S1E2: Can anyone get rich? | How To Own The World author Andrew Craig
Andrew Craig is the author of arguably the most useful British personal finance book of all time - How To Own The World. It was the book that opened up Damo’s eyes to what’s possible, laying out the steps for building wealth.
Can anyone really get rich?
Yes, you can… if you have enough time.
What you should remember from this episode
🏦 Being rich means being able to live off your money (capital), not your work (labour).
👵 You could be out of work for decades because of increasing life-expectancy so you have to think hard about your long term future. You can’t rely on the state or your workplace for your pension.
⏱️ You can get rich… if you have enough time.
📅 Time is your biggest ally in building wealth because of compounding.
💰 5k invested for 55 years at a 10% return results in £945K.
- If you want to learn more about the investment tools for children mentioned in the episode, check out Damo’s (old but still relevant) video on Junior ISAs and Junior SIPPs
🇺🇸 US stocks have returned 9% a year for 150 years.
📈 Stock markets can go down for days, weeks, months, even years - but historically, over the long term, they’ve gone up. This is why it’s so important to invest for the long haul - ideally decades.
💸 Rich people are far more likely to know about the stock market because that’s how they are likely to have become rich.
🧍Becoming financially literate, learning about stuff like the stock market, is life-changing because it’s how you can get rich. Most millionaires in the US are ‘normal people next door’ who invest in the stock market for the long term.
🚗 Learning how to do the nuts and bolts of your finances is no harder than learning to drive a car.
🪙 Investing is not trading. Investing is boring, consistent, long term - e.g. investing £100 a month in a global index fund for 30 years.
😐 Tackle your finances in a sensible priority order. Before you start putting money into high risk investments like crypto, sort the fundamentals of your finances out. Most professionals advisors would say these are the basic steps:
- Clear unsecured debts like credit card debt
- Build an emergency fund (3 - 6 months income)
- Use your ISA and your pension effectively
- Only once you’ve done these kinds of things, should you even consider high risk investments, and if you do, don’t put more than 10% of your investments in them
- Of course do it sensibly but how you see fit. Damo paid off his debt while also building up a small emergency fund so if anything went wrong he didn’t spend on the cards again
What you should do after this episode
Take charge. Take it upon yourself to become financially literate. You can learn this stuff and it can change your life. No one cares more about your money than you so it’s time for you to take the wheel.
2. Read Andrew’s book (if you only ever read one personal finance book, this is right up there). Another great book to read that Andrew mentions is The Psychology of Money - they’re two of our favourite ever books on personal finance.
3. Try to save and invest 10% a month (even more if you can). But if you can’t afford that, start somewhere because small amounts add up if you have enough time. Play around with this compound interest calculator to see what we mean.
4. Consider the investment strategy of ‘owning the world’, Andrew’s idea that because the world keeps growing, you should invest in the world’s growth rather than trying to predict the future which can be a mug’s game.
5. You can own the world by investing in lots of asset classes (like stocks, bonds and gold) but the easiest way to get started in owning the world is by buying a single global index fund. This single investment actually invests your money into thousands of companies around the world (stocks/equities), so you benefit from the world’s growth through those companies. We’ll talk more about this in our next episode.
