Are you tired of feeling financially insecure and you’re ready to start building a better future for yourself and your family? Well, we may have some insider secrets to help get you there.
We recently spoke to our good friend and investing advocate, Huw Davies. As an advocate for investing and creating financial security, it was great to sit down with Huw and discuss our own journeys, as well as share some great advice on what you can do to help get you on your way to achieving financial freedom and security.
Huw’s Personal Finance Success
Huw became financially independent in 2016, and has since gone on to build a 6-figure business from scratch, has a successful stocks and shares portfolio, and has created a £1M property portfolio, all of which are providing him with an income. That’s pretty impressive, right?
And thanks to his successful investing portfolio, Huw can now follow his passion for helping others to become financially independent too. He is here to share his knowledge so that others can achieve their financial goals. And we’re excited to find out how…
Firstly, what is Financial Security and Financial Freedom?
“Financial security means that you’re able to cover your monthly expenses comfortably, recover from setbacks, save for your future as well as feel in control of your finances.”
“Financial independence for me means that I can live my life how I choose without being dependent on others or having to be employed.”
My overall goal for both financial security and independence is that my monthly living expenses, whether that be the basic expenses such as a mortgage, household bills, etc, or more extravagant expenses such as nice holidays, are covered by my investment income.
So how do we get to that place of being financially secure and free?
Step One – Create an Emergency Fund
Let’s face it, we would all like to be financially free but to achieve it, we need to look at becoming financially secure first, as it’s the stepping stone to financial freedom. Huw recommends keeping your expenses low and looking for ways to expand your income so you can first start to create an emergency fund.
Having an emergency fund of around a year’s worth of expenses gives you peace of mind that when life decides to throw a curveball your way – like an unexpected expense, you don’t need to panic and you can easily cover it.
Step Two – Look for Ways Where You Can Make Additional Money
Huw recommends as well as keeping those expenses low, you should look for additional ways to expand your income. It’s like a game of financial Tetris – the more you fit into your budget, the more money you can accumulate which can be put to work.
Step Three – Getting Your Money Working For You
So, you’ve got your emergency fund set up and you’ve accumulated some additional money, now, it’s time to think about where you can put it to make it work for you with minimal effort.
Huw’s advice is to diversify your income sources so you’re not putting all your eggs in one investment basket. Sure, stocks and property can make you some serious cash, but it’s important not to rely on just one investment option entirely. After all, a market crash or dividend cut could really ruin your day (and your bank account). Huw decided to invest in property as well as investing in the stock market as he knew that not only would his property portfolio provide him with regular monthly cash flow but that his properties would also increase in value, creating equity that he could utilise elsewhere.
Saving v Investing – the battle for your money
Many people still believe that it is safer to save their money in the bank than to take the ‘risk’ and invest it. So when it comes to managing risk, it’s important for you to distinguish between saving and investing.
Generally, saving involves lower risk but with that comes lower returns, while investing offers the possibility of higher returns but can also come with a greater risk of loss, depending on what investment option you choose.
As Huw mentions, ultimately, deciding whether to save or invest should be based on individual circumstances and goals.
Saving: Relying solely on cash for a long-term wealth strategy may not be the best option and that is because of inflation. With inflation rates at 10.3%, relying on a 3% easy access savings account would result in a loss of 7%. Nonetheless, Huw does see the power in having a cash buffer sat in the bank, such as a lump sum of six figures or between 10-25% of total funds, which can provide options to capitalise on investment opportunities that may arise.
Investing in stocks and shares: Particularly in global index trackers, there are potential yield returns of around 9%, which, after accounting for average inflation of 2-3%, can still result in earning 6-7% over time. Passive investment strategies that involve distributing funds among different assets, such as stocks and shares, require zero time, minimal knowledge and can bring in dividends and capital appreciation.
Investing in Property: Offers a higher earning potential of up to four times, but, the process of learning, negotiating, and navigating regulations can take months or years. However, with the help of a property management company like Lifestyle Property People, individuals can leverage their expertise and experience to mitigate risks and maximise rewards.
Huw says: “If you’re looking to become financially independent and starting from scratch – in my opinion you can’t compete with property. When it comes to property, you have more control over your investment. You can negotiate the entry price, add value by refurbishing it, and choose when to sell and how much for. The stock market offers you no control over your investment”.
But it’s important to remember that diversification is key here. You should diversify your assets and spread the risk across various investments. That way you can help minimize the impact of losses and protect your whole investment portfolio.
Worried About a Potential Recession?
A recession is a period of severe and prolonged economic downturn that affects many people and businesses. And, although it can have a negative impact on the economy, a recession can also lead to what’s known as “super compensation” – a phenomenon where things eventually bounce back stronger than before. It’s not uncommon for a recession to occur during a long-term investment that spans over a decade or more. So, if you’re in it for the long haul, don’t let a recession get you down – you might just come out on top!
As the legendary Warren Buffet once said, “Everyone wants to become rich, but no one wants to become rich slowly.” So, when everyone else is running for the hills, you can invest your money wisely and reap the long term rewards. Remember, it’s all about buying and waiting for the reward.
And there you have it! We hope you found this article helpful and if you want to catch the full podcast episode with Huw, check out the link below.
Want to have a chat with us about how we can help you invest in property? Click the link to start a chat with our team on Whatsapp: https://bit.ly/42aqG4s