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  • eurfi 10:06 on 2016-09-08 Permalink | Reply  

    Two Years of Blogging – Lessons from Thinking about FI 

    Today is my two year anniversary. I started this blog exactly two years ago. My first post was a few days later. I learned about the concept of early retirement in July 2014: I stumbled upon a book review of Jacob’s book “Early Retirement Extreme”. And from his blog I also found MMM and 1500 Days etc.

    I was immediately hooked by the concept of saving enough to live from the proceeds. It really changed my thinking. I was tracking my expenses and net worth before, but I was not drawing enough conclusions out of it.

    My biggest lesson in the two years of blogging: Thinking about money pays out.

    I noticed recent yearly net worth gains were around 10k in 2012, 20k in 2013 and 30k in 2014. To recognise the pattern was easy! I made an Excel sheet and projected each year an additional increase of 10k. This would give us 600k end of 2020 and over 1 million in 2024. Our actual savings (from our salaries) were limited, so the additional income had to come from investment gains. At that moment I had around 100k in our brokerage account and about 60k cash in a money market account. There was no way I could achieve those returns with this allocation. So in 2015 I moved the cash into a new brokerage account. And this paid out handsomely. Our net worth gain in 2015 was way above the projected 40k. (There was a lot of luck involved – it just was a fantastic year for my strategies. The same strategies did not work in 2016 at all. Luckily I played it small and later stayed away from them.)

    I’m sure, if I had not made this Excel sheet, I would not have moved the money into brokerage accounts and I would not have had such a spectacular year 2015.

    A big topic for me is onboarding my wife. To achieve the goal of financial independence it is necessary to cut expenses. We spend around 600 Euros each month for pension contracts. This is no longer necessary, if we can live from our investments early. So we have to terminate these contracts. It was a heated topic for a long time. Finally we see some progress there. I hope to do quarterly reviews of our net worth with my wife. (I manage all our finances and investments.)

    This year we started a special savings account were we accrue money for our dream – a camper van. I hope to further reduce our monthly expenses with this account (reducing costs to save more for the van).

    My next area were thinking about money produced results is our dividend portfolio. I aim for a 600k portfolio and 4 % dividend yield. Almost no quality stock has 4 % yield at the moment. So I mostly sell puts with a lower strike price and collect some premiums. I’m already at a yearly return of 16k out of a nominal portfolio size of 235k (average yield 6,8 %). This yield will go down, as new investments will have a much lower yield. Nevertheless the progress is fantastic.

     
  • eurfi 20:13 on 2016-09-01 Permalink | Reply  

    August 2016 – net worth and expenses 

    This month looks like an impressive jump (+8 %), but over 21k of the gains is from terminating a pension contract. I will be terminating another one at the end of the year and two more next year. All of these will lead to around 600 Euros less in expenses! We do not need this money with 65, we need it now. The less we spent, the more we can save and the earlier we can reach financial independence.

    • brokerage accounts 280.6k (+0.9k)
    • ETFs 8.7k (+0.8k)
    • cash 59.7k (+34.9k)
    • alternative investments 19.9k (-11.0k)
    • taxes -27.3k
    • total 341.6k (+25.3k) [+8.0%]

    My goal for the end of the year is 360k. This means I need to make around 4k each month with our investments. This is possible, but the market has to cooperate.😀

    Monthly Expenses

    • January 2.8k
    • February 2.6k
    • March 3.4k
    • April 3.7k
    • May 3.3k
    • June 3.2k
    • July 2.9k
    • August 2.6k

    August was a quiet month – I like it like that. We bought some stuff, so even below 2.5k would have been possible. We have a vacation coming for September (and a lot of driving), so I’m afraid we might be over 3k again.

    Camper Van Saving Account

    • July 2.2k (monthly savings 37 Euros)
    • August 2.6k (monthly savings 165 Euros)

    Like I hoped last month, this month our no-longer-expenses have 3 digits (almost 165 Euros). The next big jumps will come in 2017.

     

     
    • spaarolifantje 22:59 on 2016-09-02 Permalink | Reply

      Are there disadvantages to terminating pension contracts? Do you have to pay fees? Or lose tax benefits?

      Personally, I’m in the Netherlands and I’m using my retirement investing options to fund my life after official retirement age, because using those accounts gives me nice tax benefits (42% of the investments are returned to me at tax time). Besides that, I also invest outside of retirement accounts to fund my life before official retirement age.

      So I see my retirement as two time periods: one before official retirement age, to be funded from regular investments and savings, and one after official retirement age, to be funded by social security and my official retirement accounts.

      Like

      • eurfi 10:59 on 2016-09-03 Permalink | Reply

        These were private contracts, a blend between investing and insurance. For a lack of a better word I called it “pension contracts”.
        They have a very high fees, so it was a mistake signing them in the first place. But this was years ago and I didn’t know better back then. Today I would never sign them in the first place.
        The gains were tax free, but what benefit is this if the gains are minuscule?

        I could approach it like you: early retirement and regular retirement. I’m aiming for not touching principle. So I would like to generate 2k per month in income, without selling stocks or ETFs. Then regular retirement income (which we will also get) is nice, but not important. I would rather have the money now, instead of in 25 years.

        Like

  • eurfi 22:46 on 2016-08-22 Permalink | Reply  

    Dividend Portfolio – Part 2 

    Last month I started my Dividend Portfolio using options. Since then I sold puts on VZ, VFC, TGT and GM with annualised yields between 4.6 % (VFC) and 7.9 % (GM). This yield is higher, if my strike price is nearer to the current stock price. All these options expire in January 2018.

    Today I sold puts on PSX relatively close to the money (stock at 77, strike 75) and with a much shorter duration (October 2016). The annualised yield is much higher (16 %), but I can only do this for stocks I would buy for the current price (because there is only little distance between the current stock price and the strike price of the option). Currently I do not find a lot of stocks that I consider attractive priced.

    Before today’s transaction my annualised yield of the whole portfolio was 5,6 % and I needed 430k to achieve my goal of 2k a month with this yield. After today’s transaction my annualised yield jumped to 7 % and my needed investment down to 340k. What a difference!

    Of course, if I can not reach the same yield in October, these numbers will go back to the previous level.

     
  • eurfi 20:26 on 2016-07-31 Permalink | Reply  

    July 2016 – net worth and expenses 

    This month would have been slightly negative. But I decided to pull an accounting trick and am now slightly positive.

    So far I did not track our IKEA and Amazon voucher balances. The Amazon one is from this month, but the IKEA balance is from December 2014. So I adjusted all prior months in my spread sheet (but not on the web site). Last months net worth goes from 315.1k to 316k.

    • brokerage accounts 279.7k (-2.4k)
    • ETFs 7.9k (+1.0k)
    • cash 24.8k (+3.2k)
    • alternative investments 30.9k (-2.2k)
    • taxes -27.0k
    • total 316.3k (+0.3k) [+0.1%]

    I sold some of our alternative investments (very illiquid). Rising stock prices were a pain to my complex option positions. Each share holder smiles, and I can not sleep. This lead to my renewed interest in a dividend portfolio.

    Monthly Expenses

    • January 2.8k
    • February 2.6k
    • March 3.4k
    • April 3.7k
    • May 3.3k
    • June 3.2k
    • July 2.9k

    Finally a month below 3k! Let’s repeat it in August.

    Camper Van Savings Account

    • July 2.2k (monthly savings 37 Euros)

    The idea behind our Camper Van Savings Account is explained here. If all goes well, the monthly savings for August will have 3 digits. These are regular monthly expenses that we cut. My primary goal for this savings account is to reduce our monthly expenses. We are earlier free if we have a smaller footprint.

     
  • eurfi 22:13 on 2016-07-29 Permalink | Reply  

    Starting a Dividend Portfolio 

    My idea of a dividend portfolio is as old as 2014. Back then I wanted to use options to build a dividend portfolio. To buy stocks cheaper than the current price you can sell put options (cash-secured put) and when you have them you can sell calls to increase yield (covered call).

    I had this idea in summer 2014. A few weeks later I met a guy who was doing all of this already (selling options on dividend growth stocks). This gave me a boost. But there are a lot of dividend paying stocks and most of them seemed expensive in 2014. So I just bought a few REITs and concentrated on other things.

    Of course, most stock prices of 2014 seem like a bargain now. I remember McDonalds to be around 80 – now 120.

    But a recent encounter made me think about this again and I started building a dividend portfolio. My goal is to have a portfolio of $600.000 (I mostly invest in US stocks) which should yield $2.000 a month. I’m not so fixated on the portfolio size, the yearly/monthly return is what counts. And Dollar is not Euro, and I also have to pay taxes. So, to really live off it, it has to be more. But if I can bring it to $2.000, I can also bring it to $2.500 or $3.000. I’m willing to use leverage.

    I’m already planning with a portfolio size of $600.000 and 40 – 50 different stocks. So a normal position is 2 – 2.5 %, which is $12.000 – $15.000. This is necessary as I need to buy round lots (usually 100) to sell options. Selling 1 options contract usually means 100 shares.

    I started this week with AAPL (Apple), KO (Coca Cola), MCD (McDonalds) and BP. If you don’t know about options, the following paragraphs might make no sense – just stop reading.😀

    For AAPL I sold 2 puts with strike 80 and expiration 01/2018. This is an options with a very long duration (1.5 years). These are called LEAPs. I got $6 per contract. If AAPL falls dramatically, I will have to buy 200 shares for 80 ($16.000). I got $1.200 for it. If all goes well I will wait till 2018. I might buy them back when they are at $3. The current price is around $4.5 (AAPL has increased about $7.5 so far). I will not get dividends for this position, as no stocks are involved.

    For KO I bought 300 shares and sold 3 calls with strike 47 and expiration 01/2018. The stock price was at $43.4 and I got $1.4 for the calls. So my entry price is $42. And the maximum I can gain is $5, because if KO raises above $47 (in 01/2018), I have to sell it for $47. This is my obligation as call seller. KO pays a dividend of $1.4 each year, so my dividend yield compared to my entry price of $42 is 3.33 %. The normal yield is 3.22 %. So this is not a big difference.

    MCD is similar to AAPL. I sold 2 puts with strike 100 and got $5.2 each. This is a yield of 3.5 % ($5.2/$100/1.5 years).

    My last position is BP. Similar to KO I bought 300 shares and sold 3 calls. This time the strike is lower than the actual share price: 32 (BP was at 34). I got $2, so my entry price is $30. I assume I have to sell BP till 01/2018. So the yield is about 12 %.

    I’m still looking for a good way to keep track of these trades. Also, I have to build a list of good candidates. It is not so important that the stocks are cheap as I can sell put options at a lower price and still make money of them. I just have to stick to quality stocks, because for selling puts the upside is limited (to your initial premium you receive) and the downside is unlimited and can be a lot more than the premium.

     
  • eurfi 13:42 on 2016-07-16 Permalink | Reply  

    Will this savings account convince my wife? 

    In a lot of couples pursuing FIRE one is more “on fire” than the partner. This is also the case for us. My wife is not against the idea of early retirement, but she would like to continue working. Her spending is sensible, but to cut certain expenses is a hot topic. From time to time I bring these topics up – constant dripping wears away the stone.

    A few months ago I had an idea. We both want our next car to be a camper van. We almost bought one a few months ago. My idea was to open a separate savings account and transfer each month the amounts of all saved expenses. When we cancelled our sport club membership, we now transfer the exact same sum each month to our new savings account. Also, when we sell something on Ebay (or our local equivalent of Craigslist). Or when one of us earns extra money.

    From the beginning of 2016 we saved already over 2.000 Euros. Saved expenses is just below 40 Euros (one month of sport club membership), but this will hopefully grow. I hope this will motivate my wife to look for (regular) expenses we can cut.

    How did you bring your wife onboard?

     
    • Financial Independence 13:27 on 2016-07-29 Permalink | Reply

      I found it difficult to get her interested in transferring money to a dedicated account or keep accurate track of it. I simply do it myself. What we do is to have our expenses track every month and see how our savings grow, if they do.
      the challenge is to agree of what needs to be cut. sometimes she gets quite excited and could quickly cut to achieve the goal sooner. As this is not sustainable we need to negotiate what we want together.
      I keep reminding her that we are still lucky to have option of savings, not everybody can do it. the thing is to stay happy on the way to the goal.

      Liked by 1 person

      • eurfi 20:30 on 2016-07-31 Permalink | Reply

        Has she also the goal to retire? My wife doesn’t want to quit her job. But I assume she would want to if I do it (and have lots of fun with the kids).
        Why not use “good mood” to agree on cutting expenses? I assume you know what the most useless expenses are.

        Like

        • Financial Independence 1:54 on 2016-08-03 Permalink

          Looking at our savings rates (which is likely to slow down this year for the next 4 years) it is unlikely that either of us would be able to retire or achieve financial independence to maintain current life style. Back in 2010 i was dreaming of retiring based on 7% return a year. This has not been the case and math is an awkward thing – I can actually see when I could possibly get there based on the past progress. I will be 65-70 at the time.

          I am also pondering on example for the kids. It is joy to be around them when they a little, but later in life they would like to see a role model. Sitting at home on a modest income is probably difficult to do. I keep saving as much as I can do comfortably and having this nest egg will keep my mind at piece.

          Liked by 1 person

  • eurfi 23:38 on 2016-07-11 Permalink | Reply  

    Goals 2016 – half year report 

    After three months things looked great. All goals seemed achievable, I even added another goal (3 nights outdoors with my oldest kid). What a difference three months can make!

    Let’s recap my goals:

    • Yearly expenses below 36.000 Euros (average of 3.000 Euros per month).
    • Change in work situation.
    • 100 Euro per month side hustle (project Escape 9 to 5) in December 2016.
    • 24 blog posts (average of 2 per month).
    • Spend 3 nights outdoors with my oldest kid.

    Our monthly expenses have been way above 3.000 Euros per month over the last three months. Right now, our yearly expenses point to 37.6k.

    I still work 3 days a week, but so far I did not use my free days fully to my advantage.

    This leads to my next goal (my side hustle). I completely lost my momentum. The number of users increased nicely, but still on a small scale. I have over 30 users now, but only a handful of them are using it regularly.

    Also, my number of posts (usually 2 per month) slowed down. So what once looked easy is now also behind schedule. But from all the goals this is the least important one.

    I still have not spent a single night outdoors. Even camping in our back yard would count – but I just haven’t done it.

     

    But not all is lost, our net worth progressed nicely. And, from this low point things only can improve.😀

     
  • eurfi 23:29 on 2016-07-03 Permalink | Reply  

    June 2016 – net worth and expenses 

    June was similar to May. Both months showed a nice gain.

    • brokerage accounts 282.1k (+9.8k)
    • ETFs 6.9k (+0.3k)
    • cash 20.7k (+1.4k)
    • alternative investments 33.1k (+0.5k)
    • taxes -27.7k
    • total 315.1k (+9.4k) [+3.1%]

    Monthly Expenses

    • January 2.8k
    • February 2.6k
    • March 3.4k
    • April 3.7k
    • May 3.3k
    • June 3.2k

    Our shopping spree continued, this month in cloths. On the way back from our vacation we stopped at an outlet mall. We spent around 400 Euros. Full retail price was over 900 Euros.

    Escape 9 to 5

    I have completely lost my momentum and did only very little in the past two months. Also, my posting frequency dropped to the bare minimum – one net worth post per month. There might come a second article in July as I have something to talk about…

     
    • No Nonsense Landlord 15:41 on 2016-07-06 Permalink | Reply

      WOW, that is a lot on clothes. But at least you can save up all the clothes, and cash them in at retirement. The clothes should be worth quite a bit more in a few years…

      Like

      • eurfi 21:52 on 2016-07-06 Permalink | Reply

        Mmh, not sure I understand you correctly. I do not think clothes rise in value. They are basically worthless once you buy them. I see this with our kids clothes we buy on flea markets: 1 Euro for a retail price of 10 Euros.

        Like

  • eurfi 22:18 on 2016-06-01 Permalink | Reply  

    May 2016 – net worth and expenses 

    The taxes are back! For the first time (month) this year my tax liability has grown. This is good news in so far this means I’m in positive terrain.

    Also, this is the first time for our net worth to be over 300k! My goal is to never go back below it.😀

    • brokerage accounts 272.3 (+30k)
    • ETFs 6.6k (+0.6k)
    • cash 19.3k (-20.0k)
    • alternative investments 32.6k (-0.4k)
    • taxes -25.1k
    • total 305.7k (+7.6k)

    I transfered 20k from cash to brokerage.

    Monthly Expenses

    • January 2.8k
    • February 2.6k
    • March 3.4k
    • April 3.7k
    • May 3.3k

    Lately I seem to be on a shopping spree that started in March. June was a very inexpensive month last year. Unfortunately we will not be able to repeat that – there is at least 600 Euros (additional) expenses for a vacation.

    Overall it does not look good for our yearly goal of 36k expenses.

     
  • eurfi 20:53 on 2016-04-30 Permalink | Reply  

    April 2016 – net worth and expenses 

    Towards the end of April I was slightly positive with my investment results (over the year), but stronger moves on the last two trading days pushed me again into red. What a contrast to 2015! So far it is a very tough year on the stock market.

    When you are looking at the net worth you won’t see this trouble – it is at all time high. Our monthly savings of 1,500 Euros are enough to make our number climb. But from May on we will save less, because my income drops (like mentioned in my last post).

    • brokerage accounts 242.3k (-18.4k)
    • ETFs 6.0k (+0.7k)
    • cash 39.3k (+21.3k)
    • alternative investments 33.0k (+0.5k)
    • taxes -22.5k
    • total 298.1k (+4.1k)

    I transfered 20k from brokerage to cash, this makes it a small gain of 1.6k for investments.

    Monthly Expenses

    • January 2.8k
    • February 2.6k
    • March 3.4k
    • April 3.7k

    April was a very expensive month. The most annoying expense was a 700 Euro car repair bill (we will change the workshop). Another 300 was from upgrading our Wifi equipment. I was fed up with the poor reception in our house.

    Escape 9 to 5

    I did not reach my goal for April. I wanted to build an initial version of a bigger feature. I made progress, but not enough. Still I have less than 10 users and only one active user! Initially I wanted to use June for marketing and increase the user count to 50. I might change my plans and try to increase my user base already in May.

     
    • Financial Independence 1:36 on 2016-05-03 Permalink | Reply

      Hi Eurfi,
      I always admire people who are willing to spend extra time and resources to pursue a dream or an idea, such as going to work 3 days a week and have more time to the personal project. That is very brave, it is easy to do when one is financially stable and quite another thing when you are working for living.
      Still you have 9 times of your annual expense as savings. This is truly good achievement. We have almost paper walls in our house, so wi-fi router in the kitchen covers two stories and every room of the house.

      Like

      • eurfi 7:54 on 2016-05-03 Permalink | Reply

        We have reinforced concrete floors, so Wifi reception is very bad. But the new gear works really well.
        Today is one of my free days – and I’m working on my software project. And I’m also getting the kids earlier out of child care.

        Like

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