Financial Statement – February

Savings rate = 61%

Total net worth increase = + 7,905 EUR

This month we were pretty good in terms of savings from our monthly income. First of all, I am already on my maternity leave (3 weeks to meet baby #2) which means I am spending less money overall on small things, like going for lunch and transportation. I also have more time to go to a cheap supermarket and, in addition, we have decided to stop ordering food. Deliveroo was eating a chunk of our budget and we were ordering 2 or 3 times a week. It is amazing how much money you can save by only changing small things!

I managed to pay the overall debt for Property #2 and my husband has only very little to pay off. We want to get rid of this debt because we are thinking about buying our primary residence as I have told you in my previous post. We will ask for another personal loan for that purpose but the conditions would be much worse if we have 2 open loans. We are now struggling with the option of selling one of our Properties that we are currently renting short-term, we are not sure whether to do it or to ask for a proper mortgage. Tricky decision as I am very frustrated with the amount of costs you pay when you ask for a mortgage, even with a low interest rate environment! But, on the other hand, selling one property would significantly decrease my future passive income. So, we are still undecided!

If you look at my past financial statements, the real estate business is not yielding much money in the last couple of months, which is mostly due to the fact that it is low season, which means less cash per night and lower occupation rates, plus it is winter, so overall increased costs, in particular heating costs. The revenues should start increasing from April onwards, which should boost our net worth, and also allow us to have more cash to use to pay for our primary residence.

Cash 10,850 -650
Net Cash flow Real Estate Business 3,300 +100
Pensions 98,460 +1,730
Security deposit for current house 2,000 +0
Rental Property #1 115,000 +0
Rental Property #2 120,000 +0
Debt (Bank) -2,750 +6,770
Total networth 346,860 +7,950

I am happy overall just by seeing that we are approaching the 350k networth. Seems like a cool round number to me 🙂

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The hidden costs of a mortgage loan

I have recently been searching for apartments, not for the purpose of investing, but as a primary residence. I know, my house should not be seen as an asset and it is definitely not the smartest financial move I can do, however I do feel that I would be more emotionally comfortable if I buy my own apartment. Ultimately, you have to feel good about where you spend your money!

We currently own 2 small apartments which we rent short-term, we bought them relatively cheap and now we are checking the possibility of selling one of them, making a profit, and using that cash for our primary residence. As our primary residence would be a 3-bedroom apartment and in the capital city, we would still need extra cash to pay for it, which we currently do not have. And this is why we have decided to contact banks to understand how much would we pay for your mortgage. I am completely shocked and I have decided to share my concerns with you so that you can also be aware of all the costs you will face when asking for a mortgage.

First of all, there are taxes and costs related to the purchase of the house you have to take into account. If an apartment is advertised at 300k, do not forget you have to pay 300k + taxes + other costs. Depending on the country, normally you need to add at least 4% on the advertised price.

In terms of costs that you have to pay to the bank, there are a lot of small costs and the fact that banks do not generally merge all of those has a purpose, i.e., so that you do not clearly see how much exactly you have to pay. Be aware of:

  • Costs you have to pay at the beginning of the mortgage: depending on the country, those can include taxes on the mortgage (in Portugal you pay 0.8% on the value of the mortgage) + numerous small costs for formalising the deal, such as payment for evaluating the home and others. Those can easily increase the price of your home by 1% or 2%, which is relatively significant.
  • Interest rate: currently interest rates are very low which might be an incentive for people to buy real estate. Indeed, we were offered a 1% rate, which is quite low. However, even with a 1% interest rate, if we are considering a 300k loan, we would pay 65k of interest over the period of 40 years, i.e., an average of 135 Euros per month. In addition, in many countries, they do not offer you a fixed rate, but instead a spread on the Euribor. As the Euribor is currently around 0%, banks assume this will be the rate for the next 40 years when they provide you with the mortgage payment simulation. This is very misleading! Be aware that most likely interest rates will increase and, therefore, we would have to pay more than 65k.
  • Insurance: Because banks need to be protected in case you do not pay your mortgage, they generally request that you have both a home and life insurance. Normally they also have an insurance company in the group and they strongly recommend that you use their products. In our case, the costs of the insurances over a period of 40 years was almost 100k, i.e., almost 200 Euros monthly.

Even though this is all very country specific, I believe in general the rules are relatively similar in Europe. Of course the exact costs and %s will depend on the country, banks and your specific individual situation.

Summarising and just to give you an example with numbers, if you are buying a home of 300k, you will have to pay to the seller 312k. You will then have to pay the bank as initial costs around 3k, which makes the total initial cost of the property = 315k. If you are granted a 40 years’ loan, even with a low interest rate, you will pay 165k in total for both interest rates and other costs (mostly insurance). Total price of the apartment = 480k, 60% higher than the advertised costs of 300k.

Crazy, right?

Financial Statement – November

November: another great month!

Savings rate = 57%

Total net worth increase = + 8,445 EUR

This is great to compensate the crazy month of December. Even though I try to be frugal, I always end up buying a few things for some family members that would take it wrong if no gifts are exchanged + I go back to my home country and I met with so many people I haven’t seen for ages, which means I end up spending way more than normal on lunches/brunches and dinners.

Cash 8,350 +2,400
Net Cash flow Real Estate Business 2,500 +1,300
Pensions 89,890 +1,560
Security deposit for current house 2,500 0
Rental Property #1 115,000 0
Rental Property #2 120,000 0
Debt (Bank) -15,890 +3,185
Total networth 322,350 +8,445

I am now 36% FI 🙂

Financial Statement – October

October was a very exciting month! We were able to grow our net worth by 9.285 Eur, which is the maximum we have been able to do so far. There were a couple of reasons for this success:

  • Our savings rate was 57%, which is probably the highest value so far. I calculate our savings rate based on our salaries and I do not consider the cash-flow yield by our real estate business. No big or unexpected expenses this month!
  • I have adjusted the value of our rental properties and increased the overall value by 2000 Eur. Still, the values I consider are at least 20% below market value, but I want to be on the safe side here in case of a market crash. To compensate for this, I have decreased by 1000 Eur the money we expect to receive when we leave our current flat. Due to our baby, the flat is not as in good shape as it should, I am assuming we need to spend some money arranging the walls and the floor before we leave (2500 Eur is my current estimation).
  • Our real estate cash-flow has yield us 1.200 Eur net, which is amazing especially taking into account that we have hardly any work and it is not high season anymore.

 

Cash 5,950
Net Cash flow Real Estate Business 1,200
Pensions 88,330
Security deposit for current house 2,500
Rental Property #1 115,000
Rental Property #2 120,000
Debt (Bank) -19,075
Total networth 313,905

I am 35% FI (still 65% to go!). Seems like a lot but I think the hardest work is done, which is to get enough cash that allows you to start investing and creating passive income. In our case, passive income is generated through real estate but you can of course decide on what products suit you the best.

Currently, I am having another dilemma: invest the money we are saving or save it and buy a property for us to live in the future?

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!