Forcing cashflow — when should you do it?

November 19, 2013 9:27 am , 13 Comments ,
Image courtesy of renjith krishnan / FreeDigitalPhotos.net

Image courtesy of renjith krishnan / FreeDigitalPhotos.net

Ever heard the term “forcing cashflow” before?

If you’ve done any real estate investing at all, sooner or later you’ll run into the concept but it’s a topic with implications well beyond real estate. It’s a tricky subject and one that I still struggle with today.

I faced the classic “forcing cashflow” situation a few years after I purchased my infamous fourplex. Regular readers might recall I actually bought two fourplexes at the same time from the same seller. After a few years of thin cashflow and pouring too much free cash in to feed the mortgages, I dumped the more problematic of the two and walked away with some decent appreciation profit.

I examined my situation. My personal monthly bills (outside of mortgage) totaled about $1,500 at the time. I was pretty obsessed with cashflow in those days so the math was simple based on my objective — specifically raising the monthly income from the property up above the amount I’d need to cover my bills. I talked to my friendly neighborhood mortgage broker and asked how much cash I’d need to bring in if I wanted to bring my payment down to $1,000/month (including escrow). Rents in the four units were around $650. So on paper I’d have $2,600 in revenue and after paying the mortgage my cashflow would be a sweet $1,600 (not counting maintenance, vacancies, etc.).  Not bad, right? Who wouldn’t want a free $1,000+ coming in every month?

Well, there are a few ways to look at forcing cashflow that complicate the matter. First we have to break out of the mindset that forcing cashflow is either “good” or “bad.” Rather there are various types of forcing cashflow that may or may not make it a good idea for your particular situation.

Old school real estate investors usually talk about forcing cashflow in the context of something amateurs do to make their numbers “work,” while they, the savvy investors, boast about their “cap rate” and similar methodologies to evaluate their purchases. And they’re quite right to do so because strictly forcing cashflow ignores the opportunity cost of putting the extra money elsewhere. For example, in my case, I would have been MUCH better off investing the money in stocks. That is to say the return I got on the additional funds was less than I could have gotten elsewhere. Thus my overall income situation would have been better by paying more attention to return and less to cashflow.

However! While all of that is true, there are other important ways to think about this. Let’s reverse things to help see this clearly. Imagine for a moment, I pulled some cash out of my property instead of putting cash in, say via a simple home equity line of credit loan (forcing a negative cashflow, if you follow me). Suddenly instead of the $1,000/month coming in, perhaps I have to feed it by $500. This could put an investor in an untenable situation, unable to keep up with payments and vulnerable in a crisis. Or to put this another way, if you were buying a rental property, how much should you put down? How could you know what the right amount is?

Cap Rate (along with GRM and GSI for you real estate investing nerds) is cashflow neutral — it only helps you determine whether the purchase (or sale) price is fair (based on revenue). Cashflow is profit-neutral, it just tells you how you’re structured. For example, you could have a 10 percent Cap Rate building (unheard of around here, we’re usually around 6 percent if we’re lucky), but if you bought it with 20 percent down and had some vacancy issues and repairs, you may have gotten a good “deal”, but the building could still be draining you every month. If you decided to force the cashflow, though, and put 50 percent down, you got the same good deal on your property and are enjoying some tasty cashflow. However, you’d have to examine your overall investment posture because you might have come out ahead by putting that additional cash into other investments.

Real estate makes a good example, but we face decisions on forcing cashflow every day, often without realizing it. Every time we’re faced with a decision on whether to pay for something up-front in order to save more over the long haul we’re making this kind of decision. Older car beginning to cost more and more in repairs — would a newer car put you ahead or behind? Worn-out refrigerator burning way too much electricity? Better to keep limping along or upgrade?

So how does one know how much to force cashflow? I have three ways I evaluate this kind of situation:

  1. Payback time – Identifying the time until you reach break-even can be a smart way to look at things. All else being equal, it can be a good idea to achieve the shortest possible break-even time with all invested money. Say you’re considering dropping $5,000 on new windows in your home to replace the drafty single-pane pieces of glass in your house. And let’s say your heating and cooling bill is $200/month and you estimate it’ll drop in half with new windows. So, “savings” of $100/month. Worth it? At a savings of $100/month, it’d take just over four years to break even. So it obviously comes down to how long you’d be staying in the house. If it’s your forever home, the sooner you get started the better. If you’re planning to move in two years, tape plastic over your windows and tough it out.
  2. Yield – Another way to look at forcing cashflow is to compare the income (or ongoing cost reduction) to what you could do in the market. In the above example we were considering investing $5,000 on new windows. What if we took that same amount and invested it in stocks? Using my 5 percent rule, we’ll assume we can make an annual 5 percent if we put our money to work in the market. Let’s compare that to our energy savings with our windows. Our energy bills drop by $100 in this example, so $1,200 per year. Making that on $5,000 isn’t too shabby. And if this is our forever house, we make that (24 percent!) into perpetuity (after year four). (Which is why it makes so much sense to make your house as energy efficient as possible. Although keep in mind saving $100 a month may not be realistic for quite a few of you.) But you do effectively make zero for four years so it’s a long term investment and that’s the way you have to look at it (although you’ll be warmer in the meantime, which is nice). And, of course, you’ll want to count the money you’re NOT making for four years in your math.
  3. Bar lowering – Traditional investors will scoff at me (rightfully maybe) for this one, but since my goal is pretirement, there is another way I look at things. I call it bar lowering and the idea is that even if your potential investment doesn’t make sense under the first two items, it may still be worth doing if it brings your pretirement closer. The idea is that it may be easier and simpler (and more guaranteed) to spend some money lowering your expenses to bring your needed income amount down. The most common example of this is paying off a mortgage. If your interest rate is only 3 percent, it may not make sense mathematically to pay off your mortgage when you could probably make more in the stock market. Let the stock market gains pay for your mortgage and keep the difference, right? Depending on your overall situation, especially your age, it might actually make more sense to take the guaranteed win of paying off your mortgage, which also lowers the amount of passive income you need each month. In effect, this is what we’re doing when we buy the new windows above as well. By dropping our bill by $100 a month, that’s $24,000 we don’t need to earn and invest (again based on 5 percent — $24,000 * 5% = $1,200/year). The basic idea here is that it’s easier and less risky to cut costs than to build up an investment portfolio. So it’s just another way of cutting “spending” even though it’s not the mindless consumerism we talk about so often here on Pretired.org.

So to me it’s not as simple as just comparing everything against what I could do in the market, although that’s become my main approach. And there are other things that complicate these decisions further. How do you really figure out what the savings could be on something like new windows? Basically it comes down to a guess. And then there are factors like resale value and your personal comfort to be considered.

For example, I constantly struggle with whether it makes sense to add solar panels to my house — something I really want. We currently budget $100/month for electricity (yes we have some of the lowest-cost power here in Seattle). I estimate it’d take $15,000 to solarize our house. That means the payback would be over 12 years! That’s hopelessly long — especially considering that we may not stay here forever. I really want them, but it just makes no financial sense. The only thing that tempts me is the bar lowering. With one up-front payment, I’d never have to pay for electricity as long as we stayed here. My share of the minimum monthly bills requirement would drop to a tiny $700!

Yet, the equivalent amount invested would only yield maybe $62/month (applying 5% to $15,000 again). And because I wouldn’t be paying a bill of $100/month, it’d be worth it, right? I don’t know! See? Confusing!

We make these choices every day without realizing it. Some are simpler than others. For example, we finally got smart and bought our own cable modem instead of leasing one from the cable company. It took nearly a year to break even but now we have the lower bill and every month is gravy. Not a big deal, but just another little hole to plug in our budget. We switched the gas furnace a few years ago at considerable expense. That was probably a 3-4 year payback timeframe, but we’re warmer and the ongoing bill is lower (lower monthly overhead).

Do I regret forcing cashflow on my old fourplex? I wouldn’t do it again. In retrospect, I think I would have been better off improving the building and increasing the rents versus trying to lower the financing overhead. But if I’m honest, if I could go back in time I’d sell that building much earlier and dive into the stock market head first. I became so obsessed with cashflow, I forgot to keep an eye on the big picture. Fortunately what I learned about cashflow and the positives and negatives of forcing cashflow help me greatly today as I put together the final elements of my pretirement.

Posted in: Investing , 13 Comments , Tagged: , , , ,

Why have the Japanese stopped having sex?

November 7, 2013 6:47 am , 31 Comments ,
Japanese workers at a Tokyo subway station

Japanese workers at a Tokyo subway station

A recent story in the Guardian rocketed around the internet recently. It’s not surprising how quickly the story was picked up given the provocative headline: “Why have young people in Japan stopped having sex?”

Now, obviously, a whole country didn’t completely literally stop having sex, but birth rates have been dropping and interest in sex and relationships have been measured at record lows.

The number of single people has reached a record high. A survey in 2011 found that 61% of unmarried men and 49% of women aged 18-34 were not in any kind of romantic relationship, a rise of almost 10% from five years earlier. Another study found that a third of people under 30 had never dated at all. (There are no figures for same-sex relationships.) Although there has long been a pragmatic separation of love and sex in Japan – a country mostly free of religious morals – sex fares no better. A survey earlier this year by the Japan Family Planning Association (JFPA) found that 45% of women aged 16-24 “were not interested in or despised sexual contact”. More than a quarter of men felt the same way.

What is going on here?

The article lists all the usual excuses: too busy, too tired, technological substitutes, you know the story. But there are other reasons, too. Businesses feel women will quit their jobs once they have a baby. And they feel babies are likely after marriage. Thus women put off marriage to avoid triggering career suicide. But overall, those interviewed for the article make it sound like it’s just a big bother. There’s work to be done and the reward doesn’t match the effort.

One must be careful not to stereotype an entire culture when reading these type of stories. We also must avoid projecting our own biases onto these people. But perhaps we can learn something about ourselves by viewing this phenomenon from the safe perspective of our own culture.

To me, the interesting aspect is the disconnect from what is real and what is important in life. And this is where I see North Americans heading down the same road, although the exact manifestation looks different.

Capitalism is an awesome power. I love the power of money to motivate people. I love how it makes us push ourselves to do better. An unleashed marketplace is one of the most powerful forces on the planet. But it makes a better servant than a master.

The Japanese obsession with career mirrors our own in many ways.  But like many things exported from America, they’ve taken our ideas and made them more efficient. I was in Japan a few years ago and riding the subway during the evening was a stereotype come to life. The train cars are totally silent. Each and every person (except for we tourists) was glazed over and typing frantically on their cell phone. They were tired, you could tell. The kind of tired you only get from being in an office all day. Their bodies swayed gently as the train rolled along. They glanced up only occasionally to see if it was their stop. On the sidewalks, people rush quickly to and from their jobs, barely looking from side-to-side as they scurry (violent crime is almost unheard of so there is little need to glance around for personal protection the way we do here in the U.S.)

I think what Japan has created here is the perfect worker drone, or something close to it. Could this help explain the Japanese fascination with robots?

(Quick side note: I don’t mean to imply everyone we met everywhere has turned into a worker drone. It was also one of the most peaceful and calm places I’ve been. People largely were very happy, open and friendly. They believe in nature, beauty and well-designed cities. It’s just in the business districts and subways where you could really see the strain on the working class.) 

In modern times, the Japanese have an unwritten understanding of lifetime (or close to it) job security. In recent years, this is reportedly slipping with more contract workers and less security overall. However, incidences of losing one’s job involuntarily are still quite rare. This security comes with a price, however, in many unpaid hours and institutional and peer pressure to work many hours. On a societal level this obviously impacts relationships and family stability. On an individual level, the price is even higher as many lead empty, unfulfilling lives of drudgery and exhaustion. Who benefits? Well, the employers, of course, pocketing free labor and a stable workforce. What does it matter if people drop dead from overwork? Yes, it happens. It’s a phenomenon common enough there is actually a word for it: karoshi.

Are we heading this direction? Are we already there? We already have a massive labor theft problem here. We already have families falling apart under financial strain. We spend hours glazed over sitting in idling cars trying to get home where we glaze over a few hours more watching TV before stumbling to bed to do it all over again. Japan may have a low marriage rate, but we have an abysmal divorce rate. While it’s still expected that the mother stays home to raise the child in Japan, we ship our little ones off to be raised by others in large groups of other kids. Maybe we’re all just the same.

 

Naturopathic doctors often look at the skin to determine your overall health. Blemishes, rashes, pimples, etc. are all indicators of various medical issues, frequently related to diet. More fundamentally, however, clear, glowing skin indicates vibrant health. Just look up “health” in any stock image site to see what I mean.

A person’s sex life is the same way. It can be an indicator of overall health and life balance. While not as outwardly visible as your skin, it’s still acts as the same type of viewing window into your overall life — even if you’re the only one who can see it.

When something as fundamental as normal sexual interactions between people begins to break down, we know the problems run deep and have been building for years, possibly generations.

The Japanese are panicking because they are concerned about a shrinking economy (and their obsession with racial purity precludes them leaning on immigration the way other countries have done.) We don’t yet know what other problems these breakdowns in normal human interactions will have. We know pretending we can force ourselves into something beyond human causes major dysfunction — just ask any altar boy. We also well understand the strain modern life can take on us, most clearly seen when the vulnerable finally snap — all too often with weaponry in-hand.

Humans are animals as much as we like to we pretend we’re not. Allowing ourselves to be turned into machines for the sake of money is damaging to ourselves and society. Yes, we need food, clothing, shelter, rest, sex, love and emotional support to survive. And that’s just for survival. Is survival the goal? Or should the goal be to live as full and vibrant a life as possible? Society should be geared to harvest the maximum value from each individual, but that value shouldn’t be measured in money.

The important thing is that men should have a purpose in life. It should be something useful, something good.
-Dalai Lama

No one wants to give up the advancements of the modern world. In many important ways, things are better now than they have ever been. But we cannot lose who we are. Stories like this one out of Japan should be the canaries in the coal mine warning us we’re veering off-course. It’s not too late to change and individuals must lead the way by valuing their humanity more than money. Choose how much and when you’ll work. Buy your freedom as soon as possible and devote your life to what you think is important. Your society (and your spouse) will thank you.

Posted in: The system , 31 Comments , Tagged: , , , ,

What the Seattle Seahawks can teach you about getting out of debt

November 4, 2013 4:21 pm , 29 Comments ,

In a hole so deep you can’t imagine ever getting out of debt? It’s never hopeless

seahawksThere were only two minutes left in the half. Pretired Mama and I sat on the couch stunned as the previously unstoppable Seattle Seahawks found themselves down 21-0. We began eating leftover Halloween candy just so we could feel something. Anything.

Already worn out from a very busy week of normal life plus a sick Pretired Baby and forced to spend most of my free time wiping up snot and scraping off the resulting “crustache,” I was exhausted. This game was too much. I couldn’t take it. I briefly considered turning the game off to get something else done.

But then I noticed something. The Seahawks weren’t shaken up. They seemed confident. Determined even. It might not be exaggerating too much to say they looked confident they were going to win despite their current situation. Quarterback Russell Wilson, in fact, almost appeared to be grateful for the challenge. He clearly decided he was going to need to show his team how to win and so he did.

With the ball safely in his hands, Wilson stayed just out of reach of Tampa Bay defenders and ended scrambling for a nice 16 yard gain. A penalty gave them an extra 15 yards and suddenly the stadium knew the momentum had shifted.

“A lot of really cool things that happened,” Coach Pete Carroll said later. “To see that Russell finds a way to get us into position to win again, he’s just a terrific football player and a great leader. He never thought for a second that we weren’t going to win this football game. He made the plays he needed to make to put us in position to do it.”

The Seahawks crawled back little by little to dramatically take the win in overtime. “The biggest thing I’ve learned is, if there’s any time left on the clock there’s still a chance,” Wilson said.

If you’re in serious debt trouble today you probably got there the same way one of the best teams in the NFL found themselves down 21 against the worst team in the league. (Those of you with health care debt get a pass.) They didn’t take Tampa Bay seriously. The Seahawks shouldn’t have needed to even break a sweat beating the Buccaneers. It’s the same way debt creeps up on people. Lack of focus, not believing it could happen to you, and a combination of many small mistakes.

Most people when faced with seemingly hopeless adversity simply give up. Sure, they may keep going through the motions. They may keep “trying.” But deep in their hearts, they haven’t adopted a winning mentality. A championship mentality.

No matter where you are right now, you can get where you want to be. It may not be easy, but it’s always possible. You’ll need to create a strategy and stay focused. In sports, champions aren’t the teams who buy the best talent (although that helps).

You can identify the champions by watching teams struggle through difficult times. Are they lazy and entitled or do they take the responsibility upon themselves to make things happen?

It’s no different for any of us. Sure, there is hard work ahead and there’s no shortcut to paying down debt. But the shift begins when the mentality changes. The first step to getting out of debt, not matter how much you have, is to shift your mindset. Know it’s possible, make a plan and you’ll get there.

Just like the Seahawks. See you next Sunday.

You’re next, Falcons! 

Posted in: Debt , 29 Comments , Tagged: , ,

Pretirement story: Leaving work for good at age 33

October 24, 2013 6:14 am , 16 Comments ,

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?  

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