Month: April 2019

I know I’m an outlier, because I read many blogs and listen to many podcasts and some of what seems mainstream in today’s world seems puzzling to me.  I’m in step when it comes to frugality, financial independence and retiring early but I’m totally out of the loop on some other things.  So, at the risk of alienating my readership I’m just going to testify, brothers and sisters, about things I do not comprehend!

Work stress is awful and potentially deadly?  No, it isn’t.  Stress really just means you care about how something turns out.  So, let’s say you have a stress-free job. Do you think that will make you dance a happy dance every day?  I do not think so, and here is why.  Having no stress means that there is no chance of anything going wrong.  That means your actions have no consequences, either good or bad and no impact on changing anything.  Think Grey’s Anatomy, lots of stress in that show because every episode people live or die depending on what Meredith and her fellow health care workers do.  But faithful fans, like my wife, love the victories and mourn the failures, because the show represents jobs that matter and people who handle the stress of saving or losing lives.  My job was not as glamorous as an emergency room doctor or surgeon, but I had a lot of people to lead and develop and sometimes things caught on fire and sometimes we had life threatening situations develop. Those times were highly stressful when someone could die based on my decisions.  Fortunately, that never happened but it could have, and oddly I never felt more alive than when I was responding to those crises.  And when I had to fire someone, that too, was stressful, and not fun in the least. But it did not wreck my health and spiral me into a funk.  I just did what I felt was right and let it go.  I think a stress-free job would be the most soul sucking, horrible thing in the world.  My job was fun because it was a high stakes proposition.

Work is something to tolerate until you don’t have to anymore.  It doesn’t have to be.  My career ranks up there as one of the best parts of my life.  I got to go from summer intern to managing hundreds of people and several companies.  I got to mentor and help develop some truly gifted engineers that are lifelong friends.  I got to travel all over the US and meet with a president, several governors and more senators and representatives than I can count.  I was on YouTube and network television and testified to congressional committees.  I enjoyed going in to work on Mondays and enjoyed getting the weekend off on Fridays.  Those were my favorite two work days, in fact.  I met brilliant and fascinating people from all over the world. I do not think I could have possibly had such a life of rich experiences without my career.  I worked well past financial independence because I simply wasn’t ready to leave the fun behind.  And my kids are great grown adults I did not neglect, and my marriage is still strong after 40 years.  I wouldn’t change anything about my work.  I still choose to keep earning money I don’t need consulting part time, because I enjoy working.

Cities are the place to be.  Not for me they aren’t!  I grew up in what passed for a large city in Arkansas.  But it wouldn’t even qualify as a decent suburb of Dallas or Chicago, much less San Francisco.  And my wife grew up outside of a town of 300 people, way outside.  We both got good public school educations and college degrees and I chose a small town in Arkansas for my first job specifically because it looked possible to live there for an entire career without limiting my advancement possibilities.  And I’ve been here for 40 years.  Maybe I could have made more money in the big city, but I doubt I could have amassed the net worth we have because life here is so inexpensive.  And I made big city wages with rural living costs.   Things we have learned not to need are lots of restaurants, a close by airport, specialized medical care, traffic, noise, crime, smog, crowds and a high cost of living.  We don’t have to keep our doors locked and our neighbors are like family, often walking over in the evening to sit on our patio and chat without invitation.  We’ve never had a break in or crime in the neighborhood in 40 years. It is quiet, and there is that 800 acres of woods behind our houses, with beaver, deer, bobcats, bears, otters, mink, coyotes and foxes.  And lots of poisonous snakes! We travel often to cities here and overseas and always, after a few days, we crave getting back to our neighborhood in the woods.  You really could not pay me to live in a big city.

Minimalism is a key to happiness. What can I say, it does not spark joy in me.  While minimalism is wonderful for many, my wife and I are very happy and we are far from living a minimalist life.  I only work a day a week, that leaves six to do nonwork stuff.  So, we do a lot of that.  We distance run, we extreme hike and bushwhack, we fish, we ride off road trails, we play tennis, we ski, we pickleball and we travel. And all of that requires some gear to do at a high level.  We have running shoes, trail running shoes, hiking shoes, tennis shoes, dress shoes and work shoes.  We have 16 fishing rods and reels!  Because we bass fish, crappie fish, trout fish and ocean fish and it takes a lot of tackle to cover all that.  We have eight tennis racquets and two pickleball paddles because there are two of us and we break strings all the time, plus in 100 degree heat the handles get so sweaty you have to switch to a dry racquet at changeovers. We have hiking poles, packs, gps apps and a satellite panic transponder for our hiking in the middle of nowhere.  We have a fishing boat and trailer and an off road side by side all terrain vehicle and trailer.  My wife is a wood worker and craftsman so she has a table saw, a router, a radial arm saw, drills, wrenches, screwdrivers and a dozen other tools.  She is a seamstress so she has a sewing machine.  We live on two acres and have a garden so we’ve got a tiller, a lawnmower, a chainsaw and all the normal hand yard and garden tools.  We each have a notebook PC, an iPad and a smartphone.  I’ve also got an iPad Pro which I use in my volunteer work.  We’ve got four television sets.  Worst of all, shudder, we have three cars between the two of us!  Even worse still we have three empty bedrooms we rarely use and two of our four bathrooms that we don’t even turn on unless we have guests.  What can I say, everything I’ve listed is something we use almost constantly, except the extra rooms in the house, and those are paid for.  We like where we live and have no financial incentive to downsize.  All those rooms were very well used when we had three teenage animals living with us. 

Maybe because we are boomers there is no hope for us to get in step with a more modern mindset?  And maybe it doesn’t matter anyway since we are happy and fiscally quite sound in spite of our peculiar preferences.  I hope these candid confessions do not make me sound like a terrible person.

What about you, do you agree with anything I’ve said? 

Are there, perhaps, some popular mainstream trends that don’t do it for you? 

As usual if you don’t see a comment box just click on the title.

I tripped over a couple of statistics the other day that made me rethink the plight of the average American retiree. First, the average couple on Social Security gets over $28,000 per year. Secondly the median net worth of Social Security age couples is $228,000. Now it gets more complex than this in the real world but if you combine those into a total net worth of sorts it turns out the normal American who has retired at the conventional sixty something age can actually make a claim at being a millionaire, with a tiny amount of rounding up!

Here’s my math, first the 4% rule indicates that your annual income from investments can be safely 4% of their total value in a year. So if Social Security pays you $28,000 a year then by definition it is roughly equivalent to $28,000/4% which is $700,000. If you add your median net worth of $228,000 to that you are sitting with a net worth of $928,000. Most people would consider that within throwing distance of being a millionaire! So where is this retirement crisis we keep hearing about? These are real numbers, the median net worth is of households 65-75 years old and the Social Security payments are straight from the Gov. It tells me that the median retired family today is doing absolutely great, they are basically millionaires. Their kids are grown and gone, they are on Medicare and their income is not taxed nearly as highly as younger people’s. They’ve got this, they are fine!

But what about the hysteria over total lack of preparation for retirement, maybe we should look at the people who are almost about to retire? Surely they are all drowning in negative net worth? Well, their median net worth is still around $190,000 and there is no reason to suspect their median Social Security checks will be much different from the already retired folks is there? I would expect them to be in just as good of shape as today’s retirees.

And that explains a lot to me, why the streets are not full of starving senior citizens. They are not doing so badly, they are essentially living off of millionaire portfolios with less taxes (some of Social Security is not taxed) and have hugely subsidized health care. The same will hold true for median couples within ten years of conventional retirement. I find it amazing that I can present such a positive outlook on retirement while the mainstream press decries it an absolute national crisis, using exactly the same data. But the facts are what they are.

But does that mean everyone is fine? No, unfortunately it does not. It means that the median couple is. But half the US couples live below the median and half live above it. About all you can say is that at least half of current and near future retired couples will be fine with the savings they already have, and that is without a single source of income except Social Security and their net worth. The other half have less, and some have much less. And it doesn’t take 50% to make a crisis, if even 5% of the population are homeless in their senior years that’s a national crisis. If even one is destitute and starving that is a personal crisis and a moral one for all of us. So do not think I’m saying “We are all rich, everything is OK!” Because I’m not. What I am saying is that most Americans would seem to be absolutely fine and well above any serious financial risk in retirement. And that makes perfect sense when you consider that for the last 100 years the US has been one of the richest countries in world history. It is also a testament to Social Security having achieved its goal for most of us.

So why the disconnect between popular opinion and the fact that median retirees, half of the retired people in the US, are living the financially independent life? At the very least they are living the lean FI life. There are dozens of bloggers in this space whose FI target number is one million dollars or less. That will provide them exactly the same lifestyle as the median retiree has, and they’ve shown it is a pretty ample life if lived frugally. I think, in part, it is the fact that bad news sells and good news bores people. Also to say that the only thing you need to do to become financially independent is to survive until 66 years of age isn’t very sexy. Plus, while my wife and I are still pretty good athletes at sixty plus, most younger people can’t fathom how anyone over fifty can even get around without a walker. There are countless studies that show that fear and pain impact us more than pleasure. So I suspect that we will all still harbor a secret fear that we might be eating cat food in our eighties if we aren’t extremely careful with our money today. Even if the numbers do not support that gloomy outlook.

What is your experience, are over half of the seniors you know destitute and living in abject poverty?

Does a nearly million dollar net worth in today’s dollars provide a decent living for retirees?

Will these same numbers hold true for Gen X and Millennial retirees? They do depend on Social Security remaining unchanged.

Side gigs are all the rage for millennials in today’s world.  With high student debt, salaries flat versus inflation for years and an increasingly regimented and unfulfilling corporate work place it is no wonder that people are looking for more.  More satisfaction and more money are on almost every worker’s wish list.   Having a second job that is flexible, that you can do where you are and when you want, that pays great and makes you feel good about yourself sounds pretty good doesn’t it?  And being able to do that on your current employer’s time clock so that it doesn’t require a lot of additional work hours sounds even better. 

“Wait”, you say, “that’s dishonest.” If I try to run a side business when I’m being paid to do something else, by someone else, it is kind of like stealing isn’t it?   That would get me fired!”  No, in fact if you do it the way I did, it is more likely to get you promoted and to get you some really bountiful raises.  So, listen up, and I’ll share a novel way to start your side gig up today while you are at work and already being paid.

How can you morally and honestly set up a side hustle during working hours?  It is the easiest thing in the world but it does have some short-term drawbacks.  And a really big one is that you cannot get paid for doing it, at least not at first because you’ll be doing it as part of your regular job.  Let me give you an example.  Early in my career I started volunteering to represent my company every chance I got.  My company was a chemical plant that was a big employer and particularly a big science, technology, engineering and math (STEM) employer.  That provided opportunities to judge science fairs, speak to high schools on career day, tour school kids though our plant and give talks to civic clubs.  These were things nobody else wanted to do because they did not see them as part of their job and because many of our engineers and chemists were introverted types who were terrified of speaking in front of groups.  That was an opportunity for me to do something I enjoyed, and since nobody else saw it that way I got to do them a lot. Sometimes they fell on my own time but I considered it an investment in my future.  I was actually starting a side gig as a corporate spokesman even though it was not anywhere in my job description and nobody asked me to do it. 

Over time I got to be a pretty fair speaker and learned how to read my audience and adjust my presentation to not be boring.  Believe me if you can talk chemistry to high school kids for ten minutes and not have their eyes glaze over you can handle nearly any group of adults!  I also met the movers and shakers in our little city. I became friends with the Mayor and the principals of the schools and the visiting politicians.   The other business leaders began to see me as the face of my company.  First that was just local, but in time it grew to where the Governor, our congressmen and the other leaders in our small southern state got to know me as well.  I found myself giving keynote presentations to thousands of other tech nerds and testifying for and against legislation in front of senate and house committees in D.C.  I got on YouTube doing stuff that mattered a lot to my industry leaders and I became friends with many of them.  Company spokesman, lobbyist and public speaking were side gigs I enjoyed but I never billed a penny for doing them. 

We were highly regulated by an alphabet soup of local, state and federal agencies.  Nobody liked the regulatory work.  It could be tedious and scary since individuals could be held to civil and even criminal penalties if the agencies decided that your information was wrong or misleading.  That sounds fair enough except in most cases even the regulators could not explain what the regulations meant or how to comply with them.  They could come back a year later and second guess any permit you had applied for or any reports you had made.  But because it was absolutely necessary to have a good relationship with the regulators and to be trusted to report honestly and accurately, I volunteered for just about every regulatory problem that came up.  I built a reputation with agencies like the EPA and OSHA and also with state agencies that helped our company avoid unnecessary conflict or penalties.  Not in my job description but it built me a network of valuable contacts and gave me negotiation skills that led me into other areas.  The company began to use me to testify in civil cases, to negotiate contracts with our union, to set up business deals with other companies.  None of that was in my job description when I took it on but after a while, I was the go-to guy at making deals, particularly regulatory ones.  It become another side gig.  I didn’t get paid to do it but I did it on company time and it was fun. 

The final area of personal growth I enjoyed was being on the committee that handled our profit sharing and 401K plans.  Again, no extra pay but I got years of free education from financial industry experts, and a charlatan or two, and experience at managing portfolios in the tens of millions of dollars.  I was witness to the wise and insanely stupid moves people made with their money and gained an understanding of what diversifying a portfolio looks like and of the importance of compound interest.  All for no pay, but I considered it a great side gig. 

So that was how I executed my plan.  I volunteered unceasingly for assignments outside of my job description as long as they were in my sweet spots of talent and passion.  And instead of becoming an experienced chemical engineer with some management experience I became a multi-talented corporate representative who could comfortably appear in a television business show, write an Op-Ed for a national magazine and testify before Congress in our nation’s capitol.  I did not turn my back on my engineering skills, I was as good as they came on that score, but I did not limit myself to that narrow a skill set.  I wanted a much more marketable talent set for that time in the future when I might walk away from corporate America. 

Why?  Why take on all those unpaid side gig assignments?  Why not just do the minimum and devote that extra effort to side gigs that you can do on your own time and can get paid for?  Glad you asked, I had two huge reasons.  One, a highly skilled technical engineer can rise to a certain level in most corporations.  That is a well paid $150,000 per year job in most cases in today’s dollars.  Most side gigger’s struggle to make even $50,000 on their gigs. The sum of those two wasn’t enough in my mind, I knew I could do even better than that in just my day job pay and not have to devote hours after work on a second job.  A broad socially skilled engineer who also had the technical chops and who could influence both coworkers and adversaries in a positive way will earn multiples of that amount if he rises far enough in the management ranks.

 My pay rose from what I started for, to 24 times that amount in my career.  Sure, some side gigs might have done that well but not very many make that much money.  I think I can make a strong case that at least 50% of my income was due to my work sponsored side gigs and that nearly 100% of the time I spent on them was company time I was already getting paid for.    And, secondly, I did not intend to stay in the corporate world forever and knowing myself, wanted to have pre-prepared marketable skills that would provide me entertaining work on my own terms. 

And that is exactly what happened. Once I was well past being financially independent and lost some of my interest in my corporate position, I retired slightly early and immediately started getting paid for the same side gig’s I had developed on my company’s time clock.  I used the same network, the same skills to solve the same problems for other companies that I had been solving for mine.  In fact, I kept solving some for my old company too, but on my own terms and schedule.  I do not need the money it makes me but I enjoy earning in spite of that and usually limit my work to a day or two a week, whatever suits me.  And remember I wasn’t finally getting paid for the side gigs, they were always partially responsible for my high pay at work.   Now that I had retired, they just kept on making me money doing things I loved to do. And as far as the financial planning I learned about from managing money for our employees, it made me money by keeping me from making emotional moves in the 2000 and 2008 financial crises.  It also gave me future content for this blog, which is not monetized but is a favorite nonpaid side gig in retirement.

How do you determine if you would best be served by an internal side gig you do not get paid for but that might greatly increase your paycheck over time?  Or if you are better off with the normal kind of side gig that earns you money for doing things on your own time that have nothing to do with your day job?  I think you have to be brutally honest with yourself.

 In my case, the first day I walked onto the job I already had a plan in place to be running the company by the time I was 40.  If I succeeded then my compensation was going to be in the mid six figure range in today’s dollars.  That made having a side income an unnecessary distraction from the rigorous corporate competition I would face to climb to the top of the heap.  And that decided the issue for me, I needed full focus on the prize and I needed to separate myself from my competition by developing skills outside of what it took to excel at the job I had now.  Skills that would make me look perfect for the jobs I wanted in the future. Skills I could take with me after my corporate days were over. 

I sized myself up as well as the competition and knew I could win the top company job and that’s exactly how things went.  But if you look at yourself and cannot see yourself in the CEO role or as the head of a division of a Fortune 500 company because of a lack of desire or talent then it is a bad plan for you.  Outside side gigs unrelated to work are a much better bet if you are not ideally positioned to run your 9 to 5 corporation some day.  And that means for 90% of you the path I took is not a good one.  But if you are in that 10% that love what you do and crave advancing to the top in your field then I think it is a superior plan to buying rental real estate, internet sales, blogging or coaching others. 

The reason I say it beats conventional side gigs is because, its fun most of the time, and rarely feels like work if you are moving up, getting big raises and bonuses and lots and lots of praise from your superiors.  It doesn’t take long hours because you get to do almost all of it on company time.  I never worked killer hours, probably less than most of my coworkers. Some of them had rental units or worked second jobs, I couldn’t have stood the hours they worked on their side gigs on top of their day jobs.  And I did not have to, I could just go home after work and relax.

If you decide to try the route I took, how do you decide what internal side gigs to build at your job?  First let me stipulate a principle that I think is universal.  You never get ahead in life by trying to turn your weak points into great personal strengths.  Every study I’ve seen says that the best choice is to run with your greatest strengths and talents and to compensate for your weaknesses as best you can.  You need to develop a depth of self awareness and self knowledge.  What are your areas of talent that you enjoy pursuing?  It may not be public speaking, it might be in researching issues or in developing procedures, not my favorites.  But you have to know what you enjoy, because if you volunteer for things you hate it will not work.  You will not do a good job at things you dislike and instead of impressing your management with your ambition and skill you’ll just destroy your reputation by looking incompetent.  Once you know the areas you are talented and inspired to pursue then you have to put the same level of intense effort to find ways to volunteer for projects at work that will allow you to showcase them.  It is not easy and takes years to accomplish but the payout can be fantastic. 

What do you think?  Is there a case for pursuing nonpaid side gigs on company time? 

Or is it possible I would have done better and retired with more wealth if I had settled for a less intense career path and focused on outside gigs to build wealth or passive income? 

As usual, if you don’t see a comment box then click on the post title and it should get you there.  Someday I’ll figure out Wordpress!