I’ve been reading and enjoying your blog for a long time, and think it’s one of the best out there for your mix of personality, short-term and long-term financial tips and advice. But one thing bothers me: the ongoing, almost central theme (obsession?) with early retirement. It seems to be the goal around which everything else in the blog revolves and leads toward.
Why is that? Do you hate your job so much, and can’t even imagine a job you would enjoy enough that you would want to do it whether you were paid or not? It doesn’t strike me that someone as industrious, curious and intellectually active as yourself would really ever retire. I understand there may be other activities you’d like to pursue, but my guess is that most of them would be potentially income-generating. So you’d still have a “job.” And if that’s the case, then why not pursue one or more of those things now, rather than delaying them until “retirement?”
It seems to me that “MyMoneyBlog” is likely one of those things, and I’m very glad you’re doing it. And if one reason is the hope to fully monetize the blog to the point of retirement from your nine-to-five job, then I hope you do that too.
But still, something about that recurrent theme of retiring just leaves me with a hollow, dead feeling in the pit of my stomach, as if we’re all inmates marking time on the wall of a dreary prison cell until our release. Maybe it’s the implied resignation to the assumption that joyless jobs are unavoidable – a bitter fact of life – that I reject. I just don’t like to think that as a society we accept a lifetime of delayed gratification as a given, and don’t rouse ourselves to do anything more about it than make sound financial plans to enjoy ourselves when the pain finally stops.
There are some great questions in there, and really it also showed me that I can improve on explaining my philosophies. I have all these ideas rattling around in my head, and not all of them reach the keyboard. My reply became rather long…
Definition of early retirement. I know that retirement is a very tricky word to use. For too many people, it conjures up images of playing golf and sitting around all day. Financial independence or financial freedom are better terms, and they all mean the same thing to me – I get to do whatever I want. Cook a new dish every day, rebuild a Land Rover Defender or Willys Jeep, volunteer, spend a year abroad, anything. F— You money.
Delayed gratification. Going back to the early retirement curve, a major assumption is that your current expenses are the same as your future expenses. Let’s say your household earns $80k and lives on $40k. Well, that curve assumes you’ll be living on $40k in “retirement” as well. Using a food analogy, getting there is not a crash diet, but requires a permanent change to healthier eating habits. I don’t feel deprived with my current lifestyle as it pertains to spending, otherwise it wouldn’t be sustainable.
A job that I would do forever? I’ve thought about this. Let’s try to design the best job possible. To start, it should satisfy this Career Venn diagram which reminds us to seek the intersection of things that we do well, things that pay well, and things we like to do. In addition, it should provide all the factors that make a job satisfying beyond money: autonomy, complexity, and a connection between effort and reward.
Does my current job cause me pain? Does my wife’s job? Not really, we are white-collar professionals so we have a certain degree of autonomy and challenge to our work. But we also have managers, meetings, clients, and politics.
Is there any such ideal job that exists? Honestly, if it had to pay $50k a year and 40 hours a week, probably not for me. I am the type of person that likes to do something for a while, and then move on to something else. Even self-employment has it’s own set of restrictions. Even though blogging is a sweet gig , having income that depends on advertising is very volatile.
This is where financial freedom comes in, because it means more flexibility. I have realized over time that I will probably need to do something, and that is a big reason why I am happy with a 4% safe withdrawal rate. All the academic studies that calculate this withdrawal rate stuff assume that a theoretical person blindly takes out 4% inflation-adjusted to the CPI every single year. From reading experiences of real early retirees, they adjust and adapt.
Let’s say we want that 4% withdrawal rate to create $40,000 of income from investments, but it ends up that 3% is a more reasonable number. Now, I need to find a job that pays $10,000 a year. I could do all kinds of things that would be kind of cool for $10,000 a year, and I wouldn’t have to work 40 hours a week either. I could do just about anything – web design, tutor high school or college students, teach English in a foreign country, apprentice with a skilled craftsman, or work as a travel guide.
Indeed, the possibilities are endless. One day, if the stars align, we will have children. At that point, we plan on downshifting to working part-time so that we can both enjoy raising kids without all the financial stress that our parents had. Our portfolio can already cover half of our expenses. Once the kids go to school, there will be more time for work, if needed. In the end, I would say that I am obsessed with freedom and autonomy.
Now, I always love every gift card that I get… but what if you’re trying to simplify your life and wanted to convert your Overpriced.com gift card to good ole’ fungible cash?
Well, the “old-fashioned” way was to sell them on eBay. A couple years ago, I tested out eBay and found estimated eBay cash-out ratios after eBay auction costs and Paypal transaction fees ranged from 81% for Gap gift cards to 90% for Amazon gift certificates. However, the eBay route adds in hassle and potential for fraud. What if some buyer from across the country says your card arrived empty?
A bunch of new websites have popped up that (1) provide upfront quotes for your gift cards, (2) provide a prepaid mailer to send in your cards, and (3) send you a check. The most popular ones appear to be Cardpool, PlasticJungle.com, GiftCards.com, and GiftCardRescue. Many of these go even further and offer things like online redemption using the codes on the back of the certain cards, and instant payouts via PayPal or via Amazon.com gift certificates.
However, I just wanted to run a simple comparison of what different card-buying websites would offer in straight-up cash for a $100 gift card at various retailers. I’m ignoring any swap-style sites, and also sites like CardWoo that make you mail in the card first without any upfront pricing quotes (why would I do that? sounds like an awful idea). Here are the results, updated for 2012:
Gift Card Website Comparison ($100 Face Value, Updated 2012)
When I first ran this comparison in December 2011, the website that offered the highest prices, on average, was GiftCards.com. However, as of January 2012 the overall winners are Cardpool and PlasticJungle. In either case, none of them had the highest prices across the board so if you can spare the time, trying each of the sites out may earn you a few more bucks. In the end, I would say that these sites do provide a useful service, as the payouts are often even better than what you could net after fees by selling directly on eBay.
The cards to stores that have the broadest appeal like Target and Home Depot have the best cash-out ratios. Something to think about next time you want to buy your buddy a gift card from StuffedMooseHeadsOnly.com.
I found it interesting that none of the sites wanted to buy an Amazon.com gift certificate from me, as they historically have a very high resale value. I’m guessing that Amazon forbids this somehow, or perhaps you can’t check the balance without adding it to a user’s account?
Here’s a TED Talk I just found by Graham Hill about simple living. Try to find something that you can apply to your life in a positive manner, instead of pointing out ways it won’t work. It’s unlikely any of us will live in a place as organized as his. A quick intro:
Can having less stuff, in less room, lead to more happiness? He makes the case for taking up less space, and lays out three rules for editing your life.
In Time is a new sci-fi movie about a future where science has figured out how to stop the aging process. To prevent overpopulation, the solution was to allow everyone to live to age 25, and then give them one year to live. Time has replaced money as currency. If you don’t earn more time, then you die. The rich effectively live forever. A cup of coffee costs 4 minutes. The trailer is below:
This storyline made me think of the almost frugal-cult-classic book Your Money or Your Life (get it used for $3 shipped). One of the concepts inside is that working is the same as exchanging your life energy for money. Let’s say you earn a solid living, $25 an hour after taxes. But then there is all the stuff attached – the commute, the clothes, the lunches, the stress (need for vacations and drinks after work). You might really be earning $20 a hour.
If your rent is $1,000, you’re spending 50 hours each month just to pay for that. An iPad costs $500, 25 hours of work. If you spend $100 a month on wasteful things that you really don’t enjoy, that’s another 5 hours of your life every month. In a way, we are sacrificing our lives for money. Sure, you may not die any sooner, but you’ll be spending that much less time on what you really want to do. It just happens so gradually and indirectly, we don’t notice. Try pricing everything out in terms of your real hourly wage. (A cup of coffee might actually cost more than 4 minutes.) Try adding up all the money you’ve ever made, and calculate your net worth to see how much you actually kept.
If you concentrate on maximizing the gap between expenses and income, one day your income from your investments will match your expenses. That’s financial independence.
Steve Jobs said in a great commencement speech that we should find work that we love. Most of us don’t love our work in the way that if we didn’t get paid, we would still go out and do it. Amazingly, he did. If you’re like me and are still having trouble with that, then at least we can reach for the day when we can simply do what we love because we don’t need more money.
I recently finished re-reading the updated edition of the popular book The 4-Hour Workweek by Tim Ferriss. I read it quickly when it first came out in 2007 or so, but this time I think was more ready for the message.
In the last lifestyle book I read, The Art of Non-Conformity, the goal was to find a convergence between your work and your passion. Ferriss goes the opposite way and clearly separates them. Forget “dream job”, matching your true dreams with a job is too hard for most people. Instead, the ideal job is the one that gives you enough money in exchange for the least amount of time. Now you can pursue your dreams.
This is a critical difference. The overarching goal is now to create automated income and free up time.
Highlights & Notes
Motivation and getting started. The timing will never be just right. Just go for it and correct course as needed. The price of failure is often low, while the price of never trying is often high.
Creating your own income. Includes various ideas on starting your own business with the goal of high income and low time commitment. Resell someone else’s products. License a product. Create your own product. Physical objects are okay, but informational products are even better if you can pull it off. Ferriss himself made his first big money by selling nutritional supplements using ads in magazines. (Not exactly a product to be proud of, which I guess fits into his point above. Good thing he’s great at marketing.)
Shifting from 9-5. Let’s say you don’t want to quit your current job yet. The goal is again to separate work from time. If you can do the work that you spread out over 40 cubicle hours in just 20 hours at home, that will create a lot of free time for you to start that side business. For some, this may be enough to start pursuing your other dreams. Detailed instructions on how to negotiate a remote-working arrangement, starting with a two-week trial and reaching a full-time remote situation.
Time management. As said elsewhere, it’s critical to stop wasting your time and energy on things are really aren’t important. Being busy is not necessarily the same as being productive. Cut out interruptions, stop time-wasters like checking e-mail all the time, and batch tasks together.
Have others work for you. Hire virtual assistants from India. They aren’t just drones, if you teach them a system and allow them to use their own discretion, they can really remove a lot of your workload. Outsource whatever you can, remember that you’re not trying just to maximize profit.
What if I actually succeed? How will you spend your time? Instead of the potentially vague pursuit of “happiness”, he asks why not simply pursue what excites you and makes you feel alive. Ferriss enjoys “mini-retirements” where he does long-term international traveling. People also tend to find satisfaction with tasks that require continuously learning and/or include helping others.
Even though sometimes I have the urge to go against popular opinion, especially when the author’s primary skill seems to be marketing, I have to say that I really enjoyed reading this book. For me, it provided a good balance of big picture theory and practical advice. As with any book of this type, 99% of the readers won’t be able to actually attain a 4-hour workweek. But in return for ten bucks and a few nights of reading, I definitely felt I got good value.
I would recommend anyone who has the entrepreneurial urge to read this book, and I’m keeping my copy around because the included companies and links are useful for future reference.
Inflation. Deflation. Hyperinflation. It’s all people seem to talk about these days. I’m always reading that you should always consider your investment returns after inflation. But what is inflation? Most of the time, they are talking about the Consumer Price Index for Urban Consumers (CPI-U) published monthly by the Bureau of Labor Statistics. This is based on the price of a theoretical basket of goods. Here are the components of the CPI, made into a nice pie chart by dshort.com from this recent BLS CPI report.
However, common sense tells us that we do not all share the same inflation rate. A long-distance trucker will be much more sensitive to the price of gas than a couple living in Manhattan. A grandmother who has owned her home since 1940 and doesn’t plan on moving doesn’t notice if rents are rising 3% or 6% a year. The CPI could have very little correlation to your personal inflation rate.
In addition, it’s possible to manage our own personal inflation rates by changing our behavior or making some upfront investments. Let’s take a look at the largest components of the CPI.
This category includes the cost of rent (or owner’s equivalent cost) as well as utilities like gas and electricity. The most obvious way to deal with inflation is to own a house, either directly or via mortgage. With a 30-year fixed mortgage, your monthly payment is going to stay the same, and your total housing payment is only going to vary a bit as your insurance and property taxes go up. My neighbor used to have a mortgage of $300 a month.
As for utilities, a solution I plan to install is solar photovoltaic (PV)panels. In most states, you can sell back the electricity you generate with solar panels throughout the day, so that it cancels out your entire electricity bill. With a large enough system, you will never have a power bill again. Here is a helpful PDF consumer’s guide on solar systems from the Department of Energy.
The large upfront cost can be defrayed with federal and state tax credits, and the panels come with (about) a 25-year warranty. Other parts, like the inverter, come with a 10-year warranty. If you have the space you could also install a windmill, or contract electricity from other sources.
If you live in an especially hot/cold climate and much of your expense is cooling/heating, a very important area is insulation.
This category includes the cost of vehicles, public transportation, and fuel. I plan on owning all my cars for at 10 years each, so even though it will catch up to me eventually, the annualized cost should remain reasonable. Avoiding the hit of depreciation during the early years, either buy buying used or holding for a long time, is important.
As for fuel, again I plan on using my solar panels to create electricity for my plug-in electric vehicle. Range is currently an issue, but as battery technology improves, I expect that it will be feasible for most households to own at least one electric vehicle.
Food & Beverages (15%)
This category includes food at home, dining out, and also alcohol. Why not grow some of your own food? We are starting to dabble in square-foot gardening, which involves planting small, efficient gardens that use minimal water, pesticides, and labor. Dining out is one of those expenses that is almost all for pleasure and convenience, so if it becomes hurtful then we’ll cut back. I’ve already been cutting back on the alcohol for waistline reasons.
Education & Communication (6%)
I’m not sure why these two are lumped together, but I really don’t see communication costs rising very much in the future. It would appear that data transfer is only going to get faster and cheaper. On the other hand, education costs continue to skyrocket. (Okay, now I see why they are together… sneaky) Even though this is only 6% of the CPI, if you have kids then tuition prices are likely a huge concern. If you don’t have kids (and are done with school), then you don’t care at all.
There are still some limited opportunities for prepaid college tuition out there, which are worth exploring if you accept the penalties for not following their restrictions. An example is the Florida Prepaid college plan.
Any other ideas for controlling your personal inflation rate?
New year, same old goals. This January, don’t sign up for an expensive gym membership with a contract, or buy a $500+ treadmill that ends up collecting dust. Yes, these might really help you achieve a healthier body, but they could also be a huge waste of money. What people should really figure out first is if they really have the discipline and motivation to stick with any exercise program.
Before dropping any cash, try one of these free fitness programs first. You don’t have to finish, just follow it for all of January. Studies have shown that it takes at least 30 days to create new habits. If you can’t even run around your neighborhood three times a week for a month, why would you buy yourself a treadmill?
Recent articles in the New York Times and BusinessWeek magazine talked about the growing emergence of websites where individuals can rent out their belonging to other strangers, coining the new term “collaborative consumption”. I like the idea. Not only can you make some extra money renting out your stuff when you aren’t using it, but as a borrower that means you need to buy less stuff as well. In addition, people can use it as a “test-drive” to try out things like a certain model car or an iPad. Here’s a list of websites in this area, please let me know any that I’ve missed.
RelayRides Peer-to-peer car rentals! Rent your car to strangers by the hour. Started in Boston and now available in San Francisco Bay Area as well. Free to join, and renters start with $25 free driving credit. Prices are cheaper than competitors like ZipCar, which owns their own private fleet. Claims that owners can make $250 a month on average renting out their vehicles. Rates include gas and insurance.
Airbnb Rent out extra rooms in your house (or the entire house, a castle, or private island…). Free to sign up. Set your own prices and availability. Airbnb facilitates all bookings and financial transactions. They already have over 50,000 properties in 10,000 cities.
Similar: ParkatmyHouse (rent out driveway or garage space in crowded areas)
Zilok Technically you can rent out anything on this site, but it has specific categories for cars, vacation sites, power tools, and event rentals. You can rent from businesses or individuals. Looks like a PS3 is going for $20-$25 a day.
Share Some Sugar Can I borrow a cup of sugar? You can also rent out anything on this site, but SSS seems to promote borrowing between people in the same neighborhood for free (with a refundable security deposit). After browsing a bit, I realize that I could use a lawn aerator, if only there was someone nearby with one available.
Similar: ShareZen (more for collaborative ownership of a plane, home, or boat), Skyara (a marketplace for “experiences”)
I suppose the main concern would be either theft or breakage of your property. Most sites have a user rating and feedback system similar to that of eBay, as well as security deposits. The car rental agencies do provide insurance, but I don’t believe the other sites do. In many cases, you can restrict your lending to members of your social network of friends via sites like Facebook.
Of course, the hardest thing about these sites is often getting the critical mass of adequate inventory to rent out to interested customers. Let’s hope one of these gains some traction. The one I want to use right now would be ParkatmyHouse. Combine their inventory with a real-time iPhone/Android app, and you could search for cheap parking almost anywhere. If you live where parking is scarce, you could profit from what is usually just a headache.
It’s the Season of Giving, so why not give away the things you don’t need anymore? I think right now is even better than “Spring cleaning”. We just spent a chunk of this past weekend making a box of stuff to give to various charities. Here’s why, along with some tips:
Get started. In order to break out the Christmas or other holiday decorations, you’re already rummaging around the attic, basement, or garage. Don’t stop there! One helpful tip I read about recently was to get three big boxes and mark them Keep, Undecided, and Toss. Then you can just barrel through quickly without getting stuck on any single semi-sentimental object.
Full Closets? Most people probably have gone through all four seasons of 2010 and not worn a lot of their clothes. If you haven’t worn something in an entire year, it’s seriously time to consider donating it. This time of year, places are always looking for winter clothes like coats, gloves, and boots. If you need some extra spending money, sell your trendier stuff to vintage and thrift shops like Buffalo Exchange.
Getting kids involved. The young ones are probably very exciting about the incoming gifts. Now that they are a “big boy” or “big girl”, isn’t it time to look through their toy box and see what they don’t play with anymore? Santa may not bring them as much stuff if they don’t have any more room… Gently used toys can easily be donated, even if you can’t re-gift directly.
End-of-year tax deductions. If you donate by December 31st, you can claim any charitable donations as a tax deduction for your 2010 taxes and reap the benefits sooner (assuming you itemize). Here are a few donation valuation guides from a Salvation Army, another Salvation Army, and a Goodwill branch. I used ItsDeductible from the Intuti TurboTax folks last year and liked it.
Use the internet to maximize your effectiveness. Sites like Freecycle and Craiglist allow you to give your stuff away to someone who can actually use it. There are also many niche charities popping up here and there, specializing in redistributing everything from sporting goods to business clothes for job-seekers to partially used gift cards.
Take a break from the holiday accumulation frenzy and declutter instead. Even though I put it off as well, it always feels great afterward.
Another topic I’ve been interested in is the 100 Thing Challenge started by Dave Bruno. If you read a lot of simplicity blogs you’ve probably already heard of it, but it’s a pretty simple idea: Live with only 100 personal possessions. You can always quibble about what is a “thing” – a pair of socks, or all your socks? Your nail clippers, or all toiletries? But you get the basic idea.
The goal of the 100 Thing Challenge is to break free from the confining habits of American-style consumerism. A lot people around the world feel “stuck in stuff.” They feel like their closets and garages are too full of things that don’t really make their lives much better. But how to get unstuck?
Seems like clothes usually take up at least 20 items. Since this challenge basically requires that as many things as possible be digitized, I’ve been eyeing out this $400 Fujitsu bulk scanner out… even though that would be a new thing.
In the process of trying to minimize junk, I sold off some pretty old textbooks this week. It’s been over ten years since I first bought any of these books, and the last time I used them was probably about 7 years ago. I had saved them initially for the qualifying exams that PhD students must take early on in graduate school, and then later thought I might go back to school or use them as references at work. They also looked nice on my bookshelf and made me feel smart.
I was about to throw them out since I figured they’d be five editions behind by now and wouldn’t be worth anything, but a quick search ended getting me about $10 per book.
Compare Offer Prices
After looking around, the easiest place to start seemed to be the price comparison engine at BigWords.com. You simply enter all the ISBN numbers at once to your virtual “bookbag”, and then click “Start Price Comparison”. The site then looks up the price offered by buyback sites like TextbooksRus, SellBackYourBook.com, Bookstores.com, Cash4Books.net, FirstClassBooks, Valore Books, and eCampus.
They also look up current lowest asking prices at sites where you can sell it yourself, like TextbookX Marketplace, Amazon.com, Half.com, and TextbooksRus. In some cases like the one below, a buyback site actually offered more than these middlemen before their commissions.
Another option I considered was to drive to the nearest college campus bookstore and run the books through each of their databases, but I decided it wasn’t worth the time and gas for me. This would obviously be much easier for current students.
Book Buyback Online
I just wanted to get rid of them in bulk and didn’t feel like maximizing my price for something that might never sell, so I just went with the highest offers from each of the buyback sites. In some cases, I had to group purchases because some sites had a minimum purchase amount (i.e. they won’t buy less than $15 of books from you).
All the sites had a similar process, and were very simple to deal with. You add the books you want to sell, and then print out a packing slip and prepaid mailing label. Most pay for USPS media mail, although some offer FedEx or other faster service. I just had to drop them off at the post office since they weighed more than a pound. Once they receive and process the books, they then cut you a check (some offer bank direct deposit or PayPal). I haven’t received my checks yet, but the sites listed appear to be reputable.
Let me know if you know of a better way to offload your unwanted old textbooks.
MyMoneyBlog.com is for informational purposes only. This website does not provide investment advice, nor is it an offer or solicitation of any kind to buy or sell any investment products. Rates and terms set on third-party websites are subject to change without notice. Please note that MyMoneyBlog.com has financial relationships with some of the merchants mentioned here. MyMoneyBlog.com may be compensated if consumers choose to utilize some of the links located throughout the content on this site and generate sales for the said merchant. I thank you for supporting this site. This is an independently-owned site and all opinions expressed are my own.