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set up a company in portugal
Daily life, Lifestyle, Tricks,

Set up a company in Portugal – my experience

Set up a company in Portugal – my experience

If you are a real estate investor, creating LLCs is really a must if you want to protect your assets and optimize taxes. I have created some companies up until this point (you can find out why in my book), and I can tell you that there are some differences to the US. I’d like to comment on those differences, as I have been working with RE investors from the US who want to create an LLC for every property. Well, in Portugal, that won’t do.

To set up a company in Portugal, you will incur the following costs:

  • €360 to register the company (LLC – which is called Lda);
  • €123-€300 to register a trademark (this depends on the sector, how protected you want it to be, etc)
  • €100-€200/mo to pay for an accountant (which is mandatory);

These are the mandatory costs (except for the trademark). However, note that you will also likely incur costs such as:

  • A salary. You don’t really have to have a salary – I don’t take any salary out of my companies. Note though that, if you do, you will have to pay for social security, medical insurance and what not. Your cost will be much higher than the salary per se.
  • Rent and utilities. Depending on the type of business you run, you may have to have a brick and mortar location. Even if you don’t have to have one, in most businesses they come in handy.
  • Advertising. This may be close to nothing or a lot. In my case, 95% of the costs of a company I run is advertising (it is a digital service, of course).
  • Bringing assets to the company. You need to pay about €50 per asset you bring to the company. This doesn’t include e-assets, fortunately. 😉
  • Insurances. Depending on the type of business you run, you may have to have insurances. I always have insurances in my companies, even if I don’t have to have them.
  • Legal advice. Unless you have a very basic type of business, today you’ll need legal counseling. This can be quite expensive as well.
  • Vehicles. Depending on the type of business you run, you may have to have vehicles to operate. I keep my companies super lean and I never bought any vehicle to any of my companies.
  • Taxes. There are two things you can’t escape in life: taxes and death.

As you see, the fact that you need to spend €100-€200 per month with an accountant, opening a company for every property usually doesn’t make sense, because your profit is wiped away by this fixed cost. At the same time, it typically only makes sense to set up an LLC when you reach 3 properties.

BTW, at the company level, in Portugal, prices are usually defined as the price + VAT. VAT is the value-added tax, which you may know as the goods and services tax (GST).

If you’re thinking about setting up a start-up in the US, check out this guide on the costs of opening a company.

Duties

Opening a company in Portugal comes at a cost (although I list multiple advantages below). Some of them include:

  • Print and send the physical copy of the invoices to the accountant, every single month.
  • Issue the digital compilation of the invoices and upload it to the tax office every three months.
  • Keep the books in order (even if you’re hiring an accountant).
  • You may be held accountable as a CEO, manager or partner, for multiple things within the company, including maximizing profit for shareholders in multiple states in the US. This became quite polemic after Martin Shkreli brought it up.
  • etc…

My companies

I have set up multiple companies in Portugal, and I have a main accountant which actually charges me €75 + VAT per extra company. I currently own or co-own the following companies:

I also think that there are multiple advantages to having companies (and multiple companies) including:

Protection

As I said, this blog belongs to a company that I use to collect royalties, online businesses, etc. This also protects me, as this asset belongs to a separate entity that doesn’t hold any of my assets.

Flexibility

If I want to charge money, I can. This wasn’t the case back in the day (as I couldn’t do business because I lacked a license or was employed on an exclusive contract with an employer).

Also, having multiple companies allows you to write off way more costs than when you don’t have these companies. For instance, as an individual, you can’t write off fees and interest with mortgages even if you do get mortgages for real estate investing. For me, that is a killer.

What about yourself? Do you own a company?

Let me know if the comments down below.

Thanks

Ben

2 or more checking accounts
Daily life, Lifestyle,

Why I have 2 or more checking accounts

Why I have 2 or more checking accounts

Sometimes, when I release one of my net worth reports, I get asked a lot why I have multiple checking accounts.

Right now, I’ve got 3 checking accounts: one for investments, one for fixed expenses and another one in Germany, as I needed an account there for some money I need to get, still. Just so you don’t get confused or misled, I pay taxes on my investment account. I am currently thinking about opening a 4th checking account.

You may have heard of other people opening multiple checking accounts and may wonder how that could help you. Not only that could help you in terms of a better control over your overall spending, as it can also help you relieve stress from managing your finances.

In this post, I will comment on the benefits of having 2 or more checking accounts.

Benefit number one: separate things

If you can use multiple checking accounts, assign each account a specific purpose. In my case, I will open a 4th checking account merely for paying bills (utilities, gas, eating out, groceries, rent, fun, etc). I will transfer €500 to this account at the beginning of the month, and force myself to live off of that.

This is a great way to check where your money is going. I am kinda lost when I don’t do this. The other option is to cash out, but this may not be convenient if you need a lot of money for your month.

Benefit number two: it takes much less time to manage your money

Knowing precisely where your money is going to can be a painkiller. Back in the day, I use to have all my expenses in one card, and I would spend a lot of time checking the expenses and what they pertained to. With a second checking account, you pretty much get the slip at the end of the month, look at it and you’re all set. Ultimately, this is a hell of a stress avoider… With two checking accounts, you’ll track your money flow like you never did before.

What I truly recommend you doing is applying Amdahl’s law to your finances: if you spend 80% of your money on X (say groceries), optimize that and forget the rest!  Within your groceries expenses, if you spend 50% of your money on meat alone, optimize that! You get the idea…

Benefit number three: a motivation to save and invest

Everybody knows this: if you have no limits when spending your money, chances are you’ll invest less. Forcing yourself to spend less money, by separating day-to-day money from investment money into 2 or more checking accounts will motivate you to invest more, as you spend less. At least it worked out well for me.

What many people with two checking accounts do is to separate fixed bills from variable ones. This is a very good system, but I personally like to factor in my fixed costs into the €500 I transfer over to my account at the beginning of the month.

Benefit number four: an actual profit on your investment money

If you decide to open a checking account with interest (for instance, check this one out), you’ll actually make a profit while you don’t invest your money. I tend to park my money until I need to renovate a rental property or I have enough money for a downpayment. This can sum up to $10,000, if not more. Parking all this money without interest means losing money. Quick tip: set up a checking account with interest for the money you save every month.

Benefit number five: create history with a new bank

I leverage a lot. For me, having a credit and non-credit history with many banks is crucial. Why? I don’t know which bank will give me the best offer on my next mortgage. Or which bank will have the best offers and fees. I want to diversify as much as I can, so creating 2 checking accounts will help you with that. If possible, use secure loans on different banks, so you develop a nice credit score with all of them.

 

What to pay attention to if you have multiple checking accounts

If you decide to go with multiple checking accounts, you’ll probably have to spend time opening and monitoring them. I have personally programmed a small Java software which collects information from my bank accounts and tells me everything I need to know. It even sends me an e-mail every day with the amount in each account, variations in regards to the previous months, and where the money went to. I know, it’s awesome, right?

However, keep in mind that some banks may charge you maintenance and even inactivity fees, so stay tuned into your account. You don’t have to code a program like I did, but you should monitor your accounts and don’t forget them.

Also, you can choose among different types of checking accounts. Make sure you’ve got a strategy before you open a second or third account and choose the type of your accounts (with interest, banking packages, etc) wisely. If you have a small business, consider opening an account just for that, and never ever mix your business’ expenses with your personal ones.

Do you have more than 2 checking accounts? What is your opinion on multiple checking accounts?

Let me know in the comments down below.

online and passive income ideas
Daily life,

101 online income streams and passive income ideas you can use right now!

Given that I report on my online income here on From Cents To Retirement, I’ve been asked many times how to make money online. To make things easy and make a comprehensive post on this, I decided to come up with a huge list of ways to make money online. If you are on your way to FIRE, this may be interesting for you!

I am so very much liking these huge lists of ideas for a specific topic… For example, check out my list of ideas to save money which I will update over time. Just like that list, with ideas to save money, I wanted to post a mega list of passive income streams and passive income ideas.

So, without further due…

Online income streams and passive income ideas you can use right away

There are tons of ways to earn money online these days, but many people have troubles starting out. I can definitely say that not all ways are probably suited for you, but there should be ways for virtually everybody making money online. Here are my favorite ones:

1 – Start a blog

There are gazillion ways to monetize a blog and most of them are pretty much passive. Check the previous link for a more detailed list, but just so you have an idea, this can range from sponsored posts to advertisements that pay you if people click on them.

The hardest part is obviously growing the blog. And that is really (I mean really) hard. Once you’ve hit 100k views per month, you can pretty much start monetizing it big time. My rule of thumb is that each 1000 views per month translate into $10 of passive income (e.g. 100k views translate into $1000/mo). Write down how much you want to make and go grow your blog!

To start a blog, check out this tutorial.

2 – Write an e-book

Amazon has enabled every single one of us to self-publish a book. You can pretty much write it on Microsoft Word, format it accordingly, get a cover (which you can outsource from Fiverr for as little as $5) and upload it to the Kindle marketspace or iBooks.

You know that I have some experience with this topic, because I published my own book in March. I can tell you that publishing a book is relatively easy (mine took a little bit more than 3 months of hard work to write), but selling many copies can be hard. The reason being the fact that in order to sell, you need to promote your book effectively (something I suck at!). Now, if you’re good at this and you’ve built a big audience, this may be your thing.

The topic is probably the most important thing about books. I haven’t written my book because of the money, but rather to share the message and keep myself motivated, but if you truly need the money from your book, I suggest you write about a topic that sells (and you also have some knowledge about, of course).

Another thing to pay attention is pricing. It can be hard to sell books if you don’t have the right price for your audience. I will soon publish a post on how to publish a Kindle book and link it to this page.

3 – Make a course you can sell

In April 2017, I met a blogger who made very little money through his blog but reached more than $50,000 on Udemy, by selling a course. After 3 years blogging about medicinal plants, he decided to put together a course based on the material that he published on his blog, Q&As he did for his readers and questions he answered via e-mail. I found it staggering that he used to answer almost 20 e-mails a day (honestly, that is way too much for me as long as From Cents To Retirement remains a side gig) and was able to pull out almost 80,000 words of content out of those e-mails!

Instead of writing a book, he decided to go the online course route and succeeded. But he is not an isolated success story. Have you heard of a math teacher who made more than a million bucks selling an online course? Yes, it is possible to make fortunes this way, if you are committed.

I should point out that, even though these are big numbers and they may sound very appealing to you, keep in mind that you’ll have to produce wonderful courses and promote them big time. Just like blogging, promoting something is very hard and takes a lot of work. In about one and a half years of blogging, I managed to hit about 1300 subscribers and 20,000 views per month. Promoting a blog (or an online course, for that matter) is a full-time job per se, in my opinion.

4 – Set up a Youtube channel

I am pretty sure you have asked yourself how much YouTubers make, right? I am sure you know at this point that there are many of them doing millions every year. The Entrepreneur website even has a detailed guide on how to make money off youtube.

Although it is clearly an option if you’re good at shooting videos and talking to big audiences, I need to let you know right away that setting up a large YouTube channel is no easier than setting up a large blog. In fact, they are very similar when it comes to gain traction. Driving traffic online is the key to success, but it is something hard to do. Online ninjas are highly rewarded today. 🙂 Even though I have experience with driving traffic to a blog (as I try to do that with mine), I have no experience doing that for a YouTube channel, as I don’t run any. Fortunately, there are some guides online, including this one from Forbes.

5 – License out your ideas

Perhaps you are the inventor-type of a guy. The good news is that it can also pay off big time.

There are two different things that you should be aware of: selling vs licensing. Selling your intellectual property means that you cash out but you don’t own it anymore. The ownership is transferred to another entity. Even if the idea gets a royalty down the road, it won’t be yours unless you agree to that prior selling it.

Licensing, on the other hand, means that you still own your idea and you get money for other people to use it. This is especially useful if your idea involves distribution, which you may not have. You can license it out to a company that already has distribution and employ your idea from day 1.

If you are inventor starting out, please check the top 6 mistakes inventors usually make.

6 – Create a product and sell it online

If you have an idea for an awesome product, this is your thing. The world is starving for awesome products priced correctly. Just create a product and let everyone know about it. Go online, create a website and shout on social media. You must look at the price though: it has to be right. Some products are not meant to survive in today’s economics, so make sure yours has a place.

My advice would be: spend slow promote fast. Do not spend much money, especially in the beginning. Check out the market and grow from there. Do create value, always. That is the beauty of becoming an entrepreneur.

I always use the Scrab daddy sponge example: it went from thousands to millions super fast, because it solves a true problem, is priced correctly and managed to grab enough attention.

7 – Create a dropshipping business

The dropshipping started to get popular a few years ago. Essentially, it is a great way to become a successful e-commerce entrepreneur without having to deal with inventory (and customer service, for a good chunk of it).

If you look around, you’ll find many histories of successful entrepreneurs who went the dropshipping path. Some of them did it very fast. Like very fast. How about zero to a million in 8 months? Powerful, right?

Today, there are a gazillion services that make it easy to start a drop shipping business. You can go to Shopify and actually automatically link to a source in Asia. Just look around and educate yourself. Dropshipping has never been easier (although it never had so much competition).

8 – Write for other sites

I need to write for other sites as a way to promote my blog. That is why I tend to write so many guest posts: exposure. However, if you are a good writer, this may be a great fit. There are many sites out there starving for great content and willing to pay you to write articles. Check out this list of 50+ blogs that pay you to write for them. If you want to write a guest post for me, shoot me a message (check the “work with me” tab in the main menu before that).

9 – Sell your consulting services

I personally made decent money out of consulting, so I know for sure that it can be done. Eventually, I personally started to become fully booked and eventually raised by hourly fee high enough so that I have enough clients to make reasonable money but I don’t spend much time consulting – as I don’t have that time…

Everyone who I tried to convince starting a small consulting business told me they would not get clients. They priced their services at $100/h. That is not the way you should start, in my opinion. I also started from the bottom, charging $30/h and I gradually raised my price until it met the sweet spot in terms of customers and time.

If you want to start your consulting business, the first thing is set up a platform to promote your services. A blog typically does the trick, but using social media appears to work best.

If you want to hire me (for any topic from FIRE and personal finances to real estate investing) shoot me a message.

10 – Work as a virtual assistant

Many of the previous ways to make money online include consistent hustle. For instance, consider a blog: we need to create content for our blog, create content for other blogs (as a way to get exposure), promote the blog, develop relationships with other blogs and a gazillion of other things I would spend this entire post talking about.

As a result, most of us decide to hire virtual assistants. I don’t recommend bloggers to hire VAs right way, but at some point I think that it takes money to make money. If you are good at managing social media, doing outreach, etc, this may be your thing. Simply make a profile at Fiverr or Upwork and get the ball rolling. If you manage to have a set of blogs your YouTube channels to manage, it can be quite lucrative…

As of October 2017, I am hiring a VA! If you are interested, send me a message.

 

If you have more passive income ideas or if you use other passive income streams, please do let me know! I’d like to add them to this post and keep growing it.

rental property renovation
Daily life, Planning, Real Estate,

Renovation of RP#3: the second phase has begun!

The moment has arrived. My favorite part in REI…

In fact, if you read about renovating properties, this can be quite fun!

I am very excited to say that the second renovation phase of RP#3 has finally begun!!! In this post, I will go through the nuts and bolts of the renovation and the deal itself.

Property specs

I have bought this property more than one year ago, but at the time I only renovated part of it. This property has 6 different units and I only renovated two of them when I bought it. I rented out those two units quite fast, for a total of €515/mo, which eventually became €500/mo as some problems popped up in one of the units and I decided to lower the rent to keep the tenants happy.

You may recall that the cost of that renovation was largely undercalculated, and I ended up spending way more money than I anticipated at first. The first renovation covered two units and one common area inside the building.

The building is divided into two parts, each of which contains 3 units:

6 unit building

Sketch of my 6-unit building.

After the renovation, I decided to put off the renovation of the second half – or right half, in the figure above – of the building (and I actually ended up renting out one of the units as it was (LINK)). The main reason was to preserve liquidity. Now, that my real estate company did well, I decided to cash out some monies and go ahead with the renovation on the second half of the building. This second half is promised to be rented out to the sub-leasing company I work with, for €540/mo, which will be instrumental for me to hit €2,000/mo until the end of the year.

Renovation Costs

First, the costs:

  • Labor: €24,000.00 (this includes renovating the facade, the electric part, plumbing and all the material for the walls and ceilings);
  • Tiles, tubs, taps, vanities and what not: about €4,000.00;
  • Kitchen cabinets and countertops: about €3,300.00;
  • Windows and outdoors: about €2,000.00;

Total: about €33,300.

To pay for this renovation, I will withdraw as many funds from my RE company as possible. At first, I thought I could cash out €30,000, but due to the amount of taxes I will pay to do this, I will only be able to cash out around half of that (unless we have big sales until the end of the year). I am also relying on a €2,500 work bonus that I will collect by Christmas. At the end of it, I will have no money in the bank, which means that I will feel comfortable – remember, if you have money sitting the bank something’s wrong! 🙂

The deal

This is a building in the very center of a mid-east city in Portugal, with a very big and reputable university. The building is also relatively close to the university, so renting it out will be easy in the long run. Just to let you know, I wrote a post entirely on this unit a while back ago.

How much I spent so far

This has been my biggest deal so far, if we account for renovation costs. I have bought RP#3 for €31,500 but I was 100% financed. Here’s the rest of the costs I’ve had with this property so far:

  • Closing costs summed up to €3,900. These were especially high, as closing costs in Portugal tend to be lower, especially if you’re 100% financed.
  • Renovation cost to this day €26,600. Keep in mind I do clever renovations.
  • Appliances and equipment €500.
  • Total mortgage costs paid to this day €1,700.

Total invested to this day = €32,200.

Given that I will invest another €33,300 into this renovation, at the end of it, I will have €65,500 invested, and I will have a mortgage of €31,000. 

Yield

As this property will safely yield €1,260 in December, we’re talking about a 23% cash on cash return and a 16% yield. I am not sure about you, but this looks like a great investment to me!

As I will write off the expenses with the renovation of the property, I will get, at least, 2 years of tax-free rental income on this property. This means that the 16% yield will be net. Well, to be fair, we need to deduct the property taxes and the insurance (together that is something like €500/yr). Therefore, the net yield is 15,15%. Still awesome, right?

Next year I will pocket €14,520 after all the renovations. I will get a line of credit on this property, of about 175k. On a 3%, 13-year credit line like this, I will pay €1,220 every month, which is essentially the rental income of the property. Note that, in the first year, €837 of the €1,220 is principle. After this, it allows me to have about 150k to go out for shopping. 🙂

Aspects of the renovation

I didn’t want to show much of the building online, but here it goes a little bit of unit. This is the lower unit of the right side of the building, which we just guttered:

renovation of rental property guttered portugal

As well as part of the 4th unit in the picture above:

rental property #3 renovation

We are still working on guttering it, actually, as we simply torn some walls down up until now. As you can see, they seem like a very small 1-bedroom (which in fact they are) that you would typically rent out to one student.

I have actually decided to start by tearing down the walls of every unit, so that we can plan the several rooms in a better way.

More to come soon! Stay tuned!

listing properties to sell
Daily life, Real Estate,

I am listing two of my properties!

Hi fellas,

Last week I decided to list two of my properties: Rental Property #1 and Rental Property #2. I want to keep you posted regarding why I did this.

Rental Property 1 – my first rental ever!

First, RP#1. I moved to this property this month, and I love living in it. My tenants left the property in a perfect shape (pretty much how I handed it to them) and it looks lovely. Here is the data as of today:

  • Acquisition cost and remodeling = €31,500.
  • Balance on the property (deducting net rents) = €28,000.
  • Current property value = about €50,000.
  • Listing price = €54,000.
  • Commission to sell = €5,000 + VAT = €6,150.

This means that if I sell at market value (€50,000) and I have to pay a 5k+VAT commission, I will end up with €43,850. From this, I gotta pay 28% on capital gains. This property VPT is almost €40,000, so there is no actual profit until €40k. If I sell for €50k, I can write off the 5k+VAT commission and therefore end up with a taxable capital gain of about 4k. From this, I can write off about 1k in expenses, including property transfer taxes (when I bought it). This means that the final taxable capital gain is about 3k and I need to pay 28% of that, which is about €850.

So, if I do sell for €50,000, I end up with €43,000. The Real Estate agent (I’ll explain in a bit why I am not selling this property through my own company), however, told me we may sell for €52k or even €53k. This sweetens the numbers up. In the worst case scenario, though, I will end up with a net profit of about €15,000 on this property. Not bad for a €31,500 – I’ll end up very close to a 50% cash on cash return!

Why sell?

…especially if I just moved in? I realized that with this kind of money, I can buy another property for myself (hopefully a 2-unit property, so that I live in one and rent the other out), remodeling it, and put €10k to work! This stroke me when I recently found a very nice condo for less than €20,000. I am not sure yet where I would put the €10,000 to work, but I’d probably split them between P2P, bonds, and stocks (a third each). More than the €10,000, I am particularly eager to buy a 2-unit property. This is the last proof that I have an investing-tailored mind: even my primary home has to return something financially.

Rental Property 2 – a great buy and hold

OK, RP#2 is a totally different ball game. When I mentioned the agent that I wanted to sell RP#1, he told me “don’t you want to sell RP#2 too? I may have a buyer for around €80k”.

RP#2 is one the best deals of my life. It generates almost €6,200 per year, and generates extra cash after I pay the mortgage off. Plus, it is a nice 3-unit property that I bought for less than €40,000. Because I got a mortgage on this property, I only had to put in about €9,000 so far (because I pre-payed 3k of the mortgage!), and I’ve collected about €6,500.

If I sell for €80k, I need to pay a €5,000 + VAT commission, which leaves me with €73,850. Then, I need to pay the mortgage off (currently at €34,500 with a 2% pre-payment penalty). This leaves me with €73,850 – €35,200 = €38,650. I also need to pay high capital gains, because I only have tax-free gains up to €64,000. This leaves me with a taxable tax gain of about €10,000, from which I can only write off about €1,000. On the €9,000 I need to pay about €2,500 on property taxes. So, at the end, selling for €80,000, I’ll end up with about €36,000, with is a 400% cash on cash return. Selling for €75,000 calculates into great numbers still, so I do hope this deal goes through.

I am not yet sure what I will do with the €30k+ that I will net from this property, should I sell it. Most likely, I will find a fix and flip deal and put the money to work there, or find another buy and hold that I buy with this money exclusively. I don’t mind making about €250/mo (vs €500+ I am making with this property), if I lower my liabilities (before the bank) AND I go after a deep value deal (meaning I buy for €30k+ but the property is worth at least €45k+). Ideally, I want to put the money to work fast and extract a high return until the end of the year.

Changing strategy?

As a buy and hold preacher, am I changing my strategy? No. I simply acknowledged that I can make quick money this way, and I believe that in the long run, I will achieve higher volumes of rent this way.

Why not selling through my company?

If I have a RE company, why not selling these properties through my own company? RP#1 is not adequate – I only have investors as buyers and RP#2 may fall short in terms of ROI. Note that if I sell for €80,000, that will mean a gross annual return of less than 8%. After taxes and property taxes that may mean about 4,5%.Also, this is an old property and renovation may be needed at any time.

To investors that look for our company, we usually propose properties that can are distressed and needed to be entirely rehabbed or properties that expectantly won’t need much maintenance over the next years. This property can actually be attractive before the local market, for investors that are happy with moderate returns. At the same time, I don’t lose anything to list it – there are absolutely no costs and it will continue to be rented in the next years.

save to retire early
Daily life,

Living frugally – the 1st pillar of early retirement

Living frugally is probably the number one thing to look at for those who want to retire early. We already know the formula: earn well, live frugally (aka save as much as you can) and invest wisely. Write down a plan and follow it no matter what. But what about the details of frugal living? How to get through them, become financially independent and still live happily?

Living frugally – the 1st pillar of early retirement

While some things are difficult to envision, try to look out for examples. This family of 4 lives on $14k a year. This family lived a year on extreme frugality. If they can do it, you can do it too!

In this post, I’ll tell you that living frugally actually means and how I do it.

What exactly do I save on?

If you stop to think about them, our culture is geared towards spending money. We are constantly bombarded with ads that prompt us to buy. We end up buying a lot of things by impulse, not because we really want them or need them.

I’ve decided to do it differently. I spend money on what I need the most, or what leaves me truly happy. You have to ask yourself the same question: what does leave you truly happy: a new car, a new smartphone, new clothes very season or being able to retire early? I am not saying that the latter is the right choice, I am simply saying that it is what I want. In the following, let me share some tips:

Home and car

As I wrote last week, I am moving to a very small condo in one of my multi-unit properties. I think I haven’t shown my car yet, so here is it:

 

Although a beautiful, reliable VW from 1999, it only cost me €3000. My family was quite surprised when I bought “such an old car” for “someone with a PhD and a large salary”. Guess what, I could not regret it less. I absolutely love my car. 🙂

This car serves me extremely well. First, it is a classic over here. Second, it is super reliable. Third, it has a huge trunk and can take up to 5 people. No other car would make out my happiness, really. Well, to be fully honest, a brand new Mercedes A45 would probably make me a little bit happier, but it would cost me €27000 more. €27000 is what I need to live comfortably for 2,5 years, so choosing between these cars having in mind that the Passat will allow me to retire at least 2,5 years before is a no brainer, even from the happiness point of view.

Food

Pretty simple – I never ever throw away food. I plan every meal accordingly and I buy food for them – not more, and rarely less.

Coupons

I’ve been less of a coupon freak. Back in the day, I use to literally go through every coupon magazine and collect tons of coupons, filter them out, and spend them or change them for money. I was a coupon machine. Today, my time is way more valuable than that. If you have spare time and you get bored easily, do search for coupons, they can save you a lot of money.

Today, I still chase coupons and try to take advantage of sales, but I am not a coupon freak anymore. I think that the time I would invest into finding coupons is way better invested in my online and Real Estate businesses and this blog. Plus, having a growing blog does leave me happier than saving a few bucks at the supermarket.

Family

Pretty difficult to deal with, I gotta be honest. My family does not understand why I want to be so frugal. If you hold a PhD and your family think you have a large salary, they won’t understand why you don’t want to go out for lunch or take advantage of Black Fridays. My family knows that I have CFS but they don’t really know I want to retire in my 30s. Plus, they don’t have a very frugal background, so frugality is not something they are really used to.

Gifts

This is the hardest part of saving. I use to give my relatives and friends pretty generous gifts, and ever since I started to work on my early retirement, I changed that. It is not exactly like I give them crappy presents now, but I try to go for something cheap that either they really need or looks expensive. For women, I tend to give flowers more often.

Let me know about you – how do you save and what tricks do you use?

how much square feet space you need
Daily life, Lifestyle,

How much square footage do I need to have a good life

The first question that everyone who wants to retire early should make. It is also one of the first questions that I analyze with my clients… How much square footage (or square meters, if you’re European) do you really need?

I’ll try to answer it from a not so explored angle…

How much square footage do I need to live the good life

Most people fantasize about a huge home (and a nice car). This is in fact what trapps them into a mortgage that they need to work their entire lifes to pay off.

However, if you are asking yourself how much square footage you need, you’ve probably arrived at the conclusion that a small home is a smart decision…

So, this month I moved to my new home. My net worth is about a quarter of a million dollars, but as always, I like to look at spending money based on the amount of happiness it brings me. If having lunch out will boost my happiness on that particular day, you bet I am going to go grab that 10 buck lunch!

This follows my philosophy that you should spend your money based on the amount of happiness it will bring you. ALWAYS make that question before spending any money. “Do I really want to drink an espresso right now, or is this rather an impulse buy?” “Does having lunch out today will make me happier and more productive?” “What will make me happier? A big home and a big mortgage or financial comfort and a passive check in my mailbox?”

Think about life as a game, where characters have those fancy “happiness bars” on top of their heads. Something like this:

happiness bars how much squared footage do I need

OK, these are what I am talking about. Imagine those next to you. You’re in the game now – you’re the main character and you’re trying to maximize your happiness. If you look to the other side, you’ll see a number, that is your money. Now go out there and try to get the best case scenario: spending as less money as possible, you want to maximize your happiness bar. Note that in this game you don’t have to impress people you don’t like. Stop now. Ask yourself. What is my perfect home now?

Chances are you’ll say you don’t need a big home because there is a sqft where your happiness levels actually start to decrease. Instead, you’ll trade a few square feet for a few (a few != many) other things, including a nice chesterfield where you can relax and a fast internet connection to read From Cents To Retirement or any other nice site out there (although you know that this is the best). You’ll probably buy plants or something that connects you to nature because we are naturally connected to nature. Or maybe you’re a city guy and nature doesn’t turn you on. Maybe an espresso machine and a shelf of books (this is sooo Ben Davis).

The bottom line is that if you ask these questions to yourself, you’ll find a reasonable limit where more sqft don’t translate into more happiness. Fortunately, downsizing has been considered more and more a weapon to early retirement. For instance, this family sold their house for £130,000 and bought a £24,000 boat, where they live permanently in. And I bet they are happier!

Have a look at the property I chose to live in (which is actually one of the units of my 6-plex), since the beginning of the month:

kitchen How much square footage do I need

room How much square footage do I need

living room How much square footage do I need

This unit is about 500 ft². Yes, that’s it. It has a small kitchen, a room, a living room and a small bathroom. I will live alone, so that is more than enough for me.

Would my happiness bar increase a lot if I moved to a much bigger home? Probably not. Would yours?

30 to 90 days of
Daily life, Health, Lifestyle, Planning,

30-90 days of… a new set of challenges in my life!

Hey guys!

Today, I want to bring you something I’ve been working on and I am really excited about! I decided that I will try a certain technique for 30/60/90 days, and I will report the results on the blog. I will cover pretty much everything, from money to personal development. For the most part, I will cover health and personal development techniques, though. This will go hand in hand with my new diet, which I expect to maintain throughout the year.

I will try to report everything in a scientific matter (or at least, as much as possible). I will try to record every single time I apply the technique and on what day. Then, I will report the results. Some techniques may produce results after 30 days. Some may only work after 60 or even 90 days. Either way, I will report after 30 complete days of a given technique. Every time I report the 30-90 day experiment and the results, I explain thoroughly why I decided to do it and the meaning of the technique.

Here’s a few things that I am eager to test:

#1: 30-90 days of Deep meditation

I have been meditating for a while, but it is easy to forget about it. Honestly, on most days, I feel I didn’t have time for anything I wanted to do (and I could only do what I had to do). I want to meditate for at least 15 minutes in the morning and 15 minutes before going to sleep, for 30 days, and assess the results.

#2: 30-90 days of Visualization

Visualization is a very powerful tool that, put roughly, takes advantage of the fact that the brain cannot distinguish between what we are thinking of and what is in fact happening. Logically, if you accept that bad thoughts affect your overall health, then we could use visualization to affect our health in a positive way. That is what I want to do. This is the best video on visualization I ever saw:

the most important part of visualization is focusing on the feeling that you experience when visualizing.

#3: 30-90 days going to bed before 11.30

I will use the time until 00 to meditate and visualize and get to sleep at midnight or even before. The crucial thing is to be on my bed at 11.30, the latest. Ideally, I will try to be there at 11 and use 30 minutes to meditate and visualize.

#4: 30-90 days on Ginseng every single day, twice a day

Ginseng is known to be an excellent adaptogen, which helps with memory and fatigue. I’ve personally used Ginseng with great success, but I will report on it again. I personally like Ginseng from Now Foods as I said many times before.

#5: 30-90 days being grateful for everything I have

In particular, I want to be grateful for what I have every day in the morning, and before bedtime. My research has shown me that our mind is really the catalyzer of life, in the sense that I personally think that a strong mindset it is the most powerful and quick way to change your life for the better. Some scientific evidence has shown that being grateful can translate into things like sleeping better and having stronger immune systems. This source also reports that there is Research by UC Davis psychologist Robert Emmons (the author of Thanks!: How the New Science of Gratitude Can Make You Happier) shows that keeping a gratitude journal can increase well-being and life satisfaction.

Does it look obvious of why I want to do this now?

#6: 30-90 days being super kind to others

…almost to the point where they think it’s fishy, I don’t care. Many people have told me that this works beautifully in making friends and having others being kind to you. You remember the commercial with that guy who waves to those who are pissed and insulting him? That is also part of the experiment. I simply want to check what result this will have on me.

#7: 30-90 days acknowledging and complimenting others

Same thing as #6.

#8: 30-90 days with irreprehensible posture

Living is learning and I am always trying to learn more and more. I recently learned that your posture affects your spine’s health, which in turn affects your well being. I wonder how much this could affect my personal situation. To maintain a really good posture, I will use a posture vest and remember myself every single day to sit straight at the computer – if I dominate that, I will pretty much be on a correct posture 95% of the time.

In this context, this is a pretty good exercise you can do at the gym:

#9: 30-90 days forcing myself to feel

Feel the smells, the air against my skin, the water falling on my body (in the shower), the sensation of success, etc.

In this context, I’ve found 5 things I can do right away to improve and harnessing the power of feeling good now. This challenge is tightly connected with other challenges (#1, #2 and #5) and they all boil down to having the part of our brain that experiences the best pleasures and emotions turned on.

#10: 30-90 days forcing myself to relax

Very connected to #9, and yet a heck of a different one… We live life so up close that it is super hard to appreciate the small moments. When I sit on my couch I do not feel that I am relaxing, yet I am. Feeling the relaxation – noticing it and letting it go through your body – is key! At least I suspect it is. Let me do 30 days of this and report the result back to you!

#11: 30-90 days going for a walk every day, for at least 10 minutes

Did you know that some people think that taking walks might be better than going to the gym?

Just forget about the routine, problems, and simply go for a walk (and enjoy it). I suspect this will free my mind, get my muscles to work and have a positive effect on my day. I am only able to do this during the Summertime (which in Portugal is pretty much 9 months in the year) LINK MISSING, but I am super curious to assess the results.

#12: 30-90 days without Facebook

Being constantly on is clearly preventing my body from relaxing. Facebook is a big part of that – although certainly not the only on. Maybe I will actually cut everything all along, including Whatsapp and other social media I use. As a hard-work blogger, I also check google analytics quite often (and Amazon affiliate/book fees), and I think that I will also refrain myself from checking those.

BTW, you can friend me now, I just created a profile: Facebook.

#13: 30-90 days without coffee

I love coffee. I absolutely love it. A good Italian or Portuguese espresso (which mean great Cameroon’s or Bolivian coffee) is certainly one of the most enjoyable parts of my day.

Coffee has a myriad of health benefits, in case you don’t know. However, coffee worsens my dizziness and therefore I would like to try out a period without any coffee whatsoever and assess the results.

#14: 30-90 days without chocolate

Actually, this is almost part of my new diet, but I want to completely remove chocolate for 30-90 days and assess the results.

Chocolate is another big pleasure that I have, but something I tend to overuse. I typically buy 70-95% cacao chocolate bars (meaning with as little sugar as possible) but this is still something I’d like to use less and less. Usually, raw cacao is preferred over any form of processed cacao for health benefits.

I figured that starting with 30-day chocolate periods is the best start to eventually eat less and less of it.

Lately, I’ve been having some trouble losing weight and I think I am overeating chocolate (really one of my favorite things to eat). Let’s see what comes out.

#15: 30-90 days focusing on others

Someone told me that the best way to feel better – especially if you have a health problem that is tightly connected to your emotions – is to focus on others. This topic has actually gotten quite popular on Quora.

I must admit that I am really going through some of the worse periods of my life. I feel quite sick and dizzy for more of the day, which are two symptoms of CFS. However, I know that this is a tight connection with my emotional status. In fact, I tend to think too much about my problem and I often have thoughts of “this is my worst phase ever” or “I will never be healthy”. Focusing on others (probably together with visualization) may be a good way to flip the switch, and I am willing to give it a shot.

#16: 30-90 days stretching every day after waking up and before going to bed

If you don’t know the benefits of stretching, I think you should have a look at those. To me, the most important one is that it may increase our energy levels. This is the routine I think I will follow (if you have one that is better, do let me know!).

#17: 30-90 days drinking 1 gallon of water every single day

Although one gallon of water may sound like a lot, we need to consider that our body is 60% water.

Now, no one can tell you exactly how much water you need.

If one gallon of water is too much or ideal, no one knows. What I know is that, back in the day, I’d drink close to a gallon a day and feel great, so I will give it a shot. If you think about drinking one gallon a day yourself, consider that a few things may happen in the transition.

#18: 30-90 days doing acupressure every single day, especially before going to bed

I’ve used acupressure before, with success, and it is also part of my lifestyle to fend off CFS symptoms. Some sources claim that regular acupressure will certainly increase immunity against all such diseases. For that reason, I want to give it a shot on a recurrent basis and assess the results.

Here are three acupressure points for overall health.

#19: 30-90 days drinking tea

The first good news about tea is that it can significantly reduce anxiety levels after suffering a stressful experience. This was confirmed by a study conducted by Malcolm Cross, of City University London.

I am not a big tea lover, I must confess. Coffee turns me on way more. However, I know that tea is a healthier alternative and can be used very effectively to treat anxiety and dizziness. I will pretty much drink chamomile and ginger tea in this experiment.

#20: 30-90 days preparing each day the night before

Have you heard that preparing your day the night before comes with a hand of benefits?

I think that the main point for me is that I won’t be anxious to make a break or something similar to that. I will be in control and know what I am supposed to do. I am curious to see how well this will work for me.


The goal of this experiment is quite intuitive, right? If something produces results in 30-90 days, then it will have a heck of a result if we apply it throughout my life. And habits compound too! We’re creatures of habit and I honestly feel I work better if I follow a specific routine. I will test out all these and adopt those that work better.

Let me know in the comments down below if you have any suggestions on what to try out!

i live where you vacation image
Daily life,

I live where you vacation – my new life

This month I am moving to Portugal (most likely for good). This will change my daily life entirely, and I am finally moving to a country I love to live in, and leaving one that I don’t like that much. Exciting times ahead… after all, I live where you vacation from now on!

I have posted on how crazy beautiful the country is, and why did I invest in Portugal in the past years, as a means to take advantage of geographic arbitrage. Today, I’d like to expand a little bit on how awesome it is to live in Portugal, and why so many people decide to take their vacation here.

Quality of life

As I have written before, Portugal is like a small paradise on earth. The quality of life is very good. In the following, I’ll cover the main points.

Food

One of my favorite points. Food is Portugal is crazy awesome, and dirt cheap. As I said before, you can find you restaurants serving you awesome meals just like this one for less than $5:

cheap meals portugal

What I love to do is to order take away. Portions are always generous and I end up making two meals out of one portion. One takeaway portion like this one usually costs about $5:

food portugal I live where you vacation

Groceries are cheap too. I take advantage of many coupons and discounts. However, I can afford to order food to takeaway, as in many cases I end up making two meals out of a single portion. If you want to have a look at the most typical Portuguese dishes and some parts of Lisbon along the away, check this video from Mark Wiens out:

I am sure Mark agrees that I live where you vacation…

Weather and people

The pictures above were taken in February. Can you notice the amount of natural light there is? I ain’t faking it….

People are also extremely open and helpful to you. I wish you could experience this personally, as words can’t convey this accurately. At this point in my life, it is such a great relief to move to a country where most people are nice.

Safety and drug usage

Portugal ranks 17th in the safest countries in the world. Security reports claim that safety breaches happen primarily at very touristic spots and these are pretty much reduced to the busy tourist season. Violent crime is very rare.

Portugal has also a unique approach to drug usage. In 2001, Portugal decriminalized the usage drugs, allowing every citizen to possess a small amount of drugs. Turns out that this has yielded fantastic results. The number of drug-induced drugs dropped from 80, in 2001, to 16, in 2016. Have a look at these stats: 16 drug-induced deaths in the entire country in one year. Currently, Portugal spends 90% of the available budget for drugs on treatment and 10% on punishment – the opposite of the US. Have a look at this documentary:

My lifestyle

I will be living in Castelo Branco, a small city near Spain, and I will be working in Aveiro.

map portugal

(taken from Google Maps)

As I took a part time position in the beautiful city of Aveiro, I will afford to drive there every week. The way we decided to structure my working time was to work 2 weeks in the month (every second week). In the other 2 weeks of the month, I will be resting at home, and working on my projects, including From Cents To Retirement. I will be driving from Castelo Branco to Aveiro every other week, arriving on Sunday and leaving on Friday (probably late in the day).

Monthly expenses

I will be staying at a nice hostel in Aveiro. I stroke a deal with them, and I will be paying them $280/mo while I am there. Therefore, I expect the following monthly expenses:

  • Rent = €260 (about $280), includes utilities;
  • Food =  €250 (about $270)
  • Health insurance = €40
  • Gas = €150 (about $160)
  • Clothing = €50
  • Entertainment = €25 (about $30)
  • Others = €100

This means that my monthly expenses will sum up to €875. I will earn €1500 from my part-time job. From my salary, I hope to save at the very least €600 (i.e. 40%) every single month. Ideally, I would spend only €500 a month, thus allowing me to continue to save 70% of my salary, but commuting so often and living in a new city will not allow me to do that. My passive income will be completely reinvested into growing my portfolio, so I can forget about using it as well. I will try to do as much as I can in terms of online income and consultation. This income will be used to 1) grow the blog and 2) continue renovating RP#3 and paying down my mortgage on RP#2. I am definitely refining my strategy, but “the vision needs to be re-iterated, I do that a lot“.

Routine

During this period, I will be following the diet and lifestyle that I have described before. I hope to go to the gym 3 times in the week and read as much as possible.

I plan to spend 25% of my time blogging, 50% working on my new job and 25% of my time working on my Real Estate and online businesses.

In 2017, I am also making some treats: 1) I will meditate for at least 5 minutes every single day, but I hope to meditate for 20 minutes on Sundays, 2) after May, I will explore the coast on my own. In particular, I will be taking one Saturday every month to do that. I will run along the sea and capture beautiful images. Is there any better definition of “I live where you vacation”?

How others see Portugal

Here’s this couple of brits talking about the prons and cons of living in Portugal:

I agree with 95% of what they say!

financial freedom
Daily life, Planning,

Financial freedom – what is it, what is necessary to get it and why I want it

I have covered the topic “financial freedom” in detail in my book “My strategy to retire early” but today I want to go over on a few angles of this topic.

What is financial freedom?

For me, financial freedom means that you attain a certain level of wealth that you don’t need to work for money anymore. This can be achieved in various ways. You can win the lottery. You can inherit more money you’ll ever spend. Maybe even sell the company you’ve built from the ground up and get a nice exit. Or you can do what I am doing: save aggressively, invest wisely, and ultimately build a nest egg that pays you enough money to live off.

If you ask people whether they want to be financially free, most will say yes. However, they lose site of this by putting other things first. Most people get themselves into huge debt for a home and a car (not to mention college debt). Others keep using their credit cards to buy stuff they really don’t need, just to have a spike of excitement (I will not even call it happiness) when they buy it.

If you want to achieve financial freedom, you will have to adopt a whole new set of rules for your life and eventually become a different person. And to truly do and embrace that, you’ll have to assess whether this is a true priority in your life. Otherwise, my experience is that it won’t work. Ask yourself questions like “am I OK with living off of 30% of my salary for 10 years?”. Or “am I strong enough to make my own meals and coffee (instead of going out) every day?”. I can’t tell you exactly what it will take for you to become financially free. However, questions like these will give you a good idea of what it really takes.

What is necessary in order to achieve financial freedom?

Piling up money is probably not the best strategy to attain financial freedom. Technically, you can achieve financial freedom if you pile up enough money to live off of, but this is a very hard way to do it. It is simply extremely difficult to pile enough money to live off of, for the rest of your life. To start off, inflation will remove transactional value of your money every single year. The idea is to save and invest, and make more money on your saved and invested money. Think of it as buying your own salary by pieces, if that makes sense. There is one especially popular chart in the ER community that works magically well:

(taken from familymoneyplan.com)

The chart basically represents a trade-off of how much you save and how many years it will take you to retire. For example, if you save 70% of your salary, it will take you about 10 years to retire. Interestingly enough, this works regardless you make 300k or 30k! The key idea is that you can live off a certain amount and you have to build a nest egg that will pay you that amount every year (ideally you want to grow it a little just to be on the safe side). Of course that this means that two people living off of 300k and 30k will have very different annual spending figures.

I like to think about in a slightly different way. To live comfortably well in Portugal, I will need a net “salary” of about €20k/year (as of April 2017). In order to net 20k from my investments, assuming a 8% return rate and 2% inflation, I would need a portfolio of about €333k. Now, let us consider a more conservative return rate, of 6,5%, and 3,5% average inflation. This means that I will net 3% of my portfolio, every year. To get €20k net per year in these conditions, my portfolio would have to be at €670k. This is, in fact, my first goal.

Having children changes things a little bit. If I were to have one child, I would have to increase my living costs by $1000/mo. With a return rate of 6,5%, and a 3,5% inflation rate, I would need a little bit more than one million bucks to net 32k/year.

Why do I want to achieve financial freedom?

If you follow my blog of you have read my book, you know that I want to retire because I have the Chronic fatigue syndrome and sometimes I just drag myself to the office. But even if I were absolutely healthy, I think I would trying to retire as well.

Whether you want to achieve financial freedom is up to you. Look deep inside and find out if you really wanna do that. Even if you already know you want to achieve financial freedom, looking deep down for the actual reasons will give you strength to fight. And boy, this is one heck of a hard road!

How do I imagine my financial freedom?

Just because I plan to retire early it doesn’t mean I will stop working. As I said, what I really want is to be able to do whatever I want, whenever I want. Maybe surprisingly for some, I love to work. In fact, most of my time is spent working on stuff I love. If you didn’t achieve financial freedom yet, you won’t be able to work on what you want. You will have to work for money. This may come in the form of a boss or your own business, but there are many things you must do even when you don’t feel like it. And that is the whole point of financial freedom. Here are some examples of stuff I will do after I achieve financial freedom:

  • Blogging. I’ve always loved to write, but blogging is a lot more than writing. If we consider the tasks underlying a blog, writing is one of the smallest tasks of a blogger. Content creation involves much more than simply writing. But content creation is not even the bulk of one blogger’s tasks. I want From cents to retirement to become a reference for personal finances and early retirement. In order to turn a blog into a reference, you need to work very hard.
  • Going into nature way more often. I love to hike (especially in not so popular wood trails), find hidden lakes and waterfalls and what not.
  • Working out more often. Between 2010 and 2012, I used to workout 3 times a week every week. My shape was amazing. I ended up giving up of that due to lack of time.
  • Write more books. I wish I had the time to write two books every year.
  • Give back to the community. I plan to help those in need, especially those with CFS.
  • Coaching other people. I have a few clients right now (I have a partner who is generous enough to send some clients over), and I coach a few friends. However, I would like to coach and help people on a much more broader scale.

If you liked this post, then I recommend you to check out the resources down below.

Ben Davis

More resources on financial freedom: