I discovered GRS and this forum already some time ago and have been an avid reader since. These have both been great sources of inspiration in my quest for financial stability. I’m 29 years old and live in Finland. I have a university degree and a job in the field of IT. Me and my wife are going to have our first baby in the end of this year and this has motivated me even more to get my finances on steady track.
The present situation with assets and liabilities is not awfully bad but it could be much better. Check out the balance sheet for details.
We have quite a new house (and a house loan to match). Our car is also quite new (we bought it used of course ) and should suit our needs for several years to come. There is a loan on the car which has the highest interest rate of all my loans. I also have a couple of student loans which annoy me a bit because I might have been able to scrape by without some of that money.
On the most part, me and my wife keep our finances separate. This seems to work well for us. Therefore this thread is mainly only about my personal finances. The house loan is of course joint debt and we have a joint bank account for normal household expenditure like groceries, cable, insurances etc. I’m also lucky in the sense that Mrs. Orange makes more money than I do J. Her income will decrease a bit at least for a year when the baby is born, but that shouldn’t have a massive impact on our economy.
I assume that majority of board readers are from the US, so I’ll try to explain some of the differences for example in the taxation and loan practices here and there.
Balance Sheet (Jul 2010)
Assets (€ 86 600 in total):
- € 1 600 Emergency fund
€ 85 000 House (my half of it)
Liabilities (€ 90 370,05 in total):
- € 791,68 Student loan #1 (2,75 % variable *)
€ 1 541,34 Student loan #2 (3,25 % variable *)
€ 2 942,76 Student loan #3 (2,75 % variable *)
€ 4 346,47 Car loan (5,79 % variable)
€ 80 770,27 House loan (my half of it) (1,82 % variable *)
€ 0 Credit card
Total Balance: - 3792,52
* Actual interest percentages are lower, because 28 % of student loans and 30 % of the house loan can be deducted from my income tax.
Monthly Income Breakdown (roughly)
Salary before tax: € 3000 /month
The salary isn’t great, but at least there should be a € 300 raise on the way. If this happens it will have a very nice effect on reaching my goals.
I get paid once a month. There’s usually a small bonus once a year and due to some old Finnish conventions July’s paycheck is about 1,5 times the normal one. This converts to about € 39 000 a year (about 50 500 USD). In addition I also do some freelancing on the side, but I don’t want to count it as a regular income since it’s on a very irregular basis.
Taxes and deductions:
- € 660: Taxes (national and municipal)
Automatic deduction according to my personal tax%.
- € 140: Pension Insurance
The Finnish pension system is state controlled and administrated by a couple of big pension insurance companies. In addition to the 140 € (about 4,5 % of my monthly salary) my employer throws in another 650 € a month (about 22 %). This should guarantee me a pension of about 60 % of my income at the age of 63. This is an automatic tax-like deduction that can’t be changed.
- € 13: Unemployment Insurance
Automatic deduction (0,4 %), can’t be changed.
- € 37: Union fee
Optional fee that guarantees me for example legal aid and a better unemployment compensation in case my employer decides to sack me.
Salary after tax: € 2150 /month
- € 425 House loan
€ 125 Utilities
€ 500 Household misc. (groceries, insurances, petrol etc.)
€ 100 Student loans
€ 150 Car loan
€ 550 Personal (clothes, eating out, hobbies etc.)
To Savings: € 300 /month
I’ve managed to come up with quite a detailed spreadsheet that calculates my balances and estimates my personal financial development. Currently I have it filled out as far as Dec 2013.
- 1. Save € 6000 to the Emergency fund (EF)
This should be enough to make a decent EF. Since both of us are working it would be quite unlikely for us to be unemployed at the same time. Also our unemployment benefits would make up to 60 % of our current income almost for 2 years. This would be plenty of time to look for a new job. I’m also pretty well covered for health related issues by employers insurance and the free national healthcare system. By my calculations I should have € 6000 in the EF by Oct 2011.
- 2. Get rid of car and student loans
Total amount of € 9599,78 should be burned by Oct 2012. I’ll probably use the debt snowball method.
- 3. Save € 5000 to a money market fund and € 3000 to long-term investments
After I’m done with the loans I want to put part of the money towards a money market fund and also some towards my long-term investments. The money market fund is for bigger purchases, traveling, investments, house loan pre-payments and so on. The long-term investments are basically stock index funds and fixed income funds that I don’t plan to sell any time soon. By my calculations I should have € 5000 in the money market fund and € 3000 in the long-term investments by Dec 2013.
Thanks to all of you who have read this far! I welcome all your comments and input. I plan to update my journal at least at the end of every month. English really isn’t my strongest language, so please comment if I've mixed up some things or otherwise expressed myself unclearly.
- Mr. Orange
EDIT: Fixed the amount of the car loan, it was a couple euros off.