How I’m Investing My Money In 2023

Maximising my income this financial year

Earlier this year I set some New Years resolutions. This included one on wealth and how I intend to improve my lot throughout this year.

Managing your money correctly is hard. It’s not really something I got to grips with until my 30s, but I’m rapidly trying to catch up and set a good foundation for the future — the mantra on it never being too late to start saving and investing has never been truer.

The purpose of this article is not to boast or dismiss the hardships or saving, but to share my own approach and hope it helps lift some of the veil on money for the everyday person who works a 9–5 and wants to manage their finances better. Some people will be ahead, some people will be behind, but it’s important to remember you’re only ever competing with yourself.

So here’s some of the ways I’m investing my money in 2023/24 to help prepare for the big moments in life.

Individual Savings Account (ISA)

Every tax year the UK government give each of us an opportunity to invest up to £20,000 into a tax-free ISA. The tax year runs from 6 April to 5 April. Essentially this means you can put up to £20,000 into an ISA each year, invest it or go for fixed savings returns, and never pay any tax on how much it earns no matter how long it is in the ISA over its lifetime.

I choose to use my tax-free ISA allowance each year as follows: £4,000 into a LISA (see below) and up to £16,000 into a stock and shares ISA.

I invest my ISA into the stock market using robo-investing via Wealthify. Robo-investing means an automatically managed fund where I put money in and it’s invested into a diverse mix of stocks and bonds which hopefully give me back more money than a savings account. It’s probably not the most efficient way for me to invest money, but I like being able to put money in each month and have someone else manage the portfolio without me having to do any work. You can invest as little as £1 and I’ve seen my portfolio grow steadily since I started. If you would like to take advantage of my referral code for Wealthify and bag yourself a free £50 use this link.

I’m not in a position to put the full £16,000 into an ISA each year, but I see it as a personal challenge to get as close as I can each year, knowing that the pot it provides will help me buy a house or get closer to being able to retire early. Watching this pot grow is a big incentive year on year but like many things I wish I had started investing using an ISA in my 20s.

Life Time Individual Savings Account (LISA)

LISAs are pretty new, and as far as I can tell, none of my friends or family take use of them. but it seems a bit of a no brainer to my beginners mind.

From the age of 18 onwards, you can put in up to £4,000 each year, until you’re 50. Each year the government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.

The Lifetime ISA limit of £4,000 counts towards your annual ISA limit. This is £20,000 for the 2023 to 2024 tax year.

You can hold cash or stocks and shares in your Lifetime ISA, or have a combination of both.

When you turn 50, you will not be able to pay into your Lifetime ISA or earn the 25% bonus. Your account will stay open and your savings will still earn interest or investment returns until you turn 60 when you can use the funds as you see fit.

I only started paying into mine aged 36. In simple terms I put the max £4,000 a year into my LISA, the government then add £1,000 meaning a total of £5,000 hits my LISA each year. I intend to input this amount until I’m 50. I invest my LISA into a Hargreaves & Landsdown account that tracks multiple funds, primarily the S&P500.

When everything matures, I am hoping this account yields a £280,000 pot aged 60 to help with my retirement. It’s worth noting if you’re married or in a couple, you can both have one of these accounts, meaning £8,000 in and £2,000 from the government each year.

Childrens Savings

Having children was a significant trigger for me to better plan ahead with my money and provide for their futures. I grew up in a house where there were no real savings or pots for me and my brothers, and it’s something I’ve always wanted to change for my own children if I can.

There are two main ways to save for children, a Junior ISA (up to £9,000 a year and managed in the same way as an ISA or LISA) or childrens savings accounts. I’ve opted for savings, as I would prefer to make sure any savings are wisely spend by the children at any point of their youth. The drawback of a JISA is that it can’t be spent before 18 years old, and on the kids 18th birthdays everything automatically transfers to them.

My wife and I both put a small regular amount into both kids savings accounts, as well as a small contribution from grandparents and birthdays/Christmas one offs. The interest returns are brilliant on a childrens account, and on top of savings, the eldest is making around £20 a month extra from the bank currently. It’s incredible how big a sum you end up with if you regularly save month on month, even in small increments.

We opened accounts for both children when they were born and intend to put into them until they are 18 — it should provide pots for them to cover their University fees (if required), help them start a business, fund travel and experiences or act as a small deposit for their first house. We haven’t told them about the money so hopefully it is a nice surprise when they are older.

Christmas Fund

About 4 years ago my wife and I realised we wanted to spend a bit more on Christmas (presents, food, travel, seasonal events) but didn’t want to feel guilty on our spend. We save £100 each a month giving us a pot of £2,400 for December. Saving ahead is a fantastic way to amount a pot for spending, meaning we can enjoy the entire month of December guilt free. If we have anything left over each year, we choose to put it into holidays or paying off a bit extra on our mortgage. I’d recommend this approach for any big ticket items to help stop reward and downtime being stressful or a burden.

Mortgage

My biggest financial success is undoubtably my house. I fully expect to trade up houses over the next 30 years to significantly upgrade my overall worth. The question I have right now is to over pay or not overpay month on month against my mortgage. It’s worth nothing the benefits of overpaying a mortgage, the compound savings against interest nearly always beats the returns possible by putting money into savings. We choose to pay a little extra each month on our fixed rate mortgage. We luckily fixed for 5 years before the huge rise in interest for UK mortgages in 2022, so right now our mortgage is very manageable.

In the past our overpayments have made our monthly repayments significantly cheaper when fixing our interest. An ambition is to pay off our mortgage to save even more each month and be in a position to consider moving house in the next 2 years.

Rainy Day: £5,000 high interest

One of the benefits of a looming global recession and rising inflation is the offer from highstreet banks on high interest accounts. I recently took out a “Rainy Day” account with my bank which offers a 5.12% annual return on balances up to £5,000. This means at a maximum I can be recouping up to £256 a year (£21.33 a month) simply for keeping those funds in the bank. Not to be sniffed at. I plan to grow my input to this account this year to end with around £5,000 all in. This will allow me to earn good savings this year, but also have it as a lump sum fund to put into any other high interest accounts in 2024 if required.

Savings Buffer: £10,000 safe and accessible

There is plenty of advice out there on how much you should have in savings by any particular age. In truth I’ve always ignored this, and largely haven’t ever had a period where I have a lump sum sitting in an account for emergency use or as a buffer. My aim is to end the year with £10,000 in savings for emergencies. To some that is a lot, to others it’s too small. For me it represents a healthy buffer to use if something significant breaks, or if a good opportunity arises. I won’t invest this money or lock it into any high return savings. It’s simply a static fund for mitigating hard times. Once I’ve saved this much, I hope the ritual of saving each month will stick and once I reach £10,000 I will simply have extra money each month to put elsewhere.

General Principles

Underpinning my endeavours this year is a kind approach to not being too hard on myself if I don’t achieve it all. Some of my investments will not grow as much as I’d like due to global recessions, and some emergency unforeseen costs will no doubt occur. There will also just be some months where we need to spend more or save a bit less — and that’s ok.

I write the above as an ambition knowing that even £1 saved is better than none at all. So far I’m well on track on all my financial goals after 4 months of the year, so long may that continue.

If you have any advice to share we me, or anything that’s turned out well (or not) for you, let me know in the comments — I’m always keen to learn and grow and hear real stories from real readers.

Thanks for reading! Please take note the financial advice above is simply my own views and experience. I hope it helps you look at your own options.

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