Will's journal

Where are you and where are you going?
Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

The grandfather of my GF passed away half a year ago and her grandmother has been living in a nursing home ever since. Together with the father of my GF we are considering buying their house, 50/50. We would do some small renovations and rent it out. Reason for doing it 50/50 is that the father of my GF is close to retirement and cannot carry a too large debt (he's very financially literate but was not very frugal during his life). For us it would be really helpful to have a co-owner living close to the rental who knows local regulations, since it is situated abroad in Germany, 200 miles from our place but only 5 from his. The house is cheap for its location and you save a whole bunch of taxes when you sell your house to your (grand) children in Germany. I would need to marry my GF though for this, which might be one of the most unromantic reasons to get married...
Still not 100% sure about the plan though, it would eat up some of our capital and only yield 3-4% per year including all costs but excluding potential appreciation. Added benefit is that we might have (half) a house in which we could live should we ever decide to move to Germany. Buying it might be worth it for the sole reason of getting rid of some unnecessary cash we have on our savings accounts which is collecting more dust than interest.

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

Follow-up on the rental purchase:
We decided that we are going to buy the house together with the parents of my GF. Since a couple of years, my parents have been wanting to gift me a significant sum for the purchase of a house. They were even mildly irritated that we haven't bought a house yet in the grossly overvalued market where we are living. I just want to use their money in the most efficient way. Though the tax rules with regard to gifting money for a house in which you are not going to live yourself are less friendly, they can still contribute significantly without paying more taxes. At least the housing prices in the region of Germany where we will be buying are a bit less inflated, but not cheap. The house will cost around 290K euro, during the next years it will require some additional work (roof, heating system) which will probably cost 20-40K. So we will contribute half of this money.

I did some research about the market for rentals and found out there are actually some quite strict rules with regard to the maximum rent (Mietpreisbremse) depending on a huge list of factors such as living surface and facilities. According to this calculation we can probably only ask 800-1000 euro as rent, which would only amount to a profit of about 3% per year when we include the budget for restoration (not including price appreciation of the house which I do not expect during the next decade). This is quite low.

An alternative would be to create separate rooms and a large common room and rent the house to three or four students, maybe with furniture included. This would cost a bit more work but likely increase the profit to about 5% per year, a more decent result. The house is situated in a popular university city so this should be doable, and the demand for student rooms is big.
Disadvantages of this are that it would be much more work, not only restoration-wise but also with regard to the likely much higher turnover of renters. Also, the neighbors might not be too happy with it and the state of the house will likely deteriorate a bit. According to my (very speculative) calculations the most efficient strategy would be to rent it out to students, but it would cost much more work for us. Do any of you have experience with this?

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

Yesterday we went to Ikea. It was a hard day for me. I lack the linguistic sophistication to be able to fully describe the degree to which I detest spending my precious free time in a full shopping center on a Sunday afternoon.
Ikea isn't all bad though, since they sell some very useful things with good a quality/price ratio. Strictly speaking, we didn't need much and still bought more than we need. Yes, this sometimes leads to tension between my GF and me, but at least I could take it out on the oddvar-ikea hack with which I built a learning tower for our daughter: https://www.google.com/url?sa=t&source= ... NQUgfxY0Nv

Chris
Posts: 678
Joined: Thu Jul 22, 2010 2:44 pm

Re: Will's journal

Post by Chris »

Will wrote:
Fri Sep 27, 2019 2:30 am
Follow-up on the rental purchase:
We decided that we are going to buy the house together with the parents of my GF.
Do you have any concerns about this? Multi-person ownership of a single asset can sometimes get messy.

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

Chris wrote:
Mon Sep 30, 2019 2:44 pm
Do you have any concerns about this? Multi-person ownership of a single asset can sometimes get messy.
Yes of course, that's a valid point. This is why we are going to document all decisions with regard to the house very carefully. The most important thing for all of us is that it's making us some money with (eventually) a low amount of hassle.
The thing which worries me most is that the house is situated in the birth town of my GF, and some people are hoping/expecting that we will move there in the future, because my GF didn't exclude the possibility when asked. But we view it purely as an investment, and I know the parents of my GF do too. We should manage some expectations.

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

We are currently in the process of trying to get married. We will do a quick and cheap ceremony in my birth city and then we will be able to buy the rental house without paying taxes (since the house is sold from the grandmother it is tax-free in Germany, provided that we are married). Basically we are getting married for tax avoidance reasons, but I still made an 'official' proposal to my GF a couple of days ago. We agreed that we will keep this marriage very simple, and throw a huge belated marriage party in a couple of years. I'm really happy to have a girl with whom I can share my goals with. She's on board with retiring early, I'm not sure how much she is with the ERE philosophy but it's at least a good start. For example: when she thinks an object is missing in her life, she still immediately starts browsing on the internet where she can find the best deal.

I had a couple of interesting discussions with my parents about the rental, and during one of these I showed them my personal finance sheets (which I have not shown anyone except for my GF). I have been telling my parents that I'm planning to quit employment around 40, which they never really though was realistic. Though they still haven't understood compounding, I believe they now see it as a theoretical possibility that relatively normal people can quit their employment at a young age. What they do not grasp either is the desirability; they are quite strongly ingrained with the duty-to-work-ethic. Well, one step at a time I guess.

The rental will be the most complicated investment I ever made, and also the one for which we need to do most work. I often question whether it will be worth it, but we'll see. I often floated the idea of just 'buying some REITs', which might achieve the same or better results in the long term.

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Working as a regular employee or a contractor?

Post by Will »

I have many collegues who work as contractors, which makes sense in the Netherlands if you're working in IT. Working as a contractor also has great synergy with ERE, since you only need to protect yourself against the most severe risks (like disability insurance). Being without a job for a period of time would not be a big problem. I view it as almost unavoidable that I will become a contractor one day, but recently I started thinking about the scenario of just doing it right now. What would be the results of such an action?

+ I would increase my net salary by 50-80%, maybe even more, fast-tracking FI by about 1,5 year (if I start as a contractor in 2021 this will still make it a whole year quicker, so by starting now I would save 6 months)
+ It would be easier to choose assignments which are closer to my door, saving me 1-1,5 hours of travel time each day I go to office
- I am planning to do an interesting training at my current job which would absolutely increase my value (paying for this training myself would likely cost around 5-10K), waiting until after I did this training would make sure I can ask a higher rate (but leaving shortly after completing it would be a very nasty move..)
- I am only working at my current job for a couple of months and am still learning a great deal of stuff, it is a very valuable experience job-wise (and my employer would likely be very disappointed if I would quit during the first year)
- When the economy turns sour, contractors are among the first ones without a job, especially relatively inexperienced ones

I'm still in doubt.

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

I just came back from a beautiful 18km beach run and am now enjoying a great lunch on my home office day, feeling good. Time for an update!

We got married! We kept it small and simple with only our parents and siblings, but it still was a very nice day. To all of our friends we promised that we will throw a big wedding party in 1 or 2 years. We will have to see about the practical implementation of this party as I aim to make it very different from most weddings. We are contemplating renting a whole campsite and organizing a nice campfire, music and food. But we will not spend any time on planning this until our current project has been finished, which is the rental we are buying:
In one or two weeks we will sign the contract to buy the house together with the parents of my – now – wife (still feels strange). The Christmas holidays will likely mostly consist of renovations, and I’m looking forward to it! Can’t wait to put all the stuff we thought out into practice. Of course some things will likely go different than planned, but we will do most things relatively cheaply and ourselves. The house is actually in a pretty good state, the only major thing which urgently needs to happen is insulation of the attic. The rest (painting some walls, replacing some floor carpet, and mostly giving/throwing old furniture away) are cheaper and smaller tasks. We do not have a strict deadline, but I hope to have tenants in the house in February/March. It's a bit complicated to buy a rental together with my parents in law, but we absolutely need them since they live close to the house and for us it's a long drive.

Financially everything is going according to plan. Even though last two months were expensive (marriage and payment for skiing holiday next March), we are saving 50% of our salaries. I almost touched a net worth 200k euro, but was stopped by stock markets. I know that many people here on this forum are skeptical about the stock markets at this point, and I am too. Still I currently have about 80% of my net worth invested in stocks at the moment. This will gradually get less with the rental, and I also expect to invest less fresh money in the stock markets during 2020. Next year I hope to reach a situation in which more than 50-60% of my expenses are paid for with stock dividends and rental income. If everything goes well, this should be a piece of cake since I’m currently at 42% for 2019, with a part of the rental income this should easily become 50%.

Our plans to take break from work for an undefined period of time after my wife finishes her PhD are become more and more clear – but first we need to make sure the rental is up and running. Of course, my parents think it’s a bad idea to take a break from working, and they also think ERE is a bad idea. After I meticulously explained every (financial) aspect of retiring early I think they now know it is possible – they just don’t think it is desirable. My mother is an absolute expert in mulling over 1,000 things which could go wrong and wreck our retirement, and my father party has a Calvinistic work ethic and I think he truly loved his job as a teacher (he’s retired now). So they are unable to understand why it would be a good idea to quit working way earlier than most of the population. Rational arguments don’t work here, I guess they will just need to see the thing work out in practice.

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

2019 financial review

Post by Will »

Happy New Year everyone!

Lots of things happened in 2019.
A short summary: We got married, bought a rental, and our daughter has grown and developed a lot. She’s 1,5 years old now. I started a new job which brought me the flexibility to work from home one day a week. And my wife has become increasingly fed up with her work and as a result we are planning an in-between-year (sabbatical), or as I like to call it, a pre-retirement in 2021.

Let’s take a look at the targets I set for 2019 in the beginning of this year and check whether I achieved them or not:

Achieve a savings rate of at least 50%
Success! My savings rate for 2019 was 55,6%

Do sports at least twice a week
Success, but only if I count the food delivery side job as sports (to be honest, sometimes it felt like it, sometimes it was a calm undertaking). If I count this, I did sports 113 times in 2019 (63x Running/cycling, 30x food delivery, 20x weight training)

Have a revenue of at least 3000 with writing content for SeekingAlpha
Failed miserably – I just did not feel like writing too much this year. I hope it will improve in 2020 since it’s a hobby which I used to enjoy a lot. Maybe a monetary target is no good stimulus for me, but I need to focus on writing what I like or attracting followers (usually quality articles will attract more followers than merely clickbait articles, but the latter get paid better since you are paid per pageview).

Get another source of income of at least 1,000 euro
I made 1090 euro with the food delivery at Deliveroo in 2019, so this was a success! I still enjoy this side job, though I only have time for it very infrequently. I will continue to do it now and then but it will not be a target for 2020 anymore.

Decrease my commuting time with at least 25% by year end
Success! My new job has about the same commute as my previous one, be it much less stressful since it has a direct train connection from my hometown. For my previous job I needed to change trains and cycle longer from the train station. Plus, I can almost always work from home one day a week in my new position! Though I still do not like my commute, these changes add up to 25 percent less commuting time compared with my previous job. (I’m working part time 4 days a week, of which 1 from home).

Net worth
Stocks 156,967
Crowdfunding 2,074
Equity in rental house 70,000
Loan -47,286
Cash 22,204
Total net worth 203,959

I crossed the 200k! The extraordinary market performance of last year combined with savings made sure that my net worth increased with more than 50k in 2019. I do not expect this to be repeated any time soon. A couple of remarks with regard to some things included in my net worth: The crowdfunding investments are small investments in consumer loans over two different websites. I want to keep my investments in this category low since it is a high risk/high reward investment. Over the last three years the crowdfunding has yielded more than 10%, but I am not investing the proceeds. The loan is a (very generous) personal loan from my parents, which I will slowly receive in full over the coming years.

2019 income and spending

Image

The category 'other' consists of other income, such as side jobs (SeekingAlpha, Deliveroo) and gifts. It includes a large monetary gift from my parents. Investment income is mostly dividends received and crowdfunding proceeds. The reason why I keep this separate is that I do not want to count it as part of my savings rate. I do want to count this as part of my non-paycheck income / expenses metric though.

Image

Notes about expenses: Most of the numbers in this table is my half of the spending of me and my wife, except for personal things like hobbies, doctor, etc. So although I do not track the personal expenses of my wife, our combined spending as a family is probably twice as high.
We spent a lot on travel this year, with our trip to California and our small holiday to the south of Germany. Also we already paid part of our skiing holiday of 2020. I guess the travel spending of 2020 will be lower than in 2019. The biggest part of the money spent on our daughter is the money we donate to our neighbors as a thanks for taking care of her three days a week. This will rather go up than down in 2020.
My health insurance will be cheaper this year and I will spend less money on doctor visits, since my wrist has hopefully fully healed now. I expect to save about 1,000 euro here in 2020 compared to last year. Marriage (done, big party will be in 2021), Public transport (paid by my new employer) and cat (died) are categories in which I expect to spend zero in 2020.
Excluding our plans for our pre-retirement (buying a camper?), I expect I should be able to stay under 15,000 euro spending in 2020.
One of the metrics which I find most interesting is the non-paycheck income as a percentage of my spending. In 2019 this was 43,6%. I excluded a large gift from my parents from this calculation since it dramatically influences the result.

Targets for 2020

In 2019 I met most of my targets, which means that I can be more ambitious in 2020!

- Achieve a savings rate of at least 55%
Should be easy, but in my current living situation a much higher savings rate than this seems very difficult without some major change

- Have a non-paycheck income of at least 50% of expenses
If the rental house performs well this should be easy. If not, it will be a challenge

- Do sports at least three times per week on average
This is ambitious, but I have enough motivation to try it

- Start as a contractor as main job OR plan and start pre-retirement (buy/build camper?)
This is the main goal of 2020. Currently it looks like we will start our pre-retirement after this year. If not, I want to start as a contractor

- Finish rental house and make sure it is rented
No-brainer goal, should be done around March

- Have a revenue of at least 1,200 from writing articles
Let’s see if I enjoy writing more than last year

- Eat more healthily/sustainably
This goal still needs to be defined. I do not have an unhealthy diet, but it could be better. My current ideas are to eat less meat, drink less coffee, drink less alcohol. The problem with these is that I’m bad at doing something partially. I need radically to quit these foods to make it work, and even then I'm not sure if it's an improvement or not. For instance, I didn’t drink coffee now since last Monday (I was afraid I had become mentally dependant on it, turned out I did not notice any difference..). Still some work to be done here.
Last edited by Will on Mon Jan 13, 2020 4:29 pm, edited 1 time in total.

wolf
Posts: 1096
Joined: Fri Jan 06, 2017 5:09 pm
Location: Germany

Re: Will's journal

Post by wolf »

Congrats to you for achieving your goals of 2019!
And the change of net worth in 2019 is quite impressive. Congrats on the 200k mark too!
Why don't you set a target savings rate of 55%, since you expect to stay under 15000?
Could you go car-free?

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

wolf wrote:
Fri Jan 10, 2020 10:11 am
Congrats to you for achieving your goals of 2019!
And the change of net worth in 2019 is quite impressive. Congrats on the 200k mark too!
Why don't you set a target savings rate of 55%, since you expect to stay under 15000?
Could you go car-free?
Thank you wolf! You're quite an inspiration with your - I must say - extremely low expenses.
You're right, I should set the target savings rate a bit more aggressive. I reckon 55% should be doable without major changes and will take your advice to adopt this as my target for 2020.
I often tried to get my wife enthusiastic for going car-free, without much success. We do not drive much, which makes it even worse that we spend almost 7% of our annual budget on our car. Until we have our rental house up and running, we actually really need our car to transport stuff. After that we want to use it to drive to our ski holiday. We could seriously start thinking about selling it, or maybe creating a co-ownership with some other people after this. During regular times, we only use our car to get groceries in bulk (the cheapest supermarket is 10km away) and to drive to my parents in law.

On the spending topic, we do have some upcoming (large) expenses for our rental house, which I will not count as personal expenses but as investments, though we will not directly get more yield or more equity from it, since it are mostly notary costs, renovation costs and energy passport costs. Also, if we decide to buy a camper this year, the savings rate target of 55% will automatically become impossible. But we will of course get rid of our car in that case..

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

Just a quick update of my journal, since last update was a couple of months ago already. Of course, the main topic dominating our lives the last 1,5 month was COVID-19.
First we cancelled our skiing holiday (we went to the resort only to find out they were closing, we should never have gone there in the first place), and now we are working from home since about a month.

It's quite ok, sometimes it does not feel bad to put everything on hold. It's a bit heavy to take care of our daughter (we will not send her to the neighbors now, they are both high-risk individuals for COVID-19) and do an adequate job at the same time, but we're managing. I'm not doing my job as well as I used to - for my job, working from home a couple days a week is ok, but not full-time. Motivation is another issue.

Of course, our expenses will drop to rock bottom these months, which is good. In the same time, we have no idea how the whole situation is going to impact our plans with regard to buying a camper and travelling from the start of next year.

Before this all broke loose, we renovated our rental, found some nice renters (out of 100+ interested people) and signed the rental contract just in time. It's hard to overstate how happy I am that we finished this all before the lockdowns, we would have never been able to arrange it now or during the next month (and depending on the economic developments, not for this rental price anymore?).

With regard to the market and our investments, we have a plan to which we are sticking. We are buying for a fixed amount at every 10% drop from the top of the S&P 500. So until now, we bought 3 times (10, 20 and 30% drop). We have enough cash to buy all the way down to a 90% drop if we have to and still have enough cash to live on for a year. While I see some people around me panicking (my father in law in particular, but my wife isn't as relaxed about it either), I'm as relaxed as I can be. Markets were long overdue for a bear market.

I'm making use of all my time at home to do sports almost every day. I'm doing some decent weight lifting and we are still allowed to go out here so I did some long runs through the dunes and on the beach recently. I decided I'm going to run an individual marathon in 2 weeks. I'm completely rebuilding and cleaning my racing bike so when the lockdowns are over I will have a perfectly groomed stallion to ride.

Though uncertainty sucks, everyone should make the best out of this situation.

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

Here in the Netherlands, things are slowly getting a bit more relaxed, going forth to the new normal.
I have been making use of the working-from-home-situation by doing a lot of sports 5-7 times a week. Mostly running and weight training, but recently also cycling.
I ran a marathon 1,5 month ago and got my upper body in the best shape ever (which is still not much to speak about since I'm very much an ectomorph. Since a couple of weeks I have started to train seriously again for road biking. I find it ironic that for me, cycling always seems to lead to an increase in expenses. Some bike parts urgently needed replacement, and in August I will make a biking trip to Germany with some friends which also costs money.

Anyway, during summer my life is driven by sports (as it should be in my opinion), but my wife's life has been driven by other things: she is writing her PhD and is pregnant again. It is still very very early, but if everything goes right we are expecting our second (and last) child in January. My wife will finish her PhD in 2020. After the birth in January 2021, she will enjoy her maternity leave and quit her job afterwards. I will also do so, unless my current employer allows me to work from a remote location permanently for 2 days a week. We will leave our rental home, live at my or her parents' place while we buy a campervan and renovate it. After 1-3 months we will slowly start travelling around Europe. I might continue to work for 2 days a week for my current employer or search for temporary remote contracts. Or I might not work at all for a year or so. This is the plan, but there are many uncertainties. I will keep you updated.

Cheepnis
Posts: 309
Joined: Mon Dec 31, 2018 11:52 am

Re: Will's journal

Post by Cheepnis »

Will! So much happening in your life and it sounds exciting! Do you expect the traveling with 2 little ones to go smoothly? Honestly sounds pretty exhausting, but that's just me.

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

Cheepnis wrote:
Sun Jun 28, 2020 10:46 am
Will! So much happening in your life and it sounds exciting! Do you expect the traveling with 2 little ones to go smoothly? Honestly sounds pretty exhausting, but that's just me.
Anyone who thinks such a trip will go perfectly smooth is delusional. But we will travel very slowly, maybe staying at the same places for a week or so. No need to hurry because we have more than enough time. I view it more like radically downsizing our apartment and living in a flexible location than active travelling. We will travel along with the weather, so being in southern Europe in winter and in the north in summer, if the COVID-19 conditions allow it. We might also stay at the parents of me or my wife for extended periods of time, which has the bonus that we have other people eager to play with our children.
I will be working a maximum of 2 days a week, my wife will probably not work at all. So we have more than enough slack if something goes wrong. Of course, if the unborn baby has some medical condition we might not be able to pull it off, but we will see about it.

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

Summer is over, and we suddenly got into a full-on autumn with 2 weeks of seemingly continuous rain. Today the weather is a bit better and I can even see the sun at this moment, which lifts my spirits. It was a long summer during which I did a huge amount of bike riding to train for a long weekend in the Black Forest with some friends in mid August. It went really well, but right now the lack of a goal and the bad weather are preventing me from staying in shape. Which is a shame, because I probably was in the second best shape of my life. Right now I have plans to pick up running again, though I am still lacking a clear goal (and thus, motivation is not optimal). I miss doing lots of sports, it is really a thing which adds meaning to my life, and the only thing which prevents me from picking it up again is myself.

Financially, everything is going well. I almost cannot believe that my investment portfolio is up more than 5% during this pandemic, I fully expect markets to tank when government stimulus discontinues again. Due to the pandemic, we also spend less, but visit our friends and parents less as well, which sucks. At the moment the Netherlands are doing badly with regard to new covid infections, and we are behaving extra cautiously, especially during weeks before we are visiting parents or other more fragile people. Until 1,5 week ago, the Netherlands was about the only country in the world which did not recommend wearing face masks, a viewpoint which originated from last year April when there was a severe shortage of them. They finally buried their stubbornness and changed their stance (they recommend them now, but it is not mandatory), though many people here continue to be too dumb to use them at locations which are obviously risky (such as supermarkets).

The pregnancy of my wife is going well, though it starts getting harder with some physical discomforts at the moment. Het PhD is progressing quite steadily, we expect her to finish the bulk of her report before she goes on pregnancy leave in December. The rest of our planning is more or less as follows: January – birth, March: buy a large campervan, sell all of our stuff and move in. April: leave. My wife already informed her job that she will take parental leave (non-paid) after her pregnancy leave, which means she is free from December this year until November next year. This way, she has the option of continuing her current job, though I think it’s likely we will continue to travel longer.

I will likely quit working around mid March 2021. My job offered me to take a year off (unpaid). But I could also take parental leave (about 11 months), which has the benefit of my pension scheme still being paid, plus I will more easily be able to start again if I want to. Also, if there would be a covid-related voluntary layoff (not unthinkable in my industry) I could get some extra cash by staying with the company on paper. I’m currently unsure whether I would like to continue working 2 days a week while travelling with 2 kids. Not only because of the many other activities which I could do during that time, but also because I expect such a job (as a remote contractor for only 2 days a week) to be difficult to find, especially during a pandemic. On the other hand, I should just try it.

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

Short update:

I picked up sports again and motivated myself to start training for a marathon again which I will run in mid December. No organized marathon though, just an individual run of 42,2km which I already did during the springtime. My target is to finish in a better time than last attempt, aiming at 3:45 or better.

Our 'sabbatical' plans are crystallizing more and more: my wife will go on pregnancy leave in 2 weeks and negotiated a leave until November 2021. I will have an unpaid leave from March 2021 until November. To the outside world we are acting as if we are planning to return to our jobs in November next year (which could happen, especially if the shit still hits te fan with regard to COVID), but it is likely that we will have different plans by then. I already applied for a 'job' (probably a very badly-paid gig, but I honestly cannot think of a nicer job at the moment) as a cycling guide in the south of Spain during the fall of 2021.

Financially, we are on track to reach a spending level which is lowest since I started my financial book keeping, about €13,000 per person this year, so €26,000 for a family of 3. This is of course partially impacted by the COVID situation which led us to spend less money on travels this year, but it still leads to some interesting conclusions: I am FI with a 5% withdrawal rate on our current level of spending. Of course, many remarks need to be made about this figure: 5% is by no means near the safe 4% which I try to reach, and I'm only counting my part of our assets (my wife has about half of what I have). Also, wealth tax in the Netherlands has a big impact on your safe withdrawal rate, since it amounts to about 1,3% on assets over €100,000.

wolf
Posts: 1096
Joined: Fri Jan 06, 2017 5:09 pm
Location: Germany

Re: Will's journal

Post by wolf »

Your "sabbatical" plans sound great. Congrats on the record in lowest spending too! During your planned sabbaticals, will you have to pay extra for health insurance, or is it still covered by your employer (partly)?
Second question: How is the wealth tax calculated? Also on real estate, or only on capital wealth in banks, depots, etc.? Do you have to pay it annually to a given date? Hopefully Germany's government won't install a wealth tax in the coming years.

Will
Posts: 76
Joined: Sun Dec 25, 2016 5:23 am

Re: Will's journal

Post by Will »

@wolf: Thanks! The health insurance system in the Netherlands is such that it is independent of employers. Everyone needs to choose a health insurance policy, which costs €100-€140 per month, depending on fanciness and choice of deductible. If you have a job, part of the taxes you pay are automatically used for the healthcare system. If you do not have a job, you only pay the monthly costs, so this is very beneficial for ERE. How is this situation in Germany?

With regard to wealth tax; the situation is evolving and rules are changing every year, but right now it is like this: there is no capital gains tax, no income tax when you sell stocks with a profit, and there is essentially no tax on dividends (officially there is, but you can subtract any dividend tax from the wealth tax you are paying). The wealth tax is calculated using your stocks/depots/bank accounts/rentals/second homes, but excluding your pension scheme. It is better explained here: https://firetheboss.eu/personal-finance ... ealth-tax/.
In the future there are plans to tax savings accounts at a much lower rate than stock investments, since the expected gains are much lower. But these plans were already changed so often that I do not really know anymore what the future will hold.

So it's a mixed bag: the Netherlands are a fiscal paradise for stock traders (which I'm not, of course), but it's very expensive if you're rich and employed with a well-paying job and have all your savings on a bank account. For ERE, benefits are the limited costs of health insurance and no capital gains tax. But the big disadvantage is the huge wealth tax, which you need to pay every year on the value of your accounts. This is a large amount when you're aiming for ERE, and it leads to us needing to save 37% more than we would need to without this tax (based on 2019 rates).

wolf
Posts: 1096
Joined: Fri Jan 06, 2017 5:09 pm
Location: Germany

Re: Will's journal

Post by wolf »

regarding health insurance in Germany: if you are mployed, then it will automatically deducted by your monthly gross income. if you were retired early, then you have to pay at least around 180€. in both cases: the higher your income, the more you have to pay for it. There is a ceiling of course.

regarding wealth tax in NL: not very ERE friendly then, if you have to save xx% more, ouch! are there no exceptions or any of that? how is it with owning a business?

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