Definitions

Just because it like to talk about finances, that doesn't mean that my friends can easily understand what i want to say, I was told. So, instead of explaining to every one of them the same thing, again and again, i will just make a post and give the link when is needed. Time gaining strategy, right?

Terms and definitions most used in FIRE related stuff:

A savings rate is the amount of money, expressed as a percentage or ratio, that one deducts from his/her disposable personal income to set aside as a nest egg or for retirement.

Return on investment, or ROI, is the most common profitability ratio. There are several ways to determine ROI, but the most frequently used method is to divide net profit by total assets. So if your net profit is $100,000 and your total assets are $300,000, your ROI would be .33 or 33 percent.

Financial independence is generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses.

An index fund is a type of mutual fund with a portfolio constructed to match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover.

A bond is a debt investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate.

Real estate is the modern term for land and anything that is permanently affixed to it. Fixtures include buildings, fences, and things attached to buildings, such as plumbing, heating, and light fixtures.

Peer-to-peer lending, sometimes abbreviated P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders directly with borrowers.

See you soon!
G.

FIRE first aid or as i said FIRE crash course 1.0.1.

Ok. New post coming. But before i start i want to point to some very pertinent blog post of FI fighter. I just find it interesting and it is worth to take a peek on it. Another good post i found is about th Roseto effect - how to live longer, better and healthier. It is a simple solution, but a very effective one.

Now back to my story. One friend was asking me how can he learn to do what i do? As a close friend he could see the changes on my personal finance and net worth, and as we have at least 20 years from the time we first meet, he realized that i did in this year more than i did in the previous 36 of my life.
But here come with the catch. How can i learn somebody about FIRE in only 2 hours if i just start with the basics after 18 months of study of this phenomenon.

So i made a plan. Emailing books to read on the subject, 1 per week. Record every expense for 3 months on a notebook named with the fancy name of FIRE ESCAPE (i must to admit that i was inspired by Huw with this one). Categorize them after every month. Learn about your money before you start saving. Start budgeting expenses and food week by week, Stick with that amount. Download a running app. I use Runkeeper or Freeletics. A bit of physical preparation. Depending on the person i would recommend some supplements. At least when you start running again after 20 years. For him it was Multivitamins, Multiminerals, Magnesium, Fish oil to burn the extra fat, Melatonin to adapt faster to the new situation and some other things, Joints stuff - the one with condroitin. Make a blog. Put every link i provide on your blogroll. I give him most of the blogs i know. Set up to show the last post. Read them regularly. Now i have 2 Excel spreadsheet that i use. One to record the plan. With 4 pages. Risk. Safe. Dreams. Costs and strategy. Another one is using different pages, one for every income sources like dividends, interests, full time work, royalties, profit, capital gained and rental. Set up accounts. Start small and get bigger at some pre-set periods of time. He started with 8% for risk investment, 4% for safest ones and 4% for achieving childhood dreams (i used this as a helping hand as it is known that achieving childhood dreams can have as a result a dramatically improvement of your motivation. I have the full research on one of my journals,
Setting up the accounts. I went for one P2P account, one property crowdfunding, one for buying shares. He agreed to make a new bank account for this with TSB for the 5% interest, where he will save first a buffer cash sum, ideally 6 months expenses. Then we will set up direct debits for the investments options mentioned before, going with the option pay yourself first, worry about an eventual shortcoming later. As in automatically pay your rent, bills, transport (train pass) and savings first after you are getting paid your wages and make a budget for the remaining amount for food and any other expenses. Took us 3 hours at first and an additional one later instead of 2 planned, but we did it.

What would you do different? I am listening.

P.S. The blog just reach the 1000 readers bar, it is time to celebrate!

I start planning...

So i start planning, and i got to this monthly expenses:
Rent 350
Bills 165
Food 120
Transport 0 ( i moved 2 miles from my new work place)
Total basic expenses £635
Clothes 25
Luxury 122
Total actual lifestyle £772

Rate of savings 45%
Savings at end of July '15 £5200

Time until retirement 12.5 years

My investing strategy will be something like:
1. £2000 cash on TSB account with 5% interest as a buffer
2. £10000 on online p2p lending with an average 6% interest
3. £ 195000 on a mix of mutual funds and tracker equity funds from UK, Europe, World equity and corporate and government UK bonds. Dividents percentage 3-7%
4. £75000 on real estate crowdfunding with average 8% interest

I am open to suggestions if i can improve in any area.