Time for fun with charts! A famous chart in the early retirement community is The Crossover Point from the book Your Money or Your Life, which shows that you’ve reached financial independence when your investment income equals your monthly expenses:
Forbes has an article about how the share economy is taking off. The primary focus is on AirBNB, which lets you rent out a room in your home with ease and last year booked around 15 million nights of stays. I’ve written about some of these sites before, and while I mostly forgot about them, some people are going quite well with them. “Almost anything you can buy new, you can also rent from a stranger.”
One person lives off of income generated by renting his house out whenever he can (while he cordons himself off to an unattached area). One person makes more money dog-sitting from home than working at Starbucks. One person rented his car out part-time for more than the monthly payments, so now he has three cars being rented out. Yet another drives his car around ridesharing every night and is basically a taxi service. These people may be the exception rather than the rule, but is it proof that the next generation of millennials really don’t care about ownership anymore? Is it better to just have access to whatever you need when you want it? Peer-to-peer everything!
Here’s an infographic from the print version of the article that lists sharing websites of all types from around the world, with the data source being Rachel Botsman of CollaborativeConsumption.com.
Here are links specifically dealing with sites that allow you to make money from your own stuff (US-focused only) – be it a room, a car, or your power tools:
Apparently I completely missed this when it first became popular, but the Holstee Manifesto is a set of ideals put forth by the founders of Holstee, a small apparel company which only sells environmentally-conscious and sustainably-sourced products. (Holstee = Holster + Tee, which I don’t think is even sold anymore.) I discovered it today only due to a LivingSocial deal selling a large poster print for $30, designed by Rachael Beresh.
My favorite line is actually “If you are looking for the love of your life, stop; they will be waiting for you when you start doing things you love.” (Although it didn’t happen to me… I was just working a part-time gig to help pay for college.)
What would my own manifesto include? Definitely something about freedom, but that could be taken as similar to doing what you love and following your passion. The difference is that I also appreciate being able to do required and difficult things, as long as I get to do it my way. I hope that made sense.
Instead, I suppose I’d add that if you want to “Keep up with the Joneses”, well, the truth is the Joneses are nearly broke, live paycheck-to-paycheck, and will work until they are quite old. Being different than the Joneses is the only way to go; there are many ways to do so but you have to pick one and be *proud* of it.
Here’s a nice feel-good story about a financially-savvy teenager. 14-year-old Willow Tufano may be America’s youngest landlord. She bought a house in a short sale in Port Charlotte, Florida for $12,000. The 3-bedroom house is now rented out for $700 a month! (The house was on the market for $100,000 at the peak of housing bubble.)
More details – She put down $6,000 cash, her mom (a real estate agent) put down $6,000. She earned her share of the cash primarily from offering a service where she clears out foreclosed houses on behalf of the new investors. She then picks through the stuff and resells any goods or appliances that she can. She also spends her weekends looking for deals from garage sales and resells them for a profit on Craigslist.
I have to wonder about the whole nature vs. nuture thing about kids like this. Certainly having a real estate agent for a mother helped in this example, but so I doubt that in itself is enough. In my idle daydreams, I think it would be cool to start some sort of farmer’s market stand with my kids to show them some business basics. From the Ellen Show:
Passion can actually be a controversial subject when it comes to the early retirement / financial independence discussion. If you truly love your work, then why ever stop working? Alternatively, what if your passion is racing cars or playing basketball? The odds of making a living doing either is very slim. So is the answer to maximize yourself financially (even if you hate it) until you can pursue your passion in retirement?
Ken Robinson is an Professor of Education who argues that passion and creativity are the key for transforming education and the economy. He wrote a book called The Element: How Finding Your Passion Changes Everything that expands on his views and also includes many stories of people finding their passion. I find his ideas interesting and added this book to my reading queue.
Of all places, I learned about Robinson in an interview inside Costco’s monthly magazine for members (emphasis mine):
Costco Connection: Can you define what you mean by finding one’s element for readers who haven’t read your book The Element?
Ken Robinson: The element is finding that point where talent meets passion. Both are important. If you’re in your element, you’re doing something for which you have a natural aptitude. You get it. I’m not suggesting that you have to be the best in the world or the best in history, but you get it and you have a natural feel for it.
I know people for whom that’s true in every type of work. Aptitude takes many different forms. But being good at something is only part of this. To be in your element, you really have to love what you’re doing. If you love something that you’re good at you never “work” again. And you can tell. If you love something, time changes when you’re doing it. An hour feels like five minutes. But if you’re doing something that you don’t care for or doesn’t resonate with your own particular energy, then five minutes feels like an hour.
I really like this idea of time relativity (having it fly by also known as a “flow” state) as it really applies to me and many activities. It also reminds me of the following Venn diagram:
Do you dream of working for yourself instead of “The Man”? Indeed, early retirement and/or financial independence is often achieved by successful small business owners. In addition, any retirement plan will be more robust if you can earn some extra money on your own as needed. As such, I definitely support the growth of freelancers doing their own thing. However, you may hit roadblocks like loneliness, distractions at home, or lack of resources.
The good news is that there are a growing number of places for those with the entrepreneurial spirit to share and collaborate with others for mutual gain. Live in a studio apartment? No problem.
Coworking, or shared working environments. These are basically large community office spaces where you can get a desk, couches, and fast internet connection so you can work around others doing the same thing. No more coffee shops! They tend to be informal, where you can work alone or network/chat with others. It can also serve as a very cheap office where you can hold meetings with clients, or places to meet up in strange cities. You can usually just search for “coworking [your city]” but here is a directory.
Techshops / Cooperative Fabrication Shops. Are you thinking of selling something physical, like iPhone cases, custom skateboards, crafts on Etsy, or wood furniture? Wouldn’t it be great if you had your own CNC machine, commercial-grade sewing machines, or professional woodworking equipment? Techshops are a growing chain of membership-based workshops that provide quality tools and equipment that most individuals don’t have access to. You’ll also find classes and lots of knowledgeable people willing to help you learn to use the machines. Not too shabby for as little as $99 a month.
Besides Techshop, you may find independent locations like Knowhow Shop LA or Maker Place in San Diego. Many more are trying to start themselves up and looking for members.
Fab Labs. These are “digital fabrication facilities”, initially started at MIT but now found around the world, where you can make higher-tech finished products using 3-D milling machines for circuit boards and laser cutters for press-fit construction of parts. (Directory)
Tool Lending Libraries. If your needs are more modest, see if your community has a tool library where you can borrow tools. You can find landscaping gear, table saws, power tools, etc. (Directory)
Most of these places have membership fees, but they are usually flexible to account for the regular or occasional user. Look into them and you may be surprised at what is available near you. Even if you’re just a frugal person that likes to DIY, these are also great places for makers and tinkerers.
Charlie Munger is best known as the long-time friend and business partner of Warren Buffett, and officially as the Vice-Chairman of Berkshire Hathaway. Even though he is Buffett’s partner in investing, Munger is different in that he does not enjoy the spotlight as much and is rather more blunt and cranky. For some reason that just makes me like him more.
For the first time ever, the wit and wisdom of Charlie Munger is available in a single volume: all his talks, lectures and public commentary. And, it has been written and compiled with both Charlie Munger and Warren Buffett’s encouragement and cooperation. So pull up your favorite reading chair and enjoy the unique humor, wit and insight that Charlie Munger brings to the world of business, investing and life itself.
The first thing you should know about this book is that it is not meant to be an investing How-To book. Yes, there is a lot of investing advice in it, but the book is more about how to live a successful and fulfilling life more than the accumulation of money. Munger puts more emphasis on integrity and how to think correctly than how to calculate a company’s return on capital.
One of the reasons that Buffett and Munger appeal to me is that their primary motivation for doing what they do is not simply to be rich, it is to to be independent. Here’s a quote from Buffett on why he wanted to make money: Read the rest of this entry…
I’ve gotten to the part in The Snowball that involves Charlie Munger. A very interesting person, although perhaps not someone I’d like to have a beer with (I’d feel stupid), he is probably best known as Buffett’s long-time friend, business partner, and vice-Chairman of Berkshire Hathaway.
Even before meeting Warren Buffett, Munger was wealthy according to most standards from real estate investing. Here is a quote from a Buffett interview in the book:
Charlie, as a very young lawyer, was probably getting $20 an hour. He thought to himself, ‘Who’s my most valuable client?’ And he decided it was himself. So he decided to sell himself an hour each day. He did it early in the morning, working on these construction projects and real estate deals. Everybody should do this, be the client, and then work for other people, too, and sell yourself an hour a day.
Now, I’m sure just being a successful lawyer would be plenty for many people. But if you aren’t satisfied with your current situation, why not work for yourself an hour each day? Instead of just idle dreaming, set aside specific time for action. Perhaps the key is small chunks of time, but at regular intervals.
Example. If you’re an administrative assistant making $10 an hour and you don’t want to be, don’t just sign up to work another hour for $10. Working longer is not necessarily the best idea. Instead, give up the $10 (or $8 after taxes), and improve yourself in some way or create something so you’ll be making a lot more. There is no one solution, look into yourself. Nursing school? Investment books? Finding a mentor?
Finally, another quote from Charlie Munger about the desire for independence:
I had a considerable passion to get rich. Not because I wanted Ferraris – I wanted the independence. I desperately wanted it. I thought it was undignified to have to send invoices to other people. I don’t where I got that notion from, but I had it.
I think I’ll be buying a copy of Poor Charlie’s Almanack the next time I run low on things to read, even though it costs fifty bucks.
Update: I bought a copy of Poor Charlie’s Almanack and will be reviewing it shortly. I still think this idea of working for yourself for an hour each day is great advice and timeless.
The conclusion from this Harvard Business Review article has stuck with me all day. Researchers looked into whether people think of their success as the result as either hard work or innate talent, and how it affected them later on. The distinction turns out to be important. Something to think about if you’re raising kids as well.
How often have you found yourself avoiding challenges and playing it safe, sticking to goals you knew would be easy for you to reach? Are there things you decided long ago that you could never be good at? Skills you believed you would never possess? If the list is a long one, you were probably one of the bright kids — and your belief that you are “stuck” being exactly as you are has done more to determine the course of your life than you probably ever imagined. Which would be fine, if your abilities were innate and unchangeable. Only they’re not.
No matter the ability — whether it’s intelligence, creativity, self-control, charm, or athleticism — studies show them to be profoundly malleable. When it comes to mastering any skill, your experience, effort, and persistence matter a lot. So if you were a bright kid, it’s time to toss out your (mistaken) belief about how ability works, embrace the fact that you can always improve, and reclaim the confidence to tackle any challenge that you lost so long ago.
On a related note, have you heard of the Dan Plan? Apparently a guy read Malcolm Gladwell’s book Outliers about how it takes 10,000 hours to become an expert at something, and decided that he wanted to go from never playing golf before to winning a PGA Tour event. He’s somewhere around 2,000 hours now. Even though I think I would have picked something different, I’ll definitely have to check back on his progress later.
If you’ve been considering making your side venture a formal separate entity, MyCorporation is offering their LLC formation and incorporation filing services for free for one day only 9/20/11 until 11:59 PST with the coupon code MYFREE (regular price $99). Also included is a copy of Quickbooks Simple Start (though I think this is always free…) and a free domain name registration. You must still pay shipping and the applicable filing fees charged by each state. I’m sure they’ll also try to upsell you some additional services, but you can decline them.
MyCorporation is owned by Intuit, makers of TurboTax and Quicken. Accordingly, you can view such online incorporation services as similar to TurboTax for taxes. Yes, you could fill out your 1040 tax forms all by yourself, but it’s much easier to go through a question-and-answer software that walks you through it and explains the steps. You could also incorporate yourself as well, may prefer some guidance. However, if you’re doing something complex or out of the ordinary, then you should hire a professional to handle it (accountant for taxes, lawyer for incorporation).
When I formed my S-Corporation years ago, I used one of their primary competitors LegalZoom and paid about $150 for the service – not including the state filing fees and shipping. It was good to have someone look over the forms before submitting, while avoiding the $1,000+ fees from a lawyer.
The decision between staying a sole proprietor/partnership or forming an LLC/corporation is not always simple. If you’d like to dig into the details on your own, I recommend the book LLC or Corporation? How to Choose the Right Form for Your Business from Nolo Press. I chose to go the S-Corp route primarily for the income tax savings. You can even have a LLC and chose to have it taxed as an S-Corp, as if things weren’t confusing enough!
California, along with many other states, is broke. As part of an attempt to create more revenue, California passed a more aggressive law to force online merchants to collect sales tax. A 1992 Supreme Court decision stated that retailers that don’t have a physical presence in a state don’t have to collect sales taxes for sales to that state. But some states have passed new laws that redefine “physical presence” to include online affiliates and any subsidiaries.
Amazon.com affiliates are the thousands of websites like this one, where if you click on a link to a book or other product and buy something within a certain time frame, I get a commission of a few percent of your purchase. It’s a safe bet that the majority of blogs you read participate, even if the actual revenue is relatively small. But, by California’s new definition, if just one person is both an affiliate and lives in California, then Amazon.com has to start collecting sales tax from everyone in the state. What’s Amazon’s solution? Easy, cut off all CA affiliates immediately. That’s what they’ve done everywhere else. From CNN:
Other states that have passed the so-called “Amazon tax” in recent years include Connecticut, Illinois, New York, North Carolina, Arkansas and Rhode Island. The retailer has dropped the associates program in all these states, except New York, where it has a brought a lawsuit against the state.
Many other merchants that operate online like Overstock.com have been doing the same thing. They’d much rather lose the incremental revenue from affiliates than have to effectively increase prices for all customers from an entire state. For many website owners, Amazon is their primary source of income, and this move will force many of them to pick up and move.
At the same time, not paying sales tax is one of the expected benefits of buying from Amazon. (Even though in many states you’re technically still supposed to calculate and send it in manually, people rarely do.) This understandably annoys the national brick-and-mortar merchants like Walmart or Target.
As both a consumer and an Amazon affiliate, I am a concerned onlooker. These are two behemoths playing a high-stakes game, but I feel empathy towards those small businesses that just lost a huge chunk of their revenue overnight through no fault of their own. They seem to be collateral damage in this battle.
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