2024 First Half Update

Our net worth was $180,483/€167.735, representing a quarter-over-quarter change of -.71% and -.34% respectively. Quarter-over-quarter this was flat performance, but our first-half wealth growth in 2024 remains decent.

The Past Three Months

We've incurred a lot of spending in the past few months, which has slowed our savings rate. For one, our summer travel plans got expensive all of a sudden. We delayed buying our tickets to the US, which caused the price to creep up.

However, there's some spending that's just the result of carelessness. Some money leaks are happening, and I need to figure out where those are. For example, we're regularly exceeding our grocery budget. Some expenses are deliberate choices that nevertheless feel careless. I bought a new iPhone, which is expensive. My wife has doubled some of her lessons. I've been making some purchases in one of my side businesses. Each choice feels small in the moment, but they add together into reduced savings over time.

The stock market was also turbulent the past three months. I contemplated our wealth reaching the $200,000 in my last post, but as I hit "publish", the market gods reminded me not to get too complacent. That said, I wasn't worried about it as it was happening. Since I've adopted the ETF strategy, my mental health around investing remains healthy.

Third Quarter Forecast

I'm glad I waited before writing this post. In the latter half of June and in early July, we were expecting to have to pay enormous sums to the Finanzamt (the German tax authority) in estimated taxes. Because the pandemic depressed our incomes, our estimated taxes also correspondingly fell. When our incomes recovered, the Finanzamt wanted to adjust our estimated tax payments to new unheard-of levels. Thanks to the quick work of our tax preparer, we got the necessary paperwork organized and dispatched, which saved us from having to raid our savings just to cover estimated taxes.

It was a stressful moment, and it reminded me that I need to be more actively saving self-employment money as estimated tax funds. We shouldn't have allowed ourselves to get into that position.

That said, we're still digesting our elevated travel costs from the past few months. This will hamper saving. We also paid an outstanding tax bill from 2022, and that alone may wipe out any savings we accrue. It's hard to say without knowing the future.

Until next time, stay healthy.

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.

How Our Current Budget is Constructed

For the past few years, we've been using Google Sheets for our budget, and it's worked very well. The original idea came from Dave Ramsey's Total Money Makeover, but as with anything you work at over years, we've made it our own.

I'm in the process of doing some alterations, so I wanted to document how we're doing it now before I  take too many next steps away from the current system.

The basics are as follows:

• We use Google Sheets because it's easily shareable, it's extensible, and it's actually very feature-rich. Plus there are lots of people writing about it and sharing spreadsheets to steal ideas from. 
• The budget tracks our spending cash amounts in Germany. It's all in euros. If you added up the German credit cards, Girokonto and cash, it should basically equal the Remainder amount in the active budget month. 
• One sheet is a master list of transactions. In my last post I discussed the kinds of information stored there. We use "Date", "Vendor", "Budget Month","Category", "Amount" (with minus signs for expenses), and "Notes" in case there's non-repeating useful information. Both income and expenses are listed on the transactions list. 
• Following that are individual sheets for each month with the following structure: 
• On the left-most column are the categories with headings for "Income", "Saving", "Expenses", and "Totals". 
• The second column has expected amounts. Some of these are recurring expenses such as rent, and some are unique, such as "Travel" and "Household". The latter refers to general expenses that my wife and I agree on. 
• In the income section are our jobs and other occasionally recurring income sources in addition to the remaining or deficient money from the previous month. A month of frugality gives us money in the next month while a month of spending leaves us with less. Ideally though, there's neither a deficit or surplus because we don't overspend, and we try to save everything that isn't earmarked for something else ASAP.
• A special sub category is "BLOW". We each get the exact same "BLOW" each month, and it's just the leftover amounts after everything else is accounted for. "BLOW" is basically money one of us may spend without asking the other person, and we tend to put clothing purchases, restaurant visits, coffee, presents, etc. into "BLOW". Basically, there's a subtotal added up of the other categories, and then the blow cells are that amount divided by two. The exception is when we know we're going to spend more in a month than we bring in, in which case "BLOW" goes to zero. More on this later. 
• To the right of this column is "Actual", which contains the amounts as they're added to the master "Transactions" list. When building your spreadsheet, the =SUMIFS() function is your friend. The idea is to SUM everything from the "Amount" column of the "Transactions" list, if it matches both the "Category" and the "Budget Month". 
• To the right of that is a simple subtraction function that shows the remaining amount. Subtract "Actual" from "Expected", and you get a number. Multiply that by -1 to get something a bit more useful. For example, if you expect -100 but only spend -50 you'd have 50 remaining following this approach.
• At the bottom are the various totals and subtotals. One cell represents the actual remaining money after everything is accounted for. That gets referenced next month. 
• One sheet looks just like a month sheet, but it adds up everything from the year. This lets us plan out yearly spending and check our progress as the year goes on. 

Not too crazy, right? It takes awhile to build the spreadsheet, but it's pretty easy to manage once it gets going. It kind of looks like this:

Category	Estimate	Actual	Remainder
INCOME
MyJob	A number	SUMIFS calculation	=SUM(B2-C2)*-1
HerJob	etc.	etc.	etc.
Last Month Leftover
Other
SAVING
Retirement
Tagesgeld
DEBT
Credit Card
Student Loan
Car Loan
EXPENSES
Rent
Electricity
Groceries
MyBLOW	=IF(B24<0, 0, IF(C9>0,0, SUM(B24/-2)))
HerBLOW	=IF(B24<0, 0, IF(C9>0,0, SUM(B24/-2)))
TOTALS
Total Income	These	cells
Total Expenses (with BLOW)	are	full
Total Expenses (no BLOW)	of	SUM
Remainder (before BLOW)	functions	and
Remainder (after BLOW)	basic	math.

Saving/Paying Off Debt

When saving any money, it looks like an expense. When drawing from savings, it looks like income. Both get the same category, so that at the end of the year, it's easy to tell whether a net amount was saved vs. drawn from. So if we save €2.000 in February but withdraw €1500 from savings in April, we have a net €500 savings amount. 

You can have several sub-categories of savings, such as Retirement, Tagesgeld (basically the German low interest savings account), Emergency Fund, or whatever you want. Same rules apply for each. 

We are out of debt, but when we were paying it off, payments were an expense like any other.

Credit Cards

We use credit cards, but they are paid off every month automatically. Therefore, a credit card purchase gets added to the transaction list like a cash or a direct debit transaction. 

More about BLOW

A bit more about "BLOW". This can only work if you and your spouse are on the same page and are pretty frugal. Since BLOW is the remainder, and any savings appear just like spending earlier in the budget, there's an incentive to under-save earlier in the budget to give yourself extra BLOW. "Hey, if I don't save anything this month I can buy the new phone/bike/camera/console/computer/dress/coat/hat/etc." This is why deciding on a standard amount of monthly BLOW ahead of time is important. We budget around €200 per person per month as BLOW. Honestly, I'd like to even lower this number further because it really adds up, but that amount is low enough to not allow giant expensive purchases while allowing a fair amount of freedom, and BLOW covers a lot of stuff.

At the end of the month, BLOW is treated differently. This took me a while to figure out, but there should be some incentive to saving BLOW. Before I figured it out, unspent BLOW just became unspent money for the next month's total household budget, which meant you couldn't save up for anything in the BLOW category. It also meant that overspending on BLOW just got erased into the overall household budget, and that's unfair to the thriftier partner. 

So now, the BLOW amount is zeroed out at the end of one budget month and added into the next budget month. To do that, I add some transactions to the master list. The first makes the current budget month BLOW remainder equal zero. Basically, if the remaining amount is greater than 0, it gets subtracted from the current month and added in a separate transaction to the next month. If the remainder is less than 0, it gets added back to the current month and subtracted from the next month. This happens entirely in the BLOW category cells and doesn't appear as income at the top of the month sheet. 

In this way, BLOW surpluses and deficits follow you from month to month. In a way, it becomes a quasi-separate fictional account that's entirely tracked through the budget spreadsheet. One consequence: the Remainder cell at the end of the month will not include the BLOW remainder once the month is closed out. 

Split Transactions

This system allows for split transactions pretty easily. Just create two transactions from the same vendor on the same date and for the same budget month. Use SUM to show your work in the Amount column to show how you extract part of a transaction from the total.

=SUM(x-y)

Why do this? Sometimes I'll buy something as part of a larger transaction that mixes categories. My wife, for example, doesn't drink any alcohol, so if I buy a bottle of wine as part of a grocery spend, I will split that out to be part of my BLOW spend. This helps discourage us from underhandedly saving on BLOW while nominally spending on a shared category. 

Last Stuff

It works for us, but there's no guarantee that it will work for anyone else. Maybe the BLOW incentive is too much temptation. Maybe this seems like too much work. Maybe your significant other is unwilling to help. In any case, budgeting has been worth it for us.

Tracking Spending Overview

"Track your spending" has a better chance of helping than hurting. I've been tracking my spending for years, and I vouch for it. Thankfully my wife is on board, so we've gotten very good at it.

Some people who have really honed their habits don't need to because they have trained themselves to habitually avoid overspending. But if you are trying to change your financial life you probably don't have those habits yet, and it can only help to write things down. Plus, if you like gathering and manipulating data, writing down data about years of transactions can provide lots of possibilities.

Here are the things that are absolutely necessary to write down:

• Transaction date. You need this to know how much is coming in and out in a given time-period. 
• Vendor name. If you don't have one, then just make one up that's memorable. "Toilet" and "Kiosk" and "Apotheke" are common European stand-ins for fairly generic vendors.  
• Category. I personally think it's better to start simple and add complexity in response to necessity than start with dozens of sub categories. The categories that are necessary for you to track will reveal themselves over time. If you want to keep it really simple, just use categories for housing, transportation, utilities, food, and everything else (we use David Ramsey's "Blow" to cover a wide variety of things). If you have debts, add those in. 
• Amount. Obvious, right? I personally list expenses with a minus sign in front, since that makes it easier to add to spreadsheet formulas. 

Those are the biggies. Here are some others that might be useful:

• Budget Month. I use "budget month" because it lets me stick things that happen in one month in a different month. For example, if you get paid at the end of the month, you want that money for the next month and not the one that just happened. 
• Account. This might be useful or it might not be. If you're doing things with credit cards, it may be useful to know if some spending happened on a credit card rather than coming out of a cash account. 
• Notes. Maybe there's something unusual about the transaction that you want to easily recall. 
• Tax-Related. If you want to deduct something, it may be good to write it down at the time of purchase. I don't do this
• Project. This is a new idea for me. Basically it lets you categorize certain spending as part of a larger effort. So, for example, if you go on a vacation, there may be costs that are categorized as "Travel", "Food", "Lodging", "Blow", and on and on, but a project tag (in this case something like "2018_SummerVacation" or "2018_SavingsGoal") lets you track the entire extended spending for the effort. You could really go off the deep end on this if you start viewing your life as a series of larger and smaller projects. 

I personally write everything down in a spreadsheet. You could also use paper if you want, but spreadsheets have the advantage of being easily modifiable, and the data can be easily analyzed as you get better at using the spreadsheet. 

I use Mint additionally, but I don't rely on it for budgeting or contemplating my cash flow. It's great for seeing transactions pop up from all my various American accounts, but their budgeting tools are too stiff for my purposes. It's better than nothing, but I think the time devoted to developing one's own system is superior. 

Once you've been doing this for awhile, it becomes second nature. I won't lie: it can take some time to build the habit. Some ways to make it easier:

• If you carry a smartphone, write down every petty cash transaction in some kind of notes app. This is for when you don't get a receipt. I've used some automation apps on iOS to add these notes to the spreadsheet once I've written them down.
• Keep every receipt and then add them to the list later. Insist on receipts if it looks like the vendor will supply them. 
• Spend less and have fewer transactions so you have to do this less often. 

Budgeting and Decisions

Yesterday, my wife and I came to a conclusion: we will not be doing a big U.S. visit in 2019. I got super stressed about this decision while we were making it, but the decision became much easier after doing three things:

• Adding up the costs of the last big trip taken a few months ago. 
• Looking at our budget for the next few months. 
• Talking about the decision with each other. 

The numbers don't lie. The last trip was really expensive. Although there are areas where we could cut costs and optimize, the next one would likely also be expensive in unavoidable ways, and combined with some other upcoming costs and upcoming financial uncertainties (cough cough taxes) it meant we'd be opening ourselves up to too much financial risk. Additionally, even if the uncertainties went our way, another trip would set us back on our longer term financial goals. 

So we had to bail on the idea. I sent out the messages to the relatives. Sorry. No big trip this year. I'd feel guilty, except that I know the numbers and how unrealistic it is to expect to do this every year. 

This is one reason why we should set financial goals, track our spending and budget future spending. At numerous points in my life, major decisions were made much clearer when the budget spit out its numbers. Rather than just a vague unease with a purchase or choice, the numbers show us why we are uneasy. They show us how the unwritten budget math in our minds is most likely lying and presenting an overly rosy view of things. Nearly any major decision can be reinforced or rejected by checking the budget. 

But we have to make one and follow it. It's hard, but it's worth it.