On Bowling Alleys and Handcuffs

I've spent a lot of time thinking about it. A LOT.

I want a bowling alley in my dream house. Wide, freshly polished lanes that I can go to anytime and hurl heavy objects around to relax. Right next to it will be a small Irish Pub, dark and cozy with wooden booths. And maybe a helicopter. Or two.

Aww yeah, I'm feeling good already.
It's a fun place to visit in daydreams, but I wouldn't want to live there.

Why? There's a term I'm thinking of: Golden Handcuffs.

It's used in business to describe a system of payment that, while incredibly generous, effectively locks the employee into that company. Think about getting a million dollar bonus the day you are hired, but having to give it back if you leave the company within five years. This doesn't just apply to business. The more financial obligations we have, the more our lives are run by money. In the case of my dream house, think of everything else that having that bowling alley/pub/helipad would entail. Maintenance, insurance, property taxes, security system, utilities, etc.

To keep up a life like this:
What kinds of jobs must I have?
How much time must I spend working to live?
What must I give up?

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Think about all of the unnecessary financial obligations you have, the golden handcuffs keeping you chained to your desk. Now ask yourself:
What kinds of jobs must I have?
How much time must I spend working to live?
What must I give up?

Take off the handcuffs.
You’ve already got the key.

The Power Of Compound Interest

Einstein called it the 8^th wonder of the world, with good reason. I heard he was pretty smart.

Yet how many people take advantage of interest? I'd much rather have money do work than me, I've got better things to do.

Most people fight it by racking up debts and paying interest to banks and credit card companies to live above their means.(Visit How Big Is Big Enough?)

If you really want to become free like I do, remember: Interest should work for you, not the other way around.

Let's make it simple. Assume that your finances are stretched so thin that all you can save is $3 a day. One less cup of coffee a day, easy. Now invest it. Use the growth of the stock market for the last 40 years: 8%.

What do you get for giving up one cup of coffee a day?

Over the course of 40 years, you would save up about $48,000 ($3 X 365 days X 40 years). Not a bad chunk of change. Now we add the compound interest:

Year	Total Amount invested at 8%
1	$1,296.00
5	$7,603.11
10	$18,774.58
20	$59,307.51
30	$146,815.04
40	$335,737.25

One less cup for $300,000? Sounds fair to me!

60% of retirees in America have less than $1000 in savings to carry themselves through retirement. 60%.

How thirsty are you really?

Food - Restaurants and Fast-food Joints Are Money-Wasters

You’re going to be shocked with how much money you could save if you didn’t eat out as much as the average American (80 restaurant meals and 189 fast-food meals a year). Why do we eat out? Is it because of the food, the ambience, or the convenience? Are those things worth the cost involved?

Let’s take the good Samaritan who thinks he consumes fast-food joints at an average of twice a week because of convenience. Who wants to get up from a comfortable chair, waste gas money on the drive there, stand in line, place your order, stand around for 10-15 minutes before you pick your order up, eat on oftentimes dirty, plastic tables and benches, then waste some more gas money on the drive back? Where is the convenience in all that? Is it the cost? Fast food might be cheaper than a restaurant, but certainly not cheaper than a home cooked meal. I think we consume fast-food because they inject an ungodly amount of flavor into their food that keeps us coming back again and again. Oftentimes, you will hear from experts, that this is not particularly healthy for our bodies. We go back to smell the hamburgers and French fries, and to feel the cold soft drink in our hands, not because it’s convenient!

What about restaurants? Is the restaurant food really worth $10 a meal? You can do a lot with $10: fill up 3 gallons of gas, go to Cici’s all-you-can-eat buffet twice, go to the movies, hit golf balls on a driving range, eat 8 to 10 frozen pizzas, and so much more. The food itself, the raw material, doesn’t cost more than probably a few cents to buy and prepare. Why does the average American spend $500 a year on outside restaurants?

How much would you save if you didn’t go out to restaurants and fast-food joints? Prepare to be surprised!

Let’s assume for argument sake the average American goes to out to a restaurant about once a week or 52 times a year; let’s also assume that the average American eats fast-food an average of twice a week or 104 times a year. Let’s also assume that the average restaurant meal costs $10 and the average fast-food meal costs $5. This does not include the gas money used to drive to the location and back.

Year	Restaurant	Fast-Food	Total Spent Yearly	Accumulated
1	$520.00	$520.00	$1,040.00	$1,040.00
2	$520.00	$520.00	$1,040.00	$2,080.00
…	$520.00	$520.00	$1,040.00	$3,120.00
40	$520.00	$520.00	$1,040.00	$41,600.00

You will spend $41,600 on restaurants and fast-food over 40 years! Now you might say, oh well, 40 grand is nothing over 40 years. Check this out…

Year	Total Spent Yearly	Invested at 8%
1	$1,040.00	$1,123.20
2	$2,080.00	$2,336.26
…	$3,120.00	$3,646.36
40	$41,600.00	$290,972.28

If you had invested the amount spent over 40 years you would have close to $300,000! Think about what you can buy with 300 grand!

How Big Is Big Enough?

Happiness is hard to measure.

It's easier to see progress against milestones. That's what lets us know that we're closer to where we want to be. Getting an undergraduate degree is a straight forward goal. Four years and you get a piece of paper that tells you "Good job, you're done!" Pretty simple stuff.

If I told you I am "exactly two units" happier this month what, exactly, would that mean? More sleep? A faster computer? More chorizo tacos? (I hope so!)

Without anything to measure up against, it's easy to get lost.

Without anything to measure up against, we find other numbers to focus on.

Net worth, horsepower, square footage...

Think.

These numbers don't mean anything, really. They're just measurements, like how tall you are. These measurements don't matter. They're something we cling onto to try and "measure" our happiness and standing.

Numbers don't make you happy.

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What's the difference between a $200,000 house and a $50,000 house?

Let's do some math.

You are 24 years old, just graduated from college, and landed a new job that pays you $50,000 a year. Let’s then say that you then buy a home worth $200,000 and use a 10% down-payment of $20,000. You secure a mortgage for $180,000 for 30 years at an 8% interest rate. Fast forward 30 years.

Mortgage Summary
$1,583.28 Monthly Payment		$569,979.44 Total of 360 Payments
$306,654.44 Total Interest Paid		Sep, 2038 Pay-off Date
$75,000.00 Total Tax Paid		$8,325.00 Total PMI Paid
Monthly PMI 111 Monthly PMI Payments of $75.00 Each		Jan, 2018 PMI Pay-off Date

http://www.mortgagecalculator.org

If you work out the math, by the time you have finished paying off your mortgage, you will have paid a total of $570,000; $306,000 of this was just in interest payments. This means you paid two times the initial mortgage in just interest.

Two times the initial mortgage in just interest.

However, assuming 5% growth, your house price will have appreciated to $740,000. Keep this in mind.

Option 2

Instead of opting for the big $200,000 house, you buy a $50,000 one. Let’s also suppose that you decide to pay this house off in 10 years instead of 30. You still put down 10% but you decide to pay the house off in ten years instead of thirty. The mortgage payment with the big house is $1,583, while the mortgage payment for the smaller house is $611.

Now we invest the difference at 8% between the two payments $927 a month or $11,676 a year. Remember, after 10 years the house is paid off.

Mortgage Summary
$611.60 Monthly Payment		$73,391.90 Total of 120 Payments
$21,785.65 Total Interest Paid		Sep, 2018 Pay-off Date
$6,250.00 Total Tax Paid		$356.25 Total PMI Paid
Monthly PMI 19 Monthly PMI Payments of $18.75 Each		May, 2010 PMI Pay-off Date

http://www.mortgagecalculator.org

You bought a smaller house and a small mortgage, but decided to invest the rest of the money into a retirement nest egg. Your $50,000 house appreciated to $205,000, and you have a retirement nest egg of $1,302,960. Your total net worth would be $1,625,614.

Big house or early retirement?

It's your choice.

What Are We Doing!?

"Consider the average American worker. The alarm rings at 6:45 and our working man or woman is up and running. Shower. Dress in the professional uniform - suits and dresses for some, coveralls for others, whites for the medical professsionals, jeans and flannel for construction workers. Breakfast, if there's time. Grab commuter mug and briefcase (or lunch box) and hop in the car for the daily punishment called rush hour. On the job from nine to five. Deal with the boss. Deal with the coworker sent by the devil to rub you the wrong way. Deal with suppliers. Deal with clients/customers/patients. Act busy. Hide mistakes. Smile when handed impossible deadlines. Give a sigh of relief when the ax known as 'restructuring' or 'downsizing' - or just plain getting laid off - falls on other heads. Shoulder the added workload. Watch the clock. Argue with your conscience but agree with the boss. Smile again. Five o'clock. Back in the car and onto the freeway for the evening commute. Home. Act human with mates, kids, or roommates. Eat. Watch TV. Bed. Eight hours of blessed oblivion.

And they call this making a living? Think about it. How many people have you seen who are more alive at the end of the work day than they were in the beginning? Do we come home with our 'making a living' activity with more life? Do we bound through the door, refreshed and energized, ready for a great evening with the family? Where's all the life we supposedly made at work? For many of us, isn't the truth of it closer to 'making a dying'? Aren't we killing ourselves - our health, our relationships, our sense of joy and wonder - for our jobs? We are sacrificing our lives for money - but it's happening so slowly that we barely notice. Graying temples and thickening middles along with dubious signs of progress like a corner office, a private secretary or tenure are the only landmarks of the passage of time. Eventually we may have all the comforts and even luxuries we could ever want, but inertia itself keeps us locked into the nine-to-five pattern. After all, if we didn't work, what would we do with our time? The dreams we had of finding meaning and fulfillment through our jobs have faded into the reality of professional politics, burnout, boredom and intense competition.

Even those of us who like our jobs and feel like we're making a contribution can recognize that there is a larger arena we could enjoy, one that is beyond the world of nine-to-five: the fulfillment that would come from doing work we love with no limitations or restraints - and no fear of getting fired and joining the ranks of the unemployed. How many times do we think or say, 'I would do it this way if I could, but the board members/Zilch Foundation want it done their way'? How much have we had to compromise our dreams in order to keep our funding or our jobs?" (Dominguez/Robin, Your Money or Your Life, Page 4)