July 2018 Financial Update – Too good to be true

Hi RIP voyeurs,

Did I tell you I love hot weather? It’s very hot these days in Switzerland. Hot and sunny! Did I tell you I love sunny weather? We’re enjoying an amazing summer in Switzerland. Probably the hottest and sunniest since I moved here in 2012! Consistently above 30 degrees the whole month. We don’t miss Italy at all 🙂

I’m spending my days writing, reading, hanging out with my family and enjoying swimming pools, lakes and rivers to refresh my body and my mind. It’s been a perfect month.

Almost too good to be true! Also from a financial point of view! Wow, it rhymes!

Let’s look at finances and metrics (and more) now!

More details can be found in my Net Worth spreadsheet (embedded here).

Metrics

Net worth: EUR 845.8k, +25.2k / CHF 979.4k , +28.4k / USD 989.1k, +28.7k. An amazing month! Earnings are regular and expenses are under control. What made our month was Mr Market spectacular performance! We’re at the edge of the million in both USD and CHF. At one point during the month USD got stronger and surpassed CHF, making us closer to the big M in CHF than in USD. It lasted a couple of days (not the first time this year that USD surpasses CHF for a couple of days) then USD lost terrain. It’s a dance around 1:1 that adds some suspense to the race for the seven digitz.

No, seriously, nobody cares 😀

No, ‘seriously’ seriously, if the market just holds and currencies don’t fluctuate we may reach the two commas in August, at least in USD. I do care about the commas, grammar is important!

A nice consideration: since I started blogging 2 years ago (June 2016) our net worth more than doubled in both CHF and USD. Not in EUR though, since EUR got a lot stronger in last 2 years.

We were in the 480k CHF / 490k USD territory. Our wealth increased more in last 2 years than in my previous 39 years of my life. Mesmerizing. Mind blowing. Whatever whatevering!

Income: 12.8k CHF. That’s the worst month of this year, and it’s going to be worse in the next months since Mrs RIP salary is fading away. She’s at the end of her maternity leave and won’t receive a salary in the following months. Well, maybe in August still some leftover and extra hours accumulated, but then nothing. Well, maybe some unemployment insurance payment but we need to wait until October I guess. Anyway, just my base salary and Mrs RIP reduced maternity compensation. No bonuses, no stocks and no dividend this month.

Expenses: 4958 CHF. Finally a below-5k month! Yes we can! And we can do way better. Most of the month has been a long staycation in Switzerland (which is not the cheapest country in the world) with no fanciness, just the 3 of us and a lot of time available. Walking, reading, swimming, running don’t cost a dime but are priceless. The majority of the expenses come from a friends Wedding in Italy at the beginning of the month and tickets and bookings for future September trips (Veneto, Italy and Krk, Croatia).

Savings: 7822 CHF. Still looking good to me!

Saving rate: 61.2%. Not bad, but one of the worst months on record, due to low income. But it’s ok 🙂 If Mrs RIP won’t work in the near future, any number above 50% is a success here.

Saving rate for 2018 so far: 73.2%. Target is 70% (Platinum badass saver) and second half of the year is worse compensation-wise. Let’s see if we can make it.

FI%: 70.48% (+2.09%). We crossed 70%! Awesome!

FI Forecast Date: May 2020 (22 months left, -6 months compared to last month). Big jump! Getting closer! Excited! Well, given the nature of our forecasts, this is due to rolling out July 2017 (a negative month) from our 12 months window.

Current Allowance: Year 29.6k EUR (+882) – Month 2467 EUR (+73) – Day 81.11 EUR (+2.42). Close to 30k EUR/Year, which is an interesting milestone.

Current Withdrawal Rate: 4.97% (-0.15%). We’re in the 4% territory. Uncle Bengen, here we come!  🙂

Years of Ideal expenses accumulated: 20.1 (+0.6). We could liquidate all our assets and survive on cash for 20 years.

Success Rate at Current WR, 40 years horizon, 75%/25% split (other options default): 61.11% (based on cfiresim).

Swiss FI%: 53.84% (+1.83%). Expenses under control and huge NW growth in CHF 🙂

Swiss FI Forecast Date: March 2022 (44 months left, -2 compared to last month). Still very far, but at least it’s before I’ll turn 45 🙂

The new progress bar:

Major Wins

1) Mr Market

It’s all green! All the ETFs are in the green, all of them! All the big boys (VHYD, CSSPX and MEUD, each of which I own shares for more than 100k) are in the +2/+3% territory. The only ETF that lost terrain is IEML, high yield emerging markets government bonds, like it’s doing since inception. 

Wait, why am I tracking this ETF? It’s in my asset allocation strategy but I didn’t buy it yet… I was actually considering whether to ever buy bonds or not last month. What happened?

More on this later 🙂

My three reference currencies are almost exactly at the same relative evaluation they were at the beginning of the month. They danced, made a mess (USDCHF went above 1 for a while) but then they cleaned after them at the end!

2) Expenses are under control

Below 5k! In a month with actual travel and future travel planning!

Ah, btw, I refactored expenses categorization: collapsed Utilities (phone, internet, electricity, cleaning lady…) into Housing.

Details:

• Housing & Utilities: 1678 CHF. A standard month, with 100 CHF spent on 4 hours of cleaning lady and the rest is just plain regular expenses. Internet&TV bill is going to be lower from September on since I cut an unnecessary 15 CHF/Mo package of Italian TV channels that we rarely watch. Actually, almost never watched. Actually, we almost never watch TV at all. Thinking about cutting more aggressively UPC Cablecom bill or switching provider or shutting down TV and using Zattoo if needed but I’m not sure it’s worth. Explained in details here.
• Travel 1061 CHF. Attending the second Wedding of this summer in Italy early this month (602 CHF), buying train tickets for an Austrian trip early in August, to meet Mr DIP‘s family (210 CHF), train tickets and downpayment on a weeklong stay in a turbo-cheap residence in September in Italy, close to Venice, again with the DIPs (209 CHF) and some leftover from FIWE (41 CHF). And it’s not over, we’re planning to spend the second week of September (after the close-to-Venice one) in Croatia. It will be my last week of paternity leave, I’ll be too sad to enjoy crystal clear water, but that’s how life goes (for now).
• Health: 720 CHF. Our baseline, just insurance premiums, is 701 CHF. We spent an extra 19 CHF for some medicine.
• Groceries: 551 CHF. A regular month. Plus some bulk purchase while in Italy.
• Clothing: 362 CHF. An expensive month but, again, exploited the fact we were in Italy for a week. Funny story: I hate, strongly hate, to go shopping for clothes. I was running very low on shoes, socks and short summer pants (still am on the last one). I went straight to Decathlon (while in Italy) and bought 5 pair of shoes and 12 of socks in something like 20 minutes. Spent ~200 EUR (~230 CHF). Problem solved. Cheaply I’d say, now I have shoes for a decade. Need to fix the pants thing though. The other ~130 CHF was spent mainly in Italy by Mrs RIP. Apparel in Italy is so convenient compared to Switzerland!
• Out: 207 CHF. Spending on eating out is slowly getting back on track with “before BabyRIP” life. Still an amount I’m comfortable spending. We’re on a staycation and indulged on low cost eating out options several times 🙂
• Baby: 122 CHF. Our angel doesn’t cost a dime. more than 70% of that amount has been discretionary. She doesn’t really need much, just love. And Switzerland gives you 200 CHF/Mo as child allowance. This month BabyRIP’s cashflow has been positive 🙂
• Gifts: 107 CHF. Few Birthdays and other gifts for friend and family, mainly kids.
• Transport: 49 CHF. Biked a lot, had to take bus few times.
• Fees: 45 CHF. Mainly brokerage fees for currency conversions and investments (more on this later) and some postal and bank fee.
• Taxes: 38 CHF. BabyRIP birth certificate. Ok, still cashflow positive 🙂
• Leisure: 18 CHF. Really? We should enjoy life more! Let’s buy a private jet next month!

Spendings have been under control this month, even though we could still do better. I expect August and September to be expensive months. We have travels, several one-off expenses like Mrs RIP yearly local transport pass runs around 800 CHF and expires in September. Plus we’re probably going to buy a bed for babyRIP and maybe changing our bed too, along with a better mattress. We’re looking into Montessori beds and explored Japanese futons but we’re too old to actually sleep on the floor.

Plus, Migros is bombarding me with MElectronics coupons. MElectronics is the “tech retail shop” by Migros. The place where you can buy computers and phones and other gadgets. We have a 11%, a 5% and two 2% Cumulus point multiplicators and a 10 CHF discount coupon.

My desktop computer at home is a All-In-One I purchased in January 2013. It has amazingly done its job for more than 5.5 years. I plan to buy a new one, and I’d like to stick with an All-In-One. I know, I know, they’re inferior to regular desktops same price. But I love the associated minimalism. Only one item, only one cable (plus wireless keyboard and mouse). Our apartment is tiny and space is a luxury.

Using all coupons and paying with a Cumulus mastercard I can get something like 20% discount. I’m monitoring melectronics.ch for offers on their site to compound discounts. They do a lot of 20-50% sales, rotating what’s on sale each week. I let an amazing Acer Aspire U27 sale (800 CHF instead of 1300) expire and I regretted it. I’m on the lookout now, my 11% coupon expires end of September.

Major Losses

1) Lost hope for Milan Apartment

I had a meeting with the unofficial realtor that is trying to sell my apartment in Milan (actually a shitty town very close to Milan). Apart from the fact that this guy tried very hard to make me sign some contract with him which would have made the situation even worse, the only offer I received for the apartment (80k EUR) has been rejected 4 times by mortgage institutions.

The realtor showed me that according to recent real estate evaluation my apartment could be worth 55k EUR, instead of the 70-75k he told me by phone just 3 months ago. It seems ridiculous to me, 55k for a 70sqm apartment 15 minutes far by public transportation to Piazza del Duomo is unbelievable. I’m kind of depressed, I paid 105k in 2010 for that apartment, almost double current evaluation. Had I put that 105k (+10-15k of furnishing and notary fees) in a S&P500 ETF I’d be FI today. It’s by large the biggest financial mistake of my life.

I’ll wait for a while, I’ll keep hoping something changes, I have no rush.

In the meantime, starting this month, I’m depreciating my apartment on my NW document by 1k a month until I reach 60k.

It sucks. Luckily it’s becoming each month a smaller fraction of my Net Worth.

2) Income heading down

Next months will be darker, since Mrs RIP will not work for a while. In August she’s technically still employed, but using leftover vacation days, overtime and some unpaid leave so we expect a lower salary. Starting from September she will not earn money.

She went to RAV (unemployment office) to explore options and she might get some money, starting in October under the assumption that she’s going to look for a new job and filing papers and maybe doing some training that her job consultant will suggest over time.

She needs to be employable with 24 hours notice and always have someone available to look after BabyRIP on a daily basis if needed.

The effort might not be worth the money (80% of her former salary), but Mrs RIP is enthusiast about it so let’s give it a try 🙂

More info about how unemployment in Switzerland works can be found in a guest post of Mr DIP on this blog.

Other financial facts

1) Changed Asset Allocation to be a little bit more conservative

I want to be humble and not rely too much on myself. I’m scared I’d overreact in case of a big drop in the market, so I’m putting up shields and safety measures.

I’ve decreased stocks exposure from 65% to 60% and increased bonds exposure from 30% to 35%. REIT is still at 5%. Last time I did a review was April 2018, just 3 months ago.

Within the bond allowance, I moved low risks from 90% to 85% and both High Yield  Corporate (WING) and Emerging Market Government (IEML)  from 5% to 7.5%.

I know, last month I was considering whether I should not invest in bonds at all, but after a deeper look I decided I want to. Both funds are performing badly since inception but they released high dividends and… did I tell you I’m in love with dividends?

This change immediately showed to me I’m overinvested in stocks (of course, I was investing 65% in stocks before the AA change). Instead of selling stocks ETFs I’ll just wait for a while and throw new available capital toward other underrepresented assets (bonds and REIT) until it will be time to invest in stocks again.

Take a look at the Investment tab on my NW spreadsheet to check current situation.

2) Invested ~9k EUR more in IPRP (REIT ETF)

I waited a bit before investing accumulated capital on IB because I had to decide what to do with bonds. I had some cash sitting in IB: the monthly 5k CHF automatic deposit, some dividend proceedings (1228 USD and 677 EUR) and ~27.5k USD coming from June Hooli stocks sale proceedings.

On July 12th I decided to unlock the pedal on bonds and allowed myself to invest the whole amount according to my asset allocation.

REIT was underrepresented and just issued a juicy dividend, so I want more of it! According to my AA there were a discrepancy of ~9k EUR between real and ideal, so why not fix this first?

Converted CHF and part of the USD to EUR and bought 217 shares at 41.825 EUR/share. End of month share price: 42.64. Cool.

3) Invested 12k USD in IEML and 12k USD in WING (bonds ETFs)

I’m bond, James Bond!

With the new AA (increased bonds exposure, and increased high yield / high risk exposure among bonds) I’m short by ~23k USD on both IEML and WING.

I had 24k USD left on my brokerage account so I split evenly 12k on IEML and 12k on WING. I expect to keep investing on bonds for the next few months until real matches ideal on my asset allocation.

Let’s talk again about IEML. It feels strange to buy an asset that has performed so shitty.

Am I a dreamer or a dumb? Anyway, high dividends. Let’s aim to that.

I bought 202 shares at 59.4 USD/share. End of month share price: 60.18. Amazing! I’m resurrecting corpses!

WING. Bought 2188 shares at 5.2525 USD/share. End of month share price: 5.280.

I was luck to invest in a relative deep, after 3 days of bad market. Don’t try to time the market!

Other Facts

1) I’m still a father!

BabyRIP celebrated 3 months in July.

She’s definitely in the top 0.01% of cuteness in the world. And no, wait, I’m not just saying this because I’m her father! She’s objectively amazing 😀

Ok, some bias may apply here, I agree. But she’s been great! She sleeps 8-10 hours straight each night! Then sleeps again. Then eat, does her physiological things, enrich our lives with her smiles, funny farts, strange faces and random legs movements. She almost never cries. Even when she’s tired and needs to sleep it takes 5 minutes to complete the routine.

We’re lucky. I’m lucky. Mrs RIP is an amazing mother (she worked with kids for a decade) and a very calm person.

Anyway, I’m on paternity leave since July 5th and until September 16th. 74 days without working. I’m spending my time working on this blog, reading, writing, searching inside myself and trying to fix my midlife crisis, doing some sport and spending time with family and friends.

It’s simply amazing. That’s FIRE life. It’s a taste of it, but trust me it’s the life I want to live. I’ve never been so calm and at peace like I am these days. Some minor issues are arising, but they are nice problems to have. For example, I wish I had a studio for myself. Trying to accomplish some deep work in a small apartment with a 3 months old baby and a cleaning lady on vacation is not easy. I solved that by… coming to Hooli!

“Whaaaaaaat?? Are you kidding me??? You’re on paternity and… you go to work??”

I’m NOT going to work. I’m going to the office, 3-4 days per week, 5-6 hours per day.

I defined several goals for this 74 days of paternity leave. One of them is of course spending time with my family. others revolve around my physical health, my creativity, my curiosity, my spirituality, my near future.

That’s why we’re not going on a 10 weeks long cruise around the world. We want time to reflect and enjoy simple living. And Switzerland in Summer is simply the best place where you want to be!

Anyway, to work on creativity, curiosity, spirituality and planning our future we decided that it would be way better and more productive to find a deep work friendly space.

I explored few coworking options in town and some libraries. Then realized: the Hooli office is simply awesome as a workplace! I can book meeting rooms, even in a different building compared to the one I usually work! I’d have free food, a gym, air conditioning, internet connection and silence. And amazing view on mountains and lakes. I’m using the office as a coworking space, avoiding spending 300-500 CHF/Mo for an inferior coworking space (one with limited opening hours, no free food, no “private” meeting room).

So far it’s being really amazing. Staying here until 3-4pm, until I perceive the marginal quality of my work declining (I’m starting to realize I can function very well for no more than 5-6 hours per day), then biking home and spend quality time with my family at the swimming pool, at the lake, riverside or simply at home. Everyone’s happy and we can’t think of a better arrangement.

And when I feel like I want to just relax all day, I’m staying at home and trying to squeeze some reading here and there, when BabyRIP (and her mother) sleeps.

Heaven.

Or FI.

And when someone asks me “hey RIP, so you’re on paternity for more than 10 weeks? Don’t you get bored?” I don’t answer the question, I just laugh as hard as I can until the interlocutor runs away disgusted 😀

No, it’s been a month and I don’t feel not even for a fraction of a second that I’m missing something of ordinary life.

2) Blogging more, but less than expected

As a side effect of devoting what was work time to personal projects (health, creativity, curiosity, spirituality) I now have more time to blog. I’ve published 5 posts in July, since I came back from the Weddings (July 10th). The blog is growing in readerships, subscriptions, page views, comments and that makes me very happy but as I said in my previous post I’m facing some dilemma.

I don’t want to duplicate my issues here, just want to mention that I originally planned to post twice a week during my sabbatical. I’ve spent a lot of time on my blog in July but I plan to slow down in August. I’d try to stick with once per week but I don’t want to commit on that.

I’ve got other things I want to do with my remaining month and half of paternity leave. Actually a month of staycation (i.e., time available for personal projects), since the first half of September we’re going to the beaches of Italy and Croatia and maybe I can keep up with reading, but I don’t know how much time I’ll have to write.

The main focus of August is resolve my midlife crisis, i.e. review FI plans and mid/long term goals of my life. Where do we want to live once FI (which affects FI)? Doing what? With whom? How much do we need? How safe do we want to be?

They may seem not too hard questions, but trust me they are. We have a daughter, I’m a software engineer that is questioning his passion for software engineering, my wife is unemployed with lack of passion for her last profession and who wants to reinvent herself, we live in the best country of the world but we could be free today if we move in ~85% of the rest of the world and so on.

Plus we may discover that if we can work 60% forever we won’t want to retire at all. Or we may take a sabbatical year traveling to clear our minds and try out few candidate ER locations and so on.

We’re in the lucky position of having so many choices, and for that I don’t thank luck. We worked hard, saved a lot and brought so many dreams to the sacrificial altar of delayed gratifications that now it’s time to just feel proud of what we accomplished.

But analysis paralysis is in our DNA, and August will be devoted to try to dispel the fog and make plans.

3) Running a lot, lost 4.5kg 🙂 – But still eating too much

On the physical side, I’m running every other day and some result is showing up. But I suffer more while running, compared to last year. Last year these days I was preparing a half marathon. I was feeling great. This year I feel tired and my knees hurt more. I would like to run the same half marathon on September 22nd (almost two months of training left) but I’m not sure I can sustain 2+ hours running.

Let’s see.

Yes, I’ve lost some weight thanks to sport, but I’m greedy and I still eat a lot. Bad habits die hard.

 

That’s all for July 🙂