When building wealth, it is important to understand where you see yourself now and where you want to be in the future. Are you an aspiring millionaire or content with a comfortable lifestyle and a healthy retirement pot?
To one person, wealth may mean millions sitting in your bank account. For another, it could be a portfolio of property, a nest egg, or simply having enough money to no longer live paycheck to paycheck.
The key thing to understand is that regardless of your ambitions, it is important to focus on wealth growth. There are many ways to do it, no matter your income amount or appetite for risk.
Wealth growth and saving are effectively the same things. The only difference is that building your wealth seeks to generate income over a certain period. Fundamental wealth creation relies on financial planning and advice.
The simplified approach is:
1. Make money
2. Save money
3. Invest money
Although you may say, “it’s not that simple!”. And you’re right. Fundamentally, these are arguably the three (four) steps to follow. However, looking deeper into each step to give you the best opportunity to build your wealth responsibly is why GSB exists.
1. Make money
Unless you have been born into a privileged life in which you have enough money never to have to work, you have to make money before you can grow it. This could be your salary or your side hustle. As long as you’re making money, you’re on the right path to building your wealth.
2. Save money
If you make enough money to be financially stable, you should save your money in some capacity. Not only is it wise to have an emergency fund or nest egg for a rainy day or unexpected cost, but saving is also an excellent way to fulfil your short-term goals. Many believe saving is the hardest step in wealth growth, but rest assured that starting is the toughest part.
Monthly budgets are a brilliant way to manage your savings. By setting yourself a personal budget, you can make sure you have small sums of money to tuck away monthly. Regular small savings can become one huge pot over a long enough period… and that is before investing it!
3. Invest money
The initial mentality and habit phases to start your saving journey are difficult for some, and perhaps surprisingly, not many people ever get to this step. The reason for this may be the complexity of investing, with an industry full of jargon and terminology making investments feel unapproachable or inaccessible for many. The second reason is cost. Some believe that investing is too expensive for them or that you have to be super wealthy to invest. Which couldn’t be further from the truth.
Our wealth managers have made the investment journey as simple and digestible as possible for our clients. No matter your salary or investment knowledge, investing is accessible for everyone.
This is all thanks to the wonder of compounding. Compounding is what happens when you reinvest your profits so that that money can make profits of its own. The longer you do it, the more money you could make.
Lump sum investments
Any significant lump sum is worth investing in, allowing it to grow. We are here to guide you on how to invest your hard-earned money.
Think about your retirement
One option with a lump sum is to build on your retirement savings. Never think it’s too early to start building up your pension pot. You could build up a substantial retirement if you start investing as early as possible. This is simply because the earlier you invest, the longer your money has to grow. If you have already established a retirement pot, adding a substantial lump sum to your pot could significantly increase your retirement income in the long run.
Your best option may be a personal pension. You can then choose how much you want to contribute. Depending on where you reside, you receive tax relief on every contribution you make.
Many believe pensions are complicated, but they don’t have to be. With the help of our Wealth Partners, we can do the hard work for you, ensuring you get the best returns on your pension savings.
Consider diversifying your portfolio
There is always a risk when it comes to investing, although there are ways to lower this risk. However, if you invest your lump sum, you should always ensure you spread the risk by diversifying your portfolio. Diversification means spreading your investments so that your exposure to any type of asset is limited. This practice is designed to reduce the volatility of your portfolio over time.
Having a range of investments can be time-consuming, especially if you have a busy schedule. This is where we’re here to help. Our Wealth Partners can choose the right funds, designing your investment plan based on your risk attitude.
Never stop thinking long-term
It’s a good idea to stick with your investments for the long run when it comes to building your wealth. The longer the investment, the more likely it will generate positive returns.
Take an example, people who invested in the FTSE 100 between 1984 and 2020. Those who held their investments for any 10-year period have had an 89% gain – and this timeframe includes many market crashes, such as Black Monday in 1987 and the Global Financial Crisis in 2008-09.
In the long run, compounding can also dramatically increase your money. Investing for a few extra years could help determine whether your pot grows larger. In other words, your initial lump sum could build into a significant amount.
If you would like further no-obligation advice on wealth building and investing a sum of money, our advisors are here to help. You tell us how much you have to invest. Our team can then suggest an investment style which works best for you while meeting your desired outcome and appetite for risk. We’re here to do the rest of the hard work, allowing your hard-earned savings to flourish.
Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change. The value of investments and income from them may go down. You may not get back the original amount invested.
Ross Whatnall is CEO and co-founder of GSB and a highly experienced private client director. Ross holds many insurance and investment management qualifications, including CISI, CII, LIBF and CFA. He started his career in private banking with HSBC in the UK before moving to the UAE in 2013 to focus on serving his private clients.