Benjamin Klarman journal

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Benjamin Klarman
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Joined: Thu Jun 07, 2018 7:41 am

Benjamin Klarman journal

Post by Benjamin Klarman » Sun Jun 10, 2018 5:15 pm

After several years for reading ER stuff and others journals at this forum, I finally though it would be good to share some of my life here. Sharing is caring, after all.

A bit about myself:
- worked 7 years in banking, and now, with a net worth (NW) of €930k, I considered myself FIREd. Nevertheless, I still spend most of my days working just out of pleasure by actively managing my savings
- 30-year old male, Portuguese, back to Portugal recently after 5 years away
- single, no kids

My FIRE path:
I am extremely lucky for being brought-up by a relatively wealthy family with solid frugal principals. Add to that my own fasciation for investing and desire of freedom, FIRE made a lot of sense to me as a main goal.

University years (2006-10): I actually have been tracking my NW since 2005. At the time, I was 18 and had just entered business school. I had the grand total of €7.5k mostly from saved allowances and gifts. In 2006, I sold my car (gifted by my father) for €30k as a means to fund my lifestyle (moved to Lisbon to live by myself), and more importantly, to fund my desire to start investing in stocks. I did quite OK considering my limited experience and the 2008 financial crisis: by the time I found my first job (2010) I had a net worth of €45k. I had more €6k than what I did in 2006, but to be fair, during that time I got from my family about €13k worth of gifts/allowances, meaning that my portfolio was short of covering all my expenses by €6k (that’s €125/month short).

Corporate life years (2010-17): I have worked as a financial analyst during 7 years in countries such as Portugal, Spain, Brazil and Germany. During that time I got paid a total of €369k net of taxes (avg €53k/year) while my family gifted me €315k. During this time I was spending between €10k and 25k/year *, likely summing up to €155k over 7 years. By the end of this period I had €706k in NW.
With liquid assets worth 28x my inflated €25k expenses - inflated in the sense I do indulge occasionally in pricey pleasures and do no real sacrifices -, I felt comfortable enough to quit my job.

FIREd since mid17: I quite missed Portugal when I was away and since I am back I tried to connect further with family and friends and I have travelling quite a bit around here. I been working for pleasure, too. I closely follow the companies I am invested on and research new ones. Curiously, this has been one of the most profitable years for me, with my NW increasing by €228k yoy to €934k mostly due to capital gains but also to dividends (€20k) and fees (€75k) from managing friends and family capital, despite keeping around 30% of my NW idle in cash.

*I only started keeping a stricter expenses record from 2015 on.
2010-12: Estimated €10k/year, as follows:
€3k/year rent (bedroom €250/month)
€1k/year vacations (usually 2x per year within Portugal, 1x outside Portugal but usually in Europe)
€7k/year for the rest (€580/month)
2013-2014 => can be conservatively assumed to have been very similar to 2015-2017, i.e., €25k per year.
2015 - €24,936
€11k rent (mostly living by myself)
whopping €5.5k in vacations (long distance relationship explains most of it and I also did some longer distance trips to Brasil and Istambul)
€1.5k police fine (crazy night, don’t ask)
€7k rest (mostly food, drinks and dinners out)
2016 - €24,505
€9k rent (sharing apartment with gf)
€4.4k travelling (vacations with gf. France, Portugal, Austria, London and moving costs)
€4k wants and hobbies (MTB plus gear)
€7.1k rest
2017 - €24,826
€10.8k rent (living my myself again)
€2.4k vacations
€2.5k wants and hobbies
€760 gifts
€914 forced one-offs (mostly work goodbye party)
€394 work stuff (CFA fees and programes)
€7.1k rest

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Re: Benjamin Klarman journal

Post by SavingWithBabies » Sun Jun 10, 2018 9:00 pm

Welcome and thank you for sharing your story! You are very fortunate to have had such support from your family. It is impressive you were able to continue to grow it and make the best of it. Do you see any difference in your upbringing that you think contributed to passing the frugal principals down to you? If you have siblings, are they similar in mindset (regarding finances)? I know that kind of thing is hard to answer with any certainty however it is of interest to me as I think of how best to help my (now very young) children later in life.

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Re: Benjamin Klarman journal

Post by Astra » Mon Jun 11, 2018 5:30 am

That's quite an impressive track record you have there! Banking is definitely a good career to reach ER: not only do you have a great salary during the working period, you also have the skills to keep your portfolio going strong - and in your case even fun doing it!

2017 has really been a freak year for investing - but even so increasing your NW by almost a third is most impressive!

I wonder if you might want to elaborate what it was like living on 10k/year while working in the banking sector. Did you feel like you were making sacrifices, compared to your colleagues? Or did you have the impression they were wasteful and you "normal" (due to your frugal family)? Did you already have FIRE in mind when you started working in 2010?

I'm also curious how managing your friends and family's capital works out for you. Did they approach you about managing their money? I'm guessing you have some sort of contract. Do you not fear it could affect the relationship during an economic downturn?

Benjamin Klarman
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Joined: Thu Jun 07, 2018 7:41 am

Re: Benjamin Klarman journal

Post by Benjamin Klarman » Mon Jun 11, 2018 4:58 pm

Thank you both for your kind words.

@SavingWithBabies: I do have a sister (6 years younger), with is not lavish but I wouldn't see her as frugal either. Likely more frugal than the average person but less than me. Certainly much less than the way I used to be on my earlier money-accumulation phase.

I believe there were a combination of factors that influenced the way I perceived finances.

Firstly, of course, there is the way I am wired... I remembering asking my father - at the age of 6, approximately - what was the point of having money in the bank. As he named earning interest as one of the reasons, and I proceeded with the follow-up question: "so if I have enough money, can I just live out of the interests?" - the dialog was likely much longer than this since I was not familiar with what earning interests meant. But still, the concept of having capital working for/instead of you started to make sense to me from a early age. Plus, I truly enjoy analysing companies and investing and I have been always very curious about it.

I think my grandfather was a huge influence, too.
Some background on his story: He was born poor and had no chance to even finish primary school. At the age of 8, he started trading pigs between local markets (doing some kind of arbitrage, to my understanding). Then he moved on to breeding pigs, to have bigger pig farms, bought some land, added cows, then bought more land, added agriculture and forest... and by the time he was 30, I believe he was quite wealthy. He too understood quite early the power of saving and compounding. Still, to date, I believe him to be the most frugal of all of our extended family, largely reinvesting his earnings or gifting it away to family, despite being the wealthiest.

Unlike my sister, I had to spend a lot of time with him between the age of 6 to 16, I remember that weekends and vacations were tougher than school and I was one of the few kids that was not really looking forward to it. I had to wake up even earlier than weekdays to go do things such as beat stinky pigs into a truck that would lead them to the slaughterhouse. Some parts were more fun, such as planting trees or seeing how my grandfather managed his employees. He would also share some of his life stories and asked me a lot of puzzles with numbers during our car rides to his properties. I guess he subtly planted several frugal principals on me over this time.

I not sure if my story is of any help to you, but perhaps, the most important takeaways are that there will be a genetic part to which you will have little control on, and there will be a more "leading by example and principals" part, which you can influence very much.

@ Astra: Living with €10k in my accumulation phase was OK, I didn't feel I was making many sacrifices. I felt more like I was being a bit smarter about money. I just kept living the same way I lived during university while adding some vacations expenses. I would say the main differences when compared with my colleagues at the time where that I kept renting a room instead of a whole flat (so my €250/month would compare with €600 + utilities + cable + internet => likely €5.4k/year), and I never bought a car (which most of them bought with credit, so at least another €2k/year of costs/depreciation). Plus I would mostly have lunch at the subsidised work canteen instead of fancier places (€4 meal instead of €8-15... so at least another €1-3k year). I think that would make the bulk of the difference.
Did you already have FIRE in mind when you started working in 2010?
Yes, at least in some form. Although I remember thinking that working for a corporation wouldn't be much of a problem, so it was more for the FI than the ER part. I was a bit naive, I think, but with 70h workweeks and some dull work, that changed that quickly. I also started to appreciate flexibility more and more. Plus I didn't particularly like all the politics game for promotions and bonuses.

Regarding managing friends and family capital: They did take the initiative of approaching me to manage part of their savings, which takes some of the pressure off. Plus, we are talking about close friends and family (only 4 people) with a mutual degree of respect and trust and with long term horizon (no need of capital for the foreseeable future, if at all). Although it remains to be tested whether a severe decrease in the market value would affect our relationship, they do make some benchmarking with other managers. So if a negative performance comes from a general market downturn, I think it should be OK. If it is specific to my investment style, I would be open about it and leave them very comfortable to allocate the money elsewhere. Moreover, I did not accept to manage a very significant part of their NW (I am managing a maximum of 10% of their liquid assets) for two main reasons: 1) to decrease their emotion attachment to this specific part of the portfolio and 2) because my investment style is not scalable (I like to invest mostly in iliquid overlooked companies).


Re: Benjamin Klarman journal

Post by thegreatvoid » Tue Jun 12, 2018 12:14 am

Congratulations on achieving ERE at such a young age.

Portugal is great country to retire. I was shocked how much cheaper things were compared to Austria, even though we share the same currency.

what are taxes on capital gains in Portugal ? What Broker do you use ?

Benjamin Klarman
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Joined: Thu Jun 07, 2018 7:41 am

Re: Benjamin Klarman journal

Post by Benjamin Klarman » Thu Jun 14, 2018 9:27 am

Indeed. Portugal is a great country to be at (mostly for its landscape, historical sights and great food) and overall cheaper than central Europe, but the recent tourism boom together with AirBnB is pushing up rents dramatically, especially in Lisbon and Oporto. Big expense items such cars are crazy expensive here... Taxes account for roughly 50% of the price depending on the car's motor size and such. We also have one of the higher gas prices in Europe. This is a big toll to the average person and most of my friends (they usually commute to work by car), although it doesn't affect me much. But yeah, still much cheaper than Austria...
I am expecting my €25k annual expenses to come down this year to about €20k despite intensive travelling. If I was to settle outside of Lisbon, I would likely be able to drop my expenses to €15k while keeping a similar lifestyle, but instead I am thinking about going 2 months to Asia to see weather I like it.

I mostly use Interactive Brokers and capital gains are taxed at 28% which is a big incentive to have a low portfolio turnorver.

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Re: Benjamin Klarman journal

Post by FBeyer » Thu Jun 14, 2018 10:46 am

If you're up for a giggle. Use google to find out what the registration fee for a car in Denmark is.

Benjamin Klarman
Posts: 9
Joined: Thu Jun 07, 2018 7:41 am

Re: Benjamin Klarman journal

Post by Benjamin Klarman » Thu Jun 14, 2018 11:30 am

Wow... 150% tax... Outch. Had no idea.

For a more direct comparison, I've looked at Numbeo, and learned the following:
Lisbon Vs. Copegagen
Volkswagen Golf 1.4 90 KW Trendline (Or Equivalent New Car) 25,000.00 € (186,249.82 kr) => 31,677.88 € (236,000.00 kr) +26.71 %
Toyota Corolla 1.6l 97kW Comfort (Or Equivalent New Car) 23,211.67 € (172,926.75 kr) => 33,068.11 € (246,357.14 kr) +42.46 %
Damn... ... Copenhagen

Benjamin Klarman
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Joined: Thu Jun 07, 2018 7:41 am

Re: Benjamin Klarman journal

Post by Benjamin Klarman » Fri Jul 06, 2018 1:56 pm

I will try to make at least a monthly update in my journal to both track my finances and my state of mind:

Finances for June '18
Spent €1,524, distributed as follows:
€609 in trips (went to Italy for a long weekend and travelled a bit within Portugal too)
€334 in one-offs (mostly on a decent set of kitchen knifes, which were most needed and a purchase that has been enough postponed)
€581 others (mostly supermarket, dinning out and drinks... when on a few dates and social events)
No rent for now... I am living in a house that belongs to my family.

Net Worth evolution
NW increased to €943k, up 1.5% mom and a a nice 20% YTD (11pp contribution from capital returns and 9pp from savings). I am quite happy with my portfolio returns so far since I managed not to make any major mistakes while some nice bargains have started to materialised. Dividend income YTD adds up to €23.5k (with the bulk of my companies having paid most of their yearly dividends already) which bodes well with my €8,5k YTD expenses (€17k annualised)

10 months into early retirement and I feel quite happy. Main hobby is still finance: looking into companies, looking at special situations such as M&A and spin-offs. Also doing cross-fit 3 times a week to stay in shape, plus the occasional bike ride, hike and other ad hoc sports. The romantic side is going well, too, since found a girl on tinder which I am quite a big fan of. She's smart, thoughtful and easygoing. Nevertheless I been conflicted whether to fool around a little bit more or have a monogamous relationship.
I guess my major issue is that days fly by really fast despite leading a relaxing life. Plus I been wanting to find a new hobby (on sports? music? programming?), but don't seem to find any motivation. The cool thing about enjoying analysing companies and investing is that it may generate money (there is also the very real risk I may destroy capital, too, of course, but I think the odds are favourable). So it will always feel more efficient that learning how to play piano for instance, since the odds that I may monetise it are really slim...

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Re: Benjamin Klarman journal

Post by Demosthenes » Fri Jul 06, 2018 9:06 pm

Thanks for sharing your thoughts Benjamin. I would be interested to hear a little bit about your portfolio. It sounds like you have put a lot of thought into it. How much of it do you change from a year to year basis? Would you consider yourself a day trader?

Benjamin Klarman
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Re: Benjamin Klarman journal

Post by Benjamin Klarman » Sun Jul 08, 2018 7:38 pm

Thank you for reading! I am not a day trader... nor really a trader. I am an investor... I invest in companies and (borrowing a quote from W. Buffet) my favourite holding period is forever. Having said that, I do invest in the occasional arbitrage, spin-off or other kind of special situation that takes from 4 to 24 months to materialise. Only less than 20% of my portfolio has been purchase less than one year ago, while 10pp of that was deployment of new cash (and the balance from stock proceeds reinvestment).

Benjamin Klarman
Posts: 9
Joined: Thu Jun 07, 2018 7:41 am

Re: Benjamin Klarman journal

Post by Benjamin Klarman » Sun Aug 05, 2018 12:23 pm

Expenses for July: €3.2k
Of which:
€1k trips (booked some flights to Sinpagore*, travelled more in Portugal)
€500 rent (booked some AirBnB for Australia*)
€1.7k rest - Eiiixh... I went a bit overboard this month. I've spent a lot on dinning out as well as on gas and tools. I expect August to be on a more normalised €700 on this line

*One could argue these are anticipated costs for Oct-Dec rather than for the past month

NW down 2.5% mom to 920k mostly due to market fluctuations. YTD still up by 17% from a 8% return and 9pp contribution from savings. It's interesting to note that my NW decreased more in the sole month (-€23k) that what I expect to spend the whole year. On the other hand, market fluctuations of +-2.5% are quite common and nothing to cry much about.

Quite happy, mostly due to a new girlfriend and to be able to allocate my time as I see fit. I can't stress enough how much I came to appreciate this level of freedom. Just a small example: I feel quite lucky to be able to wake up naturally almost every day. Also for having the opportunity to do lot's of travelling within the country, plenty of reading and sports.
Last month I didn't have the chance to look into listed companies as much I would like to though (or at least as efficiently as I would like). Most days seem to pass by really fast.

Benjamin Klarman
Posts: 9
Joined: Thu Jun 07, 2018 7:41 am

Re: Benjamin Klarman journal

Post by Benjamin Klarman » Mon Sep 03, 2018 9:53 am

Expenses for August: €2.7k
Of which:
€1.5k trips (booked more flights for Asia/Australia trip)
€445 wants (crossfit for 2 months, new battery for motorbike, a new backpack and cloths) / I do not foresee any "wants" expenses for Sept
€123 "work" related expenses (trips and subscriptions)
€647 rest - good to see that this more recurrent line is back to normalised levels

NW down 2% mom to 900k again mostly due to market fluctuations. YTD still up by 15% from a 6,7% return and 8pp contribution from savings.

Last two months NW fluctuation was massive on € amounts (€42k) which would be enough to comfortable finance my lifestyle for 2 years. I took note but I don't make much about it. I try to focus on the long-term, and moreover, YTD return is still at a nice 7% and I have 31% of my NW in cash awaiting for a market correction and/or better opportunities.
Still feeling quite happy all-in-all. I quite liked my last few months in Portugal. So much that I am even with some regrets of going away for a long period.
I met with some former colleges for lunch and left with a bit of nostalgia. To be sure, I would not consider going back, but I do miss the teamwork.

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