As the government is providing for pensions in Belgium almost everyone I talk to who is a regular employee thinks they don’t need to worry about this. Everyone around me thinks they only need to purchase a house and get it paid off before they are 67.
They probably are right up to an extend. But if you want to have a really comfortable pension or retire early, its quite useful to have some extra change.
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So how should you plan for EVERY age to live a secure and comfortable life?
15 years old
Savings: 0 EUR
The main thing you want to do here is find your first student job. You are allowed at age 15 to earn about 1072 EUR per month, but that would be dropping out of school. Working to much could also affect other activities or creativity.
But I think working about 4 hours / week at 10 EUR per hour, thus making 160 EUR per month or 1920 EUR per year should be possible. You should try to save about 400 EUR per year off this. This is not going to be easy, and I admit it depends a lot of how much your parents support you.
Also use the next years to think about your career. You want to avoid turning 18 and having no idea what you want to do next.
Most likely your parents will already have opened a savings account for you, but if they haven’t then this is what you should do first. You should get familiar with online banking and start tracking how much you save and spend.
18 years old
Savings: 1000 EUR
The main thing will be is that you arrive at 18 years old debt free and that you got to know the first layer of the financial system. At the age of 18 a must read for you is the Millionaire next door a book that is also listed in my recommendations. This could change your life.
Some people will have already have businesses ideas at this point, but I would say the large majority will either start to study or start working. Getting a degree does not always help with your job, but it could really open some doors at the start of your career and statistically it will make you more money.
If you are starting to study you are allowed to work virtually tax free 475 hours per year. You should try to max this out as much as possible making you 4750 EUR per year.
Since you are now entitled to opening a brokerage account this is what you should do next. Try to invest 200 EUR per month in a broad accumulating ETF. This is a minimum amount you should invest from 18 up to 67. It will make sure you are a millionaire by 67 and since indexes just follow the world market it also means you get familiar with the stock market in a very safe way. We will call this fund our FIRE fund for now.
Beyond that 200 EUR try to save as much as possible and start building an emergency fund. This emergency fund will help both with emergency’s after you graduated, but also with your future rent or a downpayment for a house. Lets assume for now you can save an additional 25 EUR / month. Nobody said it would be easy but hopefully reading the millionaire next door will inspire you to do the right thing.
23 years old
FIRE fund: 15.000 EUR
Savings: 2500 EUR
Housing: living at home, co-housing or student housing
By this age you will have 17500 EUR Net Worth.
This includes about 15.000 EUR in your FIRE fund that compounded for the last 5 years and 2500 EUR in your emergency fund.
By now you will be approaching graduation, you will need to look at finding a job and look at living arrangements. You absolutely need to avoid that your money will be drained on high rents at this point.
What you should be looking at is:
- Live for a few more years with your parents (at this age its not so uncommon)
- Continue to rent your student housing for 1-2 more years, you could even inscribe for just 1 course at university to make sure you are still a student. You will saving on housing but you can also enjoy a few other benefits
- Look into house sharing opportunities
You are at an age where nobody expects you to live in a fancy house or apartment. Your friends probably don’t mind to visit you with 10 at a time in a small room.
Also take this chance to see some of the world. At this age you probably don’t mind spending time on a 20 hour flight and spending the night in a 10 person hostel room with strangers, so you could travel cheap. Also consider to work abroad for a few years to expand your horizon.
The goals you need to reach before turning 30 are:
- Getting that first deposit for a house or apartment
- Continue to invest at least 200 EUR per month in your FIRE fund
- Getting a job, keep in mind the average wage in Belgium at age 23-30 is about 28.000 EUR / year or 2300 EUR / month. The most important is to get a job that will give you experience to build your career.
- On top of the 200 EUR you are investing in your FIRE fund, try to put 200 EUR / month away in a high savings accounts to save for real estate. More if possible. Its not going to be easy, but at this point in your life its just very important to live frugal, as your laying the foundation for the rest of your life
- If you get a company car…great, if not then avoid buying a car, if you do housesharing this will be in the city and you really don’t need a car there. Cars are a huge expense, avoid them if you can.
30 years old
FIRE fund: 50.000 EUR
Savings: 20.000 EUR
By now you will have 50.000 EUR in your FIRE fund and you will be seeing the first effects of compound interest. Additionally you will have enough saved up for a deposit (20.000 EUR) for your first real estate purchase. You will want to get the longest loan possible and the lowest deposit the bank offers.
Doing your first purchase will allow you to take advantage of the tax benefits the government offers to first time buyers. By extending your loan over 30 years you will be able to maximum leverage out the total value of your house. You should be looking for something you see yourself living in for at least 5 years ideally, but mind your budget, and don’t be to picky.
It will be tempting to just take out everything from your FIRE fund to dump it into the house. Re-read the millionaire next door before you decide to do this. Remember this FIRE fund is you ticket to reaching millionaire status.
If you are starting a family soon, then pick something out of the city, you will get more size for value. Again do not go over budget, your children most likely will not care or notice what their house looks like.
Remember to get some quality time with your family. Don’t overwork, they will enjoy you spending time with them in any form.
If you don’t have a hospitalization insurance from work, you should get one now. At this point it will be much cheaper then when you get it at 67 when you really need it. Take one that is at least valid in the whole EU in case you want to relocate at a later age.
Your goals for the next 10 years should be:
- Focus on career and increasing your earnings in that area
- Keep an emergency fund for about 1 year (2 years if you have children)
- At this age you probably can’t get away with not driving a car anymore. Buy a second hand, well known safe brand that is known to keep its value, for example the VW Golf
- Buy your first real estate according to your budget
- Invest minimum 200 EUR / month in your FIRE fund, but invest aggressively anything you can spare extra into this fund
- Get a hospitalisation insurance
40 years old
FIRE Fund: 143.000 EUR minimum
Savings: 1-2 years of emergency savings
Housing: home owner
At this point you might want to look into upgrading your house. You should have already 10 years old principal / interest in your current house and have a comfortable savings account. Your wage should also be higher then before, and if you have a family your children might be reaching an age they are more fond of privacy.
I would say its again fine for to for a 30 years loan. In 30 years your FIRE fund and pension will give you a comfortable income to make sure this is actually quite low.
Should you not require a bigger home that’s even better, as this will most likely enable you to retire much sooner then the Belgian official age of 67. In this case aggressively increase your FIRE fund investments.
Also remember to enjoy life at this point you will be secure enough to splurge from time to time.
I would also at this point try to aim for a 2 years emergency fund
50 years old
FIRE fund: 347.000 EUR
Emergency savings: 2 years
Housing: home owner
Depending of how your life went, at this point you could be looking into retiring early. 347.000 EUR is just the minimum you will have if you kept investing 200 EUR per month, but if you managed to invest more ages 30-50 then you might have grown high enough to consider retirement before the official age of 67.
Remember if you are retiring you need to be able to live from 3.5% / year of your FIRE fund. If its at 347.000 that is only 12.000 EUR per year. There is no capital gains taxes fortunately, but at age 50 it will not be enough, but you will most likely reach the
Don’t worry if you are not, with your own home owned and 347.000 EUR in your FIRE fund you are already doing better then probably 90% of the Belgian population.
Prepare for the 500.000 EUR FIRE fund milestone coming up and I would suggest to also celebrate this milestone by splurging on a fancy vacation.
If your children are leaving the house focus on getting hobby’s, you want to avoid dropping into a big whole once you retire.
Consider to extend your emergency savings for 3 years, this way you will be safe even during a prolonged crisis in the market, and it will allow you to leverage on market opportunities.
60 years old
FIRE fund: 788.000
Emergency savings: 2-3 years
Housing: home owner
At this point 788.000 EUR (before inflation!) might be enough to live off the next years. This will give you about 15.645 EUR to live from per year at current value when we take inflation into account. Your house might already be paid off by now, or the loan amount to be paid off will be so small compared to inflation that you can easily bridge the gap.
You will only need to be able to bridge the gap to 67 (or who knows what the retirement age is by then), but you do want to avoid your FIRE fund is decreasing, that’s why I would suggest to stick to the 3.5% rule. You will need this FIRE fund to keep living comfortably after 67 as well.
At 67 you will get a government pension and perhaps a company pension coming your way.
Remember if you had a hospitalization insurance from work you will need to extend it. This is really important.
- Look into retiring but don’t use more then 3.5% of your FIRE fund / year
- Build up your emergency fund to 3 years
67 years old
FIRE fund: 1.374.000 EUR
Emergency savings: 3 years
Housing: home owner
Welcome to the millionaires club. At this point you will have retired, your house will be or will almost be paid off and you will have access to both the government pension and your work pension. When they pay out your work pension make sure to put it all into your FIRE fund.
If you waited to retire until now it means you have reached Millionaire status. This will give you 48.000 EUR to live from or 24.000 EUR accounting for a 2% inflation on top of around 18.000 EUR of government pension. This will give you a VERY comfortable pension allowing you to travel and basically do anything you feel like doing at this point.
Remember to stick to the 3.5% rule when it comes to your FIRE fund. Who knows someone might invent eternal life and at this point you will need that FIRE fund to live from.
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