Hello again, long time no see! So yes, I haven’t posted in a very long time now.
I have been off work, been on holiday (a stay-cation with friends) and have taken part in a redecorating crusade at home. After taking a step back and taking stock of my life so far, I have come to the following conclusions:
I have very limited energy.
I have ‘shiny object syndrome’.
I lack discipline terribly.
I have been listening to many poscasts, youtube videos and audiobooks whilst off and all seem to be saying the same thing. All three things cited above are most likely quite incompatible with the whole building the million pound thing.
So, how do I address this?
This blog, a journey for self-discovery
I am hoping, via this blog to document all the positive steps I am taking towards this very ambitious goal whilst working full time, studying a masters part time and family duties. I feel tired already thinking about it.
I am going to document all the strategies, experiments, tips and tricks that I try along the way if you would like to follow my journey.
Tie your seat-belts, it’s going to be a rough one!
Ps: not only have I now got 0.07% of a million invested, but I am also making some progress with my touch-typing!
The other day on Youtube, I typed ‘Invest £100 a month’. I was trying to find examples or testimonials of people who invested this much a month because, as I have said before, becoming a millionaire £100 at a time would take more than a lifetime.
Well, Youtube didn’t disappoint; I wasn’t prepared for this though! XD
Obviously, if I am breaching copyright I am happy to take this down. However, this video is too good not to share!!! No copyright infringement is intended and all credit of this video goes to Dave Ramsey.
Investing £100 a month, my own – uneducated – calculations
Dave Ramsey here is assuming 12% interest.
I do not pretend to know much about the stock market just now, so I prefer to project using 7% interest. The results I get are very decent and manage to hit my own minimal Financial Independence for retirement. But as the title of the blog suggests, I would be a lot happier with a million pounds.
Investing 15% of income, my calculations
I have just had a small raise of £54 from this month and was wondering how to calculate this amount. I had two options.
Option 1: the first was to just calculate 15% of the new salary.
Option 2: the second was to calculate 15% of the old salary, then add £54 on top of that. That would mean that any raise would get added directly into the investment without tempting me in lifestyle inflation.
In the end, I decided that option 2 would be more in keeping with advice from the FIRE community. Therefore, I entered that particular amount in the calculator, again with 7% interest and 2% inflation.
Again, as you can see, with 7% interest I would probably still not hit a million in 40 years. However, I would end up with a very tidy sum of £742,797,94.
My take away point from crunching the numbers
After playing around with the calculator with some time, I came up with these final, realistic(ish) number.
To retire at the age of 65 with one million pounds, I would have to invest £475 a month (7%, 2% inflation) until then. I better start saving/investing then!
This month I managed to invest £236.74, nearly 50% of that target amount.
So I have some way to go to reach this goal. However, I have hit a milestone this month: I have finally saved up the equivalent of 6 months of salary in my emergency fund!
To conclude: I would love to be more optimistic about the market and have the knowledge that I would need to be able to make similar statements to Dave Ramsey.
One point he did put across powerfully is consistency and discipline are key in this process and that sacrifices can be made to get there.
Now my last question is: after a raise, does my emergency fund need to be topped up to 6 times the new salary?
When I thought of today’s post, I immediately thought of the following song from Billy Ocean. I have included it here for your viewing pleasure. There’s even a saxophone solo! Classic 😉
So I have to admit that I have my fair share of doubts and frustration on this journey. And it’s only just started. I’m (unfortunately) in for the long haul.
I listened to a summary of a book called the ‘Compound Effect’.
By using this affiliate link you are (at no extra cost to you) supporting this blog, thank you!
The concept is simple: small actions day after day are incredibly powerful . However, the frustrating thing is that, at the time, these actions don’t seem to make a big difference.
How this concept works
Let’s take the following example.
I have been learning to touch type. I am still not very accurate and quite slow compared to my usual two hands random typing style and looking at my fingers as I type; I have been used to this for the last ten years. Although in the short term I know I will be frustratingly and painfully slow, the logical step would be to stop looking at my fingers altogether and touch-type this.
In the short term, it is so much easier to look at what I am doing.
In the long term, it makes so much more sense to touch type.
Which option will I choose?
The more I type with the correct fingers, the better I will get, one paragraph at a time…
Applying the compound effect
Budgeting, expenses tracking, saving every month, investing every month: all these actions are hard to apply consistently. They are also painstakingly medium term/ long term actions. Tomorrow is not the day I will see 5 digit figures in my bank account, let alone 7.
However, it is the sum of all those months tracking expenses, budgeting, saving and investing that will in time make the biggest difference (alongside a higher income).
By devising motivating milestones and laser focus, we can celebrate the little victories along the way. 1% more saved every month doesn’t seem like much. But over the course of 2 years you could be saving a quarter of your income.
If you are wondering, in the end I did look whilst typing. However I forced myself to use the correct fingers for the letters every time rather than my own ‘freestyle’.
To conclude: Stay the course! All the things you are doing now matter. One day at a time.
I am officially at 0.05% of my objective (£500). Never know, 0.1% by Christmas?
This morning I logged into my stocks and shares ISA and found out that my £500 deposit was now only worth £498! Where have those £2 gone? Was investing ever a good idea in the first place?
In the short term seeing numbers fluctuate up and down can be scary and daunting; especially given how much hard work is required to save and invest that money in the first place.
It is easy to forget in the midst of this that only a week ago, my investment was worth £506. So how can I avoid that sinking feeling in my stomach when it all seems to go wrong?
Only invest what you could realistically afford to lose.
There is an important reason why most financial gurus out there cite investing as the last step of a financial make over, after saving up 6 months emergency fund.
This money could probably give you a lot of returns. However, it may be years, or even decades before the investment pays off – depending on the market.
Having an emergency fund in an easy access savings account enables you not to depend on selling to get your investment back. And thanks to dear Murphy and his law, it would probably happen when the markets weren’t doing so great.
For peace of mind, only invest what you can afford to lose (even if nobody really wants to ever lose it of course!)
Remember you’re playing the long game
You’ve done your research and in good faith invested in what you thought were decent index funds, ETFs or mutual funds. All the graphs showed a steady increase for the last 5 years (apart from the blip in March). And now your investment portfolio is steadily losing value.
Don’t give up just yet. Have a look at the last 5 years and see how many high and lows the graph shows on a day to day basis and how the average still goes up over the course of the years. One of the huge differences between a fixed interest ISA and an online stocks and shares ISA (like Vanguard for example) is that the daily variations of the market are reflected in the day to day value of the latter.
Don’t get obsessed with the numbers. Just let it do it’s magic in the long term.
Don’t forget, it’s all about learning
I admit that seeing the numbers going down can be unsettling at first and that long term investors seem to have nerves of steel. The good news is: you are becoming one of them!
At the end of the day, people can research for years how to make the best investment, makeup strategies as to how to (hypothetically) time the market and what the best brokerage is… the only way to learn about investing is, unfortunately, to invest!
It is by going out there, out the comfort zone of the ‘what-ifs’ and ‘maybes’ that the most powerful lessons are learned. This initial learning and experience then serve as a solid base for further learning and understanding of the wonderful world of investments, whether you read finance magazines, go through FIRE forums posts or watch Youtube videos on the topic.
Every financial blog post, podcast, Youtube and article that I have read over the last two years have contained this one piece of advice: ‘track your expenses’. This was usually followed by: ‘create a budget’.
I have during different periods of my life definite phases:
the ‘I have no money so what’s the point’ phase
the ‘Not having a budget works for now, why bother’ phase
the ‘I need to track my spending obsessively with loads of charts phase’
the ‘I missed a week, I give up!’ phase
You may recognise yourself in one or more of those. I know that I have cycled through these quite often at different times. However, there was a golden period of 4 months were I did have it down to a tee. That’s what I aspire to go back to.
So what should I have done differently at the time?
Find a really motivating long term vision.
In that golden era, I recorded all my spending and savings and knew exactly where every single £1 went. I saved enough for my yearly car insurance with a sinking fund; I even saved for Christmas presents. However, there was one problem that affected the sustainability of my system: I didn’t have a long-term goal.
At the time I hadn’t even heard of the FIRE movement. I didn’t have any concrete financial aspirations. I had never even considered investing in the market or real estate as an option. So when I saved money, though it did feel good, I didn’t have a clear purpose for it other than spending it later.
Since getting more interested in personal finance, I have discovered the caveat of not saving/investing for retirement. I have learned how inflation very slowly gnaws through savings. As a result, I have found out I cannot afford not to invest in my future.
Know your milestones
As you saw in my last post, there are some resources out there that can give some realistic and broken down milestones for financial goals; whether it is saving 3 months of expenses for an emergency fund, investing enough to cover basic living expenses, or just striving to be debt-free.
Creating a long term plan with realistic and achievable goals is the one vital thing I didn’t do during that 4-month golden phase. As a result, the £10 I saved on my phone bill, the £5 I didn’t spend on drugstore make-up and the £3 I saved by packing my lunch that day just got absorbed by my everyday spending.
What I do in those moments now is take out a calculator to work out how much closer to my goal I would be if I didn’t spend that amount. Even if it’s 0.00012%, I know that it is making a difference. Charting progress on a graph can also help to see this change visually.
Learn the art of delayed gratification
This is by far the most difficult one for me at the moment. I want to see progress and I want to see it now!!!
I know how frustrating it is to see number creep up super slowly. Times where I have set backs and times where I overspend. And times where I think to myself ‘is it really worth it?’
I want to throw in the towel, give up the hard work of going through my accounts everyday, writing everything down, planning every expense and be disciplined in my spending. I just want to live in the moment, ‘Carpe Diem’ and buy that thing I really want.
However, I need to remind myself that though the process takes time, it will be completely worth it one day. I know this because of the inspiring testimonials of people who have done this before me.
To conclude: This is something I am starting to work on from now. I hope to be able to share this journey to inspire and motivate people on their own journey.
For today’s Inspiration Station, I wanted to share here a video from this special family. Amon and Christina are part of the FIRE community (Financial Independence Retire Early) and share in this video different levels of wealth that can be aimed for on the way to financial independence.
It can be so easy to become overwhelmed when setting huge goals or ambitious projects. I love how they have broken it down step by step into more manageable goals.
I highly recommend their channel for inspiration and practical tips in your own financial journey.
To conclude: A great reminder that baby steps all count!
I will definitely be using their stages in planning my own financial journey to the coveted million £££!
They have grabby titles, eye catching thumbnails and bold claims on how they can change your mindset: the motivational video movement seems to grow year upon year on video platforms.
Although my introduction sounded a little sarcastic, I genuinely love watching and listening to this type of content. I am listing here three reasons why I love these videos and will link to some of my favourite in this post.
1) Motivational videos are often well edited and pleasing to the eye.
Okay, so this first reason may not be ‘the best’. But hear me out.
You are taking time out of your day to listen to or watch content on the internet. How much more enjoyable is the experience when the background music is epic, there is a cinematic feel of the editing of film extracts and the true grit demonstrated by some of the people in the video makes you feel you could do the exact same thing?
2) Motivational videos give some good advice
There is many a time when I have sat down to watch one of these videos and thought to myself: “Yes, that is indeed good advice”. Who would disagree with the suggestions of watching less television, eating healthier and becoming more proactive in life?
Most of the advice is sound and can be laid out in a different way so as to make it click. Who knew that a change of perspective could give such Aha! moments. I admit that agreeing with the advice doesn’t mean that I always find myself applying it afterward, a fact which I will explore in another post. In the meantime, I am grateful every day that I have such free access to the internet and the billions of tuns of information that comes with it.
3) Motivational videos are … motivational
I love that feeling after watching a motivational video. Finding that gem, then listening intently to all its content and feeling a sense of accomplishment and change. It feels like research, like an essential component to get or keep going. I am bettering myself. I am learning.
Despite the caveats to this that I will explore in another post, I thoroughly enjoy the rush of purposefulness that follows watching this kind of content.
One of the lectures that I have enjoyed watching in the past is the following:
To conclude: I have heavily focused here on positive aspects of this kind of content that I enjoy, but I am sure that you can tell that there is a darker side to all of this… To be continued… 😉