How To Start Investing And ‘Retire’ In 13 Years

How To Start Investing And Retire In 13 Years

Introduction

 

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.


Contents

 

  1. My Perspective

  2. How To  Start Investing And Retire in 13 Years

  3. Old Financial Setup

  4. New Financial Setup

  5. Conclusion: The Best Way To Start Investing

  6. [Tool Download] In How Many Years Can You ‘Retire’?

  7. References & Links

 

My Perspective

 

I believe the system is faulty because companies across the world have ONE goal only:

Growth.

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:

  1. Revenue is increased by making us as consumers spend more.
    We are being taught what life goals to aspire to.
  2. 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)

 

Before I knew how to start investing

 

 

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

Projected years until Financial Independence before I knew how to start investing

Projected 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

  • Bunq
  • Sustainable Index Funds
  • Revolut
  • Coinbase & Ledger Nano S

 

New Financial Setup

 

Bunq

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:

  1. 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.
  2. ‘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.
  3. 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

Projected years until Financial Independence afterI knew how to start investing

Projected 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! 😉

 

Revolut

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.

How to start investing with Revolut

 

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.

How to start investing in Ethereum

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

Finances

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
Ethereum

Blogs

The Minimalists
Mr Money Mustache
Steve Pankhurst

Tools

News Feed Eradicator
AlienTube
Rank A Brand
Banken Wijzer
ETH – Ethereum Ticker Chrome Extension

Video

Minimalism The Documentary
The True Cost
Cowspiracy
How The Economic Machine Works


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 

Comments 12

  1. Bunq looks interesting, but you say they don’t invest your money, but where are they storing this money? There are alot of these new FinTech banks popping up and they are all operate under umbrellas of traditional banks. How are you certain that funds held at bunq ultimately aren’t being held in the accounts of some larger “evil” bank

    1. Post
      Author

      Hi Jack!

      Thanks for reading and your reponse 🙂

      I totally get your point and you’re right that many of these new initiatives are in fact storing their money at other banks (among them the very popular N26).

      Bunq however is a completely independent bank. And their policy is that your money belongs to you and that no one else can decide what happens to it. If you deposit funds on their account, it’s simply recorded in their bookkeepings and stays static.

      This means that according to the traditional definition, Bunq is not an actual bank!

      I got this information from Bunq support.

      Hope that answered your question? 🙂

      Thanks!
      Niels

  2. Hi Niels – nice read. Do you think those fund interest rates will remain somewhat stable till retirement? I find the magic starts in later years / bigger deposits. So, even if those 13 years will be purely zero gain, you’d still be able to retire couple of years later with just savings accumulated (with no interest) – you’ll just need to find a better interest rate (switch from stable 0% to stable 5%).

    1. Post
      Author

      Hi Edgar!

      Thanks so much for the read!

      Index funds are one of the safest forms of investing, but you never know if it stays stable. It will always be more stable than investing in individual companies as with index funds you don’t put all your eggs in one basket.

      In my calculation I used an average interest / year of 5% for the ‘likely’ outcome. This pessimistic because the average return of my funds is 8,5%. Then again I didn’t count in inflation rates and savings taxes.

      The goal is to live off the interest of your savings, so just accumulating savings and then living off of that wouldn’t be a self-sustaining framework.

      The idea is that if you start early with investing and you invest regularly, you feel less of the up’s and down’s in the market.

      Hope that answers your questions!

  3. Hi Niels,

    Nice read, but I have a question. Why do you choose to invest in Triodos funds? Compared to other brokers they charge relative high costs?

    Gr. Luuk

    1. Post
      Author

      Hey Luuk!

      Good question! There are a couple of angles here:

      1. Triodos is sustainable-only. This means that not only the funds are sustainable, the whole bank is. So the fee you pay Triodos will be invested according to their policies. I haven’t found a broker, bank or tracker that has decent investing policies of their own (They invest the fee they earn from managing your portfolio).

      2. The only broker I could find that has some sort of sustainable policy is Binck Bank and their fees are quite a bit lower than Triodos’.

      But they regulate by ‘engagement’, while Triodos regulates by ‘exclusion’.

      Engagement means they regulate more mildly at what they invest in, companies that have a sustainable forecast could already be accepted.

      While exclusion means companies can only be qualified for investment when a certain set of rules are already in place at the target company.

      3. At first I was very pro exclusion but I’ve heard the exclusion policies are also greyish, so that taken into account and the lower fee that Binck asks, I’m considering moving my funds to Binck. They support the same funds that I invest in now anyway.

      What are you currently using to invest? Or do you think there’s a better alternative to Triodos/Binck? I’m curious, let me know!

      Niels

  4. Hi Niels,

    Thanks for your quick reply! It is very helpful as well. I am not investing yet. I am exploring and investigating the different investing methods and the brokers’ fee models/fund costs. I feel much for investing in sustainable ETFs, therefore I am considering the sustainable index funds of Binck, but also sustainable funds of Triodos and ASN. However, I found out that Triodos was quite expensive compared to the others. That’s why I asked you this. Overall, I think I will go for Binck..

    Luuk

    1. Post
      Author

      Good choice! You can also invest in the Triodos Funds through Binck. This way it’s cheaper but you still invest in the right funds.

      Also have a look at DeGiro. They are even cheaper than Binck, but provide less service and features with their platform.

      Hope that helps!

  5. Hi Niels,

    I read your articel and I like the concept of your investments. I also started to use Bunq as my main account so I was wondering how you automated the payments. Did you write a little tool using the Bunq API?

    Sebastian

    1. Post
      Author

      Hey Sebastian!

      With bunq you can set up auto-payments in the app, it’s pretty simple!
      Then in the interface of my investment broker, I can also set auto-buys for stocks.

      Let me know how you go!
      Niels

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