It’s time for a monthly update, and this update will be different from all the previous ones I have made. And boy, I have spent quite some time creating this new update format.
My wife and I have now officially combined our finances, so now we are not also legally married, we are also financially married. Crazy!
This means that everything changes from a financial point of view; our net worth (liquid and illiquid assets), our savings rate, our FI number(s) and our common journey towards FI.
Let’s get to it!
Personal life: What happened in October?
In our personal life, a lot has happened in the past month.
We have spent quite a bit of time on our house with new projects, been busy at work and been preparing for our mini-retirement coming up in a few weeks (we are so excited!).
We have spent time talking about the future and what we really want to do, and we will dive further into this on our mini-retirement.
Our combined finances and this blog have also been something we have discussed. My wife might start contributing a bit to the blog (I will have an interview with her online soon) and we are trying to figure out how our common (FI) journey will be, so it is not only my journey, but our common journey.
Financials: How are we tracking on our FI goal?
After spending a few months on it (and waiting patiently for our bank), we have finally managed to combine our finances across banks and investments, so we now have the full overview of our combined finances.
So what are the biggest changes? I had roughly 500,000 DKK (76,923 USD) in net worth before this, but together we have nearly five times more. What contributes to this? I have started including our projected real estate gains as part of our net worth, which makes up a fair share (roughly 1/5 of the total), and then my wife also came with a higher net worth primarily from real estate and stocks. I earn quite a bit more, so we figured it would be fair if we shared my salary and her net worth – doing this we will break even within a few years, and we both like the idea of sharing finances and “being a team” rather than individuals 🙂
Since this is the first month of tracking, it is a bit hard to track our savings rate precisely, but we had a savings rate of approximately 45%, which I consider relatively good. We will both see salary increases and bonuses coming in over the coming months, but we will not get salary during parts of our mini-retirement, so this picture might change in the coming months.
MoneyMow savings rate over time (%)[wp_charts title=”linechart” type=”line” align=”alignright” datasets=”-3,44,32,35,46,53,22,-75,30,35,28,45″ labels=”17-Oct,17-Nov,17-Dec,18-Jan,18-Feb,18-Mar,18-Apr,18-May,18-Jun,18-Jul,18-Aug,18-Sep,18-Oct” width=”100%” scaleoverride=”true” scalesteps=”10″ scalestepwidth=”10″ scalestartvalue=”0″]
Our combined take-home income was 66,001 DKK (10,154 USD) and we managed to spend 30,212 DKK (4,648 USD) resulting in the 45% savings rate excluding income from the blog.
Since we now have combined finances, I have created a new overview of our net worth going forward (I hope you like it 🙂 ). It shows our total net worth split into liquid assets (money we can use in the short-term) and illiquid assets (money we cannot use in the short-term).
Our total combined net worth is 2,379,275 DKK (366,042 USD) and as you will see in the overview, most of our assets are illiquid:
Liquid assets make up 24% of our total assets with a value of 571,643 DKK (87,945 USD).
Illiquid assets make up 76% of our total assets with a value of 1,807,631 DKK (278,097 USD).
Since we just combined our investments, I cannot report on how they performed last month, but I know that our stocks plummeted ~5% just as the rest of the market and that peer-to-peer lending was at 1% in return and cryptocurrencies remained relatively flat.
In the future, my wife and I will be striving towards three financial independence goals:
- Achieving savings equal to three years of expenses with zero income
- Achieving savings at the level of our optimistic FI number
- Achieving savings at the level of the traditional FI number
Why do we need three goals? Let me explain.
We need three goals (or milestones) because the road towards financial independence will take different turns, and we want to start experimenting with our lifestyle way before actually achieving financial independence (just as we do with going on a mini-retirement soon). What if we actually found out that traditional financial independence actually isn’t something for us? Then it would be stupid to spend many years trying to achieve it if we could be more happy with a different lifestyle.
The first goal of having savings equal to three years of expenses is to give us the freedom to make choices with a sufficient long runway of savings to experience new ways of living and potentially succeeding with different projects. As an example, one of us might start working part-time to see how that would work or start a small business. If we only chased our FI numbers, it might take quite a while for us to be able to do this.
The second goal is achieving savings equal to our “optimistic FI number”. I have written articles on how to calculate your traditional FI number, and I have made a custom FI calculator with assumptions based on the traditional financial independence calculations. However, my wife and I will most likely not pursue traditional financial independence.
Traditional financial independence assumes that you will never earn a single cent in your life after retiring early. It also assumes you must be able to withstand all potential financial crises. We have always felt that these assumptions are relatively unrealistic. Firstly, we will most likely still earn some money after retiring from part-time work or this blog for example. Secondly, we are not afraid of having to go back to full-time work if somehow a financial crisis hits and wipes out a large share of our net worth.
Our optimistic FI number assumes we have part-time income of 20,000 DKK (3,077 USD), which is less than 1/3 of what we currently have. It also assumes a higher-than-usual safe withdrawal rate of 7% where 4% is the most commonly used – simply because we would rather start working part-time sooner and run the risk of having to go back to full-time work rather than waiting a long time to be 100% sure we will be financially independent forever.
The third goal is naturally achieving savings equal to the “traditional FI number”. For this goal, we assume we will never earn any money again and we use the more traditional savings rate of 4%. Ultimately, this is what we would like to achieve, but it is not what the whole FI journey is about. That is why we have three goals – you could call them milestones.
As you will see, just changing those simple assumptions means that we will be able to become “financially independent” nearly four times as fast with the optimistic FI goal compared to the traditional FI goal, but it of course comes at a much bigger risk.
In both the optimistic and traditional FI goal, we assume that we will move to a slightly less expensive house and realize a small share of the gains we have currently had. We have done this because a lot of our net worth is in real estate and it would be stupid not to include it when we expect to downsize a little in the future. It is not included in the first goal because we will most likely not be downsizing within the next three years.
Are we really going to be financially independent when we achieve our optimistic FI goal, you might ask?
Probably not by the standard definition, but I still believe it holds the same benefits as traditional financial independence. We will be able to do what we love and spend time with people we care about. We are not afraid of working – in fact, we like working, but we just want more freedom. Based on experience, we are confident that we can each earn 10,000 DKK (1,538 USD) with a relatively small amount of effort requiring us to work much less than we currently do with great flexibility to say yes and no to work in different periods (e.g. by freelancing as consultants). This being said, it is of course still our ultimate goal to be financially independent in the traditional sense – we just know that the road there might take a few turns on the way.
I will start reporting on the progress of these three goals in our monthly updates, and as you can see in the figure below, we have a good starting point for all three:
For the first goal, we are 39.7% of the way towards having three years’ expenses in savings with 571,643 DKK (87,945 USD) in liquid savings.
For the second and third goal, we are 29.1% of the way towards reaching our optimistic financial independence goal and 7.5% of the way towards reaching traditional financial independence with 814,526 DKK (125,312 USD) in FI savings including 15% realized real estate equity.
Next week, I’ll publish a post where I dive more into each of these three goals and the assumptions behind them.
Blogging: How did income and key metrics develop on MoneyMow?
MoneyMow had a record-breaking month in October in terms of traffic – mostly because of a feature in Rockstar Finance. The blog got 2,000 page views in one single day following that feature, which is roughly 20% of a normal month’s traffic. I was sure I was being attacked by hackers when I saw the number at first 🙂 Apart from this, the blog’s traffic was relatively flat compared to September.
My income on the blog for October was:
- Affiliate programs: 295 DKK (45 USD)
- Sponsored posts: 0 DKK (0 USD)
- AdSense: 82 DKK (13 USD)
The total blog income for October was 377 DKK (58 USD). This is the lowest income I have had in the last year, and I believe it is a mix of my affiliate program not really performing as it used to and the fact that I have not been able to spend as much time on the site in previous months as I would have liked to. Hopefully, in my mini-retirement I will be able to focus in on this a bit.
The metrics from October look really good:
- Visitors: Number of visitors were 6,385 and grew with 33% compared to last month
- Page views: Page views were 14,644 and grew with 6% compared to last month
- Facebook likes: Facebook likes are at 2,765 up from 2,595 last month
- Twitter followers: Twitter followers are at 925 compared to 904 last month
- Newsletter growth: The number of people following my newsletter continued rising this month with 9% reaching 207 subscribers
Favorite posts of the month
My favorite posts of the month were:
- Cubert from Abandoned Cubicle wrote a fun post on how to survive a cold, dark winter including the concept of “hygge” – and being from Denmark (which is mentioned frequently in the post), I found the survival guide both relevant and a bit provocative to find out that us Danes have cliques and are not as open-minded towards visitors (even though I know it is actually a bit true!)
- Mrs YFG wrote a great post on FI and feminism. The post is about equality for all and having the freedom to choose – I can definitely recognize some of the prejudices they are facing as I might also stay at home while my wife is working for some parts of our life, which is generally not considered a “normal” thing to do
- Kevin from Out Of Your Rut wrote a thought-provoking post on why financial content are often only directed towards the top 10% – and I believe some of his points are right, for example that FIRE might not be applicable for everyone (e.g. people with low-mid incomes). This is something I try to be aware of when I write my blog, but I also agree with Kevin that it should not be an excuse to give up trying to achieve financial independence and that FI should always be on the radar of everyone, although recognizing that for most it might be hard to achieve the 7-figure portfolios of the top 10%
That was all I had for October! Thanks for reading all the way through this update.
See you next month!