Cycles

Hi RIPologists,

Circle chart with 5 arrows
business2community.com

Today I’m blogging about my ideal life cycles (the freedom series).

Our lives are doomed by cycles: the daily routines, the workweek, the monthly paycheck, the yearly performance review, the summer vacation and so on.

Most of today’s cycles are are driven from outside forces like the Sun (days, years), the Moon (months), the Earth tilted axis (seasons),  your job (days, weeks, months, years), your kids’ school (days, weeks, seasons).

Do you like this arrangement? Well, if we exclude the human invented week cycle the other ones are somehow natural and I do like to follow them to some extent. Ok, the month is kinda arbitrary too. I don’t feel impacted too much by the Moon’s relative position around the earth, except when I visit the Itsukushima Shrine in Mihajima isle in Japan, but that’s due to a daily tidal effect 🙂

I do like routines, I do like to follow them and I do like even more to revolutionize them! I don’t like to follow externally driven routines and schedules, but in my ideal future I’d like to keep being organized and feeling productive, whatever that means.

So, how would you design your routines if you had a white canvas and total freedom over your ideal day/week/month/season/year? I got caught by this topic while biking from the Hooli office to home and I started thinking about it in the 15 minutes it took me to commute. I have to catch it on this blog post before it disappears and my imagination flies somewhere else.

So, here is my ideal life structure:

Daily

(image: openclipart.org)
openclipart.org

Daily habits / routines are the most important to me. I care a lot of what I do on a daily basis. Take care of your health? On a daily basis. Spend time with your family? On a daily bases. Work on a project you’re passionate about? On a daily basis. When I think about a “perfect life” I think how it would be day by day more than “a list of countries I’m going to visit“. On a daily basis I’d like to focus on following my purpose in life, getting lost in my passions, feel my body, explore my spirituality, train my creativity and spend time with my family.

So, let’s design an ideal day of my future life:

  • wake up early, trying to maximize sun time. Ideally somewhere between 5 and 6 in the morning.
  • Mornings (7am – 12pm) are devoted to body and nature: meditation, outdoor activities, sport, walking, biking, gardening, house chores. I love to take a long walk, ideally in the woods, ideally listening to water noises like a river flowing, ideally listening to animal sounds. In winter days I may do indoor activities like swimming or work out at home.
  • Amazing homemade lunch with Miss RIP and (in future) my kids.
  • Afternoons (2-6 pm) are devoted to productivity and creativity. Writing, coding, studying, teaching,… I’d probably spend time sitting at a desk and in front of a computer and that’s super ok! Yes, I know, in 20-30 years from now maybe a desktop computer won’t be around and we all will be interacting with a portable device via voice commands. I’m skeptical but… good, more outdoor time! Looking forward!
  • Late afternoon and early evening (6-9 pm) are devoted to the emotional sphere. I’d spend time with Miss RIP (and the future kids). Dinner together, watching a movie, playing a game, cuddling, talking, planning the future and other activities that build up the family.
  • Late evenings (9-11 pm) are for funny and mentally challenging activities (alone or not). Meeting friends, playing videogames, playing boardgames, reading, chatting with a friend, acting, maybe writing 🙂
  • Sleep 7 hours per day (11pm – 6am). I know everyone around sponsors at least 8 hours, but after almost 40 years of experimentation I really know I work better with 7 hours of sleep. Even 6.5.

In the day cycle I care about my body, my passions, my purpose and the people I love the most

The few times I’ve been able to follow this script, I’ve felt incredibly happy. Feeling my body and the nature in the morning, working on projects I love in the early afternoon – maybe after an amazing homemade lunch on my balcony with Miss RIP – and playing boardgames with friends in the evening is the definition of a perfect day. And please notice that the money involved in such a perfect day can be very close to ZERO

This is a typical ideal day of my ideal life. Obviously days are not going to be all equal. There will be days where I won’t put my nose outside the front door, and days where I’ll never see home. So let’s explore next cycles!

Weakly

imagesbuddy.com

No, it’s not a misspell. I wrote weakly on purpose. The weekly cycle is mostly an external one. A society cycle. Schools, shops, jobs, churches,… they all follow a weekly script. It doesn’t reflect any natural loop. I don’t think animals follow a weekly schedule. Probably if I’d find myself stranded in a desert island for years I would not follow weekly (or monthly) routines. Anyway, I live in a society where everyone else has a more or less socially accepted lifestyle and each individual follows weekly activities. It implies that to some extent I need to adapt. That’s why it’s a weakly cycle .

Most of my weekly activities can easily be adapted to biweekly or monthly cycles as well.

  • Social events (dinner with friends, gaming). Yes, I know I mentioned them in my daily routine, but I don’t think it’s sustainable to do on a daily basis. In fact in the evening slot there’s room for more activities, mostly solo/family activities (like reading or playing a videogame). I guess friends and events would better fit a weekly cycle.
  • Day trips. Daily trips to nearby places or cities, daily hikes, bike trip with a picnic, a visit to parents or relatives or close friends who live not in town. These activities are fun and fulfilling on a weekly basis. Maybe biweekly or monthly though, I’m a lazy person!
  • Community activities. I want to be an active member of the society, and I love bottom-up things. Once I fix myself and I’m happy with my family and my close circle of friends, next step is helping my community. Volunteering few hours at the local library, attending local political events, getting to know the neighbors and be kind to them. I’m not a church guy, so I’ll probably won’t join the church based communities (I don’t exclude it though). Minor activities like “go meeting a neighbor” suits well in the weekly schedule, while major ones are best fit in the biweekly or monthly.

In the day cycle I care about love, passions and purpose. In the week cycle I care about social and community aspect of life. I want to be sure I’m present for my friends, relatives, community. I don’t want to be one of the obscure weird person who’s hidden behind his fences. I do enjoy spending time with people. Few of my ideal paths in life involve being super social every day!

Monthly

months
livelyminds.co.nz

Like the week, the month is another external arbitrary cycle that we all used to adapt to mostly for financial reasons. Bills, salary, rent, mortgage are example of monthly entities (at least in Europe). I’d devote months cycle to both dilute some of the weekly activities and to assure finances are in good shape.

Monthly activities:

  • Financial analysis of the current month. Cash Flow & Net Worth. Run some numbers, evaluate expectations, set targets and budget. I’d do this once per month. I don’t want to stress myself more frequently even though I must admit I enjoy playing with numbers 🙂
  • House discovery projects. Cleaning the basement, painting a wall, fixing something run through memories, assess our possessions in a specific field (books, boardgames, clothes, bicycles, canned food), run thru possessions in a specific field and decide whether to get rid of something (selling, donating, thrashing), replace something, reuse something. Plan for mindful purchases driven by impulsive-free rules (like the 30 days rule). This whole point is something I’m really missing today. In my never-ending todo list I have items like “take a look at all the books in the bookshelf and organize them / select those to give away / make space for new books“. I’m turbo procrastinating on this because it’s never urgent. But I do value so much spending time on my possessions. I do love the idea of having less of them, but I also love to reuse my stuff infinite times. I’d love to consume (use) them till they wear off. That’s the form of consumerism I like.

In the month cycle I care about the sustainability of our life and our choice. Mostly house & budget.

Seasonal (Aka Quarterly)

www.planet-science.com
planet-science.com

Finally we landed on another natural cycle! Thanks Earth axis for being so perfectly tilted! I do love the alternation of seasons (but I’d rather have more summer and spring time than winter and fall) so I love to celebrate them by applying some change in my life. It’s like a random genetic mutation that may lead to nothing, but the one time that it works my life improves by a factor 10x.

Seasonal activities:

  • Do a Project Jam. A full 48 hours non stop deep dive on a single project. Trying to flow in the “zone” and get a lot of things done. This may be done when kicking off a new project. I’ve done several in the past: few Global Game Jams and a couple of hackathons. Never alone, always in teams. They have all been fantastic experiences, where I both connected deeply with people (but I guess it would be fun alone too) and discovered how much could be done by few people over a weekend! The day after a 48 hours nonstop deep dive has always been “wowowowow now I’m coming home and keep working on that amazing project! We’d reach the sky with a couple of extra days!!“… and then falling asleep for 3 consecutive days 🙂 I totally miss that!
  • Take 1-2 weeks of vacation. That sums up to 4 nicely sized vacations per year. I don’t now, I have the impression that once I’ll be FIREd I will want to travel either more or less than this average plan. I don’t know yet, so let’s put here something I think is reasonable for now. Vacations would not necessary be weekend-to-weekend but all travel hacks tips would be applied, like flying on weekdays, go couchsurfingwwoofing or wormshowers. We both love hiking and biking so I see in this category multiday hike or bike trips. More important, I’ll allow the vacations to break my daily cycle.
  • Financial analysis and investments rebalancing. Maybe not on a seasonal basis but more twice per year but I don’t want to introduce a cycle just for this. Evaluate my investment strategy and rebalance our portfolio should be done at this frequency. Take a look at your IPS and see if it still reflects your values.

On a seasonal base I care about injecting changes, new projects. Seasons are different for their nature, so daily and weekly routines may need to adapt to seasonal changes.

Yearly

 

science.jrank.org
science.jrank.org

The year is the quantum of time we all use to indicate our age. Years are use to measure your activities in life: “I’ve been working there for 10 years“, “I’ve married with her since 5 years“, “My daughter is 7 years old“. We measure time at the largest individual scale with years. It takes 3-4-5 years to take a degree. We get yearly bonuses, we celebrate the venue of the new year. Years mark achievements in life.

Yearly activities:

  • Evaluate and define goals. I like to have yearly goals, but I do like more to take a look at what I accomplished last year. I do write long letters to myself that finally – thanks to this blog – will become (partially) public. I take time to analyze what was good and what went wrong, trying to learn from mistakes and celebrate successes.
  • Take a prolonged month long vacation. Once a year I see myself on a month long amount of time in some location that is not my primary residence. I’d like to think of it not as a vacation but a taste of nomadic life. While seasonal weekly vacations are thought to be special time to do things differently and to break daily routines, during this yearly month long “breaks” I like to think I can keep more or less my planned daily routine. This may change even more: it may leads to a nomadic lifestyle, or 6 months here and 6 months there or whatever in the middle.

On a yearly base I care of achievements. I need to find time to detach and refocus on what really matters.

Olympic?

olympicWell, I liked the name so I put it there. I don’t think there’s much room for multi yearly cycles. Life changes too much, people change, I change a lot with an Olympic frequency. Sometimes I do this exercise: I ask myself “where was I and what was I doing this exact day 5 years ago? 10? 15? 20?…” and I try to go back as much as I can with multiples of 5. It’s fascinating and I have to acknowledge that every RIP I meet in this time travel is a very different person, with different passions, loves and goals in life.

So I expect that there will keep being drastic changes in my personality on such a large timescale, plus I’ll have to face other persons’ life changes, like Miss RIP ones (assuming we’ll still be together), future kids (kids change a lot) and parents entering their old age and eventually passing away. And I’m probably forgetting important issues like my health conditions will change, my physical location will change,…

Anyway, what I do expect on this scale is to live a different life each cycle. I do have too many dreams and I’d like to think I can face one at a time every 4-5 years, time to master one and jump on the other. But who knows? Maybe I’ll get bored earlier of something or I’d devote my entire life to a single project. Who knows?

Bottom Line

I think it’s very important that you have an idea what your ideal life would be. You don’t have to be paranoiac like me and have this ridiculous amount of organization though. But please notice that my scheme is focusing on the how not on the what. I’m not saying “on Monday I’ll read a book, on Tuesday I’d code for my videogame, on January we go to Greece…”. I’m just trying to have a mental scheme of cycles and values, nothing is rigid and untouchable. As most early retiree say, you don’t know yet how you’re going to react to all these free time. No plans made before FIRE have survived more than 6 months (decompression time) of new life.

We’ll see.

Earthquake

This night an Earthquake 6.2 Richter happened close to Rome, close to where my family lives.

earthquake
(image from www.repubblica.it)

My relatives are ok, but there’s going to be several dozens, maybe few hundreds of casualties (EDIT: 24h later casualties are 247 and counting…). Plus, amazing places – like Amatrice, famous for pasta all’Amatriciana – are almost completely gone. Destroyed.

In this very moment my feelings are with the families who are suffering for a loss, but my body is at work on a sunny Wednesday, where everything else would make sense but working.

If I were already FI, I’d drop everything and go to offer my strong hands to help out on site. I’d sleep in a tent and get dirty to try to save a kid under the rubble. I’d hug old people crying and try to do my best to comfort them.

But I’m not doing it, ’cause I gotta go to work.

Another reason to speed the process up. Another reason to not go out for dinner tonight.

 

Investing Basics

Hi RIP followers,

Today we have another post in The Principles series, where I:

  • introduce fundamental philosophical/economical concepts.
  • show my vision/interpretation of them.
  • help you understand the subject from other points of view linking other online resources.
  • describe my own strategies and other thoughts on the same topic.

Today’s post is about Investments. I like to take looong and dirty country roads to describe something so intuitive so – sorry friends that’s how I’m wired – fasten your seat belts and get ready. I hope this helps some of you 🙂

investing
(image from milesweekly.com)

What does investing mean? As always, let me be helped by my guest star wikipedia:

To invest is to allocate money (or sometimes another resource, such as time) in the expectation of some benefit in the future.

Yeah, thanks wikipedia, that’s the kind of abstraction level I love! Investments are not just for bankers or for risk seeking rich guys. Everyone invests in one form or another.

A college degree? It’s an investment, where you seed your money (a lot if you’re in US, close to zero if you’re in Italy – but you get a close to zero quality degree) and your time (a lot, anywhere) in the hope to maximize your lifetime earning potential and to enjoy life more thanks to a higher understanding of how things work.

A gym membership? A nice pair of shoes? A ticket for a conference? A house? DIY repairing your own kitchen sink? Start a family? All are investments of some sort, where you give up some resource today or over time in order to get more in the future. Even frugality is an investment!

Investing is necessary in your life. You do it everyday and you know it’s the right way to do. So why when I switch to the topic of financial investing most of the people I chat with are scared?

Scared Friend: “RIP… you investing money? Aren’t you scared? Do you want to play the market??”

I: “I’m not ‘playing the market’, I’m simply investing my money. You are doing it too, but you don’t know.”

SF: “What?? No no no I don’t trust the stock market and all the sharks that populate it. I keep my (small amount of) money in a saving account at my bank. I get almost zero interest but I’ve seen too many people go broke with stocks. I’d buy a house, that’s something solid. And everybody knows that houses are always going to increase their value”

I: “You are investing. You’re investing all your money in a single currency. You’re playing the market in the worst way. What if hyperinflation hits your currency? I have a story to tell you: a friend of mine told me how his Ukrainian in laws become poor last year due to inflation rate above 50%. They were wealthy, they became poor. Weren’t they playing the market? Yes they were! Problem is that they didn’t know they were. Were they differentiating their wealth by currency, would they be better off today.”

SF: “but… there’s been a war there! European union is more stable…”

I: “Is it? Can you bet Euro will be a currency in 10 years? Are you so sure? Aren’t you playing the market?? Anyway, my imaginary friend, you’re playing the market: you’ve got a single bank account with a single bank. Banks may fail – especially in Italy – and you could lose everything overnight. You’re not trying to earn money from your investment, so you’re losing money due to inflation. The only long term investment you came up with is a house, that is ‘solid‘ you said. Well, personally I did the biggest mistake of my life with buying a house in 2010 – and my sister did the same mistake too. Was I unlucky? Well, maybe, but there are people way more expert than me that will tell you it’s not necessary a good investment. So? all your money, in a single currency, in a single bank, eaten by inflation, waiting to be thrown at a stack of bricks, along with a huge mortgage… and you’re telling me I’m being bold?”

SF: “RIP… what are those devil eyes? You’re scaring me…”

Ok, ok, let’s calm down. But the message I want to tell here is: if you are passive with your wealth management you’re not playing safe, you’re playing for someone else. You’re leaving opportunities on the table.

I realized it way too late. I did mistakes when I was young trusting bank’s financial advisers, buying high fees funds and selling them after 2 years of losses (just before the bull market of 2003). I didn’t want to play anymore since recently. Had I been adopting my current strategy since 2010, instead of buying the flat, I’d be at least 250k closer to FIRE. I didn’t play safe, I played stupid.

When thinking about living on my wealth, before my FIRE Epiphany, i measured opportunities by number of months of expenses savedIngenuous RIP: “Look, I’ve 30K in the bank! I can live cheap, 500 per month, so they’d last 5 years!” No inflation took into account, no interests neither. A static model. Now I know the missing piece: you shouldn’t plan to live on your principal, you should plan to live on the money your principal generates.

Investing is a necessity if you want to be FI. You’ve got to send your little soldiers to work for you if you want to watch the TV all day!

Let’s say it again out loud: investing is necessary if you want to be Financially Independent.

Now, what kind of financial investments are we talking about? There are several options:

Investing time (variable) in frugality.

Frugality means reducing costs on things that you don’t value, in order to save money for the things you value the most. It can be extreme or less extreme but the message is the same: cut unnecessary expenses and your life will benefit. Is it an investment strategy? Well, it is, of course. I’m a frugal person (even though spending 60-65K CHF per year would not classify me as such) and I consider frugality the single most important strategy to reach FI. Anyway, I’m not going deeper on frugality on this post, but friends, do expect a lot of rants on it in the future 😉

Investing time (a lot) & money (few) in your skills.

I’m a big fan of skill development. I’m spending time every single day on building new skills. I’m not too much into physical skills like DIY and repairs, but I’m devouring the internet on topics like science, astronomy, space exploration, finance, whatever. Really, whatever. I could spend my entire life studying.

My approach to learning is always by self learning. I’m not anymore in paying someone, attend a course, “get a degree”. I’m a researcher. The only one wise advise that HurryUp gave to me, that I still speak out loud (in my head) every day is: “we are researchers. We can learn whatever we want, we can become experts in whatever we want. Whatever. Wanna be on the cutting edge of biology? Go there. Wanna be on top of Cure for Cancer? Go there. You just have to pick the field you want to be a master and go there“.

So yes, investing in your skills is amazing and is a key ingredient for FI. DIY skills will lower your needs, gardening will lower your needs, professional skills (like software engineering) will increase your earnings, astronomy… well, if you can’t make money out of a passion (which you should always be able to) at least it will enrich your life from so many other angles!

Investing time (a lot) & money (variable) in your company.

Yeah. Go solo. Create business. Don’t depend on your boss. This is an advise I’m giving to you, dear friend, but mainly to myself. I’ve been there and loved it. I’ll be there again as soon as possible. You don’t need a shitload of money though. One of the amazing book I devoured is “The 100$ Startup” (it’s available for free in PDF) by the unconventional writer Chris Guillebeau. Start with a side gig while working, see what happens. See things fail, don’t be scared, try again. Jump onboard full time when chances of success are high. That’s probably the investment that scares the most. You don’t have a guaranteed return proportional to what you invest and this is scary. But the riskier and investment is the greater its outcomes may be.

Investing time (not that much) & money (a lot) in material goods

Material goods are… things. Like for example real estates. What? RIP, you were spitting on real estates few lines above! Wait, let me explain. I’ve been hurt by this strategy in the past and I’m biased, I know. Experienced investors say that real estates is one of the worst investment ever, due to illiquidity, taxes, fees, repairs, aging, immobility,… go read the JL Collins article about it, it’s enlightening.

Having said that, my personal opinion is: I’d buy the house where I live, if I plan to live there more than X years. X varies depending on house cost, location, notary fees, taxes,… but if you plan to live in the same house forever it’s definitely a good choice to buy your house. Be careful not to fall in the opposite problem: “since I bought this house, I need to stay there forever“. That’s something that scares me. I still feel like I want to be free to move and willing to relocate in another country whenever I want. A house binds you to a single place.

Anyway, buying the house you live in is an (arguable, eventually) investment strategy. What I want to focus here is Rental Properties. Houses, apartments, flats you buy for their dividend. The web is full of FIRE seeking people that are exploiting Rental Properties as a strategy. It basically consists of buying estate properties for the sole goal of renting them out and collect rent money. The strategy may be leveraged by aggressive mortgages but then you’ll be too much dependent of appreciation/depreciation of your properties. It’s a strategy I’m not very fond due to its active nature (instead of passive) but I may need to take into account in case it would be financially more convenient in my target country for retirement.

Other forms of material investments are precious metals, art piecescollectibles,… I’ve heard about people investing in Gold (and realizing a fortune in last year) or in Lithium (the white gold: think about the battery needs of devices, electric vehicles, Tesla Energy) or in art pieces but I’m not an expert here.

Investing time (very little) & money (a lot) in financial instruments.

That’s my favorite sector and I’ll devote next chapter of this series to financial instruments, even though one of my “mentor” says you should never own stocks and he has his points.

Financial instruments are stocks, bonds, funds and other more dangerous and more speculative assets like futures, options,… I’m not an expert here too. Anyway, financial instruments are liquid(able) assets that can be converted in cash with a click, that are usually traded in some stock market or sold directly by the state. One usually access to the market via a broker that sometimes can be a bank. We’re going to explore it more in depth in a future post.

I claimed in the section title you need to invest “very little” time in this area. Well, it’s not totally true. If you’re just a beginner and never invested before, the learning curve is quite steep. You don’t need to know everything, but I suggest to get to know at least the basics, and I’m going to provide most them in next posts. If you want to go very deep, you may take a look at JL Collins Stock series, which is biased toward US and the series is split in 30 posts.

Note that for every illiquid investment sector you can find a liquid equivalent one. You want to invest in real estates but don’t want to go shopping for houses? Buy a share of a fund that invests in that! You’re trading your mental energies for costs billed to you by the fund holder. Their costs may be way smaller than yours since they work with higher volume

Ok, cool, you convinced me RIP, I want to invest in something, somehow. How much? For how long? Following which strategy?

These are all valid questions to ask. Things here get a little bit personal. There are few general rules though, let’s dig into some of them:

  • Always invest toward a goal. Invest is a tool to reach your goals, a means to an end, not a goal itself. Define your goals. Define the path to your success. If goals change so should your plan and then your investment strategy. Define the time span of your investments. Different strategies work better for short term, mid term or long term investments.
  • EisenhowerDefine an investment strategy and stick with it. Write a plan. Write your values and your rules. Write down your investment strategy. An amazing idea i’ve found on physicianonfire that you should take time to write your Investor Policy Statement (or IPS). This is a detailed plan that contains goals, philosophy, asset allocation, exit strategy and detailed mechanics. I strongly suggest you write your IPS and review it every 6 months at least. “Cool RIP, where’s yours?” Ok, you got me. I’m a very bad “example” here, a bad master. My IPS is very long overdue. I keep telling myself I should stop and make a concrete plan before end of the year but I’m a master class procrastinator and since this is a quadrant 2 issue on the Eisenhower Matrix, I keep delegating it to my future self. I commit myself here that if I won’t write my IPS by end of year 2016 I’d shut down this blog and go flipping burgers.
  • Know what you’re investing on. Don’t follow advices you don’t understand. Don’t follow a trend because everyone does that (like buying a Million dollar house or getting 2-300K USD student loan). If you want to invest on something do your research and understand costs, risks and expectations. Be sure to shop around for better alternatives (less risks, better expectations) in your field, don’t just jump on the first option you’ve found.
  • If you need help, be sure to understand what the helper is interested in. I’m not a priori against financial advisers, estate agents, career’s tutors and any possible professional that could potentially help you. The problem is that those people have their own interests and they don’t necessary care about your success. Be sure to understand what a potential helper goal in your exchange is before trusting them. For example, in the field of financial investments, be sure you do a good screening and select fee only professional instead of a commission based one. Those whose goal is to make you buy something have their goal conflicting with yours. What if the product they want to sell is crap? Their individual goal is to sell it to you anyway, which conflicts with your goal of investing in something good.
  • Don’t be emotional. Investing should be 99% rationality and 1% feelings. If you have an IPS, stick with it. Don’t change strategy based on transient facts or feelings. Stick with the plan. The stock market crashes? Don’t sell. You got a bad professor? Don’t leave your college. Your mom told you need to buy a house because renting is a waste of money? Don’t rush to please her. Always make your self assessment and analyze the situation from a 3rd person point of view. Zoom out.
  • Invest in something you believe. Being speculative may lead to bigger returns, but be sure you want to live in the world you’re contributing to build. In your IPS you should mention your investment philosophy and ethical concerns. Do you want to finance weapon industry? Alcohol and Tobacco? Banks? Do invest in what you believe would be successful in the future and aligned with your values. Yes, surgeons make good salaries, but if you’re like me and you faint when you see blood, you’re better off getting a degree in computer science! Do invest in the market you value, but be sure you don’t fall into too much Home Bias. Speaking about it, next point is…
  • Diversify your investments. Don’t put all your eggs in the same basket. Diversification reduce risks. Diversification means also try to not invest in a market close to your profession. If the market falls, you lose twice: both your investments and your skills lose their value. I’m a software engineer and I make a good salary in the IT world. I should limit my investments in tech companies or funds based on tech. If we get another dot com bubble I may lose both my money and my job. Your job is an income generating asset, it should be on the table when taking into account diversification.
  • Know (very deeply) all the costs and fees associated with your investment. Fees compound over time and an apparently small difference in the order of percentage points or even decimals matters a lot. Take a look at this article by Trent Hamm for some math explorations. Know and evaluate all financial implications of your investments. Are there purchase fees? Maintenance fees? Deposit fees? Sell fees? other financial obligations? When calculating the Return of Investment (ROI) take all costs into account.
  • Know the tax implications of your investments. Taxes are other fees, but more subdole. They are not explicit, you need to discover tax implications among a jungle of laws. International investments add more complexity to the problem. International investments sold by an international financial institution and purchased via an international broker make things waaaay more complex. Taxes change over time. Taxes may screw your strategy up. Invest time to understand all aspects of it.

Bottom Line

Invest. Don’t be scared. Saw your seeds for a better tomorrow. Whatever path or combination of them you chose (skills, company, material goods, financial tools), whatever goals you have, be aggressive and invest. The younger you are, the more aggressive you should be. Define your values, your strategy, your plan and stick with them. Get help if you want, but be prepared to question the helper. Diversify for the win.

Are you investing? No? What are you waiting for??

Next article: financial investments

Beauty Case

Good morning RIP minions!

Today we’ll take a look at the minimalist body care of a FI seeker.

I told you about my last visit to Hooliland, didn’t I? Well, let’s take a look at my travel beauty case:

chiuso

What a big bag! It will surely be full of products! Please RIP, open it! Open it! Let us know!!

Sure guys, as you wish 🙂

aperto

What?? Where are… items? Is that all you need? Really? You joking?

Yeah. Let me explain why I (and you) don’t need too much stuff to take care of your body:

I have a toothbrush (u-uh) and toothpaste (surprise!), that make 80% of my needs. I wash my teeth very frequently (3 times per day) and I spend no less than 2-3 minutes per wash, with peaks up to 5 minutes in the evenings. I do several passes and insist until I feel my mouth very clean. Thanks to my accuracy I never had to visit a dentist so far in my life.

If I could give you a single body care recommendation I’d go for “learn how to brush your teeth and enjoy the process. It will save you tons of problems“. And I actually like the process itself, it’s like meditation. It’s a moment of deep mindfulness and it’s not rare that ideas – and new blog posts – get their birth during a teeth brush!

I bring a razor if I’m traveling for at least a week and I didn’t shave on the day of my departure or the day before.

I bring earplugs, I hate nightly noise of every kind. Hotel rooms are usually noisy due to several factors. I usually unplug fridge and air conditioner.

I bring cotton swabs, you don’t always find them in hotels.

I bring few medicines (aspirin), you never know.

That’s it!

Ok, this is my travel beauty case. At home I use more products for my body care, of course. Like… a soap. Now that’s really all!

soap

Wait, RIP, are you joking?

Absolutely no, I’m not joking this time. Let me explain:

  • I don’t use perfumes. “Holy sheet, RIP, you smell a lot than! I hope I won’t meet you anytime soon!”. No, dear friend, it’s not true. I can safely claim that I don’t smell. Like I said for my teeth, I shower a lot. At least 2 times per day, very deeply. Showering is another activity that I love. Another meditation moment. I do shower mindfully and it’s just another opportunity for my idea muscle to work out. It’s not time lost. Let’s be honest: it’s a good 5-10 minutes of disconnection from the web, i.e. it’s when good things happen!
  • I don’t use shaving foam. “Whaaat? RIP, you’re going to record a splatter movie every time you shave!”. No, that’s not true either. I do start shaving my beard while showering, with my skin hydrated and normal soap as softener. I complete the action at the bathroom sink in front of a mirror, after another dose of normal soap. Nothing happens. I do this since forever and I’m ok.
  • I don’t use aftershave. What’s it for? Disinfecting? Perfuming? Both cases I don’t need it.
  • I don’t use deodorant, but I may consider using it. I sweat a lot, specially during summer. I may reconsider this. It’s just that I hate the whole “poison industry”, I really think all these products are killing atmosphere and are harmful for life on earth. I’d rather use Potassium alum or other natural deodorants.
  • I don’t use shampoo. I do use the soap, either liquid or solid, for everything. Skin, hairs, whatever. No need for 10 different products like balsam, shampoo, body soap, face soap, moisturizer,…
  • I don’t do any hair removal practice, just shave my beard. I heard about people taking care of eyebrows or ear heirs or whatever else. I just don’t do it.

I listed body care items I don’t need. And, btw, let me explain how I handle those that I need:

  • I use a very cheap soap. I buy them in bulk or get store brands. If I take the liquid one, I’d buy at least a liter of basic soap for close-to-zero CHF. Sadly in Switzerland I can’t find nice big bottles, so when I go to Italy I buy them there. I use the same soap to wash my hands, hairs, skin, face, whatever else.
  • I use cheap 2 blades razors for beard shaving, bought by the dozen for close-to-zero CHF.
  • I use a razor twice. I shave once per week or sometimes (driven by laziness) every 2 weeks. I like my beard but after 2 weeks it becomes hard to manage so I prefer to not let it grow to much. Once per year I give up on my laziness and I let me grow a Goatee. It’s cool, I enjoy it for a month then it makes me scratch so I cut it out.
  • I cut my own hairs with a machine. I do this since I was 18 years old. I’ve changed 2 haircutting machines in 20 years. The one I use today I bought for 20 Euros I don’t remember when. I usually cut my hairs 6mm height, once every month or two. The day I shorten my hairs I like myself more than usual 🙂

Total cost of my body care: negligible.

The good news is: you can do the same. These costs can be cut to the ground. If you, like me, don’t get any value from a better body care, why spend money for it? I get value from being clean, having my teeth in good shape, not smelling and not putting on my body artificial poisonous flavors.

Frugality means cutting costs on unimportant sectors to free resources for things that matter more.

I have a friend whose house is full of beauty products. He needs 5 blades razors, sold by 50 CHF a pack of 8!! Crazy! On his last birthday we were instructed by his wife that “he uses Aesop products, so you know how to make him happy with a gift”. Aesop is an Australian body care brand that makes shops like Lush appear cheap. I’ve been wondering who is really willing to spend money on those useless things, but I didn’t have to go far to discover. A lot of people do. I discovered the existence of hand soaps, hair soaps, face soaps, body soaps,… what? There’s no nose soap? Or left ear soap? What a shame! These items are insanely priced, there’s no way I’m going to even think about shopping there.

lushOk, I lied. I do occasionally buy products from Lush (which in Switzerland, as I said, is the cheapest alternative). I do buy fizzy bath balls that make your bath experience more intense. Why I do that? For the experience, not for the quality of the product. I’d never buy those expensive single usage useless things for their quality.

I and Miss RIP like to take a long bath on weekends together, talking about projects, sharing thoughts or simply cuddling and listening relaxing music. We may spend an hour in the bathtub and our ritual begins with a fizzy ball being thrown at the hot water and watching it dissolve and liberate nice smells (claimed to be all organic) in the air.

Are we hedonically adapted to this? Would our baths be of inferior quality in case we wouldn’t use these relatively expensive things (5-7 CHF each ball depending on the flavor)? I’m sure it won’t change the experience too much. In the end, the moment is magic because of us. The music, the hot bath, birds singing are just very pleasant side dishes. I’m aware of this and I’m ready to cut off such a minor splurge as first in case we need to shrink our budget. But now we’re ok allowing ourselves this ritual moment once every 2-3 weeks on average.

Anyway, let’s take a look at my beauty case when back home, after the Hooliland trip:

dopo

Oops… it’s full of shit! RIP, you liar!! No guys, I simply believe and exercise my right to take consumable goods from hotel rooms. All the soaps will be used at home (and last for months) or on multiday hiking or biking trips, thanks to their reduced weight.

Bottom line

Be frugal, cut costs on items that don’t bring lasting value to your life to free resources for what really matters. In my case, I value natural body care: being clean and not smelly and having my teeth in order. I don’t give additional value by putting poisons on my skin or using useless product to ease shaving or paying a professional to cut my hairs. So I cut these costs (and hairs too!) as much as I physically can.

Have a nice day!

Big Spender

Hi RIP fellows,

This post is about splurges. I’ve previously mentioned that I spend ~60K CHF per year, on track for the unambitious prize of the least frugal FIRE seeker of the world. So let’s show off how I burn my money by the thousands!

Actually no, this is not a story about me burning money, but about me spending money on a business trip. A lot of money according to my standard, few dust particles for Hooli.

hollandigansThe story is: I recently switched team and most of my new colleagues are not in Switzerland, but in Hooliland. Hooliland, which is not to be confused neither with Holland nor, definitely, with Hooligans (and not even with hooligans from Holland), is the headquarter of Hooli. It’s one of the most amazing place in the world and you’ll find there all kinds of crazy stuff. It’s in another continent, not hard to guess which one though 🙂

So I decided to go visiting the rest of my team to meet and greet them and to understand more about my project and people involved. So let’s go to Hooliland!

RIO DE JANEIRO, BRAZIL - AUGUST 17: Andre de Grasse of Canada (L) and Usain Bolt of Jamaica (C) react after competing in the Men's 200m Semifinals on Day 12 of the Rio 2016 Olympic Games at the Olympic Stadium on August 17, 2016 in Rio de Janeiro, Brazil. (Photo by Ian Walton/Getty Images)
Photo by Ian Walton/Getty Images

I’m writing the first part of this post while in the lounge of my favorite flight company (Swiss, of course) in an alien airport in another continent, waiting for the flight back to Switzerland to take off. The Hooliweek is over and it’s been useful and fun, as always. To give you more data points: while you, dear European friends, set your alarm clock very early in the morning to watch 20 seconds of Usain Bolt, here in Hooliland I watch him live right after work, with the sun not yet set. Anyway, I’m sitting on a comfortable chair in this elite lounge for people who paid tons of money for their tickets and I’m writing this post.

Flight

Yes, I flight business. Like Louis CK (well no, he flights First) says: “that’s simply the way it is”. Whatever you do, I do a better version of it.

Before you get angry, I’m joking. Obviously. I’ve never flown anything but economy before today. Yes, even for work. Never done it. I deeply feel that it’s simply wrong.

What happened this time? Well, Hooli has this policy about flights and hotels: you have a maximum allowance for a trip, if you spend less than that you accumulate credits. If you spend more you either pay extra or use credits (or ask for extra manager’s approval). I’ve been traveling quite a bit in last 4 years, always economy, so I accumulated a lot of credits. This time I wanted to try it. I had to fight the feeling of guiltiness associated with flying Business. I can’t explain, but it never felt right to me. Anyway, I told myself it’s fine, I have credits, I’m doing an actual business trip… so I did book my business flight, but only the return trip. I’ve flown economy, as always, last Sunday to come here in the fairy woods of Hooliland and I’m sitting in the lounge waiting for my Business priority boarding. I’ll then jump on board earlier than the poor economy passengers and I’ll sip my champagne glass while they wait patiently in the veeery long line. Life is awesome, life is amazing, this is totally worth it. Isn’t it?

Let’s take a closer look: the price difference between economy and business for this very long flight, operated by Swiss, with departure from an expensive Swiss airport is in the range of 2000 CHF. I’ve paid 5K CHF for both legs (economy + business). If I flew economy I would have spent less than 3K on such a short notice.

[Fun story: if you want to spend half or less and you want to visit another continent from Switzerland, just buy the same ticket but from Milan. You’d get half the price for the very same flight, but you’ve to start from Italy. We discovered this trick too late. We would have saved tons of money for our trips to Japan, California and New York of last 2 years…]

So Hooli paid 5K for my flight. I consumed something like 500 credits out of the ~5000 I have. I can safely fly business every time in the future for Hooli, maybe even both ways if tickets are purchased in advance or if I accept flying with intermediate stops (no, sorry, I hate it).

Am I bragging too much? Are you disgusted? You should, cause I am too. I really feel like being in the wrong place! Is this thing worth its price? Would I ever pay for an experience like this one? What a question, RIP, are you joking?

Let’s break down the benefits of flying Business:

At purchase time:

  • You get way more miles on your frequent flyer program if you flight Business. And Hooli lets you take advantage of these benefits on your private account. That’s the actual single best reason to fly Business on other wallet’s money!

At the Airport:

  • Priorities everywhere: priority check-in is useless, just to show off and create a not-necessary envy-driven need in the heads of economy passengers. Priority security screening. Useless too, unless you arrive very late at the airport. And, btw, quicker checks here in Hooliland’s closer airport are slower than the regular ones in Switzerland. Just sayin… Priority boarding, uber-useless. I usually sit down until I’m the very last one boarding on economy. Or just exploit this arriving at the very last minute to the gate. I’ve never understood those who wait in a line at the gate. Sir, your ticket is numbered! Ok, maybe with ryanair or easyjet you need to fight for a seat, got it. Anyway, having to board before others is a factor that kind of forces you to arrive earlier making all these priorities less useful. Priority luggage delivery. Ok, this saves time at the arrival airport in the order of… few minutes?
  • loungeThe Lounge: this is the most elitists of all benefits. You get exclusive access to this special place where you get free food, wifi, cleaner toilets, comfortable seats, etc. I arrived very early at the airport. today. The flight is scheduled for 7.40pm and I arrived at 4.15 and by 4.45 I’m sitting in the lounge. Note: there’s a Silver lounge for Business passengers and a Gold lounge for First class… you always have to envy someone else. You always have to desire something more. Btw, was the lounge worth? Well, a little bit. Yes, I got free food and some relax time. Have to say that the lounge was full and noisy, because rich people demand to be able to do all the noise they wish. It’s a shitty world.

On the plane (I’m writing this section 30 minutes after takeoff):

  • Welcome drink. They claim it’s champagne, I don’t buy it. It’s a prosecco, not even the best quality.
  • Way more space for your feet. A lot. This is actually useful. I’m 1.80 and I can’t fit in economy seats. Extra space is a good thing.
  • Extra lateral space. I didn’t do the online check-in so I didn’t chose my seat. I thought anyone would be ok. Bad thing, I got the worst seat in business class. Still amazing though, but the worst one. On aisle, shared with another person – that turns out to work at Hooli. Actually half of the business class of this flight works at Hooli. Anyway, extra lateral space, no elbow-to-elbow fight happening. There are individual seats though. Next time…
  • The seat become a fully horizontal bad. It’s fully flattenable and I guess it’s amazing for sleeping (EDIT at landing: it was!).
  • There are plugs to recharge your devices. I can blog the whole 11 hours, awesome! EDIT: turns out I didn’t use it. My laptop battery lasts for 6 hours and I wasted another 6 sleeping!
  • You get gadgets you can take home and collect: toothbrush, earplugs, eye mask and a small bag.
  • Dedicated staff. It’s full of hostess and they are coming frequently to serve you. That’s obviously good, but not worth that much.
  • Better food. Yes, it looks like a restaurant. You get “a la’ carte” menu and you’re served several times during the flight. It’s nice, the food is high quality, like a real restaurant. It’s awesome, but how much would I pay for it? Probably no more than 20-30 CHF.
  • Most important of all, you get to watch the envy faces of those poor economy passengers that walk by while you’re sipping your champagne. I don’t mean I enjoyed it, I just want to report that’s one of the benefits.

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In the end, was the Business flight worth it?
Totally yes, on Hooli’s money!

Would I pay that amount for a business flight like this if it were on my budget?
Absolutely no.

How much would I pay for it if I had to set a price?
Nice question, thanks for asking. I would say no more than 15-20% of the economy price. Let’s say that if 1500 was the economy price, I’d pay 1700 for a business upgrade. But I wouldn’t even pay 1500 per leg for such a flight, I’d find ways to pay less than half. So my actual economy price would be 1500 total both ways and my bet for business would be 1700. Ok, make it 1750.

Would the business class be sustainable with people like me willing to pay 15% more for it instead than more than 2x?
Absolutely no. Let’s do the math. There are 38 seats in business class for this flight. 8 rows of 4.5 seats each, plus an aisle extra row with 2 seats. If this area would be arranged to host economy class seats there would be 10 rows (less space between rows) with 8 seats per row = 80 seats, more than double. Given all the other benefits, this business is sustainable with a ticket priced between 2 and 2.5 times the economy price, right where it is now.

What would happen if every client were like me?
They would simply dismiss this area and fill it with economy seats. If they couldn’t (thanks to some safety rules like limited maximum passengers allowed on the plane) either they’ll make seats more sparse, with global benefits for the everyone, or prices for the business would be way lower.

Ok so you said you’d be ok with paying 15-20% more for a trip in business class. You’d pay 1750 instead of 1500 for business class. Is it correct?
Now that I think about it, I’m not sure anymore. in case I and Miss RIP would do an intercontinental flight together like this one, I signed in to spend 250 per person more, i.e. 500 CHF to simply improve the flight experience. 500 CHF are a lot of money. I used to do weeks of vacation for that amount. I’ve been biking in French Riviera for a week with a budget of less than 100 Euro! So no, let’s take a step back: I wouldn’t pay a dime more for a business class flight on a regular basis. Yes, not even 1 CHF. I’d only accept free generous upgrades. I’m willing to splurge once or twice in life for very very special occasions, like honeymoon or other one time celebrations. Of course I’ll keep taking some business flight when actually flying for business reasons.

Why did you change your mind so quickly?
Because there’s a hidden cost here that would mess everything up and it’s hard to see at first: Hedonic Adaptation. I don’t want to adapt to this new normal. I want to feel the uniqueness of the experience.

Don’t let luxury becomes your standard!

Hotel

Hooli Hotel caps for Hooliland area are pretty high. Hooliland is uber-gentrified and lodging is crazily expensive.

I picked an hotel just below cap that was somehow sufficient but not extraordinary. Must admit that all the credits I accumulated so far are due to flight savings, not hotel. I always try to book hotel just below cap but not super cheap.

Nothing much to say about hotel spending, no comparison with “would you spend that much if it were on your money” makes sense, since I’d never ever ever go there, in such a crazily expensive area for leisure.

I’d never spend more than a third of what I’ve spent here on Hooli money.

Car

I don’t own a car since 2008. I’m proudly getting close to the 10 years mark of car freedom (come on, FIers, who beats me on this? Eh? Where’s my prize?). Last few times I’ve been to Hooliland I took a cab from the airport to the hotel. Sadly there’s no acceptable-quality public transportation available, it’s Hooliland country. A shitload of Tesla, Porsche and Self Driving Cars but not a 20th-century-or-above train or bus. Last time I took a taxi to reach the hotel it was a 120 CHF equivalent for a single ride of 40 minutes. Crazy. I rented a car for the week for less than 200 CHF. Hooli covers for these costs, obviously.

Anyway, I didn’t want to rent a car, I don’t like to drive. I’m actually getting unskilled at it, after years without practice. And driving for the week, even though we’re talking of ~4km between hotel and Hooliland, was an horrible experience for two reasons:

  • I’m lazy and since I had a car I didn’t ask for a visitor’s bike at Hooli. I used to take the visitor’s bike and bike to work along a creek, getting lost in the noise of nature, birds, squirrels and sun on my skin. Taking the car to go to work was boring and senseless.
  • Hooliland is traffic intense. On one morning it took me 40 minutes to drive for 4km. It’s an average speed of 6km/h. Walking would have been as time efficient as driving. That’s… unbelievable. And in the evening is not getting any better. I spent a typical day waking up (early, jet lagged), driving to work, working at a desk, driving back to the hotel, going to sleep early. Is this life? Do people who commute by car live like this? Never using their muscles? This life would kill me in a month, I’m glad I’m coming back to bikeland!

So the car experience was something I’d rather avoid at all. I was kind of forced in, due to the lack of better alternatives, but I’d rather not drive for leisure. I’m not a big fan of road trips, I’d rather go on bike or hike trips!

It was fun though to see a lot of fancy cars. Teslas and other versions of electric cars are everywhere. Hooliland is equipped with hundreds of free recharge parking lots. As I said so many times, I’m not a fan of cars anyway but I do sympathize with Elon Musk companies’ missions to reduce carbon dioxide emissions, revolutionize public transportation, use solar power and duplicate humanity on mars.

Anyway, goodbye Hooliland! See you next time!

Boredom

Hi RIPpers!

Few days ago RIP Sr came to visit me in Switzerland for the weekend. It has been a nice August weekend, with very good weather (28 Celsius) and plenty of activities for him: swimming, e-biking, walking, barbecuing with a dozen of friends… he’s no more used to live at this rhythm, he spends days mostly at home, watching television and playing card games (not gambling) online. He’s still in a friendly relationship with my mother even though they are no more together since 10 years. He’s 65 and not in good shape.

ripsr

You may have heard of him because he helped me a lot with my personal finance since I was a kid. He’s very proud of his son job and nice salary, even though it means that I have to live far from him. As always we spent few hours discussing finances.

I showed him my NW document and my FIRE goals, without going deep into the math. I told him the 4% rule and the target NW to call it FI. He’s supportive, it’s always been a dream of his. When he was young he thought: “accumulate 100M Italian Liras (50K Euros…) and you’ll live out of CDs dividends!”. Good thing he didn’t follow his plans 🙂 Sometimes I’m scared that what I’m planning right now will look so silly in 30 years and my future failure would then look so predictable.

Anyway, this post is not about money and finances.

We discussed briefly his lifestyle: no activities, little social life, a smoking addiction and a non negligible alcoholic consumption. I fear for his health. Both his parents died relatively young (grandpa 66, grandma 79) and he’s not taking care of himself. Obviously, I didn’t throw all these facts on the table at once. After our first day together I saw him so tired and took the chance: “father, you should do more physical activity. You’ve got plenty of time. You’re not too old! In my last hike trip I’ve been hiking for 2 days with 3 retired men of your age, then I had to slow down because I wasn’t able to keep their pace!! You are so pale and it’s summer. C’mon, walk at least an hour each day, get some sun, breathe some fresh air!”.

I was prepared for a wide range of possible answers – ranging from depression to anger – but his caught me unprepared: “I know, I should do more… but sometimes I do walk and reach the woods in my neighborhood… but then I don’t know what to do, I get bored.

His answer was unexpected, even though I’m solid on this topic. I decided to smile him back and listen to him instead of replying directly. In my mind thousands of possible answers, suggestions, solutions to the boredom problem. But I need to accept that there are people who can’t be helped on this.

People get bored. As far as I can understand, this is a thing. My father has never been a curious person. That’s sadly funny to see how he was aiming to his own Financial Independence without anything to do with his time. He was accompanied to pension in 2006, at age 55, and his life slowly decayed to misery. Laziness and lack of curiosity destroyed him. He’s no more the fast-thinking person he was till 10 years ago. And he’s been lucky: millennials in Italy will have to work till age 75. He retired at 55 thanks to an unsustainable pension system who brought Italy to the 3rd largest national public debt worldwide.

Anyway, what is boredom? I don’t care about “boring moments” like waiting in a line or going to work with nothing to do or being stuck at the airport for hours with no internet… I care about boredom mindset. The permanent state of mind where if you don’t have something mandatory to do then you’ll get bored. People who are scared when I tell them I dream FIRE because “you’re going to get bored”. People with no passions. People with zero curiosity. People that fear to fail in trying new things or simply scared by new things. People who don’t want to be intellectually challenged. People with fixed mindset.

fixedgrow

In my opinion, boredom mindset is one of the worst mental illness you can get. It prevents you to enjoy life at its full potential. And it’s a choice. Essentially you limit yourself by self locking your feet with ball and chain!

Why so many people seem to be infected by it? Seriously, it’s the top complaint when I tell people my plans: “you’re going to get bored”. Maybe it’s simply the normality: people have not explorative minds. People don’t ask themselves too many questions. People don’t question what they see and what they experience. Maybe that’s why religions are so popular: religion it’s the utterly “don’t ask” medicine. Maybe curiosity and creativity are not the norm.

[Fun Story: well, it’s not so fun, it’s actually turbo-sad. But it’s worth sharing: few days ago I read an article that made me think about the boredom problem. It was shared by some racist person on facebook that I happen to accidentally not have yet removed from my contacts with the intent of: “look, everyone says cops are criminals because they hurt black people, but look at how good people are these two guys…”. The article is in Italian but it says that an old couple of retired people were so bored and lonely that they started crying and screaming till someone called the cops. The cops spent few hours with the old couple and they cooked together and talked a little bit. Yes, ok, it makes for an amazing headline on a local newspaper. But what the fuck… how can someone start screaming because they feel bored? They are not even “alone, they are together, they are a couple! Don’t they have anything to do? Any passion? Read a book! Cook a new recipe. Go walking. Study Biology. Learn Swahili language and please… no. There’s no such thing as being too old for learning something new. Few years ago it died at age 110 Carla Porta Musa, an amazing Italian writer with 100 years of career and a lot of projects left unfinished on her deathbed. I’m sorry, I can’t sympathize with the old couple mentioned in the article]

I’m good at talking, am not I? But I mentioned that I’ve experienced sparkles of boredom during my longest sabbatical before joining Hooli. Yes, I had a lot of excuses, but truth is that I experienced signals of meaninglessness and uselessness when I hadn’t anything mandatory to do. This is something I need to address before FIRE if I want it to be a success on psychological level too.

Next question is: how to prevent the boredom illness for a person at my age, with my background? My recipe has 4 ingredients:

  • Be curious, learn new things. Assume you know very little about yourself. Be open to new experiences, even those who look not interesting at first sight.
  • Be creative. Train your creativity muscle everyday. Creativity and curiosity are two amazing medicines.
  • Be active, do things. Think less, plan slightly less and do more. Feel your body. Don’t waste it. Push it to the limits. Do sports go to sleep physically tired at least twice a week.
  • Be social. Meet new people and get to know them. Listen to them like today is their last day on earth. Share your passions, meet people similar to you for 80% of your time and people completely different from you in the remaining 20% to avoid overfitting with what you believe you currently are. Don’t be afraid of those who are different from you, or think differently. Embrace diversity.

If you keep training your body, your creativity, your curiosity and your sociality you will never get bored. In fact you’ll reach the opposite state of mind. There’s no word for that so I ‘m here to tell you I’m forging a new one: sboredom (joking, it really sucks! In Italian it looks like a bad word!). That state of mind where you know you’ll never get bored anymore. You know the time you’ve left on earth is not enough to satisfy all your current passions, let alone those passions you don’t know yet you have!

That’s the necessary state of mind for even desiring to be FIRE!

That state of mind will make you hate wasting your time, like waiting on a line or going to work when you don’t enjoy what you’re doing. That state of mind where you even question Hooli as a workplace – and you know 99.9% of the people would immediately swap their job to yours if given the chance. You get more aware of priorities in life. You know your time is limited and there’s no way you’re going to waste it doing something you don’t want.

And then I think about RIP Sr and about the world being filled with people like him. All the time in the world at their service and nothing to do. Screaming because you feel alone and lost.

How to cure society from this evil epidemy?

Working 40+ hours per week is not going to help. You don’t have time to explore who you are and what you could be. After 40+ years of mentally unchallenging activities you’re left with no energy to explore further. I sincerely hope that this paradigm will be rejected at society level thanks to automation and no need for everybody to work that much. Part time jobs, 60%, 50%, something like 20-25 hours per week should be the new normal. More time for yourself at 20-30-40 years will make you a better person.

Early Retirement is one of my dreams simply because slowing down is not socially accepted and hard to implement today. Early retirement is a vertical part-time strategy, opposite to conventional horizontal part-time where you work less per week but still till “retirement age”. It seems that things are changing though. Studies and experiments are happening all around the world. Part-time working is shown to boost productivity. In Sweden they’re experimenting with 6 hours workday. In Switzerland working 80%, 60% or 50% and taking prolonged sabbatical is becoming more common. I hope that in the near future working today’s 50% will become the new standard, so that we’ll call 40 hours per week “working 200%”.

Having more time alone is not enough though. That’s actually the “old retired couple” problem. Do I want to give them more free time? To make them suffer even more? Am I so evil?? If you’re not trained to be a curious person you won’t spend your extra time aiming to sboredom.

Education plays an important role here. Did I mention I want to revolutionize schools? I’ve been a volleyball coach for 2 years in the past. Kids in the age range 10-14. Even though it was such an amazing experience, like that time when my guys won a match on the day of my 21st Birthday against the top team in our league, I’ve had sad moments with them while probing their curiosity. Kids are fun, but at one point they stop exploring and quickly adapt to what’s out there. That point is shifting toward earlier stages of their lives. Their imagination is driven by what they saw in the latest blockbuster movie or videogame: “Spiderman is the best!!”, “I love minions!”, “I know all pokemons names!!”.

When I ask if they are curious about how the world works, how math works, what’s the “matter”, what are the “forces”, why we experience gravity,… none gives a shit. When I ask them to come up with a nonexistent super hero and imagine his super powers… no, sorry, creativity is not living here anymore.

What a shame! Education should help kids to be creative and curious. Reward them not by the solutions they give to simple and brainless problems, but by the questions they bring to the table. Teach them not to be sure. Not unsure of themselves, but unsure of the answer they find to the questions they ask. Help them find the answers to their questions and then question the answers. Teach them how to verify a solution and how to reach the same conclusion in 10 different ways. Make kids love to go to school to learn and play, and not let them be scared by examinations.

crea

In my why school kids will have a question book they fill over the years. The lessons will be interactive and nothing is taught directly but stories are told. Questions will be asked and kids will go hunting for answers and comparing different answers found by different kids. More questions will come. Teachers will help students to structure their knowledge and help them model the world.

Okay, that’s too much for this post, I started ranting 🙂  The why school project must wait their turn in my infinite todo list… Yes, it’s one of the bittersweets problems with sboredom: you have more projects than time!

So how can I help someone who’s paralyzed by boredom mindset? How should I help RIP Sr? How can you help you beloved friends/relatives who suffer the same illness? I guess the best way is showing leadership and integrity: teach by doing, be an example. Involve them in your passions, show them how you can take a challenge on something you’ve never been good at. “Look, I’m attending Tango lessons and we all knew I totally sucked at dancing! Now after 3 months I’m good at it and I’m having a lot of fun! Why don’t you try?”. Start early, as soon as signs of boredom mindset appears. Don’t let it settle down, it’s harder to defeat then.

Say no to boredom, say welcome to sboredom!

FU Number

Hi RIP friends!

Today we have another post in The Principles series, where I:

  • introduce fundamental philosophical/economical concepts.
  • show my vision/interpretation of them.
  • help you understand the subject from other points of view linking other online resources.
  • describe my own strategies and other thoughts on the same topic.

I’ve shown what is Financial Independencewhy I want it and how to withdraw from your NW to avoid depleting it. What’s missing here is: “when can I call myself Financially Independent”? That’s what I’m going to talk about in this post: what’s the target NW to make the call?

[Note: this post will be way less theoretical and more tailored to my personal situation and values. Mathematical details have been covered in the WR post, tl;dr: one needs a NW in the range 25-40x Yearly Expenses, according to risk aversion and expected number of retirement years. My personal choice is a factor 30x, which means a WR = 3.33% that adapts with NW fluctuations.]

Target Net Worth, Nest Egg, FU Money, FU Number, Walk Away Money, whatever… I like FU Number so let’s use it!

fum

[Fun Story: at the time of writing this post I have no idea what FU Number is going to appear at the end of the story! I’m actually sure I’m going to enjoy the process of getting lost into the math, number tweaking, hypotheses weighting and so on. I’m blogging mainly to make recorded plans (and to commit to them), to share them so that others can learn something and, most important of all, teach me something. If your plans include Financial Independence then I strongly suggest you to sit down and do the same exercise. It’s Financial Intelligence to the ultimate level!]

Given my WR of 3.33%, my FU Number is 30 times Yearly Expenses, so what I need to discover here is how much will I need per year/month to live at my chosen standard. Bear with me: for my specific situation, this is the toughest question to be answered. I can’t use current spending numbers as “chosen standard”, due to several factors:

  • Today we live in the most expensive place in the world and we’ll probably retire somewhere else. More likely in Italy.
  • Today we have no kids and we may (and actually want to) have kids in the future.
  • Today we have no cars and we may end up needing one or two in case we move to a cheaper country without such an amazing public transportation service.
  • We have no idea if we’re going to buy a house/apartment or continue renting. This decision alone is complex enough that can’t be fully analyzed here and no general rules apply.

Along with these RIP Family specific issues there are a lot of general unknowns that we must take into account somehow that range from investment performance (is the market keeping up with 7% average growth?) and kind (switch to rental properties? keep investing? On what?) to fiscality (how income, investments and wealth are taxed in the target country?) to inflation, to… too many variables!

When playing with so many unknowns what would a prudent person do? If I were an astronaut I’d consider the worst possible scenario, where every variable will get the worst possible value – I am a software engineer and I grew up as a very close friend of Murphy’s law. This is not suitable here though, most of the variables are unbounded (like inflation) and there’s no limit at the worst case scenario. And you can’t (and shouldn’t) account for every possible bad thing that could happen in such a very long term project like early retirement.

So what to do? Well, the plan I need to come up with should be robust enough to cover for a reasonably unlikely sequence of unlucky circumstances, but it doesn’t necessarily have to work in situations where even not calling ER is going to be a mess. For example: if inflation rate will reach zimbabwean levels wouldn’t it be a disaster in any case? If there will be a third world war and staples are going to cost 100x would being FIREd change the ugliness of the situation? Should I plan for such scenarios? No, I don’t.

So, my plan needs to be robust given a “normal enough” future. I don’t want to fail and have to come back to work 15 years after FIRE, but I don’t want to accumulate way much wealth than I need before calling it. It would mean having wasted healthy years in my 40s for nothing valuable but extra safety.

Let’s go with the plan then!

As I previously said, I need to estimate, as close as possible, how much I’m going to need per year, ideally each year. Each year, because yearly expenses are not stationary. I’m not talking about inflation, I’m talking about lifestyle changes mainly due to having kids. As a first safety margin, I’d try to estimate the average yearly expenses in today’s Euros for my family as the expenses we would have in the worst years, likely with 2 kids at home. A quick research on the web (US1, US2, CHIta) shows that raising a child has no peak years, costs are slowly increasing over time but mostly constant.

Plus: should I account for expected one-off expenses and/or windfalls? Let’s do this way: let’s try to estimate them and in case the windfalls are expected to be greather than expenses let’s not count them, as extra safety margin.

  • Windfalls/Heredity: my parents have a couple of properties that I and my sister are going to inherit sooner or (hopefully) later that are worth few hundreds thousands Euros. My father is a saver and a frugal person who doesn’t like to spend his money. He’s probably going to leave us cash in the order of few (one or two) hundreds thousands Euros.
  • Expected one-off expense: kids… I plan to help my future kids (and I want to plan for 2 of them) with a lump sum in the order of magnitude of 100K of today’s Euros, probably not given as a single fat check but in tranches over time. This is to help them with University, career, rent, startup,… I’d like to see them flying away on their own as soon as possible. The lump sum has nothing to do with a monthly allowance while living in our house (like my father did with me). That would be in the plan of yearly expenses.
  • Expected few-off purchases: we may need a car or two in the future. Either I consider a car purchase as a yearly expense (a fraction per year) in the plan or as a one-off here. I’d say let’s put them in the plan. I’m not a fan of new and expensive cars, so my car purchases would be in the “below 5K Euro” each, ideally a used car every 5-10 years to be driven till its death. That’s negligible in term of yearly expenses. Miss RIP is more oriented to new cars though. Need to discuss or plan accordingly.

Summing this up: one off purchases and lump sums are more than compensated with expected windfalls so I’m not taking measures to face them now. We don’t have kids now, in case we’ll have one or none things are going to be easier (financially). It’s very unlikely we’ll have more than 2 given our age, but who knows. Twins? Well, these are variables we’re going to discover before FIRE date anyway. We’ll adapt our plans accordingly.

Plus: should I account for annuities due to pension benefits? Let’s say no – extra safety margin – but calculate them under current legislations anyway:

  • Swiss Pillar 1 Pension: If I reach FI in 5 years I’d be accrued 9 years of Pillar 1 contribution. I’d get back ~400-450 CHF per month at age 65. Miss RIP will get a little bit less, depending how much she’ll work. Here‘s a link to get an estimate of your Pillar 1 Pension.
  • Swiss Pillar 2 (Mandatory) Pension: same here: 9 years, expected total = 54K, expected annuity (6.8% per year) = 3600 CHF per year = 300 CHF per month starting at age 65. I’m not counting the extra mandatory portion since I’m going to take it out as a lump sum when leaving Switzerland (or buying a house) so it’s in my NW (well, the mandatory part is in my NW too since there are situations where I can cash it out but it involves moving to a country without pension agreements with Switzerland, like US or other non-european countries). Miss RIP has no Pillar 2 at the moment and I think her employer should/must offer her a plan.
  • Italian Pension: I don’t actually know if I’m going to get some of the money I’ve paid during the years I’ve worked in Italy… Italian pension system is so messy, impossible to understand and biased toward traditional work history. I heard that if you don’t collect at least 15 years of contributions you get nothing. Maybe years worked abroad counts somehow… It probably depends if I’m going to retire in Italy or not. And eventually it will kick in very very late, somewhere around age 70 in the best case. It may be possible Swiss Pillar 1 and Italian pension would merge together. I don’t actually know and getting information on this topic is a real pain. Let’s say I won’t have any italian pension.

So, annuities with current timeline will kick in at age 65 (~20 years after FIRE) and are in the range of 8500 CHF per year. Still no, I don’t want to consider them in my plan. I like surprises 🙂

I’ve listed above few safety margins. Planning several of them is the way to handle a fair amount of uncertainties, as shown by MMM. To be as safe as possible (but not too much) I’m going to consider few more:

  • 3.33% WR is pretty safe.
  • Planned yearly expenses bigger than likely, both during family years (40-60) and traditional retirement years (60-??).
  • Two kids is the worst case (financial) scenario… and I’m sure there are tax discounts and/or other tools to mitigate the cost of a kid.
  • Windfalls not included.
  • Annuities not included.
  • Very unlikely that I’ll be earning ZERO for the rest of my life: side jobs, consulting, freelance, writing, sharing economy… some of my dreams will probably help me along the way.

Ok, cool, things are supposed to go smoothly if I stick with my pessimistic plan. Things are going to be better than planned. Probably. What to do if a series of unlucky events will hit hard (more expenses that planned, bad investment returns, asset loss due to financial institutions going bankrupt, earthquake that destroys my properties,…)?

  • As soon as I reach a significative deviation from the plan (planned 3.33% withdraw < 20% of planned yearly expenses) I’d try to shrink my budget and/or withdraw more than 3.33% and/or boost incomes (sharing economy, consulting, freelance). 20% is my Oh Crap threshold.
  • As soon as planned withdraw goes below 40% of planned yearly expenses I and/or MissRIP would look for a traditional job. 40% is my Oh Shit threshold. I sincerely hope this won’t happen.

Time to estimate yearly expenses, the hardest job. I’ve no clue but a rough idea that 3K Euros net per month will suffice, in Italy, with 2 kids. According to Numbeo, life in Italy costs roughly half of what it costs in Switzerland. I can’t simply cut in half our current spending (60K CHF per year), since other variables are missing in that budget (kids, cars) bot some may disappear (expensive vacations, dinners out, rent?).

More questions:

Housing: what would be our housing solution? Renting a flat? Buying a flat? Buying a house? Living in a RV? Living in a cohousing/ecovillage? I don’t know yet the answer, let’s plan for the “normal” scenario: buying a flat in the range 100-200k Euros and paying a low interest mortgage (or cash) for it. I’ve been thinking about buy vs rent. My opinion is that if you plan to stay in the same house for more than X years you should buy. X depends on several factors, but it’s in the range 3-7.

The equity portion of the flat would be in our NW but it won’t generate income and it will work against the 75% – 25% stocks/bonds investment split to meet the trinity study requirements. Should I consider just the investments as base for my WR or the whole NW? Should I take a mortgage and have higher monthly expenses (but more invested capital too) or pay cash and reduce the expenses and the invested capital (not an easy question: 1 – 2 – 3)?

I can’t answer right now. I’ll need to take a look at concrete houses and mortgage rates and look at the actual numbers. I can only speculate here. So let’s speculate: I’m buying a 100 square meters house for 150K Euros (120K price + 30K renovation costs) in a rural area in Italy not far from a major city. I’m paying 20% down (24K) and taking a 2-3% 20 years mortgage for the remaining 96K, plus paying cash the renovation costs. My investments will be hit by 50K, my yearly expenses by 6K.

Health Care: If in Italy, health care is “free”. We won’t need any insurance. Awesome! Well, it’s not that simple…

Taxes & investments: my stock/ETF investments are after tax money, so I don’t have to pay taxes on them. Investment earnings are taxed in Italy though. Both in the form of taxes on dividends and capital gain (not while I’m in Switzerland). I think there’s also some sort of extra tax for investments owned in foreign countries, need to investigate. I don’t know if I can keep my current investment account if I’d move to Italy. A lof of issues may impact my current FIRE strategy and make it stop working. Need to investigate.

One obvious thing to do to avoid unfair capital gain tax while in Switzerland is sell and re-buy just before moving back to Italy, to cash the tax-free capital gain. Anyway, after paying investment taxes I won’t have income taxes. Withdrawing money from my after-tax investments should be tax neutral. That’s awesome! Well, need to investigate that more since Italian tax authority is greedy with legally earned wealth (eyes are both closed with criminally earned one). In case my target country is not fond for living on investments earnings I may switch strategy and go for rental properties. I know how taxes work in that situation and I may make it work, even though I’d rather remain an index funds investor.

Do you see how hard it is? My current situation (living in Switzerland, no kids, renting, no cars) is so different from what I expect to retire on.

I can’t help but ask for more time to get to know some of the unknowns in my equation. For now let’s assume 3K per month will be good, given the above mentioned safety margins. 3K per month means 36K per year. At my 30:1 ratio, i.e. 3.33 WR it means 1’080’000 Euros. Let’s make safer, 40K per year. It means my FU Number is 1’200’000M Euros.

That’s a sad news, since so far I was aiming to a Million. It was not a secret, since my logo says 46.9% and my NW says 468’823 Euros 🙂

Maybe I’m taking into account too many safety margins and not trusting my ability of earning money even without having a job. A recent article from Financial Samurai shows how the fear of running out of money in retirement is overblown.

I can stick with my original rough estimate of 1M – reachable in 5 years, at age 44 (actually linear forecast says 4 years, based on 2016 performance… but I doubt that both the market will keep running at this pace for next 4 years and future kids won’t impact our saving rate) – or accept the new estimate of 1.2M – reachable (stretch) in 6 years at age 45. I don’t think it’s going to change a lot. In case I’d go for 1M I’ll probably surrender to the OMY syndrome and will end up working another year anyway. With the safer plan of 1.2M I’d pull the trigger as soon as I reach the goal.

I’ll take my time to think about it. For now, let’s set the FU Number at 1.2M and site logo will be updated accordingly at end of August 🙁

As expected, this post created more confusion than clarity. Instead of helping clearing my mind I’ve come up with more questions and things to go deep with than I had before start writing it. It’s been necessary though, and more questions are going to come in the near future. Is Italy suitable for early retirees? Is really 3K Euros a reasonable monthly expense with a family of 4 persons? Will I have some unplanned passive income streams at FIRE time that can lower my withdraw necessities? Are there any expected windfall coming from Miss RIP side? Are we really going to create a family? Follow me in this journey and you’ll know!

What’s your FU Number??