Have you every realized that we as humans are extremely good at not solving the core problem (i.e. the root cause), but rather stick a Band-Aid on it? What make this really bad is that we do this with almost everything! A couple of random examples (feel free to add a couple more in the comments section):

  • More and more people are distracted in traffic by mobile devices, so let’s make an app for that. Really? Why not just shut it off or ignore the phone when you are behind the wheel.
  • You’re suffering from high blood pressure, let’s take some medication for that. Really? Why not stop eating products with added salt (which is pretty much anything processed), meats (which stiffens arteries in the hours after consuming), eat more greens and beans and work out more? The previous few items are actually proven to be a lot more effective and much better for your overall health.band-aid
  • You are having a piece of month left at the end of your money. Take out a loan or pay with a credit card! Really? Why not cut back on expenses, make a budget, evaluate your life priorities, find ways to earn more, etc.
  • I need to clean my yard, of all the leaves that have fallen recently, with an obnoxiously loud leaf blower. Really? Why not get a rake and get a bit of exercise and not annoy your neighbours.
  • I need a bigger house, because I cannot fit all my stuff and toys in it. Really? Why not sell/donate/recycle all the things you don’t use, clean up the place and enjoy the same place for many more years to come.
  • I need to buy X, X and X on black Friday because it’s on sale, Really? If you actually need it, you would have bought it before and would be using it already. If you do have time, and have done  your (price) research (and could not find it used or at your local thrift store), black Friday might be an okay time to buy (assuming the item actually is cheaper).
  • I don’t like where my country is going, let’s elect an “interesting” real estate businessman for president, really? Well, you see where this is going 🙂
  • Etc., etc., etc.

But why do we do this? Because it is the path of least resistance, it takes very little effort. If you actually want to solve the problem you have to work hard, be dedicated, be informed, want to improve and, most of all, are willing to change. Without the aforementioned you will just go for the quick fix, which in reality does not solve the problem, it masks the problem and often makes it even worse.

We are obviously not immune for this, and we keep reminding ourselves not to fall into the convenience trap. For example, instead of buying a second-hand compressor and accessories to inflate car tires, we used the bicycle pump to inflate our car tires to the optimum pressure (potential savings €50). This obviously takes more effort and time, but you get a bit of a workout and savings in return.

Moral of the story, take the long hard road, it will make you happier and improve your life!

 

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As noted by Amber Tree Leaves earlier this week, we are planning another FIRED-UP meeting in early 2017. Considering the success of the last one (see some posts/comments here, here and here), we are really looking forward to continue with these meetups (improving/expanding them as we go along).join-our-meetup

We had already send out a doodle to those people whom attended last time to gain some insights on the level of enthusiasm and propose some new ideas. It turns out that a lot of people are in for a re-run. The plan this time around, as noted by ATL earlier, is to meet up in Antwerp (Belgium). But we can now also confirm that it will be done on 4 February 2017.

We are in the process of arranging a small meeting room in a bar or other facility (we will be charging a minor fee for this, but should be no more than €5 pp), to have the opportunity to have speakers/do presentations. Plan is to meet around lunch hour and continue until (late) in the evening. Detailed plans will follow and will be communicated to those attending the meeting.

privacy-meetupHow about you, are you interested? Do you want to do a presentation of something you have learned, or think is important to share with like-minded folks? Do you have any other ideas for the meeting? If so, please leave us of ATL a message or comment. We are very much looking forward to you inputs!

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We (Mr. and Mrs. CF) just finished our discussions and thoughts on how to calculate our Savings Rate going forward (and correct some older results). The outcome of how we calculate our Savings Rate is added in this new page on our blog, it may explain a few things you are wondering about, and perhaps could help you too with determining your Savings Rates.

The reason we had some discussions is because of our latest Real Estate venture. We have successfully rented out the two units and commercial workshop in our new property to some lovely people. All associated funds are coming in and are going out of our checking account. Because it’s one property, expenses for mortgage, maintenance and operating costs are shared between our personal use and our Real Estate venture. These can sometimes be hard to split, but we decided to give it a go anyways.

What does this have to do with our Savings Rate? Well, because we were not sure how everything was going to work out we added everything into our Savings Rate calculations (incomes and expenses). Now that we have completed our review of the assessed values of the properties (i.e. the “WOZ waarde” and the “Marktwaarde Taxaties”), we now have decided how to split the expenses like mortgage interest, insurance and maintenance. This is very important as it will affect how we will submit our taxes for 2016.

We have now completely pulled out and split the investment income and expenses related to real estate from our personal Saving Rate calculations. The corrected version, with changes starting from July 2016, is shown in the new overview below. If you are curious about the changes, you can also look at the one originally prepared for the Saving Rate October 2016 post. However, it pretty much boils down to the fact that we actually have had a slightly higher YTD Savings Rate than initially thought. Now that is always very good news! This actually also makes sense, as we moved to a smaller house as of July and anticipated our housing cost to go down. The data is now somewhat distorted because of the moving costs, refund of the rental deposit (see low rate in July and peak in August) and initial maintenance/decorating costs, but we might be able to achieve a 60% Savings Rate next year because of downsizing our home (fingers crossed).

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Going forward, we will use the (in our opinion) correct personal Savings Rate. But as a bonus we will also start reporting our monthly Real Estate income and expenses (for those of you whom are interested in this investment opportunity). More details to follow in December.

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Team CF is continuously discussing investment strategies, preferences and making compromises in all the final investments. Mr. CF prefers stocks combined with some crowdfunding, Mrs. CF favours real estate. It should then also be unsurprising that we have a very diverse portfolio, and we own real estate as part of it. But how did we get started? What did we do to get where we are today? And what is the return on our real estate? This is what today’s post is all about: Real Estate Investments – History, Yields, Risks and Strategies.

Real Estate Investments – History, Yields, Risks and Strategies

We got started in 2014 with our first properties after Mrs CF walked by an duplex and got excited. She pulled out the good old excel spreadsheet and started to make various calculations. We got quotes from contractors for renovations and found that the property could make an, for us reasonable, return on investment. Next the bidding and negotiation began. To our surprise we actually agreed upon the sales price that ended up at about 75% of the asking price (yes, the properly needed a lot of renovations!). Next, we renovated the place extensively (with the use of a local contractor) and about 4 months after purchase, we had both units rented to solid tenants (one through a property management firm, one to family whom had helped with the financing and renovations).

Real Estate Investments – History, Yields, Risks and Strategies

Real Estate Investments – History, Yields, Risks and Strategies – Real Estate

The financing of the properties was done utilizing the value in our existing home at the time, supplemented with family loans (yes, with proper contracts in place and interest rates according to market conditions).

Our Initial Financing

How did we got all this money? Well, before we found the path to FIRE, we were not sure what to do with our money (we had bad experiences with investing and were not properly informed about index funds or dividend stocks), so we aggressively paid off our own house. This came in very handy once we realized that we were better off investing than paying down the house. We had a HELOC (Home Equity Line Of Credit) at that time, which allowed every euro (dollar, actually) to be pulled out against the governing variable market interest rate. In short, we were able to purchase the house in cash and used remaining cash and loans for the renovations.

Fast forward to 2016, with the investment strategy to become FI firmly in mind, we searched for a property that could be split in multiple units or already consisted of multiple properties (e.g. duplex, triplex or more) to live in ourselves but also rent out the other unit or units (we had sold our previous home and were renting at this time).

We ended up finding a former B&B that suited our criteria. This property provides us with a sizable upper unit (~125m2) for ourselves and two smaller units (~40-45m2) that could be rented out. It also has a large workshop (~65m2) which could be rented out commercially (with an option to transform into an additional living unit after renovations/modifications). We financed this property with a regular mortgage, which we would be able to pay for on one salary (albeit that would have been a bit of a struggle).

What to Expect Financially?

To make a long story short, we currently own 5 rentable units, and one unit for our own use, in just about two years’ time. Two units are almost paid for (just a personal loan remaining), three are financed using a regular mortgage. An overview of their value, rental income, yield (gross and net), etc. is provided below.

Real Estate Investments – History, Yields, Risks and Strategies - Finances

Real Estate Investments – History, Yields, Risks and Strategies – Finances

To explain the various columns in a bit more detail, let’s review each one:

  • Property Market Value – the value of the property if it would be sold on the current market, for units 3-5 it is the value of what we paid for it in mid-2016;
  • Mortgage/Loan – value of the mortgage or (private) loan on the property/unit;
  • Asset Value – the Market Value minus Mortgage/loan value;
  • Gross Rental Income – Income based on 12 months’ income per year at the gross rental price (i.e. before management fees/expenses);
  • Yearly expenses – all reoccurring expenses such as property management fees, insurance, property tax, sewage/waste disposal fees, etc.;
  • Yield (Gross) – Gross Rental Income minus Yearly Expenses (value and percentage based on Asset Value);
  • Reservations and Maintenance – All units are well maintained (or newly renovated) and reservations for the coming years are primarily for paint works, replacements for fridges, dish washers, heating units, etc. The reservations also include a risk allowances for unexpected expenses (damage), temporary vacancies (i.e. no tenants) and other unforeseen scenarios (e.g. water damage). We use percentages of between 2-3% of the Property value for combined maintenance and reservations; and,
  • Yield (Net) – Yield (Gross) minus Reservations and Maintenance (Absolute Value and the percentage based on Asset Value).

RE 04As you can see the net yields are pretty healthy, even if the reservations/maintenance is under estimated we should likely still get yields in the order of 5-6% before taxes. The Gross yields are actually really good, which is what is helping us a lot. The main reason for that is that the reservations will likely not be required until a couple of years from now. This allows this cash-flow to be reinvested in other assets, thereby allowing the financial snowball to keep going faster and grow (read: “compounding interest”). However, we do need to increase our financial buffer to accomodate unexpected costs associated with issues in our Real Estate.

Where to Start?

Some recommendations/ideas to consider when you want to invest into Real Estate:

  • Start small, smaller units generally have higher yields than larger/more expensive properties and are easier to finance;
  • Look for areas that have good rental markets (e.g. in or near larger cities, or smaller towns that provide a good social environment where younger folks want to stay) and do your homework;
  • Make sure you are cash-flow positive as soon as possible after you purchase the property;
  • Using mortgages or loans as leverage allows you to need fewer of your own assets, thereby increasing the yield on your invested assets (but this does coincide with higher risks!);
  • Look for properties that are, or can be, split into multiply units. For these properties, you generally pay less per unit and thereby increase your yield on your investments; and,
  • Put effort (or funds) into tenant selection. This is one of the best risk management tools you have in Real Estate investing (plus added benefits of Box 3 Taxes). Also treat your selected tenant well and with respect, in return they tend to also take care of your property for you (this is also our personal experience).

Happy House Hunting!

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As noted in September, the Cheesy Index got a bit of an overhaul to accommodate new knowledge about Dutch taxes. Because of this new information, we appeared to have signifcantly underestimated our Cheesy Index. Fortunately, nothing new this month, so we continue the slow but steady increase going forward. The Cheesy Index up to October 2016 is estimated at 53.9%.

We have been looking at the projected income, expenses and other items (including Mr. Market potentially not liking Mr. Trump for the remainder of the year), but we might still be able to hit 55% by the end of the year. But we do need Mr. Market to not do any really crazy stuff. Fingers crossed on that one 😉

201610-ci

Did you also see your overall portfolio increase in October? We sure hope you did!

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October was a relatively steady month on the dividend front. We purchased some UNA (100 shares, in two batches of 50 shares to profit from the steady drop in stock price) this month and got lots of free money. October yielded a very respectable €545 in dividends. This is a YOY return of about 298%. But as noted last months, this is mainly due to a large amount of cash that we reinvested over the last 16 months and not “organic” dividend growth. Albeit we are very curious to see what that is going to look like. Yield this year (to date), based on book value, is about 3.45%. With two more months to go, we should end up just over 4.1%.

   20161101-monthly-dividend

We currently own a total of 43 stocks and our portfolio looks like this:

 20161101-dividend-overview

When you dump everything into a pie chart, based on the sectors the shares represent, you find the below overview:

 20161101-dividend-stock-by-sector

We still have some work to be done, as we still need to purchase more stocks to shift the sector allocations, but that is a plan in development.

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A new month, a new Saving Rate overview! We’ve now already closed the 10th month of 2016. Time flies when your having fun! I’m actually secretly very curious how the total finances for 2016 are going to look. But let’s not get ahead of myself here.

October was another good month from a social perspective. We had a blast at the FIRED-UP meeting in Breda with fellow FIRE enthousiasts, which was awesome. Thanks again for everyone that attended, we are planning another one for January 2017, more details to follow this month (so keep an eye out for that).

As to the financial side of October, here is a quick overview:

  • Incomes from both Mr and Mrs CF were normal, and we finally got the long awaited expense claim back;
  • Income (principal and interest payments) from crowdfunding loans is now exceeding €155/month;
  • We received full income from our two new rental properties and the commercial unit, adding a very nice €1400+ to our income (if you think this is nice, wait until you see next month….. details to follow);
  • Living expenses were high this month due to the quarterly payments for insurances and some maintenance related expenses. We also had to pay sewage fees and property taxes that were incorrectly allocated during the sale of property to us (~€80);
  • Groceries & grooming a bit below average at around €338;
  • Transport costs were higher this month due to quarterly road tax (€179), fuel (€55) and insurance expenses;
  • Costs for day-care and kid related expenses where slightly higher (~€1220, including benefits) due to an outstanding day care payment and the costs of the birthday gifts for Miss CF;
  • The cost for the FIRED-UP meeting was €66 and is covered under the leisure section of the budget;
  • Gifts came in at €32 this month (all experiences, no stuff);
  • Finally, we Mr CF bought new winter cycling clothing, which came in at a whopping €205. But it is money well spend as the last two trips were very comfortable and I was not cold at all, a major win here!

The saving rate for October ended up being just below average due to various higher quarterly expenses and some expensive purchases like the cycle clothing. We ended the month with a nice savings rate of 53.1%. See below for the usual graphs. Considering the projected income and expenses, we should be albe to close out the year about 57-58%. That would be seriously nice!

201610-savings-rates

201610-expenses

How did you do this month? Any large expenses, or bonus incomes? Let us know how you did!!

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It’s official, Mr. CF is going to do a career switch (sorry, it’s not one yet that revolves around FIRE….)! Where my former career was primarily revolving around project engineering, project management and design management, it will change to cost engineering. The financial side of FIRE is actually starting to rub off on things I want to do in life/work, primarily in the sense that I like to do financial estimating, cash flow reviews, profits, yields, risks and associated analysis.

I’m new to cost engineering, so will be going through a steep learning curve in the coming months but I consider this a very good thing. However, the grass is not always greener on the other side of the fence….let me explain..

I’m a very social person and like people around me for most of the time, I therefore like working in teams. This position is one that you do more on your own with fewer interactions with other parts of the team (which are supposed to provide you with inputs, that you usually only get at the last minute….). I hope that I’m overestimating this impact, but will have to see what happens.

The company is good, but it’s not the best one I have worked for in my career. My new boss seems decent, but I’m a bit sad to have to leave my current boss, who is an amazing guy. The decision to leave was therefore not an easy one (have a good boss makes a difference in a job).

I’m also going back in paid time off (currently have 40 days, will go back to 31 days), which I also will be partially compensated for. However, I rather have more time than money, but this was not negotiable….

The pension plan is also not as good at the one from my current employer, but this should not be a major concern considering we should be FI well before we reach the time that our pension will be paid out (at that time it’s a bonus/back-up income), which currently looks to be at 67 years and  3 months (and climbing).

Financially, it will also have a significant impact on our household budget, both positively and negatively. The main impact comes from losing the company car, so I will be using our own car to get to work (keep in mind that cars are very expensive in the Netherlands). Fortunately, I’m partially financially compensated for this “loss” in conditions from my old job. Furthermore, I’ve decided to bike to work one or two days per week (about 54km/day), which would help lower transport costs, get me in shape and improve my health. Clear win on this one, but the expenses for our own car will go up significantly (fuel, maintenance and depreciation). Based on our calculations, we should be cost neutral or even a bit positive (if maintenance is not too bad). Curious to see what will happen. However, due to the various compensations, different pension plan deductions and a few other incentives, overall income will go up (both absolute and cash-flow wise), even when taking into account the increased transport costs.

The bottom line is that this career switch should get me/us ahead both personally and financially. Which will actually bring us to our FI goal a bit faster and be more satisfactory from a work perspective. In short, I’m very much looking forward to this new challenge.

How about you, did you switch jobs lately? If so, why? Did you do it for the money, or for personal reasons?

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For those of you that have been here before, you probably know by now that we strive to eat very healthy, in an attempt to make sure we can really enjoy our FI for as long as possible, with as much energy as possible and the least amounts of aches and pains (and/or disabilities). Based on available science today, there is only one lifestyle that actually allows for this: a plant-based whole foods diet.

After having given this a try about 2 years ago, we were amazed by some of the results: I’ve never recovered quicker from intense workouts, which I’ve been doing for the last 20 years of so. Certain annoying conditions disappeared (afternoon dip, acid reflux, occasional headache, etc.). And hopefully we are on our way to unclog our arteries and avoid having a heart attack, type 2 diabetes, stroke, and lots and lots more (see link above for available research and data).

However, it takes much more efforts to prepare because you make pretty much everything from scratch. Which brings us to the topic of today: Apply Pie – the (almost) whole foods approach.

Frugal-licious – Apple Pie

Frugal-licious – Apple Pie

Frugal-licious – Apple Pie

Before we get started this apple pie can be a very frugal desert as well, but it depends on what you grow in your yard (in our case, both the apples and the walnuts came from our own yard). If you have to buy all items in the grocery store, it might become relatively pricy. But at least it will give you an desert that actually makes you heathy, so it’s worth some money in our opinion.

Crust:

  • 250-300g (10 ounces) of medjool dates (others work as well– avoid the ones with sulfite as preservative) – softened in water for 30-60min, if necessary (cost ~€1.5)
  • 600ml (2.5 cups) of rolled oats (cost ~€0.2)
  • 250ml (1 cup) of soaked nuts (pecan, walnut or cashew) (Free!)
  • ½ table spoon cinnamon (or to taste) (€0.1)
  • 50-75ml coconut oil (about 4-5 table spoons) – limit where possible as this is not a whole food and not particularly healthy for you. However, the curst needs to stick together with something obviously. (€0.75)
  • 1/8 teaspoon salt – limit where possible (we normally don’t use any) (€0.0)

Filling:

  • Apples (about 7-8 small ones or 5-6 large ones) (Free!)
  • Raisins (about 1-2 cups depending on your preference – avoid the ones with sulfite as preservative) (€0.5)
  • Cinnamon (1-2 table  spoons) (€0.1)

Total cost of for us for this pie (8 large pieces or 12 small pieces): €3.15 (if you buy everything, its around €5.0-5.5)

Preheat oven to about 175 degrees Celsius (350F).

Peel, core and cube the apples, add rinsed raisins and cinnamon, stir until mixed well.

Add rolled oats, nuts, cinnamon and salt to food processor (you can try this my hand, but I would not recommend this unless you have too much time on your hands). Continue mixing until the mixture has a “coarse sand” texture.

Add in dates and coconut oil, mix well until it starts to come together. If it does not, add some water. Once ready, add into pie dish to make the crust, add sides, but keep some crust to complete the top. Next pour in filling and complete top. Bake for about 45-50 min.

2016-10-fl-apple-01

Enjoy your healthy desert, we sure did!

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2016-10-gifts-02It was the birthday of Miss CF a while ago, the little bugger already turned 3 years old. We had a great birthday party with lots of family. Little Miss CF had a blast and enjoyed all the attention and gifts. Which brings us to the topic of today’s post, what is a “normal” birthday gift for a small child and how much do/should you spend on this as parents? Do you buy new of used (or both)?

I realize that this will depend on your financial position and financial mind-set. As our financial position is solid (we are very fortunate and realize this frequently) but our financial mind-set is frugal, this provides a bit of a conflict.

This year we spend €54 for Miss CF. As we don’t have much references, we are not sure if this is very little, “normal” or a lot (or all of the above). For this amount of money we got her the following:

  • Small kitchenette (€50);
  • Inflatable donut for swimming (€1.0);
  • Large toy flower (€1.0);
  • Pink hair band (€0.75);
  • 6 magnetic butterflies for on the fridge/whiteboard (€0.75); and,
  • 6 party whistles (€0.50).

The kitchenette we bought used off Marktplaats (local ebay, kijiji, etc.) and doubted a while before buying this one as it was one of the more expensive ones available, but it looked amazing and was in a very good scape. When the time comes Miss CF is outgrown the Kitchenette, we will likely be able to sell it again for anywhere between €25 and €40 (based on current prices). So in reality it may only cost us anywhere between €10 and €25, which is not a lot of money.

The other 5 items we bought at a thrift store. We let Miss CF pick out her own gifts, which is always a winner. We also made sure she got some extra attention and time from us that weekend, which resulted in an overall very happy kid.

And you guessed correctly, the six party whistles were the greatest thing in her mind. She played with them for hours, lots of giggles and laughs (and driving us crazy), and was very protective of them during the birthday party. Go figure. 2016-10-gift

But it comes to show that she favour the little things as much (or more) as the bigger ones (at least for now), however the thing she favours most is attention/experiences. Hope she can keep doing this for many more years to come, would make her a great candidate to become FI early on in her life (which would make us a couple of very proud parents ;-).

What do you think? How much do you pay for gifts for your kids (or how much would you be willing to pay)? Do you feel cheap if you buy something small or cheap?

P.s. sorry for the crummy photo of the kitchenette, got to love the quality of camera’s on most phones 😉

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As already hinted on a couple of times, the Cheesy Index got a bit of an overhaul in September due to the post of this article and associated comments from you readers. We found that we had not incorporated the tax benefit called the “heffingskorting” correctly into our FI/Cheesy Index calculations. An updated assessment showed that we needed a solid €83K less Net Worth in order to become FI. That is great news, as it turns out that we just crossed the 50% mark! Seriously good news in our ears, as you can well imagine.

We also updated the yearly Cheesy Index as can be seen here. With this increased piece of knowledge about the heffingskorting, we realized what we could shift our FI date forward by about 18 months! Nice, eh? Based on the various assumptions and ROI’s, we should be ready to FI by about mid 2024. To continue with the good news run, we are now only 0.2% from the Cheesy Index target for 2016. There is a good chance that we will beat our forecast this year (assuming Mr. Market does not do anything crazy).

The Cheesy Index up to September 2016 is estimated at 53.1%.

201609-ci

How was your month of September, did you see your porfolio increase? Did you get closer to FI? Let us know!

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2016-10-tap-2You might have encountered this discussion yourself as well….. Mr. CF: why is it so cold in the house? Mrs. CF: I don’t know I have not touched the thermostat. Mr CF goes to up the temperature to find that the thermostat has crapped out (we checked, it weren’t the batteries). This all happened on Friday night at 20:00……crap stores are closed.

So the next (very cold) morning, the search begins for a new thermostat. Two questions that come up: what is available and how much do we want to spend on it? To answer the first question is: many! There is a large selection of thermostats, the basic ones have just a temperature gauge and two buttons, the fancy ones have 4 sensors for different areas of the house. These fanct systems are wireless/remotely operated, can be programmed with an app, are highly flexible (and so on and so forth). The first options costs a very reasonable €20,95, the second type up to a whopping €499, with the majority of them around the €100-180 mark. That is quite the price difference!

What do you “need”, well you certainly need a thermostat as it won’t be very comfortable or practical to live without heating. But it is more the want’s that come into play with the thermostat. The options start with do you want to be able to program (e.g. daily on/off cycles, temperature ranges, etc.), do you want to be able to remotely turn on/off the heating of the house, or whatever else you can think of related to heating the house.

After some debate, we opted for the basic €20,95 thermostat option. Why? We noticed that our living schedule changes significantly from day to day. We don’t always come home at the same time (subject to work, Miss CF plans to play outside after day-care or desire to what’s some Roger Rabbit, spontaneous weekend plans or other reasons), so programming does not really work that well. Which means the heating is either on or off at the wrong time (which is uncomfortable or a waste of money/energy). The remotely (app) operated would be a welcome features, but just not at the price of €150-499.2016-10-tap-3

Our home these days in not too big anymore (~125m2 or about 1350sf) with lots of smaller living areas and rooms, so it heats up rather quickly; therefore increasing the temperature when coming home is not a noticeable problem for us. To keep things simple and frugal, we bought the cheapest option that does only one thing: keep us comfortable. We keep the temperature on about 17-18 degrees Celcius when we are not there and increase to around 20-20.5 degrees Celcius when we get home or if we feel cold. We have the advantage that we have large south/southwest facing windows, so the house heats up nicely during the sunny days. And with the about €130 we saved, we can also buy some sweaters 😉 Oh, and additionally we lowered the temperature of the boiler system to 65 degrees  Celcius (down from 80 degrees Celcius), this means lower gas use while still limiting the risk of nasty organisms in the water lines.

Also, on the same cold Saturday morning, we deviced a simple plan to keep warm (at least around the stove) and enjoy a good solid breakfast at the same time: Pancakes!

Because we try to eat as healthy as we can, we prefer a plant based whole foods lifestyle. But that means that pancakes are not really the heathiest way to eat. However, we found a decent recipe to eat semi-healthy pancakes without the milk and eggs:

  • 700ml soy milk
  • 300 grams whole grain flour
  • Baking powder
  • Couple of apples (cored, peeled and sliced)
  • Real Canadian Maple syrup (skip this is you want to stick to the really healthy, but you have to enjoy life as well!)
  • Bit of oil for baking (we actually used olive oil for this)

Mix soy milk and flour, add backing power. Mix thoroughly. Heat pan, add some oil, and pour in batter. Add apple slices. Turn once half way and bake pancakes until golden brown. The end result looked like this:

Bon appetite!

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September was a steady month on the dividend front, no purchases but lots of free money. However, an interesting trend developed over the last few months due to the steady increase in many stock prices. We generally had picked the number of stocks such that they would trigger automatic purchases each time dividend was paid. But as certain stocks have increase in value by more than 30% since we purchased them, this does not happen anymore. In short, we receive more and more cash into the account and we anticipate that by the end of the year we will have another €500-700 to buy a few more dividend shares (fees are about €7 per transaction).

September yielded a very nice €573 in dividends, yeah! Very exited about this. It actually is a YOY return of about 740%. But as noted last month, this is mainly due to a large amount of cash that we reinvested over the last 15 months and not “organic” dividend growth (that would have been really spectacular! But we are not magicians).

20160901-monthly-dividend

We currently own a total of 42 stocks, but due to the sale of RDSA shares after the dividend (in an attempt to make some capital gains and buy them back at a lower price, which by the way has backfired so far due to the OPEC agreed production level….) we now also dropped back below the “magic” number of 10.000 shares… bummer (just kidding).

20160901-dividend-overview

When you dump everything into a pie chart, based on the sectors the shares represent, you find the below overview. It’s not very well managed at this point as we would like less exposure to financial services stock and more to energy and consumer defence stocks (i.e. we have to buy some RDSA, UNA and AH in the next months).

20160901-dividend-stock-by-sector

How was your September? Did you get some money for doing absolutely nothing too?

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September was a good month from a social perspective. We had a great weekend getaway in Centreparcs with lots of family (the grandparents rented 3 cottages for 3 nights). Miss CF greatly enjoyed the waterpark and slept like a baby (again) in the hours afterwards. Lot of fun with the big diners and lunches, as well as the mini golf and petting zoo. Both of us also had some time to relax, life was good!

Another fun event was a local flower parade/carnival parade in the town where Mrs. CF grow up (totally free to visit). This year did not disappoint either! Great laughs all around.

As to the financial side of September, here is a quick overview:

  • Mr. CF officially changed companies (still the same work/position with the same company, but now it’s no longer a secondment). This had a big effect on the income as the payment schedule changed from a once per month to a once per 4 weeks. In short, income for Mr. CF was considerably lower this period (only got about 55% of what normally comes in);
  • Mrs. CF did not have her expense claims paid before the end of this month, resulting in a reduction in income for the month of September;
  • Income (principal and interest payments) from crowdfunding loans is now starting to exceed €150/month;
  • Income from the new rental units is now starting to come in, but we should receive the first full payments as per late October/early November;
  • We purchased glass and paint for the new windows, which will replace the old ones (~€350);
  • Groceries & grooming a bit above normal at around €425 (partially caused by the B-day party for Miss CF);
  • So were costs for day-care and kids related expenses (~€1100, including benefits);
  • The weekend getaway was completely paid for (except some food and fuel), the parade was free too and the fairground rides for Miss CF were paid for by grandma, so no travel & leisure costs this month;
  • We sold an double bed that we had purchased for friends whom were staying over in August, made €30 of the resale! We were initially wanted to keep it for ourselves, but decided not to as our own bed was still good enough. Smart move, as we made some money on selling it. This is also causing the negative percentage on the other category (it’s an negative expense); and,
  • The invoice for the webhosting and domain name for Cheesy Finance pas also paid this month (~€84)

So the saving rate for September ended up being relatively low due to the temporary lack of income and expense payments, which will correct itself in future months when there will be a double income in the same month due to the new 4 week pay periods and the expenses will be received. Still we ended the month with a respectable savings rate of 43.4%. See below for the usual graphs.

201609-savings-rates

201609-expenses

How was your month? Did you do well on you savings rate for September?

 

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FIRE In the Netherlands....

(If you have read this post before, it is important to note that updates were made on October 10, 2016 as a result of various comments on this post. The main updates include the assumption that the heffingskorting will only apply once. Not twice, as the least earning of the couple will not longer get heffingskorting as of 2024. In short, we have assumed €2242 heffingskorting for all scenarios)

How Much Do You Need To Become Financially Independent in the Netherlands

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 2242 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 2242 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.

FIRE Scenario Results

FIRE Scenario Results

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: Significant change of €55k, as with the heffingskorting you now need fewer assets and can actually end up paying very little 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). The sobering thought is that you still need more than 7% ROI to become FI in the Netherlands without having to pay taxes.
  • 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 about €119.000 in required assets. Hmmm.. we were a bit too conservative on the last assessment (What we had actually calculated, without realizing it, was almost 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 €202k and €435k to live comfortably with your family (subject to your actual ROI).

Taxation

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) when you return on investment is above the 4%. If your ROI is around the 4%, taxation on wealth or income is about the same in percentage (due to all kinds of tax benefits received from performing work).

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!

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