Hi dear readers,
I know. We’re in 2020 already, and you read it right: this is Q3 (July-September) 2019 quarterly update, not Q4 (October-December). That’s how much I’m behind.
Q4 2019 has been a tough quarter, where I experienced the real scarcity of time. I returned to work full time, time for the blog has been nonexistent. The challenges of a new job and the everyday’s life intensified by few trips, mine and Baby’s sicknesses, and a move (more on this in a future post) left me with close to zero blog time.
Anyway, this update on summer 2019 is long overdue, and I really wanted to put it out. Many things happened in parallel of my burnout experience. Things like: I finally sold my flat in Milan!
So here we are. Expect a quarterly update for a while, I want to blog about other things as well.
Let me remind you that my Net Worth document is available with live data on Google Drive. For those interested in more spreadsheet technicalities and formulas, I have and maintain a private version of the doc that I don’t share for now (sorry). This doc is pulling data from an intermediate doc to obfuscate my private doc ownership (my identity). Please, stop requesting permissions to my intermediate doc. I know that this public doc lacks formulas, but I tried to maintain and keep synced two docs and it’s a hell. Deal with it for now, but I might change my mind in 2020 🙂
Here’s a quick picture of 2019 Q3 performance:
Summer 2019 has been a very strange period of my life, as you should know if you followed my recent 4-posts burnout story. My present and future self have been pulled in one direction and another in a chaotic dance. By the end of the year we’ve finally pruned the options tree a bit and took semi-definitive decisions. Stay tuned!
Back to Q3. My financial summer has been everything but “standard”. Highs and lows, but in the end our Net Worth increased by +65k EUR in 3 months. It’s a strange bag of mixed feelings.
First: I didn’t work. It was strange, but amazing.
Second: I kept earning a nice salary, even though it was cut by 20% in August and September. I entered the “long term sickness” status, which involved a 20% salary cut and some calls from the Pillar 1 provider to check whether I have “long term disability”, thus some insurance right. I also got an appointment with a Pillar 2 representative, who’s in charge of paying our long term sickness insurance at Hooli. It felt odd. Both earning a salary without working (and what a salary!) and being almost perceived as a disabled, unable to work, felt strange and a bit unfair. The meeting with the Pillar 2 insurance person was funny: I expected a lawyer with a suitcase and a perfectly knotted tie, and I was ready to fight… but I got a 55-ish years old reassuring Grandma with a perfectly baked pie. I’m joking, there’s no pie. I’m in love with rhymes, last one was a lie.
Third: our net worth grew by more than our savings for the quarter. Wait, it actually grew by more than our earnings. Wait, it actually grew almost twice our total earnings for the quarter! it means if we earned nothing we’d still be +30k EUR this quarter. Weird, but I guess it’s how it feels to be FI. Of course 2019 returns are extraordinary so far [note from the future: we’re in January 2020 and returns are still good, but you chickened out, asshole!], so I should’t get used to such amazing returns, but still…
Fourth: (lowlights) our spending level is getting out of control and I’m not comfortable with it [note from the future: it got worse in Q4, and 2020 outlook is scary]. There are always “irregular expenses” that we tend to justify as such: “oh yes, this medical bill”, “oh right, our July vacation”, “I see, this is for the August vacation”, “and this is for our September vacation”, “ah ok, this is for the new piece of furniture which is something that we don’t do every month, I see…”
I’m writing this in early
November January 2020. October has only been marginally better. In November childcare kicks in (+920 CHF/Mo). In December we’re 99% 100% moving into a bigger apartment (+960 CHF/Mo). Long gone are months below 5k 🙁 [yes, they are loooong gone]
NW (in EUR): 1.084M (Delta: +65.3k), of course it’s an all time high!
In the other two currencies that I track (USD and CHF) our NW is close to 1.2M, with smaller Q3 deltas.
The huge Delta in EUR is due to a weak EUR compared to both CHF and USD, a good but not excellent market quarter (with negative returns in August), and a couple of financial events that brought in 10k each: selling my flat in Milan for 10k EUR more than accounted for, and filing 2018 tax return to discover that my expected tax bill is 10k CHF below my forecasts. This made us reconsider expected 2019 tax rate as well (from 22% to 20%), which resulted is a small bump in our NW due to back propagation to January 2019.
Due to loss aversion, I think it’s much better to be pessimistic and discover you have been too conservative, than to be optimistic and then discover you have less than you thought.
Anyway, the three months have not been all equal:
- July has been very good (+35.6k EUR), driven by Mr.Market and by the Milan flat sale.
- August not that much (+8.4k), below zero thanks to a better than expected 2018 tax declaration.
- September very good again (+21.3k), thanks to Mr.Market.
Here’s our NW evolution since I started blogging (more than doubled our NW in 3.5 years):
Cash Flow – Income
Total estimated Net Income (after tax) for the quarter is: 36.1k CHF (roughly the same as June income alone).
it may sound strange to you that I track wealth in EUR and cash flow in CHF, and I agree with you. But I prefer to measure wealth by the currency I’m more likely to need in future, and my best guess is that it will be EUR. While cash flow is easy to measure in the currency one mainly earns and spends money. And for us it is CHF at the moment.
Split by month: July 15.4k, August 9.6k, and September 11.1k. In August Mrs RIP quit unemployment (-2.5k) and my salary got reduced by 20% due to long term sickness policy (-2.5k). My 20% salary cut lasted 2 months, Mrs RIP lack of unemployment is an ongoing thing.
I know, it sounds weird that one “quits unemployment”, but it was very tough to be a full time mom and find time and energy for job hunting. Plus we planned to spend most of the summer on vacation and last things she wanted was to look for job openings, send CVs, and be ready for interviews while on vacation.
Starting in November our daughter will go to child care 2 days per week, so Mrs RIP might re-apply for unemployment benefits and work on her baby massage side hustle. More likely from
January February though.
Income streams breakdown:
- Salaries: 29.4k CHF (gross, pre-tax). As I said, inferior months compared to the rest of the year
- Dividends: 2959 USD + 272 EUR (gross, pre-tax). Many distributing ETFs I own distributed dividends this quarter.
- Mr RIP Pillar 2 Contribution: 7956 CHF. I’m not sure they will retroactively change my Pillar 2 contribution due to 2 months of reduced earnings. I’m playing the optimistic card here. Actually I should receive back 3 months of my contributions (roughly 4k CHF) since our contract mentions that after 3 months of sick leave “contribution premiums are waived”. I’m waiting for a refund, which I’m not accounting for. Pessimistic move as usual 🙂
- Expected Income taxes: -7092 CHF. According to my 20% average tax bracket estimation. Lower salaries and lower estimated tax bracket implies lower estimated tax amount. A good news. [Note from the future: in 2020 I’ll model my expected taxes differently: income should be much lower, and wealth is no more non-negligible. I’d model both income and wealth tax]
- Expected Lump sum Tax on Pillar 2: -477 CHF. According to my 6% lump sum tax estimation. I will raise this one to 6.5% in 2020, with a small negative bump on our Net Worth.
- Other Income 200 CHF + 150 EUR. 150 EUR gift card for BabyRIP from a family member. 70 CHF Migros Blue Coupons, 20 CHF Coop Superpunkte converted in Gift Card, 10 CHF from BabyRIP old dresses sales (Mrs RIP is selling things on Facebook Marketplace and to the internal HooliSpouses community. Q4 sales will be much better) and 100 CHF for something I’m very proud of 🙂 Let me tell you this story: I got contacted by a reader in August who asked me if I could offer some coaching. I replied “yes, sure, let’s try. Never done it formally, but let’s try!”. He asked me how much do I charge for it and I replied “nothing. Maybe one day I will, if I demonstrate to be good enough and if I discover like coaching. But for now I don’t ask anything. If you really want to express some gratitude (not expected) here’s my Paypal link for donations that I just set up last week since a guy asked”. We had a couple of hours VC chat, where I tried to listen to his issues (facing some career change and tough discussion with his manager) and offer my suggestions. He then donated me 100 CHF. I wasn’t expecting that! I felt so proud! We met few more times, and I’m happy to announce the plan we drew together succeeded, and he’s now moving on to the next steps of his career within his company, having obtained everything we planned to ask to the management! He’s also relocating in my same city, and we plan to celebrate the success in front of a beer in January! That things triggered my desire to explore career/financial coaching as an option, and to launch my coaching experiment 🙂
Cash Flow – Expenses
Total Expenses: 21940 CHF. Average for Q3: 7313 CHF/Mo. Average for 2019 so far: 6022 CHF/Mo.
Monthly Details: July 6769 CHF, August 7309 CHF, September 7862 CHF.
They’ve been expensive months. And it’s just the tip of the iceberg. I don’t hide that this spending level is negatively contributing to my well being. We’re richer in absolute terms, but poorer in accumulated “years of freedom” based on current expenses. More on this in the FIRE metrics section.
Expenses Highlights (which are actually lowlights):
- 5225 CHF – Housing (1742 CHF/Mo): August has been very good, slightly above 1500 which is the absolute baseline of rent plus utilities plus some cleaning. In July I sold my Italian flat and had to face some extra expense (not much though). In September we had to pay extra condo fees and Electricity in Switzerland. The condo administrative year ends in July, and 2018-2019 balance was higher than expected. Well, it was somewhat expected since we’re 3 people now, and we consume more heating, water, and electricity.
- 4427 CHF – Health (1476 CHF/Mo): WFT?? This is disturbing, but that’s a good representation of our 2019. We both had unexpected medical needs. Mrs RIP has some liver problem (minor for now, but it needs to be monitored) that required MRI, several doctor visits, and continuous (not cheap) medicament. I had – as you should know by now – many burnout-related doctor visits, and since August 2019 three episodes of bronchitis (one became pneumonia). I’m going to check my lungs in depth in 2020. Luckily BabyRIP has ZERO deductible, else our bills would have been even higher! As a comparison, this was our Mutuel 2018 EOY situation (sorry, in Italian):
… and this is our 2019 EOY [from the future] situation:
- 1093 CHF – Groceries (364 CHF/Mo): We’ve been traveling in August and September (and accounting for grocery spending while traveling into travel category), so this is still higher than expected.
- 275 CHF – Transport (92 CHF/Mo): we’ve been traveling, not using much public transport in our city. Still this expense looks high to me.
- 657 CHF – Going Out (219 CHF/Mo): Again, this refers to going out in Switzerland, not on vacation. This is much higher than we were used to, and we’ve been traveling most of Q3. Anyway, this is mainly due to a slightly expensive round-number Mrs RIP Birthday celebration.
- 7848 CHF – Travel (2616 CHF/Mo): Unevenly split: July 523 CHF, then August 3472 and September 3853. We’ve traveled a lot. It was planned and we enjoyed it. Not frugal vacations, not luxurious as well. Let’s not forget that we also spent in travel category 2784 CHF in June, most of it toward July/August vacation. Which means we spent more than 10k on our late spring / summer (/ early fall) vacations. And that’s ok. I was (mentally) sick, I was told I needed fresh air, I was getting paid (from Hooli) to recover from sickness, and I spent less than I earned. I didn’t optimize for frugality, and I’m happy with that. No regrets. Some travel expenses detail:
- 492 CHF – Milan in July: oops, we had to cancel Croatia trip since I had to sell the flat. More details later.
- 2948 CHF – Abruzzo in August: amazing 2 weeks with friends in the Italian east coast. Overpriced, yes: that’s how August vacations work in Italy. We wanted to go with our Italian friends, and their jobs are less flexible than ours (which are: (1) unemployed and (2) sick). So we had to go in August. We also spent 874 CHF in June for this trip.
- 4388 CHF – Portugal in September: 3 weeks in Portugal: Lisbon, Cascais, Sintra (first half on the road) and Algarve (second half more stable). It’s been a relaxing and fun trip. Fun fact: in Arrifana beach we met a Portuguese family living in Switzerland. We chatted for an entire lunch and then said goodbye. Few months later, in December, the guy wrote an email to Mr RIP asking if I were the same person he met that day. Bro, you should have asked during that lunch, you have no idea how much my Ego would have exploded by being recognized on the road 😀
- 712 CHF – Baby (237 CHF/Mo): essentially a Stokke Tripp Trapp chair (consumed 200 EUR gift cards received during these months), few items for her growth stage (books, fuckingly expensive first step shoes, some toys), and a Pampers diapers bulk purchase of 150 CHF. About the diapers bulk purchase: we decided to “invest” in pampers (which is an expensive brand) to get a Mini Micro scooter. Coop Hello Family launched a promotion back in July: if you buy 15 boxes of pampers you get the Mini Micro (100 CHF of value). We wanted the scooter anyway, and already budgeted for it. Let’s do the math: BabyRIP regularly wears the MBudget Maxi (50 nappies for 8.50 CHF, i.e. 0.17 CHF per nappy). The Pampers equivalent would be the Pampers Baby Dry Size 4 Maxi Diapers 9-14kg 44 Pieces, 16.80 CHF (0.38 CHF per nappy, more than double the MBudget price). If we bought 15 packs of Pampers we’d have spent 252 CHF for 660 nappies. The same amount of MBudget nappies would cost 112.20 CHF. Even considering the Mini Micro we’d be at loss. Ok, one can tell that Pampers are better quality than MBudget, but I don’t buy this bullshit argument. To make it worthwhile it happened that Coop has been promoting 3×2 on Pampers! If you buy 2 packs, you get one for free. Let’s do the math again! 15 packs now only cost the equivalent of 10 packs: 168 CHF. Still overpriced compared to MBudget, but now by only 56 CHF. The Mini Micro is claimed to be worth 100 CHF. Maybe it’s a strong claim, but it’s confirmed by Amazon and store retail price. One can say I wouldn’t have bought such an expensive model, but my wife was looking exactly for it since February. So we decided to act, and this is the end result:
- 465 CHF – Leisure (155 CHF/Mo): Amazon books and boardgames (I’m not addicted, I’m not!), plus some cash withdraw from Mrs RIP, and a haircut for her. And 12 USD/Mo Breaking Italy Patreon subscription.
- 280 CHF – Fees (93 CHF/Mo): Mainly a 180 CHF for 2018 Tax declaration. I changed consultant because mine raised his fees from 300 to 360 CHF/hour. I’ve always been able to stay below 30 minutes of his time, preparing all the docs in advance. I accepted friends’ and colleagues’ suggestions and switched to a cheaper provider (150 CHF/hour, less than half). Was it a smart move? No, they took 70-75 minutes and I ended up paying the same amount I would have expected from my previous consultant. One day I’ll try to file my own taxes… Other fees are banking & postal (~30 CHF) and IB trading fees (70 CHF). This year I’ve been trading a bit too much.
- 32 CHF – Gifts (11 CHF/Mo): I think the only category that’s been cut in 2019 is giving. By a lot. Mrs RIP is focusing her generosity inward (toward BabyRIP) instead that friends and family.
- 770 CHF – Wedding: whose wedding? Ours of course! “Wait… what does it mean?” We finally received (2 years later) the photo album of our wedding. While it was amazing and depressing to see how young and healthy (and happy) we were just 2 years ago, it came with a 700 EUR final bill and messed up our July expenses.
Cash Flow – Savings
Total Savings for the quarter: 14.2k CHF (4727 CHF/Mo). Not good, especially in August and September (2313 and 3279 CHF respectively). Anyway, I didn’t work, got a salary cut, and spent more than I feel comfortable about. Still we saved some, and our NW grew by 65k EUR. It’s unfair to complain 🙂
Saving rate for the quarter: 39.3%, above 50% in July only.
Saving rate so far in 2019: 73.4%. Still not bad. Will we remain above 70% by the end of the year? [No, but close: 69%. Hadn’t you relocated you’d be at ~72%]
Few graphs with expenses (and savings) per month, compared to year-to-date average. Formulas and numbers are available on my 2019 Expenses sheet, part of my Net Worth spreadsheet.
Irrelevant FIRE Metrics
I know you like when I update my progressbar on this website, so let’s do it even though I consider these metrics irrelevant until I review our long term financial goals 🙂
In early 2020 I’ll redefine the overall goals, but for now let’s pretend out FI Number still matters.
we crossed 90% FI according to our original FI metrics! [Note from the future with spoilers: the year 2019 will end at 97.40%!]. The end is near, just 7 months to go! We should prepare our luggage
and move back to Ital
NOPE, we’re not going that way in the short/mid term. But knowing that we’re close to achieve freedom in our home country
should make ourselves more relaxed.
NOPE, I’m ultra stressed. Because we like this place, we got a new and more expensive rent, and our expenses are growing out of control. In fact our FI% in Switzerland decreased by few percent points.
Let me remember you that the FIRE Italy metrics are based on expected expenses (including taxes) of 3500 EUR/Months, and a 3.5% SWR on our entire Net Worth. SWR is well thought, expected expenses are just a guess. The FIRE Switzerland metrics are based on current 12 months rolling average expenses, and a 3.5% SWR. That’s why Swiss FI Number changes while Italian FI Number stays the same (well, I should at least adjust for inflation). Btw, the Swiss FI metrics are also broken: FI in Switzerland would require more money than “Yearly spending divided by desired SWR” to account for wealth taxes, Pillar 1 mandatory contributions, inability to invest Pillar 2 and so on.
This graph shows it better than words: the red line (monthly allowance if we were to withdraw from our NW, assuming it fully invested) is catching the orange line (ideal expenses in Italy), which means FI in Italy. But the blue line (current real expenses in Switzerland) is running away fro the red line, which means we’re moving away from reaching FI in Switzerland.
Financial Facts more or less in chronological order
Sold the flat in Milan in July!
July 1st, realtor told me we have a date for selling the flat in Milan! This is real, this is going to happen! Problem is: it conflicts with our planned trip to Croatia, for which we already purchased flight tickets.
I explored every possible solution to save the trip, but couldn’t make it work. I explored the option of delegating someone to attend the notary act (“procura notarile”, which would have required my presence anyway to sign the delegation document), but few bureaucracy duties arose the days after having fixed the date, and knowing how things work in Italy I couldn’t have made myself redundant. Same reason, and some logistical complexity, made me discard the option of going to Croatia anyway and just flight back and forth to Milan just for the sale.
Nope, Italian bureaucracy showed up pretty soon, aggressive and inefficient as usual.
Had to produce funnily named documents like “copia conforme certificazione energetica” (45 EUR because a notary must produce it), and “liberatoria spese condominiali” (35 EUR and a couple of faxes).
I had to be there.
The signature date couldn’t be moved either, since the bank director for the mortgage is going on vacation and we shouldn’t play with fire. It took 2 years to have the stars aligned, and delaying the sale could mean restarting the process from scratch. I’d rather lose the flight ticket to Croatia. We’re going to travel both in August and September anyway.
The entire “selling the flat” experience has been an expression of Italian folklore, but I won’t go into detail much. I wrote a long document (in Italian) to describe what happened on that day of July 16th, with so many things borderline illegal that I’d rather keep it undisclosed for a while. Just to give a hint: the poor Lady who bought my flat paid 90k EUR. I cashed 70k. The remainder went in fees, fees, and fees. Plus “feensurances”, notary fees and whatnot. She actually didn’t pay anything, she got a 90k mortgage for a flat questionably worth 70k. She’ll be repaying the mortgage for 25 years with an interest rate of 3.5%. Not sure if the interest rate is fixed or variable. I’ve seen ~15k EUR cash bills being handed over and split among 4-5 people I’ve never seen. I didn’t felt at ease.
Anyway, I walked out of the bank where we signed the notary act with a “wire transfer” initiated by the mortgage bank, that I’d see on my own bank account 2-3 days later. I refused to get a physical check.
The good news is: on my NW doc the flat value was 60k EUR (always be a pessimist!), since I sold the flat for 70k EUR, our NW got a +10k EUR bump on the sale day!
To recap the home-ownership experience:
- Purchased the flat in June 2010 for 105k EUR cash, directly from the previous owner. No middle men: no realtor and no bank involved. No mortgage: 100k zero interest loan from my father, 50k of which as a gift. Plus I’ve spent another 10k during the first few months to buy furniture, and pay the notary fees.
- Reason for purchase: “rent is throwing money away”, they say…
- Sold for 70k in July 2019. Same 115k EUR amount invested in a S&P500 fund during the same period (June 2010 – July 2019) would have become 400k EUR.
- Paid ~1.5k per year in taxes and condo fees for 9 years.
- To resize the loss by few millimeters, I’ve been living there for 2.5 years (paying no rent), and renting a room while living there. Plus I also rented the entire flat for 4 years after I left Italy for Switzerland. The flat was not rented during the last 3 years though.
- I have some good memories there though: many boardgame nights, for one of which I had to ask neighbors for an extra table and few chairs. We were 11 people playing a 3 rounds Dominion tournament over 3 tables! Many romantic dates, most of which with my future wife (but I bought the flat before meeting her). Few creative ideas were born there, and it’s probably during my stay in the flat that I discovered the ERE/FIRE movement. Goodbye my beloved shitty flat, I will never forget you (and your opportunity cost)!
Will I be a home owner again? Who knows, the experience made me a bit skeptical of the Italian Mantra “thou shalt not pay rent, and buy a house”, but never say never.
Pillar 3A for Mrs RIP
Couldn’t find a final answer to my quest: “how much can Mrs RIP pay into her Pillar 3A account for 2019?”
She’s been unemployed (RAV) until end of July, then really unemployed after. The RAV, i.e. the regional unemployment center, doesn’t pay a Pillar 2 for Mrs RIP, and her unemployment salary has been below the minimum to be able to deposit the full amount for 2019 of 6826 CHF.
I opted for the prudent solution of 20% of her salary, like a self employed person, and deposited 3730 CHF on her PostFinance Pillar 3A account as 20% of her January-July unemployment compensation.
In July and September almost all my distributing ETFs distributed dividends. US withholding tax (15%) has been withheld for the US domiciled ETFs like VB, VOO, VYM and VYMI.
This is becoming a regular thing, so I will emphasize it down from now on, unless something special happens.
Here’s a recap:
Fun fact: on IB, USD cash earns some (taxable) interest. I’m accounting for it as a dividend income from now on.
Total US Withholding Tax for 2019 is 826 USD. It will cross 1k by EOY. I’ll let you know if and how I’ll be able to get it back.
In July, as you might remember from my burnout story (third chapter in particular) I was very close to quit Hooli.
Loss aversion amplified.
When is the bull market going to end?
On August 1st, Trump tweeted some shit about China and my portfolio lost 17k in 2 days, in the month Mrs RIP lost her unemployment benefit and my salary dropped by 20%. Then on August 5th my portfolio lost another 19k. It’s the fifth of the month and my NW delta is -25k. Essentially, a whole year of expenses for a normal family living in Italy (that could be our future) is gone in 5 days.
I can’t handle these things, I must acknowledge my weaknesses and act accordingly. Then of course work to overcome them, but let’s not pretend to be Rambo when I’m not.
Luckily the market bounced, it wasn’t the beginning of a correction or a collapse. August was a negative market month, but not a tragedy.
I slightly changed my ideal Asset Allocation to 60/40, and raised ideal cash cushion to 100k EUR. As soon as I changed ideal AA on my investing sheet, many entries needed to get rebalanced.
Sadly I don’t have a screenshot of that, it would be fun to walk through. I only have the one I reported in June Update:
Anyway few things needed to happen:
- Sell some stocks
- Buy some bonds
- Keep some cash
Cutting down ideal stocks allocation resulted in S&P500 and STOXX600 becoming the more over-represented ETFs in my portfolio, so I sold some VOO and MEUD. At the same time I raised EM ideal allocation (to 10% of stocks – don’t remember why), which made Emerging Markets under-represented, so I bought more EIMI. This is why I couldn’t sell EIMI in late December: to hold it for 6 months at least, or risk to be classified as professional investor.
I also sold some PostFinance Pension75 shares within my Pillar 3A account with PostFinance to avoid being overexposed to Swiss stocks.
Here’s my trade summary for the quarter:
“That’s awesome, but hey RIP… what the hell are IEAC and IEGA?”
Good questions, thanks for asking. That leads to…
Ok. I raised the bond ideal asset allocation, but I hadn’t invested much in bonds so far. I consider as bonds my Pillar 2 and 3 (cash). I also consider as bonds the rental deposit and my Italian Postal CDs (which are actually bonds). Apart from that, I didn’t invest in actual bonds or bonds ETF until July.
I knew I wanted to do more research before putting my money into bonds, but in the meantime I’d take whatever seemed reasonable and was bound to my reference currency (EUR).
I know bonds in Eurozone have negative yield, and I studied a bit the math behind the connection between current yield, maturity, interest rate, and interest rate variations. I think the internet is lacking a good introduction to these fundamentals, so I plan to write a post about it very soon. It’s in my “next urgent posts” list.
Anyway, I wanted to experiment with EU bonds secondary market (ETFs).
I purchased a long maturity Euro Government Bond ETF (IEGA) from iShares (TER 0.09%) with the following characteristics:
Long maturity means high leverage on the interest rate and future bonds emissions yields. If the interest rate drops, this ETF shares will go up in price, but then expected returns after the jump will be lower. If the interest rate goes up, this ETF will go down immediately, but then the expected returns will be higher. Investing in long maturity bond ETFs is a discipline on its own (that we’ll investigate in a dedicated post).
I also purchased a mid-maturity Euro Corporate (Investment Grade) Bond ETF (IEAC) form iShares (TER 0.20%, a bit high given the low expected returns):
Anyway, this was not a well thought plan, I just wanted to park money in a “better than nothing” place, with some anti-correlation with the economy: if a recession happens, governments will lower the interest rates and my bonds would bump up, marginally compensating expected losses in the stock portion of my portfolio.
“RIP, interest rates are already below zero…”
Yeah, that’s something I can’t really grasp. I used to believe that in economic expansions interest rates were high, and lowered during the recession to facilitate the recover… when the latter is going to happen, where will we end up? -5% interest rates? Essentially a wealth tax on cash imposed by central banks instead of governments? Money in the bank will have an expiration date? It seems crazy to me. I wanted to also make some bet on interest rates raising, for which I’d need short term bonds. I will act on this in October, buying short term EU bonds (which sucks a lot, with negative yield to maturity and close to zero coupons), but it’s material for next financial update.
Anyway, IndexFundInvestor has published a good reference post on investing in negative yield bonds. Go check it out.
In July I paid my second 2019 tax advance of ~14k CHF. I will decide before EOY if to hold the third chunk or just pay it. I explained this many times: I’m a C Permit holder, and I don’t pay taxes at source. I get “suggestions” from the tax authority to pay installments during the year, based on previous final tax bill. In 2019 (like 2018) I got an estimation of 42383 CHF as City & Cantonal taxes (federal tax will be paid upon receiving final tax bill), i.e. 3 installments of 14128 CHF. I can essentially do whatever I want. I can pay what they suggested, less, or more. Once the final bill is calculated, you either get refunded (with some interests), or pay the difference (with some interests). Given that interests are low both ways, one might decide to hold on as much cash as they like, and pay taxes only at final bill time, considering the amount kept for few years as a very cheap personal loan.
In my case I’m holding a bit (~10k CHF per year, and I have 3 tax years still open…), but not much. I’m not investing aggressively, and I’m holding a lot of cash. My expected returns on the tax money is on par with their charged interest, so it doesn’t make sense to hold too much tax money.
In August a good tax news came: I filed our 2018 tax return, and it’s 13k CHF better than expected! I’ve been too pessimistic in 2018 and accounted for 13k more taxes than due 🙂
I owe the tax authority roughly 7k, instead of the 20k I thought!
To be clear: it doesn’t mean I expect to pay only 7k taxes! My tax return is ~50k, instead of the 60k that I expected. I already paid ~42k advances in 2018.
Of course this is not the final bill, it’s just my tax declaration, done with the support of a tax advisor. Final calculation from the tax authority will come in 1-3 years. Yes, they are that slow.
Like last year, the tax advisor didn’t include anything related to accumulating ETFs virtual dividends in my tax declaration. If the tax authority will tax them (and it should), I calculated that I’d owe an extra 3k CHF more or less. Still, in the worst case I’m 10k richer than expected! Awesome!
Pedantic note: this 10k should be accounted as extra income for 2018. Our effective saving rate for 2018 would be 75.4% instead of 74.4% 🙂 I’m too lazy to backpropagate the good news, so I just consider it as an August lump sum of 10k CHF (assuming they’ll tax my accumulating ETFs, being pessimistic as usual).
Given that 2019 earnings are similar to 2018 ones, I reduced current expected average tax rate for 2019 from 22% to 20%, and propagated it back to January, which meant an extra nice NW raise in the order of 5k CHF. This made previous monthly reports inconsistent with the spreadsheet, but who cares? 🙂
Some Personal & Blog facts
Despite having had more time (sick leave) on my side, I wasn’t able to blog much in July and August. In September I found my perfect equilibrium while on vacation in Portugal, and published 4 posts in a month about my burnout / midlife crisis experience.
[philosophical digression on]
I love my blog, and I feel the pain of not devoting to this creative endeavor of mine the time it demands. It hurts me to not write. I’m coming to realize that what made me passionate about “writing software”, was not the “software” part, but the “writing” one. I’m a creative person, and writing software is an amazing way to express creativity. Making a career out of it, and clipping the wings to my creativity has been a struggle for my entire career. Until maybe 4 years ago, I managed to carve out some creative space while writing professional code. Mainly thanks to mastery. Knowing my trade freed me from fighting the frustrating daily struggles of the beginner. I was able to focus on solving problems, which is somewhat rewarding even if the tasks were not always interesting, purposeful, or challenging.
At Hooli everything changed. Every creative aspect of writing code has been killed. And mastery is not attainable. You’ll always be looking for needles in haystacks. Blindfolded. It’s not Hooli fault, it’s my fault to recognize too late that I’m not suited for such a creative-less, mastery-less, purposeless job.
[philosophical digression off]
I’ve been mentioned on savebly, among the giants 🙂
I don’t seek followers, shares, likes, visitors, page views, public recognition, mailing list subscribers (I don’t have an active mailing list, it’s just used to send post excerpts automatically when a new post is published), and other forms of external validations. But I’m always proud when someone acknowledge my work 🙂
I’ve also been mentioned few times on finanzaonline, an Italian finance forum with all the problems of being “Italian”, like being full of victimism and trolls, but there is also interesting content, and nice people. if you can speak Italian and you’re looking for an Italian personal finance (not FI) community, you should take a look.
Since publishing my burnout series, social life around the blog increased 10x from October on. I’ve met so many of you in last three months 🙂 I will write about this on next quarterly update.
Do not worry, I’m making more time in 2020 to focus on my blog. Not only these “personal blog” posts: I have few research / technical posts ready as well 🙂
It will be an amazing 2020!
In early August BabyRIP walked her first steps (it’s about time, lazy 15 months old lady!) and said “papà” (dad in Italian) intentionally for the first time. It’s been just the beginning of her new development stage! [note from the future: fast forward 5 months and she runs and talks all the time!]
it’s been a bless to have had time to witness this stage of her life. My sick leave and our summer vacations have rebalanced her attachment to the two of us. After a year where only mom existed (a stay at home mom), we’re now growing a proper father-daughter relationship.
On my side, I found the perfect equilibrium in our Portugal vacation, in September, where I spent the mornings working on my projects (this blog) and the afternoons/evenings with my family. This fond memory of a happy and balanced life motivates me today (January 2020) to unplug from a life dictated by external factors, and to try to restore that magic equilibrium!
Late in August Mrs RIP finally decided which Krippe (child care, day nursery, creche) to send BabyRIP to. We picked one very close to where we live (two minutes by foot, which became five minutes since we moved into the new flat) which is also the cheapest we found in the neighborhood.
Five days per week, full time price is 2300 CHF/Mo. Baby goes to Krippe just two days per week, and it’s 924 CHF per month. It’s crazy, I know. Not a very frugal decision, since Mrs RIP is not working and she could take care of Baby 100% of the time. But she needs a break, to refocus on both her mental sanity, and her professional future.
Baby will start the Krippe on November 6th but – quote unquote, spoiler alert – on November 8th we started the mental process of relocating into the new flat, which is not over yet (but close). That means that during the first two months, the days Baby has been in child care Mrs RIP worked hard on the relocation project: boxing stuff, coordinating tasks like moving, cleaning, selling stuff, showing the old flat to other people… no time to focus on her projects so far!
Plus, 2-3 waves of “Krippe viruses” arrived, making all of us sick for few days every time.
This too shall pass.
We went visiting a couple of friends’ new giant and luxurious houses.
We’re surrounded by wealthy friends, with access to more capital and/or credit than us. No envy at play, but our 50 square meters flat now looks even tinier. My need for space is real, and as you know by now, we made the move in November (more details will follow in a separate post).
My wife – despite being more attracted by stuff than I am – is less impatient to change flat. When I rant about “our flat is too tiny!” she usually calms me down by remembering me how beautiful our cozy flat is, and what we gained in exchange for a small flat: more money saved, more time spent with our family in the near future, and the option to retire earlier (or make a brave change).
I love her attitude!
But we moved into a bigger flat anyway.
Back to work!
What? Oh crap, I was going to forget this!
I went back to work in September, two times.
First time was on September 2nd, for just a full day.
I was temporary on 50% sick leave, and I went to work for a full day before taking the rest of the (50%) month off to visit Portugal.
It felt strange to go back to work for a single day, but since I already signed the new contract for a new role (Reliability Engineer) with the new team starting on September 30th, I spent the day chatting with my future ex colleagues and telling them about my new adventure. I also did some cleanup of my desk, and some standard Software Engineering cleanup chores like reassigning bugs, TODOs, unsubscribing to internal team related feeds and so on.
Second time was on September 30th, this time in the new team, and “back for good” [note from the future: well… [note from the real future: LOL!]].
I felt charged, rested, motivated
and I couldn’t wait to restart working NOPE, on the first day of my N-th life at Hooli I had the impression that I didn’t have much to do there anymore, and the first few weeks confirmed that feeling. But that’s a story for a future update 😉
Holy Crap, did you really survive until the end? It’s almost 7k words! I’ve read books smaller than this post! And I don’t mean children books 😀
I love you folks!
Happy new year, and see you very soon 🙂
Enjoy some of our summer vacation pictures!
And have a nice day!