Tag: Financial Independence

How can I maintain my money mojo?

Saving for a huge goal – like a home deposit, or financial independence – or trying to pay off a large debt, like a mortgage or student loans – can seem impossibly enormous at times. All too often I hear people throw up their hands in defeat – ‘I’ll never pay it off anyway, so why bother?’

Quite apart from the psychological benefits of having smaller, more manageable debt even if no debt isn’t an option, there’s one very important reason – interest.

Anita Bell wrote a fantastic book called Your Mortgage: And how to pay it off in five years or less. For the new edition, she changed the title, and I think I can see why. Many people I recommended this book to were initially reluctant, believing they’d never pay their mortgage off in 5 years or less, so why try?

So maybe you can’t pay your home loan off in 5 years. But wouldn’t it be great to pay it off in 15? 25? On an average mortgage, this could save you hundreds of thousands of dollars in interest.

Even if you start out excited and motivated though, it can be difficult to keep this up.

There are a variety of tips and tricks I’ve come across over the years for maintaining my motivation when it comes to savings. I’m a very goal-oriented person, so these may work better for some people than for others, so just give the ones that appeal to you a go:

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How much should I save?

The national personal household savings rate has recently increased from 7.6% to 8.1% – still a far cry from the all-time high of 20.6% in 1973.

We often hear 10% floated around as a savings goal to target. But Jacob Lund Fisker, of Early Retirement Extreme, has a unique perspective on savings.

If you save 10% of your income each year, meaning you spend 90%, at the end of 9 years, you will have amassed the equivalent of 1 whole years’ expenditure.

Effectively, you can buy your own long service leave through this plan – imagine a year off work, all expenses paid, every 9 years!

Let’s take it to the next step though.

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Are you financially independent?

Most of us think we’re financially independent when we’re no longer relying on our parents for income. But as employees, we’re still relying on our employers – to stay in business, to keep us employed, to pay us on time.

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