2020 Sankey Spending Flow

It hit me a few days ago that I didn't do a Sankey diagram for our 2020 income and spending. I really like these diagrams for visualizing that which is hard to visualize: namely, how income gets chopped up into various buckets.

Here's the 2020 flow diagram (click to enlarge):

Some notes:

• This year I've added income-dependent outflows such as income taxes, social security (Rentenversicherung), my pension, and so on. That presents a more accurate picture of how much we're actually left with to budget.
• In my wife's case (Job2), those expenses are estimated in advance and adjusted every year. So 2020's expenses are based on 2018's earnings, which is why they're such a large percent of her income. I expect that there will be a sharp revision downward once we file our 2020 taxes, but that will be months before those are finalized and accepted by the Finanzamt.
• "Rent" includes various utilities costs such as water, heating, garbage disposal, etc. In Germany, this is known as "Warmmiete".
• The "BLOW" categories house a bunch of personal things. That's where most restaurant, clothing, and miscellaneous stuff goes.
• "Household" contains expenses that are agreed upon by us both and are general meant as home improvements or large mutually beneficial expenses.
• "Rundfunk" is a cost for anyone with a dwelling in Germany. It's a controversial law that forces the public to pay for a set of media companies in order to maintain viable quality media within Germany. It costs more than Netflix for channels that my wife and I rarely pay any attention to. Nothing to be done about it though.
• "Side Stuff" includes my small time freelancing on the side. This has never reached a level to be taxed by Germany.
• "Refunds" include the various subsidies I received for my dental procedures as well as the first CARES Act stimulus payment from the IRS.
• "German Debt" includes installment plans that don't charge interest.
• "Digital Subs" includes media and cloud subscriptions.
• Any USD-based income (such as "GiftMoney") is converted to euros for this.
• I'm not including investment income or losses in this diagram.

Update: May 2021

Our net worth dropped 1.36% in USD and 2.23% in EUR to $100,509 and €82,452 respectively. The major factors leading to this monthly drop were reduced income, higher one-time spending events, and volatility in the stock market. Year over year, our net worth increased just under 60% in USD.

The biggest factor affecting 2021 so far are our reduced incomes. My salary has steadily gone up over time, but because of reduced opportunities for doing extra work, I've not had those big one-off boosts to my income. Due to Covid-19, my wife's profession has been severely affected. I've written about this paradigm since the pandemic began, so I feel like I'm repeating myself, but conditions for us have remained very stabile. No one lost their job, but we are nevertheless reduced.

This has meant that we've been unable to take advantage of the market volatility because we're just having trouble saving anything. It's a tricky moment for us on the savings front.

Closed Lots of Stock Positions

During this last month, I closed a lot of positions. I liquidated my small cryptocurrency holdings, and I sold off a lot of stocks while putting that money back into other companies.

I wrote about my feelings on crypto recently, but the stock sales arose from a sense that I couldn't go to war with these names: I knew that I would have difficulty holding them through a serious drawdown, so I bailed on them now. That, and I wanted more Amazon, Facebook, and Berkshire Hathaway shares. I moved out of low conviction names into higher conviction names.

Selling some of those positions will likely have been a mistake when I have the benefit of hindsight. But increasingly, I'm admitting to myself that I am a stock picker, and that means that I need to believe in the position if I'm going to hold it long term. A bunch of small positions that don't mean much to me are just anxiety fuel, and that was especially true because so many of them looked severely overvalued. Some of the positions I sold will likely outperform the positions I bought, but I believe that my behavior will be better in the positions I bought because I have more faith in them.

My desire is to hold a few high conviction names for the long term. That means that I have to understand what's going on and be comfortable holding them through thick and thin. It also means that I will miss out on some other stocks' meteoric rises, but that will have to be ok. I don't have to take part in absolutely everything to have a good result, and, as I saw during the big March 2020 crash, I can hold on to high conviction positions even during trying times.

But to avoid similar culling in the future, I need to be more careful with the stocks that I buy. The sin here wasn't selling, but instead it was that I purchased some names using a half-brained theory, believing that I was a computer who could dispassionately buy and sell companies that I don't have any emotional investment with based on certain factors. This has been a recurring problem for me, and it's time to forego systems that treat me like a computer.

That said, don't be surprised if some of these stocks re-enter the portfolio. I'm not dead-set against them under all circumstances.

As has been the case for the past few months, you can see those positions under the Portfolio tab.

How's June Lookin'?

June will look a lot like May. Our incomes will basically be the same, and we have to pay our estimated taxes, which will hit our savings. Unfortunately, we won't be able to save much, which is a drag.

We're still waiting on our tax refund as well as the U.S. stimulus payments, but those will arrive whenever they arrive.