The weather is getting warmer; winter jumpers & coats are being put away and being replaced by the summer wardrobe. With less covering you and more skin exposed, people want to look good in their summer clothes. So they are hitting the gym, doing lots of exercise to get that beach body that they can proudly show off to everyone around them. But despite how hard they work, they aren’t seeing the results. Why? Because the first step in getting in shape is to get your diet right. Eat healthy and reduce portion sizes first. Then hit the gym.
People make the same mistakes in building wealth. They have a few quid, stick it in an equity fund and watch it grow. But they aren’t feeling any richer and their need for money seems to be growing quicker than their investment is. Unless you get the fundamentals right, you will not be able to build wealth and achieve financial independence.
Like getting your diet right is the first step in losing weight, the first step in achieving financial independence is to spend less than you earn and save the rest. This is what being frugal is; a word a lot of people associate with being mean or stingy. If you don’t get your spending habits right, you are fighting a losing battle. Most people have a lower income in retirement than they do when working. If you are not used to living on less than you earn, you will either continue working to fund your lifestyle or you will have difficulty adjusting to life in retirement.
No matter much you try to have an accurate financial budget, life always gets in the way. These unexpected expenses can take many forms from the relatively cheap to the very expensive. Or a really good opportunity may come along for a trip you hadn’t budgeted for. It’s always good to have some cash at hand that can be used to pay for these things. Don’t worry if you do use this cash, just build it up again.
When you have adjusted your spending habits and built up some cash, the last step is to get investing. This is surplus money that you are not spending today so that you can spend it on really great experiences in the future. Investing in the markets allows companies like Apple, Google, Disney, Johnson & Johnson etc do all the hard work and grow your money for you. There will be ups and downs but that is part of the journey. Always keep the end game in mind.
Financial independence takes years to achieve and just like getting into shape, you need to have the fundamentals right in order to achieve it.
If you have any questions, send me an email to steven@bluewaterfp.ie