How to achieve financial independence?

I listened to a thought provoking Financial Times podcast recently on my walk to our Brighton office.  The Money Clinic podcast hosted by Clare Barrett was exploring a movement that has been labelled as FIRE, standing for ‘Financial Independence, Retire Early’.  Born out of the 1992 best-selling book, ‘Your Money or Your Life’ by Vicki Robin and Joe Dominguez, the FIRE movement has subsequently attracted thousands of followers and advocates.

The premise behind FIRE is that by adopting a strict personal budgeting, saving and spending regime, it is possible to accumulate wealth earlier and faster, leading to financial freedom and an ability to retire at a younger age.  Some followers aim to save 50%-70% of their income each year by radically changing their lifestyle and spending habits.  Once savings levels reach 25-30 times annual spending requirements, the theory presented is that it is possible to ditch the day job and live off an invested capital sum for the rest of your life.  Some suggest this can be achieved by the age of 40, or in some cases I have heard age 30 quoted (a note of caution is that such claims tend to be made by bloggers or authors selling their FIRE philosophical wares).  The ability to live off a capital sum for the rest of your life clearly requires careful investment to manage inflationary and volatility risks.

I would imagine that the very thought of adopting a frugal spending regime and leading a restricted lifestyle would send shivers down the spines of many.  If I had attempted to follow such a regime in the early years of my working life I am sure I would have fallen off the wagon early.  For the highly disciplined and self-controlled, the FIRE philosophy may prove of interest however at North Laine Financial Management, we approach financial planning differently.  We are acutely aware that people have very different aspirations and dreams in life and attach different meaning to work and life experiences.

For some, I am sure the prospect of retiring early may be highly attractive.  For others, work will continue to provide enjoyment and purpose in later life.  Our objective as Chartered Financial Planners is to help educate, guide and empower our clients to take control over their financial position and build financial plans that can help them achieve their personal aspirations.  We use state of the art cash flow modelling software to help clients fully understand how certain life choices could impact upon their longer term financial security.  For example, we help clients examine the financial impact of spending less or more, retiring earlier or later, working fewer hours, changing professions, up-sizing or downsizing.

We then guide our clients over the years to help keep them stay on track and refine their financial plans as life events occur.  We also help them efficiently manage their accumulating savings and investments.  Developing a lifetime financial plan can be truly enlightening but it has to be personal and realistic.

For us, it is all about helping our clients live a life well lived.  That means something different for everyone.  What does it mean for you?

Author: Sam Jermy