Become your own financial advisor – The real secrets to becoming financially independent.

  • Post Author:
  • Post Comments:0 Comments

Financial independence is something that you are more likely to come across on the internet on a blog or on twitter, not in a book. But thats exactly what Become your own financial advisor – The real secrets to becoming financially independent by Warren Ingram is about.

It is that point in your life where you have enough money to cover your expenses and lifestyle without the need to continue working. Whether it be from having enough capital, living off the investment income or from annuity income streams, it doesn’t really matter. Important thing is that you have choices to decide how you want to live and work without feeling obligated.

Financial freedom  has been made more prominent by individuals like you and me. Bloggers like Mr Money Mustache and Steve Adcock and even Stealthy Wealth in South Africa have been sharing their financial freedom journeys. It is not normally something that you will have heard from your financial advisor. The story you hear from them is the normal work for 40 years and plan for retirement with this that and the next fund.

A refreshing read

This book was a real surprise to me because it was unlike other personal financial books that I have read. I have not come across many books on this topic. Most books are usually about the different elements like investing or managing your finances or creating other income streams. Also most of these books are written by international authors with little South African relevance.

Warren Ingram the author of Become your own Financial Advisor is a successful South African financial advisor and founder of Galileo Capital. What makes this book so interesting and valuable is that being a successful financial advisor has not stopped him from sharing financial information freely. Its not just this book but he is active on twitter and hosts the Honest Money podcast that is also a  mine of information. Lastly but most importantly is that all the profit from this book goes to the Serendipitytrust, a non profit organisation to fund education for children and young adults.

The best financial freedom book to start with?

This book is easy to read and written in a user friendly way to suite all ages and life stages.  Depending on where you are in your life you will be on a different part of the financial journey. The book is written that way so you can just read the sections relevant or of interest to you. I also found it very balanced and not forcing you in a particular direction, other than financial independence of course. The author covers topics from more than one angle a also deals with many of the investment myths out there.

As someone who is on this financial freedom journey I could really identify with the book the logic and recommendations. I have had to work most of this out myself. It was good to read it because it has confirmed to me that I am on the right track and my understanding of personal finance and financial freedom is correct. Had I read this book several years ago (only published in 2019) I could have had a jumpstart. I honestly think this is one of the best personal finance books that you can read if you are just starting out.

Financial Freedom

My favourite chapter was the first. Why? Well because it is about financial freedom of course and it sets the reason for doing everything. Also Warren jumps straight into the topic instead of dragging it out. Financial freedom is a philosophy that you either get or you don’t. The rules and principles are very simple but you have to accept it, buy into it and implement it to become reality. If you don’t believe then you won’t even get out of the starting blocks.

There are 4 key rules that guide everything, follow these and you have won most of the battle

  1. Be free of bad debt all the time – Bad = high interest short term debt – clothes, furniture, holidays etc
  2. Build and emergency fund for financial emergencies – 3-6 months salary or more if you have a risky job
  3. Always spend less than you earn and save at least 15% of total income (ideally more)
  4. Build income generating assets that can eventually pay for your expenses.

Step away from that property

I mentioned earlier that the book was very balanced and it is. But that doesn’t stop it from taking a view on some topics. A strong view is taken on property investing. Its more than a view, after looking at the returns, property is not what it seems. This was my second favorite chapter. Reading it I could completely identify as I too have come to the same conclusion. Property investing is far from simple and risk free as many people want you to believe.

As an asset class it is still important for diversification. But the house that you live in doesn’t actually count as an investment. Renting can often be a better option. Buy to let requires a lot of work to get any reasonable returns. The biggest learning for me was that maybe listed property was a better option for investment returns. It has a lot of the exposure to property without some of the risks and definitely without any of the hassle.

Life Stages

Ideally we should all start investing young but the reality is that few of us do. Old people are wise and young people don’t listen, this is the way of the world and no book or advice is going to change that.

That said if you are young and starting out then the Starting Out chapter is for you. It is packed with all the reasons and examples of why it is the best time for you to setup financial freedom. If you start with financial goals early you can plan your financial future. Avoid the pitfalls of debt. Leverage the compounding effect. Take advantage of your employment and increasing salary to get a headstart.

If like some of us you had a mis-spent youth, then you need to jump to the Building Up and Balancing Out chapter. This is where you typically have all the responsibilities and no money. That is because you were not paying attention in the starting out phase. So it will probably pay to read the Starting Out chapter too so that you know what you missed out on. Good news is that you typically have a good income. So it is a matter of refocussing the spending, setting some priorities and goals and upping the savings rate. With focus and diligence there is still time for late starters to catchup.

For entrepreneurs or people staring their own businesses the picture can look quite different. It is often seen as a path to financial freedom but it comes with a lot of risk. How do you manage this financial risk. Having started a business myself I know how easy it is to lose the separation line between yourself and the business. From a financial point of view this is critical. Effectively you are putting all your money into one investment. That is not ideal from a diversification point of view. You have to keep these two separate so that if the business fails or when you want to leave you can do so without losing everything. 

Retirement turned on its head

Retirement is not an age it is a number. The number is your financial freedom number. How much money do you need to be financially free? Its more than just a number. Remember the 4 rules from earlier? If you can tick all of those off then you can effectively retire.

You will have limited financial pressure and tons of experience. That sets you up to do what you have always dreamed of. Now that sounds like a good retirement. If you can reach this by 35 or 40 years old then you are really in business.

To achieve this you need to know how much to save understand the market risks, inflation growth rates etc. If you can’t earn more then you need to spend less. Manage your budgets better and eliminate debt. All of these levers are there for you to manipulate to achieve the desired outcome. The first step is understanding all of the options You are in control of all of this. It is up to you to manage it all.

The nitty-gritty to become your own financial advisor

There is a lot of information to consider if you want to become your own financial advisor. The rest of the book covers this in detail. Budgeting and debt management focusses on planning your finances and avoiding debt. This is one of the key elements holding people back from achieving financial independence.

Once you are managing your money properly you need to invest the saved money in order to make it grow as much as possible. Investing is not about just putting all your money into the latest and greatest scheme or following your friends advice. There needs to be a plan and a systematic way of doing it. Investment 101 covers these topics

  1. Define your investment objective
  2. Establish how much you have to invest
  3. Decide on what assets to buy
  4. Get started buying shares
  5. Keep it up

How to invest is just as important as knowing what to invest in. There are many investment options and understanding these options is critical to managing your risk and meeting your objectives. Everything from bitcoin to bonds, endowments, ETF, fixed deposits, listed property, equities, annuities and off shore investing is explained.

The boring but important stuff like insurance, tax wills etc is also covered. Most of us glance over these because they are complicated and full of legal stuff. But if you want to be your own financial advisor then you had better know about everything. Its not what you know that should worry you, it is what you don’t know.

Do you need a financial planner

This book is about how to become your own financial advisor. So why would you need a financial planner?

Aristotle famously wrote “The more you know, the more you realise you don’t know”.

Even if you use a financial planner you need to understand personal finance. The more you understand the better. You cannot and should not absolve yourself of the responsibility of understanding and managing your finances.

So you should know how to choose a financial planner and what does a good one look like. What should you expect from them? How will you know if you are getting the right planning for you? This book helps you understand all these questions.

Whether you want to go it along or look for advice it doesn’t matter. If you are interested in achieving financial independence then Become Your Own Financial Advisor has all the secrets that you need to know.