Editor’s note: I first met Tom slightly over a year ago when we talked about his book: the chat was a rare pleasure. I was deeply impressed by his understanding, curiosity, open mindedness and the drive to move forward and try new things. More recently we got chatting about the ways in which life has changed: in my case for my children and in Tom’s for his generation. This interview is the result. I hope you enjoy reading it. I also hope that it’ll make you look beyond the ‘ battle of the generations’ and see problems and opportunities in a new light.
Q: Tom, tell us a bit about yourself?
Tom: I am in my mid-twenties and live in London. I used to be a suit tailor, measuring CEOs and lawyers in the City, but now I do something very different.
I run a community website called Latest Deals, where people help each other save money. The best discounts, freebies and money saving tips.
In the media I am known as an Extreme Bargain Hunter and a “life hacker”.
Q: What made you decide to get involved with LatestDeals.co.uk?
Tom: There are two parts to this answer: First, how the idea came to be, and second, how I achieved the means of doing it.
First, the idea:
Deepak Tailor, my friend and now co-founder (there are three of us in total), and I were having dinner in a Brazilian steakhouse. We tried to find a voucher code for the restaurant and could not find one.
We ranted. Finding discount codes was too difficult. Existing money saving forums seemed antiquated. Could we do something better?
For hours we brainstormed what we would do. How things could be improved. Latest Deals was born there, on a back of a napkin.
Second, the means:
It’s one thing to have an idea, it’s another to do it. I was a suit tailor. I didn’t know anything about coding or software! And Deepak was busy running another company.
How could we afford to do it, and what if it didn’t work?
At the time I was reading The Black Swan by Nassim Taleb. He discusses the impact of unpredictable outliers: earthquakes, terrorist attacks, freak stock market events.
But towards the end of the book, he also speaks of the flip side: Positive swans: unpredictable outliers that have good consequences. The unicorn start-up, ‘miracles’, and things usually attributed to luck.
Taleb writes that if he were to invest his own money (I paraphrase), he’d put 90% of it into the safest Government bond indexes, and 10% into high-risk venture capital funds.
While you ought to diversify your risk in preparation for a black swan, you should also be open to a positive swan.
However, this is impossible for most people because venture capital funds usually have a minimum investment of £100,000. At 10% of your portfolio, that means you’d need to have means to invest £1,000,000.
Unfortunately, that wasn’t and isn’t me.
The idea stuck and I couldn’t help thinking Latest Deals could be a positive swan. Or at least, I should be open to it being a positive swan.
Being a web-based company, it had next to zero start-up costs. You can get free servers if you look hard enough, you can teach yourself to code if needed, and marketing is just a matter of creativity.
The only real cost is time.
Thinking again of Taleb’s theory of diversifying financial risk 90:10, it seemed to me that if time were your only cost, then it should be invested conversely 10:90.
If your only cost is time, then you should invest 90% of it into high-risk ventures because you only stand to come out in a neutral or positive financial position. If money is the measure, how can you lose if the venture doesn’t cost you anything?
With this in mind, I said I could always go back to suit tailoring, but that here was a chance and I should take it.
Q: What are the top three grievances of millennials?
Tom: A millennial is someone who was a teenager through the year 2,000. As a generational group millennials (in the UK) have a reputation for moaning a lot.
The top three grievances come back to the same thing:
Property once because house prices have stretched far beyond the means of most. Millennials cannot afford to buy their own home without help.
Property twice because the cost of renting has increased to record highs. We can see this in the increase of proportion of income spent on rent: in 1985, the average Brit spent 10% of their income on rent; in 2014 this was 25%. In London people spend 40 % of their income on rent; and for me in 2017 it’s 57% (source: Financial Times).
Property thrice because stagnant wage growth means the cost of living grows every year. For the last decade, average UK income growth has stagnated at 1-2% (source: Trading Economics). But rental costs have grown far higher, and much faster, than this.
If older generations quaff at such complaints, there is another cost of living factor that is exclusive to millennials they may not have considered. It’s essentially an extra tax: student loans.
These have changed a lot and as it now stands it does not matter how much debt you have, what you pay back is determined by how much you earn.
After you graduate, you’ll repay 9% per year of whatever you earn above £21,000 (regardless of the size of your debt). This means if you’re earning £30,000 a year, you will repay £804 per year (source: Which?).
No previous generation has this cost which works as an additional tax.
Q: Some people my age tend to dismiss these grievances as the ‘petulant complaints of a lazy generation that expects high and immediate returns for little effort’. What do you think; are these grievances legitimate?
Tom: If anyone – millennial or not – expects high and immediate returns for little effort they will soon experience a rude awakening once they step into the world of work.
There are many things millennials should be grateful for:
I wrote about this in a blog post called How New Generations Can Be Richer Than The Old Without Owning Property.
In short, we have more food available to us than a Medieval King, clothing costs are 1% of what they were just 100 years ago, we can now travel the entire world at a fraction of the cost and at previously unimaginable speeds, we have access to so much entertainment we could not consume it all even if we wanted to, and there is more knowledge accessible than ever before.
However, because of the increased costs of living outlined above, there has also been a shift in thinking. I spoke about this with Jeremy Vine on BBC Radio 2: that millennials care less about owning things, than they do about sharing experiences.
Renting for life has become matter-of-fact; subscribing to music and films is considered the norm; staying in people’s homes, not hotels when traveling is thought of as the obvious choice; co-working spaces instead of private offices; open-source instead of proprietary; Wikipedia, not Encyclopedia Britannica; Kickstarter not venture capital.
It’s all synced together into a different idea of identity: if I can’t afford to own things, then I have to do things, and if I have to do things, then I have to share the experiences to be recognised.
This goes full circle back to the original question – millennials seem to have a lot of grievances… are they legitimate? The grievances are being shared because there is now a global platform through which they can share it for free (social media), and doing so is sharing an experience, the act of which is what now defines their identity.
Whether or not the complaints are legitimate doesn’t really matter. It’s that the complaints are being read and they’re getting little red notifications. For many, this is now the basis of identity.
Q: What are the top opportunities, in your experience, to make a decent income today? Are these opportunities generation specific?
I see two polar opposites as top opportunities to make a decent income today. On one side is engineering and programming, on the other side is traditional bespoke crafts such as suit tailoring.
The first, engineering and programming, I mean more in the Latinate sense, ingeniare, to devise: creating and inventing solutions that help people such as space travel, artificial intelligence, sustainable energy. This is about solving complex problems that have a global market.
The second is the complete opposite. Catering to a tiny localised market by producing bespoke, handcrafted quality goods. I experienced this first hand as a suit tailor. While globalisation increases the quality of life for all, there will always be some who want something extra special. Something that machines can’t make. Much of it is actually about empathy. This way to make income is about listening to someone and translating their feelings into a physical product.
In between these two extremes is a wide U-shaped curve. I feel we’re all somewhere along that line in-terms of what we do and how much money it can make.
Are these opportunities generation specific? Maybe at the extremities of age, but usually it’s not too late, nor too early, to learn a new skill.
Q: What are the best ways to build wealth? Are these open to millennials?
Tom: Readers should read other articles on The Money Principle to discover the answer to this! But, as I wrote in my book, Money’s Big Secret, there are two rules that seem to stand the test of time: diversify and wait. The latter part, waiting, is very open to millennials. If there’s one thing they have, it’s time.
Q: How is your money doing, Tom? What are your main investments?
Tom: My rental costs are 57% of my income.
I invest 37% of my income into various index funds.
That leaves 6% disposable income.
Yes, I live on 6% of my income – but I did tell you, I’m an extreme bargain hunter!
My investments have grown 9 – 12% year-on-year since I started, which is more than my tolerance of 5 – 6%. I’m on track for a healthy retirement.
I have declined to take on any debt, other than a student loan.
I have automated my investments to split into various index funds, the majority of which are Vanguard LifeStrategy funds. I spend approximately 15-20 minutes a month reviewing them.
Then there is Latest Deals: I invest 50-60% of my waking hours into it. This is now my full-time job and I hope that it continues to grow so that those initial proportions change.
Perhaps then, we could do a second interview!
Q: What are your top three pieces of advice to all millennials out there?
- Switch from reading daily news to weekly in-depth analysis (you’ll be smarter)
- Start investing into index funds now and make it a direct debit (you’ll be richer)
- Stop comparing yourself to others (you’ll be happier)