Getting Started: Part 3 - Where to start your own freedom adventure.
Vision
In short, what do you want to do? Companies often have vision plans, frequently they sound like BS. However, in your vision plan, you need to actually have something to align your life to.My vision plan effectively was to create situations to increase my freedom to choose more aspects of my life including where I live, what I work on and when I work on it. It need not be fully free, just free-er. You'll notice I don't say freedom to have a leisurely life. I don't say security. I also don't claim to be fully serendipitous. I did include serendipity in my plan (future blog on that), but it isn't required to full fill my vision. I for example don't have the freedom to live in New York City. In fact, there are many places I can't live in, but I'm a lot more free to choose than I was when I worked a job where the distance I could move was measured in miles and the number of states I could live in might have been 2.
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| "Mom, I've got this!" - Don't you hate back seat drivers telling you what to do! |
Your vision plan maybe very different, that is okay. Or you may take a variation on a theme. Jacob Fisker of ERE fame has a vision, based upon my reading of his work, of minimizing social impact by using resources more efficiently while continuing to live as good as a middle class lifestyle. Mr. Money Mustache for example is a variant on this. His goals include much of Jacobs, but he still wants to effectively live a middle class lifestyle. So while Jacob would build some elaborate method to solve a problem, such as a advert as a tarp attached to a leaky RV, MMM would take a more traditional solution, but do the work himself.
Plan
A plan is a set of steps you will execute to create the vision. What does a plan need? It needs a actionable steps. It needs a time frame. It needs a clear path to make it to where you want to go. And each element needs to support some element of the vision. Finally, you need to have some envisioning of the outcome of the steps you plan on taking. Let's break that down a bit.Your steps must actually be something you can do. If you plan on investing $2k a month, you must earn at least $2k a month, beyond your expenses. If not, you must reorder your plan to make it such that the steps preceding it will make it possible to complete. Once you have steps and sequence, timing becomes more important. If this plan is to work, you must be realistic about time. If you want to just do a mini-retirement, you probably want to plan time for finding a job again. If I were you I'd plan on coming back to work in a recession, and thus be extra careful, but that is just me. I'm a careful homeless man.
If your looking to do an adventure, you also have to know what that adventure looks like, so look into how you'd live, what it cost and guess a bit at how long you'd want to do it for. Create exit plans.
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| Horses are my jam man! I don't need a queen! |
my grandmother's house, we are evaluating cities and living conditions on the ground of some of these cities. Our plans are based upon webs of goals, an idea that was developed by Jacob Fisker's ERE.
Jacob has his 21 day make over. Frankly, if you treated it as a 21 week makeover it would still be a good plan, the point is to work on these sorts of elements. You need not adopt all of the elements nor do you need to assume that all the elements are as extreme as you can go. On day 1 he speaks of finding a place to live, an idea I've rejected and in day 2 he speaks of needing fewer bedrooms, yes I currently have none. However, his list is a good place to start. I too have a plan, however it was written cryptically for my own purposes and needs editing.
Money
Let's assume for the sake of argument your tired of your job and wish to travel. Let's assume your in your 30s and married. You have $0 dollars in the bank and $0 dollars invested in anything including property. Somehow you managed to have no student debt, meaning you have $0 saved but $0 debt. However, you have a standard american lifestyle. |
| Step right up. Pick a family, any family. (All rights trampled by google; I'm just documenting it!) |
You earn $40k a year and your SO earns $30k and you have one child. That totals $70k for 3 people. You spend $10k on your child care, $5k in clothing and food for your child, $10k on housing and utilities and $20k in cars/gas/insurance (brand new, fancy cars with a payment of $600 a month per car). You just need two cars in order to make everything work. You need to eat out several times a week and buy lots of alcohol just to deal with your life, spending a total of $20k in food/drink a year. In summary:
Child: $15k
Transport: $20k
Food: $20k
Housing: $10k
Total: $65k
Lets assume your job covers your health insurance and you never go to the doctor because your in your 30s. Generous assumption in my opinion. Oh and we forgot lawn mowing services and, and and and....
These are initial conditions. They allow this family to save $5k a year for a 7% savings rate. They can retire in 60 years, just after hell freezes over. If they were 20, they are retiring at 80! I hope they like working as Walmart greeters.
Lets start with a statement you won't believe. There are many people living on $7-15k per adult and $2-10k per child or less. So a family of 3 living off $20k is possible, but let us start with a few alternatives. In our example family, we have 3 people, two adults, lets start them lightly at $15k per person and assume they don't change anything regarding their child:
$30k + $15k = $45k.
This allows them to save 35%, a much improved savings rate. They can retired in approximately 25 years, assuming a 4% withdrawal rate. Given that many years, early retirement is really just a dream. However, to be meaningful it really must be 50% or higher. So they cut their expenses slightly to $10k per person.
$10k + $10k + $10k = $30k
That brings them up to a 57% savings rate. According to Networthify, given a 4% withdrawal rate, you can retire in about 13 years. Not doing too badly. What if they make it to that mythical $20k? They retire in 8 years. Not bad for a family with a child. Now I grant you that if you want to save for college, you might end up needing a bit more, maybe you work for 10 years. This all rests of the 4% withdrawal rate, a bit of a suspect value, but it illustrates a point. Lowering expenses has a substantial impact on savings rate and savings rate really impacts years until you accumulate a fair sum of money.
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| Creative Commons 2.5 License, He really is named Rich! |
Resources
Of course this is all an abstraction. How is it done? Well, I don't really want to recreate work done better than I have and with way more content. So allow me to give you a choose your own adventure style picking, with some advice advice around each.- Math wiz:
- I have an interest in actually knowing how this whole withdrawal rate works:
- https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/
- I have an interest in optimizing my taxes:
- https://www.madfientist.com/archives
- Generally Interested:
- I am a interested in an overview into the "FIRE" (Financially independent, retired early) movement.
- https://www.mrmoneymustache.com
- I am interested in investing without a lot of complexity.
- https://jlcollinsnh.com/category/stock-investing-series/
- Academically or Philosophically Oriented:
- ERE, the father of the whole FIRE movement is for you. This is where I spend much of my time. I find that ERE contains more theory, which can be adjusted to your own circumstance, rather than tip and tricks:
- https://wiki.earlyretirementextreme.com/wiki/21_Day_Makeover
- Book reader:
- The mother of the entire idea of living off your capital before traditional retirement age
- https://www.amazon.com/Your-Money-Life-Transforming-Relationship/dp/0143115766
- NOTE: I have never read this book, but I have listed to Vicki and enough people I trust have recommended her.
- Plant Lover:
- Permaculture
- https://en.wikipedia.org/wiki/Permaculture#Twelve_design_principles
- "It determines where these elements should be placed so they can provide maximum benefit to the local environment. Permaculture maximizes useful connections between components and synergy of the final design. The focus of permaculture, therefore, is not on each separate element, but rather on the relationships created among elements by the way they are placed together; the whole becomes greater than the sum of its parts. Permaculture design therefore seeks to minimize waste, human labor, and energy input by building systems, and maximizes benefits between design elements to achieve a high level of synergy." - From same wiki as referenced above.
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