December 2018 Monthly update

Hi RIP voyeurs,

welcome to my last monthly update of 2018, which will include a yearly update too.

Before that: a month ago I announced a temporary break / slow down from blogging. The rationale behind my decision was “I don’t want to half-ass everything“. I tried to detach from blogging to use the saved energy on other aspects of my life: family, parenting, working, social circle, creativity, curiosity and so on. I really tried.

Problem is: this is not a zero sum game. I missed my blog. I missed networking, researching, writing and all the activities associated with it. I missed the pleasure of coming up with yet another post ideas while showering! I didn’t feel more relaxed or with some surplus of energy to spend somewhere else. I felt emptied and sad.

So I decided that it doesn’t matter if it means waking up at 5am and being frustrated by life things, but I’m back! I’m back half-assing many things, while I try to shut down other activities that don’t bring a positive net value to my life.

Ok, let’s get back to work!

Brace yourself, this is going to be a loooooong post. Here’s a table of content to help you navigate it.

Hi RIP friends, welcome (again) to my last monthly update of 2018. As always, the metrics discussed here come from my Net Worth spreadsheet (embedded here).


Net Worth Metrics

Net Worth by end of December 2018 is 851.8k EUR (958k CHF / 976k USD). Bye bye Million 🙁 We’re back at June/July 2018 level.

NW Delta for December is -25.1k EUR. Ouch, a very bad month. Just two months ago I claimed October 2018 to be “the worst financial month of my life so far”, with a -16k Delta. Well, the record didn’t last for long!

NW Delta for year 2018 is +116.5k EUR. Not a bad year after all. Almost +10k per month on average. Much less than the 180k (CHF) savings, which means investments have been bad this year. More on this later.

2018 Monthly NW Delta history

Measured in EUR:

  • January+24,084 (life was good!)
  • February+3,428 (market crap, USD strong)
  • March: -5,039 (market bad, EUR strong)
  • April+25,460 (market good, USD strong, BabyRIP born)
  • May+32,062 (market ok, EUR very weak)
  • June+8,234 (a normal month)
  • July+25,580 (awesome month, market all time high, paternity leave)
  • August+20,010 (life is perfect. market goes up, another month in paternity leave. Also, I’m a millionaire now)
  • September+5,848 (any market except US is going down. Can you feel the smell? Also, paternity leave is over, I’m back to work)
  • October: -16,072 (market went south, USD got strong – losses in USD -44k. No more millionaire)
  • November+18,028 (market partially recovered, CHF is strong. Are we bullish again?)
  • December: -25,128 (nope. It’s a bear market. Worst month on record)

Here’s a visual evolution of our NW during 2018, month by month:

Yearly NW Delta history

Still measured in EUR, since I have data available:

  • 1977-2003: 10k – that’s what I started with at the end of 2003, right after graduation.
  • 2004: +9.1k – almost doubled my wealth in 2004, during research years.
  • 2005: +5.6k – another relatively good year.
  • 2006: +1.9k – money is getting scarce in research (in Italy)…
  • 2007: +4.3k – moved to Milan, developing videogames.
  • 2008: +4.7k – proudly saving money, with a low salary and high rent in Milan.
  • 2009: +2.3k – getting harder to save money…
  • 2010: +1.8k – first year as a freelance, faced some voluntary unemployment. Purchased a flat.
  • 2011: +7.9k – business is going well!
  • 2012: +25.6k – business is great! I’ll never work for the man aga… oops, I was joking Mr. Hooli!
  • 2013: +82.8k – just savings from Hooli, didn’t invest at all.
  • 2014: +93.6k – same as above.
  • 2015: +133.2k – same as above plus… oops they unpegged the CHF from the EUR.
  • 2016: +175.5k – started investing, amazing year. Also: started blogging at RIP.
  • 2017: +183.4k – best year! The delta in CHF and USD is more impressive! Also: got married.
  • 2018+116.5k – wasn’t that supposed to be a horrible year? I’m fine. Also: became father.

Here’s a visual evolution of my NW since 2004:

Income Streams

Monthly Income

Income for the month is ~54k CHF gross (expected 42.1k CHF net).

I know, it sounds ridiculous. It’s actually 54k after social security (Swiss Pension Pillar 1) contribution. The actual gross income is more or less 57k.

Anyway, it’s all been flushed down the toilet in this bear market.

Monthly Income breakdown

  • Salaries: 25,261 CHF (gross, after Pillar 1 but before income tax). My base salary, my 13th month, and Mrs RIP unemployment benefit. For those who’re not familiar with “13th months”: in most of Europe your annual salary is paid to you in 13 installments, one for each calendar month and an extra one in December. You get double salary in December. Somewhere in Italy there’s also the 14th month in Summer. Before you scream, it actually works against you. The actualized cashflow at the beginning of the year would be much better if you’d receive 1/12th of your salary each month instead of 1/13th eleven times and 2/13th at the end of the year.
  • Hooli stocks: 25,974 USD (gross, same as above). December and June are huge stock vesting months. I’m also enrolled in stocks autosale, which means my stocks are sold at vesting time and the proceedings wired to InteractiveBrokers. My December stocks have been (auto)sold on the worst day of the month (around Christmas). Given the valuation of Hooli stocks at the beginning of the month, this could have been 30k.
  • Dividends: 580 USD + 69 EUR (+ more coming in January). 554 USD from WING (high yield corporate bonds), 26 USD from VOO (Vanguard S&P500 ETF, US domiciled, distributing) and 69 EUR from IPRP (REIT Europe). There are other expected dividends yet to come: VHYD (Vanguard World High Dividend Yield Stocks) announced 0.35 USD per share, which means ~700 USD, being paid off in January, plus I expect something from IEML (Emerging Markets Government Bonds). There’s something I don’t understand from VOO: the dividend I received on my IB account is exactly what’s been announced. No 15% withhold has been applied by the IRS (US tax authority). Is that normal? Is the announced dividend already “after withholding tax”? I don’t think so, since withholding may vary (you get 30% if you don’t file a W8-BEN form). Does anyone know what’s happening? I know we’re talking about peanuts, but I plan to invest more in US domiciled funds in the near future.
  • Pension Pillar 2: 2.6k CHF. Standard. 500 CHF goes into the mandatory portion, 2.1k into the extra mandatory one.
  • Other income: 135 CHF. 100 CHF comes for a Coop gift card purchased with some of my miles&more miles that were going to expire soon. I consider this as income, since Coop gift card is real money, while I don’t account for my miles in my net worth. Another 35 CHF comes from Migros blue coupons for the period October-November. Btw, in my December Migros coupons package I see two 3x accumulation coupons instead of the old 5x. This is a bad move, Migros…
  • Expected income tax: -11.8k CHF. Based on my expected average tax rate of 23%. Almost 12k of taxes. Who said that Switzerland is the land of low taxes?
  • Expected lump sum tax on Pillar 2: -155 CHF. Based on my 6% assumption, in case I’m get the money out. I’m not sure I should keep accounting for this.

Yearly income

Yearly Income for 2018 has been ~306.6k CHF gross (after Pillar 1 but before taxes), expected 242.2k CHF net (cell P108 of my NW spreadsheet).

Best year in my life so far. It’s more per month (on average) than I was making per year until 2012!

Yearly income breakdown

  • Salaries and bonuses: 201.1k CHF gross
  • Hooli stocks: 67.2k USD gross.
  • Dividends: 3764 USD + 867 EUR gross.
  • Pension Pillar 2: 32k CHF (gross, but not subject to regular income tax).
  • Expected Income taxes: -65.5k CHF.
  • Expected lump sum tax on Pillar 2: -1.9k CHF.

Pie chart of 2018 net income breakdown. Amounts converted in kCHF and expected taxes included:

Pie chart generated with meta-chart

Expenses

Monthly expenses

Total Expenses for December have been 5206 CHF. Not super bad, considering it’s been Christmas time, and Italian apartment tax & condo fees time. Actually, looking at the graphs, December has been the averagest month of the year 🙂

Monthly expenses breakdown

  • Housing 2216 CHF: Swiss rent + condo fees 1385 CHF, Italian condo fees 250 EUR (I pay ~700 EUR per year, but I do it in 3 installments), Italian property taxes: 312 EUR (625 EUR per year, 2 installments), cleaning 100 CHF, TV&Internet 99 CHF. The Italian flat costed me 562 EUR this month (632 CHF)… Without that this would have been a ~4600 CHF month.
  • Health 857 CHF: insurance premiums for the three of us (with Mutuel, Telmed model & highest deductibles, plus semiprivate hospitalization supplemental insurance for BabyRIP) 701 CHF,  Mrs RIP medicines purchased in September 157 CHF. We thought they were free or fully insurance covered (still under the zero-deductible after-pregnancy time) but nope. Bills come 3 months late here in Switzerland.
  • Travel 850 CHF: Mrs & Baby Milan trip mid December, our Christmas in Milan, our EOY trip in Veneto. BabyRIP has been traveling quite a lot in December / early January.
  • Groceries 589 CHF: pretty standard. A good fraction of it comes from Italian bulk purchases. While we’re at it, I screenshat (is that a word?) the yearly grocery spending with second level details. Yes, I categorize spending with two levels of detail in my private accounting, but only copy first level categories in my public spreadsheet. Here’s the groceries breakdown:
And the winner is… Migros!
  • Gifts 242 CHF: Christmas Mrs RIP’s gift frenzy.
  • Baby 180 CHF: I don’t track baby food anymore, it’s just a grocery expense. This 180 CHF amount is mainly stuff/toys that Mrs RIP purchased second hand from local online communities. Plus a splurge-of-the-month: a set of 3Sprouts boxes that fit our Ikea Expedit bookshelf. I tried to push a bit for Ikea default boxes (3.99 CHF each) but then I gave up pretty soon and accepted this 25-30 CHF per box (!!!) splurge. I must admit they’re really cute 🙂 Take a look:
can you recognize some of my books? 🙂

The toughest part has been to decide which boxes to buy. They have 13 different animals with different colors. I and Mrs RIP had an independent stack ranking session and a results merge. It’s been a funny family evening 🙂 What was not fun was to free 8 out of 25 cubes of my 5×5 Expedit bookshelf. I gave up 6 cubes out of 18, Mrs RIP 2 out of 7. I can handle a 50% reduction of my clothes wardrobe with just an eyebrow shrug, but having to cut a third of my already compressed bookshelf has been physically painful. I have books covering other books covering other books. But we have a small flat and BabyRIP needs a safe space where to play. I’ll give my books the space they demand one day.

  • Leisure 129 CHF: mostly Mrs. RIP cash spending.
  • Eating out 117 CHF: a couple of lunches out for Mrs. RIP and random expenses at bars. This entry doesn’t include eating out while traveling – I decided to simplify my life and count travel expenses all in Travel category. Excluding, of course, non-consumable purchases while abroad.
  • Clothing 22 CHF: a couple of t-shirts for me. I realized that after 6 years at Hooli more than 50% of my t-shirt are Hooli branded. That’s too much. Rebalancing in progress.
  • Other 4 CHF: Italian banking fees. Ridiculous. I have a complex banking situation in Switzerland and I pay no fees. I have a single bank account in Italy and I pay fees and taxes on it. I don’t close it for 3 reasons: 1) EUR ATMs cash withdraws – ok, can withdraw EUR in Switzerland with PF, 2) domestic EUR wire transfers, like shitty flat condo fees and taxes payments – SEPA from Swiss banks doesn’t work as you expect, i.e. commissions on both sides, 3) I need it to be able to keep my high yield Italian Bond (row 28 of my spreadsheet), which is netting 650 EUR/Year, 4.6% of its value.
  • Transport ZERO: What? Well, we spent nothing in local transportation in Switzerland. I purchased my monthly pass in end of November and it covered my commutes until Christmas time. Mrs RIP consumed some leftover “6x daily pass” ticket, and most of the activities she and BabyRIP do are within walking (and baby strolling) distance. While in Italy we drove, paid highway fees, gas, parking tickets but I decided to account every expense while traveling into the Travel category. So ZERO transportation costs. That’s my way to celebrate 10 years being car free 🙂

If you exclude travel and f***ing Italian flat related expenses this would have been a fantastic cashflow month! 

Yearly expenses breakdown

Yearly expenses for 2018 have been 61,983 CHF. While my perfectionist self grunts at the missed 60k goal (5k average per month), I guess we can tellt hat 2018 has been a great year. Last year we spent 63k excluding wedding (91k wedding included, but wedding was almost financially neutral).

And we had a baby this year!

Let’s look at what we predicted about that last December:

Guess what happened? 0 out of 3! Mrs RIP is still producing income via unemployment (less than her salary though), we didn’t move into a bigger house and we didn’t use child care, which is becoming more expensive than ever. I heard a full time Kinderkrippe costs between 2.5k and 3k per month. Holy crap!

So… amazing job, RIPs! Let’s celebrate!

Btw, where did the money go? Here’s a 2018 expenses overview:

Do you want a pie?

Here you go:

Housing is eating 37% of our pie. Housing an health together makes more than 50% of our expenses. Given that we pay insurance premiums and rent between 1st and 3rd day of each month, on average on the 3rd of each month we’ve burned half of our monthly budget. LOL.

In US they say “the big three”: housing, food and transportation. Well, our big three are: housing health and travel. Ok, groceries are close enough. 

Travel, wtf?? I have the impression we didn’t travel at all this year. No big exotic trip, no long vacation. What happened?

RIP, you went to Maldives in January…

Yeah, ok, cool. But we paid 95% of the costs for this trip in December 2017, so they’re not in 2018 expenses report. What’s in those 8.3k?

2 summer weddings of very close friends, a 2 weeks long September vacation in Jesolo (close to Venice), few trips to Innsbruck/Rome/Milan/Vals, Maldives leftovers, grandparents coming to visit BabyRIP, FIWE 2018 (btw FIWE 2019 will be in Budapest in May and I’ll be there for sure! Apply now!).

Ok, fair enough. We traveled a lot. I didn’t realize it.

Taxes

A word about taxes. Expected income tax for 2018 is 62.5k CHF. More than what we spent to live, eat, have a roof, be warm, have fun, travel and do whatever we wanted. That’s disturbing.

I don’t consider taxes as expenses. Ok, yes, there’s a taxes category with 78 CHF in it, but that’s for “other minor taxes” and it’s going to disappear in 2019. And btw, in Housing category there are property taxes for my Italian flat, but we’re talking about few hundreds there.

I just realized this was the first year of my life where (expected) taxes are larger than living expenses. Should taxes be included in your expense tracking? Well it depends. My friend indeedably says:

Taxes are not something that should be blindly accepted, they can be effectively managed and minimised, just like any other expense.

And I agree with that, but I’m still reluctant with adding taxes to my expenses. I’m afraid I would look at things under a different perspective and “get depressed by truth”. 

Actually, by not considering taxes as an expense I experience accounting bugs when I do Pension Pillar 2&3 voluntary contributions. They are tax reduction actions, but taxes are not there. Actually, expected lump sum tax is there, so when I throw 12k CHF into my Pillar 2 my NW doc tells me I’m 720 CHF poorer (6% expected lump sum tax on 12k CHF) instead of at least 3k richer (save taxes on 12k at high marginal tax rate).

Maybe I should reconsider adding taxes to my expenses.

In Switzerland – unlike in Italy – you can play with taxes via geo arbitrage. If I move to a different Gemeinde (municipality) I can save some tax. If I move to a different Canton (region) I can save a shitload of taxes. Many Hooli colleagues moved to a neighboring Canton and accepted a longer commute but cut their tax bill by 30-40%. That would mean 20-25k CHF less expenses for us. That would mean “free house upgrade” or “moar money in tha bank”.

I’ll think about that. I mean adding taxes to my expenses, not moving to the tax friendly Canton right now.

Today is pie day! Not to be confused with pi day, that’s March 14th (3/14). Let’s look at another pie: a tax aware (but investment unaware) chart of “what happened to our income“:

Here savings include Pension Pillar 2 (BVG) contributions.

So we can consider our income pie – after Pillar 1 (AHV) contributions – split in 5 slices: 1 goes to the taxman, 1 goes to everything-we-need and 3 slices go to savings (and investing, and Pillar 3, and Pillar 2 voluntary contributions) for our future selves, for our freedom plans.

Saving Rate

Saving rate for December is 87.6%. It’s December, you know… 

Saving rate for 2018 is 74.4%. That’s amazing! We had the ambitious goal of saving 70% of our net income – thanks MustachianPost for your BSRI challenge, we’re Platinum this time! – and we made it to almost 75%! Three quarters of our after tax income have not been spent, but saved. Three green slices of the above pie vs the yellow one.

Note: I track my saving rate after tax, i.e. spending excluding taxes as a percent of net income.

What an amazing accomplishment! I bet 2018 will be remembered as our best year in terms of both earning and saving. We won’t double that in future, and I’m going to explain why in the 2019 goals and expectation section.

FI Metrics

What about FI metrics? Let’s jump to the numbers, even though to my eyes they’re progressively becoming meaningless over time. It’s not that I don’t care about FI – I do care about it a lot – it’s just that I don’t think there’s a sharp line between before and after anymore. And there are so many unknowns in our situation that even though I realize the line is fuzzy, I can’t even find a way to put that arbitrary line on the ground.

My new mental model is “awesome RIP, you made it to 70% of your double-imaginary goal (you have no idea about your future cashflow, and you don’t need to be 100% covered before calling it done), here have a beer. Now, let’s find a way to gradually transition into your afterFI life. You’ll be fine“, but I’m not succeeding in this. I’m not transitioning, I’m sprinting with all my energy left. When I’m empty then I’ll stop. And there I will draw the line.

Anyway, here are the numbers:

FI%: 70.98%, huge drop of -2.10% compared to November, but a +9.71% compared to end of year 2017.

FI Forecast Date: December 2021 (36 months left). This is based on a linear forecast over the last 12 months. This is bad. Still 3 years left. It’s 1 year longer than predicted last month.

FI Coast Date: December 2028. Bad months get amplified. This metric means that if we forget about our wealth and just live paycheck to paycheck, our NW snowballs itself into FI in 10 years.

Current AllowanceYear 29812 EUR – Month 2484 EUR – Day 81.68 EUR. This means that if we were able to live with such a budget (before tax), we’d be already FI.

Current Withdrawal Rate: 4.93%

Years of Ideal expenses accumulated: 20.3

Success Rate at Current WR, based on cFIREsim, 40 years horizon, 75%/25% split (other options default): 62.04%.

Swiss FI%: 54.11%. Expenses are low enough to prevent this metric from exploding.

Swiss FI Forecast Date: March 2027 (99 months left). This one is exploding, since last 12 months have been not exceptional in terms of NW growth, even more when measured in CHF.

Financial Facts more or less in chronological order

As you may imagine, December has been a rough month.

The S&P500 got close to -20% compared to its peak, putting its first foot into bear market territory.

But December started amazingly well, making the overall trip even more uncomfortable. November ended with a couple of good market days, and the trend seemed to hold on December 3rd. I woke up with a nice surprise:

By the end of the day P&L (daily profits and losses) dropped to +7k. Not bad, but still… loss aversion, you know?

On December 7th…

On the next day, my portfolio opened at -1k and by the end of the day it was -6k, zeroing the previous day.

The rest of the first week zeroed my NW delta for the month. Each day -5k, -7k, -16k (the day lady Huawei got arrested).

I account for month salaries at the beginning of the month, i.e. when I copy a month’s column into next month’s one I put expected salaries in (and bonuses, stocks, dividends…). So a ZERO NW Delta means current losses are greater than expected monthly income (minus current expenses).

A horrible week. By the first Friday of the month, all my December (future) income has been flushed down the toilet. 

And it started with a positive Monday!

Volatility sucks, loss aversion sucks.

The week after started with the End of the Year compensation letter at Hooli. Yearly bonus was 4k higher than my conservative expectations. It bumped my NW immediately by +4k (even though the bonus will be cashed in January). I got a small 2% base salary increase and a regular stock grant which will start vesting stocks in June 2019. Everything as expected, I’d say a little bit better than expected.

Sadly my portfolio went down -11k on same day, Monday 10th. NW delta is in the -10k territory now.

The rest of the second week of December was ups and downs for my portfolio, touching again Millionaire status on the 12th and saying goodbye to the second comma again on the next day.

On December 13th we invested the remainder of our Pillar 3A into PostFinance Pension75. More or less 13.5k CHF of Mrs RIP Pillar 3A. Share price will be known in few days (117 shares, 114.28 CHF per share). Our Pillar 3A investments are now more than 50k CHF, maybe it’s worth investigating other Pillar 3A options outside PostFinance since the size would justify the hassles.

Meanwhile, the Market took another week of deep dive. Each day losing 5-7k until Fed interest rates raise day on December 19th and… -12k on Thursday and -5k on Friday 21th. A tough week.

Must admit that I experienced some pain, but stayed calm. Must admit that I’d rather have a day of -100k and then a slow ramp up than an endless series of negative -5k days. 

The market had still a day to run before Merry Christmas.

On December 24th S&P500 lost 3%. My portfolio? Somewhere around -15k.

On December 27th (another shitty day) my NW reached the (local?) minimum:

That’s a huge drop in the range of 60k EUR / 70k CHF in less than a month. Ok, this is not only due to market performance, we also had expenses during the month, but still…

Every single asset, excluding the heroic IEML bond ETF lost 10% on average this month. There’s a discrepancy between CSSPX and VOO, both S&P500 ETFs, probably due to dividends: VOO distributed while CSSPX reinvested them.

On my IB account I saw for the first time negative Unrealized P&L, negative by 20k CHF. Not negative daily P&L, that means investments are down on that day. Negative P&L means that investments are down since the opening of the account. It means I paid more than current valuation for the assets I own. It means I’ve lost money on my investments so far.

Before you cry: that’s not true.

I sold some assets in the past 3 years, as you can see in my “Hall of Fame” section of my investment sheet, that realized ~40k CHF profit.

Plus, dividends are not included in P&L.

It means we’re still in the positive territory, roughly 30k above water, but we’ve crossed the +100k back in late September and it hurts.

Luckily, last 2 trading days of the year have been very good, partially mitigating the disaster.

[Spoiler alert: the first two weeks of January have been good too]

Was this the bottom of the market? Who knows.

Any lesson learned? I reacted awesomely at -10% in October, but got nervous at -20%. Should train myself to get used to this, since a drop this size is expected on average every 3-5 years. I got nervous, but I didn’t react at all, which is the best thing you can do. Emotions play a role much larger than tiny strategic details in your investment journey.

On the sad payday, which happened on the FED vs Trump day (earlier this month due to Christmas weekend), I was tempted to throw extra money into the market. I received a double salary this month, something like 22.7k CHF. I was very tempted… but I decided to pay taxes instead.

I have a C permit, I don’t pay taxes at source. I receive “tax expectations” from the tax office and I can essentially do what I want. I can even skip payments and pay all at once next year. At 0.5% interest rate it’s a cheap loan. But no, let’s not do that.

I paid the third chunk of 2018 expected (according to Swiss tax office estimations) City and Cantonal tax of 14127.65 CHF. My expectations are that I’m still 20k short on taxes – after this payment – and I don’t want to invest Uncle Rollf’s money.

Financial Analysis

What a shitty Q4! It’s been one of the worst quarter in wall street history. Does it mean anything? Should we expect now a long bear market? A recession? A rebound? I don’t know, you don’t know, nobody knows. This should not impact your strategy

My humble naive analysis is: yes, the world seems a bit fucked up for the following reasons:

  • China-US tariff fight that doesn’t help the markets.
  • China growth has slowed down.
  • European nationalisms and anti-Europeanism sentiment won’t help the EUR currency and trades.
  • In general, strong nationalism everywhere in the world doesn’t help the global market.
  • Debts are growing everywhere in the world, both at country and personal level.

Those in my opinion are the political/emotional factors that could drag down the market.

But there are reasons to be optimistic too:

  • Revenues are not going down (oops… sorry Apple, didn’t see you!).
  • Average P/E ratio is very attractive now.
  • Unemployment is still at historical minimum for developed countries.
  • Technological advancements on all fields are still strong.

And more importantly:

But let’s not forget that all of the above, and who knows what else, is already in the stock price. Nothing that I know and can think of is not already been considered by investment giants. Don’t try to be smarter than them.

Investments

My trades this month? I didn’t do any. I want to ‘stash some cash. I’ll invest all of my Hooli stocks autosale proceedings on January, after a minor refactor of my asset allocation strategy. At the time of writing this has already happened, but I’ll talk about it in a future post.

Let’s talk dividends! December has been a good month for dividends. Between December and January all of my distributing ETFs distribute dividends. 4 of them in December:

  • IPRP (high yield European real estates): a miserable 0.07 EUR per share (69 EUR total). The fat IPRP dividend is usually the June one.
  • VOO (S&P500 US domiciled): 1.289 USD per share (26 USD total). VOO distributes quarterly and in 2018 it distributed ~2% of the index value. Now, this is my first experience with US domiciled funds and dividends. I was expecting some withholding tax, but apparently my dividends have not been taxed at all. Any clue?
  • WING (High Yield Corporate Bond): 0.12 USD per share (554 USD total). Good Yield, close to 5% annualized.
  • VHYD (World High Yield Dividend Stocks): 0.35 USD per share (712 USD total). The Yield is close to 4% for 2018, the problem with Value stocks is that the price is falling down. Some say that value investing historically performed good in raising interest rates times. Let’s see. Anyway, VHYD dividend will be paid off in January.

So, this has been a high income and relatively low expenses – and shitty market – month. One where one would invest as much as possible to “buy low” but no, we stayed calm and paid our taxes and planned to accumulate more cash for this 2019 thing that I bet it would be a special year.

Personal Facts in random order

Midlife Crisis

My life in December: wake up, work 9AM to 9PM, then relax. Seven days per week. I envy those lazy Chinese 996ers! By “work” I mean the sum of actual work at Hooli and my parental job. Before I come home at 6PM after my easy daily job, I prepare myself for the daily battle on the ground. I do some mental training while on the bus, then I jump into the field and save my wife from chaos, evil toys invasion, self-reproducing dirty dishes, walking spare clothes, undead food leftovers and breadcrumbs pandemic infection. Then I play with Baby, help with food, clean more dishes, change a nappy or two (or three), read her a book and make her sleep. It’s 9PM and I can finally relax. Which these days means watch Breaking Bad with Mrs RIP. Before you scream: of course I’ve seen it till the end, but Mrs RIP is still behind and I’m happy to watch it again. What? You don’t know what Breaking Bad is? Get out soon!

Wait, you weren’t going to scream for that, were you? For what then?

Oh, yeah, of course: “RIP, don’t you like spending time with your family??

I’m not saying I don’t like that. I do like it, it’s the best part of my day! I’m saying it’s hard, it’s a job. It’s military service. It’s like playing Rugby. Yes, you like it, but you’re better off counting your bones before and after to ease your surgeon’s job.

And we’re lucky enough that even though we’re in the sandwich generation, our parents are doing fine. I can’t imagine how complicated would life become when we will need to take care of our aging parents too.

So it’s hard to do anything of value outside your daily job. Let this be a wake up call for anyone still listening after 5k words out there: if you’re fresh out of college, without a family and with ideas and projects please do yourself a favor: don’t wait. Life will happen and your time will be scarce. Don’t take a job. Or get rid of it asap. Or become FI. That’s only valid for those who have projects, dreams, those who think wasting time and skills is the worst of all sins, those who think that a fat paycheck for a soulless job is not enough to feel you’ve done your part.

Having said that: I love my daughter and my wife. I’ve spent a weekend alone in early December and I missed them. A day alone is awesome, two days alone are ok, more than that it’s unbearable. I assume that’s how addiction works.

Remaining on the family topic, the news that MMM divorced hit me strong. I heard some rumors in November but didn’t give them importance, then this “more official” December reddit post made me sad. So many thoughts on so many levels. Mainly: freedom does not imply happiness. On his official blog post on new year’s evening he tried to cool things down but that still didn’t help. My idealized picture of a future life free from a 9to5 job and filled with family and purpose is cracked a bit. A strange feeling.

So let’s jump into Midlife Crisis mode!

Let’s start by saying that my blog got shared a couple of times in internal Hooli mailing lists, so I assume colleagues are reading.

Hi colleagues 🙂

Sadly that means I can’t be 100% myself here.

But that’s not as bad as it seems. Everywhere on the FI community you keep hearing this mantra “FI is a taboo topic at work“. Well, at Hooli is almost the opposite. Many know about it, many talk about it and so my blog comes around in internal threads. It’s definitely not a taboo at Hooli. 

Curiosity spoiler: I found this nice article from Rachel by the bay about… ehm… being not young in silicon Valley:

A friend in his 50s told me a tale not too long ago which came from a conversation he was having with his manager. In short, the manager said something I still find amazing:

Why are you still working?

In those five words, the manager managed to say so many things. First, the worker is deemed “old”. Then, following from that, why can’t they afford to quit? Why haven’t they gone off to sail the world? What is their major malfunction which makes them unable to hit the jackpot? With all of the years they have put into this career of theirs, how have they managed to suck?

That implies in Silicon Valley FIRE is not a taboo topic, FIRE is expected.

Take a look at the Silicon Valley Hierarchy of Needs:

What’s your stage, dear Hooli colleague? 🙂

Anyway, December has been a tough month. Days are short, outside is snowing and raining all day long, every day, summer weather is far away and so is happiness. Far away into the future. How far?

I want my own creative studio, where I can read, write, code, relax.

I designed it in fine details in my mind and on paper, I’ve visualized so many times in my wet dreams. But it’s not here, and probably won’t be here in Switzerland that I’ll set my feet on it. Here space is very expensive, you need a lot of money to rent few square meters. You need a salary. If you have a salary and a family, then time is scarce and you don’t need the studio. That’s a shitty vicious circle. I’ll have my studio somewhere else, once we escape the rat race.

I hate Christmas time.

During Christmas time, taking few vacation days lets you spend 2 weeks out of office. It’s a perfect time to sit and refocus on what really matters. To make a life checkpoint, a life audit, or simply to make plans and reorganize your stuff, digital stuff, projects and so on. It should be perfect time for a philosophical meditation but NO, you’re expected to spend time traveling, sleeping in a different bed almost every night, spend time with racist uncle Gennaro, eating like tomorrow will never come and make useless gifts. Tons of them. Luckily Mrs RIP handles this hassle for the family.

Then you come back at home right before going back to work, with no time for your inner self and this recurring feeling of having essentially wasted your yearly vacation windfall. Again.

I’m definitely becoming introvert.

Depth Year

I’ve introduced my Depth Year experiment in November update. Let’s recall the original definition:

I keep imagining a tradition I’d like to invent. After you’re established in your career, and you have some neat stuff in your house, you take a whole year in which you don’t start anything new or acquire any new possessions you don’t need. No new hobbies, equipment, games, or books are allowed during this year. Instead, you have to find the value in what you already own or what you’ve already started.

Raptitude

The blogger recently posted an update on his own depth year 2018, go read it.

How to implement a Depth Year? It’s not clear from the post, and it’s a good thing because it’s very personal. A depth year can help you boost the following virtues:

  • Frugality: avoid compulsive spending. Pause.
  • Minimalism: both digital and physical. Simplify.
  • Depth: focus on what you have instead of chasing novelty. Reuse.

It’s a great idea, but maybe you don’t need (or want) to work on all the above virtues at once. For example, when I asked myself how to implement it I came up with the following questions:

  • Can I access to my blog feeds? All of them? Some? None?? What about giving myself a limited amount of time per day on my feed? Can I save the posts I liked? Can I put posts on “read later”? What about a limited amount of them?
  • Can I watch new YouTube videos? I can’t, seriously? Holy crap, this is going to be philosophical!
  • Can I take a look at the news? Well, I do that out of habit but I will be glad if I can get rid of this bad habit.
  • What about social media? Should I get rid of Facebook and Twitter? Yes, I’m old, I still use FB and I have no idea what Instagram is.
  • Can I buy books I have in my “To Buy” list? Mmh, it seems a cheat. Can I add books to my “To Buy” list? Well, in conjunction with the previous question that would kill the entire Depth Year mission.
  • Can I watch series/documentary/standup comedy/movies I have in my “To Watch” list? Is taking a look at the things I bookmarked (like “watch videos by Dave Chapelle”) ok or not? I mean, they’re not part of what I “physically own”, but part of what I “emotionally own”.
  • Should I re-read books I’ve already read or read books I own but I didn’t read yet?
  • What about my Google Drive folder? Can I keep accumulating docs and pdfs with no structure? Should I tidy it? Should I clean it?
  • What about my photos and videos? Can I keep making 100 pictures per week to BabyRIP?

As you can see I wanted to focus on digital detox, digital minimalism (can I buy the book?), social media detox, internet and smartphone addiction in general. I recognize I have a problem here.

But I think it’s too big of a challenge all at once.

I’m going to keep buying books (probably not many of them).

I keep following feeds and YT channels but not storing (almost) anything in “Read Later” and “Watch Later”. Either I consume the new material on the go or bye bye.

I’m allowing myself a limited amount of time each day on news and social media, using StayFocusd chrome extension, inspired one of the latest John Green’s video “I Quit Social Media”: 

My goal for Depth Year 2019 is to make sense of my digital clutter, and try to not focus on novelty but use what I saved for later consumption and re-read what I saved for reference or because I thought “that’s an awesome post!” I also flag the best bookmarks with the AWESOME tag. Of course I have a deep ramification of folders and subfolders, but I won’t annoy you here. 

Why am I storing web links? Because that’s how I build my knowledge. I classify things, and put in digital drawers what I think I might reuse one day. I also store Youtube videos, book reviews, and so on. I actually download in PDF and store on Google Drive the best articles I find on the internet. Why? Because websites disappear, content gets deleted and so on. I have the entire livingafi blog downloaded in PDF, in case my digitally inspirational blogger should delete his blog.

Is it working? I’m not really sure if it’s worth the effort, but I’m building some knowledge base that my guts tell me it will be invaluable one day.

Anyway, my digital clutter is composed of:

  • Chrome bookmarks (“read later” and “already read” folder structure)
  • YouTube playlists (“watch later” and many playlists by topic)
  • Google drive documents
  • Trello boards
  • Personal videos and photos, but I guess this is more of a storage problem than a declutter problem.

Chrome bookmarks and YouTube watch later is what I want to attack first.

I created a spreadsheet for my chrome bookmarks tracking. I have 3 main bookmarks folders:

  • To Be Read (initial value: 477)
  • To Be Reviewed (initial value: 3352… holy shit!)
  • Reviewed (initial value: 0)

I want to send TBRead to zero, TBRev to zero and Rev should grow – hopefully I won’t store many of the bookmarks I currently store. Just those flagged as AWESOME.

2019 spoiler: I’m a week into the experiment and I see some progress. The total count of bookmarks is not decreasing much because I’m also transferring here non-music YouTube videos that I want to keep.

P.S. i also joined the Depth Year Facebook Group (a kind of paradox, I know).

There are still open questions on how exactly I’m going to implement this Depth Year, but I’m ok with Deepening in Progress 🙂

Blog

In December I didn’t blog at all, almost. Just during the weekend I’ve been alone, and only to report November updates and pointing out a Millionaire Interview that appeared on ESI Money, featuring me, an ex-millionaire. 

Didn’t blog, didn’t participate in discussions, didn’t comment, didn’t forum, didn’t reddit.

But I missed it, a lot. 

That’s why I am back.

With more stuff, longer posts (ok, no, maybe I’ll experiment shorter ones in future).

And maybe some other news soon.

Like this:

No spoiler!

Ah, before I forget! FIWE 2019 has been announced on WLCB blog.

What is FIWE? An amazing European conference about Financial Independence! Last year I was there, and this year I’ll be there too – this time with the entire family 🙂

This year, 2019, the conference will take place in Budapest, between May 2nd and May 5th (the main conference). FIWE extra, i.e. hanging out with other crazy mustachians will take place after the conference, until May 8th. More details on WLCB blog.

Apply now!

Curiosity

Hi friends, welcome to my favorite section of the monthly report!

This month I’ve tried to go a little bit deeper than wider, to anticipate the coming of the following Depth Year!

I’ve been spending my learning time mainly on Farnam Street, a blog (does one say “website” nowadays?) I already recommended, about… well, “how to think” I would say.

In particular I’ve been parsing thru their amazing Mental Models catalog. I’m considering whether to join their Learning Community. I love FS content, I hate subscriptions. 

Check also out The Knowledge Project (fs podcast) and a couple of spectacular posts: on decision making, on opinion having, on reading.

A YouTube channel I’ve devoured earlier this year is 3Blue1Brown. It’s on math visualization, the highest quality I had found on the net.

Amazing videos, amazing visualization, math topics shown from different angles (take a look at Solving 2D equations using color), solutions to math problems in math competitions, introductory videos on widely known but hard to grasp for a novice topics (Neural Networks, Blockchain, Quaternions… take a look at this interactive Visualizing Quaternions site in collaboration with Ben Eater). 

I wish I had such resources available when I was studying math 🙂

Last resource I’m going to share is on Philosophy, of course! More specifically, about ethic.

It’s a website called Philosophy Experiments. As you know, thought experiments are the most important tools in a philosopher toolbox. This website will capture your brain and twist it. You start with simple questions and you’re gradually brought to extreme conclusions.

I killed the fat man.

This experiment made me think how easy it is for an individual (thus for a society) to jump to extreme conclusions from small, apparently innocent, ethic problems. How easy it is for a political leader to drive people to accept racism, genocides, discrimination, torture simply leveraging on some basic human ethic principles that don’t make you feel bad about what you’re thinking. That’s mind blowing. That’s why history repeats itself. And sadly, we may be witnessing all the stages of this cycle in the near future.

I strongly recommend you to take a look at it.

The Italians!

This month I’d like to recommend to my Italian readers one of my favorite not-so-famous blog: In Coma è Meglio (literal translation: in a coma is better), by Astutillo Smeriglia.

Astutillo (I don’t think it’s his real name) is an unreachable creator. You can’t comment on his posts, you can’t contact him. Is he a he or a she or a… they? We don’t know. We know he’s awesome. 

What is is blog about? Hard to say. I’d say human bugs (cognitive biases, logical fallacies, plain stupidity) in a funny way. 

Here are few articles of him that will make you laugh and think:

And many, many more (QI, QI2, EG e CCLa SpolaProvaci Ancora Piero…)

He also wrote a short book, that I read in few days: Pianeta Terra: Guida per visitatori alieni (planet earth: alien visitors’ guide).

i was forgetting his most successful creations: YouTube short videos and series, some with English subtitles availables: Preti, Ancora Preti, Qualcosa di Mai Visto and many others.

Random high quality articles I’ve read:

Books I’m reading

  • Sophie’s World by Jostein Gaarder (active). Introduction to Philosophy
  • The Sequences (Rationality from AI to Zombie) by Eliezer Yudkowsky (on hold). Rationality.
  • 21 Lessons from 21st Century by Harari (on hold). Present and future human challenges.
  • Baol, by Stefano Benni (read in a week during Christmas Holidays). A fiction book by one of my favorite Italian writers. Funny, surreal, deep.

Oh, about books and digital minimalism: thanks to Cal Newport (who recently wrote a book on Digital Minimalism available now for preorder) I’ve discovered this interesting kickstarter project: Mouse Books. Books the size of a smartphone, that you can carry with you to compensate your addictive smartphone checking behavior, and read instead. Mouse Books. I’ll keep an eye on it.

RIP, not even a word about…

Yes, I know what you’re talking about: Black Mirror interactive episode Bandersnatch.

I don’t have Netflix and for the first time in history of piracy I couldn’t help but pass on it.

I’ve actually downloaded a version with all default choices but stopped after few minutes: it doesn’t make sense. I will catch it up later in life.

I’m ok. FOMO go away!

2019 Goals & Expectations

Income will surely be lower than 2018. Due to how equity compensation (stocks) works at Hooli, I’m going to receive less stocks in 2019.

It’s complicated but I’ll try to explain why. Stock grants are assigned each year and they vest over a 4 year window. Hooli stock value has grown a lot in my first 4 years at Hooli and not much these days. It actually lost terrain in 2018. Since stock grants are thought in dollars, then converted in number of stocks, First grants were much larger in number of stocks. Those grants are gone now, they vested over 4 years. So I’m receiving less stocks in 2019, and the stock value is lower today than the average price of 2018.

It’s hard to make an income prediction for our family. There are other variables like “will Mrs RIP find a good job?“, “will Mrs RIP be receiving unemployment salary for long?“, “Am I going to work full time the entire year?

I don’t have an income goal, I’d be ok to land into 6 digits territory.

Expenses will probably be higher than 2018. BabyRIP is growing and costs will go up. We’re a bit tight in our cozy 50 sqm apartment. No elevator, no dishwasher, no private washing machine… it’s ultra cheap but we might want something better. And it’s hard to find anything below 3k CHF per month!

The only way to reduce expenses would be leaving Switzerland. I don’t think that’s going to happen this year.

I’d be happy to manage to stay below 70k in 2019.

Saving Rate is definitely not going to be close to what we had in last few years (65-75%). I bet we won’t be able to do better than this year in our lives. I don’t plan to earn that much for long, and while I’m here I don’t plan to spend less than this.

So yeah, 50% SR would be good enough. Long gone are the 70+% years.

Net Worth is getting out of control. It depends marginally less on saving and marginally more on portfolio performance and currencies fluctuations over time.

My dream goal is to reach 1M EUR, but I don’t see it coming, unless 2019 will be an amazing market year and/or a shitty EUR year (which would make 1M EUR worth less in purchasing power).

Investments need a major review too. I’ll do a minor review in January, both in asset allocation and securities choice: I’m moving away from small caps and toward US market in terms of AA, and I’m moving toward US domiciled funds in terms of securities choice.

A major review will happen in spring/summer, like last year.

I want to Blog more in 2019, I have so many unwritten posts that wait to be written. I want to publish at least 52 posts, one per week. Maybe I’ll switch to a shorter format though. I want to resume the EERG project and host guest posts about country reviews.

I want to structure my Curiosity and focus on few topics at a time. I like the Youtube Challenge idea by Tom Corley, I might try it out since it’s a good Depth Year exercise. Yes, it’d require exploration and “searching something new” but for the greater good of going deep.

Yes, I’m going deep this year. My goal is to let more knowledge stay in my head instead of passing by. I plan to learn better how to learn. I might start a notecard system. If I had to pick a theme or two for going deep it would be Philosophy (and Psychology). I’d love to read more books than blog posts though. And learn how to better focus and keep my digital addiction under control.

I don’t want to limit my Creativity to the blog alone. I have many ideas on how to expand it into writing a book, writing novels, podcasting, acting, teaching, coaching, mentoring, trying stand-up comedy, improvisational theater… even coding on my pet videogame project! I think I’m going to keep my projects into the drawer until FI. I have just enough energy left for one project after work&parenting, and I think this blog is the chosen one.

What about all the other aspects in life? Of course I want to be a good father, husband and friend, and a healthy person. The latter is going to get more attention in 2019. Don’t have concrete goals though. On these hard-to-measure fields I’d like to go with systems instead of goals. Wait, am I sure? What about habitsGoals, systems or habits?? Give me a break!

That’s all for December, folks!

RIP, holy shit…

What?

Welcome back but…

What do you… oh, I see. Wow, 8.5k words. I don’t think anyone would read this post till the end, but you know, I’m doing thins mainly for myself 🙂

Maybe you should split your posts…

Yeah, maybe.

26 comments

  1. Hey RIP, fellow italian here, also working in Switzerland. Great blog, and glad you will continue posting more frequently now !
    Have you considered opening a Transferwise account? They have a zero fees debit card, which is useful in my opinion when travelling and needing to pay in local currencies. I have a Euro, a USD, a CHF and a GBP account and covers the key countries i travel too. I think this could avoid you paying any EUR fees when you need to pay in Italy for example? Im sure you’ve considered it… so maybe you know some flaw in my reasoning

    1. Hi Italian friend, welcome to retireinprogress 🙂

      I’ve considered revolut, transferwise and all the “new cool things” that people around me use. They’re not worth the hassle of setting up new accounts for my situation, in my opinion.
      I’m keeping my Bancoposta account just to keep my Buoni Postali Ventennali that will generate 4.5-5% net for the next few years.

  2. Mr RIP, that was quite a novel you’ve penned there!

    Firstly, I commend you on your VERY impressive savings rate (even if ignoring taxes is cheating a little).

    Secondly, must also register a serious complaint.

    Your cartoon has planted the mental image of Mr RIP as Dr Doofensmirch. Some things cannot be unseen!

    Now whenever I read your writing, in my head I hear it being read aloud in Doofensmirch’s voice… “Curse you Perry the platypus!”

  3. Great post. I confess I skimmed through some parts, but I find incredible how you can write so much. For me is already a pain to write 1000 words.
    And congratulations on your savings rate. Now I’m a bit less proud of my 20% savings rate in 2018.
    Have a great year!

  4. Dear RIP,

    Im very glad to hear from you again. Missed your posts … 🙂
    Wish you a good year and nice investments. Thanks to you i started investing with IB last year on August…

    Greetings from Bern…

      1. Well that is true! I don`t know how it feels to have an portfolio on a plus 😀 , let say it was a good experience having -21% on my portfolio! Maybe was not the best time to get in to to the market… but the most important step has been done „starting investing“ 🙂
        So thank you again! 😀

  5. Congrats on the numbers, very impressive as always.

    Thanks for directing us towards philosophy experiments, another productivity killer was exactly what I needed at the start of the year 😀 Jokes apart, I also killed the fat man. For the first run, my consistency score was 83% and I was wondering why. Repeated it and reached 100% however it raised a question. The first question asks if you think torture is always morally wrong and my answer was yes. Then later when you still decide to torture the man for the 75% chance to save a huge number of people the system takes it as an inconsistency. So my question is, why cannot I consistently state that I find torture morally wrong even if in such a situation I would choose to do so even if there would be only 1% chance. Am I logical or have a problem with my mind?

    1. I guess academic philosophers have problem with probabilistic thinking 🙂

      Wait, is there such a thing as “probabilistic ethic”? No? Let’s define it 😀

      1. Yeah, I was wondering why that 75% number is important? Do they think that if someone sees more chance to succeed that would make the torture more acceptable? If that is true and it does matter then what is the exact percentage what will make the choice ethical? Arent all the movies/books about that in such situations heroes go for even the slightest hope? Just the other day I was reading What makes You You on WBW. The same thing came up there with replacing your body cells. What percentage of them are you able to replace before you consider the result not you. Maybe there is such a thing as a probabilistic ethic. Maybe that’s why I was not able to argue and call Thanos’ point false in the last Avengers movie…

        1. I actually HATE this thing in all movies!

          “Rick, 7 trillions ninja zombies invaded our outpost, but we’re safe here now. The zombies are coding a superhuman AI to kill all humans who show up. But we’re safe here forever. We left behind Pongo, your 2 years old daughter’s rag doll, but who car…”

          “We must all go back.”

          “Wait… But why?” (No pun intended!)

          “We can’t leave it behind, we’re good people”

          1. Nooooo, that’s plain stupidity and that is not what I was talking about XD. What you mention is the same category as in those Z rated horror movies… “there is a psycho supernatural killing machine out there, what should we do?”, “let’s have sex / let’s separate and search for him one by one” (facepalm). What I meant is that in a situation like that where thousands of people could be potentially killed (including yourself) don’t you doubt that I would torture the sh*t out of that bastard no matter how unethical the act would seem for the sake of having a chance to save us. It is a strange question I admit. Just think about the curious case of the British prime minister and the pig in Black Mirror…

  6. Hi RIP,

    great stuff here as always.
    For VOO, I got the 15% cut on the 20th of Dec. It is included in the monthly report from IB. Check it and let us know.

    Regarding this:
    “Investments need a major review too. I’ll do a minor review in January, both in asset allocation and securities choice: I’m moving away from small caps and toward US market in terms of AA, and I’m moving toward US domiciled funds in terms of securities choice.”

    I have done this already, giving 38 % of the overall equities PF to USA and US domiciled funds. I believe it is the right thing, in terms of costs and taxes, based on the fact that you can get back this 15%.

    One small thing that I am still trying to decide on, is whether I will feel comfortable to have such long exposure to USD. Mine is like 70% of overall PF. Imagine gaining X of your USD investments and lose X/2 because of currency fluctuations at the same time. It’s really tricky, as CHF investments do not have any returns nowadays.

    1. We’re on the same page, it seems 🙂
      My exposure to USD is now 40% of my Net Worth, and currency fluctuations is becoming more important than market performance in the short term.

  7. Incredible post, it’s good to read about the context as well. Overall, I think you’re doing well for yourself and the family.
    It’s interesting how you would call Switzerland a “not so low tax country” with 23% of your gross income. At your income level, I would probably be paying 45% here in The Netherlands :-).

    Anyway, keep up the good stuff!

  8. Nice article Mr. RIP ,

    “In US they say “the big three”: housing, food and transportation. Well, our big three are: housing health and travel. Ok, groceries are close enough. ”
    Actually I noticed my expenses is quite similar to yours : Housing, Health and then Foods (In & Out). Travel is the fourth largest expense after food.
    I have noticed health insurance is the most inflated expense in the recent years.
    https://www.swissinfo.ch/eng/society/expensive-coverage_health-insurance-costs-keep-on-rising/43553132
    All my other expenses stayed flat for the last five years, since I started tracking expenses).

  9. Hi there,

    Where you were able to exchange Miles&More to Coop Gift card? I know that it works other side, when spending in Coop you can get miles, but not sure how it can go opposite direction.

    Thanks

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