Financial security is often seen as being prepared for an emergency. But opening this out into being prepared for a possibility could give you a whole new perspective.
Having a “financial freedom” fund can give you the confidence to make changes, seize opportunities, or simply walk away from difficult circumstances.
Knowing your life isn’t dictated by money can be an incredibly liberating feeling. Read on to discover how to make your financial freedom fund an integral part of your financial planning.
Your financial freedom fund is about opportunity, not emergency
You might already have an “emergency fund” and be wondering why you might need another pot of money to fall back on.
But the two are palpably different. An emergency fund is designed for just that: to cover you in case of an emergency. Think things like the inevitable broken boiler just when you need it the most, or urgent car repairs that you can’t postpone.
Your financial freedom fund is much more fun. This is about giving you the freedom to take opportunities and the independence to choose to leave a situation that you’re unhappy with.
Having some freedom money could allow you to:
- Leave an unfulfilling job
- Take a career break
- Leave a difficult personal situation
- Reduce your working hours
- Relocate
- Retrain
- Travel
Essentially, it means you no longer have to put up and shut up. You can choose your next steps based around how you feel, not around whether your finances will allow.
Achieving financial freedom through careful investment
Often called the Godfather of Financial Independence, American investor and author JL Collins writes that the best way to achieve financial freedom is through investments. As they grow, in turn your dependence on earned income reduces.
On the flip side, excessive spending can limit financial freedom, given that this needs continuous financial input to maintain.
There’s no prescribed or recommended amount for your financial freedom fund. How much you allocate to this pot depends on how you think you’d use it.
One good way to figure this out is to ask how long you could manage financially if your income stopped tomorrow. We’re always happy to talk to you about incorporating some freedom money into your strategy, so please just get in touch if this is something you’d like to discuss.
Although your financial freedom fund is separate to your emergency fund, it’s a good idea to get the latter sorted first. Having between three and six months’ worth of expenses in an accessible, liquid asset can offer immediate reassurance that you’re protected from shocks or unexpected costs.
How to develop your financial freedom fund
1. Build your investments
As J L Collins posits, investments are the key to wealth building. Once you’ve decided on your portfolio, they can work away in the background, helping your wealth to grow without further input from you.
And if you stay invested, you can also benefit from the power of compound growth. Any returns on your investment can generate returns of their own, and over time this can help to accelerate growth.
A Stocks and Shares ISA is a tax-efficient investment option. You can invest up to £20,000 annually, and won’t pay any Income Tax or Capital Gains Tax (CGT) on returns.
2. Decide how much you want to contribute
This is about the proportion of your income that you save or invest, rather than spend. The more you allocate, the faster you’ll be able to build up your fund and shift your reliance away from earned income.
There’s no one-size-fits-all answer here. The solution will depend on your current earnings and circumstances, as well as your future aspirations.
We can work with you to explore a range of different scenarios to show you how different savings and investment choices could affect your wealth. This can help you to see how much you need to invest, and over what period of time, to build up an effective financial freedom fund.
3. Reduce or eliminate debt
Having debt means you’re much more likely to be reliant on earned income to make regular repayments. Managing, reducing, and preferably eradicating debt is a key factor in your freedom planning.
If you have a lot of debt, prioritise the high-interest debts first, to free up more money to save or invest.
Clearing debts can be a very liberating feeling, too, helping you to feel more in control of your future.
4. Manage your spending
The more you spend, the less you save. And you will be more dependent on income, and less able to easily walk away from a situation.
You don’t need to be overly frugal and count every penny. But tracking your spending can help you identify any unhelpful habits that you could curtail. Essentially, it’s about spending on the things you need and want, but not spending for the sake of it or due to pressure or expectation.
Get in touch
Having a good financial freedom fund can be incredibly liberating. We can help you decide the best way to create your plan. Please email us at info@servoprivatewealth.com or call 01444 715200.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Any links will direct to a third-party website and Servo Private Wealth is not responsible for the accuracy of the information or content contained within linked sites.
Approved by Best Practice IFA Group Limited on 25/09/2026