My financial situation is pretty bad. I have a negative net worth of around 20.000 dollars due to poor choices when I was younger. I didn’t know jack shit about money and the importance of managing my finances in order to live a life with a high degree of freedom and time away from work.
However, my situation has improved a little over the last couple of years. A few months ago I got a job at a government office. This is my first ‘real’ job after I graduated from university. As with many jobs, there are good things and bad things about my job.
Let’s get the negativity out of the way and start with the downsides: It tends to be boring. After all it’s an office job so naturally there’s not much action going on. I work about 40 hours a week on average. The standard in my country is actually 37 hours a week, but who cares about standards? I know this is not really that many hours, especially if you look at a global scale. But to me it’s more than enough.
My job consists mostly of legal work at my desk and meetings with various stakeholders. It’s alright but not exactly fun. On a side note, I know this whole ‘look at me I’m so special and I really don’t want to work’ and ‘buhuuu society is evil and always against me’ might come off as a bit whiny. Maybe I’m just another thin-skinned, special snowflake millennial who should really just STFU, buckle down and get to work! Well, there might be something to it. To rephrase my girlfriend: “WWE, you’re such a whiny little bitch!” She’s right, of course, but I just can’t help it.
With that out of the way, lets go on with the good aspects of my job: I can get to the office in 15 minutes. By bike. That’s a huge benefit! As I’m sure you know, many workers have much longer commutes. My mom, for example, has to commute 1,5 hours each way. Guess how often I hear her complain about it? You’re exactly right: just about every time I see her.
The co-workers are really nice and laid back. After all we’re talking about a job in the public sector. It seems like they really believe in public service, so the job is meaningful to them. Also, they’re actually normal people with a real life outside their work. Not many career-minded assholes around (I’m sorry, I know not all assholes are career-minded). I haven’t seen any signs of a toxic working environment. Of course, there’s the usual gossip and small talk but it’s not that bad. Furthermore, my boss seems to be a pretty nice guy!
Writing this blogpost has made me realize that I might be quite lucky with the job I’ve got. All in all, it’s fairly nice. It doesn’t pay that much, but it could be worse. In terms of work, this might be close to as good as it gets. So I’ll stick to it for now, while I’ll try to get my savings rate up to get started with the whole FIRE-thing.
This also means that I have to do what all personal finance advisors tell their clients first: make a goddamn budget.
I take home around 3.000 dollars a month after taxes. Not exactly much, but still way more than I’ve ever made before.
My monthly expenses covers:
- Rent 550 dollars (including cable-TV and Internet).
- Food (including lunch at work) 365 dollars
- Union membership 35 dollars
- Unemployment insurance 72 dollars
- Membership of the local soccer-team 15 dollars
- Cell-phone 7 dollars
That makes a grand total of ~ 1.050 dollars a month on fixed expenditures. That leaves me with 1.956 dollars. I’ll take ~ 370 dollars out. This is my freestyle-money, which I can use as I please. I don’t intend to be extremely frugal, I still want some luxury while I spend the only life I’ll ever have in the office.
However, I have tried to cut down on my expenses the last couple of months: I have terminated my membership in the local weightlifting gym, as I have started to do more calisthenics outside for free. This saves me 20 bucks a month, while it allows me to spend time outside doing lots of fun stuff. I have also changed my cell-phone plan and cut the expenses from 20 to 7 dollars a month.
Surely, there’s plenty room for improvement. I’d like to save the money from the union membership and unemployment insurance as it would save me 1.284 dollars a year! However, I’m not willing to give up the union membership. This might sound odd to readers outside of Scandinavia, but there are some reasons as to why I want to stay a member for now. (I’ll make a post later about the rather unique regulation of the labor market in Denmark and the influence of the unions).
I’ll definitely cut out the unemployment insurance at some point. If I manage not to get fired before September (this is not a given, I am the world’s worst employee after all), my employer’s term of notice will expand from 14 days to a month, which should be enough for me to secure a new job (most likely a shitty one though).
It’s definitely possible to spend less than I do at the moment. I could start by reducing my food budget. But I’m quite happy with my level of consumption. Bear in mind, this budget is already a huge improvement compared to the non-existing ‘budget’ I had a few years ago.
Back then my budget looked more like this:
With all the expenses out of the way, I’m left with just around 1.587 dollars, or about 50 percent of my income, to invest each month.
Before we continue, I want to state that I’m not a financial advisor, and I’m not recommending any specific investment strategies. I’m just explaining how I intent to manage my own investments. My strategy might not be the best in your case, as we all have different levels of tolerance towards risk and different goals in life. In fact, I’m a complete rookie in the world of investments. Mind you, my net worth is negative.
I want my investments to be simple and easy to manage. In fact, I don’t care much about stock trading, bonds, market timing and all that jazz. I want freedom in my life and that includes being free from thinking about money all the time. I’m not trying to get out of the 9-to-5 lifestyle just to start spending all my time worrying about market events or reading about the hottest Chinese crypto currency.
Therefore, my first step is to set my investments up to be done automatically every month. I don’t want to manage this myself every payday, as the temptation to make stupid decisions based on nothing but good old speculation would be significant. I don’t want to think about my investments for the next 15-20 years. This is key to my strategy. I’m in for the long run. No matter what happens in the market.
The automation can be set up extremely easy using an online broker (they’re often way cheaper than your normal bank). You have to be careful though, when you choose which broker to use, as there will be (hidden) costs all around you. Take your time and consider the options available to you.
I want a 100 percent stock portfolio and I’ll invest in passive index funds. I don’t want to go into too much detail about this, as the great financial guru Mr. Collins has already done a great job explaining the strategy at his blog. You can read it here: http://jlcollinsnh.com/stock-series/. I was quite happy when I read this excellent piece of advice from Mr. Collins as the strategy seemed to fit me perfect.
However, I don’t live in the US. And as I don’t have the 500.000 € required to invest directly in Vanguard US, I have had to apply Mr. Collins advice to the conditions here in Denmark.
Unfortunately, we’re way behind the US when it comes to index investing due mostly to our tax code. For example, it’s not efficient tax-wise to invest in ETF’s, if the ETF is domiciled in a foreign country. Therefore, the competition is almost non-existent and as a consequence the prices for shitty employee’s like you and me sky high.
So I’m left with some crappy index funds with expenses of close to 0.6 percent. I’ve chosen a fund that tracks the MSCI World Minimum Volatality Index and a fund that tracks the OMX Copenhagen 25 Index. 70 percent in the MSCI fund and 30 percent in the OMX 25. There you have it, simple and easy to manage.
With annual investments of around 19.000 dollars and expenses of around 17.000, I can retire in 15.7 years according to an online FIRE-calculator. This does not include the – 20.000 dollars I owe in student loans. However, it also doesn’t include the 17 percent of my income I’m contributing to my mandatory retirement account.
If nothing changes (like having kids, buying a house etc.) I’ll be ~ 45 when I can say goodbye to the 9-to-5 lifestyle! A bit old for my taste, but it sure could be worse, considering I’m only starting at this now at the age of 29.
As you can see the savings rate is by far the most important aspect. You can read more about it in this post by Mr. Money Mustache http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
Of course, there are lots of uncertainties like the return of investments etc. but I feel like I’m on the right track. Hopefully I’ll see a pay raise at some point and I have a few ideas about how I can make some money on the side.