Should I utilize retirement accounts or go taxable?

One of the major decisions when investing is whether to invest in retirement accounts or in a standard taxable brokerage account. There are so many factors playing into this that it is impossible for me to consider every imaginable situation so I will try to lay out some of the considerations and then I hope you will add your own thoughts or questions in the comments 🙂 For those of you that just want a quick answer I made this decision cheat sheet:

Don't buy into livrente, do use aldersopsparing.
Fairly simple, right?

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Buy or rent?

One of the financial questions almost everyone will ask themselves at some point is “should we buy a home or should we rent”. In Denmark, we have a very big societal pressure to buy. If you dare to question the general notion that everyone should buy their own home the answer I hear most often is: “I want to pay off on my house instead of pouring money into the pocket of some landlord”. This is an emotional response rather than a rational so I will try to dig into the math’s instead.

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How much money do I need before I can start investing?

I’ve seen this question a few times recently. It usually goes something like “I can set aside x kr. a month for investments. How many months should I save before I invest it?“. The question makes great sense because if you invest too little and too often the brokerage fees might eat up a relatively large percentage of your investment. What people sometimes forget is that if you save up in a savings account for too long to save on fees you are missing out on potential growth. So here I will try to guide you through the process of answering this question for yourself. It should be noted though that the difference you can make will be realtively minor over a long period of time – the most important thing is to save money and get them invested!

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What to do with the money I saved?

So, this is one of my favorite topics to discuss and there is no one set way to go. Here I outline what I’d probably do and then discuss some other approaches. The general idea is really simple but each step has a lot of nuances:

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Start today!

Hi all

While I know from myself that it is often tempting to get all information before starting on a new journey there is so much information available that you might never get around to starting. Like I pointed out in my previous post your savings rate is by far the most important metric in determining your time to FIRE. So, in this post I will focus on getting started saving and then my next post will specify what to do with the money you save.

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Why reduced spending is the most significant change you can make

If you read along in my previous posts you’d know that I advocate:

  • Spend less than you earn
  • Invest the difference

This is very simply put what you need to do. Taking it one step further – in order to maximize progress, you’ll need to:

  • Cut spending as much as you can while still enjoying life
  • Increase salary as much as you can or get additional sources of income
  • Invest in a way that earns you the best possible investment return

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FIRE basics

Just so that we’re all on the same page I’ll write a small introduction to Financial Independence for those that didn’t encounter the term before.

Financial independence: When you live in a way so that you don’t have to go to work to support your lifestyle.

This can be done in a few ways in Denmark:

  1. Bonderøvsstyle: Buy and pay off a small property then live off the land. Trade certain commodities for what you need.
  2. Traditional retirement: Work for 40-50 years and then live on a combination of folkepension (public pension) and your savings.
  3. Investor: Save a large portion of your income. Invest it and live off the interest.

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Your new resource for personal finance and financial independence in Denmark

I started getting interested in personal finance and specifically financial independence about a year ago but have been finding that many principles can be hard to apply in Denmark. Through social media I’ve seen that many others have had the same difficulty in applying FIRE principals in a Danish setting. I sincerely hope that this blog can stir discussion and help others along while I get my own thoughts consolidated into print. So, the triple purpose of this blog is to:

  1. Serve as a log of my thoughts and hopefully help myself better implement anything I learn.
  2. Help others understand and implement FIRE principals and personal finance ideas into their own life.
  3. Discuss ideas and thoughts with likeminded people in Denmark (and elsewhere).

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