Financial Independence : Beginning the Journey

Since the beginning of 2019, I am very interested in various articles about FIRE (Financial Independence Retirement Early). I stumbled on this term when reading an article on CNBC Make It! about someone who plans to retire early at age 37. This article led me to look for more article about the concept of early retirement.

The concept of financial independence and achieving retirement targets earlier was very impressive to me. Finally, I have a clear path to my career goal and my financial target.

In order to achieve the target of FIRE before the age of 50 years, one of my targets at the beginning of 2019 is to start tidying up family financial records. It should started in January 2019 but due to some obstacles, I was forced to start in February 2019.

The first step is to discuss with My wife Dear Rey regarding financial management. Financial records are integrated using my financial application. If so far based on memory or sporadic records, starting in February, I take several steps to be realized, for example in the form of the following:

  1. Combining family budgets. So far, some of my salary is still stand by in my account for my personal budget, such as books, ebook or my personal hobbies. Starting in February (or March to be exact), all salaries will be managed by Dear Rey. My personal budget allocation will be set from there. The allocation and budget limit may not change, it’s just that there are more centralized budget and realization records
  2. Create a detailed family financial plan, for example for an emergency fund post, it is linked to a particular bank account or an easily liquidated investment, such as fixed income mutual funds or money market mutual funds. When referring to my Financial application, the amount of emergency funds is 12 times the 1-year life requirement. So if spending for example IDR 5 million (about 350 US$), the emergency fund is IDR 60 million. If it is smaller or more expensive, just adjust to multiplication as it should.
  3. Create a financial plan for education funds. I have some investment fund, but now it get more detailed attention, for example for mutual funds or certain stock investments are connected with education funds for Zeze Vavai while mutual funds and other stocks are directed to Vivian’s education fund. I made a reference using the assumption of tuition fees at ITB and Binus, both two are reputable university in Indonesia. Based on the assumptions of Zeze Vavai and Vivian go to another campus, the costs are not too different. In addition to tuition fees, there are also estimates of monthly living costs such as studying outside the city. 
  4. Create a financial plan for our retirement target. This is the main target. Most stock investments or other long-term investments are included in this section. In the past I did it sporadically and sometimes based on instinct :-). It now began to be grouped on selected financial target. Stock investment for example, is more directed to the needs of value investing rather than for trading investment
  5. Create investment/savings targets regularly. This is much easier because it has already been done, it’s just that there are additions in the form of investment plans and savings, the amount, the investment time target and the achievement process. For example, I have a target to add Zeze Vavai and Vivian education savings of IDR 60 million in 5 years, which means that I have to set a savings account of IDR 1 million per month. There may be a profit from the value of the initial investment, but I do not want to include it in the financial plan because the profit it self is uncertain and may or may not be realized
  6. Create a vacation plans. So far, vacation plans are impulsive. If I seeing a cool place and there was a time off for the children school agenda, I’ll be immediately ordered a ticket and we are all went to vacation. Starting in 2019 target are more prepared, for example, if you want to go to a certain region or country, I must a take a simple plan for the budget, how long it can take, does it conflict with the child’s school time and the estimated monthly savings to reach the target.
  7. Maximizing the value of savings. If referring to the table “Saving Rate and Length of Working Time” , to reach the FIRE level within 7 years I have to save 75% of the take home pay value. This is a huge value as I should enforce our frugal living… To be able to get a 75% saving rate, I need to do 2 things : reducing expenses and increasing the amount of income. 

The process of tidying up family finances seems simple even though it’s not. To combine account records, for example, there may needs some consideration, such as worrying that if the entire salary will be handed over, then there will be no “own money” to be used for our own purposes. I personally more easily overcome this concern because my hobby was not expensive and did not need a big amount to cover it. 

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