Financial Statement – September

It’s been a while I don’t update my financial statements (last time was in May!) and many things happened during this period:

  • I stopped investing in Peer to Peer: it yields me less cash flow than my rental properties and I believe that once the economy turns around many of these debtors will not be able to repay the loans. It will probably not happen now but I think it will at some point.
  • I have established a proper company to manage my 2 rental properties that are currently rented for tourists. It is more efficient in terms of taxes.
Cash 3,600
Peer to Peer 0
Pensions 86,780
Security deposit for current house 3,500
Rental Property #1 100,000
Rental Property #2 133,000
Debt (Bank) -22,260
Total networth 304,620

My net worth has actually increased very little from May to September, less than 24k. This is due to the fact that we bought a second house and had to pay extra taxes, which we do not count as equity, and also the fact that we bought furniture for the new apartment and I do not account for that either in my net worth calculation. I have also decreased by 500 Euros the amount of security deposit for the current house. In general, I prefer to be on the conservative side.

From now on, as no costs related to the business/rental properties are expected, apart from the recurrent ones, we should be able to keep up with the 50% savings rate on our salaries and hopefully increase our net worth by around 8k every month. We now have income from our salaries + passive income from 2 rental properties. Our 2 rental properties should yield between 400 and 1800 net per month, depending on the season, which is very exciting.

Now that we are having extra cash and real estate prices are completely crazy, where shall we invest? I am thinking index funds dividend related. What is your view?

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Financial Statement – May

Even though our savings rate was not great (48%) we managed to take care of many things related to Property #2. We will pay it completely over the next couple of days/weeks, therefore I have already excluded the cash we are about to pay from the Cash category.

Cash 600
Peer to Peer 863
Pensions 78,030
Security deposit for current house 4,000
Rental Property #1 100,000
Rental Property #2 133,000
Debt (Bank) -35,000
Total networth 281,493

Very soon I will update you on the real numbers of my first real estate investment which is yielding more than what I had previously calculated!

You have 168 hours this week

Reading is one of my passions. I love reading about personal finance, behavioral economics, psychology and business in general. I literally cannot fall asleep if I don’t read, even if only for 5/10 minutes.

About 2 weeks ago, I had nothing to read and no ideas on what to read next. I found this post from Paula Afford Anything and the 168 hours book she recommended sounded interesting. I was feeling a bit overwhelmed trying to manage a full-time demanding job, a baby, buying property #2, a constant effort/research on how to save more and where to invest. A book on time management was exactly what I needed, in particular one tailored to families and written by a woman.

Laura is amazing (you can listen to her TED talk to understand what the book is about) and her book made me feel I really have more time than what I think I do.

Hours in a week 168
Sleep (8 hours/night) 52
Work (8 hours/weekday) 40
Commute and getting ready for work (1.5 hour/weekday) 7.5
Total time left 68.5

A week has 168 hours. After accounting for sleep, work, commuting and personal hygiene/getting ready to work, I still have 68 hours left to do whatever I want. The key is to use this time on what makes you happy, which for me is my family, exercising and my sidle hustle (my investments, this blog and my passion for personal finance).

Laura made me realise than I actually spend more time with my baby than at work! Even though I only see him 3 hours a day on weekdays, which feels too little, I have the whole weekend to be with him. Plus, I found strategies to maximise the 3 hours I am with him by outsourcing what I don’t prioritise in my life. I realised I was spending too much time going to the supermarket, cooking, some days I would also do some laundry and this was all done, of course, during these 3 hours I was supposed to be with him. Non-sense! I have decided to talk to my cleaning lady and double the time she comes every week. She will, not only clean the house, as she did before, but also cook and take care of our clothes. We have also started shopping online, which saves us at least 1 hour per week. Now, I am fully enjoying these 3 hours stress-free with my baby and it is so much better/easier for everyone.

On the other side, yes, I am spending more money than what I “should” which seems not to be in line with my financial independence goals. I gave a lot of thought to this, since I consider myself frugal, but I think I will try to be more easy going from now on and think about my core competences, where really I want to spend my time on. And, I have to admit, I don’t like home work, I hate cleaning, doing the laundry, I don’t mind cooking but also don’t love it. I do like: spending time with my family and friends, my work, my side hustle, doing exercise, in particular yoga, reading, thinking about where to invest next and how to help people having a healthier relationship with money. This is where I will spend my 68 hours per week that I have left, on the things I love, and not on the things I hate, which I was doing just to save money. Plus, I don’t plan to retire early, my goal is finance independence but not early retirement. I want to create passive income so I can feel free to pursue my passions, try my luck by starting my own company and hopefully make some money while helping others.

What I have changed in my life after reading 168 hours:

  • I now have a cleaning lady 6 hours every week instead of 3
  • I use my lunch hours very effectively, either to take care of something I need, or to go to the gym or to have lunch with friends (I schedule appointments to make sure I have lunch with people I care about and not just because they are my work colleagues)
  • I don’t feel bad about spending money on books, it is an investment towards my financial future and I love reading
  • I am more organised and I plan more, to make sure I am able to do everything I want during the week
  • I am more present, I try not to get distracted and enjoy the moment. If I am working, I try to focus and get things done as quickly as possible. If I am with my family, I don’t even look at my phone.

This book is of course tailored for people living in developed countries and who have their basic needs fully fulfilled. You have time for everything. You just need to define your priorities and organize your week around them. Time is more important than money. Do you agree?

Financial Statement – April

We had an increase of +6.6k in net worth which I am pretty happy about! Plus, this month we had an additional cost of 0.8k because my husband purchased the monthly transportation ticket and, even so, we managed to save a lot!

Cash 55,800
Peer to Peer 858
Pensions 76,540
Security deposit for current house 4,000
Rental Property #1 100,000
Rental Property #2 133,000
Debt (Rental Property #2) -94,000
Total networth 276,198

Savings rate = 53%

Our savings rate is not great and we could definitely improve it. It is amazing what you find out when you really start computing the figures! I would have guessed that my savings rate is around 60/70%.

Even though we are saving 6.6k, we are still spending 5.9k a month which sounds like a lot (and it is!). Almost 40% of that is on rent which we are not willing to compromise because 1) we love our apartment and it is quite cheap for the type of apartment/area in which we live 2) is it very convenient/time saving that both of us live close to work and to the creche 3) additional costs when moving into a different apartment.

My husband is not very keen on tracking expenses and for the sake of my marriage I have decided not to force him to 🙂 He is relatively frugal by nature and willing to engage in actions that allow us to save more money but he does not want to track every single expense. I get it and accept it. This month we have decided that from now on we will go to the cheaper/discounter supermarket at least twice a month. I am not really sure but I would say that our second most significant expense is groceries, as I think we spend more than 500 Euros in supermarket on a monthly basis. I hope we can go down by 100 or 200 Euros.

Very soon we will be buying Rental Property #2 and hopefully have it ready to rent it to tourists before August. Read more about our strategies in my previous post on Rental Property #1. I still cannot believe how much we have achieved in the last 3 years, from only slightly above 0 in net worth to almost 300k and from 0 properties to almost 2!

Going Greener Monthly Challenge 2

This month I took the decision not to use any straws, neither in the house nor outside. Of course if I really loved them, I could still buy environmentally friendly ones to have at home. But I don’t really need them, and I have to admit that most of the time I use them outside home just out of habit. From now on, I will not buy any and not accept from any shop. This is my monthly action on my my way towards a greener life!

Have you realized how much money you can save by being environmentally friendly? 🙂

Financial Statement – March

March was a pretty good month. I am very proud to say that we were able to increase our net worth by 6.5k mostly due to the fact that we did not spend much + some extra cash that I got from my previous employer.

Cash 50,700
Peer to Peer 857
Pensions 74,980
Security deposit for current house 4,000
Rental Property #1 100,000
Rental Property #2 133,000
Debt (Rental Property #2) -94,000
Total networth 269,537

Savings rate = 52%

I am still waiting for property #2 to be completely built in order to officially buy it. The property is not officially mine yet, I have just paid part of it in advance while it was still in construction. There is always some sort of risk in these businesses, I have to admit I am nervous and I will be until the day I get to sign the contract!

Total net worth or passive income: which metric to chase?

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?