tisdag 29 november 2016

Financial Freedom

woman in a canoe on a lake
Financial freedom, and how to achieve it. In previous posts I've tried to tell our story and how we gained a little peace of mind regarding the issue.
I know that my better half tends to linger on the subject of money and still stresses a bit for example if one of us is sick and would receive a smaller paycheck the coming month. But during the 2 years that we have followed the plan, we have started to figure out that we can manage through quite a bit of financial stress and even though we still think about it (a good thing), we are not stressed about it.

So how to reach it? How to stop stressing about money? I guess it depends on who you are, but for most just starting a savings account and buffer could do the trick.

A lot of people argue that they cannot afford putting away money. It seems to be the same kind of people that argue that they cannot change any of the situations that they are currently in. But you know, strength of character cannot be taught. And if an individual is not ready to make a change, then it cannot be pushed upon them either. It is a bit like the old proverb (or maybe not so old)
When the Student Is Ready the Teacher Will Appear
It is a little like trying to stop smoking, most people know that smoking is a bad habit and know that they should probably quit. But, a big but, they have not made the decision to quit. A whole business area is built around the fact that people know they should quit. And a lot of the advertising is rubbing in the fact that it is hard to quit without their products. In reality it seems that their product only prolong the addiction to nicotine in some way.
I have a lot of people around me that say that they will quit next week, they will quit together with someone else, they will do this and that. But nothing happens, as they have not made the decision. They have not owned the problem. For us, when we quit it was quite easy when we made the decision. It actually didn't take that much strength.
And my view of things it is the same thing with your financial freedom. When you decide that you need to do something about it, the change will come naturally.
Maybe you end up selling stuff on e-bay just to get started but you will do it for yourself and by your own free will.

But I guess that if you are reading by blog you are already interested in the subject. :)

Until next time: Work to Live, Don’t Live to Work

Disclaimer. I am in no way an expert on capital management or investing. On this blog I only wish to share my findings, ideas and comments on current events and fields that interest me. I hope that my thoughts can entertain you. I expect that everyone reading take their time and do their own research before acting on anything read on this blog. Investing is not for everyone. E&OE.

torsdag 24 november 2016

Extra income, Christmas times


winter landscape in the evening, snow covered trees and a little hut with lights in the window

It's that time of the year again. I'm not much of a holiday person myself, but my better half has a real thing for it.
So this weekend we will participate at a Christmas market at a local farm house. The idea, is to sell a lot of stuff. From wooden Santa's to home made candy and homemade bird food..
So. Just thought that I'd share, if you have the time and the know-how then look around the country-side of where you live to find something similar and see if you could participate as a seller. (few refuse if you are really interested.

So some things to keep in mind when preparing (learnt from previous years)
  • Make sure you know the opening hours, in our case its 4 hours.
  • Make sure you have enough items to sell for the whole opening hours, if you sell out the first 15 minutes chances are that you are not welcome next time.
  • Ask how many people are expected, and past experiences from previous years
  • Bring extra change, ask around if you are unsure.
  • Set prices at even intervals, for easier money handling. I.e. $2 instead of $1.95
  • Be ready to use new technologies, in Sweden for example Swish is an excellent compliment to cash handling.
  • Be sure you know about local regulations, and taxes that might affect you. It is your responsibility, not the arranger.
  • If you say it is home-made, be sure that it is.
If your participation goes well, be sure to check for other happenings. Many venues have family days in the spring and maybe a harvest market in the fall. 

That's all for this time. Hope this gave you some ideas.For more ideas, check out my other post on Tips to finding extra income sources!

Good luck!

söndag 20 november 2016

Financial institutes and how they create money (Insurance Companies)


This is part of a series of posts, be sure to check out the other ones too:



  • Banks
  • Investment banks
  • Insurance companies


  • The time has come to another financial institute that most of us has some kind of relation to:
    The Insurance Companies.

    The basics

    Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.
    -Wikipedia
    So, people and companies pay a set amount of money (premium) each year, to safeguard against a specific type of risk (for example car accident). If the risk becomes real, a claims request is sent to the insurer, who then pays the damages.

    Investment companies receive money in the form of premium payments from their customers. And at another point in time, they have to pay out claims.
    The naive way to think about these kind of companies would be that they create money by overcharging the premium part so that the total claims during a year would be smaller than the total premiums.

    Modern insurance companies

    The modern insurance business does not actually profit from the premium/claims difference but instead by taking advantage of the time difference between a premium paid and claims received.
    The idea is to collect a lot of premiums into an investment pool and then invest that into guaranteed and/or low risk papers, shares etc.
    When claims are received, they liquidate (cash-out) a part of the total investment and move that money to handle the request.



    Disclaimer. I am in no way an expert on capital management or investing. On this blog I only wish to share my findings, ideas and comments on current events and fields that interest me. I hope that my thoughts can entertain you. I expect that everyone reading take their time and do their own research before acting on anything read on this blog. Investing is not for everyone. E&OE.

    tisdag 15 november 2016

    13 Free stock photo sites

    woman looking in binoculars over a snowy field

    OK, so you decided to start blogging. But a blog with just text is kind of boring in the long run.
    Free stock photo sites to the help. 10 years ago it was a real pain to find quality free stock pictures but today with the help of the Creative Commons Zero (CC0) licencing model it is a joy. And you always know that you are legally on the right side of the law.

    Short intro to Creative Commons Zero

    First of all, link to the license itself.
    https://creativecommons.org/publicdomain/zero/1.0/

    Short summary. If you find an item with this license you are allowed to:
    You can copy, modify, distribute and perform the work, even for commercial purposes, all without asking permission. 
    Be sure you read the full license before you start using it, it is not long.

    Sites that share high quality pictures as CC0

    Be sure to read up on the license model that each site uses.

    pixabay.com

    stocksnap.io

    www.pexels.com

    Sites that share pictures as public domain

    unsplash.com

    publicdomainpictures.net

    splitshire.com

    1millionfreepictures.com

    viintage.com

    www.gratisography.com

    littlevisuals.co

    pdpics.com

    pickupimage.com

    publicdomainarchive.com


    onsdag 9 november 2016

    My Current Plan, 2016 November


    This month, it seems like the media around the globe has gone nuts regarding the US presidential election. Here in Sweden, it is actually hard to find local news.
    Prior to the election day, media spun up a scenario where the markets would plummet if Trump won. Quite the doomsday prophesies, a lot of backstory where everybody seemed to agree that Clinton would win.

    And this morning, 15 minutes before the Nasdaq OMX Stockholm market opened, it was clear that Trump was elected the 45th president of the United States, The headlines were:'Shock! Markets will plummet!", and at 0900 the markets opened and it was basically business as usual. As always the analysts seem to read a negative 1% as something huge and try to make it into something that it is not.
    Now, 10 hours later the headlines are:
    Looks dark for Swedish companies
    Svenska Dagbladet
    Aptite is back on Wall Street
    - Dagens Industri
    Some optimistic, some are still pessimistic and some news outlets focus on the recent snow clouds in Stockholm.

    What amazes me is how much the media can spin the stories. Are people actually surprised and shocked? Or is it just the media that expects people to be shocked? It seems like the market learned from the brexit vote, but the media didn't.
    Once again it seems that the modern day journalism leaves a lot to wish for.

    So how does all this affect my investment plan?

    Not at all.
    To quote Warren Buffet:
    Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.
    - Warren Buffet
    Meaning that I bought this months ratio of shares in my favorite bank earlier this week. Swedish banks are rising after a year of red.. But I don't really care as I have my plan. And it contains a lot of buy and very little sell over a very long time period.
    If the markets react negatively to for some reason, Trump or other, I have the possibility to act on that disaster opportunity by using some of our ordinary savings account. But for the time being, nothing like that is planned.

    So sticking to the plan

    Hope this gives some motivation to other people starting out in building their own future :)

    Disclaimer. I am in no way an expert on capital management or investing. On this blog I only wish to share my findings, ideas and comments on current events and fields that interest me. I hope that my thoughts can entertain you. I expect that everyone reading take their time and do their own research before acting on anything read on this blog. Investing is not for everyone. E&OE.

    måndag 7 november 2016

    How to read an Annual Report part 2: Dividend

    woman readon on a tablet. how to read an annual report the dividend perspective

    This is part of my series on The Annual Report. Please read the other posts for other perspectives on the matter:

    How to read an Annual Report part 1: Management
    How to read an Annual Report part 2: Dividend

    Introduction

    So, we have had a look at the management teams of the companies and what to look at there. The question is still, how do we differentiate long term, solid companies from junk companies in an easy way that doesn't require a lot of time. The answer might be dividends. Lets look at the details.

    Companies that don't pay divided

    The are numerous reasons for a company not to pay out any dividends, maybe they are in an expansion phase, researching a new product, acquiring businesses etc.  This is all well and good, the question we should ask as long term investors is:

    Is the management team creating more value for us by keeping the cash in the books instead of paying it out in dividends?

    For me, to answer this question would take too long to analyse and research. I.e. going back in reports and looking at the returns over a longer period of time. And that is basically the one reason why I don't invest in them.
    Other reasons why I keep away is because when my money making machine build phase is over, I would like to be able to live on the returns. If the companies I own don't pay out dividends I would have to sell my shares, bit by bit to be able to make a living and that just feels wrong.

    Companies that pay dividend

    So, we have now filtered out a big chunk of companies that don't pay dividends. Lets look at the ones that do.
    For a company to be able to pay a dividend it requires that it must have a revenue stream that is higher than the cost of operations. The management team must be confident that they will be able to continue with operations even after the dividend is paid. To be able to pay dividends, year after year the companies must adapt to all sorts of challenges that the world throws at them, from financial crisis to acquisitions. Everything the company does, must pay itself. The company can't afford to throw away money.

    So, companies that pay dividend are good. How do we know that they will continue to do so? As with mutual funds, we can't predict the future by looking at past performance. There is always a risk. But dividend companies have one thing that stands out: Shareholders don't tend to like them if they mess with the dividend policy.
    And that is why so many companies make an extraordinary effort to pay the dividend. If they don't do it one year, it sends out strong signals that things are not in order and many larger institutional owners tend to sell when it happens, making the share drop.

    If the company has paid dividends for a decade, we should be interested.

    Companies that raise dividend

    So dividend payers are great companies, but what makes companies stand out even more from the competition? Companies that raise their dividend year after year. To be able to raise a dividend year after year, the operations must be optimized. And just like with the dividend payout itself, shareholders tend to not like it if a company changes its dividend payout plan and doesn't raise it for one year.
    There is even a name for companies that have raised their dividends for 25 consecutive years, they are called Dividend Aristocrats.  Its a thing, it is part of the company's image. The company is a dividend raiser and most of them are quite proud of that and it takes something out of the ordinary to change that. For example the financial crisis in 2009, the list of S&P500 Aristocrats dropped 10 companies. From 52 to 42. Keep in mind that the whole financial sector was on the edge of collapse and still 42 companies managed to raise their payouts to shareholders. If you reinvested that cash during that year, you got a lot of shares for a bargain as the markets plummeted at the same time. I feel that I can trust a dividend raiser, they go the extra mile.

    Conclusions

    Of course there are companies that for various reasons stop or change their dividend payouts. Maybe that should be the signal for you to go somewhere else instead of the quarterly noise with missed expectations. If the company is still able to raise its dividend even after a 'failure', it is still a great company to own and most likely things will sort themselves out.

    I'm not that into numbers as you might have noticed on this blog, I'm happy to leave them out most of the time. But one thing that should be kept in mind when looking at companies that pay dividend is that if you re-invest the dividend payout, and the payout is higher each year. You will get some awesome compounding effects on your investment. The numbers go crazy after some years. I'll let you find the numbers on google yourself. :)

    A great place to start searching for dividend paying companies: The DRiP Investing Resource Center
    They have lists for various markets, US, Canada, UK and Sweden to name a few.


    Disclaimer. I am in no way an expert on capital management or investing. On this blog I only wish to share my findings, ideas and comments on current events and fields that interest me. I hope that my thoughts can entertain you. I expect that everyone reading take their time and do their own research before acting on anything read on this blog. Investing is not for everyone. E&OE.

    onsdag 2 november 2016

    Work to Live, Don't Live to Work

    woman dressed in black jacket and black cap seemingly happy with life

    Six years ago I worked in another city and spent 2 hours each morning and evening to commute and putting in the extra effort every time it was needed. After a summer vacation when I sat down in my car I wondered what the hell I was doing with my life. As the fall moved on I decided to look for a new job and found one 10 minutes from home. It was one of the easiest decisions in my life to just take it.
    The day before I signed the new contract I ended up in a meeting with my current manager, it was the kind where you try to figure out what your future is at the company. After 45 minutes of me trying to not answer straight we decided to discuss the elephant in the room. I told her that I was going to take another job and probably hand her my resignation the day after tomorrow.
    It turned out that she was a good boss, and she understood and told me to remember that
    We don't live to work, its the other way around. We work so that we can live.
    After that we had a quite good and relaxed discussion about life in general and future plans.

    Thought I'd share, maybe it motivates someone out there. For me, it was the advice I needed and it has helped me with work/personal balance questions from that day onward. :)

    Take the first step to financial freedom: Stabilize your economy
    And remember that life is short.