From Bad to Worse

When it comes to the pandemic, there are some good news and reasons to be hopeful. Several vaccines are either in their final development stage or about to get approved. Right on time for the end of the dreadful year of 2020. 2021 can only get better. Or can it?

We still have 5 weeks for 2020 to go, and no matter what happens until New Year’s Eve, this won’t be the end of the challenges. Challenges with the pandemic, and challenges with the economy. Production, distribution, and the re-opening of borders will take time. So will the recovery. And we are not talking about days or weeks. We are talking about months and years.

Why things might get worse

Markets tend to be optimistic, but corporations tend to be cruel – by perception. Despite the silver lining on the horizon, it is most likely that most companies will continue cutting costs, reducing payrolls, and doing whatever necessary not just to survive, but also to make-up for the lost revenue during the pandemic.

But not only that. Many companies see the current situation as an opportunity to push through decisions that may have not been possible without such a crisis.

Some of these decisions might be radical, and urgent. In fact, they might have been urgent for a while. Upgrades of IT systems. Reviews of procedures. Reorganizing teams and the abolishment of established structures. But there is also a downside to it, especially when it comes to the “reorganizing teams” part. People are and will continue losing jobs.

Same old or not?

Now don’t get me wrong. This is nothing new. Maximising revenues and minimising expenses is what every business does. That’s how you generate profits. This was the case before the pandemic. During the pandemic. And it will stay with us also after the pandemic. It’s simply how every business works.

So, while cutting expenses and especially payrolls is nothing new to us, the magnitude of the cuts in the current environment is immense. And many of these cuts are not just until this pandemic is over. Many of these lost jobs will disappear permanently.

I am working in hotels, and my industry is among the hardest hit by the pandemic. Many of my colleagues have lost their jobs. I personally had to cancel contracts with trusted contractors, shrink my teams to an absolute minimum level, and cut payrolls through unpaid leaves and other essential measures. It hurt. Almost everyone on my team was hand-picked by me since the opening of my hotel. But I had no choice. Still, some of my former colleagues are hoping to be able to return to their previous assignments once all this is over.

But this is where it gets tricky. Because when corporate number-crunchers tell you that things can be stream-lined, everyone is replaceable and that the balance sheets still don’t look good enough, then you might want to get creative in your response to minimize the damage.

Short-term requirements for a quick brush-up of the balance sheet might become costly in the long-run. As everybody “on the ground” knows well, some people are truly not replaceable, and with everything that’s happening we are loosing countless talents and professionals. Some of them possibly never to return to a business, that destroyed their dreams or didn’t get a grasp on the value that they brought to the workplace. Also, more than often, stream-lining procedures and getting “lean” can have just the opposite effect, creating processes that result in micro-management, bureaucracy, and slow response rates. In the hospitality sector in particular this can quickly lead to frustrations for the hotel teams and for hotel guests alike.

Things are not over for the service industry

The tough times are not over, and especially the service industry will continue to suffer. Hotels, bars, restaurants. People will vacation less abroad. Companies will continue keeping business travel at a minimum. Since so many people depleted their savings or borrowed money, they will eat out less and keep parties and events on the low.

As my readers know, I am managing a hotel. For the last 12 years in this industry I was never worried about my profession, and I never worried about my job (which includes finding a new one when I felt it was time to move on).

But this time it’s different. This is the first time that I am not confident in receiving the opportunity to extend my contract (which is due in May 2021). And it’s also the first time that I have doubts. In the case that it should not be renewed, finding an immediate new opportunity will be a serious challenge.

Many of my colleagues have already lost their jobs. Many of them are smarter and more experienced than I. It’s therefore only logical to assume that I might follow in their footsteps rather sooner than later.

One more reason to keep preaching financial independence, and the purpose of having multiple income streams. And practicing it.

Get independent and stop dealing with CRAP

There are many reasons to strive for financial independence. For me, some of them are company politics and the never-ending dealing with CRAP. It’s one of my favourite acronyms:

  • Criticism
  • Rejection
  • Assholes
  • Pressure

You can’t become a leader in any organization without it. It’s part of the deal. No matter what you do, once you are in charge of others, CRAP will be part of your daily experience. It’s to a large part the reason why people in higher positions get higher salaries. It’s not really about their skillset, but more so about their ability to deal with CRAP.

And some might even enjoy it for a while. The constant competition, attention and the feeling of winning whenever you come out on the top. But in the long-run it is tiring. Exhausting. And you are not always winning, you will be losing frequently. In fact, the amount of times that you got to pull yourself together, to get up after you have been beaten down and to push through things that might not match your moral or ethic standards, your expectations and believes, it is so much higher compared to the few wins that you collect along the way.

Some just accept it for what it is. But for others, this might lead to depression, frustrations, the occasional loss of faith in humanity, and burn-out. On top of all that, it is really time-consuming and you might start asking yourself, why you are doing all the effort. What is the actual purpose of your journey?

Serving others is the true purpose of any company out there

Tim Cook said it once and he is absolutely right. Every company, every product and every service is meant to be for someone, to solve some problem, challenge or requirement. Solving problems creates value and pricing follows. So whatever we do when we work, we do it to serve.

When you recognize this to be the case, you have the best chances to really understand the purpose of what you are doing. Knowing your purpose gives you passion, and aligning with it leads to dedication. Dedication leads to success. Success doesn’t necessarily mean a monetary reward, but it often comes along with it.

But serving others is a never-ending task. There will always be a problem. A challenge. An obstacle. A restraint, limitation or a sudden turn of events. And there are always other people. Foes and friends. Competitors. Supervisors. Investors. Shareholders. Politicians.

The more success you have, the more lives you will affect. Whether you want it or not, your actions will have an influence on the lives of other people. On the dreams, which you might elevate or destroy for those who work under you, to the pressure and constant rejection by the supervisors who you work for. Shareholders and investors will always keep you under pressure to deliver the best possible financial results. Sometimes forcing you to action things that might go against your conscience or against what you might consider being the right thing to do.

Cut the CRAP

And I think it’s all actually OK. It’s important. Going this path for a while can help you to understand how human minds work, about group dynamics, all the different agendas out there that people follow. Personal and business-wise. It will give you a deeper understanding of different perspectives, sometimes unexpected connections, incentives and occasional shocks on what may seem like irrational behaviour or unforeseen turn of events. Pushing towards success helps us to develop, to learn and to understand the world around us a little more.

But I don’t think you need to do this your entire life. There is a point when the whole thing becomes overwhelming. A burden. Your mind will be dragged down, your physical condition will start to suffer, your personal relations will get affected and step by step you might start seeing only the problems around you. Depression may follow and with it a steep fall from your high ground at work, and possible medical repercussions.

We call this a burn-out. It doesn’t happen overnight, but when you climb the career ladder, it will slowly creep into your work-life. Usually, when you notice it it’s already too late. So knowing all this, how can you avoid it from happening? The answers are, firstly by becoming financially independent and secondly, by choosing when to stop.

Financial independence comes first, because it’s the tool that allows you to go for the second step. When you become financially independent, you can cut the CRAP at any given time without the need to worry about any repercussions on your life. Your shelter, food and healthcare can remain protected. If you really think about it, you will realize that this is quite a lot, more than most people on the planet have today.

Find your inspiration

For me, CRAP is one of the most important reasons for working even harder to reach FIRE. This doesn’t need to be the case for everyone. Some people might enjoy regular work. Having their 7 to 5, the daily soap operas at the office, the feeling of belonging somewhere. Those may find their inspiration for FIRE somewhere else. But for me, after independence and freedom, CRAP is the next immediate reason on my list of motivations to get out of the rat race.

Career Advise for FIRE aspirants

I like to write sometimes about my work. First, because it is an exciting job, and second, because there are countless lessons I gathered on my path to the top.

As some readers will already know, I am a General Manager in a hotel, currently in Thailand. Most recently I was able to secure a new contract, which will (hopefully) turn me into an Area General Manager being in charge of up to 5 hotels. While I am not the smartest and certainly not the best hotelier out there, I reached this stage in my life after working less than 8 years in the hotel industry.

I moved up in positions quickly, from carrying luggage in a Novotel in South Korea to become an area executive for one of the largest and most powerful business company (and family) in Thailand. Therefore, I think I can share some of my knowledge about how to get there with my readers. Bear in mind, this is my personal experience and it might contradict with many, if not most things you will hear from your parents, advisers or coaches.

But before I go ahead, let me tell you first why it matters and why it is important if you are on your path to FIRE.

Your career is the single, most powerful tool to reach FIRE

You can get rich with stocks. You can get rich with a business. You can get rich with a lottery. But for most, building up a successful career is the single, most important step to reach FIRE quickly.

As I mentioned in a previous article, your career is a very important asset. This is simply because the more money you earn, the more you can save and invest. It really makes a difference whether you put aside 100 EUR a month, or whether you are able to put 2000 EUR every month into your stock account without worrying of paying your bills.

This single reason should be motivation enough to pursue a quick and rewarding position. But this is easier said than done, so here some food for thought on how to make it happen:

Forget the term “work-life balance”

The myth of a happy life with a healthy balance between the amount of time you spend at your work and with private things is a major career-killer. If you want to make it to the top, you have no choice but to really put EVERYTHING into your job. This goes far beyond your job description, as you need to really try to understand as much as you can about every aspect not only of your job but of everything that is related to it. Knowledge is the key to success. The more you know, the better-informed decisions you will be able to make and the faster you will be able to take on more responsibilities. Learning requires a lot of time and you should be willing to devote yourself to it.

Embrace what others fear – responsibility and loneliness

In all the years I have experienced this countless times. Smart, great team players who would not advance in their careers because of the fear to take on more responsibility. The excuses are always the same: I am not smart enough yet, I don’t know how to do this or that, I am not sure if this is the right thing for me…

There were much smarter and better people around me when I got my promotions along the way, but the big difference between us was always that I couldn’t wait to take on larger roles and to rush into taking charge of things bigger than me. Most of the time, I even didn’t know exactly what I would have to do once I get the promotion or the new job description. I just knew that I want to do it and I was super-confident that there is nothing that I couldn’t learn.

There is a downside to it. It will make you feel lonely sometimes. Because what most regular people enjoy about their job is the camaraderie and the feeling of belonging to a group. However, the more you move up, the smaller your group is becoming and once you are on the top, you are indeed quite alone.

Sure, you can still have great relations with your teams, but there is no way around it: Your agenda, your perspective, and your responsibilities will always set limits and restraints. And sometimes you might be forced to do things that your teams and even you won’t like, but which are necessary to help your company move forward. When you keep moving to the top, you are forced to keep the big picture in mind and to do what it takes to help your company grow. This will more than often not align with the interest of someone in your team.

There is a Chinese proverb: 高处不胜寒.
It says literally that “It’s cold at the top of a mountain”. It certainly is true for people in high positions. I would often sit alone during lunch or dinner while my teams would enjoy eating in groups at the canteen. Not that I couldn’t share the canteen food with them, but simply because I had so many things to think about and decisions to make, that I would often spend the time thinking about the right or wrong thing to do, even during the precious time that is supposed to be my lunch break.

It’s hard to balance. It’s hard to have a family who accepts you coming home late every single day, to never plan vacations and to move around the world whenever the next opportunity pops up. I am lucky enough to have a very understanding wife, but I know plenty of people who fail on that part. It’s a hard price to pay.

Don’t be scared to do mistakes – and find the right boss to coach you

When you take on more responsibilities quickly, mistakes are unavoidable. Actually, it really doesn’t matter whether your progress slowly or quickly. Mistakes will happen anyway. While you certainly should always try to keep the mistakes at a minimum level, the single most important thing is to learn from every mistake you do. You can try to do this on your own, but it’s much more efficient and will work more quickly if you have the right supervisor to teach you.

I had supervisors who would scream at me. Supervisors who wouldn’t say a word. And supervisors who were moody or simply idiots. I didn’t care about any of that, as long as I could learn anything from them. As long as the learning curve is going up, I would stick with this supervisor no matter what. But as soon as I would notice that a particular supervisor got nothing to teach me or wouldn’t make the effort to support me, I moved. One month of not learning something new can throw you back several months in your career progress, so just really make sure to keep on learning and to have the right people around you to help you grow.

Learn how to communicate and how to build trust

Whatever you know, whatever your skill is and whatever you can do, it won’t matter if you don’t get the chance to show it off, it won’t matter if you don’t get your team behind it and it won’t matter if you don’t learn how to present it to those who judge you on it.

Learning to speak, to listen, to present, to negotiate, to evaluate, to correct, to teach and to scold… it is probably the single most critical skill for any leader. Developing emotional intelligence, learning to read characters and being able to quickly adapt to any person that you encounter along the way is crucial to develop your career.

Because while you got to be used to be lonely sometimes, any business depends on other people. We build products and services with people, we work with other people and we sell our products and services to people. It’s all about people. A manager and/or leader who can’t communicate this properly will have a hard time being successful. And you need success to move up.

Forget this crap about manager/leader comparisons

There was a time when people would discuss the differences between managers and leaders. In most cases, managers were the bad guys and leaders were the good guys. I also used to do these comparisons to evaluate my bosses.

It’s all a bunch of crap.

Truth is, that you need to learn when you have to manage and when you have to lead. No matter your job, you will always have budget restraints, relations between employees and business partners to consider and of course responsibilities towards your business owners. You have to effectively manage the resources you receive to make the best out of it, and this includes the people who work for you.

So you go to take the lead when you get a chance for it, but you also need to manage when it’s required. There is no black and white here, it’s all a grey area and in most cases, it’s not about what you do but how you communicate it that will make the difference whether it’s perceived as a management or leadership decision.

Focus on your skills, not your dreams

I was once reading this quote:

“Who you are, who you want to be, and who you can be are 3 different things”. We all had a dream about who we want to be someday. We all have skills that we learned along the way. We all have weaknesses. And we all have the potential to learn new skills.

However, while I admire people who have no talent for a particular profession, but who nevertheless spend years to improve themselves to chase their dreams, from a FIRE-aspirant perspective it’s simply not the right thing to do.

It would be smarter instead to focus on skills and qualities about yourself which are among your key-strengths and to try to find a matching profession based on those skills. While your parents and teachers will preach you to find a job that you love, I say that you should find a job that you can become the best at. The love will come along together with the success that you will experience.

It’s a little bit like marriage. You don’t necessarily choose the most attractive partner you can find, but the one who you can’t imagine living without. That’s at least how I see it.

And I am not alone on this one. Marc Cuban i.e. is preaching the same, emphasizing that following your passions is simply a piece of bad advice, calling it one of the great lies of life.

Soooo… what now?

I have frankly tons of more things I would like to share but I will save it for another post. I know that some of these points might not match with many voices out there, but please don’t forget that this is specifically for people who would like to achieve FIRE as quickly as possible.

To reach FIRE quickly, you need to push up your career as far as you can so you can increase your income. This will enable you to increase your savings and investments, in ways that most people can’t imagine. Saving 40-50% of your income is just easy if your income is three or four (or more) times higher than the average Joe.

FIRE is not for everyone and there is no easy way to get there. Like with everything in life, to reach something as challenging as FIRE, you really need to work hard on it and sacrifice a few things you might hold dear. So the question is, how badly do you really want it?

Planning for the last job – ever

Following up on my new years’ plans, I am now finalizing negotiations with my next employer. As my current work contract will expire by the end of April, I focused the last 2 months on trying to secure a new contract. Today, I succeeded.

While I couldn’t hit my self-imposed targets completely, the new job will bring some significant improvements and benefits to my career and to my private life. I will be in charge of a new hotel opening as a General Manager, with the expectation to grow into an Area General Manager role and in charge of a few more hotels within the contract duration of 2 years. By 2021, and if everything goes well, I might very well be in charge of up to 5 hotels across Thailand, and by 2023 there might be even a few more doors opening.

At the same time, I have also reached out to some of my colleagues from The Motley Fool in Singapore and Hong Kong. While I sure am getting busier, following up on my work with The Motley Fool Germany to analyze markets and stocks from the German, Swiss and Austrian area, I might soon start to also write about the stock market in Thailand. Yes, I am a workaholic.

All these efforts have one main goal in common: FIRE. Financial Independence Retire Early. This is the real reason why I am putting so much on my plate.

What makes this new job so exciting is that I am actually planning this to be my last job. My new contract will be for 2 years. It might get extended later on, and I actually have some further ideas and possible plans to continue of even up to 6 years with possible promotions along the way.

But it will be (hopefully) the last company and job that I will work for full-time. Whether it will be only 2 years as per the initial contract or even grow into 4 years or more. This will be my last full-time job and the last company I applied for a job with.

Working on full-blast for even just 2 more years and keeping up my high saving rate of over 40 %, will enable me to continue building up my passive income from stocks – to a level that my passive income will be able to cover all my regular daily expenses while still keeping on growing. I have calculated it 10 times through and the result is the same. Unless anything very unexpected happens, this next 2 years will be indeed enough to reach my target.

Light at the end of the tunnel

What this really means is that I am not just planning my next career move. I am planning for FIRE to kick in and to reach financial independence. I will be 41 years old by that time. What is even more staggering to me is that I only started to really put that much effort into the whole thing when I started my hotel career at the age of 29. This means that I will have reached my goal after only 12 years of truly hard work. I wish someone would have taught me some lessons about FIRE at school, then I might have reached FIRE probably around 10 years earlier on.

All the struggles, all the pushing myself to learn more, to work over-time and to trying to impress my supervisors, business partners, colleagues, all the hard work… will finally pay off…

Obviously, being a workaholic I don’t have any intention of truly calling it a day by then. My plan is then to turn my side-gig with The Motley Fool into a little more intensive exercise. I also think about going back to Germany for a short time, to certify myself as a financial advisor and to open up a small career and financial coaching business here in Thailand.

A million ideas, let’s see which one of them will become real in the end. The main point for me about FIRE is not to stop working in general, but about to be able doing things on my own terms.

There is a quote that money is power. It is. For me, it’s the power to regain control over your life, to reduce your dependency on others and to experience a form of freedom that most people in the world struggle their whole life for to find. I am now only 2 years away from it. 24 months. 104 weeks. I am really excited about it.

The puzzle is not too complex

Reaching financial independence is best looked at as a game, a puzzle. There are all these little pieces everywhere, and your job is to get them into the right place. Only then the picture will be completed, and you can rest assured that your odds for a safe and free life have reached a comfortable point without worries.

This puzzle may look different for everyone, but if summarized into a few short key points, it would probably look something like this:

  • Health
  • Job & career
  • Expenses
  • Family & friends
  • Emergencies
  • Savings
  • Investments
  • Home
  • Other

Each of these points can have several sub-points and sub-topics which require consideration, but overall I would say that this is probably what most of our lives are about. The order of the points is not chosen by accident. This is, in my opinion, where a higher amount of focus should be distributed, when you start planning your own path to FIRE.

Health always comes first. No matter what you want to do, or what you like to do, or what you plan to continue doing – if your health drops so will all your plans.

A successful career or at least a stable job comes right after that because as we know, you need money to generate more money. Good or bad, our world is designed around money and without it, nothing gets done. So, in the beginning, you simply need to do your part and join the rat race. Without inheritance, a serious portion of luck in a lottery or casino, or any other completely uncommon circumstances, there is simply no other way. It is worth noting though, that pushing your career straight up quickly is a powerful method to escape the rate race significantly earlier. Simple logic: The more money you will have to save and invest, the sooner you can call it quits.

Controlling your expenses is on par with a career as the most powerful tool to reach FIRE. It doesn’t matter how high your salary gets, if you waste all that money on things that don’t matter, then you will have nothing to invest. In fact, it is probably one of the most difficult things to learn for the majority of people. You read all the articles about credit card debt? Education loans? Mortgage payments? How much money people spend on eating out, transportation, travel, parties, etc.? That’s right. You need to have control over your spendings, otherwise, all your efforts will be for nothing. Personally, I recommend to embrace and learn about a minimalistic quality lifestyle. More on this another time.

Balance is important, and things are not fun if we have no one to share them with. The goal for any FIRE aspirant is to have more freedom – and more time. But this freedom and this time are best spent by sharing with someone. Family and friends are an important pillar stone to keep your sanity, staying down to earth and to start appreciating all the benefits that life has to offer. It’s easy to neglect those ties when you focus on your career and try to keep your spendings at bay, but make sure to never let them tear apart.

Being prepared for emergencies is a very basic risk-control measure. All your hard earned money and all your savings can be eradicated in a glimpse when a sudden accident or incident will require you to pull out cash from your accounts. Basic insurance and a reasonable emergency fund will ensure that you can sleep well at night.

Savings & investments are a diversified topic. As my readers know, I favor the stock market. However, there are tons of other options for how money can be saved and invested. No matter how and where you start, just make sure you do it regularly. Make sure you get regular interest or dividends paid out. And make sure to re-invest those, to let the 8th world wonder of compound interest do its magic.

Home is on my last spot, for a simple reason. Home is a flexible concept for me. We all have our dreams, plans, and goals, and choosing a home can play a crucial role in your life. Repeatedly. What do I mean by that? Well, in the beginning, it might make a lot of sense to chose your home for a place where you can maximize your savings. Low tax, plenty of affordable shopping options and neighbors who don’t care about what type of car you drive really have a strong influence on your daily expenses, your lifestyle, and ultimately on how quickly you will be able to grow your nest-egg. Later, you might think more about a comfortable lifestyle, move to a tropical paradise or get back closer with your family. For a FIRE aspirant, buying a home is seldom a good investment and rather a loose and flexible concept.

Putting these pieces together and understanding what you want, how you want it and where to put your focus is the first step to understand who you are, what you want and how a realistic plan to get there might look like. Why not start thinking about it today?

2018 in retrospect

So this is it. Tomorrow is Christmas, and only a week later we will already be saying “goodbye” to 2018 and “hello” to 2019. I will be working – a lot – over the next 10 days, so let me write my last words on this blog for 2018 today.

Obviously, since the blog is about personal finance, let’s start with that.

Personal Finance

I was not able to hit all my goals and targets for 2018, but some. The most important one is obviously my savings buildup. In 2018, I managed to save / invest 32,3% of my total income. A little bit better than 2017, when I saved 31,16%, but far away from my target of 40%.

Ambitions are good, but if setup too high, it can become frustrating to chase them. So for 2019 I will drop my target slightly and try to reach 35%. This should be manageable, because as of 1st Jan 2019, I will have no more monthly instalments for my car in my budget plan. That’s right. I paid down my car early (within 3 years) with several extra payments along the way. Thus, these payments will disappear from my monthly bills and shifted towards my savings plan.

In 2019 I might also skip vacations in Europe, which are a costly family event. This is not due to my savings plan though, but rather due to an anticipated job-change sometime around the middle of the year. So instead of 4 weeks in Europe, I might just do 2 weeks in Japan or Korea.

Either way, I was promising my wife vacations in Japan basically since the first day we met – 6 years ago, so yes, it might be the right time to get set this record straight.

In terms of stock investments, we have had a negative sentiment in 2018 and in 2019, the markets might very well crash. Therefore, for the first 6 months, I intend to collect cash and to get ready for the stock sell-off. When markets crash, there are usually plenty of great opportunities on hand, and I want to be ready for it. IF markets should drop by 40-50%, it means that I should have at least a quarter or better half of my currently invested amount available in cash – to cost average existing stocks and to add some new ones which will come as great bargains.

Maybe just a word about cost-averaging.… even the most optimistic stock-maniac (such as myself) needs to understand: When a stock drops by 50%, it will need to rise again by 100% just to be back at square 1. So if your stock drops by 50%, it might make sense to double down on it and to purchase the same or even a larger amount of the same stock at half price. This will reduce your average cost per share and your losses in % down to 25%. A loss of 25% can be recovered much faster than 50% and you will end up with higher profits – provided the stock comes back to the point where it was before the crash.

I don’t intend to sell any of my stocks. Most of my positions pay a solid dividend. In 2018, based on received payments and invested total amounts, my dividend income settled at 3,2%. It’s not a great number, but it’s only that low due to the constant additional cash that I poured into my account. For 2019, I expect the dividend income to increase to something around 4-6% and for 2020 to reach a range of anywhere between 5-8% returns. Once I reach double digits will be the point where I stop adding cash to the portfolio.

How is this achievable? Well, among a few other factors, it’s the power of dividend growth and the cost-averaging of some of my positions. Let’s take a look at the European energy giant E.On, which is one of my core holding positions. In 2018, the received dividend came down to only 2,32% after taxes. E.On paid a dividend of 0,30 Eur per share in 2018 and the withholding tax on dividends is roughly 26%. In 2019 however, the dividend will be raised to 0,43 Eur per share and for 2020 the expectation is around 0,60 Eur per share. That’s almost a 43% increase in the first year and a 100% increase over 2 years. Apple (another core position of mine) is expected to raise its dividend by at least 20% year on year, for many more years to come. Royal Dutch Shell returned to me only 2,7% on annual basis, but I purchased the shares just in June, so I missed the first 2 payments in the first half of the year, which I won’t miss in 2019. Thus the income will grow to a minimum of 5,4%, given the company will not cut or increase the dividend and of course provided that I don’t add more capital to it.

I have only 1 company in my portfolio that is not paying a dividend – and it is my biggest loss this year. My VOLTABOX shares are down 53%. However, since I don’t see any valid reason for the sell-off, I will probably add some more shares of this company to cost-average down and see how things play out in 2019.

Maybe another word of advise: During rough times, focusing on dividend paying stocks has proven to be a successful strategy to minimise risks.

Career

I have pretty much reached the first top of my career ladder and don’t expect any significant position-jumps over the next years. My target for 2019 is to switch jobs, to move to a larger hotel (I am a hotel manager) and to negotiate a salary increase of approx. 15-20%. This should be possible, as I am still within the lower salary-range within the standard frame for my profession.

My current hotel was my first assignment as a General Manager and I made a couple of mistakes when negotiating the contract. Obviously, I won’t repeat those mistakes, so the 15-20% salary increase is realistic.

Other

I will continue my side-hustle and keep writing for The Motley Fool Germany. Working with the team there since July 2018 was great fun and I learned a lot. I can actually imagine doing this for many more years to come, even after I retire early (the target is at the age of 45 – in 6,5 years from now).

During the last few months I have sent some money to my parents. We are fixing a small house in the countryside in Poland and are planning to open a small bed & breakfast. Nothing large, just 3-4 rooms, but there is great opportunity to support my parents about their retirement income from that. This is also the main reason why I couldn’t increase my own savings in that amount as I was originally planning to do. However, I believe that in the long-run it can turn out to be a very beneficial move for my entire family – so it’s absolutely worth it.

Merry Xmas and a successful New Year!

That’s it. Writing things down in a blog is my way of taking the time to structure some thoughts and to re-consider my approach for things to come. It’s a great exercise, and while you don’t need a blog for that, I urge and recommend you to do just that. Take some time, think about your goals and dreams, and make a plan out of it.

There is a quote, that might be politically not correct, but it doesn’t make it any less true:

“Nobody ever wrote down a plan to be broke, fat, lazy, or stupid. Those things are what happen when you don’t have a plan.” – by Larry Winget

And one more:

“A goal without a plan is just a wish.” – by Antoine de Saint-Exupéry

Take it as a constructive feedback and keep working on your plan.
It’s the only way to escape the rat race.

 

Disclaimer: I have all the stocks mentioned in this article.

What FIRE really means

Retiring Early and being financially independent may be a dream for many. But before you put too much romance into that thought, let me tell you something: It becomes a dream once it happens. But before that, it can get really tough.

Savings target

My plan is to retire with 45. That’s 6,5 years from now. A long time? Not at all. Let’s do some basic math:

6,5 years => 52 x 6,5 => 338 weeks.

IF you would look at your current situation right now, how much money could you save up every week? 20 Euros? 30? 50? 100? Even if you would save 100 Euros a week, after 338 weeks this would equal only 33,800 Euros. Hardly enough to retire on.

So my target is actually significantly higher, with a goal of saving approx. 500-700 Euros a week. For most people this may sound hard to manage or even to be complete madness. But yes, it CAN be pulled off. It’s just really, really hard.

Focus on your career

I work as a hotel manager and have a decent salary which contributes mainly to reach my target. However, becoming a hotel manager at the age of 36 while having started in the industry only when I was 29, was a pretty tough call. In order to get quick promotions and collect the necessary knowledge and experience, I managed during this short time-frame to work in Korea, Japan, China, Scotland, Germany and Thailand. When I took on a role, I learned as much as I could, and as soon as I noticed that there is something in my way of moving up the career ladder, I simply moved on. I didn’t care about where I go, what my initial salaries were and I had almost no personal life whatsoever.

To be exact, the hotel was my life. I didn’t celebrate my birthday with any of my friends back home for several years. I didn’t celebrate Christmas or New Years back at home, because this is mostly a super busy time in any hotel around the world and you just don’t get off for that. I had no time for a family and even regular relationships were mostly annoying because they would just slow me down and require me to compromise on my career choices. My luggage was (and mostly still is) a 7 kg carry-on plus my laptop bag and a couple of suits. I hate to check-in luggage. My point here is: You got to really push yourself to get this career that will help you in building up your savings and investments.

Save a lot and use your savings to invest – aggressively

In the last 3 years I started to invest in stocks on a larger scale. Basically, when I got salary, I would send 50-60% of it to my stock account right away, and leave just enough on my cash account to get through the month. While I have a high position and a high salary by now, I really hate spending money for things that simply don’t matter. And believe me, from my point of view, there are not many things that would matter.

I don’t collect stuff, I don’t believe in buying presents or gifts. I get headaches when I enter a shopping mall and stay there for longer than 20 minutes and most of my clothes are being worn until they literally fall apart. I upgrade my phone and my laptop once every 5 years (yes, it should be Apple products, other brands just won’t survive long enough), I don’t sign any contracts that would involve monthly payments. Netflix is currently the only exception.

Don’t compromise your savings, get a side-hustle if you need more cash

But most and of all, I focus on work. When I get short on cash, I don’t withdraw any money from my stock account. I go to http://www.upwork.com and find a quick side-hustle to earn a few quick Euros to cover the expenses that suddenly came up. If I can’t collect the money quickly enough, I will put it on my credit card, collect the points and pay it off immediately as soon as I can collect my side-hustle reward.

Credit cards can be tricky but also useful. Living now in Thailand for a while, I can honestly say that during the last 3 years I never paid for a movie ticket. I got enough credit card points to go in every week (if I wanted to) without spending a dime. This is mainly, because I put almost any of the necessary expenses that I have on my card – and pay it back as soon as my points come in. Avoid delays, because credit card interest can seriously jeopardise your finances, but collecting credit card points is a great way to improve the value of your spendings.

For the last 6 months, I have filled my weekends (and some nights) with writing articles for The Motley Fool GmbH (German subsidiary). Regular writing on the side helps me a lot to keep up with my goal and additionally, it helps me to stay up to date on financial topics and stock research for any future investments.

It can get really tough

Sure, my wife complains sometimes about not having enough time for the family. My hotel job covers me for 6 days a week (yes, only 1 day off per week) and I usually spend roughly 60 hours in the hotel – every week. Researching stocks and writing about them adds at least another 20 hours on top of it. So I am now at roughly 80 hours per week. Hell, that’s a lot. Seriously, it is.

BUT the way I see it, in 6,5 years from now I will have plenty of time for everything – until I die. That may be shorter than I think. Or significantly longer. Who knows. But I don’t buy the “living for the moment” mantra when it comes to finance. Yes, I may die a year after reaching my goal, but the much higher probability is that I will be around for another 40-50 years after that.

Isn’t it a better choice to be optimistic about your life expectation and to look forward to it, with the confidence of being financially independent? I think so. I believe so. And that’s why FIRE is for me.

If you can’t motivate yourself to INVEST your time, and to dedicate your attitude and career approach to this goal, then FIRE will be seriously hard to pull off. And probably remain just a dream.

Discipline, Patience, ​and Emotions

To reach financial independence, it is important to save, invest and to create alternative sources of income. At the same time, it is also important that we keep our spending routines at bay to ensure that at the end of the month, the account remains positive, all bills have been paid and that there is still money left that can be invested. The basic formula remains as simple as it gets at all times:

Income – Expenses => Money on the bank => Money available for investments

Obviously, most of us won’t be able to set aside and invest large amounts that will immediately show a great relief. Adapting the investor mindset and truly understanding that time is our biggest asset takes a while and requires a lot of patience, but even more so, discipline.

Discipline and patience are key factors to create wealth and are both in my opinion, among the most important attributes of any human being. I might go a little far on this judgment call but I really want to point out the significance of these skills.

I can’t think of almost any situation when a patient person would not be rewarded at some point for their skill, benefitting from a much better risk/reward ratio compared to a person who rushes into things. Of course, there can be a situation where the fastest reaction may give a “winner-takes-it-all” reward. But in the long run, a patient person usually gets to where he or she wants to be in one way or another.

At the same time, nobody would doubt the benefits of a disciplined approach to any job, study or project that any person in any profession around the globe would face at any given time.

Patience

The great news is that both, patience and discipline are skills. It’s not something we are born with, but rather it’s something that can be trained. Some might find it easier or more difficult depending on the way they grew up, but overall, everyone can learn to be patient and disciplined, provided the right training and incentive.

To master patience and discipline, it is all about learning to control our emotions. 

Most of our desires are initially based on our emotions. We smell a fresh banana-pancake on the road, and we want to have it. We see the new iPhone, and we NEED it. Our friends tell us about the new gym and the amazing yoga course, and we want to join it. The sun is shining hot and bright, and we want a cool beer.

There is nothing wrong with all of that, but what we got to learn is to step back before making a decision and be able to evaluate the actual benefit of it – and whether it helps us to reach our target or not. The banana-pancake surely smells and tastes great, but if you are not actually hungry and perhaps on a diet, then you should not buy it. There is a new iPhone coming out every year. Just keep using your old one, nobody really cares and it will do the job for 5 years at least. Unless there is anything wrong in your current gym, there is probably no need to change it. Well, you might consider if it comes cheaper with a promotion. And on any day, a glass of water will refresh you more and serve your body better than a beer.

The true strength of a successful person lies in the ability to evaluate situations and to make decisions that help him or her to reach set goals, even if it goes against his/her own desires and the ideas or expectations of co-workers, families, and friends.

This is easier said than done and you may truly be forced to do some great sacrifices along the way. But at the end of the day, no one said reaching your goals would be easy. In fact, it never is. But with time on our side, setting goals and working towards them with a disciplined routine promises a high chance of success. 

Reaching financial independence quickly is not a simple task and thus not easy at all. In fact, I would say it is one the largest challenges of all times, with billions of people struggling to even think about it. It is not impossible, but in order to reach such an ambitious target, the focus and determination have to be at peak while one’s patience and dedication will truly be put to a test on more than one occasion.

  • I can’t count how many times I have been fighting with my wife about expenses that I was not willing to agree on. I am talking about simple cases, like buying toothpaste. I mean, why would I buy toothpaste if my pack at home is still full? Or buying shirts. I still got 7 perfectly fitting shirts that are less than 4 years old and enough to carry me through the week. Why would I need more?
  • I lost a lot of friends when I left my home country in pursuit of a better career and my personal goal of living abroad, in a low-tax, low-cost country. The logic was simple and turned out to be true, that we can develop better and faster in a developing surrounding. One needs to take some risk into account and accept possibly lower living conditions, but overall the risk/reward ratio is significantly higher compared with staying at home.
  • Most of my colleagues are shaking heads when they see me and my family driving around in the small Mazda 2 while I surely could afford a BMW or a Mercedes – or a second car. But why would I want to spend so much money just on some convenience? Having a car at all is already a luxury factor for me that I would not consider to have if I wouldn’t have a family, so one is more than enough. And the additional costs for gasoline, repairs, insurance, cleaning, etc. are not attractive at all. It is so much cheaper to use public transport and in the event that you really need a car, just to rent it.

This samples may sound extreme, but I want to retire with 45 and that’s only 7 more years down the road. To get to this point, I needed to focus on the main factors:

  • First to have a great career. I am sure I mentioned it before, but let me repeat: your career is your single most important starting point to get on the fast-track to financial independence, and there are more opportunities in developing countries.
  • I need to save 30-50% of my income, but this won’t be possible if I have to give away 30-40% on taxes alone and finally
  • I don’t want to spend another 30-40% of my income on basic living expenses including housing and food.

Following most financial advisors to save approx. 10% of your income is OK, if you plan on working until 65. If not, you need to save significantly more and considering this set of goals, the decision comes very rationally in my opinion. The samples don’t sound extreme to me at all. They rather show commitment to the set target. Without discipline, patience and controlling emotions, making those decisions wouldn’t be possible.

Now, this may not be everyone’s cup of coffee. Many people will say, that they want to enjoy their life and since there is a chance of dying much earlier due to an accident or unexpected medical condition, they want to make sure to make the most of it. But let me show you a very simple and brief overview. Numbers don’t lie so here it goes.

Consider living for 75 years. The first 25 years are devoted to family, school, university. Most of us have only good memories of this time due to the amount of time we spend with friends, families and other relations. Thus, out of this 75 years, 50 are left. Most of us intend to work until 65 when social security kicks in. So, from 25 to 65 are exactly 40 working years to consider.

One year has roughly 52 weeks or 14,560 days over 40 years (it’s actually exactly 14,600 days but the calculation with workweeks makes more sense here) with a 5-day workweek. That’s 260 days of work. The average European has 28 days paid vacation and another 14 days come for public holidays. So we are down to 218 days of work and 146 days off per year. You see there is one day missing out of 365 which is due to the work-week calculation, but it’s negligible in the grand picture.

A person who works 40 years will, therefore, have spent: 
218 x 40 = 8,720 days working and
146 x 40 = 5,840 days not working over the period of 40 years.

For a person who sacrifices and goes all-in to finish with 45, the calculation is as different. From 25 to 45 its 20 years dedicated to working and then he/she is done. For the purpose of a comparison, let’s see how it works to compare the 40 years of work with the same amount of time split in 20 years with, and 20 years without work.

In this case, we will have:
218 x 20 = 4,360 days working and
146 x 20 = 2,920 days not working during those first 20 years, and
52 x 7 x 20 = 7,280 days not working during the other 20 years.
Thus resulting in a total = 10,200 days not working over the period of 40 years.

I specifically calculate in days, not hours and you might be right to dispute this. If you go for a career, you will have usually no way around pushing plenty of overtime but it’s the total timeline that I want to compare.

Thus, in my eyes, there is a possible double-reward here. If you are successful in retiring early, you get to double up your free time and you reduce your total time committed to work by half. Even more so, and not taken into account on this calculation is the fact, that you won’t need to worry beyond the age of 65. Because, seriously, if you think social security will be enough to take care of you, better think again. And what about if you don’t die early, but rather old? What do you intend to do with those additional 20 or 30 years, when you won’t be able to afford going out for lunch without sacrificing payments for your medical expenses?

This is some serious stuff to think about, but no matter what, it’s never the time to get all emotional about it. Rather realize your target, set goals and start working on it. Start investing. Time is your friend. And so is the investor mindset. Stop The Rat Race.

Career Planning

It can’t be emphasized enough: Developing your career is still the best and most promising way to secure your financial future.

We all know the mantra that parents, banks and insurance agencies try to feed us: Start saving early and utilize the power of compound interest to your advantage. The sooner you start saving even small amounts, the sooner you will reach your target.

Theoretically, it makes sense and it is probably one (out of many) ways to start your journey. But I am not a big fan of it. Let me explain.

The first time when I opened a mutual fund saving account I was just 20 years old. The bank convinced me at that time that saving 50 EUR a month would make me rich by the time I retire and the numbers seemed to support it:

  • 50 EUR x 12 = 600 EUR per year.
  • Considering 45 years, that’s a down payment of 27.000 EUR.
  • With compounding interest and re-investments of all generated profits at an average market return of 8% a year, this would indeed translate into solid 250.000 EUR when I reach the age of 65.

A lot of money. Only problem: As a student 50 EUR was already a lot of money to me and I wasn’t always able to come up with it. It didn’t take long and after a year I canceled the account as I was forced to make a downpayment for a student apartment and I simply didn’t have enough cash on hand.

Looking at the calculation at that time from today’s point of view, I see things a little differently.

  • Saving 600 EUR per year would equal 3.000 EUR after 5 years and with a friendly market return of 8%, it would have generated a profit of 801,56 EUR. My account would, therefore, have a value of 3.801,56 EUR.

Here is the catch: As an employee in a managerial role, I could probably save up the same amount every 1 or 2 months.

So instead of living as a student on the brink of extinction for 5 years, it makes so much more sense to me to try to push up my career the best I can and to get to a salary level that will make up for those 5 years in as little as a month. Is it possible? Absolutely and in fact, I did just that, and it worked. In my first 3 years as a manager, I saved and invested more than I would be able to collect in 22 years of my original investment plan with the 50 EUR a month mutual fund.

I admit, not everyone can do this and the stock market has been very friendly for a long time. Also having a solid, permanent income is only one side of the coin. Another important point that has an effect on our ability to save and invest is the lifestyle we chose. I prefer a minimalistic lifestyle and buy only things that I truly need. During this 3 years, I traveled around in Asia as a hotel manager and all my possessions were in a carry-on with 7kg of weight. This increased to 12 kg after some time, but despite having a family now (which requires some adjustments to my strategy and consideration for my family’s needs), I am trying to stick to the same basic idea that allowed me to pursue my target of financial independence in the first place: Appreciation for simple life and maintaining a low cost of living.

Having a solid income and keeping your living expenses low is the perfect formula to ensure that you become financially independent in a much shorter period of time.

Don’t punish yourself when you are young, but don’t get lazy as you get older. Work on your career, try to increase your income and remain humble with spending. There is no reason to wait until 65 to be able to follow your dreams. Doing the right things at the right time, chances are that you can reach your target much earlier.