Financial Freedom Sloth

achieving financial freedom one lazy step at a time

Page 3 of 7

Tax the middle class, always tax the middle class. Until …

Amber tree had an overview of the latest taxes our beloved government will put at the feet of the Belgian investors. Although this dedication of targeting the private investor is somewhat new, the broader trend of taxing the middle class is not.

Tax the middle class, always tax the middle class

It is pretty logical to tax the middle class. The rich are hard to tax because they can afford to spend money to find ways to avoid taxes (and if everything else fails they can always chose for the nuclear option and relocate to a more favorable country). The middleclass not so much. Spending 10.000 euro on a financial expert to avoid 100.000 euro in taxes is smart. Spending 10.000 euro to avoid a few 1000 euro’s in tax not so much. And the poor, well they are poor. Take away the little they have and you could face open revolt in the streets; And if there is one thing the government want to avoid at all cost it is a revolt (rulers tend to lose their head when Europeans revolt).

So the middle class it has been for the last decades! In those decades labor has been taxed so heavenly that an increase there would actually diminish total tax returns. Consumption too is taxed at its maximum: 21% on most products. Go higher and in a small country like Belgium everybody will start shopping in France or Germany. Since earning money and spending money are out, they are now looking at what is not earned or spend: savings and investments. Looking for ways to tax it and trying to determine the maximum they can tax in that category. I am afraid they have just begun with this exercise. Fortunately for us it will be an exercise in futility.

Until …

It has been my conviction for some years now that the increasing digitalization of our world is decreasing the taxable base for our government. A digital world is also a winner takes all world. As a government you either make damn sure your country hops on new innovations when they starts or you are left with nothing. A real life example to illustrate this point.

Sigarettes. When filter cigarettes came on to the market (the filter once was an example of great technological innovation and created an entire new, bigger market of smokers), as a government, you could afford to be ‘late’ to the party. No matter when you would allow them on your market (either soon after it was invented and commercialized or years later because you had a non-filter tobacco industry you tried to protect) once you allowed it, the follow would happen. Factories would be built in your country, an entire logistics/distribution chain would be created (wholesale – retail sellers) and marketing would happen in your country. Each and ever of those things could be taxed. The only thing you lost by being late to the party was the headquarter and part of the net profit (all those years you waited, foreign brands grew bigger and bigger. Once you allow it, they flood into your country leaving no room for local entrepreneurs to launch a national brand).

Fast forward to the next innovation on smoking: vaping. Being late to the party (as Belgium is because it first did not allow the sale of it and now has a very restrictive law) means that everybody just orders it at foreign web shops. Production, marketing, almost everything now happens in another country and the only thing the Belgian government can tax is the low paid guy in his delivery van who delivers your package at your home. But he is low paid, so taxing him more could lead to revolt. See above why that is a no no. In other words, being late to the party before the internet left you as a government with about 90% of this new market still to tax. Now, it leaves you with nothing to tax.

Digitalization also, in itself has the effect of either shortening value chains or destroying them completely. Renting a movie used to have a pretty decent chain to tax: wholesale, marketing, video shops (called videotheques in Belgium). A lot of parts to be taxed. Now it is Netflix. Same for music, games, banking … pretty soon we will have self-driving cars and instead of having 6 million individual owners to tax our government will have Google and such as an opponent. And Google is a hell of a lot harder to tax than those 6 million individual owners …

So digitalization leaves less parts of value chains to tax. But, and I circle back to the taxing of individual investors, it also increases the possibilities to avoid taxes. Even if you are not part of the wealthy. The internet is a gigantic information database where people share their wisdom. Which means that as soon as 1 person finds a way to avoid a certain tax, everybody knows of it.

I am member of Facebook group about frugal living where each and every day dozen of tips are shared on how to buy stuff cheaper. Remember, every euro not spend on consumption is 0.21 euro of VAT tax lost to the government. My dad, 64 years old, spends his day on cycling forums. As a result he is now buying cycling gear in China. Those new tax laws have not yet been voted and implemented, and already ways of avoiding it are appearing on line.

And if all else fails, the nuclear option is also a lot easier to use than in the past. Relocating has never been easier and cheaper than now. You can find tons of information on the internet. Keeping contact with friends and family in the mother country is easier thanks to social media and popping over the cheapest thanks to cheap flights or buses . All this means that where once you needed a couple of million to make it feasible to relocate, I now think that 1,2 million euro is sufficient. This would give you 24.000 euro a person to live off. More than enough to live a very comfortable life in most places on this world. With a wealth tax that starts at 500.000 euro and a nuclear limit that can be deployed at 600.000 euro that does not leave a whole lot of tax room for our beloved government to tax.

The sad thing is that they know it. But where our videotheques accepted their fate and quietly disappeared (or re-invented themselves as fast-food or mobile phone shops) our government seems to have no interest in slowly fading away. Just like the industrial revolution has come to an end and been displaced by the digital revolution. The government form that evolved with that industrial revolution will sooner or later be displaced. Just look at our history. There was a long time where the land nobility ruled our society. Then the industrial revolution happened and things changed. In most countries they accepted their fate, stepped aside and let progress follow it course. In other countries they resisted and were unwilling to relinquish their power. Those got their head chopped off … Personally I abhor the value destruction that a revolt brings with it. But hey, I am sure you can find the building plans to a guillotine somewhere on the internet….

 

 

Special circumstance investing – taking on to much risk

I sold puts on Ahold Delhaize strike 17,50 expiry 09/17 and received 0,50 euro premium.

I did this for me (10 contracts, 488 euro net premium received), the girlfriends portfolio (11 contracts, 530,20 euro premium) and my parents (5 contracts, 241 euro premium). I just took on to much risk in my own portfolio and I know it.

I knew it from the start. When I transferred all my positions to Lynx (a reseller of Interactive broker) and started looking at all the shiny new toys they offered I felt like a kid in a candy store. And I knew right from the start: this is dangerous.

Especially the leverage part. Leverage is wonderful in good times and can really turbo charge your profits but when it works against you it can devastate your portfolio. I knew I needed to be careful with pulling that particular lever. Only to be used in very special circumstances (hence the name for these posts).

So I did my leveraged construction only at a good price point with an excellent stock. And I would keep the cash I got upfront in cash so I could unwind it whenever it was necessary.

Then the stock went up, my buffer grew bigger and I thought it to be ok to use some of that cash to also write puts. Puts that would not be exercised! The money now has to cover two positions. I am good as long as only one thing moves against me.

Then the put went out of money and I used the same money for two different put series. The same money now has to cover three positions. Profits are great and everything is ok as long as only 1 out of the three positions doesn’t work out.

Then the second put also went out of money and I wrote puts on Ahold. The same money now has to cover four positions. In my own portfolio I definitely have taken on to much risk and I now it. Sunday evening I logged in and only did an order in the girlfriends portfolio (no leveraged position, money only serves two put positions now) and the parents (leveraged position + 2 put positions). Then Monday morning before work I quickly entered the same order in my portfolio.

It will work out. I am sure of it. It will be a nice 488 euro extra in my bank account. But the fact remains I took on too much risk. I went over my own limit* and I know it.

There is something in my personality that likes testing boundaries. I want to know where my limit is. I only got truly, completely utterly drunk around three times in my life. I now know where my limit is and have no need to test it anymore. With other products I, as with everything, got informed. Delving deep into the internet, deep into forums. Determining save doses. Using those save doses. And then, again, testing my limits. Going, knowingly, over the save limit. I wanted to know exactly where my limit was and the only way to be sure is to go over it. I actually have a somewhat amusing post ready about the time I experimented with boosting my natural  testosterone levels. There too, I went over my limit.

So I also knew I would be testing my limits on Lynx. Going over them. Even now, with the put on Ahold Delhaize (AD) done. With knowing I have already taken on too much risk I am thinking about buying some puts on UVXY again. It shot up the last couple of days and doing it now will probably make me another 10% or even 20% profit on the money I put into it. But it would reduce the cash I have even further. It would make the risk position even worse.

I’ll probably do it after I have posted this. Because it seems to be in my nature to do so. I need to test my limit. Just that one time …

 

*With limit I mean my own limit. I am nowhere near the margin limit of Lynx. They offer up to 8x leverage which in my mind is totally crazy. My own imposed limit is 2x leverage. I am now well above that, approaching 2,5x leverage.

Special circumstance investing – July update

I had good hopes that I would do 0 trades in July. If you are a sloth less is more and nothing is bliss! Alas, the market continued to serve me with some juicy targets so I just HAD to take a swing at them.

What did I do

The ADM put I sold in June expired out of the money so that premium is completely in the pocket! When selling options time is indeed on your side. I love the time decay as it means that I am making money when sleeping or sitting on the toilet …

Last month I told you how I jumped on AB Inbev below 100 euro in the girlfriends portfolio. I really wanted to do it in my own portfolio as well but my money was already pulling double duty for the put with expiry July AND a put expiry August. I eagerly awaiting 21st July. Luck was on my side and AB inbev was still below 100 euro that day. With ADM well above 41 USD and no change of exercise anymore I jumped on the AB Inbev trade with full force. Sold 4 put contracts for expiry December 2017 at strike 100. Got less of a premium than the girlfriend (only 6,25 euro) but with double the amount of puts this trade will net me 2 492,80 euro! I was really lucky because a few days after this AB Inbev published results and the stock went above 100 euro again. Sometimes luck favors the lazy!

Remember I already made 780 euro on AB inbev when it went below 100 euro back in March of this year. These two trades would account for more than 1/4 the of what I would need from investments once I pull the plug and only work three months a year. Back in February I wrote : ‘It is my long held belief that an investor only needs a handful of quality stocks he knows really, really well and a good understanding of all the possibilities of options to do very well for himself.‘ I am even more convinced of this now.

Small explication for the higher amount of puts here. The cash I use here is actually there so I could unwind my leveraged construction if necessary. The longer this construction runs the less cash I need. Because of rising share prices and because 6 months have passed I was comfortable putting 20.000 USD at work (2x times) for writing puts that should not be exercised. But in December the construction will almost be at its end date which means that by then the full cash amount should be available. And that is why I set 40.000 USD at work for the December expiry. I’d like to say I have a spreadsheet that makes all of this more clearly but it’s all in my head (and it’s a mess up there).So small recap, I have:

-a leveraged construction for 450.000 USD with end date January 2018

This pays an upfront cash premium of around 40.000 USD which I use to pay the financing fees and keep so I could unwind the construction if necessary. But also to write puts

– 5 puts on ADM, expiry 08/2017 strike 40 (so 20.000 USD at risk)

-4 puts on AB Inbev, expiry 12/17 strike 100 (so 40.000 USD at risk)

The 21st of July was a very good day for me. I got to write the AB Inbev put but since it was an official holiday in Belgium I also had the day off.  The girlfriend was in Ghent for the festivities there and what do I do when I am home alone? Yep, day trading! And it was a good day for trading: 450 USD of profits! Can  we have more official holidays at option expiry days? I did a little bit of day trading on two other days in July so total profits are 570 USD.

So three days of option writing and day trading in July (and it only took a couple of hours per day) earned me a grand total of around 3.000 euro. An amount that far surpasses my wages from work which sit around 2.000 euro and for which I need to go to Brussels 22 times and work 7,5 hours a day. Too bad not every month is like this because otherwise I could pull the plug on work now.

The girlfriends portfolio

I didn’t do any trades in the girlfriends portfolio this month. UVXY did shoot up the last two days so I might do the UVXY put in her portfolio over the next couple of days. Thinking about it …

I did repeat the AB Inbev put in my parents portfolio on the 3th of July because I forgot their log-in on the 30th of June. So 2 more puts on ABI strike 100, expiry 12/2017. My forgetfulness cost my parents 30 euro since they got 1516 euro in premiums and the girlfriend got 1546 euro the Friday before. Sorry mom and dad!

With AB Inbev now firmly above 100 euro I am looking for a new target to double up in both the girlfriend portfolio and my parents and do another put option. ADM price is too high. Been thinking about Ahold Delhaize, it still hasn’t fully recovered from the price drop a few weeks ago. I like the premium for strike 17,50 in September quit a bit …

Damn, I might do it on Monday which would technically make it a July trade. Screw it, not going to rewrite this post. I’ll just post it in the comments.

To all the nay-sayers

Well, early retirement got some exposure in the Belgian mass media with article’s in Humo and De Tijd. It started with this article by FOB.

Especially the one at De Tijd got the usual nay-sayer comments. Comments we all know not to be correct. So in the name of efficiency and laziness (devote one decent post to it, in future encounters with nay-sayers provide link to this page, done) I put up this rebuttal post.

It can’t be done in Belgium

Most nay-sayers seem to believe that sure, in the USA it can be done but no way it can be done in Belgium! With our high taxes and all …

Sure it is possible. I actually know of two people (one of which was significantly below 40) who did it and a few more well on their way. Some of them even blog about it.

You need to earn a lot of money

Nope. I have only made around the average net wage and I am going to get there around age 47. I even did an additional year of study just for the fun of it (it clearly didn’t result in a high paid job). And made several mistakes. Hell, I have only focused on financial freedom/early retirement for the last two years. I was naturally frugal and started investing as soon as I got my first real job. But still, a better focus would have saved me a few years of working. Actually, if I hadn’t bought my current house 7 years ago I would have probably been financially free now.

In reality, most people who earn lots of money also spend lots of money as they need to wear the ‘right’ clothes/watch, drive the ‘right’ car … Lifestyle inflation is real. And strong among the high earners.

It’s possible if you come from a good (rich) family

Nope again. It helps, that is for sure. Both my parents only went to school until 16. They had saved around 8.000 euro for me when I started working. Yes, one of the guys I know who achieved financial freedom got to live cheaply at a family property. Then again, he has worked for less than 10 years in total. Needing very little money to cover your basic needs is not very motivating to tough it out at a job it appears. Also, he got to live there for cheap because the place was a rundown little farm that hadn’t been renovated since the 1960’s. Since he did a lot of repairs and upgrades to the place, the family probably got the better part of the deal.

You need to know a lot about investing

Thanks to ETF’s (exchange traded funds) with very, very low cost this is no longer the case. Yes, most people trying to achieve financial freedom are interested in investing but that is just because they are the first to realize it is actually possible! Save a good chunk of your pay check, throw it in a decent low cost ETF and you will get there. It really is that simple. No active investment approach necessary.

You need to be lucky with your investments

It does help ;-). The other guy I know off, got lucky with Apple. Good for him. That lucky investment did shave some years of his work career. But that is all it did. He would have still have gotten there. It just would have taken a bit longer. The other guy I know actually got wiped out during the dot.com crisis of 2001 (there was a reason he went to life in an old crappy little farm). I did reasonably well with my investments and avoided the big mistakes. But you know who gets lucky at investments? People who invest. Not investing is the best guarantee to never have any investment luck …

You need to live a very cheap life

Well you need to live below your means. Spending less money than you earn and investing the rest. But frugal living and cheap living are two different things. I didn’t get a car before I was 35 and that did help my savings rate. But I lived in Ghent and worked in Ghent, and then later in center Brussels. Owning a car would have been impractical. I always lived on my own but had several friends who shared a house. So I saved on a car, they saved on rent and utilities. I actually rented a pretty charming little house. I just looked around a lot until I found something with an affordable rent.

And yes, as a guy I hardly spend any money on clothing and furniture. But a friend of mine now even has a side business find cool furniture on second hand sites and markets, cleaning it up and selling it on line. Her house is always full with cool stuff. And she actually makes money of it! Another friend combines vintage stuff with self-made clothes and looks fantastic! Nice furniture or clothes do not need to cost lots of money. I didn’t go on a holiday trip until I moved in with the current girlfriend because I am not big on holidays. But I did buy 60 euro whiskey bottles and even a few above a 150 euro. I also liked to combine Belgian fries and stoofvlees from the frituur with drinking a Taittinger Millesime (it goes together fantastically). We all have stuff we like and value. And that is the essence of frugal living. Only spending money on things that really add to your life and eliminating the mindless spending. And believe me when I say that a lot of your spending is mindless.

It’s also fun to find a more frugal way to get the same thing.

I want nice, quality things

So do I. My current bedroom is a full oak one from Etnicraft. It didn’t come cheap. I bought a Vespa scooter. One from Sym looks pretty much the same and would have cost a 1.000 euro less. Thing is, I only bought those AFTER I got a decent stash of money working for me. I didn’t even have a bed until I was 38 because, well, I am guy and a mattress on the floor served me just well. So nice, quality things are absolutely possible, but only when you actually can afford it.

I wouldn’t know what do to with the time

Really? Are you serious? Honestly, I am bit sad for people saying this. Do they really have that little of imagination? Books, music, series, movies: there is a ton of quality entertainment that exists. Exploring all of that would take me three lifetimes. And that is the passive stuff. Learning new stuff (raspberry pie, maintenance of old timer motorcycles), improving my health (eating better, more sports), travel, organizing classic trance parties, spending time with old friends and meeting new friends … honestly even when I do not need to work I think I will not have enough time to do everything I want to do. Go speak with a pensioner (my parents both retired around 56 -58) and most of them will tell you they are busier after retirement than they were before

I like me job so I do not mind having to work

Great for you! Now are you sure you are going to like it for 45 years? Or perhaps the job/boss/co-workers will change and the job you used to like is now a complete and utter crapfest. You might get fired … Aiming for financial freedom/early retirement doesn’t mean you cannot work anymore. I certainly plan on working after achieving financial freedom. Just not a whole lot. If I stumble upon something I enjoy and it pays all the better. But money will no longer play a role in that decision. I’ll be free to do with my time whatever I want to.

Frugal living: keeping the old timer motorcycle or not?

A little confession and question time. When I was in between jobs (feb – april) this year I bought a 125 cc Vespa scooter (and did some day trading). I am very happy with the Vespa and I am now wondering why the hell I didn’t buy a motorcycle earlier.

The thing is, and this is the confession part, I did. You see, I also was in between jobs roughly a year before. Kinda from sept 2015 till may 2016. Kinda because I only was really unemployed from march ’16 till 1st of may 2016. But I also didn’t really had to work between sept ’15 and march’16 (part of a severance deal with my employer). It’s a long and complex story. And yes, the severance package was finger licking good. Well anyway, during that period I also bought a motorcycle (and did some day trading, yes I am starting to see a pattern here …).
I bought an old-timer. A berini m21 (probably deluxe version) form the 1950’s. It’s a beauty.

 

Berini is a Dutch brand and has some following in Holland but is largely unknown in Belgium. Meaning I got it at a good price: 350 euro. I haven’t really driven the motorcycle as the old breaks needed some work and I put it at a friends place who is an old-timer aficionado. But he is taking his sweet time ….

Anyway, I bought it because I like old-timer motorcycles and part of me views it as a fun pass time once I am semi-retired. Working on it. Learning some mechanical skills. Driving around the country roads here. Perhaps going to an old-timer meet up …. And old-timer motorcycles are a hell of a lot cheaper (especially if you limit yourself to 125cc max) than cars ….

I still like that idea. But with the new job in Brussels and going swimming and still needing to do some renovations at the house, our large garden and such I am not going to have the time as long as I am working full time. I do have plenty of storage space to put it. And it is not costing me anything just standing there.

On the other hand I know I can sell it and easily get my money back. It is 400 euro after all. But then, day trading in 2016 made me 2.455 USD and last Friday I passed the 3.000 USD mark for 2017. If I really want another 400 euro I can easily suck it up and do some extra day trading in the evening. I hardly do it anymore since working again because it is sitting behind a screen and staring at numbers, something I already do for 7,5 hours at my job … But it would also take me time behind the PC to sell it. So spending that time day trading would get me the money AND I would get to keep the motorcycle. And I know that kind of reasoning is a very dangerous slippery slope. It is one of the reasons I am not a big fan of the day trading. It screws with your view on money. Last Friday I made 300 USD in less than 30 minutes. You start getting these thoughts where 100 USD equals a quick in an out trade in Google… But the psychology of day trading is something for another post if some of you are interested in hearing my thoughts/struggles with it.

Back on track for this post. The confession part was that when I do not need to work I seem to buy a motorcycle and do some day trading. The question is, do I keep the Berini M21 or not? Even if I will probably not use it or have time for it the next 5 years?

On investing, being lazy, cumulative returns and scalability

I love investing. Which is good because I believe to be any good at it you need to love it (link). When I figured out my leveraged construction I was ecstatic. If it worked (and it does!) I only needed to do a roll over once a year and be done. It was the ultimate lazy approach to investing and an almost guarantee to beat the market for 4 out of 5 years (backtracking over the last 25 years showed 5 out of 25 years where it would have not worked). So about half way 2016 I really believed my active investments days were behind me. My inner sloth was very happy!

But then, well a curious thing happened. I kept reading financial stuff. ‘Old habit’, I thought. ‘It will tapper out’, I thought. Then I got a bit more active in the whole FIRE community and some people do really cool stuff. And I grew restless. I may not have needed to be an active investor anymore but I really wanted to! You see, it just tickles my brain in all the right places.

My weird mind

My mind likes numbers (I am crap with names, hell, I am bad with people). It also likes to figure stuff out. Find loopholes. Find errors in reasoning. It’s perfect for finding stock that is cheap but shouldn’t be. It would probably be good for shorting too but I rather have the stock go up (guess I rather am optimistic).

I just love to know how a company makes its money. Why it is better at it than other companies.

When I am bored I like to replay old trades in my head. See where I could have done better.

I often use sexual references to describe the attractiveness of a certain company at a certain price point or of a particular ‘cool’ construction. I don’t do it too shock or amuse people. It’s just that this is the connection my brain makes. An attractive young lady in a la fille d’o outfit or writing a nice put option: they have me both drooling. I know this is not normal but that is how deeply imbedded in my brain the investing stuff is. I could be completely, utterly drunk. So drunk that walking or uttering one coherent sentence is completely out of the question. But walk up to me and say ‘coca-cola below 40’ and my slurred drunken response will probably be: write put now.

So I started to dabble with puts and such again. Just because I was bored. Sure, the money is always welcome but I know it will at the very best only reduce the time I need to work with one year. It’s peanuts compared to my overall portfolio. But it is so much fun!

My lazy, lazy side

The other reason I like investing is because you can be very lazy at it and still make the big bucks. If done right it’s a one-time effort for a life time of profit. Do your homework, find an excellent company at a reasonable or cheap price and done. Buy it, hold it, go do something else (except if you have my weird brain).

Now this is a very, very exceptional thing. With almost everything else you need to redo the effort to get the same reward. But not with investing. Actually, the reward can even increase while you do nothing. Most companies try to increase their dividends over time. A 10% increase on a 100 EURO stock gives you a 10 EURO reward. But hold onto that stock for many years and it might increase another 10% when it is worth 200 EURO, giving you a reward of 20 euro! Cumulative returns for the win!

The only thing I can think of that came close to this was the music industry (before the internet and MP3’s). Make a record once and then have income of it for the rest of your live. For most of us, becoming a successful music artist is out of grasp. But ETF’s provide a good way to all of us to profit of this unique aspect of investing.

This makes for some truly ‘fun’ consequences. My first real job was at a telecom operator. My total wages there for those 6 years will have been around 144.000 euro (around 1.800 euro a month but holiday money, 13month and profit bonus ..). With savings averaging around 500 a month this means I saved 36.000 euro in total. Add in another 12.000 euro I was able to save from my severance package (a story for another post). And my total savings for that time are 48.000 euro. Investing this sum at a 7% average return will have this amount double every 10 years. Give it 20 years and it should become 192.000 euro. Deducting the original investment from this means that my investments on my savings from that job will equal my TOTAL pay I ever made at that job! The higher your savings rate and the higher your return rate, the less years it will take for your investments to eclipse the total wages of the job! If that prospect doesn’t excite you and gets you investing I don’t know what will.

Scalability

The last great quality of investing is that it scales so easily. Investing 10.000 euro or 100.000 euro takes the same amount of effort. It’s just typing in an additional zero. Yes, there are some limits where having to deploy too much money can become a hindrance. But you are talking about hundreds of millions of euro’s before you start encountering  that issue. And even then it depends on how the stock market in general is doing. When the overall market is setting record after record (like now) it may be difficult to deploy large sums of money at favorable returns. But for us, small time investors, for all practical purposes the scalability of investing is limitless.

I love scalability. I wish that housecleaning or doing the dishes was scalable!

I find we do not talk enough about scalability and cumulative returns in the FIRE community. This whole early retirement thing is, in my mind, only possible thanks to the combination of these two powers. Savings also have a certain scalability to it. Once you have developed the savings ‘skills’ you soon discover you can apply that skill set on a wide variety of items/events. And savings also have a certain cumulative return where making a saving in one area often has knock on effects in other areas. Buying a hair trimmer and no longer going to the hairdresser saves money. But it reduces your car use, thus unlocking additional savings in gas cost and wear and tear on your vehicle. It also frees up time which you can use to find additional savings … But savings alone is not enough. You then have to invest these savings so they can benefit again from the cumulative returns of the market. Both of them together is what enable you to achieve financial freedom.

Get yourself a will!

There is one thing I haven’t read a lot about in the financial freedom community. And it’s lack is a bit strange since it is about money and is probably the biggest wealth transfer you will ever handle. It is the need for a will. EVERYBODY should have a will. NOW!

Contemplating one’s own mortality might not be the most ‘fun’-activity to do but it is something that needs to be done. Personally I am hoping that when the time comes my consciousness can be transferred to a giant robot who will then go on to play a crucial role in the battle to save earth from aliens. But that doesn’t mean I have no need for a will!

A well thought out testament will not only lower the tax burden for those you chose to leave your earthly belongings but might also prevent fighting among them. In my own family it took three years to wrap up the last of the inheritance issues after the dead of the last grandparent!

DIY

The quickest and easiest way is to write one yourself. You can find examples all over the internet and if it is a simple and straightforward affair this might suffice.

Get a professional

But once property, an investment portfolio and such are added in the mix it might be best to employ the services of a notary. It is usually not that expensive (a couple of 100 euro) and they know what is possible within the law and how to best phrase it to avoid any discussion.

Since our politicians are contemplating a big change in Belgian succession law it might be best to wait until the new law is published before paying a notary. But this shouldn’t stop you from thinking this over and already writing your own testament. The better you are prepared before visiting the notary the cheaper his services will be.

Revise it every 5 – 10 years

We got ours the day we moved into our jointly bought house and officially registered at our community as living together. The one thing we forgot to take into account is what would happen when we both died at the same time. Since the girlfriend is my main beneficiary and we both live in the same house and often travel together that possibility definitely exists! (The girlfriend does not accept the giant robot scenario, even when I showed her it could be a cute robot, grr women!) If there is a realistic possibility that your main beneficiary can die at the same moment as you, you should write out this scenario also.

But it has been 7 years since we wrote our testament. Our assets have grown considerably and a new nephew has been born in that time. So a new testament will be drafted at the notary as soon as the law has been changed. We always considered this testament as ‘good enough for the next 5 years of our life’. Once you have a will it is best to revisit it every couple of years and see if changes are necessary. For small changes the do it yourself approach will suffice but for big changes a new visit to the notary might be best.

Have a talk

Another thing I would like to stress out is the need to talk. Like the old publicity of the KBC –rightfully-  claimed: talking works! Explain why you want certain things the way you want them. Your will should not contain any surprises for anybody! In the case of a will, a good surprise for somebody often means an unpleasant surprise for somebody else. Also try to avoid to ‘rule from beyond the grave’. Know your limitations! Trying to determine how somebody should use the money you gave him/her is a waste in futility and can cause problems in your family for decades to come. You are dead, stop wasting your time with these mortal issues and learn to play the harp or avoid the pitchfork 😉

 

Monthly expense report: June

June has come and gone already. Times sure flies when one is working! Second month of being back to work again and things are starting to fall into place.

Personal account:

Income: 2 037,74 euro

Expenses: 1 670,36 euro

Savings: 367,38 euro or 18%

Things are back to normal with a 1.200 euro contribution to the joint checking account to cover mortgage, electricity, gas and food. I did spend a bit more but I had maintenance done on the girlfriends electric bike I used for 10 months (I did do some maintenance myself but since we are thinking about selling it I wanted it in perfect condition). Then there was the road tax for the Vespa (61.5 euro, about one fourth of our car!), a modest restaurant visit in Leuven at 40 euro and my dad’s birthday. The swimming pool is costing me some money and I could lower this cost by getting a year subscription. No I pay 3 euro per visit, with subscription it would be around 2 euro. Main question is if I will keep it up for an entire year? I have a history of quitting things like this. I’ll make a decision after the summer.

I also made 300 USD in day trading profits but for the moment I leave them at my broker. When I transfer them to my checking account I will count them as income. I’ll keep them to smooth out any bumps in income when I take my two week holiday or make the transition from interim to fix contract (and from being paid weekly to being paid monthly).

The joint bank account

Income: 2 440,59 euro

Expenses: 2 128,91 euro

Savings: 311,68 euro

We each transferred 1 200 euro to the joint account and got a 40,59 refund form our electricity and gas provider. The month proved to be a bit expensive as we got the bill for the road tax for our car (231,13 euro) and our water bill which is only every three months (143 euro) and hopefully the last veterinary visit (another 79 euro).

Adding half of these savings to my own savings gets me a savings rate of 25,7%. I should continue to hover around this rate for the rest of the year. This means that working three weeks a month covers all of my spending and I can save the 4th weeks wages.

All in all this was what should be a typical month of earnings and savings.

More important than the savings rate (as all savings will be spend on home renovations eventually) for me is if I can indeed survive on a 1.500 euro a month budget AND enjoy it.

I always thought my spending was around 1.500 euro and these six months of using a budget did proof that. Average spending the first 6 months of 2017 was 1 576,46 euro. Pretty close for what was essentially a guess.

We did have the onetime tax refund of around 3.000 euro but we also had the onetime expense of buying a Vespa scooter.

In my first six months of expenses is also the holiday in September which I prepaid in full. And a few other onetime costs because we both have been re-examining our live, what makes us truly happy. And as a result we have been somewhat re-orienting our life. I also had some costs linked to looking for a new job. With those costs gone, no more other one-time expenses in view (well, I could use some accessories for the Vespa …) I should be able to get my spending down to 1.500 euro in the second half of the year.

Have I been enjoying the last 6 months? Hell yes!

There was the mini-retirement for three months, the Vespa and a rediscovery of lots of old school kick-ass trance classics.

Special circumstance investing – June update

Another month has passed. If you sell options this is a good thing because the more time elapsed = the more money in your pocket!

What did I do

I sold the UVXY puts! I bought 3 puts on 16 February this year. I bought them at 8 USD and sold at 8,82 USD on the 26th May
After all costs I made a 9,6% profit on 3 months and 10 days. In % this is impressive but in cold hard cash it is only 231 USD as liquidity is an issue with this product. I would love to be able to plow tens of thousands into this but with liquidity being low and bid ask spread being high I still have my doubts. But a guaranteed profit is hard for me to ignore so I’ll probably continue with it but perhaps in the girlfriends or parents portfolio so it annoys me less.

The ADM put I sold in May expired out of the money. This means I pocketed the 151 USD premium. A 0,75% return in 1 month is not that fantastic but it is on cash that I hold to unwind my leveraged construction if necessary. The leveraged construction should net me around 8% on my entire portfolio so this really is extra. And anyway, it’s a whole lot better than the 0,11% A YEAR people are getting on their savings account.
It actually is a bit better as that option only expired on 16 June and I already wrote a new put on ADM with expiry in July on the 6th May. So for 10 days the cash was pulling double duty, covering both the put with expiry 16th of May and the put with expiry in July. Premium was a little bit better and I should get 1.2% return but on a slightly longer time period : 1 month and 10 days. I am too lazy to calculate the annualized returns. If this one expires out of the money it will be another 238 USD in the bank account. We’ll see in July.

I actually really like my cash pulling double duty (the harder my money works, the less I need to work!) so on the 26th May I sold another 5 puts on ADM. This time with expiry in august. A little longer time period and a little higher premium again: 2.09% on less than 2 months. it will be another 418 USD I can once the put expires out of the money.
All puts have been written at strike 40 USD and I expect them all to expire worthless.
It also means I will probably do no trades in July. I might double up again after the July put has expired but probably only do that in august. It’s July, there are festivals and BBQ’s to attend!

Day trading a few times in June earned me another 300 USD.

So 450 USD in extra profits (and another 650 USD on their way) because I was not a complete sloth this month.

The girlfriends portfolio

I liked the put I sold on ADM so much I did the same one in my girlfriends portfolio. So another 5 puts sold on ADM with strike 40 and expiry in July. She too will be getting an extra 238 USD in premium.

I actually liked it so much I did it in my parents portfolio too. This is why the low liquidity of the UVXY puts annoys me so much. I want things that can scale. So that if I like something. If I am convinced of the attractiveness of an investment I can scale it up and not only put more of my money in it but also plow some money of the girlfriend and the parents in it. I am way too lazy to find 10 good investment opportunities in a year. Two or three is more than enough for me, but when I find those I want to be able to go big.

Like I said, I like cash working hard so I was contemplating of also writing a second put for august on ADM when the price of AB Inbev dropped below a 100 euro. I like AB inbev at the 100 euro mark a lot! So I did double up in the girlfriends portfolio but with a 2 puts on AB Inbev. Went for a longer time period: expiry December 2017. It will be a 7,7% return in under 6 months. Not exactly UVXY put territory but close. And scalable and liquid. In cash terms it means a 1546 euro premium for the girlfriend.

It also means that if AB Inbev doesn’t move a lot at opening on monday I can do the same in the parents portfolio as well (I forgot to take the log in codes with me to work, sorry dad!).

 

How I keep up with the news

Well that is simple. I don’t really. I have got the log in from a friend for the gopress database and once a week I catch up with De Tijd (the Belgian financial newspaper). Reading it with a delay reduces the time necessary to be caught up significantely. Because, when you read a weeks old newspaper you quickly realize how much is utter drivel not worth your time to read at all.

I am not alone in this. Mr money moustasche has a great post about it. He calls it the low information diet. The magazine Humo had an article about it a few weeks back. My parents still have a subscription on it. They keep them and when I visit I take a bunch of them with me. The girlfriend reads them. Since there is always one lying about at the toilet I might leaf through it when I didn’t remember to bring my smartphone with me.

The reason I do this is not to save money but purely to improve my quality of life.

The news is hardly news anymore. It is a lot of speculation about what might happen or what might be the consequences of what just happened combined with a lot of opinions about what happened, or why it happened. At best, reading this is just a waste of time. At worst it will annoy you and sour your mood for a few hours or even a few days (some Belgian politicians have developed an unique talent to deliver in 5 second soundbites such complete and utter ridiculous proposals that any sane person needs a week to just barely regain some of his mental capabilities).

Since the news hardly contains any worthwhile information. It wastes a lot of my time with other stuff that is not news and in most cases delivered information that had no impact on my life or I couldn’t change even when it does impact my life (short of leading an armed revolt to topple the EU leadership and found the Republic of the Sloth, all hail the sloth!). And on top of that it annoyed me more often than not! So I stopped reading newspapers, magazines, watching the news …

This doesn’t mean I do not read or get new information. But now this is on my terms and for subjects I find interesting or will improve my life. Informative sites or blogs about finance and technology mostly. Some fun things on boredpanda or a fun/absurd thread on reddit. Basically I want to either be informed or entertained and the internet can provide both of these in spades at no cost. The classic media offers very little of either and then has the guts to charge money for it! One wonders why they are in trouble …

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