What is financial freedom?
To achieve financial freedom, an individual needs to secure a passive income which is higher than their expenses going out of their bank account.
It is a fairly broad term and there are many ways to achieve financial freedom. Passive income streams such as property investments to interest earned on savings, from stocks and shares to selling your ideas online are just a few examples. In reality there is no fixed method to achieve financial freedom.
“Your economic security does not lie in your job; it lies in your own power to produce, to think, to learn, to create, to adapt. That’s true financial independence. It’s not having wealth; it’s having the power to produce wealth. It’s intrinsic,” Stephen R. Covey, The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change.
Last year the UK’s government rewarded savers by increasing the amount of money an individual can save tax-free to £15,000 per year.
ISAs are a tax efficient way to save money and as they are more flexible than investing, saving money in a high interest account may be an attractive option for those looking for a simple way to achieve a passive income stream.
If your goal is to achieve financial freedom through savings, look around to get the best interest rate available from an ISA. This article about cash ISAs will help you to compare some of the best deals available.
ISAs are an incredibly tax efficient way to invest your money for the future, and they offer you the chance to build up a sizeable fund through an alternative method to pensions and annuities.
ISAs are far more flexible than traditional pension schemes, offering open access to your savings at all times. New ISAs will also permit you to take out a lump sum if you need it for something and then repay it in the same year without the repayment counting towards your ISA limit, which makes them an attractive proposition.
ISAs may not be as lucrative as buy-to-let, what with an annual interest rate of up to three per cent, but the fact you are able to save up to £15,240 per year in these accounts without having to pay tax (remember to calculate income tax on any buy-to-let investment), means you will be able to keep more of your money. They also offer a far simpler way to save. For those who would rather have a hands-off approach to retirement income, ISAs offer a way to put money aside that is not complicated and easy.
Stocks and shares
Stocks and shares may appear to be an intimidating market for first-time investors however, multi-manager funds offer a wide range of options for those looking to dip their toes in the sector.
As many funds come with a wide range of assets, money is spread between a diverse range of sectors which will help to spread risk.
If done correctly, stocks and shares can help individuals achieve financial freedom.
Those with talent may be able to write the next hit song or produce an eBook that goes viral. Securing an income through royalties is a great way for some individuals to achieve financial freedom however, it probably isn’t realistic for everyone.
Everyone has different opinions about how to achieve financial freedom and in many cases some options are easier than others.
Some people strive to achieve financial freedom through property, as it a tangible asset which is less confusing than some of the options listed above.
Get some advice…
Purchasing a property can be a life changing decision. Whether it is from your bank, your financial adviser or from your local lettings agent, getting some good advice can be the make or break of a property investment.
Companies like Experience Invest are a good starting point for investors. Trading for over 10 years, the company has a vast knowledge of the UK’s property market and has successfully delivered high-yielding, income generating assets for many years. Investors are appointed a dedicated sales person who will be able to provide information and answer questions on passive income opportunities. These tips for your first investment property offer some good advice for first time investors.
There is a lot of preliminary research which should be conducted before purchasing a property. Doing this initial research will help investors prepare for any potential issues and will help determine whether the opportunity will lead to financial freedom.
Purchasing a property investment is a serious financial commitment which should not be taken lightly. Investors should have a good understanding of what is financially required from them for the duration of their investment.
For an asset to be income generating from day 1, it’s best to purchase it outright. This will mean that an investor would not have to factor in interest repayments.