Spend the day working to pay for a car that takes you to work to earn an income that pays for a house that will serve to rest the little time we have left from work.
If you read our introduction you already know the reason we write this blog. There is no better definition of what we feel about life then previous statement.
Working with the single purpose of surviving is far from what we want in our live. In order to change things and achive our financial independece we need the answers to the folowing questions:
First, How Much Money Do We Need To Have The Choice Not To Work Anymore (one of the definitions of financial independence). Accordingly with the 4% rule (based on the Trinity Study) and considering our expenses, we will need 587462,4 euros (more on this subject latter on).
Now that we have the end state next question is How To Get There? It might seem obvious, but the formula is quite simple: spend less money then what you earn and invest it. Although as simple as it is, most of us never get there and the main reasons accordingly to our research are that most of us have very poor savings habit and even worst when you talk about investing.
The first step (that we found hard to give) was to create and maintain a reccord on all of our expenses (still a work in progress). You do not need a fancy app or a wonderfull worksheet, just a simple excel in wich you keep all the expenses you have. The more dettailled the better. You will be amazed about the impact it will have on your financial independece.
The next step is to start by reducing you expences in things you dont need that much or that you can find a better business on. One of the best examples is your mortage contrat. Often you can reduce the interest rates and the insurance value. As an example by decreasing 30 euros in a monthly payment will save you 7200 euros in a 20 years mortage (and if you consider return on that money it would be more then 13000 euros).
So how long will it take to get there? The answear will depend on yours savings rate.
The table Below shows what i mean:
Now you know how long does it take to get there, but where do i invest my Money to achieve this goal? The answear could not be more simpler, you buy index funds or ETF as much as you can and the sooner the better.
The truth is that the formula has been tested and works, we just need to keep focused on the end state and keep on track,
Mr Scrooge