Most Replayed Moment: Stressed About Money? Nischa's Step-by-Step Guide To Financial Security

**SPEAKER_1** (0:00)
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**Steven Bartlett** (0:34)
So if someone's listening to this right now and they resonate with this idea of they're slightly avoidant, they don't really have a plan, they're kind of just, they get paid, they answer their bills and then they wait till the next payday. They're not being intentional with their money. Is there a step one in taking back control?

**Nischa Shah** (0:51)
The very first thing, number one, that I'll say to do is build a peace of mind fund.

**Steven Bartlett** (0:57)
A peace of mind fund.

**Nischa Shah** (0:59)
This is not about maths, it's not the mathematically optimal thing to do, but it is the psychological, because as we've discussed, money is as much about emotions as it is about numbers.
So what I'll say is go through the last 30 days of your bank statements and calculate exactly how much it costs for one month of your living. So mortgage, rent, utilities, bills, minimum debt payments, car payments, whatever that total is, that's the amount that you want to save up for your Peace of Mind Fund.

**Steven Bartlett** (1:35)
Okay, so I go through my last 30 days of my bills, I find out that it's cost me, let's say $1,000.

**Nischa Shah** (1:41)
Okay, that's one month of your core living expenses.

**Steven Bartlett** (1:45)
Yeah, so I need to save $1,000.

**Nischa Shah** (1:47)
You don't need to invest it. You don't need to save it. You don't need to, it's not for a holiday. The reason why you want to save this is because when life does what it does best, which is throw curveballs, you want to make sure that you have it handled. If a boiler broke, breaks, your car dies on a Monday morning, the last thing you want on top of the stress of dealing with that thing is the financial stress of how you're going to pay for it. That's what this thing covers. It tells you, I've got peace of mind, whatever life throws at me, I can handle it.
And saving that one month of living costs puts you ahead of 59% of Americans and 30% of people living in the UK. 59% of Americans unfortunately can't pay for a $1,000 expense, and 30% of people in the UK can't cover one month of the living expenses if something happened.

**Steven Bartlett** (2:38)
What is step two in that regard?

**Nischa Shah** (2:39)
Step two, this is where we do move into the mathematical optimal thing. This is you cut the financial bleeding. What I mean by that is I get so many times people ask me, Nischa, I have $4,000, $5,000 sitting in my bank account, what should I do with it? And my first question back to them is, do you have any high interest rate debt? Because if you have savings of $2,000 earning 4%, but you also have credit card debt at 20%, you're leaking money more than you're making it. It's like pouring water into a bucket with holes in it and wondering why it's not going to fill up. So what you want to do is you want to take all of your debt that you have, rank it from highest to lowest.

**Steven Bartlett** (3:20)
In terms of interest?

**Nischa Shah** (3:21)
In terms of interest rate. And then everything above 8%, you want to make minimum payments across everything first. And then everything above 8%, you want to throw your extra savings into the highest interest rate first, to the debt with the highest interest rate, and then move down in that order.

**Steven Bartlett** (3:35)
And interest rate, is that paid monthly or yearly?

**Nischa Shah** (3:38)
It's paid monthly.

**Steven Bartlett** (3:39)
It's paid monthly. So, if I have a thousand pound loan on a credit card, and the interest rate is 10%, I'm paying a hundred pounds.

**Nischa Shah** (3:48)
Paid monthly. Over the year, they're going to pay a hundred. But that's split out into monthly payments, assuming that they're not drawing down more on that credit card.

**Steven Bartlett** (3:56)
Are you against credit cards?

**Nischa Shah** (3:58)
Credit cards are good if you're using them in the right way. Really good if you're using them in the right way. And that means the points that you're using, the rewards that you get for it, the bonuses that you get from it, they're all really helpful only if you're paying them off in full every single month. If you're not using that or if you're not doing it in that way, which is kind of what they want you to do, because they want you to miss these payments, because that's how credit card companies make money, by your missed payments. If you're not doing that, then the benefits just don't weigh up. It doesn't make sense. Use credit cards, but use it in a way that stacks up in your favor, not in the credit card company's favor.