How I Got Started With
Financial Independence 

Everyone starts for their own reason. For me, my journey with personal finance started because my employment situation changed in 2017, my salary was cut in half. For the first time I really had to think seriously about my financial situation but also about what I wanted and why. It was time to take a serious look at my income, my values and my life goals – I had to start with the basics of defining my financial goals.

Setting Financial Goals

To get started, I set my sights on the most obvious and simple benefit – paying off my mortgage early. In 2012, I got a variable rate, Loan To Value > 80% from AIB. I played around with a mortgage over-payment calculator and realised how much of a long-term saving I would make if I could start making even a small over-payment on the mortgage. Each over-payment would also very slightly reduce my monthly outgoings as each payment off the principal amount reduces the monthly repayment.

Then I started to get more interested in subject of money, something we’re often too embarrassed to discuss in Ireland. There are plenty of books on the topic, so I started reading more. I read about the importance of living within your means, frugal lifestyles, DIY, meal planning and eventually came to the broader topics under the umbrella of personal finance.

There’s an overwhelming amount of “stuff” to read when you get started in personal finance and setting your goals for financial freedom. The fact is, there’s a lot of very good, free advice available. My first challenge, and it’s an on-going and ever changing challenge was where to start? So I started with the simple aim of defining my financial goals.

Step 1 - Defining Your Financial Goals

Defining goals is critical. There’s a really good quote that says “You can’t hit a target you can’t see. Of course, defining your financial goals doesn’t mean simply deciding on the amount of income do you want every month. It is a much broader question and its scope includes your current age, education level, ambition, family situation, health, lifestyle, personal values and a very clear understanding of what makes you happy.

Step 2 - Take Stock of Your Expenditure

If you have decided that you want financial freedom then your first step is to look at your spending? And I mean the cold, hard math of all of your expenditure. How much do you spend every month? Remember, what gets measured get managed. I have now begun recording every single thing I spend money on in a spreadsheet in Google Docs. But that’s a bit too extreme for now – let’s start with something more achievable that will give you a good overview. I started with a simple list.

My Monthly Expenses
Fitness Classes100
Electricity (Based on Annual Average)38
Gas (Based on Annual Average)40.00
Home Insurance25.00
Gym Membership29.17
Property Tax18.75
Car Tax23.34
Car Insurance71.67
Phone Credit20.00
Life Assurance9.54
Current Monthly Income
Monthly Salary€1,234.00
The Difference
 Monthly Expenses€1,111.39
 Monthly Income€2,123
Difference 1,122.61
Going by those calculations financial freedom is not inconceivable. My single biggest expense every month is the mortgage which I have already started to overpay. Aside from that, I am using my home as an asset to generate tax-free income under the rent a room scheme. As of now, I have taken the first few tentative steps towards financial freedom. Speaking of steps, have you heard of Dave Ramsey?

I’m not a big fan of the show. It’s far too American and preachy for me. Most people who call him up ask the same questions and really just want to talk to someone and get reassurance that they are doing the right thing. However, some of the advice he gives is solid. His strategy is  simple. He sets out a series of what he calls “baby steps” to clear debt and generate wealth.

Summary of the Dave Ramsey Baby Steps
  1. $1,000 to start an Emergency Fund
  2. Pay off all debt using the Debt Snowball (I don’t really agree with the debt snowball, because – maths)
  3. 3 to 6 months of expenses in savings
  4. Invest 15% of household income into Roth IRAs and pre-tax retirement
  5. College funding for children
  6. Pay off home early
  7. Build wealth and give!

How do I Compare to Dave Ramsey Right now?

Bear in mind that America is a very different place to Ireland and we simply don’t have access to some of the financial products and instruments that they do. But if I was applying these to my life – how am I doing?

  1. I have €10,000 in a savings account.
  2. The only debt I have is my mortgage and an interest free personal loan of 3000 from the Bank of Dad. All other debts are clear.
  3. I have calculated my monthly expenses above and have three months worth in the credit union.
  4. There is a very small pension provided by my job and I am looking into finding the Irish equivalent to an Roth IRA (yes that acronym means something VERY different here in Ireland).
  5. I have no kids and don’t ever plan on having them – ever. (I’m not a fan of kids)
  6. Currently managing to overpay mortgage every month but considering investing this money instead.
  7. Started investing in platforms like Degiro, Mintos and Swaper. Adding value to my house. Aiming to save for a deposit on an investment property. Being as generous as I can be with my friends and family.

Step 3 - Write Your Own Realistic Financial Goals

Remember, everyone will be at a different stage. I am lucky to not have any consumer debt (I never liked credit cards). This is what I have written for myself at the time of publishing this article.

  1. Pay off mortgage early
  2. Reduce expenditure by adopting a minimalist frugal lifestyle
  3. Save a deposit for an investment property
  4. Purchase an investment property to increase income
  5. Get to an income level where I can afford health insurance
  6. Continue to invest in peer-to-peer lending platforms and stocks/shares

I believe that if I can get my income from passive sources to 2,000 per month and retain my teaching contract over 6 months then I will achieve a level of financial freedom I am happy with. Remember, goals change. They should be regularly reviewed as your financial and life situations evolve. 

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