The Four D’s

I like to plan things in my life. I meticulously planned my career. I have a work-out routine and a work-out plan. I like to plan my daily activities for each week at least one week ahead. And I am extensively planning my finances. But no matter how good the plan is, there is always a chance that something unexpected happens, something that will throw your plans into a limbo. That’s just how it is. There is always something that can be difficult to be taken into account.

The four Ds refer to exactly these kind of circumstances, and while they are hard to plan, they are so frequent that the term “the four Ds” became financial jargon among insurers and financial advisors. These unexpected events more than often create uncertainty in our lives, and effect not only our physical and mental health, but also our finances in a dramatic way. These events are:

  • Disease
  • Divorce
  • Disaster
  • Death

Each of these terms is pretty much self-explanatory, but nevertheless let me share a few words on each point either way.

Disease will obviously seldom refer to a cold, a flu, or a fever. But it will refer to an unexpected development like the need for a surgery, a diagnosis with a severe illness like cancer or diabetes. It might also not be directly concerned with you, but with someone you care and are or feel responsible for.

Divorce is further down the line, but given that roughly some 50% of all marriages fail, it’s a pretty common event that can and will have dramatic consequences on one’s financial situation.

Disaster used to be less common, but with all the floods and fires across the globe, earth quakes, tsunamis and who knows what else is about to happen in the next months and years to come, it’s a very valid one. A disaster can literally demolish an entire life of financial investments, especially for those who focused on real estate and other physical forms of storage of value.

Death is the last one, and while even one’s own death is not for free, I’d rather consider this to be an event concerned to people who are close to us. Expenses for a funeral might come hand in hand with the need for additional financial support to someone you care about. In some instances with your direct family, you might also not inherit what you expect. It can happen that instead of adding assets to your net value calculation you get surprised with additional leverage (debt/loans) that need to be balanced and that will fall under your responsibility.

Billions of people throughout many generations have had experience with each of those Ds, and while it’s impossible to know when one of them will hit you, it certainly is possible to prepare for each one of them.

Take the time to think about this.
It will be time well spent.

Is it FIRE or just FI

This pandemic just keeps dragging on, and it’s very interesting to observe how people are handling it all across the globe. When things got started, Asia was on the forefront of effective handling of the pandemic. Vietnam, Thailand, Korea, Japan, Singapore. We managed here to keep infections and deaths on the low, as people were quick to adapt to protective measures and limitations on economic activity. Europe and the US were lagging behind, and there were frequent discussions on what the west can learn from the east in the future.

But now the tides have turned. While Europe and the US is on track to full recovery, here in Thailand I feel like we are back to where it all started. Lockdowns, economic restrictions. It’s like we got stuck somewhere along the way, and can’t find a way to move forward.

This is of course mainly due to the lack of efficient vaccines. Herd immunity is apparently not an option with this virus now circulating in the form of several diverse mutations, and our natural immune system not offering the long-term protection that would be required to keep infections at bay. To top it off, the SinoVac and SinoPharm vaccines aren’t working well, and the local production of AstraZenecca has stalled for whatever reason.

FIRE vs. FI

But let me stop here before I get political. My point is, that since this pandemic keeps dragging on and I am spending more time at home than usual, I realized a few things. One of those things is that I really don’t want to retire any soon. I like to work, and I miss having more action in my hotels, in my office, and spending more time with my guests. I like spending time with people, and the idea of retiring early and spending much more time on non-productive things feels a little less desirable after more than one year of Covid.

I know that there are thousands of people who don’t want to work at all. People who don’t want to report to anyone, to not depend on anyone, and to not being micro-managed by anyone. I am also fairly often at odds with myself over all these work-necessities, which make me sometimes feel not free, dependent, and all the negative notions that accompany these points.

But retiring early… honestly right now, it doesn’t seem for me like the right thing to do. I want to work. I might get out of the hotel business and do something else, become a consultant or stock analyst, turn to freelancing or whatever. But I am pretty sure that I will keep working for a long time to come.

So my goal changes from FIRE (Financial Independence Retire Early) to FI (Financial Independence).

It may not sound like much, but there is a significant point to it: Since I will keep working for a long time to come, I can be a little less frugal. I don’t need to maximize my savings all the time, because with a continuous stream of income from work, I have significantly more time to reach retirement. Striving “only” for financial independence first will give me the feeling of security and freedom that I want and need, while not thinking too much about retirement will take some stress and pressure out of the equation.

What’s the right thing for you?

Being financially independent offers a lot of options to do things that you actually want to do. If you don’t worry anymore about a low income, then you can start a new career, change your field of expertise or interest. Hell, you could even do an internship again in your 40s or 50s. Why not? It can open up some very exciting opportunities for you to learn more about the world, to pursue dreams which you set aside when you were younger due to financial concerns, or simply to just gain new perspectives. For me, this is absolutely “good enough”.

But of course, this means that hanging out on the beach all day and sipping Jim Beams with Coke will have to wait. That’s probably for the better anyway.

About paying taxes in Thailand

I got to admit, I don’t like to talk about taxes. Depending on where you live it is either a complicated, or very complicated topic with lots of things to know, to consider, and plenty of pitfalls. But of course, this is only the case because taxes are so important. Taxes can make all the difference when it comes to building wealth, and like it or not, it’s worth spending some time to learn about the challenges and opportunities that come with the tax code in your country.

I am living in Thailand and the tax code here is rather simple. For investors, it is a paradise. There is no capital gains tax, meaning that no matter when and how much I profit from trading equities, there are no taxes due at any point. Not today, nor tomorrow. There is a withholding tax on dividends in the acceptable amount of 10%. There are no loopholes or exceptions to avoid it, so the bank will deduct it automatically upon pay-out. There is no need to declare or report anything when you do your tax declaration. Simple and fast.

But there are hidden opportunities

I am mostly trading regular equities and ETFs and since the regulations are so easy, the tax part was never really on my radar. But I certainly should have invested more time to learn about it much earlier on.

I have learned by now that the government is actually actively supporting investors in building wealth through retirement funds. As an employee with regular income in Thailand, I can invest in mutual funds designated for my retirement, and receive significant tax benefits for doing that.

The so-called RMFs (Retirement Mutual Funds) can invest in either foreign or domestic equities or funds, and need to be hold for a minimum of 5 years before withdrawal. From your total annual investment, up to THB 500.000 per year can be deducted from your total taxable income. The tax code for personal income in Thailand in 2021 looks like this:

Taxable Income
(baht)
Tax Rate
(%)
0-150,000Exempt
more than 150,000 but less than 300,0005
more than 300,000 but less than 500,00010
more than 500,000 but less than 750,00015
more than 750,000 but less than 1,000,00020
more than 1,000,000 but less than 2,000,00025
more than 2,000,000 but less than 4,000,00030
Over 4,000,00035

Now here is how this works. Let’s say you have an income of THB 2,600,000 per year.
You will then pay:

THB 0 – on the first THB 150,000 (total 150,000)
THB 7,500 (5%) – on the next THB 150,000 (total 300,000)
THB 20,000 (10%) – on the next THB 200,000 (total 500,000)
THB 37,500 (15%) – on the next THB 250,000 (total 750,000)
THB 50,000 (20%) – on the next THB 250,000 (total 1,000,000)
THB 250,000 (25%) – on the next THB 1,000,000 (total 2,000,000) and finally
THB 180,000 (30%) – on the last THB 600,000 (total 2,600,000).

Your total tax will be therefore: THB 545,000 or 20,96%.

If you now max out your RMF contribution up to THB 500,000, you can deduct this investment from your total taxable income. This would reduce the total amount from THB 2,600,000 to only THB 2,100,000. Therefore your tax obligations for the last 30% bracket would also shrink, from THB 180,000 down to only THB 30,000. After your tax declaration you will get a refund of THB 150,000.

So on the one hand you get a tax benefit. But as an investor, I look at it another way: I receive effectively a guaranteed 30% annual return on my investment.

Do some reading

Every country has its own rules and regulations, but since we are all part of the same system, there are similar opportunities everywhere. Whether it’s the 401k in the US, the RMF in Thailand, or the “Arbeitnehmersparzulage” in Germany. Chances are that the tax code in your country offers you opportunities to boost your savings and investments. These can be quite significant and strongly support you in reaching your financial goals. So don’t be lazy. Do some reading, educate yourself, and grab the opportunities which have been designed for you to get the most out of the system.

About emergency funds

This post is probably 12 months late. As we are in the middle of a global pandemic, people are losing jobs, lives. But even more are coming to realize that they miss something truly important: An emergency fund.

I got to admit, I am also not a great role-model here. Over the last 5 years, every penny I got was being invested right away. Therefore I have not built up a proper emergency fund. This is changing now.

How much is enough?

I read several surveys from Germany and the US last year. While I don’t remember exactly the numbers, they were overall pretty similar in their final assessment. A majority of citizens (of each of the countries) are not prepared to handle even smaller unexpected (emergency) expenses out of the pocket. How small? We are talking about 300 Euros or 350 USD.

I was honestly shocked by reading about it, because 300 Euros is very little, especially when we are talking about the US or Germany. For most people, it wouldn’t be enough to cover monthly rent, groceries, let alone a potential hospital bill or car repairs.

So obviously 300 Euros is not enough and wouldn’t qualify as an emergency fund. An emergency fund is meant to offer us protection in times of real need. When something happens that threatens our 3 basic needs (shelter, food, health), possibly over a prolonged period of time.

It needs to be therefore large enough to cover our regular monthly expenses for a specific timeframe. Most financial advisors recommend 3 to 6 months.

Therefore, to determine the size of your emergency fund all you need to know is about your monthly expenses and multiply this amount with a minimum of 3 months. If you are a cautious type or consider yourself for whatever reason to be more at risk, you might want to multiply it with 6 or even 12 months.

How to get there

Of course, you are not supposed to put this money aside right away. If your monthly expenses are around 1.500 Euros, it would mean that your emergency fund should be at a minimum of 4.500 Euros to cover expenses for 3 months. If people can’t get 300 Euros out of the pocket, how can they save up 4.500 Euros?

The solution to this is of course time, consistency, cautious choices, and the occasional sacrifice.

If you are saving monthly for a certain financial goal, a part of that monthly savings needs to be redirected towards your emergency fund. When you get a salary raise or a bonus payment, you might want to skip the celebrations and put the money into your emergency fund. If you are a coffee addict, how about skipping two cups of those soft lattes each week and putting 10 dollars each week in your emergency fund instead.

This step by step approach might take time, but unless you have an emergency every few months, you should be able to get to your goal within a reasonable timeframe.

The last option is to take on a side-gig. Sacrificing a little more time for a few months or a year might prove the right choice down the road. Having an emergency fund in place will protect you not only by covering any expenses that might unexpectedly pop-up. It will also protect your investments and other financial assets. Because you won’t get under pressure to sell them when money becomes an issue.

Keeping it liquid

An emergency fund needs to be liquid, which means that it must be easily accessible and not tied up to anything. Usually, you will, therefore, keep it in cash, on a simple savings account, or as a fixed deposit which can be easily withdrawn.

I have decided to split it. I keep one month of expenses in cash, and over the next 6 months I will set up a fixed deposit account with enough money in it to cover another 3 months of expenses.

No matter which way you chose, but having some money on the side for the next pandemic, the next wave of cost cuts in your industry (meaning when you get furloughed), or the next car accident, is surely worth the effort.

About multiple income streams

People all around the globe face unprecedented challenges. Well, at least it’s unprecedented for my generation (Gen X), and certainly for Millenials and anyone younger than them. Millions are losing jobs, are forced into quarantine. Many are in dire need of some kind of assistance, whether it’s cash, food, or both.

Here in Thailand, we just passed through the first month of the lockdown. When I drive through the streets of Bangkok or Pattaya where I am currently working, I see people lining up (with social distancing) for food support from the government and from some private institutions.

The Thai government is issuing cash support of THB 5.000 per month to those who need it most. It’s not much, but it’s enough to survive on a very low bar. Together with the support from private institutions, NGOs, and hundreds of those who are more fortunate and who are volunteering to support, I have no doubt that the country will get through the event.

I am also always astonished by the amount of support among Thais in times of crisis. My wife is getting postal packages from friends and family with food, face masks, and snacks. We pass on the favor by sending things to others who need it more than us. I am fortunate enough to still have my job and my monthly salary intact, albeit slightly reduced.

About income and unexpected situations

But not everyone is lucky. Similar to other places around the globe, unemployment in Thailand is on the rise on a massive scale. This is dire in a country with very limited governmental social protection in place, and where most people live paycheck to paycheck.

Which brings me to the main point: Unemployment means for many people to lose their only source of income. And we can see right now more clear than ever, how many people’s lives really depend on their job. Being without work and without an opportunity to find new employment within a short time has now turned into an existential threat for millions of people.

Also, only very few of them could have even imagined such a situation two or three months ago. Yes, some might have an emergency fund and savings to ride out bad times. But would they have expected that they can lose their job, their income, and their benefits within such a short period of time? Hardly.

Building up multiple income streams

This is where the lessons of FIRE become such a powerful reminder, because having multiple, passive income streams is what FIRE is all about! The whole point of becoming financially independent means not being dependent on your job.

Building up passive income streams is best done by investments. Sure, the stock market is crashing and we are sliding into a recession. But out of the 33 companies in my income portfolio, so far only one of them has canceled the dividend, and only two announced to reduce it for this year.

Thanks to this, I am never worried about losing my job. Sure, my monthly dividends can’t compare with my salary, but that’s not the point. The important part for me is that I won’t need to rely on government support and on charities. I will be able to fulfill my main responsibility of providing shelter, medical protection, and food to me and my family on my own.

Personally, this is a very important factor to me, as this defines my perception of freedom and independence.

Who gets the money

And just to add another layer of understanding of why investing is a safer bet than your job, let me explain here one thing. While our savings and jobs are being destroyed, a crisis like this also generates unimaginable amounts of money. While stock valuations may be nosediving right now, governments all across the globe are printing cash like there is no tomorrow.

And where does this cash go to?

In the US, every US national is receiving a one time check of USD 1.200. There are 328,8 Million people in the US, so this sums up to roughly 395 Billion USD. Yes, it’s a lot of money.

But you know who gets more? Companies. Especially the big ones. They get bailed out when they get in trouble, they receive grants, and the FED is reducing interest rates so they can borrow money almost for free. This may sound very negative, but I don’t mean it that way. That’s just how it works for plenty and a variety of reasons.

The important thing is that you have a choice to make. Do you stick to your job and when you lose it, wait for your one-time check of USD 1.200? Or do you invest, and build up multiple and passive sources of income?

Having the knowledge that governments across the globe will put significantly more effort into protecting your investments and your sources of passive income (in comparison with taking care of you directly), this shouldn’t be a complicated choice to make.

5 Tips how to manage your time (and budget) now

These are tough times. The world is on lock-down. People are losing jobs or are getting pay-cuts. And the probably worst thing of all is that we don’t know when this is going to end. Therefore, now more than ever, it is important to manage the money we have in the most cautious and structured way possible. Frugal living and strict budgeting can’t be a hobby now. It’s a must. So here we go, 5 things that you should consider doing today to navigate your finances and your well-being through these difficult times.

black calculator near ballpoint pen on white printed paper

Photo by Pixabay on Pexels.com

1. Review your essential spendings

If you never had a personal budget, now is a great time to start. A personal budget plan sounds complicated, but it’s really a simple calculation of income and expenses. The more details you put into it, the more aware you will be about your essential and non-essential spendings. In a situation like now, this information is vital to make smart money decisions.

What do I mean by “essential” spendings? We are talking about survival here. So it’s the 3 basics: Shelter, food and health. Your rent, including electricity, water, and internet. Your spendings on food and drinking water. And your expenses to maintain your health.

Every non-essential spendings need to be put under review and you should consider cutting or minimizing them.

2. Plan ahead with weekly limits on your expenses

After having reviewed your budget, you will know the amount of cash that you have (or that will be available for spending), and how much you need to spend for your essentials. Now plan ahead and split your cash and/or income in a way to keep your essentials going for as long as possible. I guess it’s safe to say that the goal should be to try to sustain your expenses for up to 6 months.

Any remaining cash should be split into equal weekly amounts for the same total period of 6 months. Putting a strong limitation on your weekly spendings is a good way to ensure that you don’t overspend and keep track of your budget.

When I was a student and had hardly any money to live on, I had a very simple system which I still recommend: Withdraw cash for a month ahead for your spendings, divide it in 4, and put each amount in a separate envelope. Each one envelope is for each week of the month, and no matter what happens, be strict with yourself not to open any of the envelopes ahead of time. This method will greatly keep you aware of the money you have and what you can or cannot afford.

3. Get your family on-board

This point doesn’t apply for singles, but for anyone living with a family, this is a crucial one. The whole family needs to be on-board with this. It won’t help if you set up the most delicate and strict plan for yourself while your partner is clueless and keeps on living as if nothing would have changed.

If you have kids, this is a great time to teach them about the value of money. They might cry if they don’t get a toy or some ice-cream, but they will remember this as a “tough” time when the family had to stay strong together. Chances are that you will emerge from this stronger as a family. And it’s never too early to teach kids about the value of money. Trust me, the school won’t do it for you.

4. Consider a side-gig

Financial advisors are preaching to their customers the necessity of having an emergency fund, which should cover at least 6 months’ worth of expenses. The reason that this topic is coming up so often is that there are so few people who actually do it. And to be fair, even most companies don’t follow suit. Just take a look at the world right now: As our economies come to a halt, after only one or two months of missed revenues, millions of restaurants, hotels and even airlines are declaring bankruptcies or are in need of bailout money. They clearly didn’t have any emergency funds whatsoever.

So in case, if you are late on this and can’t see a way to make your finances work over the next 3-6 months, you might have no choice but to consider a side gig. The good news is that if you are reading this, it means that you have a working internet connection, and luckily, there are millions of jobs available online.

Check-out online freelance jobs through platforms like “UpWork” or “Fiverr” which may have jobs matching your skillset. But even if your skills are from completely different fields, consider teaching/tutoring English (or what else you speak), doing transcriptions or translations. There are lots of opportunities out there.

These jobs will hardly make you rich, but they can be of great support to prop up your finances and to get you through this difficult time. Another positive aspect of having a job will be that you won’t go mad while sitting at home doing nothing.

Last but not least, there is a good chance that you might end up keeping your side gig even when this crisis will be over and we get back to our regular lives.

5. Don’t slack off

And finally, no matter how long this may go, I recommend that you don’t slack off. You might relax a little for a week or two, but after that, get a routine in place. You don’t need to wake up at 6 AM, but you shouldn’t sleep until noon either.

Set a proper routine when you wake up, take a shower, shave, have breakfast, dress properly. Then work on your side gig, perhaps study a little bit. Coursera, EdX, and Udemy offer plenty of opportunities to learn some new things for free these days.

Having set times for breakfast, lunch and dinner is good for your inner clock. Set some time aside to exercise at home. Body-weight workouts are a great alternative to the gym. Any other hobbies you may have will keep your body and mind sharp and ready to get back on track immediately when all of this is over.

Unchartered Waters

Things are looking grim. As economies across the globe are setting record after record on rescue-efforts for companies and individuals alike, more people get infected and are dying by the hour. Here where I live in South East Asia, things look currently like this:3580795

But, this is not a medical blog, it’s about personal finance. So let’s talk briefly about the spread of the virus as shown above, and what it means for our personal finances.

Unemployment is on the rise

Two weeks ago, I had one of the most difficult moments of my entire career. I sat down with 25 team members, explained to them what is happening with the tourism industry, and then told them that I have no choice but to let them go. They were not full-time employees with my hotel. They worked for an outsourced supplier on a temporary contract. I worked with them since the hotel opening last year and they proved to be a dedicated and hard-working team that would always do their best.

And yet I had no choice. With the operational losses mounting up day by day, a full hotel closure became a realistic expectation, which would put all of my 60 employees on the street. No matter how many tears I would shed, there was simply nothing else left where I could cut costs to keep the ship afloat.

It was hard. But I also know, I am not the only one. In my area here in Pattaya almost 20 hotels already closed their doors. 20 hotels that I know of. On top of that, bars, restaurants, coffee shops, massage parlors. Empty. Thousands of people are now either unemployed, on leave without pay, or on leave with reduced salaries.

In the USA, last week alone more than 3,2 million people filed for unemployment – within a week! Just imagine that. A country that just celebrated being once again the strongest economy in the world, had a sudden jump in unemployment by the millions.

The same is happening all across the globe. And my industry is being hit the hardest. Hotels, restaurants, and bars employ 1 out of 10 people worldwide. We are the single largest employment industry across the globe. And we are being hit the hardest by people staying at home.

No Money, No Spending, No Income, No Taxes, No Profits

Don’t get me wrong. We need people to stay at home. Because we also can’t afford to get sick. Most of us work on minimum wage. Many of us have limited or no insurance. And many of us have no savings. No financial security to speak about.

This means that once people are sick and unemployed on a large scale, they obviously stop spending money. This leads to other businesses losing income, scaling down and ultimately profits across all industries start to dwindle. If this lasts for as little as even only a few weeks, chances are high that this turns into the beginning of a recession.

No money means no Spending. No spending for some means no income for others. This will result obviously in no taxes paid and cripple public budgets. It also cripples private businesses cash-flows and profits. Investors will therefore start observing a lot of companies losing value. Stocks start to slide and portfolios turn red. Except in China, where the colors for positive and negative are reversed.

Unchartered Waters

We had recessions before and so far, we always found a way out of it. After every recession there was a bull market that would usually rise higher and beyond expectations.

History is a great advisor, but there are no guarantees. There are just so many things that we don’t know. We don’t know how long this pandemic will endure. We don’t know, how a shut-down of the economy on such a large scale will affect our economy in the long-run. We also can’t reliably estimate which sectors will be dragged down together with the most obvious losers.

But there are reasons to be optimistic. Every recession is like a clean-up. Bad and mismanaged companies get quickly in trouble and are either bailed out or forced out of the market. Great companies adapt, adjust, and come out stronger than before. The clean up also creates ample space for new players and new competitors. This is why markets usually come back stronger and better after every crisis.

So let’s stay positive, observe, and get ready to continue investing. Preferably, when some stability comes back to the daily news, and when expectations from all market participants start to become a little less speculative, and more solid instead.

Black Swan Events

The world of finance has its own set of terms to describe whatever is happening in the market. And given the current situation, just talking about “Bulls” and “Bears” is not enough. Let me introduce to you another term. The Black Swan.

Black Swan events happen every now and then. Like now. Since this is a rare event, let me also do something rare. Let me add a visualization from my favorite visualization website, www.visualcapitalist.com to this post:

mm_black_swan_events_main-2

I love this website and I can only recommend anyone interested in understanding how the world works to be a frequent reader and/or to subscribe to their free newsletter. It’s awesome. And no, I am not getting any commission or compensation for writing this.

Having said all that, there is some great information on this graph. Let me point out one negative, and one positive.

First of all, on a slightly negative note, while the markets crashed heavily in recent weeks, there is still room to fall. It may be hard to imagine, but share prices might still not have reached the bottom. We certainly have not reached the same proportional drop as back in 2007/2008 during the financial crisis. In the long-term chart most investors who are more than 10 years in the market, are still very much in the greens.

Secondly, on a more positive note, we can learn here that every crash is followed by a recovery. Investors do well to keep their shares, not to panic, and instead to look out for opportunities to continue investing even as the crisis keeps evolving.

Is a recession coming?

This is a complicated question and there are many factors involved. But the chances are, in my humble opinion, pretty high. The current crisis is forcing major industries to shut down operations. Hotels, airlines, restaurants, bars, events… we are talking about millions of jobs worldwide. All the lost income, disappearing pay-checks, lost taxes, depleted savings accounts. We will feel the effects of this crisis far beyond the time when the Covid-19 Virus will take its place in history books.

Our entire world economy is based on consumption. People need to spend money to help us generate cash flows, profits, and to pay wages and taxes to keep this machine running. This won’t stop, but it will definitely slow down over the next couple of months. Therefore, it might very well be that we will have a couple of rough weeks or even months ahead of us.

Panic has never been a good adviser

The coronavirus is now officially a pandemic. A serious threat not only to human lives but also to the world economy, to our health system, and yes, even to our financial system.

As the virus spreads further, entire countries are closing borders, schools are closing doors, events get canceled, elections move online. People get scared to go for a beer to their local pub. Even the premiere of the new James Bond movie has been postponed!

So the ultimate outcome, and changes to our lives, possibly to the world, it’s all very uncertain. And nowhere is this uncertainty better reflected than in the stock market. Having crashed almost on a scale comparable to the financial crisis of 2008, we can see the negative sentiment of investors on full display.

Where do we go from here?

After three weeks of markets being basically in free-fall, the last Friday showed something of a possible turn around. After the US-President decided to declare a national emergency and at least showed something more of seriousness about the situation, confidence seemed to return to the markets and stocks recovered some of their losses.

But is this enough to start a full-scale recovery? In my humble opinion, it’s still way too early to even think about it. Not only does the response from the White House lack enough credibility to be trusted and to trigger a sustainable recovery. Even more importantly we will need to see some real numbers before the full impact of the crisis can be assessed. What numbers am I talking about?

  • Lost revenues
  • Lost jobs
  • Recovery costs
  • Updated annual forecasts (for everything)
  • Dividend payouts and dividend cuts
  • Repercussions on globalization as a system
  • Political repercussions

That’s a lot of data to digest and I don’t dare to predict how long the evaluation of it may take. And I am not alone there. Markets tend to react quickly to possible opportunities because there are plenty of speculative traders who are willing to take a risk to bet on the direction which they consider more plausible. But more than often these emotional and non-data driven speculations go wrong. It’s a 50:50 bet.

Don’t panic. Analyze. Invest.

Therefore, I wouldn’t be surprised to see some additional bad weeks ahead of us. The short spike-up which we observed on Friday could turn out to have been only a short-sighted flare of hope from some speculative investors betting on a turnaround, ahead of having done the required due-diligence and analyzing some real numbers.

For us private investors it’s a challenging time. First of all, we got to keep a cool head. Panic doesn’t help. As my personal portfolio has lost over 30% in value, I haven’t lost any sleep about it.

First of all, the loss is not real until I actually sell the shares. Until then, it’s only a loss on paper. And do I have any reason to sell my shares? I don’t think so. All the stocks in my portfolio have been bought for a reason. While the dividend payments might get cut or even fully canceled for a year, as long as the business itself doesn’t face an existential threat, I don’t worry.

Secondly, markets go up and down. That’s what they do. We had an 11-year run-up and it might be time for a turn-around. Will this turn-around last forever? Very unlikely. Bull-markets are followed by bear-markets and vice-versa. Do I, or my generation (I am from Gen X), need to worry? Very unlikely. I have still plenty of time ahead of me and will almost certainly see more recessions – and more recoveries.

Lastly, I am an optimist, and what I see is a great opportunity to continue building up my retirement portfolio. Even if we should have now entered a bear market and a possible recession. All I see is companies and businesses, learning to adapt, getting more efficient, improving their resilience and tweaking their operational proficiency, to come out even stronger once this bear market will be over.

So don’t panic. Analyze. Invest.

What would you do…

… if you wouldn’t need to work anymore? If you wouldn’t need to worry about food, shelter, and health, what would make you get out of bed every single day?

As the election in the US is drawing closer, I have spent some nights learning about some of the presidential candidates. The person who is standing out of the crowd for me: Andrew Yang. And even though I don’t think that he will be successful in the current campaign, I believe that his time is yet to come.

His MATH campaign (Make America Think Harder) is clearly not aiming at the people who are currently in power and who will remain so for a few more years – probably. Politics in America are old, white, and corporate. But times will change. All those who cling to power now have a very short candle of life left to burn. Once they’re gone, the change will come.

But politics aside, I want you to think about what would happen if the concept of a universal income for citizens would become reality. How would your day look like?

The Freedom dividend

This concept, also known as a universal income, is not a new idea. Without getting into details, let’s just assume that it’s feasible and you and your partner suddenly start receiving 1.000$ each on your bank account. Unconditionally, on every first day of each month.

That’s 2.000$ for the household a month. 24.000 $ a year. It’s not enough for a “perfect” life, but it’s probably enough to let you stop worrying about food, shelter and to some degree, about health. How would this change your life?

Critics are easy to point out that people would just stop working, stop doing anything for that matter. To a point, this is probably true. People would probably stop doing jobs that pay less than that. For example, service staff in restaurants or coffee shops who don’t even get paid by the hour but rely solely on tips might reconsider their life choices. Employees who get their lives sucked out by unscrupulous managers (*cough*A-m-azon*cough*) might be OK to sacrifice 100$ or 200$ a month to get their life back.

But we all need a purpose in our lives. And while many people think that rich people, those who could afford to hang out on a beach in Bali or the Bahamas all day, are living the dream relaxing and spending money all day long, nothing could be further from the truth. Most rich people work actually quite a lot. The difference is though, that they work on things that they are passionate about. Because they can afford to do so.

Don’t wait for Andrew Yang

The truth is that many skills, many qualities of the past, have disappeared over the years as they proved to be not profitable enough to provide an income for people who practiced them. Artists, handicrafts, social workers, volunteers. The list is long. Some of them were meant to go and nobody will miss them. Others are dearly missed and needed.

So while we wait for this concept to get embraced by nations who can afford it, there is another option to take matters into our own hands and to get the freedom dividend anyway: By investing, and generating passive income.

The freedom dividend is exactly that. A dividend. And you don’t need to wait for Andrew Yang to get it. All you need to do is to start investing in dividend-paying stocks. And while you build up your savings and your passive income, whether Andrew Yang will be successful or not, will not hinder you from achieving the target of getting some freedom back through regular dividend payments straight to your bank account.

Once you get that, you might find your passion in some jobs which are dearly missed and needed, but which are not being pursued by anyone due to low profits and lack of interest from large corporations. The term “retirement” might just then receive a completely new meaning for you and for others…