gubbe's journal

Where are you and where are you going?
Post Reply
User avatar
gubbe
Posts: 10
Joined: Fri Jan 17, 2020 2:44 pm

gubbe's journal

Post by gubbe »

Hi everyone,

Welcome to my journal where I keep track of my progress towards ERE.

Age: 29
Personality type: INTP
Job: white collar
Country: Denmark

I live in a small apartment with my girlfriend. I own the apartment.

I have converted the below numbers from DKK to USD.

Assets
Apartment: $ 400k
Portfolio of index funds: $ 15k

Liabilities
Mortgage + other debt connected to apartment : $ 325k
Student debt: $ 23k

Net worth (not including pension accounts): $ 67k

Pension
Pension 1 (aldersopsparing): $ 2.5k
Pension 2 (Ratepension1): $ 15k
Pension 3 (Ratepension2): $ 11k

I can access my pension at age 65-70. I pay money into my pension accounts since there are a lot of tax benefits connected to pension in Denmark.

I am already quite frugal and I do not have any expensive hobbies. My girlfriend is also very frugal. I bought an apartment right after I got my first job after university at age 25 so I have used almost all my money the last couple of years on debt reduction. I have now paid off the most expensive part of my debt. I expect to be able to invest more than $ 2.5k in index funds every month in 2020.

My goals for 2020:
1) Use more than half of my income every month on debt reduction and investment
2) Stay in good shape and exercise several times every week
3) Read a lot of books (both fiction and non-fiction)
4) Learn more about investment
5) Cook often at home and learn more about cooking (I have always been very lazy in the kitchen and my cooking skill are very low)
Last edited by gubbe on Sat Feb 15, 2020 5:39 am, edited 3 times in total.

lolxor
Posts: 8
Joined: Mon Mar 27, 2017 4:22 am
Location: Denmark
Contact:

Re: gubbe's journal

Post by lolxor »

Hi gubbe

Sounds like you are off to a great start! The student debt is at a low enough rate that I'm personally not in a hurry to pay it off - I'd imagine your mortgage is too, though any other debt might be worth getting rid off?

Regarding retirement accounts - the tax benefits are mostly an illusion over the long term imo. The 15.3% sounds great compared to 27% (or even 42%) but the fact that retirement accounts are taxed on notional gains means that over longer time frames they even out more. Retirement accounts are probably still a bit more tax efficient for most people but it's not as clear cut as the rates alone would suggest if you have a long time to retirement.

$2.5k a month is really good! Keep at it :)

Best regards
Asbjørn

User avatar
gubbe
Posts: 10
Joined: Fri Jan 17, 2020 2:44 pm

Re: gubbe's journal

Post by gubbe »

Hi Asbjørn,

Thank you the reply and your advice.

I have already paid off the expensive part of my debt (banklån) which had an interest rate above 4%. The other debt is so called "fælleslån" in my apartment which was transferred to me when I bought the apartment. The interest rate is 2% or below 2%. Currently, I just pay the required amount each month. If I want to pay off the "fælleslån" prematurely, I have to pay a lot of extra fees to the bank and homeowner association (ejerforening). Accordingly, I do not believe that it is worthwhile getting rid off prematurely.

I am paying DKK 3005 (USD 411) each month on my student loan which is above the required minimum amount. Since the interest is very low (1%), I know that it would be more logical to pay off less each month. However, for emotional reasons I would like to get rid of my student debt within a reasonable amount of time (I do not want to have student loan debt when I am in my 40s).

I do not pay instalments on my mortgage loan so I only pay the interest on my mortgage right now.

Forskaren
Posts: 189
Joined: Sat Nov 07, 2015 4:04 pm

Re: gubbe's journal

Post by Forskaren »

Good progress being that young. Impressive to invest that much each month, especially if your combined investments are even higher.

I also paid off student debt early, but I did not have any other debt with higher interest rate. Are you prevented forever to pay mortgage debt early without penalties? Or is it just locked in for a certain time? Do it matter what kind of debt you have in Denmark if you retire with debt, go bankrupt or become unable to work?

Owning your home can be very good protection against raising rents. Still, having 600% my net worth in my home would a big bet that home prices will be going up or at least staying reasonable still. I guess that the numbers look a lot better if you consider your potential to earn money in the future (”humankapital”) as an asset:

https://rikatillsammans.se/vandrande-rantefond/



”Human capital represents the stock of individual attributes—such as skills, personality, education, and health—embodied in the ability to earn labor income. It can be defined as the present discounted value of the flows of disposable labor income that an individual expects to earn over the remaining lifetime.”

User avatar
gubbe
Posts: 10
Joined: Fri Jan 17, 2020 2:44 pm

Re: gubbe's journal

Post by gubbe »

Thank you for the link Forskaren. I will watch the entire video at some point in time. Nice to receive some feedback for a fellow Scandinavian.

My mortgage is an interest-only loan for the first five years, i.e. I pay only interests. In ultimo 2021, I will start paying off the principal amount of my mortgage. I am not familiar with any special Danish rules regarding debt in connection with retirement, bankrupt etc.

Since my salary is high and my mortgage is an interest-only loan, I am able to invest a lot of money each month (and also pay off some student loan debt).

runnergirl
Posts: 19
Joined: Tue Dec 10, 2019 10:01 am

Re: gubbe's journal

Post by runnergirl »

Welcome! It's not too often I see fellow INTP :) Do you guys have healthcare concerns in retirement like we have here in the U.S.?

User avatar
gubbe
Posts: 10
Joined: Fri Jan 17, 2020 2:44 pm

Re: gubbe's journal

Post by gubbe »

Thank you runnergirl.

Healthcare is free in Denmark and is provided through the government but it is possible to get certain advantages with private health insurances. The free healthcare provided through the government is great so I do not have any concerns regarding paying for healthcare in connection with retirement.

lolxor
Posts: 8
Joined: Mon Mar 27, 2017 4:22 am
Location: Denmark
Contact:

Re: gubbe's journal

Post by lolxor »

gubbe wrote:
Fri Feb 07, 2020 1:29 pm
I have already paid off the expensive part of my debt (banklån) which had an interest rate above 4%. The other debt is so called "fælleslån" in my apartment which was transferred to me when I bought the apartment. The interest rate is 2% or below 2%. Currently, I just pay the required amount each month. If I want to pay off the "fælleslån" prematurely, I have to pay a lot of extra fees to the bank and homeowner association (ejerforening). Accordingly, I do not believe that it is worthwhile getting rid off prematurely.
I don't have much experience or knowledge on "andelslejligheder" so I can't comment specifically on "fælleslån", but from your info I agree completely that you should just follow the scheduled payments - no reason to pay fees to be able to pay down (sub) 2% loans.
gubbe wrote:
Fri Feb 07, 2020 1:29 pm
I am paying DKK 3005 (USD 411) each month on my student loan which is above the required minimum amount. Since the interest is very low (1%), I know that it would be more logical to pay off less each month. However, for emotional reasons I would like to get rid of my student debt within a reasonable amount of time (I do not want to have student loan debt when I am in my 40s).
Yeah I get that. We're on a 15 year fixed rate mortgage though financially it might have made better sense to take 30 years variable and invest the difference. My wife was more comfortable with fixed and the difference was small enough that I didn't mind. Regarding length I don't think she'd have been comfortable investing all the difference so a lot of it would probably just have gone to consumption if we had gone with a longer term. The 15 year was a good middleground of not spending the money but also not putting all our excess in stocks and it also means that we'll have it paid off before the kids leave the house.
gubbe wrote:
Fri Feb 07, 2020 1:29 pm
I do not pay instalments on my mortgage loan so I only pay the interest on my mortgage right now.
No reason to change that (fees and everything) but I find that sometimes people haven't fully understood the cost of delaying. The big thing is that the small extra fee for interest only mortgages are applied to the whole loan while the "interest only" part only applies to running payments. So a 0.4% fee difference doesn't sound like much but on a loan of say DKK 1 mil that's still DKK 4k paid extra and if the payments on that loan are lowered by say 50k over that year then you paid 4k to borrow 50k for a year (well less) which is a substantial interest. Also for fixed fee loans the "kurs" on the loan is often lower by .5% or so, so when taking a loan of a million you pay around DKK 5k immediately when taking the loan. There is a nice danish article here that goes through some example numbers: https://www.mybanker.dk/artikler/derfor ... -saa-dyrt/

Like I said I wouldn't refinance something you have, and it might be a good option for you financially and if so I apologize if this comes across as condescending or something. If you learn something then great and you might use the knowledge when/if you refinance :)
Forskaren wrote:
Sat Feb 08, 2020 1:09 am
Do it matter what kind of debt you have in Denmark if you retire with debt, go bankrupt or become unable to work?
Bankruptcies are very rare in Denmark unless you are running a startup and haven't had the forethought starting a corporation. We just don't have the medical bankruptcies that are fairly common in USA and we also don't have lawsuits bankrupting people. That said mortgages are personal in Denmark so you can't just hand over the keys and leave like you can in USA. If you become unemployed for >2 years though (or <2 if not insured) the laws are very strict and generally any net assets above DKK 10k (around 1500 usd) makes you inelligible for unemployment benefits. Retirement accounts are protected but I think there have been cases recently where they actually try to convince people to cash them out at a 60% penalty even though they can't force you to.

User avatar
gubbe
Posts: 10
Joined: Fri Jan 17, 2020 2:44 pm

Re: gubbe's journal

Post by gubbe »

lolxor wrote:
Mon Feb 10, 2020 7:54 am
I don't have much experience or knowledge on "andelslejligheder" so I can't comment specifically on "fælleslån", but from your info I agree completely that you should just follow the scheduled payments - no reason to pay fees to be able to pay down (sub) 2% loans.
I note that my apartment is not an "andelslejlighed". My apartment is a normal "ejerlejlighed". My "fælleslån" is a loan shared between the owners in the "ejerforening", e.g. a loan in connection with renovation of the entire building or new balconies etc.

See the following link for more information about "fælleslån: https://www.ejerportal.dk/guides/faelle ... oreningen/
lolxor wrote:
Mon Feb 10, 2020 7:54 am
No reason to change that (fees and everything) but I find that sometimes people haven't fully understood the cost of delaying. The big thing is that the small extra fee for interest only mortgages are applied to the whole loan while the "interest only" part only applies to running payments. So a 0.4% fee difference doesn't sound like much but on a loan of say DKK 1 mil that's still DKK 4k paid extra and if the payments on that loan are lowered by say 50k over that year then you paid 4k to borrow 50k for a year (well less) which is a substantial interest. Also for fixed fee loans the "kurs" on the loan is often lower by .5% or so, so when taking a loan of a million you pay around DKK 5k immediately when taking the loan. There is a nice danish article here that goes through some example numbers: https://www.mybanker.dk/artikler/derfor ... -saa-dyrt/

Like I said I wouldn't refinance something you have, and it might be a good option for you financially and if so I apologize if this comes across as condescending or something. If you learn something then great and you might use the knowledge when/if you refinance :)
Thank you for the link. When I bought my apartment, I took out both my mortgage loan and an expensive bank loan with an interest rate above 4%. The amount of the bank loan was approximately USD 66k (DKK 450k). I decided to take an interest only mortgages since I wanted to pay off the expensive bank loan as fast as possible. I have paid off the entire bank loan in less than 3 years even though it was planned to take 5 years according to the instalments plan, i.e. I have made a lot of extraordinary payments on the loan which I could do without paying any fees. My mortgage will be refinanced ultimo 2021 where I will begin to pay off the principal amount of the mortgage loan.

When I bought the apartment, I did not make detailed calculations regarding whether it would be cheaper to pay off the mortgage and the bank loan simultaneously. Back then, it seemed like the right decision since I had so much other debt which I also wanted to pay off, i.e. bank loan, "fælleslån" and student loan debt.

Currently, my plan is to invest at least around 50% (USD 2.5k) of my after tax income and use 13% of my income on paying off debt (student loan debt and "fælleslån").

User avatar
gubbe
Posts: 10
Joined: Fri Jan 17, 2020 2:44 pm

Re: gubbe's journal

Post by gubbe »

Update 7 April 2020

Value of index funds portfolio*: DKK 122,000 (USD 17,633)

*not including pension

The value of my investments has dropped significantly due to the collapse of the stock market. Most people on this forum have probably experienced a similar drop. It has been mentally hard to see the value of my portfolio drop so much. Even though I have invested a lot of money since my last post on this forum, the total value of my portfolio has only increased little. However, I try to keep a postive mind set and I focus on that (1) I am still very early in my savings phase and (2) I am now buying stocks a lot cheaper than in January. Hopefully, the crisis will not affect the value of my apartment in Copenhagen.

I invested DKK 10,000 (USD 1,445) in March and DKK 24,000 (USD 3,468) in April. I use the "månedsopsparing" in Nordnet to invest. My portfolio comprises of 75% Sparindex INDEX Globale Akt Min Risk KL and 25% Sparindex INDEX Emerging Markets KL. Please let me know if you have any feedback regarding my portfolio. I am fully aware that my strategy is very simple. My knowledge on investments is limited so I am not comfortable with buying individual stocks.

I have cancelled both my skiing vacation and my easter vacation due to the corona virus outbreak. I am still working on getting all my money back from the airline company. In general, the corona virus outbreak means that a lot of stores are closed and that possible activities are very limited. I believe that my monthly spending will be very low in the coming months while this corona virus outbreak is ongoing. Consequently, my monthly invested amount will probably be quite high.

In my sparetime, I have been running and taking walks in the Copenhagen area in the nice weather. It is really essential to get outside when you are working from home in a small apartment. Also, I have been reading a lot of literature.

Forskaren
Posts: 189
Joined: Sat Nov 07, 2015 4:04 pm

Re: gubbe's journal

Post by Forskaren »

I think you are very wise to not buy single stocks. As far I have seen the science is very strong against success with single stocks in the long run or timing the market.

I noticed that the fees and costs of index funds could be zero if investing in domestic index funds in Sweden. Is it the same in Denmark? Could be worth to put a small portion into that.

Forskaren
Posts: 189
Joined: Sat Nov 07, 2015 4:04 pm

Re: gubbe's journal

Post by Forskaren »

Nordnet Indeksfond Danmark

Looks pretty tempting?

But check where it is located, since Denmark takes very high taxes on dividends going to some foreign funds.

User avatar
gubbe
Posts: 10
Joined: Fri Jan 17, 2020 2:44 pm

Re: gubbe's journal

Post by gubbe »

Forskaren wrote:
Wed Apr 08, 2020 1:05 pm
Nordnet Indeksfond Danmark

Looks pretty tempting?

But check where it is located, since Denmark takes very high taxes on dividends going to some foreign funds.
Thank you for the advice.

Since I am still very early in my accumulation phase, I have decided that I will currently focus on building a portfolio with exposure towards the global stock market and emerging market even though I have to pay additional fees for this. I do not want to be heavily dependent on the performance of the Danish stock market which from an international perspective is small. At some point when I have accumulated more money, I may decide to put some money into the fund (Nordnet Indeksfond Danmark) without fees that only has exposure towards the Danish stock market.

Update May

I have invested around DKK 24,000 in May 2020 (around USD 3,585), i.e. around 60% of my monthly income. Also, I have used around 12% of my monthly income in May on debt reduction. Thus, my monthly spending has been very low in May.

The total value of my portfolio is now around DKK 152,000 (around USD 22,707) (not including pension accounts).

The corona virus situation has probably been at least part of the reason why my monthly spending in May has been low, e.g. restaurants and museums have been closed and my vacations got cancelled. Most likely, I will not be able to keep my monthly spending this low in the coming months.

I have spend a lot of time reading classics and books on philosophy during the corona outbreak and I have really noticed that reading makes me happy and expands my knowledge and understanding of the world. I have worked from home and fewer hours than normal during the outbreak which has increased my spare time and provided me with additional time to read. Now that I am back in the office, I will work more hours each day and my spare time will decrease which will leave me with less hours to read. I will, however, make an effort of finding time to read.

User avatar
gubbe
Posts: 10
Joined: Fri Jan 17, 2020 2:44 pm

Re: gubbe's journal

Post by gubbe »

Update July 2022

My life has changed significantly since I last updated my journal. I have got a new job, got married, had a kid, moved to a new country, sold my old apartment and bought a new apartment. Hence, my entire life situation has changed completely.

My current job pays less than my former job did but still an above average salary. However, there are many other benefits with my new job, e.g. (1) I work a lot less, (2) it is very flexible with respect to home office, (3) a lot less stressfull and (4) no toxic colleagues. Even though I am paid less, I believe that my new job is a lot better for my mental health and general life quality. I now have plenty of time and energy to exercise, cook delicious meals, read books and be together with my wife and child. Furthermore, I do not have to check my work email during the weekend and during vacations. Hence, I am very happy with this job even though it will delay my journey towards early retirement.

With this new apartment that I own together with my wife, I spend a lot more money on debt reduction compared to earlier. Hence, I invest a lot less in the stock market each month. I have a lot of money locked up in my apartment. If me and my wife sold the apartment, I would probably get around USD 400K in cash (i.e. my 50% would be USD200k).

The long term plan for me and my wife is to move to the country side with lower housing costs. However, I will need to accumulate some more money before this plan is carried out.

ertyu
Posts: 2893
Joined: Sun Nov 13, 2016 2:31 am

Re: gubbe's journal

Post by ertyu »

NICE. sounds like you're doing great!

Post Reply