For the last 10 years, I lived from paycheck to paycheck. It didn't matter how much I earned, be it 1500€ or 3000€ a month, at the end of the month, I had nothing or even crossing the line of credit into negative. In 2018, I finally realized my future would always be the same if I did not change my financial habits and build up some wealth. This is my journey to financial security and maybe even financial freedom 🤞.
I had exactly 0€ in savings and about 25000€ in dept. This is the plan:
- Create Transparency and Structure
- Get Dept-Free
- Create a Security Nest-Egg
- Raise Active Income
- Reduce Fix Costs
- Create Passive Income
Transparency is key before starting this. I didn't even know my fix costs but now, I know them to the cent. I'm using Numi to list all costs and calculate my progress. My list includes every recurring subtraction from my bank account: rent, car lease, heating bill, Netflix, insurance payments, Amazon Prime, etc. Costs I share with my fiancé, like rent, are accordingly considered, so the number is truly my personal fix costs per month. That number was way too high of course.
In order to save and invest more, I want to increase the delta between my earnings and my expenses by raising my income and reducing my fix costs.
My goal is to reduce them by 30% in 2019.
Every Euro counts, let's go 💪.
Especially in Germany, insurance companies try to sell you so many useless insurances, sometimes invest the money for you with terrible returns and massive fees. I educated myself a little bit at my insurer and the German YouTube channel Finanzfluss and cancelled contracts I don't need. This reduced my fix costs by about 5%
I moved from a regular Vodafone contract to a prepaid card (also from Vodafone) which halved my monthly cost while having the same benefits. Shaved of 0.8%
I was able to pay off one of my consumer debts, which reduced my monthly expenses by another 6%.
I cancelled Amazon Prime and some other subscriptions and optimized others like using a family plan. That increased my reduction by 1%.
Now, these are the big guns. We will get rid of our car this month and it will move the needle by a whopping 10%. Of course, this requires bigger changes but we use car-sharing services, our bikes and public transportation anyway most of the time so it's not that big of a deal. I assume the added transportation costs are almost covered by fuel savings.
Our rent is quite high. We will move this year to save a couple hundred Euros. I don't have a number here yet but I plan to save here about 5 - 7%.
Heating and electricity
With amazing portals like Check24, I checked potential savings by changing my utility providers. After we move, I will change them and assume a potential savings of 2%.
All of that combined amount to about 30% reduction which is quite a lot and increases my current monthly capital to save and invest by 50%. That is quite the success in my eyes. I'm not there yet but I'm quite confident I can make it. In December, I will update this post in case I used more/other ways to achieve the goal.
In case you are interested in hearing about my strategies in the other steps of the above plan, let me know on Twitter 👌