The high cost of living means it’s sometimes hard to find cash to invest in a savings account, in UK shares, or anything else. It’s particularly difficult to generate surplus cash right now as inflation rises at its fastest pace for 40 years.
That said, I’ve budgeted to make sure I have enough cash to keep building my stocks portfolio in line with my investment goals. And the good news is that, even if things get really tough, I won’t have to spend a fortune in order to keep growing my long-term wealth.
I’ll get onto how I can achieve this shortly. But firstly let me explain why investors need to try and do whatever it takes to safeguard their financial future.
Gloomy predictions
I don’t want to come over all doom and gloom. But I’m worried about how I’ll be able to fund my retirement in an uncertain future.
The Office for Budget Responsibility said last week that “the pressures of an ageing population on spending, and the loss of existing motoring taxes in a decarbonising economy, leaves public debt on an unsustainable path in the long term.”
Speaking as someone who aims to retire in around 30 years, this raises some serious concerns. For example, will the age at which I can claim the State Pension have risen well into the 70s by the time I’m eligible? What will be the size of the pension once I’m able to claim? Will I still be able to receive other financial assistance?
Investing in UK shares
To be honest, my concerns over the future of the State Pension — and of my financial health in general when I come to retire — are nothing new. I’ve been building a portfolio of UK shares for years in order to have a nest egg for retirement.
The good news is that even individuals without savings have time to build a decent pot of cash for old age. And as I said earlier, investors don’t have to break the bank to build a winning portfolio either.
£362,893!
That’s the beauty of buying UK shares. The average annual return for a long-term investor here sits around the 8% level. This makes stock investing one of the most effective ways to build wealth.
Let’s say that I can only spare £10 to invest a day. That works out on average £304.17 a month, or £3,650 over the course of a year.
Now let’s say I’m 40 with no savings or investments. By the time I reach 68 — my current State Pension age — I could have made around £362,893 through regular share investing.
Building long-term wealth
That’s based on investing that £304.17 each month, assuming an 8% annual long-term return and that all dividends are reinvested. That final point is important. It enables share investors to turbocharge their wealth, thanks to the miracle of compounding.
It’s important to note that making a big return through stock investing isn’t guaranteed. Stock markets can go down as well as up, of course.
But history shows that investing in UK shares has the potential not just to survive in old age. I might be able to build a big fund that lets me retire in comfort.
