Hopefully you have understood by now what we are about here at the The DIY Income Investor, now let's get to the interesting stuff - building up your Income Pyramid.
Level 1 was the sound foundation of no debt and paying off your mortgage - discussed here (and no easy task, either).
Level 2 is setting up an 'Easy Access' bank current/checking account. This account should have the following features (if you can find them all in one account):
- online - so that you can automate your bill-paying and top up your other savings and investments by remote control (from your home or work computer)
- easy withdrawal of your money, when you need it
- debit/credit card, so you can save money by buying online bargains (when you have to - but always question whether you need to spend the money in the first place) and always pay off the credit card each month
- good rate of interest on your money
You should NOT be interested in:
- paying anything for the account, if you can avoid it (for example, some accounts are bundled with extras, like travel insurance)
- the overdraft rates - as you will not have any need to go overdrawn - right?
You may have more than one account - for example:
- a core current/checking account (from where you control most of your savings and investment)
- a supplementary 'easy access' account that you use to build up you 'security blanket' of readily-available cash (at a higher rate of interest), before moving on to more adventurous ways of generating income
You should check the MoneySavingExpert's recommendations on bank accounts and MoneySupermarket.com's easy access accounts.
My current favorite UK current account is Lloyds TSB and their Classic Account with Vantage, which pays up to 4% interest on sums up to £7,000, which is pretty unbeatable for a current account easy-access account. You need to pay in at least £1000 per month, though.
My current pick for an 'easy access' account (made some time ago, so not now the market leader) is ING Direct, paying 2.8% interest - but only for a year (when I'll be finding a new home for the money!)
The Rest of the Pyramid
While you are getting Level 2 of the Income Pyramid sorted out, you will have time to make yourself familiar with the higher levels to come:
- Level 3 targets fixed-rate bank accounts or 'savings bonds' as they are called in the UK
- Level 4 deals with Exchange Traded Funds, held within an online brokerage account
- Level 5 covers government bonds (or 'gilts' as they are known in the UK)
- Level 6 tackles asssembling a portfolio of high-yield dividend shares
- Level 7 targets corporate bonds
I am not a financial advisor and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.
