Jen (![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
jenniferkobernik) wrote2022-06-04 03:44 pm
jenniferkobernik) wrote2022-06-04 03:44 pm
Resilience Club: Become Financially (and Psychologically) Independent of the Need for Employment
To achieve the goal of becoming free from mandatory employment (which is a highly precarious and often soul-deadening state in which to exist), there are two paths that I would pursue more or less simultaneously, depending on circumstances and inclination.
The first path is continuing to actively work, but in a way independent of employers.
This could mean starting a small business; doing odd jobs or side hustles*; or pursuing online options such as selling advertising on a blog, website, or YouTube channel, maintaining a Patreon, or putting out a virtual “tips jar” on a website. More or less all of these options (including the small business, which very well may be more work than standard employment) will dwindle to nothing if you don’t keep working or producing content, but they have the advantages of diversifying your income streams and not being subject to the whims of an employer. Consequently, they will also decrease your fear of joblessness, which is a large obstacle to success in this sort of lifestyle.
*Side hustles of people I have known:
Tutoring, editing, college application assistance, LaTeX formatting, medical transcription, selling those leggings whose name I can’t remember, mowing lawns, cleaning pools, babysitting (including at weddings, churches, conferences, or other large gatherings, and in hotels for diplomats and businesspeople), buying stuff at thrift stores/garage sales and reselling it on eBay (sometimes after spiffing it up), shopping and running errands for invalids, washing cars, running an unofficial taxi service for drunk people at bars, cleaning gutters, helping people declutter and organize their closets and belongings, teaching old people basic computer skills, sharpening chainsaws and other tools, tree trimming and landscaping, selling little knitted and crocheted goods, house/plant/pet sitting, garment alterations/repairs/custom sewing, bookkeeping services, etc. You can come up with something; I know it.
Another option to consider is that of seasonal work; while it does involve an employer, it does not engender the same totalitarian dependence as most traditional jobs, simply because it ceases periodically, and often involves a change of employer or location from year to year. I used to work as a campground host in the Sierra Nevadas during the summer, camping and hiking all summer for free while getting paid $11.50 an hour to put out abandoned campfires, write permits, and chase bears, and then living the rest of the year on what I saved by not paying rent or having easy access to restaurants while I was working. I have a friend who makes much better money than I ever did as a campground host working wildland fire. I know others who work the sugar beet harvest or other farm laborer jobs during the growing season, camp and work at Amazon warehouses periodically (ugh), or get retail jobs at a shopping mall during the holiday season (double ugh!).
The second path is that of passive income.
Traditionally, one hopes to reach this stage at retirement through Social Security, pensions, and perhaps withdrawals from dedicated retirement accounts such as 401(k)s or (Roth) IRAs.
If you are older and close to this point, you might consider taking retirement early after reducing your expenses; usually this means accepting a penalty and/or a lower monthly payout, but who knows how secure your company’s pension fund, Social Security, or the value of your retirement accounts really is? You could lose more by waiting, but this is seldom mentioned. The issue is worth at least considering if you are still working primarily to increase your retirement benefits.
If you are younger but in a decent job or career, you may realize that after drastically reducing your expenses, you could come close to retiring on the money locked up in your retirement accounts; again, it might be worth considering whether paying the penalty to withdraw the money early is worth escaping the rat race now. You may also realize that with just a few years’ work and saving, you could retire much earlier than is typical. Jacob Lund Fisker’s book (and blog) Early Retirement Extreme is an excellent resource for those considering this path.
So say that you do have a substantial amount of monetary capital saved up, either in retirement accounts, brokerage accounts, or simple savings. How do you turn it into reliable income? And how do you know whether it’s enough, and whether it will maintain its value? Therein lies the rub. Unfortunately, most of what I am about to say is relevant only in a stable (actually, slightly growing) economy, not in a contracting economy or an extremely inflationary environment. I will give an overview nonetheless, but caveat lector, etcetera.
Generally, 3% is considered a safe annual rate of withdrawal from your brokerage accounts to preserve your capital indefinitely (it should make money via interest or dividends about as fast as you withdraw it, basically); a 4% withdrawal rate will probably stretch your money out for several decades, so that you will likely be dead when it finally runs out. So, take a budget of $500 per month for one person*. You would multiply $500 by 12 to get your annual expenses of $6,000, then divide that by .04 or .03 to get a range of $150,000 to $200,000 in capital necessary to provide the annual income without exhausting the principal.
*$500/month in expenses for a single person in the USA is eminently doable if you are willing to live weirdly, I swear to you. I am happy to expound upon this, if previous posts don’t provide sufficient guidance. Or, of course, be less extreme and save more money.
Some of you who still have relatively stable middle-class jobs are now thinking, “Wow, I could slash my expenses, work five more years, and never have to work again for the rest of my life! Let it be so.”
And others are thinking, “If I ever saw that much money in one place at one time, I’d probably die of surprise before I could enjoy it.” I feel you. It doesn’t have to be all or nothing; $100 in investment income is better than $50, which is better than $0. (And there are other options than investing in financial securities, which I will discuss later in the post).
But how to actually invest it without losing your shirt? I do not have a very helpful answer for this; I wish I did. Basically, you can use any kind of investment which you understand well enough to succeed with; this might be none of them—in fact, it’s probably none of them. We are in an awkward position where cash is losing value to inflation and threatens to lose more; safe and conservative investments pay something on the order of nothing at all; stocks, real estate, and cryptocurrencies all appear to be in speculative bubbles; and many types of instability are shaking markets daily. So what is to be done? Well, spending a thousand hours of active, focused learning about investments would probably help. That’s about six months of 40-hour work weeks. Ouch. This is where I’m at in my own learning curve.
Another possible option for passive income is to create a business which you do not plan to actively run after the start-up phase; in other words, rather than creating a business to be your job, you are creating a business which you will withdraw from, allow to be run by others (or sell), and receive cash flow from. A similar strategy might be to invest in a friend’s business without taking an active role. Of course, your friend could turn out to be terrible at business. You yourself could turn out to be terrible at business. Your diversification is low compared to a portfolio of shares in many different companies; your eggs are all in one basket. However, your understanding, focus, and control is very high in comparison to your understanding and control of XYZ, Inc., in which you own some shares.
Another option which I would strongly consider pursuing is the creation of intellectual property—books, ebooks, movies, plans and blueprints, patents, etc. Essentially anything which pays a royalty. This could even be combined with the strategy above of creating a business, if you are ambitious, and if the intellectual property you create is, say, a patent on a marketable technology or product.
Rental income is another avenue to pursue; perhaps you can’t afford to buy a rental property, but you can rent out a spare room in your house or list it on AirBnB.
You could allow a company to wrap your car in obnoxious advertisements, but if you’ve been listening to me, your car will probably be too old and you won’t drive enough to qualify.
I’d be interested in hearing about more passive income strategies in the comments; this is an area which I am starting to explore, but have not yet mastered.
But for now, let us consider a scenario: You have eliminated your debts and reduced your expenses drastically. You start a YouTube channel and a blog publishing content once a week about urban homesteading, or geopolitical analysis, or minimalist style, or getting ripped without spending money at the gym, or hand sewing, or whatever, and after a few months you are bringing in about $200 a month from advertising revenue and Patreon and the honest and sparing use of affiliate links, and turning some of your blog content into ebooks as you have time, hoping you might even get a “real” book publishing contract one day. You slowly save up $50,000 over the course of a few years from your regular job and invest it selectively in the stock or bond markets, giving you an extra $125 a month in interest and dividends. You occasionally rent out a spare room in your house on AirBnB, averaging about $75/month. You tutor a local highschooler once a week for two hours at $25 an hour, or you mow lawns or babysit for 5 hours each weekend at $10 an hour, for a total of $200 a month. Lo and behold, that’s $600 a month, $100 more than your typical expenses, and you no longer need your regular job. You can quit, and focus on your writing if you like. You now have abundant free time to tutor, mow, or babysit if you feel the need for an extra cash infusion. Maybe you use your extra time to renovate that spare room or build a garage apartment, and your rental income goes up to a couple or a few hundred dollars a month. Maybe you start a more serious business with your extra time. Or you can keep working your regular job, accumulate additional capital, and eliminate the need to work odd jobs at all.
By drastically reducing expenses and combining active and passive sources of income outside of your regular job, you have created a life in which you need not fear job loss, and can in fact even quit your job if you like and do what you want with your time. Prospects are good that you will need to work less and less as you age, while preserving or even building modest wealth. You may need to get creative if you face major health problems or require care in your old age, but that is also true of people who continue working, and especially true of people who plan to continue working but end up losing their jobs. Your frugality, flexibility, and creativity will arguably serve you better in such circumstances than the largely illusory stability of employment.
It’s good to have options.
Note: If you’ve already lost your job, you have the advantage of time and motivation; people trying to pursue either of the paths outlined above while still employed are at a disadvantage in this regard, and so must summon their grit to make it happen.
On a personal note, for those interested, I have never had steady employment in my adult life, and have combined self-employment, work as an independent contractor, and part-time seasonal work to keep the wolf from the door while still saving some money. For the two-ish years up until 2022 I lived on savings while learning about permaculture and natural building in a work-trade situation for room and board, where I met my husband. My expenses at that time were about $50-$150 per month. My husband had been living on less than $250 per month for the previous few years. We recently moved back to my home state, created an LLC, and have gone into business as regenerative ranchers and permaculturists. We hope to develop the business over the next few years and eventually to branch out into investing, the creation of intellectual property, and other passive income sources. Our combined expenses average about $1,000 per month (we can reduce that by about $400 per month if we go into austerity mode), although incidental expenses have been rising in recent months as I am pregnant with our first child and we are building a house and developing our homestead.
The first path is continuing to actively work, but in a way independent of employers.
This could mean starting a small business; doing odd jobs or side hustles*; or pursuing online options such as selling advertising on a blog, website, or YouTube channel, maintaining a Patreon, or putting out a virtual “tips jar” on a website. More or less all of these options (including the small business, which very well may be more work than standard employment) will dwindle to nothing if you don’t keep working or producing content, but they have the advantages of diversifying your income streams and not being subject to the whims of an employer. Consequently, they will also decrease your fear of joblessness, which is a large obstacle to success in this sort of lifestyle.
*Side hustles of people I have known:
Tutoring, editing, college application assistance, LaTeX formatting, medical transcription, selling those leggings whose name I can’t remember, mowing lawns, cleaning pools, babysitting (including at weddings, churches, conferences, or other large gatherings, and in hotels for diplomats and businesspeople), buying stuff at thrift stores/garage sales and reselling it on eBay (sometimes after spiffing it up), shopping and running errands for invalids, washing cars, running an unofficial taxi service for drunk people at bars, cleaning gutters, helping people declutter and organize their closets and belongings, teaching old people basic computer skills, sharpening chainsaws and other tools, tree trimming and landscaping, selling little knitted and crocheted goods, house/plant/pet sitting, garment alterations/repairs/custom sewing, bookkeeping services, etc. You can come up with something; I know it.
Another option to consider is that of seasonal work; while it does involve an employer, it does not engender the same totalitarian dependence as most traditional jobs, simply because it ceases periodically, and often involves a change of employer or location from year to year. I used to work as a campground host in the Sierra Nevadas during the summer, camping and hiking all summer for free while getting paid $11.50 an hour to put out abandoned campfires, write permits, and chase bears, and then living the rest of the year on what I saved by not paying rent or having easy access to restaurants while I was working. I have a friend who makes much better money than I ever did as a campground host working wildland fire. I know others who work the sugar beet harvest or other farm laborer jobs during the growing season, camp and work at Amazon warehouses periodically (ugh), or get retail jobs at a shopping mall during the holiday season (double ugh!).
The second path is that of passive income.
Traditionally, one hopes to reach this stage at retirement through Social Security, pensions, and perhaps withdrawals from dedicated retirement accounts such as 401(k)s or (Roth) IRAs.
If you are older and close to this point, you might consider taking retirement early after reducing your expenses; usually this means accepting a penalty and/or a lower monthly payout, but who knows how secure your company’s pension fund, Social Security, or the value of your retirement accounts really is? You could lose more by waiting, but this is seldom mentioned. The issue is worth at least considering if you are still working primarily to increase your retirement benefits.
If you are younger but in a decent job or career, you may realize that after drastically reducing your expenses, you could come close to retiring on the money locked up in your retirement accounts; again, it might be worth considering whether paying the penalty to withdraw the money early is worth escaping the rat race now. You may also realize that with just a few years’ work and saving, you could retire much earlier than is typical. Jacob Lund Fisker’s book (and blog) Early Retirement Extreme is an excellent resource for those considering this path.
So say that you do have a substantial amount of monetary capital saved up, either in retirement accounts, brokerage accounts, or simple savings. How do you turn it into reliable income? And how do you know whether it’s enough, and whether it will maintain its value? Therein lies the rub. Unfortunately, most of what I am about to say is relevant only in a stable (actually, slightly growing) economy, not in a contracting economy or an extremely inflationary environment. I will give an overview nonetheless, but caveat lector, etcetera.
Generally, 3% is considered a safe annual rate of withdrawal from your brokerage accounts to preserve your capital indefinitely (it should make money via interest or dividends about as fast as you withdraw it, basically); a 4% withdrawal rate will probably stretch your money out for several decades, so that you will likely be dead when it finally runs out. So, take a budget of $500 per month for one person*. You would multiply $500 by 12 to get your annual expenses of $6,000, then divide that by .04 or .03 to get a range of $150,000 to $200,000 in capital necessary to provide the annual income without exhausting the principal.
*$500/month in expenses for a single person in the USA is eminently doable if you are willing to live weirdly, I swear to you. I am happy to expound upon this, if previous posts don’t provide sufficient guidance. Or, of course, be less extreme and save more money.
Some of you who still have relatively stable middle-class jobs are now thinking, “Wow, I could slash my expenses, work five more years, and never have to work again for the rest of my life! Let it be so.”
And others are thinking, “If I ever saw that much money in one place at one time, I’d probably die of surprise before I could enjoy it.” I feel you. It doesn’t have to be all or nothing; $100 in investment income is better than $50, which is better than $0. (And there are other options than investing in financial securities, which I will discuss later in the post).
But how to actually invest it without losing your shirt? I do not have a very helpful answer for this; I wish I did. Basically, you can use any kind of investment which you understand well enough to succeed with; this might be none of them—in fact, it’s probably none of them. We are in an awkward position where cash is losing value to inflation and threatens to lose more; safe and conservative investments pay something on the order of nothing at all; stocks, real estate, and cryptocurrencies all appear to be in speculative bubbles; and many types of instability are shaking markets daily. So what is to be done? Well, spending a thousand hours of active, focused learning about investments would probably help. That’s about six months of 40-hour work weeks. Ouch. This is where I’m at in my own learning curve.
Another possible option for passive income is to create a business which you do not plan to actively run after the start-up phase; in other words, rather than creating a business to be your job, you are creating a business which you will withdraw from, allow to be run by others (or sell), and receive cash flow from. A similar strategy might be to invest in a friend’s business without taking an active role. Of course, your friend could turn out to be terrible at business. You yourself could turn out to be terrible at business. Your diversification is low compared to a portfolio of shares in many different companies; your eggs are all in one basket. However, your understanding, focus, and control is very high in comparison to your understanding and control of XYZ, Inc., in which you own some shares.
Another option which I would strongly consider pursuing is the creation of intellectual property—books, ebooks, movies, plans and blueprints, patents, etc. Essentially anything which pays a royalty. This could even be combined with the strategy above of creating a business, if you are ambitious, and if the intellectual property you create is, say, a patent on a marketable technology or product.
Rental income is another avenue to pursue; perhaps you can’t afford to buy a rental property, but you can rent out a spare room in your house or list it on AirBnB.
You could allow a company to wrap your car in obnoxious advertisements, but if you’ve been listening to me, your car will probably be too old and you won’t drive enough to qualify.
I’d be interested in hearing about more passive income strategies in the comments; this is an area which I am starting to explore, but have not yet mastered.
But for now, let us consider a scenario: You have eliminated your debts and reduced your expenses drastically. You start a YouTube channel and a blog publishing content once a week about urban homesteading, or geopolitical analysis, or minimalist style, or getting ripped without spending money at the gym, or hand sewing, or whatever, and after a few months you are bringing in about $200 a month from advertising revenue and Patreon and the honest and sparing use of affiliate links, and turning some of your blog content into ebooks as you have time, hoping you might even get a “real” book publishing contract one day. You slowly save up $50,000 over the course of a few years from your regular job and invest it selectively in the stock or bond markets, giving you an extra $125 a month in interest and dividends. You occasionally rent out a spare room in your house on AirBnB, averaging about $75/month. You tutor a local highschooler once a week for two hours at $25 an hour, or you mow lawns or babysit for 5 hours each weekend at $10 an hour, for a total of $200 a month. Lo and behold, that’s $600 a month, $100 more than your typical expenses, and you no longer need your regular job. You can quit, and focus on your writing if you like. You now have abundant free time to tutor, mow, or babysit if you feel the need for an extra cash infusion. Maybe you use your extra time to renovate that spare room or build a garage apartment, and your rental income goes up to a couple or a few hundred dollars a month. Maybe you start a more serious business with your extra time. Or you can keep working your regular job, accumulate additional capital, and eliminate the need to work odd jobs at all.
By drastically reducing expenses and combining active and passive sources of income outside of your regular job, you have created a life in which you need not fear job loss, and can in fact even quit your job if you like and do what you want with your time. Prospects are good that you will need to work less and less as you age, while preserving or even building modest wealth. You may need to get creative if you face major health problems or require care in your old age, but that is also true of people who continue working, and especially true of people who plan to continue working but end up losing their jobs. Your frugality, flexibility, and creativity will arguably serve you better in such circumstances than the largely illusory stability of employment.
It’s good to have options.
Note: If you’ve already lost your job, you have the advantage of time and motivation; people trying to pursue either of the paths outlined above while still employed are at a disadvantage in this regard, and so must summon their grit to make it happen.
On a personal note, for those interested, I have never had steady employment in my adult life, and have combined self-employment, work as an independent contractor, and part-time seasonal work to keep the wolf from the door while still saving some money. For the two-ish years up until 2022 I lived on savings while learning about permaculture and natural building in a work-trade situation for room and board, where I met my husband. My expenses at that time were about $50-$150 per month. My husband had been living on less than $250 per month for the previous few years. We recently moved back to my home state, created an LLC, and have gone into business as regenerative ranchers and permaculturists. We hope to develop the business over the next few years and eventually to branch out into investing, the creation of intellectual property, and other passive income sources. Our combined expenses average about $1,000 per month (we can reduce that by about $400 per month if we go into austerity mode), although incidental expenses have been rising in recent months as I am pregnant with our first child and we are building a house and developing our homestead.
Investment Resources
(Anonymous) 2022-06-07 12:08 am (UTC)(link)Re: Investment Resources
Adaptability
(Anonymous) 2022-06-08 01:04 am (UTC)(link)We've tightened our belts, sold off some investments, and paid off our small house. Our 12 year old car works just fine, and we purchased a late-in-it's-life 100% warranty. Less than spending cash for a new car, and less than a car payment. This could be our last car. There are so many ways to make life work better for people. It all depends on one's circumstances.
Hope you plan to work this series into a book. Love your writing style, and truly impressive breadth of experience. I would most certainly buy a copy.
Glad you are feeling better! Blessings on you, baby, and husband.
Valerie
P.S. - Ordered a Komo Mio. Hopefully it will ship this month. Thanks again for your advice on this!
Re: Adaptability
(Anonymous) 2022-06-12 07:15 pm (UTC)(link)We've been so impressed with what they provide, and their emphasis on organic/small business/respect for their employees/etc that we're purchasing many square feet of said warehouse for them to "rent" from us on a monthly basis once it is constructed this fall and they've moved in.
It's enough money to potentially take a few hundred dollars off our annual food bill, but not so much money that if it all crashes and burns we can't absorb the loss easily.
We both very much like that this company is in our region geographically (Pacific Northwest) and what they do is intimately tied to the real world.
Thanks as always,
Valerie
Re: Adaptability
Re: Adaptability
I will have to think about the idea of working this series into a book! It feels weird to put myself forward that way (even writing these posts is out of my comfort zone), but I very much appreciate the encouragement!
And thank you very much for the blessings on our baby and family! We are all doing well (although my poor husband is rather overworked and a bit “lost in the sauce,” as he puts it).
Wow.
There is a lot of controversy over "investing" at the moment, mostly due to an uncertain future. Especially over the topics of precious metals and cryptocurrencies. Investment advisors, never having seen a depression, may not be the best source for advice - especially if working on a commission percentage. But with your experience, you transcend "low cost" living and approach "survival on a dime", IMHO. You never seemed to need to go through the collapse portion of JMG's advice - you avoided the rush completely. I envy that.
20 years ago I started looking into investing, as I had several different IRAs from IT contracting. I read a few of the Rich Dad, Poor Dad books, and started actively trading after a few years - your 1000 hour estimate is about right for the lay person to come up to speed. But at the same time, the fundamental drivers behind the markets and economies were changing, and I do believe we're in for some serious degrowth. So over the last decade or so, I've been concentrating on investing in knowledge and skills, many of which you mentioned, though I still believe there are potential investments of material items (tools especially). I'm very leery of paper investments or savings, but that's not too say some portions of that may still be valuable in the future. Nobody knows for sure. The key will be, as you're clearly focusing on, is the dynamic approach to staying alive and being resilient.
The idea around passive investing I'm working on with my family is sharing a parcel of land, to build up a support net as well as being able to garden and have space for other pursuits like salvage and refurbishment. The two highest costs for most folks are housing and health care, with little relief in sight. So having a compound of trusted kin or friends can certainly help the stress, and passive income through informal rentals, training and care can make a person with some assets very resilient. This can be done at the community level as well, and with both it's best to have some sort of vetting process to make sure you don't get too many "takers" vs. the "makers". I have not yet seen a revival in lodges, but I am a little out of touch with that avenue.
This series is really helpful for me, as I'm trying to transition from office worker employee to "other". The permaculture and regenerative ranchers of the world will have a head start on the crowd, as the future looks almost certain to involve more localized living and sustainable activities....
Re: Wow.
Yeah, the investing thing is a conundrum for me. Our need for monetary/financial wealth is pretty minimal, but what there is is important! I’d like to ensure that it is sustainably covered, but the degrowth issue certainly complicates things. We still default to investing primarily in skills and material possessions, but it makes me feel a bit profligate not to hold on to more money qua money when it does pass through our hands—it often feels more like “spending” than “investing” even when the things we buy do retain and generate value.
We are developing a little “compound” of our own—currently my husband and me (and soon our child), my dad, my mom (in a separate dwelling—they’re divorced), my cousin and his wife, with a few long-term/recurrent stays by friends who come seasonally and visit/work for a few weeks or months in a sort of informal room and board trade (sometimes we pay for heavier work if we can). My husband brought a large cadre of fit friends in their twenties with outdoor occupations and building skills as his dowry to our marriage, which is fantastic! 😂
We are hoping to develop more infrastructure for caring for additional in-laws/aging family members, get some of our younger cousins and friends to stay long-term, and offer more work trade/internship/employment opportunities as we get our feet under us. We don’t really want to go full hippie commune/intentional community (as we have experienced/witnessed a good deal of flakiness and drama on that front), more like semi-closed collection of people we are related to/good friends with, with shorter-term opportunities to interact with the broader community. More extended family farm than intentional community.
I’m really glad to hear that this series has been helpful to you; I often feel like our lives are so odd that I have a hard time sharing anything that others can really use or connect with. Although I suspect that my experience will become more relevant in the coming years/decades.
no subject
Another book for anybody who is interested is Your Money Or Your Life by Vicki Robin. The first edition of the book originally recommended investing in treasury bonds, but those aren't paying much these days. The new edition has some other ideas: build a duplex, live in half and rent out the other half; lend money directly to people in your community. Most of the book focuses on analyzing and reducing your expenses.
I've decided to follow the kind of path you describe. I quit my job this year and am attending a trade school. The plan for next year is to do some internet-based work, do a part-time job or two, seasonal farm work, teach some lessons, and use my spare time to work on some longer-term income generating projects. I anticipate being able to support my family by working much less than I had been at my full time job.
no subject
where to invest
(Anonymous) 2022-06-13 12:52 am (UTC)(link)I am wondering about government I bonds which at least are inflation adjusted for socking away some of the rental income. Or TIPS, which is another kind of inflation protected USA government bond vehicle. I know very little about this, but have heard of them and want to put this out there.
Re: where to invest
I think building up the notary work is a great idea, and your small rental sounds like a sweet setup.
I would also like to look into TIPS, as I have heard them tossed around some investing circles, but I must confess myself almost totally ignorant of them as it stands.