Part of an intentional financial life also means that I now have some money flow habits in place. Thanks to these habits, I can life below my means, travel and enjoy life and build up freedom fund as measured by the Amber Index.
What are the sources of money?
Salary: I work as an employee and get paid each month a salary.
13th month and holiday allowance: one of the benefits of being an employee in Belgium is that I get paid 14 times in a year: One extra salary in May and one extra salary in December.
Other sources: There are various other sources of money in my life
- Tax refund: In general, I pay too much taxes in a given year. hence, I get a refund. This has been the case for the past 20 years. I am curious how this will play out going forward with my new personal situation
- Various refunds: typically I pay too much on a monthly basis for electricity. Once a year, I get a refund.
- windfall: money you did not see coming
Where does my money flow to?
Living expenses: This covers my da-to-day living
- Monthly expenses: this is what I spend every month on food, entertainment, small travel, clothes,…. I report it every month in my financial report. Things that are not reported are my payments for the living expenses of my kids, telecom bill, saving for my grand child and my personal pension plan contribution .
- quarterly or yearly bills: This is my own way to deal with bills that do not come every mont: I set aside each month 1/12 of the expected expense and keep track of this. When the bill hits, I take the money out of this jar. Some companies, like my electricity company do this for me. Here you can find advances for water, electricity, insurance, house tax
- Exceptional items: Things happen, you can not model everything in life. That is why I set aside each month some money for those items that happen at random or that go above my budget and add value to my life.
Holiday fund: Travel is an essential art of my desired life style. I like to explore new regions, people and cultures. I am thankful that my job and life style choices allow me to spend a lot of money on this. There is in general a limit: I should not spe,d more than what I have in the holiday fund.
Freedom Fund: this is where the rest of the money. In essence, this is the money that I set aside to invest or to change the course of my life. An example is that I save money at the beginning of the year to take one month of unpaid holiday. That means that I save enough to cover my living expenses for one month. Once that is done, the money can flow to other assets or plans that I have in mind. The assets that contribute to my Financial Independence are measured in my Amber index.
The small print
Where is my option income? Well, I consider that as money that is generated within the freedom fund and it stays there. For simplicity of the diagram, I did not put in in the flows. The same goes for dividends.
How does your money flow?
Kudos to Geldnerd. His blogpost inspired me today to write this up. In corona times, I have free time…