Make your financial plan and take consistent action steps. Stick with the plan to realize your financial goals. A quitter never wins and a winner never quits!
Before investing any money simplify your lifestyle. Check where you can cut expenses (Internet, phone costs, insurances). Invest the difference between your monthly income and expenses each month.
Keep reinvesting the difference between your monthly income and expenses until you become financially free. Invest your money in all the three different investment buckets: security bucket, growth bucket and dream bucket.
The security bucket is the bucket which contains all secure investments. The secure investments have a secure return, between 5 – 7%. The low return percentages between 5 – 7% mean lower risk of the security.
Determine the amount you want to invest in the security bucket. Think about total cash amount of two to six monthly expenses (home, insurances and all other monthly expenses).
For instance if you earn a net amount of EUR 2.500, your security bucket for 2 months is EUR 5.000 (2 x EUR 2.500) and for 6 months is EUR 15.000 (6 x EUR 2.500). Your security bucket should be between EUR 5.000 and EUR 15.000.
A person who has security as core value has a higher amount in the security bucket than a person who does not has security as core value. In order to determine the amount in your security bucket ask yourself the following powerful questions:
‘If I do not have any income tomorrow what is the amount I need to cover my monthly expenses? How long does it take me to get a new job or start a new business?’
If it takes you one month to get a new job than your security bucket is the amount of one monthly expenses. If it takes you six months to get a new job than your security bucket is the total amount of six month expenses.
The second investment bucket is the growth bucket. Investments in this bucket have bigger return and bigger risk.
Important investment rule
Always start with the first security bucket. People lost all their investment money because they did not allocate their assets.
This means that they did not invest their money in the different investment buckets (security, growth and dream bucket). That’s why always invest a percentage of your money in the security bucket first.
Write down your financial goals (how much money you want to invest each month). Determine the percentage you want to invest in the different buckets based on your security core value. If your security core value is high use a minimum percentage of 40%. If your security core value is low you can use a lower percentage for instance 30%.
Define your financial goal: Make your decision and make it happen. Invest an amount every month for instance 10% of your income in the financial freedom account.
Divide your financial freedom account (FFA account) in three investments categories (security, growth and dream bucket). Invest 40% of the monthly investment amount in the security bucket and invest 60% of the investment amount in the growth and dream bucket.
Example of monthly investment amount of EUR 250 to FFA account (10% of monthly income)
- Investment in security bucket is EUR 100 (40% of EUR 250)
- Investment in growth bucket is EUR 75 (30% of EUR 250)
- Investment in dream bucket is EUR 75 (30% of EUR 250)
Example of monthly investment amount of EUR 500 to FFA account (10% of monthly income)
- Investment in security bucket is EUR 200 (40% of EUR 500)
- Investment in growth bucket is EUR 150 (30% of EUR 500)
- Investment in dream bucket is EUR 150 (30% of EUR 500)
Important investment rule
If you have a good return in the growth or dream bucket, no matter what don’t change the percentage of the security bucket. Always stick to the percentage of the security bucket. The security bucket is the income you need to cover primarily expenses ‘in case’ you lose your job or business.
Keep reinvesting the difference between your income and monthly expenses until you become financially free. Financially free means that your income from investments cover your lifestyle and everything you want.
Invest and keep reinvesting! You can do it! For your financial success!