Monthly Archives: May 2013

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Pretired meets Retireby40

Joe from Retireby40.org and Baby RB40 meet up with Pretired Nick and Pretired Baby at a Seattle park.

Joe from Retireby40.org and Baby RB40 meet up with Pretired Nick and Pretired Baby at a Seattle park.

Today I had the honor of meeting one of my heroes: Joe Udo from Retireby40.org and of course Baby RB40 (not really a baby anymore). Joe was up on a weekend trip from Portland and was gracious enough to offer to get together. We met up at a park in Seattle to introduce ourselves in person and for me to squeal with glee as I met the person most influential to me in deciding to begin writing about my own pretirement journey.

Joe was writing about his plans to leave his soul-sucking day job just as I was contemplating my own escape from my own soul-sucking day job. I coincidentally ended up leaving my job just a few months before he did. Now we are both enjoying our lives as stay-at-home dads.

If you haven’t already checked out Retireby40, go there RIGHT NOW and fill yourself with the inspiration to leave your own day job and get started with your pretirement!

What’s your minimum monthly requirement?

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Mea Culpa! 

This piece was originally published on Tuesday morning. In a rush to publish before I headed up to beautiful Vancouver, BC for a mid-week getaway, I inadvertently posted what amounted to a very rough draft. I wrote the piece in the middle of the night the day before we left town, planning to go over it in detail in the morning, include correct numbers from my assumption spreadsheet and then head out of town. Well, of course, I failed to do that. Thank you to those of you who wrote pointing out my errors and thanks to those of you who politely overlooked the errors and took away the overall point. I took the unprecedented step of taking this down until I could get home to my computer and carefully correct things. Publishing this before it was ready was not fair to you, my readers, and it won’t happen again. Thanks for understanding! 

I’ve never really tried to live within a budget. That has probably been a mistake.

Budgets can be powerful and great for setting yourself on a path to financial success. But I usually had enough money for whatever I needed. And if I didn’t, I typically would just wait. And being somewhat frugal by nature, I never really needed to restrict myself to a given number.

However what I have done is keep close track of what really is going OUT the door. (Which is different than setting budget goals and restricting myself to them.) This sometimes depressing look at my finances helps me rein in runaway bills and think about new ways to drive costs down.

Keeping close track of your actual spending is particularly critical if you’re pursuing pretirement. If we view pretirement as the point when our passive income becomes large enough to cover our monthly bills, knowing that number becomes all-important. And, even more importantly, the lower we can get this number to go, the sooner we can be free.

Take two hypothetical couples: (as I often do, let’s assume both have no housing costs and both have the same income for this example)

  • Couple 1: Monthly bills = $3,000 (a couple car payments, high utilities and commuting costs, cable TV, expensive vacations and some spending money)
  • Couple 2: Monthly bills = $1,800 (relatively frugal living but still a nice middle-class lifestyle)

Couple 1 would need a fund of more than $1 million to support their lifestyle. Couple 2 will need around $600,000 for theirs. Worse, Couple 1 probably can’t even build up enough to pretire because most of their income is likely being spent. But if we assume both couples can save a nice, round $1,000/month or $12,000/year (remember, this is pretirement, not “retirement”), the differences are vast.

Our frugal couple that only needs to reach $600,000 would be pretired in 25 years from the point when they started building their pretirement fund. Our spendy couple, Couple 1, would need to work 10 extra years beyond that to reach their $1 million goal. (I’m assuming a reasonable 5% taxable yield from their pretirement funds in both cases.)

But more realistically, because Couple 2 is frugal, they should be able to build their fund much more quickly. Let’s say the $1,200 difference between the two couples is put into the pretirement fund. Both are still saving the original $1,000/month. So Couple 1 is just saving $1,000/month and Couple 2 is building their pretirement fund with $2,200 each month. Couple 2 will now reach pretirement in around 15 years.

For our spendy couple, that’s an additional 18 YEARS OF WORKING!

Hold on a second while I add some additional exclamation points to ensure this point gets across:
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

So since none of us want to be forced to work an extra 18 years or more, let’s agree that driving down ongoing monthly expenses is critical to reaching your pretirement goals. But how low can we get that monthly nut to go?

This is where every person or couple is different. Our expenses may differ from person-to-person and even during various stages of life, and especially in different regions geographically. But we can agree that there are some common spending leaks that should be eliminated immediately. And if we eliminate the mindless spending from our monthly outgo, how much is left that HAS to be paid?

In discussing this topic recently with a few friends and in reading some other blogs, nearly every household said the same thing: the monthly “core” bills total to around $2,000/month. Some a little less, some a little more, but every time it comes up, it’s around $2,000. Isn’t that odd?

I was rather shocked there was so little variance so I went back and double-checked my own numbers. Here are my core monthly expenses:

  • Groceries/Eating out: $350
  • Utilities (water/sewer/garbage) $101
  • Electricity: $78
  • Gas (heating and stove): $66
  • Internet and TV: $63
  • Cell phones: $129
  • Car insurance: $256
  • Life insurance: $88
  • Property tax house: $440
  • Homeowners insurance house: $46
  • TOTAL: $1,618

I’m not counting a few things here, which is a little misleading. Any social spending is not included, such as going out to breakfast with a friend, like I did last week. Also certain expenses and random spending money aren’t included like haircuts, my wife’s commuting costs (I don’t have an office I have to go to, except down the hall), or our small splurge at the Farmer’s Market on Sunday. So maybe we average around $1,800 or so most months. Like I said, “around” $2,000/month. But can we drive it even farther down?

The $1,600 above corresponds roughly to our current “pretirement” goal (or $800 for my both my wife and I). Now, obviously(?), we’re not going to stop building our pretirement fund once those levels are reached. Rather, it’s a difference in mindset. We want to know we’re free. And in this case, we’re just talking about the minimum. We know we’ll need a little more safety cushion and we haven’t even talked about inflation and costs related to raising our son. And, because this is lunatic America, we have to think about health insurance (but not today since my wife is still working full-time).

So how low can we get our monthly bills if we really pushed it? Without moving from our home, we feel we can get down to $1,500 for our basic bills. That’s dropping the fancy cell phone plan (already underway) and lowering our car insurance (we have three vehicles currently — long story) and using our utilities more efficiently. But the much larger savings come if we downsize to a smaller home and can pay less property tax. Or if we were to move and rent, we’d probably be cashflow-positive so we could potentially be even a couple hundred lower.

But even with those savings, and knowing we’d want to have some spending and cushion money, our realistic minimum monthly requirement is still “around” the magical $2,000. Once we hit our goal of bringing in a passive $1,600/month, we’ll declare ourselves “pretired” but we’ll keep building at least until we have a solid $2,000 rolling in.

I’d be very interested to know if readers are finding themselves close to the same number. Are you over or above $2,000/month? What is your minimum monthly requirement?

Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Pretirement is punk rock

sexpistolsRebels are never accepted without a fight

Like a leather boot to the side of the head, a movement sprang from seemingly nowhere in the late 1970s. Later labeled “punk rock”, this movement grew throughout the 1980s, eventually splintering into a million subgenres by the 1990s. It was then absorbed, as all things eventually are, into the corporate borg where it became a fashion statement and a way to sell product.

But back before the phrase became a tool of corporate branding, spawning pop crap like Green Day, the movement was a very real reaction to a sick culture. An equal and opposite reaction to the widespread corruption and repression of the Thatcher and Reagan eras, punk rock ignored conventional societal norms and paved its own path. Even in the earliest days, punk was open to gays and lesbians, people of color and anyone else with an open mind. It openly challenged existing corporate power structures and boasted an inherent disdain for old money.

In challenging those old paradigms, it opened doors to new ways of thinking. In music it paved the way for later artists to reach popularity including David Bowie, Bauhaus, U2, Pixies and Nirvana. Just as punk would have been impossible without the earlier breakthroughs of the Beatles, Elvis and Chuck Berry, it in turn opened doors to the rich texture of society we enjoy today. I think it’s fair to say that the U.S. would not be now going through a marriage equality revolution without punk rock breaking the wall down first.

Old ways of thinking must die

Siouxsie_sioux

Breaking down walls was punk’s role from the very beginning. A disenchanted youth facing a depressing future of imminent nuclear war and broken families didn’t create punk rock in spite of the world they saw around them. Punk HAD to be created because of it.

Those seeking pretirement today, despite their often nerdy appearance, are breaking new ground in their approach to life and work. Refusing to be a serf for a faceless corporation for endless decades, pretirement fans are challenging the old rules about investing and consumerism and are carving their own path. It’s a path that leads directly away from the world of debt and 9-5 work and toward financial freedom.

I’m working at my job
I’m so happy
More boring by the day
But they pay me
All that time spent going to school
Just to end up following rules
Now it’s time to take a break
Don’t stray too far or you’ll be late
Thank you for your service and a long career
Glad you gave us your best years

-Dead Kennedys from “At My Job

The old way was to work at your job — “the plant,” as many a father once called it, for 40 to 50 years. Then, when you were too old to keep working, you sat back on your pension and spent your days fishing and golfing. Later the conventional path was to get a boring-ass office job and rot in your cubicle until the company found a reason to fire you at age 52. Meanwhile you would have been expected to save a small portion of your salary in your retirement plan. If you were lucky you’d be able to find other work and hang on to your house until you reached retirement age and you’d limp into a meager retirement as soon as possible.

gandhiEvery revolution starts small

Today, people willing to challenge this conventional wisdom are busting out spreadsheets and computing their own freedom number, despite what the “experts” are telling them. They are finding excellent ways to invest their money despite today’s extremely low interest rates and they’re dropping their spending rates rapidly. Many are defying ordinary expectations of houses with yards and choosing freedom instead. Some are absorbing body blows from family members as they opt out of mindless gift-giving. They’re driving aging but reliable cars (if they drive at all). They’re considered anti-social because they skip the daily lunch outings at work. They’re assumed to be “poor” because they don’t buy a Starbucks milkshake every morning.

As a percentage of the population, it’s a small group. But it’s growing. Aided by the internet, people are learning from others what is indeed possible. And part of what they’re learning is that they’re not alone.

The punk attitude has nothing to do with music or mohawks. It’s about pushing the limits of what is possible. People like Gandhi, MLK, Benjamin Franklin, Amelia Earhart, Charles Darwin, Frank Lloyd Wright, Harriet Tubman and so many others broke free from the thinking they inherited and changed the world. They were punk before there was punk.

If you’re pursuing pretirement so you can free yourself from the confines of today’s buy-work-retire trap, you’re in good company. You’re one of the true rebels. In the future you may be seen as an early pioneer of a widespread movement. You are the punk rock heroes of your day.

So enjoy the scorn and mocking. It’s a sign you’re heading in the right direction.

It wouldn’t be right to talk about the punk revolution without sharing some music. Here are some of my old favorites. Enjoy! 

More unbelievable stupidity

Photo taken on May 6. So. Stupid.

Photo taken on May 6. So. Stupid.

Following up on my post the other day on stupidity, I had to add one more item. And I’m seeing so much stupid shit lately, I’ve decided it needs its own category.

This one is a doozy: It is, by my watch, the month of MAY. What do we have here? CHRISTMAS LIGHTS ON!!
I get you really think Christmas is awesome. And sure Christmas lights can look pretty sometimes. But, really, we’re just going to leave the lights on all year? WTF? Do we have endless amounts of money and a general hatred for the environment?

What is going on here?

Aaaargh!!

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