My Financial Freedom Journey: Monthly Update #1 (January 2017)

Fellow MoneyMowers,

This blog post marks the start of my financial freedom journey.

The purpose of my journey will be to become financially independent and teach others how to achieve the same. What do I mean by being financially independent? I mean being able to sustain your current lifestyle with money solely generated from returns on investments.

I have written a bit about my motivation and why am I doing this here.

The idea of these monthly updates will be to give an overview of:

  1. What has happened in the previous month?
  2. How am I tracking on my early retirement goal?
  3. What are going to be focus areas for the coming month?

What happened last month?

In the past month, I have spent quite some time on setting up this blog and planning for success in my financial freedom journey. Amongst other things I have made a strict budget, set up all relevant accounts in the bank and read up on a lot of algebra to be able to compute key metrics such as ‘time to retirement‘. On the personal side, big things happened:

Major life event x 2

Two major events in December had a big impact on my life, but also on my future budget and financial freedom journey.

Firstly, I got engaged to my lovely girlfriend (after she luckily accepted my proposal, phew!). For my budget this meant that I had a substantial one-off expense of buying an engagement ring, but even more importantly my budget will be impacted by a new expense dedicated to saving up for the wedding in 2018.

Secondly, I bought a new apartment with my fiancée, which is more expensive than our current housing solution. We are moving from a small 1 bedroom apartment to a 3 bedroom apartment, so it is highly future proof in terms of potential family expansion. We are purchasing the house with 20% of our own savings and 80% from a 30-year, low-interest loan at 2% per year – this gives us a wide range of options to refinance, reconfigure and redeem the loan as we go, but also gives us the security of knowing exactly what we have to pay every month. To begin with (and while we do not have kids), we will rent out a room in our apartment to ease the costs slightly. We will move in on 1 May 2017.

How am I tracking on my early retirement goal?

Since this is the first month of reporting expenses and savings, I don’t know how I am tracking on the goal, however, my expected savings rate is 51% for the month, which implies a time to retirement of 15.5 years. This is obviously not the time to retirement that I am aiming for, thus I am expecting this to improve significantly over the years. Click here if you are interested in how I calculate my time to retirement.

My current financial assets as of 1 January 2017 are:

Assets1 January 2017 (DKK)1 January 2017 (USD)1 February 2017
Total assets71,04810,149n/a
Cash48,3806,911n/a
Stock indexes8,3391,191n/a
Peer-to-peer lending14,3292,047n/a

My current liquid assets amount to 71,048 DKK (10,150 USD) – in order to retire I should roughly have 4,500,000 DKK (600,000 USD), so I have some way to go. Interested in how I calculated how much money I need to retire? Read more here. As a last note, you should know that I have locked pension savings from my work currently worth 70,884 DKK (9,415 USD), but these are illiquid and will be available once I turn 70-something.

My savings rate will be calculated based on how large a fraction of my take-home pay in a given month that I am able to either save up in cash, invest in stock indexes or in peer-to-peer lending by the end of the month – disregarding potential gains or losses on these in the previous month.

Since all of my income, expenses and investments are in DKK (Danish Kroner), I will use fixed exchange rates for all years, making it possible for people from various countries to follow the journey. The fixed exchange rate from DKK to USD is 7.0 DKK/USD and the same goes for DKK/EUR that is equal to 7.0.

I have no debt as of now (but that will change when we get our new apartment in May).

Focus areas for the coming month

In the coming month, I will have three focus areas:

  1. Follow my budget strictly
  2. Start becoming accustomed to blogging
  3. Watch out for costs related to moving houses and taking on a loan

I expect quite a few one-off costs related to moving houses between now and May, thus you will see these being reflected in my asset overview next month, but I will not let them impact my savings rate due to their significant size and one-off nature.

I am looking so much forward to getting started on this journey, and I’ll be happy to hear all of your thoughts on the way.

Have a great start on 2017!

/Carl

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