My case study - are we well on track or would you make any changes?

[GenerationB]

Hello guys,

I've been following the Mr Money Mustache blog & forum and other similar blogs for a while now and decided to share my story. And numbers of course :)

Life situation: I'm a woman living in Belgium, living together with my boyfriend in a city, we're 30-32 years old right now, no children yet. We changed careers a couple of years ago and are now, after hard work, making a decent living and more than that, which is nice. We like our current jobs but would in the future probably rather work part time (80%). 
We now live in a rather small apartment but are planning in a couple of years (2 to 4 let's say) to definitely move to something bigger.

Wages: about 2200-2300/month each, meal vouchers (100 €), health insurance paid by our employers, 1 company car + gas, 1 public transport pass, holidays pay and end of year bonus.

No other considerable income sources

Most important common expenses:
mortgage: 670
utilities (gas/electric/internet): +/- 100
groceries: an estimated 250
cleaner: 50-60
other stuff (insurances, furniture, common bought gifts, some dinners, ...): +/- 200

Personal expenses (clothes, lunch/dinner, going out, hobbies, ...) are honestly very difficult to estimate. It varies from month to month.

We don't have any debts except for the mortgage of course.

Savings: 120 k for the both of us. A big part of this is thanks to an inheritance. 
Most of it is placed with Triodos, a bank investing only in sustainable projects which is very important for me.

Questions/reflection:
Of the two of us, I'm the one more involved in the financial stuff: reading about Mr Money Mustache, trying to optimize, etc. I feel this has worked quite well over the years and we've found a very agreable way of living that doesn't cost much. We try to do a lot ourselves: (baking bread, cooking most of the time, home improvements) which of course helps with that.

Ideally in a couple of years my life would look like this: have kids, living in a bigger apartment, work 80% both of us, enjoy a relaxed and sustainable life. For me the partial retirement option seems very nice and in my opinion also better suited to our country's context. I also want to have more free time to do other things than working in the future.   

Some financial choices will have to be made though to get to the above situation: should we in the future rent out our current apartment or sell it? This is a definitely a hard choice to make because our opinions differ. Pro is that it would be an extra income source, contra is the time/effort spent to deal with tenants and possible hassles..

I'm also wondering whether both of us working 80% (or even less) with children will be financially possible. But seeing as we can easily save right now I guess it would be okay.

[LWYRUP]

I find it interesting that your salary is on the lower side but then you get all sorts of perks.  I assume your compensation is structured like this due to high tax rates.  People in the USA used to get company cars and such decades ago but now that is increasingly rare, due to changes in tax laws.

I would recommend that you track your income and expenses more closely.  You can't really get a clear sense of your financial picture if you can't determine your savings rate with reasonable accuracy.

I suspect you will get lower investment returns, pay higher fees and have more investment risk by making such a specific investment choice.  I would recommend putting a substantial chunk of your savings in an all-world index fund.  It's fine to have a portion of your investments in this sustainable investment thing if it's important to you, but it's too risky to put all your eggs in one basket. 

[Dr Kidstache]

Welcome to MMM! Spending less than you earn and consumer-debt free. Way to go! I agree with @blinx7. You've got the luxury of spending less than you earn but that's also allowed you to be lax about nailing down your real financial picture. Actual expenditures never match what we *think* we are spending. Track your expenses for at least 6 months since you mention you have a lot of variation in spending. Like a lot of folks here, I use YNAB. Whether you use YNAB or not, make sure that you're also keeping track of those rare but predictable expenses (like a home repair, or tax payment, or vacation) and including those as prorated monthly expenses. Once you have concrete data, you'll be able to use spreadsheets to play with FI numbers as well as more accurately estimate the expenses of maintaining the apartment should you choose to rent it later.

[havregryn]

Hey, waving hello from the neighborhood.

Your expenses sound really low, (but ok, using Luxembourg as a frame of reference makes everything sound cheap) and that's great.

But I think it's important to know a range for the personal expenses...is this a 100€ orr 500€ makes quite a difference.

And for the apartment, I imagine the main issue there is how much rent you can collect vs. your mortgage payment. I don't know where exactly you are but all over Europe it feels generally impossible to have any kind of cash flow on a mortgaged property.
I mean, can you rent  out your place for significantly more than 670€? You'd need to pay tax on that income and only the interest is a deductible expense so you could be running negative cashflow until the mortgage is paid off. Whether that's worth it or not, you can estimate yourself, I feel here you will never get advice to do it, yet in Europe this feels like way more of a "thing" when it comes to saving/investing. I think it's because here we generally have less of an income progression compared to the US so it's not as easy to save extra income vs. having tenants pay off a place for you.

[jeroly]

It's awesome that you're doing all that saving and planning!

Some thoughts regarding the real estate: 

a. You need to run the financials of whether selling the apartment and investing the  proceeds will be better or worse than renting out the house while maintaining your leveraged investment in the house (assume a 3% real return from a diversified sotck and fixed income portfolio, and use an appreciation rate for your rental property based on the market conditions in your area - better to be conservative).  If renting is better, then consider...

b. How much time will you need to spend managing the property.  If it returns, say, 5 euros/hour, perhaps those extra hours could be spent more productively doing something else.  If it's a good enough paying job, then consider...

c.  Is it a job you want to do? As you referenced, it can be really unpleasant if you have to deal with unpleasant tenants.  Additionally, some folks don't like to worry about their own real property or about their tenant's problems.

d. Even if all three above issues are resolved, you need to figure if you can swing keeping the rental property investment AND make the down payment on your new place AND possibly pay higher mortgage/maintenance on the new place AND continue to add to your retirement savings.

[GenerationB]

Hi there!
Thanks for your encouragement and ideas and questions. Very constructive. I might open up a diary topic later to keep track of our situation.

@blinx7: welcome to Belgium i'd say in response to the low salaries combined with all sorts of extra's. That's just the situation here: high taxes but in exchange we get almost free education and health care, a (though not in all cases) decent pension and so on.
And I'd say our salaries are definitely higher than average given our age.
I try to keep track of my expenses/income ratio, but this is only for me because my boyfriend isn't interested in tracking it so closely.
Over the last 1,5 years i've saved about 60% of my total income. This excludes paying off my part of the mortgage. So I guess if I can more or less uphold this savings pace I should be fine, even with a lower income or other family situation I guess. I also think that not having to consider every penny and keeping track in detail gives me peace of mind. Of course it may be different for other people.

I'm curious as to what you think of 'just' tracking the savings/income ratio instead of the details of all expenses?

@Dr Kidstache: It is true that it allows me to be lax about my financial picture. I do still think the peace of mind (see above) is important but I'll consider keeping track of all expenses for a short period to see what comes out of it. Thanks for the suggestion.

(will respond later to the other replies)

[havregryn]

We used to track all expenses, then started tracking just the savings rate and haha, could be a coincidence (and to some degree it is as there are confounding varaibles) but our spending got out of control. I think tracking spending per category really helps you see what you're doing. Like I noticed when retroactively trying to organise some stuff that there were months where I spent 300€ on toys and random activities for the kids!?! I'd never have guessed it was that bad, I just thought I got slightly more relaxed with spending money.

Yeah Belgium seems to have insane taxes, makes Sweden (we moved to Luxembourg from Sweden) sound all liberal in comparison.
Luxembourg on the other hand is quite nice in that regard. We also have the added benefit of me working for an EU institution which makes my income non-taxable. Actually, a lot of people I work with are dying to move to Brussels as our salaries are indexed together (meaning the same post pays the same here and in Brussels) while in Brussels it goes waaaay further than here.
I also want to weep when I look at houses in Brussels but well...for now we are happy with the advantages of being here (less hectic, more family friendly, better career options for husband). Later on who knows.

[Playing with Fire UK]

Tracking your actual spending makes you so much more aware of where your money actually goes. If you are getting started I'd highly recommend looking backwards over statements to try and piece together what you spent over the last year (so that you pick up all the annual costs). This will be more instructive if you spend by card a lot rather than cash. It's the only way that you can be sure that you can afford to go down to 80% time (or buy a bigger house, or start your family). Everyone I know who's done this says that they are surprised by something or find some area to improve.

However, you know you best, and if it would make you miserable then there won't be a net benefit. Consider looking at the "Shockingly Simple Math" post, and look at the difference between saving 60% and 75% of income. It convinced me that it was worth tracking and optimising - but it could be different for you.

[Spruit]

Hello from over the Northern border :) Is the income you mentioned your net income (the number that is transfered to your bank account every month)? In that case, I certainly agree that it is a decent number considering all the perks of free car, 8%(?) holiday money, etc. How about retirement contributions?

I notice some expenses are missing in your list. How about house maintenance? Local taxes? Travel/hollidays? I would advise you to track spending (retroactively works as well) just to see how you're really doing. You don't have to be neurotic about it, but you really need data to see how you can make improvements. Once you've made some new choices / habits (or not), you can ignore for a bit and then once every x months come back to it.
I don't track every month as meticulously as I could (anymore), but every once in a while I dig into my account and list all my expenses to see how we're generally doing and what we could rearrange.

I understand that sustainability is very important for you. Have you considered investing part of your savings with Meesman as an alternative for Triodos? They recently switched to sustainable indexes. The reason I suggest this is because their TER is much lower than Triodos. On such a large sum (120k) those TERs can really make a big difference, especially over a longer period. The question is how sustainable is "sustainable enough", and only you can answer that.

Just for perspective: we are two parttimers (80% and 55%, respectively), similar age range and income (if I'd calculate our salaries to fulltime), a little less luxurious job perks (no company car, no paid health ensurance, no groceries voucher = -500 euros I think). We manage to save just fine at the moment. If a kid (or two) comes into the picture, I expect our ability to save will be less, but we'll still keep afloat quite nicely because we can minimize childcare expenses due to working parttime. Our salaries are bound to grow over time to give us more room to save (our sector has fixed pay scales and we move up the ladder every year for a while).

[GenerationB]

Hi there.

small update: you got me convinced ;) It does take an effort but it won't make me miserable & i decided it will probably be worth it SO ... i've been tracking all expenses for now to see what pops up. I'll get back to you in April with this month's overview!

The 'shockingly simple math' is indeed surprising in how a tiny change can make a big difference in the end.
Most of our fixed monthly expenses (electricity, gas, internet, ..) are already as low as possible but for some others I could probably find a way to reduce them even further. I've recently cancelled a magazine subscription that wasn't really worth it. I'm looking at other expenses.

I do wonder how I should take into account that as a government worker, I will get a pretty decent pension at retirement age. So I personnally don't save for retirement specifically as seems to be common on this forum, as the state's doing it for me. This is unless there's drastic policy changes of course, but that's hard to foresee.

@Spruit: nice to meet a Dutch mustachian! Great that with 2 part time jobs you still are saving well, that's inspiring ! 
I don't know Meesman but looked it up now, but they don't seem to be active in Belgium.. I think I'll stick with Triodos for now, use the money for downpayment once another bigger apartment is in the picture. In my current situation i don't think investing long term is a good idea. But in the future i'll look decently into all sustainable investment opportunities. I'll keep Meesman in mind, thanks!

Oh, and yes: our mentioned salaries are net (take home pay). And also growing steadily over time with sectoral pay scales and indexation.