05/12/2023
Difficult Times!
During these difficult times we need to strategise more on what we spend and how we spend it.
Our income level is usually quite static so it is often inconceivable that income can be increased without taking on extra work which may just not be feasible.
BUT we CAN make our money work better for us.
Most of us do have Bank Accounts and Savings Accounts.
Interest rates have been higher in 2023 and they look like being quite stable for the next 5 years as Banks are working towards stabilising our economy and controlling interest rates.
Savings Accounts now deliver just under 6% p.a for 12month fixed savings, so you can maximise all of your money’s earning by spreading the risk among several saving schemes.
20 years ago I remember my IFA ( independent financial adviser) recommended that no more than 10% of my savings should be in a higher risk investment. I remember that time when my £5000 earned me an 11% profit in just12 months.
But what of today?
A Hypothetical Case Study
You have £100,000 in your Bank or a Savings Account and your annual gross income is £50,000. After tax at 19% basic rate this leaves you with £40,500
This may have been just sufficient to cover all of your living costs up to now, including a conservatively priced annual holiday but this year electric and gas bills are still soaring and your current lifestyle is now under serious threat!
Here’s the strategy:
20% to your current account = £20,000 for your living costs, can earn 5% gross interest = £1,000 if you use a Bank that gives you interest! If it doesn’t then perhaps you should change it!
https://www.barclays.co.uk/current-accounts/bank-account/
(linked to Rainy Day Saver Account 5.1% on £5,000)
or try https://kroo.com/affiliates 4.35%
Then, 20% to an ISA account = £20,000. ( max allowed) 5.4% pa = £1,080 interest tax free - https://www.paragonbank.co.uk/
60% to a 12 month fixed savings account = £60,000 at 5.65% pa = £3,390 gross int. https://www.raisin.co.uk
leaving just 5% to a higher interest account - stocks, shares, crypto etc. or whatever floats your boat! = £5000
You could consider apportioning the £60k so that some funds are put into an ‘easy access’ savings account, tho this will impact slightly on the interest rate.
(n.b. rates are at time of writing and will change over time. I personally use money savings expert as good and reliable info source and I always conduct research before buying!)
https://www.moneysavingexpert.com/banking/compare-best-bank-accounts/
In total £5500 gross interest has been generated from your savings accounts whilst your remaining 5% £5,000 could be made available for a higher risk opportunity.
Look at it this way; Your £5,000 that is put to a higher risk investment will always be covered (more or less) by the interest from your savings, so if the worst happens, the loss can be re-couped over the next 12 months. But of course if the BEST things happen, your £5k will bring you a very good return!
The question then is what scheme and how risky?
Over the last 2 years I have studied trading and investment in blockchain projects. You can easily double your initial investment in just 12months providing a very useful extra income stream! The market is a volatile one, but this is where real money can be made when you follow some simple rules and don’t break them!
If you’re interested to know more then please leave me a message!
