Starting a travel blog right before COVID was definitely one of my best decisions ever – sometimes it is like the universe is trying to say „FU Marcus“ this is way too easy, let´s try hard mode. So yes, like everyone else I suffered from it. I had so many travel plans for 2020 and cancelled all of them: Gran Canaria, Mallorca, Budapest, Singapore, Oregon, Norway, Japan, Cuba….at least I made it to Iceland for two weeks during August when everything seemed to go back to normal and before it got bad again – but as always: It could have been worse.
And what did I do with all my free time: Cycling, lying in the sun and reading books. I made it through 50 books in 2020, I´m planning to go for 100 books in 2021. Wish me luck. In the last year b.c. (before COVID), during one of my US travels I went to the mall. Bored as always during travelweek-workday-evenings I was looking for something to read and I ended up browsing through the book „Quit like a millionaire“. Was it the millionaire part or the job quitting part which made it so interesting for me? I won´t tell. But it was a great read for sure.
The book is about financial freedom. Ever heard of it? No? I will present the concept on another blogpost. For now just to get you on board – Financial Freedom/Financial Independence (FI) is a state when work becomes optional. Which does not necessarily mean you won´t ever work again. It just gives you the freedom to do whatever you want with your time and choose the work you want to do. Or you can just retire from work and go to the beach every day – this would be Financial Independence, Retire Early (FIRE). Sounds intriguing right?
„FU Marcus“ this is way too easy, let´s try hard mode
So in summer 2020 still waiting for lockdown days to end and watching my bank account growing per minute because there was literally no way to spend money this book came to my mind again. Back when I first read it I thought of it as a nice concept. But not really achievable for anyone with a normal job. Lockdown days though showed me that I can live way below the level of consumption which I thought was normal and still be ok with it. I won´t say happy, because there was nothing to be happy about in 2020. So I bought a few more books on Financial Freedom (maybe 10?) – believe me, there are a lot of them out there.
And I started to budget. I started an excel file calculating the my current saving rate, an optimal saving rate I could achieve with a few lifestyle adjustments and made inventory of my current net assets. Then I added another year, and another one…up to my official retirement date which would be around 2055 (a lot of tabs…). I added a virtual portfolio to my savings (5% p.a.). And I ended up with an impressive number which made me realize I may be able to retire way earlier than I thought. So maybe this concept of Financial Freedom was not so unrealistic at all. I decided to give it a try – my COVID life was boring enough, why not add a little bit of spice to it.
Here are a few numbers of my first FI pursuit year. More or less started in May/June, it is not a representation of a full year:
First Year in review:
From January to March everything was as usual – I had a lot of travel plans and also booked some flights ahead (today I´m still waiting on the reimbursement from Ryanair…). My saving rate was around 20-30%, which was not bad given the fact that before COVID I was travelling almost every month.
Then COVID started and after a lot of cancellations and lost money, my saving rate went up to 40%. Mainly because there was no way to spend money at all. The stock market went down and my small portfolio as well. As I had a lot of free cash available, I doubled up my portfolio in May (which was a good decision, my portfolio value went up by 26% since then).
In June I began with adjustments to my expenses, improving the saving rate to 60%. A level I was able to keep for the second half of the year.
Saving Rate Targets:
Minimum savings rate: 40%
Optimal savings rate: 60%
Potential savings rate 80%
My annual saving rate in 2020 was 34% – it got offset by my Iceland travel and unplanned expenses during July & August. In total I doubled my savings (+53%) and my portfolio returned 7.1% (mainly from the recovery of the COVID market crash).
My total net worth increased by 44% – a great number for my first FI year, given the late start and all the circumstances throughout the year. I have reached an optimal level in my savings rate – in 2021 I will focus on optimizing expenses.
Potentials for future:
Income stabilization & Creation of passive income streams
Optimizing expenses & Geo-Arbitrage (upcoming in 2021)
Increase portfolio value & Optimize tax/fees
Plotting the numbers into my beautiful excel template (it is called playbook, hey Barney!) gives me following forecast of my FI jouney. Yes – it is just a forecast. I will have to re-adjust this every year I´m afraid.
Current forecast (savings rate 60%, ROI 5,34%):
Financial stability (6 months expenses saved): OK
Financial flexibility (2 years expenses saved): OK
Financial independence light I (live from savings/returns for 5y): 2021 (t+1)
Financial independence light II (live from savings/returns for 10y): 2024 (t+4)
Financial independence light III (live from savings/returns for 15y): 2026 (t+6)
Financial independence (live from returns for 25y or passive income, 4% rule): 2031-2033 (t+11)
I did not start from scratch. I already checked off the first levels of the Financial Freedom journey (Financial stability & flexibility) before/during my first year. In 2021 I will come close to my personal level of FU money. I will cover the FU money concept in separate blogposts. And I can comfortable live from my savings for a few years without going broke.
Once COVID is finally over, I definitely want to go back to some sort of traveling (work related and/or during my free time). This is and will stay a travel blog – I will just combine my FI journey with my frugal travels. It is called FIRExplorerfor a reason. However, it is a bumpy road ahead – sneak peek to The pursuit of Financial Freedom – Year 2 (2021 – The COVID aftermath) – coming later this year. It will be full of plot twists – promised.