The six-step plan to financial freedom: Father who went from £25,000 in debt to owning his own £2million firm shares his tips – from ‘categorising’ spending to having an emergency fund
- Matthew Smith, 34, from Colchester in Essex, was forced to re-evaluate his life following a near fatal allergy attack while on honeymoon in Las Vegas in 2013
- Deciding to find financial freedom, he cleared his £25k debt and set up company
- Business is now worth more than £2M and he has written a book on millennial money tips
A man who went from being £25,000 in debt to launching a business worth more than £2million in seven years has revealed his six-step plan to financial freedom.
Matthew Smith, 34, from Colchester in Essex, said he was forced to re-evaluate his life following a near fatal allergy attack while on honeymoon in Las Vegas in 2013, which landed him in hospital with a £210,000 bill.
While the bill was covered by his travel insurance, he said that ‘nearly dying’ was ‘probably one of the best things that’s ever happened to him’ as it forced him to change his life and focus on his finances.
‘If it were not for that experience, I’d probably still be working that corporate job, doing long hours, earning okayish money, but never really feeling truly fulfilled,’ he told FEMAIL.
After returning from his honeymoon, Matthew quit his job and co-founded his own business, Buckingham Gate, focused on financial planning, a sector he had worked in for almost the entirety of his working life.
Smith grew the business, which increased his income, and set about building a team around him to bolster growth even further. The business is about to recruit its 15th employee and is worth more than £2million.
Matthew Smith, 34, (pictured with his daughter) from the UK, said he was forced to re-evaluate his life following a near fatal allergy attack while on honeymoon in Las Vegas in 2013, which landed him in hospital with a £210,000 bill.
Now, in a new book, The Millennial Money Masterplan, he says that young people do not have to live a life where they are forced to rent, have few savings and no pension.
He believes that, thanks to the internet, millennials are the generation with the ‘easiest path in history’ to achieve true financial freedom with the many opportunities and assistance it provides.
The book highlights that the small, seemingly insignificant steps people can take today to improve their financial situation will compound over time, creating an unstoppable force to help you on your way to financial freedom.
Here, he tells FEMAIL the six steps to financial freedom…
Step 1: Tell the truth about where you are now
As business coach Dan Sullivan so eloquently puts it, “we are all 100 per cent committed to our existing set of habits”.
‘If you are not currently where you want to be financially, this is almost certainly down to your current set of habits around money.
‘The first step in any addiction recovery programme (and being bad with money is often similar to an addiction) is admitting that you have a problem. “Hello, my name is Matt and I am a [inset problem here]’ will usually be the way that you introduce yourself to the group.
‘In the financial world, “telling the truth” involves being honest about how you have spent your money in the past.
‘In The Millennial Money Masterplan I recommend that people try and download the past 12 months’ worth of bank and credit card statements and categorise your spending over the past year onto a spreadsheet or in one of the great financial planning apps that are available.
‘This is an exercise that will take a bit of time, but it is so worth it.
‘Once you have this information to hand, you can start to see where you may be getting pulled off track financially.
In a new book, The Millennial Money Masterplan, he says that young people do not have to live a life where they are forced to rent, have few savings and no pension
For most people, the cause of their financial strife is unconscious spending. It’s that coffee on the way to work, the takeaway pizza at the weekend and the new clothes that we order online.
‘Now, please don’t get me wrong, I am not saying that any of these things are bad.
‘If you really enjoy that coffee on the way to work, then go right ahead, but most people just do these things because it is what they have always done. It’s spending on autopilot.
‘£3.50 on a coffee each morning might not sound like much, but that’s £17.50 a week, £75 a month, £910 a year!
‘Once you have seen where you have been spending money in the past, it is much easier to make different decisions about the future.
‘Once you have that original expenditure spreadsheet for the past 12 months, it is important to update it each month, so you remain conscious about how you are spending your money.
‘Once you are up and running, this process need not take much time at all – perhaps 20 minutes at the end of each month.
‘As part of this monthly process, it then becomes easier to create a budget – how much do you want to spend on coffee or eating out each month for example.
‘CNN reports that nearly 3 in 5 people do no budgeting whatsoever – no wonder so many of us are in the dark about our finances.
‘The simple fact is that most people have no idea where they spend their money.
‘This applies to people who are old and young, wealthy and not-so-wealthy. Just being more conscious around money can create a massive improvement in someone’s financial life.
Step 2: See the future and plan what financial freedom means to you
‘Once you are clear on where you have been spending money in the past, I then encourage people to consider what they would like to spend in their future. In other words, what does financial freedom look like to you?
‘In this step, people should be allowed to dream – what would you really like your financial life to look like 10 years, 20 years from now.
‘How much would you really like to be able to spend on holidays and travel, on eating out and experiences?
‘Again, the simple fact is that most people don’t plan where they want to be in advance, but then they are surprised when they don’t achieve their goals.
‘Having a clearly defined vision of where you want to be in the future can be a very powerful motivator to help you make the right decisions around money today.
‘If people did nothing but follow Step 1 (being more conscious and intentional around money) and Step 2 (having a clearly defined goal for their financial future), I almost guarantee that this would create a massive improvement in their finances.
Step 3: Avoid the pitfalls of ‘lifestyle inflation’
How Matthew Smith went from being £25,000 in debt to running a business worth £2 million
After many years of struggling to pay back the £25,000 consumer debt and at times living beyond his means, Matthew committed to living a life of financial freedom.
He had to be honest with himself about where he had been bad with money and started religiously tracking his spending. The author mapped out the life he wanted and realised he was spending money on things that were not essential.
He quit his job and co-founded his own business, Buckingham Gate, focused on financial planning, a sector he had worked in for almost the entirety of his working life.
He made paying off his debt his number one priority and after that, made saving his most important goal followed by regular investing.
Smith grew the business, which increased his income, and set about building a team around him to bolster growth even further. The business is about to recruit its 15th employee.
He is now focused on increasing his investment portfolio and his passive income streams, such as his first book, Efficient Estate Planning, which is a best seller on Amazon in the taxation category.
Smith still enjoys life and takes seven weeks holiday every year when he travels the world with his family and he does not work weekends.
He writes in the book: ‘Money is no longer a concern. It no longer gives me sleepless nights. I have taken control of money, rather than it controlling me.
‘My hope for all of you is that it doesn’t take a near-death experience to wake you up and jolt you into action. If you’re unhappy with your job, your financial situation, your debt or your freedom, you can change all of it, quickly and relatively easily.’
‘One of the biggest things that prevents people from achieving Financial Freedom is what I call “lifestyle inflation”.
‘This is the process whereby, as people’s earnings increase, their spending increases at the same (or even a greater) rate.
‘In fact, on average, it takes Brits just 6 weeks to absorb a pay increase into their normal lifestyle.
‘Generally, most of us start out our financial lives with things looking a bit tight.
‘When we are students or we get our first job, we are often used to living frugally – because we have to.
‘As our pay increases, our lifestyles improve – often at the same rate.
‘This is all well and good, but it means that nothing is being set aside for the future.
‘When my clients receive a significant pay-rise, my advice is to “spend half and save half”.
‘If your pay has just gone up by £100 per month for example, why not increase your expenditure by £50 a month (you worked hard for that pay rise after all and life is for living).
‘And then set up a regular savings contribution for the other £50.
‘That way, you are improving your life today and planning for your future.
Step 4: Banish debt (mostly)
‘Once you have the basics in place, debt is usually the thing holding most people back from achieving financial freedom.
‘It could be a large mortgage, credit cards or loans, but generally debt will not be our friend.
‘There are two main debt repayment strategies that I outline in the book, The Debt Avalanche or The Debt Snowball.
‘It doesn’t really matter which one you use, but debt should almost always be eliminated as soon as possible.
‘There are a handful of exceptions to this rule and that is called good debt.
‘Good debt can be debt that actually pays you (cashback credit cards for example.
‘Debt that is free (interest free deals on something that you were going to buy anyway, meaning you can keep your money invested and earning for you for longer) and debt that helps you to grow your earnings (perhaps to finance a course or qualification) are all examples of debt that is working for you and not against you.
Step 5: Build financial resilience, so you don’t get pulled off track
‘One thing that can really derail your progress towards financial freedom are those unexpected emergencies.
‘Things like the car breaking down or the boiler needing a repair. These are things that don’t tend to feature in people’s budgets because they don’t happen all of the time and they are unexpected.
‘This is why building financial resilience is so important and there are two major things to cover here.
‘The first is creating a healthy emergency fund.
‘Although there are no hard and fast rules here, I think having three months’ worth of your monthly expenses in the bank is a good place to start.
‘Although this is no easy feat, it will put you in a much better place when the unexpected happens, which it will inevitably do in life.
‘The second thing to get right is insurance. Although there is a ton of insurance that is a complete waste of money, there are a few things which really are worth protecting, namely; you and your family (life cover, critical illness cover), your home, your car and your travel (my £210,000 medical bill in hospital in the USA is testament to that).
‘Having the right insurance in place means that you don’t get side-tracked when something bad happens.
‘Had it not been for my travel insurance, I may well have had to sell my house to pay my medical bills!
Matthew believes that, thanks to the internet, millennials are the generation with the ‘easiest path in history’ to achieve true financial freedom with the many opportunities and assistance it provides
Step 6: Get your house in order and maximise the opportunities in front of you
‘The final step is all about making the most of things which we all know we should be doing, but many of us simply aren’t.
‘Things like maxing out your company pension contributions (with pensions you usually get free money from your employer and the government – who wouldn’t want that), contributing to any company share schemes and making the most of other tax reliefs and incentives offered to employees and business owners.
‘These kinds of “hacks” can make a huge difference to your own financial success, but the fact remains that many people simply don’t know about them or don’t implement them.
‘There is one more step (which has a whole section dedicated to it in the book), step seven if you will.
‘This is all about creating passive income streams so that you can earn money while you sleep, but that is the subject of another article.’
The Millennial Money Masterplan is published by Springtime Books, priced £14.99.
Source: Read Full Article