Net Worth Update: December 2019 and Year End Review

Our net worth increased in December to $59,577 and €53,624, which is a one month change of 4.36% and 3.61% respectively. That's due to my bonus, the infusion of money from a relative to subsidize my wife's music lessons, and the stock market's performance.

For the year over year view, compared to December 2018, our net worth has increased by 60.95% in USD and 65% in EUR. That's an increase of $22,562.

That's not bad, but a lot of it was dumb luck. Compared to the 2019 budget I wrote at the beginning of the year, our spending was higher in nearly every single category than planned, and our saving was lower in both categories than was planned. I wish there were an obvious reason other than just unrealistic expectations, but that's the heart of it.

Percentages

With our total savings of €7,959, we had a savings rate of 13.79%. If we were total newbs at saving starting with nothing, that would imply we'd have 51 years before retirement (according to the famous "The Shockingly Simply Math Behind Early Retirement").

So where did our money go? The top category is "Rent" at 17.78%. Since bundled into the "Rent" are several utilities, it on its own does not seem too egregious. It's not ERE-level, but I'm actually pleased at how low it is. With my regular pay-raises and Germany's strong renter protections, it should trend downward as a percent over time.

The second largest line-item is "Dentist" at 13.01%. As I mentioned often, I had some major dental work done this year, and although I expect some assistance from several sources, only one of them came through before year-end (seen in the graph as "Refunds").

After that are the "BLOW" categories. Combined, they're 12.79%. This is spontaneous money and is something of an allowance for me and my wife. I estimated that we'd need €2,400 each for the year, but in reality, we each spent around €3700.

What lies within those "BLOW" numbers? It contains our hobbies, our restaurant visits with friends, our clothing, some travel, some entertainment, some toys, and so on. It's a big category. I wish I could say that I knew how to restrain spending within it, but it's tricky. Ultimately, we know inside ourselves that we can afford certain things, so we buy them.

Under those large categories are other medium sized expense groups. "Groceries" at 6.9%, "Health Insurance" at 5.68%, "Household" at 5.19%, "Travel" at 2.41% and "Telephone" at 2.36% are the largest. Groceries have proven difficult to cut. There's not much to be done about the "Health Insurance" cost. "Household" was inflated because we bought a sofa and an iPad for my wife when her computer died. It's something of a wildcard in 2020 because I'm not sure when my computer might kick it, but until it does, I'm going to assume that this category will be lower in 2020. "Telephone" was inflated due to my iPhone purchase at the beginning of the year, which I won't repeat in 2020 absent one of us losing or killing a phone.

And "Travel" basically means plane and train tickets for vacations. It's a separate category from our commuting categories (which are so small as to be essentially meaningless). Like everything else, I planned an amount, and we spent more than I planned for. I will just plan for more this year.

Stock Performance

Since our savings rate was so low, the gains came mostly from the performance of the stock market. In December, 2018, there was something of a bear market, so my numbers were depressed. As I wrote then:

Since the majority of whatever wealth we have is in the form of stocks, we were hit hard by the sell-off in equities. Anyone paying attention to the markets this past month would have seen the kind of fast paced elevator down that market pundits have been scaring us about for years. Our savings rate didn't spare us from the damage.

But in 2019, stocks did amazingly well. My collection as a group did very well, in fact, and the turnarounds by some have been shocking. I have some very good winners, and I'm pleased with the names in the portfolio right now.

That said, I did make some mistakes. In general, my mistakes have tended to be selling too early, rather than too late. Some names I took losses on for no good reason, and with others I took profits too early and missed out even higher highs.

Simply abiding a portfolio is hard, and although I'm getting better at it, there's no guarantee that I won't futz around again with negative results.

2020 Expectations

Obviously, I have no control over the stock market, so there's no guarantee that our net worth number will be higher next year than now. But I can control our savings rate.

The biggest change will be the absence of dental costs. I'll go in for a cleaning and all that, but the big procedures are behind me for the time being. If I save that, it will result in a near doubling of our 2019 savings rate. If we cut down our "BLOW" costs, then maybe we can get even more saved.

A wildcard is the parent I mentioned in "My Baby Boomer Parent is Poor". My family has reached an inflection point there, and I wonder if 2020 is the first year I'll have to help. I hope not, but it's not outside the realm of possibility.

My wife and I have no large expenses planned for 2020. Maybe a computer, but I'm not going to rush it until it becomes absolutely necessary. We'll do some travel. We have no large-scale furniture purchases planned. My hobbies don't require any new large purchases.

So this year, I'm hoping to save over €10,000 and hopefully closer to €12-€13,000, which would be a 23% savings rate. That feels doable and maybe even beatable.

Here's wishing you and your loved ones a happy and prosperous 2020.

How Our Current Budget is Constructed

For the past few years, we've been using Google Sheets for our budget, and it's worked very well. The original idea came from Dave Ramsey's Total Money Makeover, but as with anything you work at over years, we've made it our own.

I'm in the process of doing some alterations, so I wanted to document how we're doing it now before I  take too many next steps away from the current system.

The basics are as follows:

• We use Google Sheets because it's easily shareable, it's extensible, and it's actually very feature-rich. Plus there are lots of people writing about it and sharing spreadsheets to steal ideas from. 
• The budget tracks our spending cash amounts in Germany. It's all in euros. If you added up the German credit cards, Girokonto and cash, it should basically equal the Remainder amount in the active budget month. 
• One sheet is a master list of transactions. In my last post I discussed the kinds of information stored there. We use "Date", "Vendor", "Budget Month","Category", "Amount" (with minus signs for expenses), and "Notes" in case there's non-repeating useful information. Both income and expenses are listed on the transactions list. 
• Following that are individual sheets for each month with the following structure: 
• On the left-most column are the categories with headings for "Income", "Saving", "Expenses", and "Totals". 
• The second column has expected amounts. Some of these are recurring expenses such as rent, and some are unique, such as "Travel" and "Household". The latter refers to general expenses that my wife and I agree on. 
• In the income section are our jobs and other occasionally recurring income sources in addition to the remaining or deficient money from the previous month. A month of frugality gives us money in the next month while a month of spending leaves us with less. Ideally though, there's neither a deficit or surplus because we don't overspend, and we try to save everything that isn't earmarked for something else ASAP.
• A special sub category is "BLOW". We each get the exact same "BLOW" each month, and it's just the leftover amounts after everything else is accounted for. "BLOW" is basically money one of us may spend without asking the other person, and we tend to put clothing purchases, restaurant visits, coffee, presents, etc. into "BLOW". Basically, there's a subtotal added up of the other categories, and then the blow cells are that amount divided by two. The exception is when we know we're going to spend more in a month than we bring in, in which case "BLOW" goes to zero. More on this later. 
• To the right of this column is "Actual", which contains the amounts as they're added to the master "Transactions" list. When building your spreadsheet, the =SUMIFS() function is your friend. The idea is to SUM everything from the "Amount" column of the "Transactions" list, if it matches both the "Category" and the "Budget Month". 
• To the right of that is a simple subtraction function that shows the remaining amount. Subtract "Actual" from "Expected", and you get a number. Multiply that by -1 to get something a bit more useful. For example, if you expect -100 but only spend -50 you'd have 50 remaining following this approach.
• At the bottom are the various totals and subtotals. One cell represents the actual remaining money after everything is accounted for. That gets referenced next month. 
• One sheet looks just like a month sheet, but it adds up everything from the year. This lets us plan out yearly spending and check our progress as the year goes on. 

Not too crazy, right? It takes awhile to build the spreadsheet, but it's pretty easy to manage once it gets going. It kind of looks like this:

Category	Estimate	Actual	Remainder
INCOME
MyJob	A number	SUMIFS calculation	=SUM(B2-C2)*-1
HerJob	etc.	etc.	etc.
Last Month Leftover
Other
SAVING
Retirement
Tagesgeld
DEBT
Credit Card
Student Loan
Car Loan
EXPENSES
Rent
Electricity
Groceries
MyBLOW	=IF(B24<0, 0, IF(C9>0,0, SUM(B24/-2)))
HerBLOW	=IF(B24<0, 0, IF(C9>0,0, SUM(B24/-2)))
TOTALS
Total Income	These	cells
Total Expenses (with BLOW)	are	full
Total Expenses (no BLOW)	of	SUM
Remainder (before BLOW)	functions	and
Remainder (after BLOW)	basic	math.

Saving/Paying Off Debt

When saving any money, it looks like an expense. When drawing from savings, it looks like income. Both get the same category, so that at the end of the year, it's easy to tell whether a net amount was saved vs. drawn from. So if we save €2.000 in February but withdraw €1500 from savings in April, we have a net €500 savings amount. 

You can have several sub-categories of savings, such as Retirement, Tagesgeld (basically the German low interest savings account), Emergency Fund, or whatever you want. Same rules apply for each. 

We are out of debt, but when we were paying it off, payments were an expense like any other.

Credit Cards

We use credit cards, but they are paid off every month automatically. Therefore, a credit card purchase gets added to the transaction list like a cash or a direct debit transaction. 

More about BLOW

A bit more about "BLOW". This can only work if you and your spouse are on the same page and are pretty frugal. Since BLOW is the remainder, and any savings appear just like spending earlier in the budget, there's an incentive to under-save earlier in the budget to give yourself extra BLOW. "Hey, if I don't save anything this month I can buy the new phone/bike/camera/console/computer/dress/coat/hat/etc." This is why deciding on a standard amount of monthly BLOW ahead of time is important. We budget around €200 per person per month as BLOW. Honestly, I'd like to even lower this number further because it really adds up, but that amount is low enough to not allow giant expensive purchases while allowing a fair amount of freedom, and BLOW covers a lot of stuff.

At the end of the month, BLOW is treated differently. This took me a while to figure out, but there should be some incentive to saving BLOW. Before I figured it out, unspent BLOW just became unspent money for the next month's total household budget, which meant you couldn't save up for anything in the BLOW category. It also meant that overspending on BLOW just got erased into the overall household budget, and that's unfair to the thriftier partner. 

So now, the BLOW amount is zeroed out at the end of one budget month and added into the next budget month. To do that, I add some transactions to the master list. The first makes the current budget month BLOW remainder equal zero. Basically, if the remaining amount is greater than 0, it gets subtracted from the current month and added in a separate transaction to the next month. If the remainder is less than 0, it gets added back to the current month and subtracted from the next month. This happens entirely in the BLOW category cells and doesn't appear as income at the top of the month sheet. 

In this way, BLOW surpluses and deficits follow you from month to month. In a way, it becomes a quasi-separate fictional account that's entirely tracked through the budget spreadsheet. One consequence: the Remainder cell at the end of the month will not include the BLOW remainder once the month is closed out. 

Split Transactions

This system allows for split transactions pretty easily. Just create two transactions from the same vendor on the same date and for the same budget month. Use SUM to show your work in the Amount column to show how you extract part of a transaction from the total.

=SUM(x-y)

Why do this? Sometimes I'll buy something as part of a larger transaction that mixes categories. My wife, for example, doesn't drink any alcohol, so if I buy a bottle of wine as part of a grocery spend, I will split that out to be part of my BLOW spend. This helps discourage us from underhandedly saving on BLOW while nominally spending on a shared category. 

Last Stuff

It works for us, but there's no guarantee that it will work for anyone else. Maybe the BLOW incentive is too much temptation. Maybe this seems like too much work. Maybe your significant other is unwilling to help. In any case, budgeting has been worth it for us.