Thursday, June 27, 2013

Covering Expenses from Passive Income

With the run-up in stock prices since the beginning of 2013, I've been much more selective when making additional investments over the past six months.  This means we have a lot of cash ready to deploy but not much more invested than we had at the end of 2012.  I've been somewhat frustrated because most of the names on my watch list are trading far above the price I'm willing to pay for them.  I guess I need to remain patient.

One thing I did notice, however, is that the amount already invested is making a subtle difference in our cash flow.  We try to put as many purchases as possible on our credit cards, so we can take advantage of the 2-5% cash back.  However several of our utility bills can't be paid by credit card (without tacking on enormous "service fees" which wipe out the cash back and then some).  Therefore I pay all of these using the bill payment service in our brokerage account.  These bills include electricity, water, sewer, and natural gas.

Our brokerage account is also where dividends accumulate from our investments.  I noticed that the amount of dividends received year-to-date exceeds the amount we've paid out to the utility companies from the brokerage account.  So you could say that our passive investing has allowed us to cover our basic utility expenses on an ongoing basis.  Not a huge milestone, but certainly not a bad thing either.

If/when the prices of some stocks fall back to more reasonable levels, we'll be willing buyers.  I'm looking forward to the opportunity to deploy more of our cash and boost our future cash flow.

Sunday, June 2, 2013

Less Pay for Less Stress?

My wife and I have what most people would call "good" jobs.  We are "professionals", with salaries that put us closer to the higher end of the income spectrum.  The jobs feature benefits like paid time off, employer-matching retirement contributions, and company-sponsored insurance plans.  My guess is that many people who are currently looking for work would be happy to be hired into either of our jobs for these reasons.

By working at these jobs for a number of years, we have given ourselves the means to pay off our mortgage and accumulate substantial savings and investments.

Our jobs do something else for both of us:  they add stress to our lives.   The associated project deadlines and other responsibilities keep us thinking about our jobs often, even during traditional non-working times.  Both of us stay connected to our employers remotely and will work as needed during evenings, weekends, and holidays -- my wife especially (she's not as completely jaded as I am yet).

As I've mentioned before, we're frustrated because our careful planning has put us in a situation where we don't need to work like this.  We could meet our current spending needs with only a portion of one of our salaries.  But there doesn't seem to be a better option.  There is no part-time option at my employer (I've checked).  My wife may eventually have the option to move to a part-time position, but she feels that once she asks for a part-time role, it would be unlikely that she'd be given a chance to go back to full-time employment (so she wants to ensure the time is right before making such a move).  And even if she did move to part-time, the nature of her work means that she would still have deadlines and responsibilities hanging over her head.  Knowing my wife, I anticipate she'd still end up working during her "free" time to ensure that she kept up with her "part-time" assignments.

Since we paid off our mortgage two years ago, we've been operating under the assumption that we'd keep our full-time jobs (and all associated stress, etc) until the time we felt our savings and investments reached a point that we could completely quit.  Lately, however, we find ourselves discussing alternate possibilities more and more often.

My wife suggested we just draw a big X on the calendar, and commit to quitting when we get to that date, regardless of our financial situation.  At that point we can take a "sabbatical" of sorts, hopefully in the form of a long-distance hike on the Appalachian Trail, or something similar.  Afterward we could take stock of our lives and decide what course of action to take next.

I've suggested the possibility that both of us look for part-time jobs working as a team for the same employer, doing lower-stress work.  For example, there is a business here in town that we think would hire us (based on conversations I've had with the owner).  They are always looking for people to work on weekends, because that's when they do most of their sales.  If my wife and I could get into a rhythm working a three-day schedule, say Friday - Sunday or maybe Saturday - Monday, we could have four days off each week to do whatever we wanted.  This is the type of job where the instant we walked out the door, we'd be completely off the clock -- no deadlines to meet, no projects looming, nothing to worry about until we arrived at work the next day.  The caveat is that we'd lose a lot of the benefits our current jobs offer -- no paid time off, no matching retirement contributions, lower pay.  But I wonder if we wouldn't feel richer overall if we didn't have the stress of our current jobs:  working at any hour of the day, 5+ days per week.

Reflecting back on my own employment history, I remember fondly the jobs I had which could be easily mastered, and which didn't follow me out the door at the end of the day.  In high school I worked at a sandwich shop.  I got really good at making delicious sandwiches (something I liked), and was expert at taking responsibility for the entire customer experience:  from the greeting when they walked through the door, through the order and payment, the sandwich assembly, the delivery, and the clean-up and exit.  There was very little stress because it was within my power to correct almost any error or customer disappointment, and each transaction was discrete, lasting no longer than 30 minutes or so.  I didn't have to come home at night and think about the 6-month sandwich project I was working on, because that didn't exist.   The job was part-time, so it didn't dominate my waking hours.  And while the job itself was not the most stimulating, the lack of stress meant that I could fully enjoy my time off the clock, and find stimulation elsewhere.  That job didn't define me -- it just allowed me the resources (cash) to follow other pursuits which made me feel whole as a person.  Because of this, it may have been the best job I ever had.

I had several other jobs like that as a young adult.  I didn't get rich working at any of them, but I felt more happy and healthy overall when I was employed in those types of roles.

If my wife and I did decide to make a move to lower-stress, part-time jobs, we would almost certainly have to reassess some of our other goals, like moving to our eventual "dream property" or reaching true financial independence.  Although we wouldn't be preventing ourselves from reaching them, we would most likely have to push the desired achievement dates to the more distant future.

Balancing the short-term damage of stressful employment against the long-term benefit of financial independence is proving to be a challenge.  My wife and I haven't made any decisions to make a change yet, but we are working to find a course that will help give us the most life enjoyment overall.