Monthly Update – 08-2019 (August)

Ahhh…Portugal in August!

What you think it will be:

Empty Beach

What it actually is:

Crowded Beach

Just kidding.There are still a lot of secret and nice spots around. You just need some research and how to avoid the turist mob.

In August, Lisbon is pretty much awesome. Literally the city goes into ghost town mode. Every Lisboeta (Word for people from Lisbon) goes to the Algarve or abroad which means less traffic to work, less people on queues, generally less people. This is a huge bonus for me as my patience for masses of people dimishes as my age increases. Go figure, right?

We just came back from our honeymoon so this was a light month in terms of spending. Hopefuly this will set the trend for the future!

We also merged several accounts (which can be a pain..) so this process is still ongoing.

I had a few non-programmed health spending taking advantage of an empty Lisbon in August and also less stress at work. This meant body checks, dentist, etc. This is something i would like to pay closer attention in the meantime. Better do it while young!

We also had a wedding in the south side of Rio Tejo which was pretty nice and which obviously meant an expense of around 140€.

We went also a few times for dinner as usual but we are trying to reduce to 1 time per week now. Lets see if we can!

Ah! We did an investment. We found a promotion to buy Zomato Gold which is a discount for restaurants and drinks on which we spent for a whole year 25€. This allows us to get the second most expensive plate for free if the restaurante is on the network. Luckily several restaurants we like or some new are there.

Considering we spend an average of 40€ on a dinner. This means we can lower our eating out to an average of circa 30€. We went out last time to an indian restaurant and saved 12€. 😀

Zomato

In case you want to join. Use my referal code. MIGU3266 . This will give you a 50% discount signing up but also give me 3 months extra. Win-win right? I believe this is only available in Portugal and in essence Zomato e something like TripAdvisor or TimeOut.

Here goes our August monthly update ! We will be focusing on the operational part. Income vs Expenses vs Savings rate.

Income

Salaries: 3 405.96 €

Expenses

Housing

  • Mortgages: 1 046.14 €
  • Insurance, Condominium, etc: 49.74 €
  • Utilities (Water, Lights, Gas, Internet, Phones): 146.10 € (He still had Netflix this month but we will be cancelling). Our energy provider also decided to bill us in the same month for something that would be laying in September (Great GALP..)
  • Other Housing expenses: 37.97€
  • Total Housing: 1 279.95 €

Cars

  • Fuel: 201.81 €
  • Maintenance: 65.41€ (This value is not spent but goes to another account. We do it yearly and this allows us to put is aside already)
  • Insurances: 129.55 € (Same here)
  • Transportation (parking, tolls): 44.05 €
  • Total Cars: 440.82 €

Health & Personal items

  • Consultations & Exams: 339.61 € (This month this value was crazy high..i found out i need to remove a tooth)
  • Hair: 17 €
  • Total Health: 356.61 €

Food

  • Grosseries: 131.96 €
  • Eating-out: 293.15 €
  • Total Food: 425.11

Misc

  • Wedding: 140 €
  • Rest: 91.45 € (Apple Music, Gifts ,etc)
  • Total Misc: 231.45 €

Total Spent: 2 733.94 €
Budget for the Month: 2 638.65 €

Savings Rate

SR = ((Income – Expenses) / Income ) x 100 = ((3 405.96 – 2 733.94) / 3 405.96 ) x 100 = 19.73 % or 672 €

We were a bit over budget for expenses but the value is still too high. This is something we are confident we could decrease to around 1 600 € monthly when we come closer to FI. See here why.

Unfortunetly our rental property still draws us around ~700€ every month (morgage, insurances, energy, gas). This didnt matter when we had it rented out but for the past 5 months it has been sitting around empty. Luckily i’m positive we will sell it very soon.

Fun moments

Last but not least! I had for the first time this year some delicious Caracóis (Snails). They are a delicacy best served with some toasted bread and a cold beer. Ahhh.. and this is all you could ask for !

Caracois
Come here snails!
ETF Portfolio

ETF Portfolio – Baseline!

This was a month of restructuring our ETF Portfolio. Firstly i’ve shown you how our P2P Portfolio looks like, but this is not all. In fact our “Big” stategy relies on our ETF Portfolio baseline. Currently with some funds still on the way and starting to build up our position using the broker DeGiro.

Degiro Broker

This means only a part of our funds are invested. Namely 12 872.67€ with the rest 9 498.47€ either in transit or in cash.

This means a total of 22 371.14€ – for August in our ETF Portfolio baseline. Yay. I will be posting here the progress.

ETF Portfolio
Firecrackers ETF Portfolio

The main objective will be to follow the Passive investments of our friends Bogleheads with an european adaptation (Thanks PRIIPS!).

The ETF Portfolio baseline should look like this soon:

Description% AllocationTicker
Long bond5.00%CBU7
Short bond15.00%TIPS
Commodity5.00%COMF
Gold10.00%AUCO
SP5007.50%CSPX
Small-Cap15.00%IMAE
Europe10.00%SXRG
REIT10.00%EPRU
Pacific10.00%CPXJ
Emerging12.50%IEMA

Most of the ETFs are located in the Amesterdam Euronext market in order to lower costs. Unfortunetly Small-caps US had to be bought in the German (XETRA) due to unavailability on the MSCI Ishares Small-caps there.

I will be defining why we chose this strategy and why each particular allocation and also what could be the comparable ETFs but i will leave this for anothe time!

The positions have been opened on the 19th August and currently we are 83.25 € up. Im not worried. We are in this for the long run and this was expected this the markets are in all time highs.

A great website you could use to check our some European ETFs is JustETF, luckily is one of the few that lets you check those ETFs in many of the European stock exchanges.

P2P Portfolio

P2P Portfolio – Baseline!

After our last post on Savings Rate, we would like to set the baseline for our P2P portfolio. As of this month the total value is 10 298.61€. Currently spread between two platforms.

The percentage is the return to date of each investment. We did an increase in our investments in P2P to circa 20% of our portfolio and therefore the interest should start to kick in next month (September).

For the sake of simplicity we have invested 5k in each platform as the principal which means the rest has been interests so far.

This month we increased the investments here from 1.5k in Mintos to 5k and from 1k in Robo.cash to 5k. I’ve been happy with the output so far so we shouldnt be changing much for the time being.

Mintos

Mintos Platform

Mintos released this month a huge list of 16% loans which i was able to catch some 🙂 Issue? They were only for 30d..this has of course meant i had to keep an eye on the platform to make sure i put my money running once the loans are finished and the principal received.

Current Mintos Portfolio

In case you would like to invest in Mintos you can get some bonus percentage (up to 1% more) additional if you do it via a referral link. Why not mine? here

Robo.cash

RoboCash Platform

Similar to Mintos platform we have Robo.cash. Here is a bit simpler. We dont select the investment as the platform does this for us. Its easy and the pay-out has been around 12% so far. Not bad!

Want to learn more about P2P?

For some reviews about P2P you can check the review by The Poor Swiss here and by The obvious investor here

Goals (update) – Savings Rate

This week i will be talking about another important step to define in order to reach FI in our Goals – Savings Rate!

So, last time i’ve written about defining our anual / monthly expenses. This is something we will be sharing more with you. It takes consistency and its something we already have to do. So why not share it with you? Missed the post? Check it here.

Step 2 – Defining a Safe Withdrawal Rate

Defining a safe withdrawal rate will in the end determine the amount of money you need to have with a ponderation of different scenarios like inflation, return on your investments., etc.

Currently several studies point to a SWR of 4% in case you will need to withdraw money for the next 30 years. See the trinity study here. There are also very nice explanations for other FIRE enthusiasts like Mad Fientist which gives you a more detailed view on how you should define your own SWR – check here – you can even test it and see how this will determine your speed to FI.

In order to calculate our time to FI we need to have:

Networth – What is the value of our Assets – Liabilities. This is where we are.

Monthly Expenses – How much do we spend per month. (ie – 1.600€). This is how much we need.

Savings Rate – How much are we saving per month (Income – Expenses). – Lets assume 1.200€, thats the value we will be getting in the next few months. This is how fast we are getting there.

Growth rate – How much (in %) do we expect our portfolio / investments will grow. Here i will assume 7% – if its great better! This also how fast we are getting there.

The 4% rule could be easily translated into multiplying your currently yearly expenses by 25 – check here on the Fire Movement wiki. Meaning the bigger our savings (& savings rate) are the faster we can get closer to this number.

Using the logic above, if we assume the 1 600€ monthly that we predicted. This would turn to 19 200€ yearly, which x25 will be 480 000€.

This is the first goal to achieve! And this is why you will see it on the banner on the right side of the blog!

You can also make a few dry-runs and use the FIRECalc to try for yourself.

In our case, here it is:

  • Spending: 19 200€
  • Portfolio value: 480 000€
  • Years: 30 – Why 30? well i’m currently 31. Assuming we hit FI when i’m 35 it means i would need to live off my accounts until i’m 65 when my state pension will kick in.
FIRECalc looked at the 119 possible 30 year periods in the available data, starting with a portfolio of $480,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 119 cycles. The lowest and highest portfolio balance at the end of your retirement was $480,000 to $4,570,781, with an average at the end of $2,465,149. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.
How our portfolio would play out. In 119 cycles we would get 0% failures. Pretty cool, right?

How to interpret would be to verify when any of the lines crosses the zero X axis. And in this case, it was 0 !

Now, assuming we cannot lower our monthly expenses to 1 600€, we also have the other scenario which is closer to our actual spending (we have an empty rental currently which means ~500€ pending in our necks) of 2 000€, this means:

First Milestone – 480 000€ for 1 600€;

Second Milestone – 600 000€ for 2 000€;

I will be tracking our progress towards the first milestone for now!

Since I’m all about teaching people how to fish, here are some of the resources i searched for this article:

Its important to have goals right?

In order to track any progress or even to start thinking about a plan we need to define our vision or our goal.

Can we fast-forward to success? Please..?

Our goal here seems to be pretty simple right? Reach FI!

Resultado de imagem para tio patinhas
This might be what you are thinking
Resultado de imagem para guy watching tv in pijamas
Or this.
Resultado de imagem para guy taking care of horses
Or learn how to take care of horses?

And what is FI? Financial Independence means that without working you are able to maintain your current lifestyle. Which for us translates in: we can do whatever we want without thinking about the financial return.

This is not to mention we dont love what we do. We both are lucky in that part. But why do we have to do it for 30 years straight? Maybe we would like to have some break in the middle and learn a new skill (Handling plants? Soldering? anyone?)

Now, this is a tricky part. What will our lifestyle be in the future? Well…i dont know. And its usually pretty hard to make a concrete guess. But we can try extrapolating from our current one !

Step 1 – Calculate Current Yearly Expenses

I first started writing my daily, monthly expenses when i was 21 and started working full-time. Back then i received around 980€ net per month which was ok for starters but i was determined to make it worth every cent! As i wanted to take control on my financial life i wanted to be able to know informations like:

  • How much do i save per month net? And in percentage to my income?
  • How much am i spending partying and eating out? – Remember i was 21y
  • How much do i need to put aside for anual expenses like Car maintenance, insurance and vacations? – I had recently bought my first car – a brand new Honda Civic black and it cost me 21.5k which was back then a huge value for me. It drained all the money my parents have saved up to give me once i turned 18.
Resultado de imagem para honda civic black 2010
Exactly like this!
  • How much can i invest?

All of this then translated from excel spreadsheets into an anual aggregator where i would include any extra spendings (i was taking a masters at that time and had to pay tuitions) but also any extra income like overtime or gifts from birthdays and Christmas.

Fast forwarding after i moved out (at 25y) and bought a place in Lisbon it became harder to keep track of the details of my monthly spending since homeownership tends to take its tool once you have to buy EVERYTHING for a new place. I never imagined to have to spend so much in plates, cuttlery and other objects. Well..it turns out it can drain in your budget! Towels..it turns out you need them as well!

This year and thanks to Mrs.Firecracker effort we pulled our heads together to verify our current household spending.

We calculate it to be monthly around 2.000 € . Now, this includes as well anual expenses divided monthly and put into a separate account for an easier management like Life insurance for the principal apartment morgage or car insurance.

Even tough this could be considered a high value for Portugal it doesnt mean we are opening Möet & Chandon bottles every month. It means this is what is needed for us to maintain our current lifestyle which entitles eating out every week and being carefree about our spending.

Nonetheless, there are some expenses we believe will decrease massively after we reach FI. We currently own 2 cars which means – Gas, insurance and maintenance take a huge tool into our monthly budget (almost 500€). And we luckely are firm believers of not taking credits for cars, otherwise this would be another expense. Summing up, we think we dont need more than 1 car in the future.

Having this stated we also believe other expenses might decrease due to having kids in the near future (like eating out). We think its not by chance we dont see much newer parents eating out with their babies! Public shaming, noise and making a mess might have something to do here!

In essence our first milestone and the value i will be using for our FI calculations will be 1.600€ monthly. This is a number we both fell confortable and which could be sustainable since we ponder to live in the city center or to move to our farm in the interior (more on that later).

To be continued…