Warren Buffett’s portfolio of businesses generates billions of dollars in passive income every year. I am trying to replicate his approach by investing in companies that I believe the Oracle of Omaha would be interested in himself.
When it comes to finding the best stocks to buy now, I can see why some investors might ignore blue-chips. FTSE 100 equities like BT (LSE: BT.A) are lumbering giants. It seems unlikely they will be able to achieve the sort of growth and potential returns investors could receive by investing in smaller businesses.
I think this is true, but only to a certain extent. Smaller companies might have more growth potential. However, they can also be far riskier and more challenging to understand.
What’s more, blue-chip stocks are also more susceptible to market sentiment. I have lost count of the number of times I have seen shares in a high-quality FTSE 100 company slump even though it is still growing and returning cash to investors. If the City decides it does not like a blue-chip, the market’s punishment can be relentless.
For long-term investors, I think this can lead to some fantastic opportunities. And this is precisely the situation that I am seeing with BT right now.
When I have covered BT in the past couple of months, I have always noted that the company is in the middle of a transition. It is trying to grow its way out of a self-induced slump.
For years the enterprise had failed to invest enough in its operations to maintain a consistent level of customer service. Management is trying to reverse this trend and its efforts appear to be yielding results.
According to the company’s third-quarter results, published at the end of last week, adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) increased 2% for the nine months to the end of December compared to the prior-year period.
BT’s EBITDA from its consumer business is, in my opinion, the most critical number in the release. This is by far the most prominent business division, accounting for nearly 50% of adjusted revenues. Overall, adjusted EBITDA in the consumer business increased 6% year on year for the nine-month period.
Lower income from BT’s Global and Enterprise businesses helped push down the overall group EBITDA.
I think these figures show that the company is making headway. Consumers are clearly associating with its revitalised offering of fibre broadband and 5G connectivity (via BT-owned mobile network EE). This is driving growth across the business, even though spending is significantly higher. Capital expenditure increased 24% during the period.
These figures are impressive, but they are not perfect. The firm is still spending a lot of money building out its fibre network. This is restricting its ability to reduce overall net debt, which actually increased by £447m in the nine months to the end of December. As interest rates begin to rise, rising borrowing levels could become a serious issue for the enterprise.
Despite this risk, I think BT’s latest figures explain why this is one of the best stocks to buy now as a growth and income play. The stock is trading at a relatively undemanding forward price-to-earnings (P/E) multiple of just 10 and could support a potential dividend yield of 3.9% this year.
Considering these metrics and the firm’s improving outlook, I would be happy to buy BT for my portfolio today.
Should you invest £1,000 in BT right now?
Before you consider BT, you’ll want to hear this.
Motley Fool UK’s Director of Investing Mark Rogers has just revealed what he believes could be the 6 best shares for investors to buy right now… and BT wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 shares that are currently better buys.
Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Over the past year, the Boohoo (LSE:BOO) share price has fallen 72%. That’s quite a steep slump, and when reviewing the chart, it has traded lower in a linear fashion over this period. As of the closing price on Friday, it’s also now classified as a penny stock, with a price of 99p. When stocks are continuously falling, some liken it to a falling knife. Sure, this presents dangers, so should I stay away or is now actually a good time to buy Boohoo shares?
Personally, I can see several reasons why Boohoo shares have struggled over the past year. Firstly, since last summer we’ve all been made aware that inflation has been rising in the UK. This is clear from the higher cost of goods. A company like Boohoo, although it tries to pass costs on, does have to absorb some of it as well.
As noted in the latest quarterly trading update, the business is experiencing pandemic-related cost inflation. As a business, if revenue is steady but costs increase, profit falls. Boohoo has estimated that such cost inflation will impact EBITDA by approximately £20m in the fiscal year.
Another reason for wanting to steer clear is the lower outlook projections given for the final quarter of the financial year. It now expects sales growth to be 12-14%, revised down from the previous estimate of 20-25%. The adjusted EBITDA margin for the year has also been trimmed to 6-7%, from 9-9.5% previously. As seen last week, lower outlook and missed expectations can cause a stock to tumble, even for giants such as Meta.
On the other hand, I think there are positives to be found in the business. The company is still growing at a strong pace. Even if net sales only grow by 12-14%, that’s not a bad performance. The year I’m comparing it to was 2020, when the online-only business enjoyed strong demand due to lockdowns. Being an online retailer certainly helped during this period, as people could only shop from home for many goods.
Another point that I think some investors are missing is that the cost inflation and supply chain issues are likely temporary. I don’t mean that they’ll disappear next week, but I struggle to see them still being issues this time next year. The Bank of England is already stepping in to try to control inflation at a broad level by raising interest rates. In terms of supply chain issues, I know there are plenty of initiatives going on at ports and other places to rectify such problems.
My point here is that I think Boohoo shares currently price-in the worst-case scenario. I think people are thinking too short term. I don’t think this is a falling knife to run from. I’m considering buying some shares now as an undervalued penny stock.
Is this little-known company the next ‘Monster’ IPO?
Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.
Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.
The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.
But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.
Click here to see how you can get a copy of this report for yourself today
Jon Smith has no position in any share mentioned. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
The appeal of unearned income is easy to see. But how easy is it to build passive income streams in practice? One of my favourite ways to try to do it is by building a portfolio of dividend-paying shares. I think I could get there by putting aside an affordable amount of money each week.
Here’s how I would aim to do it with £45 weekly.
While many people have plans about how to earn passive income, without putting them into action they will remain only as good intentions.
That is why I would get into the habit of saving a regular amount each week. The more disciplined I am about this, the more likely I will be to hit my goals over time. To save this money, I would set up some sort of share-dealing account. That way, as the money begins to pile up, I will be ready to start buying dividend shares when I feel the time is right.
If I could afford more than £45 a week I would invest extra. The more I invest, the greater my dividend income is likely to be.
Next I would start to do some research and find dividend shares that could meet my personal investment objectives. I would start by focusing on large companies with long track records. That doesn’t mean they will necessarily be successful in future, but they could help me from falling into some common new investor mistakes of investing in high-yielding but short-lived companies.
To pay dividends, a company basically needs to generate free cash flow. So I would look for companies with highly cash generative business models that I felt could continue to do well in future. For example, utility National Grid and retailer Tesco would both be on my watchlist.
But no matter how attractive any one share may seem to me, unexpected events could hurt its dividend in future. For example, National Grid may need to invest heavily to reshape its electricity distribution network in line with changing user needs. Tesco’s growing footprint in the competitive online market could hurt its profitability. With smaller profits, a company has less scope to pay dividends.
That is why I would seek to diversify my portfolio across different dividend shares and industries. With £45 a week, I would have £2,340 a year. That’s comfortably enough for me to diversify across five to 10 shares.
If I can buy shares with an average dividend yield of 5%, I would hopefully be looking at an annual dividend yield of £117 from my first year of investing.
If I continue in the second year, I could buy new dividend shares but would hopefully still be earning dividends from shares I bought in my first year of investing. In this way, over time, £45 a week could lay the foundation for growing passive income streams. As the years went by, I might not miss my weekly £45 contribution as much as at the start — but I would hopefully notice my unearned income piling up!
5 Stocks For Trying To Build Wealth After 50
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies still trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
Click here to claim your free copy of this special investing report now!
Christopher Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
One of my earliest decisions as an investor was to make use my Stocks and Shares ISA allowance. I’m glad I did, as it’s meant I haven’t had to pay and capital gains or income tax on my investments.
The new tax year is soon arriving, so I’m looking ahead to see what investments I can make with £200 each month. For me, a Stocks and Shares ISA is still a great option, but it’s just as important I pick the right investments for my risk profile. Here’s my strategy for the year ahead.
It might not seem obvious given the name, but I can also buy funds in a Stocks and Shares ISA. There are two broad kinds of funds I can choose from: active and passive.
Starting with passive funds, such vehicles aim to replicate the performance of a stock index like the FTSE 100. They will never exactly match the performance due to the dealing costs of buying and selling the investments, and the fees I’d have to pay to the investment management company. Also, if there’s a stock market crash, by default, passive funds will crash along with the market. Nevertheless, these investments are typically cheaper than active funds, and mean I’m more diversified compared to buying single stocks.
I’d start off buying the iShares FTSE UK Dividend Plus ETF with £200 per month in my Stocks and Shares ISA. This fund aims to track the performance of the FTSE UK Dividend+ index. It’s generated a 12-month dividend yield of 5.5%, which I consider a good level of income for my portfolio.
I could also choose an active fund. This is when a fund manager attempts to beat the performance of a stock index. It could generate a higher level of income or greater capital growth. The fees are typically higher, though. And there’s never a guarantee that a fund manager will achieve the fund’s objectives.
Once I’ve built up a £1,000 stake in my chosen ETF, I’d switch to buying single stocks with my £200 investment each month. This strategy can be riskier as a lot rides on the performance of individual companies. Also, there’s a lot more research involved because I’d hope to fully understand the company before I bought any shares.
I’d start by investing in companies with strong economic moats. This is when a business is able to retain, or even grow, market share because its products or services are unique, or highly sought after. It makes it more difficult for competitors to eat into its market. A good sign of an economic moat is high profit margins. I think Auto Trader and Rightmove are two companies with economic moats as both companies have operating margins over 60%.
Stocks with high dividend yields are also an option for my portfolio. I own British American Tobacco and Legal & General as the yields are both over 6%.
Even though buying single stocks is riskier, I have a long-term horizon so they’re appropriate for my risk profile. I’ll be looking to buy these stocks with my £200 investment, switching which company I buy each month to ensure I diversify.
Dan Appleby owns shares of Auto Trader, British American Tobacco, iShares FTSE UK Dividend Plus, Legal & General and Rightmove. The Motley Fool UK has recommended Auto Trader, British American Tobacco, and Rightmove. Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
So far this year, the FTSE 100 index is broadly flat. It started January around 7,500 points and closed Friday at 7,516. However, various sectors within the index have performed differently. So when thinking about where should I invest, it’s important to note the areas that are outperforming the benchmark so far in 2022.
The hottest and best-performing sector at the moment is banking and finance. Over the past month, two of the top five individual performers are banks, Standard Chartered and HSBC. Other banks have also posted positive returns in the short term.
The main reason why this sector is hot right now is due to a shift in expectations from investors about interest rates. The Bank of England raised interest rates both in December and last week. Expectations are now for two or three more hikes this year. Higher interest rates benefit banks. They allow a higher net interest margin to be made. This measures the differences in rates charged on loans versus rates paid on deposits. A higher base rate gives the banks more flexibility in building a buffer margin for themselves. But of course, I have to remember that banks haven’t always been great performers. in recent years so I need to have faith in their prospects long term, rather than buying with a short-term outlook.
Another hot sector right now is commodity stocks. When considering where should I invest, I definitely want to have some exposure here. WTI Oil broke above $90 per barrel last week, the highest since early 2020. We’ve also seen other commodities enjoying a strong start to the year. This has enabled companies like Shell to see an 18% share price rally in just the past month.
Again, I do need to be careful when just looking at short-term performance. I’m aware that commodity stocks are volatile, so I’d prefer to have only small exposure in my portfolio.
A third hot sector where I could invest is consumer staples. Stocks such as J Sainsbury, Aviva and British American Tobacco have all done well recently. In my opinion, the reason for this is due to fears around a stock market crash. If I’m thinking about where I should invest but am concerned about a possible correction, consumer staples are key.
Typically the demand for the products and services offered (groceries, insurance and tobacco) won’t change much regardless of the state of the economy. As a result, investors typically pile into these kind of stocks during periods of uncertainty.
Personally, I don’t see a crash imminently, having reviewed my warning signs checklist.
Each sector has pros and cons depending on my existing portfolio and personal preferences. The main point is that sectors are hot for specific reasons. If I think the underlying causes could continue this year, then it’s worth me considering buying some companies from that area.
Jon Smith has no position in any share mentioned. The Motley Fool UK has recommended British American Tobacco, HSBC Holdings, and Standard Chartered. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Investing in UK shares can be a great way to beat inflation. Many companies pay dividends to shareholders out of their profits. Depending on the price I have to pay for the shares, I can pick up some pretty hefty dividend yields.
I’ve been screening for UK companies that offer inflation-busting yields. With the Consumer Prices Index rising 5.4% in December, these UK shares should provide real returns for my portfolio.
The first company I’ve been researching is residential homebuilder Persimmon (LSE: PSN). It’s one of the UK’s largest businesses with a current market value of £7.5bn, which means it’s a member of the FTSE 100.
I think the income potential is highly attractive for me as a potential shareholder. In fact, if I bought the shares today, I’d be expecting a dividend yield of 10.2% in 2022. Of course, there’s never a guarantee with dividends. The business has to keep trading well and to generate profits for it to pay out cash to shareholders.
The housing shortage in the UK should mean that Persimmon stays profitable in the years ahead, in my view. According to the BBC: “In the 30 years to 2021, three million fewer properties were built than in the previous 30. The population, however, has increased by more than nine million.” Indeed, this places significant importance on companies like Persimmon. As such, City analysts are expecting revenue for the company to grow in each of the next two years.
One additional factor to consider is rising interest rates. The Bank of England has already raised its base rate twice since December. In doing so, the cost of a mortgage should rise, and this may reduce demand in the housing sector. It’s a potential challenge for Persimmons in the months ahead.
Nevertheless, I view the double-digit dividend yield as highly attractive for my portfolio. The structural tailwind from the housing shortage should also mean the company’s homes remain in demand. I’ll be looking to add the shares to my portfolio.
I’ve also been considering adding to my position in mining company Rio Tinto (LSE: RIO). The minerals it produces are crucial for decarbonisation and electrification efforts, including for use in electric vehicle batteries, and building wind turbines.
The dividend yield is attractive as it stands. I’d be generating a yield of 9% in 2022 if I bought extra shares today. However, as mentioned, dividends can always be cut if the company’s profits fall.
On this point, a risk factor to consider is the volatility of commodity markets. For example, iron ore prices rocketed to a decade-high in 2021, but crashed back down to earth to end the year. This means Rio Tinto’s profits can be volatile, and therefore the dividend payments can be too.
A further point to note about Rio Tinto is its excellent cash generation. Analysts are expecting a free cash flow yield of over 10% in 2022, which means there should be ample cash left over for the dividend payment.
So, on balance, I’m happy to hold Rio Tinto shares in my portfolio and would add to my position. The current dividend yield is attractive and way above the rate of inflation today.
5 Stocks For Trying To Build Wealth After 50
Markets around the world are reeling from the coronavirus pandemic…
And with so many great companies still trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.
But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.
Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…
You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.
That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.
Click here to claim your free copy of this special investing report now!
Dan Appleby owns shares of Rio Tinto. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
The British Airways American Express Premium Plus Card makes flying in Business or First Class a more affordable option for people spending over £10,000 per year on their credit card.
I’m going to share my experience of snaring those coveted British Airways Business Class seats, armed with Avios (airmiles) and a Companion Voucher (giving two Avios flights for the price of one).
For me, the main attraction of this card is the ability to book tickets in Business and First Class cabins at a significant discount to the cash price. Over the last few years, we’ve used our Companion Vouchers to book First and Business Class reward flights to New York, Boston and Tampa for a family of four.
However, it’s not a cheap option given the £10,000 minimum annual spend needed to earn a Companion Voucher, £250 annual fee and high taxes on long-haul flights. Finding reward flights can be time-consuming and requires flexibility on dates and destinations.
To illustrate the potential savings, I priced up two Club World return flights to LA in August 2022, costing 75,000 Avios in total (using a Companion Voucher) and £689 in taxes per person, a significant discount to the cash fare of £2,714 per person. However, given the same Economy flights cost £990, the taxes charged on reward flights in premium cabins are significant.
Booking reward flights requires Avios points, so here are my top 3 ways to earn Avios:
Cardholders receive a Companion Voucher when they spend £10,000 on the card in a membership year. Companion Vouchers are valid for two years. But they can only be used on ‘reward flights’ – flights booked using Avios, not cash. We’ve pooled our family’s Avios into a Household Account (including under 18s) to redeem against reward flights.
The person earning the Companion Voucher must travel on the booking. However, their ‘companion’ doesn’t have to be a family member. Supplementary cardholders do not earn their own Companion Voucher, although their expenditure counts towards the £10,000 minimum spend.
Reward seats are released 355 days in advance, although more can be added later. I’ve found it easier to find reward seats since BA doubled the number of reward seats to four Club World (Business Class) seats for every flight.
From my experience, it’s easier to find reward flights to destinations with several flights a day (such as New York and Chicago) than to destinations such as the Caribbean and Australia. It’s also more difficult to find reward flights in school holidays.
It’s worth keeping an eye on the taxes. BA introduced the Reward Flight Saver (with reduced taxes from £1) to combat the issue of disproportionately high taxes on short-haul economy reward flights, although these are not always available for Companion Voucher bookings.
Using Companion Vouchers on long-haul flights maximises the value of your ‘two for one’ Companion Voucher. If I booked a return Business Class flight to Johannesburg in November 2022, then I’d be getting the equivalent of 125,000 ‘free’ Avios for the person using the Companion Voucher, compared to 40,000 Avios flying to Madrid.
[bottom_pitch]
Given the uncertainty around travelling abroad in the pandemic, I like the flexibility of being able to cancel reward flights up to 24 hours before the outbound flight (for a £35 per person cancellation fee).
An alternative option is a Future Travel Voucher that ‘freezes’ the Companion Voucher, taxes paid and Avios for use against a future reward flight booking with no cancellation fees. We opted for the voucher when we recently cancelled a reward flight booking as our Companion Vouchers were due to expire. This extended their validity until September 2023.
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Jo is a writer specialising in personal finance and investments. She is a qualified Chartered Accountant, previously working in M&A at a UK investment bank and Arthur Andersen. Jo has written on a range of subjects, from in… Read More
Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.
The easing of lockdown restrictions along with the recent festive season has seen a boom in consumer spending over the last few months. As a result, many Brits have made New Year’s resolutions to spend less and save more. A great way to achieve this goal is to complete a no-spend month.
With January often being a challenging month financially, many people opt for February or March as the ideal month to limit their spending.
As someone who loves to shop, I decided to take on the challenge myself this year. Despite being unsure at first, I managed to complete a month of zero spending in January! Here’s how I managed to achieve my goal.
A no-spend month is a month in which you limit your spending by creating rules. No-spend does not mean that you spend nothing at all! This would be impossible due to essential costs such as food, rent or mortgage payments, and utilities. However, it does require you to cut out any unnecessary purchases and reduce your essential bills as much as possible.
The exact rules of a no-spend month differ from person to person, depending on what you class as ‘essential’ to your life. For me, this meant spending no money on new clothes, cosmetics, luxury food items and unnecessary public transport. I also set myself the goal of cutting £10 from my food shopping every week.
Initially, I thought that my no-spend month would be challenging. However, after a week of following the process, I found it fairly easy. It’s not until you can’t spend any money that you realise how little you actually need the things that you purchase.
My no-spend month was made easier by following these four top tips.
One mistake that people make is taking the ‘no-spend’ concept too literally and setting goals that are unrealistic. It’s almost impossible to go a whole month without spending any money at all. It can also be very disheartening if you have to miss out on celebrations and big social events due to no-spend rules.
To ensure that you don’t set yourself up to fail, only cut out things that you really don’t need. As well as this, try to set yourself a monthly spending allowance for important social events and everyday essentials. This way, you will be able to enjoy your life whilst cutting down your spending.
One of my biggest spending downfalls is giving in to the temptation of online offers. During my no-spend month, I reduced this temptation by deleting shopping apps from my phone and unsubscribing from eCommerce email lists.
This simple trick made a huge difference! I no longer found myself aimlessly adding things to my basket or feeling tempted by ‘limited time’ email offers. This prevented me from impulse spending.
One of my goals during my no-spend month was to cut out any luxury food purchases. This meant no coffee shop pick-me-ups, lunchtime meal deals or fancy restaurant dinners. As a result, I took time to plan my meals and prepare enough food to keep me going throughout the day.
I made the most of my reusable travel mug, which saved me £3.50 on coffee every day. That’s a total of £17.50 throughout the working week! I also took plenty of snacks with me wherever I went and prepared meals so that I wasn’t tempted by restaurants in the evening.
The best way to motivate yourself through your no-spend month is to know why you’re doing it. I would recommend using any money that you save for a purpose that will benefit you in the long term. I personally used my monthly savings towards my annual car insurance payment, which saved me from having to set up costly monthly payments or dip into my emergency savings account.
Other people chose to invest their no-spend month savings in a top-rated stocks and shares ISA to ensure that what they’ve saved continues to grow.
Keep track of how much money you save each week and put this towards your final goal. You will be surprised at how much money you save by cutting out unnecessary spending!
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Ruby is a freelance writer who enjoys writing about all things personal finance. After embarking on her own side hustle journey three years ago, Ruby is passionate about helping others to learn about the ins and outs of persona… Read More
Some offers on The Motley Fool UK site are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.
The UK state pension age has been raised to 66 and is set to increase further, while the government has recently frozen the triple-lock on State Pensions that provides protection against inflation. With this in mind, you may be looking for pension tips to boost your private pension.
As people look to supplement their State Pension to secure a comfortable retirement, more than 50% of the population in the UK are investing in a private pension according to the Pensions Policy Institute.
If you’re thinking about making a pension contribution before the current tax year ends in nine weeks, here are my top four pension tips.
Pension contributions are attractive as the government ‘tops-up’ your contributions by a further 20-45%. There are two different levels of tax relief on pension contributions:
However, with the government looking to rebalance their finances, there’s been continued speculation that the chancellor may limit relief on higher-rate taxpayers’ pension contributions. The Financial Times reported that “pensions tax relief looks ripe for further cuts.”
What if I don’t pay any tax? Good news: you can currently contribute up to £2,880 per year into a pension which the government will top-up by a further £720 to make £3,600.
If you contribute to a workplace pension scheme, the tax relief is applied automatically. If you contribute into a self-invested personal pension (SIPP), the basic-rate tax relief is claimed automatically by your SIPP provider, which takes around six to eight weeks.
However, there are limits to tax relief on pension contributions, along with lifetime allowances, so it’s important to check your own individual tax circumstances.
Why should you invest in a SIPP? Well, it gives you complete control over your investments. You are responsible for choosing and managing your investments in the pension ‘wrapper’ until retirement. Some employers will contribute to your SIPP rather than a workplace pension. I’ve also moved pensions from previous employers into my SIPP so that I can manage them in one place.
Most of our top-rated Stocks and Shares ISA providers also offer SIPPs. When you’re considering which SIPP provider to use, two things to consider are:
Investing in your pension should be considered alongside other financial commitments, and it’s worth remembering that you can’t normally access the money in a SIPP until you’re 55 (rising to 57 in 2028).
However, another pension tip is that the earlier you invest in your pension, the more your pension pot will grow due to the power of compounding. Here’s how it works.
Hargreaves Lansdown and Interactive Investor allow you to invest from £25 per month into their SIPPs, with the benefit of smoothing market fluctuations by drip-feeding your money over time.
As with stocks and shares ISAs, it’s important to diversify your portfolio across different assets to manage your risk.
Risk profile typically varies by age:
If you’re looking to invest and need some inspiration, read our article on the top funds bought by UK investors last month.
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Jo is a writer specialising in personal finance and investments. She is a qualified Chartered Accountant, previously working in M&A at a UK investment bank and Arthur Andersen. Jo has written on a range of subjects, from in… Read More
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