I Have a Dream!

I have a dream …

Partly stolen from a brave man. (AKA Martin Luther King).

He had a dream, and so do I.

I really don’t believe that way we live our lives today is the best way for our happiness and well-being. We have never been more stressed than we are today.* So why do we keep on going the same path that has led us to this stress?

I have a dream of ..

.. Where Weekends are Weekdays

We have never been more stressed than we are now. I have never been sick because of it. But I have tried having to many deadlines at the same time, where I had to work 16 hours a day to reach them.

Why don’t we just swap the weekdays with weekends?

Lets have five days a week where we only do things we actually want, and two days where we work.

.. Where We Work to Thrive, Not Survive

Imagine if money wasn’t an issue? What would we then do? I think there is an insanely amount of people who pick an education because of status and how much money they can earn.

What if started to do stuff that we really had a burning desire for.

And not to just to make ends meet? Or impress others?

Imagine if we could be a “Put-in-an-activity-you-love” Instructor, but we didn’t have to worry about the food on the table. Or what about other people would think of us?

.. Where We Don’t Have Mortgages

When did it ever become normal to buy something that we need 30 years to pay off? I have never understood, and I never think I will understand it. Why we would pay that amount of money to have a place to live.

I have been working in the building industry for more than 10 years now. And I have seen both spectrums of how people can live. It is not more difficult to build a 100 m2 house that cost below 100.000 $, than it is to build a +200 m2 house that will cost you more than 1.000.000 $.

Imagine if we only spend 5 years or less to pay off a mortgage. Or not even having one? From day 1 we didn’t have any debt in the house.

So why are we building so big and unaffordable houses?

I can’t tell.

.. Where Meat Is a Luxury

Many of us in a western culture is raised with having meat in every single meal. And we can’t blame our parents for teaching us eating meat. Back in the days we was not informed on how meat-eating can affect the clima. We didn’t knew it was a problem. But we do know that now. I love the taste of meat. But there is no reason to incorporate it in every meal. Let’s start to see it as a luxury we do when we have to celebrate something big. And not something we eat everyday to survive.

There is a cheaper, easier, healthier and more environmental way to eat.

.. Where our Transportation is Awesome

I can often be stoked about how our computers and mobiles seems to have an exponential form of growth. But if we take a look at the cars, trains and bikes, there seems to be almost none growth.

The first car invented back in the 1900 had four wheels, and it run on gasoline. That is over 100 years ago, and it is not until recently that we started to drive in electrical cars.

The same goes with the bike. It still has to wheels, and a metal chain. I think the bike is one of the greatest invention. But it was not until recently that it became legal in Denmark to ride on a Speed Pedelec (a 45 km/hour e-bike). 

Riding e-bikes that goes 45 km/hour is a game changer. My dad who has 30 km for work, can now go by bike instead of the car. Save a boatload of money, being more environmental, and maybe live longer because of a better health. 

.. Where We Quit Social Status and Start Being Compassionate

I’m very open about how many money I have. 

I don’t want my money to earn respect, trust or anything else. My money has one function only, and that is buying my own time back. 

Imagine if everybody quitted the fear of “Not-being-good-enough”, and could stop spend time on impressing people we don’t know. And start to be compassionate about our friends, family and people who are in tough situation because of bad luck. 

.. Where We Have a Green Capitalistic System

Many people think of money as a greedy and en evil thing. And connects capitalism with fossil fuels, cutting down trees and the end of the world. I don’t want to disagree with that feeling. But what if we could use the power of capitalism to make a better world? I’m not talking about only surviving on this earth, what if we could leave the world as a better place for our kids and grand kids?

I believe that we can make a capitalistic system where everyone can benefit from it in their pensions, and still make the world a better place. With sustainable companies that makes this world a better place to live. 

.. Where We Have Time for our Kids

No needing to rush in the mornings because we are in hurry to our work. 

No need to work long hours on work, because you need to pay for the nanny who take care of picking up our kids.

Or paying the house cleaner, too clean up after the kids.

Or paying the restaurant for takeaway food for the family because we don’t feel like cooking after a long work day.

Just having time for the spouse you love, and for the kids you have putted into this world. No more, no less.

.. Where We Don’t Spend Money in Order to be Happy

If we live in modern western country. Most of us will have decent place to live. And a supermarket filled with healthy foods within biking distance. Which is our needs.

Anything else besides that is wants. Whenever we think that this next purchase (besides paying rent, or buying groceries) is going to make us happy. That is the exact same time that we buy a freaking lie.

The lie is that we don’t need to buy anything in order to become happy.

If we feel a little bit sad. And we think a purchase is going to put an end to that sadness. We are going to be sad our whole life.

Happiness cannot be traveled to, owned, earned or worn. It is the spiritual experience of living every minute with love, grace and gratitude. – Denis Waitley

I have no freaking idea who Denis Waitley is. But that is a hell of a quote.

*https://www.apa.org/news/press/releases/stress/2017/state-nation.pdf

Budgets. Don’t do them.

Still to this day I don’t understand budgets.

I have hated them back when I was young an idiot with my finances. But I still don’t like budgets.

I think they are boring, and a waste of time.

“But Loui? How can you save money if you don’t do budgets?”

There is a law called Parkinson’s law.

It states that:

“Work expands so as to fill the time available for its completion”

Putted in other words. If you give a project two weeks, you are likely to come up with tasks that takes about two weeks to complete. And the same goes for our finances.

If we earn 3000 $/month and we would like to save the largest amount of those money. The traditional way of figuring out how much money we can save would go something like this:

  1. Do a budget in the start of the month
  2. Figure out how much you can save
  3. Save and invest that amount

What is wrong about that is that we focus on the budget first. Just like Parkinson’s law affects deadlines on projects. It effects the same way on our finances.

If we budget 400 $/month for groceries, that is likely the amount we are going to spend on our groceries.

If we however look at how much we want to save, and make that the first thing we put aside. Parkinson’s law is going to work its magic for us.

Lets say the we make 3000 $/month, and we would like to save 50 % of that (1500 $). That would be the first thing we do when a paycheck arrives.

From there, our job is just to live on whats left.

I have even done periods where after what I have saved and invested, my account balance would be zero. So I knew whenever I wanted to buy something, my account would go in debt. That of course was just an experiment to see if I could spend even less by doing that. And I did. But it was tough.

I would recommend people try out such an experiment. Start a month with nothing on your account.

There is two reasons why it is has some benefits:

  1. You are going to love just to have SOME money on your account the next month.
  2. You are likely going to save and invest more than you normal would.
Do you want to read some life changing books?

I have been asked a lot what I could recommend people to read. And because of that. I have made a “Shit I Love” site,where you can find all sort of things that I use myself, and what I think can benefit you.

As I’m writing this there is only a couple of books that I recommend. These books have been life changing for me, and that’s why I think you should read them to.

All of the links are affiliate links, so if you use on those links. You will support this site without it’s costing you a dime.

Check the books out here:

CLICK HERE

 

 

So You Think Your Workday is 8 Hours?

We think our full-time work is an 8 hour workday, which is a lie.

A workday for normal person would go something like this:

Sleep: 8 Hours

Work: 8 Hours

Free time: 8 Hours

Total: 24 Hours

While that is true on paper. It is far from how we really spend our precious time. To have some healthy sleep we need to sleep between 7-9 hours. The older we get the less sleep we need.

But how does our workday really look like?

How many of our daily activities is work related?

Let’s try to sum it up.

Our Job Hours/Week
(Before adjustments) 40
Adjustments
Commuting 7.5
Costuming 2
Relaxing at home 5
Talking about job 2.5
Escape entertainment 5
Job related illness 1
Job, with Adjustments 53
Hours/Day 10,6

If we count every minute there is job related we end up on 53 hours/week, and not 40. And this has several disadvantages.  (And this calculation exclude working overtime and in weekends.)

If we think we have an hourly rate of 15 $, we are more likely to have a 11 $/hour. But because we spend 2,6 hours more than we think on something work related and we only have about 5 hours of “free” time.

This free time includes all of the household chores as laundry, grocery shopping, cooking, cleaning, picking up kids and so on.

If  we on average spend two hours a day on all of the household chores, we end up with only 3 hours of free time. These can be used for family/friends/spouse, training, reading/writing or whatever that brings us joy.

But is that how we want to spend all of our 50 years of working?

I know how those 3 hours feel. I’m often super exhausted, and I don’t feel like doing anything.

And is that what we want?

Three hours of not feeling like doing anything?

Just looking forward to the weekends and the holidays three months from now?

That my friend is just sad.

Fortunately there is a solution to all of this nonsense we call “normal”!

Not Spending All of Our Income

It can be done in extreme ways, saving +50% of our income (Which is what I prefer). But saving “just” 10-20 % of our income can make a huge difference for a start.

Doing this has a lot of different advantages.

  • We can work for six months, and then take the next six months off.
  • We can work part-time. So we only have three workdays instead of five
  • We can save and invest for 10-15 years and quit our job for good

And this is something we can do this very day. It is just a decision not to spend all of our money, and maybe quitting some monthly subscriptions.

Living A More Minimalistic Life

Less is more.

And let me show you how.

Whenever we do/have less, we make space for the more important things.

And there is several ways we can do this: 

Skipping breakfast. Yes you got that right. Breakfast is not the most healthy meal of the day. There is several studies on if we decrease the time we eat everyday from 16 hours to 8 hours we will have several health benefits. One of them is longevity. In other words. Only eat lunch and dinner. This is called Intermittent Fasting or Time Restricted Eating.  This does not only free up the time we need to prepare extra meal, but we will also save some money since we do not need to shop for breakfast.

Having less stuff can benefit in SO many ways.

  • Less stuff in our homes makes it easier to clean and tidy up.
  • Having fewer parts of clothes makes it easier to laundry.
  • Having fewer parts of clothes makes it easier to decide what to wear.

Commute on our bike to work. By doing this we can skip the membership of our gym, and we exercise five times a week instead of a couple of times. Time and money well saved!

Let’s imagine that you listen to what I say. And you will start to:

  1. Skip breakfast.
  2. Wear the same dress shirt for a week.
  3. Cleaning and tidying less.

I think you are going to at least save 30 minutes everyday which you can spend on your free time instead of your workday!

Let me help you!

If you feel overwhelmed in your daily life. And you would like to have a more simple life, where you are in charge of your day and finances.

Then let me help you!

I walk the talk. Trying to live my own life to the fullest. By ditching the shit that doesn’t matter to me. And making room for the awesome stuff.

Click on the link below, and let me know your story, and I will let you know how I can coach you.

If you are based in Copenhagen we can meet up, but I can coach you online aswell.

CLICK HERE

FIVE FIRE FAQs

There has been a lot of focus on the FIRE community from the media lately. And I get a ton of questions from people who have never heard about financial independence before.

So I thought a FAQ article was a good thing to post.

Why do you strive for FIRE? (Financial Independence, Retire Early)

I have reached a point in my life where I have realized that none external things is going to make me happier. If I can’t be satisfied with what I all ready have, then I will never be happy.

Because of that I end up with a lot more money than I need. And that gives me the opportunity  to reach for financial independence quiet early in life.

That is something I think I will appreciate more later in life.

What If you get hit by a car and die tomorrow?

This will take us back to the first question.

If we imagine that someday in the future I will declare myself as financial independent, that would be lovely. But. I’m not expecting that day where “I finally will be happy”.

Far from it. I will see it as an awesome opportunity to do more or less what I want. And I can’t see how that can harm me.

So I would be very sad if my last day will be tomorrow. But only because my life would come to an end, and not because I had money in my bank account that I didn’t spend.

Are you willing to mooch on your community because you won’t pay taxes?

The media loves to bring up the word “retirement”. And whenever people hear that word, we immediately think of a person who is laying in a hammock or playing petanque all day.

And that is not what I’m attending to do.

I love to do stuff. And I can’t imagine me going through a week where I don’t do something I enjoy, and not making some kind of money out of it. Maybe it won’t be much but I think I will keep working.

But let’s imagine that I manage to save enough to pull the plug from a full-time job at age 35 and NEVER EVER earning another dollar from manual labour. I would still be paying taxes from my investing. Which I gladly do.

What if everybody did like you? Then there won’t be no stock market you could benefit from.

And that is true. If everybody decided to only work on Saturdays and Sundays, and then do what they like on the weekdays. Mostly commuting by bike. And 80 % of their meals would be vegetarian.

Then yes, I think the modern way we see capitalism would have a hard time. But if everybody lived liked that, we would fix the environmental problem in no time, and I genuine believe that people would be happier.

And this is a price I’m willing to pay ten folded. If people read all of this and they think the whole point is for me to get rich (at all cost), they are misunderstanding the whole thing.

If we don’t take action about the environmental issues on our own, it looks like we won’t be here on planet earth for much longer.

What about kids, don’t you wanna have a family?

Sure I do. That is also one of the main reasons I’m doing this.

I keep hear friends and co-workers how tough it is to have kids. And I believe them. I love visiting my friends with kids. But it is just as big a relief to leave them again. Because it is awesome just to arrive home with some quiet time. But if you are a parent, you can’t just leave your kids.

It is more or less like a full-time job for the first 5 years of their lives, and from age 5-18 it will be more like a demanding part-time job.

And I can’t imagine how a full/part-time job (having kids) combined with a real full-time job is the most optimal to our wellbeing.

I think it is way better to give the kids the attention they need, without the stress a fulltime work can give to your child raising. Plus it can give myself some free time. Where I can do some work if I feel like it, or just let the day pass by as it suits me.

How Imperfection Can Change Our Life For the Better

For many years I saw myself as a perfectionist.

I wanted to do stuff better than the average joe. So I did my very best to do so.

While this can be good to some extend. It can one of the biggest procrastination issues. We all the know the feeling of how we would like to do something when the time is just right. It could be something like:

“Whenever I have achieved (Insert achievement), I will start a blog about it”

Or.

“When I have just gained a little more information about (insert a craft), then I will open my business of my dreams”

Or.

“When the (Insert investment) will hit that low. Then I will invest”

Or.

“When I have just saved (insert amount) $, I will go on that trip”

Or.

“I will say hi to that girl/boy when I have the perfect outfit on”

The truth is there will never be a perfect time to do anything. The most “perfect” time to execute on something, is this very day. Being a perfectionist is just an apology to postpone our dreams because of insecurity.

I deal with this myself. Writing on this blog is often terrifying. English is not my first language, and my vocabulary is far from perfect. But that doesn’t have to stop me, or you.

Trying to strive for imperfection can be a relieving feeling. The feeling of not have to do something perfect is awesome. It removes the inner voice in the head that says what we are doing is not good enough. Because that is what we are striving for. Things that aren’t perfect, but they are there. And they will do the job way better than something that doesn’t exist.

The Binary Mindset

Not that I’m a computer engineer, but what I do know is that computers operates in 0 and 1. Which mean either it does something, or it don’t.

This can be a healthy way to look at taking action.

To either do it. Or not.

Let’s imagine that you meet that cute person you have been thinking about the last month. And boom. Right next to you in the supermarket guess who is there? The cute person.

Now we want to take that binary mindset, and tell ourself to go from a 0 mode to a 1 mode. The trick is to forget the inner monkey mind who tells you all sort of weird things like you don’t have the right clothes on.

In this situation we could walk over to the person, and just say:

“Hi (Insert the person’s name)”

Now we have just went from the 0 to the 1, and our mission is accomplished.

The next time we hear this voice of doubt in our head. Acknowledge it. And then move on, and do something imperfect. Just do it. No matter how bad it is.

In fact. Try to do it bad. What our internal voice might think is bad, can probably do the job. And maybe even do a good job.

Perfection doesn’t exist.

Things can always be better.

Spending 60 minutes “perfecting” a 1 minute action doesn’t mean it will be 60 times better. 

Far from it.

Quantity Perfectionist

“This year I’m going to lose XX amount of kg, and I’m going to do it by eating well and run four times a week!”

Does that sentence sound familiar?

Way too often. We think that in order to do something, we need to take major action. Yes, taking huge steps toward our dreams will help us faster than small steps. But taking huge steps for a couple of months won’t take us anywhere.

That is where the perfectionist mindset about quantity comes in.

Let’s use me as an example. I could tell myself that in order for this blog to “succeed” I have to write at least 1000 words a day.

There is two reasons why this is bad for my progress on this blog:

  1. I’m setting myself a limit of 1000 words. Everyday I will sweat about those 1000 words. But whenever I hit that number. I will stop. “Man! Those 1000 words were hard to write. I better stop now”.
  2. When I don’t hit those 1000 words I’m going to feel bad. There is nothing wrong by setting ambitious daily goal. But going from 0 km/h to 200 km/h in no time. Is a bulletproof way of failing. And no one likes to “fail”.

What can we do instead?

Start being imperfect about what it takes. 

Instead of telling myself I need to write a 1000 words, I can say:

“Just write 50 words everyday, if you feel like more, do it. If not, don’t”.

If we imagine taking action as floor and a ceiling. If we make big ambitious daily goals. We are more likely to create a ceiling for ourself. But if we make small daily goals we create a floor.

By focusing on the floor (small daily goals) the ceiling becomes infinite. 

If I feel like writing 2000 words one day, good for me. But if I don’t feel like it the next day. I can just write my 50 words, clap myself on the shoulder and move on with a good gut feeling.

This can be applied to every area of our life.

If we want to eat healthier, we can just eat 1 piece of vegetable everyday. Forget about spending 30+ minutes everyday on shopping and cooking those salads. Maybe some days we will. And maybe it will be so life changing, that it doesn’t feel like a burden anymore. It is just a habit.

Or if we want to exercise more. Just run for 1 minute or take the stairs. Don’t even think about that you have to change to the sporty outfit. Just do a tiny thing. Maybe when we start to do so. It feels kind of nice, so that one day we feel like changing for to the sporty outfit and run for 30 minutes.

It can also be applied to investing and early retirement. Yes we would like to have +50 % savings rate. But just start with 5 %. That is what I did.

The beauty about taking small steps everyday is that we adapt. Running for 1 minute everyday ends up being super easy to do. Suddenly we will find ourselves running for 10 minutes, and that might end up being easy to.

Plus it is very rewarding to make progress everyday. Even small ones.

It will make us feel like doing more, instead of beating ourself up not accomplishing the big glamorous goals.

Almost 10 years down the road as an elite athlete I have seen a very clear pattern of the athletes who is world-class, and the ones who are not. And what the world-class athletes has is consistency.

We will do way better in any area of our lives by showing up at 95 % each day, rather than going 105 % when we kind of feel like it.

Comfort Is for Wimps

How many things have we purchased, done or said because we thought it was a comfortable thing to do?

I think that comfort is one of the biggest killers to a life we really have a deep desire to have. What we need to do is know what is a necessity and what is a comfort.

Let’s take an example.

Whenever I travel I see people with noise reduction headphones, a laptop, decompression socks and some sort of neck pillow (what the fuck is that anyway?!).

How many of these things is a necessity to our three-hour flight? Or are they just comfortable to bring with us?

What about the brand new car we have bought to drive the 10 km for work? Is that a necessity? Or couldn’t a 5.000 $ car done the job? Or what about biking that distance instead? Then we would save money, being healthier and we can skip that mandatory fitness membership, and spend that time by doing something that we really want to.

All the things that we really NEED is quiet easy to obtain in most part of the world. While the things we WANT can be quiet hard to get.

What about that carrier/car/house/flat/achievements we have this very day. They were once something that we only could dream of a couple of years ago.

And are we that much happier in this present moment than we were back then? I’m not.

We are doing all sort of things today that people in the 1900’s couldn’t even dream of. And do you think that we are happier today, than we were back then? I don’t think so.

What if we started to be grateful for those things that is easy to obtain here in life:

  • Living wherever we want
  • Wearing the clothes that we want
  • Eating the food that we like

Imagine that we would leave for a one month trip. How much would you pack? There is often some sort of human logic when we are going for a long trip, we need to pack a lot of stuff!

But what if we just packed:

  • another t-shirt
  • a shirt
  • two pairs of underwear
  • two pairs of socks
  • passport
  • phone
  • a charger for your phone
  • cash
  • toothbrush

At first that might seem intimidating. Because there is not much comfort in leaving your country with a lot less stuff than we initially would have packed.

I have not yet experienced to go with the minimum. Or what we would call the necessities. Without it felt more free.

What I thought would be inconvenient not to have, was actually awesome.

The feeling of being able to do things easier, and way simpler than ever thought possible is relieving. We can do so much more, with way less. 

So whenever we make our next trip/purchase/decision we should ask our self the following:

And if you chose the “No” route. Give yourself a clap on the shoulder. We have now made room in our wallets and mind to start being happy about the stuff we already have and what really matters.

The Power of Gratitude, and Small Things

I have been practicing an elite athlete routine for almost a decade now.

The most important takeaway I have from that decade is that everything is made through consistency.

Consistency trumps everything. Not one single thing is more powerful than consistency. 

I have always been a really impatient guy (And I still am to some extend). But when I realised the power of small actions every single day instead of searching for big leaps every once and while. My mindset changed.

I have six things I will do every single day. And these six things is so stupidly easy to do, that there is no excuse not to do them. If I really want it. I can do all six of them in less than 10 minutes.

At the moment the six things are these:

  1. Write 50 words on this blog
  2. Meditate for 1 minute
  3. Come up with 1 article topic for this blog
  4. Read 2 pages of a book
  5. Stretch for 1 minute
  6. Acknowledge 1 thing that you are grateful for

And I have a 7th one. But this one does not require me to do anything. I can check this off if I haven’t spent any money that day.

I’m doing this with a free app called Loop – Habit Tracker.

After I have installed the app, I can make some widgets to the starter screen, where I can check them off as I’m doing them.

The most powerful of them might also be the easiest one. It is the daily gratitude. If we don’t acknowledge the things we already have, we will never do it.

Happiness is not around the next corner, purchase, investment or traveled to. 

If we expect happiness to arrive when we final reach some imaginary milestone we will be in for a huge disappointment.

When we start to embrace the stuff we all ready have, and start to be thrilled about living in the most luxury time of man kind. Where more and more people have a decent place to live and a super market packed with organic foods within five minutes on a bike.

For a couple of years ago I stumbled across how fasting can be healthy for us humans. And until that day I think that I have had breakfast, lunch and dinner for 99 % of my life. Isnt that insane?! I never in my entire life had to miss a meal.

No matter how happy we are, there will be a person out there who has way less friends, less food, less stuff and less money, and still being happier than we are.

But if we start to practice a daily gratitude of that prosperous world the majority of people live in. We can be happier within seconds.

This is one of the main reasons why I don’t buy to many things. Because I know that 99 % of the time it will not serve how I feel.

Where I like to splurge is to buy a good friend a take-away pizza and a bottle of wine, and then have a conversation that sounds like this:

“You are the bomb!”, I will tell my friend with red wine teeth.

“No! You are the bomb!”, says my friend while he is pouring another glass of wine.

And this conversation will loop until the early morning.

That to me is happiness.

How Much Money Is Enough? Fuck the 4 % rule.

I often read blog posts on how people are retiring with 1.000.000 USD and then live off 40.000 USD/Year.

Put it another way. They stick to the 4 % rule.

There has been made a study called “The Trinity Study”. Which is often referred to in the FIRE community.

They took a close look on how much you can withdraw from a portfolio with different allocations to stocks and bonds.

I think the 4 % rule is ridiculous conservative. 

Take a look at the chart below from the trinity study:

This chart will tell us if you have a 1.000 $ portfolio and a 100 % stock allocation, and we withdraw 8 % of the initial amount (80 $), we have a 76 % chance of success.

76 % of every 30 year period between 1926-2009 would never run out of money.

That 76 % means that you NEVER EVER earn another dollar in your life.

So if we are 20 something years old spending a modest 15.000 $/year. (Which I do)

We could retire with as little as:

15.000 $ / 8 % = 187.500 $ 

And have a 76 % chance of NEVER running out of money if we NEVER earn another dime.

“But I don’t feel comfortable withdrawing 8 % of my portfolio”

All right. Then let’s round it up to a withdrawal rate of 7 %.

Then we can retire with a 100 % stock portfolio of:

215.000 $ and have 87 % chance of NEVER running out of money.

If we make a 30 year Monte Carlo simulation with a portfolio of 215.000 $ and withdrawing 15.000 $/year annual*:

If we look at the chart above. We can be pessimistic and say that 1 out 10 times the portfolio will not survive.

We can also be positive and see that 1 out of 10 times we will end up 7.200.000 $. Or put it another way, more than 30 times you initial investment.

We could also only do average. And end up with 1.500.000 $.

And we have done this by laying in over hammock for 30 years.

If we however can manage to earn some money.

And I’m not talking about a huge amount of money.

Let’s just say that we start a business of doing something we like. We don’t want the business to be something we do everyday.

Let’s call it a “Fooling-around-company”.

What if we could make 5.000 $/ year with this company?

Then we only need to withdraw 10.000 $/year on our portfolio. This is how a 30 year Monte Carlo simulation look like if we only withdraw 10.000 $/year instead of 15.000 $/year*:

We have now gone from a 87 % success rate to a 96 % success rate.

And in 30 years you will at the 50th percentile end up with 2.400.000 $ instead of your 1.400.000 $

So by earning 150.000 $ over that 30 year period. (5.000 $/year x 30 years = 150.000 $)

We are likely to have another million on our account.

Or we could withdraw 4 % each year instead of withdrawing a fixed amount of 10.000 $/year. This means if the value of our portfolio goes up, our spending can go up.

Then the situation will look like this*:

After 30 years of withdrawing we are more likely to withdraw 16.000 $ /year. And if we are lucky it will be +30.000 $/year. (Adjusted for inflation)

So please. Be a bit skeptical whenever you read the we need 25 times our annual spending.

If we are willing to be a bit flexible, by doing so we can retire A LOT sooner.

* www.portfoliovisualizer.com/monte-carlo-simulation

The Power of Spending Less

In a very long period of my life I thought that in order to become rich you need to earn a lot of money. When I started to study have the financial independent I found that this wasn’t the whole truth. The most important part to become financial independent is to spend less.

If we have two people. One is earning 500.000 $/year, the other make 50.000 $/year. If they both save 10 % each month they will have the same retirement date.

Because their 10 % is going to fund 90 % of expenses. It doesn’t matter what the amount is. The percentage is what we are looking for.

If we instead could live on 50 % of the income our situation will look like this:

Which is WAY BETTER!

“What about the rate of return then? That must be an important factor.”

Not really. That chart below is from the book Early Retirement Extreme.

It clearly shows us that when we can save +60% of our income, the rate of return is less important.

From the book “Early Retirement Extreme”

And if you have read my other article on How I’m Retiring in 5 Years or Less you can tell that I sometimes recommend people to leverage their investing. If we save and invest +60% of our salary, and we borrow the same amount to invest for. This means we hit our retirement number in half the time. And do some time diversification. If we have more money in the market early, they will make dividends, and they will have more time in the market to prove their performance.

The average savings rate here in europe is around 5 %*. And if we look at the chart above we will never be able to fund. Even if we have the same rate of return as some of the best investors in the world like Warren Buffet. He has averaged around 20 %/year. If we earn 50.000 $/year and we are saving the 5 % of our income and get a ROI on 20 %/year we will be able to retire in 25 years. While this seems like a relative short time period. We need to get the same ROI as the best investor in the world.

Yes you can be the next Warren Buffett. But I think you will have a higher chance of winning the lottery. If we instead save a large amount of money. And maybe leverage. We now have the odds with us.

* https://data.oecd.org/hha/household-savings.htm

How To Spend Less, and Still Be Happy

Buying stuff if often something that we find convenient. But there is a difference between really wanting a thing, to really need it. becoming financially independent is more about how little you can live on rather than how much you make. So if you can spend as little as 1000 $/month, you can become financial independent extremely fast.

What we humans is good at is adapting. It is the best gift humans have been dealt, but it can also be the worst thing happening to us. No matter if it is a good or a bad thing we end up adapting to cruising back to happiness level we were at before an event happen to us.

Let’s say that everything is working out perfect out for us. We have no major problems in our life. One day a terrible thing happens to us. Our immediate response is to become sad/mad/angry/depressed. But as times passes by, we cruise back to the level of happiness we were at before the depressing event occurred to us. This is the good thing about adapting. We can lose a leg, but still be as happy when had both of our legs.

Another situation would be if we have an awesome life. Nothing seems to be disturbing us. One day we end up buying a lottery ticket when we went grocery shopping. This happen to be the lottery of a gazillion dollars. Now we are driving around in Lamborghini’s, owning mansions and we are never going to cook your own meal again. Even in this situation we will adapt. We will cruise back to the level of happiness before we won the lottery.

Ever heard of Dan Bilzerian? He is a man who have bought everything imaginable. Here is a video clip of him on why money can’t buy happiness. 

When we realize that chasing material things doesn’t equal to higher happiness. We can settle down. Focus and what actually does bring happiness. And do that.

Happiness is not tied up to money. There is a lot of people happier than we are, owning less stuff than we do. So why trade your expensive time for some money, and use them on stuff that doesn’t give you anything than a short boost. A couple of weeks from the purchase we will at the very same state before we bought it.

The modern system where we go to school, get an education and work for the rest of our lives is not mandatory. And it is time that we break this cycle. We should see our youth to trade your time for money, claim your eternal freedom back. By not spending that hard-earned money. Make your money work for you, and not the other way around.

We don’t have to spend our entire youth doing this. If I had the information I have today, I could have been financial independent before my 25th birthday. Never have to worrying about earning another dollar. And not through starting a huge company, and working my self to death. It would have been by being conscious about what I would spend my money on, saved and invested it.

Some people would call it extreme to work hard, save and invest for a couple of years, living frugal and focus on happiness itself. I call it extreme to buy shit that don’t make us happy, in order to work at a desk for their entire life.

As we say in Danish.

Thanks, but no thanks. Not for me.