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Background

I am 30 years old with no financial education growing up. I live in Yorkshire UK. Up to the point where I got married, I was very careless with money (money spent on electronics). I got married, and suddenly I was very responsible, now I have a baby daughter, I am even more responsible.

I work as a software developer making £48K a year.

Issue

I read the Richest Man in Babylon and loved it. I wish Mum and Dad had taught me those things, but it turns out, they themselves weren't taught. Anyways, in the book, the author talks about making your money work for you.

After my budgeted expenses, I have about £150 left. How can I make those £150 "slave away" (words of the author) to make me more money?

In this day and age, I am not friends with any Sheild makers who buy copper/bronze from distant lands (from the book).

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    Do you have consumer debt? Step 1 get out of consumer debt. Budget better and find more than 150 left over in your budget. – Pete B. Aug 31 '17 at 13:49
  • Found the meaning. I have debt with Aunt and Mum, and I'm already setting aside money and paying them back each month. – J86 Aug 31 '17 at 13:50
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    At £150 saved per month, you would be better off by taking control of your budget [any expenses you can limit? income you can increase?] before focusing on investing. Save up an emergency fund [covering at least 3-6 months of expenses] if you haven't already. At this stage, the best thing you can invest in is yourself - are you on the best career path you can achieve while being happy? ex: could you increase your salary significantly if you spent a few years taking night courses in your field, or another field open to you? – Grade 'Eh' Bacon Aug 31 '17 at 14:45
  • @Grade'Eh'Bacon are you saying £48K is low for a .NET Developer? If not £150, what should the number be before I start thinking about investing? – J86 Aug 31 '17 at 14:48
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    @Ciwan I have no idea what a good salary should be for your career path / location. However, at this stage (your early 30's) I think for most individuals it is true that the best way to increase their wealth is to increase their employment earnings. £150 is nothing to sneeze at, and if you have all your other financial ducks in a row (no high interest debt, your career is on a good track, your spending habits are good, you have your financial goals lined up [property ownership if you want it, etc.]), then you should definitely look into investing. But first, you may have other priorities. – Grade 'Eh' Bacon Aug 31 '17 at 14:58
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First of all, never is too late to develop good habits. So, you know what you want to do and you are going about the how now...

First, you should pay off any consumer debt except from mortgage which should be planned for. Prioritize your consumer debt (credit cards, consumer loans, etc) according to the interest rates, starting with the one with the highest interest and going to the one with the lowest one. Because you should make quite the investments to pay off this interest debt and still make a profit.

Second, you should start saving some money. The 10% rule of thumb is a good one and for starters having aside the money you need to get by for at least 3 months is quite okay. As they say, cash is king.

Now, that you actually realize the amount you can spare each month to start investing (assuming you had to do something of the aforementioned) it's time to see the risk you are comfortable taking. Different risk-taking views lead to different investing routes. So, assuming once again that you are risk averse (having a newborn baby and all) and that you want something more than just a savings account, you can start looking for things that don't require much attention (even more so if you are going on you own about it) such as low risk mutual funds, ETF (Exchange Traded Funds) and index funds to track indexes like FTSE and S&P500 (you could get an average annual return of 10-12%, just google "top safe etfs" for example and you could take a quick look at credible sites like forbes etc). Also, you can take a look at fixed income options such as government bonds. Last but not least, you can always get your pick at some value companies stocks (usually big companies that have proven track record, check warren buffet on this). You should look for stocks that pay dividends since you are in for the long run and not just to make a quick buck.

I hope I helped a bit and as always be cautious about investing since they have some inherent risks. If you don't feel comfortable with making your own investment choices you should contact a specialist like a financial planner or advisor. No matter what the case may be on this, you should still educate yourself on this... just to get a grasp on this.

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In addition to the other excellent answers here, check out Mr. Money Mustache's site, it's based in the US but the basics still hold here in the UK. Another great site is the Monevator which is UK based and gives some great information on passive investing. Well done on getting to this point at your age - you've got plenty of time for the miracle of compound interest to work for you.

EDIT:

Once you have any existing debts paid off, take a look at passive/index investing. This could be a good way to make your £150 work for you by capturing the gains of the stock market. Invest it long-term (buy and hold) to make the most of the compound interested effect and over time that money will become something substantial - especially if you can increase payments over time as your income increases. You could also look at reducing your outgoings as recommended on the Mustache site linked above so you can increase your monthly investment amount.

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Thats a very open question, Depends on the risk you are willing to take with the money, or the length of time you are willing sit on it, or if you have a specific goal like buying a house.

Some banks offer high(ish) rate savings accounts http://www.bankaccountsavings.co.uk/calculator with a switching bonus that could be a good start. (combining the nationwide flexdirect and regular saver)

if you want something more long term - safe option is bonds, medium risk option is Index funds (kind of covers all 3 risks really), risky option is Stocks & shares. For these probably a S&S ISA for a tax efficient option.

Also LISA or HtB ISA are worth considering if you want to buy a house in the future.

protected by Chris W. Rea Nov 8 '17 at 17:20

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