Journey towards Financial Literacy and Freedom: 10 Investing: Ratio Analysis and the Extra Bit

On reflection after my last post; one thing I realised I perhaps shouldn’t be doing, is making up the numbers so I can benefit from a lower charge the next month (you need to read my last post to understand what I’m talking about).

Think about this; for each deal, there’s a fee of £11. Imagine that I invest in 4 shares that are really of interest to me (fee = £44) and then I invest in another five (fee=£55) just to make up the numbers. The extra £55 paid in fees, I probably could have invested in at least one other share in one of the companies I am interested in. Anyway, it’s done now and I am reflecting and learning, which is all part of the journey.

So on to the focus of this week’s post; I had promised to share some of my knowledge on investor ratios and how I might use them to make decisions on which shares to sell and which to hold. There are however several ratios, so I have limited this  to some which I think are critical to an investment decision.

I found some pictures on Instagram that tells you how to calculate the ratios (remember that you won’t need to do this as the information would be available within financial section of your investment platform or on the company’s website or on google) and I have provided explanations of what each of the ratios mean and what the consideration should be when using them in making investment decision.

Earnings Per Share (EPS) – This ratio tells you about the profitability of a company. It tells you how much of earnings (i.e. profit after tax) a company is generating for each of its shares e.g. if a company’s earnings for the year is £50,000 and it has 25,000 shares in issue, it means the company has generated £2 profit for each share in issue. If you hold 100 shares, that would mean the company has generated £200 worth of profit for your shares. So the higher the EPS, the more attractive a company’s share would be for investors.

Price Earnings Ratio (PER) – this is an investment ratio that tells you how much you would you would need to have invested in a company in order to be entitled to a portion of its earnings e.g. if a company’s EPS is £2 and its share is selling at £30, its PER would be 15, if the EPS for the same company was £5, its PER will would be 6. A high PER implies that people are paying a high price for a company’s share compared to the company’s earnings; this could be an indication of trust/confidence in a brand that investment would yield high profits in future or because of future plans of the company, or it could simply be that the shares are overvalued. Investors are likely to receive more earnings by investing in companies with lower PER, but on the flip side, a low PER could be an indication of a lack of confidence in a company’s prospects.

Return on Equity (ROE) – this ratio tells you about the performance of a company. It tells you how efficiently a company is utilising its shareholders investments, to generate profits. The higher this ratio, the higher earnings are likely to be and the higher the share price as well (as the high earnings will drive investors interest and the higher the demand the higher the price will become) and of course, the higher this ratio the better.

Price to Book Ratio (PBR) – this ratio basically compares what the market value of a share to its book value. Though this ratio doesn’t provide any information about a company’s ability to generate profit or returns for shareholders, it is useful for determining whether a share is under-valued (and in turn a potential gold mine for an investor who invests in the share early enough) or whether it is overvalued. This ratio is however best used to assess asset based companies, rather than service or intellectual property companies.  So if you are investing for capital growth, this ratio could be useful in deciding which shares to invest in.

Dividend Yield: tells you how much a company pays out in dividend each year, relative to its share price. It is an indication of how much future income an investor could generate from the shares they hold, given current share price. This is an important ratio for dividend investors.

Debt –Equity ratio: This is a leverage ratio that indicates the proportion of a company’s debt in comparison to its equity and is an indication of the proportion of a company’s operations that is being financed by debt and whether a company possesses sufficient equity to cover its debt. While equity being able to cover debt might not be too important during good times, in times like we are now (a downturn) a company’s survival could be dependent on whether it is able to cover its debts from its equity. Therefore, investing in a highly leveraged company, could be risky. However companies generally utilise debt as it is cheaper (up to a certain point) and rather than organic growth, it provides the opportunity to aggressively pursue growth. Provided utilising debt results in earnings that are higher than the cost of the debt and the economy is not in a downturn, then a high debt-equity ratio shouldn’t be a cause for alarm.

An important point to note is that the ratios should not be used in isolation, for making investment decisions, rather comparisons need to done.

  • Comparison between current year’s ratios and previous years’ – have the ratios been growing or falling, what future plans does the company have and what developments are there in its external environment that might influence its earnings and share price.
  • Comparison with similar companies in it sector
  • Comparison with sector average.

Non-financial considerations are also important and could include things like;

  • Reliability of the company to follow through on future plans (e.g. has the company’s previous plans always been delivered on or not and can investors rely on what it says it will deliver now e.g. a company whose annual report has over the years indicated a plan to produce a green washing machine, but 3 years on haven’t even made a start will not generate confidence when they say they have another big plan which might impact their profitability and make its share attractive to an investor),
  • The company management – how experienced and skilled are they in managing and generating a return for companies, what are they doing e.g. dumping all their shares in the company they manage
  • The company culture and ethos – what’s the company doing in regards improving the environment, how ethical is the company, is it an equal-opportunities employer, etc. 

Overall, what the figures and ratios tell you, are a starting point, non-financial considerations are also important.

In reality, investment decisions are personal e.g. one person might be more interested in value shares and another in dividend shares and similarly, how much weight is attached to a company’s being ethical or environmentally friendly, will differ from person to person, so it is important that you do your own research and make decisions based on both the financial and non-financial considerations that align with your values and risk appetite.

I hope you find some value in this post.  I really enjoyed writing it as well and will also enjoy reading your comments about it; including any additional considerations you think should be made when investing.

Please like, share and comment.

Journey towards Financial Literacy and Freedom: 09 Investing: Me and Shares

So my journey investing in shares, goes like this.

This time, I was determined to see through my quest of investing in shares (previous times, I gave up because I didn’t know where to start), so I reached out to someone who recommended an investment platform I could use. I also gathered a bit of information form – not as much as I should have, but just enough to get started! I don’t recommend anyone else do that, rather it is advisable to do thorough research before getting into investing.

I however have gone about it the other way round and that’s only because that’s what works for me – if I don’t do that I end up not doing it at all – that’s how I get past procrastination! Once I am in it, I put the time in to do the research. This however could be costly, so I advise that you do your research before you start.

So I signed up on an investment platform and opened a stock and shares ISA (Individual Savings Account). Why an ISA you might ask – because you don’t pay tax on income or capital gains from investments in an ISA. There is a maximum amount you can put into an ISA each financial year (£20K in 2020/21) and any income/appreciation in value from your shares doesn’t get taxed nor does any dividend payments received. More details here 

I set my account up and bought my first share at the end of Sept (in Apple) and then for my birthday, my gift to myself was a share of Tesla. I also decided that the below message was to me 😊

The choices of which shares to invest in were based purely on reputation of the brands than on any research. In my bid not to pay the higher fee of £11+ for each deal in the subsequent month (the platform I registered with has a reducing fee structure which meant I could only activate the lower fee of £8+ the next month if I placed up to nine deals in the month), I proceeded to buy other shares of less value. Some of my purchases didn’t make financial sense as the total value of the shares purchased were less than the charges I had to pay for the deal. Again, these purchases were not on the basis of any research done! Again, don’t do what I’ve done, do your research before delving in.

I then started my research! I stumbled upon a YouTube channel which I highly recommend Lots of short, easy to follow and with no technical jargon videos; the videos take you through all you need to know about investing in shares. If you are interested in taking the plunge, this is a great resource for your research. I found there were several other YouTube channels doing the same, but this I found easy to follow and very realistic.

I also bought the book ‘Shares Made Simple. A beginner’s guide to the stock market’ by Rodney Hobson. I am about halfway through it; very basic and easy to follow/helpful to understand how the stock market works and considerations when starting out.

But guess what, while listening to one of Infant Investors’ YouTube videos about how to assess shares to invest in, he talked about EPS (earnings per share) and a few other ratios, how to calculate them and the implications of the resulting ratios; and just like that, I was taken back to my accounting classes!

How could I have invested without considering these!!! At each stage of my accounting studies, we were taught financial ratios – Liquidity, Debt, Investors and Profitability ratios. (any accounting student can attest to this, irrespective of what level you’re at in your studies, you learn ratio analysis. As your level of study goes up, the teaching is developed some more e.g. how to calculate each ratio, then what each ratio means, using the ratio to analyse a company, etc.).

Once again I am left reeling and asking the question: does being an Accounting and Finance professional translate to Financial Literacy?

I am finding perhaps it’s not necessarily the case or is it just because this is one of the many areas of my studies that hasn’t translated to practice (ratio analysis is not a significant consideration in the not-for-profit sector) that it didn’t occur to me to utilise this knowledge I spent so many years learning? Well, I’ve got that muscle switched on now – thanks Infant Investors’ for jogging that memory.

It is however interesting how when you don’t utilise a skill or knowledge, it gets buried, but then one small thing triggers it and it all comes floating to the forefront! Glad to have that part of my brain now switched back on. I have created a spreadsheet to begin capturing the relevant ratios of the companies I have invested in.  Funny thing is, I don’t actually have to calculate these ratios, it is all there in the financials of each of the companies!  So no excuse;  all I need do is analyse what the ratios are telling me and review these alongside other non-financial information, and then begin to make decisions.

The decision for me in the first instance would be whether to hold all the shares I’ve invested in or sell some and reinvest the funds in other shares. This however will require investing a lot of time to do the research … game on 😊

This is a picture of what my investments looked like after the first month

As you can see, my initial investment round has yielded nothing but losses all round (some more than others)!  I have however been assured that even if I had done my research before jumping in, it probably would have been the same as the markets have been very volatile (U.S. elections, increased covid-19 cases, Brexit, etc. all having an impact).  Analysts forecast this will continue for a while, before stabilising. 

I have gone ahead and made my November investments, having done a bit more research than before, but also topping up some of the lower valued shares, just to make up the numbers that would mean less charges next month!

I definitely need to do some research on whether maintaining my account on an expensive platform is the best thing to do, perhaps better to open an account with a less expensive platform?  I however feel that for now as a newbie and the amount of the information available on this platform, I am currently in the right place.

I would love to buy a few Amazon shares though – but at over $3K per share… I’d have to work my way to that one! Reputation of the brand once again plays a big part in my interest, but it seems to tie up with what the figures are saying as well … so I’m going to have to figure out how to get there. Though I have learnt along the way that one could also invest in fractions of a share – will have to look into that as that might be my in-road to Amazon!

Do you notice that unlike my foray into forex investment, I am not running for cover in spite of the losses? That’s where interest comes in! The interest in this area (for whatever reason) keeps me committed to learning and doing the necessary research, to make a success at it.

Lots to learn as I go along and being able to put to personal use some of what I studied which had previously been buried away… fun times ahead.

Remember for the young ones, START NOW; you don’t have to have thousands of pounds to start.

Do you notice how even Warren Buffet started small, persisted and grew his investments over the years? So just start all (after doing your research of course)!

In future post, I’d share some of my knowledge on key investor ratios, what they mean and how I shall be using them in my decisions to buy or sell shares.

Until then, like, share and leave your comments.

Remember, do your own research before making any investment decisions.


Journey towards Financial Literacy and Freedom: 08 Investing: How to start (easy as ABC steps)

As mentioned in my previous post, I didn’t know how to invest in shares in the U.K. so to help others start their journey to investing, here are a few clear and simple steps on how to do it.

… and the key to successfully investing is as Warren Buffet says

So is it the time now to start investing?  With the markets going crazy and share prices dropping, is this the time when you can easily buy shares below value?  Rather than letting any cash surplus to your emergency pot sit in your bank account and slowly die (its being slowly eroded away) is this the time to get in there and buy cheap ahead of when the markets stabilises again?

Well, having followed the steps above, that’s exactly what this ‘old and low-risk appetite’ lady is doing (cautiously of course…). More on that in my next post.

You might be thinking investing is risky…

Share what you are doing in the comments box and let me know if this post is useful.

Remember, do your own research before making any investment decisions.

Journey towards Financial Literacy and Freedom: 07 Investment Dilemma (Forex)

In one of my earlier posts in this series, I alluded to the fact that I commenced this journey during the first national lock down of the 2020 pandemic; a period which most people described as weird, unprecedented times.  With lock downs looming again (since September, 2020 still), across different towns (some already in lockdown) and a risk of another national lock down, this is now looking like our new normal!  I wonder whether the world we live in would be full or partial lockdown during the cold months and partial (fearful, cautious and masked) movements, during the warmer months.  A new way of living is upon us it would seem!

Irrespective, as long as we are alive, we’ve got to keep living.  Living, I have come to realise (albeit a little late in my life) is being able to choose what I spend my time doing, which requires financial freedom!  How one gets to that is likely to change over the years with the new way of living, but for now the old way still seems to work: get rid of debt, save, invest and make your money work for you.

In order for money to work for you, it needs to be generating some return (the higher the better of course), and this is the journey I am on – finding how to make my money generate a return for me rather than having to spend my time working in order to generate a return, in effect free up my time to do what I choose to do with it.

As per my last post, below options are some suggestions on how to make that happen.

In my quest, I came across investing in forex, which perhaps sits within the paper section of the above depiction.  The person who introduced me to it, said they had subscribed to an investment company who shared trading ideas daily and based on the ideas they had made an average return of about 10% per month, and of course with compound interest, it had made them a lot of money overall.  Investing in FOREX was a new area for me and I wasn’t particularly interested in it, but the idea of just placing one trade a day and letting the money do its thing, appealed to me – passively earning income I thought!  So I decided to try it out with £500 and see how it goes; and it ended up not being one trade per day, but several and rather than making a return, I was losing money fast, and within the space of a month, I had lost about 25% of my initial investment.  I imagine part of the reason for this was that the pandemic had caused the markets to become very erratic and unpredictable!

The person who introduced me to it then said they were terminating their subscription with  the investment company and would be deciding on which trades to place themselves, having invested in training on trading FOREX.  They apologised for the experience the returns not being as they had told us, but the information they had shared was on the basis of their experience prior to the current results.  That for me was the deciding factor, it wasn’t a particular area of interest for me, I was losing money and the person who introduced me was bowing out… so I decided to cut my losses!  By the time I eventually bowed out, the losses had continued and I had lost about 30% of my initial investment

My loss, I deemed as the cost I had to pay to learn that investing in forex was definitely not for me! I started out thinking I was in it for the long haul and I imagine that if it was an investment vehicle I was interested in, even with the losses suffered, I would have done more research, dug my heels in and figured out how I could make it work, but of course as it didn’t really appeal to me, nor was I interested in putting the time in to learn, it was best for me to bow out. 

I came across the above post as I was typing up this blog and it gives me comfort and makes me feel that I am on the right path!  I just have to find what works for me and then keep at it.  Forex happens to be one of the many investment vehicles out there, but is definitely not for me; my plan is to diversify and put a certain percentage in different investment vehicles.  

I hugely believe in diversifying rather than focusing on one investment vehicle.  Yes you learn a lot, by focusing on one area and the returns could be great (after any losses suffered which generates learnings and what not to do), but given the global pandemic and the uncertainties that come with it, my opinion (and preference ) is that it is best to diversify given that all investment vehicles are not behaving in their usual manners!  So hopefully, losses in one area would be offset elsewhere!  This might be an age thing as well, given that any major losses suffered at my age might be much more difficult to recoup, which makes my risk appetite lower than it might have been years ago.

I have had previous experience investing in shares over the years, but never in U.K. (only because I didn’t know how to).  This and investing in metals (which shouldn’t be surprising, given my previous history with buying and selling gold, silver and semi-precious stones) are areas of interest and I’d be sharing my experience with these investment vehicles.

Once again, I would encourage older women like me, approaching or who’ve already hit the golden age, to get going with setting up how the much later years would be financed.  It is never too late to start and nothing will change unless you take action, so get rid of the fear and worry and TAKE ACTION NOW.  As mentioned in an earlier post, for us Africans, let’s not expect that our children will take care of us the way we did our parents.  It would be a very tough pill to swallow and a rude awakening come too late, if they don’t (and it is too much to put on them in the world we live in today) and personally, I don’t think the pension will only go that far, so the time to set up that additional income stream is NOW!

For the younger ones, your time is NOW; you have the years ahead of you to try your hands at different things, to fall and pick yourself up/start again. So get out there and go DO IT; don’t leave it late like I have.

Let’s all get going with planting that seed that will yield future benefits; we just have to each find what we are comfortable with and works best for us.

Journey towards Financial Literacy and Freedom: 06 Save or Invest (food for thought)

Picking up from my last post, now we have built up our emergency pot (six months of living expenses, or one year if you are like me and want to give yourself more of a buffer). Then what? Today I’m going to introduce some food for thought …

If we going with the old age wisdom passed down by our parents,” Yes”, we’d keep on saving. What that does, the savings pot keeps growing and gives us some comfort and reassurance.  In the the old days, interest rates were quite good and there were benefits to be derived from doing this – your money grew as a result of compound interest earned.

These days however, after your emergency pot is full, to keep saving is to put your money to sleep! In fact I’d go as far as to say that to keep saving is to slowly kill your money off; because interest rates for savings accounts in the U.K. are as low as 0.01% (depending on the type of saving account you hold) and inflation rate is at 0.5% (as quoted by BBC News a few days ago This means the value of the money in your account is being eroded, in spite of the miserly 0.01% interest (your money is slowly dying I’d say)! To put it into context, you are unlikely to be able to buy exactly the same things you buy with £10 today in a couple of weeks time. So why slowly kill your money off! 

To top things up, there is discussions about negative interest rates, which in the main is to get banks to spend rather than hoard money, but will more likely filter down to us individuals at some point and if does, it means we would be charged for keeping money in the bank (which during times of economic uncertainty, is our natural instinct).

So instead of saving for the sake of saving and for your comfort, why not make your money work for you, saving to invest, build your pot up with the intention to have surplus money that you can then make work for you.

What to invest in; especially in these days of volatility in the markets and global economy as a whole… that’s my biggest dilemma and I guess its the same particularly for those of us starting out on this journey quite late (and who are more risk averse).  A few ideas of what to invest in are shown below.

Come on the journey with me to see how I am going about resolving the dilemma; perhaps you can learn from it or give me some pointers.

Note: I am not a financial advisor, my posts take you through my past experiences and discoveries I am making on my journey to financial freedom. If you find my suggestions useful, please do your own research and make decisions on the basis of your findings.

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Journey towards Financial Literacy and Freedom: 04.07 (Basics: Recap and Saving/Emergency Pot)

Last week’s post covered what I considered to be the last of the main elements in our day-to-day spending habits; all of which impact one’s personal cash flow statement.

Quick check-in on previous action points suggested:
• Did you analyse what you are spending money on – weekly or monthly (print-out your bank statement and analyse it)?
• Are all expenses necessary; did you find any unused or duplicated subscriptions that can be cancelled or any regularly incurred frivolous expenditure (the key is to live lean and not live large)?
• Are you beginning to pay down/off bad debts, especially credit card bills (pay it off in its entirety or pay more than the minimum payment to get rid of any existing debt)?
• Are you now budgeting (to help plan and control how to spend your income) and keeping within budget?

It may take time to reach one’s goals, but it is important to keep at it and not give up. Being persistent  will yield the desired result in the long run. The goal is to end up with less outflow than inflow.

Keeping the goal in mind helps to curb the urge to go splash out on something luxurious – taking a step back from the goal.  Beyond the goal of generating a higher inflow then outflow, is the why?  To have enough to maintain a certain life style, to be able choose if and when to work (sack your boss), to be able to concentrate passion projects (freedom to choose what to fill time with), to be able to spend more time with friends and family, to be able to travel the world, etc. So it isn’t about the money itself, it’s about what one wants to do with it and whatever that is, keeping it in the forefront of one’s mind, is what keeps the focus on achieving the goal – keeping a vision board or rewriting ‘the why’ on a daily (or other periodic basis) might help keep with this.  This is where mind-set comes into play.

The temptation to slip back into old spending habits is definitely there, but it gets easier over time and having the ‘why’ at the forefront of your mind helps keep the focus and makes the journey bearable; remember money is a tool to use for your comfort and pleasure, so depriving yourself now, will only serve to give you pleasure in the long term – delayed gratification!!!

Speaking about income, anyone started a side hustle yet or secured a second job perhaps off the back of reading my post.? I haven’t quite managed this yet!  This would definitely help with paying down/off debts and being able to generate a monthly surplus much quicker.  Below are more examples of side hustles I found.

Finally, important to remember is; KEEP EXPENDITURE LOW. DON’T GROW IT AT THE SAME RATE AS YOUR INCOME GROWS, so don’t go spending all the income generated from the side hustle, is what I am saying.

So as I said in a previous post, I found that I was already generating a surplus when I analysed my personal cash flow statement, but it is a great achievement to get there if one has had to consciously go through the process of cutting expenses, paying off/down debt, etc. so it is an achievement worth celebrating (don’t go throw a party though, as it would only set you back 😊).   

So now we begin to “save” – that age old wisdom shared by generations past 😊  Yes, it is important and is the first stage to being financially independent/free in my opinion; and more likely than not, I will come back to it again soon.

Below are a couple of suggestions on how you might want to split your income once you get to this stage.

Note how the first picture says minimum saving of 50% – suggesting it is okay to save more if  possible, but suggest that be aiming for expending no more than of 50% of your income.  The second picture suggests 10% for wants; I think this is a good percentage, especially for the months where you might be struggling, and then get back to the suggestion in the first picture.

The general concession seems to be that once you are at a place where your income exceeds your expenditure (i.e. you are generating a surplus), the first thing to do is build up a saving pot that covers at least six months of your living expenses (not of your salary, but of your essential monthly expenses – needs) – this being your emergency fund.  I recommend an emergency fund that covers one year of your living expenses; at least was my target. I believe this gives you longer time to regroup/bounce back if adversity hits or you lose your job, as has been the case for many during the pandemic of 2020. However, you could build it up to six months’ worth of living expenses then continue to top it up over time.

An emergency pot is for exactly what it is called; for “emergency” only. Dipping into should be reserved for emergencies only and once the emergency has passed, it should be topped up again.  

Note: I am not a financial advisor, my posts take you through my past experiences and discoveries I am making on my journey to financial freedom. If you find my suggestions useful, please do your own research and make decisions on the basis of your findings.

I look forward to reading in the comment about discoveries you make on your journey to financial freedom.

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Journey towards Financial Literacy and Freedom: 04.06 (Basics: Debt)

This week I debated with myself about whether to cover “assets” or “debts”.  I finally settled on debt.  I think this forms part of the basics that needs to be addressed before moving on to the elements that determine our net worth.

So let’s talk debt. What is debt?  Debt, as Wikipedia puts it, is an obligation that requires the borrower (debtor) to repay an agreed amount of money to someone else, the lender (creditor).

The most common form of debt we use in our day-to-day lives is loans.  Loans come in the form of bank overdrafts, student loans, car loans, mortgages and credit cards.  A loan would usually require repayment in instalments over an agreed period of time and would often come with a premium (in the form of an interest rate) attached to it.  The effect of the premium is that the total amount repaid would be more than the original amount borrowed.

We all have those times when we need a helping hand to achieve/obtain that one thing or objective we are striving for.  From a best practice standpoint, my advice would be to delay obtaining whatever it is till you’ve saved for it or your investment yields returns which you can use to obtain it.  From a more realistic perspective, especially for people who are still undecided about getting financially disciplined and building wealth, then I’d say aim to borrow at as low a rate as possible and make sure agreed repayment schedule is adhered to.  I however strongly encourage that everyone gets financially disciplined and begin the work of building wealth to enable financial freedom.

One key question though, why debt?  What is it we are purchasing that can’t wait till we have sufficient funds to purchase it with our own funds?  The answer to this question determines whether it is a good debt or bad debt.

Yes, Good v Bad debt – a concept I first came across when I read Robert Kiyosaki’s Rich Dad’s Cashflow Quadrant and have since seen it bandied about in several of my networks.  Good debts serve to increase one’s wealth e.g. a mortgage on a rental property would which yields income and is likely to grow in value in the long term, is a good debt, while a bad debt serves to increase your liability and are often loans taken to obtain things of depreciating value e.g. a new car, that bling watch that makes you think you are fashionable (speaking more to the young impressionable guys), designer shoe and bag (for us African ladies particularly) or designer clothes. 😊  So take heed, if you are not taking out debt that would contribute to growing your wealth, then it is best to steer clear (or at least delay the purchase till you have the funds to buy it).  Below are a couple of pictures that compare and give e examples of good and bad debt.

This post would be incomplete if I don’t touch on credit card debt.  In my opinion, while making purchases on a credit cards might have some benefits, I consider it the worst debt one can get into.  The benefits of having a credit card are that you are able to instantly make a purchase (even if you can’t afford it), if used responsibly it could help build/improve your credit history/record and more importantly, it is a great way to avoid losses from fraud, as the risk sits with the credit card company.  The flip side of using the card to purchase things you can’t afford however, is that you get into the worst type of debt possible!

I say it is the worst debt possible because you get caught in a cycle by not paying off your credit card bill in its entirety (which is the only way you are able to enjoy the benefits that come from using a credit card, unless of course you have a 0% interest credit card).  No matter how small the interest rate (if it is not 0%), not paying your bill in its entirety within the deadline indicated, will lead you into the trap of servicing a never ending debt, especially if you are only paying the minimum amount payable.  This is the lender’s preference as that’s how they make their money; they keep you chained to them, paying interest!

The below table is my attempt to put it all into context.  It shows a loan of £1,000 on a credit card with 20% APR[1] – all figures are made up.  As depicted in the spreadsheet, by paying the minimum amount permissible, total repayments made after one year would be £285.98, but interest of £185.88 has also been accrued on the balance.  Note how the debt is in effect being compounded and is growing exponentially.  At the end of year one, in spite of the £285.98 repayments made, outstanding balance remains £899.91 (not £714.02 – being the deduction of your repayments from original £1,000).  

I went a step further and used Barclaycard’s repayment calculator to generate the pie chart shown above; note how interest paid overall is more than the initial loan on the card balance; and more importantly note how long it takes to pay off a £1,000  – more than 18 years!    

The key message I want to get across with this post, is that if you have to use debt, make sure it is good and not bad debt.  Credit cards, in spite of its benefits, are “NO, NO” in my opinion, unless you are using it to build your credit record or to protect yourself against fraudulent purchases, but if you choose to use it for those reasons, you’ve got to disciplined enough to pay the bill off in its entirety and within the deadline indicated on the bill.

Enough from me about debt (or should I say credit cards, as it seems to have been the focus of the post). 

Final words for today, PAY DOWN/OFF YOUR DEBTS. 

Once this is done, you are ready to begin the journey to financial freedom.


Like, share and let me know in the comments, if these posts are useful and what else you’d like to see me write about.


[1] Annual percentage rate


Journey towards Financial Literacy and Freedom: 05 (what I did – put my money where my mouth is)

It was my birthday this week (happy birthday to me)!

So I guess the excitement of it (and how busy work has been) has meant I didn’t prepare a post to publish – apologies all.

It therefore means this is not one of the standard posts in the series.

I however thought it would be useful to share reflections and realisation/demonstration that I am putting my money where my mouth is and am walking the talk


As the picture depicts, in 2018 I went all out and threw myself a party; food, birthday cake, DJ, photographer, etc. – all on me.  I spent thousands of pounds!

This year, I went out for a meal with one of my favourite people, but none of the trimmings of the 2018 celebration, and of course the picture also depicts that I spent 10% on celebrating and 90% on wealth building activities – sowing the seeds for later.

Some might argue that it was my 50th in 2018, so it was okay to go all out.  Given my current mindset, I agree that yes it was okay, provided I had previously sown the seeds that permitted it.   If the party expenses were covered from returns on prior period investments (which probably continued to yield returns) then that would have been great!  As you all know though, I had no investments at the time and it was funded from savings (and a one year loan, I am ashamed to say, which I took out when I realised my savings couldn’t cover all the expenses)!

One of my thoughts yesterday was “I wonder how much I would be reaping if I had invested the funds I spent in 2018”.  But hey, know better, do better, that’s the key.  As Steve Harvey said, “it ain’t over…”

I’ve got a great life in front of me.  It is all a process and God ain’t done with me, which is why I get to mark another birthday, and by His grace, my great years are in front and not behind of me, so onward ever….  I am looking forward to great things ahead.

To everyone out there, remember even though it is best to start early, it is never too late to start!  Also, the journey to financial freedom involves building assets and maintaining expense levels, so let’s carry on with the process together.

Feel free to share any investments you’ve made and expenses you’ve cut out.

Journey towards Financial Literacy and Freedom: 04.05 (Basics: Multi-income sources/Keep your expenses Down)

I stumbled across these Instagram posts and felt they really speak to my last post.


Even the great ones are quoted as advising against a single source of income, so if you don’t take my advice, perhaps their voice might resonate with you more?  Consider it.

Do you notice in the above chart, how the expenses of the poor seems to be rising in direct correlation with their income, and how they continue to have limited time to themselves in spite of the higher income levels?

Notice on the other hand, how the rich maintain the same level of expenses even when their income rises and see how much more time freedom they begin to have?  This is the more attractive option for me; how about you?  

That’s what financial freedom is about!  Let’s do this, get on the path that will free us up to live the life want and do the things we are passionate about.

Have a great week ahead.







Journey towards Financial Literacy and Freedom: 04.04 (Basics: Building your Savings Pot)

How do you get to the stage where you have enough to save?

In a previous post, I categorised income sources into employment, self-employment, business and investment.  Even if you are still an employee, you should seek to have other means of generating income. Some ideas on how to achieve this is shown in below pictures obtained from @savetoinvest on instagram 

In addition, there is the need to critically assess what you are spending money on and decide: is it necessary? Can you do without it for now, with a view to benefitting at a later date (delayed gratification)? Are you by any chance like me, spending on duplicated luxuries like Amazon Prime, Kindle Unlimited and Netflix, and not really fully utilising any? If you feel you can’t completely stop all subscriptions, then consider maintaining only one of the duplicated subscriptions. Every penny saved would eventually go towards building your saving pot.  Some other things we spend money on, that minimises what the amount we can put towards our saving pot are aptly depicted below by @savetoinvest

Another key thing to consider before you start building your saving pot is how to pay down your debts (excluding mortgages). Are you servicing any debts (e.g. loans, credit cards, hire purchase, etc.)? Rather than immediately beginning to save any surplus or additional income generated from cutting out luxuries and finding additional income sources, it is usually more prudent to pay down/off your debts. This is especially the case when the interest rate being paid on the debt is higher than the interest rate on the savings. However, in some situations, the cost of paying down the debts (redemption fees) could be substantial, so might be better to keep servicing it monthly. So with this point, there is no blanket rule, rather you have to weigh up the cost/benefit of paying down/off your debts. Ideally though, you will pay off any debt not generating income for you.

In summary, keep your income high and your expenses low, that way you will quickly get to that place where you have income that is surplus to your immediate requirements.


Maintain the same level of expenses even when your income grows. Tough to do, but even if you can’t do that perhaps grow your expenses at a very minimal rate to the rate of additional income being generated. This is critical to being able to begin building your saving pot/the amount you are able to save.

Once we begin to generate surplus income, we are at the stage where we can begin to ‘save’ (that age old wisdom passed down by most of our mothers’).  We’d pick up on this in subsequent posts.

Are you finding some value in this blog series? Is there anything else you’d like me to write about? Let me know in the comments box.

#financialfreedom #financialliteracy #savingspot