What to do all day – when you retire early?

One of the big and probably most important questions one should spend some time on, is to think about your plans, goals and ideas for the day after your last day at work. This is not only true for people who plan to retire early, but also for everyone else.

If you work until your 65, or 67 or… well, depending on the retirement age in your home country, waking up in the morning and having nothing on schedule might become a depressing experience. While many of us tend to complain about our jobs, the countless office hours and “wasted” time that we would rather spend doing something else, the truth is that for most people, going to work every day has also some more or less obvious benefits.

  • It gives us a purpose, a reason to wake up in the morning and something to look forward to – every day
  • Social interactions with colleagues, clients, business partners keep us challenged, entertained and in general feeling of being a part of this world
  • Routines that make our daily actions predictable and accountable also give us a sense of security and confidence

When these things disappear, we might not miss them immediately, but over time they may contribute to a degradation of our happiness. Without a reason to wake up, to take care of ourselves, without those tiny daily routines in our lives and without social interactions, sooner or later we might start questioning life itself.

Things get more tricky when you retire early

If you are planning to retire early, let’s say in your 40s or 50s, these questions become even more urgent. Chances are, that you still have another 40 or 50 years to go, and without some proper plans and things to work on, you might actually not appreciate the decision to have left the work-force early.

Sure, I know, there are plenty of easy things that come up to our minds about things that can be done: Waking up late (for those solid 9 hours sleep every night), enjoying long breakfasts and slow coffees, hitting the gym or going for a run to the park, calling up a friend for lunch, playing some video games or watching a movie, helping your kid with homework and going out for a beer at your local pub when the sun goes down. Days are actually way too short.

But when you retire early, you might quickly find out that you are kind of on your own with everything. Your friends might not have the time for lunch or a beer to spend with you, hell, they might actually even resent you for having retired early. The park gets boring after a while, the gym won’t feel like a real purpose to follow and those long breakfasts and slow coffees will start feeling increasingly like a waste of time, rather than truly enjoyable moments.

We need a purpose in our lives

So what to do? I hate to tell you, but you most probably will need to find another job. I am not talking about the employee situation that as a FIRE follower you are currently planning to escape from, but as humans, we just need something to keep us entertained, challenged and something to strive for.

You might start a blog, a small online business, or a consultancy to help others reach what you have accomplished. You might open a small coffee shop, learn a completely new skill like cooking or gardening. You might pursue the things that you wanted to do when you were significantly younger, like back-packing through the mountains of a foreign country, learning a new language or just get that motorbike and plan a 1-year-road-trip.

No matter what you decide for, it should have some consistency and last for a while. Escaping the rat race doesn’t mean becoming a couch potato. It is rather the greatest opportunity of all: To pursue new challenges without the need to worry about financials.

My plans

So, if things go well, I believe that I might be able to hit the escape button in 7 years from now. What are my plans then?

  • I plan to learn barista skills and do some part-time work at a Starbucks or Costa Coffee
  • I will train for the marathon and possibly for an iron man competition
  • I might go back to Europe for a while and subscribe to university for a Spanish and Russian language course
  • I plan to cross the mountains in Korea in the Jeolla-Nam province with a backpack
  • I plan to spend some time in Kyushu and specifically in the hot spring region of Beppu in Japan
  • I will do a road trip through the US that might take half a year to finish
  • I will master those 2000 Chinese characters that are also required for Japanese writing skills
  • I will keep blogging and might eventually try to develop this into a small online business
  • I am planning to do a certification as a financial advisor in Germany and might start an online consultancy business (so I can do it from wherever I am in the world at any time)
  • I will continue writing as a freelancer for The Motley Fool Germany
  • I will take a photography course and start working on my Instagram for some better quality pics
  • I seriously need to get better at calisthenics and plan to increase my work-out time from currently 45 min a day to about 2 hours

I probably won’t be able to follow up on all these things. Certainly not at the same time, and some of these points might prove to be not the right choice OR my priorities might shift due to unforeseeable events.

But the point is that you should seriously think about this, brainstorm, gather ideas and just make sure that you really have something to look forward to every day. Something to keep yourself active, entertained, challenged and social.

Escaping the rat race is not about money, it’s about time. We have only one life and the time we have should be spent wisely. This becomes even more true when we stop worrying about money and receive the opportunity to actually really spend the time we have on ourselves only.

Why a beautiful office matters

I have been working abroad, in developing countries, for a couple of years now. All the hotels I worked at were luxurious 5 star properties, and only my current hotel is in a slightly lower 4 star category. But almost all the hotels had (and still have) one thing in common. Their back-office areas tend to be disastrous.

As a matter of fact, this is valid not only for developing countries, but in general hotels tend to put a lower emphasise on their employee areas. While the situation is not super-bad in Europe, it certainly lacks behind the development of office cultures that young start-ups and established bigger players turned to in recent years.

My current hotel is probably the worst in those terms that I ever worked at. Constantly broken and clogged toilets, holes in walls, water-leaks whenever it rains, hell, I even got electrocuted by our copy-machine as it was not properly earthed. Luckily it was a low voltage. The canteen has plastic chairs, aluminium cutlery, and broken tables. It’s full of mosquitos that will fall upon me as soon as I take a seat. Not an amazing experience for an area that is regularly plagued by dengue fever. For the first few months, it was difficult to have paper towels and soap in all team toilets present at all times and you might guess it, there was not even one plant or picture anywhere in plain sight.

While during my first year here I tried to fix as many of those issues as possible, and was partly successful, for the majority of the problems I found only little understanding from the hotel owners, and surprisingly, not much appreciation from my employees as well. While this kind of experiences can be frustrating, I am trying to not get discouraged and fight for a better office culture.

A managers office is his home

It really is. I spend 6 days a week in my office and tend to be there from 8:30 am until 7:30 pm. I spend more time in my office than I spend with my family. I spend more time talking to my employees than I talk to my daughter, my wife, my parents and my best friends – combined. I stare at my laptop and work on excel sheets, websites, social media, guest requests, corporate systems, restaurant menus, budgets, cocktail recipes, event preparations, staff evaluations and permanent requests from hotel owners. I talk with suppliers, have normal meetings, skype meetings, webinars and got to visit occasional events to keep myself informed about the market and upcoming challenges that the world is constantly throwing at us from every corner of the world.

Doing all this and spending so much time at work, it really matters how you feel in your office. It is not your second home. You just have to admit to yourself that your office is your first home.

A new office culture

Just a few months back in July, I went back to Europe to visit my parents, and as I am planning to stop the rat race in a very foreseeable future (just reading the previous paragraph is actually giving me an energy blast to really keep working on my plan), I have visited a few co-working spaces in Berlin.

Why did I do that? Well, frankly, I am pretty sure that I can’t stop working. I love to work and I love to be kept busy. I love to meet people and I love to try to do my part to help improve this world for someone else a little bit every day. I am just pretty sure that I don’t want to do it with such a work-load as I am having now. Thus, escaping the rate race will mean for me to work on my own terms, far less and most probably on a freelance basis. But more on this another time.

So, I visited this co-working offices – and I was truly amazed. Beautiful offices with open plan spaces that looked rather like brushed up Starbucks shops than an office. Then, there were also neat and smart modular offices for small teams or individuals, fully equipped with everything one would need to get things done. And on top of that, they were all kept in warm earth-tones, in beautiful locations around parks or with amazing city views. To top the cake with a cherry, all the offices had free soft-drinks, coffee, daily fresh fruits, some were pet friendly, had showers for people who like to jogg or come on a bicycle to work AND many were accessible 24/7. Free high speed wi-fi, electric sockets with international plugs and electric / power protection were obviously standard.

That’s when it occurred to me. People are tired of ugly offices, and yes, I am not alone out there.

Spread the word

So, why am I writing all this? I would really like to encourage all the employees out there to spread the word. Don’t accept ugly offices. Don’t accept broken toilets and water leaks. Don’t accept lacks of hygiene, health and safety. I am going to leave my hotel in 7 months from now, as my contract is about to expire, and I will keep trying to fix and improve more of this until the last day. But it’s important that people really talk about this. Only then business owners and managers, such as myself, will receive not only the pressure but also the support that is necessary to drive change.

The whole world is talking about the next big disruption. Well, I don’t need a disruption. I just want a nice office.

Guilty pleasures

We all have some guilty pleasures. The movie, that everyone hates, but that you secretly enjoy watching over and over. The song, that you would never admit to your friends to have it on your playlist, but that you just have to listen to every now and then. The fast-food burger, that everyone know is not only bad for your health but also bad for your waist, but that you crave for after every work-out.

For someone who wants to retire early, guilty pleasures are even more of a concern. Because they include any not necessary spendings. Drinks or food on the go, online-shopping, giving into promotions and special offers, simple home improvements or even just that monthly Netflix charge, can quickly start feeling like a guilty pleasure. Because you know, that every Euro spent, is a Euro which does not make it into your savings or investment account, and thus will ultimately delay your dream of early retirement from becoming true.

But here is the thing. Being overly strict with yourself, can prove to be a counter-productive strategy.

The strategy to early retirement is actually simple: Spend less than you earn, save and invest what is left at the end of the month, and repeat the process until you hit your target. When it comes to determine how much one should save every month, the easiest answer is therefore of course: As much as possible. The more and the faster you safe and invest, the earlier you can retire.

Some financial planners or advisers might tell you to start by setting up smaller targets, like 10% of your monthly income. You might have already guessed it: This won’t work for an early retirement plan. Saving 10% a month might work well for a social security top-up-plan. But for early retirement and to escape the rat race, you need to get really aggressive and put as much as you can, as soon as you can to work. The power of compound interest, dividend and stock-price growth can only truly unfold it’s beautiful wings when it has enough time to do so, thus every delay, every wasted Euro and every wasted day does count and can have a significant impact, no matter how small.

You might hear or read stories about people who go as far as to save up 50% of their monthly income. While it may sound crazy, it’s definitely not impossible. The only real question is, how much you truly want it.

The yo-yo effect

However, no matter how determined you are, you are also a human. Humans have a soul, feelings and needs, that often go beyond rationale. Not surprisingly, while it can happen that following a super-strict regiment will get you to a saving percentage that will make your jaw drop, there is a high chance that you get either tired, annoyed or over-confident and without even noticing, snap back to your previous spending habits. Very similar to the famous yo-yo effect, as we know it from people who are trying to lose weight.

It’s not just about saving more – it’s a fundamental lifestyle change

I would say that reaching this goal of a 50% savings rate is definitely achievable, and it is actually something to really strive for. But you don’t need it from day one.

Your financial planner might be not wrong after all, and starting with 10% while learning about investments, understanding your spending habits and learning how to budget, track and adjust your money matters is actually probably a very good idea. This way you may lay the track for a step by step approach to adjust yourself and to slowly start shifting into sustainable changes to your lifestyle.

I have detailed budgets since 2014, and my savings rates looked like this:

  • 2014: 37,32%
  • 2015: 36,06%
  • 2016: 18,10%
  • 2017: 31,16%
  • 2018: 35,56% (expected)

My daughter was born by the end of 2015, so the majority of the initial baby-costs and family related matters kicked in a little later on in 2016. And of course I also needed to bring her and my wife to Europe so my parents will see their first granddaughter, so this was another factor and a few thousand Euros spent. But other than that, I got pretty hooked up between 31-38% year on year. While these numbers are not bad, they are for me a little bit frustrating to look at, especially since my salary has also grown during that time – significantly.  In 2018, I am earning almost 3 times what I was earning in 2014. This means, that I should be able to actually save significantly more.

Well, that’s not how life works and different circumstances required adjustments. Getting married, having a daughter and starting a family life definitely had a large impact on my overall lifestyle and spending habits. Also, it took me quite a while to bring my wife back from the dark side (of spending habits) and to get her aligned with me on our financial targets as individuals and as a family. This should start bearing fruits by 2019 and I think I am going to break through the 40% barrier by that time.

No regrets

But having said all that, you should not think that I would regret any of the Euros that didn’t make it into my investment account yet. Having a wonderful, understanding and supportive wife and a beautiful little daughter makes my days on earth truly worthwhile and I wouldn’t want to exchange any moment we had together for any of those “lost” amounts. It was actually absolutely not a loss of whatsoever, but probably one of the best investments I have actually done.

So my point in all of this is: Don’t hang up yourself if you don’t hit your magical savings and investment numbers immediately. Keep it up as your target and try your best to work towards it, but don’t forget that you still got a life to live. Living frugally is only enjoyable when you set your priorities right and allow yourself to enjoy the moments that truly matter. Even if they do cost some money sometimes.

FIRE – It’s about time, not money

Financial. Independence. Retire. Early.
F.I.R.E.

If you are interested in financial freedom, sooner rather than later you will stumble upon this term. While reaching financial independence and being able to retire early is not a new concept, it seems that these days it got plenty of steam, and there certainly is a very good reason for it. Probably more than one.

One of the main reasons I could think of would probably be the ever-increasing lack of job security, and the increased amount of options to travel and to explore the world.

Job security is becoming a relict of the past

As far back as I can remember, I was being told that to make a career one has to be flexible, adaptable and independent. While I got no problem with this and actually very much embrace the idea, one needs to realize that with more flexibility, we are also talking about more freelance jobs and short-term contracts. The traditional life-long assignment with one company has not become a rarity just yet, but it is becoming less common.

Don’t get me wrong, I don’t want to blame the industry or politics for this though. Frankly, I couldn’t imagine and wouldn’t even want to work for the same company all my life. Even 4 or 5 years would feel like an eternity to me. I rather believe that this is pretty much a reciprocal alignment of interests from both, the modern employee and employer’s side.

Working in hotels, I usually receive a contract for 1 or 2 years for each property. It happened only once, that I received an unlimited contract as a manager, but in most cases, it’s a limited offer. It’s a common standard in international hospitality so I don’t spend too many thoughts on this, but for most of my friends, family, and colleagues from my home area of Germany, there is not much understanding why anyone would agree to work on terms like this.

It all comes down to security, or does it?

Of course, the main idea behind the thinking of my family, friends, and colleagues is about the job and pension security. While schools and universities are preaching independence and flexibility, parents and politics are trying to push us into “stable” careers where you don’t need to worry about growing old – and receiving a sustainable and handy pension. This might be less common in the US, but it is pretty much the idea on which Europe has been built on.

I am traveling for a long time now, and my personal attitude was to always put freedom ahead of security. I hated the over-regulated German system and always wanted to get out of it. So, talking about security was always just some annoying concept to me. Being young, educated and in a booming industry, I was feeling like I could take on the world and handle everything by myself, while having much more fun, traveling and exploring the world along the way.

But things change, and you surely start to think differently when you turn 35 and got a family to support. For me, something happened around that time, when my daughter was born.

If you got no kids, you won’t be able to understand the fundamental change in your attitude that just comes naturally shortly after your kid is born. Your thoughts and priorities will slowly start to shift, towards wanting to make sure that you can care not only for yourself but also for your loved ones – no matter what. You might be a master in survival, but your significant other and your little ones might be much more vulnerable and you might start taking this into account at some point.

Many people start then to think about security for their family. As for my case, while security is a part of it, my worries shifted not towards security, but even more towards freedom. Freedom for myself, for my wife and for my daughter.

It’s all about time and what we do with it

I mentioned it over and over again and I will not get tired of repeating it: A successful career is the single, most important piece of the puzzle that you need to work on to reach your target of financial independence as early on as possible. The logic is simple: The more you earn, the more you can save, invest and the earlier you can start living off your investments and your savings.

A successful career has also plenty of other benefits, namely opportunities to gather experience and to face challenges in areas which you might not be able to have access to as a regular rank & file employee. Every experience helps us to develop further, to learn more and to understand the world, people and everything around it a little better. Therefore, I absolutely think that one should aim high and try to move up the career ranks quickly and with a high motivation to learn and to develop.

But having said all that, there is really no reason to do it for all your life. Especially when you have a family, spending 60-70 hours a week in an office becomes less and less desirable. You want to have more time, and you want to have the freedom to use this time the way that it will benefit you and your family the most.

Now here is the single most important realization about any job:

To work means to trade time for money. Your time is limited. Money is not.

You can only have more time if you have sufficient money to support yourself. If you don’t have money, you need to trade your time for money. You need to work. The more you have to work, the less time you have for anything else.

It’s simple, but yet only a few people truly recognize the significance of this logic.

Thus, the ultimate goal is actually not really about money. It’s about time. It’s about the freedom not to need to trade your time for money. This means that we have to use our careers, our income, and our skills to invest in assets and to set up businesses, that will allow us, step by step, to reduce the amount of time that we would normally need to trade for money.

Once we reach the point that we don’t need to trade time for money anymore, then FIRE becomes a reality. Or, whatever you would prefer to call it.

On a final note

There is one more thing that I will dedicate a separate post later on, but that I would like to shortly bring up today. If you truly understood the point above, then you will also realize another fact. Since your time is limited – on a daily basis – there is also a limit on how much you can earn by trading your time for money – on a daily basis.

Think about this: Let’s say you are a barber. It doesn’t matter how good you are and how much you charge for a hair-cut, there is a time limit as to how many haircuts you can perform per day. Meaning, there is a limit to how much you can earn.

Becoming independent also means that you remove this natural barrier, by focusing on money earning methods that are scalable. Meaning: They have no time limit attached to them and can produce higher results, without trading in additional time.

This might sound a little bit more complicated, but I will get on this topic in detail at another time soon.

Is a house an asset?

When you start planning your financial future, let’s say around the age of 25-35, one key factor to it, is to understand the difference between the 2 crucial elements that will determine whether your plan makes sense – or whether it doesn’t. You need to understand what are assets and what are liabilities.

The idea behind it is simple. You want to invest your money in assets. And you want to reduce the amount of your liabilities. Only this way you will start creating a cash-surplus as a result from your investments.

While it may sound simple, definitions of what an asset is, and what should be categorised as a liability, can differ and very much depend on your personal point of view. One such controversial topic is an investment in a house or a condo. How would you categorise it? Is it an asset or is it a liability?

Does it create cash or costs?

The topic is so controversial, because the idea of having your own house is not only being sold as a way to save money on rent in the future ahead, but also as the ultimate guide to your personal freedom. Having your own house, you are free to do what you want, when you want and how you want it. On top of that, a house gains in value over time. Right?

Well, it’s not that easy.

First of all, let me say straight ahead that I consider a house to be a liability. My top 12 reasoning points behind it are:

  1. Unless rented out, a house or condo doesn’t generate cash
  2. If rented out, it creates additional work and responsibilities
  3. The potential increase in value is very dependent on many factors that you cannot control
  4. If not regularly taken care of, a house or condo is actually dropping in value
  5. Repairs & maintenance, insurance, taxes – it adds up over the years and can actually end up costing a small fortune
  6. Depending on the country you live in, the amount of building policies and regulations can be ridiculous and you absolutely cannot do what you want, when you want it and how you want it
  7. If you don’t rent it out and use it by yourself, then you are bound to the place
  8. If you rent it out, there are tons of legal pitfalls if you get in disputes with your tenants
  9. Even if it gains value over time, selling a house is not a simple and straightforward task
  10. A house is not creating passive income, as you need to constantly devote time, effort and money to maintain it
  11. Having your own house may urge you to spend more money on decorations, furniture, etc., all the things that you want to have in your house even though they are not really necessary, thus deducting your available cash for other investments
  12. Paying a mortgage is not investing. It’s the opposite.

I am sure that pro-house advocates can find their own reasons and counter a few of these points, but certainly not all. Also, I admit that there is some romantic sentiment to the idea of just having your own place to be and as we all know just too well, feelings and sentiments can out-weight logic on occasion.

As for my logic, it is very simple: Assets should generate cash. If an investment doesn’t generate cash, it’s not an asset.

I used to have a different point of view on this topic until I read the book “Rich Dad, Poor Dad” by Robert Kiyosaki. You can find more details on it in my “Good Reads” section. The book has quite a poor title and I don’t think that it’s particularly well written. I am also not even sure, whether the story told is true or not. But it has a few eye-openers in it, and the definition of assets and liabilities is one of them.

Assets generate cash.
Liabilities cost cash.

That’s as simple as it gets.

The Vagabond Theory

As you can see at the top and just underneath of my blog title, this blog is the beginning of a larger scheme that I will start referring to sometime in the future. The life of a modern vagabond. I have been traveling now for almost 11 years, changing cities, countries and continents every 1-2 years on average. Therefore, I have a natural desire of investing in assets that do not bind me to a place.

While my career path is certainly not a typical one, I believe that our world is developing into a, work-wise, world without the ancient boundaries of borders. Now more than ever, planning a successful career requires us to be flexible, to travel and to constantly adjust to new challenges.

In my opinion, not only is this hard to do if you devote a large part of your pay-check to a house somewhere that you think you want to live in, in let’s say about 20-30 years from now. Also, you should be prepared to expect, that this one place that you admired so much in your child- or even young adulthood, might look very different to you once you left it for a couple of years, and returned to it at some later point in the future. There are just so many great places in this world, why focus on just one so early in your life?

On top of that, there is such a thing that I call the “vagabond dilemma“. It describes the feeling that once you start traveling and the longer you travel, the harder it gets to consider settling down.

The ultimate freedom of housing

Ultimately, it comes down to your character, lifestyle and expectations. If you are devoted to a career, travel the world and are looking for the ultimate freedom, buying a house is probably not a smart move. A modern vagabond is certainly better advised to put his cash in stocks, bonds and other easily convertible and accessible assets that come with less restrictions, require less time and less attention to take care of.

Just last week, I had a thought, that to reach ultimate freedom, it would probably make even perfect sense to me to live permanently in a hotel. If you travel around Asia and plenty of places in Europe, you can easily find beautiful 4 and 5 star hotels that will cost you not more than a 100 EUR per night. This adds up to roughly 3000 EUR a month and it might sound like a lot at first, but if you really think about it: This price will include a daily, sumptuous breakfast for 2, a gym that you can mostly use 24 hours and usually also comes with a sauna and a pool. You might have access to a club lounge which you can use for working remotely and which usually also includes unlimited coffees, soft drinks, even beers, wines and often light canapé dinners. You get a housekeeping service for your room on a daily basis and, finally, you don’t need to buy anything on equipment. If anything gets broken, the hotel will fix it. Some hotels are already catering to working nomads by providing dedicated contracts with fixed rates for a specified period of time, that may offer even better rates and additional perks.

Surely, this is not something that would appeal to everyone, but it is an interesting idea and I am not dismissing it as a future perspective. If you love freedom and want independence, this is pretty much the definition of independent living. The best part of it: Your housing doesn’t consume any of your time. You have every minute of the day, every day, dedicated to only those things that you truly want to do.

If you have your own place, this is probably one of the biggest trade offs of all. There is always something that needs to be done in a house. From small things like fixing light-bulbs to larger projects like repairing showers, toilets or rooftops.

Doing your own thing

Now, there is also some positive sentiment to taking care of your own house, and let’s face it, life is not all only about money. Spending some time on a veranda or a roof and just fixing your own stuff has some positive sentiment to it and it may probably even offer some mental health benefits.

I mean, it’s probably kind of calming and relaxing knowing that you just take care of your stuff. You can feel relatively safe there, since nobody can kick you out (as long as you pay your taxes and paid back the mortgage) and if you got children, you might have some pleasure in knowing that this is something that you can leave with your kids once you’re gone. If they want it. If not, they can still sell it.

That’s also worth something.

Paying a mortgage is not investing

My last point, is also my point no. 12 in the above list. We are talking about investments, but paying a mortgage has nothing to do with investing. It’s figuratively the opposite.

Taking a loan from the bank and paying it back for a long part of your life, is not a desired target. The first years, most of your money is not even going into paying back the debt, but the largest part is going into paying back interest that is being calculated and charged in advance. So usually, the first years of paying back are not even reducing your debt.

Investments should grow and generate cash while appreciate in value. This is just not the case for most house and/or condo buyers.

Disclosure: I am not a financial advisor and these articles do not represent a recommendation for financial decisions. Please do your own due diligence and invest upon your own conclusions, considering your personal preferences and risk tolerance.