Month: April 2018

When I woke up this morning there was only one thing on my calendar.  Playing tennis at 4 with Chas.  Three short years ago my calendar would have had a dozen entries for today all involving my job.  Back then I could not conceive of a day like today,  a day with absolutely nothing to do.  Now I cannot fathom ever doing a 9 to 5 job again.

Oh, so cool, they just hit the tornado siren in town for a test, it is a beautiful day and I’m sitting outside with the pets. My two dogs who are resting near me decided to join the siren in a howling concert, lovely pup vocals! The cat is far too cool for this embarrassing display and looks at the hounds with reproach.

The view of the hundreds of acres of wooded wetlands on three sides of my house is serene as each tree and bush tries its very best to out-green its neighbor.  To be honest I can’t even see all of the two acres I own much less the hundreds surrounding me that are part of somebody’s family trust.  But I know they are out there because I’ve walked them all. The woods are dense here in Arkansas and you can only see perhaps a hundred feet into them.   The flowers my wife has planted in our yard are a delicate pink but to tell the truth a natural patch of vibrant yellow wildflowers just past them out in the woods are more vibrant. The birds are singing in full stereo in all directions and it is simply amazing how beautiful everything looks, smells and sounds this morning.

Where was I, oh yes, the JOB.  I called it a 9 to 5 but it was more like a 7:30 to 5:30 plus a few hours on Sunday and unplanned call outs due to weather, power failures, equipment failures, fires (YIKES!!) surprise EPA inspections (YIKES!!) and when deadlines for presentations to the CEO Who Must Not Be Named were looming.  And there were lots of those deadlines.

It paid well, very well and I liked being the face of a large employer that provided high paying high tech jobs.  It was like being a small town mayor, everybody knew my name and most were friendly.  I traveled a lot, stayed in fancy hotels and ate fancy meals.  And I saved my money aggressively for the day when I would either be too old to work or would no longer enjoy it.

I thought that day would be in my seventies, but in my fifties it came early.  The environment became toxic and hostile, or at least my perception of it, and at the same time I inherited half of my dad’s estate.  Not enough to change my status, I was already financially independent, but enough to jolt me into the realization that I was past needing to ever earn another Benjamin.

So I told my CEO, you know I can’t say his name or he might appear, that I was planning my exit.   I told him he should look for someone else to do the job because I was seriously considering riding off into the sunset and he did and I did.  And that was three years ago which brings me back to where I am.  Sitting on my patio in my backyard with the animals and the trees and nothing to do except talk to you this morning.  And there is nothing I’d rather do than that.

 

I don’t choose to spend many days like this because I like to be in motion.  But some days, like today,  doing nothing is exactly what I want to do.  There is a gentle freedom inside me that I never felt when I worked.  Back then no matter how I tried to calm my mind next week’s deadlines loomed over me, preventing me from ever attaining the peace I feel sitting here today.

You might be where I was three years ago, with plenty of investments to fund a life past your 9 to 5 but you cannot grasp what that life will feel like.  That is very true, you will not be able know if this will work for you until you live it.  But if it is any help it is working for me, and it is working for hundreds of other bloggers who write about it every week.  When I decided, I was nearly 60, so rather than a giant leap it was just a small step.  You may be 43 and the step looks quite uncertain.  Who will you be after you give up the career that has helped define you to others?  I can tell you that most of us who retired earlier than our peers do struggle with answering the question “What do you do?”.  Because two days ago I was a lobbyist and yesterday I was a tax consultant, both side gigs, and today I’d have to say “Nothing, I do nothing”.

The thing is, life feels much different now.  I did not realize I carried much stress before, but every day of the last three years I have felt fifty pounds lighter.  My bedroom scales confirm my actual mass hasn’t changed but I still feel like I’m floating.   Some metaphysical load has been lifted off of my shoulders, off my back.  I sleep until I want to get up.  I haven’t lost my purpose or found more purpose because I’m still me but not much happens to me that I fear or dread.  All in all, life is better.  And better is good.

 

 

Are you on the edge of retiring early, slightly early or taking a mini retirement?

Does it scare you to think about what life will be like a year after you retire?

What will it take to make you decide to take that step?

 

I saved a life 30 years ago on a dark night when I was scared to death for my own.

I’m not sure how other bloggers do things but I keep a Word document on my laptop that is titled “Blog Ideas”.  When inspiration or a muse strikes me I open the document and add the idea to this living document and when I’ve used the topic I cross it out.  When I have time to write, like right now, I open the file and see what “feels” right to write about (see what I did there?). When I’m on a creative jag sometimes I will throw ideas into the mix that aren’t strictly related to my core competencies of personal finance, investing, career advancement and early retirement and today is one of those days!  It is a story from long ago that changed two lives dramatically.  Mine and Mike’s.  But in a way it is about investing, saving and risk versus reward which are surely applicable to personal finance.

Mike and I worked in a plant environment, and by that I do not mean a farm or a forest.  Our plant was of the chemical variety with a jungle of pipes and tanks and furnaces.  Hundreds of acres of extremely complex equipment containing very dangerous materials under high pressure and temperatures with hundreds of employees supporting the safe and reliable operation of the facility.  I actually worked there for over thirty years and in that time we never lost an employee to a work accident in spite of the inherently hazardous materials we worked with. But that night we did lose six lives, in a terrible accident. And yet we didn’t lose a person.

 Mike was an operations hourly union worker who was helping our maintenance crew that evening.  I was a new engineer.  We knew each other but both of us were/are on the quiet end of the scale so we had barely talked.  That night there were some problems with some of the equipment and it was being taken off line for repairs.  It should have been routine but in the planning one source of toxic gas connected to the equipment was not properly isolated.  A crew of six men was working on the equipment when a cloud of deadly gas was released directly on them.

They all fell to the ground, dead, as the gas instantly paralyzed their lungs and they stopped breathing. I wasn’t part of the planning or involved in the maintenance but I was on the scene nearby looking at some related equipment when it all went down and along with a few other workers in the area responded to recover our stricken friends.  I dropped down on my knees beside Mike, who like the others was not breathing, and to all appearances was dead.

A person’s brain can survive for three to five minutes without oxygen so the absence of breathing may look like death but there is a small window of time where lives can still be saved. Because several of us had trained in CPR for an occurrence just like this we each were able to get our patients breathing again.  Without the onsite CPR we provided all six would have died long before the ambulances and EMT’s arrived.  That was over thirty years ago and to my knowledge five of the six saved that night are still alive and well today. One died of unrelated cancer five years ago.   Mike certainly is healthy and well.

It was a pretty simple thing to perform CPR on a friend when you are the only hope he has and there is no one else there to help.  It is a little less simple when you are in a toxic gas environment yourself and have no idea which way to drag your stricken coworker to safety.  There is a point at which you just have to weigh the risk that you will be killed against the certainty that your friend is already dead unless you stop and save him.  You can run or you can stay, we all stayed and they all lived.  Of the six none remained in the chemical industry.  I guess the trauma of “dying” and coming back was too much.  Of the rescuers everyone stayed with their jobs, because the privilege of saving a life is a rare thing and pretty much cancelled out the fear we had of dying ourselves that night.

We never talked about it later, to the point that I do not even remember who most of the victims  and most of the rescuers were.  I visited Mike in the hospital a couple of days later while he was recovering and he was obviously very uncomfortable in my presence.  We still live in the same small rural area and when I see him today it remains very awkward, I’m not sure why.   It was something way too personal between two people who were only barely friends, and I think I’m a reminder when we meet of something too dark and fearful for him to come to terms with.  I don’t know what they saw at death’s doorstep, none of them ever said as far as I know.  It just became something nobody ever mentioned again.  Maybe that’s why I am doing it here.  It profoundly influenced my life and was one of my best moments where I had a choice and what I chose to do had real and lasting consequences for myself and for another family.

I suppose it is easy enough to tie this into personal finance concepts like investing.  What did the CPR classes cost my company?  A few thousand at the most.  What would six deaths have cost them had they been of the permanent variety?  Millions probably.  Maybe more when you consider the regulatory agency fines, the impact on stock prices, the civil lawsuits that never happened, the impact on company morale the difficulty of finding workers for a plant with a damaged safety record and so many other negative consequences.  It might have been the best financial investment the company ever made.

This story also deals with risk and reward.  Investing is all about balancing risk.  It is also something you have to do when life presents you an opportunity to get involved in something real.  What are the risks and what are the opportunities?  And sometimes the reward is so great that you willingly undertake great risk, particularly in career and entrepreneurial situations.

What about nonfinancial returns?  All of those guys had families, wives, children and extended family that depended on them being there.  In all the ways that family matters broken families were kept intact. That CPR investment saved 175 years of human life (and counting), the most precious commodity we have.

Teaching employees CPR was a form of insurance and if this blog post accomplishes anything I hope it encourages somebody who is hesitating on term life to go ahead and get the policy because life is not assured to any of us.  And if someone was contemplating taking a first aid or CPR course then do it, please.  It is absolutely too late to try to learn by watching YouTube at the scene.  I would try that probably if I was not trained, but realistically in a crisis you will fall back to your training and if you have none you will probably fall back to failure.

And since this was about saving something, someone, what does it say about savings?  To me it puts money into perspective.  I have enough money now, I do not need to earn another dollar for the rest of my life.  But when I look back on my life’s accomplishments, I am prouder of what I did that night thirty years ago than of any of the equipment I designed or of my current portfolio.   My message is that achieving financial independence is not a “Why” goal worth investing yourself in.  It is a means to help you achieve what is important to you but in itself it will not make you happy.  Your impact in this world on others is what will matter to you later.  Your journey to financial independence and the things you do on that trip for others and for those you love are the real return on the way you invest your life.

Are you crazy?

You are going hand down millions of dollars to your kids!
Ok, I get it, you are sitting their shaking your head because one, if you do have kids they are just little rug rats at this stage and you are way away from having your own funeral in the near-term future. Plus you do not have millions of dollars anyway, you may be still in the negative net worth column and if not you can no doubt remember a couple of years back when you were. But let me promise you, this is not hypothetical, you may not be there now, but you will be there in the future.

Making my case for future millionaire you is pretty easy so let me lay it out for you.

1. You are in this community. The FI, FIRE, Frugal, Life Hacking, Career Boosting, Entrepreneurial, Side Hacking and etc. community. Need I go on? If you are reading in this space you are likely having an inordinate amount of success in your pursuit of financial independence, however you define it.

2. The 4% rule. Everybody talks about how the underlying studies show a high rate of success for anyone that sticks with the 4% safe withdrawal rate. With success defined as an insignificant chance of running out of money. What is less often noted is that in two thirds of those cases the retiree ends up with over twice the amount of money he had at retirement, and only 10% of the time was the amount of the estate after death smaller than the original retirement nest egg. That means even if your magic number for early retirement is $500,000 there is a big chance that will grow to a million by the time you leave this mortal coil (every post needs a little Shakespeare).

3. You are killing it, and won’t know how to stop.
Most of this community of financially savvy learners is not going to be content laying on the beach for fifty years. You people get things done, you are smart and focused and are winners. The very fact that you have a plan means you are the kind of person who will always be shooting at some target ahead of you. So what? Well, the what is that you will continue to earn money, and probably even more than you spend, for the rest of your life. It may be in a location independent web based business or something more old fashioned like my consulting side gigs but it will earn you substantial income and will keep you at a 0 to 2% withdrawal rate instead of 4%. And those kind of withdrawal rates end up allowing your nest egg to not just double but grow to three to five times what you retired with. Like it or not you are going to be a millionaire or more likely a multimillionaire before your heirs receive an inheritance.

So now that I have your attention and cautious agreement that you will be faced with deciding the final destination of over a million dollars and most likely over a million dollars per child lets talk about that. I have an advantage over you in that my three kids are aged 27, 30 and 33. I know the kind of adults my kids will turn into, you don’t. Similarly I know the kinds of adults my friends’ kids have turned out to be as well. And guess what, our kids are not like us!

I was a meat eating southern guy. My wife grew up on a farm where slaughtering pigs, chickens and cows was just another daily activity. One of my daughters is a vegan, the other eats no pork. I convinced two of my three children to pursue engineering because I had so much fun doing it. Neither of them found engineering very interesting and one ended up in regulatory work while the other went back to school and is a doctor. Your kids will be like you in some ways and unlike you in many others, but how they will be with money you can’t know.

The Dave Ramsey Paradox. Now first let me point out this is my own invention, you heard it here first. The Dave Ramsey Paradox is as follows: “Advice like your grandmother gave but we keep our teeth in”. Plus, if you become good at handling your personal finances you can “Change Your Family Tree”. Let’s think on that. If you can “change your family tree” by handling money well and teaching your kids then every grandmother who gave sound money advice would have money responsible kids and in time money responsible grandkids. So if the grandmothers planted the family tree correctly how come so many people need to be pruned?

Obviously some lessons just do not catch on from one generation to another. Depression era babies see the world differently than do Boomers. Boomers do not see eye to eye with Generation X or Millennials and whatever generation comes next will almost certainly confuse all of us.

All that is to say my kids are not like me. We have outside pets which works great when your backyard has 800 acres of wooded wetlands to play in but they are city kids with indoor dogs? Really, dogs indoors? Who knew you could even do that?

And this is the problem you are going to face. You are going to drop a seven figure sum into your kid’s hands someday, and they are probably not going to share your values when it comes to money. Will it help them or hurt them when it happens? Well, what is the worst that could happen? We could look at another statistically large group of people who have had large windfalls and see how they have fared.
The news is not very good. Over one third of lottery winners go bankrupt some point after winning. It is counter intuitive that free money would cause people to end up in greater financial duress than they were before winning but one third is not a small statistical result. The correlation is clear and real. Also going broke is not the worst that can happen, “winners” also suffer higher rates of drug and alcohol abuse, divorce and suicide. It is pretty sobering to think that a “gift” of a large amount of money can have such unintended consequences.

But you could logically argue, and I would agree, that lottery players do not represent your kids. Lottery players tend to be over represented by the lowest 20% earners in the country. Your kids presumably will be at least average earners and probably higher since you are the focused achievers that you are. Maybe that alone will save them from the fate of lottery winners.
So what about the statistics of heirs to fortunes? Unfortunately they are not much better. In fact 70% of wealthy families lose their wealth in the second generation and 90% lose it by the third. So much for changing your family tree! Now those statistics are gathered from studying mega-rich families whose assets will probably exceed yours or mine but it still is concerning that families that know they will be handing down vast fortunes do not seem to be very successful at training their kids to be successful millionaires.

Maybe I have convinced you this is a real dilemma you will face someday and now I am sure you are expecting me to provide the kind of sage wizened advice that older folks like me are known for. Sorry, no help here at all. But I will tell you my plan. In my case it will all go equally to the three kids, zero restrictions. They are mature and while they may not be as frugal as I am the worst-case scenario is they will spend it and not have it for retirement or to hand down to their someday kids. That isn’t so bad and in fact I probably should have spent more of my money myself when I was younger.

On the other hand I have a relative whose kids haven’t proved themselves very responsible with money. He currently has no plans to leave his multi-million dollar estate to his kids because he fears how they would handle it. I suggested he perhaps set up a trust that only doled it out in small doses that were less susceptible to feeding undesirable behavior but I’m not really sure what his ultimate plans will be.

My kids are already adults and I know them by their lifestyles and actions. I cannot see the million dollar plus inheritances they will get someday being anything but a blessing in their lives. If you do plan on having kids, and yours may not even be here yet, and if they are they may be very young, you will have a long time to determine how to pass down your lifetime assets. There are a few other related questions that you will also want to consider if you haven’t. What will you do with your assets if you choose not to have children? How do you handle handing down money in a blended family? And very important who should raise your kids if they are left without parents while still young?

What is your plan on handing down money to your children?