The Formula to Financial Freedom

This is the ultimate goal of any professional. To be stress-free and feel secure about their money and financial situation.

Unfortunately, life happens, and unforeseen expenses always pop up, eating away at our hard-earned savings and then, of course, there is the urge towards instant gratification that often sees people taking on debt or bad credit to get what they want.

What is Financial Freedom?

Financial freedom is having enough savings, investments and money to afford the lifestyle you desire. It means having enough income to cover your living expenses and being financially secure about retirement.

Nigel Green, CEO deVere, says that “financial freedom is the choice, to eat the food and not the price, to buy the car you want and not what you can afford.”

How to Achieve Financial Freedom

The earlier in life you start financial planning, the better off you will be both now and at retirement.

Analyse your Financial Situation – Meet with your financial advisor to analyse your financial state and know where you are in your financial journey.

Make a Good Financial Plan – Now that you know where you are in your journey, you can plan how to achieve your financial goals for the future and become financially independent.

Find Solutions – Look for solutions to help you achieve your goals. Whether it be to find opportunities to earn extra income, work more shifts, or increase your qualifications to get a better-paying job.

Be Effective – Use your time effectively to achieve your goals. You need to be proactive in your saving efforts, find good investment solutions, have your financial portfolio reviewed regularly and have the patience to let your investments grow over time and earn compound interest.

Develop Good Financial Habits from a Young Age – One of the most important things to keep you on track is to develop good financial habits. You need to, for example, follow a budget, save regularly, invest in retirement, don’t spend more than you earn, avoid credit, pay yourself first and then your bills etc.

An Example of Good Investing – What makes Warren Buffet so Successful as an Investor?

Berkshire Hathaway is up 17% this year and has averaged 20% p.a. for the last 50 years. How does he do it?

  • Choose Long-term Investments – He looks for potential and what will perform well in the future. He likes long-term investing, which is the key to building wealth and financial freedom over time.
  • Invests in Companies he Understands – He looks for good companies with good management. Companies and industries that he understands and is knowledgeable of. It is not ideal to invest in companies or sectors you are unfamiliar with.
  • Looks for Companies with a Moat – These companies have space for competitors to come in. Companies that are difficult to compete within the industry they thrive in, like Apple, Amazon, Google, Financial Institutes or even Big Energy companies.
  • Patience – He sees wealth building as long-term and doesn’t sell too early when markets become volatile. Long-term investing rides the ups and downs of the markets and smooths out volatility over time. He is a patient investor.
  • Diversifies his portfolio – One of the most important things to do to spread the risk of losses is diversification. Not carrying all your eggs in one basket means investing in a wide variety of asset classes, regions and sectors that do not correlate with each other. So if one industry, asset class or region performs poorly, it won’t affect the other investments negatively.

Financial freedom is possible if you have defined financial goals, know what you want, and make plans to achieve them. Slow and steady long-term investing and saving is the key to building wealth and developing good money management habits. If you are still determining how far you are from financial freedom or unsure if your income is enough, meet with a financial advisor to analyse where you are in your wealth-building journey and make plans to fulfil them.

The younger your age, the more chance you have of achieving financial freedom as you have time to save for retirement, pay off debt and bad credit and save wealth for the future.

Please note, the above is for educational purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.

* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.

Contact Us