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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.

Categories
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.