November 2020 Update

In November, our net worth rose 12.04% and 10.91% to $83,765 and €70,155 respectively. This was after two months of greater than 5% declines.

The main reason for this is that the stock market did very well in November. It'd been a rough couple of months leading up to the US election, but November's performance more than made up for that. Some of my individual holdings really just exploded upwards, and some of the weaker positions regained some ground.

The main driver is likely the good news from the various coronavirus vaccines. I wanted Joe Biden to win, but I'm under no illusions about the market rising because of his victory. The virus and the resultant economic pain and disruption are the alpha and omega right now.

This past week was Thanksgiving, which I celebrated only by video chatting with some family in the US. My wife and I didn't prepare a giant meal since we're being good social-distancers, and a couple pizzas were just fine. I remain thankful that we've remained healthy, and that our careers haven't been too negatively impacted. It could have gone differently, but through luck we've gotten through this so far better than many. I'm thankful.

October 2020 Update

Our liquid net worth fell 5.07% and 6.51% to $74,763 and €63,252 respectively in October.

The reason for the fall is entirely because we bought a piano, and they're expensive. We actually ended up getting a better deal than expected, which will save us about 1k EUR, but it meant receiving it now rather than later. To keep myself honest, I've listed it on our balance sheet as a liability since we'll be paying for it over the course of the next year. It's a rent-to-buy: we'll be making payments while simultaneously saving for the lump-sum payment we'll have to make in one year. However, there's no interest accruing, and the price we could have paid all at once was the same as the price for rent-to-buy.

You can see the liability on the chart as a pink mass below the zero line.

Otherwise, stocks performed surprisingly well. We saved some money. I got an automatic raise due to my employment length with the company. It's the kind of raise that helps a little now, but over the course of years it really adds up. My wife is working more hours.

New COVID Lockdown

Yesterday, new coronavirus-related rules went into effect across Germany, which limit certain activities. We're allowed to go outside, and while my wife's profession isn't currently impacted, my company can't earn any revenue for the next month at least. We've been assured that it's not an existential crisis, but of course the mere mention of that idea raises alarm bells.

It's good to have savings in a time like this, though we wish we had even more. I can hear you now, "Then why the hell did you just buy a piano?" And the answer is because it was important for my marriage, which is more important than any one bout of employment. It was clear that this was very important for my wife, and I think my company will most likely survive this.

The alarm bells are nevertheless a good reminder to keep socking away cash.

I'd Hoped to Quit my Job 5 Years Ago Today

On my phone this afternoon, I got a popup from my todo app "Quit Your Job".

I laughed and left it up to admire it. Looking at the notes section of the task, I saw, "I want to be able to quit within 5 years. Written on Sunday October 4, 2015."

Unfortunately, I'm not able to quit my job. However, by setting an impossible goal, I paid off my student loans, saved a lot of money, kept myself out of debt, and avoided major financial pitfalls like buying cars.

I could have done more, yes, but what exactly? I moved to a more expensive part of the city, but the benefits to my life were too great to pass that up. Seriously, my rent was crazy low before, but we were miserable in a lonely part of town that forced us into a long train commute. We've made some big purchases, true, but we've avoided others.

I won't quit my job today, but I'm a lot closer to that dream than I was then. So I'll defer the task for another five years, and we'll see where we are then.

August and September, 2020 Update

Our net worth rose in August by 8.34% and then fell in September by 5.96% in dollars. The EUR figures are similar.

In August, we, along with anyone who owned stocks corresponding to the U.S indexes, saw our wealth shoot up rapidly. It was both fun and unnerving, since the biggest news related to Apple and Tesla's stock splits. Sure enough, shortly after both companies split their stock, the markets began to fall.

The good thing about having survived March by just watching prices plummet, is that normal corrections barely register. Now, if we suffer a protracted decline à la 2001-2002, that might be harder to stomach. But the truth is, I'm not done saving: I want prices of great companies to fall. I was nervous in August because I knew we wanted to buy more stock, rising prices now lowers future returns.

The Election

I am not changing anything about my financial goals in response to the election. That doesn't mean I'm not worried. I've imagined all sorts of horrible scenarios, such as:

• Consequences for Americans abroad due to strained relations between the US and its allies
• A closing off of American society that begins to affect the lives of Americans abroad
• A drastic change to the tax code that doesn't adequately incorporate the needs of US expats
• A collapse of the rule of law in the US
• Major civil unrest and/or civil war

I hope none of these things happens. I don't think any of them will (though the US probably isn't done writing tax laws that harm citizens abroad), but I'd be a fool not to imagine them, especially since things like this have already happened.

It's worth imagining. It's also worth remembering that the U.S. tends to figure its problems out and that having some faith in the country is likely the best course of action. You know, it's the "Triumph of the optimists".

Outlook

I'm not expecting a major change in October. We're continuing to save for the piano, and we've planned on renting to buy beginning in December. That will cost us more money vs. buying it all at once, but I view it as buying an insurance policy: just in case the world falls apart and I lose my job, I have an out. If we get to December 2021, and all is well, it will be easier to part with the full cost.

Good luck out there. It's a weird and stressful time. We've been getting some laughs by watching Cobra Kai on Netflix. I've heard it described as a guilty pleasure, but I don't feel guilty at all liking it.

Net Worth Update: June and July, 2020

In June, our liquid net worth¹ increased by 8.01% in USD and 5.7% in EUR to $68,000 and €60,606 respectively. In July, it increased 13.67% and 9.48% to $77,298 and €66,350 respectively.

The biggest factor in both months was the stock market. Like anyone who held positions similar to the overall market, we experienced terrific growth. It is counterintuitive that in such a moment, with as much economic hardship as exists, that the stock market should be on such a tear. I honestly don't know exactly what it is that the market sees, and I won't pretend to. I listen to a lot of stock market talk, and some experts claim that this is a bubble that's likely to pop at any moment, while others say otherwise. It's pointless to try and act on this chatter. I know what my time horizon is, and I hold.

Cash is King (Sometimes)

One thing I haven't been doing, however, is buying. Our savings the past few months has gone exclusively to cash. That's not a stock market timing call but rather a series of tactical moves given the relative uncertainty of the moment. I know that we have certain large expenses in the future, but I don't know what my wife's income will be, and it's hard to guess it more than a few weeks out. Therefore, I've been preemptively saving to knock out those costs whenever they arise, in order to prevent having to scramble to pay for them from that month's cashflow. You might be thinking, "Well, duh, that's the way savings works," and you'd be right. But our situation has changed enough that we have to do this for stuff that we could previously just pay for out of cashflow.

That means saving early for tax preparation costs, estimated taxes, and large purchases. We've also been continually adding to our emergency fund. An emergency fund is basically early saving for known recurring expenses in addition to surprises, after all. One unsettling aspect of this pandemic is that my industry has been especially hard hit, and my seemingly secure job doesn't feel as secure anymore.

A couple of large cash infusions also buoyed these months' changes. In June, we deposited the stimulus check that was sent out. US expats who file their taxes were also eligible, and we were happy for the money. Secondly, my employer paid me early for August, and without any message from them, I truly don't know what that was about (new employee clicked the wrong button on the bank website maybe? I've done it).

And on top of that, because most of our cash is in the euro, the recent upward spike of the euro's value has made that lump more valuable in USD.

Vacation?

Although it's summer vacation time in Germany, we have decided to stay home. And by home, I mean our apartment in Germany. We contemplated some trips, but hotel prices in Germany weren't low enough to really make it worth our while. Outside of Germany, some prices are incredible, but we quickly wrote off getting in a plane or bus or long distance train, especially since those prices also aren't all that great.

I will say, the FOMO is real. The weather's also not been very summer-like, so it's been kind of lonely and dark. We've used the time to take care of some home improvement projects, and I've been using FaceTime more often to get in touch with American family.

---

1. This includes: bank accounts, investments (excluding German private pension but including US IRAs), credit cards, rewards programs valued at 1¢ per point, cash, installment plans and any other debts. ↩︎

Net Worth Update: May, 2020

This is late, but our liquid net worth increased in May by 10.46% in USD and 8.95% in EUR to $62,959 and €57,340 respectively.

Honestly, that feels like an absurd number to report considering the economic upheaval happening around the world, but whatever the stock market is doing, it helped us in May. Of course, we're not especially wealthy, so a 10% increase meant around a $6000 change. But whatever the case, I'm happy for the positive month. I hope the asset price optimism is worth it, and that the stock market's implied future situation for the worldwide economy is correct.

Additionally, I got the last of the assistance payments for my dental work. In all, the dental work was a big cash suck (over several years), but the various bits of help from my insurances lightened the blow a bit.

Why Late?

There are two reasons this took me longer to publish than normal.

The first is that I didn't succeed in coming up with the non-liquid NW number. It turned out to be more complicated than I expected. For example, we'd need to estimate the value of both my and my wife's Social Security value as well as our Deutsche Rentenversicherung value. It's certainly doable, but it's tricky.

The second reason is that with the protests happening in the US and abroad following the murder of George Floyd, it felt tactless to write about how I made money in May. Maybe it's no better this week to do it, but that first week of June felt like attention should be focused on the protests and the issues surrounding them.

Despite the fact that I'm trying to improve our economic situation by saving as much income as is feasible, I recognize that the system has major flaws that leave a lot of people out. I think those of us trying to take advantage of the capitalist system as it stands should look at those failures and be honest about them. I don't have any answers to offer about those failures, but the first step is acknowledging them.

June Forecast

As has been the case since the start of the pandemic, my wife's income has been hit hard. I'm incredibly lucky that my job has survived thus far, and my pay hasn't been too adversely affected, but our household income is down a lot.

We got our US stimulus check in May, and after several weeks of trying to figure out how to deposit it, we finally succeeded. So that will be part of the June change.

And of course, the stock market is going to do whatever it does. This last week was crazy volatile, and I expect that we'll see lots more of that.

Net Worth Update: April, 2020

Our net worth increased in April to 8.68% in USD and 9.68% in EUR to $56,998 and €52,630 respectively.

After two months of declines, the numbers reversed with one of the best months for stock longs in decades. That was the primary basis for our own results because our income was definitely down. I earned less at the end of March than usual, and my wife's income was also depressed.

Because I own a mix of growth and value stocks, individual stock performance was all over the place. Some got creamed in March and barely recovered during the April rally, while others roared back to all time highs. Already, some companies are announcing cuts to their dividends, which I'm not worried about: I prefer that they cut their dividends than risk the viability of the firm.

We did pretty well with our savings, saving 35.51% of our mixed pre/post tax incomes. Our spending was drastically reduced in April, and I suspect that May will be the same. One area where spending remained high was groceries. Despite using some Payback points (a popular European loyalty program) to get about €100 in grocery store vouchers, we still we on the high end of our budgeted amount. Part of that was my elevated alcohol consumption at the beginning of April (even the cheap stuff adds up), but I'm still a bit surprised. I guess by not eating out ever we're just eating more groceries.

Re-thinking How I Calculate Net Worth

Currently, I add up the follow to come up with net worth:

• Bank accounts
• Investment accounts (including tax-advantaged accounts)
• Credit cards
• Loans (0 currently)
• Installment plans for large purchases (0 currently)
• Cash
• Loyalty programs with a clear cash value
• In both USD and EUR

However, we have other stuff that has value and should be added in, such as:

• Defined benefit pension
• Social security in the US and Germany
• Physical assets with some kind of sale value
• The remaining value of our labor

That's definitely part of our worth! If I took out a life insurance policy on myself, I'd try and value what my income means to my wife, and some kind of discount cash flow model would probably be the way to determine the value of the policy.

Plus the "stuff" we have has value. Just looking around the room where I'm sitting, I could probably get more than a few thousand for the random bits of technology that we have. Now, to be sure, those are depreciating assets - meaning they lose value over time - but they're assets and should be counted as such. And that's before we get to owning large physcial assets such as a house or car.

There are two reasons I haven't included them before:

1. There's a certain amount of guesswork involved in valuing these things. A DCF (discount cash flow) model has some major assumptions baked in, for one, and guessing how much I could get for a computer or camera or dining room table is tricky. Unlike cars, there's no Kelly Blue Book for most depreciating assets. I'll probably use eBay averages to get a sense of what something's worth, but it's still an assumption.
2. None of these are liquid assets. Although they might be part of my monetary worth, I can't spend this stuff. I couldn't access my pension or SS, and turning a coach into cash is hardly instantaneous. That said, my IRA accounts in the US also aren't liquid: the tax consequences are so onerous that it would be absurd to turn those into cash and spend them.

Therefore, I'll have to arrive at two numbers: a "total" net worth and a liquid net worth. I think for most people interested in FIRE (Financially Independent Retire Early), the liquid net worth is the more important number.

I think I'll have this ready to go at the end of May, but that's only a guess.

Until then.

Net Worth Update: March, 2020

Our net worth dropped since this time in February by 12.16% in USD and 12.48% in EUR to $52,448 and €47,985 respectively.

The reason is obvious. Our stock portfolios fell precipitously as Europe and the United States responded aggressively to the COVID-19 pandemic.

Big Picture

Thankfully, I still have my salaried job, and my employer has stated that we're at no risk of dissolving. My wife's work hours have dried up considerably, but she is still working over Zoom for those clients who can still manage it. My sibling still has a job despite vast layoffs. Both parents have Social Security at least and one has a healthy retirement portfolio.

Most importantly, none of us have caught the virus yet. However, I don't know how long I can expect that. Two family members live in one of the hot-spot cities in the US. One parent is working again and coming into contact with people. I have nagged them to take precautions as far as is reasonable, and I have to trust them to take care of themselves.

As of right now, I feel like I'm in an enviable position, and I consider myself very lucky. But when I see charts like this:

Or this:

I recognize that anything that affects so many people will eventually affect me as well. It's just a matter of time, and I've been mentally preparing as best I can.

Savings Rate and Other Factors

Our savings rate of our mixed pre/post tax income was 46.3%. Easiest way to get your savings rate up is to hold expenses steady when you earn more money, and this month is clear evidence of that.

I received an outsized payment at the end of February due to some extra work I did. My employer also gave me too much money, and that will be taken out of my end-of-March payment. That will obviously hurt April's savings.

We paid estimated taxes in March. Fun fun.

We spent much too much on groceries this month. We didn't stockpile aggressively at all, but we ended up well outside of our budget.

We received a refund for overpayment of health insurance for my wife. Because she's self employed and utilizes the public system (the gesetzliche Krankenkasse), her payments are based on income and fluctuate every year.

April

April is going to be tight. I wish I had a lot more money to throw at the market or our emergency savings, but it's not going to happen unless we get one of these stimulus checks from the IRS in the next few weeks.

Good luck and stay healthy.

Self-Assessment: Early Coronavirus Edition

Now that our situation has settled into our new reality, which I'll call "Semi-Self-Imposed Lockdown," I have some time to think through our position and evaluate what's going well, and what's not going so well.

What we did well leading up to this crisis

• We have an emergency fund. I don't think it's large enough, but I'll get into that with the critiques section.
• We have a stable income. My job is such that I am unlikely to be laid off during this crisis. My wife's work scales up and down, which makes it more vulnerable, but there's no point where she's "fired": work will simply start to come back over time. Because of her stability via my income, she may come out of this with an even stronger position.
• We have liquid investments that could be turned into cash if necessary. I really don't want to turn them into cash, but if it were absolutely necessary, we could probably survive a year off of our current investments.
• We always tended to buy large amounts of shelf-stable food. We still had to go to the grocery store a few times at the start, but we could have eaten our stores of stuff if we felt it wasn't worth the risk.
• We have a large amount of unused credit on American credit cards. If we had to, we could run up a giant credit card bill. It's wouldn't be ideal, but having credit is better than not having it.
• We live in a country with a social safety net and a willingness to help its residents.

Critiques

• Our emergency fund wasn't large enough. Currently, we could last a month to two months with our emergency fund. Despite my employment stability, it's not a 100% guarantee that I come out the other side of this with a job if the German economy collapses for years. Although I'm unlikely to lose my job, I am also unlikely to easily get a new job quickly if I lose this one.
• We don't own our own home outright. Renting has long seemed the wise course of action, but not having to make rent payments would go a long way towards easing my mind.
• We don't have enough over-the-counter drugs. We have aspirin and some anti-histamines, but we have no expectorants, NSAIDS other than aspirin, acetaminophen, not to mention rubbing alcohol. The German Apotheke system is great when you get a prescription, but it makes getting certain normal items more challenging than in the US.
• My investment portfolio is not diversified enough amongst asset classes. I should be holding some bonds, for example, and I'm not.
• I came into this with margin debt. Holding margin debt years into a long-run bull market is dumb. Full stop.
• I underestimated the risk of pandemic to my investment portfolio and to my life.
• We should have larger food stores. They sell giant bags of rice here, and we should probably always have at least one. Likewise lots of pasta. Likewise lots of soy milk (the cartons keep for a long time at room temperature). The risk isn't so much that we'd run out of food due to shortages, but instead it's risky going outside right now to stand in a supermarket line. Minimizing grocery store trips is important right now.

Some Action Steps

First, I need to separate out our savings into clearer buckets. I've been dumping everything into the Tagesgeldkonto (savings account), even though I'd mentally earmarked it for taxes or tax prep costs. One account should be strictly for the emergency money, and it should get steady contributions to it until it reaches the famed 6-months-of-expenses level. It's possible that FATCA will make this more difficult than it should be.

Second, we should be saving money to buy property. That needn't have a specific end date, but it's one of those things that gives us optionality should a compelling offer arise. Somewhere I read that Ramit Sethi saves some money to buy a house/apartment not because he definitely wants to buy one but because having the option is worth it.

Third, I need to go to the Apotheke and pick up some useful over-the-counter drugs. I could also order them online.

Fourth, I should build a 10% position in long-term bonds. I can buy individual bonds in Interactive Brokers no problem. The interest rates are garbage, but they provide stability and rebalancing potential in terrible stock market situations. And at the end, you get your money back.

Fifth, I shouldn't use margin.

Sixth, this blog post is my attempt to come to terms with pandemic risk.

Seventh, honestly it would be irresponsible to try and build up large amounts of food storage right now due to the general run on the grocery stores that's happening. But once the shopping situation improves, we should get on that.

Rethink Risk

Lastly, I need to reevaluate risk. I'm not going to do that by selling stocks right now. That moment has passed. But the way I was using my money was clearly riskier than I appreciated or wanted.

I have to find a new way to judge my risk tolerance and build a portfolio of assets that match it. At the same time, this crisis will subside, and we all have to make sure that we're not just fighting the last war but imagining what new surprises might come our way.

Constant Acceleration of Coronavirus News

In the past few days, it feels like the news is accelerating rapidly and in ways that directly impact us:

• The United States is no longer accepting travelers from the Schengen area of Europe, including Ireland and the UK and my personal expat home of Germany. If I were to find a flight back, according to the consulate in Frankfurt, I would have to self-quarantine in the US for two weeks, though it's unclear how that's enforced. Basically, this renders all vacations into the US impossible.
• Germany has closed its borders with France, Denmark, Austria, and Switzerland.
• Restrictions are going up on businesses, including restaurants, clubs, gyms and shopping centers. Many will be forced closed, while others will only be able to operate in shortened time windows.
• The stock market had its worst one-day crash since the 1987 crash.

And there's so much more happening, such as the restrictions going up in municipalities in the US and other European countries, that I can't list out here. It's too much.
Over the weekend, there was a clear shift in tone about this outbreak. Friends who posted skeptical memes about the virus aren't posting that stuff anymore. I have a colleague who felt safe enough to travel outside the country over the weekend and is now worried about if and when he'll be able to get back. I've been saying no to social engagements in an effort to practice "social distancing," and no one has pushed back. My employer has suspended most in-house work for the time being. My wife's work is drying up. I will continue to be paid my salary, but we are facing a definite reduction in income.

On the upside, I've had more time to contact friends and family in the US. They're less busy, and so am I, so it's been good to reconnect. There's also less temptation to spend money! So I got that going for me, I guess.

I'm continuing to hold my stock positions, but it hurts. Many have been hit much harder than the market as a whole, and I have to remind myself why I purchased them. Focus on the picture 20 years out, and it becomes easier to sit tight.

Otherwise, my wife and I are having to adjust to our new realities of being complete homebodies. And of course, we hope that we don't catch this thing.

Spoke too Soon

In my previous post, I wrote that the S&P 500 was below its 200 week moving average. But after yesterday's crazy rip, it closed above it:

How to interpret? I don't know. But I find it noteworthy.

Take the Power Back

It's stunning how quickly everything in the world is moving due to coronavirus:

• Like many organizations, my company has suspended some operations to prevent large social gatherings.
• My wife's business has seen cancellations out of fear.
• Stock markets feel like they're properly crashing. Unlike 2018 or 2016, the S&P 500 is well below the 200-week moving average. That alone makes this look like 2008 or 2001.
• Not to mention, there's the giant oil price blowup.

I took steps weeks ago to manage my risk. I sold my lowest conviction positions, and I extinguished all my margin debt. I'm fully invested (not including our emergency fund) and don't plan on making any adjustments to my existing portfolio. I've made my bed, so now it's time to sleep in it. When I get paid, I'll continue purchasing assets and setting aside cash for our cash buffer.

But more importantly, we're having to face the very real real-life possibility that we and/or many people we love will get ill and, possibly, die. I believe it's important to simply be honest about this and begin to adjust to the reality.

I have two parents over 70. I also have two grandmothers. My sibling in the US is in a densely populated city with rising numbers of infected. My company has around 500 employees working in close contact with one another, and some are definitely high risk. My city is one of the largest in Germany, and cases are increasing here.

It's funny going to the supermarkets here and seeing sold out soy milk or pasta or toilet paper. All those purchases were made out of an attempt to prepare, as if hand sanitizer or toilet paper meant you could control the outcome. Yes, yes, wash your hands, and stop touching your face. This has long been a good standard practice, so even after coronavirus, you should keep this up.

But the preparation must be more in your mind and less in your pantry. We must think through what reality might look like in the coming weeks and months for us. Only then can we make rational choices.

You might have some risks that you need to deal with. Some social distancing is wise. Some financial risks carry "blow up" potential, so deal with them as rationally as possible and move on. However, try to avoid waving your hands and justifying poor choices -- such as selling out of all equities after a big drawdown -- out of fear. We are awfully good at justifying poor behavior, so try and resist it.

And this needn't be a dark process. I've been actively reminding myself of what I enjoy. I enjoy reading. I enjoy music. I enjoy playing guitar and taking pictures. I enjoy exercising. I love my wife. I love my family. These are all things I can have more of if I choose to.

Just as you can. Take whatever power you have and use it to love your life.

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.

Morgan Stanley Buying E-Trade is Ominous for Expats Abroad

I don't like dealing in FUD, but that's exactly what I felt when I read the news that Morgan Stanley would be buying the broker E-Trade.

Recently, I've been doing some research on what brokerage was best for normal American expats who want to buy securities with USD but also give their foreign residential address rather than a US address maintained by a relative. I started putting together a spreadsheet, thinking that I'd find a handful with different upsides and downsides.

But honestly, it was worse than I imagined. Nearly every broker's website I visited required a US address, and if a foreign address was allowed, many brokerages would explicitly refuse to allow US citizens living abroad onto their platform. Yes, you read that right. So as of right now, I can find two brokerages that will let an American abroad be honest about their foreign address when creating an account:

All hail Interactive Brokers and Charles Schwab. I use IB, but I'm grateful to both for sticking by us.

Because of this dearth of options, I am worried about the consolidation of online brokerages, and I hope that IB can resist being bought out by a rival who then eliminates US expats from its customer list. Some American friends of mine living in Germany starting an OptionsHouse account back in 2015. OptionsHouse was that rare unicorn who allowed US investors abroad to open an account with a foreign address while being a US citizen. In 2016, E-Trade bought OptionsHouse, and if you try to sign up for E-Trade now, they require a US address but allow a foreign mailing address.

So far, my friends have been allowed to maintain their accounts with their foreign address, but with Morgan Stanley now buying E-Trade, I wonder how long that will last. In 2015/2016, there was a wave of account closings for expats who held their assets at some online brokerages, and with our reliance on the goodwill of a few companies, I'm waiting for the day when another wave starts.

Hopefully that never happens, but our dependence on a dwindling number of companies willing to have us as customers is, bottom line, a risk.

Driving is Absurd

The longer I live without a car, the more absurd driving seems to me.

Maybe it's not even really "driving" but car ownership that's so strange. Buying a car is an absolutely enormous expense. Despite approaching middle age, I've never considered going to a dealership to inquire about vehicles. I guess I could, but why would I? I'm hesitant to buy much less expensive stuff, and a new car just seems like an enormous obligation.

I owned a used vehicle for years while living and working in the US. I know the arguments about how necessary a car is there, and for some of my activities, a car was an absolute necessity. But I'm not certain that those activities themselves were absolute necessities. I ended up doing a lot of things that I never would have done had I not had a car, so, in a sense, it cost me twice by owning the car.

I spent so much money on gas and maintenance. So much of my mental space was clogged with mystery noises coming from the wheel wells or from the engine. It took many trips to many mechanics to find a mechanic that I trusted, and all that meant was that I could spend money with less worry. But I still had to spend the money!

Moreover, cars are dangerous. It's both amusing and annoying how easily freaked out many people are about all sorts of low risk subjects while being completely inured to the dangers of their cars. Last summer, I turned down an invitation because I would have had to have driven there with a rented car, and -- in addition to the financial costs -- driving would have placed both me and my wife at risk. "Is this trip worth the potential costs?" Increasingly, that answer is, "No."

Even without a car, I am affected by them. The air where I live is dirtier, and there is background distress about the pollutants we're breathing. The floor in our apartment builds up a dirty film when we open our windows in the summer thanks to the busy street out front. Walking to work requires serious concentration because the drivers out front are always in a hurry and are super aggressive. I've nearly been hit by cars running red lights here, and I've watched other people nearly get hit by cars. And this is despite the rigorous training German drivers go through.

Oh yea, they're really loud.

And how about the vast amount of space given over to cars? Pedestrians have to push past one another for a narrow bit of uneven sidewalk, while the cars have multiple lanes and huge parking structures given over entirely to their use. It starts to feel unfair once you no longer take part, and it's easy to get resentful that so much stuff is sacrificed to this idol. Thankfully, in Germany, there's always a Fußgängerzone, but that's one of those instances where the exception proves the rule: it shows how the default is automobile driving.

All that said, I can't guarantee that I'll never own a car again. It could happen. If we moved to the countryside or had kids or did a job where driving or hauling stuff became absolutely necessary, then maybe we'd buy a used car again. And I'll certainly drive again: whenever I visit the US, there's nearly unavoidable car use involved.

But I'd rather not if at all possible, and it is an idle wish of mine that cities and countries would back off from further sacrifices to this idol.

Net Worth Update: January, 2020

Our net worth increased from Dec. 26 to Jan. 26 in USD by 4.72% and in EUR by 5.48% to $62,387 and €56,561 respectively.

Some Changes to the Chart

This is the first time I've broken out the holdings in my taxable brokerage. I didn't do this by individual securities but instead by currency and cash amount. Since I have some securities based in euros in addition to dollars, I have split those up. You can see that reflected in the slightly higher euro assets.

Additionally, I'm using a ~10% margin position in euros. Namely, I sold euros to buy dollars some months ago, and I would like to have that debt acknowledged in my spreadsheet and chart. After long consideration paired with the low interest rates my broker charges for euros, I thought it a good idea to lever up a little bit. 10% is a very mild levered position, but it's still mildly unsettling: I am in debt, and I pay interest on that debt. It's worked out so far, but I want it to show, and you can see it in the sudden amount of euro liabilities.

I plan on going back and adjusting the previous months to show this change, but there's no set schedule for when I'll do that.

Major Factors in the MoM Change

I tried to be aggressive with our saving overall, and we saved around 37.5% of our blended income (post-tax for me pre-tax for her) this month. Some of income came after I finalized the spreadsheet: I got one of the refunds I've been expecting for my dental work, so it will be reflected in next month's net worth change.

In addition to that refund, I got some random income boosts. We both got some gift money: since we live abroad, those who wish to give us gifts often just send money. In addition, a colleague hired me for some extra work and sent that money straight into my bank account. That story deserves its own post.

The stock market performed reasonably well, though it wasn't a crazy positive month.

Possible Big Purchase in 2020

After thinking we wouldn't be buying anything large, my wife and I discussed 2020 money goals, and she mentioned a large purchase she's interested in: a piano. In my mind, this might eventually happen as an ongoing rental or a fixed upfront cost of 1000-4000€. I have some math to do!

We also haven't made fixed plans for the summer. The summer trip to see family is often our biggest outlay for the year, so that's a big wild card.

February Outlook

There's one final dental cost refund that I expect to happen in February, but otherwise, I don't expect any big cash infusions beyond our normal income. 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.

If You Buy It to Keep It Forever, Then You Need to Actually Keep It Forever

Last month, my wife's computer died.

The trackpad started glitching out, the battery couldn't hold a charge despite not being very old, and it had trouble accessing the boot disk. After some basic triaging, I determined that any potential fix was worth more than the computer was.

It was totaled.

I bought that computer in 2011 for my personal use before giving it to my wife. Back then Macbook Pros were upgradeable without too much fuss: if you wanted to add more RAM or a larger or faster disk, it wasn't difficult at all. And that's exactly what I did. I doubled the RAM in the first year, then I bought a 1 TB hard disk, and then, once prices were more reasonable, I bought a SSD and added it.

The computer, amazingly, got faster over time. OS X "Lion" was truly awful when it came to speed, but in the years that followed, OS X and subsequently macOS got faster. That combined with my hardware upgrades meant that the machine even in its final years felt speedy. In many ways it was faster than the "upgrade" I bought used via eBay that was manufactured a couple of years later.

In addition to the upgrades, I also made repairs. The most significant was changing out the keyboard after it started glitching out. That was a major operation that lasted many hours, but it fixed the problem for much less than a new computer. I also changed the battery and replaced faulty RAM sticks. When colleagues had problems with their Macs of this vintage, they'd bring them to me for the repair. This actually got us a free used computer after I revived a Macbook Air with liquid damage that the owner had given up for dead.

When I bought it, I paid up for several upgrades, but I was determined to wring every ounce of life out of that computer. And I did until it finally became untenable to do so anymore.

This is not meant as an endorsement of Macs, but instead, it's meant to be a reminder: if you pay up for something because you believe it will last a long time, then you actually need to use it a long time to get that value from it.

I've saved myself a lot of money on unnecessary replacements by asking myself, "Did I buy the thing I want to replace while thinking that I would be able to use it a more or less forever? Have I reached forever?"

If not, then I don't buy a replacement.

Obviously, "forever" isn't literal but means instead until the product becomes untenable to use. It's up to you to define what that means, but "totaled" is a good concept here: once a product costs more to repair than to discard, it's probably time to move on.

For example, I'm saved a lot on clothing with this Q/A. Boots and coats are expensive, but they're also fashion items subject to our whims. I'd love to buy the next fashionable "keep it forever" item, but I'm already in possession of several. So the better course of action it to look at what I already have and then take care of it, either through repair or basic maintenance.

I'll add that cars also fall into this category. With proper maintenance, modern cars can last very long times. When I owned my last and only vehicle (since we're car-less now), I was a regular at the quick oil-change place and the various mechanics I trusted. I drove a 1999 vehicle until 2013, and I sold it for a still respectable price once I had to. Had we not moved abroad, I assume that I'd still be driving that vehicle.

In all cases, beware the story you sell yourself to convince you that a new thing will be the real "keep it forever" item. Look at what you have and ask whether it's really and truly done for, or if you're just in the mood to spend some money.