Full transcript
0:00So today, I'm going to pull back the
0:01curtain on what I call the comfort
0:04mirage, the invisible financial snare
0:07that keeps the middle class running and
0:10going nowhere. And more importantly, I'm
0:13going to show you three very specific
0:15move. One that puts thousands back in
0:18your pocket immediately, one that takes
0:2010 minutes to set up, and one that could
0:22let you retire years earlier than you
0:26think. Now, I should warn you, some of
0:28this is going to probably sting. It's
0:31better that you hear it from me now than
0:34figure it out at like 62 when it's too
0:37late. So, what is the comfort mirage?
0:41So,
0:42there was this couple, right? Lovely
0:44people who came to see me a few years
0:46back. They had a combined income of
0:49about 130,000
0:51pounds, right? Detached big house, two
0:54or three cars on finance, kids in
0:56swimming and played rugby, annual
0:58holiday to the Algarve every year. On
1:00paper, living the dream.
1:04But when you actually sat down
1:06and looked at the numbers, they had
1:094,000 pounds in savings. Total. That's
1:13it. After years of earning like six
1:15figures between them, they had less
1:18saved than some of my clients that are
1:19on like 30 grand just starting out their
1:22journey. The husband of the couple was a
1:24properly smart guy. He just remember I
1:27remember him sitting there and just
1:28saying, "I just don't understand like
1:30where does it all go?" Well,
1:33I'll tell you where it all goes. It just
1:35flows straight through you. A big salary
1:39comes in, gets hammered by tax, and
1:42flows back out again in service of debt
1:45and lifestyle.
1:46You're not building wealth. It's just a
1:49a pipe, a flow-through. That is the
1:53comfort mirage. You can afford the
1:56monthly payments on everything. So, you
1:58kind of
2:00feel wealthy. But, affording payments
2:03and being wealthy are completely
2:06different things. And that is the gap.
2:09That's is the gap where the trap lives,
2:11okay? Now, the couple that I told you
2:14about, they assumed that spending was
2:18their problem. That if they just like
2:20budget harder, they'd be fine. But,
2:23here's what I had to show them. Even if
2:25you nail your spending, the system
2:28itself is working against you. Right
2:32now, the UK government is running a
2:36stealth tax masterclass, right? The
2:39higher rate of tax threshold was frozen
2:41at 50,270
2:43pounds and has been since 2022.
2:46And it's staying frozen until 2028. And
2:50the government has already legislated to
2:52extend that until 2031,
2:55I think. Yeah, 2031. Now, think about
2:59what that actually means, okay?
3:0110 years ago, 50,000 pounds made you a
3:05high earner.
3:06Today, a mid-level manager earns that
3:09and it's just
3:11normal, right? Because the tax bands
3:14haven't increased or moved with
3:15inflation. So, every pound over 50,270
3:20pounds gets hit by 40% income tax. Plus,
3:23of course, 2% national insurance. That
3:27is 42p gone for every pound that you
3:32earn.
3:33Now, think about what that actually
3:34means, cuz I think sometimes we're all
3:36very guilty of just seeing that
3:39information thinking, "Oh, that's really
3:40bad." But, actually think about what
3:41that means.
3:42Let's say you stay late on a Friday,
3:45right? And you grind out an extra 500
3:48quid this month. And 210
3:51pounds of it vanishes before even hit
3:54your account. That's to me, that's not a
3:57tax system. That's a magic trick that
4:00steals your watch off of your wrist.
4:02You've seen those magicians, right?
4:04You're running on this treadmill, but
4:07you're barely moving forward. Now,
4:10listen, that's all fine.
4:12But this next bit is the one that
4:14properly winds me up, especially if
4:17you've got kids. I've got a 7-month-old
4:20daughter. This is something that has
4:21become way more real for me over the
4:24last year of my life. So,
4:26the high income child benefit charge. If
4:31you earn over 60 grand, you start losing
4:35your child benefits, right? By the time
4:38that you hit 70 grand with two or three
4:42kid kids, your effective marginal rate
4:45that you pay on your tax can push you
4:47well past 60%. It's kind of a really
4:51misunderstood tax. It's a little bit
4:53like the 100,000 bit where you start
4:54paying start losing your personal
4:56allowance, but the marginal rate of tax
4:58basically in this zone can push past
5:0060%. Let me say that again. 60%
5:05You work harder, you land another big
5:08bonus. Let's say it's a 5 grand bonus.
5:10What you actually take home as a result
5:12of that is a fraction of it. I was
5:16explaining this to my partner the other
5:17night, all the tax traps, all the
5:19clawbacks, all charges. And after 10
5:23minutes of me chatting to her, she was
5:24obviously delighted by that.
5:26She goes, "So, let me get this right.
5:29The government basically punishes you
5:32for earning more and having children,
5:34right?" And you know what? That hit me
5:38badly, because you know what? That
5:40summarized it up better than I could
5:42have done in the last couple of years or
5:44so, and that's exactly what they're
5:47doing. So, if that's happening to you,
5:50have you ever looked at your pay slip
5:51after a pay rise and thought like
5:54where does it all go?
5:56Just drop a comment cuz I want to know
5:58that
5:59you're not in the you know you're not
6:01alone. Everyone else is in this squeezed
6:03trap and I want to know how many of you
6:05have been hit by this because it's
6:06brutal. And the infuriating part is is
6:10that there's a legal way to claw most of
6:13this back and I'm going to show you how.
6:14But first, what you need to understand
6:17is the next layer of this trap because
6:19it's the one that sneaks up on you the
6:20most. So,
6:23the tax system
6:25is actively taking your money, right?
6:26And that's bad. We all agree to a
6:28certain degree, right?
6:30But
6:32at least it's kind of honest about it.
6:35You know, the numbers are there. It
6:36doesn't lie necessarily. What I'm about
6:38to show you isn't. And I keep coming
6:41back to this one because it's a it's an
6:43interesting one.
6:45The financial system with all of these
6:47things that we do has kind of what I
6:50call default settings and I think
6:52they're designed to keep you poor and in
6:54particular make you feel safe and feel
6:58like you're moving forward, particularly
7:00when it comes to things like retirement
7:02and savings. So, the guy who trained me
7:05all those years ago,
7:07the proper old school advisor, he told
7:08me something when a certain set of
7:10legislation comes in around auto
7:12enrollment and pensions that came in at
7:14the time. He told me something that I've
7:16never forgotten and I think it
7:17summarizes it really well. He goes,
7:19"Josh,
7:20auto enrollment, so again, that's where
7:22you sort of automatically put into your
7:24workplace pension so you start
7:26contributing. He said, "Auto enrollment
7:28doesn't give you a pension.
7:31It gives you permission to stop thinking
7:35about a pension."
7:37And I was like, "Jesus, I I think he's
7:39right." And when you look at the
7:41numbers, he was dead right. The
7:44government mandates 8% of your salary is
7:47contributed to your pension. Five from
7:49you and three from your employer.
7:53Now, people see that happening and they
7:56say, "Oh, I'm part of my workplace
7:57pension." They see all the contributions
7:59going in and they think, "Sorted. My
8:01retirement is handled."
8:04It is not. Not even close. For example,
8:07let's say that you've got a 60,000 lb
8:11salary over your career and you're
8:12contributing at that 8% level.
8:15That might reasonably generate a pot
8:17that could generate you 12, 13,000 lb a
8:20year for retirement. The average
8:23household spends 35,000 lb in
8:26retirement. Let alone factoring in
8:28inflation and lifestyle and all of those
8:30other things.
8:31This
8:33is a poverty trap dressed up like a
8:36security and safety net.
8:39Then, the next thing is the next part of
8:41the trap is that we have a property
8:43obsession in this country. Every spare
8:46penny goes into extending the kitchen,
8:48overpaying the mortgage, adding to the
8:50garden office. And look,
8:53don't get me wrong.
8:54Owning your home outright is brilliant.
8:57I'm not knocking that at all. You know,
8:59it's something that we should all aspire
9:01to.
9:02But, here's a trade-off that not many
9:05people will mention. I sat down recently
9:07with a bloke who had like 400,000 lb of
9:11equity in his house,
9:12but he had 1,100
9:15quid in his current house in his current
9:17account. And I'm like, "Mate, your
9:19kitchen extension is beautiful, right?
9:21But, it can't pay for your daughter's
9:23university. You can't buy groceries with
9:25your kitchen island. If 90% of your
9:29wealth is locked inside your house, in
9:31the bricks and sticks of your property,
9:34well, all you are is asset
9:37cash-poor. You're still trapped. You're
9:40just in a like nicer cage. So,
9:44you've got tax squeezing you from above.
9:47You've got the default settings luring
9:49you in and lulling you into a false
9:51sense of security, and then you've got
9:53property tying everything up that you've
9:55actually built. That
9:58is the middle-class
10:00trap.
10:01But, the question that you really asking
10:04yourself, or my god, you should be
10:06asking yourself is,
10:08"How do I get out?" Now,
10:11this
10:13is something that I bang on about all
10:14the time, and you'll see this in my
10:16other videos. This is the most powerful
10:18tool that you have. I don't care what
10:21anyone else says, okay? This is the most
10:23underused and powerful tool that you
10:25have. Not just to
10:28not make the mistakes that middle class
10:29are doing, but actually to build wealth.
10:32And it frustrates me how few people
10:34actually know about it.
10:36So,
10:38imagine you earn £75,000,
10:40and you've got two kids, let's say,
10:42whatever.
10:43You can have one kid, doesn't really
10:44matter. You are getting crushed by the
10:47£40,000
10:49tax bracket. Uh sorry, 40% tax bracket
10:52over 50,270,
10:55and the child benefit clawback.
10:57Thousands of pounds a year are just
11:00evaporating.
11:02But, what if you could redirect £15,000
11:06of your salary before tax straight into
11:09your pension?
11:10Well, because pension contributions are
11:13a taxable income reducer, so they
11:15theoretically reduce the amount of
11:18earnings you have of which you pay tax
11:19on, your taxable income drops to
11:23£60,000.
11:25Now, by doing that, you fall out of the
11:27child benefit trap completely. You dodge
11:31the 40% tax on 15,000
11:3540% tax on 15,000 pounds. Now, stay with
11:39me here because this is where it starts
11:41getting good. Your employer will also
11:43throw in there, too, straight into your
11:46pot.
11:47And when you add all of that up, 6,000
11:51pounds saved in income tax, 2 and 1/2
11:53thousand pounds saved in child
11:55tax child benefit, your employer
11:59chucking in national saving national
12:00insurance savings, as well. That is over
12:0210,000 pounds of value from 15 grand of
12:07salary, an effective return of over 60%.
12:11No risk, no clever investing, just
12:13understanding how the system works. And
12:17by the way,
12:18just very quickly on this cuz I have to
12:20mention this every single time, there's
12:21talk of this being capped, the salary
12:23sacrifice system from 2029. So, this is
12:26not a window that's going to be
12:27potentially open forever. Um so, you
12:31know, if you're not on board with this,
12:33this is probably a good time. So,
12:35try and use this before it all changes,
12:38okay?
12:39Um I'll do a little bit more about
12:41salary sacrifice changes
12:43probably on the channel. Subscribe to
12:45stay up to date up to date with that so
12:46you don't don't miss it. Now, I worked
12:50with this guy once who was like a
12:52project manager, I think. Um he was on
12:56about 72-ish thousand pounds. He had two
12:58kids under 10. He was losing in this
13:00scenario exactly what we talked about,
13:023,000 pounds a year of child benefit
13:04clawbacks and didn't even know at the
13:06time. And I ran that exact exercise with
13:09him. We restructured his salary
13:11sacrifice, drew up dropped his taxable
13:13income to below 60,000, and within a
13:15month, he's basically the net result of
13:18all of that is he's basically given
13:20himself a massive pay rise. And I
13:22remember him sat there thinking like,
13:24why didn't anyone tell me this? And why
13:26isn't everyone kind of doing this? And
13:28honestly,
13:29that question,
13:31it just keeps me up at night. So, that's
13:33why I'm doing this video partially, but
13:36also, I just want you to focus on that
13:39being such an effective impact on all of
13:42this sort of stuff. And I hear it almost
13:43every week.
13:45But, I've learned something in my time.
13:48Solving the tax problem isn't enough,
13:50okay? I have sat across from hundreds of
13:53people, and nearly every one of them
13:56makes the same mistake.
13:58They spend first, and invest whatever's
14:02left. Which, of course, is usually
14:05nothing.
14:06The 8% who actually escape the trap,
14:08they do it backwards. They invest first,
14:11and spend whatever's left. The method is
14:14dead simple. I call it the anti-budget.
14:18You work out what you need to be
14:19investing each month, and then set the
14:22direct debits on payday. The money
14:24leaves your account before you see it.
14:27Then, you spend the rest however you
14:29like. That's the key point. No guilt, no
14:33spreadsheets. And here's the key shift,
14:36though.
14:37If you can't afford your lifestyle after
14:40your investment or fund is have been
14:42funded,
14:43you can't afford that lifestyle. Sorry
14:45to say.
14:47The 92%
14:49spend first.
14:51The 8% they invest first. Now, be honest
14:55with yourself for a second. Which one of
14:57you Which are you right now? Are you in
15:00the spend first, or are you in the
15:03invest first? I have watched people save
15:06thousands of pounds in tax, do
15:08everything right, and then finance a
15:10brand new car with money that they've
15:12saved. They literally used their escape
15:14hatch to buy a shinier cage. So, I am
15:18historically terrible with willpower,
15:20right? I eat the biscuits if they're in
15:22the cupboard, which is exactly why I
15:24have to automate every investment
15:26contribution that I make and I do it all
15:28without me touching it. I don't trust
15:30myself to make the right choice every
15:33single month. So, I took the choice
15:36away, right? I made sure that I didn't
15:38have that choice to make. That is the
15:41real secret. It's not about discipline,
15:43it's about designing a system that
15:46doesn't require it. So,
15:49now you've you're saving tax and you're
15:53investing automatically. Brilliant. But,
15:55this might get you.
15:56Most people in this position still can't
15:58retire when they want to. And it's
16:00because of where the money is sitting.
16:03You've already seen how we talked about
16:05how property locks your wealth away, but
16:08there is a second lock. Your pension. I
16:11will sit here and say how amazing your
16:13pension is every day of the week. But,
16:15the reality is is that you can't touch
16:17it until you're 55, soon to be very very
16:19soon 57. So, if you lose your job or you
16:23hate your boss or you want to retire at
16:2645, a pension is a wonderful vehicle,
16:29but you're kind of limited, right? The
16:31fix is to build what I call an liquid
16:35fortress. And the best tool for this is
16:37your stocks and shares ISA. You have got
16:41a £20,000
16:43a year ISA allowance every single year.
16:46Inside of your ISA, whatever goes inside
16:48of your ISA, whatever investment you put
16:50into that, grows completely free of
16:53income tax, dividend tax, capital gains
16:55tax. There is still a
16:57very very small amount of tax in the mix
17:00in terms of withholding tax and things
17:01like that sometimes, but generally
17:03speaking, completely free of tax. And
17:06yet, millions of people waste this
17:09allowance every year. And by the way,
17:11what I'm about to tell you connects with
17:13a very specific number that I'm going to
17:15mention at the end. And it's one that
17:18tells you when you can stop saving hard.
17:20So, just stay with me and I'll see I'll
17:22show you what I mean. Now,
17:23my own ISA is the thing that lets me
17:26like sleep at night, okay? It's not
17:29necessarily my pension, it's not
17:31certainly not my house because if my
17:33boss made my life miserable tomorrow, I
17:36could check my ISA, see 18 months of
17:39expenses sat there, and just
17:41walk away effectively. Now, a stocks and
17:44shares ISA yes, it's designed for a
17:45long-term growth. It's designed for
17:47investing. But if you've got that safety
17:49net there, you've got choices.
17:52That's what a 200,000 pound ISA gives
17:56you. Not just retirement funds, but
17:59options. The option to take a
18:02sabbatical, start a business, retire at
18:0555 rather than 68. That is what real
18:09wealth feels like. Not stuff you own,
18:13but options that you have.
18:16What you actually put inside that ISA,
18:19index funds, a robo advice service, a
18:22managed fund, a multi-asset fund,
18:24whatever, that depends on you. And I've
18:27done lots of other videos on that, and
18:28you can have a little look at that. But
18:30there's no single right answer. But the
18:32worst answer is leaving the 20,000
18:36pounds ISA allows on the table each
18:38year, okay? Now, by the way, save this
18:41video if you want to. You want to come
18:42back to this salary sacrifice numbers
18:44when you're actually sitting down to do
18:46this and looking through it. So, right,
18:48you've got the playbook. Three moves
18:50that'll put you 92% ahead of the of
18:53people in your position. And you
18:54remember the couple that I told you
18:56about at the start? They did all three
18:58of those things. And the last time I saw
19:00them, they had a six-month emergency
19:02fund and a growing ISA. Same house, same
19:05cars, but just completely different
19:07trajectory. And look, if hopefully this
19:10changed how you think about your money,
19:12hit the like button. It helps more
19:14people in this same position as you find
19:17out this sort of stuff. But, and I mean
19:20this literally,
19:22all three
19:24fall apart if you don't know one
19:26specific number. This is what I was
19:28talking about earlier.
19:29The specific amount where your
19:30investments start doing the heavy
19:32lifting and you can take your foot off
19:34the gas a little bit, which is why you
19:36should watch this video here next
19:38because most people have no idea this
19:41number even exists and it changes
19:42everything. So, I'm going to break it
19:43down exactly and how to calculate it.
19:46So, give it a click because without
19:48this, you're just guessing. I'll see you
19:50there.