MoneyMagpie

Feb 06

Make money the easy way and beat the banks

If you suspect you’ve been conned by the banks for years, you’re right – we’ve been sold rubbish products that make money for them rather than us for far too long. However, as the French proverb goes, “success is the best revenge”.

My book Beat the Banks shows you how to make money the easy way without their ‘help’.

The reason I wrote Beat the Banks – and why I’m doing more and more workshops and seminars in managing your money and investing for your future – is because we need to know how to take control of our money and create our own wealth. No one else is going to do it for us.

The good news, though, is that INVESTING IS NOT HARD!

Really, that’s probably the biggest message I want to put over to everyone.

Investing for yourself is quite straightforward and doesn’t need to take more than a few hours a year.

In fact, on the whole, the simpler your approach to saving and investing, the better you’ll do in the long-run.

 

 

Simple investing rules

If you just follow these simple rules and don’t do any more, you’ll do better with your money than most people in this country:

Live below your means.

Woman saving money after grocery shopping

This is what the majority of us really need to get our heads around. Not only should we not continue to live above our means – constantly borrowing on credit cards to fund overspending – but we should do even better than live within our means. We need to live below our means so that we have money left over to invest for our futures. So, if you make £1,000 a month, you should only be spending £900 a month or, better, £800 a month. The rest needs to go into savings and investments. Yes, really!

Set up regular standing orders

Online banking on a smartphone

Set up regular standing orders (do it at the beginning of the month when you pay your other bills) into savings accounts and investments.

Make it so that the money goes out just after you get paid so that you don’t have a chance to spend it first. This is what I call ‘paying yourself first’. You set an amount each month – however small – to go automatically from your account to a savings account and, ideally, some form of investment like a pension or stock market fund, and learn to live on what’s left over. After a while you won’t even notice the money going out. You will be so used to living on the smaller amount.

Invest in a range of simple products.

jars of coins growing

Two key words there: ‘range’ and ‘simple’. It’s really important to spread your money across at least three different ‘asset classes’ (like pension, stocks and shares, property, bonds etc) so that if one of them tanks you have the others to fall back on. Also, go for simple, cheap products – not complicated, expensive ones that you don’t understand. The simple ones (like index-tracking funds and stakeholder pensions) tend to perform better anyway so you’re quids in all round.

Don’t go for get-rich-quick schemes

Woman looking at money in her hand quizzically and a scam warning sign laid over the top

… ever… and don’t invest in anything peddled to you by your bank or a free financial ‘adviser’ (i.e. salesperson). Use these rules: “If it sounds too good to be true, it probably is” and “never invest in anything you don’t understand – particularly after it has been explained to you more than once”.

Leave your investments for years

Alarm clock with pile of coins next to it

Be like warren buffet and don’t get spooked by big lows or over-excited by big highs in the markets.

This goes for the property market as well as the stock market. Most investments that give you a good return over the long-term are likely to go up and down in the short-term. Keep your nerve. Unless the underlying value of something seems very wrong to you, you are generally best just leaving your money there during the downs as well as the ups. In fact, when the market is in a dip, that’s when it’s a really good idea to put more money in because it’s cheap.

Seriously, that’s pretty much all you need to do – oh and stay debt-free where at all possible, including paying off your mortgage as fast as possible.

 

Time and compound interest are on your side

Pile of money overlay-ed with clock image

It’s particularly true for young people. All I hear from people in their 20s and 30s is that they think they have no hope of a rich retirement and that they will never have property or financial security unless they manage to inherit a decent amount.

It’s not true. As I’ve been explaining to many of them, it doesn’t take a lot to build up a really decent pot of money over the years – and that’s what they have more than anything… years… time for that money to grow!

As I show in Beat the Banks, thanks to the joy and wonder of compound interest (another thing that everyone should get their heads around as early as possible), putting a relatively small amount of money every month into a well-performing investment product and leaving it there for years will give you a tidy sum at the end.

 

How compound interest works

Woman looking throughtful

When you invest money you earn interest on it (or you should do anyway). The following year you earn interest on both the money you originally put in plus the interest you made during the previous year. The next year the same happens and so on and so on. Each year your money grows by a greater amount.

For example, if you put £100 into something that gives you 10 per cent return each year, at the end of the first year you will have made £10. If you keep that money in there then you will make 10 per cent on £110, which is £11 – this is added to your total, meaning that you now have £121 earning interest. Then in the next year you will earn 10 per cent on £121, which is £12.10. So you can see that each year it goes up just that bit more.

The two things you need to know about compound interest:

  1. Small differences in interest rates make a big difference in the long term.
  2. Saving regularly over long periods of time can build up a big sum of money. For example:

Imagine putting £100 a month into something giving you 10 per cent a year for 40 years. Over forty years your meek £100 a month would turn into a roaring £559,461. Seriously – over half a million just by regularly putting £100 a month in. Makes you think eh?

 

There’s nothing to stop you saving and investing now

Just use the information on how to make money and save money on MoneyMagpie and in Beat the Banks and you’ll be able to invest for yourself better than any City boy in red braces could!

 

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WHAT DO YOU THINK?

9 thoughts on Make money the easy way and beat the banks

  1. Hi Jasmine – I’ve been looking to invest some money for a while probably in an index tracker fund. I thought after the referendum that the FTSE 100 would fall giving me the opportunity to dive in but it’s risen. Now it’s at over 7000 I’m wondering if I should now wait until we actually leave the EU to see what happens then. I was going to invest in a broad diversified tracker fund from a well know company so not just in the FTSE 100.

    Also with savings rates low what’s your oppinion of Peer to Peer?

    I would appreciate your advice.

    Regards

    Robert

    Reply
    1. Hi there Robert. Two very good questions there!

      So first, my opinion about investing in the stock market is that it’s pretty much impossible to ‘time the market’ – in other words to know when it will peak and when it will crash. People who are paid to do this day in day out still don’t get it right, so for you and I, it’s really tough!

      I agree with you, that you would think the FTSE would have fallen after the Referendum (and after Trump’s win) but it has done the opposite! It’s largely because of the low pound – which is likely to continue after we actually come out of the EU. In fact I have read in a few places that the FTSE is likely to do really well again this year – possibly grow by 10% – but one can’t really know for sure, that’s all speculation.

      Essentially though, for ordinary investors like us who don’t have time even to try to beat the market, let alone actually succeed in it, your best bet is to simply invest regularly, whatever the market seems to be doing at the moment. It’s called ‘pound cost averaging’ where you just keep investing every month, or every other month or so (whatever works for you) and you take the ups with the downs (http://www.morningstar.co.uk/uk/news/62457/the-benefits-of-pound-cost-averaging.aspx).

      When I first started putting money into an index tracker the market was high and then sunk down just a year or so afterwards. But I just kept on investing and after a while it picked up again…then sank…then picked up again…then sank…then, well you know the score!

      So if you have money to invest, I would start now, particularly as we are coming to the end of the tax year and you can make use of the ISA allowance.

      Secondly, my view of peer to peer lending is that it’s a good idea (I have money in Zopa and Landbay) but you need to know the risks. For example, right now, you could get 3.5% or 4.5% with Zopa and they have a slush fund with those rates whereby if someone doesn’t pay back their loan, you will get your money back. However, for 6% you don’t have that safety net.

      Also, more important to think about, is the fact that these companies are relatively new and don’t have the huge cash reserves that the high street banks have. If we get a big recession – which is possible at any time – some of them might not survive because loads of people could pull their money out in order to pay bills and others would renege on their loan payments. So far this hasn’t happened and, as I say, I am a fan of the concept, but you need to go in with your eyes open. As I’m sure you know, there is a relationship between risk and reward. Peer to peer is quite a bit riskier than high street savings accounts which is how you get the higher reward.

      Maybe put no more than 5% of your investment money into one of these (probably best to go with one of the oldest ones like Zopa or Ratesetter) and see how you go?

      Hope that helps!

      Jasmine

      Reply
  2. Hi Jasmine, Read your Beat the Banks and really enjoyed it. Found it very easy to read and informative. I was just wondering when your next Money Magpie workshop will be. Best wishes, George

    Reply
  3. Hi Jasmine, I have just signed up for your newsletter and to receive the free ebook and I was directed to pre-order page for your book? I tried to pre-order the book but was told that I have already subscribed, so cannot pre-order???? Help, I’m confused!!! Stu

    Reply
  4. some great info thanks!! i know its just an example but what investment can realistically earn you 10% in interest yearly?

    Reply
  5. Sorry David and Jay. That’s my fault! We had problems with the page for the workshops but I hope it will be up by tomorrow. Also, I’ll get the quiz back up on site this week. So glad you like the book!

    Reply
  6. hi..was reading the beat the banks book. on page 46 you mentoin about the workshop..but cant find the webpage..

    Reply

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