My husband and I want to buy a house, how can we go about improving our credit score?
This is an awesome question. I think lots of people come up against this issue at one point or another. Before I get into the detail, straight off the bat I’ll tell you what you don’t need to do, you don’t need to get a credit card. You can build excellent credit without a credit card despite what people say about needing a credit card to build a credit record and strong credit score. Now that I’ve got that off my chest let’s start from the beginning?
Firstly, what is a credit score and what’s it trying to achieve?
A credit score is a number that’s designed to be an indicator of your creditworthiness. This means that the credit score gives lenders an indication of how good you are at paying your debts and how likely you are to default and not pay them. Lenders only want to lend to people that are likely to repay that money and the credit score is an indicator of your likelihood to repay.
Your credit score is built up using all the information a credit reference agency has collected about you over time especially over the last 6 years; information older than 6 years usually doesn’t weigh into your score.
The credit reference agencies that you might have heard about are:
You can also go directly to Transunion or Crediva to get a credit report from but they don’t give you a score directly – they only do so via CreditKarma and checkmyfile, respectively.
If you want to improve your credit score you need to know what your current score is so you can track it. You can’t improve something if you haven’t measured. Credit scores work in the following way:
How come ClearScore and CreditKarma are free?
Both make money by selling products to their customers. But, in my opinion, the way ClearScore goes about it could land you in unnecessary debt so I wouldn’t recommend them. Under the credit information, there’s a section on ClearScore that asks you “How can I improve my credit score” and one of their pointers if you don’t have a credit card, is that you get one. CreditKarma aren’t so brazen.
I feel as though ClearScore keep my score artificially and strategically low to nudge me towards that credit card. So, if you do use ClearScore, know that even if you pay your debts on time, are current on all your bills and are essentially doing everything you should to be classified as financially responsible, you won’t get the top credit score if you don’t have a credit card. I am very anti-credit cards so I would never get one and this one aspect of ClearScore annoys me and stops me from using them.
With all this knowledge about the agencies, this is what I recommend you do to improve your credit score:
Firstly, get a CheckMyFile credit report and credit score. As I mentioned, CheckMyFile’s score is out of 1,000 and based on information from 4 agencies; you will be able to view a lot of the information that all 4 agencies hold on you.
Second, I suggest you check your credit score only (not the credit report) at Experian. Experian have a service where you can view your score anytime for free but you won’t be able to see the full credit report under that service. Because you are getting an Experian report via CheckMyFile there is no need to get it directly from Experian too, at least not in the same month.
The reason I am suggesting you get your Experian score (which is out off 999) is that I find their score very responsive to changes in your financial footprint. If you pay off debts and so on, the Experian credit score improves within a month or two and it’s actually possible to get a perfect Experian score of 999, I have had that several times.
In my experience, Experian’s credit scoring system is the most legitimate and reliable.
Make sure you unsubscribe from CheckMyFile before a month is up because they will start charging you £15 per month after that.
This will mean you lose access to credit reports and the checkmyfile score but that’s okay because you will have the Experian score and to check your credit report on a regular basis, just use CreditKarma. The level of detail Credit Karma has is actually very impressive. They actually have financial details on my profile that Experian seem to have missed and yet, outside of the little bits of missing data, Experian is generally the most comprehensive. FYI, Experian is not paying me to say any of this.
Okay, so what can you do to improve your credit score?
These are the things that will have a huge negative impact on your credit score:
In summary, what should you do to improve your credit score:
Hope this helps, Chrissy.
Have a money question for me?
Based on the things you told us about investing, my husband and I started putting £125 per month each into our SIPP pension. I hope this isn’t a silly question but what are these savings for? When can we expect to start spending that money and should we try to spend it in specific ways or on specific things? Both my husband and I are 30, we don’t plan on having children and our jobs have fixed pension benefits.
That’s a great question. While everyone has a different value system, there are two main reasons that I strongly recommend that people put money into a self-invested pension plan or SIPP a) flexibility and b) security including funds to help pay a mortgage off early.
A SIPP can be better than a stocks and shares ISA, in some cases, because you effectively pay less tax and because you can’t use the money until you are about 58 so it forces you to save.
Let’s talk about each reason in turn:
The first reason: is flexibility over when to retire
In the past, a lot of work-based pensions (aka defined benefit pension plans) used to allow early retirement from between the ages of 55 and 60, most of these type of scheme are being completely phased out and are instead being linked to the state retirement age which for you is currently expected to be 68. There is talk of moving this to age 70, so this is a future possibility.
Whatever happens, the funds that you build up in your SIPP can be taken from 10 years before the state retirement age. This means if the state retirement age moves to 70 you will still be able to use money that’s sitting in your SIPP from the age of 60.
If you and your husband are putting £125 each into a SIPP then when you are 55 years old, you and your husband’s combined pot of savings would be worth £135,000 if the pot of money only grows fast enough to keep up with inflation of about 3%; if you get growth equivalent to the average stock market return of 7% then you would have £250,000 at the age of 55 and if you get an average stock market return of 10% you would have £410,000 saved up.
At age 60 the figures would be £180,000 @ 3%, £375,000 @ 7% and £700,000 @ 10%.
These sort of returns aren’t cuckoo. According thebalance.com, “the S&P 500 Index, delivered its worst twenty-year return of 6.4% a year over the twenty years ending in May 1979. The best twenty-year return of 18% a year occurred over the twenty years ending in March 2000.”
Various sources suggest the S&P 500 has returned 10% before inflation if you buy and hold the money you invest into it. But of course, it’s useful to remember that this past success doesn’t guarantee that future returns will be as good.
Right now you would struggle to find a bank account that gives you an interest rate of 1.5%.
Back to flexibility on when you retire, however, unless you believe the US has no room for growth, then this total of £250/month you are saving could amount to a lot of money over a 25 to 30 year period and this would allow you to retire with a decent income well before the state retirement age.
If your mortgage is fully paid off by the time you retire then your cost of living could be low enough that even a modest growth in the SIPP would provide a comfortable income before your state pensions and work-place pensions kick in.
The second reason: to save the money is the added security from having extra retirement income
Having money in a SIPP means you can top up your retirement income.
Having the SIPP would mean you have 5 sources of income:
If the pension income from your jobs is lower than your final salary having access to extra funds will mean you can more or less maintain your lifestyle. This will be especially important if one person lives a lot longer than the other.
There is one special feature that the SIPP has but all the other 4 pensions do not: and that’s the fact that if you or your husband dies the state pension stops coming through and the work-place pension either stops completely or is massively reduced. However, whatever money is outstanding in the SIPP would fully transfer to the spouse without penalty.
Just to be clear, I will make that point twice: a work-place pension either dies with the person and at that point the spouse receives nothing or, from that point, the spouse gets a heavily reduced benefit – usually 50% of one-third of the amount that was being received before their spouse died.
A LOT OF PEOPLE forget this about SIPPs and other defined contribution pensions. I won’t go into the differences between defined benefit and defined contribution pension plans here but if someone is interested go to themoneyspot.co.uk and leave me a voicemail with your request.
Finally, when can you expect to start spending that money and should you try to spend it in specific ways or on specific things?
Technically, the plan is that you will never have to spend the capital but can just spend the growth.
If the fund is worth £250,000 when you start drawing from it and you are earning a 10% return per year at that point, then you could just withdraw the 10% (i.e. £25,000) or less and spend that.
If your withdrawal rate is lower than the growth rate of the fund then your retirement would continue to grow even as you take money out.
Note that some research suggests that the ideal withdrawal rate to maximise the likelihood that the money will never run out is 4%. But given you have pension income from your jobs in addition to the state retirement and you’re not worried about passing wealth on to children you could be more aggressive than this.
As for how you spend that money, well that is up to you and is a great problem to have. Having more money doesn’t only mean more holidays, it also means you can buy private health insurance which might be a necessity to avoid NHS waiting lists at a time when health problems are more likely. This would give you a lot of peace of mind.
Ability to pay mortgage off early
One thing worth adding, is a note that once you can withdraw money from your SIPP you are allowed to take 25% out as a tax-free lump sum. If your household had £250,000 saved up, you could take £62,500 out in one go which could be used to clear all or most of your mortgage.
You would then be allowed to take the rest out as an income or you could buy an annuity – with an annuity you essentially buy a fixed income which keeps being paid to you for the rest of your life.
I wouldn’t recommend an annuity for you given you have two fixed pensions coming in already, you don’t need the extra security and annuities don’t tend to be worth the money now that interest rates are so low. What you could do instead of buying an annuity is withdraw what you need from the SIPP every year. You would pay taxes based only on what you take out and could manage the withdrawals to minimise the tax bill.
I hope this helps.
Have a money question?
I want to earn extra income, however I work as a nurse in the NHS which takes up my time, do you have any suggestions on any investment that can make money. I am also interested in the stock market but don’t know where to start.
I am interested in both generating extra monthly cash flow now and increasing the amount of money I have in retirement.
Thanks for this question. I love it because I have two nurses in my immediate family, my mother-in-law was a nurse for a long time and my cousin is still one now.
Boosting current income
The, “how can I make a little extra cash now” question is one I asked myself quite recently because I wanted to put extra cash into our household ISAs. There are a few things you can do to boost your cash now:
1. Working extra shifts / locum shifts
My mother-in-law says this is not a great idea because being a nurse is hard enough work, as it is. I agree that it is very demanding work but one of the great features of working at the front line of medical services is that you can actually make more money by working more hours, even temporarily. Some jobs don’t offer opportunities to earn more by working more, you’re paid a fixed annual salary and that’s it - no overtime. Overtime either goes uncompensated or is compensated as time back in lieu.
You can sign up to a locum agency and do the same type of work for higher pay on your free days.
If you want to really juice up your income you can even look at things like working a 4-day week in your regular NHS job (your NHS pension would therefore be lower) and work for a locum agency on the 5th day. The advantage with this strategy is that you will boost your income without working more hours because the hourly rate is higher as a locum nurse. If the extra income is invested wisely it could more than make up for the lower NHS pension.
Also, keep your eyes open for higher paying promotions.
2. Do some extra work in another field.
If you have another skill that you can monetise you can look into doing extra work in that field. So ask yourself, "what other skills do I have?" I'll give you an example from my own life:
In my early 20s when I worked in banking the bonuses were not good one year and to make some extra money I slipped flyers into doors offering massages (for women only) at my house for £25/half-hour. I had someone sign up that very day. I had done a course in therapeutic massage at London College of Massage for fun and when I needed it, that skill helped me boost my income. I didn’t do it for long but it showed me that if I wanted to earn more money I could monetise other skills in my free time.
There are some things you can do that don’t even need a new skill such as babysitting. You could sign up at childcare.co.uk or sitters.co.uk and your credentials as a nurse would be very attractive to people that needed a babysitter for nights out or weekends. You haven’t said whether or not you have childcare responsibilities of your own so I don’t know if this is possible for you.
If you have skills that you can monetise online then list yourself on freelance websites like upwork or fiverr. There is a wide range of professions people hire for on these sites. I have used these sites myself to buy all manner of things including artwork, copy, copy editing and even voiceovers! Imagine that, all you’d need as a voice over artist is a microphone that records your voice clearly. Some people make serious money side-gigging on these sites.
These first two options are not completely aligned with your question as you asked for “investments that you can make” but I decided to add them to give a fuller answer.
3. Invest in or produce products that make cash.
Investing in something necessarily involves parting with money in the hope that you’ll earn even more money. You haven’t said how much money you have to invest so here are a few options.
Can you make something that people would be interested in buying that you can sell on etsy, eBay, amazon or Facebook marketplace?
Make a few samples of what you want to sell and list them on all these sites. I ran a product business myself for almost 6 years mostly using Amazon so I would recommend that you:
I would never discourage anyone from starting a business but having experienced it, I would tell you that it is very hard work. It involves a lot of long hours and is nothing like as glamorous as our culture makes being an “entrepreneur” sound. A business could consume absolutely every free moment you have – evenings and weekends. And all that time might not even produce a profit. Investing in a business comes with a lot of risk – stats vary depending on source, however, 80% to 90% of businesses fail in under 3 years.
Could you make money teaching something online? You could create a course and list it on Udemy, Teachable or another similar site. This would take some time to produce well, in the first instance, then you would need to spend some money on marketing your course but you could keep the costs very low.
Alternatively if you want to teach a GCSE or A-Level subject (High school level) or even a university course level, you can sign up to places like tutorful (previously, tutora).
5. Invest in property.
If you have enough for at least a 25% deposit then it may be worth looking into property investment. Because interest costs on buy-to-let property are no longer fully tax deductible, (that means, you can’t subtract the interest payment from the rent you receive before calculating your tax bill), property is not as attractive an investment as it used to be. That said, if you can buy a place with cash, or if the property produces a high enough profit to clear the mortgage within a reasonable amount of time (I personally target 10 to 15 years) then it could be worth doing.
Overall, the option you go for will depend on your risk tolerance and the amount of cash you have to invest. If you are relatively risk averse and don’t have cash to invest then working more to earn more will be more attractive. If you can tolerate some risk and do have some spare cash saved up, then investing in property will provide you with medium risk while investing in a business will be the higher risk option.
Boosting retirement/future income
If you’re looking to boost future income then you have two main options:
Property investing we've already talked about.
The stock market provides a good return over long periods of time; most investment advisors would suggest an investment horizon of 5 years or more. Putting money into the stock market in the hopes of a good return in a year or less is gambling rather than investing, that's why I didn't offer it as an option when we were thinking through how to "boost income now".
The most tax efficient options for investing the stock market are investing via an ISA or a SIPP. ISA are individual savings accounts and SIPPs are self-invest pension plans, they are a type of personal pension.
If you invest the money via a SIPP then you won’t have access to that money until you are between 55 and 58 years old. The exact age will depend on your age and has been set at the state retirement age minus 10 years.
The SIPP is a good option because for every £100 you put in, HMRC pay back £25 of tax and this saving is automatic. It is claimed by the SIPP provider and is shown on your investment account. The maximum you can put into a pension a year is £40,000 or your salary whichever is lower. So, if you earn £30,000/year you can put up to £30,000 into your pension without getting a tax charge. If you earn more than £40,000/year and haven’t reached the lifetime allowance of £1.055m, you can put up to £40,000 into your pension without getting a tax charge/penalty.
I will be writing several blogs on investing over the next few months that should hopefully build your confidence to make the move. In the meanwhile, you might find this useful: What platform should you use for investing and what should you invest in.
I hope this is helpful.
Have a question?
If you have any personal finance questions send them to [ME] – I will answer whatever piques my fancy via a blog post.
I just had my first baby. I'm 31 and married. Do you have any tips for how I can think about saving and investing for my baby?
This is an awesome time to be asking me this question. I also started planning for my first baby as soon as he was born.
You will be at an advantage if you start saving and investing for your children as soon as they are born. You will need to balance what you can afford with what you want to achieve for them. Firstly, what’s the goal? What are you saving for?
University costs c.£60,000 in tuition and living costs for a 3 year course at the moment - £10,000 for tuition and books, £10,000 for living – living costs can be higher or lower depending on whether you live at home, etc..
£60,000 is a huge amount of money and this cost is likely to rise in the future but it makes the maths too complicated to think about possible cost increases.
Option 1 for university savings
If you can save £20,000 in a tax-free account like a stocks and shares ISA by the time your child is 5 years old, then you can stop putting money aside and this money will have a reasonable chance of growing to £60,000 by the time your child is 18 years old.
How could you save this £4,000 per year? Perhaps you could target saving a round amount like £250 per month (equivalent to just over £30/week each for a two-income family) and because this sums to £3,000 a year, at the end of the financial year you’d hustle to throw that extra £1,000 into the ISA before the financial year closes on 5 April. Or, if you can afford it, you could just save £335/month and you would save just over £4,000/year.
Option 2 for university savings
£4,000 is likely more than most can afford. The alternative is to save £100/month until age 18 which most people can afford even on the median household disposable income of £29,400 (2019). It’s equivalent to about £12.50/week each for a two-income family).
Which option is better?
I would say option 1 trumps option 2 because you give the money the best chance of growing. Equity markets are volatile in the short-run so by saving the money early you give the money a better chance of reaching your goal. That said, something is a lot better than nothing: small savings add up to large amounts over time. Your savings may be lower than you would like to target but you will still help your children avoid the full scourge of student debt.
These are the results under each option:
Caveats on saving through a Junior ISA:
When you save the money through a Junior ISA, that money will be theirs when they hit 18 and you might not be able to control how they spend it.
However, putting it into the Junior ISA means you won’t be tempted to spend it yourself because once the money goes in, it can’t be withdrawn until your child is 18.
How can you avoid the Junior ISA so you have more control over the money?
Plan b. is a good option because you could end up not having to pay tax anyway:
The capital gains tax allowance in 2019-20 is £12,000. That is, you have to make a capital gain (the profit on your investment) bigger than this to pay the tax. If you save the £4,000 across two investment accounts - £2,000 in an investment account with your name and £2,000 in an investment account with your spouse’s name then when your child is 18 you can sell enough stock each year to keep the capital gain below the capital gains tax allowance.
The risk however is that this threshold could fall or be completely removed in which case you would end up paying more capital gains tax on the sale. It’s still a sensible option, despite this risk.
If you followed option 1 for university savings, at age 5 you’ll have stopped doing that and might find that you have some spare money to open a retirement account.
Your children will not have access to this money until they are 57 to 60 but if life hasn’t worked this will be a great cushion for them.
The beauty of investing in a retirement account is that for every £1 you put in the government puts in an extra 100/80. That is, if you want to save £100/month you only need to put £80 into the account. If you do invest £100 it will be £125/month with the government top up. For kids you can put a maximum of £2,880/year (£240/month) which equals £3,600/year.
This is the result if you choose to save £100/month indefinitely into your child’s Self-Invested Pension Plan or SIPP starting from when they are 5-years old:
You notice that the extra £25 from the government makes a real difference. By saving through the pension, based on a 7% return, on 7-Jan-2025 the investments are worth £9,269 rather than only £7,444 without the government top-up.
Don’t save into a child’s retirement account unless you have the cash flow and are meeting your own goals, e.g. paying enough into your own retirement, paying off your mortgage early and ideally, are debt free yourself (apart from the mortgage).
Some will be able to afford the full £240/month from birth, the rest of us have to work out what is realistic, that is why I personally opted for the £100/month from age 5. This decision will change with a change in your fortunes.
3. HELPING YOUR KIDS BUY A HOME
This is where the decisions get a little tricky. Some people will be able to afford funding university, helping their children get ahead with retirement savings and help with a deposit on a home without compromising their lifestyle at all but the rest of us need to make choices.
Private school vs. saving for a home
What will make the biggest difference to your children: a private education or getting onto the property ladder?
If you can afford one or the other but not both, then you might follow the route of private primary school followed by state secondary school (grammar/comprehensive). In this case you’d direct all the money you would have spent on a private secondary school education on saving for a home. In some cases this might mean your child starts life with a mortgage free home.
If you save £15,000/year (£1,250/month) from age 11 until age 21 (10 years of saving) and it grows at an average rate of 7%, how much money would your child have at 21? About £220,00 – increasing to £260,000 if the average return over that period is 10%.
This is not small money to most of us.
You could use every last cent on a private education when at the end of the day the thing that helps your child follow a life of fulfilment is being relatively debt free.
If you decide to go for a state education throughout and save £1,000/month (£12,000/year) from age 5 (when you are done with university saving) until age 21 (16 years of saving) and it grows at an average rate of 7%, how much money would your child have at 21? About £355,000 – increasing to £475,000 if the average return over that period is 10%, wow. Forget the children, you could be doing this for yourself!
If you have already made the decision to send your children to a private primary school and they are thriving, you are unlikely to reverse that decision. If I you are seeing these numbers before making a decision, you might well make a very different decision…
Not thinking about private education, anyway?
If private school is not a consideration for you, then the best choice might be to save as much as you can towards your own ISA allowance of £20,000/year (£40,000/year in a two parent home), in addition to whatever you save towards your pension (I recommend 10-15%) and when the time comes you can decide whether you can contribute towards university or a first home or both.
The best gift you can give your kids is possibly to be independent in old age so they don’t have to worry about taking care of you. You can boot strap them onto the property ladder by letting them live at home rent free – so that they can save more for their deposit. Even without cash gifts, you will be giving your children a competitive advantage by teaching them how to handle money at an early age.
Starting to invest
Next, you need to consider what platform to use for investing and what to investing in?
If you have any personal finance questions send them to [ME] – I will answer whatever piques my fancy via a blog post.
Greetings from Chengdu, China; I love your vlogs and I enjoyed watching your birthing story and recent vlog on how to make money. You are so inspiring and motivating. You inspire me. On the recent vlog you discouraged investing on the stock market. Why was that?
My husband and I have invested in properties in America and are looking at buying one in China since we will be here for the next four years. We have also been eyeing property in England.
My question for you is since we want to diversify our portfolio from real estate and land what do you recommend?
You have the cutest family and gorgeous son. My son is  months and has been keeping me very busy.
Looking forward to hearing from you when you have some free time.
Thank you so much for your lovely email. I really appreciate everything you say, it keeps me motivated and keeps me wanting to work. Children do keep you busy but they're so enriching :).
The first thing I thought when I received your email last week was, what on earth are you doing in Chengdu, China? (email me for privacy)
I am always super intrigued re. what black people do when they’re in Asia but not studying…I’d love to learn more about that. Anyhow, back to property.
Firstly, I hope you have made the very low investment in my property course, the price will go up soon so get in while it’s cheap!
This is how I think about investing in general.
Firstly, I am working towards a given gross rental income per month of £10,000 from a UK/Europe and US portfolio. We don’t currently have anything in Europe or the US but I’m eyeing both up.
After mortgages are paid off 90-95% of this will be pure profit.
I could easily reach this in the next three years if I include income from rents in Malawi but I discount that income because the country has a lot of political and economic instability and it’s possible that something could happen that completely erodes the rental income.
Based in this methodology, we’re roughly half way.
If you invest in China you might want to apply a discount too given they’re legal framework may not be as solid as that in the US or UK. That said, they are definitely much more stable than Malawi so invest away.
Keep in mind that investing in real estate in different areas and countries is also diversification.
There are four main reasons I find property so attractive:
1. Leverage magnifies returns
Just to give you an idea of what I mean.
The first property I bought cost me £16,500 including a 5% deposit of £12,500. Stamp duty of £2,500 (this is a UK property purchase tax) and about £1,500 in other costs.
That was 2006.
Fast forward 10 years and the current value of £550,000 meaning a £300,000 capital gain and a gross equity value of £400,000 including what’s been chipped off the mortgage.
No other £16,500 investment could have produced that kind of return for me.
Firstly, no one would have given me cheap leverage to invest in the stock market and secondly, the returns would have been rubbish – to use a technical term.
An investment tracking the FTSE100 would have me worse off; I’d have roughly the same £16,500 today eroded by 10 years of inflation.
An investment tracking the S&P500 would have given me £23,700 today, 16,500 x (2178/1516), this is good but certainly far from £400,000.
FTSE 100 from 2006 to 2016
S&P 500 from 2006 to 2016
2. Reduced saving burden
We don’t spend rental income. This means after interest has been paid off, every month, my tenants are effectively saving for my retirement on my behalf.
Currently, that’s about £2,000 worth of savings before tax. Very few investments can do that for you.
3. Easy release of value without impacting the investment
I remortgaged this property and took out £80,000 to invest in a business. This doesn’t affect the property’s value in any way and isn’t taxable because it’s a loan not a sale of equity.
If you sold some stock to get some money for another investment, firstly, you would have fewer shares so the overall value remaining would be lower and whatever you sold would potentially be subject to capital gains tax.
Even accounting for short-term falls in value, property is very stable.
Even if you don’t see an increase the value of your real estate investment you would still have the rental incomes.
Provided you invest were there is demand for rental properties by tourists, students or families, you have secured an income for yourself in 25-years’ time if not immediately.
Now, once I reach my target rental income of £10,000 what will I invest in?
STOCK MARKET & ANGEL INVESTING
I’d probably invest in start-ups or relatively new companies as well as the stock market.
A stock market purchase would always have to be an investment in a specific stock.
When I used to invest in the stock market that is what I did and it was quite time consuming but it felt less like gambling and more like investing:
I’d download data on the main stock indices from Bloomberg on 52-week highs, 52-week lows, P/E ratios and other vital stats to try and identify a company that was likely to do well.
I’d also think of industries that I thought were growth industries and look at new companies in the sector. For instance, I once invested in a solar company and an Asian company because Asia and renewable energy are both growth areas.
I sold my investment in the solar company (a German company called Phoenix Solar) when I tripled my money to £3,000. If I still had those shares they would be worth like £300 – the company is down badly.
I sold my shares in Citic Pacific (the Asian company) in 2011 just about recovering my money and if I’d held on for 10 years, my £1,000 investment would be worth £750 – 25% down.
Citic Pacific from 2000 to 2016
I made a great investment in Apple in 2006. I sold when I had tripled my money. If I’d held on to my Apple shares until it hit its peak my £1,000 would have reached a £15,000 in value – kaching! That said, if I still had the shares they would be worth about £10,000 today because Apple is down from its peak.
I actually didn’t lose much money investing in the stock market.
Citic Pacific and Yahoo were sold roughly were I bought them and Phoenix Solar and Apple were sold after tripling my money.
The only complete loss was a bank called Northern Rock. I bought £1,000 when the share price was crashing in the belief that the UK Government wouldn’t let it fail. I was right, the UK Government didn’t let them fail but all shareholders lost all their money.
Obviously, my opinions are coloured by my experience and although I have made more from stock investing than I have lost, I deem any investments in the stock market as 100% speculative.
It doesn’t matter what you or your investment manager believes – anything can happen. This is why I prefer to have a base of rental income from property before dabbling in the stock market.
Finally, I invest time and money in creating businesses. Whilst business is also speculative there are many low risk businesses that can bring a stable income.
For example, creating courses online doesn’t cost too much money and once you recover the investment it’s fairly easy to maintain a steady income from the investment.
With physical products you might invest more but if the investment fails you normally gain knowledge that will help a future business grow.
Business is by nature speculative but the upside is fairly unlimited and you have more control over that upside than you would with an investment in shares.
My personal strategy is to have the bulk of my retirement income coming from property so that’s what I focus my investments on.
In addition, I love writing, sharing knowledge and business in general so I pump lots of energy into these activities because I believe they produce a good return and even when they don’t, I thoroughly enjoy doing these activities.
I don’t find trying to pick stocks particularly fun over long periods of time and ultimately, currently market volatility makes the stock market very unattractive.
Thank you for you inspiring words. I started a handmade skin care business but it failed miserably. I gave it my best shot and wasted a lot of money. My question is do you think the beauty market is saturated and what tips would you give to start a successful business.
This is a great question, Denise, you’re not the first person to ask me this.
The truth is there are A LOT of skin (and hair) care products out there and a good majority of them have exactly the same ingredients so consumers find it difficult to distinguish good brands from rubbish brands. The result is that a buyer may continue to buy a product for many, many years although that product that doesn’t work particularly well for them.
The vast majority of supermarket skincare products are in fact owned by just two companies, Proctor & Gamble and Unliever; moreover, a good proportion of more upmarket skin and beauty brands are owned by L’Oreal and Estee Lauder.
This has certain repercussions for people who want to start a new brand:
Despite this there are some advantages for you:
Is the market saturated?
It is definitely saturated for “me too” products but it’s not saturated for products that come out with a great story and attempt to do something different.
To succeed today you need to find a very narrow niche, don’t try to be all things to all people and you need to do things a little differently to turn heads and make people consider switching products.
You cannot succeed with a product that’s dull and appears to be no different to existing brands.
So, how do you succeed?
A. Have a great story.
Do you know Levi Roots? He created a cooking sauce when there were thousands of sauces on supermarket aisles. He went on to Dragon’s Den (the equivalent of Shark Tank in the US) and nailed it with his pitch.
He wasn’t same-old, same-old.
He came on with his guitar, he was authentic – he didn’t attempt to change his Jamaican Patois and he charmed us all with his reggae-reggae sauce jingle.
After that interview you just thought, I want that guy’s product, that guy deserves to be rich…and rich he became.
B. Have fantastic branding.
People have more money nowadays so they’re willing to spend a bit more for something that looks amazing.
Middle class consumers care now, probably more than ever, about how they are perceived and they want to buy things that make them look wealthy and successful.
Poorly branded products have no chance.
C. Build your own audience, grass roots style.
Have you heard of Michelle Phan? She is a beauty vlogger on YouTube that’s spent hundred of hours producing beauty videos.
She grew such a large audience that L’Oreal paid her several million dollars to have her own brand of makeup products, Em. Ultimately that product line didn’t make the type of money L’Oreal hoped for, the suspicion is that the products were overpriced for the type of fans Michelle has (young and just starting out in life), but the brand is still around; it’s now owned by Michelle’s own company, Ipsy.
Building a big following means you can sell directly to a certain audience and although most beauty bloggers won’t get bought by the L’Oreals of this world, they have an opportunity to create their own brands, they have influence and can disrupt people (and industries) from their usual way of doing business.
What do you need to build a significant audience?
Time, lots of time to produce vlogs, blogs and incredible images for your social media pages.
I hope this answered your question, Denise.
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I enjoy helping people think through their personal finances and blog about that here. Join my personal finance community at The Money Spot™.