepreneur and thinking back I'm not so sure that that's accurate because I was always a broad thinker. I was always involved in things but frankly I was I was stuck. And I was stuck in this job. And while financial independence was on the horizon it wasn't as rapidly approaching as I would have liked. And there is that fear that maybe you're not going to ever express what's in there. And I really want to take a second to make sure everybody knows you have a lot of value and a lot of creativity in there. You just need to find a way to express it and that's something that Allen comes in handy for right. Alan's constantly talking about ways to enjoy what you do which is to start up a side hustle that costs very little money. This all ties together. And Alan I love your thoughts on.
1898 - 1936 So I love the analogy that Barney just used of climbing with a safety harness. I think if you've got some cash in the bank and you've got a house paid off it's a lot easier to be creative and go out there. There is another side to this as well though. You've heard of the burning the boats analogy, if you throw yourself into entrepreneurship and make it your only choice. You'll figure out how to make it happen. I think everyone is born creative. It's letting it out and not stopping the job and the different things allowing you to be creative as you get older. We're all born creative is just letting it out. And I think Barney is exactly right about that.
1936 - 2032 That's a really interesting point which is if you're middle class middle income if you've been to college in some ways the problem that you have is you have that safe option. You have that option to be a lawyer or an accountant or a doctor or you know something safe and that therefore removes your impetus the pressure on you to be entrepreneurial. If you didn't have that safe route available to you then. Alan is absolutely right you would be forced to be creative you would be forced to develop those new skills you'd be forced to take some new steps and in some ways early career success in a relatively safe occupation can be a trap because what's happening is you are being aclimatized to a regular monthly salary which is incredibly comforting. That leads to a bunch of behaviors around not putting that at risk so compliance agreeing with your boss agreeing with your peers not creating waves not speaking out maybe when you perhaps could or should. And so the frog is gently boiled in the pan and if you spend the problem with that is if you spend 30 years doing that and then the situation changes the game changes your employer just decides your now you know I'm no longer required. If you have allowed your creativity and your other skills to wither then you're screwed if you don't have that financial safety harness.
accountant, career, college
2032 - 2052 And I would say that there's another dimension to the complexity of that trap just due to student loans because yes your fixed on that paycheck the other half of that is you are potentially complacent about the slow pain down of those student loans which is also keeping you potentially trapped and raising the risk of you pursuing something that does have more of an entrepreneurial bent.
2052 - 2145 Debt ensnares you debt enslaves you debt is a form of handcuffs that keeps you to a certain lifestyle that may not be how it was designed but that is how it operates. I'm a huge believer in paying off debt even now when interest rates are low and you can borrow cheaply etc.. Debt always comes with a visible cost you know the interest rate payment but it also comes with an invisible cost. So Steve Biddulph has a fantastic phrase for this. So he says the way he puts it is you know imagine you're you're a young guy and you want to borrow money to buy your first house. So you put a tie on and you sort of trot along to the to the bank and you talk to the bank manager and he you know he says great yeah we'll lend you this money. All you have to do is fill in these forms. But then something unexpected happens. You know the bank manager reaches into one of his drawers and he pulls out a jar and you have to if you want the mortgage leave a testicle behind as security, as security for the loan. And the way Steve Biddulph tells the story is that now at any point in the future if you want to make a brave decision if you want to make a risky decision if you want to take a year off if you want to start your own business you won't do it because you haven't you don't have the balls to do it. And so you know he describes a mortgage as something that entraps and emasculates you.
2145 - 2163 So Alan let's hop in to maybe some of the more nuances of maybe the UK situation versus what you might see here in the States and in particular why don't we start with housing because I know that you do have somewhat of a unique housing situation which can potentially be slightly more problematic for someone pursuing fi. I'd love to get your take on that.
2163 - 2237 So housing is a fascinating one. The general advice in the U.K. is leverage yourself as highly as possible to get as big a house as possible. When you first start. And that's the advice we were given. That's the adevice that lots of friends are given and the price of housing in the UK depending on area can be significant. So I live sort of outside London by about 50 minutes on the train and my two bed flat two bed apartment costs around a quarter of a million pounds. If you then move slightly further into somewhere like Guilford that same flat would cost you half a million. And then if you moved even further into say west London where my brother is living that same flat would then cost you eight to nine hundred thousand pounds and that particular item depending on where you live that will change your attitude as to whether you rent whether you buy whether it's worth it and the growth of house prices down south in the UK compared to up north has been absolutely phenomenal. So there's there's a massive variance and there's no one uniform answer to housing. It's really depends on where you want to live and how much you've got to spend.
2237 - 2255 Alan have you done a rent versus buy calculation as far as like where you live and how does that generally fall on the spectrum of what makes sense financially and also in terms of what you're talking about societaly where they're arguing for people to buy buy buy. Are there opportunities to rent for less.
2255 - 2299 So in our particular area which is Basingstoke in Hampshire inspired by Jim Collins we did a rent versus buy calculation and we are better off buying because the price of housing in Basingstoke is quite low for what you get. So we are better off buying but the further you travel into London it goes all the way and it changes. There are plenty of opportunities to rent. There are plenty of places available to rent the part. here is the societal pressure to buy. We have lots of sayings like an Englishman's Castle is his home. We're very proud of homeownership compared to Europe. We have massive high levels of homeownership and it's not always the best answer. It depends on where you live within the country.
housing, travel
2299 - 2309 In the United States it is probably the number one metric that we use to define a certain level of financial success. We obviously can identify with what you're saying. Barney what's your take on the housing situation.
2309 - 2495 So that idea of property ownership being the dream that that is perhaps even stronger in the UK than it is in the US that that's how strong it is over here. It's a part of the culture. So if you look you know our TV for example has endless property porn shows you know shows like Location Location Location escapes the country and they're all kind of predicated on the idea that happiness comes from having a big house having multiple houses perhaps having holiday homes and you know this goes back a very long way in kind of British society. This idea of you know being the lord of the manor being someone with this big detached house and grounds that was how you signaled status in Britain for thousands and thousands of years. And so you know we've got this culture of property ownership and the idea that that's how you display your wealth. But also we've just got it's not just a cultural issue in the U.K. It's a small island with a lot of people and you can't escape supply and demand and there is no doubt that property is one of the biggest challenges to financial independence is one of the things that makes makes it harder in the UK I think is cracking that property conundrum now in terms of what I did when I first moved to London. I moved as close as possible to my work so that I could walk to work. But I also lived in what you might politely describe as a frontier area of London. At that point in time so you know it was not a place where middle class professionals aspired to live. You know it wasn't the equivalent maybe of kind of Harlem in the 70s but it was definitely edgy that was Bethnal Green in London's stead. But since then the situation's got harder I think for FI seekers because London and the southeast. Prices have gone up an up and up and a number of those kind of frontier areas have become gentrified and become expensive. So if I was starting my journey today I would actually look at some more kind of interesting maybe even more kind of extreme options for full property. So for example there's a there's a there's a company over here that does property guardianship which so in return for very very cheap below market rents in some amazing locations you know in London you essentially live and keep a property occupied because it's more effective than them boarding it up and putting guards on it and securing it for five months until the redevelopment kicks off. So if you're prepared to be flexible and a little bit different a little bit innovative There are always ways to get the same thing for less and to crack that problem issue. But you're going to have to be flexible to do that. So you're going to need a kind of powerful motivation to do that.
2495 - 2531 I love that flexible way around doing property. It's an incredible way to get the same thing for less just chiming in the one piece of advice that made a massive impact on my wife and I as we bought ours was Robert Kiyosaki. The difference between an asset and a liability and asset puts money in your product liability Strips money out of your product. And he said when thinking about your home buy a small a liability as possible because your home strips money out of your pocket and that has been ringing in our ear ever since and is why we still live in a two bedroom flat.
2531 - 2628 So if I was to give you a very simple kind of easy to visualize example if I was just leaving college and moving to London for the first time now what I would try and do was find a house like a townhouse in Mayfair or Westminster or one of these expensive areas and see if you could just offer the Russian billionaire or that the Chinese kind of businessman who lives there. If you could offer them to be there live in housekeeper while they're away 50 weeks of the year could you get that kind of amazing. You know London pad for either for nothing or for a kind of peppercorn rent. And so that's a tough ask you know that's not an easy thing to achieve. I'm not saying that can be the answer for everyone but you need if you if you're serious about getting financial independence you need that flexibility that creativity and that ability to kind of think a bit differently. And even if you don't do that extreme route that I kind of talked about Alan's absolutely right. You know if it were me starting again I would get on. I would look to get on the property ladder but with the smallest kind of studio flat that I possibly could and I would reframe people's view about you know sharing with flatmate's there's this idea that people often just don't think about the benefits of sharing a flat or sharing a house with other people. It's kind of people kind of look down on that a bit. It's like oh can't you afford your own place. But again it's there's a community benefit. There's kind of a security benefit to it. You know I live for many years in shared flats you know with friends and it was fun.
2628 - 2682 I think what I love about this conversation is you're talking about this idea of doing this guardianship and we have Alan who is like the essence of the pop up business right right here listening to this. And you know his mind is spinning with ideas. My mind is spinning with ideas I'm thinking right now I'm going to go get Guardian dot weebly dot com I'm going to go get a headshot I'm going to go get my whole you know certified background check put up on there with a resume of all my abilities when it comes to home maintenance and I'm going to go to channel 4 news or whatever the local TV station is and talk about this service that I offer and how it's transforming the world and really making life easier for these people that have this estate in this area that they can't maintain. How much savings it is over what it would cost to put guards up and I've got publicity which certainly gives me credibility. I've got exposure because I've got my Weebly account and I'm in business and I'm living free potentially with Alan's model. I might even get paid on top of that. Going forward it changes the game right. Allen tell me I'm wrong.
2682 - 2699 I'm telling you you're exactly right. I love that. And I love how you see a business in every opportunity now. I do too. Even if you don't see a business there's a way to get home to live in. By doing exactly what Barney said and by being creative you can get fined twice as your average person.
2699 - 2723 So for this next line item I think one of the things we should obviously contrast is healthcare and I'm one of the reasons it's important to contrast it is that it is a train wreck in the United States that we do have answers. They're not great answers but we do have ways that you can navigate those lanes. But it's clearly in flux. And I know that in the UK you've had a system in place for a long time now. And Bonnie would you like to tell us about how it basically work.
2723 - 2814 So just like housing is a thing that makes getting to financial independence in the UK harder the health care situation I think is more favorable. It makes it easier in the UK. So just you know very simply the U.S. I think spends about 18 percent of GDP on health care. The UK spends about 9 percent. So we spend about half as much on health care and we get pretty decent outcomes for a much lower expenditure. So we have the National Health Service the National Health Service covers everyone. You don't need to pay if you need something urgently. They will provide that for you for free. And so it just takes it off the table in terms of being something that you need to worry about when leaving a job. Now you still have private health insurance in the UK because people don't want to go on a waiting list for an operation. So you can still get private health insurance that will allow you to go private and get an operation immediately. But I would argue you don't even need that. If you're on the path to financial independence you can essentially self-insure. So all of the bad really bad stuff is covered by the NHS and will cover you immediately but you also if you have this kind of stash you have this freedom fund that gives you the option should you ever want to get a to go private. You can just buy the healthcare you know as and when you want. So it's just not really an issue in the UK.
health, healthinsurance, housing
2814 - 2832 So Barney with NHS this is just fully included as part of just being a citizen. Correct. Like you you obviously pay your taxes and that funds it but you don't have to send any payments and you don't have to fill out forms each year. I mean am I correct with this this is just like a part of being a British citizen.
2832 - 2846 It's just like free education free health. You know if you if you're sick and you just turn up at accident and emergency you know you're our equivalent of the ER you'll get seen you don't need any papers you'll just get seen.
2846 - 2864 It sounds a lot simpler. You know if we're going to talk about these maybe stark differences. One of the things I want to talk about is investing and I think what's interesting is it isn't necessarily as different as one would suspect at face value. Alan do you want to talk for a few minutes about your approach to investing in the U.K..
2864 - 2991 Absolutely. And it's not that different. However when you're first starting out and you're listening to fabulous American podcast like choose FI or reading Jim Collins' site or reading Tony Robbins book. There is some translation you need to do to English. I know we both speak the same language but we don't at times. You have to do a little bit of translation. Basically we have two main vehicles that you can do tax advantage savings in an ISO which is individual savings account where you pay the tax on the way in. You don't pay the tax on the way out. And then we have pensions or sips which you don't pay the tax on the way in but you pay the tax on the way out. Both of those are tax advantaged accounts. The one tip I really want to give people in England that took a long time for us to work out was you can invest directly in Vanguard and they do now have some different things that you can invest directly in Vanguard and Vanguard will allow you to invest in a nicer actually what we've discovered is actually cheaper to invest through a third party in the UK. So we did some sums and most of the places you invest in the UK will charge you an annual management fee as paid percentage. So Vanguard charge a percentage of the providers like Charles Stanley provide a percentage as well. And if you've got 10 brands they take a percentage that whatever it is we actually found Halifax charged a flat fee. So they're charging 12 £12 50 a year. So compared to one of the previous ones we were using. My wife and I did a little spreadsheet to work out the management charges over a 20 year investing period and we saved £40000 over that 20 year period. By investing through Palafox into Vanguard funds rather than a Charles Stanley or some of the other ones. So you've got to pay attention to the fees and up we have all our money invested in Vanguard through Halifax.
indexfunds, pensions, savings, tax
2991 - 3007 You know it's amazing how it always comes down to the fees that what we're constantly talking about and why we are such proponents of Vanguard. Generally But yeah we will certainly link to Halifax in the show notes so yeah that's very valuable information. Alan And Barney I'm curious your thoughts on investing.
3007 - 3067 So just on that point around percentage fees or fixed fees I just tell people over and over again if you're serious about financial independence. When you see something quoted to you as a percentage of funds under management you should run in the opposite direction. If you if you have that option. So for me I do not invest with a platform with a broker that charges me a percentage of my portfolio. It makes no sense whatsoever. I'm using a fixed cost base I'm using their infrastructure. Why should they charge me X or why should I pay them extra just because there's a few bigger numbers. Not doing a different job. So I mean I use the share center as my main platform and online broker and as Alan says it's fixed fees. It doesn't vary on you or based on your portfolio over the years that will save you thousands and thousands and thousands of pounds.
3067 - 3083 We're big fans of just VTSAX just as something that we end up pointing to a lot. Not necessarily that that's the only index fund to use but just it's kind of one that we tend to highlight for you guys. My understanding is Vanguard does have a couple of funds alan that you're a fan of. Or do you use a different index.
3083 - 3146 So I definitely invest with Vanguard following Jim Collins and your advice and the others uh Vanguard is the one we go to. I do not invest entirely in America. I'm more globally split. I don't also invest entirely in the UK because I think that would be daft. The UK is around about 8 percent of the global market at the moment and actually American market is around about 60 percent. And our investment more or less mirrors the world split economies. So we have around about 8 percent in the foot the U.K. fund and then we have the rest of our money in the developed world excluding the U.K. which is 60 percent US and then model's Australia Europe Canada Japan and the other developed nations. So our money is just split globally around the world. I don't kind of follow Jim's advice to only invest in the US. I think that's primary because I'm not base that but we are majority 60 percent in the US.
3146 - 3163 I believe in the U.K. you guys do have this marginal tax bracket as well which means that those pretax vehicles really do hold some significant appeal especially when you're moving from these high income years to potentially this financial independence period where life is much more efficient and usually cost less.
3163 - 3183 Yeah absolutely. So if youre in the higher tax brackets that can be 40 to 45 percent tax which is a massive chunk of everything you earn. So if you are investing that into a pension you get that money back and you pay the tax later. Hopefully when youre paying less. So it can be a fantastic advantage.
3183 - 3195 If the higher top marginal tax bracket that you can find yourself in during your working years is 40 to 50 percent. What tax bracket what marginal tax bracket would you try to land and as a target goal during your FI years.
3195 - 3244 So the way the tax works in the UK on income tax is currently this year you get your foot 2017 you get your first 11000 pounds tax free the 20 percent tax bracket then extends up to 45 and then you pay 40 percent above that up until 150 and then 45 percent above that if you are on a salary from a company you dont have much choice other than to just pay the tax bracket you're in. The same thing if you're self-employed if you're a company you have slightly different abilities to defer the tax to different years. Me personally I try to remain under the 40 percent tax bracket each year so I don't pay too much and I defer the tax to later on.
3244 - 3251 And is there any difference in how income is taxed and how capital gains or earnings are taxed for you guys.
3251 - 3267 Absolutely it's very similar to the US. We have capital gains and you get a personal allowance and you can combine that with your partner to give you a bigger allowance. Then you also have your income tax which is a completely separate thing.
3267 - 3271 OK so it's separated out. What is your what is the tax rate on capital gains.
3271 - 3289 I'm going to have to google that now searchable. Eleven thousand three hundred. But I have not worked out how to do that tax free harvesting in the UK. I'd be interested to know if Barney's worked it out. I've heard everyone talk about how amazing it is. I've not worked out how to do it in the UK yet.
3289 - 3345 Yeah I mean I do. So you can as Owen says you have a capital gains allowance of 11000. And also if you're married your spouse has one and you can always transfer assets from one spouse to the other to ensure that you use both of your allowances so if you had a gain of £20000 that would exceed your own capital gains allowance so you can either harvest along the way or you can transfer the asset or half the asset into your spouse's name and utilize their allowance as well. So there are things that you can do to shelter assets from capital gains tax. But even if you don't it's a much lower rate than on income. So if you pay higher rate income tax you pay only 20 percent on your gains from chargeable assets.
3345 - 3376 OK. That was the last piece I think that's useful. All right. What I wanted to move to is just talking just for a few minutes about how the social attitudes towards FI are different in the UK as to what we see here in the United States. Now make no mistake this is a subculture. Even the United States but it does seem that we have a lot more traction than you guys are seeing in the U.K. I mean Barney to be honest. Yours is the first FI blog in the U.K. that I've stumbled upon. It doesn't appear that there is any sort of tangible movement at least up to this point in the U.K. is that what you're seeing as well.
3376 - 3490 Absolutely. So there are other blogs. But what I'm talking about is a broader kind of lack of awareness or a broader lack of an infrastructure or a community or an awareness of the concept. And so I was very strong mean I spent a bit of time on holiday and on on business in the U.S. And immediately you struck by the differences. When you go over there and there is this tradition in the US of the frontier settlers there is a tradition of self-reliance. There is a suspicion of overpowerful central government. There is a tradition of personal freedom. There is a constitution where those freedoms are written down spelt out and you know enforced through the legal system and in the UK. It's the attitudes are different. We do not have the same kind of suspicion of central government. We don't have the same suspicion of large institutions. And so there's just less emphasis I think on individual freedom. You know slightly less emphasis I think on entrepreneurship although you know that has improved over last 20 years or so and there just isn't this kind of idea that you know ultimately you know pursuing personal freedom is and is an important life goal which you can achieve through management of your personal finances again in the U.S. as popular and as great as you know Mr. Money Mustache and early retirement extreme are. They didn't invent this stuff. There is a longer tradition in the U.S. that you can kind of trace back to Thoreau and you know the book Walden Pond and those social and political and constitutional differences in the US.
3490 - 3506 Now having said that you did recently have a TV show that highlighted the subculture in the UK and you are actually featured in that TV show and so at some level the mainstream is aware of this. Is that right.
3506 - 3563 Well I briefly appeared there was a programme on Channel 4 that aired in July called How to retire at 40. And so you know there is a lot of attention in the UK on pensions the problems with saving for a pension and generally that's if you read the mainstream media which I don't advise you to do. There's this kind of endlessly negative drumbeat of how difficult and impossible and it is and you might as well just give up so that there is a lot of media coverage on the issue of retirement and Channel 4 made the show called How to retire at 40 and you know I appeared on that for about 30 seconds. And I guess that was perhaps the first time that someone had spoken about the concept financial independence on on TV. But it's a very alien concept in the U.K. and other than that one kind of instance it's just not something that's had media coverage at all.
pensions, savings
3563 - 3591 So when I was preparing for this show I actually was able to find that feature and watch part of it and it struck me that even the reporters that were interviewing you and talking to a few other people just didn't get it and they weren't able to act as caretakers of that message because frankly they were still in the process of digesting it. It was almost overwhelming for them and I think that came through in the in the show that it was just this quote unquote weird thing that a few people were doing.
3591 - 3642 Yeah. I mean I have some sympathy for the producers. There are pressures upon them to create a show with mainstream appeal otherwise they won't get it commissioned. So in some ways they had to kind of look for hooks and angles and quirks that they thought would make it more accessible to a mainstream audience so they had people who had just started businesses they had people that were sharing a mortgage to buy a house together not you know which are all perfectly sensible but not really directly related to financial independence as we would understand. You know that sort of engineering your lifestyle around being able to achieve freedom with a fair degree of certainty in a limited number of years. And so it's not an easy show to make. I think for a mainstream audience. So we'll see if someone has another go at it.
3642 - 3654 And Barney what was the general reception to that show as far as I don't know if you follow it along with comments on the Internet or any reception to the actual program on television. I'd love to hear about it.
3654 - 3726 Well it got quite a bit of press coverage and the press coverage was calm was informative slightly depressing but informative. So there's a very big newspaper over here called the Daily Mail and there's a wonderful cop who called Jason and Julie who who also briefly appeared on the show and they got to financial independence about the age of 40 and they've spent the last few years just traveling around Europe in a campervan and they came from a from working class backgrounds. They didn't make big salaries. I mean their story is very inspiring. And what they did is is very impressive. Their story was written up in the Daily Mail and I made the mistake of looking at the comment section and it was a cesspit of haters. You know there were I think almost a thousand comments and very few of them were positive. For some reason that sparked a kind of wave of negativity. And I'm not not entirely sure why you know why people you know maybe it's envy of the kind of lifestyle that those guys are now living or I don't know what it exactly what it is. But I was very struck by that negative reaction.
3726 - 3748 So to each of you and maybe Alan let me start with you. I would be very curious let's say this episode became part of a series called The UK path to FI and going back to Sarah's initial voicemail. What would be your takeaway that you want someone that has never heard of FI before but is listening to this episode because someone mentioned it to them and they're just now hearing about the concept. What is that take away that you want that person to hear.
3748 - 3771 The take away message people to hear. Is it possible to do it in England. You can buy back decades of your life by getting on with the FI path is just as simple as it is in America. You can invest in a low cost index fund like Vanguard. Save your money reduce your spending. You can get to FI. It is possible in the UK to do it. Just get on with it.
3771 - 3842 And Barney unfortunately because I actually because by writing the blog and also I see coaching clients and so I see the most amazing range of people doing this. Doing it now. It's not just people with very high incomes. I think there's often a view that it's only for people in the software industry or it's only or the tech industry is only for people in finance in the UK but I have seen people from all walks of life do this stuff. So it is possible. The similarities between the U.S. and the U.K. in respect to financial independence are much greater than the differences that are much greater than differences. And from an investing point of view it really it really couldn't be simpler. You guys have Vanguard over there we've got Vanguard over here. It's the easiest thing in the world just to choose a global tracker fund with with low fees low charges and use that as your vehicle for growing wealth and creating my call a compounding machine. So the differences in terms of terminology are trivial. The fundamental principles apply equally in the UK and much of the rest of the developed world as they do in the US.
3842 - 3874 People are going to want to find you guys and connect with you guys and I know what I love about that sentences that I know how passionate both of you are seeing this community grow in the UK in London and in your respective cities. But what is the best way for people to connect with you. And let me preface this by saying Alan if you're hearing Alan for the first time we interviewed him on episode 30 which was talking about this idea of entrepreneurship multiple income streams starting a passion project. You need to go listen to that episode. It's amazing. But Alan what is the best way for someone to reach you.
3874 - 3881 Uh they can reach me through my Web site Pop-Pop business school dot co dot uk or send me a message on Twitter. @ AlanDonegan.
3881 - 3887 And Barney your blog is that the escape artist dot M-E What is the best way for people to reach you.
3887 - 3898 Yes a check out. Check out the website and on the on the Web site. There's my e-mail address. There's my Twitter account there. So just go to the escape artist dot me and you can get a hold of me there.
3898 - 3907 Now before we let you go Alan you don't get a second shot at the hot seat but Barney We would love to offer you the chance to tackle the hot seat. Have you. Have you heard our hotseat yet.
3907 - 3911 Oh man maybe not.
3911 - 3913 Or you'd remember it. You'd remember.
3913 - 3919 Bring bring. Bring it on.
3919 - 3947 In a world drowning in debt and rampant consumption. Trapped by the chains of lifestyle inflation. These questions highlight the secrets of those who are broken free. Welcome to the choose F-I hotseat.
3947 - 3948 Love it.
3948 - 3952 Question number one your favorite blog that's not your own.
3952 - 4008 OK well I have to say I have to start with the almost obligatory reference to Mr. Money Mustache. For my money that is kind of the most engaging and kind of entertaining blog out there. And it was hugely valuable for me in my journey. But I would like to give a shout out to there's a blog called moneyvator in the U.K. and the guys that write that have been doing a fantastic job just ploughing a lonely furrow often for the last 10 years in teaching people about investing and just raising even the possibility the concept of financial independence. And then finally the other one I'd mentioned that that isn't really a financial independence blog per se but the James outage a blog out of confidential that I love the kind of brutal raw honesty when he talks about all his screw ups and his mistakes. And I think that's a blog that's really written from a good place.
4008 - 4021 I listened to his podcast actually on a weekly basis but I've actually never read the blogs. I should definitely check that out. All right Barney. Question number two your favorite article of all time and this could be either something you've written or something you read on another site.
4021 - 4105 So I've got two two favorite articles and they're both on my web site but I didn't write either of them. So the first one is called an interview with the man that was written by David Kane from gratitude. And it's just the blog post. I wish I had written. It's absolutely hilarious. And just insight for the same time. It's an emotional interview with the man. You know the owner of the system and who is reputed to kind of hold us all down. That's just hilarious. And that's on my blog. David gave me permission to republish that and then the other one that I love is called a diamonds a girl's best friend which was written by Helen. From free to pursue and to me the example of engagement rings is just one of the most striking examples of the madness of consumer society. So this idea that you need to show your love by spending you know whatever 5000 pounds or ten thousand pounds on a bit of glass that is indistinguishable from cubic zirconia is just madness. And it's very easy for me as a guy to say that people are kind of yeah what you would say that you're just a cheapskate. What I love is the fact that it's written by helène a lady who advocates for not spending and those crazy amounts of money on a product from a cartel. So that will be my my two favorite articles.
4105 - 4123 And Barney actually want to plug one more article that you wrote. I just I wanted to save this printed out and print it on my wall. But the title of that was the aggregation of marginal gains. And I would love for you. I almost think it's an entire episode but I would love just to hear your synopsis of that article.
4123 - 4268 So the problem. When The problem when you try to explain financial independence to a friend or a colleague as they can't wrap their heads about how you know stashing an amount of money where you'd never need to work. How could that even be possible. And so if you give them an example of something that you do to save money like I did it you say you will I take my lunch to work rather than buy an expensive sandwich. They're just going to look at you and think What on earth man or how is that ever going to add up to an amount of money where I don't ever have to work again. So the aggregation of marginal gains is a phrase that I stole from one of the top sports coaches in the UK a guy called Dave Brailsford who runs the sky cycling team and the British Olympic cycling team and he has turned he turned Britain from a country where cycling was if not unknown was unpopular. We were terrible at it and international competitions to a situation where we won the most gold medals at the Olympics. And you know we've won the Tour de France multiple times and this phrase just refers to the fact that by doing everything just a bit better the compound effect of all of those different improvements adds up and it multiplies over time. And so you know in cycling he gives the example of one of the things that the cyclists do is when they're on tour de france they take their own pillow with them to a hotel and just having your own pillow means you're more likely to get a great night's sleep before you're more likely to perform better the next day in the race. And you know when he explains that you know you get this incredulous reaction at first from the interview it's like wow how can that possibly win you the Tour de France. And the answer is of course on its own. It can. But what he's looking for is that little edge that little incremental performance benefit in every aspect of nutrition. Training equipment and clothing and the training schedule of the athlete and that's directly analogous to financial independence there's no one magic bullet. It's about getting everything a little cheaper. It's about earning more. It's about squeezing your fees when and when you're investing. And it's the compound effect of putting all of those marginal gains together that's so powerful.
4268 - 4321 Barney that's incredible because I literally was just reading an article about the British cyclists and the Tour de France and these marginal gains. It was actually on James Clear dotcom and the article was called. This coach improved every tiny thing by one percent. And here's what happened. And that's incredible I was reading this just in the past couple of days and I meant to link to it in our Facebook group because I agree that it's so analogous to financial independence that if you can just improve things and just constantly look in your life for ways to improve not just with finances with saving time with saving stress with getting more physically fit. Just every single thing you can do to improve learning something new learning something in a completely new field just even the Cliff's Notes version like you just become a more valuable person. And these things do compound over time. So absolutely fascinating and we willing to all those articles in the show notes.
4321 - 4347 Yeah and when I was reading that Barney that was you know you were talking about articles you wish you had wrote. That was the article I wish I had written and it confirms for me that FI is so much more than packing your lunch and taking it with you to work an entire life optimization strategy that as Brad was just saying allows you to get better in every single aspect of your life. And I loved that the end of it. When someone asks you how you hit FI you say oh well when I travel I bring my pillow from home.
4347 - 4392 And for me as well there's so much more to financial independence than just the money aspect to it. The money is great. It's lovely to never you know be worried about money and to have all those stresses taken away. But once you get to financial independence you're optimizing for other things so you're optimizing for happiness for meaning purpose challenge in your life. And those examples of the benefits for example of being just getting fitter. That is seriously non-trivial. That changes how you feel it changes how you relate to other people it changes how you present those small marginal gains that you count over over time they just pay you back a hundredfold.
4392 - 4398 Tell you right that was the entire episode wasn't it. Like I literally just condensed entire episode down to like five minutes.
4398 - 4401 Yeah we're definitely doing another episode on that for sure.
4401 - 4403 All right Barney question number thee your favorite life hack.
4403 - 4464 OK so favorite life hack reading books. Reading books is the most kind of powerful reading the right books is the most powerful life hack there is because essentially the deal if you read the right books is you take a genius in their field. They condense their life's learning for you. They do all that work for years and years and years in their career than they agonize for a couple more years in how to kind of write that down and condense it and all you have to do is go on Amazon and get it delivered second hand for a couple of quid or you could get it from the library for free and you've just sucked from that person. The entire wisdom knowledge and value that they have spent decades working on. And so if you read the right books and you then kind of implement some of the lessons in your own life the benefits from that are just ridiculously great.
career, hotseat-lifehack, library
4464 - 4503 I agree that it probably is is my number one life hack if I were to really take a step back. I constantly am telling my daughters that the way to get a better life the way to learn things the way to become useful in life is to just constantly read it. And it strikes me of something that I was reading a book about Charlie Munger who is Warren Buffett's right hand man at Berkshire Hathaway and his family basically they call him a book with legs. Yeah that's what he looks like to them because he's sitting in a chair ten plus hours a day with a book propped in front of his face and all they see is the book and legs. So that is the way to become intelligent. There's no doubt about it.
4503 - 4513 And my favorite part of that was just sucking the soul out of the author for a couple of quid. I love the perfect selfishness. Right.
4513 - 4526 And I mean as you said the right books what are your top couple of books that you would recommend for someone to get a better life. have a better outlook etc.. Like what would you recommend.
4526 - 4538 I mean just there is on my blog there's a page called life changing books so you can see them all there. And essentially those are the 20 or so books that provide the intellectual framework for my for my blog.
4538 - 4567 What I love about what you do Barney is you also go through pop culture. You go through TV shows and you extract the message that a you feel like applies to the FI community. I think you do that at a deeper level than anybody else and I've seen tackle that. And what I love is your favorite FI show of all time was actually house and I won't I will break that down other than to let you know I read that and we'll link to that article on the show and people should go check it out if they want to get a list of TV shows that you extracted some FI uice from.
4567 - 4581 I mean the wisdom the knowledge you know the Smarts that went into making that show. I mean that that's just sailing over the edge of 99 percent of the population. But that was an amazing show.
4581 - 4585 All right Barney. question number four what was your biggest financial mistake.
4585 - 4665 OK so that's easy. I've written about this in the book. So back in 2003 the Iraq war was going and the stock market had been crushing. It was the tail end of the dotcom boom. More of the fall out the bear market followed the dotcom boom and you know I had all my money in the stock market and I had just watched with kind of horror for the best part of three years as almost every day the value of my portfolio went down and down and down and down until a point which I could take it no more. And I did. You know the ultimate rookie mistake in investing which is I capitulated and I sold all my investments because I just couldn't bear to see it go on anymore. And obviously by doing that I called the bottom of the market almost to the exact weight and so immediately that I'd sold all my investments. The stock market then kind of pivoted and troughed out and started a long five or six year bull run much of which I missed out on. And so that was just a ridiculous kind of rookie mistake which burned and imprinted on my my memory or my consciousness you never sell. In panic you never capitulate at the bottom of a bear market.
4665 - 4671 I would imagine that that that steel helped you out in 2008 to 2010.
4671 - 4707 So that was the making of me in 2008 and 2009. So you know after Lehman went bust and it looked like the entire banking system of the world was going to topple over and we were all going to go back to living in caves. I knew from my past experience that this too shall pass and not only did I not sell my investments at that point every every pound that I could scrape together and get my hands on. I put into the stock market at those lows because that was a direct learning experience from my from my ridiculous mistake. In 2003.
banking, mindset, stocks
4707 - 4758 I want to make a rather obvious actionable takeaway here but one of the reasons that you capitulated in 2003 was potentially the lack of a community the lack of resources the lack of role models. And and then in 2008 what you did is you learn from your past mistakes. What's really cool about the idea of reading books and being involved in the FI community is the ability to potentially bypass some of those biggest mistakes and learn and suck the soul from people that have already made it or have already made those mistakes and have then distilled what they could have done better and potentially the audience its hearing is for the first time will be steeled for that first crash and they'll be able to say look these were the biggest mistakes and pulling out at the bottom is the worst possible thing I can do. What other choice could I make and maybe it's to to to buy more to be more aggressive. Take your. What's the statement Brad that Warren Buffett makes with the washbasin.
4758 - 4773 Yeah Buffett said every decade or so dark clouds will fill the economic skies and they will briefly rain gold when downpours of that sort occur. It's imperative that we rush out doors carrying washtubs not teaspoons and that we will do.
4773 - 4776 And so it's this idea of replacing fear with opportunity.
4776 - 4793 Yeah I love it. You know and we're kind of due aren't We we're kind of due another bear market. So no one knows when that will be but it will happen at some point. And if I could kind of leave the audience with one message I would be ready for that. Doesn't that make the idiotic mistake that I made.
4793 - 4801 Yeah. And you know a Barney that is perfect I mean essentially the next thing I was going to ask you would be advice you'd give your younger self I mean is that it. Is there anything else you want to add to that.
4801 - 4834 I just think that tack onto that is just two words which is get better. So there's the idea of reading books is the idea of not selling when the stock market crashes. But the most powerful thing that you can kind of ever do is just focus on improving yourself. You can't you can't control other people you can control yourself. And if you can kind of embed into your your life a desire for self-improvement that you action the rewards from that are almost infinite.
4834 - 4836 Brad I feel like I'm talking to you right.
4836 - 4912 Yeah yeah it's. It's incredible. I mean Barney it's like it's like we're long lost brothers I mean everything you're saying I'm literally last night was working. I've recently picked up Crossfit the exercise program CrossFit and it's such a foreign thing for me I've never done any weightlifting and it's frankly it's very very difficult for me and I've always been an athlete. I'm a lifelong soccer player so I on the side on the side I'm exactly the same night so yeah I mean but it's just so difficult. And I'm literally in front of my wife and daughter yesterday I'm practicing in front of a mirror. How to do the deadlift form and doing that. hip hinge you know with no weight and just doing it over and over and over again. And when I look like a crazy person I realized that this is just about getting better and if that means trying to work on this at 9:30 at night you know in front of half my family who's laughing at me that's fine. That's OK. And also it really is a great lesson for my daughter which is all right Daddy might be good at things. He might have this financial independence. You know she knows all these things and he's working every day to just get better at something that's completely different from what he normally does. And like that's just such a cool lesson and I'm glad that I can model that for my for my children.
4912 - 4955 I love that. And I see when you get financial independence your you're going to kind of need to keep modeling that. So one of the problems potentially of Financial Independence is your children are not seeing you kind of go to a conventional job. But then that isn't really a problem at all because there are so many different ways that you can model that idea of you know getting better. Challenging yourself working hard other than just a conventional office job. So I went I went rock climbing recently with my daughter and I'm terrified of heights but I know the beauty of that is she's seeing me tackle my fear. She's seeing me do something out of my comfort zone. She's she's seeing me do something that I find difficult.
4955 - 4964 Alright Barnie this last question we got for you this is our bonus question your favorite purchase made on Amazon.com or amazon.com. What is it. dot co dot UK.
4964 - 5027 Yes. So the walking dead on Amazon's Prime streaming service that I just love that show. I love the deep kind of hidden meaning to that show. The Walking Dead was originally a comic series that is written as a satire on consumerism. So most people don't know that if you watch the walking dead and you understand that it's a satire on consumers and it's fascinating. It is also the best illustration of applied evolutionary psychology that you can find anywhere. So the learnings of Walking Dead again is something I've written about on the blog into this. You know we will have these kind of fears of something bad happening and that fear is often what stops people from pursuing financial independence or from starting a business or from leaving a job. And if you can understand the evolutionary reason for some of those fears for me it makes overcoming them that bit easier.
5027 - 5046 It strikes me Brad that the way that I take in entertainment and media and the way that Barney takes an entertainment media and TV are totally different. I'm just consuming the changes in the sports screens and the pace of the action and that sort of thing. And Barney consistently extracts the message behind the message the Meta game if you will.
5046 - 5063 Yeah it's absolutely phenomenal and Barney I'm going to go and read every single article on your site so that's probably the next week or two of my life. But thank you in advance. I appreciate it. And yeah it was absolutely a pleasure having you on. You both you and Alan. And this was really wonderful. Thank you for taking the time.
5063 - 5068 You guys ever in London let me know. Be great. Have kind of a meet up.
5068 - 5070 We will take you up on that for sure.
5070 - 5072 Thanks guys. Cheers.
5072 - 5076 Well Alan Barney thank you so much for coming on the show. This has just been an absolute blast.

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