Lazy Man and Money

Designing a FIRE Community: Housing (Part 2)

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While this is part 2 of the series, part 1 was a very brief introduction to what you could have guessed from the title. I’m imagining a FIRE community. A place designed to allow people to be financially independent as early as possible. It certainly won’t be for everyone, but it could be ideal place for many in the FIRE community.

Today, I’d like to explore the characteristics of housing in my ideal FIRE community. Housing is a natural place to start. Most people spend roughly 1/3 of their income on housing. If the average work career is around 45 years, everyone can retire in only 30 years if we just give them free houses.

Hmmm, in the off-chance that my free houses for everyone plan doesn’t work let’s come up with a plan B… cheap houses!

What’s the Cheapest House You’d Want to Live In?

That’s the question we have to answer. Unfortunately, most people will have a variety of different answers. My hope is that those who are focused on FIRE are willing to have more flexibility than most people when it comes to this very big expense. Let’s explore what characteristics some of these cheap houses might have.

1. Tiny Houses

Perhaps the best way to save money on housing is to have a little house. Not only are small houses cheaper to build, but they are cheaper to heat and cool. They also fill up faster which means less stuff to buy. You can’t hoard tons of Beanie Babies (or whatever your collectible of choice is) if you have no place to put stuff.

Here are some examples of bloggers who have talked about their tiny house lifestyle:

  • Two Cup House – A whole blog built around tiny house FIRE. Here’s the story of their tiny house.
  • Think Save Retire – They travel in an Airstream vehicle as their home. It’s hard to imagine tinier living than that.
  • Retire by 40 – Joe used to live in a sub-1000 sq. foot place (if I remember correctly from his blog), but now is in a bigger place, but not super big.

Personally, we live in an 1800 sq. foot home. I can be on the small size at times, but it’s not too bad.

In this community we’ll have places of different sizes, but nothing that would qualify as a McMansion. To help make the smaller house sizes work we’ll have an onsite self storage bin.

2. New Planning

One of the benefits of starting from scratch is that we wouldn’t have to support house design of decades or centuries old. There’s a lot of research going on to make cheap, quality houses. For example, this 20K House Project has be around for years. These designs are an amazing rabbit hole to explore.

While most of the 20K houses are also tiny houses, we can use elements of the design in any size house. Of course, we’ll include elements like solar panels to mostly eliminate electricity bills. We’ll also have rain water barrels and things like that.

3. New Processes

In that 20K project, they put a specific focus into keeping home builders in jobs. They mentioned that they could have saved money using “pre-fab” parts. I like home building jobs, but I’m fine using pre-fab parts. I don’t think we’ll be building enough homes to make a big dent in the home building job market.

We can even explore 3D printing for houses. I haven’t done much research on this, but it seems that making a 3D printed house cost between $4000 and $10,000.

Adding it all up

I think some of these housing estimates are a little extreme. I don’t really think we’re going to 3-D print houses for $10,000. If we can, that’s fine, but I’d like to budget quite a bit more. I’d like to think that we could do some pretty amazing things with $50,000.

Of course, we’ll have to cover the cost of land as well. That will vary tremendously depending on where the community is. That’s a discussion for another day. We’ll definitely not be choosing Silicon Valley for our location.

If we can limit our total costs of housing to $70,000 on average, I think we’ll keep either rents or mortgages sufficiently low. For example, a 30-year mortgage could be just a few hundred dollars. Working on this one thing alone could allow everyone in the community to retire 10-15 earlier than normal.

Designing a FIRE Community: Introduction (Part 1)

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I want to preface today’s article by asking for a quick favor.

Could give this blog a vote/nomination for a Plutus Award? The annual awards are decided by a nonprofit, the Plutus Foundation, that supports community-based programs that enhance financial literacy. In short, it’s the personal finance awards show.

My blogging career is a lot like Jaime Moyer’s Baseball Career. He played a long time, but usually just a little above average. I’m in my 13th year as a personal finance blogger, but I’m still the Susan Lucci or Ash Ketchum when it comes to winning an award. I was nominated for a lifetime achievement award once, but it was such a crowded field of much better bloggers that I’d be surprised if I got a vote.

Lazy Man and Money may be different things to a lot of different people. For example:

  • The main objective from the very first post was to explore ways to reitre early through financial independence.
  • Since my wife is in the military, I also cover some military money issues.
  • That military career directly lead us to become accidental landlords, so we’re big real estate investors now
  • I’m firmly in Generation X, so one could say that Lazy Man and Money deals with many Generation X issues
  • Over the last few years I’ve written a lot about being a Stay-at-Home-Dad to our boys (ages 5&6), so this could be a family blog
  • I often write about investing, probably more than most blogs, so Lazy Man could be an investment blog
  • My focus on helping people avoid MLM scams could be seen as deserving for a Biggest Impact award

If I had to choose one, I think the best fit is family blog. So if you’d like to nominate me with this one click I’d appreciate it.

However, if you want to nominate here for other categories are some easy links for those (roughly in order of how I view Lazy Man and Money):

Now, let’s get to today’s article…

Nearly 12 years ago, I wrote an incredible article around a grand idea. That was my memory of it. In reality, it was a laughable 260 words of unpolished slop… and it still got 14 comments.

The idea: A community designed around frugality

The goal of the article was to figure out how cheaply you could live. At the time, we had an expensive $2000/mo. rent in Silicon Valley. I wondered about whether we could live in Texas with solar panels. I thought that we might be able to telecommute for work and have one cheap used car for transportation.

I then came up with the idea of a community that was specifically designed for cheap, frugal, sustainable living. The idea was to live in tiny houses with Murphy Bed like furnature. The community would use some kind of car share like ZipCar.

My concluding thought:

The community I describe could be extremely cheap to live in.

Imagine how much money you could save with a normal salary.

How soon could you retire if you could really keep your expenses in check?

I would have called it the Lazy Man FIRE community, but back then personal finance bloggers never used the term FIRE. However, you can see that back in 2007, Lazy Man and Money was indeed a FIRE blog.

None of my article suggestions would qualify as rocket science. It was simply looking at what we typically spend most of our money on, housing and transportation, and trying to hack it to be frugal. Eliminating our energy expenses with solar panels is another easy win. I think telecommuting is much more common now.

Of course most people use Uber and Lyft instead of Zipcar now. Of course the Uber gPod isn’t quite ready for prime time yet. That’s what I’m calling a futuristic self-driving, solar-powered electric, on-demand car fleet.

Over the next few weeks, I plan to dig deeper into various aspects of what this FIRE community could look like. I’ll look into possible locations, housing styles, transportation possibilities, food, and utilities. I may do a supplemental version on college costs and health care. I’ll hopefully try to put some (very rough) real numbers into what expenses in this planned community would be.

Starting Your Kids on a Financial Independence Path

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Everyone is a product of where they focus their time and energy, right? As you can tell from this blog, much of my focus is on personal finance, especially financial independence. In my personal life, much of my focus is parenting two boys, ages 5 and 6.

Kids-Financial-Independence

Getting them started on a path of financial independence is inevitable. Given their age, we are working with simple things like chore charts and saving money for special toys.

One of my biggest concerns is the changes in the world. When I growing up in the 80s, I knew programing a computer was the future. Nowadays, retail stores and newspapers are closing. The automotive industry may nearly disappear as robot, on-demand cars may mean car ownership and driver jobs are a thing of the past. Artificial intelligence promises to disrupt more markets.

I know that most people think new jobs will be created. That’s probably true, but who knows if enough good jobs will be created. It seems that the current trend is replacing journalist jobs with influencer jobs. That should concern us all.

We can’t change where the world is going, but we can help prepare my kids. Here are a few things that we’re doing:

Teach Core Life Skills

This is a no-brainer. Some skills never grow old and can directly influence your bottom line. Here are the first two skills that came to mind. If you can think of more, I’d appreciate it if you could please drop me a line in the comments.

1. Cooking

Food is often one of people’s largest expenses. It doesn’t have to be. Eating out at restaurants is expensive. If you know the basics of cooking, going out to eat is less appealing.

We’ve got the kids enrolled in an after-school cooking class. They might not be learning much. (I’m still waiting to be served breakfast in bed.) However, they are learning and enjoying it. Those are the important things at this age.

In conjunction with learning cooking, I hope to teach the boys how to shop to save money. This will include updated versions of the following articles:

Being able to manage and limit one of their largest expenses can only help their financial bottom line in the future.

2. Handyman

I’m not handy at all. I can’t fix anything. I can barely work a screwdriver. If something breaks, I have to write a check.

That’s not good, especially for landlords like us. If you are good at fixing things and home improvement in general, you can create a lot of real estate opportunities with just sweat equity. You can fix up the house and move repeating the process over and over. You may even be able to keep the money tax-free when you sell. It may be a long time before artificial intelligence replaces carpenters and plumbers.

Perhaps someday, one of their jobs could be a managing our real estate “empire” and we could pass money and equity to them over time. I haven’t figured out exactly how this arrangement would work, but in theory there’s an opportunity there.

For now, I just want my kids to be better than I am with any handyman stuff. Home Depot has “kid workshops” once a month, but we haven’t had a chance to get to one yet. They also have workshops for adults, so maybe it’s not too late for me to learn a thing or two to pass on.

Personal Finance

I don’t think I’ll have to focus on teaching them too much about personal finance. I half suspect that they’ll learn it from osmosis perhaps like I did from my mother. However, I can give them a couple of boosts.

If they don’t master personal finance from osmosis, they can fill in the gaps with my Ultimate Guide to Financial Freedom. I’m hopeful that when they are older they’ll give their old man 10-15 minutes to read the Cliff’s Notes to financial success.

As a practical matter, I recently wrote about their kid Roth IRAs which will give them a head start in saving for retirement.

Education

Education is one of the foundations for a high-earning career. We’re investing a lot in private school now in hopes that it will set them on a great path for the future.

I’m still not sure that’s an optimal investment. For example, an episode of Teen Titans Go! (one of my favorite kid shows) brings up the idea that investing in a rental property is better than college. I don’t agree, but it’s an interesting topic. Of course, the Teen Titans teach a lot of personal finance.

Finally, it’s helpful that the the best financial independence book is actually a kids book.

Final Thoughts

One of things that I’m hoping to balance is giving an opportunity versus handing them too much. That’s why they are earning their kid Roth IRAs by picking up dog poop. That’s also why I think they would have to be property managers before they reap the benefits of the rental properties.

The Best Personal Finance/FIRE Book You’ve Never Heard Of

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If You Made A Million

You probably know that I’m not a fan of clickbait titles. That’s why I didn’t use a clickbait title.

Let’s make a deal. If you’ve heard of this personal finance book, you stick around as a reader. If not, I’m okay if you click away angry and never come back.

Have you ever heard of If You Made a Million by David M. Schwartz? It’s illustrated by Steven Kellogg who happens to have written and illustrated one of my wife’s favorite books, The Mysterious Tadpole. My wife read it when she was a little girl. Our own kids are very familiar with Alphonse.

By now you may have realized that If You Made a Million is not about helping adults understand money. It’s about helping children. But please don’t click away just yet. If there’s one thing I’ve learned over the last 2 years, it’s that adults can learn quite a bit from children’s books.

Let’s dig into what makes If You Made a Million so special. (By the way, I was not paid to write this review. I simply saw it at the library. I will however make a small commission if you purchase the book from the above link.)

If You Made a Million

Before I get started with the review, let’s get a very important number out there: 1989. That’s when If You Made a Million was written. Yes, the book is as old as Taylor Swift. It is also three years older than Your Money or Your Life, which is often considered the first FIRE book. It was also written 6 years before Suze Orman wrote her first book.

Being old doesn’t make things good. (This blog is living proof of that.) Let’s get to the actual content.

Overall, the book takes a child on a journey of earning and spending money. It starts with feeding a fish a penny, which will allow you to buy one of a shyster’s pebbles. It continues to educate children about coins with increasingly more difficult jobs and ways to spend the money. These first few pages are fairly boring, but they go quickly since there’s only a sentence or two on each page. It’s an important to build that foundation.

Once you get into earning a dollar, the book tells the story of compound interest. Here’s the first one:

Compound Interest

At ten dollars, the compound interest story gets a little more exciting:

Compound Interest

At one thousand dollars, the idea of checks and how they work is introduced. It’s simply much easier than carrying around a wheelbarrow of coins or even a bunch of bills.

At fifty thousand dollars, we learn about how mortgages work:

Mortgages

There’s a little more to mortgages. Specifically it shows how you keep giving money to the bank year after year for 40 years. The illustrations show the old man still physically bringing his check to the bank for his castle payment. It also explains that, this time, you are the one paying interest to the bank.

Finally we get to the FIRE part of the book. It only takes six sentences. The first four are:

“If you have some very expensive plans, you may have to take on a tough job that pays well.
If you think ogre-taming would be an exciting challenge, you can have fun and make a great deal of money, too.
Of course, you may not enjoy taming obstreperous ogres or building bulky bridges or painting purple pots.
Enjoying your work is more important than money, so you should look for another job or make less expensive plans.”

Remember what I wrote before about adults learning from children’s books? That last sentence is “Exhibit A” of that.

I promised you six sentences. Here’s two more:

FIRE

Did you catch the financial independence message there? Having that kind of passive income gives you the option to not work at all, but maybe you should choose the work that interests you because doing nothing could be boring.

There’s a quick concluding page after that to get children’s minds thinking about what they’d do if they made a million dollars.

Final Thoughts on If You Made a Million

I found it surprising how well the math from 1989 holds up today. Obviously the banks aren’t paying 5.25% interest like the examples. However, we often work with similar (or even larger) interest rates assuming more risk and different asset allocations.

Also, the one million number at the end might not seem like enough today. However, it is $2,034,157.94 in 2018 dollars. You’ll often see $2 million as the target number for FIRE, so the one million number from 1989 is solid.

After the story ends, there’s a significant section of “A Note from the Author.” Here you get about 1500 words on each of the themes in the book: why money?, how banks work, interest and compound interest, checks and checking accounts, loans, and income tax.

Finally there’s a huge explanation on how he calculated some of the amazing numbers used in the book. These are things like a million dollars in pennies will stack 95 miles high and a million dollars in quarters would way as much as a whale. If you love geeky math, this is fun, but you could choose to skip it and still get all the financial lessons.

Now that you have a good understanding of If You Made a Million, I have two questions:

1. Are you going to live up to the deal and stick around as a reader?
2. Did you think my title was clickbait or just spot-on analysis?

Let me know the answers in the comments.

Junk Drawer Personal Finance #1

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There’s a lot of things going on in the personal finance blogosphere. I know I can’t follow it all, so I’m guessing you (unless you are a blogger) probably can’t either.

For one, I’m not sure if there is much of a personal finance blogosphere anymore or if it is just the same as the FIRE (Financial Independent/Retire Early) blogosphere. I suppose you could say that FIRE is a subset of personal finance. However, there are blogs that I think consider them FIRE who deal with getting out debt, investing, taxes, insurance and just about personal finance topic you can think of. However, not all personal finance is about FIRE, but it certainly looks like that because who wouldn’t want to be financially independent and be able to choose the work they love?

It’s kind of like how all squares are rectangles, but not all rectangles are squares. Except in this case, all four sides are extremely close to equivalent in size.

That was an unexpected tangent.

That was also the point of this kind of article. This is a junk drawer article of personal finance thoughts. I used to do more of these, but with social media they’ve become somewhat less necessary.

Great List of Early Retirement Blogs

Building on that opening, Joe from Retire By 40 has a great list of early retirement blogs. I knew of most of the blogs, but there were a few new ones that I added to my list to follow. Now following it all got even more difficult.

Life’s Not Always Puppies and Rainbows

My favorite article over the last week or two has been Tawcan’s The End. He’s not ending the blog, but he’s working through some personal struggles. It seems like few people ever talk about this stuff personally, but in groups of surveyed data, it seems to be all over the place. I’ve felt some of the same struggles and wonder if it’s related to parenting a couple of very young kids.

Life always has its frustrations I guess, but there was some good thinking if you find yourself in the same place. Yes, it’s a little light on the personal finance aspect of the articles that I usually like to highlight. However, you should definitely watch the Happiness film there as it covers a lot of personal finance.

Bad Personal Finance Celebrity, Bad

A personal finance celebrity/self-described-expert went on a podcast with the awesome Paula Pant and had a bit of a rampage against the FIRE community. We’ll call her S.O. to avoid giving her publicity for what many people thought was a media stunt to launch her new book.

S.O. viewed personal finance and FIRE very differently, loving the first and hating the second. Her rant went on for awhile covering a lot of different unlikely scenarios that could lead to personal harm. They were things like a truck with pipes on the highway having an accident and being behind it. (That can happen despite how much money you have in the bank.) Another example was her own mother who I think she said she spent 3 million in care near the end of her life. I might be misquoting, but it was literally hundreds of millions of dollars.

There was another extreme example of when artificial intelligence takes over the world and there are no jobs left. In that scenario, the thinking was that taxes would go through the roof to support all the things like Medicare and Social Security.

The doomsday scenarios lead Mr. Tako to write a humor satire where Justin of Root of Good Falls to His Death Off a Boat. It was a great price of writing noting that “Life is a Risk” either way. The real risk is getting to age 65, 70, or 75 and missed out.

This continued on for awhile until finally S.O. realized that the “Retire Early” part of FIRE community doesn’t usually mean eating Bon-Bons at the beach at the time. It often means moving to another type of meaningful work. Somehow that alleviates all the problems of a pipes falling off trucks and artificial intelligence.

S.O. was actually correct that a lot of these could occur, and in aggregate might occur to some degree. However, it is the people who have thought about these things and actually planned for them who are most likely to be best prepared for them.

Closing the Drawer

There are a few things that I didn’t get to which I wanted to, so maybe I’ll have to do this again sometime soon. If you could drop a line and leave a comment on this very different style of writing from what I usually do (or see others do), I would appreciate it.

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