Cent by Cent

Our journey to Financial Independence

Category: Personal Growth

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The Productivity Myth – Less is More

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On April 23, 2021

In Financial Thinking, Personal Growth

Do more in less time! Every minute must have a purpose. There is no other option, you must hustle and you must be productive. Productivity has become the end and be all of our cultures. 

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Whether it’s at work or in our free time we are pressured into consistently hustling and being productive. Yet, this advice misses the mark. We don’t get the most done by hustling for the longest; on the contrary, watching a movie or going for a drink won’t set you back years.  Most importantly take the time to sleep. 

Let’s take the time to see how much you really get out of constant hustling and most especially what does the constant pursuit of more cost?

What is productivity?

Let’s go straight to the source and see what the Cambridge Dictionary tells us:

Productivity is the rate at which a person, company, or country does useful work.

Cambridge Dictionary

Quite straight forward isn’t it! You put the effort in and yield the rewards. Yet at no moment in this definition is working hours, grinding, or hustle mentioned. With this in mind… the question comes? Why do we think that to produce useful work – we need to be at it constantly. Surely 1 hour spent in a state of flow yields better results than 4 hours multitasking and hustling?

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The correlation of productivity to hours worked can be calculated by GDP per capita divided by hours worked. Within the top 10 countries, only 3 worked over 1600hours in 2019. Whereas the top 4 all were more productive per hour worked as well as being some of the happiest countries on earth. 

Society has built a cult to productivity on an erroneous basis. So much so that nowadays Americans sleep 6.5 hours on average. As we know lack of sleep leads to a mountain of problems in the long run from an increase in illnesses and a challenge in focusing. Sounds like the epitome of counterproductivity doesn’t it?

What does it mean?

We have been led to believe hard work and hustle are a badge of honor. Nothing matters more than long hours! How often do I hear “I can rest when I die”. But when it comes to producing results and growing, less is most definitely more. 

It’s not always that we need to do more but rather that we need to focus on less.

Nathan W Morris

Hustling might lead to success in the short term. I’m more interested in the marathon and succeeding in the long term. For that rest is not only important it’s necessary. By taking the time to regenerate we maintain our mental health and rebuild our focus. When we look for a job after remuneration work-life balance is often at the top of the list. It begs the question, why don’t we seek it in our personal life?

It’s not all doom and gloom though. Our working addiction can be cured and there are ways to make rest feel productive. I know firsthand how difficult it is to rest. The constant thought of “you should be doing something useful” nagging at the back of my mind. Society has shaped me to almost feel culpable about doing nothing. 

The Pillars of productive resting

There is no doubt that feeling your best is what will yield the best results. Any illusion that it’s possible to be consistent performant comes from survivorship bias. I address this in detail in my article “How Survivorship Bias Affects Your Decisions”. What are the different tools to restore your mind?

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Photo by Pixabay on Pexels.com

Peace and Quiet: Meditation is a game-changer for me. All it takes is 10 minutes a day, truly enjoying the silence and drawing away from my daily struggles. It isn’t the end of all. It’s merely a tool that helps you control your emotional response and thoughts.

Sleep is magical: Sleep isn’t an option… It’s an obligation we owe it to our body. Statistics say we need anywhere between 7 and 9 hours a night. Sticking to a healthy sleep schedule and valuing your sleep will lead to a lower need for caffeine and higher productivity.

cheetah lying on gray concrete floor
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Make Life Fun: Play is mistaken as being beholden for children. Playing is simply taking the time to enjoy yourself. When we get lost in the hustle of life we often forget hobbies and enjoyment. Whether it’s picking up a guitar or playing a video game. It might not feel productive at the moment but is a great outlet for stress.

A healthy mind in a healthy body: It doesn’t mean lifting weights every day or running marathons weekly. It is the idea of exerting yourself not only mentally but physically. Whether it’s as small as a brisk walk or a proper session of exercise. The best way for me to kickstart my creative juice is to go for a walk. 

Don’t work hard but work smart

man using laptop on table against white background
Photo by Pixabay on Pexels.com

As time goes I believe I have found a balance between resting and working. It all started with building my sleep routine. The rest of my life is built around it. I’ve set ambitious objectives from performing at work, to exercising 3 times a week and posting on my website regularly. None of this has come at the expense of my social life. 

The key is not to prioritize what’s on your schedule, but to schedule your priorities.

Steven Covey

It all starts by understanding what triggers you and what times of the day are your most productive. I personally work best in the early morning. Which means that when the need for extra work arises… I wake up earlier and get down to it! Does that mean I slept less last night? Absolutely not, I’ve padded my sleep schedule with a couple of hours. It gives me the time to enjoy my book every evening and if I have some leeway for social or professional commitments. 

Please share how you approach productivity and rest! What are your beliefs and how do you apply them?

50/30/20 Rule Is It The Way To Go? 5 Problems with it

By

On April 9, 2021

In Financial Thinking, Personal Growth, Saving Money

If you are reading this chances are you follow some rule of money management or you might just be getting started. Either way, chances are you have heard of the 50/30/20 rule. This dictates you should spend your paycheck as follows:

  • 50% on needs (rent, healthcare, food, etc.)
  • 30% on wants (gym, gaming, take-out, etc.)
  • 20% should be saved 
tax documents on the table
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This rule was popularised by Senator Elizabeth Warren in her book “All Your Worth: The Ultimate Lifetime Money Plan”. It’s seen as a straightforward way to get started with your finances. I suggest it as a starting point to stop living Paycheck to Paycheck in this article.

On the other hand, I don’t believe we should deal with absolutes. If anything money is personal and decisions will depend on your unique circumstances. Let’s go through the 5 flaws I have identified and how you can bend the rules to fit your lifestyle.

Only 20%?

set of black opened envelope and cash dollars
Photo by Karolina Grabowska on Pexels.com

If you follow this rule to the letter, you are ultimately encouraged to live wastefully. If you earn more than a median income (UK: £29,900 /US: $31,133) chances is are you could be saving more. Of course, this is contingent on the cost of living in your area and the localized median income. But if you earning a high wage this percentage can easily be increased as you no longer need to allocate 50% to your housing situation.

This is a cautionary tale when it comes to lifestyle inflation. It could be tempting to “upgrade” your life with a new phone or even a new flat. Yet. what is the point of a 10% raise if you increase your living cost by 9%? Following the 50/30/20 rule blindly will only lead to a loss of opportunity.

Understanding this has helped me go from saving 15-20% of my income to consistently saving above 40%. These savings are spread between my Emergency Fund and my investment portfolio that is hosted with an 80/20 split on both Vanguard and Trading 212. (article).

What are your goals?

As you embark or travel along your financial journey you need to set targets. You might be saving for your first house or because you aspire to achieve Financial Independence. Either way, you need to decide on what your financial goals are. 

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Based on your financial situation 20% might be too high or too little. If you are having a hard time deciding on your target check out Brandon’s article “How much money is enough?”. He dives into the numbers and shares 8 ways of figuring out what your answer is. I’ve quickly come to the realization that if I want any chance to achieve my financial goals, I cannot save less than 30% monthly. 

Additionally, if you have a high income, increasing your saving rate could help you achieve your goals faster. Of course, we all remain subject to compound interest and the time it takes to get the ball rolling.

Not as clear cut as it seems

When you read the rule at first it can seem very straightforward. Yet the 50/30/20 rule doesn’t account for the gray areas. The 6 pack of beer or the pack of crisps I bought aren’t essential. Yet I picked them up during my weekly shop. Doesn’t it qualify these items as needs? 

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Additionally, it opens the categories to interpretation. If you are a smoker and it will give you an inclination to include your cigarettes as a need. Although it would cause withdrawal symptoms, we can hardly put cigarettes and housing in the same group.

50/30/20 rule still needs tracking

Although the rule is presented as a simple solution, it still requires that you track your expenses. It isn’t possible to know where your money goes otherwise. You can decide to follow the 50/30/20 rule but without clear tracking, you will have no idea if you are hitting your targets or not.

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Photo by James Wheeler on Pexels.com

A good starting point here could be “paying yourself” first by investing/saving 20% on payday. This way you make the funds inaccessible and make sure you are progressing towards your goals. Automation makes your financial life a breeze. If you want to avoid the headaches that come with constant tracking Financial Minimalism is for you.

50/30/20 is a strain

As much as this rule could lead to wasteful expenses, it might not be possible on a minimum wage. We all have different circumstances and must adapt to them. How often do we hear gurus proclaiming “we can all be rich”. All you need to do is save $500 a month. That isn’t a realistic target for everyone and it’s ok. 

Comparing yourself to others and following arbitrary rules isn’t necessary. I know life can feel hopeless and tough at certain times but there are no certainties. Even if right now all you can save is $10 per month. Well, you are better off than last month. Rinkydoo Finance has a great article to get you started when your pockets are empty.

Should you use the 50/30/20 rule?

There is no 1 size fits all solution. It’s a great starting point to frame your saving strategy. The problem is just like everything else you must take it with a grain of salt. The problem of generalizing financial tips is that all of us have different circumstances. What applies to me might not apply to you.

It’s why I urge you to question everything and do your own research to find what fits you.

Do you follow the 50/30/20 rule or have you adapted it to your lifestyle?

four colourful houses

Financial Minimalism Builds Wealth Simply

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On March 26, 2021

In Financial Minimalism, Financial Thinking, Personal Growth, Saving Money

Money doesn’t need to be complicated. Actually, it’s one of the key reasons people are scared to embark on their financial journey… it just feels too hard. Between the overwhelming amount of well-meaning misguided advice and scammers. Differentiating right and wrong can feel impossible. 

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Yet, whether you are a beginner or advanced streamlining your finances is liberating. Not only do you gain a clear understanding of your Net Worth but budgeting and tracking become easier. The idea behind Financial Minimalism is to identify what you truly need and cut the superfluous stuff. 

What is Financial Minimalism?

To answer that question, I looked into what Minimalism itself is. The definition from the Oxford Dictionary is: “an artist, a musician, etc. who uses very simple ideas or a very small number of simple things in their work”. Just like beauty can come from simplicity wealth doesn’t need to be complex.

Minimalism has gained popularity as a lifestyle. Stereotypically we picture it as wearing the same thing every day and living in a tiny house. Yet, one of my favorite creators Matt D’Avella shares shows through his YouTube channel that there is more to it. Finding the most efficient and simple way to lead your life. It allows you to focus on the parts of daily life you value. 

Doesn’t sound so bad, does it?

Financial Minimalism in simply put terms is using a small number of tools to power your wealth journey. As it’s key to remember that simplicity doesn’t mean easy or bad. It’s quite simply the idea of streamlining your processes. Making your money management an efficient afterthought instead of a constant struggle. Radical Fire shares great insights into saving rates with a simplified look into them here.

What do minimalist finances look like?

As I started my journey into personal finance, I decided I wanted it to remain manageable. It’s the main reason I invest but don’t trade. Instead of looking for small advantages every day – my money is in it for the long run. 

So it led me onto focusing on 3 key points:

  1. Consolidation
  2. Optimization
  3. Automatization

Consolidation

The first step of my minimalistic journey was identifying all the different accounts, brokers, pensions, and more I was “using”. 

less is more
Photo by Kaboompics

Oh my gosh… there were so many. On the plus side, I was able to increase my net worth by 1.5% by finding accounts I forgot about. A financial spring cleaning if you will. Thankfully I didn’t find any new debt. Since then I have decided to limit myself. I know have:

  1. Joint Account
  2. Current/Checking Account
  3. AMEX Platinum Everyday Cashback
  4. Pension Pot
  5. Vanguard Stocks & Share ISA
  6. Trading 212 General Investment Account

Ok, it’s still quite a list… But you should have seen it before. All accounts now have a clear purpose and use. My biggest decrease was taking my credit cards from 3 to 1. I was always hunting for the best reward program. Until I realized I don’t spend enough for it to be worth it. The conclusion of my research was the AMEX platinum as it gives me 0.5% cashback. 

Additionally, a joint accounted with my partner makes bookkeeping for our flat and relationship much easier. I keep my money in a current account with Virgin Money as they have generous interest rates at 2% for the first £1000 and 0.5% for the balance of the account. I avoid changing bank account regularly as going from 0.5% to 0.6% interest rate isn’t worth the admin. 

Instead of relying on abysmal bank account interest rates I’ve consolidated my investments into my Stocks & Share ISA with Vanguard and hold about 10% of my NW in individual stocks with Trading 212. You can learn more about investing styles with my article “Trading 212 or Vanguard, which investor are you?”.

Streamlining my accounts simply helps me keep track and answer my own questions rapidly. No longer do I wonder how much I have in X obscure brokerage account. A straightforward account structure makes it easier to seize investment opportunities when they present themselves.

Optimization

composition of calculator with paper money and notebook with pen
Photo by Karolina Grabowska

Great you’ve now streamlined your accounts and feel 2 tons lighters. Does it stop here? Of course not, we can go deeper. I know this whole minimalism thing is feeling like a lot of work right now. Yet, it’s momentary pain for long-term gratification.

So what do I mean by optimization?

It’s simply the B-word… time for a good old budget. Although the way I like to approach it is to track my expenses and identify my spending patterns. This way I get to know myself and my habits. Following the trail my money left allowed me to find subscriptions I forgot about and sneaky platform fees. 

It also gave me a lens in how much I save without trying. I quickly realized I was consistently saving 25% of my income with close to no effort. Since then and by optimizing my expenses and increasing my income it has climbed up to 40% every month.

person holding gray pen sitting near laptop
Photo by energepic.com

By cutting superfluous expenses and optimizing my overall expenses I have been able to increase my monthly investments.

Automation

The hard work is behind you! Now that you have identified how much you can consistently invest and save monthly time to automate it. Using financial gurus favorite saying “pay yourself first”. I have a direct debit set to send 70% of my projected savings to my Stocks & Share ISA. The other 30% goes to my high yield saving account. 

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Photo by Luis J.

To become true to financial minimalism you want to have the less work possible. By automating every possible transaction you cover yourself from “forgetting”.

I used it first to build my emergency fund and now am saving to build my prospective house deposit. I was lucky enough to never have debt. If it’s your case focus on reimbursing your loans first whether they are credit cards or car payments. You can learn more about going debt-free with this article.

Once you have achieved a debt-free lifestyle it’s time to build your emergency fund! It might feel like you will never get to investing but having a strong financial foundation is the key to any strategy! Learn more about emergency funds here.

Are you a financial minimalist?

If you are reading this article you probably are. Yet there is always more we can do to simplify our finances. If there is one thing I want you to remember it’s that complex doesn’t mean good. 

Simply investing in an ETF tracking the S&P500 will outperform most complex portfolios. You might beat the market in 1 day but it’s highly unlikely in the long term. How have you simplified your finances?

It’s time to embark on your financial minimalism journey!

monopoly car piece

How Survivorship Bias Affects Your Decisions

By

On March 19, 2021

In Financial Minimalism, Financial Thinking, Personal Growth

I opened YouTube this morning. Time for some inspiration and to learn about personal finance. Yet, the algorithm is convinced I want to learn how much X was paid for 1 million views. They’ll of course share a few tips on how they attained this amazing amount of revenue. 

The only problem is all we see are the successes… we are constantly put in front of successful creators, investors, and entrepreneurs. It makes us believe it’s accessible. The issue here is the sample size. We forget to look at the overwhelming amount of failures. Survivorship bias is in action!

Let’s dive into what survivorship bias is and how it influences choices.

What is survivorship bias?

When researching the feasibility of an opportunity, I start with the tip of the iceberg – success. What would it mean if I became a successful investor or chef? It’s a natural instinct, we look for the best-case scenario. We fantasize about how better our life would be in X scenario. Completely neglecting those that failed.

When only focusing on top performers and statistical outliers- we become victims of survivorship bias. As conclusions are drawn, based on overwhelmingly positive examples the idea of failure becomes abstract. It’s the reason we constantly hear about unicorn startups and successful traders. Without, giving space or a voice to those that gave up along the way. 

An amazing example is Jeanne Calment (1875-1997), the human to live to longest, she ate over 2 pounds of chocolate on a weekly basis (almost 1kg). Madame Calment also credited her longevity to her diet. Yet, it would be preposterous to expect that eating 1 kg of chocolate a week would ensure you live till 120.

brown and white chocolate bars
Photo by Polina Tankilevitch

As soon as you understand survivorship bias it becomes easy to spot. From the lottery winner to the millionaire day trader. Yet you never see the thousands that lose every week playing the lottery or the traders that gave up along the way. I dive into the broader issue of comparison in my article “Comparing Yourself To Others Is Expensive”.

Biased inspiration

When you decide to undertake a new endeavour ask yourself where your new-found love comes from. Are you starting a blog or YouTube channel to make money or as a passion?

To create a successful creative venture or company, drive must come from elsewhere. Success and riches cannot be the sole driver of any endeavor. Or we risk going up in flames. Success whether financial or personal is often built on failures. 

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Photo by olia danilevich

The problem is we idolize successful outliers from dropping out of college to quitting your job with no plan. They are invited to talk at seminars and give presentations in companies. They write books on their story. 

This leads us to think “If he can do it, so can I!”. It can’t be that difficult, can it? Every year we read interviews from those that beat the odds. The one in a million genius entrepreneur. That’s the thing, isn’t it… They are 1 in 1,000,000. Why would emulating their lifestyle make me any more likely to be the 0.0000001%? 

Beating the odds takes an unimaginable amount of risk and has a small chance of success. If we were all capable to win the jackpot there would be no appeal. Don’t get me wrong… drawing inspiration from the Elon Musks of the world is normal. The problem comes when we convince ourselves that we can be as successful. Whereas, in reality, 57% of startups from 2013 were gone 5 years later. 

How to survive the bias?

The first lesson is an obvious one. Making a decision based on an inspirational tweet or video is a terrible idea. Blindly following financial gurus or simply legit investors can lead to making impulse decisions based on perception. Taking a step back to understand our own biases is key. Yet it’s easier said than done, isn’t it?

My favourite serial-entrepreneur, Richard Branson has shown that it takes failure to find success. Who doesn’t remember the terrible Virgin Cola… All aspiring entrepreneurs have looked at multi-millionaires that bet their last dollar or dropped out.

On the other hand, they rarely look at the number of failures. Worse yet, it’s almost impossible to hear from true failures. Google “Failed Entrepreneur”, you will see that quickly you hear about JK Rowling or Oprah. We forget about those that never found mainstream success.

adult frowned male writer working on typewriter at home
Photo by Andrea Piacquadio

When getting started I take the time to look into the statistics and trends of the market. Go further than the headlines. This is especially true when it comes to trading. Once mass media reports a great investment that has 10x. It’s probably too late. It’s ok to miss the wagon don’t beat yourself up. Risking everything without in-depth research is lunacy. 

As explained in my article, “Why I invest but Don’t Trade”, the reason I’ve decided to put most of my portfolio in index funds is security. Based on historical data the S&P 500 has returned 9.1% over the last 30 years. On the other hand, most day traders lose money within 300 days of trading. Yet, all we see are the successful traders flouting their wealth online. Effective investing is boring… learn more about it here.

Do your research

Whether it’s investments or health tips… take the time to research. We aren’t owed success. The achievements of a human must not set your expectations. Taking the time to understand average is great and knowledge lets you grow. Life is all about calculated risks and understanding most parameters. 

There is nothing wrong with becoming an entrepreneur – it’s simply crucial to understand the risks.

person signing loan agreement for purchase of apartment

5 Ways To Stop Living Paycheck to Paycheck

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On February 12, 2021

In Financial Thinking, Personal Growth, Saving Money

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.

person signing loan agreement for purchase of apartment
Photo by Gabby K on Pexels.com

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.

cutout paper illustration of hand with coin above jar
Photo by Gabby K on Pexels.com

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.

concept of waiting for cash credited to bank card
Photo by Gabby K on Pexels.com

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

man in white crew neck top raising hi left hand to meet the like button. He lives paycheck to paycheck as he is trapped
Photo by Oladimeji Ajegbile on Pexels.com

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. 

house luxury villa swimming pool paycheck to paycheck
Photo by Chris Goodwin on Pexels.com

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?

light bulb with success definitions

Are You Successful? 7 Definitions of Success

By

On January 21, 2021

In Financial Minimalism, Financial Thinking, Personal Growth

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.

Around the world

Should I live abroad? To Leave or Not To Leave

By

On January 7, 2021

In Financial Minimalism, Financial Thinking, Personal Growth

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?

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7 Steps To a Great Start With Personal Finance

By

On November 19, 2020

In Financial Minimalism, Financial Thinking, Personal Growth, Saving Money

Personal finance is just that. Personal. Yet there is a lot to learn from other people’s stories. It isn’t straightforward as a I learned when I graduated.

Everything changed the day I left University. I left Switzerland for the UK. A new country meant a new financial system. It also meant losing my financial security net.

“But Lionel, you are Swiss of course you can manage money”

My gosh, have I cursed, the reputation the Swiss bankers gave us… Yet I can’t deny it, I have a passion for personal finance. There I said it… a walking stereotype that’s what I am. The good news is I’ve learned some stuff along the way. Keep reading to start your journey with Personal Finance

1 Download a Budgeting App

Personal Finance through expense tracking

The first thing you should do is get an expense tracking app. It’s stores all my current accounts, credit cards and saving accounts. I’m able to visualize all my expenditures, find the hidden money sinks, and track my overall wealth.

I personally use Emma, it categories my expenses automatically! As soon as I get close to reaching a budget –  I receive a notification. I had no excuse for forgetting to track an expense. Not only could I visualize my expenses – I got to know myself.

I have now set up an external sheet for my budget but I still use Emma daily. It keeps me on top of my finances with one quick stop.

2 Apply the 50-30-20 Rule

At the start of my personal finance journey, it was difficult to grasp what my spending targets should be. After learning about Elizabeth Warren’s 50-30-20 rule. I had found a framework on which to base my decisions.

It suggests you should spend your after-tax income as follows:

  • 50% for needs (rent, food, transport, insurance)
  • 30% for wants (entertainment, gym, holidays)
  • 20% for savings (investments, paying off debt, saving accounts)

This rule helped me when deciding which country I should move to when graduating. And whether it was financially sound to do so. Since moving to the London, I’ve aimed at decreasing the 50% to grow my savings.

I have managed to shift take it down to around 40% in a couple of years. I cannot say I have achieved my goal but I am on my way.

Currently, I’m saving 43% of my income mostly supported by lockdown diminishing my expenses. Thankfully, it has lead me to increasing my investment rate to 25%. I mostly invest through Vanguard and ETFs although I also invest through Trading 212. (You can get 1 free share worth up to £100/$100 with my link.)

Wealth consists not in having great possessions, but in having few wants. — Epictetus

3. Paying off debt is an investment

Debt is like a weed. It will grow especially if you ignore it. Paying off your credit card debt should be at the top of your priorities. Most of the money they make comes from the predatory APR interest rate they charge.

When you pay off a debt you do not only increase your credit score. You lower your future debt as you curb the interest growth.

4. Build an emergency fund

Emergency Fund Jar

Since COVID-19 hit I have become a massive Emergency Fund advocate. I keep upwards of 3 months of expenses saved at all times. It allows me to keep my mind at ease. When the ghost of unemployment comes looming — I have breathing room.

Whenever I need to tap into this fund my priority is to refuel it as soon as possible. You can learn more about how to build your own with my article “How to Build an Emergency Fund in 2020“.

5. Check your finances daily

Every day, I take a couple of minutes to go through my budgeting app. It helps in making the money real. I know where, when, and what I spent.

Of course, I end up letting myself down every now and then; but my impulse purchases have gone down tremendously. Instead of treating “mistakes”. they are now learning opportunities.

6. Educate yourself

I try and read as much as I can about financial law, investment opportunities, and saving tips. The world of personal finance is ever-changing and different from 1 country to the next. Researching what applies to your area will help you grow and be critical about what you read online.

“Winning at money is 80 percent behavior and 20 percent head knowledge.” — Dave Ramsey

7. There is no "get rich quick"

When I started reading about personal finance; every other article talked about the X trick. I quickly learned that there is no such thing as easy money. Passive income is not a myth but it takes a lot of work before it becomes sustainable.

Take your time, let your money grow, and be disciplined it will all come eventually. Remember that passive income although it’s attainable is often looked at through rosy lenses. You can learn more here “Passive Income It’s All a Lie“.

Here’s the major problem with going on strike for more money: You cannot get rich by demand! — Jim Rohn

Personal Finance Is Worth It

Starting off with personal finance isn’t an easy thing. It takes rigor, discipline, and courage. It means tracking expenses and making every penny count. Yet, I find it freeing. It gives me control over my life and lets me decide where I’m going. You’ve now seen a few of my tricks. I hope they will help you begin this exciting journey.

Share you experience of Personal Finance and what gave you the bug! I would love to hear your thoughts and tips.

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