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.

First Quarter Update 2024

We had an excellent first quarter of 2024. Our net worth rose 8.42%/%10.82 quarter over quarter to $182,025/€168,542.

After I'd tallied everything, it hit me that we might cross the $200,000 mark sometime this year. It wouldn't even take outstanding performance. Even if our wealth compounds at 7% over the next two years, we'd pass that threshold sometime in 2025. Naturally, it's best to not become attached to any rate of return, but I'm trying to steel myself for the fact that growth might come more quickly than I'd anticipated.

Naturally, the primary mechanism of this is stock market growth. I've been saving every month, but the market has been easily outpacing my contributions. It's also been outpacing my spending (I went to the United States and bought a new iPhone this quarter). However, the reverse could just as easily be the case. So far in April, our portfolios have plunged more than our current year contributions. That kind of volatility is to be expected, but it's still bracing to see. Our contributions are gentle rows in a canoe that's already flowing through the water, but the current can still take us in unexpected directions.

Pension Valuation

We crossed the $100,000 mark sometime in late 2020, and I didn't recognize it at the time. I hadn't begun adding my German pension to the calculation, so life continued as normal. Frankly, I could probably goose the current numbers to equal greater than $200k now; all I'd have to do is value my pension as the equivalent of my contributions. But without a good reason to do so, I won't do that. When considering a pension rationally, the value of it can only equal or be greater than the value of contributions when viewed in hindsight.

One new emergent factor in my pension calculation is the reduction in life expectancy in the United States. Being American, I use the Social Security actuarial tables, and I have discovered that life expectancy has dropped by several years. I suspect this has to do with COVID-19, but regardless of the reason, with a potentially shortened lifespan, the valuation decreases.

Second Quarter Forecast

This has already been and will continue to be an expensive quarter.

The stock market thus far has been harsh to all factors. The one bright spot has been my small gold ETF position, but this is a mild retardant to the drawdown. Ex-US has also been relatively stable. However, this drawdown has already been nearly as severe as the cost of any of the spending I'm about to mention. If the drawdown continues, it will easily be greater than whatever spending we embark on.

My wife and I have decided it's time to do some remodeling and lifestyle upgrading, and we're spending on new bits of furniture and other household accouterments. It's nothing extravagant, but it's a cost. We will likely re-enter the world of TV ownership sometime in the next few months, for example. Ikea has also been padding its cash flow statements with our money.

We also plan to visit the US briefly this summer. My wife has an ill sibling, and we're taking some time to visit them. We also recently helped financially support this sibling's adult child, who had a cash crunch. Although they offered to reimburse us, I agree with Dave Ramsey that loaning money to family members is a way to hurt that relationship, so we gifted the money instead.

We also owe taxes from 2022. We don't know when the Finanzamt will hit us with the bill we know is due, but it's coming any day now.

Despite all that, we're doing well. Until next time. Stay happy and healthy.

2023 Update: New Worth, Reflections, Businesses

Staying the course worked.

When I wrote my end-of-year update for 2022, I was feeling pressure due to the severe drawdowns in our assets. 2022 was a rough year in nearly every asset class, and we were not spared. However, the choice to begin using ETFs for much of our portfolio meant that I didn't make any catastrophic choices despite the drawdowns, and that change paid off in 2023.

In 2023, I made additional changes, which have further solidified my temperament. Namely, my eliminating debt and restarting IRA contributions, I've taken steps that will pay off for decades while taking off some of the pressure to nail stock picks.

Net Worth Update

At the end of December 2022, I wrote:

However, December was also the first time that our net worth was down in every metric that I track. There are four comparisons at the top of my spreadsheet: USD month over month, EUR month over month, USD year over year, and EUR year over year. For the first time, all of these metrics were negative.

The story was very different in 2023.

Our net worth rose in December to $167,897/€152,080, which is a month-over-month rise of 6.6%/5.15%, a quarter-over-quarter rise of 13.90%/9.16%, and a year-over-year rise of 34.11%/30.10%. This represents an all-time high for our accumulated wealth.

2023 Changes

Debt and IRA

The biggest change was the decision to close out the loan I'd taken and restart my IRA contributions. This was not taken lightly, though some triggers made 2023 the year. I've mentioned those triggers before, but I'll summarize:

• A family conversation made me feel like I was being pushed into choices that I didn't agree with.
• Looking for emotional support to say "no" to family members, I found Dave Ramsey episodes.
• He's anti-debt, and I was in debt, and - after analyzing my feelings - I realized how stressed I was about it.
• His book Baby Steps Millionaires reminded me that tax-advantaged accounts are powerful tools for wealth building.

Looking back, had I not sold anything to pay for the debt reduction, I'd have more money today. But how would 2023 have felt? I didn't like that monthly payment to the loan company. I felt like our budget was overly tight because of it. It was a negative in my mental life, and although I'd have more money now had I simply persisted, I don't think I'd be as happy.

I filled up our IRA contributions for 2022 and 2023 early in the year, which meant I'd have to do the more complicated tax filing using the Foreign Tax Credit. I managed that, and it's not so bad, but U.S. tax filing remains a major net negative in our lives. Every year it's a stressful frightening experience.

Small Business People

We've been active small business people here in Germany. My wife made great strides in 2023, acquiring new customers and increasing her income. She diversified away from a single high-volume, low-paying customer and negotiated higher rates from several new clients. It was impressive.

I have several small businesses, and while they aren't able to compete with my wife's for income, they have increased our bottom lines. One of them is still in its infancy and therefore unprofitable, but I believe that will change in 2024. The other is almost pure profit. The attention is give towards them is what I might have in the past directed towards stock picking. This new focus is much more productive and fun.

This year, we've modified our budget spreadsheet to account for these varied sources of business income.

2024 Expectations

I don't know what will happen. At the end of 2022, I didn't expect that a single conversation with my sibling would so disrupt me. I didn't think I'd seriously enter this new line of business. I thought I might leave my job, which I didn't.

I know there will be disruptions, and there will be surprises. At least I hope so. If I could completely plan year 2024, that would be outrageously boring.

Until next time. Happy new year, happy saving in 2024, and stay healthy.