Our Plan To Retire Early Before 40

Participate in our experiment as we try to unshackle and gain financial independence before we reach the age of 40 in a country where that is very difficult. Where inflation has historically averaged around 6% and gone up to as high as 18% during the financial crisis only a few years ago.

The time frame is 6 years, as we are currently both 34 years old, one of us is Icelandic, the other one from the US. We live in Iceland. A micro nation with capital controls. That means we can’t move our money out of the country to invest in international stock markets. The best mortgages you can get in Iceland are at around 3.65%. This is the interest rate on our mortgage. But there’s a catch. Mortgages with interest rates like that are inflation indexed, calculated monthly and linked to the CPI (consumer price index).

That means that every % of inflation gets added to the mortgage interest. If inflation is at 2.1% (like it is right now) then our mortgage is effectively at 5.66% – but it’s not quite so simple, and in fact it’s far more insidious. You don’t pay the added inflation percentage right away, it gets deferred and added to the principal. Your inflation adjustment repayments are also inflation indexed, very low at the beginning, gargantuan towards the end. This means that throughout more than half of your mortgage’s lifetime, the principal is growing, not shrinking! Oh and unlike our friends in the US (and perhaps elsewhere), interest payments are not tax deductible.

I hope you enjoy reading about the wacky financial reality of people in other parts of the world. We will be focusing on everything we need to do to reach our financial freedom goal, considering all the constraints of living in Iceland. Many of the issues are shared with people in other parts of the world such as the US, but some are very unique to Iceland, but entertaining and interesting none the less. We will try to explain them so that everyone can understand them, also taking historical reasons and underlying cultural and practical reasons into account.

We will also be talking about our many side projects, many of which stem from us trying to save money and at the same time develop skills and experience with working with our hands. We try to do as much ourselves as possible. The reason is not just to save money, but mostly to gain experience and confidence and most importantly, independence. To be able to take an idea through to reality without needing to depend on external services. These projects include stuff like home brewing (our sparkling hard cider is really good), gardening, construction, house design, pole building and more.

Before ending this post, and future posts until we reach our goal, I’m going to share with you our current assets and liabilities situation as a sort of track record or snapshot in time of how we are doing. Feel free to comment and ask questions about our composition.

  • Assets: $459,167
    • Real estate: $455,506 / 56,938,190 ISK
    • Cash Savings: $3,559 / 444,867 ISK
    • Stocks: $102 / 12,750 ISK
  • Debt: -$135,150
    • Mortgage: -$134,122 / -16,765,283 ISK
    • Credit Cards: -$1,028 / -128,511 ISK

Sum: $324,017 (Down 0% – First post)


2 thoughts on “Our Plan To Retire Early Before 40

  1. Even though the debt is paid off, which include interest you might owe,
    ones retirement capital will be used up and have a lesser amount of funds that may grow for ones future As a result it can be a terrific boon for those who have
    poor credit historical past.

    1. Thank you Christine. We are aware that money spent on a mortgage is money -not- spent on savings but I ask; what should we invest in? With capital controls we are stuck on the island. With the domestic stock market’s history, I think it would be a terrible idea to invest in stocks, leaving only bonds and savings accounts. Also keep in mind that we are paying down a mortgage on real estate that we are renting out.

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