Net Worth Report 2020

I’m pretty excited to start the blog up again. It’s not going to be perfect, but it will be worth it. More and more people have become curious about what’s going on over here in Italy, so for those of you who enjoy a blog post here and there, I wanted to provide that option. It’ll be challenging to keep up, but I’m willing to give it a go. If I could clone myself, It’d be a lot easier to acheive all my goals.. But would they even be considered my goals at that point? Food for thought.

It’s the end of 2020 and life has never been crazier. At the same time, the path forward becomes ever more clear. Like many of you, I did an overview of past goals and have decided to put my future goals into writing. I find that every time I do, my feeling of obligation to complete them becomes more concrete. I’m glad that I’ve got you as a sounding board. With that said, let’s breakdown 2020 by taking a look at our families 2020 Net Worth Report. 

This report is going to be interesting since the last time I posted something about our net worth was back in December of 2013. Actually I wrote about it in 2016 and had the goal of doing posts over time to tell the story up until I finally caught up, but blogging got pushed off to the side for other things and now with the Youtube Channel absorbing much of my time… let’s just say, I am happy to share this information. One.. it keeps me accountable. Two… I hope it helps motivate someone out there. Three… It’s important to have a good understanding of your financial snapshot in life if you are going to strive for F.I.R.E.. like I’ve been doing.  

For those of you who are new here, in December 2013, my life in Italy had just begun. Married for 1 month, no children, no job, just renting.. I was spending most of my time learning Italian as best I could on my own. I had just recently learned the startup I co-founded had replaced me fearing that the distance of my new move would affect my work. Since my responsibilities in the startup were based completely online, I was already prepared to start smart working from Italy back in 2013, but the partners didn’t agree.  It’s funny that in 2020 smart working has become a country wide reality, I had been the one investing into the business even with the little I had and taking no pay check, but I didn’t really have much of a choice than to just let it go, so it was time to move on. 

So it’s time to take a look at the last 7 years and see exactly what went well and what could go better in 2021. For your reference I will be placing this same chart in various locations of this post since it contains the data we’ll be discussing. 

My Net Worth before marriage was a rocky road due to living off of credit cards amidst a previous failed venture. You can see evidence of this a year prior to our marriage when my net worth hit a low of nearly -40,000 dollars.  Jumping back to December of 2013, I did own a townhouse which was breaking even but had only paid off the loan for about 5 years at that point. So our families Net Worth was barely over 20,000 dollars. It might seem ok. At least it wasn’t in the red anymore. The problem was our debt to asset ratio was over 86%, which was definitely not a comfortable situation.  

Over the next few years, I started to settle into life in Italy. It was definitely not like Idaho, but my wife was happy, and I wanted to make her happy. I have to admit it also seemed like a fun adventure. I found a job at a local architectural firm at the beginning of 2014, though that was short lived. It was about this time that I started following the FIRE movement and also at this time that we made our first property purchase, which is the property we live in today. This had a drastic impact on our net worth since we were able to purchase the property with cash. We were fortunate to have found a great deal through real estate auctions here in Italy. We went from renting a 450 euro per month, 700 square foot, 1 bedroom apartment to a 2 bedroom townhome with bonus room and garage, allowing us to live completely rent free and mortgage free. 

That’s how life has been for the last 6.5 years. It’s time to skip forward to December 2020. During the 7 year period since our last net worth update, a lot has changed. We have purchased and renovated rental properties which has gotten us even closer to our goal of Financial Independence. I remember back when I first started blogging I made a public declaration titled ‘Financial Independence’ with 8 goals that I would focus on that would allow us to be Financial Independent with one million dollars cash in hand by the age of 39 (I’m currently 37.5) and with the option of early retirment by age 47. If you haven’t noticed, I like high goals. Since then I’ve decided 45 is more of a round number and you can see the days ticking down to my 45th birthday on the main home page of this site. It’s not so much the retirement, as the freedom to choose it if I want it that is important to me. It wasn’t until I sat down and compiled my assets and liabilities for this blog post that I really saw what having a single-minded focus on being financially independent has done for my family.

Before going over the numbers, since joining Youtube, I’ve had a lot of great people reach out to me and at the same time received a bit of scrutiny about the investment choices I’ve made. I’m guessing that even posting this, whereas it gives a clear view of where my families financial situation lies, could have a negative impact on some of those who watch my channel.  It’s going to be clear that we’re not the richest family out there, we’ve had our fair share of ups and downs through good and bad decisions. I’ve worked as an online English teacher while my wife works at a bank receiving basic salaries. So the mere fact we’ve been able to see this much growth in Net Worth over the last 7 years thrills me. Having said that, I hope you gain some value from this post and don’t attempt to compare our life to your own. If you’re doing better, great! If you have room for improvement, let’s work on it together!

Let’s pull that graph down here again and finally get to the point. Over the last 7 years, our net worth has grown from just over 20,000 dollars to nearly 170,000. If we simplify things, it means that our net worth has increased just over 21,000 dollars each year for 7 years. Remember everything is relative. Here in Italy, an architects average salary is about 1,750 euro or just shy of 2153 dollars per month Net based on todays currency exchange ratios. We saved nearly an entire architects salary each year through our real estate investing strategy. 

We could have done more for sure. For example, I coud have opted to work in Milan with a fixed salary working long into the evening as opposed to working as a remote teacher from home these last few years. It’s allowed me to be available for the family in ways that would never have even been an option if I followed the corporate path here in Italy. We even made a few mistakes with real estate investing and have still reached this point. Those mistakes ultimately led me to start communicating with others about real estate on Youtube where we’ve invested our time and money into sharing our experience and have even started educating others about Italian real estate investing from our own perspective. I have to say, I wouldn’t change a thing about our past, but I’ve definitely learned a lot for the future. 

The nice thing that you might have noticed is the inverse relation of our net worth and liabilities. From over 143,000 euros of debt down to nearly half that amount has really been a good feeling. I’ve never really talked about our debt on youtube, so I imagine some of you might be surprised to see we do have debt. This debt includes 3 major factors #1 the mortgage against our cashflowing rental properties. #2 a recent car purchase we were forced to make since we had some major car issues this summer and our backup 22 year old car was just not cutting it anymore. 

I avoided getting a car loan for months until our family Citroen Grand Picasso gave up while we were on vacation in Lecce in August. We just couldn’t take the stress of having an unreliable car anymore.  In truth, the big push was that I began to travel across Italy more often for Youtube and our backup Alfa Romeo wasn’t going to cut it.  #3, I did mention we made a few mistakes along the way. A bit of extra debt was the result of these mistakes and I can promise you, I’ve learned a lot from them. Enough to know how to avoid making the same mistakes again. I’ll share more details on that over time, but for now, just know we are striving to pay off our debts in an orderly fashion while continuing forward on our path of independence. If it makes you feel any better, the majority of the debt is with 0% interest. 

The fun part of the graph above is seeing the 648% growth in 7 years. If it was broken down from year to year, it would be easier to identify which moments went in our favor and those that ate into our independence goal. I mentioned the declining Debt to Asset ratio previously, but on this graph you can actually see the numbers. From 88% to 32% is an amazing thing to see! 

So where does that leave us?

Well for starters, my new goal is to see whether by December 2022 we can outperform our average networth growth of 92.5% annually (648% / 7 years = 92.57%. Heck, let’s just round that up to 100%. So doubling  that means our target Net Worth for the end of 2021 is 338,000 dollars.  So rounding up 2020’s net worth to 169,000 and multiplying it by two gives us 338,000. Below you can see what that would look like graphically with an estimate of increased liabilities. 

In this scenario, I am making the assumption of taking on 150,000 of investment leverage debt while paying off our car and mistake debt to the tune of 30,000 leaving us with a total of 190,000 dollars of remaining liabilities and 529,000 dollars of assets. The result? A 4% increase in our debt to asset ratio while increasing our net worth by 99-100%. I think that’s a fair risk vs reward ratio. 

How are we going to acheive it?

It might seem crazy to think that we can increase our net worth by 169,000 dollars within one year. For me the path forward is clear. We’ll do it by repeating the process that we used to arrive to this point. I’ve already got my eyes on an auction that is actually set to happen in January 2021. Due to 2020’s unexpected events, the auction was postponed. I haven’t even spoken about it on the channel since December of 2019. and if you want to check those out, I’ve embedded them below. 

I need to verify the funding is there, before pulling the trigger, but this property has high potential to be divided into 3 individual units. Two of 1100 sf in size and the third double that which I hope to use as my own living space. You see, if I can purchase it as a prima casa, I can save a lot on the purchase costs as well as do a bit of househacking renting out the additional units. One unit covering the cost of the mortgage almost completely while the majority of the other bonus cash in my pocket. At the same time, I get to upgrade my standard of living while maintaining my rent free, mortgage free status.

What happens with my current home? We’ll keep it in the portfolio for now. Our two bedroom ‘villa a schiera’ could easily serve as a rental instead. Even if I don’t get this property secured, what I mean by repeating the process, is that I’m looking to invest in a property where I can buy it, split it into multiple units and rent them out. Increasing my cash flow while additionally increasing our overall net worth. If I’m able to pick this property up this month, based on the numbers, we’ll surpass our 100% growth goal and more. If you liked this article, let me know in the comments below. If you want to add your own perspective I welcome your thoughts! Thanks for following along with our families adventures here in Italy. Let’s create an awesome 2021 together! See you on Youtube!