Being good with money means different things to different people but at its core it means not worrying about it, being able to enjoy life now and having financial security when you can’t or no longer wish to do paid work.

Warren Buffett is one of the richest people in the world, with an estimate financial fortune of $82.5 billion. He built his fortune through a company called Berkshire Hathaway, which has invested in a range of businesses, including household names like Coca Cola, American Express, Apple and GEICO (the second largest vehicle insurer in the US).

It is widely acknowledged that Buffett is one of the smartest investors in the world. Berkshire Hathaway’s shares have grown at 20.5% per annum between 1965 – 2018. This compares to 9.70% for the S & P 500 (an index benchmark of the 500 largest US quoted companies).[1]  

Your saving and investing efforts can be given a serious boost if you can benefit from free money in the form of bonuses and tax reliefs. Here are four key saving incentives available to UK tax residents.

Pension

Employees under age 75 and who are not members of a defined benefits pension can attract a bonus payment from their employer and the government that has the effect of increasing their own contribution by at least 108%. Higher bonuses are available to higher and additional rate taxpayers, and from certain employers that pay more than the legal minimum.

A healthy relationship with money means that you can balance your immediate and longer-term lifestyle desires and needs, the most expensive and non-optional of which is financial independence – that stage when you have enough money to make paid work optional.

The key variables that will affect your ability to build financial assets are the amount you save, the returns you achieve on your money and the period of time your money is invested.

We all want to worry less about money, be able to cope with any financial shocks, to afford treats and fun things now and to be financially secure when we finally stop working and earning.

Conventional advice is that to achieve anything, you should have a written goal, a plan for achieving it and regularly monitor progress to check that your daily habits and actions are getting you nearer to your goal.

What’s the most valuable asset you own? Is it your house, your car, or perhaps the value of your pension scheme? 

Unless you are approaching retirement, the most valuable asset you own is likely to be you! Or to be more precise, the cumulative value of your potential future income from working – your human capital.

Wealth is created by gradually converting your human capital into financial capital whether that’s in the form of investments, property, pensions or physical capital.

Many people dream of winning the lottery and receiving a life changing lump sum. But large lump sums can also arise from winning on Premium Bonds, negligence compensation, redundancy, sale of a business or, most commonly, from an inheritance.

But while receiving a financial windfall might sound appealing, making good financial decisions can be a real challenge for the recipient. The media is full of stories of lottery winners who ended up penniless and lonely within a few years, or a business owner who slipped into depression within a few years of selling their business.