I have been thinking a lot on which metric shall I use to measure how close I am to financial independence. Both total net worth and passive income have as a basis my expected yearly expenses but whereas total net worth generally assumes a 4% net return rate, the passive income assumes that the amounts I am earning now can be replicated in the future. Both have flaws but both can be used as a guide.
In my specific case, I have invested mostly in real estate (on my way to buy property #2) and my investments yield more than 4%. Therefore, if I consider both properties and the passive income generated by them, 40-45% of my yearly expenses are already covered by these properties (potentially even more, because I can still decrease the amount of taxes I pay for both properties if I decide to create a company and deduct expenses and VAT, which I am planning to). On the other hand, if I use the total net worth metric, I am only 30% financial independent.
It is more conservative to target total net worth, which, in our case, is 870k EUR (my husband disagrees and think this is too low) but I will still celebrate when we reach 100% of expenses covered by passive income!
What about you? How do you keep up the motivation towards your goal?
I have recently become even more aware of how much waste we generate around the house. I consider myself very conscious on the environment but there is still so much I would need to do to reduce my waste, in particular plastic. Nevertheless, let me focus on the positive aspects/actions that I am currently undertaking now:
- I do not eat meat: as you probably know, meat production is one of the top responsible for greenhouse gas emissions, in particular beef. I do try to eat vegan most of the time, but I definitely cannot consider myself a vegan, as I eat regularly eggs and fish. I do not drink milk and very occasionally eat cheese.
- I do not own a car: living car-free is also one big plus according to this recent research but I do occasionally use cabs and rent cars.
- I recycle but sometimes when visitors come and they are not aware of the rules I “relax” a bit and put everything in the normal bin. I also do not do any recycling in the toilet bin out of laziness.
- I have reusable shopping bags.
- I use cloth diapers on my baby: most of the times but not always.
- I drink tap water, i.e., I do not buy plastic bottles at least for water
As you can see, I am not an all-or-nothing type of person. I do not advocate for going 100% car-free or being 100% vegan, I would say I am on the range of 80/90% which I consider good enough. I am lucky to be able to bike to work but if you really can’t, do not blame yourself for that and try to compensate, for example by sharing your car with colleagues or by not using it during the weekend or by not eating meat, etc, etc, whatever you fell most comfortable giving up on.
What I currently do “wrong”, environmentally speaking:
- Airtravel a lot, as I do not live in my home country, I travel every 2 months to visit family and friends, plus I travel to other places for holidays. This is something I am not willing to give up on.
- Use plastic when shopping: bread, nuts, fruits, shampoos, etc. everything is covered in plastic!
- Order food at least once a week: some plastic again here.
- I use regular cleaning products which are definitely not environmentally friendly, not only the components but also the packaging.
- I use regular cotton and plastic toothbrushes.
- I use a lot of paper when cleaning my baby.
- I could eat more local and not buy exotic fruits/vegetables.
These lists are not exhaustive, as hopefully there are more things I am doing right and for sure there are additional things I could improve. My challenge is to slowly go green and do something greener every month, in particular something that will have an impact not only on that month but also in the future. Therefore, my commitment in this blog is that every month I will announce one action/life change towards a greener life.
This month my step towards a greener life is to give up on disposable tampons and sanitary pads and use a menstrual cup instead. I have tried and I am a fan! Do you know that a woman uses on average 11,000 tampons in her lifetime and that it takes decades for one to degrade? This is a women’s only step but I am sure my future steps will apply to both genders.
How about you? What are you currently doing that is considered environmentally friendly and what are your plans to slowly become greener?
I am currently taking a sick leave from work the whole week and I have to admit that I am actually enjoying staying at home. I have a 1-year old baby and it’s been over 1 year I am not home alone! So, despite the pain in my body and throat pain, I am actually enjoying this “time-off” from work. It got me even more motivated and more into financial independence because it allowed me to have time to do things I really enjoy:
- I read 2 books I have been wanting to read for a long time (Misbehaving and When, totally recommend both!)
- I have been reading more blogs on financial independence, running and updating my numbers and learning new concepts, in particular the difference between Full FI and Lean FI. I have realized I am a bit over 30% Full FI, which sounds great, because the following 30% will be much faster to reach than the first.
- I have been doing yoga by myself and realised I need to learn more/do more, even though it is very challenging to find the time when you work full time + have a baby. I will definitely do a yoga teacher training once I decide to “retire”.
- I have also been thinking on how to combine my two passions which are personal finance + girls empowerment. I am not specifically talking about the new movement current out there, I would like to focus more on how to help poor girls get through, empower them and help them to make sound financial decisions. Again, very difficult to do it in the country where I am currently living – Germany – not only because of the lack of time but also because I do not speak German fluently (not even close!), so maybe I have to delay this till when I go back to my home country. Meanwhile, I have to think what could I do online related to these topics. Any suggestion?
- I have convinced my husband to finally start saving first, i.e., every month both of us will put in a separate account 2.5k each so that we manage to save 5k a month. Let’s see if we manage to do it! We start this month!
Even though there are many things I love about my work, to name a few being an international environment, my manager is an amazing coacher, my organization is very flexible in terms of working hours, the high salary, etc., working is definitely killing my creativity and separating myself from my true passions. I feel I would be of so much more use to the society if I could focus my time on helping others to achieve their own freedom and to thrive, either through personal finance or yoga/meditation practices. However, on the other hand, I feel I still do not know enough of personal finance or meditation to be able to teach. And because I work full time I cannot find the time to get better, or at least not as much as I would like to. I guess I still need to wait a couple of years and meanwhile I will try as hard as I can do improve my skills on the topics I passionate about, without being hard on myself for not being able to do it full time.
February was a very bad month in terms of savings because my husband took unpaid parental leave and we have decided to go on holidays before he started a new job. However, personally it was very rewarding 🙂
Still, our net worth has increase by 2.5k when compared to January due to the increase in my pension amount and plus a bit of cash we managed to save. We have a lot of cash not invested because we will soon need it to pay Property #2 (and we will still need to ask for a loan because we will not have enough available). We will officially buy it once it is built, which should be in the following 2 months, hopefully! I am so looking forward to start cashing in!
|Peer to Peer
|Security deposit for current house
|Rental Property #1
|Rental Property #2
|Debt (Rental Property #2)
Savings rate = 21%. My husband took parental leave the whole month so we were living on one income. Next month hopefully this value will skyrocket to at least 50%!