Book Review: Wide-Eyed Wanderers by Richard and Amanda Ligato

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wideeyedbookA couple of weeks ago I wrote about the non-traditional retirement story of Richard and Amanda Ligato, which was highlighted in a Nationwide Insurance commercial. Usually TV commercials are too busy convincing you to buy buy buy, so the idea that people who saved half their incomes were shown was amusing.

I ended up buying a copy of their book Wide-Eyed Wanderers: A Befuddling Journey from the Rat Race to the Roads of Latin America & Africa* which covers their journey through Mexico, South America, and Africa. For simplicity and frugality, they bought a 1978 Volkswagen camper-van and basically lived in it the entire trip, driving to all of their destinations (besides being shipped from Panama to Ecuador, and then Chile to South Africa). They cooked their own meals and slept nearly every night in the van.

The Ligato’s are one feisty couple. There are multiple stories about them being shaken down by police officers, customs officials, and other government workers for bribes and how they refused to pay any of them. (I think it helped that Amanda is a native speaker of Spanish.) In another incident, they actually tackled a woman who was trying to pickpocket them and ended up arrested in an Argentinian police station (they were eventually released). They weren’t as lucky when they reached the bottom of South American and tried to talk their way into a cheap ticket to Antarctica, as they ultimately had to give up as the price was too high.

Me being me, I wanted to learn more about the economics of how they saved, planned, and budgeted for their journey. Unfortunately, they really don’t cover this in the book. The topic is only mentioned briefly when they have to hang out with what you might call the “average American traveler”. For example, on the Inca Trail in Peru, they wrote about how a fellow hiker realized that the Ligatos had spent as much on their last 15 weeks coming through Mexico and into South America as she alone had spent on her 2-week packaged tour.

For the most part, the book consists of journal entries, each from a different town or city. The stories were nice, although as a whole I wouldn’t say the book was exceptionally funny (although there are light moments) or enthralling (although there are some exciting moments). What I’m trying to say is that they aren’t professional writers and you shouldn’t expect the humor of Bill Bryson or the romanticism of Peter Mayle. This is just a true journal of real people who had a life-changing journey that most people can only dream about.

I highlighted this quote from Rich Ligato, expressed while watching a ceremony to remember the dead in Patzcuaro, Mexico:

If I were to die now would I go without regret? Have I really lived? Unlike many of those who created these ancient traditions, I’ve been given the free will to choose my path. Have I?

If are reading this, it is likely that you have more freedom in your life than most. Books like this remind me to ask myself: Are you consciously living or just passively getting by?

* I bought a physical copy, but this title should also be included for free if you are part of the Kindle Owner’s Lending Library or Kindle Unlimited. It is self-published which is probably why I couldn’t find it at my library, but you could still check.

Non-Traditional Retirement Story: 50% Savings Rate and Year-long Vacations

Rarely are people who achieve a non-traditional retirement profiled on mainstream media, and when they do it’s usually with a “omigosh look at these crazy people” type of article. So I was surprised when I ran across this couple who talk casually about saving 50% of their income and taking year-long vacations every few years on a Nationwide Insurance commercial. Via ERE Facebook page.

Further digging revealed their full names as Richard Ligato and Amanda Bejarano-Ligato, who run their own website and wrote a book Wide-Eyed Wanderers: A Befuddling Journey from the Rat Race to the Roads of Latin America & Africa in 2005. Here’s another brief description of their story from a USA Today article:

“The key is living like you did when you were a student,” says Rich Ligato, 45, who lives in San Diego. While not completely financially independent, Ligato and his wife, Amanda, stopped working steady jobs more than a decade ago. Their goal is working for three years, taking odd jobs, saving their money, then enjoying a year-long vacation break, doing something such as living in India or biking along the Western coast of the U.S. When they return, they take entirely different jobs.

Rich is currently teaching biking classes and managing an apartment, while Amanda is teaching yoga. “It’s not about money, it’s about freedom,” he says. “If you’re just driving to make things secure and safe, think about what that means. There’s nothing interesting in life. You might as well die.”

(Updated to add: I haven’t read the financial particulars of their situation, but given their 50% savings rate alone the math would say they could work one year and take the next year off if they just kept their spending rate constant. But they work 3 and take 1 year off. So even if they spend double what they do when working, then they could put away 1 year of savings for retirement, and then spend the other 2 years on their year-long vacation. That’s still more than the average person puts away (1 full year of expenses every 4 years, or 25% of their combined annual salary every year). This may be off, but roughly how I imagine it working out.)

I always get excited by stories like this; they may not be “retired” but they are living consciously and achieving their dreams. (I’m really looking for one of these stories where they have kids and travel the world.) I still bought their book and starting reading it already. Not sure how new this is, but Amazon does this neat thing now when you order a physical book, they let you start reading the beginning on the Kindle while you wait for it to arrive. Nice for us who prefer physical books but are also impatient. ;)

Reader Story: Early Retirement by Age 40 with Income-Focused Portfolio

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The following is a guest post contributed by reader Bob, who started getting serious about financial freedom about 10 years ago and plans to reach early retirement next year at age 40. Thanks Bob for candidly sharing about your personal experiences and income-oriented portfolio.

monodiv_220I started following Jonathan’s blog about five years ago because I shared the same interest in personal finance and the goal of early retirement. I’ve made a lot of investing mistakes over the years, but with my 40th birthday coming up later this month I thought I’d share my approach which had the primary goal of income generation and capital preservation.

My initial goal was to cover my fixed expenses each month (housing, transportation, utilities, etc) from investment income. Once I had covered my fixed costs I expanded the goal to full income substitution for an extended period of unemployment (24 months), and later to full income substitution for 10-15 years. I’d like to say I was focused on a fixed target, but as with everything targets changed based on circumstances.

I started focusing on saving in the summer of 2005. I had graduated with an MBA and took a position at an Investment Bank in New York. I completed my MBA at the University of Texas at Austin largely because the tuition was low and I could graduate debt free. Looking back, this decision turned out be a very good one as I was able to secure a high paying job while investing relatively little in my education. In my view, maximizing revenue and minimizing costs is what personal finance is all about. However in life’s little ironies, I ended up paying through the nose for my wife’s graduate degree at UT in 2013-2014 but at this point we are far more capable of supporting this investment.

One thing I learned early on was that I did not want to be working in investment banking beyond ten years. The job takes a lot out of you and while the money is good and you learn a lot, it can be a very volatile business. Given the volatility in the markets and our annual bonus I decided I’d invest largely in fixed income and as a single guy in New York it made sense to look at tax-free munis. I don’t pretend that I had the foresight into the real-estate and financial crisis of 2008-2009 but I did witness a lot of risk taking and leverage deployed in the pursuit of returns.

I will not go into all details of my portfolio rather I’ll just go over the highlights.

$800,000 in taxable accounts which generate about 6.5% yield through investments in closed-end funds, utilities, and REITs. The vast majority is in muni bond funds as I’d prefer tax free income but qualified dividends also enjoy a lower tax rate. REIT income offers no tax advantage but I hold them as until recently we always rented our home. There is obviously a high degree of interest rate risk in my portfolio, but given I have deployed leverage in other part of my portfolio I’m comfortable with it. Overall I think taxes will go higher and so I’d much prefer munis to treasuries. I also hedge my bond holding by selling naked puts on the TBT (leveraged short treasury ETF). This has the positive impact of boosting my cash returns and hedging my long bond position.

$100,000 in LendingClub which generates a 7-8% return inclusive of defaults. I was hoping for a returns closer to 9% but given the institutional money chasing loans and tepid demand for loans it is not a surprise returns are lower than expected. Hopefully LendingClub does not relax underwriting standards in pursuit of loan growth. I still like this asset as the loans are short-term, payments include interest and principle, and you can invest as little as $25 at a time but I’ll moderate my contributions in the future.

$200,000 in direct real-estate investments through RealtyMogul and Fundrise. I only started investing nine months ago, but I have aggressively added to this asset class. I get geographic diversification across the country and by assets class (residential, commercial, debt, equity) and you essentially cut out the fees paid to fund managers and REITs so I see this as a win-win. It is still too early to estimate returns, but I’m hoping to generate 7.5% on a cash on cash basis and any capital appreciation would be a bonus. Most of the investment promise IRR’s north of 10% so I think the 7.5% is reasonable. I also think this asset class will prove to be better than LendingClub given these are secured investments and debt financing is cheap. On the downside there is zero liquidity, lead times are very long, and the minimum investments are very high.

Overall I’m generating about $6200/month in tax advantaged income and my goal is to eventually get this up to $7000. My savings suffered over the last 12 month as we incurred costs for my wife’s graduate degree, we relocated from Berkeley, CA to Austin, TX and we purchased our first house. I feel confident in ramping up savings over the next months and hitting full income substation before my 41st birthday next year.
I’m sure other will ask how I intend to offset the impact of inflation I also have $500K in tax deferred retirement (IRA, 401K) accounts but these are broadly diversified across domestics and international index funds so not much to say. I think continuing to invest in tax deferred accounts along with real estate investments will help offset the impact of inflation.

If you have constructive questions or feedback, please leave them in the comments. Please remember to be respectful! If you’d like to share your own story, please contact me.

Stefan Sagmeister: Things I Have Learned

Designer Stefan Sagmeister did another TEDtalk titled Happiness by design where the best part was when he shared the list below of “Things I have learned in my life so far” (which later became a book of typographic artwork).

  • Complaining is silly. Either act or forget.
  • Thinking life will be better in the future is stupid. I have to live now.
  • Being not truthful works against me.
  • Helping other people helps me.
  • Organizing a charity group is surprisingly easy.
  • Everything I do always comes back to me.
  • Drugs feel great in the beginning and become a drag later on.
  • Over time I get used to everything and start taking it for granted.
  • Money does not make me happy.
  • Traveling alone is helpful for a new perspective on life.
  • Assuming is stifling.
  • Keeping a diary supports my personal development.
  • Trying to look good limits my life.
  • Worrying solves nothing.
  • Material luxuries are best enjoyed in small doses.
  • Having guts always works out for me.

Non-Traditional Retirements, or DIY Sabbaticals

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NPR Morning Edition featured a story today about non-traditional retirements: Seeing The (Northern) Light: A Temporary Arctic Retirement. Instead of waiting until 65, Winston Chen decided to stop working for an entire year mid-career and moved his family to a small Norwegian island in the Arctic Circle with only 180 residents.

The whole family got to do many things they’d never do otherwise. Financially, they offset their mortgage by renting out their Boston home completely as-is for a year to another family on a temporary work assignment. His wife Kristin was able to get a job teaching elementary school in Norway for a year, as it was a remote area that needed teachers. They could keep expenses low as the tiny village had no need for a car, no malls, and no restaurants. One of his pursuits ended up being an iPhone app that took off and now supports their entire family, although that wasn’t the goal.

The inspiration came from the TEDtalk “The power of time off” by designer Stefan Sagmeister. Here’s a screenshot (sorry for the poor quality) illustrating the traditional working timeline: learn for 25 years, work for 40 years, then retire for 25 years.

A commenter pointed out that this shows that our society seems to feel that education is for the young, work is for the middle-aged, and leisure is for the elderly. But what if you decided to snip 5 years from those retirement years and sprinkle them between your working years? This is essentially the idea of sabbaticals, usually associated with tenured professors taking a paid year off from their usual teaching and research duties. Every 7 years, Sagmeister completely shuts down his popular design shop for an entire year.

Both Sagmeister and Winston Chen add that if you do this, you shouldn’t just give yourself a year of nothing and expect to figure it out along the way. At the minimum, you should make a list of all the things that you want to try and/or accomplish (Chen’s included oil painting, photography, reading, learning Norwegian, and learning how to play the ukulele). Both broke it down into a daily schedule as well (Chen’s is below).

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David Foster Wallace “This is Water” Commencement Speech

Graduation season is here again, making it the perfect time for The Glossary to create a short film out of a great commencement speech by the late writer David Foster Wallace. It has great application to life, and thus great application to those seeking financial freedom.

Consciousness. Conscious living. Conscious spending. All things that sound simple but are so hard to actually do on a daily basis.

The speech is abridged above, I enjoyed reading the full version.

A Beach Less Traveled: From Corporate Job to Flip Flop Perfumer – Book Review

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The book A Beach Less Traveled sounded like just the thing to read during a winter weekend… an American couple shares about their true story of going from “corporate chaos” to living in a tropical paradise where they run a small perfume shop. I love travel non-fiction, especially the work of authors like Peter Mayle and Bill Bryson. So accepted a free review copy of this book, hoping to be re-energized in my ongoing quest for financial freedom.

We meet the Berglunds, a very hardworking and reasonably successful couple living in the US. He was a lawyer, a lobbyist, and a trade association executive. His wife ran a small bed and breakfast. During their vacation travels, they fell in love with the small Caribbean island of St. Martin. They drew up a 10-year plan to create a perfumery and move there, as Berglund enjoyed chemistry as a hobby. Over the next 15 years, they saved up the million dollars that was necessary to make their goal happen – create and test their fragrances, buy a property for their store, buy inventory, market to tourists, etc.

It takes a skilled writer to weave all of this into an inspiring story. Unfortunately, the reading was much more dry. Things cost more than expected. Don’t they always? I was hoping for some examples of creative frugality, but nothing especially interesting popped up. Buying property on a small island that happens to be a overseas collectivity of France? Slow. Plus you’re a US citizen? Even slower. House repair? Takes a while. Phone repair? I get it. Island life is slow. Now, perhaps this is a good lesson for someone actually thinking about moving to the island, but I was left wanting for a charismatic character, a humorous story, or that “oooo-I-wish-I-could-do-that-too” feeling.

I also couldn’t help but be slightly annoyed when they talked about “living like a local”, but kept throwing out excuses about how they live in the French (and French-speaking) side of St. Martin but refused to learn French. That doesn’t sound like living like a local to me. If this is your new home, why not learn the language?

The Berglunds sound like nice, energetic people and I’m very happy they achieved their personal goals. They should be proud of themselves. I hope they are profitable in their new business as I believe they do need it to succeed. (They were not financially independent first.) I’m afraid I just didn’t find any inspiration in the book. The takeaway lesson seemed to be that if you really want it bad enough and save up a million dollars first over 10-15 years, you too can own a small business on a Caribbean island.

Book Review: Man’s Search for Meaning by Viktor Frankl

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Viktor Frankl was a respected doctor and therapist before he became a concentration camp prisoner during the Holocaust. After somehow surviving the unthinkable only to find that he had lost both his parents and his pregnant wife, he wrote the book Man’s Search for Meaning.

I’ve visited the Dachau concentration camp, but reading this book was so much more vivid. You’re not just sent somewhere to die. You’re forced to relocate to a “labor camp”, and so you pack up your entire life into a few bags. Your bags are confiscated, so you hide some photos or jewelry in your clothes. You are stripped completely naked, and given a dead man’s rags to wear. You don’t even have a name anymore, you’re just a number (Frankl was 119104). And this is before the coming years of physical and mental torture.

With this background, Frankl introduces logotherapy, a form of existentialism that says that humans are driven not by the pursuit of pleasure (Freud) or the pursuit of power (Adler), but the pursuit of meaning. There are three ways to achieve meaning:

  1. Creating a work or doing a deed,
  2. Experiencing something or encountering someone (love),
  3. By taking a proper attitude when faced with unavoidable suffering

This last part is hard to explain unless you read the book, but the unavoidable part should be emphasized. We’re not talking about “pain is good”. In my mind, I think of it as maintaining honor and self-respect no matter what. Frankl writes:

Everything can be taken from a man but one thing, the last of the human freedoms — to choose one’s attitude in any given set of circumstances, to choose one’s own way.

He also quotes Nietzsche, “He who has a Why to live for can bear almost any How.”

How does this relate to personal finance and the pursuit of financial freedom? I think of it in two ways. First, in terms of yourself. We are all attracted to material things like houses, cars, clothes, and I’d include money. Imagine if all that was taken away. You’d still have your body, your mind, your unique meaning and purpose in the world. We should develop those things. The things you’ve learned, your memories, your experiences, your skills, all those can’t be taken away. All the good deeds that you have already accomplished, those also can never be taken away.

Second, it relates to motivation. Why do you want more money? Why do you want financial freedom? Is it enough to just want to avoid work? Maybe your goal is to spend time with your loved ones. Maybe you want to create beautiful art. Maybe you want to build an orphanage in Cambodia. Maybe you just want to try every ramen restaurant in Japan.

I have some meanings that I am pursuing, but I’m still searching for others.

Book Review: Bossypants Memoir by Tina Fey

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I have a goal this year to read and review more books, ideally a book per week on average. Recently, I’ve been into reading biographical books about interesting people pursuing their passions. Feel free to send me some suggestions.

Tina Fey’s Bossypants seemed like a funny auto-biography about someone who grew up in a “normal” working-class family and took a little while to become a respected writer, actor, producer, and comedian. Wealthy, too: Fey reportedly makes $500,000 per episode of 30 Rock and has an estimated net worth of $45 million. I should add that I have never seen a full episode of 30 Rock, although I have seen some SNL Weekend Updates, all the Sarah Palin skits, and a few of her movies.

The book was definitely Tiny-Fey-style funny and a quick read, but it wasn’t very revealing. I should have known, as the book is crosslisted under both “Humor & Entertainment” and “Biographies & Memoirs”. Indeed, I get the impression that she’s actually quite a private person and is reluctant to share anything truly intimate. She considered herself an ugly, unpopular nerd in high school. Well, that applies a lot of people. She worked a menial job at the YMCA while supporting her improv education. Eh, okay. Besides the funny bits, here are my highlighted quotes:

On being a leader:

It is an impressively arrogant move to conclude that just because you don’t like something, it is empirically not good. I don’t like Chinese food, but I don’t write articles trying to prove it doesn’t exist.

On discrimination:

When faced with sexism or ageism or lookism or even really aggressive Buddhism, ask yourself the following question: “Is this person in between me and what I want to do?” If the answer is no, ignore it and move on. Your energy is better used doing your work and outpacing people that way.

On teamwork:
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