Starting point: financial status pre FI
The idea behind this blog is to share our journey to Financial Independence. And to understand the path I believe it is important to explain where we are at the starting line.
Conservative savers, 0 investments
Up until 2018 I’d define ourselves as a couple of savers with a bag full of dreams. I did not know what were investment funds and nobody around me would speak about them (Mr. Lyn says he tried to explain, but I promise I do not recall having such conversation ;))
Important disclaimer: we are both Spanish, and the rules of the game here are quite different to the US. In Spain, people don´t typically in vehicles such as 401k or any type of retirement account. By paying our taxes we are provided healthcare and retirement when we get to 65 (now moving to 67). So the average Spanish person does not see any need to invest in financial products.
And we were the average Spanish in that sense. We saved every month but never thought our money could be in better places than in our savings account. We were risk averse, so we did not have any credit due and would only spend the money we had.
In 2015 we decided to do a full-time MBA, which was the most financially aggressive decision we had ever made. We took student loans to cover our tuition fees and depleted our life-long savings to cover our living expenses.
Naturally scared of making bold moves, we tried to cover ourselves as much as possible. Excel was our best friend already, and before taking any loan or making any decision, there were multiple scenarios made. As variables we considered our monthly expenses during the MBA and our monthly income post-MBA. Adding in the loan conditions, we knew what would be the maximum we could spend and the minimum we needed to make post-MBA to make ends meet.
2017: back to the job market
In May 2017 this was our situation: 5000€ in the bank and two student loans as liability. I got a job in Madrid and Mr Lyn went through a less conventional path trying his own venture.
Living in the most expensive city in Spain with only one income was pretty tight, so we started tracking our monthly expenses. Mr Lyn was keeping a close eye to our budget, analysing the main expense lines and telling me where we should cut.
But I had just got my new job and my signing bonus, so I did not want to hear about savings and cuts. I wanted to enjoy having a stable income after two years out of the job market seeing our savings dropping month after month.
We were still keeping our savings in our normal account, our main concern was to start paying back the loans and building up an emergency fund that would allow us to sleep at night.
These were our results:
Regarding the savings rate, it is important to mention that I do not make the same every month, my yearly salary is divided in 16 payments so every 3 months I make more. (And yes, we get monthly payments not fortnightly). This does not fully explain our monthly differences but helps.
Regarding expenses, most of our budget went towards basic living expenses (house, utilities, groceries, etc). In the second place you can find travel and loans payments.
2018: two incomes!
In 2018 we had a big change in our lives. Mr Lyn moved to London for work in January. We were now spending more because we would travel to see each other and we were payment for two accommodations. But the result was positive so our savings rate improved.
However, you can see that we did not have a plan yet and our results were not consistent.
During the first quarter of 2018 we had two big trips planned, plus our normal “see-each-other” trips, travel was a big line of expense this time. Also, I had been saving up money and accumulating it in my bank account. So I did an important down payment and cancelled my loan.
And this is where we are now. April 2018 is our first month into this journey and we are excited about the changes that will bring to our life.