January, 2021 Update

Our net worth climbed to $91,890 and €75,505, an increase of 5.34% and 5.77% respectively. For the first time, our assets grew above $100,000.

Stocks did well, and we had an inflow of cash that obviously more than made up for our spending. I bought another musical instrument, and actually, these numbers include a double charge for which I haven't yet been refunded, so it was a surprisingly good month. We sold something to some friends for a few hundred euros, and at the end of January, I received a bonus as a kind of stimulus due to the pandemic.

Regarding the pandemic, we can't do anything besides order stuff online. We considered buying some plane tickets, but it seems pre-mature at this moment. We can't go to bars, and we can't even have friends over, which often prompts us to spend a lot on groceries. There was none of that this month. Our money went to things, generally, that we can resell later.

We also hit the bonus for an American credit card, which gave us a bunch of very useful points, which we'll eventually use to save money flying back to Germany one day. I value those at 1¢ per point, though the tickets I plan using them on will cost much more than that were I to buy them with cash.

GameStop Thoughts

Since that's the big market news at the moment, I'll say that I'm not participating in this trade. It just isn't my kind of thing. And I generally try to resist this kind of stuff, even if I might end up winning big. My belief is this: the behavior that might make you outrageously rich suddenly is the same kind of behavior that might make you broke suddenly. So I'll stick to my plan, which is doing fine.

I've also watched r/wallstreetbets for a while as a lurker, and while their trade ideas are often really good, there's a time element to them that requires you to be early or not take part at all. However, with the reinforcing peer pressure on the subreddit -- all that talk about "diamond hands" -- it can incentivize the willing latecomers to participate much later than is wise. Just remember, every time you buy, it means someone else is selling.

Anyway, be careful and good luck.

January 2019 Net Worth Update

Since December 26, our net worth rose 17.5% to $43,488. In EUR it rose 17.3% to €38,114. Here's what lead to that result.

In December, I received an elevated payment from my employer due to some extra work I did. This essentially doubled my salary for the month. This money went various places:

• I paid off a medical bill that I'd been paying monthly. I'm hoping to reap a tax deduction from it.
• I bought some stocks.
• We bought a new iPhone when my wife's five and a half year old phone died after a tragic meeting with some water.
• We bought some furniture.
• We bought a coffee maker.

Now, you'll notice not all of this is savings. Sometimes it feels right to spend money. I'm not Early Retirement Extreme. But there's some logic here.

Telephone use is broadly tax deductible in Germany. I'll be able to deduct the cost of this phone over the next three years. Meanwhile, I'm hoping to keep it in our household for at least six or seven. This is one of those areas where we're willing to occasionally spend some money, so we did. The only thing I regret is that I made the purchase using an American credit card when the exchange rate made the euro unusually strong against the dollar, and it's unlikely to reach that rate again before I have to pay the card off.

As for the furniture, this particular upgrade was something we'd contemplated for several years. It wasn't excessively extravagant, but it was unusually expensive for us. I think we're done though with any other major home upgrades for a while, so I don't foresee any other such purchases in our immediate future.

The coffee maker will undoubtedly save us electricity (already shown in my electricity tracking spreadsheet), and it wasn't all that expensive. We'd been making coffee using a pour over method that required water heated on the stovetop. Once poured, the coffee would cool down quickly. The new maker uses less power to heat the water to begin with and then delivers the coffee into a thermally insulated carafe. The coffee is still warm in the late afternoon, meaning less coffee needs to be made in a day, thus saving electricity and grounds.

Note: it's funny what cultures are willing to spend money on. Coffee making in Germany, and likely in Europe as a whole, is an activity where people will spend hundreds of euros on a coffee maker. Some friends of mine have a coffee maker that's just under €1000. Ours was around €55. But the idea of convenient instant coffee is very pervasive here, and if you're not into instant coffee, then that often means a push button machine that takes coffee pods or grinds the beans on demand and coughs up a single cup of coffee.

Stocks did well this month, which boosted our numbers much more than our savings alone did. I don't know what to think of the stock market right now, so it's entirely possible that when I write this update for February, we'll have suffered another major drawdown. The last year has taught me to not get used to up days too much, because they reverse abruptly.

Forecast for the next few months: since I bought everything on credit cards, I'll be paying those off from our cash flows in February and March. That will impact those months' savings rates, but the cards will be fully paid off on time, and since this is a new awards credit card, we should see the bonus hit in February.

There are also some bureaucratic costs that we'll unfortunately have to pay because our tax statement from the government is taking so long to get back to us. It's easy to wander into those when you're a foreigner living abroad and don't entirely understand the system.

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.

CC Award Update

We got the award.

In an earlier post, I expressed some reservations about these big awards and the minimum spend required to achieve them. I still feel that, and my wife still feels that. We did drastically reduce our planned expenses. We don't like feeling incentivized to make big purchases.

But I still wanted the award for reasons I'll explain later, so I found a method of manufactured spending to make it work. There aren't many available to us Americans abroad, but there are some, and I took advantage.

The manufactured spend did cost something as a percentage of the spend, so it wasn't free. Basically, it's a cost for the accumulation of these points. I think it's better than buying a bunch of expensive stuff totaling $4000.

Why do it at all though? The basic calculation in my head was something like this: we are going to travel to the United States again at some point in the next two years, so therefore it's worth spending a little, to save much more later. The return is pretty good in this case (around $70 spent to save between $600-$1000 later). Even if I later eat the annual fee, the return is decent.

The reality is that we're going to visit family in the US at some point. It's important to both of us, and despite any savings goals we have, it's not worth sacrificing relationships or missing seeing child relatives grow up. Next summer we'll suffice with FaceTime, but the next year we'll almost certainly be heading back.

Or we'll help relatives who aren't as financially well off come visit us. It is much cheaper for us to pay to fly someone here, than for both of us to fly to the US and find accommodation and transportation.

Will we do this again? Maybe. I'm looking at other card award possibilities, but the trouble with manufactured spending is that it's kind of skirting the rules. I prefer to draw as little attention to myself as possible regarding my American financial accounts, and manufactured spending can open me up to closer inspection. I might do this with another similar card and then focus on things like hotel cards that provide free nights automatically. Since hotel costs were a high proportion of our last visit, cutting down on that would be worthwhile.

Or maybe I won't. I could just continue to add points to this card that I have and otherwise use normal German payment methods to get by. Germany doesn't have the same glut of strategies that the US has, but it has a few, and those might be enough to both satisfy the points accumulating itch and to keep things simple.

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.

Churning Isn't Worth it for Us

After talking with my wife, we're going to back off on the card churning/travel-hacking thing. When we spoke, she was totally in alignment with me and expressed similar concerns that I mention below.

Sometimes you have to just admit that something isn't worth it. We're trying to build a deep savings habit. Habits take time and effort, and credit card rewards disrupt the savings habit.

Encouraged Spending

I found myself looking for things to spend money on. If I'd ever had a thought floating in my mind soup about something I'd like to buy, I began telling myself that I'd planned buying it all along. Now was indeed the time to do it since we had the new card. That way I could get to the end of the process and say, "We only spent money we meant to," even though it probably wasn't true.

I want to think about ways of saving money rather than spending money, and I don't want to think that spending comes with big rewards. 

Expensive Thinking

I found myself angling for more expensive solutions than I'd otherwise accept in order to meet the minimum spend. Every purchase was anchored to the number $4000. I reserved a hotel for a lot more money than I would if I'd purchased it with my normal credit card. I looked at brand new high-end products when used or otherwise less expensive items would meet our needs.

Luxury Dependence

These high end credit cards are trying to get us used to the idea of luxury, and luxury is a weakness. Airport lounges, high-end hotels, first-class airplane tickets, speedy security checks, elite status, and metal cards are all nice, but they clearly want the card user to become accustomed and dependent on these niceties.

I don't want to feel like I'm entitled to that stuff. One day these cards might not be so generous with their perks, but the luxury dependance would likely remain. And then you're trapped. 

Points Aren't True Assets

Points are kind of like assets, but not really. The issuing company can change the rules whenever they want. The airlines can jack up their fuel surcharges. The points accumulate no income, and their value doesn't appreciate with time. As far as I can tell, there are no laws protecting you as a points holder.

If we spend a bunch of money now to get the bonus within the next month, we'd be spending today's money in order to save money potentially about a year from now. That's putting lot of faith that the points will be worth something then, and it's a lot of faith that the money that I could have saved today couldn't have been used in a better way. 

Stress

It was causing me stress, and that sucks. I don't want to resent my wife if she didn't put some spend on the card. I don't want my afternoon ruined if the card machine at the grocery store doesn't work. I don't want to call American banks more often than I usually have do, which for the past few years has been never. And I hated the buyer's remorse that came with buying expensive stuff.

I've always prided myself on avoiding unnecessary stress traps, and this project was becoming one. 

The moment where this really hit me is when I did our monthly net worth calculation, and I saw that it had dropped in a month where our stock performance beat the market. Additionally, I knew that it would continue to drop as we fulfilled the minimum spend over the next two months. Meanwhile, there were great deals in the stock market if only I could get some cash in to buy them. But no cash was coming. 

We got a couple awards from less ambitious cards, and maybe I'll do some of those in the future. But for the bigger cards, we just don't spend the kind of money that justifies trying to churn them. And to spend that money means forgoing buying real assets now that could be worth much more than the credit card points are next year. 

Anyway, that's my thinking. I'll write more about rewards and stuff, but for now, they're nice but not worth sacrificing real saving for. 

Post-Vacation Deprogramming

Since our last vacation, I've been going through bouts of thinking something was financially logical only to doubt myself. I mentioned before my ambivalence about credit card reward hacking, and that's continued. But moreover, I'm looking at all sorts of decisions before and since the vacation that are just puzzling, and I have to conclude that vacations of the modern variety are enormous mental and money traps if you're not exceedingly careful.

For example, social media is a vast reinforcement mechanism for what is normal and expected. Professionally and personally, I am surrounded by people who take fairly extravagant vacations and share them to social media. Moreover, the photography surrounding the vacations is rapidly improving, making personal vacations closely resemble advertisements.

As for advertisements, has anybody else noticed that YouTube can start to resemble ads for ads for ads? It's like ads all the way down. We watch ads before we watch our nicer more interesting ads. Whether it be for trailers, or makeup, or electronics, or just about anything else, it's easy to get sucked into a perpetual ad whirlpool.

Two realties that present real traps for me and my wife:

• We live far away from our broader families. 
• We live in the tourism capital of the world (Europe, broadly speaking). 

That makes taking some kind of vacation or extended travel somewhat inevitable. We can be careful, and we have been more careful in the past, but right now, I feel like something is off in my thinking and planning. 

Credit Card Award Beginner

Over the summer, while making several US trips, I managed to score a few credit card awards. These were the easy to achieve kind: spend $500 in three months and get back around $150.

In August, I might have bit off more than I can chew. I went for one of the big mid-tier cards that offer you a bunch of points for $4000 spend in three months. It has no foreign transaction fees, so I can stick a lot of our local transactions on the card. That's no problem.

But despite some lofty goals, I'm finding it hard to spend the money. First, there's a lag between being approved for the card and its arrival abroad. In that time, some spending has to happen just to eat, so that spend doesn't count towards the reward, though the clock had started ticking on the 90 days.

Second, there are few good options for manufactured spend in Germany. Those Visa cards you can load up in the U.S. don't really exist in the same way here. There's no Plastiq, so rent and a bunch of other bills happen directly from our normal bank account.

One of the rules I set for this project was to not spend extraneous money that we otherwise would not have spent. One the one hand, we haven't gone out and bought a bunch of crazy extra stuff. No new computers or cell phones.

The stuff we planned to buy that would have helped us cross the spending threshold keep getting cheaper the longer we plan. For example, we planned to put a bunch of next summer's U.S. trip on the card, but we determined that a trip would be too expensive, so we chucked that. We planned on buying a nice couch, but even with the reward, we find couches too expensive and keep finding acceptable couches at lower price points. We are taking a brief vacation on one of my long weekends, but with low-cost airlines in Europe, it just wasn't that expensive. And we planned on doing some nice-ish things for the apartment, but short of a full kitchen overhaul, we can't stand spending the money.

And some of the more outlandish ideas, such as buying a new iPhone, get snuffed out mentally before they have much gestation time.

On the other hand, we wouldn't have done even this amount of spending without the card, so it's encouraged us to open our wallets more than we otherwise would have. The couch we have is an eyesore, but it's functional. The apartment improvements could have waited. The small trip could have been even smaller.

I've been forced to update how we budget, which adds complication. It's much harder now to get a big picture idea of how well we're managing money since a budgeted item happens this month but the actual paying for it happens next month or later. I've developed some new systems, but what used to be simple is now more complex, and I believe complexity makes overspending more likely.

I keep coming back to one thing: the reward is worth between $600-$1000 depending on how well it's used. But if you don't spend any money at all, then such a reward pales in comparison to the value saved.

I've been going back to some of my favorite sources for financial inspiration, and some of my spending ideas feel more suspect. For example, I thought of front-loading our mobile prepaid amounts for the next year. But now I'm wondering if I even really need a mobile phone. I have some internet services that I use. I could prepay them... or I could cancel them and just keep the money.

I'm not certain if I'll do any of those things, but I'm considering it. So there's a kind of mental battle between my desire to try churning out of curiosity, my default frugal side, my radical frugal side that wants to move into a studio apartment and sell our furniture and use the library's internet, a certain amount of sunk cost fallacy lurking in the background, and my desire for the stuff we're going to buy.

I know an American family here that churns U.S. credit cards successfully, but I have no idea what their budget looks like, and I believe that they have willing helpers in the US who spend on the card on their behalf. I'm not so trusting as to give any of my family my credit card, so that avenue is not open to us.

At the very least, I doubt I'll do this again any time soon no matter how it turns out. It really doesn't appear practical for us.