Column: Being Financially Independent

July 24, 2019 | 2 Comments

Carla Seely Bermuda October 2018[Written by Carla Seely]

I was raised in a middle-class family of six. My father worked while my mother stayed at home to look after the family. I come from what is defined as “Generation X”, or what others term the “middle-child generation” – a generation which is self-reliant, savvy, and somewhat calculating.

I was raised from day one to be independent. It was drilled into me at a very young age to never rely on anyone but myself. This was partly due to my parents having their hands full and being unable to dedicate all of their time to us, but it was also due to them wanting us to learn for ourselves by trial and error. I firmly believe that the values my parents instilled in me have shaped my character into adulthood, guided my career choices and ensured my independence. Yes, I am happily married, but I always need to make sure I can put food on the table, a roof over my head and clothes on my back. Put more simply: I must always be financially independent.

Regardless of whether you are married, single, divorced or widowed, making sure you are financially independent is essential. Having the power to make independent choices comes from knowledge, which often comes from trial and error, and you must ultimately stand firm in your choices rather than have them made for you.

So where do you start in creating your financial independence?

Here are six tips to get you headed into the right direction:

Look at your parents

Look at your parents’ spending and saving habits, you can choose to copy what they do or do the opposite. Most of us are at a point in our lives where we can already tell whether our parents’ financial choices are working for them or not. Now, I may get scolded for that comment, but the reality is that looking at your parents’ money habits will guide you in the way you will develop yours.

Visualise and then create an action plan

What is your vision of financial independence? As we get older, our ideals change; perhaps in your 20s, it means paying off student loans, but by the time you reach your 50s, it is saving more for retirement. Whatever your age, take a serious look at your finances and take the time to develop a net worth statement to provide you with a blueprint.

Spending spreadsheet

‘Spending spreadsheet’ is a fancy term for a budget. I don’t like using the word budget as it makes me feel like I have to restrict myself. Spending spreadsheet sounds like it offers more flexibility, and at the end of the day, you are simply tracking your spending habits. I read a great quote a couple of years ago in Forbes magazine: “If you spend like a millionaire, you’ll end up a pauper, but if you spend like a pauper, you have a shot at becoming a millionaire.” Item one on your spending spreadsheet should be to pay yourself first – i.e., save some money before you spend it all on the wants and not the needs.

Eliminate the loan

Debt is crippling, and our priorities have become mixed up. “Wants” have become “needs”. Retrain the brain; if you don’t have the money to pay for it, don’t buy it. You don’t need to take a loan out to buy a car; save for the car and buy a secondhand one by paying cash. You do not need to take out a loan for your wedding. If you are planning to get married, then have a ceremony and reception that you can afford to pay outright.

Insure your greatest assets

Define what are your greatest assets – your home, your possessions, or you and your spouse? You should have adequate insurance coverage based on your situation. Review and confirm that your insurance coverage is sufficient, including life, health, property and long-term care insurance.

Plant it, water it, nurture it and let it grow

Treat your investment account the same way you do your garden. I love to garden, hence the analogy here. Firstly, selecting the right type of investments is important, and working with a professional investment advisor is essential. By adding money to your investment account on a monthly basis, you will get yourself into a long-term savings routine. Then, when you regularly review your investments, you may make changes or tweak the investments selected to ensure you maintain diversification. Over the long term, your investment portfolio will increase. This can also be done through your company pension by adding additional voluntary contributions – that way, over the long term, you will reach your goal sooner.

One thing is for sure, while everyone defines financial independence a little differently, there are some common denominators that apply to all of us. It means you are able to completely support yourself without the help of outside parties, including family, friends or partners. It means relying on your own steady income and taking control over your own finances and not living with excessive debt. It means knowing where you want your finances to be and implementing a feasible plan to achieve those goals. Taking the time to learn more about your finances and how to create financial independence will help put you on the road to financial freedom.

- Carla Seely is the Vice President – Pensions, Life and Investments at Freisenbruch-Meyer. If you would like any further information please contact cseely@fmgroup.bm or call 441 297 8686.

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Comments (2)

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  1. Pangaea says:

    Over the years I have paid over $50,000 to the T.C.D. and $40,000 in Land tax , $ 50,000 in vehicle and other insurance , you do the math for all other consumables. I earned nearly 4 times less than a politician today .

    At the rate that people are leaving the Island for reasons of affordability all that will be left is Doctors Lawyers and Politicians.

    Other reason is the related trickle down effect caused by excessive taxation, and you wonder why we have a decline in tourist beds over the last 15 years.

    There is a hole in the bucket !

  2. Slipnut says:

    The major problem we face is the lack of leadership. From the family unit straight though to the politicians and everyone in between. The challenges that families have today aren’t that much different then in the 70s and up. The issue is, over the years our people skills have fallen. Having a strong base of morals and ethics combined with a healthy amount of respect will still move you forward today faster than any PHD ever will. Having the concept to save money is primarily based on the belief something is worth more than you can afford at this present time. The structure of the banking industry has changed to allow for more personal debt. This has aided generations of people to instant gratification with little or no thoughts of the ramifications of their long term financial status. Credit Card companies make their money on financial mismanagement. Most financial stress comes form blissful ignorance. Only when we age ( 50+ ) and understand the only financial support your entitled to is what you have managed to save and invest in. From a Government prospective seniors are an expense to be paid for by the younger generation of taxpayers. This is the problem, our taxpaying middle class is less than 25k people and can’t be taxed enough to compensate for the overhead this Government is carrying. I over heard a funny story wile standing in line at the grocery store the other day. One guy said to the other guy things are getting better, I used to live pay check to paycheck now I live from direct deposit to direct deposit.

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