Tracking my expenses

Yes, I do not (yet) track my expenses. I know how important it is but since I was pretty happy with our savings rate (around 60%) and my husband was not a fan of tracking expenses I decided there was no point in doing it myself.

Luckily, nowadays banks do this for you since they categorize your expenses automatically. You just need to make sure it is the right category and categorize a few when the bank does not have information on the correct category of a specific expense. The only thing you have to do is try to use your card always, if possible. If it is not possible and you need to cash out, which in our case it is only to pay the cleaning lady and some lunches/coffees, it is fine. So, I managed to convince my husband and we will track our expenses from today onwards!

This graph below is my idea of how I currently spend my money. In one month, I will compare it with how I actually spend my money.

expenses

Keep posted, I will keep you updated on my real expenses and on my first month as a real estate investor. I have learned so much in this process of buying a house for short-term rental and hiring a management company and I will share all the tricks and tips that worked for me!

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Is renting really too expensive?

This is by far the best calculator I have found online that provides an estimate between the cost of renting vs the cost of buying. I love this calculator because it takes into account all the costs of owning a house, which are underestimated by some people, in addition to the opportunity cost of not investing in other assets that might yield better returns, in particular on the value of the down payment.

This should be used to evaluate the pros and cons of buying the apartment/house you will live in. Do not make the mistake of just comparing the monthly bank payment with the monthly rent. Much more (significant) costs have to be considered when owning a house.

Food for thought: the fisherman and the business man

There was once a businessman who was sitting by the beach in a small Brazilian village.
As he sat, he saw a Brazilian fisherman rowing a small boat towards the shore having caught quite few big fish.
The businessman was impressed and asked the fisherman, “How long does it take you to catch so many fish?”
The fisherman replied, “Oh, just a short while.”
“Then why don’t you stay longer at sea and catch even more?” The businessman was astonished.
“This is enough to feed my whole family,” the fisherman said.
The businessman then asked, “So, what do you do for the rest of the day?”
The fisherman replied, “Well, I usually wake up early in the morning, go out to sea and catch a few fish, then go back and play with my kids. In the afternoon, I take a nap with my wife, and evening comes, I join my buddies in the village for a drink — we play guitar, sing and dance throughout the night.”

The businessman offered a suggestion to the fisherman.
“I am a PhD in business management. I could help you to become a more successful person. From now on, you should spend more time at sea and try to catch as many fish as possible. When you have saved enough money, you could buy a bigger boat and catch even more fish. Soon you will be able to afford to buy more boats, set up your own company, your own production plant for canned food and distribution network. By then, you will have moved out of this village and to Sao Paulo, where you can set up HQ to manage your other branches.”

The fisherman continues, “And after that?”
The businessman laughs heartily, “After that, you can live like a king in your own house, and when the time is right, you can go public and float your shares in the Stock Exchange, and you will be rich.”
The fisherman asks, “And after that?”
The businessman says, “After that, you can finally retire, you can move to a house by the fishing village, wake up early in the morning, catch a few fish, then return home to play with kids, have a nice afternoon nap with your wife, and when evening comes, you can join your buddies for a drink, play the guitar, sing and dance throughout the night!”
The fisherman was puzzled, “Isn’t that what I am doing now?”

From Paulo Coelho blog

Financial Statement – August

 

Euros July August Gain
Mine 41,400 38,950 -2,450
M 24,200 30,800 6,600
M Pension 31,000 31,000 0
My Pension 34,840 34,840 0
House guarantee 4,000 4,000 0
House paid 100,000 100,000 0
Total 235,440 239,590 4,150
Cash 65,600 69,750 4,150

This month and the following will be atypical. My salary is much lower because I am on my parental leave until the end of September. M, on the other hand, got some money back from taxes. So, overall, an increase of 4k is not bad for a low salary month!

We are currently thinking where to invest next.. having 70k in cash is killing me! I feel I am losing money every day for not having it invested. Index funds? Or real estate?

An image worth more than a thousand words

The Eurostoxx 50 and the S&P 500 have historically been fairly correlated. However, since 2009/2010 we clearly see them splitting, as Europe is rather stable and the US presents amazing returns.

Index fund investing as a simple strategy is more complex than what John C. Bogle says. There are too many options to choose from. For investing in Europe I am confident that ishares is the best, do you have any other suggestion?

Naturally many other factors have to be taken into account when deciding what to do in terms of investment, in particular which index funds to buy. But, as we know, there is no point in thinking too much about an investment strategy; even financial experts rarely beat the market. So, would you say there will be a crash soon in the US? Shall we invest in the EuroStoxx? Let me know your views!

Financial Statement – May, June and July

I have been very busy (and a bit lazy) but here is an update on my financial performance over the last three months.

Euros April July Gain
Mine 50,080 41,400 -8,680
M 40,520 24,200 -16,320
M Pension 30,000 31,000 1,000
My Pension 30,490 34,840 4,350
House guarantee 4,000 4,000 0
House paid 55,000 100,000 45,000
Total 210,090 235,440 25,350
Cash 90,600 65,600
Money to be spent in the apartment 44,585
Cash – debt 46,015

I am very happy to say that I have finally paid off my first real estate investment. The apartment is finally built and it is currently being furnished by the company who will manage it afterwards. We will start with short-term rental because currently it is more profitable. Porto is on the top European cities for tourism so my estimation is to have an average of 7% net profit per year. I am so excited to have my first passive income generator 🙂 And praying for the company to hurry up and start in August advertising the house on the online platforms (there are still a few things they have to do before: furniture, pictures, etc.).

Meanwhile, we have to decide what do with the 65k cash that we have. Any suggestions?

A hungry man is not a free man

Most of the people spend all their life driven by others’ expectations or by extrinsic motivation, as Dan Pink very accurately described in his book Drive: The surprising truth about that motivated us. It basically means we spend our lives looking for approval in the society mostly through money and/or recognition at work. However, this only gives us a temporary boost of motivation/satisfaction/happiness. The permanent happiness is found in the intrinsic motivation which, according to Dan Pink, relies on three principles: Autonomy, Purpose and Mastery.

My personal journey to financial freedom is actually part of a bigger journey to autonomy, to finding purpose and to having time to master all the issues I have always been interested in. However, I have to admit that the short-term focus is extrinsic, that currently I am focused on making money, not for the purpose of consumption, which is used by mostly for people as a way to fell that they belong to a certain social status, but for the purpose of saving, of being free from every-day bills. As Adlai Stevenson very wisely said A hungry man is not a free man. Therefore, only when free from obligation we can be free to enjoy life at its fullest.