IWD2022: When it comes to money, there’s a cost to doing nothing

Mel Palmer

As the population continues to age and headlines like ‘Women retire worse off’ dominate the personal finance narrative, one thing is clear - we must take our financial futures into our own hands.

If we don’t, casually sipping Pina Coladas on a beach will be out of reach, nothing but a dream from decades before. In fact, five million females in the UK over the age of 50 think they won’t have enough to live on in retirement.

While we can’t solve the wage gap, the pension gap or the greater reliance placed on women for unpaid care work overnight, we can move forward by getting more people investing.

This is about making the money you do have work a hell of a lot harder.

The magic of investing

At current interest rates £10,000 saved today will be worth £10,511.40 in 10 years, if invested it could be worth £19,671.51 (assuming 7% annual interest rate), that’s a difference of over £9,000!!

This is why investing, not just saving, is critical to achieving the future you desire.

How to start building the future you want, now

Small, consistent habits

In Atomic Habits by James Clear, the evidence is clear; you are better off committing to small changes consistently, than going all in. This is the reason why gym usage spikes at the start of the year. But we all know that this resolve rarely lasts, no matter how much we try to convince ourselves differently every January…

In fact, the point he makes is that to build consistent habits it is better to go to the gym every day and do nothing to solidify the behaviour, than aim for hour-long sessions 5 days a week… and fail.

Applying this to our finances; wipe that big number from your brain that makes you feel like starting investing isn’t worthwhile. Instead, let’s just turn up.

Building your money habit: Technology is your best friend

We are in the digital age, use it to your advantage.

For example, set up a direct debit for payday to transfer however much you can spare into your investment account.

It doesn’t matter how small. Whether that’s £1, £10, £100. Start the habit. I promise you, once you get used to that amount going out each month, investing for the future becomes addictive and you will want to keep adding more and more and more…

Check out some automated investing options.

Turbo-charging your new habit: Don’t turn down free money

If you are employed and you get an employer match for your pension - use it. This is free money!

Use the tax wrappers available to you e.g. ISAs where the money you gain in interest is free from tax - yay!

Find out more about tax wrappers

Setting yourself up for success: Be honest

If you know you are terrible with money, make it hard to take the money out of your account. For example, don’t download the app! In fact do whatever you can do to create friction to make sure you keep building for your future.

Common objections to getting started investing

Objection 1: I don’t have enough. This is where the principle of just starting even with £1 is still a hugely positive step.

Objection 2: I don’t know how to invest. You don’t need to be a wall street aficionado to take advantage of investing. Find out more about automated investing here.

Objection 3: It’s not for me. Investing is for everyone, even if it doesn’t feel like it. Building wealth requires investing.

Don’t pay the price of doing nothing, the best time to start investing was yesterday, the second best time is now.

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