Third World ERE - FI Achieved!

[Ian]

I've started a thread about my new project:
viewtopic.php?f=7&t=4974

This is what I'll be doing over the coming months instead of going out and spending money.

[Ian]

The won spiked in value for some reason, so the exchange rate went beneath the usual low in winter, so I sent another chunk of money to my bank. The additional transaction fees don't hurt much, since there's a $10,000 limit to individual transactions that would have forced me to send multiple transactions at the end of the year anyway.

That again leaves me with the decision of investing. By the end of the month I'll have a $2000 emergency fund in won and about $3500 in my bank - that seems like a sufficient amount to cover emergencies. The logical thing to do would be to invest the extra, in the spirit of not timing the market, but as always I'm tempted to wait for a market correction.

I'd welcome thoughts about this or about an appropriate emergency fund size. The money hasn't finished the wire transfer yet, so I have time to decide.

[Ian]

April 2014
Net Income: $1968.96
Food: $151.98
Phone: $9.09
Gas: $9.69
Electricity: $2.74
Medical: $68.57
Misc: $19.07
Saved: $1696.09

I ate about the same, but this month I had to buy several commodities in bulk again. My food expenses are fairly lumpy, so a monthly average will be more useful than the month to month amounts. In general, I feel like tracking my expenses this way was useful for adapting and choosing priorities, but the yearly numbers will be more meaningful.

The medical expense is because I had to pay for a medical checkup to renew my contract for another year. It will be more than offset by the $1800 bonus I get for renewing, but I don't get that bonus for a while.

[rube]

I am every time amazed by the % you are able to save, 86% this time! Well done.

Instead of calculating the monthly numbers, I also calculate the averages over the last 12 months, as the monthly numbers can indeed fluctuate quite a bit.

Regarding you emergency funds: you seem to be able to get buy on very little. So it seems to be sufficient, though I don't know what cost could hit you in certain emergencies (flight back home? high medical expenses for relatives?)
I have difficulty as well to invest, as everything seems high. But, I am still sitting on a pile of cash which is not generating a lot. So if I don't invest every month our savings now, the pile will only becomes bigger and dollar averaging will only become more difficult. Do you have all in one Vanguard funds? Maybe you can spread to more to spread risks a bit.

[Hankaroundtheworld]

Hi Ian, just want to say that I am really impressed how you find your way in life, and how you structure your spending (to what is real value, and not inflate your lifestyle), a true example for others, the world would be much better with this mentality!
One of my options is to go to Vietnam (Hanoi), and your story (even though more on Korea) is inspiring.
I really wish you good luck in your next steps!

[Ian]

I am every time amazed by the % you are able to save, 86% this time! Well done.

Instead of calculating the monthly numbers, I also calculate the averages over the last 12 months, as the monthly numbers can indeed fluctuate quite a bit.

Regarding you emergency funds: you seem to be able to get buy on very little. So it seems to be sufficient, though I don't know what cost could hit you in certain emergencies (flight back home? high medical expenses for relatives?)

Thanks. I'm hoping to get some 90%+ months over the summer, but we'll see.

The most expensive emergency would definitely be somehow losing my job in a catastrophic way. That would require a lot of travel expenses plus a flight back home.

I have difficulty as well to invest, as everything seems high. But, I am still sitting on a pile of cash which is not generating a lot. So if I don't invest every month our savings now, the pile will only becomes bigger and dollar averaging will only become more difficult. Do you have all in one Vanguard funds? Maybe you can spread to more to spread risks a bit.

I'm in a number of different Vanguard funds. I've started thinking about it another way: about 20% of my net worth is in cash. That's not insane, given things like the Permanent Portfolio. I won't let it go over that, but for the time being I'll be sitting on a little cash. The psychological benefits are worth at least a little to me.

Hi Ian, just want to say that I am really impressed how you find your way in life, and how you structure your spending (to what is real value, and not inflate your lifestyle), a true example for others, the world would be much better with this mentality!
One of my options is to go to Vietnam (Hanoi), and your story (even though more on Korea) is inspiring.
I really wish you good luck in your next steps!

Thanks, and I wish you all the best in your choices. Vietnam is an interesting country I've only visited.

[Ian]

I just agreed to another contract, which means I'll be in this job until August 2015 (barring a major shift). I'm fairly happy with this situation for the following reasons:

- Though it's taken a while to figure out some things, once settled, most aspects of life here are very low stress.

- Though technically I work full time, I calculated the actual working hours and came up with... well, let's just say much less than that. This will only decrease over time.

- I expected the job to be tolerable, but I'm actually getting some satisfaction out of it. I wouldn't want to teach forever, and I can't predict burnout, but for now it's time well spent.

If given the opportunity, I think I will teach at least another year after this. Renewing automatically gives you a bonus, extra vacation, and (small) raise. Having set systems is also important to my personal happiness. Right now I feel like I could do more than three years, but outside circumstances will change after that point.

Though I've enjoyed a few things as challenges, I've been thinking about money too much recently. I prefer to have a core of frugal habits and not think much about finances either way (which is, incidentally, part of why financial independence is appealing to me).

[Ian]

May 2014
Net Income: $1968.96
Food: $141.39
Phone: $9.09
Gas: $14.54
Electricity: $3.17
Transport: $7.18
Household: $3.07
Misc: $27.41
Saved: $1763.11

I was hoping to scrape under $200 spent, but required travel and some expensive food choices prevented it. Still below my par for this year, so I should be able to make up for gas bills in winter.

[saving-10-years]

This is amazing. Thanks for sharing and very well done.

[Ian]

Thanks, glad you're appreciating it. Meanwhile, I've gotten my last groceries for the month, so...

June 2014
Net Income: $2016.45
Food: $71.05
Gas: $14.54
Electricity: $5.83
Household: $0.91
Misc: $7.27
Total Expenses: $99.60
Saved: $1916.85

This is my new record for lowest expenditures in one month, and it's probably going to stand for a while. All my periodic expenses lined up: no bulk food purchases, no phone credit necessary to keep my phone operating, no travel required, etc. Next month will be nowhere close, not least because I'll have required administrative expenses to renew my visa.

Obviously the most financially eventful thing this month was my Kickstarter campaign finishing, but you won't see it here. I haven't been including the money from any of my creative efforts, since they've always been net positive but not particularly notable. I'll be giving my overall thoughts on Kickstarter in another thread once I have some more perspective.

I reduced my emergency fund, since it was getting unnecessarily high, so I'm now further invested in index funds. I'll just have to hope the statistically correct decision was correct in this case.

[BlueNote]

Your savings rate is awesome. It looks like your rent is subsidized which is great.

I was an ESL teacher in Japan , similar culture. Hopefully you're picking up the language , it will make a world of difference to learn more then just survival level Korean. I took lessons in Japanese for a small charity donation at a community centre once a week for awhile. The return on investment was very high and in many ways unexpected.

I assume there aren't any Tanzanian Vanguard funds. Is there any special tax considerations in your home country on dividends and capital gains brought in from the foreign funds? I know if I get dividends from a stock owned in certain counties they will withhold a certain % from me.

This may sound strange but you have avoided hedonic adaption marvellously through your own innate personality and your third world heritage. This is a great thing for you, having never lived in the lap of luxury like us westerners you are probably far better prepared psychologically then a typical westerner pursuing ERE.


Good luck!

[Ian]

Yes, my job has a number of benefits. Rent and internet are entirely subsidized, lunches are partially subsidized, and I get half my medical and pension payments from the school.

I haven't done as well with learning Korean as I'd intended to, but I have gone beyond survival Korean in a few areas. I'm hoping to get something better set up for this next semester.

I assume there aren't any Tanzanian Vanguard funds. Is there any special tax considerations in your home country on dividends and capital gains brought in from the foreign funds? I know if I get dividends from a stock owned in certain counties they will withhold a certain % from me.

Yeah, I couldn't even use Vanguard's site from Tanzania, I had to set up my accounts while I moved through the US on my way to Korea. Right now, most of my money is held outside Tanzania in such a way that it's exempt, but if I ever move it back I'll face some stiff fees and taxes.

This may sound strange but you have avoided hedonic adaption marvellously through your own innate personality and your third world heritage. This is a great thing for you, having never lived in the lap of luxury like us westerners you are probably far better prepared psychologically then a typical westerner pursuing ERE.

Good luck!

Thanks. I shouldn't understate the level of luxury I've experienced, though; I've had it very easy compared to many people.

You may find it interesting that poverty can have a very negative effect on your psychological preparedness. If there's never enough money (and you'll be socially obligated to give excess to relatives) there is a tendency to view money as a temporary commodity that needs to be spent as quickly as possible. I've seen a lot of people obtain middle class lifestyles (for Tanzania) and save absolutely nothing, because they've never experienced a situation where saving is a viable strategy. There are a lot of different barriers to getting ahead long term.

[BlueNote]

You may find it interesting that poverty can have a very negative effect on your psychological preparedness. If there's never enough money (and you'll be socially obligated to give excess to relatives) there is a tendency to view money as a temporary commodity that needs to be spent as quickly as possible. I've seen a lot of people obtain middle class lifestyles (for Tanzania) and save absolutely nothing, because they've never experienced a situation where saving is a viable strategy. There are a lot of different barriers to getting ahead long term.

I do find that quite interesting, thank you for educating me.

What are you strategies for getting ahead in the long term despite the barriers? Are you thinking of emigrating?

Social obligations are difficult to avoid, and if my family was extremely poor I would also feel obligated to share with them. I am lucky that they are in Canada and will probably never have to live near the levels of poverty experienced in other parts of the world.



Also you mentioned hyperinflation, I bet that makes people inclined to spend their money quickly as well.

[Ian]

What are you strategies for getting ahead in the long term despite the barriers? Are you thinking of emigrating?

Social obligations are difficult to avoid, and if my family was extremely poor I would also feel obligated to share with them. I am lucky that they are in Canada and will probably never have to live near the levels of poverty experienced in other parts of the world.

Also you mentioned hyperinflation, I bet that makes people inclined to spend their money quickly as well.

Some of the same strategies discussed on this forum still work (that's why I'm here), they just need to be used in different ways. Of course, my advice to a young Tanzania would be completely different from a middle aged or older person, and likewise those in rural vs urban environments. The biggest barriers are actually fundamentally the same: getting people to change their views of the world and question their assumptions.

Yes, it's very likely I won't retire in Tanzania. I believe I made reference to some of the reasons in one of the early posts of this thread. In a way this is a cop out, since it simply trades many Tanzanian problems for western ones.

The issue of social obligations is complicated, because while I do feel it's a structural problem, you need to be careful or you risk blaming people for their poverty in unfair ways. One difference between many countries and Canada is that family bonds can extend almost indefinitely, so no matter how wealth you become, there will always be more relatives that need money. It's an effective system for keeping everyone alive, but not for helping anything improve.

Hyperinflation doesn't help at all, though Tanzania hasn't had much of a problem with that compared to other countries. However, it does have a lot of currency instability, which also makes money seem more arbitrary and unreliable.

[Ian]

July 2014
Net Income: $2000.83
Food: $142.92
Gas: $4.85
Electricity: $6.39
Household: $12.78
Misc: $14.18
Total Expenses: $181.12
Saved: $1819.71

I spent almost twice what I did last month; I am ashamed of my insane shopping spree. Kidding, of course, since I actually expected higher after such a low month. I feel positively about the money I spent and I'm still on track for my goals this year. It may have actually found a way to get better food for less; we'll see how things work out over the coming months.

This month I've begun research on real estate investing. I'd like to diversify into that perhaps as early as 2015, so the plan for now is to learn what I can while gathering cash reserves. I know many people think turnkey companies take too much, but they seem like the right level of passivity for my time and interest right now, so that's where I'll start.

[Ian]

This journal has officially been around for a full year of expenses, as of this month:

August 2014
Net Income: $3909.10
Food: $81.77
Gas: $4.84
Electricity: $6.33
Household: $0.91
Phone: $9.09
Misc: $1.82
Visa Fees: $54.55
Total Expenses: $159.31
Saved: $3749.79

Though I had to pay additional fees in order to renew my work visa, their effect on my savings rate was canceled out by the bonus I got for renewing. I didn't think things would line up that nicely, but my coworkers put everything off until the last second, like usual. But that's done and so I'm here through August 2015.

While it has been interesting to track my monthly expenses and I'll continue doing so, I'm going to stop reporting them here. Part of what appeals to me about FI is being able to ignore money to some degree and so I'm going to shift toward that. That means this journal will cover more general thoughts instead of the numbers.

In a few days I'll calculate my total yearly expenses and make some projections. After that, I have some new thoughts on my job here and what the future might hold.

[Ian]

Big Picture Time
During my first twelve months in Korea, I spent a little over $3200. That includes an unusually expensive first month as I got established (actually a month and a half compiled into one for the sake of simplicity). If we recalculate with a worse exchange rate that brings expenses to $3500. I'll throw in creative expenses (even though I made that money back) and round up a bunch to bring me to an even $4000.

That seems like enough hedging that I'm confident my core yearly expenses shouldn't rise too much over that. That means I'd need about 130k at 3%, though my returns are much better than that. At my current rate of savings, it would take me three years to get to this point. Unless I've miscalculated, that's pretty secure, so the big issues are...

Housing and Health Insurance
Since my FI number is 130k + housing + health insurance, the real puzzle now is figuring out those latter two. Health insurance is an ugly asterisk on any attempts to plan for the future because it's such a volatile issue. While the US seems like a good location for stability and investments, the political controversy makes this highly uncertain. Right now I'd be subsidized by the government, but I don't know if that's sustainable and I certainly won't be planning based on having it.

Housing is a much more complicated question because there are so many options. Renting seems like the only one I can dismiss out of hand, since it would easily become the majority of my expenses. There are a variety of cheap options for buying/building a house (it's not out of the question that I'd buy land and build a cob or strawbale house myself) but I'm not really at a point where I can begin calculating this.

So really, little has changed. I am still in the capital accumulation phase, not looking toward FI any time soon (by the standards of this forum, anyway). I'll put together my thoughts about how I'll get there in another post.

[TheFrugalFox]

Great journal. Quite a few similarities as I live in South Africa - but lived in the UK while in my twenties. Saving a first world salary while planning to retire in a third world country certain made it easier to save knowing what you could get "back home".

BTW, been back in SA for 10 years now and do not regret it at all. That said, we probably only a couple of votes away from a despot, so who knows!

[Ian]

From Here to FI
I'm not sure what this path is going to look like. It certainly won't be working full time, not unless I have an incredible offer. I realize that locks away a lot of the high salary positions people here have, but even half time feels like it sucks up an enormous amount of my life. Spending more years working less than that is a tradeoff I'm happy to make.

I have mixed feelings about continuing to teach here in Korea. After the end of this contract, my tax exemption runs out and that will likely eliminate the raise I get going into my third year. There would be another raise two years after that, but then I'd have maxed out the payscale. The top bracket is 35 million won per year, or about 31k USD. Probably more like 27k after taxes, 23k saved after expenses.

While that feels poor to me, I try to keep in mind just how easy my job really is. I calculated my actual working hours for the previous semester and the total was... low. While writing this it occurred to me to estimate my hourly wage and I was surprised by how good the results were.

However, there are negatives. The biggest one is that the new freshman class is horrible. That's not just my impression - I've seen their grades for all classes and talked to the other teachers. This can take a bit of a toll on me at times.

On the other hand, we'll see how things change after this semester. My worst co-teacher will retire and I'll get to see another freshman class that might not be so awful. While a third contract would mean I have to put up with these freshmen for two solid years, I'd finally have a full curriculum and cut down my working time further by reducing planning time.

I've seriously considered other options: teaching in the Middle East can be more lucrative and trying to get into an elite or international school would give me more meaningful teaching work. However, it's unlikely that I could find a position in either that would be as laid back as this school, so my hourly wage might actually go down while stress and time sacrificed would increase.

There's another unknown variable that could change my timeline: all of my creative pursuits. But I'll have to wait to type those up another day.

Great journal. Quite a few similarities as I live in South Africa - but lived in the UK while in my twenties. Saving a first world salary while planning to retire in a third world country certain made it easier to save knowing what you could get "back home".

BTW, been back in SA for 10 years now and do not regret it at all. That said, we probably only a couple of votes away from a despot, so who knows!

I know the feeling. There's instability anywhere, but some countries have a lot more reason to be nervous about it than others.

[Ian]

Vacations

I took my first non-subsidized vacation in Korea over the long holiday weekend. My part of the bill was a total of $121.95 - more than I'm used to spending, but not bad compared to the average holiday. I note that over half of that amount was due to hotel and bus costs on the days we couldn't stay at someone's apartment. Just using public transportation to get around to all the places we actually wanted to visit was remarkably cheap, but the incidental costs sure add up fast.

My next vacation will be over winter break, sometime in December-February depending on my schedule. I'll try to roll what I learned from this experience into the next one and see how much I can get out of Jeju Island without wasting money.

Winter may be my last real vacation opportunity, because I'm looking toward...

The End of My Time In Korea
Multiple factors are aligning that make staying in Korea after the end of my current contract less attractive. As I detailed above, I'll lose my tax exemption. But more importantly, I've discovered that there's a little-advertised policy that may mean I would be moved from my current school if I decided to sign a third contract.

Considering that a large part of the appeal of my current job is specifically related to my current school, that would be a bad deal. Especially if I have little control or information about where I'd be headed next contract. Knowing that I can't keep my present low key position makes traditional job hunting a more attractive option.

That choice wouldn't be without its own downsides, however. There are also a lot of other variables involved. But I won't get into those, because this decision will be made early 2015 at the soonest.