Thursday, October 31, 2013

LoToMojo: Act III, Scene 1

I quit my job last week and Damn! does it feel good. My mind has been at a new peaceful place all week that I don't recall experiencing for so many (4) days before.

So what's next for me? Let's recap...

The Journey So Far

For at least five years I have been pretty intentional about being introspective and trying to figure out what I want out of life. One of the benefits of being a dork in high school is that the girls never talked to me and I never got into a relationship in my twenties. This led to my thirties full of online dating where I felt like I really wanted a relationship, but nothing worked out. I'm not sure exactly why it's been so hard for me to find a girlfriend, but I'm beginning to think that this wanderlust that I'm now raising high up my freak flagpole was always there and that (foundational?) part of me was hesitant to commit and settle down.

The journey led me to beautiful Bozeman, MT where I have enjoyed the last 2+ years. The move from St. Paul and the condo I had purchased and made my own was a huge step, for it is never easy to move out of a home that one has been a part of for a decade. It's so easy to stay in the current groove (rut?) and just allow inertia to pass the years.

The Goal

My goal is to live a life of greater freedom where I can fulfill my sense of wonder about the world. For many years I've had three parallel thoughts that I believe in and have shared, but have only acted upon in short two-week bursts:

  1. The world is an amazing place full of so many fascinating experiences -- and I don't want to die and leave them on the table, wondering what if.
  2. How cool would it be to live in New York for a year, Paris for a year, Mongolia for a year, etc. Each place is so full of richness and life!
  3. Get busy livin' or get busy dyin'.

The A-ha Moment

About 6 weeks ago I met with a client in my career as a financial advisor. He's in his upper 50s, has a few hundred grand in savings from when he was employed as an engineer, but has been mostly out of work for the past several years. He has been living on about $1000/month in subpar conditions and wanted to know if he could afford $1300/month to upgrade his housing situation.

When I did the analysis I realized that, if he wanted to, I could help him set it up so his savings could generate for him a paycheck for the rest of his life. That paycheck would be about $1500/month and would grow over time, guaranteed to never go down.

In the financial world we always discuss the question: how much money do you need to retire? This assumes that continuing the current lifestyle is the most important thing, and that we will work as long as we need to in order to stay at the current lifestyle.

But the idea of living on $1500/month shocked my system. It changed my thinking from how much do I need to retire to how little do I need to retire?

Aha! This changes the picture entirely.

So many of my daily expenses don't add any fulfillment to my life -- eating out because I'm too lazy to cook for myself, drinking at bars because it's the easiest form of social interaction, drinking at bars because I'm stressed out from a day at work, living in a place that is big enough for three people, driving my car when I could ride my bicycle, etc.

My goal has never been to work at an unfulfilling job until age 65 and then continue living on the same amount of income as I'd been accustomed to living on to that time. My goal has always been as indicated above, but I have been stuck in the rut worn by ill-mannered inertia.

The Future

So I have options and am looking for more freedom and less job-i-ness.

With the advent of the podcast and the growth of blogging I've been able to find kindred souls who are ahead of me on this path of freedom. They have helped me understand that it's okay for me to live my life the way I want to live it, and that it's possible to do so.

Fortunately, I've been a pretty good saver for the past 15 years so I do have a cushion of money. Is it enough to live on for the rest of my life? $1000/mo. ain't gonna cut it for me so probably not. For that reason I will seek out a more passive income stream. The idea is to generate an income stream (like rental income) that isn't directly tied to hours worked.

Frugality will play a larger part in my life, as will simply living with less stuff so I require less space in which to dwell. It's not so much about denying luxuries as it is about being wise with resources and eliminating the expenses that add little value. After all, where in life to we really receive the greatest joy?

As an example, right now I live in an 1100 sq. ft. apartment. 60% of my time there is spent in bed (queen size). 30% of my time is spent in my favorite chair. The other 10% is divided between bathroom, kitchen, etc. I really only use about 300 sq. ft. and another 200 sq. ft. is nice to have for moving around. I'm paying for 600 sq. ft. that is essentially waste.

Obviously there are some unanswered questions (primarily: where will that income stream come from), but living in some ambiguity can be an empowering thing. I'm thrilled to be on a new path heading in the right direction, but just can't quite see around the next bend yet.

Sunday, October 20, 2013

On Jobs and Freedom

Job
For most people the word "job" implies a kind of undesired servitude, for truly how many of us would continue to work in our current capacity for our current employer if we didn't need the money? Someone with more power than us in the hierarchy assigns us tasks or responsibilities and if we carry them out in an acceptable manner then we receive the benefit of a paycheck and the privilege of being assigned more tasks and more responsibility.

We agree to this social norm because we have expenses in our lives that require an income to support. We make 30-year financial commitments, 18-year financial commitments, 4-year financial commitments, 12-month financial commitments. We then attempt to balance those obligations with the hope of living a lifestyle that can allow us to take occasional vacations (to get away from the job and do things we actually enjoy) and to terminate the job phase of our life sometime before we die. Some of us never get the pleasure of experiencing (healthy, vibrant) living beyond the job phase.

Retirement
We are shocked when we calculate for ourselves how much money we will need to retire. Did you say I need to save millions of dollars?! But how am I supposed to save that much when I only make $X and I have to pay for this, that and the other thing!

Instead of asking how much we need to retire, what if we asked how little we need to retire? What if we could cut back on our expenses significantly without it negatively effecting our happiness. In fact, what if cutting back on expenses could actually make us happier?

And what if there were ways to create enough income to sustain us at this lower expense level without having to work a traditional job?

Financial Freedom
One definition of financial freedom is when passive income is greater than expenses. Passive income is income that we generate that doesn't strictly depend on the number of hours that we work  -- like rental income, royalties from publishing, profits from a business or interest income.

Of course, this concept of passive income also flies in the face of Great American Ideals like work ethic, diligence and perseverance.

But are those traits always most admirable? What about "work smarter, not harder"?


Resources
Thanks to the following resources for helping me to understand that a life I always hinted at, but didn't completely understand and wasn't able to articulate, is achievable.

In the rough order in which I encountered them...