Is it OK to want to be rich?
It’s funny, in the UK we often have a very negative view of people who want to be rich – they must be selfish, greedy, mean or self-obsessed. The trouble with this (as well as being complete nonsense) is that it acts as a deterrent for people who might otherwise aspire to have the best things available to them.
How much do you need to be rich in the UK?
Being ‘rich’ means different things to different people. You could argue that being rich is more of a feeling than something real, but that doesn’t address the question. For most people, being rich is about having more money than time. So, if you stop working today, you’d have enough money to live the life you desire and do all the things you want to do with all the people you want to do them with. Basically, you will run out of time before you run out of money. It’s not about being greedy, it’s about feeling secure.
So, how much money do you need to have that amount of freedom?
Again, this varies for each person, but here’s a simple way to try and find that magic number: Let’s say you decide to retire at 60, but you hope to live to 90 – this means you’ll have to fund around 30 years without an income. (We’ll assume that you are mortgage free and you have no outstanding debts or financial dependants.)
In very simple terms, if you would like to have around £50K per year for 30 years, that’s £1.5 million. (It’s worth noting that £50K after tax is less than £40K, which doesn’t go that far if you live in an expensive part of the country.) Whereas, if you want £100K per year (currently around £67,803 after tax) for 30 years, that would be £3 million.
This is obviously a super blunt calculation, but it does give you an indication of the types of sums needed to reach your own version of being ‘rich’.
How does age make a difference?
Quite simply, the older you are, the less time you need to fund. If you are 70 years old and you have £1 million in your retirement fund, you will probably be able to have a comfortable retirement as you only need to fund around 20 years (touch wood!).
However, if you retired at 50 with the same fund, you would need to fund around 40 years, which is much more difficult – this is why so many people are now working longer than they originally planned.
I have a hairdressing business – how will I ever get the money I need/want for my retirement?
The good news is that with proper planning and enough time, it is possible to make some serious money. Yes, you need your business to make a profit and you need profit to be able to invest, but the ‘trick’ is to learn how to invest your profit to secure your own future.
If it’s so easy, why doesn’t everyone do this?
This is a question I find myself asking all the time. I guess, like so often, the needs of ‘now’ outweigh the needs of ‘the future’. Do I invest for my future OR do I book another holiday? Or buy a fancy car? All the usual stuff that gets in our way.
But the question was, is it possible for hairdressers with successful businesses to become rich? The answer is YES! The key is being able to run a profitable business as well as making smart and wise decisions that combine your needs of today with your requirements of the future.
I am in my 60s and I run a successful business, but I am not wealthy. Is it too late?
The truth is, creating wealth usually takes consistent investment and time. So, although you may well have money to invest, you don’t have as much time as someone in their 40s or 50s. That being said, it is still important to maximise your position. The best advice is to think about all this stuff as early on as possible. The more time you have, the more options you will have.
