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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: spaniardbavarian on December 20, 2015, 11:01:49 AM

Title: Financial help for a Bavarian (reader case study?)
Post by: spaniardbavarian on December 20, 2015, 11:01:49 AM
Dear fellow (if I may say so) mustachians,

I am not sure if you will bother with a reply but I thought it worthwhile writing you even for that small chance. I have a dream. The dream is to retire with 40 (which is by now only 1 year and 7 months away), which means not having to do a normal 8 to 5 job anymore. Maybe part-time work or only monthly projects but secretly I dream of not having to work at all. I am sure that would not be fun forever but at least for a while and then who knows?
I came to the conclusion of reducing costs (in the end strangely following the example my parents lead) already before reading this blog since I realized that material things don’t matter (to make a long story short). But only after reading this post it gave me an idea what to do with all the extra money I am saving (instead of spending it on vacations or NGO work). Before I thought it not to be possible to retire way before (again, I always said I don’t want to work up to the maximum years). I am following this blog and I am trying to reduce costs. But I have no idea how I can reach that dream. In fact I have the feeling that it takes me forever even with the sensation that I don’t spend so much compared to others (but maybe I am missing something…or maybe for sure?). I don’t have a steady spending pattern. For example, since September I am in Spain for at least a one year gig. I hope for more because it is a place what was described in one blog so well…you have everything in close proximity (of course, everything is new to me anyway…no vacation “needed”).
Anyway, I am writing down what I spend and figured out what I really earned (I came to that whole point after reading Your money or your life, which was mentioned once in the blog as well). So let me give you the facts:
-   I earn 3,800 EUR net (12 months a year) for a 40 hour work week (anything above is not compensated…and I try to avoid it). From that amount 600 EUR are allowance for housing and 300 EUR for Spanish classes (would you count that as expenses or not?...I do, as I figure I need a place also later ;)).
-   650 EUR go out for rent (I know this is a big chunk for a single person but given the one year I am here in Spain I wanted a nice place in a surrounding I like and with reasonable riding distance to work. With 150 EUR less I could have had another one in a not so nice city). There is a chance to reduce those costs if I put the apartment (or a room of it) on Airbnb for the vacation period. I am seriously considering it as it will bring down the rent do around 440 EUR. But what holds me back is if I would like to have somebody else in the same apartment ;)
-   300 EUR go out for learning Spanish (well, that was one of the reason for coming here)
-   I need about 20 min. per bike to work (one-way). I calculate with once a week going by car when the weather is really bad. It rains often here but so far I am below that since the weather is too nice. But I know of the bad rains in the Basque country…
-   I have an apartment back in Germany where I paid off the 10 year mortgage this September. Bought it for 125,000 EUR and it should be worth by current market standard about 185,000 EUR. I have often thought to sell it in this (excellent) market condition but in the end it has also a security side having something else than (virtual) money at the bank. It is rented out for 550 EUR net each month. Would you recommend to sell it or rather have the monthly “secured” income?
-   All my assets (stocks, gold, cash, bonds and alternative investments) are worth about 171,000 EUR right now, which earns me about 200 EUR per month (after taxes) that are paid out. Sounds low, or? But I don’t mean the overall performance here, e.g. stock increase…just what flows into my cash account. Should it be more? With what investment rate (%) are you calculating? How much cash do you have in the asset allocation? Currently I am running around 17.5% but I figure this is way too much for money sitting idle.
-   I loaned somebody money (still owes me 11,000 EUR), which drops in 100 EUR per month (don’t ask ;))
-   I own a life insurance that is worth about 8,000 EUR if I would cash it right now (which I think I will do as the interests is really low)
-   On another (government-funded) retirement insurance I have 17,000 EUR right now (stopped paying money into this one as the interests are also low on this one..but I saw on the calculations that you strongly recommend it, or?)
-   Then I have one liability insurance (in case I cannot work anymore), which is worth about 2,800 EUR right now. I would happily drop this one if I don’t work anymore ;) Would you recommend to cancel it already now (costs 38 EUR per month)?
-   Furthermore in Germany you pay into a government retirement plan but you only get this one if you do retire after x years of working as a slave (if you stop earlier your retirement is reduced…not sure if I would get anything if retiring with 40). So earliest with 60 or 67 (depending on the future governments) some money could come in from there. In fact, I try to avoid calculating with this.
-   I own a Peugeot Partner 1,6 TDI, which I haven’t used much the last 3 months (still a tank full of gas since I arrived in Spain. Yes!). I know it is big but I have constructed a bed into the back so that I can fit in a bike and sleep during weekend trips. Here I have mountains as well but I do like technical rides and seeing different outdoors. I assume that I do less trips than this year but still will have some spending here since I want to see something from the country as well. Any thoughts on this?
-   In average I spent 1,710 EUR per month in 2015. The biggest chunks are:
•   Bank fees (that included mortgage interests until September): 93 EUR -> dropped to 3 EUR per month since October
•   Food: 272 EUR (thereof 111 EUR for restaurants)
•   Part-time (which includes anything from bars, courses and sports…): 219 EUR, out of that:
   42 EUR for bars
   102 EUR for sport things (e.g. the construction of the bed for the car, clothes)
   30 EUR for festivities
   10 EUR for associations
   27 EUR for courses (Spanish course that will increase over the next months…to around 300 EUR)
•   Health: 45 EUR
•   Household & life (which includes anything from electronics, gifts, insurance and tools): 114 EUR
•   Donations: 125 EUR
•   Telecommunication (cell phone & internet): 23 EUR
•   Transport & mobility (of course the car being the biggest contributor but also contains public transportation): 200 EUR
•   Vacation: 208 EUR (what can I say? A big chunk)
•   Rent: 327 EUR (I lived extremely cheap the beginning of the year but that was only temporary possible (living in my car)…but now that would be 650 EUR)

Do you think the categories make sense or do you recommend something else? In fact I already changed them since reading some blogs (internet and cell phone are combined, vacation is a separate category now and restaurant is now under food)

But in the end it would still take me 10 years according to my projections to reach financial independence (given 2.5 % interest rate after taxes that I seem to have right now). What am I doing wrong? Any suggestions are highly welcome!

Your follower from Bavaria (although a bit of a Spaniard right now )


PS: I also filled out the spreadsheet as described in one of the forums. You can find it here:
Title: Re: Financial help for a Bavarian (reader case study?)
Post by: matchewed on December 20, 2015, 11:08:46 AM
Perhaps your situation would work better in the German thread?

Other than that if you want to retire in 1 year and 7 months but have calculated that it would take 10 years to do so you either need to spend less or earn more.

Try following the How to Write a Case Study ('case-study'-topic/) format as it will make the process simplified. The format has you list certain things in a particular format and then ask questions. It makes it easier to comprehend and follow what you're trying to ask.
Title: Re: Financial help for a Bavarian (reader case study?)
Post by: spaniardbavarian on December 25, 2015, 02:19:22 AM
Thank you very much for the reply. I will check out this section and also try to change the format :)