Julianek's journal


#41

August 2017 Update :

A lot has happened since June. Biggest news : We are expecting a baby! This made us reconsider a lot how we should structure the family finances. In particular, the FIRE project is not only mine, but the whole household’s from now on.
So Mrs Julianek is onboard as well now, even if this implies a lower average saving rate.
We decided it would not make any sense if one retires entirely while the spouse is still trimming in the rat race.

Thus we made a combined „Income Statement“ for 2017 so far :

A few remarks :
-We expect to spend on average 1564 CHF/month per person this year, which makes 37,5k CHF/year for the household. If we want to retire, that would require a Net worth between 938k CHF and 1,2 Million CHF, depending if the Safe Withdrawal Rate is 4% or 3%.
-This depends a lot from Taxes/Social contributions! As you can see, we pay currently more than 10k CHF of taxes and contributions per year. Our investment strategy relies so far on capital gains, on which we are not currently taxed.
We could expect to not be taxed anymore during FIRE. However, if the tax authorities consider that for some reason we are „professional investors“, then we will need to pay a lot more in taxes : we would need anywhere between 250k and 330k CHF more in net worth :pensive:

Where things are likely to get better financially :
-Finally next year we won’t have to pay former French Taxes again! This should go away from our budget.
-I have a legacy healthcare insurance that is far from the cheapest option available : I will switch this year to the cheapest one.
-My wife has found a part time job as a music school teacher! This should allow for more revenue :smiley: So far she was doing small jobs with kids, mainly in order to learn german.

Where things are likely to get more difficult financially :
-Obviously, the baby :grinning:. I have a hard time to estimate how much costs this will add, and we will have to adjust our budget next year. However, we are decided to not follow the consumer craze for baby related items : we already found a free second hand crib, and we plan to use cloth diapers and to breastfeed.

Any suggestion to optimize further is welcome!

Net worth :
A good progression since last time, our net worth is now at 172 900 CHF!

Books read since last time :
-How to win friends and Influence People, by Dale Carnegie: the title is cringeworthy, but the content is great! I had seen this book recommended a lot in the past, but never bothered to read it. That was a mistake, there is lot of value in this book, especially for an introverted person like me.
-Influence, by Robert Cialdini : This is a marvelous book. Surely in my top 10 so far. Cialdini manages to explain all the main bugs in our brain and how sales people take advantage of it to make us comply to their requests. Brilliant.
-Pebbles of perception, by Laurence Endersen : how a few good choices make all the difference
-Margin of Safety, by Seth Klarman : a reference in value investing, and a lot of wisdom in this book!

-On the origin of Species, Charles Darwin
-Guns, Germs and Steel, by Jared Diamond : a very interesting inquiry into how humanity and civilisations evolved and why Europe managed to conquer the whole world.
-Sapiens, by Yuval Noah Harari : same as above, but covering a wider timeframe.


#42

I also looked again at the maths used for personal finances. Let’s consider the following :
My initial capital is C0.
Each year, my savings are S and my average annual return is r%.
Let’s define C(n) by the Capital I have at year n.

Obviously, we have
C(0) = C0
C(1) = (1+r)*C(0) + S

C(n) = (1+r)*C(n-1) + S, because each year i gain r% of the capital I had the year before and I saved S as well.

We can prove by recurrence that C(n) can also be written:
C(n) = (1+r)^n * (C0 + S/r) - S/r
Which is more practical to solve equations!

Time needed to reach FIRE :

Now, let’s say that we want to reach a target capital T after N years. What would be N?

C(N) = T = (1+r)^N * (C0 + S/r) - S/r

Solving for N, we find :

N = ln((T +S/r)/(C0 + S/r)) / ln (1+r)

In my case, with the following parameters :
C0 = 172 900
r = 10% (let’s hope!)
S = 84 924 CHF
T = 953 220 (if we assume a 4% SWR)

I find N = 5.95 years. Which is quite good!

If I change my SWR to 3% to have a target T = 1 258 251 CHF, then N = 7.59 years.

So it looks that we should be able to reach our target before being 40! Good news then, even if it is only a mathematical model and a lot can happen in-between (especially regarding the value of r parameter) …

Tipping point :

Another value I find very interesting is what I call the tipping point : It is the moment when your revenue from your investments are equaling your savings.
When we reach this point, it is clear that we are very close to FI or already FI.

Let’s translate that into an equation. At tipping point moment,

r * C(n-1) = S with n = Tipping Point
we replace the value of C(n-1) to get to :

r* ( (1+r)^(n-1) * (C0+S/r) -S/r) = S

solving for n, we get :

n = 1 + ln( 2S/(S+rC0)) / ln(1+r)

Using S= 84 924 CHF, C0 = 172 900 CHF,
If r = 10%, then tipping point = 6.32 years
If r = 7%, then tipping point = 9.27 years
If r = 10%, then tipping point = 5.18 years

Let’s see in future posts if these indicators are reliable!
(and sorry in advance if this post was too geeky for some readers… :smiley: )


Unrealistic savings goals
#43

Awesome! Congratulations and welcome to the parents club!!! :slight_smile:


#44

Congrats Julianek! And may you guys have an easy pregancy :slight_smile:

If you’ve got Lidl and Otto’s close by you’re pretty much set, won’t really have huge expenses at first. My wife always gets diapers and wet wipes that are on sale from one of these stores and it’s actually marginally cheaper than buying in DE/FR. Also look for used stuff on ricardo, sometimes you find real gems there.

Cheers!

ps.: also don’t buy too many clothes of the same size for the first 3-6 months. we’ve got twins and we barely needed 3 sets of bodies (per kid) during that timespan. kids grow very fast in the first year. we learned to sort of wing it :smile:


#45

Excellent advice. I bought 90% of the stuff for my son on tutti.ch and it all is in perfect condition. Once a month I go to DE for bigger shopping, but normally I just buy stuff in Swiss Lidl. I also got a lot of diapers and other stuff as a gift from some people, so in the beginning I didn’t have to buy anything.


#46

congrats Julianek :slight_smile:
all the best for your kid!
i will be curious of reading your future statements!


#47

congrats for the baby. I second @1000000CHF, we bought a lot of stuff from Anibis, tutti.ch and even facebook in the 2nd hand groups. You’ll pay less taxes and you will receive children money every month from your canton. So it will still cost you, but if you avoid buying all new is not an enormous increase, if any. Consider that you will going out less, because going out you two will requrie some form of babysitting if you don’t have grandparents around, so this save money too :smiley:
although is important to find some time for some couple’ activity


#48

I actually bought a lot (and I’m still buying) from tutti.ch and a bit from Brocki. My baby already has 2 months, so I can tell that I actually saved even more than before (moved from 40-50% to almost 60%) because we didn’t drive too much and didn’t have guests during that time. And I haven’t received yet the family allowances (in Zug it’s CHF300 per month), so I guess in the end my saving rate will be even +60%.

In the end having a baby is also a good incentive to optimize some spendings. :slight_smile:


#49

That is good news then! We already found a crib and a very nice stroller for free on FB second hand groups (gosh, the stroller was listed as CHF 700 new!)
So yes, having kids does not seem too expensive so far ( although I am curious to see if it will be still relevant when they grow up).


#50

That depends if they’ll follow your steps in Mustachianism. :slight_smile:


#51

Congratulations, that’s terrific. The first year is sooo hard (haha, at least it was for us) - but your life gets so much richer :smiley:.

Don’t buy too much for the baby, there is so much stuff everywhere (Kinderbörsen, Flohmarkt, Brockis, Exchange on FB etc. und cheap stuff on http://www.allekleinanzeigen.ch - it searches in all portals) and your house will fill up rather quickly with material from all the people you know.

@Julianek i really love your excel with the calculation for FI, do you consider or would you mind sharing it?


#52

Thanks! So far the spreadsheet is not sharable as is, because it takes data from another spreadsheet where I log my daily spendings. However a similar template should be easily doable. which part are you interested in particular? FI numbers?
They are based on the cell “Total Estimation for the year” (here 38128 CHF) for the household.
Here the FI number with a 4% SWR is just this value times 25 (or divide by 0.04) (Which gives 953’220.71 CHF for the household)
Similarly, with a 3%SWR, you divide 38128,83 by 0.03 and you get the value of 1’258’251,34 CHF


#53

Yup, that’s the reason behind my nickname on that forum. :slight_smile:


#54

Yes, these are the nice ones. I get the calculation Burnrate/SWR - will create an Excel as well :smiley: - thank for the help

These is a nice equation, a good forecast! Maybe i have to ask you again about it, did not fully understand it.


#55

October Update :

I made my accounting until end of September 17. Here is our updated Income statement :

The saving rate diminished a little bit because of two trips abroad, but all in all it is still strong and everything is on track :slight_smile:

Our net worth is now at 190’847 CHF. We will soon go past the 200k milestone!

On the pregnancy side, everything is going well as well, and I can confirm that going second-hand is the way to go. I think we already gathered everything we will need for the baby (bed, stroller, lot of toys, books, breastfeeding tools, cloth diapers, car seat and so on) for around 250 CHF. So at least at the beginning, I am confident that having a baby won’t have too much of a financial impact (but a big happiness impact!).

As usual, I will conclude with a list of books i found interesting :

  • A guide to the good life : the ancien art of stoic joy : recommended by Mr Money Mustache, it did not disappoint me : the book revives the Stoic philosophy of life and let us understand what matters and how to face life challenges
  • Seeking Wisdom , by Peter Bevelin : another very good book about Mental Models
  • How Asia Works , by John Studwell : very interesting, let us understand why countries such as Japan and South Korea or Taiwan had a very strong growth since the second half of 20th century, while others such as Malaysia, Indonesia, Philippines or Thailand did not advance so well. Gets a long way about China too.
  • On the Happy Life, On Tranquility of Mind & On the Shortness of Life, by Seneca. The above book about Stoic philosophy had such an impact on me that I came back to the classics of Seneca.
  • The Power of Habits, by Charles Duhigg : puts into light how habits work, how to change them and how to create successfully new habits.
  • Charlie Munger : The Complete Investor, by Tren Griffin : Did I mention that I am a complete fan of Munger’s wit and wisdom? :smiley:
  • Predictibly Irrational, by Dan Ariely. Another book on behavioral economics, putting into light how we are not rational at all with a lot of examples and humor.
  • Homo Deus : I had read some bad reviews about this last book by Yuval Harari, but I have to say it made me think even more than Sapiens! For those like me that usually have a libertarian point of view, the book is very disturbing.

That is all for now, to be continued!


#56

December Update :
I have made my accounting lately so I can give you an update!
Here it is until end of november :

I observe two tendencies :

  • The expenses have been growing during the last months of the year, I’ll have to investigate where it comes from. At first sight I would say the travels during september/end of october but I want to check if there is not something more systematic…
    -Therefore, mechanically the savings estimation has been decreasing.

On the net worth side, I can proudly announce that we crossed the 200k milestone, and our net worth is now 205,211.67 CHF! :slight_smile:

On the investing side the results are quite good as well. Since I had several companies in my Saxo bank account before switching to IB (and thus the cost of transferring them all at once to IB would have generated two much fees at SaxoBank), I progressively liquidate my positions at IB when they have reached their intrinsic value and bring back the cash to IB.
Anyway, for monitoring purposes, both provide performance analysis tools, and the results are good for each account :

That is all for today!


#57

hey julianek,
that is fantastic, congrats!! every bit of it :slight_smile: I wish I had such an income :smiley:


#58

You have your spending very well under control. I definitely need to focus on this.

How did you get your healthcare spending so low? I’ve always picked the highest deductible and lowest level of cover and I still pay 314 with Assura each and 83 for our baby. Total is a painful CHF 711 per month. Have you got some way of reducing healthcare costs or is this just for one of you?

Cell phone is also impressive. Before mustachianism I stupidly signed up for a 39CHF a month deal with Salt for unlimited everything plus some roaming. Worst of all is that even though it is a sim only deal I still can only cancel after a year so I’m stuck with it for a while. Now I realise that I should just go back to pay as you go and only use internet on wifi. How do you do your phone?


#59

Healthcare costs depend where you live. If you live in a “bad” neighborhood, you pay more.


#60

I am not sure about which number you’ve looked at for healthcare. We pay on average 301 CHF per person per month for healthcare expenses. Which is low but not incredible, given that I am still paying as well a complementary healthcare insurance policy that I made the error to sign last year. Fortunately I have been able to cancel this policy for next year :slight_smile:
We are both at Sanitas with the highest deductible, which should cost around 250CHF per person for next year.

For my phone, I use a prepaid card. I realized that I have wifi at home and at work, and in this case all my calls are going through whatsapp/skype. if I really have to make a call (emergency, unplanned situation), I use my prepaid card, but this is quite rare, as I spend all of my time either at home or at work.

EDIT : +1 with ma0 : I am living in Zurich, where the insurance premiums are quite low compared to, say, the french speaking part of Switzerland.