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financial freedom
Daily life, Planning,

Financial freedom – what is it, what is necessary to get it and why I want it

I have covered the topic “financial freedom” in detail in my book “My strategy to retire early” but today I want to go over on a few angles of this topic.

What is financial freedom?

For me, financial freedom means that you attain a certain level of wealth that you don’t need to work for money anymore. This can be achieved in various ways. You can win the lottery. You can inherit more money you’ll ever spend. Maybe even sell the company you’ve built from the ground up and get a nice exit. Or you can do what I am doing: save aggressively, invest wisely, and ultimately build a nest egg that pays you enough money to live off.

If you ask people whether they want to be financially free, most will say yes. However, they lose site of this by putting other things first. Most people get themselves into huge debt for a home and a car (not to mention college debt). Others keep using their credit cards to buy stuff they really don’t need, just to have a spike of excitement (I will not even call it happiness) when they buy it.

If you want to achieve financial freedom, you will have to adopt a whole new set of rules for your life and eventually become a different person. And to truly do and embrace that, you’ll have to assess whether this is a true priority in your life. Otherwise, my experience is that it won’t work. Ask yourself questions like “am I OK with living off of 30% of my salary for 10 years?”. Or “am I strong enough to make my own meals and coffee (instead of going out) every day?”. I can’t tell you exactly what it will take for you to become financially free. However, questions like these will give you a good idea of what it really takes.

What is necessary in order to achieve financial freedom?

Piling up money is probably not the best strategy to attain financial freedom. Technically, you can achieve financial freedom if you pile up enough money to live off of, but this is a very hard way to do it. It is simply extremely difficult to pile enough money to live off of, for the rest of your life. To start off, inflation will remove transactional value of your money every single year. The idea is to save and invest, and make more money on your saved and invested money. Think of it as buying your own salary by pieces, if that makes sense. There is one especially popular chart in the ER community that works magically well:

(taken from familymoneyplan.com)

The chart basically represents a trade-off of how much you save and how many years it will take you to retire. For example, if you save 70% of your salary, it will take you about 10 years to retire. Interestingly enough, this works regardless you make 300k or 30k! The key idea is that you can live off a certain amount and you have to build a nest egg that will pay you that amount every year (ideally you want to grow it a little just to be on the safe side). Of course that this means that two people living off of 300k and 30k will have very different annual spending figures.

I like to think about in a slightly different way. To live comfortably well in Portugal, I will need a net “salary” of about €20k/year (as of April 2017). In order to net 20k from my investments, assuming a 8% return rate and 2% inflation, I would need a portfolio of about €333k. Now, let us consider a more conservative return rate, of 6,5%, and 3,5% average inflation. This means that I will net 3% of my portfolio, every year. To get €20k net per year in these conditions, my portfolio would have to be at €670k. This is, in fact, my first goal.

Having children changes things a little bit. If I were to have one child, I would have to increase my living costs by $1000/mo. With a return rate of 6,5%, and a 3,5% inflation rate, I would need a little bit more than one million bucks to net 32k/year.

Why do I want to achieve financial freedom?

If you follow my blog of you have read my book, you know that I want to retire because I have the Chronic fatigue syndrome and sometimes I just drag myself to the office. But even if I were absolutely healthy, I think I would trying to retire as well.

Whether you want to achieve financial freedom is up to you. Look deep inside and find out if you really wanna do that. Even if you already know you want to achieve financial freedom, looking deep down for the actual reasons will give you strength to fight. And boy, this is one heck of a hard road!

How do I imagine my financial freedom?

Just because I plan to retire early it doesn’t mean I will stop working. As I said, what I really want is to be able to do whatever I want, whenever I want. Maybe surprisingly for some, I love to work. In fact, most of my time is spent working on stuff I love. If you didn’t achieve financial freedom yet, you won’t be able to work on what you want. You will have to work for money. This may come in the form of a boss or your own business, but there are many things you must do even when you don’t feel like it. And that is the whole point of financial freedom. Here are some examples of stuff I will do after I achieve financial freedom:

  • Blogging. I’ve always loved to write, but blogging is a lot more than writing. If we consider the tasks underlying a blog, writing is one of the smallest tasks of a blogger. Content creation involves much more than simply writing. But content creation is not even the bulk of one blogger’s tasks. I want From cents to retirement to become a reference for personal finances and early retirement. In order to turn a blog into a reference, you need to work very hard.
  • Going into nature way more often. I love to hike (especially in not so popular wood trails), find hidden lakes and waterfalls and what not.
  • Working out more often. Between 2010 and 2012, I used to workout 3 times a week every week. My shape was amazing. I ended up giving up of that due to lack of time.
  • Write more books. I wish I had the time to write two books every year.
  • Give back to the community. I plan to help those in need, especially those with CFS.
  • Coaching other people. I have a few clients right now (I have a partner who is generous enough to send some clients over), and I coach a few friends. However, I would like to coach and help people on a much more broader scale.

If you liked this post, then I recommend you to check out the resources down below.

Ben Davis

More resources on financial freedom:

how to save money
Daily life, Planning, Tricks,

How to save money every month: saving tips you can use right now!

The main question I go through with my clients and those I advise is how to save money. If you want to retire early, you must save money. But how? Although this is a simple question, only the right actions will do the trick.

I actually answered this question on Quora in December 2016, which ended up getting almost 100k views. This post is the result of a huge compilation of savings tips and tricks to save money that I’ve been using over the years. You may find that some of these tips don’t work for you. That is fine. Simply try to apply those that do. Without further due, let us get to it…

How to save money: 20 saving tips you can use right away to save money

The first thing you have to do when asking yourself how to save money is what is actually how much is realistic to save. In my case, I make about $2400/mo net, so I decided that I had to save at least $1600/mo. I will not say that each and every one of you can do this. Yet, most of these tips are applicable by almost everyone.

1 – Pay yourself first

Again, to start saving money, you must first define what is reasonable to save. You can certainly live off of 30%, as I do, but you will need to be an avid fan of minimalism. On top of that, you need to have a burning desire to save money. In my own case, I want to retire because I have CFS, which may prevent me from working.

If you figured this out, set up a savings account if you don’t have one yet. Then, simply transfer your savings as soon as your salary clears on your account, every month. I often recommend people to set up automatic transfers because they tend to work way better than manual transfers.

Buy assets on credit and try to aggressively pay it back

What really motivated me to save money was to pay back credit. Going to the bank and paying down my mortgages. Paying off the credit card debt I used to advertise my book “My strategy to retire early“.

Maybe you’re hypersensitive to credit. If that is the case, don’t use it.

Also, when the dividends of my stocks clear, I buy more stocks, so I never get to have the chance to spend the dividends.

Note that I do not advise people to use credit unless they really know what they are doing!

2 – Withdraw money from your account for the entire week

It is much easier to use your card to pay for your expenses, so you tend to spend more that way. If you get cash and use it, you tend to stick to it in a much more powerful way than using your cards. I’ve noticed that this greatly helped me. Now, if we’re not talking about great amounts of money, I actually think you should withdraw money for the entire month. Just try it out and see whether you do better.

3 – Record every single transaction you make

You may think this is contradictory with tip #2. It is not! Although it would be easy to record every transaction if you used your cards, you’d tend to spend more. Cash out and use apps for smartphones. Just google up one, there are plenty. Use the one you like the most. The biggest advantage of doing this is that you realize where you spend your money – and maybe change your spending habits for the better!

What happened with me is that I became so disciplined about spending money that I stopped recording where I spent money, with the same results. However, I do understand the value I gained by having done this!

4 – Shop on a budget

I entitle myself to spend a given amount of dollars at the supermarket. In order to do that, I always write down what I need before actually going there. And most importantly, I stick to whatever is on the list!

I follow pretty much the same diet all year long, I know what I need straight away. Plus, I know the prices I normally buy my groceries at, so I can go to a different supermarket and buy only if the price is lower.

5 – I take advantage of the intrinsic value of my money, by buying in bulk

I usually target high expiration date items, that can come in large containers. Rice is one example. I typically buy the best organic rice at a lower price than the average rice brand. This is only possible because I buy 20-50KGs (about 40-200lbs) at a time. Another example of what I buy in bulk is toothpaste.

I also buy in bulk whenever an occasional sale of a product I already use comes up. Note that I didn’t say “whenever a sale comes up”. It must be a sale of a product I already use so I know that I am not buying just because it is cheaper than usual (which can, in fact, mean more expensive than the products I usually use).

6 – Avoid big sales and Black Fridays

Right. Take advantage of sales that feature the products you already use and trust but avoid the big ones. Why? Because in big sales like black Friday you are compelled to buy products you don’t really need. The only back Fridays I take advantage of are stock market black Friday. 🙂

7 – Turn off the television and the computer at night

You will save on the electricity bill. You’ll be less exposed to ads that compel viewers to buy stuff they don’t necessary need. I personally got rid of television for good about 8 years ago. Feeling bored? Read great books instead. Go online and learn new skills. Meditate (Affiliate link).

8 – Read on how to save money

Yes, posts like this very same one. But this is not necessary the end of it. Look for more articles. Read books that will help you even further. Browe the internet for more articles. Learn from people who did it successfully in the past.

If you are self-employed, I definitely recommend you to check this and this sources.

9. Practice minimalism: stop buying and start selling

minimalism how to save money

As I am currently in the process of moving to a new home, I wanted to make sure that I start off with the right foot. To accomplish that, I will write down a list of items I want to have in my home and stick to it. In addition, I will use the 1:1 item rule: to bring home another item, I have to get rid of one I already have.

People don’t realize it, but having many things is a lot of stress. Try to keep the minimum. Get rid of what you don’t need, by selling it online or market fleas. You’ll save money and make money. Win-win.

10 – Buy used, not new

I buy a lot of books (btw, as a 10.1 tip, aim for free books whenever you can!). The vast majority of them are used because I get a huge discount and yet, they tend to be in very good condition. Whatever you can buy used instead of new makes you saving money and help the planet.

Books are only one example. Another example would be a car, which I would never buy new. It depreciates too fast on my balance sheet. 🙂

11 – Negociate your mortgage

Having two mortgages myself, and a third one on the way, I feel competent to talk about this. Go to the bank and negotiate your mortgage! I do that every 4-6 months, or sooner if I feel that I have new arguments to negotiate. For instance, if I rent out another of my units, I try to negotiate my mortgage down. In fact, if you think about it, every month that goes by, the more creditworthy you get (assuming you don’t default)!

Your mortgage is probably your number one expense so you must be addressing it if you want to save money! Don’t be afraid of hearing the bank telling you no. That is for granted.

12 – Quit smoking. Please!

I cringe whenever I hear someone telling me they need to save money while they smoke a cigarette. Please, do me and yourself a favor: stop smoking! This is one of the best ways to start saving money because if you’re a smoker you are certainly spending lots of money on cigarettes. And smoking is SO expensive!

On top of that, it will largely benefit your health. Smoking has been shown to cause major problems to your health.

13 – Be a coupon and gift card savvy grinder

This is really for those who master the science of how to save money. So, coupons are a great way to save money. However, as I said in tip #6, you should not buy something just because it is on sale. Same thing with coupons if you’re really looking how to save money. Search for coupons everywhere and use them wisely. Don’t use coupons for products you don’t buy already. Search for coupons by typing the names of the products you already buy. Ask your favorite grocery whether they have coupons.

14 – Don’t change your cell phone

We live in a society which excludes us if we don’t have the latest gadget. Don’t go with that trend. Changing your smartphone every few years is fine, but buying the latest one all the time is certainly not a sustainable idea.

Stick to your gadgets until they don’t work anymore. Remember your excitement (if you were) when you bought them. Remember all the good things you’ve done with them. Change them when they stop working.

15 – Change to LEDs

My father comes from a very humble family. He greatly appreciates what he has right now because his family didn’t even have enough to eat. Yet, he remains super frugal and moderate. He used to float around the house turning lights off and complaining with me and my brother when we were younger. We were not particularly good at turning the lights off, you see. 🙂

Two years ago, I convinced my father to change to LEDs. I knew he was the best guinea pig I had to test whether it worked. It took me one electricity bill to become a devoted fan of LEDs. They truly work, and their price is coming down quickly, as the technology evolves. Do yourself an experiment at your own home!

16 – Pack food for the day

Start saving money is easy if you write down your monthly expenses and address the biggest ones. As I said in tip #11, your mortgage should be addressed first because I am sure it is one of the main expenses you have, if not the biggest! Food comes right after, I am sure. This is especially true if you go out for lunch. Going out for lunch every day of the week for 10 years translates into about $40k, if you spend an average of $15 per lunch.

Seriously, pack your meals. Grab what is left of yesterday’s dinner and take it to work, so you save on lunch. Make a healthy sandwich or salad. Won’t take you much time but will certainly alleviate your wallet!

17 – Downsize

Bigger homes mean more expenses, it is that simple. Downsizing is such a great way to save money! All too often, smaller homes mean also cheaper acquisition costs. If you downsize and you’ve got a mortgage, you’ll pay less for your mortgage. If you paid your home off already, you can take the extra cash and invest it. In general, you’d save on maintenance and utility bills, at the same time you create more income. Win-win!

18 – Write a “how to save money” list

This can be way more effective than it looks like. If you write down the list (and actually read it every now and then) you’ll remember what you should be doing! On the back of the list, write down the prices of your most common groceries. Next time you buy them, you’ll have good comparison terms.

19 – If you do use credit cards, choose those with cash back

This one is pretty self-explanatory. Although it really comes in the first pages of many books on how to save money, not many people do this. Choose credit cards with cash back and benefits, if you really have to use them. A reason to use credit cards is to get lower interest rates on your mortgage, as banks often do that when you get credit cards from them. Use all the benefits of credit cards – call their customer service and have them sending you the entire list of benefits!

20 – Cancel unused memberships and negotiate bank fees

I have made this mistake myself: I went on for a few good months with a club membership I never used. That was $40/mo, so we are not exactly talking about peanuts here. When I first started to think how to save money, this was one of the immediate things I changed. I have no memberships now. I pay for my gym “membership” on a monthly basis (which is 7% more expensive). As I don’t workout in August, it ends up being equally expensive – although I only pay for it if I am really using it!

Bank fees are another major component of how to save money effectively. Have your bank statements scrutinized every month and make sure you have no unknown fees popping up. If you do, question the bank right way – and don’t forget about it!

my sunday best
Daily life, Health,

My Sunday best

my sunday best

If you found this post because of music lyrics, an idiom or any other reason, such as a book, this may disappoint you… this post was written because of a much better reason. You see, I want to retire early (in my 30s), and this post is all about early retirement. Get your espresso, chill out and enjoy the post.

Yesterday was Sunday, and Sundays are super special for me. These are the days when I truly experience freedom. I think of Early retirement and financial freedom as a lotta Sundays in a row, actually. 🙂

So here’s what my typical Sunday involves:

  • A properly cooked breakfast. I typically have a few eggs in the morning, with buttered toast and salad:sunday breakfast
    (this picture is from a hotel breakfast, but you get the idea).
  • I meditate for a long while. I typically meditate for about 5 minutes a day, but on Sundays, I extend that to 15-30 minutes, at least.

meditation

  • I try to watch a movie or a TV show episode (I love Shark Tank, for example).
  • If the weather’s good, I can also hike. 🙂
  • I go out for lunch (I LOVE Italian):

italian food

  • Meet up with friends for an espresso and some chilling:

meet up with friends

  • Look up investments (I typically browse the internet for Real Estate deals and stocks).
  • Write blog posts, which takes a lotta time. Sunday is definitely the best day to write!
  • I have relaxing 30-min showers with essential oils.
  • I go for a run, at the end of the afternoon (if it is still warm), when the sun starts to set.

jog sun sets

  • Lastly, I read. I read a lot. 🙂

Some of these things are things I can only do on Sundays. It is funny that the expression “my Sunday best” which usually pertains to clothing is now becoming obsolete because fewer people go to the church (I am Christian but I usually don’t go to Church).

From April 1st, I will be starting to follow a variant of the Paleo diet, which I already presented before, and a completely new routine. I will post a truly comprehensive post on that soon, and it will be an aggregation of various “my Sunday best” routines, although with extremely fine instructions on what to eat, what to drink, when to sleep and a lot more.

What do you do to enjoy on Sundays? Let me know in the comments down below.

Best,

Ben

Daily life, Planning,

Why is it awesome to live and retire in Portugal: a comprehensive guide

living retiring portugal costs

My dear dudes,

As you know, I am canceling my contract in Germany in May to move to Portugal for good. There is a ton of reasons to do that, and I’d like to share them with you. In fact, I wanted to do this a long time ago, but a combination of expensive renovation costs for RP#3 and the fear of living without a salary for a while made me put my decision off for a few months. Not it’s settled! I am canceling my contract and moving to Portugal for good.

Daily life, Planning, Real Estate,

A big mistake: the danger of underestimating…

danger underestimating mistake money miscalculation misestimate

Holding a PhD on Applied Mathematics, being type A personality and a little OCD, I typically estimate things very accurately and thoroughly (sometimes too much!). Turns out that I messed up big this time.

I am very proud of RP#3 – it will generate a 50% Cash on Cash return and I will add 6 units to my portfolio. This would not be very surprising if we weren’t talking about a <50k property…

When I bought it, I knew right away that I would have to spend serious dollars towards renovating it. However, I did underestimate what I was going to spend…

Daily life,

Because its all about enjoying the road!

Dear readers,

You guys know that I preach frugality a lot. But I’ve also told you many times that it is all about enjoying the road. Money is not the end goal. Many people would trade money for meaning relationships, health, experiences, etc. If you’re working towards an early retirement, you have to learn how to enjoy the road as well as you meet your expectations and goals, while being frugal.

While this may sound difficult or counter intuitive, I bring you a nice example. I recently flew from Lisbon to Frankfurt in business class, as I was able to upgrade my coach ticket with mile points. I enjoyed the whole thing pretty much, and I would like to share it with you!

In Lisbon, the first / business class lounge is pretty much crazy. High quality espresso and all sorts of sandwiches, fruit, all newspapers and magazines, you name it. There is tons of space too. The chairs are super comfy:

Lisbon first class lounge

Lisbon first class lounge

Daily life,

Going mad over 20 bucks

Hi guys,

I am traveling between Germany and Portugal this week. Since I got a much cheaper flight route from central Germany (instead of northern Germany, where I usually flight from), I decided to take that route for what I needed to stay at an hotel (altogether I probably saved 200 bucks, if not more). On top of that, my employer pays for hotel stays in cases like this, so it is kinda of a win-win.

However, they don’t pay for beverages from the mini-bar. I happened to be very thirsty at some point, so I decided to go for a water bottle from the mini-bar. I knew they are usually more expensive than anywhere else, but I was thirsty and could not buy it elsewhere. When I checked out, to by biggest surprise, it cost about 5 bucks! Yes, the price was probably there all along, but I never imagined a water bottle would cost so much. This left me angry, but the story doesn’t end here.

Daily life, Planning,

A new challenge – reading 100 books in 10 months

My dear dudes,

I have suggested this before, but I haven’t really made a decision till now. But now, it is time to say that, in 2017, I will be talking one year off. The decision is made and I am not coming back. I feel way too tired and I feel that I need to rest, and work on personal projects that I really get a kick out of, including this blog and a few other projects.

In October/November, I will lay down an entire plan for the year, and how I expect to cover my expenses and grow my net worth further (I will try to add another €50k to my net worth). Right now, I want to tell you about a smaller challenge within this mega news: I will be reading, reviewing and commenting on 100 books in 10 months (this is 10 books a month).

If you haven’t noticed, I am already revitalizing the “Books” section, introducing new books and taking it to the next level. The section will catch god damn fire, so stay tuned for more!

If you have any suggestions that are NOT in here, shoot me a message.

Thanks for all the support (especially the messages sent from the “contact” form of the blog). I am still catching up on answering them all!

Ben