Category: Investing

13 Ways on How to Spend Less and Save More Money for Investing

Most times, the problem when it comes to money is that lots of people tend to neglect savings and investment and concentrate more on expenses. Although it is more fun and easier to spend all the money you laboured for within a short period but the sad truth is that there are lots of reasons why you need to spend less and save more money to invest for the future.

Stay on this article as we guide you on the ways you can reduce spending and increase savings and investment:

1. Track Your Financial Growth

Calculating your net worth will help you to determine an overview of your financial standing. Net worth is determined as, your assets which include; investment, savings and cash in checking, real estate etc. minus your debts like mortgage, overdue credit card bills, student loans, etc. By doing this each year, you will be able to monitor your progression towards any debt repayment goals and savings.

2. Make a Budget

Another thing you need to do is that you need to have a realistic budget that you stick to. You need to be intentional about your savings goal and not only think about it. This includes you being realistic about your current household financial situation. You then need to set numbers that are attainable and correspond to your spending to enable you to save.

When you know what you are spending money on, you will likely not overspend. Monzo and Starling are two digital banks that can you with this.

There are also free budgeting apps like Money Dashboard that can help you manage all your accounts in one place.

3. Pay Attention To The Cash Flow Concept

Understanding what cash flow is, how it works and what your household financial situation looks like is very essential. Revise your expenses and your income then determine your savings habit.

4. Work With Your Partner

If you have someone you stay with, or you are married, teamwork and communication about your household finances are very important. To save and invest more, you both need to be on the same page with your plan, desire, and resources.

Editor’s Pick

 

5. Differentiate Between your “Want” and “Need”

Understanding the differences between your wants and needs. Identifying them will help you to avoid unnecessary expenses and help you say NO when something that does not correspond with your financial goal comes up.

6. Cancel Redundant Subscriptions

The thing with subscriptions is that they tend to pile up. Before you know it, those little subscriptions have become very expensive.

The Covid-19 lockdown and the work from home period gave people a lot of free time and subscriptions could have piled up. Now you have to ask yourself if you really need Netflix, Disney+, and Amazon Prime accounts?

7. Save First, Spend Later

When we make money, it is really important to save first before trying to sort anything else.

The rule of thumb is to use the 50/30/20 flexible approach to budgeting. What this means is simple. 50% goes to your needs like food, bills and debt. 30% goes wants. These are things you want to buy. 20% goes for savings and financial goals.

You can always adjust the ratios to what works best for you.

8. Pay Attention To Your Accounts

Do you know about tax-free ISA allowance? You can take advantage of your £20,000 tax-free ISA allowance. ISA rates aren’t great but it makes sense if you leave the money untouched for a long period.

You can get more information about it here www.gov.uk/individual-savings-accounts. You can find the best cash ISA rates at Moneyfacts.

Secure your accounts by turning on multi-factor authentication on all of your accounts to provide an extra layer of security. To do this, first protect your money and yourself by knowing where all your account is which includes; credit cards, retirements, banking, and student loan

Also, there are several safety precautions you can take which includes; setting up credit report monitoring, etc.

9. Improve Your Financial Credit Score

To increase your credit score, the most important thing you need to do is to keep your credit utilization rate under 30%. You also need to pay off your bills on time as at when due.

Lots of credit companies pay attention to your account on the length of your credit history, the mix of credit accounts you use, and the last time you applied for new credit.

10. Plan For Your Benefits

You probably have employer’s benefits that you are not aware of. Some of these include wellness opportunities, gym reimbursements, or financial planning sessions.

Make sure you pay attention to them by taking a few minutes through your HR portal or reaching out directly to your benefits manager can yield positive results.

You should take time out to find out the benefits your employer offer.

11. Be A Clever Customer, Not Loyal

It is easy to get attached to brands. But are they always the best option for you. The truth is, the emotional connection we have to brands apart, cheaper doesn’t always mean worse.

Sometimes, cheaper could be better and more suited to your needs.

To save more, you really have to be more clever with your brands and vendors. You can use comparison sites to search for better deals.

12. Maximize Your Savings Potential

Your rate of savings is determined by the percentage of income that you keep every month concerning your expenses i.e. Income – Expenses = Savings.

By increasing your savings, you are putting yourself in a better overall financial position. This will give you extra money at hand to save or to accomplish your goal, be it to invest or buy a house.

There are several ways to increase your savings, you can unimportant monthly subscription, get a side hustle, ask for a raise at work and more.

13. Reduce your expenses

This is another way you can save more by making sure that you are spending only what is important.

You can do this by making a list of all of your non-essential expenses for the last month. How do you achieve this? You can keep track of your expenses for a few months.

Rank them from the most important to least important and reduce or cut spending on the least important or unnecessary.

Conclusion

There are several ways you can spend less money than you make. But most of them rely on you either making more money or reducing your expenses.

The methods discussed are proven ways of reducing your spending so you can have more money saved for investing.

Categories:
Best Way To Start Saving For Your Child

Best Way To Start Saving For Your Child

Being a parent comes with different responsibilities. Parenthood can be an endless journey of expenses and financial stress. This is why you need financial planning. An important aspect of this is to think about the best way to start saving for your child.

Being an adult isn’t easy and it doesn’t get any easier when you become a parent. Every decision you make is with you and your family in mind.

This means when you think about your retirement savings, for example, you must also be thinking about your child’s college funds and the likes.

The best investment you can give your child’s future isn’t always education, sometimes it is savings. Couple that with teaching them valuable money lessons and you would have done them a world of good.

I have a more comprehensive article on how to teach your child about money here.

When Should You Start Saving For Your Kids

When Should You Start Saving For Your Kids?

Ideally, saving for your kids should start as soon as you start a family. Saving for your children as early as possible saves you future stress and headache. It reduces the burden you have to shoulder in the future. But it is never too late.

Putting money away for children is a great way to teach them about financial literacy, especially when you have them participate actively in the process.

This is a great first step to teaching them about wealth building.

There is no limit to how much money you can save for your child. This decision is entirely up to you.

Here are some best savings options that you can start for your child.

Children’s Savings Accounts

To a layman, saving money for children will probably mean getting a piggybank or keeping the money in their personal or fixed account. But that is wrong. There are better ways to go about this. Financial institutions understand the importance of children’s savings and as such, a lot of them have created packages around this.

There are many savings options children have nowadays. A few examples are Junior ISA, Easy-Access savings accounts, and regular savings account.

I will be going through the advantages and disadvantages of each later in the article.

A children’s savings account is a great way of separating your child’s money from yours. It also helps you know estimate how far you have come or need to go.

You can open these accounts with as little as £1 but they all vary in their functionalities. Some accounts allow your child to withdraw anytime they like while others have limitations.

Find out how to live well on a small income here.

Children’s Regular Savings Account

With a regular savings account, you can save an amount every month for a given period. This is best for parents who want to save for something specific like future tuition fees.

Children’s Easy-Access Savings Account

Depending on the account you choose, the maximum age ranges from 15-20 years old. With this account, your child can withdraw or deposit money as they like.

Pros:

  • You can make withdrawals at any time.
  • Great for teaching kids about money. Some accounts give you passbooks that your kids can use to withdraw money. They can only use it with a parent present.

Cons:

  • Lower interest than regular or fixed-rate accounts.
  • The account is tax inclusive.

You can get more information on children’s savings account on Which? and MoneySavingExpert.

Junior ISA (Individual Savings Account)

Junior ISA (Individual Savings Account)

This is for children under the age of 18. The account is automatically converted into an adult cash Isa once they turn 18. They will then be able to manage the funds themselves.

Pros:

  • Tax-Free: All money held in Isa wrapper is free from tax.
  • Children cannot withdraw the money. This can also be a disadvantage if you want them to learn good money habits.
  • You can choose between Junior cash ISA or Junior stocks & shares ISA. You can also choose to split between both.

Cons:

  • There is an annual deposit limit.
  • Junior ISAs have no government contribution.

 

Piggy Bank

Piggybank is very popular in all parts of the world. In fact, it is probably the first bank many of us knew growing up.

But what many didn’t know is that piggy banks are not just about saving money, it is also a great way to teach kids about money.

It is great for teaching children that money is valuable when kept and it grows over time when kept safe.

You can start by teaching your kids to save their spare money or loose change in a piggy bank. You can then attach a bit of responsibility to it. For example, you can tell them to get weekend treats for themselves from the money they have saved up throughout the week.

This is a very important lesson.

It helps them realize that saving money is towards a specific purpose and when it’s gone it’s gone. That you do not save up for the fun of it. Piggybank can help children develop an understanding of how money works.

Find out how to bridge the gap between the rich and the poor here.

Friendly Society Tax-Exempt Plan

A friendly society is a mutually beneficial association created for the intention of pensions, insurance, cooperative banking, or savings. The purpose is to be advantageous to the members.

Many Friendly Societies have tax-exempt savings plans and many offer the children’s version of this.

You can pay into the plan for 10 to 25 years.

During your chosen duration, the money is invested in a share-based investment fund.

The annual maximum you can pay is £270. You can pay up to £300 if you can commit to £25 each month.

There are a couple of conditions to meet before the maturity date. Your child must be at least sixteen to access the fund. You must have also funded the account for at least ten years.

So far as you continue to service the account for the minimum amount of years, your child won’t be eligible for Capital Gains or Income Tax on any income.

 

NS&I Premium bonds

Premium bond is an investment plan offered by National Savings and Investments (NS&I).

It differs from other savings and investments because you don’t earn interest or dividend income. Instead, they enter £1 from your invested amount into a monthly prize draw.

You can earn between £25 and £1 million from these draws. According to statistics, every year one in every three people win a prize with a £1000 investment.

The winnings are also tax-free.

The minimum amount you can buy is £25 while the maximum amount you can hold is £50,000.

You can buy Premium Bonds for yourself, your child, your grandchild, or your great-grandchild. But you must be at least 16 to be able to buy them.

HM Treasury backs Premium bonds so your money is secure.

A major disadvantage is that you might not win any prizes.

Children’s pensions

Yes, you can think long-term and take a pension for your child. Saving towards your child’s retirement isn’t the most regular thought process but the idea is great.

Surely it won’t be the first savings option you thought of.

Children can access the money only when they reach 55 years of age. Let’s be honest, anyone facing retirement will be grateful for any savings they can get.

Pros:

  • Your child’s latter years are well secured monetarily.
  • Children can take over the account and make pension contributions themselves when they reach 18. This teaches them great financial habits.
  • Your child can’t spend the money lavishly because it’s inaccessible till retirement.

Cons:

  • The money will be inaccessible for a long time.
  • The maximum yearly contributions are small if you want to be eligible for tax-relief funds.
  • The pension income is not tax-free, unlike ISA accounts.

 

Who can open these accounts?

  • The provider and savings account option you choose usually decides this.
  • Instant access and fixed-term bonds can be opened by children over 7 years.
  • Junior ISA, instant access, regular saver, and fixed-term bonds can be opened by parents or guardians.
  • Instant access, regular saver, and fixed-term bonds can be opened by grandparents or other family members.
  • Some fixed-term bonds can be opened by your child from the age of 7.
  • Stock and shares account can only be opened by parents or guardian.

How can you open these accounts?

You can open these accounts in three ways. It can be done online, in a branch, or by post.

You can only apply online if you already have an existing account with the provider. If this is not the case, you may visit their nearest branch to you. You might also need to provide identification for yourself and your child.

A child’s identification is usually a passport, proof of address, or birth certificate.

Categories:

How to open a Vanguard Brokerage Account – Vanguard Stock and Share ISA

Opening a Vanguard brokerage account is a relatively straightforward process. Within a few minutes, you can start investing in stocks and shares.

However, investing in the stock market anywhere in the world can be extremely overwhelming for beginners. It is not different in the UK.

A lot of beginners in stock market investing struggle to understand how to start and where to start.

In this article, I will take you through how to open an investment account on Vanguard UK.

Before I take you through how to open the investment ISA account on the Vanguard website, I think it is very important to first explain,

  • The mindset and psychology of stock market investing
  • Stock and Shares ISA (also called Investment ISA)
  • Why vanguard is the best place to start your stock market investing
  • Investment Type
  • Fees

Mind-set and psychology of stock market investing

When you are a beginner in investing, it is important to start with the right strategy and mindset.

Think long term

Approaching investing with a long term mindset is one of the ways to succeed in stock and shares investing. There is no doubt that the market is always on the way up.

There will be a time when the market will be down or take a pause. In some cases, the economy will go into a recession which will decrease the value of your investment.

If you are investing for the long term there is no need to panic during a recession or when the market is taking a pause.

There is a difference between trading and investing. It’s important to have the right mindset and strategy. If you are doing it for the long haul then you are investing. For people that are trying to beat the market, they are trading.

Stock and Share ISA (also known as Investment ISA)

For someone who is considering starting to invest in the stock market in the UK. The best type of account to open is the stock and shares ISA account. Here is the reason why.

Stock and share ISA is a tax-efficient account that will help you to save money on tax. You will not pay tax on any income your investment generates in Stocks and Shares ISA.

It is worth mentioning that there is a personal savings allowance in the UK which means that you won’t start paying tax on income from savings and investment until you have a profit that is more than £1000.

Even if you choose to invest in a General Account that is not ISA you will only pay tax on profit or income over £1000.

For me, investing in Stocks and Shares ISA is a no-brainer.

Why vanguard is the best place to start your stock market investing

The reason why Vanguard is the best place to start is that they have a very good reputation and they are well respected in the stock market arena.

They have their limitations; the funds available are not as many as you will see on some other platforms. Honestly, this is an advantage rather than a disadvantage because of the simplicity of not getting confused with making a choice.

Vanguard mainly has its funds on their platform and their fees are very low when you compare it to their peers.

Majority of their funds are low-cost. Vanguard I believe is the favorite for passive investors.

As well, the Vanguard platform is user-friendly which makes it easy to navigate through their platform.

Fees

One of the things you need to be aware of in stock market investing is fees.

When you are just starting you are likely not to pay any attention to fees. As your investment grow you will be losing money if you get this aspect of investing wrong.

  • Platform fees

Most brokers will charge you for managing your investment for you. It is important to not use a broker who charges high fees.

All brokers charge for this which I don’t think there is a problem with. The problem lies in paying more than you need to.

  • Dealing fee

Some of the funds or shares you buy will require you to pay a fee when you buy a share or fund. For people who buy individual shares, it makes sense to make a bulk purchase of shares because if you are buying bit by bit you might be paying too much on dealing fees.

Let’s say, for example, a broker charges £8 per trade fee for trading individual shares. This means the £8 will be paid regardless of how many shares you are buying.

If you buy 10 shares in a single dealing you will pay £8. Instead, if you buy your 10 shares in two different trades i.e two trades at different times you will pay more for the dealing fees. So you will end up paying £16 as opposed to £8 if you buy in one trading.

This is the reason why it makes sense to invest in a fund that you can just put in regular payment to your investment account.

See examples of fees can be seen on the Vanguard website here.

Investment Type

Index fund and ETF

I seriously think you should not be buying individual stock when you are just starting out in  Stock Market investing.

An index fund or ETF is the best place to start as a beginner. Please don’t be confused or overwhelmed at this point if you don’t know what Index Fund or ETF are.

Index fund and ETF have something in common. Without getting you more confused. Index fund in a simple term is a collection of stocks of different companies put together in one pot called a fund.

In a simple term, instead of buying a share of Amazon, BT, Mcdonald or any other company shares, you can just buy an index fund or ETF that have various company shares in them.

Why buy an Index Fund or ETF instead of individual shares?

Another simple explanation of this is below,

Let’s say you buy an Apple stock and something happens to Apple as a company and they go out of business. This means that you will lose some or all of your investment.

Instead, if you have Apple stock and other companies stock in a fund, if Apple goes out of business, this will only be part of your investment. You will not have to worry, it will be the responsibility of people who are managing the fund to take the apple stock out and find another company to include as part of the fund.

Investing in a fund means that the risk of losing all your investment is low compared to an individual stock.

When buying a refund you need to note the following:

Management Type

This is very important because it has to do with if you are buying a fund that is ACTIVELY managed or PASSIVELY managed by fund managers. Usually, the fees on the active fund will be higher than that of the passive fund.

The reason for the high fee in the active fund is because the fund manager will be trying to outperform the market. My preference is usually to go for the passive fund because it’s better for a long-term investor.

Asset Class

There are 3 major asset classes. EQUITY which is mostly stocks, FIXED INCOME usually Bond and MULTI-ASSET which can be a mixture of stocks and bonds.

Share Class

Something else you will need to decide on is whether you want the gain on your investment to be reinvested automatically or not. This is where you will need to decide if you are buying ACCUMULATION or DISTRIBUTING/INCOME fund.

 

Index Fund and ETF Example

Below are examples of Index Fund and ETF.

Index Fund

An example of an index fund is below. You can easily see that it has index fund as part of the text and this help you to know what you are buying. The ‘accumulation at the end means that you want the gain from your investment to be automatically reinvested.

FTSE Global All Cap Index Fund Accumulation

ETF (Exchange-Traded Fund)

In the example below, you can see ETF at the end of the fund name. You will know straight away that this is an ETF.

When you are buying ETF, make sure it has the UCITS as seen below. This is important because the Undertakings for the Collective Investment in Transferable Securities (UCITS) is a regulatory framework of the European Commission that creates a harmonized regime throughout Europe for the management and sale of mutual funds. UCITS is like a sign of authenticity.

FTSE 100 UCITS ETF

 

Is Vanguard good for beginner stock market investors in the UK

How to Open Vanguard Stock and Shares Account

The simplicity of the Vanguard website is one of the reasons why I like Vanguard. To open Stocks and Shares ISA on the Vanguard website, follow the following steps.

Step 1– On the homepage as seen in the image below, at the top right, click on ‘OPEN AN ACCOUNT’

Step 2 – Click on ‘START MY APPLICATION’ as shown in the image below.  As you navigate through the application process, it is important that you read all the information on each page so you can have the right information and not just following the steps blindly.

The information on the page relates to the requirement which is mainly about UK residents. To apply you need to be a UK resident and having a National Insurance number will confirm that. As well you need to have a bank account. These are just to confirm your identity and for the regular payment to your account later on, after opening the account.

Step 3 – It is possible to transfer an existing ISA account from a different provider to Vanguard. But, for a new account, you just need to click on ‘OPEN AN ACCOUNT’ as shown in the image below.

Step 4 – Before you click on ‘I have read the above documents and would like to proceed with my investment.’ and ‘PROCEED’. You need to read the ‘Important Information’ on this page. There are documents you can actually open on the page and read. Below is the image of what is on the page.

Step 5 – This is the most interesting part. This is where you need to choose the funds you want to invest your money on. As I have already explained above ‘Why buy an index fund or ETF instead of individual shares?’ You need to choose funds based on the asset class, share class and fees. At this point, you will be the one to decide.

Step 6 – After choosing the fund you want to invest in, you will need to follow other instructions to complete the application.

 

It is worth mentioning these.

Minimum amount to open Vanguard Account

You can open your Vanguard investment account with a minimum lump sum investment of £500 or a minimum regular monthly investment of £100 or a combination of the two.

You can invest up to £20,000 in your Stocks and Shares ISA account in any financial year (April 1 and runs until March 31). However, the £20,000 is for all your ISA accounts combined if you have any other ISA accounts.

 

In Conclusion

Opening a vanguard brokerage account is quite easy. The biggest challenge that you can come across is choosing vanguard as your broker. But with some of the arguments, I have made above, choosing Vanguard as an investment beginner should be considered. Your shares and stock investments are in safe hands.

Categories: