I have created my dream life.

That is, money has created my dream life. With a bit of help from me. 

I live in Portugal with the freedom and lifestyle that I desire.

But it has not always been like this. Far from it. In a way, I have lived two lives. 

One with a 9-5 (more like 9-9), a lack of money and an inner-city lifestyle in Copenhagen, and another life with financial freedom to live the way I wanted.

I wish I could have avoided the first life. I wish someone had taken me aside and given me this money tips I’m about to give you, so I could have followed it from the start and achieved my dream life sooner.

When I was growing up, I got advice about friendships, about exercise, about health, about cooking – but there was never really anyone who gave me advice about money, even though I grew up with a father who was an economist. Go figure. 

Sound Money Tips are Worth Their Weight in Gold

It wasn’t until I was fired that I really understood how important it is that we have a strong financial foundation. That we plan our financial destiny. 

I learned to manage my money in such a way that it grew rapidly – for me instead of against me.

In this blog post, I’ll go over the most important lessons I’ve learned about money – that I wish I’d known from the beginning.

1. Understand That Money Can Actually Make You Happy

As someone posted on social media the other day, 

“They lied to you when they said money couldn’t make you happy,” …followed by a list of wonderful things money can buy you, like health insurance and vacations. 

I had to laugh because it’s kind of true.

I have lived with money and without much money. I have been a mother on unemployment benefits, and I have been a mother with 7-figure income. 

I can tell you that being a mom with a 7-figure income is way more fun.

The difference? Everything!

I used to live in a one-bedroom flat in central Copenhagen, and I couldn’t afford a holiday or a babysitter or cleaner or a car. I wanted to get away from the noise of the city, but I couldn’t afford to buy a house in Denmark that wasn’t in the middle of a rye field.

Today I live in a house 30 minutes outside of Lisbon on the coast of Portugal.

I have an au-pair to look after the boys and a maid to clean and cook. I don’t even drive the boys to school anymore.

I can’t remember the last time I was stuck in rush hour traffic, mopping the floor, or making pasta. 

I regularly go out to events and dinners – without having to beg a relative to look after my children.

No, money can’t shield me from a heartbreak or make sure my kids don’t fall riding their bike. But money can make sure I have time to go on a date and time for a fun bike ride to the beach with my kids. 

2. Invest as Early as Possible

Many people don’t invest until:

A. they have enough money,

B. they have enough time,

C. or they get their act together.

Forget it. Just do it. 

Get started right now. Today.

Buy a tiny little share in a tiny little company to get you started. See your first investment as a kind of learning fee and stop worrying about whether you will lose money.

The first investment is important because you realize it’s not that risky or dangerous or hard. 

3. Invest in Your Education as an Investor

Yes, you can read blog posts and books, and of course you should.

I have been investing since I was 30 years old in an autodidactic way. I had a decent ride, in particular because I invested a lot during the financial crisis – but my finances really took off when I bought a good value investing course where I learned to pick companies.

You can easily learn passive investing in indexes on your own. But if you want to become excellent at selecting companies, going through a checklist and understanding how to figure out what they are worth, you have to take a course. (Psst… did I tell you that I’m about to launch a value investor school?)

Why don’t we learn about money and investments in school? I think I have the answer.

I once attended an introduction at one of the Denmark’s most prestigious private schools. There was a whole army of top-level government workers in suits and nice dresses there to hear about the school. 

The headmaster explained that the school had a high academic level, and their role was to educate the children so they could attend college and subsequently enter the labor market.

Suddenly it struck me that the school is actually a factory of office workers who will receive a monthly salary. They are creating fodder for the labor market.

It’s not the school’s role to give children the knowledge or tools to become entrepreneurs or investors. 

4. Understand That Being an Employee Is Risky

Most people focus on getting an education and a good job.

It feels safe and secure… unlike investments or entrepreneurship, which many people perceive as risky.

The idea is that you could potentially lose money by investing or starting a company. Therefore, it’s considered a risk.

But you can lose all your income if you are an employee. You can get fired.

In one swoop, your financial foundation changes.

With one person’s decision.

Now that’s really putting all your eggs in one basket. That’s risky.

5. Pay Yourself First

The very first thing you should do every month is withdraw money from your salary income for yourself and your future.

Why first thing?

Because that’s how you prioritize saving to build assets.

If you expect to save money from what’s left at the end of the month, you probably won’t get it done.

We tend to use the money that is available in our checking account. That’s just how most people operate. 

6. Make Sure You Have Multiple Sources of Income

A salary is just one of several sources of income.

Stocks are another.

Can you think of more? A small online business?

Building your own company?

Renting out a property?

7. Avoid Debt 

Do everything you can to avoid creating liabilities – that is, anything that pulls money out of your finances. This could be, for example, debt with interest payments.

Avoid all unnecessary debt, such as consumer debt and the installment plans when you pay for electronics. Pay upfront for the stuff you want.

The only kind of debt I would consider is a mortgage. 

You should also avoid debt when investing. It makes you nervous as an investor and you may be blown back to square one if the market goes against you. 

8. Invest When Others Flee

There are periods when investing feels like a downward slide with no bottom.

It’s precisely at this point that you must find the courage to bet on the companies that you believe in.

Of course, it’s important to do your homework so that you’re sure it’s a good investment. 

You should take the company through a checklist – you can use mine here – and calculate what it’s really worth. You can learn about that in my e-book here.

9. Stick With It

The other big mistake people make is selling too early, either:

A.   as it drops,

B.    as soon as it has recovered after a drop,

C.   or too soon, in terms of a rising star.

The money is made in the waiting. 

So hold on, be patient, wait.

You look after the plant and water it, but you don’t have to stand and stare at the plant all the time.

Read my e-book Free Yourself to learn about the investment strategy that I use with great success. You can download it here.

Many of the things we do regularly are automatic.

These are habits that we cling to because we haven’t learned anything else. Or maybe we haven’t thought about it. Maybe we are just copying someone else’s habit.

This also applies to money.

Do you have money habits that make you poorer instead of richer?

I’ve looked back at my own experiences to see where I went wrong and how I got it right.

Read along here. Maybe you can also recognize yourself and learn something from it?

Mistake #1: You Pay Yourself Last

Every month, when money enters your account, you pay all your bills: rent, telephone bill, insurance and whatever else you need to pay. You do that first. 

Then you book a restaurant and plan both a shopping trip and a trip around town. Maybe a weekend getaway.

You intend to put money aside for your future. You want to save and invest. This is your strategy: to keep whatever is left at the end of the month… if there is anything left in the account.

Surprise! There never is.

When I began to build the foundation for my financial freedom, I started withdrawing money from my checking account at the beginning of the month to put into my savings account.

Technically, I transferred about half of my salary to a different account at a different bank than my normal bank. You know the saying: out of sight, out of mind.

I did this even before paying the bills. This is a smart choice.

If you want to be financially independent, you have to make it a priority. It needs to be as important as paying the heating bill.

When you’re hoping to have money left at the end of the month, that’s a way of saying that your financial freedom and your future are the least important things after bills, cocktails and dinners.

The funny thing is that there’s never much left in the account at the end of the month.

Why is that?

Have you heard of Parkinson’s Law?

Professor C. Northcote Parkinson did research on the public sector’s use of resources. He came to two conclusions: 1) A task always takes exactly as much time as is allocated for it, and 2) Expenditures increase until they match revenues.

Isn’t the same true of our own consumption of time and money? Let’s say you have a week to write an article – it always takes a week to write it. If you only have an hour until the deadline, it will take exactly one hour. The same goes for money. You use what’s in the account. Our consumption matches the income we know we have.

That’s why you need to withdraw money for yourself first – even before the bills. Only then will you get it done.

Mistake #2: You Try to Keep Up with the Joneses

I remember so many situations throughout my life when I spent money that was really unnecessary, just because I was uncomfortable speaking up for myself and saying no.

I remember one particular situation where I agreed to take a taxi to the airport in Copenhagen even though the subway ran right from my apartment to the airport – and was much faster. There is this old idea that you have to take a cab to the airport, but why?

I was probably a little afraid of coming across as a miser, but the truth was, I’d much rather have taken the subway. And if you haven’t taken a cab in Denmark, let me tell you, it’s like a limousine service – expensive and Mercedes only. We don’t have Ubers (they’ve been outlawed).

In this situation, you can simply say that you prefer the subway and that you can meet whoever you are traveling with at the airport. You don’t have to explain why. It’s okay to say you prefer something else.

If your friends don’t like it, well, too bad for them. If they don’t want to be friends anymore, well good for you that you had that clarified.

It may not necessarily be friends that you want to please. It could also be that you try to portray yourself a certain way in public or on social media and end up spending a lot of money to appear wealthy.

The question here is, would you rather look rich or would you rather be rich?

Be comfortable standing up for yourself and your choices.

It’s called being authentic.

Mistake #3. You Have a Foggy Idea of Your Account and Spending

It’s a habit to feel confused about your money and your spending.

It’s also a way to keep yourself ignorant and avoid taking a stand – it’s a bit like burying your head in the sand like an ostrich.

If you don’t know how much you spend on a monthly basis and if you can’t predict how much you have left at the end of the month, it’s time to get a handle on it.

You can use a lot of apps like Spiir or Mint to keep track of your spending.

I use a spreadsheet where I download a CSV file from my online bank and import the data into my own spreadsheet. It’s convenient because I have accounts in several banks and like to make my own system.

Whatever system you choose – you can even jot it down on a napkin – I recommend going through your cash flow at least once a month.

You must:

1. Set a budget.
2. Go through the entries so you know what you are spending money on and can cancel unnecessary subscriptions and close gaps.
3. Follow the development of your wealth. It is very motivating to save and invest.

Mistake #4: You Build Up Debt

It is socially acceptable to have debt.

In fact, most people expect to have debt: student debt, credit card debt, car loans, home loans, quick loans.

I’ve had student loans myself, and it took me around five years to pay them off. I remember waking up one morning and deciding to pay it all off at once with a debit card, and it was a huge relief. I’ve also had a small mortgage, but that was many years ago.

I am currently renting a house in Portugal (there were several considerations. I wanted the flexibility of renting instead of owning as I was new to the country).

In addition, I assessed that the market may have been in a bubble (I moved in the summer of 2020). My thoughts on whether or not to buy a home may be a topic for a future blog post. Hang in there.

The point here is that for the last 15 years, I’ve had no debt at all.

The point is also that you should beware of creating debt. Buy only what you can afford and look very carefully at how much you pay in interest if you have to take on debt. Look at whether the interest rate is fixed or whether it will rise over time.

Having debt means paying interest – and that slows down your journey towards financial freedom. The power of compounding works on interest on debt too.

Mistake #5: You Pay Extra Due to Lack of Planning

Are you bad at planning? That habit might be costing you a lot of money.

Maybe you have to pay twice as much for the plane tickets because you haven’t planned and booked in time.

Maybe you get a fine from the library because you forgot to return the children’s books before the holidays.

Or it could be that you forget to unsubscribe from something that you’ve been meaning to cancel for a long time.

All these things are a waste of money – and unnecessary.

Why not think ahead and set a reminder on your phone?

If you agree to the two-week free trial, set a reminder on your phone two days before it expires so you have time to decide whether you want to keep it. The same with the library books or the summer vacation tickets.

Some of it is due to sloppiness and lack of planning. Here, I’m personally pretty good at getting things done – mostly because of the phone alarm method and sticking to a deadline. My training as a journalist has helped me respect deadlines.

Other things crop up because you postpone decisions – this applies, for example, to the summer vacation planning.

Here I have to admit that I have paid a lot of unnecessary money because I am bad at planning those things well in advance.

That is due to something completely different from sloppiness. For me, it probably stems from some illogical and childish fantasy that something even better will magically appear, and a fear that I might regret the decision. This makes it hard for me to commit to a specific plan.

Or maybe there is a simpler and a less Freudian way to explain it… maybe Parkinson’s Law sets in here – you spend as much time on a task as you give it. And booking those tickets for summer vacation is really just a task with a fluid deadline.

Maybe a hard deadline and a phone reminder can solve this issue? I’d try it out. 

Mistake # 6: You Pay Too Much in Taxes

Taxes will be one of your biggest expenses throughout your life.

I can hardly think of any other expense that is bigger… maybe for some people housing expenses could be.

In any case, taxes are important. Don’t ignore them.

There are a number of things you can do to reduce your taxes.

Here are a couple of things you can do in the area of ​​stock market investment:

One option is to use some of the accounts where you pay less taxes like IRA or Roth.

You can also structure your investments in such a way that you pay less in taxes. Investing long-term and buying and holding is a great way to postpone taxes.

You can read more about it in this blog post here.

Mistake # 7: You Put Off Investing

Aha! The one-day syndrome.

You tell yourself you’ll start investing one day when you have more money. Or one day when it’s crystal clear that the stock market will rise for 10 years. Or one day when you have more time. Or one day when you have a better paying job. Or one day when the children have moved out.

It’s a slippery slope because you miss out on knowledge, experience and the financial gains.

You miss out on your future, really.

There are always excuses.

The longer you put it off, the longer you have to work to become financially independent. The sooner you start, the easier it will be for you because you’ll have to invest less of your own money to get there.

It’s as simple as that.

I started investing the moment I got my first full-time job after university, but for many years I only invested through my voluntary retirement account (similar to an IRA or Roth).

When I was laid off on maternity leave in 2016, I resented the fact that I hadn’t invested some funds that were available then (rather than only for old age) – but better late than never.

Today, my investments have changed my life; my assets have given me the freedom to design my dream life in Portugal.

You can read more about how to invest in the stock market to become financially free in my e-book Free Yourself right here.