Where I’m from, people don’t really invest. Well maybe they do, but not in my circles anyway. It’s for rich white men in expensive suits, who have five houses and do ‘business’.
I’ve been writing about money for a long time, and knew that investing was something I wanted to do, but I didn’t know how you do it.
Do you need a stockbroker? Was it dangerous? Was there some sort of banker in a pinstripe suit waiting to rip me off? Was it like Wolf of Wall Street? And most importantly, could I pick up my phone and shout ‘sell, sell, sell’ down the handset dramatically?
I had been saving for a house over the last few years and had put that money in an ISA, so when I realised that stocks and shares ISAs (which I had heard of, but didn’t really know about) WAS investing – it felt like it would be an easy transition.
Well, the truth is at a Christmas party, Faith from MuchMoreWithLess who is an absolute pro (she was there at this Vanguard Q&A), convinced me to sign up to a Vanguard ISA – and I did it the very next day.
Look, I’m not super rich – but I do have extra money these days after all my bills are paid. So I’m putting away £100 a month which goes off and does its thing in the ISA (technical eh?).
Faith explained to me that basically, the stock market goes up and down. And it can be scary to see your money drop, but you have to remember that you’re in it for the long haul. Personally, I’m hoping to hold out 20 years, maybe 10 – depends on what life throws up I suppose.
Since I’ve been investing (I feel VERY grown up saying that), I’ve been telling everyone who will listen that it’s the easiest thing ever to do. And you know what, people genuinely want to know about it – but it does seem really complicated.
When I was asked to host a Twitter Q&A with Faith and James Norton from Vanguard, jumped at the chance. I asked my social media followers what they wanted to know, and the question most of you came back with was ‘How do I know if I’m ready to invest?’.
Ladies and gents, I have you covered:
1.You’re paying into your pension
Before you even begin to think about ‘investing’, you need to be contributing into a company pension. Realistically, you should be putting in as much as your company will match – because that’s literally free money. Do it. As soon as possible.
Already doing this? Good for you. You can move onto step 2.
2. You have paid off high-interest debt
This one is a no-brainer. There’s no point putting away money if you’re wasting it on high APRs elsewhere. Look, you can have some debt – your student loan, mortgage, a manageable overdraft etc – but if it’s high interest, you really are wasting your time.
Get rid of it before you start investing.
3. You have eliminated most of your worst personal spending habits
We all have bad financial habits. For me personally, I would shop to make myself feel better. Stressed? Buy things on Asos. Upset? Back to Asos. Happy? Treating myself at Asos.
Thing is, I was spending HUNDREDS of pounds every month on clothes (and you know what, still don’t have anything to wear!).
For me, I had to ditch that reckless habit if I wanted to be more financially responsible and have the extra money to put away and invest.
Ok, so you’ve got your pension, no high-interest debt, and aren’t making stupid/wasteful financial decisions. On to step 4!
4. You have a cash emergency fund
I don’t mean you should have stacks of notes under your bed when I talk about cash – I mean money you can get at easily, like in a savings account or a normal ISA.
An emergency fund is some money that if the worse happened/something went wrong, it could cover your living expenses.
Most of us don’t have any sort of emergency fund – and it honestly freaks me out. We don’t have £300 spare if the boiler breaks, if you lose your job, get ill etc. It just takes so little (and I know from personal experience) so really ruin your life.
I don’t know what your emergency fund is. I don’t know what you *can* do, or what you would need. It really could be £300 to buy you time, or it could be (which I think is preferable) three months expenses, put away for a rainy day.
5. You have outlined your life goals
Tell me, where do you see yourself in five years’ time?
But no really, you need to think about what you’re saving for, what you want and how much you’ll need.
Mine isn’t written in stone or anything. It depends on the way life takes me, but having a vague idea helps.
Ok – so I’m 32 now. If I have kids, I’m seeing myself with things like uni fees, weddings, a house upgrade in 15/20 years time.
If I don’t have kids – I see a SUPER upgrade on the flat and maybe some sort of property abroad (maybe a boat? Ha!) I don’t know, I know I’ll want a super swanky retirement.
6. You understand your investment options: risk
Investing isn’t risk-free. It’s a bloody good way to save in the long term, but it’s not a guarantee. You have to know this and plan around it.
As well as my investments, I’ve bought a flat (which fingers crossed will go up in value). I’m also saving in cash. Look, don’t have all the plans yet – but I want an empire! Ha!
How I see it, is that £100 I’m putting away every month, is money I could lose. I don’t count it when I think about what I have. It’s gone. I pray it will come good in 15/20 years when I want to do fun things with it, but maybe not.
If you can deal with that – move onto the last step. (Offf look at this ‘real talk’, I feel like Oprah!)
7. You understand the costs
Investing ain’t free. You’re paying a company and its super qualified staff to do research, and make decisions on your behalf. Something I couldn’t do – so it seems fair to me.
That said, you don’t want to pay over the odds for it. Small charges add up, so keep it as low as possible.
You ready then?
It’s a bit nerve-racking, isn’t it? You don’t need to know a load, have a lot of spare money, or a huge amount of knowledge of how the markets work – but it’s a big step.
You know what, for me, I felt more of a grown-up investing than I did buying my flat. It’s like that extra step in responsibility. If getting your foot on the property ladder gets you an A, investments push you to an A+!
Like I said, I have an account with Vanguard which can be opened with £100 a month or a lump sum of £500 and it was the easiest thing ever to set up. I don’t even check up on it, think I’ll plan on doing it once a year – but how often you do it is up to you.
Something that Faith and the guys at Vanguard drilled into me is – there is no good time to start investing. As long as you have those seven steps covered, waiting for some shift in the market, or worrying what something like Brexit will do isn’t useful. The sooner you start investing, the better. So get on it. Off you go! Shoo!
It’s ISA season!
It’s a bit like wedding or holiday season, without cocktails. That’s a lie – it’s just the time where the financial year ends (April 5th), which means you can max out an ISA before then, and then put the next load of money in after the 5th (that make sense? Don’t worry about it too much to be honest, unless you have 40k you need investing!). Basically, now is a good time to open an ISA.
And you know what is really good about them – “And you know what is really good about them – ISA accounts are tax free. You’d be. You’d be crazy to pay tax when you don’t have to.
I hosted a Q&A on investing
If you follow me on this blog, you’re probably aware of me shouting my mouth off/moaning/sharing tips about money on Twitter. I put it to very good use and hosted a Twitter chat at Vanguard’s offices (honestly, the trading floor was so disappointing, not a bottle of bubbly to be seen anywhere – it was very tame!)
If you stick #AskVanguardUK in the search bar on Twitter, you’ll be able to see the chat. Or… give this a click – where you can see what was answered by the team at Vanguard.
Hope you find it useful! Let me know if you’ve began investing, or if you’re thinking about it. Would be more than happy to answer some questions/give you my honest experience.
This post was in collaboration with Vanguard.