Unlock the Secrets to Financial Happiness in 3 Easy Steps with Zero Stress

Welcome to my blog! In this I hope to pass on as much as I can of my small amount of wisdom on investing I have gathered over the last 5 or so years as I can. Investing can be very scary, the word often being wrongly associated with gambling and thoughts of "investing is dangerous and often a scam" and "I don't invest as I don't want to risk losing all of my money". These are to some small extent valid concerns given the amount of sharks out there trying to take your money for a large fee, and over complicating everything on purpose to make investing seem like rocket science. I can promise you, investing done right is as simple as putting your money in your bank account, with no need for thought or worry. I have boiled it down to 3 simple steps you can take to be on the path to financial happiness.

1. Clear your debts

2. Invest as much as you can afford

3. Hold on for the ride

Now before we get in to expanding on these, I should probably define what I mean by financial happiness and what it means to me as compared to the more commonly used term financial freedom. Wikipedia defines financial freedom as "a state where an individual or household has accumulated sufficient financial resources to cover its living expenses without having to depend on active employment or work to earn money in order to maintain its current lifestyle". I disagree with this statement as it sets as the end goal to freedom the notion of never working again, assuming everyone hates their job and the only way to not to work again is to gain millions in wealth. This is for many is a completely unattainable goal and before they are even out the starting gate people have set themselves up for failure, and this causes them to never invest, which is what is required to build wealth; it is a vicious circle. Financial happiness for me is defined as "the belief that you are doing everything you can with the money you earn in a job you love". Sure, you might one day acquire enough wealth to never work again, for me not financial freedom full stop, but most people won't reach that. However, if you know you're doing everything you can with what you earn and love what you do, you can't ask for more than that and I promise wealth will come your way if you invest right.

So my first step, clear your debts. Debts are like leeches; they suck your wealth, and even if you invest well, these leeches will always suck harder and you won't grow your wealth. Clear off your debts starting with the ones with the highest interest rates. This might take a while, but I promise, once you do this you will smile and it will be a weight off your shoulders. And while doing this, under no circumstances buy things while taking out loans. If you need a loan to buy something, you can't afford it and you will only add another leach to your wealth. Only buy things you can afford with the money you have, never take on debt. Taking a mortgage out for a house you live in is slightly different as it is somewhat of an investment but for me it's more of a life choice than an investment; we'll discuss that more in a future blog.

Step 2, invest as much as you can afford and do it continually. Now you are probably thinking, well what can I invest in, and this is where it can get scary for many people. There are thousands of companies trying to persuade you to invest through them for a "small" percentage of 1-2% per year. These people will then charge further fees as they swap your investments regularly as that is how they make their money, and they will also make it very hard to get your money out. What might seem like a small percentage can add up to huge sums over a long period of time. Finance is one of the few assets where the less you pay, the more you get, meaning the lower the fees that are charged to you, the more money you get to keep. The other thing that may tempt you is to buy individual stocks, but unless you know what you are doing, which hardly anyone including Wall Street does, then you are taking way too much risk and will stand to lose a lot of money. The BEST thing you can do is to own a small percentage of companies in an entire market in something called an Index Fund. The main reasons index funds are so good for the average investor is the fees are really low at 0.25% or less depending on which market you invest in, it requires no maintenance as the fund does all of the investing passively by mirroring a market e.g. the S&P 500, and you can expect to get on average 7-8% yearly returns after fees, meaning your money will double at least every 10 years. To get specific, I personally invest through Vanguard (Jack bogle the founder of Vanguard invented the index fund) as the platform is simple and the fees are some of the lowest in the market. You'll want to invest in a broad index fund, personally I invest in the FTSE Global All Cap as it invests across all investable companies in the world so you really can just invest in this single fund and leave it. I'd also recommend the US Equity index fund as investing in the entire US stock market gives you global diversification anyway given how much the US market exports.

Step 3, is hold on and don't change course. For me one of the biggest challenges people face when investing is to let their emotions get the better of them and sell their investments when there might be a bit of a dip in the market. The way to get the best returns is to hold on through the good times and bad. To highlight this, Fidelity did a study where they found that the most successful investment portfolios were those that were never touched, and within that DEAD people were the ones with the very best portfolios. If you can just resist the temptation to sell you'll be doing better than nearly everyone else who is investing. I have found the best way to not get emotional is to always come back to the long term data for holding investments of 5-10+ years, which invariably shows a straight line upward of investment returns and just trust that this will continue to happen, which it always has.

So, it's that simple! If you can follow the three rules above, you are going to be on an amazing journey to financial happiness, and can spend your time focussing on doing the things that really matter to you.

Some really useful videos and books that dig in to more detail on the above can be found below:

Videos

JL Collins is an absolute hero of mine and really set me on my investment journey.

Jack Bogle is the absolute legend who invented the index fund, he really is the very best of humanity in my opinion.

Warren Buffet is probably the worlds most famous investor and even he advises investing in index funds.

Books

The Simple Path to Wealth by JL Collins

The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by Jack Bogle