Investing – Just One More Year! One couple's story of escaping 9 to 5 until 65 Fri, 15 Jul 2016 13:52:47 +0000 en-US hourly 1 The Beginning of The Banker’s Battle Tue, 03 Nov 2015 00:15:45 +0000 Folks, today we have a very special guest post from ARB.  He is taking the blogging microphone today as I am enjoying some R & R on the beaches of Florida with my friend Billy.  I highly recommend you check out his  site and subscribe to his new posts, discovering the challenges and life of […]

The post The Beginning of The Banker’s Battle appeared first on Just One More Year!.

Folks, today we have a very special guest post from ARB.  He is taking the blogging microphone today as I am enjoying some R & R on the beaches of Florida with my friend Billy.  I highly recommend you check out his  site and subscribe to his new posts, discovering the challenges and life of a retail banker from his perspective.  It is a blast to read his articles (especially the rants), I can really appreciate his sense of humor and writing style.  ARB will be sharing his PF journey with us today. Enjoy!

Blog Guest Post
Blog Guest Post

Raargh!!! I am ARB, the Angry Retail Banker!

Over on my blog, I offer An Insider’s Take On Retail Banking. Translated into non-slogan, that means that I offer insights on how best to manage your bank account (and the money in them), as well as tell my experiences working in retail banking and dealing with the customers.

For example, I recently spoke about where the best place to order checks is. Sometime before that, I detailed my encounter a very nasty customer who is probably only alive today because I would never survive prison.

I speak a lot about the horrors of retail banking and the perils of customer service. As you can see, it makes me angry. But it’s not just my specific job that does it to me.

It’s the very concept of work.

I don’t live in Westoros, but winter is still coming. And the last thing that I want to do today, this month, or for the next 35+ years of my life is stand outside in the freezing cold waiting for a bus to shuttle me (and a bunch of other human cattle) off to deal with unruly customers and unpleasant meetings about new rules and sales quotas. Or to be a modern day slave like Boot, forced to wash his boss’s car and pick up his dry cleaning with a smile on his face, lest his almighty employer take away his one source of income and only means of providing for himself.

I don’t like the idea of spending my life in the figurative salt mines for peanuts, barely covering my expenses and keeping my head above water while employers and landlords reap the rewards of my labor.

So I’ve decided to leave this path that we all find ourselves on and take a different journey. A journey away from the darkness of wage slavery towards the light of financial freedom.

And I’m going to hijack Bryan’s blog as a platform to do so. What’s his, I’ve declared mine. Don’t tell him.

THIS is the new face of Just One More Year now
THIS is the new face of Just One More Year now

[Photo courtesy of]

What Is Financial Freedom?

Is financial freedom something I have to define here? Probably not, but I’ll do it anyway in case a newcomer pops in and accuses me of not being inclusive (work in retail and you’ll hear nonsensical complaints about everything).

There are many interpretations of financial freedom and many more on when someone has achieved it or not. But it is generally described as having enough passive income that you can cover all your expenses without working for an employer.

Wikipedia describes it thusly:

Financial independence is generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses. For example, a person’s quarterly expenses may total $4000. They receive dividends from stocks they have previously purchased totaling $5,000 quarterly, while also having more money in other assets. Under these circumstances, a person is financially independent.

        Having money come in from your assets? We call that “passive income”.

Active Income Vs Passive Income

I’m sure all the personal finance veterans on here know the difference, but this is my guest post so I can talk about whatever I want. Nyah nyah.

Anyway, active income is defined as trading your time for dollars on a 1:1 ratio, in a sense. You get paid one time for the work that you do. You want to get paid again? You’ve got to work more.

Your day job is the ur-example of active income. You work forty hours and your employer cuts you a paycheck for that time. Then you do it again. And again. And again. You stop working? You stop getting paid.

Active income sucks. Only “entrepreneurial” masochists defend active income. Should they try to convince you that active income does not suck, report them to the nearest reputable personal finance blogger immediately. They are considered armed and dangerous.

Their weapon of choice is the Protestant Work Ethic

Their weapon of choice is the Protestant Work Ethic

[Photo courtesy of Grant Wood and Wikipedia]

Passive income is defined as income that is worked for one time, after which the money continues to come in without your involvement.

Dividend income from stock investing is a perfect example. You purchase the stock, and it continues to pay you a dividend for as long as you own it. What do you have to do past that in order to receive the dividends? Nothing!

Blogs such as Angry Retail Banker and Just One More Year are also passive income in action. Is it hard work? Oh yeah. But once an article is written, it will be there on the Internet forever. As people click on ads and buy products through affiliate links, the blog owner makes money from the article. Once the article is written and posted, the blog owner technically doesn’t have to do anything going forward to receive a permanent stream of income from it.

Bryan talks about how important it is to create a passive income stream and I am not going to repeat it all here (tl;dr: “very”). But it is the secret to escaping the world of work and reclaiming your freedom.

And it is in the last couple of years that I have been traveling down this road.

My Journey To Financial Freedom

The prologue

It’s only been a couple years since I started on my FIRE journey.

For most years, I was a teller. Customers were crazy. People would sooner see me unemployed and living on the street than to show ID at the bank for a withdrawal. Yes, you have to show ID when you withdraw money. What moron (and if you argue that it shouldn’t be the case, you are objectively a moron) would think that you wouldn’t?

For many years, I thought this was the only path. I accepted the story that we hear from mainstream society every day. You know the story. You don’t just hear it every day, you live it.

Get up early and go to work. You must work at least 40 hours a week if you want to make it a decent living. Make your customers happy, make your sales. Perform well and you could get a raise, maybe even a promotion. Live the brand at all times (remember, even outside of work, you are a representative of XYZ Corporation). Remember to buy fancy things. Go into debt for them. Never let the neighbors have a fancier house or nicer car than you do. Finally retire a few years shy of the age of 70.

My dad always used to make a joke when I would tell him about a horrible day I had at work, “Don’t worry, ARB. You’ve only got another forty years until you retire.”

I passively accepted that as the reality of our cruel world like everyone else, but something always struck me as off on that. Is that really the best we as a people can come up with? According to a 2013 Gallup survey, 70% of Americans don’t like their jobs. 70% of people show up to places that they’d kill a hobo with their bare hands if it meant avoiding the place, and the best we could all do as a people is shrug our shoulders and Oh Well the whole thing?

America, I am disappointed in you.

You sit in the corner and think about what you've done. And don't you DARE let me catch you bombing Syria again
You sit in the corner and think about what you’ve done. And don’t you DARE let me catch you bombing Syria again

[Photo courtesy of]

I became disillusioned with the American way the more and more I worked. This went on for years. But I remember about two years ago when I had my “a-ha” moment.

The straw that broke the camel’s back

It was at my current bank and I was still relatively new to the platform at the time. Not so new that I didn’t know what I was doing, but new enough to still make some pretty big mistakes or allow tough customers to rattle me and take control of the conversation.

I had opened a business account for a man who operated a laundromat. Cool, I need business accounts if I want to make my ridiculous sales goals.

Two days later, I’m called into my assistant manager’s office. She can’t figure out for the life of her why I would open this account.

I thought I had taken all the business paperwork (I had the list of documents shown to me once or twice, but I never trained on how to quickly read them and pick out what needed to be picked out). It turns out I needed proof of address for the business as well, despite the fact that the address was on all the formation documents. This was new to me and was never an issue before, but somehow I was supposed to divine this requirement based on the situation.

Also, the business was out of state. Which means my manager or assistant manager would have to do a site visit to another state. Why couldn’t we just have another branch in that area do it for us? We do site visits for other branches all the time. No clue.

If you’re wondering, he opened the account in our branch because he lives in the neighborhood. The business was registered in the other state because it is located in the other state.

Also, she asked me if I had verified the business on Google Maps. No, I had not.

When we open up business accounts, we verify its location using Google Street View. God, I hate that. We’re supposed to do it when the customer is in front of us too. Now, what we do when what we see doesn’t mesh with what you’re telling us depends on the situation, but it’s a very unpleasant conversation when your manager tells you to tell a customer that we can’t open the account because he doesn’t have a visible sign on his business.

Well, there was a laundromat, but the sign was for a different business. Of course. Why the hell not?

And then—yeah, there’s more—she asked me why I didn’t ask a supervisor before opening an account for a laundromat.

Why does that even matter, you ask? Because they are a coin-intensive business, which can be very burdensome to a bank. I’ve seen vending machine operators with bags of hundreds of dollars of rolled coin that we would have to ship out. It’s quite a huge pain.

But I didn’t know that it required management approval. Nobody told me that. Again, I was supposed to divine it.

So I was tasked on getting this guy into the branch with proof of address for his business. After having a whole debate with me over the phone over why he needed to bring in proof of address and what counted as proof of address and how no other bank needed proof of address and all that other crap, he said he could produce the lease, which was recent and had the name of the business, the address, and the date it was signed and notarized.

He brought it in the next morning. That same afternoon, I had to call him back to tell him that the bank doesn’t accept leases as proof of address. Why? I have no idea.

I had off the next day. I had been told that if the assistant manager was unable to get the information from the customer, she’d have to bump it to the branch manager who would have to have a sit down with me when I got back.

The exact moment something inside me clicked was when, during that day off, I was walking to the gym. The Angry Retail Banker needed some stress relief, as this was very much on my mind. I was running through different scenarios in my head, preparing different answers to whatever questions were going to be thrown at me.

Then I stopped.

What the hell was I doing!?

I was making roughly $30,000/year in one of the most expensive cities in the country. It was my day off from work. And there I was, stressing out about the legitimacy of a laundromat in a town I’d never heard of in another friggin’ state!?

            What in the holy goddamn H-E-double golf clubs is up with that!?

That was the moment I said to myself, “I’m not doing this for the rest of my life. I have better things to do.”

And since then?

That was over two years ago. I didn’t quite catch on to the concept of passive income until I started reading My Money Design and I wasn’t convinced of the power of dividend growth investing until I started reading Dividend Mantra. The former taught me what passive income was, the latter showed me the power of dividend growth investing and how it would make the perfect primary source of passive income.

A third website, Great Passive Income Ideas, was instrumental in convincing me to start a blog (that and My Money Design). This page was essentially the place where Angry Retail Banker was conceived, at least in my mind. It was after reading this guide that I decided to go ahead and do it.

I had decided that I didn’t want to do retail banking for that much longer, but the problem was that every job that paid well was a stress-filled nightmare. I looked at what the managers did and I looked at mortgage reps and licensed brokers and I didn’t want to deal with that. I wanted the money, but I didn’t want to work.

Call me a lazy, entitled Millennial, but that’s how I feel now. I want to make money, but I just don’t want to have to do any work.

From that mentality and the discovery of the power of passive income, a goal was formed. I wanted to achieve financial freedom by the age of 35.

And how’s that been working out for you?

Meh. Tough to say. I’m only a little less than two years into my financial journey. I set the bar really high; I just turned 30 this year. I’m pretty much looking to have a truckload of self-sustainable passive income streams delivered straight to my door.

Preferably with my well-equipped ARB-mobile
Preferably with my well-equipped ARB-mobile

[Photo courtesy of Bryan at]

But I’m not letting myself get discouraged. I figure it’s about time I aimed high for something and saw it through to the end.

But how does one stay motivated throughout the journey to financial freedom? We live in the societal version of a casino, surrounded by flashing lights and little sound effects that entice us to throw our money away. We gamble rather than invest; 53% of Americans purchased a lottery ticket in the past year. We pride stuff over everything else. The opportunity for lifestyle inflation is the reason we get better jobs.

            Staying motivated is actually easier than you’d think. At least for me.

Unlike others, I have no interest in owning a fancy car. Or a big house. Or the latest smartphone (I’ll upgrade when I need to). So I have no problem saving money.

What I want instead is to be free of having to deal with annoying, rude, hostile customers. To be free of arbitrary rules that force me into emotional labor, which is more responsible for the high levels of anxiety and depression my generation faces than smartphones and tablets could ever be (sorry, Baby Boomers and up, but technology isn’t isolating us).

So then how do I stay motivated to reach financial freedom at an early age and escape the need to go to work? Easy! By having crappy days at work!

Getting the lowest mystery shop grade in the history of your branch will definitely motivate you to develop those passive income streams, and I’ll definitely tell you that bank mystery shopping is going to make me scream until my voice gives out. That is, if saying my customer’s names over and over and over and over again in order to avoid that failing grade doesn’t drive me to murder. Speaking of things that warrant a 911 call, if you want motivation to leave the world of work, just have a situation where you have to call the police on a customer.

Having a stressful low paying job—and seeing nothing but stressful and/or low paying jobs out there—will certainly motivate you to replace your job income with passive income.

Advice for your journey

Advice!? Now I’m a self-help hotline? I hope everybody’s going to become regular readers of my blog and compete for the title of “ARB’s Biggest Fan” and do your parts to maximize my blogging income. What did I say before about me not being interested in doing any work?

Fine. How’s about this for advice?

Start early.

All jokes aside, I cannot emphasize this enough. Start early.

Compounding is what makes everything work. Whether we are talking about dividend income and reinvesting them, your website’s exposure causing you to get more readers causing you to get more exposure causing you to get more readers, or using the proceeds of P2P lending to lend out more money to more people, compounding is what makes all your efforts to build passive income something that can replace your day job.

But compounding takes time. It can take a few years for those dividends to build up. It can take a few years to learn how to really market your blog. It can take a few years to learn how to manage properties.

Expect your transition from full reliance on active income to full reliance on passive income to take a decade if you’re lucky (why I’m trying to do it in half as much time is a mystery that still eludes me to this day).

Start early.

You don’t want your “early retirement” to be when you’re 55. That’s not early retirement. That’s like being scheduled to work until 5:00, getting out at 4:53, and claiming you got out early. No you didn’t.

Bryan’s comment:  For someone like myself in his early fifties, I consider retiring at 55 as being early.  The new retirement age has become 67 based on the need for most to collect their full Social Security.  If we do the quick math and say that, we start working at 22 out of college and work for 45 years, then a 55-year-old escaped 12 years early.  Using the 9-5 work schedule that says if you retire at 55, you leave work at 2:31 PM, while Dianne will be leaving work shortly after lunch at 1:29 PM.  This “early retirement” is better than the standard 5 PM quitting time to me.

You want to retire in your thirties. And it won’t happen unless you start early.

It doesn’t matter if you become a blogger, an investor, a landlord, or whatever else. Hell, just even doubling your 401k contributions can make a huge deal. Just start early.

If I could change one thing about my fight for financial freedom, it would be that. I would have started earlier than the age of 28. Much earlier.


So that, dear readers of Just One More Year, is the story of my journey towards financial freedom.

Pretty lengthy for one still in its infancy, I know.

I’m hoping that I’m not the only one here on a passive income journey. Most of us are personal finance bloggers and/or enthusiasts who are all realizing that the traditional method of retirement is a crock and that we must walk a different journey. We all got our starts in different ways. Me by stressing over a laundromat located in another state, Bryan by being sold an investment property by his father and finding himself making mortgage payments at the age of 16.

But our efforts—our journeys—all end at the same place.

Financial freedom.

Thanks, Bryan, for letting me guest post on your blog. And thanks to all his readers for reading this lengthy tome in full. Be sure to subscribe to my blog for an insider’s look at retail banking as well as to watch me go off the deep end for every single negative customer interaction I have. Be sure to follow me on Twitter as well.

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Rental Properties: How I Got Started Fri, 23 Oct 2015 00:15:12 +0000 Both personally and financially, my involvement with real estate has been an important aspect of my life. My first home was an investment property that I acquired in my late teens in a rather unusual manner. I certainly was not planning to buy a rental property at an early age, yet a serendipitous chain of […]

The post Rental Properties: How I Got Started appeared first on Just One More Year!.

Both personally and financially, my involvement with real estate has been an important aspect of my life. My first home was an investment property that I acquired in my late teens in a rather unusual manner. I certainly was not planning to buy a rental property at an early age, yet a serendipitous chain of events changed the course of my life. This is my opportunity to share the experience of residential rental properties and describe my humble beginnings, having had no prior knowledge of how to run this kind of business.

Rental Properties
Rental Properties

In our seven steps to reach FI and retirement, Step 2: Create a Passive Income Stream, is one of our most-read articles. It has generated many comments and emails on the subject of rental properties. It’s time to describe how my initial interest in rental properties developed and take a closer look at my first home purchase. This is not your typical approach to investing in rental properties.

My mother was a renter, not a property owner

My parents married at a young age and I was born in the first year of their marriage. A short two years later, my brother was born. Unfortunately, after six years my parents divorced. It was a difficult upbringing, with my mother raising my brother and me on very little income with virtually no support from my father. We moved every few years to find a better school or location to live. Each time, my mother was barely able to afford the rent. She worked two jobs for many years to make ends meet.

We would visit my father occasionally. My mother remarried seven years after the divorce, and my stepfather became the primary influence in my life moving forward.

However, in my early teens I spent time with my father, working in his woodshop on home improvement projects. I had a real interest and aptitude for working with my hands and woodworking.

The real estate market tumbled and interest rates spiked

My father was a “natural” at putting together deals. He became a successful realtor and joined forces with two partners to form a construction company. They operated this southern Colorado business in the early ’70s and were successful. They built many homes as well as some commercial buildings.

When I was 16, I began working on one of the construction crews during my summer break from high school. I started at the “grunt” level, cleaning building sites and running various errands. The following summer, I worked my way one level up to the “bottom” of the framing crew and new construction duties were assigned to me.

The construction business experienced a downturn when the housing market and economy tanked. This was at a time when the company had nearly fifty new homes for sale. This primary cause of the change to the economy was the Saudi oil embargo, the resulting gas crisis, and home mortgage interest rates hitting levels as high as 18%.

The construction company had difficulty selling any of their houses and quickly faced cash flow issues. It needed to generate cash to pay the construction loan interest and cover employee payroll. The company crews were cut in half in an effort to keep the business going.

My humble start with rental properties

Each of the construction partners in this company had several children. They ranged in ages from ten up to the mid-twenties. Since the partners had been good friends before creating their business, I knew all of them.

I believe my dad one day brainstormed an idea with the other partners, to sell a home to each of the children—setting it up as a passive income business from the start and teaching each child how to manage rental properties. They went with the idea and sold eight houses, giving each child a foundation for his or her own business. (For the younger children, their fathers managed the properties until their kids could drive and take over for themselves.) This became a great opportunity for my dad to immerse me in the rental properties business.

When I wasn’t working in construction during the summer, I worked at a local fast food restaurant the rest of the year. At age 16, making $3 an hour flipping burgers, I suddenly had a $304 month mortgage payment. (I legally could not own the property until age 18, therefore it required my dad to co-sign for the mortgage.) I was responsible for keeping the place rented, in good condition, repaired when needed, and for paying all the bills.

If you do not like real estate, all you have to do is make hamburgers, build a business around that hamburger, and franchise it.” –Robert Kiyosaki

Talk about motivation—the mortgage was more than I made from my part-time job in a month! That was a 100% debt-to-income ratio. I could not afford to allow the property to remain vacant. This was my start into the cycle of debt that, more than 35 years later, I have nearly completed.

A high-level review of my first rental property numbers

This was not a typical way to buy a property. However, I would like to share the income and expenses I incurred during my initial learning experience with rental properties. The good news is that I bought the brand new home at construction cost (at least that is what I was told) and I enjoyed years of maintenance-free ownership.

Here is a quick breakdown of the numbers I could find or remember:

  • Purchased for $36,500 and sold ten years later for $46,900 before commission.
  • $350 per month rent in the beginning and up to $400 at the end.
  • A 100% financed mortgage with a payment of $304 with about a 10% interest rate. I never did refinance this property—or would have qualified, for that matter.
  • Taxes and insurance around $50 per month.
  • Repairs, maintenance, and improvements about $3,500 total over ten years.
  • Cash flow of about $46 loss per month. Once the rent was raised to $400, it was breakeven before tax.
  • I captured a tax loss each year but, due to my low earnings, I had little income to shelter.
  • An estimated $11K net profit from my quick “back of the napkin” analysis.
  • The property was most recently sold in 2011 for $113,000.

What I learned from my first rental property experience

Our original goal with the Just One More Year blog was to talk about personal finance issues with a slant toward building passive income with rental properties. It is amazing that, with nearly 50 articles to date, I have barely touched on this subject, with only one article. I plan to go much deeper in future articles, the next one describing the purchase of my second property about 20 years ago.

I learned some valuable lessons with my first property.

The rent is not actually “paid” until the check clears the bank. (ARB  can give you some background on banking and how the rules have changes over the years.) I was relying on the tenants paying their $350 rent so I could cover my $304 mortgage payment. I operated with little reserve in my business checking, expecting the rent to be deposited. When it was not, I had several mortgage checks bounce. I had several tenants’ rent checks returned due to insufficient funds. Finally, I was late several times on my mortgage payments and paid the resulting late charges.

Advice:            Have a reserve to float a couple of months or more.

When you own a rental property, you are the boss. You are also the repair person, rent collector, painter, gardener, and rental and business manager. It requires work. The more sweat equity you put into the property, the fewer expenses you’ll have and the more profit you’ll make. It was also an invaluable experience to learn how to find new tenants, what to ask them, how to write a lease, and finally how to manage the books.

Advice:            Do everything possible yourself to understand how the business operates. You will end up earning the real-world equivalent of an advanced degree in property management.

Tenants don’t always tell you the truth. Mean people suck! A couple fellow rental property owners and I have shared war stories over the years. Granted, I have had many excellent tenants, some of them for nearly 20 years. But early on, I believed that every tenant would do what he or she promised. After many years of disappointment, these days I take a “wait and see” approach.

Advice:            Expect the best from people; however, let them earn your trust by repeatedly delivering on their word. You won’t really know how good a tenant is until the lease ends—then you can look at the payment history, take into account whether proper notice was given before moving out, and have a look at how well (or not) the tenant took care of the rental property.

This is my “thank you” to my dad for giving me my start and education in the business. He passed away three years ago.


This was a great learning experience for me—some of the lessons learned through the school of hard knocks. I learned new skills such as bookkeeping, writing and reviewing rental agreements, advertising, repairs, maintenance, banking, working with vendors, taxes, mortgages and using OPM. Those early skills developed the foundation for my professional career with employers as well as buying and managing the rental properties we own today.

This background story explains how I became accustomed early in life to owning homes and doing as much of the work as possible myself. Eight years later, I began buying rental properties again—ironically in the same city, even though I was living out of state. I have not left the rental properties business since.

The intention of this article was to show how I started with my first rental property. You might agree that it was a great opportunity for me in the unusual way I entered the business. I had no real concept of how to manage a property before that time. This is not the approach I would recommend for those people interested in building a business of rental properties as a passive income stream. The recommended due diligence and analysis will be reserved for future articles, beginning with the next step in the journey: purchasing my second rental property.


Do you own a rental property? If so, do you have some experiences to share in terms of running the business? If you don’t own a rental property, what is the primary reason?

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Step 2: Create a Passive Income Stream Fri, 07 Aug 2015 00:07:13 +0000 This article is the second in a series of seven that will discuss what it takes to reach financial independence. If you have not already read the first step, which covers budgeting, please take a minute to visit that post. This article will outline why you should create a passive income stream. When I first […]

The post Step 2: Create a Passive Income Stream appeared first on Just One More Year!.

This article is the second in a series of seven that will discuss what it takes to reach financial independence. If you have not already read the first step, which covers budgeting, please take a minute to visit that post. This article will outline why you should create a passive income stream.

Passive income ideas
Passive income ideas

When I first started my career, it became apparent that I had many working years ahead of me. I had early dreams of becoming a millionaire by age 21 and living the rockstar lifestyle of the rich and famous. I soon discovered that I would have a long wait, if relying solely on my paycheck, before I could afford my desired standard of living. I realized that I needed to create another way to earn money to pay for this dream.

I was very industrious in my younger days—mowing lawns, shoveling snow, doing odd jobs, and running a paper route for a while. I embraced the concept of improving my lifestyle. Of course, I opened up a lemonade stand a couple times during summer vacations. In my early teens, I learned how to drive by working on an 80-acre ranch doing odd jobs, feeding horses, and occasionally plowing a field.

These childhood and teenage experiences had an impact on me. Some of my mentors encouraged me to save and invest, and introduced me to real estate. I did not know then how much impact these early passive income investments would have on the direction of my life. 

Retirement from the day job could take some time

Once I discovered that my career “working for the man” could span forty years, I began to think that there had to be a better way to become financially independent. I needed to create a better plan.

It was time to make some changes. I took on roommates and a second job. I began to save even more money for my investments.

I was not afraid of doing hard work. When I was in my mid-teens, a family friend and mentor imparted some sage advice. He told me this:

“The more you use your brain and the less you use your back, the more money you will end up making.”

I was fortunate that I had some great role models in my youth who taught me the concept of working efficiently and thinking creatively, crafting better methods of getting work completed. One told me not to “make a career” out of accomplishing the task at hand, but rather to get it done quickly and efficiently.


We all need to save and invest to retire

I mentioned the importance of monitoring your expenses and saving in Step 1. This is a critical piece to control, that will have a direct impact on your ability to reach financial independence.

There has been a growing community of very frugal-minded people who are attempting to save 50% to 75% of their income. This concept did not really make an impact on my strategy until about six years ago. I discovered blogs like Early Retirement Extreme and read books like Your Money or Your Life that showed me that I didn’t need a six-figure income to retire early. Mr. Money Mustache explains it all quite well here in his “shockingly simple math” post on early retirement.

Save every penny you can

If you follow this strategy, your focus will be on lowering your actual living costs while saving the difference. It does not take long before you have enough saved to live on for the rest of your life. Speaking of saving…

Some important reasons to save money

My parents taught me the concepts of saving and compound interest, and helped me set up my first retirement account. The need to plan and save became an important focus for me with the birth of my first daughter. It reinforced the notion that I needed to save for her future—as well as our own. Depending on your situation, there are multiple reasons you should save for the future.  Here are a few for us:


Funding for repairs, infrequent expenses, and cars

There are good reasons for funding for large and infrequent expenses. This helps the budgeting process by smoothing out the fluctuations on your expenses each month. Those semiannual insurance premiums and property taxes are good examples of expenses that make sense to budget 1/12th the annual cost each month and deposit into a separate account. Saving for your next car is another important reason. This helps build a discipline of anticipating future needs rather than reacting and using credit cards to manage your expenses.


A college fund

We started a college fund for each of my daughters right after they were born. For our oldest daughter, we contributed $200 per month directly into an S&P 500 index fund for fourteen years and then stopped. With only that small savings amount each month, there was enough to pay for her public four-year university, with money left over for her wedding. This was a simple investment approach we did not touch through all the market fluctuations. I am still shocked that we were able to do so much for my daughter. This is a good example of “dollar cost averaging” in practice.

Company-sponsored IRAs or Roths

I can’t say it enough times: take advantage of any company-sponsored retirement accounts regardless of whether they offer a match. For those starting out, it might be hard contributing $18K a year, but I would recommend you invest enough to receive any company match. Those who are over 50 can also contribute an additional catch-up of $6,000 each year. The more and earlier you invest, the less stressful it will be later in life. 

Build passive income: Shorten your timeframe

Saving a significant amount of your income will tremendously improve your odds of reaching financial independence early. To turbo-charge your strategy, you may need to think in terms of starting a business or seeking out other forms of investment. I will stick with what I have had experience with in providing a couple of examples.

Start a business

I started my first business at age 18 with my brother and another friend. It was a small, niche company that taught me important lessons quickly—like managing cash flow and expenses while always searching for the next customer. After a few years we sold off the equipment, shut it down, and moved on to other things.

We can all think of people who have done well for themselves by opening their own business.

A former employee of mine comes to my mind. About ten years ago, an IT employee in his early twenties worked his way into a contracting position so he would not have to come in to the office five days a week. He asked to do this because he had recently picked up a couple of contracting work customers of his own. He did this part time customer work in the evenings. It has been nearly a year since we last spoke, but I believe he and his business partner now have over 30 employees. They also own their business’ building free and clear.

If you go this route, don’t underestimate the initial startup costs and cash flow requirements to keep your business solvent. It may take a number of years of dedicated work before the business will make a profit.

Real estate

In my late teens, I purchased my first rental property. Through some horrible market conditions, the construction company I was working for in the summer was stuck with houses they could not sell with 18% mortgage interest rates. One of the partners of this company was my father; he sold me a house at cost, and taught me how to manage a rental property. I owned that property for ten years before I sold it, relocating with the company I was working for at the time. That was the initial spark and foundation that introduced me to real estate. I have continued investing in real estate ever since.

Early on, I noticed that most wealthy people I knew tended to have built a large portion of their net worth in real estate. These people were friends of the family, doctors, dentists, and local business owners who had a variety of careers and backgrounds. What was amazing to me is that they all had some of their net worth invested in either commercial or residential real estate. In fact, some of the wealthiest people I know made their initial wealth in real estate and development.

This is a great way to leverage Other People’s Money (OPM) when you are just starting out. It is possible to buy properties with very little money out of pocket. The conventional approach with bank financing will require a 25% to 30% down payment for a non-owner occupied rental property. If you are handy and have aptitudes working on houses and their systems, this would be an excellent way to leverage your “sweat equity” by doing the work yourself.

I will get into the details of how to purchase rental properties in a different series of posts. For now, the point is that this is an excellent method to build net worth and a passive income.

The best time to start investing is now

If you are just starting out in the workforce, working forty years may get tiresome unless you truly enjoy your employer and career. For most of us who have worked many years and are closer to retirement age, we are ready to leave our paid jobs and live off a passive income.

08-06-2015_Step 2_passive income methods

There are several ways to reach financial independence early. The first approach is to cut your way to retirement by extreme saving of 50% to 75% of your income. At the 70% rate, in about seven years you can retire.

Another approach is to create the next “dot com” business that becomes successful. Then there are those of us who have company retirement plans where we have saved the maximum each year and have benefited by company matches. Save money for decades and you WILL build a solid retirement account.

Finally, you could jump into rental real estate like many others have done. We followed an approach leveraging a combination of savings, investing, and purchasing real estate for passive income.

The key point to Step 2 is that you need to both save and invest in a business outside of your job if you wish to reach financial independence in an aggressive time-frame.


Do you have a side hustle or passive income business you are building?  Are you saving a large percentage of your income today?

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Celebrating Independence and Personal Freedom July 4th Fri, 03 Jul 2015 00:05:24 +0000 Every summer, we have the opportunity to celebrate our country’s independence.  For me, I am grateful that I was born in the United States, and for the independence we have obtained as a nation.  We live in a wonderful time of innovation, technology, and new personal freedoms.Our forefathers spoke for us as a nation when […]

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Every summer, we have the opportunity to celebrate our country’s independence.  For me, I am grateful that I was born in the United States, and for the independence we have obtained as a nation.  We live in a wonderful time of innovation, technology, and new personal freedoms.Happy Independence DayOur forefathers spoke for us as a nation when they declared our independence from Great Britain.  This was accomplished through that famous document recognized as being signed on July 4, 1776.  We have 239 years of history as a country that had its humble beginning with those 13 rogue colonies wishing to remove England from its rule over our states.

Today we still have many challenges that need to be solved; however, in comparison with other countries, these are first world problems.  It is great to be alive today with the freedoms we enjoy and defend in this great nation.

This year’s holiday is special for me since it will be the last July 4th Independence Day I spend dependent on an employer for income!  Next year my wife and I will celebrate an entirely new experience when we declare ourselves Financially Independent!  July 4, 2016, here we come – only 363 days to go!


The Constitution and Declaration of Independence envisioned our freedoms and became law

 The resolution of the Declaration of Independence  was Congress’ announcement that the 13 Colonies would become independent sovereign states from Great Britain.  This was the formal statement and explanation as to why the United States should become independent of the British Empire.  That was a big goal for sure.

In 1787 the Constitution was created, setting into motion the separation of the government into the legislative, executive, and the judicial branches.  Just two years later in 1789, we had James Madison propose the 39 new amendments to the constitution that would help define and limit the powers of government.

The first 10 of these amendments became known as the Bill of Rights, which gave us such liberties as our choice of religion, the right to bear arms, freedom from search and seizure, free assembly, free speech, and a free press, just to list a few.  The Bill of Rights was intended to give individual liberties and limit the control of the government.  It is clear that over 200 years ago our new government strived to bring freedoms to individuals that would be backed and protected by the law.

It is unfortunate that it took so many more years to get past slavery, voting rights, women’s and gay rights, discrimination and many other social issues that faced our country.  But, hey, we are moving forward and our country is a “work in progress”!


How about our Freedoms with Personal Financial Independence?

As I mentioned earlier, this July 4th is special to me –  the beginning of the last year that we will be bound by personal finance debt!  Next year at this time, we will be debt-free and able to live off our passive income.  To me, this opens up a whole new list of freedoms that weren’t included in our Constitution, Declaration of Independence, or Bill of Rights:

  • Freedom from working for an employer. We will not need to work for an employer just for the sake of collecting a paycheck.  I certainly want to be in the position to determine if my attitude changes toward work.  Who knows, maybe I will enjoy work more knowing I am not stuck.
  • Freedom to work on projects I enjoy without pay. I will be able to choose to work on things that make me happy, even if there’s no money involved.  This could be a win-win for me and for my community.  Either way, I will have more options to pursue work for its own sake and not just for pay.
  • Freedom from debt and our debt snowball. No more talking about debt and how to pay it off.  I hate to even think how much time and energy we spend on this subject.
  • Location independence. We don’t have to stay in one place as a result of being tied to a job.  We can travel and see the world, as much as our budget will allow.  Work won’t stop us from experiencing our travel bug.  The good news is our passive income is location independent and thus can “follow” us wherever we may roam.
  • Freedom from limited thinking. I think the biggest improvement for me will to take on directly my most common excuse for not trying some new experience or project: my work.  With work gone, I will have freed up my time and eliminated the need to wait to try new things.

We are truly in pursuit of our own happiness.  The country set us up to succeed.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of HappinessAbraham Lincoln Gettysburg Address in 1863


Have a happy and safe July 4th Independence Day!

I am really looking forward to experiencing our new financially independent life next year.  We are certainly curious how our mood, attitude, energy level, happiness, and other aspects of life will be different from what they are now.

My plan is to reflect back on this post next year to see how my opinion and perceptions of financial independenBe freece have changed.  Will it be nirvana or simply just another day of life?  Will I still be working?  Has a new financial goal now appeared that seems important enough to keep working for money’s sake?

We are counting our blessings with respect to our national and personal independence.  We are grateful for what we can achieve with hard work, help from others, and a free society.  That would be incredibly difficult to do in many places in the world today.

I would like to wish everyone a safe and happy July 4th!  Take care.


How about you: do you feel truly independent? Do you have your own declaration of independence?  Are you seeking financial independence to go along with our country’s freedoms?


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How Does it Feel to Pay Off a Mortgage? Tue, 23 Jun 2015 03:57:21 +0000 My goal—and one that my wife and I share—has always been to be mortgage-free. Although this has felt like a huge obstacle, it has been an important milestone in planning for our retirement. These days, the trend seems to be that more people are retiring with mortgage balances. To me, it appears fiscally irresponsible and […]

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My goal—and one that my wife and I share—has always been to be mortgage-free.

Picture of a houseAlthough this has felt like a huge obstacle, it has been an important milestone in planning for our retirement.

These days, the trend seems to be that more people are retiring with mortgage balances. To me, it appears fiscally irresponsible and risky to leave behind paid work as you get closer to traditional retirement age if you still have large debt obligations, such as a mortgage. This is, of course, a perspective coming from a person in my 50-something age group, nearing the end of a typical career. Those attempting to retire extremely early may have a very difficult time unless their mortgage is already paid off.

I was very close to having my mortgage paid off ten years ago. Then, things changed dramatically. A divorce from my first wife after 20 years of marriage certainly set back my ability to reach early retirement.

The great news is that my current wife and I reached one of our key personal finance goals when we paid off our home three months ago!

I find it fascinating to hear people’s stories regarding their big goals and what it feels like when they reach them. For that reason, we would like to share our experience.


We set a big goal: pay off the mortgage extremely early

One big goal was to relocate to northern Arizona, and it will be four years in October since we made that move. We had envisioned and planned for it over many years. We aligned our lifestyle, spending, saving, and investing with the goal of my wife quitting her job and both of us living on my income. Fortunately, my wife landed an excellent job locally and that made things so much easier for the transition.

When we left California, we rented our home to some awesome tenants. After 3½ years of discussions with our tenants, we worked through a deal to sell them our place. At the closing, we eliminated about 85% of our debt in one day. It took only nine years, from 2006 to 2015.

I’ve written before that we’ve been working on an enormous passive debt snowball that I started tracking in earnest years ago using an Excel spreadsheet. I later found a nifty mobile app for my iPhone called “Debt Free.” This is a great tool for analyzing different kinds of debt and evaluating “what if” scenarios of paying down debts in a particular order, the ability to use the snowball method, and options for making additional principal payments. Armed with that information, we were nonetheless torn between:

  • Option One: pay off investment debt
  • Option Two: pay off the mortgage

We chose Option #2: pay off the mortgage

There is a lot of discussion about the benefits and wisdom of paying down a mortgage. The common argument is that perhaps you should use that relatively cheap money to invest in other higher-returning investments such as the stock market. Or, quoting what Dave Ramsey often asked listeners of his radio show, “Would you borrow against your paid-for home to buy a rental property?” In the past, I would probably have said yes, but not today.

For us, there were no after-tax benefits because we were no longer able to deduct the mortgage interest. This was due to a combination of having a low balance and not enough other deductible expenses to get past the standard allowance. (Our other passive income investments are in a C-Corp that receives different tax treatment.) It really came down to an emotional decision for us—wanting to experience the feeling that comes from owning our home, free and clear of debt. Of course, even though we own the home, we also “own” property taxes, insurance, utilities, and ongoing maintenance!

So, if you went with the argument about holding onto your mortgage as long as possible, why would you want to be like 45.8% of 55-to-64 year old people in the chart below who have mortgages? How would it help you to achieve early retirement any sooner?

06-22-2015_ Mortgage chart_1                   06-22-2015_ Mortgage chart_2

I cannot imagine being 65 years old and having a mortgage. How about the 38.9% between the ages of 65 and 74 who still have mortgage obligations? That certainly cannot be a comfortable feeling, having mortgage payments at that age. I do have to point out that the general trend in the 2013 data for all age categories, except the 65-74 group, has been a reduction of families with mortgages or home-equity loans. Perhaps the data suggests people are beginning to see the value of a paid off home? (Then again, with the economy in its current state, it’s also possible that fewer people can afford to have a mortgage at all, and are renting instead.)

How it feels to have the mortgage gone

I have reached the goal I’ve had for more than twenty years: to be mortgage-free. Today, my wife and I are sharing what it feels like to have achieved that goal. There were many bumps and detours on my path to achieving this goal. I certainly didn’t have good luck or the best timing. We made many wrong financial moves by attempting to sell homes at not the best time or location. It was an outstanding day when our loan for the California property was paid off at the sale; we paid off our Arizona home, and directed the remaining balance to our passive investment debt. It really felt like a major financial accomplishment.

My feelings

I would have thought that my experience every day would be something like this: I wake up from a restful night of sleep, look at the awesome home my wife and I share, and feel overcome with joy at having the mortgage conquered. My experience was nothing like that. I think our focus has simply shifted toward eliminating the last of our business debt.

In hindsight, I have also had some second thoughts about paying off our home, strictly from a cash flow perspective. Had we paid off our investment debt, we would have more cash flow today. Instead, we now have 100% equity locked up in a non-liquid investment (our home) that provides us no ROI. Perhaps we have to measure it in terms of ROE (Return on Emotion), knowing we can live here forever, if we choose. Yes, we could use a HELOC or credit line to borrow against the home but that would put us right back into debt and defeat our original purpose. So, the real goal is getting to the bitter end of our debt snowball so we can enjoy the cash flow on the other side of this journey.

My wife’s take:

“My husband and I had been having daily discussions about paying off our home mortgage for years. These discussions would usually take place over morning coffee, while eating lunch, and often over dinner. I did feel immense relief once we sold our California home and subsequently paid off the mortgage on our current home in Arizona. This has been a huge milestone for us. I have to say the impact of having a paid-for home has helped me sleep better at night. What has been interesting is that because we are continuing our debt snowball we now seem to be having similar daily discussions about paying off our investment debt.”

All in all, it does feel great to have paid off the mortgage. We are both glad that day finally arrived!

06-22-2015_ Mortgage burning

There are a lot of options to consider when you run into a windfall of money, such as from selling an asset or receiving an inheritance. Is it wise to pay off a 4% interest rate mortgage, which is considered cheap money by historical standards, and invest it in Mr. Market when you can make 8% with no problem?

My perspective is that I should take the 4% risk-free option (mortgage interest rate) by paying off this debt now, as opposed to the uncertainty of trying to earn more than that guaranteed 4% return in the market today.

As a result of this milestone, we have permanently lowered our monthly living costs. This certainly is in alignment with our goals for financial independence and early retirement. We are now one step closer to the option of retiring early and pursuing our dreams.


Have you paid off your mortgage? Did you spend a lot time working toward that goal? How has your life changed since the mortgage was paid off? Did it feel the way you expected it to feel?

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Emotional Biases that Affect Money Decisions Tue, 02 Jun 2015 02:55:07 +0000 I spend a lot of time looking at possibilities of how our future may develop and second-guessing some of the decisions we made along the way.  It is not uncommon for me to spend hours discussing and analyzing the potential outcomes of each decision with my wife.  Thankfully, she is patient and receptive of these […]

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I spend a lot of time looking at possibilities of how our future may develop and second-guessing some of the decisions we made along the way.  It is not uncommon for me to spend hours discussing and analyzing the potential outcomes of each decision with my wife.  Thankfully, she is patient and receptive of these mental exercises.

Spock picture about logic

The problem is that our decision-making approach is flawed!

Let’s face it – we are not completely rational beings.  We do not compute decision outcomes based on binary code using 0’s and 1’s.  Sure, we could apply some decision quality practices to make better and informed decisions.  We can create elaborate decision trees with A/B, Yes/No paths.  We can even apply weight to decision paths and turn them into mathematical equations.

Also, don’t forget the old two-column method of listing pros and cons.  Again, a lot of time, energy, and analysis can be used to weigh each item to arrive at what seems like a reasonable conclusion.

Bottom line – we have cognitive biases, and they affect the quality of our decision-making process.

One of my personal challenges is the confirmation bias:  “The tendency to search for, interpret, focus on, and remember information in a way that confirms one’s preconceptions.”  This definitely explains my infatuation with reading personal finance blogs, magazines, and books!

Perhaps the biggest challenge for me is the outcome bias: “The tendency to judge a decision by its eventual outcome instead of based on the quality of the decision at the time it was made.”  This has probably been the motivating factor that drives my passion toward achieving the end goal of Financial Independence – often overlooking many decisions to consider along the way.

The Reality of Biases

Emotions and biases are a significant component of our personality.  These have been formed by our environment, experiences, education, culture, etc.  There is just no denying it – we are emotional creatures and make decisions based on faulty data, emotions, and biases. I like to break this down into a simple model – Fear/Pain versus Greed/Pleasure.

Let’s look at some examples:

Pretend you are at a shopping mall looking for a TV and a blender.  If you become aware that that you could save $10 off a $25 kitchen blender that is 5 miles away, would you drive to get it?  How about $10 off a $1,500 TV that is also 5 miles away?  Would you drive for the blender but not for the TV?

Either decision will save you $10 for driving 5 miles.  Maybe you look at the cost of your time, your hourly rate, what it would cost in gas, etc., to make that decision.  Perhaps the decision is more swayed by the fact that you would save 40% on the blender but less than 1% on the cost of the TV.  Either way, it is still $10 and should make no difference.  This is called the framing effect bias.

Another example:

You are trying to make some decisions on what investments to choose for your work place retirement account.  One investment has a 70% to 80% chance of making money while the other has a 20% to 30% chance of losing money.  Which would you choose?

If I explained it correctly – they are both the same mathematically, yet one looks at the investment from a perspective of optimism (greed/pleasure) while the other is from the loss (fear/pain) perspective.  Studies have shown that we are at a multiple of 3 to 5 times more likely to avoid the loss (pain) than reach for the gain (pleasure).  This is a classic loss aversion behavior.

How the heck do you get around this kind of illogical behavior?

Some Approaches We Follow

  • Look at the opposite of each situation. If you are trying to make a decision about a choice you should make, take a completely different perspective.

Imagine the exact opposite of what the decision would be if you did not go with it.  Take a few minutes to visualize how that would look from your perspective and perhaps from your spouse’s viewpoint.  Sometimes this gives us some new insights into a decision that we might not have considered before, helping to eliminate several of our biases.

  • Stop, breathe, and get into the present moment. Take some time to sit in a comfortable chair, and breathe 5 large breaths in and out.  Pause after each breath, at the end of each inhale, and finally at the end of each exhale.  Your mind, of course, will wander – it will take some practice, but it is worth the effort.  Simply try to clear out the internal talk and clutter the best you can.  Then, when you are in a relaxed state, introduce the idea or decision, allowing your thoughts to focus on your decision points.  Don’t forget to keep the deep breathing going!

Once in this state, ask yourself these questions and take note of your responses:

  • If money were no object, what would you do? Does this give a different perspective to frame your decision?
  • If you had to seek for a solution that is a no-cost or low-cost decision, what would you do?  Our society seems to first seek a purchase or money solution, so this may help you think in a different manner.
  • Visualize the best and worst case scenarios of your decisions.  How could this decision become a life changing choice?  Now, if you are simply trying to decide what is for dinner – well that isn’t very important.  But what if you are trying to make the choice of whether or not to leave your job?  Now, that can have some impact!
  • Make a mental or physical note of your emotional state. Through any of these exercises it is important to make mental or physical notes of your emotional state when considering decisions.  Writing this down is, of course, the best.

What kinds of feelings, emotions, and biases have you experienced as you’ve made decisions over a period of time?  Which direction seems to feel the best both emotionally and logically?  Can you spot a trend?

  • Acknowledge we have biases. Let’s face it, we are human.  Understand that we have biases whether we admit them or not.  Do your best to understand that our emotions and our biases will affect our decisions.  Keep this in mind and do a double check on your decision process – assuming that you have introduced biases.

We don’t have perfect information!

I truly do not believe we can take the emotions out of our decisions.  I suffer sometimes from YOLO, poverty mentality, keeping up with the Joneses, and “I love and hate my job” internal dialog tapes – many times in the same week.  How logical is that?!

Fear greed_ver2

I am acknowledging that it is important to understand that we are emotional beings, and I know that I have a complex framework that is working subconsciously.  Trying to become more conscious, by recognizing your emotions and identifying biases as they creep into decisions, is better than ignoring their impact.

We will never be able to have all the information to make a perfect decision.  What is important is to make the best decision you can with the information available now, make a mental note of your emotional state, and make the best decision for now.  Once the decision is made, move forward with a positive attitude about a successful outcome, and do your best to adjust once new information has been discovered that can affect your original choice.

How about you? Do you struggle with making financial decisions?  Have you found a way to make better quality decisions?


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