The 8-Step Guide to Building Your First Emergency Fund

Building your first emergency fund is crucial if you want to be financially secure. It is not possible to predict when financial emergencies will occur, but if you have an emergency fund, you won’t have to worry about money. With that in mind, here is an 8-step guide on what it is and how to build your first emergency fund.

What is an emergency fund?

An emergency fund is an amount of money set aside for unexpected expenses. It should be used to pay for unexpected situations such as medical emergencies, car problems, home repairs, among others, and/or for all of your living expenses in the event that you are made redundant from your job.

People tend to think of an emergency fund as something they have to painstakingly build. In reality, you can build your emergency fund by saving up the little money you have left over after paying your bills and other expenses.

Why is it important to have an emergency fund?

The main reason why you need an emergency fund is to save yourself from financial disasters, emergencies, and other unforeseen circumstances.  These kinds of events can be really stressful and can affect your finances in a very bad way.

If you don’t have any savings, you will have to resort to various kinds of loans or might even have to borrow money from your family just to get by.  

On the other hand, if you have an emergency fund, you will be able to handle these kinds of situations very easily. You can just easily take out some money from your emergency fund if you have to.  

You will also be able to enjoy more peace of mind since you will know that you have a financial safety net in case anything happens.

How much money should be in my emergency fund?

Most of us would recommend somewhere between 3-12 months’ worth of expenses in your emergency fund.

It’s a case of “the more the better”, so aim to build up 12 months’ worth in total, as this would allow you to ‘get by’ without any income for a full year if you need to.

For instance, let’s say that your take-home pay after all taxes is £2,000, yet your average expenditure is £1,000 per month – that covers your accommodation, bills, basic living costs including food and water, and various other small costs that you can’t really live without.

In this scenario, each month of pay will pay for two months’ worth of living expenses, so you can build a 12-month emergency fund of £12,000 in 12 months.

What are the most common emergencies?

The most common emergencies are: medical emergencies, car breakdowns, car accidents, fires, floods, thefts and redundancies.

Any one of these can cost hundreds or thousands and as most people don’t have more than a month of expenses immediately available to them while many live paycheck to paycheck, even the smallest emergency can have a big impact on your finances.

How can I save up for my emergency fund?

The first step to building your emergency fund is to look at your expenses and see what areas you can reduce by asking yourself a number of questions such as;

  • Do you spend too much on utility bills and are you able to reduce these somehow?
  • Do you spend a lot on food and groceries and can you swap expenses brands for supermarket’s own-brand versions, or could you shop somewhere cheaper?
  • Do you smoke, drink alcohol or have another regular habit that is expensive and can you reduce those or completely cut them out?
  • Do you have credit card debt and can you use a 0% balance transfer to move that to another card with minimal costs?
  • Do you spend money on fuel for lots of short journeys where you could walk or ride a bike instead?

I perform this exercise at least once per year and always find something that I can work on to reduce my expenses.

The second step to building your emergency fund is to open a savings account and set up an automatic transfer from your current account to go through after you receive your pay each month. This way, you won’t even see the money in your account and thus are less likely to spend so much.

The amount you set up to automatically transfer to your savings account is an amount that you are guaranteed to have spare each month. So if your take-home is £2,000, your average monthly expenses are £1,000, you might want to automatically transfer £500-800/month just so that you have a little left over in case of an unforeseen last-second expense, then at the end of the month simply manually transfer anything you have left.

What are some great places to save my money?

The purpose of the budget is for it to be easily and quickly accessible, which means that you don’t want to invest it in an asset that you would then have to sell before being able to access the money.

A simple savings account with your bank will be enough for most of your emergency budget and is almost immediately available – simply login to your bank and move the money from your savings account to your current account almost instantly.

Premium Bonds and Cash ISAs are good options to store some of your emergency fund, but you should be aware that the money isn’t immediately available. Premium bonds may take up to two weeks while cash ISAs may only take 1-3 days for the money to reach your bank account.

Keep some of your budget in cash, in case you have an in-person expense to pay and are in the coincidental situation of being unable to access your bank account (such as if you misplaced your debit card).

For myself, this is where I store my 12 month emergency fund:

  • 6 months’ worth in a savings account
  • 3 months’ worth in premium bonds
  • 2 months’ worth in cash ISAs
  • 1 months’ worth in cash

How can I keep track of my expenses?

I simply use Excel or Google Sheets.

All you really need to do is look back over your bank statements, record your spending into a spreadsheet and categorise them where you can.
For instance, based on the prior 12 months of spending I can give myself a £200/month food budget, which means I expect to spend up to that much but no more.

I can total together the spending at several different supermarkets throughout the month and see how that compares to my £200/month budget for food, and record how much I spent on that category of expenses in each month.

What you want to be able to do is look back at previous months and easily see that you spent X on food, Y on utilities and Z on entertainment, which then allows you to see which categories of expenses are having the largest impact on your finances and thus which ones to work on reducing.

If you don’t fancy handling everything yourself in a spreadsheet, you can also use the following budgeting apps: YNAB and Mint.

Your emergency budget in 8 steps

  1. Calculate your emergency budget savings goal
    • Determine what your necessary living expenses are per month and multiply by twelve to get your emergency budget savings goal
  2. Review your spending habits and make alterations
    • Look over your bank statements for the last year and categorise all expenses for each month, then look for ways that you can reduce your spending in each category
  3. Reduce debt payments
    • If you have credit card debt, move this into a 0% account using a 0% balance transfer, giving you a period of time (usually 12-24 months) with no interest to pay and thus lower repayments
  4. Start saving into a savings account
    • Set up an automatic transfer from your current account to your savings account to happen after you receive your monthly salary
    • You may want to save 50% of your available cash in a savings account
  5. Open a cash ISA account
    • Find the highest-interest cash ISA that’s available, open an account and start saving
    • You may want to save 15% of your available cash in a cash ISA
  6. Open a premium bonds account with NS&I
    • You may want to save 25% of your available cash in premium bonds
  7. Monitor your spending habits regularly
    • Review your spending each month or when possible to make sure you’re on the right track to minimising your spending and maximising your savings
  8. Invest the excess
    • Once you have built up your emergency fund, funnel the rest of your available funds into investments, and for times when you have to use your emergency fund, focus on rebuilding it

Conclusion: Life is unpredictable, but with an emergency fund you can feel safe about your financial situation.

Your emergency fund is your safety net. It’s there for you if something goes wrong. It’s there for you if you lose your job, have a major car repair, are sick longer than expected, have a major appliance break, or any other unexpected expense. A true emergency fund can protect your finances from life’s unexpected events. I hope this blog post has helped you to improve your financial situation. If you have any other questions or concerns about building your first emergency fund, please feel free to comment below.

Free Email Updates

Get my updates every month

We respect your privacy.

Why retire early? 8 reasons why you should

If you’re like me, you feel like you simply don’t have enough time in your week to do everything that you want to do.

You get up at 7am, get to work for 9am, stay there until 5:30pm and get home by 6:30pm.

You’re out for half the day doing something that, even if you enjoy what you do, you’re only doing it because it helps you to afford your house, essentials and some luxuries.

But what if you had enough money that you didn’t need to work?

I’m not talking about winning millions and being able to buy everything you could ever want, but about having enough that it could pay off your expenses each year.

This is the premise behind FI/RE – Financial Indepence / Retiring Early.

Through lowering your expenses and increasing your investment portfolio in the stock market, you would simply withdraw from your investments enough to cover your expenses, so long as it doesn’t result in your portfolio dropping.

I am not going to tell you to quit your job now, but once you have planned it out and built your investments, here’s some major benefits that you’ll see;

You’ll have freedom to do what you want with your time

Feeling fatigued from having to commute 2 hours each day? Well, now you don’t have to.

You can wake up a little later in the day feeling perfectly refreshed, start your day with a hearty breakfast and some light exercise, move on to reading a book, working on your garden or house, flex your chef skills on lunch and dinner and more.

For myself, I love models and collectibles, but the last time I built or painted a model was over 10 years ago. That’s a very long time to miss out on your hobbies, so retiring early would allow me to take part in hobbies that I haven’t found time for, for years.

You’ll get more time with your family

If you have children, aging parents or pets, you’ll get more time with the people that you love.

For myself, my parents are in their 60’s and still are agile enough to do what they want, so it would be nice to spend this time with them while I can. Our family dogs are also very old now, and considering the amount of time they have left with us is a dark and sad thought, so being able to spend a few more hours with them each week would make me very happy.

You’ll have more time to take care of your health

It can take me 3 hours to cook an excellent Greek meal because of all of the preparation involved and the individual herbs, spices, vegetables and marination involved.

I just cannot find time for that on an evening after work and at most I do that a couple of times per month.

Being able to spend more time on my food would allow me to eat healthier foods that should improve my healthspan and allow me to enjoy life for longer.

Not only that, but I would have more time to spend exercising.

I, like most people, fall into the trap of rarely exercising because I am simply too fatigued after a long day at work to not only cook, clean and relax, but also to exercise on top.

Just half an hour to an hour of exercise per day would do wonders for everyone, and this would be easy to do if I didn’t have to work.

You’ll have time to work on that small business idea you’ve always had

Hold on, why retire if you’re just going to start working again?

My point with this is that you don’t have to do this, but you can do it purely because you want to and would enjoy it.

This could be as simple as starting a blog on a topic that you’re knowledgable on, or could even involve you creating something to sell on etsy.

Lets say you love art – could you make and sell art cards, paintings or something else?

How about we say you love dogs – could you do some part-time dog walking?

If you’re an advocate for Greek Pottery, could you even import a few to sell on ebay?

Maybe you could even start a subscription box business.

The world is your oyster and you could work because you want to, not because you need to.

You could take that course you’ve never had time for

I am vastly interested in astronomy and would love to learn more about physics and planetary sciences. I could be taking courses through Coursera purely to satisfy my own curiosity about the world, instead of having to take courses only to improve skills that are beneficial to my employers.

Take courses on nutrition, exercise, yoga and more and you’ll not only learn some useful and interesting knowledge, but that will also help you live a longer and healthier life too!

You could live anywhere you want

While I work for someone else, I’m forced to live within commuting distance, but if I’m retired, I could choose almost anywhere to retire to.

Maybe I’d love to move to Cardiff but my job keeps me stuck in Birmingham – not having to work would allow me to move.

Not only that, but according to Numbeo it is around 3.75% more expensive to live in Birmingham, so my money would last a little tiny bit longer in Cardiff.

Equally, if you lived in Edinburgh and for some reason wanted to move to Birmingham, you could be saving around 11%.

Maybe I could move abroad to a country where my living costs would be halved, which would actually allow me to retire many years earlier.

You could have more time to travel the world

I’m not going to say that you should spend all of your money seeing a different country every week, but simply having more time to travel would allow you to see and experience more life around the planet.

You wouldn’t need to wait until the bank holidays to maximise your time off work, bumping up the costs because everyone else does the same.

You wouldn’t need to limit your trips to a couple of big, expensive weeks each year – in fact, you could have more time at your destination, drop your daily budget and experience more.

While I’m working, about the maximum I can take is 3 weeks of holidays per year, so I pack out those days with as many activities as possible, making it very expensive.

If I could instead spend 6 weeks of travelling each year, I could take a more relaxed approach that allows me to appreciate the destination more, and yet it might not cost too much more to do this.

For myself, the money is not the limiting factor, but the main reason why I travel very little is purely down to the time I can get off work. No work = no issues finding the time.

You could cut out a lot of stress, fatigue and burnout

We’ve all had those days where we’ve come home from work feeling absolutely drained, hoping that the money we’ve earned is worth the sacrifice to our health.

There’s certainly a lot of value in abolishing that.

Why work until pension age and retire as a burnt, stressed fragment of who you could have been, only to find that those years of working reduced the amount of time you have left to enjoy to just a few years?

If I can retire 10 years earlier than I originally planned, that’s 10 years less work stress, which might actually help me to live a little longer.

What would you do if you could retire early?

How to get a free company share worth up to £200

Follow my main project and you’ll see that I use Freetrade for all of my investments. That’s because they charge no fees and 0% commission for a general investment account.

But if you’re a new customer and are referred to them (you can join here), you’ll also get a free, random share in a company or other fund, worth between £3 and £200.

In fact, so far I’ve referred seven people to Freetrade who have gone on to become a customer and have earned themselves free shares, and that’s just in the last week (at time of writing) of my blog going live.

The free shares I’ve earned for myself include;

1x Gregg’s – worth ~£18.50

2x Evraz Steel – worth £10.37

1x iShares UK Dividend – worth £6.73

1x Landsec – worth £6.54

1x iShares S&P Financials – worth £6.19

1x iShares Global Agg. Bond – worth £5.26

In addition to these, I also have ten other referrals who have joined but are yet to use their account, so I may have other free shares on the way.

Here’s how you can get a free share for yourself

  1. Join Freetrade here, download the app on your iPhone or Android and create an account
  2. Verify your account in order to deposit funds
  3. Link your bank and top up your account with some funds
  4. In your profile, there should be an option to complete a form to confirm that you are not a citizen of the United States – complete this
  5. That’s it, you should receive your free share within a week

Here’s how much money you need to retire early

This is a question of maths, pure and simple, and works no matter which country you’re in.1

How much do I need to retire? I need to have an amount of money that won’t fall below one year’s worth of expenses before I die.

I’m 30, have £20k of annual expenses, with 55 years left to live according to my life expectancy.

Thus, you might assume that if I had 55x my £20k expenses (about £1.1m), that I could retire immediately, right?

If I assumed that inflation would be 2% for the next 55 years, then my expenditure could actually rise to £58,269, which would eat through £1.1m in 38 years.

So how do you solve the problem of the money running out too early?

It’s simple really: invest it.

Investing your money into the stock market, and in particular into index funds that spread your money across a large number of companies, that will provide you with a return that you can retire from.

But how much will you need to invest, exactly?

Recommendations for the amount you need by the time you retire are usually an absolute minimum of 25x your annual expenses, and up to 40x.


The Trinity Study found that withdrawing 3-4% of an investment portfolio each year should allow it to last for more than 30 years, while differences in investing returns in the UK suggests that we British should aim for 2.5%.

Divide your annual expenditure by those percentages and you should get the same figure as if you multiplied it by 25-40.

So, quick maths tells us that for every £1k of annual expenses, you’ll need £25k-£40k in your investment portfolio.

So for myself, with £20k of annual expenses I will need £500k-£800k to match that range. As a couple, myself and my partner have around £35,000 of annual expenses, so we will need a retirement goal of £875k-£1.4m in our portfolios before we can reliably retire.

If you had £100,000 of annual expenses, you better get to work on cutting those down because you’ll need at least £2.5m before you can start to retire.

How long do I need to invest for?

Let’s say you are me – 30 years old, £20k annual expenses, requiring £800k for retirement, with no current savings or investments, investing £1,000/month.

Using this handy Early Retirement Calculator I can quickly plot out how long I will need to do this for, until the return from my investments can cover my expenses.

If 30 years until retirement is too much for you, try doubling your investments to £2,000/month and you should reduce the time until retirement to almost 20 years from now. Increase it to £3,000/month and you’ll take it down to about 15 years.

Keep in mind, however, that all of these figures are standalone from your pension(s), and taking a pension further down the line may decrease the amount you need invested for a comfortable retirement.

What should I invest in?

I have a few strategies, but mostly focus on Index Funds – these are investment funds that put your money into a large number of stocks all at once.

Using Freetrade (use my link and you’ll get a free share worth up to £200) I’m putting my money into a selection of consistent good performers that spread my money across reliable and high-earning companies.

The Vanguard FTSE All-World (VWRL) fund spreads my investment across 3,000 large and medium sized companies around the world. In the past 8 years, it has had double digit percentage growth for 4 years, single digit percentage growth for 2 years and has declined for 2 years. In that time it has increased by 121%, for an average of 15% annual growth.

Keeping in mind that all of my calculations are on a 5% ROI, this fund may actually outperform that over the long term.

As a nice little bonus, funds like VWRL offer a dividend, which gives you a small annual income based on the size of your investment. VWRL offers 1.38%, so I’ll get £1.38 for every £100 invested each year.

How do I invest?

Retirement saving and investing is actually quite simple.

Investing platforms can take some hefty fees, so for the past year I’ve been using Freetrade, which offers commission-free trading and an ISA for a flat fee of £3/month regardless of the size of your investment.

If you join, you’ll get a free share worth up to £200, so I highly recommend you check it out.

I definitely recommend that you invest through an ISA, which gives means you can make tax-free withdrawals of any profit you make.

Don’t forget your workplace pension scheme

When looking at your retirement plan, you should also consider any pension savings you made through working.

You’ll be able to take this at a fixed age – for me that’s going to be age 57, and all of your pension contributions come with tax relief – basic rate tax payers get £100 for every £80 they put in.

If I can get a guaranteed income to cover all expenses from my workplace pension fund at age 57 and actually retired at age 40, then my pre-pension income from investments only needs to last for 17 years.

In this case, I may not need to amass 40x my expenses, as 25x should still last more than long enough.

While you can take a 25% lump sum tax free, this does decrease your pension pot signficantly and impacts the amount you can withdraw each year, so do take that into account.

Don’t forget your state pension

My state pension age is 68, meaning that I can get an annual ‘wage’ from the government at that age.

The full rate will be about £180 per week, but this is pro-rata based on the number of years you have worked and paid national insurance contributions.

The full rate requires 35 years of contributions, so let’s say I only work for 20 years:

£180/35 = £5.14*20 = £102.85/week = £5,348/year.

Scenario: What if I retired at age 40 with £20k expenses?

I would have contributed 18 years worth of national insurance contributions.

From age 57 I can take my workplace pension, which at age 30 is worth only £17,000.

Estimates show that I could get about £6,000/year from this, but considering I will retire early and these estimates are based on not doing that, I will factor in £3,000 (but naturally, this is not simple to estimate).

From age 68 the government would pay me £4,811/year as a state pension, giving me £7,811 with both pension pots and leaving me with just £12,189 left to find.

Thus from my investments I need £20k from age 40, £17k from age 57 and £12.2k from age 68.

If we say that I would take 2.5% of my investments, then my investment portfolio would need to be:

£800,000 from my retirement age of 40, £680,000 from age 57, £488,000 from age 68.

To find your own numbers, look at the estimated income from your workplace pension, determine your state pension age and income and then deduct those from your annual expenses and divide those figures by 0.025 to see what your investments need to be at each age.


Retirement planning is a long process that starts with you determining how much you’ll need to cover all expenses, considering your pension pot values and investing as much as possible to reach your Financial Independence / Retire Early (or FI/RE) number to give you a good retirement income.

Once you plot all of that out, it’s just a matter of time before you reach your goals to allow you to retire early.

So, how much do you need to retire early? It’s time to work that out for yourself, but the general recommendation is 25-40x your expected annual expenses, or up to $/£40,000 for every $/£1,000 that you spend each year.

Let me know in the comments what your calculations are and share how long it’ll take.

As always, I am just a simple guy who likes maths and wants to share my knowledge on retiring early. I am not a financial adviser and none of this is financial advice.

Month 3: 6.73% Down. S&P 500 & SmallCap 600

This month I spent a little less than usual, just £90.71, split between the S&P 500 and S&P SmallCap 600. I feel as though I have done some dabbling with more volatile and riskier investments thus-far which in the very short term have underperformed, and so to balance my portfolio I am focusing some more on (hopefully) more stable ones.

Current performance:

So far, most of the portfolio is down. The best performers so far are;

  • Mitchells & Butlers – 25% up (on a single share…)
  • Evraz Steel – 8.4% up
  • S&P SmallCap 600 – 3.75% up (this month’s pick)
  • MSCI World – 2.8% up
  • Foresight Solar – 1.22% up
  • FTSE 100 – 0.82% up

The poorest performers so far are;

  • AFC Energy – 43% down
  • Pan African Resources – 29.5% down
  • iShares Clean Energy – 20% down
  • The Hut Group – 10.6% down
  • Greencoat UK Wind – 6.5% down

Clearly there are a few small winners, but the losers are quite significant, so for the past few weeks I’ve been considering different strategies that might not be so volatile.

These charts update (almost) daily and show my current portfolio in real time, so may not reflect what is mentioned in the post in several days/weeks/months/years. I may look for another solution for this.

Here’s this month’s investments:

iShares S&P SmallCap 600 (ISP6)

600 small cap UK stocks with a 0.68% dividend. Growth has looked quite stable up until the pandemic hit and has since grown quite quickly. It does seem as though the pandemic has helped some smaller, more agile companies gain a foothold and that is what caught my interest here.

1 share at £64.60

Total cost: £64.60

iShares S&P 500 (IUSA)

A standard S&P 500 ETF with a 1.22% dividend. Incredibly stable growth, doubling since 2016. This is what I benchmark my portfolio against.

1 share at £28.275

Total cost: £28.275

Ongoing Thoughts:

I have put money into a number of very small and very volatile stocks which have seen quick and quite large drops in value. Obviously, this is a long-term thing and I’m not expecting them to pay off any time soon, but it is a little disappointing to see such large drops so soon after investing.

This month I am “playing it safe” and also withholding about £10 for future investments.

I do still consider that some of my previous investments may work out and I will definitely be investing in more green shares, but for now I do need to dial back my risk somewhat.

What has been working better has been previous investments in cryptocurrencies, some which are up by as much as 50% just this month. Maybe at some point I will write about these as side investments, but I do need to get the main project on track first.

For next month, I will likely look a bit more into Evraz Steel, as one of my best performers, and some other more consistently positive ones.

Month 2: 0.25% Up. PNPL, TRIG, EVR

Over the last month I’ve split my £100 between 8 companies and funds, with a little focus on quite high risk and low-cost shares which proven to be very volatile.

Current performance:

Thus far, we are down on the majority of shares. AFC Energy from last month is down around 10%, iShares Global Clean Energy is up about 7%, while Mitchells & Butlers (my smallest investment) is up a whopping 40%, likely being driven by hype around the return to normality after the lockdown. This month’s investments are also a little all over the place, with Pineapple Power currently being down by 19.75% and various other ones fluctuating by a few percent.

Obviously, the idea is to look at these over a number of years, not simply after one month.

Overall, my portfolio has grown by 0.25%, verses FTSE100 which has grown 3.79% in that time. Evidently at the moment I would have gained more by investing directly in the FTSE100, or the S&P500, but then this blog would be just a little more boring, right?

These charts update (almost) daily and show my current portfolio in real time, so may not reflect what is mentioned in the post in several days/weeks/months/years. I may look for another solution for this.

Shares bought in the last month;

I deposited another £100 into my Freetrade account (you can get a free share worth up to £200 if you join here), however the below shares cost a total of £100.96, because I spent a little less than the target last month.

At the time of writing, this month’s £100.96 of shares is worth £104.09, which is a profit of about £3.13. Overall I have invested £199.59 and have a portfolio balance of £200.08.

Here’s this month’s investments:

Pineapple Power (PNLP)

A US-style SPAC (special purpose acquisition company) which raised funds in order to invest in a Vanadium mine. Thus-far having not acquired any other companies, the share is quite high risk as there is little information around what they will actually do. However, I am young(ish) and can afford some risk, so the potential upside of a small £25 investment could be worth a “punt”.

Out of pure luck, I bought a handful of shares right before the price jumped and within a day had made 30%+ profit. I took the profit out, leaving me with the number of shares below and lowering my average buy-in price, to put that profit into another company.

184 shares at £0.0917

Total cost: £16.87

Foresight Solar (bought with PNLP profits)

An investment trust which buys out ground-based solar farms, paying a 6.77% dividend at the time of purchasing. This was effectively free considering I sold the profits generated from PNLP above to buy these. They are on a downward trajectory since the pandemic, so I am hopeful that this is a nice discounted price which will turn around after some good news is released.

8 shares at £1.0275

Total cost: £8.22

Renewables Infrastructure Group (TRIG)

A trust which invests in infrastructure for renewable energy and pays a dividend of 5.36% at the time of purchasing. This has seen decent growth in the two years prior to the pandemic but has stalled since then. You will see that I do have some focus on green energy in some of my picks each month, because I expect this to become exponentially bigger in the future. Regardless of price movement the dividend will provide a nice annual return (percentage-wise at least).

20 shares at £2.53

Total cost: £25.27

Templeton Emerging Markets (TEM)

A trust with holdings in emerging markets mostly in China, Taiwan and Korea. Some of their largest holdings are Taiwan Semiconductor, Tencent, Samsung and Alibaba – all appear to have good growth opportunities and should be solid purchases.

1 share at £10.10

Stamp duty: £0.05

Total cost: £10.15

Greencoat UK Wind plc (UKW)

These operate wind farms through the UK and offer a 5.03% dividend at the time of writing. They are expanding nicely and have just in the last couple of weeks acquired a 24% stake in their first wind farm in the US.

10 shares at £1.3610

Stamp duty: £0.07

Total cost: £13.68

Evraz Steel plc (EVR)

An iron ore mining and steel manufacturing firm, currently offering an 8.88% dividend (wowsers!). Their production has been almost unaffected by the pandemic while demand for steel appears to be increasing. JP Morgan and other firms are raising their price targets for this stock which is promising. I’ll be keeping an eye on this a little more as the market looks like it’s set for growth, and that dividend is very attractive.

2 shares at £5.075

Stamp duty: £0.05

Total cost: £10.20

Pan African Resources plc (PAF)

A very low market cap gold producer. Their gold production in H2 2020 increased almost 6% and their net debt was reduced by almost 50%. They’re set to build solar plants at one of their mines and may roll this out to others if successful, to provide 30% of their power through the day. I’m quite impressed by their strive to ‘go green’ as their industry is typically dirty. With their debt coming down so quickly, this looks like one that could very quickly turn out a nice profit.

40 shares at £0.2428

Stamp duty: £0.05

Total cost: £9.76

iShares MSCI World ETF (IWDG)

A nice, simple ETF which tracks the performance of large and mid-cap companies in developed markets, holding Apple, Microsoft, Amazon, Facebook, Tesla, Alphabet (Google) and similar companies. This looks like the safest option in this month’s list.

1 share at £6.81

Total cost: £6.81

Can you retire early investing £100/month?

I’ve been dipping in and out of the FI/RE (Financial Independence, Retiring Early) space for some years now, primarily fueled by a longstanding desire to have the freedom to do what I want, without having to spend five days per week at work.

Now, I don’t think many would expect a £100/month investment to allow them to retire early, but, could it?

Below I’ll go through a few scenarios and maths the hell out of this, so buckle up!

Some assumptions:

  • £20,000 annual expenditure in today’s money
  • Also investing in a pension which will cover expenditure from age ~57
  • The pension age will be 57-60, depending on the government..
  • 3% inflation devaluing the purchasing power of my money
  • The pot of money won’t be touched until retirement
  • Upon retirement, the lot is withdrawn and no further gains are made (just to reduce complexity so I’m not maths-ing the cr@p out of this all day)
  • Average annual 8% return doesn’t change

Scenario 1: Myself, 30, investing £100/month, S&P 500 average returns.

The average S&P 500 returns were 8% over the last 60 years (source), or 0.67% per month, so if we use this as a benchmark, I would expect to see a return of £8 profit for every £100 invested after 12 months.

I’m investing this into my ISA on Freetrade (join and you’ll get a free share worth up to £200 when you use my link), investing in a range of ETFs and equities.

In the first month, I would start off with £100.

In month two, I would have the original £100, 0.67% of that in growth (or, £0.67) and this month’s £100.

In month three, I would have the prior two months worth of £100 deposits (£200), 0.67% of that in growth (or £1.33), the prior month’s growth (£0.67) and this month’s £100.

I won’t go on, but you can see from the below that I might expect to make 67p profit in month two, £2 in total by month three, £4 by month four and so on, resulting in a growth/profit of £44.99 by the end of the first twelve months:

After ten years of following this method, I would expect month 120 to return a total of £18,294.60, or growth/profit of £6,294.60, from a £12,000 investment.

Hardly enough to even bring my retirement age forward by half a year.

However, double it, because after the 20th year my £24,000 investment will be worth £58,902.04, meaning growth/profit of £34,902.04.

Now that could actually bring forward my retirement age by one, maybe even two years!

Alas, inflation… at 3% annually for 20 years, the £35,000 growth would be equivalent to £20,000 today, so one year off is more likely.

In fact, investing £100/month from age 30, it would take until I am 57 for my ISA to produce 1.5 years worth of living expenses as growth, which is roughly the year that I should be able to take my workplace pension, so this may still only allow me to retire 1-2 years early!

Let’s say I did this for my (theoretical) child who is ten at the start of the project (obviously they would take on the investment once they earn the money..):

Scenario 2: My (theoretical) child, 10, S&P 500 average returns

Investing £100/month for 30 years would mean that by age 40, my (theoretical) child would have made £301,000 in growth/profit from a £48,000 investment:

At this scale, inflation will really hit that figure quite hard.

If we estimate an average 3% inflation for the next 30 years (hopefully it’s not so high), that £301,000 will be roughly equivalent to £124,000 today, which may only equate to chopping around six years off of my (theoretical) son’s retirement age by that point.

However, just ten years later and this happens:

When you consider 3% inflation for 40 years, that £733,000 growth/profit is equivalent to £225,000 today, which could chop 11 years off of the retirement age of someone with £20,000 annual expenditure (in today’s money).

By this point, if my (theoretical) son was ten years old at the start of investing (where, obviously, as a parent I would need to start them off) and they would now be 50 years old, and with more than enough in this pot to retire – in fact, they may have been able to retire in the prior 2-3 years!

Obviously this is of almost no use to anyone who either isn’t ten years old, or who can’t/won’t put £100/month towards a ten year old’s ISA.

What these two scenarios show is that starting early is essential to retiring early. Because I have started investing so late (is 30 actually late when most people never do it anyway?), I will obviously not be able to rely solely on my £100 Every Month project to allow me to retire early, unless my investments beat the average of the stock market by a considerable degree – this remains to be seen.

But I would consider that £100/month is the absolute minimum that you should invest from age 30 in order to see any impact on your retirement age.

Scenario 3: Myself, 30, £100/month year increasing by £100/month every 2 years up to max £1,000/month

Rather than looking at a straight £1k/month investment which isn’t realistic for most people, this scenario increases the monthly investment by £100 every 24 months – hopefully more achievable.

Starting at age 30, this would mean you hit £1,000/month being invested when you reach 50 years old, where 8% annual return would give you growth/profit of £101,000 just after you turn 50.

At age 52, the amount invested and the growth/profit would be more or less the same, about £138,000. This £138k would be the equivalent to £72,000 in today’s money, or worth just over 3.5 years of expenditure. Considering we would have invested the same amount, there should be enough money in the pot for us to retire around six-seven years early.

Now, the investment here is more than double that of scenario 2 and will likely chop off about half of the impact on the retirement age – even massively increasing our investment doesn’t outperform starting earlier.

Conclusion: Start ’em young!

Investing early makes more of a difference than investing late, even if you massively increase the amount you invest.

If you can only afford to invest £100 Every Month, that is better than waiting a number of years before investing 2x,5x or 10x that amount, because the interest you gain this year will gain it’s own interest next year, and so on (gotta love compound interest).

Heck, if you can afford to only deposit £25 every month into your ISA, that is far better than waiting ten years; I could have done this 10 years ago when I was 20 and by now it would have grown by 50%, for a tasty £1,500 growth/profit.

Investing is not just for people who have £1,000+/month to put away. It’s for everyone.

Month 1: £0.74 Up, FTSE, Energy, Emerging Mkts, THG

For my first month I’ve split my investment between the FTSE100 (which seems like a historically safe option), green energy and emerging markets as important long-term options and some smaller companies; The Hut Group, Mitchell & Butlers and AFC Energy.

I deposited £100 into my Freetrade account (you can get a free share worth up to £200 if you join here), however the below shares cost a total of £98.77, so the rest is left as cash to be invested in future months. At the time of writing my £98.77 of shares is worth £99.51, which is a profit of about £0.74.

The below shares were purchase on December 29th (two weeks ago). For future posts I will invest at roughly the same time each month and publish the summary about two weeks later.

Shares bought last month:

Mitchells & Butlers

A large chain of pubs and restaurants in the UK. Their share price stagnated between 2016 and 2019, rallied in the second half of 2019, then fell during the first lockdown. I envisage a rebound once the country has vaccinated the majority, but they may fall further in the meantime.

1 share at £2.53

£0.01 Stamp Duty

Total cost: £2.54

iShares FTSE 100

100 of the largest UK companies. Very consistent growth over the years means it has tripled since I started high school in 2002. Graphs even show positive growth since the vote on Brexit. A good drop since our first lockdown means I may be getting this at a nice discount.

3 shares at £6.54

Total cost: £19.62

iShares Global Clean Energy

An index of global companies which focus on sustainable and renewable energy. I’m aware of the growing need for clean energy, and with younger generations being very conscious of this, it is surely an industry which will grow massively in my lifetime.

1 share at £12.16

Genesis Emerging Markets Trust

Investing in companies in emerging markets such as China, India, Brazil, South Korea and Russia. My employer is expanding into some of these emerging markets, because they can achieve larger percentage growth than expanding further in the UK. This is the same logic I’m using – these markets are expanding rapidly and there is no doubt that at least some of the companies this invests in will become significant players.

2 shares at £8.865

Total cost: £17.73

The Hut Group

A collection of around 100 ecommerce sites, including MyProtein, Glossybox and a tonne of others which are popular with Millennials and Gen Z. Myself and many others I know of are regular customers. They invest a lot in marketing to Gen Z, and as that’s the next generation to have disposable income, investing in these now seems like an obvious move.

3 shares at £7.3733

£0.11 Stamp Duty

Total cost: £22.23

AFC Energy

A clean-energy company developing hydrogen fuel cells, which has recently established a partnership to produce batteries for electric vehicles. This was a bit of a pot-luck stand-out one for me, as I had not heard of these before this investment. Some small investments into potential future large-players are worthy of some consideration. This company and many others in this industry could grow massively over the next 10 years as electric vehicles become more mainstream.

28 shares at £0.8746

Total cost: £24.49

As of 13th January:

Total cost of stocks and shares: £98.77

Current value: £99.51

Difference: +£0.74

Cash left over: £1.23

Current value + cash: £100.74

Considerations for next month:

I’m currently engaged in a lot of research so the below list is likely to change. If you check my Portfolio page, Global Clean Energy is up by a double digit percentage since I invested, so I am keen to put a little more into there and expand further into similar spaces.

I am also looking at dividend stocks and considering if this is a good way forward.

Some ideas:

  • Proctor and Gamble
    • Makes many popular brands and is likely a long-term consistent performer
  • Other emerging markets
    • Good growth with larger risk, but a long-term option
  • Smaller companies funds
    • Hopefully some good growth after Coronavirus has been dealt with
  • Green energy and Electric Vehicles
    • QuantumScape
      • Producing batteries for electric vehicles
    • WorkHorse
      • Deploys electric vehicles for delivery

Introduction to 100 Every Month

Welcome to 100 Every Month, where you can follow my stock market journey as I start (almost) from scratch with a £100/month regular investment.

I started this journey on December 29th 2020 where I set up a Stocks and Shares ISA with Freetrade, a trading app which takes no commission and allows completely free trading, with an optional £3/month ISA, or optionally more features for £9.99/month.

I only have two guidelines that I’ll follow on this journey:

  1. I must invest roughly £100 every month through my ISA
  2. While I will choose roughly £100 of shares each month to track for this project, I will include any additional investments separately, while focusing on the original £100 investment

I’m currently engaged in a tonne of reading and research, as I have little experience of the stock market outside of cryptocurrencies, so I would consider my position to be not much better than the average person who has no experience of investing. Hopefully this will serve as a worthwhile project to follow which might provide some learnings for future readers.

Who am I?

Call me Jay (or James); unmarried, no children, renting a terraced house with my partner. I’m a tech geek, early-adopter of cryptocurrencies, side-business-owner. I work in marketing in the money-saving industry earning a little above average for the UK while my side-business brings in some play-money.

Why invest in stocks and shares?

With average returns of 8-11% annually (depending on your source), this is far more attractive than current savings accounts which might pay 0.4%. This also beats out any other strategy of investing my money which I can think of, yet there are even countless examples of investors who are able to beat the average over time.

Working in marketing, I do have some insight into consumer trends, so this may also allow me to understand a little more about companies with potentially bright futures by looking at the people buying from them. This may not give me any advantage over other investors, but I feel as though I can see some trends emerging which I want to get into.

Why invest £100 every month?

There’s a few reasons for this:

  • It’s a small enough number that I won’t miss it (much)
  • It’s easy to free up this much money by cutting back on some expenses, if I need to
  • Investing every month ensures I’m actively looking at the market and don’t forget to actually invest
  • This should be easy enough to follow for readers of most income levels, who wouldn’t follow along with a £500-1,000/month investment strategy

As well as provide insight into my portfolio’s performance, I may also post some advice of how to fund your own investments. My work in the money-saving industry for the past 5 years means that I’m pretty fluent in saving money, which will certainly help with funding this strategy and any additional investments.

What about additional investments?

I will discuss these in the portfolio update post each month, but they will not be included in the main portfolio tracking, as this will be reserved exclusively for the £100 monthly investment.

I may purchase more of the same shares, if I feel that it is a particularly good investment.

How will I decide on which shares are included in the £100 Every Month project and which are included in the additional investments?

I will consider what I would invest in, as if I only have £100 to invest. Some months it may be that I can only afford the £100 investment, and some months I may be able to invest 5x that much. In any case, my main focus will be on what I think are the best investments for my £100 Every Month strategy, and any additional shares will be an afterthought.

Where does my money come from?

I’m no rich kid; I’ve earned my money through hard work and graft.

I grew up in a regular household, where my parents made the financially-unfortunate decisions to leave their above-average paying jobs to spend more time with their family, by buying a small series of convenience stores which over time went bankrupt. My father went from earning £36k in the mid 90’s (equivalent to about £70k now) to about £18k in 2018 when he retired.

Since a young age, I watched as my parent’s money disappeared and as the nice, annual holidays to Florida stopped, dreading having to work for anyone and relying on them for a pittance of income. I grafted through some small business ideas that made money but never really took off, and learned SEO and marketing from the ground up.

The overwhelming majority of my disposable income comes from my day job, which pays less than the equivalent of what my father’s mid 90’s salary would be worth.

As you can see, I am no rich kid with hundreds of thousands to throw at the stock market and there’s even a good likelihood that you may be in a better financial situation than I am in.

What is my money situation like right now?

I have around £15,000 of debt through a small low-interest loan and a couple of 0% interest credit cards. I move my debt around every 18 months or so in order to continue utilising the 0% interest introductory periods, so as to pay off the debt over time with very little in the way of fees to pay.

My credit card debt is being obliterated by November this year and my loan will be paid off in 2022.

My savings account is currently at about £300, or around 2 weeks of living expenses – this fluctuates depending on how much I pay off of my credit cards. In the last couple of weeks I have paid about £1k off of one card, which I withdrew from my savings account – this is to help me clear it by March, when the 0% interest period expires.

I have a small side-business, selling through ebay and etsy. This produces margins of around 50% on each sale but currently only generates £1,000 on a good, average month. Theoretically, myself and my partner could withdraw £250/month each and the business should sustain itself by generating enough money to reinvest into new stock each year.

We are currently saving for a large purchase of stock, but I hope to start taking a small sum of money out in the next 6 months. In the future I may invest more to grow this business, once we have a larger property where we can store more stock.

For reference, this side-business cost us very little money, around £100-200/month for each of us for a couple of years or so, but required a lot of time to investigate. We resell handmade products as accessories for a larger market. I do believe that we can grow this business much further but that we are currently restricted by space. I also believe that if we can do this, then anyone with the right determination and some startup funds can do the same, if not a lot better.

What am I hoping to get out of this?

As I am just about to turn 30, I don’t expect that a £100/month investment at an 8% average return, would do much to help me retire early (in fact, £100/month with a 0.66%/month return will take 25.7 years to reach a £100k valuation, far from retirement money..).

But, I am hoping that it will help me to achieve a better life for myself one day. To bring forward my retirement age, I will need to make further, additional investments, and/or invest in riskier shares which may provide better than average returns.

For example, at 8% growth and £100/month, I could expect to attain a £100k value by the time I am 55, yet at 10% growth I could do the same by the time I am 52 – if this were enough for me to retire on, I would have brought my retirement age forward by about 3 years.

For my readers, I want you to see what a small, but regular investment can do, good or bad, market-beating, average or losing to the market.

Follow my journey by browsing my more recent posts.