FIRE????? What is that?
I recently learned about the FIRE movement (Financially Independent, Retire Early) and it blew my mind. I have always felt uncomfortable with the idea of having to work until (probably by that time with the increase retirement ages) I’m 70 years old. That would mean another 42 years! Having started working at 21, it just seems too long. I want to enjoy life!
The general idea of FIRE is that you minimize your spending and increase your income, savings and net worth, up to a certain point (25x the amount you need to life off per year), followed by living of 4% of your worth per year.
We recently sat down and talked finances. It was super uncomfortable, but it was good!
It turned out, we are willing to lower some costs but nothing too extreme.
We are already in a good place with regards to savings. We both have a very nice income and are able to save about 20-25% of our combined income each month.
Besides that, we are paying off our mortgage which in a way is also a savings account.
In 2014, the housing market was bad, really bad, houses were sold way under their real value, but we noticed the market started to recover so we actually bought our home in that year, knowing the value would go up. We started with a mortgage of 104% of the value of our home and are now down to 92%, if the value would have remained the same as when we bought it.
Luckily, the housing market has, as expected, increased significantly since we bought our place. If we would sell our house now, we would probably be able to get about €50,000 to €70,000 more for it. A friend of mine bought his house one month before us, he is now selling it for €80,000 more than he payed for it, and the first bid already went €10,000 over the asking price.
Combined with the part of our mortgage we already paid off, that would provide us with €80,000-€100,000 euro’s, just like that. Ok, in the Netherlands you are obliged to use that for the purchase of your next home within 3 years, otherwise you will have to pay taxes over this “fortune”. But still, less mortgage for the next house, or if you don’t buy a new home, more money to invest.
Increasing savings, lowering cost
So back to FIRE. The next part was finding out how much we could save, without any effort, without losing any of our luxury, without noticing it in our daily lives. Because that is the best saving right?
We both went through our memberships and other automatic payments and found we could save a lot of money. I had a membership which cost me €16.47 per month, only so I could save 5% on some of our insurances. I did the math and it doesn’t save me 16.47 or more per month, so actually, this membership is costing me money. So I ended it and informed the insurance company of my changed membership. To make sure I save this €16.47 per month, I set up an automated transfer to my savings account.
Same for my parking membership. Per license plate you have in their system, you pay 2.5 euros per month. You can add and remove license plates as you like, but you always need 1 at least. Even though we have 2 cars, I turned out to have 3 license plates in my app (one was from my mom and I used it once). I removed 2 and saved 5 euros per month, and I can always add a new one if needed.
Again, this money goes to the saving account each month.
You get the idea, we stopped a lot of these unnecessary memberships and payments. With some, you must wait for a few months before they really end your membership but that’s ok, at least we took the time and effort to stop those payments in the end.
We also investigated spending less on groceries, but this is really a habit we need to change so this requires some more work. We did stop with getting daily groceries and switched to 2 to 3 times a week. Let’s say we have successful weeks and less successful weeks.
So far for reducing our spending at this moment, the next part involves increasing our income.
Even though with my new contract, I went down in hours, my monthly income is still the same as with my former company. This freed up more time for me, without losing income.
This extra free time, we decided, will be spend on trying to create passive income streams or other income streams, besides our regular jobs.
Options for this are:
- Start my own business, to make and sell wooden cupboards or cabinets. I made two for our own home, because we have some odd sized rooms and corners, and they turned out great and I loved doing the work. If I can offer these made to fit, this might be a nice side income.
- I speculate on the stock market with plus500.nl. I aim to put some more time into this and increase my profit.
- Maarten has started to invest in small loans against a 5 to 15% interest rate for projects in our own country and usually in our direct neighborhood.
- Instead of throwing away stuff we never use, we now take the effort to try and sell it on Marktplaats (similar to Craigslist, but Dutch).
- Maarten loves to explain things and he is very passionate about his field of expertise so we might start a Youtube channel for that. I’ll let you know when the time is there!
- Maarten might take a job as an expat for a few years, this would definitely boost our bank account.
- We hope to be able to keep this house if we ever want to move, so we can rent it out.
And a few more similar options. As we can’t start everything at the same time we are focussing on things that are easy to implement, to start gaining some momentum.
Do I think we’ll be able to retire at, just putting out a number, 40?
No, I don’t, but we might be able to increase our savings enough to retire waaaay before 70.
On the other hand, I’m only 28 now, in 12 years we should be able to get a long way! Let’s try and see how far we’ll get.
But for now, these extra savings are very welcome for our wedding 😉 by the way, only 6 months left till our wedding!!!! Time flies!
I’ll keep you posted on our progress!
Are you aiming for FIRE? How are you managing your spending? How are you creating more (passive) income?