3 Things I Learned from Reading “You’re Not Broke, You’re Pre-Rich”
Your financial freedom impacts everything else
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Emilie Bellet is CEO and founder of Vestpod, a company dedicated to helping women to be smarter with their finances. She is also possibly the most relatable woman in financial education, or as Refinery29 put it, “The Coolest Woman In Money.”
I went to her workshops back when Vestpod was first starting out, and what I liked about them was the tone. Before that evening, I’d never been in a room only with women, only talking about money.
I signed up to the Vestpod email newsletter, full of links like “10 Easy & Sensible Ways to Save Money” as well as “Closing the ‘first promotion’ gender gap.” (For every 100 men promoted or hired into their first management position, only 72 women are given the opportunity to take the same step.)
These days, I’m addicted to the Money Diaries section as it’s fascinating to learn others’ perspectives on how they manage their finances.
In this one, a 36-year-old woman talks about her medium term financial goals being “Continue building the investments portfolio, hopefully sell up to move out of London to go somewhere coastal. Nail some passive income!”
I read Emilie’s book in a couple of sittings — it was easy to work through and reiterated stuff that everyone should know.
1. Your finances influence the framework of everything else
This is the basis of why it’s so crucial for women to take control of their money. It’s not just about negotiating for a higher salary —because how much you spend and save is just as crucial as how much you earn.
It’s about recognising that your financial freedom impacts everything else.
“I see money creating so much stress and distress for women,” Emilie recently said to the FT. “I want them to be in a financial situation where they don’t need to rely on anyone else at any point in time, today or in the future.”
“If they are in a bad relationship they can just leave it, they can choose the job they want because they know they have a safety net and they can invest in things they believe in. All of this comes back to education.”
2. Compound interest matters
Investing sounds complicated but the more I read about the different options, the more I realised that leaving your cash in a bank account can actually have its own risks. What I took away from the book is to start investing, instead of letting money sit passively, and to start early.
Interest compounding is a simple but powerful concept, and even Einstein talked about it: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t pays it.”
I liked this free online calculator which demonstrates how much you can earn. While we think we need to have huge sums to invest, even £50 a month can be enough to start seeing returns. Starting with an initial investment of £500, with a monthly contribution of £50 at a 0.1% interest rate, it calculated that in 5 years, this would total £3,508.
Just doing that kind of exercise made me realise how much I was costing my future self by neglecting to invest.
3. Your salary is just a starting point
I learned from the book that when it comes to building wealth, the focus needs to be on gaining assets that will appreciate (increase in value) over time rather than causing further debt. The goal is to lessen liabilities (e.g. credit card debt) that cost you money (like interest) and avoid investing in items that will depreciate (lose value).
This all sounds like common sense, but actually spelling it out helped me to realise how important it is to keep this approach front-of-mind. You could be earning £30,000 or £150,000 — but the person earning less yet saving and investing more is still going to wind up with more wealth in the long run.
Your salary is just one way to build net worth: other sources of income might include side-hustles. The goal is to create income from multiple sources: your assets (things you own). Ideally over the years, these should generate more money and allow you to work less (and retire one day).
You get to true wealth by acquiring assets that will increase in value and generate income. Any outgoings that you are repaying over time, like credit card debt, loans or a mortgage, will influence your ability to save and create more assets.
