Building up a financial safety net has been my fundamental need since my early twenties.
Why?
Because pitfalls, failures, and mistakes are normal and affect everyone. After all, life is not straightforward but follows winding paths. And sometimes, whether consciously or unconsciously, we have to venture into the unknown and take risks.
The problem is that I have a strong aversion to taking risks. Although I’m probably still young, in my early thirties, I often act like a shaky old scaredy-cat.
So I was always like “I NEED THIS NET OF SAFETY”.
Almost ten years later, I can tell you that having at least some form of financial safety net is an ace up your sleeve to outsmart quite a few obstacles in life.
Wrinkles of worry
The one or two worry lines on my face are due to the fear of not being able to live the lifestyle in old age that I have built up and enjoyed over the decades.
I live a hedonistic life
Living a frugal life is not an option for me. To say no in a world of excess is a luxury; we should name it for what it is.
Frugalism is luxury. In many ways, I am simply a hedonist who likes good food, traveling, and not cheap hobbies like rowing.
And for more than two years, I have had to add my small family, and I can now say one thing: children cost :D.
The regulatory environment is rather unfortunate
At the same time, Germany is a country that has been governed by even greater cowards than me for decades. The result is an entirely messed-up, underfunded pension system resembling a house of cards.
Conversely, the high taxes on capital gains make it difficult to save for retirement privately. Furthermore, the tax system does not provide incentives to work exceptionally hard. Low taxes on inherited assets (the higher the inheritance, the lower the taxes) not only perpetuate but also accelerate the inequality between different social classes.
I find this state of affairs unfortunate, but in the end, it is a luxury problem that I cannot change anyway. So I play the game and pursue my own strategy within the rules.
The choice we all face: discipline now or regret later – planning for (early) retirement
To sum it up: life takes us all on a journey, and one constant truth we face is getting older and eventually retiring. While retirement promises relaxation and freedom to chase passions, it can also bring financial worries if not appropriately planned.
The key to a secure and comfortable retirement lies in disciplined investing. As the saying goes,
Everyone must choose one of two pains: The pain of discipline or the pain of regret.
To me, this rings especially true when planning for my golden years.
There is magic in every beginning
Building a secure financial safety net requires consistency and discipline. This means regularly putting aside a portion of my income, making informed investment choices, and keeping a long-term perspective.
While wealth management is relatively easy in theory, sticking to the long-term plan comes with challenges.
They say the first 100k are the hardest. But in the end, this saying applies to every “first”.
The first 10k was also harder for me than the second. Today, my portfolio often fluctuates by ± 10k per week. It won’t be long before my annual dividends after taxes exceed 10k.
I am still in the early game
I think that the “mid-game” will start for me at that point at the latest. Right now, I still see myself as being in the “early game”. An early game, mind you, that has already been going on for more than eight years.
But these years were necessary because, as in every early game, I could build up my strategy slowly and set everything up so that I could successfully maneuver the ship through the mid-game.
Now, it’s a matter of correcting any undesirable developments, such as diworsification, and focusing more on companies with strong growth.
I also regularly sell shares in companies that massively cut their dividends due to serious business problems, such as Leggett & Platt and V.F. Corp. Conversely, I hold on to my winners and let them run.
The game of life is so much bigger and more meaningful than the investment game alone
For me, however, the investment game is not to be seen in isolation from the whole game of life, which consists of many individual elements and phases, including marriage and children.
As I said, I am a hedonist. I did not and do not want to sacrifice any of these things to get to the last level of the early retirement game faster.
At my age, the transition to a phase begins in which many people are increasingly only concerned with themselves.
An excessive focus on investing can lead to a corresponding reduction in consumer spending.
This focus can have a reinforcing effect on increasing loneliness.
I can eat my lunch at home or alone in the office. This saves me money, but conversely, it limits my social contacts.
That’s why I try to arrange to meet friends for lunch regularly. Of course, we usually go to a restaurant because it’s convenient. But on the other hand, these are the highlights of my day that I look forward to.
I also don’t want to miss my holidays. No dividend in the world will replace the memory of my walk at sunrise along the Catalan coast.
The safety net is already noticeable
The safety net is already making a difference. With a few hundred thousand euros in the bank, it’s easier to sleep at night than if I had to wait for my next salary.
The saying “money doesn’t bring happiness” is often quoted to emphasize that material things are not everything in life. That’s bullshit.
Anyone claiming that money is unimportant may live in a world far from reality. Money may not be the only source of happiness, but it does enable us to enjoy an essential quality of life: security, health, education, and social participation.
In a world where almost everything has a price, money is a key to self-determination and freedom. It also opens the door to immaterial pleasures because even these have a price.
The argument that money alone does not make you happy obscures how crucial financial stability is for well-being. It is time to rethink this old saying. Money alone may not make you happy, but it creates the basis for a happy and fulfilling life.
It’s a form of fuck-you money that I would miss if I didn’t have it. Today, I am thinking about what other options I would have in life if I didn’t have a job. I could start my own business. Even if I did nothing, there would still be a growing number of months per year when my monthly cash flow would cover 80 to 90 percent of my fixed costs.
This comfort zone will grow with each passing year and multiply my options.
Making it easier for the next generation
I come from a relatively modest background.
I had to take out a state-subsidized loan from Germany and repaid it partly. Nevertheless, I appreciate my financial security now. Although I don’t say that I lacked anything in retrospect, it’s always better to have a financial safety net than to need one.
That’s why my wife and I started managing a custodial account for TEV Junior as trustees when TEV Junior was born. We transfer money monthly and buy a World ETF for TEV Junior.
That was also important because I knew a World ETF would likely perform better than my portfolio. Accordingly, I am taking the path of least risk here.
Because I know one thing: when I am old and see that my children have a financial safety net that I helped to build, I will have one less worry :).
