What’s up with this financial freedom nonsense?

Changes are you have stumbled upon this blog via other personal finance sites and already known the concepts of financial freedom and early retirement. If this is the case, you can skip this post. For those few who are not familiar with this little sub section of the personal finance space, I will cover the basics below.

Financial independence (I chose to go with financial freedom because financial freedom sloth had a nicer ring to it, it just sounded a little bit better 😉 is the point where your passive income covers your normal expenses. Basically you do no longer need to work. To some this is also the point that some do in fact decide to stop working altogether and decide to retire. Hence the early retirement part of it. Since a lot of people who are drawn to this concept appear to be engineers and they love abbreviations, FI and FIRE where born. With FIRE being Financial Independent Retire Early.

financial freedom sign

So one can say that financial freedom has two parts:

Generating passive income.

Of course passive income is never 100% passive. Even the most passive investment needs you to log in to your investment account now and then and transfer some money around (perhaps even sell or buy something – gasp, the horror!). Some people achieve financial freedom via real estate which does involve some (or even a lot) of work.

But the general consensus here is that you get most or all your income from other sources than having to work full time for somebody else or in your own business. In most cases the passive income comes from investments (either stocks, bonds, real estate) but we live in a strange world and other possibilities are possible (perhaps you own a patent that pays regular royalties, a company pays you well to put some windmills on a plot of land, your grumpy cat achieved internet stardom and brings in the money …). Point is, you are no longer under any obligation to get up early in the morning and go to work every day of the week, for most weeks of the year.

Covering your normal expenses

The more you spend each month, the more passive income you are going to need. Sounds simple enough but you would be surprised how many people are not aware of the link between their day to day spending and their ability to save …

How much do you need to cover your expenses? Well, this guy has a pretty good answer to it. The basis is the trinity study.

Now, if you go poking around on the internet you can find posts on forums where intense debate rages about this study. And as a non USA person you could say: does it apply to my country? But I had never heard about the trinity study and also came more or less to the same conclusions just by observing that even in Belgium we had a handful of companies paying out a net dividend (after taxes) of 3% to 4%. They even continued to pay their dividend during the biggest market storms (anybody remember 2008, or before that 2001?) and in most cases are able to increase their dividends over the years, thus giving some inflation protection. The 25x annual expenses in investments (whatever form those investments may take) is a pretty practical rule of thumb. We’ll go with it for the time being. Once you are close to that number you may want to examine more closely your assumptions, expenses, rates of return and all that stuff.

The same guy also has a pretty good post on how to get there.

Basically: the less you spend, the more you save AND the less you actually need to achieve financial independence. Being frugal is the name of the game (being smart helps).

Two other sites also cover the basics (and much more) of this whole FIRE thingy pretty well

http://earlyretirementextreme.com/

http://jlcollinsnh.com/

Any questions? Google is your friend (I am the lazy one here, so go click, click the links and read, read …)

In the next post, I will go into the details of how I view what financial freedom in Belgium specifically means.

Luckily for us, achieving freedom no longer involves painting our faces blue, having to listen to Mel Gibson going on and on about something or another and then ride into battle and die horribly. So we have that going for us!

Mission statement

Hello and welcome to yet another personal finance blog dedicated to financial freedom and early retirement.

I am a 42 years old guy living in Belgium (the country with the highest tax rate in the world), making an average wage, who would like to achieve financial freedom by 45. And I hope this blog will help me stay the course.

The ‘living in Belgium’ part is also the reason why I am doing this blog. The personal finance community might have grown quite a bit in the last years in the USA but in Belgium Europe even) personal finance blogs are pretty spars. I also think my perspective will be different than most. And who knows, we might be able to learn a bit from each other!

So goal number one is achieving financial freedom before I turn 46. I will go more in depth in a follow up post what financial freedom means exactly for me. But my investments will have to go up.

Goal number two, but equally important is getting back into shape. Young mr financial freedom sloth was a dashing young man 😉 in excellent shape. Current mr FFsloth is an overweight slob (1m78 height and 105 kilograms, not good by any metric). So the weight will have to go down. Achieving financial freedom without good health would be a shallow victory. Also, getting in shape might actually help becoming financially free as it will give me more energy to explore new money making side hustles.

Goal number three of the blog is to keep me on course. As you will discover in the following posts, I am a bit (ok, a lot) of a slacker: hence the average wage, hence the being fat (I am also brutally honest ;-). Being disciplined over a longer time period isn’t exactly my strongest point. My style is more that of a sloth for long periods, intersected with short bursts of intense activity and then retreat back to sloth. (Little side note: by typing the last sentence I stumbled upon the name for my blog! I was going to go for financialfreedomat45 but financialfreedomsloth is so much better. As a bonus, sloths are cool animals!!)

Being a sloth isn’t necessarily bad as it did get me a university degree. With honors even!! How I loved the old annual university system in Belgium: muck about till the first of May, then one month of intense studying, another month of exams and 1st of July I could be full on sloth till 1st of October. Sigh, the good old days.

It also got me an investment account approaching 240.000 euro. A sloth does not spend much. And value investing can be very sloth like, even Buffett loves a sloth : Lethargy bordering on sloth remains the cornerstone of our investment style.

And I am the proud owner of a charming old farm house approaching a value of 300.000 euro where the mortgage is currently around 130.000 (having a partner helped here, so only half of that is mine).

Yes, this sloth has done a few things right. But it could have been so much more had I been a bit more disciplined and focused!

So this sloth is counting on you dear readers to keep me disciplined and honest. In exchange you will get a brutally honest report on how a lazy, overweight (no it is not the waffles or the beer that got me fat), middle aged Belgian guy goes about achieving financial freedom in a country with one of the highest tax rates in the world. Trust me, it’s going to be a crazy ride.