Starting from scratch with investing can be challenging, especially if you don't know where to find the money to begin buying shares or funds. However, it is now easier than ever to set aside small amounts in an investment Isa or other account. Simple lifestyle changes can help you start building a portfolio without feeling overwhelmed. Thanks to the power of compounding over time, these small swaps can lead to a substantial portfolio over five or ten years.
To get started, consider opening a DIY stocks and shares Isa or pension with any online platform. Some allow you to invest from as little as £1 a month into low-cost funds suitable for beginners, such as global tracker funds. Then, implement any of the five changes below and deposit the money you save directly into these investments. After five years, you could have anywhere from £1,360 to £7,500 in your new stocks and shares Isa, depending on which changes you adopt. Do them all, and a few simple habit changes could net you more than £26,000.
Smart swap one: Netflix Premium to iPlayer and free trials
Monthly saving: £18.99 Portfolio after five years: £1,360
According to media regulator Ofcom, two-thirds of UK households subscribe to at least one of Netflix, Amazon Prime Video, or Disney+. You might not have noticed the increasing costs of your subscriptions or that you have ended up on the most expensive plan. Cancelling one streaming subscription and diverting that saved money into your investment account could be the start of a long-term investment plan. If you cancel Netflix Premium, for example, and put the £18.99 a month you save into your Isa, you will have around £1,360 after five years, assuming a seven per cent moderate rate of investment growth. Can't bear to lose a service? Downgrade both your premium Disney and Netflix subscriptions to the basic 'with ads' tier and save £22 a month into your investment account. Stick with it, and you will end up with £1,584 after five years if your portfolio grows by seven per cent.
Smart swap two: Three weekly coffees for a flask from home
Monthly saving: £60.45 Portfolio after five years: £4,304
A medium coffee at Starbucks costs around £4.95, so if you buy three a week, you spend £14.85 on caffeine. Buy an insulated flask for £20, and you can take hot coffee to work for about 30p per cup. By putting your savings into your investments as soon as you open your flask, you consciously reward yourself for sensible decision-making and give that money as long as possible to grow. After five years, at a seven per cent return, those three coffees a week could lead to a £4,304 portfolio.
Smart swap three: Premium phone contract for a cheap SIM-only deal
Monthly saving: £50 Portfolio after five years: £3,580
If you bundle the cost of a new handset with your phone contract, you are likely paying too much each month, especially if you are happy with your current phone. Contracts that include pricey handsets come in at around £55 a month, according to comparison sites like Uswitch. However, you can get a cheap SIM-only deal for £5 a month from budget providers like Lebara and Giffgaff. These providers usually include European roaming and use the same networks as bigger providers, so you won't lose out on coverage. Use your existing handset and put the £50 you save each month into investments, and you will have £3,580 after five years. Need a new handset every few years? Buy one on refurbished site Backmarket at £250 in year two and year four, and you will still have more than £3,000 saved compared to keeping your old deal.
Smart swap four: Weekly takeaway for a weekly fakeaway
Monthly saving: £130 Portfolio after five years: £9,352
Spending £45-50 on a weekly takeaway plus delivery is a reasonable treat for a family of four, but you could save money by swapping it for a supermarket meal box of Chinese or Indian favourites. You could save £130 every month by swapping the £45 takeaway for a £15 meal kit from Aldi. Put the £30 into your investments every week on 'Fakeaway Friday,' and you will soon see your balance climb. In three years at seven per cent, you would have £9,352 in your investment pot.
Smart swap five: Cycle in Zone 1-4 London commute three times a week
Monthly saving: £108 Portfolio after five years: £7,500
Get in the saddle and cycle to work three times a week instead of taking the Tube or train to boost both your portfolio and fitness. Put the price of two Zone 1-4 peak fares (£4.80) each day into your investment account, then subtract the cost of maintaining your bike. Even with a £200 budget on wear and tear and an early investment into waterproof cycle kit, a D-lock, and high-visibility lights, you would still end up with £7,488 after five years.
Stacking your habits
If you are willing to make all five life changes, you could amass a significant sum in just five years. Swap Netflix, your coffee, your phone contract, your commute, and your takeaways, and you could end up with more than £26,000. That is a figure many of us would find motivating every time we reach for the Deliveroo app or pass a Starbucks.
Savings at a glance
- Netflix Premium to free iPlayer and trials — £18.99 a month, £1,360 in five years
- Three weekly coffees for a flask from home — £60.45 a month, £4,304 in five years
- Premium phone contract to cheap SIM-only deal — £50 a month, £3,580 in five years
- Weekly restaurant takeaway to grocery fakeaway — £130 a month, £9,352 in five years
- Zone 1-4 TfL commute to 3x/week bicycle trip — £108 a month, £7,500 in five years
- TOTAL £367.44 a month, £26,096 in five years
