For years, frugalist Oliver Noelting pursued the plan to have financially at the age of 40. Then he became a father – and set new goals for himself. What remains of the dream of financial independence?
When Oliver Noelting started his first job as a software developer after graduating, he couldn’t afford a car or a large apartment. Nor did he waste a thought on expensive vacations, flat-screen TVs and other material luxuries. Instead, he made a plan: If he only spent the bare minimum every month and invested the rest in the capital market, by the age of 40 he could have enough money to never have to work again.
Frugalism is the name of the idea of being financially secure through extreme saving at a young age. It comes from the USA, where a movement called “FIRE” (Financial Independence, Retire Early) has emerged, whose members dream of leaving the hamster wheel working life prematurely – and who exchange information about it in blogs and forums.
Oliver Noelting has been describing how the path to financial freedom can work in Germany for almost six years on his well-known blog frugalisten.de. There he gives detailed insights into his daily income and expenses as well as his savings and investment strategy. This envisaged simply continuing to live like a student despite a good salary and putting 70 percent of the work income aside. Noelting wanted to save a fortune of 425,000 euros by his 40th birthday – and from then on to live on this money. A master plan that many blog readers took as inspiration to work towards financial freedom themselves.
“Retirement at 40 is dead”
A few months ago, however, Noelting shocked his frugalist community with a confession: “Retirement at 40 is dead,” wrote Noelting in a blog post. In it, the now 32-year-old explained why he was moving away from his goal of saving like a berserk up to the age of 40, in order to then go into early retirement, and from now on pursuing a more flexible approach.
The main reason is as simple as it is human: Noelting has become the father of a young daughter – and that has also shifted the priorities of the staunch frugalist. “Simply continuing to save up to a fixed amount X suddenly seemed arbitrary to me,” explains Noelting in an interview with the stern. He wanted more free time with his young family, and cut working hours and thus income and monthly savings rate. “My daughter is now small and sweet. I probably benefit more from a reduction in hours or a few months of parental leave than I would have the entire day off at 40,” says Noelting.
Starting a family has also changed something on the expenditure side. In addition to baby stuff and daycare fees, the move from the 2 to 3 room apartment within the apartment building in Hanover was due in the spring. In addition, the family of three recently owns their own car. And the fact that Noelting also works on a voluntary basis as a treasurer for the parents’ initiative that runs the crèche is fun for him, but of course he doesn’t pay into the account either.
So is the idea of financial independence and the ultra-early retirement you have developed yourself just an illusion that cannot be combined with normal family life? Has Noelting’s experiment on frugalism failed?
It will continue to be saved
Noelting considers this interpretation to be “a major misunderstanding”. He said from the beginning that his plan could change with the living conditions, for example if family came into play. For him, financial independence is no longer a fixed point that you can achieve or not. Rather, he understands the big goal as a direction in which one is moving and from which one can benefit while on the go. “The more money I have saved, the more freedom I can treat myself to,” says Noelting.
His account currently stands at 180,000 euros and despite the joys of fatherhood, the amount should continue to grow. Noelting works 24 hours a week as an employed software developer at a company for online tax returns and around 20 hours a month as a freelance programmer. Since the family still lives comparatively spartan and girlfriend Joana has also started to work again, Noelting was able to increase his savings rate again recently.
Noelting can currently set aside around 60 percent of net income, around 1200 euros a month. His investment strategy is amazingly simple. The money does not flow into Bitcoins or other highly speculative bets with supposed miracle returns, but rather shoddily in ETFs. These are broadly diversified passive funds with which the risk of price fluctuations is lower in the long term than with individual stocks. Eighty percent of Noelting’s assets are in ETFs, especially stocks, and to a small extent in government bonds, real estate REITs and commodity futures. The rest is in the overnight deposit account for security.
The interim corona crash last year, which also tore Noelting’s depot deep into the red, did not make him nervous. In the meantime, the stock exchanges are posting record levels again. How is Noelting’s plan now after he canceled his retirement at 40? Working towards retirement at 45 or 50? He prefers not to commit himself to a specific age, nor to the question of what comes next: no longer working at all? Work less? Take a sabbatical and travel around the world? Everything possible. “At the moment I can well imagine that in a few years I will organize my working life in such a way that I have completely free time during the children’s vacation periods,” says Noelting.
In order to have such options, Noelting also recommends frugalism to people who from the outset do not even set the “retirement at 40” as their goal. Ultimately, frugalism means, above all, a simple, humble life. Those who also earn well can dream. Noelting’s tip for all young professionals: “Go full throttle until you have the first 100,000 euros.” This means: working hard for a few years, gaining valuable qualifications, earning a lot – and putting every spare euro aside right from the start in order to take advantage of the compound interest effect. Then really only life can get in the way.
Frugalist Noelting also has a few brain teasers to solve when adapting his retirement age 40 strategy. Because so far he has only pursued his master savings plan for himself. He and his friend Joana have separate accounts to this day. But now both of them not only share the apartment, but also the responsibility for a child. In addition to shared expenses, this also brings with it questions such as: who can work how much, who is backing off professionally? Currently, Noelting is paying his girlfriend, who spends more time looking after children, a kind of monthly loss of income, but things are getting increasingly difficult to figure out. Drawing up a fair financial plan that works for the whole family will therefore be Noelting’s next project.