Updates from September, 2016 Toggle Comment Threads | Keyboard Shortcuts

  • 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.

    • Financial Independence 12:05 on 2016-12-26 Permalink | Reply

      I keep our financial independence separately from the wife’s pension. More over I actively encourage her to contribute her maximum amount she can at her work pension.
      Pensions are protected from bankruptcy, create her good feeling and allows me to do some real life benchmark. I do not think we will be able to retire any earlier than ordinary people unless something changes dramatically.


      • eurfi 0:04 on 2016-12-27 Permalink | Reply

        I assume the “dramatic changes” have to occur on the side of the expenses. 66k is quite a bit! But I know: This is easier said than done. (A few days ago I learned that our FI expenses will be at least 300 Euros a month higher – I will blog about it soon.)


  • 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.


      • 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.


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