Financial Statement – December

Savings rate = 49%

Total net worth increase = + 6,655 EUR

December was not an amazing month as our savings rate went down mostly due to gifts and money spent going out with friends and family. We could have though about ways of being more frugal but we were a bit lazy this Christmas to do it!

We still manage to pay off our debt and to increase our cash reserves, so overall not bad. However, it is low season for our short-term real estate business and therefore it only yield 600 Eur.

Cash 9,650 +1,300
Net Cash flow Real Estate Business 3,100 +600
Pensions 91,460 +1,570
Security deposit for current house 2,500 0
Rental Property #1 115,000 0
Rental Property #2 120,000 0
Debt (Bank) -12,705 +3,185
Total networth 329,005 +6,655

This is lower than my expectation but hopefully next month, with a salary increase and a small bonus, the goal of growing my networth by 8k every month will be real again 🙂

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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?