nomad4ever

To achieve Financial Independence, you can’t just rely on making a lot of money fast. There is always 2 sides of the balance, so check your expenses too. Over time everyone develops habits, which can be sometimes contra-productive and hinder you on your way to Financial Independence. Habits are hard to beat, so remember some of Wallstreet Journal’s more important financial lessons:

• It’s hard to cut back. Once you’re used to a certain standard of living, it’s difficult to go back. So why not live on less?Don’t spend all your of your paycheck’s money at once, put it away and safe it! You might need it one day.

• You’ll never be satisfied. There’s always something else you’ll want. This is the peer pressure, which society and marketing put on us these days. If you can learn to curb your desires, you’ll reach your financial goals more quickly.

• Borrowings have to be repaid. And with interest. Credit cards are not free money, credit card installments are mainly scams and excessive. So why borrow money for spendings of your consumerism? Learn to live more economically with what you have. If you have to borrow money, use it as a leverage for other investments (to develop a stream of income, which can support you in the future). Thus having ‘good’ debt instead of ‘bad’ debt.

• Fancy cars, homes and expensive clothes aren’t a sign of wealth. They’re merely a sign of spent money. (Or, quite often, borrowed money and a big ego.)

• Your family could prove to be your greatest liability. It’s not just kids: adult children can be a drain on finances, and so can elderly parents who haven’t saved for retirement. Encourage your entire family to engage in sensible personal finance habits and become financially aware and self-sufficient.

• Investors face three enemies: inflation, taxes, and investment costs. Minimize their effects any way you can.
  Adding risky investments can lower risk. Contrarian investments can actually even out your portfolio’s performance over the long run.

• Diversification is a mixed bag. A diversified portfolio can perform well at times, but can be dragged down by poor performers at others. Diversify your portfolio carefully (as per industries, regions, currencies). Not all risks are rewarded. If your diversified portfolio declines in value, you can bet it’ll eventually recover. That’s not always true with individual stocks.

• Most investors fail to beat the market.

• Change is costly. Any time you buy and sell investments, you’re paying a price. Only buy and sell when absolutely necessary. To reduce the risks of individual stocks, hold your good positions, but cut your losses early and re-invest in diversified assets.

• Your best investment strategy is saving. The more money you’ve saved, the more you have to invest.

• Information can give you knowledge advantage and a head-start compared to others – so never stop learning

Suggested further reading:

Your Money or Your Life – Vicki Robin and Joe Dominguez:

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written by Chris