A Tale of a small Failure and a big Success

Hi RIP readers,

Today I want to tell you 2 stories. One of them is a story of incredible success and the other one is a story of a miserable failure.

Let’s start with the failure. Yes, you guessed right, the failure story is mine, 100%.

Wait, no, it’s not that I gave up on my journey to Financial Independence! Guys, I said “small” failure… I’m not even talking about giving up on waking up early, even though I didn’t set my alarm at 6am as planned (yet).

The story is the following one: yes, I did wake up early last Friday and – empowered by the fact I don’t work on Friday – I spent an entire day… playing a videogame! One of first hard earned Fridays – that’s costing me roughly 500 EUR of missed earning – wasted playing videogames.

I don’t feel guilty though 🙂

What do I feel? A little bit “is this right?“, a little bit “I’m an asshole, what am I doing?” and then “that’s super cool!“. What scares me is when I go like “Am I sure I want a life like that? I talk about life purpose and then I waste time with such a short term leisure?“. Yes, that scares me. Freedom doesn’t imply happiness, for happiness one has to work hard on themself and results are not guaranteed.

They say “the devil will find work for idle hands” and while I don’t like this sentence (I’m not hurting anyone, go away devil!) it is true that we humans are lazy and greedy beasts and we naturally follow the path of least resistance. Defeating our natural default behavior is very hard even considering we all know how much more rewarding it would be.

Anyway, I enjoyed the experience and, as I’ve previously stated, at the beginning of this 80% experience I’ll use my free Fridays to decompress and try to relax. The real problem is that I’m not done with this videogame! I just started, I want to play more!

RIP, you’re a loser, we all know that. What’s the second story? Wanna brag about a success of yours. And btw, what videogame is this? Is it really that good?

Yeah, let’s move to the second story. I’m sorry to disappoint you, but no, it’s not a success of mine. The success story is all about the videogame itself.

If you’re following me since the beginning (or if you read my story) you know I moved from Rome to Milan in 2007 to follow one of my dreams: become a Videogame Developer. I’ve always loved videogames since I was a child and apparently it’s not something that’s going away with age. I’ve spent so many nights awake playing 2D strategic PC games of any kind: TBSs, RTSs, RPGs. I never bought the 3D graphics story, the console wars, the mobile whatever… I still consider myself an hardcore PC gamer even though I almost don’t play that much anymore (till last Friday).

Yeah RIP, you nerd with your SCUMMy Day of the Tentacle. Shame on you. Cmon, what’s this new game name? Candy something? What-the-hell Birds? Is it at least a MOBA?

No no no, it’s an Indie game 🙂 Developed by a single guy in the good old fashioned way. Here’s the game name: Stardew Valley (wikipedia, game site)!

RIP, a farming game? In 2017? Are you joking? Wait, is this advertising??

No advertising, I don’t get a Rappen for this post. I’m serious about this game, let me explain: the game is about you inheriting a farm from grandpa, quitting your cubicle and becoming a farmer. You get to your land – which is in a very bad shape – and are supposed to try to fix problems and grow crops, breed animals, get to know your rural new friends and see what happens!

RIP. It’s a farming game. A f*cking farming game. A boring game for kids, c’mon…

No, it’s not! It’s the perfect game for me! Listen to me, here’s what I love about this game:

First, I like this genre. Managerial game where you need to plan what to do with your resources, better if the pace is not too fast, I’m too old for action games.

Second, I love the style. 2D games are terrific. I don’t care about cutting edge graphics or other bullsheets. The game is graphically perfect, tons of 2D sprites, animations, a lot of care on details. You should see autumn leaves…

Third, I love the gameplay. I love the game mechanics: how you perform actions and how you get rewards out of them. It’s a never-ending game.

Next, I love the game complexity and level of details: you plant seeds that become crops, than you harvest vegetables and fruits then you can process them and create other ingredients that you can use in advanced recipes so that you can eat or give them as present to other villagers… then there are animals, you need to feed them, pet them, protect them and harvest their products… and that’s just the surface. The game has skills that level up, quests, maps, monsters and combats, mines and caves, desert and mountains, minerals (tons of them), fishing (hundreds of fish types), foraging plants, fruits, shells. There’s a village, with NPCs – 40 of them, local shops, a community center with… ok no spoiler, a quarry, a SPA, a Bar, a calendar with birthdays and social gatherings, weather conditions, time of the day, seasons (fish, crops and fruits are season dependent), an enemy corporation, ghosts, mummies, a dwarf, a wizard and an adventurer guild where you can buy swords and go fighting. Did I mention a gender respectful way to build relationships and family and kids? It’s just about farming eh? Each aspect of the game is extremely curated and deep. Nothing is poorly executed.

Breathe.

Next, this is an indie game, meaning a videogame developed by a small team, with a small budget. A game you could have made! In an era dominated by few huge companies with billionaire budgets, making every year the same game with more graphics (EA, I’m looking at you) indie games are romantic resistance. Like in the game itself the villagers with their local shops are romantic resistance against the mega corporations who wants to “corporatize” our lovely Pelican Town.

Finally, we’re not talking about “a small indie company“. This game was developed by a single guy. Everything: code, game design, character design, level design, graphics, musics. There are tons of assets in the game: 2D sprites, animations, items of any kind. hundreds of items, check the official wiki. Take a look at the crops! There are 40 different types, each one with 5-8 hand made, pixel art sprites! What about NPCs design? Quests? Minerals? I don’t know if you ever worked in the videogame industry (I did) but trust me: that’s an unbelievable amount of work for a single person, and the quality is excellent on every aspect.

This guy, named Eric Barone a.k.a. ConcernedApe, started all of this alone 5 years ago, at age 22, right after his graduation in Computer Science. Being pissed off of sending CVs around he accepted a minimum wage job as a usher at a Theatre. In the meantime he decided to start this pet project “using the opportunity as an exercise to improve his own programming and game design skills“. He loved and played a lot a similar, older game named Harvest Moon. That game had some shortcomings he didn’t like so he designed the perfect game he would like to play. Applause. Be the change you want to see in the world!

After 4 years of hard work, in February 2016, the game launched on Steam and Gog. The game sold more than a million copies two months after launch and is now way above two millions just on Steam. The game’s price is 15 CHF per copy (I guess it’s 10 EUR / 10 USD outside the rich Switzerland) so the game earned north of 20M, just on Steam.

And we’re not talking about those super simple random mobile games that inexplicably become successful out of nothing, we’re talking about a game whose metacritic score is 88/100.

It took 4 years of very hard work, working 60-80 hours per week without a boss giving you priorities and keeping you focused. He had to find motivations inside himself and the strength to keep up when, inevitably, morale went down. For 4 years. His story is in my opinion a great lesson for anyone who wants to achieve anything so let’s dig a little bit deep here.

Lesson 1: Passion, Hard Work, Commitment and Integrity are more important than Talent

I don’t have any doubt that this guy has a lot of talent too, but I’m pretty sure that the base ingredients for Barone’s success are:

  • Passion: he loves video games, specifically this kind of games.
  • Hard work: he put 60-80 hours per week on this project, doing and redoing stuff several times.
  • Commitment: 4 years. As a solo developer. It takes a lot of consistency and faith to keep up and not quit.
  • Integrity: He delayed the release date even when publishers and marketplace wanted it out because he was not satisfied and the game was not feature complete according to his plan. He didn’t succumb to business rules. And he won. Amazing! But there’s more: Barone wanted to create an immersive farming experience, with the ambition “to have real-world messages” (that probably weren’t very business friendly) like cubicle sucks, you should pet and not butcher farm animals, love has no gender limitation and dwarves, wizards and mummies are real things and live in caves and mines… ahem, ok.

Talent is overrated.

Lesson 2: Emotional Intelligence is more important than Rational Intelligence

Why am I mentioning Barone’s EI skills? I don’t know him and he’s probably an introvert anti-social geek (just watch some of his rare interviews). What I know though is that his game is a collective story begun 5 years ago with an announcement and it’s not ended yed. Barone leveraged the power of internet and social networks, sitting on the shoulder of the giants.

How? Barone made the development of his game completely public, releasing previews and test versions of the early game, listening to feedback and engaging in discussions on reddit and twitter.

Roughly 1 year after his announcement a producer jumped him and offered to help and raise Eric from any non-development responsibility.

Engaging with the community and being present generated an immense hype around the game and a growing fan base that showed an unprecedented respect and love for the game and his creator. Listen to this story: the game is completely an offline game and you can easily find it on torrent, download it illegally and play it for free – I stil remember the time when software companies went broke thanks to piracy. This game could have easily been a similar story. But I read that some of those who pirated the game, after playing it for a while, planned to get an actual copy and pay for it. I’ve read stories of fans that offered to help paying the game for those that can’t afford it. Things never seen before! These stories (unconfirmed, but they are on wikipedia) show a tremendous amount of respect and love for Barone’s hard work, social attitude and devotion to the community. The community’s involvement is greater than this, though: take a look at the modding community!

I’ve been into videogame development. A month before a game launches it’s already dead from a development point of view. You’re already working on the next game. Yeah, a patch here and there, if we didn’t delete the entire codebase from the repository yet… What about this game? It was launched a year ago and Barone recently said he’s spending more time than before on the game – not coding anymore – replying to fans and being present in the community. And, I guess, playing his beloved game!

Given sales numbers I assume the publisher hired a team to keep the development alive. They ported the game on all consoles and announced a cooperative multiplayer experience sooner or later. FIRE seekers out there, I can’t wait to play together on our minimalist & frugal farm 🙂

Lesson3 : In the risks vs rewards spectrum, investing in yourself is the best choice

Now… this guy knew nothing (I suppose) about publishing, contracts, money, marketing… so maybe he got a very bad deal, we don’t know. But let’s assume he negotiated his life changing deal so badly that he’s earning only 1$ per copy sold. That’s more than 2 Million dollars in his pockets! He reached Financial Independence at age 26. If you’re brave enough and choose yourself you may get 1000% return and more on your investments, not just that miserable expected 7% long term with stocks!

That’s the success story that inspired me the most in last few years! Thanks Eric for this incredible game and for inspiring me and so many others!

That’s more or less me at work on Monday…

 

But let’s talk a little bit about my gaming experience, so maybe we’ll transform my failure in something else. At least a funny story that will gladly crack a smile out of your face!

The game starts with main character design. You can customize your aspect, name, gender and other things. Here’s Mr RIP, the spreadsheets lover from Hooli land 🙂

The game starts with an intro where you receive a letter for your dying grandpa accompanied with those wise words

I’m ready grandpa, I surely am!

Then you’re teleported into your current cubicle life at Joja (which is the evil company in the game) and you can experience how miserable it is.

Your environment is sparkling energy in every directions! A lot of fun! Yeah, someone has been terminated and your colleague on the extreme right is apparently not feeling very good today, but life goes on, doesn’t it?

Then one day, luckily, you get fired!

… or you reach FI 🙂

Anyway, you find the guts to read that letter:

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Oooh, I’m totally bought in grandpa…

And here I started, in Hooli Land! Cleaning up the land and getting started with seeds, plants, vegetables, animals: I have a dog named ETF and few chickens named S&P500, STOXX600 and SmallCap and my farm is doing great!

Joking aside, I’m learning which plants grow in which season, funny real new vegetables names (what the hell is a Parsnip?) and most important of all: I felt like being there, in a smaller community, living a simpler life (with wizards and skeletons, though). That’s my dimension, in my future ecovillage, a day hopefully not too far from now.

What are you waiting for?

My Investor Policy Statement

Hi RIP friends,

Facilitated by some recent extra time purchases, as promised to myself (and publicly committed), I’ve finally allocated time last weekend to redact my IPS.

image: physicianonfire

What’s an IPS? IPS stays for Investor Policy Statement, essentially an investing guideline you define for yourself that helps keeping you on path when situations may trigger your instincts. The market crashes? You have a money surplus? You’re having kids? You lost your job? They say this year Emerging Markets will rock? What did you write in your IPS for those cases?

I wanted to write it down after having read this amazing post on PhysicianOnFire several months ago. I strongly recommend you write your own if you’re going to invest money (and you should). Btw, invest 5 minutes of your precious time and go read PoF post.

One of the first rule of investing is “define your goals, priorities and strategies”, that’s almost all an IPS is about. The level of details of your IPS should match your desired complexity level. A too detailed IPS may end up being edited too frequently or going soon out of sync with reality. A too generic IPS is mostly worthless. I use the CV rule: it should never be longer than 3 pages.

In writing your IPS you’ll be challenged to think about your values, your long term strategy and your exit strategy. You’re forced to ask yourself if you really understand what you’re investing in and why you’re investing in such categories and specific assets. You may start researching and gathering more information, refining your asset allocation and diversification strategies and, if you’re a nerd like me, you end up engineering your lifelong economic algorithm.

I chose to make mine a little bit longer than I’m comfortable with (whaaat? 5 pages??), since I wanted to embed in it my FIRE algorithm too.

Enjoy!


Mr. RIP Investor Policy Statement

Terminology
NW = Net Worth
WR = Withdraw Rate
SR = Saving Rate
FU = Target NW to call it FI

Objectives

  • Reach FI (NW >= FU) before age 45, i.e. before year 2022.
    • FU = 30x yearly expenses (desired WR = 3.33%).
    • Yearly expenses to be estimated not based on current ones but considering factors like: 1) moving out of Switzerland 2) having 1-2 kids 3) buying or not a house.
    • Once FI is reached, Yearly expenses (thus FU) updated each year based on forecasts and actual spending.
  • Reach 150% FU before age 50.
  • Stay above 80% FU forever, after having reached FI.

Overall Strategy

  • Hard Accumulation” phase while NW < 100% FU.
    • Save at least 50% of income (SR >= 50%).
    • Save at least 50k EUR each year.
    • It’s ok to not go beyond if it would impact well being (80% or even 60% is ok if previous 2 conditions are met).
  • Self Sustainability” phase while 80% FU < NW < 120% FU.
    • SR >= 0% – Don’t touch the principal, keep working sporadically or find other ways to bring money at home to cover for expenses and let the principal grow.
    • Note that between 80% and 100% there’s a so called hysteresis: keep behaving according to the rules in current state.
    • Below 80% (Oh Crap percentage – cit LivingAFI) restart accumulating (probably via frugality and hustling more).
    • Below 60% (Oh Shit percentage) get back to work unless some form of social security is triggered or I am above conventional retirement age.
  • What’s income?” phase while NW >= 120% FU.
    • make all work and income decisions as if the wage were 0 – cit MMM.
    • Stop caring about having to earn money, It’s ok to withdraw from the principal.
    • Stay in this phase while NW > 100% FU (hysteresis between 100% and 120%).
  • What’s money?” phase while NW >= 200% FU.
    • make all spending decisions as if the price were 0 – cit MMM.
    • Stop caring about budgeting, expenses, earnings. Just avoid plain stupidity.
    • Stay in this phase while NW > 150% FU (hysteresis between 150% and 200%).
    • Note that the FU% will decrease if yearly expenses increase.

Investment Philosophy

  • Invest mainly in stocks (>50%), secondary in bonds (<30%), maybe real estates (<15%), might consider p2p lending or angel investing.
  • Max out stocks investment at 100% FU. If my asset allocation says 60% stocks, once that 60% NW = FU (NW = 166% FU) then don’t over-invest in stocks, take extra money out of market ready to be reinvested in case of market drop.
  • Buy and hold stocks strategy.
    • stay invested (extra invest if possible) if the market crashes.
  • Stay low on costs in the “costs vs efforts” spectrum.
    • No individual stock picking (super low costs, high effort).
    • Yes Manually diversificate among regional Index Based ETFs: US, Europe, Emerging, Pacific (low costs, medium effort).
    • No world ETFs (medium costs, low effort).
    • No robo-adviser (high costs, zero effort).
  • Avoid investing in specific sectors (like “travel”, “consumer goods”, “technology”, “banks”).
  • Accept territorial home bias, i.e. invest heavily in the market where I live.
    • To keep up with local currency inflation and economic situation.
  • Avoid professional home bias while in accumulation phase (avoid “tech” investments).
    • To diversificate, i.e. avoid making a tech industry crash a double loss.
  • Optimize for tax efficiency over small variations (<0.2%) of costs (TER).
  • Prefer Distributing over Accumulating ETFs given same costs and tax conditions.
  • Don’t do DCA (JL Collins).
  • During accumulation phase, keep investing each month.
    • Use the monthly investing to rebalance.
    • Keep track of real vs ideal for each asset and throw money to assets that need the most.
    • To reduce investing trade costs, define an investing quantum and never invest amounts smaller than the quantum.
    • Forego monthly investment to cover large expenses (travel, vehicles…).
  • Once every 6 months do a major rebalance between asset classes and within each class.
    • Keep in mind the “no stocks above 100% FU” rule (and that 100% FU changes over time since actual yearly expenses and forecasts change).
    • Use this major rebalance to review this doc and eventually improve/change it.

Asset Allocation

  • 60% Stocks
    • 25% – Europe Large/Mid/Small (STOXX600).
    • 25% – US Stocks: 20% Large (S&P500), 5% Small.
    • 5% – Pacific.
    • 5% – Emerging Markets.
    • I allow myself to go on a slightly different route while in accumulation phase.
  • 25% Bonds
    • Pension Pillars (once left Switzerland these will disappear).
    • Government & Corporate Bonds (mainly local market).
  • 15% Real Estate
    • Primary residence.
    • Eventual rental properties.

Cash

  • Keep 2-6 months of living expenses in cash while working.
  • Keep 12-24 months of living expenses in cash while not working.
    • Consider cash an asset class that needs to be rebalanced every major cycle.
  • In case of urgent need of cash in bear market, sell bonds first.

Other Considerations

  • While in Switzerland, maximise tax deductions via Pillar 3a and Pillar 2a buy-ins.
    • Check the cantonal limit up to which a Pillar 2 buy in is not locked for 3 years.
  • Don’t take into account social security and pensions at regular retirement age.
  • Don’t take into account expected inheritance.

Supporting Family Members

  • Support eventual children.
    • Pay for their education till Master’s Degree.
    • Don’t give them paychecks but make them work for the household and earn money.
    • Teach them financial skills (spend less, earn more, be frugal, save, invest, be free).
    • Encourage them to be independent and leave the nest as early as possible.
  • Support other family members (parents, siblings).

Preparing my finances for my expected death

  • Aim to leave a significant portion of inheritance for a greater good.
    • Angel investing.
    • Charities.
    • Projects I care about (going to Mars?).
  • Aim to leave enough to my children and eventual surviving spouse.

Preparing my finances for my unexpected death

  • Make a will to make sure my assets are handled as I wish.
  • Have a life insurance after work’s one will expire to make sure my family won’t have financial issues.

Open problems

  • Given that most probably we’ll retire in Italy, understand investments opportunities and tax implications there.
    • Check income, dividends, capital gain and wealth taxes.
    • Check rental properties business.
    • Check freelancing / launching a company complexity and costs.

since this post won’t be edited much while my IPS will, I’m linking here a live version in Google Docs for those who want to follow how my IPS is changing over time. Here’s the link.

What are you waiting for?

Go write your IPS!

Early to bed and early to rise…

Hi RIP friends,

Let’s steal half of the famous Benjamin Franklin’s quote for today’s post.

Early to bed and early to rise, makes a man healthy, wealthy, and wise.
(Benjamin Franklin)

The second half is reserved for for Tim Ferriss’ Tools of Titans book review, which will take some time.

Tim, seriously, 700 pages??

Ok, straight to the point. After so many signals on books (like the above mentioned ToT), videos, blog posts – check out this amazing post by ESIMoney – I decided to give it a try: I’m waking up earlier than usual since Tuesday January 10th, weekends included.

 

Why?

No, it’s not a procrastinated “new year resolution that won’t make it to February“. I’ve always told myself the following story: “I’m not a morning person, I like to stay up till 12am, 1am, 2am“. I was convinced by that. But that’s just a story that you can and should change. I was not fully satisfied with going to bed so late, spending too much time in front of a computer after 10pm and always feeling I was missing quality time with just myself.

So I tried it. I challenged the status quo and started experimenting something new. Let’s see what happens, I started without a plan. The goal is to install a new good habit.

 

How earlier?

I used to wake up at 8.30am. I know, it sounds ridiculous. Shame on me! I moved the alarm clock at 7 and after few days moved again to 6.30. Next goal is to reach at least 6am, planned to happen on Monday January 23rd, but I’m secretly aiming to 5am. 5am gives me roughly 3 hours of morning time. Plenty of time!

Wait… what? They say the magic hour is 4am? Ok, one step at a time…

 

How did I do?

One of the biggest challenge of every time I try to install a new habit is the beginning. The first step. Not the biggest challenge though, that one is consistency, i.e. not giving up after a while. But still the first step is a major blocker.

To help making the first small step a giant leap for myself (in your face, Neil Armstrong!) there are two ingredients that I discovered they work well for me:

  • Strong Motivation, backed by concrete goals (desire to reach something) and some form of discomfort in current settings (desire to leave something).
  • A Brain Blocker, a way to stop thinking and put myself in autopilot. I discovered that my mind is my worst enemy in such situations. Should I go to the swimming pool? Mmh… why? It’s cold outside… I don’t know… maybe I can do something else instead. No. Stop thinking. Just do it. Yeah, I know these words look cliché (and a company logo) but it’s how it works for me! Wanna jump from a 10 meters high springboard? Let’s see… ouch, it’s so high… let me think… I may get hurt… and so I spent five minutes staring at the pool’s water, among preteens laughing at me… Then I blocked my brain, assessed that there were no risks, and then I just jumped.

My bed is the springboard. When I tried this in the past, the brain blocked me from actually leaving the bed. Snooze the alarm, just stay another 5 minutes in the warmth of my blankets, silence the alarm, goodbye! I had to silence my brain instead and just go out of my bed as soon as the alarm rings.

Then I discovered that this is an actual technique, known as the Heroic Minute:

The heroic minute. It is the time fixed for getting up. Without hesitation: a supernatural reflection and… up!
(Saint Josemaria Escriva )

Well, I transformed it into the Heroic Five Seconds. A minute would be too long 🙂

I discovered there’s a whole community behind this idea, both on Facebook and Twitter. I didn’t, but feel free to join the #HeroicMinuteChallenge if it helps you staying committed.

I never risked going back to bed once awaken but it seems to be an issue with someone. To avoid this you can get dressed soon (you’re less likely to undress to go back to bed), light all the lights in the room (your brain will adapt to the new normal), move to another room (get far from the bed), drink a big glass of cold water, do some stretching exercise, wash your face with cold water, do some awakening meditation or quickly go for a walk.

Going for a walk excites me enough, but given my current balcony view and the fact that current forecast’s maximum temperature for the upcoming week is -5 I’d rather skip it for now.

Waking up early is amazing, but every rose has its thorn: I have to go to bed early too. That’s the hardest challenge now. I used to go to bed late, very late. I don’t remember when it was last time I went to sleep before midnight. Usually spending a lot of time in front of a computer or my smartphone, rarely reading a book. It’s still time with myself since Miss RIP goes to bed earlier than me, but it’s not quality time. I’m tired, I’m low in energy level and most of the activities I’d like to do in the morning simply can’t be done at night.

In previous attempts to move my wake up window a couple of hours earlier I tried (and failed) to work on my bedtime. Intentionally trying to go to sleep earlier. Failed. Even if I tried to turn off lights and pretend to be ready to sleep I’d stay awake forever.

This time I forced myself to not care about bedtime and just force wake up time and see what happens. It happened that the first night I slept something like 5 hours instead of my usual 7. I was not very fresh that Tuesday at work!

Coincidentally we – the RIPs – had a very intense social second week of January: Wednesday to Sunday evening all booked with my Theater rehearsals on Wed, dinners at friends’ houses on Thu and Fri, a surprise party on Sat and a boardgame evening on Sun. Going to bed early is going to be a tough challenge. I may need to give up something I’m not sure I’m actually ok with.

Anyway, so far it’s working fine. I left earlier than usual evening events and set a hard rule of no digital after 10pm. Wasting my attention on videogames, mails, facebook and whatever else late in the evening makes sleeping harder. I can tolerate watching a movie though. Let’s rephrase the rule in “no digital device closer than a meter to my eyes after 10pm“.

On Monday January 16th, after a week of experiment and with less social events in sight, I moved my alarm to 6.30am and conquered the last (for now) 30 minutes of territory.

 

What does it feel like?

So far so good: I’ve finally found the time I was missing in my life. Time for my projects, time for myself!

Not enough, though (yet). Waking up at 6.30 gives me roughly 90 minutes of peace before the world (Miss Rip) wakes up and destroys the atmosphere. I guess there would be even less time available with kids around. I’m joking, though. Before this experiment I used to keep sleeping for another 30 minutes after Miss RIP’s alarm clock rang. Never been there to kiss her or hug her when she awakens. Now I hear her alarm from the other room, acknowledge my time is over, and run to her to wake her up with hugs and kisses. It’s amazing how this simple small practice boosts her happiness (and mine too).

Anyway, 90 minutes of myself every morning is an amazing gift. I actually crave for it when going to sleep! This, combined with The Fridays, gives me plenty of time to enjoy life in my way.

After the mentioned long social weekend was gone I was finally able to go to bed very early for my standards. On Monday I fell asleep at 9.30pm! I hope I won’t feel guilty with Miss RIP and friends for trading my evening social time with my egoistic morning time.

 

What do I do with this extra time?

These first 10 days have been very experimental. I focused on enjoying whatever I wanted to do, without much structure. I’ve been reading (Tools of Titans), planning the day, writing, blogging, meditating, stretching, playing videogames, washing dishes, stared at the outside snow, completing a jigsaw puzzle, watching youtube videos and reading other blogs. Unstructured time just to see how it feels, to try to destress, to simply enjoy life.

Free lunch is over though. I want to follow some kind of structured routine that involves:

  • Physical (10-60 minutes): walking, biking, do some workout routine at home, go to the swimming pool. The goal here is getting my body challenged.
  • Curiosity (10-30 minutes): read nonfiction (or mind challenging fiction, like The Silo Trilogy or Hyperion), study, watch youtube videos and TED talks. In general: getting my mind challenged.
  • Creativity (30-90 minutes): write a blog post, code for a pet project or a new software idea, write down 10 ideas, enjoying thoughts experiments (like the dinner table series on waitbutwhy) and/or create new ones. The goal here is to put myself at work on something I’m passionate about.
  • Spirituality (5-20 minutes): daily meditation, weekly reflection about where I am in life, where I’m going and what makes me happy. This is to find my purpose in life and remind myself to not forget that there’s more than living in survival mode and chasing pleasures.
  • Planning (5-20 minutes): planning the day, scheduling the duties (errands, bills, social events), play with the Eisenhower Matrix and set morning time for the “important but not urgent” items. This is to try to keep some sort of control over natural life chaos.
  • Leisure (0-30 minutes): whatever I want that makes me pure short-term pleasure like watching an episode of a tv series, playing a videogame, solo play a boardgame, waste time on facebook…

I don’t want to be too broad though. I’d like to focus on few projects, ideally just one at a time for each category.

 

Yeah but this blog is about Personal Finance and FIRE. Is waking up early related to money?

Personal finance is a journey. You may jump in after a tough awakening from your financial nightmares, then you start tracking pennies to get your head above water. You become financially awake/aware. You install good habits and reach integrity, right direction, wealth.

Then at one point money start fading into the background. You have enough of it. You can finally focus solely on how to improve your life. I don’t care about money, I care about building a happier and better life. Follow your passions, find your purpose, seek happiness, improve well being, connect with others. Money is just a means to these ends.

So yes, waking up early perfectly fit my Personal Finance framework: it’s a way to improve my life using my resources (time here, not money).

Plus, as an amazing positive feedback loop, waking up early makes you a more organized and productive person. A person with excess of quality time available to work on side projects, learn a new skills, plan and prioritize things in your life, remove some physical and mental clutter and explore your inner self. All of these will somehow find their way to improve your wealth.

Not convinced? Let’s ask Kobe Bryant:

Kobe Bryant‘s words!

Thanks Kobe 🙂

 

Bottom Line

Wake up, don’t be lazy! The world is awesome when the others are sleeping! That silence, the hidden sunlight, the frosty winter… I can’t imagine what will it look like to go for a long walk before dawn in spring or summer! Coming back at home after hours of walking in the woods… and it’s still 8am!

And it all started with setting an alarm clock and waking up within a minute!

You still not convinced? There are plenty of resources out there, like The Miracle Morning book and the associated Facebook community.

Btw, if you need some help, you can always purchase a money shredder alarm clock, they say it helps 😀

So guys, go to bed and see you tomorrow at 6am!

Yaown… what time is it? What’s up?

Nothing, nothing, go back to sleep my friend 😉

Guest Post on WhatLifeCouldBe

Hi RIP friends,

One of the goals of this blog – as stated in the About Me page – is to meet like minded people along my journey to FIRE.

How to do that? Easy: join forums, communities, social networks, physical meet-ups, read other blogs…

Simple to say, hard to do. My life is getting ultra busy in this first half of 2017: getting married, planning (and then doing) the honeymoon, playing in theaters, planning for another hiking trip during Easter, getting 40 years old (sic!), working (80%, thankfully).

I don’t have much time left for this human interaction thing. I skipped few European meet-ups and I don’t plan to attend expensive (scammy?) Chautauqua. Sad, super sad!

So RIP, are you going to dig a hole and stay forever alone?

No, no, wait my imaginary friend. I’m still doing my best to be as much social as possible!

First, I’m an active member of Rockstar Finance Forum.

Second, I read a lot of other blogs (probably too many) and join the discussions in comments when I think I can add some value.

Third, hey, I’ve done my MBTI test and ended up being a ENTJ, clear? There a big E (extrovert), not a I! I strongly recommend you do the test. It’s free, it takes 15 minutes and it’s fun! Check out this amazing post by FIRECracker (Millennial Revolution) about “MBTI and Money“. If you like it, go ahead and reach out this deep “average human vs FIRE blogger” post on freedomthirtyfiveblog.

So yeah, I’m a proven social person, backed by solid data!

Hey RIP, you mocking us? I heard you’re wasting your time making jigsaw puzzles in your spare time…

It’s just a rumor, cmon! Who does puzzles in the third millennium??

Anyway, ok, I may not be the most social blogger out there, but I’ve established strong connections with several bloggers that are now officially part of my blogging family.

Welcome to Don RIP Famiglia my friends!

I’d consider in this group Andrea (Incassaforte, he hosted me for a guest post), Olivier (Frugalisten, we competed for 2016 best saving rate among bloggers and he won by less than 1.5%!), MP (MustachianPost, the reference European FI blog) and finally Mr.W (Whatlifecouldbe, my official blog brother).

With W Family (Mr. and Mrs.) we have regular skype calls, virtual whisky toasts and even a skyped Cashflow 101 match!

So what do we answer when they ask if I want to write a guest post on their blog?

You answer: ‘No, go away, I have to finish my puzzle!’ ”

No, I write a wholehearted guest post!

… and here’s my guest post on What Life Could Be!

Guest Post: meet Mr. RIP from retireinprogress.com

Enjoy! 🙂

“…”

What? -.-

How’s going with the puzzle?

Rumors, Just rumors!

How to Fix your Financial Problems

Hi RIP friends,

Welcome to yet another post about “basics financial tactics” on the internet. I’d like to show my suggested strategy to face and solve your financial problems, trying to offer my unique point of view.

First of all, what kind of financial problems do people have?

Given that everyone has their own individual problems, let’s try to cluster them in few groups:

  • People struggling with debts, who have hard time keeping the head above the water.
  • People with a very tight cash flow, to whom any unexpected expense is a nightmare and won’t make them sleep well.
  • People with no job or a very unstable one.
  • People with no immediate financial problem, but locked into a job they don’t like.
  • People with apparently no financial problems, seeking for ways to improve quality of their lives.

Well, the list may go on and on but to keep the post readable let’s focus on the above mentioned categories.

What are the basic steps you should take to improve your situation? Let’s take a look!

Step 1: where are you?

First step should always be: write your financial self assessment. Where are you? What’s your actual financial situation? Instead of running after emergencies and panicking, take your time. Breathe. Sit down, set 2-4 hours aside and start your financial self assessment.

Understand and quantify your monetary assets. Sum up your valuable assets. Do you own a house? A car? A valuable collection? Money on your bank accounts? Other kind of equities/securities? Art pieces? Precious metals? Pension funds? Savings? Piggybanks? Lottery winning tickets?

Be realistic: only track assets you can actually monetise and track them at their expected resell value. I suggest to skip tracking minor stuff whose selling process may end up being more expensive than the item’s value itself.

Remember that over time some of your assets will depreciate (your used car, your jewelry, your used golf clubs set) while other may appreciate, like your house, your pension fund and your Coca Cola Company stocks. Note: there’s no guarantee that any of your asset will appreciate.

Understand and quantify your liabilities.

Do you have debts? Mortgages? Loans? Credit cards debts? Family debts? Unpaid bills?

Write all of them down. Write the full amount due and – aside – the interest rate you’re paying on each liability. The interest rate is not useful in this self assessment phase, but it will soon be when we’ll talk about taking actions.

credits: petrunway.co.uk

Produce your Net Worth document.

Your Net Worth is a number that tell you “where you are” on the financial path.

If you’re below zero it means you have more debts than assets. It means a homeless, or even a kitten, is richer than you.

Obviously that doesn’t mean the kitten will have an easier financial life than you: you probably have other non monetary assets that provide opportunities to change your trajectory, like your skills and your social/professional network.

I have my NW document publicly shared. Feel free to take a look and be inspired.

Before running to any conclusion, ask yourself few questions: did you expect to be where your NW shows you actually are? Do you feel relaxed? That’s good. Do you feel anxious? That’s good too.

Anyway, congratulations! You’ve taken first step toward a path that leads to improve your permanent well being. Who cares if your scale says you weight too much on day zero of your diet? It’s actually better, more room for improvements!

Step 2: where are you going to?

You now have a snapshot of your financial situation. It’s like a single frame in your lifelong financial movie. It tells you something but not everything.

Start tracking your Net Worth over time.

Your assets will change their value, your liabilities will increase/decrease. Track your first magic number over time, on a monthly/quarterly/yearly basis. Or have some mechanism in place to track it in real time, like financial apps (personal capital, mint, …) or a simple spreadsheet – and a nerdy attitude.

Tracking your NW will tell your wealth derivative: the rate of change of your NW. Is it increasing month by month? Is it decreasing? Where do you expect to be in a year if you do nothing? Does it scare you?

Let’s go further, let’s try to anticipate the future.

Take expectations into account.

Are there any financially impactful events expected to happen in the near future? Do you have huge bills expected to come? Do you have kids leaving your home and lowering your expenses? Do you have an expected inheritance coming sooner or later?

Try to do a qualitative analysis and see how these events will change your financial situation.

Take desires into account.

Are you planning for an expensive summer vacation next year? Do you want to buy a new car soon-ish? Do you want to have a kid? Do you want to move to a bigger home with your (possibly growing) family?

Play with numbers and try to do a quantitative analysis of the impacts of your desires on your Net Worth. Can you afford them? Are they worth? Most of them will surely be, some of them maybe not.

Understand unknowns and try to take them into account.

What if you lost your job today? What if you had an unexpected 1000 Euro expense tomorrow? What if your landlord wanted to evict you at the end of the month?

Do these questions terrify you? Sorry friend, you need to face them. Life will happen.

How to take them into account, though? It’s hard to understand the impact of the unknowns based solely on your Net Worth.

Step 3: why are you going there?

We’ve seen how to understand what’s your movie about, by analysing some frames and speculating over few known events. We don’t actually understand why things are happening, we’re passive spectators at the theatre, who just opened their eyes and discovered that’s an horror movie the one we’re looking at, not a Pixar’s one!

Track your cash flow.

Track down each of your income streams and each of your expenses. Make a budget. Understand where your money is actually going. Track this over time.

Do you have a positive or negative cash flow? Assuming your assets don’t change their values, if you have a negative cash flow your NW is going to decrease. If you keep having a negative cash flow you’ll have to sell some of them in order to pay your bills.

Do you have a negative cash flow due to low earnings or high expenses (or both)? Do you understand the impact of each entry in your cash flow?

I know tracking expenses may be a lot of work, but it’s an extremely valuable tool if you’re seeking for financial help. Whoever tells you how to fix your situation without looking at how you currently spend your money is a liar.

Tracking individual expenses is not always necessary, though. For example I’ve been lazily skipping that for a very long time, but I’ve always been in amazing financial shape and without big spending troubles. I belong to the category of those with “apparently no financial problems, seeking for ways to improve quality of their lives“. I restarted tracking my expenses when I started this blog (June 2016), with the goal of improving further my finances to reach earlier my goals.

Even if you don’t want to track individual expenses, I strongly recommend you to understand the total amount spent and to get a rough idea of your main expense categories.

Ok, now you have knowledge and awareness over your finances. You don’t just passively observe that “your NW increased by 500 Euro last month“, you knew and predicted that because “your earnings were 300 Euro greater than your expenses and your other assets appreciated by 200 Euro“. You can finally explain why your NW is changing over time.

… You achieved Financial Intelligence, congratulations! You’re fully aware of your current situation, your directions and the impact of each one of your choices.

You understand what’s happening on the movie so you can stop laughing when others are and actually understand the jokes instead!

Step 4: where else could you go?

This movie is a good one isn’t it? I like the characters, I understand their behavior, I can anticipate what’s happening… but are they taking the right actions? Are they driving the plot toward a nice ending? How many different finale can you imagine for the movie? How many interesting paths were left unfollowed so far?

Understand your tools.

Which tools can you use if you want to change your financial direction? You may have a job. You may have few other income streams, or potential income streams like business ideas. You have skills. You have passions. You have a social network. No, I’m not talking about facebook. I mean people who care about you: your friends, your lover and your family. You have a professional network. Well, yes, I’m also talking about linkedin here. But I mainly mean people who endorse you because of your skills, people who witnessed your quality and would help you changing your job/career.

What about your Net Worth, again? What about repeating the game of playing with desires and with unknowns? Is this the right time to buy a new car? Is this the right size of a mortgage? What if soon after purchasing this dream house interest rates go up and your mortgage’s interest rate raises by 20%? Can you still afford it?

Wait, now we’ve bound actions to consequences! What if Walter White just accepted Gretchen and Elliott’s help?

Can you think alternative scripts for your movie?

You’ve been tracking your numbers since few months now and you’re able to play with them and with your imagination. Is there only one possible future? Of course not! Well, unless you believe in predetermined fate. In that case you can keep complaining with your bad luck and do nothing to change your situation. You’re in good company, that’s what the vast majority of people do!

Step 5: where do you want to go?

We’ve played with characters in your movie, we understand what they do and what they could do instead. We can make hypothesis and expect outcomes… but how would you want the movie to end? If you were the main character, what would you want to achieve? You’re in a Horror movie, are you ok with that? Do you want to make it an action movie? a romantic one? Would is your favorite genre?

Define your financial goals.

Individuals have different goals, different ambitions. Take your time to define what matters to you. Without a goal there would be no way to suggest you the right actions. There would be no right action. Whoever tells you how to fix your situation without asking what are your goals is a liar.

It doesn’t have to be a long term goal, can also be a simple milestone or the end of a chapter in your life. It actually works better if the goal is small and reachable at first.

For example: “be able to make ends meet this month”, “get rid of debts”, “buy a house and not go broke”, “quit my job”, “have 10K Euro saved”, “be able to afford 6 months of unemployment”, “increase my saving rate by 10%”, “reduce expenses by 300 euro per month”, “get a raise”, “reach financial independence” and so on.

Be S.M.A.R.T.:

  • Specific: avoid vague or indirect goals like “be able to sleep at night”. A sleeping pill will do the job and you’re still broke.
  • Measurable: avoid “reduce expenses”, prefer “reduce expenses below 2K per month”.
  • Assignable: usually assignable to you. If you’re part of a family or a community working together to reach your goals be sure each member has a role in this.
  • Realistic: avoid “spend less than 100 Euro per month”, prefer “spend 100 Euro less per month”.
  • Time related: avoid “quit my job”, prefer “quit my job before July 2017”.

there is no favorable wind for the sailor who doesn’t know where to go. (Seneca)

Step 6: what are you going to do to go there?

You’re no more a spectator of the movie, you’re the main character. You happen to be in a movie you didn’t plot – actually you did, but you lost control over time – but now you choose to be active and drive the plot. Maybe you’re in a drama or a Horror movie and you don’t like it. You envisioned your preferred finale, or what you think it would be a nice scene: “I’m gonna kill the dragon and kiss the princess before the end of the first act!”. Ok, cool, how are you going to do it?

  • Force yourself to have a positive cash flow, i.e. spend less than you earn.

If you’re driving your car against a wall you can push the accelerator or the brake. If you want to avoid the collision you need to brake. Depending on your speed and the distance between you and the wall, it may not be enough to brake softly.

Same is true with money. Main rule is: spend less than you earn. No matter how tough it is, no matter how many sacrifices you need to do, how thrifty your life needs to become. Spend less than you earn.

It’s a mantra. Repeat again: spend less than you earn.

Which means:

  • Spend less, i.e. reduce your expenses.

The Philosophical way: you’re not your purchases. Embrace minimalism and simplify your life. Take your budget, understand where your money are going and check if the expenses match your values. Cut expenses that bring marginal value to your life. Maybe cutting the top 100 Euro on your monthly grocery bill won’t sensibly impact your happiness while cutting more will. Then cut just 100 Euro.

The Psychological way: Don’t keep up with the joneses, don’t try to impress people you don’t like. Learn how to recognize differences between your wants and your needs. Avoid impulsive spending, apply the 10 seconds rule before an impulsive purchase. Invest enough time for major purchases, apply the One hour per 100 Dollars rule and the 30 days rule. Guess the price of an item (or the price you’d be willing to pay for it) before looking at its actual price. Get rid of those dangerous cognitive biases like Anchoring, Bandwagon effect and System justification.

The Pragmatical way: Embrace frugality, think long term. Buy used stuff. Learn DIY skills and get out of your comfort zone. Don’t throw money at problems, throw skills. Become a reinassance man.

The Funny way: it doesn’t have to feel miserable, make it fun! Gamify the process: find a community, join a shared challenge (like the uber frugal month challenge). Challenge yourself, see if you can live with zero for a week.

And also:

  • Earn more, i.e. increase your earnings.

On your current job: work harder, work more, work overtime, get better at it, be reliable, be autonomous, be proactive, show competence, show leadership, show impact, take more responsibilities, ask for feedback, document your progresses, negotiate a raise, get a promotion.

On your next job: always do interviews, don’t stay too much in a place you don’t like, change company when you think you’re not learning anything new, learn how to negotiate a salary, learn how to negotiate a severance package, get out of your comfort zone.

On your next career: learn new skills, be curious, become an idea machine, start a side hustle, fail, start another one, don’t care about revenues for the first 2 years, don’t care about revenues after two years, create value, get these thousand true fans, quit your job, go solo, think long term.

Don’t look for jobs, attract them. (Marco Montemagno)

Once your cash flow is greater than zero, amazing things happens. You now have a saving rate (i.e. savings/earnings), your financial situation is getting better month after month! It can be as low as 1% and as high as 70% or more, it doesn’t matter too much for now.

What to do next?

  • If don’t have one, build an emergency fund.

Cash is king. Without cash at hand you may need to sell some assets or get high interest debts. Without cash how would you feed your family in case you lose your job tomorrow? Do not rely on social security, your state can cut unemployment supports tomorrow if it needs be.

Build an emergency fund, sized between 2 and 6 months of your current expenses depending on your tolerance to risks and unemployment support in your country.

With a fat fund in your bank account you can take risks, you can sleep at night, you can bring food on the table tomorrow.

Don’t exaggerate though, too much money sitting in a low earning saving account looks like a bunch of wasted opportunities. Send your green army to fight for you instead!

You should learn how to invest but first…

  • Pay off your debts, always start from those with highest interest rates.

Once you have few months ‘stashed away and you can face bad news without panicking, it’s time to make your money go to work for you, bringing back more of the same.

What you want to maximize with your invested capital is the return on investment (ROI), i.e. how much (in percentage) that capital grows after a fixed amount of time. A commonly used metric is the yearly return on investment. If a dollar invested today becomes two dollars in a year, it’s 100% ROI. Pretty hard to achieve.

Lending money to you is a nice way to invest for your creditors. A nice way to get a good ROI is paying off your debts. If you have a 10% interest loan, paying it back is completely equivalent to invest the same amount and obtain a 10% return. Paying back a 10% loan is an investment with guaranteed 10% ROI.

10% ROI is very high and you can’t get anything better without risks. Credit cards debts, personal loans, payday loans, car loans… all these category of debts are usually in that range and should be killed before even start investing.

So kill your debts as a first priority once the previous steps have been taken. As a nice side effect, paying off your debts will reduce your total monthly expenses and improve your cash flow and your saving rate.

There’s a debate toward repaying low interest debts though. Mortgages, student loans… I don’t really have a position here, I’ve never been in debt.

If you think low interest debts are good, look at your debts and try to revert the question: “Would I borrow money at that interest rate to reinvest it? Which amount?

I suggest to pay off any debt whose interest rate is greater than half your expected investments return. My expected investments return is the equivalent guaranteed return I’d take for not investing. If someone comes to me tomorrow with this offer: “Borrow me all your invested money, I’ll return it to you in a year with X% interest, guaranteed“, which is X would you accept? I don’t know you but I’d take 6% for sure.

So my suggestion is to get rid asap of debts with interest rate greater than (put your number here) 3% and limit exposure to “healthier” debts to no more than 10-30% of your Net Worth.

  • Invest.

    image credits: chrishooper.me

Once no high interests debt (possibly any debt) is hunting you down you have to find other ways to make your little green soldiers (what a cool name!) work for you, i.e. you have to invest your money.

There’s a lot of common ground but in the end “how to invest” is strongly country specific. Learn about your country taxation, opportunities and synergies.

You can actively invest your time and energy along with your money to hope for a greater return or, as I’d suggest to beginners, just go passive and join a fund.

Anyway, by no means you should jump on something you don’t fully understand! Learn the basics, understand risks and expectations, build your own model and validate it against reality.

Read some books, like “The Simple Path to Wealth“, “The richest Man in Babylon“, “The Bogleheads’ Guide to Investing“, “A Random Walk Down Wall Street“.

Once you’ve enough confidence, write down your Assets Allocation policy and your Investor Policy Statement. State your goals, your strategy, your exit strategy, your failure conditions, your withdraw policy.

Then invest! Go for it!

There are well known investment instruments like: financial instruments (bonds, stocks, funds, options…), real estates (flipping, renting), precious metals, art pieces, businesses and a lot of other atypical opportunities.

I just discovered someone is still making a living by producing digital dresses and selling them on secondlife!

You don’t have to pick only one of them, you can – and should – differentiate in order to reduce risks.

Seek out tax advantage investments, like pension funds. Max contributions out and – given the right conditions – do extra voluntary payments!

And finally, invest in yourself! Choose Yourself! As James Altucher (the author) always says: investing a Dollar on yourself is likely to give you a 50x better ROI than anything else. True story!

  • Increase your saving rate

You’re already in the amazing world of the “positive cashflowers” (what an amazing name?? I gave you too many nerdy tips so far!) things will naturally keep getting better and better over time.

Reducing debts will lower your expenses and improving your cash flow. Investing will increase your earnings and improving your cash flow. Why not push the pedal down even more? Like with sports or with a diet: you see good results and you push harder! Let the positive feedback loop spiral you up!

Aim to increase your saving rate. Your SR is your best friend. It’s the number that matters the most when evaluating one’s financial situation. The higher your saving rate, the stronger the spiral force will push you up.

And it’s incredibly easy to reach SR of 20-50%. It’s easy for you, my financial intelligent reader, that quit luxury and useless stuff to embrace happy and funny frugality!

  • Differentiate & Automate

Do you have all of your eggs into the same basket? Bad!

Don’t get in love with a single strategy. Don’t rely on a single income stream. Don’t invest in a single asset. Don’t rely on a single currency. Don’t rely on a single bank/broker.

Differentiate. The more the better.

Differentiate your skills too, don’t become ultra specialist on a single task. Always be learning new skills and put them into work. Start a side project, start ten of them. Create more income streams.

You want to fail 100 times with your new projects and ideas to learn and iterate faster, but you don’t want to fail once with your wealth!

Automate.

Make your savings and investing as automatic as possible. Save life energies (like your time) for things you like more.

Make your income streams as much passive as you can. Automate your earnings. Get your stocks dividends while comfortably sitting on your couch. Create, and let your creations work for you while you’re getting tanned on the beach.

Again, think long term.

… congratulation, you achieved financial integrity! Financial Integrity is “taking actions” and you now master it. You’re a machine, you no more have financial problems, you have financial goals!

Is that all?

Next Steps

The movie never ends. You’ve reached the finale you think you wanted but spectators are not leaving the theatre! You may realize that’s not a finale, that’s just the beginning of another movie. Or you may want to change your mind and rewrite the entire story. You’re confident in your tools and you have so much control that you can start experimenting. If things go south who cares, you can fix them and write another script. You’re now more a screenwriter than a simple character of that movie.

Happiness & Freedom

Here’s when money starts fading in background. You’re in awesome financial shape and headed toward never have to care about financial issues anymore. What’s next? It’s up to you. What do you value most? What makes you feel happy? Do you like your job? Do you like your house? Do you like the country you’re living in? You have tons of options. Here’s where you realize that money is the tool, the enabler. Once you have anything enabled money doesn’t matter anymore. Anything, not everything like the Joneses want to make you believe.

Intelligence is giving yourself more options, and I wholeheartedly believe that. As your financial situation gets better you can take important decisions like: taking a less paying but more interesting job, reducing your working time, retiring earlier than normal, retiring extremely earlier than normal, travel more, launch a business, fulfilling your dreams, seeking happiness and find your purpose in life. Achieve self-actualization.

My personal goals can be summarised as follows:

  • Pleasure: spend time with people I love (care).
  • Passion: learning as much as possible (curiosity).
  • Purpose: building something that positively impacts other people’s lives (creativity).

Spending too much life energy working on a job (even though I have the best job in the world) won’t bring me there, that’s why my next natural goal is to reach Financial Independence and quit the rat race as soon as possible.

Have a nice journey!

December 2016 Financial Update

Hi RIP voyeurs,

December 2016 is gone. Well, the whole 2016 is gone.

What a year! Half of the singer/actors died, terrorism and wars are everywhere and populism is slowly destroying the human species.

Sorry, I can’t help but share the cutest image ever, as a sign of hope for an amazing 2017. Here’s a kitten with a froggy hat.

Anyway, sad episodes apart, this 2016 guy has been incredibly good for RIP’s economy! I don’t know if we’re inside a (tech?) bubble or not, but everything went well beyond the most optimistic expectations!

Let’s not rush and follow the steps: as end-of-month routine I’m here showing my detailed numbers and getting positively surprised by them. That’s another over the top month, where along with an expected very high saving rate we achieved yet another gargantuan NW increase.

The reference document for the following considerations is my Net Worth spreadsheet. I’ll post a screenshot every month in these financial update posts.

Overview

Last month, we got the third comma (in Italian Lira), a round number I dreamed about when I was a kid! Apart from breaking walls, we increased our NW by ~22K and I thought that this trend was going sooner or later to reach an end.

Not today! December 2016 went actually better, NW increased by 23.8K EUR!

Here are the major wins for December 2016:

  • Good investments’ performance, especially the STOXX600 fund! Go Europe go! Actually, just before Christmas things were even better, with investments peaking and EUR weaker compared to CHF and USD. Delta NW was close to +28K, doomed to decline to a modest ~+24K 🙂
  • (Expected) Amazing saving rate, 83.4%. Mainly due to thirteenth salary and stocks vesting. Anyway, these factors were already accounted for in previous months (rows 11 and 34).
  • Greater than expected yearly bonus at Hooli. Expected 20-22K, got 26K. This bonus will be credited in January 2017, and that’s the 17K you can see in row 34. In November we had ~18K credits, part of it was the 13th month, part the expected bonus (lower than the actual one). Now I’m putting in 17K, which is the (pessimistic) net expectations for the 26K gross bonus, while the 13th has been cashed. That’s a nice contribution to NW increase.

Losses of December 2016:

  • Close to rent the Milan apartment, potential tenant declined at contract signing date. I hate my failure-remembering apartment. I’d rather sell it and put a big stone on this.
  • Unexpected medical bill for an October Miss RIP’s doctor visit we forgot. 437 CHF. We’d been below 4K without it. We received a suspiciously low bill of 134.50 CHF in October and here is the “remainder”.

Other facts:

  • Pillar 3 Buy in of 6,768 CHF done. Started a new Pillar 3 with PostFinance.
  • 80% part-time request at Hooli approved! I’m starting in January 2017. Sadly, first 2 Fridays are already gone for a trip to Rome to visit RIP Sr. which is in hospital for some heart problems. Anyway, being able to go to Rome 4 full days (Thu 5th evening to Mon 9th evening) without having to take vacation (just trade the following Friday 12th with Monday 9th) is one of the aspects that makes this life closer to what I expect FI would be. I can be there to help and support instead of being at work.

Incomes

Income for the month was 26,547 CHF (cell O57), second best month of the year, second to January when I received 2015 yearly Hooli bonus. This very high salary was expected, thanks to 13th salary and huge stocks vesting.

  • ~15,500 CHF my base net salary + 13th month. As you can see it’s lower to twice regular salary because (1) money got taxed more (2) my 13th salary was prorated by ~90% – I worked 90% this year – and (3) some benefits are not doubled, like health insurance contribution and transportation allowance. Anyway, very good!
  • ~7,700 CHF stocks vesting.
  • ~2,250 CHF Pillar 2 contributions.
  • 1,000 CHF Miss RIP contribution to shared economy.
  • 15 CHF Migros blue coupons. Yeah, I consider them income.

Total income in 2016: 191,250 CHF (cell P57). As expected, above 190K. I’m talking about net income. Actually, net take-home pay that includes everything injected into our Net Worth that doesn’t come from investments appreciation, dividends, interests etc.

Average monthly income in 2016 is 15,938 CHF (cell R57).

2017 Target is 170K CHF. I know, it’s conventional to set a target higher than last performance cycle, but I’m going to work 80% and that’s going to make a difference. I’m cutting 10% to 2016 income and let’s see if it works. I don’t plan (for now) to have a worth-mentioning side gig or other passive revenues.

Expenses

Total expenses for the month were 4,376 CHF (cell O58). Wait, before you say “Ha-ha you didn’t make below 4K as you planned!” I can explain the difference. We received an extra bill for a forgotten Miss RIP October doctor’s visit of 436.90 CHF. Without that we’d make it. In Christmas month, with two trips to Italy and huge and expensive dinners with friends and relatives. It’s totally ok!

Hey RIP… ha-ha you didn’t make below 4K as you planned!

-.-

Here’s the detailed list of expenses (in CHF):

  • 1443 – Flat rent (1278) and condo fees (165). Business as usual. I figured out that the actual split is 1278 rent and 165 condo fees. Just saying.
  • 863 – Health.
    • 437 – Doctor’s bill. Unexpected. From October.
    • 426 – Insurances (213 each one). Lower than the other months since we removed Miss RIP’s accident insurance. Next month on, this expense will grow into 490 CHF per month, since we changed provider and all providers are raising their premiums by 10% at least. Apparently healthcare costs are raising, that’s the second year in a row. And they say inflation in Switzerland is below zero… If you wonder how does healthcare work in Switzerland, there’s enough complexity that I feel time has come for a post about it.
  • 674 – Groceries. What the hell… We spent more on groceries during this month than the previous 3 combined! I had to do the math twice to be sure. Well, we’ve organised (and paid for) several huge dinners during this Holiday season. Plus we’ve done some convenient grocery bulk purchase in Italy and returned 100 EUR to Miss RIP’s dad for a grocery bulk purchase done in November.
  • 532 – Travel & Transportation:
    • 251 – Mexico trip. It seems so far away now, but yes, we returned on December 4th.
    • 101 – Local Transportation. My local monthly pass and few Metro tickets in Milan. I could and should have biked this month. The weather has been nice and it never rained. January looks way cooler and I can’t stand below zero biking, for now.
    • 85 – Flight tickets to Rome. Told you I’m using my first 2 Fridays to go to Rome: Jan 5th to 9th. I purchased last minute tickets using my Miles&More miles and got a nice offer. 15K miles for the “fare” portion of the ticket, i.e. 200 CHF. They offered me to pay the 85 CHF taxes and “fuel surcharge” with another 15K miles but I’d rather keep them and optimize their value. Btw, why there’s still a fuel surcharge when oil price is at its minimum?
    • 43 – Gas. Twice in Milan, used Miss RIP’s family car. Yes, I know, I bragged about being car free since 2008 but we’re going twice per month in Milan for secret project X and we need to be surgically fast and time efficient.
    • 42 – Trains. We paid for December train trips to Milan in advance, so this expense is for January Miss RIP’s solo trip to Milan.
    • 10 – Tolls. Italian highways.
  • 217 – Dinners Out. Christmas time, friends time and 100 EUR associated to Project X here.
  • 172 – Gifts. Miss RIP is unstoppable. Considering it’s Christmas time, I see this amount as acceptable. And btw, did you check out our reciprocal Christmas gifts?
  • 125 – Leisure. Few items purchased. In this category I also put 50 CHF for Theater Acting! The news is that after too many years without acting I’m back on stage 🙂 The financial news is that I joined a self funded company and at subscription time you have to pay a one-off entry deposit of 500 CHF. They say when you leave you get the money back, assuming shows tickets will cover costs (which they claim it happened for 20 years out of 21 since the company exists). To be safe, I’m assuming I won’t get my money back. I don’t wan to call a 500 CHF expense for December, so I’d keep an asset in “Other – CHF” (row 36) which will depreciate by 50 CHF per month for the next 10 months, generating 10 monthly expenses of 50 CHF. If I’ll get back my money when I leave the company (hopefully very far in the future) that would be a nice unexpected small windfall.
  • 111 – Taxes. Extra property tax on Milan apartment…
  • 100 – Cleaning Lady. A single 4 hour visit this month.
  • 75 – Utilities & Phone.
  • 63 – Fees. Half of it is Interactive Brokers fee on 40K sale of my Tech ETF. More on this later. Then bank fees and Project X fees.
  • <5 – Not tracked.

That’s ok, that would have been below 4K without the unexpected late medical bill. We could have saved on groceries and maybe some dinners out, but it’s Christmas, that’s essentially why we’re getting a thirteenth salary: to spend it on stupid useless things! Or, in my case, to ‘stash it entirely!

Total expenses in 2016 is 59,740 CHF (cell P58). Below 60K, cool. Above last month’s ambitious target of 59K. It’s ok.

Average per month: 4,978 CHF (cell R58). Finally below 5K per month.

2017 Target is 70K CHF. Whaaat? Less income and more spending? What’s wrong with you RIP? Well, Project X will cost a lot. It would involve some math and there will surely be some positive financial consequences too, but still expenses will skyrocket.

Savings & Saving Rate

Total savings for December are 22,035 CHF (cell O59). That’s… fun!

Total savings in 2016 is 131,510 CHF (cell P59). As expected.

Average monthly savings are 10,959 CHF (cell R59). Boom! 11K saved per month! It’s more than I earned in 2006. Earned, not saved. In 2006, not December 2006. That’s amazing!

Saving rate for December is 83.4% (cell O60). Out of every 6 CHF earned, 5 have been saved. Enough said.

2016 saving rate so far 68.8% (cell P60). Big jump toward 70% but not enough. We should have spend less than 2200 CHF in December to get the platinum badge! Anyway, I’m temporarily in first position but I heard that Oliver at Frugalisten will break the wall. Good for you mate! 🙂

Target for 2017 is 60%. Can’t cheat with Math. Less income, more expenses… 60% is actually hard to achieve.

Net Worth

Net worth at the end of the year is 551,973 EUR (cell O41 or P41). More than expected! Thanks Mr. Market!

Delta for December 2016 is +23,712 EUR (cell O42). Again, best month in 2016!

Delta Percent December 2016: +4.49% (cell O43).

The logo of this blog changed accordingly:

With another big jump of +2.37% toward the big goal.

Here’s a GIF that shows progresses (and my poor graphic skills) since June 2016, when I started blogging

Net Worth Delta in 2016: +169,459 EUR (cell P42). Being a high income FIRE seeker, most of it is due to savings. Still roughly 38K EUR come from investments, though. Not bad!

Net Worth Delta Percent in 2016: +44.30% (cell P43). Last year we achieved +53%, which is ok since all of it came from savings and the starting point was lower while earnings were similar to 2016.

Net Worth Target for 2017 is 670K EUR: expecting a 8% returns on investments (optimistic, given that we’re at all time market high) and lower savings.

FIRE

Forecast for 100% FIRE: 32 months left (-4 months, again), i.e. forecast Fire Date is August 1st 2019, (cell T20). Forecasts are drugged by these incredible months where I’m cutting 4 months each month and it just can’t keep up forever. I’m also going to slow down in 2017, so I guess I’ll need way more time.

So far I’m forecasting using current year’s data. To avoid getting depressed by an eventual bad 2017 start I’ll keep using a 12 months window. Plus, I think I’m going to review the Million EUR goal soonish.

Current Monthly allowance: 1,533 EUR (+66 EUR, cell T26). It represents how much I could withdraw indefinitely per month (at my desired WR) in case I decided to call myself FI today. This month I created another 66 Euro per month, forever!

Current Withdrawal Rate – Real: 10.10% (-0.51%, cell T29). This represents the WR I need to support current spending regime with my today’s NW. It got better this month because we increased our NW and reduced yearly expenses compared to previous forecast.

Current Withdrawal Rate – Ideal: 6.04% (-0.27%, cell T32). This represents the WR I need to support my desired spending regime (lower than current, since I plan to retire in Italy and not in Switzerland) with my today’s NW. When this number will be equal to the desired Withdrawal Rate (cell T11) we’ll be FI. Getting closer…

Next Steps

Investing

  • Pillar 3a. Opened an account with PostFinance and moved there 6,768 CHF, i.e. maximum Pillar 3a contribution for year 2016. I’m letting the money sit into a Pillar 3a saving account. PF allows you to invest part or all the money into some Pension funds with high stocks component, like Pension 75. I’ve been thinking about it for a while, but these funds are kind of crappy: high fees and the stocks are mainly Swiss stocks, which are not performing well. I can change my mind anytime, so no need to rush. Plus, we may be forced to cash it out when we leave Switzerland so we may lack the required long term horizon for a stocks-based investment. I’d also like to close the UBS 3a position (3 years of contribution, ~20.5K CHF) and move the money to PF. I don’t know if it’s possible and how much it would cost to me though.
  • Stocks & ETFs – Strategy. I didn’t set up time in this crazy December to write my Investor Policy Statement (IPS), redefine an assets allocation strategy and study which investment tools are better for my situation. Anyway, I’m giving myself room for corrections, i.e. I’m hoarding cash and differentiating by currencies. I’ve sold roughly 40K of Tech US ETF (sell price per share 116.51 USD, price now is 116.35). I’ve converted USD from the ETF sale to EUR, roughly 40K EUR (USDEUR price was 0.954, it’s still 0.954). I’m keeping cash, I’m expecting another ~35K CHF cash coming by end of January (Hooli stocks sale and 2016 yearly bonus). I plan to rebalance my portfolio by end of month, and I’ll need a strategy by then!

Simplifying

I didn’t start the process of getting rid of UBS account yet but I changed all the electronic bills and direct debit instruction to PostFinance shared account. I’ve also opened a personal PF account.

Missing: move salary over the new personal PF account, close Pillar 3a account (and ideally move the money to my PF Pillar 3a) and get a non UBS credit card. No need to rush but I’d like to get it done early this year.

Installed access apps for my banks and few mobile payments apps. Bye bye access card readers! On the downside, I’m even more bound to my phone. It’s the single most important thing I own, and not for its value but for the data you can access from it. If I lost it or it gets stolen I’m ruined.

Project X 

Most important pieces are defined, details (tons of them) need to be resolved, but that’s the fun part of the project!

Hey RIP, you think you’re funny? You want to grow a hype around this project none cares about? Just tell us what it is, who cares?

You’re rude! Not now, be patient!

Tax credit for 2016

We do taxes in March but with a click you can postpone tax time to September and that’s what I usually do, as a first class procrastinator. Not this time, though! In 2017 I want to file my taxes as soon as possible.

Like last year, the Pillar 2&3 buy-ins will likely generate some tax credit that I want to add to my NW asap (look at the +5,366 CHF entry on cells K36:O36, it’s about 2015 taxes). Tax credits and debts are resolved in 3 fiscal years, so in 2017 I expect to have to pay 2014 tax difference of 784 and be left with 2015 and 2016 huge tax credits. I’m not sure 2016 tax credit will be huge, since I’d need to pay taxes on ETFs dividends even though my ETFs are accumulating and not distributing, i.e. I received no dividend, the fund itself reinvests them. The Swiss tax authority has a list of dividends payments by fund and you’d better check it out before buying shares of a specific fund: if yours is not in the list, the whole capital gain (normally not taxed in Switzerland) will be considered dividend!

So, assuming 2% yearly dividend on my 250K investment basis we’re talking of 5K taxable, which means 2K taxes. I still expect to get back more than 3K. Good.

Others

I was close to rent my apartment starting January but the tenant declined at the very last minute. His current landlord demands 3 months notice to leave the apartment. I don’t understand if he started this process though. I’m not sure he’s assuming I’ll wait till April, without any signed agreement. I don’t know, I’m losing hope here.

On the bookkeeping side, I’m planning to simplify these reports: there are too many details here and information is too spread. I’ve set up the spreadsheets for 2017: a fully detailed one (the master, maybe not shared), an aggregated one with less information and cool to share, an expense-centric one and a dashboard one (cool graphs are coming).

I’m also going to stop including work credits, like “vesting” stocks or portion of 13th and bonus each month. It will lead to greater variance between months and in general smaller NW growth, since I’ll only add credits when they are 100% guaranteed. For example in case I’d lose my job the bonus and not vested stocks won’t happen. They are not guaranteed, so I don’t want to consider them until the money physically sits in one of my accounts.

Blogging Update

The year is gone, I’m 6 months into this blogging thing and I’m still ultra-motivated and want to write about so many things that it feels frustrating not to have enough time. Winter’s weekends are perfect for writing, but on each December weekend I’ve been busy traveling or hosting friends.

I only published 4 posts in December, one per week, and 52 posts since the beginning (i.e. 2 per week).

Readership is slowly growing and it makes me feel good. I’m not doing anything special to make it grow. I don’t set growth goals, I’m not selling anything and this blog is ads free, ideally it will be like this forever. It’s rewarding to see readership growth, though. It’s a morale boost!

I think with 3-days weekends I’ll have more time to write but I can’t commit to that. Several weekends will be spent with my Theater company, preparing our next show (8 dates between March 30th and April 9th).

From the networking side, I’ve been mentioned by the legendary Joe Udo in his Early Retirement Blogs list, that’s great! I’m also becoming more active on Rockstar Finance forum, which is the coolest place on the internet, thanks to Jay Money 🙂

That’s all for this month!

How was your December? What about your 2016?

 

What?

Project X…

Uff… ok, you’ve been patient enough. I and Miss RIP are getting married in June 2017 🙂

It’s an Italian traditional wedding so it will not be as frugal as I would have liked. I set up a budget of 20K EUR but I may overflow to 25K… Probably half of it may come back as gifts. Moooore on this in another post: the non-frugal wedding of the RIPs!

Happy new year!