We may not all be aware of how much we spend on coffee (or other incidentals) each month. Research tells us that it is likely to be about £100 per month which is spent – or perhaps ‘wasted’ on just buying coffee.
We also know that the average person in the UK spends £13 per week on the lottery and lottery scratch cards and games of chance. They do that with a one in 14 million chance of being wealthy – but there is a better way! By investing your money you could have a 100% chance of being wealthy in your lifetime.
It is an absolute truth that if we just invested a little of this wasted money we could make a significant difference to our financial lives over time, and we may even be able to make ourselves financially free with it.
So how does that work then?
We will go through the method needed to turn £13 per week – or just £1.85 per day into a million or so.
All you need to do is to save £1.85 per day for your working life (18 – 65) into an investment fund which produces 11.7% return (or 12% just to make it simpler), and you will end up with:
You decide what you want and when and take the right action to make sure that you get the right result.
So here goes!
Action
1. Start TODAY! By putting £1.85 into a cup, tray, box or whatever receptacle takes your fancy.
2. Do that with another £1.85 EVERY day – yep even Saturdays and Sundays – and keep doing it.
3. In the meantime log onto your computer. Type in:
which is the web site of the Investment Management Association! Click on the link to ‘Investors’ and off you go.
4. Click on the button there that says Find A Fund – it’s normally at the left hand side of the front screen – about half way down the menu list.
5. Then click on the options that appear. Tick the box that says Tracker funds – and then press ‘submit’ and you will be given a list of tracker funds.
(Hang on a minute what’s a tracker fund?
Well a tracker fund is simply a fund which invests in each of the shares in a particular index – so for example, the shares in the FTSE 100. The tracker fund just ‘tracks’ or mirrors the index by buying the shares that make up the index (the biggest 100 companies in the case of the FTSE 100). If you do this you can get invested in all the top shares – with a very small amount of money.
Is that OK?)
So back to the action then:
6. The screen will now give you a list of all the tracker funds that you can invest in.
7. Now you’ve got to pick one! Start by eliminating some possible funds and you can do this by sifting out all of those that won’t allow you to save in little bits of monthly money. There is a column which says at the top ‘minimum monthly saving’. If it says £0 – cross them off your list. If you are saving £1.85 per day – that’s £55 per month – so you want one that has a minimum monthly saving amount of about £50.
8. You can then cross off the list any fund that needs a minimum monthly saving of anything greater than £55.
But what about if I want to save £100 per month?
Well in that case you include all the funds that allow monthly savings of £100.
But for the rest of us with our £1.85 per day – we only need the £50 per month group!
9. If we take out any fund that doesn’t like regular savings – that will bring your choice down to about 40 possible funds, and then take out all those that need at least £100 – you will then be left with a choice of about 35 possible funds
NB the fund list can be sorted into amounts – so if you click on sort at the top of the column it will put them in order for you so your search is easier.
10. Now you start to make investment decisions – well not really – because all you need to do now is to review the remaining list and start to pick out those that say FTSE 100 or FTSE 250 in the title – or the FTSE all share. Or look down the extreme right hand column and you will see descriptions of the shares invested. Look for those saying things like UK All Companies, and exclude all those that say stuff like Japan, or Asia.
Why do I do that?
Well what you want is a fund that invests in a general UK based fund where the shares and the companies are based here. Rather than say a Japanese fund – for the only reason that the formula works on UK FTSE shares!
The funds that remain are the 30 possible funds that have passed all our tests.
10. You are now left with a list of potential funds that you could save your money with. You have the funds that: invest in a tracker fund which tracks a UK based FTSE share index, where the shares are in the larger UK companies And : will accept regular savings – at your particular savings level.
11. So now go and get a pin – the bigger the better - so an old fashioned hat pin works best. Do a dramatic swish of your arm and plonk the pin in your list – and there you have it – your investment choice is made!
11. What you now do is to click on the menu list on the left hand side where it says ‘Find a Fund Manager’ – and all you need to do is to scroll down the drop down list until you find the one that your pin landed on. That will give you the contact details, web site and other pieces of information, such as can you transact on line or not.
12. Contact that fund manager and say “I want to invest £55 per month into your FTSE 100 tracker fund. Please send me an application form.
13. When that arrives, fill it out, and send it off with a cheque for your first months savings, and then set up a standing order to make sure that your savings go in every month
14. In the meantime, your box of £1.85’s now has at least £55 in – empty out the box, take the money to your bank and pay it in, such that when you write out that first cheque or the monthly standing order is collected – the money is there.
15. Repeat the last step every month.
16. Sit back and relax knowing that you are on the way to your first/next million!
And that’s all there is to it – have fun