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Friday, March 24, 2017

The Money Saving Skill Set

Posted by Tim Stobbs on March 31, 2011

In a consumer driven society you are basically supposed to have your one specialization that you work at and then you are supposed to buy everything else you need.  Thus while you might be a great ‘insert job title here‘, you are suppose to suck at everything else.  Too often this is exactly what happens and people really don’t have a skill set to address many of the minor repairs or jobs that could significantly reduce your costs.  By having additional skills you can save on a large number of minor things that when compounded can help you retire earlier.

So what skill set should an early retiree have?  Basically there is no limit on what you should have other than as many as you can learn and have an interest in.  In my life I’ve noticed the following skills to be very useful so far:

  1. Cooking.  Now cooking isn’t just a single skill but rather a spectrum of skills where you start at boiling water and work yourself up to inventing supper from the leftovers in your fridge with no recipe.  Perhaps the most useful skill I’ve learned so far in this is the ability to substitute items in a recipe.  From experience (and Google) I’ve learned how to take a recipe as a template and reinvent most of it based on what I have in the house.  So rather than going shopping to make supper I end up using what I already have in the house.  For example, if a recipe calls for buttermilk more often than not you can use sour milk instead (milk with a splash of white vinegar in it).  The pay off of this skill for an average family would likely be reducing your food bill in half.
  2. Clothing Repair.  While I don’t have a sewing machine (I’m not that good yet) I do keep a little basket in the house with needles, thread, pins and other useful items. To date I’ve fixed countless little things that were 98% useable except for one minor rip or fallen off button.  For more complex projects like a new set of curtains or a cover for a bench I get help from friends or family who can do the project for me.  While I can give an exact estimate of savings here, I’m fairly sure I’ve saved over $100 in clothes in the last six months.  Mainly because I’ve got two boys that seem to be fairly skilled at wrecking pants and shirts.
  3. Minor House Repairs.  This is a broad category with lots of sub-skills to it.  Some examples include carpentry, plumbing, electrical, tiling, painting and installing new flooring.  In general I grew up fairly clueless on how to do most of these things, but from various people over the years continue to learn how to do things and skip paying someone else when I have the time to do the project myself.  So know I’m to the point I’ve leveraging my skills to fix other things like broken toys.  I can’t even begin to calculate the thousands of dollars I’ve saved over the years because of these skills.  But over two house I’ve likely saved at least $10,000 in flooring and painting projects alone.

Now there are other skills you can continue to learn depending on your interest and natural skill set.  Other examples of skills include hair cutting, stain removing, deck building, patio installation, auto repair, electronic troubleshooting, computer repair … you get the idea.

If you have a spouse or partner feel free to leverage what the other one is good at to round out your combined skill sets.  For example, when painting I’ve determined my wife should never be allowed to cut in the ceiling, but I’m good at it.  Yet she is great with a roller, while I suck at it.  So we split our paint jobs according to what we do best.

Perhaps the most important skill of all if don’t be afraid to try something out.  For example, if the item in question is already broken and heading for the trash: try to fix it.  Even if you fail, it only cost you a little time and if you make it work again you have saved some money.

Passive Income Myth

Posted by Tim Stobbs on March 30, 2011

Every time I hear the words ‘passive income’ my teeth grind down a little bit.  Why do I have such a hostile reaction?  Well it comes from the fact: there is no such thing as passive income!  Every source of income requires some investment of time and effort on your part.

Don’t believe me? Let’s go down the list of few of the common ones.

  1. Dividend Paying Stocks – You think this would be a easy one to say it is passive, but most people seem to forgot the up front work of researching the company and then following the news on the company to protect your investment.  You don’t have to read every news story on them, but you should have a clue on what the company is doing by reviewing the annual report.
  2. Real Estate – If you never had to look after a rental unit, people like to think that it really isn’t much work.  They can be so wrong!  Bounced cheques, late rent, repairs and upgrades and that doesn’t even include the work of showing the place to get tenants in their in the first place.  Granted you can hire someone to do this for you, but that still requires the work to get the unit and research a company to look after it for you.
  3. A Blog – To be honest, this one always surprises me that people think blogs don’t require work.  Have you every tried setting up a WordPress installation?  Granted it isn’t hard, but it takes time to get all the plug-ins that you want loaded up and running right.  Then creating content, linking to other blogs and rising up your page rank.  It all takes time to get up and running even if you turn it into a static site down the road.
  4. Small Business – Depending on what you do here it can be set up fairly easily, but getting sales still takes time and effort on your part.  After a while the business may require less handling, but in the beginning you can bet you will be putting in lots of hard work to get it running right.

This isn’t to discourage you from going after these kinds of means of making money, but do keep in mind some front end work will be required no matter what you pick.   Granted if you like doing that kind of work, it won’t really feel like a burden at all.  So make sure to pick what will work best for you.

So what do you do beyond your day job to earn more money? Why did you pick that method?  In my case, I do #1, 3, 4 since I cover off #2 by owning a REIT instead of a single unit because as much as I like real estate I’m not interested in owning a unit directly.

I Just Don’t Fit In…

Posted by Dave on March 29, 2011

This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any.  Dave is from Ontario and is working towards his CGA certification.

Even though I’m around a decade and a half from being completely financially independent (hopefully), over the past year or so my mindset has changed.  The mundane parts of work that you can read about on a Dilbert comic strip irritate me considerably more than they did previously.  All of this annoyance seems to stem from the fact that I basically don’t need the job that I have right now.

I still need “a” job, but I think I could work part-time for minimum wage and cover all of my expenses every month.  Working a minimum wage job would definitely put early retirement out of reach, but it is pretty freeing to know that I could do this – one of quite a few benefits of having a small debt-load and living a frugal lifestyle.

I think that most people go to work fearing they will lose their job.  Losing a “good” job and being unemployed could possibly decimate some people financially.  With this fear, people tend to put their heads down and tolerate a lot of stuff that they don’t have to in order to keep their bosses happy and the paycheque rolling in.  I wouldn’t say that I’m a rebel or a s*&t disturber (I don’t pick unnecessary battles with management) I think I am a much better employee now than I used to be because I go to work looking to help out my company and make it better. I used to just show up and tried to stay out of people’s way instead of trying to make a difference for my company.

In general, I feel considerably less stress these days over money than I did a few years ago.  Having a financial plan and a minimal requirement for money every month allows me to sleep much better at night.  I am by nature a worrier, and knowing that it would be reasonably easy to replace my income gives me peace of mind, which to me is a reasonable tradeoff to what could be perceived as a somewhat spartan lifestyle.

Having the flexibility to be able to shift careers is comforting as well – I don’t feel stuck where I am.  If at some point in the future the Dilbert-like lifestyle that I am currently experiencing becomes unbearable, I can leave and find something else to do that would bring in enough money to support my lifestyle.  This action would probably be something of a last-resort, but I like to know that it is always there, if my current employer starts acting crazy, I don’t have to stick with them, I can leave rather than staying needing to stay for the money and being miserable.

I don’t fit in because I can (to a certain extent) choose to work right now.  For someone in their early 30’s, I think that this is a different kind of mindset to have.  I don’t live in fear of job-loss and because of this, I feel somewhat empowered.  I credit this feeling to being essentially debt-free and living a frugal lifestyle.

Do you feel stuck in your job?  Have you considered leaving recently?