Category: Investing

So what exactly is investing? For our purposes, to invest refers to the act of buying one of the following things: 1) Stocks, also known as Shares or Equities (all synonymous) 2) Bonds 3) Cash 4) Property The proper term for the aforementioned things is “asset classes“. Investing differs from saving in that investing grows your money at a far higher inflation-beating rate than simply saving money in a bank account. When you save, you have to continuously keep working to replace the money you spend whereas when you invest…

Read More

“How much money do I need to have at my chosen retirement age to be able to live comfortably for the rest of my life without ever having to work again?” The answer to this question is attained by using the 4% rule. A quick summary of the 4% rule is this:  Total yearly expenses ÷ 4% = The amount of money you need for retirement  OR Total yearly expenses x 25 = The amount of money you need for retirement OR Total monthly expenses × 300 = The amount…

Read More

Now for the fun part – the world of investing! The very first payment you make upon receiving your salary should be a payment to yourself. More specifically, a payment to your future self. If you do not do so you will never be financially free. This is a necessary condition for financial independence. Without doing so everything else you do will be in vain. What “paying yourself first” means in practical terms, is that one should invest a minimum of 15 – 20% of their salary every month towards…

Read More

What is an emergency fund? It’s an account containing enough money saved to cover 3-6 months’ living expenses and emergencies. It should be kept in an account that allows immediate withdrawals in the event of an emergency. It’s recommended that you take time to create an emergency fund before you start investing. The reason is that if you start investing before having an emergency fund you might find yourself faced with a situation where some unforeseen emergency arises (eg unexpected loss of employment) that forces you to withdraw money from…

Read More

So how does one achieve Financial Independence? Luckily for us, the entire collection of personal financial theories can be summarised in one short simple sentence: “Spend less than you earn, and invest the difference” So in order to become financially independent, one should: 1) Earn more money 2) Spend less than they earn 3) Invest the difference left over Earn more money “Spend less than you earn, and invest the difference” I think the idea that earning more money is a necessary step towards financial independence is very intuitive and…

Read More