The 7 step journey to financial freedom
The best part of our job as trusted financial planners is seeing and helping our clients meet their financial objectives. And in January 2020, one of our longstanding clients hit his primary objective: to hit financial independence at age 60; for work to be an option.
Here is the 7 step journey to financial freedom, taken by a real life Opus client.
This is the story and journey of a real life Opus client, Mr K.
The best part of our job as trusted financial planners is seeing and helping our clients meet their financial objectives. And in January 2020, one of our longstanding clients hit his primary objective:
To hit financial independence at age 60; for work to be an option
He in fact hit financial independence 3 years earlier than planned.
This is how he did it:
1. How it started
Mr K got in touch with Opus in 2009, seeking help with his mortgage and his finances in general. He had a few old pensions and some savings.
He worked as a senior manager in the manufacturing industry. His role involved a lot of travel, which he generally enjoyed but knew he couldn’t do forever.
2. The discovery meeting
During the initial discovery meeting, Ben took the time to understand Mr K’s background, philosophy, needs and objectives.
His overriding financial objective was established: to reach financial independence age 60.
Mr K agreed for Ben to build his financial masterplan that promised to answer the important questions:
1. What does his financial future hold
2. Will he have enough to retire age 60
3. If not, what can he do now to make sure he has enough
3. The Masterplan
Retiring at age 60 was possible for Mr K
He agreed to implement his masterplan. This included:
o a plan to control his expenses
o changing the structure of his existing pensions
o switching to a suitable investment strategy
o introducing regular monthly savings for his future self
o protecting against disaster through the appropriate insurances
4. Maintaining and updating the plan:
Mr K agreed to become an ongoing Opus client
During forward planning meetings, the masterplan was updated and evolved over time
Progression in his career resulted in promotions and pay rises. But rather than suffer from “lifestyle creep” and spending more, Mr K instead ramped up his savings
5. Staying the course
Mr K stayed disciplined, controlled his lifestyle and continued to save
Our job was to keep Mr K accountable and we worked with him to follow through on his commitments
Throughout turbulent investment markets, he most importantly stuck to the plan
6. The outcome
Through a combination of bumper investment returns and increased savings, it was clear that Mr K was due to hit financial independence earlier than planned
The work trips away had become tiresome and Mr K had finally had enough
He agreed his exit from work in January 2020, with his trusted partner in Opus in his corner providing the confidence and security he needed to pass the finish line
7. And now?
Mr K has plenty to do following his exit and intends on spending time doing what he enjoys:
o following his rugby team on tour
o spending time with his family
o reducing his handicap at the local golf club
The dream trip to New Zealand was postponed by Covid, but still remains on the agenda for 2022
He may return to work in some capacity, but doing something he enjoys and on his terms
We are proud to be the trusted partner to our clients, helping them through the difficult times and appreciating the good.
Life is not a rehearsal; a financial masterplan will make your goals a reality.
“After many years of guidance from Ben and the Opus team I’ve finally become financially secure. Opus have always looked after me extremely well through annual reviews and adhoc meetings and phone calls. They have always been professional, knowledgeable and friendly, dispelling any financial apprehensions I might have had. They explain all options in detail, providing a good understanding for me to make financial decisions, aligning to my overall goal. I’d like to take this opportunity to thank Ben and Jordan, who’ve become very good friends, for all they’ve done for me.” - Mr K ,May 2021
Could you be our next success story?
Please get in touch should you wish to discuss your how lifestyle financial planning could help you.
Private school – can you afford it?
The ability to finance school fees on a pay-as-you-go basis out of taxed income is a colossal commitment. The sooner you start planning the better.
At 28, my friends are all starting to have children.
I recently played golf with a close friend who is a first time Dad-to-be. Amongst the usual polite baby chat, I asked whether he’s considered the extra cost of having a baby.
He was shocked to learn the basic cost of raising a child up to age 18 is £153,000[1]. Not only that, my friend also wants to send his child to private school. He attended private school himself, and research shows that private schooling leads to improved academic performance.
“I get it, you want the best for your child” I said, “but the sooner you start planning, the better”.
Here is why:
The average fee per term for a private day school in the UK is around £4,763, which equates to over £14,000 per year[2]
Independent school fees continue to rise faster than inflation; between 2010 and 2019 fees increased 3.9% per year on average
The ability to finance school fees on a pay-as-you-go basis out of taxed income is a colossal commitment. School fees are typically paid per term, which is subject to annual price increases.
You would therefore need an eye watering £246,000 to fund primary and secondary school.
No parent wants to disrupt their child’s education and friendships part way through because they have run out of money.
However, let’s consider putting a plan in place. By putting aside £153,484 today and assuming 5% growth, you would be able to fund the entirety of your child’s education. Investing this money utilises the power of investment returns and compounding to grow your money above inflation.
So planning ahead could save £93,000.
The outcome? A very significant portion of the heavy lifting would be done by investment growth.
By using a sophisticated computer software, we’ve since built a robust financial plan for my friend. He doesn’t have the £153,484 spare. Instead, the school fees are affordable by a combination of a lump sum (with grateful help from willing parents and grandparents), alongside regular savings. The outcome:
Confidence in being able to send his child to private school
No impact on lifestyle and plans for retirement
Security the fees can be met as they fall due
Reducing the financial burden
Are you considering private school? We’ve put together a school fees planning calculator to help. It is a quick and easy way to calculate how much you need to fund your child's/grandchild’s education. The figures provided by this calculator are for illustrative purposes only.
Keen to know more? Speak to a professional.
Book a free 30 minute initial call with Jordan, Chartered Financial Planner.
Results are for your general information and use only and are not intended to address your particular requirements. Results should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate results and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of using this calculator. Thresholds, percentage rates and tax legislation may change in subsequent finance acts. Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested.
[1] Source: CPAG Report October 2020: https://cpag.org.uk/sites/default/files/files/policypost/CostofaChild2020_web.pdf
[2] Source: Independent Schools Council 2019 Census and Annual Report: https://www.isc.co.uk/media/5479/isc_census_2019_report.pdf
The Mexican Fisherman
In a financial planning context, this story illustrates how the search for more: more money, more possessions, higher investment returns, without due consideration for what it is that we truly want out of life, can be futile.
A Mexican fisherman docked his tiny boat at the pier of the small coastal Mexican village, as he did most days. Inside the fishing boat were several large yellowfin tuna. A passing American banker complimented the Mexican on the quality of his fish and asked how long it took to catch them, to which the fisherman replied, “only a little while”.
The banker then asked why didn’t he stay out longer and catch more fish, to which the fisherman replied that he had enough to support his family’s immediate needs.
“But what do you do with the rest of your time?” the banker asked.
“I sleep late, fish a little, play with my children, take siestas with my wife, Maria, stroll into the village each evening where I sip wine, and play guitar with my amigos. I have a full and busy life…’ the fisherman replied.
“I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat. With the proceeds from the bigger boat, you could buy several boats, eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing, and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually New York City, where you will run your expanding enterprise.” Said the banker
The Mexican fisherman asked, “But, how long will this all take?”, to which the banker replied, “15 – 20 years!”
“But what then?” Asked the Mexican.
The banker laughed and said, “That’s the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions!”
“Millions – then what?” quipped the fisherman
The banker explained “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siestas with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos.”
In a financial planning context, this story illustrates how the search for more: more money, more possessions, higher investment returns, without due consideration for what it is that we truly want out of life, can be futile.
Don’t get me wrong, sometimes ‘more’ can be good but only when we defined our core objectives can we truly determine whether it’s worth chasing ‘more’ or simply to sit back and enjoy what we do have.
This is why, in our work with clients, we work hard to understand what is it they are trying to achieve in their lives and we often find that what they need isn’t more money or higher investment returns. It is to organise what they already have in the best possible way to meet their objectives.
That’s when true financial planning comes into its own.
The Matrix
“Because some things never change, and some things do.” What are the things that change? Our age, goals and priorities in life all change over time. This is the bulk of the work we do with our existing clients: managing change and ensure their individual plan remains on track.
Lockdown 3.0 has afforded me the time to watch a few must see films. Over the last 3 days, I have embarked on a Matrix marathon.
The Matrix follows the adventures of Neo, a young hacker who discovers that his reality is actually a simulation controlled by a species of sentient machines, and that humanity is embroiled in a desperate war for their freedom. This film is a classic and sits in the top 20 in IMDB’s top rated movies, so do check it out if you haven’t seen it (free on Amazon Prime).
Morpheus, the inspirational leader, repeated the same phrase throughout the film:
“Because some things never change, and some things do”
An obvious statement, but it did make me stop and think about the work we do as financial planners.
What are the things that change? Our age, goals and priorities in life all change over time. This is the bulk of the work we do with our existing clients: managing change and ensure their individual plan remains on track.
But, what do we want to not change? Three immediately spring to mind:
Our health
Our ability to work and earn money
Our lifestyle
Our health and ability to earn money underpins all that we do. We tend to take it for granted.
You could have the perfectly crafted financial plan, investment portfolio and strategy to reach your objectives, but if along the way life throws you a curve ball (which it tends to do from time to time) and you fall ill or are unable to work, this can all be thrown off track. This is why we recommend, where it is appropriate, putting suitable insurance in place in the form of life, critical illness and income protection cover. Of course, we don’t like paying the premiums and we hope it’s a big waste of money, but ultimately, our plans are built on sand without it.
What about lifestyle?
I sometimes speak to clients that are not exactly sure what they want. But they know what they don’t want:- they don’t want less than what they have now. So this is the starting point and the first primary financial objective for most: maintaining what you’ve got.
This involves understanding the cost of your lifestyle and what needs to be done in order to maintain it. This may involve additional saving for example for your future.
Some out there already have enough. They either simply don’t know it yet, or lack the confidence to give up. This is what financial planning is all about: providing clarity over what is possible for you and your future.
I like to think Neo, on his quest for reality, would have worked with a financial planner. Perhaps he would have chosen the blue pill, avoided the hassle of the sentient machines and remained in the matrix indefinitely
He would have had a great life, but I doubt it would have made a great film.