It already seems like ages ago, but it was only 3 weeks since we were celebrating our holiday in Germany. It was yet another “holiday on a budget”, similar to the one we did in Belgium earlier this year. This was somewhat intentional, as we are well aware that little Miss CF does not need much to be happy. Actually, it makes her happy just to get attention, we don’t need to travel far or fancy to have a great time. She also does not like to sit in a car very long, so we are currently limiting our holidays within about 4 hours drive from where we live.

There is definitely a win-win here, great holidays, little travel and a limited budget impact.

Holiday in Germany

Germany is a great country to visit. It has lots of culture, great food and drinks and enough entertainment to make every one happy. We tried to balance the cultural side with some activities and fun things for Miss CF. Seems like we managed it again. Below is a random collection of some of the things we have seen and done.

Bad-Arolsen

Holiday in Germany: Bad-Arolsen City Centre

Holiday in Germany: Bad-Arolsen City Centre

Holiday in Germany: Schloss Arolsen

Holiday in Germany: Schloss Arolsen

Willingen and Area

Willingen lies about 15km Northeast of Winterberg, a popular ski resort. Willing has it’s own ski area too. Artificial snow is made from the water in this lake:

Holiday in Germany: Viewpoint

Holiday in Germany: Viewpoint

Holiday in Germany: Appartment View

Holiday in Germany: Appartment View

Kleve and Area

Kleve is a town just across the border with Nijmegen and has a pretty castle on the hill and a nice town centre.

Holiday in Germany: Castle in Kleve

Holiday in Germany: Castle in Kleve

Holiday in Germany: Peaceful River

Holiday in Germany: Peaceful River

A bit further east you can find Schloss Moyland, it has a museum for modern art inside (which we did not visit) and a very pretty garden that you can walk (fees €2pp).

Holiday in Germany: Art?

Holiday in Germany: Art?

Holiday in Germany: Schloss Moyland

Holiday in Germany: Schloss Moyland

Irrland

If you have kids, and you want a cheap but very fun day, check our Irrland (no affiliate link!) in Germany (just across the border near Venlo). Entrance fee is just €6.50pp and you have 300.000m2 (!) of play areas to choose from and around 1000 BBQ spots. it’s hugh! Snacks and drinks are also very affordable in the single euro range (albeit we brought our own of course….).

Holiday in Germany: Irrland

Holiday in Germany: Irrland

Holiday in Germany: Irrland

Holiday in Germany: Irrland (Awesome Slides!)

The Finances

We had a great time, even on a relaively small budget. Let’s have a quick look at the numbers:

  • Days away: 9 (8 nights);
  • AirBnB first two nights: €43.5 (this was dirt cheap, but surprisingly comfortable);
  • Accomodation next 5 nights: €292.5 (Appartment with it’s on indoor pool);
  • Accomodation final night: €76 (Hotel near Maastricht);
  • Food: €144.5 (primarily from de Lidl and REWE; also includes some beers as gifts for family);
  • Gas: €85.5; and,
  • Cash/Entrance Fees/General: €70.

Total cost for the holiday: €712. Not bad, we generally aim to be below €100 per day for the 3 of us combined. Considering the fun we had, it was money very well spent!

Just as a heads up, you don’t see thos total amount in the upcoming savings rate post. Here we remove the fees for gas and food, as they are reported under Transportation and Groceries. Some expenses will also be coming in the October overview too.

 

How was your last holiday, or where are you going next? Let us know!

A recent post by Divnomics about her job switch got me thinking, how is the FIRE journey affecting my job? Vice versa it is quite good, the job is definitely helping the journey to FIRE! But the FIRE journey has really affected how I value my job and my motivation for one. Todays post is then also about the FIRE Journey and the Job.

FIRE Journey and the Job

Divnomics notes in her post that she felt no longer challenge in her job, which meant to her the she’s not growing in her position. The best solution would be to jump ship and swim to a new one. This she has been able to do, congrats!

The problem with me is that I didn’t particularly like my jobs I’ve been having in the past few years. Make that the last 4-5 years actually. The problem started in 2012 when I had landed a dream job and enjoyed that for about a year. The problem with that job was that it had an expiry date. Once completed I had to return to doing things I was good at, but could no longer find satisfaction at.

The 5-year plan - Work

FIRE Journey and the Job
Source: https://www.linkedin.com/pulse/should-i-work-free-well-duh-martin-aleta-curry

Job Switches

What I look for in a job is the ability to have an impact, the ability to control how things are being executed. Despite promises this never materialized in the past years. I therefore switched jobs about 3 times since that pinnacle year and position, unfortunately never able to find something similar. The last job switch was into a new field of expertise, which was nice, but it starting to loose it’s appeal too. I’m bored quickly, annoying habit really.

Fortunately Mrs. CF is still liking her work, and would not mind doing it a bit longer. This really helps in the form of having some financial/emotional stability in the household. It also provides the opportunity to do new things, which are still in the works but delayed until we sort out our investments first. For this I still need a job…..sigh.

Not really liking your job is a problem, it actually caused (amongst others) our search for freedom and triggered the journey to FIRE. But it also affects your motivation and work ethics…..

Work Ethics

To be brutally honest, my current work ethics are horrible. I get my job done and do so within the required deadlines, but I cringe at the level of quality I generate and the energy I put into my work. Strangely enough it appears to be sufficient as I just got offered an contract extension! Apparently I have mastered the 80-20 rule, as I seem to be able to get “80%” of my work done (which is valued at 100%) in “20%” of the time. This seems to do the trick for now.

However, I don’t like that I’m not motived and not performing at the top of my abilities, it feels wrong. It feels like I don’t deserve the massive paycheck I get every 4 weeks. I don’t mind having to work a few more years until we reach FIRE, but I would like to do so with a sense of satisfaction. Just not sure how I will be able to do so.

Perhaps, as noted in the 5 year plan, I should pull the plug as quickly as I can. The problem is the financing for new Real Estate opportunities. For this I do need my current job just a little while longer. It really is a catch 22 to which I don’t seem to be able to find the correct answer (read find the right opportunity). Until I do, I’ve decided to keep the job, slaving my time away and thinking about the next holiday.

Are you back?

No, not quite, the above has been bothering me and on a date night earlier this week we have extensively discussed this topic. Just needed to write this down to set my mind straight. By the way, I forgot how expensive going to dinner is in the Netherlands. We went to a decent restaurant for date night (first time in about 3 years!) and walked out with our bellies full and being €95 lighter. So much for being frugal 😉 Strangely though, it was really worth it! We had a great time and very good discussions.

However, I have not done any financial reconciliations, tracking of dividend or rental income. Not in detail anyways. We are, as always, also still looking at new Real Estate and hope to know more by late next week. Updates are definitely to come, just not sure when.

How about you, how does the interface between FIRE and jobs affect you?

Birthday Gifts

Today Cheesy Finance is 731 days old, or put simply, we are celebrating our 2 year blogiversary! Lots has happened in the last year(s) and it certainly has been an rewarding journey so far, but….

731 Days Old

What did we do in those 731 Days? Here is a quick review of what happened in the past 2 years:

  • Total of 167 posts…..excluding this one. Wow, that’s a lot.
  • Total of 2530+ comments (about half are ours, well mine….)
  • 2015 Total page views : 6.963
  • 2016 Total page views : 133.582
  • 2017 YTD page views : 198.000+
  • Total page views over the two years: 338.500+
  • 2015 Unique visitors: 762
  • 2016 Unique visitors: 14.957
  • 2017 YTD Unique visitors: 21.500+
  • Lots of hours spent behind a screen and keyboard!
  • We got a twitter account…..boy that’s addictive.

More importantly than all the numbers and stats, we made some great friends in real life through the blog. Big shout out here to Amber Tree Leaves, Divnomics, Geldnerd and many more! Looking forward to seeing many of you again in November!

P.s. we are now full and cannot accept any more registrations (hit the max allowable number of people for the venue), but will also make a waiting list of another 2-3 just in case. If you are interested, let me know.

Two Year Blogiversary

Two Year Blogiversary
Source: http://ourfamiliesuntoldstories.com/tag/blogiversary/

The Future?

We are 731 days old, now what? Good question, we actually had that discussion earlier this week, and the jury is not out on this topic. On one side this blog does provide the ability to sort our thoughts and get some feedback. On the other end, it’s taking up an enormous amount of time! Time that I could also spend on other hobbies or tasks around the house.

Blogging is fun, but is it worth it? In the beginning it certainly was, but after a while it starts to become “repetitive”, it is starting to feel “forced” and most of the “critical” posts have been made. With critical I’m referring to topics that are of importance to us in our journey to FIRE. It’s likely that at some point we have to update a couple of things, due to tax code changes and changes in the portfolio. So, fortunately, there is still more to explore and write about!

A Slow Down?

That being said, I’m a bit tired of the blog at the moment. Besides, I’ve actually developed some RSI as a result of intensive database use at work in combination with trying to keep up with the blog, commenting and research. This is not a good development obviously! If I don’t do something drastically about this, it’s going to negatively affect my health in the long run. Don’t want that.

Holiday Ostrich Method

Holiday Ostrich Method

I’ve therefore decided to take one month of “leave” from both the blog, commenting on other blogs and our twitter account. Well, perhaps there might be the occasional cycling and beer picture on Twitter….. I’m planning to combine this with an overall (social) media “diet” for the coming 30 days. Kind of done with all the negativity in the world right now, so I’m doing the ostrich approach :-)This also works well in combination with our German holiday in the last week of September! Ok, there might potentially be some twitter holiday photo’s too.

We will be back mid-late October with the usual updates and perhaps more information about the Meetup in Eindhoven in November! For now, goodbye and keep hammering away at your goals!

Options Trading

In the same trend as July, the August 2017 Options Trading Update is not a positive one. I had to do lots of option rolling to later dates/other strike prices (or both). Let’s have a look at this ongoing options experiment.

August 2017 Options Trading Update

The options trading income for August was -€99,25. Oops again! The loss came primarily from put options. The reason for this negative options trading report is, once again, because I had to roll various options to a later date and/or different strike price. They were all in the money and share prices had moved “too” much to let them expire. I would have bought or sold shares at prices far from what they were worth. Neither is a good idea.

Options that were particularly painful are those from AH and VPK. Both shares heavily fluctuated in the month of August, and not in the right direction I might add. On that note, the value of our AH shares is down by more than €2600.00 since June! This makes our loss in options trading a drop in a bucket. Then again, could be worse.

August 2017 Options Trading Update

August 2017 Options Trading Update

Below is an option trading overview for 2017, which provides the monthly and total YTD incomes (or “expenses”……). So far the options trading generated a total of €180.00. We are still in the black and with the potential to make more premiums, but not until (much) later this year…..

Monthly Options Trading Income

Monthly Options Trading Income

Options Trading Forecast

The forecast for the immediate future is not very good either. We will likely make a paper loss again in September, and you already know the culprit: rolling options. We now have quite a few open option (about 14) with expiration dates in October and December (and even in 2018!). Some might expire worthless, others may need to be rolled again!

To put this all into perspective, and if I would not trade going forward, the “losses” for September are likely about €160. This would mean that all profits from the pervious months would have all but disappeared. On the other side, if all open options were to expire worthless, the total premiums would be about €1.370.

Guess I’m too greedy (read: “emotionally unstable” 😉 and want all options to work out well, which is not going to happen. Its likely that I have to take various losses at some point and move on. The last few months of options trading did teach me a valuable lesson, I like Real Estate better! I also prefer stock market options that do not involve “me”. With the latter I mean making a dividend portfolio or purchasing ETF’s on a monthly basis.

 

How did you do on the options trading front in August? What do you think about my option adventure?

Monthly Cheesy Index

The August 2017 Cheesy Index provided yet another positive month, but the (Dutch) stock market fluctuations did make a small dent. We did have a very good savings ratedividend income and rental income, which helped us increase our net worth in August.

August 2017 Cheesy Index

Considering the low expenses and good investment income, the Cheesy Index continued to increase to new heights! The August 2017 Cheesy Index increased to 63.6%. We are still aiming for 65% by the end of the year, which we are confident we will reach. We are anticipating to breach the 64% barrier in September, subject to stock market fluctuations, of course.

August 2017 Cheesy Index

August 2017 Cheesy Index

Cheesy Index Forecast

We actually got Mrs. CF’s final tax assessment back for 2015. This means we can finally also book this tax return into our net worth. I’m quite happy with this considering I’ve been manually correcting the net worth (and this Cheesy Index) for the last year and a bit. We had initially received too much and were required to pay about half of the amount back.

The error came from misinterpretation when filling out the paper tax forms. Why the paper version? Because it was the year we got back from our international adventures, you cannot file digitally for those years….. What was the final tax return? Around €1550! That’s a lot of money, so we are happy with this corrected assessment.

More good news for the future Cheesy Index is the return of overpaid money for utilities. We received about €896 back last week. Pardon?! How much, I hear you ask. Too much! The main reason is that we moved last year. The previous owners had just installed solar panels and that extra savings had not been include in the energy consumption for this address. In short, our energy supplier expected a high use and thus gave us a high monthly payment to start with.

In reality we used much less than the previous owners and the solar panels provided quite a bit of energy too. So in the last year we had dropped the monthly payment twice (by about a third!), as we noticed we did not use as much. Still, we got a massive amount. Won’t happen again this year!

 

How were the developments in your net worth or “index” for August?

 

The month of August is typically not a month with a high dividend income. However, now that our portfolio is starting to really grow, we still had a very decent income. Let take a look at the August 2017 Dividend Update.

Monthly Dividend Update

With AH taking another dive this month, we added yet more shares to the position and are now at 800 shares (and losing money on paper….). The business is generally good, albeit upcoming heavy competition from the US is not helping. The share price has dropped about 30% from its high a few months back, and we have been buying on the way down. Probably not a bad moment in time to buy this stock, albeit it will go down further if we get another crisis (North Korea anyone?).

We continue to DRIP as many shares as possible (no fees and some share price discounts!). These include the usual monthly dividend payers such as AAR.UN, CJR.B, DRG.UN, LIQ.UN, HR.UN, PLZ.UN, CIX and SJR.B. We also dripped a few others including EMA, MIC and POT.

Don’t forget to check out the community updates at the Dividend Diplomats and Easy Dividend.

August Dividends

All the dividend deposits received into the bank accounts (correct for exchange rates) sum up to a total dividend income of ~€378. That is pretty neat! It’s actually an increase of about 6.6% compared to last year. This is not stellar, but at least it’s an increase!

Talking about an increase, we were a bit too soon with posting last months’ dividend update. There were some dividends that came in late and where higher then anticipated. In short, last months total dividend has been revised to €499.30. The YOY increase for July therefore jumped to 9.5%.

August 2017 Dividend Update - Dividend Income

August 2017 Dividend Update – Dividend Income

The graph below is showing the yearly dividend totals for 2015 and 2016, and a year-to-date dividend total for 2017. We are slowly creeping up towards the total for 2016. It’s not unlikely that we will hit this by next month!

The “Dutch” dividend income (AH, ABN, BOS, UNA and RDSA) are all after taxes (15%). The rest are held in RRSP’s and are not taxed (we will pay withholding tax when we withdraw from the account, but the dividends are not taxed themselves).

August 2017 Dividend Update - Yearly Dividend Overview

August 2017 Dividend Update – Yearly Dividend Overview

Dividend Stock Overview

Our dividend portfolio still contains 46 companies with a total of 12.133 shares and looks like this (up 2.089 shares from a year ago):

August 2017 Dividend Update - Dividend Overview

August 2017 Dividend Update – Dividend Overview

Dividend Sector Breakdown

When you breakdown the previously shown dividend stock overview by sector, it looks as follows:

August 2017 Dividend Update - Sector Allocation

August 2017 Dividend Update – Sector Allocation

 

Are you satisfied with you August Dividend Income? How much free money did you get?

 

 

Savings Rate Update

We are back on steam with our August 2017 Savings Rate! Great result overall and we even have booked most of our holiday accommodations for September this month as well.

August Finances

August was about as much fun as July. Summer months are really a great time of the year. Funnily enough the second half of the summer was considerably better financially. Here is a short financial overview of the month:

  • We received our regular incomes this month, nothing special to report. Next month there is another expense claim awaiting payment;
  • The crowdfunding income was €180 in deposits (combined interest and principle), which is below normal. Mental note, check the numbers!;
  • Living and healthcare spending was very low this month. It was literally a third of that of last month! But July had a major repair bill included. This month we had no quarterly payments for insurance or any taxes due;
  • The transport costs were also well below average with over €213 spent (again, about a third of last month. I see a trend….). Only some fuel, insurance and ferry tickets :
  • Grocery costs were also below normal this month with a total of about €263. Guess the high number for last month averaged out. No special purchases;
  • The kid category was, as per usual, really stable. But we have now paid the final instalment of the daycare fees. Still awaiting the new costs for after school care (they do already have our account number, oh boy). It should be less, but we don’t know by how much just yet. This will start as of October 2;
  • Travel and Leisure was about €316. This included all the fees for 7 nights stay in 2 different locations. We booked one via AirB&B, one via a regular travel site. We also booked one night directly at the hotel, but we will pay this one at arrival. There were also a few minor costs for day trip items for our Miss CF; and,
  • The other category was about €136. This included some swimwear, couple of small gifts and some random small expenses.

August 2017 Savings Rate 

The savings rate for August was a whopper again with 64,4%. The year-to-date savings rate is now back up to 59,3%. We are holding on to the badass gold saver status 🙂 

Here are the stats:

August 2017 Savings Rate - Overview

August 2017 Savings Rate – Overview

If you breakdown our expenses for the month, the distribution looks like this:

August 2017 Savings Rate - Expenses

August 2017 Savings Rate – Expenses

Looking forward to September, it will likely be another good month. No major expenses anticipated and we are even expecting a back-payment of the utility provider. This extra money will help offset some of the holiday expenses.

 

How did you do in August? Any holiday expenses that affected the numbers?

Travel - Culture

There is a lot happening in our Real Estate world, primarily good things fortunately. We are (very actively) looking at properties and found a couple that are interesting. Let’s therefore have a look at the Real Estate Report – August 2017.

Real Estate Report – August 2017

Rental Income

Our rental income for August is (again) above the €3.000 mark. There is one unit (Unit 1) that is also due for another (small) rental price update. We have let this one slip by accident and need to chase this one up shortly. We are also working hard to beef this monthly sum up to about double what it currently is, but more on this later.

The monthly income overview is provided below:

Real Estate Update - August 2017 Income

Real Estate Update – August 2017 Income

Rental Expenses

The costs for the month where the mortgage, personal loan and property management fees. That was it! “Cheapest” month on record. No insurance payments or property taxes were due this month. What a difference that makes. We also had not work done on the properties, so no maintenance costs either. I would like many more of these months 🙂

The expenses for the month are as follows:

Real Estate Update - August 2017 Expenses

Real Estate Update – August 2017 Expenses

Real Estate Report – Overview

We made a total of almost €2.444 in net rental income for the month of August (before taxes), a new record this year! The net cash-flow will come in at around €2.000. Our total YTD net rental income for 2017 is now about €15.743 (before taxes). We are now just about €500 shy of our target income for the year. But please remember that we are still anticipating a big bill in the coming months to pay for the outside restauration of two properties. This is assuming we get our act together and sort out quotes…..

Real Estate Update - August 2017 Overview

Real Estate Update – August 2017 Overview

Real Estate Report – Forecast

We finally got confirmation that our two tenants are leaving us. They have successfully bought their own place. The unit was put on the market the same day. A week later we had 7(!) viewings and yesterday morning agreed on a new tenant to move in. So no vacancy! Nice. However, this does mean new fees for the tenant selection….

For those of you that remembered our interest in German Real Estate investments (see here), we checked the tax implications and they are not favorable. We would be required to pay income tax, which boils down to 20-25% of the net profits. That’s a lot!

On the searching front, the property we looked at with 12 units has too much risk associated with it. We could get the numbers to work (was relatively good actually), but we could not get the exit strategy to match. There were also some permit concerns that were vital for this one to work. In short, we thanked the broker for the time and efforts and we moved on to the next……3 options.

Options?

Option 1: simple 70m2 condo. Reasonably priced, so we thought, but after the viewing earlier this week decided against it. Too much work to be done, lots of cracks in the walls. Partial bathroom remodel required. Kitchen needed professional cleaning (grease everywhere) and tile replacement. No time for this right now, getting a contractor would be too expensive and will impact return on investment. We walked away. Was potentially a 850 per month unit.

Option 2: Triplex with 3 very large units (+100m2 each). Have a scheduled visit tomorrow. Promising on paper, nice photos, good neighborhood but not the best rental market (i.e. not a large city with ditto companies). However, we are very interested to see where this is going. Current estimate is about 3.000 month in rental income if successful. Would also be cash-flow positive from day one. Friday update: what a disappointment…… make a detailed calculation to figure out the renovation costs to get it into rentable state…..€100k. That either means a lot lower purchase price (doubt that) or we need to walk away. Afraid it will be the latter. Bummer!

Option 3: House along a dyke (already looked at it last weekend). Currently 3 units with option to make it into 4. Large yard with two storage sheds (with potential to convert one into another unit). Requires extensive work, need to build two bathrooms and one kitchen. It also has a dated interior, which would require some upgrading. Potential rental income is also about 3.000 per month (for 4 units). Big upside: its cheaper than option 2, even with expected renovations (including safety margin). But the big downside is the amount of work. Time to book a viewing!

We are having so much fun! 🙂

 

How about you, any interesting news to share? Any recent purchases or issues? Let us know

Somewhat inspired by Mr. 1500 gratitude Friday, todays post is centered around “Thank You”. We have a lot to be grateful about, and it is time to express some of that gratitude.

Life is Good

Life is treating us very nicely, we are happy, healthy and on our way to lots of free time. But before we get there we have to work our butts off. A good life does not come easy, well the financial and healthy part at least. The rest of life can come quite easy as long as you are able to be happy with the little things in life. Mrs. CF being the wise one in the household figured this out a long time ago. I needed to be nudged into the right direction. But for that we have the internet!

Thank You

Thank You
Source: http://erhartyorktwpfire.com/thank-you-2/

FIRE

The gratitude for FIRE started back in the summer of 2013, when Mrs. CF showed me an article on MoneySense about Jacob Lund Fisker. Jacob runs the blog http://earlyretirementextreme.com/and extreme it is. Jacob managed to live on just $7.000 a year. What per year? Yes, $7k per year! That was a bit of an eye opener and gave me some insight on how (extremely) frugal you have to be to make this happen. In return of this extreme frugality you get time and freedom, which is what I really wanted at that moment in time. Albeit life was good, the job satisfaction was not.

For most people (including us) this ERE lifestyle is a bit too much. In some countries this $7K figures is not even possible due to cost of living and mandatory health insurance. Then again, you can always move! But it was the general FIRE philosophy, and living with less, that’s the important concept. The rest is adaptation and perseverance. Thank you Jacob!

Via Jacob I ended up at the famous Mr. Money Mustache, but also Go Curry Cracker and Root of Good. Slowly I started to see how my (and thereby our) life could be directed in a “better” direction. Both financially and personally/emotionally, life was already good, but it was bound to get a whole lot better. Thank you Pete, Jeremy and Justin!

Fun

FIRE and fun are two topics that can be easily mixed, but only few are really good at putting this down on “paper”. My personal preference is Mr. 1500. So thank you Carl for the fun and laughs of the last few years. You have been really good at mixing FIRE with soiled underwear from laughing hard. I certainly hope there are many more years to come!

Freedom Through Dividends

As we initially were not sure what our preferred investment method was, we started looking at many options. However, we eventually ended up with a preference for both Dividend Growth Investing and Real Estate. The Real Estate we primarily figured out ourselves, but for DGI we were definitely inspired by others.

So a special thanks goes out to Jason Fieber (former Dividend Mantra, now Mr Free at 33), The Diplomats (Bert and Lanny) and Dividend Growth Investor. We are both very grateful for the inspiration, education and lessons learned. We have now build a nice DGI portfolio, which is far from perfect, but trending in the right direction thanks to you.

You!

Our final gratitude goes out to you our readers. In the almost 2 years “we” are blogging now, we have received lots of feedback and were able to meet several of you in person. This has been very rewarding and a lot of fun! We hope that we can continue doing this for a very long time.

Thank you!

 

How about you, who get’s your gratefulness for getting you to go in the right direction?

Options Trading

All that cycling is nice, but it’s a killer from a time perspective (+8 hours this week so far)! Struggling to find the time to sit down and go through all the options I’ve traded in the last weeks. But got it done! So here is the July 2017 Options Trading Update.

July 2017 Options Trading Update

The options trading income for July was, ahum, -€170,00. Oops…It was from both call and put options. The reason for this negative options trading report is because I had to roll various options to a later date and/or different strike price. They were all in the money and share prices had moved “too” much to let them expire.

I had a discussion with Amber Tree Leaves as how to report, he reports once the option is finally expired/closed, even when rolling a few times. I decided to report once an option is closed (or expired) at every trade, even as part of rolling an option. Gives me a better insight in what happens, but it does cause more fluctuations in update reports.

July 2017 Options Trading Update

July 2017 Options Trading Update

Below an option trading overview for 2017 is provided with the monthly and total YTD incomes. So far the options trading generated a total of €279.25. So we are still in the black and with the potential to make more premiums, but not until later this year…..

Monthly Options Trading Income

Monthly Options Trading Income

Experiences and Notes

Based on the last 4 months I’ve learned the following:

  • I suck at this! Primarily because I do not stick to my own rules. I have an (unstoppable) tendency to try to time the market, which sometimes works but most often not;
  • Options are however great instruments to increase your yield, when you are disciplined;
  • I really need to switch trading platforms if I want to be successful in the longer term (need broader selection of dividend shares to write option on); and,
  • I’m inclined to (temporarily) stop options trading as soon as we have found more Real Estate. I’ve noticed that I focus too much on market movements, which is not possible with Real Estate. In short, mentally RE takes less effort and results in less “stress” (for lack of better words).

Options Trading Forecast

There is a good chance that August and September will be (much) more profitable again. Especially for September we have several trades that are doing well, but the market could change in a heart beat. I think for the foreseeable future it’s not a bad idea to load up on more call options, rather than put options. Problem is that we have quite a few put options right now, for which I’m afraid I will have to roll (again).

Another thing we have to do is develop an exit strategy for options trading if we would find a new Real Estate opportunity, within the next few months. For what we are planning now (looking at a condo we can purchase in cash), we will pretty much need to liquidate all our Dutch investment accounts.

 

How did you do on the options trading front in July?

The gift conundrum, it happens every year at least a dozen of times. Both for gifts received and gift to be given. Here is what we do, let us know how your system works!

The Gift Conundrum

Mr. CF celebrated his birthday last week, well not really “celebrated”, but it was my birthday. I received a couple of gifts too, one was in the form of beer the other in the form of cash. A liquid gift is always nice and I have no issues with those. It’s a consumable, does not take up much space and it’s hard to go wrong.

The cash gift this year came from my parents and my grandma. Grandma is not that mobile anymore, so I’ve been getting cash for decades now. It’s always welcome and I usually buy something useful with it. Next, I go and visit grandma and show her what I’ve gotten for the money. She’s always happy with the visit and It’s fun for us to visit her too, double win here!

My mom also called to ask if there was anything I wanted, the answer was “nothing really, well maybe….”. Actually I’m in need of some new cycling gear (helmet and shorts, the current ones are too old/worn). But considering I had not done my research yet on what I want, I just got some cash to go and get what I needed. It’s been going like this for years too. Getting (cash to buy) practical gifts is great actually.

Getting random “stuff” not so much (still have a unopened gift from last year sitting in the garage, no use for it….). If we do celebrate a B-day, we usually ask friends/family to bring themselves, and no gifts. It’s slowly getting better! But some are still stubborn.

The gift conundrum - Gift Packages

The gift conundrum – Gift Packages
Source: https://wallpaperscraft.com/download/gifts_boxes_set_bright_86637/5655×3621

Savings Rate

On the note of cash gifts, how to deal with this “income”? So far we have left it out of the budget and treated it as a non-cash gift. The reason is that if we would add the cash to the budget, and spend it all, this would draw down the overall savings rate.

On the other hand, if you add the cash to income and would not spend the money but invest. This could artificially increase your savings rate. Again, this is not really an appropriate way to deal with this in our minds.

Funnily enough, in both scenarios the money does aid your path to FIRE. In the first case because you don’t have to spend the money yourself from your income on the gear/materials/products you “need” (“wants” are a different story). This will leave more money for investing, as would the second option to directly invest the money. Either way, it will take a long time before you can buy this sub at $15M:

The gift conundrum - Expensive Gifts

The gift conundrum – Expensive Gifts: $15M sub
Source: http://www.luxury4play.com/boats/top-5-of-the-coolest-and-most-expensive-water-based-gifts-on-the-market-20151209/

 

Gifts to be given

We are trying hard to not give “stuff” unless specifically asked for. We try to give experiences where we can, especially for kids. For them we try to take them on a day of fun to a zoo, play area, museum or other activity. For adult birthdays we usually show up without a gift, or just a bottle of wine or case/six-pack of beer/book. With parents we usually plan an outing, such as a a restaurant visit. Sometimes we do this in combination with an activity such as bowling, cycling, theatre performance, out-door activity or similar.

It really depends on who’s birthday it is, what their attitude is around money and time available. However, we are starting to see that more and more people appreciate you just coming over for the fun, even without bringing gifts. There is still hope 😉

 

How do you deal with gifts and your savings rate? Do you invest cash gifts? How about gifts you give?

Holiday on FIRE

When I write this on post (last Tuesday), we just came back from a short weekend family holiday. As a yearly thing we are invited by the in-laws for a long weekend in a chalet vacation park (they even pay for it!). On of these CenterParcs/Landal Greenparks places with a big tropical swimming pool and assorted other play things. It was great fun and I’m (again) in need of another holiday due to the short nights, FIRE pit evenings and booze. In short, we has a Holiday on FIRE!

Holiday on FIRE

The FIRE theme came back many times during this short holiday, in more ways then one. First and foremost it was financially. Because the in-laws paid for most of it, it turned out into a very frugal (cheap?) weekend. We only had to pay for the fuel to get there, some (random) groceries and a couple of drinks in the local café/bar/pool. We had brought food for most of the breakfasts, lunches and dinners (and so did most of the family).

We only went out to a restaurant once to get food, and that was a pancake restaurant (for the kids obviously, had a massive play area both indoors and outdoors). As you are aware, a pancake restaurant is not very expensive either. We were supposed to pay for our own food, but the in-laws were so happy with the fun night, they paid the bill (again)! That being said, we are going to take them out for a day of fun to “repay” some of the expense they have made for us. This is the least we could do (they won’t accept any money from us to cover expenses).

The good thing about doing a weekend out in one of these parks is that you can keep the costs down. We had received vouchers for early bookings, so kids had (besides the pool/petting zoo/play areas) free activities. They really loved it! You can also cook yourself (which we did) and limit costs this way too. The trick is to plan ahead and bring much of your own stuff, the grocery store in the park is not a frugal place to shop….

FIRE at the Fire Pit

On the evenings that we had put al the kids to bed (which was not easy some times, they were having loads of fun and too much sugar), we had time to drink a beer and relax. We obviously did this at the available fire pit! We had the kids help us with finding some extra fire wood in the local area (a very frugal exercise!). But when the adults started to feel like they were 12 year olds, entire trees ended up in the fire pit too. It might have had something to do with the beer……

Holiday on FIRE with Beer

Holiday on FIRE with Beer

https://twitter.com/CheesyFinance/status/896470856259555329

 

Once at the fire pit, the topic fire was brought up. But not the FIRE was are used to finances are hardly discussed during these short holidays. Money really is still a taboo topic. Most of our (in-law) family are aware of what we try to do, and we try to help them out with financial/frugal recommendations. But this still is a hard nut to crack! Some are a bit susceptible to the idea, most live according to the YOLO principle (“you only live once”). We are however finding that they do confide in us more, which is a great trend. They also value our opinion about (handling) money, which is also very rewarding. Maybe there is still some hope 🙂

Fire at the Fire Pit

Most of the talk around fire was about the actual fire and songs around fire. Out came the phones and (thanks to WIFI) we had fun listening to various songs about fire, while watching fire. But where we started out OK, it quickly got out of hand and very tacky! A short selection in increasingly tackier order…..

 

How do you mix FIRE and a (short) holiday? How was your latest (short) holiday, where you also tired when you came home. In dire need of another holiday?

Wait, don’t run away screaming because the posts title states “Taxation”. This one is interesting (for the Dutch at least)! As you might be aware, we currently have all our Real Estate being taxed in Box 3, to benefit from the most favorable taxation option. However, if you would to purely FIRE on Real Estate in the Netherlands,  which taxation options is best? Our post today will try to shed some light on this. We present to you Dutch Real Estate: Taxation Options.

Disclaimer: we are not tax professionals and this is only our interpretation of the tax code. Consult a specialist if you want to make sure the tax approach is best your situation!

Dutch Real Estate: Taxation Options Introduction

As noted before, the Dutch tax system is quite complicated, but also gives you various options to manage the taxation of your Real Estate. It all depends on what you want to achieve and how actively you want to participate in your Real Estate. For today we will look at 3 taxation options:

  • Taxation of Real Estate income in Box 1:
  • Taxation on Real Estate when incorporated, with Box 2; and,
  • Taxation of your wealth in Real Estate in Box 3.

Let’s have a more detailed look at that the different options would entail. Note that the general deduction (Algemene heffingskortingen) should be the same for Box 2 and 3 options. It is subject to your income for Box 1 and therefore varies.

Real Estate with a pool

Real Estate with a pool

Box 1 Real Estate Income Option

First off, in principle the government almost always sees your Real Estate as wealth under Box 3. However, and this is where the tax law gets a bit fuzzy, when your Real Estate ventures (buying, sell, renting out) start to resemble “an active business”, the income is taxed as if you “work”. In this case your Real Estate income would be considered under Box 1. For the Dutch among you, this is a good post with some clarifications.

However, for this assessment we assume you actively manage your properties (assumed as long-term rentals) and that taxation is similar to the short-term rentals (think a B&B, AirB&B and similar situations). The taxation in this case is based on the net income you make from the property. You will have to report 70% of this net income, over which you will pay income taxes and social insurance premiums.

2018-08-18 Update: for actively managed (including AirBnB/etc.) rentals of an investment property, you might actually be required to add the total net income to your Box 1 taxes (not just 70% calculated as in this example, which applies to short term rentals of you own home only!).

Box 2 Real Estate Dividend Option

Another option to deal with your Real Estate is to incorporate into a business. In this case you can manage the properties anyway you please. You can also use the depreciation of the buildings and pretty much all other costs to limit your profit (and thus taxes). On this profit you will have to pay 20% tax (flat rate). Whatever is left, you can pay to yourself as dividend, which is taxed at another 25% (flat rate). In short, your net profits are effectively taxed with 40%.

We have actually incorporated before when we were still living abroad, because at that time it was an interesting option to limit our overall tax burden. However, you have to be very careful with this option. Here is why. There is a “ter beschikking stellen” clause in the dutch tax code. This means that if you loan money to your own business, you have to report income on this loan under income taxes (Box 1). If you already have paid employment, this taxation could be as high as 52%!

The interest rate your company pays on your loan also has to be conforming to market rates. You are not permitted to charge excessively high interest rates or no interest at all. In the later case the tax man will assume an interest rate for you and will tax you on it…..so be warned. Considering market conforming rates are currently in the order of 3-6% (-isch), you would only net 1.5-3% on this loaned money after taxes. Not very appealing!

Box 3 Real Estate Wealth Option

As noted in the introduction, and as also explained here and here, Box 3 taxation is based on your wealth. For Real Estate purposes this wealth is calculated as the government assess property value (WOZ) times a factor that is based on the rental income. If you have a profitable property, this percentage is usually 85%. Next, you deduct all your mortgagee and loans, which leaves you with your net “wealth” for tax purposes.

Depending on your wealth, various taxation percentages apply. Note that, in order to be qualified for Box 3 taxation, you will need a property manager that takes care of the rental property for you, as this investment has to be “passive” (read: no “work” required).

Real Estate

Real Estate at Sea

Assessment Assumptions

Now, let’s compare the 3 taxation options to see which one is best to FIRE purely on Real Estate in the Netherlands.

We have assumed the following for a single person:

  • Property market value (4 units) €500.000
  • Properties WOZ value (4 units) €450.000
  • Yearly rental income (gross) €50.000
  • Insurances: €1.500
  • Maintenance (3% market value): €15.000 (assumed primarily done by external parties; equal amount spend each year)
  • Property Taxes, sewage, garbage, etc.: €2.500
  • Property Management (tenant selection): €1.600
  • Property Management (monthly fees): €3.000
  • Marketing Costs (€50/month): €600
  • Yearly business expenses (year end statement, accountant, etc.) €1.000
  • Building Depreciation (2% per year, building value €300.000): €6.000

For this example no mortgages are taken into consideration. If you want to see how this work for you, include the interest as an expense for the Box 1 and Box 2 options. For Box 3, correct for the mortgage value. Simple as that.

Tax rates and social insurance premiums for 2017 are used for the calculations. Utilities are assumed to be paid by the tenants. We have kept costs for insurances, property taxes and maintenance the same for all options.

Box 1 Tax Results

For this assessment we have assumed we need about €600 per year in marketing costs for the various units when they become available on the market.

Based on the assumptions above, the Net Income is about €18.937. This could be improved a bit if you do some of your own maintenance. Do realize that for every euro reduction in expenses, you only earn about €0,5 back in net income due to taxes and social insurance premiums.

Also note that if you start to earn more, the tax burden also increases as income tax is progressive (from 36.55%, all the way up to 52%).

Dutch Real Estate: Taxation Options - Box 1 Income

Dutch Real Estate: Taxation Options – Box 1 Income

Box 2 Tax Results

We have had several people question why we don’t incorporate. This is why! The net income you can withdraw from a company (in the form of dividends), after paying profit and Box 2 dividend taxes, is lower then if you manage the property yourself (at least for this scenario). The total net income comes to only €16.294. But you will have another €6.000 in the company to use for investments.

The main reason is the depreciation of the building, this money will be available within the company as cash, but cannot be withdrawn! It’s considered a reserve, not profit, so you cannot pay it to yourself as dividend. The money will be available for future investments though.

There are some other reasons to incorporate obviously, of which a big one is the ability to limit personal liability. Incorporation might still be appealing for certain people and situations, but you really need to do your homework here.

Note: you still have to perform work at the company as you actively manage the properties. If you work for the company you also need to pay yourself income (which comes in Box 1 for tax purposes). However, for simplicity reasons, this has not been taken into consideration. If you would, the profit, and thus the available dividend, becomes smaller. You would get some of this lost income back via Box 1 income. We are also assuming you don’t pay yourself the minimum Major Shareholder amount (which is €45.000 per year), obviously.

Dutch Real Estate: Taxation Options - Box 2 Income

Dutch Real Estate: Taxation Options – Box 2 Income

Box 3 Tax Results

This leads us to Box 3 Real Estate investments, which clearly is the winner with the lowest taxation and thus the highest net income at €23.178. Even with the additional costs for a property manager (in terms of both selection fees and monthly fees), you are still better of from a net income perspective. This is a double bonus, as you don’t do any of the work and still get more at the end compared to Box 1 and Box 2 investing. How good is that?

Dutch Real Estate: Taxation Options - Box 3 Income

Dutch Real Estate: Taxation Options – Box 3 Income

Discussion and Notes

We did some more calculations for higher incomes too. We made the same calculations for a €1M Real Estate portfolio for a single person. This showed exactly the same results; with Box 3 investments outperforming both Box 1 and 2 by a healthy margin. If you are a couple and you have a €1M Real Estate portfolio, you can even benefit more as you can split the income or wealth and limit your taxes that way.

Now, the above is simplified obviously, as it is rather difficult to compare the three options due to all the requirements and options/limitations. Have a look at your personal situation to find out what works best for you!

Conclusions

Based on the above assessments and assumptions, you are best off getting a property manager and maintain all your Real Estate investments in Box 3 for tax purposes. We are planning to do the same. Best of luck!

 

Does this provide new insight to you? Have I missed anything critical? Did I make an error somewhere, please do share!

Monthly Cheesy Index

The July 2017 Cheesy Index had yet another (very) positive month due to the reasonable savings rate and the good dividend income and rental income. We really cannot complain on the progress at all. Even the exchange rates stayed relatively stable, which helped too!

July 2017 Cheesy Index

As you can see below, we can report yet another increase in the Cheesy Index to new heights! We are now at the 63.4% mark. We are still aiming for 65% by the end of the year, but it would be great if we could reach 66.6%. This would mean we are 2/3rd done on our journey to FIRE. Kind of a nice milestone, but unless a miracle comes along, I doubt this will happen.

July 2017 Cheesy Index

July 2017 Cheesy Index

Cheesy Index Breakdown

In case you are wondering what is included in the Cheesy Index and how the wealth is broken down, let’s have a look.

We have divided our wealth into three categories (for more details, see here):

  • Income producing assets (stocks, real estate, etc.)
  • Non-income producing assets (cash, “valuable” posessions)
  • Depreciating assets (i.e. the car)

This looks as follows:

2017 Asset Allocations

2017 Asset Allocations

The growth in non-income assets is due to the increase in cash reserves we have to buy more real estate (or shares/ETF, subject to whichever comes first).

When you breakdown the income producing assets, you will have:

  • Real Estate
  • Dividend Shares
  • ETF’s/Index Funds
  • Crowdfunding

This breakdown looks as follows:

2017 Income Asset Allocation

2017 Income Asset Allocation

As you can see, the crowdfunding is slowly being phased out. The ETF/Index fund portion of the porfolio is slowly growing. The dividend portion is fluctuating a lot as the majority of shares are Canadian. Real Estate covers the majority of the portfolio. The latter is hopefully to increase over the coming months if we manage to find something reasonably priced. Time will tell!

Long Weekend Holiday

We are off to a long weekend away with family and will be back next week. I plan to really relax and ignore the blog for the most (there might be a tweet on occasion). It will therefore take a bit longer than usual for me to reply to any of your comments, so my apologies in advance! Hope you have a great (long?) weekend too.

 

Did your net worth or “index” also grew in July? Did you also see a nice increase?

Savings Rate Update

As noted last month, the July 2017 Savings Rate was bound to be significantly lower. Still, kind of (positively) surprised about the final result 🙂

July Finances

July was a fun and surprisingly busy month, both at work as well as socially. A financial overview of the month:

  • We received our regular incomes this month and the expense claims and costs cancelled each other out.  Nothing more, northing less;
  • The crowdfunding income was €196 in deposits (combined interest and principle);
  • Living and healthcare spending was (very) high this month due to the payment of the €977 deductible for the storm damage to our roof. Take this one expense out of the equation and we only had a slightly above “normal” month;
  • The transport costs were also well above average with over €630 spent. The primary cause was obviously the major maintenance service done on our practical family car. There was a “positive” note side to this bill, as it came in lower than expected. Primarily caused by the fact that there was nothing found during the maintenance. We like that!;
  • Grocery costs were also above below normal this month with a total of about €382. Not sure where this came from, as we did not do any special grocery shopping. Probably just how the weekends fell this month;
  • The kid category was, as per usual, fairly stable. We only paid for day-care fees (net fees are about €953). We cancelled the day-care per the third week of September. As of October school and after school care will commence for Miss CF. We therefore have one more (higher) day-care bill and than it should drop significantly (albeit we don’t know by how much, still need to get the new prices);
  • Travel and Leisure was about €122. Amongst others we took Mrs CF’s dad out for bowling and a pancake dinner (Miss CF loved it too), but there were many daytrips (think Amsterdam) and small (and frugal) events; and,
  • The other category was about €184 (think cash, gym, computer related expenses, birthdays, etc.).

July 2017 Savings Rate 

The savings rate for July ended up being 42,0%…ouch. The year to date savings rate is now 58,6% Still a badass gold saver

Here are the stats:

July 2017 Savings Rate - Overview

July 2017 Savings Rate – Overview

If you breakdown our expenses for the month, the distribution looks like this:

July 2017 Savings Rate - Expenses

July 2017 Savings Rate – Expenses

August will again be relatively uneventful from a financial viewpoint. The only exception might be that we will make reservation for accomodatoin for a holiday at the end of September. We will likely go to Germany by car (perhaps it will also turn into a business trip too to check out Real Estate…but that’s not the primary plan!).

 

Did you also have a tough(er) month? Share your story!