We have been busy making some updates and modifications to the underlying calculations (and numbers) for the Cheesy Index, which will apply as per this January 2018 Cheesy Index. There were some significant changes implemented. This caused our target wealth number to change, albeit not too much. What did we do and what changed?
January 2018 Cheesy Index
We closed out 2017 with an incredible increase in the Cheesy Index, we really could not have hoped for anything better. Based on last years target numbers we got to 69%. But that was so last year! 😉
Here are the latest stats:
Huh, hold on, you went backward by about 2.1%. Cheesy, that’s the wrong direction! Yes, it is, let me explain.
Cheesy Index Updates
As time goes by, things change. What changed? Well……
- Future Housing situation
- Family loan write off
A new year and we got new wealth taxes (again). I’ll do a more detailed post on this in the future, but it boils down that if you have less wealth than about €200.000 per person, you are better off. If you are worth more, not so much. Albeit the changes are not very drastic (fortunately), it’s not helping either.
Future Housing Situation
Once we are FIRE (and before FIRE obviously) we still need a place to live. As Mrs. CF already hinted on in this post, she’s not moving to Thailand (or somewhere else warm, sunny and cheap). The current plan is therefore to move out of our current home in 2020-2021, which we will split and rent out (yay, extra rental income!).
However, we are planning to move into one of our own rentals that is closer to family. Because this property is paid off, we suddenly will have more equity that is not doing much, but our expenses will also drop. The end result is a slight increase in wealth required to FIRE.
The plan is however to get a mortgage on this property and use that money to invest into other real estate (or the stockmarket if it has a major correction in the mean time). Borrowing at say 1.5-2% and reinvesting in something that provides about 6-7% seems logical to us.
Family Loan Write Off
To be blunt, we wrote off about €9.600. Ouch! This is an (very) old loan that Mrs. CF gave to her sister. She used it to buy a car to get to work. She started to pay off this loan but stopped once she moved to Africa for volunteer work. Instead of paying back the loan when selling her car, she used it to pay for the volunteer work (amongst others, pissing off Mrs. CF in the process).
Fast forward a few years, she is now a mom of two, no job, partner with a “average salary”. They live fairly frugal, but have no way to pay of this loan right now. We stopped charging interest a few years back already (problem just got worse). There is still the intent to pay it back, but Mrs CF does not want to push the matter at this time. She might once her sister start working again when the kids both go to school.
In short, we have taken the loan value off our balance sheet. We might still get the money, but it will be a bonus if/when we do. It does not impact our existing investments, but just dropped the “non-income” assets a bit. But it obviously will impact our future possible investments/cash-flow, since we have less to invest.
Moral of the story, never loan money to family! (Almost) always a royal pain in the @$$. If you do, make up a formal contract and keep your relatives responsible. Cheesy top tip.
Cheesy Index Forecast
So, with the above changes, and me voluntary becoming unemployed as of May 1, there will be more changes. Oh, and don’t forget the 10 week road trip that is coming up! The major impact is the speed to get to FIRE. Instead of taking about 3-4 years, it will likely now be about 6 (getting us to late 2023, subject to market developments). This is assuming I don’t make any money at all from potential side hustles.
In case you are wondering why the Cheesy Index chart above says a target of 72.5% for 2018 and the one below 70.9% for 2018, we like to aim high 😉
This is the new forecast:
Taking into consideration the new wealth target, we were not at 69% by the end of last year, but actually “only” 67.4%. Despite the major write off, we actually only dropped 0.5% month over month. There is probably another drop coming in February, due to the recent market corrections. Such is life, but we just keep going!
How about you? Did you go forwards or backwards?