Linda Kleynscheldt, Head of Actuarial and Product at PSG Wealth
To some, financial freedom seems like an elusive target only reachable by others. With inflation constantly snapping away at our livelihoods, and the ever-present pressure on our spending patterns, the challenge to achieve it is real.
The meaning of financial freedom will differ from person to person – and therein lies the crux of achieving it. As an investor, start by understanding what financial freedom means to you. For some, it will simply mean having enough to meet their current needs. For others, it will include providing for themselves and others in the future. Yet others define financial freedom as paying as little as possible in the form of taxes and fees. Then there are combinations of all of these, where prioritisation of your needs becomes part of the planning.
Choosing the right vehicles to get to your version of financial freedom is crucial. There are different products available in the industry, ranging from the simple to the very complex.
Looking ahead and providing for the future
If your definition of freedom is not having to worry about income in your later years, then considering a retirement product is where you should start. These products allow you to save from your pre-tax income (subject to certain annual limits) and offer benefits from the pooling of assets, which generally makes these products cheaper to manage. You are also able to extend the benefits of these products to your dependants. Retirement annuities and preservation funds are examples of these products.
What about when life is still moving at full speed?
If you are comfortable with the state of your financial future, or if you place a higher value on shorter-term savings, a voluntary savings product or a tax-free savings account are excellent products to consider. These are great options if you want to save up for a more financially secure future or even to make an expensive purchase. If you are a confident saver with a higher risk appetite, a personal share portfolio allows you to directly access security investments.
Enjoying the rewards of a lifetime of saving
For many, freedom means not having to worry about an income when they reach retirement age. After all, it’s the time to enjoy the benefits of one’s hard work. If this is how you define financial freedom, consider purchasing a living annuity or another type of annuity with the proceeds of your retirement savings to help you manage your income withdrawals.
With freedom comes responsibility
Navigating your way to financial freedom comes with the responsibility of understanding what you are investing in, regularly checking if the products you are invested in still match your needs, and taking note of any changes in taxation or legislation that will impact you on your journey. By working with the right road map, doing a regular check-up on your vehicle, and keeping your speed up, reaching financial freedom is a journey worth taking.
ENDS
