juni 2021 – Simple with Money

juni 30, 2021juni 29, 2021Investing, Money

Pay yourself first at the beginning of each month

Until now, I’ve always had the strategy of saving what’s left at the end of the month. This works fine for me, there is usually some money left over. Frugal living pays off, I have already saved a nice amount. However, I do it differently than a lot of advice I read. A lot of financial advice is to pay yourself first. For example from the book Rich dad, poor dad and also The richest man in Babylon. Even Warren Buffett gives this as advice. The people who say this know what they are talking about. They are all millionaires who are very good with money. In the FIRE community there are a lot of people who also pay themselves first. So we can’t get around that.

Not paying rent this month…

Investing immediately after your salary has been received and only spending what is left is also called pay yourself first. Some things are not open to negotiation. It is not optional whether you pay your rent or mortgage this month or whether you do or don’t pay your electricity bill. You just do it because otherwise you will get into very annoying problems very quickly. There is no room for negotiation. The pay yourself first principle states that investing every month is also non-negotiable. You do this every month, preferably a fixed amount.

By doing this at the beginning of the (financial) month, you live frugally. You see how much is still in your bank account and it is easier to decide not to make a purchase if your account is almost empty. I want to implement this, pay myself first and I will start on July 1. I have to pay close attention, because my bills are only debited at the end of the financial month. If I can’t manage my budget, then there isn’t enough to write off the direct debits from the fixed costs.

Resolutions to pay yourself first

From the coming month on, I will think in advance what I will need in the coming month, on what things I expect to spend money. Then I calculate what comes in. I will use the difference according to my investment strategy.

To me, that’s what it looks like for July 2021.

Mortgage	595	Same every month
Electricity and heating	65	Low because of the solarpanels
Phone/spotify/netflix/internet	59	I share Netflix and don’t have a tv
Groceries	200	On the higher end (especially since i’ve stocked up) but I like some room here.
Car (Taxes, insurance and gas)	300	I commute to and from work 4 times a week and it’s about a 120km per day drive. With the gasprices rising it’s a lot. I get compensated more than half of this by my boss.
Eating out	100	The past couple of months (one and a half year) I barely went out to eat or for drinks, but now that we can, I will not cut back.
Miscellaneous	300	All the other stuff, like going away for a weekend, a laser treatment and birthday gifts.
Total	1619

pay yourself first — Waiting for the bridge to close with 30C. Luckily the windows open!

I round to 1700 and anything above that in income goes towards my investment strategy. If I have more left over because I broadly calculated, the remaining money will go to the investment account with next months round.

Planning a big purchase

I’m thinking about buying a camera. I allow myself flexibility in that. If I want to buy it, I take the money from the savings account. I top up the emergency fund the next month to the minimum of 3 months in expenses. If my emergency fund contains a little less than 3 months of expenses for a week or two, I won’t lose any sleep over it. After all, I still have the investments to back me up when shit hits the fan. The money from the investments can be put into my bank account within a day or two if there is an emergency.

I am very curious if budgeting in this way at the beginning of the month will help me to organize my finances even more tightly. That’s why I’m going to try to keep it up for a few months, not just one month. This forces me to start thinking about what I’m going to spend in the next month and then stay within budget. A good exercise in planning and thinking ahead.

How are you doing it, are you paying yourself first?

Do you also plan your finances at the beginning of the month? And can you stick to it? Let me know, I’m curious about your experience.

Until next time!

Elske

I am not a financial advisor, and therefore not your financial advisor. I am not a financial professional. This blog is for entertainment purposes only.

Elske 1

juni 23, 2021juni 30, 2021Lifestyle, Money

Acquiring Financial Independence For Feeling Free In 2021

I am a huge proponent of financial independence. If you have built up reserves, you have more choice in how you shape your life. When you’re in debt or spend your entire paycheck every month, you’re dependent on your paycheck or your business. If you make less profit for a month with your company or the company you are employed for goes bankrupt or you are fired, you will immediately be in trouble. But even if these things don’t happen to you and you’re unhappy with your job or your business, you still have a problem. You are 100% dependent on your income if you spend everything. That is why I think it is super important to get your finances in order and to ensure that you get a lot of freedom back.

Never work again

It is very difficult to save up for so much freedom (money) that you never have to work again. My personal goal is exactly that, and I write about that here. Then you are completely free to organize your time as you wish. But one step before that is that you are free to quit your job if you are unhappy about it. Then you can take a job that earns less without getting into trouble. Or if due to circumstances (for example a pandemic) you can get by for a few months with a lot less income. Or that you can stand on your own two feet if you live together and decide to separate.

Shared household

Many couples arrange their finances, especially if it concerns a family with children. By running a household together you can save a lot. So you only have the rent or mortgage once and groceries together is relatively cheaper than for one person. Municipal tax, water, gas, etc. are also relatively cheaper if you live together.

Girl Boss!

To maintain your own freedom, it is extra important that you do not lean on your partner. Even if you are super in love, you never know what the future will bring. Make sure you can stand on your own two feet, even if you may not be doing that right now. When shit hits the fan, it is important that you can stand on your own two feet and leave if necessary. For example, make sure you have your own emergency fund that you (alone) can access or that you can quickly work more hours at your job so that you can support yourself if necessary. Nothing is more oppressive than staying together out of financial need.

No partner? Then it is at least as important, if not even more important, that you do not wait Mr. Perfect to come and rescue you. Save, invest and plan your financial future so that you don’t have to depend on a partner (or a job!). Someone who is financially independent and actively planning his/her own future is super sexy! Is your partner intimidated by your independence? Afraid that if you’re not dependent, you might just run away? Then that might not be the right candidate… You’re not together for the money, are you?! If you want to read more about financial independence for woman, buy this book!

Financial independence

In the Netherlands and other western countries it is perfectly possible to become financially independent. At least independent enough that it is possible to provide for one’s own livelihood. The woman in the Netherlands earn more or less the same as the man and should therefore also be able to be financially independent from her partner. That is different in some countries. In some countries, women’s wages are so low that it barely covers the commute. Of course, this will not make it possible to build up independence. Fortunately, women here earn enough to build up financial independence. So do that too, our grandmothers fought hard for that privilage.

In short: Build your own financial independence and thereby increase your freedom.

How can you best do that? By focusing on three things:

– Get more income from your job or other sources.

– Spend less than you earn.

– Investing the difference so that that money also works for you.

This way you build up a freedom buffer.

Simply put, not so easily done but you can do it! I believe in you!!

Untill next time,

Elske

I am not a Financial advisor nor am I your financial advisor. I am not a trained financial professional. This blog is for entertainment purposes only.

Elske 0

juni 16, 2021juni 16, 2021Lifestyle, Minimalism

Benefits of minimalism

Minimalism is only keeping the things in your life that add value to you. The term is usually used for stuff. Get rid of clothes you don’t wear, only hang wall art that you enjoy looking at. Do not put down furniture just to fill the space and keep your cupboards in the kitchen as empty as possible so that everything is clear and easily accessible. Minimalism also refers to things that are not materialistic such as friendships, how you organize your time and what projects you work on. If you are a minimalist you think about this very consciously and you only choose those things that you really value and that you find important.

Stark white walls with a hint of pastel

Search minimalism on pinterest and you will see all white with beige and soft colors very empty and tidy houses. Usually with a plant in the corner. Minimalism doesn’t have to be that, of course. The things, people and projects in your life can give life a lot more color than white with a pastel tint. What I want you to think about today are some of the benefits that minimalism brings.

Benefits

By having less stuff, cleaning and keeping tidy is much easier. If your cupboards are full of decorations and knick-knacks, dusting the cupboard is a time-consuming task. If there is nothing or just one thing on it, cleaning will go much faster. This also applies to the wardrobe and kitchen cupboards, where you can find things more easily and keep them neat and organized.
If you have less stuff, you take better care of it. If you have a few extra of something, you may be reckless with your stuff. Do you only have one? Then there is a good chance that you will be more economical with your belongings.
Because you have an overview, you are less tempted to buy more. You can see at a glance that you have enough of something.
You spend less time looking for your stuff. If it is a mess, you are often looking for where you left things. If you have much less stuff, you will notice if something is not in its place and you will find it faster.
Your things get their own ‘home’. Every thing in your house should have a fixed place where that thing lives. Then you always know where it is and that nothing else can stand there either. Cleaning up is much faster if you put things back where they belong without having to make up or clear a place for them first.
You get more free time because less time is spent on clearing, cleaning, repairing, washing and replacing your stuff.
Buying less stuff is good for the environment. To get stuff to your house, raw materials must first be extracted from the environment, it must be made, packed, transported and then you can enjoy the thing. Until you don’t and then it becomes waste. This has to be removed, transported and recycled. Or it has to be transported to the landfill. Less stuff means less environmental impact.
By buying less stuff you have money left over, and you can put that money to work for you by investing it. Your money works for you instead of the other way around. So you are freer. Who would not want that.
Because you have less stuff and use it economically, you can buy better quality stuff when it needs to be replaced.
Because you have less stuff, you don’t need a bigger house or storage. Saves money again! A large house is not only more expensive to rent or purchase. It is also more expensive to maintain, requires more paint, more furniture, more energy, more vacuuming, more dusting, etc. By living less large, you save on all these things.

Freedom

Do you see the connection? All these things will save you more time or more money. Minimalism creates tranquillity. Money buys time and time buys freedom. Because you spend less time searching, tidying up, organizing, cleaning, maintaining and working, you suddenly have much more time for the things that are important to you.

What those things are is very personal. The Minimalists have a weekly podcast on the subject for inspiration. You can think of spending time with yourself, with your loved one, friends and family. You also have more time for hobbies, to learn something you always wanted to learn or to get enough sleep, make healthier meals and exercise, for example. And these last three things make you feel energetic and you have more energy for the things that are important to you. Such as, for example, time with your loved one, friends or family or to learn something new. I only see benefits. The vicious circle is turning in the right direction!
Are you now also motivated to minimize?

Until next time!
Elske

Elske 1

juni 7, 2021juni 8, 2021Investing, Money

Disadvangates of paying off your mortgage extra fast

The feeling of having a fully paid off house is incredible. But at what cost should you do it as fast as possible? I like to highlight the disadvantages of paying off your mortgage fast. This is a topic that is highly discussed in the financial independent retire early movement. ‘You should pay of your mortgage and only then start investing, mortgage is a debt and therefore it is bad’. Or the opposite: ‘Don’t pay off your mortgage fast, invest the money in stocks’. Which is right?

Well, it depends…

What answer is right depends on your own situation. For example your interest rate. If you pay off your mortgage and your house is paid for in full, you have a lot more money to put in your index funds and other investments, making you more profit by compounding interest after you’ve paid off the house. On the other hand, if your interest rate is low, you can consider just paying of the minimum required and invest the surplus in a low fee index fund or however your investment portfolio suggests. Chances are you can easily make a higher profit on that.

Look at it this way: the interest rate on your mortgage is your guaranteed return of investment if you pay it off. If you have an 8% or more interest rate, you are probably better off paying it off as soon as possible, for the chance of making more on the stock market is a gamble. If your interest rate is low, say 2%, your return of investment is probably higher on the stock market then when you down pay it on the mortgage. I heard of people in the Netherlands that bought a house with just over or even under (!) 1% interest rate these days. It is not that hard to outperform that with investing. Index funds like the S&P500 perform at an average of 8% per year. Please don’t look at this in the terms of one or two years. Look at this more in the 15-30 year range. If you put your money in an index fund, in the long run you will earn about 8% on it. Yes, even if you are at loss right now or the first few years.

Inflation

Other disadvantages of paying off your mortgage for example are inflation. So if you pay of your house now, you are putting a higher percentage of your income to it. In the future, with inflation, your income will increase and the same amount of mortgage left will be worth less than it is today. So in that sense, it would be better to pay if off as slow as possible. But of course it all depends on the percentage of interest you pay.

More than 6%.

What to do if your mortgage interest rate is higher than 6%? What will happen if you pay it off faster? On the ROI (Return of investment) side, you will get more return on your money (by not handing it over to the bank as interest).Think hard on doing a down payment, once it’s in the mortgage you can’t spend or invest it anymore. This is called the opportunity cost. It’s basically gone until you sell your house, but probably it will be in another house you buy next.

My best bet is check if you can refinance to a lower interest rate. This may cost you a fee right now but calculate it and see if it will be cheaper in the long run.

Between 3-6%.

What if your interest rate is between 3-6%? Try and refinance it as well, call your bank, check how to refinance, shop around at other providers as well. Calculate what you save vs. what the fine of refinancing is. Make your own decision. Same as for the high interest rate, maybe it will be good to do down payments but you will not be able to touch that money for anything else anymore. The opportunity cost is at stake here too.

Under 3%.

If your interest rate is low, let say under 3%, I would not pay it off any faster than required. Put money you are not spending in a low-fee index fund every month and grow your stash that way. The chances of having a higher return of investment are on your side. Especially in the long run. The big benefit here is the money is more liquid, easier to access in case of emergency.

In the netherlands

The taxsystem in the Netherlands makes the disadvantages of paying off your mortgage even bigger. Here in the Netherlands chances are you are getting hypotheek rente aftrek (tax deductionon the interest). This makes the net interest rate even lower. And there is the possibility your paid off house will cost you more in taxes in the future. If your house is currently worth more than the remains of the mortgage, call your bank to ask for a lower interest rate (schuld-marktwaarde verhouding). This only works when you don’t have NHG on it. Chances are the interest rate will be lowered.

But if anything, don’t store surplus money on your savings, as it is zero or close to zero at the moment.

And remember:

I am not a Financial advisor nor am I your financial advisor. I am not a trained financial professional. This blog is for entertainment purposes only.

What’s your thought on this subject?

Untill next time,

Elske

Elske 0

juni 4, 2021juni 3, 2021Lifestyle

Dear diary, what i did in May 2021

What a month! Welcome to my diary of may 2021. The weather did not improve yet, I was ill for too long, I could not finish a single book and the garden, well the weeds grow better than the vegetable garden unfortunately. In the last weekend I could be found in the countryside for a few days. I also participated in a clean-up campaign to clear up cigarette butts. I also followed an online visibility training. I got a lot of inspiration there about how to present yourself online. Now I have facebook and instagram. Zarayda, who gave the training, also encourages to do more with video, but that’s scary!

Books

In terms of books, I had started the Donut Economy by Kate Raworth. To be honest, I couldn’t get through this. I understand that there is a very good philosophy behind this. Fortunately, I was also able to find the book as an audiobook in the library’s app. I bet I’m going to listen to this book. That will be vastly better.

Now I started in Think and Get Rich of Napoleon Hill. A true classic. Not finished yet so stay tuned for that…

Audiobooks

Audiobooks went better. This month I listened to Normal People by Salley Rooney. A compelling story about two teenagers who have nothing in common, but who nevertheless develop a very strong bond. About how they influence each other. A book in which nothing happened, but you still want to keep listening for everything to happen. Highly recommended if you like novels.

Miljonair met een gewone baan (Million with a regular job) is a Dutch classic by Oeds-Jan Postma and cannot be missed from the list. Actually, this is exactly what I’m preaching here on my blog. I am going to buy the paper version of this. I can draw inspiration from that to write articles about for a long time to come. Because of the power of repetition, it never gets old to talk about these topics. I myself need a continuous flow of encouragement not to buy new things, for example, but to keep myself under control. That’s why I listen to podcasts from The Minimalists and read blogs about minimalism. Same goed for keeping your finances in check. Keep reading about the same topics for encouragement.

And then…

I was listening to Dave Ramsey’s Total Money Make Over. What a mess is that book. Talking about the 7 steps to getting out of debt but the first half of the book was a sales pitch about how many lives it changed and how great the program was. It took a long time before he came to the actual steps. I’ll spare you the trouble and time and summarize them:

1. Save 1000 euros

2. Pay Off Debt on Your Mortgage Already

3. Save 3-6 months of expenses in an emergency fund

4. Set aside 15% for your pension

5. Save for your children’s studies

6. Pay off your mortgage faster

7. Build wealth and give to charities

So. Now you know what Dave Ramsey thinks about building wealth.

Documentaries

In addition, I watched Explained Money on Netflix. There are five episodes of 22 minutes each. Unfortunately, there are three episodes about the system in America. Interesting to see how things like student loans, pensions and credit cards are arranged there. That made it clear to me why it is so difficult in the US to get rid of your credit card debt or your student loan. An example was given of someone who had 80,000 in student debt. After paying off 120,000, there was still 78,000 left. The rest was spent on interest. Such a battle cannot be won, it’s rediculous. This situation does explain why it is so important not to get into debt. The compound interest then works in the opposite direction. Sometimes as much as 25% rent is paid per loan!

I also listened to Peter de Ruiter’s audio documentary about investing in bitcoins. He gives a performance in the world of cryptocurrency, various companies and individuals investing in cryptos. Because so much is happening in the world of cryptocurrencies, it is already an outdated documentary. Still, it gives a good explanation of what it is and what you can do with it.

Expenses

May was just like April a great month! A weekend away and some presents were just about the expenses in addition to the fixed costs of the house, car and groceries. And strepsils, lots and lots of strepsils. A very short summary but there is really not much more to say about it. For entertainment, a gamenight is priceless.

The garden

Okay garden then. As I wrote in the introduction, the weeds are in their heyday, but the vegetable garden is left behind. June will be better for the greens I hope.

What have you been up to?

Until next time,

Elske

Elske 0