My guess is that many individuals would like to get rich, retire early, and beat the income from the State Pension.
Others may simply wish to get rich and beat the State Pension without retiring early. And some may be content with merely beating the income from the State provision.
But I doubt there are many who wish to remain poor, retire late, and live within the means that a State Pension provides in their golden years! After all, the current rate for the full State Pension is just £185.15 per week. I’d find it very difficult to make ends meet on as little money as that. And the problem is being made worse with the current cost-of-living crisis.
Any gains are better than just the State Pension
So, it makes sense to think about generating extra funds — and starting the process early on in a working lifetime. However, it’s never too late to begin because anything extra is better than nothing in retirement. But why stop at that? So, I’m aiming, as I said, at getting rich, retiring early and beating the State Pension.
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Meanwhile, I’m following a simple three-step plan aimed at achieving my financial goals. The first step is to save money every month before spending my income on anything else. So, before paying any of the household bills, the holiday expenses or buying something new, I make sure my regular savings leave my current account to go towards financing my financial dream.
The second step is to focus on the process of compounding. For example, compound interest happens in an interest-paying cash savings account. It just means the interest is retained in the account as extra capital to earn even more interest further on.
That process may sound uncomplicated, but it’s key to building wealth. However, because cash savings accounts pay such low interest rates, the compounding process will take too long. And the value of my money would likely lag the ravaging effects of inflation. So…
Seeking higher annual returns from stocks and shares
Step three is to find a higher rate of annual return. It’s amazing what a huge difference compounding, say, 7% a year makes compared to 1% a year. For example, if I saved £1,000 and compounded annual gains of 1% for 10 years I’d end up with around £1,105. But increasing that annual rate of return to 7% leads to a sum of just over £1,967.
And I’m aiming to achieve higher annual returns by investing in stocks and shares. Gains can come from share prices moving higher and from dividend income. But, of course, there’s no certainty of a positive investment outcome. I may not get rich, retire early, and beat the State Pension. After all, businesses can run into operational problems and stocks can fluctuate up and down. Indeed, all shares carry risks as well as positive potential.
But returns from the stock market, in general, have a good record of outperforming other classes of assets over the long haul. So, I’m embracing the uncertainties with the aim of capturing the long-term potential of stocks and shares. And I’ll keep trying!
