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One of the first questions a financial adviser asks a potential new client is ‘What are your financial goals?’. Whilst many will think of owning a super yacht, others will ultimately think of financial freedom. Achieving financial freedom isn’t easy, it requires budgeting and forming better spending habits. 


A few years back I heard of a 30-day technique which involved not buying something for 30 days and only after the period had ended could I buy it – if I still really wanted/needed it.  

Now of course, without sounding completely ridiculous, this doesn’t work for everything. That said, my window shopping had improved, and I was actually able to ‘shop’ without spending, resisting the urge to spend for the sake of it.  

‘It’s only £20’ – I’d say this to myself to comfort my spending habits of purchasing something new every other day. 

To put the £20 into context, spending such a sum every week over the course of a year equates to £1,040 per year. Suddenly that’s a lot of money, and over the course of say 20 or 30 years, this can really impact whether or not I reach my financial goals. 

Now, I’m no robot and I’m assuming neither is anyone reading this (minus the odd AI machine for SEO purposes), so how do you/we find a balance? 

Let’s return to that original question ‘What are your financial goals?’. 

This question can mean something different to each of us. Understanding what’s important to us takes time and ultimately there’s a sense of sacrificing somethings for another. ‘What does financial success look like to you’ – this for me, is a more prudent question. 

There’s no denying the UK population are living longer, despite increasing global warming. 

To that extent, financial success – for me – includes having the freedom to make choices on what and where to spend my money in the future. Having enough money to support me in my later years and through retirement – a time when I’m not working and earning a regular income.  

This might sound frivolous, but in order to understand how I might achieve my goals, I simply ask myself ‘How can I achieve that?’. 

The simplest form of understanding how I, or you for that matter, can achieve financial success and freedom is to identify your current financial position, this includes understanding your income and expenditure. Below are some simple steps you can take: 

  • Calculate your income
  • Create a list of your monthly expenditure
  • Identify any fixed or variable expenses
  • Identify your monthly net position

From here you can begin asking yourself – Where am I spending my money? – What can I live without? How can I save more money? 

Many moons ago when I undertook this process for the first time, I found I bought a coffee from a well-known coffee house every single day. The cost of which was a circa £3. So, for five days a week, over a month, a year, minus the odd holiday, I learnt I was spending over £600 per year on one coffee a day (£15 a week, £60 a month).  

Sure, everyone’s entitled to one small vice, but at the cost of £600 a year – this isn’t going to help me, or anyone reach a financial goal. FYI, I’m not suggesting you completely ignore the coffee shops or your urge to buy a coffee, just think a little prior to buying it – do you really need it? 

Creating a budget, one that’s flexible and allows you to make the odd ad hoc purchase as a treat for yourself requires taking time to understand where you are spending presently. In my coffee example above, I reduced my spend to one coffee a week and every Friday, when dress down Fridays were a ‘thing’, I’d visit the coffee shop for my little treat.  

Over time, coupled with a pandemic, I have removed this spending habit completely. 

To help me reach my goals in a tax efficient way I now invest regularly into my future self via the form of a Pension and ISA’s. There will be ad hoc purchases made along my life journey, that I know, things like needing a new car for example, at some point we’ll all be needing an electric car – we have a planet to save don’t we! 

To better understand what a future budget looks like, there are processes such as a Cash Flow Analysis which can help identify any impact future spending may have on reaching a financial goal.  

Factoring in the costs and impacts of holidays, family planning, school fees, moving house etc, all need to be understood better if you really want to meet your financial goals. 

I’ve formed a new saving habit year after year to save more money for the future me, some years my plan hasn’t changed much. But I have budgeted and understood my budget in the short term to understand the impact my spending habits have today, on the future me. 

Using the £3 daily coffee and the needless £20 weekly spending as an example, I formed a new saving habit of £120 a month. 

All things being equal and factoring in what Albert Einstein is rumoured to have called ‘The 8th wonder of the world’, my new spending habit could return me over £120,000 in 30 years’ time, through the power of compound interest. An illustration is below.  

Compound interest isn’t the same as simple interest, you earn interest on interest.  

To shed some light on the example above, in my first year I started with £1,000 and added £120 per month. At the end of Year 1 I will have £1,000 PLUS 12 x £120 (monthly contributions), equalling £2,440 on deposit. I earn 6% on the balance (£146) resulting in a balance of £2,586 at the beginning of Year 2.  

At the end of Year 2, after contributing £120 per month throughout the year, I earn 6% or £241 on the balance – £2,586 PLUS 12 x £120 (monthly contributions), resulting in a balance of £4,267 at the start of Year 3.  

All things being well, the process will continue over 30 years. 

After just 2 years the interest gained would be £387. 

In comparison to simple interest. If I invested £4,267 at the very beginning, over a 2-year period with an interest rate of 6%, the interest gained would be £256. 

Compound interest sees me £131 better off. 

It is clear, earning interest on interest is considerably better than earning simple interest. Perhaps Albert Einstein was right! 

Right now, in the UK, according to research by the Financial Conduct Authority (see research here), the average pension pot is £61,897. 

With the population living longer, let’s assume your retirement lasts 20 years, £61,897 split over 20 years is £3,094 per year.  

Now don’t panic, there is the comfort of receiving a State Pension for most, which is roughly £9,600 a year. This results in a potential retirement income of £12,694.  

Will this be enough for you to live on in retirement?  

Does this sound like you’ll be able to live in financial freedom throughout your later years after a life of working? 

For a lot of people, the answer will be No! 

Maybe it’s time to start taking your financial goals seriously. 

The earlier you start improving your spending habits and begin budgeting, the more likely you are to reach your financial goals – whatever they are. 

If you’d like to discuss your spending habits and begin budgeting better for the future you, seek regulated financial advice. Most offer a free initial meeting and explain the areas of finance they can assist you with throughout your life. 

Identifying your spending habits and any areas where you can improve your saving is bespoke to you, this article is to provoke thought and does not constitute any financial advice. 

The important thing is to find an adviser and a company you can trust. 

At Fiducia Wealth Management, we are a Chartered Firm of Financial Advisers, we put you and your goals first.  

Reach out if you’d like some more info, if it’s not me or us, please do start controlling your spending habits and budget.