Sunday, October 14, 2012

Lucky Thirteen

Earlier this week I passed my thirteen-year anniversary* of working for my current employer.  Although this is not the only job I have ever held, this is the only one that I would call a "career" job -- the earlier ones were ways to make a little income during and immediately after my high school and college years.  I seem to be something of an anomaly as nearly everyone I know from my own generation has changed employers at least once, either purposefully or due to factors beyond their control.

My current tenure was almost cut short a number of years ago when the department I worked for was abruptly transferred to another state.  Not wanting to relocate, I hastily found a job with a different group, only to be completely dissatisfied and frustrated with the culture in the new organization.  I gave my notice and sent out a farewell email to current and former peers, only to have one of them quickly recruit me to work with him in a new role in the same company -- the one in which I still find myself employed today.

I work for a large company on sound financial footing.  This has its advantages and disadvantages.  On the plus side, the compensation and benefits are fair and generous.  I am not micromanaged, which allows me to work a somewhat flexible schedule, often from home.  Of course, like many large organizations, there are frustrating layers of bureaucracy and inane policies that leave the employees feeling more like interchangeable parts rather than human beings.  Overall, I would say the positives largely outweigh the negatives, which is why I've been satisfied to remain with the company as long as I have.

Having said that, I have no desire to spend another 13 years working for this company, or for any other.  I am hopeful that before my 25-year employment anniversary, my wife and I will have built up our own finances so that we are no longer dependent on full-time salaries and benefits from our employers.  Of course, this blog is here to track our progress toward this goal.

One of my favorite personal finance books, Your Money or Your Life (by Robin and Dominguez), advises readers to add up all of the money they've ever earned, and then compare it to their current position in life.  By doing this the reader is given the opportunity to reflect on whether they have made the most of their money in the past, and decide whether changes are needed going forward.

Looking back over my own working career, I have to say that I've done a decent job.  On the eve of my first working day at my current employer, I had about $10,000 to my name, half of it in cash and half in a used car.  I also had a college degree and no debt of any kind -- no car loan, no student loans, no credit card debt.  I have my parents to thank for all of this, because they were wise enough to manage their own finances so that I could start my independent life with an education and without having to dig out of debt.  I'm extremely grateful to them for this opportunity.

Thirteen years ago, I was renting a small condo that I shared with my girlfriend at the time.  I was not at all passionate about starting a career, but I needed an income and wanted to stop working the odd jobs that I had been doing to make ends meet up to that point.  Using an online job posting website, I managed to get an interview with my current employer, not knowing much at all about the company.  Fortunately, this was the late 1990s, when the economy was booming, and employers were scrambling to hire anyone and everyone they could.  I was hired based on a single interview.  I started in an entry-level position and worked a lot for the first several years, since overtime was plentiful and I was fearful that by working "only" 40 hours per week I would look like I was not willing to do my fair share.  This was not my preference.  Even then, with meager assets, I was frugal, and had no real ambition to earn money for the sake of more consumption.  My time off was at least as valuable to me as my paid time, even at time-and-a-half rates.  After my 40 hours were up, I wanted to be out hiking the beautiful mountains of New Hampshire, or playing games on my computer, or hanging out with friends.  Somehow I managed to stay in good graces with my managers, working just enough overtime hours to not raise any red flags, but few enough that I was able to keep my own sanity.

Over the first few the years I earned raises and promotions (with salary increases), and eventually saved enough for a down payment on a condo.  Early on, I remember daydreaming about how nice it would be to get rid of the mortgage so I could be free of those monthly payments.  Still, I lived relatively frugally, not choosing to go into extra debt to make major home renovations.  I also avoided a "cash out" refinance like a lot of people were doing at the time, as real estate values rapidly increased in the early 2000s.  I made small extra mortgage payments when I could, and saved steadily in tax-advantaged retirement accounts, maximizing my 401k and Roth IRA contributions every year.

Fortune smiled on me when I met my wife.  Although I knew right away that we clicked on so many levels, it wasn't until at least a year into our marriage that I pleasantly realized we had similar financial goals as well.  She was the one who convinced me that a mortgage-free lifestyle didn't have to be a distant dream.  This was triggered by a minor personal crisis that brought us even closer together.  After we had weathered the storm, we started talking in earnest about what we wanted from life.  We decided to work aggressively toward financial independence so that we could enjoy all of the things we love so much together, while we were both still young enough to fully appreciate them, without having to spend all of our time working.  This led us to embark on a journey to pay off our mortgage first, as quickly as possible:  partly as an insurance policy against sudden loss of income and partly as a way to kickstart our savings.  We knew that once the mortgage was gone, we could funnel all of our extra cash toward an escape fund.

So now, thirteen years later, I find myself (along with my wife) belonging to the exclusive** club of homeowners without a mortgage.  We're clearly in the very high end of savers for retirement and net worth, especially for our age group***.  We are growing our savings and investing for early-retirement income.  And while I must give my wife substantial credit for her contributions since we got married, I certainly would not be where I am today without the influence of my employer over the past thirteen years.  Having a steady stream of income and benefits provided me with a solid financial foundation.  However, while I appreciate the opportunities that come along with steady employment, I hope to continue to build on our current financial foundation.  In the not-too-distant future I want to replace our employment anniversaries with financial independence anniversaries.

*By the way, thirteen years sounds like a long time.  New Kindergarten students in October 1999 are now college freshmen or out on their own.  I feel old.

**According to the US Census, just over 30 percent of homes were owned "free and clear" (without a mortgage) as of 2009.  Of further interest is that almost half of those "free and clear" homes were owned by those 65 years of age or older, leaving my wife and I in the remaining 15-16 percent of the homeowners under 65 years old and without a mortgage.

*** I track our net worth monthly, using NetworthIQ.

Friday, October 12, 2012

Work and Fishing

While riding my bicycle into the office yesterday, I saw a bumper sticker on the back of a vehicle which read: 

Work is for people who don't know how to fish.

I smiled at this, amused at the public declaration of preferences.  Although fishing is not one of my own passions, I can easily sympathize with the desire to pursue something other than work.

As I rode on, though, I got thinking about the phrasing of the statement, and wondered if there might be a deeper meaning to the statement on the bumper sticker.  It didn't say that work is for people who don't like to fish.  It said that work is for people who don't know how to fish.  This slight difference in phrasing opens up a different interpretation.

I'm sure most people are familiar with the old adage which states:

Give a man a fish, and he eats for a day.  Teach a  man to fish, and he eats for a lifetime.*

What if "knowing how to fish", as referenced in the bumper sticker slogan, is a metaphor for something else?  Could "knowing how to fish" encompass all of the steps involved with planning, implementing, and realizing an escape from the workplace?

Even if this was unintentional, and I'm reading more into the bumper sticker than I should, I still appreciate the truth behind both statements.  First, every time we choose to work, we are choosing to take time away from "fishing" -- all of the other passions that make life worth living.  And second, it's possible to eventually escape from the bonds that work holds on us by "knowing how to fish" -- learning other ways of living that reduce the dependency on the regular paycheck -- which should then free up more time for "fishing".

In the case of my wife and me, we're in the process of learning how to fish -- living without any debts, saving a large portion of our income, and investing for the future.  I look forward to the day when we can choose to "fish" as often as we want.

*Unless the man is vegetarian, in which case the phrase could be modified along the lines of "Give a man some corn...Teach a man to grow corn..."

Thursday, October 4, 2012

Positive Outlook

Several days ago my wife and I went to a surprise birthday celebration for one of our friends.  While we were waiting for the guest of honor to show up, we talked with others in attendance, most of whom work at the same place that I do.  The topic of conversation moved to saving and investing.  I met another guy who had been following a dividend growth strategy for several years.  He reported being pleased with his progress so far.  I told him I had been doing my own research into dividend-paying stocks as well and had just started investing this year.

Another guest overheard our conversation and expressed his own opinion of the viability of long-term investing.  He said he was concerned with the direction the country was going, and expressed fear that dollar-based assets would significantly lose value in the coming years due to inflation and the monetary policy of many first-world nations.  He said that lately he had been picking up gold coins at antique dealers and auctions and hiding them in his house.  When pressed, he also admitted to owning some Wal-Mart stock that he bought a number of years ago.  (Maybe WMT is immune to inflation?)

I found the contrast between the two investment philosophies intriguing.  Both of these men work for the same company, doing basically the same job, and yet their investment philosophies could not be more different.  This was more than a difference in risk tolerance or asset allocation.  This difference centered around their future outlook.  One had at worst a neutral view of the future, while the other held a very dim view of the coming years.

I suppose any long-term investor has to have a minimally positive outlook on life in order to be willing to save and invest in stocks (day traders and short sellers excepted).  Whether you are investing with an eye on dividends or capital appreciation (or some combination of the two), it does not seem logical to invest cash in intangible assets unless you believe that the future holds some promise of stability and prosperity.