Index investing, here I come!

Coins and plant, isolated on white background

Things have been hard as Mr. German and I struggle to work together on our long term goals.

So we took a much needed week-off work to give ourselves time to figure it out.

While it may sound boring to most, I spent the entire week learning about different investment strategies.

The Dow Jones between 1900-2012 – up up up!

I’m choosing index investing! It suits my personality the most because it offers a simple, passive strategy with low fees and high performance.

Jim Collins explains it well in his stock series. Which I read the entirety of plus some repeats over the past week. It was easy to understand for a beginner DIY investor like me, and has saved me months of research. Thanks to Jim’s advice, he has also helped me get me over my fear of investing.

Since I’m a transplant and hold residencies in both Canada and Germany, the Canadian Couch Potato, EconoWiser, and Smart Kohle have also been invaluably helpful to me on setting things up locally.

This is what I’ve narrowed down to (the percentages are my allocations):

  • VCN: Vangaurd FTSE Canada All Cap Index ETF – 35%
  • VUN: Vangaurd US Total Market Index ETF – 35%
  • VWRL: Vanguard FTSE All-World UCITS ETF – 30%

100% stocks and no dollar-cost averaging, meaning that once I set up my brokerage accounts in both Canada and Germany, I’m going to buy these all at once! (VCN & VUN in CADs, VWRL in euros)

I know I’m heavy on the US markets, since VWRL is also US-heavy, but I’m comfortable with that. VWRL is also the fund that I’ll contribute regularly to, since it’s held in my German account and I live and earn an income in Germany.

I’m also about to purchase iShares DivDAX UCITS ETF, a fund that tracks 15 German large caps traded on the DAX. This will be through my Vermögenswirksame Leistungen (VL) account with money contributed from my employer. Not sure what the status is on this yet, the papers are still being pushed.

P.S. I haven’t included Mr. German’s networth in this mix, since he may want to buy real estate with his stash.

Will having a baby throw us off course?

baby

Even though we’re trying to get pregnant, I didn’t consider any baby or child-rearing expenses in my 7-year FIRE projections.

That’s because built into my calculations, is our travel budget of 300 EUR per month, or 3600 EUR per year. I imagine if we have a child, we would no longer travel (far) while s/he is still young, so our travel budget could then be converted to baby expenses.

That, plus 184 EUR per month of Kindergeld (supplement from the German government for all kids until adulthood), would give us 484 EUR per month for raising a child.

In Germany, this is a decent amount as long as housing is already covered (which it is in our budget).

We are also both publicly health insured, so a child will go under one of our policies at no extra cost.

Having a child will change our savings rate though. For the first year, I would be on maternity leave and earning only 67% of my income.

Since Germany allows Elternzeit, or parental leave for the first 3 years of having a baby, that would also be 3 years of earning 67% of either mine or Mr. German’s income depending on who takes the leave.

While we don’t know yet, we have discussed that Mr. German should take Elternzeit for 2 years after my maternity leave, and I’ll go back to work. This is because Mr. German wants to look after our baby, plus I think he could do a better job at accessing services for the baby (doctors, etc…) since he’s the German speaker.

After the baby reaches toddlerhood and we are not able to take Elternzeit and still not financially independent, we could use the 484 EUR to find a Kindergarten (daycare) placement.

In my line of work, I can also switch to freelancing and earn more while working less (and working from home). Not that I think I could eliminate daycare costs entirely while also working full-time from home, but it could help expenses. I plan to freelance in a few years anyway, whether we have a baby or not.

So I’m optimistic that if we do have a baby, we will be able to raise the baby comfortably without getting off track on becoming financially independent in 7 years from now. Being a parenting n00b, I’m probably missing some major cost, but ahhh, what is life without surprises. 🙂

Travelling vs. driving a BMW

travel

Travel is my thing, and if I amortize the cost of our travel over the year, I easily spend what Mr. German spends on his BMW! (about 300 EUR per month)

So I can’t really pick on Mr. German’s auto choice, since he thinks I pick on him for that. 😕

To tout the BMW’s horn, it benefits both of us regularly throughout the year, and also contributes to Mr. German’s ability to earn an income (since he uses his car to commute to an office that is difficult to reach with public transit). While I don’t drive the car much, it’s also helpful for me to have easy access to a car when needed.

OTOH, my habit of travelling is concentrated to a few days or weeks throughout the year, does not contribute at all to income generation, and is also not very relaxing due to my travelling style. Travelling also tends to benefit me more than Mr. German, since Mr. German is not thrilled about any distant travel.

I’m trying to cut down on my travelling though. Like last year I did not travel at all internationally (for leisure), and this year I’m also planning to stay the course. This also means though, that I likely won’t see my parents and my 90 year old Grandma for 2 consecutive years in total. I spend most of my travel budget on visiting family.

Did I mention I’m close to my family? 😦

But! There are other reasons why I’m resisting going back to Canada. That’s because I can get quite homesick, and visiting my home town only quells the sickness temporarily yet makes it more difficult for me when I return to Germany. The emotional rollercoaster is too much for me to handle, so I’m choosing to focus on building my life here in Germany with no interruptions.

It’s better for my long term comfort, especially since I’ve decided to stay here in Germany until we retire (in 7 years).

There’s also so much going on with us right now. We’re trying to buy property, set up our FIRE strategy, and also get pregnant.

The pregnancy thing alone is enough to make me not want to travel. I can’t imagine how un-fun it would be to travel while pregnant.

So while I love travelling, it’s better that I don’t plan any long, faraway trips in 2015 at least. I’ve also travelled enough to scratch the itch, so I can take delaying travel for now.

Planning for the future as newlyweds

newlyweds1year

Mr. German and I have been stressed about our future goals. This is one of the difficulties of being newlyweds, I think, because before we were married, we weren’t thinking of merging our finances and/or making long term [financial] goals together.

We have been married for 1.5 years now. Admittedly, it has been a very stressful 1.5 years trying to figure out what to do.

I would say that Mr. German and I have very similar financial goals, but our execution differs by a lot.

Obviously, I’m into a lifestyle that prioritizes and accelerates achieving financial freedom. I have a road map on how to get there, and I plan on getting there in 7 years or less.

Mr. German’s method is to work hard, be frugal, and save. But without much thought because finances are boring.

This would all be very simple, IF we lived in Canada. I know how things work in Canada, plus I can read & write & speak English! But living here in Germany requires me to go through Mr. German on everything administrative. Setting up accounts, tax considerations, phone calls, implementing a strategy… all the things he hates to do and/or think about.

It is really frustrating to both of us.

We have to work together even more intensively than if we lived in Canada, because while we’re living in Germany, we can’t capitalize off my strengths of planning and setting up our structures.

Mr. German really has to pull his weight here, under my direction. But you can probably guess how this dynamic can get tense.

He has been doing a great job though (thanks dear!), but still, it ain’t easy. I keep having to remind myself that these are *good* problems to have, because they are. We have money and need to do something about it! That’s a mighty privilege to behold.

Of course, a solution could be to move to Canada, but Mr. German is not keen on it. For now, I think living in Germany is fine. We just have to get over this hump of setting everything up. Once it’s set and we fall into a groove, things will get better.

Caravanning in early retirement

campervan

When we retire, I envision us fixing up a camper van like the one above, and taking our sweet time caravanning around Europe.

The interior looks quite cozy.

OLYMPUS DIGITAL CAMERA

We could also consider shipping it over to Canada, and taking a cross-country road trip.

Canada

It’s been my dream for a while to drive across Canada. I’ve just never had the time to do it, and think early retirement would be the best time for it.

Life has so many possibilities when we’re financially independent and not chained to our jobs!

No thanks to careerism

cartoon-woman-and-ladder-187x300

Climbing the career ladder is within my reach. Because I have a ‘good attitude’, I attract a lot of people at work who want to help and groom me to be career-successful like they are. It’s incredible how many helpful people there are in the world. This is very nice, and I like making friends, but I don’t really want to move up in my career.

Even if I could earn more from career progression, I don’t think it helps my FIRE goals. Taking on more responsibilities at work would only mean stress for me, and that’s not my goal. I would rather have 7 relatively easy working years, rather than 5 stressful years.

Working is largely meaningless to me. I pretend to care about it (at work), but really I don’t care much about it. Asides from working being a means to an end.

I want to live my life!

It pains me to sit in my office attached to my computer, while the world is out-there waiting for me.

The corporate environment is not really for me. Imagine a hippie working in an office – that’s me! Except I look like a yuppie (think fitted pant suits), which is a look I’m comfortable with. But still, I would prefer to be at the beach surfing, hiking mountains, and volunteering at organic farms and animal sanctuaries. Also hanging out with my Mom!

Where to live and whether it matches our FIRE goals

Fire flames isolated on white background

Currently we pay about 610 EUR per month for rent, which is affordable, but we think the place is worth max 500 EUR per month based on other comparables in the area. Since we are interested in FIRE-ing, we can find much better uses for an extra 100 EUR per month!

So we’ve been toying with some options, but keep going back and forth on what we want/what is feasible. Mr. German and I are really different, so that can make it hard to come up with a solution that suits us both. *sigh*

As with all blog entries here, I’m writing to figure it out, while also communicating to Mr. German in a way that is not overbearing to him (he is new to FIRE and personal finance in general).

Goals

It’s important to keep both of our goals in mind.

Ms. Canadian Expat’s goals: to reduce our housing costs to 400 EUR per month or less, so that we can balance out the cost of our car (!), and put the extra money into the stock market to generate passive income. I need to generate enough passive income so that I can retire from my field in 7 years. Ideally, I would like us both to be able to leave the workforce in 7 years (if we want), so we can be FREE and do things more fun than working 50-60 hours a week!

Mr. German’s goals: to live somewhere comfortably, that is cheaper than where we live now, but not so far-out that it makes it difficult for my dear wife to commute (she already commutes 1 hour to work each way); to be close to nature, and to have time for hobbies that don’t involve talking about FIRE-ing in every single conversation!

^ I’m paraphrasing Mr. German here. If he wants, he can help me clarify his goals further, but that seems to be what I get when we speak about it.

options

Here are some options we’ve been toying with.

Option 1: Buy a ‘normal’ flat in our cheap city. I wrote about it here. We’ve been looking at 2 bedroom flats near the main train station. Ideally we’d like something we can afford in cash, because anything that involves a mortgage will mean we will be paying more than 610 EUR per month, which makes achieving the 4% rule (our FIRE goal) harder to do in 7 years.

Cons: Hard to find something that we can afford in cash; can’t find one we like or agree upon; we keep changing our minds/arguing about this. 😕

Option 2: Buy a studio apartment in our cheap city, and use tiny home design ideas to make it functional (like what these 2 Brooklyn roommates have done!). We had considered renting a studio for about 300-350 EUR per month, but in reality, landlords only want to rent these out to singles. So, why not buy a studio instead? We can comfortably afford this, while still having some cash left over for my stock investment strategy.

Cons: Mr. German is not so comfortable with this; it requires potential renovation work, and we both work busy full-time jobs; more pressure on Mr. German who is the handy one out of the 2 of us and also the German speaker; we may have a baby soon, which may make the space tight; if we don’t like living so small, it may be hard to sell and we don’t prefer to be landlords.

Option 3: Find cheaper rent. We can easily find something in the 400-450 EUR range in our city, in an area that we like. We haven’t done this yet because we can’t decide on whether we should continue renting or buying. We’ve actually switched sides on this issue. I used to want to own, while Mr. German was more hesitant about it. Now he is all for owning, and I’m less committed to it. I’ve mainly ducked out of searching for apartments and instead, have focussed on setting up a stock investment strategy for our passive income stream. But if Mr. German can find something nice, I’m also fine with buying.

Cons: a feeling of living in a temporary space; potentially missing out on getting into the real estate market while it’s still affordable; installing a kitchen in someone else’s space again (many flats here don’t come with kitchens, making moving a huge PITA!).

Option 4: Staying put in our [overpriced] flat. We really like our flat, we have a great view, and it’s easy for both of us to commute to work. We’re also right across the street from grocery shopping, and 800m away from the forest where go mountain biking every weekend (or everyday for Mr. German). Living here saves us a lot of time and hassle. One of the reasons we haven’t moved yet is because we can’t find anything as good as what we have here. Lifestyle-wise, this place hits all the marks and keeps things simple for us.

Cons: Overpriced rent, feelings of not getting a good deal, not being open to change.

Anyone have ideas for us? We’re open to what you think!

I lean more towards option 2 (buying a studio) or option 3 (cheaper rent), while Mr. German is more for option 1 (buying a nice flat) and 4 (staying put). Of course, life can’t be totally agreeable between us. 🙂