August - monthly report - coming soon

This was an interesting month, and one of the best financially speaking in the 2016. I am still compiling the data. I will work on the report soon.

The bad "good" news

...or as I wanted to say, this is my face when the Santander 123 bank account interest dropped from 3% to 1.5%, but it is still the best available if you have more than 20k on it.

Financial independence overnight

Let's say that you just won the big prize. You are a normal person, who never had any specialized financial education. What to do next?

1. You still need to pay your tax for the money you won, so it is recommended to find out what you have to pay and pay it.

2. If you have any debts, student loan or mortgage, pay them.

3. You need basic control over your emotional state, in order to understand your comfort zone and your limits. If you buy shares, for example, and the price goes down, will you sell? Or will you buy more? Are you prone to make impulsive decisions? You need safeguards and restraint in order to not spend it all in the next few years? Do you feel tempted if someone come to you with a investment with a 25-75% annual return (this is too god to be true, you know that, right) ?

4. Keep your identity and lifestyle the same if possible, maintain a low profile, and a need to know basis. You can tell to your wife, and your kids, maybe. If word goes by, a lot of people will come to you with real or not so real problems, asking for financial help. It is better to remain anonymous and support the causes that are important for you.

5. Priorities, goals and values. Do you want to live in another country, or countries? Do you want to still keep your work or stop doing it? Do you want to have another career that you always dreamed off, but you did not have the time and the money to follow it? Do you want to spend more time with your family? To travel around the world? To buy another house or car? Your partner have the same priorities like you or you need to compromise?

Keep in mind that 9 out of 10 lottery winners end up broke 5-10 years later.

One simple algorithm for early retirement

A. Do you want to retire?

Yes - Go to B                      
No - Stop reading (Some people are lucky enough to to something they like, so you can see the necessity to retire if you have a better alternative. Of course, it is much rewarding to go to your actual work as volunteer knowing that your bank account is big enough so you do not need to work another day of your life if you do not need or want.)

B. When do you want to retire?

At the retirement age, as everybody else I know - Stop reading.
Before the retirement age - If this is your wish, my friend. You need to start saving. And more than that, you need to know how much you need to save, therefore you need to calculate your retirement expenses and to know how to provide your retirement income. Go to C.

C.  What will be the estimate cost when you will retire?

You are rich - Stop reading.
You know why you want to retire and when, now you need to know what your expenses will be and how to cover them -  You need a decent plan on how to generate wealth and passive income (because of ageing), and how to overestimate a bit your needed income (because inflation, global crisis and stuff). Go to D.

D. The plan

Once you are here, you have your plan, and you can divide the years until your retirement to find how much you need to save yearly. Then you need to start saving, record everything, reach the retirement date, retire and make a good book about this. Do not forget to sent me the book. I promise i will read it.

Testing, testing!

Here are the results of my latest experiments:

1. Moneybox  is live and kicking, rounding up my expenses and investing the change in shares, gilts and bonds. Click on the link if you want to test it. It is still a beta version, but seems to run smoothly and it is easy to set up.

2. Dollarupload website is working and seems to be a good opportunity for some, but not for me. At the moment I had few tries but my account there is still a big Zero.

3. The brilliant idea of the guys behind the Mondo Card is up, and i am waiting for mine soon. I will make a review after I used it for a while. We are talking about a current account completely managed from your smartphone, with no fee for anything you buy, anywhere in the world. More about it here. We will see what's next!

That's all for today, see you soon.
G.

Financial freedom - how do I start?

Trying to reconsider my portfolio, I was just asking some of my friends about some ideas. Sadly enough, many of them proposed simplistic solution, and I would often tell them, is this what you would do if you were in my place? My understanding that we need a real financial education seems more needed than ever. But the thing is, that so many think they already know everything they need to know, and despite this, they do not act upon it. They just react to the environment. And this little difference is what we make us to reach financial independence, to retire early, and to enjoy many years of happy, fulfilled life. Being active instead of reactive is all we need. When someone see my results and ask for help, I advice my trademark beginner strategy. Save enough cash to cover 6 months of basic expenses and buy a piggy bank and save something daily in it. At the end of the month, just take whatever you saved and put it in a savings account. Why I do this? Easy, saving a six months basic expenses will make you to feel committed and ready to tackle the issue of your financial freedom, while building the habit of regular saving is also helped by the daily piggy bank deposit, even if it is only 0.01 per day. The habit is the goal, not the saving per se. Later, when this is already part of your normal life, we can start to make a plan. Most of the times, saving 30-50% of your income is not only recommended, but also possible, and the final goal is within your reach. Five to ten years later, you are financially independent. End of the project. And then the real adventure begin.

Rent or buy?

This is one of my struggles lately, and despite knowing that I need to rent where i want to live, and buy where i want to rent, I am still trying to convince myself about this true fact. I am still dreaming to build a house as i would like, projected and furnished by me, for me. I am in the middle of both sides, like Aesop's donkey, missing them both, but still feeling guilty if i would chose one of the two options.

What to do? What to do?

Quote of the day

"Rent where you want to live. Own where you can rent."
(anonymous)

This could be a real estate investing mantra. When you are financially free, you want to be mobile. You can live whenever you want, literally. One year in Thailand, near the beach, one year in Prague, learning everything about beer and baroque architecture, and maybe one year in Paris or Barcelona. But you want to own a house near an university, or a place with lots of warehouses, for example. Anyway, is a good tip.

Rich or free?

Let's talk about definitions. Some people are financially free, some people are rich. In the others perception, i mean, and the difference is often very subtle. Financially free people are still like us, not splashing and maintaining a rich person image, even when they are ceasing to be. This can cause depression and every other rich people problems. You can be free and earning only 2k per month, you can be rich and not financially independent. So, to explain it better, a rich person is maybe known as being part of the 1%, even if, statistically speaking, as long as you earn more than £35k per month, you really are part of the 1%, but let's go with this. A financially free person is a person which covered all the life normal expenses (living, bills, transport, food, entertainment) with more than 90% passive income, as opposed to active income (wages).

Now i will ask, do you want to be rich or financially independent? Don't forget, everything start with a plan.

About money and character

I understood finally some of my grandpa words, and now i can see a secret knowledge in them, but you can read it only when you will live it. He use to say: Money are not the root of the evil, they only enhance what you already are. If you become rich, and you were an asshole, you will be a gigantic asshole. If you were a humanitarian, you will become an even better humanitarian. They are just another tool, and the problem is you, not the money. I can see now what he wanted to say.

Thank grandpa!

G.

Emotions, emotions

The hardest part was to detach myself from the obsessive thought that i gonna make it. And to stop thinking again and again at that moment when i will actually retire. As i decided that i will still work for a while, even after i will have all my retirement fund ready, my mind gradually calmed down, and i regained my daily focus. It was coming as a big surprise that this will happen, with a minimal effort from my part, based mostly on luck, but the idea hit me seriously, borderline to my mental health and focus. After the surprise faded away (thanks to hedonic adaptation), i realized than all that i need is to keep my routine for a while and to implement the changes gradually. Still, i cannot wait for the moment when this will happen, and to decide when to do it in your own terms seems to help a lot. I will come back with another posts when all this will clear up. Until then, i will start to do my things in the same way as before.

One more word of encouragement: If i can do it, you can do it too.

See you soon.

G.

Feelings and early retirement

I realized that i did not read much about the emotional part of the early retirement process. Truthfully, I have read only one article about this, more than 8 months ago. I will look for it, because it is interesting how we can perceive this, in the moment we realize that this will happen, and it will happen soon. The human brain is a fascinating subject. I will come back with more about this when I will be ready.

July - monthly report

June 2016 - Monthly report
My Overview

Total portfolio: £8659 (-744)
Debt: £1930 (+550)
Net Worth: £6729 (-1155)

Investments UK: £1881 (+30)
Investments overseas : £1839
Cash: £333 (-945)
Pension: £4606 (+432)

Total Income: £1530 (-160)
Passive income: £63 (4.11%)
Savings rate: Unknown

Side hustle 1 value: £392 (-108)
Side hustle 2 value: £6285

Interesting numbers, and overall my portfolio and net worth is decreasing, while the debt is increasing. But this is only temporary as I am trying different ways to increase my net worth, and Side hustle number 2 will start to generate income at the beginning of September. Side hustle number 1 is still work in progress, and i do not know if it will produce the expected results, but out of my two attempts done in this year, one seems to be highly succesful reaching unexpectedly good results in the next months.I am still planning to end all my debt by the end of the year, and to increase my passive income (almost passive as i am working on it 3-4 hours per month).I can see a decrease in cash, as i am planning an one week holiday in Spain, and flight and accommodation was paid. Pension jumped a bit due to the nice performance of the stock market. Very small increase in the local investments, but in the end it is increasing.