gubbe's journal

Where are you and where are you going?
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gubbe
Posts: 6
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
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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

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gubbe
Posts: 6
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: 157
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.”

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gubbe
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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: 12
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.?

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gubbe
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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
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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.

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gubbe
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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").

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