You can build a bigger savings pot than you might realise just by putting a little bit away every month, especially if you learn about the different savings products available.
Today’s guest Rotimi Merriman-Johnson is a qualified financial advisor, ambassador for the National Numeracy charity, award-winning content creator and podcaster, and financial educator.
He answers our burning questions about financial decisions that can have big positive or negative impacts, what the Black British wealth gap is and his determination to close it, and how to build a savings pot for emergencies, even if we’re in a position where we can’t save much each month.
Rotimi covered the Help to Save scheme, which can be powerful if you’re eligible to use it. How does Help to Save compare with other savings products? He also explores the features of some of the UK’s other most popular savings products including Lifetime ISAs (LISAs), traditional savings accounts, and Premium Bonds. Which is the best home for your money depends on your financial goals and circumstances.
Rotimi discusses the effect of compounding interest, with a clear explanation of how it works and how it affects investing and saving, and debt. And when it comes to debt, Rotimi explains the difference between using the avalanche method and the snowball method to reduce and clear your debts.
And we look into how to set up and stick to a budget, with practical steps you can take to stay on top of your day to day spending (you’ll be amazed at the impact of Rotimi’s tools and techniques to help hit your financial goals).
Watch the interview here:
Get rich slowly with Mr MoneyJar - Rotimi Merriman-Johnson
Or find it on YouTube, Spotify, Apple Podcasts, Amazon Music and other podcast platforms – just search for Salad Talks Money.
Whether you’re trying to build a financial safety-net, cushion or buffer, want to make your money work harder or have a savings goal in mind this episode includes practical tips to help.
Jamie Veitch:
Welcome to Salad Talks Money. And today we're joined by Rotimi Merriman-Johnson, Mr MoneyJar. Thank you for joining us today.
Rotimi Merriman-Johnson:
Thanks for having me, Jamie.
Jamie Veitch:
First of all, can you just kick the ball rolling for us? Tell us how much is in your wallet today.
Rotimi Merriman-Johnson:
Today, nothing is in my wallet. I'm more of a cards and contactless guy.
Jamie Veitch:
I wondered. Indeed. So tell us a little bit about you, why you do what you do.
Rotimi Merriman-Johnson:
Right. So I am a financial creator. I run a financial education platform called Mr MoneyJar. I've been doing it for just over six years, and I create content online about personal finances, investing, getting on the property ladder. I do broadcast appearances and guest on podcasts like this one. I deliver talks, teach workshops. I'm a host of my own podcast as well, The Mr MoneyJar Show. And I speak chiefly about two things. I speak about finance with respect to the UK as a whole, but I also specialise in Black British wealth.
Jamie Veitch:
And you have written a lot and spoken a lot about the Black British wealth gap. Can you explain what that is, how big it is, and what's causing it?
Rotimi Merriman-Johnson:
Absolutely. So the Office for National Statistics runs a piece of research every couple of years called the Wealth and Asset Survey. And in that they look at the amount of household wealth in households in Great Britain. When we look at the country as a whole, household wealth for Great Britain sits at around the 293,000 pound mark, so just above that. And that's made up of property, which is the largest store of household wealth in the country; pension savings; financial assets, which is savings and investments minus debt; and physical assets, which the ONS defines as your car and the contents of your home and collectibles and that sort of thing.
However, when we look at the Black Caribbean ethnic group, that 293,000 falls to 65,000 pounds. And when we look at the Black African ethnic group, it falls lower still to just over 39,000 pounds. So essentially a 200,000 pound gap, and all of those are median figures. So just for those who don't know what a median is, it's where you take all of the households within a given data set, order them from lowest household wealth to highest household wealth. And then you point at the household that's in the middle.
Jamie Veitch:
So the gap will be much starker for many, many people.
Rotimi Merriman-Johnson:
Yeah.
Jamie Veitch:
And is this the main motivating factor behind the work that you are doing now today?
Rotimi Merriman-Johnson:
Well, the thing about these figures, Jamie, is they're not just numbers to me. I spend a lot of time on websites like the ONS, on gov.uk, in front of spreadsheets. And my first job out of Uni was as a researcher for a financial PR company. But with these figures, they're not just numbers, they actually speak directly to my lived experience and the lived experience of many people who came from households like mine. So when we drill down into Black British property wealth, for example, the median property wealth in the Black British community is zero pounds.
Jamie Veitch:
That's astonishing.
Rotimi Merriman-Johnson:
So this points to very low rates of home-ownership and equity being built up in homes. But when I look at my life, that maps onto the 10 rented accommodations I lived in by the time I was 18 years old. And you can imagine how destabilizing that is, the disruption that causes, moving house every two, three years, going to different schools and so on. When we look at the financial assets figure for the Black British community, it's roughly 1000 pounds or less.
And again, that speaks to the financial instability that I experienced when I was growing up, but also things like relationship breakdown. I grew up in a single-parent household in South London. I came from a friendship group where many people grew up in single-parent households. And we know that financial instability is one of the chief causes of relationship breakdown. So for me, I think that speaking about this gap and educating people about it, there's an economic imperative to do this, but I think there's certainly also a moral and a personal imperative for me as well. And I think that if we can close the gap, and I do believe it can be closed within a generation, that everyone will benefit: both the communities involved and the country as a whole.
Jamie Veitch:
So all communities would benefit if we close this gap because of increased participation in the economy. You talked about a moral imperative and an economic imperative to do so. What are the best ways in which the financial services community and sector, the government and all of us as individuals, how can we close the gap?
Rotimi Merriman-Johnson:
Well, firstly, platforming the conversation, having conversations like this one. And I just wanted to say as well that the Black British community is made up of roughly three million people. And as a community, we punch far above our weight in terms of contributions to this country. In fact, there was a report that came out last week that showed that the music industry, the UK music industry over the last three decades has brought in 30 billion pounds into the UK, and that 80% of that has come from music of Black origin, for example. So there are lots of contributions that we make. And I think that if we can ensure that those who are on the sharper end of this wealth divide are supported, then think of how much more those groups could contribute.
What can policymakers, individuals, citizens do? I think a lot about how information spreads in the current day. And I work directly with the government as well, with government departments. And I don't actually think it is the responsibility of government departments to try and solve every single problem. They sort of represent the country. I think a lot of work can be done by working with individuals like myself and other people looking at other specific challenges, and working with community leaders on the interventions that are needed to solve issues like this, and consulting with them on which policies can be created that help particular communities as well. I'm speaking with regards to the Black British community, but you could say the same for young people, for women, for lots of other communities who have their own specific challenges.
Jamie Veitch:
You certainly could, couldn't you? I mean, you could say the same for many communities since quite often services are designed for the average. The average person doesn't necessarily exist.
Rotimi Merriman-Johnson:
Yes.
Jamie Veitch:
Great. So let's move on then to some of the other areas of your work. And you mentioned being qualified, you hold the Diploma for Financial Advisors qualification. I wonder what that qualification is. How long does it take to achieve it?
Rotimi Merriman-Johnson:
Yeah. So I took the DipFA with the London Institute of Banking and Finance, and it took me about a year and a half to do. And it's one of the qualifications you can do to become a qualified financial advisor in the UK. And then the next step is to join a firm, to register with the FCA, and to go on and practice. I did this because I started out as just a normal person on social media just posting about money because it was of interest to me. But it got to a point where I wanted to round out my knowledge and I wanted to add to my credibility. I kind of put myself in the position of the people that are watching me. And I kind of came to the conclusion of if I was watching a professional, I'd want to know that they'd done at least something. But there are many talented content creators who haven't done exams who speak with authority and credibility as well. It's worth me saying.
So I did it three years into being a content creator. I'm not currently practicing, but I do see myself practicing at some point down the line. I would say that the main challenge when it comes to financial education at the moment is informational. A lot of people know roughly where they'd like to get to when it comes to certain financial objectives. They just need to have things explained to them in a way that's easily understandable so that they can take action.
Jamie Veitch:
And on that note, I think that moves us very nicely into next question, which is about small decisions that can perhaps have big impacts on your finances. A lot of us know what we need to do. We don't necessarily know how best to do it. And I wanted to look at ways in which people can build, perhaps, a savings pot for emergencies, for example, and how to put a little bit of money away. Even if you can't save very much each month, we know that there are products out there that people can use, and one of those is the Help to Save scheme. I'm always astonished by the Help to Save scheme because I think it's quite powerful, it can be powerful when it's used well, but it isn't very well-known. Can you tell us what the Help to Save scheme is please?
Rotimi Merriman-Johnson:
So the Help to Save scheme is a government initiative whereby certain individuals who are claiming universal credit can get a boost to their savings over a four-year period. So you can save between 1 pound and 50 pounds per month. And what happens is, after year two and then between years three and four, you're given a bonus. You can save a maximum of 2,400 pounds over the four-year period, and then you get a 600 pound bonus maximum after the second year, and then another 600 pound bonus maximum after the fourth year. And it's based upon where your highest balance is during those periods.
Jamie Veitch:
Right. So if you'd saved that much, you're getting 50 pence for every pound that you put in.
Rotimi Merriman-Johnson:
Yeah, a 50% uplift.
Jamie Veitch:
It's an astonishing uplift, isn't it?
Rotimi Merriman-Johnson:
Yeah.
Jamie Veitch:
Why do you think it isn't that well known?
Rotimi Merriman-Johnson:
I did a piece of work on unclaimed benefits a few years ago, and I think that there are so many schemes and so many systems out there that it's almost a challenge of too much information. So I think that, certainly if there are individuals watching this who are claiming universal credit, if you just put in Help to Save into search and check the eligibility, see if you're eligible for it, it's a really powerful system.
Jamie Veitch:
Right. And that's well-worth looking at. How does it compare with other savings products that people can use?
Rotimi Merriman-Johnson:
Yeah. So I guess you have savings accounts, just bog standard savings accounts, easy access, regular savers, notice savers, and fixed-rate savers. I've listed them in order from kind of accessibility, most accessible to least accessible. Generally with savings accounts, the more accessible your money is, the lower interest you can expect to be paid on them. But with these, you put your money in, you earn an interest rate, and you can earn interest up to a certain point and then you start to pay tax on it. And that's covered by the personal savings allowance.
Then there are cash ISAs. Cash ISAs are slightly different to general savings accounts because ISAs are tax-free by nature. We have four ISA accounts in the UK, cash ISAs, stocks and shares ISAs, Lifetime ISAs, and Innovative Finance ISAs. You can put in up to 20,000 pounds per tax year into that family of four accounts, apart from the Lifetime ISA, which has its own 4,000 pound limit. And the idea is that you save into these products, and any growth you get is tax-free and any income you get, whether that be interest or dividends is tax-free. That becomes increasingly more powerful the bigger your pot is in an ISA. And the idea is that you put in as much as you can every tax year until the amount that your savings grow by or earn is enough to possibly facilitate your lifestyle.
And then you have premium bonds as well, which we were talking about prior to this recording. And premium bonds are essentially a way to purchase a chance to win cash prizes, almost like a jackpot. And you can put in between 25 pounds and 50,000 pounds into premium bonds.
Jamie Veitch:
So if we were to look at some of these products and saying, well, for someone who is perhaps earning somewhere between say 25,000 pounds and say 35, 40,000 pounds a year, doesn't necessarily have a great deal of money to put aside, but could put aside a little bit of money per month into one of these. The product that's right for the person is going to depend on their personal circumstances. Of course, we're not making any recommendations here, but the LISA, the Lifetime ISA, has certain specific pros and cons. I wanted to explore a couple of those if we can first.
Rotimi Merriman-Johnson:
For sure. So the Lifetime ISA was set up to support people between the age of 18 and 39 in the purchase of their first home. So you can save 4,000 pounds per tax year into a Lifetime ISA. It's worth saying the tax year runs from the 6th of April to the 5th of April, and you'll get a 25% government bonus on the savings. So the max you can put in is 4,000, and the max bonus you can get is 1,000 pounds. And after you have a Lifetime ISA for a year, you can put that money towards the purchase of a property. The property cannot cost more than 450,000. And you can combine Lifetime ISA savings with another person if you're buying, and you can use it for that. If you don't use it towards the purchase of a first home, then you can access the funds without a withdrawal charge by the time you are 60.
Jamie Veitch:
Right, by the time you're 60.
Rotimi Merriman-Johnson:
Yeah. And I just kind of gave a little nod to the catch. So if you do withdraw the money, not to buy a first home or before the age of 60, then you do take out slightly less than what you put in.
Jamie Veitch:
Indeed. So someone might look at that and think, "That's great. I get a 25% uplift on what I put in, but it's restricted in terms of what I can use it for." So if I were able to save say 50 pounds a month, for example, or 25 pounds a month even, then that 25 pounds a month, that would be 300 pounds a year, but I would be given 25% more than that on top, but I'm restricted in terms of what I can use it for.
Rotimi Merriman-Johnson:
Yeah. It's also worth saying that the government's currently looking at an even more simplified product to succeed the Lifetime ISA. That will be for the purchase of a first home only. Because we've been speaking about savings in quite a lot of technical detail in this conversation, but it's really important that people in the UK can achieve basic life milestones like buying their first home, like starting a family, should they wish. These things are what keep the country running. And when we look at average house prices, both inside and outside the capital, when we look at the age at which people become first-time buyers, the age at which people become parents for the first time, all of these ages are going up. And it's almost as if your 20s are like a second adolescence now.
Certainly for me, there were things I thought I would've achieved by the time I was 30, where I just had to go back to the drawing board and say maybe this isn't going to happen. Cost of living is incredibly high. The world is incredibly uncertain. And I do think it is the job of our leaders to create schemes and policies that enable people to get on with their lives. And with home-ownership, it is one of the main milestones that people would like to achieve before they do things like start a family. And if we can't make that accessible to them, then it does all sorts of things, not in the least affects the fertility of the nation and so on.
Jamie Veitch:
Indeed. Indeed. So huge ramifications there. And so whether someone has specific goals like home-ownership or whether someone's trying to build up a savings pot so that there's rainy day money in case of emergencies or whatever, they need to think about what those goals are to help choose the right savings product out of those that are available. We talked about Help to Save, and that can be incredibly powerful for those who are eligible for that product. We've talked a bit about Lifetime ISA, as you mentioned, and savings accounts as well. You mentioned premium bonds too, and those come with the possibility of winning prizes and a small entry ticket. What's the lowest amount of premium bonds someone could purchase?
Rotimi Merriman-Johnson:
25 pounds, these can also be gifted to a child under the age of 16. And then the most you can have in premium bonds is 50,000 pounds. And each bond carries with it a chance of winning a prize of between 25 pounds and 1 million pounds. I would consider myself a fairly literate person. I was on the NS&I [National Savings and Investments] website trying to understand how they allocate the prizes between the million and the 25, and I couldn't understand it. But essentially you buy a bond and you get a chance to win a prize every month. And there's kind of an algorithm going on in the background whereby the prizes are allocated in certain bands. For me, I have just one premium bond. I put 25 pounds in, and I have the app on my phone and I check it every month. I haven't won anything yet though.
Jamie Veitch:
No, I mean that's really, really interesting. And it's hard to work out what the equivalent rate of interest is and how winning prizes compares to just putting your money in a savings account really because of that, perhaps, lack of clarity that you're talking about there in terms of how they're describing how the prizes are allocated.
Rotimi Merriman-Johnson:
Yeah. And you've kind of alluded to this, premium bonds don't earn an interest rate in the way that savings account would. You just have the chance to win money. So I guess the calculation would have to be how much you've put in, and then how much your win is as a percentage of how much you've put in. So people have to decide what the use case is for that, but the prizes are tax-free, and your money is safe with them. So there'll be some people out there for whom premium bonds are appropriate for them.
I think when it comes to saving in general, your first port of call will be an emergency fund. And this is a pot of cash that you set to one side just in case you lose your primary source of income or you encounter any emergencies. And any kind of account where your money is easily accessible is appropriate for that. Then you'll obviously have large and planned spends coming up in the next year or two perhaps, perhaps even longer if you're saving for something like a house deposit. So there'll be savings accounts that are appropriate for that. And then long-term, you're saving for your kids, financial independence, your retirement. I tend to think of savings are sitting in those short, medium, and long-term use cases.
Jamie Veitch:
So some people would call them jars, and you are Mr MoneyJar. Some people use the envelope theory of putting different amounts of money into different envelopes for different purposes. Are there any other things that people can do to help them build up small pots of emergency savings buffers, for example?
Rotimi Merriman-Johnson:
Yeah. I think that when we live through a period of time like what we're living through now where prices are high and particularly in London, it feels like just leaving the house costs you 10 to 15 pounds. Visibility is very important. So when I deliver talks, when I teach workshops, I always say, "If you can, download one of the free budget trackers to your phone, add your bank accounts to it, or you can use one of the app only banks which will break down your spending for you. And this will show you how much money you have coming in and how much you spent."
And because especially if you have different bank accounts for different purposes, it's nice to have it all in one place. And then what you can do is you can look back. I like to do this on a weekly basis by the way. I think the more expensive things are, the more you want to shorten that checking cycle. Look back over the past week, my day to do this is on a Sunday, and just look at what you spent money on, judgment-free if you can. And if there's a few too many cabs in there, a few too many takeaways in there, you can then make a plan for the week ahead to decide how you want to spend your money. So that first one is visibility. Then there's paying yourself first.
Jamie Veitch:
What does that mean?
Rotimi Merriman-Johnson:
So rather than getting paid, spending your money throughout the month and then saving what's remaining at the end, if there is anything at the end, see if you can on or as close to payday as possible, pay a percentage of what you earn into a separate savings account. And that means you saved upfront and then you spend the rest.
Jamie Veitch:
Yes. So that's locked away then.
Rotimi Merriman-Johnson:
So it's locked away. So we call that the pay yourself first principle. I am a huge advocate of setting up a bill day. I don't know, do you have a bill day?
Jamie Veitch:
Yes, I do. Yeah.
Rotimi Merriman-Johnson:
So syncing your bills and your subscriptions to come out by a certain time of the month. Again, this gives you that stability of, for me, I pay myself towards the end of the month. My bill day is the first for most things. And so on the first, I check my bank account and everything's come out, rent, bills, subscriptions, everything. And what that means is that the money that you have remaining is not subject to random deductions throughout the month. And if there is one, then you can cancel it or decide what you want to do with it because it's happening outside of the bill day. So that's another system that I like.
And I also like automating. So any way that you can take out you having to do something, whether that's by setting up standing orders, for example. Yeah, it's just all about giving yourself visibility, setting up systems, and automating them where you can. And it's especially important in the times we're living now to do these things.
Jamie Veitch:
You're absolutely right. I mean, I remember living in a house on the Walworth Road in South London, and putting pounds into the meter. And you didn't know whether you'd run out or not. And then you move from meters through to monthly bills, but some months those bills were huge and some months those bills were absolutely tiny. And actually being on a direct debit, which is exactly the same every month, for example, is so much better and easier to help you plan as long as your energy provider will let you do that. But they don't let everyone do that. And that's a problem sometimes with this bill day issue idea, which I think is really powerful and totally agree with the principle.
If someone is in a position where perhaps because of credit score or other difficulties that they've faced in life in the past, are there any things that they can do to help navigate the cost of living and the bills that are coming in like that? Any particular strategies that would work for them?
Rotimi Merriman-Johnson:
So if you have an adverse credit score, then at that point I would say that it's worth speaking to one of the many free debt advice charities in the UK where you can pick up the phone to them, and have a conversation with them about where you find yourself budget-wise or credit-wise, and get free and impartial advice. I would also say that, and I hope this isn't a cop-out answer, I think that we're at a point with regards to the cost of living where there are systemic issues and geopolitical issues that are affecting our cost of living. And so if we look at the conflict in Iran at the moment, there are people who will pay the price for that in terms of increased energy costs and inflation on essential goods where it's not been their fault.
Jamie Veitch:
No.
Rotimi Merriman-Johnson:
And so I would look to our political leaders to intervene.
Jamie Veitch:
Okay. Thank you for that. So I was wondering about mistakes that we all make as individuals, bearing in mind everything that you've just said about things that are outside of our control and which we can't do anything about. When it comes to things that we could do something about, you must see people with great intentions occasionally make mistakes, and you must see some mistakes come up more frequently than others. What are the biggest mistakes that you see and observe, and that perhaps could warn people to take notice of?
Rotimi Merriman-Johnson:
Just in terms of their finances?
Jamie Veitch:
Yes.
Rotimi Merriman-Johnson:
I will often speak to people who are using one bank account for everything. So they get paid into this bank account, but they have a large lump sum in the bank account as well. So they're using it for saving. They're also using it to pay for their necessities. They're also using it to pay for their going out and stuff. And the issue with this is, you don't really have visibility over the different things you're using your money for. And certainly if you're using the same bank account to pay for both your necessities and your wants, there are so many bottomless money pits out there you may find yourself overspending where you didn't intend to. I'm a gamer, and the way that the digital gaming ecosystems are set up is to give you an infinite number of things to buy.
Jamie Veitch:
Yes.
Rotimi Merriman-Johnson:
Yeah. And there are lots of other examples of that. So I quite like the two bank account strategy whereby you are paid into one bank account, but then you set aside some spending money for yourself in a second bank account. And again, the app-only banks are really good for this because when you spend money, you get the notification-
Jamie Veitch:
Yes, indeed.
Rotimi Merriman-Johnson:
... and you get the breakdown in terms of your budget. So I call this the two bank account strategy, and having those different accounts for different purposes... And sending that money to your separate bank account on your bill day like a bill also gives you that stability. I'm a big fan of that.
Holding large amounts of money in cash is going to erode at the purchasing power of your money over time. I think if more people realised that the way that our financial system is set up is for the price of things to go up by about two or 3% every single year, and that if your money isn't earning that in interest or if your pay isn't going up by that amount in interest, that you are going to lose the purchasing power of your money. I think more people would shop around for things like interest rates on savings accounts the same way they shop around on energy bills or phone bills, for example. And just to be clear, because sometimes I hear this articulated that the value of money goes down. The value of money stays the same. 10 pounds is still 10 pounds, but between the '90s and now the price of everything has gone up around that 10 pounds.
Jamie Veitch:
Absolutely right. Yes. It's all shot up, hasn't it?
Rotimi Merriman-Johnson:
And that's how it's supposed to go. Yeah. And I would say the third thing that I see people not doing, this is more of a mindset piece, but I would encourage people not to moralise money. It makes me sad when I hear people say that they're bad with money because many of us weren't taught about money at home or at school. And so you don't know what you don't know. And I would encourage people to think more of managing money and understanding money as a skill. If you hadn't had a driving lesson before, you wouldn't say you're bad at driving, you would just say you don't know, but you can learn what you need to learn.
Jamie Veitch:
That's a really good perspective on it. And you're absolutely right, many of us had no financial education whatsoever. And whilst now the national Financial Inclusion Strategy, which came out last year has talked about financial education, there are millions of adults navigating the world that we live in who have never had the opportunity to learn anything. So I really like the way you put that in terms of not beating ourselves up.
Rotimi Merriman-Johnson:
Yeah. And I would also say that the financial education we did have was very one-sided. It was in how to consume. And therefore we know which shops to go to buy our favourite things, when the deals are on, the melodies to the different adverts and the jingles from years ago. We've just been taught how to consume, but we've not been taught how to save or invest or pay off debt or anything. And I do believe that's been purposeful, but I am a fan of teaching people about money holistically. Consumption is fine, but you need to know how to do all the other things as well.
Jamie Veitch:
You really, really do. You just mentioned paying off debt, and I wanted to ask you about a couple of strategies that people talk about when it comes to debt. A couple of phrases are used quite often. One is the snowball method and one is the avalanche method when it comes to dealing with debts that people have. What are those two methods and how do they work?
Rotimi Merriman-Johnson:
Sure. So if you have debts, particularly if you have debts from different lenders, when I sit down with individuals, the first thing we'll do, is we'll write them all down. Who are all the different lenders? What are all of the different balances that you have on the different borrowings? What are the different APRs? So interest rates if you know them, and what are the limits on all those borrowings as well so that we can understand, okay, so you're borrowing this much out of this limit on this credit card. And then you can arrange these debts in one of two ways from the smallest balance to the highest balance or from the lowest interest rate to the highest interest rate. With the snowball method, you pay your minimums on all your debts, but you pay off as much as you can on the smallest balance. This is psychologically the best way to pay off debt. You are basically getting rid of the smallest amount so you don't have to think about it again.
With the avalanche method, you are sorting the debts from lowest interest rate, from highest interest rates, sorry, to lowest interest rate. You are paying the minimums on everything but paying as much as you can off of the most expensive debt. This is mathematically the quickest way to pay off debt, but the debt with the highest interest rate may also have a huge balance. And so that's about putting a long-term plan to pay it off. But like we were saying earlier on in the conversation, when it comes to paying off debt, if you are able to either look at it or have that conversation with a trusted individual, that's actually a big piece of the puzzle. And then you can decide what method you want to use to pay it off.
Jamie Veitch:
What other debt management strategies do people ask you about?
Rotimi Merriman-Johnson:
I get questions about money transfer and balance transfer cards as well and how they work. Money transfer cards really helped me when I left uni and when I started working because when I went to uni, I got a student account that came with the free two grand overdraft, which I of course promptly bought loads of video games and clothes with. And I left uni still in my overdraft, actually to the point where when I earned my first salary, it brought my bank account up to zero pounds. And the thing with this overdraft is the interest rate would creep up on the balance each year after graduating. So what I was able to do was take out a money transfer credit card, which is a specialist type of credit card that lets you withdraw money from it at a 0% rate. I paid off the overdraft, and then I focused on paying off that 0% money transfer credit card.
Jamie Veitch:
So you were looking at the products that were available to you at that time, and choosing very carefully what was right for your circumstances as opposed to using a product like that for additional new spending-
Rotimi Merriman-Johnson:
Additional consumption.
Jamie Veitch:
... you were in fact consolidating. Yeah.
Rotimi Merriman-Johnson:
I wanted to be rid of the overdraft completely. And then balance transfer credit cards work in a similar way. You can transfer the balance or balances of expensive credit cards to a zero or low-percent credit card. And then those cards are paid off, you can then focus on paying off the 0% card within the 0% period. And then after that 0% period, the interest rate pings up. So there are things that you can do. Yes, they are credit score-dependent, but there are things you can do to consolidate debt if you know where to look.
Jamie Veitch:
Indeed. And again, not all products are available to all people, but it's about looking at the products that are available to you and finding the one that fits best, and actually offers you the best potential fit with your circumstances. Yeah. Okay. You're an ambassador for National Numeracy as well. What is that? I know it's a national charity.
Rotimi Merriman-Johnson:
National Numeracy is a maths charity which helps UK adults and children feel more confident about numbers. And there are two key points throughout the year where activity kind of picks up. It's National Numeracy Day, which is actually on the 20th of May this year. And then there's Number Confidence Week, which normally occurs in the first couple of weeks of November. And I've been an ambassador of them since 2021. And I'm actually really grateful to them for bringing me on because I've been able to do so many wonderful things with them, not just on these two points of the year, but throughout the year. And it's really enabled me to grow as a creator.
Just for example, last November I did a live school assembly with kids, year-three to year-six, and we did maths quizzes and money quizzes and stuff. And that's when you want to first introduce children to financial literacy at that young age. And they were so excited, and it's genuine because they're kids and stuff. So there's been so many fantastic opportunities through National Numeracy. And like with money, math is one of those things that people will have one negative experience with at school, and then they'll close the door on it and they'll just say, "I'm bad at maths."
Jamie Veitch:
Isn't that sad? Isn't that sad that it can have such profound impact? Yeah.
Rotimi Merriman-Johnson:
I'm not a math person, I'm not a money person. And this happened to me. I really enjoyed maths in primary school. I sort of fell out of love with it in secondary school. And then once I started working, my job as a researcher required me to use maths again and I fell back in love with it again. So we really try to impress on individuals that just because you had a bad experience with maths at school, doesn't mean that you can't learn the skills you need to learn to pick it up. Doesn't mean that you can't use tools, whether that be calculators, spreadsheets, AI. We have the National Numeracy Challenge, which is a maths challenge that, not only asks you questions about maths questions, but also gauges your levels of confidence as well, which you can use a calculator with. Yeah, we believe that learning is a lifelong process.
Jamie Veitch:
Sounds like you really enjoy that work as well.
Rotimi Merriman-Johnson:
Mm-hmm.
Jamie Veitch:
You mentioned tools, you mentioned budget planning tools earlier on in our conversation, and you've just mentioned tools again. I wonder if you can explain the best way to use a budget planning calculator or tool or app.
Rotimi Merriman-Johnson:
Where I would start with a budget planning tool or app is, you download it to your device, you link your bank accounts to it. You should get a few numbers back. How much money has come into you during a given period of time, how much money you spent, but also the categorisation of your money into different things. So like rent, bills, entertainment and leisure, groceries, healthcare. The next thing is to, as a starting point, use the 50, 30, 20 principle.
Jamie Veitch:
What's that?
Rotimi Merriman-Johnson:
It is a budgeting principle which essentially says that of the income you receive, divvy it up into three pots, aim to spend 50% of your income on your needs, 30% of your income on your wants, and allocate 20% to savings. It's very crucial to say that this is a general guide, and that different people's 50, 30, 20 will look different, particularly during cost of living. You may be spending 60 or 70% on your needs, which absolutely fine. You just reduce the other two pots accordingly. But using this kind of breakdown, decide to yourself, "How much do I want to save? And what do I want to pay myself first on or just after payday? What in my life constitutes a need? What in my life constitutes a want?" And on those seven-day cycles, try to stick to those percentages.
Jamie Veitch:
That's really practical as is the idea of a look back every seven days and a look forward.
Rotimi Merriman-Johnson:
Definitely look back and look forward. And in my opinion, do it weekly. I used to do it monthly, but I have no idea why I was doing this time last month, let alone spending money on this time last month. With a week, you can remember what happened in the last week.
Jamie Veitch:
Yeah, you can. It's much easier, isn't it?
Rotimi Merriman-Johnson:
And then just build, tweak and so on.
Jamie Veitch:
Wonderful. And on your website on Mr MoneyJar, there are quite a few different calculators. There are tools and calculators to help people plan their savings, to help people manage their repayments on loans or other debts, and to hit their financial goals. And I'm wondering which of those tools you see being used most commonly, most often?
Rotimi Merriman-Johnson:
Yeah. The take-home pay calculator, I guess, because we have so many people in this country on monthly salaries, and the take-home pay calculator lets you put in your gross earnings and then shows you how that breaks down in terms of how much income tax you're paying, how much NI you're paying. You can put your student loan plan in, you can put your pension contributions in. And then my personal favourite is the compound interest calculator because I like to use that to work out, if I was to invest this much per month at this much return, how much could I have in the future? And I've found that during periods like what we're living in now, it can actually be very powerful to say to people, "If you do these small things every month now, here are the results you'll achieve down the line."
Jamie Veitch:
Yes. And I think it's probably worth us doing the 30-second explanation of what we mean by compound interest.
Rotimi Merriman-Johnson:
Oh, right. So compounding is a mathematical principle whereby if you set money aside and it increases, let's say during yearly cycles. So you put aside some money, and it grows by a certain amount in year one. When it then grows in year two, it's not just the principle sum that is growing, it is the amount that it grew by that grows as well. So if you put your hundred pounds away and it grows by 10%, you'll have 110 pounds. Then if you increase that by 10%, you'll have 121 pounds. Then if you increase that by 10%, you'll have 133. And essentially by year eight, your hundred pounds will have doubled by virtue of this 10% increase. And that's compounding. It starts off slow, but it's like a snowball, you see an exponential growth in the thing that you're compounding. And this is one of the things that you can tap into if you invest your money.
It's why we say when you invest, starting young is one of the most powerful things you can do because the longer you invest for, the more time you give your investments to grow, even if you start with relatively small sums. It's also worth saying that when we look at things like debt, high interest consumer debt, the compounding happens in the opposite direction. So the debt balances you hold increase, but then they increase again based upon how much you had in the previous cycle. So that's why when we talk about paying off debt, it's super, super important to do that, particularly when you look at the average interest rates on credit cards, overdrafts, and personal loans.
Jamie Veitch:
Indeed. It's really important to understand it can have this profound impact, positive and negative on your financial health. And I suppose we don't all understand how, even because of the compounding effect, small amounts of interest can help build a big pot when we're saving, for example. And the same as you say with debt.
Rotimi Merriman-Johnson:
Yeah. And other things compound as well, gains in the gym. If you run and you try and complete your runs X percent more quickly each time you run, then you'll get progressively faster. Human relationships compound. I like compounding because it frees me up. I'm a content creator, and I'm trying to grow my following and I'm trying to grow my views. I have a podcast of my own. And when you understand that growth is exponential when it comes to certain activities, it frees you up to start small.
Jamie Veitch:
And that's a really important message, isn't it? So we don't have to think that we can go from naught to a thousand in five seconds. Those tiny little steps build up and up and build on themselves. We've covered a lot of ground today, Rotimi.
Rotimi Merriman-Johnson:
We have done. Yeah.
Jamie Veitch:
It's thoroughly fascinating talking with you, and thank you for coming on the show with us as well. I wanted to ask you a question about anything else you'd like to tell listeners, but before I do, I've got a question to throw at you. I know you're not really a paper money kind of a guy. You're paying for things on your app or on cards and so on, but paper money still exists and it's quite emotive as well, isn't it, paper money? And for quite a long time, we've carried pictures of people on banknotes in the UK and elsewhere too, of course. But in the UK, the current pictures on bank notes are Jane Austen, Alan Turing, Winston Churchill, and I think a couple of other folk as well. If it was up to you, who you would put on a bank note, and we have of course a picture of the King on the other side of bank notes as well. If it's up to you who to put on the bank notes, who would you choose?
Rotimi Merriman-Johnson:
Yeah. I gave this some thought, and I would drop Claudia Jones into the hat. So she's a Black British Caribbean woman, an activist, and the founder of the now Notting Hill Carnival, which actually was started because of the discriminatory murder of a Caribbean man in the Notting Hill area. But she set up the Carnival as a protest, but also as a way to bring people together. And I just think there's something very powerful about that. And we fast-forward 60 years into the future, and it's now the largest street event in Europe.
Jamie Veitch:
Indeed. Thank you very much for that choice. Is there anything else that you'd like to tell people watching or listening to this about finance based on the common concerns and questions people bring to you?
Rotimi Merriman-Johnson:
Yeah. I guess the final thing that I would say was, increasingly, my content is going to focus on this topic of Black British wealth. And this comes after many weeks and months of deliberating about whether I wanted to focus on it as an area, whether I had the credibility, whether I was brave enough to say, "I would like to focus on this area." And a few weeks ago I changed all my social media bios to say Black British Wealth. And when you go on my website, it's one of the first things that you see there. I was very worried that focusing on this area would alienate people, and that people wouldn't understand where I was coming from. But I've been really pleased to say that since I've started to create content about this topic, people from both within and outside of the community have actually shown a lot of interest and care, not in the least yourself. So it's just to say thank you. Thank you for platforming this conversation, for your interest in me and in the things I have to say. And I think the future is bright.
Jamie Veitch:
I hope so too. And thank you for joining us on the show today. Where can folk find out more about you, Rotimi?
Rotimi Merriman-Johnson:
I am @MrMoneyJar across all social platforms, and my website is mrmoneyjar.com.
Jamie Veitch:
Wonderful. Rotimi, thank you ever so much for joining us.
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