Schnitzel's Journal (located in Germany)

[SchnitzelEngineer]

Hello folks,

my wife and I are both located in the center of Germany (Frankfurt macro area) and new to the ERE/FIRE-topic. After finishing the engineering degrees we started working in a medium size company each. The entering positions in our companies are satisfying yet the career options are limited.

Status: 28 & 29 years old, married, no kids yet, no house yet, Germany
Employment: both working as engineers (<2 Years)
Skills: Engineering, DIY, Cooking, HomeCinema, Gardning
Salary: net ~5,5 k€/month (in total)

Savings Rate: ~50% last year.

Existing Portfolio:
- some company stocks (net worth 15 k€)
- building savings contracts ("Wohnriester", "Bausparverträge"), 3 contracts, total net worth ~22 k€
- ETF funds: net worth ~35 k€
- company pension plan ("Betriebliche Altersvorsorge"): net worth ~2k €
- cash: 25 k€

We discussed the financial topic several times and decided to do individual saving plans (easier for the german tax regulations). The saving rate (3000€/m) is chosen this high to reduce the cash.

Current investment strategy:
- passive index funds (ETFs): 3000 €/month (MSCI World, EM, SP500, Nasdaq, ...)
- building saving contracts: 500 €/month
- company pension plan: 200 €/month

We discussed the financial topic several times and are open minded. We both have different assets in our portfolios.


Why did I register to join ERE?

I'm fascinated by the idea of not working for the rest of our lives (till 67+). In Germany we can assume to live until an age of ~85-90 years. A hopefully realistic aim is to retire in less than 15 Years, at the half of our lives. With the current saving rate this should be no big deal. But in the next years some fundamental changes (kids, house) will hopefully take place. The saving rate will drop significantly to approx. 1300-1500 €/month.

Related with this topic:
I'm interested in diversified "new" investment ideas (REITs, P2P, options) and currently reading much on financial blogs/books. I want to develop and try out some more or less "boring" strategies which work for me.

I want to keep this journal as a record through the next months / years, always looking for some hints/ideas.


Cheers!
SchnitzelEng

[2Birds1Stone]

Welcome to the forums. It sounds like you have a solid plan laid out.

With some creativity and income increase from careers, maybe you can maintain that 50%+ savings rate even with the purchase of a house and building a family. It's quite amazing how your mindset will shift after spending enough time here

[SchnitzelEngineer]

Thanks 2birts1stone.

Following the slogan "knowledge is power" I performed an analysis of the spending behavior of the schnitzel-family. I understood the monthly and yearly spendings. In categorized the expenses as followed:

• rent incl. Additional costs
  insurances
  holidays
  local shops (mostly food)
  family spending mrs&mr schnitzel
  restautant visits
  media subscription (netflix, …)
  federal media fee
  internet
  clothes mrs schnitzel
  clothes mr schnitzel
  individual spending mrs schnitzel
  individual spending mr schnitzel

The total balance after 344 days is feasible. Therefore I will continue the calculations in excel. The result should be some kind of reliable forecast to predict financial situation after future scenarios (first child, the house).

I'm looking forward to learning about more ERE strategies for cost optimization. I suggest the greatest potential in absolute €€ is hidden behind the bullet point "family spending mrs&mr schnitzel".

The individual spendings are closely linked to the acceptance of the FIRE-abition. Therefore I dont want to proclaim a strict limit as long as the saving rate is achieved. Minor optimizations are self evident (cheap cellphone plan, cost efficient, long lasting clothes, limited lifestyle inflation). I will continue reading ERE- / financial independance blogs and forums to find more ideas.

Cheers!
SchnitzelEng

[SchnitzelEngineer]

"individual spending" is not a category, you can categorize better than this!

We follow the 3 bank accounts-model: my account, her account, our account.

We both transfer a share of our monthly income (salary) to the common account. It pays the rent, our food, our other categories. The account has a cash-size that would last one year (unemployment, ...). We dont have to care whether the rent is paid or the insurance fee is charged.

The main part of our money remains on our individual bank accounts. Each one of us invests in index funds, in total ~3000 €/m and the other forms of tax efficient saving-plans.

The whole idea of spending the main amount of money, living on the small flame is a newly learned behavoir. We did not learn this in school nor by our parents. Therefore doubts were omnipresent in the beginning. A vital part of the model uses the fact, that each one of us has a certain amount of individual money available, which one can spend for individual hobbys/interests "play money". This helps us to avoid discussions like "Why did you buy this or that?". We don't have to explain ourselfs for what we do with this money. Examples:

- She wants to buy some wool and knit a woolen hat? GOOD.
- I want to buy some blurays/books? EVEN BETTER!

It's our form of individual freedom, limited freedom, but freedom.

This is meant by the term "individual spending". I don't know how to categorize this in a better way. Any ideas?

[SchnitzelEngineer]

Thanks bigato for your advices. The categories are far from perfect, I know. But I can live with these for the moment. I keep all the original data, so i can reevaluate it later with other categories.
For the moment I learned a lot about our spending. The first 6 months of the record (July-Dec 2018) we lived at two different locations, which almost doubled the cost for the category "rent incl. Additional costs". In 2019 we moved together again.

In the last 6 month quite a lot happened:
- We bought a house (260 k€ mortgage @ <0,88% interest rate) in the new area.
- I tried some alternative investments aside the ETF-portfolios.

House:
The house is a large 1-family-house. The floor plan allows it, that we can fit a small 3-room-apartment in a part of the basement*. Since August we are renovating the upper floor. We plan to move in in Q2-2020.
For a long time it was absolutely clear, that we would build a small house some day. Now we bought a house, which allows that we can bring in ourselves in the renovation process. My wife and I could learn several manual skills in the last months. We drilled holes in the ceiling; slammed with a 5kg-hammer a wall in parts, we dismantled the old water supply. Today we layed bricks and prepared the new electrical wiring.

*This is an hypothetical option, which would cost approx. ~20 k€ for the renovation, electrical and piping work.

Other investments:
There is a incredible amount of material out there: books, blogs, videos, boards, smart-media-groups. After I read the early-retirement-book and the david bach "smart couples finish rich" in the summer holiday I was infected with the "financial virus". My wife read the smart couples book too. She increased her contributions to her saving account.
For further investments her response was some positive toleration. I will give some of them a trial. The aim is to generate a income stream which outperformes the standard boring ETF portfolios. For the long run the income / "cashflow" should come from more or less non-active, safe investments. My personal experience this year:

- P2P / micro lending: 5 eastern european platforms, <3 k€ invested. 120 € revenue (= ~9% p.a.).
- selling stock options: ~10k€ invested, ~800€ revenue (=~20% p.a.)

P2P:
The outperformance compared to the common indices (msci world, msci em, sp500) is measurable, but not that significant, that the risk (potential loss of money) would be justified. Regarding the P2P-Lending I catch myself scolling around and wasting time on these platforms doing (pseudo) microoptimizations. I will reduce my activity to 2 or 3 platforms. Managing 5 is too time consuming. I will give the surviving platforms this year the chance to change my mind.

The stock option topic is very interesting. I learned a lot about the stock market and discussed ideas with like-minded guys. The return is very very attractive. I will definitely keep track on this path. After more months the return rate will be more meaningful.

The amount of money to generate a monthly return of 3000 € (pre tax) is directly related to the yield:
7% <=> 530000€
5% <=> 750000€
3% <=> 1250000€
Therefore every half percent-point is valuable.

[singvestor]

With your skills you could easily triple your salaries when leaving Germany and moving to a country with higher income (lower tax).

[SchnitzelEngineer]

Hello folks,

crazy how fast the time is passing by. The last year - the corona year - whoa, I can't believe how much happened in these months. I'm shocked that my last post is dated on 2019. So I'll give you a short summary of the last ~15 month, for sure I will forget the most details.

Corona:
We did not lost any relatives or friends due to the flew. In fact I only met a very few people who had been infected. In germany we did a pretty good start in 2020, the first wave, was followed by a "lockdown", followed by restrictions of the cultural life, restaurants, ... .

Work:
Luckily my wife and I do both work in the industrial field as engineers, we were both not effected by these restrictions. It did not even effect the daily work in the plant. My wife switched the employer in the middle of the year.

Housing:
In 2020 we continued the renovation on the house. My wife and I learned a lot about construction work, building materials, electric wiring, piping and several renovation topics. Our professional background (engineers) helped to understand. It was pretty impressive to learn about all these manual techniques. We received useful tips and tricks from friends, colleagues and contractors. After performing and "testing" all these several activities we identified specific preferences.
My wife did a great job and enjoyed plastering work. I for myself enjoyed destructive work and eletrical wiring. Both in common we used the work on the house as a compensation to our daily work (mostly working on the computer, doing calculations, organizing stuff).

In 2020 we spend around ~350+ days on renovating the house the year, typically around 3-4 hours each day; adding up to ~2500 h/a. On some weekends friends and family helped. Due to corona restrictions in germany, the most work was done by ourselves.

Around January / February we gave up the flat, we rented before and moved in the house.

Family:
Still happily married to a beautiful and tolerant wife. It was stressful and we fought about this and that. But in the end we grew stronger.

Investments:
- We continued our saving plans (automated monthly investments) on ETFs.
- I failed on reducing the complexity of the P2P stuff. Two of the p2p-lending-portals did not survive the crises. It doesn't matter, whether linked or to fraud; some money is lost. Now the recovery process started; Time will tell, how long these processes will take. My previous instinct regarding P"P was correct, but I did follow my instinct. Shame on me.

The main focus for the investment concept will remain on two pillars:
- Feeding the ETF-saving plans. Its long term orientated (buy and hold portfolio).
- stock options (short term focus).
- repayment on the mortgage (reducing the loan by 1k/month).

The ETF thing is very boring. But it gives pretty reliable basis for calculations. We will keep track.



- - Schnitzel