Even though the setup is much better than your standard gym exercises (read Is your workout wasting your time?) and of course close to the ultimate for a competitive powerlifter, I would not choose it for general purposes. The treadmill is easy enough to discard. It is simply much harder and also much less expensive to run in the real world. On a treadmill you only have to move your legs. In the real world you have to move your entire body. The difference becomes painfully real on inclines. A 15% incline on a treadmill is comparably easy because you only have to lift your foot a bit higher before you put it down. A 15% incline in the real world (try running up the last few hundred yards up to the observatory of Mt Diablo) might just be the worst experience of your life because you have to power your entire body against gravity. The problem with power lifting is that it often results in what is known as gym-strength although obviously the discrepancy won’t be nearly as out of touch with reality as the leg press machine. Indeed a powerlifter will be stronger than average person and much stronger in the three lifts. However, overall he will not be stronger than a wrestler or a gymnast when it comes to simply moving stuff around. In fact he might just be weaker. Three easy test demonstrates this. First, the one-armed push-up in strict form without dropping the shoulder or twisting the body or legs. Many guys with 300lbs+ in the bench fail this because their supporting musculature is weak compared to their massive triceps and pecs. The second test involves picking up a round of fire wood of say 90lbs of so. This is much harder than it sounds because it does not have the nice and easy grip of a 1″ bar. In addition the grip is not symmetrical. Some people who can deadlift even a few hundred pounds fail this test and don’t understand why they seem so much weaker when they are moving semi-heavy furniture like king sized mattress or couches. Finally, holding the round of firewood, hold one leg straight out and squat on only leg. If you can squat 400lbs on two legs, squatting 90lbs on one leg should be easy, but it’s not. Under no circumstance try this at home if you have no experience with odd lifts!! Fact is that there are a lot of small muscles that are not used in gym specific exercises that nevertheless are often used in real life.

I goes without saying that I would not set my foot in commercial gyms for all the reasons that are nicely outlined in the article above. Furthermore, family friendly commercial gyms don’t allow hardcore training and besides – they cost money. Thus I prefer to train at home. This does require a small outlay of money e.g. maybe 2 months worth of gym subscription to get you started. However, per my rule of allowing spending that somehow improves me, this is and has been money well spent. Over the past 3 years I have added 25 pounds (I used to be a skinny geek), dropped my bodyfat to about 8-9% and I’m currently sporting an “office work” pulse of around 50 beats per minute. With enough dedication it can be done from home.

In terms of equipment there was a lot of good advice in the comments in particular about buying used. One problem with buying used equipment is that those in the know practically never sell. The reason is that quality weight equipment lasts a lifetime. Therefore, one has to be very patient or very lucky to pick up good used equipment. Conversely, “popular”, cheap, or retrospectively useless equipment can frequently be had for free. A brief search on current availability on craigslist reveals a couple of treadmills, a few exercise bikes, one recumbent, and various funky contraptions that I bet was once “as seen on TV”. Multi-gyms can often be had for a couple of hundreds. We have one sitting on the curb a few streets over right now. It would easily fill half our garage.

Fortunately, a good workout is not so much about expensive equipment as the equipment manufacturers would like us to believe. The philosophy in fitness is typical of the philosophy found throughout consumer culture e.g. substituting skills for expensive solutions, here in the form of specialized equipment. Instead, I want to focus on skills.

Focusing on skills keeps the workout interesting. It must be dreadfully boring to hop on a treadmill or an elliptical and run like a hamster for 45 minutes. This is probably the reason why they are placed in front of the TV or why they come with cup holders and magazine holders. Am I the only one who sees something fundamentally wrong with this picture? Similarly, those who lift weight or pull or push levers are practically all connected to an iPod. I say, if you need distraction like that or even need it to get energized, your workout is too simple.

The workout direction I prefer is one which I believe it was Pavel Tsatsouline who referred to it as low tech, high concept. Low tech – high concept means that it is YOU rather than the tool that makes the difference. Think of chess. A chess board with pieces can be had for very little money yet there is enough to study for a lifetime. Conversely, a computer game is high tech, expensive and can be played through in a few weeks or months after which a new computer game is required. Doesn’t that sound like the typical gym experience? It’s fun for two months and then it becomes dreary.

Of course this way of thinking about fitness, that it should be useful or about function rather than form, and that it should be high concept is enormously appealing to me because it is simply so compatible with the rest of my philosophy when it comes to dealing with life in general. In in the next part I will talk about what I use to train.

Coming soon.

Originally posted 2008-01-10 03:54:38.

Here’s where my education comes into play. I know that water boils at 100C and that by heating water, I can not make it hotter than 100C. I also know that the water coming out of the faucet is about 20C—okay, I’m just guessing about that one.

What I have is

1. The ability to make 100C water.
   
2. The ability to make 20C water.
   
3. The ability to combine them at a certain ratio to make 90C water.
   

I also know that the heat capacity of water is more or less constant, hence if X denotes the fraction of 100C (373K) water and Y denotes the fraction of 20C (293K) water and we want to end up with 90C (363K) water then

X+Y=1 and 373X+293Y=363(X+Y)=363, so *waves hands* Y=0.125.

Hence, I boil 1.75 cups of water, and I add 0.25 cups from the faucet and this automatically gives me the right temperature.

Physics saved the day. More importantly, it saved me from buying a new thermometer; also this is much more convenient than trying to hit 90C/194F by watching the thermometer while heating the water.

On a side note, this is one of the rare instances, where high school math and physics is actually useful outside the class room. I recall an anecdote where the Danish ministry of education or whatever sponsored a contest for math teachers to come up with one realistic real world example where one would have to solve a quadratic equation to get the answer. They received one entry that qualified. It’s not difficult to come up with examples, but it is quite difficult to come up with examples of problems that are frequently encountered.

Well, at least you have now seen a real world example of using linear algebra to brew coffee.

Of course, I could just have bought a new thermometer.

Still even if an index is in a trading range and the general economy is in a funk, individual companies can still do well. Remember that recessions are usually localized in sectors (presently financials, consumer discretionary and homebuilders). Now it is indeed sad that the government acts against prudent investors by further devaluing the dollar to grab votes and save their own budget. The only strategy I can think off is to keep buying domestic companies with low P/B (*) or non-cyclic companies with a depressed P/E.

(*) Be careful that the book value does not contain too many intangibles and that it is not in danger of being written off. For instance, home builders who currently sport very low P/B have also been writing down their book values.

As always, I am not a financial advisor and this is strictly my opinion.

Originally posted 2008-02-04 06:43:29.

Since the mechanical clock was invented and work was scheduled—about 300 years ago—we have gotten so used to dividing time into equal segments that this has become almost invisible.

I was reminded of this yesterday when we were discussing the weather forecast. We consider forecasting important first and foremost in terms of the timing. What will the weather be like on Thursday? We consider this vastly more important than the fact that “soon it will rain” or “temperatures will hit 100F.” Now, it so happens that (as far as I know) timing a dynamic system like the weather is much harder than getting the ranges right. If we weren’t so focused on looking at the clock, we would find the weather forecast more useful. To wit, from a retired or time-independent point of view, all I need to know is whether I should get my ice-skates out or whether it’s time to bring out the sunscreen. If it rains today, I’ll simply go tomorrow instead; no particular need to plan a given day.

A similar perspective on time is found in the world of investing. It is often said that market timing is impossible. This may or may not be true. From my perspective, it doesn’t matter. I simply need to find a business which is stable and pays a dividend or a business that is undervalued. Who is to say when the market realizes this? It may take a day or it may take a year. All I know is the range—the “climate” so to speak; I don’t care about “the weather.”

Another way of thinking about this is that certain things operate in “compressed time.” This is the case for the stock market, where we have long periods of “no activity” which is interrupted by bursts of “much activity”. The long periods of no activity can be considered compressed as the long interval contains as much information as a short burst of frantic activity.

The same holds for creativity. If work is not routine, it is likely characterized by short periods of frantic activity (like writing this blog post) and long periods of inactivity.

This, however, only appears to be the case for someone who plots activity as a function of linear time. If it is plotted as a function of neural activity, the processing is more likely to be constant. The apparent inactivity of the creative person is merely due to not observing the (re)building phase of new ideas. The inactivity of the stock market is due to ineffective or discontinuous information distribution.

Time-perception is a curious little meme. It can be fairly developed—some people will be able to tell you, fairly accurately, what time it is without looking at the clock. I think that the elimination of time[-perception] ranks as high as the elimination of the ego in terms of personal development. It will eliminate “waiting”, where “waiting” is just mapping activity to time an being annoyed by the apparent lack of activity.

Waiting is simply due to plotting the wrong variable. A variable that has been trained into most people all their lives.

Stop drinking milk!

Let’s face it sucking on the teat of a cow is simply unnatural unless you are a calf. Since you are reading this, I’m willing to bet that you walk upright on two legs at the very least. Thus you are not a calf.

Doing some due diligence will reveal many counter arguments to drinking milk. Many people are lactose intolerant for starters. If humans were evolutionary conditioned to drink milk that would not make sense. In fact the few lactose tolerant people in the world are those who genetically/culturally have been drinking milk for many many generations e.g. Northern Europeans and a few others.

Actually, I did not give up milk many years ago in order to save money. I gave it up because I was too lazy to go shopping often enough to keep the milk fresh. This was before hormones and preservatives became a natural ingredient. Back then milk turned sour in 5 days! Who knows – had I not been lazy and had I been unaware of the chemistry of modern cow fodder, I would probably still be drinking milk “to keep my bones strong”. (Food for thought – what do cows drink to keep THEIR bones strong?).

Anyway, lazy won, and I got used to doing without milk. Admittedly DW buys it anyway from time to time – it makes her happy – so I get off the wagon and use some on my cereal. I never drink it though.

However, water works fine with cereal. I usually mix some oatmeal in with the rest, corn flakes, raisins, nuts, seeds, sometimes a dab of honey. This gives the water a nice taste. When it comes to bread, I use water. This will change the taste slightly – I actually like water-based bread (bread classic!) better than milk based bread (bread post agricultural – support your farmer – revolution). Try it out. Just use the same amount of water instead of milk. In fact you can substitute milk for water in almost any recipe except maybe ice cream.

Originally posted 2007-12-08 08:03:00.

I would think up new hobbies just so I could spend many hours researching and reading consumer reports on which camera or computer system to buy, which accessories I should get for my system. I probably spent more time contemplating the equipment before I bought it than I did using it later.

My name is Jacob and I’m a gadget-o-holic.

My initial solution along with many holics was complete abstinence. From that point on, all hobbies were to be free to avoid the excitement of making big plans just to excuse the later acquisition which was the real driving force behind the plan.

Eventually I mellowed out. Instead of insisting that all hobbies must be free, I now try to enforce bootstrapping. This means that I am allowed to purchase equipment only insofar that using it can return a value corresponding to the money I spent or am going to spend.

This means that hobby expenses need not be zero if there is a corresponding revenue in terms of money saved or earned. The hobby must not operate at a net loss on the income statement.

This excludes many hobbies which are only intended to burn through money with no valuable return. Yet it leaves some hobbies with the potential to earn money or simply eliminate an existing expense.

Many people fear early retirement because they are used to living a life that has been structured by their employers. Get up at 6. Eat food. Get in car. Drive car to work. Sit at desk. Fill out forms. Give forms to other people. Eat lunch at noon. Sit at desk again. Push more papers. Go home at 5. Eat. Crash in front of TV. Go to bed.

Most regular people I talk to think this routine is highly meaningful. And they are looking for something to replace this structure. This is actually the first thing I worry about when someone talks about retiring no matter how old the person is.

It seems that some people are self-starters and many people are not. I believe most people are born self-starters. Most children are capable of creativity. Even if you leave them with nothing, they start playing. They can turn a small rock into an improvised soccer game, a stick into a sword or a bicycle into a spaceship. Most adults have substituted this creativity for this so-called meaningful work that they do filling out forms, pushing buttons, writing memos, … In return they have lost their creativity and their ability to generate their own meaning.

They worry what they are going to do when they retire. Who will provide their meaning for them?

The question you have to ask yourself before you retire.

Can you do the adult equivalent of kicking rocks around?

Originally posted 2008-08-05 08:48:49.

However, people with 6+ figure portfolio/savings might want to work a little harder. Suppose spending 100 hours on market research a year yields an increased return of investment of 1%. Now with a $10000 portfolio, that is $100 or $1/hour. Unless market research is considered to be a hobby that is not worth it compared to taking a second job as a burger flipper or filling out surveys. However, with a $100000 portfolio, 1% is $1000 or $10/hour. The point here is that the larger the portfolio, the larger the return on time spent.

The next step up from savings accounts, CDs and index funds are managed mutual funds. Now most managed funds underperform the market. One reason is that they grow so large that they essentially become the market while still charging 1% fees that are much higher than index fees. On the other hand, some funds consistently outperform the indices and have a long track record of doing so. In general, the market is such that every flavor of investing will become trendy at some point (right now it’s index funds for “the people” and hedge funds for “the ballers”). In my opinion it is more important to pick a fund based on whether you agree with the manager/company’s investment values than based on whatever short term returns they have demonstrated. The worst thing is to switch investment styles and try to follow trends. If, on the other hand, you stick with one philosophy you will make money if that philosophy becomes popular. Agreeing with the fund manager’s values also makes it a lot easier emotionally speaking to stick with it even if year over year returns are negative. Personally I like value based and econometric funds, such as Oakmark, Hussman, Clipper, Fairholme, Permanent Portfolio Family, FPA, and Icon Funds, but that’s just me. Figuring out who “you” are and who “they” are is what 100 hours a year are for.

The next step up from buying managed mutual funds is buying single stocks and the occasional closed-end fund. I would consider this step when you’re past $20000 (but $100000 is better) in liquid assets and you can put in a $10000 order and watch it drop $500 within an hour without passing out. This is the step where you take complete responsibility of your investments and it is the step I’m currently working at. The effort needed here is on the order of 10-15 hours a week. Most of this is due to me having a background in hard science rather than business. I actually working towards heavy duty finance degree to get a solid investment background partially because it would make me a more knowledgeable individual investor but also because it would allow for a career change with new opportunities. I’m not telling you what it is, but I’ll give you a hint: It’s a rather respectable three letter acronym. The trick here is of course not only in knowing what your investment philosophy is but also how to apply it e.g. which individual shares would represent your philosophy. When buying single shares, annual fees and commissions can drop almost to zero as some companies would be held for years for free.

I’m not sure what the next step is. I suppose if you can easily spare $50000 of your investment income e.g. your net worth is counted in the millions, the thing to do would be to hire a wealth manager and spend your time on the beach. Personally I don’t plan on getting that rich. Doing so would require that I keep working until I’m 60 or so.

Originally posted 2007-12-20 15:08:00.

Apparently the idea is that these savings are supposed to make us feel like the savvy shoppers we aren’t. “Look honey, I just saved $100 on XXX,” or, “Come into store YYY and save 50% on ZZZ,” to which I always feel compelled to say, “But stay OUT of store YYY and save 100%.” Sometimes I wish I had my own radio show.

Although technically savings, the savings accrued during shopping are not like savings in the bank. The reason is that there is no associated cash flow. In fact they often require a negative cash flow, and negative cash flows don’t impress me at all. Spending $7 to “save” $3 does not make economic sense. Pricing something at $10 and immediately discounting it and selling it at $7 is an accounting gimmick. I understand that companies report a $10 revenue and a $3 cost of sales in this case, while the customers report a cost of $7 with $3 in savings. This serves no purpose other than to make everybody feel smarter about their economic choices.

It is my sincere wish that companies would stop trying to deceive me about how much I save when I buy something, when the item is on perpetual sale at a price comparable to other stores. To the folks at Safeway, Martins, etc. who probably have no choice, please stop telling me how much I saved when I just handed you my money. The problem is that companies are trying to create a fake anchor point that is also known as the MRSP—minimum recommended selling price. I have never come across something that doesn’t sell below this “minimum.” Instead, I use JMPC—Jacob’s maximum price ceiling—which is very close to the lowest price I have ever seen advertised. Because of technology and other efficiencies, prices should generally go down; if they don’t, I wait. Fictitious savings are not a selling point in my world. I know what something is worth, and made up savings are worth nothing.

Originally posted 2007-12-27 16:32:00.

• Establish a cash position. During a recession cash is king. The reason is that credit is often harder to obtain. Also with uncertain future prospects the certitude of cash can not be beat. Some people call this an emergency fund. I would not go that far. For instance, you could use the cash in the “emergency” that a stock goes on sale. In general, you should not count on being able to sell some other stock to fund the purchase because the other stock is probably on sale too. Cash can also be used to buy things from people and companies that need money now.  Finally, cash can be used to pay for living expenses without sending you into a spiral of debt that is hard to get out of. The coming years are when the next real estate fortunes will be made.
• Develop alternative income streams. Having just one albeit impressively large income stream is a very risky position to be in. This means the middle class. Recessions rarely cause pain to the wealthy and the poor. For the middle class losing the job means losing everything while being left with all the liabilities. With multiple income streams such as 2+ jobs, investments, or even better a business with many customers is much safer financially speaking.
• Learn to cook, sew, and otherwise fix things yourself. Personally I get a lot of satisfaction out of being able to do things myself. However, sometimes it makes sense to outsource things like cooking, cleaning, daycare, painting, and simple repair jobs. A recession is not such a time. If you are laid off you are effectively paying yourself if you are able to boil an egg rather than heading down to the restaurant. Tax free too.
• Downsize. Convert unwanted stuff into cash before everybody else starts doing it. Get a cheaper place before everybody else starts doing it. If the economy crashes hard you might even be able to buy it back at a discount. Don’t start selling at the moment you lose your job. Most likely a lot of other people will lose their job at the same time. Equally likely they will all think of selling their stock of jet skies and other garage filler while looking for a cheaper place to live at the same time.
• Don’t sign up for 0% interest buy now, pay in 2009 deals. Companies that are hurting might try this strategy on you. Instead I suggest asking for a discount of 20% if you pay in cash. Besides will you still have a job next year?

Originally posted 2008-02-09 07:37:44.

The Silicon Valley #2 meetup will take place at Lake Vasona in Los Gatos on September 11th @ 2pm. See the forum discussion for ongoing refinements.

The New York City meetup will take place at Columbos Park in Chinatown at September 18th @ 3pm. See the forum discussion for ongoing refinements.

It would be nice to have an idea of the head count. You can make your intentions known in the appropriate forums—if that’s not possible, you can do it in the comments below.

There have been two meetups so far—Silicon Valley #1 and Chicago. There haven’t really been any traditions established for the meetups—no presentations, no schedule; just people talking—and we do seem to click. Ever wondered how it would be to talk to someone who immediately understood why you wanted financial independence/(extreme) early retirement? Find out at the meetups. One thing I have been doing outside the meetups is to lend out some of my books, presuming that everybody will meet again at some time, so I may bring some for the next Silicon Valley meetup.

You have now obtained a degree. While this doesn’t show you to have any particularly useful skills, save for a few notable professions, it will make you employable in the corporate world. You now have a choice to make: You can join the majority, have a career, and work for the next 30 years while dreaming of retiring to Florida someday, unless prematurely stopped by a heart attack, or you could retire in five years.

For the former, the cookie-cutter lifestyle, allocate 15% of your income to a so-called retirement account (401k, IRA, etc.) and invest it in an index fund (I suggest 50% world and 50% US), and buy a house in the suburbs so you can start itemizing your deductions. Get a mortgage you can understand (e.g. 6% fixed for 360 months). Pay attention to the resale value. Also, buy a car that will survive the commute. Equip the house with furniture, entertainment electronics, and a barbecue. Don’t make any modifications to the house. While it may be cool to have a fireman’s pole from the attic, this will not help the resale value. If you get married, don’t get divorced, or at least get a prenup. Hire an accountant, a lawyer, a gardener, a plumber, a babysitter, a personal trainer, etc. for the things you don’t have time or skills to do yourself, and you’ll be set.

For the latter option, you’ve got some learning to do. It is very likely that you do not know how to cook (especially if you went to a fancier school where dinner was served), which foods are good and which are bad, how to mend socks and patch clothes, how to fill out a tax return, how to evaluate businesses and invest in them, how to fix a clogged sink, how to raise kids, how to clean a house, how to stay in shape, how to wash clothes (while making them last), how to change a car’s oil, how to ride 10 miles on a bike, or how to grow your own food. So regardless of how tempting it is, learn this instead of crashing in front of the TV all the time. Get a job, but don’t get the house in the suburbs. Furthermore, find somewhere to live within walking or cycling distance of your job and the nearest supermarket. Get your furniture used and get a roommate or two. Cook your own meals. Buy a very small but classic wardrobe. Buy quality, not quantity—this may require some research, as most things today are not built to last. Stay healthy, watch what you eat and take care of your teeth. Avoid owning a car, or get an old beater if you absolutely have to. Never pay interest on your credit cards. Save 75% of your income while learning the difference between gross profit margin and net profit margin, then start investing slowly for income.

If you choose the second approach, then after five years you will be a fairly competent and independent individual, and you will have enough money from your investments to pay your living costs, forever. Don’t forget–life is an adventure, not a race.

Good luck!
Jacob@ERE

Originally posted 2008-06-17 07:08:34.

Stoicism and Zen Buddhism are very similar. They both try to deal with the problems of the ego. Conversely, consumerism is all about gratifying the ego.

I don’t think I’m qualified to comment in detail–however…

Zen Buddhism and Bud? eliminate the ego through “practice.” This practice can take the form of meditation or detailed repetition of, say, martial arts techniques or brush strokes. The goal is to reach the state of no-mind, also called enlightenment.

I find it interesting that one can replace “upgrading” and “acquisition” as the meaning of life with the act of “practice.” Of course, in some sense one can think of going to work as practice. What’s important, however, is the intention behind the practice. Just going to work or even practicing by going through the motions is not going to do anything. In practicing, one must strive for that one perfect move—I think “filing a form perfectly” does count in some sense.

Applying this concept, which in business is called Kaizen, is probably also why the Japanese car industry creamed the competition. It is also a good way to live–or at least it gives you an excuse to indulge your inner perfectionist.

Stoicism eliminates the ego through active rationality. It is not as time-consuming. I don’t think this can lead to the no-mind state, but I do think it can more easily render ego gratification less relevant. Stoicism seems to be quite appealing to the INTJ mindset. This may be because emotional appeal and external accumulation or status-by-title/status-by-stuff hold little natural value to the INTJ, so they are easy to replace with another framework. In fact, it only requires a hint–such as this blog–to do so.

The key difference between Zen Buddhism and Stoicism seems to be whether rationalization or the intellect is embraced or rejected. A student of Zen will study koans with the objective of eventually realizing that trying to rationalize an intellectual answer is futile. Conversely, a student of Stoicism will study logic to fine-tune his intellect.

I think that usually when two different “schools” of opinion or thought seem to achieve the same results or success but differ on a key issue, then that issue is actually not very “key” at all.

I’ve been pondering this for some weeks now. I wish I could expound on it in more detail, but this is what I have for now.

If you want to “study along,” A Man in Full by Tom Wolfe is a story in which two characters become stoic. You need to get to page 300 before anything relevant to this happens, then a long break, and finally some more development around page 650. I read that book after reading A Guide to The Good Life as referred to in the forums. Next I’m going to read The Stoics.

I don’t have any good references for Zen Buddhism. I have focused more on Bud?, not having the patience/time for extended meditationbeing more of an active person. My favorite Bud? book is Budo Mind and Body. It is a very quick read and I try to read it every so often to reinforce my training and stay serious. This book also contains a very good bibliography of related titles complete with detailed descriptions.

RDPD has a fairly poor reputation amongst personal finance bloggers. I think the reason is that it questions widely held beliefs on personal finance. The aim of RDPD is to get the reader to stop thinking like a middle-class person and start thinking like a capitalist or an investor. This is about as hard as convincing a Democrat to become a Republican or vice versa. Many readers completely miss this point and instead complain that RDPD does not contain lists of baby steps towards getting out of debt or 100 ways to save money, out of which they can pick a handful and believe they are on their way to financial health. That is to say, the complaint is that the book does not show how to become rich while thinking like a poor person.

Fit Dad, Fat Dad follows the same prescription: I remember a dinner once where the conversation fell on the subject of calories. I was pointing out various parts of the meal, explaining that the lettuce and vegetables were around 40–80 kcal/100g, while the dressing was around 600 and the bread was around 300, etc. Then one of the 220-pound guys at the table commented how funny it was that I knew these things, when I was exactly the one who didn’t need such knowledge. This is similar to when fit people are told that since they are so fit, they don’t need to exercise. Of course, the fact that fit people exercise is exactly the reason why they don’t need to.

If I wrote a book, I would have my “fat dad” personify the attitude that one loses weight by counting calories and taking small steps by cutting out the weekly ice cream, while my “fit dad” would personify the attitude that eating the wrong kinds of food (taking on caloric debt) is simply bad for you. Since “fit dad” would know the true value of food, “fit dad” would subconsciously choose to eat healthily and in moderation. “Fat dad” would tend to value food according to what tastes good. Now, counting calories works, but it is unlikely to work well until “fat dad” understands why he is counting calories—namely to see what is nutritious and what is detrimental. Similarly, setting up a budget is not the end but only a means of understanding how some cash flows are good and some are bad.

When it comes to exercising, “fat dad” sees the ripped abs and bulging biceps, whereas “fit dad” sees the ability to do 200 sit-ups or 30 pull-ups. “Fat dad” sees exercise as a chore or at least something to be endured to reach his end goals of looking good. “Fit dad” sees exercise as a way of testing his limits and being physically capable. Looking good without a shirt on is merely a side effect. “Fat dad” would stop exercising as soon as he has reached his goal of looking good; “Fit dad” would keep pushing. Hence, machines for easy abs in just 10 minutes and liposuction are for “fat dad”. “Fat dad” drives to the gym a couple times a week and exercises for a bit on a recumbent while reading a magazine. The financial equivalent of “fat dad” is setting up automatic contributions to a 401k, forgetting about it, and going through the motions. The financial equivalent of “fit dad” is a focused search for high-ROI opportunities, whether they are found in the stock market, through cheaper insurance, or at the supermarket.

Originally posted 2008-03-06 07:07:24.

If you ask whether you can retire with $10 million, the answer is still no.

The problem is essentially scale-less. Asking the question implies that one has accumulated X dollars without any thought towards expenses and jobless income. I posit that if those things are considered, the answer would be obvious and the question would not have to be asked.

However, until one figures out one’s expenses and jobless income, the question can’t be answered.

So I can only give a very general answer (provided you don’t ask the question ).

Yes, it is possible to retire with $2 million. It is possible to retire with $1 million. It is also possible to retire with half a million or a quarter million. $50,000 is also solution. And so on. The more you know, the less you need.

Originally posted 2008-06-27 07:24:48.

I have to wonder: Is the inability to value one’s time (rather than hyper-accumulating Things) simply an inability to accept one’s inevitable departure from this world? Do people who have an acquisitive mentality towards life have an inherent denial of death, and thus seek to “escape” into their goods, which are for all intents and purposes replacements for “immortality” (objects do not “die” after all, although they do depreciate! )

I don’t think it’s a desire to own something that outlives us, that is, a way of transubstantiating our soul into a blender Most of the crap sold and bought nowadays is purposefully engineered for planned obsolescence. I lean more towards the theory that people (or rather our culture) are not yet used to everything being abundant and practically available on demand that everybody is still hoarding their own tool collection, their own library, their own car, their own home cinema, etc.

I think it’s similar to how people undergoing a demographic transition from an underdeveloped area still have many children whereas more mature cultures, which went through their transition generations ago, have much fewer children. The reason is that in more mature and civilized countries having a lot of children are no longer seen as a source of financial security, retirement safety, cheap labor, good life, or simply joy and happiness but rather as a liability.

There is clearly an overabundance of people now which is why more people are seen as a liability, but I think we have yet to undergo a transition in terms of the abundance of stuff. The problem is that most people do not yet see their collection of stuff as a liability, which it actually is in this day and age, but as a source of wealth, which it no longer is.

Open source, freecycling, or just extensive “used”-markets like amazon or ebay are great examples of this mature attitude towards stuff.

Originally posted 2008-03-05 07:20:48.

Running a marathon is comparatively simple in that it only requires a high level of fitness, some legwork, and following some simple rules about hydration and nutrition. For those who are already competitively fit, a marathon is not a big deal and there a certainly more grueling challenges for those who want to test their limits (ask me sometime). However, or sedentary people it is a big deal just like getting out of debt and building up a large stash of money is a big deal. So what does marathon running and personal finance have in common.

In both cases, it is not the completion of the event that matters. Rather, it is the preparation needed to get to the event. Like a disciplined savings program, preparing for a marathon requires a tremendous amount of self-discipline. Would-be marathoners need to stick to their training plan for several months and learn to deal with sustained discomfort for extended periods of time while building up a sufficient level of cardiovascular fitness.

The preparation requires an ongoing effort. Training for a week and a half and then taking a week off and then starting again or putting the training off will not obtain the expected results in time for the event. Whether we like it or not, delaying the training or the savings plan does not extend the time until the competition or the day of retirement and one risks showing up unprepared.

Sometimes a small effort is not enough. Nobody can complete a marathon by never pushing oneself beyond jogging. At some point the actual transition to running has to be done. Similarly, saving 5% for retirement is better than nothing, but it is not enough to actually retire in time. The larger the effort, the better the results.

It’s a primarily mental game. The learning curve of running is relatively shallow just like saving money does not require any special talents. All it requires is to follow a few simple rules and then go out and do it. Daily. Week after week. In short, what is needed is legwork to build up the tolerance of the legs and joints to be pounded on for hours at a time despite the mild discomfort. Similarly financial security is built by going without present comforts and saving money over an extended period of time. There is no fast way to get there. Going too fast risks injury just like get rich quick schemes rarely work and often have high risks of setting progress back by several month.

Marathon running can change your life. I must say that running half a marathon did not change my life and I doubt doubling the distance would have made much of a difference, but that was because I did not need to prepare for more than a couple of weeks. However, preparing to a competitive level in clubbell sports, which took 18 months, did change me. It made me physically confident in the sense that I am ready to accept any physical challenge that life may throw at me. Similarly getting in financial shape will thoroughly change a person’s self-confidence and attitude towards money.

It is perhaps not surprising that personal finance and personal fitness have many things in common and why some personal finance bloggers also have an interest in fitness. Finance and fitness are both about self-discipline, self-control and hard work. People with those life skills will tend to do well in any endeavor and running a marathon (or saving a lot of money) can help uncover or build them.

Originally posted 2007-12-29 20:17:39.

Another problem is that sometimes ingredients are bought and only partially used or not used at all. This is perhaps an even bigger problem.

DW and I rarely throw any food anymore after we adopted the following strategy.

We take turns cooking. Each person cooks for one week. Then it is the other person’s turn. We are both quite lazy, so this means that if there are any leftovers from the other person, they get eaten early in the following week. I am not sure why they weren’t getting eaten with our past and more irregular schedule (to be honest, DW did 95% of the cooking back then), but this method works.

If leftovers aren’t eaten directly, they tend to go into “leftover-omelet”. This is a fairly easy thing to make. Put eggs in a deep pan. Whisk them around with a pair of forks or use a electrically powered utensil if you must you owner of a handmixer and then dump the leftovers in there (cut them in small pieces first).

I would also like to take a piece of the honor for not wasting any ingredients. My cooking style is to cook around special ingredients using staples. So come Monday, I look in the fridge to see when we have. Then I see how far I can keep it going with those ingredients without buying more.

I think our food costs have gone down using this method as well.

Originally posted 2008-08-03 18:48:11.

The original retirement plan was to move to some cheap place to live that didn’t suck too much. Preferably it would be within walking distance of many things but it certainly did not have to be big. In fact smaller would be better as it would leave more time for more interesting things than cleaning and housekeeping. One potential problem is that I am not comfortable with stagnation – at all. There has to be a learning curve, and for a house this learning curve would naturally have to be found elsewhere. Therefore I was never quite satisfied with the idea. Being the home-owner of a generic cookie-cutter seems like a non-scary nightmare. I am NOT a homemaker.

The second idea was to get an RV, specifically to build an RV. I quickly found out that unless one drives a $100,000 RV bus, one is just a few steps removed from the homeless on the persecution scale. This may be wrong but all the sites I read about stealth camping suggested as much.

The third idea was a combination of the former two. Get a tumbleweedhouse and park it in an RV or trailer park. This could even be done as a snowbird. If people didn’t understand (I’m so used to this that I have come expect it), the house could simply be driven away. Of course this came with its own problems. Aside from building the house, there is no learning curve.

Now I don’t know how I came across the idea, but how about living aboard a yacht in a marina, anchored of a tropical island, or just cruising on blue water. Sounds unreal, but apparently many people do this and they’re not all full of money. Boat living can cost as much as you want but frugal estimates rank at $600-$1000 per month which are very familiar numbers to me. While some people never leave the slip (harbor), others spend time cruising. Some people even sail around the world. I am quite taken by the fact that one can take a $30,000 boat and sail it across the Pacific or the Atlantic, just like one would take a car and drive it across the US (only somewhat harder). Skippering a boat also has some aspects that I have been missing from modern life, namely, accountability and self-reliance. If something goes wrong, it is plain clear where the buck stops. In “real” life, the buck is often passed along. As I read in some boating forum, sailing is actually closer to reality, because unlike this world, there are immediate consequences for mistakes, and one can not talk or pay one’s way out of mistakes. It also fits a lot of my other values. On a boat there is no clutter and so consumerism becomes so irrelevant that it would be considered crazy. The focus is on functionally, personal ingenuity, and skills rather than appearance. Sailing is physically demanding. If one can’t hoist a main sail, well, then the boat doesn’t move. Forsooth, one’s body actually becomes more than just a sloppy vessel for carrying one’s expert brain around between the job, the car, and the couch/bed like on our present (degenerate) world.

The only problem. I have no clue as to how one sails!

I have also learned how to sail. In that regard, I have learned that I am perhaps not as adventurous as I thought I was. Facing 10+ foot waves in a 30 feet boat in near gale conditions teaches one things that are hard to grasp intellectually However, while sailing around the world is out of the picture (maybe until I become vastly more experienced), I am longer wary of buying a boat afraid that it might sink if I don’t operate the marine toilet properly.

Originally posted 2008-04-03 07:32:47.

I was asked who I thought was the worse parasite, someone living on his investments or someone living on the welfare system?

To answer that, I suggest reading this primer on simple “Robinson Crusoe” economics first.

Imagine two people who only eat apples. Each day they each pick 50 apples. Since 40 apples is enough to sustain each of them, they don’t need to work–that is, pick apples all the time. When Apple Eater #1 is not working, he spends time hanging out while consuming (spending) the apples he saved. Apple Eater #2 is working in his spare time to fashion a picking stick (investing) which will allow him to pick 50 apples in half the time. Eventually, he makes 10 sticks. Apple Eater #2 offers to lend out a stick, which allows one to pick 100 apples in the time it normally takes to pick 50, in return for five of those apples. Lending 10 sticks out, he gets 50 apples a day from “rent” or “dividends” instead of work. Apple Eater #2 is living on his investments.

A welfare recipient is someone who either can’t or won’t work, in Apple World and in reality. Normally, such a person would starve, but there is a third group of people called government, who don’t pick any apples either, and who go around taking other people’s apples and giving them to others.

Overall, I’d say the welfare recipient is worse. Without him, everybody would be better off money-wise, except the government workers. Conversely, without the person lending out the money (sticks), everybody would be worse off, because they wouldn’t be able to pick as many apples.

Note that I said “money-wise.” It may well be that the welfare recipient is a nice person that the entire community likes and that the capitalist is a mean bastard. Apple-wise, though, the capitalist has made people richer (in apples) and the welfare recipient has made people poorer (in apples).

Let’s further complicate the example: Can the capitalist morally patent his stick, thus preventing others from making their own sticks? Is it better to take people’s money legally, but perhaps not morally, and give it to the poor, than the poor taking it illegally and ending up in prison? The latter is very much the US solution; the former is the European solution. What about the carrying capacity of the apple trees? Did the sticks make the world better for the apple trees? Should we care? What if we pick so many apples that there are none left to eat?

Indeed, things quickly get complicated when considering the systemic effects. From a micro perspective, though, the capitalist is a giver and the welfare recipient is a taker.

I’m almost afraid to ask, but what do you think?