Reader Case Study: Working to FIRE in Finland

Jen and her husband Marc live on the west coast of Finland along with their two-year-old son. They recently bought their dream home near the sea and are enjoying their new lifestyle outside of the city. While Jen likes her job as a product champion engineer, she has aspirations to reach FIRE (financial independence, retire early). She’s also interested in pursuing a real estate portfolio, starting by renting out the cottage on their property via AirBnB. Jen would like our help determining how to approach real estate investing as well as when she and Marc might reach their FIRE number. Let’s travel to Finland today to delve in Jen and Marc’s questions!

What’s a Reader Case Study?

Case Studies address financial and life dilemmas that readers of Frugalwoods send to me requesting advice. Then, we (that’d be me and YOU, dear reader) read through their situation and provide advice, encouragement, insight and feedback in the comment section.

For an example, check out the last case study. Case Studies are updated by participants (at the end of the post) several months after the Case is featured. Visit this page for links to all updated Case Studies.

The Goal Of Reader Case Studies

Marc and son at the beach

Reader Case Studies are intended to highlight a diverse range of financial situations, ages, ethnicities, geography, goals, careers, incomes, family compositions and more!

The Case Study series began in 2016 and, to date, there’ve been 62 Case Studies. I’ve featured folks with annual incomes ranging from $17k to $200k+ and net worths ranging from -$300k to $2.9M+.

I’ve featured single, married, partnered, divorced, child-filled and child-free households. I’ve featured gay, straight and trans people. I’ve featured men, women and non-binary folks. I’ve had cat people and dog people. I’ve featured folks from the US, Australia, Canada, England, South Africa, Spain, Finland and France.

I’ve featured people with PhDs and people with high school diplomas. I’ve featured people in their early 20’s and people in their late 60’s. I’ve featured folks who live on farms and folks who live in New York City.

The goal is diversity and only YOU can help me achieve that by emailing me your story! If you haven’t seen your circumstances reflected in a Case Study, I encourage you to apply to be a Case Study participant by emailing mrs@frugalwoods.com.

Reader Case Study Guidelines

I probably don’t need to say the following because you folks are the kindest, most polite commenters on the internet, but please note that Frugalwoods is a judgement-free zone where we endeavor to help one another, not condemn.

There’s no room for rudeness here–the goal is to create a supportive environment where we all acknowledge that we’re human, we’re flawed, but we choose to be here together, workshopping our money and our lives with positive, proactive suggestions and ideas.

A disclaimer that I am not a trained financial professional and I encourage people not to make serious financial decisions based solely on what one person on the internet advises. I encourage everyone to do their own research to determine the best course of action for their finances. I am not a financial advisor and I am not your financial advisor.

With that I’ll let Jen, today’s Case Study subject, take it from here!

Jen’s Story

Forest in front of Jen & Marc’s house

Hi Frugalwoods and Frugalwoods nation! I have so looked forward to this and it has already been so much fun composing this article. I’m Jen, a 38-year old engineer living on the west coast of Finland. This little country of nearly six million inhabitants in northern Europe might be quite unknown to most Frugalwoods readers.

Finland is a welfare state and apparently we are the happiest people in the world (which we ourselves find a bit surprising!). It is by no means perfect, but on average it is really good. It’s a safe and secure environment in which to raise a child. Our little family consists of my hubby Marc (who turns 40 this year) and our 2-year old son. We are both bi-lingual in Finnish and Swedish and both languages are used at home. I found FIRE and minimalism back in 2017, which is also when I started investing on a larger scale.

Jen’s Career

Honeymoon Jen looking out on Florence

While I’m writing this, I am on vacation. I quit my job as a factory manager to go back to R&D, which is better suited for me. During the winter I was very tired and was actually thinking of trying to become self-employed. After some calculations, I concluded that such an endeavor would drastically push back my FIRE date and after testing it out, I realized I felt too alone. Instead I started searching for a sustainable job, somewhere that I’d be challenged but that wasn’t too stressful and where I’d have great colleagues.

The positive side of living in Finland is that companies usually offer a good work-life balance. On average people do not work overtime. The white-collar work week is 37.5 hours. On the back-side, the wages are nowhere close to what you guys in the US make. It is nevertheless enough to live a good life. I got a new job as a Product Champion, which will entail managing the features (functions) of a control system. As a social being, I love the possibility of having a job where I am required to interact with our stakeholders on a regular basis. Since work is such a big part of my life, it has to be technically interesting and stimulating for me.

Marc’s Career

Marc hiking in the Swiss Alps

Marc finished school a year ago and got a job as a software test engineer at a company making apps. He studied Industrial Management and is hoping to take the leap into that arena after getting some engineering work experience first. His current employment is not his dream job but the company has been good to him and he has great teammates.

He was fortunate to get a job while being newly graduated in the midst of the pandemic (in December). The rest of last year he was on parental leave taking care of our son. The two bonded on a deeper level during this period.

Childcare in Finland

Now that both of us parents work, our son goes to daycare three days a week. Childcare is provided, and regulated, by the state. In our county, the daycare fee is 216 €/month/3 days for us. The fee is calibrated on the parents’ income and we pay the maximum amount. Marc stays home 1 day a week and in my old job, I used to stay home one day.

As I transition into my new position, I will be working full time and his grandmother will take care of him one day a week. I have plans to maybe go back to a 4-day week sometime in the future. Here in Finland you have the lawful right to do so until your child starts third grade. And, a small allowance is paid by the state until your child turns three.

Hobbies

Marc and Jen’s new house

In whatever free time we have, I try to work out. Running has been a continuous partner for me throughout my life. I did figure skating before my pregnancy, let’s see if I get back to that. Marc enjoys computer games. A new pastime is exploring our new surroundings by bike and trail running for Jen. Just today we found a new playground and other interesting things in our widespread (geographically) village.

Jen and Marc’s Home

Last year we found our dream home situated next to the sea. This is a place for enjoying–hiking in the surrounding forests, swimming in the sea on the other side of the road, doing garden work and renovating the house.

Moving out of the city allowed us to give our son the luxury of exploring nature and having a slower-paced life. The neighbours are great and the community is unusually active. It is a true luxury having an extensive garden with fruit trees and berry bushes. We look forward to having a small kitchen garden. The yard also offers a huge potential for a change from office work. We have grand plans to build a small greenhouse, garage, swing set, etc etc. The possibilities are indeed endless. This summer will bring roof painting and fixing the terrace railing.

Here’s a list of repairs and upgrades we plan to do in the near-ish future:

The AirBnB Potential

Snow-covered Future AirBnB

Our property also houses a small cottage that we have been renovating. Owning an AirBnB has long been a dream of mine and with this set-up, that will be quite easy to realize. The building can also double as my office. Doing the renovations has been a pleasant undertaking, in fact, it surprised me how much I am enjoying it! Let’s see what the next “commercial” project could be.

In any case, I am also looking forward to testing out my landlady abilities this summer. Rough calculations estimate that we could gross about 50€ per night. According to AirBnB I can gross around 500€/month in my area for a house this size, so let’s budget for 300€. We will be paying income tax on this income.

Jen and Marc’s Approach to Finances

Jen and Marc’s son

In a strict sense, we do not budget. We have separate finances and on payday, we both transfer money to our shared accounts for bills. As the main breadwinner I also transfer at least 400€ to our grocery and gas account, which usually isn’t enough. We then sometimes use our personal money to cover the rest. Investments are made at this time as well.

Marc’s savings rate has been low due to studies and parental leave. Now, he is hopefully getting back in the game. We have had a few cost-cutting projects through the years and our costs have decreased. Moving to a big house has increased costs. However, we always have money left in our private accounts when a new paycheck arrives.

Our FIRE journey also set me on the course of shopping for used things. I did not realize how good I have gotten at it. Looking around our house, most everything is used. Our kid is also free to play around as he wishes in his used clothes. This has drastically decreased our spending. We try to keep our grocery costs low, but fail every now and then.

My main goal currently is to not throw anything away. We try to create recipes around what we already have at home and I bring lunch to work most days. We are able to save for bigger purchases in advance and generally have stable finances. But we don’t budget and even though we have a hunch on how big our fixed expenses are, we do not know what the exact number is. Before now, that is 🙂

As for saving and investing, I started that journey relatively late. When I got my first real job at 28 I put a whopping 50€ a month into a special savings account for first time home buyers. It was 5 years later that we opened our first investment account, which is now 6 years ago. Even though we never overspent back in the day, we also didn’t have much left to save. Nowadays, it is another story and we invest a significant portion of our income.

Things That are Different in Finland

There are a few country-specific aspects I thought it good to mention.

Pensions

State pension excerpt

There are no 401K’s or similar tax-free retirement saving options here. We have a public (compulsory) pension system, which in itself is relatively good. However, we have a huge problem with an aging population. Too few new Finns are being born, which means that there is no one to pay for future generation’s pensions. The system is poor since a large part of pensions are paid directly from the current workforce’s paychecks to today’s pensioners. There is no way to opt out of this system. At right is an excerpt from the state pension provider.

Healthcare

Currently the healthcare system is quite good, but big structural changes are coming. As mentioned, our aging population is a big burden. Anyhow, only our son has health insurance and even he could do without it. It is a convenience as it enables him to see private doctors more quickly. My employer also has employee healthcare, which gives access to some basic private health care services. We all have some congenital health issues and the public sector takes care of us quite cheaply. A specialist appointment is just 41€, including all procedures or tests that might be needed before the appointment. I predict we can live for the longterm without private insurance–it’s just an inconvenience.

University

Higher education is basically free in Finland and so we will not be saving any money for our son’s education. I studied for 7 years and never had any debt. I did work in the summers, but have nothing money-wise to show for that. I was a big spender back in the day! We have an investment account for the costs our son will incur in his teens (such as his driver’s license, which costs around 1800 €).

Taxes

Taxes are high in Finland. The taxation is progressive on income, but due to the marginal tax rates, some income bracket groups’ net income might in some instances decrease even though your incomes go up!

Unemployment and Sick Leave

We have quite a small buffer in cash. But unemployment in Finland is quite good. If I lost my job, I’d make about 70-80% of my salary for 500 days, which is higher due to payments to the unemployment fund. If I got really sick, the social insurance institution of Finland would pay some kind of sickness allowance. Prescription drugs cost a maximum of 580€ annually and after that, you pay 2,5 € per medicine package you buy. Hospital costs max out at 683€.

What feels most pressing right now? What brings you to submit a Case Study?

Jen & son going to the grocery store with kick sled

I found the minimalism and FIRE movement in 2017 and worked hard at getting started. I now feel a bit stuck and unmotivated. I think one reason for this is our lack of any concrete milestones. The only fuzzy goal we have is FIRE, which will not happen in the near future. I am also unsure what our FIRE number should be.

We don’t really budget either. I would also like to dip my toes into the pool of real estate, but am a bit afraid. As I’ve thought about what to write in my Case Study I’ve realized that I don’t really know what I would do for work if I retired early. What would I like to spend my days on when I have done the fun stuff, the projects and how would I replace my social life that a regular workplace provides? There doesn’t seem to be that big of a FIRE community in our neighborhood.

What’s the best part of your current lifestyle/routine?

We love the increased opportunities to spend time outside with our son. Every day after daycare we take his tricycle and head out to the shore. We still cannot believe we were so lucky to find a nice house right next to the water! Having nature right outside our door is great and last fall it was lovely to pick wild berries from our own yard. I have enjoyed having several renovation projects to dig my teeth into, and Marc has enjoyed participating in those, but a bit less. This winter we loved hiking on the ice as well and found a bunch of hiking paths in the forest. Marc enjoys teaching Alex new things (or at least everything there is to know about space 🙂 ) He is also the chef in the family and tries out new gourmet recipes as well as makes a Spaghetti Bolognese to die for! Together, we enjoy discussing politics, investments and pondering science/engineering topics.

The financial stability we have built up over the years maybe doesn’t elicit joy but provides a sense of stability and peace of mind.

What’s the worst part of your current lifestyle/routine?

Sales picture from Jen and Marc’s former apartment

Our former walking lifestyle was great! Moving away from the city center and bus routes has forced us to use our car more. We’re also unable to walk to wine bars and restaurants like we did before (before a child and COVID, that is).

I also wish I had more time and energy to exercise and work out (which would give me more energy, I know!). Even though we only work 80% we are very tired in the evenings when our son needs a lot of love and attention. Working life is hard and for me I would love to be more free and not so stuck to the 9-5 schedule. I’d like to have more time (and energy) to work on projects in our garden as well as projects around the house. There are so many projects I’d like to start that I feel like I don’t know where to start. As we work normal jobs, we are not free to take off on trips and such without rigorous planning.

Where Jen and Marc Want to be in 10 Years

Finances:

• Our combined net worth should be at least 600k-800k euros
• Jen would like to own several rentals and/or AirBnBs

Lifestyle:

Career:

• Marc sees himself progressing towards a slightly more lucrative career with more responsibilities.
• Jen sees herself either in a comfortable expert job, working part-time, or in an interesting director’s position working full-time and being near the end of her career.
• We would increasingly like to complement our salaries with income from a real estate portfolio. We would like to buy apartments, row houses, or a cottage to rent out. Another alternative would be AirBnB-ing a cottage by the sea. To maximize profits we are aiming at purchasing fixer-uppers.

Jen and Marc’s Finances

Note: all amounts are listed in Euros (€). The Euro to US Dollar exchange rate as of today (July 16, 2021) is $1.18 to €1.

Income

Mortgage Details

Debts: €0

Assets

Vehicles

Expenses

Credit Card Strategy

Jen and Marc’s Questions for You:

1) Do you have tips/examples on how to divide the journey to FIRE? Having an end-goal of FIRE in 12-15 years seems so daunting.

2) Looking at our budget, do you have any tips for how we can save more money? We don’t have time for small details. The savings have to be worthwhile.

3) I’d like to be financially independent, however as many folks do, I’d still like to dedicate some of my time to some kind of work. How should we go about calculating our FIRE number? Are those of you who have a mortgage including that in the annual expenses for calculating the number? This cost will disappear at some point.

4) We will have some kind of pension (but I’m not holding my breath there). How do we add that into our FIRE calculations, if at all?

5) I feel that entering the real estate market is a bit scary. What are good first and then later steps for preparing and actually entering that marketplace?

6) To the AirBnB owners out there – what are your tips for managing one? Do you have any specific lessons learned or tricks of the trade to share?

Liz Frugalwoods’ Recommendations

Jen and Marc sound like so much fun! They’ve managed to buy their dream home, start their family, and create a lifestyle they enjoy–all without going into debt. Hooray and cheers to that! In many ways, my advice to them today centers around continuing to do what they’re already doing: increase incomes, decrease expenses, look for ways to augment and diversify their investments and enjoy life! I’ll be addressing Jen’s questions out of order, but only because that’s how my brain was working today…

Jen’s Question #2: Looking at our budget, do you have any tips for how we can save more money? We don’t have time for small details. The savings have to be worthwhile.

Sanding kitchen doors in the spring sun

This is a somewhat challenging time for Jen and Marc to do a Case Study because: they recently bought a new home, their expenses are in flux and they’re both transitioning their levels of employment and income.

When everything is in flux–both income and expenses–it’s difficult to make projections. However, the good news is that Jen and Marc now have the Case Study framework to utilize as their circumstances settle out.

Here’s what I suggest they do:

Track Expenses

• Track their expenses closely every month, using whatever system works best for them. I use and recommend the free service from Personal Capital, if that’s your jam (affiliate link).
• In the course of tracking their expenses, they need to remove the previous one-time expenses, such as the fees for purchasing their home, etc. The goal is to get a realistic, holistic view of how much they spend on an annual basis.
• Tracking by month is a start, but the truly informative data points come from annual tracking.
• Jen notes that the “savings have to be worthwhile” and I agree! However, it’s also true that one’s budget is typically made up of a bunch of smaller expenses. Most of Jen and Marc’s expenses are less than €100, but they add up to quite a lot in the end. Sometimes you can get away with a few magic bullet expense cuts, but more often, it’s the accumulation of lots of smaller expenses that get you to a higher savings rate.

Determine Income

• Once their new incomes come through, with taxes and other deductions, record these totals.
• This information, along with a clear expense list, will help Jen and Marc determine how much money they have to work with every month.

Jen’s Question #1: Do you have tips/examples on how to divide the journey to FIRE? Having an end-goal of FIRE in 12-15 years seems so daunting.

In many ways, Jen and Marc are already doing the three things I always advise:

1. Find ways to make life meaningful and enjoyable on the journey
2. Dive into extensive research on what your post-FIRE life will look like
3. Develop a clear sense of what you’re retiring TO, not just what you’re retiring FROM

Marc fishing in a nearby lake

In my experience and opinion, successful FIRE has two components: the finances and the plan. You can’t work towards FIRE with ONLY the goal of quitting your job. You can’t work towards FIRE with only a dollar amount goal in mind. Because one day you’ll reach that number, you’ll quit your job and…. then what? You’ll still be the same person. Knowing what you’re retiring TO is just as crucial an element of a FIRE plan as the financials.

I sense some uncertainty in Jen’s aspirations and I want to point out that it’s perfectly fine to FI and not RE. In other words, you can reach financial independence and choose to continue working–either full-time or part-time or on seasonal, hybrid projects. There’s no FIRE police who will come remove you from your job once you hit your number ;). What FIRE does provide are options and freedom. FIRE frees you up to choose how to spend your two most valuable resources: your money and your time.

Jen’s Question #3: How should we go about calculating our FIRE number? Are those of you who have a mortgage including that in the annual expenses for calculating the number? This cost will disappear at some point.

Picking blueberries a few years ago

So this question will be, in part, calibrated on what Jen and Marc’s income and expenses settle out to be. Without knowing their actual savings rate (or their actual spending), it’s tough to calculate this number. However, those two variables are easily identified. Once they’ve solved for those two factors, there are a number of online calculators Jen and Marc can use to arrive at a sustainable FIRE number. Here are two resources that’ll be helpful to Jen and Marc (and anyone interested in pursuing FIRE):

#1: Early Retirement Now’s detailed, well-researched series of posts titled The Ultimate Guide to Safe Withdrawal Rates.

#2: Engaging Data’s “Rich, Dead or Broke?” calculator, which I’ve gotta say, is pretty much the best name ever for a calculator. Jen and Marc can input their numbers, play around with the variables, and get a pretty good sense of how much money they’ll need to last them for a long and happy early retirement.

To Jen’s mortgage question, as long as they’re still paying it off, it’s still a real expense. Once it’s paid off, they can remove it from their monthly balance sheet. But as long as you’re still paying it off, it counts.

Jen’s Questions #5 & 6: Real Estate Investing + the AirBnB

I think Jen is spot on that real estate investing IS indeed scary. But, she and Marc have a fantastic, ready-made investment: the cottage on their property. Since they already own this thing, I think their instinct to rent it out is perfect. If it were me, I would focus on getting this property up and running. Rent it out, manage tenant transitions, clean in between guests, manage maintence and repairs and… see how it goes!

I’d do this for at least a year before making the decision to buy additional properties. Managing rentals isn’t for everyone and it’s not “passive” income. In fact, it can be pretty active and pretty expensive. That said, it can be lucrative and an excellent diversification for an investment portfolio. This year-long trial period will allow Jen to determine her actual revenue (after expenses) and give her a feel for the work of real estate management.

Jen’s Question #4: We will have some kind of pension (but I’m not holding my breath there). How do we add that into our FIRE calculations, if at all?

Sunset at the beach in the middle of the winter

Unfortunately, I am supremely unqualified to answer this question. Their old-age retirement hinges on their state pension and I don’t know enough about Finnish politics to make an assessment here.

I think the good news is that Jen and Marc have other savings and investments, although no employer-sponsored tax-advantaged retirement accounts, like I’m used to dealing with here in the US.

I wish I could offer something concrete here, but we’re well outside of my knowledge base. I suggest Jen explore this question with Finnish FIRE groups online–I have to imagine someone has done an analysis of this country-specific question.

Summary:

1. Begin tracking expenses and build up a year’s worth of data.
2. Determine their new take-home salaries.
3. From those two data points, figure out how much they can save and invest each month.
4. Proceed with the plan to rent out the cottage on AirBnB. Gather data on expenses, revenue and whether or not they like managing a rental.
5. After a year or so of renting out their cottage, make a determination about investing in additional rental properties.
6. Research the viability of Finland’s pension system and whether or not they’ll need to self-insure their old-age retirement.
7. Play around with the FIRE calculators I listed above to help deepen their understanding of how much they’ll need to save in order to safely retire early.
8. Develop a clear roadmap of what they’re retiring TO after they reach financial independence.
9. Enjoy the journey and keep us posted!!

Ok Frugalwoods nation, what advice would you give to Jen? We’ll both reply to comments, so please feel free to ask any clarifying questions!

Would you like your own case study to appear here on Frugalwoods? Email me (mrs@frugalwoods.com) your brief story and we’ll talk.