Investing De-Confusified: The Super Secret Sauce of Badass Budgetopian Behaviour

I was about to write some witty, humorous but complainy-pants introduction about how it's been a long week before I realised it's only Monday night - oops! For whatever reason it's been a tough one, but that's ok. Some days are harder than others, but I like to at least try and live my life a bit like I treat my money: a step at a time, always carrying on regardless of what's going on around me (within reason, of course. Sometimes the boiler explodes or something. But there's always that emergency fund...).

The good news for any information-ravenous Budgetopians is that part of my current work is being extremely concise, specific and objective in the way I write. Well, I'm home now, so don't expect ANY of that!

But despite being a bit knackered and offering a likely tangential (but hopefully entertaining) waffle, I also promised a post about investing. Hang in there, if you can. I promise it'll be worth it.

"Someone's sitting in the shade today because someone planted a tree a long time ago." - Warren Buffet on investing

It would be disingenuous of me to try and write a personal finance blog to help you understand more about reaching financial freedom without talking about investing. Not only disingenuous in fact, but almost impossible, as you may have gathered by now with my frequent hat-tips to the concept with a mysterious 'coming soon' aura surrounding them.

If you spend any time whatsoever online searching for tips and tricks for slow, long-term wealth building (just me?) you'll have likely come across a hundred people who all somehow have the same amazing, unknown CURE to being BROKE that they are offering YOU (like and subscribe!) so you can enter the inner circle.

While well intentioned - because I genuinely believe the majority of Finfluencers do really want to educate their audience - the way this information is shared more often than not manages to make the relatively simple concept feel EVEN MORE out of reach and confusing than it did before you saw it. Inevitably you end up rolling your eyes, think "not for me", and crack on with your life, begrudgingly content with the idea of working until you're about 100.

Well...

What if I told you I HAVE THE SECRET?

I don't. Well, I do. Sort of. But it isn't a secret. In fact, the concept of investing is thought to have been around thousands of years ago. In a paper published in 2021 exploring the history of investing, the author presents evidence for an investing framework present in 1700BC Iraq, where individuals pledged land as collateral against different investment projects. Your pension (which, by the way, makes you an investor by default) probably dates back to the Romans, when Caesar wanted to devise a way of keeping retired soldiers sweet to prevent potential uprising. Investing in the more familiar form it takes now still dates back to 1602 at the Amsterdam Stock Exchange, where individuals could invest in voyages East for commodities such as spices and silk and were paid a percentage of proceeds (if the ship ever came back).

So, as you can hopefully see, there's nothing new or particularly exciting about investing. It's been around even longer than Warren Buffet himself. But what actually IS IT?

Investing is buying something with the expectation of it going up in value.

Let's say I sell you an apple. You buy my apple for £0.50, knowing that tomorrow, every apple tree in the world will succumb to a mysterious deadly disease, rendering your new apple one of the rarest commodities in the world. You sell the apple to a Russian Oligarch for £1. You have made a 100% return in your investment.

Once you've stopped laughing, instead of apples think of shares. A share is simply a piece of a company. When a company gets big enough and goes public, it will be listed on a stock exchange (which look a bit different now to the Amsterdam one pictured above) and we, as public investors, are able to help grow the company by buying shares. The reason this is investing is because when we buy a share in a company, we are doing so with the expectation (or hope) that the company will be successful, and therefore the business (and our share) will go up in value.

To visualise this, picture my apple business. I list my apple business, a business specialising in the long-term storage of apples, on the stock exchange and issue shares. You buy one share of my apple business for £1. If the aforementioned disaster strikes, what happens? My company, that has stores of a now extremely rare and valuable asset, sky rockets in value, and so does your share. You sell your share for a ridiculous amount and retire to the moon.

I'm being ridiculous, but the premise is solid.

Investing is the bread and butter of wealth building and the gin to the tonic of financial freedom.

So why am I only now filling you in?

Remember when we spoke about priorities? I introduced you to three very broad and fairly non-specific systems to follow to get your financial life in order. These were:

1. Take stock (make a budget)
2. Spend less/Earn more
3. Save and Invest

Making a budget helps you understand where your money is going, highlights areas you could make changes, and tells your money where to go. Spending less and earning more gives you more flexibility and, more importantly, margin in your budget. Saving and THEN investing goes next - your savings help you achieve your short-term goals and provides a buffer against emergencies, while the investing is your engine for the long journey ahead.

It makes absolute ZERO sense to invest in your engine if you set yourself up for a flat tire every 5 miles.

Catch my drift? Investing comes last, after everything else is taken care of - that's how we set ourselves up for success. That way, you always have enough to cover necessities and protect yourself against emergencies WITHOUT having to touch your investments. This is ABSOLUTELY key.

Picture again your share in my apple business. The night before the mysterious apple tree murdering disease hits, you suddenly have need for an emergency private dental appointment and you don't have an emergency fund. You sell the share, using the cash to pay for the dentist. If you'd had an emergency fund, and held the share, you'd have made a return the day after to buy your dentist and have them live in your home dressed as the tooth fairy.

To quote a deeply respected figure in the personal finance space, Pete Matthew, possibly himself quoting some book or another:

"The wise man built his house upon the rocks"

Now I've hopefully given you something to start thinking about. Remember my chicken shop maths? The premise that a small purchase can amount to a huge sum later down the line is what investing is all about, and something we'll be exploring very soon.

It also beats the living daylights out of inflation, from hereon to be known as The Enemy, but more on that later.

Don't worry - I know I've been a bit of a tease here. I'm going to do a deeper dive on exactly what you need to do to get started investing (and what will get us to Budgetopia far before we otherwise would) as well as explaining the wheels behind long-term investing: compound interest.

Until then, my takeaway thought for you today, paraphrasing Mellody Hobson, is this:

The biggest risk of all in terms of your financial freedom, is taking none

Cheers and have a brilliant week!