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? 🙂

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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?

Going Greener Monthly Challenge

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?

30% Financial Independent

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.

Rental property #1

As I have told you before, at the end of 2016, I have invested 100k in my first real estate property in the beautiful city center of Porto, Portugal. I bought it before it was built, so we were finally able to start cashing-in in the beginning of September 2017. We have decided to hire a property manager specialized in short-term rentals and until now it has been going great. Check out my property in Airbnb!

Here is a quick summary of the current situation, with actual values until January 2018 and estimated values for the future months:

net profit

I will have around 6400 Euros net per year which represents a yield of 5.9% on my initial investment (my initial investment includes not only the cost of the apartment, but also taxes, furniture, etc. anything I had to pay before the apartment was ready). It sounds like a pretty good investment to me! However, I can still improve it, as I do not have the most efficient situation in terms of taxes and I can maybe still negotiate the cost of the property manager.

This experience has been very exciting! At first, we were concerned and a bit annoyed because there were some delays in furnishing the apartment, so could not start cashing-in in August 2017 which is a pretty good month for tourism. But, once everything was settled, there is not much you have to do, apart from seeing the money coming in into our account every month! With so much free time, we have decided to do a quick analysis on the strengths and risks/weaknesses of our investment.

 

Strengths:

  • New apartment in the city center (my opinion is that the city center hardly ever devaluates, in particular in Portugal where prices are still low and the reconstruction of the city centers in big cities started very recently)
  • Perfect for tourism but also can be rented long-term (we were contacted by an agency with an offer for our furnished apartment which would yield us 5500 Euros net per year)
  • Tourism is growing at very high rates in Portugal and this growth is expected to continue in the future

 

Risks/weaknesses:

  • Legal changes in short-term rental laws in Portugal (tourism has been the main driver of growth so I think this risk is small but it should be considered)
  • Small apartment with no parking space

 

We have weighted the pros and cons and we have decided that it is a really good investment and a niche that we would like to focus on: small apartments in premium areas in cities we are familiar with. This is why,  a few days ago, we have decided to buy property #2, a very similar apartment to property #1, for the same purposes: short-term rental. We were a bit unlucky this time (or lucky in the first time) as the prices are quickly increasing, therefore the price of this property is 35k higher than the first one (auch!). But, whereas in the rental property #1 we had to wait 1 year until we started cashing in because the apartment was not built when we bought it, rental property #2 is almost built and we hope to start cashing-in before July. All the same, instead of a 5.9% annual return, we are expecting around 4.5%.

Our following steps are to check with a tax adviser if we can/should create a commercial company for our real estate investments so we can deduct the costs of the investment for tax purposes. Currently, we are paying a significant amount of taxes because we cannot deduct the costs that we have on the investment. At the same time, with 2 apartments, we hope to be able to negotiate the cost of the property manager.

I am so excited about this project! Not only it is profitable but also I am learning so much about real state, Portuguese laws and about taxation. I fell I am an expert by now, so feel free to ask me any questions related to these topics!

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!

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!