2019 Q3 (July-August-September) Financial Update – Shame on us!

Hi dear readers,

I know. We’re in 2020 already, and you read it right:ย 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 ๐Ÿ™‚

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 ๐Ÿ™ย  [yes, they are loooong gone]

Net Worth

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):

While here you can find historical data back to 1991, a bit dominated by the Hooli phase. In my Historical Net Worth sheet you can find tabular data.

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 ๐Ÿ™‚
  • 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 ๐Ÿ™‚ 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 ๐Ÿ™‚

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):
I was healthy as fuck in 2018! I wish I could have predicted what was going to happen in 2019 and lowered my deductible to 300 CHF… is it “timing the market”?

… and this is our 2019 EOY [from the future] situation:

Jackpot! We both spent our entire high deductible and dipped into co-insurance (10%) region. And 2020 looks closer to 2019 than to 2018. I missed the deadline to reduce the deductible for 2020, which was November 30th 2019. I thought I had time until EOY. A mistake that would cost us ~500 CHF each if we’d spend both deductibles again ๐Ÿ™
  • 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 ๐Ÿ˜€
  • 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:
R.I.P. MBudget box, buried below a dozen high quality Pampers nappies! P.S: I actually thought about reselling the pampers for 70% of their tag price and make a profit…
  • 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. Mrsย  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 ๐Ÿ™‚

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.

July:

Health and “Wedding” expenses ruined July

August:

Health and Travel expenses (and low salary) made August worst month of 2019

September:

Health and Travel. Another bad month.

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 ๐Ÿ™‚

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.

Dividend Season

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.

Trades

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:

I was so aggressive back in June… 50k cash, and 65/35 stock/bond split… the good ol’ times!

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…

Bonds

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.

Taxes

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 ๐Ÿ™‚

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% ๐Ÿ™‚ 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? ๐Ÿ™‚

Some Personal & Blog facts

Blog

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 ๐Ÿ™‚

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 ๐Ÿ™‚

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 ๐Ÿ™‚ 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 ๐Ÿ™‚

It will be an amazing 2020!

Parenting

In early August BabyRIP walked her first steps (it’s about time, lazy 15 months old lady!) and said “papร ” (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.

Other

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 knowย  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 ๐Ÿ˜‰

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 ๐Ÿ˜€

I love you folks!

Happy new year, and see you very soon ๐Ÿ™‚

Enjoy some of our summer vacation pictures!

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And have a nice day!

32 comments

  1. Interesting post! Iโ€™d avoid investing in low yielding Euro bonds though. Afaik you pay tax on the coupon (which is often higher than the YTM (yield-to-maturity) following a period of declining yields) but only earn the YTM. Holding such bonds to maturity you would net lose (as TER + taxes outweigh the close-to-zero YTM). Youโ€™d only benefit short-term in case of further declines in yields through MtM gains (which are in the long run offset by lower YTM). Also, the main risk I see for the stock market would be increasing rates in which bonds would also suffer tremendously and not bring any diversification.

    1. I know, it’s a probably bad move to hold EU bonds in general now. There are few scenarios that would make the investment worth though, the problem is that those scenarios correlate with expected high stocks return. Will write more about this in a future post (or series) about bonds investing.

      btw, are you talking about short or long maturity? corp or gov? or simply the one I currently hold?

      1. Generally about all EUR bonds. Negative yields plus excessive taxes IMO make them really unattrative. As an example, according to your screenshot IEGA has an average coupon of around 2.5%. That’s the value tax authorities use to calculate tax on those investments, even though in reality you do not earn anything. In my canton (BS) I’d pay around 28% tax (marginal tax probably even a bit higher) on dividends/ coupons resulting in a yearly cost for holding this ETF of 0.7% (to be fair I should probably add that this will decrease over the years as higher-coupon bonds mature). This is not even considering the fund’s TER and obviously it is before inflation. Not very appealing. If you want to add stability to your portfolio I would hold cash instead, making sure not to pay interest (some banks started to charge) and to be coverd by deposit insurance. I’d rather have a sure 0% return than an uncertain negative 0.8% (TER 0.09% + tax 0.7%) return.

        1. Well, sure 0% (which is not sure above certain threshold) vs very low volatility 1.7% (1.5 -0.7 -0.09) I’m with the latter, especially when it’s uncorrelated (or better inversely correlated) with stocks. I’m not sure how correlated short term bonds are with stocks in this low interest rate / bull market weird situation though.

          Anyway, I’m not here to defend EU bonds or claim that they’re awesome – they’re not. I’m just (as always) trying to not follow the herd.

          1. What I tried to say is that you do not get any positive yield on these bonds. In fact, the coupon is irrelevant (it matters only for tax purposes), your return is the yield-to-maturity.

            Here a simple example: a new 1-year bond is issued at a price of 100 and pays a coupon of 10% (single coupon in 1y). Now the bond price goes up to 110. The coupon is still 10% (side remark: it is market convention to express the coupon relative to the nominal and not the price), but the yield-to-maturity is now 0%. Why is that? Because a new investor purchasing this bond needs to pay 110 and at maturity gets back 100 (principal) + 10 coupon (ie in total again 110). He hence gets a return of zero even though the coupon (used to determine his tax) is still 10%.

            Computing the return based on the yield-to-maturity and assuming a 30 percent tax on the coupon, I get the following after-tax (pre inflation) return for IEGA: 0.13% – 30%2.48% – 0.09% = -0.70% (ie negative 70bp) and for IEAC 0.6% – 30%1.71% – 0.2% = -0.11% (ie negative 11bp). Obviously for both you assume duration risk and for IEAC also corporate credit risk (say credit spreads go up by 1% but sovereign yields remain unchanged, IEAC loses around 5%), so not entirely risk free either.

            About the “herd”: I am quite sure it is still in EUR bonds as they have no other choice: institutional investors cannot place EUR cash without negative return, eg ECB charges banks -0.5% for overnight deposits. There are still ways for private investors however to invest EUR cash at 0% (and remaining under deposit insurance). It’s a situation where private investors have a certain advantage over institutional ones. I work for a fixed-income house, and believe me if we could we would love to invest in EUR with a (close to risk-free) return of 0% but we can’t – hence we need to buy EUR bonds to get a pick-up over the -0.5% ECB rate.

            On the correlation: cash has 0% correlation with stocks, I would say not too bad ๐Ÿ™‚

            Just trying to say that EUR bonds after tax do not look that appealing. Personally I hold neither bonds nor cash, I am 100% in equities since many years now.

          2. replying to sunnyberny:
            my fault, you’re right. YTM includes coupons (It is also assumed that all interest payments received are reinvested at the same interest rate as the bond itself – cit investopedia).
            So high coupons (high taxes) and low YTM is the recipe of disaster.

            I’m learning, the hard way it seems ๐Ÿ™‚

            I don’t know yet, maybe some of the coupons amount is not taxed though.

            Some of my reasoning still might hold, but now I’m less confident. You showed me how bond yields are driven so low by banks who have worst borrowing condition from ECG than retail bank customers.

            I’ll take time to digest this info and act on it.

            Thank you very much!

          3. P.S. I think you are right with the tax, looking at ICTAX it seems they tax you rather on something in between the yield and the coupon (but not as high as the coupon). Maybe tax is based on the distribution yield which is somewhere in between the yield-to-maturity and the coupon these days. It is higher than the yield-to-maturity as it does not factor in negative pull-to-par effect (most bonds trade above par and will hence lose in value or pull-to-par until maturity) but lower than the coupon (again as most bonds trade above par the yield distributed as a percentage of the price is lower than the coupon). So it is not as bad as I thought, but probably you still end up with a very close to zero or even slightly negative return.

            All the best anyway, was not meant as a dogmatic comment against bonds or your asset allocation. You are on the right track anyway ๐Ÿ˜‰

  2. Hey RIP,

    really curious about the posts on bonds you are planning to make. I was shocked about how little is written around negative yield bonds. I think if this were US bonds there would not be such a lack of information.
    around your unease with your increases with spending. Mad Fientist recently did a really nice episode with Ramit Sethi (https://www.madfientist.com/ramit-sethi-interview/). They talk a bit about this and it may be helpful to you.

    Godspeed!

    1. Hi IFI, yes, I can’t find good bonds (secondary market) investing information. It’s easy to find “what is a bond” and how to understand its yield, but nobody buys bonds directly ๐Ÿ™‚
      I have a post (or a series) about that in my “urgent next posts” list.

      about Ramit Sethi, his “I Will Teach You To Be Rich” used to be one of my best blog of pre 2010 era. I stopped following him I guess 6-7 years ago when he was giving anti-frugality advices and mocking penny pitcher. I know his site evolved out of personal finance, maybe I should take a look again.

      p.s. I’m making progresses on “your project” but please forgive me if I’m slow.

  3. Hi Mr RIP

    It sounds as if you made some decisions about your future. The next update seems promising. Looking forward to it!

    Some notes:
    – your wife could have paid the whole 3a amount of 6826 (see here https://www.beobachter.ch/geld/3-saule/vorsorge-auch-ohne-job-saule-3a-einzahlen). Its too late now, but you could have saved a few taxes there.
    – regarding diapers: ever heard of Lillydoo? Definitely much cheaper than pampers and you never have to carry home diapers again.
    – jesus, I donโ€˜t understand how you pay somebody to do your taxes. Especially now when you sold your flat. Buy me a bottle of red wine and Iโ€˜ll teach you how to do it on your own. ๐Ÿ˜‰

    1. About Pillar 3A for my wife: I’m not sure it works this way. She didn’t “not work” the entire year, and also got less than the minimum to be eligible for a Pillar 2 if she were working (CHF 21’330).
      If we were allowed to deposit more into her 3rd pillar it would be a (small) tax loophole: she could work for a month, we will deposit the full amount, then she quit.

      Interesting diapers solution, but still a lot more expensive than MBudget ๐Ÿ™‚

      Deal, bottle of wife is waiting for you!

      1. Hmm… I might have to re-read your article again (Can’t remember where it was – if only your articles were shorter. ๐Ÿ˜œ).
        I understood that your wife was unemployed (i.e. going to the RAV). If so, then she would be considered as “employed” even if she does not pay into a 2nd pillar. Actually you could check her unemployment-payouts – there should be deductions for insurances and if she is insured against death and disability that makes her eligible to pay the so-called “small amount” into pillar 3a.
        The 20% usually only counts if you are self-employed.

        Working for a month and depositing the full amount should work – given that she earns more than 6826; you cannot put more into 3a than you actually earn, but it is totally fine to bring your income down to 0.- (many students have an income of zero after all the deductions).

        I know – but my girlfriend was considering pampers. And I honestly also like that I don’t have to carry anything home and I like the ease of a subscription. For us, it is worth the additional price.

        No need for bottles of “wife”, thanks. ๐Ÿ˜‰
        But you can write me an email if you want to discuss the tax forms.

        1. In theory, since our tax declarations are combined, we could benefit from deducting the full small amount of 6.8k even if my wife earned 1 CHF as a yearly salary ๐Ÿ™‚

          Anyway, with RAV she didn’t get a Pillar 2 but she paid the LPP insurance, which should be enough to make her eligible for the full small amount. That raises my subjective likelihood of you being right to 90%, which I think is as high as it can get since there’s some ineradicable ambiguity in how the rules are stated.

  4. Good to see you doing these updates again ๐Ÿ™‚

    Total US Withholding Tax for 2019 is 826 USD. It will cross 1k by EOY. Iโ€™ll let you know if and how Iโ€™ll be able to get it back.

    I’d be super interested in that post!

  5. Hey Mr. RIP

    just a question, why is in your networth spreadsheet your “Mr Pillar 2” and “Mrs Pillar 2” under income declared? For me this is an expensive which i had to pay each month from my salary.

    Thanks for your answer ahead.

    1. Hi Daniel, my cash flow section records money in and out of our accounts.

      In the salary section I put the salary before expected taxes, and after Pillar 1 and 2 contributions. So the salary is already AFTER Pillar 2 contribution.

      in the Pillar 2 section I put all the money that ends up hitting our retirement accounts, including the company matches, minus the risks component (which are unrecoverable costs, with no residual value).

      So if you see “Salary 10k”, “Pillar2 2.5k” it means I received ~11.25k salary, paid 1.25k into Pillar2, and my company matched it with another 1.25k. Which means my checking account receives 10k, and my Pillar2 account receives 2.5k.

      Pillar2 money is still money, and it’s yours. It has some limitations, and expected taxes on withdrawal, but it’s your money and should be treated as well.

      Is that clear now?

  6. Fantastic insights about the financials as always, Mr. RIP!! But there’s just one thing I can’t shake off which is seeing that picture of all the Pampers you bought! How can one SMALL TINY baby consume so much? I often ponder about this point as I also have one tiny demanding, bossy baby myself haha

    P.S. I also bought the Coop deal of Buy 2 get 2 FREE but I didn’t “commit” as much as you did haha

  7. Hi RIP and best wishes for 2020,

    I made a search and could not find that you analyzed the rent versus buy question in your situation and in switzerland. I donโ€™t know if FIRE in switzerland is still one of your option.
    I would be interested to get some feedback from people who did the math on this. I donโ€™t know which city you live in, but I bet a flat equivalent to your new rent to buy is probably >= 1.2 MCHF (my rent in geneva is 2800.-/month and I bet the same flat would sell somewhere between 1.3 and 1.7M).
    The monthly housing expense would be greatly reduced, but on the other hand several hundreds of thousands have to be removed from ETF investing.

    This is linked to my second thought reading your article, your need for space. I fear at some point you will feel again the lack of space even in your new flat (kids are invasive and the worst part is still ahead of you ;-)). Could you tell how you are dealing with this, were you able to organize a space for you to have some time alone in your new flat ? I am a daddy of two, and I couldnโ€™t find any solution to keep a good balance (I just gave up on the idea to have time to read, write, thinkโ€ฆhoping to find this balance back somewhere in a distant future).
    I am also amazed to read that you can dedicate half-days to yourself during vacations of you 3, to be clear I am admirative! If I intended to do a quarter of this my wife would make it clear that this kind of selfish behaviour is impossible. Do you have any advice or tricks on how your family is able to make these alone moments possible ? (because if I understand correctly Mrs RIP also needs some rest sometimes).

    Cheers

    1. Hi Metalflakegreen,

      Regarding your half-day me time question. Weโ€™ve got twins that are just coming out of the toddler period and my wife is a SAHM. It most likely strongly depends on your life partner. My wife is also quite understanding and cuts me more slack than vice versa. However the grind she does is tough. She is much better when she gets moments of respite and because I want her to remain sane I pitch in โ€” plus now the little ones are waaaay more interesting. One thing you could do is reserve alone time for each of you and then the other takes 100% control. Communication and time management are essential with this setup and one does end up having to temporarily compromise in some aspects. This shall pass as well ๐Ÿ˜‰

      And to your point about space in the apartment our solution was to rent bigger than weโ€™d really need. The kids share a room and share a schedule. Since I have regular home office weโ€™ve set aside a room for this purposeโ€ฆno disturbing when door closed. Then once the kids are asleep (usually by 2000) we know whether we want to spend the evening together or whether each wants to do his own stuff for 2h. Donโ€™t forget to hit the sack by 2230 cause otherwise you wonโ€™t get your beauty sleep :)โ€ฆ and in my case be non-functional the next day.

      1. Hi justanotherfry, good points. I guess with two kids things don’t scale linearly, and high family effort is expected from both.

        Pre-agreed alone time should be in the constitution, and the human rights.

        Our daughter also goes to sleep at 20 more or less. The problem is that in last 4-5 months she takes up to 2 hours to fully sleep and free my wife to do whatever she wants in the evenings, which is usually “go to sleep as well”.

        1. Hi MrRIP,

          The best advice we got from our first pediatrician: put them on a schedule and never deviate, ever! And to be honest we would have had a very hard time if we had not done exactly that. Kids love routine and they thrive on it. You notice they get messed up when you go on vacation and are more lax about the structure of their day and their routine.

          Our two sleep through the night since they turned 4 (months ;).) We do pre-sleep routine starting 1900-1915. By 1945 lights are definitely out and although they want us to sit with them in the room to fall asleep seldom takes more than 15โ€ฒ-20โ€ฒ. So by 2000 weโ€™re out and have about 2 hrs for ourselves, whatever that may mean. Oh, before I forget, we made their room pitch black for falling asleep from day 1 and they also were in their room since day 1.

          We knew that we would not have help so our main goal was to have them independent as soon as we could, otherwise the grind would wear us down. Failure is not an option though.

          1. I totally agree with your pediatrician advice: routines work like a charm! We were able to install good routines and deviate from the norm just a bit until 6 months ago. Nowadays it’s a mess. We’ve gone 2 months on vacation, then relocated, then Christmas…

    2. hi Metalflakegreen,
      very valid questions indeed.

      You’re right, I didn’t do any serious post on rent vs buy. I’ll write about it, but it’s not in the “next urgent posts”. A post about my experience moving to the new flat, and some cool pictures, is half baked and probably coming out soon-ish (2-3 more urgent posts). The closest you can get to my current thoughts about rent vs buy is the “5% rule” video by Ben Felix, but make it 3% instead of 5%. that means a flat rented for 2.8k/mo (33.6k/y) should be priced less than 1.12M CHF to be worth considering. If 2.8k includes Nebenkosten (condo fees, common charges), which you would have to pay anyway, the break even price is even lower.

      About space: you’re scaring me ๐Ÿ™‚

      First, we used to live in a very small flat, so we’re now experiencing a kind of an abundance crisis. It bothers me to have to choose which toilet to use (or which one runs short of toilet paper)! With that in mind, it will take time to feel tight in this new flat. We also both come from families with small flats. My wife used to live in 70 square meters in a family of 5 (7 at peak!).

      Second: I have a room for my studio. It was a prereq for moving. I’m sharing it with a sauna (!!!), but my 7-8 square meters represents my empire over which I’m the benevolent dictator for life. Our flat is a 4.5 rooms, which means my daughter is the dictator of her 14sqm room, and my wife dominates the remaining 80sqm empire. But I’m ok with that ๐Ÿ™‚

      Is it true though that our daughter doesn’t let me focus 100% as I wish while I’m at home, but once I’ll be working from home we’ll try to educate the family that “dad is working now”. plus, she goes 2 days to child care full day, which helps. Noise canceling headphones + locking the room with a key should also help.

      About time & family settings: you’re scaring me again!

      First: our “vacation” was nut just a vacation. It’s different if you work the entire year and go 2 weeks on vacation. Then she would have killed me if I wanted some alone time. We spent ~6 weeks on vacation. It was ok to not be 100% together. Plus I was sick. I needed to recover. I was getting paid to recover. The happiness and stability (and financial future) of our family depends on my recovery. That was a priority.

      Talking about the future, I’m going to work on my own project one (very close) day, and since we’re not FI I’m still the “horse” our family is betting on to bring food on the table. If I need focus time, we agree that it’s good for the family as well.

      Plus, my wife really likes to spend time with our daughter, and 2 days per week she’s also free to work on whatever she likes. She’s already FI in some sense ๐Ÿ™‚

      I guess this would drastically change if we have a second child, which is at least 9 months + an extra 15 months before the eventual newborn needs more space than a crib. No need to worry now.

  8. Hi RIP,

    First time posting here. ๐Ÿ™‚ Just want to tell you that I really enjoy your posts and the way you write them, they really fell “natural” and human.

    One of the things I like is your honesty about all subjects even the ones that you show that you are contradicting yourself from the past about all the “good rules” of investing. It shows the real human you are and how afraid you are of losing… The same happens to me and I believe to many more non-professional investors and FIRE wannabes once they feel the ground going away from their feet while losing money.

    At least the last half a dozen years really had been the best for FIRE wannabes and investors in general. I can almost say is really easy to make money by investing in ETFs like the S&P 500 but we should do a simple mental exercise of thinking that the same way that the market goes up, it can also go down by the same amount. Do you have the stomach for that? I know I don’t… I have been there with some small amounts and I didn’t like the feeling.

    My advice to all is, do your mental exercises, do the math of losing some large amount of your investments, imagine yourself 50% poorer and think what makes you comfortable enough to sleep well at night. In the end it can be your health at risk, not only your money. Don’t loose your health for nothing in this world.

    Regards,
    Luis Sismeiro

    1. Well said.
      I did my mental exercise – and experimented a couple of -10%/-20% on the field – and I know that such high volatility PLUS the lack of a predictable income (I’m quitting) AND high expenses can’t go together.

  9. Great post and hats off for posting about your struggles as well.

    I was wondering about the tax implications for taking out some of your pillar 2 after a buy in beyond the 3 year freeze. You said the tax authorities can impose a higher tax rate if you misuse the system but for your canton (ZH?) anything up to 12k is safe. Where did you find that info? I did a few buy ins and like to repeat them (but in canton VD). Thanks!

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