Over the last couple of months I’ve started to get the finances in order, read a whole load about FI, become a father and I’m now wondering what to do next. Here’s a case study on where I am so far. i’d be really interested on anyone’s perspective. I’m not some kind of massively highly paid finance worker. I’m 34 and I work for an NGO.
I’ve made some dubious financial decisions over the last few years and I’m weighing up what to try and unpick and what to stick with.
Let’s start with some numbers for my family:
Current net worth about 520,000 CHF
277k is equity in property (2 properties) (Property value 488k, debt 211k)
31k is in VWRL on corner trader
49k is in cash. Part of this is an emergency fund.
176k in pension funds, pillar 2s and UK pension funds
15k per month family income. Soon to drop dramatically due to reduced working to look after baby.
Saving probably 6k per month
Up until about 6 months ago the only thing I thought was worth investing in was property. I’m from the UK and betting on house values rising is sort of a national sport. I thought buying shares meant either knowing the future or gambling so stayed clear.
Then I started reading all these wonderful blogs and realised that index funds and buying and holding were far less hassle and have far less hidden costs than property. At that point I realised that any new savings should probably go into a decent index fund.
The second revelation was that I should really stop pouring money down the drain. Money I save now buys freedom later so no more spending on things I don’t value.
Now lets talk about property. I have one property that I consider to be a fairly decent investment. I paid GBP 143k for it in 2011 it’s now worth about 200k and it brings in about GBP 8400 per year. The service charge is about GBP800 per year. At the moment I route all the excess into the mortgage. In the UK you can overpay by as much as you like each month. My plan is to just leave this property to pay for itself. By my calculations I’ll own it outright by 2026. Today there’s about 50k left on the mortgage (@3%). I know that I could probably get a better return if I paid off the minimum and did something else with the money but I do like the idea of paying off debt before interest rates rise. Besides, there are probably more pressing changes to make. The UK has no tax on your first 10k so no taxes to pay on the income but I do have to file a return every year.
The second and slightly more embarrassing property is my alpine apartment in a french mountain town. Bought for EUR200k, renovated and now rented on airbnb. It has brought in EUR 7k and I used it on weekends whenever it wasn’t rented. I still have a 146k mortgage (@2.2%) on this place and the mortgage is around 10k per year. That leaves me to pick up around 3k on the mortgage plus the rest of the charges. I flip between thinking that buying this place was the best thing I ever did and a terrible financial mistake. I live in a small rented apartment and spending most weekends in the mountains is something I really value. I’m also really happy to spend most of my holidays in the same place so I figure I’m saving something there. Unfortunately the french tax system is quite merciless. I’ll go into it in a future post but the total income and property taxes are about 1.5k.
While I’m not quite ready to dismantle the property empire I have at least decided that that’s probably quite enough of my money tied up in it for now. Going forwards all new saving will be in index funds.
I’ve followed the great conversion to IB and will probably switch from Corner Trader at some point when my stache is a bit bigger. I’m planning on one transaction every three months so the cost of CT isn’t huge for me.
I’ve run some simulations about whether to save via 3a and have opened a post finance one so I can put funds in the Postfinance 75 fund. I’m still not convinced that the potential for increasing management costs and loss of access to the funds until I’m in my 50s are worth it but I’m now leaning towards filling up the maximum allowance from here on in.
My goal is not necessarily to retire but to reach the point where I can take any job regardless of how well it’s paid. Many smaller NGOs that work on interesting things don’t pay well so it would be great to be at a point where I could could pick and choose and work a bit less.