Frustrating, isn’t it?
Hot weather, it’s holiday season and you’re stuck in the office wishing you were on the beach enjoying a Mr Whippy.
There is probably a very good reason you are in the office; your boss expects you to be or perhaps you are your own boss and your client is relying on you.
Perhaps you are due to be on the beach very soon and your mind is drifting off there already.
I’m not advocating you take leave of your responsibilities and bunk off early but what if you could go to the beach (or anywhere you wanted to), when you wanted to because you are financially independent?
How great would that be?
The problem is for many that point is further away than it should be.
Why, because they are ‘hitting and hoping’ with their financial planning.
There is no forethought, no planning for the future, simply going through the motions hoping everything will be OK.
There may be a pension plan in place but there is no strategy to it, no idea of whether it will be enough when they decide they’re done working and decide to retire.
So how can you make sure your life is a beach?
Follow these simple steps:
1. Start NOW. The sooner you start the easier it will be.
2. Give yourself a target to work towards. By what age would you like to be financially independent?
3. What is your current financial position? How much do you own and how much do you owe? If you still have debt you are not financially independent so how are you going to pay it off as quickly as possible?
4. What is your annual expenditure? Are you spending money on items that aren’t truly valuable to you where the savings could be used to fund your retirement lifestyle?
5. What do you want your retirement lifestyle to look like? What areas will you spend more on and where will there be reductions?
6. If you have a pension plan what is it projected to provide for you in retirement? Have a look at your last statement and it will give you a forecast. Not enough? Then you will need to find ways to build the fund up. This may be by making higher contributions, taking more investment risk or a combination of the two.
7. Do you have savings and investments? Is this money working hard enough for you? If all of your spare money is in a savings account you are probably forgoing the opportunity to get higher returns over the long term by not having some of it invested.
8. Take free money when it is offered to you. It’s there if you look for it, either via pensions (employer contributions, Government funded tax relief and tax free growth) or tax free savings and income within ISAs.
9. Work out what an appropriate degree of investment to take is. Too little and you miss the opportunity for a higher income in retirement, too much and you may suffer losses that you have to work longer to recoup.
10. Map out what your future wealth may be. By working out your net worth and disposable income and by making certain assumptions about the future you can forecast what your financial future may look like. This will help you determine whether you will have enough to be financially independent when you want to be (see point 2).
If the forecast suggests you are not on course you can decide what to prioritise; make changes now to bring forward your financial independence date or accept this to be at an older age to maintain your current lifestyle.
11. Keep your financial position under regular review to make sure you remain on track and can adapt to changes that occur.
12. Get expert advice. We would love to talk to you so do get in touch here.
Once you get to the beach just make sure you don’t get sand in your sandwiches (literally and metaphorically!).
