Spending money is not a bad thing, especially if it’s to better yourself, I think it’s a good thing. Having positive hobbies and a positive lifestyle that is within budget can make the journey much more enjoyable, but it’s also important to save and invest for the future. The last month and a half I have worked extra to buy a few items that will enhance my life. New surfboards, wetsuit, weights, and a motorcycle. They all hold a valued purpose in my life and my lifestyle soi I felt these expenses are more like an investment into myself. Now that these purchases are almost completed, I will focus on my financial freedom goals.
I have a goal to be financially free within 8-10 years and at my current rate I believe I can do this. Financially free for me so to have no debts and enough passive income to sustain my bills and lifestyle. This will differ for everyone but for me it’s not that much. My new debt the motorcycle will become my priority in the next few months to have it paid off and then I will have to decide.
The decision is I would like to pay off my student loan but it’s still as expensive as a luxury car and I still want to invest in my investment strategy. Both have pros and cons. Lets go with student loan payoff for me. My interest rate is 5.25% because I am enrolled in auto pay, and this interest does add up. I currently pay more every month to make sure the principle is still being brought down. Having that debt off my record will help my credit score even more. Without the payment, I will have more disposable income. Becoming financially free will take less investments. Cons, I won’t have access to the money I put into paying off the loan if I needed a big emergency fund. I can gain more returns by my investment strategy. The monthly payment will still be present longer and dragging my overall disposable income lower. Now investing has pros and cons too which are similar but opposite of the payoff strategy.
My approach. Currently I feel my approach is to divide my disposable income into two categories. One will go to my debts, motorcycle, student loan and mortgage. The second category will go into investments. I may not get the glory of doing fully one or the other but knowing that I am tackling both at the same time and not missing out on the pros of each fits my personality. The big question is what percentage I divide the income by. Let’s give an example since I have three debts and I want to increase how much I put into my debts. As one is paid off, I will lower the percentage and move those extra funds into investments. I choose to do this way because as I pay off my debts the interest rates on my debts are lower. Motorcycle has a 7% interest rate, student loan 5.25 and mortgage is 3.2%. Return on investments is 5-14%. This is the reason, as debts are paid off more disposable income will move into investments.
This is my personal financial freedom plan, as you will have to find what works for you. The best thing I can say is don’t carry credit card debt. Auto debts are terrible too. Yes, I have a motorcycle I bought but I will have it paid off in 4-5 months from purchase. Honestly, I should have just waited to buy it and save the cash, but when a deal comes and it’s something you want I said welp let’s do it.
Part of the journey is making sure the journey can continue. The journey is supposed to be fun and enjoyable and get better as time goes on. Making finical plans and goals will help and ensure the future of the journey. I will continually check in with this plan every so often, but I don’t want this blog to be about finances.
