No savings at 50, but want to invest for your retirement? I could make a smarty comment like “Well, cut down on what you spend and start saving then.” But I doubt that would help. Here are two things that I think will.
Write it down
It’s easy to reach the end of a day not knowing where that £20 note you just broke into has gone. So my first suggestion is to keep an account of every penny you spend, for a whole month.
I know it’s hard, but it’s something I do at regular intervals. I even carry a small notebook and I write down every spend as soon I’ve made it.
And if you do as I do, you can reap an additional benefit in addition to understanding your spending. Noting my spending is enough in itself to make me reduce it. I make unnecessary purchases far less often if I’m fully aware of how much I’ve spent so far each day.
Now for the actual savings part. Once you have a month’s worth of spending data, you’ll be in a much better position to know what you can cut down on and what genuinely is essential.
For each item, ask: “Did I pay someone to do something I could have done myself?” Coffee is one obvious one, with the UK’s spending in coffee shops breaking the £10bn barrier for the first time in 2018. I’d never pay someone £2.50 or more for something I can make myself for pennies.
Open an ISA
Once saving, I’d first make sure I have a bit of cash put away for emergencies. After that, there’s a bewildering array of investment products on offer these days. But the only place for my investments is shares in UK companies, as companies doing business are the only things that generate actual new wealth.
Many people think that sounds risky, but if you’re 50 then you could have close to 20 years before you retire. And over that kind of timescale, shares have a great record of beating other forms of investment. In fact, over the past century and more, UK shares have generated average annual returns of 4.9% ahead of inflation.
So how do you go about it? I recommend a Stocks and Shares ISA, which will protect your gains from tax.
I won’t go into the details here, as I’ve explained it all recently. But what I really want to suggest is… open it now. Sure, you might not have any cash to put in it just yet, and you’re nowhere near deciding what shares you might want to buy.
Getting started
But opening a Stocks and Shares ISA right away gives you something to look forward to. For one thing, you can log on and spend as much time as you like exploring how it all works. That should inspire you to think, ahead of time, about what shares you’ll want to go for. Generally, shares paying steady dividends are my favourites.
And you can use it as a place to stash your investment cash right from day one. Did you just manage to save £20? Great, transfer £20 to your ISA right away towards your first share purchase. It will remove the temptation to spend it, and it’s surprising how it soon it can add up.