Category Archives: retirement

What do you think of this new tagline?

oxygenNot that it makes a huge difference in the whole scheme of things, but I put a new tagline up at the top of my blog. Here’s why…

I figured that there are a thousand frugal blogs out there (even though this was the only “frugalism” blog), so I needed something more unique and inspiring. The new tagline is:

Work to earn. Earn to save. Save to invest. Stop working.

It was inspired by this awesome article on what “retirement” means in this day and age. The full context is:

I demonstrated a very typical Generation X attitude to finance. Rather than thinking of it as having a pension plan, getting vested, putting in my time, and making monthly installments on my defined contribution plan, I looked at the “rules” of the game. How does the money system work? Should I work to earn and earn to consume? Or should I work to earn and earn to save and save to invest so I can stop working?

I broke it into four sections that are really the four main topics of Foundry in the Forest

  1. Work to earn means Maximizing Income. Reading your average frugal blog has a diminishing return on your time, since there’s a limit to how little you can spend (Jacob, the guy who wrote the above article, seems to have found that limit, $7k a year per person). On the other hand, there’s no limit to how much you can earn. That’s why I recommend most people focus their efforts on maximizing income. Once you’re past 6 figures, you’re probably good in this department.
  2. Earn to save means Minimizing Spending. Figure out how much is enough and don’t spend a penny more. If you increased the frequency of your breathing, you could gulp up so much more oxygen. But you don’t because you have all the oxygen you need.
  3. Save to invest means Educating yourself about Investing. I wrote a series of posts on this topic that will help start your investing education. But never stop learning!
  4. Stop working means Becoming Financially Independent, and no longer requiring paid employment. That part should be self-explanatory. But maybe not, since smart people are still re-working the definition of “retirement” these days.

So that’s the new tagline. What do you think?

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Any investing can be Socially Responsible Investing [foundry mailbag]

Last week was Gold Week here at the Foundry, and the past few weeks are turning into Investing Week, a topic that I’m still learning a lot about and totally fascinated by.

Foundry Friend and reader Betsy commented with a great suggestion for a topic, so-called “socially responsible investing” or simply “social investing.” She writes:

I would be interested to hear your thoughts on having one’s investments match their values, even if it means lessening returns.

In fact, Venessa recently asked “Exactly which companies are these index funds investing in?” And we both had an “ew” moment when we read down the list. Most were companies we dislike or distrust, and a few are brands we actively boycot!

So what’s going on here? Is there a way to reconcile the wisdom of diversified index fund investing with one’s personal values? Or does the conscientious investor just need to hold one’s nose while building wealth?

For most people, investing is really going to be a little of both. Apparently there is a way to attain an acceptable level of diversification while limiting investments to “socially responsible” funds, at least according to this academic paper. Maybe this is callous of me, but I don’t really have time to read academic papers, and to pick and choose funds. I have a “set it and forget it” method to investing.

However, there is a bright side. I’m here to argue that one’s level of social responsibility is determined less by the investments themselves, and more by what you do with your life once you’re living off those investments.

If someone lives the Foundry lifestyle and becomes financially independent at age 40, they have the opportunity to spend the majority of their adult life doing whatever moves them. Personally, I plan on spending much of my time volunteering and that’s what lets me sleep at night, regardless of what’s in my portfolio. I know that I have a finite number of years until I reach this goal, and that my investments are a means to a very socially responsible end.

In my next post, I’ll discuss a method of investing that I feel is very socially responsible that won’t replace the traditional index fund investing style, but is a good way to complement it.

Ok, fine! I invested in gold, sorta (Diversification 101)

This post continues the discussion on investing in gold, by segueing to investing in general. In a previous post, I explained why not to invest in gold, because I think it’s currently experiencing a bubble in valuation. Then a friend wrote a guest post with an interesting theory that the price of gold isn’t inflated, rather the value of the dollar has decreased.

In this post I’ll begin to explain why a bit of precious metals investment may actually be a helpful thing, as long as you’re spreading your money around to a diverse array of investments.

Living the lifestyle I write about on this blog is saving a lot of money (it’s also increasing my quality of life…go figure!). In the old days, when I was doing the standard “save 10%” thing (and then spending the other 90% whether I needed to or not), it was pretty straightforward how to invest it: a little into the 401k and some into a savings account for short- or medium-term goals.

Now that The Foundry’s savings rate hovers around 50%, we’re stashing a lot more money away for a rainy day. As such, I’ve been doing some research about investing and decided that the “rule of thumb” portfolio* isn’t going to cut it any longer. I need a portfolio that…

  1. performs as well as a stock-heavy portfolio (over decades).
  2. spreads money over many different types of investments, in a calculated way, to decrease risk.
  3. takes the guesswork out of the complex tax implications of each kind of investment.
  4. most importantly, is simple to manage (I’m talking “minutes per year”).

I read a number of books on money and investing, each presenting what the author believed to be the BEST way to invest your money. But only one author was able to back up his claims with research into nobel-prize winning investment theory, and present it in an easy to understand format.

Find out which book in our next installment on investing…

*  The rule of thumb being “invest your age in bonds and the rest in stocks.” So a 30 year old would have 30% of their investments in a bond fund and 70% in a stock fund. That way their portfolio gets increasingly conservative as they near retirement.

Foundry Goals

Once you’re past Freshman year of Frugal School, you’ll understand the importance of setting goals. What you might not have learned is that one effective way to stay accountable to your goals is to publicize them.

Like the old management quote says, you can only change the things you monitor.

In this spirt, the goals for my family and this website are listed on a new area called Foundry Goals. Just like in a role-playing game, each goal has levels that are more challenging then the previous ones.

You’ll note that there are no dollar signs to be found on these goals. That’s because the amount of money the Foundry makes is somewhat irrelevant. What’s more important is keeping a high savings rate by minimzing spending and maximizing income, which in turn will drive up the amount of investment income our savings can provide. When investment income matches spending, you don’t require paid employment any more, if you don’t want. While it’s important to track and optimize spending/income (which are measured in dollars), they aren’t goals in and of themselves.

I’d love to hear suggestions for other goals, or hear about your goals.

See the Foundry’s Goals here.

Fill In The Blanks

Welcome MMM readers! This is a blog about urban frugalism and my family’s Mustachian journey, here in Seattle, USA. Take a look around, I think fellow Mustachians will find a lot to love.

One of my favorite Personal Finance bloggers, Mr. Money Mustache, is gone for the summer and taking a break from blogging. As some sort of taunt or joke, he left a list of all the blog posts he’s been meaning to write but hasn’t got around to it. I thought it would be fun to steal, I mean write a few of them for him, in a slapdash manner…

An Amazing New Prescription Medication
It’s called “exercise,” and you can self-prescribe based on the dosage you need. Taken daily, it boosts your immune system, and increases your longevity. Side-effects include happiness, weight-loss, and socializing with others. Best of all, it’s practically free.

Fancy New Appliances, for Less than Zero Dollars?
If your old appliances are wasting gas or electricity, and you find almost-new ones on craigslist for a deep discount, the amount you’ll save in energy costs over the lifespan of the new appliance will outweigh the initial cost. Therefore, you’ll be making money by buying new appliances. Do the math.

Are You Using Work as an Excuse to Accomplish Nothing?
When you work a 9-5 for someone else it’s easy to occupy yourself with non-productive busywork that pleases your manager but doesn’t really accomplish anything great. Furthermore, the busywork helps mask the fact that you’re not happy with your job. They seem to go together.

Quality over Quantity
In almost every situation, quality wins out. I’d rather have a small steak from the grass-fed beef we bought directly from a local farmer, than any number of fast-food hamburgers. Same goes for most other purchases, and also intangibles such as spending time with friends and family. Quantity is what marketers want you to buy so it’s what’s shoved down your throat on a daily basis. You have to step back and consciously choose quality, but you’ll be glad you did.

Mr. Money Mustache vs. Peak Oil
Folks like MMM who bike everywhere don’t care about peak oil or the price of gas. In fact, we’d love to see the price of gas go to $10+ per gallon. Then more people would ride bikes and the roads would be safer for all of us. Plus there’d be less pollution, more healthy people putting less of a strain on our healthcare system, etc. I could go on for hours on this one but you get the point.

Recovering from the Pack Rat Years
I feel like I’m living through this one now, with the July Challenge of giving away 100 things. Ask me again in a few weeks.

My 401k is Too Small to Retire, Waah, Waah!
You have a few choices: 1. invent a time machine and go back to when you were 21 to punch yourself in the face. 2. cut living expenses to the point where you can live off your current 401k balance. 3. do #2 but also work your ass off for a few more years to drastically increase the balance.

Fasting: a Fast Way to Greater Badassity
I fast once a year at the Jewish holiday of Yom Kippur. It also includes no water. I consider that pretty badass. It feels amazing and when you break the fast, no matter what you’re eating it tastes like the best food ever. I recommend trying it once in a while. Fasting also makes you very thankful for what you have.

Wealth is something that is created, not just divided
Making and saving money isn’t a zero-sum game, so no need to get competitive about it. You can make a bunch of money and the next guy/gal can too. In fact, it’s best for all of us if we work together and share tips. That’s one reason I started this blog.

Life Cycle Funds: Become a Dynamic Fancypants Investor with No Effort
I just happened to write about Vanguard’s LifeStrategy funds in a previous post, so go check it out. Vanguard also has a set of “Target Retirement” funds, which grow more conservative as they approach the target date. For instance, if you plan to retire in 2040, the fund for that year is mostly stocks with just a few bonds right now, but over the next couple decades, it will slowly sell stocks and buy bonds so you’ll have a low-risk/low-volatility fund by the time you retire. All without the need to rebalance or figure out your optimal blend of investments for your age.


Hope you enjoyed reading these as much as I enjoyed writing them. Next post will be on a topic of my own choosing, or maybe yours…? Let me know if there’s something you’d like me to write about!

update: I sent this post to MMM and he tweeted about it, calling the post “not bad”. I’ll take that as a compliment 🙂

When it comes to timing your retirement, only two questions matter

The names in this true story have been changed to protect the innocent.

At our Mother’s Day BBQ, the conversation turned to finances and Facebook’s IPO. The consensus among family members was that nobody was going to buy IPO shares in the company. But Aunt Marsha told me that a friend of hers was considering moving her entire 401k savings into shares of Facebook, at which point I almost choked on my BBQ Salmon. I explained that putting a large portion of capital into any single company is too risky, and advised Aunt Marsha’s friend to put the money in a low-cost index fund, and keep it there.

Then Aunt Marsha said, “Thanks for letting me know, because she’s got a lot of money in her 401k. Like $30,000.” Keep in mind Aunt Marsha is almost 60 and her friend is approximately the same age. We got to talking about what it means to have that amount saved up for retirement at that age, and I explained the following:

Anybody can retire at any time they want, but there are two variables in the “can I retire?” equation:

A. How much do you plan to spend per year in retirement?

B. How much do I have saved up?

If the answer to Question A is 4% or less than the answer to Question B, then hand in your pink slip! Otherwise, you don’t necessarily need to keep working (but you probably will need some more capital somehow). You can:

1. Minimize spending.

2. Maximize income.

3. Increase savings rate.

4. Go into partial retirement (which will probably reduce spending but will also reduce income). I’ll write about this last one (including a book review) later.