Author Topic: Norwegian now 30 - retire at 36?  (Read 2861 times)

Bjorn

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Norwegian now 30 - retire at 36?
« on: February 17, 2015, 09:48:11 AM »
Hi all, just became a registered user today after lurking around for some time. I'm reaching out to this great community to do a checkup on myself and see if I could be on the track to FIRE as soon as I hope. I also need some help to explore my options.

Short intro of me
I'm soon-to-be 30 yrs old and work full time as a bookkeeper/accountant. I make about 320.000 after taxes in a year (NOK), thats about $45.000, plus another 12.000 NOK in positive cash flow from a real estate investment.
Last year I married my GF from Kenya who just recently moved in with me. Because of visa issues she will have to wait another 6-8 months before she's allowed to start working. In the meantime I'm supporting her. No plans of kids unless her bio-clock makes her change her mind.
Simply put I want to be able to retire soonest. Not out of lazyness, but freedom. I'd like to live in Kenya for 6 months or maybe some years, devote more time to free hobbies, workout, go camping for a week and basically not feel like an office slave depending on my monthly salary. I wish to do this through real estate, because I'm better at that than with stocks and it feels safe owning something that pays you in cash monthly. People will always need shelter. So here goes :)

My monthly expenses in 2015
Rent: 4.500
Electricity: 850
Internet: 400
Transport (bus): 340
Healthcare: 100
Cell phone: 50
Gym: 0
Student loan: 1.522
Food: 2.000
Other: 4.000
Total: 13.712

Expenses/2015: 164.554
Savings/2015: 155.456

Some comments and questions on the budget:
 - We rent a 2 bedroom apartment at 8.500 but renting out one of the bedrooms at 4.000/month. At some point when wife is financially established we will probably stop renting out, but then wife will pay 50% of all our shared costs so it shouln't change much for me personally anyway. Iam slowly getting tired of having a roommate, but she is nice and she has a cute dog plus it helps alot on the finances.
 - I could cut bus expenses. Those are for winter season (5 months) when walking to work takes 45 minutes.
 - I am looking to change work into something that doesn't require bus, and pays slightly more (maybe 20.000 more per year).
 - Cell phone is paid by employer, so this cost might increase to 150 including depreciation in case of changing jobs. Currently wife uses my personal cell phone.
 - Student loan balance is about 100.000 and I will be able to clear it off this year. Interest rate 2,7%. Should I clear it?
 - Food is hard to cut when supporting my wife. But should be able to reduce it to 1.500 with time.
 - Other: About 1.000 of it are necessities accounting for depreciation (like new laptop every 3-5 years, new clothes, dentist every other year etc). Another 1.000 is (summer) holidays. Another 1.000 is entertainment/wants on my side which I'm having a hard time cutting further. It used to be 2.000 in the past :)
And the last 1.000 is extra costs relating to my wife before she starts working, like getting a winter jacket last month, getting language books this month, doubling up costs when doing something that costs money etc.
- Are you seing any clear costs I could rid of? I could skip holiday money, but since my inlaws live in Kenya and my own family live 50 miles away I will need to spend to see them.

My assets and debts
Rental property: 1.250.000 (bought Feb 2014)
Rental property bank account: 15.000 (grows +1.000 every month on average)
Savings account: 118.000 (75.000 is "locked" the next 3 years)
Other investments: 54.000

Loan for the rental property: 900.000
Student loan: 100.000

Net value: 437.000

Other investments are loans made to family, which is slowly being paid back. I expect the 54.000 to transfer into savings during the course of this year.

The future
2015 is a special year because I am supporting my wife. When she starts working I hope to reduce annual spending to below 120.000.
I also hope to raise my income by +12.000 by the end of the year.
So if all goes well my savings rate will increase to about 230.000/year when 2016 is here.
I am assuming expenses of 120.000/year will be enough for me to do the things I want to do long term so that is the "passive income" number I am aiming for.
Incidentally, if I own 2 mortage free rental properties I will make 120.000/year.

Option A)
My thinking is that from the numbers I've presented in this post I could manage to clear the student loan this year and clear the property loan before 2017 ends. Then my annual income will get a boost of 60.000/year from a mortage free property, totalling up to 290.000/year in savings. At that point I could spend 4 years saving up for another similar property, buy it cash and collect 60.000 x 2 = 120.000 in yearly rent and retire.

Option B)
Another option is saving up just enough for a downpayment for the second property this year. Assuming I save my planned 155.000 in 2015, I will have enough for a downpayment to qualify for a loan. This way I will be heavy in debt, but on the positive I will get another rental income to help pay it off. Assuming interest rates stay low and property prices rise about, this might get me retired 1 year earlier. Keyword: might. But 1 year feels like alot.

Option A is what keeps me easily motivated for this. It simply feels good if I clear the student debt this year, and then only 2 more years to clear the property loan.
Option B seems smarter financially, as it takes advantage of low interest rates and will be a hedge against real estate inflation. But theres a big mental difference between having 1 million in debt and 2 million in debt...

What do you guys think?

Earthling

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Re: Norwegian now 30 - retire at 36?
« Reply #1 on: February 17, 2015, 09:54:48 AM »
I always understood, perhaps incorrectly, that Norwegian citizens were entitled to generous pension benefits via the sovereign wealth fund.

ZiziPB

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Re: Norwegian now 30 - retire at 36?
« Reply #2 on: February 17, 2015, 10:03:05 AM »
I always understood, perhaps incorrectly, that Norwegian citizens were entitled to generous pension benefits via the sovereign wealth fund.

Presumably not at 36 years of age, though...

Bjorn

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Re: Norwegian now 30 - retire at 36?
« Reply #3 on: February 17, 2015, 10:46:56 AM »
I am intrigued by the amount of activity in these forums. New replies all over the place every minute!

You are both right. We have good pensions, but the earliest I can get access to those funds will be at age 62. So I don't really consider them. Maybe the government manages to spend it all before the time comes:)

DagobertDuck

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Re: Norwegian now 30 - retire at 36?
« Reply #4 on: February 17, 2015, 10:51:34 AM »
I'm under the impression that the Norwegian government uses their oil/gas revenues more wisely than ours. ;-)

ShoulderThingThatGoesUp

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Re: Norwegian now 30 - retire at 36?
« Reply #5 on: February 17, 2015, 10:54:48 AM »
What's a standard stock market growth rate for a Norwegian investor, and how much does your currency usually inflate per year? That will put a lot of context around 2.7%.

ZiziPB

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Re: Norwegian now 30 - retire at 36?
« Reply #6 on: February 17, 2015, 10:55:31 AM »
I should have said, Welcome Bjorn.

I think I would probably do a combination of both your options.  Sounds like you are comfortable with being a landlord but are not that crazy about being in debt.  So I would pay off the student loans as soon as you can (I know it's a low interest rate but I think it would be nice to be just done with them) and then save for another property. 

Bjorn

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Re: Norwegian now 30 - retire at 36?
« Reply #7 on: February 17, 2015, 01:12:42 PM »
What's a standard stock market growth rate for a Norwegian investor, and how much does your currency usually inflate per year? That will put a lot of context around 2.7%.
Our central bank tries to create 2.5% inflation and usually manages to get pretty close.

Standard stock market growth rate is assumed to be around 8% annually.

Thank you ZiziPB :)

So you suggest I pay off the student loan this year. Then save up for a down payment and leverage it into a rental property? That was my plan but I was struck by second thoughts for some reason.

Earthling

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Re: Norwegian now 30 - retire at 36?
« Reply #8 on: February 17, 2015, 01:41:21 PM »
I'm under the impression that the Norwegian government uses their oil/gas revenues more wisely than ours. ;-)

In Norway, the Crown (i.e., government) owns the subsurface and mineral resources.

In the United States, the subsurface and mineral resources are owned by three different parties: (1) the federal government (so-called federal lands), (2) state governments (state lands), and (3) private parties.

For what it is worth, the hydraulic fracturing revolution underway in the United States is largely occurring, perhaps even exclusively, on private lands. This suggests a positive correlation between productive use of resources and the principle of private property ownership.

Bottom line: in the United States, save for royalties and taxes imposed by government, oil/gas revenues are the domain of the private sector -- a system, I'd suggest, has served us well since the first well was drilled in Pennsylvania in the late 1800's. Stated another way, shareholders largely direct the use of oil/gas revenues in the United States. I'd rather trust the collective judgement of two million shareholders than the sole decision of an unelected bureaucrat, or a King or Queen, any day of the week -- and twice on Sundays.