What is the biggest goal in your life? For many of us, there’s no greater priority than providing the most fulfilling life possible for our nearest and dearest. We accumulate wealth, with the aim of growing money into a nest egg to provide for things such as school fees, retirement, and inheritance.
A nest egg that is big enough to provide for the average UK family’s needs will take years to build, which is why it could be a good idea to invest for the long-term in a globally diversified Portfolio. Through products such as a Stocks & Shares ISA or Pension, you can benefit from compound growth that will help you reach your goals.
There are some simple steps that could get you to your nest egg goal sooner, or result in an even bigger nest egg than you first predicted.
1. Set your goal and stay committed to it
The starting point for your nest egg is proper planning, which you then follow up with a disciplined investing routine which consistently closes the gap towards your goal.
When setting your goal, consider how exactly your nest egg will be used. If your nest egg is for your children’s education fees, then you are perhaps looking at a window of five to ten years for achieving your investment goal. A Stocks & Shares ISA could be suited to this type of goal, with a globally diversified Portfolio aiming to grow your investment towards your goal sum. You can invest up to £20,000 tax free in the 2019/20 tax year and withdraw from this investment at any time.
If your goal is for the longer term, such as retirement or leaving an inheritance, then a Pension could be a good choice. You get tax relief when paying into a Pension, with your contributions boosted at the point of investment. For a Basic Rate tax payer, this is an additional 20%, Higher Rate tax payers get 40% relief and Additional Rate taxpayers 45%. Basic tax relief is claimed on your behalf, but the Higher and Additional Rates must be claimed on an annual tax return. Tax relief can be claimed on up to 100% of your earnings or your annual allowance (which is usually £40,000, but can be higher or lower).
With a long-term, tax efficient Pension, you can usually withdraw your funds once you reach 55 years old. You will typically be able to access 25% of the value of your pension pot tax free. The rest is subject to income tax rules at the time of withdrawal.
If you are thinking about how your nest egg will leave an inheritance, then consider our in-depth look at how to leave an inheritance for your children, which explores the tax implications of your decisions.
Whatever your goal, the key is to stay disciplined, making regular investments that get you one step closer to the complete nest egg.
2. Invest early and often
One of the best ways to ensure you achieve a bigger nest egg for your family is to get started on investing early. The more time you have, the more your money can benefit from compound growth.
Investing a little is worth more than adding larger amounts later on, as those earlier deposits have had longer to snowball in compound growth. In other words, as well as the original investment growing, there’s time for growth on top of growth.
What does this mean if you are later on in your life? It just means that you have to contribute larger amounts to try and catch up. It is never too late to reach your nest egg goal, you just have to adjust your contribution amount based on time remaining.
3. Automate your investment
One of the easiest ways to make sure you stay committed towards achieving your nest egg, is to automate a direct debit each month. This ensures you pay yourself first at the start of the month, taking a portion of your disposable income and committing to a set investment. This is “paying yourself first” as ultimately that money has the potential to come back to you as a greater sum with compound growth.
Adding a direct debit to your True Potential account is quick and easy
- Log in to your True Potential online account as usual
- Click through to your investments
- Scroll down and select the policy you wish to add a direct debit to
- On the policy page, click ‘Edit monthly investment’
- Enter your monthly amount and bank details, and we’ll take care of the rest
This makes achieving your nest egg a lot easier. It is as simple as calculating how much you need to invest and for how long based on an assumed annual growth. Once you know this, simply set your monthly direct debit and you’ll be on your way.
4. Track and top up
Automating your investment doesn’t mean forgetting your investment. Download the True Potential app from the App store or Google Play (or log in online) to track your investment performance.
One of the ways you can achieve your nest egg earlier than originally planned is to top up whenever you have extra disposable income. This is made easy with True Potential’s impulseSave® feature, allowing you to top up anytime, anywhere, through your mobile device or desktop from just £1.
By occasionally adding a little extra to your regular contribution, you could realise your nest egg goal sooner than you first imagined.
5. Know your Portfolio
Logging in regularly to your True Potential account is the best way to keep track of your nest egg. This can help you to track performance and highlight the best way forward to your nest egg. Think of your True Potential overview as a financial fitness report, if you were going to the gym you’d weigh-in every couple of weeks to track your weight loss progress. Your True Potential overview works as your financial fitness scales – by logging-in every few weeks you know where you are at in your journey towards your goal.
These insights can then be applied to your timeframe for investing and regular contributions. Maybe you’ll realise what a big difference it could make by increasing your contribution, or maybe you’ll decide that you can take a bit longer to get to your goal if you aren’t on track to meet it.
6. Know your other assets
A nest egg isn’t just about your investment. Assets and liabilities will have a big impact on how you provide for yourself and your family. You can list your assets and liabilities within your True Potential account, in order to gain a complete overview of your financial well-being. Your net wealth is your assets and investments, minus your liabilities.
Take action today
Whatever journey you are on towards your nest egg, you can get closer to your goal by taking action today. Just by logging in and making a small impulseSave® when you have the disposable funds available will close your gap to goal.
Going forward, try to make that a habit, logging in every couple of weeks to track your investment and impulseSave® any extra disposable income you may have. With that routine established, you could be hatching your nest egg sooner than you ever thought possible.
Log-in now
How to log-in
On our responsive desktop site: Once logged in, scroll down the Overview page and you’ll be able to see a section for Your Policies, Your Assets & Liabilities and Personal Finance. Click through each to build a complete view of your finances.
On our App: Search for ‘True Potential’ in the Apple App Store or Google Play Store and download the app to your phone or tablet. Once logged in, click on the Menu button in the top left of the screen, you’ll then be able to see options for Overview and Your Assets & Liabilities. Click through each to build a complete view of your finances.
Please be aware that this communication should not be considered as financial advice.
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