The “If” Mortgage Calculating Game

I don’t know what it is lately, but I like to play around with the calculator in order to get things into perspective when it comes to money.

Today, I like to play the “If” Mortgage Calculating Game. It goes something like this: if we don’t spend X% of our annual income we would be able to buy X% of our home. (I am totally ignoring the tax restrictions on our mortgage right now, that would make it more complicated. But we will calculate how much that will cost us….not today though!) Sounds fun, doesn’t it? 😉

If we don’t spend 10% of our annual income we could buy 2,57% of our home each year.
If we don’t spend 15% of our annual income we could buy 3,86% of our home each year.
If we don’t spend 20% of our annual income we could buy 5,14% of our home each year.
If we don’t spend 25% of our annual income we could buy 6,43% of our home each year.
If we don’t spend 30% of our annual income we could buy 7.71% of our home each year.
If we don’t spend 35% of our annual income we could buy 9% of our home each year. (This amount exceeds the amount we’re allowed to pay off each year, which is 10% of the original number, our maximum equals 33.33% of our annual income and that could buy us 8.57% of our home each year)

At this point in time we own 26.78% of our home. If we manage to throw 33.33% of our annual income into the mortgage we would be mortgage-free in less than 9 years! Also: while making these extra payments there are also our regular mortgage payments. So it would probably come down to less than 8 years from now or whatever.

It’s not about the exact number…it’s about the fact that freedom is within reach! This is purely motivational.

Right now, we’re aiming for a 25% non-spending rate in 2013. Maybe we could boost it to 30% in 2014? Or maybe even hit our ideal 33.33% number?!

Do you play these sort of calculating games?

Love,

Mrs EconoWiser

Things To Look Forward To

I’m looking forward to a six-week holiday. That’s right, no typos! I only have to work this Tuesday and Wednesday. Monday’s my day off and on Thursday we have a staff day. After that I’ll be doing some more early retirement practise. I’ll start working for my employer as of the 20th of August. Oh, and I get paid during the summer holiday. Life sure is good!

My husband will take a three-week summer holiday during the first three weeks of August. In the meantime I’ll be able to put in a lot of hours for the side business. Great!

I’m also looking forward to doing the administration this Tuesday. My husband made an extra mortgage payment at the beginning of the month, I made one a week ago and my husband is going to make one within the next hour or so. The mortgage percentages will sky-rocket this month!

With all those extra mortgage payments I think we’ll be able to pay off the interest-only part of the mortgage well before the end of this year. The snowball effect is really happening here.

I am also looking forward to another frugal month. Besides the indoor skiing there won’t be any outrageous expenses I can foresee for this month. I liked frugal June and I’m sure we’ll love frugal July.

Oh, and I am also looking forward to the rest of this wonderful weekend. Today we won’t be doing all that much, besides working on the side business which is FUN.

What are you looking forward to?

Love,

Mrs EconoWiser

A Lot And Nothing Really

Uncle Sam told us we’re going to get a part of our tax refund within the next 2 weeks. I made a small extra mortgage payment the day I received this month’s salary. I just threw in most of what was left right before the bank transfer. I have a feeling June is going to turn out to be a nice and frugal month for us. As soon as we receive the first part of our refund we’ll throw that into the mortgage.

Furthermore, I had a talk with my superior about my salary. I threw in all these really great arguments but he didn’t budge. He’s not going to give me more money… If I don’t like the pay, I should look for a different job. This is very not very motivating to say the least, I already explained the bit about the OLDER MEN earning heaps more while sucking at their jobs. From now on I’ll just work 100% and that’s it. No more extra work for free, he ain’t gonna get that out of me anymore!

I went to the gynaecologist’s a couple of times during the past week. I have another appointment tomorrow. Turns out my husband’s tools (if you catch my drift) are doing a great job. The little fellas are alive and kickin’. That’s great news! However, my ovaries aren’t doing what they’re supposed to be doing: releasing some nice eggs at the appropriate time. No wonder I’m still not pregnant. Hmpf…I’ll probably have to get some sort of fertility treatment. Starting with chlomid tablets in order to get these eggs all nice and grown. If that won’t work it’ll be hormone injections and if that won’t work…well let’s not think about IVF just yet. I am soooooooo glad that I live in The Netherlands and all these things will be paid for.

Love,

Mrs EconoWiser

Just Another Lazy Sunday

Although the weather sucks here in The Netherlands we are thoroughly enjoying our Sunday so far. Yesterday I read two personal finance books and started number three. I’ll probably finish number three today. I’ve been doing a couple of chores around the house here and there. Oh, and yesterday I made another extra mortgage payment! Unfortunately, Uncle Sam hasn’t transferred the €8000 just yet which will make a huge impact on paying off our mortgage. We now own almost 26% of our home.

Well, I’m off now…reading and contemplating on what to do with the rest of this wonderful day.

Love,

Mrs EconoWiser

Fast Forward Twenty Years From Now: How Do I Extract The 4%?

I seriously wouldn’t know how to go about this. Okay, I get the 4% rule thingy and the 25 times your expenses ratio in order to retire early. I’m not daft…but how do I go about paying myself twenty years from now?

I mean, if you’ve built a property portfolio and landlording ‘n stuff…I get that your income comes from rent. Duh. But we don’t intend to do that (The Netherlands just isn’t the best place in the world to do that, we HATE DIY and we just couldn’t be bothered handling tenants).

So, we intend to have a mortgage-free home and a kick-ass portfolio that will consist of stocks, bonds and maybe some REITs.

The thing I haven’t read about in any of the cool blogs is how to go about this early retirement business then. Just the 4% rule. But do we extract 4% annually and put it on a savings account which we’ll then extract money from each month, or do we extract 0.33% monthly…or what?

I know we’re not there yet, not even close. But it’s good to know what to do when you’ve finally arrived.

Is this a really silly question or what do you reckon?

Maybe I should ask jlcollinsnh or MMM?

Love,

Mrs EconoWiser

I Have Increased My Investment Budget

The more I take in when it comes to index investing the more I come to realize that this is our golden ticket to early retirement. Therefore I have decided to increase the amount I automatically invest each month with €100. Between the two of us we now automatically invest €600 each month.

Up till now we haven’t thrown any extra money into these investment accounts yet. All that is going towards the interest-only part of our mortgage. As that will be paid off by the end of this year our plan is to throw extra cash into our investments accounts from then on. We still have to calculate things…but it seems like throwing extra money into the savings part of our mortgage will bite us in the ass in the end…because of our weird tax system. This means that we’ll go for a twenty-year mortgage (seventeen years to go still). Unless the tax rules will be changed, then we’ll pay off the damned thing much quicker.

We do find it very scary though…throwing the difference between our income and spending into investment accounts. I guess we’ll just have to get used to that?!

Love,

Mrs EconoWiser

This Is The New Cool Thing…

So, since bikes are like money machines and also have something to do with the fountain of youth plus are the safest form of transportation I’d like to show you my “cool” bike trailer.

It’s freakin’ UGLY, isn’t it?! Haha, but I don’t care! Love the fact that I can roll it all the way up to the back door and then unload the groceries. It’s not difficult or super heavy to peddle with one of these tagging along. In case you want one, it’s a Roland Jumbo. I bought it second-hand for €150 and the previous owner only used it about five times. It retails for around €400.

The fun thing is that I am getting positive remarks from people at the supermarket…which I’ll park right in front of..cuz I can!

Oh, and was this worth it? €150 could grow into €324 in ten years and it was TOTALLY worth spending that amount of money on. I mean…the amount of money it will save us is just ridiculous. The new bike (which rocks!) was a good investment…now add the bike trailer. It’s like our very own money-makin’ towing machine, now we’re talkin’ some serious shit! 😉

Guess I have now joined the early adapters?

Do you have a bike trailer yet?

Love,

Mrs EconoWiser

It’s Inevitable…You’re Going To Ride A Freakin’ Bike!

It really is going to happen, all you future financially independent peoplez are going to ride bikes! In case you didn’t get the memo, here it is. It’s a cool interview with MMM, jlcollinsnh AND his daughter. Good to know that our future kids are going to be happy about the way we intend to raise them, we’re taking notes!

Besides the bike thing (which is integrated into the keeping costs as low as possible idea) we read about throwing at least 50% of what we’re making into index funds. Oh, and then the coolest part: something about wine (I’m all ears!), sippin’ it and figuring out what to do with your life now you’ve reached the FI status. Oh, what a dilemma?!

Parental side note: make sure you program your kids never to marry a spendalot! That Jessica certainly carries a smart head on her shoulders. She’ll avoid that pitfall. Also, we’re sooooooo going to play “investment” with our kids and their savings (with us being their “investment broker”) as suggested by MMM who has recently started this with his own kid. I hope he’s going to write a nice blog post about it sometime soon.

Where were MMM and jlcollinsnh ten years ago? Well, better late than never. Luckily we caught up in our thirties!

Love,

Mrs EconoWiser

Sensible Investing TV

I found this cool new site about sensible investing and I believe these people are doing their utmost best to try and promote passive investing. Although the target audience is the UK, these lessons are to be learned world wide.

Start with this eight-part series on passive investing:

Have you watched all eight of them? Did you learn anything new from this series?

Love,

Mrs EconoWiser

How To Think About Money: The Training Begins

Another great jlcollinsnh blog post really started to make me change the way I think about money. (By the way, if you haven’t read his ongoing series of blog posts about investing yet…you should start doing that asap and start here.)

Okay, so the idea is you calculate what the amount of money you want to spend on something right now would grow into if you didn’t buy the thing but bought index funds with the money instead. Interesting, right?

So, if you’re not familiar with the compound interest theory and the formula you’d have to use, click here.

I’m using 8% growth a year and check what that amount would grow into after ten years.

Okay, let’s go “shopping”!

I’d like to buy a couple of books on index investing, such as: The Boglehead’s Guide to Investing, The Intelligent Asset Allocator, A Random Walk Down Wall Street. Let’s say it’ll cost me about €100. Ten years from now that money could have grown to €215,89. Is the stuff I’ll read in these books worth 216 euros ten years from now? You bet your ass it will! By the way, these books have been on my wish list for over a year now. I intend to buy them with gift certificates…

Outdoor kitchens are all the rage now in The Netherlands. I want to do me some outdoor cooking! And by outdoor kitchens we mean a BBQ that runs on gas. Anyways, the coolest one is about €1500. That could hypothetically grow into €3238. Don’t think I love to BBQ that much. We could also go for a cheaper or second-hand version of around €300, which would equal to €647 in ten years. That’s one I might have to think about for a while.

I would also like customized skiing boots. I have wide feet and all those rentals hurt like hell. A pair of those boots would be around €350 which could grow into €755. I think those are definitely worth it. I know…I know…skiing is not very Mustachian. But hey, MMM himself enjoys a snowboarding vacation once a year.

There’s not much else worth mentioning on my wish list…a couple of games and other items in that category. They’re on my wish list so in case somebody wants to give me something and they ask for a wish list I am able to send them mine. Nothing extravagant on there, really.

Let’s say I hypothetically would want a motor bike (I used to own one) of about €5,000. In ten years that could grow into €10,794. The motor bike would definitely lose while playing this game. Renting is also the best option if you’d like to enjoy a ride every once in a while.

Do you like this approach in order to check whether the product is worth the amount you could have grown it into over the next ten years?

Love,

Mrs EconoWiser