What dividends are you earning on your investments?  Which of those are guaranteed dividends?

I was listening to Big ERN on ChooseFI who mentioned his home paid him a monthly dividend.  That’s just GENIUS.  It’s really a reverse, tax-free dividend—no need to worry about dividend/LT cap gains rates on this one.

There are people who feel their house in an investment and it’s often their largest asset.  I personally don’t want an investment that cost significant money to maintain and only increases slightly over the inflation rate on average.  Nor do I want an investment that can only be sold in whole if I need some money.  “It’s not like you can eat your house…”  [Notes: leveraging your down payment for profit multiplication is definitely interesting & housing markets determine their own rate of return]

There are people who have the opposite position that your house is a liability.  That is a solid position as well because you are required to pay expenses on your home.  I agree with most of the different position in one way or another.

How did we get to where we live today?  At some points in our lives, we’ve usually had to work a job(s) to pay taxes and take home the leftover.  That leftover probably went toward our housing expense, if not as the highest priority bill, probably very close to the top.  It’s very important to optimize this highest bill to meet your lifestyle choice…budget home or McMansion.

House Dividend Amount Theory:

Let’s say for round numbers your housing principle and interest payment equals $1000 per month.  It’s quite possible you would have to earn $1300-$1500  (1000 net + fed tax + state tax + FICA tax) just to pay for your housing shell.  For now,  I’m ignoring all the other costs such as insurance, utilities, maintenance, etc.

Let’s say you own your home [not, the-bank-owns-my-home-and-I’m buying-it-from-them-each-month; see your deed for details].  At this point, you do not need to earn $1300+ to make your house payment.  That means your house is contributing to/avoiding the removal of $1000 from your earnings/assets (either financial or human capital).

This is the financial “flip-side” of the “it feels great to have a paid for house.”  This is a way of looking at the house actually paying for you to live it in.

Each month the owned house gives your budget a $1000 cost avoidance.  It removes the $1000 cash outflow, thereby not requiring a $1000 of cash inflow ($1300-1500 gross income).  It’s the equivalent of $1000 tax-free dividend, or $1300-1500 taxable dividend income [note: divd tax rates are not 30%, but you get the idea].

Remember, there’s always another angle to view a situation

I love Big ERN’s interesting logic, which I interpret as, not having a payment (outflow), yet still having the item (service) is like a personal dividend.

There are plenty of ways to break this perspective apart and revisit the own/rent discussion.  I just liked ERNs angle for the positive view.

So much of personal finance is related to cash flow.  A dividend-paying home reverses the negative cash flow.  Brilliant sir, as usual for you.

What do you do part deux?  I could spend weeks writing about how many different ways our collective could share our lifestyle with the commoners/consumers.   Wait, I already do that here.  FIRE is really just relief retirement from a fixed career, a Repriorment if you will. (thanks Linda for sharing this term which sums up the journey so succinctly).  So I will expand…

Repriorment is so very simple.  For me, it is the act of prioritizing anything or everything.  Since you are reading this, you already do this.  You make conscious decisions on what you do with your time.  You make conscious decisions on how you manage your cash flow.  You are thoughtful and rely on the power of your mind.  I can confirm to you that you are extraordinary.

Improvement

I’ve seen repriorment used in the retirement context, but actually, it takes place every minute you are active.  The entire decision of what to do right now—or coming up—is a decision made on what you prioritize.  The little incremental decisions you make over a lifetime shape not only your current actions, but also compound into your future self.  It is truly the amazing results mentioned on ChooseFI of the aggregation of marginal gains.

Every once-in-a-while, pause for a second and think about what you’re doing right now, is it what you prioritize or just and offshoot of something you were doing?  Are to completing a conscious task?  Are you completing a multi-task (consciously)?  Or, are you just randomizing?  These are all OK, and because you’re extraordinary, they are all probably adding to your awesomeness…at some level.  But I feel we could all drive ourselves a sliver more.  It’s in our nature as extraordinary people.

Optional

FIOR is a great acronym that has come out of nowhere but I hear it more often.  Lisa is a genius.  She is exactly correct.  OPTIONAL is the key word.  More specifically optional is exactly the heart of the entire FIRE/FIOR world.

The option to reprioritize everything, every day.  There is near total freedom on how you live your day/week/month.  Stop and think about that for a full minute………ANYTHING is possible today, and acceptable.  You have ALL the options, especially at FI

Result

We ALL want days like this, where it’s our day to decide what to do.

The very best description I read about FIRE is:

“remember when you got out of school for the summer and you wake up the first morning of summer vacation? And you realize you have no school and no homework you have to do? And you have the whole day ahead of you to do whatever the hell you feel like? It feels like that.”  MrFreakyFrugal nailed it.

There is nothing I want to add to that.  It’s pure, simple and exactly correct.

In closing, there is a retirement community near me with a billboard that says “Retire Like You Mean It.”^TM  That’s awesome!  Go to sleep knowing you own tomorrow.  Wake up knowing you own the day.  Imagine living 24 hours a day knowing you are your own boss.  This is almost priceless.

Let’s talk about shopping.  There’s either planned need-based shopping or entertainment shopping.  We’ve all done both at many times in our lives.  Of course, we’re supposed to just perform planned/need-based shopping excursions, but that’s no fun.  Let’s talk about discount shopping—with a plan.

Normal shopping has a few pricing models, full-price, sale-price, some other crazy-price.  The goods we purchase come in two states—new or used.

Today I feel the need to talk about used items.  Something that someone wanted to get rid of and allow us to have that those items for less money.  So excellent for the wallet!  There are many used item locations ebay, craigslist, garage sales, neighborhood posting sites, thrift stores, (bulk trash for some), etc.

Let’s talk about Goodwill thrift stores.  Tons of merchandise—some horrible junk, other may be nice finds or “treasures.”

Here’s the best part:  Goodwill stores often have multiple pricing options.  Full priced items, half priced items,  and excellent $1 items.  Many Goodwill stores base the price on how long the item has been for sale in the store.

• Full Price: As items arrive they are priced with the new color tag of the week (e.g. pink) for full price.  I’m not sure, but I believe my store has 5 colors of tags— as an example a store may use Pink, Purple, Green, Blue, and Yellow.
• 50% off: The fifth(?) Friday after arrival, those old pink tags become 50% off their full price to incentivize people to get those items out of the store.  Friday morning can get a little busy in some goodwill stores.  There may also 50% off Saturdays when the entire store is on sale.
• $1 day: Then on the following Thu—end of that color’s 50% off week— all those 50% pink tagged items become $1 to really try and push the items out of the store.  Thursday morning can be even crazier.  Imagine getting jeans or a jacket for $1.

Then the next day (Friday) the discount process starts over with the next (oldest) color, in this example, Purple tags become 50% off their full price.

There are also 50% off Saturdays,  Senior Tuesday, Military day savings

My tip:  Near the end of the year many people donate items for the tax write and in Jan many items are donated because of new year’s ‘cleaning’ resolutions.  So if we can time 5 weeks after these items arrive (mid-Jan – mid/late Feb) you will find a large selection of very discounted stuff.  My local Goodwill’s racks are jam-packed with clothes and shelves are stacked with items.

I’m sorry this post went up at the end of this timeframe, I just realized myself why there was so much stuff at the stores.  Keep a shopping list of items you need/want in your task list.  Set up a calendar reminder for late Jan and Early Feb next year to take advantage of Goodwill Thrift Store donations sales to load up on stuff and save your wallet some serious money…and have hopefully a great entertainment shopping adventure.

FI: Financially Aware, Financially Optimizing; Enjoying Life.  That is the title I wanted to use, but Jonathan and Brad’s ChooseFI podcast deserves the headline.

I’ve now met repeatedly with two local ChooseFI groups and the meetings continue to be some of the most amazing meetings ever.

Gathered around a large table—or in rows of chairs—were over a dozen people who are locked in on the idea of being in Financial Control.  These people have the power over their money and not let money—or worse bills—control them.

The members of the group are so interested—or experienced—in mastering their money, time, and life.  The term “life hacks” is so magically applicable to many repeated examples shared in these meetings.  The brain power and information could be overwhelming in the 3ish hours if we weren’t all totally engrossed in the topics, constantly jumping to new topics or expounding on those in the current discussion.  I NEVER have an attention span over an hour, not with anything, except with the ChooseFI group(s).  To be fair, I understand some significant others have been known to overload and “skip” some of the future meetings, but a huge percentage of the group loves the information, even more so than considering the time just “well-spent-learning-hours.”

The two groups I’m in are full of people so different from the norm.  The entire group is actually quite different from each other.  We differ in age, family size, residence location, careers, experience with finances, wealth, financial sub-interests, etc.  Yet, there is such an open—and actually an excitement—between us.  The FI foundation we all share shows that the structure(s) we build on top can be and look different, but we are all so similar.

How the hell can so many strangers get so excited, raising their voices, and one-upping each other, when the Instant Pot comes up?  Hilariously amazing.

Maybe I’m just communicating the fact that we are ALL working to be better.  Financial freedom takes away a huge burden allowing the best in each of us.  How we choose to give our best back to the world may differ, but it shines through when you’re around the group.

I just wonder, what if the other 9,999 people out of 10,000 could learn 1/3 (1hr per month) of these ideas, skills, hacks?  What would our society, our neighborhoods, our friends and family do with this feeling of control, of power?

On a personal note: I’ve been pushing my FIRE life aggressively for over 12 years (7-10 pre/3+ post FIRE).  I looked 3, 5, 10 years ago to see if there were groups discussing FI for younger, middle-aged people with no luck.  I found the ChooseFI podcast after listening to podcasts for 10+ years and enjoy it along with my other podcasts.  What I do find truly remarkable is the way Brad and Jonathan have grown the FI topic from the typical blogs/podcasts into local meetings.  I’m over the hump and living FIRE on hopefully a LONG, LONG glide path, but I still learn and definitely love to share ideas I learned along the way.  It’s amazing to be with groups of people who are on a similar flight path, just have different takeoff dates and current altitudes.

Try the ChooseFI podcast, try to find a local ChooseFI group (or meetup) even if you’re not a social person like me.  I’ll tell you, it’s easy to be around people like you…actually, it’s awesome.  They’re awesome!

I think I’ve found something sweet in life!

Nearly every morning as I wake up I take a few moments to relax and prepare for the day.  I don’t even have to think about my daily plans (those activities are already in my schetchle but rather think about how amazing life is.

Of course, we all know that each morning we see the sunlight is much better than the other option, but how thankful are we?

I have found that laying in bed, being comfortable, knowing that I’m so lucky to have lived my life in a way so far to allow me to fully own my day as my own, really sets me up for the great day ahead.  There are many wise people that take some time each morning to meditate calming or clearing their mind, so it’s possible I’m doing this in my own way.

The other day I was enjoying the start of my morning, feeling VERY comfortable and content, laying under the fluffy down comforter when I realized that I’m like the frosting on my bed cake.  Yep, sometimes a calm mind comes up with strange things.

So, my bed is the nice soft foundation of the cake and the comforter is the fluffy frosting on the cake.  I was laying there in full comfort right in the middle of the sweet frosting.

Everyone should have the opportunity to take advantage of some of this “frosting” time.  All too often we are jarred awake by an alarm, we pull ourselves out of bed—or delay the inevitable before getting up—and drag ourselves into the day.  If only more of us could find the few minutes to lay in the frosting and enjoy the sweetness of what we have—even if only for 5 minutes.

I have written before how the best time of my day is the 10-15 before I fall asleep. I’m realizing more and more that sleep is where your body recovers, repairs itself, reset itself and realigns to for the upcoming day(s).  It is important to maximize your sleep almost as much as you maximize your day.  Your health may depend on it.

I believe I have always thought about many things differently than others.  My mind is usually a straight-ahead plan, but I also envision random ideas along the way.  I’m not artistic, but I’m possibly mentally creative?  I guess I’m sharing an alternate perspective—maybe one you could try to get a different perspective and outcome for yourself.

There is so much zen about mindset.  I really try to work on zen but it’s not my nature.  Yet I continue to try and find calm.  Finding this frosting time—and naming it—has made it more of a functional time than just being lazy.  I know my days, especially my mornings, have been better because of enjoying the frosting.

A couple weeks ago I met with the Phoenix ChooseFI Local group and it was one of the most amazing meetings ever.

Gathered around a large table were over a dozen people who are taking control of their financial lives.  Some are starting this as a new level goal while others are expanding their financial skills.

There were quick introductions where everyone told a little about their story. Savers. Real estate investors. Small business or side hustlers. I could feel my energy and excitement grow every couple minutes with each new “I’m into this” story.

The attendees (FI’er’s) were ALL interested to learn more and be better with Finances.  Specifically to control their finances and gain financial power for their lives.  It wasn’t like some of those tv/movie “financial seminars” I’d viewed or imaged.  The gung-ho, rah-rah, let’s-go-make-money ideals.  This was a “how do you…”  “How could I…”  …get into the powerful position of money/financial confidence.

So fast forward two weeks and I’m in San Diego (life is great) and I’m able to meet up with another ChooseFI Local group.  Nearly thirty (stars) at a neighborhood church meeting room. Some retired. Some brand new. Some feeling the need to fine tune. Some feeling the need or newfound desire to get their money smacked down and under control.

Again as everyone introduced themselves I felt the energy of grown and experience from these amazing people.  Different people at different stages of finances but all with the same thinking of being in control.

I STRONGLY recommend finding a local ChooseFI group and attending/sharing.  You can quietly listen and/or talk and talk because the group(s) are really easy going and very smart and totally welcoming.  In all honesty, life-changing.

[continuing my car theme from my last post]

50 Years: My wife and I were thinking about how things change. Small changes over time add up to huge differences from point A to point B. We thought about her ’69 mustang and how it’s almost 50 years old. Older than me! We thought about the MASSIVE changes in technology over the recent 50 years, such as better braking, stability, computer controlled everything, adaptive cruise control, blind spot sensors, rear cameras, not to mention self-driving cars/semis.

We then thought about how the 69 mustang was hugely different than say a 1918 model T, or even a 1915 high-end Cadillac. This of the open wheels, hand crank, buggy carriage setup, kazoo horn…

Next 50 years: Here’s my next thought—I may be around 50 years from now and be able to witness another of these cycles. It’s possible the cycles will speed up—similar to binary growth/compounding—allowing two-fold of these “cycles” in the next 50 years.

These changes are limitless in automotive, air travel, technology, medicine, science, space travel, even super-duper-earth-travel?

[This is the positive way to look at future “progress/growth” rather than the stressful FIRE thoughts about inflation and how much more everything will cost in the future. Those mid 60’s mustangs were around $2500 new. In today’s dollars, that would equal about $20,000. Projecting forward just seems scary. If the average new car today is $30k, then it would be possible a new car in 2057 could be $250k.]

Hold on for the amazing future:

Can you even imagine the future you will be part of?

How can we prepare our financial lives for such changes?

This is such a great time to be alive and living in this world…and into the future. “Find The Positive!”

Well…Money people constantly talk about “the number.”  It’s your retirement number, the target you’re shooting for, the goal, the goal-to-end-all-goals.  I have some thoughts about this super magical number—or more specifically—your goal(s).

When I was 25 I thought about an early retirement around age 55.  I thought how reaching a million dollars would surely enable an early retirement.  Oh, how I could live off the income generated from that magical million dollars.  Well, I’ve read and learned that it turns out “one million” dollars wouldn’t actually be what it was 30 years earlier.  Oops!  Time to rethink think magic number.  You would think business school would have made that more clear—and more importantly taught us three simple words “total market index.”

So if the target is no longer (for many people) the magical million dollars, what is the target?  What is your savings goal?  It seems to me that looking at the issue in reverse may yield the best answer.  Your financial well being is based on what you spend, not what you earn in most cases.  Therefore, understanding how much you spend is critical to your financial well being before and during retirement.

I’ve tracked my monthly spending for 20+ years.  Each month I look at bank statements to log each transaction to get a really good idea of spending, usually to about 98% accuracy or so.  [we’ve learned it really doesn’t change too much over the years if you keep the same house, cars, spouse, etc]

Once you know what your spending pattern is while you’re working, you can then project how that spending may change in retirement (more opportunities to spend?).

Saving 25x (30x?) your yearly spending amount allows for the standard Safe Withdrawal Rate over a lengthy retirement based on many studies of historical models.  Yet based on unbelievably low current and recent fixed income rates the 4% SWR rule places retirees, and especially early retirees in a conundrum.  The first question, can you withdrawal 4% of your portfolio balance on year one—and adjust for inflation in subsequent years?  There is no way to answer this until you are 15, 20, 30 years into retirement.  Well, what about the logic that you spend more early in your retirement, in your “Go-Go” years?  As you, and your body, decide to do less adventurous/active/expensive activities as the years progress you may very well spend less money.  Will medical costs in those later life years increase, most probably.  Will those medical costs be more than your 4% inflation-adjusted spend rate?  Nobody knows your specific case.

The option I am working with is, what if I can use a withdrawal rate of 3%, or 2.5%, even 3.5%.  Some calculations I’ve performed show one half of one percent compounded over 20,30,40 years is DRAMATIC.  I also consider the possibility that my investment portfolio may perform better, or much better, than a worse case withdrawal rate.  Many financial advisors consider this the Flexible Withdrawal Strategy.  Where you withdrawal a little more following a good return year—pull a little more of the high profits— and less following a subpar year—live more basic.  The flexible withdrawal rate strategy seems to come back to controlling your fixed spending requirements for poor return years so you can maximize your Go-Go following the good years.  They say the overall stock market goes up approx 70% of the years.  Seven good years and three basic years every decade seems like a great idea to me.  Maybe you will want to rest and recover those three years from all your Go-Go activities.

My current working plan—being only 3+ years into FIRE— is to stick pretty close to my pre-FIRE spending rate, which was the target for my FIRE spending.  This plan luckily falls well below the 4% SWR.  My wife and I also seem to have stumbled into some flexible part-time working opportunities that we enjoy enough to do it.  We may spend a day or two per week, every few weeks working and gain some nice “playchecks” to buy “extra stuff” or put towards the basic bills.

So, “the number” is really just a checkpoint to allow you to route along the lifestyle you’ve planned to live.  The goal of “retirement” seems to be to have a plan for living life.  Your net worth should be tied directly to living.