Our journey to Financial Independence

Category: Financial Thinking Page 1 of 2

Banks abroad piggy bank and coins

How Much Can You Really Afford?

No matter how hard we try to save… Society is built on spending. From the roof over my head to the food on my plate. Everything comes at a cost. The only way to be free of expenses is by living off the grid. Then again that isn’t feasible for most of us.

So how much can you afford? Truly… It depends on who you are. The principal of the Financial Independence Retire Early (FIRE) movement is to maximize income and minimize expenses. Optimizing your saving rate to achieve freedom in x amount of years. 

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Even if FIRE isn’t your cup of tea and you just want to set a few dollars aside. There is one inevitable question. Can you afford it? Having the exact amount on your credit line or on your checking account means nothing. 

So what is affordable and why can you afford less than you think?

What does affordable mean?

Affordability is often only taken into account for big purchases. For example, the bank will calculate your affordability before allowing you to mortgage a home. You might also give more thought to a car purchase as it’s a milestone. 

Yet, we often overlook the affordability of everyday items. How many beers can you truly afford? Or a phone plan are you sure you can afford it? The biggest culprits are monthly payments and 0% financing. They insidiously increase your expenses.

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What is $20 more a month for a brand new TV! It will completely change your life, 8k is the new thing. On the other side, your monthly expenses have increased for an asset you won’t own for another 47 months. 

Understanding what you can truly afford is the key. Are there any rules? Not really. It’s up to you to find the best system and stick to it. To help you in this journey and avoid living paycheck to paycheck: this article will go into each type of expense and give a rough idea of ratios.

Let’s break it down into 3 categories: Transportation, Lodging, and leisure.

How much transportation can you afford?

Transportation covers as much a car as a commute. Are you truly making the most of your salary if most of your time and money is sunk into your commute? Let’s take London as an example cost of life overall is extortionate and living centrally on an entry-level salary is challenging… A yearly railcard costs over £2600/pa. 

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The cost of transportation therefore not only factors into a new car but into your choice of work… If you were to move out of the city center the savings on rent might be offset by your commute. Not only will it cost you financially, but your time will also disappear into the back and forth. 

How about a car? People tend to think their car is their business card. That it’s something they will be judged on. So much so that in the USA the median cost of a new car is $40,573 with the average buyer borrowing $35k. The median average salary in the States is $49,724… 

More than half of the yearly income went to buying or borrowing to buy a car. Without taking depreciation into account it’s a significant hole to put oneself in. As this doesn’t cover insurance or taxes. My friend Yasi from Fast Track Life makes a great case for the hidden costs of a car in her article “The Under Estimated Costs of Owning a Car”.

I personally don’t own a car but I have been on the prowl for a new ride. I’ve decided to apply Andrei Jikh’s idea of no more than 10% of my annual salary. The car won’t be anything fancy but it will get me from A to B without bankrupting me! You can discover his video below:

Just because you can pay for it today doesn’t mean you can afford it. Remember the long-term implications and how it will tie you up. I explore this more in-depth in “5 Ways To Stop Living Paycheck to Paycheck”.

How much housing can you afford?

Whether it’s buying or renting you are going to need to pay to get a roof over your head. Of course, you could go off-grid but even that would cost up front and still need to be factored in. 

Renting

I won’t delve too much into buying versus renting as that will be the object of a future article. I for one rent in London, England. The way my girlfriend and I have approached it is our share of the rent can’t be higher than 33% of our net monthly salary.

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This was a big factor when deciding to move to the UK from my native Switzerland. I explore more of it in “Should I Live Abroad?”. It allowed me to get started with the 50-30-20 rule. In which you should spend no more than 50% on needs which include energy, food, and shelter.

I decided to stick to 33% at first for our rent as it allows me to set aside 40%+ of my income monthly. Since then, we are looking to increase our income and take the cost of shelter below 30%. 

Would we like a new fancy flat with a gym etc? Of course, who wouldn’t? The problem with this is it inevitably leads to Lifestyle inflation and an infinite circle of loss.

Buying

I’m yet to acquire my first property as I value geographical flexibility highly. But there are a few things to keep in mind. The goal of a Bank is to loan you the highest amount of money that you can afford. In this case, it would be as little as making ends meet. 

Having saved up the exact amount of money for a deposit is risky. It leaves you with no capital for unforeseen costs and taxes. You might be a homeowner but a mortgage can set you back.

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Old school sources would recommend you only by property worth 4.5 times your annual income. It would give you a strong ratio of debt to equity. I would personally always look to a mortgage when the interest rates are as low as today. You have a high chance to make a higher return by investing the remainder of the sum.

There are many reasons to invest in real estate as long as you can cover your cost. Check-out “Real Estate Investing: The 3 Edged Sword” by Plant Money Seeds for an in-depth look.

How much fun can you afford?

There is less of an absolute side here. Of course, some will tell you to stop drinking your Starbucks or getting a pint after work. But these are not the reason your portfolio isn’t growing. Leisure expenses can become insidious.

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Whether it’s spending a few thousand on a holiday or a new phone can you afford it? My rule of thumb here is if you were to spend twice as much would you still get it? This gives you a healthy mindset towards spending. 

Most importantly, will you need to go into debt for it? There is absolutely no reason to get into debt for a want. This is where monthly payments pile up. We all know about Credit Card payments and how easily you can overspend. 

The positive side of Credit Cards is that they immediately show you how little you can afford. On the other hand, the new financing options lead you to spend more than you should. 0% APR and only £75 a month! What a great deal for the new iPhone. Yet, when you add it to the new TV payment, your car payment, and all the other “bargains”. You end up starting the month with 90% of your income dedicated to fixed expenses. 

Time to spend

Here’s the bottom line… we are going to keep spending money. No matter what we think we will. The trick is to understand how much we can truly afford and let our money grow around it. 

For mid to long-term goals investing is a great solution. It allows you to fulfill your “buying” urge but put your money to work. Of course, if you are going to need the money in less than 10 years going to the high-yield savings account is the way.  

If you want to start your investing journey why not find out which investor you are and start off with my article “Trading 212 or Vanguard? What investor are you?

What are your tips and trips to figure out affordability?

Don’t forget to sign up for my monthly Newsletter which hold unique insights and much more!

origin stories matter on old typewriter

My Financial Origin Story: Cent by Cent

First I’ve got to clear the air this article was inspired by the Monevator’s article “What’s your financial origin story?” The challenge has been taken up by Sovereign Quest and was an amazing opportunity for some self-reflection.

This introspection is definitely welcome as a thought experiment. Why have I fallen head over heels for personal finance? What motivates me to stick with it and more importantly what was the deciding factor?

Who am I?

My financial Origin Story starts here

At the time of writing this, I’m a 24-year-old Swiss expat based in London. I won’t divulge my exact net worth but I’m 2 years into my personal finance journey and loving it! By day, I strategize and grow revenue for hotels across Europe as a Cluster Revenue Manager and by night I work on Cent by Cent.

 Now that we know where I am, how about we discover how I got here?

My financial origin story starts in Lausanne Switzerland. Where I grew up in a blue-collar family. My paternal grandfather had started his butchery from scratch in his 30s. My father took over the shop early in my childhood and has been running it ever since.

Lightning struck twice as entrepreneurship ran on both sides of the family. With my maternal grandfather traveling to East Africa and setting up a company there.

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Being raised in not only a multicultural but business-minded environment meant I was exposed to “shop talk” from an early age. As a curious-minded kid, I would butt it and give my very “thoughtful” advice. At least I used to think it was… 

Money was never taboo at our table. My family would discuss investments, financial upswing, and downfalls alike. This candor and openness gave me the bug for good deals. To such an extent that some could see it as cheap. I see it as thrifty.

Every cent has a purpose

From my 11th birthday, the Christmas holidays were spent helping around the shop. The frenzy would go crescendo until the 24th of December. It was complete pandemonium and hard work. 

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Although, some parents would have expected the help and given nothing in return. Mine saw it differently. In their eyes, any job deserves a reward. They taught my sister and me, that every franc had to be earned. Whether it was through chores, work at the shop, or in general.

Your work won’t always pay off but you need to learn the value of each cent.

My father

Growing up I would, of course, spend my money on silly impulses from video games to sodas. Yet all these “blows” to my net worth were a learning step.

I might have spent a little too much money on Steam… But the hours of joy follow me to this day. Say what you will but managing an in-game economy in MMORPGs had a lot to do with my origin story as well.

As I got the university… I was able to find side jobs as a waiter, bar manager, or simply event staff. It was relatively well paid and allowed me to fund my backpacking trips.

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My aim was to discover the world on a budget and on my dime. It led me to 3 continents and unforgettable experiences. When I say budget I mean it… I spent a month in Indonesia for a total cost of $1200 flights included.

Of course, I could have started investing earlier or saving aggressively. But the worthwhile investment in my eyes was to expand my mind and grow my knowledge of the world.

Money isn’t happiness

As I was graduating in 2018, I decided I wanted to leave Switzerland. Although, the cushy salaries were attractive – I could always come back. No departure is definitive but the risk of being locked in a golden prison was too high. I discuss this more in my article “Should I live Abroad? To Leave or Not To Leave”.

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My dream was to work in a strategic role of some capacity. The opportunity to join a brand new graduate program in Revenue Management was perfect. So I packed my bags and flew out to London. On the way there I waved goodbye to Swiss Salaries. 

It was the financial kick in the butt… I was breaking even monthly sometimes saving as much as 10%. But always looking over my shoulder raised a red flag. It was time for a change in my financial philosophy. Down the rabbit hole of Personal Finance, I went. 

It started with Graham Stephan on YouTube, which led a couple of years later to starting Cent by Cent. 

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Throughout the first 18 months of my contract, I managed to settle my savings at 10% monthly. My Net Worth wasn’t going leaps and bounds but at least, I built my Emergency Fund. A safety net of 4.5 months of expenses saved up in case hard times hit! 

2020 the game changer

And oh boy did they… As 2020 came around I was promoted and saw a salary increase of 50%. A game-changer I would be able to save and invest almost 50% of my salary! 

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The only problem? My flatmate left leaving with a full rent to pay. I could have found a replacement right? Well… COVID-19 hit and no one was going anywhere. I quickly found myself on furlough and having my income match my expenses. 

For almost 6 months, my current account would show £100 before needing to reach into my emergency fund. I can’t tell you how happy I was to have my emergency fund. On the other hand, it was an amazing opportunity to review my expenses and learn to live a more frugal lifestyle. 

I realized that I miss very little. The opportunity to fly home once in a while, pay rent now that I moved in with my lovely girlfriend, and put food on the table. Those are the true essentials! Thankfully since October, I’ve returned to full-time employment. Since then I can proudly say that I’ve consistently been saving 40+% of my income. 

Where am I now?

I’ll be turning 25 in June… and although Financial Independence is a long way. The journey has been thrilling so far. Most of my investments sit with Vanguard in different ETFs and grow monthly. As I look to the future, I draw inspiration from practical guides and build my plans accordingly

It might take me more than 10 years to achieve Financial Independence but articles like “How To Become Financially Independent in 10 Years” are a source of practical inspiration.

Cent by Cent is yet to generate revenue but allows me to share what I’ve learnt so far. My net worth grows more every month and keeps me focused on my goal! Personal Finance might be personal but it’s a team effort. By working together and sharing our tips and tricks we all move forward. 

What is your Personal Finance Story? How far along of the journey are you?

person signing loan agreement for purchase of apartment

5 Ways To Stop Living Paycheck to Paycheck

No matter how much they earn, people end up living paycheck to paycheck. Whether you are a professional athlete or a student with a side job you might be in this situation. But stay positive, because you are struggling today doesn’t mean there is no hope.

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Although, many will have managed to save some money during the pandemic. It’s often down to having fewer opportunities to spend no more clubs, restaurants, or shops. The likelihood of us going on a spending spree diminished greatly.

“Act your Wage”

DAve Ramsey

It would be naive to think that once the opportunities return, spending will remain in place. So why not create healthy habits now and protect ourselves from temptation and expenditure?

The vicious circle of living paycheck to paycheck

32%, you read that right 32% of people, surveyed in 2020, were in financial distress. Whether they earned $40,000 or over 200,000 the result was the same 30% or more ran out of money before payday. Unsurprisingly, below that threshold people ran out closer to 40%.

Whether it’s taking on debt early in life or succumbing to Lifestyle inflation. The continuous chase for more leaves many behind grappling at straws. When your checking account approaches the inevitable overdraft – credit cards become a saving grace. 

Summers might be easier but when winter hits and the energy bill goes up things can change drastically. That new iPhone or brand new car might seem like only a few hundred per month now… In the long run, monthly payments and debts add up.

“If you can’t pay for it twice cash don’t buy it”

Peter Saddington

Lifestyle inflation is the culprit when wages go up, we tend to want to live “our best life”. Worse than that we increase our expenditures with the hope of a windfall. That is nothing short of lunacy. In an episode of the Fast Track Podcast, Peter Saddington shares the spending habits that brought him to 1milion net worth at 26!

Of course, it’s easier said than done once you have reached Financial Independence. Yet you need a backup plan and solutions. Time to dive in:

How to escape living paycheck to paycheck

You aren’t as smart as you think

I know it hurts to hear… But studies show that 71% of people have an inflated perception of their Financial Literacy. Only 34% of people were able to answer basic Financial Literacy questions.

That percentage rings a bell, doesn’t it? There might be no correlation but it seems like an unlikely coincidence. If you want to test your knowledge follow this link.

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By accepting our true knowledge we make a giant step towards saving more money. Lower financial knowledge leads to riskier investments. Not only does it mean you are taking more risk you lose track of your portfolio. 

Take the time to educate yourself and learn there are many resources out there to get yourself started.

BUDGET BUDGET BUDGET

If you want to get out of this vicious circle… you need to know where your paycheck is going. Track all your expenses and money sinks. Don’t be ashamed of where the money is going but try and understand why you are spending it. 

A great rule of thumb as a beginner is to follow the 50-30-20 rule. No more than 50% of your expenses go towards needs, 30% towards wants, and 20% towards savings. 

The 50/30/20 rule to avoid living paycheck to paycheck

By reverse engineering a budget you can make it fit your lifestyle. The biggest problem with budgeting and following plans is the same as with fad diets. They don’t fit you or your lifestyle. 

Build your budget from the ground up to protect yourself from financial trauma. Understanding why you are saving money and where it’s going will also give you a clear purpose. It’s also likely to help you stick to your habits! 

Debt First

Paying back your overdue debt is the highest guaranteed investment you can make. Credit Card debt is typically 15% and higher interest. If you stick to minimal payments and max out your credit line… You will quickly be in over your head.

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At a 20% interest rate, your debt will have doubled within 4 years. The compounding effect isn’t always your ally if you aren’t ready for it. Paying back debt should be your number 1 priority.

Debt will trap you into the vicious circle of living paycheck to paycheck.

Sneaky Influencers

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Our generation deals with a new kind of financial pressure: social media. Seeing people living their amazing lives on Instagram or quitting college to hustle on Twitter… It’s enough to drive anyone incoherent. 

Schwab’s “Modern Wealth Survey” showed FOMO is the leading cause for spending. 35% of people surveyed spend more than they can afford to join experiences. 34% will make unexpected purchases based on Social Media.

This is where lifestyle inflation often hits the hardest. Now that your salary has increased you need to show it through your lifestyle. You make $50k a year, so you definitely deserve a brand new BMW worth 40k. It doesn’t matter that you will be making a $600 payment monthly. 

The other trap is moving to a higher cost of living area to fit with your new lifestyle. The biggest fixed cost often is rent. Once you’ve signed a contract for 2 years you are stuck. No matter what happens you will be shelling out “the appearance cost” of your apartment. 

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By “improving” your lifestyle and de facto increasing your expenses you negate the effect of a raise. By relocating to a cheaper neighborhood, downsizing your flat, or finding a flatmate you will effectively decrease costs.  

Living in a mansion isn’t worth it if you end up bankrupt. If you want to learn more about how to avoid lifestyle inflation and other financial sins read my article “7 deadly Personal Finance Sins”.

Prepare for the worst

You’ve finally gotten out of debt and cut out most of your superfluous expenses! Congratulations. Unfortunately, you aren’t quite ready to invest yet. I know this feels like it’s taking forever but you are getting there!

Before, investing you need a security net. It will protect you from falling back into old habits and lose all the progress you have made. This magic tool is an Emergency Fund. Typically, an emergency fund is anywhere between 3 and 6 months of expenses saved. Having it at hand guarantees that you are ready for let’s say… a global pandemic?

Emergency Fund Piggy Bank

This is not a future “enjoyment” fund it’s the last resort. Having an emergency fund allows you to keep your head cool when a medical emergency arises or you lose your job. Additionally, you will feel at ease when looking at your bank statements. 

Breaking the Vicious Circle!

Now that you have the tools, how are you going to use them? Learning about Personal Finance and how to manage my income has changed my life. I’ve been on this journey for a little over a year now and would love to see you join me!

There is always more to be done and to be learnt. Living paycheck to paycheck isn’t a necessity. What was your first step towards living a Financial Stress-free life?

Passive income is alie

Passive Income, it’s all a lie!

We all dream of it… the coveted passive income! Picture that income flowing in and no need to work! Truly a dream come true. We’ve all seen the YouTube ads, this one simple trick will allow you to unlock unlimited income! What if I told you passive income is a lie?

There I said it – there is no such thing as passive income. At least not entirely. You can earn some income on the side with low effort. But there is no such thing as completely work-free income.

If anyone promised a completely work-free income it’s a major red flag! They are lying or looking to scam you.

What is Passive Income?

At the end of the day, we are all in the pursuit of carefree income. Therefore holding onto the mirage of passive income is wonderful. It feels dreamy and special. Just like someone playing the lottery we hold out with the hope of a consistent payout. 

To figure this out let’s look at the proper definition of passive income: “Passive income has been a relatively loosely used term in recent years. Colloquially, it’s been used to define money being earned regularly with little or no effort on the part of the person receiving it.” Investopedia

Navigating as if Passive Income exists

I don’t believe a single job out is lucrative with no work. To get behind this we need to understand what it takes to get a profitable and regular passive income. It usually will come from investments, entrepreneurship, or royalties. All of these need varying amounts of work to set up.

So yes passive income might exist but it’s hardly completely hands-off.

What is real passive income?

The idea behind passive income is to build new income streams. The average millionaire having 7 income streams. They will vary in activity level but will all need a level or another of supervision.

Isn’t it exciting the idea to work from home and get money funneled to your account regularly? But all 7 income streams have some kind of maintenance. Even the epitome of passive income: dividend stocks or bonds require maintenance. You need to pick the right portfolio and stay diversified! You can learn more about that in my article “Trading 212 or Vanguard? Which investor are you?

What are your options?

What do people mistakenly take for passive income? The list is long I will tell you that. Whenever you find an article titled “top 5 passive incomes for 2021” you should probably run. Let’s take the time to list out the commonly touted options and understand why they aren’t so passive after all.

  1. Airbnb or House hacking
  2. Ecommerce
  3. Youtube
  4. Podcasts
  5. eBooks and Courses
  6. Blogging/Medium
  7. Affiliate Marketing

All of the above are often cited as sources of passive income. Ways to become your own boss. Yet what most omit to share is that you need to work extremely hard to set up these income streams. Let’s look into what each of them needs to be set up.

AirBnB

House hacking sounds easy, right? You’ve got a spare room put it on Airbnb and boom regular easy outcome. Sounds great! Easy income from a spare room that would otherwise drain energy. 

passive income from AirBnB

This is vastly miss understanding Airbnb. The best way to drive consistent bookings and revenue is by being a “Super-Host”. To become one you need to have had 10 guests stay and leave a high star review.

Becoming a “Super-Host” is all but easy. In order to get high reviews, you will need to create an experience. Remember the sensation you feel when your bed is set up in the perfect way. Some soap and shampoo in the bathroom and maybe a guide of the city!

That makes all the difference. But getting your spare room ready multiple times a week to incur “passive income” seems like work to me. What do you think about it?

eCommerce

Just set up a store and find something to flip and sell online. Just pop over to Teespring. Create a viral design and start selling T-shirts. Not only do you need to acquire the skills for basic design and the communication skills to sell your designs. 

What about flipping items? Well, let’s say you decide to flip tech items such as vintage consoles. You need to:

  • Research Them
  • Test and buy them
  • Find a buyer

Repeat this for every item and marginal gains. Once more you might be able to set yourself up and get evergreen designs that will sell months after publishing them. These designs will payoff regularly with low effort on your side. This is still disregarding the past work needed.

YouTube, podcast, and blogging

Any of these 3 needs a strong amount of work. They might, in the long run, lead to consistent revenue from your portfolio. Yet setting them up in the first place is insanely difficult.

YouTube keeps you from earning revenue until you reach 1k subscribers and 4,000 hours of watch time. It takes on average 22 months of consistent posting to reach this milestone. Almost 2 years and no income? Doesn’t exactly sound like passive income to me. In the long run, it might return dividends but nothing is guaranteed.

Content Creation for Passive Income

Podcasts take months to earn an income. You need to build a loyal fan base and stand out from the crowd of similar products. You’ll also need to find a way to advertise your product and drive consistent income. There are some fantastic podcasters out there like Yasi at Fast Track Life and seeing her drive I can tell you there is nothing passive about it!

Blogging/Medium with a blog you start at a loss. You have to pay for hosting fees and produce content consistently with the hope of an increase in Domain Authority and on Google’s rankings. 

Find your balance and push but more than anything writing is a passion. I wrote on Medium for 6 months before starting Cent by Cent and made $12. 26 articles for $12 and I still loved it. Remember that on Medium only 7% of writers make $100 or more a month.

If anything these creative outlets is a form of passion income more than passive income. Down the road, you might see some regular revenue but right now you do it by passion.

eBooks and Courses

Both of these can become a great and regular passive form of income. The only problem? It takes an immense amount of work ahead of publishing it. Graham Stephan created the YouTuber Academy and he says it took a month of 18hour workdays to be ready to publish it. Even with 1000 newsletter followers and thousands of subscribers, he sold 1 course in the first 24 hours.

Learn more about it in his interview with the Colin and Samir podcast.

Courses can lead to a regular income screen but even with a loyal following, it can be hard to have a regular income. If you want to make income from educational content you will need to build a strong community around you first!

Affiliate Marketing

Similarly to courses, you will need to be trusted and build a strong community. Whether you create an affiliate marketing blog or do it via Social Media it won’t be easy. Building an audience can be done in a few months. But we can’t expect a reliable income. 

Once you manage to set up your community you will need to consistently market your products. It will always take a certain amount of work.

Not so Passive after all

Whatever angle you look at it… true passive income is a myth. You won’t sign up for a new service and receive money daily for free. It always takes a certain amount of work and dedication to be launched. 

Your income-generating assets always need some looking after however small. So if you are thinking about setting up a new income stream. I have one piece of advice that was given to me by Matt the Financial Imagineer. Look for your passion income if you can do it for free the revenue down the line will be a bonus.

So how are you going to set up your passion income to create some passive income?

Universal Basic Income could it be THE Answer?

What if the government covered your living cost? Would you still go to work? What even is Universal Basic Income? Could it work?

2020 was the biggest challenge our social systems have seen in a long time. It forced countries to become creative and find new solutions. One of these solutions was Universal Basic Income or UBI. Whilst it’s not a new concept it bounced to the forefront of our attention. We saw different examples last year from the American stimulus checks to the travel grants in Japan. 

The first hurdle the policy faces is its definition. Some call for a replacement of welfare by UBI and others for an addition. The longest-standing “experiment” of UBI is the Alaskan “oil dividend”. Which sees any permanent resident of Alaska receiving an annual monetary stipend.

Oil Dividend Alaska Monthly Stipend

This monetary stipend has not had an impact on employment or wealth imbalance in the area. It has seen an increase in part-time work and “evening” studies. We will explore this more later.

I believe that UBI could open the doors to Financial Independence to many as well as giving more time for meaningful work. Less risk of living paycheck to paycheck and higher chance to make a valuable contribution. This ties in with the ideas I explore in “Financial Goals: I was wrong“.

So today let’s explore what Universal Basic Income is, what it means for the economy, and the pros and cons.

What is Universal Basic Income?

Universal Basic Income is quite easy to define it’s the idea that every adult should get a monthly stipend. Although, it sounds utopic and simple. It’s far from easy to put in place. There are many different takes on it from a no questions asked to check to a restricted special use debit card.

This concept has been around since the 16th century and is back with a vengeance currently. Tough economic situations suggest a radical solution. UBI is one of the options. The perfect amount is not a matter of economics but politics. The one rule the policy would abide by is that no matter who you are, what you do, or what you believe you are entitled to it.

Additionally UBI is not a plea to make people work less. It’s the power to enable them to a job that matters. It not only means an increased chance to work according to your values. It empowers workers in less enviable positions as they gain leverage to request higher working conditions. 

Implementing it could be as a supplement to the welfare offered by the state which would increase the overall cost and tax at higher incomes. Or replace it partially/fully and become a new and fairer approach that has diminishing returns as you go up the income ladder. All in all, it is an effort to bridge the wealth gap. But can it work?

How could UBI Work?

Negative taxation?

At the end of the day, UBI starts with tax reform and implementing a negative income tax (yet another name for UBI. To help you visualize the situation in table 1. You can see the impact on your taxes and net income. The data is based on the European Average tax level in 2019 39% and the global average of 31%. As well as a £1000 per month income or £12000pa.

Universal Basic Income Breakdown

If you are more of a visual thinker the curb looks like this :

Universal Basic Income Gross Income vs Net Tax Rate

As you can see with a negative income tax as the basis for UBI taxes would normalize fast. Instead of creating an inflationary situation it would lead to the redistribution of wealth whilst giving an equal footing to all.

Regional Currency?

Gyeonggi province in Korea has had a basic income for under 24-year-olds for some time now. The idea was that they get a quarterly stipend of 100’000won or 85USD which they had to spend in local business with a revenue of under 830,000USD. (article link

The program has now been expanded to the whole of the adult population since the start of COVID-19. It allows the state to subsidize small businesses whilst empowering and protecting its people. With the spending restricted and limited to certain regions.

By directing the cashflow via local spenders and increasing the regional GDP – the population is also enabled to invest. Not only in stocks but in themselves. It empowers workers to focus on their education and retrain new skills. This is particularly important in a country with a strong increase in automation.

Why not check out the video below from the Wall Street Journal which visited a recipient of this variant of UBI.

Replacing Welfare?

Welfare can often feel like a trap. With clear thresholds that are arbitrarily set and rarely updated. By generalizing aid and removing constraints you give a chance to recipients to use the funds as growth support. Supporters of the cause call for this to be funded by existing welfare funds as well as with saved administrative costs. The OECD (Organisation for Economic Co-operation and Development) says its members spend on average 20% of their GDP on welfare. Or 8700USD per capita in 2019 raising to 22.7k for Luxemburg.

Social Welfare Cost OECD

This data excludes 2020 were due to COVID-19 relief efforts the value is certain to raise. It also excludes the cost of administration for such efforts.

What are the risks of Universal Basic Income?

In this category, it’s essential to differentiate perceived risks and risk themselves. In this case, I will explore the biggest perceived risks and whether or not studies see them as founded or not.

People will stop working

A big if not the biggest sociological fear around UBI is that people will stop working. The idea that UBI which causes higher taxes and a stronger base for a living will incentivize people to stop working. 

Evidence shows that indeed working rates significantly decrease when focusing on child labor. Although it only made it disappear in 8/19 studies it did show a decrease in hours worked in all studies! Which in turn led to an increase in school attendance and literacy.

As for the adult workforce, cash transfers did lead to a slight decrease among the elderly and those that care for dependants.

People will misuse the funds

But wouldn’t people just use the money on booze and cigarettes? A 2017 University of Chicago study on “Cash Transfer and Temptation Goods” has shown that when offered a basic income or subsidy the expenditure has a significant negative effect with a -0.18 standard dev. Studies have therefore been showing that concerns around tobacco and alcohol consumption are not applicable! 

Indeed the research paper also points out that temptation goods are subject to high substitution effects When one unlocks the fund for more valuable substitutes they tend to gravitate towards them. These alternatives include a higher education with uptake in reskilling as well as health-based replacements such as nutritious foods or exercise equipment.

How about inflation?

The worry of inflation is linked to the decrease of work in relation to the income earned. As seen above UBI doesn’t lead to a significant decrease in working hours and thus should only mildly impact inflation. 

Seeing it as a general raise is correct. A great example being Alaska’s oil dividend once more. Prices in Alaska although inflated rank 41st in the country despite supplementing income far from the likes of California, DC, or New York. 

Additionally, an approach in line with Gyeonggi pay would make sure UBI would be redirected and consumed within the region. Boosting the local economy in turn. In a study by the Roosevelt Institute on the Macroeconomic Effects of UBI, they point out a potential uplift of the GDP by 12.56% over 8 years.

They also conclude that there was as of 2017 no empirical data that such a program would lead to an inflationary economy.

Why Do We Need Universal Basic Income?

It often feels like the status quo is fine. It’s comfortable and easy as we know how it works. The goal of this article is to challenge your understanding and try and give you an alternative point of view. We grew up with our social system in place but go back 70 or 80 years and Paid Time Off was unimaginable. 

The strength of humanity is its constant evolution. With 2020 in the rear mirror and 2021 looking just as bad, the question stands are we doing enough?

The Wealth Gap

UBI inequality growth
Graph by David Leonhardt - NY Times Aug 7, 2017

This graph shows the striking difference in income growth between 1980 and 2014. We seem to think that the rich get richer was always true. Yet a measly 30/40 years ago the trend was reversed. With a wealth gap that was shrinking.

Of course, it would be delusional to think we could go back to the economic growth of the past. Yet redistributing the cards at the top of the range would make a large difference. Systemic poverty is engrained and not moving as the wealth gap increases.

An egalitarian UBI would give the chance to the 98% to bridge the gap and start working towards a greener future. Currently juggling multiple jobs with a constant fear of losing them leaves no space for hope or betterment.

Often when working towards Financial Independence we forget that the deck was stacked in our favor. Of course, there are exceptions and inspiring stories. Yet recognizing my privilege and looking to help others grow is equally important.

A security net

If COVID-19 has taught us anything, we can’t be prepared for everything. With 40% of British people between 22 and 29 having no savings at all. Many have found themselves in dire situations as the age group was the hardest hit. 

With no social security net or protection in place in the United Kingdom, the jump below the poverty line is very fast. 

Not only does the crisis happen but it’s foreseen that 1 in 4 Americans will lose their job to automation in the next 12 years. UBI would allow peace of mind whilst these workers retrain for newly profitable jobs. 

Of course, it would be easy to say prepare in advance but when living paycheck to paycheck that is an option many can’t sustain.

Entrepreneurial Boost

Entrepreneurial Take Off thanks to UBI

With the rise of platforms like Patreon we see an increasing amount of creators relying on donations from their followers to live. This is no different than a basic income provided by self taxation. UBI is no different and would allow the extension of such principles to a bigger share of the population.

By paying, a consistent stipend and delivering what is effectively an income floor. Residents are empowered to take more calculated risks and create their own path. In turn, creating employment and boosting the economy. 

Ask yourself, how often do you hear people wish they could afford to start a company. But it’s just too risky they might lose everything. The impact knowing one can feed his family has on ambition is astounding.

Conclusion

My goal here wasn’t to convince you we need to adopt UBI. It was to dispel preconceived notions of economic downfall. Of course, just like every societal revolution, there will be repercussions and tradeoffs. 

Yet it doesn’t mean we will be taxed to all hell. Of course, we can expect an increase in taxation in the short term. Yet the chance of creating opportunities for everyone equally is worth it in my eyes. UBI, when tested, has led to an increase in GDP, education, and morale. 

As studies have shown an increase in mental health across the board!

I would love to hear your thoughts and ideas around this issue! How would you reform societal help?

Sources

light bulb with success definitions

Are You Successful? 7 Definitions of Success

How do top performers define success?

Are you going to be a success? I wish I could guarantee it. The problem begins when I ask you, how you define success.

By the way… How do you define success?

I’ll be honest, I have no clue. Curious as I am — I couldn’t leave this question unanswered. From Personal Finance to life, in general, it’s an essential question. We measure ourselves comparably to the success of others. Although, ultimately it doesn’t matter we cannot stop ourselves. 

So to be sure I had the best insight I had to look at the best for feedback. At the end of the day, we measure our own success. Yet finding pride from within can be challenging. I’m sure that whatever you believe is a success you will find yourself below!

1. If you're engaged it's a success

When asked about success Richard Branson answers

“My definition of success? The more you’re actively and practically engaged, the more successful you will feel.”

Mr Branson makes no mention of performance. In his eyes, success is a feeling – an emotional reaction. Although this quote might be difficult to apply to investing. It’s perfect when it comes to chasing Financial Independence. As we achieve FI the chase of success becomes an easy one. You have the time to throw yourself into engaging work, despite lower potential returns.

The book “Finding My Virginity” , an autobiography by Richard Branson, was eye-opening for me. Although, he has failed dozens of times and gotten back up. He started with nothing and has built the Virgin Empire by pursuing passion projects. 

We can put it down to luck. But it opens the question: had business been less profitable would he have the same definition of success? 

I feel close to this definition as motivation always runs high when I’m passionate. It certainly explains why “pro-bono” work feels rewarding.

2. Sacrifice is necessary

I didn’t expect to find “it’s easy” among the answers. Yet the way the Dalai Lama puts the value of success in perspective is mind-opening. It’s also a quote that is perfectly at its place on a FI/RE and Personal Finance blog.

“Judge your success by what you had to give up in order to get it.”

If you strive for Financial Freedom – you know the importance of lowering expenses and growing income. Achieving your yearly saving rate is a success in itself as it requires you to sacrifice some comfort.

I talk about the challenge of moving abroad in my article “Should I Live Abroad?”. My move abroad although at the cost of higher pay is in my eyes a success. Sacrificing the comfort from home for personal growth was the right call!

Take time to reflect on what you’ve given up on to reach your current position.

3. Success to the unyielding

How Bad do you want success?

Striking gold is tough. The likelihood of it being on the first throw is minuscule. You will fail. Not once probably, many times. How do you keep your drive? More importantly, how do you find your strength in failure?

Winston Churchill defines “Success is walking from failure to failure with no loss of enthusiasm.”

I’ll be honest here… If I had given up blogging at my first hiccup. There would be no article. What keeps me relentlessly motivated and wanting more is passion. And maybe, more importantly, the conviction that Cent by Cent will go somewhere. 

Similarly when it comes to investing, “holding” is the only true strategy. Of course, rebalancing occasionally is important. But to reach the coveted million dollars the best tactic is consistent investing. Whether the market drops or rises you stay in the market. The technical term is Dollar Cost Averaging.

Keep your heart and hope high, success will accompany you. Do not let yourself be shot down and keep growing no matter what.

4. Eyes on the Prize

As an ambitious person, I tend to go from idea to idea. I get excited by many different projects, which end up leading to nothing. Expecting dumb luck or some kind of innate talent. Not realizing that concentrating my energy was the answer. Bruce Lee put it best when he said:

“The successful warrior is the average man, with laser-like focus.”

When it comes to investing, set your end goal and thrive for that. When saving feels pointless this month remember that you do it for tomorrow. Keeping a clear goal in mind and focusing all your efforts on it.

Of course, blind loyalty even to yourself is a Damocles sword. With strong focus comes emotional attachment. Sometimes accepting to take a loss is the best decision you can make. The high focus tends to make that difficult. As we saw with Winston Churchill accepting a failure can define your success! 

I dive into this idea in my article “2020 Retrospective: 10 Important Lessons

I’m not special but if I stay concentrated. I might just become successful.

5. Will it even matter?

“Try not to become a person of success, but rather try to become a person of value.”

This quote by Albert Einstein caught me by surprise. I was tunneling on success.

Society has taught me success is all that matters. 

Yet, does it matter if I must betray my beliefs? 

When making a big decision I always come back to this quote. I ask “what is the cost of this success?”.

From investing to lifestyle decisions, realize your values are what define you. Without them you are but a dragon hoarding money and accolades. Working aimlessly towards growth is an illusion.

The only true measure of your success is how much you grow towards your values. As a way to stay true to my values, I read the poem “If” by Rudyard Kipling weekly.  Alternatively, I explore the idea of setting goals in line with my values in my article “Financial Goals: Why I was Wrong”.

6. Where to start?

Whether it comes to storytelling, launching a company, or buying a house. We all get started with an idea. Pablo Picasso tells us to take a step back:

“You have to have an idea of what you are going to do, but it should be a vague idea.”

This resonates strongly with me. Of course, having objectives is important. On the other hand, being too specific can feel limiting. When I set off to write a new article I decide on a general topic and let it take me. The more free reign I give myself the more creative I get. 

Similarly when it comes to investments having rigid targets is taxing. I personally am aiming to save 5 digits this year. But I refuse to give myself an objective on returns. No one can control the market and when you are in it in the long run… one year’s returns is a drop in the ocean.

7. Success is accepting imperfection

Success won’t come easy. That’s a given. Success eludes many as they define it as reaching perfection. Perfectly mastering a skill, a perfect recipe or creation are but dreams. 

Have no fear of perfection – you’ll never reach it.

Salvador Dali

I find this quote relaxing. It reminds me that although quality is important – perfection is fiction. When I started Cent by Cent, I would refuse to publish an article if it wasn’t perfect. It took me a month to understand I’ll always find flaws in my work. It’s better to publish and grow than to stagnate and wait for perfection.

The same goes with Personal Finance, I’ve accepted I’ll never rid myself of all unnecessary expenses. It’s impossible simply because sometimes “treating” yourself is a necessity. I try to keep my mistakes to a minimum but accept that I can’t completely avoid them.

So What is success?

No Idea…

Really None.. but isn’t that the beauty of it? 

You are able to create your own definition of success. One thing that seems to be in common is to never back down. Whether it’s in life or in finance, hold your positions and give yourself the time to grow. 

The biggest cause of failure is giving up. On the other hand, I try to remember to not be stubborn. Sometimes, giving up is the best thing you can do. As long as you grow from every endeavour whether it ends in success or failure doesn’t matter.

We must strive to create our own measure of success and to live according to our values!

I would love to hear what you define success as and how you apply it to your everyday life.

Trading 212 or Vanguard?

Trading 212 or Vanguard? What investor are you?

I am not and do not pretend to be a financial advisor. I am a financial enthusiast and all information contained in this article is not to be taken as advice but as an opinion. The article contains affiliate links marked as (AF). All opinions are my own and are free of external influence.

Time to start compounding your wealth! I’m sure you’ve heard it 1000 times but which broker should you pick Trading 212 or Vanguard? What’s the difference is one better than the other and will your path to financial security change depending on your choice?

Whether you chose Trading 212 or Vanguard doesn’t matter. At the end of the day, the important thing is to start investing! The first pound/dollar is always scary but once you get the ball rolling it can truly change your life. 

But before I go on a rant about the amazing thing that is compound interest (find out more here) let’s focus on the subject at hand. Should you go with Trading 212 or Vanguard? 

To answer this in the best way possible we will explore what each service offers, what investing profile fits each best, and how to get the most out of both!

What are Trading 212 and Vanguard?

Investment growth

Trading 212

Let’s start with the newer product! Trading 212 is a fee-free broker that allows you to trade in real shares and CFDs. You are also able to invest in fractional shares! No need to save for an entire share. Do you want to own $1 in TSLA well it’s possible! Unfortunately, they aren’t available in the USA or Canada. If you live in either of these countries you should check out M1 Finance as they offer a similar product for the American market.

Let’s get back to Trading 212, the system is built with 3 separate accounts:

  1. Invest
  2. ISA
  3. CFD

ISA accounts are tax-free accounts for the UK market. If you want to learn more about them feel free to read my article “What are ISAs”. CFD and Invest account being separated ensure that you will not trade options accidentally. Something that can easily happen with eToro for example. 

From company stocks like Microsoft to Index funds for the likes of the  S&P 500 Trading 212 has everything you can wish for. Provided you have the time to pick and choose your shares T212 is amazing! 

Additionally, Trading212 allows you to rebalance your investment pies automatically when you add, remove, or change the weight of a stock. If you are unfamiliar with rebalancing why not give The Banker On Wheels’ latest article a read? “The only skill you need – Portfolio Rebalancing”

The website also allows you to have a demo account and practice trading with up to 50000. It’s a great way to get familiar with trading and more accepting of numbers both in the red and the green!

If you want to get started with Trading 212 use my link and with the first £1/$1 invested you will get a free stock worth up to £100/$100. (AF)

Vanguard

Vanguard is a more traditional asset manager. They offer a wide array of ETFs and Index Funds that are traded either on the NYSE (New York Stock Exchange) or in the UK. It means you have the opportunity to open an account with them as your broker or trade them through other brokers. 

In short, you can trade Vanguard stocks on Trading 212 but not the other way! 

For more details on what Vanguard offers, I already wrote an introductory guide to their product in my article: “How to invest with Vanguard”.

What kind of Investor are you?

So we covered the basics both brokers allow you to trade and invest in the long run… is one better than the other? Well first of all if you are not a UK, US, or Canadian investor Vanguard’s platform won’t be accessible to you. That was easy, wasn’t it!

On the other hand, their funds will still be accessible to you! So this part is still relevant to you. Why does your personality have an impact on the broker or approach you should take?

Well depending on your risk aversion, time at disposal, and interests, you might prefer different brokers. 

I’ll  be separating investing profiles into 4 different archetypes:

  1. Risk-averse and Hands-off: The Sleeper
  2. Risk-averse and Hands-on: The Judge 
  3. Risk-insensitive and Hands-off: The Sheriff
  4. Risk-insensitive and Hands-on: The Cow-Boy

The Sleeper

 You want your wealth to grow but you want minimal risk and do not want to touch your account. First of all sorry to tell you this but no risk doesn’t exist when it comes to investing. Low risk does but there is no such thing as 100% guaranteed returns. 

The good news is Vanguard has the perfect products for you. If you are based in the UK I would go with one of their LifeStrategy funds as they allow you to blend equity and bonds to your liking. All you have to do is set up your direct debit and every month your money will be invested and diversified for you!

The Lifestrategy 60% equity and 40% bond which has returned 54.75% over the last 5 years is diversified as follows:

If you are based elsewhere and want to build a safe portfolio you can forget about it’s easy to do with Trading 212. They give you the chance to create your investment pie and give you an idea of your annualized returns based on the last 5 years. Why not build a pie with a similar mixture of index funds and fixed income funds.

Set them up and come and check on them 2 or 3 times a year they should lead to consistent growth!

The Judge

You want returns but you are ready to get a little less as long as your nest egg is safe. But on the other hand, you like being in control. You want to know what companies you hold and how they are performing at all times. 

I find myself in this category at times. Although Vanguard would once again be great for you. You would rather pick and choose your companies as you want only solid stocks. You might dabble in a few funds for security but overall you want to build a company portfolio.

Therefore, I think you should pick up Trading 212 if in the UK don’t forget to open an ISA and top that up before a general investment account. But honestly, you will get more out of this broker.

Once again to make sure you are invested in the “safest” stocks and funds possible, having the opportunity to rebalance your pie will make your life much easier! 

Resources to get started:(AF)

  1. 1 free share valued up to £100/$100 using this link
  2. A 29 pages long course on how to begin investing “Opening Bell: Time to Invest

The Sheriff

You’re in it because you want to win. The more you can maximize your return the happier you are! The Sheriff is willing to take on a little more risk as long as he gets to reap more rewards. Your focus is equity as that’s where the growth is! The Sheriff doesn’t want to put too much effort into his investing though. 

As for any passive trader, Vanguard would be perfect for you! Whether it’s them All Cap Accumulation Fund, VUSA/VOO (S&P 500 index fund), or the Lifestrategy 100% you are all in. Of course like any sensitive trader you have set up your direct debits and invest the same sum regardless of the state of the market. 

What would your diversification and portfolio look like if you went with Vanguard’s Lifestrategy 100%?As for how you could set this up in Trading 212, I would add in multiple index funds like VUSA or iShares funds that track equity markets. That way you don’t need to check daily as stocks are rotated in and out of indexes depending on their performance. Historically the S&P 500 has returned 7.2% p/a in the last 10 years it climbs to 10%!

The Cowboy

You want it all the control, the returns, victory! You are willing to risk more to get more. But be careful there’s a reason Cowboys were commonly poor. The Investing Cow-Boy often takes too much risk. Remember you cannot know everything and predict the market. 

Although I cannot recommend this approach unless you know exactly what you are doing or have a lot of time on hand. But if you stand here you should focus on Trading 212 as it allows you to invest and buy as much as you want every day and with no fees. 

Their categories and the option to sort by “big winners”, “big losers”, or “growth stocks” will make your life easier. But remember to always do your own research and remain consistent with your criteria!

More importantly never invest more than you can afford!

Trading 212 or Vanguard conclusion

You might feel like you don’t fit into any category. That’s very likely as we are adaptable animals. Personally, I stand between the Sheriff and the Judge. I invest 80% of my savings into the Lifestrategy 80% and the FTSE Global All Cap Fund held by Vanguard. 

Every month without fault a direct debit for £400 is sent straight to my Stocks & Shares ISA. The 20% that remain go to my Trading 212 UK dividend pie. Every Tuesday I buy in £25 worth of fractional shares. It also means that ¼ of my monthly investments are easily rebalanceable. Additionally, I save another £500 in high-yield savings account as a fund for a first Real Estate Investment!

At the end of the day, the broker doesn’t make your wealth your decisions do! So if you invest regularly or are getting started, tell me in the comments what type of investor you are?

Around the world

Should I live abroad? To Leave or Not To Leave

Should you live abroad?

How difficult could it be to go abroad?

People, do it all the time, don’t they?

I was confident when I decided to leave Switzerland. Living abroad was going to be a walk in the park. Although, I had always worked and lived by Lake Geneva. English and traveling had been a big part of my upbringing. On the other hand, it never felt like quite enough – I wasn’t fulfilled.

All my friends had gone abroad to study, learn a language, or on internships. 6 months here, 6 months there. Surprisingly, most of them have decided to drop their bags in Switzerland — it was my turn to go out and explore. Yes moving abroad meant turning my back on the infamous “Swiss Salaries” but I needed to do it.

Sometimes decisions have to be made despite FI/RE as mental wellbeing is paramount.

Just like every 22 years old, I was convinced I had everything under control! Once I found a great job opportunity in London, it was very straightforward, get there: find a flat and go to work. Friends, finances, and all the rest will just fall in place.

They will right?

Well… it wasn’t quite that easy. Let me share what I learned, hopefully, it’ll make your life easier.

Living abroad can feel extraterrestrial

Sounds obvious, doesn’t it. Of course, I expected a few things to differ. From the currency to the language or the cost of living. Somehow differences are hidden everywhere. Even within Europe, social expectations, work culture, and mindset are drastically different.

People were bonding in different ways. Where back home we tend to be straight to the point— in the UK people would take offense. Where working overtime was customary (and paid), it was now frowned upon or hidden in plain sight. It isn’t bad far from it. It just took some time to get accustomed. None of these things were deal breakers, I’m more than happy to be abroad. But when preparing or thinking about a move abroad take the time to research smaller things. It won’t always be plug and play. The learning curve can be steep at times but golly gee is it worth it.

For example, if you are looking to move abroad and are from the USA The Frugal Expat shares amazing insights on wealth from the other side of the world.

Living abroad an astronaut on the moon

Banks, credit score, and more...

Oh, how naive I was…

Why did I expect everywhere to function like the Swiss system? I have no idea… most likely I was arrogant. Take it from me at least research how to open a bank account. Sounds straight forward right? Well, it wasn’t… I had to go to at least 10 banks before I could start the process. They didn’t understand how time-sensitive it was. I mean how was I supposed to receive my salary, pay rent, get a phone?

Once again this could have been avoided with a bit of research. Had I known which documents were needed for what — it might have been easier. I’d recommend researching the following:

  1. How to open a bank account?
  2. How to get a phone plan?
  3. Public transportation or a car?
  4. How does healthcare work?
  5. Do you need to change your driving license?

The list goes on. But had I figured out the 5 above, my driving license wouldn’t have expired…

Look for financial opportunities for example in the UK you can open an ISA (a tax-free account) and opening a brokerage account tax-free is simple! Whenever you are making a move abroad take the time to look for opportunities. If you are in the UK learn how to start investing with Index Funds here. If you are in Switzerland check-out this article 2 Step Guide To Achieve $1,000,000 In Your Voluntary Retirement Account — Swiss Edition by Fast Track.

There are many more to find and countries all have their hidden tricks. Luckily you can find Personal Finance bloggers all over!

Banks abroad piggy bank and coins

Building Trust Abroad

Leaving your support system behind for a city — you’d traveled to once is tricky. I expected building a new support system would be easy. Somehow knowing which supermarket to go to was already a challenge.

The problem, when you move abroad for work and not for studies, is people are at different stages of life. Some have a family, some have a favorite pub, or group, finally, the other new guys are also completely lost. Although, I quickly found circles to join building trust and true friendship took time.

Thankfully, I stuck through it. I got out of my comfort zone and got to know these lovely people. Since then I have formed a tight-knit group of friends and met a wonderful young lady. The rough start was definitely worth it. I’m now blessed to have true friends both in Switzerland and in London.

“No distance of place or lapse of time can lessen the friendship of those who are thoroughly persuaded of each other’s worth.” — Robert Southey

Homesickness is sneaky

6 months… they flew by — it hit all of a sudden. What in the world was happening? Everything had felt normal until that moment. This intense feeling of doubt and dread suddenly dawned upon me.

I might never live there again.

A crazy thought. The 1-way flight ticket should have made that obvious. I remember the Sunday 17th of February 2019 like yesterday. It suddenly all became real. I picked up the phone and called home. Hearing my mother’s voice was all I needed. I guess there is just something about rainy Sundays in Watford that makes you nostalgic.

Instead of letting the feeling control me — I let it flow. 

I dug in what did it mean?

The sadness was not that I left, it was the realization I was creating a new home in the UK. A new identity, even though I grew up in Switzerland — I can exist elsewhere. Every time, I feel it since then, I take time to reflect and I look at my partner — it’s worth it. No doubt here! I’m happy, but I would lie if I said I didn’t miss the mountains.

“Maybe you had to leave in order to really miss a place; maybe you had to travel to figure out how beloved your starting point was.” — Jodi Picoult

The best decision of my life

Despite all of this, leaving home was the best decision of my life. Of course, staying would’ve been easier. On the other hand, going home now has a completely different flavor. I enjoy every moment with my family and friends tenfold. I have also created a support system and met the most wonderful person here.

The beauty of leaving is not knowing when I’ll return. The open ending means my life is up to me. I get to choose my direction, my purpose, and my passions. Although traveling for vacation feels liberating, nothing compares to packing your bags and leaving. A 1-way plane ticket feels and is entirely different. How could I regret being truly alive?

If you are contemplating making this decision. I couldn’t recommend it more. Get out of your comfort zone, travel, live elsewhere. You’ll never regret it.

What was your big decision financial or travel-related? What makes you feel alive?

pins on a map

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2020 in the rear mirror

2020 Retrospective: 10 Important Lessons

The time has come to say goodby to this awful year. Finishing the year with a retrospective is a great way to appreciate our growth. Yet at the same time… Saying the past year was tough is an understatement.

Like many, I was determined not to let 2020 go to waste. It would be easy to wallow and think that we wasted 365 days. Inaction is always the easy route. This year especially required creativity to grow and improve. 

On the other hand, despite all its flaws 2020 was an amazing learning opportunity from self-improvement to personal finance. Never has my life changed this much. This article is an opportunity for introspection and a window into my mind.

Embrace uncertainty

If I had to take 1 thing away it uncertainty is unavoidable. I always thought I could design my future. 2020 showed me you must make the most of the cards you are given. 

It was liberating as it taught me to be more laidback. I take things as they come and enjoy the moment.

Better late than never

Before 2020 my investment portfolio was all of £200. I had tiptoed into using a roboinvestor but it had never really stuck as a habit. That was until I discovered the power of compounding interest. 

When I realized that £500 per month for 20 years would be worth £312k with an interest gain of £173.7k. I became impatient and had to start that instant. If you want to get into investing check out my article on “Investing with Vanguard.”

It would’ve been easier to think why not wait an extra year? As I had already lost the first 2 years of my career. On the other hand, I could start today and reap bigger rewards. 

It was a no brainer

coins in front of a clock money is time

Just start

As I grew up, I had a flawed idea – I believed in perfect timing. There was no point starting something if all the stars didn’t align. If I wanted to work out my body needed to be in top shape. 

Yet as I spent most of the year on furlough. I realized that appetite comes as we eat. The first minutes of exercise, writing, or cooking might feel dreadful. But as it goes on the result feels more rewarding and empowering. 

All I need to do is get going.

Define yourself

I grew up in a family of very hard-workers. Coupled with the societal belief that your work defines your identity. As I was sent home for the foreseeable future in March – I felt directionless. 

My goals and purpose had been solidly tied to my job and before that to my studies. For the first time, I had no given path. It left me with an empty feeling. Until my partner helped me wake up and showed me life had more to give. 

As 2020 went by I rediscovered what mattered to me and how I would build myself. This lead to Cent by Cent and countless memories!

Remain true to your values

values Strong like an oak

My own mortality

I was always aware that I will die. Luckily, I’ve always been in good health. Never had the thought will this be my last breath crossed my mind before 2020. As I was struggling to breathe in March – the thought dawned on me. 

“I might not wake up tomorrow”

The hospitals were full… people were dying and the UK was in crisis. I was laying there wondering how I would draw air in. There were no regrets to be had but I was lost. The situation only truly became apparent as I looked into my partner’s eyes. She was sharing my pain. 

I have lived a life that leaves me with no regrets. Every decision has led me to where I am today and for that I’m thankful. Yet one thought kept ringing in my mind.

It’s too early I still have so much to do, see, and create.

Creativity is within us all

My talent for the arts is close to none. I can’t draw or paint and you most definitely do not want to hear me sing. On the other hand, I’ve always been drawn to art – the need to create was buried within. 

The game-changer was writing. As I started publishing on Medium I found my voice and strived to help people on their Personal Finance Journey. Do my early articles make me cringe? Undoubtedly but they are a sign of progress.

Unlimited

It was easy to think that I wasn’t:

  • Talented enough
  • Creative enough
  • Funny enough

2020 is the year I realized. I create my own limitations. It’s up to me to set my limits and break them. There is no limit to my personal growth. The only way I stop growing is when I stop learning. 

A lifelong learner is unstoppable.

Agility is key

This year was a nightmare for all control freaks. Everything went out the window. Rules society relied on for decades were gone. Some reacted by closing themselves up and throwing up the white flag. Others used 2020 as a catalyst and put down the fight of their lives. 

A situation although immovable is what you make of it. 2020 could have been a lost year but I decided to make it mine. 

Was it perfect?

Far from it. 

But I adapted to this ever-changing world and made the most of it. My friend the Financial Imagineer shared this bit of wisdom: 

“When the wind of change blows, some build walls, some build windmills.”

An old Chinese saying

money in a tissue box

Money isn’t important

Sorry for misleading you. It is. But not as much as we think. Money is a tool. It allows us to purchase freedom and peace of mind. On the other hand, money isn’t the key to happiness. 

Have you ever tried hugging a stack of banknotes?

It’s cold and probably feels very lonely. Wealth is important as it allows you to focus on your true values. Falling in love with money is greed personified and a slippery slope to loneliness.

I explore this more in-depth in my article “Financial Goals: Why I Was Wrong”.

Never Alone

The grind is often sold as a 1 player game. Work as hard as you can neglect your relationships and build your wealth. On the other hand, you’ll reap the rewards down the road they say.

I have a simple question what is the point?

Throughout this year I was lucky enough to move in with my Significant Other, spend time with family and friends. After all, I found a community of like-minded people online that I’m excited to grow with. 

2020 might’ve been the year we were all a part but for me, it shone a bright light on my relationships. Don’t give up building meaningful relationships in pursuit of wealth. Life isn’t made to be lived in isolation.

If unfortunately, you had to spend the Holidays in isolation or alone. Please know that you are loved and valued whoever you are.

2020 retrospective

This year was full of surprises good or bad. But looking back, never have I grown and learned this much. Although, it came with its load of troubles 2020 counted double in many cases. 

The end of the year doesn’t mean the end of the pandemic, unfortunately. Yet it’s a great time to reflect and learn. What have you drawn from 2020 and how will you apply it in the future?

fireworks on 2021

5 Easy Personal Finance New Year’s Resolutions for 2021

New Year’s Resolutions or Financial Goals

Every year the same dance begins. We look back onto the last 365 days and realize we haven’t turned our life around. What’s the next logical step you might ask?

It’s easy we engage in the yearly ritual of New Year’s Resolutions. 2021 is a blank slate that we are determined to transform into a new chapter. From new diets, learning a new language, or more exercise everything will change. Instead of seeking a gradual change, we decide to make drastic changes.

Surprise, surprise…

We never stick to them. How many times have I told myself: “Next year I will exercise every day” more than I would care to admit. Unfortunately, I cannot say I’ve stuck to it so far.

So why not try a new type of New Year’s Resolutions? Let’s set financial goals and build the base of new healthy habits. Whether you decide to try out all of my tips or only to set 1 goal is up to you. Remember small changes are always preferable to no changes.

1. Build an Emergency Fund

If you don’t have one yet this should be at the top of your list. If 2020 has taught me anything it’s that life is highly unpredictable. Building an emergency fund is a great way to cover your back. 

You are ready to face any curveball directed at you. Take a look at your essential monthly outgoings from food, rent, and energy. Then keep in a high-yield saving account the equivalent of 3 to 6 months of these expenses.

Learn more about building your emergency fund for 2021 with my article “How To Build An Emergency Fund”.

2. Invest in being debt-free

Consumer debt is a plague in today’s society. The average Personal Debt in the US was $16,529 in 2018. You might think if everyone has it why do I need to pay it back? Isn’t it just part of life? I’ll make more money by continuously investing. 

If you are an Index Fund Investor and invest in an S&P 500 tracking fund such as VTI or VUSA. You can expect an annual return of around 7% although it could very well fall. On the other hand, Credit Cards charge an APR of 16+%. 

When you invest you are hoping for a return nothing is guaranteed. All you have to do to get an instant return on investment of 15+% is repay your debt. It’s the first step towards Financial Independence.

If you can’t afford to pay the balance in full, work towards paying more than the minimum deposit. Future you will thank you!

grow your investments graphs going up

3. Plant the first seeds

2021 is the year to invest your first $1. It might sound scary, risky, or even pointless to invest so little. Your mind is more at ease with the cash in a savings account. There is 1 simple problem with that…

High-yield saving accounts earn around 0.6% at most in 2020. Whereas inflation is on average at 1.2% in the US. You effectively lose 60 cents by 100 dollars you keep in the bank. 

You can start investing easily today with Vanguard for example that offers a wide array of index funds. If you were to invest $1 per day into an S&P500 index fund you would have 16,949. The power of compounding interest is mind-boggling.

If you want to learn more about investing with Vanguard and Index Fund investing discover my article “How To Start Investing With Vanguard”. If you want a no-fee and easily accessible trading, I use “Trading 212”. Give it a try with as little as $1 and if you use my link you will get a free share valued up to $100.

Change your life  by getting a headstart on your New Year’s Resolutions by starting today.

4. Learn Something New

If you are like me you need to know what you are getting into. It might be the Swiss in me but I like planning ahead. On my side, I use 2 tools books and financial podcasts. My favorite is adding a book to my library as I can always come back to it and grow my knowledge. 

If I had to read 1 book on the subject it would be “Your Money or Your Life” by Vicki Robin. If you are one of my regular readers you probably can’t stand me talking about this book anymore. But it truly changed the way I view money and my relationship to finances. I won’t spoil any more of it but it will change your life.

As for podcasts, there are thousands out there, I was lucky enough to be on an episode of “The Art of Money Saving” that you can find here. Otherwise, I strongly recommend fasttrack.life as Yasi Zhang regularly receives high-profile guests that breakdown the essentials of Personal Finance.

a desk with increasing returns

5. Just Talk

This New Year’s Resolution is simultaneously the easiest and hardest. The best way to grow your wealth and hopefully achieve financial independence is by talking about it. 

That’s it?

Well no… but it’s a great start. Sharing your experiences and asking experts about their’s will lead to a higher understanding. You liberate yourself of stigma and make financial decisions more rational. Yet one of my favorite quotes comes to mind:

“Money is the last taboo. People will talk about their sex lives before they discuss their finances.” Marvin H. McIntyre

Money is kept in a sacrosanct position. Society and big firms will have you believe that it’s a private matter. Yet, knowledge is power. So start talking! 

What will yours be?

Now it’s time to decide what will you do? Don’t pick too many choose 1 and get started. It doesn’t need to be suggested here. I personally have the goal to have £10,000 invested by the end of 2021.

To achieve it I will need to increase my monthly contributions as soon as I get a raise or am able to monetize Cent by Cent. I also aim to make my blog a secondary source of income for 2021 and further.

What will you be doing to better your financial future?

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