Last Saturday was the third meet up of belgian/dutch people who strive for financial freedom.
It was the second I attended (missed Antwerp due to illness) and very glad I could make it. Always great to meet like mined people. contrary to my girlfriend some of those attending do not fall asleep when I am talking about options!
I also gave a presentation. I’ll make it available to download here.
It is part a condensation and part an elaboration of ideas and numbers in these three posts on my blog:
The really short version is that instead of aiming for full financial freedom I only aim for partial financial freedom. Some work will still be necessary. My practical side limited that work to the tax free amount of 7.400 euro since that is the easiest money to earn by working. My stash will cover the remaining 12.000 euro I am going to need to live a full year.
What I did not do fully elaborate on is the reasons why I chose this path.
Some are practical:
- it’s more tax efficient, swapping work that is taxed at 50% for work that is taxed at 0%
some are personal:
- my age, I will already be 47 when I achieve this for both me and my partner; achieving full financial freedom would take 7 more years. I would then be 54!
But the main reason is that for me this whole financial freedom is about happiness. Trying to live life on your own terms. Having the freedom to pursue personal interests and projects.
When working full time I simply do not have enough time to do this. Hell, I should do a lot more sport to get my weight down and my general fitness up. But that would mean almost no time to relax in the evening. And I like relaxing in the evening!
But working only 3 months a year or 1.5 days a week will give me the time I need. Not only to do more sports but also to pursue my interest and passions. Having even more free time than those 9 months will not add a lot more happiness to my life. But getting those 9 months years earlier than the in the fully financial freedom scenario will.
The way I see it, is that financial freedom should not cover everything. It should only cover the basics. For the rest you can still work, put in some effort. With some luck, you might even be able to earn some money pursuing your passion thus eliminating the need to work for an employer completely.
I have seen a lot of people on the moustache forums falling prey to the ‘one more year’ syndrome. People with a big stash who still keep working ‘one more year’ because they are afraid the stash will not cover every imaginable future cost. Planning to do some work eliminates this fear. Then your buffer is not an ever larger stash but just working a bit more when unexpected costs appear. For instance: my calculations use the tax free amount of 7.400 euro a year. But due to my mortgage deduction I can actually earn 9.600 euro tax free a year. That 2.000 euro I can earn extra every year would mean 50.000 in stash I do not need to earn before ‘pulling the plug’.
A lot of people on the forums also earn money once ‘retired’. Just look at Mr. money moustaches wife making enough with her Etsy shop to cover both their basic spending. Off course this income was not predictable. But the fact that you will have SOME income is predictable. Even if you do not yet know how you will earn that income. Mr. money moustache had his carpentry skills to fall back to if some additional income was necessary.
In Belgium 7.400 euro is the easiest money you can earn. Since this will only take around 3 months to earn and thus leaves me plenty of time to pursue my own interest it is the basis for my calculations.
This basis will probably be different for everybody. Just like not everybody will plan on spending only 18.000 a year. some will be ok with only 6 months of not having to work, others will want to spend 24.000 euro a year (or more). That is what makes it personal finance. But do take some future income into account in your calculations. If done right you will still be relative young when the basics are covered by the stash. You will want to do SOMETHING. Wasting extra years at a job you do not like or postponing projects, passions until the stash is big enough to cover every imaginable and even unimaginable future expense is in my book foolish. The alternative: to plan some work after ‘retirement’ is a lot better since it will allow you to pull the plug on the full time job years earlier and will give you the flexibility to handle unexpected costs if those should ever arise.