Early Retirement

Learning the Ropes – Starting up my Brokerage Account

Posted by FI Monkey

Hey guys. So I’m still focusing on building my side business this week, but I also don’t want to let my primary goals go either.

Today, I’ve been getting things set up for taxable investing. Last week, I set up a brokerage account with Vanguard for this very purpose and went through the trouble of transferring some money over only to learn that, for an account the size of mine, they only allow $7 trades for the first 25; after that, they become $20 each. So I decided to use Scottrade in the mean time while my Vanguard + Brokerage add up to more than $50,000. After that point, the trades become $7 each with no limit.

Once that happens, my plan is to consolidate everything over to Vanguard so that both my taxable and non-taxable accounts are there. Whether that will actually happen is up to future me and how much it will cost me. Ideally, it would be nothing since I’d want to hold on to the same stocks and such. Worst case, I can keep trading with Scottrade.

On the other hand, the reason I’d like to keep things with Vanguard is that once you have $500,000 with them, all trades become $2! I’m sure there’s something even more amazing out there, but for someone who’s as green as I am to stock trading, that seems like a pretty great deal.

And as some of you are probably paying close attention, you’ll note that I already have a brokerage account through Chase, but my plan is to also consolidate that. I hate having so many accounts all over the place. I’d rather have everything set up simply so there’s less for my simple mind to worry about.

All that being said, my account with Scottrade should be ready for funding this week and I should be ready to get things started with some dividend growth stocks. From what I’ve read recently, Coca Cola isn’t a bad one to start with, so I’ll probably go with that and a few other familiars just to get things rolling. I’m only starting with $2500, so I’ll probably invest in a handful of stocks in addition to KO (most likely borrowed from the amazing Dividend Growth blogs I follow). I’m still trying to come up with my own vetting process which, admittedly, is also largely borrowed from the blogs I read.

For those of you who I’ll be stealing from, please accept it as flattery more than outright theft! I just want to be more like you fine people.

I’ll probably update once things are actually set up and I’m ready to start buying, but while we’re on the subject…

Any recommendations for my first five or so stocks?

Any links to a checklist I should go over to vet each one before buying?

Any general advice?

Setting Goals for the Rest of the Year

Posted by FI Monkey

Man, today has been a busy day for side hustles!

I must have spent a good six hours re-making an old site that was just sitting there gathering dust. Well, sort of. Yesterday, I was just casually checking my AdSense stats which have been at an average of about $0.02/day now (up from $0.01! Yay!), when I noticed a single $0.15 click. Upon further investigation, it turned out that it was a site I’d sort of set up and forgotten about. So of course I had to dig in a bit more and it turns out that it’s ranked well for a number of organic search terms.

Naturally, there was only one thing to do — give that puppy a make-over while preserving SEO. And that’s what I did. As soon as work was done, I got to work. Luckily, my wife took the kids out for the night so I’ve been in focus mode the entire time (early retirement light, I guess). She’ll soon return, which is why I feel a bit rushed in writing this but I wanted to get a post out tonight. I hate breaking that chain.

Boy have I digressed from the title.

So today, I read a post from my buddy Adam over at I Want to Retire Soon (IWTRS) where he went over his progress for the year so far. I feel like I’ve been doing a lot of that, but one thing I haven’t really done is set any kind of public goals for me to embarrass myself with (just kidding), so I wanted to take the opportunity to set a few in the same vein as IWTRS. So without further adieu…

Goal 1. Fill Emergency Fund to 100% (Status: Completed)

Okay, I’m kind of cheating on this one but to be fair, it was the only real goal I publicly stated (besides my FI date goal stated in my About page, that is). Also, I killed that goal, so I’m going to give myself that one.

Goal 2. Reach $20,000 in investments for the year (Status: On track)

So far, I have about $12,000 invested (as you know from my many postings on the subject). This goal poses some threat as I have an upcoming dip in salary coming, albeit temporary (side hustles and side businesses — time to step it up).

Goal 3. Write at least 25 posts here per month (Status: Behind)

Last month, I wrote 24 posts. I feel like none of my posts are really super long, nor are they super short, so I feel like that should be a good momentum to maintain. However, I’m going to reach a little higher on this one and call it ‘Behind’ because I’d like to generate more quality content on a constant basis.

Goal 4. Comment on at least 20 posts per week on similar blogs (Status: On track)

I’m totally ripping Adam off here on this one, but I think this is vital to keeping involved and keeping the right mindset. If I’m constantly thinking about financial independence, early retirement, dividend growth investing, index funds, I will be much less likely to fail. I’m calling this one ‘on track’ because I comment on at least 5 blogs every day just because I enjoy it. And Adam, if you find a way to track that metric, please let me know.

Goal 5. Get my feet wet with Dividend Growth Investing (Status: Behind)

I’ve been bothering a lot of people in my attempts at researching this one, and I don’t think that will stop anytime soon. Still, I haven’t achieved it yet and I want to sort of pressure myself into it because I think it will pay off well in the long-run. Hopefully this one is set to “on track” by the beginning of Q4!

Well, that’s it for now. I’ve got stuff to do around the house since I’ve been staring at this stupid screen all day!

Until next time.

As Luck Would Have It

Posted by FI Monkey
It's times like these when you think, "Man, I sure could use a shovel."
It’s times like these when you think, “Man, I sure could use a shovel.”

Isn’t life funny?

One moment, you’re stressing about things in a major way and the next moment, opportunity lands right on your face. Or desk. Opportunity lands somewhere. And if things have sorted themselves just so, it’s sort of like being stuck in a hole and having a shovel fall in with you — not the best situation, and it won’t be easy getting out, but at least you have a way out.

So yesterday, after getting my absolutely final offer from the company I’ll be taking a job from, I had resigned to the fact that I’d be making a lot less money over the next year — again, somewhere around 35% (but closer to 30% because of the way taxes work out).

In fact, this is why my posts have been sparse. I’ve been doing a lot of thinking. Thinking about how to reduce expenses, what that will do to my marriage, what that will do to my self-image. I know the amount of money I make shouldn’t be tied to my self worth and that’s quite often what I tell other people, but combined with a personal “crash” of sorts which has taken the FI Monkey “stock” down 35%, it’s much easier said than done. And that’s exactly what sort of hit me yesterday — my “portfolio” (income rate) is about to take a huge hit and because I am not diversified (having multiple income streams), I am feeling the full brunt of that impact.

And so I thought about that.

Now obviously I have promised myself (and my readers!) that I will start a side business (or side hustle, as they say these days) and I absolutely intend on doing just that. But as I said at the beginning of this post, opportunity landed. And that opportunity came in the form of a consulting agency that wants to farm part time work out to me at the rate I’ve been charging the company I work for.

And the more I think about it, the better it sounds:

  • I get paid the same rate I was being paid before
  • I can work at my own pace and on my own schedule
  • I can deny projects if I should so choose
  • I can even charge flat rates for projects
  • I don’t have to work directly with clients and act like a project manager
  • I don’t have to manage people
Now we're talking.
Since I was beating the stock analogy to death, here is a picture of a horse wearing roller-skates. You’re welcome.

The trade-off, of course, is that I have to charge accurately and competitively. These guys aren’t going to pay a slow horse to do a fast horse’s job. But I can swing that. The trick is staying within those guidelines while keeping my main income stream happy, but what makes me most happy about this possibility is just that — I will no longer have just one main income stream.

As of next week (I believe), I will have become diversified. Naturally, having just two income streams is not really diversified but it’s an excellent start. It just means that starting (or buying) a business will become yet a third income stream and lead to an even more balanced “portfolio.” I’ll have my stable income (bonds?) and my volatile income (stocks!) that will hopefully both grow at different rates.

The side benefit to this (not that I want to try to predict the future so early on) is that, should it somehow work out that I get close or even hit my financial independence number, I will be able to transition away from my main income stream and then slowly ramp down this side work over time in order to focus on my main business. Or who knows, maybe I’ll continue. I should probably figure out what my ideal “early retirement” looks like before waxing on about it, but you get the point.

What I have to be extremely careful about is making sure that my main job is not impacted by work from the others. But I also have to make sure I can get things done in a timely fashion with my second job. Luckily, I took the job that allows me to do all of this from the comfort of my home office. And I’m beginning to think I won’t have to keep beating myself up over the choice I made.

As luck would have it, things have a way of working out.

$1,000,000 in Lifetime Earnings

Posted by FI Monkey

Last night, I was going over some expenses to determine what is a “nice to have” and what is a “need to have.” Doing this on a fairly regular basis has become cathartic in the same way that clearing your desk is. It’s minimalism applied to expenses, which serves to remove distractions and get down to the essential.

Of course, none of the monthly expenses I have are actually essential, but I mean necessary to continue saving at rate less than dismal.

Staring at the spreadsheet of expenses, I started to wonder a few things:

  • How much money I’ve made in my entire career.
  • How much money has gone to stuff I no longer use or never used more than a few times.
  • How much money I could have saved had I not spent it on those things.

So, immediately, I searched for my salary history and found that it was missing the past few jobs. Being that I’m getting paid a lot more, it made sense that the most recent work years would amount to the biggest spike in income. After looking up the various amounts and filling them in, I was astounded to find out that I’ve crossed the million dollar mark in lifetime earnings.

762195e1666497074ede151e0cbeb39738a411d967572cbbe24b90cf8db6011f
Two comma club .. sort of.

For some of you, this may not mean much. And for others, it might seem unreal. I was in the latter group. If you’ve read about my story, you’ll know that I grew up in a house where we didn’t want for things, but we weren’t exactly rolling in dough. The thought of reaching a million dollars was so far off. As I’ve mentioned before, my brother and I marveled at $1,000 when we held it in our hands. I honestly never thought I’d reach a million bucks before I was either old or dead, and yet, here it is.

Next came the easy part. To figure out how much money I’ve spent on stuff I no longer use or never used more than a few times, I could go into some crazy detail or I could just subtract my net worth to figure that number out. Conveniently, I started tracking that number not too long ago, so it wasn’t too difficult to find.

$1,000,000 – $422,000 = $578,000

Granted, a big part of that $422,000 is equity on my mortgage. I could easily include that, but it’s not something I earned through income, so let’s strip it away.

$422,000 – $256,000 = $166,000

Adding in the depreciation of both vehicles, I would bump that up to $175,000. So our new number is something like this:

$1,000,000 – $175,000 = $825,000

Credit: Ingram Pinn (I think)
Credit: Ingram Pinn (I think)

There, that’s more like it. I’ve been working since I was 17, so that means for the last 15 years of work, I only have 17.5% to show for it. In other words, I have let nearly 83% of my income slip like sand through my fingers. True, a lot of that has gone to things like rent, utilities, school — for myself and for the kids –, fuel, vacations but also to eating out (A LOT), asset depreciation and general frivolousness with my income. So it’s not like I’d be a millionaire right now had I just buckled down a bit, but my point is that I’d be a lot closer. I figure that if I’d had a modest average savings rate of 15% for that entire time, it would have come out to an extra $100,000 during that time.

Ultimately, it comes down to this: for all the time I’ve traded in for money, what do I have to show for it?

Yes, I understand that I’m effectively complaining about having so little when I obviously have a lot. But it doesn’t hurt to stop and look back for some perspective. I don’t want to hold my former self accountable too much, because I was ignorant. Things could have gone much worse for a person ignorant of finance. Not that I’m Buffett at this point or anything, but I’ve come a long way.

In fact, this post is more about the next million than about the previous one. The real question at the heart of this post is: now that I know, how much of that next million will I use to become financially independent?

And where past meets present, I now understand that even that 15% is hard to maintain when the future starts looking a little difficult. It’s hard to take income volatility into account when you’re making these numbers up. And 15% isn’t even a good savings rate. I’d rather be saving at 40-50%, or more.

But when it’s not in the cards, it’s not in the cards.

Even if I only save 15% of the next million, that will still be another $150,000 tacked onto my net worth. And while I won’t be financially independent by that point given my current spending habits, I will be that much closer to early retirement.

And, as I’ve maintained, I will continue to push through that earnings gap to make up the difference. Be it through my main source of income or some side hustle, I’m determined to stay focused on that one goal.

 

Took Monday Off But Now I’m Back

Posted by FI Monkey

So, there was no post yesterday, not because I’m lazy but because there was a lot going on. Not that I’m not lazy, but I just wasn’t yesterday. You understand.

As most of you know, I’m going through a rough patch in my life and having to sort of take a step back to examine where I’m headed. That means I had a big decision to make between two job offers, both of which were a cut in terms of pay but one allowed me to keep working from home. Unfortunately, that’s the job that came with the biggest cut.

That being said, I went with it.

Just the facts, ma'am.After comparing each point of both jobs in an Excel spreadsheet and weighing the pros and cons, trying to ignore the ease of just working from home as a factor and paying more attention to the pure facts, the answer became clear.

Clear, that is, assuming I work steadily to create a decent side business. As that’s been my intention for a long time coming anyway, it really made sense and is just the fire I need to get going with it. Even if that means starting small.

And actually, the offer isn’t as bad as it was previously. After some more back-and-forth, I was able to decrease the damage from around 38% down to about 35%. That means I’ll be able to take more advantage of my upcoming 401(k). It also means there’s less of a gap to bridge in terms of side income earnings. The amount isn’t laughable, but every bit I can shave off the distance helps.

Good Listening

In other news, Mad Fientist released his new podcast recently, which I listened to almost immediately. I’m listening to it again right now, in fact. So good. In this episode, he rapped about financial independence, early retirement and geographic arbitrage with Ed Mills from The Millionaire Educator. I don’t know if it was the fact that I was just out of Fientist podcasts for a while or if it was just a particularly interesting episode, but I found this episode the most inspiring by far. Ed Mills apparently started out 40k in the hole after going to grad school, then got to zero net worth at 35.

In other words, he started on his FI journey at 35. It took him a few years after that — I think when he was 37 or 38 — to hit the $100k mark, and then it just kept going up from there. The kicker, though, is that he and his wife did this as teachers.

Did you hear that? Teachers.

So many of us are ahead of the game in this respect. I know a couple of people in our community who are in their early 20s who have hit $100k net worth. To think that someone in their late 30s could hit that number, but then just consistently hit goal after goal is such a great example to the rest of us. One, that someone could do that in such a short time (I think he and his wife achieved FI within 15 years), and two, that he and his wife were on the same page for so long to the point where they achieved what we’re all after. And they did it all as teachers.

Just … wow.

The Library

Don't Touch My CakeAnother thing I’m excited about is learning about my local library’s collection of audio books. For a long while before I cut back on some unnecessary expenses in my life, I was paying $14.95/month or about $180/year for Audible. It’s a great service, but just unnecessary for me. So I put it on pause to make it easier to use up the credits that are just sitting there without accruing more in the meantime. Then I come to find out that my local library has a very similar service and it’s all free!

So now I can have my cake and eat it too.

Oh, and did you know that there’s this other service the library offers? It’s sort of like Netflix but offline. Apparently you can borrow actual books from this place, and as long as you don’t keep them too long, you don’t have to pay anything. I know, I know. I was blown away by it too.

Just keep that between me and you. We don’t want everyone to find out.