A Little Bit Richer

Voiceover: This series is brought to you by L&G, helping you build a future that's a little bit richer.

Iona Bain: Hello, and a very warm welcome to A Little Bit Richer with me, Iona Bain, brought to you by Legal & General. Now, many of us barely glance at our financial statements, but what if they were trying to tell us something about ourselves, our habits, both good and bad, and even our ability to build wealth? The truth is, our bank and credit card statements and our payslips reveal a whole lot more about us than we realise. Joining me to unpack it all is financial content creator Gabriel Nussbaum, known as That Money Guy on social media. Gabriel has amassed a huge 1.5 million following across his accounts, teaching people all about money and how to be better with it. We're going to be finding out today what messages may be hiding in our financial statements and what they say about our likely financial future. Welcome, Gabriel.

Gabriel Nussbaum: Thank you for having me.

Iona Bain: Thank you for joining us. We're going to start off with a quick question. Gabriel, in 30 seconds or less, can you tell us what our income and outgoings say about us and our likelihood of creating wealth?

Gabriel Nussbaum: Okay, 30 seconds. I think I can do this. I can see my time has literally started.

Iona Bain: Go.

Gabriel Nussbaum: I like to say that across your bank account statements, your payslip, and your credit card statements, if I was to take a little magnifying glass and study all of those in intense detail, even not in intense detail, I could immediately pick out five things, five indicators that would tell me whether or not you're good with money. I think we'll probably run through the five throughout the whole episode, so you want to stick around and listen to all of them.
Iona Bain: Nice. You got that timing perfectly, I would say. You mentioned there about how you can glean these clues like a financial Sherlock, which I really like. What are some of the key indicators that you look for that lets you know whether somebody is on track to create a strong financial future?

Gabriel Nussbaum: I'm going to open up your payslip first and immediately going straight towards pension contributions. I think it's a clear indicator of whether or not you're being clever and smart from both a tax side of things, but from a free extra money from employer side of things. We'll delve into that a bit later. Number two, your credit cards. It's simple: is there a balance? Again, we'll go into more detail, but I like credit cards being paid off in full. The three, when you take a look at your bank account, is number one, is it all sat in there or do you have it across multiple accounts? Number two, do I see savings leaving at the beginning or the end of the month? In other words, when your money comes in, do you save straight away or not? Number three is then, full stop, are you saving and investing at all? I like to see good habits, at least £1, I say, doing something other than just being sat in a boring current account.

Iona Bain: That's a fantastic overview. Let's dig into those different areas, starting with accounts, because many people will just have one current account where everything lands and everything leaves. Why can that actually be a bit of a costly mistake? What does the ideal account set up look like in your eyes?

Gabriel Nussbaum: It's actually costly from two sides. A lot of people think that money is purely mathematical. If you're good at maths, you'll be good at money. But money is actually mostly emotional. I like to think that it's even 90% emotions, 10% logic and maths. Why I say that is because your account that your money is sat in covers both of those points. Number one, from a maths perspective, you're probably not optimising what you're actually doing with your money if it's sat in a current account, earning no interest, literally doing nothing for you. When you put it in different places, it can achieve different goals that you want to do in life. From a psychological perspective, all of your money being sat in one place is so bad. As humans, we are weak. We are weak creatures, and we need friction to stop us doing the things that we actually don't want to do. If it's all sat there, and you're thinking, "My savings are in there, my investments are in there, all of my spending money is in there, the things I want to do next month," you're never going to actually be able to separate that money just on pure will.

Gabriel Nussbaum: That's why I think having it in different places is ultimately the key to stopping that psychological side of you, that weak side from doing things that you don't want to do with your money, which you will if it's all in one place. You alluded to the main places that I think you should keep it. Now, again, I like rules of five, so I'm going to stick with rules of five. Five key places: number one, your current account, not for storing money. It's just for where your money lands, then we're going to put it in other places. Number two, an emergency fund, self-explanatory. Number three, short-term savings. I like you to have goals in less than 3 to 5 years, a holiday this year, a wedding in a couple of years. Start saving towards that. Four, investments. We're talking longer term, 5 years and above. Finally, your pension. Really big one. Your pension is for you, retiring and not having to stress about money at a period in your life where you're not bringing anything in, or you're wanting to take a step back from work. I'll add a little bonus one as well, which is a fun money pot. If you budget fun money pots, you'll give yourself more freedom with your spending than you've ever had in your entire life.

Iona Bain: Balance is important, right?
Gabriel Nussbaum: Balance is fundamental. I like to say both current you and future you deserve to have a little bit of happiness in life. It's not all for that person in 30 years, and it's not all for you here today to go and spend everything you have. Both of you deserve to have a little bit of something.

Iona Bain: You mentioned about emergency funds, and I think on the surface, we all understand what that means. But there's a bit of a debate about how much you want to save in an emergency fund. Also, can you provide some advice on how you can save at the end of the month when money might be feeling a bit tight?

Gabriel Nussbaum: An emergency fund is going to be the biggest psychological stress alleviation you will ever build when it comes to your money and your habits, because unexpected expenses are guaranteed in life. To give an example, this week, £700 on a service for my car. This car is like 15 years old or so. I went in, expected a £300 service charge overall, £700. Now, who has £400 just lying around? Unless you've built an emergency fund, which is literally built to cover those expenses, I didn't like spending it, but I knew I had the money sat there. These are the things that crop up all throughout the year, all throughout life. Typically, people say 3 to 6 months' worth of living expenses, but that's just a really broad scope to try and cover as many people as possible. What it actually is meant to do is it's a pot of money set aside. Let's say the worst case scenario happened in your life, you know you'd be covered for a period of time that you're comfortable with. If you're 18 years old, you're living at home, you've got money coming in, you've got no expenses because rent and food is all covered for you, one month or £1,000 might be enough for you inside of an emergency fund.

Gabriel Nussbaum: If you are 45 years old, you've got four children, an auntie, a cat, and 75 other people relying on you, and you lose your job, maybe 12 months is something that would actually allow you to sleep at night. You can see how this is about building it for yourself. It's living expenses. We're talking about on a month-to-month basis, no money coming in. What would you actually need to survive? Then it's just working out that comfortable amount for you. When it comes to how to actually get started with that, I think it's about habit rather than an amount at the start. Obviously, target's £1,000, £2,000 help, but some people get put off by those big numbers. But at the start, focus on that monthly habit, regardless of the amount, because that will allow you to actually change the way that you treat your money and put it away towards a future version of you.
Iona Bain: Is that what you would prioritise if you haven't got this multi-account set up just yet, and you're really starting at first base?

Gabriel Nussbaum: I think so. I think it's the fundamental one because that then takes the stress off you to be a bit more adventurous with your money. But if that's not built in the first place, one mistake can set you back and not just back to zero, beyond zero into the negative. You might be getting loans, credit cards to get you out of jail, when in reality this pot of funds stops that from happening. On the other side, if you're starting to build savings and investments towards a certain goal in life, if you're having to pull out of those, it's so demoralising to start again, so get that one built first before anything else.

Iona Bain: Good advice. Bank statements, they reveal a lot when it comes to emotional spending, right? You can, I assume, identify quite a lot from someone's transactions. Talk me through the most effective ways to break that cycle of emotional spending.
Gabriel Nussbaum: The dreaded bank statement. I remember the first time that I ripped that band-aid off and actually had a look at what I was spending my money on. You would be so surprised at the person you think you are when it comes to spending versus the person you actually are. Your bank statement cannot lie.

Iona Bain: It's a very unforgiving mirror.

Gabriel Nussbaum: It's horrible, but necessary. The key thing is doing it. Just do it. Open up. Take a look at, ideally, the last 3 months because that gives a bit more of an average. But if it's stressing you out, start with one month. That's absolutely fine. Just be aware of where your money is going. The big categories are the best things to do. How much is going on my essentials? How much on my bills every month? How much actually spending on eating out? How much am I spending on shopping, entertainment, those things? There are plenty of apps as well that can do this for you automatically these days. It's not an excuse of, "I don't know how to do it." You can literally connect your bank account to an app that does the budgeting for you and will categorise it for you. Then from there, it's just a bit of a realisation, "Wow, I actually spent a hundred on Deliveroo last month. That doesn't feel right to me. I don't need to be spending that much."

Gabriel Nussbaum: What you'll find is even just by a quick glance at what you've done the month before, you'll naturally start to spend less, knowing that the next month you're going to take a look again and judge that version of yourself. You'll think twice before decisions. I'm not saying you won't enjoy life any more, but you'll be a bit more thoughtful around every single transaction you make moving forward.

Iona Bain: Are there practical things that people can do to put that friction back into their finances as well and remove some of those temptations?

Gabriel Nussbaum: There's so many little tactics that you can do to create friction. The more friction, the better. There are tactics like the 48-hour rule, big purchases worth more than, let's say, £50. You cannot buy them on the spot because often the emotion, the endorphins you get from shopping are actually around putting it in the basket and going to the checkout rather than actually owning that item. I've been trying other little tactics at the moment, like removing Apple Pay.

Iona Bain: Yes, it really works.

Gabriel Nussbaum: It really does, honestly. Or turning off tap to pay on cards, so you'll have to put your PIN in. It's just little things that give you a split second to actually think before you make purchases, deleting your automatically-inputted details on every single app. You have to get the card back out, put the details in, "Oh, I can't. Actually, I'm not going to buy this thing anymore." Those little elements of friction are massive if you are someone that's really struggling.

Iona Bain: Turning to payslips, what would you look for there that would let you know that somebody's on track for achieving a good financial future?

Gabriel Nussbaum: I think payslips are the most underrated source because there's so much information on there, and most people have never looked at a payslip in their entire life. Or at the very least, if they have looked at a payslip, it's probably just, "Oh, what's that number that's landing in my bank account at the end of the month? Let's just make sure that lines up", which is a great thing to check. But there is so much more information on there, whether it's your tax code, your National Insurance contributions, your pension contributions, any other benefits that your employer might offer. But the one key indicator that I'm going to go for is your pension, because your pension contribution is an absolute superpower, A, from a tax efficiency side of things. It will save you on tax. Yeah, I know. People like to pay less tax, and this is one way that you can do that, and you're literally leaving free money on the table if you're not maximising pension schemes. Workplaces are actually legally obliged to pay you a certain amount above your salary towards a pension if you put in a certain amount as well.

Gabriel Nussbaum: A lot of employers will go above and beyond. I've heard of places where five and five. That means you put in 5%, they'll put in 5%, you put in 6%, they'll put in 6%. I've actually heard people tell me as high as 10 and 10, which is a crazy amount of free money to imagine not taking when it's being offered to you. Remember, this is above and beyond your actual payslip or your current pay package. When I look at your payslip, what I'm simply looking at is, are you maximising whatever scheme you are on from your employer? If the answer is yes, I get it. You like free money, which I think most people do. If the answer is no, then I'm like, "There's so much potential here, and you're missing out on stuff."

Gabriel Nussbaum: I do get that a lot of young people will look at their pension and go, "I'd rather have that 50 quid in my account. I just want to have a bit more fun in life." But what time does with that money is the real superpower. When you leave that extra amount in your pension over a decade, two decades, three decades, four decades, the compounding effect of what it can do with the interest that it's earning through those investments, the earlier you start, the better. It's just as simple as that.

Iona Bain: And it doesn't have to be that much. It's the power of compounding that will make it really explosive over time.

Gabriel Nussbaum: Absolutely. Get started, take what you can. Be cheeky and ask for more from an employer, if they are willing to do so. Why not have the conversation and just try and get as much free money out of the person paying you as possible? I think that's just a great policy for life.

Iona Bain: If you don't ask, you don't get.

Gabriel Nussbaum: Exactly.

Iona Bain: Credit card statements, they also tell us a lot about somebody's financial habits. What are the most problematic issues that you see on people's statements?

Gabriel Nussbaum: I'll keep it nice and simple. If you're not paying off in full, don't get a credit card. I know some people listening to this might be already stuck in the cycle of having to pay off interest, and they're trying to work towards it. I'm not speaking to those people. I'm obviously with those people, either seek advice, go to a charity to try and help you get out of that debt cycle. But for those considering getting out a credit card because they're like, "Oh, a bit of free money this month. I can put a bit of spending on that." It's literally not worth the plastic it is printed on if you do not pay that thing off in full every single month, because the interest is abysmal. The numbers are stupidly high. I get people go, "But what about the points? What about the Avios? What about the rewards?" If I take a look at your credit card statement, and you're paying that thing off in full every single month, I'm like, "Great." But if you're not, it's just not worth it.

Iona Bain: That's really good to differentiate between demonising credit cards and saying it's all unhealthy and unhelpful, and saying, "Actually, there is a way to do it that's sensible and going to benefit you in the long run."

Gabriel Nussbaum: A credit card is a piece of plastic at the end of the day. It's not good, it's not bad. The good or bad side of it comes from you, the user. It's like a hammer. It's a tool. I don't look at a credit card in exactly the same way. Know yourself, understand the way that you manage your own money, and if you don't think you're paying that thing off in full every single month, don't go for it. But if you do, you can train yourself onto it with smaller amounts and grow it over time.

Iona Bain: Investing is something that might not feel accessible to everybody who is watching and listening to this. Why is it so important? What are the habits that you would expect to see when it comes to investing that are a big green flag for you?
Gabriel Nussbaum: Again, this one goes back to taking a look at your bank statements and seeing, is it going towards a saving or an investment every single month? I like to call myself a boring investor. I don't think of investing as the exciting day traders. "Oh, it's going up. Let's quickly buy this stock. Oh, SpaceX has launched. Let's quickly jump into that because everyone else is talking about it," or Bitcoin and crypto and all that stuff. I think the best investing is boring investing. Really well-diversified global index funds or ETFs. You might have heard these terms. If you haven't, a quick Google search or YouTube will tell you everything you need to know. You set it and forget it, a little bit every single month. You're trying to achieve boring average market returns. I'm not trying to outpace the market because most professionals can't do it over a long period of time. Literally people whose jobs it is to outperform the market struggle over really long periods of time.

Gabriel Nussbaum: The whole point of investing is that it's a long period of time. Most people say 5 years plus. I like to say 10 years plus, 15 years plus, 20 years. Genuinely, the longer, the better because time is actually the magic ingredient in all of this. If you get boring returns over a long period of time, you will just sit there and think, "Wow, that was the best decision I ever made."

Iona Bain: But you got to make it today.

Gabriel Nussbaum: Time works in funny ways because it's constantly moving. There is no earlier time to start than today. People are like, "Oh, wait, but the market's really high at the moment, so maybe I should wait to see if the market drops."
Iona Bain: And we are in very uncertain times, so people are a little bit hesitant.

Gabriel Nussbaum: Yeah, but I say if you've got money that you're looking to put away for at least 5 years, trying to time and perfect the market, the best professionals can't do this stuff. It's one thing trying to sell your investments when they're at a really good price. But then trying to buy back, you're trying to time it at two different ends, at the top and at the bottom. Just time plus average returns, a little bit every month, globalised index funds that try and buy and diversify your portfolio as much as possible, and so you can sleep at night. That's the way that I like to do it. That's probably the method that a lot of people should probably consider over trying to think that they're really smart and can do better than anyone else.

Iona Bain: You've definitely made that much more straightforward. I really like that phrase, "Set and forget" as well. That's such a good one to hold on to.

Gabriel Nussbaum: I went into my investing app that I use, and I had to redownload the app because I hadn't been on it in 3 months. That's how often I look at my investing account. You got to bear in mind that people often look at me and go, "Oh, you must know what you're doing with investing." That is genuinely how I treat it. It's just automatically from bank account into the investment app. It's set on the investments I'm going to buy, and I do nothing. I don't check it very often because humans, again, we go—and I'm going to go through this so many times—we see things going wrong, we'll act on it through our emotions, but if I'm not looking, then my emotions aren't going to get involved. Someone might say to me occasionally, "Oh, my God, have you seen what the market's doing?" I'm like, "No, not really. I'll have a little look now. Cool. That's interesting. I'm not really touching this money for another 15 years at least", so it just does not matter to me what's happening today.

Iona Bain: There's something very clarifying and peaceful about taking that attitude.

Gabriel Nussbaum: Absolutely. I also like to think that investing is this generation's property in a way. If you go back 20, 30 years ago, and you look at a lot of people's parents who got into the property market, maybe in their 20s or 30s, that's becoming less and less achievable for young people these days, really, sadly. But at the same time, investing has never been more democratised. It's never been easier. If my dad wanted to invest when he was my age, he'd have to call someone up, find a broker, they'd be charging some fee to execute an order. Today, I can literally put a quid on an app in 5 minutes with a click of a button and voilà, I'm investing. I have 75 different platforms to choose from. Now, as long as they're FSCS protected, FCA regulated platforms, then pick one and go from there.
Iona Bain: You've mentioned being able to invest through all these different platforms. What's the actual vehicle or product that you would use in that situation?

Gabriel Nussbaum: This is really important because if you are new to investing, and it's something you actually want to do, when you go on most platforms, they'll give you two options: either a general investing account, or a stocks and shares ISA. They both do exactly the same thing, but with the ISA, you don't pay tax on the gains that you make. Again, who wants to pay extra tax they didn't need to in the first place? Now, you have an ISA allowance, which is £20,000 across all the various types of ISAs. A quick Google search, a quick YouTube video will explain to you all the various intricacies around that. But overall, for most people starting out investing, a stocks and shares ISA is the place you're going to want to get started because let's not pay tax that we don't have to.
Iona Bain: Finally, if someone is listening and feeling really inspired, and they feel like they need to go away and do a financial audit, but they don't really know where to begin, whilst they're waiting for the kettle to boil as they're making their cup of tea, what would you urge them to think about?

Gabriel Nussbaum: All right, the kettle is boiling. All I want you to do is go to the account where you spend your money from, whether that's on a credit card or in your debit account, your current account, and just have a little scroll. Take a look. I want you to check and see, do you recognise every payment coming out there in the first place? If not, why are you letting unrecognisable payments leave your account? Are there subscriptions in there that you can easily cancel? Then finally, just start to look at the patterns. If you have a bit more time because you're boiling the kettle again because you forgot to click it the first time, why not start to categorise and actually have a look at how much you're spending in each category so you can start doing a lot of things we spoke about today: like building that emergency fund, reducing the amount that you spend in each of those things, adding the friction points, and seeing if you have multiple accounts for your money. Might take longer than a cup of tea, but maybe whilst you're drinking the tea, you can go into that.

Iona Bain: I was going to say, and based on everything you've said, actually, a lot of this is a little bit easier and quicker than people might think. You might get it done before you finish a cup of tea.

Gabriel Nussbaum: I think you'll get it done before the kettle's even boiled.
Iona Bain: This has been so insightful, and I think it's going to give a real kick up the bum, but in a good way, Gabriel.

Gabriel Nussbaum: Absolutely.
Iona Bain: Thank you so much for joining us.

Gabriel Nussbaum: Thank you again for having me.

Iona Bain: That's a wrap for this episode. We really hope it's given you a reason to want to take a slightly closer look at your financial statements to make sure you're creating habits that will help you get a little bit richer. Next time, I'll be joined by Vikki Brownridge from Debt Charity StepChange to talk about the not-so-obvious warning signs of debt, the impact it can have, and how best to manage it if it affects you or someone you know. This podcast is brought to you by L&G. We would love it if you could share the podcast and help others get a little bit richer, too. You can keep up with the show on YouTube, TikTok, and Instagram @legalandgeneral. If you have a question or a topic that you would like answered on the show, please get in touch on our socials because we absolutely love to hear from you. Until next time, see you soon, and thanks for listening.