Update: January 2021

This one is very late. There was a lot of real life that happened in the first week and a half of February that threw off my normal schedules. With that out of the way...

Our net worth shrank in January by 3.02% in USD and 1.72% in EUR to $121,177 and €107,809 respectively.

The main drivers were the stock market and some personal spending. Anyone who's exposed to the tech sector has experienced a good amount of pain recently. January had a sharp decline and a reversal at the end of the month that eased the pain a little, otherwise our numbers would have been worse.

On the spending side, I'm re-jiggering my cameras (I like photography and, increasingly, video). That means, I'm buying cameras and trying to sell my older cameras. That will impact the January and February numbers.

On the upside, our incomes are improving as normal working life resumes post-pandemic, and we received our German tax refund. Score.

That's it for this month. February so far has also been a rough stock month, so I expect losses. Thankfully that will be mitigated by our incomes somewhat, but it won't be enough, I expect, to totally offset this volatility.

Stay healthy. Until next time.

Update: July 2021, Back in the USA

Our net worth increased in July to $107,189 and €90,838, which is a month over month rise of 4.81% and 6.05% respectively.

This is a surprising result for me, because I'm in the USA, and I'm spending money. The trip has been more expensive than I originally expected (though there was always an inner voice telling me to expect it), and the stock market sort of bailed me out. If you owned US stocks in July, you were likely rewarded. At least up until that last week.

Stocks Reporting Earnings

Some of my largest holdings reported earnings in July: Ally Financial, Apple, Alphabet, Charter, Amazon, Facebook, Paypal, and T-Mobile all reported earnings, and the news was generally good. These companies are continuing to grow, and their future prospects are strong.

That doesn't mean that the corresponding stocks were rewarded immediately for that growth. While Ally, Alphabet, and Charter rose following their announcements, Apple, Facebook, Paypal and, especially, Amazon fell in price. Those falls happened in the days after I recorded our net worth change, so they're not reflected in the above totals, but suffice it to say, they were meaningful. Amazon fell a little over 7% in one day, and since that's my largest taxable holding, it was a meaningful drop.

These drops and rises though are just noise though. They are meaningless for long-term success. And getting mad at the market for punishing strong companies' stocks is like shouting at the wind (which I've done at my more pathetic moments). We all see the comments on Twitter and Seeking Alpha that go something like, "Company x just announced a huge beat, and the stock is down 5%? How does that make any sense?"

Maybe it makes sense, and maybe it doesn't. Maybe the company is overvalued, or maybe large holders are taking profits. It's all a guessing game, and it's pointless to try and justify or deride every market move.

I write this, and I have to admit that only in the past year and a half have I been able to actually remain calm during these kinds of drops. My first stupid sale from a drop was Booking Holdings back in the fall of 2017. That kind of sudden reversal was terrifying for me, especially after the easy rise up the market had in 2017. From there to now, I've experienced a real maturation of my response to these movements.

The United States After a 2 Year Absence

I'm currently in the US after being absent from it for two years due to the pandemic. It's been eye opening. The country feels alive and dynamic in a way that I miss from Germany. Germany is solid, and it's treated me very well, but I've never regarded it as an exciting place. The US is exciting. It feels like stuff is happening, like deals are being done, like boundaries are being pushed, like money is bounding forth from all the dynamism.

I like this feeling. It's seductive.

At the same time, there's the dark side. I turn on the TV, and there are the drug ads. CBS Morning has a segment called "Bill of the Month", which highlighted a man with two separate insurance plans who still owed $150,000 after an accident that left him in an out-of-network hospital. I see that a pill that I take daily costs many multiples more than what I pay in Germany, even for a generic! Lots of peers my age are living with crippling student loans and few job prospects if they didn't choose the hot career of the moment.

And during my time here, I kept having to sequester myself from my family to continue working on the Streamlined Filing Procedure. I believe that once it's all done, I won't owe any money, and the IRS won't come after me. But I won't be entirely sure until the statute of limitations is up.

I've lost so much time and energy to this process in a period when I wanted to focus on my family. Since the IRS has to decide - somewhat arbitrarily - whether my actions were willful or not, I had to just hustle to get this done. I wanted to finish it before I left Germany, but I couldn't do it, and the whole thing kept underlining how absurd it is.

For example, I make some self-employment income on the side in Germany. In Germany, there's some threshold you have to cross before they start taxing you on that income, which means I've never been taxed on it even though I always declare it in my German tax return. In the US, that threshold is MUCH lower, and so during this process I essentially had to create a set of P&L books just for my US tax return. I also did the same for my wife's small business.

It's all crazy. Now I have to worry that the IRS is going to bother me about some write off for this tiny small business that I have in a foreign country where the foreign country itself doesn't even consider me worth taxing! These write-offs are to avoid social security, but they know I live in Germany, which has a Totalization Agreement with the US about Social Security, but to actually get out of paying SS in the US, I have to fulfill some additional paperwork that for some reason the German Rentenversicherung doesn't want to provide me (naturally, they just don't respond to my requests for it).

I just don't get why my home country is this way.

Suffice it to say, I have mixed feelings about America right now. It feels like a vibrant place full of opportunity, but it's also loaded with traps and harassment for its citizens.

Let's also not forget that the US is being hit by another wave of the coronavirus primarily because of vaccine hesitancy. To say I'm disappointed in many of my countrymen and women is an understatement. I have several family members who are ill with it, and I hope they pull through.

August Forecast

On the day that I left Germany, the third of the three stimulus payments arrived in our Postfach. However, I was out the door already, and so my wife has been sitting tight on that check. We also received our long-awaited German tax refund at the end of July. Both of those will contribute meaningfully to month over month changes in my August update.

My wife's work is also picking up. We'll see how long that lasts (since Germans are hardly free from this vaccine hesitancy madness), but for now some extra income is very welcome.

As for expenses, I expect to pay for our American and German tax preparers. I do not resent either of them personally since they've both been very good for us, but I do resent this system I've found myself in.

Until next time, stay healthy and look out for your loved ones.

Net Worth Update: February, 2020

From last month's update:

Our February budget right now is aiming for a 22.6% savings rate, so if the market holds still for a month, we're looking at a net worth change of ~€1000-€2000.

¯\_(ツ)_/¯

Instead, our net worth declined to $59,706/€54,826, which is a decline of 4.3% and 3.07% respectively.

Stocks Plunge

The reason is clear. In the last weeks of February, and especially in the last week, the international stock markets plunged. My portfolio went down right alongside it.

The reason for the drop is typically blamed on the outbreak of the coronavirus. That may have been the catalyst, but it's also true that the markets had been running up in valuation, and there was likely going to be something that triggered a pullback in any case. There's no way to run that alternate experiment though, so nothing is certain.

What is certain, is that I saw that the risk was real at the beginning of the week and began unloading my lowest conviction positions. Something told me that heading into this with margin debt wasn't a great idea, so I trimmed that back, and as of this writing, I'm not using margin at all.

This process has actually been very enlightening, because it's helped me see what gives me confidence in positions during difficult situations. Why are some positions that are in drawdowns fine to hold while others in drawdowns grate on my psyche? It was irritating to sell those positions, to be sure, but the money was lost when I bought them, because I didn't buy them for good reasons. I also sold some things for a profit, and again, these were positions that were my least confident positions. But whether something is in drawdown or at a profit isn't necessarily what gives me confidence.

The past few years has been showing me what it looks like to have confidence in positions. I'm not a professional money manager, so finding confidence to hold individual companies might arise from something different in myself than a professional might have. Something else has to grab me about a position to make it worth the stress of owning it.

Anyway, I think I'll write more about this idea in the future.

Savings Rate

We achieved a savings rate of our mixed pre/post tax income of around 31.5% in February, which was pretty good for us! It is disappointing that the money saved seemed to be fed into the markets with very little return, but that's the way it goes sometimes.

I mentioned last month that my wife wants to buy a piano, so we're saving up the required money over the next year. I couldn't stomach the idea of cutting from our asset-building savings to save up for it, so it's coming from both of our BLOW budgets.

March

Who knows what's going to happen. As I said, I'm out of margin debt as of this writing, partially because I got such a large payment from my company at the end of February. I'm still waiting on more dental stuff refunds, so one day that will come.

But the truth is the markets will determine what happens over the next month. I've put in the money, and now I have to wait just like everyone else. Much as I hate to see past money lose value, my future money would appreciate lower asset prices, so I'm of two minds regarding what I want.

Tja, wir sehen mal.

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.

Getting Used to Market Drops

In the past week and a half, I've lost more money in the markets (nominally) than I ever have. I wasn't investing in 2000 or 2008, and I cashed out the few stocks I had in 2015 to help pay off the student loans before that year's turbulence hit. Right now, I'm sitting on a large net loss that I predict will become larger.

With the fall yesterday, the S&P 500 looks like it will close below the ten-month moving average. This is a fairly rare event, and it's one of those possible triggers for trend-following people to close their positions and wait things out. I'm not going to do that, but I am and have been girding myself emotionally for the potential of a big drawdown.

I don't really feel any panic about this. Maybe I'm fooling myself, and if there's a 50% drawdown, I could conceivably panic. But I suspect I won't.

Tempered by past panics

In the past year, my tolerance for big drops has improved. I had my first taste about a year ago when one of my large holdings dropped by 16% in a day and then kept falling. I panic sold, and the holding eventually recovered, much to my chagrin.

After that I held more doggedly through big drops and was rewarded. I hated holding, but I did it, and one big draw down became a big winner, which I sold for a profit when the price appreciation looked too good to be true.

And then 2018 came, and suddenly big drops for some names didn't recover. Currently, I'm sitting on some securities that are very much drawn down, and the speed with which their plummets happened feels a bit punitive. When I described how one holding has fallen 40% since April on no real news, a friend laughed and said, "It's because God hates you."

But there's also something irrational about the plummets. Many of them are falling not because of their current actual performance but because of fears of future performance or fears of their markets being encroached by newer technology players. Fair enough. But the penalties in many of these cases are extremely pessimistic, and extreme pessimism can equal good value opportunities if the world doesn't fall apart. Which is admittedly a big "if" right now.

Backtests

One exercise that also helped gird me mentally was all the backtesting I did. There are some market drops that can be mostly avoided. The dot-com bubble was one such example. If you'd bought value at that point, you breezed through that basically unscathed.

Meanwhile, 2008 was a different beast altogether. If you're long-only, the only real way to dodge 2008 was to not be there. But if you weren't there in 2008, you probably weren't there in March 2009, and if you were there in March 2009, you were rewarded. Big time.

It's not easy. But it does show that the big drops are opportunities if you're buying. And they're also something to plan for.

Dreams of cheap prices

So there's a part of me that wants to see prices really fall. Like, c'mon lads, let's do this. Since I'm still earning money, I'd love for my future money to meet much lower prices. The CAPE ratio is still high, and if we think it has any predictive power at all, all of us who are buying securities right now should be praying for it to fall.

The only people who should be hoping for higher prices are those who aren't buying anymore or who are mega-rich. Higher prices don't help young people. Higher prices don't help savers. Think about how much you've already saved vs. what you will save in the future. Which number is bigger? If it's the latter, then you should want an 80% drawdown to happen (as long as you get to keep your job) because the compounding effects of that money will be so much greater.

So to wrap up, I've been training my brain to not get too distressed about this. There's some distress, not going to lie, but it's not panic, and if I'm not panicking now considering the amount of money I've lost, I doubt I'll panic later.