Within this blog, you know as well as document my own family’s journey to financial freedom and security so we can live our dream life, I also want to give you as much information as you can to make your own financial goals a reality and strategies to make that happen too.
Absolutely everyone should be saving part of their income each month towards their future – whether that be a pension, towards increasing your net worth (getting rid of those debts), and even including investing to make your money grow more money passively without you having to work for it.
Each month on my youtube channel I share how my family is doing against our financial goal of becoming completely financial free and having enough profits from our investments and savings to live off without needing a job to create income.
This post is not sponsored in any way but any of the products or companies mentioned – this is my own personal strategy for my family, and stress that you need to investigate and be comfortable with your own strategy before investing your own money. Don’t just take my word for it!
// Know you want to start investing but don’t know where to start?
There are two key components to understand to make your money work smarter for you – you need to pay yourself first in the future (put some of your money without fail towards savings and passive incomes) and using the power of component interest and time as much as you can.
A great place to start if you are brand new to investing and want to start is to check out my video and post here.
// What is an Investment ISA?
An Individual Savings Account (ISA) is a UK tax exempt savings fund (up to currently £20k per person per year) where you will not pay capital gains tax for your interest increases each year if you keep within that limit.
ISAs come in many types depending on your desire from the savings account, however I personally use a Investment ISA as part of my financial freedom strategy due to allowing me to use the power of the Stock Exchange to have a much higher return on my savings placed there compared to a normal savings bank account.
Of course – with any financial advice – stocks and shares can go up as well as down, but generally the longer you leave your money there the better the outcome.
To be perfectly honest, any money you place in such an account for your financial freedom you should not really be touching ever.
You are leaving it there to generate your more money indefinitely, and you can find out how compound interest makes you more money and rich, check out my post and video here.
// How do you know how much to save each month?
If you have a goal, you are certain to achieve it if you make it as exact as possible.
If your goal is to have financial freedom, just like my own family’s goal being worked on right now, we needed to know the EXACT AMOUNT of savings we needed to be working towards having in our Investments to live off the interest.
A dream without a plan and goal is just a dream after all.
Action towards a fixed target makes it so much easier to achieve and stress you to take time to work out your exact financial freedom number too.
// How do I invest my money each month?
Currently I use an Vanguard Investment ISA for my major savings, in combination with my pension contributions with my employee.
I went with Vanguard as they are regarded as one of the very best in the field, plus I like the fact that I can choose exactly where to invest my money.
If you are brand new to investing, you can let Vanguard balance your investments for you with their Lifestyle Funds or you can choose to invest in a particular low cost index fund and market.
Do your research for your own money, but personally I am currently investing in their Lifestyle 80% Stocks/20% Cash fund with a small portion purchasing in the UK S&P index fund.
I personally use Index funds as it is a way to harness the power of a group of companies, rather than invest in one single company.
With your investing strategy, remember that this is the long game.
If you need this money back, best place it somewhere like a normal savings account as we will not make the most of the power of compound interest and the stock exchange if we sell/move our money around all the time.
We want to leave it there as long as we can, until we absolutely need to draw a yearly “wage” from it without worrying about the state of the stock market.
// What if I save more than my ISA personal allowance?
Be sure you know that both you and your partner can have separate ISA allowances of up to £20k currently per year tax free gains.
If you go over this, you can also set up a Vanguard or other company normal Investment account and that will be my strategy once I hit that limit.
// How much do we currently invest and save each month in our future?
We currently save 21% of our household income in our future, then with pensions on top, it totals to almost 27% of our pre-tax income is straight on our future finances.
We have recently paid off £22k worth of credit card debt too, so if we can pay off debt anyone can with simple principles I share on my blog too.
We have reached this position by simplifying our budget but also some way to go to remove all our debts such as a home and cars currently.
We are credit card debt free, but I believe that absolutely everyone can and should look to invest at least 10% of their total income each month to work toward retiring much earlier than the normal population in the UK.
// Can you invest in your children’s future too?
The beauty of the ISA is also that you can have Junior ISAs for each of your children too.
What better gift to give them than to use the power of time and compound interest to allow them to receive an Adult ISA when they turn 18 with a lump sum or even better – teach them how to continue to save in their ISA and they could be very rich when they retire and even save far less (that is the power of time and interest)!
Vanguard and others allow you to set up Junior ISAs very quickly with low monthly deposits, and even encourage you to add birthday or special event money gifts to the fund – you can give relatives the account details directly to make deposits for their futures quickly and easily.
My goal for the next few months ahead will be to set up funds for my children whilst they are very young, so that they too can face a future with less financial worries thanks to the knowledge I have gained and goals we are working towards as a family.
Want to make your Savings and Spending even smarter?
Be sure to check out my paid off £22k worth of credit card debt too