Step-by-step guide for how and where to invest your first £1,000
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Step 1: Pay off high interest debt
Before you start investing you should first look to pay down any high interest debt. This includes:
Credit card balances
Car finance
Personal loans
Student loans, here’s a video i did on this: https://youtu.be/gg4QSsze-C0
You may want to build up a small emergency fund before doing this as otherwise you may get caught out in need of cash and have no other option but to go into more debt!
Step 2: Build up an Emergency Fund
Having a suitable emergency fund, to pay for any unexpected expenses, allows you to invest the rest of your money in the confidence that you won’t need to draw on it. Investing is a long term game, and you need to be able to keep that money invested for 5+ years, but you should really be thinking 30+ years!
Typically 3-9 months worth of expenses is enough. But it’s really up to you. If you’re conservative you could have more than this. If you’re comfortable with risk you could have no fund and just use credit cards
An emergency fund should be kept in an easily accessible savings account, if you have a large fund (10+ months) you could even put some of it in fixed term deposits.
You will not get a good level of interest. But this money is not there to get a good return. It’s there so you can confidently take risk, and get good returns, with the rest of your money.
Step 3: Get the right Protection
This is more important for those with young families. But everyone that’s working should have some level of cover.
If you get ill and are unable to work, or you die, you’re family is going to be in a very bad financial situation and any money you’re squirreled away for retirement isn’t going to go far.
Before you start investing, you should make sure you’ve got the right level of insurance to cover you if there worst should happen.
Income Protection - https://moneytothemasses.com/quick-savings/insurance-2/income-protection-insurance-insurance-2/income-protection-do-you-really-need-it
Life Insurance - https://moneytothemasses.com/quick-savings/insurance-2/life-insurance/do-you-need-life-insurance
https://www.confused.com/life-insurance/guides/life-insurance-buyers-guide
To find our what cover you have through work you should email your HR department or manager, they will let you know the details.
What level of cover do I need?
Think this through, if the worst did happen, how much would you need? You should be able to answer this question yourself just by doing some simple forecasting. You should make sure that whatever protection you take out has some for of inflation adjustment. There’s no point taking out a policy today for £X and then claiming it in 10 years time only to find that £X is worth a lot less than it is today due to inflation!
Step 4: Choosing the right app
Watch my video on investing apps here: https://youtu.be/61snJRa45PM
Step 5: Account Types
You should fully understand how each of these work and when they should be used. Do this before you start investing:
General Investment Account
ISA - https://www.nationwide.co.uk/savings/help/isas-explained
LISA - https://www.moneysavingexpert.com/savings/lifetime-isas/
SIPP - https://www.which.co.uk/money/pensions-and-retirement/personal-pensions/self-invested-personal-pensions-sipps/what-is-a-sipp-a4p4n0c1ts84
Step 6: What to invest in
Please watch my video on Index funds here: https://youtu.be/aL-GgWkA25Q
Please watch my video on Vanguard Lifestrategy funds here: https://youtu.be/lGQ9KyQq8Jw
Watch my video here on why investing in individual stocks is not a good idea: https://youtu.be/G41th-qA5cc
It can be tempting to want to invest in individual companies or lots of different funds but my advice here is to keep it as simple as possible. The less decisions you have to make, the less you’re likely to make a mistake.
I invest the majority of my money in a ready-made portfolio, i don’t have to touch it, i don’t have to do anything, and it frees up my time to do other things like create content!
DISCLAIMER This channel is for education purposes only and is not affiliated with any financial institution, although James does work as an employee for a wealth manager. This content is not a personal recommendation to take action. If you are looking for personal investment advice contact James directly.
0:00 Intro
1:34 Step 1 - Debt
2:53 Step 2 - Cash buffer
4:29 Step 3 - Best Investment apps
6:05 Step 4 - Account Types
7:58 Step 5 - To Fund or not to Fund
9:10 Step 6 - What to invest in
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