Hi RIP friends,
Welcome to my first Financial Update of 2019!
Few things are going to change (as always).
There are a lot of new readers around, and I’m lucky enough that many are contacting me for various reasons. I realized that I write my posts assuming that if you’re reading this one, you must be following me since the beginning, so I try to write posts that are “chapters” of an almost-infinite-length book that’s my life. And I tell myself that “yeah, sure readers are following me” or maybe “readers? I’m writing all this blog thing for myself, like a journal! Go the hell out of here!”. So I’m going to provide more context, more basics, without giving everything for granted. Just probably… not today!
I created my 2019 Net Worth and Expenses public spreadsheets (private versions were ready in December of course). Spoiler alert: my new net worth doc has also live data! So if you have ever had troubles sleeping because you didn’t know if the RIPs were millionaires or not… now you can check it in real time 😀
I know that my spreadsheets inspired some of you into starting your own versions. Many of you shared spreadsheets with me to get feedback. I’ve seen a nice range of complexity, spreading from simpler versions to incredibly more complicated and automated ones. The crown for the spreadsheet king goes to a Hooli colleague who’s juggling with 5 currencies and 3 tax regimes. You’re a master!
To be able to inspire more people I’m going to dig deeper into my spreadsheets in a separate post, coming up (hopefully) in February. It will be a better version of my Net Worth post which is rusty and old. Stay tuned.
Another change: I’m going to split Financial and Personal updates in 2 posts. I want to keep writing and updating you, my readers, on both my money and my life but I don’t want to clog your browsers with 8k words at a time. Your money or your life? You can still have both!
Ok, let’s start with the first financial update of the new year! Here is the new Net Worth spreadsheet (with live data!)
Net Worth Metrics
Net Worth by end of January 2019 is 901.4k EUR (1.026M CHF / 1.032M USD). All time high in every currency! First time Millionaire in Swiss Francs at the end of a month (been above and below several times during the second half of 2018) and returning Millionaire in US Dollars. I hope we left the million mark behind for good. NW growth is driven by a huge Mr. Market comeback, who recovered more than half of the Q4 2018 losses, and – of course – by our crazy January savings.
NW Delta for January is +49.6k EUR. Best on record. The alternation between bests and worsts months on record is disturbing. Here’s a visual evolution of my NW since 2004:
My Net Worth doesn’t account for “virtual” anymore. I don’t account for fraction of not vested yet Hooli stocks or pro-rated end of year expected bonus. I do account for pro-rated 13th salary since it’s guaranteed under any circumstances.
Income for the month is ~47k CHF gross (expected 37.3k CHF net). December gross income was 54k, meaning that between December 20th and January 25th (35 days) we earned a 6 digits gross salary. Ridiculous. That’s how December and January work at Hooli. Money winter is coming though, February to May, the “boring middle”, you name it. June will be the next money-rain month.
Monthly Income breakdown
- Salaries: 43’105 CHF (gross, after Pillar 1 but before income tax). My base salary, my 2018 bonus, and Mrs RIP unemployment benefit. The high income is not the cause of high NW delta, since the ~30k bonus was already accounted for (pro-rated) during the entire 2018.
- Dividends: 1’384 USD. 712 USD from VHYD (Vanguard World High Yield Dividend stocks) and 672 USD from IEML (Emerging Markets Government Bonds).
- Pension Pillar 2: 2’642 CHF. Standard. 500 CHF goes into the mandatory portion, 2.1k into the extra mandatory one.
- Other income: 148.5 CHF. Partial internet at home reimbursement from Hooli.
- Expected income tax: -9.8k CHF. Reduced the expected average tax rate from 23% to 22%. I expect to earn less this year, so I expect to pay less taxes.
- Expected lump sum tax on Pillar 2: -159 CHF. Based on my 6% lump sum tax assumption.
Total Expenses for the month have been 5882 CHF. We let ourselves indulge a bit. I spent a lot of money in “Leisure” things, like books and board games. It’s ok. We had an amazing January with record income and record NW delta. Let’s celebrate!
Monthly expenses breakdown
- Housing 1805 CHF: rent + condo fees 1385 CHF, furniture 142 CHF (an Ikea visit), cleaning 110 CHF, TV&Internet 99 CHF, electricity bill 59 CHF, Mrs RIp phone bill 10 CHF (a Lycamobile top-up). Pretty standard.
- Travel 971 CHF: We’re definitely travel junkies, without actually traveling as we’d like. I mean, we spend a lot of money in “travel”, but we’re not in a safari trip all the time, having fun. So where the hell this thousand CHF went? 506 CHF plane tickets to Rome, a 4 days trip that will happen in February, 271 CHF Milan Christmas/EOY time, 98 CHF Grandparents subcategory (while I was in Silicon Valley Mrs RIP hosted her parents in Switzerland), 96 CHF California. Yep, First Class and tips included. Of course the Californian trip was covered by Hooli, but I stayed over for the weekend and felt guilty charging my company for my personal expenses. So I got 500 USD cash from another colleague for “personal expenses in US”. I spent 39 USD for a useless 7 days Muni Passport and ~60 USD for food during the weekend. I exchanged back my remaining USDs for CHFs with another colleague. Hooli forex network is awesome. What? How was the First Class flight? Overrated. Moving up from Economy to Business is awesome. Business to First doesn’t change much. You get more comfort and attention (and food, and a VIP passport control area) but not worth a tenth of the price difference. Best benefit is that you get to board before the others and avoid this.
- Health 947 CHF: insurance premiums for the three of us (with Mutuel, Telmed model & highest deductibles, plus semiprivate hospitalization supplemental insurance for BabyRIP) 718 CHF. It went up 2.4% in 2019, compared to the 701 CHF/Mo of 2018. Mrs RIP medicines 102 CHF, Swimming Pool multi pass ticket 80 CHF, Baby RIP doctor visits 47 CHF (we only pay 10% contribution up to 300 CHF/Y, and zero deductible).
- Leisure 888 CHF: I know, I know, that’s outrageous. But let’s dig into it a bit. 304 CHF Mrs RIP cash withdraws. I don’t want to track how Mrs RIP spends her cash, so I account all of it as “Leisure”. Some of this money is spent for the family though. For example, she gave her parents some cash to buy groceries while they were in Switzerland. I think at least 100-150 CHF of her leisure money should be moved into groceries. 253 CHF Mr RIP Learning. Yes, it’s me. I consumed so much material from Farnam Street that I decided to join the Learning Community and purchase The Art of Reading course (no more available). Of course I’m reluctant to such expenses so it took me a lot of energy and a desperate attempt to get some discount or affiliate option
They replied (not Shane in person though):
Even though I didn’t get an affiliation, I was offered a 2 for 1 discount and I decided to proceed with the purchase. I still didn’t start my course, but I enjoyed the learning community forum, resources, book club and podcasts transcripts. I can’t tell if it’s “good value for the money” yet. I might decide to extract a budget category for “Learning/Training” and move the entry out from Leisure. In February Mrs RIP will have an expensive professional training too.
Other leisure expenses: 240 CHF board games. YES YES YES I KNOW PLEASE STOP SCREAMING. It’s a lot of money, but holy fuck I got 40k salary this month, can you give me break??
“RIP, you are doing everything yourself…“
Yes, I feel guilty a bit, but I got the latest two Dominion Expansions, Terraforming Mars and all the expansions and several hundreds card sleeves for the above mentioned games. I’ve already played Terraforming Mars with Mrs RIP and it’s been awesome! Regret nothing!
“…Are you sure?“
Other leisure expenses: 86 CHF in books and 5 CHF in I don’t remember what.
“Wasn’t this supposed to be a Depth Year?“
More on this later (probably next post).
- Groceries 467 CHF: hey my blue friend, where are you now? Anything to say on our groceries spending? Ok, to be fair probably 100-150 CHF of Mrs RIP leisure should be groceries, but I don’t track cash expenses individually, too much work. Shops breakdown: 345 CHF Migros, 120 CHF Coop, 3 CHF Ikea (LOL).
- Baby 300 CHF: Baby Stuff 210 CHF. So many toys, books, things. Both used and new. Another 90 CHF of courses: a play group in our Gemeinschaftszentren and a song singing group in our Mütter und Väterberatung (social institutions in Switzerland).
- Transport 247 CHF: my monthly pass, train tickets to visit friends in a neighboring Canton, a Mobility car rental, local transport tickets for Mrs RIP. We’re still measuring if it’s worth to buy a monthly/yearly pass for Mrs RIP. So far it’s not.
- Eating Out 208 CHF: a romantic dinner the three of us (well, Baby RIP didn’t order much), a couple of cheap dinners out with friends, few brunches with friends. Acceptable.
- Others expenses: Gifts 23 CHF, Clothing 19 CHF, Fees 7 CHF: Good.
Without crazy Travel and Leisure expenses that would have been a frugal month. Anyway, splurges included we’re still below 6k, good.
Total Savings for the month have been 31.4k CHF. Not bad!
Saving rate for the month is 84.2%. January… I love you!
Saving rate for 2019 so far is of course 82.4%. As I said, I expect expenses to grow and income to decrease. It’s good to start with the right foot but… winter is coming!
FI Metrics are becoming meaningless. I don’t believe in a sharp line between before-FI and after-FI anymore. Goals are changing, the decisions we make in the near future will tell if we’re 40% done, 70% done or already 100% done.
Here’s a screenshot of the FI Metrics part though
Apparently we crossed 75% FI and cut 10 months of “prison sentence” in January 🙂
Financial Facts, more or less in chronological order
It’s been a good month, indeed.
It started with huge December Hooli stock vesting (26k USD) being auto-sold and proceedings transferred to InteractiveBrokers to be invested, along with regular 5k CHF monthly transfer from our checking account to IB. So I had 31k USD/CHF to invest at the beginning of the month.
I did a minor asset allocation adjustment, as you can see in the investing sheet of my Net Worth spreadsheet. This is still WIP, a more stable (still minor I guess) adjustment will be done and documented in February/March, along with a huge refactor of the Portfolios spreadsheet. Stay tuned 😉
Anyway, minor adjustment consisted in:
- Increased ideal cash amount to 40k EUR (I changed the investing reference currency to EUR). I want to ‘stash more cash (maybe raising it to 50k soon) and try to be more Yieldy with the rest.
- Increased ideal Stocks exposure to 64% and reduced Bonds exposure to 31%, on our way to 65/30/5 from 60/35/5 where last component is REIT.
- Move to US domiciled funds for US stocks. The tax I could save by claiming back dividends withholding via a DA-1 form crossed an itching line, and dangers of being hit by US Estate tax seem low while we’re in Switzerland. For Swiss resident there’s a high threshold in US estate tax exemption (something like 5M, not true for other countries like Italy) and ETFs are easy to liquidate and make them no more US domiciled in case something happens to me. Another reason for the move is to lower costs in both TER and trade fees.
- Increased significantly ideal exposure to US.
- Increased a bit ideal exposure to Emerging Markets and Pacific.
- Reduced significantly ideal exposure to EU.
- Increased a bit ideal exposure to Value stocks (High Yield Dividends).
- Reduced ideal exposure to small cap stocks in general.
About Value stocks: I added rows is the AA for US high dividend and non-US high dividend. Not sure I want a lot of non-US high dividend stocks, since the top holdings are the Swiss stocks, the Royal Dutch and so on, that I already own both via PF Pension75 and STOXX600… I own Roche Nestlé and Novartis via 3 funds (VHYD, PF Pension75 and MEUD)! That’s why I’ve put 15% in US and 5% in non-US in my investing sheet. That’s a revolution, since VHYD contains 64% of non-US and 36% of US.
- Increased ideal High Yield Corporate exposure.
- Still looking for some low risk alternative to Pillar 2 (which btw is going to be less low risk for us, since Hooli Pillar 2 provider moved out from fully insured model in 2019).
I decided to not rebalance by selling yet. The new allocation generated huge unbalances but I’m just buying more of the under-represented parts without selling the over-represented ones. That’s because the AA is subject to another review soon. I’ll then probably sell to rebalance. Another reason to not sell to rebalance is because I don’t want to sell positions that are at loss. They may be good for “tax loss harvesting” in case we move to a country with capital gain tax (like Italy).
Actions I could have done, and that I will surely do before end of March is moving to US domiciled funds for assets traded in the US. In particular:
- Move small cap US from CSUSS to a US domiciled ETF (VIOO?)
- Split High Yield Dividends in US and non-US. Get rid of VHYD and buy VYM (and maybe VYMI for non US?).
- Move all CSSPX to VOO (realize tons of unrealized P&L)
… Vanguard, I’m all in!
I didn’t do that yet. I want to combine “funds laundering” with a revision of my asset allocation and a discovery phase of new ETFs. Stay tuned.
Anyway, I didn’t want to sit on the 31k USD/CHF available on IB at the beginning of the month. Even though investing all of it would have resulted in unbalanced cash position… but who cares? If funds are on IB they need to be invested!
I bought VOO, S&P500 ETF US domiciled: 139 shares at 226 USD (circa) per share = 31.4k USD.
Since cash in IB gets invested, and since I want to increase cash position, I reduced the monthly automated investing amount to 2.5k CHF (from 5k).
On January 7th the combined effects of market going up and USD going down made us Millionaire again in USD. Didn’t cross back the line again so far. Did we finally enter the Millionaire Era? Who knows. On Jan 16th we reached the status of Millionaire in CHF too.
We need to open a vested benefits account (Freizügigkeitskonto in German) for Mrs RIP previous employer’s pension pillar 2. Which means, we can’t keep the pillar 2 with her previous employer’s pillar 2 provider and must store it temporary in a bank, waiting to be moved again to another employer’s pension fund or cashed out, under the same circumstances of a regular pillar 2 (buying a house, becoming self employed, leaving Switzerland – but it depends where you go). Maybe I’ll write a post about VBA one day…
We quickly compared the offerings on moneyland.ch and picked Raiffaisen (0.15% interests, zero fees, 150 withdraw penalty for property purchase) as a first choice. Discarded PostFinance, where we have our checkings and Pillar 3A accounts due to high costs (0.05% interests, 9 chf/quarter fees, 500 CHF withdraw penalty for property purchase). Sadly after a couple of calls we discovered Raiffaisen doesn’t offer a VBA to everybody, just to their customers. I suspect if you show up with 100k they’d make an exception, btw. So after another failed attempt with the Cantonal Bank we gave up and filed papers to open a VBA with PostFinance. It’s been 10 days and the account is not open yet, kind of disappointed by the process.
Last but not least: I used Uber for the first time in US on January 28th, to go to San Francisco Airport. It took 30 seconds to get a driver and 10 minutes to reach the airport. Simply awesome. I know, you probably think “RIP, what are you excited about? That’s how it works!“, but it still amazes me. Really, in 10 minutes I was at the airport, right 4 hours before the takeoff – to enjoy First Class lounge of course.
Everybody uses Uber in California all the time. I felt a dinosaur with my Muni 7-days passport moving around in San Francisco. Uber rates are low, but still 3-5x public transportation and I want to stimulate public transportation. I hate that in US there’s no serious transportation system and everyone uses a car.
I met two friends and former coworkers in San Francisco who both told me “let’s meet in XYZ, just take an Uber to there” but no, I stubbornly stuck to my Muni card and juggled with buses and tram lines. I don’t want to give for granted that I’m going to spend 5x for my transportation! plus, crossing Chinatown with the bus 8-Bayshore has been a rich experience: I felt no more in US, I was the only non-asian on the bus and on the outside I didn’t see any non-chinese signs… it’s been a 15 minutes vacation within the working trip.
So yes, I loved the Uber trip to the airport, but let’s not give up with public transportation: it’s more efficient for the society, more sustainable and cheaper for the end user.
Other (non-financial, but it’s ok) reflections on US:
- Marijuana smell everywhere. I don’t smoke and don’t like smoke smell. Walking around San Francisco you smell Marijuana everywhere. That adds up to pee smell, garbage, dog’s shit and fast food. I never realized how spoiled my nose was. I’m so used to clean air and good smells that I was disgusted 90% of the time walking in San Francisco. It felt like poverty, even though this is one of the richest cities in the world. It made me ask myself “what’s the point of being rich here, if outside your mansion you have… this?“
- Silence is no more a value. There’s noise everywhere, except in the dorms neighborhood. Those neighborhood where there are only houses/condos, you can’t find a bar in kilometers and you need a car to do everything.
- Nerd facts: no drones! whaaat? Are they regulated here? I was expecting drones everywhere, but I’ve seen none.
Ok, that’s all for January 🙂
why do you always talk about “expected taxes”? Don’t you get a “net salary” in Switz from your company? Or you get a gross figure and than you need to hire an accountant to paid your due taxes? thanks
C permit holders and Swiss citizens don’t pay tax at source. And even those who do, it’s a withholding of expected taxed. At tax declaration time you calculate/discover actual taxes due. It’s very personal and it depends on wealth, deductions, pension contributions and so on
have you thought about hedging your positions against a big negative move of the market in the next 2 years?
My idea was to raise a Yield Shield, like Wanderer from Millennial Revolution wrote several months ago:
But after yesterday’s Big ERN post “The Yield Illusion” I’m back on base 1
Base 1 which is not dumb btw, it’s the wise “dead investor” position: do nothing. Why are we all waiting for a negative move of the market? What changed with respect 3 years ago? Are we timing the market?
Glad to see you are also a board game fan. We introduced our 7 year old to TTR and she is a monster. Bought Lords of Waterdeep and looking forward to playing that too! Hope you have a good start to 2019!
7 years old ruling at board games? Wow, I wish my daughter will get a similar epiphany 🙂
P.S. my favorite board games are: Dominion, Agricola, Carcassonne, Caverna, Burgundy, Terraforming Mars, Village, Imperial, GoT board game (yes, Diplomacy too), Terra Mystica, Pandemic and I’m probably leaving a dozen of them disrespectfully unmentioned 😀
That was quite the month then! It’s amazing how much you guys are able to save. I guess I should up my income game too by moving to Switzerland…
You moving here? When? Where? 🙂