Here is the next part of our interview with Pasquale, this Swiss man who is approaching 50 years old with a net worth of about CHF 25 million. Today, we will read the answers to the questions of the readers of the blog concerning his techniques to build his fortune, taxes and pension fund, psychology and philosophy of money, and finally, his mistakes and lessons learned.
Techniques to build your wealth
MP: “How much did you start out with in life as you transitioned into adulthood (i.e. more dependent on your parents)?”
Pasquale: I arrived at my 20th birthday with CHF 40'000 in savings as a mason. I was saving CHF 1'000 per month since my apprenticeship. I continued like that while living with my parents, which allowed me to accumulate CHF 80'000 at the age of 24, and to inject it into my masonry business.
Did you receive an inheritance that facilitated your access to your first million? If not, how did you get to your first million (via what activities, how long did it take)?"
Pasquale: No financial heritage! Only the love of my family (my parents and my sister), and their trust. And that’s worth all the gold in the world as a legacy, really.
MP: “Can you tell us how long it took you to reach your first 10k? 100k? 1M? 10M? 25M?”
Pasquale: Yeah it’s pretty easy because I have a memory for numbers:
- CHF 10'000: at age 16
- CHF 100'000: at age 25
- CHF 1'000'000: at age 29
- CHF 10'000'000: between 37-38 years
- CHF 25'000'000: at age 50
My first million came from the fruit of my hands via my masonry business that I created at 24 years old. I could obtain CHF 200'000 per year in salary over 5 years.
And to date, my wealth can be summarized as follows:
- CHF 70'000'000 of real estate assets in Switzerland
- CHF 45'000'000 in mortgages
- => Net assets = CHF 25'000'000
MP: “By what did you start out to develop your wealth? In other words, what was the trigger that set you on the right path to becoming rich? Was it a book, a particular inspirational person (like a mentor), a situation, an event?”
Pasquale: I would say it was some of the people I met through my work. I was always naturally drawn to people who were 10-15 years older than me, who I would listen to in order to learn from their experience.
And there was also the educational foundation of my father.
MP: “When you have a net worth of CHF 25 million, it is relatively ’easy’ to increase it by 1 million per year. But when you have a fortune of CHF 100'000, what is the key to make it grow exponentially?”
MP: “You started building your fortune 26 years ago. That was before the dot com crash, before the crash of 2008 — so, in a different world. How applicable do you think your experiences are to someone starting today? If you had to start over with no capital today, how do you think you could do it?”
Pasquale: Today it would be difficult, but doable. And it would be reproducible if you had time, if you took small step after small step, if you took the time to capitalize on your experience, if you learned by doing, and if you took calculated risks. There is no magic formula in real estate.
Ah, and yeah, and you have to beware of bankers! Some of them are real assholes!
MP: “So if we copy your method today, we can expect the same gains in 26 years according to you?”
Pasquale: Yes, even if it was difficult, it would be possible to follow the same path if you are lucky enough to have a supportive environment (parents, spouse), if you are ready to work hard at your job, and if you have a clear mind (i.e. serene, without any illness in your life or in a loved one).
For example, the most difficult time in my life to build my wealth was the time of suffering that was my split up.
For me, stability on a human and family level is a key element of any financial success.
And, in any field, an important point for your success is to learn to keep the assholes out of your life (people harmful to your well-being).
For me, stability on a human and family level is a key element of any financial success.
MP: “What role did luck play in building your wealth in Switzerland? Could your path be the right one if it was repeated many times?”
Pasquale: I would say that yes, I was lucky in the family I had and that I built. That was and still is my foundation. Concerning the business, I would say that I provoked luck by working much more than the others.
MP: “What were your most important habits that allowed your wealth to grow (and continue to grow)?”
Pasquale: I have three: patience, taking the time to analyze, and not focusing only on the result. But patience is by far the most important virtue in business. And prudence too.
MP: “Ergh, so I’m 64 years old. What would you advise me to do to increase my wealth?”
Pasquale: It depends if you have a family here. If not, then I would leave Switzerland to have a higher standard of living than here by lowering your daily living expenses.
And as for launching yourself in real estate, it would be faster to “shoot yourself” because no banker will follow you…
MP: “Is it better to put your efforts on what you earn, or what you save?”
Pasquale: Both. You need both. And you have to be careful not to lose what you have acquired. And you have to be thrifty, but without depriving yourself.
MP: “Do you know your savings rate, and how it has evolved from when you started, up until today?”
Pasquale: When I started, I was saving about 5-10%. And now I save 70% of what I earn. There’s about CHF 100'000 of monthly income coming in, and I’m living on CHF 30'000 [MP note: per month!]. Even though it’s huge — and I’m aware of that — the growth of my net worth was exponential, because my income increased more than my lifestyle.
By the way, since we’re talking about my current standard of living, I want to tell you that I achieved financial serenity long before this day. I would say it was from the age of 35 onwards when my house was fully paid off without a mortgage, I had a few real estate investments, and my family was (and still is, luckily!) in good health.
Also, I can’t imagine my lifestyle increasing indefinitely by spending more and more money on big cars (except if for an investment) and luxurious trips. My father and mother always told me to be humble, and to pay attention to people. And thanks to soccer, I learnt that just because you win 3-0 at the 88th minute [of a 90 minutes’ game] doesn’t mean that the game is won, and that the wind can’t change… you have to be alert, and never slacken off (including on expenses which, even if high, are under control).
MP: “What is possible in 10 years for a 40 year old man with two small children? How would you proceed at this point if you could only invest CHF 1'000 per month?”
Pasquale: I would say that with that amount of monthly savings, it’s too late to get into real estate. What I would do if I were him is that I would get a life insurance for my children so that they have a “nice plus” when they start out in life as an adult.
MP: “And if you started planning your retirement only today (without a big fortune), at your age — i.e. 49, knowing everything you have learned since you were 23, what would you do?”
Pasquale: Ergh, 49, that would really be the cutoff date to start in real estate. But I’d go for it. Just like if my entire wealth were to disappear overnight, and I only have CHF 100'000 left of my CHF 25'000'000, then I know I’d be able to bounce back with that capital and my network. I would be fine.
MP: “Do you have a particular book you would recommend for building my wealth from scratch?”**
Pasquale: “Rich Dad, Poor Dad” by Robert T. Kiyosaki.
MP: “In building your wealth, you must have lost money along the way, right? If so, could you describe that part of your journey — how it happened, why, and how you kept your cool when it happened?”
Pasquale: Well, actually, no. Real estate is regular enough for that if you don’t make hasty choices or with reckless risks.
But when I think about it, yes, I have lost some money. Each time it was when I trusted people working in big Swiss banks, but as I always say: “There is an opportunity in every failure”. And the opportunity in these cases was to understand that there are more assholes than I thought. And so, since then, I manage my business with my own hands and my own head.
There is an opportunity in every failure.
MP: “What do you think of blogs like the Mustachian Post that promote frugality to achieve financial independence?”
Pasquale: I have mixed feelings. I think you have to live without deprivation, because in the long run it leads to frustration and that’s never good. It’s like when you’re on a diet and you see a friend eating a great pie, but you say you can’t — but your brain isn’t convinced…
[I explain him in detail the concept of frugality for us Mustachians]
After your explanation, I do realize that my lifestyle was quite frugal, if we assume that a Mustachian does not restrict himself on the things that bring real value to their life, but cuts all other expenses drastically without any sense of sacrifice.
Taxes and pension fund
MP: “How does the taxation work in Switzerland when you only rely on the income from your investments? I guess you are not a professional trader, so in theory you should pay 0 tax (0 tax on investments, since that’s how it works in Switzerland, and no tax in general, since I guess you don’t have a job)?”
Pasquale: The Swiss tax system is advantageous in my opinion. Yes, I pay a lot of taxes on my rental income (i.e. I am in the highest bracket), but in return we have a global system (roads, schools, etc.) that is healthy and works well.
MP: “Are there things to do or not to do, especially concerning taxes and the OASI / pension fund (the OASI is compulsory until retirement and, in case of inactivity, it is proportional to the wealth)”
Pasquale: For my part, I am employed by my company and self-employed. What I recommend to my friends and family is to be careful with the AVS for married couples who retire. Indeed, the maximum pension for a married couple is 150%, and not 200% as logic would have it. It is important to get information on these financial matters as early as possible from independent organizations like VZ (they have offices in Lausanne).
MP: “Any tips to share in order to optimize your taxation when you are at your level (choice of canton or other)?”
Pasquale: It’s difficult, because you are taxed where the building is. And since I am not familiar with regions like Schwyz where the tax system is more advantageous, I will not venture there just for the taxes. So I concentrate on what I can optimize, i.e. maintaining my real estate in order to benefit from tax deductions, and consequently increase the value of my properties in the long term.
MP: “Do you have any particular advice to offer regarding the estate management of your wealth, once you have passed away?”
Pasquale: “It’s better to settle things cold when you’re hot, than hot when you’re cold.” That’s the only useful advice I’ve received from a banker :) So my advice is to sort out the will and mandate of incapacity (with the help of a trusted notary if you’re not comfortable doing it yourself).
Psychology and philosophy
MP: “Currently, from a more psychological point of view, do you lead a discreet life? Are your children/friends aware of your wealth and how relaxed your life is? Are you afraid of crooks, kidnappers or other bad people?”
Pasquale: I tend to follow the proverb “Let’s live happily, let’s live hidden”
. My children know almost everything about my wealth, I explain everything to them. So much so that when my daughter was only 6-7 years old, and a friend told her “You’re lucky to live in a beautiful house like this!”, she retorted: “It’s not luck, it’s just that my daddy worked a lot!” — it brings tears to my eyes just thinking about it. I’m so proud to have been able to pass this mindset on to her.
It’s not luck [that we have such a beautiful house], it’s just that my daddy worked a lot!
Regarding jealousy about my wealth, I’m not too afraid of crooks, but I stay alert. I don’t trust a guy who comes into my life overnight. My instincts have had 50 years to sharpen, and I would say that out of 100 people, I’ve only been wrong twice so far.
And as for the kidnapping stories, I know that success can create jealousy, but as long as I am in Switzerland I feel safe in this respect.
MP: “Have you managed to keep your friendships and family relationships as they were before you acquired your wealth, or have some been lost because of the money?”
Pasquale: Yes, I kept all my relationships. Or at least, if I lost any, they were not good friends… But it’s funny your question because I regularly ask my closest friends: “Have I changed?!”
MP: “Are you afraid of losing your wealth overnight (stock market or real estate crisis)?”
Pasquale: No, I’m not afraid of that. It would still bother me, but I tell myself that it’s not that important. I’m much more afraid of losing someone in my family, even though I’m attached to my property, because I built it with my own hands.
MP: “What character or personality trait would you say made you different from everyone else at the beginning of your journey?”
Pasquale: Another great question from your readers! I would say it’s appreciation and mutual respect in all my relationships. If someone appreciates you, you will have better results than if someone fears you. I don’t like people who play with fear, because anyway sooner or later they will get stabbed in the back.
The other thing I think about when I think about it is discipline and seriousness. My mother always told me: “Be polite to people, greet people, be respectful, don’t steal, etc.” These are basics that have stayed with me and transpired through all my professional and personal actions.
MP: “They say that money makes you happy. Have your deepest values evolved with this material certainty?”
Pasquale: So clearly, we’re not going to lie to each other, getting economic security as a family man brings you more serenity. But, no, it hasn’t changed my deepest values, although it’s easier when you win than when you lose.
And yes, if it were possible, I would exchange my CHF 25'000'000 for something…
MP: “What did you get by building all this wealth? Happiness? Freedom? Security? Knowing where you are now, would you do anything differently? Would you trade your wealth for something — if so, what?”
Pasquale: Yes, my wealth has brought me freedom, and therefore happiness. And yes, if it were possible, I would exchange all my wealth for something: to be able to live until 120 years old with the people I love all in good health.
MP: “Do you think you’ll ever stop working? If so, are you afraid of it? If not, why not, and what will you continue to do?”
Pasquale: I hope to have ambition for something until my last breath, that my engine is always running for gardening or any other activity even not related to business. I hope that the day I stop breathing, I will say to myself: “I did what I loved until the end!”
MP: “What would you consider a good use of your 25 million Swiss francs today?”
Pasquale: It would be to be able to offer serenity to my descendants. And also to give my friends the benefit, without pampering them either. Because I wouldn’t want to feel higher than them. Sometimes I also think that I could go to the far end of Africa with CHF 500'000 in my pocket to change some people’s lives — and do it myself, without going through any association to make sure that the money goes where it should.
MP: “Why are you increasing your net worth? What are you saving for? What is your goal in life now? I think if I earned that much passive income, I’d probably spend most of it on good causes, and only keep what I really need. What do you think?”
Pasquale: I don’t do any of my current activities to increase my wealth, because what I have today is enough. I do what I do i.e. real estate in Switzerland, because I love it.
MP: “Is the increase in your wealth still a driving force or a side effect of what you have today?”
Pasquale: It was always a side effect, never a driver.
MP: “From a general perspective on life, what would you say to the 23 year old you if he were here today?”
Pasquale: I would tell him “Congratulations Pasquale, you must dream! Dream, go all in, and don’t waste the moments. Do what you love TO THE FULL, having fun with your friends when it’s time. Time goes by so fast. And at a certain age you think “Why didn’t I do it?”
Knowing that to this day, I am lucky because I don’t regret anything from the last 49 years.
Mistakes and lessons learned
MP: “What are the top 5 lessons learned from the biggest mistakes you’ve made along the way?”
Pasquale: There is only one, and that is to trust the right people.
MP: “During your great rise, there must have been moments when you could have slipped and hurt yourself (financially, relationally, etc.) — do you have 1-2 glaring examples to explain to us?”
Pasquale: So frankly, and without sounding pretentious, I would say no. I’ve always been a cautious guy, and I’ve taken it one step at a time.
MP: “If you had to do something again in your career, what would you change? And specifically in the beginning of your journey?”
MP: “What’s the biggest misconception you’ve ever had? For example, maybe you thought doing X or Y would be a bad thing, but you did it anyway, and it turned out to be a good thing in the end.”
Pasquale: Investing my money through an intermediary. I had a lot of confidence in this intermediary, but it wasn’t enough. The right thing for me to do is to invest my money myself.
MP: “What’s your biggest win in life?”
Pasquale: The relationship with my children. And if I have to be reductive and answer financially, then I would say the construction of my first building with my buddy!
Content of the part 4/4
In the last chapter of this CHF 25 million series, I will present the 14 lessons I learned from this interview with Pasquale.
Photo credits: Pexels (Kampus Production)