In this post I determined that to be to be financially free in Belgium you need an investment between 325.000 and 525.000. I will now tell you how, at age 42 I am well on my way to reach this.
In the beginning there was nothing.
Well, actually lets scratch that: In the beginning there was nothing. My parents had, as most parents do, saved some money for me. Around 8.000 euro which 24 years ago (and 18 year old, me being able to make around 1.000 euro at a summer job), was a decent amount of change.
I had played a bit in the stock market as a student. But not really knowing what I did, this was more or less a wash.
Raised by pretty frugal parents I was never a spendypants.
In the year 2000 I entered the work force but continued the cheap ass lifestyle of a student: cheap housing, no car. I was saving a lot of my pay check (estimates are somewhere between 35% a 40%) without really knowing why.
The job was boring and crap but paid reasonably well, although below the average net wage of Belgium. Only for about 5 years out of my, at this moment, 16 year old career I would be making the average wage. Most years I was a little under it (being a sloth does have its consequences …). But at that first job I could get my 8 hours work done in about 6 hours, which left 2 hours a work day to muck around on the internet.
During one of those,” let’s see if there is anything interesting to read on the internet”-moments I stumbled upon Warren Buffett’s letters to the shareholders. I had finally found a decent foundation upon which to build my own investment approach! I have always been an all or nothing kinda guy (with a strong preference towards nothing) so the more I read about value investing the more confident I felt to go all in. Not being a complete idiot (there are many, many people who are more than willing to testify – with extensive proof – that I actually am a complete idiot in many, many area’s, luckily money is not one of those area’s!) I decided to hedge my investment. I went all in, but half of my money I invested in Berkshire Hathaway. The other half I would invest myself according to the value investing principles (O, the arrogance of youth!).
Up until 2005 I remained my frugal self: biking everywhere, not going on holidays (current amount of holidays: 9, two of which when I was a student, and involved driving a cheap old mobile home through France and the U.K with 5 friends) and basically living like I did when I was a student.
Around 2005 I moved in with my girlfriend and even though my housing costs went down I starting living a somewhat less frugal life. Still no car for myself but she had one, she also dragged me on holidays to foreign countries (the horror!) or wanted to go eat at a restaurant sometimes (the restaurant thing never really worked: I still find the experience unpleasant). Savings rate must have dropped but I never really budgeted so no numbers to back up this feeling.
In 2006 my employer decided that they were really overpaying us for the type of work we did so they moved about 20 of us to an even more crap department. They either hoped we would find another department in the company (hopefully with a job content more aligned with the pay we received) or leave the company altogether. But one provision of this restructuring was that if we did not like the new department and did not find another job within the company, after 6 months we could ask to be terminated with full benefits. Using the power of FU-money for the first time I took this way out. Less than 2 months later (November 2006) I had a better paying job and could put about 13.000 euro of my severance pay in investments.
In 2008 I moved to another company and was finally taking home about the average net wage in Belgium. Still no car. Still living with the girlfriend, so I now had a few ‘real’ vacations under my belt. I found the experience to be OK (more for the not having to work than the holiday itself). In true sloth fashion I was not a big fan of all this moving around a vacation apparently involves …
Around 2010 my girlfriend was really sick of living in a bad part of the city and I started to come round to her viewpoint so we became serious about looking for a house to buy. My iron rule: I refused to sell any of my investments to fund the purchase. Finally bought a car together: the girlfriend had sold her car when she was unemployed and studying again; so we had been a no car couple for a few years. Her studying did keep both off us pretty frugal.
In 2011 we bought our current house. Because of my rule not wanting to sell any investments we had to look intensively for something we liked in our price range (and also 115 km away from friends and family). We finally found an old farmhouse with a decent size garden. Because off our budget, the house needed a lot of work. Despite this, I kinda forced my girlfriend to invest a chunk of her profits from selling her house in the city in stocks (forcing somebody to invest, luckily for me, has never become a punishable offence in Belgium). It is one of the reasons why we are still renovating the place. It forced us to continue to life a somewhat frugal life but now all available cash was thrown into the house and no longer into my investing. Those investments off course kept appreciating as I turned out not to be that bad at finding undervalued stocks and Buffett kept hitting balls out of the park. The girlfriend also was 1 year unemployed. We normally split everything 50/50 but during 6 months of her unemployment I had to compensate a bit to make up her reduced income.
Due to some new laws our government passed (they passed a tax on ‘speculative gains’, not their smartest move and as of 2017 this tax will be terminated again as it was costing them more in losses on another tax) I had to reassess my investment approach. In December 2015 I moved to another broker who offered CfD’s (which provided a way around the new tax). Prior to this move my investments were scattered over different brokers. Putting everything in one place gave me a better view. I had a total of 176.000 euro in investments. But I hadn’t really done any better than Buffett had (better than the index, worse than Buffett). With the new tax in effect and the new tools provided by my new broker I decided to change my approach. Since the new broker made it possible to have a margin account guaranteed by stock, I would keep everything in Berkshire and only rarely do an investment on margin when an opportunity arises. Special circumstance investing I would call it.
I needed not wait very longer. AB Inbev, the world’s largest brewer and a Belgian company I had known for decades (we take our beer very seriously here in Belgium) made a take offer bid on SAB MILLER. They offered 44 GBP but the market had doubts so the SAB MILER stock traded at 40 GBP. I had no doubts. Remember me being an all or nothing kinda guy? Yeah, I bought 200.000 GBP worth of SAB Miller CfD’s on the underlying stock. The brexit vote would force me out of the trade since my broker changed it margin requirements (receiving that mail was a bit of a surprise, unwinding the trade in my account, my parents account and my girlfriends account gave me about 2 small heart attacks). The brexit vote did cost me some profit but in the end I walked away with over 10.000 euro on a trade that was in effect less than 6 months. I decided I liked this special circumstances investing!
In March 2016 I was also terminated at my employer. A restructuring provided a way to leave the company on very favorable terms. From September 2015 till march 2016 I was still paid but only needed to attend some outplacement classes; in March I got full severance. Over 25.000 euro, which went a long way in paying our kitchen and bathroom renovation!
Since I no longer needed to go to work at that moment and my SAB Miller trade was unwound I decided to have some fun and daytrade google when it was beaten down to the 730 USD level. A profitable experience but way too much work (and stress). During that time, I also stumbled upon Mr Money moustache. I liked what I read!
Since I had decided to squander my severance pay on a new kitchen and a bathroom (the girlfriend did not agree with the ‘hooker and blow’-route) I also needed another job. On May the first I landed a temp job (until January 2017) which has payed the bills until now. But I was once again below the average wage of Belgium. Still I must not complain. To recap 2016: payed by old company until 9 march, severance pay until 9 December. 1st Of May until the end of December paid by temp job. That’s 19 months and 1 week of wages for a grand total of 8 months real work (at the temp job). I could get used to that, but alas will not be able to repeat this in 2017!
Somewhere in June I stumbled upon another special circumstance investing opportunity which has brought in another 10.000+ euro of profits and which I will be able to repeat in January for another 20.000 euro profit (except in the case of global thermonuclear war).
All this special circumstance investing and the rise in stock price of Berkshire Hathaway has brought the investments up to almost the ¼ million mark: present value (before the opening of the US market) on 30 December 2016: a cool 244.000 euro. A gain of 68.000 euro or 39% in one year. I think it is safe to say I will not be repeating this performance in 2017 (actually I hope not as this would indicate a gigantic bubble run in stocks, stock prices being flat over 2017 would be nice). Fun little fact: the company that terminated me in March 2016? Yes, it was a financial company. Life can be funny that way …
But there you have it. A somewhat frugal person, making below average wage in Belgium and getting a little bit above market returns has over 16 years of working build a stash of 244.000 euro. Do not let the performance of 2016 fool you, all in all I have beat the markets by perhaps 2% or 3% over those 16 years. Ok, it makes a difference. But I could have made more money at work: several co-workers of those early days are being paid quit generously at the moment. I could have been more frugal: I went on 7 holidays in the last 12 years! I have had a car for the last 5 years! I spend a 1.000 euro on a quadcopter I hardly use and decent money on other electronics and whiskey (everybody has his weaknesses).
Honestly, in many aspects I have been a true sloth over the last 10 years, 20 years, all my life! And then I look around me, see people making lots more money than me and have almost no investments. Which has me thinking: am I that smart or are they so stupid? It really is not that hard: save a big part of your paycheck, buy index trackers (or learn a bit about investing yourself), rinse, repeat for around 20 years and boom you are done! Are restaurant visits, expensive clothes or a shiny new cars really worth working an extra 20 to 25 years? Because I do not see the allure of it. I never have.