How did I save the money I currently own?

Most of the money I currently own was saved during the last 1.5 years. 2 years ago, me and my husband started looking for high(er) paying jobs outside our home country, which is a low-paying/low-opportunities country, and we actually found a job more or less at the same time but unfortunately in different countries. M went to Switzerland and I came to Germany. The good thing was that we actually were quite close, if you consider 5:30 hours by train or 1:30 flying close. At the end, we got used to it and we saw each other every weekend, either in one of the places or other places, as we took the opportunity to get to know other cities nearby and countries. I have realized what a beautiful country Switzerland is and I got to know many other cities in Germany, Austria and Poland. Yes, we could have saved more but your relationship is definitely more important than the savings rate, so I have decided to save on other things:

– Renting an unfurnished and cheap studio
Luckily my employer paid for all my furniture transportation from Portugal and therefore I could find a cheaper apartment as unfurnished apartments are generally cheaper. The studio was maybe a bit small for 2 but for 1 person it was more than enough.

– I bought a bike and I did not spend money on car/taxis/metro
I am lucky to live in Frankfurt, which is a very safe and relatively small city and that allows me to bike everywhere. I have saved not only 70 Euros a month, which normally people pay for monthly public transportation pass, but also I hardly ever took a cab. In addition, only in exceptional situations, i.e., if it is raining a lot, I take the metro. Currently, I am 4 months pregnant and I plan to bike everywhere until I feel good, hopefully till the end of my pregnancy! I did not and do not plan to buy a car, even though everyone tries to convince me cars are very cheap in Germany and I should do it. I did not fall into the trap of buying a car and having huge costs and worries every month. Not only you have to pay parking, taxes, insurance but also devaluation is a huge cost. If we need a car, which is very rarely, we can easily rent it for around 20/30 euros a day.

– I was always paying attention to cheap ways to get to Switzerland or other places to visit
I was always checking the cheapest way to travel, either by train or flying, not only to see my husband but also to visit my family back in Portugal. For Christmas and other high demand periods, I always bought the tickets at least 6 months in advance.

– I did not change my lifestyle
My salary increased by almost 4 times than what I was previously earning in Portugal. Germany is a relatively cheap country, only slightly more expensive than my home country. There is a huge temptation to change your lifestyle, i.e., buy expensive clothes, expensive furniture, go to fancy places and not to be careful about money in general. However, apart from travelling more often and buying a good bike (1 000 Euros), I did not change my habits. I still hardly ever buy clothes, I always have lunch in my canteen, go for dinner not more than once a week and hardly ever to expensive places. Most important of all, all the expensive things I bought/experienced I have regarded them as what they are – a luxury – and did not allow them to take any role in my habits. I did experience Michelin star restaurants but actually my favorite place to have dinner in Frankfurt is still the Moroccan place around the corner, where you pay 10 Euros per person and the food is amazing! I just did it for the experience, which is valuable for me, the same way I went skiing and did a biking competition of 110km, all of those are somehow expensive, but again, the most important thing is not to make them a part of your habits and regard it as an experience. On a normal weekend, we go biking around Frankfurt and we bring lunch and water with us, which makes it an almost free activity. And I love it!

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Financial Statement – September 2016

I will update you with my financial statements, which include mine and my husband’s, every month. I haven’t started investing yet, so we only have cash and pension funds investments.

Euros
Mine 59 065 Result of saving 10/20% during 6 years and around 50% in the last 1.5 years
M 54 000 Similar saving rates
M Pension 27 000 This we can only get when we officially retire, i.e., around 65/67 years
My Pension 20 570 This can actually be withdrawn if I stay less than 5 years in my current workplace
Total 160 635
Cash 113 065 This is the money we have on your current accounts

This month we are moving into a bigger apartment, therefore we will have more expenses than usual, such as the guarantee for the house, the big car we are renting to do the move, and some new furniture. I am expecting at least 7k to be spent on that (the guarantee alone is 5.2k) but I will update my financial statements and include both earnings and expenses at the end of next month.

Rules to follow

1 – Look for a high paying job and save at least 50% of your salary

Yes, you need to work. Especially if you have no money saved. Not only you need a stable influx of money to start saving but also it is important for you to understand how society works; focusing on improving your social and technical skills, which will be highly important once you reach financial independence. Try to find a good compromise between working hours and pay but, honestly, from my point of view, there is no way you can build financial freedom if you do not have a high paying job. Look for a job that pays well, preferably in a city that is not expensive. I had to leave my beautiful low salary country to start my journey to financial freedom in Germany. Even though I was not very excited about moving in to Frankfurt at first, I have actually been positively surprised by the city in many aspects. Not only it was easy for my husband to come here and to also find a high paying job, I have managed to visit many places around Europe and I have learnt how much I love biking.

2 – Do not discuss or try to justify your financial decisions to others

In general, people feel they are taking the best financial decisions that can possibly be taken. However, remember that 99% of those people will work their ass off until they are 65 or more. Everyone is trying to convince you to buy instead of renting your current house? Nobody understands how you are saving/investing money while at the same time renting a house? Do not waste your energy trying to explain because 1) they will not understand and 2) it takes a long time to explain people the hidden costs and the lack of flexibility in owning a house, so you will be wasting your time too. Focus on your plan and accept the fact that, while most of the people would love to be financial independent at the age of 40, nobody wants to think strategically on how to reach it and especially are not willing to make any effort. Yes, you are alone!

3 – Treat yourself and others with compassion

Do not aim for perfection. Have a rational plan and stick to it 90% of the time. If one month due to whatever circumstances you end up not saving what you had expected – or not saving at all – do not blame yourself. Those are sunk costs and, again, do not waste your time or energy with guilt. This lifestyle is like a diet, yes, you will reach your destination sooner or later and yes, cheat days are allowed from time to time.

We, humans, have this natural tendency to compare ourselves with others. Try to be as smart as your neighbor, as interesting as your friend, feeling envy in a positive way, and do not try to strive with material goods. Feel compassion for those who do it. Unless they are Warren Buffet, they will never be 100% fulfilled. All the latest studies on happiness show that wealth is irrelevant so feel compassion for those who feel they can only achieve happiness with material goods.

4 – Make 2 lists: one with all the things that are highly valuable to you and another one with all the things that you would have more time to do more if you didn’t have a full-time job (some overlap of course)

Here are my lists:

Highly valuable/make me happy

  • Biking
  • Spending time with my husband (and, in the very near future, my son)
  • Learning/reading about psychology and economics
  • Writing
  • Being there in important steps of my family/friend’s lives
  • Doing something for others
  • Have an experience on starting a start-up full time
  • Be an example for my son and show him that being free is more important than being super wealthy, that taking care of himself/his health and happiness are more important than working for others
  • Doing yoga and understanding its benefits for the human body
  • Feeling I own my time

This I would love to do more if I wold have time

  • Surprising my husband more often and write about my feelings
  • Cooking
  • Read and write more
  • Learn German
  • Volunteer
  • Do more yoga
  • Be more mindful