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My Experience Doing the Uber Frugal Month Challenge

 

UFM
The Frugalwoods Website

 

The Frugalwoods is one of my favorite blogs. I’m not nearly as frugal as they are, nor do I want to be, but what I love is that their blog does help me to question some of my assumptions on frugality. Each January mrs. Frugalwoods hosts an Uber Frugal Challenge, but you can take the challenge each month if you want to. She sends out an email each day of the month with some questions to ponder and links to relevant blog posts on the topic.

Why I Participated

The reason that I took the challenge was that I’m very motivated to get as close to our maximum mortgage goal this year as we can. That is going to take some extra effort, so I wanted to see if there was anything I could get from it.

Lessons learned

The questions that were asked at the beginning of the challenge were particularly helpful of refocusing on the reason I want to be frugal. I also thought that since we’ve been budgeters for years now that there was nothing anymore that we could cut from our budget. However, we took another hard look and canceled two subscriptions that we had for years. It won’t make or break our budget, but even the small things can add up.

The only personal money I spent was on a pizza with a friend (€17) and my credit card was charged for the book The Year of Less by Cait Flanders (€17,82) which I pre-ordered in December. Other than that we spent zero money on eating out, take out, or coffee on the go. It wasn’t always easy, but it was doable. I also started to enjoy making sure I was prepared so that I wouldn’t have to spend money unnecessarily. I’m also not very good at doing monthly challenges because I don’t like the all-or-nothing nature of it. I was actually quite proud and surprised that I finished this one with success.

Going Forward

The trouble with any type of restrictive challenge is that it is tempting to go all out on a binge afterwards and undo any of the good work you did during the challenge.

There was some temptation out there for this to happen on day one. On February 1st, I had a particularly challenging day at work and I had a lot of delays getting home because of a broken train. Then I had to endure rain and hail on my bike ride on the way home from the train station. Our dinner was based on stuff we had in the pantry: lentils, black beans and some pumpkin from the freezer over rice. Not exactly a meal I was looking forward to. Everything in my body just wanted to order pizza and call it a day. I started cooking anyway and the food was just so dry and not what I wanted after that day. I added some tomato paste and herbs, but it was still not good. I was so tempted to just go out and buy something unhealthy, but I knew I would feel really bad breaking the challenge after only one day in the new month. Also, I am really motivated to save so I would feel bad about spending money on unnecessary food.

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A picture of my not-so-good meal

So I didn’t do it in the end! I will admit that I did not eat a whole lot and that I may or may not have eaten some Nutella straight out of the jar to compensate.

This is not to say that I won’t spend anything on impulses going forward, but I feel happy that I was able to break this habit for the month and it had an effect going forward as well.

Did you ever participate in a no spending challenge, and how did you like it?

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Monthly Updates

January Numbers

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I skipped December’s numbers, but I want to get back into it. What better month than January to get back on track? We tried to be very frugal with our grocery spending and personal spending money (more on that in another future post!). I’m quite happy with the results, but our savings rate for the month is still very low due to some large expenses. OK, let’s go to the numbers!

January Mortgage Numbers

We can pay an extra 10% of the original mortgage balance per calendar year in extra payments and we hit that number in September of last year. January is the start of the new year so that means that we can make extra payments on the mortgage again! That made us very excited and motivated to get going again. We transferred the first extra €1500 in January. That leads to the following results:  

Interest Only Mortgage €97.288 -€1500 change from last month due to extra principal payment
Annuity Mortgage €108.447,41 – €202,11 change from last month, just the regular payment
Linear Mortgage €5.207,31 -€14,79 change from last month, just the regular payment
Savings Mortgage* €80.000 No change
Total Mortgage €290.943,12
Savings Balance Attached to Savings Mortgage €14.596,49 +€194,34
Total Mortgage inc. Savings in Savings Mortgage €276.346,63 – €1.911,24

The original mortgage balance was €380.500. This means 27,37% of the mortgage is now paid off (0,5% increase from last month)

* The €80.000 mortgage remains outstanding until the end of the 30-year loan. Attached to this mortgage is a blocked savings account where you save for 30 years and receive the same interest as the interest rate that you’re paying on the mortgage. After 30 years there is €80.000 in the account and you pay the mortgage off.

Savings Rate**

January Savings Rate: 10,1%

Savings Rate 2018 Year to Date: 10,1%

Our savings rate in January is very low because we paid our health insurance premium for the entire year. The premiums were close to €2400 so that took a considerable portion out of salaries. We also booked our flights for our summer vacation (€650), so I’m happy that our savings rate is not negative considering all that. The upside is that we won’t have to pay for health insurance for the rest of the year so that should help with our savings rate going forward. I still hope we can get to 40% savings for the year, so we have some work to do!

** To calculate our savings rate I deduct everything that we’ve spent in a month from our income. Divide that number by our income, and that gives us our savings rate. Not included in the savings rate are pension contributions because those happen before taxes and are mandatory in our case. I also don’t include our regular principal payments.

Investments

We added 5,35% of our income to investments this month. We are focusing on the mortgage first, but we do some investing each month as well.

That sums up January 2018 for us. Did you get off to a good start for the new year?

Environment · Finances

Why I Am Switching Banks

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According to research I found online, 73% of Dutch people are still banking with the same bank where they opened their first bank account. Banks love that kind of brand loyalty. Until recently I was part of that 73%, even though there were good reasons for switching. Nowadays it’s very easy to switch energy companies, insurance, cable companies and mobile phone providers. However, not a lot of people are willing to switch banks.

Benefits of switching

My current bank is a big bank and as such is counting on the fact that people will not switch out of convenience. I am getting paid a measly 0,05% interest rate on my savings account and the banking fees for all our bank accounts are €11,90 per month. The bank that I’m considering switching pays a higher interest account on savings accounts (0,2%) and is also paying that same interest on a checking account for balances up to €5.000. Also, the banking fees would count up to €8,59 a month, so that would also be cheaper.

In addition to financial reasons, I’m also changing banks for moral reasons. The new bank does not invest their money in weapons, tobacco but in environmentally friendly projects. Also, they don’t pay out extreme bonuses that might stimulate unethical behavior.

Then what took me so long?

This all sounds like switching banks was a no-brainer, but still, it took me quite some time to take the plunge. I already had a savings account with this bank, but it took me until last month to also open up a checking account. Truthfully, I was somewhat scared of the hassle of having to switch all automatic transfers to the new bank account. In the end, I started by switching for just my personal account and I kept our joint checking account with the old bank. There’s just one automatic payment happening from my personal account so that was not that hard. That change was made within an hour.

I also have a credit card with my old bank and because of the switch, I now have to change credit cards as well. This is because I can’t have a credit card without the checking account. I’ve applied for a different credit card, but I’ll wait to cancel my personal bank account until I get the confirmation that I’m approved for the new credit card. It’s not that I use my credit card a lot, sadly hardly points/cashback/miles can be earned as opposed to the US, but it would be inconvenient to be without one for travel or some online purchases.

Next Steps

The next step will be to also switch for our joint checking account. This will be more work, but fortunately Dutch banks nowadays offer a transfer service. It’s a free service you can sign up for in order to make switching banks easier. They transfer all automatic deductions from your old account to the new account automatically and inform the companies of your new banking information. They will do this for 13 months, so that should cover most automatic deductions that happen. We are planning on using this service for our joint account. To be safe I think we’ll also keep a larger cash cushion than normal in both accounts just to be sure no overdrafts happen.

Have you ever switched banks? If not, what is stopping you? What has been your experience when switching banks?

Finances

Our Money Management System

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One of the topics that I always find interesting is to read how other people manage their money. So I thought it would be nice to share today how we manage ours!

 

Budgeting

In the personal finance community there are a lot of people who use a budget to manage their money. On the other hand there seem to be a lot of people in the FIRE community that don’t use a budget. We’ve been using a zero-based budget for years and love it! At first, we used an Excel spreadsheet to build our budget, but we’ve been using YNAB (You Need A Budget)* since November 2013 and haven’t looked back since! 

 

YNAB-Logo

I like how budgeting helped me not feeling guilty about every euro that is spent and the fact that it helps us reach our financial goals. I don’t want to turn this into a YNAB commercial, but it has really helped us in being on top of our money. No stress, budgeting can be easily done on the phone. I also love the ability to set savings goals and it updates automatically if you save more or less in a certain month. We used to do this on our own when we used Excel and had a number of different savings accounts to keep track of it all, but this is much simpler.

Bank Accounts

Our budget is combined, but we still have three bank accounts. Each one of us has a personal bank account that we do most of our personal spending out of (what a surprise…). Then we have a joint account that we use for most other things. I like having most of our finances combined, but I like it that it’s not immediately obvious to J. if I had a weak moment at the train station and bought a cookie on the way home or if we want to buy a gift for each other without the other one knowing. This system works really well for us. 

Investments

We have one joint investment account at Meesman where we have automated our investments and €100 gets transferred automatically to that account. J. also has a blocked savings account (banksparen) for retirement, but we have stopped contributing to that for now. I also have my own investment account where I transfer 5% of my income to each month for retirement. I want to keep this account separate as an experiment to see how this account will build up over time without putting a ton of money into it at one.

Our process

We both get paid once a month at the end of the month (around the 19th and the 24th). Since I’m the money nerd, I usually make a first draft of the budget once that money comes in for the month ahead. Then on the last day of the month, we sit down together to finalize the budget for that upcoming month. We then also calculate how much extra can be sent to the mortgage since that has been our main focus this year. Usually, this takes 30 minutes to an hour max. 

About a year ago I had a bit of budgeting fatigue and we quit the budget for one month, but I didn’t even last a week and I begged J. if we could please go back to budgeting. We aren’t too strict with ourselves if something unexpected comes up and we need to spend more on a certain category we have the room in our budget to make that work.

Please share, how do you manage your money? Do you use a budget or not?

If you use this link to sign up for YNAB we both get a month for free! 

 

Personal

Why My Mother Is a Huge Inspiration for My FIRE Journey

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My mother rocking it on a bike trip in France

One of the things that I like about the FIRE community is that it is full of people who do not settle for average and try to get the best out of their lives and pursue the things that give meaning to their life. Today I want to share how my mother is a huge source of inspiration for me in that regard.

My mother’s career track

My mother started out her career at a difficult time because when she graduated, the job she trained for had basically turned into a volunteer position. Paid leadership positions in her field were still available but not realistic to get as 21-year old without experience. So she ended up working for my grandparents who owned a small business, way below her abilities. My sister and I were born after a few years and she transferred to a customer service job at a very large company. In the next 12 years, she slowly worked up the corporate ladder and eventually got a good position making good money. However, after a while her idea of what it means to be a good manager no longer aligned with what the company wanted her to do. It was a hard process but she ended up quitting in her late forties without another job lined up.

It took some soul searching and a lot of job applications but eventually, she got another job. She had to take a pay cut but she found a great company and worked there for about five years. She had a good time at that company for quite some time. After some time the work environment started to change. The stress and pressure to do more with fewer people was making her miserable. The bosses just seemed to be focusing on increasing value for shareholders of the company and not on serving people well. She contemplated just quitting and retiring early but one aspect of her current job she really liked and was still giving her a lot of energy. So instead my mother has started getting some formal education in that field and is starting her own business. She quit her job in September at age 55 and is starting her business on the side. My mother has some clients right now, be it unpaid for now because she is still in training. I’m quite sure she will be able to make money once she is done with her training next year.

How Does She Inspire Me?

Especially in my previous job, there were a lot of people in their late forties, early fifties who were already counting the days until retirement. They were constantly complaining about their job and how everything used to be better. I really disliked it because they could really sour the work environment. Sure, I understand it’s not easy to change jobs in your fifties and age discrimination is a real thing. Here in Holland employees now have to work until age 67 before they can collect social security and most pensions are linked to that age as well. To be miserable in your job for that amount of time is just so depressing. I commend my mother for having the guts to quit her job twice when it no longer was a good fit for her.

All of this wouldn’t have been possible without my father. They have the ability to live on his income when necessary.  In order to do so they had to make some lifestyle changes. My father makes a good living, but he’s also not a very high earner. My parents have always been relatively frugal and never took on debt except for a mortgage. We’ve always lived in fairly modest housing. My parents raised us to live on less than you make and not spend money before you have it. This mindset has made sure that they could make the decision that my mother did not have to keep working a job that was making her miserable and was affecting her health.

I’m a very risk-averse person so quitting a job without having another one lined up would make me throw up of anxiety. My mother showed me that it can be done in a responsible way and turn out OK.

In Conclusion

This has turned into a rather long post and I could write a lot more about this if I want to. To sum up, this is why my mother is a huge inspiration for me in my journey to FIRE:

  • It’s worth it to find out what makes you happy and pursue that path even if it’s not always easy or conforming to the norm. 
  • Live well within your means; this will give you the freedom and the choice to not be enslaved to a certain career or job.
  • Take a risk sometimes (very hard one for me!)
  • You don’t have to have everything figured out at age 30, it’s still OK to change careers at age 55.

This is my story of how my mother is an inspiration in my journey to FIRE. Have your parents (or anyone else!) been an inspiration for you?

 

Monthly Updates

October 2017 Numbers

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This is our third monthly update where I share the most important numbers that I try to keep track off. This was an expensive month again because we traveled to Edinburgh for a weekend. J. had to go there for work during the week and we decided that I would come over for the weekend. I really enjoyed Edinburgh! Also we bought a new bed this month and we had to pay 25% of the purchase price. Let’s dig into the numbers for this month!

October Mortgage Numbers

There is not a lot of news this month on the mortgage. We have paid off the 10% of the mortgage balance that we are allowed to pay off without penalty so no progress here other than our usual payment.

Interest Only Mortgage €98.788 No change
Savings Mortgage* €80.000 No change
Annuity Mortgage €109.052,79 – €200,76 change from last month, just the regular payment
Lineair Mortgage €5.251,68 – €14,79 change from last month, just the regular payment
Total Mortgage €293.092,47
Savings Balance Attached to Savings Mortgage €14.013,68 + €191,56 change from last month
Total Mortgage incl. Savings in Savings Mortgage €279.078,79

26,65% of the mortgage is paid off, 73,35% is still outstanding (0,1% improvement from last month).

The €80.000 mortgage remains outstanding until the end of the 30-year loan. Attached to this mortgage is a blocked savings account where you save for 30 years and receive the same interest as the interest rate that you’re paying on the mortgage. After 30 years there is €80.000 in the account and you pay the mortgage off.

Savings Rate**

October Savings Rate: 38,47%
Savings Rate 2017 Year to Date: 21,97%

Our savings rate in 2017 is not that impressive, because we had a lot of expenses in the middle of the year because of our move. Our savings rate for October is quite good considering the purchase of our bed and the trip to Edinburgh. I’d like to get this number to 40%…

** To calculate our savings rate I deduct everything we’ve spent in a month from our income. Divide that number by our income, and that gives us our savings rate. Not included in the savings rate are pension contributions because those happen before taxes and are mandatory in our case.

Progress towards FI

In addition the mortgage numbers I also look at how far along we are on the path to be financially independent. Since we’re not investing that much just yet this is not a very impressive number. Using the 4% rule we are currently at 1,46% of the amount that we need in order to declare ourselves financially independent. That’s an 0,03% increase from last month. In order to calculate how much we need for early retirement I use the average of our expenses over the past year. Even though the markets were strong this month, this is not a very large increase, but at least we’re heading in the right direction this time!

How did your October finances go? I’m going to receive some extra pay in November so I’m looking forward to my numbers in November!

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Where have I been?

To my embarrassment I’ve only posted once this month about our September numbers. Today marks the last day of this month and I haven’t posted anything else. So what’s up? Work has been crazy this past month so I worked a ton of extra hours and then when I get home, the last thing I wanted to do is to use my laptop some more.

Also since English is not my first language it’s taking up a lot of my brainpower to write posts. On the other hand this is not an excuse. There are plenty of other bloggers who also have busy lives and still manage to post on a regular schedule. It’s also a matter of priority. Amidst all the chaos from work I’ve chosen to spend my free time to exercise and still try to see friends and family as much as possible as a form of self care to help ease the stress. I don’t feel bad about that, but I do wish I posted more than once this month. So I’m going to try to do better next month! The work stress situation is still far from over, but I want to try to post at least once a week. Starting with our October numbers and we’ll see how it goes from there. I love the community feeling that other blogs have and I want to be a part of that so that is going to take some effort on my part. See you soon!