To round up 2020, I thought some might like to learn a little more about me as an individual. And, because I prefer not to talk about myself I thought I'd share an interview that I had with ​Alex Sapala who invited me onto his show, the Business, Wealth And Mindset Podcast. Alex is one of the most successful and ambitious Malawians living in Britain today, he's made a massive success of himself in the work place and also with property investing but you would never know because he keeps himself humble. 

Alex with Heather who shares her fascinating journey and discusses why she has chosen to be employed in a role that offers her flexibility and the time to undertake the hobbies she loves.
​
This is a great opportunity to hear from someone who experienced being employed and working for herself before making a conscious choice to be employed. It’s always vital to find out what makes you happy, what is the real you and how to achieve this in life.

KEY TAKEAWAYS

• Self-employment is not all glamour and I was on call to my customers all the time
• Being employed gives me the stability I want.
• I get paid well and have all the flexibility that I expected but didn’t get when I was self-employed.
• The period when I was self-employed was the period where I was least happy.
• My happiness comes from being able to express myself in my own way.
• I have a job that allows me to pursue the hobbies I want to and I enjoy the diversity of the life I have.
• Time freedom is an important aspect to consider in your life.
• Having a job provides you with work experience and stability, both important elements to have in your life.
• Being employed doesn’t preclude exploring working for yourself and employment works for me and offers the flexibility I want
• The stock markets are a good place to put money over longer periods of time
• Never suffer in silence talking to others is the key to changing things.

BEST MOMENTS

• ‘I depend on my siblings for emotional support’
• ‘I worked hard at school so that at some point further on I won’t have to work so hard’
• ‘Life is about people and staying connected to them through positive interactions’

VALUABLE RESOURCES

• Business, Wealth and Mindset podcast series   
• The Money Spot Podcast 

ABOUT THE GUEST
Heather Katsonga-Woodward

Having spent 7 years in investment banking at Goldman Sachs (Corporate Finance) and HSBC (Corporate Derivatives Structuring) and a further 6 years pursuing her own business interests, Heather is currently a civil servant. She describes it as the best job she’s ever had.

Heather is an investor in property, the stock market and as a hobby enjoys creating personal finance digital learning resources that can be found at katsonga.com and on the podcast, The Money Spot™️. Her courses on Udemy (on property and business) had attracted over 10,000 students as at 2020.

Heather graduated with First Class Honours in Economics from the University of Cambridge. She has the CFA Charter, the ACCA accounting qualification and the Certificate in Mortgage Advice and Practice (CeMAP).

She lives in Birmingham (UK) with her husband and two children.

ABOUT THE HOST

Alex is a prize-winning chartered accountant with experience in financial markets from trading finance, capital hedging, structural foreign exchange and interest rates to operational risk from the world’s top financial and advisory institutions including Deloitte, RBS and JPMorgan Chase

Alex has been involved in property development programmes across different types since 2008, building and managing a portfolio that includes standard buy-to-lets, student accommodation and other houses in multiple occupancy (HMOs).

He specialises in raising finance, providing potential investors, investors and joint venture partners with ad hoc (to their specific requirements), hands-free and hassle-free property investments solutions as well as coaching and mentoring

Alex aspires to share business and financial knowledge with upcoming entrepreneurs and experienced business minds to learn and master the concepts and mindsets required to succeed, stand-out, have the edge and make a difference.

Alex is also a keen traveller, cyclist and photographer.

CONTACT METHOD

• Facebook.com/AlexSapalaOfficial
• Twitter - @alex_sapala 
• Alex's YouTube channel

My very best,
Heather 
p.s. subscribe to my podcast and ask me any money question, HERE - do it now!

Building on the last post on 7 things that hold black children back from succeeding. This is the current Economic status of black people in the UK relative to other groups:

ASSETS
 
On home ownership
 
According to .gov.uk:

• 63% of households in England owned their own homes in the 2 years from 2016 to 2018;
• 68% of White British households owned their own homes, compared with 74% of Indian households;
• households in the Black African (20%) and Arab (17%) ethnic groups had the lowest rates of home ownership at 20% and 17% respectively;
• home ownership among Black Caribbeans at 40% was twice that of Black African (20%);
• in every, socio-economic group and age group, White British households were more likely to own their own homes than all ethnic minority households combined

 
On pensions assets:
 
According to a January 2020 report by the People Pension, compared to White ethnic groups,

• Black ethnic groups have a 27% lower pension;
• Asian ethnic groups have a 30% lower pension;
• Mixed heritage  groups have a 13% lower pension;
• Arab and other ethnic groups have a 6% higher pension.

 
The average gap between a female pensioner from an ethnic minority group and male pensioner from white ethnic groups is 51% (half). This figure is 27% for an ethnic minority male pensioner.
 
The average ethnic minority pensioner has £3,350 less in annual pension income.
 
Ethnic minorities are also less likely to qualify for auto-enrolment into a work place pension because they are more likely to earn less than the auto-enrolment threshold of £10,000.
 
INCOME
 
According to gov.uk:
 
In the year ending March 2019, the median annual household income in each quintile before housing costs were paid was:

• top quintile (top 20%): £54,000
• second highest quintile: £35,700
• middle quintile: £26,800
• second lowest quintile: £20,500
• bottom quintile (bottom): £13,300

 
If we look at the bottom two income quintiles, that is the lowest 40% of income earners,

• If you are black there’s a 57% chance that you are there;
• Only two ethnic groups perform worse – 67% (two-thirds) of Bangladeshis and 74% (three-quarters) of Pakistanis are in the bottom two income quintiles.
• Only 38% of whites and 38% of Indians are in the bottom two income quintiles.

If we look at the top two income quintiles, that is the highest 40% of income earners,

• If you are black there’s a 25% chance that you are there;
• Only two ethnic groups perform worse – only 15% of Bangladeshis and 11% of Pakistanis find themselves in the top two income quintiles.
• 42% of whites and 44% of Indians are in the top two income quintiles.

 
These figures are before housing costs. The picture changes a little bit after housing costs but I chose to present the ‘before housing costs’ picture because there is a degree of discretion with regards to how much a household decides to spend on housing.
 
While there are income disparities that will feed the gap between the assets of the rich and the assets of the poor, I feel as though the reasoning behind the asset differential is very basic and needs further exploration.
 
On job security:
 
Do ethnic minorities just work less and as a result earn less?
 
No! According to gov.uk:

• 75% of working age people (aged 16 to 64) in England, Scotland and Wales were employed in 2018;
• 82% of people from White ethnic groups were employed, the highest percentage out of all ethnic groups;
• 57% of people from the combined Pakistani and Bangladeshi ethnic group were employed, the lowest percentage out of all ethnic groups; and
• 67% of working age Black people were in employment.

 
Based on these stats, the employment rate for black people is 8 points lower than the average for the population  and 15 points lower than for Whites.
 
In addition, it’s worth noting that Black people and other minorities are more likely to be self-employed, be on zero hours contracts and are generally more likely to be employed in less secure lower income jobs including as part of the gig economy.
 
Two things stand out as definitely missing:

1. How many ethnic minorities don’t own a home in the UK but own a home (or homes) back home in Africa or the Caribbean? This would be an interesting statistic but the government would probably struggle to get any meaningful data on it except perhaps through anonymised surveys.
2. Also, what proportion of people are struggling to build a meaningful asset base because a high proportion goes to support relatives back home? 

 
The UK doesn’t have an identical history to the US and certainly I don’t think UK mortgage lenders discriminate according to race directly or indirectly but if someone thinks they do, I’d love to hear their story.

Remittances are a key component of economic growth in Africa. According to Pew Research, "money sent by the African diaspora to their home countries in sub-Saharan Africa reached a record $41 billion in 2017...a 10% jump in remittances from the previous year", another source suggests $46 billion was remitted in 2018, that would be the official figures but billions more are remitted via unrecorded channels. Official development aid to Africa was just shy of $52.8 billion in 2017 (OECD 2019 statistic). Provided this money isn't all being used for consumption, wealth accumulation by Africans is underestimated if we look purely at wealth held by the diaspora within the countries they live.

In addition, after discussing the issue of low rates of home ownership with my African peers other factors to consider include:

• A knowledge gap in which either people do not think of buying a home because they don't think it's possible or they think it's a complex process.
• Misinformation within the community with regard to the financial sense of buying a home in the UK;
• Poor financial literacy in black communities including the fact that we are not held accountable by the community in the same way Indians are;
• Indians also have a lifestyle which means many full-time earners commonly live in the same household thereby allowing reduced costs and homeownership for investment, etc;
• A higher proportion of people struggling with mental health problems meaning it's more difficult to deal with big life issues like home ownership...they become stressors and triggers.

 
Social mobility
 
According to research from the University of Manchester,

• Ethnic minorities in Britain are experiencing growth in clerical, professional and managerial employment (absolute mobility), however they still face significant barriers to enjoying the levels of social mobility of their white British peers (relative mobility)
• Immigrant minorities have lower rates of social mobility than does the rest of British society. Their children experience rates of upwards mobility that are similar to their white British peers. Despite this mobility, the second generation still faces what they called “significant ethnic penalties in the labour market.”
• “Levels of educational attainment have improved significantly for ethnic minorities, but these have not translated into improved outcomes in the labour market. The success of policy interventions and third sector projects targeted at ethnic inequalities in early childhood and education, contrasts to the continuing employment barriers faced by young black men and Muslim women.” This finding means that even if they succeed in education: young black men and Muslim women struggle to get jobs that are commensurate with their human capital. Apparently, “unemployment rates for Black African and Black Caribbean men have consistently been triple those of white men”.

 
 
FACTORS THAT COULD HOLD BLACK PEOPLE BACK
 
When it comes to discrimination in the labour market, some of the same things that lead to targeting or discrimination in the formative years (as described in my previous post) can also adversely affect the likelihood of black people getting well paid jobs:

1. Name – some research suggests people with non-white sounding names are called to interviews at lower rates.
2. Black hair styles can be interpreted as not professional and lead to potential employers not hiring a black person based on their hair with reasons like, “we didn’t think they were an appropriate fit.” Certainly, when I go to interviews I make sure to have a Westernised wig on, I don’t want my hair to hold me back. Once I get the job, I style my hair as I please.
3. The perception of being threatening – may prevent black people and especially black men from getting jobs that they desire.
4. The stereotype that black people are less intelligent – an absolutely abominable stereotype to hold in this day and age may prevent some getting well paid jobs and result in a higher propensity for black people to be hired into lower skilled, manual jobs.
5. And all the issues of poverty and educational inequalities and racism in educational institutions covered in the last post are cumulative and have long run negative effects on black people’s economic prospects.

 
So there you have it. This is a summary of the current wealth and income stats for black people in Britain. I think it raises a lot of questions. I would love for people to contact me and leave a voice message or a note at katsonga.com/coach or as a comment on this post explaining what they think has helped them succeed or what they believe is holding them back from progressing to higher levels in their career and in building wealth.

​​Heather 
p.s. subscribe to my podcast and ask me any money question, HERE - do it now!

Hey heather, thanks for your podcast, I find it incredibly useful because it's UK specific and everything else I find seems to be geared towards the US.

Anyhow, my name's Dee, I'm in my 50s and have been a military stay-at-home mum all my adult life although I went to university. Being a military wife has exposed me to so many countries and cultures which I love but you do sometimes encounter traumatic things so it's nice to settle in the UK.

My family currently rents and all our adult children live at home including one that is dependent.

We'd like to get on the property ladder but have been struggling with when and whether to do it. In the past I've left all the money stuff to my husband but now that the children are older I'd also like to start earning an income and I've been considering investment property. I want to gain some financial independence and I'd love to be able to help the children out financially.

I am so ready to make up for the time I spent raising children. I don't know if it was stupid not to use my degree sooner but I guess better late than never.

Keep helping with your posts! Thanks.

Hi D,
 
Thank you for this question that covers a very wide range of things. I am also very sorry that you have experienced something traumatic. Your life choices are not stupid, many women find themselves in circumstances that mean they have to stay at home with the kids for whatever reason so your question may well resonate with lots of other mums.
 
Being in my mid to late 30s, you will forgive me for providing what might sound like a slightly optimistic review of your situation.
 
Your question as it is framed requires me to speak to:
1.Providing for your children particularly the dependent child with medical needs;
2.Buying property as a home;
3.Buying property as an investment;
4.Earning an income for yourself;
 
PROVIDING FOR YOUR CHILDREN
By letting your adult children to stay at home rent free you are doing plenty. That alone should allow them to save for their own property deposits and is a financial boost many people including myself did not have. If I could have lived at home rent, free, that would have had me on the property ladder a lot sooner.
 
The other thing you could do is direct them to read the type of personal finance books that will give them ideas for how they can be financially responsible so that you don’t need to worry about them. I recommend The Richest Man in Babylon and The Millionaire Next Door as good starting points.
 
Does your child with medical needs financial support from you as well as general support for all their living? I won’t touch too much upon this except to say that make sure that you are accessing all the state benefits you can for the child’s support including the carer’s allowance if it is applicable.
 
BUYING A HOME
 
Firstly, as far as the UK is concerned I always advise that, if you get nothing else right, at least buy your own home.
 
From your message, it’s not clear whether or not you and your husband discuss finances but I am guessing that this may not be the case. Firstly, I would try to get the two of you on the same page. Working as a team when it comes to building wealth can really supercharge your financial health.
 
The UK property market is completely different to the US property market in so many ways so I’d be a little careful before taking advice on property from US authors and podcasters (lots of property advice on the internet tends to be US-focused that’s why I bring this up). To begin with the population density of the UK is 281 per Km2 (727 people per mi2); population density in the United States is 36 per Km2 (94 people per mi2). What does this mean? It means that UK property in many areas doesn’t see price crashes (too many people, too little land) and there is a propensity for house prices to be sticky upwards.
 
In addition, because US mortgages are fixed for the full term of 25 years whereas UK fixed terms are only for 3, 5, 7 or 10 years, interest rates are much lower in the UK compared to the US (almost half). The result of this is that very often the interest you pay on your mortgage is much much lower than rent. As an example, I live on a street where the rents range from £1,200 to £1,500, however, the interest we pay on our mortgage is just £350 (it was a 25% deposit mortgage). The full monthly mortgage payment is almost £1,000 but everything above the interest of £350 is money that will come back to us if we sell our home.
 
So, provided you can get a good deposit together, you will save a lot of money by buying a home rather than renting. In the long run owning where you live will give you a lot of security including the psychological comfort it provides.
 
At 50-something, you are not too old to get a mortgage and may even be able to get a mortgage of 20+ years, however, if you owned property abroad and sold it when you left then it’s worth buying the home outright.
 
State pension
 
Another thing to consider with regard to your financial security is that even the full UK state pension only pays £175/week per person (about £759/month) this would be double for a couple. If you live in a home that’s been completely paid off, no mortgage, then you can survive on the state pension relatively comfortably.
 
However, as you have lived abroad for many years you need to contact HMRC to see how many qualifying years you have. Your UK State Pension will be based on your UK National Insurance record. You need 10 years of UK National Insurance contributions to be eligible for any amount of the new State Pension and for people my age 35 years of credit are needed to get the full entitlement, you may be in the generation that only needs 30 years of credit.
 
You may be able to use time spent abroad to make up the 10 qualifying years. This is most likely if you’ve lived or worked in:

• The European Economic Area;
• Gibraltar;
• Switzerland; and
• certain countries that have a social security agreement with the UK.

 
I would contact HMRC as soon as possible (link above) and ask what you need to do or pay to increase your entitlement to the UK state pension.
 
You may get National Insurance credits if you cannot work - for example because of illness or disability, or if you’re a carer or you’re unemployed.
 
You might also be able to pay voluntary National Insurance contributions if you’re not in one of these groups but want to increase your State Pension amount.
 
BUYING AN INVESTMENT PROPERTY
 
I recently read David Tarn’s “The Complete No-Nonsense Guide to Becoming a UK Property Investor: The 1-2-3 on Property Investing” and found it useful on the topic. The author is based in the North of England where property is much cheaper. He is into buying property and letting out the whole house to a single group like a family – so, standard single let properties.
 
In addition, I would recommend The Inside Property Investing podcast. There are over 300 episodes, if you binge listen to the episodes that appear interesting, you will move up the knowledge curve rapidly. The ‘Inside Property Investing’ podcasters are themselves heavily into High Multiple Occupancy properties (this is when you let a single property out to 3 or more unrelated people like students or professionals). However, the beauty of the podcast is that they regularly interview people on the show that follow a variety of different property investment strategies.
 
Don’t pay for any overly expensive property course before you’ve gained all the knowledge that is available for free or almost free – a friend of mine recently paid £24,000 for a property course, she went 50-50 with her daughter and even had to put some of the cost on a credit card! You’ve been warned.
 
For the basics on property investing I have a course up on Udemy for under £50. This will give you all the basic knowledge you need about the property buying process in the UK.
 
EARNING
 
There are many jobs out there. If you just want to boost your confidence and get some money rolling in there are plenty of jobs out there provided you are not too picky about the pay as long as you get your foot in the door. If you want to build a work life for yourself have a look on jobs boards at what’s going and start applying. If you want to build a career within a specific field related to your field of study consider taking a course to freshen up your skills.
 
I have no idea what your salary expectations are but median UK income for 2020 is 30,800 according to the ONS. After tax that would bring home just over £2,000/month; if due to covid etc you secured a job with a salary of £24,000/year, that’s still £1,600/month which definitely isn’t shabby especially if your husband earns too. A GQ article gives an interesting breakdown on age, occupation and the covid-19 pandemic’s impact on earnings.
 
 
I hope this helps. Far from thinking you are too old. I am feeling soooo excited for you. This is a fresh start and even over a 15 year period you can build an amazing life and financial cushion.
 
Good luck.

 Hi Heather,
 
My husband and I want to buy a house, how can we go about improving our credit score?
 
Chrissy
 
Hi Chrissy,
 
This is an awesome question. I think lots of people come up against this issue at one point or another. Before I get into the detail, straight off the bat I’ll tell you what you don’t need to do, you don’t need to get a credit card. You can build excellent credit without a credit card despite what people say about needing a credit card to build a credit record and strong credit score. Now that I’ve got that off my chest let’s start from the beginning?
 
Firstly, what is a credit score and what’s it trying to achieve?
 
A credit score is a number that’s designed to be an indicator of your creditworthiness. This means that the credit score gives lenders an indication of how good you are at paying your debts and how likely you are to default and not pay them. Lenders only want to lend to people that are likely to repay that money and the credit score is an indicator of your likelihood to repay.
 
Your credit score is built up using all the information a credit reference agency has collected about you over time especially over the last 6 years; information older than 6 years usually doesn’t weigh into your score.
 
The credit reference agencies that you might have heard about are:

• Experian and
• Equifax

They are the household names – but there are lesser known agencies or associates of agencies that you can use; these are:

• Credit Karma – which uses TransUnion data,
• ClearScorev– which uses Experian data, and
• CheckMyFile – which uses data from 4 credit reference agency – Experian, Equifax, Crediva and TransUnion.

 
You can also go directly to Transunion or Crediva to get a credit report from but they don’t give you a score directly – they only do so via CreditKarma and checkmyfile, respectively.
 
If you want to improve your credit score you need to know what your current score is so you can track it. You can’t improve something if you haven’t measured. Credit scores work in the following way:

• CheckMyFile (score out of 1,000, free for a month then £15/month).
• Experian: score out of 999, free for a month then £15/month
• Equifax: score out of 700, free for a month then £8/month
• Credit Karma: score out of 850, free for life), and
• ClearScore: score out of 700, free for a life.

How come ClearScore and CreditKarma are free?
 
Both make money by selling products to their customers. But, in my opinion, the way ClearScore goes about it could land you in unnecessary debt so I wouldn’t recommend them. Under the credit information, there’s a section on ClearScore that asks you “How can I improve my credit score” and one of their pointers if you don’t have a credit card, is that you get one. CreditKarma aren’t so brazen.
 
I feel as though ClearScore keep my score artificially and strategically low to nudge me towards that credit card. So, if you do use ClearScore, know that even if you pay your debts on time, are current on all your bills and are essentially doing everything you should to be classified as financially responsible, you won’t get the top credit score if you don’t have a credit card. I am very anti-credit cards so I would never get one and this one aspect of ClearScore annoys me and stops me from using them.
 
With all this knowledge about the agencies, this is what I recommend you do to improve your credit score:
 
Firstly, get a CheckMyFile credit report and credit score. As I mentioned, CheckMyFile’s score is out of 1,000 and based on information from 4 agencies; you will be able to view a lot of the information that all 4 agencies hold on you.
 
Second, I suggest you check your credit score only (not the credit report) at Experian. Experian have a service where you can view your score anytime for free but you won’t be able to see the full credit report under that service. Because you are getting an Experian report via CheckMyFile there is no need to get it directly from Experian too, at least not in the same month.
 
The reason I am suggesting you get your Experian score (which is out off 999) is that I find their score very responsive to changes in your financial footprint. If you pay off debts and so on, the Experian credit score improves within a month or two and it’s actually possible to get a perfect Experian score of 999, I have had that several times.
 
In my experience, Experian’s credit scoring system is the most legitimate and reliable.
 
Make sure you unsubscribe from CheckMyFile before a month is up because they will start charging you £15 per month after that.
 
This will mean you lose access to credit reports and the checkmyfile score but that’s okay because you will have the Experian score and to check your credit report on a regular basis, just use CreditKarma. The level of detail Credit Karma has is actually very impressive. They actually have financial details on my profile that Experian seem to have missed and yet, outside of the little bits of missing data, Experian is generally the most comprehensive. FYI, Experian is not paying me to say any of this.
 
Okay, so what can you do to improve your credit score?

1. First things first, if you identify any errors on your credit report, get that corrected straight away.
2. You don’t need to have a credit card to improve your score but you do need to have credit. Things that count as credit include mobile phone contracts (not pay as you go contracts), broadband/TV/Phone contracts, utilities (e.g. water, gas, electricity). Make sure you and you husband both have 2 or three utilities in your name. Some suppliers will allow two names to appear on a bill and where this is the case, have both you and your husband named on that bill so you can use the same bill on mortgage applications.
3. Pay your bills on time ALL THE TIME. Don’t wait to get a reminder because your credit report will show how late you were with a payment. Best way to keep up to date with bills is to just have everything on direct debit.
4. For at least 6 months before the mortgage application don’t take out any new credit. This means don’t get any new loans, credit cards or even phone contracts because your credit score dips down every time you do this. Applying for credit from too many parties within a short time-frame can suggest someone is in financial trouble that’s why your score dips once your credit profile is pulled by a potential lender.
5. Pay off your debts. I once wanted to apply for a mortgage and pulled up my credit score. I had only one consumer loan on my credit record and I thought it was pulling my score down. I paid the loan off in full and a month later my score was back to 999 on Experian so paying your debts off is a very effective way to improve your credit score.
6. Make sure all your contracts are updated with your current address – banks, utilities, store cards, credit cards etc. If you move house always update the address; having multiple current addresses makes it seem like you will be hard to track if you default, this is why lenders like people that have been at the same address for a long while, this bring me to the next point.
7. Don’t move house a lot if you can help it. Lenders feel more confident in lending to someone if they have a stable home, once you have lived somewhere for at least 3 years, you look stable.
8. Remove any financial associates with a poor credit record. They will pull you down. Your credit report will show who your financial associates are these are people that you have applied for credit with jointly. If you have a joint mortgage with the financial associate you won’t be able to remove the association without paying off the mortgage. However, I am assuming you don’t have any mortgages right now so it should be easy to remove credit-poor financial associates, for example, if you have an ex-partner that you had a joint account with and if that account hasn’t been closed yet, close it down – even if it’s dormant and unused that financial associate will affect your score.
9. Close any unused lines of credit, this includes credit cards, store cards, direct debits and mobile contracts.
10. If you absolutely feel you benefit from having a credit card, for whatever reason, then pay it off in full every month. That habit will have the best impact on your credit score.

 
These are the things that will have a huge negative impact on your credit score:

• Having county court judgments, defaults or bankruptcies has a huge negative impact on your credit and these stay on your profile for 6 years.
• In fact, even late payments are visible on your credit profile for 6 years before they are expunged but they don’t have much of an impact on the score after a while.
• Also, having fraudulent activity associated with your name will not help your credit score.

 
In summary, what should you do to improve your credit score:

1. Go to checkmyfile.com and sign up to get your credit report and credit score. Save the credit report.
2. Go to Experian and get your credit score only.
3. Sign up to CreditKarma and get your credit score only.
4. Change all the behaviours I’ve discussed
5. Go to the settings in checkmyfile and cancel your subscription within a month, that is, before they start charging you.
6. You will be able to track your credit score via Experian and Credit Karma going forward.
7. Check your Experian score monthly.

 
Hope this helps, Chrissy.

If you have any personal finance questions send them to [ME] – I will answer whatever piques my fancy via a blog post.

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Dear Heather,
 
Greetings from Chengdu, China; I love your vlogs and I enjoyed watching your birthing story and recent vlog on how to make money. You are so inspiring and motivating. You inspire me. On the recent vlog you discouraged investing on the stock market. Why was that?
 
My husband and I have invested in properties in America and are looking at buying one in China since we will be here for the next four years. We have also been eyeing property in England.
 
My question for you is since we want to diversify our portfolio from real estate and land what do you recommend? 
 
You have the cutest family and gorgeous son. My son is [] months and has been keeping me very busy.
 
Looking forward to hearing from you when you have some free time.
 
Best Regards,
Faith

​Dearest Faith
 
Thank you so much for your lovely email. I really appreciate everything you say, it keeps me motivated and keeps me wanting to work. Children do keep you busy but they're so enriching :).
 
The first thing I thought when I received your email last week was, what on earth are you doing in Chengdu, China? (email me for privacy)
 
I am always super intrigued re. what black people do when they’re in Asia but not studying…I’d love to learn more about that. Anyhow, back to property.
 
Firstly, I hope you have made the very low investment in my property course, the price will go up soon so get in while it’s cheap!
 
This is how I think about investing in general.
 
Firstly, I am working towards a given gross rental income per month of £10,000 from a UK/Europe and US portfolio. We don’t currently have anything in Europe or the US but I’m eyeing both up.
 
After mortgages are paid off 90-95% of this will be pure profit.
 
I could easily reach this in the next three years if I include income from rents in Malawi but I discount that income because the country has a lot of political and economic instability and it’s possible that something could happen that completely erodes the rental income.
 
Based on this methodology, we’re roughly half way.
 
If you invest in China you might want to apply a discount too given they’re legal framework may not be as solid as that in the US or UK. That said, they are definitely much more stable than Malawi so invest away.
 
Keep in mind that investing in real estate in different areas and countries is also diversification.

   1. Leverage magnifies returns 
​
Just to give you an idea of what I mean.
 
The first property I bought cost me £16,500 including a 5% deposit of £12,500. Stamp duty of £2,500 (this is a UK property purchase tax) and about £1,500 in other costs.
 
That was 2006.
 
Fast forward 10 years and the current value of £550,000 meaning a £300,000 capital gain and a gross equity value of £400,000 including what’s been chipped off the mortgage.
 
No other £16,500 investment could have produced that kind of return for me.
 
Firstly, no one would have given me cheap leverage to invest in the stock market and secondly, the returns would have been rubbish – to use a technical term.
 
An investment tracking the FTSE100 would have me worse off; I’d have roughly the same £16,500 today eroded by 10 years of inflation.
 
An investment tracking the S&P500 would have given me £23,700 today, 16,500 x (2178/1516), this is good but certainly far from £400,000.

   2. Reduced saving burden 

We don’t spend rental income. This means after interest has been paid off, every month, my tenants are effectively saving for my retirement on my behalf.
 
Currently, that’s about £2,000 worth of savings before tax. Very few investments can do that for you.

   3. Easy release of value without impacting the investment 

I remortgaged this property and took out £80,000 to invest in a business. This doesn’t affect the property’s value in any way and isn’t taxable because it’s a loan not a sale of equity.
 
If you sold some stock to get some money for another investment, firstly, you would have fewer shares so the overall value remaining would be lower and whatever you sold would potentially be subject to capital gains tax.

   4. Stability
​ 
Even accounting for short-term falls in value, property is very stable.
 
Even if you don’t see an increase the value of your real estate investment you would still have the rental incomes.
 
Provided you invest were there is demand for rental properties by tourists, students or families, you have secured an income for yourself in 25-years’ time if not immediately.
 
Now, once I reach my target rental income of £10,000 what will I invest in?

While I used to invest in single stocks in the past, I no longer do so as I think that long-term investing into diversified index funds is much, much wiser and definitely safer. This view has been informed by tonnes of reading and more experience in investing.
 
The next few paragraphs written in 2016 illustrate how I used to invest in 2006/7 when I was a newbie with zero experience - I no longer invest in this way but I share this anyway:

When I used to invest in the stock market at the beginning of my working like (2005 to 2010), I had no education in investing and my methods were quite time consuming but the time spent made it feel less like gambling and more like investing:
 
I’d download data on the main stock indices from Bloomberg (FTSE, S&P, Hang Seng, etc.) For each share I'd have the following data: 52-week high, 52-week low, P/E ratio, current price and other vital stats to try and identify a company that was undervalued.
 
I’d also think of industries that I thought were growth industries and look at new companies in the sector. For instance, I once invested in a solar company and an Asian company because Asia and renewable energy were/are both growth areas.
 
I sold my investment in the solar company (a German company called Phoenix Solar) when I tripled my money to £3,000. If I still had those shares they would be worth like £300 – the company is down badly.
 
I sold my shares in Citic Pacific (the Asian company) in 2011 just about recovering my money and if I’d held on for 10 years, my £1,000 investment would be worth £750 – 25% down.

Single stock investing is very risky especially if investing is not your full time job so you don't have time to go into great deal - reading annual reports and other regulatory filings.

I made a great investment in Apple in 2006. I sold when I had tripled my money. If I’d held on to my Apple shares until it hit its peak my £1,000 would have reached a £15,000 in value – kaching! That said, if I still had the shares they would be worth about £10,000 today because Apple is down from its peak.
 
I actually didn’t lose much money investing in the stock market.
 
Citic Pacific and Yahoo were sold roughly were I bought them and Phoenix Solar and Apple were sold after tripling my money.
 
The only complete loss was a bank called Northern Rock. I bought £1,000 when the share price was crashing in the belief that the UK Government wouldn’t let it fail. I was right, the UK Government didn’t let them fail but all shareholders lost all their money.
  
Stock markets go up and down in an unpredictable fashion. This is why I prefer to have a base of rental income from property before dabbling in the stock market. However, if you are investing in the stock market for the very long term 10+ years, and also in well-diversified funds, I think it is a sensible place to keep money safe and earn a decent above-inflation return.

​Finally, I invest time and money in creating businesses. Whilst business is also speculative there are many low risk businesses that can bring a stable income.
 
For example, creating courses online doesn’t cost too much money and once you recover the investment it’s fairly easy to maintain a steady income from the investment.
 
With physical products you might invest more but if the investment fails you normally gain knowledge that will help a future business grow.
 
Business is by nature speculative but the upside is fairly unlimited and you have more control over that upside than you would with an investment in shares.

​My personal strategy is to have enough retirement income coming from property to cover all my needs and some of my luxuries and the rest coming from my stock portfolio. So I focused my early investing on property and started diverting more savings into stock market indices when I was comfortable with the rental income we were generating.
 
In addition, I love writing, sharing knowledge and business in general so I pump lots of energy into these activities because I believe they produce a good return in the long run and even if they don’t, I thoroughly enjoy engaging in these activities.

Have a business or life question you want me to answer? send me a message.

Lots of scary statistics get thrown around regarding the negative retirement prospects for current 30-somethings (and even worse for those younger than us), so this week I’ve decided to dig deep. I’ll write a series of 3 articles on retirement: what do that the stats look like in the UK and the US and ultimately, what will it cost you to retire?

I will not do an article on retirement stats in Africa because for the most part those statistics are VERY hard to come by. However, I found a fantastical article by the OECD that looks at Pensions In Africa.
 
This is what I assume we all want to know:

• When Do You Get A UK State Pension?
• What’s The Amount of The UK State Pension?
• How Much Does The Average Pensioner Actually Have In The UK?
• What Do The Pension Savings of Workers In The UK Look Like?
• What Proportion Of Pensioners Own Their Home Outright?

​The retirement age used to be 60 for men and 65 for women. It’s now been equalized to 65 for both. It’s moving up to 66 by 2020, 67 by 2028 and 68 by 2046.
 
I’ll qualify to get a UK state pension at the age 68 in 2051 provided I’ve paid national insurance (NI) taxes or have NI Credits. You can calculate your own pension age here.
 
What does this mean?
 
Those of us that reach retirement age after 6 April 2010 need to have 30 “qualifying years” to get the maximum state pension and at least 10 qualifying years to get anything at all.
 
If you don’t have a National Insurance record before 6 April 2016 you’ll need 35 qualifying years.  Qualifying years are years in which:

• you were working and paid National Insurance or
• you were getting National Insurance Credits, e.g. for unemployment, sickness or as a parent or carer or
• you were paying voluntary National Insurance contributions –

 
For instance, if you work abroad or aren’t working for any reason you can pay voluntary contributions to ensure you qualify for a full state pension. I see this as a sort of backup insurance policy and I would definitely do it if I was working abroad.
 
“If you reached the pension age before April 2010, then a woman normally needed 39 qualifying years, and a man needed 44 qualifying years during a regular working life to get the full state pension.” BBC

​If you are retiring on or after 6 April 2016 the full state pension you can get is £155.65/week, this is £8,094/year or £675/month.
 
This amount is guaranteed by the government to rise by the higher of:

• earnings - the average % growth in wages (in Great Britain) or
• prices - the % growth in prices in the UK as measured by the Consumer Prices Index (CPI) or
• 2.5%

 
But, of course, government plans do change and this guarantee could fall away if the UK hits problems. There is a lot of press surrounding this possibility right now. 

​People retiring in 2016 expected income of £17,700 per annum according to a Prudential survey. They carry out this survey annually and the table below shows the results.
 
This number is actually £1,000 lower than in 2008 but it’s been making a steady recovery:

According to Partnership the average UK pension pot stood at £87,724 in 2015. There is a lot of variance within the UK, with Essex having the highest pension pots, £125,478, and Shropshire the lowest, £44,336. Check out where your region stands using the image below.
 
With compulsory workplace pensions now in effect pension savings should hopefully rise for a good majority of people.

Property ownership is one of the key determinants of financial independence in old age.

​Here are stats from the 2011 census carried out by the Office of National Statistics:

• There are 23.4 million households in the UK.
  • Out of these 7.2m were retired households (The FT, quoting the same census)
• 15 million are homeowners (64%) and 8.3 million are renters (36%)
• Of the 15 million homeowners, 7.2m homes were owned outright while the remaining 7.8m were mortgaged
• 31% of owner occupied homes were documented as being inactive, i.e. not looking for work and of these 92% were retired
  • We can therefore extrapolate that 2.05 million (7.2 x 0.31 x 0.92) retired households own their home outright and 2.22 million retirees have a mortgage.
• 36% of renters were documented as being inactive and around 50% of these were retired
  • We can therefore extrapolate that 1.5 million (8.3 x 0.36 x 0.5) retired household rent their home
• These extrapolated figures are very back of the envelope but we can assume based on these that 35% of retired people in the UK own their homes outright { 2.05 / (2.05+2.22+1.5) }, 25% rent and 40% have a mortgage, possibly a small one.

 
The obvious advantage of outright home ownership when you are retired is that you save yourself what is usually a household’s biggest expense.
 
Home ownership is almost necessary to guarantee a comfortable retirement because state pensions rules are changing all the time.
 
Personally, I hope for the best when it comes to state pensions but I certainly won’t depend on the government to look after me in old age.

Have a business or life question you want me to answer? Please email it to me with the subject “Question”. Note that all such questions will be answered as a blog post and will be sent to my full email list. 

Want to start a business? Check out The Money Spot Program.
 
References
Basic State Pension Overview (gov.uk)
State Pension Eligibility (gov.uk)
State pension: The overhaul and you
The pension pot map of the UK revealed
Retirees in 2016 expect income of nearly £18k a year
Home ownership and renting in England and Wales
Number of UK working-age households drops for first time
​Pensions In Africa

​Your understanding of money and your friends’ understanding of money are likely to be totally different.
 
Differing views on money, budgeting, investing and so on and so forth is exactly why some people get rich whilst other stay poor. It’s why some people are able to retire whilst other have to get a job at the checkout counter of their local supermarket once they’re too old to be wanted by anyone else but still need to make ends meet.
 
Anyhow, I asked my friend, Oscar how he’d spend a million pounds to see if his answer would bare any resemblance to mine and it was completely different.

​He said he’d:

• Spend £3,000 on a holiday to see his cousin in America
• £500,000 would go to his parent - £250k for his mum and £250k for his pops – he has since decided he was perhaps being too generous, his parents don’t even need money
• £200,000 would go towards building a music studio
• £200,000 towards finding artists and we didn’t even get into the last £97,000.

 
Only the investment in the studio is a sure-fire investment here. The money spent on artists is a gamble and of course the gift to his parents would never come back.
 
I said I’d invest every single last penny on building a property portfolio that produced at least £5,000 of rental income per month.
 
In my initial answer I said I’d look for about 6 properties that cost c.£100k each and produced £500 of income per month each. In addition, I’d look for 2 properties that cost c.£200k each and produced £1,000 of income per month each.
 
Having thought about it long and hard I’ve decided I’d go for 5 properties that cost c.£200k each and produced £1,000 of income per month each because the revenue produced by small properties would quickly get chewed up by the fixed costs of managing them.
 
I’ve invested in the stock market in the past and done quite well. However, I no longer believe that shares are a good investment because you can’t borrow money against them to increase your returns.
 
The fact is, with property the returns are amazing because you can borrow against that investment and invest in even more property.
 
After my £1million was fully and carefully invested I could just go to a bank and borrow up to £750,000. I could then invest that in more properties producing even more rental income.
 
Overall, my goal is to own no more than 10 properties because I don’t want to be have to much debt plus I don’t want the hassle of managing an overly large portfolio so I’d probably borrow £500,000 only and stop there.
 
That £500,000 would be invested in 5 more properties of £200k each with £100k of released equity and £100k of fresh mortgage debt.
 
What would I be left with?

• 10 properties worth a total of £2million
• £10,000 in monthly income = £120,000 a year
• £1million in mortgage debt – this is a 50% loan-to-value on the portfolio, not too risky at all
• ​This would cost me £4,200 in interest every month assuming 5% interest

 
Annual costs would be:

• Gas safety certificates: £50 x 10 = £500
• Buildings insurance: £220 x £10 = £2,200
• Inventories (assuming 5 new tenants every year): £150 x 5 = £750
• Maintenance and management: I’d set aside a month of rentals every year = £10,000
• I would manage the properties myself, for the most part, I might use estate agents if I think they are worth their weight in gold

That £10,000 set aside for maintenance would allow you to keep the portfolio in tip-top shape. Within that sum you could lease a car and few other borderline personal costs.
​
Total fixed costs: £13,450
Total interest costs: £4,200 x 12 = £50,400
Total costs per year= £63,850
 
Profit per year: £120,000 - £63,850 = 56,150 
 
I would use the full profit to pay down the £1million mortgage because I don’t need the income right now which means I’d have mortgage free portfolio in under 18 years, less if I didn’t use all the maintenance budget for maintenance.

​In fact, it would be much less than this because the interest costs would fall every year as I pay down the mortgage debt.
 
At that point profits become £120,000 - £13,450 = £106,550. Probably more because rents tend to rise with time. Could the good husband and I live on this? Like kings!
  
I’d generally let my properties out unfurnished because I’ve found that tenants that bring their own furniture are in it for the long haul.
 
As for taking care of my parents, once the £1million was fully invested I’d take them on a huge holiday. My parents make very good money from their own property investments so they don’t need money from me. But, of course, it’s always great to get gifts from your children so I would send them amazing treats and gifts regularly. I’m good with money because they gave me all the money skills I need so that would be my thanks.
 
Job done -