Why financial independence may be a lot closer than you think…

By David Lamb

The next component of lifestyle, after fun and recreation is financial independence.

Financial independence can be described as having enough income to pay for your living expenses for the rest of your life without having to work or be dependent on others or a business.

At first this may sound quite difficult and daunting to achieve, but we have never had a client come through our doors where we haven’t been able to tell them to do a couple of things to achieve financial independence. It is easy!

All you need to do is:

1. Sell everything. Your house, your car, contents, everything! Turn all you have into cash.

2. Move to Malawi. Malawi is a generally peaceful country that has had stable governments since gaining independence from Britain in 1964. The cost of living is lower than the UK – the total cost of living for two people, with average consumption, for one month will be $705 (£546). The average salary for an accountant is $14,166 (£10.981), in the UK they can earn up to £60,000, or more. You will probably be the richest family in your new village and will never worry about money again!

But you may not have the lifestyle that you want……

Many people are under the misunderstanding that to achieve financial independence, they need as much money as possible. Unfortunately, we have seen many clients who continue to work long after they could have retired.

As I mentioned in an earlier blog, I don’t think it is a bad idea to work past retirement, so long as it is enjoyable and is keeping you young. But working unnecessarily often means that this is at the detriment to other areas of their lifestyle such as health, relationships and time doing the things you want to do.

Understanding your lifestyle (enjoying the good parts and being able to identify areas for improvement to give you more balance) should be at the heart of financial planning.

When you have identified the lifestyle that you want, you can then work out how much this will cost. When you have done this, using cash flow modelling, a financial planner can then calculate how much is enough. Enough to give you the lifestyle that you want without the fear of running out of money, whatever happens.

In my experience, this is quite often a lot less than people would imagine.

Financial independence may be a lot closer than you think. You just need to know how much is enough and then create a simple, realistic, and reasoned plan to get you there.

How good would you feel if you didn’t need to worry about money?