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Today’s “money story” is a guest post from Bob Clyatt, author of the outstanding Work Less, Live More, which is one of my favorite books about financial independence and early retirement. [My review.] It’s an update on what his life has been like since moving to sem-retirement fifteen years ago.

I had the good fortune to start a digital design firm in 1994. I sold it during the dot-com frenzy, leaving me with a bad case of burnout and full retirement accounts. It seemed like the right time to pull the plug, so in 2001 — at the age of 42 — I left full-time work.

I embarked on a self-funded post-career lifestyle that wasn’t quite retirement (at least not in the traditional sense). I chose to do part-time, work-like activity in order to stay challenged and engaged while also closing budget gaps. Five years later, I wrote Work Less, Live More, which popularized the notion of semi-retirement.

So, I guess the big question is: Does semi-retirement work? What has it been like for me and my family? What lessons have I learned since embarking upon this path?

The Way to Semi-Retirement

The quick answer is: Yes, semi-retirement can and does work. The investing approach outlined in Work Less, Live More has sustained our spending since the day my wife and I quit work in early 2001. Our savings have allowed us to have part-time, low-paid (but intrinsically fun and meaningful jobs) at a time when the normal people in those jobs can’t actually make ends meet — and can’t enjoy them as a result.

My wife works ten or twenty hours a week in a large specialty women’s clothing store. Her job allows her to stay connected to her interests in fashion while spending time with a younger generation of women: her co-workers and managers.

Meanwhile, I got to pursue my dream of becoming an artist. I went to art school, then built a sculpture studio. I now show and sell my work everywhere from Hong Kong to Paris, from trendy art fairs in Miami to galleries in Manhattan. [Check out Clyatt’s contemporary sculpture at his website.]

I’ve certainly had fifteen-hour days and eight-hour weeks in semi-retirement, but mostly I putter around in the morning before going to my studio after lunch. I spend an active afternoon sculpting. At night, I’m parked on the couch just like the rest of the country.

Like all artists, I sigh that I don’t have as many sales as I’d hoped after an art fair or gallery show. But then I pinch myself and remember that the art itself is getting better. I remind myself that creating the art is deeply meaningful and our financial needs are still covered by our savings.

Our Time in Eden

We have a close family.

Our two sons (now 21 and 25) were short-changed for Mom & Dad Time during the 1990s. Business trips and long hours at the office scarred me deeply and took me away from the kids. This was probably the driving force pushing me toward early retirement, actually.

But were able to spend a lot more time with the boys once we chose the path to semi-retirement. (They probably got too much time with us by the time high school and college rolled around!) We bought a boat and took plenty of family vacations, and there was always time to play catch or Frisbee while the kids were growing up.

Once I left the rat race, I got into yoga. I spent more time working out than the average executive could ever dream. Staying fit takes time and energy. I had plenty of both. We also took the time to to prepare healthful meals at home. As I get older and I’m unable to eat as much without packing on the pounds, preparing exciting, well-made food has been something of a compensation.

Now that our kids and in-laws have moved out, our house is more than we need. It requires plenty of work, but is a source of enduring pleasure for us. The gardens and grounds are Edenic. We entertain a lot at home, and the studio I built on the property a few years back has made me something of a homebody (gladly so!).

I have the time to think, to read, to putter — and still get my errands done and art created. Mornings inevitably involve a long read of the Wall Street Journal over a big cup of strong coffee, looking out on the gardens and digesting what’s happening out in the world.

Art has been a good avenue for opening up the world further. We’ve met lots of young, interesting people, and enjoyed at least ten trips a year to art-selling or exhibition locations where my work is being shown: art fairs in Miami or fine craft fairs around the Northeast, international symposia in Europe or Asia. We’ve found that it’s always more fun to travel with a purpose, and weaving together art and travel has been something my wife and I enjoy doing together.

Our marriage is no doubt stronger for having gone down the semi-retirement path. I’m convinced a lot of marriages founder out of need for more time and energy for each other. Finding that time and energy can be so difficult when juggling full-time work, commutes, and the inevitable life-maintenance that everyone has to attend to.

We often look at friends who work full-time, especially those at the lower rungs on the pay ladder, and wonder how people can possibly hold it all together given the stresses. So we’re grateful for the gift we’ve been able to give ourselves of time, and the extra bit of cash it sometimes takes to keep irritants at bay: a parking ticket doesn’t ruin our day or cause us to fight, but the irony is we have more time to drive around to find a parking spot in the first place so the issue just doesn’t come up.

Our social lives are active. We have rich friendships among people and couples of all age groups in our community. We participate in community groups and volunteer for causes we care about. We feel connected to our town and the people in it. We never had time for this when we worked full time. But now I pop up regularly in the local paper because of one project or another. (Usually I’m mentioned for helping to bring sculptor friends’ work to our town for temporary installations around our parks and public areas.)

The Downside to Downshifting

All that probably sounds idyllic — and it is. But there are things cropping up after fifteen years of semi-retirement that are less than perfect. I’m not complaining, but I feel like I should mention these in the interest of full disclosure.

My concerns aren’t financial. We’ve kept our lifestyle in check, so we have enough — and then some. While my aging friends have started to show up with flashier cars (Maseratis and Teslas are “in” with my male peers), and they’ve started buying second and third homes, this isn’t a problem for me. I’m not wired to envy them or to feel left out.

What is concerning, though, are questions of identity and accomplishment. When you leave life in the fast lane a decade or two before your peers, some of the folks you know will go on to become Big Dogs at a time when you’re feeling more like a Chihuahua!

Sidenote: It’s rare to be a Big Dog in the art world, especially for a late-bloomer like me. Most artists subsist on the joy of creating and the satisfaction of nudging a body of work into the public sphere to some admiring fans and a few sales.

I’ve always had the respect of my still-working friends. They like having a window into my aesthetic, alternative lifestyle. They admire the chutzpah it took to walk out on the System and chart my own course. Still, the fact is that on conventional metrics they have gone further and achieved more in their extra years, allowing them now, as they approach traditional retirement age, to play the next few decades at a level I hadn’t really foreseen. That world is now closed off to me.

For example, I have friends who are entering their sixties with large career accomplishments are becoming directors of significant public companies, an ideal semi-retirement role. Others who have done well financially are in a position to engage in philanthropy at a level I simply can’t.

In addition to the genuine good they’re doing through their gifts, they’re invited into advisory roles where they can help steer the vision and activities of their chose charities. This work is deeply meaningful for them. These roles also bring accolades that keep the older semi-retiree feeling appreciated, respected, and useful in a significant way, while remaining connected to other high-achievers.

Because I left the fast lane early, I don’t have as many post-work opportunities.

I’m certainly appreciated and respected in the circles I move in. But those circles sometimes feel rather quiet and small. When I chose semi-retirement fifteen years ago, I understood intellectually that this would happen. I made an intention choice to pursue a quieter, more introspective bath. Yet there’s a sense of loss — of missing out — that comes when you realize certain paths are closed off forever.

J.D.’s note: I’ve experienced this in my own life. When I chose to enter semi-retirement, I left near the top of my field. In the years since, others have produced bigger and better websites. Now that I’ve resumed writing about money, I feel like a young pup instead of a Big Dog. I’m glad for the success of my colleagues, but can’t help wondering what might have been if I’d elected not to cash in my chips.

Know Thyself

Of course many readers will have no interest in embarking on any kind of high-profile semi-retirement activity: “Let me have a quiet place to do what I want and leave the living large to others!”

But plenty of early retirees are able to save big precisely because they’re high-achieving, high-energy people. When they’re done working, they want it all: lots of relaxation while retaining the sense that they’re connected and needed. This simply might not be possible if you drift away from the limelight for an extended period.

Don’t get me wrong: I’m glad I made the change to the slow lane. But before you make the shift, think about your own needs to be useful and/or achieve recognition. Make sure your future is going to be a good fit for you in the long term.

To learn more about Bob Clyatt, check out his gallery of contemporary sculpture. You can buy Work Less, Live More on Amazon or visit the book’s website. Lastly, you might want to check out my review of the book.

The post Fifteen years of semi-retirement: A real-life look at what it’s like to live more and work less appeared first on Get Rich Slowly.

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In this week’s installment of Get Rich Slowly Theater, we’re going to look at a real-life money boss: Earl Crawley, a parking attendant from Baltimore. Mr. Earl (as he’s known) was profiled on the PBS show MoneyTrack. Here’s a six-minute segment about this super saver:

Mr. Earl "Super Saver" - YouTube

Mr. Earl has worked as a parking attendant for 44 years — at the same parking lot! He’s never made more than $12 per hour. He’s never earned more than $20,000 in a year, yet he has a net worth over half a million dollars.

Like many successful folks, Earl started working when he was young. At age 13, he got a job at a produce market to help pay the family bills. His mother took most of his income to help make ends meet, leaving her son with just a few cents out of every dollar. This forced saving plan was the start of a life-long habit.

Mr. Earl says he was a slow learner. He wasn’t very good in school. He had dyslexia, so reading was a struggle. Growing up in the 1950s, there weren’t a lot of opportunities for people in situations like his. He knew he was destined for a lifetime of low-wage jobs, so he decided he’d better save what little he earned.

He and his wife raised three children — and sent them to Catholic school instead of public school — despite their meager budget. (Mr. Earl took extra jobs in order to pay tuition.) Meanwhile, he started investing.

Mr. Earl’s investing habit started small. At first, he put his money into savings stamps and savings bonds. He saved what might have seemed like meaningless amounts to other people, starting with pennies and moving up to dollars. For fifteen years, he invested $25 each month into a mutual fund. His balance grew. By the end of the 1970s, his net worth was $25,000.

Eventually, Mr. Earl decided he wanted to “play the stock market” himself. He began buying shares in Blue Chip companies like IBM and Caterpillar and Coca-Cola. He bought just a share or two at a time, but that was enough. (His first purchase was a single share of IBM in 1981.) His secret?

“Instead of taking the dividends and pocketing it, I let it set — or let it reinvest itself — and increase my shares. The more shares I had, the more dividends I had. And eventually, the more money I had down the road.”

Like any good money boss, Earl built a wealth snowball.

How did Earl become so savvy with money? It’s not just because of habits he developed when he was young. You see, his parking lot is in the middle of a financial district. Over time, he picked the brains of the folks who passed his way. He picked up tips on how to save and invest.

“I talked to everybody and listened to the advice everybody gave me,” he says. Because he had trouble reading, he made a point of listening.

Today, Mr. Earl’s stock portfolio is worth more than $500,000. He owns his home free and clear. He has no debt.

Mr. Earl is a prime example of a money boss. He made the most of the cards life dealt him. He found a way to turn a losing hand into a winner. And now he’s paying it forward, teaching others how to save and invest.

The dude is awesome.

For more about Mr. Earl, check out this short interview at Kiplinger.

The post GRS Theater: The parking lot attendant worth half a million bucks appeared first on Get Rich Slowly.

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So much of financial success involves good habits practiced over long periods of time.

Yes, you can still have a positive impact on your financial future if you’re starting late in life — but if you’re 59 years old and just beginning to think about financial freedom, you have a lot of work to do.

But if you’re 19, you have an extra forty years to set yourself up for financial success. This extra time makes a ginormous difference!

A lot of this is due to the magic of compounding. Over the short term, your investment returns don’t help a whole bunch. But over the long term? Over decades? Wow! Compounding can help you create a truly impressive wealth snowball.

I once received email from a reader named Anders who testified the power of compounding:

I used to save money in funds without knowing more than it gave a better interest than ordinary savings accounts. Then a few years ago I came across a book that explained compound interest and showed graphs of how it works. I was blown away by the idea!

I think, for me, that was the biggest impact on my way of thinking about savings and it got me more interested in the stock market too. So in my opinion, the things people who don’t know too much about savings/investing need to hear is about how compound interest works and how the stock market works.

We’ll leave “how the stock market works” for another day. (If you want to know more right now, check out my articles on stock market returns and how to invest.) Today I want to look at why some folks consider compounding to be the most powerful force in the universe.

The Power of Compounding

On its surface, compounding is innocuous — even boring. How much does it matter if you start saving now? Will it really affect what you can spend in the future?

To illustrate the power of compounding, I spent far too much time playing with spreadsheets. (Seriously. Kim managed to get like three major projects done in the time it took me to generate the following numbers and graphs. But I had more fun.)

Note: All of the numbers that follow are based on certain assumptions. For each of the three asset classes — stocks, bonds, gold — I’m using the long-term average real return: 6.8% for stocks, 2.4% for bonds, and 1.2% for gold. That’s what these investments return over decades (not year to year) after accounting for inflation. However, it’s very important to undertand that average is not normal. Returns can (and do) vary widely from year to year.

First up, here’s a basic look at compounding in action. This table assumes you invested one dollar into each of stocks, bonds, and gold. Based on historical averages, I’ve calculated how much your dollar would have grown to at the end of each year for fifty years:

As you can see, compounding doesn’t really do much during the first few years. After a decade, your $1.00 would nearly double if invested in stocks. (Remember, this is inflation-adjusted. The nominal number would be greater. But this is what your dollar would be worth.) If invested in bonds, that $1.00 would grow to $1.27. And if you invested in gold? That $1.00 would grow to $1.13. (For the record, my research shows that real estate offers long-term returns similar to gold. Others say real estate returns are worse than gold.)

The longer your money remains invested, however, the more powerful compounding becomes. After ten years, your $1.00 in stocks grew to nearly $2.00. Afters sixteen years, it will grow to nearly $3.00. In 20 years, it’ll grow to nearly $4.00. In 24 years, it’ll be worth more than $5.00. From there, the growth becomes even more rapid. By year 40 — which, yes, is a very long time — you’re earning more than a dollar every year.

Compounding a One-Time Investment

That’s a fine hypothetical example, but nobody invests just a dollar. Let’s assume instead that you made a one-time $5500 investment in your Roth IRA. How would your future returns on that investment vary depending on where you put the money? Here’s a table that demonstrates:

As you can see, compounding can make a huge difference — especially when time is allowed to magnify the difference in annual returns. (This is one reason index funds outshine managed mutual funds. Index funds, as a whole, earn that 6.8% average annual return that the overall stock market earns. Managed funds earn that less fees, which average about 2%. That’s not much in the short-term, but it’s a huge amount in the long-term.)

For the visual thinkers out there, I’ve created a series of charts that dramatically demonstrate the difference that compounding can make over time.

Over fifty years, compounding can make a dramatic difference if you’re able to earn higher returns on your investments! (Who has a fifty-year investment horizon? Well, your typical college student does, for one.)

The Importance of Saving

Now, it’s often said — sometimes even by me — that your investment returns are less important than your investment contributions. That is, how much you invest matters more than where you invest it. Here, for instance, is an XKCD comic belittling the power of compounding:

How true is that? Let’s look at another hypothetical example.

In this case, assume you invest $5500 on January 1st for the next fifty years. How would your investments grow in this case? Here’s the table:

And here are the charts:

Look at that! Investing more does make a difference. Shocking! Sarcasm aside, there are a couple of things to note about these numbers:

  • First, investing more absolutely produces better results. The more you contribute, the more there is to compound. If you want to build a wealth snowball — and I hope you do — the best thing you can do is invest as much money as possible.
  • Second, when you invest more, you erase some (but nowhere near all) of the difference between the rates of return. Take a look at our one-time investment example. In that situation, stocks double gold by year 13 and they double bonds by year 16. But with ongoing investments, it takes stocks 21 years to double gold and 26 years to double bonds.

Yes, the amount of you save is more important than the returns you earn. That said, there’s no denying the extraordinary power of compounding over time. Real-world numbers bear this out.

A Real-Life Example

Finally, let’s look at a real-life example or two. These are actual numbers from actual accounts.

To start, here’s the balance history for the 401(k) I started back when Get Rich Slowly was throwing off huge wads of cash:

The blue line represents my actual balance over time; the orange line represents my balance if I had not been invested. (In other words, if I were earning no return because I stuffed my money under a figurative or literal mattress.)

I’ve contributed a total of $60,518 to this 401(k) since the end of 2008. In that time, it’s grown $117.121.19 so that my balance today is $225,331.75. That’s 193.5% growth in just over eight years (or 12.31% annually).

Here’s a second example, this time with the moved money from my box factory retirement plan to a rollover IRA:

Here, I’ve contributed a total of $65,027.41 to the account — most of it in 2009, but a few thousand just last month. (I closed a smaller IRA and moved the proceeds to this account.) In that time, I’ve gained $86,425.88. That’s 132.9% growth (9.73% annually) in under eight years — all because of compounding.

The Bottom Line

Based on all of this, there are three keys to make compounding work for you:

  • Start early. The sooner you start, the more time compounding has to work in your favor, and the wealthier you can become. The next best thing to starting early is starting now. Yes, if you start investing at age 19, you’ll enjoy better results by the time you’re 65. But even if you’re 59, compounding is your friend and you shouldn’t hesitate to invest.
  • Stay disciplined. Make regular contributions to your savings and retirement accounts, and do what you can to increase your deposits as time goes on. Your goal should be to generate as large a saving rate as possible, to widen the gap between what you earn and what you spend. Don’t be tempted to cash out a retirement account when you switch jobs. I see so many people make this mistake, and it makes me want to cry. Don’t be tempted to sacrifice your future security for a few bucks today.
  • Be patient. Don’t touch your investments. Compounding only works if you let your money grow. Remember: You’re creating a wealth snowball. At first, your returns may seem small, but they’ll become enormous as more money accumulates.

Do these things, and your wealth snowball will grow. Sure, there might be some years where your investment balance decreases rather than increases. Again, that’s normal. The examples I’ve used here assume stocks, bonds, and gold return a stead annual average. They don’t. Their returns fluctuate — sometimes wildly. But, over long periods of time, your investment accounts should steadily swell.

For a brilliant example of compounding in real life, turn to American statesman Benjamin Franklin. When he died in 1790, Franklin left the equivalent of $4400 to each of two cities, Boston and Philadelphia. But his gift came with strings attached. The money had to be loaned out to young married couples at five percent interest. What’s more, the cities couldn’t access the funds until 1890 — and they couldn’t have full access until 1990. Two hundred years later, Franklin’s $8800 bequest had grown to more than $6.5 million between the two cities! True story.

The post The power of compounding: How your wealth snowball grows with time appeared first on Get Rich Slowly.

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In order to survive and thrive, you need to earn a profit.

You already know profit is the lifeblood of every business. It’s like food and water for the human body. Although proper nutrition isn’t the purpose of life, we couldn’t exist without it. Food and water give us strength to do the stuff that matters most. So too, profit isn’t necessarily the purpose of business — but a company can’t survive without it.

Here’s a secret: People need profit too.

In personal finance, “profit” is typically called “savings”. That’s too bad. When people hear about savings, their eyes glaze over and their brains turn to mush. Bor-ing! But if you talk about profit instead, people get jazzed: “Of course, I want to earn a profit! Who wouldn’t?”

Profit is easy to calculate. It’s net income, the difference between what you earn and what you spend. You can compute your profit with this simple formula:


If you earned $4000 last month and spent $3000, you had a profit of $1000. If you earned $4000 and spent $4500, you had a loss of $500.

There are only two ways a business can boost profits, and there are only two ways you can boost personal profitability:

  • Spend less. A business can increase profits by slashing overhead: finding new suppliers, renting cheaper office space, laying off employees. You can increase your personal profit by spending less on groceries, cutting cable television, or refinancing your mortgage.
  • Earn more. To generate increased revenue, a business might develop new products or find new ways to market its services. At home, you could make more by working overtime, taking a second job, or selling your motorcycle.

When you earn a profit, you don’t have to worry about how you’ll pay your bills. Profit lets you chip away at the chains of debt. Profit removes the wall of worry and grants you control of your life. Profit frees you to do work that you want instead of being trapped by a job you hate. When you make a profit, you truly become the boss of your own life.

With even a small surplus, the balance of power shifts in your favor.

The Most Important Number in Personal Finance

If you’ve ever calculated your net worth, you know that number is a snapshot of your current wealth. But it’s more than that. Your net worth is the grand total of years (or decades) of profits and losses.

As the authors of Your Money or Your Life put it, “[Your net worth] is what you currently have to show for your lifetime income; the rest is memories and illusions.” Ouch!

The greater the gap between your earning and spending, the faster your net worth grows (or shrinks). This may seem obvious, but it’s important. Everything you do — clipping coupons, asking for a raise, saving for a retirement — should be done to increase your profit and wealth.

But profit doesn’t mean much on its own. Is a $1000 monthly profit good or bad? Well, it depends on your circumstances.

  • If your income is $2000 per month (or $24,000 per year), a $1000 monthly profit is great. That’s a saving rate of 50%. Congratulations!
  • On the other hand, if your income is $20,000 per month (or $240,000 per year), a $1000 monthly profit gives you a saving rate of 5%. That’s average at best.

You see, it’s not your total income that determines how wealthy you are and will become. Nor is it your monthly surplus. No, the true measure of progress is your saving rate — how much you save as a percentage of your income.

In business, saving rate is called profit margin. I think it’s useful for everyday people — especially folks who have decided to act like the CFO of their own lives — to think of saving rate as profit margin too.

Pull out your personal mission statement. Look at your goals. Your profit margin directly affects how quickly you’ll achieve these aims. A saving rate of 20% will allow you to reach your destination twice as quickly as a saving rate of 10%. And if you can save 40% or 60%, you’ll get there even quicker.

The growth of your wealth snowball is directly dependent on the size of your saving rate.

Profit is Power

Now I’d like you to meet my friend Pete:

Some of you may know Pete as Mr. Money Mustache.

Pete’s personal mission is to enjoy a rich life with his small family in a small house in a small town in Colorado. He wants to pass his days slicing through canyons on his bicycle, building things in his workshop, and sharing quiet moments with his wife and son. And Pete doesn’t want to be tied to a job.

Following the standard advice to save between 10% and 20% of his income, it would have taken decades for Pete to achieve these goals. Pete is an impatient man. He didn’t want to wait that long, so he deliberately pumped up his saving rate.

After college, Pete and his wife worked long hours at jobs that paid well. They moved to a town where the cost of living was low and they could bike anywhere they needed. They bought a modest home. The Mustache family generated a lot of revenue while keeping overhead low.

As a result, Pete and his wife set aside more than half of their combined take-home pay. After ten years with profit margins near 70%, they were able to “retire”. He was thirty years old. Now, a decade later, Pete and his wife continue to pursue their mission, happily ignoring detractors who say what they’ve done is impossible.

The more you save — the higher your profit margin — the sooner you can have the things you really want out of life.

This is the bottom line, the entire thesis of the Money Boss method: Profit is power.

Computing Your Profit Margin

My mission at Get Rich Slowly is to give you the power to choose the lifestyle you want. That means helping you boost your saving rate. If you promise to do the work needed to generate greater “profits”, I promise to share the strategies and mindsets that will help you do so.

To find your current saving rate, you need two other numbers: your monthly income and your monthly expenses. For now, let’s look at only last month. (You’re free to run the numbers on past months or years, but for this exercise last month is enough.)

Here’s how to find your income and expenses:

  • If you’re a money geek who already generates a monthly income statement (a.k.a. profit-and-loss statement), just grab your total income and total expenses from the form.
  • Many of you track your money in Quicken or through services like Personal Capital. These too make it easy to find your monthly income and expenses. Some will even compute your profit for you. Here, for instance, are my own numbers from Personal Capital. You can see I had a $3214 profit in this example month, which means my saving rate was about 32%. (By the way, these numbers aren’t normal for me. Both income and spending were high!)

  • If your finances aren’t yet automated, it’s not too tough to run numbers by hand. Collect your brokerage, bank, and credit-card statements from last month. Use these to total your income and expenses. (You shouldn’t have to do this line by line. Most statements total income and expenses separately in some fashion.)
  • What if you don’t track your money? Start! If you owned a business, you’d keep books. Well, a money boss keeps books too. It’s the only way to spot trends and to measure progress. Pick a tracking method — many GRS readers like YNAB — and make tracking part of your weekly financial routine.

Now it’s time for a little math. To find your monthly profit, subtract your income from your expenses. (If your income was $3500 and your expenses were $3000, your profit was $500.) To find your profit margin (or saving rate), divide your profit by your income. (Using the previous example, you’d divide $500 by $3500 to get 0.14286 — a profit margin of 14.3%.)

Burn this number onto your brain. We’re going to spend the months and years ahead making your profit margin grow.

If you want to get fancy, run the numbers again. This time subtract your mortgage and car loan and credit-card payments (and so on) from your expenses before calculating profit and profit margin. See how much profit you’ll have once you’ve paid off your debt? Cool, huh?

Note: During the month of March, I’m migrating old Money Boss material to Get Rich Slowly — including the articles that describe the “Money Boss method”. This is the third of those articles.

Look for further installments in the “Money Boss method” series twice a week until they’ve all been transferred from the old site.

The post Your saving rate: The most important number in personal finance appeared first on Get Rich Slowly.

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Hello, and welcome back to Get Rich Slowly!

My name is J.D. Roth, and I founded this site in 2006. I sold GRS in 2009, but I bought it back last autumn. I’ve been publishing new material regularly for the past five months. It’s been awesome!

This announcement will seem strange to folks who have been following along since last October. I apologize. However, I just now reclaimed the old subscription management account from the site’s previous owners. That means — in theory — that when I publish this short blurb, up to 120,000 former RSS subscribers will suddenly discover that I’m back and that the site is back.

Plus, if things work correctly, another 28,406 people will get an email tomorrow morning letting them know that GRS has returned from the dead. This announcement is for these former fans — not for the people who have been reading right along.

(There’s a distinct possibility that nobody will see the announcement because I’ve reconnected things incorrectly. If that happens, I’ll have to make fixes then re-announce.)

If you are a former reader who is shocked to see this news in your inbox, welcome back! Look around. I hope you’ll be pleasantly surprised to see that GRS has awoken from hibernation, and that we’re publishing awesome articles. There’s a lot of maintenance to be done behind the scenes to get the site modernized, but we’re working on it.

As part of this process, the old email system is going away. (It’s been dead for several years, anyhow.) If you’d like to read Get Rich Slowly by email, subscribe to the GRS newsletter here. Every Friday, I send an update profiling three of the week’s best blog articles plus three additional outstanding money-related stories from other sites. I hope the 6692 people who currently subscribe to the newsletter would agree that it’s both useful and fun.

In any event, welcome to all readers — new and old. I’m grateful to have you here.

The post Hello, former readers. Get Rich Slowly is back — and so am I. appeared first on Get Rich Slowly.

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I’m generally an even-keeled guy. I don’t get worked up about much. I understand that different people have different perspectives, so I try to be respectful when others disagree with me. Having said that, there are indeed certain things that piss me off.

For instance, I get mad-dog lathered up at traditional advice about how much to save for retirement, such as this article at Business Insider (echoed here at The Wall Street Journal):

So how much are you supposed to be saving in order to finance 20 to 30 years post-work? The commonly accepted rule of thumb is that you’ll want about 70% of your former annual income — at least — to continue living at or near the style to which you’ve been accustomed.

Let me be blunt: This rule of thumb is asinine.

This “rule” (which is used by most retirement calculators, both on the web and from financial planners) estimates how much money you’ll need by using your income as a starting point. The 70% ratio is commonly used, but plenty of places use 80% or 90%. Regardless the percentage, estimating your retirement spending from your current income is ludicrous. It’s like trying to guess how much fuel you’ll use on a trip to grandmother’s house based on the size of your vehicle’s gas tank!

  • Say you make $50,000 a year but spend $60,000. In this case, your income understates your lifestyle by $10,000 a year. If you based your retirement needs on your income, you’d be screwed.
  • On the other hand, if you’re a money boss who saves half what she earns, you’d only spend $25,000 of a $50,000 salary. Basing your retirement needs on your income would cause you to save much more than you need. You’d be working long after the point at which you could retire safely.

Predicting how much much to save for retirement based on income makes zero sense. (Zero!) It’s one of those pervasive financial rules of thumb — such as “buy as much home as you can afford” — that does more harm than good. There’s a real danger that if you heed this advice you won’t have enough saved in retirement. If you’re proactive like many Get Rich Slowly readers are, you run the risk of saving too much, meaning you’ll miss out on using money to enjoy life when you’re younger.

Instead of estimating how much to save for retirement based on your income, it makes far more sense to plan your retirement needs around your spending. Your spending reflects your lifestyle; your income doesn’t.

So, how much do you need to save for retirement? How much will you spend? It depends.

For many people, expenses drop when they stop working. They drive less. The kids are out of the house. The mortgage is gone. And, ironically, they no longer have to save for retirement. Meanwhile, other expenses increase. (Most notably, health care costs tend to balloon as we age.)

That said, it is possible to get a general idea of how much you’ll need in the future. According to the 2016 Retirement Confidence Survey: about 38% spend more in retirement than when they’re working. 21% spend less, and 38% spend the same. Past iterations of this survey have shown that roughly two-thirds of Americans spend the same (or only slightly different amounts) during retirement as they did while working.

Translation: In general, your pre-retirement expenses are an excellent predictor of your post-retirement expenses. That’s why I prefer this rule of thumb: When estimating how much you need to save for retirement, assume you’ll spend about as much in the future as you do now.

Forget the “70% of your income” bullshit when planning for retirement. Use 100% of your current expenses instead.

When I originally published this article at Money Boss in July 2016, financial planner Michael Kitces — who has an awesome blog — sent me a note to explain why advisors use the “70% of your income” rule. The answer? “Because it works.”

Generally speaking, the 70% of income replacement ratio works because once you subtract taxes and work-related expenses (plus savings), it’s close to 100% of expenses in most cases. I still think this is a crazy way to come at it — why not just use 100% of expenses? — and that it’s completely off-base for folks with high saving rates. For more on this subject, check out Michael’s article in defense of the 70% replacement ratio.

The post Traditional advice is wrong: Here’s how much you actually need to save for retirement appeared first on Get Rich Slowly.

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Okay, I know this is sort of strange thing for me to post at Get Rich Slowly — although it’s not really that strange if you’ve been reading me for any length of time — but this afternoon, I want to share a mind-boggling deal on digital comics at Amazon.

I’ve been reading comic books all of my life. Over the course of 40 years, I built a masssive (and valuable) collection. Then, about five years ago, I sold most of my comics. I only kept the non-valuable stuff that had nostalgic value. (My complete run of Micronauts, for example. I love Micronauts.)

That said, I’ve continued to read comics on my Kindle. They’re cheaper than physical comic books and they carry less mental baggage.

Generally speaking, a collection of digital comics runs about $8 to $12 for a book that contains maybe ten individual comic books. That’s not a bad deal, but it’s not such a good deal that I can spend indiscriminately.

Right now, however, Amazon is having some crazy sale that I cannot fathom. A few hundred Marvel comic compilations — there doesn’t seem to be a rhyme or reason as to the selection — are on sale for ninety-nine cents each.

My fellow nerds in the comic book forums cannot believe this deal either:

I’m sorry, but this is like a once in a lifetime deal. I feel like I would be a bad blogger if I did not share this news so that my fellow nerds could take advantage. I have zero clue how long the deal will last. I only know that it’s been around since Monday. In the past 48 hours, I’ve spent $72 on comic compilations, but that $72 has netted me 73 books (or about 730 individual comics).

Here are some examples of the stuff that’s on sale:

There are many more titles available with this ninety-nine cent sale, but I’ve reached the end of my patience (two hours) typing these out. Feel free to browse.

If you want to take advantage of this sale, I suggest you do what I did: After you follow a link to something you like, root around the suggested items to find other ninety-nine cent gems.

As soon as I hear that this deal has gone away, I’ll pull this post. Non-nerd readers, I apologize for taking up your valuable time. Fellow nerds, rejoice!

The post Mind-boggling sale on digital comics at Amazon! appeared first on Get Rich Slowly.

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In 1988’s Cashing In on the American Dream [my review], Paul Terhorst wrote about retiring at age 35. Although his aim was to show readers the path to early retirement, he also sang the praises of temporary retirement — retiring young with the idea that you might go back to work later in life.

As I mentioned a few days ago in my article on the five types of retirement there’s another way to mix work with financial independence. In Work Less, Live More, Bob Clyatt makes the case for semi-retirement.

The Way to Semi-Retirement

In many ways, Work Less, Live More (published in 2005) reads like an updated (and more detailed) Cashing In on the American Dream. Even the author bios sound similar. Here’s how Clyatt describes his background:

In 2001, after 20 years of sustained high-pressure work, the last seven spent battling in the Internet wars, my wife Wonda and I chucked it in, mothballed our suits, rented a small summer house in Italy, and began our new lives as early retirees.

But early retirement was no paradise for Clyatt and his wife. They were stressed, and their friends were stressed too. Did he really have enough money saved? What about the sluggish stock market? He began to question his assumptions: Had he made a terrible mistake?

Ultimately, he realized the worst-case scenario wasn’t so bad. He probably did have enough to stashed away to sustain his early retirement, but even if he didn’t the downside was that he might have to do a little work. This realization allowed him to embrace the idea of semi-retirement.

“Doing some amount of engaging work offers a comfortable transition between full work mode and full retirement mode,” Clyatt writes. “With a modest income from part-time work, early semi-retirees may not have to face the dramatic downshifting in spending and lifestyle that so often confronts those who live only on savings or pensions.”

Here’s an extended explanation from the book:

Semi-retirement — reclaiming a proper balance between life and work by leaving a full-time job — offers a way out of the madness of overwork. By reducing spending and switching to a pared-back but more satisfying lifestyle, less money goes out the door.

Tapping into accumulated savings in a sensible way provides a steady annual income. Any shortfall can be filled with a modest amount of work, done in an entirely new state of mind: With less need to work for the largest paycheck possible, you can find low-stress work that you truly enjoy, on a schedule that gives you time to breathe.

Clyatt divides Work Less, Live More into eight chapters, each of which explores one of his rules for semi-retirement:

  1. Figure out why you want to do this.
  2. Live below your means.
  3. Put your investing on autopilot.
  4. Take 4% forever.
  5. Stop worrying about taxes.
  6. Do anything you want, but do something.
  7. Don’t blow it.
  8. Make your life matter.

Let’s take a closer look at the semi-retirement approach to creating work-life balance.

Figure Out Why You Want to Do This

Pursuing semi-retirement (and early retirement) requires commitment. It takes time and energy. Before you begin, Clyatt says, you should ask yourself why you want to do this. (Do you want to do this? If you love your career and want to keep working, then do so. Don’t give up a good thing!)

If semi-retirement feels like a good fit for you, you should do two things:

  • Examine your current life to determine which aspects don’t work well. Are you spending too much time in the car? Do you hate your neighborhood? Do you wish you had more time for fitness?
  • Conversely, try to imagine what your ideal life would be like. If you had all the time and money in the world, what would you do?

Using the “big rocks” metaphor, Clyatt says the key to a successful semi-retirement is prioritizing the important stuff while allowing the daily distractions to sift to the bottom of your to-do list. Here’s a video that demonstrates this idea:

Big Rocks - YouTube

This concept is true for everybody, whether you want to pursue early retirement or not. To better manage your time, to increase your well-being, you ought to focus on your big rocks first.

If you decide that semi-retirement is right for you, be sure your partner is on board. You don’t want to be working at cross purposes. Also, be careful to practice moderation. Too many people become obsessed with saving too much too quickly. This can lead to disillusionment and resentment. Instead, practice balance. Remember to enjoy today even as you save for tomorrow.

Live Below Your Means

“If you are planning to semi-retire, you’ll need to spend less than you earn,” Clyatt writes. You’ll need to live below your means.

Anyone who is under 65 and on the path of semi-retirement needs to think of assets as a resource to be carefully planted and harvested. You may long for some material luxury such as a new car or a second home, and you may even have enough cash on hand to pay for it. But because you are building a safe spending and budgeting plan for the long term, you need to keep that money invested and working for you, instead.

According to Clyatt, “Living Below Your Means is spending less than you make, less than you could, less than your peers. It’s a powerful tool.” In Get Rich Slowly terms, he’s talking about the power of personal profit — the gap between your earning and spending. The greater your profit margin, the faster you can achieve your goals.

The advice in Work Less, Live More is standard stuff, but that’s not a bad thing. You hear these recommendations all the time because they work: manage your career to maximize income, cut costs wherever possible (especially on the big stuff). “Don’t even try to keep up with the Joneses,” writes Clyatt. And learn to say “no” — to your friends, to your family, and especially to yourself.

Put Your Investing on Autopilot

What do you do with your personal profit? Build an enormous retirement stash! Clyatt advocates what he calls Rational Investing. Here are its basic tenets:

  • Allocate your investments broadly. Don’t put all of your eggs into one basket. Practice smart diversification, investing in a wide variety of asset classes. In other words, don’t limit yourself to only stocks or only real estate. Own both. Plus bonds. Plus cash. And so on. Own a bit of everything.
  • Rebalance your portfolio. Have a target asset allocation — the way your money is divided among your investments — and strive to maintain that. If stocks have a good year and now your portfolio is weighted to heavily in that direction, then sell some stocks and buy whatever is now under-represented.
  • Keep management fees low. By now, most educated investors understand that fees can wreak havoc on long-term investment performance. The number-one barrier to good returns is investor behavior. But fees and expenses are the second-biggest problem.

“A semi-retiree, particularly a younger one, should not try to simply achieve the highest rate of return if that means an unacceptable level of volatility or risk,” Clyatt writes. “Choose a mix of assets to maintain an acceptable level of return at the lowest risk, which generally means holding lower levels of equity [stock] than some other long-term investing models advocate.”

Although Clyatt likes passive investing, he does not recommend putting your entire stash into a single S&P 500 index fund. He prefers a slightly more complicated (and nuanced) approach.

Take 4% Forever

“Withdrawing money safely from your portfolio each year is the engine that makes semi-retirement viable,” Clyatt writes. There are two steps to starting your economic engine:

  1. Choose a safe rate at which to withdraw.
  2. Withdraw money using a safe method.

There’s a wide range of rigorous statistical research to support the idea that it’s safe to withdraw about 4% from your portfolio each year to use as living expenses. But this number is an estimate. It’s not a rule and it’s not a guarantee. If you knew how long you were going to live and what your investment returns would be each year, it’d be easy to come up with an exact number. But you can’t know these things, so all you can do is estimate.

Studies show that withdrawing about 4% each year will allow you to keep the inflation-adjusted value of your principal intact. Of course, if your goal is to “die broke” — which some people aim to do — your spend rate can be higher. And if you’re an older semi-retiree, you can withdraw more than 4% too.

If you’re curious about what sort of spending your current retirement stash could support, check out my list of best online retirement calculators.

Clyatt says that in the olden days, people set their withdrawal rate on their first day of retirement — then only adjusted it for inflation in the future. So, if you had $1,000,000 saved when you retired, you’d take $40,000 for living expenses in the first year, and adjust that number annually for inflation thereafter.

Unfortunately, this method runs a high risk of depleting a portfolio if the economy turns sour. Instead, Clyatt recommends the following:

  • Each year, withdraw up to 4% of your portfolio’s value for living expenses. “You can increase the amount to 4.5% with slightly diminished safety,” he writes.
  • After a bad year for the stock market, use what he calls the 95% rule: Reduce your spending to 95% of the previous year. So, if you withdrew $40,000 for living expenses last year but the stock market has crashed, then take $38,000 this year (95% of $40,000).

How do you get your 4% living expenses out of your investment portfolio? Simple. Instead of having distributions reinvested — as most of us do — request that these funds be channeled into a money market account. Pull out more cash when you rebalance your portfolio every year. And if you need more money, then sell some of your investments.

Filling in the Blanks

The first four chapters form the bulk of the book. The last four chapters fill in some blanks, covering topics ranging from taxes to time management. Here are some highlights:

  • As a semi-retiree, your taxes will be comparatively low. Couple this with two other facts — U.S. taxes are low compared to other nations and they’re low compared to our own history — and you should let your mind rest easy. Don’t fret so much. All the same, Clyatt offers a handful of strategies for minimizing your tax burden during retirement.
  • In Cashing In on the American Dream, Paul Terhorst offered the following rule to early retirees: “Do what you wish, but you must do something. The idea is to live, not to dissipate time.” Clyatt echoes this advice. He suggests you imagine yourself as a nineteen-year-old kid going to college. You have no real idea what you want to be or do, so you engage in exploration and discovery to figure out what you like. Fill your time with meaningful hobbies, work, and experiences. (As always, I suggest people start by crafting a personal mission statement.)
  • As awesome as early retirement and semi-retirement are, they’re not without drawbacks. Don’t allow these challenges to sabotage you. Handle the guilt, the boredom, and the panic constructively. Let go of your ego and allow yourself to be ordinary. Honor your own time, and honor the time of your spouse or partner.
  • Finally, make your life matter. “It’s up to you to decide what you will make of your life,” Clyatt writes. “People with more time to stop and talk — or even better, stop and listen — could help make life a little better for everyone.”

Work Less, Live More contains ample examples from real-life people who have opted for semi-retirement. These folks come from all backgrounds and have a variety of motives for choosing this path. And semi-retirement looks different for each individual. For some it’s a chance to travel. For others, it’s a chance to pursue a passion (such as art). And for others it’s a chance to spend more time with their children.

For years, Work Less, Live More has been my go-to book for info about early retirement. I give away copies several times a year. I recommend it when replying to email. I refer to it myself when I have questions.

I like this book because it strikes a balance between the high-level Big Picture stuff (like you’d find in Cashing In on the American Dream) and the low-level nitty-gritty numbers crunching (such as the material in Early Retirement Extreme). Both of those books are great, and I recommend them too, but Work Less, Live More seems to offer the best all-around approach to early retirement planning.

Postscript: I contacted Clyatt by email, and he graciously agreed to share an update on his own semi-retirement. Look for that article in this Sunday’s “reader story” slot!

The post Work less, live more: The way to semi-retirement appeared first on Get Rich Slowly.

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What do you want out of life?

Maybe that seems like a strange question. What do goals have to do with getting rich slowly? Everything! Having a personal mission is key to running your life like a business. Your goals help you decide how to spend your time and money.

When I think about the difference between people with purpose and people without, I always think of my friend Paul.

Twenty years ago, as I was swimming in self-induced debt, Paul was living a bare-bones lifestyle that seemed ridiculous to me. He didn’t own a television. He had few books and little furniture. His only indulgence seemed to be a collection of bootleg U2 albums.

“How can you live like this?” I asked him during one visit. “Where’s all of your Stuff?”

He shrugged. “I don’t need a lot of Stuff, J.D. Stuff isn’t important. It gets in the way of the things I really want.”

I didn’t know what he meant. To me, life was all about the Stuff. I had hundreds of CDs and thousands of books. I had a TV, a stereo, a house, and a car. I wanted more.

Paul didn’t have any of these, but he had things I didn’t have. He had happiness. He had freedom. He had money. He had goals.

A Man with a Plan

At the time, I earned at least twice Paul’s income, but he had money in the bank while I had none. I couldn’t see the connection between Paul’s choices and his financial success, and I couldn’t see the connection between my spending and my mounting debt. I was blind.

One day, Paul and I went for a hike. As we walked, he told me what he’d been up to. He was living in a small town in northern Washington, working two full-time jobs and a part-time job. He got free rent in exchange for housesitting with an elderly homeowner. “I’ve only had five or six days off in the past eight months,” Paul told me.

“That’s insane!” I said. “Why would you do that to yourself?”

Paul smiled. “I have a plan,” he said. “I want see the world. I’m going to buy a one-way ticket to Thailand. I’m just going to go. I’ll travel for as long as my money holds out. The more I work, the longer I’ll be able to stay on the road.”

I heard what he was saying, but I didn’t really understand.

“Do you want to come with me?” Paul asked. Of course I did, but I couldn’t. I was in debt. I had no savings. I couldn’t afford to leave work for a few days, let alone a few months. How would I pay for all of my Stuff?

Paul went on his trip. He backpacked across Europe and Asia, and he loved it. He sent me postcards from Thailand and India, from Nepal and Israel and Jordan. He was gone for five months. Then, because he’d built his life around this goal, he returned to a financial position similar to the one he’d left.

Back in Oregon, Paul settled down to a more “normal” way of life. He got a real job. He even bought a house. Still he pinched his pennies, spending only on the things that mattered most to him. In time, I began to see the connection between his lifestyle and his quiet wealth.

Here’s what Paul taught me: Have a plan so amazing, so glowing, that you’re willing to walk blurry-eyed to work every day to make the money necessary to achieve it.

What’s Your Why?

What do you want out of life?

Too many people never take the time to answer this question. And of those who do answer it, a large number have only nebulous dreams and goals. I want you to do more. Today, I want you to create a personal mission statement.

To complete this exercise — which is based on the work of Alan Lakein — you’ll need about an hour of uninterrupted time. You’ll also need a pen, some paper, and some sort of stopwatch. When you’re ready, I want you to do the following.

Note: To make things easier, I’ve created a free PDF version of this project for you to download and print: Your Personal Mission Statement. It’s still branded for Money Boss, but we’ll change that once we have an official logo for Get Rich Slowly.

  1. At the top of a blank page, write this question: What are my lifetime goals? For five minutes, list whatever comes to mind. Imagine you don’t have to worry about money, now or in the future. What would you do with the rest of your life? Don’t filter yourself. Fill the entire page, if you can. When you’re finished, spend an additional five minutes reviewing these goals. Make any changes or additions you see fit. Before moving on, note the three goals that seem most important to you.
  2. On a new piece of paper, write: How would I like to spend the next five years? Spend five minutes answering this question. Be honest. Don’t list what you will do or should do, but what you’d like to do. Suspend judgment. When your time is up, again spend five minutes reviewing and editing your answers. As before, highlight the three goals that most appeal to you.
  3. Start a page with the question: How would I live if I knew I’d be dead in six months? Imagine that your doctor says you’ve contracted a new disease that won’t compromise your health now, but which will suddenly strike you dead in exactly six months. There is no cure. How would you spend the time you have left? What would you regret not having done? You know the drill: Take five minutes to brainstorm as many answers as possible, then five minutes to go back through and consider your responses. When you’re ready, indicate the three things that matter most to you.
  4. At the top of a fourth piece of paper, write: My Most Important Goals. Below that, copy over the goals you marked as most important from answering each of the three questions. (If any answers are similar, combine them into one. For instance, if “write a novel” was one of your top answers to the first question and “writing fiction” was a top answer to the second, you’d merge these into a single goal.)
  5. The final step requires a bit of creativity. Label a fifth piece of paper My Mission. Look through your list of most important goals. Does one stand out from the others? Can you see a common thread that connects some (or all) of the goals? Using your list as a starting point, draft a Mission Statement. Your Mission Statement should be short — but not too short. It might be anywhere from a few words to a few sentences. Take as much time as you need to make this the best, most compelling paragraph you can write.

When you’ve finished, I want you to set aside your Mission Statement and walk away. Go about the rest of your life for a few days. Don’t forget about your mission, but keep it in the back of your mind.

Your Personal Mission Statement

After you’ve had time to stew on things, sit down and review what you’ve written. How does your Mission Statement make you feel? Can you improve upon it? You want a vision to give you a sense of purpose that drives you day-in and day-out, through good times and bad. Ideally, your mission will do for you what my friend Paul’s did for him. It’ll be so amazing, so glowing that you’re willing to walk blurry-eyed to work each morning to make the money necessary to reach your goal.

Note: Your Mission Statement isn’t permanent. As your priorities and tastes change, and as new opportunities present themselves, your mission will adapt and grow.

What does an actual Mission Statement look like? Good question! Here are personal mission statements from five famous CEOs. And here’s mine:

I want to be the best person I can be, both mentally and physically. I want to sample all that the world has to offer by fostering new relationships, exploring new ideas, and daring to try new things. I want to use my skills and experience to improve the lives of others while also improving my own.

Sound boring? Not to me! I wrote this mission statement more than five years ago, and it still guides me today. When I set personal goals, I base them on this mission statement. When I make decisions about where to live and what to do with my life, I use this mission statement to guide me. Bottom line: This mission statement shapes the way I manage my money and my life.

After you’ve created a Mission Statement, the next step — if you’re ready to take it — is to brainstorm a list of Next Actions to support your Mission Statement. What kinds of things can you do to help you achieve this goal or pursue this mission? Write down anything that comes to mind.

When you have your list of Next Actions, pick the three you can do most quickly (these should become your short-term goals) and the three that would have the biggest impact on your life (these should become your long-term goals). Focus on these six goals!

What if you’re still having trouble coming up with a mission? Don’t give up. Try a different approach. Head to your public library and borrow one of the following books, each of which has great info about figuring out what to do with your life:

If, after all this, you still need more help creating your Mission Statement, take a few minutes to walk through the Mission Statement Builder from FranklinCovey. It’s a free online tool that translates your goals and values into a statement of purpose.

Note: During the month of March, I’m migrating old Money Boss material to Get Rich Slowly — including the articles that describe the “Money Boss method”. This is the third of those articles.

Look for further installments in the “Money Boss method” series twice a week until they’ve all been transferred from the old site.

The post What’s your why? How to write a personal mission statement appeared first on Get Rich Slowly.

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This guest post from Cody is part of the “money stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all stages of financial maturity.

In January, I attended Camp FI in Florida. While most of the attendees were thirty- or forty-somethings pursuing early retirement, one young man stood out. We were all amazed at the presence of Cody Berman, a 21-year-old hustler who defies the Millennial stereotype. Cody works hard, saves tons, and has a vision for his future. I asked if he’d be willing to share his story with GRS readers. Here it is.

From a young age, my parents instilled the value of saving into me. Throughout my early childhood, my father would match my contributions to my savings account dollar for dollar. This made me excited to save birthday money and miscellaneous earnings because the money would double. (Thanks, Dad!)

When I turned eleven, I started my first job working in the snack shack at my uncle’s local disc golf course; I earned five bucks an hour. Throughout middle school and high school, I worked various jobs and saved nearly every penny. At age sixteen, I bought my first car with the money I had accumulated over the years. I still drive that car to this day.

During high school, I took several AP courses and received college credit for them. If I had only known then what I know now, I would have taken nearly every AP course and CLEP exam available. When it came time to select a college, I was torn between Bentley University and the University of Massachusetts Amherst. I calculated that Bentley would have put me in approximately $80,000 of debt after four years but that I could attend UMass Amherst virtually for free. My frugality won. I chose the latter.

Making the Most out of College

Upon my arrival at UMass Amherst, I joined as many clubs and organizations as possible. Simultaneously, I obtained a job as a teacher’s assistant to financially support myself. After several weeks of attending dozens of meetings for multiple groups, I decided that the Investment Club, Fixed Income Fund, and Finance Society were particularly interesting to me. [J.D.’s notes: Where were clubs like these when I was in college?]

I soon realized that in order to get a leg up on my peers, I needed an internship. I applied to nearly thirty positions and heard back from only one. That summer, I worked in a low-tier operations role at a small branch of a major bank.

I came back sophomore year with increased confidence and a motivation to achieve the best internship possible. This time, I applied to nearly 35 positions and received responses from about 20% of them. Initially, none of my top prospects were interested in me.

Then, one day in early April, I received an email from a private equity company who asked me to come in for an interview. Three interviews later and the position was mine. That summer, I commuted two hours each way to my internship and worked long days. I thought I was on my way to become a rich, successful investment banker. What could be better, right?

Finding Financial Independence

During my junior year, I networked relentlessly and received offers from various top-tier investment firms. I knew that whichever firm I chose to work for following my junior year would probably be the firm I received a full-time offer from. I aimed for high-caliber, high-paying jobs in New York City.

It was during this year that I discovered the financial independence movement and realized something important: Time is more valuable than money.

Because of this newly-acquired perspective, I declined all of my high-powered NYC offers and chose to work for a financial firm that valued hard work, respected work-life balance, and compensated for overtime (extremely rare in the finance space). My friends and mentors all thought I was crazy for turning down the ultra-high-paying, high-stress offers, but I knew that I was making the right decision.

Once I discovered the financial independence movement, I was immediately attracted to the idea of a side hustle. I wanted to unlock an alternative income stream to allow me to reach my financial freedom quicker. I took steps to start a t-shirt company and tutoring business, but both failed due to lack of interest and commitment.

Eventually, I collaborated with James, a mechanical engineer friend of mine, and we created the ultimate side hustle: Arsenal Discs. Our company manufactures premium golf discs and equipment for the disc golf sport.

My passion for disc golf, coupled with my business mindset, made me a great fit to run the finance and marketing arms of the business. My business partner James, who loves to design and create, complemented my weaknesses perfectly by taking over the technical, engineering side of the business.

An Alternate Path

I see too many adults miserable in their jobs, complaining about money, and never having the time to do things. I’ve decided that this was not the life I wanted. I want freedom.

This yearning for freedom initially stemmed from my resentment of authority and being forced to perform tasks that I found neither useful or beneficial. Financial freedom grants you autonomy to work on projects that you’re truly passionate about. Once the need for a financial reward is eliminated, then altruism, passion, and authenticity foster motivation, not money.

My goal is to have a deep impact on society and, ultimately, the world. Whether this be through financial consulting, global volunteerism, or content creation, I strive to change others’ lives for the better. I feel that the typical nine-to-five job won’t grant me this satisfaction, and even if it could, I’d like to discover that career from a position of financial independence, not financial need.

I’d also like to help other young adults discover the road of financial freedom.

In my three years since discovering and advocating for the financial independence movement, I’ve had only one friend reach out to me for guidance. Most people in my peer group can’t be bothered with planning for their financial futures. They’re just finishing college. They may have just accepted their first job offer. The last thing they have on their minds is their financial situation ten years from now.

My advice to any college-aged reader out there is simple: Continue living on your college budget, even after you begin your career. As Jim Collins says, you can eventually reach financial independence by following one simple rule: “Save more than you spend and invest the rest”.

A single, twenty-something with no kids can easily live on $20,000 or less per year by making educated financial decisions. With the average graduate salary just topping $50,000 in 2017, a young adult can start with a nearly 60% saving rate! Using Mr. Money Mustache’s shockingly simply math behind early retirement, and assuming income grows at the same rate as expenses, that person could reach financial independence in eleven years. That’s incredible!

Plans for the Future

Luckily, I’m not alone in the path to financial independence.

My girlfriend Lauren, who is frugal by nature, is 100% on-board with my plans. It’s hard to argue against the idea of financial freedom in five years or less! Plus, I have my mom Ruth to thank. She’s turned me on to new blogs, podcasts, and other sources of information to add to my ever-growing repository of skills and lifehacks. She’s been extremely supportive in all of my efforts, whether it’s my studies, new ventures, or financial planning.

I’m a firm believer in creating multiple income streams to diversify risk. At this point, I have my high-paying W2 banking job, my side hustle, and miscellaneous side jobs and weekend jobs earning me income. I plan to further accelerate my wealth accumulation through real estate (e.g. house hacking, live-in flip, etc.). Developing these passive and semi-passive income streams will allow my saving rate to soar.

My hope is to work for less than three years in a traditional nine-to-five job. Instead, I’d rely on my (hopefully) successful side hustles and real estate ventures. Once I reach this point, I can put all of my time into passion projects, volunteerism, and traveling. I’m sure to make some mistakes along the way, but the goal of becoming financially independent at age 25 sounds too good to not pursue.

Nothing that I’m doing involves prodigious intelligence or tremendous abilities. I’m not a genius. I’m just a guy who wants to truly enjoy life and extract as much value out of it as possible. All it takes is a game plan, hustle, and ambition. The rest will follow. It’s never too late to take back control of your life.

Reminder: Please be nice. After twenty years of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are.

The post Money story: “I’m 21 and pursuing the path to financial independence.” appeared first on Get Rich Slowly.

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