Uncategorized

Savings rate April 2020: a record high 85.71%!

I would like to say that thanks to my cunning saving plans I managed to get a nice savings rate, and while I can say that my expenses are actually the lowest in over a year, I could not have done it without also having a boosted income in April! Read on and find out how I managed to get such a high savings rate. Everything will be reveled!

Expenses

Lets compare April with March and see what moved exactly:

 [visualizer id=”2480″] 

[visualizer id=”2634″] 

The highlights

  • Living costs remained at 645 EUR
  • Restaurants costs dropped to 0 for the first time ever!!! I did not go on a restaurant once, and I had no take away food either! Such a huge saving here!
  • Grocery Shopping dropped to 156. It’s much lower then I usually have, but if you recall it was a bit higher in April when I bought some extra supplies, and now I was able to live off those supplies for a part. All things considering its actually still quite high!
  • Health: apart from my yearly health insurance contribution I also had some doctor visits for my back. This resulted in medicines and some tools to help me out, leading to probably the highest health expense I had in a year in one month. But my back allows me to do sports so its important that it gets the best possible care. I also should get some money back from insurance.
  • Shopping was my guilty pleasure this month. I spend about 300 EUR on clothing (I had not bought any in a few months) and also bought some new furniture for 300 EUR. That’s the thing with spending a lot of time at home, you start noticing what furniture you are missing

Income

For income this is my favorite time of the year. In March we find out if we get a raise, and in April we find out how much our bonus is for the year. My yearly bonus came in May last year, but this year I was lucky and we got it in May.

I made almost all my taxes last year and even outperformed. If me and my department made all our targets I would get 25% of my usual wage in a bonus. Almost all of them were met and I got a 24.3% bonus!

Now cash bonuses are heavily taxed in Belgium. Actually you would only get 46% of your bonus after taxes. For the first time my company gave us the choice to choose warrants instead.

What is the difference between warrants and cash? Well to start with, neither the company or the employee pay social security on warrants. That alone saves you 28% in taxes. However the personal income tax is slightly higher, but not high enough to be as high as social security. So whats the catch? The catch is that warrants are listed on the stock market. And in these very uncertain times there is a Risk. For some of our company this risk was the reason they did go for the cash bonus.

But I know the market well, and I realized you could sell the warrants already the next day. So the market risk is only one day! In times we saw the market drop 10% in one day there is a still a risk, but the risk is so small that I decided to take it. The market decided to go up about 1% that day and I ended up with an about 30% higher bonus then I would have if I took the bonus in cash, and ended up paying “only” about 40% of taxes.

As travel is still suspended I am afraid my daily bonuses I get when travelling are still reduced to 0. My company still has all travels grounded until June, so for the time being this will not change. At the same time I do enjoy spending time in Belgium and I am not that eager to go back on the road.

I am also getting meal cheques, this month is was 168 EUR. I forgot to actually add these to my income while I believe they should be part of it. I have corrected it for all of 2020, so my saving rate for 2020 is slightly higher.

Saving Rate

So despite of the loss of income from business trips and mainly thanks to a small cut back on expenses and my yearly bonus I managed to get a 85.71% saving rate, outperforming any previously recorded savings rate!

I have a competition with myself that I need to do 5% better then last year and this is the first time I actually see some improvement, but I do see a difficult month ahead with some housing expenses coming up in May that I will need to tend to.

2019 saving rate: 45.8%

2020 average (so far): 46.4%

Whats next

I will continue to do sports (running / cycling is almost free), watch my grocery expenses and try harder to control my shopping urges!

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Early Retirement

How to pay less taxes in 2021 by spending the right way in 2020

With an average wage in Belgium of 3489 EUR per month or 41868 per year that means a slight majority of the Belgians will pay 50% taxes on their wage or 20934 EUR! No wonder that we are looking for ways to lower these taxes. And ways to lower there are! For the government offering lower tax rates is a friendly way to steer people’s behavior in the right direction, for us its a way to bring one of the highest tax rates in the world down a little.

Investing in stocks that give a dividend – 240 EUR

The Belgian state has a 30% tax rate on all dividends. However not all people know that dividends from stocks are free of taxes for the first 800 EUR. That means you will pay 30% taxes or 240 EUR for every 800 EUR of dividends but you will be able to get this money back.

Keep in mind this is only for regular stocks, so ETFs or Funds do not fall under this category! If you are looking to invest in stocks then check out DEGIRO which is the broker I use and recommend. Find out why I moved to DEGIRO.

Retirement saving: 315 EUR

Every year you can deposit 1260 EUR and withdraw 25% or 315 EUR from that. This is my longest running tax withdrawal post. I started with this right after I had purchased my first property. The earlier you start doing this the bigger the effect will be. When you reach the official retirement age you will be quite happy that you had invested 1260 EUR every year. Keep in mind its just 1260 EUR, you will not feel it that much.

My retirement savings account

Buying off educational years: 4173 EUR

For people interested in stopping with work before the official retirement age in Belgium buying off the years you studied is almost a must have. Buying off these years is quite expensive but it will increase your income after 67 quite a lot, especially if you stop working before 55. Be aware that after 30/11/2020 it will become a lot more expensive if you graduated over 10 years ago. You can actually do the calculation yourself on mypension yourself and see if it is worth it for you.

An example of a calculation. To the left the amount I would get when I work until 67 (1934 EUR/month), to the right the amount if I work until 50 (1446 EUR / month – that I get from 67)

Keep in mind that if you plan to work the MAX number of years before your retire this will not give a benefit, this is only useful for people who want to reach financial independence before the official retirement age.

You can buy off max 5 years at 1560 EUR per year. You can get a tax advantage of that of, depending of your income, 50% + community tax (lets say this is 3.5% average in Belgium). Assuming you studied for 5 years and have an average income you can subtract 4173 EUR from your taxes in 2021.

For anyone that plans for Financial Independence Retire Early this really is a must have, it will give you much more financial security after 67 even if you retire at 50.

After I bought of the years they appeared in mypension as”worked years” (in yellow)

Long Term saving : 717 EUR

Since 2020 you can no longer subtract taxes from purchasing your first house. This regional Tax Withdrawal was canceled both in the regional taxes as in the Federal. However there is a way to still get taxes back from real estate purchases called “Long term saving”. This is a Federal tax withdrawal post that is meant to “save long term”. You basically can save 2390 EUR per year, and subtract 30% taxes of that or 717 EUR.

Now if you still have to purchase a home you can save for the long term with your bank (ask your bank for details), and most banks allow you to use your long term saving to cover your debt insurance in case you pass away and your loan is not paid off yet. Most banks force you to take this insurance, which everyone knows but what you might not know is that most banks also allow you to cover this with whatever is in your long term savings account.

If you already purchased a home you can use it for the debt insurance of your second home, but also you can actually subtract the interest of the loan of your second house as the Federal government also considers this as a method to do long term saving!

Investing in Startups

Another method to pay less taxes is to invest in Startups. I have invested in startups myself. Keep in mind it needs to be a recognized Belgian platform such as spreds for example. What most people don’t know is that you can actually subtract 45% off your taxes for the smallest startups. But keep in mind this is a very risky investment. I would recommend to do it only with small amounts with money you can afford to lose, and more as a hobby or things you really believe in and would want to use yourself.

Please keep in mind that these investments are very long term and it can take 5-10 years before you see anything back. Although I consider all my investments long term, for stocks you do have a much higher liquidity in the unlikely event you need to sell.

My investments on spreads

Donations

If you make a donation make sure its at least 40 EUR and to a recognized institution. If you do it this way you can deduct 45% from your taxes. While I am sure this is not the main reason people donate if you have the choice to donate to an organisation on the street or do it online on the website its better to use the website so you are sure you will get some money back the next year and you supported your favorite charity!

Service Cheques -210 EUR

Flanders

My remaining service cheques

Another method in Flanders to get some taxes back is service cheques. Service cheques are cheques you can use for services such as cleaning in your home or ironing of your clothes. For the first 500 cheques you can subtract 30%. A cheque costs about 9 EUR so you can substract 2.7 EUR. per cheque. So for example assuming you let someone clean your house for 3 hours every 2 weeks you will be able to subtract 210 EUR. Of course it will still cost you 702 EUR in a year.

What we see in this withdrawal post is that the benefit has been dropping every few years so it might not be so interesting anymore for a single person household. The major reason for me to do this was an investment in my time. By investing in my time I was able to spend time on other things such as blogging or doing sports that actually do make sense.

Brussels

For those living in Brussels there is a similar system. Altough the tax refund is much smaller, you are able to subtract only 15% or 1,63 EUR per service cheque and this for the first 163 cheques. I still think for a family or couple its worth doing this, although I am not sure for a single household.

Wallonia

Those living in Wallonia are the worst of. They can only substract 0.9 EUR per cheque of 9 EUR.

My personal tax plans

I wanted to be open with what I personally spend, although all the items above are things I have done in the past or am considering, what we can see so far is that the withdrawal for 2019 is quite small with 1267 EUR, but this year I am on my way to get 3678 EUR back from the Tax man!

 Spend in 2019Tax Benefit 2019Plan 2020Expected 2020Comment
Stocks0000Right now I prefer to invest in ETFs
Pension Saving12603151260315I will continue to invest the MAX every year
Buy off educational years0062403363I bought these off in February 2020
Long Term Saving00TBD TBD Q4 2020
House000  
Tax Shelter16007200 For now I will not invest more here
Donations5022,5TBD I want to donate more this year
Service Cheques720210TBD The Tax benefit drops every year so I canceled it in May
Total 1267,5 3678 

Interested to know more? Check out some other articles on my blog, or follow me and stay up to date of the most recent news!

Uncategorized

Savings rate March 2020: drop to 32%!

Like I mentioned in my blog about Corona my initial expectation during the lockdown is an increase in expenses on some levels and a drop on others. I would expect groceries and shopping to go up, and restaurants to go down. At least for my specific case, and this mainly in the first month.

Expenses

Lets compare February with March and see what moved exactly:

 [visualizer id=”2482″] 

[visualizer id=”2480″] 

Its a bit like what I predicted. Restaurant costs have plummeted, groceries and shopping expenses went up.

The highlights

  • Living costs were not so bad and stayed at 772EUR this month, even though they are my biggest expense, 772 EUR is really fine as it includes a 550 EUR / month payment of my loan
  • Restaurants costs dropped from 500 EUR to 99 EUR and a further drop is expected in April as all restaurants are closed! Good news for my wallet!
  • Grocery Shopping increased to 400 EUR which is 200 EUR more then usual but its expected when I don’t go out eating. However I am paying more attention now to the things I buy in the supermarkt so I am hoping it will drop next month
  • I spend 532 EUR on a Virtual Reality Glasses (Oculus Quest) that I classified under shopping, any games I bought I classified under hobby’s. I bought 4 games in total costing me about 100 EUR. It was a really good purchase in the end as it is helping me to go trough lockdown.
  • Otherwise no abnormal spendings, just a regular month

Income

I also had a drop in income as I get bonuses when I travel for work, and I was able to travel much less for work. So while my expenses remained about the same I have a drop in saving rate. I plan to spend a bit less next month to compensate better. I could still travel the first 9 days of March, so the drop is still limited, but I expect it to be even larger next month.

But there is also good news. My company noticed that in march all projects can continue as its business as usually. The next 3 months will be hard to sign new contracts but also to recruit new people. End of march is usually when we get to hear if there will be a raise or not. I was really afraid it would be 0% this year, but I am happy to say I did got a raise that I am happy and grateful with given the circumstances. This will most likely help me to improve my saving rate on the long run!

Saving Rate

All in all I can’t complain. I’m healthy and so is my family, I still have my job and am able to work from home. So even if my saving rate dropped to 32% I’m still happy. I hope that you and your family are also in good health and you are able to keep your income stable.

The moment you have all been waiting for 😉 The graph with my savings rate. Compared to last year its not looking so good, but I am happy where I am so far and I will try to keep my shopping in check 🙂

I have a competition with myself that I need to do 5% better then last year. Its not looking good, but I feel April could turn things around! I went in a trip in May Last year and Paid some items in April. And guess what I am not able to do this year? Yes Travel! So let’s see how this will give me a chance to turn things around!

Whats next

I will continue to do sports (running / cycling is almost free), watch my grocery expenses and try not to shop to much in April!

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Uncategorized

Will the Corona lockdown help you to live more frugal?

By now its clear that 100s of Millions of people are in lockdown. In Europe alone we are talking about Italy, Spain, France, Belgium, and now also UK and the Netherlands are going in lockdown. In America US states are starting lockdown procedures and India has already put 1.2 Billjard people in lockdown. In total we will be approaching 2 Billjard people in lockdown worldwide! What effect will this lockdown have on your wallet?

Your income side

Needless to say that being lockdown has a very bad effect on our income. I am not talking about dividends, passive income, rental income or any kind of income on investments, but I am talking about wages.

Anyone working in profession that cannot be done by working remotely is by default at the very least technically unemployed. In most developed countries we can fall back on some kind of government supported replacement income. People might lose their job or fall in some kind of temporary unemployment system.

Additionally people who have to travel a lot for work will also get a burst in their income. Personally travel is a part of my job, and not being able to travel costs me probably 25% of my income. Lucky I am fortunate enough that I am able to work from home for most parts of my job.

Your expense side

What do Europeans spend money on?

Pre-Corona according to eurostat, the European household spends mostly money on Housing 24%, Transport (13,2%), and Food (12,1%), but of course there is quite a few smaller expenses that also take a bite of the budget.

For sure some expenses will go up. You will spend more on electricity, heating, water, coffee, … all these are normal effects from having to spend more time at home. But at the same time some will go down. So the what will have the higher effect (not taking the income side into account). Will living in lockdown automatically make you more frugal?

What will you spend more on?

In a first stage I can imagine people will be spending more money on things they require when they spend more time at home. People in lockdown land in a situation that most will not have planned for.

At best they will see the lockdown coming a few weeks ahead. At this point I can imagine (and we actually see this happening) people will shop more for groceries they require during lockdown. We have seen an increase in almost all countries for grocery shopping. Especially less prepared countries have seen a rush on supermarkts causing empty shelves.

In Belgium I figured empty shelves were a thing you only saw on TV happening in less developed countries, but even here there was a traffic outside to get into the store. While in the 2,5 weeks we have been in lockdown I never came to a situation where there was no fresh items to buy, for sure there was some items that could not be purchased occasionally. The biggest rush here is over by now, but I can imagine in some countries this can lead to severe shortages. I am convinced almost everyone who could has at least grabbed a few items extra, be it knowingly or unknowingly and some of us have stacked up quite huge, preparing for a long isolation or a period where items might be more difficult to find in the supermarkets.

Another expense will be healthcare. In a first place I can see people stocking up on items to prevent them from getting ill. This includes items like mouth masks, matterials to make mouth masks, gloves, but also medicine they can use in case they fall in such as Paracetamol or Dafalgan. In the worst case scenario people will get infected and will have to go to the hospital. In Belgium the financial effect of this would be limited, but in some countries this can leave you with huge hospital bills.

Then there is hobby’s. You might not be foreseen on doing things at home and most of us will not be prepared for the sudden large amounts of spare time they have. You might get bored and want to purchase some things for you to do at home. This can include fitness items for at home or for digital entertainment.

You could spend a lot more if you would have spend it on the most expensive thing

What will you save on?

Travel! You will probably not be able to travel for a few months. At least in Belgium the government is recommending not to book any holidays for this summer. At best people will be able to enjoy a holiday in their own country. For people usually travelling in summer (unlike me), this will be a large cut back.

Another big expense you will save on is restaurants and bars. I believe most people don’t realize how much they spend on this. I personally did not notice it until I started keeping track of my expenses. I found out I spend more then any other hobby on this. Its quite a huge saving that I can no longer go. It will actually be a very good exercise for me to spend less on restaurants!

Clothing is another item you will probably save on. Who cares about what they look when they can’t go out and barely see anyone apart from family. There is no need for a new outfit for a fancy party you will attend. If you have to dress up for work then this is clothing you won’t need to purchase anything for a while either.

There is little need to worry about bills for public transport or cars. Roads look abandoned and trains drive around with no passengers.

Since the cultural sector is pretty much closed for business any fans of theater, movies, museums, dancing, will not have to worry about their wallets as there is no way to spend any money on these items.

Transport, culture, recreation, travel, restaurants, bars , clothing account for about 35% of Europeans budget and all of these will have a very large drop when going into lockdown. So yes I absolutely believe that the lockdown will help us to live more frugal. Extra expenses to adapt to our new situation will be temporary while items on the expense side have a rather permanent character. At least permanent as long as the Corona virus is raging in our cities.

This is a similar effect I expect on my expenses. Probably break even the first month, due to extra purchases to help me with my new situation, and after that I really do expect a positive effect on my expense side.

That being said as many people will have lower income, being in lockdown will not automatically give a higher savings rate!

This is your chance to embrace Frugality!

If you are not frugal yet, or had trouble to get certain expenses under control, this is your chance to do so!

If you had large expenses that you had trouble to get under control pre – lockdown, now is your chance to start with a new habit.

Did you used to go for beers every evening after work coming home with a big bar bill?

Did you go to expensive cocktail party’s every saturday?

Did you had a big restaurant bill every month?

Did go on a citytrip every month?

Did you hire people to do chores in the house?

Did you took anything that broke in for repairs instead of trying it yourself?

The lockdown will teach you that you can actually do these yourself! Perhaps you will finally become the cook or cocktologist you always wanted to be. Perhaps you will finally learn how to replace a flat tire on a bicycle. Perhaps you will learn that spending some relaxing time as home has its charms as well.

So instead of seeing this as a time of despair see this is as an opportunity to pick up some new frugal habits!

Those who have been reading my blog know I spend to much on restaurants! Since the lockdown I have been cooking fresh food myself every day, and I have even been trying some new recipes. I look forward to changing this habit permanently as it will be such a money saver!

Did I miss any effects of the virus on your wallet on the expense or the income side? Are there any habits that you are happy to chance while in lockdown? Let me know in the comments bellow!

Interested to find out more and see what affect Corona will have on my saving rate? Then join me on my roadtrip to Financial Independence!

Uncategorized

Savings rate February 2020: back at 60%!

After two difficult months with dropping savings rate it seems that I finally managed to turn it around! I decided to visualize my expenses so its easier to see where my money is going. Check out my new pie chart for the very first time!

Let’s go over the highlights of this month:

  • Living costs were not so bad and staid at 718 EUR this month, even though they are my biggest expense, 700 EUR is really fine as it includes a 550 EUR / month payment of my loan
  • Restaurants costs went up again to 500 EUR. I had to go on a business trip to Tel Aviv, I didn’t knew anyone there so I went out eating a lot more then usually. Although I do get paid a bit extra for going there, so it does evens out
  • I probably spend to much on shopping this month, Ill have to watch that next month!
  • Otherwise no abnormal spendings, just a regular month. I decided to visualize

Again the 1270 EUR seems like an impossible goal unless I plan to live inside a cave and never come out! But maybe there will be one month where I manage to pull this off. Maybe March or April…? 🙂

In total I’m really happy about my savings rate, it ended at 59,55%, although I think I can do even better!

The chart

The moment you have all been waiting for 😉 The graph with my savings rate. Compared to last year Im doing much better in February, although its clear that last year my holiday costs came in February and

Average saving rate so far…

As a final note I want to close with my average saving rate of the last 12 months. So far I am able to get a 40% savings rate in the last twelve months, an increase with about 5% compared to last month. I have not reached 50% yet but I keep reaching!

I have a competition with myself that I need to do 5% better then last year. All I can say is, its not over until the fat lady sings 🙂

Whats next

I have a week holiday in march, while it will lower my income slightly I have not planned anything big. I do need to purchase some extra clothing as some things just really need to be replaced.

I am starting to do more and more sports and hobby’s, something I am happy to spend money on as its the best investment I can make! This will make me happy and not have a big effect on my savings rate so a perfect combination! Having fun should not be expensive, it should just be fun.

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