With this article series you can follow my journey to financial freedom step by step. That way everyone can see how I achieved my goal and all steps, the ups and downs, along the way. Wish me luck!
Overview of 2019
Last year I started my journey to financial freedom. This is the first update, which I am writing at the beginning of 2020. First of all, I graduated! That didn’t exactly go without issues. Over the summer I failed an exam twice which generally means you have to redo the entire year. With a bit of luck I managed to get a 3rd resit for the one exam standing between me and my diploma. Thankfully, I passed the exam a month after I had already started working. The graduation ceremony was a week later which allowed me to graduate with the rest of my class.
As stated before I have started working 40 hours a week. I am not going to lie, it is exhausting the first couple of months(!). The firm I work has a steep learning curve so I learn a lot. I have gotten to know my team, the hierarchy and the clients. My study (Accountancy) was in some ways useless as I was currently working as an IT Auditor. Besides that, university is a lot more theory and practice and auditing is not really a subject that gets taught in school so you learn most of it on the job. Although I was aware of the horror stories of working at big corporate firms, the first year was quite fine (fingers crossed for next year!). I started in a lucky period, the salaries had not been benchmarked to similar firms for a while so in the summer it was announced that there would be a general salary increase for almost all employees. So my first salary increase was in the pocket. Unfortunately, I did get another year contract instead of a permanent contract. That is not really common for this firm but this time it was mostly my own fault. It gave me some alternative opportunities so I will have to see if my decision pays off.
Besides work, in my personal development I have also had some challenges. After half a year of work I have started living together with my boyfriend whom I met around 1 and a half years ago. My boyfriend finished his own studies at the end of summer and started working at the same company (which means same salary and fringe benefits). My boyfriend and have talked about finances and we have agreed to take the road to financial freedom together. That means from now on, this has become our journey to financial freedom! It also means that besides you, my fellow traveler, one more person has joined my on my journey.
We made the conscious decision to move to a bigger place. We are very wary of life-style creep but we currently both lived in a student apartment of around 20m2 in the noisy centre of a city. It works great as a student but not so much as a working adult. Our old rooms were inconvenient with regards to traveling time (traveling to work by car on a bad day was 2,5 hours) as well as comfort in our house (I only had 1 chair and 1-person bed). We needed something bigger. Because I am quite sensitive to noise and we didn’t want to travel that far we decided in what location we wanted to live. It also had to have a decent public transport connection which saved us a lot of time during some road protests this year. Currently we live in the smaller city next to a big city in the centre of the country. This allows us to be flexible where we can work, the major cities are around 1 hour away. Due to our study debt buying a house was not an option yet so we decided to rent for the first 2-3 years in order to save and wait for the housing prices to stabilise. In the end we settled for a minimum of 2 bedrooms in order to keep the peace in an appartment of around 10 years old that is 105 m2 (1130 sq ft2). It has a separate toilet, bathroom, storage room and 1 parking place in the apartment complex but free parking outside for the other car. My current living costs increased by 50 euro’s but I am getting 5 times as much space in return. That was a fair deal to me. That is one of the benefits of living together: more space for less money.
This year we have started our savings plan and at the end of the year we have surpassed our initial goal for the year by wide margin. We achieved this while still being able to live normally, although not lavishly. We dine out once a week and have taken a 2 week holiday to the sun by plane. Thus far, keeping up this live in the future is fine!
Dit jaar zijn we ook begonnen met sparen en hebben ons doel voor dit jaar ruimschoots gehaald. Dit hebben we gehaald terwijl we wel normaal hebben kunnen leven. We eten nog gewoon 1 keer per week buiten de deur en zijn ook met het vliegtuig 2 weken op vakantie geweest naar de zon. Tot zover, is dit leven allemaal prima vol te houden!
The short overview above has had some impact on our finances. The rental price of our house is 1.250€ which is €625 a month for each of us. If you read my article on why you should have multiple bank accounts you know that I have a joint fixed cost account (€1500 each month) and a join grocery account (€300 each month). We also have one savings account for municipal taxes for our home and one savings account for the leftover money at the end of the month we use for vacation or other trips.From the joint fixed cost account we pay the bills for rent/water/gas/electricity and insurances. We also save €30 a month for taxes. I made the mistake not saving for that as a student but this time I looked up the amount before hand so we could save for it.
Personally, I paid €150 in insurances but due to my increasing emergency fund and savings account I can afford a lower insurance with a higher personal risk that will cost me around €120 next year. This is included in the €180 personal fixed costs I set aside each month from which I also pay my subscriptions and bank fees. I still have the around €200 “splurge money that I use for buying clothing, drinks & dining out and any other entertainment.
For our vacation we spend with the two of us €516 on flight tickets and €570 on vacation itself on food, transport and entertainment. We budgeted €1.000 so we spend €88 more than budget which is fine. It was our only vacation trip this year and we paid it from our holiday pay. Our company saves up the holiday pay and does not pay it out monthly so we get it all at the end of they year or when we decide to take it out at an earlier point. We decided to keep it like that so we wouldn’t accidentally spend it. If you are not a good saver this might also help you.
Our study debt remains the same for me (€44.000) and my boyfriend (€12.000) as we do no have to pay this off the first 2 years after graduating. Due to the negative interest rate, the amount remains the same and is set for the next 5 years. Currently I am also no longer broke and have paid all outstanding bills and replaced most of the formal clothing that needed replacing.
As of February 1 2019 I have saved €500 a month for a total of €6.000 at the end of the year. I first put €2.000 in my emergency fund on a savings account. In another savings account I save up the money throughout the year that I can put in the investment account which currently contains around €2.050. Around €1.500 is in a defensive investment account which generally generates a return of around 3% but this year got the amazing return of 10%. There is also €450 each in the S&P500, MSCI Worldindex and U.S Treasury bonds on a DeGiro investment account. My boyfriend had more luck at the start of his career and managed to exceed his savings target (€3000) easily. Because we expect buy a house in the future and there is a crisis coming, he does not have investment accounts yet.
In 2020 I have received a salary increase of €156 before taxes but due to the fact that I will be studying one day a week (partially paid for by my employer) I will not earn anything more after taxes than last year, so around €1.900 a month. The savings goal for 2020 is €600 a month (around 31% of my after-tax income). The end of year savings goal is a total amount of €22.000 for the both of us. This is fully in line with our FIRE plan. At a conservative average return on investment of 3% that means we can retire when I am 42 at the latest. If the return would be 5% instead, we can retire when I am 38. I will explain my FIRE plan in a different article.