2023 Update: New Worth, Reflections, Businesses

Staying the course worked.

When I wrote my end-of-year update for 2022, I was feeling pressure due to the severe drawdowns in our assets. 2022 was a rough year in nearly every asset class, and we were not spared. However, the choice to begin using ETFs for much of our portfolio meant that I didn't make any catastrophic choices despite the drawdowns, and that change paid off in 2023.

In 2023, I made additional changes, which have further solidified my temperament. Namely, my eliminating debt and restarting IRA contributions, I've taken steps that will pay off for decades while taking off some of the pressure to nail stock picks.

Net Worth Update

At the end of December 2022, I wrote:

However, December was also the first time that our net worth was down in every metric that I track. There are four comparisons at the top of my spreadsheet: USD month over month, EUR month over month, USD year over year, and EUR year over year. For the first time, all of these metrics were negative.

The story was very different in 2023.

Our net worth rose in December to $167,897/€152,080, which is a month-over-month rise of 6.6%/5.15%, a quarter-over-quarter rise of 13.90%/9.16%, and a year-over-year rise of 34.11%/30.10%. This represents an all-time high for our accumulated wealth.

2023 Changes

Debt and IRA

The biggest change was the decision to close out the loan I'd taken and restart my IRA contributions. This was not taken lightly, though some triggers made 2023 the year. I've mentioned those triggers before, but I'll summarize:

• A family conversation made me feel like I was being pushed into choices that I didn't agree with.
• Looking for emotional support to say "no" to family members, I found Dave Ramsey episodes.
• He's anti-debt, and I was in debt, and - after analyzing my feelings - I realized how stressed I was about it.
• His book Baby Steps Millionaires reminded me that tax-advantaged accounts are powerful tools for wealth building.

Looking back, had I not sold anything to pay for the debt reduction, I'd have more money today. But how would 2023 have felt? I didn't like that monthly payment to the loan company. I felt like our budget was overly tight because of it. It was a negative in my mental life, and although I'd have more money now had I simply persisted, I don't think I'd be as happy.

I filled up our IRA contributions for 2022 and 2023 early in the year, which meant I'd have to do the more complicated tax filing using the Foreign Tax Credit. I managed that, and it's not so bad, but U.S. tax filing remains a major net negative in our lives. Every year it's a stressful frightening experience.

Small Business People

We've been active small business people here in Germany. My wife made great strides in 2023, acquiring new customers and increasing her income. She diversified away from a single high-volume, low-paying customer and negotiated higher rates from several new clients. It was impressive.

I have several small businesses, and while they aren't able to compete with my wife's for income, they have increased our bottom lines. One of them is still in its infancy and therefore unprofitable, but I believe that will change in 2024. The other is almost pure profit. The attention is give towards them is what I might have in the past directed towards stock picking. This new focus is much more productive and fun.

This year, we've modified our budget spreadsheet to account for these varied sources of business income.

2024 Expectations

I don't know what will happen. At the end of 2022, I didn't expect that a single conversation with my sibling would so disrupt me. I didn't think I'd seriously enter this new line of business. I thought I might leave my job, which I didn't.

I know there will be disruptions, and there will be surprises. At least I hope so. If I could completely plan year 2024, that would be outrageously boring.

Until next time. Happy new year, happy saving in 2024, and stay healthy.

2023 First Quarter Update

When I decided to move to a quarterly posting schedule for these updates, I did so out of fear that I was getting repetitive. How many times could I write, "Net worth was up/down a bit... Mostly it was thanks to stocks one way or the other"?

Pretty dull.

The first quarter of 2023 was not dull, however. The consequences of one conversation rippled outward and touched all areas of our financial lives.

The Texts That Launched 1,000 Ships

One Sunday in January, I got a series of texts from my sibling (hereafter Sib) regarding my poor parent (hereafter PoorParent). It was a horrible conversation full of disagreements.

I've thought about writing more details about this, but it's much too personal. Long story short, the worries I laid out in My Baby Boomer Parent is Poor are threatening us much earlier than I had anticipated. The reality for me and Sib is that supporting PoorParent right now is only possible by severely limiting our lives in other ways. It would also make it more difficult to help PoorParent in the future when more dire situations arise.

Sib agrees with me now, but getting there was an unpleasant path.

Enter Dave Ramsey

I went to YouTube and looked up advice for people in my situation. There's hardly any, which is shocking, and the only person out there really talking about the duties or lack thereof of children when it comes to supporting their elderly poor parents is Dave Ramsey. So Dave Ramsey re-entered my life for the first time since I read his book Total Money Makeover back in 2009.

Although I'm not a pure Ramsey-ite, Dave's thinking has deeply influenced mine. Many of my money concepts can be directly linked to The Total Money Makeover. I've been budgeting for that long because, well, he told me too. I've become a true budget believer, and so has my wife. Even our "Blow" category is directly taken from his budget outline. Suffice it to say, I was primed to listen to what he had to say.

One thing that became clear was that I'm allowed to say no. To use his metaphor, I'm allowed to put on my own financial oxygen mask before I help other people, and that includes my parents.

Additionally, I now suspect that Sib and I had been enabling PoorParent. We can only take so much responsibility because we were much younger, but I can look to specific choices that PoorParent made that were emotionally and/or logistically supported by us. Had we gone along with fewer of these choices, we might currently have a better situation on our hands.

Tchüss, Debt

I was taking too much risk. That giant loan I took out in August 2021 was dumb. Sure, the interest rate was rock bottom, but so what? The monthly payments were annoying, and they limited our actual choices.

In February, I mostly paid it off after selling off a bunch of my individual stock positions. There's a pre-payment penalty for nearly all German debt, so I left slightly more than three scheduled payments to avoid that trap. You'll see a big change in the assets and liabilities of our net worth chart.

My thinking about the loan was wrong from the beginning.

FOMO

Reflecting, I got the loan after visiting America and feeling FOMO. I had this sense that I should do something, which is not a great emotional place from which to make decisions.

Most of the time, as I'm learning, the adult choice is just to keep on doing smart stable things. As Dave Ramsey describes it, his baby steps 4 and onward are pretty boring. Saving for retirement takes time, dedication, and patience. It's exciting in terms of the power of compound interest, but otherwise, it's a boring process. I've listened now to many calls into his show where someone has had a windfall and wants to do something to maximize their return on that money. For most people, the correct answer is to simply pay off any debt and their mortgage, and invest in mutual funds. This advice is often unsatisfactory for the caller, however.

Since I've become much less tolerant of holding individual stocks, the cognitive dissonance of being in debt while holding individual stocks became unbearable for me. I have no idea if I'm any good at picking stocks. For someone like me, borrowing money while owning individual stocks is especially dumb. I've learned in the past that my thinking goes crazy when I leveraged a position, and sure enough, I felt perpetually crazy.

The risk I had taken was:

• Job loss risk and risk that I couldn't make the future payments
• Increased risk of emotional volatility leading to poor decisions
• Currency rate risk (borrowed in euros to buy in dollars)
• Opportunity cost since that income was tied to monthly payments

It also bothered me philosophically that I was in debt. I liked being out of debt, and it was a point of pride that I'd paid off my student loans early. Along the way, yes, I had some installment plans, but there was never any interest attached. But now, I was in debt and paying interest. Yuck.

But even those installment plans need to be a thing of the past. Making choices for future me to pay for stuff is a mean thing to do to myself. It also assumes that the future looks like the present, which is not guaranteed.

Re-enter the IRA

During my Dave Ramsey rabbit hole, I listened to the Chris Hogan book "Everyday Millionaires" and read Ramsey's "Baby Steps Millionaires". One of the statistics was that most millionaires did it by steadily adding to their 401k plans. I hadn't added to my IRA since 2012, which was my loss because the money I'd put in between 2008 and 2012 - a total of $1,750 - had quintupled.

Therefore, after a decade of avoidance and fear, I've decided to continue adding to my IRA. For expats, this is tricky but doable. I'll have to use the Foreign Tax Credit rather than the Foreign Earned Income Exclusion to prevent tax payments to the US. This is more work, but having tax-sheltered investments is too important.

Wiseguy 2.0

I'll continue adding to the Wiseguy Portfolio allocation across my various accounts. Using Portfolio Performance, this is relatively easy to do with the Asset Allocation feature.

I've made an adjustment to weightings, however, which I'm thinking of as Wiseguy 2.0. There's now a 10% weighting to REITs, now that there's a tax-sheltered place for me to put them. REITs in a taxable account are dumb dumb dumb, which is why I left them out before. Within the REIT basket is a 25% allocation to ex-US REITs, so 2.5% of the total portfolio. That may seem paltry, but the fees on the Vanguard ex-US REIT fund are high. I'd like exposure, but until the fees come down more, I can't justify a heavy weighting.

To make space for the 10%, I've reduced the bond allocation to 10% from 20%. I'm taking more risk, which means that any future drawdowns will likely be more stomach-churning. However, I'm hoping this will also lead to long-term greater returns. I can't access my IRA money for another 30 years after all.

So Wiseguy 2.0 is this:

• 25% US Small Cap Value
• 25% US Large Cap Growth
• 25% ex-US Small Cap Value
• 10% Long-term bonds (both Treasury and Corporates)
• 10% REITs (75% US/25% ex-US)
• 5% Gold

Net Worth

Image: A stacked bar chart of our net worth over time. Click to enlarge.

As of March 31, 2023, our net worth rose since December by 8.22% in USD and 6.83% in EUR to $135,357 and €124,753 respectively. Liquid net worth is $99,747.

This new chart is meant to simplify viewing. The previous style was pretty difficult to read, and this new iteration makes it clearer. It also, perhaps a bit pretentiously, uses typical business accounting terms for some items, such as "Cash and cash equivalents". "Accounts receivable" at this point means strictly dividends for which the ex-dividend date has passed.

Stock Performance

Stocks have more or less been in an uptrend. Of the Wiseguy components, US large-cap growth, gold, and bonds have all done very well. Small-cap value has performed poorly, likely as a result of banking industry volatility. The purchase of the REIT funds accidentally corresponded with a bounce for that asset class, which wasn't intentional but worked out in my favor.

Spending

In addition to the big macro money moves, we've also re-committed to following our budget. We reined in our grocery spending, cut down on subscriptions, and otherwise made choices that resulted in lower spending overall. I'm also turning reward points (classified as "intangible assets") into groceries or money as much as I can.

We did buy a plane ticket for my wife to visit her family in the States. That was necessary. However, we've declined to go on a big vacation this summer in the US. This was a secondary set of conversations with my family that were difficult, but I'm at peace about it.

Simultaneously, the elimination of the debt also eliminated the lifetime interest cost, which I had added to the liabilities side of our balance sheet. That was about €2,000.

Second Quarter Forecast

Considering how much activity there was in the past three months, it's hard to consider what might happen in the next three. Here's some of what we know:

Our heating bill has gone up a lot. We'll have to eat a big upfront cost in April, and our monthly warm rent will rise. That's a bummer, but it's the situation Germany finds itself in.

My wife and I will likely plan some modest trip for the two of us. We'll probably pay for it before the end of June.

I'm going to aggressively add to my IRA until I hit the max for 2023. $6500 is a doable number, and I hope to never miss hitting the max ever again. I doubt I'll get there by the end of June though.

The last debt payment will be gone at the end of May. Good riddance.

Until next time, stay healthy and avoid FOMO.

Net Worth: October 2018

Our net worth spreadsheet gets updated on the 26th of every month. I chose this date because it's deep enough into the month that we've likely made most of our payments for the month, so that whatever remains is the accumulated surplus. I could inflate the numbers by doing the calculations right after my pay period, but that seems self-defeating to me.

For October 2018, our combined total net worth was $36,070.18 or €31,612.78.

Composition

Since this is the first of these posts, I should describe what makes up our net worth spreadsheet.

There's a U.S. dollar section and a euro part. Each one contains the following:

• Bank accounts, including checking and savings accounts.
• Credit card accounts.
• Investment accounts (currently USD only).
• Loans and other lump-sum liabilities.
• An "Other" sections, which includes rounded petty cash as well as the estimated value of loyalty programs.

These are added together, and along with the prevailing EURUSD exchange rate, I calculate the value in dollars and euros. Since this spreadsheet has data from 2013, some accounts are closed, but the rows remain in the spreadsheet in order to maintain their data. Some things that aren't there that may eventually make an appearance are:

• Physical Assets. We currently don't have any physical assets that are worth adding to the spreadsheet (cars, houses).
• Pensions et al. I haven't added my pension from my German job. I haven't figured out a good way to do it yet. Likewise Social Security or the German Rentenversicherung.

This is a complete net worth spreadsheet and not a true FIRE net worth spreadsheet, but it's easy enough to calculate those numbers with a few clicks in the spreadsheet. Just Control/Command click the necessary accounts, and I'm good to go.

Up top, I have a couple of interpretations of the data in discrete cells. Namely, what is 4% of our worth? If it's lower than $40k, then it's shaded red, and if it's higher, then it's shaded green. It's definitely shaded red. I also have a sheet that calculates the Millionaire Next Door categories "Average Accumulator of Wealth" and "Prodigious Accumulator of Wealth" values for us and how much we're below/above those amounts. If our wealth is below the "Average Accumulator", it's also shaded red, which it definitely is right now.

Those two items are purely reminders of long-term goals and reminders just how much needs to be saved rather than being explicit thresholds.

Factors Affecting Current Net Worth

The biggest factors that affected this month's net worth change is the stock market. I'm a long only investor, and October has been pretty rough on us. Additionally, most of my portfolio is value stocks, and those prices have been getting crushed. The "growth" stocks also suffered but not nearly as much. I also have some positions in German companies, and Germany's stock market has been lagging for about a year.

Because of this volatility, my tax deferred retirement accounts and my taxable brokerage account fell several percent. We saved a good amount of money this month, but the market mostly netted the change to zero.

Funnily enough though, because the euro fell against the dollar, the value of these accounts rose in value in euros, even as they fell in dollars. Silver lining?

This month, I began to calculate the estimated value of loyalty programs. I'm calculating the various points as being worth ¢1 a piece. It doesn't add a lot of value to net worth, but those points have some kind of value, so I'd might as well add them. I'm not sure if it's worth adding them in for past months, since it's such a small value (around $1k).

Regarding credit cards and loans, none of that costs us interest. We currently never carry a balance, and the one "loan" is an installment plan from a dentist that doesn't charge any interest. In the beginning of the spreadsheet, we did have interest-accumulating accounts due to student loans and the cost of moving abroad, but those are long gone.

So there's the first of hopefully many updates.

My Money Mistakes: Student Loans

One of my early money mistakes was my student loans. Although they weren’t my first money mistake, they were definitely my first big mistake.

First, I chose a field in college that could easily be described as a “hopes and dreams” field. I don’t want to say what the major was, but let’s just say that taking out loans for it was dumb. For some salt in the wound, because I came from a relatively poor household, I got grants and scholarships high enough to cover the costs and living expenses of college. Let me repeat that: I got enough financial aid and merit scholarships to go to school for free, and I still took out student loans in addition.

You can see why I consider this my first big mistake.

Over the course of my undergrad years, I amassed a total of around $22,000 in student loans. I also took out some credit cards during that time and often carried a balance.

In the summer before my final year, it hit me that I was reaching the end of college, and that I had this giant debt and no idea what to do next. I know, I know. I listened to the Dave Ramsey show a bit today, and there are debts that are much greater than my $22k. Compared to someone who's amassed a $600k student loan sum, my amount sounds paltry. But that's also a danger of making comparisons like that: $22,000 is a lot of money for someone in his 20's who graduated with an impractical degree. In any case, it felt like a lot.

In my last year, I applied myself seriously at school. I'd been an OK student before, but in my last year I really tried. In so doing, I made contacts that would ultimately lead to real career advancement later. The loan amount climbed though as I took out my final loans for my undergrad years.

By the end, I had the previously quoted $22k debt. Around $1500 was in an unsubsidized loan, while the others were all subsidized. That was a bit of accidental good luck.

In the intervening years before moving abroad, I went to graduate school paid for with a teaching assistant position, and I did a variety of jobs, some of which were related to my field and some not. I consolidated all my student loans at a 7% interest rate right before the financial crisis caused interest rates to drop to basically nothing. I used tools like Upromise to shuttle extra pennies into the loans, and I used Sallie Mae's offers to lower the interest rate after a certain number of on-time payments and with automatic withdrawal.

The payment plan I'd selected meant that the payments were interest-only for a decade or something crazy. However, I tried making whatever extra payments I could to lower the principle enough that the scheduled payment amount would also take off at least some of the principle.

While I worked in graduate school, the loans went into subsidized deferment even though I was earning a very modest salary. I used that time to keep paying money into the loans, and left graduate school with a lower principle amount. I also opened my Roth IRA at that time.

I listened to Dave Ramsey and tried to get the "baby steps" thing going, but what ultimately got the loans paid off was two things:

• The habits and the desire to pay the loans off that built up while I was essentially broke.
• Getting a job that paid me a lot more money.

I would have eventually paid off the loans on my previous track, but it would have taken decades. I was dedicated though. All that was missing was the income to get the job done, and I got that moving to Germany. When I look at our net worth chart, I'm shocked at how quickly things changed once we had a steady situation. We went from a negative net worth of $23k when we moved here to a positive net worth of around $16k in two years.

I think there are a lot of warnings one can take away from this. The first: avoid debt. Just dodge the bullet, and you won't have to waste time trying to heal the wound.

The second: earning power is important. My degree was a silly degree to go into debt for. I don't regret the degree itself because my life is good, but I sat in negative net worth territory for too long, and a lot of my earned money went to interest payments. That's money that Sallie Mae gets to loan out now and earn income on.

Meanwhile, because my income was so low so often, I often had credit cards that needed to be taken care whenever I got enough money for debt-paydown times. I wanted to be done with the student loans, and looking back, I had periods where I intelligently managed my money, but lack of steady income plus debt equaled lots of squandered time as income came and went along with emergency funds.

The third lesson is that learning to live frugally is worthwhile from as early an age as possible. I got serious about saving money once I left school. I still made plenty of mistakes from that point, but I was beginning the saving practice in earnest then. If only that could have been shifted to when I was 16 and earning my first paychecks from my fast-food job. I had friends who already did have a savings mindset and who saved up thousands before leaving high school just from side jobs.

And the fourth I'll list is this: student loan debt can be paid off. You can get rid of it. You can do it pretty quickly too if you set your mind to it, earn enough, and spend it frugally. Just get it done and move on. When you make the final payment, you sadly won't get a screen full of balloons and a giant "Congratulations!", but it's something that you'll never have to worry about again.