Are you a slave and you don't even know it?

Long time ago, slavery means your master owns you. You do all your work for no compensation other than enough food and shelter to keep you alive. Perhaps enough nutrition to keep you strong if you need to do manual labor.

Those times of slavery are mostly gone in the US (or is it?) but has been replaced by a new kind of order. It doesn't quite resemble slavery because it has an illusion of freedom. For those that watch Game of Thrones, in Season 6 Episode 4, Tyrion Lannister offered to end slavery within 7 years to the slave masters at Slaver's Bay. He alluded to riches does not necessarily require slavery but can be transformed into a 'new order' that works even better because he is even richer than the slave masters while requiring no slaves at all.

So are you a slave? How many hours a week of true freedom do you really have? A large portion of the population is locked into a life of perpetual work. Many low wage workers have to take up 2 or 3 part time jobs in order to make enough to sustain a meager life. Many simply do not even have free time.

I must assume life as a slave largely means working every waking hour with no days off. So that may mean 16 hours days 7 days a week or 112 hours a week of work. I assume taking 2-3 jobs is no different.

Life these days for the average middle class person is no where as brutal but could be thought of as a type of fractional slavery. You work at a job in exchange for pay that you use to sustain your life. You have the 'freedom' to vacation time of about 2 or more weeks a year. But do you really have freedom? To some extent yes but you are not allowed to leave your job for long or else you'll get fired. You are not allowed to quit a job for long or your prospects of a new job will dwindle. If you leave long enough, you will likely exhaust your money supply and bring forth your own demise and likely end up homeless and hungry.

Now I as ask you dear readers: What would you do if you have enough money to sustain your life and do not need to go in to work? Would you still go to work because you enjoy it so much or will you do something else? I fully believe people who say they will stay at their job to be completely lying to themselves. How many of us stays at their job after winning the lottery? Truth is, we say we are happy at our jobs as a way to reconcile ourselves so that we wont hate our very existence.

Now I ask you again. What would you do if do not need to go to work? The answer is probably the path to true contentment and happiness. It might not be just one single thing but the freedom to pursue various endeavors what ever it might be. Maybe it would to travel the world endlessly. That might be only temporary because people usually get a bit of home sick after wandering for an extended period of time.

So what is keeping the masses in an endless perpetual semi slave state? It's largely your spending habits and the marketing machine that altered your mind to think you need one of the many necessities of life that may not actually be all the necessary at all. If you are not financially independent, you are a semi-slave period. Your boss basically dictates what you do. Even the boss has their boss so we're all locked into doing someone's bidding. Even the CEO, is required to do the bidding of the shareholders.

I challenge you to look at something that you think is absolutely necessary and really think if you really do need it. Do you NEED that commonly talked about $5 latte? Do you need internet? Do you need to eat $100 per person French Dinner? What you need actually comes down to food, clean water, clothing, and shelter.

If you live in the US, you live in one of the most wasteful country in the world and if you are able to break the cycle, you can easily break yourself free. One interesting to notice is that you are getting paid as if you are wasteful. But if you get paid typically but spend atypically, you can easily amass enough wealth to get your to be financially independent pretty quickly.

Is your freedom not the most important thing to strive for? If we all continue to spend typically we will likely continue to be a slave for the rest of our lives, perhaps until 70. But perhaps if you do not buy that new car and instead buy a used one, you could finally do what you want to do one year earlier at age 69. What if you never buy cable? Maybe you can pull it back another year. How about bringing your lunch everyday? That's probably another years worth.

You can take any amount you are about to spend today and extrapolate how much earlier you can retire. This has a directly consequence of putting a life value in days to the item you are buying. Every item you do not buy, you save yourself a number of days maybe 100 of NOT having to go to work. If that isn't enough to convince you to not buy that luxury leather good, it just means marketing won.

The Spending Divide

Although I myself have almost fully converted to an extremely frugal state of spending, I am puzzled why there is such a difference in spending habit with those around me.

As I mentioned before, I bought expensive jeans once upon a time and have finally realized that buying the expensive pair meant nothing to me. Now I opt for about $15-18 (usd) jeans instead. Sure I would like to have the expensive ones but I am not willing to spend the money to trade for it. You see, the money costs me a finite amount of my time which equates to a finite amount of my LIFE.

A lot of people vicariously spend without care. There is a very ingrained physiology involved that I've been trying to get to the root of. For example, I know buying a new car depreciates greatly off the lot. The value evaporates like puddles of water off a cast iron skillet. So, rather than buying new, you buy used and you skip all the depreciation. Even if you use the car in both cases til end of life, it serves you better to use the used car to end of life as that gives a much better value.

Although I would like a new car one day, I equate that  to essentially burning cash. If I had so much money that I would not blink an eye to really burn cash, then perhaps I would consider getting a new car. And yet, said person was told all these point of views and reasoning but still adamantly chooses to buy a new car. The quoted rebuttal being "I like it". My mind was boggled.

Now, I understand the allure of a new car fully. You can see it from the new state and you would know everything that happens to it. But the price is hefty enough that giving up that new car smell is certainly worth the $10k reduction in price by buying one that is 1-4 years old.

So can we chalk this up to difference of opinion? Do people just inherently prefer new goods? New anything is great of course but I think the point is to realize the amount of money spent is really not just using what you saved up but rather using units of your life that you traded for these money 'credits'. If it takes you 1000 hours at $10 an hour to make that $10k in price difference, will you readily spend it?

Does it take the realization that the $10k costs 1000 hours of work. In order to generate that 1000 hour of work, you actually had to commute, eat, sleep to produce those 1000 hours of work. If you add up the days you spent creating those 1000 hours of work, you'll realize it actually takes 6 months of your life to make this $10k. In other words, assuming a 80 year lifespan, you spent
0.6% of your LIFE that you will NEVER get back. (Not everyone makes $10/hour, if you make $60/hour then it costs you 0.1% of your life)

With that, you can only spend 0.6% of your life 133 times in your lifetime before you lay on your death bed. At which point you spent your life spending your life away by trading your most valuable commodity for mere things.

I hope at this point you will agree with me that the next time you spend $10k on anything that is completely discretionary and if looked carefully could be superfluous, you would say "Hell no, I'm not spending my life to buy that".

How Much is Too Little to Earn?

How much should you value your time is something I've always thought about. Do you value it by how much you earn per hour on average at your day job? Do you value it much more or much less?

It all comes down to what you do with your off work time hours. Even playing video games is worth while because it provides you a source of enjoyment.

Now lets think about how much it would take for you to do something for extra cash. How about $100 for sitting in a market study? What about shopping around for 30 minutes and you were able to get something for $20 instead of $30? How about those online surveys that pays you an equivalent of $1 for 30 minutes of time it takes to complete the survey?

At some point, it will feel like its not worth your time. Heck, perhaps even $100 for 1 hour might not be worth your time because you much prefer to spend every last bit of time with your loved ones. That is certainly agreeable to me and everybody has their own preferences.

For a long while I had this penny pinching and dollar hoarding attitude and jump at opportunities that even save or earn $0.25. I still think this is not a bad way to go because your hourly rate at work does not equal the rate during your off work hours. If that is that case, why not just double your 40 hour week to 80 and earn double? Unless you sneak in two full time jobs, you cannot do that.

Hence, if you use all your free time, that is, time you have left after you spend with your loved ones and leisure, you should use all of it to generate extra cash no matter the effective hourly rate.

Recently though, I was doing a transaction that effectively earned me about $1 and it take roughly 15 minutes of my time. After doing several, I started to realize that I could be doing something else that earns much more. Hence is the opportunity cost of applying my time in areas that are not the most effective.

Of course, if you do not have any other endeavors that earns more, then by all means, earn $2-4 an hour. On the other hand, if you have several things you could do that earns more, it might be wiser to prioritize the higher side income endeavors first. You may find that once you do so, there will never be a chance to tackle the $2-4/hour tasks. Frankly, I might prefer to just sit there and stare at the wall than busying myself for such a low rate.

Compounding on top of all this is if the extracurricular activity actually has a potential to expand. If it does, such as the scaling I mentioned in an earlier post, then even earning $2-4/hour might be okay. As of now, I earn nothing writing this blog post but I see a potential of a larger audience one day. Hence I choose to continue these posts for the time being.

Getting Paid for Value and not Time

Time is a non-renewable and finite resource for everyone. No one knows how much of if you have but as of now, it is capped at 78.7 years on average. Yet we readily trade this very personal and very valuable resource for money. We must in order to pay our bills.

When you look at how much life you must trade for a certain big ticket item, things gets interesting. What? That new and very large LCD TV will take 40 hours of my life to buy? You pause a bit but might just go ahead with it anyway.

The trick is to look at it even further away. How much LIFE is it going to take. The hours spent at work is not just 40 hours a week at face value. You must add commute time, time it took to eat during those days and time it takes to recuperate because you cannot really enjoy anything else you do on a weekday work night.

So you trade a portion of your life for some money. Some argue that you can always get more money but you cannot get more life. It's true but your ability to get more money depends largely on your entrepreneurship skills. So you cannot just ditch your job and just run off playing.

If you stop work today, will you be able to support yourself? If not then we better work on that as I am now. You see, when you trade Value for money you can potentially get a return that will greatly exceed $1000/hour for the time you spend created that value. I personally got paid roughly that much for 3 hours of my time making a successful online video.

Of course, creating something of value does not automatically land you in the presidential suite. You need to sell it. You need to use a platform that will allow it to scale. SCALING to me is one of those magic terms. Scale meant to multiply and so you create something that is can multiply in profit.

Perhaps you want to bake cookies but that is a profit on a per unit basis. You have to make each one which limits your ability to sell a million of them. Rather, building the machine that bakes the cookies non-stop really is like building a money printing press. That or hiring people to do that work.

So when you look at various jobs that trades your TIME for MONEY, stay away from it. You will get paid yes, but it will not scale. This leave you to work the rest of your life. Uber for example is a trade time for money endeavor. You HAVE to drive in order to receive fares. If you stop driving, you will not earn any fares. If you take a vacation, you will not earn fares. If you retire, you will not earn any fares. If you SLEEP, you will not earn any fares.

The main point I want to get across in this post is to avoid the trade your TIME for MONEY traps. Resale businesses also earns a pretty good amount but it also is a trade time for money endeavor. You must spend time making the sale as well as spending time shipping it if it is an online thing.

For those that totally understand what I am talking about, you'll recognize that if you just simply avoid the time for money traps, you can concentrate on efforts that scales. This will save you years if not 10+ years of chasing after wealth in endeavors that have a cap on your per hour wages.

So what could these value creation endeavors be? On an abstract level, it's creating something of value to others. When you make something useful and something someone needs, they will pay a good amount for it. If it is easily replica-able like a digital product be it Written, Audio, Video, then it can be scaled very easily.

So just remember, strive to get paid for value and not on a salary or a per hour basis. With that, you may start out earning pennies but a scale-able profit can earn millions.

Help! My Stocks Went Up Too High!

As silly as it may seem, sometimes you come upon a problem of your stocks going too high. Is this bragging? A little, but I do have a problem I am worried about which is if it is prone to a crash after having gone up so much.

The stock or 'bond' in question is the Pimco CA Municipal Bonds '2' I purchase around end of June 2015. I have an average buy-in price of $9.39/share. It is now $10.69/share translating to a gain of 13.87%

Take a look at this google finance chart:



From this, I am starting to think I caught some sort of Warren Buffet mojo. A few other assets I bought in the last year appears to have been smiled upon by the god(s) as well but let me just focus on just this fund on this post.

It's not everyday I am able to pick the bottom. I happened to buy it because I wanted a steady income stream. When I bought it at the time, the cost was $9.39 translating to a yield of 6.9% a year. I.e. $10,000 invested will get you $690 of dividends that is Tax Free. I put in about $20k worth so I get about 2x time per year.

Yeah! Did you hear that right? TAX FREE! This is the stuff that rich people use to not pay any taxes and so why shouldn't you employ it to do the same? They have millions to spare so as part of a diversified portfolio, maybe they put in 1/4 of their assets worth $1million in. That nets you $69,000 of easy spending cash a year! Wholly molly! 6.9% of dividend is nothing to sneeze at. Unfortunately, the price has gone up so much that you only get about 6.03% now, still not too shabby.

To figure out what you have to earn to get $690 of after tax dollars you do:

$690/(1-0.28)= $958.33

This is assuming you are in the 28% tax bracket. It doesn't matter the exact bracket but you get the point, its a lot more before tax dollars.

So back to the original point of the price going too high. There is a thing called NAV or net asset value of the bond. PCK have fund managers that buys whole bunch of CA bonds from various places like schools and citys and such on the order of 1-20 million. These places have to pay them back at a certain interest rate and that is roughly how we get our 6.9%. The NAV is the value of all the assets minus any liabilities, so in essence it is what it is really WORTH.

The current price of $10.69 but the NAV is about $9.09 representing a whopping 17.6% premium over the underlying value.

You can check PCK and its NAV comparison on Morningstar's website here: http://bit.ly/1pSxtNH

In a way, you can think of paying for the premium like a buy-in in order to get the good 6% a year returns. You just have to wait 3 years before the payouts will cover the premium you paid to get it.

Since 2008, there has been a growing premium on PCK and it is this growth that has me wondering if I should take the profit but loose out on all the monthly payouts. You could say that even if I reverts to the NAV value, I would not have lost much because you buy this for the payouts and not the appreciation of the stock itself.

I am certainly thinking about selling this asset as anyone should if the premium over NAV gets too much into the crazy money territory.

Whats this whole post about anyway? It's about informing you, the reader, about such cool things as tax-free bonds out there that you can buy to get yourself a recurring income. This being an essential part of freeing yourself from the cubicle.

$100 Jeans are for the weak minded

I have to admit, I have never always been so adverse to name brand goods. And when I say name brand goods, I mean the really expensive stuff that far exceeds the value given by the increased durability and ease of use. There once was a time I was shopping with a friend and we were looking at expensive jeans at an outlet store costing close to $100 a pair. This is an outlet already so the actual cost at the retail store would be close to $200.

Psychologically, I might have jumped the gun and bought it to fit in or to impress that I can purchase it without flinching. But that little show was for the weak minded for I was weak.

Mind you, I was just following along to the store. I myself would not have went around looking at those things all by myself. Let me summarize some points I like to make:

1. Said person could want to impress their other friends by wearing such jeans.
2. The selection is limited because it is an outlet.
3. Increase in quality is not proportional to increase in price.
4. Features such as reduced size availability and unwanted featured led to the price reduction.

After years of wearing these expensive jeans I have noticed a few things. Because they were at an outlet, the length size was not perfect. Hence, you need to get the bottom re-done or fold them in every time. I chose the ladder and it must have cost an aggregate of 1 minute each time I fold them in adding up to eat least 1 hour of folding per year of use. Another point is that the jeans were button fly. I knew I would not like it but got them anyway due to the comparably low price. It turns out I hated button fly. It takes 5 times as long to open and close the fly not to mention the fly sometimes likes to pop open.

All this lead to a sort of dread to wear these expensive jeans. The one redeeming quality is the print on the back pocket that looks unique and the texture of the fabric. The fabric actually felt smooth one way and ribbed another, strange but interesting.

So all this fuss and how does it relate to escaping from the cubicle? Wasted resources. By buying that, I have extended my time in the cubicle by about 1 day. I could go into investing that and all but the amount is not all the much when it comes to retirement. It is the aggregate of purchases like these that matters most.

So I say buying those is for the weak minded because the weak minded fell for the marketing and social pressures. Most people don't care if you wear $100 jeans or not and if they do, they may not be very good friends. What do people do care about? That you care about them and are genuinely interested in them. You still need to look the part in your social circle tho and not appear like a hobo.

It works the opposite way too. Some of my friends who choose to buy expensive cars has zero bearing on if it would make me think more of them or not. I am certainly a bit jealous yes but I have bigger fish to fry first. If anything, buying an overly expensive vehicle is a waste to me and not something I would do myself. (UNLESS of course, I have expendable money over and above the money needed for a lifetime of retirement. I.e net worth minus house of more than 2 million.)

These days, I try to find good quality jeans that are not super name brand costing close to $15-20 a pair. And guess what? It has a zipper, has the correct waist and length, and also looks faded in the right spots. Brand? Don't care.

CEO Tragedy

"Energy CEO McClendon dies in Oklahoma car crash, a day after indictment" reads the headline on 3/2/2016. Article here.

The CEO appears to have committed suicide although there's is no final verdict yet. Maybe he did violate antitrust laws, maybe he didn't. Dying one day after the indictment certainly makes him appear guilty. Lets just assume he was guilty and there are not hidden facts in this story, why did he try to rig the bidding process?

Perhaps, it's a shortcut to obtain more wealth? More power? This type of ethics breach may not be as far fetched to everyone as it seems. The temptation of money is great and the actual act of antitrust could just be from a casual remark. Imagine, gaining a few million dollars just from a chat with a fellow bidder which would then allow you to buy 10 new Lamborghini. Yes... all of which you can imagine to drive while sleeping in a PRISON CELL.

A life in prison might just be worse than dying. How long will the sentence be if he was tried and found guilty? It appears he did not want to wait to find the answer. There could of course be other factors that cause him to do such a thing. Let me not speculate further as it just happened and not all the facts are known.

This leads us to a tie in to this blog about financial independence. One must not fall into the trap of shortcuts and ethics breach in order to more firmly secure financial independence. There are plenty of white hat things you can do to increase your wealth the normal and legal way. Once you do those, it certainly FEELS like you're robbing everybody from the loads of cash rolling in.

No, you're not ACTUALLY robbing anyone at all. Merely making money in a strategic manner which so few people actually know, understand, or willing to put in the effort to do.

Rather than talk in generalities, let me point out a few examples where I FEEL like I robbed someone but didn't at all. It was just a gang busters financial transaction. Made out with hundreds without much effort on my part.

1. Checking account sign up bonus. $500 - Signed up, waited 3 months, and closed the account. Probably 2 hours of work and a bit of attention to timing on my part.

2. Dividend payouts at 7%. Every $10k yields $700/year. You need $10k of course but that's why money makes you more money.

3. Credit card points bonus on Citi Premier 50,000 pts equivalent to about $625 in travel dollars. I regularly take advantage of credit card sign up bonuses so this is a pretty regular occurrence. I think I average around $1000-2000 a year on sign ups without trying too hard.

4. Comparison shopping and shopping using cash back credit cards. Assuming you spend $20k/year on everything. 5% cash back of $20k is about $1000. 20-40% discount could be obtained if you shop smart and could amount to $4-8k in shopping smart. This of course means that everything you buy is a pretty awesome bargain. For me, a lot of times I only buy stuff at an awesome bargain. No, you don't go out and buy stuff you don't need, I'm buying stuff I normally use at those discounts. Sometimes I am even able to get things for 100% discount. No, I'm not stealing! I stack my gift card bonus I earn from store cards while also using the store sales.

All these may seem like chump change but it adds up pretty quickly when you go in increments of $500. With proper application of being frugal and earning residual income, you can almost cancel out your living costs!

 The exact details of how I get stuff for free, I'm going to save for a later post. It's a doozy.