Tag Archives: Pretirement

Today was perfect

Today was perfect.

Today was perfect.

Today was one of those Mondays. Pretired Baby woke up at the same time as me so I didn’t have any time to check in online and see what was happening in the world, my web site or my life.

After a quick diaper change, we had a leisurely breakfast together (egg frittata, toast, yogurt, banana, milk and cereal). Then I cleaned up the kitchen while he watched from the playpen. Then some playing on the floor before he went down for nap number one.

Once he was down, I rushed to handle the latest two money-sucking nightmares with my fourplex sale. After an hour of calls with my property manager, realtor and a contractor, I took a quick shower and tried to de-stress a little bit. Then I answered a few more emails (mostly blog-related) until I heard Pretired Baby hollering to let me know he was awake.

After a lunch of grilled cheese, leftover pasta and leftover yogurt from breakfast, I cleaned up once again and we played on the floor together for awhile, while I surreptitiously checked email occasionally to see how the fourplex craziness was proceeding. As that was more or less under control, I loaded Pretired Baby into the stroller for a trip down to Seattle’s best park, Lincoln Park, just a couple miles from Pretired.org World Headquarters.

While the park was quite empty compared to the weekend crowds, all the swings were taken so I couldn’t continue my mission of getting him used to swinging (he starts wanting down after about two minutes currently). So we walked the lovely path along the water, nodding at the various MILFs, retirees and dog-walkers. We walked around the Colman Pool building (Seattle’s only saltwater pool and only accessible via a pretty decent hike from the parking lot.)

We paused along the path on the way back and I pulled Pretired Baby out to sit on my lap on a bench. He sat very quietly watching the water, the sky, the passersby and the ferry to Vashon Island. The water splashed gently. Old ladies smiled at us enviously. His tiny toes curled and uncurled around my thumb. A light breeze lifted his thin hair and laid it down gently again.

With some different luck and some different choices I could very well have been sitting in a cubicle right now while he swapped germs with other babies at a daycare center. But here we were in a nearly empty park enjoying some of the best weather in North America.

The stress was gone. Everything that has been keeping me so busy could wait a little while. We climbed the hill for home where I laid him down for a nap. He fell asleep with no protest. Life is good. Today was perfect.

Update

When Pretired Mama got home, we decided to make the day even more perfect by getting some Fish ‘n’ Chips at Spuds on Alki Beach, the oldest fast food restaurant in Seattle and eat dinner on the sand. Then we got frozen yogurt on the way home. Every day should be like this…

Mmm, that sand looks delicious!

Mmm, that sand looks delicious!

 

Home again. Too tired to clean the frozen yogurt and sand off my face.

Home again. Too tired to clean the frozen yogurt and sand off my face.

10 Questions For: Retire By 40

Joe Udo and Baby RB40 Photo courtesy Retireby40.org.

Joe Udo and Baby RB40
Photo courtesy Retireby40.org.

Today I’m kicking off a brand new feature on Pretired.org. It’ll be an occasionally recurring piece called “10 Questions For”. For the first one, I felt it only appropriate to feature the man who is basically my blogfather: Joe Udo of Retireby40.org. Joe’s blog is more than a detailed primer on how to escape the corporate treadmill, but is also an inspiring journey. Go back to his first post and read your way forward the way I did and you’ll be drawn in by his complete transparency and you’ll share his joy as he finally makes the move and quits his job. It’s a great blog and I recommend it to anyone considering pretirement. But I wanted to know more so I asked him 10 Questions.

How old were you when you decided to “Retire by 40”?

I think I was 36. Before that point, I was just planning to switch jobs or try to find a job at a different company.

I imagine there was a certain moment when you realized that you were throwing your life away working at a big corporation. Can you share that turning point?

It was a gradual process for me. I started getting some mysterious illnesses like dizziness and panic attacks when I was 35. The doctors never found anything conclusive, but I figured the stress was getting to me. I hated walking into work every day and that’s not a good way to live.

You figured out the path to financial independence earlier in life than most people in America. To what influences do you give credit for learning how to get there?

Actually, we’re not quite there yet. Mrs. RB40 is still working and that’s how she likes it. Our next target is to be able to function without her paycheck and save all of it. I think starting the Retire By 40 blog really helped me figure out how to quit my job. I had to research all the articles I wrote and the more I wrote, the more I learned. I was already reading a lot of personal finance articles, but writing my own blog was a big step toward financial independence.

You could have decided to “retire by 45” or “retire by 50”. You chose 40. Did you ever think about working a few more years to pad your retirement?

Not really. I already stayed at my old job longer than I wanted to. I figure if I couldn’t make it work, I could always go find another job. We also continue to save so our net worth is still increasing. We are not drawing-down yet so all-in-all we are doing fine.

It’s fairly unusual for the male in the relationship to be the one who stays home to raise the child. How did you and your wife decide you’d stay home? How does she feel about it?

She loves that I’m able to stay home with our kid. She knows she can’t be a stay at home mom because she likes to work and she is not the most patient person in the world. It’s not for every family, but it works well for us.

At what age does your wife plan to retire? What are her plans?

I think she’ll keep working until about 60 or so. She is restless and she likes being in the workforce. Perhaps she’ll cut down on the hours if we don’t need her salary anymore.

Your last day at your old job must have been amazing. What was that like?

It wasn’t dramatic because I wasn’t going in much in the last week. I worked from home and just took care of a few things. It felt great to drive away from the office for the last time, though.

Many, if not most, people are afraid to leave corporate life at such a relatively young age. What fears did you have before and do you have any worries now that you’re a stay-at-home dad?

Of course, I was afraid we wouldn’t be able to make the cash flow work. You can plan, but you never know how it’s going to turn out. Things are going really well, though, so I don’t worry much about the finance at this point. 

Do you think everyone should try to retire by 40 or is it only for people who hate corporate life?

It’s more applicable to people who don’t enjoy their job anymore. However, you should still plan ahead even if you love your job/career. You probably won’t love it forever and it would be good to have an alternative plan.

What are your plans for when your son goes off to school? Obviously you’ll have a lot more time on your hands.

I’m still trying to figure it out. I would like to start some kind of micro business or just work more online. How about you? Do you have any plan for when your son starts school?

See folks, this is how nice of a guy Joe is! I’m asking him 10 Questions and he turns it around to find out more about me! But I’ll answer anyway: I’m not sure what I’ll do when Pretired Baby goes off to school. I’ll be 50 by that point so it’s going to be pretty hard to get a real job at that point, even if I wanted to find one. Ideally I’d have a little business of my own or maybe we’ll just do a lot of travel and sort of home-school him from the road. Short answer is I’m not sure yet, but it sure is nice to have options!

Thanks again, Joe! And for anyone who hasn’t already discovered Joe’s excellent blog, be sure to head over to Retireby40 right now!

I’m sure Joe will be stopping by at some point so feel free to say hello in the comments as well! 

Pretirement fun for the week of July 15

Stories of financial independence, saving money and early retirement

pretirement_livingPretirement fun had to take a few weeks off as I was too busy to put a post together. Lame! We’re back with some great posts that are definitely worth your time.

Here is some of the best Pretirement Fun I read recently:

Hope everyone has a great weekend!

Dividend mapping: The craziest thing I never did

Dividend Mapping: Stupid or brilliant?

dividend-mapping2Just for fun I thought I’d share an investing concept I dreamed up quite a while back. I never actually pursued the idea because it didn’t make sense on a number of levels. In fact it was pretty dumb once I thought about it a little.

Allow me to explain.

The whole concept of pretirement is built upon the idea that once passive investments generate enough money to pay for your monthly bills, you’re financially independent. Thus, you enter into a rarely discussed era of life: pretirement. As you age and become less able to work (thereby making your risk of financial problems higher), you then enter traditional retirement, adding in your Social Security, your personal retirement funds and Medicare to give you the security you need later in life.

OK, that’s straightforward enough, right?

Now let’s talk about investing. Every investor at one point or another has heard the advice about choosing stocks to invest in by looking in your own refrigerator (or looking around your own house, etc.) The idea is pretty simple: If you are a pretty typical person, then it’s fair to say that there are a lot of other people making the same buying choices as you. Therefore the companies who make the products that fill your own home are the ones you should invest in. Classically this advice has pointed investors toward companies like Proctor & Gamble, PepsiCo or General Mills.

Dividend Mapping (a term I just made up), takes this idea a little farther.

Here’s how it would work. I’ll use my own bills as an example (with some rounding to clean it up for you. Also, this is just my share of the bills. If you want the real number with both my wife and I included, just double it.)

1. Make a list of your ongoing monthly bills with the amounts you pay.

  • Food $175
  • Seattle PUD $50
  • Seattle City Light $50
  • Gas bill – PG&E $50
  • Comcast $32
  • Cell Phones $10*
  • Car Insurance $130
  • Life Insurance $45
  • Property Taxes $220
  • Homeowner’s Insurance $25

Total: $787

2. Re-jigger your list to organize it by company. So for me:

  • Food: N/A $175
  • Seattle PUD $50
  • Seattle City Light $50
  • Gas bill – PG&E $50
  • Comcast $32
  • AirVoice Wireless $10
  • Allstate Insurance (Car, Life, Homeowner’s) $420

3. Now, see if I can “map” investments to each line item:

Only three of my core bills are publicly traded, PG&E, Comcast and Allstate. Let’s ignore the rest for now and see if I can use dividend mapping to pay those bills.

  • PG&E: I need $50 of income per month, or $600 per year.
  • Comcast: I need $32 of income per month or $384 per year.
  • Allstate: I need $420 of income per month or $5,040 per year. (Actually what I need is a lower insurance bill, but that’s a story for another day, although this certainly does illustrate how buying too much house can kill you.)

OK? Now let’s dividend-map these three:

  • PG&E pays a respectable yield of 3.94%, so I’d need to own $15,000 in PG&E stock. Actually this is pretty doable.
  • Comcast pays a dividend of 1.77%, so I’d need to own $22,000 in Comcast stock. Kind of a lot of money to throw at Comcast, but possible.
  • Allstate pays a dividend of 1.95%, so I’d need to own a whopping $258,000 in Allstate stock — that’s almost as much as my entire pretirement fund. (Are you beginning to see why I never pursued this wacky idea?)

So here’s why I like this idea and why I spent so many late night hours so long ago thinking so deeply about this.

  • There’s a poetic symmetry to the concept of essentially having a company pay for its own expense. If my Comcast dividend pays for my TV and internet, I’m likely to hate them (and the bill) a lot less.
  • It makes investing, and the concept of dividend investing, easier to understand.
  • It allows (in theory, but not really in practice for the most part) you to pick off your bills one at a time. For example, I rather like the idea of suggesting to a person on a tight budget, “As soon as you accumulate $22,000 in Comcast stock, you can order cable.”
  • The companies that you send money to each month are likely pretty decent investment opportunities for the reasons explained above. And by staying on top of your dividend map mix over the years, you would adjust to changing times. For example, I just dropped AT&T as my cell phone company. Had I been dividend map investing, I would have also liquidated my AT&T stock at the same time and moved it to my new provider, if possible. In this way, you would also theoretically be following the herd, so to speak, as customers move and adjust with the marketplace.
  • Because it does take a fair amount of money to generate the income to pay for some of these bills, this concept is great for getting you focused on your monthly expenses. Suddenly saving $5 or $10 on a monthly bill matters!

Reasons this idea is terrible:

  • The main reason I never seriously pursued this concept was one of the reasons shown by my Allstate example. Because the yield is so low relatively speaking, my money could be performing better by not using this gimmick. Who cares if there is no poetic symmetry? I need to maximize my entire fund if this is going to work.
  • The other reason made clear by my Allstate example is that it could trick you into being over-allocated into certain stocks. If I put that much (impossible in my case, but you get the idea) into Allstate, I could be very vulnerable if Allstate fell into trouble.
  • This idea could trick you into buying really poor companies just because you happen to be their customer. It could be doubly painful to be paying a company money each month on top of watching their share of your portfolio collapse.
  • Not every company is public. Utilities obviously make up a big portion of the bills we all pay each month and not every company is on the stock market, especially publicly owned utilities.
  • Some line items aren’t that simple. I’m mainly thinking of food here, but there could be others. Who do I invest in to cover my food budget? The grocery store chain? The food manufacturers?
  • It leaves out some great buys. Apple has been a great growth stock in recent years, but you would have totally missed out on it if you’d only been dividend mapping. Had you moved to AT&T because of the iPhone, that could have made both of them good buys (see the variations section.)
  • Because bills do go up, you’re not necessarily keeping up with inflation unless you’re getting stock growth or leaving some dividends in to reinvest. Depending on your strategy, this could mean you’d need to keep an extra margin invested beyond what I’ve shown here. (Plus I’m leaving out taxes and fees for these examples to keep things simple.)

Variations to consider:

Like I said, even though this idea is stupid on its face, there may be some redeeming factors to some parts of the concept, such as investing in companies that you use every day. Therefore there are a few variations to think about:

  • Buying a sector vs. individual stocks. Perhaps buying a set of food stocks, mutual fund style, instead of just a single stock could bring the yields you need as well as simplicity and safety desired.
  • Buying bonds as a proxy for your utility stocks could make some sense if you were in love with the dividend mapping concept.
  • Buying a supplier to your company could be an option if your company is private or is just not investment-worthy. For example, AirVoice Wireless uses the AT&T network. Therefore I could look at how much AT&T I’d need to cover my $10/month AirVoice bill ($2,500).
  • Buying a similar company. Perhaps I could find another insurance company to substitute for my Allstate stock.
  • Keep the mapping, but forget all the perfect symmetry nonsense. Just keep it really simple and focus strictly on the investment and ignore everything else. The idea here is really about attacking one expense at a time. So maybe you start with your smallest bill. In my case, maybe it’s my $10/month cell phone bill. Let’s say I found a company that offered a yield of 5%. I take my $2,500 in hand and buy in. Now one of my bills is gone! Then I start saving for the next bill. It’s not as pretty as the pure dividend mapping, but it’s still mapping dividend income to a specific expense.

The last point is probably the best one for people just beginning to think about financial freedom. By picking your bills off one at a time in this fashion, your goals will seem more attainable than ever. Invest until your smallest bill is covered. Then invest until the second bill is covered. And so on. I’d especially love to see young people try this approach as they gradually move toward financial freedom.

So there you have it: An entire post dedicated to something I’ve never done and don’t recommend. Aren’t you glad I didn’t waste your time?

You can give me a piece of your mind in the comments! 

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