Monthly Archives: October 2013

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Pretirement story: Leaving work for good at age 33

Hey folks, I want to introduce you to a new blogger on the scene! Justin decided he was leaving work for good at 33 years old and has been writing some terrific content over at Root of Good for just a few weeks. He was kind enough to host a guest post of mine on his site earlier this week. Be sure to check it out and let me know what you think! 

Justin and I share a similar mind-set about pretirement and about focusing our respective web sites on giving you real information straight from the heart. You won’t find a lot of boring lists of regurgitated financial “tips” on either of our sites. And neither of us are afraid of offending anyone. Justin wants to show you how easy it is to leave the corporate world behind for good and he’s off to a great start. I predict big things for his site. He has a great story and is a great writer on top of it. I am honored to be the first site to host a guest post of his anywhere! I hope you enjoy it!

Goodbye work, hello blogging!

Photo courtesy Root of Good blog.

Photo courtesy Root of Good blog.

I started Root of Good not long after I retired from full time work.  I found myself sitting at home with a lot of free time and an interest in finances, early retirement, writing, computers, coding, and technology. I was able to “retire” at the tender age of 33, and I figured I could share my story and provide insight into how I accomplished this feat of financial engineering. One day a couple of weeks into my retirement, one of those crazy ideas crept into my head — I’ll start a blog!

Some people have nagging thoughts like “I really want a pick-up truck, a new boat, and a vacation house on the lake where I can store my new boat”. The nagging thought in my head was “I’m going to start a blog!”. I couldn’t get it out of my head. I resigned myself to spending the next few days investigating “how to blog” to figure out the basics. I had no clue where to even start with blogging.

You have to have a server that provides your carefully written blog posts to all your thousands of readers. You need software that makes your blog look beautiful and helps you manage your content. You’ll have to tweak the appearance of your site to make it conform to your wants and needs. Once you get your site up and running and offering readers the aesthetic experience you are aiming for, you still aren’t done. Unless you are particularly fond of writing soliloquies, you have to figure out how to get readers to surf over to your awesome new blog.

One way to attract readers to your blog is to read other blogs and comment on these other blogs, with the hopes that someone will like your comment and click on your name to find out more about this really clever and interesting commentator. Some aspiring bloggers prefer to carpet bomb the blogosphere with rather shallow comments that lead back to their own blogs in order to get as many clicks as possible.

I took a different approach and focused on finding the most relevant bloggers in my little niche of expertise — financial independence and early retirement. I read these blogs and engaged with the bloggers and their other readers. Since I’m not running my blog like a business (although I love making money!), I prefer to have genuine conversations with interesting people where we can all benefit mutually from sharing knowledge while entertaining each other in the process.

Enter Pretired.org. I was looking around the internet and I found dozens, perhaps hundreds of personal finance blogs of varying quality and usefulness. Nick’s writing sucked me in. I liked his philosophy of “pretirement” since I struggled a bit with defining myself.

One of the first pages at Root of Good was my “About” page. I realized I had to give myself a title in the very first paragraph of the “About” page.  Here is what I came up with:

Through careful saving and planning, I managed to accumulate enough wealth to make me financially independent by age 33.  I could also be variously described as unemployed, in between jobs, a stay at home dad, retired, or a kept man with a sweet sugar momma.  Call me what you want!

“Retired” is a strange word — a sort of verbal shorthand for “financially independent and not working”. “Retired” for a 33 year old is a really strange word. I see many of my friends from high school and college posting on Facebook about how excited they are to be finally finishing up their PhD dissertations or completing their medical residencies. And here I am retired.

Retired or Pretired?

When I composed my “About” page, I had never heard of the concept of “pretirement”. It makes so much sense though. When you retire in your 30s or 40s, you aren’t heading off into the sunset to a life of sitting on the porch in your rocking chair.  You probably won’t play any shuffleboard or bingo for at least a few more decades. You are still 15+ years too young for an “active adult” retirement community that frowns on those under age 55.

And let’s face the facts.  If you manage to work hard and accumulate enough wealth to retire at a very early age, you probably aren’t cut out for sitting around twiddling your thumbs all day anyway.

Pretirement is a perfect word to describe that period of time after you reach financial independence but before you hit the traditional retirement age of 65. It is one of the few periods of your life that you get to choose what you want to do. You are still healthy enough to climb mountains (in a figurative or literal sense). You still have enough energy to pursue side projects and hobbies, and try out volunteer opportunities that you put off during your working life.

In my situation (as well as Pretired Nick’s), leaving full time work has meant a big increase in how much time we spend with our families. We both have toddlers running around the house, and they take a lot of time and energy. I was busy working a full time job and making money when my other two kids were toddlers. This time around, I won’t miss my kid’s childhood because I was too busy working, or too busy de-stressing from work to give them my undivided attention.

I also view pretirement (or early retirement) as a renaissance of your life. A chance to reinvent your life in whatever form you want it to be. I decided to pursue blogging, which has led to hours of fulfilling work writing blog posts about topics I find interesting. It also led me into the world of coding and tweaking WordPress blog software. I’m currently a novice, which means I have a lot to learn.

I recently spent a few hours reading tutorials and modifying code to enable a certain kind of automated functionality at Root of Good. At first I had trouble getting the code to work like I wanted. After some trial and error and learning the basics of WordPress programming, I eventually got the program to output the web page with the desired appearance. A small victory, but a rewarding feeling to accomplish something new. Now I have a new skill and can build on that skill by taking on more challenging and complex coding issues to tweak Root of Good.

Who knows what these skills will lead to? I may develop my WordPress and PHP skills enough to be able to take on freelance programming work a few hours per week to make some easy cash. I don’t really need the money, but if the money comes easily, why not try to earn a little bit? It’s hard to call it “work” if you make a couple hundred dollars in exchange for a few hours of your time and you are doing something you like.

If that sounds really boring to you, wait till you hear about my other interests! Since retiring, I don’t feel guilty about spending hours watching, reading, or learning about the things that happen to interest me. So far this has included an interest in 16th century Europe. Lately I have been watching period drama TV shows and reading fiction and non-fiction works set in that period.

I also spent a lot of time studying the French language using a free online language instruction program (Duolingo.com for the curious). Lately I have been too busy (imagine that!) to spend much time learning French, but it will be there waiting for me if I find myself wallowing in boredom. Like that will ever happen.

During my full time career, it was difficult to do very much of anything recreational during the work week. My job and my three kids required most of my attention during the week. This left little unscheduled free time to pursue other interests. Now my job is no longer, but I have picked up full time child care duties for our one year old. That still leaves me with a lot of free time during the day, and also allows me to live life more intentionally at a slower pace. I walk the kids to and from school every day, and bring the little one to weekly story times and toddler play times at the community center.

Working for the Man

I have always regarded “work” as an instrumentally valuable activity that provides an income sufficient to fund my wants and needs. Work should also pay well enough to leave a surplus (after my expenses are paid) that I can invest for future use. It is great when work is interesting and provides happiness and satisfaction, as that is an added bonus on top of the paycheck.

Some find work intrinsically valuable — that is, work in and of itself provides value, meaning, and validation to their lives. I suppose I was unlucky during my short career since I never found a position that I considered to be intrinsically valuable. Maybe I should have chosen social work or the medical field instead of engineering. Not that I want to take a mulligan on life at this point!

Work provides money. Money buys freedom. It is a simple transaction in my mind. But the only money that can be put toward your future freedom is the money that you don’t spend.

How much money you spend depends on your wants and your needs. Needs tend to be relatively fixed in price (basic food, water, and shelter). Wants can be highly variable. The trick to being able to retire early is to pay attention to your “wants” and figure out how much value you get out of the “wants”. Some may prefer a shiny new car and a McMansion over the equivalent value invested at an 8-10% rate of return. I’m satisfied driving a 13-year-old compact car and living in a moderately priced house. For others, they may derive great unimaginable value out of living in a fancy car. Whoops, Freudian slip! Living in a fancy car is what you do when you can’t pay your fancy mortgage on your fancy house and it goes back to the fancy bank.

Living Well

The Root of Good family spends around $2,000 per month on our core expenses. Some people are shocked we can keep food on the table let alone live well on this amount of money. We aren’t eating Kobe steaks stuffed with caviar encrusted lobsters every night for dinner. But we eat well enough. Being retired means I have plenty of free time to try new experiments recipes and procure high quality ingredients at low prices. Our house keeps us safe and comfortable. Our cars get us where we need to go. Our minds are occupied with a variety of entertainment and educational options. Our friends (and our kids’ friends) are treated well at social events frequently hosted at our house. We are simply very value conscious consumers living well on a low budget.

By focusing our spending on the things that bring the most value to us while cutting costs in other places that aren’t very important, we have managed to live well and save a significant portion of our earnings each year. These turbocharged savings led to early retirement at 33 for me.

Pretired Nick here again. Well, what do you all think? Does Justin’s story get you dreaming at all? What will you do when you’re done working for good? Are you just bouncing along for the ride or are you deciding what you want to do every day and choosing to do that?  

Labor theft: How your life is stolen from you bit by bit

Worried businessman image courtesy of David Castillo Dominici. Farmer image courtesy Sura Nualpradid. Both via FreeDigitalPhotos.net

Worried businessman image courtesy of David Castillo Dominici. Farmer image courtesy Sura Nualpradid. Both via FreeDigitalPhotos.net

Labor theft: No one really knows when it first began. But certainly as soon as one group had the power over another, the subjugated group was put to work. There are well known examples of slavery throughout ancient history, perhaps most notably in Egypt.

While certainly the indigenous people of North and South America practiced various forms of slavery at times before European invaders arrived, it was only with the arrival of the white man that the practice became so efficient and so systematic.

The arrival of Columbus could be considered the critical turning point in this dark history. The discovery of the New World set off a fascinating economic boom with wealth extracted from the local population and shipped off to Europe.

The history taught today in the U.S. skips quickly from the arrival of Columbus in 1492 to the arrival of the Mayflower in 1620. In those 128 years, however, a great deal happened. Columbus himself became a tyrant and entire tribes were completely obliterated in the Bahamas. When there were no more locals left to exploit, the import of black slaves from Africa began. This practice quickly spread to the farmland of what would become the southern United States. In South America, a conveyor belt of ships began filling up local settlements with Spaniards. The Spaniards had equally devastated the cities of that continent, wiping out the Incas and replacing their epic civilizations with adorable Colonial towns. And yes, coerced labor was widespread there, too. Tending crops, digging in mines, moving stones.

Yep, it’s still happening

In North America, we have a rich tradition of stealing the labor of others. It stains our conscience and pulls at the patchwork of our country, even today. In 1607, the settlement at Jamestown started things off with indentured servants. These people worked off their debts for a set period of time before being set free. It was a difficult life, but would seem like heaven compared to the nightmare that would come later. By the mid-1600s black slavery was fully part of the American culture, so accepted that it seemed as normal as not having slaves seems to us today. Even today there are millions living in slavery here and around the world.

We pretend it doesn’t exist even as we benefit. It’s always been this way. We think of the people living in the “free” North as against slavery back in the 1800s, but I’m sure they all wore cotton shirts. We abhor exploitation of labor in the abstract. We get all worked up about it, even as we read about it on smartphones created with exploited labor. Our fingers are encrusted with diamonds dug from mines by enslaved hands.

Our long tradition of stealing labor, of moneyed interests exploiting the work that created their wealth, crops up in new and surprising ways all the time, as much as we try to ignore it. Often it hides in the shadows and goes by other names, but it’s still with us, yes even here.

Our own workforce is frequently exploited. This modern version of labor theft comes in many forms and companies use many tactics to keep us trapped. Let’s look at a few:

Cheap overseas manufacturing

Think about it: I can say with almost 100% certainty that everything you’re touching right now was made in China. Why? Because the American appetite for low prices is a perfect fit for China’s abundant supply of untapped labor. Setting aside the exploitation of China’s workforce for a moment, the other effect of globalization has been the disappearance of America’s good manufacturing jobs. Factory workers who still have jobs in the U.S. now have to compete with very low cost workers in other countries. Countries without labor protection and safety laws.

Undocumented workers

One has to love the hubris of the American right wing as they demonize “illegal immigrants”. After all, the party obsessed with big business has been instrumental in ensuring millions of foreign workers stream into our country to find cheap work. Why? So our “expensive” labor will have cheap competition.

High unemployment rate

Want to talk about cheap competition? How about millions of people thrown out of work? Why import a bunch of cheap labor when we can just make our own, right? No, I’m not saying these criminals crashed the economy on purpose to create cheap labor. But I am saying it’s just another opportunity to drive down the cost of labor. Not only is there always someone else willing to work more cheaply, but you’re less likely to demand a raise or move to another company if there are limited opportunities out there.

Wage theft

Wage theft is a tried and true form of labor theft. It’s pretty simple. Have someone work for you, then don’t pay them. I know a lot of hired day laborers run into this a lot, especially undocumented workers who have no recourse. But others who work legally often have portions of their checks stolen by shaving hours or not paying overtime.

Debt

Taking on large amounts of debt has reached the level of sport in America. It’s like a competition to see who can rack up the most debt before they tip over. The party-time of endless shopping has a downside, though, when the realization comes that this debt has left you trapped in your job. Being trapped means you have little alternative but to keep working for whatever you can get.

Health care system

Attaching one’s health care to one’s job was always a terrible idea. It was a movement driven by labor unions — misguidedly in my opinion — to drive toward health coverage. At a time when most workers were unionized, I guess it made sense. Unfortunately this handed a massive amount of power to corporations. At its absolute worst before the Affordable Care Act was finally passed, the chronically ill were truly enslaved to their companies. Others were simply forced to work for less and less money as health costs were shifted onto workers. Many people worked many extra years, not for money, but for health coverage.

Worker “productivity”

Worker productivity is a euphemism for squeezing more work out of each employee. Now I don’t blame companies for wanting to get the most out of their labor dollars. Even as a fellow employee, I would be totally aggravated by people who took the paycheck, but did little, if any, actual work. The problem, however, is without any union framework or a balanced economy, there is no countervailing force on the employee side. I once knew a guy who worked nearly every night doing the work he didn’t have time to complete during the day. He was a director, but he sat on the couch each night instead of playing with his kids, entering new SKUs into the database. What the hell? This is an entry level job, but he was doing it for the company for free, on top of his regular job. Why? Because he had kids and a mortgage and a low self-esteem. He was terrified of taking another conference room beating for not having his work done. I don’t mind putting in a few extra hours when a project calls for it. Certainly work doesn’t always come in nice eight-hour bundles. But every night? I would have been out of there before my lips could form the words “fuck you.”

America has managed to turn the purist word in the world — “freedom” — into a brand name. We pretend we’re free as we’re forced into work by our massive mortgage, car payments and school loans. Worse, we buy “cheap” stuff made elsewhere, thinking we’re saving money and yet are taking money out of our own economy to send elsewhere, driving down our own wages.

Is your labor being stolen?

If you’ve been working for the same pay for years or are being pressured to work nights and weekends, you may not have a lot of immediate options in the short-run. However, in the long run, you do have some choices. Stay out of debt, drop the mindless spending, build up your passive income and pretire as soon as possible.

Look, if you’re regularly working 16-hour days, your company is stealing from you.  And it’s worse than stealing a few dollars from your wallet. They’re stealing your LIFE. You only get so many hours on this planet. Sell them as needed but don’t let anyone take them from you.

‘OMG, I’m SO BUSY’

Pretired Baby doing a little swinging before the Seahawks game.

Pretired Baby doing a little swinging before the Seahawks game.

Lately I’ve been feeling increasingly time-crunched. I often joke I may need to go find a job just so I can have some free time again! I’ve even screeched those most emasculating of words, “OMG, I’m SO BUSY!”

The house is a mess. No, really, it’s getting embarrassing. This blog has been getting crusty from neglect (although traffic keeps rising — thank you!). I haven’t found the time to figure out how I want to invest my $100,000. (Although I’m somewhat dragging my feet while I watch what goes down with the government shutdown.) I haven’t been able to read many of my favorite blogs. I’ve got a book that is due back to the library soon and there’s still quite a bit of it left.

Ack!

But am I really that busy? I remember this excuse being used so commonly when I was working that I banned it from my excuse book, replacing it with “Sorry, it’s still a few items down on the priority list.” It seemed more honest than “I haven’t had time yet.”

You haven’t had time? Gah, how I hate that excuse (even when I catch myself saying it)! Because, really, we all have the same amount of time each day.

One of my favorite sayings is “the only way to get more time in each day is to steal some from the night.” Because it’s really about how we choose to spend our time — there isn’t an unequal distribution of hours each day depending on how important we think we are.

When I was working, the people who were most likely to give me the “I’m too busy” excuse were inevitably the ones spending the most time screwing around. In fact, I believe that if you want someone to do something for you, look for the busiest person. No one goes to the people who aren’t busy because they can’t get anything done. Frustratingly, some of the “too busy” folks were buddies of mine so I could see what they were really doing on Facebook. Hmm, seems like you weren’t TOO BUSY to spend eight hours playing Call of Duty all weekend, were you? 

Pretired Baby has been waking up early lately and since he gets 90 percent of my attention when he’s awake, it cuts into my “me” time. My side consulting work has been very busy lately and I’m still picking away at the basement project during the handful of hours each week when the baby is awake and Pretired Mama can take care of him. We have breakfast, play for awhile and when he’s ready for his nap, I race to take a shower and begin my work for the day. When he wakes up, it’s lunch, maybe a trip to the park, more playing and then naptime again, when I race for the computer again for an hour or so. Then it’s time to make dinner, play, take a bath and finally bedtime for the baby. And then TV. Sweet, sweet TV. And Twitter. Sweet, sweet, Twitter.

After I’ve rested enough, I’ll stumble back to the computer for some blog writing or maintenance.

The days are flying by. Weeks are flying by. That voice in my head is sternly warning me that I “need to be getting something done.”

But am I really that busy? I still check Facebook umpteen times a day. I have time for TV most nights, where I glaze over and rest a bit. I still shower almost every day. Meals with my son are leisurely and usually hilarious. The kitchen is staying under control. Groceries are finding their way in the door and down my gullet. I even have time for drinks with a buddy once a week. I get close to eight hours of sleep every night. The schedule is firmly blocked out to ensure no Seahawks game is missed. (Go Hawks!)

So I’m not really busy at all. I’m filling my time with what is important to me, and mostly that’s Pretired Baby right now. Many of the other things impacting my time are self-inflicted as well, such as blogging or the basement project. And isn’t this what pretirement is supposed to be about? Doing what one WANTS to every day instead of schlepping to some job you hate?

I’m one of those people who when I’m not “too busy,” I’m bored. There is no in-between. And I always try to remember that we all get the same 24 hours. Using them as best I can should be the goal, not trying to squeeze more and more into those same hours.

The house can stay messy another week. The blog will be fine. The basement project will be done eventually. We’re going to the park. And we’re going to play on the swings. For as long as we want.

How many times have you blown $1,000?

Ever wondered how many times in your life you’ve blown $1,000?

$1,000 x 300 = $300,000

Image courtesy of graur razvan ionut / FreeDigitalPhotos.net

Image courtesy of graur razvan ionut / FreeDigitalPhotos.net

In past posts, I’ve noted a few of my focus numbers for pretirement. For example I’ve targeted a goal of around $300,000 (plus paid-off mortgage) as my freedom number. (Think $600,000 for a couple.) I’ve also remarked on how many households pin their core monthly non-mortgage expenses at around $2,000 per month ($1,000 per person). This includes my own.

So if you’ve been aggressive and paid off your mortgage in record time, you are likely looking at monthly core expenses near that magical $2,000/month (for two people). And, of course, if that seems insane, you’ll probably want to examine your spending rates. However, if we accept that number, then we can safely say your Pretirement Fund number is probably somewhere around $300,000 for each person. It might be a little higher or a little lower based on your personal investment yield, taxes and other factors, but just to keep things simple, we’ll use round numbers for now.

In my own situation, I’m a little shy of that number, which is why I’m only semi-pretired today. I have too much net worth locked up in my house and, of course, made many dumb investing and spending mistakes over the years.

Which begs the question: How many times have I blown $1,000? It’s an important, but troubling question. Have I done it 300 times? More? It makes me want to go back and slap earlier me across the face.

Let’s take a look: (Making guesses at the exact amount in most cases.)

Over-improved my first home$30,000+30
Luxurious vacations over the past 20 years (At least $3,000/year on average)$60,000+60
Bought new car (Stupid, stupid)$40,000+40
Eating out (Maybe $40/week on average for the last 10 years)$20,000+20
Over-improving current house$30,000+30
Various electronics over past few years$15,000+15
Furniture purchases$10,000+10
Random other crap$20,000+20
TOTAL$225,000225

So because I’m Pretired Nick, you might assume I’m some sort of Frugality Ninja (hey, good URL, someone should snag that!). But, really, I’ve been just as much as a big American spender as anyone else. OK, maybe not as much as most people, but still pretty bad. But I’m not here to shame myself before all of you, but rather to show HOW EASY it is to reach pretirement by doing nothing more than staying employed and cutting back on the spending.

$100 x 10 = $1,000

So you don’t think you’ve blown $1,000 all that many times? Let’s break it down: how many times have you blown $100? Dropping a hundo is easy. I sneeze a hundred bucks into a tissue just about every week! My numbers above are definitely under-counting the drip by drip of small purchases. Gas for the car, art, gifts, new shoes I didn’t really need, tools purchased unnecessarily and so on.

Have you dropped $100 just 10 times in the past year? Month? If you dropped $100 per week, that’s $5,200 each year. Doesn’t sound like that much money until you realize that’s five $1,000 bills that could have gone toward your pretirement fund — nearly 2 percent of what you needed right there!

I listed out just my big, memorable purchases above totaling to $225,000. If I had cut back just by $100 per week on average for the past 15 years (something that would have been very easy for me at various times), I’d have more than the remaining $75,000 needed to reach my Pretirement Fund goal.

$30,000 x 10 = $300,000

Or to frame things in terms of time, let’s say you’ve realized 40 years in a cubicle isn’t for you and you’d like to tough it out through 10 more years of your career and then be done. You’d need $30,000/year ($2,500/month) for each of those years on average (again, ignoring your mortgage and growth on the money).

But $2,500 a month seems like an impossible amount to put aside month after month! The thing is, many households have monthly budgets of $6,000-$8,000 or even more. Obviously housing costs are by far the biggest drag on people, but it’s also TVs, vacations, clothing, random plastic crap, lattes and car expenses.

I realize it’s too late for many of us. We can’t go back and add many years of savings to our lives. But like the Chinese proverb says: There are only two times to plant a tree — 20 years ago and today. Regardless of where you’re starting, build a spreadsheet, decide on your goals and build a plan to get there.

$100,000 x 3 = $300,000

It always comes back to real estate with me. Like I have mentioned many times, we really have more house than we should have given our goals. Should we choose to downsize — something we’re seriously considering — that should free up at least $100,000 that I can put toward my Pretirement Fund, putting me over the top! Or I could work a couple more years and save that up quickly given that I have very low expenses.

Which way will we end up going? We really have no idea at this point. But you’ll be the first to know as we wrestle with this final step toward pretirement right here in front of all of you!

Hopefully the math lesson wasn’t too silly for everyone. The point isn’t to teach my readers basic division and multiplication, but simply to remind that breaking big problems into smaller problems always makes things easier and that small spending, even $1,000 here or there, can really add up and keep you working much longer than you want. I’m living proof on both the negative and positive sides of that equation.

So what do you think? Does breaking your goals into bite-sized chunks help you get there? And how many times do you think you’ve blown $1,000? 

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