Ideal Lifestyle 🏞
Quote Of The Week 🖋
I came across this quote from author James Clear around this time last year and it stopped me in my tracks and allowed me to review what I wanted to achieve in my life.
From a young age, we are indoctrinated to believe that we have to work for 40 years of our life to deserve retirement. We are lulled into a rat race to spend the best years of our life focusing on amassing a retirement pot to enjoy the twilight years.
I realised that it doesn’t have to be that way. Our ideal lifestyles can be achieved in a few years compared to a few decades if we focus on peace and control of our time over material posessesions.
In my early 20s, I wanted the Lamborghini, the penthouse and luxury items just as much as the next person. Now? Give me a secluded wooden cabin on the shore of a lake with a 1967 Ford Mustang on the drive.
Do You Have An Emergency Fund? 💰
Managing your money starts with building an emergency fund. This will stop you getting into debt if you lose your job / sources of income by allowing you to keep paying expenses.
Whilst saving £500 or £1,000 is a great start, ideally this fund should cover at least 3 months of worth of expenses as it may take us a few months to get back on our feet.
Start by making a list of your non-negotiable monthly expenses. This should cover things like the mortgage/rent, car payments, utilities, groceries etc in the worked example below.
Once you have a total, multiply this number by 3 to build a 3 month emergency fund or by 6 to build a 6 month emergency fund for extra peace of mind. This should be kept in an instant access savings account and only utilised in the case of emergencies.
Investing 101 📈
We covered some stock market related terms in last week’s newsletter. For this week, I felt it worthwhile to cover Cryptocurrencies.
What is a Cryptocurrency?
A digital form of payment that can be exchanged online for goods and services.
What are the benefits of Cryptocurrencies?
Users can conduct transactions directly without the use of “middlemen” such as banks.
Decentralized nature means that they cannot be controlled or influenced by governements or companies.
Strong encryption through cryptography & blockchain makes them impossible to counterfeit.
What are the use cases of Cryptocurrencies?
Payments: Want to send £1,000 urgently to someone who lives in a different country? Your bank would require all sorts of details and then take 3-7 days to settle the transfer. Using cryptocurrencies, you can complete monetary transfers in minutes without any need or use of a bank.
Smart Contracts: Smart contracts are like vending machines. The right inputs (money + snack selection) lead to a certain guaranteed output (snack dispensed). The need for third parties (banks/businesses) to facilitate and verify transactions is removed as inputs and outputs can be programmed onto the blockchain and executed when certain conditions are met.
Store of Value: Fiat currencies (£,$,€) lose value over time as more currency is printed into circulation. Cryptocurrencies such as Bitcoin have a hard cap, which means that there will never be more than 21 million coins in existence. With limited supply and increasing demand, they increase in value over time and thus can be a good store of value, similar to gold.
Decentralized Finance (DeFi): Decentralized Finance (DeFi) is the term given to a variety of financial applications that utilise the use of cryptocurrencies and the blockchain to offer financial services through the use of smart contracts. For example, anyone living anywhere in the world could lend and borrow cryptocurrencies almost instantly through the use of DeFi applications with smart contracts set up to ensure collateral andtimely repayments.
NFTs: Non-Fungible Tokens (NFTs) are unique, non-replacable digital assets that are stored and authenticated on the blockchain. They are a type of collectible, similar to paintings and pokemon cards, but exist digitally. NFTs can be digital art, photos, videos, audio or any other type of digital file. They are purchased and traded using cryptocurrencies such Ethereum and Solana.
What I’m Reading 📖
This article covers the decline in the purchasing power of the U.S. Dollar over the last 100 years. A very interesting read that will help you understand why you need to invest your money to ensure that the purchasing power of your wealth doesn’t erode over time.
Inflation is the silent killer in our bank accounts. Any savings over and above our emergency funds should be invested.
Question For You 💭
What is your ideal lifestyle? How many years will it take you to achieve that? What can you do in the next hour that will set you on that path?
Thank You 😊
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