Are you happy and secure in your work with your finances all in order? If so, read no further. But if you long to be independent, read on...
Life's too short to spend years of your life doing something you don't enjoy. As Prefab Sprout once sang:
"Life's a miracle
We gotta do our best, before it's time to rest
Life's a miracle, it's a summer's day
It's a passing moment
"... And if the dead could speak I know what they would say
To you and me, don't waste another day"
Now this is a song about love, and I don't want to sully it by talking about money, but I'll have to a little. After all, it's difficult to seize the passing moment when you have big bills to pay and another day of office drudge ahead of you.
What to do?
If you find yourself in this position, you're not alone. According to the Bank of England's figures, each UK household is now carrying an average debt of somewhere around £10,000 -- excluding mortgage debt. Include mortgages and this figure rises to £61,000.
Apparently, an amazing one-in-four people in debt are receiving treatment for stress, depression and anxiety.
People with high earnings often spend a lot and give the impression of wealth, but the reality is that they're tied to their jobs. That's fine if they enjoy their work, but it's a fairly hollow existence if not. And yet people who long to be free of the nine-to-five often continue to spend to fill the void or for the short term distraction it brings.
So unless you're going to win the lottery, you have to take action to change your lot. This either means a new and fulfilling career -- or financial freedom. If it's the latter, there are many steps you can take. In short, though, you're going to have to earn more than you spend and invest the surplus as wisely as possible. This means earning more and/or spending less.
Gently does it
This isn't exactly rocket science, but real wealth and, therefore, freedom from the obligation to work doing something you don't enjoy, comes from assets and from capital which generates income, but which isn't itself spent.
The trick is in deciding for yourself what is or isn't capital and then sticking to your guns and keeping it as such. It takes time to gradually build your capital to a point where you can comfortably live off the proceeds. For many people, this is simply retirement at the traditional age (or not these days!), but it's perfectly plausible to arrive there much more quickly as many buy-to-let investors did during the times when the return on investment figures still made sense.
For people in salaried jobs, the route to true financial freedom lies in investing their surplus income in ways that don't take up too much time – and in reinvesting the proceeds to gain from the "miracle" of compounding.
Share the wealth
Of the main asset classes (cash, bonds, commodities, property and shares), shares have historically produced the best returns. Over the past nine decades, the UK stock market has returned around 11% a year, with dividends reinvested. Historically, post-inflation returns from shares are usually said to be in the range of 5.5% to 8% a year in the long term. Of this, around 4% to 5% comes from dividends and their re-investment.
A high yield strategy is an excellent starting point for those who don't really have the time to devote to investing. The aim of such a strategy is to produce an annual income that rises at more than the rate of inflation. At some point in time, you will be able, in theory, to call it a day and live off the income stream alone.
That may not seem very plausible in these times when many traditionally high-yielding companies have been forced to reduce their dividends, or stop paying them altogether, but it's important to take a long term perspective on this.
If you're a long way off being able to seize the passing moment, fear not. You will be amazed at how much progress you're able to make once you take control.
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