May Financial Update – The Italian Joke

Hi RIPvoyeurs,

Let’s welcome summer to Switzerland! It’s been an amazingly hot month, with some thunderstorm along the way 🙂

I’m traveling the first days of June for several reasons (friends wedding, FIWE, bringing babyRIP to parents and relatives) and I won’t be posting for a couple of weeks at least.

May has been a strange month. Regular Income, uncomfortably high expenses (but I have few excuses) and investments… well, it depends. Currency fluctuations is the elephant in the RIP room. EUR lost a lot of terrain compared to my other two reference currencies (CHF and USD). I guess Italian political instability and anti-EUR parties going to party together for government (right while I’m writing this post) helped a bit.

Anyway, let’s take a look at the metrics, if you want more details go directly to my Net Worth spreadsheet (embedded here).

Metrics

Net worth: EUR 812.9k, +31.6k (CHF 937k , +2.4k / USD 950k, +6.7k). That’s why I call this month strange. I have hard time judging it on absolute scale and apparently I need to get used to it. I mean, the EUR NW jumped by more than 30k! It’s the best month ever, if we exclude March 2017 when I joined finances with Mrs RIP. But on the other side, CHF delta is ridiculous and the USD one barely acceptable. Anyway, since I’m historically using EUR as the reference currency… hurrah! Another wall has been broken, the 800k wall 🙂

Income: 14.7k CHF.  Slightly higher-than-normal salary: I got a generous one-off 500 CHF baby bonus and a permanent bigger health insurance contribution from Hooli. Plus the Swiss child allowance of 200 CHF gross per month, permanent. Nice. Mrs RIP got 100% salary even though while in maternity she should receive something like 80%. That’s good, we’re not going to complain 😀 Apart from that, no special stock vesting (a huuuuuge one is coming in June) or significant bonus.

Expenses: 5647 CHF. Too much, but I have excuses. More details will follow

Savings: 9020 CHF. Fine 🙂

Saving rate: 61.5%. Not bad.

Saving rate for 2018 so far: 72.4%. Target is 70% (Platinum badass saver), we’re on track!

FI%: 67.74% (+2.63%). What a jump! We crossed the 2/3 barrier 🙂

FI Forecast Date: September 2020 (28 months left, -7 compared to last month). That’s a gigantic cut! Freedom is getting closer (but still too far).

Current Allowance: Year 28.5k EUR (+1106) – Month 2,371 EUR (+92) – Day 77.94 EUR (+3.03). This month we generated 3 EUR/Day for the rest of our lives 🙂

Current Withdrawal Rate: 5.17% (-0.21%). Say we want to call ourself out today and claim to be FI with our strategy, i.e. withdrawing our ideal expenses every month forever, inflation adjusted. That would correspond to a SWR of 5.17%.

Years of Ideal expenses accumulated: 19.4 (+0.8). One month is passed, ~10 months of ideal expenses accumulated. Looks like a good trade!

Success Rate at Current WR, 40 years horizon, 75%/25% split: 55.56% (based on cfiresim).  Say we want to retire today and withdraw our ideal expenses (inflation adjusted) every month for next 40 years (5.17% SWR). What would be the odds of making it? More than 55%!

Optimistic FI Forecast Date (4% SWR): October 2021 (17 months left). If you read my Playing with FIRE post you know I’m experimenting with FIRE numbers. I’m trying to see if I can trade some confidence for some money.

Ultra Optimistic FI Forecast Date (4% SWR and 3k EUR monthly allowance): December 2018 (7 months left). That’s… tomorrow! So tempting…

Swiss FI%: 52.25% (-0.21%). This got worse because even though net worth is (slowly) growing, expenses are growing faster.

Swiss FI Forecast Date: January 2022 (44 months left, +2 compared to last month). Too far, way too far.

The new progress bar, still considering conservative metrics 🙂

Major Wins

1) EUR dropping

NW in EUR is skyrocketing thanks to that!

Since we’re getting close to a million CHF/USD and I don’t know yet if we’re moving to the real Europe after FI, I’m not as excited when EUR drops as I used to be.

Btw, will there still be a common currency in few years? Wind of (shitty) change is blowing.

2) Relatively frugal parenting so far

BabyRIP is awesome! She’s so cute and easy going! I was expecting much much more work but so far it’s been a walk in the park! Even financially, she’s not draining us down! We’ve spent 557 CHF on category Baby (excluding health insurance) but most of the costs were setup costs, not recurring ones.

We wanted to buy a baby carrier and the most used model in Switzerland is the Manduca Baby Carrier. Instead of buying it new for 120-150 CHF we bought 2 of them used on ricardo.ch and tutti.ch for 65 CHF total! And they’re awesome!

Plus, our “dinners out” expenses went to ZERO from an average of 200-300 in previous months!

3) Got 100 CHF from PostFinance

I received the money few days ago, thanks to having purchased at least (exactly) 5k CHF pension fund out of my Pillar 3A account with them back in March.

It’s a 2% sign-in bonus as an incentive to buy their 1% TER Pension75 fund. It’s 2 years of expenses paid, but now I can quit their fund, cash the 2% bonus (plus the fund value is above its initial 5k valuation) and move my Pillar 3 somewhere else, like VIAC.

It seems everybody is getting excited about VIAC. In general I’m not an early adopter so I’ll wait until more data is available and their business will prove to be solid.

Major Losses

1) Expenses are still too high: 5.5k CHF 

I think I can say goodbye to “below 4k months”, but I’d like to say hello to some “below 5k month”.

Highlights:

• 1539 CHF for housing. rent, condo fees, a small piece of furniture. Business as usual.
• 713 CHF for weddings. I’m considering the two weddings we’re attending in June/July as a “travel expenses”. I’ll put in this category each wedding related expense: transportation, clothing, gifts, lodging and so on. This big expense is mainly the first wedding gift plus some train and bus tickets. On June I’m buying a suit, Mrs RIP a dress, babyRIP something too plus we’re going to face some lodging and traveling expenses and of course another very expensive wedding gift for July’s wedding. Another 1-1.5k flushed away.
• 701 CHF for health insurances. That’s our new baseline for 2018. Both I and Mrs RIP have a discounted health insurance (Mutuel, Telmed, highest deductible, 284.40 CHF/Mo each) but for babyRIP we opted for a semi-private insurance (Mutuel, Telmed, 0 deductible, Semi private, 131.70 CHF/Mo). You never know, first years of life are so unpredictable – and the premiums are so low for her.
• 602 CHF for groceries. A little bit high, but we hosted my sister, my mother in law and friends for a while to visit (and to help with) babyRIP and we NEVER ate out.
• 557 CHF babyRIP related. Powdered milk (as a supplement), diapers, photo printing (Mrs RIP is getting crazy with photos), material for Munari Mobile (Montessori tool for newborn’s brain development) that Mrs RIP has built, some baby clothes, 2 Manduca Baby Carrier and other stuff. Ah, I almost forgot: 136 CHF for her Italian Passport…
• 269 CHF for a new Phone for Mrs RIP. Her previous phone went dark. That’s something we may need to discuss about, as a society, as a whole. Phone lifetime is becoming dangerously low. I don’t want to consider it as a yearly tax. So far we survived with Hooli Christmas phone gifts, but this year we received none. Anyway, we did some research and aimed to a second tier phone. We opted for a Huawei Mate 10, purchased online with some coupons that will earn us a ~7% cash back (plus 0.5% cash back from the credit card). The phone is very good and Mrs RIP is happy.
• 244 CHF for books. Holy crap! That’s a lot! I purchased so many books this month! And I discovered that Cembra (Cumulus Mastecard) charges a lot for currency conversion. I’ve run an experiment few months ago, where I placed two orders of the same amount on Amazon and on one I let Amazon convert the currency, on the other one I let Cembra doing the same. apparently they ended up roughly being equal, according to what I can see on my account on Cembra website. Now I’ve discovered that Cembra changes the conversions when they emit the final monthly bill! And they change them for worse! And the CHF got stronger between buying time and bill time, that’s a double theft! Lesson learned: fuck Cembra, never let them perform currency conversions again.
• 175 CHF for tax consulting. Filed my 2017 tax return, more on this later. Organized my docs before meeting the expensive consultant. Was able to minimize time spent with him. I think time has come to try to file my own taxes and cut this yearly fee.
• 168 CHF for transportation. 78 CHF for local transport: bus/tram tickets for visitors , some ticket for me (I bike these days, but sometimes it’s rainy or you need to go grab people at the train station…). I always buy multi-tickets (6 tickets at the price of ~5), we’re going to use them anyway. We also tried Flixbus (25 CHF) and used Mobility a couple of times (50 CHF). I really like this car-ownership-free life, with supporting tools on demand! It’s way cheaper and hassle-free than owning a car.
• 115 CHF for meds. Mrs RIP needed extra attention after the birth too, and that required some visits to the pharmacy.
• 113 CHF for cleaning lady. May has been a mess! We needed help.
• 90 CHF for stuff on Amazon. It’s been a spending spree month on Amazon. I lost track of what these small purchases were about. I guess some of them were for my notecard system.

Taking a look at the above list, I see at least 1.5k of unnecessary expenses. At least.

Many of the expenses were not recurring ones but I start to acknowledge that every month we have many “non recurring” expenses. They are… recurring!

June doesn’t look good either, with another expensive wedding between two very very close Mrs RIP friends (she’ll be wedding witness), summer vacation planing and Italian property taxes on my apartment.

2) Still waiting for mortgage approval for my Italian apartment prospect buyer…

The realtor said we should wait max 10 days. That was 20 days ago. I’ve lost hope. Probably we need to restart the process from scratch. It’s a painful process. In the meantime I pay condo fees, property taxes, garbage taxes…

Other financial facts

1) Mr Market neutral

A lot of fluctuations, 4 out of 8 of my ETFs grew this month, 3 of them lost few points and one (MEUD) ended up at the same value of beginning of the month. The three losers are: small EU (CEUS), Emerging Markets (EIMI) and High Yield Dividends (VHYD).

The overall performance has been neutral, if you don’t consider currency fluctuations.

2) 2017 tax return almost as expected (but weird experience)

My tax advisor is not very good at handling investments. He claimed that “there’s no capital gain tax in Switzerland, so there you go: you’re short by 4481 CHF total taxes due for 2017!” I was expecting something around 7.8k and I was surprised.

I discovered he didn’t count for accumulating ETFs profits that are taxed anyway. I did my math in advance and told him that he forgot to add profits, which (according to my calculation) were about 10.5k, taxed at a 30-35% marginal tax rate: 3600 CHF more or less.

He said “if they want more money, let them put the effort and ask us more money“. I didn’t reply but… what the fuck! Of course they’ll do, and they’ll come back to me and then I have to either come back to you (and pay again) or face the monster!

Anyway, I’m accounting for 4481 + 3600 total taxes due for 2017, which is 200 CHF above what I was expecting before. I didn’t pay anything yet, I wait the final bill next year.

3) Paid another 14k of 2018 expected taxes

Yes, as you can see tax handling is complicated when you switch tax regime. I have 3 tax years still open: 2016, 2017 and 2018.

I decided to advance another 14,127 CHF for 2018. I set a reminder to myself to evaluate whether to make another advance in August or not.

4) No investments this month

I have some money sitting on my IB account (6k CHF). I didn’t invest them yet due to laziness.

Beginning of June another 5k will be automatically transferred to my IB account (I set a recurring transfer of 5k CHF each month) and at the end of the month, more likely beginning of July, some 25-30k USD will come from Hooli stocks vesting autosale (plus July’s 5k CHF automatic transfer).

So 40-45k are coming within a month, a good time to rebalance a little bit.

I’m probably going to put money on bonds: WING and IEML performed badly since I added them to my ideal portfolio. Good time to jump on the losingwagon!

Other Facts

1) I’m a father now!

Yeah, this month has been a month where I’ve been “a father” the entire month! It’s been the first full month! Apparently this is not going to change anytime soon so I better get used to it.

How’s going? Well, I guess it’s awesome. I have not fully realized the “big picture” yet. I’ve been focusing on keeping her alive which is a tough job. I discovered I’m more anxious than I’d like to admit. But I love taking care of my daughter!

I’m eager to help her in cognitive development! I’m reading a book suggested by data-driven friends: Brain Rules for Baby. I’m reading it slowly but so far so good.

Let’s not forget I’m also a husband. It’s easy to focus too much on parenthood and lose contact with your SO, but we’re doing our best to pretend we still have a life. We went visiting friends (with babyRIP, of course), watched some movies together (not a rewarding experience though) and spent a lot of time the three of us together.

The pluses are beating the minuses so far 🙂

2) Started a notecard sistem

I’ve talked about it in my last post.

3) Becoming a theater teacher

That’s been an amazing month from theater perspective! We’re preparing few workshops for late June and I’ll be teaching theater acting to beginners. If this will go well we may start an official theater group for beginners and I’ll be happy to lead it!

Of course I’m doing this for free now! Theater is hard to monetize, but having yet another card in my FIRE deck doesn’t hurt, does it? 🙂

Future Actions

1) still expecting high expenses for next 2 months

Weddings, Italian taxes and July vacation (probably 2 weeks in Côte d’Azur starting in mid July) will intoxicate June and July expenses too. I expect things going back to normality in August.

2) Need to review life plans while on paternity, probably during August-September

I have amazing plans for August and first half of September! A 45 days staycation to bond with babyRIP but also to better connect with myself. I plan to go to some coworking area from 8am to 4pm to write, read, focus on deep work, do any kind of self analysis and write down lists. Back at home go running or swimming or biking and then, from 5pm on, spend quality time with my family and friends.

Each day, for a month and half. That’s my ideal life!

(Of course Mrs RIP will try to organize activities or invite people and that would rip apart my plans…)

I’m going to test this FIRE life and find a way to switch to it as soon as possible. There will be open family discussions around concrete plans I’m going to bring on the table to address the higher abstraction layers of our life (r)evolution.

3) Going to FIWE next week

Going to talk about Midlife FIRE crisis I’m facing. Something very similar to what you can find on this brilliant old post by living a FI, one of my favorite blogs of all time.

So sad Mr Doom is not writing anymore!

4) Got intoxicated by Italian Politic

They’re doing their best to make me not come back to my country. Fascists and Populists together promising a universal basic income and flat tax (plus racism) with no idea how to make it financially sustainable.

I’m not optimistic, this is the beginning of a deep dive into third world. It makes me so sad, since I really like to be able to consider Italy as the main candidate for RIPs after-FI life.

That’s all folks 🙂