Archives for 2017

Financial Freedom Is Time Freedom

by J.D. Roth on 10 August 2017 9 Comments

For the past month, my entire life seems to have revolved around repairs and maintenance on the new house.

Some days, I’m the one doing the work: shoveling level ground for a planned writing shed, crawling under the house to check for leaks, pruning the overgrown hedges. Most days, however, I’m meeting with other folks: roofing contractors, siding contractors, HVAC contractors, plumbing contractors, pest control contractors. For the past thirty days, this has almost been a full-time job!

“You know, you’re lucky,” a friend said to me a few days ago.

“What do you mean?” I asked.

“Most people don’t have the freedom you have,” he said. “It seems like you’re able to just press ‘pause’ on life to focus on your new home. You can shift your time and attention. Most people have to go to work every day. They can’t get eight roofing contractors out to bid on the project because they can’t take time off to meet with eight different companies.”

My friend has a point.

Because I’m financially independent, I’m able to structure my life in such a way that I have tremendous flexibility with how I spend my days. I guess this is somewhat obvious, isn’t it? I mean, I’ve written before about how frugality buys freedom, about how, in a very real sense, time is money — and money is time.

But our conversation made me consider this concept in a new way. It made me realize that what I value most about my financial situation is that it gives me the luxury to do what I want — when I want to do it.

I’ve written before about the six stages of financial freedom. The more money you save, the more freedom you have, and the greater risks you can take.

[The Stages of Financial Freedom]

I feel like a similar set of stages exists for time independence. They don’t line up perfectly with the milestones on the road to financial freedom — somebody who gets financial support from his family might have plenty of free time, for instance — but there’s a lot of overlap.

When you’re in debt, for example, your time is not your own. “Debt is slavery,” writes Michael Mihalik in his book of the same name. When you owe money, your freedom is restricted. When you work, the money you earn (from your time on the job) belongs to somebody else.
Once you’re debt-free, your time becomes yours again. Your wages go into your pocket and fund your future. But what you can do with your time is still limited by your ongoing expenses. If you don’t have anything saved, you can’t afford the time and money to pack up and travel the world. You can’t afford to stay home with your family. If you’re spending exactly what you earn, you’re essentially treading water with time.
When you begin to earn a personal profit — when you begin to earn more than you spend — then you begin to bank time. Sure, you’re actually banking money, but that money represents future freedom, future minutes and hours that you can use to do whatever you choose.
With good fortune and hard work, you’ll eventually reach the latter levels of financial independence. At these stages, how you spend your time is dictated almost exclusively by your goals and your personal mission statement. All of the weeks and months and years you worked hard to save money come to fruition. Your days belong to you.

In my case, financial independence has allowed me to structure my days so that I can pursue my priorities. Instead of having to drive to the box factory at 6:30 every morning (as I did for many years), I can get out of bed and drink my coffee while checking email. I can take the dog for a walk. I can go to the gym. I can sit in the living room and read. When I feel moved to write, I can write. And if I feel like I need to spend an entire month working with contractors, I can spend an entire month working with contractors.

Money gives you freedom not just to have the things you want, but also to do the things you want. Financial independence is temporal independence. Financial freedom is time freedom.

How to Stay on Top of Home Improvement

by J.D. Roth on 11 July 2017 35 Comments

Earlier this week, I published an article comparing a half-ass homeowner to a Money Boss homeowner. While the piece made some important points about maintaining your home, those points were clouded by overly emotional (even petty) comments on my part. This article is a revision of the previous piece with the negativity removed.

When Kim and I bought our new house — which was built in 1948 — we knew we’d have a lot of work. The inspection report revealed that most of the major systems were victims of deferred maintenance. For one reason or another, the previous owners hadn’t bothered to upgrade or maintain the roof, the siding, the floors, the decks, or the ductwork under the house. The electrical system was wonky and the windows had issues.

After moving in, we realized that we had even more work ahead of us than expected. In addition to the big stuff, there was lots of little stuff that needed attention. Knobs and screws were loose pretty much everywhere, the walls need painting, shelves need to be reinforced, the furnace is more than thirty years old, and so on.

Now, there are plenty of reasons the previous owners might not have addressed these issues. Maybe they experienced illness or accident. Maybe they were busy with their work and lives. Maybe they couldn’t afford the routine maintenance. (Maybe they were lazy or didn’t think the repairs were necessary — but that’s just one possibility.)

Because Kim and I love this place, we want it to shine. We want it to be a home we can be proud of. Right now, we have the enthusiasm all new homeowners get when they move into a place. Plus, we’re fortunate to have profited $59,000 from selling the condo and buying our “English cottage”. All of that money can be used for repairs and upgrades. (And we don’t mind dipping into savings, if needed.)

Before we become too settled, we’re tackling as many of these projects as possible. We’re putting the Money Boss ideals into practice with our new home.

The Money Boss Homeowner

The primary theme here at Money Boss is that you should manage your personal finances as if you were managing a business. By taking a rational approach to earning and spending, you can boost your profit in order to better pursue your goals. Being a money boss homeowner is a huge part of this process.

Note that I’m not one of those who blindly advocates homeownership. Owning makes sense for some people, but not for others. Generally speaking, I believe the choice is a financial wash and the decision comes down to other factors. (The financial implications differ based on where you live, of course.) Still, much of this advice is applicable whether you’re renting or buying.

According to U.S. government statistics, housing is the largest expense for the typical American family. It represents, on average, one-third of household spending. Nothing else comes close. Naturally, it makes a lot of sense to treat your home with care, to perform maintenance and upgrades that reduce future costs while also sustaining the building’s structural integrity.

A lot of people get distracted or forget about the importance of ongoing home improvement. A money boss makes it a priority.

Our Homeownership To-Do Lists

How to Stay on Top of Home Improvement

In order to balance continual home maintenance with the demands of daily life, you need to have a plan.

From my experience, the best approach is to use your home inspection as basis from which to work. Your inspector probably documented tons of issues (both major and minor) as he examined the property. His report makes an excellent source to start your to-do list. But that’s just the beginning. [Read more…]

Our New Home: The Good, the Bad, and the Ugly

by J.D. Roth on 05 July 2017 39 Comments

I know it’s been quiet around Money Boss recently, but that’s because it’s been a busy three weeks in Real Life.

Kim and I spent the latter half of June packing the condo and prepping to move. Last Friday evening, we picked up the keys to our new place. We brought the animals over and spent the night. Then, on Saturday morning, we started a four-day marathon of shifting our household eight miles south.

Our new home

We’re still not completely unpacked — and probably won’t be for a couple of weeks — but we’ve made good progress. The kitchen, bathroom, bedroom, and living room are all functional (if somewhat cluttered). All of our remaining boxes are staged in the back office (which used to be a garage). The internet is now operational. Mail has begun to arrive. The cats and dog have already learned to love the place. So have we.

After only five nights in the new house, Kim and I do love it — warts and all. And make no mistake: This place has some warts. [Read more…]

The Key to Financial Freedom

by J.D. Roth on 15 June 2017 14 Comments

It’s been a crazy couple of months for me. Since April, most of my time has been dedicated to selling our condo and buying a new home. Now, at last, the turbulent times are almost over. Kim and I closed on the condo last week, and we’ll close on the “country cottage” next Monday. On July 1st, we’ll move to the new place and a new chapter of our lives will begin.

As some semblance of normalcy returns to my world, I’ve been sorting through my Money Boss inbox. I love reading what you folks write to me (even if I don’t always respond!), especially when you share your goals and dreams for the future.

Debt is Slavery

For instance, here’s part of a message from a woman we’ll call Irene. Irene recently experienced an epiphany:

I see my parents, both of them tired and still worrying about the money. I see people in my country, counting days to retirement yet dreading the date like it’s some kind of an invisible curse that cuts off their pay by a large margin they now have to live with from month to month, even asking for a federal support to make the ends meet. I see young people whose potential is squandered just because they are slaves to the system they were told about — go to school, finish it, find a job, work your part until retirement, and then, if you’re lucky, you have ten to twelve years to enjoy…probably.

I see all that…and I want more out of my life than simply be a part of a rat race we all are invariably losing. I want to be that girl who dared to dream the impossible and then realized it.

I love it! It’s email from money bosses like Irene that keeps me motivated to continue doing the work I do.

In this case, Irene’s message struck a deeper chord with me. It reminded me of my own struggles with money.

When I was younger, I lived paycheck to paycheck on an average salary. I was deep in debt. I had no savings. I spent every penny I earned. Like many folks in similar circumstances, I felt chained to my job. I felt like I had no options.

“Debt is slavery,” argues Michael Mihalik in his book of the same name. “You drag yourself out of bed and go to work because you have to.” You have a mortgage, a car payment, credit card bills, student loans, and other financial obligations. If you don’t go to work, if you don’t keep earning money, you risk financial ruin.

Most people believe this is simply how life works. It’s the price you pay to live in a modern society. And because most people allow themselves to accept these financial burdens, they’re chained to their jobs. They lack freedom. They’re unable to take risks.

But most people aren’t money bosses. You are.

The Key to Financial Freedom

Because you’re a money boss, you recognize that it’s up to you to escape the chains of debt. You know that the key to financial freedom can be found through a simple concept: profit margin, the gap between what you earn and what you spend. And the best thing about profit margin is that it buys you freedom both today and tomorrow.

The greater the gap between your earning and spending, the more freedom you have today. This profit margin gives you power — power to make choices that might otherwise be unavailable to you.
At the same time, profit gives you greater freedom tomorrow. When you earn more than you spend, you’re able to set aside savings. This savings — your accumulated profits — grants you a wider range of options in the future.

The more money you save, the more freedom you have, and the greater risks you can take. As your financial independence increases, you chip away at the wall of worry. You’re able to make decisions based on happiness rather than dollars.

Remember my roadmap to financial freedom?

[The Stages of Financial Freedom]

A lot of folks think financial independence is a fixed point. It’s not. Financial independence is a process, with different stages along the path to complete freedom. As you reach each stage, it’s as if you’ve gained a key to unlock another chain that has tied you down.

When you reach solvency, for instance, you obtain the key that unbinds you from depending on others for financial support. When you reach stability, you unlock the chains of consumer debt. When you reach agency, you’re no longer shackled to your job. And so on.

This is not just theory. This is how money works — not just for me, but for you as well.

Buying Freedom

My inbox is filled with examples of folks who have managed to shed their financial shackles to one degree or another. For instance, another money boss — let’s call her Marie — wrote to say that she’s in a precarious position at work. There’s conflict, and she’s worried about her job. But because she’s managed to boost her income while trimming her expenses, she’s less worried than she might have been in the past.

This is a terrific real-life example of the security that comes when your work as a money boss comes to fruition. If she were in debt and/or spending exactly what she earned, Marie would feel stuck in a job that’s causing her stress. But because she’s paid off her debt and has accumulated some savings, the work conflict isn’t as scary. She knows that if she leaves her job, she’ll be fine for a while. She’s bought a degree of freedom.

No matter where you are on the road to financial freedom, I urge you to continue making smart choices. Remember to manage your life like a business. Ruthlessly guard against unnecessary expenses. Boost your income whenever possible. Never forget that your goal is to remove the chains that hold you back, to gain the freedom to do and be who you choose.

How to Do Great Work

by J.D. Roth on 07 June 2017 10 Comments

I’ve been frustrated lately with the quality and quantity of my work. I haven’t produced as much here at Money Boss as I would like — due largely to the fact that I’m selling one home and buying another — and what work I have produced isn’t as good as I would like. This lack of productivity has put me in a funk, which in turn makes me even less productive than before. It’s a vicious circle.

How nice, then, to stumble upon the transcript of a 30-year-old talk from Richard Hamming, a former math and computer professor and researcher. (Hamming was also part of the team that worked on the Manhattan Project during World War Two.) Hamming titled his talk, which he presented on 07 March 1986, “You and Your Research,” but his actual subject was how to do great work.

I read the transcript this morning during my flight from London to Portland. (I spent the past week in London, in part to give a talk of my own. I spoke to other financial bloggers about the importance of community.) Although it discusses the work of researchers and scientists, I found much of the advice applied to me and to writing. I suspect that many of you will find its lessons valuable too.

It’s a long talk, though. I know how tough it is for me to sit and read a computer screen most of the time. (On a ten-hour flight, I’m perfectly happy to devote a chunk of time to wading through pages of text though!) In order to make things more palatable — and in order to help me remember more of this material — I’m going to summarize Hamming’s message. I hope you find it useful.

What Greatness Isn’t

Most people think greatness is achieved by luck, Hamming says. They’re wrong.

Yes, great ideas and achievements all contain elements of chance, but hard work and preparation are the necessary groundwork to bring about this luck. “Luck favors the prepared mind,” Pasteur once said. And the brash Newton argued that, “If others would think as hard as I did, then they would get similar results.”

Hamming would agree that luck is no accident. Unexpected good things are more likely to happen when you do the work needed create favorable conditions for them.

Nor is greatness achieved solely by genius. Sure, there have been many brilliant scientists. But there’s been more great work done by folks who were less gifted yet willing to put in the time and effort to achieve the results.

Finally, it’s never too late to be great. Yes, many researchers did their best work when they were young. But plenty of others produced greatness later in life, after they’d had a chance to accumulate knowledge and experience.

So, if luck and youth and brains aren’t pre-requisites for great work, what is necessary? Let’s take a look. [Read more…]