In the previous two posts on the topic “How Much Do You Need To Become Financially Independent in the Netherlands”, we looked at three scenarios (the “poverty” option, “base case” option and the “luxury” option) and taxation for these scenarios.

In light of recent discoveries and online discussions with various other bloggers (Financieel Vrij en Mr. FOB, both in Dutch), an update of the last post is required, and for a good and very positive reason: lower taxes! Albeit not incorrect as a ballpark calculation, the previously mentioned net worth requirements can be considered as too conservative.coin5

We therefore recalculated the total asset value required to provide your household (in this case defined as two adults and one/two children) with a net “base case” income of €25,000 per year (in 2016 Euros). The assumption remains that you make an average return on your investment (ROI) of 4% after correction for inflation/escalation, but before taxes (unless noted otherwise).

For this analysis we assumed 4 (updated) scenario’s (see link below for details):

1)      All your income falls under Box 1

2)      All your income falls under Box 2

3)      All your income falls under Box 3

4)      Your net income has a 40 – 60 percentage split between income in Box 1 and Box 3

For the original post with further details on when the scenarios would apply and how this would work in the real world, see here.

The major difference with the previously performed analyses is that we now also correctly incorporate the heffingskorting (aka “a general tax refund”) for scenarios 2, 3 and 4. Furthermore, we now also assume the new 2017 tax rates on wealth in Box 3. Finally, a few more minor calculation errors were corrected and assumptions changed to better reflect reality.

Scenario Assumptions

We have assumed the following for each scenario (including updates from the previous assessment):

Scenario 1:

  • Taxation is based on 2016 rates
  • It assumes income is from labour (Box 1, but only assumes you get the “heffingskorting” (no other benefits for sake of simplicity).
  • No income from other benefits or government/private pension
  • You are younger than 67 years
  • No special tax arrangements or benefits (e.g. no company car, you rent a house, no special life insurance or other policies, etc.), just to keep it simple.

Scenario 2:

  • Taxation is based on 2016 rates
  • There is only income in Box 2 from special interests in a company (paid in dividends)
  • Inclusion of “heffingskorting” for two adults (i.e. €4484 in general tax reductions)

Scenario 3:euro-note3

  • Taxation is based on 2017 rates
  • Inclusion of “heffingskorting” for two adults (i.e. €4484 in general tax reductions)
  • Assumed net ROI of 2%, 4% and 7% (to show taxation effects).

Scenario 4:

  • Taxation is based on 2016 rates (Box 1) and 2017 (Box 3)
  • Total yearly net income of €10.000 from labour (or other Box 1 income forms)
  • Inclusion of “heffingskorting” for two adults (i.e. €4484 in general tax reductions)
  • No income from benefits or pension
  • You are younger than 67 years (calculation uses a person of 35 years)
  • No special tax arrangements or benefits (e.g. no company car, you rent a house, no special life insurance or other policies, etc.)
  • Assumed net ROI’s of 4% and 7%.

The Results

For details on the taxation amounts, please see Box 1, Box 2 and Box 3 (and check the website of the Belastingdienst for the latest and greatest). Please keep in mind that taxation between box 1, 2 and 3 is not interchangeable (i.e. taxation credits cannot be switch between boxes)!

Based on our assessments, you get the following taxation amounts and effective tax rates based on the above noted assumptions. The required amount of assets are based on the noted returns on investments.

2016-09-hmdyn-p3

New Observations and Conclusions

Based on the updated calculations (with hopefully the correct tax interpretations) there are a couple of interesting developments compared to the previous analyses (as shown here):

  • Scenario 1: pretty much the same with no major changes.
  • Scenario 2: you need considerably less gross income to the make the €25k net income thanks to the heffingskorting. However, it remains unknown how many assets you need, as this scenario covers dividend payments by your own company or company in which you have a majority share of at least 5%.
  • Scenario 3a: Massive change, as with the heffingskorting you now need fewer assets and can actually end up not paying any taxes! However, this means you do actually make more than 7% net ROI, every year (possible, but not very likely if you are invested in the stock market).
  • Scenario 3b: Double whammy here due to the heffingskorting, you need fewer assets to get a net €25k income, however fewer assets is less wealth tax. End result, a drop of over €200.000 in required assets. Hmmm.. we were a bit too conservative on the last assessment (What we had actually calculated, without realizing it, was the “Luxury” income scenario!).
  • Scenario 3C: now this one is interesting. Due to the new progressive tax regime for Box 3 wealth, it has now become impossible to get €25k net income if you only have a ROI of 2%. In short, you will always need to sell assets in this year (or years) to cover expenses (irrespective of the total amount of assets, even if you have €2.000.000 or more!), assuming you have no emergency cash, obviously.
  • Scenario 4a/4B: as expected you need fewer assets due to the heffingskorting to be able to partially become financially independent. If you like to work part of the time (say 1-2 days per week), you need anywhere between €160k and €350k to live comfortably with your family (subject to your actual ROI).

A general comment is that whichever option you choose to financially retire (assuming passive income in box 2 or 3), effective taxation is much lower than that on income (see Scenario 1 – Box 1).

As you can imagine we also recalculated our new own target for our FIRE required Net Worth. We won’t make this number public, but it should be obvious that our target dropped considerably. We are therefore much further ahead on the Cheesy Index than previously calculated. Keep an eye out for the next Cheesy Index update!

How about you, have you determined your number? Did you calculate it right the first time around? Are we still missing anything? Let us know!

Wow, this went by fast, but we (well, the blog anyway) actually exist now for 365 days, today! It was a fun year, we learned a lot and had lots of fun with you guys out there on the interweb.

It all started with this first post, and we went on to (re)discover Dutch taxes, figured out how much we need to become financially independent in the Netherlands. Only to find out in the last few weeks that we overestimated the taxes and therefore the required net worth. We are still in the process to re-assess the situation according to the new data. So updates are to follow in the coming time.

Statistics

We were kind of curious to see our web traffic after the first year, see below for some graphs.

201609-1-year-stats

You guys stay around surprisingly long at around 250-280s for each visit, thank you! Guess we should see this as a sign that the posts are interesting. We currently have between 150-200 17-42* unique visitors per day (and slowly increasing), as noted above the total visits per day are a bit higher. Since inception we had about 150.000 80.000* page views. However, some blogs get close to this in just a few days! Ok, they needed some unwanted Yahoo exposure for this…..but still.

However, as you can see below, we are not going to become rich doing this (nor was this the original intend for placing ads). We just paid the web domain and hosting fees again, they came in at around €84. Which means we are far from breaking even at this time. If you want to help, please do by clicking on any of the very annoying ads! If you do, we may ultimately be able to take them down.

201609-1-year-income

Some other random stats:

  • 60 posts (we are aiming for about 1 per week)
  • 507 comments (including ours)
  • Most page views are from the USA (followed by the Netherlands)
  • Sunday is the busiest day of the week
  • Most popular post is the running challenge with Amber Tree leaves (1677 views)
  • Most popular page is the Blogroll (2531 views in 2016)
  • Most referrers come from http://www.meneerenmevrouw.com/blogroll/ at 149 (thanks!)

The Future

As you can perhaps imagine, with two full time jobs and a kid, time is valuable and we don’t have as much time for this blog as we would like. That being said, we will continue to post dividend income (of which the last full year of investing brought us a very nice €4708). Also the Cheesy Index, Frugal-licious and Tax series are poised to get additions and updates.

Furthermore, Mr. CF would love to start doing (free) one-on-one (or one-on-two) sessions with people ready to start their journey to FIRE or folks whom just wanting to discuss their savings and/or investment ideas. If you are interested, drop me an email at info @ cheesyfinance(dot)nl (without the (), “dot” and spaces obviously 😉 ). In this world of hard working people, it would be nice to actually talk to few as well about getting out early. This is also why we are looking forward to the FIRED Meetup on October 15, 2016!

 

*: UPDATE SEPTEMBER 21

ok, after reading up more on internet and website statistics, the above stats are correct but not correct (you keep learning!). They also include non-viewed traffic which is generated by websites/spambots/etc. For the new and improved stats (read: correct stats) I needed to use a different graph, which is shown below (could only show 2015 or 2016 and not the whole previous year unfortunately). We had ~7.000 page view for 2015 and ~71.500 this year: 78.500 in the last 365 days. But is also means that we have far fewer daily unique visitors than initially believed at anywhere between 17 and 42 for 2016. Would be cool to see if we can grow to over 100 per day maybe by 2017??

201609-1-year-stats-2

The Cheesy Index made a remarkable recovery in August. This was primarily due to the amazing Savings Rate that we were able to obtain, for details see here. But also due to a very happy Mr. Market.

However, we discovered two things this week and both have a major impact on the Cheesy Index. The main reason is as follows, thanks to a post by Financieel Vrij, (sorry in Dutch only) we discovered that we overestimated the amount of taxes that we have to pay during FI. This to the amount of up to €4500 per year, as we were of the impression that the general tax break did not apply to Box 3 income (details to follows in a later post). Apparently, it does and will provide us with a massive tax savings. The result is that our previously calculated target net worth, can be significantly lowered (by as much as €100.000 or more!).

Furthermore, we are in the process of a property swap from our company to us personally. The lawyer (aka the “Notaris”) actually pointed us in the direction of a tax law that also applies to real estate which is held personally and declared in Box 3 . The good thing here is that the value of the property, when used as a rental, is assigned a lower value for taxation. How much lower actually depends on the assessment value (or “WOZ” value as determined by the local municipality) and the yearly rental income. We found that for us it can be lower by as much as 15 to 38%. Why is this a good thing? Because our wealth tax in Box 3 is based on this corrected property value (and not the actual market value), which will result in lower overall taxes.

In short, we have over estimated our taxes now and during FI. We therefore have to redo some calculations, update our new target net worth and associated Cheesy Index. Expect a higher Cheesy Index next month!

The Cheesy Index up to August 2016 is as follows (still a solid, albeit significantly under estimated, 48.1% complete):

201608-ci

It’s official, we have no more cash to re-invest into dividend stocks from the original sale of our mutual funds. The plan is to keep on buying dividend stocks through DRIP’s and a few more when the market has a bad day and we have cash available. As of September, all newly purchased shares should start to provide dividends. So we are hoping for a record month….. will see (have not done the calculations just yet).

This is also the first month that we can report the YOY increase in dividends received, which is a whopping 690%. Unfortunately, this is not a reflection of our ability to invest, rather the result of a large cash pile being invested into dividend paying stocks over the period of about 12 months. Oh, and another record, we now officially own more than 10,000 shares in companies (fun record if you are a numbers geek, but does not mean a thing, really).

Here is an overview of our dividend stocks (we currently have 43 different stocks):

20160801 Dividend Overview

If you group the above dividend stocks by sector, the distribution of our portfolio is as follows (based on market value at close of markets on August 31, 2016):

20160801 Dividend Stock by Sector

Purchases for August include RDSA, BPY.UN and DRG.UN (the latter two are REIT’s).

How was your Month of August?

August was a bit of a “mess” from a Savings Rate perspective, but this was far from a bad thing. Let us explain:

  • We finally received the final tax refund for Mr. CF, which came in at just above €2000! Yeah, nice extra income.
  • Other income was normal and we even got all expense claims paid on time, lovely.
  • Now that Miss CF started daycare again, we also reapplied for the daycare benefits, and we got the payment for both August and September in once go: €640 in reduced expenses
  • We also received (finally) the deposit for our previous rental back on our account: €1770 in reduced expenses for the “living category” (we had previously entered this as an expense in 2015)
  • We got a €400 bill for assessments completed on our two new rentals (these are mandatory if you want to rent units and include the so called “energy index” and point score = maximum rental price)
  • We had the first fill month of interest charges on the mortgage (at around €820).
  • We received a refund of €515 on our gas and electricity bill of the previous home we were living in. This is very welcome obviously, but it also meant that we overpaid for the last year and had higher out of pocket expenses than we should. We will try to do this better in our new home, which should be possible as we now have remote meters that are downloaded every two months. Should be albe to lower the cashflow costs a bit this way.
  • We bought some new tires and tubes for the road bike and our regular commuting bike for Mrs. CF (the valve snapped off: loud bang and scared the crap out of Miss CF, whom was riding on the back) at €85.
  • Sold various items on Marktplaats (local ebay, kijiji, etc.) and cashed about €90.

All other expenses were pretty normal (e.g. food, utilities, insurance, car, etc.), so no surprises here. But due to all the significant transfers in and out of the checking account, the Savings Rate for August is a bit strange. According to the numbers we had negative expenses in the Living and Healthcare category (caused by the refund of the rental deposit). But we ended up with a savings rate of nearly 87.6%, which is really good! It nicely compensates the savings rate of July, which was only 32.0% (corrected from 39.6% due to a charge that had a shift in settlement date from August into July). The very good news is that our yearly overall SR is now back over 55% again! See below for the various graphs.

201608 Savings Rates

201608 Expenses

How was your August? Got hit by holiday expenses, or did you also receive final tax refunds?

 

 

As Amber Tree Leaves already pointed out here, it is great fun meeting folks that have the same or similar ideas as you do, or have the same or similar goals. That is why ATL and us are teaming up to organize the first(?) Belgian/Dutch FIRED UP meeting.Free walking

Our goals it to locally expand on the wildly successful FIWE 2016 (see here), but this does not mean that anyone outside Belgium or the Netherlands is not invited! The goal of the meeting will primarily be to have some great fun with likeminded folks, but also exchange ideas, strategies and everything else FIRE and life related.

Outdoor-Cafe-Illustration-Vector

The current plan is to meet in a city/town close to the Dutch/Belgian border on October 15, 2016 around noon-ish. The general plan is to meetup at a café, do a city tour by foot or visit a local attraction (subject to weather) after which we will have a bite at one of the local restaurants. For those who want, another round of drinks and finally depart back home or to a local accommodation (all your choice obviously). Will aim to make this fun and frugal of course 😉

As privacy is paramount for most in the financial blogging sphere, the final details will only be made available to those who want to join. Either or both ATL and us will contact you personally to get to know you and exchange meetup information.

We already have a list of a few (international) bloggers that are interested to join. How about you? Please leave a comment or shoot us an email and info @ “our blog name – one word” .nl.

Cheerio!

The Cheesy Index took a hit in July, just as expected. The main reason is the costs for the closing of the home purchase. This caused the total cost of the house to become more than the assessed value of the property. No surprise here. And, as shown in the post on the July Saving Rates, we had several expenses in July that affected the Cheesy Index as well (as in, we did not add as much to the portfolio as we normally do in a month).

The Cheesy Index up to July 2016 is as follows (still a solid 47% complete):

201607 CI

A bit more detail on how our assets have developed over time in 2016 can be seen in the two graphs below. The first one provides the distribution of the income, non-income and depreciated assets. The first category includes all real estate, stocks, index funds and loans. The non-income assets include the house (the portion we are living in), cash and some valuable personal possessions (art/jukebox). The depreciating asset is our car. Side note, the asset allocation does not include debt or debt corrections (i.e. the mortgage).

There is clearly an uptick in non-income assets in July, but this can be explained by the fact that we now own a house again, which obviously currently does not generate any cashflow (its an expense so to say). However, if we were to move, we would rent it out and make it into an income asset (it’s a non-activated income asset).

2016-08 Asset Allocation

In the second graph provided below, you can see the more detailed distribution of the above income asset columns above. Again, you see an uptick in real estate, which is because we added 3 rentable units to our portfolio. As a result the percentage of the other groups fell, despite small additions to some of these group (dividend stocks, crown funding and index funds) in July.

2016-08 Income Asset Allocation

How is your FI number doing, and your portfolio? Let us know!

With almost all of our cash pile now reinvested into dividend stocks, we have very limited ways to do more purchases (we also still purchase index funds, invest in crowdfunding and invest into real estate with new incoming funds). Most stocks are now on autopilot with various dividend reinvestment plans happening automatically. We will have the occasional purchase, but not many more than three to four per year (at around €1000-2500 each). The total dividend for July came in at just over €450. We also found a small error in the calculation for June dividend, which was corrected with a new total just under €700 (instead of above).

20160801 Monthly Dividend

Here is an overview of our dividend stocks (we currently have 40 different stocks):

20160801 Dividend Overview

We sold Ahold, Unilever and Shell already in both June and July, but do plan to buy back some of the stock in the coming months once we have a clear picture on the finances after our real estate transactions (we still have a few things to sort out).

If you group the above dividend stocks by sector, the distribution of our portfolio is as follows (based on market value at close of markets on July 31, 2016):

20160801 Dividend Stock by Sector

No new purchases were made in July.  How did you do last month?

As expected, July was a “horrible” month from a Savings Rate perspective (compared to our previous months, all is relative of course), but still a good one considering all that happened in July! This months was rather expensive for several reasons:

  • We moved so had moving expenses and costs associated with the new home (think paint, supplies, etc.);
  • We bought a new washing machine (we borrowed one up till now). We bought it refurbished for 50% of the retail value (yes, it has scratches but also 2 year warranty) for €544 (it can load 12kg!);
  • Maintenance and road tax for our car; and,
  • We had double day care costs (due to the move and associated timing of payments) and also had to pay funds back to the government for benefits received that were slightly too high.

On the upside, we got double expense claims and income from our new rental property! Yay. The SR for the month ended up being 39.6%

201607 Savings Rates

Below you can find an overview of our expenses in percentage. As noted prior, transport is low for us as both Mr. and Mrs. CF have their commutes paid for (one company car and one public transportation card. However as noted above, this month we had some additional expenses for gas, maintenance and road tax, therefore the relatively high number. The “Kid” category was very high this month due to aforementioned reasons. The other category includes the washing machine and a spare bed. Groceries were slightly higher due to some inefficiencies with cooking during the move.

201607 Expenses

No leisure this month, had to work hard to get our stuff setup on the new house 😉

How did you do this month??

For another post on the frugal-licious series we take on of our favorite (albeit not very heathy) snacks: the Samosa!

As you may be aware, we try to follow a plant based whole foods lifestyle as much as possible (why? because your body will thank you now and when you are older). This recipe ain’t it, but we try to make it as healthy as possible by not using salt and oils.

What do you need?

  • 1 large potato finely diced (5-10mm cubes)
  • 1 large carrot finely diced (as above)
  • 2 cloves of garlic (crushed)
  • 1 lage Onion finely chopped
  • 1.5 cup of (frozen) peas
  • 1 table spoon of vegetable oil (optional, a bit of water also works fine)
  • 2-3 teaspoons of curry powder (or any spice mix that you want/prefer)
  • Salt/peper to tast (we actually don’t use any salt)
  • 100ml of vegetable stock (but you can also replace with water and up the spice mix a bit)
  • 1 package of 10 square phyllo-dough sheets (preferably with the least amount of ingredients and additives)

Heat the oil/water in a frying pan, add the onions and garlic, mix in the spices and fry until soft. Next, add the vegetables, seasoning and stir will until coated. Add the stock/water, cover and simmer for about 30 min until cooked and a bit mushy.

Next (and this is the easy route), open the packed of phyllo-dough and place on a large oven plate. Make sure that they, if they are just out of the freezer, are warmed up and flexible. Add as much of the mixture in the phyllo-dough as you can (but you are still able to close and seal the sides, see picture below). Put the plate into the oven and bake for about 15-20min at about 200 degrees Celsius (about 390-400F).

Samosa

sorry for the crappy resolution, we don’t have expensive phones with good cameras (go figure!).

Enjoy!

Oh, and you can also make “appelflappen” in exactly the same way. Only insert a mixture of about 3-4 large apples, a cup or two of raisins and table spoon of cinnamon. Make sure you first cook this mixture until tender in a small pan to make sure it shrinks less in the oven. Gives you a appelflap with much more filling.