Gus' road to retirement

Where are you and where are you going?
Post Reply
Riggerjack
Posts: 2699
Joined: Thu Jul 14, 2011 3:09 am

Re: Gus' road to retirement

Post by Riggerjack » Tue Dec 25, 2018 9:30 am

I don't read journals, much. But I just read all the way through this one.

Agustus, earlier, you didn't know if you would like to work 2 months per year in retirement, or six. You wanted to make a software AP. And throughout, you have obsessed about how much work was right for you.

How much do you think you would pull in, working 2 months per year? If you subtract that amount from your annual expenses, are you FI, yet? If so, why not cut back to 2 months per year, to see if you like it? If not, how many months income (estimated average) would it take? Cut back to that. Act FI to see if you like it. Use some of the time to try your AP. Maybe you can close the FI gap with your own project.

Working harder, to save, to work less in the future, is reasonable in the beginning of accumulation, but accurate forecasting is more important near the end. You seem to be in need of some quality data on what you really want, and maybe you are too good at distracting yourself with work. Or maybe I am just projecting... :?

In any case, it was a good read, and good luck to you.

Augustus
Posts: 897
Joined: Sat Apr 02, 2016 10:15 am

Re: Gus' road to retirement

Post by Augustus » Sun Dec 30, 2018 8:38 pm

Riggerjack wrote:
Tue Dec 25, 2018 9:30 am
Thanks Riggerjack! I'm a fan of most of what you write. I was flip flopping on whether or not to enact exactly what you mention earlier this year. I'm on the cusp. The main thing that held me back is childcare costs, and I value childcare because I can get some me time in each day. My kid will be eligible for kindergarten in 2 years, and that's when I plan to cut the cord. I gave not working a try for 3 months about a year and a half ago and looooved it. One of the happiest times of my life.

The next two years will be the most expensive of my life (I hope), by the end of them I plan to buy a house to fix my rent costs and one more rental to complete my accumulation goals. With childcare going away, my monthly burn will decrease and my passive income will increase at about the same time. Then it's definitely time to scale back.

As far as the app goes, I'm close to finding out whether or not it will be profitable. I'm planning to launch it in the app store next month. The major work is done, I've just got to polish it up, I've been testing it like crazy to ensure that it won't get bad reviews and that it will hold up to traffic, then I can submit for approval to the store and market it to the best of my ability. If things go really well I can semi retire sooner, but I'd be happy with even a few hundred a month provided I didn't have to work more than a few hours a month to maintain it, keep the features competitive with the competition, and customer support.

Augustus
Posts: 897
Joined: Sat Apr 02, 2016 10:15 am

Re: Gus' road to retirement

Post by Augustus » Fri Jan 04, 2019 3:43 pm

I just got back from vacation, hung out by the beach, did some surfing, and thought a lot about my future.

I keep revising the amount of money I need to accumulate downward. At this point I'm going to shoot for another 140k, and maybe even 120k. That puts me out to about 2 years or a little less. My kid will still be headed into kindergarten a few months after I cut the cord at that point. I'd have higher expenses in the short term which would be covered by my 3-6 mos of work per year, and the long term is still covered by 3 rentals plus an equity based rainy day fund that was sitting around 100k earlier this year, haven't bothered looking at it after all the losses, I don't plan on touching it for 30 years so short term volatility doesn't matter. The cornerstone of my plan is having 3 rentals, paid off by the time I'm 65 by the tenants, instead of the 2 I currently have. If I've got 3 rentals turning an average profit of 1k/mo in todays dollars, that covers what I'm projecting our expenses to be when we're in our 60s, 800/mo of which will be taxes/ins/hoa (thanks California! but the wife is happy here...so whatever). With the rainy day fund and social security, I feel pretty safe even if we get hit with medical expenses down the road. Granted we could always get wiped out by catastrophe. I need to research a bit more on insurance options.

I've even thought about reducing that savings target further, by taking equity out of my paid off rental, and throwing that into a third rental. I just don't know if a) the banks would even approve that or b) if it's a good idea to overextend like that, I am very leery of over leveraging, my rentals overall would only be about 50% leveraged even if I took 200k out of the paid off rental and put it into a new one, and the profits from them would cover the payments unless the rental market declined by more than %30. I guess a third option would be selling the current paid off rental, taking the ~280 or so left after fees, and then splitting that up into 2 down payments. If I did that... I'd have even less short term monthly income, but age 65 income requirements would be met, I'd still be turning about 1500/mo in profit, and I'd only need to save another 50k or so. I'd just have much less short term income. But if I'm planning to work 3-6 mos every year... that's not really a problem? Maybe?

I wont pull the trigger on any of this until we buy our house in SoCal, because that's the more immediate need and means a lot to my whole family, and I don't want to get my debt to income out of whack until that's been completed. I'm crossing my fingers that the market here will continue to decline, it's gone down somewhere around 10-15% so far, and that we may be in a position to purchase by the end of 2019. That's out of my hands, but I've seen a couple in homes sell in the last couple of months that are about 10k outside of my maximum price point. The best trend I've seen is that homes that I'd want to live in are selling for 20k under asking price, and that's after asking price has already been reduced from 2017's highs. If that trend continues, then we'll definitely be buying our "forever" this year. But that's out of my hands and unpredictable.

The other big factor here is my family. E.g. childcare costs and wife. If I sell the paid off rental and use the proceeds to buy other rentals with 50% down which would hit my long term goals and bring my date in to 1 more year of full time work, I've got to figure out what to do with my kid for a year before she starts kindergarten, full time daycare runs $1300/mo where I live. I really value having my own personal time, like right now, as it's the only time I get to think deep thoughts, when everyone else is out of the house. I'd also have a very panicky wife to calm down and explain my reasoning to, "yes, i'm taking time off, no, we're not going to go bankrupt, look, we have a cash buffer of 6 mos expenses so we are not in immediate danger, yes, I'm planning to work again in a few months."

Working a minimum of 2 more years is a lot more stable and has a lot less resistance. I'd end up with more short term cash flow to the tune of around 2200/mo and lower short term expenses (1300/mo in childcare ends in 2 years) and a happier wife.

OTOH, taking a more aggressive stance would mean I cut the cord in 1 year if everything goes well, and transition to semi retirement working ~6 mos a year on average at the beginning.

It's very easy for me to point to a likely recession in the next few years, panicky wife, high childcare costs, and choose the safe route of working another year. That's definitely my default route. The more aggressive route has it's perks too, like being able to say I'm going semi retired in 1 year! There's also a very strong possibility that the more aggressive route would end up totally fine as well, I started my software consulting business in 2009, that should be proof enough to myself that I can make money in a bad economic climate. I'll have to mull it over for the next year or so. I'm a pretty risk averse individual, and one more year doesn't seem so bad considering the much lower risk... I have one more year syndrome for sure.

Feedback is appreciated, I'm sure I've got blind spots and things I'm not seeing.

suomalainen
Posts: 733
Joined: Sat Oct 18, 2014 12:49 pm

Re: Gus' road to retirement

Post by suomalainen » Fri Jan 04, 2019 5:02 pm

Since you asked...two thoughts:

1) Complexity does not scale linearly with the number of family members, does it?
2) Without re-reading your whole journal, my recollection is that you're in a pretty sweet situation right now - you work on or near the beach some/much of the time, you work for yourself (well, third party clients), you can work flexibly...what exactly are you trying to achieve? A short sabbatical? Instead of framing it as a sabbatical, can't you frame it as part of the business plan and/or reduce your work load once the current set of contracts terminate?
3) Instead of the all-or-nothing approach, where you might hit a "fuck this isn't what I thought it would be like" moment like financial samurai's full-time parenting moment, can't you engineer a smoother glidepath from call it 40 hours/week worth of work to 20 or 10 or 0 and try it out and have a back-up emergency on-ramp if you decide you need some work in your life (for reasons other than money)?

I guess this is sort of the same reaction as @riggerjack from above - if you have the flexibility to just do it (turn down work), do you really have to announce it or label it as anything? I'm probably not understanding the nature of your work.

Augustus
Posts: 897
Joined: Sat Apr 02, 2016 10:15 am

Re: Gus' road to retirement

Post by Augustus » Fri Jan 04, 2019 9:08 pm

I need to define semi retirement better now that you mention it, I'm kind of winging it, I've never done it before. It usually takes months to drum up new work, so for the past 9 years I've juggled multiple clients at a time, you try to keep the pipeline full and hire out to subcontractors if needed. In 2016 I let them all fizzle out without drumming up new work, taking 3 months off. Since then I've been doing single client multi year big contracts, but those are all or nothing. My semi retirement goal, which I've never tried, will be to scale back and basically cover my expenses but not accumulate by looking for smaller project based work going from 6 months to a year and then taking time off after, rinse and repeat. While I'm accumulating the big multi year contracts are the best because they are the most profitable, basically getting on retainer, but they go for years and are all or nothing. So when I say cut the cord I mean no longer trying to accumulate, picking up 1 project then taking long breaks in between, just covering expenses.

There are smaller days to weeks length projects but my experience with those is that they're never ending because you're constantly having to market yourself to keep the pipeline full. They're also way less profitable because time spent selling stuff is unpaid. It's possible I could just half ass that type of work, but I'd prefer having large blocks of totally free time and smaller blocks of really well paid time. Like I could find 1 2k project each month working part time earning 24k and working year round albeit halfassedly, or I could instead pick up a 6-8 month 60-90k project and take a full year off after.

Not following you on the linear complexity wrt family.

prognastat
Posts: 1000
Joined: Fri May 04, 2018 8:30 pm
Location: Texas
Contact:

Re: Gus' road to retirement

Post by prognastat » Fri Jan 04, 2019 9:28 pm

I think he means that going from single to married adds a decent bit of complexity to your life. Then adding a kid adds some more, but not as much. Adding another kid again adds some more, but less again etc. Thus making it non-linear.

Augustus
Posts: 897
Joined: Sat Apr 02, 2016 10:15 am

Re: Gus' road to retirement

Post by Augustus » Fri Jan 04, 2019 9:40 pm

Differently complicated :) my wife I can send to work, my kid needs 24/7 supervision. My wife needs hours to talk to be content, my kid is perfectly content jumping on a bed.

One other big issue I just thought of is that I can't cut the cord until I've secured home loans. Getting home loans when self employed is complicated. Even though my rentals are profitable, I'll have to show steady income to secure them, so I'll need to get those in place before calling it a day. Whether that's a cash out refi in the paid off rental to buy another, or selling the paid off rental to put 50% down on 2 more rentals.

suomalainen
Posts: 733
Joined: Sat Oct 18, 2014 12:49 pm

Re: Gus' road to retirement

Post by suomalainen » Fri Jan 04, 2019 10:38 pm

When I said non-linear, I meant in the other direction. A two person family isn't twice as complex as a one person family - it's more than twice as complex. Adding a third isn't 3x as complex, it's more than 3x complex, etc. Like this from a hetero male perspective (change pronouns for others):

1 person:
- Man considers man. The end. 1 thing.*

2 person:
- Man considers man. Man considers wife. Man considers marriage. Man considers what wife thinks of man, of herself, of marriage. 6 things.

3 person:
- Man considers man. Man considers wife. Man considers marriage. Man considers child. Man considers father-child relationship. Man considers mother-child relationship. Man considers parent-child relationship. Man considers family. Man considers what wife thinks of man, of herself, of marriage, of child, of mother-child relationship, of father-child relationship, of parent-child relationship, of family. Man considers what child thinks of man, of mother, of parents together, of itself, of mother-child relationship, of father-child relationship, of parents-child relationship, of family. 24 things.

4 person:
- Man considers man. Man considers wife. Man considers marriage. Man considers child A. Man considers child B. Man considers children together. Man considers mother-child A. Man considers mother-child B. Man considers mother-children. Man considers parents-children. Man considers family. Man considers what wife thinks of man, of herself, of marriage, of child A, of child B, of mother-child A relationship, of mother-child B relationship, of mother-children relationship, of father-child A relationship, of father-child B relationship, of father-children relationship, of parents-child A relationship, of parents-child B relationship, of parents-children relationship, of family. Etc. I dunno, it's like 55 things.

Etc.

If you don't believe me, remove any one person from my family of five for an afternoon, a day, a week and the dynamics are TOTALLY different, depending on who you remove. And this complexity only really kicks in to full gear in middle school, in my experience. Babies, toddlers, elementary school aged kids are EASY by comparison, in my experience - you still consider their needs, but you just sorta make a decision and do it and they just sorta go along with it (although even still some kids are harder than others).

* Man is happy. :lol:

edit: concrete recent example:

Me: I'm going to go visit my parents and bring DS2.
Wife: NOOOOO, not the easy one!
Me: What? It's his turn.
Wife: I know, but don't leave me with the other two. They'll just fight the whole time. I need my DS2 buffer.
Me: [muttering] I shoulda stayed single.

bigato
Posts: 2165
Joined: Sat Mar 05, 2011 12:43 pm

Re: Gus' road to retirement

Post by bigato » Sat Jan 05, 2019 6:25 am

Wow, this analysis is really good, thanks for that. It may be easier for my personality to just keep happy at level 1 after all, or maybe level 2.

jacob
Site Admin
Posts: 11413
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 73
Contact:

Re: Gus' road to retirement

Post by jacob » Sat Jan 05, 2019 10:18 am

Also see https://www.amazon.com/Over-Our-Heads-M ... 674445880/ The levels described above roughly map out 1-1. Note that @soumalainen's description of all (1-4 person) was from a Kegan5 perspective and Kegan estimates that ~1% of humans habitually engage(*) with other people at that level. 56% of humans operate at the "2 person" level, 14% operate at the "1 person" level, and 29% at the "3 person level". There's also a 0 person level which is before "man considers man", that is, before man develops an ego, so pre-teen age and these are quite easy to deal with... almost mechanical.

(*) It's of course a lot easier to intellectually understand a model than it is to internalize it and apply it in daily interactions.

Similar to Wheaton levels, it's really hard to see the next level until you're at it---at which point it's hard to go back.

daylen
Posts: 1212
Joined: Wed Dec 16, 2015 4:17 am

Re: Gus' road to retirement

Post by daylen » Sat Jan 05, 2019 11:33 am

If the number of vertices is labeled n (people in network) and the graph is complete (all relationships considered), then the number of edges/relations is n(n-1)/2.

In a four-person family, the number of relationships is 4(4-1)/2 = 6. This is just how many groups of 2 there are. There are also 4 groups of 1 (considering self), 4 groups of 3, and 1 group of 4. Now we are at 6+4+4+1 = 15.

This is an objective, birds eye view of the network. For a subjective view each group must be considered by all people, so 15×4 = 45.

Probably not helpful, but it was interesting to think about.

Augustus
Posts: 897
Joined: Sat Apr 02, 2016 10:15 am

Re: Gus' road to retirement

Post by Augustus » Wed Jan 16, 2019 6:57 pm

Took a nice long walk for lunch and got in some good thinking time. That is honestly one of my biggest desires in life: uninterrupted time for deep thinking to the tune of 2-3 hours per day by myself with no urgent tasks or chores to be completed. More than just about anything else, I desire that. I'd probably forego that to keep my family alive or keep all my assets from burning up, but that's about it.

The focus of todays walk was my app and it's possibilities, which I'm hopefully going to make live in the app store this week. Production servers are up and running, production app listing is created but not published, I'm going to do some stress testing and final quality testing, then it's time to push the button. It's a really big mile stone for me, although it's really only the beginning of trying to do an app based business, after this it's going to be all about marketing and maintenance/support/staying competitive with features.

I'm also probably partnering up with another freelancer I know on a second venture. I have a very dim view of partnerships in general, I had a very shitty partner in one of my earlier business attempts, it was just brutal to the tune of a very angry bitter divorce with lawyers and threats and yada yada yada. The one thing I learned with partnerships is always leave yourself a way out, which translates to having another income or stream or two that can cover your bills, because when money starts rolling in there are all of a sudden a lot of things people can argue about. But, I have the secondary income stream with my little consulting business and the rentals, and this guy has a decent track record of a decade or so in his freelancing career, and we've worked together well in the past, and I've made it very explicit in our written contract that I am not going to be working full time on this new thing and that I have my own stuff that is mine and not his.

All that said, his thinking is that I should aim higher with my business goals. I've been thinking I'd be happy netting ~2000-5000 per month out of these endeavors. So I've been thinking about what aim higher means, just running through various hypothetical monthly net profits in my head. Here's what I've discovered:

2,000/mo
I get a new income stream, in 2 years it would cover my base costs, I'd basically have more FU money. It wouldn't change any long term goals or lifestyle habits really. I'd still plan to keep consulting on my own an average of 3-6 months a year. The main thing in all these scenarios is that I can't let it get to the point where I'm working full time on this, if I do it's just not worth it. At 2,000/mo I'd need to be working an average of say 5 hours per week.

5,000/mo-10,000/mo
More FU money, I'd be able to buy a third or fourth rental sooner, which means I'd be able to quit working full time in 1 year instead of the current 2 years. Same rules as above, has to be ~5-10 hrs per week.

20,000-100,000/mo
This would obviously be a rather dramatic change in income, but here's where it gets really interesting, I thought about how this would change my life and spending habits, and I realized that it wouldn't, at least not all that much. Even if I were to hit a home run, and get say 20,000 customers with an average of $20/mo income per customer, which is not out of the realm of possibility mind you, I don't think I'd inflate my lifestyle all that much. In my eyes this is the critical difference between ERE and most of the FI community. With ERE you figure out which trades you're willing to make, what lifestyle is your minimum, and then you set it up so that you can live that way with whatever withdrawal rate/semi retirement strategy suits you.

What I discovered when I thought about this, and I basically just imagined what would happen if I started having various amounts of monthly income over a period of the next 5 years and what I'd earmark the money for each month, is that I have pretty much everything that I want. I'd probably get a nicer house, somewhere in the 800k range, but food habits, cars, clothes, insurance, utilities, doodads, shiny things, gadgets, I really have no desire to upgrade. I've got enough. What I ended up with, is that I hit the 20,000-100,000/mo range is that I'd buy more income generating assets and splurge a bit on a house, and that would be it. Past 2,000,000 in assets, it got to the point where I was thinking, wtf would I even do with that much money? 2,000,000 in assets equates to ~7,000-10,000 passive income per month and a ridiculously nice house. I'd have money just piling up with no purpose to it. I'd probably eat out a bit more, hire someone to do the things I don't like to do around the house, and go surf in exotic places, but even with all that I'd still have tons of money left over. What's more interesting, is that having domestic servants, nicer food, and exotic surfing isn't really all that appealing to me. If I had to work an extra year full time in exchange for those things, I'd probably turn it down? Above 2,000,000 in assets the only thing I could think of is helping people.

Anyways, fun thought experiment.

Another question that comes up, is do I even really want to bother with business at this point? I'm 2 years away from what I consider a pretty ideal situation. The answer is yes as long as I scale back on hours, I've been putting in a lot (which in my mind is anything > 10 per week) on this final push to get the damn thing finished. I'm okay with it right now because 1) it's new and I'm learning, which is good for several reasons, mostly experience, the more development experience and tools in the tool box the better and 2) it's been on my bucket list, develop an app and sell it, always wanted to do it. Those reasons are going to phase out soon though. Which means, I'm going to give this a go, but eventually if it doesn't work and I feel like I've given it a good try, I'm going to let drop it and move on to the next thing on my bucket list. The LAST thing I want right now though is another full time job that lasts a decade or whatever. IOTW the costs of this cannot be allow to exceed the benefits.

Mister Imperceptible
Posts: 1035
Joined: Fri Nov 10, 2017 4:18 pm

Re: Gus' road to retirement

Post by Mister Imperceptible » Wed Jan 16, 2019 7:27 pm

You have to admit that the idea of becoming “Emperor Augustus” is intriguing.

suomalainen
Posts: 733
Joined: Sat Oct 18, 2014 12:49 pm

Re: Gus' road to retirement

Post by suomalainen » Wed Jan 16, 2019 8:45 pm

So, what's the app do?

Augustus
Posts: 897
Joined: Sat Apr 02, 2016 10:15 am

Re: Gus' road to retirement

Post by Augustus » Wed Jan 16, 2019 9:13 pm

Mister Imperceptible wrote:
Wed Jan 16, 2019 7:27 pm
See that's what I thought was interesting, I have no desire to pay people to clean up my house or drive fancy cars or lust after shiny things. I think most of the FI community out there still desires that stuff. I'd probably go in for an upgraded bathroom and a jacuzzi in the backyard, but that's where I draw the line. The big aha moment for me was that more money would have very little impact on my life or plans for life, and worse it might decrease my satisfaction if I had to work too hard to get it.
suomalainen wrote:
Wed Jan 16, 2019 8:45 pm
Automates various marketing tasks, provides relief for various business pain points, the usual. Don't want to doxx myself :)

Augustus
Posts: 897
Joined: Sat Apr 02, 2016 10:15 am

Re: Gus' road to retirement

Post by Augustus » Tue Jan 22, 2019 5:53 pm

First app submitted to app store! Ran into a bunch of unexpected stuff, but that was to be expected, because I was expecting the unexpected on the first try. There are some minor bugs that need to be addressed in the next day or two. Next I'm immediately going to spawn the second app based on the first apps framework and try to get that finished in a ridiculously ambitious time frame. We'll see..

prognastat
Posts: 1000
Joined: Fri May 04, 2018 8:30 pm
Location: Texas
Contact:

Re: Gus' road to retirement

Post by prognastat » Tue Jan 22, 2019 6:36 pm

Congrats on submitting your first app. I hope it does well.

Augustus
Posts: 897
Joined: Sat Apr 02, 2016 10:15 am

Re: Gus' road to retirement

Post by Augustus » Thu Jan 24, 2019 11:05 pm

Thanks! Me too, but I'm not putting high hopes on this one, more of a spray and pray and see what sticks.

classical_Liberal
Posts: 1048
Joined: Sun Mar 20, 2016 6:05 am

Re: Gus' road to retirement

Post by classical_Liberal » Fri Jan 25, 2019 2:24 am

Congrats on the app! Much better option to try and generate cashflow than part-time nursing! :D Of course my opinion is currently tainted :roll: .

I reread your last several entries and it seems two things are on your mind. The first is you need more alone time (I love thinking walks as well BTW). The second seems like you are trying to figure out "enough". You seem to be in a similar circumstance as me (trying to figure out enough and a big want lying in wait) in that if you just stick to the status quo for a couple more years both will probably iron themselves out.

You are definitely one up on me in that you're actively throwing a couple new things against the wall, income generation wise, to see if they will stick. Maybe just actively trying, whether they work out or not, is enough to keep your head in the game to handle the next couple of years? I'm certainly not offering any advice, other than maybe just encouragement to stay active in your pursuits. I started to realized I was in this situation awhile ago and have done nothing but try to "stick it out" and that strategy is not working at all. My lazy ass can't find the motivation to do anything other than read or play video games in my off time from work, and I don't have a toddler running around, so props to you!

prognastat
Posts: 1000
Joined: Fri May 04, 2018 8:30 pm
Location: Texas
Contact:

Re: Gus' road to retirement

Post by prognastat » Fri Jan 25, 2019 11:46 am

Even if it does fail though, you know have more experience creating an app and going through the process of getting it on the store which will make you more efficient at doing so in future attempts. So even a failure will still be progress.

Post Reply