Want to become financially independent? The royals are doing it, so why not get on board?
Unfortunately, 61% of UK adults are not financially independent, and 15% believe it’s not in their cards according to a study by King Street Wealth Management. But financial independence is a feasible goal. So if you want tips to retire early or simply cut the cord from family support, here are some helpful financial independence tips to get you started.
1. Set a goal
First, what exactly are you aiming for? The definition of financial independence and the outcome is very personal and unique to every individual.
For Harry and Meghan, this means no longer receiving funding through the Sovereign grant. The rest of us tend to have more humble goals, such as “retire early”, “quitting my job”, “pay off debts”, or “own my own home”.
2. Budget towards it
Whatever the goal, big or small, it helps to break down the journey into smaller and more achievable steps. Start by setting a budget and financial plan that mixes budgeting, savings and investments. Remember, every spare pound and pence beyond the essentials (food, shelter, clothing…) could be best used towards your financial independence goal.
To budget successfully, it’s best to use an online service or app like Money Dashboard to track and categorise all transactions, giving you a clear view of your financial progress.
3. Live below your means
As part of your budgeting strategy, consider how little of your income you can feasibly live off of. Many people live at or even above their means but a few lifestyle changes can mean big savings. You can use Money Dashboard to evaluate your regular costs and, better yet, use the planning feature to see what future savings and expenses might look like if you lower your rent, for example, or switch to biking instead of the bus.
Although some financial sacrifices may seem unpalatable at first, remember that even millionaires use this tactic of living below their means to save money and grow their wealth.
4. Build an emergency fund
According to ING, more than a quarter of UK households have no emergency fund. But a single emergency like a sudden home or car repair can wipe out months if not years of savings and investments and, with it, your progress towards financial independence. You can lessen or eliminate the blow by building an emergency fund. In fact, this should be part of your financial foundation.
To build the fund, automate a small monthly transfer and any spare cash into a separate high-interest earning fund until it totals at least 3 months of expenses. The account should have no penalties for sudden withdrawals.