Your money-making expert. Financial journalist, TV and radio personality.
Here’s a genuine ‘get rich quick scheme’. Most of them, as you know, are ‘get poor quick’ schemes. But this one is a real money-maker that will help you get rich much quicker than you would imagine.
It’s a secret that few people know but it works.
It’s simply based on ignoring your latest pay rise and, instead, putting the extra money you’re being paid into an investment right at the start of the month, just after you get your pay.
Isn’t it wonderful to get a pay rise?
Makes you almost skip home on the day you get told of it.
But, did you know that the joy of a pay rise gets old hat after just six weeks?
That’s what the people at Direct Line found. They said (and I’m sure you’ve experienced this too) that in just the next month after people get their pay rise, they end up spending more and find themselves in the same situation as before.
That’s the way we humans are: if we get more money, we spend more money.
And we wonder why we have no savings!
Want to get rich quick? Want to trick yourself into saving and investing more than you could imagine?
Be a MoneyMagpie and live one pay rise behind yourself!
That’s right. Real MoneyMagpies ignore pay rises and put all (or at least some) of the extra cash into investments and carry on living as though they hadn’t had that rise.
According to the research by Direct Line, the first items that Brits splash the cash on following a pay rise are
To be honest, that’s fair enough as it’s nice to have a bit of a boost here and there if you get some more money.
But, the extra spending should be small. The big thing to think about when you get a pay rise is how much you can put away for your future.
In fact, Direct Line found that people who were more sensible with their new-found wealth chose to put their extra income into savings (71% of them did that) with almost a third doing so immediately.
And that’s the secret: Do it immediately, before you get too used to the nice extra cash each month!
…is Standing Orders.
Yes, that’s all you need.
Just set up at least one Standing Order from your current account to a savings account and, ideally, into an investment like an equities ISA or a personal pension.
Set up the Standing Order(s) to go out at the beginning of the month (or whenever you get your pay) so that the money goes out right at the start before you spend money on restaurants, holidays or clothes.
This is how you ‘pay yourself first’. Think of it that way because that’s what it is.
You are paying your future self before you pay the clothes shops, pubs and travel agents.
The money you put away now will grow – particularly if you put it into an equities ISA or a pension – so that your future self will have enough money to have a comfortable life later on.
Don’t wait until the end of the month because you won’t have any money left then. Nobody ever does!
Do it at the start and let it be done automatically, that way you never have to think about it. It just does it for you.
There are lots of other ways to get yourself to save without really noticing it.
You can see at least ten ways in our sneaky ways to save article here.
It includes things like:
Let’s assume that you would be getting, net, an extra £200 a month.
If you live on the old amount and put the extra £200 a month into an equities ISA at an average return of 6% a year, then after ten years you will only have put in £12,000 but your savings pot will have grown to a fabulous £33,300. Not bad eh?
So be a real MoneyMagpie.
Live one pay rise behind and see that money mount up.