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I’m a big fan of ERE. When I embarked on my journey towards financial freedom last year, I followed many of the principles outlined in ERE, just that I didn’t know there was an official term for doing what I was doing.
My ERE strategy is quite simple. Each month:
- I contribute first and foremost to my financial freedom fund. My paychecks now pay for my paychecks later. I have a defined target that I absolutely must meet each month. This tactic has worked so well that I can’t believe how much I have saved over the past nine months.
- I then contribute to my short-term goals. Sounds weird? Sounds counter-intuitive? Whatever happened to my medium-term goals? I want to enjoy the “now” as well — completely and without regret. My medium-terms goals (such as saving-up cash for my next car) are certainly important but come lower down the pecking order.
- I then contribute to my medium-term goals. I just have one at the moment.
- Finally, I either splurge whatever’s left or, if I’m in an aggressive ERE mindset, I contribute whatever’s left as a bonus into my financial freedom fund.
Here’s what my ERE-chart looks like:
Monthly ERE-savings are, on an average, 43% of my monthly income. Monthly expenses are, on an average, 26% of my monthly income. The remaining 31%, on an average, goes into everything else. I can break this down further if you’d like me to.
I want to bump-up that 43% closer to 50%! That would be serious ERE. That would require me to burn less petrol each month — consider this: 49,000 kilometers on the Swift odometer, 10 kilometers per liter of petrol, 4,900 liters of petrol, Rs 65 per liter of petrol (on an average), you do the calculations.
D won’t let me do it. She’s smitten with the Swift.
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