The road to financial independence.

Student_of_£

I'm currently 3/4 of the way through my degree and I know that one of my goals in life is to be financially independent one day.
I graduate in July 2014 and so I am giving myself from July 2014 untill October 2050 (the month before my 60th birthday) to reach my goal of being financially independent.

From what I understand, the following are good tips to reach my goal:
- Spend less than I earn and pay myself first (I'm planning to save 40-60% of salary)
- To get things at reduced cost if not free
- Don't keep up with the Jones'
- Always shop around and get the best deals
- Pay mortgage asap
- To invest my savings

Can you add any more?
Thanks

badger09

Not sure what you mean by 'financial independance'

Independent of your parents? Your partner? Your student loan? Your overdraft? Your salary?

Why would you want to wait until you're almost 60 to be financially independent :eek: Why not aim for 25 or 30?

Apologies if I've misunderstood your topic heading.

vectistim

What is your definition of financial independence.

kidmugsy

1) Don't buy stuff you don't need with money you don't have.
2) Your first priority is to use Cash ISAs to save up a "get stuffed" fund, so that if you ever find yourself in a job you hate or under a boss you despise, you can give 'em the said recommendation.
3) Never buy a brand new car.

Zebra

badger09 wrote: »

Not sure what you mean by 'financial independance'

Independent of your parents? Your partner? Your student loan? Your overdraft? Your salary?

Why would you want to wait until you're almost 60 to be financially independent :eek: Why not aim for 25 or 30?

I presume what the OP means by 'financial independence' is not having to work for a living and instead living off passive income rather than earned income.

OP, the tips you've already got seem a good starting point, although I don't necessarily agree with paying off the mortgage as being a priority, especially with interest rates being so low.

The only thing I would add is to try to save and invest regularly and to make the most of compounding.

Lomcevak

OP, the tips you've already got seem a good starting point, although I don't necessarily agree with paying off the mortgage as being a priority, especially with interest rates being so low.

I kind of agree at the moment, but the OP is looking at the July 2014 untill October 2050 timeframe and it seems unlikely that the current near-zero interest rates will last for all that time. Getting the mortgage paid off is low-risk element for becoming self-sufficient, not least because it removes one large monthly outgoing from the budget. The alternative is presumably to use the same money to generate greater returns than the effective return of a mortgage overpayment; in a low-interest rate environment that may well be possible, but is less assured.

- Pay mortgage asap

Also remember that there are lots of secondary costs in moving house (legal, removals, estate agent fees if you are selling, stamp duty once you hit certain price levels, etc.) and a tendency to reset the clock on the new mortgage back to 25 years. Over time this is a huge drain on your finances. So when you do buy, aim to buy somewhere you want to live long-term.

atush

Use tax wrappers. Use Cash Isas for cash, and S&S Isas and pensions for investments.

Don't neglect a pension in favor of 100% into ISAs.

srcandas

For the first ten years focus on gaining qualifications, good notable experience, increasing your skill set, improving your CV, your people's skills, your adaptability (vital as the world accelerates change).

Yes do all the other things but investing in yourself is vital and should be given the highest priority. Your ability to earn large salaries plus perks for 30 years or more of your working life outweighs anything you will gain at an early stage by saving and/or investing in the traditional sense.

For example (just one of many) becoming fluent in a language you part learnt at school might mean some long holidays overseas, spending a month between jobs at immersion sessions in another country, buying expensive CD sets to listen to in the car on the way to and from work. But the returns career-wise might be again beyond the money and potential gains you spent. And learning a language is a good additive to your CV.

And in my case I even had a spanish wife thrown in

Enjoy whatever

Student_of_£

1) My definition of financial independence is getting to 60 and having the passive income to support me in a comfortable retirement for the next 30-40 years.
2) I am studying French and Italian at university and have just spent 3 months in France and will spend 4 months in Italy. I am also conversant in Spanish and Portuguese.
3) As for pensions, I was thinking of first of all establishing a healthy emergency fund and then trying to max out my S&S ISA every year until I reach retirement, I heard that if you do this it is possible to gain a portfolio of £1-2 million, I understand the risks involved!!

jimjames

Student_of_£ wrote: »

From what I understand, the following are good tips to reach my goal:
1- Spend less than I earn and pay myself first (I'm planning to save 40-60% of salary)
2- To get things at reduced cost if not free
3- Don't keep up with the Jones'
4- Always shop around and get the best deals
5- Pay mortgage asap
6- To invest my savings

Can you add any more?
Thanks

I've numbered to make it easier to refer.

No 1 is definitely one I would suggest and something that causes far too many people problems but spending money they don't have.

2 & 4 are not necessarily the same. Free isn't always best if it will cost you more in the long run but shopping around is certainly good advice.

As the post by kidmugsy running an older car is far more cost effective than a new car every couple of years.

Stubod

Be carefull!!!!....I don't want to put a dampener on your plans, which I think are basically sound.....but you may spend a lifetime saving and not "having some fun"...only to get to 60 (or earlier), and find you have health problems, or that you have become so used to saving that you can't bring yourself to spend anything...and its too late....!

Its important to get the balance right.