financial freedom – 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

mei 31, 2021mei 30, 2021Money

How to use a cash book for personal finances.

If you read my blog you might think that I am obsessive about money. That I’ve figured out my entire financial route and I’m a star investor. Or just that I’m a cheapskate. Of all these things cheapskate still comes closest haha. But not really. I do keep a cash book and I live frugally, but enjoy life. This way I can easily order a drink on the terrace without having to save on anything else. I can also enjoy a holiday without saving on anything else. As I type this I am sitting among the sheep at my holiday resort enjoying the good life. Or if I don’t feel like cooking, I even order something. The latter doesn’t happen very often, by the way. Getting food delivered is really expensive!

cheap sheep — Sheep in the garden of the hotel 😉

How much time do I actually spend on my finances?

The short answer is about an hour a month. Let’s have a closer look.

On the first of the month (or at least that week) I review my finances. I have been doing this since 2013. Then I log in to all my accounts (bank accounts and brokers) and I put everything I have spent per category in an excel file. My own excel cash book. The greatest benefit of this monthly ritual is insight. I have insight into my income and expenses. In addition, I can easily determine where I can save money or where I have to adjust when things get out of hand. I can also see at a glance whether I will achieve my financial goals.

Note everythink manually

I type in everything by hand. Every transaction i made. So I have to retype manually every subscriptions that I don’t use and other leaks in my expenses every month from my bank statements to my cash book. This makes me want to quickly get rid of expenses and subscriptions I don’t value. It hurts to write it down at the end of the month.

“You must take control over your money or the lack of it will forever control you.”
Dave Ramsey

For me it looks like this:

my cash book — with fictitious numbers but in my actual cashbook.

Investment book

Since this year, I also keep track of my investments once a month. That way I have a better view of my return. That is sometimes a bit difficult to find in the various apps of the investor accounts. I also add up the balances of all accounts and any cash. At the end of the year, I therefore have a monthly overview of how much my net worth was at that time. All in all, keeping the entire household book takes me about half an hour to 45 minutes. Not that long, but enough to have a good overview and to focus on my goals.

Look ahead and look back

At the end of the year, I look back on the past year and look forward to the year ahead. I list all income and expenses and the investment I made (easy since I kept track of that every month) and then I see how I did. For example, this year I aim to pay at least for the entire renovation of the attic without touching my piggy bank and investments. At the end of the year I will know exactly if I hit my goal. For more on my investment strategy click here.

I encourage you to do this too if you want to take (back) control of your money. It will take you an hour to set up and then an hour a month to keep up. Your overview of what and how you spend becomes a lot clearer. Maybe you always thought you spend about 50 euros a month on home delivery, but now you see that it is more around 150. Then you can do something about it!

Take control of your money back and notice that as soon as you no longer have money worries, you experience a lot less stress and anxiety.

Do you keep track of your finances in a cash book? Let me know, I like to learn new insights!

Until next time!

Elske

Elske 0

mei 17, 2021mei 18, 2021Investing, Lifestyle, Minimalism, Money

How to get rich with compound interest

I want to help you save 25 euros this week because it can yield 65,000 after 20 years with compound interest! Who would not want that!

einstein — Compound interest is the 8th world wonder.

This week I invite you to do a challenge with me. I want to help you with saving and investing the first 25 euros (or more!) and grow your money tree. Do this every week and you will have saved up a wonderful pot of freedom in 20 years. You deserve it! Join the hashtag #simplechallenge and tag me in your post! @simplewithmoney on instagram.

Compound interest

Earlier I wrote about the 8th wonder of the world as Albert Einstein described it. Whether he really said this or not is unclear. That it’s true is certain! If you understand how compound interest works, then you will benefit from it. If you don’t understand it, you pay for it.

Today we are going to calculate with interest. “Ewww, numbers, I really don’t like that. So difficult! “

Okay, I get it. Still, I ask you to calculate with me. If you invest in a well-spread indexfund, the average return over 20 years is around 8% per year. If you invest 1 euro now, it is worth about € 4.65 in 20 years with 8% growth per year. That doesn’t sound very impressive.

Invest 100 euros.

If you are going to invest 100 euros now, it will be worth 466 euros in 20 years’ time. That sounds like more fun, but it doesn’t make you rich.

If you invest 100 euros every month this year, that will probably be worth more than € 5500 in 20 years. Sounds better allready. Your investment has then been doubled more than 4.5 times!

I want to challenge you to do this. Deposit 100 euros every month. And if you can do that for a year, just go on and do it for 20 years in a row!

Invest 100 euros every month for the next 20 years gives you a possible return of 65,000 euros!!! You have then deposited 24,000 euros. The profit is therefore € 65,000- € 24,000 = € 41,000. You didn’t have to do anything for that, except put in 100 euros every month. Add another 10 years to this and with an average return of 8% per year you suddenly have doubled, around €159,000 in your investor account! Mindblowing!

Now you know how compound interest works and you can benefit from it for the rest of your life. This works the other way around as well. If you have a mortgage with 8% interest, you pay compound interest on it too! Let that sink in for a moment.

Hardcore investers

For the high flyers, I will put an example below under what happens if you save 500 per month for 20 years. I also realize that for many normal people with normal incomes this is not possible to set aside 500 euros every month. It may succeed in a season in your life, but with a family expansion, divorce, renovation or loss of income / job, it may not be very realistic to set aside 500 every month for 20 years. I encourage you to live frugally and below your means and if you have a nice salary or team up with your partner to cut living costs in half, you can certainly get very far! And of course keep reading this blog 😉 Therefore, here is the calculation to motivate you.

Join me on this challenge! Take a picture of what you saved with the #simplechallenge and tag me @simplewithmoney.

At the end of the week we are going to deposit the 25 euros in an indexfund.

Until 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 2

april 27, 2021april 27, 2021Lifestyle, Minimalism

Start your minimalism journey today

All we ever want is more, more, more. More gadgets, more clothes, more money, more house, more cars. More. More. More. Not today. Here is a case for minimalism and tranquility.

This is a different post then the usual. And it is at least as important if you want to take control over your finances. If you agree with me and dream of a tranquil world of connection and time for each other as well, read along.

You probably have enough

If you read this, you probably have enough. You have a mobile phone, computer or tablet. You are connected to the internet. Chances are if you have these two things, there is also a roof over your head and enough food on the table. Let’s take some time to appreciate that. If you are satisfied with who you are and where you are and you realize you have every need met, you start to want to consume less.

There is enough stuff, no need to add more. There are enough clothes, no need to add more. There is enough food on the table, no need to add more. There is enough space in the house, no need to move to a bigger place. There simply is enough. Realizing this hopefully makes you want to consume less. Take control of what you want and you will notice there is enough for everything you need. If you desire a life of less stress and hurry, by spending less, you can work less hours. This way there is more room for what you want most. Time to spend with loved ones and experience traquility for example.

The essence of being financial independent is a stress free, worry free life.

I dream of a world with less stress and hurry and more calm and connection. How nice it would be if we just had a little bit more time to spend together without multitasking in the meantime. Actually taking our time to listen and be there together.

This is the biggest reason I want to be financially free. If I don’t have to worry about my needs being met, I can be my best self. I can take my day off and just spend it as I want. No need to hustle 7 days a week. No need to stress about paying the bills. I often take a complete afternoon or an afternoon and evening to just chill with a loved one and really take the time to be together. This is so valuable, you can’t put a price tag on it.

Be content with what you have

What if you were satisfied with what you have? Find gratitude in the here and now. I try and practice this every now and then. It gives a lot of tranquility and peace of mind. I am where I should be and that is perfectly fine. It gives me time to actually be here and take a breath. It makes me less stressed and more calm. By no means I am perfect or even good at this, I just practice and am aware of it sometimes.

As I look around me while writing this, the house is a mess. There is cat hair everywhere. Laundry to be folded, mess to be cleaned and food to be prepared. Also I am tired of a long day at work and really want to take a nap. I can label this as ‘not good’ or ‘ I failed’ or ‘this should not be happening’. But all of the mess and tasks I am behind on , it’s OK. I do my best and if I don’t finish doing all today then I’ll do it tomorrow. No need to stress about it. So I label it as it is: OK. Try it, it is relaxing.

Declutter and have less to be even more content

Also by realizing you have enough, try and look at what you have in excess. Declutter your house and car. Get rid of the items that you no longer use and want in the house. If the house is clean and all the stuff in it actually has a place to stay, it is easier and faster to clean and organize. This way, there is more time to spend doing the things you value most.

Minimalism

For me, this being tranquil with the situation is the essence of minimalism. Not decluttering or having as little ‘stuff’ as possible. Not to count your possessions. Be content with what you have and have a more tranquil life with more time for important things. Take control over your life by being deliberate with what you spend your time, resources and money on.

I want you to practice together with me in being content with what you have and try and feel being perfectly fine with everything being not perfect. Try and consume less and make time for the things that are most important to you. Spend time with your family and friends.

If you have the energy, try and declutter a part of the house and give every item a home, its own place to stay. All items that don’t belong in your home anymore should leave the house. Do this as often as needed. In the beginning, this will be often. As you practice this should become easier over time. For me, I’ve been decluttering a couple of years now and every time I do a round of decluttering, it’s faster and there is less to declutter. This feels good and you deserve it too!

Do you want to read more content like this? Leo Babauta, creator of ZenHabits is a huge inspiration for me. I highly recommend reading his blog.

Are you getting on this journey with me?

Till next time,

Elske

Elske 1

januari 25, 2021mei 19, 2021Investing, Lifestyle, Money

The 4% rule for financial independence

Do you dream of financial independence? You can achieve it!

Have you ever heard of the FIRE Movement? It started in the USA and is now making its way to Europe. FIRE stands for Financially independent, retire early. People of the FIRE movement work/hustle to earn as much money as they can. They are frugal and spend as little as possible and invest the surplus. This way they can live off of their investments in the future without needing to work. Sounds impossible? It’s really not!

Playing with fire

Return of investment

If you put your money in low-fee investments, the average annual return is about 7-8% a year. Now of course this is on average. Some years it is less and some years it is more. In the FIRE movement the general rule is as follows: If you invest your money and on average you gain 7-8% in returns when you retire you take out of your investments 4% per year. This way you will never run out of money and even account for inflation (your money will grow).

So if you need let’s say 40.000 euro per year, you will need 40.000*25=1.000.000.

(4% of 1 million is 40.000)

One million! That is hard to save up before your actual retirement. This ofcourse depends on what you make and where you live.

But! There is a but! If you happen to only need 20.000 per year, you will need ‘just’ 500.000.

If you need less every month…

I can only speak for myself of course but if I pay of my house entirely, I can almost cut that in half again to live off of. Now i ‘only’ need 250.000. Especially since when I an not working for a boss anymore there is more time for home cooked meals, insourcing, repairing things myself and there is less of the fancy clothes bought just of wearing at the office, less fancy car and less gas because I don’t have to commute every day and I could go on.

All the time in the world to cuddle this cutie pie!

Track your expenses

So I have tracked my expenses to the euro for the past 8(!) years already and I know how much I spent in any given month. So after I pay for the mortgage I usually spend between 600 and 1600 per month on groceries, internet, electricity and everything else combined. That to me is a pretty wide range still, but it’s something I can work with. If I pay off my house in full I will need somewhere between 800-1500 per month to live off.

If I want to retire early I will need:

800 per month = 9600 per year * 25 = 240.000

1500 per month = 18.000 per year * 25 =450.000

Hypothetically I start off with zero, and save 100 per month and have 8% per year return. How long do I need to work to retire?

With 240,000 euro’s I will need to work for 36 years to have saved enough for financial independence. With 450,000 euro’s I will need to work for 45 years to have saved enough to retire. That is 9 years longer!

Now let’s do the same but we save 500 per month starting at zero. With 240,000 euro’s I will need to work 18 years to have saved enough and withfor financial independence 450.000 about 25 years. Sounds a lot better already. And how about 1000 euro’s saved per month? Well 240.000 I need 12 years of work and 450,000 just 17,5 years.

So a person that starts at 20 years old can really retire in their early 30’s if they just live frugal and manage to save a lot. It can be done people! Also if you feel like working ans hustling for 15-25 years straight to then finally do what you love is not what you want? You can do a semi-retirement way before this and work part time and save just a little to non and make your savings more by investing.

What is important to you

Also if you feel like living frugal is not worth it? I really want you to think about what is important in live. Is it to impress people, is it to go to work every day for 45 years straight? Is it to raise your own kids and have some time for your hobbies, is it maybe some fast and expensive car to impress the ladies? Think about it and let the path to financial independence be your own path and not something somebody else expects you to do. Be clear on what makes you happy, what are your goals in life and what you want out of it. Take control of it yourself!

Happy Saving!

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 2