Breaking free

[Balog]

Ok, at the urging of the illustrious Mr. Fig, I'm starting this thread to brainstorm ideas on living free of the "system". We're talking financial liberty; being your own boss, spending your time as you choose while being able to support a family. And a shooting habit.

So let's hear from all you small business owners, independent contractors, freelancers, and even PT work for others PT work for yourselfers. How did you do it? What made it easier? What was some mistakes you ran into. Doesn't have to be first person; I'm interested in why your cousin's poodle waxing biz went belly up, but his Yorkie plucking one made him a multi-millionair.

Oh, and since I'm in the Marine Corps any advice on wringing the last drops of help from them would be appreciated.

[Felonious Monk/Fignozzle]

Hmmmm...I'll go first...(unless someone posts past me)

Art Eatman is my hero.  He has done it the way of the true American dream.  Worked a job (wherever/whatever), and on the side, fixed up cars, bought low/sold high on guns, coins, and so on.  Once you work a little cash, maybe you can do this on a larger basis...

A story: nearly 20 years ago, I was a young turk manufacturer's rep.  Although it was Automotive Aftermarket, I had a good territory, and was instrumental to lots of tire/auto parts dealers.  One had begun to transition himself out of the auto parts biz, having bought and sold 5-6 houses and still owned several rental properties to boot.  He really liked me, and said he had the perfect duplex set aside for me, if I wanted to buy it.  The other side was rented to a stable, long-time renter, and he would sell it to me for a price that would allow for positive cashflow.  Being young and dumb, I passed.

There needs to be a way to not become enslaved to the corporate treadmill.
Flipping houses? Rental properties? Just not sure...

[Moondoggie]

First of all, your goal for independence must be realistic.  I hit that place at 50, much sooner than I thought..although to tell the truch I never really thought about it/planned for it.

I spent my time in the Marines, and that retirement check with medical benefits makes all of the difference.  The commissary privelege is also a big help.

I can't calim that I have a secret formula...in my mind the "get rich quick" stuff only happens to one in a million.

What my wife and I did was work and watch our money.  I frequently worked an additional part time job.  Wife & I cleaned base housing units for a couple of yrs nites/wkends.  We bought property smart and sold one rental property at a healthy profit after several yrs of positive cash flow from it.  Wife was able to stay at home to raise our one son.  

When I retired from the military and started trucking we used a low interest home equity loan to give us enough cash to pay for my tractor.  A couple of yrs later, when we got our own DOT Authority and went totally independent we paid cash for our used refer trlr.  When our son left home, my wife got her CDL and we teamed hauling produce coast to coast for about 3 yrs.  It was a lot of work, but we enjoyed each other's company in the truck, and we made a lot of money.

A couple of yrs ago we sold our home in Yuma, taking a bunch of equity with us.  We moved to my wife's hometown in NE to look after her Mom in her declining yrs.   The living expenses here are ridiculously cheap.  There are frequent estate sales hereabouts that allow us to pick up items we want for 10% of retail, or sometimes less.  Between my retirement and the revenue from part time trucking, we do just fine.  


When my 83 yr old MIL passes on we will inherit somewhere around $400K, minimum.   It's all set up in trust stuff with us as the personal representatives/executors.  We plan to use some of it to move us into the house we want on a secluded property in a favorable climate.  NorthEast TX comes to mind.  Still researching.  Our corporation will probably own the property in the intrest or passing it with minimum taxes when we're gone.  Also there are aspects of invisibility to having the property listed in the name of the corporation.

On our own, we only owe payments on one vehicle at zero interest.  No other debt.  We've got about 35K in savings.  Our house is paid for.  I have plenty of time for my shooting habit, and buy an occasional gun when it talks to me.  Our corporation for the trucking biz has considerable cash assets, plus the paid for equipment.

Now, at 53, I only work 2 days per week running a round trip in my truck from Topeka to Chicago.  Same pickups and deliveries every week.  I guess I could stop whenever I wanted to, but what would I do?  I don't see us as rich, but we are comfortable.

Looking back, I can see that I worked hard and worked A LOT...but it doesn't seem as if it were that hard.  If that's what led me to the "status" that I enjoy today it was worth it.

My answer to your question regarding what it takes?  Time, hard work, common sense, and a little frugality.

[Felonious Monk/Fignozzle]

Moon, thanks for showing us it CAN be done.  Your story brings up another point: When you're 18, committing to 20 years in the military seems light years beyond reality, since it's longer even than a kid's been alive.  However, my brother in law retired from the USAF last year, with an MCSE in place and ready to jump into another career.
Med coverage, PX privs, whatever % of salary from the USAF coming in on top of the new job leaves him sitting real nice, at 38 years old.  
Woulda Coulda Shoulda stayed in.  Hindsight's 20/20.

[Moondoggie]

Felonioius, I also benefited from positive and negative examples.

My parents made incredibly stupid decisions and died broke due to health care costs.  Their bad decisions encompassed smoking, overweight, bad diet, early retirement with almost no pension.

My wife's parents were frugal and forward looking.  My FIL died suddenly from undiagnosed cancer at 74, otherwise I'm sure he'd still be with us.  My 83 yr old MIL doesn't take a pill and still leads a very active life.  They both had a strong focus on living on the cheap and savings.  That $400K inheritance I mentioned is half of the picture...my wife has a sibling.  My FIL worked for the USPS.  MIL worked as a cleaning lady at a nursing home long enough to be vested in SS.  They grew a huge garden every year and sold produce.  They picked up Black Walnuts and sold nutmeats for $7/qt.  FIL made wooden knicknacks (doll cradels, plate racks, toy chests) in his workshop and sold them on consignment for decades.  My FIL went for a long walk along the highway every morning and picked up cans to sell.   A few bucks here, a few bucks there plus the miracle of compound interest...it all adds up.  I'm a sloth compared to him!

Part of the decision process for me has been to ensure that I never end up like my folks.  I think most of us look at our parents and try to make sure that we do better if there were recognizable problems.

[...has left the building.]

I think getting there is far simpler, but not necessarily easier, than people think. I'm taking a multi-step approach at age 24:

-Get out of debt that isn't making me money, i.e., if I can earn a higher return somewhere else, I'll keep the debt. Of course, you want to keep your debt-to-income ratio in check as well.
-Have cash reserves for 6-8 months of your expenses. If you can't do it with all of your debt, either you have too much debt or too little income.
-Increase income. I'm making excellent money now but I'm still planning on going back for my MBA. My goal is to make in the high 100's/low 200's five years out of my MBA program. When you have more to work with, it definitely helps. Increasing income is a lot easier than people think, it just takes a lot of hard work, determination, and most importantly, great planning.
-Spend wisely. If it doesn't add value, it is a luxury, from cars to clothes to entertainment.
-Shield from taxes. Working with a CPA definitely helps clear up any legalities.
-Invest. Make your money work for you and all that.
-Max your 401K, especially if your employer matches. This really is just another form of tax-shielding.

That's all I can think of off the top of my head. Discipline and planning are key.


Keep doing this and make your money that you're making/saving/investing/etc. work for you. This can be done through setting up your own business, doing real estate, investing in the markets, and many other ways. Eventually you'll find out that you have enough income from your investments and enough safety with your reserves that you can retire from the daily grind.

[Art Eatman]

What do you like to do when you're not in your 8 to 5 deal?  

I loved messin' with cars.  With guns.  Some buddies got me into coin collecting.  Okay, that worked for me.  I was able to turn what I learned into penny-ante on-the-side business.

One thing that let me live pretty good compared to others at or even above my income level was that Iearned how to do all the around-the-house repairs.  I didn't have to pay others.

I built my tool sets little-by-little, as each different job showed up.

You get a high school diploma or a college degree from books, right?  Okay.  Go to a used-book store and browse through the "how to" books.  Cheap, cheap, cheap.  And a shop manual for your car.  Cheap.  Why pay somebody else to change oil and filter, or spark plugs or disk pads.

That's what weekends are for.  You can go skiing later.

Services:  Again, weekends.  Work just your own neighborhood, mowing yards and trimming shrubbery.  Not all day, both days, but the exercise is as good as at a gym, and you're getting paid for it.

If you already have SOME money, and have a small business with a bookkeeper or secretary on premises, buy a small piece of land and build rental storage.    The rental office doesn't have to be on-site with the storage units.  And these critters run 98% occupancy.

And on and on and on...

Art

[chaim]

I think you probably have several options depending upon your risk tolerance and tolerance for uncertainty.  

1) If you have a strong need for stability and no tolerance for risk/uncertainty you may want to continue to work for others, but there are still ways to increase your self-sufficiency:

-Pay off revolving debt NOW.  Not all debt is bad (a mortgage has tax benefits to the degree that even people who can pay cash for a house usually don't) but revolving credit card type debt IS bad.  If you can't afford it now, don't buy it now, and if you used it in the past- pay it off ASAP.  Only keep a credit card on hand for car rentals and hotel reservations if they won't take a debit card, and also to pay for emergencies (like a car repair) that you don't have the cash for.  In the meantime, save up an emergency fund so you can get rid of the CC altogether (today, most car rental companines and hotels will take a debit card).

-Buy older used cars for a while so as not to have a car payment, then pay yourself a car payment so you can buy a better car next time.  Always go with a used car- I bought a new 2004 Hyundai Sonata 1 1/2 yrs ago which now has over 40K miles on it, my dad bought a 2001 Ford Taurus today with under 60K miles.  Both cars should fairly easily go another 100K miles but my dad paid barely more than half of what I still owe.

-Buy some books, or take non-credit courses at the local community college, and learn to do basic carpentry, plumbing and electrical work.  Similarly, learn to fix your own car.  If you don't have to pay someone else it will save you a bit of money, and to really get ahead pay yourself what you'd have had to pay a professional by putting the money into a special savings account.

-As your income increases, do not increase your expenses/lifestyle proportionally.  You can make yourself a little more comfortable if you want, but be sure the increase is no more than about 50% of the raise in salary.  That will allow you to put more in the bank, and allow you to weather more of a paycut should circumstances change- after a few years if you are living as if you still make $35K/yr but are making $45K/yr that is a lot of money left proportional to income to use to pay off debt or save.  In the end, it will allow you to retire much earlier.

-If you are young and have the energy, put in as much overtime as you can stand or take a second job.  Do it for as long as you can stand it- and PUT THE EXTRA MONEY INTO THE BANK OR PAY OFF DEBT.  Have a goal time period or a target dollar amount, then stop.  A second job has the advantage of being something other than your regular job- if you will work that many hours you may appreciate doing different things for part of it.  Also, your regular job may not pay overtime or may not authorize it.  Last, you can walk out of the extra job at any time and you won't have to worry about your employer becoming used to your working overtime and expecting it for when you are ready to stop.  Overtime has the advantage of being paid time and half for the extra hours, while a second job may not even pay as much per hour as your regular rate at your "real" job.

-If you are comfortable changing jobs, try your hand at sales.  It has the advantages of benefits and a regular paycheck (usually they pay a draw on commissions, or even a base salary, to help you cover the slower times) like a "regular" job, with the higher (or even nearly unlimited) upside of self-employment.  Most of the people I know who really make GOOD money do it in sales.  However, you still have a boss over you and a company/employer making their own demands on your time.  If it turns out it isn't for you, if you try it for 6 months you should have enough time to know, and you can always move on to something else.

-If your employer has matching definately max out your 401K.  Matching is a great benefit.

-Put 10% of your paycheck into savings, much of it in investments.  Even the low interest of a low risk CD is better than putting it into a mattress.  Invest in shorter term CDs when interest rates are low, longer term CDs when they are high.  Stagger the timing of the maturity so you have some flexibility to move the money or to work like dollar cost averaging if rates are changing quickly.


(continued below)

[chaim]

(continued from above)


2) If you aren't completely risk adverse, but like the stability of a 9-5 type job and regular paycheck, there are other options (still do what is laid out above):

-Do something on the side.  Work your 9-5 but go into business for yourself.  Make sure the on-the-side business is something you like.  If you are a little less risk adverse work a 20-25 hour a week job for the benefits and a small guaranteed paycheck, and make your full-time gig your business.  After a while your business may be secure enough to drop the job.

-Do one of the types of sales where you are an independent contractor.  Stock brokers, real estate agents, and insurance are usually independent.  You'll have more support than if you are totally self-employed and they'll probably offer benefits, yet you will still have more upside (and more risk) as well as more control over your schedule v. a regular sales job.  This would be instead of being in business for yourself in the above suggestion.

-If you have the assets go completly self-employed, but do it by buying into a franchise.  This gives you the advantage of brand recognition if it is a big enough franchise, and at least some marketing and training support.  They may even have health benefits you can buy into.

-You may want to put some of your investments into higher risk investments.  Stocks, precious metals and real estate are higher risk than a bank account or bonds, but have a much greater upside.

-Invest in real estate.  Even if the "bubble" bursts and prices start going down you can still make money.  Buy houses that need some work, clean and fix them up, and sell for a profit.  If that is too much risk (or involves skills you don't have) buy exclusively homes to rent.  If you can rent the house for at least the price of the mortgage, taxes, and maintainance you will make a profit even if the house depreciates in cost.  Let me repeat that- if the rent will cover expenses (usually it does) you can't lose money.  If you owe $800/month, pay $100/month on taxes and average $100 a month on misc. expenses and rent the place for $1000/month then you will make money.  Hold the house until the loan has been paid down enough for there to be some money left after the loan is paid off and every penny over your down payment is profit.  If real estate prices are going down, so long as you are renting it for enough to cover expenses, you only have to hold it a little longer until the mortgage is paid down enough that the payments aren't only covering interest.  If real estate is still appreciating you can cash out faster.


3) For the most risk adverse:

-Quit your job and get into real estate investing.

-Buy a business and put everything into it.

[280plus]

Figure out what you like to do most and see / decide if there's a carreer in it. People seem to think that they will make more money and work less by being self employed. Nothing could be further from the truth. But when you're doing it for yourself  and you LIKE what you're doing the long hours don't matter. The real thing here is the FREEDOM!

I started after quitting the umpteenth mom and pop HVAC business and deciding I'd had enough. I composed a flier introducing myself and spent the next few weeks handing them out and introducing myself to every local business and business owner I could find. Most of them liked my initiative and that went a long way toward getting work from them. It took about 3 years before I had enough work to keep going and start paying down my debt. I took advantage of all those low interest "introductory" offers from credit cards to set myself up. The only thing with that is you MUST be dicsiplined enough to pour as much money as you can each month at those debts. Forget the Mercdes SUV, forget the friggin' boat and forget all the other niceties that most newbie business owners will blow all that excess money on. Pay down your debt! Don't pull up to me in your Mercedes and tell me you can't afford to pay me right now like you said you would.

And whatever you do, I don't care HOW GOOD you cook, DO NOT open a resturant, unless you like 12-14 hour days 6-7 days a week. Becasue that's what it takes for a resturant owner to survive. I see so many people toss their life savings down the tubes and into a resturant only to find out, "Gee, this is a LOT of hard work." and be out of it in less than a year. Also watch your overhead. What kills another vast majority is store space rental and electricity. They will put you under in no time.

Oh, Prior to all this I DID take my GI bill and get myself a bachelors. I worked a 40 hour week and carried 12 credits a semester for many years. Cost me the first wife but she was, is and always will be worthless, so in my case it wasn't that great a loss. I doubt I would have had the wherewithall to pull this independent contractor stuff off had I never gotten a degree. The MOST IMPORTANT thing earning a college degree does for you is teach you how to manage your TIME efficiently. Very important concept for an independent business owner. I don't care WHAT the degree is in. (Mine is in Music / guitar.)

[brimic]

Figure out what you like to do most and see / decide if there's a carreer in it.

There is a HUGE industry and tons of career opportunities in the realm of what I like to do most, unfortunately mainly for pretty women and not balding out of shape and average-equiped guys like me.

[280plus]

LOL...

Don't you get offers by email for stuff that will "enhance" your equipment? Then all you'll have to work on is the balding out of shape part...  

[Leatherneck]

"Part of the decision process for me has been to ensure that I never end up like my folks.  I think most of us look at our parents and try to make sure that we do better if there were recognizable problems."  Moondoggie hits a nail squarely on the head. My parents died virtually penniless. They lived on SS and a small railroad retirement stipend.

I put myself through college with scholarships and student loans from a private bank, joined the Marine Corps looking to become an airline pilot. After flying fighters in war, I couldn't fathom the attractiveness of flying buses, regardless of how much they paid. Wound up being a test pilot, which led to a career  in The Office of the SecDef, now a GS-15 maxed out. The money ain't bad, but nowhere near as much as industry would pay. I just feel more comfortable on the .gov side of the table in determining whether warbirds work or not.

Have a bad jones for saving and investing any loose money. Always have. We just engaged an architect to design our last house on the waterfront property we bought about ten years ago. Will pay cah for the house using the $400K in equity from this NoVa house we've raised kids in since 1980. I reckon when I retire soon we'll have about a half mil liquid assets, stocks, and mutual funds.

My advice? Pay yourself FIRST.

TC

[Moondoggie]

Hey Leatherneck...

I ran across one of my former CO's after we had both retired.  He was an F/A-18 driver.

He asked what I was doing for a living and I replied "Driving a truck".

He said, rather sardonically, "Me too."

He flys for FedEx.

Since I spent my last 13 years on active duty in aviation units, I'm sure we know some of the same folks:

Toad, Hooter, Griz, Skinner, Cookie, Fang, Clutch, Circus, Molokai, Smut, Gambler, Hammer, Trotski, Orca, Wildman, Sonny, Ajax, not to mention a bunch of worthless helo guys.