Wealth and Appreciation

From the FF alumni newsletter:

Hi Financial Freedom gang! Hope this fall is off to a good start! Some pieces of news from the PUGS FF world:

1. Did you hear that I'm stepping down from PUGS? I'm doing so to teach more and feel more free to travel more next year. I'm thinking of doing a 3 month temporary relocation to Victoria BC to see if I like it. I want PUGS to grow and be of great service to Portland, unrestrained by me. 

2. I've been surveying alumni about how the impact of FF1 on their finances. I've been hearing that people are saving $100-$800 a month(!) after taking the course. That's amazing. I'm proud of the course and of all the change everyone is reporting. 

3. The one crazy outlier: someone told me yesterday that she and her husband have saved $64,000 in the 18 months since they took FF1. Holy crap. It was a combination of improved defense and much much more offense. She attributed it to a major attitude change since FF1. THAT's taking control of your finances.

4. Last week, I gave a talk at the Whidbey Institute conference Money Meaning and Power. Vicki Robin, the author of Your Money or Your Life (the book that started the FIRE movement in the 1990s) gave a talk about the policies that we need to create #financialfreedomforall. The policies included universal health care, free education, and universal basic income. Financial freedom shouldn't be exclusive and for the privileged. Super interesting. My talk was called, "Capitalism isn't the problem, you are." I was told to be controversial. haha. You basically know what I talked about: consumerism, the Story of Stuff, lagom, the carbon footprints of liberals being higher than conservatives  etc. If I get the video, I'll send it to you.  

5. What I've been thinking about: frictionless spending. Making the space and thought between a consumer's desire and their purchasing is the next frontier of market capitalism. Scary stuff.  

6. Lastly, I've been thinking a lot about the question from Module 1: "What is wealth?" I've begun to realize that how you feel while you're working towards financial freedom is just as important as the math. And so much of it about feeling grateful. Here's a quote from the comedian Ben Stein:

Now, I have found that I cannot predict the stock market except over very long periods. I cannot tell you when the housing bubble will burst - only that it will burst. I cannot tell you when the dollar will stop rallying - only that it will stop. So I cannot tell you anything that, in a few minutes, will tell you how to be rich. But I can tell you how to feel rich, which is far better, let me tell you firsthand, than being rich. Be grateful. - Ben Stein


I've been wanting to add more gratitude in my life. As we talked about in class, we all have an internal script that more money will make us happier, but statistically, it's not true.  I was hit with that a lot on my big trip around the world this year. visiting countries where people experienced traumas and dfficulties (Vietnam, Rwanda, India, South Africa) that we Americans can't imagine.  I got a strong sense that in America, we have so much more, yet are no more grateful for our lives. The leading researcher on gratitude, Robert Emmons, talks about the unhelpful attitudes we have in our country, a perception of victimhood, a sense of entitlement, and the belief that we're self-sufficient.  And our culture of consumption makes us think of ourselves as producers and consumers, instead of being held in a weave of interdependence, as receivers of gifts. And we have so much.

All this thinking as got me to offer a PUGS course, in October called The Appreciation Project. It's about the science and practice of gratitude. We'll keep a simple gratitude journal and then do a one month project where we each choose 20 people in our lives who we're grateful to, and write letters of appreciation to them. If you feel called to bring more gratitude to your life (and you live in Portland), consider signing up. Would love to see some FF alumni in that course. 

In response to JD Roth’s “The death of Anthony Bourdain: Thoughts on productivity, pleasure, and depression”

I’m doing a 3 hour workshop on Financial Freedom at World Domination Summit next week with my new friend JD Roth. I'm excited: he’s a big reason why I teach Financial Freedom. Indeed I didn’t know I had had saved enough money to "retire"until I attended his and Mr Money Mustache's WDS workshop in 2015 and did the math on my finances. Our workshop is 9am to noon on Thursday, June 28th, in downtown Portland. For more info (or to register), you should go here. (Please note: Although there’s a nominal fee to attend this presentation, JD and I aren’t paid, we’re doing this as a gift to the community. WDS is mostly volunteer run, which is part of the magic of the event)

JD runs a fantastic FIRE (financial independence, retiring early) website at getrichslowly.com. I suggest subscribing to his weekly email newsletters, it'll help you keep financial literacy in your inbox. Last week he posted a heartfelt essay called “The death of Anthony Bourdain: Thoughts on productivity, pleasure, and depression” and it's been on my mind ever since. It’s worth reading the whole thing for the deeper issues of how American society expresses the human condition and how that shows up in our relationship with money.

The Productivity Trap

In it, JD talks about the Productivity Trap, linking to a HBS essay “If you’re so successful, how come you’re working 70 hours a week?”  As I mentioned briefly in my previous blog post that my ten-week trip around the world gave me a new perspective about American culture. Here’s one thing that I thought a lot: The people I saw around the world lived more leisurely, widely spaced lives. In comparison, Americans are really busy. Do you feel busy? Americans tend to pack as many things into a day as possible: a job, a workout, seeing friends, meditation, a hobby. It’s a very full life. Perhaps too full?

In the course, we talk about lagom, the Swedish word that is roughly translated to enough. To the Swedes, lagom is better than too much: lagom food is better than overeating, a lagom social life is better than having too many engagements. It’s a mellower, more contained life.

With work specifically, the struggle is two-fold. Job insecurity is one reason Americans work harder and longer than we have in a century. But there’s another, more subtle reason: the demand that our careers provide purpose and identity for our lives. So many of us derive so much meaning from our careers: our work is supposed to express what we cared about, or as Parker Palmer writes "lets your life speak." "Do what you love" is another common phrase. But that attitude, obviously privileged and bourgois, has a shadow side: the subject (and quality) of your work is a reflection of you and how you express yourself in the world. When our self-esteem, status, and sense of personhood are tied to what we do for work, how can we not feel stressed? If you read the HBS article, you'll see how corporate culture takes advantage of that too. There are plenty of platitudes of “You are not your job” and “You are not what you do” but I don't think Americans, particularly those with education and status, truly believe that. I mean, is what you do for 8 hours a day important to you? Does it take a big chunk of your intellectual and emotional energy? 

The Pleasure Trap

JD continues with writing about the “pleasure trap,” our desire for “experiences” like travel over crass commercialism and the purchase of “things.” All of Instagram culture is predicated on the display of experiences, it's the social currency of educated urban Americans. Anthony Bourdain’s immense popularity was based on performance of “authenticity” and “experience,” we could experience different foods, cultures, and conversations through him and try to emulate them ourselves. But, as JD's essay posits “... in many ways, collecting experiences is no better (nor any different) than collecting things.”

I absolutely agree with that. After traveling around the world, I consumed the experience of other cultures (which are increasingly catering to tourists instead of locals and thus becoming increasingly homogenous, but that’s a topic for another day) and I’m not permanently better or happier than before. Or better or happier than any of the people I met who would probably never travel to see me. It reminds me of my friend Harsha, who, after doing a 10 day silent meditation retreat, told me he didn’t feel magically changed by the experience in any long-lasting way. They are just experiences and experiences, compared to the long drip of daily living, are ephemeral sensations.

I know it’s contrarian and perhaps a little aggravating for me to tell you that the purchase and consumption of experiences aren’t important or worth spending money on. JD writes "a meaningful life doesn’t consist of a series of cool experiences, or traveling or eating cool stuff… It may be the opposite — the continuity and free-time to invest in loving relationships may actually be the key to happiness." While I agree, I would go one step further: I don't think that happiness is something we should be pursuing.

Back to American fundamental beliefs, we believe in the “pursuit of happiness.” It's in our founding document. Read that again: the pursuit of happiness. Doesn't constantly pursuing something sound exhausting? Doesn't constantly reaching for something make us uncentered? If we’re always wanting, are we ever settled? Do we ever catch happiness and possess it? I’m reminded of a quote from Eknath Easwaran:

To enjoy anything, we cannot be attached to it. William Blake understood this beautifully: He who binds to himself a Joy, Doth the winged life destroy; But he who kisses the Joy as it flies / Lives in Eternity’s sunrise. What we usually try to do is capture any joy that comes our way before it can escape. We have our butterfly net and go after the joy like a hunter stalking his prey. We hide and wait, pounce on it, catch it, and take it home to put on our wall. When our friends come to visit, we say, “Hey, Stu, would you like to see my joy?” There it is on the wall - dead. We try to cling to pleasure, but all we succeed in doing is making ourselves frustrated because, whatever it promises, pleasure simply cannot last. But if I am willing to kiss the joy as it flies, I say, ‘Yes, this moment is beautiful. I won’t grab it. I’ll let it go.’

Happiness is a feeling. When it becomes the goal, we run into problems. I think the insistence that we always need to be happy is paradoxically a source of discontent. Nathaniel Hawthorne wrote, "Happiness is a butterfly, which when pursued, is always just beyond your grasp, but which, if you will sit down quietly, may alight upon you." We can’t always expect to be happy anymore we can expect to always feel full. If we do, we’ll always be disappointed. That’s the paradox of why Danes are the “happiest people in the world,” they, humorously, have the lowest expectations. I thought a lot about that as I met people on my trip: their demands on life were so much less than mine, and because of that, they could live with less.

chatting with my seatmateOn a bus to lake kivu, rwanda.

chatting with my seatmateOn a bus to lake kivu, rwanda.

Happiness, Depression, and Peace

In my 30s, I read all the books about the science of happiness. Pursued all the things: meaningful relationships, meaningful career, and sense of purpose. Did the yoga and the meditation. At the same time, I was living through a extended, multi-year stretch of depression. At the time, the depression felt unrelenting and I didn’t know if it would ever end. And then it gradually went away. Without me noticing, that oppressive blanket slowly withdrew. Depression is a complex topic and I don’t know how it went away for me (my guess is that as I got older, my hormones changed), but I know that all my attempts at pursuing happiness didn’t alleviate my condition. 

Here on the other side, the thing I’ve found is a sense of inner peace and contentment. In many ways, I spent most of my adult life trying to be good, trying to make the world better. But I’ve come to believe that the desire for “goodness” in both me and the world around me, meant by definition dissatisfaction in me and in the world around me. I was looking at what was wrong and wishing it were better, i.e. more of something else. There is that word more again. It was when I realized that the world was enough, even with Trump, even with poverty, even with loneliness, could I find peace. Being at peace with myself and world, as it is, is the sum of all my wisdom, of anything I could ever impart. 

So what does this have to do about money? Well, everything. We live in a society where literally hundreds of billions of dollars are spent triggering the feeling that we are not enough and with the purchase and consumption of things or experiences, we can be different and better. This is not a conspiracy theory. That's how marketing and advertising professionals explicitly describe their jobs. Financial freedom is taking an active stance away from that. As we talk about in the course, the inner belief in enough vs. more is a spiritual condition. Our external actions, and specifically, how we spend our money, are expressions of our internal worlds. The productivity and pleasure traps and our relentless pursuit of happiness are expressions of an internal yearning for something deeper: esteem and status in our lives, or avoidance of uncomfortable feelings we don't like. Doing the internal work to address that is more sustainable (and cheaper) than anything else. Unless we do that, nothing else works. 

Many thanks to JD Roth for his essay. Come see us at WDS on Thursday.


Notes on Financial Freedom after ten weeks of travel

The Paradoxes of Privilege, Discovery/Security, & Past/Present Selves

I just got back from a 10 week trip around the world. There’s so much to tell and I’m still settling my thoughts about the trip. The obvious first one is the incredible privilege it is to travel around the world. I met so many wonderful people, and couldn’t help thinking about the asymmetry of that they will never get to visit me like I got to visit them. The power of the American passport and the American dollar allows me to do things most people in the world can’t.

Some crazy fish dish in Hue, Vietnam.

Some crazy fish dish in Hue, Vietnam.

However, I never thought that that made them less happy than Americans. (I visited Vietnam, India, Rwanda, South Africa, Spain, Argentina, and Mexico, so my experience are specifically to who I met, obviously not the entire world). My major takeaway was that people around the world know how to enjoy life more than Americans. Almost everyone I met were at ease with themselves and the world.  In contrast, Americans walk around with pinched, concentrated faces. I think Americans work harder, worry more, and are perhaps more dissatisfied with themselves. We may have more, but we enjoy life less. My guess is that we Americans feel more responsible for our lives. We’re told that what happens to us is the result of what our efforts, so what happens to us is the moral result of our effort. That American belief gives us more individual power and opportunity, and also stress and instability. As we talk about in the Financial Freedom course, Americans have a hard time with enough. We always have a desire for more. So what does our privilege give us, really?

Another thing I thought a lot about: prospect-refuge theory. Prospect-refuge theory comes from the world of architecture and is the idea is that humans have a desire for spaces that give us opportunity [prospect] while being safe [refuge].  Innate from our time on the African savannah, our evolutionary survival as hunters depended on being able to see prey while not being seen, or preyed upon, ourselves. So architects attempt to build spaces that are both cozy/enclosed and with wide views. Think penthouses overlooking the city, or beach homes, or bedrooms with large windows. We want the experience of discovery and security at the same time.  

It occured to me on my trip that financial freedom fits within prospect-refuge theory. In the course I talk a lot about FIRE (financial independence, retiring early) in terms of freedom, the ability to own every hour of your time. You get to do what you’re passionate about, with the people you care about, in the amount that you want. You get to live your life creatively. But I don’t think I emphasize the security portion of FIRE enough. Since I “crossed over,” I simply worry about money less. Of course I still have a budget. I don’t spend frivolously. But having financial freedom means I simply feel safer in the world.

I feel privileged to go away for 10 weeks to discover the world with the security of passive income meaning, I was doing in a financially sustainable way (the environmental impact is a different matter with 43,000 miles). In some ways, the trip didn’t “cost” anything: because I was flying on miles and mostly staying with friends, I was spending the same amount I would have in Portland. And as we discussed in the course, not spending all our current income doesn’t mean we don’t spend our money; we’re simply saving it for future consumption (and saving it for freedom and security). For 20 years, I saved half my income, i.e. the 50% profit margin. My theory was for every dollar I would let myself spend now, I would give my future self a dollar (not even counting the miracle of compound interest). On my trip, I kept on thinking of the “gift” my past self gave me in financial freedom; it delayed its spending so that its future self (i.e. me now) would have opportunities to do what it wanted.

In the end, I was grateful to that past self. Hoping your future self will feel the same way about you too. Next Financial Freedom cohort runs July 1-August 31. It's online and you can do it on your own schedule in those two months. If you want to sign up or know someone who would want to take it, here's the link: https://www.pugspdx.com/july-2018-courses/financial-freedom-1.

Good to be home,


Saving for retirement is scary. But not if you break it into small numbers.

The goal for your nest egg is 25x your annual consumption. If you spend $20,000 a year, you need $500,000 to have enough passive income monthly to never have to work for money again. If you spend $50,000 a year, you need $1.25 million (see the need to reduce consumption?).

That sounds all so hard and abstract. You want it broken down into easier numbers?

The miracle of compound interest means that saving $5,000 a year and consistently earning 6% on it (after inflation) creates a $841,000 nest egg after 40 years. Using the 25x rule, that produces $33,000 in yearly retirement income. The key is earning 6% after inflation.

Of course, the miracle of compound interest means the reverse if you're in debt. You pay more and more over time the longer you owe money to someone else. And that's a big deal if the rate is 12%-18% like most credit cards. Credit card debt is a fast chute to financial failure. If you have credit card debt, you should pay that off before you even contemplate anything else in this article.

But back to $5k, 40 years, 6%. This should be the bare minimum goal you have in your financial planning. If you can save more than $5k, you shave off the years. If you earn less than 6%, you add years (I would not count on earning more than 6%, that's just magical thinking). 


It sounds so easy and yet it's so hard. First of all, people don't start saving $5000 a year at age 25. Second, even if they did, most typically do not have the discipline to do it EVERY year for 40 years. And that's just the surface of it. After that, most people invest poorly. They buy stocks when the market is hot and the news is how great the market is and then they sell when the market tanks and everyone is panicking. You can't earn the 6% by buying high and selling low. They don't have the systemic education and perspective to have a disciplined system.

Here's Dilbert creator Scott Adams on success:

"A system is something you do on a regular basis that increases your odds of happiness in the long run. If you do something every day, it's a system. If you're waiting to achieve it someday in the future, it's a goal. The system-versus-goals model can be applied to most human endeavors. In the world of dieting, losing twenty pounds is a goal, but eating right is a system. In the exercise realm, running a marathon in under four hours is a goal, but exercising daily is a system. In business, making a million dollars is a goal, but being a serial entrepreneur is a system."

I think it's also the lack of community and the lack of in-depth education around personal finance. We all sorta know to do this, but it's easy to put off because we've never been trained in it. We didn't learn from our parents and school didn't teach us. It's a huge, unconscionable hole in our educational system. Personal finance is inarguably more important and more revelant to life than Algebra II but I spent a year in Algebra II. 

$5k a year, 40 years, 6%. So easy, and yet so hard. 

Money is life energy - "Your Money or Your Life"

One great idea from the book "Your Money or Your Life" is the concept of "real hourly wage." You probably know your nominal hourly wage, what your employer pays you. The book makes you calculate how much extra time and money it takes for you to make that hourly wage. First, figure out federal, state, social security, and local taxes and subtract that (around 42% total for Oregonians). Add in commute time. Costuming, i.e. work clothes. Transit costs, either public transit or auto payments. Money you spend due to work stress: drinking, expensive vacations or trips, gym membership, massages, etc..

Do your own calculation. What you will come up with, after all of that, is that your real hourly wage is much less, probably closer to 1/3 of your nominal hourly wage (remember taxes take out a huge chunk before you see anything). So if you make $30 an hour, you're actually making maybe $10 an hour. So when you spend $20 on a meal, you're choosing to spend two extra hours of your life working. If you spend $90 on a piece of clothing, you're choosing to spend 9 more hours of your life working. Reframing spending money as how you spend your life hours is powerful.

A life of "ascetic virtue"

Someone in my current cohort of Financial Freedom 1 asked: "Wait, so you are saying that with a life of ascetic virtue I can quickly (somewhat quickly) 'retire' to live a life of… ascetic virtue?"

I guess other people see the way I've lived my life as "ascetic" or "virtuous." But to me, this goes back to the concept of wealth. What does it mean to be wealthy? I'd rather be wealthy in time to do what I want to do, with the people I want. I take naps every day. I play soccer 5x a week and eat lunch with friends. I nap. I get to do creative endeavors like PUGS or stupid politcal books. In April, May, and June, I'm travelling around the world, visiting friends on 5 continents.

That to me is more luxurious than more belongings and consumerism while having to work at a 40 hour a week job for 40 years. Time is the only wealth to me, especially after seeing my dad die early and not do the things he wanted to do.

Then again, I sorta like the idea of ascetic virtue. :)


How much Social Security will you get?

About 30% of Americans aged 55 or over have no retirement savings. Another 26% have less than $50,000 of retirement savings. Most people will depend on Social Security as their main source of retirement income. 

The average Social Security benefit is $1,317 per month. Baby boomers retirements (about 10,000 a day!) are now reducing the number of workers paying into and adding people taking out of the system. As a result, the ratio of workers to retirees dropped from 3.4 in 2008 to 2.9 by 2012, and is projected to decline as low as 2.1 workers per retiree by 2035.

By 2034, there will be no more social security "surplus" and benefits will drop by 25%. So benefits will be just over $1,000 a month, not nearly enough to live on. Congress has been long talking about doing something about it, but the only real solutions are raising the retirement age or increasing social security taxes on working people.



If you want to an estimate of your Social Security benefits, go here: https://www.ssa.gov/benefits/retirement/estimator.html

One question I always get is: why didn't our parents talk to us about this? I suspect that there are a number of reasons. One, most parents don't like laying their money stresses on their kids (do YOU talk to YOUR kids about money?). Two, it's impolite to talk about money in American society so it becomes the silent pervasive and ubitiquous thing that everything thinks about but no one discusses. Three, previous generations have lifetime secure employment and pensions, which took the responsibility away from them.

How much will you need per month in retirement? If you need more income  than Social Security, you'll need to plan for it. 

For millenials, saving $5,000 a year and consistently earning 6% on it (after inflation) gives you $841,000 dollar nest egg after 40 year. Using the 25x rule, that produces $33,000 of retirement income yearly. Starting to save later means you save a lot less. Call it the miracle of compound interest. 

Look at the chart below. This is what compound interest does at 7% (what the stock market has earned in the last 100 years).


The key is finding investments earning 6% after inflation. But this should be the bare minimum goal you have in your financial planning.

The Most Important Number in the World

Do you know your savings rate?

Your savings rate is the percentage of income you don't spend that you put away for retirement, emergency expenses, and rainy-day savings. It's the money you're paying to your future self. You know, the person who's probably not going to be working from ages 65 to 85. 

In 1981, the average American saved 10.9% of their post-tax income. Readers of this blog and Financial Freedom alumni will recognize this chart, which shows how many years it takes to reach financial independence based on savings rate:


With a 10% savings rate, you work 45 years, say from ages 20 to 65, and have enough money to sustain your life in retirement. 

Do you know what the savings rate is today? (Here's a hint!) As of November 2017, the average savings rate is 2.9%. Now look at the chart above again. With a 2.9% savings rate, people will never retire, or when they do retire, they will not have enough money to survive. 

Don't count on Social Security filling the gap, either. In 2029, it runs out of the surplus we've built for decades and will only pay out at 71% of current levels. That's roughly $1,200 a month, though that number will vary depending on your individual circumstances.

What's perhaps scariest about a 2.9% savings rate is that we're in the midst of an eight-year economic boom, one of the longest post-war economic expansions in our history. Unemployment is at a historic low. So what happens when we hit a recession and people lose their jobs? For most of us, it won't be pretty.

That's why your personal savings rate is actually your most important financial number. You should be planning your entire finances around it.

In the FIRE (Financial Independence, Retire Early) world, there's a saying: "Pay yourself first." It means that any time you get a paycheck, you budget for your personal savings rate before you spend a single penny. Before you pay rent, buy groceries, or go out to eat, you put money aside for your future self. 

Most people do the reverse. They budget for housing, food, entertainment, and everything else, then leave the rest to savings. You see the problem with that already: it's very easy NOT to pay yourself at all. So principle #1: Pay yourself before you pay everyone else. 

Paying yourself first requires a complete shift in perspective: prioritizing investing into your future self. But the side benefit is more security and peace of mind in the present. From the Atlantic:

"A 2014 Bankrate survey, echoing the Fed’s data, found that only 38 percent of Americans would cover a $1,000 emergency-room visit or $500 car repair with money they’d saved. Two reports published last year by the Pew Charitable Trusts found, respectively, that 55 percent of households didn’t have enough liquid savings to replace a month’s worth of lost income, and that of the 56 percent of people who said they’d worried about their finances in the previous year, 71 percent were concerned about having enough money to cover everyday expenses. A similar study conducted by Annamaria Lusardi of George Washington University, Peter Tufano of Oxford, and Daniel Schneider, then of Princeton, asked individuals whether they could 'come up with' $2,000 within 30 days for an unanticipated expense. They found that slightly more than one-quarter could not, and another 19 percent could do so only if they pawned possessions or took out payday loans. The conclusion: Nearly half of American adults are 'financially fragile' and 'living very close to the financial edge.'”

A healthy personal savings rate moves you away from that ledge. It's buying peace of mind in the present while buying your freedom and security in the future. 

In my course Financial Freedom 1 Online, we talk more about savings rates and the core principles you need to follow to achieve financial independence. The next cohort runs February 1 to March 31. 

Do you know your personal savings rate?

The Ownership Experience


Thank you for reading and commenting on the first two Financial Freedom Newsletter. It's been really fun to talk about this. I've taught PUGS Financial Freedom six times in the last year and I've found that so many people have never gotten any education about money and I've found teaching how to take control of your financial life so rewarding. It's been a gift to me.

To recap, I achieved financial independence 3 years ago at age 42 after living on $20,000 and investing everything else for twenty years. In essense, I bought time instead of things or even "experiences." And with the freedom to do what I want, I started PUGS.

Here's a short case study of Olivia and Devin, who took the course this year. Two things I love: they're now able to talk more openly about the financial future. And Olivia has the knowledge and plan to retire in 16 years! 

Q: You talk about the "only two (or three) numbers you know to achieve financial freedom"? What are they?

A: Personal finance really relies on two numbers, which creates the third. You need to know your annual salary and your annual expenses. As we talked about in blog post 1, most people know their income but don't keep a budget and have no idea what their annual consumption is and how to control it. When you subtract your annual consumption from your annual income, you get your annual profit. Once you have your annual profit, you can project how long it will take for you to retire. If you have an annual profit of 50%, you achieve financial freedom in 16 years. 

I know many of you have this first objection: "But Douglas, there's no way I can save half my income each year!" That may or may not be true, but to paraphrase former Blazer Rasheed Wallace, math don't lie. Since there are only three numbers to play with I have only three suggestions:

  • My first go-to is: are you keeping a budget? Do you know what goes to needs, what goes to wants, and what goes to bullshit? That's a core exercise in the course. How you cut into all three of those categories will reduce your consumption.
  • You can find ways to increase income. We talk about having an entreprenuerial mindset to your career, possibly starting your own business, or at least running a side hustle. Your current income is in no way the cap on your income potential. 
  • Lastly, you can target a different number of years to financial freedom. 

Is it worth it? Two answers. First, yes. Working towards financial independence means you create some discipline around money in your life and get to spend your life doing what's valuable to you, on your terms. Spend time with family. Travel. Create your art. Make a difference in people's lives. Second, the alternative is SO bad. If you don't plan for financial independence, what happens as you get older? The average American has less than $60,000 in their 401k when they hit retirement age, not nearly enough to live for the following 20 years, even with Social Security. They can either rely on the income of their children or rely on an increasingly fraying social security net. I think it's much better to provide income for your future self now.

I'm almost done with creating the online course! I'm testing out the links and prepping the online community platform. The course will run November and December and it will help people start 2018 with a sense of empowerment over your financial future. And the people I know interested, would make a great cohort. Stay tuned and watch your email for a notice when I open registration. 

I would love your comments on this blog or on social media. Thank you again for this opportunity. 

The Transformation

Thanks for reading last week's article about how I reached financial independence at age 42 by living on $20,000 a year for 20 years. I got a lot of great responses and interesting comments. I decided to follow up with an article about what happens AFTER you reach financial independence.

This weekend, I asked on Facebook: "If you didn't have to work anymore, what would you do with your time? Assume living at your current standard of living, that you didn't win the lotto or something." You can see what people said here.

It's interesting to note that people don't say that they would do nothing. Independent of needing money, people want work to provide meaning and purpose in their lives. The famous blogger Mr Money Mustasche believes the real purpose of work is to create, that our fundamental desire as human being is not to be lazy but to engage in continual creative effort and learning.  You can see that desire in what people wrote. 

Same with me. When I got laid off 3 years ago, I looked at my finances and realized that I didn't have to work anymore. That's when I founded PUGS. (Actually, I had started PUGS as a side hustle a month before getting laid off, but hadn't intended it to be this big of a project). Here's the interesting thing: once you achieve financial freedom, you have to be honest about what's truly important to you. You don't have anymore excuses for doing what you care about.

My mission in life, one that I wrote in 2000, after my layoff/firing as a intellectual property lawyer in San Francisco, is "I want to help people learn and feel closer to their communities." When I hit financial freedom, I decided to live my life fully that way. That's why I decided to make PUGS. 

That's not to say I do it full time. Again, my health is important to me. So I play soccer 5 times a week. My family and friends are important to me. So I travel about once a month to see them. I also get to teach what I want and when I want. That's the transformation you get when you can make decisions with your life independent of money. 

Most people, when asked what's important to them, say these things:

  • Friendship

  • Family

  • Freedom

  • Health

  • Meaningful work

  • Privacy

  • Community

  • Philosophy of Life

Most people have never been asked to contemplate the question"What do you hope to achieve in your life and what kind of person do you want to be?" If you get a moment, take 15-20 minutes and just write freely, without regard to grammar or spelling. Be concrete: who would you spend more time with? (I go see my parents every few months) How would you live healthier? (I go play soccer every weekday) How much would you sleep? (I take a nap everyday) What places would you see? (This year, I've visited Vancouver, Chicago, Montreal, Spain, Portugal, Berlin, Brussels, and Iceland). The point is not all the cool things I've done. The point is to imagine the life you want, the values you want to live by, and way you want to contribute to this world. It's also the things you get to opt out of: the 40 hour workweek, two weeks of vacation, participating in an economic system you have qualms with. If you do this exercise, you'll see the transformation that's possible for you.

All it takes is financial freedom:

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Haha. Leave a question or a comment below if you want me to answer it my next blog post. In it, I'll answer a few more of your financial freedom questions and talk about how to make it all happen. That will happen in the couple of days. 

The Opportunity

Hey, I'm Douglas. I'm the founder of PUGS.

I created PUGS three years ago after retiring at age 42. Of course, the first question people ask is how I retired at age 42. Here's the story.

I grew up in an immigrant family who fled the Communists for the U.S.. Money was tight. When I was in college, my personal budget was $5,000. When I graduated, I got a job as a paralegal at the Justice Department and made $25,000 and spent $15,000. I felt rich! I was spending literally three times more than I was used to. I decided then and there, philosophically, environmentally, financially, that that amount was **enough** to make me happy. So I decided that that was what I was going to spend annually from there on out. Since then, I've had jobs as a corporate lawyer at $150,000 and jobs as a Quaker schoolteacher at $30,000 and everything in between. But each year, I only spent $15,000 (now $25,000 through inflation) and invested everything else. When I got laid off 3 years ago, I realized that I had made enough money not to have to work anymore.

A major key is keeping a tight lid on expenses: I need a smaller nest egg to produce the annual passive income I need. Also, having a rigorously tight budget means I had a lot of freedom even during those 20 years. I had two separate periods where I didn't work for 2 year stretches because I wanted to switch careers. 

The big thing I've discovered about financial freedom is you get to do what you truly want with your life. Do you care about your health? I play soccer and take naps everyday. Do you care about your relationships? I get to travel to see family when I want and vacation with my friends when I want. Do you want to make a positive impact? I get to create PUGS and enact the vision of what I want in the world. I think the best thing you can buy with your money isn't things or experiences, it's your freedom.

Visiting my former student jasper in sydney in 2014

Visiting my former student jasper in sydney in 2014

People can't imagine saving enough to gain financial freedom. Or thinking about money causes a lot of anxiety so they avoid it. But I think those attitudes and beliefs being from lack of education, which cause a lack of empowerment. Most people weren't taught financial literacy when they were young. Their parents didn't teach them and they certainly were taught this in school. But avoidance is a really bad strategy.  56% of Americans have less than $10,000 in retirement savings. Looking at people closer to retirement age, Americans average $60,000 in their 401k at retirement. That's not nearly enough to fund 20 years of retirement, especially with the upcoming crisis in Social Security. 

I got a number of outstanding questions when I asked the PUGS mailing list what questions they had about Financial Freedom. 

How should I be investing my money and thinking about the future? How should I keep track of my spending without feeling like I'm counting pennies? The way I think about it is annual profit. Take a company, say Apple Computer. When you ask Apple Computer who much they made last year, they tell you their profit ($37 billion in 2016, BTW). They take their gross income (sales from phones and computers etc) and subtract all their expenses (salaries, materials etc). But when you ask a person how much money they make, they tell you their salary. In other words, they tell you their gross income without thinking about their expenses. I want to offer a new way of thinking: what's your annual profit? How much money do you have after all your expenses? That's what you're using to buy your financial freedom. I think that shift in thinking helps you stop thinking about counting pennies and towards building a future you want. 


How does a couple whose individual relationships with money differ negotiate and deal successfully with their differences?

How do I change my relationship with money/scarcity and how to know what "enough" looks like (spiritually and financially).

How can I get out of the cycle of saying (every single month): My god, we spent a lot! Next month we have to do better?

These are all great questions individually and yet there's a common theme to them. Money is never about money; it's about your relationship to money. We all grow up with money scripts, unconscious stories we've learned and then tell ourselves about money: it's evil, or it's love, or it's never enough. Part of financial freedom is becoming aware of those money scripts and learning to tell a new story of money in your life. For couples, understanding that they come with different scripts and desires is so important to coming to a joint understanding of what they want together. 

The best personal finance book out there is Your Money or Your Life. It talks about how "most people’s money problems are actually connected to a lack of fundamental direction in their life." If you deepen into your values and what you really care about (your children, being healthy, learning, making a difference), knowing what "enough" is and actually keeping a budget becomes a lot easier. 

In the next blog post, I'll talk about the how thinking about money is really thinking about deeper questions about your sense of purpose and discovering what makes you happy. 

Thoughts? Feel free to add a question or contribute to the comments section below.