The Perfect Heist

A cop and his partner investigate the death of an accountant, who is found in an industrial wood shredder (what’s left of him anyways).

In their search for the truth they end up with a pastor at a local church. This pastor turns out to be a con-man who had defrauded another congregation a few years before. His signature trade was to have the congregation work hard to make money for their parish. Next, the “wolf in sheep’s cloths” (aka the Pastor) would transfer the funds abroad (Curacao in this case) and vanish with his pretty partner.

The Perfect Heist - Industrial Wood Shredder

The Perfect Heist – The Industrial Wood Shredder, a useful tool for every criminal/murderer
Source: https://www.vermeer.com/NA/en/N/industries/wood_waste

 

However, this time the female partner realized she is betrayed by the pastor. She had found out that he impregnated another female of the congregation. In a twist these ladies start to work together and conspire against the pastor and have the congregation members kill him. They end up getting away with $357.000 and you see them sipping (virgin) margarita’s on the beach in Curacao. End good, all good! Or is it? For some reason(s) we don’t think this was the perfect heist….

Curacao

The above story lines comes from an episode of the series “Grimm”. We watched some of this series on Netflix last week. The episode was called “the good shepherd”, in case you are interested. But his episode got us thinking, it is possible to survive and even thrive on the income from “the perfect heist” as commonly shown in movies and series? Time to find out!

The Perfect Heist - Curacao

The Perfect Heist – Location of Curacao

Let’s start with the story line as noted above. Besides the $357.000 heist from the parish in Portland, the initial heist from the first parish also collected $440.000. This totals to a nice $797.000, assuming all the transferred funds were untouched. Now, the two ladies had to fly to Curacao. There would have been costs for bank accounts and transfer fees. Let’s also assume they party a bit in the first month of “retirement”. A rough guess is that they would have about $790.000 left for a long-term stay on Curacao.

A Long and Happy Retirement?

For sake of simplicity we assume the 4%-rule is true and will hold up in the coming decades (this is debatable, we know). The 4% SWR would yield $31.600 per year. Let’s assume this is after taxes. Would these two ladies be able to survive in Curacao?

According to the Cost Of Living Index, Curacao is not too bad for individual costs. However there is no data rank for this place. We therefore assume it is about 65% of living in New York City (which is the benchmark). This percentage is based on neighboring countries/areas and the fact that Curacao is an tropical island (and thus more expensive for certain goods and services).

At 65% of NYC, the living costs without rent is approximately $727 per person per month (NYC = $1.119 pppm). Rental of an apartment outside a city with 3 rooms averages about $1371/month. The two ladies would therefore need about $2.825/month. This is $33.900/year. What do you know! If they are able to save about $2.300 per year, they might actually be able to make it. But it won’t be margaritas on the beach every day served by sexy waiters. It would be a relaxed, but a far from glamorous retirement.

Low Cost of Living Areas

Perhaps it’s not a bad idea for them to move to a lower COL area, to stretch the “hard earned” dollars a bit further. Based on the COL index, you’d likely end up in India, Egypt, Pakistan or Ukraine. If they’d like a bit less of an adventure and a more “western” feel to it, they could go to Las Palmas in Spain.

The Perfect Heist - Las Palmas Spain

The Perfect Heist – Las Palmas Spain
Source: http://www.grancanaria.com/patronato_turismo/Discover-the-city.12652.0.html

Las Palmas has a COL index of 48.62. This translates into living actual costs of just $544 pppm. Rent for a 3 bedroom apartment is about $621/month. This would mean total costs of $1709/month or $20.508/year. That would leave about $12.000 per year for sun, fun and margaritas! Guess we have a clear winner here.

Catch?

But there is also a catch. Curacao and Spain both have an extradition treaty with the USA. Considering the two cops already know who they are, they could be in for some serious issues! More on this later.

Heist Amounts

In most cases heists are performed by a group of people. Even the electronic heists are usually done with a team of “experts”. I’ve make a short list of several movie heists and associated values (total and per person). It is actually quite hard to find the heist amount in most movie synopsis. If you feel I missed an important one (or two/three/etc.), please comment! Would love to make this list a bit longer.

The Perfect Heist - Heist the Movie

The Perfect Heist – Heist the Movie

  • Heist: Cash for sick daughter’s medical bill. Value: $300.000 (not for retirement, obviously)
  • Snatch: 86 carat diamond. Value: $3.9M. Team size 6 = $0.65M pp
  • The Score: Scepter. Value: $4.0M. Team size 4(?) = $1.0M pp
  • The Italian Job: Gold. Value $38M. Team size 6 = $6.33M pp
  • Ocean’s Eleven: Cash. Value $150M. Team size 11 = $13.63M pp

In most of the above examples, the guys/girls should be just fine financially. Especially in the case of Ocean’s Eleven! They would have no issue living in Zurich or Bermuda (the two highest COL areas in the index).

But in some of the above cases they are on the run from law enforcement, or pissed off gangsters/mobsters or even both. It is probably time to disappear instead of flaunting the new wealth, but where to go?

Safe and Affordable Locations to Retire for the Aspiring Criminal

A quick search on the interweb found the following post. There is quite the list of countries with no extradition treaty with the USA. This is the good news if you have law enforcement coming after you! However, as noted in the article, there is still the chance of you becoming a pawn of governments. A deal to extradite you might still be made and you would be out of luck (and in prison!).

That being said, the following countries could be interesting (depending on your retirement preferences):

  • Cuba (No COL index available)
  • Indonesia (Yogyakarta COL index = 35.08)
  • The Maldives (No COL index available)
  • Namibia (No COL index available)
  • Nepal (Kathmandu COL index = 34.24)
  • Morocco (Casablanca COL index = 37.94)
  • Samoa (No COL index available)
  • São Tomé & Príncipe (No COL index available)
  • Taiwan (Kaohsiung COL index = 59.78)
  • Vietnam (Ho Chi Minh City COL index = 43.38)

Unsurprisingly, most these places have a pretty low COL and you could live like a king. Not really low key though….might attract more attention than you want. Guess if (fellow) gangsters are after you, the Brazilian jungle or Siberian mountains are a better place to stay. These places will undoubtedly have a low COL too, but are far from glamorous/comfortable.

The Perfect Heist - Cost Of Living Index

The Perfect Heist – Cost Of Living Index Map of the world
Source: https://www.numbeo.com/cost-of-living/

The Perfect Heist

The perfect heist is obviously difficult, as nothing is perfect. So here are some considerations for “the perfect heist” (or “practical heist”) from a financial perspective:

  • Gold is not too bad. The weight of $1M in gold today (@ $1.267/oz.) is about 789.3 oz. = 22.37 kg. You could still add this into your luggage and not have to pay extra when flying out of the country! It does have poor resale value at (smaller) jewelers/pawn shops. When stealing $1M in market value, you could probably lose up to 30% or so in commissions/exchange rates.
  • Diamonds are great in the sense that they are light and easy to transport. The price is however subject to the market, quality and the size (higher carat diamonds are generally worth more per carat). You would have to steel many more smaller ones to get the same value. But in this case you should probably still steel small diamonds, as the bigger ones are more difficult as there are fewer available. Finding a balance is key here.
  • Cash might also be a problem too depending on how much you steal. The weight of $1M in $20 bills is 50kg and encompasses nearly 52l of volume! That’s an extra charge at the airport (unless you use points or are a frequent flyer). Perhaps you better steel $100 notes, in that case you are down to 10 kg and just over 10.3l of volume. That should fit in a backpack! Traceability might still be a problem, as each bill has a unique number/code.
  • Art is a tricky one as the value per weight/dimensions can be really high. But because art is so unique, selling it might be difficult. When you sell on the black market it is likely also at significantly reduced values.
  • That leaves electronic data/currency, which has no weight (unless you transport on a stick of drive). It might take some time to shift the funds via different banks in different countries to a final destination bank or banks. Even better, transfer into Bitcoin or some other non-traceable digital currency. This way you might be able to really disappear of the (virtual) radar. But with Bitcoin, the value in USD also changes and I’m not sure about any transfer/transaction fees. The fluctuations might actually work two ways, it could make you even more money, or result in big losses. Only time will tell.
The Perfect Heist - The Diamond Heist

The Perfect Heist – The Diamond Heist
Source: http://www.enigmarooms.co.uk/

The Moral of this Story

If you plan “the perfect heist” of some sorts, make sure it is for a good amount of (guaranteed) money to cover your risks. And quickly get your butt to a non-extradition country and lay low for a while!

But despite all the options, the perfect heist is likely not doing one at all. Probably better to just slash costs of living and invest the difference into income producing assets. This is almost a guarantee for success with no risk to your personal life. Clear win if you’d ask me.

So, no plans on our side for any of this, but one can dream, right?! How about you, what’s your perfect heist?

P.s. interesting trivia, the actor playing the con-man/pastor actually stopped working to sail around the world for 2.5 years with his family! Seems like a smart cookie that knows how to value life and experiences.

During our Holiday in Belgium, we had a fair number of discussions about what we want to do in the coming years. As mentioned before, we differ greatly in the way we think about the future. A compromise is essential for us. The time during the holiday in April was a great way to work out some of our ideas into a plan: The 5-year plan!

Jobs/Work

Mrs. CF loves her Job, Mr. CF……. not so much. The plan going forward includes Mr. CF quitting his day-time job by the end of 2017.

The idea for Mr. CF is to start to hustle a bit (besides running the household and preparing for a Olympic distance triathlon in 2018). I’m really looking forward to do things I actually like doing! Lost my passion for the “normal” work already too long ago.

The 5-year plan - Work

The 5-year plan – Work
Source: https://www.linkedin.com/pulse/should-i-work-free-well-duh-martin-aleta-curry

Activities that are being considered include:

  • Start to coaching and organize workshops on how to become financialy stable, financially independent and/or retire early;
  • Up the blogging with more case-study posts regarding real estate, B&B’s, starting a franchise, etc. I simply don’t have enough time to write more content posts at the moment, which I’m not happy with; and,
  • Dog walking. Our current house does not really allow for a dog or dogs. Dog walking is a perfect combo, playing with dogs, bit of exercise, no expenses and potentially even making money on the side. A clear win-win if you’d ask me!

Mrs. CF will continue to work, but likely reduces to part-time work (32 hours) as of 2018 or 2019. This depends a bit on how her team is doing. She’s training several people and it they do well, she should have the time to work less.

Investments

On the investment front there will be a couple (small) changes. Primarily driven by our investment preferences (cash-flow heavy portfolio) and available time. That being said, if an opportunity presents itself, we might deviate from the below:

The 5-year plan - Investments

The 5-year plan – Investments
Source: https://www.linkedin.com/pulse/10-top-alternative-investments-you-probably-didnt-know-kirk-chisholm

  • Phase out of crowdfunding. This investment style is not for us. Albeit we like the cash-flow of the investment, the yield only has downward potential (to the point of negative yield!). This due to the risk of defaults in projects, which are not uncommon as many people have no idea how to properly run (or grow) a business. In about 4 years all (still successful) projects should have been completed and the account will be closed;
  • Keep investing in dividend growth stock and expand the portfolio to about 60-75 different companies (currently at about 45);
  • Increase the rental units from 5 now to 7-8 in the future. As we don’t know how the real estate market will develop, we either have to renovate and increase the units within our current property. Or alternatively, we have to sell two of our existing properties and buy a larger building with more 3 or more units. Time will tell which option it is going to be (perhaps even both!);
  • Index funds are probably one of the best and easiest investment methods out there, but they are boring! I don’t like boring, but I probably should. Unfortunately is not in my nature. We therefore might sell the index funds and use to increase our dividend stock holdings and/or real estate holdings. However, for now we will continue with this investment method as it is a good diversification of our portfolio and it is easy to liquidate too; and,
  • Options trading/day trading. I would like to expand this a bit more, perhaps up to about 10% of our investment portfolio. Why would we do this? Because it is fun and can be lucrative too! It might also be a way to generate some additional income to offset the loss of income from the day-time job.

Just to be clear, as long as Mrs. CF is still working we don’t mind a more active approach to investing. But once she’s also leaving the company when we are fully FI, the passive in “passive income” is going to become more critical.

The key here is to find a balance between cash-flow, passive, fun and yield. What that exact balance will be is subject to the stage in our lives and the time we have available. Our portfolio will therefore be re-balanced a few more times, but the key components will remain real estate and dividend growth stocks.

Housing

We bought our last house with a different approach than most people do. When we bought our current house we were not looking for our “dream home”. We were looking for an investment opportunity, and we found it! The plan is to move out in about 4-10 years (depends a bit on Miss CF and how our family is doing health wise) and redevelop the building to house 5-6 units (currently it has 4, including the main one we are using).

The plan is to move out of the region and move closer to where lots of our family is living. We are keeping our eyes open for a small house (75-100m2 / 800-1100sft) with a large yard (ideally 2.000m2 or more) to be able to generate our own food and potentially sell some on the side too. Now this is going to be a struggle as finding such specific properties in the western part of the Netherlands is hard. It’s the plot size that makes it difficult to find/affordable.

Vacations/Travel

For 2018 we are planning a 9 week road trip through Europe (southern Europe to be exact). The timing will be around April-June. Main reason is the costs (not peak season yet), weather (not too hot), and our daughter does not have to go to school mandatorily yet (starts at age 5 here in the Netherlands).

However, we are also considering an around the world trip. But with only 9 weeks of available time this might be a bit too ambitious. It certainly is possible, but we actually want to also enjoy our time and limit the amount of jetlag/”travel” time.

The 5-year plan - Holiday

The 5-year plan – Holiday
Source: http://weknowyourdreams.com/single/travel/travel-07

Another thing to consider is obviously cost. But this would be a “once in a life time” trip so spending some money on this is not a big problem.

A tentative itinerary could be something like this: Dubai, Singapore, Australia, New Zealand, Hawaii, USA, Canada, Iceland. Most of our time would be spend in Australia and New Zealand.

In the near term we will do another holiday in September of this year, it will be something similar to our trip to Belgium (read: cheap, fun, close-by).

That being said, with the recent story on free castles in Italy, we might need to do a holiday there to do some research 🙂

From 2019 and onwards we are planning to have about 2 trips per year, primarily focusing on Europe. Once Miss CF gets a bit older and is able to really enjoy and remember the travels, we might expand our travels a bit further.

What about FIRE?

Well, this is really simple, we will still FIRE at some point but likely not in the timeframe we were initially envisaging (around 2023-2025). When our income drops substantially, the amount available to invest will also drop. It’s only to be seen how much can be offset with hustling by Mr. CF. it’s likely nowhere near the amount I’m earning now.

But that is fine, we rather both enjoy what we do on a day to day basis, then make the sprint to FI. Especially because I’ve been going work for years that I don’t really get any satisfaction out of. I really don’t what to continue this for another 5+ years!

That being said, you could also consider this as partial FI. As we do already have sufficient assets to offset more than 60% of what we spend (and plan to spend once FI). In line with this recent post by the financial freedom sloth, working part-time in combination with a stash is also a good way to enjoy more time now. Another benefit is the social interaction at work and perhaps even some fun experiences from less conventional/seasonal type work.

Do you ever think about your future? Do you have a “5-year plan”? What do you think about our musings?

When you read this we will be on holidays in the southern part of the Netherlands/northern part of Belgium. After working hard on the house replacing windows and installing mechanical ventilation in the rental unit, we are ready to relax!

When we do a holiday, it usually is a computer/table/phone holiday too. Preferably we don’t ready any emails, watch news or check stock markets to really relax worry free. Perhaps a bit of an ostrich approach, but it works miracles! We will also tune down the activity on the blog for the coming week. It will take a bit longer before we respond to your comments, but we certainly will.

Holiday Ostrich Method

Holiday Ostrich Method
Source: https://www.vn.nl/struisvogel-in-ruste/

Going Abroad

This may sound strange, but as soon as we cross the Dutch-Belgium border the holiday feeling really kicks in. It’s primarily due to the different building styles, stores and road signs. We will actually be staying in Belgium for most of the time (got to support out fiends Belgian ATL, FFS and WDYR with some taxes ;-), but will travel to the Netherlands on occasion. For example on Kings Day we will be going back to the Netherlands, Maastricht to be exact. I’ll be wearing my orange suit for sure (really? you have an orange dress suit?…..Absolutely!).

Considering we are somewhat limited by our 3,5 year old little girl, the holiday destinations will also revolve heavily around swimming pools, zoo visit and other kids related day trips. We hope to squeeze in the odd cultural and nature side-tracks. But for some reason a 3.5 year old does not find this very entertaining. Shocking, right?

Holiday Belgium-Netherlands

Holiday Belgium-Netherlands. Pointer is NOT where we are going. Courtesy of Google

Finances

We have booked ourselves a nice AirBnB (well at least we hope it is nice) for €400 for a whole week! Pretty good deal if you’d ask us. There will also be some fuel costs for driving around, expenses for foods, drink and activities. Considering we eat and drink at home too (go figure), these costs are not included in the  holiday expenses. Same goes the expenses for the car, it’s got it’s own “transportation” budget and expenses will be covered here.

However, any “holiday” activities will be tracked under the “leisure and travel” component of our budget. In this case going out for breakfast/lunch/finer will be included. Not having planned out all activities (depends on how Miss CF is feeling…) we have no clear idea of the total expected spend. But it will likely come in around €700-900, excluding fuel and food/drinks. More to follow in the savings rate post next month.

Holiday Destination Maastricht

Holiday Destination: Maastricht
Source: http://www.vvvlimburg.nl/regio-vvvs/maastricht/

How about you? Any trips planned, or did you already go?

Future Healthcare Costs

To pick up where we left of last week, this week we will look at the historical cost. But we will also quickly look at the potential development of future healthcare costs. We have been digging in historical data to see how healthcare costs developed over the past 30 years. Both in absolute terms and in relation with inflation. We hope this gives you and us a bit of an idea what to expect during FIRE in the coming years.

Rising Healthcare Costs

Healthcare costs are rising in pretty much every country around the world. Looking at the healthcare cost per citizen for various countries, you can see the immense burden on the governments (which we fund). But also on ourselves in the form insurance premiums, deductibles and other indirect healthcare cost. Let’s have a look at both.

Overall Healthcare Costs

The US is particularly high up when looking at healthcare costs per capita, but unfortunately the Netherlands is not that great either. Dutch healthcare costs have been increasing rapidly over the last years. The graph below shows the growth of healthcare cost over the period from 1980 to 2009 (EOCD health data). The Netherlands started out at about $850/year in 1980 and increased to $5.056/year in 2010 (second image).

Historical Healthcare Costs

Historical Healthcare Costs

Healthcare Cost Per Capita in 2010

Healthcare Cost Per Capita in 2010

Based on an calculated average of 2.58% inflation in this same period (derived from the graph below), the healthcare cost should have been around $1.823/year in 2010 (instead of $5.056!). The actual average healthcare cost inflation was thus a staggering 6.1%. Almost two and a half times the average inflation, that’s high. On a positive note, investment returns (in the US at least) during the same period outpaced this increase in healthcare costs 🙂

Dutch Inflation 1980-2016

Dutch Inflation 1980-2016

Direct Healthcare Cost

Let’s look at how overall healthcare costs are broken down. Based on this report (prepared by the Dutch bureau of statics – text in Dutch), the breakdown is as follows:

The light blue is insurance premiums (mandatory insurance), the dark blue is deductibles, the purple is extra healthcare insurance (voluntary insurance). The two (yellow) green’s and orange are covered by taxes and social premiums (some taken from your paycheck/paid by your employer). We thus pay about a third of the overall healthcare costs directly via insurance premiums and deductibles. The remainder of the overall healthcare costs is paid indirectly via various taxes and social premiums.

Since the mandatory insurance commenced in 2006, premiums have increased from about €1027 per person per year (no deductible at that time) to €1541 per person per year (based on €98/month rate + deductible) in 2017. That is an 50% increase in 11 years, or 3.75% per year. For comparison purposes, the inflation between 2006-2017 was only 1.69%.

Future Costs?

As noted in last week’s post, healthcare insurance is mandatory in the Netherland. Current (2017) costs range between about €77 and €150 per month per person (subject to the coverage and deductible you want). That’s already a lot of money. If you are unlucky enough to land in a hospital, you can shelve out the deductible too as a bonus expense.

It should also be noted that insurance companies are currently not making much money on healthcare insurance (they are about at cost, sometimes even below). In short, it is not unlikely that premiums will rapidly rise in the coming years to remain profitable (or at least keep up with rising healthcare costs).

So, what are healthcare costs going to do? If per capita healthcare cost for the period between 1980 and 2010 are an indication, we could count on about 6% per year. Direct costs on the other hand increased by “only” 3.75% in the period from 2006 to 2014.  Not as bad as the overall per capita healthcare costs, but still well above inflation.

We think it is fair to say that healthcare costs will most likely outpace inflation with a significant margin. This is something to consider in your FI calculations. We are counting on our healthcare costs (premiums + out-of-pocket expenses) to go up with 5%/year going forward. We assume that overall healthcare cost increases will be limited by the current low inflation. But we also assume that premiums will go up rapidly in the coming years. Therefore a 5% increase seems reasonable, but time will tell….

Why Are Healthcare Costs Rising?

What is causing this rapid increase in healthcare cost? This will be a combination of many variables including an aging population, inefficiencies within the healthcare system and increasingly expensive medication.

But there is one component that appears to have a far larger impact than any other: lifestyle choices. We as humans have become so detached from nature that we have also stepped away from an active and healthy lifestyle. Have a look at the following two short videos (reference data to the used research is also provided):

http://nutritionfacts.org/video/nations-diet-in-crisis/

http://nutritionfacts.org/video/what-percent-of-americans-lead-healthy-lifestyles/

Human nature

It’s becoming clearer through science that we ourselves are to blame for most of our chronic diseases (obesity, coronary heart disease (CHD), high blood pressure, cancer, inflammation, etc.). Simply by literally poisoning ourselves through diet and lack of exercise. Fact is that only a small minority of these chronic diseases actually have a genetic component to it. Albeit most people like to believe otherwise (so they can keep up destroying their lives by not changing the way they live).

Fortunately many chronic diseases actually can be prevented, arrested or even reversed through diet and lifestyle choices. The human body is actually able to selfheal under proper conditions, which has been confirmed by many scientific studies on for example diabetes (type 2) and CHD.

Unfortunately, it’s in the human nature to limit energy consumption in everything we do. We are particularly bad at getting off our asses when it comes to something important as our own health. Humans are also really good at putting a bandage on something. Rather than solving the underlying root cause of the problem. For example high blood pressure. Let ‘s take a pill, rather than change the poor diet with too much salt and too little exercise/veggies. Sigh….

It’s Primarily Us!

In conclusion, one of the main reasons why healthcare costs are becoming so expensive is us. It’s also only us that can regain an affordable healthcare system, simply by improving our lifestyles. Literally one step or one bite at a time. Food for thought? 😉

The Dividend Growth Investor tweeted us the other day if we had a post on healthcare in the Netherlands. In fact we don’t, we only briefly touched on the subject on this post. Considering that healthcare costs will represent about 10% of our total spend during FI, it’s probably not a bad idea to have a look at these healthcare costs.

Healthcare Insurance

The system today is very simple, you have to mandatorily insure yourself for healthcare costs (when you are a resident of the Netherlands). From that perspective it is probably similar to “Obama care” in the US. Beside you having to mandatorily insure, the insurer has to mandatorily accept your request to insure. You cannot be refused based on your medical condition, which is a great thing to have when you are ill.

The mandatory coverage is required when you become 18 years of age, kids below this age are automatically covered under the insurance of their parents. Further, if you have a low income there are benefits to aid you in paying this mandatory insurance.

Basic Coverage

You have the option to select various package as far as coverage is concerned. The “basic” package for 2017 covers you for visits to a general practitioner (Dutch: “huisarts”), hospitalizations/operations, medication, physiotherapy for kids under 18; dental works for kids under 18, child birth, dietary advice and a few other items.

Additional coverage

There is a volunatry option to increase coverage for, amongst others, adult physiotherapy, alternative medicine, psychology, glasses and lenses, dental and certain specific child birth expenses.

Healthcare Costs

Healthcare Costs
Source: http://www.gs1.org/healthcare

Healthcare Costs

Basic healthcare costs will set you back around €92-100+ per month (subject to the provider and terms & conditions of coverage). This is in combination with a mandatory deductible of €385 per person per year. When you increase this deductible to €885 per person per year costs for basic covers drops to around €77-85 per month.

In principle all actual expenses will come out of the deductible first, with the exception of costs associated with general practitioner visits (but not any meditation of bloodwork following the visit!), dental for kids under 18, child birth costs and a few other items.

Additional coverage

The costs for additional coverage vary significantly depending on what you want. But generally ranges between as little as €5 up to €50 per month.

Dental Coverage

Dental work for adults are covered under additional packages. Depending on the package you choose, you can get coverage of up to about €2.000 per year per person (the rest will generally come out of your own pocket). If you only need minor dental work or just check-ups, coverage to about €250 per person per year is usually sufficient. Orthodontics are covered separately in some cases.

Fees for this range €8-50 per month depending on the coverage amount.

Team Cheesy Coverage

Our coverage is with Anderzorg (a Menzis company, no affiliate link here) as they appeared to have the best value for money for our situation. We pay €181.90 per month for the three of us. We have additional dental coverage for €250 per year for the both of us. Our deductible is at the maximum allowable €885 per person, as you probably figured out already.

In short, with no use of the deductible, we pay almost €2.183 per year. We generally budget for around €2.500, which would be about 10% of our FI budget.

Insurance Conditions

Most insurers don’t make lots of money on the basic healthcare insurance coverage due to the competitive market. This is great for the consumer, as you pay really about cost price for this insurance.

However, insurance companies found ways to make your life difficult. Medical care is sometimes only permitted at designated medical institutions with which the insurer has a contract. It could therefore be that you have to travel for certain medical procedures. When you have opted for coverage with a limited number of medical institutions, you could also run into waiting lists issues for certain procedures. Keep that in mind or pay more premium to have free choice in hospitals. It’ up to you.

Future Healthcare Costs?

Now that the basics of the Dutch healthcare insurance are covered, the next logical thing to do is take a look at the development of costs over the past years. We need this to allow us to make calculated predictions where this is going. This will be covered in a post we have planned for next week. Stay tuned!

No, don’t worry, we have no plans for a frugal funeral any time soon. Nor do we anticipate to have one in the near future for ourselves (and hopefully also not for our family and/or friends). On the contrary, we try to follow a very healthy lifestyle with lots of whole plant-based foods to extent our lives and delay the inevitable for as long as possible.

But I (Mr. CF) did have a conversation with my mom about the topic of caskets. I have absolutely no idea how we got to the topic, but we were probably joking around and arrived at a morbid end (pun intended). That is also when I realized that I have no idea about funeral costs and/or funeral insurances. Is it possible to have a frugal funeral? If so, how much is it? Or is it better to insure or self-insure yourself for this? Time to find out!

Frugal Funeral - Ikea Casket?

Frugal Funeral – Ikea Casket? Source: http://media-cache-ec0.pinimg.com/736x/ab/f3/59/abf3599171d826263d7752394ebd24e4.jpg

Frugal Funeral

Ok, let’s keep this simple for the post: you can either get buried or cremated. Cremation is generally cheaper than burials due to the costs for the crave (you pay the municipality for this) and the tombstone.

But what are the general costs? Here is a list to consider (derived from the website of a national Dutch insurer):

  • Basic fees and administration: €1.800-1.900
  • Moving the body to the funeral home: €300
  • Embalming the body: €200
  • Wake/viewings: €700-1.000
  • Casket: €500-5.000 (or more if you want, check out this link for some interesting ideas)
  • Cremation (you’d really be on FIRE…. Ok, bad pun): €1.350-1.500
  • Burial: €1.350-7.000!! Depends heavily on a municipality and if you want a private/two person grave and for how long you want the grave to remain (prices are usually for 15-20 years).
  • Transport: €300-1.000 (depending on type and people)
  • Ceremony (incl. catering for 50): €250-400
  • Flowers (normal): €185-225
  • Ads in newspaper: €500-700
  • Cards: €160 per 50 cards
  • Urn for ashes: €500

Depending on what you want, you can easily spend between €7.500-10.000. We have actually done our wedding and honeymoon to Hawaii for less! But if you want you can keep it pretty simple, arrange your own casket, transport, ceremony, etc. You probably could get away with anything between about €2.500 and €3.500 for a decent funeral. However, there are even discount funeral arrangements these days. The cheapest I found was just €1.150 for a cremation and €1.750 for a burial! But that is really bare bones!

Frugal Funeral - Budget Casket

Frugal Funeral – Budget Casket Source: http://www.flatpackconstruction.co.uk/wp-content/uploads/2014/01/flatpackcoffin.jpg

Funeral Insurance

As with pretty much everything else in life, you can also insure for funerals. I personally don’t know anyone that has insurance for this. We personally don’t have it either. It’s one of these things we rather self-insure, as we recon is cheaper. But if you would, how much would it be?

For my case, being 36 year of age, I had the following options:

  • Luxury package: €12.62/month – €12.100 coverage
  • Most purchased package: €9.54/month – €8.800 coverage
  • Basis package: €6.46 – €5.500 coverage
  • Frugal option (selected by me): €5.73 – €4.290 coverage

If I would be 30 years older (so 66 year of age), the following rates apply:

  • Luxury package: €56.01/month – €12.100 coverage
  • Most purchased package: €41.43/month – €8.800 coverage
  • Basis package: €26.85 – €5.500 coverage
  • Frugal option (selected by me): €23.40 – €4.290 coverage

If you wonder what’s in the frugal option, only the absolute basics. No reception, flowers, cards, paper ads, special transport, etc. If covers the basic formal/administrative costs and has a simple casket and cremation without an urn.

Frugal Funeral Investments

Let’s assume I’m turning 86 years of age (random selection). In that case the frugal option would set me back €3.438 in fees. Pretty good for the coverage I’m getting. For the 66 year old me, it would be €5.616, so you’re getting screwed. However, for the current me it seem like a good idea, right? Wrong!

If you set aside and invest this €5.73 every month, and you assume net 5% on a yearly basis (to correct for taxes and inflation), over 50 years. You end up with close to €14.400! That is one very luxurious funeral arrangement. However, if you would start at age 66 and have only 20 years, the calculation comes to just over €8.100. Again, much better than the coverage you are getting. You have got to love the effects of compounding interest!

Frugal Funeral - Cool blue casket

Frugal Funeral – Cool blue casket for when the FIRE is out!

Taboo Diner Talks

As with the whole topic of organ donations, talking about your funeral wishes with your partner/family is probably not a bad idea. It may still be far off (hopefully), but unfortunate things do happen. It would be great for your partner/family to have an idea of what you want.

To be brutally honest, we have not had this conversation, but probably should in the near future (together with arranging a will). Just to get is sorted for now (ideas will likely change in the future, but at least you would have a starting point…). Interestingly enough I do now know what to arrange for my mom. She even said she will leave some money for it too (she does not carry insurance).

My dad is also still alive, but there is a very large change that he will pass away before my mom does (he’s significantly older), in which case she will take care of these decisions. That being said, we already have an idea of what my dad would want too (again, no insurance here either).

How about you, ever thought of this? Do you agree it’s better to self-insure? Other considerations?

 

Triggered by an absolutely brilliant post by OurNextLife, we want to talk about our blog income (or lack thereof, actually). The post by ONL is about the income that some big-name financial blogger are generating with their site. ONL states that she thinks the bloggers deserve the blog income, but that they should be more open about it. Her pet peeve is that these bloggers are no longer living FI based on their original premises of investing into assets (which is what made/makes them great blogs to read). Which is fine, but some transparency would be nice. It would also be interesting to see how blogger do that don’t have ads or affiliate marketing income, during FI (i.e. no extra blog income). We both completely agree!

Mr. Money Mustache actually seems to do this to a degree. He still posts his expenses on a yearly basis, which have been quite stable throughout the years. He obviously earns a lot more money via his blog. How much is unknown, but it is fair to say that he would easily cover his living expenses of $25.000/year. What is he doing with all this extra cash? Who knows! But some of it he is donating to charities (he donated $100.000 last year, see link below), which is a great way to spend some of that extra blogging income if you’d ask us.

Notes on Giving Away my First $100,000

Blog Income

So let’s be transparent on our blog too. We have posted about the blog income topic before here and here. To date we only had Google AdSense to generate some income to cover hosting expenses. We started this blog income experiment in November 2015 with the aim to take the ads offline (for the remainder of the year) once we had received sufficient income to cover expenses.

With a starting blog, this was obviously not yet possible. But we are starting to have increased traffic to our site (getting close to beating 40.000 pageviews this month). We have now received our first payment of €70+ (apparently we are not allowed to expose the actual value due to restrictions in the Google Adsense T&C’s). But considering we paid about €150 for the first two years for hosting and domain name, we are far from breaking even at this point. Google AdSense is certainly not going to make us rich 😉

When we started this blog, we had done our research and found a hosting provider (neostrada.nl) that fitted our criteria and had a good promotional rate for the first year (at least for that time). We have since found out that we are overpaying at the moment (it is worth mentioning that the services have been great so far). Once renewal of the contract comes in September, we will have to renegotiate or move to a better (read cheaper) hosting provider (thank Mr FOB for the hint). Once we do this, we also don’t have to keep the ads up for longer than necessary.

That being said, our current intent is still to not make any extra money via this blog. However, this may change in the future as a bit of extra cash is always useful for during (partial) FI. We are not expecting heaps of money and also want to stay true to our (blogging) ethics. However, diversified as we are in our investments, we would happily receive some extra cash from this blog on a monthly basis to cover our living expenses. It’s a bit of a dilemma!

Advertisements and Affiliate Marketing

Advertisements and Affiliate Marketing
Source: https://jaroeducation.files.wordpress.com/

Ads and Affiliate Marketing

Ok, so what have we changed to our blog recently? Google Adsense will remain for now (until the time we break even on overall operating costs). However, we have moved the ads over to the side bar to keep them out of the posts to not annoy you, our beloved readers, too much.

Based on all the talk about affiliate marketing by various bloggers, we decided to give this a go too. But where to start and what to consider?

First off, we do not want to promote things we don’t use ourselves or that does not jive with that our blog is about: wise investing and limiting expenses. We therefore decided against credit cards/air miles/similar products. We also don’t feel much for programs such as Euroclix (Dutch), Klezzer (Dutch)and similar consumer (review) programs. So those our out too.

What we do use ourselves are companies such as Bol.com and Amazon.com. We have used these companies for years and like them too. Full disclosure in the case of Bol.com (the Dutch version of Amazon.com), we actually own Ahold shares which is the mother company. Increased sales at Bol.com will impact our future dividend income, but any potential use of an affiliate link would also provide us direct income (albeit not very much). In short, this would be a win-(small) win.

We have therefore decided to add an Bol.com affiliate program widget to the blog as a trial. If you would use this link, we will get a small commission (which varies per product and ranges up to 8%). It would obviously not affect your sales price, as it’s part of the marketing budget of Ahold/Bol.com.

What do you think? What would you as a reader still find acceptable on Cheesy Finance? We truly value your opinions as our readers! So please, let us know the good, bad and ugly.

P.s. this posts does not contain any affiliate links! 🙂

Brains

Mrs. CF’s brain is definitely wired differently than mine, which is why were are such a great couple (if I may say so myself :-p ). Despite some differences being surprisingly big, we do supplement each other on many fronts. Fortunately we are also in sync on so many other items (including finances and ethics). Love her to bits, she is a great woman, wife and mom.

Travel - Culture

Travel – Culture

 

Mrs. CF is more of an introvert and values other things then me (e.g. more emphasis on family). To put it boldly, I’m a bit of a loose cannon who talks too much (extrovert) and sometime thinks too little. She is the patient and stable (less erratic) force in the household. She’s also an extremely good listener and as a result liked by most people she encounters, whereas I can upset some people from the start with my opinions. I’m bored in no-time, yet she can do the same thing over and over again. She is a bookworm, I cannot even find the patience to read a magazine! Yes, our marriage still works, strange eh? However, different brains also poses a challenge regarding what to do when FI.

The Question 

When we started on the path to FI, she asked me “ what are you going to do when FI? ”. The interesting thing is that I had no idea! I was far to occupied with the here and now of trying to figure out how to get to FI. I’m a problem solver by nature, and “ what are you going to do when FI? ” is a problem I can solve when it gets close or when I’m there. In short, I was not worried about that question at all! Mrs. CF, who has a far better idea of what she wants, was a bit surprised (and probably a bit frustrated that I really did not care that much about that stage of our future life).

But I have to admit, she’s right! I do have to start thinking about what I want, what we want and can do as a family. It all is going to have to fit around Miss CF having to go to school mandatorily until she’s about 16 (or is it 18?) year of age. For those people tuning in the US/Canada, home schooling is not permitted in this country. You can get a serious fine for this (and they will find you). We will therefore have some restrictions during our initial years when FI.

What I  would like

This is what I (Mr CF) would like to do if there would be no restraints (e.g. family, school, investment wise, etc.):

  • Slow travel and house sitting for many years in various countries such as Chili, New Zealand and Peru (bonus points for those who see the connection!). Also on that (wish) list are Namibia, Thailand, Vietnam, Japan, Croatia, South Africa and USA (specifically Hawaii and Alaska).
  • When I’m done with the above, I’ll find someting to entertain myself. This has never been a problem before 😉
Travel - Hiking

Travel – Hiking

 

But the above isn’t going to happen due to school restrictions for the next decade and a half! Nor does Mrs. CF want to live out of a suitcase for more than a month.

What I/we most likely will do

Now here is the more realistic outlook of what I/we are planning for (in random order):

  • Frequent travel (as much as restrictions, time and money will allow);
  • Find a nice and/or build small-ish property with a large yard (working toward being self-sustainable as much as practically possible);
  • Get two K9’s (potentially in combination with fostering/volunteering for an dog shelter);
  • Start a small (consulting) business (part-time only – just for fun and interaction with people);
  • Keep blogging and organizing meetups with ATL;
  • Prepare for a Olympic/quarter triathlon (just me);
  • Beating my personal best on the 10km and onwards to run one under 42min (depending on how it does, might become 40min).
  • Increase our real estate venture (not for the income, purely for fun); and,
  • Learn new skills including home DYI (considering an internship with a construction company for a year or so) and car maintenance.

Even when hitting FI somewhere within the next 5 years or so, we will likely continue on a bit longer (part time!) to increase the stash and allow various extra’s that we currently have not accounted for (such as the two dogs, increased travel frequency and perhaps even a little sports car). 

What are you going to do when FI?

So, now that you have an idea of what floats around in my and our minds, we would like to know what’s in YOUR’S!  Let us know what you want would like to do, and what plans you have to get there or how to tackle any obstacles.

If you already made FI plans before, how have they stood the test of time?

Most (if not all) of you are familiar with the Savings Rate (check the link for more details). It is simply put the ratio between your savings (defined as income minus expenses) and income. It’s a great tool to give you an idea how efficient you are with your money.

After some conversations in Antwerp and comments on posts by another blogger (Mr FOB – Dutch Blog), we realized that we should also consider and review another Financial Independence (FI) metric: The Investment Index.

Investment Index

This is not a rocket science invention, but something useful for those of you that are interested how close you are towards FI. The Investment Index is nothing more than the ratio between your investment income and your household expenses.

Thus: Investment Income / Expenses * 100% = Investment Index

The result interpretation is pretty obvious, if it is higher than 100% you are technically FI. Well at least for that month or that year. Perhaps you would also continoiusly need well over 100% to stay FI in the long run (think inflation and market swings)!

Expenses

The expenses are relatively easy to calculate. You just have to review your bank statements and add up all the costs you have on a monthly or yearly basis.

Small caveat, you can do this on cash-flow or cost basis principle. In the cash-flow case your entire expense of your mortgage is included (i.e. interest and principal payment). In the cost basis version, you only include your paid interest. Same applies to personal and business loans. For car loans (if you have any), I strongly recommend using the cash-flow principle!

Investment income

The investment income should be easy to calculate, but depending on what type of asset(s) you have it could be quite the calculation.

Same as with the expenses, you can use the cash-flow principle of the cost basis principle. Albeit this primarily revolves around real estate (i.e. due to mortgage/loan payments). For most other assets (stocks, bonds, options, etc.), you simply take the increase in value (minus any investments and/or purchase costs) for the month or the year.

But fortunately you could also simplify life and just use your net worth increase for the month or the year (minus invested funds). This is obviously not as accurate, but in our case a lot easier to calculate (same as the financial freedom sloth, we can be very lazy!)

Yearly Historical Data

As noted above, we are lazy, so we used our net worth option to calculate our Investment Index. Note that we use cost basis for these calculations.

Considering we saw the FIRE light in 2014, it makes sense to see how we did since that time. As you can see below, 2014 and 2016 were pretty good. For 2014 is was primarily our real estate that helped out, as we had bought a wreck and transformed it into two nice rental units. As a result the value of the property rose more than the initial investment = good year from an investment income perspective.

Investment Index

2014-2016 Investment Index

As we emigrated back to the Netherlands 2015, this year was horrible. Very high expenses due to the international move, little to invest (and some major investments occurred into our real estate: new kitchen/bathroom) and thus a low (well negative actually) Investment Index.

In 2016 we turned things around, especially with the new real estate and the sky-rocketing market. We are actually getting really close to FI when looking at last year! In fact, if we were FI our expenses would be considerably lower as we would not have daycare. With daycare removed from the expenses, the Investment Index would actually have been 137%! We technically were FI last year, how good is that?!

Taxes and Cash-flow

But before we get too excited. Taxes have not been included in the above calculations, as the bill for our 2016 wealth will come later this year. As noted earlier, this is all evaluated on cost basis, from a cash-flow perspective we are definitely not there yet! Furthermore, this was yet another bull market year. So it’s a bit skewed upwards too.

We have come to the conclusion that we prefer to become FI on a cash-flow basis, and want to do this by having primarily dividend stocks and real estate. We therefore want to develop this Investment Index also from a cash-flow perspective, but realized that taxes are making this rather difficult. Keep in mind that we have Canadian pension accounts that have a withholding tax of 25%, which holds the majority of our dividend stocks. We will therefore pick this up in a later posts.

Indexes

It is also interesting to see the difference between the Cheesy Index and the Investment Index with regards to the proximity to FI. The main reason for this is that the Cheesy Index assumes an average, a long term 4% Safe Withdrawal Rate (SWR). This actually is not entirely correct anymore as the 4% rule applies to a portfolio made of stocks and bonds. We simply don’t have such a portfolio. Secondly, the 4% is probably too high for the future for such a portolio. Check out the SWR post series by Earyretirementnow.com if you are interested.

That being said, we think that with our portfolio a long term 4% net return is considered somewhat conservative. It is therefore also unsurprising that the Investment Index show’s we are closer to FI than our Cheesy Index does. If we could only get our cash-flow up quickly, we could become FI very soon 🙂 Do miracles exist, or will it be old fashioned hard work? Nevermind, don’t answer that……

Have you calculated your equivalent of the “Investment Index” before? If so, where are you? How much does if differ from your equivalent of the “Cheesy Index”? We are curious to know!

Do you have an exit strategy? This was the question that Mrs. CF asked Mr. CF a couple of months ago during a conversation on investments. I was looking at her and glazed over a bit. A what? Was my counter question. An exit strategy? Having focused on increasing our various investment positions, exiting those positions was not really on the top of my mind. But she had a very valid point, when you buy certain assets, you will ultimately get rid of them too. It is therefore important to think about an exit strategy to make this work as smooth/profitable as possible.

Besides an exit strategy on investments, you might also need an exit strategy when it comes to your career. Albeit we are not there yet, (partial) FI is approaching faster than we initially thought. An career exit strategy is therefore really key at this stage, as the impact on our finances is rather larger when income is reduced and expenses temporarily increase (for details, keep reading :-).

Exit strategy maze, Image source

 

Investment exit strategy

Why an exit strategy?

Simply but: life changes and evolves! An investment strategy might no longer fit with your preferences, life situation (e.g. divorce, kids, location independency, age, etc.) or market conditions.

For example, we own some real estate. We currently really like it, but we have also seen older folks that simply don’t want to deal with the risks or potential hassles/works (e.g. repairs/maintenance) when they get older. We have seen various investor trying to offload (a portion of) their real estate investment portfolio due to their age/changing preferences.

Another example is your age/time left on this planet, you might lose your risk appetite and decide to rebalance your portfolio from stock heavy to bond heavy. Or you might want to sell your business/franchise, or have someone manage it on your behalf (so you just receive dividends).

Planning for an exit strategy

Albeit not required in detail during your search for investments, you should considered how easy an asset is to sell. For shares, index funds and bonds this is pretty straight forward. But for real estate, crowdfunding loans, or (internet) businesses/franchises this could be a lot more difficult. It can take time to transition these assets to another owner (or may not be possible at all!). If you have time this is not an issue, but if there are time constraints (say due to a divorce/illness/etc.) you have to make sure your asset is ready to be sold at any given time. However, it also needs to sell for the right price!

What to consider?

Here are a few things which you could consider:

  • Approximate moment from or to a major market crash/correction;
  • Conditions of your portfolio (up/down);
  • Type of assets (Stocks / bonds / Loans / Real Estate / combinations);
  • Your risk tolerance;
  • Age;
  • Health;
  • Family situations (no kids, expecting kids, older kids, pets, etc.);
  • Investment preferences;
  • Location preferences (nomad/stay-at-home/frequent traveler); and/or
  • Housing preferences (rent/buy).

Some exit strategy examples

Here are some random examples of exit strategies, for various investments and stages of life:

Stock market exit strategy, image source

 

  • Index funds; depending on your age, expenses and market conditions, sell one or more year’s equivalent of expenses to capture capital gains. Transfer into bonds to have a stead pot of money to draw from for several years of worry free living. The selection of the number of years you transfer into bonds can depend on how close you think you are towards or from a major market correction (or your age);
  • Keep your rental property in tiptop conditions, so that when a tenant moves out you can sell for a good price on the open market. Or, see if you tenant is willing to buy from you (could save realtor fee’s). Before you sell, decide if and how, you want to reinvest the proceeds (dividend shares, bonds, personal loans, business loans, etc.); or,
  • In case you are older and want to limit inheritance taxes, start selling or transferring ownership of dividend growth stocks to your children, family or charity (e.g. “estate planning”). Same applies to your primary property: sell to you children and rent it back from them for your last few years on this planet (saves lots in inheritance taxes!).

If you have more suggestions, please feel free to leave us some comments!

Career exit strategy

Why an exit strategy?

You never know how life is going to change, unfortunate things happen, so leaving the work force (or changing careers) should be done amicably. Even when you have a horrible boss and cannot wait to never see him or her ever again, the recommendation is to finish off professionally. It’s often a small world, and it could make a difference! References can really aid you in the long run, even outside your current career path.

That being said, handing in the resignation letter is relatively easy. How to do write it and what you are going to do afterwards can be less straight forward. Its needs a plan, it needs an exit strategy.

Planning and an example

Depending on what you want to do after your current career, timely commencement of your planning could be important. Take our case, I (Mr. CF) really want to stop working my current day job and pursue a part-time business during (partial) FI. However, we also would like to take a 9 week road trip in 2018 before Miss CF will have to go to school. And we “need” to replace the current kitchen (it’s about 25-30 years old and it is at its end-of-operational-life phase).

The business will not be expensive to commence, but will take time to develop. An early start is very useful here to kick-start this side project. The road trip in 2017 will be done somewhat frugal, but will still cost a fair bit of money. The renovation job I’m actually looking forward to. It will be a combination of me and a contractor attacking this one. But despite my involvement, it still will cost a large sum of money, as we will also enlarge the kitchen by re-routing the staircase and demolishing an old bathroom. The latter is already replaced by a new one, but the old one is now taking up precious (future kitchen) space.

In short, if it were just the new business, I would probably quite once my one year contract expires in November. But due to the extra expenses coming, I hope to get a contract extension and work about 4 more months to offset some of these anticipated expenses. In short, it’s probably good that we considered this about 15-18 months in advance and have some options to play with.

If you wonder what Mrs. CF will be doing, she will likely continue her career that the current company (but you never know!). Her exit strategy will be next.

Life exit strategy, image source

What could you consider?

Some of the things you may want to consider:

  • When you are FI, how solid are your finances? Can you survive a few years in a downward market (e.g. you FI start date is at the worst possible time)? Do you have a back-up plan (e.g. go back to work)? If not, perhaps you need to continue a bit longer, or find something part-time.
  • If you are not FI, how long are you planning to not work (e.g. take a sabbatical)? Or, do you want to already have a new job before you hand in your notice? Or do you want to go part-time?
  • When you are considering a career switch, do you need education? Can you potentially get some at your current employer? Or do you need education to commence the new career?
  • In case you are going to start your own business. Do you have sufficient knowledge? Can you perhaps do an internship or other training to give your new business a flying start and also make sure it is successful. Can other bloggers/entrepreneurs help you? It could be a smart thing to reach out.

In some cases you will find it is better to extent your career a bit to get some extra fun money, or renovation funds, or an emergency fund. Perhaps it also provides you with startup money for a hobby project or new business. On the other hand, if you really do not like your job and it makes your miserable, you could get out early, knowing that you have to get some temporary work to fill the financial gap. Potentially making a part time FI situation for yourself. The options are endless, but you need an exit strategy to make the most sensible decision!

The moral of today’s story is: always have a backup plan. Consider your exit strategy!

Do you have exit strategies? If so, let us know what they are and why you have them. What where your considerations?

 

Insurance products can be a great thing. Especially when mother nature decides to cause storm damage to your house 🙁

Winter Storm

Last Thursday we had a winter storm in the Netherlands (and other parts of western Europe). It was not as bad a forecasted, but winds did whip up to over 100km/h (+60mph). During the evening we heard something fall outside, but when looking out the windows we saw our neighbour/tenant walking around and loading her car. She did not seem to be phased, so we figured it was her or stuff she was moving around. We did not investigate any further.

But later that night, the roof was a lot noisier than normal during high winds. It kept us up for quite a few hours until the storm died down later that night. This was something we had to address at some point, but it turned out that we had to do this a bit sooner than expected.

Storm Damage

This morning (Saturday) we finally had some time to go into the yard and clean it up from all the stuff that had blown in. To our surprise we found one shingle too! Turns out we actually have a hole in our roof. Not good.

Storm Damage - Smash up shingle

Storm Damage – Smash up shingle (left) and new shingle (right)

Storm Damage - hole in roof

Storm damage – we have a hole in our roof!

 

This would all not be too bad, if it was not for the weather forecast for the coming week. So we quickly called the insurance support centre to report the damage. They have now scheduled an emergency repair for this weekend. Been on the phone with several parties already, hopefully they find a spot to help us out. Because, as you can imagine, we are not the only ones with roof damage at this time.

Rain

Weather forecast – lots of rain…

Financial Damage

Considering the work is not actually completed at this stage, the final bill is unclear. However, the insurance policy states a deductible of €250 for damage other than damage by Fire. The work itself is very limited, but due to inaccessibility the final bill will likely still be around the deductible. Ah well, such is life.

March 3 update:

The roof finally got fixed this morning. They also bolted down an additional row of shingles to prevent this from happening again. Curious to see what the bill is going to look like! Hope it will be just the deductible of €250.

We are doing another historical review today, after we reviewed our historical savings rates earlier this week. However, this time we will be looking at the development of our income assets. We will look at the historical return on investment on those assets. And, in addition, we will also be looking at the return on investment on our total net worth.

Historical Income Asset Allocation

When we were doing the historical data evaluations for the savings rates, we obviously did more than just that. It was a great time to review most of our historical developments. it took at bit of time to get to this stage, but it is interesting and fun to see the (financial) developments match with life decision we made in the past.

Same as with the saving rates, data up to 2010 is a “best guess” based on income/tax statements, (partial) excel overviews of expenses and receipts from all kinds of purchases. As of 2011 the data is very accurate as we have been keeping track of our finances in detail. The result looks a follows:

Historical Income Asset Allocation

2006-2016 Income Asset Allocation

Income Asset Allocation History

We were able to reconstruct our finances back to 2006, which is when Mr CF got his first job out of University. The first few years we earned quite a bit of money so our savings rate was high. Unfortunately we did not invest much into the stock market at that time, only Mr CF had some ETF’s. This was a financial legacy from his parents (a gift when I turned 18, the fund were to be used for school/housing/etc.).

As interest rates were pretty good at that time, we deposited most of our money in “Deposito’s”, which are savings accounts with fixed interest rates for fixed durations. We got around 3.5-4.5% per year on most of these accounts (which is amazing compared to these days).  For the period between 2006 and 2009, we did not own a house (were renting at that time to remain flexible in our living locations). The percentage of our income producing assets was therefore high, but did not really grow organically over time due to a lack of real estate of stock market exposure.

As of 2010 we sunk pretty much all our money into a McMansion (and cars/motorcycles). The drop in income producing assets is shocking to say the least! But we simply did not know any better at that time. Fortunately, we started with company pension plans and our income producing assets slowly grew again between 2010 and 2013.

The Income Asset Turn-Around Years

In 2014 we had our financial epiphany and started our turn-around. We withdraw money from out mortgage to purchase two rental properties that year. Significantly improving the amount of income producing assets.

We sold our McMansion in 2015, investing the money we got out of our house into our pension accounts (maxing our the RRSP’s), as well as unregistered investment accounts/crowdfunding. This process was slow and steady for about a year and a half. Some of the money “left” was used for the purchase of our home and associated rental properties in 2016. The resulting jump in income assets is pretty impressive! Not only in percentage, but also in return on investment which we will be looking at next.

Return on Investment – Income Assets

Due to a lack of data, we were not able to reconstruct the return on investment on income producing assets before 2014. But it is safe to say that percentages would have hovered around 2.0-4.5% for the period 2006-2010. Considering we did not have any stocks during the crisis in 2008 and 2009, we never actually “lost” any money. We therefore likely also did not see any negative returns on income producing assets either. For the period 2011-2013 they would have probably been between 4-6% considering we primarily held ETF’s within our RRSP accounts and the market was slowly recovering.

What we do know is the return on investment as of 2014 till now. Because our investment strategy is very diverse, and because of exchange rate variations (which were positive for us), the return on investment is actually rather good. Especially for 2014, when the market went up nicely and exchange rates shifted in our favour. The ROI for 2015 and 2016 is still very good due to climbing markets, but is dropping somewhat due to our real estate investments. The latter is however providing good cash-flow results, which is what we prefer.

We calculate Return on Investment on Income Assets (IA) as follows:

((Net Worth this year – Net Worth previous year) – Invested Funds ) / IA (previous year)

The results are as follows:

2014-2016 ROI Income Assets

Historical Return on Investment of Income Assets

Return on Investment – Overall

We also calculated our Return on Investment on All Assets (i.e. our Net Worth), which we did as follows:

((Net Worth this year – Net Worth previous year) – Invested Funds ) / Net Worth previous year

This is rough measure to figure out how well you have been doing with your money over time. For example, when you buy a big house, cars or go on expensive holidays. Your overall assets will decline (directly or over time) due to expenses and/or depreciation. However, if you are in an wanted area, your house may actually increase in value and add to your net worth. In our case, our home did increase in value, but this was offset by money we spend on the yard and basement development.

Return on Investment - All Assets

Our historical return on investment on our net worth

As noted prior, we purchased our house, cars and motorcycles in 2009 and 2010. This lead to a massive drop in our Return on Investment on our overall assets. However, this was not the only reason, the drop in 2009 (and the rise in 2011) were actually also significantly affected by fluctuating exchange rates.

That beign said, we are just very happy to see that since 2011 we have been doing well and our net worth is increasing steadily. This is partially caused by an bull market and partially by our FIRE revelations and decisions. We are working hard to keep the percentages as high as we can going forward.

Return on Investment – Yearly Average

Now this is the one that hurts the most. When looking at our total net earnings over the years (so income minus expenses) and compare that to our net worth at the end of 2016, you can calculate the average yearly Return on Investment (on all assets). In this case ours was……just 2.9%. We barely kept up with inflation (could be worse, we could have lost money)!

But if we now only look at the last three years (after we discovered FIRE and rearranged our finances), it’s a more respectable 8.7% yearly average. For two Duchies just winging it, that’s pretty decent. And it even included some rookie investment mistakes. We are a very happy couple 🙂

How did you do over the years, do you know your return on investment on your income assets?

 

It is history week at Cheesy Finance, with two posts this week about our historical financial affairs. Today we will focus on our historical Savings Rates. Later this week we will look at historical Return on Investment and income asset allocations.

Historical Savings Rates

We kept detailed records of our spending since about mid-2010. But we had some partial household overviews from 2006-2008, plus bank statements, pay checks and receipts from (large) expenses to puzzle together the remaining years. Everything up to and including 2010 is therefore our best guess, everything from 2011 is pretty accurate.

An overview of our savings rates for the period from 2006 to 2016 (and the average to date) is shown in the figure below:

Historical Savings Rates

Historical Savings Rates from Team CF between 2006 and 2016

A Bit of Team CF Life History

Mrs CF started her career in about 2004, Mr CF started his in 2006. Both of us graduated with MSc degrees in our fields. When we met in 2004, Mrs CF had just about paid off here student loans. Mr CF (thanks many as three side jobs at one time and his parents) was able to graduate without any student loans at all.

Before we started living together in the same home in 2007, we still each had a student accommodation (costing about €275-350/month). When we moved in together we rented a small place for about €600/month (including heating, excluding electricity/water/internet). This place was a lot bigger than our student accommodations but overall costed about the same.

At this time Mrs. CF has a pretty good job as an accountant, Mr CF had a job which included extended travel outside the country. In short, we were (still) living like students and had good pay-checks. Because we were somewhat frugal by nature, our savings rate started out really good in the beginning. But then Mr CF got restless……and consumerism/”keeping up with the joneses” started to take hold.

Saving Rate Developments over the Years

As noted and shown in the previous paragraphs, the savings rates between 2006 and 2008 were pretty good as we kept our life simple and only had a small apartment. Then we moved to Canada in 2009, this obviously was not cheap as you have to start your life again (although the visa’s and move were paid for by the company). For most of 2009 only Mr. CF had a job and Mrs. CF did lots of job interviews (bad timing with the crisis ongoing), studying and volunteer work. However, we bought a new car and motorcycle that same year.

As of 2010 we both had full time employment and life was good. We did lots of hiking, travelling but still kept our budget in check. We had also purchased a home in 2010 (reasonable timing as far a purchase price, but it was a massive 280 square metre (3000sf) McMansion!), a second car and upsized the motorcycle. We actually sunk virtually all our savings from 2006-2009 into the house, cars and motorcycles. Consumerism at its finest.

In 2011 and 2013 our incomes kept getting bigger, but our expenses stayed about the same. In short, pretty good savings rates for those years. It’s interesting to see the good saving rates despite getting married, doing a 20-day Hawaii honeymoon and Miss CF being born in those years.

The Transition Years

As of 2014 the effects of Miss CF being with us, and associated parental leave, are becoming visible. The lack of income, some extended travel and daycare costs start to have a big effect on the savings rate. However, 2014 was also the year that the FIRE principles started to take shape. The parental leave gave us insight into living with all the time in the world on a modest income. Then Mrs CF discovered ERE and things rapidly progressed from there with the purchase of our first two rentals.

2015, which was a massive transition year, was pretty “bad” from a savings perspective. We emigrated back from Canada to the Netherlands, but this time we had to pay for the international move ourselves. We also were unemployed for about 3-5 months that year, and we did a bit of travelling as well. It was a great year, just not from a savings perspective 🙂

Last year (2016) was a turn-around year, for the better. We both were employed for the whole year, had good incomes, our investments did well and we managed to add 2 properties and one workshop (as well as one property for ourselves) to our portfolio. The savings rate is back into the right territory, despite the massive costs of day-care for Miss CF (about 30% of our total expenses). We did not travel much last year either, which is not necessarily a bad thing as we did quite a bit of travelling over the years. But it obviously had a big positive impact on the savings rate.

The Future?

For 2017 we hope to keep this momentum going! But there are many developments and ideas we are working on, we don’t know yet how the year is going to turn out. If we keep our employment as it is now, we hope to remain around the 50% mark. This is driven by day-care costs and renovation works scheduled, plus catching up on travelling.

How about you, do you know how your savings rates developed over the years?

Mr. CF was driving to work one morning last december when I heard a loud bang on the front windshield….. A big crack appeared throughout the front windshield, darn. Well, we are insured for stuff like this, so filled in the online form and got the insurance process started. “Great fun”. First thing was to find the right windshield to replace the cracked on, sounds simple, right?

The Missing Windshield

When I called the garage to I told them about the cracked windshield and that the car is imported from Canada. No problem he said, but do drop by so that he could have a look. Considering the repair shop is close by our house, I drove by on the way back from work.

At the shop, the owner looked at the various ID markers on the car and window. Later that day he called and told me to come back 10 days later for an install (this was just before Christmas, so it took more time than usual). Perfect, I was off for the Christmas break anyways and could drop by on the proposed time and date. Problem solved, right? Wrong!

When I arrived at the repair shop, they partially ripped out the windshield before they realized that the one they had was too small! Huh? How does that work, the car is the same shape and size as the European model? Anyway, went home with a complely ruined front windshield and a nasty feeling.

The nasty feeling is not because of the window being broken, but because the APK ((bi)-yearly mandatory inspection for cars in the Netherlands) was due late February. With the broken window I could not pass the impection. If you do not have a valid APK, you have to park the car as you are no longer permitted to drive! Still, we had a few more weeks before it would become an issue. We were positive for a good ending.

Car Scare

http://www.usedcarguys.com.au/buying-hail-damaged-car-brisbane/cash-for-hail-damaged-cars-sales/

Car Scare

About 4 weeks later (after several calls back and forth) the guy calls me back to say he cannot find the windshield. He told me to go to the dealership to have another look. I did that a soon as possible and drove by the repair shop again to find out that…..they could not supply an new windshield until halfway April! Oops….

This news meant that we now had to suspend the car (costing €70) as of the APK laps date, arrange loaner cars, rental cars or otherwise (I still need to get to work!). Aahhh. Have you ever looked at what a car rental costs for almost 7 weeks? In the netherlands, at the lowest possible price for a very small car (think Toyota Aygo), you are looking at close to €1.000. This is not really money we want to be spending!

The only “good” thing is that when you suspend your car, you can also suspend road tax and insurance. This would “save” us about €200. Fortunately after some asking around, we were able to arrange cars for about 5 our of the 7 weeks. So just two weeks of potential rentals required (thank you family). Then we get a call in the first week of February…

Good News!

They found the windshield, so I quickly made a appointment two days later to have it installed. It turned out that they were looking at the wrong vehicle and had ordered the wrong window to begin with (they got it for a regular version of the car, not the wagon). So as soon as we had the new windshield, we also drove by an APK certified car dealership to have the APK inspection completed the same day.

We are now able to (legally) drive the car until 2019 on Dutch roads, and we see out of the front windshield again. In the end it did not cost us a cent extra, but it did gave us a good car scare!

Have you ever had a car scare? Where you lucky too?

Net Worth

Some of you may be familiar with J$ (or J-Money), whom runs the websites www.rockstarfinance.com and www.budgetsaresexy.com (both very entertaining websites/blogs by the way). On www.rockstarfinance.com you can also find a list of net worth updates from various personal finance bloggers. It’s quite diverse as it ranges from as much as -$0,5M to as much as +$4M, and everything in between. The list of millionaires is quickly growing as more people blog about their finances and are open in discussing where they are and how they got there. Albeit we don’t post our net worth (we do have the Cheesy Index of course!), most of you that have been here before and are keeping track of what we do, should have a pretty good idea of what we are worth.

Earlier this week, Mr. 1500 posted another similar and rather personal question to his readers to divulge their net worth’s, what followed next in the comments section was rather spectacular! I was reading it all with awe. There were so many non-bloggers and bloggers that were very open about their finances and many (new?) millionaires-next-door popped up, some folks who’s comments I’ve been reading for a while or others I’ve never seen before.

Feeling a bit like a loser…

But seeing all these millions pop up, it suddenly made me feel like a loser! Although our net worth is nothing to sneeze at, we are nowhere near any of these $1-2,5M numbers. And most likely we won’t even reach anywhere near these numbers in the next decade….

This actually has two reasons, one: we don’t need that much money to live and two: I don’t’ want to be working for a boss so much longer (I simply don’t like my job that much). Will be ultimately hit a 7 figure number, absolutely, just not any time soon (at least I hope not because that would mean someone would have died and left us a sizable inheritance. It won’t be the lottery, since we don’t play :-).

Strangely enough, it was both motivating and demotivating at the same time. On one side you kind of want to be that successful financially, it would really be a pat on the back that you have been frugal, have invested well and have made the “right” decisions. On the other side, we only saw “the light of FIRE” about two and a half years ago. We have made massive turn around in that time, cleaned up our act, moved internationally and nearly quadrupled the value of our income producing assets and added 5 properties to our portfolio. That on its own should be something to be proud of! But it doesn’t feel that way…..

Patience is a virtue

Maybe I want to much too soon, building wealth takes research, efforts, time and patience. Not doing this would actually hamper you efforts to increase your wealth and would probably even make you unhappy. My major problem is patience, it’s not my strongest character trade. I can get really motivated and can achieve quite a bit in a relatively short period of time. When the changes are visible quickly, it really motivates me more, again improving the results in return. But at some point you have done as much as you can and just need to “ride it out” to the finish line (read: keep on saving and investing).

Any words of wisdom?? How do you deal with motivating yourself on the path to FIRE? Do you know that double feeling when looking at others that are already successful on obtaining the status of FI?