Hey, it's Kia. Throughout this series, we've been exploring different ways to save and grow your money. In this episode, I want to focus on what your money can actually get you. Everything's changing. It used to be you'd work one job all your life and then retire, but these days there are so many different approaches to work and
leisure. So today, I'm talking to Jenny Hazan, Director of Customer Value Management at Legal &; General, about all the different choices out there, and the freedom our finances bring us to make these choices. So, Jenny, there are many different approaches to work and finances out there. People are doing FIRE, they're taking sabbaticals, they're having portfolio careers. Can you talk me through a few of these different options?
Yeah, totally, Kia. So as you said, that distinction between working life and retirement used to be really clear. In fact, we worked at one organization, probably stayed in the same industry, maybe even at the same company for all of our career. And then on a set date, we suddenly became retired, and hopefully by that point the kids have moved out, you paid off the mortgage, and now
was the time that you got to enjoy life. And I think people are looking for more financial freedom, flexibility and choice, and they're looking for different options. Even just friends of mine actually, that have taken on new ways
of doing this. So a portfolio career, for example, is where you may choose to be freelance, you may choose to work on a number of projects that are related or unrelated, working for companies and organizations that are interesting to you, that you're passionate about. I also have a friend
that's recently taken a sabbatical. So a sabbatical is a period of time where you will agree with your company to take unpaid, usually unpaid, time off, so maybe three months or six months, to focus on other passions or
things like travel. And then in addition to that, because of the pandemic and because of our ability to connect with the working world from lots of different places, lots of people are choosing to be digital nomads, work from wherever they are, abroad. And I think people are really looking for opportunities to do things a little bit differently.
So there's definitely a push for people to think about, " Well, can I work for a certain period of time? And then only work if I need to work?" And we mentioned FIRE, so FIRE stands for financial independence, retire early, and that's a movement that started off in the
US and became popular probably from about 2010 onwards. And the main principles are about saving as much as you possibly can, investing as much as you can, living off less of the world's resources, but living well. But people that are taking on the FIRE movement, are tending to save a lot more than what most people can usually
save. So up to 70% of their income. And they're usually aiming to get around about 25 times their living expenses, so that they can invest that money and live off the investment returns. Now that might seem a little bit extreme and it does mean a lot of sacrifice, but I think what this shows is that people are
looking for different options for themselves. I know for me personally, travel's really important, and so I want to be able to have a lifestyle that over time my working life will allow me to do that.
It is great hearing the different ways that people are actually taking charge of their finances and taking charge of how they work. It is so key, because this generation is very much thinking about the future and thinking about different ways, like you mentioned, our parents or our grandparents, their generation was like you said, one job, work till
you retire, retire, then that's it. And now we're kind of saying, " No, I actually want a bit more freedom. What can I do to get more freedom?" So I want to ask you then, how can our finances help us to access these different choices that we've got?
Yeah, so I think the principles, even if we talk about FIRE where we say, " Oh gosh, that's quite extreme," but the principles of it still stand strong, which is save as much as you can as early as you can. And the reason for that is because the earlier you save, the more time that money has to potentially
grow. And I think with so many different choices available to us now, it can be quite difficult to think ahead to the things that you might want to do. So actually setting out some goals, whether those be long- term, medium, or short- term, so that could be anything from having flexibility around your career, to saving up a deposit, to just being able to afford some nicer little
luxuries in life, is really, really important. But that takes budgeting, that takes saving, and also working towards a goal.
I think sometimes it can be quite hard to think about starting these sorts of things, so one of the things about thinking about these goals, and actually starting to picture them in your head, is that you then have a much clearer motivation for doing the work that you need to do in order to plan for this.
I love goals so much. I'm glad you touched on it, because I think when you come to your finances and you come to planning, or saving, or anything to do with your finances, and you're almost saving aimlessly, it can feel like, " Why am I doing this?" But when you have a goal in mind, that can help. And I'm someone who's very visual, so I put my goals down on a vision board-
Same.
... so I know... (inaudible) . ... so I know at the foot of my bed or wherever I choose to place it at my house, I can wake up, and when you have those days like, " Oh, I just want to spend my money on... I just don't want to do this," you can kind of look at your vision board, and see, actually, I know I'm saving, because I want to get to this or I'm investing for this reason. And it helps
to keep you on track, which is so good. And I'm so glad you mentioned goals, because it's just really, really important. Now, you touched on it a little bit just now, but what can our listeners be doing with their finances now, that can give them as much freedom as possible in the future with their finances?
Once you're clear about your goals and what those goals might look like, what sort of money you might need to afford those goals, the first thing is really to have a look at your finances. So what have you got coming in, what have you got going out. How much do you think that you could save. And I think a lot of people sort of struggle with the concept of, " I don't even know how much to start
with," or, " I haven't got much flexibility." So a general rule is the 50, 30, 20 rule. So 50% of your income would be spent on your essentials. So the needs. 30% on your wants or the fun stuff. And then 20%
saving for the future. So you can start there, and it will be different for different people, but what you want to be thinking about is, " How do I build towards financial resilience?" So what that means is, " Can I weather the storm if something comes out of the blue?" all the way through to financial freedom, which is where you get more flexibility with your choices over the long-
term. So to start off with, make a budget, try and stick to it, and keep going, be consistent. If you have a month that's tough, don't give up, keep going. The second thing is you need to think about emergency savings. So thinking about your living expenses and trying to put away three months to six months of savings that are in an easily accessible cash account, high interest
if possible, that you can gain access to. So these are for the things that might go wrong in life. You know, your MOT just came through and your car's failed, or that you unfortunately lose your job, or maybe the washing machine broke down. So these are things, emergencies,
that you need money for. And if you haven't got three months saved away and you're thinking, " My God, how do I do that?" start with one month, start with one week, step- by- step. The second thing that you can do once you've got an emergency savings budget is start to work on something that the industry sometimes like to call the FU fund. And that is really about
having power and having choice. So this is the ability to walk away in situations where they're not serving you anymore. So that might be a job that you really hate, that's really impacting your mental health. It might be to walk away from a relationship. It might be to walk away from that awful flatmate that has not washed the dishes since the day they moved in. And over
time you can continue to build that fund. So I think that's a really important one to think about. After that, you can start thinking about those savings goals. So the short- term, the medium- term, and the long- term, and think about what sort of money you will need for those goals, and at what point in your life, because that has an impact on where you want to
invest that money. So I think from a longer term perspective, obviously a pension is a great place to start thinking about long- term saving. Pensions can be really tax- efficient, so if you wanted to put a hundred pounds into your pension, £ 80 of that would come from you, £ 20 would come from the government. And also, your employer will, if you've got a workplace pension, will also be
making contributions as well. And I think it's worthwhile mentioning that some employers will put more money in, they'll match your contributions. And if you're not going to that level, you're actually leaving free money on the table, and no one wants to do that.
I love the fact that you mentioned that fund, the FU fund. I'm from a Caribbean household, so in my background we call that like the vexed fund.
The vexed fund. Love it.
So when you're, like you said, when you're annoyed, just having that pot of money, but I think it is about making your finances or making your money a point
to give you freedom. So like you said, freedom of choice, to decide to leave a job that you don't like, all the things that you mentioned, or freedom to cover your income if you happen to lose it for a period of time, or freedom to decide that I want to retire at 45, but I'm going to put my money aside to be able to do that. I think that's the
main key here. We're just trying to get our money to work for us so it can give us more freedom. We have been talking about this and it sounds great, but I want to ask you, are there any disadvantages to all of this? Is it maybe too much to focus on so much of this for the future? Are we putting too much emphasis and too much pressure on a lot of things at once for the future?
I think that's a great question. I think it's all about balance, and that balance is going to be really different depending on your own financial circumstances and what you're trying to achieve. And the worst thing that you could do is stretch yourself so far that you end up running up credit card bills whilst you're cleverly saving away, but actually you might have something that's a high interest
rate debt, and you don't want to do that. You want to pay that down. So I think this is where it comes back to really sitting down with your finances, getting really clear about what it is that you really want. And I don't necessarily mean " things" in that sense. It will be, what experiences do you want? What sort of lifestyle would you like to have? How can
you build up to that gradually? The plus point is if you're younger, then you've got a lot more time to do that if you start early. And I think sometimes we worry about whether or not we're saving enough, whether or not we're on track, and there's lots of tools that can help you with that. But I think the important bit is not overstretching yourself, making sure that
you remain balanced. And if you align your savings to your goals and to your ambitions, then it becomes a lot easier to say, " Do you know what? I probably could've made my lunch at home rather than buying it out. I probably don't need that other coffee. Do I need those new trainers?" and still give yourself a little bit
of flexibility to reward yourself. We talked about the 30% of income on fun, because life should be fun.
Life should be fun. Absolutely. I agree with you. As someone who's in their 20s, I know how important it is to balance your finances. Obviously it is very important to make sure that your money's working for you and you're planning for the future, but also, I want to make memories. I want to have fun. So it is about striking that right balance where you're not, like I
said, just spending tons of money on things. That maybe if you sat down you're probably just like, "I could've done without that." But equally, you're not saving everything or investing everything, so that you can't go out with your friends one weekend and have a good time, or you can't go on that trip that you wanted to go on. It's finding that right
balance, like you said. Jenny, I always end these episodes with the same questions, so I'm going to ask you, what are your three pieces of advice to help our listeners get a little bit richer?
So we talk about money here, but actually it's about what it can allow you to do. So get really, really deep with yourself in terms of what you want your life to look like, what's important to you, what your values are, because developing your goals based around this will make it a lot easier to have the motivation
to save. The second one is save as much as you can as early as you can, because it really does make a big difference to the amount that you can save over time, and you get the awesome impact of compound growth as well. And then the third thing is have fun with it. So I think sometimes we are at risk of not enjoying the saving that we
do, because we see it as something to sacrifice. That we're sacrificing things in the now for things in the future. But actually, make it fun. Make it a game. Think about the rewards that you can offer yourself, and feel empowered. At the moment it can feel really stretched, particularly with rents increasing, mortgage rates increasing, the cost of just living is increasing, and so it can feel really
difficult to think about saving. But ultimately, we can always start small, one step at a time.
Jenny, thank you so much. This has been just a great episode for people to kind of have some food for thought, to figure out what they want their money to be doing for them. And like we keep emphasizing, striking the right balance, and also enjoying life as well. That's the important bit. So thank you so much for coming
on to the episode. This has been amazing. Some great tips for planning for the future there, and that's really key. You just never know what might happen. Which is why, next week, I'm focusing on how unexpected life events, like illness, can impact your finances. It's important stuff. So if this is resonating with you, then follow the podcast and tell your friends. See you next week.