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My Journey to Financial Independence

Hi Reader,

I am a happily married man with two wonderful kids and a loving wife. We live in beautiful but unaffordable California! However, we have both been blessed with stable careers but have reached our mid 40s and realized that the rat race/maze is something we would like to stop in the near future.

I decided to write this blog to document our journey to financial independence but also remind us (and perhaps teach others) about the mistakes we have made in the past in order to avoid doing so in the future.  As it is often said, “History repeats itself.”

I hope to discuss a variety of life lessons with irreverent humor and hopefully nuggets of truth regarding our journey including:

  • Retirement investing
  • Budgeting/spending
  • Real estate investing
  • Credit cards/credit scores
  • Raising a family
  • Educational resources
  • Economics and Societal Issues

Wife comments: Holy cow! You think anyone is going to read this? It put me to sleep in just two minutes!….

I guess that can be a positive? 

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My Journey with Bitcoin Begins

I have been hearing so much about bitcoin and have been mildly interested since a few years back. The wild fluctuations of bitcoin the defacto and first form of cryptocurrency has seen fluctuations that would make the Danish Tulip Mania of 1637 look like a walk in the park – along with every other fad and overbought “asset” in history.

Wikipedia has a phenomenal graph showing various bubble periods for cryptocurrency since its inception. What is so surprising to me is the frequency of the bubbles.

Cryptocurrency bubble – Wikipedia

So first and foremost if you decide to go on this journey with me on learning more about cryptocurrency – full disclosure I know NOTHING! The money I anticipate to use I also EXPECT TO LOSE EVERYTHING!

Wife’s comment: And he really will lose it! I wouldn’t trust my money with him let along my children…hmm…crap that didn’t come out right…

Remember dear reader, what is another name for retail investor? Sheep!

Initial Research and Actions (January 6, 2021)

I have been reading various articles generated from various financial journals/websites and their ilk for awhile now (the past year or two). You can find plenty of articles discussing how to open your own bitcoin wallet, set up bitcoin miners, “investing” in crypto alternatives to bitcoin like Ethereum, and how to actually use bitcoin (hard to believe you can actually use this stuff to buy other stuff! Like tangible stuff!)

Now I am too lazy to get into the nuts and bolts of cryptocurrency but ultimately as I understand it – like any form of currency it is based on the faith of its users. What is the value of the dollar, euro, or even gold other than what we have placed on them?

Unlike land, manufactured goods, or services – currency is an idea based on fidelity, faith, transparency and willingness to transact between two willing parties. Currency without these characteristics is worthless (i.e. – look at Venezuelan bolivar or petro cryptocurrency).

Actions taken today:

  1. Researched free crypto mining software. One way to get “free” cryptocurrency is to “mine” for them. However nothing worth anything is free. There are costs involved in using a miner including: a computer (one with higher specs/hash rate/overclocking capabilities is preferable), unlimited internet connection (internet providers may put caps on data – looking at you Comcast!), electricity. Unlike the old days when bitcoin was of little “value”, the cost/benefit ratio was relatively worthwhile – whereas now you are competing against bitcoin farms and professionals. I doubt that the novice miner will profit much if at all today.
  2. Researched bitcoin trading apps. First all of these trading platforms will charge you a fee (typically a percent of the transactions):
    • Paypal: less than $25 ($.50 fee), $25-$100 (2.3% fee), greater than $1000 (1.5% fee). Problem the bitcoin you buy here is never yours to keep but you can cash out. You have to trust Paypal to keep your bitcoin safe.
    • Robinhood: Like Paypal does not offer withdrawals. Robinhood puts limit orders on purchases and sales – allowing some protection for the user when an order/sale is placed. Downside, you don’t get to take your bitcoin out of Robinhood and put into your own wallet.
    • Coinbase: The vanguard of bitcoin trading apps. It’s fee structures are laid out on it’s website but a bit confusing (Coinbase pricing and fees disclosures | Coinbase Help). They charge a spread and fee (which is the greater of a flat fee or variable percent as determined by region, product, payment type). Fees can be as high as 4.6%.
    • Cash App (by Square): Like Paypal, Venmo, Square is another app allowing parties to send money easily to each other. It’s fees are obscure (see Cash App may charge a fee when you buy or sell bitcoin.), but includes both a service fee and price volatility fee. It is supposed to be clear in the Cash App when you tap the Bitcoin tab in the app.

My decision on this is to likely use both Coinbase and Paypal. These two choices are based primarily on personal preference and not an endorsement of either vendor. For me, Coinbase’s website and app are very user friendly and clear regarding pricing of various cryptocurrencies. Second, it allows you to transfer the bitcoin you buy into your own wallet (the biggest benefit of those interested in a decentralized currency). Paypal, on the other hand is an app I use frequently to make payments and receive payments and obviously the fee structure is better than Coinbase.

3. Revisiting FOMO. After a furious period of research and seat of the pants actions. I sat back and committed to some self reflection. I like every other human in this day and age of social media experience FOMO or the fear of missing out. FOMO is defined as a form of social anxiety experienced by a person that stems from the belief that others are experiencing something unique and special or “once in a lifetime” experience. The self perceived “deprivation” a person feels can affect self-esteem and, mood, personal satisfaction and well-being. In this day of Facebook/Instagram, staying connected and resultant FOMO is detrimental to happiness I personally believe.

Taking a look at the above chart of the bitcoin price since inception helps ground me into not making a poor reflexive action like pouring my hard earned money into bitcoin or other cryptocurrencies today. On July 25, 2020 the price of bitcoin was just under $10,000 USD and as of today 1/6/21 it is $34,435 – tripling in value in 5 months!

For those of you who bought around July, 2020 – congratulations! You have made a tidy sum! I bow to your prescience! However, I can’t help but feel that bitcoin’s historic pricing trends point to a correction – but I only come from this as an experienced index, long term fund investor. I welcome additional education from any of my readers on this matter. As of today, I will not put any funds into cryptocurrency and will likely put some in once prices go down. Stay tuned.

Short term thinking, Sustainability and FIRE

We live in a world of short term gratification and commensurate, small rewards.  The companies we invest in, the average CEO’s tenure is five years.  Companies like Berkshire Hathaway, the Koch brothers can laugh their way to the bank knowing they have longer time horizons to weather the short term fluctuations of the market building a more stable cash flow – while growing their wealth slowly but surely.

I have found the FIRE movement to be similar.  On the surface, non-practitioners criticize FIRE members as a short term, get rich quick and get out type of crowd.  However, the fundamentals that underlie the FIRE movement is all about the long-term.  Principles or profound truths such as:

  • Invest as early as possible, as much as possible and let compounding do it’s wonders. Imagine starting at age 20 and investing the max into your retirement as allowed.  No surprise if you have $1 million be age 40.
  • Naysayers say these FIRE people probably make a lot of risky investments in order to get the nest eggs they have, when in truth…Most FIRE proponents Invest in the broad market and not that sure-fire stock (Enron, anyone?).  The key word, Invest…not Gamble.
    • FIRE investing is simple…A Vanguard Index Fund of the S&P 500 with some Bond Index mixed in or a Target date Fund as long as they are low cost (less than .25%). Done.
  • Retiring by 40.   The naysayers say that is crazy!  However, they never notice that from 20 to 40 – we are talking 20 years! A whole career and one generation before early retirement.  How much can you do in 20 years if you really focus and dedicate yourself?
  • Is that leak in your bucket smaller than the water you are filling the bucket with?  As my wife tells me all the time,”It’s simple math dummy, I mean honey. Spend less than you bring in!”  I have found the simple pleasures of simplicity in life, uncluttered in thought and material wealth but rich in life experiences and relationships to be the key to the satisfaction and happiness I have.
    • If you have not watched Marie Kondo, you should do so.  When you relieve yourself of things and even thank them – you will find in the end a life richer for it.  Gandhi, Buddhism, Christianity, Islam – all speak to simplicity and the “evils” of materialism.
    • Case in point. Storage centers.  Why are you spending $200/month to store things that you are not using? A year later, you just spent $2000 in storage fees for things that likely have depreciated significantly – and likely not worth as much as that $2000 hole in your pocket.
    • What it boils down to is if you spend less on things – you will find the road to FIRE that much sooner.

Dear FIRE friends if there are other truths you have learned on this journey please share them with me.

How can College be So Expensive?

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Source: Pixabay.com

This article is about how expensive a college education has become.  Back in the early to mid-90’s both my wife and I finished undergrad and even graduate school owing about $10,000 and $30,000 respectively. We both went to local universities well-known in our respective states but not nationally ranked in the top twenties.  We both chose our respective schools based primarily on financial aid and ultimately the cost of our education since we would be paying for it ourselves.

Looking back at our lives, I do not think missing out of going to a “top-tier” school affected us in terms of career opportunities but perhaps more importantly – neither of us were saddled with overwhelming debt.

I look at my nephews and nieces today who are saddled with $100k in debt and realize they are not exceptions to the rule. I cannot imagine starting a marathon a mile back from those in the front.  So many of the colleges today promote this fallacy of earning more money for college graduates vs. those who do not go to college.

Yes, I know on average the college graduate does earn more than the non-graduate …and the amount is not insignificant!  Colleges market this and it has become a trope that is rattled out to all the parents of today.  However, this trope is being used to perpetuate the crime of ever increasing college tuition, room and board and fees – all in the name of providing that better paying job.

We live in California and the cost of in-state UC education increased to $35,774 annually – that’s just tuition! I’m unsure that the content of my English, Math, and Science classes have changed that much in comparison to today to warrant what used to cost $5000 a year in the 90’s.  What can you do as a consumer of college education?

Perspective is a wonderful tool when it comes to a college education.  What are you trying to achieve by going to college and are the results the same between different colleges?

What I mean by this is what are you trying to achieve and are the results (getting a good paying career) when comparing College A (most expensive/all bells and whistles), College B (mid-tier) and College C (cheapest) the same?

My steps to getting a College Education:

  1. Do not go to a for profit college!
  2. Consider community college for the first two years before transferring to University (get the good grades though!).
  3. Pick the University that you will end up with the least amount of debt.
  4. If your parents are picking up the tab, don’t complain and say thank you if they want you to go to a certain school (I assume it’s the one they and you can both afford).
  5. Consider summer courses to shorten the time frame and costs of college.
  6. Treat college like a full time job – because IT IS your job.  Getting good grades are part of your job. In the real world you don’t perform – you get fired.  Your college grades represent your performance.

For you Californians out there. A great article by Nico Savidge summarized recent tuition costs in 2018 for California Community College and State University was $1,104 and $5742 per semester respectively for a full time load of 12 credits/semester.  He writes a great article on how to get a college education in California on the cheap at  Quick guide for cheap college tuition California.

 

 

The Value of Time When Pursuing F.I.R.E.

From time to time, I read or hear all of these financial experts talk about saving for retirement and the importance of saving as much as you can as early as you can.  Those sound bites are great and all but what does it mean?  Well, if you are reading this and in your twenties – what perfect timing! Let’s discuss the importance of time when it comes to saving for retirement.

Using the compound interest calculator from the SEC, you can compare different monthly savings rates and rates of return for different age groups very easily:

SEC Compound Interest Calculator

For instance:

  1. A twenty year old who initially started with a $1000 in their retirement account would need to contribute roughly $450 per month to accrue roughly $1.1 million by the time they are 60 years old – given a annual return of 7% (interest is calculated annually in this scenario).
  2. A thirty year old who also started with a $1000 would have to contribute double the amount at $900/month to accrue $1.03 million by the time they were 60 years old.
  3. A forty year old who started with $1000 would have to contribute $2100/month to hit that magic $1 million mark, again given a return of 7% annually. Which by the way is more than the allowable 401k max of $19,000 for 2019 (bad news for you Mr./Ms. Forty year old).

The mathematicians out there will beat up on this simplistic example but again the exercise is what’s important.  I would suggest all you readers to sit down a play with this calculator to experience the visceral feeling of what it would take to secure that first million (make sure you hit Refresh, sometimes the calculator doesn’t update and you have to re-enter your numbers).

Try increasing your initial investment to see how significant the monthly payments can decrease.  What if you took your graduation money or took a portion of your high school/college job and socked it away? What if your initial deposit or starting point was $10,000 instead of $1000? Or $20,000? $30,000? Keep increasing that starting amount / initial savings amount you incredible stud (ent)! You saw that, awesome play on words there if I say so myself!

Wife comment: Not really…..

Ultimately what this calculator shows you is that saving for retirement has three components: the amount you set aside, the rate of return and the time frame.  The longer you have to save – the less you have to save over time with all things being equal!

For those of you in your twenties or still students, financial aid is not affected by whatever you have in your retirement account!  The psychological  impact of starting your retirement savings early in life cannot be discounted as well. Imagine your willingness to put up with that crappy job or boss knowing you are putting away $200-400 per month and being able to say Adios to them and thanks for the employer match. Or being able to take the risk on that dream job that pays peanuts because you have enough saved up to consider that.

I’m not saying that having money in the bank is going to make you happy but…wait…

No! Hell Yeah I’m Sayin’ Dat! I am saying that having a million dollars in the bank is making me happy and knowing that I can say “See Ya!” to my boss tomorrow feels great!

Wife comment: You know he does say “I quit!” with this weird grin on his face when he looks at that Retirement account…

I don’t say that! I do say, “My Precious” while stroking my computer monitor once in awhile but everybody does that…don’t they?

Give the calculator a shot!

How Stress is Killing You – Societal vs. Corporate Good

Recently I came across some incredible work by Dr. Tony Iton, of the California Endowment Organization, regarding how American society is killing Americans before our time.  Perhaps the most interesting anecdote is that the stresses and social mores unique to America have resulted in decreasing our life expectancy vs. countries at our economic level.  The shocking statistic is the decreased life expectancy is affecting all economic classes – even the American rich have a decreased life expectancy vs. those in other countries.  In some scenarios Americans are living 20 years less than others of their social class in comparison with other foreign countries.

The stresses of today have influenced the increased rates for:

  1. Cardiovascular disease (American Heart Association)
  2. Diabetes
  3. Obesity

The American Heart Association issued the following statistics regarding heart disease.

  • Cardiovascular disease is the cause of death for over 800,000 Americans or 1 in 3 deaths annually .
  • About 2,300 Americans die from this disease a day.
  • About 92 million Americans are living with some form of heart disease or stroke related issues.
  • Costs related to cardiovascular disease are over $300 Billion in health related and productivity losses/expenditures.
  • High blood pressure has been recently correlated with Alzheimer’s and dementia

Diabetes is the seventh leading cause of death in America as of 2015.

  • As of 2015, Diabetes affects over 30 million Americans.
  • An estimated 7 million are undiagnosed.
  • As of 2017, this number has grown to 100 million Americans who are diabetic or prediabetic (CDC).
  • In 2015, over 5 million global deaths were related to Diabetes.

Obesity Prevalence in America as of 2014 (from NIH)

  • 70.2% of Adult Americans are overweight or obese in America (2 in 3 adults)
  • 1 in 6 children and teens (ages 2-19) are considered to have obesity
  • Normal Body Mass Index (BMI) ranges from 18.5-24.9, Overweight is 25-29.9, 30+ is Obese
  • Obesity is a risk factor for Diabetes, High blood pressure, joint problems, chronic pain, and more

Wife comment: What does this have to do with early retirement? Holy cow when did this site become a course in Epidemiology?

Honey, your health has everything to do with F.I.R.E.!

Imagine having all the money in the world and being diagnosed with several chronic disease all related to your lifestyle..In order to achieve financial independence we cannot forsake our health and well-being.  In short, what’s the point of having all the money in  the world if you are not there to enjoy it?

Continue reading “How Stress is Killing You – Societal vs. Corporate Good”

The False Security of Net Worth

Recently,  I found out my Net Worth has increased…Now I am a multi-millionaire!

I am such a genius and soooo rich.  Oh yeah baby! Oh yeah, take advice from me and you too can be the richest bloke on the block….Just buy my book that I haven’t written yet….
networth 071318_001

Wife’s comment: Idiot! If they only knew how much of it was just dumb luck…sigh

Honey! You are doing that thing again…Yes..You know that thing where you put me in my place….Come on! Not nice!

However, again she is right.  I am learning that Net Worth has given me false security making me feel like I can go out there and spend money like water and stop my efforts in saving. How wrong I was…

Keep on reading to learn how I came to that conclusion..

Continue reading “The False Security of Net Worth”

Who are the Working Class?

Many Americans today would consider themselves to be Working Class.   Until recently, I had assumed I fell into that category as well.  I have a full time job, my wife has a full time job – have two kids, a house and two cars…your typical Middle class, working class family.

For me, anyone who has to work to take care of their living and lifestyle falls into the category of Working Class.

In fact, today in 2018 it is great to be Working Class – you are able to find a job if you want to…the Great Recession is behind us.  Furthermore, with current rate of unemployment at 3.9% (as of April, 2018), America is considered to be at full employment – a term meaning roughly that there are an equal amount of employer jobs available for those looking for work.

Yet, why are there so many of us stressed out about our finances and our futures?  Why are Americans falling into greater and greater debt?  Why does it feel like we are on the precipice of a cliff?

accomplishment-adult-adventure-372098

Wife comment: Don’t jump honey…we forgot to renew your life insurance policy!

Continue reading “Who are the Working Class?”

How To Make Lots Of Money During The Next Downturn — Financial Samurai

Wonderful Article by Financial Samurai! Please follow him and learn quite a bit about investing.  I am not sure if I am allowed to share his article on my site and better yet go to his site to read it, link below.  The bull cycle seems a bit long in the tooth.

 

During the last downturn, I lost about 35% of my net worth. I don’t plan on doing that again. Losing 35% is not as bad as the S&P 500 losing ~60% during its worst period, but it still hurt like hell due to the speed and absolute dollar amount of the loss. 1,894 more words

via How To Make Lots Of Money During The Next Downturn — Financial Samurai

Raising an Affluenza Kid or a Compassionate, Happy, Content Kid

Affluenza per Google is defined as:

“a psychological malaise supposedly affecting wealthy young people, symptoms of which include a lack of motivation, feelings of guilt, and a sense of isolation.”

This term became a part of the American zeitgeist due to the infamous case of Ethan Couch who claimed in his drunk driving defence and death of multiple people that the accident was in part due to his affliction from affluenza.

Mr. Couch has become an example of a serious concern for those who have been blessed with material riches and who have children.  Scientific American wrote an insightful article regarding studies concluding that wealth reduces compassion (https://www.scientificamerican.com/article/how-wealth-reduces-compassion/) (“How Wealth Reduces Compassion” by Daisy Grewal 4/10/12).

My wife and I have had the mixed blessing of being raised in poor families with hard working, sacrificing parents. With luck, hard work and persistence – we were both able to achieve a modicum of success.  Furthermore, with sacrifices of our own on top of the sacrifices of our parents – we are able to achieve the levels of success we both have today. Seeing our parents wake up at 5 am and go to work at back breaking jobs, coming home to make dinner, and help with our homework as best they could (although often we were on our own) – we both had the best role models in the world.  With the support of such parents and wonderful school teachers and counselors we climbed up and out of our situation. Our role models were not famous people, actors, or athletes but just normal hardworking, self-sacrificing Americans.

On my father’s death bed, he told me with regret that he could not be there to see that we all have become secure in our futures….all I could say to him was that he had done enough…more than any Superman could have done. With role models like these, it almost seems impossible that we would not succeed.  Their sacrifices are carved in our souls and drive us even today.

Continue reading “Raising an Affluenza Kid or a Compassionate, Happy, Content Kid”

Tax Season…IRS scams and phone calls

I just received a “wonderful”, roller coaster pounding phone call yesterday….

“Dear sir, do not hang up this is the IRS calling to inform you that you are under criminal investigation for not paying your taxes.  Please contact us at XXX-XXX-XXXX so that we can correct this otherwise you will be arrested within the next two weeks.”

Not to make fun at the caller but it would help that their accent wasn’t so thick and hard to understand…Not to say that this would have made the call more legitimate.

Anyways, it is the beginning of the Tax filing season.  Perhaps you have heard about the newest and coolest way of scam phone calls.  If not, I copied the response from the IRS website for you to read up on for future reference.

First, IRS never make phone calls about your taxes..

Second, if they did always search for the official IRS phone number (you can Google it) and call the IRS directly to ask about your situation.  No one likes to talk to the IRS, go to the dentist, see the doctor, get your flu shot but you eventually have to do it.

So climb up your saddle pardner its TAX SEASON…Yippee Kai Yea!

Continue reading “Tax Season…IRS scams and phone calls”

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