From old of mistakes to FIRE?

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Hey everyone. I’m Josh. I’m in my early thirties and living in Switzerland.

During my twenties, I spent money like there was no tomorrow, carpe diem, you get the idea. At the turn of my 30s, I realized that this was… problematic, to say the least. Living paycheck to paycheck, no savings apart from pillar 2 and 3a. At it’s “bottom”, my debt, not counting the car leasing, was -50kCHF. Today, my debt is nearly totally gone after a couple of years of frugality. I am lucky enough to earn a good income, enabling me to take care of this somewhat quickly. I still owe a few thousands to low-interests parties, but this should be resolved by the end of the year.

Speaking of car lease, this is still haunting me and I’m actively trying to sell the car or transfer the lease, which, despite low interests, is simply too much for me and a complete hindrance on the way to FIRE. I’m also moving to a smaller, cheaper place. I’m an idiot who didn’t need to live in a 140+ sqm apartment by myself. Today, the car and the apartment amount to about 30% of my income.

My journey to FIRE is just starting, really. From Reddit’s personal finance sub, to Mr Money Mustache, to now the Mustachian Post, my only reaction is: “What the hell have I done???”

So, yeah. Time for changes. All in all, with my current income and the changes I’m working on right now, I should enable me to save more than 50% of my income starting in January 2019.

Basically, my goals are:

  1. Reach FI before the age of 45, giving me around 14 years to get there.
  2. Save at least 50% of my income until then, more when possible.
  3. Once reaching FIRE, to move to a lower COL country. I love Asia and spend most of my vacations there, so it seems like a good fit.
  4. From there, it’s easy to start a “remote side gig” in my area of expertise if I want/need some complementary incomes.

To achieve my goals, I have already lowered my expenses drastically and will reach a point where those will amount to about 20% of my income, not counting taxes, which will amount to about 30% of my income.

While I have to take care of the debts and car first, and also prepare a small emergency fund, this gives me about three months now to prepare/validate my strategy and learn how to do it properly.

I look forward to learning from all of you. Any and all feedback/criticism is welcome.

Have a nice day!

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I like how you have no mercy for your past self :smiley: . But hey, if it cheers you up, I spent my 20s in Poland, where with a savings rate of over 50% I managed to save a miserable 40’000 CHF.

I’m sure you know all these FIRE calculators, but I just stumbled upon a really simple and neat one. So putting in your hypothetical numbers gives us:

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So yeah, even with a savings rate of 50% it’s possible to retire within 15 years! It all depends on the market return, which is the most uncertain variable here…

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I tell you that in the same way there will be more rejoicing in heaven over one sinner who repents than over ninety-nine righteous persons who do not need to repent. :slight_smile:

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Welcome here Software Engineer. :slight_smile:
Your pay should be huge if a 140sqm apt + car is only 30% of your salary :slight_smile:
Have fun reading all the posts here.

On a side note, if you collect information here, you might be able to summarize on a wiki post for all. This will not only help everyone, but also gives you one more reason to get informed and stay on track.

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@Bojack, thanks for the reality check! Indeed, my situation could be a lot more miserable. Through Pillar 2 and Pillar 3a, I already have a comfortable nest egg stashed away. And thanks for the link! It correlates with my own Excel sheets.

@1000000CHF, hello Ron! :slight_smile: Are you too burying gold around your properties so that Tammy I, Tammy II and the government won’t get their hands on your fortune?

@ma0, not a software engineer but in IT indeed! Good idea about the wiki. For now, all those information are a bit overwhelming but oh so motivating.

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First steps have been taken. This forum has a wealth of information and knowledge, it’s amazing!

1) Pillar 3A

I currently have a Pillar 3A with Migros Bank. I had chosen this in the past because of their lower fees and higher returns compared to insurances or other banks. But I now realize that it is still too expensive and the returns could be better. I was investing my Pillar 3A in Migros Bank (CH) Fonds - Sustainable 45 V, which has a TER of 1.15% (or 0.90% when invested in Pillar 3A through Migros Bank).

I have now opened an account with VIAC and started moving my monthly contributions to 3A there, starting this end of the month. I have chosen their Global 80 strategy for now. I have also opened a second portfolio with them to transfer my Migros Bank 3A account to them at the end of the year. I will not do it just now, because otherwise I will have to start paying monthly fees to Migros Bank (CHF 3.-/month) until I have enough money aside in my “emergency fund” (target: 10kCHF).

2) Credit Cards

I currently have a Visa Gold card through Migros Bank that costs 200.-/year. I used to justify it to me because of the “prestige” (yeah, right) and the added travel insurances. I have now opened a Revolut account and will use this instead. I have also asked for an invitation to their “Metal” program because of their cashback and travel insurances. Metal costs GBP 12.90/month, but offers 1% cashback. As I usually have between 2-3kCHF per month on my card (mostly due to work, which is of course reimbursed), the card will pay itself each month for me, and I get to keep the advantages of the travel insurances I had with Migros Bank’s credit card.

I also have a Migros/Cembra free credit card that I don’t use much but keep aside in case I have problems with my main credit card. As it doesn’t costs anything, I will keep it as is.

My main problem, now, is that I need to change my “use cycle”: I used to (and frankly still am, for a couple more months) living paycheck to paycheck. As such, once all bills are paid at the end of the month, there is not much left on my account. As such, I have taken the (bad) habit of using my credit card for personal expenses too, and to pay the credit card at the end of the month, essentially using a free monthly credit to get by. By switching to Revolut, I need the cash upfront in the account.

3) Banking

I am currently using Migros Bank. While I like it, I see that once I start to use Revolut, I will have to pay transfer fees when “charging” my Revolut card. I don’t want that. Post Finance offers free SEPA transfers so that should take care of it.

I will switch banks in December, when I have enough money in savings/emergency, so that the Post Finance account doesn’t costs me anything. Also, the fact that now Post Finance lets you get money from different shops in Switzerland and not only their Post Finance ATM or the Post Office makes it more interesting than Migros Bank has become (they used to offer free ATM withdrawals anywhere in Switzerland, but stopped that a few years ago). For the rest of the time, Revolut’s free monthly withdrawals should cover what I need elsewhere.

4) Trading

This is where I’m not so sure yet.

I still have an old and dormant account with Swissquote, that I used for a few years more than 10 years ago when I dabbled a bit with stock. I will now close it.

But, I’m not sure where to open one for now. I have written a separate post regarding my concerns with Degiro, which is what I’m leaning toward for now. As I won’t start investing until the end of the year, I have time to make up my mind.

5) Uncluttering

Nothing like moving to a new, much smaller place, to get a dose of minimalism in your life! As I will be moving in a few weeks, I have started an inventory of everything I have. And I feel ridiculous.

Those dumbbells I swore I would use everyday to get exercise? More dust on them that in my granny’s attic.
This golf set that I received 10 years ago from a friend who wanted me to go golfing with him? Yeah, collecting dust ever since I decided that golf was certainly not for me.
…
The list goes on, unfortunately.

I guess now Anibis and Ricardo will become my best friends for the next few weeks.

My main “problem” is that my main two hobbies are very expensive. Photography and music. There is a running joke about photography: “Teach your kids about photography, and they won’t ever have money for drugs.” The same could be said about electric guitars and associated equipment. Do I need so many lenses, guitars, amps? Definitely not. Do I want them? Of course! Do you use them all? Well… yeah, at least once a year. Is it logical to keep all of this? No, definitely not. Long story short: My heart is not yet ready to let go of my hoarding for those two hobbies. I’ll revisit this in a few months.

It’s amazing to realize how much stuff one can have and not use, really. Same goes for clothes, sport equipment, … I really need to step my game up before my move.

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I guess that’s about it for now. First steps taken. Let’s keep building the momentum toward the cruising speed to FIRE!

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Impressive progress! Well done!

Here I see the constant problem of balancing out the pleasures of today and saving for tomorrow…

My approach to it is that if I am really passionate about something / really want to do it and I can afford it without damaging my savings plan extremely then I do it. Or, to put it the other way around. You can calculate how much earlier you could get to FIRE if you didn’t have photography. Then you can ask yourself. Is it worth it?

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13 posts were merged into an existing topic: Revolut is back

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I gave a lot of thoughts to this, this weekend. I have always been interested by minimalism, not in the “artsy”/hipstery sense of the term. Just… to be content with simple things. After having a good look at my possessions, I can confidently say that I probably only regularly use only 10% of all that I own. This goes for about everything I have, from clothes to kitchen apparatus (I love to cook) to DVDs/CDs to… you get the idea.

This reminded of MMM’s “King for Just One Day” article about the importance of having the experience over the possession. This also reminded me of a quote by Felix Dennis: “If it flies, floats or fornicates, always rent it - it’s cheaper in the long run.” It’s crude, but the essence of this rings true. (I don’t agree with the “fornicates” part, but hey. To each its own opinion.)

I don’t want to become a cheapskate person, nor do I want to deprive myself from happiness, but I think that part of the journey to FIRE is also, for me, to change my mindset about what brings me lasting happiness, instead of the thrill of something new. I.e., that I shouldn’t buy stuff if I’m not going to actively use it in my daily life nor if it’s not going to contribute to my happiness on the long run.

So yeah, lots of stuff to sell in the coming weeks. It’s going to be fun.

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Wow, @Josh, you’re in for quite a transformation! I’m excited to follow your progress, keep us updated!

I have to say I’m surprised to hear that your apartment and car are “only” 30% of your income and yet you’re living paycheck to paycheck. You must have a ton of camera gear!

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@Alex, you are correct. There was a lot of frivolous expenses. This brings me to a small update:

1) Expenses review

After cutting a lot of expenses already, I looked for other ways to reduce the remaining ones. The biggest win in this category was lunches during the week. I like to cook but am quite lazy when it comes to cooking for myself. I forced myself to do so and this marks the first week in which I haven’t had to go out for lunch at work nor buy pre-cooked meals. This (used to) mean CHF 15-30.-/day.

Actually, by using what I already had stored in my kitchen and only buying what I needed, this week’s groceries amount to… CHF 30. I know it won’t always be like this once the cupboards are a bit more empty, this is what I would normally pay for 1 to 2 meals tops, and I have used this for 21 meals this week. Being vegetarian helps of course, and having a good stock of legumes, rice and pasta has helped a lot.

2) Budgetting

I know, I know, YNAB. I thought this was bulls****. It was not. Long story short: living paycheck to paycheck, I always had this small bit of anxiety in the back of my mind about being able to pay all my bills on time and of not knowing exactly where I was standing. I don’t have this anxiety anymore. I now have a clear idea of where I stand and where I will be standing in the coming months. It’s liberating.

This also contributed to make me realize where I could easily cut other expenses (cf. point 1).

3) Pillar 2 optimization

I’m in a position where I can actually move the Pillar 2 pension at the companies for whom I work. I am therefore actively looking into a better pension plan than the one we have that has (always) been giving only the minimum interests to their members, so 1% since 2017. This will of course benefit me, but also all the employees, which is a nice bonus.

I wish there was an equivalent to VIAC for Pillar 2! The clostest I have found that gives acceptable, or at least higher than minimal, returns is “Fondation BCV 2ème Pillier”. Last year, their interest for members was 2.75%, while their result on the market was 7.68%. The difference between paid interests and their result seems to have gone into coverage reserves and management fees. This seems to be somewhat on par with what I have seen so far.

If any of you have recommendations for a good Pillar 2 pension plan, I’m all ears!

4) Vested Pillar 2 transfer

As the current Pension plan I’m affiliated with is so bad, and as I had a lot of “surobligatory” saving, I had (without my understanding at the time) a good chunk of my previous Pillar 2 put into a Pillar 2 Vested Benefits Account at the same pension, giving… no interest at all. I discovered this while looking into every aspect of my finances.

Yesterday, I have sent them the required paperwork to transfer this sum to a Postfinance Vested benefits account that I plan to put in their PostFinance Pension 45 fund (which is the maximum they’ll allow for Pillar 2, otherwise I would have gone with Pension 75).

Normally, you can’t transfer such accounts unless some specific conditions are met, most notably changing job or early withdrawal, but there is an exception to the law that allows you to move your vested benefits pillar 2 to another institution/pension/bank if you so desire and IF and only IF you don’t have a lack of coverage in your Pillar 2.

It’s not giving amazing returns (well, actually not at all this year so far), but will still be a lot better than 0% or even 1% in the long run. Furthermore, the big advantage is that this account counts toward the required assets under management to qualify for a free account. This way, I won’t have to keep CHF 7’500 laying around in a 0% account nor have to settle for their crappy funds with money I could otherwise invest elsewhere. Between this and the “emergency fund”, I will even reach the CHF 25’000 needed for the “Private Plus” account offering free worldwide ATM withdrawal, so why not.

If you have vested Pillar 2 accounts from previous jobs laying around, have a look at your options, it could be interesting to move them somewhere else. If you have lost track of those accounts, the 2nd Pillar Central Office can help you track them down.

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So there you have it. I have been busy reviewing everything I could about my finances. It’s a thrilling process, actually, as there is so much to learn. I’m banging my head on the wall seeing how clueless I was and actually how easy it would have been to learn it all 10 years ago.

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So VIAC are currently working on offering a pillar 2 plan!
Have look here, VIAC mentioned it.

However we have no idea how far this is out… could be a couple of years

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Congratulations!

Here is something about Pillar 2. It’s an article from Sonntagszeitung. Ofc. it puts Allianz on top :slight_smile:

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I think it will only applies to vested benefits, not company-wide plans, but I will get in touch with them nonetheless. Thank you for bringing this to my attention!

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i am also considering. until there is something like VIAC for 2nd pillar, i thought about simply putting the money into a swisscanto 45% stocks fund, the highest stock fraction you can get currently, and with non of that “5%-goes-to-the-reserve-fund-and-current-retirees” - bullshit. however this is for private persons, and i am not shure if you referred to change your company’s plan, where this does not work, it must be a pension fund, not a 2nd pillar investment fund.

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Indeed. Company plan. I have received an answer from VIAC, they target their offering for Q1 2019, but it will only apply to vested benefits, not to company plans.

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What does it mean? Can you give me an example?

I only know vested benefits in the form of company shares that are paid out on top of your salary and which you are not allowed to sell for example for 5 years. What does it have to do with the 2nd pillar?

I know that my boss has to pay some minimum to BVG, and then there is the voluntary part. He can put more, and it’s more tax efficient than paying it out as bonus. Is the new solution by VIAC going to apply in this scenario?

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@Bojack, I should have been more specific. “Vested benefits”, in relation to Pillar 2, is a lousy translation. It’s actually “Freizügigkeitskonto 2. Säule” in German and “Compte de libre passage 2e pilier” in French. It’s one of those unnecessarily and overly complicated thing about our retirement system. It has nothing to do with company stocks.

You can use one of those special accounts in two scenarios:

  1. When you leave your emloyer without having another one lined up;
  2. When a new employer’s pension plan isn’t as good as the previous one and you have “too much” Pillar 2 for them to handle it.

My situation is the second.

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What do you mean “too much” pillar 2 to handle? As in amount of assets?

So I have a pretty good 2nd pillar right now. When I switch jobs the new one probably will be worse. How do I go about using this Freizügigkeitskonto? Speak to new HR?

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There is obligatory contribution, and surobligatory ones, meaning above what is required by law. Depending on your company’s pension fund policy, if their plan plans for a coverage/contribution lower than your previous job, the new pension fund might put part of your transfer into one of those vested benefits accounts in the same institution.

HR might not have all answers, but it’s worth a shot. Upon the start of your new job, you will be asked to transfer your Pillar 2 from your old pension fund to the new one. You should ask for information about the pension coverage before doing so. If all else fails, just wait until they send you the Pillar 2 paperwork and see if everything was taken into the policy, and if not, do the transfer of the vested benefits then.

In any case, asking about Pillar 2 pension, while not the primary concern when changing job, should be a question asked before signing a new contract.