November 21, 2007

Network Thanks

Earlier I had posted on the importance of considering a network as a financial asset (and much more). Also, I am celebrating this holiday because it would be one of the first holidays in which I am not looking forward to just because it is a reprieve from work. In years past, Thanksgiving was only good for a four-day weekend, that big meal that I didn't have to cook, as well as catching up on sleep because I was too tired to do anything else. This year is different because I was able to play a bigger role in planning Thanksgiving with my grandparents, actually have the energy and time to volunteer at a soup kitchen, and spend quality time with other friends and family that also have time off. Spending time with them is especially important and in retirement, I make sure to take advantage of strengthening my existing networks during the holidays because they do not have as much free time as I do.

However, in the spirit of the holiday, I would like to write a thank you post about my network and how they have contributed financially. Names will be replaced with spunky aliases for anonymity and for jokes.

The 'rents - I have been financially independent for many years now but having a child is definitely a financial burden for them and a benefit for me. MaineToday has calculated this to be around 250k$ and does not count all the other things they did for me that required time and effort. Considering my current situation, having a family is not something visible in my horizon. The fact that they were willing to sacrifice a good portion of their assets (unless I was an accident - they never told me) makes me very thankful.

Googlers - I'm sure many of you know the perks that are involved with working at the Google. Free food, free drinks, and they have these great take-out boxes where I can take home food. I have a strong network there (meaning I practically abuse their generosity) so lets say they contributed to half a year's worth of food. Not to mention, one of them is my roommate so I get a number of free perks free as well. I won't identify these perks specifically, but lets just say Google doesn't like their employees paying for anything...even bills. So let's say 2000$.

Dance Guys - If I were to use a tech industry metaphor, these guys would be the Professional Services of software industry solutions. They do not provide anything specific but they provide everything else at a drop of a dime. They have picked me up from airports, driven me to interviews, let me crash on their couch when Ex-Mrs-Parrish was mad at Soup Parrish. Basically, I can go to them whenever I want because of how strong my network is with them. So ballpark estimate - on-call chauffeurs and manual labor would cost 10/hr, 20 hours/wk, and we'll say over the last year - 10k$.

The Biggest A's Fan - This guy has guided me since our days at UC Somewhere. While I was being a scrappy fraternity boy, he was studying in the basement of the Engineering library. While he was making professional connections, I was making social connections (with females). While he was at T.A.'s office hours, I was sleeping in and recovering from the night before. (I'm actually exaggerating - I had a respectable GPA and was a dedicated student...just not compared to this guy.) Since then, he has taught me how to interview, how to write a resume, and guided me professionally towards a career. We even followed the exact same career path job-to-job (until I decided to retire). If I ever decide to grow up (or so some of my critics say), my ability to contribute in a professional environment will be as strong as when I left it thanks to this guy. I can say this guy is worth practically an education (he gave me training in professionalism, tutoring, a professional network, and career advice) - so maybe 20k$ least.

Scruffy, the Bag Lady - What I owe this little lady has been beyond words but I'm still going to try to put a dollar amount on it. She has been basically my finance mentor since the early days when we attended Cougarland Highschool. She has shown me how to sweep (win contests by bulk entries), how to set up my first ecommerce (bookselling through amazon), how to play the stock market, and thats just the tip of the iceberg. I had gone to her for real estate advice which saved me hundreds of thousands if you take a look at the Bay Area housing market now. She has helped me understand my professional worth and I was able to bump up my first salary by 20k$. She helped me get my first internship at Interslice, Inc. which gave me my first useful piece of information on my resume. She is the reason I'm even writing this blog. I even got to be in her wedding. So lets try to add this up - she was my business consultant for ecommerce (3k$), financial adviser (2k$, or ~3% of my net worth, and 5k$ for professional advice), real estate agent and adviser (42k$ for her cut, and 100k$ for money saved), professional worth consultant (20k$). There's probably a lot more that I'm forgetting but add all that up, the Bag Lady has contributed a whopping $172k. I should ask her if it was worth 172k$ for me to walk down the wedding aisle.

There are a lot of other people I'm forgetting but if you add all that up, my network has contributed 204k$. I didn't included my parents in the math because hey....who doesn't get 250k$ from their parents? *high five*....*then feels guilty because taking privileged life for granted*

Now its quite obvious that most of this math is subjective and kind of a (really huge) ballpark estimate. Regardless of this, for me, it puts in perspective the financial worth of a network. Many people take their network for granted and don't seem to realize how valuable this is as well as the importance of contributing resources to a network of people. One of my theories which explains this is that rich people are friends with rich people while poor people are friends with poor people. A rich person doesn't really get much contribution from a network of rich people. They take for granted the free meals, the professional network, and all the other things they had grown up with. On the other hand, a poor person can't expect to receive much contribution from his network - everyone is busy holding down 2 fulltime jobs. They also lack the financial education to pass on and the knowledge to give career advice. However, lucky for me, I am a retired (read: poor) person with rich and knowledgeable friends. Their financial worth to me is a huge part of my assets. On top of what they contribute financially, their intangibles (yes, I do realize that networks are worth more than just money), makes my friends and family...priceless.

Happy Thanksgiving!

November 18, 2007

Health Insurance

I haven't posted for a while because I've been planning family things for the upcoming holiday, and catching up for lost time. I always thought that retirement brings a lot of free time (heaven knows I'm unsuccessfully trying to find some hobbies for my grandpa to keep him active) but I'm quite busy nowadays. This is a good sign, because being unproductive would mean my retirement is failing because of the violation of Rule #3.

When I finally found some time, I read some comments on my previous posts and I feel that this retirement plan of mine has a lot of issues to address. Some issues that my readers brought up I have thought about while others I have not, and for that, I would like to thank them for keeping me on my toes.

One of the things that were brought up was health insurance. Obviously, my retirement does not yet factor any kind long term plan for that. I'm currently on a health plan from my previous employer that has an expiration date. After that, I might have to go without insurance or maybe a skeletal emergency plan that costs less than 100/month. A lot of Americans today don't have health insurance. This is the reality and a lot of people just have to make-do. My retirement plan is and will always be about adjusting.

So how am I going to adjust to finding health insurance? Well, currently, the mayor of San Francisco has promised to provide free city-wide health insurance. Thankfully, I live here so if that comes through, you can be sure that I will be one happy camper. However, let's say that falls through. You can tell by this blog that I am kind of idealistic. I probably won't be this way forever but there is a reason why young people are idealistic - they can afford to be. There are millions of Americans today that don't have health insurance due to a faulty system. Most people feel that they would just have to accept the system and make the best of the shackles they wear. I don't like accepting unfair systems and I don't think the rest of the nation does either. As a result, I feel this will have to change in the future whether it is a change forced by the hands of the people, or just through innovativeness to get around the HMO's. Instead of sacrificing an unfair amount of resources now to have health insurance, I can look forward to being one of the beneficiaries when a more realistic plan comes through for myself and many other fellow Americans.

Also, another thing about health insurance is that it is an assumed need - like shelter and sustenance. This may be true for some (older) people but I'm young and healthy and I recover from sickness quite fast. I feel that while it is something I will have to address in the future, I'm free to lower it on the priority list for now. This concept is hard to grasp because it breaks away from the status quo which makes it seem like I have to prepare for limbs getting hacked off and life-threatening diseases flying around rampantly. The truth is that the time my health becomes an issue is the time I will have to adjust to the problem.

Finally, it does not take a health plan to enforce preventive measures. I eat healthy, I exercise and I research best health practices because I actually have the time to do all 3 now. Whereas before when I was sitting in front of the computer for 40+ hours a week, now my body is much more energetic and probably better prepared to fight any health problems that come my way. Just like volunteering, I am able to trade money for time and turn that time into something that will save money. My retirement is about trade-offs and trying to find the benefits of the alternative to working - the alternative in this case being having more time to be healthy but not having health insurance. Out-of-the-box thinking has a huge impact on making my retirement work.

There is risk involved but I can't always plan for the worst. Afterall, why doesn't everyone also get UFO Abduction insurance? This is an extreme example but it illustrates the point for my current situation: the risk is too low. I will adjust when the time comes. Hopefully by then, I will be sending a gift basket to the mayor of San Francisco.

I'd like to thank my readers for inspiring this post and to encourage them to keep commenting. One of the reasons I have this blog is to allow an open forum for discussion to help me work through the problems I will face in my retirement.

November 14, 2007

ROI - Time

I'm a week or so into my retirement I realize that a huge portion of my life is dealing with time. I need to figure out how to value it, how to spend it, how to save it - the classic saying, "Time is Money" rings truer in retirement than any other time in my life. I spent today reflecting on this issue while doing other chores and I thought I would do well to share with my readers.

Unlike money, time is a finite resource. I only have so many hours to live and I should spend the time I have as productive as possible with focus on the things I want out of life. On the other hand, doing these productive things costs money. If I go to the movies, if I take a pottery class, if I go out for dinner, if I want to surf the internet, I would have to pay for each thing. I need to figure out what I can afford to do that would minimize the amount of money it takes as well as maximize the amount of time in which I am doing what I want to do.

Lets start with an example. Let's say theres a whole laundry list of things I want to do - things that I would consider productive with my time. Here are two examples: Taking an art class and watching a movie. The art class costs 100 dollars + art supplies for 5 one-hour lessons. Watching a movie would cost 10 dollars - 20 if I have a date.
So comparing the two, let's say I'm a loser and I go watch a movie by myself and it costs me 10 dollars /2 hours. Comparing this to the art class, it would cost 20 dollars / hour. It seems that the no-brainer decision would be to watch a movie. However, I also factor in how doing either of these things affect the rest of my free time. Watching a movie might give me an additional hour or two of entertaining conversations with friends. Learning to paint, however, will not only give me a potential source of revenue but will also provide hours of productive time spent practicing and using the skill. Needless to say, I went with the art class with the assumption that I will turn the time I have in the future into something more productive than I would have if I had went and watched a movie.

I started applying this to all the decision making I did with how to spend time. Things like paying for broadband internet and buying a data plan for my iphone were justified because of the large amount of productive time I spend on them - the cost would likely be pennies to the hour. I also decided to cut back on fancy and extravagant eating (this one was a painful thing to do) because fancy food costs me tens of dollars to the hour. I only can be full for so long before I have to eat again, no matter how amazing the full-bodied sauvignon blanc went with the balsamic gastrique duck. While I will miss the fine dining, the amount of time and money I save by not going to dinner parties will contribute significantly towards my retirement. At the same time, I will be able to spend that time painting.
And on that note, I set my plan in action.

...I'm kind of hungry. I'm going to go paint.

November 12, 2007

Green Day

So one of the first things I want to do in retirement is to find a volunteer organization. I've done a number of non-profit ventures throughout my life and they always turn out very well. This last weekend, I participated in a large charity fundraiser where teams of four would do a scavenger hunt all over the city. It was immensely fun and definitely follows Rule #1 as well as Rule #3. I met a bunch of wonderful people and even talked about my retirement plan. I got a mixed reaction of fascination, confusion, disbelief, skepticism, and sometimes even a small hint of admiration. I was fed throughout the day and after the big scavenger hunt, there was a big party that had an open bar. One of my all-time favorite musicians performed and I even got to meet him and take a picture with him. I also met some other volunteers who welcomed me in future events they were planning. After exchanging contact information, me and my fellow volunteers danced the night away in drunken merriment.
Needless to say, it was a day well spent because my expense was 0 dollars (you could even say I made money by getting free food and booze), I enjoyed myself, and I helped a charity foundation.

So the reason I am telling my readers about this day was that it represents everything that this blog is about. I was able to participate in an event that I would have done before retirement if I was not working all the time. On top of that, the event did not cost me anything and I was even able to avoid drawing from my food budget for a day. This aspect of cutting costs each day is extremely important because of my ambitious retirement plan. Finally, with time and effort, I gave back to the community that allows me to live such a rich and bountiful life. Anyone who has volunteered for a cause knows giving with your blood, sweat, and tears is much more satisfying than just donating money. And finally, I was able to network. This is one of the most undervalued assets in most people's finances because it is so difficult to calculate how much your connection with an acquaintance is worth.
For example, my friend works at a company that provides free food and is always happy to have me for lunch. I also have a friend who knows how to cut hair and always is glad to help me crop my noodle. When I'm in need of someone to help me move to a new apartment, or if I need a ride from the airport, or if I need advice on stocks, I have a number of friends willing to help out.
Imagine how much each of these things are worth - a free lunch is always worth a good 5 dollars. A haircut nowadays costs me 15 dollars. Movers cost 50 dollars, an airport shuttle costs 30 dollars, stock tips or classes can be in the thousands of dollars! The power of networking and community is amazing and will be a huge part of my retirement.
Of course, I do not want to be the friend that takes and gives nothing in return. Though my retirement plan restricts me from giving back financially, I will be always good for the things I can provide - a free guitar lesson, a friend to talk to or hang out with, manual labor and whatnot. And of course, all of these things I would have done free of charge even if I wasn't retired. I honestly feel that working hard to develop a network of people instead working hard for a paycheck has a much higher return on investment and is much more satisfying in its own regards. Who calls helping a friend "work"?

I decided to help categorize my adventures by labeling things either a green day or a red day. A green day means I successfully went through a day without eating into the 25% return buffer I require to retire while following the 3 rules. A red day means I had to break one of the rules (I hope for good reason) or I had to eat into my 25% return. And this last weekend was most definitely a Green Day.

November 9, 2007

Ground Rules

Like all big plans in life, I feel it is important to map out the strategies and not just charge blindly into the future. In my earlier post, I laid out what I needed to do to achieve retirement which was to get about 25% return each year on what I currently have. Now, I want to set some ground rules for myself so that I actually have a purpose behind doing this. After all, I could just get a part-time job as a waiter and say that that my 25% goal has been reached but if I have a job, thats not really retirement at all.

The first thing I looked at since being retired is what I'm going to do with my life. Most retired people do things like sit on their porch and watch the cows herd by or take hikes early in the morning and other things that sound extremely boring to a young guy like me. However, the bottom line is that retired people do what they want to do. For my retirement, I'm going to do whatever I want to do. And as a young guy, I'm not very sure what that is. I'm going to spend the large amount of free time I have trying new things I always wanted to try.
This leads me to my first rule:
1. Any source of income must come from something I would have been doing on my own time for free anyways.
This makes sense to me. For example, if I play music on my free time and turned that into a paying gig at local venues, I don't see that as a conflict of interest to retirement. This will also let me turn some of my hobbies into contributing factors for the 25% return I need each year. With this in mind, I have listed out a few of my hobbies that could potentially turn into a source of income.
1. Advertisements from blogging.
2. Guitar teacher
3. Music Performer
The first step for establishing a routine in retirement would be to turn these hobbies into a small source of revenue. I have networked a few musicians and we'll be practicing these coming weeks. I put up advertisements to be a guitar teacher on craigslist. And finally, I got a Google Adsense account (with more coming) to leverage the help of my wonderful readers.

Now the next ground rule I have comes from making sure that while transforming my hobbies into sources of revenue, I do not commit to anything long term - i.e., a job. One of the most attractive benefits of retirement is the freedom to do what I want, when I want. If I were to rely on blog ads or having a weekly paid gig as a source of income, then I would have to make sure I blog X amount or make sure I book a gig every week. What if I wanted to go camping without internet in Seattle for a week? I would not want to be dependent on those hobbies as if they were a job.
2. Any source of income must have at-will commitment.
I would not want to be responsible for too many things while retired. This rule would allow me to move quickly between things I want to do. If I wanted to play music one week, then travel the next, I would want to make sure I have the freedom to do so. Of course, some responsibilities and commitments are important and unavoidable but I feel this rule will help me curb the amount of commitments I have. Retirement is about maximizing the freedom of choice.

Finally, the last rule I can think of for now is to make sure I am productive in life. Many young people fall into the downward spiral of being lethargic when not having any responsibilities. I want to make sure, moreso from a philosophical standpoint than a financial one, that I can look back at my life and be satisfied. That's not going to happen if I sit around on a couch all day.
3. All actions in retirement must contribute to personal growth or the community.
I developed a strong set of ethics growing up. I want to make sure I still stay true to these principles especially if I am going to live a life lavished by temptation to the contrary. This rule is probably the most important one because even if I successfully achieve a 25% return every year but I just end up watching daytime television and sleeping 12 hours a day, it will ruin the whole point of retiring.
Society has jobs to make sure people contribute to the community. Instead of forcing me to contribute, I want to willingly contribute. When people are forced to do something, they do a poor job and contribute minimally. When people willingly contribute, they go above and beyond and receive a sense of satisfaction. I would much rather do the latter than the former and retirement allows me to do so. I realize that this line of thinking is Utopian and would not work for everyone (some people just can't help being lazy unless they are forced to work), but with this third rule, I hope that everything will work out the way I want for me.

So now with a goal to reach and a creed to follow, I start my retirement! Wish me luck, readers.

November 8, 2007

Newly Retired

At a first glance, you might think my blog about (extremely) early retirement is about a lazy guy trying to find a loophole in the system so he can keep on being lazy. I assure you, that is not the case. To explain, I will give my readers a little background on how this came to be.

I'm 24 years old and I am retired. I didn't invent a new search algorithm or create a new video game and I didn't inherit anything. In fact, I'm kind of poor. I just decided that there is no point in working. My history would show that I led a very standard life for a privileged middle-class American. I studied hard, got good grades, and went to college and got an Engineering degree. I found my first job and I hated it but I got work experience under my belt. I found my second job and it was great...for a job. I was doing a little bit of sales, marketing, sales engineering, finance, and many other business mumbo jumbo. I did very well and saved a little bit of money and I left the company. And here I am, ready to move on to the next phase of my life.

Currently, I reside in San Francisco, I reluctantly have an iphone, and I like to go to nice places to eat on weekends. I like playing basketball, playing music, traveling, and other mid-20s-young-singles stuff. You might think that with little-to-no income coming in, this lifestyle would start draining my savings. The goal is to try to make it so that it won't. During my time of studying hard, working hard, and sleeping little, I learned a lot about making wise financial decisions. I believe that with a small but strong set of assets, a network of people, and just being smart with money, I can pull this off.

So the first step towards making this retirement work is to see what I have. My money is in a diverse portfolio spread across many different investments or holdings. I was able to make a Google Doc to keep track of all my money and it seems that I saved up 70k. I paid off all my student loans and I don't have any other large payments to take care of. That means I have 70,000$ to play with for whatever I need to do to make this work.

The next step is to find out how much money I need and this part was highly entertaining. If I'm going to retire miserably, I might as well keep working miserably and get money. So I did not cut expenses. I want to live my life the way I would if I was working, except without the working part. To quickly sum up the math (no pun intended), lets say my rent will cost me 1000/month, cell phone bill will cost 60/month, other bills will cost 100/month, food will cost 200/month, and other unforeseen luxuries or emergencies will cost 50/month. That comes out to be $17,000/year!!

So that means every year, with my 70,000$, I have to find a way to get 25% return (after taxes) through wise financial investments. I'm not going to lie to you. 25% is a lot. But hey, you know what? I have all the time in the world to figure out how I'm going to do that. I'm retired.

Disclaimer: Even though this blog heavily emphasizes the financial aspects of retiring with nothing, I won't really give out tips or investment advice. It's really more about exploring the possibility of doing this and the tips and tricks I find to help.