Your Questions Answered: Volume One

This week I decided to dig through my emails and finish answering some questions.

In this post we take another look at investing now vs later, the dynamics of financial independence without retiring early, housing and home ownership, more on day trading and investing apps, what the hell I do with my time, and much more.

Here is what is keeping you guys up at night, or at least spurring mild curiosity.

More on Investing Now Vs. Later:

Reader: I save aggressively because I know the “multiplier” on my savings today is greater than the multiplier on my savings 10 years from now (because the investment has a longer time horizon). That said, my income is (hopefully) lower today than it will be 10 years from now, meaning each dollar I earn is worth more to me today. Any thoughts on how to think about this?

CC: I think you’re thinking about it right. Yes, you will probably make more money in the future than you do today. However, each dollar you earn will always be worth more today than it will be tomorrow, due to the erosional forces of inflation (the time-value of money). So, if you can invest a dollar today, do it. If you can invest five dollars in three years, invest five dollars. Don’t overthink it too much: investing what you can whenever you can, with a long-term outlook will likely work wonders.

Here’s more on this concept:

The Wondrous and Fantastic Power of Compound Growth

Spending vs Saving If I Don’t Want to Retire Early

Reader: Say you don’t want to retire early, but want to have a well-balanced lifestyle between work and not working. The saving versus spending calculus presumably differs from that of someone who wants to retire early (even if not by much). Any beta on how to think about this?

CC: For sure. Early retirement is by no means a requirement of financial independence. That said, a dream job today can turn into a nightmare tomorrow. Or, as was typical with my industry, a paycheck could simply disappear without warning. That’s why I feel the pursuit of financial independence, even if not it in its entirety, is worthy. We believe in building our own job security.

The Flex Portfolio

If you have no ambitions to truly leave work, here’s the simplest way I can distill it: Create a portfolio, that in tandem with your income, has a 3-3.5% safe withdrawal rate. For instance, let’s say your heart is in a low-paying job that nets you $20,000 per year, but you spend $40,000 per year. You have a $20k gap to cover.

I’d save, invest, and generate a liquid portfolio worth at least about $570,000 – $666,000 ($20,000➗ 0.035 or 0.03), split across pre-tax retirement accounts and a post-tax brokerage account. That sounds like a lot, but once the forces of compound growth kick in, you’ll (likely) be there sooner than you think*. With this portfolio, you can live off your $20,000 job income and generate another $20,000 of investment income, staying within a 3-3.5% withdrawal rate.

This is admittedly way oversimplified, as there is some nuance involved in funding and withdrawing from the correct investing bucket and considering long-term complications, like taxes and required minimum distributions on retirement accounts. But that’s a skeleton plan. I’m just Johnny Appleseed throwing seeds. You must water and nurture the seed.

Honestly though, if you are satisfied with your job, just keep saving and investing and stay where you are. With your financial strength, throw that swagger around a push for more workplace flexibility, like perhaps remote work.

*Referring to compound growth, the first several hundred thousand dollars are slow to build. Once that snowball gets rolling, those next milestones come at you faster and faster and faster. Psyched!

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Alternative (Non-Stock) Income Streams

Reader (paraphrasing): What are some alternative income streams other than conventional investments?

CC: Real estate is a big one. If I did it again, I’d look long and hard at having someone pay all or most of my mortgage for me. Renting out a room, or even building a rental empire (of sorts) are common ways folks either reduce and/or eliminate housing expenses, or even go on to full financial independence. I’ll admit though, my desire to have roommates at age 36 is bouncing on zero.

Remember though: real estate is not liquid. If you need cash, you have to sell off properties, which can be a costly and lengthy process. Also, real estate investment often carries a major debt burden. We never really liked the idea of debt, so we went with the lazy and passive index fund investing method.

Day Trading on Investing Apps

Reader (paraphrasing) : What do you think of day trading on Robinhood?

CC: This is complex. And full disclosure, I’ve never touched these apps. My gut reaction, as you saw with this unfiltered rant, is to say that these platforms are a slippery slope. I want to tell people to just go to Vegas and throw some dice. At least you’ll get some sunshine, social activity, a few free cocktails, and some great desert scenery.

No Barrier to Entry: Encouraging or Disastrous?

But…I also recognize that these apps allow folks a very low barrier to entry on investing with zero fees and no minimum investments. Anyone can invest. Perhaps it’s good that someone can get going with minimal funds, but I fear people are going in far too often with a lack of fundamentals or understanding of how markets work.

I generally feel that a required minimum investment is a good thing. The decision to buy company X or index fund Y feels a lot different if it requires a minimum investment of $500 or $3,000, compared to throwing $5 at it. However, I also recognize that that very same heightened level of seriousness keeps many from ever investing at all.

As per day trading, I know people like to play, and some folks are good at it. Some people really do have a knack for picking stocks, but most of us don’t. Few people in history have sustainably picked winners and losers. I’m not one of them, and you probably aren’t either. Pick a stock index fund that tracks the entire market, close the browser, and go for a hike. You’ll be better off.

But, as I’ve said before, if you want to play with 5% or less of your total net worth, go for it. I just don’t want someone’s only view of investing to be day trading on an app. At least these platforms offer no commission fees and are allegedly sleek. I don’t know, I don’t touch the stuff.

Tell Me What to Do with My Finances!

Many readers (paraphrasing): Hi, I just heard you on a podcast an hour ago. Can you quickly tell me what stocks to buy and where to put them?

CC: No! Don’t send me these emails! This is your financial future, which is linked closely to your future. At least convince me that you’ve spent some time on this before shooting me a two-sentence email. Here’s my recommended course of action:

Read these two posts on how we invest:

CC Family Investing Strategy, Part 1

CC Family Investing Strategy, Part 2

And then read this book and keep it on your bookshelf forever:

The Simple Path to Wealth, by JL Collins

If you are more serious about the fundamentals of investing and want to understand the differences between passive and active investing, this was the book that started it all for me:

The Intelligent Investor, By Benjamin Graham

And then take action here:

Your 2021 Guide to Actually Saving Real Money

Good things come with effort. Plus, an uninformed plan created in good times is a plan likely to be mismanaged in bad times. Inform thyself!

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Saving on Travel

Reader (paraphrasing): I’m interested in money saving tips, especially for travel.

CC: Oh boy, travel is one of the least optimized items on a budget spreadsheet. We are huge fans of using credit card rewards points. But first, you absolutely must be a responsible credit card user and pay off the balances each and every single month. No exceptions.

We cycle through various travel reward credit cards, which provide generous sign-on bonuses and points-as-you-spend. We put all of our normal spending on these cards, pay them off (in-full) each month, and reap the rewards.

For flights and hotels, we use our Chase Sapphire Preferred card. If you want to retroactively reimburse yourself for Airbnb’s, cars, or other travel expenses, we lean heavily on the Capital One Venture Card. Boom!

We’ve paid hardly a dime for flights and lodging for the last four to five years, which includes multi-week trips to (spray ahead) France, Germany, Mallorca (Spain), and Sicily (Italy). Instead of spending $5-10k on a trip like this, as is typical, we tend to spend around $1,000 – $2,000 USD total. That’s everything included, total bill, for two people in nice accommodations. That’s huge savings.

Responsible credit card use also has the added benefit of acting as an emergency fund. If I need to put in a roof or pay a ransom today, I can put it on a credit card and secure the cash from other sources before the bill is due. Plus, Mrs. CC will be psyched that we can fly to Greece for free after saving her from her captives.

Here’s some more reading:

How to Fly to Europe for Free

Traveling Abroad: You’re Paying Too Much

Mallorca: January Adventures and the Cost to Do It

Sicily, Part 3: Two People, Two Weeks, $1,300

Staying Busy When Everyone is at Work

Reader: What the heck do you do M-F from 9-5 when all of your newfound friends are working?

CC: Do I come across as someone with friends? Aww, that’s sweet of you and makes me feel good.

I actually have a huge problem with putting too much on my plate. I thought that would end when I freed up 40+ hours that was once dedicated to a company. The reality is that I immediately filled that time with my obsessive desire to be productive. I like that about myself 75% of the time, and the other 25% of the time I’m sort of worn out. Yes, even without a job.

I do too much.

What I’m Doing

I’m a climber, so I do a lot of climbing and training.

Writing and working on this website occupies a lot of my time. I really like how this has grown to feel like a duty, in a good way.

I give awkward white lies to my inquisitive neighbors about why I clearly don’t have a real job.

We are busy with small home projects, you know, breaking and fixing things. Mostly breaking things. Look, I made a home wall (see inquisitive neighbor discussion above)!

I go on long walks and call friends and family, trying to make the best of social outreach during a pandemic.

I’m working a volunteer position in a local non-profit that I care about. It’s rewarding, and I’ve been integrated more into the local community with bi-weekly Zoom meetings.

What I Want to Do

Here’s what I want to do: I’d love to get back into route development (bolting or re-bolting) or searching for obscure boulders. It almost feels like time to get back in the camper and explore off-the-beaten-path desert landscapes. I want to play my piano and guitar more, and start recording music again. I want to learn Spanish once and for all. I’d love to do more on this website to make it a better resource. I’m eager to meet more locals and (one day) cook food for people again. And for the love of God, I want to get on a plane and fly somewhere far away, where people look different, don’t speak English, and have shelves of amazing wine for $5. Soon.

For more on how I manage the day in a post-work world:

Boredom: Ain’t Nobody Got Time for That

Are Storage Costs Worth It When Traveling?

Reader: Was it worth the cost to store your belongings while you traveled, instead of selling and rebuying?

CC: Yes, it was! At the time, the stress of hiring movers, getting stuff into storage, and then reversing that process and driving our stuff across the Rocky Mountains in January seemed daunting. By the way, we made the move, and we lived.

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Our Expenses

We ended up spending about $2,600 all-in, and storage costs were only a tiny fraction of the bill. That’s $700 to move into storage with Denver movers, store for $70/month, move out with Denver movers (New Year’s Eve nightmare) at $400, rent and (white-knuckle) drive our own 26’ U-Haul over 10,000-foot mountain passes at $1,100, and hire St. George movers to unload ($250). For a sense of scale, we moved to and from a 3 bedroom/2 bathroom house with a garage.

In theory, perhaps we could have sold a bunch of stuff for money and repurchased in St. George. The problem with that plan is that it takes a hell of a lot of effort, twice. I’m a hobby guy: I have music gear, tons of materials for a home climbing wall (holds in particular are now very expensive and in high demand), and plenty of other non-furniture items that would be difficult and expensive to replace.

If we did it again, we’d sell easily replaceable items and keep the important stuff, thereby saving on storage space and a smaller moving truck. We just didn’t have time when we hastily decided to sell our house.

Other Opportunities

Although the act of moving in and out of storage probably shed years from my life, the economics definitely panned out. Once all the stuff arrived at our new house, we were psyched to not have to start all over again. Plus, we had an opportunity to smuggle in five months’ worth of 2-buck-chuck from Trader Joe’s in Denver!

Had it not been a pandemic, I would have spent about $50 on beer and had some beefcake friends help me out, cutting all the local moving costs (almost $1,000). Also, if you plan to hire a major mover to do everything, all bets might be off. We looked, and I think the bill would have been much closer to $8,000 – $10,000, possibly even more. Plus, everyone seems to hate those guys.

What Do I Do After College?

Reader: Can you help me decide what to do after college?

CC: Have a glass of champagne?

I could use a lot more information, but maybe this helps:

Reader Case Study: Maximize Adventure or Career?

Should I Buy a House?

Reader (paraphrasing): Are the low mortgage rates a good incentive for a first-time home buyer?

CC: Maybe…

Here’s much more on our recent home-buying experience and an analysis of current home ownership affordability:

And We’re Back to Home Ownership! But Why Now?

Relocation: A Guide to Moving and Housing Affordability

Making a Solid Offer in a Competitive Housing Market

Reader (verbatim): How the [REDACTED] do I make an appealing offer on a house in an aggressive market?

CC: Yes indeed. While the incentives to buy are there, competitiveness in the market is REAL. When we made an offer in NOVEMBER there were four offers, and three were cash. Fortunately, we had cash, and beat the next offer by merely $1,000. We were the fortunate winners of bidding wars for both houses we’ve owned. As such, we have some experience here.

You probably have to bid over the asking price.

Ask your realtor, or sometimes better yet, research yourself the average percent difference on asking vs closing prices. Don’t go too high, but don’t even bother if you can’t at least hit that mark. Unless you are off in left field, you will usually get a second chance if your offer is competitive but not the highest. It’s in the realtor’s best interest to see everyone dig deep. It’s very psychologically demanding.

Have a high down payment.

When we sold our Denver house, those with the highest down-payments were the most attractive. A high down-payment simply shows that the buyer is serious and didn’t just decide in their last REM cycle to buy a house.

Obviously, a full-cash offer is always very attractive to a seller, as there are no potential hang-ups with a loan and the deal closes faster. I’d say a down payment under 20% is not going to be very competitive without making a really high bottom-line offer.

Appraisal shortage.

Once a home is under contract, lenders require an appraisal. The lender wants to make sure you are not offering $600,000 for a house only worth $500,000. Some buyers are writing offers to forego any difference.

For example, if a buyer makes an offer of $600,000 and the appraisal comes back at $580,000, some buyers are foregoing their opportunity to negotiate the price down. I don’t know how I feel about this. That said, if multiple people are making offers above the appraisal price, maybe the price has changed. The market obviously supports this new price (for now).

Offer to pay less or nothing on inspection repairs…maybe.

Some folks are offering to by-pass the home inspection altogether, but I think that’s desperate and potentially disastrous, especially in older homes.

More often, buyers might make an offer to, for instance, not require any fixes or only require reimbursement on the sale price up to a certain amount.

As an example, we had an offer on our Denver home that stated that the buyer would only ask for fixes if the total was greater than $5,000.

Write a really nice letter.

Back in 2013 we were trying to outbid another buyer on a house we really liked. We didn’t want to go any higher, and our realtor suspected that the two offers were very close. She suggested we write a letter about fulfilling our dreams and having babies and smiling and crockpot cooking and family. Some homeowners are very attached to their homes and want to see them go to good people. This was not one of those homeowners. They wrote us back and thanked us for our gushy letter, but took the highest bid. I’m glad we didn’t get that house, actually.

Hell hath no fury like a bad mortgage.

Chris Rock

Big offers are still king.

All this stuff I’ve listed is still unfortunately of very distant priority to the bottom-line offer price. Prices are high. Make for damn sure you can afford this house, through thick and thin, and all that comes with it. The biggest offer is probably going to win, but that doesn’t mean it’s a good idea to go big.

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Wow, there’s a blog post for ya. By the way, we had a fantastic realtor in Denver. Let me know if you are looking in that area!

Here’s much more on buying homes and the opportunity cost of doing so:

And We’re Back to Home Ownership! But Why Now?

This Just In: The Real Cost of Home Ownership

How Much Cash Should I Keep??

Reader (paraphrasing): Build a bigger emergency fund or invest?

CC: Ah yes, right up there with crag babies and crag dogs. There is no right answer, but you’ll love my dog.

For folks who are generating appreciating assets (you good people), having an emergency fund of three-six months is plenty sufficient for those in their wealth-accumulation phase. Anything more, and arguably even that, carries opportunity cost.

As you save and invest, you are building a giant emergency fund. While it’s true that there is nuance—taxes and penalties are applied for withdrawals from certain retirement accounts—you are simply not at risk of insolvency like those living paycheck-to-paycheck. Plus, see my credit card discussion above (not at all to be confused with incurring consumer debt = bad).

Now that we are entering our drawdown phase (selling shares to fund our life) we have close to two years of cash, which I personally feel is ridiculous. But Mrs. CC likes to wrap herself in a warm blanket of cash, so I grumble and moan and take it. She’s probably right. Infinite wisdom, that one. 

The bottom line is to do what makes you feel comfortable, and the least comfortable person is the default decider. It’s kind of like simul-climbing: put the scared/inexperienced climber on lead so he/she doesn’t pull your ass off the cliff!

That said, I’m still a big fan of this article from Early Retirement Now (even if I’ve never been able put it into action in our house): Our emergency fund is exactly $0.00.

Turning Intention to Action

Reader: How do I turn intention to action?

CC: I love this. It’s never a lack of information, is it? Maybe this will help…Taking Action: Moving Beyond Inspiration

Also, have you read Atomic Habits, by James Clear? Do it! That book features easily digestible content on starting new (good) habits or stopping old (bad) habits.

The short answer is to make small changes often. I lean heavily on schedules, notes, reminders, and tracking, perhaps to a fault. Have you been meaning to track your spending? Take the small action today of downloading my free spreadsheet 😉. You’ve done all you need to do.

Now congratulate yourself by pulling on some small holds.

Bitcoin and Other Investments:

Reader: Why not invest in Bitcoin?

CC: Here’s why (but you can, in very small doses):

Bitcoin and Other Things You Shouldn’t Own

Also, you might enjoy this recent rant:

The GameStop Saga: Hedge Funds, Reddit Investors, and Why They’re All Wrong

Index Fund Investing Outside the US

Reader (verbatim): Do you know about paying taxes on index fund gains outside of the US (Ireland)? Nobody here knows wtf.

CC: Unfortunately, no. I get the occasional email from foreign nationals with investing questions. I’m just happy to know how it works in my own country!

Maybe this is useful for Ireland though? Beginner’s Guide to Investing – Irish Domiciled. I just Googled “FIRE index fund Ireland” and came to this fairly quickly. I claim nothing.

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That’s Enough for This Week

Wow, this ended up being long! I still have more questions to answer, but perhaps I should make this sort of Q&A thing more regular?

What do you think?

What do you want to know?

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