WEBVTT - Finding Financial Freedom 0:00:00.540 --> 0:00:04.530 Hey, it's Kia. Throughout this series, we've been exploring different 0:00:04.530 --> 0:00:07.560 ways to save and grow your money. In this episode, 0:00:07.710 --> 0:00:10.079 I want to focus on what your money can actually 0:00:10.080 --> 0:00:13.230 get you. Everything's changing. It used to be you'd work 0:00:13.230 --> 0:00:16.199 one job all your life and then retire, but these 0:00:16.199 --> 0:00:18.900 days there are so many different approaches to work and 0:00:18.900 --> 0:00:22.619 leisure. So today, I'm talking to Jenny Hazan, Director of 0:00:22.620 --> 0:00:25.499 Customer Value Management at Legal & General, about all the different 0:00:25.500 --> 0:00:28.380 choices out there, and the freedom our finances bring us 0:00:28.410 --> 0:00:33.089 to make these choices. So, Jenny, there are many different 0:00:33.089 --> 0:00:36.510 approaches to work and finances out there. People are doing 0:00:36.510 --> 0:00:41.010 FIRE, they're taking sabbaticals, they're having portfolio careers. Can you 0:00:41.010 --> 0:00:43.800 talk me through a few of these different options? 0:00:43.860 --> 0:00:47.400 Yeah, totally, Kia. So as you said, that distinction between 0:00:47.400 --> 0:00:50.129 working life and retirement used to be really clear. In 0:00:50.130 --> 0:00:53.459 fact, we worked at one organization, probably stayed in the 0:00:53.459 --> 0:00:57.660 same industry, maybe even at the same company for all 0:00:57.660 --> 0:00:59.910 of our career. And then on a set date, we 0:00:59.910 --> 0:01:02.670 suddenly became retired, and hopefully by that point the kids 0:01:02.670 --> 0:01:04.889 have moved out, you paid off the mortgage, and now 0:01:04.889 --> 0:01:07.229 was the time that you got to enjoy life. And 0:01:07.230 --> 0:01:11.039 I think people are looking for more financial freedom, flexibility 0:01:11.039 --> 0:01:15.208 and choice, and they're looking for different options. Even just 0:01:15.240 --> 0:01:18.179 friends of mine actually, that have taken on new ways 0:01:18.180 --> 0:01:20.940 of doing this. So a portfolio career, for example, is 0:01:20.940 --> 0:01:23.670 where you may choose to be freelance, you may choose 0:01:23.670 --> 0:01:26.219 to work on a number of projects that are related 0:01:26.219 --> 0:01:30.959 or unrelated, working for companies and organizations that are interesting 0:01:30.959 --> 0:01:33.569 to you, that you're passionate about. I also have a friend 0:01:33.569 --> 0:01:37.140 that's recently taken a sabbatical. So a sabbatical is a 0:01:37.140 --> 0:01:40.350 period of time where you will agree with your company 0:01:40.530 --> 0:01:44.279 to take unpaid, usually unpaid, time off, so maybe three 0:01:44.280 --> 0:01:47.219 months or six months, to focus on other passions or 0:01:47.219 --> 0:01:50.430 things like travel. And then in addition to that, because 0:01:50.430 --> 0:01:53.850 of the pandemic and because of our ability to connect 0:01:53.850 --> 0:01:56.340 with the working world from lots of different places, lots 0:01:56.340 --> 0:01:59.219 of people are choosing to be digital nomads, work from 0:01:59.219 --> 0:02:02.579 wherever they are, abroad. And I think people are really 0:02:02.580 --> 0:02:05.970 looking for opportunities to do things a little bit differently. 0:02:06.209 --> 0:02:09.899 So there's definitely a push for people to think about, " 0:02:10.050 --> 0:02:12.389 Well, can I work for a certain period of time? 0:02:12.570 --> 0:02:14.910 And then only work if I need to work?" And 0:02:14.910 --> 0:02:20.190 we mentioned FIRE, so FIRE stands for financial independence, retire 0:02:20.219 --> 0:02:22.559 early, and that's a movement that started off in the 0:02:22.559 --> 0:02:26.940 US and became popular probably from about 2010 onwards. And 0:02:26.940 --> 0:02:30.630 the main principles are about saving as much as you 0:02:30.630 --> 0:02:35.040 possibly can, investing as much as you can, living off 0:02:35.700 --> 0:02:39.059 less of the world's resources, but living well. But people 0:02:39.059 --> 0:02:41.969 that are taking on the FIRE movement, are tending to 0:02:41.969 --> 0:02:44.880 save a lot more than what most people can usually 0:02:44.880 --> 0:02:49.080 save. So up to 70% of their income. And they're 0:02:49.080 --> 0:02:53.219 usually aiming to get around about 25 times their living 0:02:53.219 --> 0:02:55.889 expenses, so that they can invest that money and live 0:02:55.889 --> 0:02:59.760 off the investment returns. Now that might seem a little 0:02:59.760 --> 0:03:02.850 bit extreme and it does mean a lot of sacrifice, 0:03:02.850 --> 0:03:05.010 but I think what this shows is that people are 0:03:05.010 --> 0:03:08.790 looking for different options for themselves. I know for me 0:03:08.790 --> 0:03:12.209 personally, travel's really important, and so I want to be 0:03:12.210 --> 0:03:15.540 able to have a lifestyle that over time my working 0:03:15.540 --> 0:03:16.710 life will allow me to do that. 0:03:16.710 --> 0:03:20.730 It is great hearing the different ways that people are 0:03:20.730 --> 0:03:23.970 actually taking charge of their finances and taking charge of 0:03:23.970 --> 0:03:26.820 how they work. It is so key, because this generation 0:03:26.820 --> 0:03:29.700 is very much thinking about the future and thinking about 0:03:29.700 --> 0:03:33.120 different ways, like you mentioned, our parents or our grandparents, 0:03:33.389 --> 0:03:36.119 their generation was like you said, one job, work till 0:03:36.119 --> 0:03:39.210 you retire, retire, then that's it. And now we're kind 0:03:39.210 --> 0:03:40.950 of saying, " No, I actually want a bit more freedom. 0:03:40.950 --> 0:03:43.800 What can I do to get more freedom?" So I 0:03:43.800 --> 0:03:47.250 want to ask you then, how can our finances help 0:03:47.250 --> 0:03:49.560 us to access these different choices that we've got? 0:03:49.920 --> 0:03:52.619 Yeah, so I think the principles, even if we talk 0:03:52.619 --> 0:03:54.990 about FIRE where we say, " Oh gosh, that's quite extreme," 0:03:54.990 --> 0:03:57.960 but the principles of it still stand strong, which is 0:03:58.410 --> 0:04:00.900 save as much as you can as early as you 0:04:00.900 --> 0:04:03.360 can. And the reason for that is because the earlier 0:04:03.360 --> 0:04:06.360 you save, the more time that money has to potentially 0:04:06.360 --> 0:04:10.109 grow. And I think with so many different choices available 0:04:10.109 --> 0:04:12.990 to us now, it can be quite difficult to think 0:04:12.990 --> 0:04:15.240 ahead to the things that you might want to do. 0:04:15.240 --> 0:04:18.420 So actually setting out some goals, whether those be long- 0:04:18.420 --> 0:04:21.900 term, medium, or short- term, so that could be anything 0:04:21.900 --> 0:04:25.469 from having flexibility around your career, to saving up a 0:04:25.469 --> 0:04:28.559 deposit, to just being able to afford some nicer little 0:04:28.559 --> 0:04:32.550 luxuries in life, is really, really important. But that takes 0:04:32.940 --> 0:04:37.020 budgeting, that takes saving, and also working towards a goal. 0:04:37.350 --> 0:04:40.500 I think sometimes it can be quite hard to think 0:04:40.500 --> 0:04:43.380 about starting these sorts of things, so one of the 0:04:43.380 --> 0:04:46.139 things about thinking about these goals, and actually starting to 0:04:46.139 --> 0:04:48.870 picture them in your head, is that you then have 0:04:48.870 --> 0:04:52.560 a much clearer motivation for doing the work that you 0:04:52.560 --> 0:04:54.630 need to do in order to plan for this. 0:04:54.990 --> 0:04:57.659 I love goals so much. I'm glad you touched on 0:04:57.660 --> 0:05:00.748 it, because I think when you come to your finances 0:05:00.750 --> 0:05:02.520 and you come to planning, or saving, or anything to do with 0:05:02.520 --> 0:05:06.510 your finances, and you're almost saving aimlessly, it can feel like, " 0:05:06.510 --> 0:05:07.980 Why am I doing this?" But when you have a 0:05:07.980 --> 0:05:10.320 goal in mind, that can help. And I'm someone who's 0:05:10.320 --> 0:05:12.420 very visual, so I put my goals down on a 0:05:12.420 --> 0:05:12.990 vision board- 0:05:13.200 --> 0:05:13.200 Same. 0:05:13.201 --> 0:05:16.830 ... so I know... (inaudible) . ... so I know at the foot of 0:05:16.830 --> 0:05:18.119 my bed or wherever I choose to place it at 0:05:18.120 --> 0:05:20.070 my house, I can wake up, and when you have 0:05:20.070 --> 0:05:21.719 those days like, " Oh, I just want to spend my 0:05:21.719 --> 0:05:23.940 money on... I just don't want to do this," you can 0:05:23.940 --> 0:05:27.300 kind of look at your vision board, and see, actually, 0:05:27.660 --> 0:05:29.220 I know I'm saving, because I want to get to 0:05:29.220 --> 0:05:31.440 this or I'm investing for this reason. And it helps 0:05:31.440 --> 0:05:34.260 to keep you on track, which is so good. And 0:05:34.349 --> 0:05:36.690 I'm so glad you mentioned goals, because it's just really, 0:05:36.690 --> 0:05:39.120 really important. Now, you touched on it a little bit 0:05:39.150 --> 0:05:42.690 just now, but what can our listeners be doing with 0:05:42.690 --> 0:05:46.950 their finances now, that can give them as much freedom 0:05:46.950 --> 0:05:49.020 as possible in the future with their finances? 0:05:49.560 --> 0:05:52.769 Once you're clear about your goals and what those goals 0:05:52.770 --> 0:05:55.079 might look like, what sort of money you might need 0:05:55.349 --> 0:05:58.469 to afford those goals, the first thing is really to 0:05:58.469 --> 0:06:00.540 have a look at your finances. So what have you 0:06:00.540 --> 0:06:03.300 got coming in, what have you got going out. How 0:06:03.300 --> 0:06:05.460 much do you think that you could save. And I 0:06:05.460 --> 0:06:07.170 think a lot of people sort of struggle with the 0:06:07.170 --> 0:06:10.380 concept of, " I don't even know how much to start 0:06:10.380 --> 0:06:14.190 with," or, " I haven't got much flexibility." So a general 0:06:14.190 --> 0:06:19.050 rule is the 50, 30, 20 rule. So 50% of your income 0:06:19.140 --> 0:06:23.310 would be spent on your essentials. So the needs. 30% 0:06:23.370 --> 0:06:27.570 on your wants or the fun stuff. And then 20% 0:06:27.570 --> 0:06:30.420 saving for the future. So you can start there, and 0:06:30.420 --> 0:06:32.849 it will be different for different people, but what you 0:06:32.849 --> 0:06:35.039 want to be thinking about is, " How do I build 0:06:35.039 --> 0:06:38.550 towards financial resilience?" So what that means is, " Can I 0:06:38.550 --> 0:06:41.700 weather the storm if something comes out of the blue?" 0:06:42.089 --> 0:06:44.578 all the way through to financial freedom, which is where 0:06:44.580 --> 0:06:47.400 you get more flexibility with your choices over the long- 0:06:47.400 --> 0:06:51.420 term. So to start off with, make a budget, try 0:06:51.420 --> 0:06:54.930 and stick to it, and keep going, be consistent. If 0:06:54.930 --> 0:06:58.289 you have a month that's tough, don't give up, keep 0:06:58.290 --> 0:07:01.349 going. The second thing is you need to think about 0:07:01.410 --> 0:07:06.899 emergency savings. So thinking about your living expenses and trying 0:07:06.900 --> 0:07:11.009 to put away three months to six months of savings 0:07:11.010 --> 0:07:15.120 that are in an easily accessible cash account, high interest 0:07:15.120 --> 0:07:18.090 if possible, that you can gain access to. So these 0:07:18.090 --> 0:07:19.890 are for the things that might go wrong in life. 0:07:19.890 --> 0:07:22.799 You know, your MOT just came through and your car's 0:07:22.800 --> 0:07:28.289 failed, or that you unfortunately lose your job, or maybe 0:07:28.289 --> 0:07:30.990 the washing machine broke down. So these are things, emergencies, 0:07:30.990 --> 0:07:33.360 that you need money for. And if you haven't got 0:07:33.510 --> 0:07:36.330 three months saved away and you're thinking, " My God, how 0:07:36.330 --> 0:07:38.849 do I do that?" start with one month, start with 0:07:38.849 --> 0:07:42.000 one week, step- by- step. The second thing that you 0:07:42.000 --> 0:07:45.120 can do once you've got an emergency savings budget is 0:07:45.120 --> 0:07:48.180 start to work on something that the industry sometimes like 0:07:48.180 --> 0:07:52.140 to call the FU fund. And that is really about 0:07:52.200 --> 0:07:55.440 having power and having choice. So this is the ability 0:07:55.440 --> 0:07:59.190 to walk away in situations where they're not serving you 0:07:59.190 --> 0:08:01.529 anymore. So that might be a job that you really 0:08:01.530 --> 0:08:04.680 hate, that's really impacting your mental health. It might be 0:08:04.680 --> 0:08:07.230 to walk away from a relationship. It might be to 0:08:07.230 --> 0:08:10.110 walk away from that awful flatmate that has not washed 0:08:10.110 --> 0:08:12.900 the dishes since the day they moved in. And over 0:08:12.900 --> 0:08:16.619 time you can continue to build that fund. So I 0:08:16.620 --> 0:08:19.200 think that's a really important one to think about. After 0:08:19.200 --> 0:08:22.619 that, you can start thinking about those savings goals. So 0:08:22.709 --> 0:08:25.620 the short- term, the medium- term, and the long- term, 0:08:25.860 --> 0:08:28.560 and think about what sort of money you will need 0:08:28.560 --> 0:08:31.020 for those goals, and at what point in your life, 0:08:31.020 --> 0:08:33.420 because that has an impact on where you want to 0:08:33.420 --> 0:08:36.328 invest that money. So I think from a longer term 0:08:36.330 --> 0:08:40.529 perspective, obviously a pension is a great place to start 0:08:40.529 --> 0:08:43.920 thinking about long- term saving. Pensions can be really tax- 0:08:43.920 --> 0:08:47.220 efficient, so if you wanted to put a hundred pounds 0:08:47.220 --> 0:08:50.340 into your pension, £ 80 of that would come from you, £ 0:08:50.639 --> 0:08:54.059 20 would come from the government. And also, your employer 0:08:54.059 --> 0:08:56.880 will, if you've got a workplace pension, will also be 0:08:56.880 --> 0:09:00.208 making contributions as well. And I think it's worthwhile mentioning 0:09:00.208 --> 0:09:03.809 that some employers will put more money in, they'll match 0:09:03.990 --> 0:09:07.650 your contributions. And if you're not going to that level, 0:09:07.650 --> 0:09:09.809 you're actually leaving free money on the table, and no 0:09:09.809 --> 0:09:10.920 one wants to do that. 0:09:11.040 --> 0:09:14.338 I love the fact that you mentioned that fund, the 0:09:14.340 --> 0:09:18.059 FU fund. I'm from a Caribbean household, so in my 0:09:18.179 --> 0:09:19.740 background we call that like the vexed fund. 0:09:19.740 --> 0:09:20.819 The vexed fund. Love it. 0:09:20.820 --> 0:09:23.010 So when you're, like you said, when you're annoyed, just 0:09:23.010 --> 0:09:25.020 having that pot of money, but I think it is 0:09:25.020 --> 0:09:30.480 about making your finances or making your money a point 0:09:30.480 --> 0:09:32.910 to give you freedom. So like you said, freedom of 0:09:32.910 --> 0:09:35.069 choice, to decide to leave a job that you don't like, all 0:09:35.070 --> 0:09:38.970 the things that you mentioned, or freedom to cover your 0:09:39.030 --> 0:09:40.679 income if you happen to lose it for a period 0:09:40.679 --> 0:09:43.110 of time, or freedom to decide that I want to 0:09:43.110 --> 0:09:45.509 retire at 45, but I'm going to put my money aside 0:09:45.510 --> 0:09:47.699 to be able to do that. I think that's the 0:09:47.700 --> 0:09:49.439 main key here. We're just trying to get our money 0:09:49.440 --> 0:09:51.570 to work for us so it can give us more 0:09:51.570 --> 0:09:55.588 freedom. We have been talking about this and it sounds 0:09:55.800 --> 0:09:58.800 great, but I want to ask you, are there any 0:09:58.800 --> 0:10:03.659 disadvantages to all of this? Is it maybe too much 0:10:04.500 --> 0:10:06.659 to focus on so much of this for the future? Are 0:10:06.660 --> 0:10:08.760 we putting too much emphasis and too much pressure on 0:10:08.940 --> 0:10:10.708 a lot of things at once for the future? 0:10:11.010 --> 0:10:13.290 I think that's a great question. I think it's all 0:10:13.290 --> 0:10:15.660 about balance, and that balance is going to be really 0:10:15.660 --> 0:10:19.770 different depending on your own financial circumstances and what you're 0:10:19.770 --> 0:10:22.500 trying to achieve. And the worst thing that you could 0:10:22.500 --> 0:10:24.988 do is stretch yourself so far that you end up 0:10:25.380 --> 0:10:29.969 running up credit card bills whilst you're cleverly saving away, 0:10:29.969 --> 0:10:32.520 but actually you might have something that's a high interest 0:10:32.520 --> 0:10:34.860 rate debt, and you don't want to do that. You 0:10:34.860 --> 0:10:36.900 want to pay that down. So I think this is 0:10:36.900 --> 0:10:39.179 where it comes back to really sitting down with your 0:10:39.179 --> 0:10:42.300 finances, getting really clear about what it is that you 0:10:42.300 --> 0:10:45.149 really want. And I don't necessarily mean " things" in that 0:10:45.150 --> 0:10:48.360 sense. It will be, what experiences do you want? What 0:10:48.360 --> 0:10:51.000 sort of lifestyle would you like to have? How can 0:10:51.000 --> 0:10:53.880 you build up to that gradually? The plus point is 0:10:53.880 --> 0:10:55.830 if you're younger, then you've got a lot more time 0:10:55.830 --> 0:10:58.860 to do that if you start early. And I think 0:10:59.099 --> 0:11:02.819 sometimes we worry about whether or not we're saving enough, 0:11:03.000 --> 0:11:05.490 whether or not we're on track, and there's lots of 0:11:05.490 --> 0:11:07.559 tools that can help you with that. But I think 0:11:07.559 --> 0:11:11.160 the important bit is not overstretching yourself, making sure that 0:11:11.160 --> 0:11:15.958 you remain balanced. And if you align your savings to 0:11:15.960 --> 0:11:19.320 your goals and to your ambitions, then it becomes a lot 0:11:19.320 --> 0:11:22.588 easier to say, " Do you know what? I probably could've 0:11:22.590 --> 0:11:24.960 made my lunch at home rather than buying it out. 0:11:25.140 --> 0:11:28.080 I probably don't need that other coffee. Do I need 0:11:28.080 --> 0:11:31.170 those new trainers?" and still give yourself a little bit 0:11:31.170 --> 0:11:35.460 of flexibility to reward yourself. We talked about the 30% 0:11:35.460 --> 0:11:38.309 of income on fun, because life should be fun. 0:11:38.309 --> 0:11:40.410 Life should be fun. Absolutely. I agree with you. As 0:11:40.410 --> 0:11:44.699 someone who's in their 20s, I know how important it 0:11:44.700 --> 0:11:48.570 is to balance your finances. Obviously it is very important 0:11:48.570 --> 0:11:50.130 to make sure that your money's working for you and 0:11:50.130 --> 0:11:53.910 you're planning for the future, but also, I want to 0:11:53.910 --> 0:11:55.889 make memories. I want to have fun. So it is 0:11:55.889 --> 0:11:58.260 about striking that right balance where you're not, like I 0:11:58.260 --> 0:12:01.140 said, just spending tons of money on things. That maybe 0:12:01.140 --> 0:12:03.120 if you sat down you're probably just like, "I could've done without that." 0:12:03.750 --> 0:12:06.510 But equally, you're not saving everything or investing everything, so 0:12:06.510 --> 0:12:09.120 that you can't go out with your friends one weekend and 0:12:09.120 --> 0:12:11.370 have a good time, or you can't go on that trip 0:12:11.370 --> 0:12:13.049 that you wanted to go on. It's finding that right 0:12:13.049 --> 0:12:17.759 balance, like you said. Jenny, I always end these episodes 0:12:17.760 --> 0:12:20.040 with the same questions, so I'm going to ask you, 0:12:20.130 --> 0:12:22.920 what are your three pieces of advice to help our 0:12:22.920 --> 0:12:24.600 listeners get a little bit richer? 0:12:24.660 --> 0:12:27.990 So we talk about money here, but actually it's about 0:12:27.990 --> 0:12:30.630 what it can allow you to do. So get really, 0:12:30.630 --> 0:12:33.029 really deep with yourself in terms of what you want 0:12:33.030 --> 0:12:35.369 your life to look like, what's important to you, what 0:12:35.369 --> 0:12:38.940 your values are, because developing your goals based around this 0:12:38.940 --> 0:12:42.420 will make it a lot easier to have the motivation 0:12:42.570 --> 0:12:46.710 to save. The second one is save as much as 0:12:46.710 --> 0:12:49.740 you can as early as you can, because it really 0:12:49.740 --> 0:12:51.870 does make a big difference to the amount that you 0:12:51.870 --> 0:12:55.980 can save over time, and you get the awesome impact 0:12:55.980 --> 0:12:59.130 of compound growth as well. And then the third thing 0:12:59.130 --> 0:13:02.520 is have fun with it. So I think sometimes we 0:13:02.520 --> 0:13:08.009 are at risk of not enjoying the saving that we 0:13:08.009 --> 0:13:12.208 do, because we see it as something to sacrifice. That 0:13:12.208 --> 0:13:14.400 we're sacrificing things in the now for things in the 0:13:14.400 --> 0:13:17.520 future. But actually, make it fun. Make it a game. 0:13:17.670 --> 0:13:20.400 Think about the rewards that you can offer yourself, and 0:13:20.400 --> 0:13:24.030 feel empowered. At the moment it can feel really stretched, 0:13:24.030 --> 0:13:29.339 particularly with rents increasing, mortgage rates increasing, the cost of 0:13:29.580 --> 0:13:32.730 just living is increasing, and so it can feel really 0:13:32.730 --> 0:13:36.120 difficult to think about saving. But ultimately, we can always 0:13:36.120 --> 0:13:37.980 start small, one step at a time. 0:13:38.040 --> 0:13:42.718 Jenny, thank you so much. This has been just a 0:13:42.719 --> 0:13:45.719 great episode for people to kind of have some food 0:13:45.719 --> 0:13:48.270 for thought, to figure out what they want their money to 0:13:48.270 --> 0:13:51.210 be doing for them. And like we keep emphasizing, striking 0:13:51.210 --> 0:13:54.328 the right balance, and also enjoying life as well. That's 0:13:54.330 --> 0:13:55.800 the important bit. So thank you so much for coming 0:13:55.800 --> 0:13:59.400 on to the episode. This has been amazing. Some great 0:13:59.400 --> 0:14:02.190 tips for planning for the future there, and that's really 0:14:02.190 --> 0:14:05.490 key. You just never know what might happen. Which is 0:14:05.490 --> 0:14:08.880 why, next week, I'm focusing on how unexpected life events, 0:14:09.030 --> 0:14:13.468 like illness, can impact your finances. It's important stuff. So 0:14:13.470 --> 0:14:16.229 if this is resonating with you, then follow the podcast 0:14:16.230 --> 0:14:18.509 and tell your friends. See you next week.