Tag: geld

Goals and finance.

Goals, or dreams. Everyone got them. Goals often start out as a dram, slowly the dream develops into a goal. The easy steps are often taken swiftly. Let’s take a big trip, or better yet a world trip as an example. Travel guides are quickly purchased , a shiny new notebook and a pen for writing down the ideas as well. Let’s start the party ! Long train commutes from and to work are futile ground for plotting the country’s , places and other things to visit on this world tour. It makes you feel better during the day as well, happy days. The notebook quickly fills up, and after a few months it’s almost full.

After all the fun stuff the practical side of things kicks in, the how when and why kick in. And also it will cost a ton of money. Slowly but surely the newly acquired travel guides disappear and the notebook lands on the pile of unfinished projects.

How does this happen ? Well the dreaming and figuring out the fun stuff is new and exciting, it gives you energy. But how do you manage going from the dream to the goal and actually making it happen ?

Don’t get me wrong, dreaming and working on the first part of the goal is a necessary tool for getting off the ground. Keep at it. But make sure the pile of unfinished projects doesn’t get too big. It’s not fun having a large amount of ever growing unfinished projects , worse it demotivates.

As soon as the fun part is over, our world travel plan has a near definitive shape the ‘boring’ part begins , taking care of the logistics of it all. How about the job , house , cats and dogs ? And how are we going to pay for all of this ? Most projects get some start in the way of the hard part. But at some point doubt sets in , some practical solutions may end up in the notebook but for most that’s it.

What does this tell you ? Is it the doubt about the achievability at this moment ? Wait another year ? Or is this dream simply not suitable for you ?

The last question might be the most important one. Is this dream, which along the way has the shape of a goal and a project really worth all your time and a large part of your future time money and energy ?

Think long and hard about all of the dreams you had the last few years, write them all down on a piece of paper. Get the old notebooks out en relive the process. Look at it with one question in mind , how badly do I want this ? Do I really want this world trip ? Or is it just because a lot of people seem to be doing it? Is it an escape from something else ?

Really take your time ! And pick 3 goals you are passionate about , with a limited time frame in which you want to achieve them. Take the easiest one first, let’s say staying in the travel examples, take a citytrip too Valencia. Get out your calendar out and pick a date.

In comes the finance part, make an estimate of expenses, the traveling, hotel and daily budget. Put it all in a nice excel sheet and calculate what it takes too save up for it in the time you have before you go. Even if you have the finances ready, do it to get used too making a sacrifice for your goals.

It teaches discipline and persistence , cancel a night out on the town , or make more creative plans which cost less money. Or make plans to get the money with a new side hustle.

After this first goal , you take it of your list of 3 goals and start the second one. Don’t add more goals too the list until you finish all 3. This is important, it teaches you if your selection process is a valid one. Maybe one was not as fun as it was supposed too be. And it keeps you from being distracted. As soon as all 3 goals are done, you asses them. Were all 3 goals as good as I dreamt ? How much effort went into them and was it worth it ? As soon as this is done you can repeat the process and start over. Let the dreaming begin , and with a better self knowledge you can pick better goals. Have fun dreaming !

Why buying a home is not an investment, but still a good idea

With the housing market being at pre crisis levels again and people desperately trying too buy a house the euphoria is back again. The sort of euphoria were people count there paper profits as actual profits and fantasize what they can buy with it.

A strange phenomena which returns every time housing price rise, so I have been thinking a bit about and the only logical conclusion for me is, stop looking at the house you live in as an investment. But it’s still a good idea to own your home.

There are only 2 options when it comes too getting a roof over your head, renting or buying. Basically renting is paying for the use of the house and the owner taking the risks, which in return you will pay a premium for the owner too cover his expenses, inflation and profit. Too keep up with inflation rents are raised with a certain percentage every year. Fortunately in most country’s rents are regulated. And in higher segments during crisis you can get nice discounts. But for the most part rents tend too rise.

When buying a property , you carry all the costs , maintenance insurance taxes and so on. You can simply buy a house with cash savings but most people will have to take out a mortgage on the property. This is a different risk landscape, the bank will loan you the money and will ask a certain interest percentage for risk covering and profit. But the house is yours, and here is where the fun starts.

At a certain point in time when you buy the house, a large part of your living expenses is set for the duration of the mortgage , mostly 10, 20 or 30 years. So your monthly payments are the same. When renting you will see a raise every year.

The monthly mortgage payments consists of interest and a part of the initial loan the principal (the part of the loan you pay back to the bank and thus lowering the outstanding debt). Now the fun bit, most banks permit paying back extra on the principal , so your monthly expenses will go down, you will pay less interest on the remaining loan and the amount you are obligated in paying back each month also drops. What you can do with this extra money is food for another post.

You have a certain control on what the roof over your head will costs you each month, the most significant is the absence of the yearly rise in rent. But buy paying back extra you will own your house faster and save paying future interest. This can add up quickly.

So why is owning your house not an investment ? Well simply because it doesn’t yield any income. No interest will come your way, like when you have a savings account with a bank, nor will there be dividend payments like when you own shares in a dividend paying company.

The only way in cashing in is selling the house. You should not consider yourself richer because of the paper profit which at some point wil be there. Your house is simply an expense which your are obligated inlaying each month , but you need too live somewhere.

Why it’s still a good idea? First you own the house and you can control your monthly expenses more easily.
Second, buy simply having the option repaying the mortgage faster you can get your costs down. Instead of the sure rise in living costs you have when renting. And historically housing always been following inflation (minus the bust and bubbles in the meantime) So after you are done living in your house and downsize start renting after retirement there wil always be a sum of money left over after the sale. You simply gain an asset by doing something you need , having a roof over your head.

Why not rent ? Renting can be cheaper in some cases, when you need the excess money after retirement and downsize. When you move a lot for work. But most people live in a house for years, making buying almost always cheaper than renting. It’s also the easiest way to control a large part of your monthly expense.

But just remember a house you live in is first and foremost a roof over your head and not an fictional ETM machine which you can use for your daily groceries. So no investment but still a good idea.