Third Quarter 2023 Update: Boredom Hack, Net Worth, Side Hustles, Taxes

I've had a breakthrough.

Here's a question: how much poor stock market performance is due to boredom? As in, if we're bored with our lives, are we turning to the markets purely for entertainment? For example, the speculative extremes during the pandemic may have been caused by people having nothing better to do.

In my own case, it's a likely factor in much of my own bad behavior. I have periods, especially since moving abroad, where I feel directionless. Due to the lack of upward mobility of my day job, it's hard to get excited about it when I'm at home. My wife can't absorb all of my neediness (nor should she be expected to, of course), but it has to go somewhere. My stock market life became an obsession and a fantasy, where maybe, just maybe, I could find the formula to let me bail on my day job and its constrictions.

This singular focus on it did some good things for me. Learning about companies is learning about the world. However, the anxiety of watching the market plagued my mental health. As a result, I've made a number of decisions that were poor and have led to head-scratching consequences. "What was I thinking?" has been a recurrent thought.

Two things have lightened my mental load. The first is having bitten the bullet and moved to mutual funds. Taking some of the pressure off of my individual stock positions came with an unfortunate tax bill (more on that later), but the concomitant reduction in anxiety has been worth it. The second is the reinvigorization of my side hustles. Over the summer, one of them got new life breathed into it. Having somewhere else to project my ambitions has been great for me.

Being too busy to worry about markets is an incredible hack. I go days now without looking at my portfolio's performance. It exists and does its thing. Honestly, as clever as I think the Wiseguy Portfolio is, I'm considering simplifying it even further because I want to spend even less time worrying about it and fiddling with it. Because there are more dividends from different funds coming in at any given time, and because I need to occasionally rebalance all these different funds, it gives me more chances to look at it and worry. It also eats up time that I could be using productively elsewhere.

I haven't made a final decision about that.

Net Worth

Our net worth increased quarter over quarter to $150,992 and €142,714, which is a quarter-over-quarter gain of 1.27% and 4.81% respectively.

The third quarter generally sees a lot of income come in (haha), which offset some of the market shenanigans. I got my summer bonus, and my wife also got some good-sized payments from her customers. Since our vacations were modest this year, we didn't have large summer outflows, and she could work more often uninteruptted.

The past two months have seen high market volatility, and my portfolio was hit. Bonds have been especially strongly hit, but some of my individual stocks have been beaten up too. Green Brick Partners, for example, has had a rough go of it due to some bad news in the mortgage market as well as Greenlight Capital selling a sizable chunk of their position to rebalance.

Side Hustle

One of my side hustles generated some sales, but I also had expenses that more than offset those. I'm trying to sell some things to keep the hit in line, but so far, I've been unsuccessful. I've also gotten a refund on one expensive item that will show up the next time I write one of these.

I want this side hustle to become a profit generator for me, and that's where most of my ambitious energy has been directed. The upside is that making wild swings in the side hustle might lead to imperfect results and some wasted money, but it won't lead to disaster like a bunch of stock trades can. And if I can make even a few multiples of profit on my invested money, I can have a return generator greater than most of my stock positions.

Taxes

In 2022, when I moved a lot of money to mutual funds, I did this by selling a bunch of individual stocks. This has led to a large tax bill in Germany, whis has taken me by surprise because I had a loss in the US.

The culprit was, besides myself, the weakened euro. Some of my trades were purchased when the euro was at a high point and sold when the euro was at a low point. This made gains more valuable and losses less potent. Because nearly all of my positions are dollar-denominated, I couldn't see my mistake, and as such, I had enough gains to have to accrue my first capital gains tax in Germany. Oops.

That hit hasn't landed in our net worth statement yet, but it's coming.

It's made me realize that it's very hard for me to determine the euro cost basis of my positions. I knew that I'd sold during a weak time for the euro, but I didn't realize that the difference would be that extreme. However, to determine my liability, I'd have to track every single lot purchase in a spreadsheet. Interactive Brokers does not provide good cross-currency tax planning tools, and if I don't do it myself, I'll just walk into this trap over and over again.

Final Thoughts

Even with the missteps, this was a good quarter. I feel relaxed about money for the first time in years, and I feel like I have somewhere to direct my creative energies outside of my day job.

We'll have some big costs coming up. My wife wants to see her family over Thanksgiving. The aforementioned tax bill will hit. I still have some investments I need to make in this side hustle. Hopefully, these costs are offset somewhat by some additional side hustle sales, some sales of personal items, and increased income from our day jobs. As for the stock market, it's anyone's guess.

Until next time, stay healthy.

Net Worth Update: June, 2019

In June, our net worth increased in USD 1.81% to $47,921 and in EUR 0.29% to 42.110€.

The big factors in the move this month were as follows:

• Good stock market performance. Although, in my personal portfolio, we haven't totally recovered from the May drop, the performance plus our savings were strong enough to offset some big expenses.
• We saved around 20% of our cash flow, split between the Tagesgeld account (normal savings) and the brokerage. I'm using the term "cash flow", because I get paid in post-tax money, and my wife gets paid pre-tax money. I could try to include my pre-tax withholdings.... but nah. I'll start in 2020 when I update my budget spreadsheet. Cash flow it is.
• We made a big payment to the German government for estimated taxes.
• I made a large purchase of a used item for a hobby that I'm hoping to turn into a side income stream. That was around €1.200. I have some things that I hope to sell in the next couple of months to help offset the purchase.

Year-Over-Year Tells Its Own Story

It's funny, that is a very small looking percentage change, but I also track the year over year numbers (YOY), and those show just how steady growth over time can lead to big changes. From one year ago, our net worth is up 51.61% and 55.21% from $31,608 USD and €27.132 EUR, respectively. This is after a series of (in USD) smaller changes of 9.77%, 3.61%, -1.62%, 1.98%, 5.24%, -2.49%, 17.49%, 7.58%, 1.31%, 3.73%, -4.26%, and this latest 1.81%.

That's one reason I write these updates. I'm doing this anonymously, and it's not to brag or show off that I have some saved money. Instead it's to document how small changes over time lead to big changes that are counter-intuitive.

Over this last year, compounding had almost nothing to do with the YOY change. At my level of wealth, savings is the biggest factor in terms of wealth growth. My actual stock market returns are basically zilch over the last year. I'm hoping that changes, but my activities regarding saving should be biased towards a) earning more and b) saving more vs. c) earning higher returns.

July Expectations

This will be an expensive month:

• We paid our tax advisor for two separate items.
• We paid the government to reapply for our work visas. It's surprisingly expensive.
• I'm taking a trip to the U.S. later in the month. I'll do what I can, but it will cost money.
• I might have some random bits of income coming in from small gigs. We'll see.
• My wife is working fewer hours because of the usual summer slow down.
• We are expecting a tax refund (!!!), but we won't get that until August most likely.

Out of Levers at my Current Job

I've hit a kind of mental stumbling block recently. I've run out of levers to pull at my job.

What I mean by "levers": when I look at my budget, I see places where I can focus to save more. By making a choice over here, I can cut our grocery bill. By doing x I can cut the electricity bill. If x then y. Onwards and onwards.

With a career, there are similar levers to pull. I can network. I can work harder or smarter. I can simply be better at a given task.

When thinking about levers, the basic concept is that with the effort, one should expect to see some result, and the result should ideally scale with the effort at a minimum.

At my job, I earn a salary and then additional money from some extra work that sometimes comes my way. I don't get to decide when I get this work, and the value that I get monetarily is highly variable. But I get this work because I'm reliable and have given a lot of effort when I've been given the opportunities to do it. In this case it's "if x then maaaaaybe y".

This December, I earned the most money from this extra work that I may ever earn from it from one assignment. And it was exhausting. My wife says that when I began, my stress level jumped up, and it didn't come down for months. I put so much effort and personal pride on the line for this extra work, and there's no moving up from here. I know what kind of additional extra work I'll get this next year, and it's not like I'll be rewarded with more pay as a consequence of my previous efforts. I got the money, and now it's on to the next thing, and the next thing doesn't reflect the previous effort I've given at all.

I find this incredibly frustrating, and I don't know what to do about it. On the one hand, I could change jobs, but due to the homogenization and unionization of this particular industry in Germany, it is unlikely that the situation will be meaningfully different elsewhere. Most likely, I'd just find myself in the same or worse situation. At the very least, at this job, I get the extra work, but I've gotten to this point after years of credibility building.

Starting elsewhere, I'd be beginning all over.

Not to mention, moving is expensive. I'd need a guaranteed upgrade to make it worth it. But again: the homogenization in the industry makes that unlikely. Where I am now has a funny balance of decent pay and relatively low cost of living. I could try for the same job in one of the larger German cities, but the COL would jump.

In summary: I've run out of levers at this job. I don't think I can push harder and make more money from it. There has to be some kind of paradigm shift to resolve this inner turmoil of mine. Some ideas:

• Drastically reduce spending. Go total LeanFIRE on our current circumstances.
• Find a side hustle. That's currently hard for me because I'm on a visa, and starting side businesses in Germany requires entering into the bureaucracy. This will be a better possibility once I get the German equivalent of a green card and get my permanent residency.
• Change careers. Not sure what that would be, and I'm not sure if I'd want to do it in Germany.
• Enter into a similar career within the same industry that might lead to better future opportunities. It's very risky in this particular industry.
• Take it easy and enjoy the work/life balance I have and be more cautious on how much personal stake I take in my job.

Some comments about the second and last points. I have a colleague - also an immigrant to Germany - who does his job but who has officially refused to take any of the extra work. Instead, he's built up a portfolio of rental properties that he owns and manages.

It's obvious that those properties are what he really cares about professionally-speaking, but he puts in his time at our employer and keeps his personal investment low. Meanwhile, he puts in back-breaking work on the properties. Those levers make sense and justify the effort: make an improvement on one area, and he can raise the rent or sell the property for more later. If x then y.

I used to resent him for his lackadaisical attitude towards the job we share, but maybe he has the right idea. Or at least, there's part of his strategy that I should adapt and adopt. Namely, I should back myself out of so much personal investment in the job. They aren't going to meaningfully reward me for anything beyond a certain point, and I need to find that point and live there.

And I need to develop something on the side. I don't know if rental property is that thing, since the American tax consequences might be awful (sigh), but I need to explore.

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.