Stoicism

No person has the power to have everything they want, but it is in their poser not to want what they don’t have, and to cheerfully put to good use what they do have.” Seneca, Moral Letters

Many of you know that I have, over the last year or so, started reading and trying to follow some of the basic concepts of stoicism. The philosophy practiced by some of the ancients in Greece and Rome has had quite a resurgence over the last 20 years. I thank Tim Ferris for introducing me to the stoic philosophy and the first book I read on it. Many folks get it wrong, and think of it as an emotionless, stone-like attitude to life. This is not true – it does encourage you to experience and enjoy life; but it suggests that many of the emotions that are created by life’s issues (depression, anger, etc.) aren’t really valid because most of the issues are transitory and don’t really matter in the grand scheme of things.

I have found it difficult to follow many of the lessons of the stoic philosophy. While I am an engineer, I am also a very emotion-driven individual. I’m not sure what caused it (genetics, issues growing up, etc.) but I have quite a temper, especially when I feel that I am not getting the respect I believe I am due. For many parts of my life, my emotions have been the driving force in my decision making. This is, of course, in contradiction to the stoic way.

That is why I am enjoying my reading and daily meditations on the subject. While I still have a long journey to make along this path, I believe it has already helped me. I got a book at the beginning of the year titled The Daily Stoic by Ryan Holiday. It has a daily quote from some of the great stoic philosophers of history, which I can use for my meditation, and to attempt to build a better life. Today’s is where I got the quote above from.

 

I hope you folks are enjoying your journey on the path to Financial Independence and a better life.

 

Mr. 39 Months

Searching for a new home

As a resident of New Jersey, I know that we aren’t going to be able to retire “in place,” i.e. we won’t be able to stay where we live when we retire. New Jersey is already one of the most expensive (or the most expensive) states to live in, and it’s only going to get worse. Taxes keep going up, and as the “Pension Bomb” goes off, there won’t be any money for basic services. The roads are already starting to look like California’s (i.e. rotten). It’s a shame, because the state does have a lot to recommend it, especially its awesome beaches. Still, if we want to be financially independent for the long-term, we’ll have to leave.

There are parts of the country that we have vacationed in that we really like (Pacific Northwest, Northeast US) but we don’t want to retire to. We have ended up concentrating on two areas, Delaware and North Carolina/Tennessee. We can’t decide between beaches and mountains to retire in (I really like mountains, and Mrs. 39 Months and I both grew up in areas that had mountains). We want an area with decent services (hospital, shops, things to do, etc.) and Mrs. 39 Months would like to live in a town setting (she grew up in something like that) where you can walk to things.

Delaware has the advantage of being close to our current area, and the support network we have created (friends, hobbies, clubs, etc.). It has beaches, though the decent ones are very far south (Rehoboth, etc.). It has no sales tax, something that a FI person, who isn’t really generating a lot of income, should concern himself with (Tennessee has no income tax, but a high sales tax). It’s also got relatively low property taxes (because it doesn’t spend a lot on schools, something that shouldn’t concern us). Some of its disadvantages are that it’s very flat, and the beaches aren’t great up north (where the towns and services we like are).

In North Carolina, we are thinking of the Asheville area (near the Smoky Mtns) and in Tennessee we are considering Chattanooga. Both of these spots are in the mountains, offer a lot of outdoor activities, and a thriving social scene in the city. Services are good, though the cost of each (because of their great retirement possibilities) are a tad expensive. Normally I’d think we could sell the house in NJ and buy something in NC/TN and have some money left over, but not so much. Seems everyone is retiring there. Also, it would be a big move, away from all the relationships and everything we’ve built around us here.

I guess that is one of the issues with FIRE. You can use geo-arbitrage to speed up the process, but you still have to consider the move.

 

How are your plans going for where you want to retire?

 

Mr. 39 Months

Sequence

If you are just starting out on the path to FI, or counselling someone who is just starting out, what is the sequence of steps that you would work on? What would you counsel your colleague to do first, then second, then third, etc?  I’ve read numerous books and articles on the various aspects of getting your financial house in order and moving forward. For the most part, they jump around a great deal, based on the author’s particular interests.

If you had a young adult who came to you for guidance on the subject, what would you have them do first?

My thoughts on the subject, and the order I would approach them would be:

  1. Goals: The first step is to identify where you want to go. This is the opportunity to bump up the motivation, as you get your friend to dream big dreams (and small dreams) and identify where they want to go in the next month, next year, next 5-10 years. Its fuel for the fire.
  2. Paycheck: Get ahold of a copy of the paycheck and work out what you are getting paid for, what withdrawals are being taken out, and what benefits you are getting, or could claim (like a 401K, reduced cost insurance, etc.). This is the basis for everything that follows – you have to have money coming in if you are to budget, pay off debts, invest and increase your net worth.
  3. Expenses: Once you identify what is coming in, you need to work out what is going out (housing, transportation, food, clothing, debt, etc.). Depending on the person’s situation, this could be small (student) or large (adult out in the world for a while).
  4. Budget & Cash Flow: Now that you have your income and expenses, you can work out your cash flow (income – expenses = cash flow). If it’s not positive, then it’s time to do whatever is necessary to get it there (additional job, cut expenses, etc.). Once you understand your cash flow, you can make intelligent decisions on how you want to live your life, and how you can pursue your goals.
  5. New Worth: Some folks would say to move this higher up (maybe #2) to get an idea of where you are, but it think this is a more complicated topic, one that you need to have a little knowledge about finances before you can really delve into it. Here you are going to get a “snapshot” of your current financial situation, and this will help you see how far you are from reaching your goals. T
  6. Debt /debt service ratios: So many people are deeply in debt and feel helpless to pull themselves out. By gaining an understanding of debt, a good debt ratio (never have more than 40% of your income in debt payments) and ways to pay it off as quickly as possible, helps to create a feeling of control on the part of the practitioner.
  7. Power of Compound Interest/Investing: The last part I would I would have them learn would be the power of compound interest, and basic investing, to grow their money faster.

I think these would be a good start, and from there, you could cover other items in depth which will add to the knowledge (emergency funds, taxes, spending on home & cars, insurance, etc.).

So what would be the first 5-7 steps you would counsel someone on?

 

Mr. 39 Months

Book Review – Five Years before you Retire by Emily Birken

The title of the book intrigued me, since I started out my journey 39 months from retirement (currently with 23 months left, yay!). The objective of the book is to “layout what you need to do in the last few years before retirement to make sure your life post-career is financially comfortable and fulfilling.” It’s a big objective, and one we here in the FIRE community have been talking about for many years. In fact the author writes for several blogs that are in our community.

Please note that this book is aimed at a US audience, so for those readers outside the US, you will need to take the advice and translate to your country’s situation.

The initial four chapters cover some of the basic finance questions that folks who are nearing retirement.

  1. How far away are you?  (calculating current spending, resources, rates of return, calculating money needs)
  2. Saving and Budgeting for next five years (Ideas to maximize your savings and reduce your expenses in order to close the gap)
  3. Income in retirement (the 4% rule, bucket method for withdrawal, required minimum distributions)
  4. Find the right financial planner (Types, pay structures, questions to ask)

While many of these topics are covered in depth in various FIRE blogs, the book puts them all in one spot for easy reading. There are other ways to perform the calculations in the book, and you can search for others that appeal to you more – but at least it gives you an idea of the steps necessary at the time.

The second part of the book covers aspects of the government that need to be included in your retirement planning.

  1. What to expect from Social Security (Mechanics of SS, what you will get, survivor benefits)
  2. Taxes and your Retirement Income (Taxes on Social Security, 401K, Roth, other investments)
  3. What to Expect from Medicare (Part A & B, Drug coverage, additional costs)
  4. Planning for Health-Care Expenses in Retirement (Coverage if you retire early, Medigap, Disability and Long-Term care).

It covers the basics of government support and costs, and is full of good information. The discussion is chapter 8 covers the basics of seeking out health care if you retire before 65, but doesn’t have many details or links. The book still assumes that Social Security and Medicare will be available when you retire (something we are all a highly suspect of at this time).

The final section covers home, family and other considerations as you prepare to retire.

  1. Housing in retirement (paying off mortgage, staying put or moving, reverse mortgages)
  2. The Family Fortunes (discussions with family, estate planning)
  3. Creating a budget on a Retirement Income (Typical day, week & year, anticipated spending, budget)
  4. Common Retirement Pitfalls (Relying on factors outside your control, 9 others)
  5. If you Don’t have enough saved (work longer, cut spending, change plan)

One of the great things about the book is that, at the end of each chapter, there is a countdown of the topics covered in the chapter, and what needs to be done 5 years before retirement, 4 years, 3, 2, and 1). It’s an excellent guide on the important aspects in the chapter. I would recommend this book for those just starting out on their FIRE journey, or if you want to give the book to a friend or spouse who hasn’t embraced the FIRE lifestyle yet.

Grade B+

 

Mr. 39 Months

Stuff…

Too much stuff!

Like many reformed FIRE people, I have looked into the whole “minimalism” concept, and all the people who cheered for the idea. I can see how seductive it is, because many of us have reached a point where we can see that “stuff” doesn’t really buy happiness. Like a lot of you, my home is full of items I bought at one point in time, intending to use it a great deal, only to find that I rarely (if ever) used the item.

Mrs. 39 Months is much worse than I am. We have a bedroom which I have built shelving for and which holds nothing but box-after-box of her things (old clothes, papers from college, arts & crafts tools, etc.). I joke with her that she will end up on an episode of hoarders sometime.

At the same time, both of us frown on the whole “minimalist” movement, with folks living with “100 items” and competing with each other to see who can “out-minimal” each other. Life is to be enjoyed, and part of that is to have things that bring you joy. In addition, for those of us who live in areas that have major weather swings (100 degree humid months and 12 inch snow months) you need to have some items. We both have hobbies we enjoy (woodworking, knitting, music, etc.) so again – if the item brings you joy, don’t automatically toss it.

The one area that I can understand (and sometimes indulge in myself) are books. One of the “fun” things we do is go to Barnes & Noble, drink coffee and read – and typically buy books. Our home is choke-full of books, about 80% of them being hers. They lie all over the house, half-read and stacked on each other on any available flat surface. Still, it’s a relatively benign addiction, with the potential to provide years of comfort as we retire. Better than blowing it at the craps table!

As we approach FI and the potential of moving somewhere better for our retirement lifestyle (you just can’t retire in New Jersey, due to expenses) the thought of wading through these items and determining what stays and what goes fills both of us with dread. I figure I have one “move” left in Mrs.39 Months, so wherever we go, we will end up staying there. Of course that brings up the quest of where that “one point” is.

That is a topic for another time.

 

Mr. 39 Months

Purging your Blogroll

One of the things which has always brought me a lot of pleasure is reading other FIRE blogs and seeing the different facets of the subject. It seems each blogger has a topic which motivates them, and they concentrate a great deal of energy on that topic. The result is some excellent reading and the opportunity to learn in-depth of a wide variety of topics.

However, as many folks know, blogging tends to be an exhausting process, and the ground is littered with bloggers who have not lasted more than a year. It seems folks start blogs to tell their tale or write-up their passion. Once that is done, they trail off, and the enjoyment that folks take in reading their work is lost.

As you look to the right on this page, you will see my “blogroll” of sites that I have found and believe worthy of further reading. Yet one of the tasks that has to be done, if the blogroll is not to grow too large, is the weed or “cull” the list occasionally. This can be done due to a fall off in productivity (not that many posts) or quality (no interesting posts). Some sites just stop publishing entirely.

It is often a sad affair, as the reason they were put on is because they have excellent topics and interesting writing. I try to do this at least twice a year, and recently culled a few sites (while adding several others). It is a personal decision, and not one that I take lightly. I hope that my blogroll continues to provide you, the reader, with a good list for you to check out on your own.

I hope you enjoy my writing and the writing of those I point out. Enjoy the rest of summer!

 

Mr. 39 Months

Freedom!

Mrs. 39 Months and I had an interesting discussion recently. As we have closed in on FI, and really started thinking about what our lives might be like, we have both turned to the topic of continuing to work, and what it might look like. For the FIRE community, the idea of continuing to work past our FI point is a matter of some controversy. Some think that even running a blog and making money from it disqualifies you from being “retired.” Others continue to work and earn a paycheck, but they do it in a way that benefits them (their goals, timeline, vacation schedule, etc.).

Both of us believe we want to continue to “do something” once we hit FI, and the idea of the social aspects of work (comradery, people to interact with, etc.) is compelling. Yet one of the other aspects of continuing to work kept rising up in our discussions, and we both voiced it – the desire for more free time.

The current work structure in the US, even for those who are long-term employees, is somewhat regimented. Most folks get 2-3 weeks of vacation a year, plus some sick time.  Yet to hit many of our “bucket list” items and to really enjoy our hobbies, Mrs. 39 Months and I need a lot more time than that. Heck, I’ll need at least 4-5 weeks a year for three years in order to finish up my backpacking on the Appalachian Trail!

This got me thinking about the current work structure in the US, and how it may alter in the years ahead. With low unemployment (below 4%) many key job functions are having a hard time finding potential employees. My company is struggling to find truck drivers, engineers, and key analysts. While this is happening, the baby boomers (yep, I’m one) are retiring in record numbers, leaving the workforce bare of people who have done the job for 40+ years (and who typically can be relied on to come to work )

I have read numerous articles about Gen X and Millennials demanding more free time and benefits from their companies, and who are willing to leave after 1-2 years if they don’t get them. Companies are frantic about developing their internal candidates – because the cost and effort to bring on new ones and train them is so high (and so “hit and miss”).

Does this mean that companies might become more flexible with free time in the future? My thought would be to provide unpaid time to workers, upon request (i.e. the workers would have to schedule it). That way, companies wouldn’t bear the burden of having to pay folks for not working (and could free up costs during business lulls) and workers could get some additional free time to pursue other interests.

Not sure if this will ever happen, but the ongoing shift to worker’s being more valued (getting bigger pay increases, hiring bonuses, etc.) is nice to see.

 

Mr. 39 Months

Good post on lessons for your first year of FI – from the Mad Fientist

While listening to his podcast, I found the link to this article and thought it was very good. In it, he discusses some of the trials, successes and surprises from his first year of FIRE.

Valuable Lessons from My First Year of Freedom

I think I’m going to create a new category just for lessons from the first years of FI. Its a topic I’m very interested in, as I close in on my number.

 

Mr. 39 Monts

Book Review – The One Page Financial Plan by Carl Richards

It’s been a while since I did a book review. I have done a lot of reading on the internet (blogs, articles, etc.) but not many new books. Recently I saw an article on this new book The One Page Financial Plan, and it intrigued me. So I took the opportunity to purchase the book and read through it. So here goes.

First of all, those who are hard core FI people will find little for their number crunching here. The book is rather small on calculations, ratios, etc. If you are looking for a book to go through your investment strategies or net worth calculations, then there are other ones which will do a better job than this one. That is not the objective of the writer. Instead, he offers a less-number oriented, more “touchy/feely” type of financial plan book, as one might expect from the title.

The first part of the book is the “discovery” phase, where the authors uses some questions and exercises to help the reader determine the “why” for their financial planning (the most important question), the where (where you want to go, i.e. goals) and where you currently are (net worth, assets & liabilities, etc.). Again, very few numbers are discussed or worked through here.

The second part of the book works through spending and saving. He discusses simple ways to determine your current spending and how to create a basic budget. He then ties that back to the goals developed in the first section, and uses that to motivate the reader to save.

The third section discusses investing and other finance topics, including insurance (buy as little as necessary, but buy it), debt (good and bad), and basic, beginner investing – with a heavy emphasis on index funds, and buy & hold strategy. He finishes with some good information on the need for rebalancing. As before, there is a startling lack of numbers in these chapters – just basic common sense for the beginning investor.

The final section covers avoiding big mistakes that can sideline you (not hiring a good financial advisor to help teach you, always making the decisions instead of trusting the advisor, not panicking at market dips, etc.). His lesson is one of basic, boring investing over time.

In the end, I believe this is a good book for folks who are just getting interested in the FI journey, or for those passionate FI people that are trying to interest another (a spouse, a family member, etc.) in many of the concepts and ideas. It’s a great book for someone to get started, and then as they grow in interest and knowledge, they can seek out additional, more detailed information for those topics that interest them.

 

Mr. 39 Months