How investors can make a passive income with just £7 a day!

Investing in UK shares can be a great way to create long-term passive income. At FTSE 100 itself packed with mature, cash-generating companies that pay big dividends. There are stacks of top income stocks to buy more London Stock Exchange index, too.

The good news is that investors don’t need to spend money to create life-changing wealth. Let me show you how.

Build wealth with just £7

Most people do not have large sums to invest in UK stocks. Money is tighter now as inflation remains near a 40-year high.

But that’s okay. For the cost of a couple of Starbucks coffee every day I can put myself on the road to financial comfort.

For example, I can set aside £7 a day to invest. During the month that adds up to £212.91. After a year, I will have £2,555 sitting in the bank.

Now let’s assume I use this to buy income stocks with a 5% dividend yield. If the brokers dividend forecast proves correct that would make a passive income of £127.75 a year.

Big return long-term

This is clearly not an amount that will change my standard of living. But the most successful investors are those who take a long-term approach, as billionaire stock guru Warren Buffett will attest.

If I continue to invest that £7 a day, I can turn that passive income from £127.75 in year one to more than £1,277 by year 10. If I keep going up I can finally make a second annual income above £3,832 per year. 30. After thirty years, I too will build a very good portfolio of stocks!

2 FTSE 100 stocks on my watch list

Of course I could get better returns if I could find a dividend stock with a yield above 5%. Here are two high-yielding FTSE 100 shares I am considering buying for my own portfolio in 2023.

The Vodafone Group

Telecommunications business Vodafone has a long track record of paying market-beating dividends. And for this financial year, the company generated 8.7% dividend.

Vodafone is able to pay huge dividends because of its incredible cash flow. It can also pay above-average pay thanks to defensive operations.

Demand for mobile phones and broadband remains stable at all points in the economic cycle. This means that the company has enough profits to reward healthy shareholders.

I would buy Vodafone shares despite the threat of huge competition.

The Phoenix Group

Fellow FTSE 100 shares The Phoenix Group Meanwhile, it yields an impressive 8.4% dividend. This is another company whose daily operations generate a lot of money. It buys insurance policies from other financial service providers and runs them to completion.

I like Phoenix Group because of the great brand strength of the Standard Life division. Additionally, I believe demand for insurance and pension products could increase as the UK’s elderly population continues to grow.

A lack of decent acquisitions can damage earnings growth. But on balance I think Phoenix shows great dividends for long-term passive income.