MrLowBudget - Presentation + some questions

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#1

Hi everyone,

I am a guy on his late twenties. I am new to the forum as well as new to the blog. Lately, I’ve been interested in investment and the FIRE strategy and I found this is a good place to get some knowledge and read some stories from other people and get advice. There are so much information in the forum and I am trying to get as much as I can.

Lately, I opened an account with the Degiro and a 3a pillar which I did not have before, and I will put some money inside as soon as possible.

My last 5/6 years I’ve been working as a software engineer and I have a well paid job over 90k per year. I would like to still grow in terms of salary in the future. That said, during this period I was mostly enjoying my twenties travelling and spending most of the money I was making, so now I don’t have a lot of money saved in my account, I have some but not so much compared from what I read here.

Now I think is time for me to stop a bit and look for the future. I would like to address you guys some questions regarding the investments and financial planning.

I earning around 5k5 per month + the 13th salary, and I have around 2k CHF of mandatory things to pay (rent, GA, insurance, mobile phone and internet mainly)

  1. What would you start doing if you are in your twenties that you have not done in yours financially speaking?
  2. How much money should I save per year if I earning around 90/95k per year?
  3. Speaking of the FIRE movement, how much money should I put in degiro and 3a pillar per month?
  4. Aid with Financial advice: I personally have a credit card which I think I use a bit much to get some things for my hobbies. This money is always debite from my account at the end of the month putting me in a situation where I paid the mandatory 2k plus the money wasted with the credit card. Should I get rid of the credit card? I basically start using it mostly all months because I will need to get money from there as the payment (of the credit card bill) from last month get me with no money all most at the end of the day.

Thank you so much for reading me, and if you respond some of my questions is well appreciated.
MrLowBudget.

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#2

Welcome to the forum.

  1. Travel. Though hat costs money - any you’ve done that. If there‘s one financial regret I have and one thing that I would change in hindsight: trade less, keeping my investments, be invested for the long term and don’t worry too much about it. Contribute regularly. Don’t get too distracted from short-term movements in the markets. In your 20s …well at least in mine I didn’t have that much of a long-term perspective on investing.
  2. It‘s up to you. I‘d budget some „fun money“. And I‘d start with a four-digit monthly investment. Maybe 1500/month? Or 2000? You can increase later. You may also want to set aside some money for non-investment purposes (education? travel? A gap year?). Rather than giving you a definite amount - which will also depend on your personal living arrangement, I‘d suggest saving at least 50% of your future income/wage increases.
  3. Max out pillar 3a, whether you do it monthly or yearly. I‘m only paying in yearly and do it as fast as I can, just to be done with it for the year.
  4. Except for my health insurance and rent (plus utility bills), I‘m basically living on my credit card. I don’t use anything else. It is, in fact, some sort of low-key budgeting tool for me. It doesn’t matter if you use a credit or debit card. Or cash. In the end they’re merely tools for payment. You rather should get a good grasp on your budgeting and spending habits (though getting rid of the card might help you in doing so. Keep in mind though that credit cards are useful or sometimes necessary for travel and rentals).
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#3

My recommendation for myself aged 29 would be to build a simple excel forecast of how much money you will have at the end of each year for the rest of your life based on salary growth, spending and investment assumptions. It takes 5 mins and simple but most people don’t do this.

You can then play with the assumptions.If you save 1500 per month for 30 years at 7% return you can expect to have 1.7M chf which is enough to live off. If you save 1000 chf per month at only 3% because you avoid risky investments you can expect to have <600k.

Live your life, you don’t need to live like a church mouse but this will help you understand the future impact of current decisions

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#4

Thank you so much for your answer! Good advice in the 4th point I was not seeing like this.

#5

Thank you! I am going to do this right now! I’ve built an small software to track all this.

Would you recommendo first to same some money like maybe 6k to 10k in a saving account. Then later start putting the same amount of money in a portfolio?

#6

If you have 0 assets or savings, then yes. Build up a little emergency fund first, then start putting all the money into investements where they can grow. Later when you have 100k or so in the stock portfolio you can start thinking about giving up the emergency fund as you could lend money based on the portfolio (assuming you will open a IBKR account).

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#7

If you keep 10k in a savings account @ 0.4% for 40 years you’ll have 12k CHF at the end. The same amount invested in the stock market @ long term average 7% gives 150k CHF.

You need to keep some cash in a current account to live your life but not too much. I do not see much benefit in savings accounts at present

#8

I personally don’t do much budgeting or spend time on it. The only thing I deliberately budget is probably my amounts to be invested/saved.

  1. I calculate the - as you call it - “mandatory things”. At most once a year. Every 2 or 3 years is probably enough, unless your circumstances change significantly. With only a small margin for additional expenses.
  2. Then I budget an amount that I want to invest/save every month. This gets transferred out of my current account as soon as I receive my wage.
  3. Everything else gets paid through me credit card (even the mobile phone bills now).
  4. Comparing my monthly credit card statement to my bank account balance provides instant feedback. I am paying my credit card bill in full every month. As long as I can do this without my current account going into the red, I know that my budgeting for the month has worked out.
  5. Any remaining balance will get saved as well. My bank account will pretty much be at zero before payday.

(I’ve previously written about it here and here)

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#9

PS: Or in practical terms:

  • 25th of every month, I’m receiving my salary payment into my Neon bank account.
  • 28th of the month, the monthly rent payment is transferred to the landlord.
  • 30th a pre-budgeted amount for the yearly recurring “big ticket” necessities (taxes, transport pass, health insurance) and pillar 3a is transferred to my other bank account at Cler.
  • 30th of the month, another pre-budgeted amount is transferred to my investment account (IBKR).
  • Electricity / internet is paid from my Neon account as well (less than 100 CHF every quarter)
  • Everything else I‘ll pay by credit card over the course of the month
  • 15th of the month I‘m receiving my credit card statement. I‘m paying if off immediately in full. As long as I can do that without my Neon account going into the red, my budgeting has worked out for the month.
  • Afterwards, I‘ll swipe the remaining balance to savings as well

I‘ll try to only ever dig into my account at „savings“ Cler to pay to my taxes, yearly transport pass, health insurance, or to my make additional savings/investments in 3a or my IBKR account.

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#10

Why do you wait for 5 days after receiving your salary?

Is that to keep your investment amount stable over the months (DCA)?

I for one look at the upcoming bills for the next month (electricity, taxes, additional insurances, yearly internet bill, rtc), add the recurring monthly costs (only three items: health insurance, mobile phone, rent), my budget for flexible costs (food, etc) and transfer all the rest to IB.

I find your credit card idea good as then I can invest my flexible costs earlier and pay them later, therefore not having any „non-working“ money. And why do credit cards tend to charge midmonth? This is just a scheme to get more interest payments.

#11

Maybe I wouldn’t need to. All payments are standing orders that have been running for a while now.

I think I chose the dates to prioritise the (obligatory) rent over other personal transfers - while accounting for some “margin of error” in the dates and not having to calculate around holidays etc. I also know that Neon has an occasional issue with payment dates likely related to time zones (which I’ve reported to them).

And my salary payday is the 25th - but one day later, on the 26, if the 25th falls on a sunday (thinking further: what if Monday the 26th is holiday? But I’m lazy and just make the rent payment on the 28th).

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