General

On Being Original

Posted by FI Monkey

Good Will Hunting is probably one of my top five favorite movies of all time. It’s one of those movies I purchased on iTunes but don’t feel bad about owning because I’ve probably watched it over 50 times by now. This post is about a specific part in the movie where Will has just stepped in to use his eidetic memory to stop a pony-tailed jerk from bullying his friend in front of a lady. If you’ve ever seen the movie, then you’ll know what I’m talking about, but if you haven’t, feel free to read the entire exchange here.

The key part I was thinking about today is this one:

Will: See the sad thing about a guy like you, is in about 50 years you’re gonna start doin’ some thinkin’ on your own and you’re gonna come up with the fact that there are two certainties in life. One, don’t do that. And two, you dropped a hundred and fifty grand on a fuckin’ education you coulda’ got for a dollar fifty in late charges at the Public Library.
Clark: Yeah, but I will have a degree, and you’ll be serving my kids fries at a drive-thru on our way to a skiing trip.
Will: [smiles] Yeah, maybe. But at least I won’t be unoriginal.

This is an excellent scene for a number of reasons. Mainly because our hero has just completely demolished some rich Harvard kid by finishing the sentence he’d memorized and then asking if he was going to continue plagiarizing. Priceless. But this scene isn’t just awesome for that reason, it’s because the playing field has been leveled. On one hand, you’ve got this rich kid who — and I’m just assuming here — has been handed his life on a silver platter. Then, on the other hand, you’ve got Will who was abused as a kid, lives in run-down house — in a low income area — which he pays for by working construction. Normally, there would be no question who was a success and who wasn’t.

But suddenly, perspective gets adjusted when social status is removed from the situation. Sure, Clark is smart, but it’s immediately clear that Will is right. Technically, we could all educate ourselves, more or less, on the information contained in books alone. Assuming, that is, that we could read at the super-human speed Will does while apparently photographically memorizing each page for perfect recall later on. But never mind that.

The absolute kicker is that things boil down to their most basic expectations here when Clark tries to throw his last right hook. “I will have a degree, and you’ll be serving my kids fries at a drive-thru on our way to a skiing trip.” Ah, so stripped of all else, this is how Clark pictures success. He’s with his family on the way to a skiing trip while some poor jerk serves his family fast food. And there you have it, the reason we are all pressured into student loans and mortgages.

In that scenario, no one wants to be the guy asking if you’d like fries with your order.

And yes, I get it, it’s a movie. But this is something we experience on a daily basis in the form of social pressure and why? Well, for the longest time people had a great point. If you didn’t have a degree, you would end up with a much lower-paying job than your degree-holding counterpart. But the funny thing is, people like you and me have done something very interesting and it’s worth some consideration.

Suddenly, you’ve got a part of society living off the interest and they didn’t even need the degree to get there.

Oh, and that part of society could afford to go skiing if they wanted to, or sleep, or write all day, or whatever they may want to do. They could also choose to go back to school and get the degree if they wanted. Or maybe read book after book at the library. The point is that they have choice. Between Will and Clark, neither of them have the kinds of choice I’m talking about. They are limited to the framework in which they’ve placed themselves. My argument is that having choice is better. Being financially independent is the next step in evolution. It’s not a new idea by any stretch, but every day it’s catching on with more people. Each day, there are more of us trying to achieve it. Some of us even succeed.

And at that point, life stretches out before you like a grassy plain. Like the poem by Robert Frost, there are some paths and you could choose the less-traveled path*, but you would do just as well to use that power of choice to tread down your own path. And indeed, when given such freedom, you have little choice but to do so.

* Frost isn’t talking about an actual path that is less-traveled. He’s talking about a traveler who, after learning that both paths are equal and that he will only get to experience one in his lifetime, decides to choose one at random and then later tell people he took the one less-traveled. The dirty liar.

Reducing Expenses and Curbing Impulses

Posted by FI Monkey

Curbing Impulses

Today, I found myself about to buy a movie because it was on sale and then caught myself. I could, of course, afford the movie — it was $7.99 on iTunes for the HD version — but I was going to just impulsively buy it so I could watch it immediately. And this wouldn’t be the first time in the last month I’d done so. I’d estimate that in the past few months, I’ve spent nearly $150 on movies alone (to be fair, $75 of that was to purchase the Star Wars HD set on iTunes). It’s clear I have a weakness for entertainment and I do not like to buy hard copies of things.

But still, it’s a weakness. And one that potentially harms my ability to maximize savings and reduce expenses.

It’s clear that if I ever want to live solely off of passive income, this is some behavior that has to be addressed. Luckily, today I took a moment to think it through and come to an understanding with myself that I really didn’t need to make the purchase. In a way, I saved myself an extra $8 for the lost opportunity. A small victory, but a victory nonetheless.

And this is a behavior I’d like to make permanent.

Reducing Expenses

For the past few months, I’ve been actively working on reducing expenses just by cutting out the extra and unnecessary. Of course, there are still some things to cut in order to really get ongoing expenses under control, but up to this point I’ve cut out some great ones. Take Sirius radio, for example. This was costing me $54 every quarter, or $18 per month. We are already paying for Rdio to eliminate the need to buy any music and satisfy our need to find new music, so my wife and I agreed that it was unnecessary to continue paying for something extra.

To further emphasize how much of an addiction I apparently have to entertainment, I was also paying $10/month for a subscription to Stream Nation. Luckily, they merged with another service I was paying for, so that expense sort of disappeared but regardless, I was paying $120/year for the ability to watch not only my movies by my friends’ movies as well. It had to go.

There are also some services I’m using currently that will soon face the chopping block:

  • Mozy – An excellent back-up service that charges $7.99/month ($95.88/year). I have effectively replaced it with CrashPlan, which blows them away for $5.99/month with unlimited online storage. I just need to make sure I’ve absolutely transferred all my data before I pull the trigger.
  • RescueTime – I absolutely love this service for tracking my time spent on the computer, but soon, the company I work for will provide me with an alternative and I can’t justify keeping both. They charge $9/month, which is $108/year I will soon be shaving off.
  • Audible – Another service I absolutely love that I have put on pause for now. I have 5 credits saved up with them that I’d like to let dwindle a bit before I re-activate my account. Still, I love Audible, especially during long commutes. For the program I had, it was $14.95/month ($179.40/year), which is pretty decent in terms of saving over the next year or so.

So already, we’re saving $216 + $120 or $336/year by cutting Sirius and Stream Nation. These additional cuts will result in a total savings of $719.28/year, or around $60/month. That’s less money I’ll have to worry about generating passively in the future.

As I continue reducing expenses, I’ll post more because it is an extremely important factor in achieving financial independence.

Update: I knew I was forgetting something! I came back and added in Audible (and adjusted the math) which is technically paused but it should take me a while to get through those 5 remaining credits. I give it a year. :)

Curb Spending and Get Fit by Gamifying Bad Habits

Posted by FI Monkey

In my last post, Reducing Expenses and Curbing Impulses, I outlined that I have somewhat of an addiction to entertainment. Well, that reminded me of a thread I came across a while back on Reddit where user Fibonacci_Toast came up with a great way to tie delayed gratification to a similar affliction.

Here’s an excerpt from the post:

First you pick the “good habit” you want to work on. For me, since I had just gotten a FitBit at the time, it was walking (steps). But it could be anything you can track–my sister in medical school uses hours studied, a friend of mine who is a writer uses words written. If you run, you can use miles run. Etc etc etc. Then, you have to pick a budget to tie your habit to. I used entertainment (mostly video games for me). You could also use eating out or any other kind of discretionary spending. Next, you have to come up with a conversion rate. This is closely tied to how much money you are willing to spend on this category a month, and how much of your desired habit you are likely to do. What I used was $1 per 10,000 steps walked. Since I walk between 12k-16k a day, my entertainment budget works out to about $40 a month. You may have to track yourself for a week or so to work out what your rate should be. Finally, you start tracking!

As it turns out, I too use a fitness tracker to count my steps. And I too have an issue with entertainment. In my case, it’s mainly movies. And until I read this post, I couldn’t think of a good way to sort of limit myself on movies.

But this opens up some interesting possibilities.

Let’s say you set up an incentive to tie some healthy habit to. You give it some sort of price per unit, then give yourself a goal to achieve. Oh, what? Yeah. Things just got interesting. Is your weakness eating out? Going to the theater? Buying movies on iTunes? Anything will do. That’s the genius in this idea. You’re gamifying a negative and turning it into a positive.

Of course, you could make the argument that it doesn’t directly add to your bank account. You could. But then I would have to point out the way this method is an automatic way to delay your own gratification. That delay is like a governor on your spending. In other words, you are reducing expenses. You are also increasing joy.

I, for one, am excited to give this a shot. However, if $1 per 10,000 steps is too high for you, why not set it to $1 per 5,000 steps to try it out? You can adjust from there. For me, I am perfectly happy with $1 per 10,000 steps.  I’ve already taken over 50,000 steps this week so I have $5 to spend.

Look out world.

Let Me Introduce Myself

Posted by FI Monkey

Welcome and hello! I just wanted to take a second to get an introduction out there before I start in on some actual posts and getting into what my hopes for this blog.

I’m currently a software developer living in southern California with my wife and three kids. I’m a little over thirty now, but when I was nineteen I had this burning sensation.

No, it wasn’t herpes.

It was more about dissatisfaction with where I was in life. I was already tired of trading time for money, even though I knew there were far worse ways a person could spend their limited time here on Earth. No, I had a desire to get money and I didn’t care how I had to get it. Of course, I had some impediments along the way. For starters, I was pretty shy so I didn’t want to have to talk to anyone. Second, I hated selling things to people (the only time I’ve been actually fired is from a sales job). Third, it had to be easy. In other words, I wanted a quick way to get easy money. I’m sure you see where this is going.

Fast forward to me sitting in a bookstore in the self help section going through book after book on money-making techniques. Book after book yielded squat in terms of things I wanted to do. In fact, reading Rich Dad Poor Dad, I discovered two things about myself. One, I was tired of reading books that told me I needed to spend money to make money and two, I obviously needed to make more money before I could do anything useful (given my specific personality, that is). So I decided to just go ahead with my life and stop worrying about getting rich quick and other nonsense.

And guess what? Life improved. I went through a lot of changes throughout my twenties, got married, had a kid, learned a ton, became a much better developer, started making a lot more money, had another kid, made some more money and then had yet another kid. Somewhere in the middle of all that insanity, my wife and I bought a house. And not a small, cheap house. I’m talking about a big house worth over half a million at the time. You could say I was just sort of going with the flow.

Awesome wife who loves me? Check.

Amazing kids? Check.

Career I enjoy? Check.

Big, expensive house? Check.

Oh, and to top it off, I bought myself an expensive car. It was like I was flying on American Dream Autopilot. Meanwhile, I had no real savings to speak of, nothing sizable set aside for retirement and the money we spent every month sort of flowed straight back out of our bank account into various places. We ate out all the time. If we wanted to buy something, we got it. If we wanted to go somewhere, we went.

I’m not sure when it hit me, but somewhere in the middle of all that, I had a moment of clarity which changed my path. Suddenly I was thirty and I remembered my eighteen year old self. I remembered wanting to be free and do all the things I wanted to do. If you’ve ever tried to split life between a full time job, a family and side projects, you’ll know what I mean when I say that it was hard to fit my own hobbies in. It’s not easy.

So here I was, making more money than I ever had in my whole life and had nothing to show for it. Sure, I was a “real estate owner,” and I had a couple of cars but what would happen if the money ever ran out? What would I do when I’m old? What would my wife have if I die? My kids? It was a lot to process, but it solidified a single-minded purpose in me. I wanted to figure my financial situation and get it under control. I wanted to put savings into high gear and then put it in places that would actually work for me. But, of course, I knew nothing about it.

I started reading books. I searched the web. For the first time, I started finding like-minded individuals. These were people who just wanted to live simply by living below their means. Period.

At that point, I was making around $150,000 as a software developer, and wanted to start diverting some of that toward financial independence. I discussed things with my wife. I told her about a plan I’d formed after binge reading through a number of online forums on how to set yourself up to be financially secure. The plan was in three parts. First, I had to establish 6-month Emergency Fund. Second, I had to start maxing out an IRA every year for tax-advantaged savings. Third, once both the Emergency Fund and IRA were filled, I would start investing.

So I started on the path to saving $50,000.00.

Keep in mind, I had never saved more than a few thousand in my whole life. Not for just having, anyway. Even when my wife and I purchased our home, we pooled our money together to put 5% down on an FHA mortgage. But again, I was determined.

So I started stashing money in an account earning 1% at Ally. At first, the amount in there was depressing in a way. It was sort of like the feeling of starting a diet knowing you’ll give in at some point and all the weight will come back. There was nothing groundbreaking happening. It was just money I couldn’t spend. Then I started hitting goals and things shifted a bit. Once I got to $5,000, I really wanted to see if I could reach $10,000 without giving up. A few months later, I was there. Honestly, that was one of the best moments in my life and I couldn’t share it with anyone except my wife. My wife, by the way, was already amazing with money until she married me. It was my job to bring us both back to saving the right way.

Have you ever heard someone say that the more you save, the easier it becomes? Well, it’s absolutely true.

I think I started out saving $1,200 or so every month, but seeing the number growing became almost a game. I wanted to hit my goal and hit it faster. I started going through our finances found that we could start diverting more money toward the goal. So I increased it. $2,000. $2,250. $2,500. Every month, I’d do this and sort of close my eyes waiting for the hammer to drop, but it never did. I’m currently saving at around $4,000 per month now and have nearly reached the $50,000 goal.

And that’s where I want to start this blog. Right before I hit the big number one. When it happens, I will post about it here. When I learn something new, I will share it here. My hope is that it will help someone who was on the same American Dream Autopilot I was on, and snap them out of it.