Category Archives: Observations

The most magical number: 20

Across the internet these days, there is a nonstop stream of confusing investment advice. What stocks to buy? Will interest rates go up or down? Are we due for a market correction? What’s the right investment yield I should plan for? And on and on and on.  But really, if you’re going to get serious about early retirement or pretirement, there’s just one number to remember: the number twenty.

Good ol’ TWO ZERO will serve as your task master and trusty guide, leading you safely to the glory land of pretirement.

Now many of us, including your humble host, have known about the number 20 for some time without truly UNDERSTANDING its almighty power.

Here’s how it works. You’re going to use the number 20 to determine what something REALLY costs. That will, in turn, tell you not to buy it. Or, if it’s something you really need, it may tell you HOW to buy it. How? Simply by multiplying the cost by 20.

First, some basic math. My rule of thumb is an investment in today’s market can be done with reasonable risk to drive a 5% yield. Some say 4%, some say as high as 7%. I like 5% because it’s a pretty safe number and it makes for easy math. (If you’re new to investing, just think of investing $100. If you do, you should make a yield of $5 per year. In other words, it’s just another way of saying 1/20th of 100 — you know, 5% see?) So if you want to make $50 per month in the stock market, you need to have $12,000 invested. (50 x 12 x 20)

So let’s take an example. How about your cable TV bill? Let’s say the cable TV temptation is $60/month. First convert that to an annual number, multiple by 12 so $60 x 12 months = $720. That’s what you’re paying every year to watch TV. Now let’s use the magical number 20 to find out what the cable TV REALLY costs. $720 multiplied by 20 is $14,400. You need nearly $15,000 invested to justify your TV habit. Wow, is your love for “Storage Wars” really that great? Netflix streaming at $8/month ($96/year) is a much better deal at only $1,920 invested in the market to pay for it.

Bigger items can be even scarier. Say you want a $30,000 car. You don’t need a new car every year, so one way to look at this is to think about how long you’ll have this car. Say you’ll own the car for five years and then sell it for $10,000. So your cost over five years is $20,000 (actually much higher with insurance, etc, but we’re keeping it simple for this example). Over five years, that’s only $4,000/year. Not too bad, right? Well, bring in Mr. 20.

Twenty times your $4,000 yearly cost brings you to $80,000 yearly. You would need to have $80,000 invested to afford that vehicle for each year of those five years. And, to boot, that money wouldn’t be available for anything else.

So use the number 20 to your advantage. Multiple all recurring monthly expenses by 12 then by 20. For one-time or infrequent expenses, simply multiple by 20 to gauge its overall cost, or compute the yearly cost and do the same math. Even if you can’t purchase something on a yearly or monthly basis, understanding what the purchase is costing your future is worth examining.

And that examination is much easier with the number 20 on your side.

Why Generation X is so hot on pretirement

As Herman Cain would say, “I don’t have any evidence to back this up,” but from the empirical data that I see every day, it seems Generation X is embracing the idea of pretirement like no other.

I have several friends in similar situations as myself, looking to get out of the rat race. (Some have already made it and are floating along just fine with home-based business and part-time work.) I have a few other friends also in or seeking pretirement that are not Gen Xers, but they are older Millennials or young Baby Boomers*, so in some sense, socially they identify more with Gen Xers like me than their “official” group. I fully expect the Millennials to be even more grounded in what’s really important in life and to embrace pretirement even more broadly than my generation. That may be a post for another day.

I’ve wondered for many years why Generation X is so interested in the pretirement phenomenon, but only in recent months have I settled on a few possible reasons:

  • We’ve spent our entire lives watching Boomers waste their own, and now our, money. Boomers had very cheap homes, easy credit and now, of course, will get their sweet, sweet Social Security and Medicare while the next generation (me) gets our benefits cut. How many Baby Boomers do you know who fumbled through life, have nearly no savings now and have been living off their parents’ estates and government help? I’m guessing more than a few.
  • Not only has it been tough to get ahead career-wise, the Congress, now run by Baby Boomers has moved the goalposts for the generation behind them, cutting retirement benefits and moving the age farther away.
  • Health care has been a skyrocketing expense, rising just as we age to the point where we need it most.
  • Our parents were frequently divorced, setting us behind financially and causing widespread depression and misery. There is a reason goth is the music of my people.
  • Even if our parents were still together, typically both were working so we came home to empty homes and mischief.
  • Because our parents are now old, but our kids are still young (we had our kids at an older age), we have a double-ended care hit like no other group.
  • Our education system was being gutted just as we were coming up in it. The only good news is we did better than the nearly illiterate generation behind us.
  • Dismissed as slackers, we actually had to work much harder to get ahead.
  • We’re now getting to that age where the excitement of our early careers is wearing off and we’re realizing how much it sucks. OK, maybe that happened awhile ago.
  • We just got shaken up by a massive economic collapse. Many of my peers lost jobs, homes and their basic sense of security. I would be willing to bet that Generation X also leads in Doomsday Prepping.
  • We’ve been told constantly since we were in our twenties that retirement was a hopeless dream for us (actually we were told that about home ownership, too). For example:
  • Perhaps worst of all, our generation was impressionable just as the seductive sickness of Reaganomics was taking hold. Even as it crippled our ability to get ahead, my generation supported wacky supply side nonsense more strongly than any other. Talk about putting your own head in the noose.

So Generation X, labeled early on as a generation of whiners, actually had a lot to complain about. Oddly once we were firmly in the ’90s, I didn’t hear too much whining from my peers. We were saved economically by the internet, instantly making us the most valued workers and making Boomers close to useless. Not to mention growing the economy at a critical time. We became optimistic, entrepreneurial, and very, very independent.

But the nice thing about being disillusioned early is you take on a healthy distrust of any authority. We question doctor advice, challenge politicians, stand up to our bosses. We won’t be micromanaged. We always think there’s another way to do things.

Which is why I think pretirement is growing as a movement. We question the bullshit advice that you need to have $1,300,000 invested before you can retire. We think the only way tiny contributions to a 401K get us to retirement is to become wage slaves for endless decades. And we don’t like being tied down. Most of all, we challenge the very premise of consumerist America that there is no way we can opt out.

Starved of our parents’ love, we want to spend every possible second holding our own children. Dumping our kids off at daycare breaks our hearts. We leave work ON TIME because A) FUCK YOU and B) I have a LIFE.

We share a goal, nearly all of us. To spend the days doing as we please. We want time to explore, to learn, to love. The rat race is for suckers. We want out.

This site is dedicated to those who share these goals but don’t know how to get there.


*Even though it should be obvious, I am speaking in generalities here. Clearly not every member of any generation fits its stereotype.

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