Since my last holiday in my homeland, I realised that I can save money and take control of my expenses pretty well but what I do with my savings needs improvement. Most of my friends in Germany and in Argentina have developed strategies to have valuable savings when they retire. Some of them asked me about my investments and my answer was vague: I did a small investment in 2018 to make my tax advisor happy. He has been warning me about keeping my savings in the bank in this zero-interest times for two years and I wanted to show progress.
Here I will describe all the steps I did to define and execute a long-term investment strategy and explain my life goals and my personal feelings towards money, risk and income return. I will update this page regularly, it will be a work in progress for my whole life and a easy way to talk about money and discuss investments with my family and friends. Sex and money are two topics which we, as society, have to talk more about.
I would like to thank my tax advisor and my friends in Argentina for showing me what I am doing wrong and what I can improve. I love constructive critic.
Warning: This text doesn't contain any financial advice. When you invest, you can loose all your money. This text describes my personal opinion and each investment decision is personal because your life goals and your personality must be taken into account.
Books
Instead of spending money, making mistakes and correcting my investments, I decided to read before taking any further financial decision. Because finance is a new topic for me and as I want to invest for a minimum of 20 years, I small time investment now will be worth a lot of money later. I want to understand who to keep the value of my savings and have a positive attitude towards putting my money to work. I have learned that this isn't a greedy idea but necessary in a world with inflation and governments with money printing capabilities.
Since January 2019 I have been reading about investing in different assets classes and the only book, post or magazine which I still like to read is Der Finanzwesir - Was Sie über Vermögensaufbau wirklich wissen müssen. Intelligent Geld anlegen und finanzielle Freiheit erlangen mit ETF und Index-Fonds. Unfortunately it is in German and some of the insurances recommended there don't exist in Argentina. I will follow his basic structure to make investments covering five levels on this post. In those issues where we disagree, I will write a note here.
The only book with has similar topics by looking at the index -I didn't read it- is Investing without Wall Street: The Five Essentials of Financial Freedom 1st edition by Jacobs, Sheldon. If you read it, let me know if it was useful for you.
Investment Policy
This is the most influential aspect of your investments and involves describing our ideas towards money, risk and return and our personality, take control of our expenses and finally defining our goals. If we lie to ourself, we won't be able to hold our investment strategy long enough to see the results.
Taking control of my expenses and incomes and documenting what I owned
To reach your finance goals you have to save and invest your money. To save means to spend less than you earn and the way to learn what it is left at the end of the month is to do private accounting. This also shows you what habits cost you money like smoking and make the decision to keep it or leave it.
Since I started earning money, when I was 14 years old, I register my expenses and incomes. During all these years I have improved my method which now involves an accounting programme (GNUcash), an Android app (Financisto) and an Excel-Spreadsheet with my budget and my yearly reports.
If you have never register your expenses and incomes in a complete way, I would recommend you to start slowly:
- ask a friend to show you how GNUcash works and to create the first income, expenses, active and passive simple accounts for you
- then you have to collect invoices and tickets
- once every 2-3 days register the expenses on GNUCash and correct the account balance of your wallet. Some cash will just disappear (15 minutes)
- at the end of the month you can download the account statements from your bank and register all the expenses and incomes (1 hour)
- finally you have to check that the account balances are correct. I still make mistakes and it is always better to correct the mistakes as soon as possible (30 minutes)
- every six month ask you questions about your finances and try to find answers on your data. If you need more data, think who to register it. (3 hours)
I like GNUcash because it learns about your past expenses and incomes and auto-completes most of information you have to fill. Its reports are quite powerful and you can have accounts in many foreign currencies which it ideal for people living in Argentina or world travellers. Finally it was developed by a handful of volunteers all around the world which use it everyday. This means GNUcash will help you with any financial goal you will have like buying a house or investing in the capital market.
It is very important to improve your accounting method over time. Your goal is to invest less and less time on accounting but keep it updated, as complete as possible and useful for taking decisions.
If your have already done any serious accounting, just start with your own method and improve it over time. The Finanzwesir recommends avoiding apps and just using Excel. In the long term, an accounting programme has more useful features than Excel.
My ideas towards money, risk and return - My dogmas
- I have to save for the bad years. Health issues during my childhood show me how fragile our life is and how extremely our life can change from one day to another. More savings means more safety for the unfortunate moments of my life, my family and friends.
- I want to have experiences, owning material things is a pain. I spend lot of time with friends and my hobbies and I love to do something special on my birthday party like laser shot or playing bowling. Material presents only have value if they are really hard to find and extremely useful like the big tea filter I got last year.
- Money is the resource for my dreams. Most of my dreams require more time than money
- I don't give status to people based their wealth. You are rich when you are happy with your life and your are fulfilling your dreams.
- After certain level of wealth, money don't make you happy. If you are struggling to pay all the expenses of your family, due to a poorly paid job, to inheritance some dollars will take some of these problems away. I had the luck to learn from wealthy relatives how unhappy they were with their lives. They had too many choices, they could start any hobby they wanted to but they didn't have a passion of it
- I can't sleep having debt because one day my income could disappear
- I don't trust in any government in providing a good pension insurance. Governments use the money of the pensions for short-term goals and inflation is a tax
- I would shame myself living on government help. TODO I have to find out why. If I get ill, I am not guilty about it.
- During the 20 years before my retirement date, it would be difficult for me to find a good paid job. TODO Read more about this topic and look for statistics and take with my friends about it
- What I pay for a service must be proportional to the value its provides. I read the small letter of every insurance and contract to find out what are the limits of the service
My current financial and personal goals
- I can help my family and friends in case they need money due to unfortunate things
- I could start a family in the next 3-5 years, if I find a women with whom I want to spend my whole life. Afterwards I won't be interest in having children
- I don't want to buy any flat and live there until I am 65 years old. I can't image myself paying the instalments of a credit for 20 years and it is a lot of pressure for parents of young children
- When I turn 65 years old, I want to have an income coming from my investments which covers 100% of my expenses. I still have to check if this is possible
- When I turn 45 years old, I want to have an income coming from my investments which covers 50% of my expenses. I still have to check if this is possible. After I turn 45, I expect to have difficulties finding a job.
Mix of Stocks and Bonds
TODO
Implementation Strategy: Passive or Active?
TODO
Selection of finance products
TODO
Buy and Sell
TODO
My portfolio
TODO
