Achieving financial freedom

This is a term that gets thrown around a lot in financial blogs, there’s no doubt that on the surface it sounds great and something that we all want to be a part of, but what does it actually mean?

financial-freedom

It’s a common misconception that to have financial freedom, you have to be the next Bill Gates. You might be surprised to know that an income of €30,250 is in the top 1% worldwide. Let that sink in for a minute.

So next time you are giving yourself a hard time for not being a billionaire, think about how you can use your existing income to set and achieve your financial goals. Below, we’ve outlined 3 example goals that will help you define what Financial Freedom means to you and how to achieve it:

1. Short term goal (3-5 years) – Using your investments to pay for that big purchase

It’s important to note firstly that you should always take a long term view with your investments, looking at a minimum of 3 years to let your money grow and for the compound interest to start to kick in. Maybe you have your eye on that new Jaguar that’s currently in production and will be released in a few years? Maybe you want to pay a nice chunk off your mortgage before your next big birthday? Or maybe you are planning to pop the question to your significant other? Whatever it is, write down your goal on a piece of paper and keep it in mind to motivate you along the way.

big purchase

2. Medium term goal (5-20 years+) – Earn the same monthly amount from your investments as you do from your work

For most this sounds like a fairy tale, can you really earn the same amount of money from your investments as you do from your work? The answer is a resounding yes. All it takes is dedication, persistence and a forward looking plan. We will talk more about how this is possible in our upcoming ‘The miracle that is compound interest’ post.

3. Long term goal (20+ years) – Having the option to work

You might love your work, and if you do then you probably have no intention of giving it up any time soon despite how much you earn from your investments. But what would be nice is if you could have the option to work or pack it all in if they’ve gone one step too far in the office and removed the coffee machine.

Stick to it

Once you set these goals, you absolutely must stick to them because you will no doubt be tempted to change them a few months down the line to make them a bit easier (It’s human nature). So, write them down and do whatever it takes to make sure they are set in stone, stick them on your mirror and tell your close ones about them.

Good luck and let us know how you get on with your goal setting at [email protected], we would love to hear from you!

No money to invest? Read our top 3 money saving tips

How many times have you heard someone say, ‘I want to start investing, but I don’t have any money’? For anyone new to investing this is a common psychological barrier that must be overcome to get started on your journey to financial freedom. We’ve put together our top 3 money saving tips to help your take that first step:

Piggy-bank-Bondora

1. Pay yourself first

Think about the first thing you do once you get paid each month, do you go out for a lavish meal? Pay your bills? Perhaps a spontaneous purchase of an ice sculpture?

The day you get paid, you should set aside a minimum of 10% of your net salary to pay yourself and use the funds for investments, then you can focus on your bills and everything else.

Once you get in to the habit of doing this, you may find that you choose to up your monthly percentage that you invest to 20%, even 30%, because it can be extremely motivating once you start to see your money work for you and generate interest.

2. Emergency fund

This is an interesting one and will be different for everyone depending on your circumstances. Some people may find it enough to have one month’s salary locked away in a savings account for a rainy day, others who are super cautious may have as much as 12 months’ salary saved.

Let me ask you this, when have you ever needed funds totaling your annual salary at short notice? Sure, your car might stop working or you might have an unexpected leak on your roof that needs repair, but think to yourself if the amount you have saved in your emergency fund is realistically necessary.

3. Be frugal

Now, we’re not saying you have to move in to your car, but how much do you really need that vente caramel cinnamon dolce latte with marshmallows and chocolate sprinkles from Starbucks every morning?

€3 every working day on a coffee works out to €60 per month, or €720 per year! Instead of going cold turkey from your morning caffeine, try making a coffee at home and take it in a thermo flask so it’s still steaming hot by the time you get to your desk. By cutting back on regular purchases like this you will see your bank balance build up in no time.

Bringing it all together

So to sum up our top money savings tips; set yourself a percentage goal each month for paying yourself first, review how realistic your emergency fund is and give Starbucks a miss. Take control of your finances and reap the rewards.

P.S. With Bondora you can invest a minimum of €1, so get started here today.