At The Fry Group our mission is to provide our clients with financial freedom. But what does financial freedom actually mean? David Pugh, our Chief Strategy and Commercial Officer, explores the concept.
Financial freedom will mean different things to different people. Some of you will be focused on paying off your mortgage, whilst saving for a comfortable retirement. Others will be working towards ensuring they have a handful of properties at their disposal, with the financial mobility to move between them as and when holidays allow, or retirement is reached. Those with goals can structure their finances around their desired outcomes, adjusting plans and savings accordingly to keep things realistic and achievable. Yet sadly many people still have inadequate pension funds, and have not considered what their own retirement looks like.
It’s clear when striving for financial freedom of any description, whether it’s working less, retiring early or travelling the world, the key is to maintain a long-term perspective and build in goals along the way. Ultimately the right approach is to start planning, even if it’s in a relatively small, manageable way to begin with.
With the concept of financial freedom in mind there are a few steps or levels which it can help to consider when planning how much to save:
Step 1 – Build savings
Financial freedom starts by ensuring you have a savings fund which you can access quickly and easily, as the need arises. This allows you to sensibly manage unexpected bills, such as household or car repairs, giving you breathing space that life won’t catch you out.
Step 2 – Reduce reliance on your salary
Many of us rely on our career to fund day-to-day living, and long-term savings. The ability to take a step away from your role, for a sabbatical, long holiday or some breathing space, can be a powerful feeling. Working to provide a financial cushion can be mentally empowering and in the short-term you can use any funds to help provide some support for step 1.
Step 3 – Enjoy life
A sense of freedom can usually be achieved by living in the moment. It’s important to balance long-term savings and investments with enjoying yourself. So consider what is important in terms of socialising or holidaying, whilst ensuring that your lifestyle doesn’t overly compromise your retirement goals.
Step 4 – Take some time out
In recent years the concept of a good work/life balance has become more important to many of us. Flexibility is essential in the quest for financial freedom; who wants to be a slave to money? Having time to spend with family, friends or to pursue your own hobbies and dreams is an important consideration.
Step 5 – Plan retirement
Planning for an early retirement is a phrase that many of us in the financial world hear repeatedly. For some, work is a means to an end and retiring cannot come soon enough! In this situation it’s useful to think about what your simplest form of retirement would look like. It may be that you could retire somewhere with a lower cost of living, or significantly change your lifestyle, in which case the retirement fund you need could be smaller. Other choices may offer some solutions too, such as settling for a smaller car or releasing the equity in your home by downsizing.
Step 6 – Retire well
It may be that you want to continue to maintain your existing lifestyle, home, car and spending potential. Understanding that this is your main driver, and working to accumulate the right pension pot to provide for it is an enormous win when retirement planning. It can take dedication and focus, but will ensure that you feel successful having reached your goal.
Step 7 – The perfect retirement
Considering the perfect retirement can be a true motivator. Without the pressures of work, you will have time to do the things you always wanted to do. Your list may include spending time with friends, travelling regularly, enjoying the finer things, exploring the world and enjoying particular hobbies. Thinking about what would make you really happy is important and can encourage you to work towards building a pension fund which supports your perfect life.
Step 8 – True financial freedom
Financial security, with more money available than you need, probably represents the highest echelon of financial freedom, and is usually reserved for those who have inherited funds or founded extremely successful companies. True financial freedom perhaps offers the opportunity to enjoy wealth, whilst never worrying it will run out!
These levels offer some insight into what matters to you when it comes to retirement, and how you want your life to look a few years or decades from now. They can help you begin to formulate plans and decide what’s most important in your own steps towards financial freedom, whether it’s the simple life or the opportunity to travel widely, a long career or a chance to escape the ties of a working role as early as possible.