Three Pillars of Self-Determination: Autonomy, Competence, and Community

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After reading the book Sapiens about how the history of our species affects our everyday experience, I found the related book Tribe: On Homecoming and Belonging by Sebastian Junger. Again, our genetic material hasn’t had enough time to change much from a human living 10,000 years ago, when all humans roamed together in nomadic bands of around 30-50 people. Humans today still retain a strong instinct to belong to such small, social groups that work together toward a common purpose – “tribes.”

What happens we can’t live in tribes anymore? Why does living in our modern, affluent society actually lead to higher rates of depression and suicide?

First agriculture, and then industry, changed two fundamental things about the human experience. The accumulation of personal property allowed people to make more and more individualistic choices about their lives, and those choices unavoidably diminished group efforts toward a common good. And as society modernized, people found themselves able to live independently from any communal group. A person living in a modern city or a suburb can, for the first time in history, go through an entire day—or an entire life—mostly encountering complete strangers. They can be surrounded by others and yet feel deeply, dangerously alone.

In contrast, when a large-scale catastrophe occurs, rates of depression and suicide actually drop for a while, perhaps because we again feel united and connected with others.

[Researcher Fritz] was unable to find a single instance where communities that had been hit by catastrophic events lapsed into sustained panic, much less anything approaching anarchy. If anything, he found that social bonds were reinforced during disasters, and that people overwhelmingly devoted their energies toward the good of the community rather than just themselves.

The book includes many examples of how this need for true community is behind many societal problems. This also fits in with self-determination theory:

The findings are in keeping with something called self-determination theory, which holds that human beings need three basic things in order to be content: they need to feel competent at what they do; they need to feel authentic in their lives; and they need to feel connected to others. These values are considered “intrinsic” to human happiness and far outweigh “extrinsic” values such as beauty, money, and status.

Here how Wikipedia describes these three pillars:

  • Autonomy – Desire to be causal agents of one’s own life and act in harmony with one’s integrated self. (This does not mean you want to be alone.)
  • Competence – Seek to control the outcome and experience mastery.
  • Relatedness (Community) – Will to interact with, be connected to, and experience caring for others.

We want to help others. We are perfectly willing to sacrifice to do so. But we also want to be in a trusted group that would also risk themselves to help us. These smaller groups that extend past your nuclear family are a common element of Blue Zones.

What would you risk dying for—and for whom—is perhaps the most profound question a person can ask themselves.

A lighter version might be, how many people do you know that would be willing to commit real, significant sacrifice to help each other?

In the big picture, our country is struggling because we don’t feel united as one team. In the small picture, this is a critical part of “retirement planning”. Many people derive both competence and community from their work, and you will have to replace that to create a happy post-work life. (Similarly, if you hate your work, you probably don’t find community and competence there.)

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

68 Bits of Unsolicited Advice by Kevin Kelly

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The best thing I read this week was a “Things I’ve Learned…” list called 68 Bits of Unsolicited Advice by Kevin Kelly – a very interesting fellow (see his bio, about me pages) who must have secretly figured out how to freeze time given all the things he does! I’m most familiar with him as the editor of Cool Tools.

Certain items on the list will sound familiar and only a few are finance-related, but chances are you’ll find something new that clicks. Here’s a small selection:

– When you are young spend at least 6 months to one year living as poor as you can, owning as little as you possibly can, eating beans and rice in a tiny room or tent, to experience what your “worst” lifestyle might be. That way any time you have to risk something in the future you won’t be afraid of the worst case scenario.

– Don’t be the best. Be the only.

– Perhaps the most counter-intuitive truth of the universe is that the more you give to others, the more you’ll get. Understanding this is the beginning of wisdom.

– Separate the processes of creation from improving. You can’t write and edit, or sculpt and polish, or make and analyze at the same time. If you do, the editor stops the creator. While you invent, don’t select. While you sketch, don’t inspect. While you write the first draft, don’t reflect. At the start, the creator mind must be unleashed from judgement.

– Following your bliss is a recipe for paralysis if you don’t know what you are passionate about. A better motto for most youth is “master something, anything”. Through mastery of one thing, you can drift towards extensions of that mastery that bring you more joy, and eventually discover where your bliss is.

Definitely something to bookmark and read again.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Better Future: Free Background Check Powered by Checkr

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(Update: I just read the Vox article, Beware of these futuristic background checks, and that reminded me of this service. An inaccurate background check can prevent you from getting a job. Unfortunately, they have temporarily suspended their free background checks due to COVID-19.)

While updating my posts on free Consumer Reports, I noticed that Checkr offered a free background check via the BetterFuture.com website. No credit card required, no trials. Checkr is a legitimate company that provides background checks for Uber, Lyft, Postmates, and Instacart, so I valued their results more than most other “free lookup” sites.

The benefit of knowing what is on your background check is that you can fix any inaccuracies before applying for employment. In return, Checkr makes money by trying to connect you with relevant job opportunities based on your unique information.

Better Future takes your basic information (name, address, SSN) and pulls data from federal databases and public records from over 3,200 local counties. The sections of the background check report are:

  • Address History
  • SSN Trace
  • Sex Offender Search
  • Global Watchlist Search (International crime databases)
  • National Criminal Search
  • County Criminal Searches

I decided to run a free background check on myself, and it only took about an hour even though it said it might take up to 3 days. The information shown was all correct to my knowledge. Here’s a redacted screenshot of my report:

The background check does not include Employment History, Driving Records, or Civil Records. Here is the disclaimer that comes with the report:

This background check is for the named individual only. Better Future searched the sources listed below based on the information you provided. Failure to provide accurate or complete information may affect results. Third parties, such as potential employers, may search other databases for information about you. This is not a “consumer report” as defined by the Fair Credit Reporting Act (FCRA) and may not be used for determining any person’s eligibility for credit, insurance, employment, housing, or for any other purposes covered under the FCRA.

Bottom line. Checkr offers a free background check via BetterFuture.com. No credit cards, no trials. In return, they can match you up with job opportunities (optional). I signed up for a free report and I found no errors in the information.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Big List of Free Consumer Data Reports (2/2): See Your Confidential Rental History, Insurance, Retail, & Employment Data

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magUpdated 2020. Here is the second part of my big list of free consumer reports from over 50 different reporting agencies. The first part included your credit, banking, and subprime lending-related information. This part includes your housing, insurance, and employment history. Request a free copy every 12 months of what these databases have stored about you and are telling prospective landlords, insurers, or employers.

Again, you may not need to check all of these, and many may not even have a file on you anyway. But for example if you are a renter then you’d want to make sure your rental history is clean and correct, or if were applying for life insurance you might check your medical reports.

Based on my situation, I have checked the following reports out of the ones listed below – CLUE Auto, CLUE Property, MIB.com, Milliman IntelliScript.

Rental History

Realpage Consumer Report. Provides tenant screening through their LeasingDesk product, including “the industry’s largest rental payment history database.”

CoreLogic SafeRent. SafeRent provides both tenant and employment screening data, including information regarding landlord tenant and criminal public court records. One free report every 12 months.

Experian RentBureau Rental History Report. “Every 24 hours, Experian RentBureau receives updated rental payment history data from property owners/managers, electronic rent payment services and collection companies and makes that information available immediately to the multifamily industry through our resident screening partners.”

First Advantage Resident History Report. Tenant and employment background checks. One free report every 12 months.

Contemporary Information Corp. CIC provides background checks on prospective tenants and/or employees and contractors for landlords and management companies. Keep records of any rental evictions.

Tenant Data. Provides tenant history reports, including any reported damages, unpaid balances, evictions, lease violations, noise complaints, or unauthorized pets.

Screening Reports, Inc. A national provider of background screening service to the multi-family housing industry.

TransUnion Rental Screening Solutions SmartMove provides tenant credit, eviction, and background checks.

  • MySmartMove.com FAQ page
  • SmartMove will disclose the contents of a criminal and/or credit report retained by SmartMove to an individual who requests a copy of their report. To verify your identity and obtain a copy of your report(s) or dispute any information within that report, please contact customer service at 866-775-0961.

LeasingDesk (Real Page, Inc.) Tenant screening.

Auto and Property Insurance

C.L.U.E. Personal Property Report. A division of LexisNexis, CLUE stands for Comprehensive Loss Underwriting Exchange, which collects information that is used to calculate your insurance premiums. This report provides a seven year history of losses associated with an individual and his/her personal property. Includes date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name. This also means you can find out about previous claims on the house you are currently renting or recently bought, even if they weren’t made by you.

C.L.U.E. Auto Report. This report provides a seven year history of automobile insurance losses associated with an individual. Includes date of loss, loss type, and amount paid along with general information such as policy number, claim number and insurance company name.

A-PLUS Loss History Reports, subsidiary of Verisk. ISO stands for Insurance Services Office, A-PLUS stands for Automated Property Loss Underwriting System. Auto and property loss claim history.

Drivers History. Owned by TransUnion. Collects driving violations.

Insurance Information Exchange (IIX), subsidiary of Verisk. Provide reports including your motor vehicle records and driver history, including any traffic violations or related criminal history. May require proof of adverse action to obtain free report.

Utilities

National Consumer Telecom and Utilities Exchange. NCTUE tracks when people don’t pay their phone, cable, or utility bills. One free report every 12 months.

Retail

The Retail Equation. Tracks product return and exchange abuse at retail merchants.

Gaming

VIP Preferred. Tracks consumer data regarding check-cashing at casinos.

Medical History

MIB (previously known as Medical Information Bureau). Run by 470 insurance companies with a “primary mission of detecting and deterring fraud that may occur in the course of obtaining life, health, disability income, critical illness, and long-term care insurance.” They record information of “underwriting significance” like medical conditions or hazardous activities. If you have not applied for individually underwritten life, health, or disability income insurance during the preceding seven year period, then you probably don’t have a record.

Milliman IntelliScript. Tracks your prescription drug purchase history. “Milliman IntelliScript will have prescription information about you only if you authorized the release of your medical records to an insurance company and that company requested that we gather a report on you.”

Employment History

The following companies all offer background screening services for employers. Most will not have any information about you unless you authorized a potential employer to run a background check on you (probably during the application process). Some will not provide you information unless there was adverse action. Otherwise, you can get one free copy every 12 months.

The Work Number (division of Equifax). They also keep historical income records.

Accurate Background, Inc.

American Databank, LLC.

Backgroundchecks.com.

Checkr

EmpInfo

  • EmpInfo.com report request page (scroll down to FCRA section).
  • Generally won’t have a report on everyone, only for people specifically requested by an employer.
  • 800-274-9694

First Advantage Background Check. Tenant and employment background checks. One free report every 12 months.

HireRight, also recently merged with General Information Services (GIS)

Info Cubic.

IntelliCorp

OPENonline

Pre-employ

Professional Screening & Information, Inc.

Sterling Talent Solutions (acquired EmployeeScreenIQ)

PeopleFacts

Truework

Reminder: Also see Part 1: Big List of Free Consumer Reports with Your Credit, Banking, and Payday Lending Data.

Sources: ConsumerFinance.gov, FTC.gov, Wikipedia

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Open Enrollment Checklist: HSA, HCFSA, DCFSA, Disability Insurance, Life Insurance

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maxben

We just finished our open enrollment paperwork, and like many other workers we faced a long and confusing list of instructions. They tried to distract me from the increased health insurance premiums by adding a bunch of optional “perks” like universal life insurance and paid identity theft protection. Christine Benz has a thoughtful Checklist for Open Enrollment Season. Here are my own thoughts as I went through the options:

Health Savings Accounts (HSA). Doesn’t “triple tax-free” sound good? HSA contributions are tax-deductible (pre-tax money), they grow tax-free once there, and your withdrawals are tax-free when spent on qualified healthcare expenses. However, you have to be enrolled in a qualified high-deductible health plan (HDHP) to be eligible, which means your higher out-of-pocket costs might not offset the cheaper premium plus upfront tax savings. Depending on your estimated healthcare costs, tax rate, and how much your employer pays, you may be better off with a traditional HMO or PPO plan. A bit of math will be needed.

In order to maximize the HSA’s long-term advantages, you will also want to treat the HSA as an investment account. This means you’ll you need to cover the higher annual out-of-pocket costs yourself and still have money left over to fund the HSA.

Healthcare Flexible Spendings Accounts (HC FSA). I’ve said it before, but these can be a bureaucratic mess. The benefit is “use-it-or-lose it”, but for me it has been “use-it-and-lose-my-mind”. Third-party benefits administrators have given me several bad experiences with submitting my receipts and ensuring they are approved. If it takes me an hour to submit/check/argue/re-submit/check a $50 medical expense, then in my opinion the tax savings of $10 was not worth it at all. But if I don’t follow through, I lose the entire $50. Asymmetric risk in a bad way.

There are also some finer details if you want to have both an HSA and an FSA (look up limited-purpose or post-deductible FSAs).

Dependent Care Flexible Spendings Accounts (DC FSA). These are better. You can have both an HC FSA and a DC FSA as they cover separate things. If you have eligible childcare costs (or adult dependent care), it is quite possible you reach the $5,000 annual maximum. I usually wait until I’ve already paid out $5,000 in preschool tuition, and then I just submit a single receipt for a potential $1,000 tax savings (assuming 20% tax rate on $5,000). Now that’s a good per-hour rate.

Employer-sponsored disability insurance. The best thing about group disability insurance through your employer is that it’s easier to qualify and the cost may be subsidized by your employer. However, if you switch or lose your jobs, you might lose your group disability insurance at the same time. This won’t happen with your own portable plan. Specialized workers can purchase riders that will pay out as long as you can no longer perform your specific occupation (as opposed to any lower-paying job). However, it’s so easy to put this off that getting some employer-sponsored disability insurance can be a good first step.

Life insurance. A common offering is a year of your salary in life insurance. Beyond that, you should always compare with an individual term life insurance plan. That way, if you have a special medical condition that makes your private premium somehow crazy expensive, then you can always fall back on the group plan. For most healthy folks, finding your own portable term life policy will be cheaper and it won’t go away if you lose your job. If you get a 20-year level term policy, your premium also stays fixed for those 20 years. No surprise increases.

Other benefits. The menu seems to expand every year. 401k investment advice. Commuter benefits. Student loan repayment assistance programs. Accidental death and dismemberment (ADD) insurance. Critical illness insurance. Long-term care insurance. Identity theft insurance If it’s free, I’ll take it but in general I decline the ones that require a premium.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Maximizing Retirement Time: Being Flexible in Both Work Income and Spending

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When it comes to Financial Independence Retire Early (FIRE), many people get turned off because they define retirement as “never, ever working again for money”. Financial independence fits better with my goal of spending the most of your limited time on Earth aligned with your values.

If the idea is to maximize your independent time, then you have to accept that luck matters. This chart from Michael Kitces explores equally likely scenarios from someone spending down a $1,000,000 portfolio of 60% stocks and 40% bonds.

Equally likely:

  • Ending up broke or feel alarmingly like you are headed towards broke.
  • Ending up with many, many times more money than you started with.

Is retiring as soon as you reach the 4% rule too risky because you might run out of money? Or is working longer for 3% too risky because you might have wasted years of your life working when you didn’t need to?

Let’s look again at some charts from Engaging Data. Here are sample results for the early retirement scenario at 4% withdrawal rate at age 40 ($40k from a $1m 65/35/5 portfolio, retirement horizon 50 years, female longevity table).

  • Red – Alive, but ran out of money.
  • Light green – Alive, with less money than you started with.
  • Green – Alive, with between 100% and 200% of what you started with.
  • Dark green – Alive, with over 200% of what you started with.
  • Grey – Dead.

Here is retired at 40 with a lower 3% withdrawal rate ($30k from a $1m 65/35/5 portfolio, retirement horizon 50 years, female longevity table):

Notice at even with the riskier 4% withdrawal rate, you have roughly a 60% chance that your portfolio never goes below the starting balance for as long as you are alive. That means you just spend your 4% every year and it just replenishes itself over and over. Sure, the 3% chart looks safer as there is no red “failure” area. But is that chance of failure worth working maybe another 10 years to go from 25x expenses (4%) to 33x expenses (3%)?

If your portfolio value drops early in retirement, flexible withdrawals are one important tool to improve your portfolio survival odds. However, what about flexible income as well?

What if you retired earlier so that if things go well, you get more retirement years, but if things go bad, then you fall back on some part-time back-up work? Your main risk is of poor returns in the first 10 years of retirement or so. You would accept the chance that you might have to do a little work again to prop your portfolio up during that time. A good part-time job would have the following characteristics:

  • Scales up and down easily. Ideally, you could spend 10 hours a week, 20 hours a week, or 40 hours a week on it as necessary. This could mean hourly shift work or flexible self-employment.
  • Higher-paid skilled work that is at least partially satisfying. Unskilled work will be the easiest to obtain, but the pay will be low. Uber/Lyft driver, food delivery, home health aide, retail, warehouse, etc. You want something where your special skills are compensated accordingly.
  • Minimal maintenance. For some jobs, if you aren’t constantly putting in hours, you’ll become obsolete and won’t be able to start back up again. There may be professional licenses to maintain, etc.

Here’s a brief list of ideas:

  • Healthcare. Many positions in the healthcare field can be part-time and hourly, from doctor to nurses to technician positions.
  • Elder care. This may be related to healthcare, but the overall aging population is another trend to consider.
  • Accounting. An accountant or someone with similar skills can usually find work during tax season, assisting other accountants.
  • Tech. There is often consulting or project work available, if you keep your contacts and skills up-to-date.
  • Passion work. Turn your hobbies into work. You could be a travel guide, taking people on hikes, tours, kayaking, etc. Carpentry projects could turn into an Etsy store. If you like to fix things, become the neighborhood handyperson.
  • Real estate. I tend to break up residential real estate investing into two parts – the actual ownership and the property management. Property management is basically a part-time job which you can do yourself, and the effective wage can be quite high if you are skilled at managing tenants. (The catch is that you can also lose money if you are unskilled at it.)
  • Teaching and kid-related. People are having fewer kids, but spending more on each one. Sleep training consultant. Potty training consultant. Academic tutoring at any age. Sports coaching at any age. Chess coaching. Language coaching. Musical coaching. These all command premium hourly rates.

I am a conservative person at heart, and I know that I would worry about my family’s finances if my portfolio dropped significantly from my retirement date. Therefore, I am both using a conservative withdrawal method and maintaining a semi-retired work schedule for the time being. I don’t have the luxury of a full traditional retirement, but I like the balance so far.

Bottom line. Living off of an investment portfolio of stocks and bonds depends a lot on luck. One way to deal with this is to be flexible with your withdrawals. Good luck means spending more, bad luck means spending less. This flexibility may allow you to retire earlier with a smaller portfolio balance. However, you could also plan for a little work income to offset early bad luck with portfolio returns. If you instead have early good luck with market returns, then you’ve just won many more years of free time.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Boeing Engineer: From Dream Job to Nightmare

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The most depressing thing I read today was Former Boeing Engineers Say Relentless Cost-Cutting Sacrificed Safety at Bloomberg Businessweek.

If you want to know why I am not part of the “I love what I do and I’m going to plan to work forever” crowd, this article pretty much sums it up. As someone who has an engineering background and has actually done work inside some of their facilities years ago (but never worked for Boeing), I also felt Boeing had the reputation of hiring the best aerospace engineers and thus made awesome airplanes. As a kid, that was a dream job. C’mon, you get to make airplanes!!!

Yet somehow a company renowned for its meticulous engineering installed software that drove the aircraft into the ground while the pilots searched desperately for answers.

Why? The answers to all your questions is money. At Boeing, the bean counters won and the engineers lost. It wasn’t overnight, but it like many things it seems gradually and then all at once. Even though the FAA basically let Boeing police itself, the FAA has still had to forcefully ground two of Boeing’s planes in the last 6 years. The last time a plane was grounded before that was 1979. The worst part is that they still don’t seem to understand their mistakes.

The relentless message: Shareholders would henceforth come first at Boeing. The important thing was not to get “overly focused on the box,” Hopkins said in a 2000 interview with Bloomberg. “The box”—the plane itself—“is obviously important, but customers are assuming the box is of great quality.” This was heresy to engineers, to whom the box was everything.

I can’t imagine how disheartening this would be to a Boeing engineer or factory worker. Their obsession is why the airline industry has become so commonplace and successful. We trust that we will land safely. They built up a great reputation. Now it appears that Boeing executives started trading that assumption of quality (reputation) in exchange for short-term profits (while firing many of the engineers). The product that they helped create had defects that killed people. Worker morale must be at an all-time low.

This is why building up a certain level of financial independence is important. Sure, your job right now is great. The pay is great. You’re building something cool. You like your boss. There is no end in sight, so why not buy the huge house, luxury car, and new boat? If you have the dream job and your specialized skills are highly valued, enjoy it but remember that if done properly you only need to get rich once! A dream job can turn into a nightmare. Read this article and watch out for those bean counters. I’m so thankful that I never have to answer to one again.

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

The Most Common Sacrifices Investors Make to Reach Their Financial Goals

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According to a Wells Fargo/Gallup survey of U.S. investors, 78% say they are at least fairly disciplined in reaching their financial goals. About 50% of investors say they will have to sacrifice a “fair amount” or “a lot” to reach their financial goals, while the other half only expects to sacrifice “only a little” or “nothing”. Investors are defined as adults with $10,000 or more invested in stocks, bonds or mutual funds, either within or outside of a retirement savings account.

In what areas do they expect to sacrifice? Here is a chart showing the most popular ways in which the polled investors say they have and/or expect to sacrifice to reach their personal financial goals:

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Financial Freedom Is About Resilience to Outside Shocks

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I found myself thinking a lot today about General Motors announcing layoffs for over 14,000 employees – 6,000 hourly and 8,000 salaried workers. This affected the factory workers making the cars, engineers designing the cars, managers, and executives. I know one of those workers.

When you talk about the pursuit of financial freedom, often you may have a vision of sunny beaches and European cruises. Younger folks may be thinking instead about a cross-country RV trip with the entire family or spending a year hiking across Southeast Asia.

But instead of being aspirational, I have to admit that my pursuit started with a basis in fear. I am afraid of being broke, bankrupt, or having to beg someone else for help. I hate, hate, hate not being control. Most households do not have the ability to withstand a few months of unemployment without major disruption. I can’t stand that feeling of vulnerability.

Financial freedom is not a black and white thing. It is a gradual process of increasing your resilience to things outside your control.

  • Once you save up $500, you can withstand a car breakdown or a broken appliance. You don’t pay for your rent in weekly increments. You can pay for minor things without starting a cycle of debt that eventually spins out of control.
  • Once you have a couple of months of expenses saved up, you can withstand a decent-sized medical bill or a series of bad luck that would otherwise send you into high-interest debt.
  • Once you have a year of expenses saved up, you can withstand a layoff and short-term unemployment. You have the ability to move to a better geographic location to pursue better opportunities. You have options. You are not stuck.
  • Once you have a few years of expenses saved up, you can withstand a layoff and longer-term unemployment. You can train yourself for something different, something better, something more aligned with your values. With or without a primary job, you can take some risks, perhaps start a new business venture.
  • Once you have more than 10 years of expenses saved up, honestly, you have more money saved up than most people ever will at any age. If you reach this point, you probably have a system in place where it is likely just a matter of time until your investments grow that amount ever higher.

GM says they are trying to save money while times are good. Individual workers may need to have the same idea. From the Reuters article Money disasters can derail retirement:

Contrary to popular retirement saving strategies that are based on the assumption that procrastination is the root of the problem, the Rand researchers think there should be more focus on the probability of money disasters, which are much more common than most people assume. That scare would get people to focus on saving more during good times.

Many of my friends are that mix of skilled and lucky that the last time they involuntarily ended their job, they quickly found another job that paid even more. Maybe you’re one of those people too. But in the next big recession, which may or may not arrive soon, things might not be so easy.

Karyn Golden’s income was approaching $200,000 as she lived a carefree single existence at the peak of her career in Chicago, 20 years ago. She brokered real estate deals, served on boards and lunched with political leaders. She never imagined she would be where she is now – 70 and down to her last $200 in savings.

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Will We Ever Talk Openly About Income and Money?

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I started sharing my net worth anonymously because it was so hard talk about it publicly. Even today, my site logo is a voice bubble with money inside. Fast forward nearly 15 years later, and it is still unlikely that you know your coworkers’ salaries, let alone their net worth!

Do you know what the average tech worker in Silicon Valley makes? You might be surprised to know that with 5-9 years of experience, the average total compensation is nearly $300,000 per year. I know this from Jackie Luo’s Medium article I Know the Salaries of Thousands of Tech Employees. Luo herself is a software engineer at Square with 3 years of experience, and her base salary is $130,000 with a total annual compensation of about $230,000 (depends on stock price). She asked for anonymous data and compiled the following chart:

Her data reveals that stock grants are a huge part of total compensation (and one that is negotiable). As such, she encourages people to talk about their compensation and create a new culture of openness will help make things more fair. I admit I’m skeptical about that part. You’re fighting against a lot of deeply-ingrained discomfort. Is there any culture on Earth that talks about their wealth (and thus wealth inequality) openly?

I think that the best you can hope for is a trusted, popular website that becomes a huge database of anonymous submissions. I’m not sure any site has reached that level, but the cited ones trying include Glassdoor, Comparably, and Levels. While poking around, I even found a site that compares PhD stipends.

As an aside, this chart also explains why a disproportionate amount of early retirees are tech workers. If you’ve got people making $170,000 right out of college, I don’t care if you do live in the Bay Area, that is still a lot of income. If you have even a small degree of self-awareness, you know that many people live on far less, and that you could too. If you’re a tech couple pulling in $300,000+ a year, financial freedom within 15 years is on the menu. Whether you pick that option or not, that’s up to you.

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Good Luck or Bad Luck? Maybe, It’s Hard To Tell

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Reading children’s books to my kids has become a regular source of new wisdom. I guess that’s not surprising, if the goal is to teach kids about life. Here’s one that came across recently and keeps popping back in my head.

I first read it in the children’s book Zen Shorts by Jon J. Muth (Caldecott Honor book). There are many variations of it online, and it may be credited as a Chinese, Buddhist, Taoist, or Zen parable. Here’s a brief version from Daily Zen:

There is a Taoist story of an old farmer who had worked his crops for many years. One day his horse ran away. Upon hearing the news, his neighbors came to visit. “Such bad luck,” they said sympathetically. “Maybe,” the farmer replied.

The next morning the horse returned, bringing with it three other wild horses. “How wonderful,” the neighbors exclaimed. “Maybe,” replied the old man.

The following day, his son tried to ride one of the untamed horses, was thrown, and broke his leg. The neighbors again came to offer their sympathy on his misfortune. “Maybe,” answered the farmer.

The day after, military officials came to the village to draft young men into the army. Seeing that the son’s leg was broken, they passed him by. The neighbors congratulated the farmer on how well things had turned out. “Maybe,” said the farmer.

I enjoy the sound of Alan Watts’ voice, so I am also embedding this YouTube version:

I still have a hard time applying this parable in real-time, but it does help me after some time passes. This parable is also tricky because you have to remember both when life puts up a roadblock and when you receive an unexpected windfall.

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The Greatest Fear of Newt Scamander

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Harry Potter fans will remember boggarts, shape-shifters that take on the form of the viewer’s greatest fear. This will be different for everyone – perhaps snakes or public speaking. If you’re reading this site, you might relate to Newt Scamander’s greatest fear as revealed in the latest trailer from the movie Fantastic Beasts: The Crimes of Grindelwald.

Now, there’s nothing universally wrong with working in an office. Some people work well in an office environment, while others can’t stand it. I don’t have hard statistics on this, but my hunch is that those that really hate the office environment are more likely to seek early financial independence. You have to motivated to think outside the figurative box (to get out of the literal cubicle).

My Money Blog has partnered with CardRatings and Credit-Land for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.