What’s your story?
I’m 26, and I’ve lived in London my entire life. I come from a middle class background, and currently work as a web developer for a major retail brokerage in central London.
Investing became an interest of mine towards the end of university. I was driven to do it after saving £7,000 ($9,000) from a year long internship and only receiving an interest rate of 0.25%. I was fortunate to discover the power of compounding, and realized significant wealth can be achieved if I started investing.
Since then, it’s become a hobby of mine (and has transferred over to my profession because I now work in the finance industry). Recently I surpassed £100,000 ($130,000), which is 10% of my £1 million goal, and I hope to achieve that by my mid- to late-30s.
What’s been your experience with money?
I don’t consider myself to be extremely frugal, but as a kid I was fairly good at saving whenever I wanted to buy something. During my early teens one of my interests was filming, and it took me three years and a lot of persistence to save up £370 ($482) for a DVR camcorder.
These days, I’m mindful of the adage “assets not liabilities” that I picked up from Rich Dad Poor Dad, and so I’ve kept my spending level as my salary has gradually increased. For example, I’m currently typing this on an eight-year-old MacBook Pro that was a gift on my 18th birthday.
I’m lucky to have a family I get along with too, because I currently live with my parents and that helps keep my spending down. (Right now, I don’t need an entire place to myself or a car as London has a good transport system.)
As far as investing, it didn’t occur to me how much of an effect stock market fluctuations would have on me. When I started back in 2012, it made me realize how emotionally attached I was to my money. But persistent investing has helped to fix that as I have to deal with the constant fluctuations in my portfolio, and accept it as part of being an investor.
How much do you spend and save?
My employer covers healthcare, so a month typically looks like this:
Rent and living costs: £250.00
Travel costs: £224.50
Subscriptions like Netflix: £12.83
Dental care: £12.50
Cell phone: £5.00
Take out and snacks: £25.00
Total: £549.83 ($716.73)
This gives me a take-home savings rate of 82%, and I invest that in the market.
How are you planning to generate passive income?
When I reach my goal of £1 million, my plan is to switch a large percentage of my investments to peer-to-peer lending and S&P 500 index funds, and then live off the interest and dividend payments. I’d like to not withdraw anything more than the interest gained each year.
A small percentage of my money is currently invested in peer-to-peer lending. I like the weekly interest payments I receive from the borrowers, and the fact that my money is spread out across many small businesses in small amounts to help mitigate risk.
The majority of my stock holdings are held in tax efficient accounts available to UK residents (ISA, spread bet, and SIPP accounts). The UK has recently made the Innovative Finance ISA available which is a tax free wrapper (currently up to £15,240) for peer-to-peer loans, so I hope to be able to leverage this for tax free income in the future.
Any tools you use?
I use Finviz.com, Google Finance, and The Financial Times to research stocks, I use TradingView for technical analysis, and I often visit forums and pay attention to what people are talking about (with a large grain of salt).
Google Sheets comes in handy for keeping track of my portfolio, budgeting, and general decision making regarding cost effective approaches on large purchases. And I keep track of my credit score using ClearScore.
What challenges have you experienced?
Lifestyle creep has been tough. I compare myself to friends buying that new car or property, or going on some lavish holiday, so I have to constantly ask myself whether I really need those things.
I realize I’m not going to live with my parents forever, so for the past six months I’ve been putting some money aside for a deposit on a small property. That will be a challenge because of the high housing prices around London.
Lastly, having the resilience to withstand market corrections and not panic and sell. I normally handle this by reminding myself that my investments are all long term, and it’s always better to be in the market than not at all.
During significant market moves, I found it’s best not to check my portfolio. A good example of this was when the UK decided to leave the EU. I hold 50% UK stocks, so I refrained from checking my portfolio for a month. When I finally did it was actually up 8%.
What mistakes have you made?
Seeing the opportunity to invest in the market in 2009, and not taking action. I remember the moment when BBC News was reporting Barclays at record lows, but I didn’t know how to invest (it turns out to be easier than I thought).
Another is identifying if the financial media has overhyped a company or an industry. An example of this is the 3D printing industry. I consider it to have a promising future, but it’s not quite ready. So, I’ve adopted Chris’s approach of handling these positions by only adding additional capital to the position if the company proves to be profitable. Positions that have failed to present consistent profit aren’t allocated any more capital, and as a result they become a smaller percentage of the portfolio over time.
What money advice would you give your 22-year-old self?
Don’t spend too much money on your hobby related projects because you enjoy the build more than anything.
And for fun, what item, for $100 or less, had the biggest impact on your quality of life?
My subscription to Netflix!
Chris’s Main Takeaways:
1. Set a financial goal, and then be persistent. Whether it was his goal to save up £370 to buy a camcorder, or now to save up £1 million, I love that Richard sets a goal and then works towards it. Success doesn’t happen overnight. It happens when you’re persistent, and Richard is persistent.
2. Money is something to be leveraged. Wealthy people know that you don’t spend all the money that you earn, some is to be leveraged. Spend on the things that really matter to you, invest the rest, and ignore what everyone else is doing.
3. The most important thing is to start. I say that all the time, but if you start investing now and build the habit, you’ll be ahead of all the people who will never do anything.