The Importance Of How Far Money Can Take You – Financial Independence

If you want to gain independence and freedom from the daily pressure, all you have to do is be financially independent.

What is this supposed to mean?

Independent means you can survive without working and without borrowing money. You can do this if you have savings, if you have income generated from investments of all sorts and/or if your living expenses are non-existent.

Now check your bank account and see how far your savings can take you. Calculate the amount of money you need for your needs and see how far your existing savings can take you.

It is possible that you are in debt and you need a few years before you are able to pay it all off and before you can finally start your way towards independence. Up to now you didn’t see anything wrong with debt and if you did you were unable to do anything about it. The only thing you can do is pay it back as soon as you can, bit by bit, month by month.

Do you know what independence is? It is freedom.

Freedom to live wherever you want and not where work dictates you to. City people live in the city mostly because that’s where the work is. But the living conditions are not the most favourable and whatever they earn they have to spend mostly on elevated living expenses which is not fair. Especially when you studied to get where you are today and took study loans.

You are free to go after whatever job you want when you are not in debt.

The quickest solution to gaining financial independence and freedom is to get rid of debt. It used to be that many people were confident that if they couldn’t earn a respectable income and they faced financial difficulties then they could rely on their government to step in and take care of them in different forms of unemployment support and pension in older age. It turns out this isn’t always the case anymore and people search for alternative solutions elsewhere.

I can’t stress enough that living below your means and getting rid of debt is a great solution to great financial independence. Earning a big income is another one but that can come later. Right now you can only start in the now and with what you have.

 

In a nutshell, the farther your savings can take you, the better you can do in your financial life.

Two Things You Need To Know Before Moving To The City As A Young Adult

You became an adult! Congratulations! True life only just begins in its full glory and it is nothing like what you’d expected.

Now you can finally spend as much as you’d like, providing you have an income and you can go any place you like. If you want to be an adult without debt it is important that you always treat your life respectfully when it comes to your finances. Moving to a new place can add a lot of expenses and cause you to spend money you don’t even have.

What is your reason for moving to a city? The big city has more opportunities for work and more opportunities for you to bring your dreams to life. Perhaps you are going to the city for studies. Whatever your reason your life to the city starts a long time before you relocate to your new dream location.

You are very excited to be living life on your own terms. Finally! It’s excited isn’t? Do you research the places you’d like to visit, the schools you’d like to attend and the objects you’d like to purchase?

Of course you do! I always made endless lists at that age because time wasn’t moving fast enough for me. Here however I’m going to share with you a couple of things that no one told me when I moved to the city and into responsible adulthood.

  1. If you are still in high school you know that there are three roads to take. That of further education, work and starting a family. It is not necessary to only go for one of them. It is perfectly acceptable to combine two of them or even all three. It is your life. You decide. Whatever your choice that’s perfectly fine. As long as you are kind to yourself and you take your own time to get on with life you’ll always be fine.
  2. Whatever you do in life, if you chose to relocate to a city, always go there with a very specific goal and keep that goal alive in your mind at all times. This goal will help you to keep moving forward even in difficult times. Cities have the tendency to close down on you and make people depressed and disappointed when low income, crashed dreams and unpleasant situations knock at their door. The best way to face everything, especially in a city environment is to always be prepared, physically and psychologically.

Having said that, now it is time to work on your dream and your goal of relocation, because everything has to start somewhere. You’ll need money, time and information to get where you need to go. I’m sure you’ll get there sooner or later. Move at your own pace and things will be just fine!

How to Use a Credit Card

Let me tell you how to use credit cards.

Don’t use them.

Unless of course you are very good with numbers, you have loads of money in the bank and/or your skills are highly needed and you have never had difficulty getting a job.

Otherwise don’t use them. At least not if you can help it. Now, if you are in dire need and you have no other option, by all means go ahead and do it.

I’m here to share with you five tips on how to use credit cards in case you are on low salary and/or in debt.

Tip 1: Use your credit card only to purchase what you need. Go about your life as if you don’t have any money, because in reality you actually don’t. If you did you wouldn’t use borrowed money. In life we have needs and wants. If you have to borrow on a credit card because what you have is not enough to make do with, then it is highly unwise to be adding on your debt by satisfying your wants.

Tip 2: Do not finance a business on a credit card. If you don’t have savings aside to be paying for your needs then don’t start a business just yet. If it is necessary to be using credit card to survive it is not time for business adventures. I say this because if you do start a business while broke you are 90% more likely to fail. You’ll be stressed, with no margin for mistakes and no time to wait till the business starts making profit while your daily expenses run on full speed.

Tip 3: Pay your credit card in full at the end of the month so that you are not charged interest on what you borrowed. If you are struggling financially the last things you need is added interest to your expenses.

Tip 4: If you cannot afford to pay your credit card back in full at the end of the month, then at least try to make payments larger to that of the minimum ones required. If you do so you’ll get rid of your credit card debt sooner. Yes, it is possible to become debt free even on minimum salary!

Tip 5: Whatever you do, if you already started dancing the credit card dance, do not cut up your credit card. You might really want to get rid of your big debt, but if you don’t have big savings in the bank and somewhere secure to sleep at night for a year, keep your credit cards well tact away in a safe place. If any unexpected needs come up and you have nowhere to turn to, then you’ll need your much hated credit card. You never know when you’ll need additional help. You are not immune to needs if you are a human being. Needs such as an unexpected pregnancy, health issues, young children, old parents, vehicle loss, unemployment and whatnot, have the habit of turning up the moment you least expect them.

I know you are only human and you want to buy nice things that will make you happy like every other normal human being.

If you keep in mind however that it is all part of a never-ending consumeristic cycle, a cycle that at the end of the day is not to your benefit, you’ll be very careful as to where you spend your hard earned cash.

Budgeting tips when you have a limited and unstable income

There are three steps to budgeting when you have an unstable income. These are the following:

  1. Know what your basic needs cost
  2. Know when you are next getting paid
  3. Make sure you have that amount of money until you get paid next

If you want to simplify the steps and make it even easier, then you can add a few additional steps.

  1. Define what your basic financial needs are
  2. Define how much they cost
  3. Know when they occur
  4. Make sure you have the money for when they occur
  5. Make sure you have enough money for your basic financial needs until the next time you have income coming in

The number one thing that you need to do when your income is unstable is to have an exact picture of what your basic needs are and what they cost.

When I say basic I mean the absolute necessities.

These are:

Food

Housing

Transport

Bills

Medical expenses

Minimum payments for loans and credit cards

 

The second thing you need to know is when your basic expenses occur.

Minimum payments for loans and credit cards usually occur monthly and at the end of the month. Usually the same applies for housing and bills. A health insurance perhaps can be paid monthly or you could make an arrangement for payment to be made every three or six months. It all depends on the company you are insured with.

Food and transport could be paid on a daily or on an as they come basis.

Make sure you have enough money aside to pay for your financial needs when these come. Adjust the frequency of your budgeting on weekly, biweekly or monthly budgets. It all depends on your circumstances and personal goals.

As long as you have enough money aside for your financial needs until the next time you get paid you’ll always be alright. Here of course you might say, “I don’t know when I’m next getting paid Maria”.

If this is the case, that’s perfectly fine. You might be a freelancer. You might be unemployed and have no income support whatsoever. What you can do in this situation is calculate the amount of money you need for your needs and see how far your existing money can take you.

The one thing that you’ll always have to remember if you are on a limited and unstable income is to only spend money on your needs. Your spending habits can change once your income has become of greater frequency and substance. Until then be careful, aware and above all else ambitious!

Mind your money: Don’t pay other people’s bills

There are times that we want to save money but for some reason not only we don’t save but we are also forced to pay a lot more additionally to what we planned. Especially when we are to meet friends and other people in our social circles.  Often it is our inner need to appear as equals that will make us spend more money or will push us away from the event altogether.   BIG-7-splitting-bill

Photo source: Google

We all know of the ‘I’m not going’ option to save money. The idea of being with our friends to have fun AND not spend much money or any at all, is not widely popular. But why is this?

We feel this invisible pressure that if we spend money then we are considered of a certain approved financial equality. From fear they won’t like us or that we’ll be the ones standing out for all the wrong reasons, we won’t dare to even bring it up and spend money we don’t have for holidays, dinners or a friend’s birthday.

Do you fret the moment where you tell people that you are only going to be paying for what you ordered and that’s that? You shouldn’t feel this way, yet you do. It is awkward and you’d rather didn’t bring it up. Don’t worry, it’s not just you.

It is an unspoken agreement people don’t discuss. Did you know that it’s actually something that can be easily changed? You can practice it right at the moment it happens. At the next social event you attend, such as a birthday dinner where someone majestically clever splits the bill in equal parts and you are asked to pay twice that of which you ordered, because you ordered only a main and a soft drink, bring it up with your sweetest smile. It will be a terrifying moment. State what you ordered and what it costed. At their argument, restate what you ordered and what it costed.

If you plan to be liked by everyone then by all means pay their bill. But if you had enough of such nonsense, state what you ordered, give them the exact amount of money and stick to it whatever their argument. Worst case scenario all people present at this dinner table will disappear from your life. If that happens know that you are lucky. You don’t need leeches in your life. Whatever the case, your friends will remain your friends. Best case scenario you might even make new ones because people deep down respect strong characters.

It is a sensitive subject. If you are respected by others it might lead to friendship. However, if you desire to be liked by the masses make sure you don’t stand out as a stingy or frugal person. Such people are not preferred in wide social circles. It all depends I suppose in what you do for a living, how popular you want to be and what your future life plans are.

One thing is certain. When it comes to your pocket and you are trying to save money, being realistic about finances and standing on your own two feet is a priority. You are the only person you have to answer to. Have integrity, mind your money and the rest will follow.

If you think speaking up your financial mind is difficult or that it is not something that you can change, think of this: Accountants don’t have this financial/social issue and they are the ones dealing with money. They know that every little helps and as a rule they don’t care if people dislike them. They know their numbers and they go to extremes. They are not stingy. They are devoid of those out of nothing social bonds that create the energy of being obliged to someone. They are trained to understand numbers. Numbers that represent money.

Life is all about choices and true friends. Stand firm on your beliefs and sooner or later you’ll be surrounded by like-minded people. Enjoy spending, enjoy saving, enjoy life!

How to Budget: Income and Living Expenses

Whether you are new or old to budgeting, this game of money managing tends to be an art all by itself. If you’ve been budgeting for years then you’re already aware of the basics and have formed your own way of doing things with the odd variation here and there. If you are new then there is no better time than now. To start budgeting requires a strong passion for making do with your money and where your money goes.

According to Wikipedia budget is ‘a financial plan for a defined period of time’. For me budget basically means to have a certain amount of money to accomplish certain things for a certain period of time. The money for example can be 500 euros to live on for a month. That means paying rent, food, all I need to exist on. The time can be a week, two weeks, a month, a number of months, a year.

If you don’t know where to start here is my good old time budgeting recipe.

  1. Know your income
  2. Know what your basic needs are
  3. Know what your basic needs cost in total
  4. Subtract these costs from your income. Your spending money should be less that your income money. (This is widely known as living below your means)

For many people who have used budgets for years it might be straightforward. If it isn’t for you just yet that’s perfectly fine. To do all of the above it is necessary that you develop a habit of tracking your money. Write down on a booklet all your expenses. From your monthly car instalment to the tip you gave at that low cost restaurant. Know where your money goes. All of it, to the last penny.

After your financial needs have been met and there is still money over you can proceed and spend what is left on your wants. Or perhaps you could save what you didn’t spend instead. As long as you keep the costs of your needs and your wants below your income you’ll always have emergency money to fall back on and you’ll stay out of debt.

Once you’ve mastered your income vs living expenses budget then you can move on to further budgets. You’ll realize that once you get the hang of it, every other type of budget is similar.

Thank you for reading my tips, I wish you a beautiful day and a well budgeted life!

City Relocation – Suitcase Basics

If you life has changed in such a way and you have taken the decision to relocate to a city, taking the absolute essentials with you in your luggage is a must. Being the practical person that I am, I put together a few lists for your luggage, especially for city relocation. When you relocate to a city, you need to have the very basics with you, especially if you know absolutely nothing about the place you are moving into.

I have separated the art of moving about in three parts.

  1. On Your Person Basics
  2. The Carry On Basics
  3. The Suitcase Basics

In this article I’m going to share with you the contents of The Suitcase Basics in no particular order:

  1. One change of work clothes
  2. Nice shoes: You might want to go out to dinner, or in a club or a date or a job interview.
  3. Warm pyjamas: Absolute necessity if you move to a cold city.
  4. Sleepers: Essential if you move into a shared housing situation and you don’t want to walk around barefoot especially when the floors might not be that clean.
  5. Bathrobe: Very useful when living in a shared environment, such as renting a room or living in a hostel. It also doubles as an extra warm long cardigan when eating in the kitchen and there is no heating.
  6. Towel for feet
  7. Towel for face
  8. Shampoo
  9. Conditioner
  10. A bar of soap in a soap container: You can wash hands, body and clothes with it. A bar of soap is the best.
  11. Hairdryer/shaving machine: Appearances usually mater when working in the city.
  12. Nail clippers/scissors
  13. Nail file
  14. Toothpaste
  15. Padlock: Sometimes within a temporary dwelling establishment you have to lock your suitcase inside a dedicated cupboard and you need to provide the padlock. Also you might need to lock a storage unit or even a room you might be renting.
  16. One set of nice clothes: You might want to go out on a date, to the theatre, a unique job interview, a make it or break it moment.
  17. Three sets of every day clothes: This can be three dresses. Two skirts, one pair of trousers, two shirts and two tops. If you are a guy two pairs of trousers are essential and three tops.
  18. Two undershirts: One you’ll be wearing while you are travelling. So when you need to change into a clean one you have one in case the second one is still wet from the wash.
  19. Three pairs of socks: For work and every day.
  20. Five sets of underwear
  21. Two bras and three tights: You might in a rush to rip the one tight and the second one might be in need of a wash.

What you can omit from this list:

  1. Nice shoes: If your work shoes are pretty ones or if you don’t have and you are on a tight budget. You are moving to the city with a goal remember? And your first goal is to survive.
  2. Hairdryer/shaving machine: If you have long hair and moving in a cold city then it’s necessary to have dry hair before bed time not to catch a cold. If you are a man you can just use plain soap and disposable razors for shaving.
  3. Toothpaste: You can brush your teeth with plain water the first days or you can borrow from a friend or a flatmate. Just remember to not make it a habit and to go buy your own eventually.
  4. Shampoo: If you don’t have hair you obviously don’t need it. If you have hair but no space in your suitcase, you can wash your hair with just water or perhaps use a little washing liquid or borrow from someone until you buy your own or until you have the money to buy your own.
  5. Conditioner: As above, if you have no hair you obviously don’t need it. You also might be using a 2in1 shampoo or might use special oils for your hair or you might not give a care about hair conditioner. It’s optional.
  6. Five underwear: You can do with less but you’ll have to be hand-washing every day.

I hope my Suitcase Basics list has been of help to you and has given you some great inside as to what to pack now that you are getting ready to move to the big city!

Your Financial Situation – Your Rules

When it comes to finances, do you ever get frustrated when you hear of suggestions, financial ideas and systems that you cannot possibly implement on your personal situation?

If this is the case then it is very possible that you are one of those people that the generic rules don’t apply to because of your personal circumstances. Every individual is unique and it all has to do with factors such as upbringing, financial education, whether you were financially well off as a child and what your overall opinion is with regards to money.

Your financial situation, follow your rules

Whatever your personal circumstances might be, if it frustrates you, then simply remember that banks and credit card companies would never be so wealthy if those very simple systems of wealth creation and savings worked for everyone.

Only last year I heard of David Ramsey, a radio personality who is rather famous in the United States for his advice on people with debt and how to get rid of it. I found him on YouTube the same way I’ve found a number of everyday people like me who share ideas and tricks and who have inspired me during my debt-free journey .

There are many everyday people out there who share frugal tips and saving tricks with the world. Many also share their debt and general financial situation. Some are money gurus, determined to persuade everyone else that making big money is so easy and why don’t we do it already. Whatever the case, these people can inspire you to change your finances and might even give you ideas for an abundant future. At the end of the day however they shouln’t make you model your financial habits after theirs when they are not aware of your unique and personal situation.

Since you already struggle financially, it’s pointless to get stressed because you cannot apply somebody else’s financial rules. Just let it go. Free yourself and don’t compare.

But because I’ve been there and I’ve done that, I know that you’ll try it anyway because you are desperate to change your situation, you want to be a winner and you’ll do anything to improve your finances. In vain you’ll compare yourself to others. Be warn. You’ll only get frustrated, angry and unhappy. When it happens, don’t worry. It’s time to let it go. Stop beating yourself up because you cannot possibly apply rules, programs and approaches that are foreign to what you already know. They weren’t made for you. They were made for others. Maybe for you too, but only when you are ready. Take your time.

Budgeting is a Loose Concept with a Loose Meaning

Budget is not a certain amount of money that you can live on per month or per year. Your needs are needs and however little your salary, it is imperative that your basic survival needs are met.

Budget is the step up after your needs. It is a sort of allowance that you must not exceed in order to make your money last longer, to survive within certain comfort during a certain period of time and to divide them in parts to fit your financial goals. For example when you need to save for various things and it is necessary to allocate a specific amount to each of them. Also toys/activities when it comes to children or presents for social dos, friends and family, etc.

In a previous article we discussed what our needs are. Lets have a brief reminder again as to what these are.

  1. Food
  2. Shelter/safety
  3. Clothes for work and weather
  4. Transport to work
  5. Health and medicine
  6. Phone (Remember that the phone can be a necessity for safety, for you and your family, and also imperative to get a job and/or to maintain it, and to communicate with family members)

 

Once your needs have been met, whatever money is now left you can put it aside for a rainy day or towards something major you’d love to purchase without having to take a loan first. Here is when the actual budgeting begins.  When you allocate your leftover monies for various saving purposes then you start entering the budgeting matrix. The purpose or goal can vary and can be things such as a house, a piece of land, a car, to start a business etc.

Budgeting can help very much with the plain survival. Once the needs have been met, we can then manage our foreseeable needs even better.  The examples given below are only a tiny fraction of what can be done. With creativity and long term habits a lot can be achieved.

Let’s say you covered your needs for this month and you are left with $400, or €400 or £400. It doesn’t matter what the currency is here, only the number itself. There is a whole lot you could do with this money. You could stock on long lasting groceries in your house, groceries that you found on sale very cheap or simply you buy in big amounts because it is costly to make frequent grocery trips. With the little money you have left over you can stock as much as your wallet can take and use over time till you run out. It can be tomato paste or sauce, it can be pasta etc. Meat could easily go under this category if it is possible for you to freeze. If you usually buy 1 kilo of meat a week for your family, but you found down prized meat that your family eats, then you can buy 10 kilos of the said meat, divide it in ten portions and freeze it. Next time you’ll be in need for meat you won’t have to buy it full prize. You will have spent less on your needs and you can save this small amount of money aside.

  1. You can buy in bulk things you use regularly, mostly food. When buying in bulk it is usually cheaper. Non-foods that I can think off right now and is common for my area, is wood for the winter (stove/fire place), linen for the house, underwear, soaps, detergents and the like. Food that can be bought in bulk is flour, lentils, beans, rice etc. They can usually be bought by the sack. Oil in big containers, cheese in similar containers and so on. This way, your basic need of feeding yourself will be less costly and so the money you’ll be able to save will be more.
  2. Next month you’ll be able to save $430 (€, £), instead of only $400 because your needs will cost less because there’ll be more in your pantry. Or you could use the excess money you saved towards wants to not feel less privileged in case you are new to personal financial management, aka savings, and still suffer from the transition. There are many steps to personal finances, budgeting and savings, and it takes a strong mindset. But fear not, everyone can develop financial sense over time, all you need is a personal why and time to adjust. The financial enlightenment will follow.

Some people use budgeting in a very simple yet very productive way. They say their income is $800. Now it is January. By December they want to have $1000 saved to go for a skiing vacation. That gives them 11 months to save this money. Which means they take the amount they require to save ($1000) divided by the time they have (11 months) and end up with the amazing amount of $91 which they have to save each month in order to have acquired their desired savings by December 1st.

They don’t put restrictions as to what they are going to do with the rest of their money and how they are going to distribute it in relations to their needs or overall wants. They want to go on vacation in December and that’s all that matters. They are content to put aside this amount monthly and keep it simple.

Everybody has their own strategy. Use whatever works for you.

 

How to Save Money

There are many ways and tactics to save money, but before you chose one that suits you, you need to understanding a few simple things first.

  1. You need an income.
  2. Your living expenses need to be below your income.
  3. You need some basic understanding of numbers. (Knowledge of simple mathematics. Addition, subtraction, multiplication, percentages, decimals, etc. Lack of money and having to survive from a very young age made me good with numbers. As I had to become able to get by with what I had, numbers became my friends.)

 

When is it that you live below, within or above your income? How do you know that?

YOUR EXPENSES MUST ALWAYS BE LESS THAN YOUR INCOME.

  1. If you have a salary but there is nothing left at the end of the month, then you don’t live below your means. You live within your means.
  2. If you have a salary and also you are using credit cards to support your living, and at the end of the month you have no savings then you live above your means and also you have debt.
  3. For example. You have an income that lets say is 800. Dollars, sterling, euros. It doesn’t matter the currency. But your needs cost you 900. Then you are in debt. Because you need 100 more to survive.
  4. If you income is 800 and your needs cost you 800 then you’ll never be in debt but you won’t save anything either. But because you haven’t saved anything aside for a rainy day, when an emergency happens you won’t be able to withstand the hiccup. You’ll always be worried because you never know when your income source(s) will disappear or a health issue might turn up.
  5. If your income is 800 but your needs 700 then you can save 100.

 

How do you get your expenses to be below your income? How do you manage this?

YOU MUST CLEARLY DEFINE WHAT YOUR WANTS AND WHAT YOUR NEEDS ARE.

  1. Your needs are food, shelter/safety, transport to work, clothes for weather and work, health and medicine.
  2. You need to survive. Therefore your income MUST cover your needs. That’s why you need to understand clearly what your needs and what your wants are first.
  3. If your income doesn’t cover your needs, your basic survival needs, then you have to find ways to increase your income or become creative with your needs and find a way to make ends meet. For instance, you might be able to teach German and your electrician wants to learn German but doesn’t have the money. You teach him and he pays you in services later on. Always be creative with needs.

 

YOU NEED A BUDGET.

  1. Once you have defined what your needs and wants are, then you can start budgeting according to when your income comes in or according to another time sequence that suits you best. Like when you pay your rent/mortgage, when you pay for your school tuition or when you pay your employees.
  2. You definitely need a budget. Preferably a long term budget, a yearly one, a five year one even a lifetime one if you are ready to plan for retirement. You are the only one who can decide on the time length of your budget. It all depends on what your life goals are and your current financial situation. It might be that you need to get out of debt asap, and what is happening in the future is not exactly of importance yet. You need to survive FIRST. Surviving now is a priority. You might be expecting a baby or you might still be in the process of discovering what it is that renders you broke at the end of every month.
  3. You are the one who knows what your goals and personal emergencies are. Your personal circumstances are your own and there is no need to apologise to anyone for them as long as you are financially independent and you don’t owe others money.
  4. Some people have a monthly salary, whereas some get paid weekly, some make odd jobs and get paid on the day or three months later. If you don’t know when your next pay check is going to come in, then you need a budget even the more.

 

 

EXPENSES PER MONTH
Rent/Mortgage  
Utilities  
Food  
Bus/train fare/tickets  
Car gas/petrol money  
Car insurance/parking money  
Work clothes/shoes  
Weather clothes/shoes  
Child/parent/invalid care  
Soap/Deodorant/shampoo/hair clips/shaving gear/haircuts  
Healthcare