So how did I recharge my batteries? Well that was easy while on a recent trip I made sure of one thing above all else.  I would do absolutely nothing related to work for one full week.  No day job work, no trustee job, no writing … absolutely nothing other than minor things like washing the car.  It was like heaven for the first few days but by the end I knew my batteries were starting to get charged as I was getting creative bursts where I was itching to start writing again.

Now that I’m back at the house I’ve been digging into my ‘fun’ work with a vengeance during this last week of my vacation.  I’m actually looking forward to writing again and managing to get some work done and some much needed planning on how to get to finish off several outstanding projects that I’ve been working on.  It’s sort of refreshing to be able to sit down at a computer with a smile on my face and look forward to writing something like this post.

I think also my family can tell I’m back so to speak.  I’m smiling more and much easier to be around and much less likely to get angry over silly things like spilling a drink at the table.  I’ve also just enjoying the simple things like having time to read a book strictly for entertainment rather than a book review or research.

This is exactly why I wanted to ‘retire early’ and now I’m getting it now rather than waiting 13 years or so for it to happen.  Time is not refundable and so I’ve taken to watching were mine is going a bit more carefully lately to ensure I’m enjoying life and still working towards my dreams as well.

So how are you charging up your batteries this summer?  Vacation away from home?  Resting around the house?

The first item we were looking into buying was a charcoal barbeque.  We decided to purchase a simple Weber model that had a 22” grill that cost $120.  It came with a 2-year warranty and reviews on it were highly positive from what I could see.  Prior to purchasing it though, I noticed a smaller portable grill that cost $30 that I asked my wife if she would think about buying  – turns out she was not a fan at all.  I asked her why, and she stated that it would be ridiculous to have to be squatting down to cook on the grill and would just look silly.  My question to her was basically whether the meat that we wanted to eat (cooked on a barbeque) would still end up cooked, which it obviously would – for $30 compared to $120.

We ended up buying the larger, more expensive model mainly because it would be inconvenient to cook for a larger group of people on the smaller, cheaper barbeque – which is probably when we would use it the most.

In the same vain, we are looking for a freezer to put the half of a cow we recently bought and will be ready by the end of the summer.  We need about a 9 cubic foot freezer to accommodate the cow, as well as the pig that I want to buy at some future point.  There have been several of these listed on kijiji at approximately $50 – $100 depending on the listing (tax free).  A new model will end up costing $400 plus taxes.  Initially, my wife (who seems like she is being picked on here, but as always is the one that I have these kind of discussions with) was against getting such an appliance, as a 5 or 10 year old freezer does not look as nice as a new one, and it would be going into our basement living area rather than a dusty corner somewhere. [Editor's Note: Another consideration is the amount of energy a new one would use vs the old one.  Don't save cash up front to pay it out in a lifetime of energy costs.]

In this situation, I think we will end up buying used.  A freezer is a very simple appliance, and a new one is not significantly more efficient than a used one – we could buy 4 used freezers for the same price as a new one.  To make it look nicer, or more fun we’ll probably paint it with chalk-board paint, which would allow my wife to draw all over it (which is something she enjoys doing).

Those are two situations where the alternative would do exactly the same thing as a newer, more expensive model and cost significantly less.  I think at least keeping an alternative in mind can allow for significant savings on purchases, rather than just going out and buying the shiny new thing.  Obviously, neither one of these purchases are life or death in nature (both are what I would classify as luxuries) but do stand as an example of looking for something that carries out the same function that you’re looking to carry out.

Do you have any examples where you found a cheaper alternative?  Did it work out, or do you wish you would have gotten the exact thing you initially wanted?

An entrepreneur owns her business. She works in her business, she understands her business and she has control over her business. If she wants a better return, she can change her strategy, hire different people or increase her offerings. She will have a reasonably good idea of the value of her business and she’ll be willing to sell only for a fair price. Otherwise, she won’t worry about the price people are willing to pay to buy her business, because she’ll be focused on earning a profit.

A stock market investor owns stocks. He knows how to read companies’ financial reports, he knows what common indicators to look for and he knows how to question management. He is comfortable owning a variety of businesses and he probably has a good idea of the value of each. He is unlikely to panic and sell his shares during a crash and unlikely to overpay during a bubble, because he understands each one.

A real estate investor owns real property. Whether she’s a real estate agent or a landlord or a developer, she is familiar with the local market for real estate. She understands what people value and what they don’t, she understands the difficulties of buying, selling and renting and she’s willing to borrow large amounts of money to make a profit in the real estate market. She’ll have clear ideas about the value of her properties, and she will only be willing to make a deal that seems reasonable to her.

A collector has knowledge about certain items. Whether it’s sports cards, coins, stamps, old cars, art or anything else, he understands the rarity and value of certain objects. He also knows who else is in the market and is able to buy and sell profitably.

It is possible to profit by buying, owning and selling a variety of things. People who have little or no knowledge are less likely to profit. People who have no knowledge at all should “invest” in safe vehicles such as GICs, savings accounts and savings bonds. This way, they are guaranteed a return with certainty and don’t risk losing money by making a mistake. Then, little by little, the saver can learn about and start investing in one area. As their knowledge and confidence grow, it makes sense to allocate more and more capital away from savings toward investment.

What do you know about? How does it affect your investing?

1. The Park – My kids are currently obsessed with going to the local school play structure so we have been going at least a few times a week.  We often just walk over take a drink and snack and spend a hour or two playing games like tag or how far can you go and not touch the ground.   Cost $0.  Cheap Add On: Slurpee run – walk to your local 7-11 or other store and pick up a treat/drink on the way home for $5 to $10.
2. The Library – This is a weekly event in our house.  Often I drive over since we often do this with other errands, but sometimes we walk as well.  Beyond picking up our holds we also pick out a few movies for the kids, read a few books, take out a few books, play with the toys at the library and then play at the park located outside.  Then come home and immediately put a movie in for the kids to watch. Cost $0.  Cheap Add On: Pick up some ice cream from the grocery store $3 to $5 or 40 Timbits for $5.
3. Water Fun – Now this one can be done in several grades depending on the effort/money you want to put into it.  Option a) Running around in the sprinkler at home.  Who knew watering the lawn can actually be fun? Cost $0. Option b) Hit up the local spray park and run around.  Cost $0. Option c) Hit up the local outdoor/indoor pool.  Cost $11 (at least around here).
4. Museums/Galleries/Science Centers – Playing tourist in your own backyard can be fun and my kids love to see new things, so this makes for a great afternoon event for us.  Cost Free to $30 depending on which one you go see.
5. The Lake – Find a friend/family member with a cabin and get a invite out for the afternoon or the weekend.  Be sure to ask to see if they need anything and be prepared to help out with chores.  We do this fairly often over the summer as my parents literally live at the lake for the summer so if we want to get a visit in we often need to go see them. Cost $40 to $100 or more (depends on gas, what you bring out: food & drinks, etc).

So what do you do for fun over the summer?  If you have an idea please share.

That feeling likely drove a lot of my desire to shift over to part time work.  I couldn’t wait any more to try my hand at having more time off.   So far I have to say it was the best decision I’ve made in a while.  I’m so much more relaxed and on top of things than I was even a few weeks ago.

So as much as I do have these bursts of envy I’m start to relax into my new routine and accept that this is a fairly damn good life that I have right now.  The danger of having retirement envy is people can forget to live for today and constantly live dreaming of future days.  Taken far enough it can get out right sad to watch as people don’t do anything for themselves and push off everything for ‘later’.

I was recently watching a movie where in one scene a character asked “What’s the point of it all?” to which another character replied “There is none.”  Which is actually strangely true, we assign meaning to what we want to in our lives.  So you can choose to make tomorrow more important than today or not.  You can also choose to want both as well.  It’s ok to have dreams and work towards them.  Is there a point? Not really, but as long as you really want go ahead and do something different today as you can never know how things turn out.

So even as I keep working towards early retirement I know things won’t turn out.  I can’t predict the future and I don’t want to: I’m too busy enjoying today.  It’s my method of coping with retirement envy.  So how often do you get retirement envy?  How do you deal with bursts of it?

• Margarine $4
• 8 L of Milk $8
• 1lb Coffee $1.98
• Fruit (5 nectarines, 4 plums, 3 apples, 5 peaches) $5.82
• Fresh Tomatoes (5) $1.27
• TOTAL $21.07 (84% of budget)

So you can see we actually didn’t even hit the total budget during our 18 day experiment.  In total we spent $0.29 per day per person.  What surprised me about this challenge was how easy it was to pull off with a bit of planning and focusing in on what we had in the house to eat.  To be honest I think the fact we had two packages of veggies from my farmer which made this so easy (which included green onions x 2, radishes x 2, small bag fresh greens (spinach etc) x 4, parsley).  If you included the retail value of that food that would bring us up to $0.71 per person per day.  Our diet was actually fairly normal for the entire couple of weeks and we ate fruit and veggies fairly regularly.

Actually my wife like the idea of cleaning out the pantry and freezer so much that she wants use to do something similar at least twice a year going forward to prevent food clutter from building up.  By the way, I define food clutter as that stuff you buy to try something new and then forget about for two months before you use it again (like rice paper wraps).  So overall the challenge can’t have been that difficult if she wants to repeat it.

Yet the challenge was useful for me to realize a few new lessons on how we approach our food:

1. Forget Name Brand - It’s all about what is on sale, not the name on the package (especially for generic items like pasta) .  If you follow that rule you can cut back a fair amount on some grocery bill.  When in doubt look for the cost per unit mass/volume on the shelf tag to find out what is the cheapest, when you hit a sale load up the pantry.
2. Junk Food is a Budget killer – I don’t think I really understand how much a bag a chips is until you realize how many potatoes or apples you can get instead.  Cutting back on this will make a huge difference to your grocery bill and likely improve your health.
3. Eat around what you have, not what you feel like – Most people know that dangers of impulse shopping what is interesting is we don’t consider how often we do impulse cooking which requires picking up something from the store.  I was guilty of doing this a fair amount, but now I realize if you plan your meals around what you have you will make less waste and throw out less leftovers.  Also you can then shop by the sale to restock your pantry, rather than paying full price for things that keep for a long time (can soup, oil, flour, etc).
4. Plan Your Meals Weekly – This is likely the key to eating on the cheap and ties into #3 as well.  By planning what to eat in advance you can make themes for a week.  For example, I had some ham in the freezer so we planned chickpea ham salad, chef salad and carbonara for one week. Also you can plan to eat your leftovers.  This can be a huge amount of savings in money and time since you don’t have to think about what to eat.  You can walk in the door get your defrosted meat from the fridge and start cooking.
5. Get Creative – Perhaps one of the more interesting dishes I made involved me looking at our pantry and trying to figure out what to do with a can of pork and beans and some pasta.  Thanks to Google I managed to dig out a recipe a template and then just adjusted it to what I had in the house.  It was surprisingly good to eat despite my concerns of trying it.

In the end, eating on the very cheap is entirely possible, especially for short periods of time.  The trick is to do an inventory of what you have and plan around that.  Also with a bit of work I think most people could cut their food bill in half just by shopping sales and eating what you have.  So would you try something similar?  If you have, what did you learn?

The ten years between car purchases can be used as an example of a large purchase that our household will budget for.   After retirement, it will be difficult to come up with the $10,000 to $20,000 needed to purchase a new car (this would be a large capital divestment from your portfolio).  So to solve this issue our household has implemented a long-term savings plan for our next car.  The same kind of system will likely be employed for other large items, but for us a car is the largest and most pressing purchase that will need to be made in the next year or two (but hopefully longer, as this would allow further savings to accrue).

If, for example, I retired at 45  that would mean purchasing 3 or 4 cars (anticipating our household’s ability to drive until approximately 85 years old).  To pay for that I would rather save $150 per month as part of my budget for the next car rather than finance it.  I personally don’t like financing because I don’t want any liabilities in retirement or alternatively taking the capital out of investments.

Planning like this when you are going into retirement, whatever your age, is very important.  Too often it appears that  people go into retirement with a huge pot of money and assume that everything will work itself out.  If plans are made ahead of time that would mitigate foreseeable emergencies (loss of heat from a broken old furnace) retirement will go much smoother than going in with just a pot of money.

I will admit I may be an over-planner on purchases like this.  Perhaps having a large pool of money sitting around would be easier.  But I would rather know that I have a specific “necessary expense” covered so that if several of these things needed replaced in a short period, I would know that financially I would be okay.

So, that’s my plan to deal with large purchases in retirement– do you have something similar in your spending plan now or in your retirement?  If not, how do you plan on making large purchases (I’m always open to ideas)?

Legendary investor Benjamin Graham, the mentor of Warren Buffet, explained that price does not always equal value. That’s sometimes difficult to see because we are not used to negotiating prices.  In the grocery store, the price on the tag is the price we pay.  The same applies to almost all shopping, with the most common exceptions of cars and houses.  But price does not always equal value.  Think, for example, of sales.  The price is lowered, but has the value changed? What is the true value: the sale price, or the original price? In the stock market, the changes in price are more common and more extreme, further obscuring value.

Ben Graham offered an analogy to investing in the market. Imagine you work in a business partnership with a manic depressive called Mr. Market. Every day he comes in to work and, depending on how he’s feeling, names a price at which he’s willing to buy your portion of the business or sell you his portion of the business. Some days he’s manic, and willing to pay a high price to buy your shares. Other days, he’s depressive and willing to sell you his shares at a low price. What would you do? I would try to determine, within a reasonable range, a fair value for the business, so that I could buy from him when he’s depressive and sell to him when he’s manic.

That is a very fair comparison to what goes on in the stock market. Just because the price varies daily and hourly, the value of the company doesn’t necessarily. If you read financial media (which I don’t advise), you’ll see that the market price of a company supposedly rises and falls due to global economic outlook, local investor outlook and sometimes because of reasons that aren’t even related. It comes down to investor sentiment, and people will pay higher prices when they’re optimistic, and offer only lower prices when they’re pessimistic.

Determining value doesn’t require an advanced education. Investing means buying cash flow, so the value of a company depends on the profits they are expected to earn and the dependability of future earnings. We can do this by looking at past earnings to find how profitable the company has been, and how consistent the earnings have been. Unless there’s a real event that will cause lower (or higher) profitability in future, it’s normal to pay around 15 times earnings. This is the P/E (price/earnings) ratio. Around 15 is seen as normal, over 20 is seen as high and under 10 is seen as low.

When I walk into a grocery store, and I see soup on sale, I don’t think: “It’s going to zero, time to sell all my canned soup!” Buying low means buying on sale. Companies whose stock price is cheap relative to earnings are more likely to offer good value for money. Later, there are two reasons I may sell. If someone is willing to pay me more than my shares are worth, there’s an opportunity to profit. On the other hand, if there’s a real reason to think the company will be less profitable in future and the value has broken down, selling is usually the best option.

Not everyone has the confidence and patience to invest in the stock market. Wild fluctuations are normal and distracting. Finding the true value is not a science and is prone to error. However, if I can determine the likely value of a company (within a reasonable range) and buy it cheaper, I can have confidence that I’ll profit over time. How do you stay calm during days, weeks or months when stock markets fall? How do you decide when to buy and when to sell?

Now with that taken care of here are some reading material which I found interesting:

How Much Cash Do You Need to Retire?

How Do you Define Financial Freedom?

Downsizing Your Life Can Be Hard

Ditching Retirement to Go Green

Why Mortgage Funds Are Cool

Pension Reform: What Choices Do We Have?

The Rewards of Frugality and Thrift

The Price of Happiness

Tiny Tarts

And some shameless self interest promotion: What’s the Craziest Thing You’ve Done to Save Money?

Enjoy your weekend,
Tim

What happened to suddenly get back to this? Well  it stuck me that if I was planning on writing/publishing work when I leave my day job, why wait to start building up the business?  I’m “semi-retired” from the day job anyway with my recent drop to 80% time, perhaps my long term goal shouldn’t be just a set amount of investment income per year, but rather the combination of investment and business income that exceeds my spending per year.  How this would work? I don’t know yet, but I’m rolling the idea around my head.

The end result is a new focus for my energies on building my business up via several different avenues:

1. Build a better blog
2. Self publish a book
3. Freelance writing

All of which will take some time and effort, but it will be worth it to grow my little business into something.  I’m not convinced I’ll make much money at the venue, but I think breaking even is a reasonable goal for the first year.  I’ll keep you all posted with its development with the odd update post on how I’m doing and the pitfall I find myself in.