Sometimes you need to find new friends on the path to financial freedom

Resistance by friends to your budgeting and saving may be strong. In my case, I can think of several occasions when I was either insulted, told I was cheap so I wasn't worthy of a relationship, or worse. It is time for another story.

A friend of mine, at least I thought he was a friend, who I know had trouble grasping the concepts of frugality so that one could save money for whatever, had asked me to join him and other friends to celebrate Saturday, the 15th of September (grito de independencia). We had gone out before with and without other friends so I thought it would be fine.

There were several of us and we had a decent time, but I think I would have enjoyed myself as much watching a movie on the computer. I bought three drinks and relaxed a little. As we left around 4 in the morning I could tell that my friend was in a bad mood.

 He started to complain to the others about how I bought inexpensive shoes.  I had told him one day many months ago how I had bought new dress shoes at the mall near the apartment for about 500 pesos and I casually mentioned that my last tennis shoes were 200 pesos in the market. That day he mentioned that he knew of a place where I could get very good tennis shoes for 400 pesos of better quality and I had said yes, I was interested. Many months later he hasn't accompanied me to go buy them. We had actually scheduled a day to go shoe shopping once and he left me waiting for his call. That didn't however stop him from telling them how cheap I was early Sunday morning. Obviously cheap tennis shoes aren't going to last very long, but for 1/3 of normal price  I don't really care if they'd only last a few months.

I don't remember all of the conversation, but  I commented that I am careful with my money because I'm saving money to buy my house. Instead of saying ok, not having my own home yet, was again held against me.  It seems that you aren't supposed to save money and you are supposed to magically own while maintaining an above one's means lifestyle!  The topic then changed for a few minutes.

Supposedly we were all going to go have supper at 5am somewhere. When we arrived at a bus stop, one of them said that I was inviting them to supper. I guess all my efforts to save part of my low income makes them think that I'd buy a meal at an undisclosed location for people I had just met (my "friend" had friends I hadn't met join us).  Then several others repeated that statement that I'd pay. Here in Mexico, inviting someone means you pay the bill. I said no and then one of them said that my Spanish was very bad (even though I'm fluent). It was clear that he was offended because I wouldn't invite them a meal. Of course, they didn't invite me any drinks or anything earlier.

I keep discovering that the people who accuse me of being cheap and ask me to "invite" them things are people who never buy me anything not even a subway ticket.

I didn't respond to his insult since I didn't see the point. I normally don't have a desire to argue or fight especially about stupid things between 10pm and 9am. I'm much rather relax, have a good time, or sleep. Instead of fighting back, I retied one of my shoes.  Then one of them said they didn't feel like waiting more for the bus and they started walking toward the undisclosed all night restaurant. Since it was only a few seconds after the insult, I decided to cut my losses. They went one way and without a word because I was angry, I crossed the street to take the same bus route going the opposite direction home.

I was hoping to get a text message or a message in Facebook asking what happened or if I was ok, but instead I got nothing.  I can interpret this in several ways. One is that my friend is jealous that I'm saving money now and trying to reach a goal. Another is that he's a very low quality friend or at least very inconsiderate. Finally I can accept that while I might join him sometime in the future to a bar, that that's about the extent of our friendship and that it is time to find friends who are happy that one is trying to improve his situation.

If you have been saving money for your future whether you are saving for your first home or your retirement, don't be surprised to find out that your friends are less than supportive even when they have more money than you do.  Sometimes you need to find new friends on your path to financial freedom!

Measuring Financial Independence Progress and the arrogance of idiots

Last night I was in Messenger, and I said hello to a contact that I haven't met in person, but he was someone with whom I'd chat with about 2 years ago.  All was well until I mentioned to him that I started sharing my bedroom in the apartment I rent.

He didn't ask me why, but he quickly went on to judge me (someone he hasn't even met). He asked my age. I'm 36. Then he went on to ask me about my posessions. Do I have my own house? no
Do I have a car? no, and I don't want one. I live only a few minutes walk from the subway and a major avenue. I definitely don't want to waste money on a car. Then he went on to tell me that I don't even know if I'll have food to eat tomorrow.  That isn't the case, but I didn't feel like correcting him since he didn't seem to care about my situation only my posessions.

He then told me that I have nothing. Then he continued to tell me how he has his own house and furniture and he pays his bills.

The difference is that he lived with his parents most of his life and his parents gave him for free the lot to build his house on. The hardest thing in a megacity is to find WHERE to build a house and actually buy it. The actual construction here is very easy to manage once you own the land. It is very likely he never rented.  I'm not saying anything he did to have his house is wrong.  What I'm saying is that his arrogance is wrong since he basically lived off of his parents while I have had to pay rent and bills and yes, I buy my furniture too.  If he had been renting since his early 20s like I have and had he bought the land his house is on then I'd admire him. Since that's not the case, I think he's a jerk who deserves retribution for being so arrogant.

Should I have my own place by now? I suppose I really should, but my income isn't high, and I'm single. Most of my income isn't considered when applying for a loan. He also works independently, but since his parents gave him the land, he didn't even need to request a loan to build.  Land in a megacity/metropolis is very expensive. If I lived in a small town or even a small city, I probably would be able to buy an empty lot for not so much.

As for his scolding me for sharing my room, I think that was just stupid, but that shows you how backwards people are. Instead of praising you for making a sacrifice to finally get ahead financially, they scold you since you really should spend as much money as possible and somehow manage to buy a house of your own while single on a low income.  Sorry, but I'm not going to buy into that backwards thinking.  That's what leads people into mortgage foreclosure and living on the street or with family, because they spent instead of saved.

No, I don't regret not living off of my parents during my 20s and then have the option of being an arrogant idiot like him.  I'm very proud that I've been able to survive without having to ask my parents to support me or to give me land for my own house.  I only regret not posting the roommate advertisement years ago! I'd have a lot more money saved today if I had a roommate sharing a room not only an apartment. I also wouldn't have had to move  a few years ago when times were tough if I had shared the rent of my room with another.

I definitely want to continue to live with roommates and yes share my room (I started sharing this month).  Some of the money I save will go toward bunk beds. The rest of the money I save goes toward my financial independence and early retirement.  I definitely hope to have my own home, but I'm not going to be a jerk about it when I do.  As long as I am single, I plan to have roommates! It just makes sense to share.  Housing costs are normally the biggest expense and rent money isn't an investment. You pay it and it is gone. When I buy my own place, I also plan on having roommates. If I'm lucky their rent money will pay the bills or most of them. I will be able to have my own place and still retire early.

I actually could get a small loan for a tiny house without a yard on the outskirts of the metropolis, but I wouldn't be able to live there while I am working since it would be about 2.5 or 3 hours away and since there is no yard I wouldn't be able to have a garden. Those houses only have 1-2 tiny bedrooms so I wouldn't be able to share. It wouldn't be a very good investment since it wouldn't be a place I'd want except in an emergency. It makes more sense for me to invest in dividend stocks and bonds.

What do you value? Do luxuries like a car make you feel like you have more value that someone who takes public transportation?  I think a better measure of how you are doing is in stability, the ability to cover your basic needs, and safety for the future. Having your own home gives stability, but only as much stability as being able to live in it and pay the bills.  A car doesn't make you more stable, it eats money. A car is a convenience.  How many months could you survive if you stopped working your regular job today?  If I stopped earning money today, I could easily live 7 months and 10 months if I only cooked basic food at home.

Sometimes you need to increase income to reach very early retirement

Being frugal is sometimes not enough for extremely early retirement (or financial independence) 

Extremely early retirement is possible through frugal living, but it is also important to have a decent come to let you save up fast. If you only make what counts for minimum wage in your country, even a high percentage isn't much money and who wants to live on a completely bare-bones depression budget?  We should live off of the basics, but not suffer to get by.

To me frugal is to only spend on what you need to be healthy, happy, and comfortable over the long term. I don't need to have a night at the cinema to be happy. At least I don't need that more than once a month (or perhaps once every two months.

I do however need to eat a variety of vegetables on a regular basis. If I don't eat my veggies, I feel bad and lethargic. I know that if I only ate the cheapest vegetables I'd spent a little less on food, but it would cause a large decrease in happiness compared to the savings of perhaps 30-40 pesos per week.

Being frugal is also not buying on impulse or getting something just because it is cool, trendy, or what all your friends have. It is living without spending a lot of money on entertainment.

Having said that, we all have to eat, pay for a place to live, and clothes to wear. Unless you have a several thousand dollar a month income or live for free with your parents, it will be difficult for you to save the 80% of income needed to retire in about 6 years.  saving 80% spending 20% withdrawing 4% annually 6.25 =25/(0.8/0.2).


The less you save the longer it will take you to reach your very early retirement savings goal. I was a little disappointed to see that at my current 50% savings  (about 40% more than your typical earthling), It will take me about 25 years according to the formula. 25 =25/(0.5/0.5) If I were in my early 20s that would be fine, but I'm almost 36 years old and I want to retire in my mid 40s so I need to make a plan to increase that percent!


If I go from 50% to 60% (which would either mean packing my sandwich or rice with vegetables or eating at home everyday and perhaps washing my clothes by hand), It will take me about 17 years. That's still too long for me.


The only solution is to live frugally and increase income. The more I make while maintaining my expenses at the current (frugal, but no suffering) level, the more I will save (the higher the percent for savings).


At 70% savings, I can retire at almost 11 years. That's not bad. It is one year more than I'd like, but I am actually planning on working on my artwork so I could sell a few paintings and digital artwork and sell some graphic design. I very much doubt that Print-on-Demand websites will go away so I won't have to live 100% off my savings. I might go into semi-retirement after 8 years if I can build a small or tiny house in the country and have a garden, internet, and a solar water heater. It is hard to say since I only recently thought of the idea. It would be fun to have a couple years dedicated to creating art and design to survive on and live simply. Sometimes being a teacher with a full schedule can be stressful.


Now that I know I need to increase my income and live simply to reach my retirement goal, the next step is to find ways to increase that income. Do I want to find another job? Perhaps I could blog for someone else or write a book? I could put extra time into creating great graphic design. I could try to find more translation work. It is stressful, but a long translation could mean a lot of income if I could find someone who needs that help. I could also raise prices for English classes, but that also will increase the possibility that people will cancel when they have unplanned expenses.

I want to retire in 10 years when I'm almost 46

Last Thursday, I was talking to a student who owns a small accounting firm. I've had conversation classes with him off and on for probably 7 years. We typically meet once a week.
I'm not sure how exactly, but we got into a conversation about the future.  His plan is to have his big house to enjoy with his family in a good neighborhood and live well. He loves his work, but he plans on stopping around the age of 60 or perhaps late 50s or at 65 depending on how things go. I think he has a great plan since he loves his work. I don't think there is a right or wrong as long as you have a plan that will meet what you need and want out of life.

I told him something that surprised him. He shouldn't have been surprised. You'd think he wouldn't be that surprised, but I saw a shocked look on his face for a few seconds.  I told him that I want to retire in 10 years.

We started to discuss the numbers since accountants need to see the numbers to fully relate to the concept.  We decided that saving an average of 8000 pesos a month would probably be enough to get by with minimal expenses since I'd make interest which would compound and of course I don't have any children to take care of or a mortgage to pay for.

The next question was what I would do if I retired in ten years.  He understood my answer although he couldn't really relate.  I told him that I'd travel off and on. I'd love backpacking and staying at hostels and meeting people and trying new things and taking photos and all that.   I don't want to wait until I'm old to experience that. If you wait until you're 65 to enjoy your retirement, you'll probably only have a few more years of good health to actually travel and do all that.  You'll probably live into your 80s if you don't get sick, but most people die in their 80s and have not-so-great health in their 70s.  I want to be able to enjoy a few decades of travel, discovery, trying new things, and spending time with friends and loved ones BEFORE I get that old.

If I had the same awareness 10 years ago, I would have planned to retire sooner, but I wasn't mature enough in my 20s to take the decision to save a high percent of my income skipping some immediate pleasure to have it years from now. I suppose most of us think that we have decades more before we should even think about it. I think that after reading the typical advice of working and saving 10% and retiring when you are too old to fully enjoy it wasn't very motivating to me. To retire early, you need to save a very high percent of your income and invest it, but I NEVER saw any popular personal finance adviser recommend it. I always read to save 10% and have an emergency fund and just keep working until you're old and hopefully have paid off your huge mortgage on the big house.

Yet, I think the problem is really how I define retirement. Retirement for me is NOT sitting on the balcony bored watching people walk by and watching some television.  To me retirement will be living simply, gardening if I can find the space, learning and growing as a person, and getting inspired and helping others when I can without being taken advantage of.

I don't plan on not working at all. I plan on working part time when I feel like it not working because I have to because I need to pay the rent and bills. Perhaps I'll teach one group or become a writer. I might decide to study in a study from home using the internet for a university degree. I might take some painting or drawing courses or learn something completely new.

Retirement for me is financial independence. The ability to choose what you want to do or not do on your own terms.

Personal expenses Spring 2012

Here is a glimpse at my current expenses while working and my thoughts regarding current spending levels in each area. It will vary a lot, but you'll notice that compared to the typical person from the USA, I live in extreme poverty, yet for here, I'd probably be considered lower middle class. If I only lived with a working significant other I'd live better. Single without children living is more expensive than married without children because of having to find a roommate and you can't expect them to share all the costs only rent and basic utilities. You also never know when they'll move out and you'll have to pay more and find someone else or move to another place. Remember everything is in pesos!

I can adapt pretty easily and when I make nothing I'm good at cooking at home and walking everywhere and washing clothes by hand.  When I work a lot my expenses go up a lot, but at least I can save money when I work.

 I've saved 20,000 in the bank for emergency living expenses and put half in a certificate of deposit to get some interest for 90 days. Interest bearing accounts have really high minimum balances here. So now I'm starting my investing phase. I'm depositing money to my AFORE which is an independent retirement account that invests mostly in bonds and gets around 6-7%. I can't select investments the bank decides based on age groups. I can only withdraw money (any voluntary contributions) once every 6 months so it is good place to put medium to long term investments.

Rent 1267

 (sharing 3 bedroom cheap apartment with 2 others) I don't think I could find cheaper near a subway station without moving to a neighborhood known for armed robbery.

Food 3000

This is one I'm working on because when I don't work this drops down to 1000 pesos. (when I don't work I cook and people think I'm vegetarian since I cut back on meat then too.)
I'm trying to get it down to 2000 while working a lot.  3000 a month is basically 100 a day (9 dollars a day +/- goes by so fast even buying food sold on the street and a soda.) I'm going home to eat between classes now twice a week and other days perhaps I can pack sandwiches or something)

Transport 1500
I teach in 3 different places right now. Atizapan (Northwest), Polanco (west-central), and Roma Norte. (almost central) I can't move near classes because 1. those areas have MUCH higer rent (perhaps 8,000 in Roma Norte, perhaps 16,000 in Polanco, and 3,500 in Atizapan) and in anycase if I lived near one I'd be far from the others and who knows when someone will ask for classes in some other part of the city.)
I take the metro (subway) and buses everywhere. It averages out to about 50 pesos a day mostly bus cost since the subway is partially funded by the state and the bus to Atizapan where I currently teach most classes is full price. If I stopped working I probably would not go there very often.

Internet 210

It is a good connection and I use it everyday when at home. I use it to communicate with family and friends and of course to check the sites where I upload artwork and designs.
When I'm financially independent I plan on just doing art and graphic design.

Cell 300
I'm on a two year contract. It is one of the cheapest plans I could find that would give me enough text messages and internet. I only get one hour call time, but I normally use its internet to send messages on facebook or whatapp. I had canceled the telephone service here since the roommates didn't want to help with the bill like they had agreed.

Laundry 400
I could wash by hand. I was working on decluttering this weekend, but we'll see. I notice that clothes wear out faster when I wash by hand even though I save on cleaning cost.

Supplies 500

stuff for creating artwork, personal care products, DVDs for backing up artwork, etc. normally 300-600 pesos.

Electricity 100
approx. it is actually a bill that comes every other month and split three ways. Electricity costs vary by usage and neighborhood. Poor areas pay less. Expensive areas like Polanco pay full cost. One of my roommates has the bill and he hasn't shown it too me and he's been at his parents' house all week. I'm worried that he's going to move back home.

Natural Gas 100
Here you buy tanks of gas of different sizes and it depends on how often you cook and if you keep your water heater on hot, warm, or off between baths.
We actually don't have a tank connected to the water heater so I've been showering in cold water. I've done that off and on for years. It isn't enjoyable at all, but it is tolerable.
If I had my own house I'd install a solar water heater and panels, but you can't do that when you rent.

In total I am currently spending about 7,500 pesos a month on the basics + laundry, cell, and internet.

Since I want to retire or be financially independent, saving 10-20% of my income isn't enough. It is essential that I reduce costs as much as possible while working. Ideally, I'd save at least 50% every month.

Reduce Transport Costs and Invest more money

The next important expense to reduce so you'll have more money to save is transportation. Transportation like housing and food is very important, but there are several things you can do.

You could move close to your office. If you are only a kilometer or two away from the office you could walk to and from work. Not only will you save money, you'll increase your fitness and probably lose a little weight.

If you are not quite that close you might be able to go to work by bicycle. Biking to work is also great exercise.

If you have a car, consider carpooling with those you work with. Either take turns driving or give gas money.

If you don't have children sell your car. If you are married just have one car for both of you to use. One car per person is a very recent concept that you don't have to follow.

Living in a large city often means long commutes however it also means the option of taking a bus or taking the subway.  Do a cost comparison between driving, carpooling, and taking public transportation when it is too cold to walk or bike to work.