Achieving Financial Independence
Tim Stalkartt
Managing Partner, Financial Planning at Evelyn Partners - Helping professionals, senior executives and their families achieve what matters to them
Financial independence is arguably the single most important financial objective for people, albeit our experience is that it is likely to be unarticulated and undefined. Having a good grasp of the concept and key factors is important in assuring the financial wellbeing of you and your family.
In this article we define the term, and consider some of the factors we assess when working with clients.
Financial independence is when you have accumulated sufficient funds to support your lifestyle for the rest of your life. If you continue to work, you do so because you want to, rather than because you have to.
It matters because you know what you are targeting; you know you can afford to stop earning (or not); and making future financial decisions becomes a whole lot easier with a clearly defined objective.
Whilst defining what we mean by financial independence is straightforward enough, what’s not so easy is knowing what the right level of capital is: what’s your number? To get to this magic number you will need to have a pretty good idea of what your future lifestyle looks like. If money was no object, how would you live your life? We then need to translate your ideal future lifestyle into a cost to run your future life.
With a strawman of what the future looks like, and desired timescales, plus a whole host of assumptions we can calculate the magic number. And with a target we create a strategy to get there. What return do you need on your investment, how much can you save, and what’s the most efficient way of investing. How do we minimise the taxman’s share. Life can bring unexpected and unwelcome challenges: protecting your family against the impact of ill health, or premature death are crucial elements of any plan, because it might just happen to you.
If you would like to talk to us about achieving financial independence please do get in touch. We plan to send you a series of short articles all focused on elements of achieving financial independence.
Is it time you got a plan?