2018 in retrospect

So this is it. Tomorrow is Christmas, and only a week later we will already be saying “goodbye” to 2018 and “hello” to 2019. I will be working – a lot – over the next 10 days, so let me write my last words on this blog for 2018 today.

Obviously, since the blog is about personal finance, let’s start with that.

Personal Finance

I was not able to hit all my goals and targets for 2018, but some. The most important one is obviously my savings buildup. In 2018, I managed to save / invest 32,3% of my total income. A little bit better than 2017, when I saved 31,16%, but far away from my target of 40%.

Ambitions are good, but if setup too high, it can become frustrating to chase them. So for 2019 I will drop my target slightly and try to reach 35%. This should be manageable, because as of 1st Jan 2019, I will have no more monthly instalments for my car in my budget plan. That’s right. I paid down my car early (within 3 years) with several extra payments along the way. Thus, these payments will disappear from my monthly bills and shifted towards my savings plan.

In 2019 I might also skip vacations in Europe, which are a costly family event. This is not due to my savings plan though, but rather due to an anticipated job-change sometime around the middle of the year. So instead of 4 weeks in Europe, I might just do 2 weeks in Japan or Korea.

Either way, I was promising my wife vacations in Japan basically since the first day we met – 6 years ago, so yes, it might be the right time to get set this record straight.

In terms of stock investments, we have had a negative sentiment in 2018 and in 2019, the markets might very well crash. Therefore, for the first 6 months, I intend to collect cash and to get ready for the stock sell-off. When markets crash, there are usually plenty of great opportunities on hand, and I want to be ready for it. IF markets should drop by 40-50%, it means that I should have at least a quarter or better half of my currently invested amount available in cash – to cost average existing stocks and to add some new ones which will come as great bargains.

Maybe just a word about cost-averaging.… even the most optimistic stock-maniac (such as myself) needs to understand: When a stock drops by 50%, it will need to rise again by 100% just to be back at square 1. So if your stock drops by 50%, it might make sense to double down on it and to purchase the same or even a larger amount of the same stock at half price. This will reduce your average cost per share and your losses in % down to 25%. A loss of 25% can be recovered much faster than 50% and you will end up with higher profits – provided the stock comes back to the point where it was before the crash.

I don’t intend to sell any of my stocks. Most of my positions pay a solid dividend. In 2018, based on received payments and invested total amounts, my dividend income settled at 3,2%. It’s not a great number, but it’s only that low due to the constant additional cash that I poured into my account. For 2019, I expect the dividend income to increase to something around 4-6% and for 2020 to reach a range of anywhere between 5-8% returns. Once I reach double digits will be the point where I stop adding cash to the portfolio.

How is this achievable? Well, among a few other factors, it’s the power of dividend growth and the cost-averaging of some of my positions. Let’s take a look at the European energy giant E.On, which is one of my core holding positions. In 2018, the received dividend came down to only 2,32% after taxes. E.On paid a dividend of 0,30 Eur per share in 2018 and the withholding tax on dividends is roughly 26%. In 2019 however, the dividend will be raised to 0,43 Eur per share and for 2020 the expectation is around 0,60 Eur per share. That’s almost a 43% increase in the first year and a 100% increase over 2 years. Apple (another core position of mine) is expected to raise its dividend by at least 20% year on year, for many more years to come. Royal Dutch Shell returned to me only 2,7% on annual basis, but I purchased the shares just in June, so I missed the first 2 payments in the first half of the year, which I won’t miss in 2019. Thus the income will grow to a minimum of 5,4%, given the company will not cut or increase the dividend and of course provided that I don’t add more capital to it.

I have only 1 company in my portfolio that is not paying a dividend – and it is my biggest loss this year. My VOLTABOX shares are down 53%. However, since I don’t see any valid reason for the sell-off, I will probably add some more shares of this company to cost-average down and see how things play out in 2019.

Maybe another word of advise: During rough times, focusing on dividend paying stocks has proven to be a successful strategy to minimise risks.

Career

I have pretty much reached the first top of my career ladder and don’t expect any significant position-jumps over the next years. My target for 2019 is to switch jobs, to move to a larger hotel (I am a hotel manager) and to negotiate a salary increase of approx. 15-20%. This should be possible, as I am still within the lower salary-range within the standard frame for my profession.

My current hotel was my first assignment as a General Manager and I made a couple of mistakes when negotiating the contract. Obviously, I won’t repeat those mistakes, so the 15-20% salary increase is realistic.

Other

I will continue my side-hustle and keep writing for The Motley Fool Germany. Working with the team there since July 2018 was great fun and I learned a lot. I can actually imagine doing this for many more years to come, even after I retire early (the target is at the age of 45 – in 6,5 years from now).

During the last few months I have sent some money to my parents. We are fixing a small house in the countryside in Poland and are planning to open a small bed & breakfast. Nothing large, just 3-4 rooms, but there is great opportunity to support my parents about their retirement income from that. This is also the main reason why I couldn’t increase my own savings in that amount as I was originally planning to do. However, I believe that in the long-run it can turn out to be a very beneficial move for my entire family – so it’s absolutely worth it.

Merry Xmas and a successful New Year!

That’s it. Writing things down in a blog is my way of taking the time to structure some thoughts and to re-consider my approach for things to come. It’s a great exercise, and while you don’t need a blog for that, I urge and recommend you to do just that. Take some time, think about your goals and dreams, and make a plan out of it.

There is a quote, that might be politically not correct, but it doesn’t make it any less true:

“Nobody ever wrote down a plan to be broke, fat, lazy, or stupid. Those things are what happen when you don’t have a plan.” – by Larry Winget

And one more:

“A goal without a plan is just a wish.” – by Antoine de Saint-Exupéry

Take it as a constructive feedback and keep working on your plan.
It’s the only way to escape the rat race.

 

Disclaimer: I have all the stocks mentioned in this article.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s