Don’t be a slave to money. Make money work hard for you and your goals!
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If you’re reading this, chances are, you’re engaged in your finances. You will no doubt be a hard worker, but are you working smart?
The goal for many of us is a free calendar that we can fill with what we choose and desire to do, rather than what our mortgage payments force us to do.
To achieve this goal, here are four steps that you can follow.
Chris Hewson, a Chartered Financial Planner at Medical & Dental (a division of Acumen Financial Planning), also talks about diversifying investments and its meaning.
4 simple steps to achieve financial independence
1. Spend less than you earn
It makes sense if the money you bring in on a regular basis is more than the money going out (which is trickier said than done currently). This way you’re able to live within your means while having enough money set aside for your financial goals.
2. Build an emergency fund
Start to build up your contingent funds, often referred to as an ‘emergency fund’. This is a level of easily accessible cash in case something unexpected pops up. As a minimum, this should cover three months of your expenses. More than this really comes down to personal preference.
3. Invest your money
You can start to invest any money you’ve built up that isn’t forecast to be needed for the next five years. Knowing what the money will be used for will help you determine how you will invest. Is it for a trip of a lifetime? Is it to fund a wedding or honeymoon? Is it to build up money for a deposit or to achieve financial independence so that you can look forward to life after work, with life being on your own terms? That will dictate whether products such as Individual Savings Account (ISA), Pension, Investment Account, or something else is most suitable to help you achieve your goals.
The important point is to get started. Compound interest is the eighth wonder of the world, according to Albert Einstein. So, the earlier you can start, the greater that snowball can grow and build up momentum.
4. Diversify your investments
Diversifying your investments – meaning ‘don’t put all your eggs in one basket,’ as they say. This is sage advice when it comes to your finances. With the current cost of living crisis, having different options at your disposal is always a good idea. Putting your money in different pots is also the simplest and easiest thing you can do to achieve long-term returns.
Don’t rely on luck when it comes to your finances
You never know what the future might hold, exciting or otherwise. No one knows whether the price of New Zealand wool will be a better performer than Swedish flat pack furniture over the time you’re invested. Everyone would love to be able to pick the next big company to invest in. But the reality is, even if you dedicate all your time to researching it, Lady Luck could knock you back down.
Our world continues to evolve and someone once said, ‘if you’re not agile; you’re fragile.’ Consistent incremental steps towards your goals may not feel like progress at the time. But they really start to add up. There will always be bumps in the road and diversions to the master plan that you have to adapt to. But you have the ability to manage this if you know the destination you’re aiming for.
Seek expert financial advice
If you are unsure where to start, seek qualified financial advice and work with someone that you trust, who will be with you through thick and thin and provide the expertise and objectivity you need to achieve your goals. Sticking to your plan with the right guidance can pay dividends (pun fully intended) over the long term. You are your own biggest strength, so surround yourself with people who help you raise your game and allow you to focus on the things you hold most important to you. Set your north star (your destination, your goals) and go out and get it with the help and guidance you need to keep you on track when life throws you its inevitable curveballs.
For more information on diversifying investments and its meaning, visit Medical & Dental’s website or email info@medicaldental.com
