I am an incredibly lucky person.  I have a loving family and lifelong friends.  I am educated.  I am secure.  My fiance and I are self-sufficient, supporting ourselves independently just over a thousand miles away from where I was born.  Life is good.  But if I had to name a single dissatisfaction, it would have to be that in order to sustain my current lifestyle I am required to exhaust 40 hours a week of my valuable time advancing the interests of others.

I work for a very successful private company experiencing rapid growth, and I do my job well.  Consequently, I have no fear of being laid off.  Through my job I meet MANY new people who tend to be intelligent, young, and attractive.  They often have a technical background and share similar interests.  Some put in 60+ hour weeks and/or travel 75% of the time, but not me.  Admittedly, I have it real good over here.  But after three years I am not as interested in the work as I used to be, and resent the way it prevents me from being free to travel and enjoy the experiences and people that REALLY make my life so rich.

Don’t I sound like a big complainy-pants?  Some people would kill for a job like mine in this economy.  And yet despite all of the advantages of staying put (there are many) I cannot help but feel that I am missing opportunities elsewhere.

I am well-compensated for my 40 hours a week, enough so that I am able to use one third of my earnings to cover ALL of my expenses and put the rest away where it can work for me.  That is my solution, my ticket out.  Those savings will yield further savings that will compound until I am able to live off the interest ALONE by the age of 35.  I am still rankled that I have 10 more years of 40-hour weeks to go; this is not because I feel entitled but rather because I could have reached my goal of financial independence earlier by being more proactive and managing my money better as a teenager and student.  But at least I have a plan now, and a yardstick with which to measure my progress.

To satisfy my wanderlust I will change jobs over those 10 remaining years.  I will move to other cities, and the change of scenery will help me endure the proverbial treadmill, consoled by my private knowledge that my treadmill is shorter than most.  I will go on reasonably priced vacations using “vacation days” given to me by my employer.  And I will save, save, save until the day when I can step outside of the system.

I am advantaged; I admit it.  I’m not a wage slave flipping burgers, or an immigrant working fields.  I may be able to reach my goal of financial independence sooner than most.  And I have less reason than most to want to leave this system.  But at the end of the day I’m sure we all feel the same way about this: nothing is more important than your time, and your freedom to spend it however you wish.  Now you understand the justification of my pursuit.

Happy Friday Everybody!  Enjoy your weekend, because on Monday it’s back to the salt mines…


I’ve got a bike

I can ride it if I like.  And I do, as often as I can.  Since my last post I’ve ridden about 60 miles to and from work.  I live 5 miles away from my workplace where we are provided with showers, making a bicycle commute pleasant and convenient.  With a change of clothes in my backpack I whistle past the grocery store, a high school, some farms, two ponds, the public library, athletic fields, and residential developments.  I listen to the birds and frogs and watch the ducks.  My city is very bicycle-friendly; there are bike lanes everywhere and the traffic is easy to navigate.  When I arrive my towel, shampoo, and deodorant are waiting for me in a cubby, and I keep a box of cereal or some fruit in my office for breakfast.

What an invigorating way to start the day!  When it is time to leave I change back into my riding clothes.  Sometimes I stop at the public library on my way home to drop off or pick up a book.  Sometimes I stop at the (air conditioned) grocery store.  It is all very convenient; I highly recommend considering the relative locations of these institutions when picking out a house or apartment.

I also walk to these places, as well as to the nearby Buffalo Wild Wings (henceforth referred to as “Bdubs”), and a dive bar with a sand volleyball court where I participate in an amateur league.  I grew up near the ocean and now that I live inland I cherish every moment I get to feel sand between my toes.

I’ve found that since the weather has turned I’ve only used my car for weekend outings, with few exceptions.  I filled up my gas tank (17 gallons) at the end of April, and at the rate I am going I don’t think I will need to fill up again during the entire month of May.  Pushing myself to get places using my own energy is making me richer and healthier.  I’m even beginning to get a nice tan!  This is generally unusual for somebody like me who spends so much time with computers.  I can’t think of a single disadvantage to my bicycle commute.  If any of you readers think of one that isn’t a complaint prompted by laziness, please share it with me!

How much money do you spend each month on gas?  How much do you weigh?  If you think either of those numbers is too high perhaps the lifestyle change a bicycle commute provides is right for you.  But you live too far away from work?  Now would be a great opportunity for you to move someplace closer (and cheaper)!  Can’t afford a nice bicycle?  Sell the car!  You’ll save money in the long run.  Thinking about making all of these changes together might seem intimidating if you are firmly entrenched on the consumer treadmill (gotta love mixed metaphors) but you’ll find that one change naturally leads to another and before you know it, you’ll be able to retire early too.

Convenience has its cost.  I would rather give up unnecessary conveniences now while I am young than give up the freedom later to spend years of my life with friends and family doing exactly what I want.  That freedom is worth more to me than getting to work 15 minutes quicker without moving my legs.

“Life is like riding a bicycle.  To keep your balance you must keep moving.” – Albert Einstein, in a letter to his son Edward, 1930

EOM April 2013

The weather is finally turning, there isn’t even the tiniest patch of snow on the ground, and flowers are beginning to bloom!  It even reached 70 degrees F this week!  The Green Pilgrim took advantage of this wonderful weather to bike to work for the first time all year.  It is only a 5 mile ride, and with the right gear I could really do the bike commute year-round, rain or shine.  Fie my laziness!  I hope to bicycle to work more regularly this year than ever before, and to show off how much I save on gas and other auto-related expenses in future posts.

But now to look back on the past.  My all-important Savings Rate for April was 75%!  Please excuse me while I pat myself on the back.  With my after-tax earnings this month, I could fully fund 3 months of retirement.  My yearly Savings Rate so far for 2013 is 65%, slightly below my 2012 rate of 67%.  We’re still seeing the effects of my significant but worthy purchases of a vacation and an engagement ring, both of which I consider investments that will return priceless experiences and memories.  Next month I hope to bring my running savings rate for 2013 back above my rate for 2012.  I think my goal for 2013 of 85% was a bit lofty, and 75% is looking like a more reasonable goal now.  I will continue to benchmark my progress against my original goal though, to keep the fire lit beneath me.

Savings Rate April 2013

Areas where I saved this month include:

  • Gaming!  Spent only $10 on a 40-day MMORPG subscription.  I plan on renting the new Tomb Raider game instead of buying it sometime this month and saving that way while continuing to enjoy my favorite hobby.  I’ve also been enjoying many free board games with good company recently.
  • Cell Phone!  Spent $10 for a month of service.  I love this new prepaid plan.
  • Entertainment!  Spent only $22 on my Netflix subscription and 2 games of bowling.

Areas to watch:

  • Alcohol, $53.  Less than my monthly average across 2012, but still can do better.
  • Groceries, $140.  My average monthly expenditure on groceries is $126.
  • Gasoline, $80.  My average monthly gas expense is $62.  I can lower this (and be healthier!) by biking more.

One last thing I want to share this month is my favorite graph.  I stripped the $$ y-axis labels, but you’ll still understand why this graph is so cool to me.

FavGraph May2013

You can see where I paid off all of my student loans and car loan in September 2012, because my savings have really ramped up since then.  I’ve also explored using tax leveraged accounts like my Roth IRA and Roth 401k to invest my savings.  What a ride it has been!

Anyway, thanks for following along with me on my path to early retirement.  Here’s to saving 75% or more of my after-tax earnings next month also!  Cheers

Web of Debt

I just finished reading another excellent book: Web of Debt.  This will not be a post about personal finance; instead I want to talk about money in general.  I have always had a lot of misconceptions about where money comes from and how it flows, and this book did a great job of disabusing me of what in retrospect I now recognize to be some rather ignorant notions.  The fact that these rather simple lessons either aren’t taught by our educational system or are intentionally obfuscated is suspicious, but at the end of the day I had nobody to blame for my ignorance but myself, and want to make up for it by sharing what I’ve learned with all of you.  These are not the book’s conclusions; Instead they are the commonly misunderstood axioms.

Where does money come from?  If you are like me, you may have an image in your mind of the government running a series of giant printing presses.  In reality, less than 3% of the national money supply is in the form of physical cash.  The 97% of the money supply not represented by physical cash is instead represented by numbers on a computer screen (or entries in a ledger).

So where does THAT money come from?  It is created when a bank lends it.  For example: the bank agrees that you owe them $500, and in return $500 appears in your checking account.  All money is created this way, in the form of debt.

It is interesting that the bank does not really have the money it is lending out.  The bank usually keeps on hand, in cash, a fraction of the amounts in its accounts (this is called “fractional reserve banking”) to accommodate withdrawals, but most of the money really doesn’t exist except in the ledger.

So let’s say you want to pay off the $500 loan you took out.  You return the debt-money and it eliminates the debt, in much the same way that matter and anti-matter annihilate each other on contact.  The ledger balances, and the total money supply of the simple closed system in this example contracts by $500, which is to say that $500 simply disappears, because money only exists in the form of debt.

But the bank doesn’t lend out money for free (even though it doesn’t really have the money to begin with).  The bank charges interest on its loans.  So when you pay back the $500, you also pay back $50 in interest.  Where did that $50 come from?  It must have been created by being borrowed somewhere else in the system.  Where does the money come from to pay the interest on THAT loan?  Good question.

On a national scale the bank is the Federal Reserve Bank, and the astronomical number we call the “national debt” is actually a measure of the money supply (money in circulation) plus interest owed.  Congress has the legal power to create money but delegated it a long time ago to a private institution called the Federal Reserve Bank (also known as “The Fed”).  The Fed is neither owned nor controlled by the government (i.e. the public) despite its name.  The Fed creates money by lending it to the government, which spends it on public works, putting the debt-money into circulation.  Every dollar (or “Federal Reserve Note”, as they are marked) in your pocket is a small part of the national debt.

So that is how your money works, if you live in the United States today.  Hopefully you found my brief explanation enlightening.  If you’re interested in learning more about the history of this system and/or alternative systems I highly recommend a trip to your local public library to check out Web of Debt.