# What should financial freedom mean?



## Betsy Og (15 Aug 2005)

While this is, I suppose, a personal thing, any thoughts as to what we should be aspiring to??

No. 1 is probably paying off the mortgage. That said its the cheapest borrowing you'll ever have, and is paying it off only really for those of us who harbour, at some level, the fear that everything could go pearshaped and that at least we'd have a roof over our heads if all came to all?

Personally I think it would be the freedom to do the job or work we think we'd like to do - to be able to give up the current grind and pursue the "dreams" - to work to the beat of our own drum.

Re early retirment, while it sounds good, if you retired at 50 (say), assuming your health will hold for a good few years then you have a full 20 years up to 70 - at which time you might still be fairly sprightly. Thats a long time to be kicking your heels.

So would think 58 onwards maybe would be a good target - or if you get into the job you want/enjoy/were born for (does such exist I wonder??) then maybe you'd love working until you're 70??


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## z107 (15 Aug 2005)

I wouldn't worry too much about paying off the mortgage. It's cheap money, and best of all someone else's money 

Some people might advise using cheap money to work for you.

If the economy goes pearshaped, well we're all in the same boat. (Well a great many of us anyway)


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## dam099 (15 Aug 2005)

Betsy Og said:
			
		

> Re early retirment, while it sounds good, if you retired at 50 (say), assuming your health will hold for a good few years then you have a full 20 years up to 70 - at which time you might still be fairly sprightly. Thats a long time to be kicking your heels.
> 
> So would think 58 onwards maybe would be a good target - or if you get into the job you want/enjoy/were born for (does such exist I wonder??) then maybe you'd love working until you're 70??


 
It obviously depends on what age you are now but for people currently in their 20's and 30's and maybe even 40's then I think if healthcare advances continue at current rates and with the looming pension problems then working well into the 60's and maybe even 70's may well be the norm in years to come.

Life expectancy at birth is 75 for men and 80 for women so if you have already made it to 50 then you statistically are probably going to get a few more years than that.

There are scientists out there at the moment who seem to think that we are on the verge of some major medical technology breakthroughs that could see life expectancy increase significantly in the next few decades (of course they may be as accurate as those who saw us all in flying cars by now)


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## ClubMan (15 Aug 2005)

I had no other loans so worked to clear the mortgage before it ran full term. Best financial thing I ever did. I was then able to divert the erstwhile repayments into my _SSIA_, pension and other regular savings. I have been totally debt free for a good few years now and am very happy with that. Others with different situations and goals may find other approaches more appropriate to their needs. If I did find it necessary to borrow I would certainly do so at mortgage rates and over the shorters term possible.


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## RainyDay (15 Aug 2005)

umop3p!sdn said:
			
		

> I wouldn't worry too much about paying off the mortgage. It's cheap money, and best of all someone else's money
> 
> Some people might advise using cheap money to work for you.
> 
> If the economy goes pearshaped, well we're all in the same boat. (Well a great many of us anyway)


Don't see the logic of the 'same boat' comment - It isn't much comfort to you if your home gets reposessed to know that others have been reposessed too.


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## RainyDay (15 Aug 2005)

Betsy Og said:
			
		

> While this is, I suppose, a personal thing, any thoughts as to what we should be aspiring to??
> 
> No. 1 is probably paying off the mortgage. That said its the cheapest borrowing you'll ever have, and is paying it off only really for those of us who harbour, at some level, the fear that everything could go pearshaped and that at least we'd have a roof over our heads if all came to all?
> 
> Personally I think it would be the freedom to do the job or work we think we'd like to do - to be able to give up the current grind and pursue the "dreams" - to work to the beat of our own drum.


For me, it would be not having to set the alarm clock - to be able to get up at the time that my body clock wakes up.


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## z107 (15 Aug 2005)

> Don't see the logic of the 'same boat' comment - It isn't much comfort to you if your home gets reposessed to know that others have been reposessed too.


 
Herd mentality. It's probably what's keeping the economy going! If the economy did go bust, then the government probably would have to step in once most of its citizens are homeless and the banks go bust. Who knows what would happen. In the same boat, even if it's sinking.



> For me, it would be not having to set the alarm clock - to be able to get up at the time that my body clock wakes up.



Is it posible you could arrange to work from home?

I find that I do my best work from 10:30pm onwards. I suppose it's to do with fewer distractions (like AAM )
If I waited until my body clock told me to get up, I'd probably end up nocturnal, or sleeping like my cat (20 hours a day)!


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## ClubMan (15 Aug 2005)

umop3p!sdn said:
			
		

> I find that I do my best work from 10:30pm onwards. I suppose it's to do with fewer distractions (like AAM )


Now I have visions of _Brendan _reading a prayer before bedtime followed by _AAM _closedown for the evening...


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## CCOVICH (16 Aug 2005)

RainyDay said:
			
		

> For me, it would be not having to set the alarm clock - to be able to get up at the time that my body clock wakes up.


 
Well I've been getting up between 5.30 and 7.30 pretty much every day since I was 12.  So my body clock alarm goes off at around 7.30/8 every morning at the latest (regardless of how much drink taken etc.).

I don't mind my mortgage, but I guess I'd mind it a lot less if I had it been paid off.

I guess financial freedom to me would be to be able to take a job I actually thought might be interesting and challenging, rather than taking one that I feel I have to, because of money etc.

Oh yeah.  And not to have car loan and my insurance on dd!


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## Brendan Burgess (16 Aug 2005)

I think owning your own home without a mortgage is an essential aspect of financial freedom. If you have a mortgage, you are not free. (Having a mortgage while having liquid investments which exceed it is the same as having no mortgage. )

Being able to retire comfortably immediately is also part of being financially free. And that's why it is almost impossible to achieve complete freedom. How much is enough to retire on at 40? A nice house and €4m? What if you have huge medical bills? What if you live until 150? What if your status changes - you get married or you split up? If you split up, you may have to give him the house and half the €3m left after buying your own house. So now you have a nice house and €1.5m, so it's back to work for you. 

The reality for most people is that there is rarely such a thing as enough money. The more they earn, the more they spend, the bigger their debt. I can only think of one person whom I know who says she has plenty of money, and she is 98 years old and in good health. 

Financial freedom is a fairly abstract concept. In reality, we are faced with more practical questions:
Can I afford to take a cut in salary to do a job I prefer?
Can I cut down my hours to mind the family?
Can I afford to give my child a present to help him buy a house? 
Can I afford to trade up or buy a holiday home? 

Financial freedom is probably unattainable, but reasonable financial comfort is a realistic goal. 

Brendan


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## RainyDay (16 Aug 2005)

umop3p!sdn said:
			
		

> Herd mentality. It's probably what's keeping the economy going! If the economy did go bust, then the government probably would have to step in once most of its citizens are homeless and the banks go bust. Who knows what would happen. In the same boat, even if it's sinking.


This wouldn't be the same Govt who you repeatedly complain are too big, too intrusive, too taxing etc etc - but you're depending on it being there with a safety net for you?


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## ClubMan (16 Aug 2005)

Hoist with his own petard.


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## Allen (17 Aug 2005)

Brendan said:
			
		

> So now you have a nice house and €1.5m, so it's back to work for you.
> Brendan


 
You must have an extravagant lifestyle if you can't retire on €1.5! I think you have said elsewhere that average stockmarket returns give around 7% which would give you an annual income of over €100,000. That is more than a comfortable living in my book!


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## dam099 (17 Aug 2005)

Allen said:
			
		

> You must have an extravagant lifestyle if you can't retire on €1.5! I think you have said elsewhere that average stockmarket returns give around 7% which would give you an annual income of over €100,000. That is more than a comfortable living in my book!


 
Some of that return would need to be left in to maintain the value of your capital dur to inflation (so reduce that by 2-3% in the present enviroment).
If you were to sell to realise capital gains you would also incur dealing costs.

However it would be possible for example to build a portfolio of blue chips with a dividend yield of around 3% which would provide about EUR45,000 p.a. not enough for an extravagant lifestyle but probably comfortable if you have no mortgage to worry about.


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## oysterman (25 Aug 2005)

Allen said:
			
		

> You must have an extravagant lifestyle if you can't retire on €1.5! I think you have said elsewhere that average stockmarket returns give around 7% which would give you an annual income of over €100,000. That is more than a comfortable living in my book!


Beware inflation.

One of my early memories is a great-uncle retiring and selling his business at the turn of the 1970s. He was the only wealthy person in our family. He was really well off.

He died in the '80s and his wife died around 1990. She died poor.

What did for that wealth was the inflation of the 1970s and an investment strategy which didn't keep pace with it.

I wouldn't feel remotely confident making a decision to live off €1.5 million. I'd be straight back to work with Brendan....


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## Betsy Og (25 Aug 2005)

In an era of sluggish Euorzone economies, ours excepted, I dont really ever see a return to v. high inflation. Maybe this deserves a thread of its own but I think that low interest rates and low inflation would seem to be the new era.


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## oysterman (25 Aug 2005)

Spiralling oil prices? Declining oil supplies? A world economy hopelessly dependant on oil and its derivatives?

No danger of inflation?


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## Betsy Og (29 Aug 2005)

oysterman said:
			
		

> Spiralling oil prices? Declining oil supplies? A world economy hopelessly dependant on oil and its derivatives?
> 
> No danger of inflation?


 
Point taken, though I reckon at some stage we'll get over the oil dependancy - as they said, the stone age didnt end because they ran out of stones.

In Ireland there should be no duty on renewable fuel e.g. rape seed oil and bio-mass. A reduction in the car tax for diesels, i.e. make the tax for a 1.9 diesel the same as a 1.6 petrol. Maybe reduce duty on diesel as is more environmentally friendly and diesel engines can use the aforementioned renewable fuel.


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## Moneybags (16 Sep 2005)

I'd much rather put my money into a pension than a mortgage. Clearing the mortgage early might not be a bright idea when money is cheap but it's hard to pay a mortgage and a pension at the same time. If you want financial freedom, you'll have to have a decent pension. And the tax breaks for pension payments are much better than for mortgages.


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## Itchy (18 Oct 2005)

Interesting point. Can you elaborate further on this?


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## Rujib (18 Oct 2005)

Moneybags said:
			
		

> I'd much rather put my money into a pension than a mortgage. Clearing the mortgage early might not be a bright idea when money is cheap but it's hard to pay a mortgage and a pension at the same time. If you want financial freedom, you'll have to have a decent pension. And the tax breaks for pension payments are much better than for mortgages.


 
Very good point and one which have practiced having paid morgtage off 6 years befor term and putting 24% plus of salary into my pension since age 35.

Trouble is every time I look at my annual statements I get the feeling I would be better off putting my AVC on the horses!

I know, I know, investing is for the long term and all that BUT, I would still like the fund manager to show me what he is getting paid for. MAKING A DAMN PROFIT!!

Anyway, to get back to the original question re financial freedom.

There is no such thing probably. Just look at the grief that lady in Limerick has had since she won the Euro Lottery €115 million.

Tks


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