Did you know, that if you were to invest just £100 per week for the next 40 years at an interest rate of 8% per year, you could potentially end up with £1,396,403!
In todays post, I’m going to give you my step by step plan on how you can put yourself on the right path to achieving that and we’re getting started right now.
Step 1 – Have £100 per week to invest.
Now of course, the first thing we need to make sure is that we actually have £100 per week to invest to start off with. Now, whilst I can’t speak for everyone because all of our personal situations, outgoings and incomes are different, I do have some things you can start doing straight away to get you to that £100 mark.
- Review your spending. I can almost guarantee you that if you haven’t done this before, you can easily trim an extra £50 off per week by maybe cancelling a redundant subscription or maybe cutting down on the meals out.
- Start a side hustle. If you have cut back on your spending and you still haven’t freed up a spare £100 per week to invest, now is the time to start looking into side hustles. There are literally so many small side hustles that you can do for just a couple hours each week that can bring in some nice returns. For example, you could work for Deliveroo or a deliver fast food for 1/2 nights a week or maybe you could sell some spare junk on eBay.
Step 2 – Build an emergency fund.
Basically, all an emergency fund is a set amount put aside incase you need to access money instantly. This could be your boiler breaking, maybe a car repair or maybe you lose your job. It’s basically for anything that could potentially pop up without you really knowing about it.
Doing this is so important to laying the correct foundations towards building a better financial future.
I personally suggest anything up to 6 months of your monthly outgoings set aside as an emergency fund. However, if you have built up multiple streams of income, you could probably get away with a lower amount.
Step 3 – Open a Stocks & Shares ISA
Now, this is the time when we start putting our money to work but first, we want to make sure we can make the most of it and not have to pay any unwanted tax.
Luckily, in the UK you are allowed to save up to £20,000 every single year within a Stocks & Shares ISA without being subject to any capital gains tax in the future and this is exactly where we want to be holding our £100 a week investments.
In terms of where is the place to open a Stocks and Shares ISA, I would highly suggest FreeTrade which is absolutely fantastic for beginners. One great thing about FreeTrade also is that if you click here, and then continue to sign up to the app, you will actually get a FREE SHARE via my refer a friend link.
Finally, if you wanted to read more about the UK Law surrounding ISA’s, click here.
Step 4 – 50% into an Index Fund.
For this step, we want to be taking £50 a week of our £100 budget and investing into a low cost index fund.
If you were unsure about what index funds are, check out the YouTube video below but basically, when you are investing into an Index Fund, you are investing into a collection of stocks instead of just one. Doing this contains much lower risk than buying stock in just one company and should be the foundation of building your portfolio.
With Index Funds, due to them being much lower risk, you will find the reward to be smaller but one that is much more consistent and steady.
Step 5 – 25% into individual stocks.
Now that we have a solid base with our index funds, we can now take a few more risks by investing into individual companies.
For beginners, I suggest starting out by looking into well established companies that you understand, ones that you’re interested in and companies where you actually use both their products and services. For example, in my case the big companies that stand out to me are Apple, Facebook, Coca Cola and Google.
Once again, FreeTrade is a great option where you can go ahead and do this with their commission free trading platform.
Finally, when investing into individual stocks I highly suggest you spend some time researching the stock so that it can help you make a better decision and set some expectations for the future. Here are some key things I suggest taking a look at:
- The management structure
- Past Income Statements and Balance Sheets
- News around the stock
- Potential outlook for future growth
Step 6 – 25% towards investing in yourself
I can’t stress how important investing into yourself is there are a few ways in which you can do it.
- Education – Invest into some books, buy an online course or pay for some mentoring.
- Build a business – What’s stopping you putting a small chunk away each month towards building your dream business. I did exactly this for my reselling business which is still my full time gig till this day.
Doing either of these two things will have an indirect but great return on your investment over a long period of time. I used to be the person who always was against this kind of thing but now I can’t preach it to people enough.
INVEST IN YOURSELF.
Okay so just to summarise:
- Work out a plan so that you have £100 a week to invest
- Build an emergency fund of anything between 3 – 6 months of your outgoing bills.
- Store your money within a tax free stocks and shares ISA.
- Invest 50% into a low cost index fund.
- Invest 25% into individual stocks.
- Invest 25% into yourself.
And basically, this is exactly what I do everything single month and I personally believe it has put me on the right path towards complete financial freedom.
I hope you found this article valuable. If you wanted a more detailed explanation then please check out the YouTube video at the top of the page and some of the links included in the post.