Blog - Lazy Man and Money

End of Your Rope? Tie a Knot and Hang on Tight.

August 10, 2020 by Lazy Man 13 Comments

If you ever feel like you’re at the end of your rope… tie a knot baby, and hold on tight!
– Steven Tyler, Aerosmith

It seems that the quote comes originally from Roosevelt, but I remember it from an Aerosmith concert in the mid-1990s. Google didn’t exist yet, so, to me, Steven Tyler owns the quote.

Yesterday I explained how I got an e-mail from a woman who lost her job and the feelings that I went through in a similar situation. Today, I’ll detail what I did about it then and what I’d do about it today.

(* This was originally written in 2007 but, with few edits, it is still applicable today. As COVID-19 continues to make 2020 terrible, this may help you or someone you love.)

First off, I’d break your plan of attack into three phases:

Phase 1 (Immediate Term) – Desperation mode

Before you even begin this phase, I hope you have an emergency fund.

Step 1 – Cut costs

Look around at everything that costs you money. Try to either eliminate it or bring the costs to a minimum.

Extras – I would quit most any subscription service… Netflix, Cable TV, Vogue Magazine… all gone. (In COVID-19 world, this advice may not be the best, it gets better.)
Food – I’m not entirely joking, but I’d go on the Survivor diet – lots of white rice and water. Perhaps some Ramen noodles if you want to splurge. I’d mix some beans in as they are a great source of protein and fiber and are relatively cheap. Eggs can be a good cheap option as well. Chicken is extremely cheap as well. We are lucky that food costs in 2020 are low if you are flexible on nutrition for the short term.
Insurance – Use COBRA to get health insurance unless you have a better option such as a spouse.
Housing – The woman in the email had a home and mortgage payments. If you own a home, can you get a roommate? Is AirBnb an option? Is it possible to sell it and downsize or rent?

Step 2 – Earn an income

It’s impossible to make payments on your home without money coming in.

Look into Unemployment – This is an obvious first step, I hope. When I was jobless, my unemployment benefit was quite large as I was downsized from a high paying job. The downside of this is that it discouraged me from looking for work. With unemployment, if you make $50 that week, you report it and then you get $50 less for the week. This extends your time on unemployment though, so if you are still unemployed when your unemployment would have run out, you’ll still have that $50 to get the following week. This was poor motivation for me to take any available work, which would normally be my instinct. For example, if I took a minimum wage job, I would be working 40 hours a week for literally no money. It’s a strange system in my opinion.
Make Extra Money – See if there some ways you can make an buck on the side. There’s another great example at Get Rich Slowly.
Think about small jobs – Don’t be afraid to work double shifts at McDonald’s or some other fast food place. I used to work at a fast food place and I actually thought it was fun (in high school at least). The bonus is that if you work the night shift, you can often bring some leftover food home. It wasn’t uncommon for me to bring home 12 calzones a night that would have otherwise been thrown out. They went into the freezer and our family had food for months.
Focus on what skills you have. Maybe you can teach a class on something better than most people. Maybe you can create logos on Fiverr. One benefit of 2020 over 2007 is that we have a robust gig economy. I make money dog sitting.
Talk to Friends – Tap your social network and see if you can find a job there. I once found a job for a friend through another friend… and none of it happened through a social network. It was talking to people in real life.
Look for Jobs Online – Look online at Monster, CareerBuilder, and Indeed. LinkedIn is an obvious way to go.
Blogging – Blogging for money is possible, but expect to earn somewhere around 5 to 10 cents per hour spent for the first 5 months. It took me a year of 2 hours a night (on average) to make a thousand dollars a month… but it was much, much easier in 2007. Most people spend their time on social networks, not independent blogs. Thirteen years later and it’s a struggle to grow beyond a thousand a month… and I know a lot of bloggers who would love to make a couple of hundred dollars a month.
Nonetheless, if you are looking into blogging as a longer-term solution here are ten reasons to be a personal finance blogger. And here is a little guide to being a successful blogger. (Note: These articles are in need of updating. They are good motivation, but there is better practical advice out there.)
Consider selling things you have of value – This is a tough decision and must be made on an item by item basis. You may have a few hundred dollars in stuff from eBay, Craigslist, Facebook Marketplace, or a garage sale.

Step 3 – Take Care of Yourself

It’s more important now than ever. I originally meant that because losing a job or dealing with any kind of financial hardship is tough. Coronavirus turns it up a couple of notches.

Pay Attention to Your Health – It’s easy to get depressed when in this desperation mode.
Be Social – When I was laid off in 2001, I was lucky enough to live with roommates. They pushed me to be social when I worried about the expense of the restaurant meal or drinks at a bar.
Exercise – My apartment building also had a gym, so I scheduled a block time there every day. If you are on the cheap diet I mentioned above, you should be working out. Exercising releases endorphins which will make you feel better. Studies show exercise works as well as (or even better than) some anti-depressants.

Phase 2 – Recovery

Hopefully, you won’t be without a steady income for a long time. I had to go for two years until software engineering jobs came back. That’s a long time to try to get by on emergency fund.

If you took my advice and ended up getting two minimum wage jobs, chances are you are going to burn out before too long. It’s almost like treading water, you just want to prevent yourself from sinking. Once you’ve stopped the bleeding, it’s time to begin the recovery phase. The recovery phase is where you will need to spend any spare time looking for one job that used to pay like the one you previously had. That means making a huge effort to apply for new jobs in your industry. You may find that you need to learn new skills or require additional education. It will be hard to do this while you are working two jobs, but it’s necessary to get back to where you were.

Phase 3 – Prevention

If you’ve been able to secure a salary near what you had before the job loss, you are ready to enter the third phase – prevention.

You want to prevent this situation from happening again. You want to build back up that emergency fund. I prevented a total loss of income by building passive income streams. That way if I lose one, the others can keep me afloat. Looking back at this 13 years later, my wife and I have a very solid net worth, great retirement income, some rental properties, equities, side hustles (blogging, dog sitting). We can be financially independent in a couple of weeks by eliminating extra education costs.

Originally published May 15-16, 2007

For fun here are a couple of the outdated references I removed:

– Vonage’s cheap per minute VOIP home line instead of a traditional landline
– Advice of getting rid of your cell phone. Now just get a cheaper phone and a cheaper plan.
– Use HotJobs as a source to find new jobs

Operation “Wife Retire” Activated

August 6, 2020 by Lazy Man 3 Comments

The plan for my wife to retire was actually set in place long ago. When we met she told me that with the military, she’d be eligible for a pension and able to retire at age 43. That’s one of the main reasons why I started this blog. I didn’t want to work another 22 years after her and start living life at age 65.

That was 2006. We’ve had a great 14 years of financial planning. We’ve seen our net worth growth 4x or 5x. We should be in a great place to begin retirement.

In a lot of ways we are. I have some freelance work, dog sitting, and this blog business that brings in some money. We have some rental properties (from being an accidental landlord) that are losing money but have equity. The mortgages are done in 7 years and should bring in a good income of around $30,000/year after that.

…and yet I’m still very nervous about how to make retirement “happen.”

Now this isn’t a situation where the stay-at-home person, me, is trying to be selfish… or I don’t think I am. To understand why I think I have to explain the unique situation and obstacles.

Obstacle #1: Kids’ Private School

My wife and I treasure the education that the kids get at their private school. It may not be the very best in the country, but it would be above the 90 percentile, maybe even above 95 percentile. We wouldn’t ordinarily consider the expense of sending our kids to this school, but her military discount is exceptional and makes the math work.

However, if she retires, we expect that military discount to go away. Our expenses would go up about 35% at the same time our income drops 40%. That’s not usually a good plan to a successful retirement.

While the school is certainly something that we can eliminate, I think my wife is less willing to do that than I am. They’re in a K-8 school now, and my wife is thinking about private high school (even more expensive), while I’m thinking a combination of public high school and community college.

Do we have to cut a deal with the school? Could we cut a deal with the school? Could we look into another particular (cheaper) school that we’ve some other kids switch to?

These are all on the table. However, approaching the school with these questions takes some tact and timing. I’m often afraid of asking questions when I suspect that I’m going to get an answer that I’m not going like. We don’t know how much of a “what if” this situation even is.

Obstacle #2: Lack of Savings

I’ve always tried to make the smartest financial decision. That’s why I have this blog. In most cases it is to use index funds and retirement accounts to plan for the future. We’ve got a very good nest egg saved up… in retirement accounts that we can’t easily touch.

Many financial bloggers will use Roth IRA Conversion Ladder to get access to retirement money with limited tax consequences. It doesn’t work out as well if you have a pension and if my side hustles are performing.

One answer here may be to take out our Roth IRA contributions over the years. That would give us some savings. Obviously that comes at the risk of retirement growth, but for all the reasons I mentioned at the beginning, we look to be in very good shape down the line.

There are more obstacles, but the previous two are the big and obvious ones that I can see.

My Wife Makes the Call

My wife came up with an idea recently that makes a lot of sense. She wants to have a year of income saved up in cash. That would help cover obstacle #2.

The only problem? It’s been hard for us to save money. Between saving in retirement accounts, paying our house on a 15-year mortgage, private school, travel, restaurants, and the annual surprises, we don’t save a lot of extra cash. We’ve found that in COVID-19 world the lack of travel and restaurants allowed us to save more. My freelance work has also helped. While I still haven’t settled out the month’s bills, I think we’ll be at a quarter of a year’s income saved up.

More Plans to Be Made

On my plate is to do a more comprehensive review of our expenses. I’ve been estimating our necessary expenses for a long time. However, it’s been a while since I even ran one of those estimates. I want to be able to provide an analysis of expected income and expenses, with and without the school. In the end, I expect that will only be a guide… my income numbers fluctuate and our expenses fluctuate as well.

Sabatical or Retirement

My wife isn’t likely to go into permanent retirement. She wants to start her own consulting company using her Pharm. D. and pharmaceutical policy MBA. I don’t know anything about this field. She doesn’t know anything about the private sector. There’s a lot of potential research to be done there. It’s possible she pivots to be an even higher earner than she is now. It’s also possible that she tries to start a boy band with our kids and few of their friends.

It’s great to have those kinds of options, but it’s more uncertainty. Obviously with all this uncertainly, it’s best to plan for the worst-case scenario. There are two problems with planning for the worst-case scenario:

Planning for the worst case of all the above scenarios could mean that there’s no retirement in sight in the short term.
If 2020 has taught us anything, you can plan for one worst-case scenario… but there can always be another one right it.

Final Thoughts

While it seems like we’ve already taken ten thousand steps towards retirement, this feels like the first real step. It’s one thing to increase your options for the future. It’s another to try to formalize the steps and move forward with them.

When Less is More

July 30, 2020 by Lazy Man 11 Comments

I’m always amazed that I can read thousands and thousands of words and have dozens of conversations… and nothing ever becomes of them.

Then I hear 7 words and it motivates me to change my life. Last night, my 7-year old said these words:

“Can we have a playroom like Theo?”

Years ago, we resisted the temptation to buy a McMansion. It was more important to us to spend responsibly. It’s hard to retire early if you are “house rich, cash poor.” In theory, our 1800 sq. ft home should be enough for a family of four and a dog. In the world of COVID-19, like everyone, we wish we had a little more home. Unfortunately, my crystal ball’s history of success is mixed at best.

In practice, we could use more space. The kids’ grandparents buy tons of toys. I buy every STEM toy known to mankind. My wife knows she has a summer dress problem. I have my own tech gear problem.

However, the biggest problem of all is that I can’t let anything go. I simply can’t bring myself to through something in the trash. I always think, “That has value.” I also feel terrible for contributing more to the landfills. There must be a way to reuse this thing. (For some reason this doesn’t occur to me when I’m buying stuff.)

The worst example of not being able to let anything go is in the image on this post. I have a Sky Mall magazine from 2010. It’s a 10-year old magazine from a company that went bankrupt 5 years ago. Obviously this is extreme and it’s going straight into the recycle bin. However, all the other things I have hoarded are not as easily discardable. It’s not as bad as what you might see on Hoarders, but it certainly isn’t insignificant either.

The other problem is that soon after we had two kids, my wife’s job changed. They put her on a non-stop treadmill and she’s often working 14-hours days. When she has any time off we want to get out and enjoy life with the kids while they are still young. The regular home maintenance gets lost in the shuffle.

It’s time for a change.

My 7-year-old is right, he should have a playroom. It’s not just going to be a kids’ room though. We need a space that can be used for exercise, watching a movie/game (when the primary movie space is being used), doing some quiet deep work, etc. Another living space instead of storage space would help a lot.

There’s a saying, “What you own, owns you” and that’s the case here.

Since this is a large task, I went where I always go, to a spreadsheet. I started to break it up into smaller parts. For example, much of the stuff is going to have to go or get moved to the garage. However, the garage has to be organized and pared down as well. It’s not going to be easy, but it’s something that can be done. One other big plus? I can do it without depending on some outside factor derailing me. It feels great to have full control over something.

There’s an extra benefit to doing all this work… I can put the kids to work. They can’t call a contractor or figure out how to combine a water heater and furnace. However, I’ve said that if parents are doing all this work to make something that will be a playroom, the kids are going to have to help. That means no fighting with each other. It means getting drinks themselves when they are thirsty. It means cleaning their room and having a normal bed-time routine that doesn’t take hours.

I’m just starting to scratch the surface on what it would cost to finish the basement. It is difficult because I don’t have a design in mind. I know that I want it to be able to perform many different functions. I know that I want to use concepts of tiny houses to maximize space. That’s about all I know. I think the costs will be around $15,000. It’s a lot of money, but I think it will be worth it.

If anyone has any advice on a basement renovation or decluttering in general. I’d love to hear it. I should probably watch the Marie Kondo show on Netflix, but that’s precious time that I could use actually doing the decluttering.

Passive Income Update: June 2020 ($6,801.15)

July 23, 2020 by Lazy Man 6 Comments

I know it’s late in the month to review last month’s numbers. I haven’t been in the best mental health state lately. Of course who is nowadays? Don’t let some of the pictures in the article below fool you. There have been some good moments, but lots of time when I feel like I’m just stuck in the mud, unable to move forward with anything.

When I last reported passive income in May things were about as bad as they could be. We were still dealing with homeschooling kids and added systemic racism and police brutality riots. The online community of personal finance bloggers seemed to be destroyed after a number of revelations lead it to be “canceled” by the community.

The bright side was that the nation was opening up and we were down to around 20K new cases in the United States a day. It seems that opening up wasn’t the right plan, as cases per day doubled in June… and they’ve only gotten worse from there.

On a personal level, the kids got out of (home)school, which has helped a lot. We got a chance to take a coronavirus staycation. Here’s a picture of the kids enjoying some s’mores on Block Island:

Our state, Rhode Island, is doing as well as any in the nation, especially for being between the epicenters of NY and MA. We can do almost anything now, but it’s different because it’s all masked and socially-distant. I know that it’s very difficult across much of the country. It’s a strange, helpless feeling. I just want everyone to experience this so that you know what you get if everyone masks-up, tests, and quarantines.

In a lot of ways, we’re very lucky to have the kids at camp. However, I still worry. While we haven’t had a lot of cases, but they are starting to rise a little bit. It’s so hard to look at someone like getting near them would be the end of the world.

That’s enough lead-in… let’s start the Passive Income report. I used to call this the Alternative Income Report, but everyone loves passive income better. While I transition to the new terminology, there may be some “alternative income” mentions including the FAQ. If you are a new reader, you’re going to want to refer to my Alternative Income FAQ as you’ll likely have a lot of questions.

The way I calculate these numbers requires explanation – it isn’t intuitive at all. The reason why I do things a little differently is that it is a journey. For example, we don’t have passive income from our rental properties while we are paying down their mortgages. These numbers reflect the progress of that journey.

Lazy Man’s Passive Income – June 2020

I categorize our passive income into 3 main sources that are largely represented in my passive income pyramid. For this report, I ignore the bottom section, “career/job” – that’s not passive at all. I combine dog sitting and blogging into one section of “somewhat active” income. I leave real estate and investment income as their own separate main sources of very passive income.

1. Blogging + Dog Sitting Income

After a few months of zero dog sitting, we’re getting dog requests again. It was only one dog for a few days in June, but we’ve been busy in July.

Blogging income has been down. I can’t do much about it while we have coronavirus. Advertising is down, but our spending, in general, is down too. Few people are searching for information about retiring early. In June we didn’t have the kids at camp. My wife took some time off and we tried to do some staycation stuff. I’m spending almost all my time with the kids until camps start. From 6AM to 8PM, I don’t even try to work. I’m setting up some educational activities, cooking food, doing laundry, washing so many dishes, doing the educational activities, walking the dog with the kids to get fresh air, and fighting through their bedtime routine.

In May, dogs and blogs combined for a total of $2,167.12. In June, it was:

Total Blogging + Dog Sitting Income: $1,804.15

This is the lowest it’s been for the year and yet another reason why my mental health isn’t where I want it to be. I simply don’t feel like I have any control in my life. Again, I know a lot of people are feeling that way.

In the olden days of pre-COVID-19, I would say that dog sitting is great because my kids are old enough to pitch in and help. I could pay them a legitimately earned income (a small percentage of the overall income). This allows them to save money in their kid Roth IRAs, money that they’ll never pay tax on. I’m starting to rethink that because there isn’t as much dog sitting income this year. The kids may play a more meaningful role in the blog going forward.

(The above is our oldest kid who is a natural with our dog. He’s grown up with him his whole life. This is the center of the labyrinth meditation maze on Block Island.)

(Note: The blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

2. Rental Property Income

Zillow estimates seem to be finally factoring COVID-19. The value of our properties went down a bit. At least tenants continue to pay us. That’s a load off my mind since we lose money on these properties every month. (We’re accidental landlords, for the most part, making the best of the situation. However, we also have 15-year mortgages in hopes of turning them into an income stream in several years.) As with every month, we paid off a couple of thousand dollars of mortgage debt and grow some equity.

We now have 64.39% of the equity in our properties with a combined rent of $3,325 after insurance, property taxes, condo fees, and estimated maintenance. I use that number because it represents our net gain.

(Kids took me out to a Father’s Day lunch, which was quite beautiful.)

If you multiply $3,325 by 64.39% you get $2,141 in estimated monthly passive income. When I started tracking this (beginning of 2017), we only owned 36.4% of the properties and they had lower rents. The math worked out to $1,174 back then. So in 41 months, we’ve seen the number grow $1076/mo. That’s like giving ourselves an annual $12,804 raise until the end of time. It’s a very nice gain from 3+ years ago.

As the years march on, the ratio will grow to 100% of the $3,325 monthly, inflation-resistant rent. That’s what gets us to that annual $40,000 income I mentioned in the FAQ above. I may need to update that $40,000 number as well – it’s looking closer to $30,000. In either case, it should be enough money for us to live on with our own home paid off (plus our solar panels, frugal shopping, and military healthcare.)

In the previous report, the rental property income was $2,122. This number always moves slowly as it only changes if one of two things happens: 1) The properties go up in value. 2) We charge more for rent.

Total Rental Property Income: $2,141

3. Dividend Income

For this section, I assume we will earn a 2.5% dividend yield on our holdings. That could be from a high-dividend ETF or from simply holding strong companies that have a long history of dividend growth. For that we’ll look at making passive income with dividend kings. If I wanted to simply retire on this dividend income, I would get Sure Dividend’s newsletter to try to get closer to a 4% average dividend yield. That link to the newsletter has a special discount rate and in full disclosure, I make a few dollars if you sign up for it.

(We still had school in early June. This was part of my overly optimistic “Dad School”, where the kids used technology like this Osmo coding toy. Read my Osmo review here. I haven’t been able to keep the kids doing much “educational” during the summer.)

The last snapshot had the markets coming back. When I took these numbers on July 7, the market was doing great. Maybe the market loves the free money that the government is giving out. Maybe it’s looking forward to vaccines and opening up the country for business. I’m scared by all this, but I can’t deny the math. The market has done very well over the last month.

Last month, we continued to get a profit-sharing check since I bought (a lot of) a company. The business is still doing well. It’s actually almost ideally positioned due to its virtual nature. The investment income from this is essentially the same as dividend income. It is taxed differently, but for the purposes of this report, it makes sense to group together all stock ownership in this bucket.

Total Dividend-ish Income: $2,856

Last month, it was $2,798. A couple of months ago, I wrote, “even in a bad-case scenario, we’d be north of $2500.” We weren’t obvious, but we are back there now, with some room to spare.

(I’m up over 400+ days of learning Japanese on Duolingo. I know a number of characters and probably a few hundred words, but I’ve only spent a few minutes a day, so I need to do some “deep learning” time to make it all stick.)

Hopefully, we’ll beat COVID-19 and the economy gets fully back to normal. I expect that it will take at least 2 years and probably a lot longer. However, if that happens, this number will grow even stronger than before. I bought shares of companies at depressed prices throughout the drop.

Annualized, this monthly $2,856 is $34,272. If our mortgage was paid off, we might be able to scrape by on this by itself. However, because most of our investments are in retirement accounts, we can’t use much of this income for now. (We can use the profit-sharing check as it goes straight to our checking account.) We’ll let the rest of this income continue to compound for at least another 15 years, but hopefully a lot longer.

Very Close to Passive Income

Our “very close to passive income” is a combination of rental property income and dividend income. If there were some royalty income from books, movies, or music, I’d include that here. I’m too tone-deaf to have a rockstar music career, but maybe there’s room to have a book someday.

(Kids are staying cool in this $20 inflatable pool. We keep our expectations low and the costs low and we find we are fairly happy with the results.)

The stock market goes up and down fast, even more so nowadays. That makes the dividend calculation fluctuate a lot more than it normally would. We don’t even know if companies can reliably pay dividends anymore. Without customers, and profits, many companies have cut their dividends.

The rental property income typically keeps going up because the mortgages are always getting paid down every month. Unless there’s a housing market crash, this should continue to happen. That housing crash may be coming, but for this month it hasn’t happened.

For a few years, I’ve been saying:

I love having both types of income working together for us. I think everyone interested in FIRE should have stocks and real estate income streams. The diversification gives me great confidence that we’ll be better prepared than most people in the case of an unfortunate economic event. We’ll still likely get rent checks if the stock market crashes. We’ll still get dividend checks if a tenant is late paying for awhile. Of course a bad economy may impact both at the same time, but that’s what an emergency fund is for.

Here we are in an unfortunate economic event. Our stocks went down a lot, but then went back up. Our real estate has held steady. We’re just lucky because many tenants can’t pay rent.

(My younger son plays with an Ozobot – yet another learning to code toy that we have around the house. He loves to draw, so this is well-suited for him.)

While the stock market is doing well, the real economy is terrible. No President wants to see long food lines, six-figure homeland deaths, and an unemployment rate balloon to ~15%. The best answer is a bailout of nearly everyone and everything at a cost of several trillion dollars… and it may go up from there. If only the people in political power believed that an ounce of prevention is worth a pound of cure, we’d be in a much better situation. It would have, figuratively, saved our bacon.

It seems like we don’t know which way things are going to go. Since we are easing up on social distancing, it might go poorly again. Some states are seeing increased problems.

Very Close to Passive Income: $4,997

Last month it was $4,919. We had lost $500 a couple of months ago, but we are just a few dollars off from the highs of March. All things considered, that’s not bad at all.

This “very close to passive income” has grown from $2,354 in January 2017. It’s worth noting that, once again, these are fudged numbers that aren’t “real” yet (except for that profit-sharing check). Add in stock market growth (of a conservative 4%) and this number could be real, non-fudged $100K/year. I’m especially looking forward to 7 years from now when the mortgages on the investment properties (and our primary residence) are paid off. That’s going to be a huge financial swing for us.

Final Passive Income

When you add up “dogs and blogs” to the “very close to passive income” you get:

Passive Income: $6,801.15

That’s reasonably good overall for another month of everything being shut down. We’re getting back to our frugal roots, so one could argue that this lower number overall could put us in a better long-term financial position. That all depends if we continue to be frugal after coronavirus, which may not be likely.

This nearly $6800+/mo income is $81K+ a year. That largely hypothetical annual income for writing on a blog, taking care of one dog, and investing feels like a dream. In the long term, $81K would be a lot more income than we’d need. Here’s what our necessary expenses look like… for the next 45 years. Of course, those necessary expenses aren’t everything, but it’s a large percentage of everything.

I always say that you never know what bad news is lurking around the corner, but this gives us the financial flexibility to fight it.

None of the numbers here include my wife’s bread-winning pharmacist income, her vested military pension (more passive income), or the freelance work I’ve been doing over the last couple of years (which isn’t passive at all). That’s the fuel that drives the passive income engine.

As always, I’m still hoping to write a book someday. That would add some more passive income. My wife will probably get her book out first. She had an incredibly interesting life until she met me – I am so boring. I may tip my toe into self-publishing sometime next year. I would love to talk to a real publisher, but I don’t want to take on the “job” of writing. That’s probably a deal-breaker. If you know someone who I could talk to contact me.

My favorite thing about the graph below is that it doesn’t dip down too far. It’s been above $6,000 for a while now. I thought that it may be tested with the coronavirus, but maybe it won’t be after all.

(Once again, the blue line is the monthly number. The red line is a 3-month average which helps smooth the curve.)

Net Worth Update

My net worth updates aren’t very exciting as I don’t share the exact numbers. That’s why it’s just a footnote here.

I truly believe that net worth is one of the most important numbers in personal finance so it is worth sharing in some way. Showing relative growth can be useful, I think.

Like most investors in June, our net worth did very well. It was a slow and steady gain of 1.77%. For the year, our net worth is UP 5.25%. We continue to do something right.

Our real estate value is going down just a little bit. The lesson here is that diversification helps a lot in bad times. Even when the stock market was way down, we were still grounded with our real estate. We can’t control the market, but we can be happy that the amazing river of compound interest has been working well for us over the years.

I feel it’s important to acknowledge that everyone is in a different place in their financial journey. I’ve been blogging about personal finance for 14 years. FIRE wasn’t a “thing” back then, but it’s in the news all the time now. We naturally are further along in that journey than some younger readers who may be beginning their journey. I hope you won’t be discouraged by some of the numbers above if you are just starting out. I didn’t start many of these graphs until year 11 of blogging (year 13 of early retirement planning). Please try to use it as motivation for what may be possible (depending on your circumstances).

There’s a big wild card in calculating our net worth. Now that my wife’s pension is vested, it’s reasonable to ask whether to include a pension in your net worth. I decided that it does make sense to include it. She could have earned more direct monetary compensation if she didn’t work for the government. That would have boosted all the numbers across the board. Calculating pension value is not easy, but here’s the best way to know what a pension is worth. In the end, it seems my wife’s pension may be worth $2.3 million. However, like most of the money mentioned in this article, this isn’t money we can spend right now.

Because the pension would ridiculously dominate our net worth, I’ll note two separate numbers in my personal spreadsheet. I don’t share the numbers anyway, aside from these hints, so I don’t think it should matter much to you. It’s not like I’m suggesting that you might want to make a financial-based decision on a pension.

I always end this article by asking how your last month went. I know that COVID-19 is making everything difficult. Feel free to use the comments to vent – it doesn’t even have to be about personal finance.

What’s Worth Collecting?

July 22, 2020 by Kosmo 1 Comment

Here’s another article from regular contributor Kosmo. Once again he’s saving my bacon as I’ve been struggling with a lot of things. (Aren’t we all?) I’m hoping to get a fresh article of my own tomorrow.

As many of you know, I have recently begun collecting stamps, primarily those of New Zealand. One of the more interesting aspects of collections is deciding what to collect. Some stamp collectors have a very broad collection – collecting any stamp from any country. Others are much more narrow – perhaps collecting almost unnoticeable variations of just a few stamp designs.

The “Lake Wakitipu” stamp

One recent purchase made me think more about exactly what is worth collecting and what is not. The stamp was a 2 1/2 pence stamp issued by New Zealand in 1898 (the stamps on the left). It features Lake Wakatipu. Unfortunately, in the lower right corner, the stamp says “Lake Wakitipu”. The error was caught and corrected quickly (with the stamp on the right). Normally, that would cause the error to be quite scarce.

But people wanted the error stamp. Demand was strong enough that the postal authorities kept printing the stamp and had to limit how many could be purchased. People bought the stamps and tucked them safely away. No doubt the postal authorities were pleased – when a post office sells a stamp that doesn’t get used, it’s almost pure profit for the post office. Those stamps are probably worth a fortune, right?

Well, no. The fact that people were immediately purchasing them and collecting them means that there is sufficient supply on the market. The postally used stamp is actually the more valuable stamp, because few people “wasted” them by using them to mail a letter. This is the opposite of normal stamp pricing, where the mint copy is worth more.

I know what you’re thinking. Can’t you just pop the stamp on an envelope, have it get canceled, and make an immediate profit? Unfortunately no. The premium for the postally used stamp is only for stamps that were postally used during the relevant time – what is known as a contemporary postmark. In the case of my stamp, it was postmarked in Wellington on May 12, 1898 (if you’re a postmark nerd, it’s a G class cancellation). That’s shortly after release, and clearly qualifies as a contemporary cancellation. If the postmark was in 1908, it would not command the same premium.

Postmarks

Aside from stamps, you can collect envelopes (known in the hobby as “covers”) or even postmarks. I recently nabbed a lot on eBay. None of the stamps were particularly interesting. In fact, half of them were the exact same stamp (one penny 1882 Queen Victoria sideface). That doesn’t mean they were identical, though. Not only were there a few different configurations (strips of two of three stamps), and imperfect perforations, but there were also a variety of postmarks, including some partials of the 1900 Wellington Flag cancellation – a very wide postmark that doesn’t fit on a single stamp. Those partial flag cancellations were the main reason I bought the lot.

Freebies

Another choice some collectors make is to collect the stamps on their inbound mail. I’ve been fortunate enough to buy stamps from sellers in about a dozen different countries. Some (awesome) sellers make a bit of a game of it, plastering their envelopes with older, lower-denomination stamps. The main reason they do this is because you can typically buy modern unused postage at a discount – sometimes as much as 35-40%. Once again, this is because some collectors hoarded unused stamps in hopes that they would increase in value. Unfortunately, so many people did this that there’s a glut of these available. If you have a relatively small number, you can just use them on your own postage. But if you have thousands, you’ll have to sell – and there just isn’t much demand.

How do you save the stamps? Put them in warm water for about ten minutes, pushing the stamp below the surface. I use an old sour cream container for this purpose. After about ten minutes, the stamp will slide right off the paper. Rinse off the back to remove any remaining gum residue. To get them really dry – and to prevent curling – put them between two paper towels, put a bunch of books on top of them, and wait 24 hours.

The scourge of the hobby are the self-adhesive stamps that became popular in the 90s. You really can’t soak them to remove the gum. To make it worse, some countries add anti-soaking aspects that basically ruin the stamp if you try to soak it. They’re not trying to be mean to collectors – they’re just trying to prevent people from reusing stamps. Luckily, I don’t collect many post-1970 stamps, so this isn’t a headache I worry about very much.

A general rule

A general rule when it comes to collecting: if something is marketed as collectible, it probably won’t be. The collectibles that tend to appreciate the most are the ones that were never intended to be collected. When postage stamps were introduced in the 1840s, few people actively collected them – they simply wanted a mail letter. Postmarks are even less intentional. Many postmarks have value because it’s from a post office that only existed for a short period of time. It’s scenarios like that – an organic limit on the supply – that tend to make something more valuable.

But the final rule is this: collect what you want to collect. You may be able to squeeze a few bucks out of it in the end, but the true value is in the hours of entertainment the collection brings you.

End of Your Rope? Tie a Knot and Hang on Tight.