How to Achieve Financial Freedom, with The Humble Penny
How to Achieve Financial Freedom, with The Humble Penny
💸 Ever feel like you should be saving more for uncertainties, but just never manage to? Or perhaps you dream of freedom and the option of retiring earlier? Maybe you feel like you work hard but just don’t earn enough money?
In today’s episode, I had the pleasure to interview Mary and Ken Okoroafor, founders of The Humble Penny, who are pros at helping you achieve your money goals faster and live a life of financial freedom.
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You can listen (32 min) and subscribe here:
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“The people you have around you are absolutely critical because they will help you to really stay challenged and stay on your toes, as well as really look inward. By looking inward that you begin to ask yourself, what kind of mindset do I actually have?”
Creating a Different Life for Yourself
Ken Okoroafor moved to the UK when he was 14 — first generation immigrants in the UK. His family didn’t have money, so he grew up thinking of how he could create a different life for himself. Mary was born in London to immigrant parents, and was raised in a rough council estate in Hackney. She, too, wanted to make a better life for herself.
Most people live pay check to pay check. They earn their income, they pay their bills, and they pay for debt. They might book a holiday, but then they wait for that next pay check. The thing that separates the people who are maybe more financially secure and ultimately become financially independent is that they have created a much larger buffer.
To get started on that journey, it’s important to try to live below your means. As millennials, we struggle with the concept of the future — so to start, it’s key that you understand where you are because a lot of people run away from the reality of their finances.
Then, you need to understand your destination — what does that financially independent life look like? What does it mean in numbers? Then, it’s what's the gap in between that that needs to be filled? That's the very basic outline of the initial picture that one needs to begin to create.
Trying to calculate that first number can be hard — but it's simply when the income coming from your assets is able to cover your outgoing living expenses. Everyone’s numbers will be different. If your lifestyle is simple and low cost, you will achieve independence sooner than those who want a more expensive lifestyle.
If you can simplify your lifestyle and then, over time, invest in assets to generate your income without you necessarily having to work every hour of the day. When you trim your outgoings, you are far more likely to get where you want to be because your output is into investing into various assets that then generate your income on a monthly basis.
When we talk about assets, it’s basically something you can invest in the traditional asset classes or equities, stocks and shares, bonds, fixed income, cash and property. But there's also less traditional and alternative asset classes.
figuring out your investments
Ken and Mary are big fans of investing in themselves — because the more valuable you are to the marketplace, the more you're likely to earn more over time. It’s important to feel like you are always growing, don’t feel stagnant or like you’re not progressing. This will mean that economically, you're much more likely to earn more because your skill set is at a much higher level than other people’s.
It’s also important to invest in the stock market. Ken and Mary started doing so in 2010 which has been a big part of their journey. Initially, they started with specific income paying dividend stocks, but then they started to diversify into other areas such as index funds and ETFs.
Property investments were also something that the couple took advantage of, starting with their home that they’ve now paid off. Next came other properties, and then a chain of businesses. Mary ran several nursery businesses that bring them an income to this day.
understanding the ‘fire’ movement
Financial Independence, Retire Early (FIRE) is a financial movement defined by frugality and extreme savings and investment. FIRE can help plan your finances and curb your spending, so you can stop working as early as your 40s.
The challenge of living by the FIRE movement is that you can feel like you’re out of the loop with your friends and society, because everyone seems to spend more than you. There are also sacrifices you have to make — like opting for lower priced holidays or less expensive cars. The hours spent on juggling having a career, children, and gaining additional degrees can be extremely tiring — but it’s all just temporary, which helped the Ken and Mary stay motivated.
Other sacrifices include saving money on food — getting creative with what you buy, where you shop, and how you cook.
Another important sacrifice was that Mary and Ken decided to not have a third child — which of course was a very personal choice.
If you want to try out the FIRE movement, it’s helpful to have a framework that you can rely on. There is one called the POS, which is P for purpose — i.e what's your core and why do you want to go on this financial independence journey? Why does it matter to you as an individual?
Then there's the O, which is the objective. For example, you want to build a 600K portfolio by the 31 December 2032. It has to be really clear and really visible.
Then, the S in the strategy, which — what's going to be my approach for how I do this? Will it be investing in the stock market? Will you focus on getting promoted in your career and really advancing yourself? Or maybe you will have a side hustle in addition to your daily job? And then there's the O, which is the objective.
If you want to keep motivated, definitely consider joining communities of like-minded people because it's so important to surround yourself with people who have the same kind of mindset as you.
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You can follow and connect with The Humble Penny at:
Instagram: @thehumblepenny
Twitter: @thehumblepenny
Website: thehumblepenny.com
*** Our podcast partners PensionBee are also offering you a £25 pension contribution (£20, plus £5 in tax relief) when you sign up. To claim the offer, follow this link: https://www.pensionbee.com/vestpod. Capital at risk. ***