Well what better than to wrap up and summarize 2017 than with the Cheesy Index? In this December 2017 Cheesy Index post we will also look at the portfolio allocation and some random financial statistics, which also showed we were FI in 2017! Too bad that from a cash-flow perspective we still have a long way to go….

December 2017 Cheesy Index

Despite not having posted the December savings rate or dividend incomes yet, we could already see that 2017 was going to be a great year for the Cheesy Index (see also the post form last month). We closed out the year with a Cheesy Index with a total of 69%! Just look at all the cheese stacking up, it’s just pretty ;-). We also shot past our 65% target for the year, in largely thanks to the stock market and our Real Estate income.

Here are the stats:

December 2017 Cheesy Index

December 2017 Cheesy Index

Portfolio Allocations

As you might be aware, we have divided our assets into three classes:

  • Income generating assets (stocks, real estate, loans, etc.);
  • Non-income generating assets (cash, our house, art, jukebox, etc.); and,
  • Depreciating assets (i.e. our car).

If you look at these three assets classes, and their development in 2017, you get this:

2017 Asset Allocations

2017 Asset Allocations

It is hard to miss the shift from ETF’s and Dividend shares to a Real Estate loan in November/December. But we now have more than 85% of our available wealth invested, that is good! However, we now have to work at getting some more cash for 2018. Primarily to pay for maintenance on our real estate and a 9 week road trip holiday (partially unpaid) in Q2 2018.

Portfolio Allocations – Income Assets

When you now breakdown the income assets into the following categories:

  • Our real estate;
  • The dividend shares;
  • Our Index funds;
  • The various crowdfunding loans;
  • Some sustainable investments (solar/wind); and finally,
  • Crypto-currencies.

And you dump all that into a graph for 2017, it looks like this:

2017 Income Asset Allocations

2017 Income Asset Allocations

As you can see, we are now heavily invested into Real Estate, followed by dividend shares. We currently have virtually no ETF’s anymore, very little crowdfunding left and only small positions in sustainable investments and crypto currencies. It’s unlikely that there will be major changes in this final distribution (from December 2017) during 2018.

Random Statistics and why we were FI in 2017 (and why not)

Ok, now for the fun part, here are some random statistics and notes for the financial year 2017:

  • Overall expenses covered by total investment income (before taxes): 107.6% (the bank decided to shift some charges to 2018, so it went up since this surprisingly popular tweet)
  • Total core expenses (excludes daycare and holidays/leisure expenses) covered by total investment income (before taxes): 149.7% (holy heck!!)
  • Total core expenses (excludes daycare and holidays) covered by net cash-flow (including estimated taxes): 91.8%
  • Target FIRE expenses covered by current net cash-flow (including estimated taxes): 83.9%
  • Overall 2017 return on investment (on income assets): 8.2%
  • 2017 was our highest income year on record, just a but higher than our previous record high from 2012
  • Net Worth increase in 2017: 20.1%

As you can see both taxes and cash-flow limitations are “killing” us right now. That being said, due to higher than expected yields we are close to FIRE than the cheesy index makes us believe. This is also not influenced by market valuations, which is promising!

 

Slowly but surely getting there! How about you?

 

 

It is time for the last post of the year! There is a little bit of time left to discuss Real Estate and some of our plans for 2018. Time for the Real Estate Report – December 2017 edition.

Real Estate Report – December 2017

Rental Income

Our rental income for December, in combination with a new private Real Estate investment loan, has rocketed our income to almost €3.400. During December we rolled two separate private real estate loans into one. Because the second loan only commenced halfway the month, the interest only reflects a portion of the total forward monthly income. The loan has already been used to purchase new real estate. Exciting times for all parties involved.

The monthly income overview is provided below:

Real Estate Update - December 2017 Income

Real Estate Update – December 2017 Income

Rental Expenses

The expense for December were very low again. The expenses consisted of the usual:

  • Mortgage and loan payments,
  • Management fees; and,
  • We got some money back due to a corrected tax assessment! Always good news.

Maintenance on the heating systems of two units was done in late December, but the bills will come in January. Due to a lack of any other works, we have no maintenance expense this month.

The expenses for the month are as follows:

Real Estate Update - December 2017 Expenses

Real Estate Update – December 2017 Expenses

Real Estate Report – Overview

What better than to close the year with a big bang?! We made a total of almost €2.871 in net rental and loan income for the month of December (before taxes). The net cash-flow will come in at around €2.200 for this month.

Our total net rental income for 2017 came in at almost €23.617 (before taxes), the associated net cashflow is around €18.600. This is all much more than we expected last year when we made the forecast. This is all due to the delay in maintenance works for the exterior of two units, which is currently estimated at €6.500 (have the quote already). We were too late with getting stuff sorted and now have to wait for the next warm season.

Real Estate Update - December 2017 Overview

Real Estate Update – December 2017 Overview

Real Estate Report – Forecast

Ok, so the sale of one unit has started and is expected to close in March/April. Why that late? Because some of the parties will be abroad. Perhaps we can speed things up, but we have not looked into this at the moment. We also still need to complete assessments of the property to determine the final sales price and arrange a mortgage with our relative, who will be buying the property. Lots of fun stuff

Based on the existing situation, anticipated new tenants, the planned sale and the scheduled maintenance work. Here is a quick overview of the numbers for 2018.

  • €38.500 rental and loan income (excluding any new investments)
  • €20.000 expenses (includes €6.500 for large scale external maintenance for two units scheduled in April 2018)
  • €18.500 net income (cash flow is considerably lower as the loan payments are not paid out but compound)

In short, we expect higher operating costs next year and therefore a slightly lower net income in 2018 than in 2017. Note that we don’t know how, or in what, we will invest the proceeds of the unit sale. Perhaps we will do another real estate loan, or we might purchase one of two units. Will keep you posted as always!

 

Best wishes for you and your family and all the best in Real Estate investing in 2018!

Happy Holidays!

Merry Christmas and all the best wishes for 2018. We hope that your 2017 was awesome for you (and your family) and that you can continue this trend in 2018.

We also wanted to thank all of our readers for the support and feedback we have received over the past year. It’s been very rewarding to have been able to make this FIRE journey with you al, both online and in person. We hope that we are able to meet many of you in real life at some point (perhaps already in 2018?). On that note, looking forward to next Saturday for some stroopwafels, cheese and beer. Until that time, enjoy the food, fun, family and friends!

Happy Holidays!

Happy Holidays!

As all of you are aware (if you are not, you have been living under a rock!), cryptocurrencies have gone bananas lately (and plummeted next). We have also decided to dip our toes into the new world of cryptocurrencies: the Combicoin! It’s not really investing, so much as gambling, but you have to have some fun money, right?

Disclaimer: we have no interests in Triaconta or Combicoin, nor do we get any compensation for writing this post!

However, if you are interested after reading this post and have done your own homework and risk assessment (!), you may use this link to buy your Combicoins: https://triaconta.com/?ref=COMBI-214484

If you do, we both will get 0.5% extra combicoins.

Update 09-01-2018: the sale of the Combicoin has been temporarily suspended due to a voluntary process to get regulatory approval. For those who already have Combicoins, you are able to sell them back to Triaconta in February, or can wait to sell them on the trading platform once it’s operational. See news here: https://triaconta.com/triaconta-is-voluntarily-acquiring-regulatory-approval/

Cryptocurrencies: the Combicoin

Because we (currently) lack the general understanding of which cryptocurrencies have more long-term potential than others, it’s difficult to know what to buy. Bitcoin certainly is not the answer as it’s too slow to be used as an actual currency. It also needs amazing amounts of energy to be mined (and traded), not really sustainable!

But which one is? Ripple? Dash? Beats me (you are strongly encouraged to leave some comments)! However, the same applies as with ETF’s and index funds. If you don’t know which one “candy” (read: company/coin) to buy, just buy the candy store! That is how we found the Combicoin. Albeit technically, the Combicoin is not a cryptocurrency but a token.

Cryptocurrencies - Combicoin

Cryptocurrencies – Combicoin

Combicoin

The Combicoin was developed by a bunch of our smart countrymen at a company called Triaconta. They thought that making a candy store was a good idea. So they came up with the Combicoin, which is supposed to be fully backed by the top 30 cryptocurrencies. The idea is that the value of this token is based on the underlying value of the top 30 cryptocurrencies and fluctuates accordingly.

When the asset distribution (which starts at 1/30th for each) gets skewed, the portfolio is rebalanced by buying and selling the underlying cryptocurrencies. This is done periodically or if certain trigger levels are hit. The asset distribution as per 19 December 2017 is as follows (check out their webpage for more up to date information).

Cryptocurrencies - Distribution

Cryptocurrencies – Distribution

Status

Ok, so late November we purchased about 77 Combicoins, which cost us around $15.30 each after exchange rates and fees. The initial investment was thus €1.000. This is what happened next (Extra Note 22-12-2017 – value dropped like a brick to around $28 and recovered a bit):

Cryptocurrencies - Status 19 December 2017

Cryptocurrencies – Status 19 December 2017

But here is the kicker, we cannot sell yet!!! We will have to wait until the company (Triaconta) has developed the trading software. Next it needs to find an exchange that accepts this Combicoin and will allow trading it. Until that time we will have to wait, watch and see what’s going to happen. It does make this rollercoaster ride a lot easier to handle 🙂

We have done our research into the company, the white paper and online reviews and comments. However, I can’t vouch for the company or the token. It seems legit, I have received the tokes and everything seems to go according to what they write on their website. But I now have to trust the company and their abilities to actually make a profit on this investment (or was it a gamble?). Only time will tell.

That being said, it has been a rather hilarious exercise so far! Every time I look, the value goes up or done massively. Bet you that by the time we can sell, the market has imploded and the value of the Combicoin is less then we paid for it. At least we would have had some fun. That being said, we do view this as a buy and hold “investment”.

How about you?

Have you bought cryptocurrencies already? If so, which ones and did you already make some money (i.e. did you actually cash in on the increase in value)? What are you going to do with the proceeds? Reinvest in cryptocurrencies or other? Any recommendations for which individual cryptocurrencies to buy and hold?

Oops, just discovered that I never did the October 217 Cheesy Index. Ha, too busy writing all kinds of ethical stuff. To catch up here are the October and November 2017 Cheesy Index.

October 2017 Cheesy Index

Thanks to the great savings rate of October, the Cheesy Index continued its march upwards. We even blasted past the 2017 target and landed on 66.7%! That absolutely amazing and I had to check all excel sheets to make sure that there was no error somewhere. A 1.7% increase in just a month? How is that possible?

It was a perfect storm, high savings/investment incomes, massive stock market change and favourable exchange rate. Everything aligned nicely for this month. Question remains, could we continue in November?

Here are the stats:

October 2017 Cheesy Index

October 2017 Cheesy Index

November 2017 Cheesy Index

Yes, also in November were able to hold on to the already high Cheesy Index even increase it further. Same as in October, also the November savings rate was great! Include some great dividends and real estate income and you have a winner 🙂

Here are the stats:

November 2017 Cheesy Index

November 2017 Cheesy Index

Cheesy Index Forecast

So, now what? We have moved a lot of our available funds into an RE venture with some other investors. This means that our investment exposure to stocks has somewhat reduced (currently having a tiny exposure to ETF’s and still a sizable dividend portfolio).

Because of this switch we had to end all options contracts that were still open, which hurt, a lot! Simply did not have sufficient margin available to keep them, it was not an decision that was taken lightly. Time will tell if this was a good move. We have started a small position in crypto currencies and we completed our first sustainable investment.

What does this mean for the Cheesy Index? It should continue to increase “slowly” in the next year (2018), without major changes due to stock market changes (up or down) or dropping savings rate (due to unpaid leave and a 2 month European road trip). With a 10 year bull market, we want to be in good position to convert our available cash-flow into ETF’s/Dividend shares when the next correction roles around, whether that be 2018 or 2019 or later.

What to expect for the end of 2017? We anticipate to hit somewhere around the 69.0% mark. It all depends on the stock market (as per usual) and the timing of real estate income (considering January 1 is a Monday, most funds will likely come in on the first week of 2018).

 

How were the developments in your net worth or “index” for November? How are you shaping up for the year? Also trending towards a record?

As mentioned in a previous Real Estate Report, we have been looking into real estate loans. We have even already had a meeting with a real estate loan platform, and have been “approved” to become dedicated investors. Let’s have a look at said platform and associated pros and cons.

Disclaimer: we have no interests in Mogelijk.nl nor do we get any compensation for writing this post!

Real Estate Loans via Mogelijk.nl

A reader from our blog (which we also met in person during on of the meetups) gave us a hint a while back. She had been in contact with the people from Mogelijk.nl and believed it could be interesting for us. And right she was! We dropped them a message and got talking about the services they provide and the opportunities they have.

Real Estate Loans - Mogelijk.nl

Real Estate Loans – Mogelijk.nl

The Setup

The platform works sort of as a crowdfunding platform, but with one main difference. Instead of having many different investors, there will only be one. Yes, one investor per project. The reason is simple, the investor will get the first lien right (hypotheekrecht or “mortgage right”) on the property. With crowdfunding this is not the case, the property is however used as collateral for the crowdfunding loan.

How does it work? it’s rather simple actually. You first have an initial meeting with the people behind Mogelijk.nl. It’s their policy to screen all potential investors to see if they are a good fit. We had a very good, about 2.5 hour long, conversation about them and us. We reviewed options, discussed risks, opportunities and limitations.

Next, they grant you access to the platform and place you on the distribution list for new prospects (posted every Tuesday). Once you have found one that your like, you take an option on that project. The short version of what happens next: you, the person requesting the loan and someone from the platform visit the notary public. Here the money is transferred, mortgage documents are prepared and signed and you are on your way.

When the contract is signed and the money is transferred, the monthly repayments commence. Similar to a mortgage (and most crowdfunding loans), you now receive interest and repayment of principle. Depending on the conditions of the loan, the principle could be paid back completely, or partially over a 20 year amortization period.

The Pros

What are the neat perks for this type of investment loan? The following come to mind:

  • Good yield considering the risk profile (most are around 5-6% per annum after fees);
  • Choices between residential and commercial real estate;
  • Mogelijk.nl provides all administration, collection and distribution of funds (and legal advice/support), so you don’t have to worry about any of this;
  • You invest in real estate without any of the associated hassles!;
  • It is possible to transfer the mortgage right to another investor (various fees apply), so you can get your money out of the investment if required;
  • You have first mortgage right (and generally low loan-to-value ratios), so even if the project runs into default and needs to be liquidated, the changes of losing your principle are (very?) small;
  • If the project runs into default, you have the chance to purchase the property yourself during auction and add it to your portfolio; and,
  • Long term contracts (normally a 20 year amortization period and 5 year fixed interest rates).
Real Estate Loans - Possible Investments

Real Estate Loans – Possible Investments

The Cons (and fees)

Not everything is perfect obviously. There are some downsides and costs to consider:

  • As with most investments via financial platforms there are costs associated with participation. As an investor you pay a 2% commission at the start of the loan agreement;
  • You also pay 0.5% fees over the monthly interest portion of the repayment for administrative works performed by Mogelijk.nl;
  • There is a risk that the loan is repaid in full before the end of the loan agreement (and you need to start looking for a new project or other investment), hence the higher interest rate;
  • If we are in a (housing) crisis, the project runs into default and needs to be liquidated at an action, there is a change you get less principle back then you put in. If you don’t have the means to buy the property yourself at that time, you will lose money;
  • The interest is fixed for 5 years, but you don’t know what interests will do afterwards;
  • No possible real estate taxation benefits in Box 3 (you have to include the entire loan value for your tax assessment); and,
  • You need a lot of money to start with! The minimum amount to invest is €100.000 (max. loans are €500.000).

Other considerations

In summary, you get a pretty decent return on investment with these loans for pretty much no work required. That’s very appealing! Especially to us lazy investors. There are some inherent risks to this investment, of which early repayment is our largest concern. Due to the low loan-to-value ratio and the ability to buy the property at auction, we consider the risks associated with defaults limited.

Another thing you need to consider is that you will not benefit from any value increase of the property (it does work in your favor in the sense that it further reduces the loan-to-value ratio over time).

I hear you think, why not buy a property yourself if you have that much money? We have, very actively, be looking to see if you could find one, but none that we found even came close to this net return on investment (even after taxes!). Considering the effort and risks that go into having a property yourself, you really want the return to match. With the current high valuations, the limitation that we want to property managed (for tax and risk reasons), it’s hard to find a good deal. So if you cannot find one, what do you do?

Real Estate Loans - Deal

Real Estate Loans – Deal
Source: http://leadersinrealestate.com/finding-the-greatest-deals-in-commercial-real-property/

What’s next?

We actually just made a private loan deal with other real estate investors last week for a total value of €125.000. So we are out of money for the next little while, that is until we sell one of our rental units early next year to family. With the proceeds of that sale we are seriously considering picking up one of these loans.

We doubt that we will see a major housing market correction any time soon that will make local real estate appealing again. We are also not really looking to take on a lot of leverage in the near future either. Loans such as these therefore become quite an appealing investment (unless we see a major stock market correction in the mean time).

 

What do you think? Have any of you ever done any of these type of real estate loans before?

We thought we had bought our first bond a couple weeks ago. But after some digging this turned out to not be (completely) true. The Dutch term for the product we bought is an “obligatielening”. An “obligatie” is a bond.  A “lening” is a loan. So what did we get, a bond or a loan? Either way, we did some ethical investing!

Sustainable Bonds vs. Loans

When I started to write this post I did not have much knowledge about bonds. Why not, because we don’t own any. Why don’t we own any, because the return on investment is usually too low for us. We are happy to take on more risk and in return have the chance of a higher reward. We have time on our hands, so let’s use that. That is why we are primarily invested into dividend stocks, index funds and real estate.

But what is a bond? The picture below gives a nice simple overview of the difference between a bond and a loan.

Sustainable Loans - Bonds vs Loans

Sustainable Loans – Bonds vs Loans

Reading the prospectus of the financial product we were invested in, it appears that it is transferable (with limits), but it won’t be traded on any financial market. In short, it looks to be more like a loan than a real bond. For those interested, there are various sustainable bonds out there in the market. The post give you some examples.

Sustainable Investment Loans/Bonds

All this talk about FIRE and Investment Ethics a couple weeks ago, and than this came by (Karma anyone?). Our energy provider is one of the more sustainable in the Netherlands, and they regularly come up with sustainable projects to invest in. If we can make a (small) environmental difference and invest some money at the same time, we might be interested! It all depends on the project specifics and the projected return on investment.

A couple of weeks ago we purchased 8 “wind” participations  (€55 each) with our energy provider. They will be using the proceeds to construct a new wind turbine. These wind participations will “generate” a minimum guaranteed 250kWh each for the next 5 year. The power production is taken from our usage and if we use less then we get the difference paid out. Return on investment is up to about 5% per year on average, not too bad eh? And we now know that every kWh we use will be sustainably produced. Nice win-win here.

Anyhow, what about that other investment we were looking at? This sustainable energy project involved the placement of close to 9.000 solar panels on the top of the Nissan production facility at the Port of Amsterdam. For this investment, they needed money. Part of this money is collected via a crowdfunding platform dedicated to sustainable energy projects. The remainder is financed by a “green projects” funds from a Dutch Bank (ASN Bank for those interested).

Sustainable Loans - Solar Panels

Sustainable Loans – Solar Panels
Source: REUTERS/Jean-Paul Pelissier

We looked that terms, the return on investment and decided to invest a total of €1.000 into this project for the next 15 years. Making this the first sustainable loan (not bond!) we own (or the second? technically the earlier mentioned wind participations are a loan too).

Return on Investment

Now, because this is an investment into solar power, the return on investment will fluctuate. This is the result of environmental factors (power production) and economic factors (electricity price, system performance/maintenance). Based on the provided summary and prospectus this is what we can expect (we get a “bonus rate” because we are also a client of the energy provider associated with this project).

Sustainable Loans - Return on Investment

Sustainable Loans – Return on Investment

In short, is the electricity price stays about the same at round €0.058 per kWh (the core energy price before taxes) and we have an average amount of sunshine, we should get about 4.2% over a 15 year period. That’s not bad actually. “Worst case” (low sunshine hours and low energy price) we still make 3.4%. For a sustainable project, this is pretty good! Most sustainable projects make a whole lot less (there are a few notable exceptions).

However, there are more risks, like default of the main user (Nissan) or solar operator, storm of fire damage, equipment malfunction, etc. All of this will result in risks to the project, and in lesser amount to you as the loan provider. Insurance is included for the project, but I could not quickly find it production losses are included here as well. As with ANY investment, there are risks.

Process and Maturity

What are the next steps. Well the crowdfunding project raised over €0.5M within a couple of days. That’s impressive! We also already transferred the funds. The plan for the future is as follows.

Sustainable Loans - Time Sequence

Sustainable Loans – Time Sequence

In short, the construction of the solar project will commence on February 2018 (funds will formally be transferred too). First power production is scheduled for late April 2018. The first (combined) interest payment is scheduled for July 21, 2019. Then we get paid every year around February 22 and we receive the original deposit back in early 2033.

 

Do you own bonds (the real deal!)? Or do you also have invested some of your money into sustainable projects? How well is that going?

How about a November 2017 Dividend Update? Not really a month that stands out, but we still have quite a few monthly payers that even make this month interesting.

Monthly Dividend Update

We had a sell order in place for UFS (Domtar Corp) that triggered on the last day of the month. It’s not a bad company, but we found that our position (in terms of value) was a bit too high for our likings. If the price would come down again, we might pick it back up. In the mean time we will spread some of the proceeds around to other companies that have more growth potential (both in value as well as in dividend growth).

One monthly dividend payer (temporarily?) stopped paying, being LIQ (liquor stores). They are not doing well and have already cut their dividend big time a while back. They are also restructuring and have been selling their US assets. We have previously unloaded some of these shares and are considering to now sell the remaining shares.  Perhaps it’s time to take our losses and move on? We are considering to wait a while to see if the restructuring causes share price increase.

We continued to DRIP as many shares as possible (no fees and some share price discounts!). These include the usual monthly dividend payers such as (and a few quarterly payers too such as BMO, RBC, FTT and EMA):

  • AAR.UN (REIT);
  • CJR.B (Communication Services);
  • CIX (Finance);
  • DRG.UN (REIT);
  • SJR.B (Communication Services);
  • HR.UN (REIT); and,
  • PLZ.UN (REIT).

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

November Dividends

All the dividend deposits received into the bank accounts (correct for exchange rates) sum up to a total dividend income of about €422. This is an decrease of about 2.8% compared to last year. Wait, what? A decrease? Yes, but this is only driven by the exchange rate, in CAD terms we actually saw an increase of 4.8% in YoY dividend increases. We are not worried yet 😉

The stats for last month:

November 2017 Dividend Update - Dividend Income

November 2017 Dividend Update – Dividend Income

The graph below is showing the yearly dividend totals for 2015 and 2016, and a year-to-date dividend total for 2017. It’s starting to really look pretty, doesn’t it? We should crack that €7.000 barrier by the end of the year. However, because we sold RDSA before the dividend record date, the December dividend income will be significantly lower than last year.

November 2017 Dividend Update - Yearly Dividend Overview

November 2017 Dividend Update – Yearly Dividend Overview

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

Dividend Stock Overview

Our dividend portfolio contains 42 companies with a total of 11.208 shares (up 986 shares from a year ago).

It looks like this:

November 2017 Dividend Update - Dividend Overview

November 2017 Dividend Update – Dividend Overview

Dividend Sector Breakdown

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

November 2017 Dividend Update - Sector Allocation

November 2017 Dividend Update – Sector Allocation

How was your dividend income, any good surprises for you too?

Let’s have a drink! No, this post is not about buying your favorite liquor (will, maybe it is, it’s up to you 🙂 ). As the next BENL FIRE meetup is proposed for later February or Early March, we wanted to do something in between. So we devised a simple plan…..let’s have a drink!

The Plan?

The plan is rather simple actually, we name a location and venue(s) and you show up. How simple is that? No presentations or formal program for the day, no fees, just fun discussion and something to drink and eat. All at your own discretion of course (i.e. everyone pays for their own food and consumptions). We make no reservations anywhere, so be prepared to be flexible.

Obviously, similar to the meetups, the locations have to be easy to access by public transport, car and/or bicycle. But since we are lazy, we are currently planning to stick to cities in South-Holland so we keep our travel limited.

For this first drink we are proposing the beautiful city Gouda. Yes, from the Cheese (appropriate, isn’t it? You’d almost think we did this on purpose!). Potentially followed by places like Leiden, Haarlem, Delft, the Hague, Rotterdam, etc., if it’s a success (it’s up to you, no pressure).

Let's have a drink! - Gouda

Let’s have a drink! – Gouda
Source: https://www.holland.com/be_nl/toerisme/bestemmingen/provincies/zuid-holland/gouda.htm

Why?

We love meeting with people that are interested in personal finance, investing and FIRE. Same as you we struggle to find people in our daily lives to chat with, we hope that these informal meetings will help.

When?

Saturday December 30, 2017.

Location(s)?

The plan is to start after lunch at around 14:00 and meet at the “Siroopwafels & Banketbakkerij-Tearoom Van den Berg” in Gouda. For details have a look here: http://vd-berg.nl/contact-1

Let's have a drink - Stroopwafels

Let’s have a drink – Stroopwafels
Source: https://www.tripadvisor.nl/Restaurant_Review-g188628-d10302255-Reviews-Het_Stroopwafelwinkeltje-Gouda_South_Holland_Province.html

Between 17:00-19:00 we will just walk to the town square to get some dinner or a quick snack. If you want to join, make sure you are at the Tearoom before 17:00.

From about 19:00 onwards we will be at beer café “De Goudse Eend”. For details see here: http://www.cafedegoudseeend.nl/

Alternatives?

If you want to organize something yourself too, please do! But do let us know, we would love to come.

 

See you soon!

 

 

Cool, another month with “just above normal” savings rates. Not entirely expected, but we will take it! Here is the November 2017 Savings Rate.

November Finances

November was another very good month. But also for an less fortunate reason. We wanted to have some work done on our house/roof. But could not due to the crappy weather. We have moved the appointment twice already as it needs to be dry. Dry and November don’t go well together! Go figure…. In short, the €1200 maintenance bill is postponed until further notice (just need dry weather AND availability of the roofing contractor, how hard can that be in December?!).

Financial Overview

Here is a short financial overview:

  • Due to receiving 4 weekly wage payments for Mr CF, you always have one month per year with 2 payments! November was it 🙂 . So we received a lot of money in November. No expense claims though or other extra income. We thus had a well above normal month from in income perspective;
  • The crowdfunding income was below normal with €184 in deposits (combined interest and principle), some payments were received already last month (bank error);
  • Living and healthcare category was high at about €1.016 in total. This includes costs for mortgage interest, home insurance, healthcare premiums, utilities and some minor home maintenance. We also bought 9 “wind participations” through our energy supplier (€440). This is a one-off charge (they use the proceeds to build a new windturbine) that provides a discount to energy consumption for the next 5 years. Call it a prepayment for green electricity use; 
  • The transport costs were way above average with €791 spent. The €500 deductible for the second windscreen this year really hurt (first one was free, but changed he policy earlier this year. Because how big is the chance of having two windows cracked/broken in one year……right?!);
  • Grocery costs were again well below normal this month with just €281;
  • The kid category was above the “new” normal with about €617, which is consisting of after school care (4 days per week, including benefits) and a one-off school fee;
  • Travel and Leisure was €0. No money spent at all? Really?! Strange thing was that is was quite busy on the social front, but all free! How about that; and,
  • The other category was about €170. Money was spend on some cloths, gifts and the gym for Mrs CF.

November 2017 Savings Rate 

The savings rate for November was a very good 71.7%. The year-to-date savings rate is now up to 64,5%. We are definitely not going to make platinum for 2017, but the badass gold saver category “winner” is in the bag! 

Here are the stats:

November 2017 Savings Rate - Overview

November 2017 Savings Rate – Overview

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

November 2017 Savings Rate - Expenses

November 2017 Savings Rate – Expenses

 

How was your November from a savings perspective?

After figuring out that the journey to FIRE is horrible and all the talk about FIRE and ethics, its time to look at the cold hard cash we received. It’s time to take a look at the Real Estate Report – November 2017 edition.

Real Estate Report – November 2017

Rental Income

Our rental income for November remains well above the €3.000 mark. There are (unfortunately) no new developments to report. Still looking at ways to expand our portfolio, one way or the other (yes, we are picky, so it takes time). If you want an example of how this works, this comes to mind:

The monthly income overview is provided below:

Real Estate Update - November 2017 Income

Real Estate Update – November 2017 Income

Rental Expenses

The expense for November were quite low again. The expenses consisted of the usual:

  • Mortgage and loan payments,
  • Management fees; and,
  • Maintenance on the heating systems of two units (the other 3 are done in December).

The expenses for the month are as follows:

Real Estate Update - November 2017 Expenses

Real Estate Update – November 2017 Expenses

Real Estate Report – Overview

We made a total of almost €2.281 in net rental income for the month of November (before taxes).  The net cash-flow will come in at around €1.800 for this month.

Our total YTD net rental income for 2017 is now about €21.129 (before taxes), the associated net cashflow is around €17.000.

Real Estate Update - November 2017 Overview

Real Estate Update – November 2017 Overview

Real Estate Report – Forecast

One of our relatives who is renting one of our units has decided to buy the place. This is good news for us as it give us the opportunity to cash in on some of the capital gains made. This also gives us the ability to invest into higher yielding RE investments. It is one of our first investment properties, albeit not a bad investment, there are better options out there (even now).

We now need to start the process of mortgage assessments, pricing, any land registry items and some outstanding maintenance works. Don’t believe there will be any issues as we made clear deals with our family member how to proceed. Not sure how long this is all going to take, but we should have quite a bit of money next year to play with. Perhaps the investment loan as noted in last month’s real estate report will be a good option. Still to write a post about it, perhaps I can find some time in December.

 

What’s up with you? Any cool stuff to share?

The journey to FIRE is horrible, no really! All the choices, things you have to discover and find out. it takes an enormous amount of time and what do you get in return, money. Lovely….

The Journey to FIRE is Horrible

I remember it as if it was yesterday, the day I discovered the principles of FIRE. Thank you ERE, and that guy with a Mustache, for making my life overly complicated and difficult. Ever since that one day in the summer of 2014 our lives have revolved around the journey to FIRE, and it has been a emotional disaster.

The journey to FIRE is horrible - Horrible Day

The journey to FIRE is horrible – Horrible Day
Source: https://dreamersjourneytolife.wordpress.com/2015/12/20/day-282-a-hell-of-a-day/

Research

When you first find one of those so-called FIRE blogs your brain starts to process this new information. In most cases one of these light bulbs turns on and you become enlightened, whatever that might be. Suddenly you find yourself craving for more of these blogs, and books, and podcasts, heck even meeting up with others who have the same interest. It’s all just such a waste of time, time you could be spending on spending money! Or watching TV or any other way of not making yourself useful. Think of all the reductions in wasting time, it’s horrible.

Savings

Apparently the major thing you need to do on the road to FIRE is spent as little as possible. Something to do with a high savings rate and the ability to shorten this horrible journey. OK, so no more sports cars, exotic all-inclusive 5 star holidays and no new fancy label cloths. Where’s the fun in that? You only live once! Why on earth do you want more money? An empty wallet is just so much less confusing, no opportunities to spend money at all! Now that is a stress free life if you’d ask me.

The journey to FIRE is horrible - AAAAHHHH

The journey to FIRE is horrible – AAAAHHHH

Investments

Since you suddenly have money to spare, there seems to be this thing about making money with money. Right, as if money can duplicate itself? Ever seen mating euros or dollars? Thought so.

But you start looking at investments anyways (despite knowing better), and then you find out that there are so many! First there are these things called stocks, that seem to just go up over time, albeit with the occasional hiccup. But there are so many, it’s like trying to figure out which candy is the best? Just buy the bloody candy store!

Then there are those wooden and concrete boxes that you live in. There are entire movements of people spending money on these and then not live in them? What’s the point? No, they let other people live in those boxes, who even pay for this! Strange world.

Then there are those companies that pay you money regularly, just for being an owner of the place. Shouldn’t they just spend that money on Christmas bonuses for their worker bees? But no, that would make too much sense, wouldn’t it.

Just the sheer volume of options gives me stress. Heck, Options give me stress. Investments, they are really bad for you health, seriously!

Personal Development

Once you have finally overcome the many doses of Prozac and other stress mitigating drugs, there is this thing called personal development. For Pete’s sake, does this FIRE journey never end? Now I suddenly have to figure out what I’m going to do with all this money, sorry, I mean time. Time is money, so money must mean time? I’m confused.

Ok, so you suddenly have time. Since you apparently are no longer allowed to waste time (or was it money?),  you have to think of ways to make  yourself useful. Right, so I’m finally of the Prozac and I again get too many options what to do with my life. This thing just never ends, does it? It’s just one long and tiring emotional rollercoaster, without seatbelts and many loops. The journey to FIRE is horrible, period! Don’t recommend doing any of this nonsense.

 

End Rant 😉

 

This is a bit of a bonus post and something that I don’t do often. Actually, I’ve never done this before! Today a quick book review: financial freedom, conversations with people how don’t have to work anymore.

Book Review: Financial Freedom

For those people who know me, I don’t read books. I’m too much a millennial with focusing issues. I can read articles and short pieces (blog posts included), but I get bored when I read a book. I don’t seem to be able to sit still long enough to focus. Going to University was a challenge from this perspective :-).

So to be brutally honest, I did not completely read this book either, but I did read several of the chapters and scanned through most of the rest (all 122 pages of it).

Book Review - Financial Freedom

Book Review – Financial Freedom: conversations with people who don’t have to work anymore

The book consists of two “parts”. The first half is related to some of the practical and emotional aspects of FIRE. Including the more philosophical questions of the drivers behind FIRE. It’s definitely NOT a self-help book in “how to get invest to get to FIRE”. However, it does provide the basics in terms of savings and investing.

The second part of the book is showcasing several different interviews with people who are FIRE. How they got there, why they did it and how they are doing. Due to the variety it’s really quite interesting. I’ve actually enjoyed this part of the book the most. It’s been inspiring and given some nice insights into others that are bit ahead of us in terms of this “I don’t need to work anymore” thing.

Where and how much?

More details about the author (Gisela Enders) and the book can be found here:

http://www.financial-free.eu/?lang=en

On this page you can also find the link to where you can order the book. But please pay attention, the book should be available for the reduced price of €2.99 (regular price is €14.99) between November 24 – 26, 2017.

The book was translated into English for free and all the proceeds of the English version of the book will be donated to a children’s home in Romania. That’s a clear win-win if you ask me!

 

Full disclaimer: I don’t get AHY money or other rewards/reimbursements for this and nor do I want any. This really just has been a “pay if forward” effort.

 

How do Ethics and FIRE mingle? This appears to be a topic that a lot of people struggle with, at least that is the feedback that we received after the last Meetup in Eindhoven. For the next meet up we will likely add a discussion on this topic. This development also caused us to rethink various question(s). What do we think and why? How does it affect our investment decisions? Today we look at Part 2.

Ethics and FIRE

For sake of clarity I’d split the Ethics and FIRE discussion into two main components:

  • Ethics of FIRE itself (i.e. “living off the system”, while paying relatively little taxes and social security premiums), as discussed earlier this week; and,
  • Investment ethics (e.g. investment in oil, weapons, energy, real estate, cigarettes, etc.).

Today I’ll focus on the second part: Ethics of Investments.

The Ethics of Investments

This one is bound to really stir up some opinions 🙂 Please don’t hold back! Let’s have a look at a few of the industries/sectors and discuss, shall we?

Cigarettes

Stating the obvious here: smoking is really bad for you, period. But it is one’s own decision to start smoking, so is to quit smoking. It’s a personal responsibility. From a health perspective I don’t mind that it is discouraged via taxation. Heck, if it was me the taxes would go way up, or better abolish smoking by law. There are simply no positives about smoking.

Ethics of Investments - Cigarettes

Ethics of Investments – Cigarettes

That being said, investing in cigarette companies appears to be very lucrative. Companies such as Phillip Morris have proved to be a very good investment decision over the past decades. They are great dividend stocks. But would buying it be unethical? Would you stimulate smoking by owning shares in a company that produces cigarettes? I personally don’t believe so. Yet we don’t invest into this sector either. I don’t want my money to facilitate a habit that is so disgusting. Perhaps we are loosing some ROI and diversification in the process, but we are OK with this.

Weapons

I’m going to group small guns and all the way to army weapon systems into one sector here for sake of convenience. Contrary to cigarettes (where you make the choice), it’s the government that has the biggest impact on this industry (or lack thereof due to influential lobbying).

Ethics of Investments - Weapons

Ethics of Investments – Weapons

It’s an industry that is driven only in a small part by private consumers, the majority of the buyers are governments (especially on the “commercial” side of things). In short, my wallet does have little to no impact on this sector (but my voting rights may!).

This is also why we don’t own any shares in companies that produce weapons. It’s the only way to have an impact (if any). Again, we will lack some diversification and yield as a result. But that is a trade-off that we happily live with. At least our money is not used to destroy each other.

Energy

Again, for sake of convenience, I’m going to combine both oil & gas and utility companies together. Both are sectors that concern energy production, distribution and usage. Whether this be for your car, your holiday flights or the heating of your house.

As noted earlier, I don’t think I have much impact as an investor. But I do have a “major” impact as a consumer. When I use less fuel, electricity or gas, I directly affect the core business of these companies. If I actively purchase “green” energy, companies will see new business opportunities and modify their business models to capture this “new” market. Prices go down and we have a global win-win.

Ethics and Investments - Oil & Gas

Ethics and Investments – Oil & Gas Source: http://www.ampcapital.com.au/site-assets/articles/market-watch/2014/august/natural-gas-extraction-whats-the-fracking-problem

Furthermore, these companies operate under environmental licenses (or lack thereof) issued by governments. So if I really want to have an impact, my voting should do the trick. By voting green parties you could have some impact on legislation, which in return could affect how these companies do their business.

Mining

For mining companies the same applies as for the Energy sector. By consuming less “stuff”, you need fewer resources, this less demand on products thus fewer unethical practices. You vote with you wallet! Same as with the energy industry, governments and legislation (and verifying that legislation is followed!) also have a direct major impact. If you want change, you have to vote.

Sure, there is something to be said that you don’t wan to support companies that are knowingly not adhering to environmental and ethical standards and policies. Some of this misconduct finds it’s way out in the open via the main stream media. In that case you can make the decision not to invest into that specific company.

In short, we invest in the mining (and energy and utility) sectors, we have no (major) ethical issues with it as we do try to affect their business model via different routes. We do try to select companies that have a reasonable track record from an environmental stand point.

Ethics and Investments - Oilsands Mining

Ethics and Investments – Oilsands Mining

Airlines

We actually own shares in airlines. It was part of a diversification strategy to include this sector as well. However, the airline industry is one of the most heavily subsidized industries on the planet (after the agricultural sector). Which makes sense once you realize that a flight within Europe can be cheaper than driving with your car. With “normal” economics that should never be possible. This is obviously driving major growth in this sector (and associated sectors like tourism and trade). The downside is a significant environmental impact, considering flying is the most polluting form of transport.

Ethics and Investments - Airlines

Ethics and Investments – Airlines
Source: https://www.westjet.com/en-ca/about-us/fleet/767-aircraft

Is it therefore unethical to invest into this industry? In my opinion it is not. Ultimately the responsibility of whether to fly lies with you. You might be able to drive, bus, train, boat, cycle or even walk to your holiday destination. It might not go as fast, but it is often a possibility (notable exception is if you need to cross the big ponds, a boat will take a while). Same with business meetings, a telecon might work just as well.

If the government starts to get real on conservation and sustainability, the subsidies will be reduced and the sector might become less profitable. By that time we will have moved away from this investment sector and deploy the cash elsewhere. In the mean time, we try to limit our travel by air and offset some of the damage where possible.

Real Estate

Ethics of Investment - Real Estate

Ethics of Investment – Real Estate

As you are likely aware we are real estate investors. Is this ethical? I would say yes, assuming you are sticking to applicable laws and regulations. In fact we are providing housing solutions to people that need a temporary place to live (before buying their own or moving in with someone else).

We do make a good profit at the end of the day on these investments. But we also accept the risk and obligations that come with this investment form. The latter is the reason why we also think this is an ethical investment, it’s not a free for all. It’s also a voluntary decision by the tenant to sign the binding contract to use your (living/working) space.

Agricultural

There are obviously many more industries that have ethical aspects to it. The agricultural sector also springs to mind, specifically the livestock production. When ranking environmentally damaging industries, this one comes in close to the top. Especially when combining the effects of methane, CO2, air & water & soil pollution, antibiotics and animal cruelty.

But as mentioned before, we as consumers have the biggest impact. Just eat less or no meat and you will be doing yourself and mother nature a big favor. But is investing in this industry unethical? I would again say no, but there is one company we will never invest in, which is Monsanto. Their way of lobbying and doing business (treatment of (organic) farmers) is just too unethical for my taste.

Ethics and Investments - Lifestock Agriculture

Ethics and Investments – Life stock Agriculture
Source: https://summitcountyvoice.com/2011/07/20/study-pinpoints-greenhouse-gas-emissions-from-livestock/

Pharmaceutical/Medical

Another interesting sector is the pharmaceutical industry (in combination with the medical profession). I would love to make it my personal mission to spend little to no money here by living healthy. There are obviously many products they provide that are either convenient (think painkillers, cold medication, etc.) or very useful (cancer treatments, medical equipment, vaccinations, etc.).

However, the pharmaceutical lobby is very powerful and has a major impact on government politics (and doctors!). They are very good at selling their products. To be brutally honest, they don’t benefit from a healthy population! It’s actually best for them to just have you be slightly ill (read chronically ill) so they can keep selling your medication (think diabetes type 2, high blood pressure, blood thinners, cholesterol lowering, etc.). Simple fact is that you can get avoid or eliminate most of these with dietary changes (it takes an hour, but it’s worth watching this video).

It’s not uncommon for the pharmaceutical industry to produce research (highly recommend watching this video, very good) that confirms the “need” for their products. This is obviously far from ethical behavior! Unfortunately, the only way to control this industry is by government regulation, which is nearly non-existing due to strong lobbying. A catch 22….

Discussion and Conclusions

As mentioned in the previous post, ethics will mean a different thing to everyone, which makes for interesting discussions and decisions. Same as “personal” finance, ethics is very much personal too. Ultimately you have to do what feels right to you. That being said, it might not be such a bad thing to also look at how your decisions impact others, directly and indirectly.

I believe it is the governments responsibility to limit sectors that have a negative impact on humanity and stimulate sectors that have a positive impact. I also believe that we as consumers can have a far larger impact with our wallets than with our investments. By not buying certain products, or buying less of them, we affect the business models of many companies. Thereby we stimulate change in certain sectors.

That being said, you as a shareholder have “some” impact on a company. You have voting rights. But considering most people and institutions invest to make money, very few will use their right to make businesses noticeably more sustainable or force them to change their core business model. But it does occasionally happen (think Shell).

Personally, I rather keep voting with my wallet and change our investment strategy depending on how businesses are doing, rather than what they are doing (with a few notable exceptions). It is also key to make sure your investments make good yields or capital gains, especially is you want to become and remain FI. Finding the right investments that combine this trait, but still adhere to your ethics can be a challenge indeed.

 

What’s your strategy to combine ethics with investing?

How do Ethics and FIRE mingle? This appears to be a topic that a lot of people struggle with, at least that is the feedback that we received after the last Meetup in Eindhoven. For the next meet up we will likely add a discussion on this topic. This development also caused us to rethink various question(s). What do we think and why? How does it affect our investment decisions? This poat could easily turninto an PhD thesis, so I’m going to try to keep it limited 🙂 Or better, a two post series! Today we start with part 1, will do part 2 later this week.

Ethics and FIRE

For sake of clarity I’m going to split the Ethics and FIRE discussion into two main components:

  • Ethics of FIRE itself (i.e. “living off the system”, while paying relatively little taxes and social security premiums); and,
  • Investment ethics (e.g. investment in oil, weapons, energy, real estate, cigarettes, etc.).

Today we look at Part 1: Ethics and FIRE.

The Ethics of FIRE

I have mentioned once to a colleague that I was planning to become Financially Independent and Retire Early (FIRE). Her first response was that it was unethical because I would not longer pay any taxes (funny note, most people first ask “how” to become FIRE).

Now, for the Netherlands this is far from true, as we are taxed on an assumed ROI of our wealth (the latter is defined as “assets minus liabilities” in tax Box 3). It is however true that we will be paying a lot less taxes and no more social security premiums when we stop working when we are FI. Obviously, we will continue paying taxes on our properties and fees for local water management and for garbage removal.

However, we recon that our overall tax burden (including social premiums) would drop by about a factor 7-8 once we are FIRE-d. But we will still be using public roads, the medical system, police and fire services, and perhaps even qualify for certain benefits and/or subsidies (albeit very few).

Taxation

Taxation

Ethics Discussion

This begs the question is this ethical? Paying less into the system, but still using it (both directly and indirectly). From a pure social perspective, it is not. However, we would have a lot of time to volunteer (and will likely do so). Albeit this does not directly mean anything in financial terms for the government. It does have a positive social and perhaps even economic impact. Would it offset the loss in taxes, I’m not sure, but it does make me feel better.

Does it feel selfish to FIRE? To a degree is does. Is it going to stop us, eh, nope. By the time we reach FIRE we would have worked about 40-50% of our “normal” working life. Due to our above average education and associated income, we pay well above average amounts of taxes. Does this make it right, probably not, but it does make it feel more acceptable.

Plus, we will continue to pay taxes, as mentioned earlier, on our investments. This amount will likely be more than some people pay with little to no income (ignoring people on benefits here too). There is the caveat that we are not contributing to the social system (we would not pay social premiums when FIRE), but are not allowed to use the system either (due to our wealth), with the exception of old age security (AOW) and the medical system.

Conclusions

Ethics will mean a different thing to everyone, which makes for interesting discussions and decisions. Same as “personal” finance, ethics is very much personal too. Ultimately you have to do what feels right to you. That being said, it might not be such a bad thing to also look at how your decisions impact others, directly and indirectly.

Is striving and becoming FIRE ethical? Depending on your opinions, country where you live, the local tax system and what you are going to be doing once you are FI, the answer may be different. There certainly is a selfish component to becoming FI and RE, but to say it is unethical is a bit much for my taste. As long as you stick to the rules of the system, “legally” there is nothing “wrong” with becoming FIRE.

 

What’s your strategy to combine ethics and FIRE?