Step 95: Visualize your Dreams

Step 95 of the 100 Steps Mission to Financial Independence: Visualize your Dreams
Step 95: Visualize your Dreams

Today we’ll step away from the numbers and figures and logical planning for a moment and instead focus on a fun step towards financial independence: visualizing your dreams. This step is the ultimate step to all of the following:

  • keeping up your motivation
  • setting goals
  • not forgetting to live in the “now”

We’ve discussed the first two points in detail in several of the previous steps, but the third one we haven’t yet looked at so much. Let’s discuss the importance of that third point through an example: imagine a couple who gets really inspired to become financially independent. They make a budget, cut expenses, start a side hustle to earn some more money to invest and they see their efforts paying off as their bank account increases. So they hustle a little more, cut another few expenses and speed up the process. But with time they become so absorbed by this process that other things are being cut too. Even though they have a fair amount of money, family holidays are “too expensive”, clothes are recycled well past their “best before” date (which makes the children an easy target to laugh at at school) and any real family time is disappearing quickly as the side hustle takes up any valuable time the family might have had together. After many years of dedication and hard work their bank account finally reaches that milestone of $1,000,000 that they had set themselves. The couple gets ready to celebrate this moment and loosen the reins a little – not wanting to retire completely but at least to work less – only to find that their children have gone off to college, friends from the past are have ceased to be friends as they have hardly seen each other in recent years as the couple had either no time or no money to attend get-togethers. They are not longer members of their sport clubs and realize they don’t know that many people anymore. There are no photo albums on the shelves with photos of happy family holidays, no memories of fun days down at the beach or up in the  mountains at the weekends and they can’t really remember having taken the children on any visits to the theatre, a museum or even the cinema. The couple never had time for fun activities and only ever thought of making money and then some more.

And what for? What is the point of having $1,000,000 in your bank account if you can’t enjoy it? What is the value of money if not to use it and enjoy the little things in life? Spending time with the people we love? More than those $1,000,000 isn’t it important to have time to do what you want to do and to make a difference in the world? Continue reading “Step 95: Visualize your Dreams”

Step 86: The 8 Stages of Financial Independence

Step 86 of the 100 Steps Mission to Financial Independence: The 8 Stages of Financial Independence
Step 86: The 8 Stages of Financial Independence

As with many things in life, if you start looking behind the simplicity of a concept there is more than just a black and white division, a yes or no, a fail or succeed. Even with financial independence the reality is that you aren’t just financially independent or not… Indeed there are many different financial phases that one can reach along the way.

Below are the 8 most commonly identified stages, starting with financial dependence going all the way up to and then well past financial independence. Continue reading “Step 86: The 8 Stages of Financial Independence”

Step 78: Set your Financial Independence Goal

Step 78 of the 100 steps mission to financial independence: Set your Financial Independence Goal
Step 78: Set your Financial Independence Goal

All along this mission we have been talking about financial independence and I’ve identified and described steps that will help you to get closer to your financial independence. But what exactly is Financial Independence to you? It is important to have a goal and to know what you are working towards to in order to once actually achieve that goal. Now that we are nearing the last part of our 100 steps and now that you know a lot more about finance and money management, you’ll want to dedicate some time to determine your long-term goal so you can kick things into next gear and align your mission with your ultimate financial goal.

Four goals of financial independence

Below are four common goals that people have for their financial independence. They are presented in a logical progression to go through and whereas getting to stage 1 should be easy if you follow this mission plan and even getting beyond that first step into the 2nd step might not be too difficult if you keep up well with the plan, getting into that 3rd stage depends completely on whether you push yourself beyond your current beliefs, habits and limitations and of course whether you ultimately really want to get there. Remember also that whilst the last stage of financial freedom might seem almost unattainable for most of us, it is not completely impossible. People like you and me have done it before and will do it again. But hey I admit that requires some SERIOUS hard work and dedication.

Let’s discuss the four common financial independence goals you might identify with and see which one corresponds most closely to your financial goal at the moment. Continue reading “Step 78: Set your Financial Independence Goal”

Step 75: Budget and Spend on YOU

Step 75 of the 100 steps mission to financial independence: Budget and spend on YOU
Step 75: Budget and spend on YOU

Unlike the rest of the 100 steps mission, this step advocates a little spending and whilst some of the content might sound as if it takes you away from your ultimate goal of a secure financial future, it is indeed a very important step to financial independence. The habit of budgeting to spend on you continuously reminds you of what is important and why you are going through the hassle of all the other steps.

It can be very tempting once you get really into personal finance and see the advantages of building up savings and investing to try to cut down all of your expenses as much as possible, to skimp and save and live a lifestyle of extreme frugality. And although there is nothing wrong with being frugal and some people can indeed get real satisfaction out of this, some take it to a level that is a little too extreme to actually make them happy. Many of them end up giving up on their journey to financial independence as it is asking too much of them, or they become unhappy and disgruntled as they feel they can no longer enjoy life and instead are only thinking about “tomorrow”, “a secure financial future” and “being cheap”.

Of course you have embarked on this mission for your own reasons, but I truly hope that your ultimate goal is to achieve happiness and not actually having an X amount of money in the bank. There is of course nothing wrong with wanting to have that money in the bank, but never lose sight of your why: Why do you want that money? Wanting just for wanting’s sake is foolish and will not make you happy. But if you know why you want that money (to become a stay-at-home-parent to spend more time with your family, to travel, to live a more fulfilling life by volunteering or being able to set up your own company… ), whatever it is, you need to keep just that in mind. As that is what will bring you happiness, the money in itself won’t, it will only allow you to achieve your goals faster.

To make sure you keep happiness and enjoying life at the centre of our mission, you are going to do some spending on yourself! You need to keep this journey it fun, keep your motivation up, see short-term results and just simply reward yourself now and again. Budgeting something for you is a great way to achieve all of the above. You need to spend a little extra on yourself now and again, ideally on something you otherwise wouldn’t do. It should be something extra, maybe a little luxury.

Some examples of how you can spend a little extra on yourself:

  • Luxury bath or shower product or make-up;
  • A new magazine or book;
  • A new accessory for a gadget;
  • An item of clothing that is extra and maybe not something you need and outside of your clothing budget.
  • A new plant or some flowers.
  • A massage or beauty treatment

It can be anything that gives you some special joy and happiness and that feels like splurging a little. You’re looking for something that you would like to buy for yourself but that you don’t normally do. It should take you maybe two or three months to get that money together, so you really feel you’ve earned it and it built up anticipation of getting the money together so you start thinking what you can buy with it. It should be something relatively common and easy to acquire, it is not a savings goal in itself, it is just a kitty with some money you set aside each month so you can buy something with it every 2 – 3 months. We’re not talking about a new iPhone here as that is a bigger savings goal in itself, it should be something smaller that gives you the feeling of a reward.

Whatever you buy, it should be something for YOU. Maybe buying your daughter a new jumper makes you happy, but that isn’t YOU, that’s your daughter. Buying your partner an extra present for their birthday is not YOU.

Step 75 – Budget and Spend on YOU – in detail

  • Decide what would be the ideal reward for you that would give you pleasure and a sense of achievement every time you were able to use it or purchase it. Ideally it would be:
    • something that is not a long-term saving goal, as the whole point here is that you get more regular rewards and not a long term reward.
    • something that you can set relatively small amounts of money aside for each month (say $5 – $20) and that after 2 or 3 months gives you enough to buy the item.
  • Create a separate kitty or a nice jewelery box where you put the money in if in cash. Alternatively assign the money to this category in your new budget each month.
  • As soon as you have enough to buy something with it: go out and buy it! The whole point here is that you get to see the advantages of setting money aside, but without having to wait 20 years in order to collect your prize.

Don’t feel guilty for spending this money. Life is to be lived and the small pleasures of life form an important part in this. So don’t NOT spend this money just because it is an extra or luxury category. You have worked hard enough to earn save this money and are allowed something extra from all of this as well!

Read more about my 100 steps mission to financial independence or simply decide to take control today and join us on our step-by-step quest on how to make your finances work for you, starting with step 1.

Step 70: Pay off your mortgage

Step 70 of the 100 steps mission to financial independence: Pay off your mortgage
Step 70 : Pay off your mortgage

Now that you’ve been through the various steps on expenses and budgeting, saving, pensions, investing and planning for your future, it’s time to go back again to the bit on debts with one debt in particular which is probably your biggest debt: your mortgage (providing you have one – otherwise you can skip this step). We of course spoke about paying off debt at the start of our mission, but as we said there, since your mortgage has a lower interest rate than most of your other debts, chances are you haven’t yet started paying it down faster.

As commented before many people would argue that a mortgage is a different type of debt and therefore not to worry about as much as they see having a mortgage as an investment. At the end of the day they say, your house is an asset that will probably increase in value over time. I disagree for several reasons:

  •  first of all it isn’t the same type of assets such as stocks and bond that you can just sell to generate some extra money. The only situations in which you can argue that your house is an asset like any other is when you don’t need it anymore for example because you decide to:
    • travel
    • move in with somebody else
    • live in another house that you already own or rent
    • scale down and don’t need a mortgage on a new house
    • live on the streets
  • secondly, you never know when you can sell your house. Some houses are on the market for years, so liquidating that asset isn’t as easy as with other assets.
  • thirdly nothing guarantees your house will truly increase in value or have increased in value by the time you need or want to sell. During the recent house market crash, many houses were sold below their original purchase price.
  • fourthly you are still losing money by having a mortgage in the form of interest payments and you are tied to paying back regularly so until you pay off your mortgage in my eyes this is a debt that takes a big toll on your monthly finances.

Continue reading “Step 70: Pay off your mortgage”

Step 64: Tax Planning

Step 64 of the 100 steps to financial independence: Tax Planning
Step 64 of the 100 steps: Tax Planning

Wow okay, I know, tax planning might sound even more boring or complicated than our previous “introduction to taxes”. But what’s the point knowing about taxes if you don’t use that information to your advantage? And if you think that tax planning is again for the rich and famous only, you’re wrong … Most legislations are designed is such a way to even give the ordinary man and woman some tax relief in certain areas. You should use those as that is what they are for.

Now let’s start with the single most important first requirement for this step: never, ever, not in a million years avoid paying taxes or try to mislead the tax authorities. Don’t ever even think of it. The tax authorities are smarter than you and you’ll end up in jail and that is NOT worth the extra money you might be getting or think you might be getting. Besides that, it’s morally wrong. Just don’t do it.

Good, now that is sorted, let’s have a look at some very basic tax planning principles you might be able to apply to your own life, that might help you save some bucks.  Just keep an eye on that fine line between tax planning and tax evasion though as if you get carried away with it too much, you might end up on the wrong side of that line. Continue reading “Step 64: Tax Planning”

Step 61: Disability Insurance

Step 61 of the 100 Steps to Financial Independence: Disability Insurance
Step 61 of the 100 Steps: Disability Insurance

A disability insurance provides you with financial compensation in the event of a disability that stops you from going back to work. It covers your future wage by paying a certain percentage of your wage, often around 60-70%,  either until you are able to go back to work again or for as long as the policy contracted states that you are entitled to the compensation.

There could be several reasons for somebody being unable to work, including illness, medical conditions or after an accident. The difference with a medical insurance is that the latter only covers your medical bills, not the fact that you no longer have an income to support you financially. In some cases and countries social security might offer a disability coverage, but conditions vary greatly and it might not kick in until after a certain time, sometimes not even til after a year.

Do you need disability insurance?

The chances of becoming disabled before retirement age can be 2 – 3 times higher than the odds of dying before retirement age so there is a relatively big chance you might become disabled at some point. Due to this high chance, disability insurance tends to be fairly expensive. There are several situations in which you might not need disability insurance, including: Continue reading “Step 61: Disability Insurance”

Step 60: Car Insurance

Step 60 of the 100 steps mission to financial independence: Car Insurance
Step 60: Car Insurance

Car insurance, also known as motor or auto insurance, is often obligatory to have in order to use a public road. Most countries distinguish between insuring a driver and insuring a vehicle, and in some you insure a car regardless of its drivers (as long as the driver has the car owner’s permission to drive it), whereas in other countries you might insure the driver regardless of which car they drive.

Characteristics of car insurance:

A car insurance generally has different parts to it and whilst the terms used for these coverages can vary from one country to the next, most insurances use a similar classification system. Continue reading “Step 60: Car Insurance”

Step 54: Bull & Bear Markets

Step 54 of the 100 steps mission to financial independence: Bull & Bear Markets
Step 54: Bull & Bear Markets

Now, as I’ve mentioned a few times before, by no means am I an expert on investing (yet..), but there are a few concepts that I have picked up along the way and that I’d like to share at this stage. These are to do with the practicalities when it comes to investing on a day-to-day (or year-to-year) basis.

As I have said before, I – and with me many others on their way to financial independence -, see index investing as the safest, easiest and surest way to invest. It is boring, but most likely to get decent results. Of course not everybody agrees, there are many who prefer other ways to invest, (or of course to not invest at all), so make sure you choose what is good for you. With that said, I am mainly referring to index investing in this step, so not everything might be applicable to the other ways of investing.

Bull & Bear Markets

Let’s first start with two definitions in the investing world: bull and bear markets. During a bull market, the general market does well: prices are on the rise, investors feel confident, every day more people want to buy shares which pushes the prices further up as demand exceeds supply, people see their portfolio grow and demand increases even further..  Continue reading “Step 54: Bull & Bear Markets”

Step 53: To invest or not to invest

Step 53 of the 100 Steps mission to financial independence: To invest or not to invest?
Step 53 of the 100 Steps mission: To invest or not to invest?

The big question is of course whether you should or shouldn’t start investing. Ask anybody and you are likely to get very different answers, some saying they can recommend putting in some money monthly, others saying only the really wealthy or dumb invest in the market, whilst still others see it as their main way to (early) retirement.

The truth is, whether or not to invest depends entirely on you, your personal (and financial) situation, and the reasons you might want to invest in the first place. In this step I’ll try to give you some pointers to think about to help you determine whether or not you should invest, but the ultimate decision is yours and you have to feel comfortable and happy with that decision.

My boyfriend at the time (he’s my husband now), suggested we’d start investing in 2009 when the market was at a low. Now I wish we had, as we would have been able to buy lots of really cheap shares, but at the time I didn’t know anything about money and didn’t feel comfortable putting money into something that I didn’t understand. Of course I regret not having bought those cheap shares now, but I don’t regret not putting in money without knowing what I was doing and whether I really wanted to invest. Continue reading “Step 53: To invest or not to invest”