Tag: money management

Step 44: Personal pensions

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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

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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:

Automatic

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 40: Plan your income

~ Inge Natalie Hol ~ 1 Comment
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

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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

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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” →

Step 37: Income Stream 5: Dividend Income

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Step 37 of the 100 steps to financial independence: Income stream 5: Dividend Income
Step 37: Income stream 5: Dividend Income

Time to look at our 5th possible income stream, which is dividend income. This type of income is based on company profits paid out to the shareholders of that company. Before you dismiss this type of income as not your thing, read on and then jump to the investing steps later on, as you’ll find that investing can be more or less risky, depending on the risk that you feel you can deal with and you can start with very little money, yet over the years build up a considerable portfolio.

Now back to the dividend income. If you have shares in a company, you basically own a tiny part of that company. If that company then makes a profit, some of that profit goes to the owners of that company, i.e. the shareholders. Continue reading “Step 37: Income Stream 5: Dividend Income” →

Step 36: Income stream 4: Capital Gains

~ Inge Natalie Hol ~ 2 Comments
Step 36 of the 100 steps to financial independence: Income strem 4: Capital gains
Step 36: Income stream 4: Capital gains

The fourth income stream that we’ll look at is that of capital gains. Whether or not you feel like working towards developing this income stream or not (some people don’t), capital gains in a key source of income to many people.

Capital gains are the profits one makes when selling something at a higher price than the original purchase price they paid. The difference with profit income is that profit income comes from something you made or created over time as part of your regular business activity, whereas a capital gain involves an original investment, and then the value of this investment increasing over time, but not a result of a regular business activity. Continue reading “Step 36: Income stream 4: Capital Gains” →

Step 33: Income stream 1: Earned Income

~ Inge Natalie Hol ~ 2 Comments
Step 33 of the 100 steps mission to financial independence: Income Stream 1: Earned Income
Step 33: Income Stream 1: Earned Income

In step 32 we looked at a quick overview of the 7 different income streams one can build, and in these next 7 steps we are going to look at each income stream in turn, to analyze possibilities of (further) developing each possible source of income. You shouldn’t however feel that you need to take action in all 7 areas, instead the main purpose is to make you aware of each income source so you can decide what works best for you.

Let’s start with the first income stream, which is your earned income. Most people get this from working for somebody else, although if you are an entrepreneur you might also receive a regular wage from your own company if you are taking a salary.

A key feature of earned income is generally that you are paid for your time, be that time you spend in the office, working from home, at conferences, at clients’ offices or wherever your job requires you to be. Generally speaking the more you work, the more you get paid: if you go from part-time to fulltime you get paid more, if you work extra hours you get paid more and by taking on a management role which might require more time (as well as extra responsibilities, experience and whatever else), you also get paid more. Continue reading “Step 33: Income stream 1: Earned Income” →

Step 32: Multiple income streams

~ Inge Natalie Hol ~ 1 Comment
Step 32 of the 100 steps mission to financial independence: Multiple Income Streams
Step 32 of the 100 steps mission: Multiple Income Streams

Up until now we have made great progress in the areas of our savings, debt and reducing our spending in order to increase our cashflow on our way to financial independence by putting extra money towards a secure financial future. We are now going to move away from these areas for a little while and start with a new theme as there is another way to increase your cash flow: by increasing your income.

The vast majority of people see income as the money that they get from their job, and we have already touched upon income increases such as a bonus or pay rise in previous steps as a way to increase your money. Whilst income from a job is normally not only a very decent provider of money as well as a financially secure way to guarantee a steady and satisfactory income, it doesn’t have to be your only way of bringing in money. Continue reading “Step 32: Multiple income streams” →

Step 31: Understand you will never have enough money

~ Inge Natalie Hol ~ 1 Comment
Step 31 of the 100 steps mission to financial independence: Understand you will never have enough money
Step 31: Understand you will never have enough money

No matter at what stage in your life you are, you probably feel that you don’t have enough money to live the lifestyle you truly aspire, let alone to behave (even more) sensibly with your money. When planning out, or even just thinking about, putting money aside to save, invest or pay off a debt, it is tempting to justify holding off making that sacrifice until you…. (insert excuse here).

Until you earn more? Until you’ve finished your post-grad course? Until you are married? Until you have bought a house?  Until your children are independent? You can come up with a billion reasons here, many of them probably valid in their own way, so let’s look at some of the most common excuses, so you can appreciate that with every change in your life, your spending patterns will most likely also change.

There are two main reasons why this thinking pattern of “I will start saving when…” never really works: Continue reading “Step 31: Understand you will never have enough money” →