Monday, November 16, 2015

Life after Financial Independence

In a previous article, I discussed that I will reach Financial Independence some time in 2018. After I reach the dividend crossover point, my dividend income will pay for expenses. Many assumed that I will just call it quits and live off the $1,500 - $2,000 in monthly dividend income that the portfolio will generate.

These assumptions are further away from the truth however.

Last year, I shared with you that I was running low on motivation on my quest towards financial independence. I was working at a job that was really nice to work at initially. After about an year or so however, I was put on a terrible project with impossible deadlines and management. After burning out quickly, I found a new opportunity.

I once worked at an organization just like that where I kept track of my time in 6 minute increments and worked 60 - 80 hours/week. Not a lot of fun, and a lot of backstabbing too. Though if you stayed for 10+ years, you could have made a lot of money and earned a decent pension too.

Then I moved to an organization where I worked 30 - 40 hours/week, and earned more income. The first organization taught me how valuable my time was. This lesson I never forget - allocating time is as important factor in success as allocating capital.

I enjoy my current position. I have ebbs and flows in the amount of work throughout the month, but I actually enjoy it. I could see myself doing that for several years after reaching financial independence.

I would see myself there for a while, as long as they keep me of course. If we get a round of layoffs, it is possible that I may have to either find another opportunity or just take some time off to explore other things.

I do enjoy investing, and have also enjoyed writing about investing. I guess I have a track record of consistently writing about dividend investing 3 – 4 times per week, every week, for eight years in a row. I have never taken “a break from blogging".  I believe that my consistency in posting has translated into consistency in investing every month for years.

While I personally enjoy writing about investing, and connecting with smart readers, I do not know if I will enjoy it as much in a couple of years. After writing for eight years, I can tell you that my motivation has decreased from the initial stages.

I would think that in a couple of years I would be at the crossroads with this site however. I could either

1) Post much less often.
2) Stop posting altogether

The thing to consider is that over time, we evolve. I was really hungry to attain financial independence when I started this site 8 years ago. I didn't want to work 60 - 80 hours per week at a stressful job, and live paycheck to paycheck. This desire to be able to do my own thing, and have more control over my own life, is the reason why I worked so hard to live below my means, and front-load my efforts by saving as much as possible early in my 20s in an effort to reach financial independence quickly.

Nowadays, I do not have that fire as much. I do enjoy flexibility, and I have grown to really enjoy time that is not scheduled or booked for in advance.  I have really pushed myself for the past 8 years, and would likely push myself for two more years. But since I see the light at the end of the tunnel, my drive is decreasing a little bit.  While learning about the stock market and investments has been a focus for over a decade and a half, it is quite possible that I may want to explore other interests in the future. Building relationships with others could be an important priority. Taking a break to explore the world, and not pushing myself too hard could recharge my batteries and help me rekindle the fire again.

Slowing down would be beneficial for health as well. It makes no sense to retire from working at some point, only to replace that with spending 50 - 60 hours/week on this site and 20 - 30 hours/week on my investing. I have come to appreciate having a job for once where I work 40 hours per week, but have some flexibility. For example, I am able to research companies, and respond to comments during any down time. Going from 60 - 80 hours/week to 40 hours/week ( a few of which are working from home) has definitely increased my level job satisfaction. If things can remain the same, I can see myself doing this job for a few more years. If not, I have the flexibility to find something else or just take a break.

In the meantime, I will try to keep my current job for a few years until I reach FI. I would likely stay at it for a couple of years past FI. I get to see how a few businesses operate in my current position, which is interesting, and builds my knowledge of business. The nice thing is that my job offers some flexibility such as working from home, and a decent vacation package. The other nice thing is that my retirement plan allows for both pre-tax and after-tax retirement contributions. This would mean that I could put as much as $53,000/year in tax-deferred accounts per year. This includes $18,000 in pre-tax 401 (k), a couple of thousand in an employer match, and the rest in after-tax 401 (k) contributions. Those after-tax contributions could be converted into a Roth 401 (k) several times per year. As part of my long-term financial plan, I want to have as much of my assets as possible in a tax-deferred plan. This would allow those funds to compound tax-free for decades, and would also provide a hedge in case tax-rates grow in the future. In addition, assets in an employer retirement plan under $1 million offer more protection than assets in a taxable amount.

The other nice thing about having a job is that I get to earn money with a lower level of effort than say entrepreneurial activities ( such as writing on this site). Over the past several months, I have been thinking about return on investment for different activities I pursue. I have learned that writing for a site could earn some money, but the return on each hour spent writing is rather low.  While some people end up earning thousands of dollars per month online, only a few manage to accomplish that. And of those few that manage to accomplish it, they are subject to an intense level of competition, and many suffer from burnout due to excessive amount of hours worked. Of course, I don't write on this site for money. If i wrote only for money, I would have stopped having fun since it would have felt like a job. If I didn't enjoy doing what I was doing, I would not be doing it. However, it is possible that at some point in the future, I may become wiser, and therefore stop positing here as frequently. As much as I enjoy interacting with you readers, I may decide that focusing my efforts on building relationships with close family members to be of higher priority. I do not want to become Warren Buffett, who focused exclusively on making money all his life, to the detriment of building relationships with his spouse, children and relatives.

I would not be selling the site however if I stopped writing. Selling a site is usually a mistake, because I have no idea if the administrators after me will maintain the level of quality that I think I offer here. In addition, sites sell for 1 - 2 times earnings, which is very low. If I sold this site for one or two times earnings, and then used the money to buy dividend paying stocks at 15 - 20 times earnings, I would be proving to you that I am a terrible capital allocator. If I simply stopped posting, I would likely generate as much revenue as the amount the site sells for after 3 - 4 years and still maintain ownership of the site. If I kept the site however, I could generate the same amount of revenues after two years as the sale price. However, I would also still have ownership of the site as well.

Not all is bad however. I have an enormous amount of ideas daily on the topic of dividend investing, investing in general, and dividend investing strategy. I have several hundred pages worth of ideas, article drafts etc. This could easily translate into two or three articles per week for the next two years. What can I say, I like the process of preparing for various outcomes in the future.  In the meantime, I would be focusing on important things in my life. But I would also be exploring things such as slow travel, reading, and connecting with others.

I would also think that I want to try different things, that may end up generating money. One of them include writing a book. It would likely be a very bad return on investment on my time however.

Jacob from Early Retirement Extreme talked how he would have made more money for the time spent writing the book if he worked a minimum wage job.

So I would assume that while you could earn some money from a book, chances are it won’t be anything earth shattering.

I could also be a financial adviser to others. I would feel more qualified to provide advice for people on how to reach retirement, if I were FI myself. I have absolutely no interest in selling complicated but lucrative annuities, loaded mutual funds etc. I would have an interest in helping others reach financial independence.

I also need to focus more on my health, which would mean less time sitting in front of a computer. It could also mean spending more time building out relationships with people that matter.

To summarize, financial independence provides you with options on what you want to do with your life. Some people retire from a job they absolutely hate. Others retire to a life of travel, exploring new interests and volunteering. In my case, I am going to keep options open, but will focus on things that are important to me, such as family and relationships. I may continue working at a job, but I may not update this site as much as I have in the past eight years. The important thing is to be able to do things I enjoy doing, rather than doing things that I have to do.

What are your plans after you reach financial independence?

Thanks for reading.

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