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!

16 comments

  1. “If yours is not in the list, the whole capital gain (normally not taxed in Switzerland) will be considered dividend” – how sure are you about this? I checked it some time ago and realized that one of the 6 funds that I’ve chosen is not on the list (VXUS, which I could have easily replaced with basically the same VEU which is on the list…). If they’re going to tax all capital gains, then probably it’s better to sell it now and just switch to VEU, but I’d need to pay stamp duty on both transactions… Which is not a lot. I’m more worried about it messing up my spreadsheets. 😀

    I’ve heard that they only tax capital gains if there is no way to determine actual dividends. For Vanguard funds they’re listed quite clearly on their website. And since you are the one entering the dividends that are going to be taxed, maybe you can just copy the info from there?..

    And congratulations on the Project X! 🙂

    1. Hi Rimas,
      your case is very specific so I recommend you to seek out a qualified financial advisor. My guess is that Vanguard is somehow special and I’m pretty sure Swiss tax authority is able to get the dividend information.

    1. Thanks PoF, but as I said it’s pretty hard with lower income and greater expenses in sight 🙂
      I hope that the 52 extra vacation days will bring other kind of happiness in my life, more than the money I’m leaving on the table.

      … Actually 51 days, since Friday April 14th 2017 is Good Friday and it’s a Holiday in Switzerland (at least in my Canton).

  2. Hi RIP, you’re moving really fast towards your target, congratulations ! And for your Project X too, of course ! 🙂

    I’ve seen you’ve chosen PostFinance for your 3rd pillar. I understand you’re going to move back to Italy for your retirement and you don’t want to be stuck with the Post Fund if swiss market sinks, but did you consider the PF Pension25 ? It’s mainly bonds, also more stable than the other products, but it offers a better return than the 0.5% of the saving account… I’ve gone with Pension75 but I’m not going to leave for many years.

    By the way, how did you get rid of the yellow card reader ? Did you switch to MobileID ?

    1. Hi Weirded, yeah, last two months have been incredibly good for our finances. It’s mainly due to good market performances and my insane exposure toward USD that I’m going to fix early in 2017.

      I didn’t consider Pension 25, actually. I didn’t set up much time to think… I was in “either go 100% stocks or leave these peanuts in a saving account”. But you’re totally right, maybe I’ll give a shot. My problem is that PF pension funds are based on UBS ones with extra fees on top. It’s a fee orgy. I need to convince myself that it’s ok and that there’s nothing better I can do with that money.

      Got rid of yellow PF card reader switching to MobileID. I don’t understand why they want to make me pay something like 4 CHF per year after first year free. I’m playing with it for this year and see if it’s worth (spoiler alert: yes, it is. A Franc per quarter is totally acceptable).

  3. Hi RIP, you’re right that PF funds are “funds of funds” and you don’t see the real expenses. Anyway, once you have your yearly 6.8k locked in your 3rd pillar, you don’t have many possibilities… either taking the 0.5% (for now) letting them sit on the savings account or try to get something more with the funds path!

    Anyway, one can decide in any moment to transfer from the saving account to the fund(s) or vice versa, so we have no hurry ! 🙂

    I’ve also thought about getting rid of the horrible card reader in favour of the MobileID, but according to the MobileID site it seems I have to change my SIM card too… that being so I put the idea in the fridge… will think about it again this year !

  4. Hey RIP,
    I was just going through your numbers, (expenses/Income/Saving rates). I noticed you consider savings for 131,510 for this year BUT, at which point are you considering Income taxes detraction?
    In reality that would be 131,510 – Federal/Cantonal/Local Taxes.

    Are these the numbers for the family (future Msr. RIP and yourself?) or just yours? I mean Income/Expenses.

    Looking forward to be in touch

    1. Hi Erik!
      Actually, 131K are already after tax. I have a B permit, I’m subject to “tax at source” (quellensteuer). The earnings you see are already after income tax. I’m also doing my best to account for the Kapitalauszahlungssteuer for my Pillars 2&3 future withdraws!
      I’m even sure I’m going to get some positive tax return (last year I’ve ended up getting back ~5000 CHF, not yet cashed) thanks to my Pillar 2&3 extra buy-in (and increased Pillar 2 contribution).

      So no, taxes are already included in my numbers 🙂

      This number is for myself + shared economy. Current model is: I get my salary, future Mrs. RIP gets her salary, we pay “taxes” to our family in ratio 3:1 (normally I pay 3K and she pays 1K each month). I’m tracking the economy of Me + RIPFamily. Which means: earnings are my salary + Mrs. RIP contribution to shared economy. Expenses are my personal expenses + family expenses.

      I plan to join our numbers (more on this on another post) once married, which would inject some instant +30-40K of Net Worth (Mrs RIP savings) and change the cashflow by adding more incomes (the currently Mrs RIP kept portion of her salary, ~2K) and more expenses (Mrs RIP individual expenses, close to ZERO).

      things are going to be way brighter once we do that 🙂 Saving Rate will be back at normal 65-70% 😀

      1. That’s great!
        are you aware of the fact that earning >120k per year allows you to pay taxes as a citizen and not to have to pay at source? By doing so, you could save some extra money with some extra deductions. At least that is my case. up to today that have helped us save more.
        cheers!

        1. I don’t think so, are you sure?
          I knew that earning >120k per year means that you have to file tax return, while <120k you’re just paying tax at source.
          To pay taxes “as a citizen” you need to have C Permit, which I hope to get in November 2017, after 5 years of residence 🙂

  5. Hey, thanks so much for this post and best of luck reaching FI within 2.5 years!
    I have a question: how did you learn all that stuff? I am european too, and wonder how I can start investing? Is there some safe simple way until I learn more about stocks market? (Like in US they have “buy vanguard s&p500” thingy)
    Thanks again!

    1. I learned it on the internet and consuming shared resources among colleagues.
      I studied a little bit ETFs, which market indexes exist, what’s a stock exchange, what’s an ISIN, a TICKER, what’s the difference between accumulating and distributing, what’s a fund’s domicile (ok, I need to continue my “investments” series), what’s the TER, what’s a currency pair, what’s P/E ratio, what’s the importance of diversification and so on.

      Then I found which is the best broker available in Switzerland and how to setup an account and place orders.

      Then I picked few indexes I wanted to track and put money on them 🙂

      Then – yesterday – I refined my strategy and asset allocation (more to come soon).

      What’s blocking you?

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