My first wage was 1270 EUR after taxes / Month
Additionally I got a “gasoline card”, basically free gasoline for my car
I was really proud. I thought I was making a ton of money.
Ok…1270 is not such a high wage by Western standards perhaps.
But include free transportation, and knowing healthcare is almost free in Belgium, what more do you need?
I was living in Gent (famous university city), and was still renting my Student studio.
I had inscribed me in just one course at University that allowed me to stay there.
And this at just 270 EUR / Month!
It is strange that after almost 9 years I still remember those numbers. They meant a great deal to me.
In a way even then I was right I would not need to worry about money.
Not as long as I am working anyway.
Because of that I never really paid much attention to what I bought.
Still I was able to save.
I was always a simple person. I didn’t need much to be happy.
I always carefully consider every purchase.
Its just part of me.
Is this part of you to?
Are we the kind of people who try to become Financial Independent?
Are we the people who are just happy with what they have? Do not need much.
My work shoes for example costed 300 EUR. They are now about 7 years old.
When they broke I had them fixed. As good as new for 25 EUR.
Not that I wanted to save so much money. I really just like the shoes. Why change if they fit and look good?
It just shows that Fire might be something you have all along. Even if you don’t know about it.
We are part of a community of people who have come to realize we are happy with what we have.
If you are not happy with what you have you might not ever be happy.
If you make 1270 EUR / month and you are unhappy, you might not be unhappy with 2000 / month. Maybe not with 10000 / month either.
You will always want more. Want to spend more.
These are not the people who become Financial Independent.
You need to stop buying that new car you do not need.
That bigger house.
So you have enough room for all your friends…
That new furniture you can show off.
The thing is your friends do not care.
They don’t mind to sit on an old couch.
They might even like your vintage table and chairs that you bought second hand.
Mostly they like your company.
Buy what you need, not what you want.
Buy what you need, not what you think others want.
Do not spend and buy whatever comes to mind.
Not if you want to become Fire.
The fact of the matter is you do not become rich.
You either feel rich, or you might not ever be.
You are not rich by acting rich.
You are rich by being happy with what you have. A simple life for some, but great wealth for those who have always been happy with just what they need.
Not what they want.
Yet there is plenty of people who consume this way. They are many.
They like the big house. The fancy car.
They act rich. They look rich. They are not.
And they probably never will be.
They will not be happy with what hey have. They will always want more. And with more comes more bills.
They might have a high wage. But a high wage is not wealth.
They are not bad people. I am not a preacher against this culture.
I am happy when I can keep my 7 years old shoes that fit well longer.
Some others are happy when they can get that 10.000 EUR watch. A 50.000 EUR car.
A 50.000 EUR new car… New? Only new the day you buy it.
In the end consuming is good for the economy. And a good economy is good for me.
But its not for me to act rich.
And you are reading this. So maybe we have something in common?
I can help you with that. Three words.
Stop acting rich.
Stop acting rich.
Stop acting rich.
Three words, three times. That should stick.
a quote from a book I read a few months ago: The millionaire next door by Thomas Stanley.
A must read really.
But we are wandering.
What you really need to do to become rich? Follow me!
So back to me
As a “rich” guy making 1270 a month, I had no clue about Fire.
I didn’t had a desire to be retired.
I wanted to work. I wanted to be useful
I know a lot of people are this way. Its in our nature to be challenged.
But as we know Fire is not about retirement.
Its about freedom of choice. To be able to do what you love.
To be able to do what makes you happy. Because who can say they have been happy every single day at work so far?
I read about Fire, now maybe for the first time one year ago.
I always assumed I was a good saver. In another blog I wrote that I estimate my savings rate is about 70%.
I never really wanted to take the effort to write down how much I saved.
One friend even asked me recently what my savings rate was and I confirmed again 70%.
70% is huge. I thought I was a star.
Until this weekend.
Prepare for a shock
This weekend I did decide to take the time and write it down. And do the calculation.
As it turns out I am a decent saver, but not the star I thought I was.
August seems pretty bad. My highest expenses in August are
- My loan for my apartment (ok cant help this)
- The building organisation for my apartment (we are putting up a new roof. It will be high for another while, but its a quarterly payment..)
- Cheques for cleaning
Yes I have a cleaning lady.
I pay only about 40 EUR / month for this. As we are the Fire community we know how precious time is.
For me this is a cheap way to buy some free time. So I won’t cut back on this.
I payed 270 EUR this month. It seems high but that’s only because I paid for a few upcoming months.
That leaves my restaurant bill. This is actually a recurring issue.
Every month I have a huge restaurant bill.
I guess its not until I did the calculation of my savings rate that I found out.
You see I travel a lot for work. A lot.
And when you travel you don’t know many people. You don’t always want to sit at home and buy something in the supermarket.
There is also social pressure. You do not want to be the guy who says its to expensive.
And lastly I do enjoy to go to restaurants. I enjoy trying different food.
I am Belgian afterall. And we are famous to enjoy food and drinks.
Belgian beers anyone?
But I know that cutting on this would be the easiest way to increase my savings rate.
Why is savings rate important?
Ok lets move back a bit and figure this out first.
There is two components that will determine when you are Financially free:
- How much return (such as interest) you make on investments
- How much you spend
While a high wage will help to have a higher savings rate easier, in the end if you have a low savings rate then it will not matter how much you earn.
The Fire community usually assumes a 5% return on investments. But as a safety border all calculations happen with 4%.
So lets assume the following:
- Saving rate of 62%
- Investment return of 4% (that I take out every year)
- I invest everything I save
- I have no savings or investments right now (as we know this is false but lets just assume it for now)
Then I can retire in 11.7 years.
11. 7 years. It actually does not sound so long.
This could be you as well.
..what if I take out something? Maybe those restaurants?
Well what we see is that even an increase in 2% savings rate could make me retire 1 year earlier.
This could be you as well. Would saving an extra 2% be worth it?
Worth it to be financially free 1 year earlier?
Have one year extra that you are totally free.
And can do whatever you want?
Whatever you want!
So are those restaurants really worth it?
I do enjoy them. Dropping them will be difficult. But maybe I can try to lower them?
Would 1 year extra be worth it for me? Would it be for you?
That’s what we are trying for right?
Didn’t we say being able to do whatever we want?
Isn’t Financial Freedom also about the choice to do that?
I had my shoes repaired for 25 EUR, not to save 300 EUR on new shoes, but because I liked them.
So wouldn’t whatever I want include those restaurants visits for me?
Or perhaps I am not that different afterall from the consumers society we live in then?
We all have some of that in us. And that’s okay. We are good for the economy this way afterall.
But you cannot have and the restaurants, and the trip around the world, and the big house. Not if you want to be free.
You must find what that freedom means to you.
How many years of freedom is it worth to you..
How much is it worth to have that new 50000 EUR car..?
..that car that is only new the day you buy it..