An uncertain future

On February 17th — in the middle of nine days without power due to an ice storm — we had the foundation contractor out to re-inspect our house. We experienced some settling last fall, and I was worried that might indicate deeper problems.

For thirty minutes, the contractor explored the crawlspace while I sat in the living room, fretting. When he finished, he came up to tell me what he’d found.

“Look,” he said, “my assessment is the same as when you had me out here three years ago. Your foundation is fine. It’s not failing. The house isn’t falling down.”

I felt a wave of relief wash over me.

“That said,” he continued, “I do think you’d feel better if you were to reinforce one section of the foundation. It looks to me as if you’re seeing some minor expansion and contraction of the soil, which is what’s causing your settling issues. It’d cost about $9000 to remedy that.”

Plan for reinforcing foundation

That evening as Kim and I huddled in our powerless living room, bundled in coats and jackets and using flashlights to read, I made a confession.

“I want to move,” I said. “I know we both love this house and this yard, but it’s taking a toll on my mental health.”

“I know,” Kim said. “I know you’ve been struggling. Ever since we moved in, I’ve seen how you’ve grown increasingly depressed and anxious. I’ll do whatever it takes to make you happy, but I think maybe you should give up on your dream of owning an old house.”

She’s right. I love old houses but my personality isn’t suited for them. They stress me out. (My ex-wife and I owned an old house too — she still lives there — and it caused me endless stress, as well.)

For the next couple of weeks, Kim and I spent many hours discussing our best course of action. Then, one month ago today, we made a decision: We would sell the house as soon as possible (to take advantage of the crazy Portland real-estate market), then rent a place for a while as we made a careful, calculated decision about where to live next.

Springing into Action

March was a crazy flurry of activity. From the moment we decided to sell, Kim and I have been working almost non-stop to get the house ready for market.

  • We’ve performed nearly all of the repairs that we know need to be done. We have a couple more scheduled. (And we’re deferring the foundation reinforcement. We’ll disclose that inspection and estimate to the buyers and let them make the decision.)
  • We rented a storage unit and have been methodically packing our unnecessary stuff and moving it over. Plus, I moved out of my rented office space, putting all of those things into storage too.
  • As we pack, we’re trying to do a deep clean on every corner of the house: scrubbing walls, washing windows, wiping out cupboards, and so on.
  • We’re also cleaning the yard. During our four years at this country cottage, we’ve collected a variety of stuff — spare lumber, old fenceboards, unearthed stones — that we’ve stacked in various piles. We’re clearing out those piles.

Honestly, the house looks better now than at any point during which we’ve owned it.

While we prep, we’re torn. We do love this house and yard. The yard, especially, is almost perfect for us. But there’s absolutely no doubt that this home, for whatever reason, causes me mental anguish. I can’t live here.

In fact, I spent the entire first half of March in a deep, dark place. I was filled with anxiety as I ruminated over the house. Whenever it was possible to catastrophize, I catastrophized: “What if the house doesn’t sell? What if the contractors we call in find more things wrong? What if we can’t sell it for what we’ve put into it?”

I was a mess. And it was taking a toll on my relationship with Kim.

Finding Myself Again

Fortunately, the past two weeks have been better, and for a variety of reasons.

First, the contractors who’ve come out have not found more trouble with the house. In fact, they each say similar things: “Yes, this thing I’m fixing is a problem, but it’s not as bad as you think it is, and I don’t see anything else wrong.”

Second, I’ve been trying to practice mindfulness. As new fears surface, I acknowledge them and move on. “Oh yep, there I am stressing about the gutters again. But we’ve fixed the problem out front and the contractor said there’s nothing else wrong, so I’m just stressing over nothing.”

Related to this, I’ve been asking myself, “What’s the worst that could happen?” We bought this place for $442,000. We spent another $150,000 or so on repairs and remodeling. (I’ll have a precise number by the end of today.) Our cost basis for this place is thus about $600,000.

“The land itself is worth $300,000 easy,” I tell myself as I browse Zillow to see what other homes are selling for. “With the house, we should have no problem getting $442,000. And with all of the upgrades we’ve made, it should fetch $500,000. Maybe even $550,000. So, even if I do lose money on the house, I probably won’t lose much.” Basically, I do my best to talk myself out of the catastrophizing.

Finally — and perhaps most importantly — just over two weeks ago I began taking my ADHD meds.

When I was diagnosed with ADHD in 2012, my therapist and doctor prescribed Vyvanse, a mild stimulant. I took the stuff briefly, but stopped after a few days because I hated how it made me feel. While there’s no question that it settles my mind, the Vyvanse makes me physically tense. My mind calms, but my body coils like a spring for eight hours. So, I’ve only ever used the stuff occasionally, when I know I have to get stuff done.

Then, Kim and I read this article about ADHD from our friend, David Cain. “David’s article could be about you,” Kim said. She was right. Everything he wrote was as if it were coming from my own mind and my own experience.

At the same time, I read an article that described the connection between ADHD and depression/anxiety. Suddenly everything clicked. “Holy shit,” I thought. “What if my depression and anxiety are exacerbated – or even caused — by the ADHD?”

So, at Kim’s urging (and the urging of my business partner, Tom), I started taking my ADHD meds every day. I’ve been taking them every day for nearly three weeks now. And you know what? The depression and anxiety are (mostly) gone. I’m serious. No, I don’t like the side effects from the Vyvanse, but those side effects may be worth it when I consider the benefits.

I still notice various flaws with the house, but they no longer send me into a mental tailspin. Everything about my mind seems somehow calmer, more organized. My short-term memory has improved markedly. (Both Kim and Kris have long told me that I have a terrible short-term memory. I’m now seeing that this could be tied to the ADHD.)

Plus, as one might expect, the Vyvanse keeps me focused. I’m able to do work like a normal person! I wake in the morning, take my pill, drink my coffee, then I tackle my to-do list, one task at a time. I don’t jump all over the place, moving from one chore to another. I just pick one job and work on it until it’s finished.

As an example, I sat down to write this article about 45 minutes ago. I’ve written continuously without distraction for that entire period of time. More exciting (to me), I’ve written this piece linearly instead of bouncing all over the place from beginning to end to middle to end to beginning to middle to end. I started at the beginning, am now in the middle, and am approaching the end. Writing like this is revelatory!

An Uncertain Future

Our future is murky.

Right now, Kim and I have no idea where we’ll be living a month from now, let alone a year. But we’re okay with that.

If all goes according to plan, our home will be ready to list in about ten days. Like many other parts of the country, Portland has low housing inventory right now and homes are selling quickly — even quirky homes like ours. It’s very possible that the place will sell the first weekend that it’s on the market.

Once we’ve accepted an offer and the home has passed inspection, we’ll look for a place to rent. (This is the one thing that’s causing Kim stress, by the way. She’s worried we won’t find a place that will take all of our beasts: three cats and a dog.) While we rent, we’ll take our time looking for another place to live.

It’s possible we’ll stick around the Portland area, probably in a small town further away from the city. But it’s also possible that we’ll find ourselves settled on the southern Oregon coast. Or maybe somewhere in Washington. Or perhaps in Omaha. (I spend far too much browsing homes on Zillow. You can get smoking deals on nice homes in Omaha. Wouldn’t it be fun to live just a few blocks from Warren Buffett?)

An inexpensive house in Omaha

Yesterday, my friend Castle came out with her husband to haul away old fenceboards. (Castle and Jim are artists. They turn old fenceboards into cool crafts that they sell at Portland’s Saturday Market.) They told us about the place they bought a few years ago.

“We live about an hour north of Portland on the Washington side of the river,” Castle told us. “We have a few acres, which gives us a buffer between us and our neighbors. Plus, it gives us room for farming and gardening. We bought a manufactured home, but it’s awesome. It’s so nice and so much cheaper.”

Kim’s eyes lit up. “I love that idea. I could live in a manufactured home,” she said. Then she looked at me. “I don’t know if J.D. could do it, though. He grew up in one. He doesn’t have fond memories of it.”

I shrugged. At this point, I’m not ruling out anything. I grew up in a beat-up mobile home, it’s true, and I’ve long felt like it was a stamp of just how poor we were.

Since then, though, I’ve lived in a standard ranch house. Twice, I’ve lived in quirky old homes with large yards. I spent fifteen months on the road in a motorhome. And for four years, I owned a penthouse condo overlooking the river. I’ve come to realize that a house is just a house. Right now, I feel like I could live almost anywhere — just not here.

from Get Rich Slowly https://www.getrichslowly.org/an-uncertain-future/
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My life philosophy: 52 lessons from 52 years

Now we are 52And now we are 52…

On this day in 1969, baby J.D. entered the world. I don’t think there’s any way my parents could have predicted the path their firstborn would take through life. It hasn’t always been easy — no thanks to the obstacles I’ve placed in my own way — but I’ve really had a wonderful (and interesting) life, and I look forward to whatever time is left me.

As I do every year here at Get Rich Slowly, I’m going to commemorate my birthday by sharing some of the most important things I’ve learned during my time on Earth. These are the most important pieces of my life philosophy.

Let’s start with a look at the core takeaway from my 52nd year, the newest addition to my life philosophy.

What I Learned During My 52nd Year

This past year, especially, has been an interesting one. I know that’s true for the world as a whole, but I personally have experienced a great deal of growth over the last twelve months. It’s been a deeply introspective year.

If you were following along, you could see me process some of this introspection in real time, both here on the blog and at the Get Rich Slowly channel on YouTube.

In July, I wrote that I am the one thing in life I can control. In August, I wrote about eliminating net negatives (or trying to). In October, I wrote about the pursuit of quality. And just a few weeks ago, I wrote about the power of low expectations.

What I’ve realized in recent weeks is that all of these Deep Thoughts seem to be a manifestation of the same fundamental problem in my life: my ADHD. For years, I suspected I had ADHD. In 2012, my therapist confirmed it. In consultation with my M.D., my therapist prescribed a medication (Vyvanse) that I was meant to take every day. I hate the side effects, though, so I never did. I took it only as needed.

But in searching for answers regarding my ongoing depression and anxiety, I’ve come to understand that these two debilitating mental illnesses can actually be caused by ADHD. My inability to focus leads me to become overwhelmed. When I become overwhelmed, I get stressed. When I get stressed, I get anxious and depressed.

It all seems obvious today, but it was never obvious before.

Anyhow, I’ve begun taking my Vyvanse regularly. Today is the sixth day in a row that I’ve used it. It seems to be helping. Meanwhile, I’ve been trying to practice mindfulness in everyday life. Plus, Kim and I are taking some big steps (to be discussed here in the coming weeks) to alleviate some of the things that overwhelm me on a regular basis.

Coming to grips with the fact that my ADHD is more pronounced than I believed (and that it’s probably the source of so many of the things that bring me suffering) has been eye-opening. As I reviewed this list, for instance, I was surprised at just how many pieces of my philosophy directly tied to ADHD coping mechanisms. It’s crazy.

So, the biggest lesson I learned this year is the age-old maxim: know thyself. As far as possible, know what makes you tick — and how that affects your goals, actions, and relationships.

My Life Philosophy

Before we dive into the rest of my life philosophy, I want to make something clear: I am no wiser or smarter than anybody else. And I’m certainly no better. But I am an individual.

I’m my own person with my own personal preferences and personal experiences. These have all jumbled together over the past 52 years to give me a unique perspective on life (just as you have a unique perspective on life). To quote my favorite poem:

Much have I seen and known; cities of men
And manners, climates, councils, governments,
Myself not least, but honour’d of them all;
And drunk delight of battle with my peers,
Far on the ringing plains of windy Troy.
I am a part of all that I have met…

So, these 52 nuggets of wisdom are things I’ve found to be true for me — and, I believe, for most other people. (But each of us is different. What works for me may not work for you.) These beliefs make up the core of my personal philosophy of life.

Some of these ideas are original to me. Some aren’t. When I’ve borrowed something, I’ve done my best to cite my source. (And I’ve tried to cite the oldest source I can find. Lots of folks borrow ideas from each other. There’s nothing new under the sun and all that.)

Here are 52 principles I’ve found to be true during my 52 years on this planet. I’ll lead with this year’s new addition.

  • Know thyself. All of us are similar, but each of us is different. It’s these differences that make us unique individuals. It’s up to you to discover your strengths (and weaknesses), to figure out what’s important to you, to plot your own course through this world. Taking time periodically to re-asses what makes you tick is an essential part of building a life that allows you to flourish.
  • Love yourself. All my life, I’ve struggled with low self-esteem. There have been times when I’ve hated myself. Recent years have been especially tough for me as anxiety and depression proved to be crippling for months on end. Working with a therapist helped. She helped me to understand that it’s important to learn to both accept myself and love myself — even though, like everyone, I’m imperfect. I still have a long way to go, but I’m making progress.
  • Self-care comes first. If you’re not healthy, it’s tough to be happy. Before you can take care of your friends and your family, you need to take care of yourself. Eat well. Exercise. Nurture your mind, body, and spirit. Your body is a temple; treat it like one. If you don’t have your health, you’ve got nothing.
  • You get what you give. Your outer life is a reflection of your inner life. If you think the world is a shitty place, the world is going to be a shitty place. If you think people are out to get you, people will be out to get you. But if you believe people are basically good, you’ll find that this is true wherever you go.
  • Life is like a lottery. You receive tickets every time you try new things and meet new people. Most of these lottery tickets won’t have a pay-out, and that’s okay. But every now and then, you’ll hit the jackpot. The more you play — the more you say “yes” to new friends and new experiences — the more often you’ll win. You can’t win if you don’t play. That said, however…
  • Luck is no accident. What we think of as luck has almost nothing to do with randomness and almost everything to do with attitude. Lucky people watch for — and take advantage of — opportunities. They listen to their hunches. They know how to “fail forward”, making good out of bad. [Via the book Luck is No Accident.]
  • Don’t try to change others. “Attempts to change others are rarely successful, and even then are probably not completely satisfying,” Harry Browne wrote in How I Found Freedom in an Unfree World. “To accept others as they are doesn’t mean you have to give into them or put up with them. You are sovereign. You own your own world. You can choose…There are millions of people out there in the world; you have a lot more to choose from than just what you see in front of you now.”
  • Don’t allow others to try to change you. Again from How I Found Freedom in an Unfree World: “You are free to live your life as you want…The demands and wishes of others don’t control your life. You do. You make the decisions…There are thousands of people who wouldn’t demand that you bend yourself out of shape to please them. There are people who will want you to be yourself, people who see things as you do, people who want the same things you want. Why should you have to waste your life in a futile effort to please those with whom you aren’t compatible?”

An Early Birthday

  • Be impeccable with your word. Be honest — with yourself and others. If you promise to do something, do it. When somebody asks you a question, tell the truth. Practice what you preach. Avoid gossip. [This is directly from Don Miguel’s The Four Agreements.]
  • Don’t take things personally. When people criticize you and your actions, it’s not about you — it’s about them. They can’t know what it’s like to be you and live your life. When you take things personally, you’re allowing others to control your life and your happiness. Heed the Arab proverb: The dogs bark but the caravan moves on. [This is also one of The Four Agreements.]
  • Don’t make assumptions. The flip side of not taking things personally is to not assume you know what’s going on in other people’s heads. Don’t assume you know the motivations for their actions. Just as their reality doesn’t reflect your reality, your life is not theirs. Give people the benefit of the doubt. [Another of The Four Agreements.]
  • Always do your best. Your best varies from moment to moment. Some days in the gym, for instance, I’m able to lift heavier weights than on other days. Some days I can run faster than usual; some days, I’m slower. That’s okay. What matters most is that I give my best effort every time. No matter what you do, do it as well as you can. This is one of the keys to success and happiness. [This is the last of The Four Agreements.]
  • Effort matters more than skill or talent. “Effort counts twice,” argues Angela Duckworth in Grit: The Power of Passon and Perseverance. Skill, she says, is talent multiplied by effort. The more you do what you’re good at, the better you get. But achievement is the product of skill multiplied by effort. Effort counts twice. (This may be why psychologists say it’s better to praise your child’s efforts instead of her results. Praise her for spending time on her homework, not because she got an A.)
  • Embrace the imperfections. If you do what is right, and you do your best, then there’s no reason to feel bad about the outcome. Nobody’s perfect. Don’t beat yourself up if you make mistakes. And don’t sweat it if other people get upset with you too. If you’re doing the best you can, that’s good enough.
  • The perfect is the enemy of the good. Too many people never get started because they don’t know that the “best” first step is. You don’t know the best guitar, so you never learn to play. You don’t know which Spanish book is best, so you never learn to speak. You don’t know how to bench press, so you never go to the gym. Don’t worry about getting things exactly right — just choose a good option and do something to get started.
  • There’s no single “right” way to achieve success. Each of us is different. We have different goals, personalities, and experiences. We each need to find the tools and techniques that are effective for our own situations. There’s no one right way to eat, love, pray, or pay off debt. Don’t believe anyone who tells you there is. Experiment until you find methods that are effective for you. (Note, however, that there are wrong ways to do these things — steer clear of obvious bad choices.)
  • Be present in the moment. Accept life for what it is, without labels or judgment. Yield to events; don’t block them. Go with the flow. Nothing exists outside the present moment: Don’t dwell on the past or worry about the future. Improve the quality of the here and now. When you do something, do that thing. When you’re with somebody, be with them. Don’t multitask. Put away the smartphone or the computer or the book. Be all there. [This is an ancient concept made popular by The Power of Now.]
  • Spirituality is personal. The desire for one person (or group) to impose her (or their) beliefs on others is the source of much of this world’s strife. Believe what you want, and let others do the same. “There is no need for temples, no need for complicated philosophies. My brain and heart are my temples; my philosophy is kindness.” — the Dalai Lama
  • Be skeptical — but keep an open mind. Don’t believe everything you hear — from others and from your own internal self-talk. Practice healthy skepticism. But keep an open mind. Don’t automatically assume that everything is fake or false. Do your best to analyze the things you see and hear to determine whether they actually make sense.
  • Don’t yuck someone else’s yum. Just because you don’t like something doesn’t mean it’s bad. Pursue your passions, and let others pursue theirs. If you don’t like something, fine. Don’t make a big deal about it.
  • You can’t prevent every possible thing from going wrong. Don’t even try. Instead, learn to deal effectively with minor problems. You’ll build self-confidence, which will lead to an increased willingness to take calculated risks. (Similarly, you can’t make everyone like you. It’s foolish to try.)
  • Be flexible. Goals are good, but single-minded devotion to a goal can often blind a person to other opportunities. And it’s a mistake to cling to one path out of sense of obligation. If you enter law school and discover you hate it, then quit. Don’t endure years of misery because you feel like it’s expected of you. That’s dumb. You have more options than you think, but you may need to slow down and open your eyes in order to see them.
  • Be encouraging. Support the creative, positive actions of others. There are a lot of people out there who want to tell others what’s wrong with their actions, why the things they want to do can’t be done. They’re quick to criticize small mistakes instead of praising the greater effort. Don’t be this way. Do what you can — in ways both big and small — to help others achieve their goals. [Taken from Action Girl’s Guide to Living.]

Keep Dropping Keys All Night Long

  • You are the author of your own life. Everyone has a story they want to tell you about yourself. Society tries to push a “standard narrative” on us about how life should go. Ignore these stories. If you don’t like the story you’re living, it’s up to you to change the plot. You didn’t write the beginning of your story, but you have the power to choose the ending. Choose and adventure you love instead of one that makes you unhappy.
  • You don’t need permission. When we’re young, we wait for our parents and teachers to say it’s okay to do the things we want to do. As an adult, you don’t need permission from anybody else. Do you want to quit your job and travel the world? Do it. Do you want to learn how to ride a motorcycle? Do it. Don’t wait for somebody else to give you the go-ahead. You are the only one who needs to give yourself permission to do these things.
  • Don’t let fear guide your decision-making process. My girlfriend Kim told me this on one of our first dates, and it echoes something my accountant once told me. He says that too many people make money moves based solely on the tax repercussions. “That’s dumb,” he told me. “You should do what you want because you want to, not because of the tax hit.” This applies in all aspects of life. Make decisions based on what you want to do. Move toward something, not away from something.
  • Action cures fear. Thought creates fear; action cures it. What we’re actually afraid of is the unknown. We like certainty, and choosing to do something with an uncertain outcome makes us nervous. Taking the first step can be scary, but each additional step becomes easier and easier. When you act, you remove the mystery. Action creates confidence. It creates motivation. (Most people think motivation comes before action. They’re wrong. Action creates motivation.) [This is an old idea but this phrasing is from The Magic of Thinking Big.]
  • Action is character. If you never did anything, you wouldn’t be anybody. Superman is a superhero because he does heroic things, not because he talks about doing them. And a writer is a writer because she writes, not because she talks about writing. What we say doesn’t matter; it’s what we do that counts. We are what we repeatedly do. [From F. Scott Fitzgerald’s notes on The Last Tycoon.]
  • You’re more likely to regret the things you don’t do than the things you do. That’s not to say you should be an asshole, or that you won’t regret making big mistakes. But generally speaking, you’re more likely to be sorry that you didn’t introduce yourself to the barista at the coffeehouse, didn’t go bungee-jumping with your friends, didn’t stay in touch with your friends. [This is the central idea in The Top Five Regrets of the Dying.]
  • Give without the expectation of return. Help other people — even if it costs a bit of money or time. Don’t always expect a financial payoff. Don’t get offended if your effort isn’t acknowledged or appreciated. Help because it’s the right thing to do, not because you want to be noticed.
  • When good things happen to people you know, help them celebrate. Their success does not diminish you. Be happy when your friends and family achieve something cool. If a co-worker gets a raise, be supportive and not jealous. Approach life as if it were a win-win game. Because it is.
  • Happy people almost never criticize, says Steven Pressfield in The War of Art. “If they speak at all,” he writes, “it’s to offer encouragement.” This is true in my experience, as well. Being sarcastic and cutting doesn’t mean that you’re smarter than the people around you. Most of the time, it simply means you’re an asshole. And that leads me to the next lesson…
  • Staying in a relationship out of a sense of obligation or pity is not a good reason. Sometimes you really do have to walk away — from a friendship, from a family member, even from a romantic partner. Yours isn’t the only story in this world; sometimes it’s better to be somebody else’s villain than to make yourself miserable.
  • You have the freedom to choose how you respond to any event. In the classic Man’s Search for Meaning, Victor Fankl writes, “Everything can be taken from a man but one thing: the last of human freedoms — to choose one’s attitude in any given set of circumstances, to choose one’s own way.” He based this philosophy on his personal experience in a Nazi concentration camp. When that jerk cuts you off on the freeway, you get to choose if you’ll get angry or give him the benefit of the doubt. When you get stuck behind the old lady in line at the grocery store, it’s up to you how to respond. When those stupid kids next door vandalize your lawn, you get to choose how you feel about it.
  • You’ll be happier if you focus on efforts and attention only on the things you can control. Each of us has a large number of things about which we’re concerned: our health, our family, our friends, our jobs; world affairs, the plight of the poor, the threat of terrorism, the current political climate. Within that Circle of Concern, there’s a smaller subset of things over which we have actual, direct control: how much we exercise, what time we go to bed, whether we leave for work on time; what we eat, where we live, with whom we socialize. You’ll be happier and more productive if you dedicate yourself to your Circle of Control and ignore your Circle of Concern. [This notion is part of Julian Rotter’s social-learning theory of personality, but was popularized by Stephen Covey in The Seven Habits of Highly Effective People.]

[Circle of Concern vs. Circle of Control]

  • You can have anything you want — but you can’t have everything you want. Everything is a trade-off. You have limited resources. When you choose to spend — time, money, brainwidth — on one thing, you’re also choosing not to spend on others. Do your best to spend only on the things that matter most to you. Don’t really give a rat’s ass about Big Bang Theory? Then why are you watching it? Spend your time and energy on something you do care about.
  • Make room for the big rocks first. It’s easy to let your time and energy be sucked up by trivial errands and tasks. You find you no longer have space for the things you thought were most important. Don’t do that. Always carve out time and attention for those people and activities you value most. If the house doesn’t get clean because you were hanging out with a friend, so what? If you didn’t mow the lawn because you went to the gym instead, that’s a good thing. Tackle the important, then the trivial.
  • If you want to avoid feeling overwhelmed, create margin in your life. Simplicity brings peace. Many people have tried to beat this into my head over the years, but it wasn’t until I read The Life-Changing Magic of Tidying Up that I really understood. Every item you own, every meeting you schedule, every email you receive — every obligation in your life carries both psychic and physical weight. Traveling in an RV for fifteen months, I learned to love owning very little. It was freeing! And it was freeing too to not be a slave to a schedule. As much as you can, build margin into your life so that you can feel peaceful and free.
  • Be your own advocate. Don’t be afraid to ask what you want and what you need — especially if it’s help. Too often, we struggle in silence when we could make our lives better simply by asking a question or two. Better to look ignorant for a moment than to remain ignorant for a lifetime. Don’t wait for others to solve your problems. Be proactive. Find answers. Take action. Learn to help yourself.
  • It’s always best to be proactive. In life, there are often default options. If you don’t consciously and deliberately choose something different, you get the default. When this happens, your life shapes you instead of you shaping your life. Most people go through their entire lives in default mode. They accept what life hands them without question. They’re reactive. Choose to be proactive instead. If you don’t set your own goals, somebody else will set them for you.
  • Quality tools can make life better. For years, I equated low cost with smart spending. Now I know that’s not always the case. Now, I’m willing to spend to buy high-quality things when I know I’ll use them all the time. I have high-quality boots, for instance, and an expensive computer. I’m okay with that. I walk everywhere I go, so the boots are worth it. And my computer is my livelihood. The expense is worth it because it makes working a joy. For items used daily, buy the best. If you don’t use it often, of if it’s not important to you, buy the cheapest possible.
  • The meaning of life is the meaning you decide to give it. Some people are searchers. They wander through life looking for answers…but rarely find them. Others accept without question what an outside authority tells them is true. I believe that the meaning of life comes from within, from the things that you lean to prioritize and value. Nobody is going to tell you what life should mean to you; you have to decide that for yourself.
  • You are the boss of you. Your circumstances might not be your fault, but they’re your responsibility. Don’t blame anyone or anything else for your situation, and don’t expect somebody else to rescue you. If you don’t like where you are, resolve to do what it takes to make a change.
  • Don’t compare yourself to others. I preach this often at Get Rich Slowly. Comparing yourself to others is counter-productive. Generally one of two things happens: You either feel shitty because you’re not as good as the other person, or you feel superior because they’re not as good as you. In reality, nobody is better than anybody else. We’re just different. If you want to compare yourself, compare Present You to Past You — and do what you can to make Future You a better version of why you are today.
  • You can’t get rid of a bad habit; you can only change it. “You can never truly extinguish bad habits,” writes Charles Duhigg in The Power of Habit. “Rather, to change a habit, you must keep the old cue, and deliver the old reward, but insert a new routine.” He calls this the Golden Rule of Habit Change. To change your habit loop, you have to do something different when the habit is triggered. Let me give you an example: I used to be a stress-eater. I’d eat junk food — and lots of it — any time I had a deadline or a conflict with a friend. The act of eating soothed my mind. The stress was the cue (the trigger), and the rush was the reward. No surprise, this habit made me fat. I’ve managed to (mostly) change the habit loop by walking instead of eating. Now if I get stressed, I go for a walk. I get a similar rush for a reward, but my actions are healthier.
  • Positive reinforcement is powerful. When Tahlequah performs a desired behavior — sitting, coming when called, being nice to the cats — we reward her. She learns to connect the treat with the actions we wants, and becomes more likely to offer them…even when we don’t reward her. What’s true for dogs is true for people too. Does nagging your spouse actually work? Probably not. (In fact, it probably has the opposite effect you intend!) But if you reward the behavior your want, you’ll eventually see it offered without prompting. The same thing is true with children, co-workers, family members, and so on. [This is a fundamental principle of psychology. An excellent source for more info is Don’t Shoot the Dog.]

  • Create your own certainty. Don’t allow yourself to be dependent on the choices and actions of others. I call this “Michelle’s Law” after my friend who taught it to me. But I have another friend — Jenn — who talks about “ensuring success”. When she’s working on something important, whether it’s a relationship or a vacation, she always follows up to make sure that what she expects to happen will happen. This philosophy is akin to the idea that you should trust, but verify.
  • Choose happiness. Do work and play that brings fulfillment. Spend time with people who build you up, not those who bring you (and others) down. Strip from your life the things that take time, money, and energy, but which do not bring you joy. Focus on the essentials.
  • Time is more valuable than money. You can always make more money…but you can’t make more time. This isn’t permission to spend lavishly on anything and everything just because you might get hit by a truck tomorrow. It is, however, an invitation to consider what’s important to you and to focus on that. It’s encouragement to get clear on your personal mission statement and to build your life around it.
  • It’s never too late to be great. It takes time to achieve anything worthwhile. But just because you haven’t started yet — or haven’t reached the level your aiming for — doesn’t mean you can’t or won’t make it happen. Don’t be daunted by audacious goals. Are you fifty and want to run a marathon? Start training. Are you sixty and only now thinking of retirement? That’s okay. Better late than never. Are you seventy and want to write a novel? Do it. History is filled with examples of folks who achieve great things later in life. [This argument is made persuasively by Tom Butler-Bowdon in his book, Never Too Late to Be Great.]
  • Be yourself. This is the most important thing I’ve learned during my 52 years of life. For too long, I tried to please others. I tried to be and do the things I thought they wanted me to be and do. As a result, I was unhappy. And most of the time, my actions didn’t have the results I thought they would. They didn’t make others like me any better. Instead of trying to please others, now I’m just me. I’m honest about who I am and what I want. Maybe some of my old friends don’t like who I’ve become. That’s okay. I’ve made plenty of people who do like who I am.
  • “Everybody is talented, original and has something important to say.” — Barbara Ueland, If You Want to Write.

This isn’t a comprehensive list of my beliefs, but it’s a fair survey of my life philosophy. It has evolved from my philosophy when I was forty or thirty. And I’m sure that my philosophy at sixty will have changed in ways that I cannot foresee right now.

Also note that although I really do believe these things to be true, I also struggle with them. I’m human, just like you. I don’t always live up to my ideal self. I don’t always adhere to my own life philosophy.

How many of these ideas do you agree with? Which do you disagree with? More to the point: What are the core ideas that make up your personal life philosophy?

One Hundred Words

from Get Rich Slowly https://www.getrichslowly.org/my-life-philosophy/
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My new Audible course on financial independence and early retirement!

Nearly two years ago, I received an unusual email at an address I rarely check anymore. The author wrote:

I am writing to you today because The Great Courses in partnership with Audible is exploring the possibility of creating a high-quality series on Financial Independence. We believe that you may be an excellent candidate to teach such a series. I’ve read many articles at Get Rich Slowly and I’m always impressed by your writing and how much excellent content you create.

At first, I thought this was spam. Before I deleted the message, though, I checked the sender. Sure enough. The sender (and the message) was legit.

I wrote back:

Thank you for reaching out. I get a lot of requests for my time and typically turn them down. Not this one. I feel like this is a terrific idea and well-worth exploring. I am a long-time fan of both Audible and the Great Courses. I’m not joking.

I included screen captures to prove that I owned 72 Great Courses and nearly 372 audiobooks from Audible. Those numbers have since grown, naturally.

My library of audio learning

Discussions ensued, a contract was created, and in December 2019, I began the work of creating a five-hour, ten-part course on financial independence and early retirement. I finished that course last April. I recorded it in May. And last month, at long last, How to Achieve Financial Independence and Retire Early made its way into the world!

FIRE in 40,000 Words

Writing a blog about financial independence and writing a course about financial independence are two different things. A blog is open-ended. It’s personal. It’s informal. But a project for Audible and The Great Courses? Well, that sort of project has constraints and requires a different tone.

You folks all know that I am on a personal-finance journey. You all know that I’m constantly learning about money, and that my understanding and opinions tend to change with time. With this sort of project, though, I have to present myself as an expert. The info I provide has to be self-contained in one neat little package.

In this case, I had some very specific parameters.

The course had to be roughly 40,000 words in length, and the whole had to be divided into ten smaller “chapters”. Why 40,000 words? Because 40,000 words is roughly five hours when read aloud. Essentially, my task was to encapsulate the most important facets of financial independence in ten half-hour (4000-word) lectures. So, that’s what I did.

I also had to decide who the course was for. Was this meant for folks who already knew about FIRE (financial independence and early retirement)? I’m not the best person to offer deep, technical advice (as you well know), so I decided against that. I decided to target folks who were FI-curious: those who has heard about the concepts but needed a crash course in what FIRE entails.

How to Achieve Financial Independence and Retire Early

In the end, I adopted the following outline:

  • Lecture one — What is financial independence? I start the course by discussing the difference between financial independence and early retirement. I also spend some time talking about how society has programmed most people to think about money in only one way. But there are other ways to approach personal finance.
  • Lecture two — The power of purpose. Naturally, I then dive into my pet subject: finding purpose. If you’ve read GRS for any length of time, you know exactly what this lecture contains. This is my core message.
  • Lecture three — The power of profit. With the philosophy out of the way, I explore the numbers behind financial independence and eaerly retirement. I talk about net worth, saving rate, and more.
  • Lecture four — Spend less. The fourth lecture explores frugality and the power of saving on the big stuff, such as housing and transportation.
  • Lecture five — Increase your income. After talking about spending, I talk about income. While most of the material in this course is new, this particular lecture sticks closely to my usual speil about earning more. (But with more resources included.)
  • Lecture six — Your wealth snowball. Once I’ve explained how the gap between earning and spending creates a “profit”, I then share the best ways to make use of this profit: a debt snowball (if you’re in debt) and a wealth snowball (once your debt is gone).
  • Lecture seven — Investing for early retirement. The seventh lecture was, by far, the most difficult to write. How in the hell do you compress all of investing into 4000 words? It can’t be done — but I tried. (And then I sent people to read The Simple Path to Wealth by J.L. Collins haha.)
  • Lecture eight — How much is enough? Next, I explore the factors that affect how much you need to save for retirement, including life expectancy, inflation, withdrawal rates, and more.
  • Lecture nine — Barriers on the road to financial independence. I spend the ninth lecture addressing problems that people encounter when they pursue financial independence — and offering possible solutions to those problems.
  • Lecture ten — Building a rich life. Lastly, I explore what happens once you achieve financial independence and/or early retirement. I urge listeners to build a rich life.

As I said, I did my best to cover the core concepts of the FIRE movement. I made a deliberate decision to keep the course as non-technical as possible, which probably comes as no surprise. And, when possible, I explored the psychological and philosophical implications of wealth.

Because of the limitations of this project, I couldn’t cover certain pet topics of the FIRE community: travel hacking (which actually has zero to do with FIRE anyhow), health care (which is important!), backdoor Roths, etcetera. Nor could I dive deep into any given topic. There just wasn’t space.

In the end, though, I’m proud of the course I created. To my mind — and I know I’m biased — this project is the best introduction to financial independence and early retirement available. I’m not joking.

If you want to share this concept with friends or family, I believe this course is a great way to do it.

An Intro to FIRE

The most difficult part of creating this course was recording it. Early last May — while uncertainty about COVID still raged — I spent two days at a local recording studio, reading my words aloud. It was tough!

I’m a talkative fellow, but I’ve never had to actually read for hours on end. It’s more difficult than you might expect. By the end of the second day, I felt like my mouth was full of marbles. Plus, I worried and worried and worried that my delivery was terrible. (And, in the months since I recorded the course, I’ve had second thoughts about two sentences that I regret including haha.)

So, my biggest fear was that people would hate my “performance” of the stuff I’d written. Much to my surprise, that hasn’t been the case. In fact, my performance is the highest-rated part of the course. Whuh?!?

Current ratings for my course

Ready for some math nerdery? Good, because you’re going to get it.

Your Money: The Missing Manual was released on 01 March 2010. In the eleven years since, the book has received 86 ratings at Amazon. How to Achieve Financial Independence and Retire Early was released on 16 February 2021. In the five weeks since, the course has received 77 ratings at Audible.

What amuses me, though, is that the breakdown of these ratings is nearly identical. Take a look:

Consistency!

Consistently, 5% of folks don’t like my big projects. Another 5% find them to be meh. And — thank god — 90% seem to like them.

Anyhow, my Audible course is out! I’m proud of it. I think it’s an excellent intro to the core concepts of the financial independence and early retirement movement. I hope it proves useful for many people.

As proud as I am of this course, and as much as I hope it helps people, I’d be remiss if I didn’t point out that I first explored these basic ideas in The Money Boss Manifesto, which remains available as a free PDF. The Audible course is much more comprehensive and features my latest thoughts on each subject, of course, but that free PDF is a good resource for folks who can’t (or don’t want to) buy the course.

from Get Rich Slowly https://www.getrichslowly.org/audible-fire-course/
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The power of low expectations

At the end of January, I had an epiphany.

Kim and I were sitting in the living room one evening, relaxed in our easy chairs, both reading books. All four of our beasts were nestled nearby. The house was quiet. For the first time in forever, I felt completely content.

For maybe twenty minutes, I paused what I was doing and simply savored the moment. I stopped. I looked around. I made time to be present in the Now.

Eventually, my mind began to wander. “When was the last time I was this happy?” I wondered. I thought back to the late 1990s when my ex-wife and I lived in similar circumstances. Kris and I would read together in the evening, each with a cat in our laps. Life was simpler. I felt no anxiety. I was happy.

Then too, I achieved a similar level of contentment as recently as 2013. Soon after Kris I got divorced, Kim and I began dating. I lived alone in an apartment. My life wasn’t filled with obligations and Stuff. Again, things were simpler. Simpler and saner and more filled with joy.

“But what really is the difference between those two periods of time and the last few years?” I thought. “Why have I been so anxious recently?”

The difference, I realized, has a lot to do with my expectations.

Last week, I had a three-hour coffee date with Kris. Although we got divorced almost nine years ago, she probably still knows me better than anyone. (After all, we were together for 23 years.) I asked her if she considered me an anxious person while we were married.

“No,” she said. “In fact, it used to be you were the opposite of anxious. You were care-free, happy go lucky. You didn’t pay enough attention to the future.”

The anxiety, I think, increased as my expectations of myself (and my life) increased.

The Fundamental Equation of Wellbeing

Our expectations play a profound role in our daily contentment.

In the book Engineering Happiness, economists Manel Baucells and Rakesh Sarin cite the fundamental equation of wellbeing: happiness equals reality minus expectations. I’m sure you’ve all heard this notion before.

  • If you expect more from life than you currently have, you’ll be unhappy.
  • Conversely, if your current experience exceeds your expectations, you’ll be happy.

So, just as you can increase your saving rate by improving income and/or lowering expenses, you can deliberately increase your happiness by improving your circumstances and/or lowering your expectations. But it’s usually easier to lower your expectations.

When I think about how my own expectations have influenced my happiness, I recall the early days of Get Rich Slowly. Back when I started GRS in 2006, I had a problem. I had high expectations for myself and this site. Very high expectations.

After the first few months of finding my feet, GRS experienced rapid growth. As the audience grew, I felt pressure to to provide as much quality information as possible. Get Rich Slowly shifted from a curious hobby to a near full-time endeavor.

As part of that, I set a publishing schedule. I told myself that I wanted to post two articles every weekday, plus one article each Saturday and Sunday. My aim was to produce twelve articles every week. That’s a lot of work for one guy, as I’m sure you can imagine. And more often than not, I failed to meet these expectations.

Instead of writing twelve articles per week, I usually managed to share ten. It drove me nuts.

Now, you and I both know now that ten articles per week is an amazing rate for one person to create content. Back then, though, I felt like a failure. Yes, I was producing ten articles per week, but I was falling short of my goal to produce twelve articles per week. I felt like I was letting people down. Worse, I felt like I was letting myself down.

After a few months of feeling miserable, I realized my expectations were too high. “What if,” I thought sometime in early 2008, “what if instead of expecting two articles every weekday, I only expected one article every weekday?” My aim would be seven blog posts per week instead of twelve.

Do you know what happened? Nothing changed except the stress level in my life.

I continued to churn out roughly ten articles every week. But now instead of being angry with myself because I’d fallen short of my goal, I felt pleased because I had exceeded my expectations. My production rate didn’t change one whit. My expectations changed. And with the lowered expectations came increased happiness.

An Ode to Low Expectations

I’ve been thinking a lot about how that one small change in expectations yielded an outsized increase in happiness. How can I apply this concept in other areas of my life?

Last week, I read a (very) short piece at The Atlantic that offered some insights. In “An Ode to Low Expectations” [possible paywall], James Parker writes:

Strive for excellence, by all means. My God, please strive for excellence. Excellence alone will haul us out of the hogwash. But lower the bar, and keep it low, when it comes to your personal attachment to the world. Gratification? Satisfaction? Having your needs met? Fool’s gold. If you can get a buzz of animal cheer from the rubbishy sandwich you’re eating, the daft movie you’re watching, the highly difficult person you’re talking to, you’re in business. And when trouble comes, you’ll be fitter for it.

[…]

Revise your expectations downward. Extend forgiveness to your idiot friends; extend forgiveness to your idiot self. Make it a practice. Come to rest in actuality.

This excerpt — which is literally half of the entire essay — struck home for me. “Come to rest in actuality,” Parker writes. Translation: Don’t allow your expectations to exceed reality.

Then, completely out of the blue, my cousin Duane (who is continuing to kick cancer’s ass, by the way!) sent me an article about Charlie Munger, the business partner of Warren Buffett. The piece features some recent wisdom from Munger that directly relates to the fundamental equation of wellbeing:

A happy life is very simple. The first rule of a happy life is low expectations. That’s one you can easily arrange. And if you have unrealistic expectations, you’re going to be miserable all your life. I was good at having low expectations and that helped me. And also, when you [experience] reversals, if you just suck it in and cope, that helps if you don’t just stew yourself into a lot of misery.

Duane sent me this article (and this quote) because he knows me. He knows me well.

Not only do I tend to have high expectations — for life in general, but especially for myself — but I also tend to stew about my problems. Our house sucks! I forgot to pay my car loan last month! I have too much work to do! I fret and fret and fret about things. I stew myself into a lot of misery.

The Power of Low Expectations

I’m sure that by now you’re seeing the connection between expectations and various aspects of personal finance.

For one, managing expectations is directly related to lifestyle inflation and the hedonic treadmill. People naturally become accustomed to whatever it is they have. When your circumstances improve, you feel an initial burst of excitement because your new life is better than your old life. Your reality exceeds your expectations.

In time, though, your expectations adjust to the new reality. You grow accustomed to your improved circumstances. A seven-buck dinner at Dairy Queen used to be a treat. Now you barely enjoy a $70 dinner at the local Italian place. You’re not happy until the next time your circumstances experience a boost.

This is lifestyle inflation. This is the hedonic treadmill.

Expectations also play a role when it comes to making decisions. I frequently cite The Paradox of Choice by Barry Schwartz. In the book, Schwartz describes his research into two groups of people, Maximizers and Satisficers:

  • Maximizers are those who only accept the best. Every time they make a purchase (or do anything else, for that matter), they need to be sure they’ve made the best decision possible. When shopping for shoes, for example, a Maximizer wants to look at all of the options. He wants to compare of the prices. And even after he’s made his purchase, he worries that maybe he missed a better shoe or a better price at another store.
  • Satisficers, on the other hand, have learned that, contrary to conventional wisdom, good enough often is. Satisficers have learned to settle for something other than the best. A Satisficer still has expectations and standards, but once she’s found something that meets those standards, she buys it. When shopping for shoes, a Satisficer makes do with a pair that meets her needs at a price she can afford.

As you might guess, Maximizers are not as happy as Satisficers. In his research, Schwartz has found that:

  • Maximizers are more likely to regret their purchases despite the fact that they have (in theory, at least) come closer than Satisficers to making the best decision.
  • On the flip side, Satisficers generally feel more positive about their purchases. They know they’ve made a choice that met (or exceeded) their expectations.
  • Maximizers enjoy positive events less than Satisficers, and they don’t cope as well with negative events.

This concept is closely related to perfectionism, which I’ve begun to think of as “the curse of high expectations”.

When you expect the best, you’ll never be better than satisfied. If you do get the best, you’re getting only what you expected. There’s no way for anyone or anything to please you by exceeding expectations. And most of the time things won’t live up to your expectations, so you’ll be disappointed.

When you lower the bar, however, you’re less likely to be disappointed. Sure, sometimes people will fail to live up to your expectations, but because you don’t expect perfection, these failures will happen less frequently and cause you less woe. Most of the time, you’ll get exactly what you expect. And sometimes someone or something will exceed your expectations, and that will bring you joy.

Lowering My Expectations

I grew up in beat-up old trailer house. I grew up poor. I grew up in family with very low expectations. These low expectations served me well for many, many years. They made me adaptable and resilient. From the time I left for college in 1987 until the time Kris and I bought our second home in 2004, everything about my life constantly improved upon what had come before. There was nowhere to go but up!

But sometime soon after that (around the time I started Get Rich Slowly in 2006), my expectations began to shift. I experienced anxiety for the first time. I lost that “happy go lucky” spirit of my youth.

I want to reclaim that spirit.

My epiphany at the end of January has caused me to think deeply about the direction of my life. I’m asking myself some fundamental questions, most of which (but not all) are related to my expectations.

For instance:

  • Should Kim and I get married? It’s embarrassing to admit, but I realized I hadn’t fully committed to Kim. I’m not sure why, but part of me was holding out. I wanted her to be better. I wanted her to be perfect. Kim isn’t perfect. She’s human. I love Kim, and it’s unfair of me to not be wholly invested in this relationship. I’ve decided I’m ready to wholly invest.
  • Should Kim and I move? Our house has caused me stress since the day we bought it. I’ve poured an enormous amount of time and money into improving the place, and there’s still more work to be done. It makes me anxious. It’s reached the point where I need to fully commit one way or the other. We either need to accept this place for what it is and adjust our expectations, or we need to move on. I need to stop stewing myself into a lot of misery, as Charlie Munger would say.
  • How much work should I be doing? As in the early days of GRS, I find myself lately feeling pressured to write articles and/or record videos. I’m putting this pressure on myself. Somehow, I’ve shifted from perceiving myself as “retired” to perceiving myself as business owner. I don’t like it. I want to return to the retired mindset. I want my expectation to be that Get Rich Slowly is a fun pastime, a hobby, not a serious business.
  • How can I spend more time with friends and family? I used to spend a lot of time with my friends. That’s no longer true, and it’s not simply because of the pandemic. When Kim and I returned from our year-long RV adventure, I did a shitty job of reconnecting with people. During the past month, I’ve deliberately made an effort to connect with people — even over the gasp! telephone.

To add to this introspection, I’ve been reading a lot about mindfulness and Buddhist philosophy.

In his book Waking Up, Sam Harris explains that “the Buddha taught mindfulness as the appropriate response to the truth of dukkha“. Dukkha is often translated as “suffering”, but Harris argues that “unsatisfactoriness” is a better equivalent.

“We crave lasting happiness in the midst of change,” Harris writes. “Our bodies age, cherished objects break, pleasures fade, realtionships fail. Our attachment to the good things in life and our aversion to the bad amount to a denial of these realities, and this inevitably leads to feelings of dissatisfaction.”

Quite clearly, Harris is writing about our expectations and how we manage them. He continues [emphasis mine]:

Some people are content in the midst of deprivation and danger, while others are miserable despite having all the luck in the world. This is not to say that external circumstances do not matter. But it is your mind, rather than the circumstances themselves, that determine the quality of your life.

In other words, the Buddha was an ancient proponent of the fundamental equation of wellbeing: happiness equals reality minus expectations.

Managing expectations is working for me. February was probably my best month in years — since April 2016, at least. My anxiety subsided. My depression was dormant. I was active and engaged with life. I read. I wrote. I played. Most of the time, I was mindful and present in the moment.

I attribute all of this to my epiphany at the end of January, and to my lowered expectations for myself — and for everyone and everything else in my life.

from Get Rich Slowly https://www.getrichslowly.org/the-power-of-low-expectations/
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An ice-cold update

Ah, life. It’s funny sometimes, isn’t it?

On Thursday, I began writing an article about the difference between personal finance in Mexico vs. the United States. You see, last week I spent several days in Mexico with a friend (who also happens to be my accountant). I had planned to finish the article on Friday. I came close. I got the YouTube version done and was nearing completion on the blog version.

But then Portland was hit with a winter storm.

Kim and I spent Friday afternoon prepping our yard for ice. Good thing, too. That night, our neighborhood was blanketed with an inch of freezing rain.

I’ve lived through a handful of ice storms over the past couple of decades. Two of them were worse than this when measured in inches. But when measured in sheer damage? Wow, this year’s storm takes top billing.

In our neighborhood, anyhow, it’s like a bomb went off. Dozens of downed trees and hundreds (thousands?) of fallen limbs and branches. These trees and limbs have taken down utility lines all over the place. Lots of people have damage to homes and cars. Fortunately, we don’t.

One of many fallen trees in our neighborhood

Kim and I have been without power and water and cell service since 10:30 on Friday evening. We’re safe though, as are our animals. We’ve been able to make do. We’re going to lose everything in the freezer at this point, but that’s not so bad, right? There’s no way to tell whether we have damage to our plumbing until power is restored, and there’s no estimate for that. It’ll probably be days. It could be a week or two.)

Like many other Porltanders, we booked a room in a local hotel for a couple of nights so that we could shower, shave, and have some warmth. But even that plan went awry. While booking over the phone, we requested (and were promised) a dog-friendly room. Turns out the hotel was not dog-friendly. So, after a quick shower (and after charging all of my devices), I drove our pup home. I spent the past two nights sleeping alone with our beasts in a cold, cold house.

Tonight, we may be borrowing a generator from one of Kim’s patients. We don’t know how to use a generator (and it’ll be dark when she gets home), but we’ll try to figure it out. Can’t be too complicated. Plus, YouTube is my friend.

As crazy as this is for us, I know it’s been worse for many other folks around the U.S. I’m not complaining — only observing.

Meanwhile, this week was supposed to see the launch of my new FIRE course at Audible. And, in fact, the course was released yesterday! But all of my grand plans for promoting the thing have been put on hold.

How to Achieve Financial Independence and Retire Early

I don’t have the power or internet needed to do the work, you know? Right now, I’m grabbing a few hours of access from a friend who has graciously allowed me to use his office for the afternoon. But that doesn’t give me time to do any sort of serious promotion work. That’ll have to come when power is restored — which may be another week yet.

(p.s. We had our foundation inspected this morning. The house isn’t falling over, but to mitigate existing issues will cost $9000. I consider this a win, believe it or not!)

from Get Rich Slowly https://www.getrichslowly.org/an-ice-cold-update/
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Becoming a frugalvore: How to eat well for less

Hey hey, y’all. Here’s a guest post from former GRS staff writer (and perennial reader favorite) Donna Freedman. This piece about becoming a frugalvore contains material that originally appeared at Donna’s site, Surviving and Thriving. It’s been modified for GRS. Enjoy!

The “locavore” movement is based on the idea of eating only foods grown within a 100-mile radius of where you live. Vicki Robin, for instance, might be best-known for her money manual Your Money or Your Life, but she also wrote a book for locavores in which she advocates a ten-mile diet.

I’m not a locavore but I have my own system, and I think it deserves its own name: I’m a “frugalvore”. Becoming a frugalvore is pretty simple. You shop mostly (or completely) for what’s on sale.

This isn’t exactly a new idea. Plenty of people shop that way their whole lives. But it might be new to you if you grew up in a home where no one read the supermarket ads, created menus, and then worked to get the most bang for each grocery buck.

Becoming a frugalvore both simplifies and complicates your approach to eating.

On the one hand, it’s easier to shop because you plan menus around that week’s most affordable foodstuffs. However, if you’re the kind of person who always shopped by grabbing whatever looked good, then you’ll need to rethink your supermarket habits.

Fortunately, it’s fairly simple. Not always easy, but simple. Here’s how you can become a frugalvore.

Read the Ads

Again, the point of being a frugalvore is to buy what’s on sale whenever possible. To know what’s on sale, you have to read the ads that come in the mail (instead of pitching them directly into the recycling). Pay special attention to loss leaders.

A loss leader is an item with an irresistible price that gets you into the store, at which point you’re likely to buy other stuff. This a simple and effective marketing strategy for supermarkets unless you, the customer, are:

  • Frugal, and
  • Have enough time to cherry-pick deals at more than one place.

There are two supermarkets in our area. We shop mostly at one chain because it has the best overall best prices. But we keep an eye on the other store’s ads. If there’s a truly skookum deal on chicken thighs or bananas, we might head over. The two retailers are fairly close together so it’s not exactly out of our way.

Maybe you’ve got more than two options. Lucky you! If you don’t have time to read and cross-reference four or five (or more) stores, then obviously you’d go with the one(s) with consistently good prices.

Speaking of which…

Keep a Price Book

Some people can keep average prices in their heads. When they see a “sale” price on cold cereal or canned tomatoes that they know is actually only a few cents off the normal price, it’s not the time to stock up.

If you can remember prices, great! Skip to the next section.

But if you find it hard to remember what Rice Krispies or green beans should cost, create a spreadsheet or carry a small notebook with the general cost of the foods you eat most often. Or download an app. (I don’t use one so I can’t recommend any, but do a search for “price book app” and read the user reviews.)

Create a Menu

Don’t just read the ads. Ask yourself, “What’s on sale that we like to eat?”

Here’s where the internet comes in handy. Look up recipes and/or google each week’s loss leaders (plus the contents of your larder) to come up with affordable, delicious menus.

The good news is that shopping and cooking can actually be fun; you needn’t spend countless hours doing either one (especially if you search on terms like “meals under 20 minutes”). Even if you never become a superb cook, the typical person can feed herself (and anyone else who lives with her) quite well with a relatively small outlay.

Check for Unadvertised Specials

Remember: Not all sales are advertised. For frugalvores, unadvertised specials can be like winning the lottery.

Look for “manager’s special” or “closeout” stickers on shelves. But also check for unadvertised specials in these departments:

  • Dairy. Half-price milk means my homemade yogurt is even cheaper. We’ve also learned to look for “hand-picked eggs”: When some dozens are damaged, the employees make up new (and much cheaper) collections from the un-cracked cackleberries.
  • Baked goods. If there’s an in-store bakery, chances are you’ll be able to get day-old discounts on rolls, breads, cookies and the like.
  • Clearance. Many supermarkets maintain a section in the back of the store (often near the door to the stockroom) with discontinued and ding-and-dent items. Sometimes this means seriously dented cans, which I judge via the USDA standard: Pass on any cans with dents so deep you can lay a finger in them. But some of the cans are only slightly affected. Other items found there are seasonal items at fire-sale prices, or a package that was slightly damaged.
  • Meat. Meat is perishable, so it’s frequently discounted. Recently, my DF (“dearest friend”) stopped at Safeway for a special price on milk and bananas, through their JustForU program. To his shock, he found one-pound chubs of ground beef for 99 cents each. This was 93 percent lean beef, too – not the fattier kind. We’ve gotten ground turkey, bratwurst, and other meats at fire-sale prices, too. We use or freeze it right away.

The lesson here? Ads are a great way to find sale items, but they’re not the only way. Learn how and where your local market hides unadvertised specials.

For example, in late December I saw a bin full of ramen for 10 cents a pack. While ramen isn’t the healthiest food on Earth, it makes an okay lunch now and then (especially if I add some vegetables and leftover chicken, if we have any). I bought more packages than I care to recall, but dropped lots of them off at my niece’s house and donated a bunch more to the food bank.

I have no idea why the ramen was that cheap. But I wasn’t going to turn my back on a 10-cent lunch.

J.D.’s note: I make frequent use of both the clearance section and the discounted meat at my local supermarket. Browsing the clearance section is a fun way to find new foods to try.

Learn the Sales Cycles

Keep in mind that some items are discounted seasonally, such as frozen foods in March, eggs in April, dairy items in June, canned goods in September, and turkeys in November. But non-seasonal deals are what make up most of a frugalvore’s cart.

The true grocery cognoscenti know how to follow the “sales cycles”. Many popular items/brands go on sale about every twelve weeks (or sooner). If you know that your household goes through a box of cornflakes per week, then buy enough to get you through until the next sales cycle.

Obviously you wouldn’t refuse to buy a needed staple, especially if it’s one that goes on sale relatively rarely. If I’m out of pepper jack cheese, it’s unlikely that I’ll wait until the next sale cycle or loss-leader price. Of course, it’s also likely that I stocked up during the last big sale.

Frugalvore Hacks

This article can’t list every possible frugal tip, of course, but here are a handful of other helpful hints.

  • Make use of your store loyalty card. Get discounts with it. Download coupons to it. Earn points with it. My DF uses the Just4U program through Safeway to get us decent prices on staples like milk and bananas, and when he earns enough Just4U points he can trade them in for certain grocery items.
  • Take advantage of other discounts. Every first Tuesday of the month, we over-55s enjoy 10% off Kroger brands at Fred Meyer. There’s also Military Tuesday. I know that different stores offer different discounts on different days. If you qualify for any of these discounts, take advantage of them.
  • Watch for promos. A free gallon of milk if you buy four boxes of cereal! A bottle of barbecue sauce with the purchase of certain meats! Buy one/get one free on whatever!
  • Use coupons. Fewer physical coupons exist nowadays, but sometimes they’re available in tiny machines with blinking lights (a.k.a “blinkies”) or they’re attached to products. You’re much more likely to be able to download them directly to your store card from the store’s website or from a site like Coupon Mom. (I like Coupon Mom. She does coupon/sales matchups for supermarkets, drugstores, and dollar stores in every state. Let her do the work for you!)
  • Think outside the box. Coupon Mom includes deals at dollar stores and supermarkets – so shop there. I’ve found discounted/last-chance bins in both types of emporia, which led to deals like a roll of plastic wrap for 50 cents and four-packs of toilet paper for a quarter. Groceries aren’t always about food, after all. But both emporia also put food items out as loss leaders, and in the case of dollar stores always have some pretty good deals, such as a pound and a half of macaroni for a buck.
  • Earn rebates. Coupon Mom also matches Ibotta rebates to those coupon/sales deals. I’d also suggest downloading the Fetch Rewards and Shopkick apps, and earning points that way as well. Some of the deals are for free items, which I use either for holiday stockings/Easter baskets or donations to the food bank. You can trade the points for gift cards or cash.
  • Be flexible. Maybe you’ve written “whole fryers” on your shopping list but once in the store you see 99-cent-a-pound pork loin. It’s okay to change gears. You can get the chicken anyway if the price is good. But you could also rewrite some of that week’s menu and load up on pork loin (as much as will fit in your freezer).

As I said, there are many other ways to eat well for less but I don’t want to overwhelm you. You can find more tips for frugal food shopping here at Get Rich Slowly or at my own site, Surviving and Thriving.

Becoming a Frugalvore

Is it easy to become (and remain) a frugalvore? Not always. And it definitely won’t be as easy as grabbing a precooked chicken or ordering takeout.

But keep in mind that until fairly recently, people generally cooked most or all of their meals at home. Yes, we’re a busy nation. Sure, that rotisserie bird looks delicious – and, more to the point, it’s ready to eat.

However, those on tight budgets generally don’t have the luxury of spending the majority of their food dollars on prefab grub. And even those with some disposable income should consider frugalvorism at least some of the time.

What we choose to buy and eat has consequences. Dollars spent on the priciest beef or the out-of-season tomatoes flown in from Israel are dollars that can’t support our long-term goals.

So try this mantra: If it’s not on sale, it’s not in my cart. Say it as often as you need to until frugalvorism becomes automatic. This isn’t penury. It’s prudence.

Donna doesn’t just keep an awesome frugality blog. She has also written two books. The PDF versions are available to GRS readers for $5 each: Your Playbook for Tough Times (discount code GRS1) and Your Playbook for Tough Times, Vol. 2 (discount code GRS2).

from Get Rich Slowly https://www.getrichslowly.org/frugalvore/
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When rules bring freedom

While I’ve identified as a writer since I was eight years old, what I’ve written has changed significantly over time.

When I was very young, I was only interested in writing stories. These stories were child-like, to be sure, but they grew in sophistication as I did. By junior high, I was drafting large chunks of fantasy novels (mimicking the books I tended to read at the time). Then, in high school, I discovered a love for poetry.

In high school and college, I mostly wrote poetry. Some of it was actually good, too. (Seriously!) I won contests and scholarships with my poetry, and some of it even saw print in small magazines.

But somewhere along the way, I stopped writing poems. I’ve written a few songs with friends over the years, but that’s it really. The part of me that’s a poet — a part that once was integral — seems to no longer exist.

Anyhow, it occurred to me today that the spending moratorium I’ve set for myself in 2021 is, in a way, like writing poetry. Let me explain.

Rules for Poetry

You see, part of the fun of writing poetry — for me, anyhow — is figuring out how to express yourself while adhering to the rules. And the “rules of poetry” aren’t set in stone. Each poet sets her own standards. What’s more, those rules might change from poem to poem.

Take Shakespeare, for instance. Shakespeare’s sonnets follow a specific format.

  • Each sonnet contains fourteen lines.
  • Those fourteen lines are divided into four groups: three four-line quatrains and a final two-line couplet.
  • Each line contains ten syllables of iambic pentameter.

These rules are part of what makes Shakespeare’s poems so appealing. He was able to express himself, to convey a great deal of emotion, while playing by these rules. If you re-write a Shakespeare sonnet without the rules, it loses its beauty. (Fun fact: One of my favorite Shakespearean sonnets uses money metaphors!)

On the other hand, e.e. cummings played by a different set of rules. “anyone lived in a pretty how town” is still one of my favorite poems, but it’s vastly different than a Shakespearean sonnet.

For many young poets, rules are frustrating. They feel like limits on creativity rather than sources of inspiration. As a result, we often latch on to free verse, which seems less restrictive.

When I was writing poetry, I found that giving myself rules fostered creativity instead of stifling it. That’s kind of counter-intuitive, I think, but it’s true. It’s a fun challenge to see what you can create when your options have been restricted.

To this day, I find that (generally speaking) I admire poets who work with meter and rhyme more than those who simply produce free verse. (This isn’t always true. There are plenty of great poems written in free verse. But all things being equal, I tend to prefer a poem with structure over one without.)

Rules for Spending

Why do I bring this up? What does it have to do with personal finance? How is this related to my spending moratorium?

For the past week, I’ve been on a deeply reflective kick. I’m not suffering from my chronic anxeity and depression (yay!) but I am asking myself deep questions about what I should do with my future, and I’m trying to figure out how to keep the depression and anxiety from returning. As part of that, I’ve been reading about mindfulness and meditation.

As I talk with friends about this, they’ve been recommending books. Researching these books leads me to discover other books. Reading articles online about mindfulness makes me want to read still more books. And if I weren’t on a spending moratorium at the moment, I would be allowing myself to buy some of these books.

Fortunately, this isn’t a new interest for me. In the past, I’ve wanted to learn more about mindfulness and meditation, so I’ve picked up maybe a dozen books on the subject(s) over the years. They’ve been gathering dust in my library.

Now, in 2021, a few of these books are titles I’ve decided I want to read. Yes, there are a couple of books I don’t own that sound really interesting to me and I want to buy them. But I can’t. Or, more precisely, I won’t. Because I’m on a spending moratorium for 2021.

In the past, I might have found this frustrating. Right now, though, it’s kind of liberating.

My spending moratorium is doing exactly what it’s intended to do. It’s forcing me to look inward, to search my existing library, instead of turning outward and ordering more books. Ordering the new books wouldn’t solve anything anyhow. They’d just end up like the books I already own: unread on my bookshelves.

But because of the artificial structure I’ve imposed on myself, I’m forced to become creative, to be resourceful, to work with what I have. I’ve begun reading the books on my bookshelf. Yay!

This is very much like writing poetry given a set of specific rules. And you know what? Turns out the results are the same too.

When Rules Bring Freedom

Yesterday, I started reading Waking Up by Sam Harris. Holy cats, you guys. This is exactly the book I needed for this moment in my life. And it’s one that I already I own. Amazon says I bought the book in 2015 but I only started reading it yesterday morning. Crazy stuff.

I bought this book five years ago and never read it!

But I’m only reading Waking Up now because of the rules of my spending moratorium. I browsed my (digital) bookshelf and that book stood out. If I weren’t playing by these rules right now, I wouldn’t be reading anything yet. I’d be waiting for new books to arrive from Amazon.

The same thing has been true with my recreational reading. I ran out of John le Carré novels on hand, so I had to look for something else. I couldn’t just order Tinker Tailor Solider Spy. Instead, I’ve decided to work through my science fiction paperbacks one by one. (I’ll look for Tinker at the public library.)

Plus, the spending moratorium is leading me to get creative in other areas of my life.

On a larger level, it’s interesting to think of the implications here. I’m saying that I appreciate poetry more when it’s bound by rules, when the poet isn’t free to do whatever she pleases. I’m also saying that I kind of like the fact that my book choices are currently limited to what I have on hand.

My frustration at not being able to buy a new book lasts for maybe thirty seconds, then I turn my attention to the available options. These options are fewer, but I don’t feel any less happy. (So far, anyhow.)

Perhaps this shouldn’t be surprising. This is, after all, the thesis of The Paradox of Choice by Barry Schwartz. He argues that we think we want more options, but we really don’t. When we have more options, it becomes more difficult to choose because we’re afraid of not making the “right” decision. (Even if there isn’t a “right” decision.)

In a very real way, rules bring freedom — with poetry and with spending.

Footnote: This reminds me of the rules I set for myself when I’m trying to get fit. A decade ago, I created a short document of “acceptable” foods. These are, in essence, my rules for healthy eating. When I’m doing well with my fitness, it’s usually because I’m sticking to these guidelines. I allow myself to eat anything I want as long as it’s healthy, as long as it follows my food rules. Donuts for breakfast? No, that breaks the rules. Filet mignon for breakfast? That doesn’t break the rules. Let’s do it! Sounds silly but it works.

from Get Rich Slowly https://www.getrichslowly.org/rules-bring-freedom/
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A retraction

Earlier this week, I published a guest article from Financial Samurai. I’ve decided to do something I’ve only twice before in fifteen years at Get Rich Slowly — I’m retracting that article.

Sam’s article, while new, rehashed a piece he’d previously written for his own site. I was unaware of that original article until I published this new version. In principle, I’m fine posting this sort of thing — an article that covers existing material in a new way — because that’s what we writers do: We cover the same topics again and again and again.

In this case, however, not only was I unaware that Sam had already written about this material, but I was unaware that the original piece had generated a ton of controversy, and that many of Sam’s assertions had been called into question and/or disproven. (What can I say? I read a lot of personal-finance blogs, but it’s not possible for me to see every article.)

While I didn’t agree with Sam’s premises or conclusions in the article, that didn’t bug me. I don’t view Get Rich Slowly as a monolithic, dogmatic place that promotes only one view of money. Quite the opposite, in fact.

My motto here since Day One has been “do what works for you”. By this, I mean to say that there are many different ways to constructively manage your finances. What works for one person might not work for somebody else. There are often multiple ways to accomplish the same goal. (Take getting out of debt, for instance. There are several smart ways to go about that task.)

Because I’m open to sharing different ideas, I sometimes publish articles from authors who hold very different viewpoints from my own. This is nothing new. I’ve been doing it since I started the site.

I believe strongly, for instance, that it’s perfectly fine for committed couples — even married couples — to maintain separate finances. Again, do what works for you. All the same, I once published an article arguing that the only right way to manage money is to merge your finances when you get married. And I’ve published pieces on the importance of religion in personal finance despite the fact that I’m agnostic. You get the idea.

I don’t believe that I know everything, that I have everything figured out. (I obviously don’t!) Because of this, I think it’s fun to share other people’s perspectives.

That said, there need to be some limits to what I’ll publish, right? And there are.

  • I refuse to publish anything that’s overly promotional. (That’s why GRS has never run “advertorials” or paid posts.)
  • I won’t publish anything that’s so poorly written that it can’t be edited into a coherent piece. (You’d be surprised at how bad some submissions are.)
  • And, most importantly, I won’t publish a guest post that spreads misinformation and/or harms readers.

When I edited Sam’s article, I had some reservations but they weren’t strong enough to prevent me from publishing the piece. I made a mistake by not scrutinizing the material more closely.

I didn’t agree with some of Sam’s premises (I hate the idea of using income as a basis for determining retirement needs, for instance), and I thought his conclusion sounded extreme. So, I included a disclaimer at the end to let readers know that I didn’t agree with everything he’d written. Then, when early commenters failed to see that disclaimer, I added an additional notice at the top of the story.

After I published the story, readers quickly let me know about the original piece and its attendant controversy. This lead me to re-read the article much more closely. In doing so, the initial logical error (that safe withdrawal rates are somehow tied to bond yields) was obvious. What’s more, Sam’s conclusion (that the safe withdrawal rate is equivalent to 80% of the 10-year bond yield) seemed absurd.

I told Sam as much in an e-mail conversation during which I voiced my concerns. Sam dismissed them. When I suggested that he leave comments offering clarification, that he at least connect the dots from bond yields to safe withdrawal rates, he declined. This is disappointing. I’d hope that Sam is interested in education and accuracy. Because I am.

The final straw came when one GRS reader wrote:

The bad news is that my 67 year old father, who is perfectly positioned for retirement, somehow came across this piece and sent it to me because it panicked him.

As I said earlier, I won’t publish guest posts that spread misinformation and/or harm readers. This article crossed the line.

Get Rich Slowly isn’t about sensationalism. And it’s most certainly not about bad advice. I keep telling my business partner, Tom, that I want Get Rich Slowly to be a trusted resource where people can come to get reliable info about all aspects of personal finance.

Sam’s article contained bad information and bad advice. I want to believe that Sam’s intentions are good, and that he truly believes what he wrote. But as it stands, I cannot allow the article to remain at GRS. It violates the trust of GRS readers by spreading misinformation and drawing false conclusions.

Ultimately, this incident is my fault, and I acknowledge that. If I had read the article more closely to begin with, I wouldn’t have published it. Instead, I allowed myself to give in to the technical jargon and Sam’s years of experience in the financial industry. “This doesn’t make sense to me, but he must know what he’s talking about,” I told myself. (For real. This is almost literally what I said to myself!)

I regret that. I ought to have trusted my gut and asked Sam to provide clarification before I published the piece.

I apologize to you, the GRS readers for not vetting this more thoroughly, and I apologize to Sam for putting him through this. (I suspect, however, that Sam’s used to this and knew it was coming.)

Lesson learned!

from Get Rich Slowly https://www.getrichslowly.org/a-retraction/
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Re-thinking safe-withdrawal rates and how much you’ll need in retirement

On 27 August 2020, the Federal Reserve announced a major policy shift. Fed Chair Jerome Powell said the Fed is willing to allow inflation to run hotter than normal in order to support the labor market and broader economy.

In other words, the Federal Reserve is likely to keep its Fed Funds rate at or near zero percent for longer. In the past, the Federal Reserve would consider raising interest rates when the unemployment rate falls to ward off inflation down the road.

Given this policy shift, I think you’d be a fool to follow a four-percent safe withdrawal rate in retirement. Let me tell you why.

Why the Four-Percent Rule Is Dead

The so-called four-percent rule was first published in the Journal Of Financial Planning in 1994 by William P Bengen. It was subsequently popularized by three Trinity University professors in their “Trinity Study” of 1998. At the time, inflation and interest rates were much higher and pensions were common.

In 1998, when the Trinity Study made the Four-Percent Rule popular, the 10-year bond yield was between 4.41% to 5.6%. The average 10-year bond yield rate was 5% in 1998.

Therefore, of course you’d likely never run out of money in retirement following a four-percent withdrawal rate. You could earn 5% on average risk-free!

Financial Samurai Safe Withdrawal Rate

Today, the 10-year bond yield is at around 1.1%. It got to a low of 0.51% in August 2020.

Given the dramatic decline in the 10-year bond yield since the 4% Rule was popularized, it doesn’t make sense to stick to a rule devised over 25 years ago.

The 10-Year Yield’s Importance

Returns in the stock market, bond market, and real estate market are all relative to the risk-free rate of return (10-year bond yield). If the risk-free rate of return declines, so do overall returns for risk assets ceteris paribus.

Let me share some examples on the 10-year yield’s importance.

Example #1: A Decline in Corporate Bond Yields

A company looking to raise money to fund operations isn’t going to issue a bond that pays 8%, unless it’s in dire straits. Instead, a company will probably discover that adding a 2% – 3% interest rate premium to the 10-year bond yield will garner enough demand.

In other words, companies can raise debt at a cheaper price when the 10-year goes down. In turn, the company can use the debt to fund operations or acquire new companies. With more expansion and acquisitions, company profits may go up.

Example #2: A Decline in Stock Dividend Yields

A company has historically paid a 60% dividend payout ratio. During the ups and downs, the company’s dividend yield has range between 3% – 4%. The company has always wanted its shareholders to earn at least a 1% premium to the 10-year bond yield.

With the 10-year bond yield down to 1%, the company can now cut its dividend payout ratio and provide closer to a 2% – 3% yield. The company can then keep more retained earnings for growth and operations.

Example #3: Increased Interest in Real Estate

Let’s say you want to take advantage of potential distressed asset opportunities in commercial real estate. One of the key ways to find opportunity is to monitor the spread between cap rates versus the 10-year treasury yield. The greater the gap, the greater the potential profit potential.

With the pandemic, the current office cap rate vs. 10-year treasury yield spread is at its highest in history. Therefore, commercial real estate might generate some greater returns in the future. The asset class has certainly lagged stocks and residential real estate.

The proper retirement withdrawal rate has declined

When it comes to investing, everything is intertwined. The 10-year bond yield has direct implications for asset returns and yields. Let me demonstrate.

Few Follow a 4% Safe Withdrawal Rate

What’s funny about the 4% Rule is that its proponents don’t even follow the rule!

For example, William P Bengen, the creator of the 4% rule mentioned in my post on the proper safe withdrawal rate that he’s onto his 4th career as an author and researcher. You can read his comment on my site for yourself.

Meanwhile, other retirement experts and financial advisors are certainly not following a 4% safe withdrawal rate because they are all still working.

Finally, since leaving my day job in 2012, I have yet to meet a single FIRE blogger who regularly withdraws 4% from their portfolio to pay for living expenses. Instead, FIRE bloggers are almost always earning supplemental retirement income online.

I am no exception. But I haven’t told anybody I’ve been retired since a year after I left finance in 2012. After a year of traveling and twiddling my thumbs, I focused on writing on Financial Samurai. It felt disingenuous to say I was retired when writing these posts takes hours to write!

Even J.D. has mentioned that despite being financially independent on paper, he’ll likely need to generate income to get him to 59.5. He has no plans of withdrawing from his tax-advantageous retirement accounts early and paying a 10% penalty.

The New Safe Withdrawal Rate To Follow

If you have children or plan to donate to charities after you are gone, it’s important to plan financially beyond yourself.

Given the 4% Rule was established at a 20% discount to where the 10-year bond yield was at the time, we can also establish a similar 20% discount to today’s 10-year bond yield to come up with a new safe withdrawal rate.

With the 10-year bond yield at ~1.1%, a safe withdrawal rate is actually closer to 0.88%. When the 10-year bond yield was at its low of 0.51%, the safe withdrawal rate was equivalent to 0.4%.

To make things simple, the new safe withdrawal rate equals the 10-year bond yield X 80%. Let’s call this the Financial Samurai Safe Withdrawal Rate.

For reference, below is a table I created using the Financial Safe Withdrawal Rate formula.

Proper safe withdrawal rates in retirement - 4 percent rule is outdated

Three Ways To Use The Financial Samurai Safe Withdrawal Rate Rule

Let’s look at a few ways to use this new safe withdrawal rate that I’ve developed.

1) Stretch Net Worth Growth Target

With the 4% Rule, you multiply your annual expenses by 25 to get a target net worth. If the new safe withdrawal rate is 1%, you multiply your annual expenses by 100 to get a target net worth.

For example, if you want to live off $50,000 a year in retirement and have no other income streams, then your stretch net worth target is $5 million based on the new safe withdrawal rate rule.

For a more reasonable net worth target, may I suggest the 20x Gross Annual Income Rule. With this rule you can’t cheat by simply lowering your annual expense budget. The 20s gross income rule forces you to accumulate more wealth as your income grows. It also makes you better decide whether you want to continue your way of life.

2) Calculate How More More Wealth Is Left To Build

A less onerous way to calculate your retirement net worth goal is to add up how much retirement income you already have and subtract it from your desired retirement income.

For example, let’s say your passive income portfolio already generates $30,000 a year, but you want to earn $50,000 a year. The difference is $20,000. Therefore, if the new safe withdrawal rate is 1%, your goal is to try to amass another $2 million in net worth, regardless of what your existing net worth is.

3) Reverse engineer your desired safe withdrawal rate.

Use the Financial Samurai Safe Withdrawal Rate only as a net worth target. Once you’ve reached your net worth target based on the FS Safe Withdrawal Rate, then you can change your safe withdrawal rate as you see fit.

For example, let’s say you’re happy living off $50,000 a year in retirement. You don’t have a pension, Social Security, or any passive income. A safe withdrawal rate of 1% dictates that you will need to amass a $5 million net worth. Let’s say you succeed in getting to $5 million by age 70 and expect to live until age 90.

With an expected 20 years left to live, you could divide your $5 million by 20 and safely withdraw $250,000 a year. Withdrawing $250,000 a year is equivalent to a 5 percent withdrawal rate. If there is a bear market or big unexpected expense during this time, you can adjust your withdrawal rate accordingly.

The Way Around The Financial Samurai Safe Withdrawal Rate Rule

Obviously, when the 10-year bond yield is low, following the Financial Samurai Safe Withdrawal Rate will be more difficult. Therefore, the easiest way to circumvent my new safe withdrawal rate is to earn supplemental income.

For example, let’s say you want to live off $50,000 a year in retirement income. This would equate to having a $5 million net worth using a 1 percent safe withdrawal rate. Unfortunately, you’ve been following the 4 percent safe withdrawal rule. Therefore, you thought accumulating $1.25 million was enough.

You now realize the 4% Rule was developed in 1998 when the 10-year bond yield averaged 5%. After cursing out the Federal Reserve for slashing rates to zero, you calm down and figure out the gap.

Your $1.25 million can only safely generate $12,500 a year in passive income at 1%. Therefore, your retirement income shortfall is $37,500 ($50,000 desired retirement income – $12,500 your true retirement income). You are also too young to collect Social Security, nor do you have a pension.

Since you don’t think you’ll ever get to a $5 million net worth, you need to find a way to make $37,000 a year in supplemental retirement income. Thankfully, there are multiple ways to make money from home nowadays if you start a website like this one. You can also freelance.

Taking More Risk By Reaching For Yield

The final way to circumvent the Financial Samurai Safe Withdrawal Rate is to take more risk. To be able to sustain a higher withdrawal rate, the retirement portfolio must either generate higher yields, higher returns, or both.

Ideally, if you don’t make supplemental retirement income, you want to have a portfolio that yields your desired withdrawal rate or higher. Instead of investing a more conservative 50/50 equity/bond portfolio, perhaps you’re comfortable shifting the equities allocation up to 70%.

A retiree does not have to only invest in bonds or risk-free assets in retirement, despite my new safe withdrawal rate rule.

Here are some investment ideas that have the potential to generate higher yields:

  • Investing in a REIT ETF like VNQ, which has a yield of ~3%
  • Investing in individual REITs like O, which has a yield of ~4.5%
  • Investing in private eREITs (what I’ve been investing in recently) that have historically provided a ~9% return, even when the stock market is down
  • Investing in individual dividend-paying stocks like AT&T with a forward yield of ~6.5%
  • Investing in a dividend ETF like VYM with a ~3.5% yield
  • Buying rental property
  • Lending out hard money
  • Buying an annuity

However, the more risk you take, the greater the chance of losing money. Therefore, it’s important to assess your own risk tolerance and invest accordingly.

Retirement Life Will Be Different Than What You Imagine

As someone who left his day job in 2012 at 34, I’m providing you some firsthand retirement perspective. It is easy to pontificate about the proper safe withdrawal rate in retirement while you still have a steady paycheck.

But I assure you, only when you and your partner no longer have a steady paycheck will you genuinely experience all the emotions that comes with being unemployed. And let me tell you, not all of the emotions are positive.

You may find it extremely uncomfortable to go from building your investment portfolio all your life to withdrawing. I know I did. Until this day, I still have not touched a dollar of principal from my retirement savings.

J.D. tells me that he’s just as uncomfortable drawing down his savings. But because he “retired” with a smaller nest egg than I did (and because he’s encountered some bumps along the way), he’s had no choice. Tapping his savings makes him nervous.

Use The New Safe Withdrawal Rate Rule As A Guide

Don’t be mad at the Financial Samurai Safe Withdrawal Rate. If anything, be mad at the Federal Reserve and the government for saving us from a global pandemic. The trillions in stimulus have crushed interest rates. Further, the debt will eventually have to be paid back.

Thankfully, none of us are zombies. We don’t aimlessly follow a safe withdrawal rate rule until we die. Instead, we adjust based on economic conditions. Further, there should be Social Security income, perhaps just not the full amount as promised.

My new safe withdrawal rate rule of the 10-year bond yield x 80% is just a net worth and safe withdrawal rate guide in this low-interest rate environment.

Depending on how much of your wealth you want to pass on and how much risk you want to take, my safe withdrawal rate rule may be too aggressive or too conservative. Only you can decide.

At the very least, let’s agree that following a 4% safe withdrawal rate today is misguided. We must adjust our retirement planning based on the realities of the world today.

Personally, I plan to keep on trying to generate as much active and passive income as possible. Once we reach herd immunity, fingers crossed, then it’ll finally be time to take things down a notch. Here’s hoping that our investments cooperate in the meantime!

Readers, what do you think is an appropriate safe withdrawal rate in this low-interest rate environment? After such a long bull market, have investors become complacent in always expecting positive returns? Why do think people still believe in the 4% Rule when the risk-free rate of return was 5% when the rule was first created?

J.D.’s notes
Financial Samurai is a smart guy and I think this is an interesting analysis. That said, I don’t necessarily agree with all of his conclusions.

For instance, I remain vocally opposed to making any sort of retirement calculations based on income. I think doing so completely misses the point. (So, in other words, I think Sam’s 20x Gross Annual Income Rule is a red herring.) I believe it’s much better to use spending when determining how much to save for retirement.

You should also know that William Bengen, the source of the four-percent rule, has been public in recent years that he would actually revise safe withdrawal rates upward, not down. He’s good with something like 7% in many cases, and certainly 5% in nearly every case.

That said, I’ll admit that Sam knows far more about this stuff than I do. So, give his advice serious consideration. But balance it by reading other perspectives too.

from Get Rich Slowly https://www.getrichslowly.org/rethinking-safe-withdrawal-rates/
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The power of habit tracking

For decades, I’ve been a proponent of habit tracking. Habit tracking sounds and feels nerdy to a lot of folks, so many people avoid it. That’s too bad. Habit tracking is a powerful tool that can help you make better decisions about your life.

Let me share an example.

Over at Reaktor, Olof Hoverfält recently published a long piece about why he’s tracked every single piece of clothing he’s worn for three years.

That’s right: For 1000+ days, Hoverfält documented every garment he wore. (And, in fact, he’s continuing to document his wardrobe publicly.) Using the info he collected, he’s now able to make better decisions about which clothes to keep and which clothes to buy. I love it!

Hoverfält says people worry about how much time it’d take to do something like this but they shouldn’t. Most of the time investment is in the initial setup, in that first batch of data entry. Actually using and maintaining the system requires about one minute each day. And the rewards are far greater than the cost in time.

Hoverfält’s project is a perfect example of the power of habit tracking.

The Power of Habit Tracking

For a long time, I’ve preached the importance of tracking your spending. But I think it’s smart to log anything you’re curious about or want to change: your fitness habits, your time habits, your work habits. Documentation is the first step to lasting change.

I recently met my goal to lose thirty pounds in six months, for instance. To succeed, I logged my fitness stats every morning. (And I’ll continue to do so for the foreseeable future.) Kim is starting a weight-loss journey of her own, so she’s logging every calorie she burns or consumes.

And what about tracking your time? All this month, I’ve been using an app called ATracker to log what I’m doing at any given moment. Using the app requires very little effort. The results are interesting. They provide insight into how I actually use my time versus how I think I use it.

Using ATracker for habit tracking

That’s the real value to projects like this. Habit tracking allows us to differentiate perception from reality. (In his article, Hoverfält covers this in the section on “actual versus imagined use”.)

I’ve learned that what people think they do (or what they say they do) is often quite different from their actual behavior. “I don’t spend much on clothes,” somebody will say, but when they actually crunch the numbers, they see that their clothes spending is much higher than average. “I don’t overeat,” another person will say, but when they log their calories, the see that their ginger ale addiction adds an extra 500 calories per day to their diet.

Faithful, honest tracking of habits is the only way to truly learn what it is you do with your time and your life.

Here’s another (silly) example of how tracking can help you differentiate perception from reality. A couple of years ago, Kim and I had a disagreement over who cleaned the litterbox most often. She felt like she always did it. I felt like I always did it. We started tracking behavior. We put a sticky note next to the litterbox, and when one of us changed the litter, we made a note. Turns out we were both cleaning the litterbox equally. Disagreement over! The solution to our litterbox problem is to have fewer cats haha.

Don’t Combine Tracking with Judgment

It’s important to keep decisions separate from tracking. When you’re tracking a habit — your spending, your alcohol consumption, your wardrobe use — you want to track actual behavior. Your job in that moment is recorder, not judge.

This is something I’m trying to stress to Kim as she begins logging her food intake. “Don’t beat yourself up over any of this right now,” I told her. “If you eat a cookie, that’s fine. Just write it down.”

If you combine judging with data collection, it’s a recipe for failure. You end up feeling guilty every time you make a poor choice. This makes it so you don’t want to document your behavior. You want to give up. You want to hide.

Habit tracking is only habit tracking. Data collection is only data collection. You’re like an impartial third-party observer who is noting what you actually do and who has not vested interest in whether those actions support your goals or not. In data collection mode, you’re after information — and only information.

Tracking my weight loss this year

Once you’ve collected enough info, then you can act.

After Kim has documented her diet for a few weeks, she can sit down and look for patterns. Based on these patterns, she can experiment with adopting different habits.

You can see this in my own annual financial updates. I track my spending throughout the year, but I do so only for information. Normally, I don’t try to make course corrections in June or July. But in early January, after I’ve had a chance to crunch the numbers, then I compare how my current habits have veered from my goals. I use this info to make choices like “I want to spend less in restaurants this year” or “I want to experiment with a spending moratorium”.

I’ve found that by keeping documentation and judgment separate, I’m more likely to make changes. Plus, I don’t beat myself up as much. When it comes time to analyze the data, I’m able to do so more rationally because I’m not in the heat of the moment, and I’m looking at a large collection of data instead of individual choices.

The Bottom Line

Okay, you get the point. Habit tracking is a great way to learn what you do with your time, money, and energy. But you need to be sure to keep tracking separate from judgment. Got it. But what about Hoverfält’s wardrobe project? What lessons did he learn?

Cost per wear

If you don’t want to read the entire article (although I think you should), here are some quick takeaways:

  • “In some cases, buying cheap is provenly more expensive.” This is the boots theory of socioeconomic unfairness. More expensive items are often (not always) better quality. As a result, they actually cost less to own in the long run than repeatedly buying cheap. This is only true when the extra cost buys extra quality, though. If the extra cost is due to buying a brand or a style, that doesn’t necessarily translate into savings.
  • “Frequency of use is the underlying driver of performance.” This is obvious but easily overlooked. The more you wear something, the less its long-term cost. The $100 shoes you wear twice a week for a year are actually more cost-effective than the $50 shoes you wear once a month.
  • “A wardrobe with nothing but favorite clothes sounds nice. It may also be the best in terms of cost performance.” Because the value of your garments is driven by “cost per wear”, the more you wear a given item, the more value you receive from it. This naturally means your favorite pieces are most cost-effective. The bottom line? Not only do you enjoy wearing your favorite pieces more than your other clothes, these favorites save you money.

Based on three years of data, Hoverfält has some advice for others.

Find what you need and love, then buy only that. Focus on cost per use, not on price. Buy only favorites. (Or, using Marie Kondo’s terminology, buy only those items that “spark joy”.) Try to buy only clothes that can be worn in a wide range of situations. Buy for the long-term. Take good care of your clothes. Know when to get rid of an item.

I think one reason I love this article (and project) so much is that it reinforces some conclusions I’ve already come to.

Now that I’ve lost thirty pounds, I can fit in my old clothes again. And now my closet is filled to the gills because it contains both skinny clothes and fat clothes. It’s a mess. I’ve been thinking about how to evaluate what to keep and what to discard, and Hoverfält’s article helped to provide some clarity.

This weekend, I’ll make a pass through my closet and drawers to get rid of (and/or store) the things I know I won’t wear. And who knows? When I’m finished, maybe I’ll make time to create a wardrobe spreadsheet of my own. It sounds like fun!

from Get Rich Slowly https://www.getrichslowly.org/habit-tracking/
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