Tag: money management

Step 30: Invest 50% of a payrise

~ Inge Natalie Hol ~ 1 Comment
Step 30 of the 100 steps mission to financial independence: Invest 50% of any pay rise
Step 30: Invest 50% of any pay rise

In step 28 we’ve looked at how to put away extra money that you might get at a certain moment in time, such as a bonus or as a gift, in order to find a balance between rewarding yourself in the moment, whilst at the same time making the most of the extra payment in the long-term by saving a part of it.

From now on, you are going to do exactly the same when you get a pay rise. In this case you should interpret “pay rise” in a broad sense and think of it of an increase in your monthly cashflow, which can come about for many different reasons. This could indeed be a higher pay from your employer, but it could also be a little side income you might be getting from doing extra work, or even a lower mortgage pay or some other favourable reduction in your expenses on a structural basis, resulting in a little extra money left over at the end of each month. Continue reading “Step 30: Invest 50% of a payrise” →

Step 27: Build a 3 months living fund

~ Inge Natalie Hol ~ 1 Comment
Step 27 of the 100 steps mission to financial independence: Build a 3 Months Living Fund
Step 27: Build a 3 Months Living Fund

Once you have built your emergency fund of $1000 (or the equivalent in yourn own currency) for unexpected or emergency expenses, you are going to continue with the new savings goal in line with our mission to reaching financial independence. In this step we look at the ins and outs of a 3 months living fund and you are going to start working towards putting together this fund.

The rationale behind a 3 months living fund is that it would cover your basic living expenses if for whatever reason you no longer receive an income. This might be because you lose your job, are unable to work or voluntarily decide to take time out of work, for example to care for an elderly parent or sick relative or because you want to take time to focus on something else. It a safety net that ties you over for at least three months that will at least cover your basic living expenses for some months, leaving you time to find a new job, an alternative income or just allowing you to take those three months off before returning back to work. Continue reading “Step 27: Build a 3 months living fund” →

Step 25: Start a Monthly Finance Review

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Step 25 of the #100stepsmission to financial independence: Start a Monthly Finance Review
Step 25: Start a Monthly Finance Review

In step 18 we looked at starting a weekly finance review and what to focus on during that weekly half an hour, to ensure you stay on track for that month’s spending, bills and goals.

Today we are going to take this one step further, by starting a monthly finance review, in addition to your weekly review. Whereas the weekly review is incredibly useful to ensure you achieve your monthly goals, the monthly review helps you to achieve your longer term goals that you set out to achieve, such as becoming debt free, getting to a certain net worth or saving a specific amount of money. It is the moment to plan and look ahead a little further and to readjust your goals and spending patterns.

During most months you can probably combine every fourth weekly review with your monthly review, although for your monthly analysis you will need to set aside more time, as you are analysing the entire past month and also looking further ahead. I recommend scheduling in roughly 2 hours every month to complete this step.
Continue reading “Step 25: Start a Monthly Finance Review” →

Step 24: Become debt free

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Step 24 of the 100 steps mission to financial independence: Become debt free
Step 24: Become debt free

Becoming debt free might or might not have been a goal you identified when you put together your principal financial goals in step 2. Whether this was the case or not, you hopefully have realized that becoming debt free is possible with some extra effort and money, and in your interest (no pun intended) if you want to avoid paying the extra costs of oustanding loans. It might take you three years, 10 years or 20 years, but being able to say you have finally paid down all your debts is a huge achievement. And as we saw in the last few steps, the time it takes to pay off a debt can be sped up incredibly by making extra payments.

The next part of your mission and the main focus of this current step is for you to set yourself goals to pay off your debts. You will set yourself a target date to pay off the first debt that you have already started working on, then for each and every other debt you will do the very same, all the way to the very last debt you will be attacking. That will be your target date to becoming completely debt free. Continue reading “Step 24: Become debt free” →

Step 23: Start paying off 1 debt

~ Inge Natalie Hol ~ 1 Comment
Step 23 of the 100 steps mission to financial independence: Start paying off 1 debt
Step 23: Start paying off 1 debt

From the previous step you are now up to speed about the positive effect of extra payments on outstanding debts. That leads us to the current step: start paying off a debt. You might think you are already paying off a debt, or several of your debts, but the point here is that you are going to pay off a debt faster by making higher monthly contributions than the minimum required.

When you pay off a debt faster than scheduled, a few amazing things happen:

  • You end up paying less interest, resulting in a lower amount of money paid back overall;
  • It takes less time to pay back the loan, meaning you can tick it off your list a lot sooner;
  • Psychologically it is a great relief to have paid off a debt: one less thing to worry about;
  • It increases your motivation by showing you that you can achieve your goals;
  • And here’s a great thing: once you’ve paid off a debt, that monthly amount you poured into this debt suddenly becomes available, which you can then use in its entirety to pay off another debt, meaning it keeps up that momentum!

Continue reading “Step 23: Start paying off 1 debt” →

Step 22: The impact of extra debt payments

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Step 22 of the 100 steps mission to financial independence: The Impact of Extra Debt Payments
Step 22: The Impact of Extra Debt Payments

After some rather depressing news to do with debt and interest, it is again time for some uplifting information. In this step we are going to look at how powerful it can be to put extra money towards paying off a loan and how much it reduces not just the time spent on paying back the money, but also the total amount paid back.

This information will hopefully inspire you to find ways of making extra payments towards reducing your debts. As even if they are small extra payments, in the long run, thanks to that friend of ours called compound interest, it will have a huge effect.

Let’s go back to the same example as the one I used in step 21 to illustrate how credit cards work, in which we looked at an outstanding debt of $1000, at a 1,5% monthly interest rate and a payback rate of 3% with a minimum of $10. But this time you make an effort each month to pay the minimum amount (3% of the outstanding debt) and an EXTRA $25 on top of the minimum amount. Let’s see how this works out. Continue reading “Step 22: The impact of extra debt payments” →

Step 21: Stop accumulating debt

~ Inge Natalie Hol ~ 1 Comment
Step 21 of the 100 steps mission to financial independence: Stop accumulating debt
Step 21: Stop accumulating debt

It’s time to start looking at an area of your finances that makes many people nervous, scared and / or depressed, leaving them ignoring rather than analyzing and planning how to deal with that very same area: debts.

Yet in order to become financially independent and in total control of your finances, it is important to understand how debts work and how even seemingly small debts or amounts can make a tremendous difference to your long-term finances.

In step 4, you listed all of your debts, so you should have a good idea of how much debt you have and how much you are paying towards amortizing these loans. In this current step we are going to look at the effects of debt and how much extra you end up paying on any long-term debts. Continue reading “Step 21: Stop accumulating debt” →

Step 20: Learn about Compound interest

~ Inge Natalie Hol ~ 3 Comments
Step 20 of the 100 steps mission to financial independence: Learn about Compound Interest
Step 20: Learn about Compound Interest

You have probably heard about compound interest, and might even feel you understand the notion of compound interest quite well, but since it is the key concept in some of the next steps and because the impact of compound interest over time might be far bigger than you realize, this entire step is dedicated to looking at how compound interest works.

In finance compound interest is one of the most powerful factors at work that by using time as it catalyst, can do one of two things:

  • keeping you poor by losing money on outstanding debts
  • making you richer by making more money with the money you already have

Let’s look at how compound interest works and how it generates this power over time. Continue reading “Step 20: Learn about Compound interest” →

Step 18: Start a Weekly Finance Review

~ Inge Natalie Hol ~ 1 Comment
Step 18 of the 100 steps mission to financial independence: Start a weekly finance review
Step 18: Start a Weekly Finance Review

Step 18 is all about starting a new and incredibly powerful habit, one that will allow you to focus on your mission, realign your spending and savings patterns to your goals and get closer each time until little by little one day you tick off your first goal, then your second one, your third, until you realize you are able to hit your goals one after the other.

This new super habit is starting a weekly finance review, during which you will go through your goals and some of the main steps we have covered up til now, and when you work your way through the next 82 steps that are still to come, you will add some of those steps to your weekly review too. In that way you consistently hold yourself accountable for your success as you review whether you are on track (or not) for the rest of the month, and what adjustments need to be made in order to make sure you will achieve your goals for the month, and with that ultimately those much desired long-term goals.

Continue reading “Step 18: Start a Weekly Finance Review” →

Step 16: Start an Emergency Fund

~ Inge Natalie Hol ~ 3 Comments
Step 16 of the 100 steps mission to Financial Independence: Start an Emergency Fund
Step 16: Start an Emergency Fund

No matter how organized you are and how carefully you have planned and budgeted for the next month, there will always be surprises that come up and hit you financially at unexpected and often inconvenient moments: a car maintenance or fix that you hadn’t planned for, a plumbing issue that needs immediate attention, a sudden vet bill for one of your pets or your washing machine that suddenly breaks down. I am sure you can think of many occasions and examples that could suddenly happen and throw you off-track.

If you don’t expect an expense to come up, often times you won’t have the money available, and you will either be forced to borrow money, eat into your savings or cut out money elsewhere.

In this step you are going to set up and build an emergency fund, in which you have a certain amount of money put away that you can use in case of these unforseen but needed expenses that come up. In that way you don’t need to worry about scraping the money together, you can just pay the bill and get on with your life. A good amount to aim for is generally $1000 or the equivalent in your currency. Whenever you take money out of this account, you aim to get it back up to the $1000 as soon as possible afterwards. Continue reading “Step 16: Start an Emergency Fund” →