tiistai 4. kesäkuuta 2019

How I track my daily expenses and why should you do it too !?

Tracking your daily expenses is a HUGE thing when you are pursuing for financial independece. It is one of the things that most people just don't do. I did not do it myself, until couple months ago I decided that I need to start doing it, because I spent too much on groceries and I wanted to limit my expenses even more.

Why should you track your expenses?

Many people don't know how much they are spending and what they are buying. It comes as a surprise for people that they spend so much money without even thinking it. Insurances, transportation, clothes, housing, hobbies, subscriptions, food etc. When you actually track all of the money you spend, you will easily see how your financial actions dictate your account balance. That is a crucial part when you are trying to became financially free. Most of the people in western countries save max 15%, but if you are aiming to achieve financial independence, that number should be at leat 50%. It is not even that hard, but you just have to be mindful about you expenses and reduce them whenever possible (without losing your quality of life).

Also, I know people who are even afraid to see their account balance, because they have spent too much money. You might have had the same feeling after a night-out when you wake up with a hangover and -100 $USD on your bank account.

It is easy to track daily expenses with modern technology 

Some people use Excel to track their spending, but it is kind of an old way to do it. I like to use Monefy - an app for tracking your money. The data from the app can be synchronized to your Google Drive, which is a very good thing.

Monefy is simple and easy to use.

Other apps/sites to track your money are for example MINT and Personal Capital. These are good if you want to manage all of your wealth in one place.

perjantai 31. toukokuuta 2019

Why the rich get richer and the poor get poorer?

There is this old saying which is pretty accurate and true in most cases. I never thought about it deeply, until I realized that it is actually very true.

When you grow up, you start learning. You mimic your friends, family members, relatives basically anyone you are interested of. You have your own reality, but most likely, you parents guide you throughout your life. They encourage you to do certain kind of things they believe in. If your parents know nothing about handling money, there is a great change that you will not learn these things anywhere else. If your parents believe that economic markets and investing is for rich frauds, you will not get very appropriate financial education from your family.

Education is highly inheritable. The level of education of the parents of the child defines usually quite precisely how educated the kid will be. The same applies usually for financial education and knowledge. For example, I learned a lot about investing in my home from my mother.

When you learn how to put money working FOR YOU, you can get rich.
10 years of S&P 500 - an example how the money can work for you
It is a cold fact, that the more you make money, the more you can invest, thus enjoy the benefits of a compound interest. And the earlier you start, the better. It is a recipe for riches. That is what rich people do more often than poor people. That is why they get richer and the poor don't get richer.

perjantai 24. toukokuuta 2019

Differences between USA and Nordic Europe - from an economic view

I this post, I want to write about the differences between USA and Nordic Europe from an economical point of view. I have visited in USA and Canada a couple of times. I have also visited in every Nordic country + I live in one of those ;.

This is an interesting topic for me, because I read many blogs that are based in USA. There are some differences when it comes to investing and saving. There is a stereotype that Americans are little bit unconscious about every other country than USA. Well, now I will tell you how are things in Nordic Europe from an economical point of view.

School system

In USA, there are lots of different schools to choose. In Nordic countries, we don't have private schools that much. Schools are generally pretty same, they don't differ that much compared to each other. There are small gaps between top schools and the lowest-performing schools. That is not the case in USA.  Here are some reasons why Finnish education system has done very well compared to many other country. Teachers are also more educated in Finland than in the US.

Because of high taxes, universities are mostly free or very cheap for students in Nordic countries. Students also get pretty good economical support from the government. American students have to take much bigger student loans than us, which is why they usually graduate with great debt. However, Americans usually have bigger wages and not as high tax-rate, so bigger student loans are not necessarily a problem.

High taxes and small differences in income

Public sector is bigger than in USA, thus we pay high taxes and have a good social security.
We have this idea that everyone should be in the same level, and there should be no differences in incomes. Nordic countries are the most equal countries in gender issues. But we also have very small income differences compared to the rest of the world. We have high taxes and a good social security. Public healthcare is almost free, and you have pretty (too) good economical security if you can't find a job.

Top-3 are all Nordic Countries. Canada is close.

Investing and saving

It is much easier to save and invest money in America, because in many states, tax-rates are very low compared to Nordic Countries. Nordic Countries have quite good salaries, but the cost of living and high taxes mean that it is not the easiest thing to save money, especially If you live in some big city  with not-so-big salary.

In Nordic countries, if you make, let's say a 100Keuro a year (111885 USD), you pay more than 50% of you salary to taxes. In addition to high income taxes, there are also high tax-rate for capital gains and dividents (25-35 %). 

keskiviikko 22. toukokuuta 2019

FIRE (Financial Independence, Retire Early) - Why there are haters and doubters

Whenever you open up to someone about investing, financial independence and the possibility to retire early, they get almost offended. Thus, it is not always easy to tell your friends about your plans and actions. FIRE is usually out of their reality. They just don't simply believe it's possible. Haters stem from the insecurities that people have. If someone is doing great, and you are not, it indicates that you are a looser (extreme example).  That creates negative feelings which usually come out as feelings of hate. It is easy to start blaming others, rather than grab the bull by the horns. 

Too many people are living from paycheck to paycheck because they can't handle their money. They are victims of too much consumerism. Most of the people are not used to think outside of the box. They are sheep who follow each other and do as they are expected to do, by society, by parents, by friends, by anybody else. Society has set up certain expectations for you: study, work, pay your taxes, shut up, and die. Most of the people follow these rules and are slaves of rat race almost their whole life. They have become accustomed for it, yet they still secretly want to win the lottery every saturday. 

People are not usually very satisfied with their jobs. Modern work is pretty demanding and consuming because the world is changing so fast. There is more and more uncertainty in the air. 
Back in the days, our grandparents and even parents had very promising career prospects with enough certainty, at least if they had a university degree. Nowadays, even a degree does not guarantee you a safe job for the next 40 years. That makes things very complex and creates lots of uncertainty.

Yet, most of the people are not aware of the power of compound interest and its possibilities, especially if investing is started in your 20s. 30s, 40s or even 50s is not too late, because people live longer and longer nowadays. When my parents were at my age, there were no Internet, so information did not flow as smoothly as it does nowadays across the world. Luckily, because of Internet, more and more people are getting interested in investing and financial markets nowadays. 

I feel that my mission is to inform and educate as many people as possible about the power interesting and compound interest.

My wealth 05/2019

My money is allocated to various different investment options and platforms, but I will present all of them here, as clearly as possible. My currency is Euro!

      #1 rule in investing: Asset allocation, Investing's Only Free Lunch ;)

Cash + money in investments:  172 488e
Student loan: 9393e

Wealth In total: 163 095 Euros, which is 182030 in USD

If I would sell my equity funds + savings contracts, I would have to pay taxes. I am not sure how much in total, but the tax rate for capital gains is 30% (or 34 if it's over 30k) in my country. I assume that if I would sell all my investments for cash right now, I would have to pay maybe 10-15k for taxes. So my net wealth is actually that much lower. 

My student  loan is actually 15593, and I will take it little bit more until it hits 18k. But, I have to pay only 11800 for the 18000, if I graduate early (it seems like  I will). That is our government's policy to get students faster through their studies.

It is not always black and white when you calculate your money and wealth, and it's chanching all the time. I have almost 100 kEur in equity funds, so I will be hit hard when stock  markets rise/fall.

I believe that I will grow my investments in P2P-lending and also slowly in equity funds. P2P-lending is a new way of investing: you borrow money straight to those who need it. There are no middlemen (such as banks) who are taking their piece from the money-cake.

What do you think about my portfolio and its allocation? I would like to hear your thoughts :)

My story: Who am I & am I financially free yet?

Welcome to the blog!

I am a 24 year-old man from Nordic Europe who is interested in becoming financially independent at relatively young age. By that, I mean at least before I'm 40 years old. I have a strong passion in investing, saving and becoming your own boss. My goal is not to stop working when I retire, not at all. Instead, my goal is to have more time and money to do whatever I want. That can be helping other people,  travelling, creating content, mentoring or something like that. I get bored if I have no goals or ambitions, just like everyone else. I just don't want to be slave for work, I want to escape the rat race when it's possible.

Currently, I am finishing my masters degree in IT and Business in a university. I have some work experience from the field also.

I have many people who I look up to. But one guy, who inspired me to start this blog is Jason Fieber (also Divident Mantra -blog). His story is so god damn inspiring, you should definitely check his stuff! He became financially free at 33, in just 5-6 years by saving and investing aggressively. He also had his side hustle, the blog, which generated extra income for him, especially in later years. Right now I am reading his book, 5 Steps To Retire in 5 Years, which is very easy to read and informative.

I have always been quite frugal, which has allowed me to save some money already in my previous life. I have also had some money from my grandparents, which has allowed me to enjoy the benefits of compound interest and it's amazing benefits. My parents have invested the money that I got from my grandparents when I was just a kid. I knew nothing about investing while the money was doing work for me without me even knowing that.

By the age of 18, I was able to access my money, and I started to learn a lot about investing. I remember wathing stock prices in high school via my mobile phone in class. It was all very interesting, and after I read couple of books and read some online articles, I realized that I can have the money working for me, if I learn how to invest correctly. Actually, my parents had already diversified my portfolio, so I did not had to do that much changes, I just started to watch my investments and learned along the way. It was 2013 when I started to learn about investing.

Now, I get it. I get it totally. I was very fortunate to get some money without me even knowing it. I was lucky, luckier than most people in that sense.  I am forever grateful for my grandparents who gave some of their money away, and also to my parents who invested it wisely. I was lucky, I admit it. But believe me, money does not make people happy, although people in western world think it goes that way. Money can give you freedom and opportunities, and that's it. There has been studies that after a certain number of income, the extra income won't make a man any happier. 

Now it's 2019 and I am still learning, because learning never stops and the world (also economy) is changing all the time, more rapidly than ever before in history.

I decided to start writing my blog because I want to inspire other people, share my knowledge and also document my own journey. I want to be accountable and learn from you guys also! I want people to start thinking outside of the box, and I want to show them that investing is very simple if you want it to be!

- Aron Musk