Investments do rise and do fall in value and we strongly advise that professional advice is taken before investing your money
Buy what you understand, understand what you buy, sounds easy, yeah?
It is said that about a quarter of the population have a holding in some sort of Crypto currency and have been caught up in the hype of bitcoin, some will be feeling a bit wheezy after it drops to less than half its value at the peak, and as an outside observer this feels like people are capitulating and giving up.
Let’s be fair the technology that drives bitcoin (blockchain) will be an important technology, but bitcoin as a store of value, well, who are you kidding, this is still early days and very much the Wild West.
Hopefully those that have been affected can lick their wounds until the next speculative ramp and maybe learn their lesson, life is cruel…
Lastly, a fool and his money are lucky to get together, protect your wealth and learn that only you can protect you, not all that glistens is gold.
I wanted to share a story with you so that you can protect yourself from falling into the same trap...
Having recently met with a lovely couple, it occurred to me that there seems to be a growing trend which I fear could be setting people up for financial failure. What seems to be happening is that the kids have grown-up, the husband is hard at work (or perhaps the wife) and the boss of the house is following their passion be it as a yoga teacher, artist, actor, you get the gist. This will typically produce only a minimum income but the thinking is that with less bills, hey it works.
It’s not long into the conversation that the one who is semi-retired says that their husband / wife also wants to retire sooner rather than later and then they are going to go on lots of holidays and live a great life.
At this stage I start to feel uncomfortable as there is so much excitement and why not, it’s the perfect life! So, why are you feeling uncomfortable you may ask?
Well, in our discussion they have told me how much they think things are going to cost and other than a few shekels the cupboard is bare. So, I ask "how are you going to finance this perfect life?" "Oh, we thought we could use our pension which has got £100k in it, so we need you to tell us how to invest it so we can retire!"
I hate to be the one to spoil the party but let’s just say if your heart's desire is to retire and live all those dreams don’t leave it too late - I am a financial planner not a magician!
Consider that it is from the age of 50 when you can bank more capital for your next phase of life’s journey as you are in peak earnings territory and one partner taking a lower paying role at that crucial point might sound great but will not be financially contributing to the next phase of financial freedom and this puts the long-term picture in jeopardy.
There are only four sure ways to accumulate money.
Firstly, you can steal, but may I suggest this is not a good move! As they say, easy come easy go, and you will always be looking over your shoulder trying to work out who's going to steal from you.
Secondly, you can wait to inherit. The only problem with this is you don't know when and if you are fortunate enough to have relatives with money, how much will be left? They may have to go into a care home at some stage which will quickly use up money and there could be equity release arrangements to pay back, so you may find there is not much left over after all.
Thirdly, you can simply work hard and save over your working life. This is the nearest that most will get to achieving a comfortable level of money and with careful planning and discipline, this is a good option.
Lastly, if you are a hard worker and willing to take a bit more 'risk', then being self-employed, a shareholder in a growing business or a business owner that’s delivering a valued service, is one step better than working hard for someone else as you get to keep the fruits of your labour if you manage your money wisely.
So, there you have it no real secret and your mum and dad where right after all!
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I recently found myself at a social event - I know, me, Mr unsociable! Anyway, I was chatting with a chap who is very passionate about his successful career. I suspect he does not know what I do and as I am the worst networker, I did not tell him.
The interesting point is that he asked how we fared through the pandemic and I replied politely and modestly that we fared better than most and I reciprocated the question knowing he runs his own business.
He said that he had only just about qualified for a bounce back loan which he was very pleased with himself to have secured, and then went on to explain that this gave him enough money to renovate his bathrooms, all three of them!
Clearly, this was an opportunity to access a large amount of money, and some might think "that was a cool move - smart guy", but on the other side some might think "the world is about to end, we don’t know how we are going to be affected financially, and will we be able to put food on the table - is he nuts?!"
You can probably guess where I sit with this but the point I want to make is that in order to escape the financial chains and oppression you need to plan and build your escape, adding to your oppression by borrowing money to get a short-term high is the road to failure…
We are happy to talk with people who at least want financial freedom even if they have not got all the tools at this time to succeed.
In order to become rich, you must start somewhere, ‘at the beginning’.
If you do not what to be a slave to the system, then you need to plan to buy your freedom so that you are no longer a slave.
The first thing you must do is ‘pay yourself’ and that needs to be around 10% of your income, what 10%? Yes, at least!
You must then live on the remainder, and you will surprise yourself because I bet you will not actually feel any real difference once you adjust.
As you progress through time your wallet will start to fill, but do not be tempted to spend what has been accumulated, if you do, then you will always be a slave and will fail.
Keep one eye on your heart’s desires of what your future will look like and the other eye on how to make this money start to work for you.
If you invest well your money will produce more money and this money will also in turn be working for you and your family's future. So, through the benefit of compounding returns your money accumulates faster.
So, now you know, there is no great secret, you simply need to spend less than you earn and invest wisely!
Remember, from small acorns do big oak trees grow.
We are all on a journey in life and if you think about it carefully.
What is it you want to achieve?
What are the memories you wish to create?
How do your cash, investments, and pensions support your goals and do you even have a financial plan?
You are destined to earn a set amount of money over your lifetime so the question is do you know how to use it wisely?
It is only when we face reality and put a plan in place that we can take control.
Having a sound plan helps us to avoid wasting our hard-earned money and make the most of what we have so that we can enjoy the things that make life great.
After all, life is not a dress rehearsal.
#money #investments #livingthedream
Well, there may be a good reason why this may be the case…
You are a smart cookie and you understand the value in being careful with the pennies so the pounds take care of themselves, right? Whilst this is an excellent discipline to have, you may be missing one part of the jigsaw.
Let me explain, if you know how much you will need to live your best life then you may find that you are in a better position than you thought and this could give you the confidence to loosen your purse strings and do more of what you love.
This is the power of a cashflow modelling - freedom!
Steven is a Fellow of the Personal Finance Society, whom is passionate about investing and getting the most from your money.
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