fugazi's journal
Posted: Fri Jan 22, 2016 11:16 am
Hi! I am 20-something years old web developer/designer from the Czech Republic who just started his journey towards financial independence. More details can be found here. Before I start, I should mention the economical situation in my country. Being a part of the European Union, we are somehow reluctantly moving towards adopting euro, but it could still take around 5 to 10 years. Until that moment, we are stuck with the Czech crown. Anyway, to put the numbers in perspective, the average gross monthly salary is roughly $1000 (about $1700 PPP adjusted).
I am currently employed at a medium sized software firm, earning $2800 monthly pre-tax ($2000 after deductions). With my current skillset and situation, I'd say I could peak at $4000 in few years, possibly moving to a different job. I also do some freelance work, which on average yields another $400 per month. The plan is to gradually move towards more freelance work, until I earn roughly the same - but on my schedule.
I live with my GF in a small apartment, which costs us around $450 per month, including energy bills and internet. My GF, who is an architect (therefore horribly underpaid), earns roughly 3.5 times less than me, which means we split our rent using that number. We also try to split our food expenses ($320 on average) in the same way. Even though we buy quality stuff and both eat a lot of meat, we cook all our food including lunches at work and almost never dine out. I find it kind of amusing that $40 of that is just for eggs, meaning that having my own hens would probably save me around $400 per year :)
My biggest expense at the moment is monthly payments of $450 for a mortgage that my mother took several years back. At around $44,500, it is about half paid. At the end of 2018, there will be an opportunity to reduce the principal, which I plan to do, using any cash available and possibly paying it all at once.
I don't have a car (or driver's license) and I bike to work, so that's about that for major recurring expenses. I do have some smaller ones, though. I pay around $14 for monthly phone bills, $5 for cloud-based backup service (mostly because of photos), another $5 for private VPN service, and yet another $5 for music streaming service. When it comes to books, I read several per month. Most of the time I download/steal (pick the one you prefer) the electronic version and if I like it, I buy the physical book. Anyway, I usually don't buy more than one a month. I also pay around $8 for magazine subscriptions.
Regarding savings, I have around $4000 in a savings account with a tiny interest of 0,7% p.a. I also put around $120 per month into a building savings that yields 2% p.a. and which also offers a nice bonus of $80 per year if I put more than $800 per year into the account. It matures in five years (starting 2014) with maximal possible savings of around $8100, which I intend to put in the aforementioned mortgage if needed. I also buy around $400 worth of gold and silver every month and plan to build a hard cash reserve of at least $2000 for emergencies.
I recently started educating myself on financial markets, mostly by reading Benjamin Graham, Mohnish Pabrai, Warren Buffet and similar people. And while I regard their shared view on investing as sound, I believe the principles they propose no longer apply in our current situation. Projecting past experiences into future, especially when the limits of growth are fairly evident, and hoping for sustained income seems to me extremely shortsighted and naive. That's why I don't consider the "4% rule" as a viable long-term solution for financial independence. If I ever partake in the stock market, I'd probably engage in some kind of short-term value investing with a very limited portion of my assets. That, and possibly investing in very specific industries, such as energy storage and raw material recycling. Unfortunately, I don't have the necessary knowledge or experience for any of that, at least for the moment. Anyway, if I theoretically followed the 4% rule (after paying down the mortgage), I'd need to invest around $150k to cover our expenses comfortably, with no other source of income whatsoever.
My current strategy for financial independence is therefore as follows: earn as much money as possible while I still enjoy the high paying work I do at the moment, radically reduce my spendings and dependence on external services, and put the majority of my money either into tangible assets, such as land (woods, agricultural land, aquifiers) and raw materials, or local businesses. The next part of the solution is real estate. The mortgage I mentioned is on a new house (my mother lives there) that was built on a property with an old building that is currently being renovated (almost finished). I could either move into that house or rent it to cover my own rent payments. Either way gets me rid of a major expense. My GF's family also owns a fairly large house in another city, which could be split into three separate apartments to rent, either long-term or short-term, AirBnB-way (the city is a popular destination for tourists). However, that would require substantial expenditures because of the much needed renovation.
That'd be all for now, I guess. Hopefully, I'll have something new to share soon.
I am currently employed at a medium sized software firm, earning $2800 monthly pre-tax ($2000 after deductions). With my current skillset and situation, I'd say I could peak at $4000 in few years, possibly moving to a different job. I also do some freelance work, which on average yields another $400 per month. The plan is to gradually move towards more freelance work, until I earn roughly the same - but on my schedule.
I live with my GF in a small apartment, which costs us around $450 per month, including energy bills and internet. My GF, who is an architect (therefore horribly underpaid), earns roughly 3.5 times less than me, which means we split our rent using that number. We also try to split our food expenses ($320 on average) in the same way. Even though we buy quality stuff and both eat a lot of meat, we cook all our food including lunches at work and almost never dine out. I find it kind of amusing that $40 of that is just for eggs, meaning that having my own hens would probably save me around $400 per year :)
My biggest expense at the moment is monthly payments of $450 for a mortgage that my mother took several years back. At around $44,500, it is about half paid. At the end of 2018, there will be an opportunity to reduce the principal, which I plan to do, using any cash available and possibly paying it all at once.
I don't have a car (or driver's license) and I bike to work, so that's about that for major recurring expenses. I do have some smaller ones, though. I pay around $14 for monthly phone bills, $5 for cloud-based backup service (mostly because of photos), another $5 for private VPN service, and yet another $5 for music streaming service. When it comes to books, I read several per month. Most of the time I download/steal (pick the one you prefer) the electronic version and if I like it, I buy the physical book. Anyway, I usually don't buy more than one a month. I also pay around $8 for magazine subscriptions.
Regarding savings, I have around $4000 in a savings account with a tiny interest of 0,7% p.a. I also put around $120 per month into a building savings that yields 2% p.a. and which also offers a nice bonus of $80 per year if I put more than $800 per year into the account. It matures in five years (starting 2014) with maximal possible savings of around $8100, which I intend to put in the aforementioned mortgage if needed. I also buy around $400 worth of gold and silver every month and plan to build a hard cash reserve of at least $2000 for emergencies.
I recently started educating myself on financial markets, mostly by reading Benjamin Graham, Mohnish Pabrai, Warren Buffet and similar people. And while I regard their shared view on investing as sound, I believe the principles they propose no longer apply in our current situation. Projecting past experiences into future, especially when the limits of growth are fairly evident, and hoping for sustained income seems to me extremely shortsighted and naive. That's why I don't consider the "4% rule" as a viable long-term solution for financial independence. If I ever partake in the stock market, I'd probably engage in some kind of short-term value investing with a very limited portion of my assets. That, and possibly investing in very specific industries, such as energy storage and raw material recycling. Unfortunately, I don't have the necessary knowledge or experience for any of that, at least for the moment. Anyway, if I theoretically followed the 4% rule (after paying down the mortgage), I'd need to invest around $150k to cover our expenses comfortably, with no other source of income whatsoever.
My current strategy for financial independence is therefore as follows: earn as much money as possible while I still enjoy the high paying work I do at the moment, radically reduce my spendings and dependence on external services, and put the majority of my money either into tangible assets, such as land (woods, agricultural land, aquifiers) and raw materials, or local businesses. The next part of the solution is real estate. The mortgage I mentioned is on a new house (my mother lives there) that was built on a property with an old building that is currently being renovated (almost finished). I could either move into that house or rent it to cover my own rent payments. Either way gets me rid of a major expense. My GF's family also owns a fairly large house in another city, which could be split into three separate apartments to rent, either long-term or short-term, AirBnB-way (the city is a popular destination for tourists). However, that would require substantial expenditures because of the much needed renovation.
That'd be all for now, I guess. Hopefully, I'll have something new to share soon.
