January 2017 Financial Update

Hi RIP voyeurs,

January 2017 is gone. It’s been freezing cold here in Switzerland with temperatures below zero all the time.

Anyway, new year new spreadsheets! 2016 monthly reports have been very long full of boring details. I want to simplify from now on. The main NW spreadsheet for 2017 has been simplified and assets in the same class collapsed (except stocks/ETFs investments).

Overview

Before we start, here’s a note about 2017 Net Worth: I won’t take into account virtual earnings, i.e. “vesting” stocks, 13th month, yearly bonus. I used to consider them, a fraction each month. I have quarterly, by-quarterly (semesterly?) and yearly vesting stocks. I used to put into my NW respectively 1/3, 1/6 and 1/12 of the “vesting stocks” each month. I used to account for 1/12 of expected net 13th month and yearly bonus each month. Now I don’t. Those are not guaranteed until the money is on my checking account and the stocks are in my brokerage account.

What does that mean? While NW growth due to earnings used to be regular, it will now be spiky. March, June, September and December will be stellar months while the other eight will look poorer. In the end the yearly delta will not change.

The only credit I allow myself is the yearly bonus credit: issued in December and paid in January. Once issued it’s guaranteed unless you quit the company or get fired between Christmas and end of January. Not a wise decision to quit in January. That’s why January is not a stellar month given that paycheck contains yearly bonus. That’s why I expect December 2017 to be ridiculous in terms of NW delta: 10-12k net vested stocks (4 stocks packages, at today’s stock price), 7k base salary, 6k 13th month, 15k yearly bonus. All net, not gross.

This month NW delta is +6,624 EUR. Not that bad given that the USD dropped 2.5% compared to EUR, and US – where I invest a good portion of my wealth – has been downgraded to a Flawed Democracy.

Till the European morning of January 30th the delta was in the 5 digits world but then Muslim ban’s market reactions, dollar dropped and, yeah, 4K burnt to ashes.

Here are the major wins for January 2017:

  • Market’s still doing good! Well, I started drafting this post before The Psychopath signed the Muslim ban, right before market dropped. Anyway, all our ETFs went up, gold medal being the Tech US ETF (+2.77%). That’s to remind me that I did a stupid move last month by selling 40K of it. Never try to time the market again.
  • (Expected) Ridiculous saving rate, 87.3%. 2016 Yearly bonus + January salary = very high income. As I said, if you wonder why NW delta is small (+6.6K) given 23.8K CHF absolute savings and a favorable market, I already accounted for my 2016 yearly bonus under the “Other” (row 13). Expected 17K net, probably received a little bit less (I can’t tell exactly, but salary + bonus + extras = 24K).
  • Low expenses, less than 3500 CHF. A month below 4K is a good month! Well, there are some wedding expenses not included here, like Miss RIP’s wedding dress (she paid with her account but we will share total expenses). Actually there will be several wedding expenses in the following months that mess up our finances, but that’s how life goes.
  • Another small bonus at Hooli. 500 CHF to be credited in Feb for my amazing performances, cool!

Losses of January 2017:

  • Lower than expected net salary. 26K gross bonus + 10K gross base salary + unknown extras (complicated and boring to explain) = 24K net salary. Who said Switzerland is the land of low taxes??
  • USD dropped 2.49% compared to EUR (and 2.77% to CHF).

Other facts:

  • Wrote my IPS. Took time to write down objectives, strategies and asset allocation.
  • Invested more money. 13th month and Yearly bonus went straight to InteractiveBrokers! I’ve sent 35K CHF to my brokerage account and extracted 10K EUR to my Italian EUR bank account to cope with wedding expenses. A nice side effect of using InteractiveBrokers is the amazingly low currency conversions costs. I can buy EUR on the market at its price (actually buying EURCHF currency pair) and pay between 1.50 and 2.50 CHF trade fee. No costs on deposits to IB and no costs on your first withdraw each month from IB. Beat it if you can!
  • Rebalanced my investments according to the IPS. I didn’t fully adhere to my newly written IPS since it’d require a lot of trades. I’d like to aim to perfect balance with time, with new money being invested in assets lacking funds rather than selling current assets and buying new assets. The more money you move the higher you pay in trading fees. With 40k USD cash sitting on my brokerage account after the sale of half of my Tech US ETF and the extra 35k CHF invested I purchase 50k EUR worth of STOXX600 ETF and 15k USD worth of SWX:CSUSS-USD, an ETF tracking the MSCI USA Small Cap index. Extra 10k have been sent to my Italian EUR bank account as previously explained. My portfolio looks better to me but still not perfect.
  • I started a healthy routine of waking up early. Still not at it’s final permanent stage (and I skipped a morning), but waking up early in a consistent way is bringing more quality time into my life.
  • Free Fridays. 80% is here and it’s awesome! I don’t work on Friday anymore and the life balance of a 4 days workweek / 3 days weekend is a step toward acceptability. I guess 3 / 4 would be even better but in my “Hard Accumulation Phase” working 60% would unacceptably slow my FIRE journey.
  • Health emergencies in both Mr. and Miss RIP family. Both RIP Sr. and Miss RIP’s brother had surgery in Italy. We had to travel at the very last minute to visit our relatives. They’re ok now, but they have both seen better days. So yeah, January nomination to “first month without international trains or planes since I-don’t-even-remember-when” had to be withdrew.
  • Wedding budget finalized. It won’t be a frugal wedding and I’m not happy with that. What makes me happy is that Miss RIP cares about a perfect wedding and I’m doing my best (not much though, just avoid complaining too much with pricey extras) to make her happy. I won’t put many details here, like individual wedding related expenses, because few close friends of mine read my blog. I’m ok with throwing totals here though. Initial budget was 20k EUR, current forecasts say 23k but I guess we’d end up above 25k. It’s a shitload of money, I know. I don’t feel comfortable with it. I made the mistake of showing Miss RIP my yearly bonus… Anyway, wedding expenses will mess up our finances this year. Regular monthly cycles no more apply in 2017 and bills will come at random till June. Combined with spiky income months, I expect expect negative saving rate when the stars align.
  • Finished reading the Healthy chapters of Tools of Titans (Tim Ferriss). Want to blog about it. It’s awesome. It’s very inspiring.
  • Mr DIP found a job and he’s no more unemployed! I guess he needs a new nickname now 🙂

Numbers & Details

Total Income for the month was 27,227 CHF (cell E36).

Income highlights:

  • ~24,300 CHF my Hooli salary + 2016 bonus. Expecting less taxes but it’s ok.
  • ~2,000 CHF my Pillar 2 contribution.
  • 1,000 CHF Miss RIP contribution to shared economy.

Total Expenses for the month were 3,448 CHF (cell E37). Nice one! Anyway, I’m trying to change the way I report expenses. I added an expenses sheet to my NW spreadsheet. I won’t go into details here, take a look at the sheet if you want.

Expenses highlights:

  • New health insurance, costs went up from 426 to 490 CHF.
  • Several Trade fees (64 CHF) for investments. roughly 0.08%of capital moved (70k) plus some currency conversions.
  • Milan condo fees 120 EUR. We pay condo fees in Milan 5 times per year in July, September, November, January and March.
  • Paid 180 EUR as deposit for our next group hiking trip along the Via Francigena! It will be 5 days during Easter with Walden Viaggi a Piedi, an italian social trekking company. Both I and Miss RIP will take this break right after my theater plays and before turning 40 and getting married. Yes, it will be a pretty intense Q2 2017. Anyway, this trip will be a super frugal group hiking with a guide and seeking for hospitality in hostels and monasteries. Have you ever heard about Via Francigena? Canterbury (UK) to Rome? It’s our Camino de Santiago! Well, we’ll just walk 5 days in Tuscany, from Florence to Siena, first time together (I’m used to hiking trips). looking forward!

Total savings are 23,779 CHF (cell E38), very good. Saving rate is 87.3% (cell E39). Do not worry, we’ll be back to normal in February.

Net worth is 558,597 EUR (cell E15). Crap. Delta is +6,624 EUR (cell E16), percent 1.20% (cell E17). Very bad. As explained above it’s mainly due to USD drop and lower than expected net salary.

The progress bar changed accordingly:

With a small step of +0.46% toward the big goal. We were used to 2% jumps, it’s ok. There will be better months. And worse for sure! If Mr. Market will get irritated w may end up reusing some of the old logos…

Forecast for 100% FIRE: 33 months left (+1 months, calm, breathe), i.e. forecast Fire Date is October 1st 2019, (cell U19). What the hell! A month has passed, net worth increased by 6.6K and FIRE date moved away from us by 2 months? Just for fun I tried to play with linear forecasts. What if our NW increased every month by 6.6K EUR during 2017? We’d be doing steps toward FI, I expect to get closer to the goal. Let’s take a look at the FIRE date:

Whaaaaaaat?? If our NW increased by 6.6k per month in 2017 we’d end the year with 56 more months to go. How depressing 🙁

What if it increased by 5 digits per month from now on?

Holy sheet, 10k NW increase per month and at the end of the year we’d still be 34 months far from FI? Carrot and stick. Actually 10k per month is above my expectations for 2017. I don’t think the Market is going to positively surprise us in 2017 and let “exponential growth” or “compounding magic” happen.

All forecasts are linear forecasts over a 12 months window.

Current Monthly allowance: 1,552 EUR (+19 EUR, cell U25). It represents how much I could withdraw indefinitely per month (at my desired WR) in case I decided to call myself FI today.

Current Withdrawal Rate – Real:  9.75% (-0.35%, cell U28). This represents the WR I need to support current spending regime with 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: 5.97% (-0.05%, cell U31). 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 today’s NW. When this number will meet the desired Withdrawal Rate (cell U10) we’ll be FI.

Next Steps & Other Updates

Investing

  • I have extra money to invest in February, roughly 13k USD from Hooli stocks sale. Need to finish rebalancing my investments. I may sell another portion of Tech US (17k) to kick off Emerging Markets and Pacific.
  • Since we’ll do joined tax declaration in 2017, I’m thinking about opening a Pillar 3a for Miss RIP. She holds her Swiss savings in cash, what a waste of money. She’s totally not into investments and I may consider suggesting “safe” investments to her.

Wedding

This wedding project has been so far the most complex project we’ve been involved together. So much effort for “a single day”. I’m talking about the wedding day here, not about the fact we’re starting a family and the long term project. Just the wedding day.

Miss RIP is handling roughly 90% of the details, while I take care of bureaucracy. She’s doing an amazing job with location, invites, hotel for guests, transportation for guests, menu details, church details, flowers, rings, photos, videos… I’m just caring about my dress, whose hunt didn’t start yet while she’s already purchased it.

Anyway, expenses are coming. A lot of trips to Milan are coming too. In February we’ll purchase tons of train/plane tickets to Rome/Milan to cover until end of June 2017. Purchasing in advance lowers ticket costs by up to 90%.

Theater

That’s going great! I’ll be on stage end of March – beginning of April with at least 7 performances. The theater company is amazing and I already love all my new friends! I took over minor IT responsibilities and now maintain the company website and Facebook page. Feb & March will be super intense with full weekends of rehearsals and then it will be “on stage” again!

Milan’s apartment

I was (again) close to rent my apartment starting February but the tenant declined (again) at the very last minute. It’s getting really depressing.

Blog

January has been a page view record month. After few stable months PVs spiked! That’s not due to an “awesome day”, just the daily basis kind of doubled and… it feels good 🙂

Engagement followed the same pattern: more people interacting, commenting and it feels good too! I’m active in Rockstar Finance Forum, which probably helped a little.

Ah, I’m also on Twitter now 🙂

I technically have more time to blog so I may end up writing more. I still love writing but I’m thinking about kicking off a coding project with my free time that might erode time to my beloved blog. I don’t know. No, I won’t switch to full time Stardew Valley farming, do not worry 🙂

That’s all!

How was your January?

14 comments

  1. Dear Mr. RIP.

    I’m a Swiss FIREstarter originally from Germany. So from time to time, I want to transfer some CHF to my German EUR account. Using SEPA, my bank gives me a shitty exchange rate that resembles a fee of about 1.5%. So now I use Transferwise and pay a 0.5% fee.

    But I heard Interactive Brokers is even better. You write “I can buy EUR on the market at its price (actually buying EURCHF currency pair) and pay between 1.50 and 2.50 CHF trade fee. ”
    So I opened an IB account. But now they want me to transfer money to an account in Great Britain! Which would cost me SEPA fees. But oh well.
    However, IB charges a minimum fee of 10 USD per Month. So I’d have to exchange more than about 24’000 CHF per year to get below the 0.5% fee that Transferwise charges.

    I understand that you also have all your investments in your IB account. So you probably spend the 10 USD per month in transaction fees anyway. But I don’t feel comfortable having all my wealth invested with a U.S. based company operating from the UK. There’s a lot legal stuff to consider (see “Unified Commercial Code”). Do you feel safe with Interactive Brokers?

    Thanks & regards, Peter

    1. Hi Peter, welcome to retireinprogress 🙂
      Let’s tackle your questions!

      I have an IB account with base currency CHF and EUR & USD as other currencies. When I deposit money the deposit method changes based on the currency. If it’s CHF it’s an UK account, if it’s USD is a US account, if it’s EUR… well, I don’t know, I’ve never done a EUR deposit!

      Moving CHF from UBS / PostFinance to IB is straightforward. It’s a WIRE transfer and costs me nothing. Just select “all costs borne by beneficiary”.

      The 10 USD minimum IB fee only applies if you have less than 100k USD total assets value. I’m at 300k+ so I don’t pay any monthly fee.

      I feel safe with IB, 90% of people I know here in Switzerland (mainly my coworker) use it.

      1. Hi RIP,
        with PF I didn’t see the option “all costsvborne by beneficiary”. Only shared. Where do you find this option ?

        1. Isn’t it available in PF? With UBS it is. I’ve never tried sending money from PF to IB so far, but I’ll be doing this extensively in the future (when I’ll kill the UBS account)

          1. When selecting an international transfer with PF I’m given just 2 options: “shared” and “our”.
            Clicking on the help link gives more details about these 2 options (with shared you have a “fix” deduction while with “our” they simply say the expenses are borne by you… on their leaflet they don’t give any hint about amounts…).
            Two weeks ago I tried “shared” and paid 2 CHF to PF (they are billed at the end of the month) + 5 CHF to the “intermediary” (they state it should be 2 + 10 CHF if the amount transferred is > 10k).
            Today I’ve sent a transfer to IB through MigrosBank (which also has the “beneficiary” option). Let’s see how much will it cost…

          2. That’s weird… why the hell won’t PF allow you to select “all costs borne to beneficiary”? UBS does, MigrosBank does… that kind of sucks. 12 CHF for > 10k? It’s a lot!

            I’m in the process of closing my UBS positions, it’s planned to happen last week of Feb, after double checking that Feb salary is credited to PF. This PF->IB issue may make me reconsider the move. Thanks for the info!

            Please update us on costs for MigrosBank!

          3. OK, I can update on the Migros Bank situation using the option “all costs borne by beneficiary”.
            Sent 15’000, received 14’995 (-5 CHF). So basically the same thing as selecting “shared costs” (which I did two weeks ago; in that case the 5 CHF had been taken “by leaving” the MB account rather than “on arrival” at IB account…).
            Next time I’m going to try with SwissQuote (my last chance… :-)): according to their site, outbound payments in CHF “should” cost 2 CHF…
            https://www.swissquote.ch/sqw-static/trading/fees/fees_private_clients.jsp?l=e
            Let me know if you find something else with other banks. It would probably be worth a separate post or a “sticky” post on MP Forum…

          4. That’s sad. Anyway, is the 5 CHF a fixed cost? Does it scale with the amount deposited?

            I only handle blocks of 10k+ CHF to not fall below the minimum cost per transaction at IB.

            5 chf for transfer + 10 chf per trade looks like 0.15 “generalized trade fee”.

      2. Thanks for you reply.

        Just make sure what happens to your assets when IB goes down.
        In the US, you might lose everything (SEC Rule 15c3 – 3, Regulation T / Account Segregation, Re-hypothecation etc.). Since you are probably customer of IB UK, laws may be different. But still you’re under forein (soon non-EU) legislation.

        I’ve got about >400k with PostFinance, but transferring everything to IB would cost me dearly. They charge 100 CHF per transferred position! In Germany, this has to be free. By law. Selling everything would also involve a lot of money, a few thousand CHF.

        I opted for DEGIRO as my new broker (leaving the PF account untouched). DEGIRO’s GUI ist extremely efficient and their prices are competitive. Another plus: you do not have to pay the Swiss Stempelsteuer (“stamp tax”) if your broker is not Swiss-based. Or not?!

        Btw: By supporting Interactive Brokers, you indirectly support Trump (https://www.bloomberg.com/news/articles/2016-09-26/billionaire-donors-led-by-soros-simons-favor-clinton-over-trump). 😉 Just kidding. But know who you make business with.

        1. Ouch… the IB founder is a strong Trump supporter… What a sad revelation 🙁
          Yes, the “broker can go broke” risk is one of the scariest in the chain of risks (broker, ETF owner, company).
          It’s not even a matter of “what happens to your assets”, since if they want to be evil they can sell everything on your behalf and then bankrupt. Even in a state where your assets have some sort of guarantee.
          But I see this scenario highly unlikely. Banks can fail too. A “local” broker can fail too. It won’t help get your money back that it’s physically in your country.

    1. 33 months are a very optimistic forecast, based on linear forecast over last 12 months, which have been extremely positive. My realistic expectations are at least an extra year more.

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