Its the first time I am actually looking at my saving rate. I always thought I was doing really well, when someone asked me how much I was saving I said around 70%, and that I could do 85% if I was not paying off my loan. I managed to go back in my Finance history and was able to calculate my saving rate for all the way to November last year.
What I concluded was that I was not doing at all as good as I expected. Additionally the calculation comes at a time when I really had a horrible month with a lot of expenses. Some which I could have helped perhaps, others I am afraid I could not.
One big expense throughout the year is the fact our apartment building (I do own an apartment – something which I did not blog about, but which I should clearly) required a new roof. This has greatly increased my housing expenses. We will be paying off this loan for a few more years, and infact next year we will have a short overlap where we pay off 2 loans at the same time.
Another big one is restaurants. I realized I spend about 400 EUR a month on restaurants. I am aware about this and I will try to get this number down. One thing I could do to help here is to stop going out to eat in the evening during the week. Something I am already doing less then before (at one point on my life I ate out every might!), but I clearly need to improve more. Additionally if I do go out, I need to avoid the restaurants charging 40-50 EUR a meal, but try to stay bellow 25 EUR.
When I put the numbers together this is what I get. I think it will be fairly correct. It was not easy as I do have a lot of business expenses that I had to subtract, but I do believe its correct.
Lets explain a few of the ups and downs shall we?
I actually went on two holidays in January: Disneyland and South Africa. Both credit cards had to be paid that month, leaving me a big cap in my expenses. I don’t regret either holidays. South Africa was the experience of a lifetime and Disneyland was a great family outing. I would do it all again in a heartbeat.
I do realize that skipping holidays would be a huge boost for my saving rate, but even so I would be happy to do it again next year. I might choose something a bit cheaper then South Africa though this time such as somewhere in South – East – Asia. But being able to be away in winter (January and February are so boring in Belgium!) when its cold here and summer there is priceless really.
One big expense I had to do here was put in new heating in my apartment, cutting a whole in my budget. Additionally we went to Ireland (or at least start booking our holidays) making sure a big whole in my budget got cut away. All in all keeping about 20% savings rate, despite of these is not that bad.
Ok lets have a look at my top month. In May I can be really proud as I managed to get a saving rate of 75%. That being said, I cannot be THAT proud, as its the month I get my yearly bonus. So my increase in saving rate has more to do with an increase in income rather then in my excellent saving skills..
The very first month I start calculating my savings rate and I start off with a disaster. Only 15%! So lets look at this month a bit more in detail shall we?
My living expenses are higher this month due to housing expenses (paying off the loan for the roof), this fell together with yearly housing taxes (500 EUR!), Shopping for some new clothes / shoes (my walking shoes were 7 years old…give me a break), and my restaurant visits came at an all time high this month of about 500 EUR. Yes I really do know where I will cut costs next month… The only advantage of these high restaurant costs is that my grocery costs are lower this month (only 140 EUR).
And the last reason why I only managed to get a 15% savings rate, I took 2 weeks off in August causing my wage to be lower this month.
But really, objective for October will be, cook more eat out less! and if I do eat out, eat out cheaper!
Average saving rate so far…
As a final note I want to close with my average saving rate. So far I am able to get a 48% savings rate. I might have made some slight calculation errors but all things considered this is not to bad. In a way knowing this number will help me to increase it, and if it was to high, then it would make it really difficult for me to improve it. In my yearly goals I had set for 2020 to increase it with 3%, but I might update that to do 5% better, as a 5% increase would have a huge impact on my time to FiRe.
Years to Financial Independence based on savings rate
I did put in these numbers into a Fire calculator and actually based on my current portfolio, and savings rate I would be Financially independent in 14.9 years. That would be assuming 2800 EUR expenses per month would be enough. If I assume 4200 EUR expenses (my final passive income goal), I would be FiRe at 55, which is not bad either really..
What if I save longer
Should I wait even longer, then by 60 I would have a monthly income of 5800 EUR to spend. Considering my legal pension would be around 1500 EUR, its really incredible. But really it would be way to much for me. I do not need a pension of 7300 EUR, its just ridiculous, I could never spend it. It’s not me at all to have this kind of income.
Plans can change
But this is all assuming this goes as planned, but plans could still change really.
I am a licensed diver (although I do not dive anymore), and one thing I learned was to plan your dive and dive your plan. Then you had the highest chance of making sure things worked out.
But would the same really be true for your Financial Future? Can you plan your Fire age, and reach the FiRe age as you planned it?
I have a few uncertainties in my life that I will need to narrow down first:
- I still need to invest in a house, as I live in a small apartment now. I will need to constrain myself of buying a big villa, and instead buying something a bit smaller or more outside the city.
- At the same time the calculation did not held into account any wage increases I might have. And its almost certain that I will get some.
- Its also possible I get a wife and have children in the future, also this could also have an effect.
So long term there is a lot of things that can affect the FiRe age, but we always need to go off on what we know right now, and that is right now there is a chance I do reach the FiRe age before the age of 50, and when things change…plans will change.
October is coming up and anything can still happen! However I do not expect any major expenses next month: no extra housing costs, no extra taxes, no holidays and no need for any purchases so I do believe my savings rate will go up slightly, but lets wait and find out!