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  • Writer's pictureLisa Perry

Achieving financial freedom by retirement age…. Or before

Updated: May 3, 2023


"Financial independence is the status of having enough income to pay one's living expenses for the rest of one's life without having to be employed or dependant on others. Income you earn without having to work a job is commonly referred to as passive income." Wikipedia

The basic rule in obtaining financial freedom is to save less and spend more. If this was so easy many more people would have achieved this; so, what stops so many people from achieving this “easy task”?

  1. People carry too much debt; I refer to a previous post where we spoke about lifestyle vs investment assets. Buying lifestyle assets with borrowed money = debt; buying investment assets = wealth and financial freedom.

  2. People do not actively manage their budgets; By actively managing your budget each month, your emergency fund should be growing with the funds you save. Once you are in the habit of putting that extra cash into your emergency funds, you may as well add it as a debit order and invest it long term. Slowly changing habits from spending to saving.

  3. We spend too much on things we don’t need and don’t save for the actual things we want; Purchases that don’t serve your bigger picture or purpose are wasted funds. I am a “bit” of a retail therapy shopper, I can shop and accumulate things I don’t need for hours. I have recently disciplined myself into filling my basket, calculating the value of the things in my basket, putting them all back and transferring the funds into my money market which is pegged for rainy days and broken dishwashers, as well as investing into assets which will take me closer to financial freedom.

  4. We don’t know what we want. PWH Wealth Group take our clients through a process of no boundary goal setting (The world is mine if I want it) and that becomes the basis of our journey into the world of financial freedom and achieving our purpose. It is very hard to put back R1 000 worth of things I don’t need when I don’t know what I want. It’s easy to put back R1000 worth of things I don’t need when I am motivated and excited about moving towards the things I do want.

At no stage is the reason you are not on the road to financial freedom because you don’t earn enough.

Lets look at some numbers and use the Albert Einstein’s theory.

There are five things you control:

  1. When you start saving

  2. How much you save

  3. When you want to achieve financial freedom, or retire

  4. How much you want to live off

  5. How much market risk are you prepared to take

BASE PLAN

Option 1 – Start Investing earlier

Option 2 – Increase Contributions

Option 3 – Work Longer

Option 4 – Reduce Income at retirement

Option 5 – Increase Investment return

The NUMBER 1 cause of poor investment returns is INVESTOR BEHAVIOUR and not bad market performance. When investments are underperforming, investors pull out and capitalize on the bad performance. Markets will go up and markets will go down. Assets managers or portfolio managers will struggle and they will prosper (All assuming you have selected a good fund manager).

Investors buy more when the markets are up and sell when down. AND repeat until broke.

The Cost of Investor Behaviour

In summary, get your financial life in order, focus on your purpose, have a plan and get excited about chasing your dreams. Unpack the shopping basket and invest for your tomorrow. Together with PWH Wealth Group let’s look to celebrate your financial freedom on your terms. Have a strategy and stick to it.


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