Reaping the rewards of financial responsibility

Financial responsibility refers to the ability and commitment to manage one’s finances effectively and prudently. It involves making informed decisions about earning, spending, saving, investing, and managing debt to ensure long-term financial stability and well-being. Being financially responsible means understanding the implications of financial choices and acting in a way that aligns with one’s financial goals, obligations, and ethical standards.

Today I wanted to share Helen's story because if you are in your twenties or thirties and want a little window into what your future might look like, then this story will share some great insights.

I am always talking about taking financial responsibility as early in life as possible as I have found so many people, especially women just don't do this.

Helen started saving in her piggy bank from a young child and from such beginnings developed a mindset that allowed Helen to retire at 55.

Her story is an excellent example to all women.

Being in control of your money

Being in control of your finances, living within your means and having clear financial goals provides true financial security and leads on to a very comfortable retirement.

Helen’s parents ensured she did not get the things she wanted without working for them. Helen went to Newcastle University to study Naval Architecture (engineering for shipbuilding), a subject dominated by men. But this was a girl who had been allowed to feel secure in doing things others wouldn’t necessarily do and the environment supported and welcomed her.

She came out with a 2:1 degree and met the man she married. Working in a male-dominated environment After university Helen searched for a role in the shipping industry. Unfortunately, unlike university, she found the male-dominated industry was very uncomfortable with the idea of a woman being equal. Fighting this sexist work environment was not for her. Friends were going into accountancy, the profession her father had been in for years. At that time, attitude was more important for the big accountancy firms than a degree in a specific discipline. It made absolute sense to follow in her father’s footsteps.

A big life change In their 20s the couple led a good life in London. Helen was getting plenty of training in her chosen field, and with two good incomes and no children, they were free to socialise and travel. As the couple approached their 30s, it became apparent they were on different paths. They drifted apart and divorced.

Divorce

This was Helen’s first real challenge in making longer-term financial decisions. In splitting their financial assets including property, they had to take into consideration that Helen’s husband had not paid into a pension, whilst she had contributed to her defined benefit company pension scheme as soon as she began working. As a result, they had to agree an amount of money to compensate him for his lack of pension contributions as well as trying to balance the difference in their earnings. Both bought other properties and went their separate ways.

Reevaluating financial goals

As she readjusted to a single life, Helen realised she was spending money needlessly. She reviewed her situation and decided there were better things she could do with her money.

Helen explained: “I was overspending on frivolous things. I started to think that overpaying the mortgage made more sense. Then I increased my pension contributions. I was lucky to get a job at a large US firm with a defined benefit pension scheme. That was rare by then but very cool! Every time I received a pay rise, I increased contributions towards my pension.”

When she turned 40, Helen’s thoughts focused on retirement. She had never considered when she would like to stop working. After consideration, she thought 52 was an ideal age?– young enough to still take on the physical challenges she enjoyed. The goal had been set, but things changed again when she decided to leave London.

Taking advice from a financial advisor In her mid-40s, Helen decided she’d had enough of living in the capital. So, she had to decide: did she keep the London property and rent it out, or sell it? She decided to sell.

Helen moved north, which is where we met. I began working with Helen to help her optimise her pensions and savings as she approached her 50s.

We regularly reviewed how money is apportioned to mortgage overpayments, her pension pot and ISAs. Not surprisingly, Helen has kept her defined benefit scheme pensions, given the incomes they are projected to produce.

I helped her consolidate her other pensions into one pot. And following this approach so assiduously has allowed her to achieve one of her key goals. In June? 2022, Helen quit work. She had good pensions and money saved in ISAs. Helen is enjoying life at a time when many are still thinking about another decade in employment. And she is working, although it feels like a hobby.

Helen is a keen gardener, so a local elderly couple asked her to look after their garden. Their niece followed suit. Now she is earning a reasonable income doing something she loves while having access to savings, using her pensions to absorb her annual tax personal allowance, and having the security of defined pension schemes to draw down in years to come. Life is good.

The bucket list!

Helen is looking forward to an active and fulfilling retirement. Aside from her gardening, Helen is learning tennis and French and is a keen traveller, boosted by visiting friends across Britain and Europe. But she is not leaving her retirement to chance. Helen is a planner and organiser and wrote down everything she wanted to do. The bucket list was organised into activities that required her to be physically fit, ones that needed more money than others and so on. She then broke them down into the short, medium and long term.

Planning your goals is an excellent way of achieving them. Helen has done that with her finances and will undoubtedly do so with her retirement dreams. She says of her objectives: “I’m risk averse. I have my list, and I know what I want to do. But if something is costly and I want it enough, I’d return to work.”

How it feels to retire early

Helen retired knowing she could afford to live without skimping unnecessarily. But she also knew she couldn’t live a life of luxury. She breaks her spending down as follows: “I have basic living expenses, nice-to-haves and completely discretionary spending. The latter includes things like David Lloyd Health Club and my holidays.” The holidays are her biggest discretionary spend: “I’m not bothered about clothes or eating out,” she says. She knows she can always cut back on that discretionary spending if she needs to. But travel is a big part of her life these days.

Knowing where her money goes every month means she stays within her means and lives the life she wants to live.

Helen’s advice to young women

Helen looks back at her adult life and sees three major trigger points:

? Divorce in her early 30s

? Planning retirement when she hit 40

? Moving away from London in her mid-40s.

That made her reflect: “In my 20s and 30s, I only thought about money for the short term.

Looking back, I would have planned my short-, medium- and long term needs better.

That way, you can be clear on what you want at different points in your life and have enough to fall back on when difficult circumstances arise.”

Helen’s story is about a woman who took control of her finances very young and has achieved much of what she wanted to do in life. “Developing a good career, saving for the future and setting goals is important. It’s the only way to ensure a good life through retirement"

This is one of many stories in my book 'She Can Prosper'. If you need financial advice do get in touch.