When I said farewell to my youthful, fun life and started working on building my career back in 2015, I quickly noticed I was making way more money than I was spending.
After a year of full-time employment I had saved more than € 10.000.
I was considering:
- Moving to a bigger house
- Buying a car
- Getting a fancy barbecue set
- Buying an off-road segway
Truthfully, I didn’t really need any of those…
I decided to start investing time in something called Passive Income; which is basically like setting up a cash machine and laying on the beach while the money flows into your PayPal account.
I was compelled by the idea, and eager to consume all ideas of the Gary Vaynerchuks and Robert Kiyosakis of this world who buy real estate, invest in Uber, Snapchat and Twitter.
But I knew that my € 10.000 would never buy me a house in Amsterdam and since I wasn’t a super connected millionaire in Silicon Valley, investing in the next Uber was off the table too.
So what could I possibly do?
I did what any logical human being would do: ask Santa Claus! That Christmas I received a couple of flyers and pamphlets on the best way to start investing.
The info I was given was about investing in sustainable index funds. I researched the different funds and decided to put in € 8.000 to see what would happen.
From that moment on things started working for me. I was intrigued to discover that I could instantly pay off my € 50 / month mobile plan with the interest I received from my €8.000 investment.
So… I made a bunch of calculations and found a way to become financially independent WAY earlier than the national retirement age.
I am going to share with you my perspective, tools, and financial setup on how I will become financially independent at age 38.
I believe the system is faulty because companies across the world have ONE goal only:
And especially growth for shareholders rather than stakeholders. Growth is GREAT but only if it also takes the stakeholders and the world as a whole into account.
Our system, unfortunately, is not designed this way. We are made to believe the alternative is stagnation, and stagnation results in decline.
Growth can happen in two ways:
- Revenue is increased by making us as consumers spend more.
We are being taught what life goals to aspire to.
- Costs are reduced by evading/bending rules and exploit unregulated parts of production.
Like outsourcing production to less prosperous markets and denying climate problems.
These mechanisms are everywhere. In order for them to work, they must influence consumers in a way that leads them to believe the ultimate path to success is this materialistic, perfect dream we see every day in the media. I mean, look at this Jay Alvarrez:
The ultimate goal is to ensure lifelong happiness, right? Media tells us the way to achieve this is by buying all the marketed stuff and live the life you see on instagram.
But by focusing on happiness itself, you can have a much better life than those who focus on luxury, convenience and follow the herd that is the ad-absorbing Middle Class of the western world. Happiness comes from many sources, but none of these sources involve a Ferrari or an iPhone 8.
A New Perspective On ‘Success’
While working remotely for Growth Mechanics I have met many on my travels who became way happier after they got inspired by a new lifestyle called Minimalism.
My key takeaways from those conversations are that you:
- Only buy stuff you really need.
- Reset yourself and get rid of everything you don’t use anymore.
- Make things efficient by setting up systems that are multi-purpose.
I watched Minimalism The Documentary and started experimenting with the idea. I found this ‘minimal’ perspective creates headspace, feels lightweight and saves you a lot of $$$. The latter being a powerful way to start investing more.
‘The trouble with simple living is that, though it can be joyful, rich, and creative, it isn’t simple.’
– Doris Janzen Longacre
How To Start Investing And ‘Retire’ In 13 Years
I’m not saying that retiring is the ultimate goal here.
Having a sustainable passive income stream that covers your expenses, frees up headspace, allows you to take more entrepreneurial risk and pursue ideas that are not directly incentivized by money; that’s the goal!
In the past, investing has always alarmed me. I thought it was only for senseless capitalists who make money off the back of others. Now I know that the key to start investing smartly depends on what you invest in.
I think everyone should actively think about their financial setup at least once. It can make a HUGE difference in 10 – 20 years. You might even be abe to live off of the interest of your savings and be financially free.
Now I also happen to be an automation nerd, so I want to make everything as efficient and automated as possible. Let’s dig in:
My Old Financial Setup
Tools I used
- ING Checking Account (€40 / year)
- ING ‘Savings Account’ (0,2% interest / year)
Most people don’t know that they support non-ethical enterprises by keeping their money in banks that do not prioritize sustainability. Check out how well your bank scores with the Independent Bank Evaluator.
I discovered ING is one of those: They don’t care about human and animal welfare and invest only in companies that have a profitable cashflow. They neglect to evaluate policies for sustainable impact, human rights and climate change.
Apart from the sustainable side of things, you could say my setup was very unprofitable and messy.
My income went into the same account from which I bought groceries and beer. I had to manually send chunks of my income to a different account, so I would have a rough idea of what I could spend and what I could save.
This other account wasn’t a high interest savings account, but a tiny bit more lucrative. I had a yearly interest rate of 0,2%. So my €10.000 in savings would make me… *tum* *tum* *tum* €20 / year. Yay!
Aside from having no idea about how much I was spending and saving, I made zero euros off my savings: Lose-Lose.
Old Setup: 81 Years Until Financial Independence
81 years from now, I would still be unable to cover my expenses with my interest. When 106 years old, I would have €1.900.000,00 in my account, but only make around €4.000,00 in interest / year.
Luckily I changed my setup…
My New Financial Setup
You often hear about sexy investing stories from people in San Francisco. I’m happy that they have a good return on 1% of their portfolio, but:
- Investing in early-stage companies is like going to the casino.
- Investing in mid- and late-stage companies is only possible for a select few and puts your eggs in one basket.
For example: if you had invested €100k in Electronic Arts (a big video game development firm) in 2002, you’d still have €100K in 2008. And then €130k in 2012. So that’s a very unpredictable curve, even though EA is a huge firm that generally does very well!
I am happy to trade in the potential of huge wins for more stability and fewer losses. Also, considering the retirement age in Holland is continuously going up and freelancing is on the rise, I think it’s wise to know how to start investing early…
Tools I use
- Sustainable Index Funds
- Coinbase & Ledger Nano S
I’m not affiliated with Bunq in any way, but I’m a complete fan. If you’re not living in the Netherlands you should check out similar services in your country, I’ve listed some at the bottom of this page. There are several reasons for choosing them:
- They do not invest your money, your money is only used by you. Instead you pay € 1 / month + € 0,02 / transaction. (This total is similar to an account package at ING. See pricing here.)
- They have a bank license, and every account is covered up to € 100.000.
- They have the best designed smartphone app out there, hands down.
- Best customer support is just one swipe away, all over the world.
- You can have up to 10 accounts for free, all with their own IBAN number for which you only need one card that you can assign to the right account via the app.
- Public API which means everyone can build handy new apps and tools on top of the platform. Think about automatic tax administration, automatic payment sharing with your partner, tracking dashboards for your income and expenses. You can even manage your kids’ pocket money with Otly!.
I have set up 3 bank accounts at Bunq:
- A central ‘Hub’ account
- My income streams.
- My fixed monthly expenses.
- Monthly automated transfers to investment funds.
- Monthly automated transfers to good causes.
- Monthly automated transfer to my recreational account.
- Recreational account
- Receives a monthly fixed amount from the ‘Hub’ account.
- I pay all recreational expenses and groceries from here, so I can easily track my living costs.
- Tax account
- Automatically takes the VAT from certain income streams.
This new set-up gave me a lot of control over and insight into my income and expenses, freeing up a lot of headspace and making me happy.
Edit: Bunq updated it’s business model. You now pay a flat fee of €7,99 / month. You get a debitcard and two MasterCards for more convenient international banking.
Sustainable Index Funds – Best Way To Start Investing
Putting your savings in a bank like Bunq eliminates the negative, but I would also like to do good with my savings. This was my main incentive for leaving ING and writing this article.
After lots of research I eventually ended up with Triodos Bank and found out how to start investing in their sustainable index funds. Do your own research and find banks that allow you to invest in sustainable index funds in your own country.
I came up with 3 incentives to start investing in sustainable funds:
- Ethical Incentive
You don’t want to make money off the back of other people. E.g. you don’t want to invest in tobacco companies, weapons manufacturers, or other companies that don’t take human rights very seriously like fashion giants Primark, Forever21, and ZARA.
- ‘Want To Make A Change’ Incentive
You want to invest in a better future, like companies that specialise in the production of wind energy and solar panels. Think about companies like Tesla.
- Financial Incentive
According to several studies from Harvard Business School, the companies that prioritize sustainability, are more profitable.
My investment funds:
- Fair Share Fund
Average of 5.3% / year. Makes micro investments in third-world countries.
- Sustainable Mixed Fund
Average of 6.7% / year. Invests in companies that score above average on social and ecological areas.
- Sustainable Pioneer Fund
Average of 13,5% / year. Invests in small to mid-size companies that are listed in the stock market. Companies in emerging markets like med tech and wind tech.
I spread my monthly investments in a 3 : 2 : 1 ratio across these three funds. I have it set up to be a little aggressive. You can look through the funds to see which ones fit you most, links are below in the Links & Resources section.
Be very careful with trusting a bank to invest in ‘sustainable’ companies.
Shell could advertise that they have a sustainable way of extracting oil from the ground, while oil is not a sustainable product in the first place.
Update: I switched to Binck Bank. Binck allows you to invest in the funds above but with lower fees. I also invest in other funds now. For the full list of sustainable funds that Binck support, head over to their page here. You can find more information by searching the name of the fund on Morningstar.
I can recommend opening a FundCoach account at Binck too, so you can invest monthly without any extra fees.
New Setup: 13 Years Until Financial Independence
13 years from now. At age 38 I will have enough savings to cover my expenses off of the interest! My total savings will be around € 430.000,00 with a yearly interest of around € 21.000,00.
That’s around € 1.750,00 / month!
…where’s the champagne at? Oh wait..! That will postpone my retirement with 4 months! 😉
As I am working location independent, I’m often based in countries that have a foreign currency. So I use Revolut to escape the currency exchange fees that banks charge, when you use a terminal in a different currency. These charges can add up to 6% to each withdrawal according to Revolut. I’ve paid additional charges of 3% more times than I can remember.
Revolut only uses the inter-bank exchange rates, so you get the lowest guaranteed rate at each moment. You only pay 1% of the amount whenever you top the card up.
Coinbase – investing in ethereum
I invest in Ethereum because it’s fun and I stand behind the blockchain idea. Ethereum has an awesome ecosystem and a lot of potential. I don’t take it into account in my calculation to financial independence.
Coinbase is the world’s biggest exchange market for investing in cryptocurrency and they make it really easy to manage your assets. It’s an alternative to Bitcoin that hasn’t boomed yet. Note that this is far from a stable investment, so be careful! 😉
Register via this link and we’ll both get $10 in our account when you make your first investment.
You don’t see curves like this very often!
Update: ETH is now at +/- €250.
Conclusion: The Best Way To Start Investing
Don’t worry too much about the details – just start saving for now and watch as your lifestyle transforms and your worries about financial stability and safety melt away. It’s a long-term play and it’s good that you now know how to start investing.
To wrap up here are the key take-aways:
- Get rid of stuff you don’t need
- Diminish your expenses and/or increase your income
- Move your money to a sustainable index fund (like the funds of Triodos Bank).
- Download the spreadsheet below to quickly see when the interest from your savings will cover your expenses.
Follow these, start investing, and you’re be well on your way to achieve financial independence!
[Tool Download] In How Many Years Can You Retire?
Enter your details below and I’ll send you a link to download the tool :-).
References & Links
Revolut – Beyond Banking
Bunq – Bank Of The Free
Triodos Bank – Sustainable Investing
Robin Hood – Stock Trading App
N26 – The Mobile Bank
Monese – For Mobile People
Atom Bank – The Future Of Banking
Did you like this read? How many years until do you have to work to cover your expenses?
Let me know in the comments below or tweet me @nillavanilla