My story, my mistakes. How to fix them?

Hello everyone,
here is my story and my mistakes. Together with you, I would really like to understand how I can improve my financial management and optimise my economic resources.

Although I am a fan of F.I.R.E. it is currently not a goal of mine, as with my earnings it is impossible to get it in Switzerland. In other European countries it might be an option for the future…

At the moment my family consists of me (early 30s), my wife (late 20s) and a baby on the way. In the future I hope to have a second child.

I currently work as a designer in the construction industry and my poor salary is approx. 5’600 CHF/mo. My wife is currently not working.

Let’s start with the mistakes:

Education:
Despite having a master’s degree my salary is for a high school education. Even if I change companies I think I could realistically only earn +500/1000 CHF/mo. To aspire to high earnings I have to change sectors.

Investments:
For the first investment I give my capital to a broker. Unfortunately it turned out to be a scam and I lost about 8,000 CHF.

The second investment was buying a house in the USA to rent out. I wanted to use the BRRR method, but the house was always empty. With property management I have a 2-year contract (end of 2022), as soon as it ends I will ask to put the house for sale.

My net worth:
45,000 CHF cash in the bank account (unused)
80,000 CHF US real estate
20’000 CHF 2 pillar (50% stocks, 25% bonds, 25% real estate in Switzerland, 5% interest)
10,000 CHF car (no leasing)
5,000 CHF Genossenschaftskapital (1.25% interest)
Total 160,000 CHF

Next steps:

  • 2022 increase my 2nd pillar retention to the maximum (6.7% vs 6.0% currently)
  • 2022 open a 3a pillar (Finpension 100 - 6883 CHF/year)
  • 2023 look for a job with better pay
  • 2023 wife’s new job (60% salary 3000 CHF/mo)
  • 2023 sell property in the US, hoping not to lose too much
  • 2023 open a 3a pillar for my wife (Finpension 100 - 6883 CHF/year)

In the future I would like to buy a house here in AG, but with the housing market in bubble I think it doesn’t make sense.
At the same time I would like to do an CAP with ETFs, but seeing the terrible results so far with investments I don’t think my wife would agree with my strategy.

Thank you for your attention.

Thanks in advance to everyone who would like to give me their opinion :slight_smile:

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I think it is most important for you to convince your wife that you are not making mistakes with investments :roll_eyes:. I have a similar situation, and my significant losses were before we met, so she is not aware of it. Find out what would convince her.

There are also external wealth management if it helps her feel better. Vermögenszentrum looks reasonably priced.

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Nevertheless don’t rush with buy ins into 2nd pillar before you decide on your desired assets allocation.

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Hi
Sorry to hear your bad luck. It looks like you are approaching the issues in a sensible way so well done. Also 160k is a pretty great result compared to many people your age

Where is your US property? Can’t you get out of the contract? I’ve >10 years of good and some very bad results there so may be able to help or share experiences. It’s the Wild West. Feel free to PM me if you prefer to share details that way

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Investing with a scam broker and buying property that materializes to be more a liability than an asset - these are symptoms of underlying mistakes. Befor you invest a penny - try to at least identify the genuine mistakes you made. Only then, once you truly understood them may… only then will you stand a Chance to ensure they no longer happened.

Or even more frank. You are the very first Person I actually hear from (ither than strange news articles)… that falls victim to a scam broker. It is very hard to even find such broker. How did this happen, what made you proceeding this direction? No need to answer this but maybe you need to adress this first (greed, lack of financial education, naivity, … whatever the Problem was).

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Hi and welcome!

Taking that as the 72K displayed on the share your salary topic, that’s about on par with what my understanding is of what a civil engineer working on roads or hydraulics (no idea about structure) starting their career, or a 30 something geologist would earn in Wallis. There is a good margin for progress and it certainly makes things difficult for you with a family of 3, but I would not consider this a poor salary as a matter of framing my situation, even though the path forward probably involves increasing your income.

My bet is a lot of master’s degrees lead to that kind of salaries at least for the first few years of their career (which, at 30, is probably kind of at the margin of where you still are). I wouldn’t focus on my degree of education when considering my financial prospects in Switzerland. There again, it’s mainly a matter of framing but framing helps muster energy or nourrish despair so it’s an important part of the journey.

As an alternative to changing field, you may also consider working for the public sector (if you aren’t already). They can’t compete for the highest paying jobs (a business owner or someone with big responsibilities will make multiple in the private sector of what they could make working public) but usually offer better paygrades for people in what may be your range of qualifications.

That’s not bad at all at 30 with a single income 3 people family, congrats!

What is the Genossenschaftskapital in?

I’d start by trying to build trust and confidence, being on the same page is important. In your situation, and in order to get your wife on board more easily, the baskets approach may make sense.

I’d start by sitting together with your wife establishing what your expectations are, as a family:

for the present: are you happy with your lifestyle? What amount of spending would you like to be able to afford? Are there specific purchases/expenses you are targetting (you have mentioned buying a house)?

for the future:

  • what kind of lifestyle do you want to be able to support in retirement? Does your wife think and plan that you are going to receive the max AHV pension in retirement (spoiler alert, chances are you won’t if you keep on your present track).

  • what kind of life do you want to offer your children? Does it involve availability and spending time with them? Will it require funding certain activities? Also, what role models do you want to be?

This is important to set expectations: your wife may be thinking you can afford comfort that you realistically can’t and won’t be able to working your current job and putting extra savings in a bank account. It’s also important to know and agree on what your minimal safety level should be, and to make sure that that level, at least, is guaranteed.

Regarding that point, I’d start by looking at my insurance coverage situation before getting to investments. This would help both of you feel safe, protect your family against hardship and build confidence in your ability to invest and not need those funds for the coming years.

Step 1 would be looking at your pillar 2 statement and figure out how much:

  • You would get in case of disability.
  • Your wife would get in case of untimely death from your part.
  • Your children would get in case of your disability.
  • Your children would get in case of your death.

Also check if that coverage is linked to the amount of the savings part of the policy or if it is a fixed amount based only on your salary.

Step 2 would be checking your situation with AHV-IV to know how much you would receive in case of death or disability, also in retirement. You can ask for a statement (there’s a limit to how often you can do that but I’d definitely do it when first starting to assess my financial situation): Statement of the individual account | Leaflets & forms | Information Center OASI/DI

Don’t forget to ask one for your wife too: raising kids gives right to AHV bonuses that you don’t want to miss on: https://www.ahv-iv.ch/p/2.03.e

Step 3 would be to assess if your current coverage in case of death or disability is sufficient. If it isn’t, then the answer is a term life insurance policy, covering risk only.

Step 4 would involve a nice relaxing weekend spent together in a resort (or whatever place where you can do activities you enjoy and that take you away from your everyday life) in order to cement that you enjoy spending time together in an unstressful life. That should help illustrate the time-value of money and emphasize that living a stressful life is not worth the cost. Financial independance is worth it because it makes moments like this possible more broadly, it is a stress-be-gone spray. That’s important for your wife to realize.

Step 5 is when you start pondering about investments. I’d make it simple, on the basis of your Pillar 1 and 2 statements, assess if you can afford the lifestyle you want to based on your current life (chances are your retirement prospects are worse than she is imagining, which would warrant taking steps toward earning more, saving and investing). Have her read (and read yourself if you haven’t already) a few texts:

Bill Bernstein’s If you can (written for americans but easy to translate into the swiss system)
JD Roth’s How to be happy and the relationship between time, money and happiness
Big ERN’s Things that keep us motivated
Mr. Money Mustache’s Zero to Hero

Let us know if you require literature in a specific language, the FIRE movement is international, chances are useful texts exist.

Step 6 is to start talking about investments. What level of comfort would she feel confident with? What asset classes are ok? Does she trust you with an active management of your assets? Would she trust you with executing a passive management of your assets? Do you need to use a third party in order for both of you to feel confident about it? Maybe it would make her feel better if she was the one to execute a passive management of your assets, would you be ok with that?

Step 7 is to write an IPS that you both agree with: Investment policy statement - Bogleheads

Step 8 is both of you researching investment vehicles that fit your IPS (or just you if she expresses an unequivocal will that you are the one tasked with it). In your situation, I’d not brush away the here-dreaded insurance investing products: while they are riddled with fees and offer lackluster returns, they do offer guarantees and management by a third party which may make your wife more confident about your future.

Step 9 is to create the accounts (I’d do it together to have her involved in the process and build her trust and confidence) and execute on the IPS.

Step 10 is to hold regular meetings (annual would be my chosen frequency) to keep both of you appraised on what’s going on and cement both of you being onboard with the plan.

Also, never ever be afraid to come back and ask about a particular investment before putting money into it. There are a lot of scams out there, we stand stronger together. :slight_smile:

Edit:

Reacting on that very important remark from @TeaCup, one question I would also ask myself, to which the answer may vary depending on your personality, your wife’s personality and your relationship is whether you, your wife or a third party should handle your investments. We tend to think that being a man involves taking these kinds of responsibilities on our shoulders but it isn’t necessarily true. Being an adequate man involves the wisdom to look at things how they are and to take the required steps to make them go in the right direction. This may involve you taking the lead, there are some couples for whom it wouldn’t.

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How did you end up investing in direct US properties with a salary CHF 6000 per month?

Where is your property? Do you have a credit with a US bank? What about us taxes? What kind of due diligence did you do prior the investment?

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Hi everyone, thanks for the advice and constructive critique.

@Dr.PI
Thank you for your contribution. I feel guilty as it was my idea to make these investments. My wife is aware of everything, but she wanted to go along with me so I feel responsible.

Yes I also thought that using an asset manager might make her feel more comfortable. If I were to go this route I would choose between Findepent or TrueWealth, they have the lowest commissions to date.

As for the second pillar, it would be going from the current CHF 283.55 (5%) to CHF 358.45 per month (6%), it doesn’t make a big difference. The asset allocation is already given by the pension fund, I cannot choose.

@Barto
Thank you for your support. Yes maybe my current wealth is not so bad, clearly coming from a lower class family I am starting from scratch and have big ambitions.

The property is located in the Great Lakes region. Yes the contract can be terminated after two years, so in a few months.

@TeaCup
Thanks for your critique. In reality, falling into the trap of a scam is easier than it may seem. Madoff managed to steal 65 billion by swindling millions of people, banks and financial institutions…

In my case it was not the usual scam of someone contacting you on FB and guaranteeing to earn 1% per day. But it was a company with offices in Paradeplatz, active in the field for years and with high but reasonable returns. Moreover, I was recommended by people close to me who, like me, had been victims of scams. This company stole 3-4 million CHF from over 100 people. Among those who lost money I am one of the lucky ones, there are those who lost over 100,000 CHF or their entire second pillar. The investigation by the cantonal police is still ongoing, so nothing has come out in the newspapers.

As for the property, I relied on a property manager who has studied with people like Donald Trump (yes that Donald Trump) and Robert Kiyosaki. They manage over $30 million and +400 properties. Of these less than 10% have had problems, and I am among them. I bought in 2020, between the BLM protests that set the city on fire and the mismanagement of the Covid pandemic it’s been a bad 2 years for the US. Can we call it bad luck?

Without wishing to make excuses what made me make bad choices is surely a lack of financial education (that’s what I’m here for) and perhaps a bit of greed? Coming from a ‘poor’ family I learned to live frugally and save, but I want my children to never have to worry about money.

As far as investments are concerned, I am here asking for advice on things that I think are ‘normal’: increasing the second pillar, starting a third pillar and buying a house (my area, at least in this I have no problems).

@Wolverine
Thank you very much for your support and advice!

Genossenschaftskapital is the capital you have to give the Genossenschaftswohnungen when you want to rent one of their flats.

@Guillaume_GVA
Since this is an investment I have decided to abandon, I would rather not go into details as they are not relevant for the future.

That said, I will answer your questions:

How did you end up investing in direct US properties with a salary CHF 6000 per month?
Thanks to a Property Manager who buys properties in eviction directly from banks at much lower price.

Where is your property?
Great Lakes Region

Do you have a credit with a US bank?
No the property is fully paid for. As a foreigner you cannot have a credit.

What about us taxes?
I pay 700 $ for an accountant. For Switzerland I have to pay 3% of the rental value.

What kind of due diligence did you do prior the investment?
I have a contract with the Property Manager. In the USA it’s full of foreigners buying property.

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I suggest you let your wife make the next investment decisions or at let her at least make a few suggestions and then decide together. They might err on the conservative side but with a baby on the way, conservative might be the right approach.

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Thanks for your answer.

Would it be right to say that you give credit to people’s credentials and to the trapings of success (an office on Paradeplatz, a nice car, having written a book, being presented as wealthy and/or being otherwise famous)?

Those are ways the scammers use to impress their marks. Both Kiyosaki and Trump are known for crafting their narratives to suit their purpose, and a lot of people selling investments do so too. What’s important to remember is that the people selling us an investment product make their money with the fees we pay them (or kickbacks they receive for enrolling us). Some have their interests aligned with ours in some way (getting part of their income tied to the performance of their solutions) but even for those, the name of the game is to get their money out of our pockets, not out of the returns of the market.

Sorry you had to go through that. This is also one of the tricks of scammers: they manage to convince some trusting person, then the person, convinced they’ve made a great investment, starts convincing their acquaintances/relationships, which are more eager to trust the scheme as it has been pitched to them by someone they trust.

Family members and friends are not financial advisors. People selling investments are not fiduciary financial advisors. People on the internet (of which us here) are not financial advisors. Due diligence is required, we should only invest in what we are able to understand.

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I can highly recommend the book “Influence” from Robert B. Cialdini. It describes many ways how we get influenced pychologically by sales people and the like and suggests some strategies to protect yourself from these “traps”.

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Ok, I see.

I don’t know what you was supposed to be invested into, but I guess it was something obscure and concentrated.

Rather obscure, especially if you are not American, and extremely concentrated.

Reasonable but still concentrated.

Your first lesson should be “There are no free lunches in investing except of diversification”. Otherwise I also suggest you to educate yourself what investment is about.

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You need to try and find a good property manager who properly vets and stays on top of tenants if they are late. I’ve owned property in that area and had this issue and changing the manager fixed it. pm me if you want to share the city in case it is the same one

As you probably learned the downside of US and property is that it is full of overly positive sales people who promise the world (lots of bs)

Ps: has your property value increased? Check Zillow if you haven’t done so as prices went crazy in the past year

This is probably to be able to rent the flat in the first place. This is not really a typical investment (for receiving direct returns), but Genossenschafts-Wohnungen are owned by all the tenants (more or less) and require a certain buy-in when one moves in, and in “return” the rent is a few CHF 100 p.m. below market price. Compared to the buy-in amount (which is generally refundable when you move out) the rental discount is actually (in general) a very good “return” on the buy-in amount, and concentration is much less than owning one’s own property since the amount invested is pretty little.

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Hi everyone, thanks for the advice.

@Wolverine

Thanks for the advices

@Burningstone

Thank you too for your advice.

@Dr.PI

The first investment, the scam, consisted of investing in the currency market… Bad idea.

For real estate in the US, however, what made me make this choice was the possibility of using leverage through the BRRRR method. I hoped to make money faster this way. Another bad idea.

The Genossenschaftskapital is not an investment. It is the capital required by the cooperative to be able to rent a flat at a lower price (in my case ca. 30%) than the market price. This way I can save around 5-6’000 CHF per year. When I leave the flat this money will be returned to me. Moreover as long as it is ‘invested’ it yields 1.25% per year. I think this is the only right choice I have made.

@Barto

OK, tomorrow i sent you a pm.

I checked on Zillow and the property is now worth USD 110,000, maybe I can recover a good part of what I invested.

@rolandinho

Exactly.

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5 posts were merged into an existing topic: US Person status (debate)