Uncertainty….some thoughts.

I met a few friends for lunch recently and I was struct by the randomness of events that each one of us was going through…

  • Friend  1 developed kidney stones suddenly and spent a couple of painful hours in Emergency….just came back from a visit.
  • Friend 2 developed twitching on one side of the jaw and that was diagnosed to be a neurological condition….
  • Friend 3 experienced an unexpected job loss…we are trying to help out with job leads…
  • Last year and a half, I have experienced unexpected hospitalization, unexpected job loss and an unexpected crisis of confidence….so, I am not that behind 🙂

Some friends expressed the inability to forecast how the next 5-10 years will look like and how it was creating a lot of stress in their respective lives. Ironically, a similar pattern is what forced me to discover Financial Independence 🙂

That led me to think about Uncertainty about the future and its effect on Happiness today. I came to the sudden realization that the dramatic popularity of FIRE (Financial Independence and Early Retirement) over the last few years is directly proportional to the level of Uncertainty in the society as a whole. Let me think aloud on this a bit. Read on if you are interested!

What is Uncertainty?

There are many definitions of what Uncertainty is.

  • According to Merriam Webster dictionary, Uncertainty is defined as the quality or state of being uncertain.
  • According to probability theory, any event can have many possible outcomes. If the result of many of these outcomes cannot be predicted ahead of time OR worse yet, the outcomes itself cannot be predicted, then there is supposed to be Uncertainty.
  • I remember reading on a bumper sticker that the oldest emotion of man is fear and the strongest of the fears is the fear of unknown. Not sure who said it, but it seems right to me. When there are unknowns in our life, there is Uncertainty.

Uncertainties in life

Let us take me as an example. There are four main uncertainties that I can think of in my life.

  • Income uncertainty
    • I am in a profession where assuming income certainty does not exist. I got half a day notice to pack my bags and leave in my previous job.
    • Planning for the long term like buying a house, paying for college, saving for retirement, etc requires sustained income for atleast 15-20 years.
  • Health uncertainty
    • All the years spent slogging, both student years and work years, have taken their toll on my body. Another decade of stress and the certainty of failing health is guaranteed!
  • Family Relationships Uncertainty
    • Uncertainty of aged parents’ health on both mine and my wife’s side
    • Uncertainty of a vagabond life (moving to different rental houses) on kids and wife
  • Social Network Uncertainty
    • Social network includes family and friends whom I can count on in case of an emergency. The pressures of the HCOL area economy has driven a couple of close people out of town and out of state….some due to job loss and some due to high cost of living issues.

Priority of Uncertainties

Uncertainties about the future can eat away at the happiness. Not knowing all the outcomes and if the outcomes are known, not knowing the results can cause stress and anxiety. If I were to rank the uncertainties in the order of severity to me, here is what I came up with:

  • Severity High
    • Income Uncertainty
    • Health Uncertainty
  • Severity Medium
    • Family relationships Uncertainty
  • Severity Low
    • Social Network Uncertainty

Importance of Income Certainty

Achieving Income Certainty has an impact on all the other uncertainties. Take the example of a Government employee who has the most certain income situation I can think of. The size of the income is less important than the certainty of it is. With income certainty, I see the following advantages:

  • Improved health
    • When sustained income is assured, then long term decisions like housing, etc can be taken with less stress and anxiety.
    • Health uncertainty is reduced
  • More time to work on getting healthy
    • I have found that more uncertainty leads to working longer and harder to try and make the outcomes more certain…whether it be work OR relationships or something else.
    • More working leads to missing out on gym time, eating unhealthy food, etc
    • Income certainty to me would mean more time work on improving my health.
    • Health uncertainty is reduced
  • More time to spend with family and friends
    • When working longer and harder to overcome income uncertainty, time with family and friends is usually a casualty. When sustained income is assured, spending time with family and friends is is much easier.
    • I once went to a baseball game on a Thursday afternoon as part of a team outing from work and I found the train station overflowing with families. There was no standing room even in the station! I then realized that I had not gone to a baseball game in years and the station was packed on Thursday…a full blown working day!!
    • One person I met on that station many years ago was a post office worker. I saw a lot of happiness and joy in that man and he was the one who taught me the difference between the size of an income (small in his case) and the certainty of that income (high in his case).
    • Family relationships uncertainty and Social network uncertainty is reduced.

Conclusion

In the last two decades of my life, the uncertainty that has grown the most around me in Income Uncertainty. I used to hear about this topic rarely in social events…now it has reached me and my inner most circle of friends and families. I have seen family and friends go through it…and I have seen what devastation it can cause in life…divorces, bankruptcies, three kids and 2 adults in a 2 bedroom apartment, depression, etc etc

With so much income uncertainty, is it any surprise at the wave of populist movements sweeping across the entire developed world? With this background, is it any surprise that FIRE has taken hold in our society and across the world.

Life is meant to be enjoyed. Life with complete certainty is most probably boring. Uncertainties in life are supposed to be indicate exciting new possibilities….new places to visit, new people to meet, new adventures to experience. But, is all of this possible without Income Certainty? Does it take a certain kind of personality to live with Uncertainties but no income certainty?

I am so glad that I discovered FIRE and thanks to the education and support of the FIRE community, I am on my way towards income certainty 🙂

Advertisements

How much freedom did I buy today?

I was having a very tiring day today…a few tiring days actually and I was totally spent when I came home. I checked my blog emails and found some uplifting comments from readers of one of my blog posts. My spirits got recharged due to those comments. Thanks to Tristan (Dividends Down Under), Ambertreeleaves (ambertreeleaves) and Mister SLM. I decided to put my recharged spirits to good use and write a blog post that I have been thinking about sharing for quite a while. This is my way of paying my dues for the good karma that came my way today from the three wonderful people mentioned above.

Back in mid 2014, I defined what Financial Independence means to me in one of my very early blog posts (link). The plan definitely has changed a bit over the last two years. But, I have been executing this plan with all the motivation and money that I can muster

Along the way, I realized one profound motivational idea that I will share via this blog post. I have spreadsheets that track my monthly dividends going all the way back  a few years and in there, I track which of my monthly needs are funded fully by my current passive income.

One day, while updating that, I realized this profound motivational question. Every now and then, I have a rough day at work or at home and sometimes both 🙂 I keep myself motivated by asking myself this question: How much freedom did I buy today?

Here is my answer.

  • My Passive Income goal is
    • $4000 per month (Why $4000 pm?)
    • $48000 per year
    • $131.5 per day ($48K/365)
  • By end of this year, if all goes well, my monthly passive income will be $750 per month. This has come through a lot of sacrifices…both by me and my family.
  • How much freedom will $750 pm buy me?
    • $750/$131.5  =>  5.7 days per month => 136 hours per month => 4.38 hrs a day (31 day month)
  • To put this in perspective, here is the amount of freedom $750 pm of passive income will buy me:
    • 4.38 hours     of absolute freedom every day!
    • 5.7 days         of absolute freedom every month!
    • 68.4 days      of absolute freedom every year!
    • 2 months      of absolute freedom every year!

When I started working many many years ago, saving was defined as money that I did not spend. I was very aimless and had no idea of Financial Independence. Obviously, money vaporized like water. It took a nasty and depressing curve ball in life to start me on a search to something different and I ended up discovering Financial Independence by accident (my first blog post). Thanks to the wonderful world of FIRE bloggers, I found my “something different” i.e. Financial Independence and Early Retirement. Though, it is not going to be as early for me…but better late than never hey !!

The question that keeps me motivated and fills me with enormous drive is the question:

  • How much freedom did I buy today?
    • My answer is 4 hours a day. 
    • What is yours? 

Hope this question motivates you to keep striving for FIRE!

Live now vs Save for FIRE….

I read a wonderful article today written by my fellow Belgian FI blogger AmberTreeLeaves. The article of his title was “endless doubt on FIRE“. I was behind on my FI blogger reads and read it a week too late. But, the article was very thought provoking and I would really recommend a read.

Since there were already quite a few posts, commenting there was probably not going to be too helpful…hence this new post 🙂 Hope AmberTreeLeaves does not mind stealing an idea for a post from his blog!

That post by AmberTreeLeaves raised a conflict that I often had and continue to have within myself. One sentence from the post captures this conflict very well: The conflict is mainly between travel /live now and prepare FIRE.

I go through the same conflict in my mind….not just with travel, but also things like buying a car, etc. My parents sacrificed a lot in their present and postponed all their enjoyment to the future. And it did not end well. I went through some years where I did the opposite…living for the now..I guess I was running away from my parent’s philosophy. And when I discovered Financial Independence, I swung the other way….live for the future only and my family was none to happy about it 🙂

But, I have now come to a fair medium. I have come up with a decision framework that helps me rationalize live now OR live for the future vs the benefit I am getting. This has helped making sacrifices easier. Let me state two example cases.

  1. Lets assume a family vacation costs $5000 on average and hypothetically our family’s post tax take home salary is $60000. My requirement is that I want to have one vacation each for the next 10 years before my kids head out to college. So, I need roughly $50000 to fund all the vacations. $50000 adds one additional year to my family’s expected FI target. Considering that we will never get that many chances to spend time together as a family after kids head out to college, this addition is worth it to me.
  2. Now consider purchasing a new luxury car like some of my friends have. The car costs $80000 and after financing and maintenance costs, it can rise up to $90000 at least…yes, I could not believe it 🙂 With the same post-tax family salary of $50000 per year, it would add almost 2 years to my expected FI target. For me, getting freedom 2 years earlier is more important than driving a luxury car. Don’t get me wrong…I like the cars…I have sat in them and I think they are awesome….but not awesome enough compared to achieving freedom 2 years earlier…for me.

I am trying to apply this framework for every major decision…it had helped me rationalize family vacations and buying a new car. Next is applying this for buying a home. I am curious how do others deal with this conflict. Lemme know your thoughts please.

And once again, thanks to AmberTreeLeaves for a wonderful and thought provoking post. It took me back in time to a period when I learnt some important lessons.

DIGIT savings….2015 year end update

In February of this year (2015), I stumbled on a new way to save some additional money. That new way was called DIGIT…my first post on DIGIT is here. It is a new way of squeezing out some extra cash from my bank account. My goal was to squeeze some leftover money after accounting for all the budgeted categories (expenses, savings and investment goals). Every time the DIGIT savings account accumulated to a couple hundred bucks, my plan was to withdraw it and apply towards my Financial Independence goals….more specifically, my home down payment fund. I had a few monthly updates that  I wrote about here here. But, once the savings picked up steam and became regular, I stopped the monthly updates….why bore people hey 😉

That said, this is the end of year 2015 already. So, how well did DIGIT save money for me this year?

  • $184.34        Dec
  • $440.51        Oct + Nov
  • $280             September
  • $302.06       August
  • $654.03        July
  • $296.64       June
  • $161.86        May
  • $238.29       April
  • $2692.51     Total for 2015

The amazing thing is that this is money, all $2692.51 of it, that I did not know I could save! In fact, I am pretty sure I would have spent it on something if it were to remain in my checking account. This is almost $2600 towards my home down payment fund without as much as batting an eyelid.

DIGIT savings is an opportunistic savings vehicle for me…in addition to my planned monthly savings towards home down payment. I am really glad I signed up for DIGIT in 2015 and will continue for the next year as well!

PS: If you want to sign up and try it out, go directly to Digit’s website here at https://digit.co/

Link to Yahoo Article: http://finance.yahoo.com/news/29-old-invented-painless-way-170000170.html

DIGIT savings….Month 4 update

I started using DIGIT, a new way of squeezing out some extra cash from my bank account, four months ago. I wrote about it here. My goal was to squeeze some leftover money after accounting for all the budgeted categories (expenses, savings and investment goals). Every time the savings account accumulates to a couple hundred bucks, my plan was to withdraw it and apply towards my Financial Independence goals….more specifically, my home down payment fund.

That said, how well did DIGIT save money for me in June?

  • For the month of June 2015, DIGIT squirreled away 226.64 from my bank account.
    • This is 226.64 that I would have spent on something less important than my financial independence goals.
    • Every month, DIGIT is getting more aggressive and squeezing out all the extra fat from my account…way to go!
  • Since signup, DIGIT has saved me $748.50.
    • If money is saved at the same rate for the rest of the year, I will have $1000 (!!) added to my down payment money…this is money I did not know I could save. So, go DIGIT!

But, where is the saved money going? About a month back, I wrote about my plan to benefit from the next recession here. My plan is to buy a house at a price less than the bubblicious prices prevalent in my HCOL area today. So, at the end of every month, the money DIGIT saves for me moves to my home downpayment fund. DIGIT savings is an opportunistic saving for me…apart from the planned savings towards home down payment. I will take the money however I can save it 🙂

PS: If you want to sign up and try it out, go directly to Digit’s website here at https://digit.co/

If you do sign up at all, please do share your experiences, positive OR negative, via comments on this page. I would love to hear from you on how this works out.

Link to Yahoo Article: http://finance.yahoo.com/news/29-old-invented-painless-way-170000170.html

When you have total control of time, you feel wealthy!

The month of June was a difficult one for me and I re-learnt an important lesson. There was a perfect storm of difficulties i.e. both professional and personal difficulties arriving at the same time and creating havoc.

  • Professionally, my company had a layoff…it was a stressful week while all of this was happening as the laid off folks were not announced at the same time. Fortunately I was not affected, but a friend and colleague was. It left a bad taste in my mouth. Nothing to compare what my friend was going through, but I have been around a few layoffs in my career and it leaves more disgust in its wake each time. My mind was yearning for freedom from all of this for many days. What this event made clear is that the path I am on right now i.e. the path of achieving Financial Independence, is the best choice I could have ever made.
  • Personally, there was a family emergency that forced me to travel across the country and away from my office at the critical time of layoffs. The issue took a week to resolve itself and the resolution was mostly positive. But, while I was spending time out there, my mind kept coming back to my work and the layoff scenario. I know that is really lame, but I kept wishing I had the freedom to spend some more time taking care of the family issue rather than coming back after a week or so.

On my path to Financial Independence, I am learning a lot from my experiences and in a bigger way from all the smart people who share experiences from their financial independence journey. And somehow along the way, my journey has focused mostly on financial goals. Yes, finance is a great part of achieving financial independence, but I think I forgot the true underlying reason to reach for Financial Independence. I would like those who are reading this to pause and rethink the reasons for their FI journey. Anyways, my real reason is hinted in the title of this post, which is a total steal from some wise person. I just do not remember whom to make a proper attribution to….my apologies for this.

True financial independence is not only about having enough money, but it is also about having total control of your time. It is the ability to spend time as you wish and when you wish it. I remember some wise soul saying that everything in life is about trading money for time OR vice versa. FI is about trading money for time i.e. building enough FU money (link below) to be able to gain control of our time in life. The amount of money needed for FI may be different for each person, but once achieved, you have control of how to spend your time and that is being wealthy. While I was waiting for the family situation to resolve itself, I re-learnt this important feeling of wealth. Thanks to June 2015.

PS: I am behind on some of my blog updates and replies to some wonderful comments. My apologies for that along with my promise to get back to them soon.

Links

DIGIT savings….Month 3 update

I started using DIGIT, a new way of squeezing out some extra cash from my bank account, three months ago. I wrote about it here. My goal was to squeeze some leftover money after accounting for all the budgeted categories (expenses, savings and investment goals). Every time the savings account accumulates to a couple hundred bucks, my plan was to withdraw it and apply towards my Financial Independence goals….more specifically, my home down payment fund.

That said, how well did DIGIT save money for me in May?

  • For the month of May 2015, DIGIT has squirreled away 161.86 from my bank account.
    • This is 161.86 that I would have spent on something less important than my financial independence goals.
  • Since signup, DIGIT has saved me $521.86.
    • If money is saved at the same rate for the rest of the year, I will have $1000 (!!) added to my down payment money…this is money I did not know I could save. So, go DIGIT!

But, where is the saved money going? About a month back, I wrote about my plan to benefit from the next recession here. My plan is to buy a house at a price less than the bubblicious prices prevalent in my HCOL area today. So, at the end of every month, the money DIGIT saves for me moves to my home downpayment fund. DIGIT savings is an opportunistic saving for me…apart from the planned savings towards home down payment. I will take the money however I can save it 🙂

PS: If you want to sign up and try it out, go directly to Digit’s website here at https://digit.co/

If you do sign up at all, please do share your experiences, positive OR negative, via comments on this page. I would love to hear from you on how this works out.

Link to Yahoo Article: http://finance.yahoo.com/news/29-old-invented-painless-way-170000170.html

DIGIT savings….Month 2 update

I started using DIGIT, a new way of squeezing out some extra cash from my bank account, two months ago. I wrote about it here. My goal was to squeeze some leftover money after accounting for all the budgeted categories (expenses, savings and investment goals). Every time the savings account accumulates to a couple hundred bucks, my plan was to withdraw it and apply towards my Financial Independence goals….more specifically, my home down payment fund.

That said, how well did DIGIT save money for me in April? Quite well in fact. For the month of April 2015, DIGIT has squirreled away 238.29 from my bank account. I got a tax refund that I was a bit lazy in moving towards a goal. DIGIT pounced on it and increased the savings rate automatically. This is good in two ways for me:

  • This is 238.29 I did know I could live without and
  • This is 238.29 that I would have spent on something less important than my financial independence goals.

Since signup, DIGIT has saved me $360….this is money I did not know I could save. So, go DIGIT!

But, where is the saved money going? About a month back, I wrote about my plan to benefit from the next recession here. My plan is to buy a house at a price less than the bubblicious prices prevalent in my HCOL area today. So, at the end of every month, the money DIGIT saves for me moves to my home downpayment fund. DIGIT savings is an opportunistic saving for me…apart from the planned savings towards all my goals, including home down payment. I will take money however I can save it 🙂

PS: If you want to sign up and try it out, go directly to Digit’s website here at https://digit.co/

If you do sign up at all, please do share your experiences, positive OR negative, via comments on this page. I would love to hear from you on how this works out.

Link to Yahoo Article: http://finance.yahoo.com/news/29-old-invented-painless-way-170000170.html

DIGIT savings….Month 1 update

I started using DIGIT, a new way of squeezing out some extra cash from my bank account, exactly a month ago. I wrote about it here. My goal was to squeeze some leftover money after accounting for all the budgeted categories (expenses, savings and investment goals). Every time the savings account accumulates to a couple hundred bucks, my plan was to withdraw it and apply towards my Financial Independence goals.

That said, how is DIGIT doing? Very well 🙂

As of today, DIGIT has squirreled away $106 from my bank account. It started slower than I originally anticipated, but it seems to be learning fast and squeezing more money out of my account. This is good in two ways for me:

  • This is $106 I did know I could live without and
  • This is $106 that I would have spent on something less important than my financial independence goals.

So, go DIGIT! By next DIGIT update, I will talk about how I used this money towards my financial independence goals.

 

PS: If you want to sign up and try it out, go directly to Digit’s website here at https://digit.co/

If you do sign up at all, please do share your experiences, positive OR negative, via comments on this page. I would love to hear from you on how this works out.

Link to Yahoo Article: http://finance.yahoo.com/news/29-old-invented-painless-way-170000170.html

Adversity: Forge a Meaning, Build an Identity.

All of us face adversity many times in our lives. Some adversity we are forced to go through, some adversity we try to avoid using many many ingenious ways. But, we all surely face adversity. Is there any benefit from adversity? Is it useful at all? I have often read that adversity will forge your character. During my own times of adversity, believe me I have had a few tough ones and will have some for the rest of my life, I do not think about character building….but I have always asked one question: what is the meaning of life? Is this adversity supposed to help me find meaning in some way?

Towards that end, I recently came across a wonderful talk on TED…a website with some wonderful talks by an amazing set of people.  This talk is from a person named Andrew Solomon, whom I had not heard about before this talk. The talk was titled “How the worst moments in our lives make us who we are“. The main thesis in the talk was to use Adversity to Forge a Meaning and hence Build an Identity. The examples given in that talk explains the thesis so beautifully that I felt it would benefit others as well. It is amazing how some people can frame the problem and the solutions so beautifully that it is beneficial to lots of others who do not have that gift. The talk is about 21 mts and worth every minute of it.

Hope it benefits all who watch it.