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How to live like a millionaire - MoneytotheMasses.com podcast 59 transcript
Andy: I don't want to give too much away about how we record these podcasts, because I like people to guess how it's all done, but every so often we do use technology but we've got a change this week. I can actually see you and hear you properly, which is sometimes a bit of a difficulty, living in a village with the worst Internet connection in the world. But fibre has hit my village. We have fibre.
Damien: You do look clear, Andy. You look more handsome than ever. Yeah, it's almost like high definition.
Andy: Yeah, doesn't it? And I can hear you. There's not that awkward sort of gap where I'm thinking, "Did he just say something to me?"
Damien: Yeah, or that awkward gap where people think, "Oh, Damien's whittling on quite a lot," and that's normally because Andy has frozen on screen.
Andy: Connection's dropped, yeah. Anyway, anything exciting happen to you this week?
Damien: Funny you should ask, because this week, MoneytotheMasses.com had an important milestone.
Andy: Ohh, okay.
Damien: We had our millionth UK consumer use MoneytotheMasses.com.
Damien: I was blown away by that stat. It crept up on me. I don't sit there and look at how many people useMoneytotheMasses.com or read stuff on it or contact me, and it's just one of those things, I was doing a bit of number crunching and I realised that, we've had a million people in the UK access the stuff that I write about and obviously talk about on this podcast. So, that was such a big "Whoa" moment. Don't forget MoneytotheMasses.com started as a blog I wrote in my spare time, as you know, and I used to write in the early hours of the morning when my daughter was very small and she didn't sleep very well. It was something I just wanted to do. I started helping people and writing about money on a pretty naff laptop and a really basic blog, then it blossomed into the site it is today. A million people, I mean, that's a huge, huge number, so it was something that was quite humbling, to be honest.
Andy: Yeah, I imagine it is.
Damien: MoneytotheMasses.com hasn't got lots of money behind it, it's just driven by my passion to give advice and information on money and teach people about personal finance So, as a result of that, I'm doing a bit of a "million" theme to this podcast. There's one section about the number one million, as if to re-emphasise the fact we've had our millionth user. So, I'll come onto that in a second, but there are just a couple of other bits I wanted to chuck in, and it just shows the importance of what we say and do and that people listen out there. Also, I've been asked to go on a couple of judging panels, one of them is to judge the best investment journalist from a national newspaper.
Andy: Okay. Is that where you look at the entries and sit down amongst a few experts then the winner gets announced at an awards ceremony night?
Damien: Pretty much. I've also been asked to judge another set of awards for investment platforms, the likes of Hargreaves Lansdown or Fidelity, where you do your investing. I've been asked to go on a panel for the Direct To Consumer Award, for the best investment platform. So, I think we sometimes forget how much influence we have even via MoneytotheMasses.com and this podcast. It's also a bit of a great motivator for anyone who's thinking of following their passion. A bit like you and your book writing Andy when you eventually had a bestseller.
Andy: Funny you should mention that actually, bringing the book in. I don't want to make this about me, because it's all about that number "one million," which is absolutely amazing by the way. But as you mentioned the book and we're talking about milestones, just today, I got my 150th review on "Minimize Me," my latest book. Now, 150 reviews isn't a massive number, but it's not bad. Certainly in the self-publishing world that's pretty good.
Damien: I think it is a big number, I think that if you see 50 reviews on a product on Amazon, then that is a lot of reviews, because you know that people can't really get 50 friends
Andy: People haven't got 50 friends that are willing to go online and rate something.
Damien: Yeah. So, I think, 150 is fantastic! Pat yourself on the back, Andy.
Andy: I thought I'd read my 150th review out for you, if you like. Is that okay?
Damien: Yeah, go for it.
Andy: So, my 150th review; "Funny, well-written and educational." That's the tag-line. And it says here, I won't read it all, it says, "Andy did all the work for us. I've tried a couple of these diets and would never try others. Fabulous read." So, that's the gist of it. And the reason I mentioned that is, and we talk about chalk and cheese and yin and yang...can I read my 149th review for you, please?
Damien: Go for it.
Andy: Because, as much as I'd love to sell myself and my product, I'm a little bit uncomfortable with praise. So, let me read it out word-for-word my, 149th review, which is right next to that five star 150 review, and it goes to show how people see things differently. So, here we go - "Waste of time, well, this book was on a free promotion, so I guess the price was just about right. But I have to say it wasn't worth the time it took to read it, though it's fairly short, so that minimised the loss for me. One won't learn anything from it as to the nuts and bolts and the various diets with which he tinkered. Yes, he lost weight. Good for him. He basically did it by not eating much. There! I've saved you all a couple hours of reading a bunch of hubristic drivel. You're welcome." The definition of hubristic is, "Extremely arrogant behaviour resulting from pride or passion." So there we have it. "Hubristic drivel that's a waste of time," and, yeah. I'm an arrogant person apparently.
Damien: I think that's harsh. I don't see how you could be arrogant. Ignore them, Andy.
Andy I think it's brilliant. Should we talk about money before people turn off? So what have we got this week?
Damien: One of the things I want to talk about is how much money you need to live the millionaire's lifestyle.
Damien: Many people think to have a millionaire lifestyle, you need a million pounds. No, you don't. That used to be the case, when your grandparents were around, but not anymore. You need more money than that. So, I'll talk about that. I'm also going to talk about how you can get compensation if companies hand out your details without your permission. Finally, I'm going to talk about investment platforms. So, let's go into the first one. I'm going to start with the investment platforms, just a quick tip on this one.
Andy: Okay. Go for it.
How to reduce investment platform charges by 50%
Damien: Investment platforms, you know if you go and invest with the likes of Hargreaves Lansdown or Fidelity, they all have different charging structures, for different investment amounts. So, if you've got lots of money, one might be cheaper, but if you've got a smaller pot of money, then another investment platform might be cheaper. An investment platform is the mechanism by which you buy funds and invest your pension.
Andy: When you say "cheaper," is that from charges that they levy on your investments or is there an upfront fee or anything like that?
Damien: I'm talking overall charges. Some investment platforms charge admin fees. Some of them charge you for just giving you statements. There's a whole range of different charges and that's what makes it hard to compare investment platforms. It's very difficult to compare one investment platform to another. So, what you need to do is when you go to an investment platform, let's say you have about £100,000 or more, so you've got a decent pension pot is get a quote.
You can go to the likes of Hargreaves Lansdown and all the other investment platforms and get a quote from them and ask them how much it will cost. You do not have to accept the standard charging terms when you log on online or apply online. You can go to them and actually negotiate a discount. You can say to them, "So-and-so is going to charge me this amount. Can you beat it?" and there have been cases where people have actually had up to 50% of the charges knocked off to save them thousands of pounds. So, if you're in that boat, go to the likes of Hargreaves or Fidelity and see if you can get a better deal Shop around, even on investment platforms, even if you're already with one, and you could save yourself a lot of money. Not many people know that.
Andy: That's a really good tip. I was watching a program just recently on telly which teaches people to basically not accept the price that you see in the High Street, and you think, "High Street shops, there's no way you can do a deal." Well actually, if you ask to speak to the manager, a lot of the time you can get money knocked off.
Damien: The reason it works like this with investment platforms is because the platforms also deal with financial advisers. With financial advisers those sorts of discussions happen all the time because they've acquired a lot of clients and they're trying to negotiate for them. The ability to negotiate already exists within those investment platforms and with their management, so if you're a particularly big client and you had quite a bit of money you can negotiate a better deal than their advertised one, so go do it.
Andy: Interesting stuff. Good. Okay. What have we got next?
How much money do you need to live like a millionaire?
Damien: Right. Let's go onto the millionaire story. Now, how much money do you really need to live the life of a millionaire, Andy?
Andy: Let's have the definition of what the life of a millionaire is. You need to still have that million pounds in the bank and still live sort of a lavish lifestyle, is that right?
Damien: Yes, so a million pounds might make you a millionaire in numerical terms, but these days, that isn't going to get you very far, especially if you look at the average house price in London which is somewhere north of £300,000. So, to be a millionaire these days isn't quite the same as it was when our grandparents were our age. The idea of living a millionaire's lifestyle is an interesting question. How would go about answering that? Is it about how much you spend, how many boats you have, or is it to do with the sort of people you mix with? What is a millionaire's lifestyle?
Andy: Do you know what? My definition, in my head, and the way I've always seen a millionaire, is not one of these paper millionaires that when they count everything up and look around them and say, "Yeah, that's worth this," and it all adds up to a million. For me, that's not a true millionaire. Me growing up, I've always thought a millionaire is someone who's got at least £1 million in the bank that they could write a check for. That's my definition, personal definition, of a millionaire. One day, Rodney, who knows, I might be there, too.
Damien: Yeah. See, I differ from you, because if you were to live a millionaire's lifestyle, I would sit there and think, "I've got to be able to go out and eat in the nicest restaurants every week," if you wanted to do that, or buy a car that you wanted, a particularly nice car, because it is about being able to do what you want, when you want. That's really, I suppose, what a millionaire can do, a true millionaire lifestyle. Because what we're doing is separating the idea of what you have in assets to what you're able to do with those assets, so therefore you need more. So, interestingly, the Centre for Economics and Business Research quite, back in 2008, did a piece of research to try and work out how much money you actually need to live a millionaire's lifestyle, and what I've done is go back and look at that research and then updated it to bring it all the way up to 2015. They did the research in conjunction with the national lottery. The way they actually worked out what a millionaire is to put people into different bands, black, platinum, gold, silver and blue millionaire. I've gone through and looked at each of these profiles and then worked out, based on what they said at the time, how much money you need today. So, shall I rattle through some of them?
Damien: If you want the millionaire's lifestyle that we all dream of, this is how much money you're going to need. Now, the bottom rung of millionaires is what they called the "blue millionaire," and these are people who typically have a three to four bed home, they might have an apartment in the Mediterranean, they might drive something like a Range Rover or some 4x4, and the top holidays they take are Mediterranean cruises or go to Florida. The sort of typical, lavish item that they might have personally might be a £2,000 watch, and the sort of things they do is they have meals out and they're members of the golf club. If you want this lifestyle, then the amount of money you need to live that today is £2.1 million.
Damien: So, let's go onto the next band. The next band are called the "silver millionaires" these are deemed as the people who are truly living a millionaire's lifestyle, but they're sort of the bare minimum. These people are more are typically someone like a pop musician and they will typically have a detached house with a gym. They'll have a villa, probably, again, in the Mediterranean. They'll have a couple of cars like BMWs and Audis.
Andy: Possible indoor pool out the back do you think, maybe?
Damien: Yes, definitely.
Andy: On that detached house?
Damien: There will be Caribbean holidays and £10,000 of jewellery and they'll throw lavish parties as well. The sort of recreational thing they will have is a box at their Premier League football club.
Andy: Yeah, I can see musicians having those. Yeah, definitely.
Damien: You can already see where we're if you want to be able to live the dream. The amount of money you would need today to live like that is £7.2 million.
Damien: There you have it. To be a true millionaire where you can live the millionaire's lifestyle and buy the things you want, probably a boat and all these things, you need. £7.2 million of assets, not £1 million. There are still higher categories of millionaire, so I'm going to rattle through them, because I know everybody else is thinking, "Well, if you had to have £7 million to be a mere basic millionaire, how much do you need to be the other three categories?" The answer is, to be a gold millionaire, these people are normally professional sportsmen, someone like Lewis Hamilton, they end up having homes all over the place, they drive cars like a Porsche and various Mercedes cars. They do cruises round the world, safaris, they will have a £20,000 watch, they'll think nothing of that, and they too might have boxes at sports grounds. So it's the next level up, but they are particularly lavish. Now you'd need £17 million to live like them.
Andy: Sorry, when you say they need £17 million to kind of keep that lavish life do you mean a constant £17 million that keeps needing to be topped up? That needs to be the baseline, you know? Because they won't last long if you've only got £17 million with no other income coming in. I'm just thinking when they retire as a sportsman, can they keep their life?
Damien: If you gave me £1 million, I could sit there and provide an income of say up to £50,000 a year net of tax in a sustainable way. If you were creative with the way you actually invest using different tax structures, nothing outlandish or illegal, but you could get 5% easily. If you had £10 million, you can already see that, before you even touch the sides of this money, you'd be generating half a million a year. So therefore, if you think that someone has got the house already and they've got their bits, half a million a year is quite a bit of money, isn't it?
Andy: Of course, yeah.
Damien: So these guys are going to be spending lots but they're going to be making about a million pounds a year off the almost £20 million they've already got. Of course, if they go crazy and take private jets everywhere, then they will go bankrupt.
Andy: See, what I'm forgetting about these people is, when I'm doing the sums in my head, I'm going, "Yeah, but what about the mortgage? What about the payments on the car and the electricity?" But of course, it's all upfront with them. There is no ongoing monthly bills. A purchase is a purchase, it's a one-off, it's done. So, yeah. I get it.
Damien: Do you know what the biggest thing when I used to deal with guys in the City and these lawyers who had so much money they were making a few million pounds a year, their biggest expenditure for them was principally their children's school fees, because they're sending them to very nice private schools. They can cost a couple hundred thousand pounds a year if they had a few children. Then the rest of their money was spent on the house and the upkeep and the development of their houses, because they're constantly developing them, that was where most of their money goes. If you're a real multi-millionaire, you're one of these gold millionaires, and the chances are, if you've got all that nailed down and you're going to be just spending your money on lavish things, it's going to be replenished.
The platinums band of millionaires, these are the actors of this world, there you need £72 million to live like them. So you're talking about the Hollywood actors, that's how much they have. And you know what a Hollywood actor's lifestyle is like, I don't need to tell you. You see plenty of it on TV. So the top category, which is basically the "black card" millionaires, would be the likes of the Beckhams and other real superstars of this world, probably Kanye West You need at least £134 million to live their lifestyle. So, there you go. In a nutshell, if you want to live the millionaire's lifestyle, Get at least £7 million and you'll be there. If you've only got £5million, then unfortunately you're going to probably be...
Andy: You've got some work to do.
Damien: You've got some work to do and will be heading back down to earth with the rest of us.
Get compensation if a company shares your personal details
Damien: Right. On to our next piece, this is a relatively short piece actually, Andy. I mentioned earlier about getting compensation if somebody gives your details away.
Damien: It drives me up the wall when companies do that, because they're not supposed to. If you say they're not allowed to share your personal information then they shouldn't. But you can actually get compensation, because there have been a couple of cases recently where there have been complaints that have ended up with a financial ombudsman ruling in favour of the person complaining. The consumer has even been awarded money in damages for the upset caused. What happened in one case, a chap owed money and a bailiff came round to his house but he was out. The bailiff then pinned a note to his door detailing what he wanted and why he'd called. And of course the demand was posted on his front door, so all of his neighbours read the demand as they're walking past. Of course he was furious about this and complained and he got £400 off that company. Which is brilliant, because obviously bailiffs are a horrible bunch, anyway. That wasn't a case of where he'd ticked a box online to opt put of marketing and they start selling his details on regardless. It was a case where somebody has just written a note and put it on a door and gave away some of his personal details. So, if somebody does something like that to you, you can make a complaint.
Another example that happened was where a company rang up a chap who was struggling with his mortgage and told his wife when she answered the phone what was going on, and the mortgage was actually in his name only, and his wife then left him. He then obviously made a complaint about the fact that they'd actually given over his details and he was successful too. So if you ever get into a position whereby you're upset because somebody has revealed information to somebody where you feel they shouldn't have, then you could make a complaint to that company and if they don't do anything, ultimately the financial ombudsman service could order them to compensate you or redress you in some way. So that is a tip to remember.
Andy: Interestingly, did you know, the box that is online where you tick it sometimes or you forget to tick it, sometimes you have to tick it, sometimes you have to leave it unchecked. The one that says basically, "Other people can contact you," is that basically them selling your details, like making money from your details? Or is that something slightly less sinister and it's just them providing details to their already associated partners where they might be able to make more money from you?
Damien: Yeah. The answer is, "Yes and no." I only know this because I've been involved in building things that actually had those boxes and there are strict rules on it. As a business, you don't want to collect people's information needlessly, because you have to treat it with care. You can't just sort of sell it on or allow it to be leaked out or anything like that. Often you'll see two boxes on these things: one that says you can share with their own internal partners.
Andy: A good example on that is if you're buying car insurance from, let's say Aviva, and I'm just using that as an example, Aviva also do life insurance. So other subsidiaries within that business, for example.
Damien: Yeah, then the other box you get is where you give them permission to pretty much sell your data on, and there's big, big money in being able to sell or purchase data. Also some of it comes about because you're on the open register. You know, when you register to vote, there are two registers. I talked about it before on a previous podcast. There's an open register and an electoral roll. Now the open register, anyone can look at, you and I could go and look at it if we wanted and find out people's details and then write to them. You can choose to take yourself off that, which I advise everyone to do. But I'll give you a really good story that I saw years ago. A chap decided that whenever he had to fill out forms which he suspected would be used for marketing he would deliberately use fictitious middle names.
Andy: A different one every time kind of thing?
Damien: Yeah, when he un-ticked the marketing boxes and said he didn't give them permission to pass on his details he started getting junk mail with the wrong initials name on them. So he could pinpoint which company had actually sold on his details illegally even when companies denied they had.
Andy: That's really clever, because my question was, "You trust yourself to not tick that button, sometimes you make a mistake and forget, but let's say you do it diligently and somehow you still have unwanted stuff, how can you track it back?" But this guy did it. He actually tracked it back by using that very clever method.
Damien: Yeah, and they ended up approaching the company. It was on BBC Watchdog at the time. This was years ago, I'd say at least six, seven years ago. The company denied it, but of course he had the evidence that it was them that must have sold on his data.
Andy: Clever man. I'd like to buy that man a beer, because that is sneaky and brilliant.
Damien: Yeah. It is, isn't it? It is brilliant.
Andy: I am so worried about data theft that you hear about these stories about people going through your bins, so I regularly, whenever I have any post or anything I always shred it all. But every so often you'll get something, say from Amazon, and you just pop it in the recycling, but often you'll have a label on there with your name and address. I cut off that label and make sure that there's no evidence of my name or address in my rubbish bin, because I also don't want the council snooping around and finding out that I've put something in the wrong bin or something like that, because I've heard stories about that.
Damien: You've not been recycling?
Andy: Am I weird?
Damien: No, you're not weird. I do that as well, actually. I take off all that stuff, because don't forget: people can, if they really wanted to, they could take some bits of information and piece them together. So, there are ways. Just because they don't have your date of birth, they might be able to find that out a slightly different way, and that's the sort of information that I would always shred. The answer is, if you're not sure, then shred it. Because you can get a shredder for a tenner. I know as time goes on, we all get a bit lazy and we do become lazy, because receipts these days don't tend to state your full credit card number like they used to. They stopped all that, but occasionally you find the odd one that still does. But as a general rule, it would be much better if you do shred everything, and I am with you on that, Andy. I don't think there's anything wrong with that, and it drives me up the wall when I get circulars and things that have my full name on and I sit and think, "Well, great. Now I've got something I didn't even want that I've got to go and shred now."
Damien: The tip is to plug your shredder near your front door, so when things come in, I just chuck it into the shredder.
Andy: Or, go old school like me and don't plug your shredder in at all. I've got a manual hand crank shredder that can be used anywhere. Yeah, it's got a hand crank on the side. It's quite good. It makes a hell of a noise, though. I suppose every shredder makes a noise.
Damien: Do you have one of those old fashioned washing board things to do your clothes as well, Andy? That's it for this week. A couple of quick ones, actually. Oh, I've got to share this: the worst ever money tip I saw this week. Have you seen the supermarkets or the large shops now have to charge or will be charging 5p for a plastic bag.
Andy: Yeah, actually in our local Sainsbury's, there are big signs up.
Damien: But the worst tip, the money tip I've seen was probably the result of the newspaper scratching around for content. But the tip was that there are certain supermarkets that will actually almost reimburse you 5p for each plastic bag you reuse .So their tip was to go around and find unwanted plastic bags in the hedgerows and collect them, which I think the slight flaw to that, other than you'd need a lot, you'd need a 100 for a fiver, you'd also need 100 of their own branded plastic bags, presumably, That actually makes it even more challenging. So, the worst money tip on the planet is go in hedgerows and collect plastic bags, for 5p each. There you go. That's it for this week but don't forget anyone can contact me by email. Just because there are lots of people who use MoneytotheMasses.com, I still respond to everybody who emails me. And I spend a lot of time in the week doing it. I love it. I love contacting people when they're talking to me. So, email me at the usual address at [email protected] So, there you go. Until next week, Andy, that's me done.
Andy: Indeed, Damien. Good stuff as always, and look forward to you next week. Catch you later.
Damien: Catch you later.