They say the best time to plant a tree was 20 years ago, and the next best time is now. The same goes with investing. It is sometimes disheartening to see how other people are much further along on their path to financial independence, but if you don’t get started, you’ll never get there. The good news is, getting started is not that complicated, and even little amounts will add up over the years to a substantial nest egg.
For example, if you were to start today by investing just £100 a month, and do so religiously for the next 30 years, at 8% interest you would have about £150,000 for retirement. £100 a month is £25 a week, under £4 a day. If you think you have nothing left in your monthly budget to afford investing, think again. There may be a few ways to cut back on your expenses so you can plan for your financial future.
It can be as simple as doing an online search and getting a better deal on your utilities and broadband. Or packing your lunch to work. Or getting rid of that magazine subscription you never read. If you get started, and manage to save on these little things, chances are you will gain momentum and will find even more ways to save on daily items. Or tackle the big expenses, such as refinancing your mortgage for a lower rates. Rates are pretty low these days, and even a drop of a quarter of a point in interest can save you thousands of pounds, which you can in turn use to invest.
If you are able to increase your same £100 monthly contribution just 10% per year (£110 a month the next year, £121 the following year, etc.), you would retire with a nest egg of nearly half a million pounds! £480,223 to be exact. Now we’re talking.
Invest your raises and bonuses, and keep living on last year’s salary, and you could realistically save over a million pounds. A one time £5,000 raise or bonus invested in year one alone would turn into an extra £54,000 for retirement! And with pensions being pretty uncertain 30 years from now, no one but you can make sure you have the golden years you worked so hard for and deserve.
Now that we have covered ways to find extra money to invest, let’s talk about the investing part. A few years back, in order to invest, you had to really know what you were doing. Spend hours researching stocks, calling your bank to place a trade… this is all much easier nowadays. Robo advisors offer smart algorithms that will allocate your money based on your risk profile, and pretty much manage it automatically for you.
One such provider is Wealthsimple. Wealthsimple started up in Canada and in three years grew a client base of over 50,000 investors. They now manage over £1Billion of assets worldwide. As the name states, Wealthsimple makes investing straightforward and transparent.
They charge a flat 0.7% fee, down to 0.5% if you invest over £100,000 with them. And readers get their first £10,000 managed for free for the first year. All you have to do is click the link at the end of this article to enjoy this offer.
The Wealthsimple Black tier for six figure investors comes complete with a private session with an advisor, and free VIP airport lounge access worldwide.
All Wealthsimple investors enjoy a diversified portfolio of low cost funds that match their investor profile, automatic rebalancing of their portfolio, and dividend reinvesting for further compounding.
You can also set up a direct debit and pretty much forget about it. As Warren Buffet says, you should spend what is left after saving, and not save what is left after spending, so ideally your direct debit would be set up at the beginning of the month when you get paid, and you would get used to living on what is left on your account.
With Wealthsimple, your cash is protected by the Financial Services Compensation Scheme up to £85,000. Your financial information is encrypted and kept secure.
For further growth of your nest egg, you should consider investing through and ISA, or Individual Savings Account. ISAs allow you to invest up to £20,000 this tax year, and your money will grow tax free for as long as you keep it there. So don’t overdo it at first, because if you withdraw money from your ISA, you can’t put it back in. Say you invest £15,000 and take out £5,000 to cover an emergency, then grow your savings back to £10,000, you would only be able to invest another £5,000 in your ISA until next April.
The same way, only invest money you can afford to leave through market ups and downs, so you do not need to withdraw it at a loss.
Once you have defined how much you are ready to invest as a lump sum and every month, simply sign up for an account, and answer a few questions to determine your ideal asset allocation. A conservative asset allocation will be mostly in bonds, while a growth allocation will focus on equities. The socially responsible investing option allows you to invest in companies that have stronger corporate governance, are committed to fair labour standards, or innovating in cleantech. You can rebalance at any time, and usually the more years you have before retirement, the more aggressive you can afford to be with your investments.
Ready? Click here to start investing with Wealthsimple and get your first £10,000 managed for free the first year.