Beginners Guide to Financial Planning. My 10 Tips to Start Investing!

Beginners guide to Financial Planning. How to Start Investing

The idea of financial planning and investing can be daunting . It’s something that people frequently put off until tomorrow but sadly, tomorrow never comes! In this blog I’m going to give my 10 top tips to start investing. Trust me, getting started when you’re young will put you miles ahead of 99% of people.

Even if you’re not really young now though, never tell yourself it’s too late. Start today with some of these simple things and you’ll still end up being ahead of most people. Remember, it’s better late than never.

My best tips on where to start is something I’m asked about all the time. Anybody can follow these to help themselves achieve financial freedom and independence.

Right, let’s get into it…

My number one tip when it comes down to investing is…

1. JUST START INVESTING!

Start investing today into simple, low cost, index funds that give your money a broad exposure to the stock market. You don’t need to know anything about shares. You don’t need to know how to analyse any charts or reports. You don’t need to know how to read company accounts, you just need to know some very basic things…

  • Where to open an account (Vanguardinvestor.co.uk, Moneyboxapp.com)
  • Which type of account to open… I recommend a Tax-Free ISA if you haven’t opened one already (see my recent video here)
  • What to invest in… Low-cost index tracking funds or ETFs (broad market exposure – market goes up over time)
  • Money moves up and down but over a long enough period of time, you can be quite sure it will go up.
  • Don’t withdraw when it goes down in value – that is a sure fire way to lose money; just invest THROUGH those periods.

Investing regularly and automatically on a monthly basis, allows you to benefit from pound cost averaging. This basically just means buying shares at different prices, so you get bargains when they dip in value. Just starting as soon as possible and maintaining the habit can easily see your money grow to hundreds of thousands of pounds or more over 20, 30, 40 years.

If you’re 18 now, imagine having 100s of 1000s coolly stashed away in your ISA when you’re in your late 30s. You’ll definitely be in the 1%!

OR easily having enough to not only purchase your own home, but to put down as a deposit on investment properties as well to really build your asset column and passive income.

2. Start a Pension

For the same reasons as above: The longer you do it, the more it’ll be worth, the earlier and more comfortable your retirement will be.

The beauty of pensions is that HMRC will add 25% on top of whatever you pay in to a personal pension through what’s called tax relief. So, for every £100 you pay in, an extra £25 will be given to you for free. You may be eligible to get even more via your tax code if you are a higher rate or additional rate taxpayer.

You then get growth on this growth through the power of COMPOUND INTEREST.

You can’t access pension money until you’re 55 at the moment and that’s planned to rise to 57 and then 58 in future, but that means if you’re young now the money will be in there to grow for a very long time.

Even if it’s just a small amount monthly, just start! It will enhance what you get through any workplace pension you may be a member of.

The providers I mentioned earlier offer a pension wrapper, with exception of Trading 212.

3. Get an Emergency Fund

Equally important as the first two tips when you’re young is getting an emergency fund. This is just some money set aside in a liquid account for emergency purposes. Emergency means that: It doesn’t mean an emergency trip to Ibiza (as tempting as that may be!)

It might be something health related like an emergency dental appointment, or something urgently needs repairing.

There’s no set amount for how much this should be. As a rule of thumb try to build up 3 months’ worth of expenditure in an account and make sure it’s instantly accessible. This is to be used as a nice comfort blanket, so you know you have covered yourself if an emergency was to arise without getting into debt, which can be a slippery slope.

start investing in an emergency fund

 

4. Get the Right Bank Account

Speaking of accounts another tip is getting the right bank account. Online accounts these days like Starling Bank and Monzo are leading the way with some of their features.

Starling account can be opened in minutes and actually provides a small bit of interest on your balance, which is rare for a current account and both of those companies allow fee free withdrawals abroad.

Monzo is great because it allows you to create different pots for different savings, helps budget you on how much you have left for your monthly spends and notifies you with each transaction made. The best part is you can manage it all within an app on your phone so it’s easy to keep track of what your money is doing.

Avoiding fees is always a winner but also be savvy with bank accounts…

Have more than one to take advantage of special high interest rate deals and cash back rewards such as those with Bank of Scotland and Santander.

You may need to organise payments and direct debits to meet certain criteria, but it’s not rocket science and can be worth it.

I’d highly recommend doing ‘round up’ investing with the Moneybox app as well to make sure your spare change is invested.

 

5. Get A Credit Card

I’ve done a recent video about the virtues of credit cards and it’s something that everyone should have.

From helping to improve your credit score, to giving you better purchase protection to giving you cash back so you actually earn money from your purchases. The right credit card is essential. Open one as soon as you are able to and learn how to manage it effectively. Watch my credit card video here for a more in depth run through on that. Ensure you fully pay off credit card balances every month because left over balances are bad debt, and you want to avoid having any of that.

 

6. Shop Smart and Get Cash Back

Look out for cash back deals not only from your bank account and credit card but through affiliate programmes and rewards sites. You may as well get paid for the things you are going to purchase anyway! The key thing here though is not to spend the cash back, but to invest it. You’ll be amazed at how much those little kickbacks will grow over time.

7. Live Below Your Means, Start Investing The Rest

This is definitely something I should have switched onto when I was younger and I could have put this right at the top of the list to be honest, but I didn’t want to give away all of the value too early on!

LIVE BELOW YOUR MEANS! START INVESTING THE REST!

Don’t spend every last penny that comes in. Always pay yourself first by automating your investments but aim to live on less than what you’re earning. Try to ensure that you don’t just invest at the start of the month, but at the end as well, by investing what’s left over.

It’s hard to do, but if you can master it, you’ll basically win at life!

When you get that first pay rise, don’t rush out to get a better car or phone. Live on what you were earning before and invest the rest. Your aim should be to build your assets to the point that they can produce a passive income. That is what you can then spend on more luxuries!

Think property portfolio that pays rent or stock portfolio that pays dividends.

start investing for growth

8. Know the Real Cost of What You Spend

People say, ‘it’s only a fiver’, ‘it’s only a tenner, it doesn’t matter’. They’re not appreciating the long-term cost of that wastage. Instead of wasting £20 a month, if you invested it and received a compound return of 8% a year, in 20 years’ time those £20s would be worth over £11,500. That’s what you’re depriving yourself of. Always think of the long-term cost of your spending!

 

9. Get Income Protection Insurance

Almost no one does this when they’re young, but protecting your income early is the best time to do it because it’s cheap. You may need to increment the cover when you start earning more. To be honest whatever age you are now, income replacement cover is never going to be this cheap again because it just keeps increasing with age.

The main reason people don’t have income protection is because they think they’ll never need it, but we all know at least one person who’s been off work long term. If you are off work, would you still want to save and invest for your future, retire early and enjoy life? If the answer is yes then you need income protection, because it will pay you monthly a percentage of your earnings, generally tax free, until you can work again.

 

10. Start Investing in Yourself. This is the Investment You’ll Get the Highest Return On

Every successful person never stops learning. They are constantly teaching themselves new skills and giving themselves new knowledge. Whether reading books, downloading courses or joining mentoring programmes, you will only get ahead by doing this.

learn to start investing

Warren Buffett has always said ‘investing in yourself is the best investment you’ll ever make’. As the most successful investor of all time, I think he knows his stuff!

It’s often said that everyone is just one skill away from greatness. It could be learning about how to market yourself or your business online, presentation skills, leadership skills, sales skills. It’s never been easier to find and obtain the knowledge you need, and it’s never been more essential in this super competitive world!

SkillShare has one of the widest online course selections available and you can make the most of a 14 day free trial and 30% OFF an annual membership with my affiliate link HERE.

If you want to start investing small, read my How to Invest £100 A Month Blog for some nifty tips!

Have you got any tips to start investing that I haven’t discussed? Let me know over on my Instagram!

 

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