Monthly Archives: June 2013

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Online advertising: Another piece of the pretirement puzzle?

Should I fill Pretired.org with ads?

EPSON scanner imageWhen I threw this site together back in March, I had some things to get off my chest and I wanted to keep my mind sharp as I began my life as a semi-pretired stay-at-home dad. In my mind I pictured my two teenage nephews listening attentively to my every word and learning how to be financially independent and living rich, full lives. In reality they couldn’t give a crap about any of this so they’re more like me at that age than I like to admit.

It started as a very personal blog. I never really expected to have, you know, readers. So to make it look the way I wanted and to best represent the clean, efficient approach that is the secret to financial freedom, I chose the most minimalist blog theme I could find. Ample white space, lots of of clean lines, minimal decoration. And no ads. I was so sure I would never put ads on my site that I chose a layout that doesn’t even have a natural place to put them.

I’ve enjoyed sharing what I’ve learned, including even my dumb mistakes. It’s thrilling to think there may be a few people out there that could avoid some of my errors and live happier lives because of words I threw up on the web in the middle of the night. I’ve also enjoyed getting to know some of the other financial bloggers out there. Best of all, by exploring the world of personal finance a little more deeply, I’ve been learning even more.

But now I feel like a chump. And a hypocrite! I’m supposed to be writing about how to live without a corporate job and I’m ignoring a potential source of side money! Almost every site I visit now has a nice mix of ads and affiliate links. Many (like this one) have also been sharing their monthly earnings and I feel like I’m missing out! The traffic to Pretired.org has been continually growing over the past four months. I never thought I would have this kind of audience. Feeling all these eyeballs on me makes me want to take this more seriously. It makes me want to write with more care, explore new topics and put myself out there a bit more (never easy for introverts such as myself).

Will you still come by?

If I put online advertising on my site, I don’t want it to turn people away. I’m still going to write first for myself, but every writer craves an audience most of all. Of course I would avoid anything too annoying (you’ll never see a pop-up here). And I would do my best to restrict spammy garbage ads from the site, realizing that’s always an imperfect science.

My other concern, of course, is to place ads where they’d be seen, yet unobtrusive. Somehow I need to find nice, little places on my site to tuck the ads in where they won’t upset my chi when I look at my own site. Naturally I’d disclose when a link is an affiliate link so you can take what I’m saying with the appropriate grain of salt.

I guess my other worry is that I don’t really want to become a servant to Pretired.org. I’ve been having fun, but if it becomes a job then it starts defeating the purpose. I in NO WAY consider blogging or other online moneymaking activities to be truly passive income. But, if you’re semi-pretired or pretired and just want a little extra side money, why not put some free time into sharing what you know? That’s where I want to keep it. If it becomes drudgery, I might as well go back to an office job and make the big coin again.

What works and what doesn’t?

While I have a lot of experience in all manner of online marketing and communications, one thing I haven’t done a lot of is generating money via blog ads. For those of you who are already quite successful in this area, what’s working for you? How much effort is it taking each week to keep the money rolling in? Any other tips for a neophyte such as myself?

Sorry to go meta twice in a row! I do hope those of you who have explored online advertising on your own sites will share your thoughts in the comments! 

Pretirement fun from last week

Stories of financial independence, saving money and early retirement

pretirement_livingTaking a cue from so many of my fellow personal finance bloggers, I wanted to start sharing some of my favorite readings from the last week. I’m calling the series Pretirement Fun!

Living the life of a semi-pretired stay-at-home dad keeps me pretty busy so I can’t guarantee I’ll be able to produce a summary each week, but I’ll do my best. Hope you enjoy!

Here are a few of my favorite things I read in the past week:

  • Mr. 1500 from 1500 Days wrote a delightful rant about one of the crappiest unnecessary spending items he’s found lately.
  • The always delightful Holly from ClubThrifty talked about the savings she’s seeing now that she works from home
  • Tim Stobbs at Canadian Dream Free at 45, laid out an interesting thought experiment: Could you retire today?
  • The point of pretirement is to live a happier, more stress-free life. That’s why I love that Tony talked about How to Reduce Financial Stress. Very smart piece!
  • Joe Udo at Retire by 40 produced a rare rant on stupid spending. You’ll be amazed just how stupid.

Hope everyone is having a great weekend!

Convert spending into winning and trick yourself into saving

Money is inherently psychological. If we as a society lose our faith in our paper currency, it loses all its power and instantly becomes worthless paper. In a way, we only believe money is real because everyone else believes that everyone else believes it’s real. If you follow me.

But it’s also psychological in other ways. If we loan money to a friend, it immediately changes our relationship. We don’t feel that way when we loan tools or clothing. Why is money so different?

Fortunately we can also use money’s psychological powers in clever ways that become money-saving tricks. Next time you’re likely to make a mindless impulse purchase, try this trick out and let me know how it works. I do this from time-to-time and it helps me stay out of trouble.

The trick is this: convert the dollar amount you’re about to spend into money you just won or found. By employing this method, you can reset the importance of that money to your brain, helping you make different choices.

For example, say you’re about to blow $6 on a delicious, hot latte. Mmm, hot latte! Now, logically you know you’ll just be draining that latte into the toilet in about an hour, but oh, it’ll taste so good! But would you just throw $6 into the toilet? Hell, no! To resist the temptation, try converting the dollar amount in your mind to money you just found. Ask yourself how you’d feel if you reached in your desk drawer and found $6 you didn’t know was there. You’d be psyched! But by not buying the latte you’re saving the exact same amount! Remind yourself of the happy feeling when you find money and it’ll help you hold back.

Money can seem small or large depending on the context or price of what you’re buying. If you were buying, say, a TV, one unit might be “only” $200 more than the next one. You rationalize to yourself that it’s not much more to spring for the slightly better model. You whip out the card and make the purchase. But if you remember the exhilarating feeling you got last time you won with a lottery ticket* you can trick yourself into remembering what the real value of $200 is and restrain yourself. Congrats, you just won the lottery!  Or if you found $200 in an old jacket pocket. Would you be so casual about that?

Imagine a van pulls up to the side of your house one day and a guy runs up to your door to hand you an oversize check for $200,000! Wow, that’s a lot of money! What a great feeling! But by downsizing your house some of you might be able to get that $200,000 in your hands, but you ignore it. Don’t you want to win $200,000?

Pretty much the only casino game I’ve ever enjoyed playing is craps. It’s complex, fast-paced and I generally make some money at it. The fact that it’s relatively easy to walk away with cash is probably why it’s getting harder to find craps tables in casinos. Instead, the casinos are packed with slot machines which are very carefully designed to relieve idiots of hard-earned money.

One of the calls I’ve been procrastinating on making lately is to my insurance agent. I need to make several changes to my policies, but I’ve been waiting until I sold some real estate so I could do everything at once. I figure my family should be able to save $100/month once the changes are in place. That’s $1,200 every year! I would be psyched if I won $1,200 playing craps! That would be an amazing amount of money to walk away with! Yet, here I sit with my thumb up my butt waiting for the “perfect time”. OK, that’s it, I’m going to call today! See? It works!

What about you? Do you have any clever ways to trick yourself into saving? 

*I hope none of you have ever really done anything as stupid as buying a lottery ticket.

Pop your own housing bubble

Is it time to downsize?

It feels like a million years ago now, but the massive real estate crash of 2008 was only a few years ago. I saw the collapse up close and personal. Well before the crash, my wife and I bought a fairly large fixer, planning to move in once the bulk of the work was complete. Part-way through, we decided we hated the place and decided to complete the work and sell it. It’s what I call our inadvertent house flip.

Once we put it on the market, we had one (ONE!) interested buyer. No one else had really even given it a serious sniff. The housing market was cooling, but a total meltdown was yet to occur. But I could tell a bomb was about to go off. I just didn’t know how big the bomb was. My heart was racing nearly every day. Even as our buyers got squirrely, we did everything they asked, even suddenly replacing the furnace just days before closing. And we survived! With our asses intact. We didn’t lose any money but didn’t really make any either. All we lost in the end was a year of very hard work. We felt like winners as we watched the house’s Zillow rating drop by $200,000. That was late 2007. I think it was close to a year later that the stock market collapsed and all hell broke loose.

So that’s how I found myself sitting pretty when the big crash finally hit. I still owned a lot of real estate with rapidly declining value, but I had equity in everything and was cashflow-positive on the investment side. Plus I was working at a stable healthcare company. While the company was experiencing a brutal income drop as workers lost their insurance, it was getting through just fine. In fact, the crash may have helped that organization shake itself out of its complacency and begin running a much more lean operation.

Fear and debt

During that time, I talked to many of my coworkers about their finances. And they were SCARED. Scared shitless. One friend had decided to let the bank take his condo back after they announced massive assessments and he realized the value was never coming back. But most folks, many in their 40s and 50s, just had that blank stare of someone who is beyond panic. I had just two words of advice for them: Shed. Debt. These were good people, nurses and techs, who would wipe up your bodily fluids without thinking twice and give you a hug on your way out. Better people than I’ll ever be. They’d worked long, hard careers, but most of them had very little financial security.

That was when I realized just how much debt people were actually carrying. It was stressful for me just talking to them. Massive house payments, car payments, credit cards, school loans and on and on and on. I had just one good friend who was on track to having her house completely paid off and wasn’t even that worried after her husband was laid off. Good for her!

That’s not to imply that I wasn’t freaked out, though. I had three mortgages I was responsible for. Would have been four if I hadn’t unloaded that other home! I had to drop the rent price a few times and had a few periods of vacancies, but really it was not that big of a deal looking back. But, still, I was pretty spooked by the whole thing. That’s why I was so anxious to get mortgage-free as soon as possible and to reach financial independence as soon as possible.

Instead of reinvesting the cash from that home sale like we should have, (DAMNIT!) my wife and I decided to finally buy the house we really wanted, leaving my starter home behind. We also bought way too much house. Too much room, a nicer view than we really should justify given our financial goals and more yard than I can maintain.

That’s not to say we don’t love it. We love our neighbors. The house is wonderful. Our neighborhood cannot be beat. But it was probably well into 2010 before we realized how much this house is holding us back. So as we sit here in our beautiful cage contemplating our pretirement, we’re rethinking things. Hopefully many of you are as well. That fear that so many of us felt was driven by our over-inflated lifestyles. The good news is that we now have a chance to restructure things so we never feel that fear ever again.

Time to pop your own housing bubble?

It occurs to me that that the real estate market has largely recovered (at least here in Seattle), that it may be the right time for quite a few people to make strategic adjustments to their housing situations. Pop your own housing bubble, if you will.

Now on one hand, real estate appreciation could mean we’re in the perfect situation. Just ride up with the market, sell at the right time and be loaded! And that might be where we end up. Our neighborhood could very likely appreciate by 10% a year for the next few years. Don’t scoff, it’s true. Right now, houses are selling on their first day in my neighborhood and prices are rising rapidly.

On the other hand, depending on when a person purchased their home, they may already have significant equity but prices in general are still somewhat deflated, particularly if they were to move to another area. But more importantly, by downsizing, a family could move from being saddled with too much mortgage and back-breaking maintenance to a debt-free lifestyle with a fast-track plan to pretirement!

As always with real estate, whether this is possible for you depends on your situation.

Let’s say a family owes $400,000 on a house valued at $600,000 and are still paying on their original loan. They could dump the giant house, buy a still-very-nice $400,000 home and be paying on a mortgage of just $200,000. And with the low interest rates of today, they could enjoy an additional boost in their savings. And using my patented mortgage payoff acceleration plan, they could be mortgage-free in just a few years! Or they could rent awhile and put all of their equity toward their pretirement funds. That invested money could even generate enough income to pay a good chunk of their rent if they were so inclined. If the house can be rented to cover the mortgage or close to it, you could still pop your bubble by renting our your house and moving yourself to a cheaper place.

Can someone without a ton of equity also pop their housing bubble? Of course! Renting a fancy apartment way bigger than you need? Move! Only have a tiny bit of equity but know you bought too much house? Works for you too! You might want to wait a bit for the market to run up a bit more, but as soon as the timing looks right, sell it off and downsize!

The bottom line is that if you’re a normal American, you are living with way more than you NEED. By downsizing now, while you can, you may be able to greatly accelerate your pretirement. It’s time for a difficult conversation with yourself (and your spouse): How much do you REALLY love your house? I figure that by buying such a luxurious home cost us at least an extra TWO YEARS of working.

What will we do? I don’t know. We’re talking about it now. We’ll be here at least another year or so and then we’ll make the decision. We may rent a cheaper place for a time and pocket the difference (our current house could rent for quite a bit). We may even keep living here awhile. And, who knows, maybe we’ll change our minds and decide to take the hit and just live out our days here. It may be a cage, but it’s a damn nice one.

In the meantime, we’re getting this place ready to sell or rent. Even if we decide to stay here at least we’ll have all these projects done!

What about you? Are you thinking about popping your own housing bubble? 

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