ESG funds – green sustainable investing or a marketing gimic?

In recent months I have been looking at all aspects of my life to assess where I can lighten my ecological footprint and, within my personal sphere of influence, positively encourage global warming mitigation action.

Naturally for someone interested in personal finance, the question arises whether there are ways to invest in companies that have more progressive stances on the environment and, likewise, avoid certain firms or industries which don’t.

One approach that is becoming increasingly popular is ESG investing. ESG refers to Environmental, Social and Governance, three key factors in measuring the sustainability and ethical impact of an investment in a particular company. The concept picks up environmental concerns (eg. climate change and sustainability), social concerns (eg. diversity, human rights, consumer protection and animal welfare) and corporate governance (eg. executive pay, employee relations and compensation). All good things in my mind, and aligned with my values.

Like anything though, it is important to look beyond the surface and unfortunately ESG doesn’t necessarily mean as green, sustainable or ethical as I assumed. Digging a little deeper has me questioning whether ESG funds are materially different from other investment options, especially within an index fund. At a more fundamental level, I’m also questioning whether attempting to invest in sustainable companies makes sense or if there better ways to allocate my money and time.

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The paradox of thrift – what if everyone became more frugal?

Having recently watched the Playing with FIRE documentary and contemplating the increased media attention around the Financial Independence movement, I started asking myself – What if this idea really took off? What if a lot of people embraced a more frugal lifestyle? What if everyone started saving more and Financial Independence became mainstream? What if a large percentage of the working age population didn’t need to work?

This is probably nothing more than a fun thought experiment, given the unfortunately high level of financial illiteracy, societal pressure to keep up with Joneses and the rampant consumerism now embedded deeply in our social conscious.

But what if…..

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Appreciating the good life at Thanksgiving

As an expat living in the United States, we’ve been privileged to be exposed to the American tradition of Thanksgiving for a couple of years now. While we haven’t embraced the national Turkey obsession, it is a fantastic time of year to spend time with family and reflect on the many things we have to be grateful for.

It is also a time of year when there is lots of temptation. The sales are already in full effect and Black Friday promotions seem to come earlier and earlier in the year. During the spending frenzy happening around you, remember that the best things in life aren’t things!

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FI Around The World: Considerations for those pursuing Financial Independence outside the US

The Financial Independence (FI) movement can appear to be very US centric, having the largest community and most prominent bloggers and podcasters. The terminology used, retirement vehicles highlighted and strategies suggested are, not surprisingly, typically those available in America.

As an expat living in the US, but likely to be moving on next year, I’ve been conscious and interested in the broader international approach to Financial Independence.

What works in one country may not necessarily work in another one. Where you live can have a big impact on the approach you take and strategies you employ to save effectively, minimize tax, invest and build assets.

So what are the universal themes applicable wherever you live? What are some of the key differences to think about and consider when developing your plan of attack to reach Financial Independence?

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The traps and benefits of “just in case” thinking

Why do we hold onto things that we don’t use or value? Why do we take certain actions that don’t make sense, given current circumstances? Very often the internal rationale is “just in case”. We tell ourselves that we might need an item sometime in the future, even when it hasn’t been used in years. Sometimes we act in a certain way because of perceived possible future scenarios.

We all know the Boy Scout saying “Be prepared” and the old adage “By failing to prepare, you are preparing to fail”. I’m not sure that this is always great advice or rather, it has taken too literally by some people and becomes their Just In Case (JIC) excuse.

1 in 11 Americans, pay $90+ per month to store their personal junk in self-storage facilities
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Lifestyle inflation – the silent assassin!

I’ve written previously about the millions of people living paycheck-to-paycheck. It doesn’t matter how much you earn but rather how much you spend. According to a recent Nielson survey, 25% of American families earning more than $150,000 per year still live paycheck-to-paycheck, so even the wealthy aren’t immune. Apart from poor financial habits, a key reason for this ongoing money stress, for many people, is lifestyle inflation.

It is a gradual, subtle and common problem that’s killing our collective finances. The harmful effects occur over time and in a way that often goes unnoticed.

Like the fable of the boiling frog, who didn’t perceive the danger of the increasingly hot water and was slowly cooked to death, many of us have been unwittingly turning up the financial heat in our own lives by trying to keep up with the Joneses or “upgrading” our lifestyles when we get a payrise.

Most of us have been victims to the silent assassin of lifestyle inflation. Our spending inches up year-on-year, and what was once something you considered a luxury item is now a must have “need”.

Lifestyle inflation, a silent assassin

Those moments when you convinced yourself that you deserved it because you work hard, or that a “one-off” treat won’t hurt, have added up over time. The aggregate impact of decisions to get a nicer couch, second car or bigger house increase our monthly spend commitments and raise the bar of what we need to earn.

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Life is too short to not take control

Resignation or resistance? Passiveness or proactivity? Unconscious or mindful? These are active decisions and ones which I believe have a dramatic impact on our quality of life. The mind shift to being more in control of one’s destiny also requires an honest recognition of the situtation, relationship, circumstance or lifestyle we are living and then a resolution to change. Instead of complaining about your lot in life, do something about it.

One of the most liberating realizations you can come to is that you are not a victim of circumstance, but rather a product of your decisions. There are the small decisions that aggregate over time, and bigger changes that shift the paradigm.

“We are not imprisoned by our circumstances, our setbacks, our history, our mistakes, or even staggering defeats along the way. We are freed by our choices”

Jim Collins

I’ve written in detail about some of the positive actions and choices I’ve made in recent months about my finances and the pursuit of financial independence, trying to live with less and implementing changes to lighten my ecological footprint.

Another area I’m looking to proactively address is work.

Time and life is finite!
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