How to achieve financial independence
This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincolnshire or other local offices.
Financial independence – sometimes called FIRE (Financial Independence, Retire Early) has become quite popular in recent years, especially amongst younger people who dream of a nomadic lifestyle travelling the world.
This is one version of the dream. Another version is to increase your financial “resilience” – making you less dependent on a salary to maintain your lifestyle, living paycheque to paycheque.
Here, financial independence starts to blend with financial protection. Below, our Grantham financial planners offer ideas to grow this version of financial freedom in your own life.
We hope this content is helpful. If you want to discuss your financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:
01476 855 585
info@casfin.co.uk
Learn how to regard money
Some people think that richer people have fewer money worries. In fact, the worries of the affluent are often simply different. For instance, some rich people lose sleep over trying to “keep up” with other, richer people.
One writer, Mr Gallagher, writes that he is a “multimillionaire” at age 72. Yet he confesses: “I still feel, to some extent, that I don’t have enough money.” Wealth brings freedom, but it can also create fear if a healthy relationship with money is not maintained.
Perhaps someone fears that money might “corrupt” them or make them indifferent to others’ sufferings. Maybe they worry that family wealth will spoil their children.
Fortunately, these issues can be addressed with strong financial education. For instance, suppose you worry that you might outlive your money. How realistic is that scenario, truly? With some good financial planning, the odds will almost certainly be low.
Maybe you grew up believing certain stereotypes in society – e.g. rich people only care about themselves. However, is that truly the case? Undeniably, many wealthy individuals have put a lot of money towards noble causes and lived very generously. Warren Buffet, for instance, has given away $46.1bn in his lifetime (his net worth is $115.6 bn).
Learning to control money, rather than letting it control you, is the core of any form of true financial independence. Pursuing financial education and finding a purpose (“What do I want this money to do?”) are two great ways to develop this in your own life.
Invest in yourself
A key component of the FIRE movement is to develop enough “passive” income streams that you no longer need to work and can simply live off your investments.
Another approach is to keep yourself nimble in the job market. If your employer or wider industry collapsed (e.g. due to technological change), would you be able to adapt and continue offering value elsewhere?
Investing in yourself is a great way to keep your career options open. In today’s digital world, this can be done very easily by finding online courses (many of which are free) and learning something new that you enjoy, and could possibly be paid for.
Financial advisers rightly emphasise the importance of diversifying your investments. Consider applying this principle not just to your wealth, but also to your skillset.
Learning is an integral part of being human. Even those in retirement – out of the job market – can still benefit from it.
Take some practical first steps
With these foundational principles now described, what can individuals do to grow financial independence?
A good starting point is to examine your balance of assets and liabilities. Too much of the latter (e.g. loans) can lead to excessive stress, repayment problems and other issues. It suggests you are living beyond your means.
Cutting spending and paying down debt can help to redress the balance. Another good principle is to build up 3-6 months’ worth of living costs in easy-access savings, for emergencies. This helps you avoid turning to credit if you suddenly lose your job.
Having a strong tax plan can also help. Perhaps you could keep more of your income and investment returns with some restructuring, working alongside a financial adviser?
Another good principle is to remember the long term, not just your immediate finances. In particular, what does retirement look like to you? Do you have a good plan in place? It might help to check your pension contributions and investment strategy with a financial adviser.
Learning self-discipline to live below your means will also work wonders. This gives you the power to say “no” to certain things and “yes” to those purchases which align with your goals, values and passions.
Paying off your mortgage early used to widely be seen as inferior to investing. Yet in 2023, following successive interest rate rises by the Bank of England, a stronger case can be made for overpaying a mortgage.
In some cases, doing this can help an individual access better mortgage deals in the future – saving on interest and possibly lowering monthly repayments (letting you keep more of your income).
A final thought is to consider your protection plan. What financial safeguards do you have if things go wrong? Income protection, critical illness cover, life insurance and private medical insurance are examples of some different options to explore with a financial adviser.
Conclusion & invitation
If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
01476 855 585
info@casfin.co.uk
