My financial independence plan
My biggest financial goal in life is to be financial independent. The reason for this is so I can take back the control over my time. Let me tell you about my financial independence plan.
It doesn’t feel right to live the rest of my life working for the MAN. I want to work on my own projects, have more time with my spouse, family and friends. To feel like that the work I do, I do for myself and not for someone else.
My investments in index funds
I regulary save in index funds that tracks MSCI World and MSCI Emerging Markets. I started this journey in january 2018, and I will continue until I have 5 million NOK (aprox. 607.000 US $).
If I use the 4% SWR this means I can withdraw 25.000 US $ every year. This is about my annual spending pt. And, I don’t think I never will earn any money from regular work again, so I’m not afraid of “pulling the plug” to early.
By now my investments has a market value of 140.000 US $ (1.150.000 NOK), that means I’m aprox. 1/4 to my goal. That’s a good start!
Below (figure 1) you can see my investments so far.
Figure 1: My index funds shown as investment value/market value.
Sold my apartment and moved in with spouse
I had my own apartment, but after I sold it and bought an apartment with my spouse instead (cheaper to share), there was extra money to buy stocks.
Every month from now I will continue to update my index funds value in the chart above. Hopefully I manage to save 3000 US $ from my salary every month, so I can buy more stocks.
I also have a mortgage on my apartment (750 US $/month). My goal for total savings per month is therefore between 3000 – 3750 US $.
In the chart below (figure 2) I will track my spendings, earnings and monthly FI money. As we speak my baseline salary from my dayjob is aprox. 4500 US $, but I’ll try to increase with some side hustles (Craiglist and betting so far, but I would love to try freelance writing as well!).
My plan to become FI is easy, you can do it too!
My mothly spending (included mortgage) is aprox. 1800 US $ every month, and I’ve done my best to cut the costs even more, but for now I think my main priority is to increase the earnings.
My monthly FI money is how much money I safely can withdraw every month (and never deplet the account).
For this number I’ve used the 4% rule. This number is now 485 US $. This means that I can withdraw almost 500 US $ every month, or almost 6000 US $ every year!
I don’t want to withdraw anything yet, but I think it is cool that I’ve managed to get this far already. I’ll let the compound effect do it’s magic!
Figure 2: Savings, earnings and Monthly FI money
I’ll just continue to invest in index funds every month no matter how the market conditions are like.
This is why you should stay in the market no matter what
I don’t believe in “timing the market”, but what I do believe is “time in the market”.
A study by Johnson & Krueger based on SP500 data from 1982 to 2001 showed that annual return dropped from 11,8 % to 9 % if you were out of the market in 10 of the best 5050 days this period contained.
And if you were out of the market in the 50 best days in these 5050 days, your total return would only be 2,4 %. That’s 80 % lower than if you just stayed in the market!
Why I’m using leverage
Oh, and I forgot to mention that aprox. 33.000 of my 140.000 US $ portfolio is index funds on margin. I value this as a calculated risk, because my interest rate on this loan is only 2.19%.
I expect my stocks to raise by 7 % annualy in the long run, and therefore I think this is a no-brainer. To buy stocks on margin with such a low interest rate is something all investors should consider.
Maybe I’ll consider real estate to be included in my portfolio after a while, because it gives you cashflow every month, but for now I’ll stick with index funds. I’m already heavily invested in real estate through my own apartment.
UPDATE: I will be FI in only 5 years!
For me, I think 5 years is a long time. Sometimes I wonder if I instead should seek barista FI, semi-retirement, switch career or just try full time freelancing. How do you guys keep your head up through the years in the cubicle?
I think my personality (INFJ) keeps me from enjoying my job too much. INFJs are likely to find that most corporate career paths are not designed for them.
Many INFJs struggle to begin a career early on because they see ten wildly different paths forward, each with its own intrinsic rewards, alluring but also heartbreaking, because each means abandoning so much else. Read more about me here: Meet mr. Route 2 FI
What to do when I’m FI??
When I hit my FI-mark I will still do some kind of work, but this will be work for myself. I think Mr. Free @ 33 wrote a great article about it here: Work Makes Leisure More Enjoyable (And Vice Versa)
I also dream about reading my favorite Haruki Murakami novels over and over again, drink tea while I sit at a cafe and watch people fly around and enjoy more time with my family. Haha, I’m such a introvert.
What do you dream about when you become FI? And what kind of personality type are you? I’m so jealous on my friends who actually enjoy their cubicle career!