As soon as we start our careers we’re told that we need to start saving. We need to start saving for our first car, and then our first house. And there should always be spare money for any emergencies that may occur.
The problem with a lot of this is that, one, it can be pretty difficult to save up meaningful amounts of cash. And two, it’s boring saving for undefined future events that are so far ahead.
There’s absolutely one fund you should start saving for, though, and you should certainly be motivated enough to work on it. Let us talk you through the freedom fund.
The freedom fund is a small fund of personal wealth that can be used to, well, give you freedom from life’s big annoyances. Here’s how it works.
If you have a joint bank account, credit card or a property with a partner, the freedom fund is a secret stash of your own cash. It’s to be used should your relationship go south or you get into an uncomfortable situation at work, or you just need to make a clean break.
The original idea behind a freedom fund was for young women to become financially independent from their partners or jobs, rather than relying on a bad situation. But having financial freedom can apply to anyone.
It might sound like an emergency fund but it’s slightly different. The clue is in the name; an emergency fund should only be touched when you have an emergency – when your car breaks down or you have to deal with unexpected medical bills. A freedom fund is your own money, separate from anyone else’s, and you know you can use it whenever you want to step away from the hamster wheel and make a sudden change in your life.
So, how do I start?
Before you can start building any extra fund for your future, it’s essential that you pay off any debt you have first. Then start saving money from your pay cheques. Once you’ve paid off your debt the main thing is that you stay out of debt. Keep track of your money, know exactly how your spending your money and where it’s going. For example, you could surprise yourself and find that you never unsubscribed from a magazine that you don’t read anymore.
Decrease your expenses
Like any savings fund, you need to ditch any non-essential direct debits. So, heading out for another work lunch because your salad doesn’t look appetising has to stop. You may miss out on socialising with friends but remember the whole point behind the fund – you want to have financial freedom. You may have to sacrifice now to enjoy later.
If you’re prone to treating yourself to mid-week takeaways or treats then they need to be cut out. It may not seem like you’re paying a lot because it’s every now and then but those expenses add up eventually – plus it can help you eat healthier, and who doesn’t want that?
Set up a private account
If you haven’t got a separate savings account, set one up. This is the best way to see your money grow, especially if you set up automatic savings. Watching your account increase will breed more motivation.
To determine how much money you can actually save, you need to determine a goal. Look at how much you’re willing to sacrifice and how fast you want the process to move. The general rule of thumb for any type of saving fund is at least six months of your total living expense. It’s a small enough amount to set you up for a short amount of time. But if you’re planning on more than that, find a way to fill in the gaps.
Filling the gap
Maybe you’ve decided to sell your car, or you received a bonus at work. Put that money straight away into the account – don’t tempt yourself with extra money when you’re saving.
There is always the possibility of negotiating a pay rise. You could offer to take on some additional responsibility for more pay, or even ask if you could receive money for doing over-time.
If asking work for money doesn’t sit well with you or it’s not possible, then there are always websites where you can sell unwanted clothes, shoes and even furniture.
The bottom line
The best way to make saving ‘fun’ is to think of it more as a lifestyle change, rather than putting away hard-earned money that you may not be able to touch for at least a couple of months. If you want money so you can turn around to your partner or your job and say “Adios” then there needs to be discipline in place.
You may need this type of fund more than you think. Living in the UAE, life can quickly become a routine, but when the time comes when you need to escape, you’ll be able to do so far more easily if you have the financial resources. That’s what the freedom fund is all about.