Work an extra five hours a week and make over £400k!

Here’s how you could become a lot richer by working just a handful more hours each week

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

One thing that most working people would like is an opportunity to be financially free in retirement. However, it may seem at times as though the cost of a mortgage, commuting, cars and other bills mount up to such an extent that it becomes almost impossible to save up for an enjoyable retirement. And with the retirement age constantly creeping upwards for both men and women, it sometimes feels as though retirement will be shorter and less abundant than many people had imagined – even a few years ago.

However, this may not be the case. There’s a way of generating an extra £400,000 over a working life by simply working five hours extra a week. Clearly, five hours may sound like a lot of work, but it represents just 14% of the standard 35-hour working week. And when the return over a 40-year period could be as much as £400,000, many people may feel that it’s well worth the extra effort.

Remember to invest

The figures depend on two assumptions that are relatively conservative. The first is that an individual is paid the minimum wage for those five hours of work. He/she is then taxed at the basic income tax rate of 20%, plus National Insurance contributions of 12%. The second assumption is that the amount earned is invested in the stock market and that it generates an annualised return of 9% over a period of 40 years.

Clearly, there’s scope for an individual to earn a higher pay rate than the minimum wage. However, the calculations show that anyone who’s willing to work an additional five hours a week in any job in the UK has the opportunity to be £400,000 richer when they retire.

In addition, there’s the potential for much higher returns from the stock market during the 40-year period. The 9% per annum return figure used is simply the annualised total return from the FTSE 100’s inception in 1984 to the present day. With the index having a yield of just under 4%, it seems to offer excellent value for money at the present time. This indicates that there could be higher returns in the long run, which would clearly cause the £400,000 figure to increase significantly.

FTSE 250

In fact, investing a portion of the amount earned each week into the FTSE 250 as opposed to the FTSE 100 could be a sound move. That’s because the FTSE 250 has delivered capital gains of 215% over the last 17 years, while the FTSE 100 has been flat. And with the FTSE 250 offering diversification benefits, it seems to be a sound long-term buy alongside the FTSE 100.

Of course, there are no guarantees that 9% per annum growth will be recorded and the £400,000 figure may not be achieved. However, by giving up just five hours per week, history tells us that it’s very much on the cards.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »