Rehearsals for Retirement
If you like folksingers from the 1960s, you’re probably familiar with Phil Ochs, who sang “I ain’t marching anymore” and many more catchy protest songs. He came to a sad end (self-inflicted) and one of his last albums was entitled Rehearsals for Retirement. (Yes, I still have the original vinyl and the song title is actually one of the chapter titles in Findependence Day).
That title also serves as today’s blog title and happens to be a key strategy for those who are pursuing financial independence. I’m taking this week off from my day job at MoneySense but it’s more or less a “Staycation”: a working vacation spent at home. Other terms for this are “Veranda Beach” or (in Quebec), “Balconville.”
In the book, I write that the day after Findependence may well be the same as the days and weeks before: you continue to practice whatever craft or profession that got you to Findependence. You’re not “retired,” you’re still productive and you still wish to be engaged in the world, connecting with the workplace, colleagues, friends and family — either virtually or physically.
Definition of Findependence
Let’s step back a second and review the definition of financial independence (findependence for short). I wrote about this on my Financial Independence blog last week at MoneySense.ca, which you can find here. Based on how I interpret the Wikipedia definition of financial independence, it is a prerequisite for retirement: that is, you can’t have retirement without findependence, but on the flip side, you CAN have findependence without retirement. Findependence is also the precursor to such variations on retirement as phased retirement, semi-retirement and today’s theme of “rehearsals for retirement.” A one-year “sabattical” is one long such rehearsal but as I write below, even a one-week paid vacation from your day job can be a rehearsal if it’s a working staycation.
Varieties of Staycations
There are I suppose two or three types of staycations: one is where you really take a vacation from work of any kind; another is where you continue to work, but on your own projects rather than an employer’s. Your time being your own, you can also do a hybrid of these, which is the route I’m going this week: doing various errands and chores one normally might tackle on weekends, but also engaging in social media, writing and other work-like tasks.
As I experience this, I’m reflecting that a working staycation is very much like Och’s Rehearsals for Retirement. I have several friends who are both findependent and fully retired, in that they no longer perusue economic (money-making) activities. But of course, they end up as busy as anyone else: household chores, shopping and maintenance don’t go away even if full-time employment ceases to be. You may pursue various artistic or entrepreneurial activities that may or may not lead to economic reward down the road.
If you still have a day job but have reached the point where you have several weeks of paid vacation each year, you may find a working staycation an excellent trial run for retirement. When I wrote the first edition of Findependence Day in the summer of 2008, I began the writing during my paid vacation weeks from my newspaper staff columnist job. Since I had been a freelance writer for several years in the 1980s, I was familiar with the rhythmn of writing at home. At some point I can see finishing my journalism career in the same way, supplementing the various “Findependence” sources of multiple income with the odd freelance assignment, book royalties and the like.
As I write the first draft of the blog entry you’re now reading, I’m doing so on a MacBook Air in my back yard. The sun is shining, a waterfall is splashing into our fish pond, cardinals and blue jays are pecking away at a bird feeder and life is good. I’ll go back into the house to polish this and format it for the web but this is an example of the kind of life I describe as “findependence.”
If you’re contemplating such a step but unsure about whether you’re suited for it, I recommend trying a week or two of a working Staycation during paid leave from your current day job.
Not yet retirement, but perhaps a rehearsal for it!
Note to US book reviewers & financial bloggers
One of the activities in which I’m engaged this week is promotion of the US edition of Findependence Day. Any journalist in the mainstream media can request a review copy by emailing promotions@trafford.com. If you’re a financial blogger or a financial planner with a newsletter or good social media followings, I’d be glad to mail you an access card in order to download the e-book edition in most major formats. I’ll also email you a Word file of the end-of-chapter summaries, such as the one below. You can reach me at jonathan@findependenceday.com.
Chapter 3 summary
Finally, as promised, here’s the next installment of the end-of-chapter summaries of the main lessons learned in the book:
Chapter 3: Poor Boy Blues
You can’t save by spending; Be an Owner, Not a Loaner
• Frugality needs to be a lifetime habit, ranging from brown-bagging work lunches to taking public transit half the time.
• Don’t just focus on cutting expenses through small sacrifices; find ways to increase your income.
• Beware financial industry gimmicks like “spend ‘n save” cards.
• Department store credit cards charge the highest rates of interest.
• The secret of building wealth is to be a business owner.
• Be an owner, not a loaner means investing in stocks rather than bonds; or better yet, starting your own business.
• While the biggest fortunes come from starting a business, most of us are better off diversifying our equity exposure through index funds or Exchange-Traded Funds (ETFs).
Retiring Retirement
Here’ a post from my Financial Independence blog at MoneySense.ca, posted this week from the Morningstar annual conference held in Toronto on Wednesday. Pictured is Michael Falk, a partner with Illinois-based Focus Consulting Group, and I’m reporting on his talk entitled Prime Minister, There’s a Hole in My Safety Net.
And as promised a few weeks back, here’s the second-chapter summary of financial lessons learned in the second chapter of the new US edition of Findependence Day:
Chapter 2: Money Money Money: It’s a Rich Man’s World
• The best investment is paying off debt
• A line of credit lets you consolidate high-interest loans at one combined lower interest rate.
• A more effective method is to spend less than you earn.
• Avoid paying only the minimum monthly payment on your credit card. Better yet, pay balances off in full and never pay a dime interest.
• Build a six-month cash cushion.
• Mutual funds offer young investors professional security selection and diversification and through equity funds, exposure to the stock market.
• Financial Independence is not the same thing as Retirement. It means you continue to work because you want to, not because you have to.
• As your portfolio grows, you can lower investment management costs by using a discount brokerage, buying low-cost passively managed investments, and engaging a fee-only financial planner.
• During Semi-Retirement or the “First Retirement” you can give back to the community by volunteering, and discover talents you never knew you had.
Seek Findependence, not Retirement
This week, I did a guest blog on Roger Wohlner’s blog, The Chicago Financial Planner, which you can find here. As I note there, Roger [pictured on the left] is the kind of fee-only financial planner I recommend in Findependence Day. By the way, Roger is a must-follow on Twitter as @rwohlner
As you can note in the comments section which follow that post, people are becoming more aware of this paradigm shift and the distinction the book makes between traditional “Retirement” and Financial Independence (or “Findependence”).
As one commented, by viewing the goal as Findependence rather than full-stop retirement, he was able to move his “retirement” date up by 15 years.
Related to this concept is a blog I did here a few months ago about Early Findependence being a more achievable goal than Early Retirement. I note in this weekend’s Financial Post, a package of stories about extreme saving (I’d call that ‘guerrilla frugality”) by Melissa Leong, including a profile of a couple who supposedly “retired” at 35.
We’ve seen these stories before of course: Derek Foster and Dianne Nahirny both wrote books describing how they retired in their 30s. But of course, they were really describing Findependence since if nothing else they were still “working” by writing books how about how they stopped working!
The basic financial literacy lessons underlying Findependence Day
While Findependence Day is at one level a “novel,” complete with a multi-layered plot, characters, setting etc., it’s a hybrid creation that also attempts to weave the basic lessons of financial literacy into the story.
As indicated last post, the new US edition, including the e-books, includes a feature not present in the original North American (i.e. Canadian) edition: end-of-chapter lessons of the basic concepts learned.
In retrospect, I should have done this from the get-go since the book is first and foremost a financial literacy primer.
As I create a backgrounder for the press, I’ve gone through the exercise of extracting the 18 end-of-chapter summaries (“What Jamie & Sheena learned this chapter”) into a single document. It reinforces that if you toss out the story, there’s plenty of useful material there, so much so that I sincerely believe that if anyone took every lesson to heart, they would indeed “achieve financial independence while they’re still young enough to enjoy it.”
Those who have only the Canadian edition can view the new foreword and an example of the end-of-chapter summaries by previewing the free Amazon Kindle version here. And you can get the e-book version for $3.99 or less in most tablet and e-reader formats by clicking through the Trafford link here.
But for those who would rather not, I’ve decided I’m going to roll out the 18 summaries in this blog perhaps on a weekly basis. We’ll start with chapter 1, even though that’s already available in the sneak preview:
Chapter 1 Summary: Take it to the Limit
Topic: Credit cards and other forms of bad debt
• You can’t start building wealth until you’ve eliminated debt.
• To save, you must stop spending.
• To stop spending, you must embrace “guerrilla frugality” and be willing to make small sacrifices.
• The foundation of Financial Independence is a paid-for home.
• Findependence Day is simply a contraction of Financial Independence Day.
• The key to manifesting your Findependence Day is to pick an actual date in the future and visualize it happening.
• To reinforce the idea that saving is more important than spending, take to heart the motto “Freedom, Not Stuff!”
What the e-book has that the original edition lacks
If you already happen to own the original print edition of Findependence Day (now called the Canadian edition), is there any reason to also buy the new e-book edition of the just-published US edition? Perhaps there is, considering that at $3.99 or less for all but the Kindle edition, the e-books are only a quarter of the price of print editions.
The two main features in the e-book that are new are the glossary at the end, and the end-of-chapter summaries of what Jamie and Sheena learned. The latter may be useful for those who have already read the story and now just want to be reminded of the basic principles of financial literacy covered.
End-of-chapter summaries
For example, you can view the summary after Chapter 1 by clicking the sneak preview of the Amazon Kindle version here. (Amazon charges US$7.63 for it). For convenience, I’ve reposted that page below. Most of the bullet points apply to either edition, although some are focused on US-specific financial content like IRAs or Roth plans. This isn’t the case for the excerpt below, though. At some point, I will likely do an all-Canadian ebook edition but until then, readers of the original book may still find the US ebook useful.
There are also some subtle differences most wouldn’t notice unless you compared the editions side by each. The original was finished just as the financial crisis was hitting, while the new edition benefits from the insights investors have gained since 2008. There are minor changes in the technology devices: in the original, Jamie has a cell phone, in the new one, it’s an iPhone and there are more references to social media in the subplot about Jamie’s troubles with his business partner. Some names and places have been changed but the story itself and the financial lessons imparted remain pretty much the same.
Kindle, Nook, iPad & other formats
If you want the Kindle version, access the Amazon.com link shown under the Buy American edition button. For the Nook e-book, access the Barnes & Noble link under the same button or click here. For most other e-book formats, go to the Trafford.com site here, select the e-book edition and you’ll get a list of formats from which to choose.
What Jamie & Sheena learned this chapter (Chapter 1):
• You can’t start building wealth until you’ve eliminated debt.
• To save, you must stop spending.
• To stop spending, you must embrace “guerrilla frugality” and be willing to make small sacrifices.
• The foundation of Financial Independence is a paid-for home.
• Findependence Day is simply a contraction of Financial Independence Day.
• The key to manifesting your Findependence Day is to pick an actual date in the future and visualize it happening.
• To reinforce the idea that saving is more important than spending, take to heart the motto “Freedom, Not Stuff!”
News release on new edition: review copies available on request
The official news release announcing the new US edition of Findependence Day has just gone up on PR Web. Click here to view. Since the publisher does not as a matter of course send out review copies to the media, any member of the press interested in reviewing the book needs to contact the publisher to formally request a copy.
The contact for this is at the top right hand of the release linked above: Marketing Services, Trafford Publishing, 888-232-4444. There’s also an email request form there. If you tried and found the process unwieldy, drop me an email at jonathan@findependenceday.com and I’ll try to expedite the request.
Review: Findependence Day = Financial Independence Day
For some reason — perhaps because I was finalizing the new American edition of the book — I missed this The Canadian Wallet review of the Canadian edition that ran in January of this year. For those who missed it (apart from myself!), here it is.
I was intrigued by the reviewer’s suggestion for several sequels that might focus on single people or other markets. The original and the US edition are of course both oriented to couples embarking on family formation.
Anyone up for a sequel?
Of course, as soon as I completed the original Canadian edition in 2008, I had an idea for a sequel, possibly following the Michaela character (Jamie & Sheena’s daughter) forward as she enters adulthood — somewhat like my own daughter Helen, who has just graduated from university.
If there are any readers out there who think any of these sequel ideas might be promising, leave a comment here or email me at jonathan@findependenceday.com.
For now, I have my hands full with MoneySense and the US edition.
Speaking of reviews, over the past week, a handful of 4-star and 5-star reviews have appeared on Amazon.com in conjunction with the new American edition. One of them describes the book as a “bargain: where else can you get a financial plan for under $30?”
Where indeed!
Gold & Findependence
Since the price of gold crashed a few weeks ago, I’ve twice blogged on the topic over at MoneySense.ca, as you can read here. I’ve also done a bit of radio and TV commentary on the topic. As noted at MoneySense, personally I’m somewhere between the 5% “gold as insurance” camp and the “gold bug” camp that allocates upwards of 15 to 25% of a total portfolio to the yellow metal as a permanent strategic allocation in a well balanced portfolio.
My second MoneySense blog looks at Nick Barisheff’s just-released book, $10,000 Gold, a prediction which if it came true would mean a seven-bagger from the most recent post-correction price of $1460 or so. Of course, gold has started to recover from the shocking drop that grabbed the media’s attention earlier this month.
So how does gold fit in with the concept of financial independence? Historically, it has held its own in providing a degree of capital preservation. Anyone who experienced the hyperinflation of Weimar Germany or more recently Zimbabwe can attest to the value of “real money” when contrasted with mere pieces of paper that once promised to pay the underlying metal “to the bearer on demand,” but today are no more real than digits in a computer somewhere.
Bricks & Mortar are another tangible investment I like
So the question isn’t so much whether gold could possibly rise seven fold or ten fold from here, although that’s roughly what it DID accomplish over the past decade. The question is whether paper money backed only by governments with unlimited access to printing presses can continue to be perceived as having value. Just as real estate investors see value in bricks and mortar and the assured streams of income known as “rent,” so too do some investors feel comfortable having at least some of their wealth in tangible precious metals or comparable financial derivatives they hope will retain value if mere paper money falls in value (i.e. ETFs like GLD or SLV). As readers of Findependence Day know, a major subplot of the book is the conflict between Sheena’s desire for tangible bricks and mortar and Jamie’s preference for paper/electronic assets like stocks and bonds.
I’m a Capital Preservation Asset Allocation Bug
Does all this make me a gold bug? No, it makes me a capital preservation asset allocation bug: SOME gold, some cash, some bonds, some stocks and some real estate. And of course, that’s just the investment part of the equation. To this we should add employer pensions and Government pensions like Social Security or the Canada Pension Plan. If someone came to me saying they believed ONLY in their employer pension plan or ONLY in their Social Security or CPP pensions, I’d be just as worried on their behalf as I would be if they told me they had only paper money or — for that matter — only gold coins.
Together, this is my recipe for financial independence.
The vinyl records subplot in Findependence Day
As noted on Twitter, there have been a fair number of stories in the press lately about the resurgence of vinyl records: as recently as Friday morning on BBC World News.
When I tell people vinyl actually plays a big role in the subplot of Findependence Day, I usually get some blank stares. So I’ll summarize it here. The Jamie character is 28 years old when the action begins, which makes him an echo boomer or member of Generation Y. He carries an iPhone everywhere he goes and, like most of his generation, listens to music mostly via MP3s, although he also frequents traditional music stores to buy physical CDs and DVDs.
After he meets a financial planner (Theo) on the financial reality TV show, Jamie “gets religion” about guerrilla frugality, and starts brown-bagging it and visiting a vinyl record store in Boston. Ostensibly this is to save money but also because the proprietor is a fee-only financial planner on the side, and recommended highly by Theo.
Will cloud-based music eventually vanish?
Jamie returns frequently for vinyl bargains and financial advice and ends up creating a hobby web site and selling vinyl through the site around the world. He starts blogging about the future of digital music, taking a bit of a “retro” approach as he champions the superior audio quality of the Boomers’ old vinyl records. He starts to fret that all the music held on the cloud and in mobile devices will eventually vanish. When a blog he writes entitled “The day the music died,” goes viral, his web site starts attracting interest from big social media sites, which spins the plot in another direction.
The other recurring theme in Findependence Day is real estate. This ties in to the vinyl subplot when Jamie decides to venture into commercial real estate, living in an apartment above a commercial unit that eventually becomes a vinyl-themed Internet cafe. When it too attracts attention for its franchising potential, the plot again advances. On top of all this, there are romantic complications, as Jamie’s marriage with Sheena encounters turbulence triggered — as is so often the case with modern couples — over disagreements about money.
You can read the first two chapters free at Amazon.com, which includes the very beginning of the vinyl subplot midway through chapter two, when Theo suggests Jamie should visit his friend Bobby at the Vinyl Cave.
Findependence Day USA now available on the Nook
In addition to the various e-book formats found at Trafford.com (see previous post), Barnes & Noble is now making the new US edition of Findependence Day available on the Nook, and at a slight discount to the regular e-book price of $3.99. Details here. Note that you can also peek at the first two chapters, table of contents and new foreword by Sheryl Garrett without having to commit to purchase.
P.S. I sometimes refer to the new American edition as Findependence Day USA to distinguish it from the original Canadian edition. However, the actual title in both versions is simply Findependence Day.
