Why my last year of work before FI is turning out to be the hardest…and how I’m surviving it.

After a decade of working the career ladder, spending conscientiously, running the numbers, and daydreaming about the day I get to call it quits, I’m now one year away from reaching my financial independence goals.

It feels really good. But, it also makes for a serious case of Senioritis. I’ve spent the last six months in a state of extreme negativity towards my job. My job was always a means towards an end, but in the past I found satisfaction and even enjoyment in parts of it. Now, the work week is a source of dread. And instead of my stress-levels dissipating as I near the end, they’ve skyrocketed. Every incoming email or additional responsibility becomes yet another thing I have to get through before I get to move onto my “real” life.

It’d be natural to accept that this last year is just something I have to grind through. But I’ve decided that’s not good enough for me. First, a year is still a long time. I spend too many hours at my job to accept that there’s no option but to suffer through it. Second, I firmly believe happiness is a choice. It’s not my job itself that makes me suffer; it’s my attitude towards it. And whose to say that even after I remove my job from the equation, I won’t face other things in life that I wish I weren’t there?

Happiness comes from embracing reality as it is in this moment. So how I am embracing my current reality, which includes showing up at an office every day to a demanding job?

What I’m doing to not only survive, but thrive, in my last year of work:

  • Find “one thing” you want to accomplish in your career before you leave, and let everything else go. My one thing is to be a kick-ass manager, which means helping my team grow professionally and personally. At this point, delivering project X or achieving business goal Y really has no meaning to me. But people always matter, and I still have an opportunity to make a meaningful impact in my remaining year as their boss. The hard part is letting the rest go, because it WILL get uncomfortable if you’re used to always being on top of everything. But embrace the chaos. It’s the way to peace.
  • Change up your work situation so you can find new challenges to be excited about. I really couldn’t bear the thought of dragging myself through the same 1hr+ commute, to the same campus, and in the same business unit as I have been working for the last decade. So I took an international transfer to Zurich, Switzerland. On top of giving my family a whole new adventure and an opportunity to live in Europe, I also got a 30% bump in salary for cost of living adjustment. Awesome!
  • If you can, reduce your hours. It’s probably better financially to stay at your job and work part-time than quit prematurely because you just can’t take it anymore. Last month, I moved to 90% time which means I work from home Friday mornings and take off Friday afternoons. While it’s only a 10% reduction in time and pay, it’s made at least a 25% increase in my everyday happiness.
  • Start living your post-FI life now. After writing my “Ten Year Plan for a Remarkable Life,” I realised that my ideal life is actually quite simple and achievable today. So instead of daydreaming about everything I’m going to do with all my post-FI free time, I try to live that life now as much as possible. These include: Daily time for exercise and meditation. Luxurious breakfasts with the family. Reading and writing (including this blog) for pleasure. World travel (yes for Switzerland!).

Life is too short and unpredictable to defer your happiness to post-FI. What are you doing to find joy in your situation today?

January 2016 Financial Report Card

How’d we do in our first month against our 2016 budget goal to reduce spend by 30%+ compared to last year?

We went over budget by 11%, or $360. This was mainly due to an intentional overspend in gifts given and dining out (Baby ModelMinority is coming soon and we’re enjoying our last nights out), and a way-too-high heating bill that I’m going to be much more careful about.

Our net worth tanked along with the market, dropping -4.9%. While it hurts, I’m feeling relatively okay about it. We’ll stick to the plan and keep our money in the market in accordance with our asset allocation. I may even put some more in later, depending on how we’re progressing against our value path (more on how to use value-path investing to mitigate risk in another post).

Expenses

January 2016 budget

We went over unintentionally on utilities, due to a $198 heating bill that is 2x(!) our average bill. I worked from home most of January and it was unseasonably cold, so the heat was kept on nearly all day. Oops, time to turn off the heat and put on a sweater!

In contrast, our dining over-spend was done consciously. Baby ModelMinority is due in early March, and we’re trying to get out with friends as much as possible before life gets a lot more complicated. February will probably also go over. Compared to the $795/mo. dining spend that we averaged in 2015 though, this is still an improvement.

Groceries was slightly over. We’ve been trying out Green Chef and Blue Apron, which are meal services that deliver fresh ingredients to your door that you cook yourself according to their easy-to-follow and delicious recipes. Clearly, this is not the cheapest way to cook at home. But it is still cheaper and healthier than eating out, which is what we’re trying to wean ourselves off of. After trying both services, we’re sticking with Green Chef. It’s slightly more expensive ($80/wk vs $59/wk for Blue Apron), but it’s organic, the portions are bigger, and the food is tastier.

Gifts was another conscious over-spend. We had a couple of baby showers and my brother’s big 30th birthday.

Clothing & Personal Care spend should go down after this month, as we still owed one last payment on the massage club subscription that has since been canceled.

Net Worth

January 2016 net worth

Ouch! This represents a $60K loss in January, and that’s painful to see. My asset allocation helped to mitigate some risk relative to the stock market, but it did not help that my company stock  tanked by 10% over the month.

Se la vie. Good thing my meditation practice and gratitude journal seems to be working in keeping me grounded. After all, money can always gained back. Time, on the other hand, can never be recovered. And with Baby ModelMinority due in a month, my remaining time as a dependent-free adult is truly precious!

 

 

 

Retiring by 2018: Our Journey to Financial Independence (with breaks in between)

Ever since a grueling stint in my early 20s as a junior banking analyst in which I watched my colleagues trade in their lifeblood for wealth and career progression, I’ve been determined to escape the same fate. My initial plan was to look for a job with a much more manageable work/life balance, avoid financial commitments that would keep me obligated to work (e.g. taking on a big mortgage or getting a MBA), and take periodic sabbaticals like my year-off in my mid-20’s to volunteer in Asia and again with my wife-to-be in our round-the-world trip from 2011-2012.

I’ve managed to stick to this plan for the last decade, and I was feeling pretty good about my gradually growing net worth thanks to a reasonable budget (at least compared to the standards of high-wage earners in the Silicon Valley). I figured that things would go like this for more-or-less the next two decades, until I could fully retire at the still-respectable age of 50: Put in my hours at a well-compensating 9-5, take a long sabbatical every 5 years, and live within a reasonable budget.

But then two years ago, my mind was blown when I read Extreme Early Retirement: A Philosophical and Practical Guide to Financial Independence.  While my plan is already quite radical to many in my circle who could never imagine departing from their careers to take a year off or retiring short of 65, it was not nearly radical enough once I got exposed to the ideas in the EER community.

The problem with my plan was that it still required me to keep holding a job in my current field in order to keep bringing in high wages. Now, my job isn’t bad by any standard – work/life balance is great, colleagues are lovely, there’s plenty of intellectual challenge, and it pays well – but it’s still a job. It means that’s 50 hours per week that I can’t spend with the people I love or undertake a hobby or explore a new career path that could be more fulfilling (but less compensating). It also means physically tying my family to a location, which is difficult for a wanderlust like me.

Hence, I’ve embarked on a path to full Financial Independence by the end of 2018, or age 37 for me and age 39 for my wife. Our net worth has gotten a huge boost in recent few years, thanks to a meaningful stock grant from my employer that then doubled in value. And since 2013 and my enlightenment in EER, we’ve also worked on reducing expenses by ~15% every year and increasing our savings rate. But our expenses are still way, way too high to sustain post-retirement, and our focus going forward will be to cut these even more radically.

ModelMinority’s Path to Financial Freedom

Financial independence plan

The red line are my actual expenses excluding tax, which will be dramatically lower after retirement given loss of income. While I’ll still have some kind of tax bill post-FI, it should be minimal if I play my cards right so I’m just taking taxes out of this equation for simplicity. The green line is my projected passive income, based on 3% withdrawal rate from net worth. This is more conservative than the typically accepted 4% safe withdrawal rate, but that’s what I feel comfortable with given how early we’re trying to retire. The blue line (which is graphed on a different axis) is our net worth.

The point of freedom is when the red and green line intersect, and my goal is to have them intersect at the black line which marks my goal expense budget and my goal passive income. This means I need to continue socking money away to build up my net worth, while decreasing my expenses further.

 

ModelMinority’s Annual Expenses

I’m embarrassed by these numbers, but I’m putting this out there to show our ongoing rehab from the high-spending life. 

Annual expenses

ModelMinority’s Budget Breakdown

Again, rather embarrassing. Highlighted line items are especially atrocious (how are we spending that much money to feed a family of two women?).

Budget

What we have to do between now and our 2018 FI goal: 

  • Reduce our annual spend to $60K. This means a 30%+ reduction in costs, compared to our spend for 2015. There are some big expenses that will naturally fall off, but we still have a long way to go when comparing our budget to that of other FIers. Also by 2018, we hope to be a family of four so we need to take into account added cost of the kiddos. Our plan for meeting the new aggressive budget:

Dining: This is honestly the most difficult bucket. We truly enjoy good food and even moreso when it’s enjoyed with good friends. Given that the end goal of this entire exercise isn’t to accumulate money, but rather to enjoy life more fully – we refuse to let money prohibit us from dining out with friends or on special occasions. However, what we can cut is all the mindless dining out we do because we failed to bring lunch to work or because we were too lazy to cook (which accounted for at least $1K in 2015). We’re also receiving a fancy espresso machine from a relative who is moving, so no more excuse to casually spend at Starbucks either! Our bottom line philosophy on this one: We will still dine out, but we’re committed to dining out mindfully.

Home/General: We’ve been fostering a dog for a friend this past year, and when the dog goes in January that will naturally reduce $1800 in costs. Also no dog means a cleaner house, so we’ll reduce housecleaning from 2x/mo. to 1x/mo., another $500 savings.

Clothing/Personal Care: We’re cutting our subscription to a massage club where we both have been getting monthly massages, which saves us $1157. I’m also on the hook to cut my personal care expenses in half ($250 savings), and we’ll cut our clothing budget from $350/mo. to $100/mo. Still very beefy compared to the truly frugal budgets I’ve seen from other bloggers, but a dramatic reduction from where we’ve been.

Gifts Given: In 2015 we went nuts with a lavish gift for my mom’s 60th birthday (a helicopter volcano tour in Hawaii) and numerous other gestures of financial generosity to our friends and family. This is another tricky one – we feel incredibly fortunate to be in the financial position that we’re in, and we don’t want to become Scrooge McDuck just to accumulate more wealth for ourselves. We’ll see how this one goes but we are committed to making more homemade gifts and gifting experiences rather than things, which will make the gifts we give more meaningful and less expensive.

  • Get our net worth to >$2M. Based on a 3% withdrawal, that’s how much we need to sustain $60K/year spend. Even with my wife planning to leave the workforce next year to care for our first kiddo (we’re expecting in March ’16), I feel like it’s possible to achieve this by our 2018 deadline assuming the market does not crash.
  • Live life to the fullest in the meantime! I could consider these next 3 years as a deferral of pleasure for the sake of future rewards. But life is too short, and the future is never certain (e.g. the market could crash, our health could be compromised). We need to enjoy the moment, because we’ll never have them again. To this end, I’m turning my maternity leave next spring into a 6-month mini-sabbatical which will include a RV roadtrip across North America and a trip to Mexico. In reality, we could get to FI much sooner by having my wife stay in the workforce and cutting my leave short – but we want to enjoy parenthood, and these first years will fly by only too quickly.

 

Learning to fight for my joy

Let me be real. I’ve been doing terribly in my attempt to rest. In large part, I can blame this on too many good things happening to me at once. In the past 30 days, I got a big promotion at my day job, the wife and I successfully went through phase one of our IVF fertility treatment, we signed our first distribution deal on our film (more on this passion project another time), and…drum roll…we just got invited to speak at a TED event next month. 

As I’m writing this all out, it’s no surprise that I’m thrilled and totally overwhelmed at the same time. I’ve been working towards this promotion for the past year and half, but now that I finally have it, I’m worried about whether or not I can actually live up to my new position as a Director. The success of the first phase of our fertility procedure is a HUGE relief, but I still can’t allow myself to hope for more. And the TED invitation is the biggest thing to have happened to this passion project, yet of course I’m panicking at the thought of the speech itself. What’s clear to me is that if you don’t intentionally take time to celebrate your successes, it’s all too easy to allow the pressure of achievement overshadow your joy. 

As a way to put some rigor and discipline around resting (yes I know it’s ironic, but that’s who I am), I adopted a few goals based on the 90-day action plan espoused by performance coach Todd Herman:

  •  Process goals: My goals here were to meditate 1x/day, go on a meditation retreat, and do something restful everyday. Meditation fell off the table for much of March and April, but I’ve been bringing it back here and there in the form walking meditation (typically post-dinner walks with the dog). I was hoping to go on an official meditation retreat, but the best I managed to schedule is a weekend getaway with some Buddhist friends which will include some scheduled meditation time. As for doing something restful everyday, I’ve been more mindful about this than ever, though execution is still haphazard. My most restful day was one that I had no choice over – after my fertility procedure, I was pretty drugged out and couldn’t do much other than play video games and eat ice cream for the rest of the day. And all guilt free – oh the bliss!
  • Performance goals: My goal here was to feel less guilty about taking a break. Emotional hang-ups don’t get cured overnight, and neither will my unhealthy preoccupation with staying productive. But, I have been reminding myself of all the reasons why rest is necessary for creativity and well-being. I’m doing a decent job of putting time limits around work so that I make sure to step away from my desk and do something rejuvenating every few hours.
  • Outcome goals: My goal here was to get restored and give myself space for insight and self-reflection. Hmmm…no, I can’t say I’m anywhere near feeling restored. In fact, it feels like my life is this roller coaster ride that looks like a lot of fun to everyone else, but really it’s all I can do to just hang on for dear life. For now, my main relief comes from cuddle time with my wife, quiet walks with the dog, and Trader Joe’s mini mint ice cream sandwiches.

Sometimes I also find relief by staring at the net worth number posted on my Personal Capital account to remind myself that the promised land of Financial Independence and infinite free time is only a few years away. But as much as the idea of the future brings me anticipatory joy, I also know that life is lived in these moments right now, no matter how harried and crazy they may feel. After all no one knows what the future may hold, and these may be my only moments.

So this weekend, I promised myself to take time out from the errands and obligatory social events to do something that I truly enjoy. I looked up a new hiking route just 20 minutes from my house, and I was delighted to discover a beautiful 8-mile mountain trail with postcard views of the rugged California coastline. So often, just making the small intention to enjoy the present moment can yield such surprising rewards.