Let’s be honest. If you are reading this as 20 something years old, and you have just started to make some money. GOOD FOR YOU! You are better off than many other people.
But not everybody is that lucky. Some might just get all these “FIRE information” when they are 30, 40 well maybe even 50+ years old.
Nobody told them they could do what they REALLY wanted if they just saved and invested some money.
BUT! Even if you are stoked about the idea of chasing FIRE, and you are 25 years old. If you are a diligent saver and save 60 % of your income. It will still take you 12 years of working, saving and investing. (7 % annual return)
If you start when you are 25 years old, it means that you will be 37 years old when you have reached your goal of 25 times your annual spending.
That is not bad at all.
But you would still have wasted a lot of time being at a soul-sucking job you don’t like.
Psssst… My Little Secret You Can’t Tell Anyone
I got several new friends by being a part of this FIRE community. And many of them are super badass. The ones that are probably the coolest are the following:
When you meet Pernille she seems to have a very normal/glamorous life with expensive vacations with the entire family. And Jacob is a bit more extreme and is spending less than 10.000 $/year with no kids. Pete Adeney has one kid, he does own a couple of cars but prefers to bike around.
But the thing they have in common is that they have all reached financial independence by having a normal job.
Said in another way. They all have more than 25 times their annual spending saved and invested.
But they have another thing in common.
And here is my “secret”.
Not any of them touches the principal of their portfolio.
Yep, that’s right.
All of them have some sort of new business or job, that covers their expenses. None of them uses the money they have in the portfolio. It is more like a nice cushion if they didn’t feel like making an income.
But FIRE is not about not working. It is about doing stuff you like more, and you decide how many hours you feel like doing it.
So why should you save up 25 times (or more) of your annual spending? To “retire”, but never touch that principal.
Why don’t we just save up 2-5 times our annual spending? Do a bit of work, which is nice. Go for a couple of mini-retirements. And let compound interest do the rest of the work?
Do We Even Need 25 Times Our Annual Spending?
“How much money you would like to retire with??”
It is often the question we hear when we talk about personal finance. But it is the wrong angle to ask the question.
How LITTLE money can we retire with is the right way to ask that question.
The “25 times-your-annual-spending-rule” is based on the thought that we never want to run out of money. And why is that?
What if the day we hit the graveyard, that will be the same day that our accounts are empty. If that is the case. We could change our goal.
So if we want to hit the graveyard with no money. AND we don’t want to have an income from when we are 65 years old. (Which is almost impossible because we have the public retirement funds)
That means we only need to have 16 times our annual spending saved and invested. Because we have only have 16 more years to live.
Even with 16 times our annual spending, and a conservative allocation of 50 % bonds and 50 % global stocks (because we are old and worried about stock market crashes). You only have a 5 % chance of running out of money.*
At the bottom 10th percentile you still end up on the graveyard with 2 times your annual spending to your name.*
And we are more than likely to end up with MORE money than when we started our retirement as 65 years old.
You can have as little as 10 times your annual spending in a 100 % global stock portfolio and STILL only have a 45 % chance of running out of money.
And remember the goal was to have an empty account when we were about to die.
Early Retirement 2.0
So how LITTLE money do we need to retire early?
This graph will show you how much you need to have saved and invested to hit 16 times your annual spending at age 65.
The assumptions are the following:
We spend 25.000 $/year (175.000 DKK) (That is what Pete Adeney is spending, which is not too extreme.)
We invest in a 100 % global stock portfolio
Or we can put it another way.
How many times our annual spending do we need according to our age, to hit 16 times our annual spending at age 65.
So if you read this at 40 years old. And you would like to spend 15.000 $/year when you are 65 years old.
You are going to be perfectly fine if you have 51.000 $ saved and invested.
From that point, you can just earn what you are spending. Which is probably something you can earn by working part-time or work for a couple of months each year.
Just continue working, stashing up way more cash than you would ever need.
At the moment I have about 75.000 $ (520.000 DKK) invested, which is about 4-5 times my annual spending. If I just leave that money till I’m 65 years old they will probably compound* into something like 640.000 $ (4.400.000 DKK). (After inflation)
Which is more like 36 times my annual spending.
In that case, I will be 65 years old, but I have money for the next 36 years, without relying on interest there is more than inflation.
So take it easy!
You probably have way more money in your portfolio than you need to!
The more I look around, the more I realize that we might be on of the biggest tribe animals on this planet. Going outside of the tribe, and being a lonely wolf, can be scary.
Being a part of a tribe was a good thing back in 10.000 BC. Because the only thing we were worrying about was the following:
Will it kill me?
Can I eat it?
Can I fuck it?
Our brains still has this way of thinking. That’s why we end up following the tribe. Because it will be easier to kill, eat and raise a child if we are in a tribe out in the nature, trying to survive.
Things Happens Outside of the Tribe
The thing is. If we follow a tribe, our lives will end up like the tribe. Which would be awesome if we daily feared for our lives. The tribe would have our backs.
But in a modern society, where tigers are locked up in cages at the local zoo, our meal is just around the corner and the kid is at the kindergarten. There is no reason to be a in tribe.
The modern (average) tribe will do the following:
Get an education
Have some student debt
Work from 9-5 for 50 years
Have some kids they don’t have time for
Eat +3 meals a day, and be overweight
And the tribe do so, because that is how we define a prosperous life.
If we step outside of this tribe, new windows will open. But the entire tribe will tell you how the tiger is going to kill when we are on our own. Because that is how our brain works.
How I Step Outside of the Tribe
Here are 4 things I do, which is “unusual” for the tribe.
Not Having a Mobile
I have never been more present social than I’m right now. And that’s because I don’t have a mobile.
The thing is. The people who are closest to me, is getting more and more pissed about me not having a mobile. Because they can’t contact me when they feel like it. They do not pay attention to how I devote 100 % of my time to them, whenever I’m with them.
Loss aversion is the fact we find it more painful to lose 100 $, than the joy of finding 200 $.
People are hardly noticing me not looking at my mobile every 10-15 minutes, but are super pissed about that one minute every 14 days that they can’t get in contact with me.
And that is why “the tribe” is keep telling me to get a mobile.
Eating 1-2 Meals a Day
Eating is a very social thing. Whenever I tell people that I’m not having lunch today, they are about to fall down from the chair.
If we say that we spend around 45 minutes prepping, eating and cleaning after each meal. We then devote 2 hours 15 minutes consuming calories each day.
Eating less frequent is one of the most awesome habits I do and has several benefits:
Saving time = more productivity
Eat as much as I like
Drinking more water
Staying healthy and lean
Saving + 50 % of My Income
When I tell people about me chasing FIRE. People often understand it. But will never try to do it themselves.
I’m still trying to figure out what they are fearing. The conclusion so far is that people is so scared of stepping outside of the tribe. Just the thought of “losing” money in the stock market, is enough for them to stay in the comfort zone, and not leaving (just for period) a job they don’t feel like.
And they focus more on the “Spending less” than they focus on the “Do what you want” part of the equation. Which again is a Loss Aversion thing.
My mind can’t grasp the idea of people showing up at a job for 50 years if they could do whatever they felt like. If we could cherry pick activities without worrying about our finances, I can’t imagine that we would live the way we do now.
Don’t get me wrong. I don’t think that people will do well sitting in hammock. But the solution is not how we are living our lives now.
The ambition of not wanting to own stuff is still super weird to many people.
It seems like there is an equivalent of how many things we have and how happy/successful we are.
Which is not my reality.
I believe in presence and empathy, which can be done for free without gifts or other stuff.
The other day we had a election for a new government in Denmark.
And I’m really pleased about the result.
It turns out that we get a new socialist government, which I think is good because they are the ones who focus most on the environment.
I voted for a party called Alternativet because they focus the most on the environment. Sadly they didn’t do to well.
Politics is Bullocks
Don’t get me wrong. I feel very privileged living in a society where I have the opportunity to vote in a democratic election. The alternative to a democratic system is often fatal.
But often I find politics hypocritical. Especial when it is about the environment.
Politicians and electors often say/vote something, and still have their airplane ticket to Thailand in their drawer.
And yes – I have three airplane trips planned this year. Which I don’t feel good about. In a couple of weeks I’m going to Italy, and I will go by train if it is possible.
Action > Politics
If you are concerned about the environment, how we act is way more important than what we are voting.
I think that everybody should vote, but voting doesn’t make a person an environmentalist. Action does.
If you however hate immigrants and want them out of the country, you can’t just start to throw people out because you feel like it. Then you have to vote. (But please don’t vote for people who hate immigrants).
But it is different about the environment.
$1 Spent = C02 Emissions
I don’t care how people spent their money. But if we spent less than we earn, we would be more environmental than if we would have spent all of our money.
I could go out and spent almost 3 times as many money as I’m currently doing. But I’m choosing not to in order to be environmental and financial independent.
Fortunately there is a direct correlation between being environmental and trying to cut back on our spending.
The picture below is from a presentation I made for the school I’m currently at.
For a month ago I said yes to participate in two young boys school project about financial independence.
I said yes, because I know how important the youth is.
In every single rowing club I know, the future success of the clubs determines on how big (and good) of a youth department they have.
All of the rowing clubs who neglect the young ones, is slowly digging their own graves. As time past by, there will only be grumpy old men back at the club. And that is not to appealing to anyone (sorry old men).
FIRE and Kids
Sometimes I feel frustrated about that I never got introduced to FIRE as kid. I’m quite sure that I would have been mature enough to see the benefits of that lifestyle, and probably be financial independent at my current age.
That’s why I would like to give my knowledge about FIRE to as many kids as I can.
They should know from very early age that we are able to shape the life we want, and not what society expect from us.
And that the road to happiness is not filled with mindless consuming.
I told the two boys that I was willing to come a make a presentation about FIRE on their school if they wanted to.
If you read this as a kid, and think it would be fun for your school to hear about FIRE. I’m willing to come and tell about it. For free.
Feel free to contact me on: Loui@wannabewalden.com
I haven’t had a mobile for the last month. It happen by an “accident”.
For a month ago I got fired from my job. And when had to have a phone for my work, I decided to ditch my private one.
The last day I had to deliver the phone back.
So there I was. Without a phone.
A bit shocked about being fired from my job, I didn’t feel like going to town to shop for a new phone. I just wanted to take a some days off, relax a bit, and then shop for new phone.
A couple of days into my “I-have-no-phone-at-the-moment” life, I started to enjoy feeling unconnected.
From days, to weeks to now a month without a phone, I have no desire of rushing into buying a new phone anytime soon.
Here is the list of things I enjoy the most of not having a phone.
There is one thing I hate by not having a phone.
1) Being More Present
This might be a obvious one.
But by not having a phone, and being with somebody. I force myself to interact with the person on a deeper level than what I normal would. If this person starts to bore me, it is the easiest thing to grab my phone, and start scrolling.
I have started to notice that some of my friends can take up their phone and start scrolling for a couple of minutes in the middle of our conversation. Which is so ignoring!
The most scariest thing is that I’m 100 % certain that I have done that way too often myself.
2) Less Stress
I could feel a vibrating item in my pocket for weeks after I got rid of my phone. But I had no vibrating item in my pocket.
It was like 5 % of my unconscious mind was alert about my phone.
That “alertness” is gone after a month of not having a phone.
3) Reaching Out More
When was the last time you asked someone:
“Excuse me, what time is it??”
The only wrist watch I have had for years, has been a heart rate watch I used for my rowing training. And I kept breaking them. So the last time I broke the watch, I didn’t feel like turning it in for a new one. Just like the mobile, days without a watch turned into weeks, and then months. And now I just like not having a wrist watch.
That means I constantly ask people what the time is.
And that act alone, has made me talk with 10+ people I wouldn’t have.
4) No Stress About Battery
The feeling of plugging an almost dead phone into the charger is so satisfying.
But why is it satisfying?
Because we have stressed about that we need to find a charger soon, because the world is coming to an end if I don’t have my precious phone.
We all know the term FOMO.
I started to enjoy a new one.
Joy of missing out.
There is direct correlation of me being surprised about my friends telling me stuff they have been doing. And me not having a phone.
I spent less than 10 minutes a week now on instagram, which would be my main source of my friends “gossip”.
When I don’t get this gossip, and just don’t know what my friends are up to. Except if I meet with them. Which is an awesome feeling.
6) Doing Nothing
I have completely forgot the feeling about being bored.
The last time I remember being bored was back when I was a kid.
Sitting down, maybe waiting for the train and doing absolutely nothing.
Is super nice!
7) Saves Me Money
No need to think about cell phone deals.
Or worry about breaking the screen.
My Main Problem of Not Having a Phone
As the avid reader knows. I will be spending the next 3 months on a school where I’m going to sail, and just have a good time.
The “Just-have-a-good-time” part often involves beer.
And the only payment the bar accepts is through an app.
Not having a phone, means that I currently have no apps. So I can’t pay for my beers! Which is a pain in the ass!
It is time for Wannabe Walden to write about a less critical topic. And how about a “recipe” for the most delicious, yet super simple pancakes?
I have learned this “recipe” from a friend of mine from my rowing club. And I have made them every single day since the first time I got them.
I use them as breakfast, dessert or just a snack.
I freaking love them!
As rule of thumb, this is the amounts you are going to need for a single person. I just had triple that amount myself, but that was because I was hungry, and I have a hard brazilian jiu jitsu session later today.
For 1 person:
1 Tablespoon of sugar (optional, I crave sugar)
This portion will make you 3-5 small pancakes.
The price of the ingredients are the following:
1 x banana = 2 DKK (0,3 $)
1 x egg = 3 DKK (0,5 $)
1 x tablespoon of sugar = 0,25 DKK (0,05 $)
A portion will cost you = 5,25 DKK (0,85 $)
Put a pan on the stove, turn on medium heat and put some tasteless oil on (I use rapeseed oil) or butter.
Take all of the ingredients and mix it in bowl, and mash the whole thing with a fork.
*LIFEHACK* Crack the egg on a flat surface (your kitchen table) instead of the edge of the bowl. You are more unlikely to have egg shells in the mix by doing so.
It is not super important that you get every single banana chunk mashed out. It is okay if it is a bit chunky.
Fry Those Sons of B*tches
Go for medium heat, and give them 2-3 minutes on each side.
They can be pretty hard to turn over if they are to big. What I do is to make three small pancakes at a time.
At the moment I top them off with peanut butter and jelly. My little sister is super allergic to peanuts, so I never had peanut butter as a kid. This has resulted in me having a small addiction to it. But I also like to top them off with nutella or something similar.
Having a boat load of these along with a good cup of black coffee is the best!
So the other day I made room for a new chapter in my personal finance Excel Book. The name of the chapter was 2019.
Just for fun I would throw some numbers around. I don’t know why. But it kind of surprise me that if could cut back my spending even further. I would be quiet close to have enough money a year from now.
In 2018 I have been spending around 10.000 DKK/month (1500 $). And if I subtract my student loan payment, and some work related expenses. My spending is around 8.000 DKK/month (1200 $).
I have then decided to try live a month for less than 6.500 DKK (1000$). I know that Jakob Lund Fisker from earlyretirementextreme.com, has a yearly budget on 7.000 $/year. And being active on various forums. I hear about people who has Monthly budgets below 3000 DKK (500 $). I think it is very inspiring to hear people living on very low budgets.
Starting a Fresh New Year
So I thought to myself. Why not just try to start 2019 with a monthly spending significant lower than my previous years. If im able to only spend 6000 DKK (950 $), I can then subtract all of my job related expenses and my monthly student loan payments. Which means I’m more likely to have expenses for 4500-5000 DKK (800-900 $). And that would be around 30-40 % less than my previous years. If I don’t feel like spending that little, I can just spend more the next month. My theory is that no matter how little I spend, it will not affect how happy I’m. So why not just try to spend way less than normal. At least just for a month.
With expenses around 4500-5000 DKK/month (800-900 $), my annual expenses will be something like 50-60.000 DKK (9.000-10.000 $). And if we multiply that with 20, I will need around 1-1.200.000 DKK (150.000-180.000 $). And with some leverage I think I can hit that number in 2019.
Even with no rate of return I should be able to go from 600.000 DKK (90.000 $) (my current statement) to 1.000.000 (150.000 $) in 2019. With 200.000 DKK (30.000 $) from my own pocket, and 200.000 DKK (200.000 $) leverage.
Budget For January
My payments this month (January 2019) looks like this:
Rent: 2350 DKK (400 $)
A-kasse (Salary insurance): 1344 DKK (200 $)
SOS (Children charity): 235 DKK (40 $)
Student loan: 1005 DKK (180 $)
Internet: 219 DKK (40 $)
Food: 600 DKK (100 $)
Laundry (half-year payment): 400 DKK (80 $)
Fuck up money: 600 DKK (100 $)
Total: 6155 DKK (950$)
This is what I “budget” to spend for January 2019. The biggest difference will be how much I spent on food. I’m sort of frugal according to how I spent my money on food. But it is definitely a place where I can save money.
I have read about how Jakob Lund Fisker is shopping at exotic grocery centers. To buy big bags of rice, beans and onions as the core of his food. And I have checked the prices at my local shop called “Asia Bazar”. If I buy 5 kg of rice, 3 kg of beans and a large sack of onions, I will approximately spent around 160-180 DKK (30 $) and that food will last for 10 days, ish. (Yes I eat a lot).
I will make a weekly update, on how things are going.
And feel free to join me, and let me know how you are doing as well.
Back To the Roots
In Denmark we have this luxury of free education, and being paid while doing so. I think that a student who is above 18 years and is living on their own, gets around 5500 DKK/month (800 $).
What I’m trying to say here is that there is a lot of young people who spent less than 1000 $ a month.
I kind of did that myself when I studied as a building constructor. But I did manage to get 100.000 DKK (15.000 $) in student loans. It was first at the very end of that education that I had a totally mindshift about money and freedom. It happen when I read mrmoneymustache.com for the first time.
1 $ Traffic of Your Choice?
I’m came up with this fun experiment. From this day on I’m going to sell sponsors for every blog post I make.
The first sponsor is going to cost 1 $. The next will cost 2 $, the third 3 $ and so on.
You will get a headline, 50 words and a link for your site at the bottom of a blog post.
I think the average page views a day is around 50, and on the best days they are around 500.
If you would like the very first spot for 1 $ let me know by writing me on: