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

The Gift Conundrum

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

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

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

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

The gift conundrum - Gift Packages

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

Savings Rate

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

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

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

The gift conundrum - Expensive Gifts

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

 

Gifts to be given

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

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

 

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

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Holiday on FIRE

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

Holiday on FIRE

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

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

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

FIRE at the Fire Pit

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

Holiday on FIRE with Beer

Holiday on FIRE with Beer

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

 

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

Fire at the Fire Pit

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

 

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

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Mrs. CF and I watch a lot of documentaries. As a lazy person it’s a great way to learn new things and get exposed to different viewpoints on certain topics. We have been watching the documentary “Requiem for the American Dream“, which explains “how the system works”,  and it is not pretty! You should be able to find this documentary on Netflix (at least in the Netherlands you can). We can highly recommend watching it. We like it so much that it currently sits on top of our list of best ever documentaries.

Requiem for the American Dream

If you have not watched this documentary, do so without knowing or looking up who Noam Chomsky is. Try to have a completely unbiased view and focus on the content in relation to FIRE. It should open your eyes and explain many phenomena and observations you may have already made. We actually watched it 3 times in the last half year or so, to actually have it all fall into place (despite it being dummied down into a documentary, you can also read the book). It’s a rather complex theory told by an intellectual, so it takes time to process. Strangely enough we did not feel that it was boring at all, on the contrary, it was very enlightening.

Chomsky uses 10 principles to explain what is currently happening within our society and explains “how the system works”. Below is a short summary of these 10 principles. We have added in our thoughts on how this interacts with FIRE and the attitude required to become FI.

The italic texts is a copy from this post: http://www.alternet.org/news-amp-politics/noam-chomsky-wants-you-wake-american-dream. Personally think that Mr. David Swanson made a good summary here.

1. Reduce Democracy.

Chomsky finds this acted on by the very “founding fathers” of the United States, in the creation of the U.S. Senate, and in James Madison’s statement during debate over the U.S. Constitution that the new government would need to protect the wealthy from too much democracy. Chomsky finds the same theme in Aristotle but with Aristotle proposing to reduce inequality, while Madison proposed to reduce democracy. The burst of activism and democracy in the United States in the 1960s scared the protectors of wealth and privilege, and Chomsky admits that he did not anticipate the strength of the backlash through which we have been suffering since.

Most people will value democracy as it provides freedom, security and wealth to a bread section of the population (likely including me and you). But for a small and (very) wealthy portion of the population and for corporations, it generally hampers their ability to grow their wealth/profits. Democracy generally provides a distribution of wealth and a better quality of life, whereas a lack of democracy generally favors just a few. It is therefore no wonder that very wealthy individuals and corporations are systemically trying to reduce the democracy (even on a small/local scale).

As the FIRE crowd we are (happily/unknowingly?) surfing along with these changes. Simply by being invested in these corporations, and thereby indirectly also into these wealth individuals, by owning company shares and index funds.

2. Shape Ideology.

The Powell Memo from the corporate right, and the Trilateral Commission’s first ever report, called “The Crisis of Democracy,” are cited by Chomsky as roadmaps for the backlash. That report referred to an “excess of democracy,” the over engagement of young people with civic life, and the view that young people were just not receiving proper “indoctrination.” Well, there’s a problem that’s been fixed, huh?

If you have wealth, or a good market share as a company, you want to maintain this and increase it were possible (sounds familiar, right?). How much would you do to maintain your wealth? Apparently, both individuals and corporations will go far (to the point of being unethical) to maintain their wealth levels. Excess wealth is corrupting, but that should hardly be something new to you.

The trick here is to try to avoid the above noted “indoctrination”, which we as a FIRE crowd are relatively good at.

3. Redesign the Economy.

Since the 1970s the United States has been moved toward an ever larger role for financial institutions. By 2007 they “earned” 40% of corporate profits. Deregulation has produced wealth concentration and economic crashes, followed by anti-capitalist bailouts making for more wealth concentration. Offshore production has reduced workers’ pay. Alan Greenspan testified to Congress about the benefits of promoting “job insecurity” — something those Europeans in Michael Moore’s film don’t know about and might find it hard to appreciate.

To be clear, this is not a conspiracy theory rather a development generated by a desire to have more control over wealth and wealth generation. It’s a natural, albeit destructive, development in a system that revolves around money. Money makes money so ways to make (more) money will be exploited.

However, this leads to the (un)intended consequence that businesses take advantage of the average Joe/Jane. Without some government interference/control this will generally favor a few and negatively affect the majority. The next logical step for wealthy individuals and corporations is to also “control” the government. See also points 6 and 7.

4. Shift the Burden.

The American Dream in the 1950s and 60s was partly real. Both the rich and the poor got richer. Since then, we’ve seen the steady advance of what Chomsky calls the plutonomy and the precariat, that is the wealthy few who run the show and get all the new wealth, and the precarious proletariat. Back then, taxes were quite high on corporations, dividends, and wealth. Not anymore.

A reduction in corporate taxes and dividends is great news for share holders like you and me. We actually get better from it and will get to FI faster too! But realistically it is killing for a large portion of the population. Less taxes is less income for the government and thus less money for social programs like schooling, unemployment benefits, Medicare coverage, etc. See also the next point.

5. Attack Solidarity.

To go after Social Security and public education, Chomsky says, you have to drive the normal emotion of caring about others out of people’s heads. The U.S. of the 1950s was able to make college essentially free with the G.I. Bill and other public funding. Now a much wealthier United States is full of “serious” experts who claim that such a thing is impossible (and who must strictly avoid watching Michael Moore).

We are definitely becoming more individualistic in society, and I don’t believe that this is a good thing. I’ll leave out what the possible reasons might be, but the results are far from pretty. Whereas things like medical care and educations should be free to all in my mind (they are basic human rights). But also some social security for the less fortunate (which could also be you or me in a few years, life happens!).

There will be a bill to be paid for this by all of us (via taxes and/or direct payments). In a society revolving around money where people (and governments) are generally mismanaging their finances, this will became increasingly more difficult. Making sure you save up and have a financial buffer, like we do, (partially) shields you from some of these risks/developments.

6. Run the Regulators.

The 1970s saw enormous growth in lobbying. It is now routine for the interests being regulated to control the regulators, which makes things much easier on the regulated.

Lobbying is great for corporations and the agenda of few very wealthy individuals, and thus indirectly also for the majority of the FIRE crowd. But the interest of lobbying groups is definitely not for the common good! It’s also rarely based on facts or science, it’s based on (corporate) interests.

7. Engineer Elections. 

Thus we’ve seen the creation of corporate personhood, the equation of money with speech, and the lifting of all limits under Citizens United.

Look at the last few American elections, do I need to say more? This is not a democracy! This is a media spectacle without any real content orchestrated by two parties and their (wealthy/corporate) supporters and sponsors. How can the American people make an educated decision if they are only fed commercials and mud slinging? Life is not black or white, it’s grey. Compromise!

Considering compromising is not going to happen (as it is not in the interest of the supporters/sponsors), the democratic/governmental system is bound to fail (or at least being very inefficient).

8. Keep the Rabble in Line.

Here Chomsky focuses on attacks on organized labor, including the Taft Hartley Act, but one could imagine further expansions on the theme.

This is actually a very scary developments that labor rights are systematically removed. Good for cheap products and stuff, not so much for the majority of the people working in these industries. But, great way to control this section of the population and generate more profits for you and me.

9. Manufacture Consent.

Obsessive consumers are not born, they’re molded by advertising. The goal of directing people to superficial consumption as a means of keeping people in their place was explicit and has been reached. In a market economy, Chomsky says, informative advertisements would result in rational decisions. But actual advertisements provide no information and promote irrational choices. Here Chomsky is talking about, not just ads for automobiles and soap, but also election campaigns for candidates.

As the FIRE crowd we are painstakingly aware of this. We all know the tricks marketers pull to lure us to buy products (and sometimes even become debt slaves). Most of us have learned, to a certain degree, that you are actually happier with less stuff and frugal purchases. So we therefore buy less of it, which in return causes us to save more money that we invest to become (or maintain) FI. For some reason we collectively have been able to partially wrestle us from this grip of corporations. Feels good, right?

However, we still have much to learn, here is a great example: https://nutritionfacts.org/video/the-food-industry-wants-the-public-confused-about-nutrition/

10. Marginalize the Population.

This seems as much a result as a tactic, but it certainly has been achieved. What the public wants does not typically impact what the U.S. government does.

Think this is pretty clear, most people want good healthcare, schooling, well paid jobs, social benefits, etc.. But this is clearly not what most governments (and in particular that of the US) are actually doing for it’s citizens. However, governments are great at providing subsidies to large industries (think air traffic, transportation, agriculture, big oil, etc.) that in return benefit our shares, dividends and index funds once again.

Conclusion

You might think that the above is some random incoherent rambling, but if you watch the documentary things might sink into place. The inherent power by corporations and wealthy individuals is really influencing politics/governments (via fund raising and lobbying) and therefore general policy. This will in return make life more expensive and difficult for large potions of the population.

However, for people like you and my that are aspiring for FI, this is great news as our investments will do very well. But for society (and the environment) as a whole it is very detrimental and will certainly cause issues in the future. Despite being on the path to FIRE, we are still part of society and will be affected. This is important to keep in mind.

What I found most interesting is the fact that the FIRE community partially sees through the system and uses it to their own benefits. I’m just afraid that it might turn around at some point and bite us in the @$$.

 

What do you think? if you watched the documentary, what did you think about it? If you didn’t watch it (yet), do you recognize elements in this post in your situation or country? Curious to know your thoughts.

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Barn on FIRE

Meneer (Mr.) from the blog of www.meneerenmevrouw.com dropped me an email this weekend. He had read our 5-year plan and commented on the fun fact that he and the Mrs. had been considering some of the same ideas. What ideas you might ask: buying an detached house with a large plot of land (i.e. usually an old farm) to grow your own produce while perhaps also doing some (Air)B&B on the side for some extra income. This got me thinking, what about a FIRE barn? A what?

The FIRE Barn

The FIRE Barn
Source: http://huispromotie.nl/een-boerderij-verkopen/

The FIRE Barn

We have obviously been looking at old barns already and have found a couple that might even be interesting too. However, most are a bit too expensive for us right now, especially when you consider the costs for renovations and preparations for the vegetable yard/permaculture setup. We could sell some of the Real Estate, but would rather not due to the nice cash-flow it is currently generating. However, there is another option, what about doing it with likeminded people from the FIRE community? Yes, a FIRE Barn 😉

The Idea

The idea is really simple actually, you share financial and human resources to purchase, renovate and setup a barn and associated yard/garden. You share the joys and work to assure you get the maximum yield on your time, efforts and money. You can obviously also implement a system where you become completely self-sustainable (i.e. no utility connections) too. Think septic systems, solar power, geothermal heating system, heat exchangers, etc.

Subject to the amount of people that are joining in, and the size/space of the property, you have various options (here are just a few):

  • Small FIRE barn: two or three families/couples. Each a section of the house or barn. Communal yard with shared efforts to maintain.
  • Large FIRE barn: 3-5 families/couples. Still each with their own private areas. Communal yard with shared efforts, with perhaps some private sections.
  • Extra large farm house/barn/barn extension: up to 10 families. Likely private quarters but communal kitchen(s) and/or living areas. This really starts to look like communal living.

In all scenarios you share the expenses of the farmhouse/barn equally among the parties (i.e. taxes, maintenance, utilities, insurance, etc.). Guess you can setup a system where you “buy” or “sell” your share of the expense depending on the amount of work you do around the place. Subject to yard size/regulators, you might have the option to create camp sites/chalets/converted barn for some (Air)B&B income to limit overal expenses.

Lot’s of option here to benefit from each others knowledge, skill sets and the property.

Bed and Breakfast?

I hate and love B&B’s. On the one side they are a good way of creating some extra income, but on the other side they are far from passive income generators. You really have to work hard at keeping the place clean, booked and running. Also, social contacts are very important for most humans (including me), and having a B&B definitely provides that interface. I’ve actually done this for 3 weeks in the USA as a favor in exchange for free accommodation and meals. It was great fun, but I’m not sure how long it would have been an interesting activity.

Guess part-time B&B-ing is not a bad idea. Just run the B&B for the summer months and close it down for the winter ones (so you yourself can travel to warmer places). That being said, I have to admit that an farm/barn is a great place for a B&B. You usually have a lot of space and it’s not that difficult to make some guest spaces available for additional income. You also tend to get the easier going/older people at these types of locations who like nature, limiting the amount of work (read: cleaning, maintenance).

The jury is not out on this one…. albeit it is a good opportunity to cover some of the farmhouse/barn expenses for sure.

Permaculture

What is permaculture, why do we (think we) like it and why is it perfect for farmhouse/barn living? Permaculture, by wiki’s definition, is ” a system of agricultural and social design principles centered around simulating or directly utilizing the patterns and features observed in natural ecosystems”. Huh, what? It is pretty much optimizing the natural world as much as possible and efficiently using all the resources it provides.

The Fire Barn - Permaculture

The Fire Barn – Permaculture
Source: https://permacultureprinciples.com/

Why is the interesting? The primary reason most people like this is because it actually is the most sustainable way to live (ethical living). But for me as a lazy person (and an engineer) it is also nature engineering to the highest degree. If you setup your permaculture garden well (and this does take time), you can have a 4 hour work week with a massive amount of garden produce (and potentially much more). It would almost be passive income, and we like that!

If you do it right, It might even make you self sustainable from a food perspective and provide additional savings in energy usage. Now that is cool. Why is a barn such a good place, usually it comes with a large plot of land. Albeit you don’t need much, a larger plot does give you more options and a bigger harvest/larger variety in resources. It also does require more time and efforts to implement, obviously.

This post is way too short to list the amazing things one can do with permaculture. Can highly recommend reading up on it, if you can deal with the high hippy content.

Travel

Many people in the FIRE community would like to travel, perhaps even long-term when FI. In a FIRE barn setup this should be very much possible. Because you already would have a relatively low cost of living with a FIRE barn setup, leaving for the longer term is not a big problem. More so, you have the option to (Air)B&B out your livingspace and have your farm friends help out with the management. The extra income would likely cover your expense requirements, leaving you with no or very little fixed costs at home while you travel. This would obviously only work if you have a good system in place and mutual understandings of how life on the farm/barn is managed. Lot of opportunities here!

Negatives

Ok, perhaps you now think I have gone completely mad (you’d be right). You might think I want to start a sect (close) or have become a hippy (heck, even I don’t know in what “box” I fit anymore)? Not to fret, it’s not that bad (yet).

The FIRE Barn - Crowded

The FIRE Barn – Crowded
Source: https://nl.pinterest.com/pin/140033869636673393/

Perhaps I might change my mind, but I don’t see this happening anytime soon, for one main reason: privacy. I like my “me” time, which is already hard to get these days with the little one. But in this case it is also the fact that you can’t really get away from your fellow farm friends. Despite the fact that you would have your own space, and you are free to go as you please, you would still have quite a few people around all the time.

Considering all the benefits this setup might provide, it might still be a good idea. I would just have to find a way to get my privacy/peace-and-quite time. Not impossible at all, but I need to really want it (i.e. being self sustainable with added benefits) before I would put the (mental) effort into it.

There is a second component that is critical and that is that all members are on the same page with their thinking/attitude. This might be the most difficult part as every human is unique and has different options and ideas during different stages of life. While you might get along now, you might not in the future. This could cause issues and strife, which always ends up costing money one way or the other. Personally, I like to do my own thing and also make decisions on my own (read: making compromises with Mrs CF only). But then again, this is also a risk that you can manage!

 

So dear readers, what do you think? Would this be something you would even consider? Or are you to attached to your privacy like me? What other pros and cons do you see?

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Blog Traffic Update

I’ve been trying to understand website traffic as various blog traffic reports show different numbers. The following post was rather enlightening to be honest:

AWStats Vs Webalizer Vs Google Analytics Visitor Numbers

A short summary of this post:

  • Webalizer is way over estimating your traffic – it measures at your server and interprets log files
  • AWStats is slightly over estimating your traffic – it measures at your server and interprets log files
  • Google Analytics is slightly underestimating your traffic – it measures traffic via cookies

An the funny thing, all of them are wrong (albeit some more then others)! Nice…..

Blog Traffic Update

I don’t have Google analytics setup for this blog. I already think Google knows way too much of me and this blog, don’t need to give them even more information. Therefore I use the AWStats data to figure out if you guys like this blog (or not), and if so, which posts are the most appreciated. The amount of comments you guys leave give some indication, but I really cannot find a connection between comments and the type of post/content. If you can leave a comment on what you particularly like, and what not, that would be appreciated 😉

However, I made my life difficult and changed the site in early May to have a secure SSL (https://) connection. This screwed up all the pretty graphs in terms of blog traffic. Therefore the two graphs below:

  • Graph 1 show traffic via non-secured connections up to May 2017
  • Graph 2 shows traffic via a secured connection from May 2017

June 2017 was the first full month of having he secured connection up.

2017 Blog Traffic Update - Non-secured Traffics

2017 Blog Traffic Update – Non-secured Traffics

2017 Blog Traffic Update - Secured Traffic

2017 Blog Traffic Update – Secured Traffic

 

Based on the YTD summaries, see below for the blog traffic for non-secured and secured connections (up to July 10, 2017):

2017 Blog Traffic Update - Non-Secured Traffic Summary

2017 Blog Traffic Update – Non-Secured Traffic Summary

 

2017 Blog Traffic Update - Secured Traffic Summary

2017 Blog Traffic Update – Secured Traffic Summary

 

Considering summer is here, and people (rightfully so) spend more time outside, it looks like we will be hovering around the 35.000-40.000 page views per month. We probably will be having about 4.500-5.500 unique visitors per month. Based on the summaries above, we had about 250.000 or so page views in the first half of this year. Not half bad, but certainly not spectacular either! Various established bloggers pull this in per month.

However, I realize I’m already writing for a niche public (Dutch FIRE) in a niche community (Personal Finance). But my analytical way of thinking (and writing) is not for everyone (you may call it boring/factual). What you also won’t find here is tips of saving money or how to destroy debt, as these topics are in our nature and we find it “normal” to do this under all circumstances. But it’s those types of posts that attract most readers on various other blogs. The investment side is far more interesting to us!

Considering all of this, I’m pretty happy that I’m not just blogging for myself, but other people actually “enjoy” our posts and find them helpful. The personal feedback during the last FIRE meet up was than also priceless!

What You Liked

Based on combined numbers for secured and non-secured sites, the following posts were most popular in terms of page views:

Posts We Liked

The following posts we liked best, simply because of the new insights they gave or the clarity it brought in terms of “peace of mind”:

 

What about you, what did you like best personally and why? What topic would you like to see covered?

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Cars

When we would reach FIRE, we don’t need a car anymore to get to work (yay!). However, we will still want to move around as we don’t live close to many of our relatives and friends. We will primarily try to do this with our bicycles and public transport, but this is not always an option. The type of transportation will all depend on the distance, locations and costs. However, the freedom of a car can be quite nice. Plus, if you need to move (kid) stuff around, a car is rather useful. But what’s the cheapest way to get around with a car? Todays post will review the Car Ownership vs. Car Rental vs. Car Sharing vs. Private lease debate. At least for the Dutch…..

The Assumptions

As you would likely agree, there are too many options to review and the needs and distances for each of us will be (very) different. I’m going to try to provide ranges and rough indications of what would work best for each scenario. Granted, there might still be other options and situation that will affect the data presented. The idea is to use this info as a guideline to start your own assessments.

As most of you know. the Netherlands is a very expensive country from a car perspective. We will therefore only focus on two car classes:

The mini class is fine to get up to 4 people around in short trips under about 1-2 hours. It’s the simplest away to get from A to B. The compact class is great to get up to 4 people around in reasonable comfort and to move stuff around (love hatchbacks!).

Why not review anything bigger? Because you only need one of these on occasion and not every day when you are FIRE. If you need one, just rent one for the day/week. Rates are only €10-25 more per day for rentals/car-sharing, so won’t kill the budget.

The Mini

The following assumptions where used for the mini class:

Car Costs - Mini Car

Car Costs – A Mini Car
Source: http://www.automobiledimension.com/

  • 2.500, 5.000, 10.0000 and 20.000km driven per year;
  • Two scenarios where the average trip is either 50 or 100km;
  • For the scenario of 20.000km/year and 50km average, we used 300 days of use;
  • Fuel costs are €1.50/l;
  • Fuel consumption is 21km/l (~50 mpg);
  • Car purchase price is €8.000 (assumed about 3 years old);
  • Driver is 35 years old an had a clean 10 year driving record (for insurance purposes);
  • Opportunity costs based on 7% yield per year; and,
  • Private lease includes 12.000km pear year, extra km cost you €0.06/km.

The Compact

The following assumptions where used for the compact class:

Car Costs - Compact Car

Car Costs – A Compact Car
Source: http://www.automobiledimension.com/

  • 2.500, 5.000, 10.0000 and 20.000km driven per year;
  • Two scenarios where the average trip is either 50 or 100km;
  • For the scenario of 20.000km/year and 50km average, we used 300 days of use;
  • Fuel costs are €1.50/l;
  • Fuel consumption is 17km/l (~40 mpg);
  • Car purchase price is €15.000 (assumed about 3 years old);
  • Driver is 35 years old an had a clean 10 year driving record (for insurance purposes);
  • Opportunity costs based on 7% yield per year; and,
  • Private lease includes 12.000km pear year, extra km cost you €0.07/km

The Data Sources

For the assessments I used the following data sources and sites to get pricing information (for affiliate links!).

For car ownership

Wat kost een auto?

https://www.autotrader.nl/

For Private Lease

https://www.privelease.nl/

Private Lease van Justlease.nl

For Car Rental

https://www.cheapcars.nl/

https://www.sixt.nl/

hhttps://www.greenwheels.com/nl/

For Care Sharing

https://www.snappcar.nl/

https://mywheels.nl/

The Results

Ok, time for some pretty graphs. Based on the above scenarios, data and car types, the following graphs provide some guidance. Keep the following in mind:

  • For car ownership the opportunity costs are also included. In case of the mini class these costs are €560/year;
  • Car ownership includes all costs, including depreciation, maintenance, fuel, insurance and taxes;
  • Costs for car rental, car sharing and private lease are also all-inclusive rates;
  • If the average trip is 50km and distance is 5.000km/year, the assumption is that you do 100 trips per year. Similarly, if the average trip 100km and the distance is 2500km/year, the assumption is that you do 25 trips per year. The number of trips obviously significantly affect the costs in the rental and car sharing options, as you are charged by the day; and,
  • In all scenarios we assume you get the car for the whole day (24 hours).

Average trip of 50km

Cars Costs 50km average trip - Mini Class

Cars Costs 50km average trip – Mini Class

 

Cars Costs 50km average trip - Compact Class

Cars Costs 50km average trip – Compact Class

Average trip of 100km

Cars Costs 100km average trip - Mini Class

Cars Costs 100km average trip – Mini Class

 

Cars Costs 100km average trip - Compact Class

Cars Costs 100km average trip – Compact Class

The Conclusions

This assessment provided us some interesting insights, and some surprises too! We always believed that private lease was very expensive, but this is not as bad when you compare cars of about the same age (we used a 3 year old car for ownership vs. a new car for private lease). This is partially caused by the opportunity costs.

Another interesting (but not surprising) observation is that the number of days you actually use the car are of greater impact on the costs when renting or car sharing. If you can limit the number of times you need a car, you significantly reduce the overall costs for rental/car-sharing.

Some other general conclusions:

  • If you need a car only once-twice per week, you are better of with car-sharing or renting. Which option is better for you depends on availability of both rental cars and car-sharing programs in your area;
  • If you need a car about twice-three times per week, buy a small (older) one. This way the opportunity costs are lower and you still beat a private lease; and,
  • For us personally, we are cheaper off going for car-sharing or rental (we have both option in our area) when FIRE. We probably only need the car 25-35 times per year for one or two days each. Considering our current car costs us about €4.500-5.500/year (all-inclusive), we would save quite a bit of money on transportation costs.

Fun Fact for our American/Canadian readers. The road tax on a F350 Diesel (weight 2726kg; €3340/year) is more than operating a mini car for a whole year at 20.000km (all-inclusive!). That is why we drive small cars in this county 🙂

 

What about you, any new insights into car costs? Does this match with what you see with your own car? Have you used car-sharing yet? We are curious about your thoughts!

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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.

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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?

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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?

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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? 😉

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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!

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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?

 

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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! 🙂

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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?

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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!

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