Monday, June 30, 2008

Peak Oil and Retirement

I know I've mentioned how my landlord thinks the world economy will crash and burn in the next 20 years, based on peak oil production occurring now. (In short, the premise is that the world economy is based on oil production, and that when the oil is gone, the economy goes poof.)

So with this in mind, how should one invest for their retirement? In 20 years, I'll be almost 60 years old. First, I don't hold any illusions about receiving social security when I'm 62, and second, I'll be in a really, really bad position if all the saving I do now leaves me with nothing because of an economic implosion.

I have a small family, and I don't have (and don't plan on having) kids, so who will I be able to fall back on? Will I end up homeless? Do I need to take survivalist training courses so that I can live in the country and garden and hunt and be self-sufficient?

Yes, it's pretty extreme to think the economy will go poof in the next 20 years, but while I don't fully agree with the peak oil hypotheses about what will happen to the economy, I can't help but wonder. The arguments do have merit. How long will it take the US to really get behind alternative energy sources and alternatives to driving cars that rely on gas alone? Will it happen before or after a major economic depression?

Will I still have retirement savings at 60?

If the implosion does happen, will I be aware enough of what's going on to cash out my money so that I'm not financially stranded?

I'm not speculating on all of this as a way to say "oh, well, I'm going to spend my money now." I'm just really trying to look at the big, long-term picture. My plan has always been to support myself and be self-sufficient. While I plan to get married one of these days, I still plan on having my own financial net.

Having a semi-substantial cache of cash under the mattress may not be such a bad idea...

Saturday, June 28, 2008

Side Income Spectacular

I know I'm self-employed. However, when forecasting what I plan to make this year, I only forecast based on what I expect to earn from my primary client. All other clients are what I consider secondary income, and what others might call snowflake income.

After working a little over 40 hours since Sunday (though it feels like far, far more), I decided to play around with the Crack Spreadsheet and see how my side income is stacking up.

Drumroll...

Before getting paid for the project I will finish Saturday, I've already earned 10% of what I've earned from my primary client. This number will almost exactly double once I bill and receive payment for the project that's kept me crazybusy this since Sunday (and which will, mercy exists -- this project has been rough, be finished tomorrow). Which will mean my income will have been bolstered by 20% from my side projects.

Not too shabby.

Aside from what I'm billing for the crazybusy project, I really didn't think all the other streams of income added up to that much. I've sold more jewelry than I realized, and I've made more on the website work than I'd realized, too. Not a bad realization!

So, it just all goes to show just how much a little here and a little there can add up.

Thursday, June 26, 2008

When is it Enough?

I haven't mentioned it, but I've been working on a new, very short-term editing project for a new client. It pays well. With that income for this month, I'm on track for June 2008 to be my highest income month ever. Which is pretty cool.

Except... Bills. Debt.

My snowball fund is pretty healthy right now, and I need to transfer it to one of my debts.

My economic stimulus check should be delivered next week, and it should go to savings or debts.
And my emergency savings account isn't yet quite at the level I'd like, so I should put some of the largesse there, too.

But really, I want to go and spend some of this fantastic cash!! I'm working a lot and hard this month (hence the sparsity of posts...), and I want more than the measly 10% I give myself for non-primary client work. I've talked about taking a week of vacation in the next month or so and going somewhere, and I'm probably going to visit a friend in mid-July (not the beach vacation I want, but it will be relaxing and sunny).

And then I started thinking: when does the scrimping end?

I know that once my debt is gone, I will be scrambling to hyper-fund my condo downpayment fund and retirement savings accounts (and thank the government for allowing us self-employed folks SEPs in which we can contribute something like 25% of our income, even after funding a regular IRA account). Which means I'll switch from scrambling to pay off my debt to scrambling to fund two other savings accounts.

When does it end?

What level of savings do you have to have to feel secure enough to say "hey, I just earned more money this month than ever before, and I'm going to celebrate and not feel guilty because everything is paid up, my savings accounts are great, and the retirement funds are maxed out"?! Is the secret in the balance (which I suspect, and this is how I manage my finances anyway), or is there really a dollar amount on this? Is it the price of finding financial freedom?

I'm not usually like this about my finances...it's just this month is turning out so great for me financially, and I wish I could just go do something frivolous and expensive and not worry about the cost. As it is, with the extra 10% I will have (once everyone is billed and paid up), I will probably just go buy a new pair of shoes (which I desperately need).

Sunday, June 22, 2008

Carnivals and Festivals

So, I had a bit more time to write this past week, and I participated in a few carnivals and festivals. I participated in the following:

Carnival of Money Stories over at MoneyNing.

Money Hacks Carnival over at Mrs Nespy's Frugal World. Mrs. N used a clever theme of Music of the 80s. Ahh, the memories of when those songs were brand new...sigh.

Carnival of Financial Planning over at The Skilled Investor.

Thursday, June 19, 2008

How Do You Name Yourself?

So. I'm at a point where I need to create a proper business public profile for myself. My business feels like it's on the verge of turning the corner of true success, and I'm thrilled. This means I need to behave a bit more like a serious business owner (instead of the accidental business owner I sometimes feel like).

I need a clearer demarcation between personal and professional lines of communication. I need a website. I need an email beyond my personal Yahoo account. I need business cards.

All of these things, I can handle. In fact, I've already played around a little with designing the website.

But the real hurdle is this: how do I choose my business name?

I have a couple names currently at the top of my list, still, but I'm still not certain. Whatever I choose will be with me (hopefully) for quite a while to come, so I need to choose a name with the right gravitas and business sensibility and uniqueness. A friend suggested "[my last name] Communications", though I shot this down pretty quick, since my last name is as consistently mis-spelt as my first name is mis-pronounced...aka 95% of the time.

Another major factor is domain availability. One of my initial favorite picks was nixed because two other US businesses already have that name, and the URL wasn't available. Being anything less than #1 in a Google search for my business name isn't an option (and my current top pick definitely fits the bill), and I do not want any confusion over which company is mine. This isn't so much an issue now, since all my new clients are based on referrals, but I'm looking forward to my even more illustrious future.

The perfectionist in me is so hesitant to just buy my current top pick, because I have this self-doubt that tells me that as soon as I publish the website, print the business cards, and formally announce the business name, I will come up with some other, snappy, oh-so-perfect name. Why can't I be a snappy copywriter instead of a kick-a$$ technical writer, editor, and budding web designer?

Part of me wants to handle this now and part of me is hesitant to make such a big decision. While I know I can always change the name in the future, this isn't something I want to approach as a trial run or as something disposable. This is my business, and I'm going to do it right...the first time.

Wednesday, June 18, 2008

How to Financially Plan a Mini-Retirement: The Uber-Basics

Before I took my year-long mini-retirement, and spent over nine of those months travelling, people frequently asked me how I could afford to take a year off. I was appalled when people would say “how much did you save?” or “how much does the trip cost?” That was information I’d previously only shared with a couple close friends.

But you, dear reader, get to learn the theory of how I did it.

First: I figured my daily budget was $50/day (remember, this was for a trip in 2004-5). I knew that some places would require far less money, and some would require far more (ahem, UK and Paris). This amount included lodging, food, local transportation, and whatever I wanted to do or buy.

Second: I figured out a travel budget based on where I wanted to go and what I had been able to price out online. My itinerary changed at the beginning of my trip (during the four months I spent in Argentina, the 2004 tsunami occurred), though I think I kept the same travel budget. I did this because I decided to just spend more time in Europe (5-6 months, instead of two), and I knew I would be travelling around a lot there.

Third: I figured out how much I needed to cover my bills each month, and then I dumped that money into a second checking account and set-up automatic bill pay for the first of every month. This was smart, though I needed to check the minimum balance of my main credit card more often, as I would use it to buy travel tickets (because of the insurance the card provided), and I didn’t always transfer that money over immediately. Thus, my minimum payments changed from time to time, and I didn’t always catch it right off…


Fourth: I put aside some money in a "Come Back Fund." The first time I went overseas, I spent every last penny (this isn't a joke) and came back penniless. I was barely 19, and when my flight from Sydney was delayed and we weren't given food vouchers, I barely had enough money to buy an apple for $1... This first trip was literally done entirely with cash -- I converted all my money to Australian dollars and traveller's checks before leaving. Traveller's checks! I didn't have a credit card and this was before bank debit cards were introduced. Thankfully my mother took me in when I came back and lent me money until I had worked enough to pay her back and get my own place.

That's really all there is to it: plan your expenses, plan to take care of any ongoing expenses (e.g. debt, insurance, home taxes, whatever it is), have a plan for coming back. Period.

Even if you don't plan on travelling, you still need to figure these things. When you have time on your hands, you spend your money differently and that sometimes results in more money being spent -- even when you stay at home.

While I had begun saving for my mini-retirement out of my work income, much of the mini-retirement was funded through a small inheritance and me selling some of my hi-tech stock.

For me, the hardest part was deciding where to go during my mini-retirement. Taking it was one of the most remarkable experiences of my life, and it really, truly changed me. I had had a lot of negative things happened in my life the year before I left, and taking my mini-retirement restored my sanity, my faith in myself, showed me that what I had gone through wasn't so important in the great scheme of the world, and (most importantly) it showed me the sheer options the world and life has to offer.

So, all you need to do is sit down and figure out the financial aspects of a mini-retirement and how you want to spend your time. While taking one is a big deal, figuring out how to do it isn't. For further reading, I recommend Six Months Off (especially recommended for those with families -- this book isn't geared towards younger or single people, though younger or single people may still find it useful) and Vagabonding (this is obviously geared towards long-term travellers, though it also has a wealth of general travel information and planning aspects, too -- the author is a well-respected and popular writer among travellers).

What would you do if you could take a year off?

Tuesday, June 10, 2008

The Value of Being Friendly and Chatty

No, this isn't about networking (though it certainly applies to that, too). This is about me being a chatty person and my last trip to the dentist.

I've gone to the same dentist for over 15 years. I love them. They love me. I've referred several friends there over the years, and back in the hi-tech days, I used to recommend my dentist to anyone who'd ask (we had an email list where you could ask for recommendations). Somehow my dentist found out that I'd done that (I think someone quoted what I'd written for the internal wiki). Ever since then, I get discounts. Note: I quit the hi-tech job in 2004.

The last time I went in, they didn't charge me for my post-cleaning consultation ($56, I think), and they gave me an $80+ discount for paying in full (I also had two small fillings).

Because I'm on good terms with my dentist, I saved over $130 on that last visit. Saving the $80 for paying immediately definitely makes up for having to put the bill on my credit card (my work wasn't stabilized enough then for me to feel comfortable using my "emergency" fund for the visit).

So, I saved over 35%, just because I've built a good relationship with my dentist! I know they give discounts for paying in full at the actual visit, but I'm not so sure the discount is quite the percentage I received then...

I remember having annual reviews, back in the hi-tech days, where the biggest criticism on the review would be me being chatty. However, back then it helped to get things done (when you have a friendly relationship with someone, they're far more likely to acquiesce to a "can you just give me a minute and squeeze what I need in now" request), and the same quality still gets "things" done (saving over $130 at the dentist -- which was a pretty significant percentage, considering my total bill).

So yes, just like telling people what you're up to makes sense from a business networking point of view, it also makes financial sense to be friendly.

Thursday, June 5, 2008

Are You Ready to Budget? A Quiz

1) How do you feel about giving up your morning Starbucks?
a. Uh, no.
b. Can I just get a regular instead of a venti?
c. OK, they are really expensive.

2) Do you think you have money you don't realize?
a. Are you crazy? I wouldn't be in debt if I had extra money.
b. Maybe, but wouldn't I already know that?
c. Probably, but I don't know where to find it.

3) Can you go without recreational shopping for a month?
a. I'm just stopping this quiz. That is an unrealistic and cruel question.
b. Can I go just once?
c. It would be hard, but I'm willing to try.

4) Are you willing to give up other luxuries, for the sake of your budget?
a. Life's not worth living without regular luxuries. Period.
b. Depends. I'll have to choose which ones to give up.
c. For the sake of my budget, yes, I think I can do this.

5) Your favorite author/musician has a new book/cd out. You:
a. Rush out and buy it immediately in a bricks and mortar store, at full price.
b. Watch an online store like Amazon.com for a used copy.
c. Get it from the library/get it from a friend/wait until paperback and then buy it used.

6) You just blew your budget for the week, taking a friend out for their birthday. You:
a. Don't change your budget at all for the next couple weeks. Didn't pay cash anyway, because that's what credit cards are for, right?
b. Try to spend less this week.
c. Adjust your spending money for the next few weeks to offset this.

7) It's grocery shopping time. Do you:
a. Grocery shopping? I only eat out.
b. Shop wherever is convenient, though this sometimes means spending a bit more than planned.
c. Shop in a store that has the consistently lowest prices, and try to remember to use coupons.

8) Do you think it's possible to live your lifestyle on less money?
a. My lifestyle on less money? HA! No way, Jose.
b. I'd like to believe that's true.
c. I suppose it's possible, though I wouldn't know where to start making those changes.

9) What does this statement mean to you: "I have an emergency fund"?:
a. What's that?
b. I wish I had one.
c. I have a little money in my savings, but it wouldn't cover me if something big happened.

10) Do you save for retirement?
a) I expect my spouse to do that/I expect to win the lottery/I expect to inherit money.
b) I saved a little before, but I haven't contributed to an IRA or 401k in a few years.
c) I save a little, but I'm far from maxing out my contributions.

If you answered mostly As: while you're not ready to start following a budget, you probably need one. Suggested reading: Lessons I Wish I Learned Earlier and Financial Lessons I Learned Early.

If you answered mostly Bs: you're already taking some budgeting steps and you're conscious of doing so. If you're in debt, you could probably find more money to put towards your debt. Though since you might not know where to start, getting a book (like Get A Financial Life) would probably help tremendously. Suggested reading: Debt Reduction Strategies That Work.

If you answered mostly Cs: you are definitely ready to budget. You are already pretty keenly aware of how you spend your money, and you look for deals. You probably just need a good nudge to adjust your weaker habits, and to improve your better habits. Be careful to not step over the line of frugality and into cheapness. Suggested reading: Frugal vs Cheap.

This week's Carnival of Personal Finance

Pinyo over at Moolanomy hosted this week's Carnival of Personal Finance, and he included my article Reasons to Cheer the Higher Price of Gas.

There are a ton of other great articles, so hop on over and have a look!

Sunday, June 1, 2008

Reasons To Cheer the Higher Price of Gas

No, this isn't a joke.

I came across this article over at Market Watch, and I think it's (mostly) pretty great. It goes far beyond the moaning over the current price of gas, and makes predictions as to what may likely happen as the price of gas hits $8.

The article also made me think: what is your threshold for paying to drive? At what point will people realize that driving is a luxury, and not a need? How much higher does the price of gas have to go before you really realize that to save money you just need to not drive alone, or to drive less?

I've seen people comment on "Oh, but it takes longer to carpool/take public transportation." Well, maybe...maybe not. Let's look at an example I experienced firsthand: a little over a year ago, I came back from living abroad and I stayed with my mother for a few months while I got re-settled. My mother works somewhat close to my primary client's office, and we would carpool together. There were times when my mother commented that she would get to work 20 minutes early because she'd been able to use the carpool lanes on the freeway. This, after having to get off the freeway, deal with street traffice, drop me off, and then get back on the freeway. Of course, some days the time savings was a bit less, but she was never late to work because she carpooled with me. In fact, I got her to start leaving a few minutes later (I'm not a morning person and I'll take an extra five minutes of sleep if I can), and she was still early to work!

How about two more examples, this time with public transit? I live close to downtown Seattle, and my primary client is on the eastside. The bus I take to get there uses a private entry to the freeway, allowing it to bypass around a mile of car traffic. Yes, it gets caught in that traffic when it merges, but compare the time savings for even that single mile. When I lived in another part of Seattle, it used to take ages for the bus to cross the couple miles on the freeway, so that it could connect to another freeway (this sounds longer than it is -- the total commute for me was somewhere around 8-9 miles). Eventually, a wonderful solution came up -- the city designated a lane on the freeway for the exclusive use of the buses. So, what would previously take as much as 20 minutes was reduced to a couple minutes. It also made commuting in a car longer, because cars had a lane taken from them.

Aside from potentially quicker commutes, think about this: haven't had time to read a book? Haven't had time to return an acquaintance's phone call? Do you wish your stress level was lower? Do you wish you could take a nap in the afternoon? Well, public transit enables all of these things. I generally read at least two books per week -- much of it while commuting. I don't generally have phone conversations on the bus, though I do occasionally. While I don't even know how to drive, I've seen the stress of drivers I've ridden with, and I'm thankful I don't have to deal with the jacka**es I've seen them deal with. I also regularly take naps when I take the bus back to Seattle.

Sure, there are some jacka**es on the bus, I know. I've sat next to the loonies who use styrofoam as a microphone to broadcast their views on whatever tickle's their fancy. I've sat in front of loonies singing country songs and moaning about government conspiracies.

I know some people will say "oh, but those are exactly the reasons I don't ride the bus...I don't want contact with those people." I say PFFT! Stop making excuses. Especially if you live in the suburbs, you really don't have to worry about this. Nearly everyone on the bus I take to my client's office is pretty vanilla. And really, the occasional loonies make the ride interesting -- I've gotten some pretty entertaining stories.

Yes, I know some people live places where public transportation isn't great. But that doesn't mean that you need an SUV in the city (really, how many people with SUVs really use them as a Sports Utility Vehicle???!). Get involved in your community and help drive the creation of a good/better transportation system. Just because one doesn't exist doesn't mean that driving a too big car too often is justified.

There have always been times when I wished I could drive. Yet none of those wishes has revolved around just being about to get to work more quickly. Sure, the bus to my client's office doesn't go exactly the route from the bus stop to the office (obviously), but I use that time for other "me" things. Sure, I like it when I can carpool to my client's. I also try to plan when I ride the bus, so that it won't take longer because of rush hour traffic (this can mean the difference between a 20 minute and a 60+ minute ride).

I once figured out (around 2002) that, living in Seattle where parking alone is outrageously expensive, it would cost me a good $500-700 per month to have a car. This included: car payment, insurance, gas, parking. Actually, it didn't really include parking because there was free parking where I lived then. When we go to the grocery store, we say "Is this loaf of bread really worth $4?" and make a decision that generally includes finding a cheaper alternative. Is being able to drive yourself around in a car, without carpooling or sharing that expense (e.g. family) really worth what it costs to rent an apartment in an urban city?? Because really, when I figured out the $500-700/month cost, I was paying under $800 to rent a one bedroom apartment.

So yeah, if people start rethinking their lives and choosing sane alternatives, it's a win-win situation: cheaper for the person, better for the environment, and a wake-up call to the car companies that refuse to aggressively pursue viable fuel alternatives.