What you need to know about building financial freedom
How many times have you needed to pay something, and felt a knot in your stomach at the realisation you can’t afford it?
Maybe it was an unexpected bill.
Or your daughter asking for help with her wedding costs and house deposit.
Perhaps it was a family birthday meal at a restaurant costing more than you anticipated.
Whatever the reason, the weight pushing down on your shoulders is the same. The sudden stress that sends your mind racing as you frantically think about how you can cover the cost – until next time.
It can feel like a bottomless pit you can’t climb out of – the never-ending cycle of being unable to save because of the constant expenses, and difficulty paying the expenses because there’s no money saved.
Small changes create drastic results
Take a moment to picture what financial freedom would mean for you. Is it frequent holidays, leaving your job, not worrying about bills, or being able to donate to charities generously?
One of the most common mistakes people make with money is believing that for it to have a real difference in their life, there needs to be a lot of it.
Think about it this way: £100 is a substantial amount of money (especially when someone asks you to give it to them and you don’t have it!), but we often view £10 as insignificant. £10 here and there on lunch, cinema tickets, a DVD – all are insignificant costs individually, but spending £10 ten times sets you back £100.
Let’s repeat that: spending £10 ten times sets you back £100. Yet how often do we think about that when faced with the option of spending “just £10”?
Take it one step further: if you can save that £100 ten times, you have £1,000 sitting in your savings account, ready as a stress-blocker when you have to pay for something unexpected. Instead of the all too familiar panic when something needs repairing, you can smile and make a withdrawal from your savings.
This is the secret to building wealth: look after the pennies, and the pounds will look after themselves. Or look after the tens, and the thousands will take care of themselves…
You could be losing money without even realising
If financial freedom grows from small sums then you will need to keep as much of your money as possible, and let it work hard for you. You have the obvious low-hanging fruit to tackle, such as clearing debt or at least moving any credit card balance to a 0% card while you eradicate it, and seeing if you can get cheaper deals on your insurance products and telephone service.
But there are also the costs that we rarely think about. Unfortunately these are often the ones that have a massive effect on our wealth.
Ongoing fees are one example of this. If you are in an older pension, there is a good chance that it has higher fees than modern schemes, and it may have lower growth as well. This is a toxic combination.
In fact, reducing your fees by just 1% could mean an extra £25,000 in just 20 years!*
What would that much money mean to you? It might pay off your mortgage, clear student loans for a child or grandchild, or give you the opportunity to take the holiday of a lifetime. You would have the money and could spend it as you wish, rather than it boosting the bottom line of your pension provider.
This is why our clients are usually in a pension that has some of the lowest fees, so they can enjoy the rewards of their money working hard over the years.
Such a change is just one of the small adjustments you could make to get closer to living your life on your terms.
Each day that your pension is losing out to high fees or underperformance is a day that your wealth is being eroded.
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The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section: https://www.portafina.co.uk/whats-new
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