The day my portfolio dropped by 15 %

My path as a dividend growth investor

My first steps in the stock market go back to 1999, somewhere near the peak of the “Dot-Com Bubble” which left my investment portfolio consisting of two high tech stocks with a hefty book loss of over 50 % when the bubble eventually burst in spring 2001.

Quite an unpleasant and discouraging start as an investor, right?

Well, it turned out that these early experiences served me well.

I was kind of forced to take a long-term perspective and to become patient in order to successfully pursue my goal to building up a stock portfolio providing me with a reliable and ever growing passive income stream over time. Continue reading The day my portfolio dropped by 15 %

Dividend Income January 2017

Hi there! Appreciate you stopping by. It’s time for my first monthly dividend report in 2017!

But before that, just a short look back to 2016: my investments generated around CHF 4’000 in passive income and I target an increase of 15 % through dividend increases, dividend reinvestments and by adding new positions. Continue reading Dividend Income January 2017

Slowing dividend growth is nothing to lament about

Can an investment in a solid and attractive – but “maturing” – company deliver decent returns despite slowing dividend growth?

Yes. But it is extremely important not to overpay and to take a long term view.

There are several wonderful businesses in my portfolio where I expect future growth to be weaker than in the last decades. I think in particular of Coca Cola, Nestlé, Novartis and Roche.

The Swiss company Roche has a market capitalisation of well above USD 200 Bn and is one of the largest pharma and biotechnology businesses in the world. It’s just massive!

In 2011, I acquired 18 non-voting shares of Roche at a price of around Swiss Francs 135 (CHF; trades more or less at parity to the USD).

Few weeks before I made that investment, shares of Roche had become kind of “unpopular” due to some damped expectations regarding profit contributions of one of its blockbuster drug. The stock price came down by around 20 %, making an investment even more attractive to me.

The worries of the market proved exaggerated, Roche delivered solid results and the stock price quickly recovered. In the last four years, the stock price has been more or less flat, trading in a range between CHF 230 and 280.

I don’t focus too much on the stock price or book gains/losses regarding my investments, but it is still interesting to see how some short term market expectations can lead to quite a nice entry price.

Much more important for me is the cash flow I get in form of dividends.

When I make an investment, I want to see at least these two things over time:

  • the market value of the principal amount to stay “intact”  on a inflation-adjusted basis. I mean hereby that the market value should grow more than 3 % year over year (YoY)
  • dividends to grow three percentage points above inflation YoY

If an investment does not meet (or  excel) these two criteria, it does not contribute to my wealth building process.

Roche’s dividends from 2005-2010

The dividend payments in that time period were as follows (in CHF; gross amounts before witholding tax): 3.00, 2.50, 4.60, 5.00, 6.00. The payouts doubled in just five years which is very strong.

If someone had bought Roche in 2005 and is still holding that investment, he or she would have been rewarded handsomely in the past and will be spectacularily in the future.

From 2005 to 2015, Roche showed a dividend growth rate of well above 14 %. But there are two crucial points to consider:

  • The last five years (2011 – 2015) of that time period showed a significant slowdown of the dividend growth rate to less than 6 %.
  • The payout ratio substantially increased, even the slowed dividend growth from 2010 to 2015 exceeded the growth of earnings per share (EPS) in that period.

Roche’s dividends 2011-2015

From 2011 to 2015 the dividend payments (in CHF; gross amounts) from Roche were as follows: 6.80, 7.35, 7.80, 8.00, 8.10. The 5 year dividend growth rate was around 5.9 %, much less than in the past.

My investment in Roche falls exactly in that slow growth period.

Fair enough. Let’s have a look at the development of the yearly cash returns compared to my initial investment of CHF 135 in 2011 (yield at cost). The deduction of the Swiss witholding of 35 % has hereby to be considered (if there is a double taxation treaty with the country of the investor, twenty percentage points can be reimbursed to that investor to lower the tax rate to 15 %).

My dividend yields at cost (after witholding taxes) from 2011 to 2015 were as follows: 3.25 %, 3.54 %, 3.75 %, 3.85 %, 3.9 %.

I expect my dividend yield at cost for 2016 (paid in 2017) to be well above 4 %. In the last five years, I collected over 18 % of the invested amount in dividends.

These are quite decent returns so far (I don’t even factor in the book gain or dividend (re-) investments).

Just to put the dividend returns into relation: The dividend yield of my total portfolio currently stands at around 3.3 %, “organic growth” due to dividend hikes of my holdings has been between 3 % and 4 % in the past years. So Roche was an important contibutor to “organic growth” of my portfolio and I expect it to be so in future.


Roche is a leader in biotechnology, cancer treatment and diagnostics. The company shows a 28 years of consecutive dividend growth. The business has a broad economic moat and shows strong fundamentals and attractive growth prospects.

The increasing payout ratio of Roche shows that EPS growth didn’t catch up with dividend growth. For decades, the payout ratio was low (under 20 %) and “jumped” above 40 % in 2003. Since the financial crisis starting in 2007 the payout ratio climbed  steadily to settle currently at around 55 %. Still quite comfortable. Dividends are very well covered by free cash flow and there is some room for growth. But I expect dividend growth hikes to be modest in the future.

As a long term investor I don’t complain about that. A slowing payout is even prudent by the company.

I will rather have a look whether

  • the “cash generation machine” is intact,
  • fundamentals remain strong and
  • the growth rate is well above inflation.

Stocks of an outstanding company such as Roche acquired at a fair price can still deliver very decent returns over time. And if dividends are reinvested, the compound effect can do miracles.



You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.



The magic wisdom of Mary Poppins

Drawing by the blogauthor

We have a wonderful custom in our family. Every year at Christmastime we watch the film “Mary Poppins”.

It’s a lovely musical fantasy comedy, produced by Disney in 1964. The main character, Mary Poppins, is a magical woman who descends from the clouds after having received an advertisement from the family Banks searching for a nanny to look after the two children Jane and Michael.

The wonderful messages in the dialogues and songs of the film are timeless:

  • having time with your loved ones
  • being the master of your own dreams
  • having fun
  • finding fulfillment in life

Continue reading The magic wisdom of Mary Poppins

My Stock Investments in 2016

Hi there, thanks for stopping by!

As promised in my latest blogpost Passive Income Review 2016 and Preview I will to give you a brief overview on the stock purchases I made this year.

In 2016 I invested the amount of Swiss Francs 16’600 (CHF; trades more or less at parity to the USD) into stocks of following five companies: Coca Cola, Walt Disney, Diageo, HSBC and Bayer.

I target a year over year growth of my dividend income of at least 15 % whereas

  • half of that growth is expected to come from organic growth (dividend hikes) plus dividend reinvestments and
  • the other half derives from new acquisitions.

According to my projection, the five stock investments I made in 2016 will increase my 2017 dividend income by at least CHF 500. I expect that amount to grow by around 7.5 % each year due to organic growth and dividend reinvestments.

In 2016, Bayer, Diageo (I collected one of two semester dividend payments in 2016) and HSBC (I collected two of the quaterly dividend payments in 2016) already contributed to my income in the amount of CHF 205. In 2017 I will get dividends from Coca Cola’s and Walt Disney’s for the first time.

Now my considereations regarding the stock investments.

Coca Cola

In December, 76 shares were acquired at a price of USD 40.3.

I view consumer staples and health-care shares as the backbone of my investment portfolio. I took some exposure into cyclical sectors and raw materials in the last two years as I saw attractive oportunities. In the long run though I want to give my stock portfolio a more defensive shape. There are some companies in these sectors I find interesting (e.g. J.M. Smucker) but stock prices are yet not there where I would feel comfortable.

I’ve had an eye on Coca Cola for some years. The stock has been trading in a range between USD 38 and USD 48 since 2012. I saw USD 40 as an interesting entry price and put a corresponding electronic order which was executed in December 2016.

I am well aware that the phenomenal earning per share (EPS) and dividend growth of the last decades are not likely to be replicable, but Coca Cola is still a very solid business with attractive prospects. More than half a century the company increased its dividends year over year. I don’t view a stagnant stock price over some years per se as a bad thing especially not when you reinvest the dividends and benefit from the compound effect.

Coca Cola’s payout ratio stands between 60 and 70 % which is higher than the decades before. It is very obvious that EPS-growth did not not keep up with the dividend increases of the last few years.

But  the company has a strong balance sheet which has even improved in the last years. Coca Cola is sitting on over USD 20 Billion in cash. So, plenty of options for acquisitions (like the bottling operations from SABMiller in Africa) and future growth.

Walt Disney

In November, 40 Shares were acquired at a price of USD 91.8.

I had an eye on Walt Disney for months and wrote about the company in one of my blogposts in October 2016 (Disney is a wonderful company but is the Price fair?). Since then, the price came down quite a bit and I made the purchase slightly above USD 90. Certainly not cheap but I am fine with that price.


In June, 132 shares were acquired at a price of GBP 20.75

Spirits and beer producer Diageo is a consumer staples company I have been looking at for several months. It has a great product portfolio with brands such as Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Guiness Beer etc.

Unsurprisingly, you almost never see that company becoming really cheap. There is a wide economic moat and growth perspectives look very promising to me. I consider my purchase as “acquiring a piece of an attractive business for a fair price”.


In June, 466 shares were acquired at a price of GBP 4.6

A relatively large portion of my investment portfolio already consists of bank stocks. From the perspective of a long-term dividend growth investor (I want to hold my investments for decades unless fundamentals significantly deteriorate) I have quite mixed feelings concerning banks. There are

  • some few undervalued jewels,
  • several fine businesses trading at an attractive price and of course
  • many value traps.

I think the banking industry as a whole  is one of the very few investment segments where shareholder value has been destroyed over decades.

Fair enough. When I saw the stock price of HSBC being beaten down ahead of the Brexit vote I just couldn’t resist. In my view, HSBC is one of the very few banks to consider as solid businesses to invest in, of course always under the condition that the price is right and that there is a sufficient margin of safety.

When I made the investment in May 2016, the stock price was significantly below book value and price earnings ratio looked attractive to me. HSBC’s debt profile is robust and the bank’s core capital has been significantly strengthened. In August 2016, HSBC announced to start a share buy-back plan in the amount of USD 2.5 Billion (to finish early 2017) and to hold dividends steady.


In January, 30 shares were acquired at a price of EUR 103.

Bayer operates in four segments: pharmaceuticals, crop science, animal health and  consumer health with well-known brands such as Aspirin, Alka Selzer, Bepanthen, Elevit, Supradyn, Rennie etc.

Bayer showed good performance in the past with strong EPS-growth and nice dividend history.

I had an eye on the company all trough 2015 and was particularily pleased to see the stock price coming down from EUR 140 to around EUR 100 in January 2016 at the time when I entered the position.

In May 2016, Bayer publicly disclosed to make an all-cash offer of USD 62 Billion to acquire the agriculture company Monsanto. The offer was increased to USD 66 Billion when Bayer and Monsanto finally came to an agreement regarding the merger. The closing of the transaction is expected by the end of 2017. Over 85 % of the offered amount has to be financed by a combination of debt and equity. Bayer will carry over USD 40 Bn in debts after the merger and promised to start deleveraging quickly.

There is no doubt, that Bayer has a track record of sucessfully acquiring companies, but this is by far the largest one ever. Bayer knows when there is an attractive investment oportunity, but from a perspective of a shareholder I see some downsides:

  • the combined company will be more subjected to cyclical factors, the generation of  profits and cash will become more volatile.
  • the relatively high debt load will be a drag for the next years to come. Bayer promised to strictly deleverage after the merger which is fine, but there is less room for dividend hikes.
  • financing in part with equity will lead to a dilution for shareholders.

As said, I take a long-term view in regard to my investments and unless there will be a severe recession (such as the last one we saw from 2007 to 2009) over the next years, the combined compay has the potential to deliver double digit EPS-growth in future and – hopefully – shareholders will be compensated appropriately for their patience.


What do you think about the companies I invested in? Which investments have you made in 2016? Feel free to share your thoughts.



You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.



Passive Income Review 2016 and Outlook

Just eleven days, and 2016 will be over. Time goes by so fast! It has been just an amazing year, I had a great time with my family and so much fun on our journey towards Financial Independence.

I want to share with you a brief look back to my passive income from dividends and interests which I have been tracking since 2012. I will also make some projections regarding future passive income streams.

As you can see, my two passive income sources developed quite differently. Continue reading Passive Income Review 2016 and Outlook

Dividend Income December 2016

Wow! Isn’t it amazing how fast that year seems to have passed? So many big events and important factors having an influence on financial markets (Brexit, US presidential election, monetary policy by central banks etc.).

My portfolio has done pretty well so far and my dividend income for December 2016 (net dividend payments received in Swiss Francs which trades more less at parity to the USD) increased year to date by around 2o % due to the acquisition of HSBC stocks, organic dividend increases and dividend reinvestments.

Royal Dutch Shell (RDS)

In 2009, I acquired 200 stocks of RDS for around CHF 5’000 and since then consistently reinvested all dividends into the same company. Today, the  stock count stands at 290, an increase of almost 50 % in seven years. That’s the magic of the compound effect! Also considering the stock price increase since 2009 that investment has paid off handsomely so far.

Today, RDS is to some extent a different business mainly due to the acquisition of the British multinational oil and gas corporation BG Group. After the combination, RDS is one of the world’s top liquified natural gas company. Over the medium and longer term that acquisition may substantially strengthen RDS and has already positioned the company as the world’s second-largest public oil and gas company behind ExxonMobil. But that move also led to an elevated leverage. In combination with a low oil price level which puts pressure on the generation of free cash flow this is to the substantial detriment of the risk position and the financial flexibility of the company.

It seems, that the acquisition is quite well on track. The company is committed to reduce debts mainly through asset sales and “pledged” to keep its “iconic dividend” intact. The last time, RDS had to cut its dividends was 1945 and since then, decade over decade, shareholder benefitted from increasing payments.

Chevron Corporation (CVX)

Plummetting oil and gas prices forced CVX to streamline, which the company did at an amazing pace. CVX is also vigorously slashing capital spendings. The company targets a positive Free Cash Flow after dividends by 2017. With mega-projects coming online in the next quarters they substantially contribute to the company’s cash flow and profit generation. With these projects ramping up, less capital spending is needed, revenues and operational cash flow are expected to improve significantly even in a low oil price environment. For the future, CVX is set to focus on less capital intense, shortcycle and high margins projects and underlined its priorities in deleveraging and increasing dividends over time.

CVX increased its quarterly dividend for the fourth quarter from USD 1.07 to USD 1.08 per share, that’s the 29th consecutive year the company elevated its dividend payout. The last hike is relatively small but an important message to us shareholders underlining the confidence in the company’s financial strength and optimism regarding future performance.

Exxon Mobil Corporation (XOM)

Compared to the other oil-majors, XOM is very strong from a financial standpoint and robust in terms of operational results. But plummetting oil and gas prices took a toll on that company too, putting free cash flow and profits under enormous pressure. The debt level more than doubled in recent years. In April 2016, the rating agency Standard & Poors downgraded XOMs Rating from AAA to AA+ Outlook stable. The downgrade is in my view more symbolic than effectively to the detriment of the borrowing conditions of XOM. AA+ is still very comfortable.

XOM has paid dividends for more than 100 years! In April 2016, the company increased the dividend by 2.7 %. This makes 34 years of consecutive annual dividend hikes in a row!

As an integrated oil company with such strong upstream and downstream operations and with one of the largest chemical businesses of the world, XOM should be able to adapt to a prolonged period of low oil and gas prices and deliver robust results in the future.

Hongkong and Shanghai Banking Corporation (HSBC)

HSBC is one of the largest banking and financial services companies in the world, headquartered in London.

I acquired the stocks ahead of the Brexit vote, when I felt that they traded at a significant discount to book value per share and price earings ratio looked attractive. The company is diversified and well positioned in growth markets, mainly in asia. The debt profile seems relatively robust.

There is no questions there a several challenges for the company. As a global bank in an ultra low interest rate environment with falling revenues and high regulatory requirements HSBC is certainly facing strong headwinds. As a systemically relevant bank HSBC has to fulfill capital requirements expressed in the Tier 1 Common Capital Ratio (CET) which puts the bank’s core equity capital in relation to its total risk-weighted assets and signifies the financial strength. HSBC made significant progress in this respect being able to boost the CET from below 12 % to 13.9 % (compared to the previous year). This was mainly achieved by the disposal of assets in Latin America.

The third quarter earning report shows that the company also made progress regarding operating expenses and achieved a positive jaws in 3 Q 2016 which means that HSBC – being confronted with falling revenues – managed to slash spendings even faster and to protect the profitability (see blogpost Positive Jaws Ratio improves finances).

The company announced to hold the dividend steady and started a share buy-back program this summer expected to finish early 2017.

Orange SA (ORA)

Orange is a French multinational telecommunication Company with over 250 millions customers around the world and over 170’000 employees.

After some years of declining profits due to weaknesses in its main market France and due to cut throat competion in the European telecommunication market,  Orange’s last quarterly earning reports showed steadily improving results. Being in my view a fine business, it seems to me that I overpaid, when I acquired stocks of Orange in 2010. Even taking into account the dividends collected in the past six years, the total return of that investment is more or less zero.

But I still like my position in Orange, the fundamentals and growth catalysts look just fine to me. The company is so large and well positioned in attractive markets and benefits from a strong name. What I also like is the sound financial condition with a moderate debt level.

Unilever (ULVR)

I like that company for its attractive and stable business model, the strong brands with household names and products such as Lipton Ice Tea, Magnum Ice Cream, Axe, Rexona, Knorr, Persil etc. The company is broadly diversified, well positioned and should benefit from several catalysts for future growth and being able to comfortably weather headwinds in some markets.

The current dividend yield at costs of my investment stands at 3.6 %. In the past decades, earnings per share and dividend grew decently around 5 % per year which makes the business a stable cash generation machine.


How was your December in terms of dividend income?



You are responsible for your own investment and financial decisions. This article is not, and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.

Taking different perspectives in life

That’s not a chart, it’s s a castle

Yesterday evening I was reading financial reports of a company I am considering to invest in. While I was studiying the chart of that company showing the development of the stock price of the last months, my son came to me and asked what I was looking at. 

“That’s a chart.” I said. 

My son replied with a smile: “No dad. That’s a castle”. 

That made me laugh. How cute! And indeed, I could immediately recognize the resemblance, just think of the castles shown in Disney films. Interstingly, all of a sudden I could see much more: a mountain range, a skyline, a fire, icicles, a cave with stalagmites and so on. 

What I nice reminder that each thing and each experience in life can be looked at from various perspectives.

Thinking outside the box 

Education, worklife and daily routines over time let us unlearn our essential ability to look at things from different perspectives which leads to an extremely one-dimensional thinking. To a certain degree this makes us stuck.

We tend to limitate ourselves.  

Just take as an example the general concept and deeply rooted set of beliefs in our society  “expecting” that someone has to

  • immediately “find” a job after school, university etc.
  • work eight to nine hours a day
  • work until he or she is 65 (or even longer)
  • work hard, be ambitious and loyal towards the employer and in exchange get a good salary
  • use almost the entire salary to consume and feel good about that

Where are the limitations when you look at the points above? They lie in the assumptions that someone

  • does not have many other purposes in life other than working and consuming
  • wants to depend on an employer and wants to get a job instead of creating opportunities (for example by pursuing the path of an entrepreneur and/or as an investor)
  • does not invest in productive assets and therefore the salary is the only source of income
  • increases spendings for consumption over time and consequently has a falling savings rate (if any)
  • relies on an ever growing salary which leads to high dependency on a job

There is a high probability that these general assumptions are not applicable to all of us and yet they seem to set the framework for our lives.

There are many cool alternatives

I know people who earned a salary far below average and nevertheless were able to stop working at the age of 50 years to travel the world. Some of them were even much younger when they quit their job. How is this possible?

In fact it is quite simple: they aligned their spendings, led a down to earth lifestyle and invested wisely. They took a decision and chose a different pathway to become financially independent instead of “working in order to consume for decades”.

So the basic concept of working “9 to 5” for almost the entire life is just one way of life.  There are uncountable other possibilities.

Breaking limitations

Looking at things from different perspectives is extremely refreshing and shows us plenty of options. Thinking outside the box is the base for creativity, the ability to address challenges with new ideas and solve complex problems. It’s a different learning process than through emulation and memorising facts.

We all have choices and can have an influence on many variables. We just have to relearn to see them. If you don’t want to work for decades and pursue something you are really passionate about, you can go for it. It is possible. It’s all a function of how much you need to live well, how much money you accumulated and how hard that stash is working for you. In a nutshell it boils down to the savings rate. 

It is the right and duty of each of us to take control of our life, take care of our loved ones, to pursue our dreams, rise to the top of our capabilities and to find fulfillment.  

If your household was a company, would it be an attractive investment?


Hi there. Appreciate you stopping by!

Let me ask you a question.

Would you invest in a business that makes USD  100’000 in revenues and grows that amount by 10 % annually?

Yes, if the price is right” you might answer. Investing in a growing business can make a lot of sense, after all such a revenue growth rate is to some extent an indicator that the business offers good products or services to its customers.

Fair enough.

And what would you say if the annual overheads of that company were USD 90’000 and grew by 12 % every year alongside with the revenues?

Hmm. Not so attractive anomymore, am I right?

The reason is quite clear and intuitive: although that company is able to consistently increase revenues by a remarkable annual rate of 10 %, profits are squeezed year by year as costs grow even faster. Such a business is not attractive as an investment. It is pretty clear, that the fundamentals of that company are leading to losses, eroding shareholder value over time. The prospect would be daunting. After just a few years, dividend payments would be cancelled or slashed or – even worse – be financed with additional debts which is to the detriment of the financial flexibility and risk position of the business. The compelling revenue growth of 10 % in our example came at very high costs and sooner or later such a company would be out of business.

Companies are considered to make profits

As an investor, you are primarily interested in “your” company to make sustainable and growing profits. That’s the way shareholder value is created and increased over time. Successful companies (such as Johnson & Johnson, Coca Cola, Nestlé, Walt Disney) have a certain “financial behaviour”. For decades, they

  • focus on making sustainable and growing profits
  • tend to increase revenues faster than costs in order to boost profits
  • consistently reinvest a portion of their profits to grow their business, improve products and processes and to make acquisitions
  • use the power of the compound effect to their benefit
  • invest in productive assets in order to increase their economic moat and ensure increased future profits
  • focus on business oportunities, new products and services to establish new sources of income to make profits
  • take on debt to grow their business and increase financial flexibility
  • pay out between 30 % to 60 % of the profits to the shareholders in form of dividends and/or by buying back shares of the own company

Profits are the essence of successful businesses and consistently being reinvested make these companies real compounding machines. The difference between revenues and costs should be as wide as possible and – ideally – grow over time.

Households are considered to earn as much as possible in order to consume

The equivalent of profits in terms of households are their savings, defined as the difference between income (take-home-pay etc.) less spendings.

Interestingly, people have a different measure of success, when it comes to households and their personal finances. While companies are considered to make profits, individuals are generally considered to

  • work hard
  • be ambitious and loyal employees
  • rely on having/getting a well paid job
  • earn as much money as possible
  • feel good at spending money and showing their consumption habits
  • invest only a minor part of their income in productive assets such as stocks
  • rarely take profit of the compound effect
  • take on debts to invest in just one asset class  wich is in general their house in which they live (therefore that investment is not productive)

So, the focus of households is quite different from companies and is set on the renumeration for working hours and consumption. Or just simply put:

“One earns to spend”

Both – businesses and individuals alike – are considered to manage  resources efficiently and handle economic risks. But more often than not, households act irrationally when it comes to their finances. High consumption is perceived as a “successful lifestyle”.

Just let’s take a highly paid executive for example, making USD 500’000 annually and getting a pay rise of 10 % every year. The general perception is: “he or she made it” – Right?

Most people wouldn’t even change their perception, if they knew that our highly paid executive took a mortgage of USD 1 Mio. to finance the house and yearly spendings accounted for USD 400’000 annually and are set to grow by 12 % each year. Savings are eroding year by year finally turning negative in the medium term. What’s the result? Accumulated wealth will decrease and finally additional debts have to be taken on to sustain the lifestyle level. High consumption is litterally eating away the savings of the highly paid executive putting him or her in a financially risky position.

Remember, if a company showed these financial fundamentals, no one would consider an investment in such a business as it would be considered as unattractive. Just think of it: the mortgage by far exceeds ten times the yearly savings of the highly paid executive. A company with debts higher than three times yearly profit is already considered as highly leveraged and risky.  Rating agencies such as Moody’s, S&P and Fitch wouldn’t even consider a company with such fundamentals investment grade.

Although the highly paid executive in our example arguably and objectively is in an uncomfortable financial position, few people would see it that way.

High income and high consumption of individuals are considered as measures of success

Why is that?

In my humble opinion, it is deeply rooted in our society and part of our education system and worklife. We are consistently trained to be good, loyal and ambitious employees and in exchange we are put in a position to consume. “The more the better”.

What’s the problem with consumerism and depending on a job?

Someone who works hard just to spend most of his or her  income is caught in a ratrace and is in a very risky position. There is usually just one source of income. People depend on a specific job and more often than not on an increasing income level to keep pace with their “standard of living”. It is very hard – and sometimes impossible – to change high fixed lifestyle costs in the short run. Taking a position with a lower income level e.g. to work on something he or her is passionate about would be perceived to be to the detriment of the “standard of living”.

Escaping the ratrace

Consumerism is not per se a bad thing, but it can make you stuck. You don’t have many options. How can you lead a voluntary life if you exist from paycheck to paycheck? It’s impossible to truly pursue your dreams and rise to the top of your capabilities.

You should save. As much as possible and as much as you feel good about and even increase your savings rate over time. After all, that’s what successful companies do. They increase profits, they grow, they thrive financially.

So should you.

Aim for a higher savings rate to streamline your finances and to gain financial flexibility.

Invest in productive assets, diversify your income streams and put your money to work for you instead of the other way around.

Make money your friend.