At any rate, I’ve been mulling that post/concept over in my head and I’ve noticed a subtle shift within myself, relating to how I prioritize my tasks. One year ago, if you were to ask me what I did for a living, I would have told you that I’m a software developer, real estate investor and freelancer. But now, I’ve come to realize that if you were to ask me the same question today, I would probably flip the last two.

This is kind of a startling realization to me but it makes sense given our shift in priorities over the last few months. We paid off the car and built up a good emergency fund in preparation to live on one income. These things took money and so it’s taken some time to get our capital reserves back up to where they need to be. I also started this blog, adding to the list of hats and demands for my time.

But still, it was kind of unsettling to realize this shift had taken place since real estate is the future. It’s our chosen vehicle to grow our networth and passive income to eventually free ourselves from working. And I had de-emphasized, de-prioritized it, in favor of a second job! This has to stop.

There’s a causal relationship, a feedback loop if you will, between belief, action, and perception. You only act in ways which conform to your beliefs and your beliefs are, in turn, influenced by how you perceive the results of your actions.

We had put off looking for our next property because of our vacation. There’s already enough uncertainty around a transaction without including the possibility that you might be needed while you are gone. But now that we are back, I’m ready to get after it and put this money to work. We’ve got enough for another property and it’s burning a metaphorical hole in my metaphorical pocket.

Looking at a graph of my estimated passive income over the last year, it hasn’t really changed all that much. It’s kind of a step-function anyway since it makes a big stroke upward after we buy a property but it’s been flat for the last 11 months and I’m ready to see some upward progress. Wish me luck!

Breakfast of Champions. Just kidding: this was at lunch (probably)

Well, it’s all over and my feet are, more or less, firmly planted back in “reality” again. We had a fabulous time and took a ton of pictures which I will be sprinkling into my posts for the next few weeks.

Two weeks is a long time to be on vacation and for me, it was the longest I’d been away from home for a long time. Two weeks is enough time to break out of your routine and your old habits. It’s enough time to “clear your head” and maybe reassess your priorities while you step a little out of your comfort zone and experience a new culture for a while.

It’s also plenty of time to learn a few new things so I thought I’d share a few lessons.

“Hostel” is not a bad word. When you say “hostel”, most people thing of a small room, jam-packed with young people sleeping on bunk beds. I know I did. But we stayed in a few hostels and really, they can be just like a hotel. We had our own room and a private bathroom so it was really no different than a traditional hotel except for the price!

Stick with the house wine. Our first meal in Rome, we ordered a bottle of wine which sounded good but it wasn’t on the wine list so we didn’t know how much it was. It was silly, I know, and it ended up being the most expensive bottle we have ever purchased. From then on, we stuck to the half liter of the house red.

Delicious Paella

I seriously love pizza. I already knew this but I didn’t realize how deep my love of pizza ran until I had the chance to eat it everywhere we went. Italian pizza is different than American pizza but damn is it ever delicious!

Jellyfish #!@$ing hurt. I guess I might not have mentioned it until now but the Mrs and I are both certified scuba divers. When we were in Sorrento, Italy, we planned to do two dives but ended up only doing one, as the place was overrun with the slimy, stinging bastards. We both got stung during the first dive and that put a damper on the whole experience. The one dive we did was still one of the best dives ever (and our first cave dive).

 Give yourself some “off” days. The temptation is to cram your limited vacation days with as much activity as possible, to make the most of them. But you’re there to enjoy yourself and too much activity will wear you out! Who wants to set an alarm every morning of your vacation? I know I don’t! Give yourself a few days with no concrete plans and just enjoy your surroundings.

I’m a real home-body. I really enjoy traveling, but by the time we were done, I was ready to be home. In fact, the only reason I didn’t get homesick sooner was all the moving around we did.

La Sagrada Familia has been under construction for 126 years

Your American debit card will work in Europe. I mentioned previously that we had a bit of a cash crunch when we ran out of Euros on our pre-paid European credit card. We were under the assumption that our American cards wouldn’t work in most places in Europe because they have a chip instead of a magnetic strip. This assumption was just plain false and our debit card worked at every ATM we tried. In fact, our bank gave us a better exchange rate than the company who sold us the pre-paid card.

And finally: Human nature has remain unchanged for thousands of years. This was the underlying theme of our trip through ancient Rome and the ruins of Pompeii. We’re the same as we were then. Our hopes, desires, fears are all the same, even after all this time.

I’m sure I could go on for a while but my jet-lagged brain is telling me it needs a rest. We had an absolute blast during the last two weeks but I’m looking forward to some normalcy and a renewed focus on the ultimate goal and purpose of this blog: financial independence!

I don’t have much to say about money today other than that Europe is a pretty expensive continent. Compound that with the fact that my currency is worth less than the native one and it all adds up quickly.

In fact, we had a bit of a situation where we ran out of Euros on our “cash passport” which is a reloadable mastercard with a european-style chip in it. The crisis is averted but the thought of being disconnected from your money on a different continent is a scary one.

We spent the last few days in Barcelona which is a beautiful city with a lot of delicious food to eat and sites to see. If you like art, be sure to check out the Picasso museum which is also free on the first Sunday of the month. Eat lots of “tapas” and remember: dos mas cervesas, por favor. Muy bien!

Now that I have the net, I’ll try to post again this week. In the meantime, anyone know any good restaurants north of the Vatican? Ciao!

Just Do It

We use this technique a lot! You can see from my budget post a few months ago that we’ve got a top-level category for “goals”. Or, what I like to call “future spending”.

We set up goals for all of the following things and more:

• My wife’s engagement ring
• Our Wedding
• A down payment for our first house
• Our last car
• Christmas for the 3 years (and the next two!)
• Several big vacation and dive trips

You can use any ol’ savings account to set up a goal but our favorite, by far, is SmartyPig.

In case you haven’t heard of it, SmartyPig is a savings account but it was specifically designed to help you save up for goals. You tell is what you are saving for, when you need the money, and how much you want to save. SmartyPig will figure out how much you need to save per month, including the interest, to meet your goal.

The best part about SmartyPig is that the savings are automatic. There’s no forgetting, no tracking. You tell it when to take the money and it will do all the work.

An Example

Even if you don’t have any big purchases coming up, you probably have something you can save for. Just about everyone is going to have some seasonal spending and for my family, it’s grouped into two time frames: Christmas and the Summer Birthday Extravaganza.

I’m sure you all know what Christmas is so I’ll focus on the other one: in my wife’s family, literally everyone was born in the summer and so rather then having 20 birthday parties, they condense them all down into one, mega, gift-giving exchange. Since we know how many people there are and about how much we’d like to spend, we can set up a goal for it.

We expect to spend about $600. If we didn’t save for it, this would likely come out of the budget in May, which would force us to come up with the money somehow. For those with tight budgets, this means it would probably come from a credit card.

But over the course of a year, $600 is $50 a month without any interest and that’s pretty manageable. In fact, we’re actually saving for Christmas 2013 and given the long time period, the transfers are almost nothing.

It may seem silly to save for a holiday two years in advance but the fact is, we’re going to spend that money anyway so I’d rather pay for it over time – painlessly – then try to scramble for the money when I really need it.

Europe: Here We Come

Today we’re leaving to go to Europe for two weeks and the whole trip is paid for thanks to a trickle of savings over the last three years.

It feels really good to be able to plan a big trip like this and know that, while our budget isn’t unlimited, we won’t have to worry about where it’s coming from: it’s already there.

How about y’all? Do you have a saving system for “the big stuff” in life?

Goings-on

Financially, April was a pretty rough month. A car repair and a busted water heater put the emergency fund back by a few grand but hey: that’s what it’s for! We went over our cell phone minutes – $150 worth – due to all the social gatherings and other activity that went on.

We got our taxes done on-time and found that we owed a lot less than we thought we were going to. Real estate has a lot of tax benefits so there’s no taxes due there but we knew we’d owe a few thousand because of all the extra money we made from freelancing. Between the real estate “losses” and Mrs Dollar’s realtor startup costs, we ended up owing about half of what we expected to which means we can plow the difference into our investments. And there was much rejoicing!

Goal Progress

With the mix of good and bad news this month, you can expect the same for my goal progess:

Get our food budget under $250: Failed. Some of these transactions could be miscategorized but we ended up spending $358 this month. Some of that was from food for get-togethers that we attended. But still, that amounts to $179/person which isn’t all that bad.

Exercise 3x a week: Partial Success. I didn’t work out 3x every week but I think I averaged about 3x per week so I’m calling this a partial success. Some exercise is better than no exercise!

Get myself into shape to start bike commuting: Failed. I think I only put 15 miles on my bike the whole month. This goal itself was very vague to begin with and I didn’t follow my own rules when coming up with a goal. I’m going to try something more specific next time.

Secure one additional freelance software project: Failed. There was one in the works but it ended up falling through.

Work 20+ hours on our current software contract: Partial Success. We worked only 8 hours but that was all the work the client had the whole month.

You might look at that list and consider the month a big failure. I don’t. You can only fail if you stop trying. And you can’t succeed if you don’t try at all. A month where you wrote down your goals and worked towards them is a successful month, regardless of the outcome.

May Goals

We’re going to Europe for two weeks this coming Friday so this month is going to be a little weird. Regardless, here’s what I want to accomplish:

• Stay within our vacation budget. This should be pretty easy as we’ve been saving for a while.
• Exercise 3x a week. This could be hard as we’re going to have some busy days ahead of us. Then again, we’ll probably do a lot of walking!
• Put 30 miles on my bike. That’s only 15 miles a week for the two weeks we will be in town.
• Ride my bike to work once. I’m going to start small but the end-game is to ride it every day I go in. That would be 42 miles a week which isn’t all that much, really.

That’s probably good. This month is going to be interesting, given that we’ll be away from home for a while. Naturally, all the bills should be lower so that $250 in groceries goal will be easy

Good luck on your goals!

Many of us will wear a huge collection of hats over the course of our lifetime. Indeed, within a single day, many of us will wear multiple hats as we juggle, or try to juggle, the things which are important to us. Many will find creative ways to “double dip” and wear multiple hats at the same time, a practice which in reality, is usually reserved for weirdos and crazy people, but can be a huge help when we’re talking about our metaphorical hats.

I thought it would be a laugh to lay out all of that hats in my metaphorical collection and try to figure out what kind of hat they would be.

My Hat Rack

In no particular order, here’s my collection of hats:

“The Husband”. I said “no particular order” but really, this is my most important hat. My relationship with my wife is the most important thing in the world to me and is the foundation of all my potential and realized success. She’s my best friend and you would do well to marry your best friend too. This hat would probably be something all-weather and rugged, like a hard hat or a mining helmet. Being in a relationship isn’t always easy and there will be ups and downs. But it’s also extremely rewarding. Kind of like mining for diamonds.

“The Family Man”. I’m a son, brother, cousin, grandson and uncle to a whole lot of people with whom I share a common ancestry. I try to make sure they know how important they are to me but I don’t always do the best job of it. This hat’s probably something equally rugged, like a cowboy hat. Actually, it’s definitely a cowboy hat since I have to represent Texas within the family.

“The Blogger”. A hat which I’m still breaking in. This is still a hobby but it’s one which I find pretty rewarding. This hat is something dapper, like a nice top hat. I consider myself a positive person so I try to project that positivity in my writing. Only you can tell me if I’m rockin’ the top hat effectively or not.

“The Employee”. A hat which most of us have in common, or at least we all have worn at one time or another. It’s an upgraded version of the “The Student” which most of us wore for a long time without getting paid. For me, this hat’s not very stylish. Maybe a boater or a pork pie hat.

“The Freelancer.” Now, this is a weird hat if you ever saw one. Not only does it have to be flashy so you can get the jobs, but it also has to be functional since you’re doing the work too. It’s tough juggling this hat and The Employee hat but the extra pay comes in handy. Probably a flashy pirate hat with a feather in it. Looks good and keeps the rain out of your eyes.

“The Real Estate Investor.” Depending upon your flavor of real estate investing, it could be any type of hat but if you’re a landlord, you need something which is “all business.” I’m thinking a pith helmet like the type worn by stereotypical safari hunters. You need to be tough when the bad tenants try to walk all over you.

“The Friend”. In case you haven’t figured it out, I’m kind of the joker in my group of friends. My sense of humor is what wins people over so I’d have to wear an equally silly hat. Like one of those court jester hats with the bells on it.

“The Physical”. As a being with a corporeal form (aka: a body), you need to use it or lose it. And since my job involves sitting at a desk for hours on end, this means I have to go out of my way to make my life a little harder and stress the system so it says fit. Normal people call this “exercise”. This hat is probably a beret: serious looking and less likely to fall off when cranking out those reps or going for a bike ride.

“The Spiritual”. When I say “spiritual”, I don’t necessarily mean belief in a higher power although that definitely falls under this term. I think everyone has a certain yearning to make the most of out their lives. Call it religion, call it self-actualization or your life’s purpose. I’m still not certain what type of hat this is but it’s probably some kind of small skullcap. That way, I could wear it under all the other hats.

There You Have It

I might have missed a few but those are all or most of the roles I play in my life. While it’s entertaining to imagine juggling all those funky hats, it’s important to recognize our roles in life and to try to be the best we can at all of them. It’s too easy to take your hat off at the end of the day and just waste time in front of the TV.

This is another hat which is “all business”.

Hard to say if the grass would have been greener

It’s over folks and I didn’t take the job. In case you missed it, I’ll fill you in.

First, I mentioned that a new job was on the horizon.

I went in for the interview and while the position would be interesting and I think I would enjoy the work, the environment would be more stressful and I’d have less freedom. Namely, I’d lose the ability to work from home.

After I went for the interview, which I nailed, they made an offer but it was far from what I was expecting. A few back-and-forth emails later, and I had their best offer which was still at the bottom of the range I asked for.

Armed with this offer, I scheduled a meeting with my manager the next day to see what would happen.

Honesty

That night, I kept imagining how that meeting would go. What would happen? Would they try to match it or would they just wish we good luck? After all this day dreaming, I came to a realization: I really had no intention of taking the job and I didn’t think it would be right to go into that office and act like I did. It would be one thing if I might actually leave but in this case it would be a complete bluff.

So the next day, my manager is in meetings all morning and I nervously wait for the opportunity to talk to him. It would have been silly to just say “nevermind” because I think he knew something was going on without knowing what. When the opportunity finally comes, I seize it and start telling my story.

I lead with the simple truth that I wasn’t looking for another job but this opportunity came to me so I had to see it through. I hand him the offer letter with the relevant details highlighted and by this point I can imagine what he is expecting. I explain that my original plan was to try to negotiate something but that I actually have no intention of leaving. I tell him that I really like my current position: both the work and the freedom that I enjoy. He asks what I want from him and I tell him to just keep this in mind during my annual review, which is in June.

The Right Choice?

After this meeting, I actually got a call from someone at the other place: the manager of the manager I would be working for. He wanted to know why I had rejected their opportunity and I told him the truth too: I was actually happy where I was and that I really enjoy the freedom I have now. If I were on the fence (and a smooth negotiator), I bet I could have gotten more money and more vacation since it was clear how badly they wanted me.

Did I do the right thing? Who knows…?

Maybe if I actually wanted that new job, I could have walked in there and gotten an immediate pay bump in order to stay. But I also would have made a lot of waves and cast myself in a poor light. My feeling is that by playing it how I did, I will get more money anyway without having to demand it. I put the ball in their court and showed them how much my skills are worth on the open market.

Flickr photo by mscaprikell

What do you think? Was following my instincts the way to go or did I play my cards wrong?

It’s no big mystery and that’s really all there is to it. But money on it’s own isn’t worth anything. In order to improve your life in some way, you have to deploy or use your money for some purpose.

If you boil it down to the basics, there’s only 3 ways you can spend your money: Stuff, Experiences, and Investments. If you think about it, you’ll find that that’s really all there is, and each has certain advantages and disadvantages.

Stuff

Stuff is a pretty obvious category: it’s everything that you physically buy. All of your basic necessities fall under this category: food, shelter, and clothing. Additionally, a lot of non-necessities are also Stuff like expensive food, grand houses, unnecessary clothing, etc.

Stuff generally takes up space in your house and is used up or consumed in the process of enjoying it. Some Stuff can last for a long time such as your house or your favorite pair of jeans. Other stuff is quickly consumed like food or cigarettes.

But there’s a lot of things you buy which bridge the gap between Stuff and Experiences. For example, you might purchase a magazine. The magazine itself has a physical embodiment in that it’s composed of matter and whatnot. But what you’re really paying for is the experience of reading the magazine. Similarly with a meal out or drinks with your friends: you’re really paying for both Stuff and Experiences.

Obviously, it would be very hard to live a life devoid of Stuff and I’m certainly not advocating that here. But the trick is to find a balance and only spend money on Stuff which will provide lasting value.

A good example is a solid winter coat. If properly taken care of, the coat will last for years, especially if you don’t care for fashion, which might compel you to get rid of the coat long before it wears out.

Another great example is a good bike, which will last a long time and provide hours and hours of entertainment, transportation and physical fitness. Reading into that example further, and what you will find is that the bike actually provides an opportunity for Experiences.

By it’s very nature, Stuff requires us to use it in some way and this usage destroys our Stuff, either all at once or over time.

We often store it in our homes until that time. Unused Stuff, if left unchecked, eventually becomes Clutter which actually makes it harder to find the Stuff we need since it’s buried under so much stuff which we clearly don’t.

Experiences

Experiences are all the activities you pay for: concert tickets, classes, gym memberships and the like. While all Experiences will eventually end, Experiences can leave a lasting trace on people. Not all experiences will be remembered for a lifetime but you are more likely to remember a latte shared with friends over one which you drank by yourself.

Experiences can bring people closer together. My wife and I just ran the Warrior Dash over the weekend and it was an amazing experience, one which we will both remember fondly. The pictures of us covered in mud are awesome!

Experiences can be good for us. Running that race was both enjoyable and physically challenging. I’m sore today, I can tell you that! Experiences which push us out of our comfort zone can help us grow as people, not just in a fitness capacity but also in other ways. I’ll never forgot the experience of being confronted with abject poverty on our honeymoon in Belize. You can read about the poor living conditions in other countries but it’s certainly not the same as seeing it for yourself.

A lot of Experiences are free or already paid for. Riding your bike is free. Checking out books at the library is free.

It’s for these reasons that many people rank experiences over stuff in terms of what they’d rather spend their money on and I’m definitely among that group.

Investments

Investing is the highest use of your money. You use the dollars of today to buy assets, with the expectation that those assets will be worth more dollars in the future.

When you’ve purchased enough assets, eventually you won’t have to work any more. For some like myself, the hope is that this can be achieved sooner, rather than later. But that’s the ultimate goal: freedom from work. And it’s one which all of us should be working towards in some fashion or another. After all, these bodies of ours are fragile and eventually we’ll be unable to work at all. That’s why we have to use the money we make while we still can work to eventually prepare for a time when we can’t.

The more of your income you can plow into this category, the sooner you will be free from working. The obvious disadvantage is that you can’t spend that money now. But there will come a time when your investments are producing enough cash where they will pay for all the Stuff and Experiences you need for a satisfying life.

How soon that time arrives depends on how much you can invest and how little you need to feel satisfied!

Balancing

Spending money is all a balancing act: balancing the needs and wants of today with the needs and wants of the future. Stuff and Experiences which can be enjoyed now and Investments which will allow you to afford the Stuff and Experiences of the future.

My advice is to really figure out what it takes for you to be happy and try to balance your spending towards the future. The needs of today are known but the needs of tomorrow may be only vaguely understood. That latte you drink today will be gone and soon forgotten.

Not by a lot.

Showing Your Cards

Through this whole process, the recruiter asked me what I’d like to make. Master negotiators will tell you that you should hold off on revealing your salary until they are ready to make an offer. That way, since they have already decided they want to hire you, you are more likely to get what you want. The whole time, you are supposed to put them off saying “Why don’t we see if I am a good fit before we discuss compensation” and similar phrases.

Well, I’m not a master negotiator. And I know that it’s a total rookie move to tell them, but it’s really hard not to. Right in the beginning, the recruiter asked me what I’d like to make. So I gave him a number (#1) which was about $10k more than I make now. After the phone screen went well, he asked me again, saying that he had forgotten and I took the opportunity to give him a range (#1-#2). Up until they point, they don’t know what I actually make – only what I’d like to.

Then came the interview, which I nailed. I’m the guy for the job and they wanted to make me an offer. That’s when they asked me to fill out an application online. And the application asked for my full employment and salary history. I filled it all out truthfully and without holding anything back. When the application asked what I’d like to make, I put a number (#3) which was right in the middle of the range I provided before.

Then I waited.

Surprise!

I got the email yesterday with the offer and was excited! Then underwhelmed. Apparently, once they got a look at what I actually make, they decided to just offer me 5k more than that, which was 5k less than #1.

It’s actually kind of nice to be in a position of power for once. Every other job I took, I was pretty desperate to leave and so I didn’t try and negotiate at all, I just accepted, happy that I could move on to something else and make a little more money. In this case, I wrote back immediately to express my disappointment and thank them for their time. He wrote me back within 2 minutes asking to chat on the phone, and saying that they wanted to counter.

I had to think about it, to decide if it was even worth it. At this point, I’m pretty positive that I’m not going to take it anyway, given the nice environment I have at my current job. The fact that they could disregard even my initial request didn’t speak highly of them.

While I was deliberating, he wrote back again and wanted to offer #1. I told him that given the difference between the work environments, he would have to offer #3 for me to consider it in addition to matching my current level of vacation, which I will need when we have a baby. He said he’d see what he can do, and cited that he was willing to offer #1, which is what I had originally asked for. At this point, I don’t care.

Oh Well

I’m not going to take the job, even if they come back with #3. I’d much rather get my current company to match it and move on. I don’t know what it is, maybe I’m getting soft, but the more I think about leaving, the less I actually want to. Having the level of freedom I enjoy now will be really helpful when we have a newborn, probably about this time next year. I think that’s worth more to me than the extra money, especially since the environment would likely be more stressful and involve longer hours then where I am now.

But there is still a lesson or two here:

1. I’m very employable, and if I lost my job, I could probably find another one, making what I make now, within a month or two
2. It’s much easier to negotiate when the outcome doesn’t really matter
3. It’s hard to put a price on freedom at work

Thanks for stopping by and have a great weekend!

I should be more excited but during the interview process, it came up that I would not be able to work from home, citing the high degree of collaboration the manager wants to foster between the team members. I can understand that, given the environment at that company, but it’s definitely not something that I’m used to. In fact, at my current position I’m kind of spoiled because I can work from home 1-2 days a week without raising any eyebrows. My current job is very “results-oriented”: if I get my work done, my managers don’t really care how or when as long as I meet my deadlines and they can get a hold of me when they need to.

I expect to get a substantial pay increase by changing companies so there’s two sides to this issue.

Freedom is More Important

This is the camp that my wife is firmly in and I completely understand her perspective. She’s at home and wants me to be at home as much as possible, and so do I. This will especially come in handy when our first little Baby Disciple is born sometime next year. If I were to stay at my current company I’d have 4 weeks of vacation by then which, when supplemented with my at-home work, would be a huge help in sharing responsibilities of child rearing. However…

Money is More Important

If I do get a big pay increase to switch, we would end up plowing all of that extra money into growing our business. This means I could quit my corporate job altogether, potentially a year or two sooner. Of course, this is all conjecture because we don’t know what will happen in the future or how effectively we will be able to invest that money. But my gut says that a big increase in salary would mean a big increase in savings rate, making that race to the finish over quicker. For me, if the offer was 20-25% more than my current salary, it would be worth it.

What I Will Probably Do

Since I really like it at my current position, if the offer ends up being a lot higher I’ll probably take it to my manager and see what he can do. I’ll try to explain it as diplomatically as possible by saying that I wasn’t actively looking but this company approached me. I followed through because I was interested but this is what they are willing to offer me. I was wondering what you could do since I really like it here. Something along those lines.

The worst that could happen is them coming back and saying that they can’t match it, in which case I’d just say thanks and take the new job. Best case is them coming back and matching or beating the new offer, in which case I will happily stay.

How about y’all? Ever been in a position of strength like this one? How did you handle it? How much is freedom at work worth to you?