Month: May 2018

In our slightly early retirement my wife and I both play on a couple of tennis teams and most of our matches are about 100 miles from home.  What can I say, it is a rural flyover state and there just aren’t enough tennis players to have competition unless you gather the whole state in one place.  At least sometimes our matches are in the same city at the same time so we can go in one car.  That was the case two Saturday’s ago when I was through with my men’s doubles match and running errands while she was still playing.

I was driving along the interstate at 75 mph when suddenly my ten year old Infiniti sports coupe’s engine blew up.  Well that wasn’t the technical term for it but smoke and steam started coming into the passenger compartment through the air vents so it is close enough.  AAA came and got me and towed my little speedster to the dealer, twenty miles away.

 

Due to the age and the pretty high mileage on my car the blue book value was only about $7,500 so I was pretty sure it would not be worth fixing.  The high performance engine alone would cost close to $6,000 to replace and nobody in their right mind is putting that much in repairs into a $7,500 car.

 

So, what to do?  Even though we are fairly frugal with the cars we buy, the Infiniti was a splurge.  Not because it was expensive, because it was not at all, but because it was a third car for two people.  You could easily make a case that two retired people could share one car so having three is, by most counts, a little excessive.

 

And it is, but the sports car is crazy fun to drive and we can afford it with no problem so it is a luxury we (OK I) chose to buy.   In our defense, all three cars have well over 100k on the odometers and only one of them is worth over $10,000, and that’s maybe barely over.  Our hobbies have us needing larger vehicles with more cargo capacity often so neither of us was willing to have a small coupe as our main car but both of us like having it as a fun ride on solo trips with limited baggage.

 

So we had a decision to make, go back to two cars or look for a replacement for our little rocket sled.  The model we had is pretty rare with less than 4,000 of them produced.  It wasn’t limited edition, it just was not a very popular car and was dropped from production after a few years due to lack of demand.

 

We came up with a plan, to see if the dealer would give us a trade in on the dead smoker for something similar on his lot.  Oddly, he had a virtually identical car with similar mileage and age for $7,000.  The only other used car he had that was in the same category was much newer and lower mileage and cost $22,000.

 

I weighed the relative merits of a nearly new slower sports sedan that cornered poorly with what I knew to be a fun little beast and wrote him a check for the $7,000 replacement Infiniti, exactly the same car I had before mine melted down.  They towed my sad old car to an auction where it will be sold  for parts that I might get $700 for, or about $500 net after paying the tow and the auction fee.  (Update, I netted $850!)  Any lessons in this?  A few I think.

 

One, if you drive old cars you need to expect to have a few issues and on rare occasions a catastrophic failure is possible.  I fully expected 200,000 miles out of that car but got less than 150,000 miles.  It happens, and that’s a great thing about being financially independent.  We had $20,000 in checking and just wrote the $7,000 check  for the replacement car and it made exactly zero difference in our financial state.  We didn’t have to move any money from any retirement accounts because we always keep enough money on hand to handle emergencies, or in this case an inconvenience.

 

Two, even though old cars come with a reliability risk they can still be very nice.  Our new/old Infiniti for $7,000 has a huge horsepower to weight ratio so it goes way fast and can pass another car on our Arkansas two lane roads with only a very small amount of space needed. It sticks to the road like glue with awesome handling characteristics.    It has independent climate control on both sides, heated leather seats, all wheel drive, Bose sound with a subwoofer, massive disk brakes, memory on  seat, mirror and steering wheel position for two drivers, and because it is such a weird looking car of such a small production run nobody has any idea that it is not new when they see it.  People seem to think I’m driving a $50,000 late model sports car instead of a $7,000 near antique.  One friend of mine who drives a $68,000 pick up truck thought it was a 2018 model!

 

Three, although having three cars is a ridiculous splurge I’m doing it for a lot less money than many guys around here spend on one pickup truck or large SUV.  No matter how much money you accumulate if you love bargains it is hard to spend a fortune on a brand new car when driving an older car in good shape is just as much fun.

 

The truth is my wife and I could buy brand new Mercedes or Porsches with cash and never risk running out of money, but that seems incredibly wasteful and the driving experience would be about the same.  And if this car goes “Three Mile Island” like the last one and I have to write it off I’m really not out that much money.  Plus it  makes having that AAA auto club premium membership a paying proposition!  Those tow truck drivers are on a first name basis with me now, shout out to Cowboy!

 

This last week I had a blowout on the new/old Infiniti.  And lest you chalk that up to my driving old cars with lots of miles on them that had nothing to do with the flat tire.  The car had four brand new tires but I hit a piece of metal on the highway that I did not see and shredded one of the new tires.  It was kind of ironic that the only  equipment on that car that was brand new were the tires and that’s what failed!

 

How about it, has anyone else found a way to satisfy their “need for speed” with low cost performance vehicles?

 

Are you comfortable with the reliability of cars approaching 200k miles?

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The financial independence and early retirement community is pretty diverse but if there is a common theme espoused almost universally it is that the way to achieve financial freedom is to spend less than you earn and invest the rest.  After that it splits off into many different factions.  There are those that major on frugal living, those who emphasize having multiple streams of passive income, the real estate investment crowd, the self-employment side gigging crew and the maximize your corporate career people, like me.  But controlling your cost of living by avoiding unnecessary or extravagant spending is generally something almost everyone agrees with.  Why then would any of us voluntarily give up that hard earned money in exchange for nothing, or at least nothing tangible?

Giving to others, for faith based, humanitarian or philosophical reasons is a difficult topic to blog about.  It is self-aggrandizing to talk about how much you’ve given away to non-profit charities if you are a large giver and it feels uncomfortably like bragging.  As a guy who was not a popular member of the in crowd in my youth, but who has had a modicum of success in my adult life, bragging is something to which I am susceptible.  Because I succeeded way past my own expectations in life I sometimes feel compelled to share my success story with others, and that is sometimes OK, but all too often is just me propping up my own ego.  In other words it is me bragging.    On the other hand it is a little like, if a tree falls in the woods and nobody hears it, did it really make any noise?  As an anonymous blogger when you post about your accomplishments are you really bragging if nobody knows who you are?  So if it looks like I’m doing that then I’m sorry, but I’m going to forge ahead into this sketchy territory anyway.

After reading a couple of blog posts about giving I decided a few days ago to estimate what my wife and I had given away to others over our married life.  Since we’ve been married over thirty years that sounds like a huge task, but it was actually very easy.  I already have a spreadsheet that includes my actual income for every working year of my life.  You also have that whether you know it or not! The Social Security web site my Social Security will let you print out your income for every year of your working life.  It does not list what you’ve given away, of course, but in my case I knew the percentage of what we gave roughly based on our gross income.  With a spreadsheet I estimated the annual gifts and then calculated what they would have grown to if they were invested like the rest of our portfolio.  That’s fair if I assume we would have put the money into investments had we not given it away.

The total was a little over $1.6 Million excluding my wife’s income and special gifts we made above our  normal percentage minimum of giving.  Adding those in brings the total up to right at $2 Million.   I have never revealed our exact net worth and while it is more than my wife and I will ever spend it would be significantly enhanced if I could add a couple of more millions to the pot.  In fact when you look at the range of savings rates for this community, which run from maybe 20% on the low side to 75% on the high side, voluntarily giving up a chunk as large as 10-15%, which is what my family chose to do, seems absolutely crazy on the surface.  Another way of stating it is that the largest single expense in our family household for every single month we have lived has been our charitable giving.  It was two to three times the size of our house payment which was the only debt we ever incurred.  So why do otherwise frugal people decide to give away the equivalent of two extra house payments every month for no tangible benefits?

For me it started with my dad.  Dad earned a solid middle-class income selling insurance while my mom was a school teacher.  We had a comfortable life in a small house and my brother and I had our college paid for by our parents, allowing us to graduate with zero debt.  While my dad did not make a lot of money he was a savvy saver and investor.  One place he saved money was on our allowances, there weren’t any.  From the time we could ride bicycles and mow lawns my brother and I had jobs before and after school or we had no spending money whatsoever.  As we grew Dad shared with us his financial spreadsheet that listed all his investments.  It was a real shock, as poor as we felt growing up in a frugal household, that Dad was a millionaire.  I would guess he never made more than $40,000 a year in his working career but he saved aggressively and always had his money earning more money in stocks and bonds.  But the main money lesson he taught, repeatedly and with emphasis, was that he tithed on his gross income without fail.  His belief was that if he honored his faith that he would be financially blessed.  And he did and he was.

Neither my brother nor myself feel like the connection between giving and financial rewards is an unfailing algorithm.  My own theology leans more toward the concept that having faith brings rewards but they are spiritual and not always material.  I also feel that giving 10% of gross or net income is only a  guideline and not any kind of specific command or spiritual directive.  However, I do believe there are solid psychological reasons why giving to others does bring material rewards. Giving a large enough part of your income, say over 10%, is something you can’t help but feel.

Writing out a check that is two or three times larger than your house payment or rent every single month makes an impression on you.  Dave Ramsey would say it triggers the pain center in your brain.  It forces you to reconcile writing that check with your overall value system.  In our case when we gave a large percent of our discretionary income it confronted us each month with the fact that our faith compelled us to give generously regardless of how that felt.  It reminded us that life is very temporary, money won’t be making that trip to the afterlife with us and that everything we had did not really belong to us but was a gift we were to use for good.  It forced us to admit, every month, that money is not our purpose or our end goal in life.

So what does that do for you, the constant reminder that money is not the big why in life?  I can only give you my opinion, I’m not a qualified life expert by any stretch.  Putting money in a subordinate position to your other life goals changes your view of wealth.  Putting money below your care and regard for other people makes you kind.  It makes you generous.  It helps make you trustworthy.  Those are great gifts, priceless really.  My experience in the corporate world is that the people who get ahead in the employment game most often are those who are the most well liked and well trusted.  Sure, you need proficiency at the skills required but after you get to a certain level everyone has the skills.  Being trusted and likeable are key differentiators.  When your value system places people above money then you will be liked and trusted by others.  You will be generous and willing to play fair at work.  You’ll share credit freely and admit your mistakes.  Nothing builds trust and causes others to like you more than those qualities.

My dad credited his amassing a sizeable estate to his giving.  To him his wealth was a gift from above.  I guess I really do agree with him on that, except I see it being worked out as a result of his giving making him a better employee and person, rather than some supernatural miracle.  My dad also thought he got back even more than he gave.  I guess I feel that way as well.  I do not think it is a guaranteed thing, like my dad, but I do think the odds are in your favor if you give a large enough amount regularly that you feel it.  I think I earned at least a couple of million more in my career than I would have if I had not climbed the corporate ladder so fast and so far.  And I do not think I would have achieved what I did in my career without the constant impact of putting money in its place.  Regular and sizeable percentage giving created that impact on our values.

And then when my parents had passed their estate was split between my brother and me.  It was much less than two million dollars each but it was still a very large tax free addition to our net worths.  The inheritance, added to the extra income my career netted me due to having a healthy attitude toward money, more than covered our lifetime of giving.  It really was a “win win” for us to have given out of our excess to our church, the United Way, our college and university and the many other individuals and non-profit’s we have supported. The groups we gave to changed a lot of lives and having a healthy attitude toward money changed ours.

What was right for me may not be for you.  Life is complex and I am not sure there is any part of it harder to write a rule for than the act of giving.  And in many cases the gift of your time and your love is vastly more important than giving money.  So please do not take this as judging anyone who chooses to give to a different degree or in a different way.  This was just written for me, to think back over a lifetime of behavior and to try to make sense of it.  And I feel better for having done that.

 

What do you think about the concept of giving and how it helps or hurts the journey toward financial independence?

 

If you are in the camp that does follow a percentage guideline in your giving how does that work once you no longer earn an income?

 

I’m side gigging now and still earning a decent living but at some point I’ll just be living off my investments, should I still give then and how should I figure out how much?

A persistent theme of the financial independence and retire early communities is that 9 to 5’s are a modern form of indentured servitude.  A rat in a wheel kind of hopeless and purposeless existence designed to feed hedonic adaptation until said rat is no longer able to spin the wheel at a proper velocity and is replaced by a younger and more vigorous rodent, in a never-ending cycle.

 

I get that.  I can’t imagine anyone who ever worked in corporate America or corporate Europe or Asia not identifying with that metaphor at times in their career. The usual alternatives to that melancholy life break down into a handful of alternative paths.  One of the most common two of these is saving money like mad to minimize your time in the cage and trimming your lifestyle costs so that you can be free never to have to work again by the time you are 35-50 years old.  There are a host of examples of people who have pulled this off like Mr. Money Moustache, Financial Samurai, Firecracker and way too many others to try to name.  I admire and actively follow  these as well as many  others because they are incredibly inspiring humans.  The other route is to combine aggressive side hustles and/or real estate to build passive and/or active income streams that eliminate the need for a full time job allowing you to transition into early retirement at a similarly early age.  Paula Pant, Joe Saul-Sehy and dozens of others exemplify how this can be a successful route to freedom.

 

As a younger boomer (is that an oxymoron or what?) I never considered early retirement as an option because I didn’t know it existed.  Honestly it wasn’t a thing as far as I knew, I only remember hearing of one guy in my entire industry that actually left the office and went to the beach in his forties because of a huge stock windfall. In fact, as I recall, that guy popped up again working for another company later so if he did in fact retire early he did not stay retired.  But despite my lack of understanding of FIRE as a possibility I do not feel short changed.  I’ve had a marvelous and thoroughly enjoyable life, in part due to the fact that I spent over 30 years at a corporate 9 to 5.

 

So today I am here to defend the 9 to 5 as a valid and possibly fulfilling path to early or even not so early retirement.  I have already established my bona fides as a corporate drone, 30 years is a lifetime after all.  But I can also claim to understand and have experience in the gig economy.  For the last three years since I left the 9 to 5 I have earned 100 percent of my family’s expenses doing five paid side gigs as an independent contractor.  So I’ve done life both ways.

 

So here are the things a 9 to 5 career gave me that may not be as easily gained through being self employed in the gig economy or by building a real estate empire.

 

Free Training:  I had to obtain my college degree first but when I landed my job I was sent, on average, to at least one three day to week long high level training course per year.  These cost the company about $3,000 per year for tuition and another $1,500 for travel and lodging.  I was introduced to the leading experts in my field at these seminars as well as the up and comers at competitor corporations and these relationships served me well throughout my career and continue to bear fruit in my self employed pursuits.

Company Benefits:  I had top notch health insurance, my kids got college grants from the company, I had access to profit sharing and 401K plans.  I had a frequently replaced company car, free gasoline, free car insurance and free maintenance for most of my career as a work perk.  That meant we only had to have one car at home which saved us a lot. Same thing for free laptops and cell phones with unlimited data plans and no restrictions on personal use.   I was shielded from civil and criminal liability in most cases by my status as an employee.  I was granted stock rights that were worth over six figures and bonuses of similar size. I have seen blogs on how rare 401k millionaires are, well, it was very easy for me to grow well past a million in my 401k without even feeling the automatic withdrawals from my paycheck.

Experience: As a contractor now my projects are generally fairly small but as a corporate employee I designed hundreds of millions of dollars of equipment and had responsibility for over 700 coworkers.  With that came invaluable on the job training on human resources, leadership, budgeting, cost control, safety, environmental, investment management, insurance and risk management, accounting, financing and transportation.  Those skills are the ones that helped me launch my profitable side gigs and rather than paying to learn, I was well paid to absorb the knowledge that would later make self employment feasible.

Network: The most valuable thing my career gave me was not the technical knowledge or the business acumen but my extensive network.  From backwoods Arkansas to Washington DC to Australia and Germany I know people.  When I decided to leave my job I contacted business leaders in industries totally different than mine but who I knew from business and political circles.   I designed a dream retirement consultancy that I pitched to them and they agreed to fund it because they felt I could save their companies a lot of money. It has worked well for three years now and I may just keep doing it forever because it is fun and it helps me feel relevant while still only requiring  part time effort.  It gave me a base post retirement career that also lets me branch out into some other fun paid pursuits.  I would have had a very hard time landing a flexible part time self employed specialty where I both add great value to others and am well compensated, without the network that my corporate job allowed me to build.

 

Flexible: There were times when work got in the way of life and I missed a vacation or two but generally, as a family owned company, my management made family life a priority.  My morning commute was eight minutes tops.  I could drive home for lunch and often did.  I was never pressured to stay after 5 PM or to come in early even though I did quite often because I just got caught up in some project that I couldn’t put down.  I rarely worked weekends unless we had some major problems and then my feeling of ownership made me want to be there to fix things.  Nobody worried about people taking time to get a haircut or a to have a dentist appointment or to attend a day time school function.  I did not miss seeing my kids grow up and I could take them into work anytime I wanted.  All three of my kids worked there as summer interns just as I had and two of them became engineers, like their, dad partly because they saw that I loved what I did.

 

Fun:  And this one might surprise you.  For most of my career, right up to the very end, work was a terrific adventure!  I really was that guy that looked forward to Monday morning because the projects I had waiting on me were exciting and the thrill of achievement was always close at hand.  My management was complimentary and provided generous compensation along with the previously mentioned benefits. I had many friends at work and at business partner companies.  I was in a position of teaching younger employees which was fulfilling and also spent a lot of time as the spokesman and face of the company in the press, on television and even in front of Congress a couple of times.  The travel on commercial airlines and private jets, generous expense accounts and fine hotels were a lot of fun and meeting the occasional VIP was interesting as well.  I would not have wanted to miss having done all those things, and they were things I would not have likely been afforded if I had been self employed for most of those years.  And it was fairly stress free because at the end of each day, if things no longer felt right, I knew I could pick up the phone and have another job of my choosing.  I never worried about being fired because my phone was always ringing with job offers, in fact it still is though I never intend to go back to a full time job.

 

Admittedly my experience is a little uncommon.  Some of my coworkers did not like their jobs, their pay or their potential future with the company.  I had a blessed path from summer intern to the top corporate position in our company with very few bumps in the road. My observation is that less than half of my coworkers really enjoyed work and I am not sure I ever met anyone that liked it quite as much as I did.    I originally expected to work until 70 but because I was “exposed” to this community of younger FIRE brands I began to think differently in my fifties and pulled the plug much earlier than I had ever thought possible.  And I’m glad I did.  But that doesn’t change the fact that I’m very grateful for my career and if I had it all to do over again I would follow the very same path, of 30 plus years of corporate 9 to 5 life because it was so very good!

 

Am I alone here or are there others who enjoy their 9 to 5 and plan to stick with it for maybe 30 or more years?