Julianek's journal


#1

It is now my turn to create my journal!

A quick presentation/recap first :
So I am Julien, 30, have been married for two months now to a wonderful polish woman.
We arrived in Zürich at the beginning of 2016, and we were living in Paris before.
I have been now working for 6 years (5 in France, 1 in Switzerland) as a software developer for the financial industry.
However, moving to Switzerland has been really beneficial because, even if i was very frugal in France, I managed to save as much in one year as in five in France :slight_smile:

Our goal is to retire in ten years and go to live in Poland. My target is thus 1,2 M CHF, which is composed of the following :
-200kCHF should be (very) sufficient to buy a house there (the average is around 400-500k zlotys, which make 100-125k CHF) but I prefer to have a margin for inflation and small construction projects as I would like to have a small farm.
-1M CHF for our passive income. With a yield of 4%, this should provide annually 40k CHF. Monthly, this amounts in local currency to around 13000 Zlotys, which is more than three time the polish gross salary. So this should be largely enough to provide for a family of two adults and two children.

I know i am overshooting but I still need to take into account inflation and local taxation, which is not clear yet.

So this is the target. Now for our current sources of income :
-I have a annual gross salary of 110k CHF, so that leaves me with a net monthly salary after contributions and Quellensteuer of 7615 CHF
-the current practice in my company is to give an annual bonus of around 20%. I know i should not expect that to happen every year, but even if it happens only half of the years, this should lead at the end of 10 years to more than 100kCHF, so that makes a big difference in my project.
-My wife is currently doing small jobs : her focus is to learn german quickly and it should help her to find a better job. She does that by principally taking care of children. Good thing with children is, they won’t judge you if you make language mistakes and they are happy to correct you, so it accelerates learning! The money she earns allow her to pay for healthcare insurance, her part of food and small expenses.

Now for the main expenses :
-I pay the rent for both of us : we live in a 65 m2 apartment in Zürich with a very nice view on the Alps, and the rent is 1500 CHF, including water and other expenses, which from what i have seen from Zürich standards, is quite low.
-Healthcare : I pay now 340CHF per month for healthcare insurance(*)
-Food : I pay around 250 CHF per month for food (as i said, my wife pay also her part, so that is 250 CHF each)
-Utilities : Internet 40 CHF, electricity around 30CHF. I use my phone as rarely as possible, using Wifi/Whatsapp/Skype whenever possible. So my prepaid 20 CHF phone has not been reloaded since May.
-Transportation : I currently bike, but i am curious to see how the winter will be. I might take a ZVV subscription for the winter months.

(*) As I have mentioned in another topic, I had issues this year with a financial advisor which convinced me to subscribe to several assurances. I already made a topic with the life insurance for 3a pillar. However, at that time, i also subscribed for additional healthcare insurance/home insurances. I have realized lately that these are way overkill ( and also not at all advantageous for the life insurance). However, i also learned the hard way that in Switzerland, i cannot resiliate healthcare/home insurances contract when I want. So this will be regularized this year. I think it is important that i am being transparent with my rookie mistakes.

So that leaves me with a saving rate of around 72%, without taking possible bonuses into account. We can expect to save around 5400 CHF per month. Obviously we have to take into account unexpected expenses every month, so let’s be conservative and say 5100 CHF.

My current net worth is 85k CHF.
With the following assumptions :
-We will manage to save 5100 CHF every month
-I will have a bonus half of the time (which is conservative, given the past practices of my company)
-I am not taking any salary raise into account

=> I need an average annual return of 8% to retire at age 40. If I retire at age 41, it falls to only an average of 6% annual returns.

We’ll see how it goes, but i will consider it a success if I manage to retire before being 42 (the magical number, for those who know the reference :wink: )

Plus another thing is my second pillar : If I work until 40-42, i will have saved an additional 80-100k CHF that will compound until i am 65, and will be available then. Even with a small compounding rate, 100k CHF is the price of a nice house in Poland!

Challenges :
I mentioned kids above. We plan to have kids, and we are already looking for how we can minimize kid-related expenses. Facebook and Tutti are full of second hand baby items and this should help. MMM and ERE also have nice posts about how to handle kids while shooting for early retirement.

So this is it for my first journal post, I am open to every comments!


#2

Hi Julianek,

how can you keep your saving rate this high ?

Don’t you have other expenses such as clothes, holidays etc ?

Just curious. I’m sadly far, far, far (far) away from that rate (with 2 kids, tough…:wink:)


#3

Hi Weirded,

Thanks for your question. I will try to expand a little bit about my mindset regarding expenses.
First, as I said, I don´t have kids yet. However we plan to have children in the near future so we are heavily documenting ourselves about how to integrate them in our system without compromising their happiness. But this is still in progress.

I am also lucky to have a wonderful wife who has the same mindset as me regarding expenses and it helps a lot.
Right after children, our priority number one is to retire in Poland in ten years.

When it comes to spending, I try to comply to these two principles :

  • Always get great value for the paid price
  • Minimize depreciation as much as possible. I have created a topic on that subject here.

With that in mind, let us try to review the most common spendings :

  • Biggest one is obviously housing. When I compare the price of buying versus renting for the same surface, this is a no brainer in Switzerland : buying is much more expensive and i don´t think it is a good idea to buy your principal residence, it is better to rent and invest the remaining money. Usually a good rule of thumb is that buying is a good option if the price to buy is equal to 100-150 monthly rents for a similar house/apartment. This is obviously not the case in Switzerland, so let´s rent.
    Furthermore I live in Zürich where the housing market is very tight, and you may feel that it is more the apartment which chooses you than the other way around. Nevertheless we were lucky enough to find a 2.5 room apartment in the southern extremity of Zürich (Leimbach) for 1500/month, expenses included. It is a little bit smaller than swiss usual standards (63 square meters) but as we were coming from Paris where apartment are very tiny, this was already a huge surface for us. Plus, we got a nice view through the windows on the Glarner Alps, which is a big plus for the mood :slight_smile:

  • Transportation : I usually bike, though i am considering a ZVV subscription for winter months. I think when we will have kids the Zvv subscription will become mandatory. When we want to go outside zürich with train, we look for Spar tickets on the SBB website(-50% without the halb tax card). If the train is not an option, then we would rent a car.

  • Food: Food is also a category where you cannot minimize depreciation (because, once it is eaten it is gone) so we should look deeply into that. I came to the conclusion that the only reason prices are so high at Coop/Migros is because Swiss people can afford it. Or perhaps they take advantage of the cognitive bias of the fact that higher price = higher perceived value. Prices there have nothing to do with value. So we go to Lidl. Let´s take bananas as an example : how can we justify that bananas (which are obviously not raised in Switzerland) cost almost 3Fr/kg at Coop/Migros whereas only 1.49 at Lidl? And don´t tell me the usual high salary excuse, because cashiers at Lidl already earn 4000CHF per month. From my experience Lidl has good quality, swiss made products when possible. But the packaging is not as nice. Well, when I look for food I don´t want to eat the package so i don´t care. Going to Lidl allowed us to divide by two our food expenses : around 250 fr per person per month. And we eat meat twice a day. We also have some other tricks (like using a slow cooker for making big meal batches), but going to Lidl is the one with the biggest impact.

-Clothes : When I buy clothes I usually look for clothes that will last a long time. So first conclusion is that I am not looking for the current fashion, and second conclusion is that i am willing to pay twice as much if I know that the item will last three time longer. For instance, my pair of winter boots (Crockett & Jones) are worth quite a lot of money (i bought them for around 500 euros) but they did not deteriorate in three years and I am convinced that they will last me ten another years. For the overall picture, When I started working six years ago I also started to assemble a wardrobe of basics : a set of intemporal but good tshirts, shirts, shoes, winter coat, summer jacket, and so on. Every season i would add an item of good quality to my wardrobe, following the same principles of looking for quality at a good price, and looking for stuffs that would last long. it took three years and a half. but now the consequence is that in the last two years i never bought any clothes. The exception being my wedding suit this fall (but i made sure that this suit can also be used for business purposes, so here again i minimize depreciation).
And don`t think that it is not compatible with style : I regularly get compliments from my coworkers about how elegant i am.

-Vacations : well with my wife we are big lovers of hiking. We arrived in Switzerland this year, so we decided that these summer vacations would be hiking in Switzerland. Now it can be expensive if you go to hotels, restaurants and so on. Or you can minimize all of that by renting a RV for several weeks and going in a big road trip with hiking halts, and cooking yourself. We did that when we went to Iceland two years ago and we decided that it would be our standard mode of vacation.

-Social activities : This one is also big, because we live in a city where a beer costs 8 francs, a cocktail more than 20 and a burger in a restaurant 30 francs. Our answer is simple : I almost never go out (well, around once every two months) Instead (because having a social life is important), we have a lot of friends that we invite at our home, and everybody brings something. That way you keep contact and good moments with people, and you learn to cook very good dishes yourself.

-A final thought : As a general rule, in Switzerland as soon as you need someone else to do something for you (most services), it is going to be expensive. So my advice would also be to learn and acquire the skills that you need the most so you don´t have pay people to do it for you. Look at your credit card summary and see where your expenses are going and try to think if you can not internalize these services/skills. For instance, i cut my hair myself. My wife too. A good advantage of this is that you are never bored because you always want to learn something new.

I hope this helps you to understand my mindset regarding expenses :slight_smile:


#4

Hi Julianek,
thank you for sharing.

I began tracking credit card expenses one year ago (it did help understanding a little bit where all the money goes) but I’m tracking the other classical expenses since 3-4 years.

My monthly, regular expenses are about 1’750 CHF (1’200 CHF mortgage, 40 CHF Billag, 50 CHF Internet/phone, 230 CHF eating out at lunch, 200 CHF ATM).

Then I have car plates, car insurances, car services (sadly both of us need a car, me for going work, 2x35 km with bad connections, and the wife for taking care of the kids, mainly extra activities etc…), health insurance (4x), house insurance, light/heat. This makes +/- 1’350 CHF/month.

Then credit cards (here we could surely cut but I need help from the wife…:wink:) about 2’500 CHF/month.

So the sum of this is already 5’600 CHF/month ! (:scream: I’m ashamed to write it…).

All the above without taking into account holiday(s), extraordinary expenses (doctor, dentist, car repair, house repair, …) which - in our case - average 1’150 CHF/month -> the real number is a shaming 6’750 CHF/month !

This considered, and having a single income even if adequate, i’m very far from your saving rate… :pensive:

I’m constantly trying to optimize (credit card expenses categorizing and tracking in the last year helps a little bit, even though you have to convince yourself about what is “necessary” and what’s not!:joy:) but the wife is hard to convince (she means we will save more if we have to and I too began to embrace the FI path just one year ago, then I can’t be too hard on this…:wink:).


#5

Hi Weirded,

I know it is not easy but from your post it seems that more than 1/3 of your monthly budget is your credit card expenses! Other than that :
-housing cost is quite reasonable (your mortgage is lower than my rent)
-if you absolutely need cars, there is not a lot you can do, especially if you bought your house so moving is not really an option
-I guess you already tried to optimize your insurances. If not, do it now.
-Health costs are not easily avoidable
-so it really comes to your credit card expenses. I think the most effective action you can take (but sadly not the easiest) is to talk to your wife and try to align your common projects, because it seems to me that the incentives in your couple are not at all aligned in the same directions. I know it is quite difficult, especially when feelings and relationships are thrown in the way of your savings…


#6

Hi Julianek,
thank you for your advice.

I’ve reviewed my credit card expenses in the last 15 months and it’s (even) a little bit worse than I thought…:pensive:

Our average credit card spending in the period 09.15-12.16 (15 months) has been 2’950 CHF/month, distributed as follows (average monthly value):

Clothes: 300 CHF
House: 200 CHF
Health: 100 CHF
Grocery: 650 CHF
Hobbies: 400 CHF
Transports: 400 CHF
Holidays: 900 CHF

Health, grocery and trasports can’t be optimised, I think. Better to try work on the other categories and see if the average value can be reduced.

I’ll keep trying to work on the other half and see what I get…:smile:


#7

“The First $100’000 is a bitch.” Charlie Munger

I just crossed the CHF100’000 milestone tonight and I am so happy about this that I had to share it with you!


#8

congrats!!!
anow heading for 1’000’000?^^


#9

Congrats!

I recently reached the 2nd 100k :slight_smile: It was easier than the first one.


#10

Thanks everybody! Yes, the second 100k seems easier to attain now :slight_smile:
My last post was two months ago, and between my savings, bonus and market returns, I have already covered 20% of the second 100k!


#11

congrats!!! well done!!


#12

Hi Julianek,

Now I know why your nickname is “Julianek” (“small Julian” in Polish). :slight_smile: I’m Polish mustachian, currently located in Zug and to be frank my objectives (and means to achieve them) are pretty much similar. Although I don’t know yet if I want to move back to Poland. That depends mostly on my own career and my wife’s career after our son will be old enough to go to school (he’s going to be delivered in about a month in Kantonsspital Zug - and 90% of the stuff we bought for him on Tutti :slight_smile: ).

If you’d like to meet and discuss the mustachian stuff for a beer/coffee/whatever here in Zug or in Zurich, drop me a line in a private message. :slight_smile:

Cheers,
Tomasz

PS. Your savings rate is amazing - before I started reading mustachian stuff, I was saving about 20-30% of my salary, this month is the first one when I’ll finally get 50%. Looking forward to convince my wife to target 70%. :smiley:


#13

MP sent :wink:

Indeed, you caught me on my nickname!
To be frank we are also currently questioning the choice of going to going to Poland. The good thing is, having mustachian savings gives the freedom to be able to have the choice where you want to live. So we still have many years to make this decision and, in ten years, a lot can happen.

Regarding my saving rate, it is quite optimized currently, but the big unknown is how kids will impact this. Don’t get me wrong, I know it is manageable to have a wonderful time with kids and not spend too much money (There are some examples like @Moebius on the forum) but i still don’t know what will be the final impact…

Good luck for your future child!


#14

That’s why we’re doing these weird things - for freedom of choice! I’m considering changing my profession after FIRE, but don’t know yet how it will look like. As you say, 10 years is really long time. Maybe we will move back to Poland, maybe we will stay in Switzerland.

Yeah, my savings rate was relatively low last months because I bought a car (5-year old Skoda Octavia 1.8L - I know, one of the most un-mustachian decisions in my life, especially in CH). My second huge cost factor was - guests. Everybody wanted to visit us before the birth of the baby, so we had visitors queuing for last 3 months practically every weekend (and each of them I had to take to Luzern/Zurich/Alps/etc by car and I mostly funded the food for them at my place). Third cost contributor was our German classes - before we switched to a skype conversations with a Polish teachers (200 CHF/m), we paid almost 1000 CHF/month for learning German at Migros Klubschule (I know - that’s nuts). So, we ended with 30% during last months and this month it will be first time ~50%, so I’m super excited. :slight_smile:

Next month will be our first month with our son on board, so we’ll see how our costs structure changes. I’ll let you know if you’re interested. At least with the car, we’re able to buy diapers and other stuff in Germany - this should balance the costs a bit, but I guess it will be more difficult to keep the 50% savings rate. On the other hand, we’ll have less guests and car trips around Switzerland (+ we switched to Skype language learning), so maybe we’ll still manage to keep it at 50%.

Thank you for your kind wishes! I’ll pass them to him! :slight_smile:


#15

That’s not so unreasonable if you are going to use it regularly. Insane would be to buy a brand new car or drop a fortune on GA or Mobility

[quote=“1000000CHF, post:14, topic:117”]My second huge cost factor was - guests. Everybody wanted to visit us before the birth of the baby, so we had visitors queuing for last 3 months practically every weekend (and each of them I had to take to Luzern/Zurich/Alps/etc by car and I mostly funded the food for them at my place).
[/quote]
Maybe it’s just a cultural thing, but many of our Belgian friends who are getting married or babies these days send us postcards for wedding, birth, baptism, etc. and aren’t really shy to mention their IBAN with it. They don’t write the amount they want to cash in, of course, but it’s implied that you should pay up something to attend or not offend them…


#16

Well, last 3 months I’ve been using it a lot. Except for the trips with our guests, we also went for a trip to Genoa/Turin/Aosta during Easter. I probably did few thousand kilometres (Another un-mustachian thing - I have to start tracking my car usage and optimise it!) To be frank, I’m not sure how often we gonna use it once we’ll have a baby. We like trips in general and I visited already a huge chunk of Switzerland. This is one of the things that I wouldn’t like to limit to increase my savings rate. (For instance today we’re going to drive to Zugerberg and have a picnic there.)

It’s definitely a cultural thing. In Poland that would look really awkward. There’s a strong custom of hospitality in Poland, so if you invite anyone, you’d fall all over yourself to treat them as best as you can. It would be also super weird to ask anyone for money. Some people are insisting on contributing during the stay at someone’s place, but many aren’t.


#17

Small kids = small expenses… :wink:


#18

Well I agree buying a brand new car is always insane. But I disagree with Mobility and GA. Is working very well for us. So is not always insane :wink:
Once a month we do weekend back at grandparents (4 hour train per trip) and the fact that I can play 8 hours with my daughter on the play zone on the train is much more valuable to me than spending 4 hours driving with an asleep daughter on the back. Having a car and GA for the whole family would be insane though :smiley:
Car is always a time expenditure too, difficult to optimize. You can’t really driving and do something else, aside from the usual (phone call, audiobook)


#19

June Update :

With less spendings and a small salary raise, my net worth is now at 132 k CHF.
With the 4% rule, I’d say I am currently at 16% of the FI target. However, I still haven’t decided if I should use 4% (very optimistic), 3,5% or 3% (very conservative).
One figure I like to calculate as well is what I call my “virtual withdrawal rate” : with a given level of annual spending, it states what percentage of my capital these spendings would eat if I stopped to work now.
This virtual withdrawal rate is currently at 24% => this means that I could already have a 4 year mini-retirement!

Regarding my investments, my Net-Net strategy is working well so far. In particular, Rubicon Technology (RBCN), Emerson Radio (MSN), Sanshin Electronics (8150) and more recently Infosonics Corp (IFON) have very well performed.
On a side note, it is getting more and more difficult to find such stocks, because the market valuation is going higher and higher. Therefore, I have progressively increased my cash and my asset allocation is currently 2/3 Stocks vs 1/3 Cash.I must wait patiently to find more opportunities…

Finally, I thought it would be a good idea to add suggestions of the books I have read since the beginning of my journey:

  • Early Retirement Extreme by Jacob Fisker : the book that got me hooked on this journey. A really good analytic vision of modern society, and a brilliant application of system thinking to personal finances.

  • Poor Charlie’s Almanach, by Charlie Munger : All the Wisdom of Charlie Munger : this book is a must have. It contains, among other, a lot of Commencement Speeches that Munger gave to graduates, which are a concentrate of wisdom. For instance, the 25 sources of Human Misjudgment are outstanding. Also, his view on why we should have a lattice work of mental models and what are these models is especially interesting.

  • Fooled by Randomness, The Black Swan & Antifragile, by Nassim Taleb : : Three really impressive books that will challenge your idea of probabilities. Antifragile is particularly brilliant.

  • The Most Important Thing, by Howard Marks : Great book. What I like about it is that it is at the same time thought provoking, and with a lot of common sense.

  • The Education of a Value Investor, by Guy Spier : a very honest vision of what it takes to be an investor, and how the author transformed his way of thinking to get there. Plus, Guy Spier is based in Zürich!

  • Fortune’s Formula : An inquiry in the story of the Kelly Criterion, and how to use it to maximize returns. Very interesting, but so far I did not find a practical way to implement it. The book make us realize how brilliant Claude Shannon and Edward Thorp were.Speaking of Edward Thorp :

  • A man for all markets, by E. Thorp (his autobiography). Thorp relates how he invented a successful card counting system in Blackjack, how he beat the casino roulette game with Claude Shannon, with the help of the first portable computer that they invented as well. Then, tired with casino games, he decided to beat the stock market and created a hedge fund. With 230 months out of 232 of positive returns. The guy is a genius.

  • The Snowball, by Alice Schroeder : the biography of Warren Buffett. It made me understand how the investment philosophy of Buffett has developped over the years. What is really encouraging is that The “Cigar butts” method he used at his beginnings were nothing more than Net Net stocks :slight_smile:

  • More than you know, by Michael Mauboussin : various essays explaining how we can adapt system thinking and different mental models to stock investing

  • When genius failed, by Roger Lowenstein : the story of the Rise and ultimate failure of LTCM. In a nutshell : don’t be over leveraged. Also, VaR and Modern Finance Theory are quite dangerous some time.

  • Value Investing, by James Montier : a good book that brings Graham’s works into new lights.The beginning of the book is a particularly good reminder of all the errors that we should not try to reproduce when investing…

Two classics :

  • The intelligent investor & Security Analysis by Benjamin Graham : I think that everything has already been said on these two books :slight_smile: Therefore, I have nothing to add, except saying that they are outstanding!

#20

Hi @Julianek, very nice summary!

I’m wondering if you’re not losing money on waiting for opportunities. There’s certainly some opportunity cost here. If you’re waiting too long and you stash too much cash on your bank account, you’re losing whatever index is gaining during that time.