wolf's journal

Where are you and where are you going?
wolf
Posts: 684
Joined: Fri Jan 06, 2017 5:09 pm
Location: Germany

September 18 Financial Status

Post by wolf » Fri Sep 28, 2018 8:24 am

Savings Rate = 88,3% (12 months rolling average)
Yearly Expenses = 5285€ (12 months rolling average) *
Withdrawal Rate = 7.7% (actual yearly expenses + margin of safety + health insurance)
Milestone = 86% (accumulated money compared to milestone of 210k€ by end of 2019) **
Investment Ratio = 69% (invested money in equity/bond/commodity market, rest of it in cash)
Passive Income = 61% (actual dividend&bonds passive income covering my actual yearly expenses)
Investment Rate= 4111€ (in this month)
JAFI = 1.02 (assuming I had to pay health insurance like I were RE)

* that is without health insurance
** After achieving the milestone, I'd like to reevaluate possibilities "Coasting deliberately to FI/FF"

wolf
Posts: 684
Joined: Fri Jan 06, 2017 5:09 pm
Location: Germany

October 18 Financial Status

Post by wolf » Wed Oct 31, 2018 10:55 am

Savings Rate = 89% (12 months rolling average)
Yearly Expenses = 4803€ (12 months rolling average) *
Withdrawal Rate = 6,5% (actual yearly expenses + margin of safety + health insurance)
Milestone = 88% (accumulated money compared to milestone of 210k€ by end of 2019) **
Investment Ratio = 71% (invested money in equity/bond/commodity market, rest of it in cash)
Passive Income = 67% (actual dividend&bonds passive income covering my actual yearly expenses)
Investment Rate= 5007€ (in this month)
JAFI = 0.97 (assuming I had to pay health insurance like I were RE)

* that is without health insurance
** After achieving the milestone, I'd like to reevaluate possibilities "Coasting deliberately to FI/FF"

LiberateMind
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Re: wolf's journal

Post by LiberateMind » Wed Oct 31, 2018 11:24 am

Impressive Savings rate!! Any forecast on when you are going to achieve the milestone?

wolf
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Location: Germany

Re: wolf's journal

Post by wolf » Wed Oct 31, 2018 11:32 am

@LiberateMind: thx! Maybe I'll achieve the milestone in Q3/19. (if there is no market crash)

classical_Liberal
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Re: wolf's journal

Post by classical_Liberal » Wed Oct 31, 2018 9:08 pm

Congrats on increasing assets even in the really poor market conditions of October... Very impressive!

Q3 of 2019 is really close. Are you still leaning towards the coast to FI/Semi-ERE plan?

wolf
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Location: Germany

Re: wolf's journal

Post by wolf » Thu Nov 01, 2018 1:43 am

@classical_Liberal: Thanks! To be honest, I increased my assets only because of my SR. Markets were only of little help. About 80% of my invested assets are based on USD. So from an investment perspective the EURO weakness helped a bit, because my ETFs are priced in EUROs.

Yeah, Q3 of 2019 is close. That's motivating. And I still plan to coast to FI or semi-ERE in a few years. There might be also some changes at work in the next few years. So I first have to wait and figure out how those possible changes will influence me (and my income). Till I know exactly about it, I'll try to save and invest like I have been over the last 12 months. Maybe I'll postpone the start of "coasting to FI" / "semi-ERE" a bit, depending on the circumstances. Well, let's see.

First things first! Let's focus on the next milestone. After that comes the next milestone for sure.

In addition to the text form of my monthly financial progress, I am planning to upload some graphs at the end of the year. Those will show the progress from a financial point of view over the last few years, since I started with ERE back in 2016.

wolf
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Location: Germany

Re: wolf's journal

Post by wolf » Thu Nov 01, 2018 6:03 am

In order to become antifragil, I thought about various "backup"-systems.
Best case would be that they are not influencing each other, are independent and non-correlating.
Many of those "backup"-systems have been already mentioned in the ERE-Forum, because they are a part of ERE.

I came up with the following "backup"-systems:
- ERE skills, competencies, tools, wisdom, etc.
- real estate (where I live in)
- family, friends, neighbours, community
- health
- insurances, especially health insurance
- pension
- career "capital", work related / marketable skills and experiences
- basic security benefits
- unemployment insurance
- capital assets
- cashflow from actual passive income (dividends, yields, etc.)
- etc.

In the second step I thought about measuring them. Monetary "backup"-systems are the easiest to measure, because they are quantifiable.
I created a spreadsheet which measures the following quantifiable "backup"-systems on a yearly basis.
- expense ratio (expenses / income), in order to quantify my expenses flexibility (margin of safety)
- years of expenses based my capital assets (the traditional x FI years)
- years fo expenses based on my real estate, where I live in
- percentage of expenses which would be probably covered with my predicted pension
- my expenses compared with the statistical average of my peer group in my country (1 single person, Germany), as an indicator for my ERE skills
- percentage of expenses which would be covered with my predicted unemployment insurance for the next 12 months, if I would get unemployed
- percentage of expenses which are already covered from my passive income

I collected the data for the last five years, in order to see changes / progress.
The overview ("Big Picture" of my monetary "backup"-systems) gave me further confidence, that I am on a good way to become/be antifragil in a monetary sense.

Of course that is only one part of the equation in order to get a antifragile score. The other parts (see list above) are also very important and crucial, e.g. health and relationships.

classical_Liberal
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Re: wolf's journal

Post by classical_Liberal » Fri Nov 02, 2018 3:53 am

Even monetary back systems are hard to quantify when trying to predict 20+ years into the future. The difference between 3% & 4% real growth of capital is pretty astounding.

Personally, I have a separate "old age" monetary bucket. I use very conservative assumptions. Probably the worst case scenario if Western civilization remains intact over the timeframe of decades. Still, that's not a guarantee.

That's why I think the other, less tangible, assets are truly the most important forms of diversification. IOW, situations in which my pension (social security) fails will probably highly correlate with situations in which invested capital fails to produce 3% real returns. In these cases one would need ridiculous (say 100X spending) amounts of monetary capital to avoid disaster. It's much "cheaper", from a YMOYL life-energy standpoint, to work on genratating other forms of capital (80/20 rule) than it is to accumulate that much money. It's the best insurance at the best price.

wolf
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Re: wolf's journal

Post by wolf » Fri Nov 02, 2018 2:06 pm

classical_Liberal wrote:
Fri Nov 02, 2018 3:53 am
That's why I think the other, less tangible, assets are truly the most important forms of diversification. IOW, situations in which my pension (social security) fails will probably highly correlate with situations in which invested capital fails to produce 3% real returns. In these cases one would need ridiculous (say 100X spending) amounts of monetary capital to avoid disaster. It's much "cheaper", from a YMOYL life-energy standpoint, to work on genratating other forms of capital (80/20 rule) than it is to accumulate that much money. It's the best insurance at the best price.
Interesting point of view. I do think too that other, less tangible, assets are important for diversification.

For example, first I think of health. I find it easy to get in shape, do exercises, weight training, go for a walk/run, go bicyling, eat healty etc. And if I use the Pareto Principle it would be even easier.

My second example is friends, family, relationships, social connections, and community. From a YMOYL life energy standpoint I find it more difficult than just work, earn money, save and invest. Maybe one reason lies in my personality type (INTJ). Because I assume, I compare (unconsciously) my RHW (real hourly wage) with the expenses/investments involved in building social connections. Therefore I find connecting with people and building an "asset" on it much more difficult than building capital assets. Of course, I try to do it, but building longterm relationships (as a type of "asset" for diversification) is challenging for me. Well, I have a really good connection to my family. But beside family, I have only one friend, who I see regurarly. I In addition to that I have good connections to my colleagues, but I don't count them as an "asset". Well, I value independence and time by myself.

Do you mean that with "cheaper" and less tangible assets? I am interested to understand you, how you mean it. Can you give me examples. And how do you apply the 80/20-Principle? What are your other "backup"-systems, besides an "old age monetary bucket"?

classical_Liberal
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Re: wolf's journal

Post by classical_Liberal » Sat Nov 03, 2018 12:33 am

I tend to think most people who are interested in the FI portion of ERE are so because something about how they earn financial capital is unfulfilling. This may be that specialization does not suit them, or they are in the midst of "divorcing" their career (see Jacobs blog post) due to lack of interest, or are multipotents, ect. For these people working longer/more in a specialized career to earn more financial capital is more difficult, than branching out.

For example, I could spend time learning yet another nursing specialty. Hence adding to my ability for earnings in current career. This would also slightly add to antifragility, more potential contracts. Frankly, I'm just not that interested in learning more specialties and I feel like I'm in the process divorcing this career entirely. So I chose to learn something completely new. One of the best ways to do this is by finding a person/group who enjoys doing whatever it is I would like to learn. So instead of learning a new career specialty, I will go hunting with an acquaintance. This actually costs me financially, but, the time "feels" like a break. It also allows me to share an activity with someone who has a common interest, increasing social capital. In the event of food shortage I now know how to hunt, what is the financial value of this? Hard to quantify exactly, but in certain circumstances that would correlate with financial asset failure it could be priceless and it takes much less time than learning a new specialty.

I realize INTJ's tend to prefer less social activity. Personally I have become much more introverted as I age and understand how social interaction can be unappealing. However, the importance of having some relationships with others of a different personality type adds significant value. This is part of the reason I love conversations on the INTJ dominated forum. Provides a different perspective. I find that relationships based on a single common interest can overcome many other differences. Conversations and shared learning abut common interests can actually be very invigorating. If you and I ever met IRL, I'm sure our ERE conversations would have us feeling very friendly towards each other in short order, even if we had nothing else in common.

Sorry if I am not articulating my ideas very well.

wolf
Posts: 684
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Location: Germany

Re: wolf's journal

Post by wolf » Sat Nov 03, 2018 1:58 am

@classical_liberal

Together with your journal your thoughts make perfect sense to me, especially with this post here: viewtopic.php?f=9&t=8943&start=80.

I've started to read the posts in your journal (again). It's a great inspiration to me regarding a semiERE-mindset, contentment in life and building social connections, and of course all types of "assets".

When I read, that you identify yourself as an ENTJ, I was even more motivated to read your journal from the beginning. I would like to have a little bit more E in my life. Well, working on it. ;)

For example I have been meeting with a friend on a weekly basis, in order to go out for walks in the woods with dogs. And she is an ISFJ. So our conversation topics are very interesting. They are totally different from what I used to think about myself. Sometimes I'm even speechless :o and don't know what to answer, because I don't talk and think about such topics very often (senses, feelings, people-based/-centered stories, mundane tasks, empathy, etc.) So I understand what you mean with the following:
the importance of having some relationships with others of a different personality type adds significant value

noahrudite
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Re: wolf's journal

Post by noahrudite » Sun Nov 04, 2018 3:08 pm

You mention that you want to become more antifragile. Looking at the list I can only see things that would make you more robust or resilient. Those are not bad things, but is there anything that can be done to become truly antifragile? As per Wikipedia: "Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better".

wolf
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Re: wolf's journal

Post by wolf » Mon Nov 05, 2018 12:21 pm

Interesting...I am gonna think about that.

wolf
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Re: wolf's journal

Post by wolf » Sat Nov 10, 2018 10:44 am

Bankai wrote:
Sat Nov 10, 2018 3:59 am
@wolf - are you saying <1.5% then? What are you factoring in? Supporting more humans or just spending way more? Good job reaching 4%!
from SWR milestones

Thank you Bakai! I answer your question in my journal, because I don't want to start a off-topic discussion over there.

Well, first of all, I have a defensive asset allocation. I think the total real return will be more like 3% than 4% p.a.
Secondly, I'll plan to spend more, e.g. for traveling, leisure activities, vacacions, experiences in life, maybe also tools and stuff. (of course all in a ERE style)
Last but not least, I want a margin of safety in order to be flexible with my budged/expenses, e.g. if health related costs will increase significantly more than expected, or ...

But really, it is just a "number", which I consider as a "north star", that leads the direction I wanna be in the very longterm.

And recently I learned to focus more on the journey and not the destination. So I don't concentrate too much on that special longterm goal. Rather I set my next milestone in midterm (either financially, or work related, or a special travel, etc). And then I try to reach that, e.g. my milestone of 210k€ till the end of 2019.

thegreatvoid
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Re: wolf's journal

Post by thegreatvoid » Sat Nov 10, 2018 6:28 pm

@wolf do you take welfare benefits into account , when calculating your numbers ? I don´t know about Germany , but in Austria when you get fired or quit your job, you get unemployment insurance for a very long time ( 60 % of your gross pay in your last job ) .

after that you can receive something combarable to Hartz IV in Germany , for a year , which is 95 % of unemplyment insurance .

after that you can receive benifits indefinitley ,but they force you to sell your assets first.

I know it´s very anti-social to maybe game the systems , but most of us pay into these programs and never receive any benifits.

just wondering what your thoughts are ? PS Glückwunsch reaching 4 % SWR

wolf
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Re: wolf's journal

Post by wolf » Sun Nov 11, 2018 2:15 am

Thank you for the "Glückwunsch" :)

No, I don't take welfare benefits into account and I don't plan to do so. I want to be selfsufficient by myself and I don't want others to pay.

Of course I pay unemployment insurance every months. On the other side I would get some money (60% for 12 months) from it, when/if I would become unemployed.

But I consider unemployment insurance as a kind of backup system (one of many), as I described a few posts earlier (viewtopic.php?f=9&t=9636&p=177207#p176624)

I guess when it comes to welfare benefits these are the positive/negative aspects of a social country (e.g. Germany, Austria, ...), depending on your view (poor/rich, liberal/conservative/, paying/receiving, ...)

@thegreatvoid: Do you take welfare benefits into account, when you calculate your numbers?

wolf
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Re: wolf's journal

Post by wolf » Sun Nov 11, 2018 2:39 am

2Birds1Stone wrote:
Sat Nov 10, 2018 11:40 am
Congrats Wolf! Do you find it get's easier for the WR% to drop once you got to 4%?
from SWR milestones

Thank you 2Birds1Stone! I answer your question in my journal, because I don't want to start a off-topic discussion over there.

Good question! And I guess that there are many possible answers to it, depending on many aspects, etc.
I do think that it gets easier, but not because of the number, but because of others things around that number.
When I found out about ERE, back in 2015/2016, my WR was much higher. It was around 20%, because I had already saved some money till then and I have been living quite frugally since I started working. So in the beginning of my ERE journey my expenses were 2-3 times greater than these days. With practicing ERE and reducing my expenses a S-curve developed. In the beginning the improvements were little. But after some months the improvements (mostly dut to reducing my expenses) became greater and greater. Now, my expenses had flattened out. There is not too much room for improvement anymore (when comparing with a few years ago). Of course I could increase my income, but I find that not as easy to do as reducing my expenses. So yes, in a some way I find it got easier to drop my WR%. Time will tell, if that is also the case for the future months and years.

How have you experienced the change from a much higher WR% to around ~4% (where you are right now)?

thegreatvoid
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Re: wolf's journal

Post by thegreatvoid » Sun Nov 11, 2018 4:08 am

It´s indeed a very strange system we have. Just as an example. My younger sister´s SO quit his job in may and has been receiving unemployment benefits ever since, even though he earns 7 k a month from renting out his house.

I don´t take it into account when calculating my numbers, but I´m thinking about going to university towards the end of my accumulatio phase and coasting to FI .
For the reason I have been working full time for 4 years, I am eligble to a program here in Austria, from which I would receive 800 Euros per month for studying, which is pretty great considering it´s more than my monthly expenses and I live 3 kilometers from the univesity.

As a danish citizen I would also get SU ( money for stuying ) , but I don´t think I will ever move back to Denmark, due to the high taxes.

I´m in a similar position like you. Comprable SWR , but I´m also aiming for a very low SwR due to my young age and
presumably higher spending in retirement.

2Birds1Stone
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Re: wolf's journal

Post by 2Birds1Stone » Sun Nov 11, 2018 8:17 am

wolf wrote:
Sun Nov 11, 2018 2:39 am
from SWR milestones

Thank you 2Birds1Stone! I answer your question in my journal, because I don't want to start a off-topic discussion over there.

How have you experienced the change from a much higher WR% to around ~4% (where you are right now)?
Thank you for the explanation.

I have detailed monthly WR% data going back to December of 2014, where it was 22.92%!

In the beginning, the addition of investments made the biggest difference in WR% change, but as the portfolio grew, new funds represented a smaller and smaller portion of the entire nut. While my portfolio grew in the first 2 years, so did my income, and spending! The last 18 months, I'm finding that reducing spending has a much more profound impact on WR%. For example, in October 2017, my TTM spending was $24,630 and WR% was 7.3%, 12 months later I hit WR% of 4.46%, largely in part to TTM spending dropping to $18,547. To get the same effect from new investments/returns, my portfolio would have to grow by $200,000.....I guess the point I'm trying to make is, there is still a lot of room for improvement on spending for me/us.

I do feel like once you get close to or below 4%, and still earn an income, you end up in runaway mode......unless you drastically increase your expenses moving forward.

classical_Liberal
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Re: wolf's journal

Post by classical_Liberal » Tue Nov 13, 2018 4:07 am

2Birds1Stone wrote:
Sun Nov 11, 2018 8:17 am
......unless you drastically increase your expenses moving forward.
and @wolf

This is one of the main reasons ERE is so superior to other FIRE sites (second only to the amazingly insightful user threads/comments). People actually encourage the spending reduction to the point of "poverty level" spending. It has had such a profound impact on quality of life in general, not just WR rate. Changes thought processes completely. Personally, my goal is $1250 USD per month next year. I see no reason (outside of pure laziness) this is not doable.

I remember back in late 2014 when I first came across FIRE. I started to run numbers at a 30k spend rate, which seemed like an awful big stretch at that time. Now, I couldn't imagine spending that much. Admittedly, I'm more like the tortoise in my changes, had I moved more quickly, I'd be FI by now. I will say, there hasn't been a single change made which reduced spending that I'd take back. Each forward movement has inextricably improved my life in other ways. I know this because there have been times I went backwards, then literally got stressed out over the extra thing/service I started paying for again.

I can say with certainty the only possibility of amping up future spending will be a result of exorbitant medical prices or potentially higher housing costs due to changing preferences in my primary location. Even then, I bet I find a way to bypass too many increases.

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