Our journey to Financial Independence

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

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 
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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%?

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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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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?

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Financial Minimalism Builds Wealth Simply

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”. 

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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

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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.

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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!

Comparing Yourself To Others Is Expensive

Why do we do anything? Is it from an innate desire to succeed or is it to show off?

No matter what I undertake – my brain tends to compare myself to others. How is John doing on this project? Will he succeed and where I failed? Although I’m able to control these impulses better nowadays… it has been quite the journey. I used to see life as a zero-sum game. For one to succeed others must fail. 

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Photo by Kevin Bidwell

As I grew and took a step back, I realized how nonsensical it was. As time progressed humanity grew. Yet, we arguably have never seen as many successful people. Paradoxically, mental health has been on the decline. As a result, I’ve decided to dive into facts and studies.

Is comparing yourself always bad? And most importantly how can we solve it?

As always sources and complimentary information available at the bottom of the article.

What does the research say?

30 studies or more have shown that constant comparison leads to both mental and physical ailments. Not only are we pushed into a toxic spiral but the impact varies in every case. There is no concrete evidence that looking up to someone or on the opposite saying that you are doing better than someone else helps you grow. 

The best way to recognize our biases and decision trees is by accepting our flaws. True introspection is shown to have decreased the negative spiral. Furthermore, instead of nurturing hate, understanding that we can learn from our perceived foes is key.

Simon Sinek clarifies that it isn’t only social media that is to blame. He indicates that we have a tendency to psychologically self-harm by creating rivals and only focusing on their strengths. Looking inward and focusing on our strengths opens us up to growth. By doing so he was able to learn from his former rival.

Additionally, consistently looking up to others leads to unrealistic expectations. Contrary to what gurus say it’s unlikely you will have a private jet or become a billionaire.

Studies have shown it is unsustainable to draw motivation from unrealistic goals. As you constantly fail to achieve them. On the other hand, Research shows a change in perspective can counteract it. 

As we understand that comparison is a vicious circle how does it impact our finances and investments?

The Financial Impact of Comparing yourself

Weirdly enough constantly comparing yourself can cost you thousands. October 2020 was when I finally pulled the trigger on Instagram. I said goodbye to the temptation of showing off in Stories or posts. The amount I have saved isn’t quantifiable but my saving rate has increased and my impulse buys have diminished.

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Photo by Gratisography

Purchasing behavior

Since then I’ve focused more on the utilitarian side of purchases. When shopping for groceries or medicine, I go to the store-brand. The quality is on par and no one will know the difference.

Although, my friends have purchased beautiful german cars. I realized that in the long run it will cost them more than a beat down car. Additionally, we earn the same income why spend more upfront?

Recently, I wrote about how much we can truly afford. As impulse and status buy often end up costing tenfold in the long run. You can learn more in “How Much Can You Really Afford”.

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Photo by cottonbro

Furthermore, peer-pressure is a strong component in your purchase decision tree. By including and seeking the opinion of others we influence ourselves. This plays into the hand of marketers and “fake gurus” leading you to believe outlandish claims or programs. Multi-Level Marketing bases most of its strategy on this.

Additionally, studies have shown that we gravitate to shopping sprees to boost our self-esteem. This is built on the idea that something new will make you feel better. On the contrary, a study shared on the “Oxford Academy” shows that when you have low self-esteem you will gravitate to lower quality products. Therefore not only does comparing ourselves to others lead to lower self-esteem and impulsive purchases but it’s a vicious circle.

A Study by HEC Paris found that:

“We found that the willingness to pay for status products did result in self-repair, but only for the people who saw the ad with no tagline.”

Although, there is a positive impact from status products as soon as we let ourselves be influenced by external forces… the positive impact is lost. 

Realizing that most of my “want” purchases were based not on my desires but societal pressure has lead me to save substantially more. Since coming to this realization in September has helped me skyrocket my savings rate by 4%. Learn how to stop living paycheck to paycheck here. 5 Ways to Stop Living Paycheck to Paycheck.

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Photo by Anna Nekrashevich

Wealth insecurities

Whether it’s on social media or in the news we are constantly bombarded by wealth signals. To such an extent that we don’t question how the money was made or if it’s truly affordable. The problem is we only see the positive online.

From your colleague’s brand new car to the gains your favorite influencer has made. You never get to see their Profit & Loss (P&L) statement. Without that, it’s impossible to know their true position.

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Photo by olia danilevich

If an influencer was truly making 6 figures a month by trading or with dropshipping. They wouldn’t need to sell you a $50 course. Don’t get me wrong not all courses are scams. But it’s impossible to make a 2% gain daily constantly that would be over 600% a year. 

Warren Buffet is often regarded as the greatest investor of all time. Over the past 30 years, he has returned on average 20%. Which makes it highly unlikely that someone selling their signals would help you achieve anywhere near this. 

Constantly comparing ourselves to unachievable targets leads to us chasing returns. Asking the question “why haven’t I bought into Tesla, Dogecoin, or GME?” Without understanding that by the time a stock has hit the news you probably missed the train. And it’s ok! My friend Steve, the Frugal Expat, goes in-depth in his article “How Chasing Returns is a loser’s game” a brilliant read that shows how flawed this idea is.

Stop comparing yourself start building 

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Photo by Anna Shvets

Overall taking a step back and focusing on growth gives you time to build. It’s the main reason I don’t share the exact value of my Net Worth. Instead, I want to focus on growth, diversification, and progress as percentages. 

Recognising we all have a different path and expectations was what allowed me to truly embark on this journey. Wealth and Life aren’t a competition as nobody will ever walk the same path. I invite you to discover my Financial Origin Story to discover more of my philosophy. 

This research has comforted me in the idea that; although I’m not alone in the journey – it’s mine to travel. My key takeaways were:

  1. Comparison leads to impulse buys
  2. Envy leads to unnecessary risks
  3. Jealousy leads to a lack of productivity

How do you deal with comparing yourselves to others?


Sources

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Why I Invest But I Don’t Trade

Investing and Trading use similar tools but are extremely different. Neither is inherently better than the other. Both of them work by buying assets on the stock market with the goal of a Return on Investment.

The big difference is the approach. When it comes to investing, you buy assets and hold them for years. You bet on the future of a company and how well you believe it will do in the long run. It sounds boring, right? Well, my strategy is boring. I focus on the long-term returns, not the thrill.

On the other hand, a trader focuses on short-term appreciation to make gains. The objective is to maximize returns on a daily, weekly, or monthly basis. Some would call it speculation and gambling. At the end of the day, both investors and traders are betting on the future of a company whether it’s short or long term.

Morgan Housel puts it beautifully when he says:

“Every investor is making bets on the future. It’s only called speculation when you disagree with someone else’s bet.”

Morgan Housel

His article “When Everyone’s a Genius (a Few Thoughts On Speculation)” is a gold mine. It showcases the importance of storytelling when it comes to investing. 

It’s time to dive into why I focus on investing for more than 80% of my portfolio. As I see myself as a Sheriff when it comes to investing. I’m open to some risk but want controlled exposure for a long-term return.

Different kind of traders and investors

When it comes to investing or trading your wealth there are a plethora of styles.

Investors 

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Investors tend to focus on real-estate, equity, bonds, or angel investing. The majority of casual investors, myself included, focus on index funds and ETFs. These particular tools allow me to diversify my investment and bet on the market and not specific companies. 

A real estate investor will look at purchasing multiple properties with the objective of flipping them or renting them out. The problem of real estate investing is it takes considerable initial investment. It’s, therefore, less accessible and takes more time to get rolling. Yet it remains one of my diversification goals. Currently, I stick to REITs (Real Estate Investment Trusts) as they allow me to tiptoe into space before my first property. 

As for Angel Investing, it is a whole other can of worms. It takes substantial capital and is a long-term bet on start-ups. The goal of an angel investor is to bring expertise and finances to a burgeoning company with the hopes of a high return in the long run.

Traders

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I personally don’t trade anything that I cannot afford to lose. My total trades in the past year amount to less than $500 dollars. I’ll simply stick to summing up what each type of trader does. 

  • Day Trader: seeks to make profits on short trades throughout the day. They hardly hold any funds overnight.
  • Scalp Traders: only holds their position over a few minutes/seconds and never overnight.
  • Swing Trader: surfs on trends and looks at making a profit on trades over a few weeks/days. 
  • Position Trader holds positions for months to years but always has the goal to sell for a profit.

The style of trading you decide to follow depends on the time you will hold the stocks or options. Recently with the GME short squeeze, we saw retail traders become position traders and hold with the hope to swing the price. 

Overall whether you are trading or investing your decisions will depend on your risk tolerance, knowledge, and time you have at hand. Time is key as being a hobbyist day trader isn’t possible.

Success rate for Traders and Investors

When researching investing at first, I kept bumping into day trading gurus. They were selling a magical system to make millions day-trading. As always, I was cautious about things that sounded too good to be true.

It’s not to say that you can be successful day-trading it is a job in itself. My eyebrows simply rose… why would you need to sell me a course if you made that much money? Recently in a discussion with Coffeezil (Youtuber), Jason Calacanis an angel investor. Explored the fact that successful entrepreneurs and investors share their knowledge for free with retail traders. They don’t need your $300 dollars to make a profit.

Learn more in the video below.

First of all, there are 2 ways to start trading either you go professional or head out solo. When you join a financial firm, your salary itself is set but additionally, you can expect a 10%-30% bonus on the profits you realize. Of course, the returns are capped. But the losses do not impact your wealth.

On the other hand, most traders go out solo. Not only is the capital small at first but you have no safety net. Learning about charts and signals is a step. The only problem? On average successful day-traders will make an annualised return of 10%… Even with a starting fund of $30k you would only be making $3k a year…

Stock options then become a tempting idea as they allow you to swing bigger wins. The only problem is it’s a double-edged sword. As you are exposed to higher losses. 

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In a study by the University of Sao Paolo and the Sao Paolo School of Economics, it was found that it’s virtually impossible to make a living day trading. When analyzing all traders that began day-trading between 2013 and 2015 they found 97% lost money when trading more than 300 days. 

Additionally, despite the high risk, only 1.1% earned minimum wage. Only 0.5% earned the equivalent of an entry-level bank teller. 

In Taiwan, day treaders were studied for 15 years from 1992 to 2006. The results were only marginally better. With only 1% achieving what they refer to as abnormal results. 

What about investors?

ETFs and Index funds have consistently outperformed day traders. Not only is it easier to get started as you are able to bet on the overall market. For example, using the VUSA, Vanguard’s ETF tracks the S&P500. As long as the S&P 500 rises so will your portfolio. 

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Over the last 100 years, the S&P500 has returned an annualized return of 10%. Don’t get me wrong investing in index funds is boring. Yet, I much rather prefer boring to terrifying. It also is a terrible place to put your money in the short term. Not one year is guaranteed to be positive. Yet the S&P 500 has never had a negative return in any 20 year period. 

You can learn more about my portfolio and investing mindset here. If you haven’t started investing with Trading 212 yet. Today is the day – if you invest as little as £1/$1 using my link, we will both receive a share worth up to £100. 

Why do I Invest and not Trade?

I acknowledge that I don’t know enough. That I’m not good enough to beat the market. My objective is not to be rich tomorrow or even next week. Actually, I’ve set my target at 25 years from now. Yes, you read that right. 25 years. 

It might be faster if luck strikes and I’m able to pick some good real estate investments or funds. But overall I’m in no rush, I would rather a consistent 10% return that compounds to my benefit. Then going out every day to risk my wealth on some options. 

If any of you decide to go the trading route. I wish you every success and hope that you will be in the 0.5%. On my side, I will stick to my 85% index fund strategy.

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How Much Can You Really Afford?

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

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

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

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

What does affordable mean?

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

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

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

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

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

How much transportation can you afford?

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

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

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

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

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

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

How much housing can you afford?

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

Renting

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

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

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

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

Buying

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

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

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

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

How much fun can you afford?

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

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

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

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

Time to spend

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

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

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

What are your tips and trips to figure out affordability?

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

origin stories matter on old typewriter

My Financial Origin Story: Cent by Cent

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

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

Who am I?

My financial Origin Story starts here

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

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

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

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

white and brown cow near mountain during daytime
Photo by Heiner on Pexels.com

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

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

Every cent has a purpose

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

mother giving her daughter her allowance
Photo by Karolina Grabowska on Pexels.com

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

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

My father

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

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

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

man with backpack standing on stone near lake in highland
Photo by Rachel Claire on Pexels.com

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

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

Money isn’t happiness

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

abundance bank banking banknotes
Photo by Pixabay on Pexels.com

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

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

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

light inside library
Photo by Janko Ferlic on Pexels.com

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

2020 the game changer

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

man with fireworks
Photo by Rakicevic Nenad on Pexels.com

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

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

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

Where am I now?

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

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

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

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

Passive income is alie

Passive Income, it’s all a lie!

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

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

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

What is Passive Income?

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

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

Navigating as if Passive Income exists

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

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

What is real passive income?

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

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

What are your options?

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

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

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

AirBnB

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

passive income from AirBnB

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

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

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

eCommerce

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

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

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

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

YouTube, podcast, and blogging

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

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

Content Creation for Passive Income

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

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

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

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

eBooks and Courses

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

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

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

Affiliate Marketing

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

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

Not so Passive after all

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

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

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

Universal Basic Income could it be THE Answer?

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

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

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

Oil Dividend Alaska Monthly Stipend

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

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

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

What is Universal Basic Income?

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

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

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

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

How could UBI Work?

Negative taxation?

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

Universal Basic Income Breakdown

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

Universal Basic Income Gross Income vs Net Tax Rate

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

Regional Currency?

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

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

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

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

Replacing Welfare?

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

Social Welfare Cost OECD

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

What are the risks of Universal Basic Income?

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

People will stop working

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

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

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

People will misuse the funds

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

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

How about inflation?

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

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

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

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

Why Do We Need Universal Basic Income?

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

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

The Wealth Gap

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

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

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

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

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

A security net

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

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

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

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

Entrepreneurial Boost

Entrepreneurial Take Off thanks to UBI

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

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

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

Conclusion

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

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

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

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

Sources

light bulb with success definitions

Are You Successful? 7 Definitions of Success

How do top performers define success?

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

By the way… How do you define success?

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

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

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

When asked about success Richard Branson answers

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

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

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

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

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

2. Sacrifice is necessary

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

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

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

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

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

3. Success to the unyielding

How Bad do you want success?

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

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

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

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

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

4. Eyes on the Prize

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

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

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

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

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

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

5. Will it even matter?

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

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

Society has taught me success is all that matters. 

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

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

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

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

6. Where to start?

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

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

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

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

7. Success is accepting imperfection

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

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

Salvador Dali

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

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

So What is success?

No Idea…

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

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

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

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

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

Around the world

Should I live abroad? To Leave or Not To Leave

Should you live abroad?

How difficult could it be to go abroad?

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

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

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

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

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

They will right?

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

Living abroad can feel extraterrestrial

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

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

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

Living abroad an astronaut on the moon

Banks, credit score, and more...

Oh, how naive I was…

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

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

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

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

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

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

Banks abroad piggy bank and coins

Building Trust Abroad

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

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

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

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

Homesickness is sneaky

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

I might never live there again.

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

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

I dug in what did it mean?

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

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

The best decision of my life

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

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

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

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

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