I have been thinking about the costs of investing in my LHV Growth Account. 

There are many costs associated with this account. There is a monthly fee of 0,05% starting from the second year and there is also a 1% fee for purchases. Also selling ETFs is rather expensive with an 11€ fee + 0,3% per instrument, and LHV funds charge 1% of sales fee (not sure if this also includes the 11€ or not). Why I use it? Well, it is still the cheapest option offered here in Estonia, also due to the tax law I can postpone income tax on this account. In the future, I might also look into Interactive Broker or other options but at the moment I am using the LHV Growth Account.

But I had one more cost associated with this account. One of the ETFs I was using was an IEMM (Emerging market companies - iShares MSCI EM UCITS). And although they tell you the fund is operated in euro, they lie! So every time I bought my funds or every time I received dividends - it happened in USD. And every time I had to pay for the currency exchange for this. I decided to end this extra cost. So first I stopped buying this fund, and then I waited for the fund to go up enough that I could sell it without losses. So I had 32,149 shares of it and my personal purchase price had been 35,63€ (so 1145,47€ invested) and I sold at the price of 36,664€ (1178,71€) and paid 14,54 as a fee. So I sold with a tiny margin and was rather happy as the fund had been rather volatile. Of course, since then it has gone up being over 37,40€ at the moment, but you win some you lose some. At least now all my ETFs are traded in euro and I have therefore limited somewhat my monthly costs on the account.

As I mentioned in my previous post I do not get a tax refund but many people do. Either they are perhaps too cautious on the tax calculations month to month or perhaps they have several tax write off options which give them a refund. 

So what to do with the refund?

First of all, it is important to remember that this is not a windfall. It is your hard earned money and as such this should not just be spent on random things so that in a months time you have no idea where it went. So here are some great ideas on what to do with it. I have tried to order them more or less in the order of importance. I think the first three should be clear priorities if you have not done those previously.

• Start or top up the emergency fund. Having an emergency fund is something everyone should have so that if something happens you would not need to take out (credit card) loans. So it is extra money you do not use for daily living expenses but is there for cases like your car breaking down or you losing ypur job etc. I have written a longer post on it here. If your emergency fund covers currently less than 6 months living expenses I would suggest you use the money to top this up.
• Pay off debt. This is a rather individual topic as people deal differently with the dept. I would say that paying off any debt which is more than 4-5% interest should be a priority. So any credit card debt, consumer loans, car loans etc. As the interest rate is higher than the general inflation any debt you pay off will save you money in the long run and the more you are able to pay off the principal balance, the less you need to pay in interest. If you have a low-interest mortgage loan perhaps this is not a priority. But it also depends on your personal preference. Although many mortgage loans are similar interest rate to inflation and perhaps paying them off is not financially best idea (instead of that paying the monthly dues and investing the extra money might be the financially better plan) I personally hate the feeling of owing money and I would sleep better with less money owed.
• Start investing/invest the money. If you already invest- great add the money to an investment portfolio. If you are not yet investing, start now. This is money you in all likelihood did not miss from your monthly budget so it is perfect for a first investment. If you do not know where to start I would look into ETFs (I use LHV Growth Account service) or if you are more adventurous and would like to try p2p investing them perhaps Mintos is a great place to start (look for payback guarantee loans).
• Make one time purchases. I think we all have some things in our lives which would need some upgrade. And I do mean needs, not just wants. So think about it. Perhaps your home would really need some repair work or your car should go to the mechanic? When was the last time you went to the dentist? Do you know which money you will use to buy wood for next winter heating? Thinking of these larger costly things is important and if you keep an eye on these things they will not surprise you in the most inopportune moment. Also if you perhaps have been saving up for some larger project such as a new roof then add this money to the cause.
  As I stressed - think of one time purchases. I think it is important not to spend this money on any type of subscription service, be it TV, monthly boxes, gym membership or something else. This money should not be the easy entry into additional monthly costs for the rest of a year. Unless...
• Becoming smarter. Investing in yourself is also important life goal and this can both improve the mindset and your earnings. So the only subscription type service this money perhaps could go to, is a bigger down payment on a course you have been meaning to take or a subscription to an educational book service etc. I personally use the Äripäeva raamatuklubi, which is a service offering 1 or 2 books a month on financial and business topics. As I can decline any book I am not interested in (I do it most months) and the books I do want are cheaper than in stores, I feel OK to use this service. This service does not cost anything to enter so tax refund does not really play a role here but I thought of mentioning the service as it might be interesting to my Estonian readers. But a university course, language course, online courses- there are many options and if you have been meaning to take this step this is a great time to start a course you are interested in.
• Donate. I think in the times where you are doing all right, it is important to look also to those less fortunate than you. So using perhaps part of this money to a cause you believe in, is a great way to spend it. Everyone is passionate about different things, I tend to give to animals. I have for many years adopted different Tallinn zoo animals with my friends as a group effort. I have given to animal shelters and I also have an adopted saiga antelope somewhere in Mongolia and my mom has an adopted sea turtle. Maybe you give to a women's shelter or to people with disabilities or disease research, any cause you believe in is important.
  One organisation I would like to point out to you is KIVA. Technically it is not donation... Kiva allows you to lend money to people in need in different countries of the world. The money is usually spent to set up some kind of business on the local scale. So there is a possibility of profit for the person getting the money and this profit is used to pay back the loan. The loans are with no interest, so it is an easy way to make someones world a better place and when you get back the money perhaps to lend it to the next person. On the site, you can select the person you lend to based on location, goal etc and you see the person asking for the money. So it is a personal experience and you can choose a topic you care about (water security, refugee, single parent, arts, schooling etc). If nothing else, just look at the site and perhaps help out someone, the minimum loan is 25$.
• Spending on time with your family. Although I do not feel using this money on a vacation or such one-time costly event is a good idea there are some things that can seem costly but bring a lot of joy to the family. I personally love different types of board games with friends or family. And some more elaborate games cost around of 80-100€. This is a lot of money for "just" a game. But if you do the research on what game to get and think about how many cosy evenings you will spend playing it- it is one of the best ways to spend money. I personally do not enjoy too complicated games but I do not mind if they take a lot of time to play. So things like Bohnansa, Carcassone, The Great Dinosaur Rush, Mexican Train, Forbidden Desert, Discworld, Organ Attack, Citadels, Cards Against Humanity, Fluxx are some of my favourites... I mean there are so many good ones and selecting something for your needs can guarantee great evenings for years to come. 

As you can see this is not a list where you need to select just one thing. If your refund is a bit bigger perhaps using 5-10% of it on just buying something you want is a great idea, and then using 50% on debt payoff and maybe some for the home and maybe donating a bit is a great balance for you? Maybe putting all of it into the emergency fund is the best solution for you? 

I can not tell what is the right answer, but I hope you will think about it and will not just mindlessly spend it on things you will not able to remember what they were in few months time.

Also if the money is in the main account you use day-to-day it is easy to spend it without meaning to. So if you have not yet decided what to do with it, put it on a savings account or a secondary account until you decide- this really helps :)

Maybe a bit more of a lifestyle post, but it does link slightly to the budget part of personal finance.

I am a bit of a hoarder. I tend to collect things and I have a hard time letting them go. This also tends to include things which have lost their usefulness.

So I decided to go through my closet and look at what I have, what I am missing and what (for the love of God) I should get rid of. This is important for several reasons...

First of all, if you are a hoarder like me I think it is important to take the time at least once a year to go through all your clothes and look at them closely.

Is it still in good condition? Yes? Great! Does it need mending, does it have stains etc? If so, will you take the time to correct these problems? Great! Or is it likely it will still need mending in a month or two? If so, it should be thrown out. You can also test it by collecting all these items to a selected place and give yourself for example 30 days to mend them. The ones not mended by the deadline, need to go.

I do feel it can be OK do keep one rather worn out favorite jumper to be worn just around the house or maybe one old pair of stained jeans which are great for gardening, painting a room etc (where ruining the next pair is likely to happen). But really, why did I have 5 pairs of old worn out jeans in my closet? 4 of those MUST go! So I had a hard look at my closet and throw out quite some things where I had no real idea, why I had been keeping these.

Also on the clothes which are in good condition- do they still fit you and do you wear them? It is appropriate to this season, and you have not worn it yet? Make a plan for the next few weeks to wear all the things you have not worn in a long time, to see if you still love them. Maybe it itches, or the hem tends to ride up when you walk or is actually a bit too tight/loose etc. Then get rid of it- if it is in good condition you can sell it and make some money in the process. Testing the weather appropriate clothes is a good thing to be done once every season. I plan to test my winter clothes in next weeks, I will see how it goes.

It was also a good time to reorganize my closet again, as wearing things means they are not always put back in the right place and this, in the end, means I forget about it and will not wear it. For example, if I want to wear a cardigan and look at where my cardigans are folded, I will not see the one I have absent-mindedly hung on a hanger next to my blouses and shirts...

So to sum up:

1) Clear out broken things;

2) Test the things not worn a long time;

3) Reorganize

And why do I feel that the end of a year is a great time to do all of this? Well, it might end up that you realize you actually are missing something you wardrobe really needs. And after the holiday madness, the shops tend to do sales, as they need to draw in the customers somehow. And maybe you received some gift cards for holidays you should use up, and the best thing is to use them up for a thing you actually need, not on an impulse purchase. So, I think it is a great time to plan these purchases to January.

What do I need?

I work in a quite casual office but from time to time, I need to dress more formally, so I, for example, need to look for a new pair of dress pants, and also a warmer weather suit jacket/blazer. The jacket will be really hard as my body shape means I almost never find things suited for me... But at least I can look for it.

I think in many times we get the general advice to quit the daily latte habit and hinting that this would lead to great success. I believe there is not a great value in cutting things you truly enjoy. Yes, maybe streamlining such costs and finding savings on them can be good. Even a latte can be perhaps even more rewarding if it is not bought every day but just sometimes. But I try to focus more on some more hidden costs I have realised I could cut or have already cut from my budget.

These are not always relevant for everyone but are meant to get you thinking along, so let's start!

Saving on energy in long-term.

Using only very energy efficient light bulbs in your home. They can be more expensive but moving on to these over several months when old ones break, leads to great savings in the long run. Depending on the sockets I use either LED or other energy efficient options. For me, it is really important as I use several plant lights with timers as in the north the days are short and my potted plants need this extra light. So I have lights that do burn 12 hours a day, every day, and it makes a huge difference if it is a 100 W bulb or a 9 W bulb which gives the same amount of light.

Also as some things tend to run on timers in my home I make sure to unplug the things I am not using to counterbalance my energy consumption. Many plugged in electronics still use a small amount of electricity when plugged in, also extension cords do use energy (so I've been told at least). So I try to make a habit of unplugging the things I am not using. I also have an electric water heater for the bathroom and I either switch it off or regulate it to minimum temperature when I am away from home travelling. If you leave for several nights it tends to be more efficient to do this. But when leaving just for a day or so, then keeping it heated compared to needing to heat it from the room temperature might be more useful. Look at the manual of your item to make sure when to unplug and when not to. 

Also, the general habit of turning off the lights and switching off TV etc when you leave a room is a great habit to cultivate on your home.

Memberships you do not actually use or get the full value out of.

A lot of companies are trying to get you to sign up to different types of monthly fees and sometimes you forget about them or perhaps feel that the hassle of ending such contract could be too much trouble. But in the end, month by month, you are spending money on these. 

For example, I travel quite a lot for my work, so I ended my monthly gym subscription which expected monthly payments every month. Instead of that, I buy 30-day memberships which is a bit more expensive, compared to a normal monthly fee with a yearly plan, or sometimes pay just for single use attendance fee. I buy the 30-day plan only when I actually have 4 weeks in a row to attend it regularly - so most months I do not buy and therefore in yearly cost I save almost 50% compared to the normal monthly memberships. So maybe you have a similar case and perhaps it is more valuable to pay a different type of contract compared to a yearly plan.

Next examples are magazine and newspaper subscriptions either digital or real paper ones. I do not say that you should not have them, but to really look at them and decide if you actually use them enough to justify the cost. If you use it seldom maybe just buy that issue? Also if the plan has flexibility use it. I have a book order plan where every month I can say if I wish to receive this concrete monthly book. And most months I cancel it, so I make sure I pay for only the ones I realistically will read. 

Also music and video streaming options. Think about it, do you use the Audible Account, Netflix, Spotify, cable plan etc. Just a few days ago I talked to a colleague who complained that the Estonian Netflix plan has a very limited selection (it does, that is why I never subscribed!). Every time she searches for something - it is not on there. So she has been paying a monthly fee for just watching House of Cards for a few weeks when it comes out, and the rest of the year it is just costing her. 

Think critically and cancel the ones you are not using.

I have some more ideas on this topic, but not to make this post too long, I will post them as part 2 another time.

I have been really trying to figure out how being ill effects my financial state- my income and spending. It is not just curiosity... I guess nobody thinks of being unwell when they are healthy... Within the last month, I have been in the hospital for about 15 days, some of it in the intensive care unit. 

And of course all of it depends on what is the matter with you, but it really feels like financially it has been rather positive for me. 

In Estonia, you get sickness benefit from the fourth day of your falling ill, and some employers also pay for the first 3 days. The sickness benefit is paid at the rate of 70% of daily income, and this is calculated based on the last 6 months wages. So, yes, of course, you get less money when being ill but you get also paid for the weekends and holidays (which can be is important for those who work shift work for example). Also compared to being healthy or just ill at home - in the hospital you have almost no ability to spend your money. You are given food 3 times a day, you get all the medications you need... You are expected to pay "bed fee" of 2,5 € per day from the second day of being in the hospital and this is not paid for the intensive care unit days. So basically you get 30 % less money but spend just 2,5€ a day. Sounds like a deal doesn't it?

Being ill at home and buying expensive medicines, being unable to cook at home for some reason and needing to order in a lot of food etc can be really expensive. But this hospital stay seems like best saving month ever. To be honest being home from the hospital for a few days I did spend more than usual as I just missed so many foods. Hospital food is filling but there is a limit of how many times I can eat cabbage soup... I guess anyone who has been in Estonian hospital in summer and eaten cabbage soup 1-2 times a day (for 15 days) like me, knows it. 

First of all to be honest I do not know exactly how I spend my money. 

There are some amazing people who know down to the last cent how much toothpaste they buy a year, I am not one of them. I have tried so many options of keeping track- either apps, writing everything down physically or keeping the receipts, but I always give up within a week. Mostly the things that throw me off are the really seldom happening larger costs which skew the monthly budget and then my motivation diminishes. Or I forget to do it and then if feels pointless to start again. For example this week I bought pet food- it cost me 77€! It will last me for about a year but I had to buy it now as I was almost out. And it feels really expensive although it actually costs me just about 6,50 a month if I buy these larger containers, compared to buying smaller ones several times a year, which would be a lot more, but still, it IS expensive for me.

I do try to keep track of my weekly expenses I will explain how at the end of this post, and although I do not budget in the traditional sense - this method really works for me.

My salary is 1100€ netto, we have usually no bonuses, over my years with the current employer, I have gotten the year-end bonus once. So this 1100€ is what I really work with every month.

But the bigger monthly costs first:

By the way, I will round things, so if my internet is 19,99€ I will write 20€ for my sanity-sake :)

So let's start with the costs I have to pay. My rent is 210€, I also pay utilities (gas, water, electricity, heating, maintenance etc) to the owner, in our cold climate they wary a lot, the lowest is in the summer with about 90€ and winter comes up to 190€ due to the heating. So the average is 140€.

I am paying off my student loan, so 70€ a month goes for this, less than a year to go!

My internet cost is 20, mobile is 8, I have no TV, Netflix etc.

I try to invest at least 250 a month, usually more, let's say 300€. As the info is online in the excel my actual average over the past 12 months was 515 a month. This was because last year for 6 months I had extra tasks and had a higher salary and also I did invest some money I had saved up previously, this is not realistic now as I am back to the lower wages, so I try to do 300€ a month or more than 25% of my income. So my savings rate 27% which is quite good I think?

So quick math tells me I am left with 352, or slightly over 10 € a day for groceries, toiletries, home goods, transport, clothes etc. Let's be honest this is not much. This is why paying 77€ for pet food really makes a difference in my monthly budget as I really calculate around this 10€ a day and this costs more than weeks living money... Same with needing new shoes, winter jacket etc, these things really throw off my budget. But I manage. Many people live with a lot less- for many people in Estonia this 350 is their whole salary and they need to pay rent etc from it. I honestly can't understand how they do it, but they are my heroes!

As I said in winter the home costs are up and also some produce is more expensive, so in summer I add a bit to my savings to take from when the heating bill is really high. At the same time, I am not really frugal. I could cook more, but really most days at work I eat out and therefore spend more than half my daily allowance for lunch (working in Tallinn city center most daily lunch offers are between 5€-7€). I work long hours so cooking and bringing food to work would be good but a) I am not a good cook, and b) getting home half past seven (mostly working 10-11h days) means I am so tired I just can't be bothered... Yes, civil servants are lazy and never do anything... 

But how do I keep track of my living expenses if I do not know where I spend my money? 

For me, the main issue is that if I pay by card I seem to lose track of how much I spend. At the same time in many instances, it is easier to pay with a card. So what do I do? In a way, I use heavily modified envelope system.

So all the other things I mentioned before I pay online, they are the things I need to pay and then I won't think of them anymore. Most of them are automated. So what is left is everyday living expenses.

At the beginning of every week, I withdraw enough money to have weeks worth of cash in my wallet (so 70€ for me). I do not count coins, sometimes I have gathered extra 10€ there, sometimes it is almost empty, but this is kind of extra... So beginning of the week I have 70€ paper money. Every time I pay cash this goes down. Every time I pay by card I take the relevant amount rounding it to closest 5 or 10 etc (as 5€ note is the smallest paper note) and place it to a separate slot in my wallet. This way I can see every day how I am doing and this has been the easiest way to also visualize card payments. So I calculate by week, if I do bigger grocery shopping sometimes I use 2-3 days money in a day, but then I have also a lot of food to eat for several days. By the end of the week on Sunday or Monday morning I look how much I have in this extra slot (where I put money when I paid by card) and withdraw enough to have 70 again, and a new week begins. Sometimes I have spent less, and still, I have cash in the main compartment- this is just saving of that week, but it will not carry over as extra for next week. I will give an example:

So let's say by the end of the week I still have 5€ in the main compartment and 25€ in the "I paid by card" compartment - so I have 30€ in my wallet. So I withdraw 40€ and put all this 70€ again to the main compartment and all begins again.

As long as I stay within this 70€ / week I do not set myself any other limitations. 

As you perhaps noticed I actually allow myself to spend a bit less than I have (even if there are 31 days in a given month it is just 310€ I can spend), and as sometimes I spend less in a week, so a small amount gathers to my account. But sometimes some extra things are needed, expensive things, like the aforementioned pet food or new winter boots... this is when I really think hard, decide if I really need these things or just want them. And if I really need them I will buy it and I pay by card from this small stockpile of extra money I have gathered there over the weeks and months. For these purchases, I won't move money to the separate compartment as these large purchases are outside the normal weekly budget.

I hope this explanation has made sense and might be useful for some. This is really the best system I have found, and it really works for me. 

Do you budget? How? Any tips for me?