Hifideo's Journal

[hifideo]

Hello,

So to start my journal.

My Vital stats: I turn 38 this month, I live in Oslo with my wife and two young daughters, our only debt is our mortgage. We are a good family. Our NW is positive, though nothing especially useful yet.

Goals: FI, the ability to solve most problems without the debit card. The desire to do more things without the debit card, and to do so successfully. I don't want to retire necessarily but I want to be intrinsically motivated, be able to spend as much time with my kids as I want, and to go travelling when I please, preferably by foot or bicycle.

Financial status: We have a mortgage, which while a relatively low debt ratio, is a high absolute number. We moved here recently and had to take a new mortgage out, which has 24 years left on it. If we include the 10 years during which we paid down the mortgage on our previous apartment, we will have had a mortgage for 35 years, which makes me wince. Right now our interest rate is 5% effective, and our mortgage and housing payments are 28% of our take home monthly pay. A ratio that is way too high for my comfort, especially considering how expensive food and home goods are here in Norway. Currently 24% of our take home pay goes to food and other household goods from either the supermarket or the apothecary.

We could reduce the daily goods 24% by a little, but nothing that would be life changing from a mathematical perspective. Reducing that percentage could have a high psychological benefit, and I am working at that now. We rarely eat out, but there are a lot of cafe visits, though the actual cost is a small portion of our budget.

The efforts at the margin have, in dollar terms, not that much marginal value. The real money sucker for us is our mortgage.

We dont have that high of expenses otherwise. We are trying to be better about clothes and household goods though.Before buying something new, I have started asking myself if there is 1. an easy substitute or 2., something that I can improvise a solution with. A small example from yesterday that I am proud of is figuring out how to make our baby call with a power cord work outside during naps. We lost part of our wireless baby call and were about to buy a new wireless set since I couldn't find anyone to borrow a wireless baby call from. We had an old wired baby call sitting around though, and I managed to make that work.

If we cant decrease our spending dramatically, then there is also the option of increasing our income. My wife won't be doing that anytime soon, but I am changing work as I write this. My next job should either 1. have a significantly higher salary or 2. the possibility of significant capital gains down the road.

I wrote in my hello post viewtopic.php?t=12948that I am much more interested in freedom than wealth. Wealth will probably be an important factor, but I am not interested in carrying a loaded balance sheet with investment accounts on one side and a good deal of debt on the other. To test this principal we recently took a good portion of our savings to pay down our student debt. This was not the excel sheet answer, in fact it was the worst excel sheet answer. But it made sense to my desire to not have debt and to improve our cash flow. The paradigm I have been using recently is a wealth vs. cash-flow, and right now I am interested in improving our cashflow. Cashflow, for me, gives us flexibility--something wealth does not (at least right now).

I know this is a lot of talk about money and this isn't really the ultimate point of ERE, but its important to state where we stand. Money is not the answer but it is a very present guest in our lives- we cant ignore it, and we can't rest until it has calmed down, too. Its a part of the family, for better or for worse, and we need to address it.

Big influences for me: This website back in its beginnings, MMM, and recently Dave Ramsey and YMOYL. I know all about the discussion around Dave Ramsey, but for right now I find him helpful. However, I cannot afford a 15 year mortgage on my current place, even if I wanted to. (I dont think?!)

So one thing I would like suggestions for: How do I approach our mortgage? Should I go hard after it or just accept I have a big mortgage for now and stretch it out? Inflation is going to weaken it over time, that does seem pretty likely for the moment. Zooming out, we could move 40 minutes out of town and be mortgage free. That would financially be epic, but we are well established in our current neighborhood, and we like it. The social costs of moving would be quite dramatic for us. Our transportation costs would increase significantly, both in terms of cash, time and convenience. The most obvious solution seems to be just earn more money. That, though, doesn't really turn me on.

Thanks for reading!

[chenda]

Velkommen Hifideo

Although I'd personally be tempted to move out of town and be mortgage free (especially if you could also be car free) sounds like you would prefer to stay where you are for the time being. You could maybe reconsider moving a few years down the line.

[sky]

Since you seem to be happy with the location and the home itself, perhaps you can ease your concerns about being in long term debt by making modest additional principal payments when you have funds available. Perhaps saving and investing part of your income, and paying the mortgage with part.

[Salathor]

At least compared to the US, a 28% mortgage cost does not seem astronomically high. 24% of income to food and household goods does sound astronomically high to me, though.

I personally would focus on getting food/goods costs down to like 10% and then put that other 14% as additional mortgage principal payments.

[hifideo]

@chenda, that seems like a fair analysis.

@sky, thanks. thats a reasonable suggestion!

@Salathor, thanks. Your suggestion sent me looking to see what the average food expenses are here for a family of four, and we spend about 75% percent more than the average apparently. I am going to do a deep analysis this month. Unfortunately it seems that the main issue is fresh fruit and veg. A single cucumber here costs over 2 dollars! But I will keep the records and see if there is a different expense here that is a bigger/easier win.

[chenda]

I heard in Stavanger that people their often fly to Newcastle to do shopping, as it's quicker and cheaper than travelling to Oslo. There's a big shopping centre there which caters to Norwegian visitors.

[hifideo]

Hello,
entry #2

Time flies these days, suddenly its Friday again.

So the goal for september is a clear but modest improvement in household good expenses. I know this is not the most interesting or philosophical discussion, but seems like some nuts and bolts that are worth focusing on and talking about.


@Salathor's comment about food and household goods as a percentage of income peaked my ears and has led to a deep analysis of our spending at home. My wife asked around, and someone also presented a statistic that we spend only 25% more than the average family of 4, which felt more inline with our experience. However our household income is greater than average, so as a percentage of income we were possible already doing well.

The only meat we buy is fish and we don't buy alcohol, but we do spend a lot on fresh fruit and vegetables. We thought baby stuff would take up a large portion of our budget but so far this month the main culprit is household goods. We spent 12% on vegetables, nearly 10% of our budget on coffee, which is eye opening, and around 10% on eggs and fish. We have front-loaded on household goods and frozen fish to take advantage of sales, though, so its not too crazy. The coffee, though while on sale, is not being stocked up. We try to brew all of our coffee at home, but still its quite something to spend 10% of our budget on one product. I can switch to tea for a substantial savings in my consumption, which I will experiment with the rest of this month by reducing my coffee to my morning coffee and then tea the rest of the day.

As of the 12th of september, we have spent 33% of our monthly household good budgets. We set a target of 19% of our monthly income on household goods, excluding everything that we buy from the apothecary/drug store. We have put aside 2% of our budget for apothecary costs, but that is almost certainly not going to be used up.


@chenda, it can definitely be cheaper to go abroad for some forms of shopping. I have heard of people who have traveled all the way to New Hampshire to buy mountaineering gear and still save money! The Norwegian kroner is super weak now, though, so it's not as great as it used to be.

[ertyu]

+1 on half my salary going to caffeine may the force be with you and yours

[hifideo]

@ertyu 2 young kids and a lot of home office really adds up

[loutfard]

There's also the option of replacing coffee with tap water. Instant 10% household goods savings, and healthier. 2.4% of your income is nothing to sneeze at. You could call it the cold turkey fund.

This represents about 8.57% of your monthly loan payment. Seeing you want to get rid of loans early, just this could shorten your loan duration by between between 1.5 and over 3 years _and_ result in a healthier you. Nothing to sneeze at...

[hifideo]

@loutfard thanks for the perspective, those numbers are powerful. Giving up coffee has been used as a "sacrifice" before, so my relationship to it is less a luxury and more of a staple. My first reaction to your suggestion was "thats awfully ascetic..." Could very well be worth an experiment without the Lentien framing, but a more positive one.

[loutfard]

@loutfard thanks for the perspective, those numbers are powerful. Giving up coffee has been used as a "sacrifice" before, so my relationship to it is less a luxury and more of a staple. My first reaction to your suggestion was "thats awfully ascetic..." Could very well be worth an experiment without the Lentien framing, but a more positive one.

Not sure what you mean with "Lentien". A quick online search gave me "Lentein", water lentil powder.

I am lucky never to have liked the taste of coffee. I guess that enabled me to imagine a coffee free future for others too Whatever you decide to actually do, good luck!

[hifideo]

Thanks! By lentien I meant something related to the period of lent, so the 40 days before Easter, which often includes some sort of symbolic sacrifice.

I used to work in coffee, so it has a place in my heart. I could have a worse addiction

[ertyu]

oof, the callout, as kids say these days on the internet

[hifideo]

Two big purchases this week>
1. a new to me refurbished computer.
2. A new pair of glasses.

One big sale:
1. A bike that I didnt use.

Of course these cost some money, but in return I also sold one of my bikes for a tidy some which more than balanced out the two expenditures. That was an act of simplification, as I have two bikes and I don't use them enough. I bought that third bike because I felt like I deserved it. I guess I did, but that didn't mean much in the end. I didnt need it and it was taking up space!

I also got a severance package last week, or signed the agreement in any case. If I get a new job quickly then it was a nice windfall sum, and if I dont then I have 8 months now to enjoy my self-directed learning and apply for more jobs.

It was clearly the time for me to move on from my old job. I am in paternity leave now, so its a nice time to transitition, and I have a couple of promising leads. One of them is in a very young start-up as part of the management team, so there might be some good potential upside coming out of that. I have had three interviews with them, and should hear a decision from them sometime later this week.

This has been on my mind because while I have been thinking about saving money, I have also been thinking about increasing earnings. Increasing earnings is a sticky topic for me, mainly for psycological reasons. I have never entirely succeeded in work world. I have been in a lot of smaller start-up like environments, which are very unstable and very open and free, which suits me personally, but are a bit hit and miss. I dont think anyone could describe my work life or history as "stable" or "predictable", or even so far "lucrative" or even "engaging". Work has been a general disappointment for me. Thats an unfortunate thing to write; it doesnt feel very good to write it either.

But I have been successful in other ways, and for that I am very grateful. But its inevitable to think about work when thinking about money.

Going back to the windfall, if I do get a job quite quickly, then I will probably put 50% into the mortgage, 40% into savings and 10% cash. Feel free to tell me how you would do it instead!

[hifideo]

So our efforts at reducing our food costs has gone well this month. I dont think we did anything more than just be conscious that we wanted to reduce our spending at the grocery store, but it has had the dramatic effect of reducing our costs by about 30%. Thats both interesting and exciting. One thing that we still use a lot of money on as a family is toilet paper, but that is a topic for discussion that I am not willing to take up with the wife!

I didn`t get the job at the start up. Its disappointing, but I am alright with it at the same time. It gives me an opportunity to keep learning computer science, something I have always found interesting, studied a bit at university, but never got around to getting especially good at it. I turned 38 today, and I realized that I am much happier in my skin than when I was 28. I am not anxious pursuing the things that I am interested in right now. I am older, and that is in a way sad, but at the same time life is much better than it was 10 years ago, and I wouldn`t want to give up getting older. Experience is a wonderful thing to collect, even if it comes at such a dramatic expense like life-time.

We will see how this self-study goes. My hope is that it leads to a better income and more satisfying work and a toolkit with skills that are actually useful. Working in management is so hand-wavy, and trying to get work in it is just odd. What do people want? They want something good and not bad. What does that mean for peope with people skills? I don't really know, and I think that so much of soft skill hiring is a crap shoot. It also doesnt make me feel very good at what I do or particularly useful. Bullshit jobs indeed.

We got a cake and takeout for my birthday. I had mixed emotions around it, but it was for the oldest kid. She really wanted to "celebrate" my birthday in a way that made sense to her, and I didn't want to be a scrooge explaining to a four year old how they were wrong. Of course she isn't right ,she is four, but I want to respect her for that as well.

One thing that I haven't found in this forum or in the book is much discussion around generosity. Getting takeaway is a generous act for my daughter if it makes her feel like she is celebrating me. Giving money away is generous. Im guessing that people here will say that you should give time away, that is generous. And they are right, but it is not always the metric that others expect, want, or need. Sometimes it is an object or just plain cash.

[loutfard]

One thing that I haven't found in this forum or in the book is much discussion around generosity. Getting takeaway is a generous act for my daughter if it makes her feel like she is celebrating me. Giving money away is generous. Im guessing that people here will say that you should give time away, that is generous. And they are right, but it is not always the metric that others expect, want, or need. Sometimes it is an object or just plain cash.

Keeping the financial budget for giving under control is a thing.

- I have a good friend in the remote Baltic countryside who makes wooden toys. He makes batches to give to friends. I pay him correctly and give him wood from our garden. Cheap gifts, very happy friends.

- I sometimes make custom gifts for friends myself.

- I spend _a lot_ of time volunteering for a non-profit.

- I try to be there when my friends need me.

[delay]

Going back to the windfall, if I do get a job quite quickly, then I will probably put 50% into the mortgage, 40% into savings and 10% cash. Feel free to tell me how you would do it instead!

Mortgages make you think. Old people seem to find themselves owning a house but having less money then they would like. So they look for financial products that allow them to consume the value of their house. The end result is a lifetime use of mortgages. First to build up home ownership and then to build it down.

Here in The Netherlands the mortgages for old people (that take value out of the house) are very expensive. The type that would make sense, trading home ownership in return for a lifetime indexed pension, is not available at all.

[hifideo]

@delay I have read of people who argue never paying down your mortgage, and that you should just pay enough to be able to get your bank to allow you to just pay off the interest and never the principal. In theory you have a mortgage forever, and you just pay "rent" in practice for your house. The equity increases as the value of the property goes up, but you never pay down the original principal. The money that would go to the principal can go to another investment, then, so that you don't have to get a reverse mortgage later to get the equity out of the house.

This makes sense in my head, to a degree, but there is something about having a mortgage that sticks in my brain. Its a feeling of insecurity thing, reasonable or not.

My grandparents also have done a reverse mortgage, which also seems to mean there is nothing really left to give away when they both eventually pass, there is just some debt and leftover equity in the house. Of course whether this matters or not is another question.

@loutfard that sounds like a great relationship with your neighbor!

[delay]

Thanks for the reply! Over the past eighty years not paying down was the best choice in terms of money. Your house increased in value and you could invest money at a higher rate of return. But it's risky in the sense that your house is not guaranteed to keep rising in value, and interest rates can also change. Sounds insecure to me too.

To combine peace of mind and financial independence, you'd both own a home and have investments to live off. In countries like Norway or where I live, The Netherlands, house prices are high compared to income, so this would require extreme choices.