Frugality and working towards financial independence (FI) are key players in our big picture Homestead plan. That’s why we keep track of our spending every month and work towards having a high savings rate (read more about our budget here). Many financial independence bloggers post a monthly update of their expenses and savings so I thought that I would do a version of this too since I love seeing progress being made in graphs. I am not going to share the actual numbers but rather a percentage of our goal that we have achieved so far. The reason for this is that how much you need to be financially independent along with your salary, expenses and savings rates are highly individual and dependent on your life situation which is why you need to do the math yourself. I am no expert at this so if you are interested the post The Shockingly Simple Math Behind Early Retirement from Mr Money Mustache is a great place to start. You can check out some books in my post here or some blogs/podcasts that I think are great here to figure out your own path.
The LIL family’s financial goal
Our goal is to reach FI somewhere between 40 and 45 years old (we are 27 at the moment). The range gives us plenty of wiggle room since acheiving our goal depends greatly on our savings rate and where life takes us. For us it is important to also live and be happy during this time and not just deprive ourselves of everything and wait for the time to pass until we reach FI. That is why we figure out what things are worth spending money on and actually gives us happiness and what money we are spending on things that we aren’t bothered with. This means that if something comes along that we want to pursue (which might cost more money like for example living abroad) we think it’s worth pushing FI a couple of years (within our 40-45 years old plan). That is what all the saving is for after all – to give us options and not be limited by money.
This is the progress graph of our money making machine (so only our investments in index funds) in percentages:
As of April we have achieved 4,37% of our goal. It doesn’t look like much at the moment since we only started 5 months ago when I got Mr LIL oboard the money making machine. But it will be interesting to follow this graph over time since investing in index funds results in exponential growth which means that it will go super slow at first but then our money will start to grow much faster. The first part time goal is getting to what is referred by J L Collins as FU money which is around 10% of our goal. I’ll let him explain it himself in the video below (with a warning about very colorful language):
Our goal is to have at least a 50% saving rate. This includes investing in indexfunds and our mortgage payments. We also have temporary savings that we use for trips but since this is just delayed consumption we don’t count it as actual saving.
During April we actually managed to achieve a savings rate of 50,88%!! This was a one off though because Mr LIL is filling up his emergency fund. Our normal rate is between 38-40% but through frugality, earning more (Mr LIL just got a raise!) and a project we will reveal when the time is right we think we’ll be able to hit a 50% savings rate during 2018.
50% will be the minimum savings rate during our DINK (double income no kids) or rather DINKBD (double income no kids but dog) years. These are our work and savings focused years. As for the stage after that when there might be a mini LIL in the picture all I know is that I want to have enough money saved up in the money making machine so that it can just grow without us needing to add as much to it. That way we can be home with our baby and then work part time as long as we want without worrying about money. Sweden has great terms for parental leave and parental allowance and also daycare that is very cheap compared to other countries which makes it less of a financial issue the day we decide that we are ready for that next step.
So these are our financial goals that I will report our progress on every month!