The FiFi Basics of Finance

We can elaborate endlessly on money, business, and life but whichever way you look at it the primordial ground rule for healthy personal and business finance:

Each and every month you strive to spend less than your income.

If you break this ground rule for long enough your business will fail, your life will be miserable or your country will go bankrupt.

To ensure you won’t break this ground rule every month it’s good to work on the following:

  1. Eradicate your debt.
    Excluding your mortgage may or may not be beneficial in specific cases.
  2. Create a basic buffer that covers 3 to 6 months of your expenses.
    This should be in a liquid account, without too much risk involved. You want this money to be directly accessible in case you lose your job or when your car breaks down.
  3. Start each month by saving at least 10% of your income into long-term saving and investing accounts.
    Only after you have 1. and 2. covered. Wherever you put this money, you intend to not touch it for at least a decade (or your retirement, whichever comes first).


1. How to become debt-free?

Start with the highest interest loans. If you have any payday loans, get rid of that asap. Make an overview of all your loans. If you have lower some smaller lower interest loans, consider paying these off just because it will give you a better financial overview.

What if you don’t even see how to become debt-free?

If you can’t make ends meet, first think of ways to spend less money, e.g. by cutting down on monthly, subscriptions, getting a smaller, more economical car and cutting out all non-essential expenses such as restaurants.

Second, consider making some extra money. Put all your clutter and unused stuff up for a garage sale, get a side gig as a driver with Uber, as a nanny.

2. Basic buffer

Your basic buffer will give you some peace of mind. Aim for at least 3 months of expenses. 6 months is better. Cutting down on monthly expenses will make building and maintaining this buffer easier.

3. Save and invest

It’s an excellent idea to maximize your 401k and Roth IRA accounts every year. Even more so if your employer matches your investment. Only go for low cost index funds from Vanguard, Fidelity or similar funds. You want to pay less than 0.2% on managing the funds. Don’t invest through anything that incurs a 1% yearly fee, unless you go for high risk.

If you are inspired by the FIRE “financially independent retire early” movement, it’s a good idea to consider the possibilities of cranking up your saving rate even more. Even some folks with modest salaries manage to get to saving rates of 50% and higher. And with a saving rate of 50% you can start thinking of retiring in 10 years from now.

Riskier than index funds

Another possibility that can offer (more) freedom sooner is to invest in riskier assets. This is best approached in an anti-fragile way: only ever invest what you can loose. And keep more of your money in less risky assets. Some possibilities here are:

  • Investing in P2P loans through companies such as Lending Club, you can achieve rates of return over 10% here. Also interesting to spread out geographically, e.g. by investing through European P2P companies.
  • Real estate. No REITs, no time shares, no flipping, no villas. Middle of the road, decent looking properties that are also easy to rent during economic turmoil.
  • Cryptocurrencies have shown extremely high risk/reward properties. If you’re at step 3 it can be interesting to put 1% of your monthly investments in this entirely new asset class. Square’s Cash App is probably the best way to get started with this.

How can we help?

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Robin is one of the founders of FiFi Finance. He is our financial expert on loans, savings, wealth growth as well as our political and economic analyst. He is a former financial journalist and has been a web-editor for more than 20 years. Read more about the whole editorial team at FiFi.