Start Here

When you first start reading about personal finance, it’s easy to get overwhelmed by the amount of detail, jargon and conflicting advice. To keep things really simple, here is my 10-step plan to sorting out your finances. You can get familiar with each step fairly quickly and then re-visit them all periodically to optimise everything.

The steps are in a specific order. You really do need an emergency fund and to pay off your credit card debt before you do anything else. Even if that will take a while, look ahead so you know what you need to do next. Like anything in life, if you have a clear plan for the future and measure your progress against it, you will quickly start to see results.

Your Dead Simple 10-Step Plan to Financial Independence

    1) Track your total 'net worth' monthly with your major assets (cash, investments, car etc.) in one column and your liabilities (loans, cards, money owed) in a second column.
    2) Track your major income sources and expenses, to identify what you can chop and try to maximise how much you can save each month.
    3) Set short and long-term goals for your net worth. You can 'retire' from corporate life when your annual cost of living is 4% of your investment portfolio. Don't forget inflation if it will take you a while to get there.
    4) Build an emergency cash fund of $/£/€1000.
    5) Aggressively reduce loan and card balances on anything charging you more than 5% interest per year. Never let a credit card balance build for more than one month, it's not worth it.
    6) Build a cash buffer of at least 3 months' expenses.
    7) Identify items you are saving for within 1-5 years e.g. property deposit, education and invest the money safely in term deposits, low-risk fixed income investments etc.
    8) Invest any money you don't need for 10-30 years monthly or quarterly into a retirement portfolio of stocks, bonds and/or property. Try to save as much money into this as possible. Don't try to time the market or invest more than 10% of your portfolio in individual stocks, cryptocurrency etc.
    Expats: Use an offshore broker such as Interactive Brokers to invest in cheap, highly-diversified ETFs such as the Vanguard FTSE All-World UCITS Fund (VWRD).
    Residents: maximise any flexible tax-shelters available from the government. Invest in cheap, highly-diversified index funds - it's hard to beat the Vanguard LifeStrategy funds.
    9) Review any pensions, life insurance or savings plans you have abroad or at home. Check what they are invested in to ensure it is not overly concentrated in emerging markets, commodities, structured notes or funds with expensive fees. Avoid taking out savings plans or whole life insurance plans that are expensive and inflexible.
    10) Revisit all of the above periodically and optimise then further to maximise your monthly saving rate and investment portfolio growth.
    And that's it! Simple.

Step 8 is the one that will have the most impact over the long term but where you may struggle to get started. Click here for more information about creating your diversified investment portfolio and look out for more guides coming soon! If you feel there is a missing topic that really needs addressing, then contact me here.

Thanks to The National, which published the initial version of my 10-Step Plan. You can read the article along with a photo of me looking very serious here.