Super useful video! I've gone through four years of university, and only now I realise that I don't want to be an employee, so I'm documenting my journey to financial freedom 😊
To ppl who would struggle to put away the large amounts, please don't despair. Just put away whatever you can for now. 14 years ago we were in the same position, small kids, one income etc..we struggled despite having only a mortgage as our only debt. Being frugal, getting a side income ( only small but it helped) and chipping away at the mortgage intentionally has put us in a much stronger position. If things are hard for you right now it doesn't mean it always will be. Set yourself really small manageable targets. Savings challenges can be fun and keep you motivated, even small amounts make a difference .
Great comment Jane - I stressed in this video it is not saying you need to put away £1667 every month or else forget about it, it is saying look what you can do with any amount of money and time.
I’m loving this content so far. Just found your channel today. I retired from teaching last year (aged 36). I was banging on about compound interest (it is on the GCSE maths syllabus 🤭) to all my students. Interestingly it was not the academic students that were that interested. It was the colourful characters who didn’t really fit the education system!
Yeah! I love teaching compound interest. It's a Higher topic though but I do love to make it as exciting as possible. I try to teach percentages as very closely linked to finance as that really does switch some kids brains on 😊
@@georgewright9914 It was in GCSE in 2010 (when I was in yr11), it's basically an application not non-linear relationships and I'm 99% sure you would've learnt it and been assessed on it. It's also something I currently teach about to seniors (college age) in the lowest level maths course- we go into credit cards (comparing the interest rates other loans: personal and mortgage), appreciation, depreciation etc. all applications of compound interest because it's assumed knowledge as that point since it is taught in (even in the bottom level) in Year 10 at the latest. We also teach tax- from Year 9 (including deductibles), seniors only: loan repayment, annuities (if you continue to deposit or withdraw on a balance that is also earning interest, this is the most 'real world' application of savings or retirement funds I can think of), shares and even government support payments like pensions, disabilty, student payments etc. It's frustrating when people say they didn't learn real world maths in school- you absolutely did it's just not as memorable as pythag or something, because it's complicated and has many different applications that involve basic reasoning, rather than just plugging straight into a formula. If you do higher level maths you do more 'pure maths' stuff and not so much real world but most people whinging did lower maths and just didn't pay attention until they had money in the bank. These concepts are too complicated for junior years which is why we just try to teach basic reasoning through simple concepts- even percentage increase decrease which some kids really struggle with.
I find your content really useful and informative and I agree this sort of financial education should be part of the school curriculums. However, to me those numbers are just not representative of what an average household could achieve in my opinion. I don’t know anyone that that has the ability to save £1600+ per month after paying living expenses.
Completely agree Simon - and the concept is to show the maximum you can achieve and how potentially quickly. The point is then to use the concepts and whatever wage you have, use that as your guide for what you want to achieve. I think sometimes we get caught with the values and don't see the principle and message behind it - I hope this helps explain and don't let the numbers be the barrier :)
I agree, it’s a high amount but I’m working towards doing it..I might just fall short this year but I’m hoping to maybe max out my ISA next year. The way I look to do it is to have additional income sources, not just my salary.
You'd be surprised ,for example If you bought a property 15 years ago you could easily of made £100,000 in equity ,plus paid over half of the debt off ..Sell up or remortgage and put £20k a year of this money into your ISA.. Buy rental properties and invest the rent into the ISA plus the savings from your salary .
Depends on your lifestyle choices - I have no kids - and save £1,600 pm easy / 50% of income working 4 days pw - I'm 49 and target is £500k in 5 years time (currently £275k). Best advice kids - become a plumber and save half your age in your isa till have say 1 years spending money and then pension. Not factored in inflation - but most of my funds hitting about 16%
Great advice, if a little simplistic. One wonders what your inexperienced followers will do when they have been invested for a few years (or months) and suddenly their investments drop 40% ( or 56% as the S&P did in 2007/8) with no end in sight, as inevitably will happen. Remember, in hindsight it’s easy to say how much money we made post 2008, but at the time, the media were all telling us this was another 1929. Will their nerve hold? Let’s hope so, but very few inexperienced investors make rational decisions at such times, and many cut their ‘losses’ and jump out. It takes a strong will and the experience of living through such events to ignore the media doom mongers that will bombard them at the first minor hiccup in the markets. Keep up your positive and important message, but include some rational explanation of what they will inevitably face and just how hard it is to weather such storms, when their nest egg is decimated and continuing to plunge. It’s not as easy as it sounds, but when stocks are going through the floor it is only the experienced investor that continues to buy.
A really important lesson for people to learn. I wish they showed this video in schools. I would be retired sitting on a beach in the Maldives by now haha 😂
Bro....thank the school for not teaching all this at school.....if everyone retires, who will work :D :D :D .....school curriculum is designed to make workers who work from 6 am to midnight and not for people loitering their time o beaches :D :D :D....i see you to do something with finance.....so i think you got my point :D :D :D
Absolutely love the concept and I invest aggressively into my stocks - although £1,666 per month I wouldn't consider to be "retirement" money but definitely a good passive and additional income alongside a job.
@@turnittoglue 10hr 40hrs a week is around 1.600 a month try invest 1000 rather than 1600 a month. Just make you save something. It doesn’t have to start as fast instantly depositing max amounts.
Start with what you can afford . Trust me once you do that it becomes addictive and you will become creative in terms of generating other source of income to fund your investment account or you will become so good at cutting down unnecessary expenses. JUST START. I am sick and tired of funding restaurants, Amazon , clothing stores and the like .
I'm so used to financial videos being American that I just brushed that off as being dollars and possibly more realistic. Just clicked that it was actually £1,600 a month!
Excellent video as always. Thank you. I opened a Vanguard ISA and invested in a LifeStrategy fund in after watching some of your videos. So far I have invested just over £10k and will continue until it is maxed out at £20k.
Do you find your making good returns with the amount you’ve invested? I notice with mine it can be +4% one day then +0.5% the next day with the return being back at the baseline of whats been invested. I am a new investor of less than a year though so i can appreciate it may take some time to start seeing some returns
I've argued for years that maths in schools focuses on completely the wrong areas. Book keeping, budgeting, accountancy and investing the fruits of your labour are what the majority of us actually need to learn about algebra, not so much.
There is a reason they don’t to teach you these things in school. If everyone saved and invested their money (instead of spending), the economy would collapse, productivity would plummet. It’s not good for the capitalist system. The reality is, we need as many rats in the wheel for as long as possible. It allows the world to advance rapidly. The lucky ones will work this out for themselves.
Love this video. I watch it over every now again to remind myself but it's great to see a path clearly mapped out. Although the % investing rate required is high for the average person, it's still so powerful to (there is something quite mind-opening (is that a word?)) to see a clear route to how to achieve your goals!
Very good informative video for beginners to FIRE. Just to add that you can only invest money in one ISA of the same type per tax year. Basically there are three types of ISAs: 1) Cash ISAs. 2) Life time ISAs. 3) Stocks and Shares ISAs. 4) Innovative finance ISAs. 5) Help to buy ISAs, which is obsolete now (you cannot open a new one anymore). You can deposit max £20,000 spread on any of these accounts, but if you have lets say two Stocks & Shares ISA, you can only deposit in one of this type the same tax year. Failing to that, can incur fines from the government. I hope it makes sense.
"The best time to plant a tree is 20 years ago, the second best time is now." - a proverb. Could be Greek, could be Chinese, either way - ancient wisdom relevant to investing too. Great video
@Adam Green may I Add that you can go for a split of £16 in ISA and a £4k in LISA every year for better average return in the first 5 years. Reason being that LISA give 25% Bonus for your savings up to £4k/ year. That money can only be used for TWO reasons. Retirement or deposit of First property
I know that I am ancient (reached 60 on Tuesday 6th) and certainly had nothing about personal finance at my school in the 70s. My twin 15 yr old grandsons get none either so we haven't moved any further forward in around 40 years.
I am not knocking these figures but if you think that £20k is the annual amount you can live on now, in 10 years time you will need closer to £28k annually to have the same buying power based on the last 10 years inflation rates and cost of living index. If you want to keep your income in check with inflation/cost of living you will need a greater amount of capital or a greater return rate otherwise your capital will dwindle or your standard of living will fall every year.
I also used ISA account too and prefer Stock and Shares stock ISA. The best thing to do is keep receiving dividend income. The power of dividend income allowed myself to compound my interest by reinvest it for larger sum amount of dividend until I can afford to live without work. Thanks for sharing.
Thanks for the comment, and hopefully the video also got across that you ignore the values and apply the principles for your own goals. Don't fix on the amount per month, fix on the way to achieve an income if you would like to work towards it. This was to show the maximum power you have available, but the tax free option remains regardless of the amount you deposit.
Just noticed you have a video about how you budget your £47k yearly income. How do you manage to invest £1.6k a month with a family to support? Why did you use such a high figure that, I’m assuming, most viewers are simply not going to be able to put away?
The problem with this is, If you invest for say 10 yrs 15yrs or even 20 yrs And you want to pull at at a set date you may be restricted If there is a crash you could loose 20-30% of your investments in a blink of a eye so you would be force to keep that money in there until the market recovers.
Another great video Jennifer. I have a Vanguard investment ISA, invested in the 100% equity Life Strategy Fund. It's the best financial move that I ever made.
Great video and such an important lesson for young people everywhere. Did a wee calc myself and looks like I'm about 12 years away from "Coast FIRE" and probably a form of semi-retirement where I can reduce my hours or effectively inflate my lifestyle and continue to work for the next 8 years until full retirement in my early 50s, not bad but just wish I'd started sooner!
Be careful very ambitious number 9.8%. You would need high risk stock with no Fixed Interest asset holdings to achieve an average yes average 9.8% growth. More like 5% growth is safer bet with diversified assets.
What is the name of the S&P 500 Index ‘Accumulation’ product mentioned here? I looked it up on vanguard and this index product is only offered as an ETF which pays out the dividends.
This sort of thing wasn't around when I was young. My Dad tried to time the market using a stock broker, buying and selling to make money on individual stocks. Totally uninteresting or unfathomable for the average Jo / Joanna. The originator of low fee passive managed funds Vanguard /tax free ISAs came in much later. I'm only just finding out about how complete novices can start investing, just starting my investment journey at 56, never too late!
Great video, I'm thinking £20K in years to come won't have the same value tho, by the time we're elderly it might only be worth 10K in today's money because of inflation
If you invest in a low cost ETF, within a tax free Stocks & Shares / Investment ISA, and after year 8, you want to take out £20k, you are going to need to sell shares of that ETF/Index fund, which will reduce your capital. The capital appreciation is not interest that is paid into your account, it is growth of your ETF/portfolio, so you will need to sell £20k worth of shares. Is that correct?
Correct. If you has 200K and got interest per year of 20k, and at the end of 'that' year your portfolio would be worth 220k. You would then sell 20K worth of stocks / shares and it would go back to 200K worth. The year after that you would (hopefully) get another 10% increase so that 200K would be worth 220K again. Then repeat the cycle, hence why you could live off the interest.
Low cost funds the key also returns on bonds is very low. The biggest returns can be achieved with 100% equity but this is a suitable strategy if you’re investing long term 10-20 years
Interesting video. For the average Joe, £1,600 pm to save or invest is but a dream. However, until I can somehow up my income, £100 pm is better than nothing. Plus I understand I can still pay into a Lifetime ISA. I'm also buying a share of my brother's buy to let. But I'm 40 years young and starting late but still have hope that I won't have to work until I'm 65 or whatever it will be by then.
Yes, however In the calculator you can choose to select that your monthly payments will increase due to inflation. You increase the payments in accordance to inflation, your percentages in and percentages out should be the same.
here i was wondering why i am getting pennies as interest in my ISA account. Now can get few pounds by investing in an Investment ISA. Got it. Thank you, Mama.
To my knowledge, in the UK you are only protected by the FSCS for the first £85K and in order to implement this strategy you need about £230K in a single account to live off the interest. Are you risking it and hoping your investment ISA provider doesn’t disappear or am I missing something?
FSCS only cover deposits in a retail bank. Most ISA providers are not banks. If you are worried about them disappearing you could spread ISAs across a few providers. The big providers are unlikely to go away, they are 100 billion dollar plus companies. They are not taking the risk in shares, you are. They make the money from charging you fees. A necessary evil I'm afraid.
Doesn't have to be in a single account - you can open a different one each year. I've investments across 10 different providers for that very reason of FSCS backing and safety - it still compounds and you can still live off the interest in the same way - the maths is actually the same whether you split or not. You just need keep track of them all. Of course, if you're very lucky, over time some investments can end up compounding over the limit anyway - but then not really a situation I complain about!
@@adamgreen2824 may I Add that you can go for a split of £16 in ISA and a £4k in LISA every year for better average return in the first 5 years. Reason being that LISA give 25% Bonus for your savings up to £4k/ year. That money can only be used for TWO reasons. Retirement or deposit of First property
@@squirrelinstructor6075 your money is in stocks and index funds, which means it is not sitting in a bank account, it is invested in companies. So this is totally different. You can't have two stocks&shares isa accounts, but you can have a cash isa and a stocks&shares Isa at the same time for example.
Yes a great example of compounding. Only 1% of the working population could put away £20K. The average wage in the UK is about £25K so you're not going to have much of a life style for 10 years if you take away tax and NI off that wage. Having said that this looks like the best way to invest any spare cash or long term savings. Good explanation possibly suitable for giving away money to avoid inheritance tax.
For me that's impossible to save 20k a year,also 20k in 10years,due to inflation won't be buying me as much as it's buying it now. But that definitely still a big kick added if in 8-10years I decide to have a family and i.e. go part time
How much do you spend in a coffee cup or soda/pop? Do the calculations how much you spend on the month and then a year? A Starbucks cup 1 every day costing $3.00 (this like really cheap) that’s almost roughly $1100.00 a year. And, obviously, we spend more in those things or going out. Another example, putting $60 on saving daily will be $21000. Or, $30 x 365 = $10950.00. Can be done.
@@RafaelMoralesjr73 £20k a year is a big ask. Assuming your expenses are about £1000pcm (in london, you could easily pay more than that just in rent), and assuming you invested everything, no savings, you'd need a salary of about £45k to max an ISA at £20k per year. That's like top 80th percentile.
we actually do learn quite a bit about compound interest in maths tho i am in a higher set we learnt about it in year 10 however my teachers attitude was more this is how the rich stays rich then this is something you can use
I strongly agree with the sentiment but a note of caution - this is somewhat optimistic - it doesn't take inflation into account (20K income in 15 years will buy MUCH less than 20k today). 8 years to achieve this IMO is unrealistic. Also doesn't take into account that the best strategy is to pay off debt BEFORE you embark on this.
I was with you right up until you said I had to invest £1,667 per month. To be able to afford that, you'd need to be earning £80-100k a year as an employee. If you are earning that amount of money, retiring on £20k a year would be a travesty.
Hi David - Don't let the numbers put you off, the concept and calculations still work with any amount of money. That is the point to show the concepts and the maximum BUT it doesn't stop the theory working with less.
Compound interest is very powerful but I'm not convinced the next decade or 2 will grow at 9.8%, of course I hope it does but my prediction is after inflation which is the true value I say it will be around 6%
Thank you so much for this video, I don't mean to be rude but after watching and understanding, this does feel like clickbait haha but none the less, It really put into perspective the effect of compound interest and how to think like an investor. Very much appreciated 👍
Hi John - not clickbait, as it shows clearly how to achieve this and the maths will equally work with any amount you wish to create as a passive income. Don't let the numbers for the maximum stop us from being able to apply it to our own financial goals.
All depends when you want to withdraw funds. Pension and SIPP is rather for late retirement. And ISA will be suitable for someone wanting to be financial independent before 57.
Interest rates are nowhere near 9.8% and who can save a surplus of £1600 a month then after 8yrs basically you get your own money back at gues what £1600 pm ???
On an income of 24K that's not possible and pay the mortgage. I know that's below the national average - any advice for a 58 year old? Also, I'm baffled looking at Vanguard, Hargreave Lansdown, etc - would you do a video on navigating around the sites and what to look for, etc.
If you search for Mamafurfur and Vanguard here on UA-cam, tons of them to help :) Also remember the tutorial here is maxing out an Investment ISA £20k a year. Not possible for everyone, but then you take a step back and use the calculator instead with what you can achieve. Aim for 10% of take home pay as a good starter, and work up to what feels right and balance life.
Another great video Jen!! 👍🏾. Thank you for producing UK based, honest, educational finance videos. I’m currently paying a small monthly amount into a Moneybox investment ISA while clearing my credit card debts. Once my debts are cleared I plan to use the amounts paid to clear my debt into investments, should I increase the amount I pay into my Money box ISA or start a new one (with Vanguard for example)?
Hi Marvin, I agree with Simons comment below. Vanguard would be better as the fees as lower, and won’t eat into your gains as much as Moneybox would . Best of luck on your financial freedom journey!:)
Thanks Tim - it's not meant to be the amount that is the requirement, the same theory can be applied with any amount just changing the end result value.
I'm 60 years old and would never like to retire ever. How can you help me? I prefer a sroke while at work, if possible please. Your advice will be greatly appreciated.
Great advice and great strategy but come on, 1667 deposit every month is hardly feasible for the majority of people. Most people havnt got an extra 400 a month right now.
If my liberal parents had instilled in me the importance of work and saving I'd have 20k by the age of 20, instead I wasted time playing video games and screwing around. Liberalism is a disease.
nice video, thankyou but the reality it is highly unlikely your average bod will achieve 9.8% in current market conditions, so I would work on a lot lower average.
Yeah I think this sounds massively unrealistic, trying to base your life on a constant 10% growth is probably unlikely. It's probably more sensible to assume less growth and if you over achieve then great, if not then at least it's factored in. Also as someone has mentioned above the 4% rule too
Remember with anything - the longer you leave the investment then any dips/drops/growth end up being smoothed out (dollar cost averaging and time with compound growth). The exercise is not to be a textbook but to show the power of how you can achieve things. You then get to decide if after a length of time you want to work part time perhaps and draw 3-4% and wait another length of time OR choose to withdraw it. I would say not making investments your own income source is key regardless of the length of time/amount you withdraw. You are putting all your income in one basket, and especially important not to do that. Thanks for the comment - great discussion!
Thanks for this helpful information. Am a new subscriber to your video. Am not in Uk but in Africa. What is your advice on small Investment can I start with one thousand Dollars for a start.
Great video showing what is possible to achieve. I’m currently 31 and have a 5 figure lump sum from bitcoin I’m planning to grow a bit further before properly delving in. In the meantime I’ve got a small vanguard portfolio using this method. The only issue I have with this video is that it’s a bit misleading. How can anyone afford to put 20k a year away in to this? And if someone really can do that then how on earth are they going to have a lifestyle that can be sustained on a 20k/year retirement??
Thank you for the comment. I don't agree with misleading as it is showing the theory if you can put away the maximum into an Investment ISA. The theory though is to inspire with whatever income amounts you have, we don't have to just aim for the maximum but use what we can afford and create our own plan accordingly. Don't let the maximum amount put you off from the theory.
@@JenniferAMThomson thank you for the reply. I take back the word misleading, though I do still think this amount is unobtainable for the vast majority to achieve. Please don’t confuse me for a troll, I really enjoy your content. Keep up the good work!
Totally agree that a goal of £1667 a month does require perhaps creating extra incomes, but it is possible. As said the maximum amount doesn't distract from the theory, which anyone can apply and get rewards from :)
Think of it being like a rollercoaster, it goes up and it goes down. You only get hurt if you jump off. Ride out the rough patches and you don’t lose anything. This is why you should have an emergency fund and only invest what you can afford to have tied up.
The mindset is shares are on sale a discounted prices buy more. You’ll still get dividends and as long as your investment time line is over 13 years historical data indicates you’ll profit over that time frame.
How do you keep re investing if your annual interest gained is say 34000. Then you want to re invest it all in your isa, if your only allowed to put 20k in. What can you do with the 14000 if you dont want to use it as cash.
I’d say avoid FTSE 100. Guys don’t forget that the real inflation is around 7%. They don’t tell us the truth so we don’t ask for inflation adjusted income raise. IMO Vanguard’s indices and ETFs are good enough to offset the inflation and leave you with some extra return on investment .
Do you have any videos which show manual reallocation of funds, specifically thinking about decreasing equities and increasing bonds, at the minute I am 100% equities but at some point in the future I will want to start buying bonds, should you sell equities to buy bonds and increase your bond % that way or just increase through buying bonds?
Super useful video! I've gone through four years of university, and only now I realise that I don't want to be an employee, so I'm documenting my journey to financial freedom 😊
Glad it was helpful!
To ppl who would struggle to put away the large amounts, please don't despair. Just put away whatever you can for now.
14 years ago we were in the same position, small kids, one income etc..we struggled despite having only a mortgage as our only debt.
Being frugal, getting a side income ( only small but it helped) and chipping away at the mortgage intentionally has put us in a much stronger position.
If things are hard for you right now it doesn't mean it always will be. Set yourself really small manageable targets.
Savings challenges can be fun and keep you motivated, even small amounts make a difference .
Great comment Jane - I stressed in this video it is not saying you need to put away £1667 every month or else forget about it, it is saying look what you can do with any amount of money and time.
@@JenniferAMThomson I know but then you read the comments and think..erm??? So I wanted to give you some back up 🤣
I’m loving this content so far. Just found your channel today. I retired from teaching last year (aged 36). I was banging on about compound interest (it is on the GCSE maths syllabus 🤭) to all my students. Interestingly it was not the academic students that were that interested. It was the colourful characters who didn’t really fit the education system!
Welcome aboard!
Yeah! I love teaching compound interest. It's a Higher topic though but I do love to make it as exciting as possible. I try to teach percentages as very closely linked to finance as that really does switch some kids brains on 😊
I didn’t see any compound interest in my GCSE maths exam back 2009 🤔
@@georgewright9914 It was in GCSE in 2010 (when I was in yr11), it's basically an application not non-linear relationships and I'm 99% sure you would've learnt it and been assessed on it. It's also something I currently teach about to seniors (college age) in the lowest level maths course- we go into credit cards (comparing the interest rates other loans: personal and mortgage), appreciation, depreciation etc. all applications of compound interest because it's assumed knowledge as that point since it is taught in (even in the bottom level) in Year 10 at the latest. We also teach tax- from Year 9 (including deductibles), seniors only: loan repayment, annuities (if you continue to deposit or withdraw on a balance that is also earning interest, this is the most 'real world' application of savings or retirement funds I can think of), shares and even government support payments like pensions, disabilty, student payments etc. It's frustrating when people say they didn't learn real world maths in school- you absolutely did it's just not as memorable as pythag or something, because it's complicated and has many different applications that involve basic reasoning, rather than just plugging straight into a formula. If you do higher level maths you do more 'pure maths' stuff and not so much real world but most people whinging did lower maths and just didn't pay attention until they had money in the bank. These concepts are too complicated for junior years which is why we just try to teach basic reasoning through simple concepts- even percentage increase decrease which some kids really struggle with.
Yes so I was someone who hated maths and I still do but when it comes to money am fully tuned in.
I just started investing i am 18 i have about 1.6k soo far
that’s so cool i’m 16 and have around £600 so far invested from an original £400 just from moving it around and stuff in the last year or so
I’m just grateful that I was able to educate myself on personal finance at the time I did.
Currently 21 and been investing for just over a year now
You got any first-timer tips? I plan to open a LISA account and a Vanguard: Stocks and Shares account as soon as I start my new job.
Wow that's great 👍
Future millionaire in the making
Wish I could go back and do this when I first started working at 22! I’d be rolling in it now!
Results?
I got obsessed about fire, investing and personal finance about six months ago and I’m hooked.
Compound interest is the 8th wonder of the world - Albert Einstein.
what the best etf to become wealthy in 20 years?
@@CHRIS198490 . I think she mentioned the SNP 500
@@keithchegwin1222 it's S&P not the Scottish Nationalist Party 500 :p
I find your content really useful and informative and I agree this sort of financial education should be part of the school curriculums. However, to me those numbers are just not representative of what an average household could achieve in my opinion. I don’t know anyone that that has the ability to save £1600+ per month after paying living expenses.
Completely agree Simon - and the concept is to show the maximum you can achieve and how potentially quickly. The point is then to use the concepts and whatever wage you have, use that as your guide for what you want to achieve. I think sometimes we get caught with the values and don't see the principle and message behind it - I hope this helps explain and don't let the numbers be the barrier :)
I agree, it’s a high amount but I’m working towards doing it..I might just fall short this year but I’m hoping to maybe max out my ISA next year. The way I look to do it is to have additional income sources, not just my salary.
You'd be surprised ,for example If you bought a property 15 years ago you could easily of made £100,000 in equity ,plus paid over half of the debt off ..Sell up or remortgage and put £20k a year of this money into your ISA.. Buy rental properties and invest the rent into the ISA plus the savings from your salary .
Depends on your lifestyle choices - I have no kids - and save £1,600 pm easy / 50% of income working 4 days pw - I'm 49 and target is £500k in 5 years time (currently £275k). Best advice kids - become a plumber and save half your age in your isa till have say 1 years spending money and then pension. Not factored in inflation - but most of my funds hitting about 16%
Hi, good video! The only thing I don’t understand is how can anyone deposit £1667 a month every month for 8 years?! Or am I missing something. Thanks
Yeah... I'd say £1,667/month is unreachable for most of the population.
You can’t. I think she is just saying that if you can get your investment up to that a month then you can retire
@@NZAnimeManga I think you actually need a combination of the both of sipp and isa or you could be waiting until your 57 before you can retire.
Very possible, I am doing the same, salary income plus side hustle income being invested
@@NZAnimeManga which SIPP provider do you use?
Great advice, if a little simplistic. One wonders what your inexperienced followers will do when they have been invested for a few years (or months) and suddenly their investments drop 40% ( or 56% as the S&P did in 2007/8) with no end in sight, as inevitably will happen. Remember, in hindsight it’s easy to say how much money we made post 2008, but at the time, the media were all telling us this was another 1929. Will their nerve hold? Let’s hope so, but very few inexperienced investors make rational decisions at such times, and many cut their ‘losses’ and jump out. It takes a strong will and the experience of living through such events to ignore the media doom mongers that will bombard them at the first minor hiccup in the markets. Keep up your positive and important message, but include some rational explanation of what they will inevitably face and just how hard it is to weather such storms, when their nest egg is decimated and continuing to plunge. It’s not as easy as it sounds, but when stocks are going through the floor it is only the experienced investor that continues to buy.
Wish I had known this 20 years ago , but never too late, thanks Jennifer been following you for a few years learning new things from you always
A really important lesson for people to learn. I wish they showed this video in schools. I would be retired sitting on a beach in the Maldives by now haha 😂
I share your sentiment. When I look back and think ....but, no time like the present to do things differently!
Bro....thank the school for not teaching all this at school.....if everyone retires, who will work :D :D :D .....school curriculum is designed to make workers who work from 6 am to midnight and not for people loitering their time o beaches :D :D :D....i see you to do something with finance.....so i think you got my point :D :D :D
Free your Finance nah there’s better options than the Maldives which are way too expensive and under the yoke of fanatical Islam.
It’s intentionally not on the curriculum. The economy depends on consumers.
Absolutely love the concept and I invest aggressively into my stocks - although £1,666 per month I wouldn't consider to be "retirement" money but definitely a good passive and additional income alongside a job.
1667 was the deposit not the withdrawal.
Wish I had £100 a month never mind £1000 to save
Init. Who has 1600+ p/m disposable income - this isn't for the masses.
@@turnittoglue 10hr 40hrs a week is around 1.600 a month try invest 1000 rather than 1600 a month. Just make you save something. It doesn’t have to start as fast instantly depositing max amounts.
Start with what you can afford . Trust me once you do that it becomes addictive and you will become creative in terms of generating other source of income to fund your investment account or you will become so good at cutting down unnecessary expenses. JUST START. I am sick and tired of funding restaurants, Amazon , clothing stores and the like .
I'm so used to financial videos being American that I just brushed that off as being dollars and possibly more realistic. Just clicked that it was actually £1,600 a month!
Investing a small sum is better than investing nothing at all!
I’m 30 now and started investing this year! I only wish i’d started 10 years ago 🤦🏻♂️. Awesome video 👍🏻
Exactly the same situation mate, best thing is that you have started though!
I’m 33, and I’ve only started this year, so well done for starting sooner.
The best time to invest is 10 year ago.
The second best time is now
The thing is..u could be 10 years older than you are now..saying the same thing
Same here, better late than never 👍
Excellent video as always. Thank you. I opened a Vanguard ISA and invested in a LifeStrategy fund in after watching some of your videos. So far I have invested just over £10k and will continue until it is maxed out at £20k.
Do you find your making good returns with the amount you’ve invested? I notice with mine it can be +4% one day then +0.5% the next day with the return being back at the baseline of whats been invested.
I am a new investor of less than a year though so i can appreciate it may take some time to start seeing some returns
@@oliverconroy9373 don’t bother checking everyday mate it’ll just stress ya out, just set it and forget it
I've argued for years that maths in schools focuses on completely the wrong areas. Book keeping, budgeting, accountancy and investing the fruits of your labour are what the majority of us actually need to learn about algebra, not so much.
There is a reason they don’t to teach you these things in school. If everyone saved and invested their money (instead of spending), the economy would collapse, productivity would plummet. It’s not good for the capitalist system. The reality is, we need as many rats in the wheel for as long as possible. It allows the world to advance rapidly.
The lucky ones will work this out for themselves.
Love this video. I watch it over every now again to remind myself but it's great to see a path clearly mapped out. Although the % investing rate required is high for the average person, it's still so powerful to (there is something quite mind-opening (is that a word?)) to see a clear route to how to achieve your goals!
Very good informative video for beginners to FIRE. Just to add that you can only invest money in one ISA of the same type per tax year. Basically there are three types of ISAs: 1) Cash ISAs. 2) Life time ISAs. 3) Stocks and Shares ISAs. 4) Innovative finance ISAs. 5) Help to buy ISAs, which is obsolete now (you cannot open a new one anymore). You can deposit max £20,000 spread on any of these accounts, but if you have lets say two Stocks & Shares ISA, you can only deposit in one of this type the same tax year. Failing to that, can incur fines from the government. I hope it makes sense.
"The best time to plant a tree is 20 years ago, the second best time is now." - a proverb. Could be Greek, could be Chinese, either way - ancient wisdom relevant to investing too. Great video
Well said!
Very useful and informative. The downside is that I couldn't afford to put even a third of that amount in.
The third amount is better than zero no excuse.
@Adam Green may I Add that you can go for a split of £16 in ISA and a £4k in LISA every year for better average return in the first 5 years. Reason being that LISA give 25% Bonus for your savings up to £4k/ year. That money can only be used for TWO reasons. Retirement or deposit of First property
Which one works out better in the long run? I guess the the stocks and share ISA as you do not get penalised if you withdraw?
I know that I am ancient (reached 60 on Tuesday 6th) and certainly had nothing about personal finance at my school in the 70s. My twin 15 yr old grandsons get none either so we haven't moved any further forward in around 40 years.
Jennifer I love your videos could you please do a video on why you don't personally invest in property but chose the stock market instead
Incredible, as always!! I'm talking this through with my kids! Brilliant!! Thank you for sharing your knowledge with us!
I am not knocking these figures but if you think that £20k is the annual amount you can live on now, in 10 years time you will need closer to £28k annually to have the same buying power based on the last 10 years inflation rates and cost of living index. If you want to keep your income in check with inflation/cost of living you will need a greater amount of capital or a greater return rate otherwise your capital will dwindle or your standard of living will fall every year.
Or have multiple income streams in place e.g. LG /civil service pension plus reduced basic pension/ savings accounts etc.
I also used ISA account too and prefer Stock and Shares stock ISA. The best thing to do is keep receiving dividend income. The power of dividend income allowed myself to compound my interest by reinvest it for larger sum amount of dividend until I can afford to live without work. Thanks for sharing.
nice one hen. What you have stated is true, but as you know not all people people have a spare 20k each year to invest unfortunetly.
Very true - but we can still take away the theory and apply it to any amount of money.
I'm sure the few people who have £1667 spare a month will appreciate this advice!
Thanks for the comment, and hopefully the video also got across that you ignore the values and apply the principles for your own goals. Don't fix on the amount per month, fix on the way to achieve an income if you would like to work towards it. This was to show the maximum power you have available, but the tax free option remains regardless of the amount you deposit.
Just noticed you have a video about how you budget your £47k yearly income. How do you manage to invest £1.6k a month with a family to support? Why did you use such a high figure that, I’m assuming, most viewers are simply not going to be able to put away?
The problem with this is, If you invest for say 10 yrs 15yrs or even 20 yrs
And you want to pull at at a set date you may be restricted If there is a crash you could loose 20-30% of your investments in a blink of a eye so you would be force to keep that money in there until the market recovers.
Another great video Jennifer. I have a Vanguard investment ISA, invested in the 100% equity Life Strategy Fund. It's the best financial move that I ever made.
Hey, why’s that?
Tell us more buddy
Love your channel and content. I have tried the calculator and its amazing to keep motivated and investing ! Thanks Jennifer :)
Great video and such an important lesson for young people everywhere. Did a wee calc myself and looks like I'm about 12 years away from "Coast FIRE" and probably a form of semi-retirement where I can reduce my hours or effectively inflate my lifestyle and continue to work for the next 8 years until full retirement in my early 50s, not bad but just wish I'd started sooner!
Be careful very ambitious number 9.8%. You would need high risk stock with no Fixed Interest asset holdings to achieve an average yes average 9.8% growth. More like 5% growth is safer bet with diversified assets.
What is the name of the S&P 500 Index ‘Accumulation’ product mentioned here? I looked it up on vanguard and this index product is only offered as an ETF which pays out the dividends.
I really wish I'd understood this sort of thing when I was younger, would have made such a difference.
This sort of thing wasn't around when I was young. My Dad tried to time the market using a stock broker, buying and selling to make money on individual stocks. Totally uninteresting or unfathomable for the average Jo / Joanna. The originator of low fee passive managed funds Vanguard /tax free ISAs came in much later. I'm only just finding out about how complete novices can start investing, just starting my investment journey at 56, never too late!
Wow...this is one of the easiest way to understand investment for me...thank you so much....I wish I knew this ages ago.
You're very welcome!
Great video, I'm thinking £20K in years to come won't have the same value tho, by the time we're elderly it might only be worth 10K in today's money because of inflation
still nice to have that passive income, even if it's only 10k
Especially if you are no longer on the BBC grazy train
If you invest in a low cost ETF, within a tax free Stocks & Shares / Investment ISA, and after year 8, you want to take out £20k, you are going to need to sell shares of that ETF/Index fund, which will reduce your capital. The capital appreciation is not interest that is paid into your account, it is growth of your ETF/portfolio, so you will need to sell £20k worth of shares. Is that correct?
Correct. If you has 200K and got interest per year of 20k, and at the end of 'that' year your portfolio would be worth 220k. You would then sell 20K worth of stocks / shares and it would go back to 200K worth. The year after that you would (hopefully) get another 10% increase so that 200K would be worth 220K again. Then repeat the cycle, hence why you could live off the interest.
Low cost funds the key also returns on bonds is very low. The biggest returns can be achieved with 100% equity but this is a suitable strategy if you’re investing long term 10-20 years
Interested to know whether you still are still investing in the s&p500 with China and Russia trying to weaken the dollar ?
You are just a blessing, dear.
Taking a full return, each year, after 8 years how do you compensate for inflation? inflation compounds too.
Interesting video. For the average Joe, £1,600 pm to save or invest is but a dream. However, until I can somehow up my income, £100 pm is better than nothing. Plus I understand I can still pay into a Lifetime ISA. I'm also buying a share of my brother's buy to let. But I'm 40 years young and starting late but still have hope that I won't have to work until I'm 65 or whatever it will be by then.
Thank you for showing us this. I have 19 years left to save for my retirement.
The only issue I'm have is every 10 years everything doubles so 350k will be like 125k so that will be less
Yes, however In the calculator you can choose to select that your monthly payments will increase due to inflation. You increase the payments in accordance to inflation, your percentages in and percentages out should be the same.
All good stuff which I follow too and am teaching my son now he's getting old enough to understand.
Love this video Jennifer. Thank you for sharing 😊
Thanks for watching!
here i was wondering why i am getting pennies as interest in my ISA account. Now can get few pounds by investing in an Investment ISA. Got it. Thank you, Mama.
To my knowledge, in the UK you are only protected by the FSCS for the first £85K and in order to implement this strategy you need about £230K in a single account to live off the interest.
Are you risking it and hoping your investment ISA provider doesn’t disappear or am I missing something?
FSCS only cover deposits in a retail bank. Most ISA providers are not banks. If you are worried about them disappearing you could spread ISAs across a few providers. The big providers are unlikely to go away, they are 100 billion dollar plus companies. They are not taking the risk in shares, you are. They make the money from charging you fees. A necessary evil I'm afraid.
Doesn't have to be in a single account - you can open a different one each year. I've investments across 10 different providers for that very reason of FSCS backing and safety - it still compounds and you can still live off the interest in the same way - the maths is actually the same whether you split or not. You just need keep track of them all. Of course, if you're very lucky, over time some investments can end up compounding over the limit anyway - but then not really a situation I complain about!
Thanks both, spreading it across a few providers seems obvious now.
@@adamgreen2824 may I Add that you can go for a split of £16 in ISA and a £4k in LISA every year for better average return in the first 5 years. Reason being that LISA give 25% Bonus for your savings up to £4k/ year. That money can only be used for TWO reasons. Retirement or deposit of First property
@@squirrelinstructor6075 your money is in stocks and index funds, which means it is not sitting in a bank account, it is invested in companies. So this is totally different. You can't have two stocks&shares isa accounts, but you can have a cash isa and a stocks&shares Isa at the same time for example.
If you repeat the calculation based on a mix of ISA and 8k investment in a SIPP (2k tax rebate, 2k Government top up) you get even faster growth
Is there a minimum age you need to be before you can get money out from a SIPP?
@@jodie1074 was 55 but moving to 57. Can take 1/4 out as a tax free lump sum at 57.
thanks Jennifer. I just love your channel. very useful content.
You are so welcome!
Yes a great example of compounding. Only 1% of the working population could put away £20K. The average wage in the UK is about £25K so you're not going to have much of a life style for 10 years if you take away tax and NI off that wage. Having said that this looks like the best way to invest any spare cash or long term savings. Good explanation possibly suitable for giving away money to avoid inheritance tax.
For me that's impossible to save 20k a year,also 20k in 10years,due to inflation won't be buying me as much as it's buying it now. But that definitely still a big kick added if in 8-10years I decide to have a family and i.e. go part time
How much do you spend in a coffee cup or soda/pop? Do the calculations how much you spend on the month and then a year?
A Starbucks cup 1 every day costing $3.00 (this like really cheap) that’s almost roughly $1100.00 a year. And, obviously, we spend more in those things or going out.
Another example, putting $60 on saving daily will be $21000. Or, $30 x 365 = $10950.00. Can be done.
@@RafaelMoralesjr73 £20k a year is a big ask. Assuming your expenses are about £1000pcm (in london, you could easily pay more than that just in rent), and assuming you invested everything, no savings, you'd need a salary of about £45k to max an ISA at £20k per year. That's like top 80th percentile.
we actually do learn quite a bit about compound interest in maths tho i am in a higher set we learnt about it in year 10 however my teachers attitude was more this is how the rich stays rich then this is something you can use
I strongly agree with the sentiment but a note of caution - this is somewhat optimistic - it doesn't take inflation into account (20K income in 15 years will buy MUCH less than 20k today). 8 years to achieve this IMO is unrealistic. Also doesn't take into account that the best strategy is to pay off debt BEFORE you embark on this.
Yeah debt noobs, pay your debts haha
Only took me 9 months to come across this..
Subscribed and thank you
Great video. Very informative. Keep up the good work Jennifer
Awesome video explains it all so clearly. Criminal that we are not taught this in schools.. then again they can't have everyone retiring that soon!
I was with you right up until you said I had to invest £1,667 per month. To be able to afford that, you'd need to be earning £80-100k a year as an employee. If you are earning that amount of money, retiring on £20k a year would be a travesty.
Hi David - Don't let the numbers put you off, the concept and calculations still work with any amount of money. That is the point to show the concepts and the maximum BUT it doesn't stop the theory working with less.
Compound interest is very powerful but I'm not convinced the next decade or 2 will grow at 9.8%, of course I hope it does but my prediction is after inflation which is the true value I say it will be around 6%
nostradamus lol
Thank you so much for this video, I don't mean to be rude but after watching and understanding, this does feel like clickbait haha but none the less, It really put into perspective the effect of compound interest and how to think like an investor.
Very much appreciated 👍
Hi John - not clickbait, as it shows clearly how to achieve this and the maths will equally work with any amount you wish to create as a passive income. Don't let the numbers for the maximum stop us from being able to apply it to our own financial goals.
How about using a combination of a Lifetime ISA & regular ISA?It would work out better in the long run considering the 1k bonus from the government...
So Jenny, can someone tell us what the true down sides of the investment ISA is, please? Your genuine answers will be appreciated!
It’s not protected from IHT, apart from that. It’s the best vehicle for financial planning.
Excellent teaching,
I thank you.
You are welcome!
I forgot, thank you for a great video
I really appreciate the effort you made in creating these useful content.
Glad you like them!
Excellent material!!
Why would you invest into a ISA rather than a Pension or SIPP factoring in Pension Freedoms?
All depends when you want to withdraw funds. Pension and SIPP is rather for late retirement. And ISA will be suitable for someone wanting to be financial independent before 57.
I don't want my money locked away
New sub here, loving your content. (Binge watching over the last couple of days)Thank you
Interest rates are nowhere near 9.8% and who can save a surplus of £1600 a month then after 8yrs basically you get your own money back at gues what £1600 pm ???
On an income of 24K that's not possible and pay the mortgage. I know that's below the national average - any advice for a 58 year old? Also, I'm baffled looking at Vanguard, Hargreave Lansdown, etc - would you do a video on navigating around the sites and what to look for, etc.
Looking for your vanguard videos ...
If you search for Mamafurfur and Vanguard here on UA-cam, tons of them to help :) Also remember the tutorial here is maxing out an Investment ISA £20k a year. Not possible for everyone, but then you take a step back and use the calculator instead with what you can achieve. Aim for 10% of take home pay as a good starter, and work up to what feels right and balance life.
Thanks for the amazing video. You have a new subi
It is the best way and you teach very well,I am doing my research from Namibia Cansen Cansey
Another great video Jen!! 👍🏾. Thank you for producing UK based, honest, educational finance videos. I’m currently paying a small monthly amount into a Moneybox investment ISA while clearing my credit card debts. Once my debts are cleared I plan to use the amounts paid to clear my debt into investments, should I increase the amount I pay into my Money box ISA or start a new one (with Vanguard for example)?
Vanguard would be cheaper than Moneybox as they Charge £1.00 month on top of your investments, Vanguard is a 0.15% of the amount I believe
Hi Marvin, I agree with Simons comment below. Vanguard would be better as the fees as lower, and won’t eat into your gains as much as Moneybox would . Best of luck on your financial freedom journey!:)
I liked the information but do think that most average working people could not pay in 20k per year
Thanks Tim - it's not meant to be the amount that is the requirement, the same theory can be applied with any amount just changing the end result value.
One caveat with ISA's they are subject to 40% inheritance tax
I'm 60 years old and would never like to retire ever. How can you help me? I prefer a sroke while at work, if possible please. Your advice will be greatly appreciated.
Brilliant! Maybe too late for me, but definitely useful for my kids!
Great advice and great strategy but come on, 1667 deposit every month is hardly feasible for the majority of people. Most people havnt got an extra 400 a month right now.
I like the video but the 9.8% IMHO is too high. Also not everybody has £20,000 free cash.
If my liberal parents had instilled in me the importance of work and saving I'd have 20k by the age of 20, instead I wasted time playing video games and screwing around. Liberalism is a disease.
@@jimmycakes7158 👏👏👏
Great video but who has 1.6k a month free to put into something !! 400 is way more reasonable !
nice video, thankyou but the reality it is highly unlikely your average bod will achieve 9.8% in current market conditions, so I would work on a lot lower average.
My mate just put me on to you
Cheers mamafurfur, you've got a new sub 💪
Awesome, thank you!
Really informative video, thanks for producing
Glad you enjoyed it!
What happens if you have a negative year, then a couple of low growth years, how much would that effect figures if you're drawing 20k per year out?
Nothing is certain but if it happens then keep buying the dips get a job for a year 😁
Yeah I think this sounds massively unrealistic, trying to base your life on a constant 10% growth is probably unlikely. It's probably more sensible to assume less growth and if you over achieve then great, if not then at least it's factored in. Also as someone has mentioned above the 4% rule too
Remember with anything - the longer you leave the investment then any dips/drops/growth end up being smoothed out (dollar cost averaging and time with compound growth). The exercise is not to be a textbook but to show the power of how you can achieve things. You then get to decide if after a length of time you want to work part time perhaps and draw 3-4% and wait another length of time OR choose to withdraw it. I would say not making investments your own income source is key regardless of the length of time/amount you withdraw. You are putting all your income in one basket, and especially important not to do that. Thanks for the comment - great discussion!
Thanks for this helpful information. Am a new subscriber to your video. Am not in Uk but in Africa. What is your advice on small Investment can I start with one thousand Dollars for a start.
Great video showing what is possible to achieve. I’m currently 31 and have a 5 figure lump sum from bitcoin I’m planning to grow a bit further before properly delving in. In the meantime I’ve got a small vanguard portfolio using this method.
The only issue I have with this video is that it’s a bit misleading. How can anyone afford to put 20k a year away in to this? And if someone really can do that then how on earth are they going to have a lifestyle that can be sustained on a 20k/year retirement??
Thank you for the comment. I don't agree with misleading as it is showing the theory if you can put away the maximum into an Investment ISA. The theory though is to inspire with whatever income amounts you have, we don't have to just aim for the maximum but use what we can afford and create our own plan accordingly. Don't let the maximum amount put you off from the theory.
@@JenniferAMThomson thank you for the reply. I take back the word misleading, though I do still think this amount is unobtainable for the vast majority to achieve.
Please don’t confuse me for a troll, I really enjoy your content. Keep up the good work!
Totally agree that a goal of £1667 a month does require perhaps creating extra incomes, but it is possible. As said the maximum amount doesn't distract from the theory, which anyone can apply and get rewards from :)
I am 59 and retire at 67. I have 20000 to invest right know. Is this the right way to go for me please
Please can you do a video on mindset when the stock market crashes. I’m new and every time it dips I think about taking it all out 🤷♀️
Think of it being like a rollercoaster, it goes up and it goes down. You only get hurt if you jump off. Ride out the rough patches and you don’t lose anything. This is why you should have an emergency fund and only invest what you can afford to have tied up.
The mindset is shares are on sale a discounted prices buy more. You’ll still get dividends and as long as your investment time line is over 13 years historical data indicates you’ll profit over that time frame.
How do you keep re investing if your annual interest gained is say 34000. Then you want to re invest it all in your isa, if your only allowed to put 20k in. What can you do with the 14000 if you dont want to use it as cash.
Good presentation
The averag intrest rate for stock is 6 point 9 persent.
You would do much better to learn to use derivitives
Good video,, sounds easy,, what i like to know have you done it & did it work..thanks colin
I’d say avoid FTSE 100. Guys don’t forget that the real inflation is around 7%. They don’t tell us the truth so we don’t ask for inflation adjusted income raise. IMO Vanguard’s indices and ETFs are good enough to offset the inflation and leave you with some extra return on investment .
Is it just me, I miss the theme tune at the start! Love mammafurfur! Xx❤️
Oh it will be back soon! :)
Great vid - food for thought 😀👍❤️
Thanks! 🙂
Love your videos Jen.
Do you have any videos which show manual reallocation of funds, specifically thinking about decreasing equities and increasing bonds, at the minute I am 100% equities but at some point in the future I will want to start buying bonds, should you sell equities to buy bonds and increase your bond % that way or just increase through buying bonds?
Great tutorial video!
Thank you for sharing.
Glad it was helpful!
Be interested in seeing what the difference would be not using an ISA account, with living and working abroad I am unable to use an ISA.