How I Invest For My Peace Of Mind - Part I
Here at MoneyNotes I’m all about calling DIBS (debt, investing,budgeting and savings) on better living and focusing on achieving financial and emotional wellbeing.
While dealing with our debts, making and sticking to a budget and building up our savings will all make a huge difference, when it comes to growing our money, investing is where it’s at.
Now, I’m going to level with you as always - investing can seem quite complicated and overwhelming but it has never been simpler with the help of technology which has signaficantly improved how people can access investment opportunities.
In true MoneyNotes style, we are about the education not the advice so instead of telling you how you should go about investing, I will be telling you how I do it In our “How I Invest For My Peace of Mind” series, I’ll break down how I manage my money for short, medium and long term investments.
This week, we’re looking at the short term investing.
What do I class as short term investing? My rule of thumb when it comes to short term is the first three years.
I do not believe this is a long enough period to invest and truly enjoy the benefits of investing.
Which is why your short term investing should be cash where it’s accessible as a rainy day fund. A rainy day fund is cash that can be easily accessed in case of any emergencies.
The amount in this rainy day fund can differe, but it is generally recommended that you put aside the equivalent of least three times your monthly salary. While some people do question the importance of a rainy day fund, please do remember that without one, when an emergency does strike, many people find themselves incurring debt such as the dreaded short term payday loans to cover the unexpected costs.
For my peace of mind and to reduce my chances of going into debt, I currently have three months salary salary put away in my rainy day fund and try to regularly top this up to make sure that I’m protected should that rainy day come. Rather than investing the money from this rainy day fund, I’ve instead chosen to keep it in a Cash ISA.
For anyone who hasn’t come across these, cash ISAs are savings accounts that offer you tax free interest on your dosh up to a maximum of £20,000 per year (accurate as if 2019/20 tax year).
My cash ISA is with Nationwide and managed for instant access as I have explained above. However, you can always shop around for the best Cash ISA with a high interest rate .
Keep an eye on the interest rate of your Cash ISA. A pesky little trick that some providers pull is to offer you what at first glance looks like a higher rate of interest. The problem is, this is often an “introductory offer” and after a year or so, the interest rate offered will drastically drop. Of course it’s worth getting the higher rate while you can, but don’t make the decision based entirely on this.
Now that you have the short term investing sorted, the next step is to build the medium term investments. I will cover this in the next blog. In the meantime, you can start your financial education journey here for your own peace of mind.