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Financial Planning Personal Rant

When you fail to reach savings goals – Survival checklist!

I have a confession to make in this post. In the months of November and December, I failed to reach savings goals. I saved nothing in November and saved half of what I wanted to in December. Es ist mein schuld! It is my fault (schuld is also used as the German word for debt!) and am now trying to cope with lack of discipline while chasing Financial Independence.

Did Black Friday made me fail to reach savings goals?

The truth here is a combination of gift giving and planning for future travel. In the past 30 days I spent money on gifts for our anniversary, my wife’s birthday, a dinner on that birthday and gifts for a friend who just got married. You see a pattern here?

How did I get there?

My failing to save in November was quite disappointing, and I had resolved to make amends in December.

Come December, I fell off the wagon, I avoided reading any FI content to hide behind my shame. Today, I finally felt brave enough to look myself in the mirror and forgave myself.

I have little regret for spending money on people I cared about, and was conscious to not go overboard. What I did fail at was not being able to plan these expenses.

and survival checklist?

Ah yes, the Dave Ramsey approach is to eat rice and beans! My checklist to survive when you fail to reach saving goals:

  • Is this a symptom of a bigger issue? Am I not able to control myself here? No
  • Is this temporary or a permanent expenses which I cannot handle? No
  • Were my savings goals too big that they simply put me off and I felt I won’t get there anyway? Maybe

So, I aimed to save more than 1k EUR per month, and the goal was far too high to achieve. Like my dieting attempts, the high goal simply made progress impossible. In the tight months I could have lowered the targets and survived the frustration.

My survival tip to manage goals is to attempt Incremental changes, small steps lead to big results, else your old habits are hard to break. In fact in a way I just ignored my own advice.

I also suggest this beautiful Everyday App, which makes it super easy to track changes.

Categories
Financial Planning Personal Post Real Estate

Why we have to delay buying our home

I have not been a keen imitator is template dreams, I still do not own a car, and have argued against buying an apartment at home. However, recent changes in the local European interest rates, changes in life situation and simply higher rents made me start believing that we could own a home. However, recent events have just made us decide that we have to delay buying our home.

For Sale

Why buy when you could have rented Mr A?

True. We tried and are failing.

After becoming a parent, the limitations of the space in our current rented apartment and the struggle of our visiting parents climbing 3 flights of stairs made us search for a bigger rented apartment.

Yet, with the constant struggle of applying and never being called to visit, and the few instances when we did get to visit homes, we are facing an uphill challenge where a bare increase of 10 sq.m area is going to cost us 40% more in rent. Rents have simply skyrocketed in the last 3 years. Additionally, we cannot simply move too far as we are bound by constraints of the daycare (already 7 km away). Thus the brilliant idea of buying an apartment was born, and we started to save for it.

You have to delay buying a home, because you do not have the money, isn’t it?

True again. Isn’t that always the case? I had been keeping an eye on a new development which was in a perfect location, and closer to the day care and yet not so far from the town center. An year of more purposeful saving made us come close to around 12% of the house value we had planned for (based on prices in the same area 18 months ago).

The price list came through on Monday, and it simply crashed through our plan. The prices of the apartments have risen higher than we had estimated, and our down-payment is lower than we wanted. I know I can probably get the apartment at 90% mortgage. I am tempted to try this, the apartment seemed perfect and had parks and no drive zone for children. But paying more than 35% of our monthly income for 30 years and extra maintenance money on top is not a financially wise decision. This is not how we Get FI! I do not want to write this purchase to be the title of my next Money Mistake post!

My wife and I had a long discussion this morning, and she just said,’We cannot take a 30 year mortgage which eats 40% of our income, this is stupid given that our child will be out of his daycare in 2.5 years‘.

She is right.

Delay buying a home. Hurts.

So, we have now reassessed our dreams and take a step back. We will save more next year, and are looking at places within our budget. Hopefully it might work out in 2020. I know I really liked that place, but I also like Maseratis

In the end, our homes are our safe spaces, and it is our loved ones which make them a home else they are just brick and cement.

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Personal Post

Achtung! We can still fail to achieve Financial Independence

Achtung! Drop ahead.

Let me state out this in the first sentence, “I am not an expert on this topic, I am fiddling around and will help you figure what I already know. I am not even 7% of my FI Target and I can still fail to achieve financial independence”

But, I am confident that I will do better than what I was doing earlier (which was nothing), I might be slow or fast but I will get there eventually!

…but if we fail to achieve financial independence, we are screwed!

No, of course there are pitfalls on your journey to attempt to get to financial independence, let us not make it sound easier than it is. That side hustle may not work out, your pay rise may not happen, sickness can happen, repairs, car breakdown, bad investments and so on. There are a million unknowns which may or may not happen, and we cannot control them.

The only thing we can control is, our reaction to them, and still keep moving forward. So here are some postulates we can work with!

  • Some saving is better than no saving, it can be 50 EURs instead of 250 EURs you had assumed. It still counts.
  • Markets, be it housing or financial, will crash and rise. This is not in our control, but what is in our control is to invest for the long term.
  • Health beats any hustle or job, eventually ignoring your health will cost you the very same money you made by ignoring it.
  • Missing goals and targets in short term is normal. Don’t sweat it, bad days or weeks or months are natural!
  • Inspite of all the money talk here, money is still not the most important thing in life. So, live a little!

So, all I am trying to say is, start now and work towards this hard but worthwhile goal. We might be slow, or not achieve 100% of the target, but we will not even up in mud. Unless you make really serious mistakes, you will not end up broke.

Besides do you even have a choice?

When your rentenversicherung(pension) will get you less than 1k EURs after working for 35 years, and your retirement date will continue to climb up to almost 70, how will you survive? Old age poverty is as real as it can be.

Our current social security system is not sustainable and will be either barebones or collapse completely by the time we age, and we need to find a way to supplement the gaps in our income at that age.

Old Age Poverty in Germany

So, as I said it before and will repeat, it is all worth the effort.

Categories
Financial Planning Personal Post

Financial Independence is worthwhile for me, you and everybody. Period.

Have you come across internet posts which label the FIRE movement as a cult, or how meaningless life will be if you retire at 40, or how FIRE is all about those people who hate their jobs? My answer to them all is Nein, Nein Nein! Financial Independence (sans retirement) is a worthwhile pursuit meant for all of us.

Job Losses are a reality

Job losses are real, and a reality of business cycles

Bayer to cut 4,500 jobs in Germany

Ford to cut 5,000 jobs in Germany in savings drive

Bank Job Cuts Approach 60,000 as Commerzbank Plans to Swing Ax

Thomas Cook is no more – What happens to its 21000 staff

The above headlines are from 2019, and we are yet to announce a recession. All those big companies are shedding, and I can bet that most of the employees there are really good smart people, and have families to take care of, yet they face a massive challenge in the months to come.

Sure, the German unemployment insurance will cover 60% of their pay for upto 2 years. Will they find good jobs soon, with similar pay and satisfaction? How many will end up being long term unemployed?

Finally, what if you or I were among those people, with obligations to take care of. Wouldn’t having an active effort towards Financial Independence make it easier? You may start with a small rainy day fund, but aim for a long winter, every little step will count.

Let us drop the myth that you are only Financial Independent if you do not need a job anymore, you can be Financially Independent for shorter period of time as well.

..but I do not want to Retire Early…

Exactly, Retiring Early is optional, not even an important factor here. Sadly blogs and popular media obsess over RE more than they talk of FI. All steps taken for goals, investments are really oriented towards being FI.

JL Collins wrote an amazing book called the Simple Path to wealth, he talks about how being Financial prudent allowed him to survive multiple job losses.

..but to be Financially Independent, I need to be frugal, its hard…

Image rights : Pat Bagly

Balance, and disciple is necessary for any worthwhile pursuit in life. You can either do a crash diet to lose weight, fail and gain all of it back again, or make quality food choice which you can continue over long term and reap health benefits.

What I mean is, its still okay to have a coffee from a cafe sometimes or continue your Netflix subscription if that feels essential to you. Guilt tripping oneself for every spend is not the way to do it, but tracking or planning reasonable purchases is. (PS: You define what is reasonable)

However, If your balance is in spending everything, then you need to re-assess your priorities. The decision to pursue Financial Independence is also your own life decision, nobody can force you into this, you are the hero/heroine of your life.

..but Financial Independence is worthwhile for people with above average incomes, and I can barely get by

If you had been lucky to have enough in the past and this is a temporary blimp then attempts at Financial Independence would have helped.

In contrast, if you never got a chance to even start saving and have been struggling for a long while, then you need to seek help, it can be help to find a new job, or upgrade skills or even more. I can only suggest that you need to hang in there tight, and keep going.

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My Money Mistakes Personal Post Series

My Money Mistakes – 2019 edition

While we are on the topic of my relationship with money, I would kick start the series of My Money Mistakes and make it an annual edition. The year is yet to close, but I think I have already done the worst ones.

Our Goa trip; can’t remember the taste anymore..

Each year I make stupid money mistakes, which I mentally tag into my stupid mistakes bucket. Small bad purchases or misses which result in this are allocated, and try not to beat myself over them. My Money Mistakes is not about those accidental events, but of seemingly deliberate stupid decisions I have made, and will make with money.

This year, I have two really good candidates,

  • Trip to India, to attend a destination wedding and never getting to meet my own immediate family. We planned months ahead, got tickets for the three of us, survived 13 hours of flights (and a bomb scare at the airport) with a toddler to attend a wedding and meet old friends for 10 days. We did take a few days off after the wedding to stay in a resort and enjoy Goa (look it up, nice place). Yet, if I add up the tickets+gifts+wedding wear+hassle we had to go through, the trip was just not worth it.

    Apart from a damage of over 3000 euros, we got sucked into showing off our well being (the indian way). We did enjoy meeting some family members and friends, but this could have been done differently at another time. Never again.
  • Investing in Cannabis stocks. You can already see where this is going, I bought into CGC and AC stocks, both of them tanked horribly. I had a stop loss and luckily only experimented with 300 bucks, but even with that a loss of 21% in value hurts. Clearly I was high without learning the specifics. Will-not-repeat.
    (Side Note: On the other had I sold off Shopify which I never trusted and still made a profit, it is still going upwards but I don’t buy it.)

Would you like to share a mistake you made with money in the past year? Maybe we learn from it

Categories
Personal Post

Decoding my relationship with money

The reason behind sharing this personal story is to decode my relationship with money, this post also puts out into public the story of family’s struggles over the years.

As mentioned in About Me, I am from India, my parents continue to live in India. Born into a relatively wealthy family, my father opted out of their business and went on to work in a government owned technology company. He did well for the first two decades or so, managed to build himself a house and grow in the organization. My parents were always cautious in spending and these values passed on to us.

Retirement planning

Strike 1: Depletion of Investments and Faith

India had to opt for various reforms in early 90s, which opened up its markets to global investors. In 1992, the BSE Sensex grew from 2000 points in January to over 4467 points in April. This was a massive bull-run, fueled by stock price manipulation orchestrated by Harsad Mehta. On April 28, 1992, the market crashed by 12% wiping off billions of investments.

This single event resulted in losses for my father, as a result of it, he never spent a single dime towards market investments. The faith on market forces was broke, and remains to be so. He missed on the growth options available.

Strike 2: Surviving on partial pay for almost a decade changed the relationship with money

As a result of economic reforms, state owned companies started facing massive competition from new entrants, their inefficiencies/mis-management laid bare and my fathers employer ended up being a loss making firm. The direct impact of this was overdue salary payments, take-it-or-leave it early retirement options became the only choices.

Multiple years of partial pay meant we struggled managing our lives, and were extra frugal for many years. The unpaid income is lost, and has never been paid. He finally opted out with an early retirement. Switched careers in mid-50s to become a professor and lasted another decade. This helped him build a little corpus and helped his confidence.

Personal memories

The topic of money was not openly (and still is) discussed, we had no real financial education except for being frugal. I believe that there was a sense of shame for them, for they actively tried to hide their situation with their friends or family.

I still remember an argument between my parents when my father had to pay extra 300 INR (5 EURs) for an AC train ticket for me. This was because I was to accompany a cousin who could afford to travel in AC. It was one of the few times when the strain was laid bare.

The other event which I remember is when I was about to start my first job, and he wanted me to take a flight the first time. To support this, he took a personal loan and give me a little bit of money for the first month. He simply had no savings to help me out then, but he was proud of me. I am happy to add that it was the last time I asked him for money during my working life.

So, my relationship with money?

  • Save. Save. Save. Be frugal and careful on how you spend money. The result is that whenever my monthly account goes below 10% of a month’s pay, I feel stressed.
  • Do not invest. The market is rigged. It has resulted in me avoiding the market, and even when I started the invested amounts were minimal. It is only in my 30s that I understood my mistake and have tried to fix it.
  • Security over risk. I am pretty risk averse, be it investing or career. This remains to be a barrier, and I believe being FI will allow me to take those chances.
  • Don’t talk Money. We don’t speak money with each other. This has lead to a situation where they think I do not earn well enough because I am frugal!

Do you have any stories to share about how your relationship with money was shaped?