Five Reasons to Become Financially Independent

Five Reasons to Become Financially Independent


Why even bother to try to become financially independent?

Why postpone your spending so you can invest and have more money for spending in the future?

What if you’re happy with your life and your job as it is?

I’ll tell you why.

Why Becoming Financially Independent is Important

It’s my firm conviction that everybody should invest purposefully to become financially free.


Including the person with a great career. 

Including the person who feels safe because her partner is providing for her.

Including the person who feels like the future is golden.


It’s called prevention.

It’s like eating fresh vegetables and working out even though you aren’t sick now.

Becoming financially independent is one of the steps in creating a wonderful life.

Here are five specific reasons why you should invest in stocks now in order to become free later:

Reason No. 1: Avoiding Adding a Crisis to a Crisis

Your life will take its own turns.

Surprises are part of life.

It could be sickness, a divorce, a dismissal, a global pandemic, or a sudden death in the family.

Yeah, we don’t really want to talk about that, and that’s why most people avoid planning for disasters like these.

It’s like facing the pictures of the starving children in Yemen. It makes you feel uncomfortable, and instinctively you want to scroll on.

Yes, it’s unpleasant thinking about how something can disrupt the path you’re on.

But that’s the nature of life.

We’ll be surprised, challenged, and we’ll overcome.

But we have to get through the difficulties, and that’s why you need to do some preventive work.

You need to make sure that a crisis doesn’t become bigger than it should be.

If you’re going through a divorce worrying about money, you’re adding one crisis on top of another crisis.

If you get laid off and worry about your finances, you’re adding one crisis on top of another.

If you get sick and have to worry about being able to keep your job while trying to recover, you’re adding one crisis on top of another – making it more difficult to focus on healing.

Being financially independent will make you stronger in life and better equipped to handle the challenges life throws at you.

Reason No. 2: Being Able to Choose From the Top Shelf

When you are financially independent, you have more freedom to build the life of your dreams.

I don’t mean just material stuff like adding another designer bag to your wardrobe.

I’m talking about the big decisions in life and the experiences you can have:

Like resigning impromptu if your boss is pestering you.

Like taking a year off to travel around the globe.

Like deciding to have a child without having to google the cost of daycare.

Like exploring a hobby, even if it’s a bit extravagant.

Like pursuing an infatuation even if the person lives in another state or country.

Those kinds of choices. The truly important choices.

Reason No. 3: Being Able to Spend Time With Your Loved Ones

If you’re dependent on a salary, there will be situations where you’ll be at your desk wishing you were with your family instead.

Maybe your family is gathering for a celebration, and you can’t be there because work is calling.

It can be something negative you need to handle, but can’t.

When my mother died, I was spending most of my time at work.

The doctors turned off the machines that were feeding her because they said it was her wish. She had had a stroke, was unable to move much, but was conscious. We knew she only had a week left. She was dying slowly in a hospital bed.

Most of that week, I was at work. I came after work when I could.

It’s a week I can never have back.

If I had been financially independent, I would have had a choice.

Maybe I didn’t have to resign from my job, but I would have had more leverage and bargaining courage, knowing that i had the money to make it possible to resign. 

Reason No. 4: To Prevent Stress

You’re more inclined to get stressed if you worry about your finances.

That’s a fact.

If you know that you can always provide for yourself and your family no matter what happens, it’s easier to shrug when things don’t go your way. That’s what being financially independent means. 

It won’t bother you as much if your boss is giving you a hard time.

Sometimes small things become huge when something else is worrying you.

Parents who don’t feel safe financially have all blurted out stuff at their children like “Money doesn’t grow on trees” or “Are you insane? Do you know what that costs?”

That stops when you know with certainty that there is always enough money for you.

Isn’t that a wonderful thought?

Try saying it out loud: “There is always enough money for me/us.”

How does that feel?

Reason No. 5: Being Able to Provide for Your Family for Generations

Investing in stocks isn’t only about you.

It’s about your family. It’s about all the people you care about and the ones who haven’t been born yet.

You’re building wealth, and while you’re doing that, you’re building their future too.

You can make your children, nieces and nephews financially independent too.

You can do that in several ways.

You’re your children’s most important role model. If they see and hear you talk about investing, there is a higher likelihood that they’ll be responsible with their money too.

The other way is to invest for them.

I’ve opened savings accounts and retirement accounts for my two boys, and I actively invest the money on their behalf.

My boys are still small and there’s plenty of runway to make a modest amount of money become millions.

Their savings can really grow, and it will have a big impact on how their lives unfold.

Now what?

Are you ready to invest in stocks?

Are you ready to take charge and steer your finances towards becoming financially independent? Even really wealthy?

Sounds good.

Now you need more information about how to do it.

You’re in luck because next week I am hosting a free, live webinar called Five steps to financial freedom.

I only host a live webinar once or twice a year, so don’t miss out. Of course you can also download the e-book Free Yourself and learn more. A combination of the two is the best. You can download your free copy right here.

You can sign up for the webinar Five Steps to Financial Freedom which takes place Thursday September 21st at 6 pm UCT. You can sign up right here.

What Is My House Worth in Warren Buffett’s Eyes?

What Is My House Worth in Warren Buffett’s Eyes?

How do you know how much you should pay for your next dream house?

Currently, I’m looking at houses in Portugal, where we live. I’ve found a house that I absolutely love. But is the price right? What is my house worth?

I have looked at many houses, apartments, townhouses, and villas in both Denmark and Portugal.

We actually live a cozy and comfortably life right now in a rented house, but our landlord has decided to increase our monthly rent from 3,000 euros to 5,000 euros, which has sparked a search for our own home.

Both the rent and real estate prices in Portugal have risen dramatically the last couple of years.

The house I rent was listed for 800,000 euros when we arrived here two years ago, but now identical houses are listed for 1.2 million euros.

In other words, there is quite a hot simmering housing market in Lisbon’s attractive suburb Cascais… possibly even a bursting housing bubble.

There are many flexible mortgage borrowers among the Portuguese, and they may not be able to keep up with interest rate increases in the long run. But we haven’t seen that yet – prices seem to be holding steady for now.

What Is My House Worth?

There are, of course, many ways to assess it.

I have fallen for an old house that is located inconveniently half an hour away from Cascais and the international school and an hour away from Lisbon. But what’s even worse… it needs a significant update.

The big plus of the house is that it is charming and has a fantastic view. How do you put a price on that view? How do you put a price on a cozy local community?

I’ve hired a consultant who uses the simple strategy of looking at similar houses in the area and making comparisons.

Well, that’s a very simple strategy. Maybe a bit too simple.

It’s like buying stocks with the assumption that the stock is worth what similar companies are trading at. 

If you used this method on an internet-based startup during the dot-com bubble in 1999-2000, you would have overlooked the fact that the entire industry was in a bubble about to burst.

There’s another method that is much better.

Warren Buffett actually has a pretty simple calculation.

What Is My House Worth to a Value Investor Like Warren Buffett?

In 1993, Warren Buffett had the opportunity to buy a large property near Washington Square Park – the place where the characters from the TV show Friends were supposed to live. A very attractive location in Manhattan.

Warren Buffett calculated a few things in his head and quickly made the decision without even seeing the inside of the building. People marvel at how he can make big decisions by just thinking for a moment or scribbling a number on a napkin.

That’s because his calculations are simple and get to the heart of the matter.

He calculates the income, subtracts the expenses, and multiplies it by 10.


That’s his purchase price.

Owner Earnings Used for Properties

When I buy stocks, I calculate whether it’s a good deal. I figure out at what price I need to buy the shares to (theoretically) earn back the money in ten years.

The calculation is called owner earnings, and you may have come across it in my book Free Yourself. 

This calculation actually originated from real estate investment.

When it comes to stocks, you need to find the pretax income and subtract maintenance costs for running the existing business.

It’s exactly what you do when calculating a building’s value.

You figure out how much rental income you have from the house. From there, you subtract all ongoing expenses and maintenance costs. That means you need to subtract expenses for gardening, occasional repairs, roof replacement, cleaning, painting, administration, appliance replacement. Then you multiply it by ten.

Why multiply by ten? Well, you want the house to have paid for itself in ten years with the income from the rental. From the 11th year onwards, it starts generating profit.

With this calculation, the appreciation in value is a free ticket. If the house increases in value, it’s just an extra bonus.

So, What Price Should You Buy a House For?

I have seen houses in the Cascais area of Portugal ranging from 800,000 euros and up – it mostly depends on the location.

For the house I’m currently considering, I’ve made a bid of 820,000 euros.

It’s located an hour outside Lisbon and 30 minutes outside Cascais in an area that is becoming popular, especially among German and Scandinavian expats.

I estimate that the house could be rented out for 5,000 euros per month, mainly because of the view. That means I would ideally want to buy it for a maximum of 600,000 euros (not counting ongoing expenses).

Unfortunately, I’m not the only one interested in the house, so it’s not realistic to negotiate a lower price.

The House Requires Significant Renovations

I have had a building inspector and an architect go through the house.

The necessary renovations and improvements that I want would cost at least 400,000 euros.

It needs a new roof, new electrical wiring, new plumbing, a new water system, and some walls need to be demolished – but first, structural reinforcement needs to be done.

I want a pool and a lower garden and wall to better enjoy the view from the house.

I want to improve the insulation and install new windows. I want to move the kitchen and perhaps create an annex.

I want to convert the attic into an office and bedroom.


The list is long.

Let’s say the final price, including renovations, would be 1.2 million euros. 

How much should I be able to rent it out for?

I would need a minimum of 10,000 euros per month (not counting ongoing expenses), and that is not going to happen.

What should I do then?

Well, I’m actually still thinking about that.

The house is located in a completely unique place with protected nature. How do you put a price on a view? How do you put a price on how happy it will make me every day? It’s difficult, and the calculation doesn’t take that into account.

If the house were already renovated, I would probably buy it – even at the 1.2-million-euro total cost with renovations.

The work the house requires makes me hesitate. It will take at least 6 months to plan with architects and 6 months to execute.

It’s a year-long wait.

But what about all the time I would spend on it? What is my time worth?

I would spend a lot of time planning and following up, having meetings with architects and craftsmen, and probably a lot of time waiting in the house when some of the people don’t show up.

If the renovation doesn’t go smoothly, I might lie awake at night.

All the time it would take and the headaches it can cause.

Can I put a price on that?

No, I can’t.

So, am I going to buy it?

Hmm… I have made a preliminary non-binding offer, but there has already been a new and higher bid from another buyer.

Now I have to consider whether I want to engage in a bidding war and contribute to further raising the price.

These are my thoughts on my possible future dream house.

What would you do?

You can read more about owner earnings in my e-book Free Yourself. You can learn how to apply the method to companies so you know when to invest. Download the e-book here.


My Top 9 Money Tips I Wish I’d Known Sooner

My Top 9 Money Tips I Wish I’d Known Sooner

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.

Beware of These 7 Money Habits That Keep You Poor

Beware of These 7 Money Habits That Keep You Poor

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.

How to Reduce Taxes on Stocks 2022

How to Reduce Taxes on Stocks 2022

Taxes can eat up a big chunk of your capital gains, and they really affect the long-term effect of compounding. 

The good news is that there are steps you can take to minimize the taxes you pay on stock gains. The tax regulations are different from country to country, and I’m trying to generalize, but most of the examples that I use are from the US tax system.

Let’s get cracking. Here are a few things you can do.  

1. Maximize Your Contribution to Accounts that Offer Tax Advantages

In most countries, there are some kind of savings accounts that give you tax advantages.

These could be 401(k) plans where you can contribute a part of your paycheck before taxes, thereby reducing the amount you have to pay taxes on (if you are self-employed, the equivalent is a SEP IRA).

This could also be a Roth IRA that lets you contribute money you already paid taxes on, where your money can grow tax-free. In other words, putting money into an Roth IRA doesn’t reduce your taxable income the year you make the contribution, but you get a tax benefit on the back end.

The UK equivalent would be an ISA account.

These types of accounts have a different name in every country, so you should research your options and take advantage of them. You might want to call an accountant or call your local tax authorities to learn what accounts that offer tax advantages are available to you. 

2. Invest Long-Term

If you don’t sell your stocks, you don’t pay taxes on them. 

Did you know that Warren Buffett pays a lower tax rate than his secretary? How come one of the richest men in the world doesn’t pay a lot in taxes?

That’s because Warren Buffett doesn’t sell shares.

Warren Buffett’s income is actually very modest. His annual salary from his company Berkshire Hathaway is just $100,000 a year, and his secretary is rumored to make at least $200,000.

Warren Buffett’s wealth comes from holding just one stock: Berkshire Hathaway, and he doesn’t sell it – which means he pays no taxes on his accumulating personal wealth.

Some countries give you a more favorable treatment if you are a long-term stockholder. In the US, you pay regular income tax on a stock you hold for less than one year. If you hold it for one year and a day or more, you pay capital gains taxes, which are lower than regular income taxes. 

3. Combine Gains and Losses Strategically 

If you have an investment that has gone bad, you can sell it off strategically to offset capital gains.

If you sell shares with a loss in your taxable brokerage account, that loss can help offset other short-term or long-term gains. 

How does that work? In most countries, you only pay taxes on your net gain (the amount you have realized in gains minus your losses). So if you know you have some realized gain, you have an opportunity to realize some losses too to offset that gain. This is called tax harvesting.  

Of course, you don’t want to have any losing position on purpose just to avoid taxes, but if you happen to have an investment that didn’t go as planned, you can be strategic about when you sell it.

4. Structure Your Investment for Tax Efficiency

On some accounts, you don’t pay taxes, and on others you do.

You can position your investments so you get the best of each system. 

Why not place the very long-term investments in your taxable brokerage account where you only pay taxes when you sell them?

Why not place dividend paying stocks or short-term investments in your Roth IRA, where you don’t pay taxes? 

Don’t Let Taxes Overshadow Your Investment Strategy

You should buy or sell investments based on your belief that they will gain or lose value over the long term. Don’t make investment decisions just to reduce your tax burden.

Taxes are a luxury problem. If you pay taxes, it means you’ve made money. Don’t forget that. Be grateful for it.

Also remember all the things you contribute to with your taxes: roads, hospitals, schools, universities, police and security.

Like my uncle used to say, “I pay my taxes with gratitude.” 

Try to pay your taxes with a sense of gratitude and think of how you contribute to society.  

Don’t forget the e-book Free Yourself.  It’ll teach you how to calculate how much a company is worth. You can get it for free here

How to Create Extreme Wealth

How to Create Extreme Wealth

Recently, I had a revelation.

It happened when I overheard the motivational speaker Bob Proctor talk about the three money types.

He divides people into M1, M2 and M3.

He talks about those who make money by giving their time to get money, i.e., those with a paid job.

Those are M1.

Around 96 percent of the population fall into that category. It’s all the people who go to work to get a salary.

It’s the nurse, but it’s also the doctor, the lawyer, and the CEO.

Then he talks about those who have understood the principle of creating assets and who have invested in something. He calls them M2.

If you have started investing in stocks, you fall into M2, and congratulations – you’re part of an exclusive crowd of people who only make up 3 percent of the population, according to Bob Proctor.

But he goes a step further to a group that I hadn’t heard of before. The M3s are the true elite on the money front.

Who are they?

They’re the ones who set up many sources of income. They aren’t content with a salary from a job and stocks and shares.

We all know these types. I have a friend who has a normal, but well-paid job. That doesn’t stop her from starting a business, selling online courses, writing books, say yes to speaking at conferences. She rents out a property. And of course, she also has a few million in stocks and shares.

Do you know someone like that?

It’s like they’re running a program called “Where Else Can I Make Money?”

It dawned on me that I’ve been an advocate of the M2, when in fact I’m driving the small version of the M3 myself – without being aware of it.

Occasionally I get asked why I sell online courses and group coaching when I am financially independent from stock market investments.

I’ve brushed the question off with the thought that I’m doing it because it’s fun and because I want to share my knowledge and help people become financially independent.

Now I can see what I’ve done. I’ve set up several sources of income.

Now that I know that there is such a thing as M3 money types, I think it’s the way forward.

The idea of ​​M3 has shifted my perspectives and boundaries in a way where I can feel that my business and my life are about to accelerate.

I plan to develop as an M3 money type, and I also recommend that you do that.

“But how?” you may ask.

To be honest, you’re not going to jump directly from M1 to M3 by snapping your fingers.

You’ll probably go from M1 to M2 and slowly on to the M3, step by step.

If you are an M1 right now, the logical next step is to buy shares so that you can become an M2.

Becoming an M2 is a huge step and a clear improvement. It’s still my opinion that stocks are the best way to create a passive income. They’re superior to almost any other passive income.

How do you find sources of income other than stocks?

1. Expand Within Your Current Field

First, you need to see if you can come up with new sources of income within your current profession.

I’ll use my own former career as an example. As a journalist, I could have taken on chairing a conference or maybe freelance writing in my free time. If I had written a book, it would have created a passive income, increased my value on the market as I positioned myself as an expert, and it would have most likely also led to other gigs, such as speaking.

2. Brainstorm New Fields

Are there other areas where you can make money?

Sit down and brainstorm and draw a mind map.

What are your special talents? Where are your interests? Do you have any old dreams? What do you love to do? Could there be something there?

There is probably something simple you can do right away without a big business plan.

For example, if you love cars, could there be a hobby and source of income in buying old cars, repairing them, and selling them at a profit?

If you like writing, can you start blogging about an area you love?

If you have a following on one of the social media platforms, could you start monetizing it?

Is there anything you can rent out for a period of time? Your summer home maybe?

For each idea you write down, turn it into a mind map, i.e., you circle the main idea, and then draw lines out to other circles where you write multiple sources of income.

In the beginning, your M3 projects might be small hobby-size projects, but over time you might get a real business idea that can grow into something bigger.

My blog Money and Freedom began just like that.

3. Calculate the Profitability of Your Time

When you get these new ideas on how to make money, evaluate how much time goes into it.

Some ideas are better money machines than others.

For example, if you love knitting and consider selling hand-knit socks at a Christmas market, you have to consider the hourly rate.

Let’s say you can sell them for 15 dollars and they take 15 hours to knit. That amounts to an hourly rate of less than 1 dollar when the yarn is deducted – not a particularly good use of your time. It’s not the socks that will lead to “extreme” prosperity.

4. Sort Your Ideas Into Passive and Active Streams

You also need to divide your ideas into active and passive income.

Active income is when you have to constantly supply your labor, while passive income is something you set up once which can be sold over and over again.

To use the knitting example, the knitted socks is an active income stream because you have to spend time knitting before you can sell a pair of socks.

But if you create an online knitting course, it’s considered passive income because you only have to set it up once and then you can sell the same course over and over again.

It’s important that you set up passive sources of income. These are the ones you need to prioritize.

Your First Step

An obvious place to start would be to buy stocks in public companies if you have not yet started investing.

After all, jumping from a pure M1 to an M2 means that you are moving from 96 percent of the population to the exclusive club of the 3 percenters.

When you get other sources of income set up, it’s important that you do not use all the money on consumption.

Let all (or most of) your new income stream be reinvested in new money machines. Those money machines could obviously be stocks and shares.

A great place to start learning about stocks is by reading my e-book Free Yourself. You can download it here.