An older Dilbert comic, but right on the money, as usual.
This is the third part in a series I’m doing called “Younger Me,” in which I write as if this were something the younger version of myself could pick up, read and have a head start on achieving financial independence.
Message #3: Keeping Up With The Joneses Is For Suckers
Typically, financial independence and being frugal go hand in hand. The general answer to people asking the question, “How can I retire early?” goes something like this — “Save 25 times your annual expenses and withdraw at a 4% rate.” Think about that for a second. The message we’re sending to people just getting into their groove with saving for retirement is to save their annual expenses twenty-five times over. It’s no wonder so many people think it unachievable.
I’m sure the psychology behind brushing the idea off is tied to people thinking they automatically have to earn more income to reach such a goal, while a little bit of reading blogs like Mr. Money Mustache (specifically, the post on the math behind early retirement) will let you in on the little secret to retiring exponentially earlier: spend less. A person who can cut his or her annual expenses in half, for example, can retire much sooner. This is a light bulb moment for some people and there’s no confusion in it. All I have to do is spend less and I can get to doing whatever I want sooner? Uh, yes please.
And then there are those who realize you can do both and retire even sooner.
For anyone just getting started though, you’ve already got a head start. You’re not spending much. The trick, then, is to keep from accumulating things for the sake of checking things off of a list. Young FI Monkey was guilty of just that. Having relatives who had much more money than I did buy toys was somehow offensive to my manhood when I couldn’t just go out and buy the same thing. And that’s just skewed thinking. That pursuit is empty. Once you have the thing they have, rather than feeling like you’ve evened the scales of justice, you feel good for a few minutes until the scales start tipping once again. This never ends.
The secret to general happiness is not difficult: be satisfied with less and mindfully appreciate what you already do have. There’s a lot more to it, of course. Unfortunately, there’s no one-size-fits-all solution but that’s a pretty damned good rule to go by.
Of course, I didn’t have this wonderful advice to read when I was in my 20s.
Like sand slips through the fingers, so went all the money I traded in my time for. I’m not saying there weren’t amazing experiences (there should always be a healthy mix of those) along the way, but I failed to put my money to work for me so I wouldn’t have to trade my time in for money for the rest of my life. I saw what others were buying and wanted the same. This is starting to feel more like a confessional than a helpful article, but I suppose that’s an important part of understanding my reasons behind wanting to be free from a job. We must re-focus from time to time, because it’s easy to lose sight of that one simple desire. Repeat after me:
I don’t want to need a job my whole life.
There, we’ve refocused. Meditating on that single thought and holding it in comparison to just accumulating things helps bring shocking clarity to doing what everyone else is doing without questioning it. Of course, that thought had been in my head since I was about 18, but sort of clunking around in the back. It was more of a general nameless feeling back then. It’s the driving force behind my reading so many books about getting rich and what were effectively get-rich-quick scams. I call them scams because if the thing being sold to you is a way to sell the same thing to someone else, to me that’s a scam. That’s exactly what I’d read about time and time again. It’s also the reason I got into Internet Marketing for a long while. I knew I didn’t want to need to work for someone else. Every time I go on a vacation, I never want to go back. I often read or hear about working people who go on vacation and can’t stop thinking about work until about a week in. For me, it takes mere hours to forget about the trivialities of work and enter vacation mode. And that’s something I want to hold on to. Coming back to work after that kind of letting-go is, frankly, depressing.
Whether it takes a week or even if it’s instantaneous, there’s a reason we feel this way. It’s because we don’t truly feel free unless we aren’t scheduling freedom in between work hours. So the goal is to eradicate scheduling freedom and make freedom the default.
Going back to the point, when freedom is the default, you no longer need that job your whole life. So if we can consider this whenever the idea of keeping up with the Joneses creeps up, the decision is immediately made simple. Does buying this thing get me closer to being comfortably jobless? If the answer is no, you should probably sleep on it. I am in no way saying that there isn’t room for just having fun and a huge part of your twenties should be primarily about that. On the other hand, that fun should happen with what’s left after you save. Pay yourself first and then go nuts.
Do not go nuts and then pay yourself with what’s left.
So while I’m giving regular updates on my Emergency Fund, after reading a few blogs, I figured I could give monthly updates on my net worth as a way to show my progress on the road to Financial Independence. I figured I might as well start with where I left off last month.
May 2015 Net Worth: $422,042.26
Just to catch you up, I started the year off with $379,290.29 for a total increase (so far) of $42,751.97!
Here’s my first net worth statement:
You’ll notice a few things here. For one, my Emergency Fund jumped up from $30,000.00 to over $35,000.00, which is a significant jump and represented reaching 70% of the way to $50,000.00. After this month, you should start seeing bigger increases on the Taxable Brokerage Account line. Still, there was an increase of $227.35 in that area. Not too bad considering I don’t touch it. The home value is based on the Zillow “Zestimate,” which Mint uses. I realize this may be over or under, depending on the market, but for the sake of projections and updates, I’m just going to go with it. On the other side of things, my mortgage has gone from about $560,000 when it started, to hovering just at the $500,000 mark today. Still a long road ahead, but we’re making progress.
Overall, there was a change of +4.93% in net worth. A big part of that was probably the tax refund we got, which came out to $8,688.00.
Personally, I don’t like how much of my worth is tied up in the real estate market, but from what I gather, it all counts. I suppose I’ll be more on board with the notion once we start investing in more real estate. For now, it just seems like these numbers could plummet with the market and get cut in half. But such is the nature of the beast.
That wraps up the month of May. I plan to release an update like this once a month while keeping the corresponding number updated in the sidebar. I’ve been seeing that in a lot of blogs and I love it for some reason.
Until next time.
As of this morning, I have hit the 90% mark and it feels amazing!
Though I must say it’s less amazing, however, than hitting the first 10%. I suppose there’s some psychology behind the idea of throwing money on a small pile as opposed to throwing money on a big pile — the former probably feels far more rewarding. Regardless, the bigger number — 100% — is what I’m after and to be this close to it really does feel great. And just to clarify, it has been no easy feat. I am really moving things around to hit that target because I am determined and focused. For those of you paying attention, my last Emergency Fund Update post had me at 80%, so it’s really incredible to me that I’d be able to increment 10% at a time.
To put things in perspective, the amount I’m saving each time is more than I used to make in two months when I was younger. Just insane.
Moving forward, I am trying to see what I can do to make that last stretch and finally hit 100%. The gears are already turning. Because, you see, I intend on hitting that goal before the month is over, but it is not yet immediately clear how I will get there. What inspired me to hustle this month is a few things, but also remembering this important quote:
Don’t save what is left after spending; spend what is left after saving.
— Warren Buffett
Ha! This seems laughably obvious, yet in practice is counterintuitive. I love when things can be put so succinctly, yet have such an impact.
One thing is clear — you can bet when I hit 100%, I will be celebrating that milestone. That marks the end of one journey and the beginning of another. The achievement of my first huge goal and the beginning of actually investing.
You get the idea.
Every once in a while, I think it’s a good idea for those of us walking along the path of financial independence to take a minute to envision what retirement would look like. Part of the reason for this is that it’s a visualization technique — something to help us refocus when we lose track. Something that gives us a light at the end of the tunnel. But additionally, it’s also to sort of recalibrate what makes sense given where we are. For some, retirement could mean what it does in the traditional sense — stopping work altogether to just live. For some, it could be stopping work to start a business. For others, it could be a mix of the two and that’s where I fall in line.
Personally, I never want to stop programming, but I also don’t want to have to program. I’d rather work on fun projects. When I as young and poor, a few of my many side projects actually took off and could have been immensely popular. Well, if I’d had the good sense to do something with them, but that’s for another post. So that’s the kind of programming I’d want to do. Creating things that just pop into my head.
Writing is another thing I love to do. I find excuses to write all the time. Mostly, I write for myself and occasionally I’ll publish something online. Oh, and I also write in this blog to help quench the need, but it’s always there. So for me, I’d have the freedom to take 4-5 hours out of my day to do those things (or not), as well as anything else I felt needed doing. Or there are days where you just feel like doing nothing.
What it comes down to is freedom. The way I envision my retirement basically involves writing (almost) every day in this blog, giving back to the community and then working on personal projects. There’s not much I’d change about the things that happen outside work hours. Except, maybe, I would put my phone down more and be 1,000 times less stressed.
Times Flies When You’re Having Fun
I’d love to get some feedback from someone who is already technically retired on this one. One of my main fears about having nothing to do is that my days, normally slowed at least by the seconds ticking achingly by as I wait for my “shift” to be over, would start to become a blur much like the time travel scene in The Time Machine:
I don’t know if the speed of time is enough reason to warrant ongoing intermittent misery though. I, for one, am willing to take a chance on that.
Time Freed Up Is But A Vacuum
The next fear I have is that my time, no longer monopolized by work, would become filled in by other things without leaving room for the things I want to do. Of course, this is less a problem with the nature of retirement and more a problem with the nature of managing relationships with those around you. When people want your time, it’s rarely a bad thing, but it can get in the way of overall happiness and enjoyment. Two things I want to maximize once I stop clocking in every day.
A great way to battle the vacuum filling up with undesirable activities is to set regularly scheduled time for yourself. With my wife, for instance, I would argue that while my time wasn’t directly being converted to money, the tighter budget we would inevitably end up living on would be much eased with some solid irons in the fire. In other words, I would inevitably work on projects that would result in even more passive income for the family. Scheduling time for myself would also help to combat my sitting on the couch and watching movies all day. (Yes, sadly I would have to fight myself on that one. Remember my weakness: entertainment).
Either We Redefine Retirement Or We Switch Words
So instead of stopping work, I would replace work. Now that sounds like a “retirement” I can get behind. At least for the day to day. One thing I rarely get to do is travel (now there’s a novel idea)! But I don’t want to just travel, I want to go on long, slow vacations. The kind that let you immerse yourself in a place, its people, its food and its general culture. I honestly don’t know what we’d do about school for the kids, but that’s a problem I’d love to tackle, because it would mean I’d have retired within the next 10-15 years. For those following closely, that would mean retirement by about 45. Man, that sounds great.
And while I’m at it, one thing I rarely get to do is dedicate time to just helping other people. My friends, family or just people in need. Not necessarily with direct financial contributions, but with my time. That’s time I could spend with my parents as they age, or my still-living grandparents. Honestly, a life spent toiling away is one of the worst things we’ve come up with as a species.
What If Everyone Were Retired?
Sometimes I find myself wondering what life would be like if everyone had a basic income that allowed them to live a moderate lifestyle. This is usually queued by one of those out-of-nowhere news stories about universal basic income, but nonetheless it makes me think. Obviously there are less-desirable parts of society that just need getting done and people might not feel inclined to get their hands dirty if basic needs were met. This is something to be considered. Society still needs plumbers, functioning sewers and street sweeping, that sort of thing. And then there’s the argument that having jobs fills up the days of those that would otherwise find themselves with idle hands. Insert something here about idle hands being the tools of the devil.
But then there’s the positive. Maybe instead of working all the time, the prerequisite for that universal basic income is an ongoing education. Never mind where all the money is going to come from to fund this (we’re dreaming here). It’s funny, my wife and I tell our kids that it’s our job to work and it’s their job to go to school. Why not make it everyone’s job? Less stress, more education, more time for travel. Seems like a win-win to me. But I digress.
Although I plan to make another post of this nature in the far future, I’ll conclude this one with a witty quote. It’s important, after all, to semi-frequently revisit this topic and ask the question, “What will I do when I don’t have to do anything?” Right now, because I am in charge of making sure my family is taken care of, I am forced to trade in hours upon hours of my life. That’s work. I don’t want to do work. I want to use my talents to make this microcosm around me a better place.
Oh, and here’s that witty quote:
“Nothing is work unless you’d rather be doing something else.” – George Halas