The sooner that you start investing and building your wealth, the more time your investments have to potentially grow and benefit from compounding of savings interest and investment return. It can be hard to know where to start when it comes to creating wealth if you do not normally save or invest money each month.
Our Financial Advisers are often asked ‘How can I grow my money fast?’, there is no simple answer to this, however here are some tips help to increase the value of your savings and investments on your current income.
Automate your savings and investments
The easiest way to get into the habit of saving and investing each month is to automate your savings and investments.
You can automate savings into a savings account or investments into, for example, an ISA or pension by setting up a direct debit to automatically transfer an amount that you choose into your chosen savings account/ISA or pension.
Make saving and investing a habit
Once you get into the habit of setting aside some of your income each month for the future, you will get used to having less disposable income and be able to adjust your spending habits accordingly. Find out more about saving and investing for yours and your family’s future.
Create money goals
Creating financial goals can motivate you to stick to your budget and save/invest as much of your disposable income as you can. Financial goals are often motivated by future financial needs. You could create short, medium and long term goals. For example, paying off credit card debt could be a short term goal, as could building-up savings for emergencies and short-term capital needs; whereas investing for your retirement could be a long term goal.
Review your current expenses
Reducing your expenditure can mean that you have more disposable income to invest each month. To begin taking control of your finances, you need to know how much you are spending each month. Start by writing a list of your monthly and annual outgoings.
Then go through each of your outgoings, are they all necessary? Are there any that can be reduced? For example, could you move to a cheaper internet provider? Do you use your gym subscription?
Budgeting is important so you are aware of where your money is going each month. Effective budgeting will also help you to know how much money you will have left over each month and how much you can set aside for the future.
Have multiple sources of income
Another way to potentially create wealth quicker is to create multiple sources of income. For example, you may be able to rent out a spare room in your house or do some freelance work alongside your regular job. You could then save or invest all additional income from this new income source to help boost your savings and investments.
Prioritise paying off debt
Having debt can mean that you can save or invest less each month as your outgoings are higher. You should be strategic about paying off your debt, for example you should prioritise paying off the debt with higher interest first. It is important that you check if you will be liable for any early repayment penalties. Your financial adviser can work with you to create a plan to eliminate any debt you have while you are building your savings and investments.
Increase pension contributions
A pension is one of the most tax-efficient ways you can invest for your retirement. Increasing your pension contributions will mean that the money in your pension pot has more time to potentially grow. If you have a workplace pension, you will also benefit from employer contributions.
Member contributions to a personal pension will usually be paid net of basic rate income tax, the pension provider will then reclaim basic rate income tax from HMRC and add it to your pension pot. For example, if you pay in £300 per month, you will get tax relief of £75. For higher and additional rate taxpayers, the government could put in up to 40% or 45% respectively overall, with higher and additional rate tax relief being obtained through Self-Assessment.
Start building your wealth today
Contact Four Wealth Management for a no-obligation review of your financial situation. A dedicated financial adviser will work with you to create a bespoke financial plan suitable for your individual circumstances.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may therefore fall as well as rise. You may get back less than you invested. An investment in equities does not provide the security of capital associated with a deposit account with a bank or building society.
The levels and bases of taxation, and reliefs from taxation, change change at any time. The value of any tax relief depends on individual circumstances.