Stop buying shit you don’t need and start investing

Matt Cottle
7th January 2022
Matt Cottle 345

Property investor and landlord Matt Cottle, shares his insight on getting started with property investment and making your money work for you, rather than you work for your money.

Christmas is finally over and the endless greetings of Happy New Year are already getting tiresome. I can literally smell the holier-than-thou January-only vegans coming to educate us all, and the calls of Dry January are echoing loud and proud through our social media feeds. No doubt at this point you’ll be thinking about the year in work ahead. Does it fill you with dread? Or are you fired up and ready to take on the challenge of a New Year filled with targets, meetings and travelling?

If you’re in the latter camp, you are one of the lucky ones. Knowing that you have a fulfilling job that excites you will drive you forward for the year ahead. I know how that feels, I was excited almost every day for most of the 20 years I ran my business. Raring to go every Monday morning, I knew how fortunate I was to be in such a position.

The new landscape

The pandemic has given us other ideas. It’s altered the horizon on employment for good. Staff are taking full advantage. In Wales, embattled employers now face fines if they insist their staff come to work if they can do their job from home. But they can meet their mates in a group of 6 at the pub. It was hard enough to get people to come to work and sit in one place all day, prior to the pandemic!

People have become very serious about downtime. Most of us spent lockdowns in an unending cycle of domestic chores; emptying the dishwasher and hanging out the washing while trying to keep the kids logged in to their Teams lessons. But more than that it was overdue time well-spent with family, reconnecting with our children and watching them grow in real-time.

Getting more downtime

The single greatest achievement of 2021 for me was this: since I left my demanding job to concentrate on family, my kids now come to me as much as they come to my wife for cuddles, snacks, help with reading or anything else they might need. Prior to me being around 24/7, they would head to Mum by default while looking at me with suspicion, despite my open arms and well-meaning coochie-coos. Had I not had a passive income, I wouldn’t have been able to step back from my job, and I’m not sure that newfound connection with my kids would have ever happened so naturally.

Creating passive income

This brings me neatly onto property investment and the benefits thereof. Getting more and more of that family time requires you to be able to earn money passively and it's only possible with a razor-sharp focus on saving money to build investments while keeping down your monthly costs. Not easy right? That’s because we’ve all been spun a bit of a yarn our whole lives. We’ve all been taught that working hard, day in, day out for life is how you earn money. And what should we do with it? Spend it of course. On shit we don’t need.

It’s what keeps the economy moving. Car finance, credit cards, plastic stuff from China, big screen TV’s, sparkly things that catch your eye and so on. Spend it all, go on. Then get back to work on Monday and earn the money to pay for it, sucker. Get a promotion, earn more money, trade in the car for a bigger one, and start looking for a house with more room too, because we’re going to need it to store all that useless shit we keep buying. It’s called the rat race my friend, and the chances are you’re stuck in the middle of it.

Shit you don’t need

It’s a sad fact that we are all so materialistic today. Just look at that Christmas credit card bill that’s about to drop. Ask a kid what they had for Christmas and the chances are that they’ll cock their head and look at you for a while before finally remembering one or two of the maybe fifty items delivered overnight by the big fat man with the long white beard. Conversely, you’ll know all of them because you can log in and look at your credit card statement.

How much better our lives could be if we were to own a set of Le Creuset pans or a Sub Zero fridge with a glass door, and an expensive tap that produces cold, hot & boiling water and three different types of IPA at the click of a finger. We imagine our friends’ elevated opinions of us following such purchases. What about those all-important options you can add to your car when ordering a new one?

The neighbours will undoubtedly be impressed with your choice of 20-inch wheels and a carbon fibre spoiler, won’t they? You’ll be able to corner faster, and the downforce will keep you pinned to the road, very important on your weekly trip to Tesco. On a PCP deal, it’s only an extra £20 a month. Fill your boots.

Here’s an idea – why don’t we stop buying shit we don’t need?

Most people will spend an entire lifetime working their fingers to the bone to be able to continue purchasing stuff - liabilities. Just head up into your attic and then to your garage and shed. Take a calculator with you and add up the cost of all that stuff you longer use, the items you’ll soon be throwing out to make way for a truckload of new things you don’t need. Bezos has a lot to answer for. Just imagine if we only bought the things that we needed and invested all the spare money?

“Compound interest is the eighth wonder of the world. He who understands it earns it ... he who doesn't ... pays it.” Albert Einstein.

If you’ve never taken the time to understand the real power of compound interest, may I suggest you stop everything and Google it right now. This is what we should be teaching our kids at grassroots level.

Look at The Rich and see how they do it. Firstly, they generally don’t ‘work’ a day job. Secondly, they rarely buy anything that doesn’t make them money. Finally, and most importantly, they spend their money and time accumulating assets, not liabilities. Their particular flavour of assets are ones that generate income. Not only do they increase

in value over time, but they also spit out cash - monthly, quarterly, or annually, forever. Rich people teach their kids the importance of accumulating incoming-earning assets and compounding the results, not endlessly purchasing liabilities. This difference in the way their children are educated about money, and how to use it, is why the rich get richer and the poor get poorer.

But I love my job I hear you say. OK, I understand. Have you considered how long you would be able to survive if you couldn’t work? A week? A month, 6 months? Maybe you feel indestructible. Good for you. What happens if one of your family becomes sick and needs you full time. You can’t work and you have little to no savings to fall back on. How will you keep your family in the way they are accustomed to living? You need to start building passive income, my friend. Today.

If you want to be more like rich people, do as they do. Stop buying the things you don’t need and start investing. Take advantage of ISA’s and pensions are great, please take advantage of them (I do) and start investing in property. The sooner you start and persist, the richer you’ll become.

Get ‘match-fit’

Getting onto the rental property ladder will require capital. There’re no ifs or buts about it. There are many ways to come by capital. You can save it, borrow it, marry it, inherit it or steal it. Don’t do the latter, please. But if you can get/have got a deposit together, you can buy a ticket and get on board the good ship Buy to Let. But first, you must reduce your costs. You must become financially ‘match fit’. No point in going to the trouble of building investments to throw it all away again.

You must know exactly what’s leaving your bank account and on what day. You’ll need to renegotiate every contract you have, utilities, phones, Sky, etc. Pay off any outstanding short-term debt like credit and store cards etc. Sell your bread maker, air fryer and sound system. Trade-in your gas-guzzler for an electric car and get rid of unwanted jewellery. eBay the things you and your kids no longer need. Do whatever you need to do to get match fit. Once you are free of irrelevant clutter and have fewer outgoings, you’ll feel good and you’ll be ready to save and invest your money wisely.

How many properties will you need? It depends on how much income you need to replace. Around half of all UK landlords have only one rental property. But that won’t be enough. Acquiring more will take time and additional capital. Be patient because it won’t happen quickly. You can’t build a pension pot overnight and you won’t build a property portfolio overnight either. Remember what your Grandma told you - all good things come to those who wait.

The price of happiness

A well-being study carried out in 2018 proved that when household income reaches £72,500, we are at our happiest. Any more than that led to feelings of lower-level well-being. Why? Because once we have enough money to cover our core needs, more money will have little additional impact on life satisfaction. You may earn a lot more or a lot less than that. In 2020, the average UK household income was £30,800 so you can draw your own conclusions. The great part about getting match fit and reducing those monthly outgoings is that you need to replace less income.

When I buy a property to let, I always aim for at least £500 net profit per month. That’s after I’ve accounted for the mortgage, maintenance costs and insurance. Quite often it’s a lot more than that. Any less and I walk away from the deal. There’ll be 2 more just around the corner. According to my figures then, the average person would need to purchase 5 properties over a period to ensure they can one day replace their existing income. Personally, I only invest in single-let properties, because I want my portfolio to create passive income. It means I can be available for family at any time, travel, cycle, go to the gym and not have to think about my business for any more than a few hours a week. I run everything from just an iPhone.

But that’s my format. If you want more cash flow, and you want to be more involved, investigate HMO or holiday-let properties as you could earn 2 or 3 times more. But be prepared to put in the time to manage lots of people coming and going. You may be able to replace your earned income faster though, as you’ll get more return for your capital. I would certainly recommend seeing what works for you before you take the plunge.

On a final note, remember that when you buy an investment property, you’re in control. It’s the pension fund that pays today. You do the hard work once and aside from a little maintenance once or twice a year, you’ll get paid every month forever.

So, stop buying shit you don’t need and instead start investing today, and then tell me all about it.

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