Our journey to Financial Independence

Tag: Financial Independence

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?

Money Talk

Money Taboos Cost You A Fortune, Time To Start Talking

“Money makes the world go round.”

“Don’t share your income.”

“Don’t talk about your money goals.”

“Spending money will make you happy.”

Money is part of my life whether I like it or not. Yet, I’m not supposed to talk about it. I need to be smart, invest, save, spend, etc. But by default, seeking advice is tough as people get cold feet when talking about this hidden divinity that is cash.

Just like everyone else I dream of Financial Independence. Imagine being able to work for pleasure not thinking about having to make ends meet. Money Taboos are counterproductive. 

How am I expected to reach freedom, if I can’t be open?

I was lucky, my family always talked freely about finances. Whether it from downturns to investments. It made money mundane instead of some kind of deity. We need it to live — but it’s nothing more than a tool. Vicki Robinson’s “Your Money or Your Life”, completely transformed my understanding of money.

What relationship do I want with it? 

Should it govern my life? 

How much do I need?

That last question hit me hard. When am I going to have enough? I’m not a dragon… No need to hoard as much as I can. What would be the point? Her book helped me realize that juggling multiple side-hustles, a normal job — isn’t making a living. We are dying at work. When do I get the time to live?

Money Clock

No More Shame - No More Taboo

How many times have you bought something on a whim?

How many times did you look at the object shamefully?

Yeah me too… 

The number of times I spent money on a “must-have”  is unmeasurable. When I started questioning why I didn’t share my expenses more. I realized it was because of this inherent shame. 

What are they going to think about me? 

Who spends that much on tech?

It was much easier to keep it for myself. At the end of the day it’s none of their business, is it?

That’s that I’m not sharing. But what if I did? I couldn’t shake the thought off. Some day I took the step. I started small. Talking about my overall rent with some colleagues. My gosh… it’s like a weight was lifted. By listening to their tips, tricks, and struggles. I felt like I was seeing light. Then the dreaded “Why?” came. Why do I spend this amount? Why not more or less?

This epiphany made me realize that not only am I not alone. But we are all going through this existential crisis. 

Opening up about my expenses allows me to understand why I’m spending. The need for a strict budget has passed me over. I must understand what my values are. As long as my spending reflects them — I’m doing well. No point in being ashamed either. Ridding myself of Money Taboos made me realize: What is spent is spent. Discover more about this thought process with my article Why I Was Wrong About My Financial Goals.

Monkey Money Taboos

What Am I Worth?

An intense yet important question. We are encouraged by society to keep our income to ourselves. It’s simply bad etiquette to discuss salary. Truly the most engrained of Money Taboos. But how am I supposed to know what I deserve if I can’t talk about it?

Another head-scratcher. The answer was easier. I didn’t want to sell myself short. How are the different roles compensated? Opening the discussion with my colleagues, friends, and family was a mixed bag. It was easier with my generation. We have similar roles. We were all in the same ballpark. On the other hand, it meant we had less to learn from each other.

Although starting a conversation with older generations was tough. It was beneficial when the shell started to crack. Not only could I learn about future potential earnings within my job. I learned a lot about multiple income streams. Whether it was rental income, dividends, or general freelancing.

This topic is paramount when it comes to blogging and freelancing. As we all adventure on our journey to creativity we are blind. The community and people being open about their revenue online is what gives us referral points. 

By opening up the conversation around income. I discovered options for future revenue streams. It set expectations for my financial future and a benchmark for my blogging. But most importantly, I understood my worth isn’t tied to my income.

Investments around the world

Let's Get Rid Of Money Taboos Together

Understanding money is a tough nut to crack. You can’t do it alone, yet sharing is frowned upon. By opening up about my finances – I liberated myself. I realized that I’m not alone. Sharing both my fears and my successes means they become real. The only way to deal with something is by acknowledging it.

Not only has it empowered me it has helped people around me. 

Having money talks is beneficial. It made me understand that my income doesn’t represent my worth. It is a building block I use to reach fulfillment.

I would love to hear from you. What helped you break the Money Taboo? How to you go around Money Talks?

money in a tissue box

7 Deadly Personal Finance Sins To Avoid In 2021

How do Personal Finance Sins impact you?

Whether you are religious or an atheist – you commit these Personal Finance sins. They have led to bad financial habits. You might not notice it but they wreak havoc over your future. 

Personal finance and FI/RE are about the path to independence which requires discipline and focus. Yet, along the path, traps are often disguised as great opportunities. Which all lead to Personal Finance Hell. They range from debt, an empty pension fund to overwhelming clutter. 

Any of these sound familiar?

We often don’t realize the situation we are in before we take a hard look in the mirror. For me, the realization came during a move… As I was clearing my room the number of unnecessary clothes, gadgets, and other “must-haves” appalled me. I had accumulated so many pointless items. 

As the saying goes “Hindsight is 2020”. It hit the nail on the head, all these purchases were made on a whim, to keep with society, or to have the latest tech. None of them were thought out or aligned with who I am. It felt like I had gone on a gluttonous shopping spree that left me with nothing but dust and an empty wallet.

Key Takeaways

  • Take your time before any financial decision at minimum 24 hours
  • Never make big decisions when you are emotional
  • If it sounds too good to be true it is
  • Pay it forward, match every dollar spent on wants with a dollar invested
  • Be humble, you’ll never know everything about finance (or anything else for that matter)

As I moved forward I started noticing different types of impulses and mistakes. It led me to re-categorize them as the 7 deadly personal finance sins:

1. Lust - The Impulsive Buyer

Have you seen the new iPhone?

How can you live without it? The only path to happiness is to own it now. 

How couldn’t you?.. everyone else bought it. 

Even your broke friend has it. 

It can’t hurt it’s just another $34 per month or maybe just $900 today. Not only do you need it but you need it now. Before, the hype has passed.

Lust makes you crave unnecessary things just for imaginary pleasure. Social Media and events, such as Black Friday, are tremendous enablers. They spam you with ads, reviews, and deals. You to fantasize about the amazing new features. 

Aaaah the “IT”, the purchase to rule them all, to satisfy all cravings. You just know you’ll be fulfilled once you have “IT”. For that reason, no point thinking much – let me enter my credit card.

The purchase has gone through – you own “IT”. The Amazon Delivery comes in the next day. My gosh is this what happiness feels like? You put the item in the cupboard – it can wait for now. 

The rush is gone it lasted all of 30 seconds. The fantasy was arguably the most enjoyable part of the adventure. Oh well, maybe the next iPhone will do the trick…

The first of the 7 Personal Finance Sins Lust is treacherous…

Tools against Lust

When your mind gets filled with dreams of a new marvel. Start a clock, give yourself 24 hours during which you don’t shop around for accessories, look up the stats, or research good deals. 

Take the time to discuss with someone you trust – explain why you must have it. Ask them about their opinion. How would they use it? Don’t try, to convince them instead of having a conversation.

If you still want it. Start researching for another day. How much does maintenance cost, how long does it last, and what’s the best deal. If you are approaching Black Friday or the summer sale be patient. You’ll be thankful to have saved 20+% on your purchase.

Shopping Lust

2. Gluttony - The Overflowing Wardrobe

I often feel gluttony creeping up when I go grocery shopping. I have a clear list of what I need. I have a distinct plan of which shops and where to go. 

Yet when I get to the shop it all goes through the window. The offers, sales, and yellow stickers draw me in. Another box of cereal of course. Obviously, the pack of 3 only cost $1.29. How could I not… there’re only 5 others in the cupboard.

The never-ending cycle of stockpiling. Suddenly I have an overflowing bag and a 30-minute walk home. 

If only it stopped here. As you go online to buy a new pair of running shoes you notice the nice looking shorts. You definitely could use more of those. Down the rabbit hole we go… 1 hour and $150 later you have bought 2 t-shirts, 1 shorts, and a football but you forgot your running shoes. It doesn’t matter the deals were so good. 

Now where to put them my wardrobe is full…Not only had you not bought these shoes would you’ve avoided clutter. But in 20 years these $150 invested in an ETF could be worth: $605.81. That small decision cost you over $450. Start your investment journey with Trading 212 (and get a free stock valued up to $100)

As discrete of a personal finance sin, gluttony is not to be underestimated.

Tools against Gluttony

Reverse engineer sales; do your research. My favorite habit to get in the right frame of mind is withdrawing the exact amount of cash I need for each trip and leaving my credit card behind. 

Ok… I add around $10 just in case but it means unless I find the deal of the century. I cannot give in to my gluttony and leave with exactly what I planned for. It might sound rigid but after a few times, I promise you will not think twice about shopping trips. 

Having built the habit, I no longer need the trick but my gosh am I grateful. So is my wardrobe…

3. Greed - The Vicious Circle

Greed is in the same vein as Lust. You can’t resist your appetite. It’s more than a fantasy you need it. You are willing to do anything for it. As a result, Greed is the greatest of the Personal Finance Sin. 

You are willing to sacrifice social ties, your credit score, or your emergency fund to get it. Greed is what sucks people into Multi-Level-Marketing (pyramid schemes). The promise of riches and freedom sound so good don’t they…

People that buy into these programs sacrifice their family ties, their dignity, and their financial prospects. Not only does the initial investment come at a high price. For even the smallest ROI  you must leech on your family. Down the line, you are left with an empty bank account and no social ties. 

Greed leads you to emptiness and hopelessness. The only thing holding you together is the object of your greed. Soon, that too fades away as you can no longer afford it…

Tools against Greed

The only tool against greed is patience. There are no get rich quick scheme you need to invest in today. There is no point in going into debt to buy a brand new car or to kick-start your MLM career. 

Take your time if you cannot afford it today don’t dive headfirst. As I explained in my article around financial goals understanding what you value will lower your greed.

Don’t forget to be humble and seek advice! It will lead you to review the objective impact of your decisions.

4. Sloth - The Lazy Text

From Takeaway to uneducated purchases… we all pay this tax once in a while. How often have you been sat on the couch thinking “I’m too lazy to cook: I’ll just get a pizza delivery.” Instead of spending ~$1 on your meal you’ve just spent $10.

We’re all culprits here and honestly once in a while fair enough. Indulge in a small pleasure. The trick is it quickly snowballs into a regular offense. Just like everything else… If it’s ok today it means I can do it again tomorrow. 

This leads to the $10 quickly transforming into $50 or more. Imagine that $50 a month… that would be worth $10,681.24 in 20 years

The Lazy Tax also strikes when purchasing new items. If you don’t take the time to shop sales or find deals with apps such as Honey (the US mostly) or Pouch (the UK only). This is a harder amount to put a number too. But if the purchase isn’t an emergency why buy it today?

Money Clock

Tools against Sloth

TAKE YOUR TIME. Personal Finance is all about the long game. If you aren’t in a rush shop around and wait for the next sale if you can. This not only lets you think twice but leads to you being ready for sales.

As far as takeaway goes, I’ve gotten into the habit of matching my spending with an investment. For each dollar I spend – I invest another. This has transformed takeaway into productive action. The easiest way to lower your food expenses is to meal prep and freeze your leftovers. You just need to fish them out when you feel lazy!

Sloth is the easiest of the Personal Finance Sins to get rid off all it takes is preparation!

Wrath - The Decision Maker

This one is going to be short. You make a lot of financial mistakes when emotional. A great example is the March 2020 market crash. Many rushed to selling and closing their positions expecting a bearish market for the year.

Yet the S&P 500, for example, increased more than 60% since then. With many other financial indexes reaching all-time highs. Whereas by selling and buying in once more. You pay the fees and spread twice. Without benefiting from Dollar Cost Averaging.

Tools against Wrath

This one is tricky… emotions are incredibly difficult to control.  I can tell you to stick it out. But if you’re in fight or flight mode you won’t remember. I’ve learned meditation and breath-work has helped me stay in control as my adrenaline rises. 

What are your tricks to handle wrath?

6. Envy - Lifestyle Inflation

Stop trying to “keep up with the Joneses”. Whether it is through credit cards or spending all our income on payday. We need to keep up appearances. What matters isn’t how our bank account and future looks but what our Instagram feed reflects. 

Social Media is consistently trying to sell you something. Whether it’s holidays on the other side of the world or a new car you need the likes. AT WHATEVER COST. Influencers in Russia have started renting studio space to make them look as they can afford a private jet…

We look forward to our next raise or bonus as it will allow us to have more. You need more right? You need that Tesla. Instead of seeing the potential of additional investments we see a new wardrobe. 

In the end, we are blinded by the likes and the clout. It’s all that matters. Whether the investment brings us value or not.

Tools against Envy

Take a break from social media. I’ve uninstalled Instagram for around 2 months now. My gosh have my purchasing impulses changed. No longer do I feel like I need all the latest tech. I’m happier to take time to discover what works for me and around me. 

I now invest in what I value instead of what others do. It has made a huge change in my life. 

Unsubscribe from brand newsletters. From Amazon to Converse they bombard you with offers and “1 time opportunities” opportunities. Worse they share the most popular discounted items. In an attempt to generate sales. As strong as we think we are, such spam unconsciously creates needs.

7. Pride - The Knowledgeable Ignorant

The biggest mistake you can make as a Personal Finance enthusiast is thinking you know it all. Because you go through blogs and watch a few videos you assume you know the market 

Remember that Monkeys have consistently outperformed fund managers. They generated higher returns for prospective clients. If you want to learn more about our Monkey Overlords I recommend this article.

By consistently taking more risks and assuming we know better we expose ourselves to great losses. I lack the knowledge to get involved with day trading and options. Therefore I avoid them entirely – they are akin to gambling.

It’s not to say that if you’re knowledgeable there is a lot of money to be made in that space!

grow your investments graphs going up

Tools against Pride

Be humble. It’s as simple as that. Accept that however figures you have in your accounts. There will always be someone more knowledgeable. If even Warren Buffet has been wrong in the past… How can we be certain of any decision? 

You’ll win some and you’ll lose some. Take risks appropriate to your knowledge, more importantly, ask for help.

Begone Personal Finance Sins

This article was long enough to warrant a short conclusion. Personal Finance sins are inevitable we all get caught up in them. Learn how to deal with them and every mishap will have a solution.  Never forget you must take your time!

Below are the Key Takeaways you found at the top of the article!

Key Takeaways

  • Take your time before any financial decision at minimum 24 hours
  • Never make big decisions when you are emotional
  • If it sounds too good to be true it is
  • Pay it forward, match every dollar spent on wants with a dollar invested
  • Be humble, you’ll never know everything about finance (or anything else for that matter)

What are your top tips when it comes to avoiding these 7 deadly sins? Are there any you would add?

Credit Cards in a pocket

Why Your Credit Card Can Be A Powerful Ally

DISCLAIMER

Before you read this article, if you are in any kind of Credit Card debt, stop here. I recommend you pay off debt before any investment

“Don’t use Credit Cards… they are a gateway to debt!”

How many times have I heard that sentence? Often from older generations, but also reputable sources such as Dave Ramsey.  Yet I’m here to tell you they aren’t all evil.

As long as you pay it in full every month your credit card is effectively a debit card with perks. Since moving to the UK, I have used my American Express credit card for almost everything. Whether I’m buying a flight, groceries, or paying for gas. 

Since then I’ve acquired 40,000 miles with British Airways, a cashback of 0.5% with my purchases, and had access to airport lounges on long trips. 

Have I succumbed to the marketing, maybe a little? On the other hand, throughout this article, we will explore the pros and cons of using your credit card every day. 

Pros and cons of a Credit Card

Of course, credit cards wouldn’t be such a controversial topic if they didn’t have downsides. I believe the cure to credit card debt is understanding how they function. They are not a “get out of jail” card. To quote Uncle Ben “With great power comes great responsibility”. 

Pros

Let’s start with why you should be using your credit card as much as possible within your means.

Most Credit Cards will offer rewards. Which typically come in 3 forms:

  • Points
  • Cashback
  • Preferential Rates

The credit card you pick will greatly depend on your lifestyle. I use both points and cashback. As AMEX allows me to collect miles for BA with the “Gold or BA Card” and earn 1% cashback on my purchases with my Everyday platinum card. Whilst also offering discounts with many brands!

When paying with a Credit Card you benefit from scam protection. If you contest a purchase they will reimburse your purchase. This is a great way to cover yourself when traveling or buying online as the Credit Refund will often be faster than that of the store. 

 In the form of travel insurance and a guarantee, your credit card acts as an extra safety net when traveling. When my friend’s wedding was canceled due to COVID-19 – AMEX’s travel insurance helped me with the refund process. It took my friend 6 months to get reimbursed I had the money within 2.

This one is straight forward a good history of full repayment will increase your credit score.  I have personally gone from 0 as a foreigner to almost 900.

I was able to get over 30,000 miles by referring friends to the American Express Gold card. I currently use the AMEX Everyday Platinum if you use my link you will get £10 credit the first time you spend £1. Thereafter you’ll get 5% cashback on every purchase up to £100 cashback earned. 

As you can see there are many benefits in kind for using a Credit Card. Additionally, it also makes it easy to track expenses and builds healthy habits. I have personally set mine to Payment in full and it keeps me covered as I never go over my threshold.

Credit Card or Cash?

Cons

You won’t catch me saying that everything is great with credit cards. Their companies would not exist if it were the case. To understand where the dark side comes from you must understand how they make their money. In this article, Peter Stephens goes in-depth about each stream of income. They earn money from

  1. Predatory Interest Rates
  2. Merchant fees
  3. Consumer Fees

This leads us to the 3 risks of Credit Cards.

It’s very easy to think credit cards are free money. Keep in mind you will need to pay back everything in full. I recommend setting up a limit on your Credit Card so you remain.

If you miss a payment you are quickly stuck in a vicious cycle. As interest rates are upwards of 15% you quickly end up unable to pay. To avoid crippling debt keep track of where you stand.

Withdrawing cash comes at a high cost with credit cards. In the case of AMEX, it is upwards of 2%. Spending money abroad might also incur additional charges.

 

If the temptation of free money is too high you should stay away from Credit Cards. To help you decide whether Credit Cards are for you, – keep reading as I share my experience.

What have I learnt using my Credit Card

As I said previously, I currently use the AMEX Everyday Platinum card. Previously, I owned the AMEX Gold but only for 1 year as it was free. My experience with American Express has been wonderful. I’ve had a few issues with COVID-19 and they were able to help me. No question asked. 

I have also been able to increase my Credit Score by more than 200 points. Which has allowed me to get approved for apartments faster and will surely help when I acquire real estate. My score was helped by paying my card off in full monthly. Additionally, I have accumulated £300 plus of value from British Airways Miles mostly through the referral program. 

On that note, if you decide to go for a credit card use a referral! You’ll get additional perks monetary or not. For example, if you use my link for the Platinum Everyday Card you will get £10 for free after your first purchase.

Share your experience with credit cards and how you use them in the comments! I would love to hear your tips & tricks and answer your questions.

I recommend checking out Graham Stephen’s video on the matter as it was very insightful at the start of my journey.

7 Steps To a Great Start With Personal Finance

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

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.

Investments around the world

How To Start Investing With Vanguard in 2020

What’s Vanguard and Why should you care?

Vanguard is the investment firm I use for my Stocks & Share ISA. They offer low fee trading via a selection of funds owned by the company. This ensures you benefit from the full return of your portfolio. 

Vanguard started trading in the US 45 years ago and reached the UK in 2009. I’ll dive deeper into exactly what they offer within the article. You can invest in most funds via most trading platforms or use Vanguard’s Investor directly

The biggest selling point is you don’t need to be an expert to trade with Vanguard. It has many options and a clear explanation for each. By going through their funds you get to pick by risk profile, historical returns, and cost. Whether you are starting your journey with investing or are looking for a new placement. They have something for you.

Why do you recommend Vanguard funds?

I’m a big adept of the Dollar Cost Averaging approach of investing. It isn’t possible to time the market. Studies have shown that by investing consistently or by investing a lump sum at once in-market tracking funds such as VUSA (S&P 500 tracker) you will always outperform the market. 

If you want to understand the math behind DCA, I recommend this article by Investopedia. This theory is what led me to set up a direct debit for the first of each month. On that date, 20% of my salary is automatically invested.

Vanguard has a successful track record with market tracking funds over the last 45 years. Investing a fix-sum into the S&P while not guaranteeing returns makes them very likely in the long-term. If you are in the US the fund is VOO and additionally holds a dividend yield of 1.2%. On the other hand, if you are investing with Vanguard’s platform in the UK you will have access to VUSA. They are both represented in the pictures below.

As you can see over the last decade both have grown consistently even with hiccups such as the April 2020 Crash. You also have a large array of fixed income funds from Bonds (gits in the UK) to High Dividends. 

Don't worry you have other options

If all of this feels too overwhelming and you would rather have simpler, more straightforward solutions… You are covered with Vanguard’s blended funds. They are my favorite as you will see below. The Lifestrategy funds give you the opportunity based on your risk aversion and targets to decide on the percentage of equity vs bonds you hold. They go from LifeStrategy 20 (20% equity & 80% bonds) to LifeStrategy 100. 

Not only will you be invested in both equity and bonds they will be internationally spread to minimize the impact of local crashes. The way you should pick such funds is based on your age and risk profile. Low equity means low risk at the expense of high profitability. On the other hand, the high equity is “High Risk, High Reward”.

In case you are looking to retire soon, focus on low equity funds. Whereas with long-term goals (10+ years) you can look at higher risks as Dollar Cost Averaging is on your side.

Vanguard Investors different accounts (UK)

If you aren’t from the UK but want to see my portfolio skip this part! And if you are here we go. 

Vanguard offers 4 different types of accounts in the UK:

If you are unfamiliar with ISAs, I go in-depth in “What Is An ISA (Individual Savings Account)?”. The short version is that you can save up to £20’000 p/an in ISAs. Any gain whether from interest, capital, or dividends made on this allowance will be tax-free. Maxing out your ISA should be your priority.

Well, a pension account is straight forward. Your allowance is £40’000 p/a. This money will only be accessible once you reach retirement and will be growing till then. Maxing out your pension allowance should be your priority once you maxed out your ISA.

You should only use General Accounts once both others have been maxed out. As your earnings will be subjected to HMRC’s law. As far as Vanguard is concerned this account functions in the same capacity as any other account. You can freely buy and sell Vanguard funds. If you want to open a General Account I recommend using a third-party app such as Trading 212 as you have access to a higher amount of funds. (Use my referral link and get a free stock valued up to £100/$100).

A junior ISA is just that, an ISA account for Minors. They will not have access to it until they reach 18 and it only holds an allowance of £9,000.

Vanguard’s 3 types of funds

Welcome back to everyone lucky enough not to live in the UK. It’s time to look into vanguard’s 3 types of funds. 

Let’s start with Equity funds. There are 36 of them and are accessible through both Vanguard’s platform or third-party apps such as Trading 212. (follow the link to get 1 free stock worth up to £100/$100). As said earlier they are riskier investments but will have higher returns in the long run. You can find the list here with their tickers available when you click on them. The funds are spread out per category:

  1. European 
  2. Global 
  3. UK
  4. Emerging Markets
  5. Asian Pacific
  6. USA

Each of them with their own characteristics. I personally invest monthly in VUSA as I strongly believe in the S&P 500.

Secondly, you have a Fixed Income. This category regroups all BONDS. Once again you have the choice of your investment platform. These funds typically hold a lower fee and return a coupon quarterly which goes from 0.5% to 5%. Your coupon will depend on your risk profile once more. Government bonds are safer than Corporate but yield lower payments. Holding bonds is a true form of passive income as they will payout until maturity.

Vanguard splits them into the same categories as Equity and they total 24.

Finally, you have blended funds. As explained earlier they are only accessible from Vanguard’s platform. As a blend of equity and bonds, they lead to quick diversification of your portfolio.

What does my portfolio look like?

I started investing with Vanguard at the start of the Financial Year. And so far I have seen a rate of return of 16.6%. With 4.5% coming in the last 3 months. I invest 20% of my income by direct debit monthly. It ensures a stable growth of my portfolio whilst practicing DCA.

Vanguard offers a clear insight tab which makes it easy to see in which markets you are invested and how your portfolio is structured. Mine looks like this:

Vanguard portfolio fund

As you can see I am heavily invested in the European and American markets. I tend to invest most of my direct debit directly into the LifeStrategy 80% which has seen the highest returns so far. The rest is split between VUSA and UK/American government bonds. This ensures I receive a 2.5% coupon quarterly on these investments.

As far as funds and Sectors themselves my portfolio looks like this:

Vanguard Funds breakdown

With a high amount of diversification, I am mostly covered by the tides of the market. With this screen, I’m also able to quickly review if I am satisfied with where my money is allocated. I then make modifications ahead of next month’s investments.

Final thoughts

As far as investors go Vanguard is a safe option. With a proven track record, a straight-forward website, and a high diversity it is difficult not to recommend. Whether you are a starter or an experienced trader Vanguard will have something for you. 

I will say their website is quite dated especially on mobile and if you do not want to be pigeonholed into 1 investor. I recommend using a third-party trader.

In addition to Vanguard, I use Trading 212 which has no fees and the benefit of giving both of us a free share if you sign up with this link. It is quite straightforward and will allow you to open positions with other traders. I will do an in-depth review of it in a future article. 

Please share your thoughts on investments and how you prefer to do it below in the comments.

Disclaimer: The links for Trading 212 are affiliate links. I am not paid for my opinion and all opinions shared are my own.

How To Build An Emergency Fund in 2021

You need an Emergency Fund. Whether you like it or not. It’s easy to feel safe and comfortable in our job. If 2020 taught me anything it’s that nothing is as it seems.  Preparing for the worst is the only way to protect yourself.

 Whether, it’s a solid job, parents, or social security nothing is ever guaranteed. Before COVID-19, I felt unstoppable my job was going great. I used to think “I work in hospitality and people would never stop traveling.”

All of a sudden, the unimaginable happened everyone was stuck at home and on furlough I went. 6 months… Not knowing if I would do my job again. Thankfully, I had prepared myself for it. 4 months of expenses saved up spared me from liquidating my investments.

It’s easy to get excited about potential investments and forget about covering our rear. One thing has become apparent the true priority is to have a financial safety net. 

illustration of trolley with gold as part of fund

Pros & Cons of an Emergency Fund

You’re probably thinking is there any negative? And also “we get it you are safer with it.” Stick with me you won’t regret it I promise. There is a reason why an Emergency Fund is the first step in “5 Ways to Stop Living Paycheck to Paycheck“.

PROS

Peace of Mind

Living on the edge always sounds like more fun than it’s worth. I started off wanting every penny I made to have a purpose. That could only be putting it to work right? Right… An emergency fund is not only purposeful, but it’s also vital. Knowing you are financially secure will make taking risks all the more enjoyable.

A Back-Up Plan

Whatever happens, you can always get out of a pinch. Of course, this fund should only be used for emergencies. I’ll plead guilty here. I’ve used it to pay a deposit on a flat in the past as I was running low on cash. In this case, you should always make it a priority to replenish the fund. Hopefully, you learned from GME that GameStop options aren’t an emergency.

Debt-Free

 With an emergency fund, you’re protected from Credit Card (CC) debt. Although, CCs can be a great tool. Who doesn’t like a few miles?

They also come with extremely predatory interest rates between 14% and 35% APR. They might seem like a good solution to solve problems in the short-term. Yet,  you soon end up in a vicious circle. With a few months of expenses set aside, you always have a safe solution.

CON

You might be wondering, how can there be any CONs? Well, there is just one – it’s a bit of a first-world problem though.

Inflation

Your emergency fund can be too big. What does that even mean?

Well once you have 6 months of expenses set aside the extra cash will lay prey to inflation. If you were to transfer additional savings to a high-interest saving account the money would be growing (Although less than 1 percent). You could also look into investing in market tracking funds like Vanguard’s VUSA which tracks the S&P 500. The market has seen a growth of 7% annually on average over 100 years.

Additionally investing your extra cash is a great opportunity to make use of your ISA allowance.

How much do you need?

There isn’t a one size fits all answer. How much you need in your Emergency Fund will depend on your circumstances.

 

Let’s say you are working in an at-risk job and live abroad. In that case, you will want to save 6 months worth of expenses. Whereas if you still live with your parents and have a job within a stable industry 3 months probably will be enough. 

 

Furthermore, the country you live in will impact the amount you need to save. I live in the UK therefore I benefit from free healthcare. Whereas if you are based in the US, you’ll need to get closer to 6 months saved as a medical emergency could hit you hard. 

 

When you are establishing your total sum. You should focus on the following expenses.

  1. Rent
  2. Utilities (WIFI, mobile phone, energy)
  3. Food (Groceries only)
  4. Transport

Everything necessary to survive. You shouldn’t include outings to the movies, your gym membership, or a shopping spree in it. Focus on what your essentials cost you.

 

Once you’ve answered the questions above you should have your number. Keep in mind that it isn’t fixed. As you move house, country, or have a family – costs will change. I review my needs on a bi-annual basis and adapt my fund as I go.

Don’t forget any additional savings can go to building up your investment portfolio whether it’s with Trading 212 (Get a free share valued up to £100/$100 with my link) or Vanguard.

List of sums representing emergency fund

How did I set my Emergency Fund up?

  1. I calculated my monthly expenses and reviewed the conditions of my work package (Severance pay) so I knew what I was entitled to. It led me to a targeted total of 3.5 months of expenses.
  2. I opened a separate bank account at my bank. Although it is easily accessible it makes sure I don’t tap into my fund inadvertently. I personally recommend Virgin Money’s Current Account. As you get 2% interest rate up to £1000 and 0.5% on the remainder of your money.
  3. Track your spending and round up. As I track my daily spending with Emma (AFL) I can track how much I spend weekly and round it up to the next £5. That way, at the end of the month I transfer the total to my Emergency savings. If you use the cash you could put the coins aside when you break a note.
  4. Automatic Transfers. I can save a minimum of £700 a month so I set up a standing order to my emergency account on payday. I make sure no matter what that money is set aside.
  5. Do you get a bonus? I’m lucky enough to get a yearly company bonus. You know where I’m going with this it goes straight into the piggy bank.
  6. In the first year of setting up this account, I would check the balance quarterly. It took me around 18 months to build my safety net. I know can invest the money elsewhere! 
  7. Priority Number 1. If ever I need to call on to the emergency fund my priority is to refill it as soon as possible.

What have we learnt about Emergency Funds?

Well, quite a bit so I decided to summarize the key points for you below.

 

Key points:

  1. Keep 3 to 6 months of expenses as an emergency fund.
  2. Review it frequently.
  3. Keep the money in a separate account.

I hope you enjoyed Cent by Cent’s first guide! I truly believe Emergency funds are often overlooked. Hopefully, you never need to tap into it, and peace of mind is priceless to achieve your financial goals. Feel free to share how many months you’ve set aside and how you built your Emergency fund. 

grow your investments graphs going up

What Is An ISA (Individual Savings Account)?

ISA the UK's tax free saving account

What if I told you that you could open an account and never pay a cent on the interest and capital gained?

Sounds amazing, doesn’t it? Almost like it’s too good to be true. 

Well, that’s partially true… You are limited to £20’000 per financial year. This target might seem unreachable right now, but if you are in the right place to change that. 

2 years ago, I had just arrived in London – my eyes full of stars. No idea what to do with my money though… A new country meant a new system. Thankfully, many of my colleagues had come from abroad and could help. They told me about Individual Saving Accounts (ISA). 

Honestly, I couldn’t believe it existed and I come from Switzerland… the country of Banks. This sounded like a golden opportunity. 

As a result, I can’t have you missing out can I? Here, is what you need to know about the ISA system. You can deposit up to £20,000 per financial year  all earnings will be tax free. They come in 4 forms:

  1. Cash ISA
  2. Lifetime ISA
  3. Stocks & Shares ISA
  4. Inovative Finance ISA

Why should you care?

You might be thinking why does it even matter? I’m barely able to save £100 whether my interest is taxed or not won’t make a difference. You couldn’t be further from the truth.

If you were to save £100 a month for 20 years and keep it in cash you would have £24,000. Whereas if you were to invest it in a fund tracking the S&P 500 which annually returns 7% on average – you would have £52,638.21. If you save this money in an ISA you will have earned £28,638.21 tax-free. On the other hand, if you kept the investment in a general account you would be taxed on account of capital gains.  

S&P 500 ETF tracking fund

Although the tax-saving might seem minor today, in the long run, your ISA will work for you. Aiming to max-out your ISA should be a goal every year. 

As of now, I have gone from saving around £1000 annually to targeting a £6000 saving goal this year. If I were to pay taxes on my return this year I would go from a £150 interest accrued to around £100. ISAs are a blessing in disguise.

What are the different ISA?

At this point, you might be wondering what are my options? Also, How do they work? In this article, I will summarize each ISA. In effect, giving you an overview of what each account does.

  1. Cash ISA

This one is straight forward it’s a fixed interest saving account. Which is either instant access with a lower interest rate or fixed-term and will incur a penalty for early withdrawal.

  1. Innovative Finance ISA (IFISA)

As an IFISA holder, your investment is in the form of a peer to peer (P2P) loan. Based on how long you are willing to leave your money in the account you will receive interest from the loanee. It’s risky as default is a common occurrence. Withdrawal of funds is also extremely challenging.

  1. Lifetime ISA 

This Account is capped at £4000 p/a and can only be opened between 18 and 40. You can contribute until you are 50. During this time, the government will add a 25% bonus. This contribution can only be accessed when withdrawing for retirement or first-time property buyers.

  1. Stocks & Shares ISA (My favorite)

This Individual Savings Account allows you to invest in stocks, funds, ETFs, and bonds of your choosing via a brokerage platform. Although capital is at risk, it allows you to earn interest, dividends, and coupons tax-free.

I will be doing individual reviews for each type of ISA and giving you tips on how to set them up. If any questions come to mind ask away in the comments.

Join the newsletter or check here.

Which one did I go for?

So far I have held both a Cash and Stocks & Shares ISA. After seeing the interest rates plummet in March. I decided to close my Cash ISA. Since then, I have invested with both Vanguard and Moneybox. I will review both services in an upcoming blog post. 

Currently, I’m satisfied with my return as on average Vanguard has returned 14% and Moneybox hovers around 6%. As I look to get on the property ladder. The Lifetime ISA will most likely be the next stop in my ISA adventure.

I would love to hear your thoughts on ISAs, if you are not from the UK what does your country offer?

I’ll be writing individual articles for each type of ISA going in-depth on the pros and cons. Watch this space as I will backlink towards each post and include the articles in my Newsletter!


Feel free to share the article with your friends and if you know of anyone with the same question as you.

A chair in a gray room

Financial Goals: Why I Was Wrong

The fulfillment curve changed my outlook on wealth.

“Lionel, you should always strive for more”

How many times have I heard this? Whether it was from parents, teachers, or managers. The common advice always seems to be you need more. Whether it is money, possessions, or likes. I was taught that if I want to win at life — I must be rich.

There is no such thing as enough.

The baseline of our society. Yet this constant race for more left me feeling empty. More = Happy right? I will be fulfilled the more I have. On the other hand, every new purchase makes me feel guilty. As my Financial Goals became clearer – I found fulfillment.

I never understood this feeling before I read “Your Money or Your Life” (the link is an affiliate link to Amazon to find the book). Vicki Robin introduces the concept of the fulfillment curve.

Fulfillment Curve, a tool to set Financial Goals

The idea is that fulfillment progresses along the curve before it hits a point of diminishing returns. It serves the idea that money=fulfillment no longer works. It works against us.

What happens after the peak?

Clutter strikes. Although, I have enough coats for 12 seasons, 1 more won’t harm me. It’s impossible to have too much money, right?

One thing leads to another, with more income comes more taxes, a larger house, and new “needs”. Yet at each upgrade, I feel less satisfied. I need to spend more to get a tenth of the thrill. As a teen, receiving a new phone felt exceptional. Last year, I bought the latest smartphone — the thrill lasted a day or two. 1 thought was on my mind once I left the shop. Have I really spent this much when my previous phone was fine? The familiar guilt was creeping in.

All these new luxuries and must-haves ended up crowding my flat. I recently moved and was appalled by the things I bought and never used. I was ashamed. How much money had disappeared?

I don’t want to know…

Not only was I losing money. I quickly realized that I could replace “money spent” with “time spent”. I started looking at how I spent my time. Forgetting an item on my weekly grocery run meant an additional trip. When I get passionate about something new the clutter is never far. I enjoy running. You’d think a pair of shoes would suffice. I quickly add all “recommended” paraphernalia. Not only did it have a financial cost, but it also took a lot of research time.

The ideal amount of money is that which neither falls within the range of poverty nor far exceeds it. — Seneca

Why I tied my Financial Goals to my values

I realized that when I fix a problem. I don’t ask what can I do but what can I buy. Materialism is more than wanting shiny things. Vicki Robin says it’s an easy substitute for problem-solving. I feel like I’m losing my resourcefulness.

Not only does “more” not lead to fulfillment. It has a terrible impact on the environment. Every purchase has an environmental cost. I decided that if I were to buy an unnecessary item it would be second hand. I’ll clutter my life but help the environment.

Row of hangers a representation of Financial Goals
Photo by Rene Asmussen from Pexels

When is it enough?

Sorry to disappoint, I don’t have an answer. Enough is different for everyone. It’s also constantly evolving. What is enough as a single 25-year-old is not the same as a married 40 something.

Great isn’t it? Not only am I supposed to stop wanting more but it isn’t clear when. Vicki Robin defines it as:

“It’s appreciating and fully enjoying what money brings into your life yet never purchasing anything that isn’t needed and wanted”

To figure out what my Financial Goals are; I had to get to know myself. More precisely my spending habits. I divided my monthly expenses by category (food, shelter, clothing, etc.). At the end of the month, I review my expenditure and assess whether it brought value to my life. It has led me to save money without guilt.

When I spend time/money — I wonder if it aligns with my values. Not only did this approach quickly make the need for a budget disappear. It took the shame away from shopping. Every purchase is meaningful. When it isn’t I learn and change my habits.

Consistently thinking about the fulfillment curve led me to understand my patterns. I found peace of mind. I realized a treat loses its value if bought every day. If I want my Matcha Latte to feel special I should buy it less often. 

Am I fulfilled?

I’m getting there. Understanding what your Financial Goals should be – is tough. Especially when you leave your home country. I had to find my financial “enough” alone. On the upside not having any l influence meant I could explore freely.

It led to me realizing — I don’t need to be rich. What is the point to have everything. What would I do with all of it? It’s liberating to have a new objective. I’m no longer aiming to be rich. My goal is to achieve an amount of wealth that lets me be true to my values.

Fulfillment might not be a given. Relearning what society teaches isn’t easy. Yet, this evolution feels wonderful. I feel lighter and the pressure has been alleviated. Join me on my journey to enough!

I would love to know how you have been setting your Financial Goals! Please share them in the comment box below. If you want to know more about Cent by Cent and what we do go to our homepage!

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