Personal essay
Financial Independence
A 2020 notebook. First published in February 2020, with updates through January 2021. Lightly edited for readability in October 2026, with corrections explained in the footnotes. The budget, plans and financial assumptions belong to that earlier period.
My 2020 notes on what money should make possible: choosing work, spending, saving, investing and giving, with the budget and plans I was working from at the time.
This essay explores the second theme of my 2020 goals: financial independence.
What do I want money to make possible? I want to understand my finances, but also how earning, saving and spending affect the time I have.
At the moment, I don’t have much cash, but I hope to build some wealth and give effectively. Preparing now seems worthwhile, even if many of the questions already apply to daily life.
I worked through this with a friend, starting with what I wanted money to make possible. The questions below cover spending, work, investing, retirement and giving, followed by my budget and property notes.
Financial goals
These goals run roughly from covering the basics to building wealth. My own expenses are relatively low, so much of the plan is about what to do with money beyond those costs.
- Earn a living wage (have enough money to pay the bills)
- Save money for my pension each month
- Have money spare to do nice things (holidays)
- Have money to donate
- Own a house
- Pay off that house
- Pay down student debt (someday)
- Invest in stocks/bonds/other
- Build wealth
- Live off that wealth (if needed)
Working through the questions
I’ve organised my notes around the questions I started with.
How do I compare spending now with saving?
I don’t want to save everything for an age when I might be less able to enjoy it, or might not be around at all.
For myself, I would say that spending anything on things I could also do for free or cheaper is somewhat of a waste of money. With that attitude, I think I will have enough money left to donate and save.
Let me give an example here. I think that getting coffee at Starbucks is somewhat of a waste (so I aim to always bring my own coffee / get it for free at the office which is near Starbucks). But I do spend some money on festivals because I enjoy that more than say only taking walks in the park.
I do think that I will be happier if I have more money saved (so saving in itself is a good thing), but that the effect on the day-to-day is very small.
What I can imagine is that I should spend some money now to save in the future and that I shouldn’t be hesitant to do this (e.g. to get solar panels)
Actionable: Make a budget (well I have one, so updating it, see appendix 1).
How should I spend my working time?
Working on interesting problems matters to me. Some of that work needs to earn money; some can free up time for interesting things that don’t.
Spending a little more time on less interesting paid work could be worthwhile if it makes room for new ideas or unpaid projects.
There is a limit, though. I don’t want to work 100 hours a week as a lawyer or consultant so I can enjoy life later. The work and the life around it need to be worthwhile along the way.
How can I invest?
My reading of A Random Walk Down Wall Street left me favouring regular monthly investing over trying to time the market.
That still leaves the question of what to invest in.
Another book that I liked is The Most Important Thing. This is more sensible advice on how to think about investing, more for the active investor.
Do I have an informational advantage?
Maybe one day there is an informational advantage to be had in either psychedelics or longevity. Both are of great interest to me, but I haven’t looked at the investment space yet. I also doubt that there is much a single investor can do here at this moment (i.e. it’s only for funds and other organisations).
I do think that my psychology (calm, thoughtful, second-order thinking) is suited for investing. But I do know that I don’t know much. So, for now, I will defer this question to my advice on investing (for a pension) the same amount every month.
Which funds and broker should I choose?
From the blogs and reviews I’ve read in 2020, DeGiro looks like a promising option to investigate. If I do commit to this way of investing, I will update which tracker/basket (or individual stocks?) I’ve bought.
At this moment (March 2020) I will also leave this question open. I might investigate this further (or defer to friends) when I want to buy stocks outside pension investments.
Update: April 2020
These are the tracker funds and annual charges I noted in April 2020, rather than a current comparison:1 The original DeGiro article was one starting point.
- Vanguard FTSE: worldwide, 0.25% per year
- Vanguard S&P 500: large US companies, 0.07% per year
- iShares MSCI World A: worldwide, 0.20% per year
- iShares S&P 500: large US companies, 0.07% per year
My notes at the time described a selection of trackers with no transaction fee under certain conditions, including a monthly trading limit (see this blog with info about finding all these, and the official list here).
The blogs I read tended to favour the first option. The S&P 500 options focus on large US companies, many of which are also held in global funds.
I’m more cautious about picking individual shares. One company can fail, and a good run could be luck rather than skill. An index spreads that exposure, but it can still fall and its future returns aren’t guaranteed.
Shares or bonds?
One rule of thumb I came across was to hold your age as a percentage in bonds, with the rest in shares. At 30, that would mean 30% bonds and 70% shares.
I think this makes sense, but with me planning on living far beyond 70 years of age (when people plan on withdrawing money, and thus want fewer fluctuations), I think I will stick to a higher percentage of stocks. The exact percentage, I will have to see.
Buy all at once or spread it out?
I might have a relatively significant amount of money to invest (versus the €300 I now invest in pension-investing every month). I’ve searched if I should invest it all in one go, or spread that investment out.
This Vanguard article says that historically the lump sum way works best. But investing over a longer time may lower your chances of regret (e.g. by not investing everything just before a crash).
What about property?
After looking into this with a friend, I thought paying off my own house first would put me in a better position to consider a rental property. The financing and risks put me off for now; there are more notes in appendix 2.
For now, I’ll focus on the pension investing I already do.
Am I spending on the right things?
This point fits nicely in with appendix 1. Here I look at my monthly budget and take a snapshot of how I spend my money. This will change over time and every month I fill in my Excel to track this. Please message me if you want a blank copy to make your own plan.
How can I save for retirement?
I will stick to investing €300 into my pension every month. I have some ‘sandbox’ calculations where I can see that at low expenses this is all I ‘need’, so for now I will just invest/give away everything above what I spend.
How do taxes fit into the model?
Together with a friend, I’ve made a model of this and as with the other things, feel free to ask me for it.
The key points are:
- Our plan is to take our usual DGA loon (director’s salary), with additional income as dividends, based on our tax model
- I was expecting changes to wealth tax and built that expectation into my thinking2
- You will be taxed over your income if you’re retired, this includes the AOW and pension-savings (pensioenfonds).
How much would I need to retire?
Well, I don’t plan on ever retiring and sitting behind the petunias. I also plan to live for a whole long while (see here). And that is living in good health (mental and physical), so therefore I also plan to stay productive and be able to earn enough (and have low expenses).
Ok, that all being said. I’ve modelled some scenarios (again, feel free to ask for the Excel) and these are some concrete (probably wrong, but in the right ballpark) numbers:
The numbers below use a 4% withdrawal-rate assumption in my model.3
For the scenarios after age 70, I included €826.80 gross AOW (Dutch state pension) and an estimated €1,754 gross from my own pension. These were the figures in my model at the time. I hadn’t consistently adjusted them for inflation, and neither is included in the scenarios before age 70.
FIRE: financial independence, retire early
If I would want to keep on living as I do now, with the same expenditures, I would need the following:
After 70 y/o: €390.000 (or €235k if no mortgage: INM)
Before 70 y/o: €1.180.000 (€900.000 INM)
Lean FIRE
If I would live on the ‘bachelor’ budget (see appendix 1), I would need the following:
After 70 y/o: €30.000 (€- INM)
Before 70 y/o: €700.000 (€550k INM)
So it does really differ a lot if my (our) expenditures are high or low when I ‘retire’. If, after 70 years (the assumed retirement age) I retire and spend little, I need virtually no savings, but if I want to retire now and keep on living at the same pace, the amount of money needed is substantial.
A few notes. The model is somewhat pessimistic in money from AOW (could be higher): but with inflation could be the same. And it takes into account an average amount of taxation on savings in a few bands, so the actual taxation is a bit lower (see here for more on ‘vermogensbelasting’)
How do I protect the downside?
One thing I think is important here (besides that you read The Black Swan), is to limit expenditures. This is what limits the amount of money needed to be saved and then also the amount of taxes you have to pay over that amount of money.
One question I haven’t worked through yet is how large an emergency fund to keep.
How does giving fit into this?
If I look at my budget (appendix 1), then one could argue that everything above €3000 income (net) is too much (i.e. could be donated: on top of the €250 already in there).
But I also want to save money to be able to ‘retire’, I want to buy off the mortgage on the house, and I still have quite a lot of student debts.
This is my draft for the spending percentages of the ‘extra’ money above €3000:
- first €1000 on mortgage
- then 50% donated, 50% saved for student loans (start paying back in 2022) / investments
- Donation minimum is €3000 per year, so this will supersede the other two categories (investments/mortgage) if need be
- The money saved for student loans is also the money I will invest (so everything above student loans is investment money)
- So, if I’ve ‘saved’ the student loan money, the 50% is investment
- And if I’ve paid off the mortgage, I could just keep the 50/50 donating and investing
- I was considering investing monthly and withdrawing money for donations in December. That would expose the donation money to losses before I needed it, so the return I hoped for wasn’t something I could rely on4
Where can I keep learning?
- Mr. Money Mustache: Financial Independence blog, doesn’t post that much but has an awesome archive
- Early Retirement Extreme: Another great Financial Independence blog, also see the book below
Putting the plan into practice
I’ve already implemented most of the things discussed. I do think I could be spending less and will focus on doing those regular things better (getting a beer at the supermarket, getting free coffee at work, etc).
But the main focus points, over time, will be on investing and making the most of the money. And of course, being able to donate.
With my next venture (now in the early phases), I also plan to donate away everything where possible, as long as there is enough money to keep the business going.
I plan to write out my views for that soon.
Appendix 1: my 2020 budget
This is my personal budget, with notes on what falls into each category and what I might change. It includes half our shared expenses, but not my girlfriend’s personal spending.
Income
Total Income: €3000 (this is variable and based on the ‘DGA loon’ plus a little extra (e.g. Airbnb income))
| Category | Budget and original notes |
|---|---|
| Mortgage | €410 (I understand that this is extremely low, I’ve paid off a part of the mortgage already so that factors in) |
| Repairs | €125 (VVE: collective money for repairs) |
| Improvements | €100 (other improvements, like insulating glass, later |
| Electricity | €65 (I think this also includes gas but could be a bit higher together: maybe this will be updated to €100 ish) |
| Water | €15 (for the municipality) |
| Sewer | €80 (it’s a smaller amount per month, but includes a once-a-year payment to the municipality) |
| Cleaning | €0 (no housekeeper, can do it ourselves plus Anne (our cleaning robot: highly recommended, as is a cordless vacuum)) |
| Phone | €7,50 (no-phone abbo, 2gb) |
| Internet | €34 (alas no fibre internet yet) |
| TV | €0 (also no Netflix for me, girlfriend does have it in her personal budget) |
| Insurance | €105 (Medical, Travel, Home/Inventory insurance) |
| Medical | €40 (budget, but averaged €5 in 2019) |
| Groceries | €180 (seems reasonable, but I think it could be lower, €6 per day now: pandemic update: this is much higher as going out and other categories have folded into this one) |
| Clothing | €45 (I don’t really shop that much, if at all, for fashion, so it’s mostly new shoes, trousers, etc when needed) |
| Mobility | €80 (I was over budget here, with €97 per month last year, of that €34 is weekend-free for NS, rest is also mostly NS: pandemic update: also much lower) |
| Pets | €80 (food for Max, some indestructible toys) |
| Dining | €30 (1x per month) |
| Brunch | €30 (1,5/2x per month) |
| Going Out | €140 (everything from going climbing, to seeing a movie, festival, could also be a bit lower) |
| Drinks | €60 (could/should be lower, budget recently separated from ‘going out’) |
| Personal Care | €15 (things bought at pharmacy) |
| Sports | €20 (sports attributes, now low because the gym is below office (free)) |
| Tech | €150 (this is too high, also a bit of a catch-all of websites, but includes new phone, laptop, etc: some/a part also gets reimbursed by work) |
| Gifts | €30 (actual was €42 last year) |
| Holiday | €500 (also quite high budget, but only for this year (2 months away, and ski, and with friends 11 days: normal budget is €250) |
| Donations | €250 (will probably be higher soon) |
| Books | €20 (actual was €4, so a large portion disappeared in the ‘tech’ category) |
| Pension | €300 (I’m saving this per month via BrandNewDay for my pension) |
| Savings | €50 (what is left after the rest: this excludes some money from my girlfriend for the house, the large holiday budget, and possibly higher income: but overall it’s quite balanced as a basis) |
My original headline total was €2,950 per month, although the line items above add up to €2,961.50. I estimated out-of-pocket expenses of €2,745 per month (€32,940 per year), after allowing for tax relief on donations and pension contributions. These remain my estimates from that period.
What if I lived just as a bachelor, without a girlfriend but with a social life. Then I expect that I will not spend €2950, but only €1942 per month (€23.304 p/y). Most of the savings come from the lower holiday budget of ZERO. Or €1392 (€16704 p/y) without donations and pension (which now already are partially deductible).
Or even massaged further, to see what I could theoretically live on if the house is paid off and I live alone (but of course you could live for the same amount together), the total ‘necessary’ spending (also lowering tech a bit) would be €932 per month (€11.184 per year).
| Category | Budget |
|---|---|
| Mortgage | €410,00 |
| Repairs | €125,00 |
| Improvements | €20,00 |
| Electricity | €65,00 |
| Water | €15,00 |
| Sewer | €80,00 |
| Phone | €7,50 |
| Internet | €34,00 |
| Insurance | €105,00 |
| Medical | €10,00 |
| Groceries | €130,00 |
| Clothing | €40,00 |
| Mobility | €40,00 |
| Pets | €80,00 |
| Going Out | €60,00 |
| Sports | €20,00 |
| Tech | €100,00 |
| Gifts | €30,00 |
| Holiday | €– |
| Donations | €250,00 |
| Books | €20,00 |
| Pension | €300,00 |
Appendix 2: property notes from 2020
These are my exploratory notes from 2020 about buying a rental property in the Netherlands, rather than a checked account of lending rules.
My impression was that financing a rental property while I still had my own mortgage would be difficult, and might require a large cash contribution. I hadn’t established what lenders would actually offer me.
I also needed to distinguish a loan for a second home from one that permitted letting it out, and to check the interest rate and conditions.
My notes assumed no owner-occupied mortgage-interest relief for a property bought to rent out. I hadn’t worked through the full tax treatment.
We also discussed whether paying off my own mortgage would make a rental-property mortgage more feasible. My notes mention a possible 20–30% down payment, but that was an assumption to investigate, not an offer from a lender.
I hadn’t yet established what the financing would cost.
The friend I worked on this with estimated a possible 9% return on the cash invested. That included monthly fees but excluded repairs, purchase costs, problems with tenants and property damage. It was an incomplete estimate, rather than a return I could count on.
Buying a house to rent it out will probably not be the way to go. Maybe one day if/when I plan to live outside the city, then renting out the (fully bought) house here could be an idea. That would, however, take another 6-7 years at the fastest.
Sources and further reading
Most sources are linked throughout the article, but here are some more great links.
- The Intelligent Investor: Benjamin Graham (Book Review)
- Buy a portfolio of stocks, hold onto them
- A Random Walk Down Wall Street: Burton G. Malkiel (Book Review)
- The case for broad investing rather than market timing
- Early Retirement Extreme: Jacob Lund Fisker (Book Review)
- Align your goals, make money work for you
- The Most Important Thing: Howard Marks (Book Review)
- Smart money management advice
- Capital In The Twenty-First Century: Thomas Piketty (Book Review)
- Big-picture overview of capital/labour, inequality
- Poor Charlie’s Almanack: Charlie Munger (Book Review)
- Life (and money) philosophy by a calm billionaire
- What Money Can’t Buy: Michael Sandel (Book Review)
- Morality of money
- Billion Dollar Whale: Bradley Hope & Tom Wright (Book Review)
- Money can’t buy happiness
- A crazy story that dwarfs Wolf of Wall Street
- Socially Responsible Investing (EA discussion notes)
- Notes of Effective Altruism Meetup
Footnotes
- Fund descriptions and the 2020 comparison.
The original described the S&P 500 funds as technology funds. The index provider describes the S&P 500 as 500 leading large US companies, rather than a technology-only index. The old statement that an index would keep rising has also been corrected. The fund names, charges and broker terms here remain my April 2020 notes; they haven’t been verified as current or as a like-for-like product comparison.
Back to text ↑ - A tax assumption that needed correcting.
The original suggested wealth tax might soon apply only above €440,000. That was an expectation, not the exemption in force. The Belastingdienst’s historical table gives the 2020 box 3 exemption as €30,846 without a fiscal partner and €61,692 with one. The salary, dividend and pension notes here are a record of my model at the time, not a current tax calculation.
Back to text ↑ - Reading the retirement scenarios.
These are outputs from my 2020 spreadsheet, not updated targets or a guarantee that a 4% withdrawal rate would last. The pension, tax and inflation assumptions weren’t consistently specified, and I haven’t recalculated the model here. The old budget totals and scenarios are retained as recorded, rather than presented as reconciled accounts.
Back to text ↑ - Investing money needed for a donation.
The original estimated a 3.5% gain from investing money before donating it in December, without explaining the assumptions or the risk of a loss. That estimate has been removed. The AFM’s investor checklist advises taking a long view and investing money that isn’t needed in the near term.
Back to text ↑