November 2022 Update: Electricity, Net Worth, Portfolio

We got a refund on our electricity. Hallelujah.

In 2016, I got it into my head to track our electricity in a spreadsheet. Weirdly, we're required to do our own meter readings and report them to the power company, and since the meter was right there in the apartment, I figured I'd track it. Every Sunday and first of the month, I dutifully snap a photo of the meter. Each photo's numbers gets plugged into a weekly or monthly spreadsheet, which tells me the change week over week or month over month. Add in some spreadsheet functions, and I can see how we're doing in a given year and how our usage has changed over time.

Image: Chart of average weekly electricity usage over time. Does not include heat, which is a separate bill.

Until recently, our average had steadily been moving upwards. This felt inexorable until we made some drastic changes. The main one has been reducing the shower's heat. As I've written before, this means lukewarm rather than luxurious. I also only run the shower when rinsing; while lathering up, the water is off. Both of us are in and our pretty quickly.

Long story short, we managed to save enough electricity to warrant a small refund from the power company. This was a nice boost to November and a pleasant surprise in a sea of horror stories about electricity prices.

All in all, I recommend this practice of proactive electricity usage tracking. Obviously, if I had a smart meter, this might be easier, but this current process forces me to stare at results and ponder why one week was higher or lower, which has prompted changes.

Net Worth

Image: Chart of our net worth in USD since 2013

Our net worth rose 5.33% in USD and .52% in EUR to $128,316 and €123,857 respectively. Liquid net worth stands at $99,626 and €96,164.

Euro Strength

The main driver of the discrepancy between USD and EUR returns was the strengthening euro. Last month, the euro could buy $0.98871, while now it can buy $1.036. That blunts the upward movement of gains in a USD portfolio.

It's fine by me though. One small benefit is that credit card purchases made on US credit cards are cheaper to pay off since the value of the debt has shrunk over time thanks to the currency movement. Yes, I track this.

Portfolio Performance

Image: November portfolio performance as a percentage. Green line = Wiseguy portfolio, yellow = individual US-listed stocks, red = S&P 500, blue = IRA

My portfolios, with the exception of my IRA, outperformed in November. The Wiseguy Portfolio did especially well, rising just under 8%. This was led by the strong performance of the Avantis International Small Cap Value ETF at 12.82%(!), the Vanguard Long Term Bond ETF at 8.55% and the abrdn Physical Gold Shares ETF at 8.45%.

Image: Breakdown of returns within the Wiseguy Portfolio in October and November vs. Vanguard's S&P 500 fund.

Portfolio Changes

Image: My IRAs in blue vs. the S&P 500 in red in 2022

After the last day of November, the trend following rules were hit, and I bought Vanguard's Total World Admiral Shares in my IRA. It is entirely possible that I'll get whip lashed out of that position if the market resumes a downward trajectory. Them's the breaks with trend following.

Near the end of November, I sold Exxon Mobile for a small profit. The proceeds were sent to the Wiseguy Portfolio at the start of December. I'm not good at holding oil extraction companies and should probably avoid them. Berkshire and the small cap ETFs have significant exposure to energy commodities as is.

Other Factors and December Outlook

We received the yearly family subsidy for my wife's piano lessons. That will be stored in our high yield savings account.

December is shaping up to be a mixed bag, savings wise. Christmas is generally expensive, but I also receive my holiday bonus. However, some of my wife's customers were laggards paying their invoices in November, which meant fewer euros being carried over to December. Some of our expenses were also unexpectedly high in November.

We expect visitors from the US for Christmas, which is worth some spending and fun. It's such a pleasure to have anyone visit us over here, and we may do some small scale Europe travel. We will certainly get some kind of Christmas tree.

We also plan to make a donation to our local food bank, whose services we personally witness since they're in our neighborhood. More than food, they provide other nourishment for those who are having bad luck in their lives.

Until next time, count your blessings and help others where you can.

September Update: Electricity Reduction, Net Worth, Wiseguy, Euro

My work picked up in September, and life felt like it regained a some sense of normalcy. I was concerned with the ongoings at my job, and there were work politics and friendships to manage. Since I'm not traveling, I could devote myself to my hobbies and to fitness. My wife took new bold steps in her business and is attracting new better-paying customers.

With a moment's reflection, it becomes clear that things are not normal. For one example, we've done a good job lowering our electricity usage by reducing the temperature of our showers. Lukewarm is the best description. We've relegated using our clothes drier to being emergency use only. I've tuned our Synology to only turn on and back up our computers at night. I wake up and immediately unplug the chargers in my bedside table, since they're mini computers, drawing a small current at all times. Lights come on and are shut off quickly. The fridge and freezer are less cold. The kitchen water heater isn't as hot. I cook food in bulk and eat it throughout the week.

We also haven't used our radiators at all yet. It's starting to get chilly in Germany, but we are resisting using them until it's absolutely necessary. We've always kept hot water bottles, and so we've used those when the chill was too oppressive.

For our efforts, our electricity was reduced to 193.4 kWh in September, down from an average of 259.75 kWh per month in the first half of 2022. That's about a 26% reduction. As the weather cools and the sunshine becomes ever shorter, our usage will inevitably creep back up, but I continue to look for other ways to reduce our demand here.

Net Worth Changes

Image: our net worth in a stacked bar chart. The dark blue line is the net sum of assets and liabilities.

Our net worth fell 3.66% in USD and 1.89% in EUR to $117,080 and €119,469 respectively.

For this month, it was entirely due to declines in our stock and ETF portfolios. There was one area of - short term - good news, when Store Capital agreed to be bought out at a premium to what I paid, which brought in a sudden burst of profit. However, this could not counteract the declines elsewhere.

Cash

I continue to hold what are, for me, substantial cash positions. Additionally, my IRA remains in a money market fund as the trend following rule triggering a purchase has not been met. As interest rates rise, these sums bring in ever greater monthly income. However, that is not enough to counteract the S&P 500's regular down 1% days in any meaningful way.

Wiseguy Portfolio

Image: The Wiseguy Portfolio (green line) vs. S&P 500 (red line) in September

The Wiseguy Portfolio did what it should have in September, but it was cold comfort. It "only" fell by 8.51% vs. the S&P 500's 9.87%. I continue to add to it, however, and I add to that which has done most poorly. In October, I added exclusively to the international small cap value fund, since that had been the most battered. In September, unfortunately, we didn't have the income to make a purchase.

Euro

The euro continues to decline, which leaves me conflicted. On the one hand, I'm worried because I earn euros, and although a $500 addition per month to the Wiseguy Portfolio will likely be enough on its own to make us wealthy over time, if $500 per month becomes out of reach, my plan may come undone.

Image: Our net worth in euros over time. Notice the lower volatility.

On the other, I feel ganz schön clever for having all these dollar assets, because in euros, our net worth has been much more stable than the dollar equivalent. My US bank accounts have grown in euros over time by just sitting there.

As I said. Conflicted.

Life Goes On

Despite all the worries, we're trying to live our lives as happily as we can. I have lived without hot water entirely at one point in my life, and it had no effect on my happiness. Ultimately, relationships are wealth, and we've had some social occasions this last month that reinforced that truth. Additionally, we expect my sibling to visit in Christmas, which excites me to no end.

It's a frightening time, but human life is more than the numbers and more than the creature comforts.

Until next time, stay healthy and hug those who need hugging.

Update June 2022: Bear Market, Options, Life in Germany

In June, our net worth fell by 5.93% in USD and 3.04% in EUR to $115,344 and €110,695 respectively. Liquid net worth was at $83,151/€79,800.

The Bear Market

The S&P 500 officially entered a bear market in June, but this has felt like a bear market to me for awhile. I was holding stocks like Netflix, Facebook, Amazon, Paypal, and Cloudflare from 2021 into 2022, and they're down much more than 20%. It's funny: I knew holding that stuff was really risky, but I couldn't see a way out. I didn't want to sell and pay taxes, so I just held and watched money evaporate. Dumb.

However, even when I did sell, I'd often buy shares in a different company that hadn't started falling yet but inevitably would. For example, if I sold Cloudflare or Square I'd put the money in Amazon. So there was this sense that there was nowhere to run: stay in the name and lose money or sell to buy something "safer" and still lose money.

The names in my individual stock portfolio have gotten progressively more boring. One advantage is that they aren't nearly as correlated, even though on the really bad days, they still all fall together. But at least it's not one big tech trade, which rises or falls based on how the world is viewing tech as a whole.

Painful as this has been, I have learned a lot:

• Be careful of correlations.
• Valuation eventually does matter.
• Paying taxes is better than a crash.

Lastly, this experience has convinced me that most of my money should be in a basket of diversified ETFs, where single stock risk won't wreck my day.

Options Trading

In June, I bought and sold my first options contracts. This is small potatoes, but I bought a call option and sold it the same day, and I'm holding on to a few puts on the overall stock market.

I've long wanted to be able to buy this kind of insurance on my portfolio, but I just didn't follow through with my broker. That said, because it's new, and because it's risky, I don't want to commit a lot of money to this. I remember on Reddit's /r/Wallstreetsbets when there were a few weeks of easy gains for the guys who bought weekly calls on SPY. Inevitably a bunch of other people followed and bet huge sums only to see their options expire worthless.

I recognize the risk that goes along with options trading, and I'll size accordingly.

Life in Germany Right Now

The other day, my wife and I along with a group of others assisted a Ukrainian family move in to a new home. They obviously don't know anyone, so organizations have sprung up to help house them. The family, like many such families coming to Germany, consisted of a mother and her children: the men tend to stay behind in Ukraine.

During this last week, the power company Uniper said that they might need financial assistance from the Bundesregierung due to rising gas prices in addition to lower gas flows from Russia. As I wrote in my last piece, we were asked by our local power company to pay more for our electricity due to the current price realities. When we first moved in, our electricity was around 24 cents per kWh vs. the 39 cents we're now paying. Electricity prices have always felt high here, but now every click of a light bulb or every drop of warm water feels consequential.

The whole situation is unsettling, and it's only summer now: few people use air conditioning here. What happens in the winter when we're all cranking up the heat? I don't know.

There are shortages too, though they're limited to specific items. For example, my employer told us to conserve paper due to a paper shortage. Canola oil in Germany is now basically a distant memory.

Weird as it may sound, I've begun asking myself what event would cause me to buy some plane tickets and bail on Germany. My usual trigger is something like the war expanding into other countries or hitting a NATO country.

I don't want to leave though. It's really a very pleasant country to live in. So let's hope for some kind of peaceful resolution to this violent madness.

Forecasting

My wife and I will be leaving this week to enjoy our summer vacations. We're going to France, so there's clearly still plenty of fun to be had in Europe, despite the present reminders of hardship. Afterwards I'll be flying to the US. I need to hug my family members and, ahem, log into my US accounts from the address I claim as my residence (haha).

And with a vacation comes expenses, but it also comes with my employer's summer bonus. So I've sent off a lot of money - for me - to the various savings account, and I think I've set aside enough for the two of us to enjoy ourselves. My wife also needs a new computer, so that will take a bite out of us.

Until next time, take care. Enjoy yourself in whatever way makes you happiest.

Inflation Bites: Action vs. Acceptance

Image: Consumer prices in Germany broken out by sector, from Destatis

When I woke up this morning, it really hit me for the first time: we aren't in total control of our expenses. I kind of freaked.

Electricity

In the past month, we've been hit with two disturbing price increases. First, we were hit with a price increase for our electricity. It's gone from 31.345 cents/kWh to 39.827 cents/kWh, which is a 27% jump. It would be even worse if we changed contracts, since existing customers get slightly better deals than new customers, so there's nowhere to run.

Right now, we're trying to get our electricity use under control; shorter more precise showers, bulk food prep, and turning electronics off and unplugging them are some of the steps we're taking. So far, it's only made a slight difference.

I've considered buying more efficient electronics (a new stove or refrigerator), but would these new objects actually pay for themselves fast enough to be worth it? I doubt it.

Rent

Even worse, our rent was raised by 17%. Back when we signed our lease, we agreed to have our rent tied to the Verbraucherpreisindex (the German consumer price index). The landlord explained this to us, and I even remember him telling us, but I didn't totally understand what it meant because, well, not understanding everything you're hearing is just part of the immigrant experience¹.

However, I didn't really understand what I was signing. I feel both like an idiot and like I'm sitting on a time bomb. If inflation continues rising in Germany, we could not only be priced out of our existing apartment, but we could be priced out of our neighborhood entirely, forcing us to downsize our living space and move much further from my employer.

German housing sucks right now. I looked around the city to see what prices are like for buying apartments and houses, and it's all bad news. From an American perspective, houses are laughably small and are often comparable to apartments in terms of actual living space. However, they are still expensive and often situated away from good public transport.

Apartments are probably a better option, but they come with mandatory building expenses and neighbors. To be fair, both apartments and houses are often joined to a neighbor's structure, and although I'd like to have some real privacy, privacy is out of our budget.

Let's not forget that mortgages have also gotten more expensive, so previously affordable mortgages are now priced out. Naturally, my German savings account still pays me nothing.

Running the Numbers

As I mentioned in a previous article, you take a huge loss up front when you buy property here. If we saved up €50,000 for a down payment on a place, it's likely that most of that would just go to the Grundsteuer, the Makler, the registration costs and so on. It's a pure loss up front, and it's the kind of thing that leads to sunk cost fallacies: no matter how much I'd want to make a life change, I'd always have this huge expense in the back of my mind.

So I'm trying to look at the numbers rationally and chill out. The rent increase is about 112 EUR. Divide €50,000 by €112, and that's 446 months or 36.16 years. So does it make sense to spend €50,000 to save myself from 36 years of this rent increase?

No, damn it, it doesn't make sense².

Remodeling as Further Disincentive

Another number to consider: if we moved, we'd likely have to remodel in some fashion. German houses and apartments often come without floors, for example, or toilets or kitchens. All of that costs money. So let's say we moved and remodeled, and it cost us €20,000 on top of the €50k we already spent on taxes and fees. That another 178.57 months of this rent increase or just under 15 years.

The risk, of course, is that this isn't the only rent increase. The German CPI jumped by 17% year over year in May, so let's extrapolate into the future. If rent increased again by 17% from our new level, that would be a €129.61 increase. Combined with the previous raise that's a €242 additional payment. So €70,000/242 = 289 months or 24 years. So would it make sense to save and then spend €70,000 up front in order to spare myself 24 years of a worst case scenario rent increase?

I don't think so. But now I'm less certain. And if it happened for a third and fourth year in a row, the numbers start to get worrying very fast. I have to remind myself however, that even if we owned a place, a world in which prices are rising by 17% every year is a world where we're still on the hook to buy things that are increasing 17% every year. If a water heater breaks or if the roof needs repairs or whatever, that would be on us.

I don't have a good answer, and I think I'll have to live with that. My hope is that our incomes will also rise to meet this new challenge, but I can't guarantee it.

Accepting a Loss of Control

Image: various price changes from Destatis

I'm not happy with it, but I have to live with being out of control to some extent. Otherwise I'll drive myself crazy. We do have control over some things, such as our groceries, which have also gone up in price. In that realm, we still have some maneuverability, so we'll have to do what we can there to feel like we have some power.

Hopefully, this doesn't go on forever. And hopefully, I won't be writing a similar article a year from now, chastising myself for not seeing the signs of impending doom via inflation and taking decision action. I'm not sure what action is best besides trying to earn more and spend less.

I'm sure you're feeling some pain from inflation. This is a difficult period for everyone. Just make sure you look at the numbers before taking some kind of drastic action to save yourself from it. It might not be worth it.

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1. This is a relatively new method for German landlords to extract higher rents since the default method is for rent increases to be determined by the city. ↩︎

2. I would like to own property one day, but the upfront costs continue to dissuade me from going too far down this path. ↩︎

November 2018 Net Worth Update

In November, our net worth rose about 5.25% to $37,962. In euros, it rose 5.7% to €33.417.The big factors that affected this number are as follows.

Stock Market

The stock market continued its volatility, and a number of individual companies I own fell by quite a lot. That's not fun to watch, but I have to content myself that the prices have fallen, and all future purchases are now going to matter more due to the lower purchase price.

I'm sitting on a net unrealized loss. That's mentally taxing, to put it mildly, but in addition to the above-listed consolation, I also spend a lot of time looking at past market corrections and how they affected the names that I'm holding. It feels painful now, but in a few years this will have been a blip in the movement of the stock markets. Even if this lasts a year, it is unlikely to be horrible.

I remember watching the 2015/2016 correction happening, and although it was exciting at the time, it now feels like nothing. When people talk about the long bull market, they rarely mention 2015/16, even though it was incredibly painful for a wide variety of stocks and industries. If you were holding commodity stocks, especially oil, you just got hammered. But that gets lost in the narrative of "the longest bull market in history".

Saving and a Gift

We saved a good amount this month (33.5% of income). Despite the stock market pain and despite my wife working fewer hours last month, our savings rate helped us inch upwards. We did get the electricity bill refund, so that basically eliminated our electricity costs for the month.

The biggest lever when you're talking about modest sums of money isn't the returns from investments but the total amount saved.

For transparency's sake, at the end of last month I received a monetary gift of $1000 out of the blue. I'm still uncertain as to why (other than that person loving me), but that money went straight to savings.

Economic Outpatient Care

The The Millionaire Next Door, Dr. Stanley spent a lot of time discussing "economic out-patient care". His basic idea was this: young people who receive a lot of monetary support from their familial elders often remain dependent on that support and develop bad habits that limit their future financial resourcefulness. He called that "weakening the weak".

Since learning of the concept, I've tried to be much more careful with such gifts. When I was much younger, I did develop bad habits from the knowledge that I had monetary help should I need it, and I'm trying to make up for past sins, so to speak.

Looking Ahead

December is a bit of a wild card. We have estimated taxes to pay, and we will eventually be billed for an extra payment for last year's German taxes. We also have a small trip to enjoy, which will cost some money, but I doubt we'll be extravagant.

Of course, there's always Christmas gifts, but we're modest gift givers, and we encourage modest gifts for ourselves as well. Because we live abroad, nobody expects anything too expensive or complicated, which does reduce expectations.

Unless the market really falls off a cliff, I expect further slow but steady progress.

Electricity Tracking

Unlike the U.S., we report our electricity usage once per year here. We pay a monthly fee that makes up part of a yearly estimated fee based on what's known about us. If we're over that estimated usage, we have to pay yet one more fee, and if we're under, we get a refund.

I find this system absolutely crazy, but there's nothing I can do about it. If you make a mistake one month, you're likely to make it year-round, and you won't have any sense of it until you get your final bill. It's a big delay, and the results can be terrible: you can be hit with an enormous final bill if you aren't careful.

The power company estimates for us much less than what's normal in the U.S. For me and my wife, our 2018 estimate was 2821 kWh for the year. The average in the U.S is 10,399 kWh for a residence.

Despite the difference in usage, we are incentivized to use very little electricity. There's no way around it: electricity is expensive here. For us, we're looking at a price of 0.22€-0.27€ per kWh, while in the U.S. it's 12¢. That's a major difference, and the kind of stuff that I found clever in the U.S. to keep my electricity bill low must now be standard procedure to avoid paying enormous electricity costs.

The first two years, we had to make an extra payment of roughly an extra month of electricity at the end of the billing cycle. That was irritating. For this year, I've kept better track of our usage, and if I understand the system at all, we should be getting a refund (taxes and fees are always a wild-card). Fingers crossed and thumbs pressed.

For our 2018 year, the electricity company estimated we'd use 2821 kWh. We ended up using 2331 kWh instead. I tracked this weekly and monthly in a spreadsheet (spreadsheets are a superpower), and when a weekly number jumped, I tried to look for reasons why.

Adjusting Usage: The Big Levers to Pull

There are a few levers we can pull to change electricity usage. Of course, there are the obvious ones like turning off lights, but we use LEDs for every bulb in the house. Lights aren't what drive our usage.

The big one is warming up water.

Our heating is provided via radiators and a building-wide central heating system. That's a different set of costs, and I won't get into that here other than to say that general home heating isn't included in our electricity costs. Instead, we heat water to:

• Bathe or otherwise wash ourselves.
• To cook or heat water for hot beverages.
• Wash clothes.
• Wash dishes.

The appliances associated with those activities are:

• The bathroom Durchlauferhitzer. A Durchlauferhitzer heats water on-demand as it passes by the heating elements. It's a nifty device, except that it chews through electricity. It's also a trap because you'll never run out of hot water in the shower.
• The kitchen's under-sink hot water resevoir. I just installed this, and despite storing hot water, it's not as big an electricity hog as the Durchlauferhitzer. That said, it supplies much less hot water since it's a small reservoir.
• The stove.
• The clothes washer, which is a front facing washer.
• The dishwasher.

The biggest and easiest lever here is the Durchlauferhitzer in the bathroom, which supplies the shower and the sink. Any period of time in which we deliberately shorten the amount of time the Durchlauferhitzer is heating water is a period where electricity usage will be noticeably lower.

After that, the easiest lever is the clothes washer. This machine allows us to set the temperature of the water very precisely, and if we set it to 0°, then the electricity usage is negligible.

Changing the stove usage is harder. By using the stove, we cut down on eating out, the cost of which easily can dwarf the electricity usage of the stove. However, there are strategic ways of using it to conserve electricity. By preparing a food in bulk (such as boiled potatoes or hard-boiled eggs or a big batch of TVP), you can eat the cooked foods over several days without resorting to the stove. We still use the stove for coffee and tea prep since we don't want to buy more expensive/more complicated preparation devices for those activities. But making food in bulk does have a noticeable effect on our usage numbers.

The dishwasher has a short cycle that does the job well enough if we prep the dishes well. Unfortunately, our sink is very small, so washing dishes by hand is perfectly possible, but it's a pain and often leads to a big countertop mess.

The Medium Levers

We also have a dryer, which we try to limit use of. It's a condenser-dryer rather than the standard American dryer with heating elements, and it's pretty efficient. Since our apartment has good cross breezes, we often use drying racks strategically placed where the air flows and where the sunlight falls. Now that it's getting to be winter, and therefore cold, dark, and damp, we'll probably use the dryer near-exclusively.

Our vacuum cleaner is surprisingly power hungry, and with our apartment's old electricity system, it often trips the fuse. It may be worth retiring this machine at some point, but we received it for free from friends when we first came here, so we'd need a super efficient machine to make the switch worth it.

Lastly, we have a fridge and freezer. The fridge was given to us, so again, we're not itching to get rid of it and buy something more efficient. We just try to keep the temperature down and keep some water in there. As for the freezer, we bought that a few years ago, and it doesn't consume too much power. We keep the freezer packed nearly 100% of the time since we rely on so much frozen food.

Misc. Power Sucks

We also have the following that we try to keep tabs on, but are much more minor electricity sucks:

• Laptops
• Cell phones
• A NAS and some HDs for computer backups (the NAS is admittedly a decadent solution for this challenge)
• Routers for internet access
• LED light bulbs
• Fans
• Electric power drill
• A+ rated range hood with LED light
• A HEPA air filter for the bedroom
• Blow dryer, clothes iron, sewing machine (used often enough to make them worth keeping, but not used often enough to cause a big spike in power usage)
• Electric piano
• Blender
• Electric dental things
• A rarely plugged in bluetooth speaker

These things will definitely suck power if we're not careful, but they're the least important in terms of the big picture of our power usage.

Electricity Eaters We Don't Have

We don't have an air conditioner. I've been tempted to buy one since heat waves in Germany are rough. But their electricity use would force us over our yearly estimate. For almost anyone, if you have and use an air conditioning unit, it's probably the biggest single lever you have to raise or reduce electricity use.

We don't have many small kitchen gadgets. I'll probably write more about our thinking here, but we don't have a microwave or a electric coffee maker or countertop water heater or any other variety of common small kitchen appliance. The exception is the blender.

We have no television nor any of the requisite co-gadgets that come with one. Any type of movie or TV show viewing happens on the laptops or phones. The computer speakers are mostly adequate for that. We wouldn't want to annoy our neighbors with a thumping sound system in any case.

And with that, there's a picture of our electricity usage. Here's hoping for that refund.