Schnitzel's Journal (located in Germany)

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SchnitzelEngineer
Posts: 3
Joined: Mon Jun 10, 2019 1:53 pm

Schnitzel's Journal (located in Germany)

Post by SchnitzelEngineer » Mon Jun 10, 2019 2:57 pm

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
Posts: 613
Joined: Thu Nov 19, 2015 11:20 am

Re: Schnitzel's Journal (located in Germany)

Post by 2Birds1Stone » Tue Jun 11, 2019 9:26 am

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
Posts: 3
Joined: Mon Jun 10, 2019 1:53 pm

Re: Schnitzel's Journal (located in Germany)

Post by SchnitzelEngineer » Tue Jun 11, 2019 2:39 pm

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

bigato
Posts: 1834
Joined: Sat Mar 05, 2011 12:43 pm

Re: Schnitzel's Journal (located in Germany)

Post by bigato » Thu Jun 13, 2019 3:56 pm

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

SchnitzelEngineer
Posts: 3
Joined: Mon Jun 10, 2019 1:53 pm

Re: Schnitzel's Journal (located in Germany)

Post by SchnitzelEngineer » Thu Jun 13, 2019 4:39 pm

bigato wrote:
Thu Jun 13, 2019 3:56 pm
"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?

bigato
Posts: 1834
Joined: Sat Mar 05, 2011 12:43 pm

Re: Schnitzel's Journal (located in Germany)

Post by bigato » Thu Jun 13, 2019 5:02 pm

None of that answers the issue. You must categorize better, at least your spending. There are no excuses, smartphones make this so easy. Just create more categories if necessary but with titles that make sense. "Individual spending" is not an acceptable category. I'm not saying you should fight over expenses with her, I'm not even saying that you should deprive yourself of anything. You just need to categorize clearly and honestly.

bigato
Posts: 1834
Joined: Sat Mar 05, 2011 12:43 pm

Re: Schnitzel's Journal (located in Germany)

Post by bigato » Thu Jun 13, 2019 5:05 pm

Some suggestions: I find perfectly fine to have categories for books/knowledge, fun/entertaining, social, travel, whatever makes sense to you and that describes with more precision what the money is being used for.

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