Step 47: Understanding Shares

Step 47 of the 100 steps to financial independence: Understanding Shares
Step 47: Understanding Shares

Here starts a new part of our 100 steps to financial independence, with this being the first step in a mini-series on investing.

If you are serious about money, it is worth understanding more about the stock market and at least get a basic idea of what it is and how it works, before you decide for yourself whether investing will be something you would like to start doing. Investing is often a long-term decision and depending on the risks you are willing to take, you might or might not feel that investing is the right thing to do for you.

Let’s start with one of the key components of the stock market: shares (also known as stocks) and find out what they are, why they exist and how they make or lose us money.

What is a share

A share is basically a very small part of a company. If you have a share, it means you own a part of that very business and the more shares you have, the bigger the part you own of that company. Continue reading “Step 47: Understanding Shares”

Step 46: On Inflation and Interest Rates

Step 46 of the 100 steps mission to financial independence: On Inflation and Interest Rates
Step 46: On Inflation and Interest Rates

We’ve mentioned inflation in several earlier steps, so it’s time to have a closer look at this economical phenomenon, how it works and what effect it has on the economy and your personal finances specifically.


Inflation is an increase in the prices of goods and services over a period of time, leading to a  loss of the relative value of our money. If you have $1,000, you can buy 10 items that cost $100 each today, but when the item price goes up to $110, the $1,000 will only buy you 9 items in the future. Inflation leads to us being able to buy less for the same amount of money.


The opposite of inflation is deflation, with prices dropping and therefore our money increasing in value. Although this might initially sound like a fantastic situation, a period of deflation is normally a sign of economic recession. When customers know that prices will go down with time and that their money will be worth more tomorrow than today, they hold off making new purchases or investments. Often times this is a vicious circle, as interest rates on loans drop (see further down as to why) so holding off bigger purchasing such as a house means not only that it will be cheaper if one waits a little, but also that the interest on a mortgage will be lower. The more people do this, the more prices drop further, the more interesting it becomes to wait even longer. Less money is spent, the government needs to make cuts as less taxes are coming in, more businesses struggle to survive, people lose their jobs and money is no longer flowing, meaning the economy is becoming unhealthy and in no time the economy is affected negatively tremendously. So in reality a situation of deflation is not generally a desirable one. Continue reading “Step 46: On Inflation and Interest Rates”

Step 45: Calculate your Desired Pension

Step 45: Calculate your desired pension
Step 45: Calculate your desired pension

Although it is nearly impossible to predict how your pension will develop over time and how much pension schemes will change, especially if you are still many years, if not decades, away from your retirement, calculating your pension regularly and setting pension goals is a key habit to develop and establish if you don’t want to be taken by surprise when you finally get to retirement age and start needing to rely on your pension.

It’s easy to think that our pensions will work their way out for us and that we will be able to retire comfortably after 40 or 45 or even 50 years of working. Yet with fewer and fewer young people carrying the burden of paying for an ever-increasing aging population, not just in numbers but also in years living after retirement as saw in step 42, we don’t know exactly how the pensions will develop. Already many countries are increasing retirement age and this might happen again in a decade a two.  Continue reading “Step 45: Calculate your Desired Pension”

Step 44: Personal pensions

Step 44 of the 100 steps to financial independence: Personal Pensions
Step 44: Personal Pensions

If you aren’t enrolled in a workplace pension and don’t have the option to join one, it is worth considering setting up your own personal pension. And even if you have an occupational pension, you might still want to look into personal pensions either as an alternative, or in addition to your workplace pension. Of course, you don’t have to if your workplace pension offers you exactly what you need and how much you need anyway., but as with anything it is worth considering the different options, to know for sure you have chosen the option(s) that are most relevant to you.

A personal pension works in very much the same way as a workplace pension, with the exception that your employer usually won’t be required to make a contribution. Another difference is that you need to make more decisions. Not only do you have to choose a pension provider (whereas in the case of occupational pensions your employer would have already done this for you), you often also need to choose from different packages, conditions and investment options.  Continue reading “Step 44: Personal pensions”

Step 43: Workplace Pensions

Step 43 of the 100 steps mission to financial independence: Workplace pensions
Step 43: Workplace pensions

As we saw before, a workplace pension is often offered by your employer or work sector and contributions are usually made monthly directly from your paycheck. Although many of the characteristics discussed in step 42 on state pensions are also applicable to workplace pensions, the latter often have many additional advantages or characteristics, including some of the following:


It is often (though not always!) automatic, meaning in many workplace pensions employees are automatically enrolled. If you don’t take action to opt-out you are systematically making monthly payments into your pension scheme.

Monthly contribution

You can determine your monthly contribution. There is usually both a minimum and maximum contribution you are allowed to make, and although many people might just pay the bare minimum, if you budget well and set aside enough money, you can obviously pay in more. The more you contribute (i.e. save) now, the more you’ll again have by the time you retire, not just from your monthly paymentsbut also from the compounded interest.  Continue reading “Step 43: Workplace Pensions”

Step 42: State Pensions

Step 42 of the 100 steps mission to financial independence: State Pensions
Step 42 of the 100 steps mission: State Pensions

In the previous step we looked at the different types of pensions that exist. In this step we look at state pensions in detail, although many of the characteristics of state pensions also apply to other types of pensions. Pensions vary greatly from one country to the next, if they even exist at all, as not all countries offer state pensions, so make sure to do your homework well and read up on the details of the state pension for your country.

If you are entitled to a state pension this is normally regardless of the height of your salary and of any workplace or private pensions you might or might not have. Bear in mind that most state pensions tend to be far from generous and designed mainly to just provide for your basic needs.  Continue reading “Step 42: State Pensions”

Step 41: An Introduction to Pensions

Step 41 of the 100 steps mission to financial independence: An introduction to pensions
Step 41: An introduction to pensions

Pension… a word dreaded by many, not just because they might not like the idea of being old, or – on the contrary – are worried it’ll be way too long before they can finally retire. Many simply don’t have a clue what their pension might look like and fear that they might never be able to retire properly, due to a (nearly) empty pension pot or the absence of a decent pension plan altogether.

Or maybe you just hate the idea of talking about pensions as it sounds like the most BORING topic in the world to you.

Be that as it is, ignoring your pension is not going to do you any good and considering the many changes that pensions are going through at the moment in many countries, it is wise to learn more about them and especially to understand your own pension projection better and to put together your own pension plan. So you are going to take the bull by the horns here and set up or review your current pension scheme. It might be tough, unpleasant or tedious at first, but once the bulk of the work has been done, you can sit back with a comfortable feeling, knowing you might still be a long way away from where you want to be, or from your retirement in general, but that you’ve put in a plan to get you back on track or closer to your end goal. Continue reading “Step 41: An Introduction to Pensions”

Step 40: Plan your income

Step 40 of the 100 steps mission to financial independence: Plan your income
Step 40.: Plan your income

For the past 8 steps we’ve looked at different income sources and you have analyzed each one in detail, looking at your own situation to determine whether any of these might be possible avenues for you to pursue further. What else do we want, right?

Well, just one last thing: a plan. If you truly want to change your income, thinking and talking about it is all nice and fun, but nothing will ever happen unless you make a plan and stick to your plan. Feeling inspired to do something about your finances is one thing, but actually getting off your bottom and taking action is what will ultimately determine whether anything will change, or whether it will just remain a fantasy . Continue reading “Step 40: Plan your income”

Step 39: Income stream 7: Rental Income

Step 39 of the 100 steps mission to financial independence: Income stream 7: rental income
Step 39: Income stream 7: rental income

We’ve got to the last income stream of the 7 different income streams: rental income. This type of income can come from any asset that you own and rent out. The most obvious and well-known form of rental income is the renting out of a building, such as a house or apartment for private use (having tenants living in your property) but it can also be for commercial use, such as the renting out of an office space or shop.

Rental income isn’t limited to the rent of a building however,  you can also rent out other assets that you have, as the recent increase in local initiatives such as rent-my-lawn-mower or rent-my-toolbox-for-a-day prove. So as always: don’t limit yourself by thinking that rental income isn’t something you could ever make any money with as you might well have something that somebody would like to borrow from you and they might happily pay for it if they can’t or don’t want to buy their own version of it, due to financial reasons, or a sense of minimalism (living with less) and is there really a point in buying a drill if you know you’ll only ever use it two or three times a year?  Continue reading “Step 39: Income stream 7: Rental Income”

Step 38: Income stream 6: Royalties

Step 38 of the 100 steps mission to financial independence: Income stream 6: Royalties
Step 38: Income stream 6: Royalties

If you’re like me, you think about famous pop stars when you hear the word royalties and immediately discard it as an option to gain a side income via this yourself. Since you probably aren’t a famous singer, guitar player or author, this isn’t something that would be attainable for you, right?

Turns out, royalties aren’t only for the (already) rich and famous, royalties are in fact paid to whoever creates or invents something that gets sold or used, and more often than not, that can indeed be an author of a not so famous book, or a product that is sold that was patented or an artwork that gets produced and sold en-masse.

Royalties in reality is money you get from people using your ideas, your products or something else that you came up with. After you have created, invented or put together your product in whatever way, other people market, promote and sell it, meaning they are the ones working hard to make the product succesful, but on each sale you get a small percentage of the profit. Or in the case of a franchise such as a a Starbucks franchise, they pay for the use of the logo, concepts and marketing by sending off money to Starbucks. Continue reading “Step 38: Income stream 6: Royalties”