Mindset, Outlook and Happiness

I watched a couple of documentary movies this weekend (a favorite hobby of mine). I watched them on Netflix or Amazon. The first one is a bit of off the beaten path type of thinking that seemed to work for those that were doing it:

Tiny: A Story About Living Small
– the movie’s site: http://tiny-themovie.com/
– on IMDB: http://www.imdb.com/title/tt2450264/

A similar movie: http://topdocumentaryfilms.com/we-the-tiny-house-people/

The other movie that I took in was called Happy. I thought that it was interesting and showed people that were living happy, fulfilling lives in varying circumstances along with accompanying research on living a more happy and fulfilling life. One example given in the movie was a man living in slums in India and another was an entire relatively poor yet very happy family living in Louisiana. Both examples made it clear that a good balance in life is very important to happiness, but mindset and outlook are important pieces as well.

– movie’s site: http://www.thehappymovie.com/
– on IMDB: http://www.imdb.com/title/tt1613092/?ref_=fn_al_tt_2
– watch free if you have Amazon Prime:http://www.amazon.com/gp/product/B007BECIVC/

Are there any movies or other media that you would suggest that could be wrapped into the theme of mindset, outlook, optimism, or happiness?


PS: While I’m on the topic, I’ll add a bit of love from Mr. Money Mustache:

The power of $3 or $4 a day

Many people spend at lest $3 a day on consumables such as coffee, snacks, and other things that they really could otherwise do without or incorporate a much less expensive alternative.

Doing this is costing these people TONS of money!  This totals to about $1500 a year to be exact!  $15,460 over ten years if the money were invested instead.

Here’s the simple math:

$3 x 365.25 = $1095.75 x 10 years = $10,957.50

If the money were invested and getting a very conservative return of 6% annually, compounded monthly, the total would be $15,460.  $4 per day makes it just over $20,000!

If this doesn’t make you think twice about those coffees or snacks or some useless $3 item, I don’t know what will.

Additional Calculations

After the 10 years of investing $4 a day, you can spend $2.20 a day forever from the interest gained on the investment! I haven’t done the calculation, but I’d guess that after a total of 15-17 years, you could spend $4 a day!

On Minimalism

Currently, I am not what I would call am minimalist.  I do like to think that way, but personally and as a family, far too much stuff is contained within the walls of our house (and outside of it).  Much of the ‘stuff’ is my own, much of it is the family’s, much of it is toys, much of it is simply stuff we rarely, if ever use.

Yesterday, I began to pare down my work / dress shirts.  I removed about ten shirts from the ranks along with at least two sweaters.  I have far too many.  I will continue remove shirts from my closet until I could fit my pants and shirts on one section.  Currently, only the shirts very tightly fitting in one approximately three to four foot section with a few shirts being excluded.  The pants hang in the section below.

I will do the same with my beloved t-shirts as well.  Two plus drawers full are more than enough to wear.  I can’t wear them at work (though I do typically wear one under my work shirt).  The main times that I wear t-shirts are occasionally after work and on the weekends.  If I were to guess at the number of shirts that I currently own, I’d say that it’s somewhere in the neighborhood of at least 50-75.  That is simply far too many.  I’d like to whittle it down to maybe 40.  In my defense, I do typically wear two shirts at a time, so that allows for a few more shirts than what one may typically own.  I used to wear nearly exclusively size large shirts, but now prefer a medium, though a small can fit slightly snugly.

Before all of this on the list would be to decrease the number of Magic cards that I own.  That will be an ongoing item on my list to decrease the number of items that I own (currently in the ballpark of 150,000 – 200,000+).

Another similar thing would be books.  I have many, many books and could likely stand to get rid of several of them.  I don’t know the best way to do this as I don’t really just want to recycle them as paper products.  Of the books that I own, many are textbooks, but are likely far beyond any usefulness to current students.  I do like to keep them around for reference, but I have obviously not touched them in a long time and the internet is a fine reference, so the books are left untouched.

The last big thing on the list is computer related items.  I have several computer cases (with and without the ‘guts’ of computers inside.  I also have several other computer components and related computer stuff strewn about.  I did do a massive computer recycling before moving from our old house about a year ago, but I still held onto several things and have accumulated one or two additional computers since then.  I may take the time to revamp one or two of the computers, but doing so may not be worth the effort.  I should simply take in at least one new round of computer recycling stuff to get rid of most of the items.  I can do that at any time, so this would be the easiest and quickest way to free up space and decrease clutter.  I think that this will be the next area to tackle after the closet.

The plan

I have plans and spreadsheets!

In short, my plan is to begin saving $26,500 per year beginning in January of 2015 (roughly $2,210 per month).  This will be done in order to save just about $600k to live off of the interest.  I have worked out the time frame to do this starting from zero to starting with $50k already invested.  Starting from zero, the $600k date is end of month (eom) June 2028; starting with $10k = eom Feb. 2028; starting $30k = eom May 2027; $50k = eom Sept. 2026.  What I already have saved for ‘retirement’ is in my 401(k), life insurance, a slight pension, and physical items, so the theoretical $50k based upon those ‘investments’ should actually be a pretty conservative figure.

I have a present, mid-term, and future household budgets worked out, but need to tighten up the numbers quite a bit in order to hit the goal of saving $2210 per month (I’m currently about $440 short on the mid-term budget! [based upon a 40% savings rate = $2330 in savings per month from all savings sources]).  In order to do this, I need to get a slightly better handle of where our money is going and how to decrease the expenses that we currently have.  The assumptions that would change in our present and mid-term budgets are a decrease in the phone bill ($120 to $65), our van will be paid off in Aug. 2014 ($478 to $0), groceries will decrease a bit ($546 to $425), and the internet/cable bill has decreased ($78 to $59 – eliminated cable).  All of the outlined decreases will go into savings/investing ($673 per month).

This is merely the beginning.  I will continue to plan more and learn more as I go forward.

Spending is largely emotional

I was just listening to an excellent episode of the Mad FIentist Podcast and I had to stop listening to make this post.  I’m just around 14 minutes into it and the host and guest (JD Roth) made great points about how spending is largely emotionally driven.  The guest was telling of his history from being deeply in debt to conquering the debt.  He also made the point that he knew the math side of personal finance very well, but lost control of the emotional side and that’s how he ended up in debt.  Personally, I can relate to his story very well.  I had fallen victim to the exact same disease: emotional spending.  The emotional high that would come with a purchase and the crash that would come when I would have to ‘pay the man’ when the time came.  I’ve still got to ‘pay the man’, but now I know why and recognize that much of spending is emotional (not just mine, but, I’d guess, everybody else’s as well).

Most people around the US have at least enough to cover their basic needs and more.  There are two spots where most of the difficulty seems to come in: 1) lifestyle inflation (aka – ‘keeping up with the Jones’) and 2) emotional spending (aka – ‘this will make me feel good and I deserve it!’).  As with most any ‘recovery’ program, you need to realize and acknowledge that you have a problem.  A great thing to add is a solid plan for dealing with said problem.  I had to go through this at least twice with my personal financial problem.  Like the podcast guest, I knew the math and results on paper, but translating that into something meaningful, tangible and emotional was a bit more work.  I’ll go a bit more into personal financial detail in a future post, but let’s say that I’ve learned my lessons about being in debt the hard way.  I now recognize that spending is much too easy and every cent counts!

FIRE Intro

The prevailing thinking on retirement is backwards. The status quo is focused on saving a minuscule amount while spending the remainder of income (or more). The key to financial independence and/or early retirement is to, per usual, go directly against the status quo. If the end goal is early retirement or just being financially independent, the means to that goal are the same; switch the percentages of your ‘financial pie’. In a recent white paper that I read, a suggested mix for finances was 20/60/20 the two 20% figures being saving/investing and discretionary spending and the 60% being ‘essential’ expenses.

I would recommend striving for the following:

Minimize ‘essential’ and discretionary expenses. Strive for zero, but try to get the combination of the two under $15k per adult in your family, half of that or less for children. Maximize savings by putting the remainder of income into savings and investments.

I know what you may be thinking, “I’m already saving my 20% or more, why should I save more?” Simple, if you want to be financially independent or retire early, you need to do something different in order to achieve a different outcome from retiring when you’re 62, 65, 67 or never. The higher percentage of your income that you can invest, the lower the amount of time until you reach financial independence. Here’s the easy formula (assuming zero net worth):

Yearly expenses / .04
——————————  = Years until FI
    yearly saving

For example:
after tax income = $70k
yearly expenses = $30k
yearly savings (roughly $70k-$30k) = $40k

thus $30k x .04 = $750k / $40k = 18.75 years

The picture above only gets better with additional details such as pre-tax savings (401k anyone?) and having a positive net worth (subtract it from the the numerator; in the example, subtract it from the $750k).

There are tons of hints, tips, tricks and other useful pieces of info to help get to a good savings rate that are covered on the inspirational blog noted below and I plan to illustrate some here as well.  Check it out!

Inspired by the ‘Shockingly Simple Math behind Early Retirement’:  http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/