How to think about your side hustle income

Originally published at Millennial Money Guide:

It’s no secret that millennials are a generation of hustlers. Many of us have, or are looking to develop, side hustles to supplement the income from our main jobs. But how should you categorize your side hustle income? Make sure every dollar has a purpose with these 4 strategies.

1. Don’t double count your earnings

I recall my first non-wage side hustle income. It was the simplest introduction possible: I started selling my old stuff on eBay. My primary motivation wasn’t even the income, but rather the decluttering that selling my stuff would facilitate. I was looking to ditch dead weight, and focussing on physical clutter seemed like one way to begin. But, when the sales actually began hitting my PayPal account, I began thinking of all the things that new income stream could offset. And I do mean all the things. I was full of excitement about how that $75 I earned selling a handbag could cover my groceries for a week! And half a plane ticket to Vegas! And a nice restaurant meal out! I needed to slow down and realise it might offset one of those areas of spending, but not all. And that it ultimately represented a net loss anyways, given the handbag probably cost over $200 new.

Once your side hustle income starts flowing, check that you’re not allocating it to more than one area. Give each dollar a singular purpose, be it covering day to day spending, bulking up your emergency fund, or investing.

2. Don’t spend it before you earn it

Closely correlated to the above, be mindful about adjusting your spending upward, especially before your side hustle income really starts materializing. My preferred way of looking at it is, earning side hustle income is not a good reason to spend recklessly, or in a way you wouldn’t have done otherwise.

An example of this is income earned from Airbnb, particularly if it’s only when you travel. I list my apartment on Airbnb when I travel, but I only do so for trips I would’ve taken (and would’ve been able to afford) anyways. If I started taking trips just for the purpose of earning more Airbnb cash, I’d want to be very mindful of the overall cost of that travel, relative to the potential income generated. The same could be said of buying items to flip, which is a really interesting area to look into. Just be conscious that the inventory you bought doesn’t represent actual cash until you’ve successfully flipped it. And it should go without saying, but please don’t go into debt chasing side hustle income.

3. Budget for taxes

Depending on the character of your side hustle income, you may need to report it as self-employment income. One way or another, in most cases it will ultimately end up on your tax return. One exception would be when you have a loss on the sale of personal-use property, such as your car, home furnishings, or clothing (i.e. that $200 handbag I sold for $75), which is not reportable, as it’s not a deductible loss. In general, any source that has paid you more than $600 is required to issue you a 1099, which is reported to the IRS, and is then your responsibility to report on your tax return. For a broad overview, the Turbotax blog provides a summary of what to think about. You should consult a tax professional for the specifics on this as related to your personal circumstances.

4. Enjoy the process while you develop your hustle muscle

I’ve found delving into different side hustles to be a really fun process. Even just those first few eBay sales started building up my entrepreneurial drive. My side hustle muscle, if you will. It’s remarkable how different it feels earning your first independent income, versus getting the same old paycheck you’re used to. I’ve found, and have noticed in others, that it tends to spark the desire to do more, to seek out new opportunities, to optimize other areas of life. As millennials, we’ve tapped into the power of developing multiple income streams, and we certainly love the freedom and flexibility that allows. Keeping a few key concepts in mind as we do this will serve us well as those income streams grow and change over time. Whether your goal is to replace your day job income, pad your savings, or fund your next adventure, thinking more like an entrepreneur is going to get you there faster.

The Secret Superpower of a (Relatively*) Low Salary

When I accepted the job that allowed me to move to Ireland, I was acutely aware I was taking a pay cut. Cue the shock and disbelief! How could someone who prides herself on being financially responsible, on the path to financial independence, voluntarily accept less money?

One of the common threads I note in the financial independence community is that, for basically all of us, money is far from the most important thing in our lives. Instead, we simply agree that mastery of money is one of the best ways to give those things that are the most important to us the time and attention they deserve.

Thus, when I was offered the opportunity to have another expat experience, which has always been one of my goals, I took it, and decided not to worry (at least not too much) about the lost savings potential. Life’s too short, #YOLO, and all that. It was one of the best decisions I’ve ever made, and here’s why:

The Secret Superpower of a Low Salary

  1. Keeping expenses low is a superpower

If you can live within your means on a low salary, it means you can budget, find the best deals, and eliminate the unnecessary. That makes you a badass who can demonstrate immigrant hustle when called upon. This is a good muscle to develop no matter your income, but it really shines in situations where income is limited, or taxes/cost of living is higher than what you might be used to. You’re proving to yourself that you can survive, thrive, and be happy, while spending very little. This is a necessary precondition for the next step.

  1. Determination to save, no mater what, is a superpower

I consider saving money a non-negotiable. When you are living far from home, it’s especially important to not be spending every cent you earn and thus have a cushion to fall back on. It’s just a good practice that will serve people at any income and with any lifestyle goals. But when you can take a relatively modest take-home salary and decide how much of it absolutely must be saved, no matter what, you’ve just levelled up your superpowers and are ready for the next, most crucial phase of this process.

  1. Low salaries aren’t that difficult to walk away from (or replace)

And here’s the kicker, the biggest secret superpower of a low salary: no golden handcuffs here! You’ve proven to yourself that you can be happy, and save, on a fairly modest amount. Now you can start doing the math, and figure out exactly how much you’d need to replicate that lifestyle. Playing around with the numbers in lower cost of living areas is particularly fun, for example. But the important thing is now you know the income amount on which you can continue your totally satisfactory and financially responsible lifestyle without changing a thing. And you may find that it’s not that daunting to try and replace it.

If you’ve mastered these superpowers, the real secret is you’re already free. You can take the leap into self employment, entrepreneurship, alternative income streams, or side hustle work. You can happily walk away from the salaried job, with its stress and demands on your time.

Being debt free is the foundation that makes it all possible

It’s really much easier than perhaps many people think to keep expenses low, but I feel the need to caveat that it’s made possible by having no monthly non-negotiable expenses. Yeah, none. Most notably, no debt payments. Everything else can be optimised and adjusted, everything else is just a fun variable to plug into our calculators (what does it look like if I spend €50 less on food? What about €100 less on housing?). Debt sucks, I’m extremely grateful I don’t have any, and I’m vigilant about guarding against acquiring any debt in future. Being debt free, combined with being even a little flexible or creative in your other must-haves opens up the entire world to you. Quite literally, as I’m about to find out.

*One important note. I’m being a bit flippant about the comparatively lower salaries on offer in Ireland vis-a-vis the US, combined with high cost of living and high taxes. I’m very, very aware that my salary here is above the local average and is certainly enough to live comfortably while making very few real sacrifices. I’m very grateful for that and am conscious that being in a position to walk away from any salary is a huge privilege. But, with that being said, it is a privilege I think more people could get closer to, if they wanted, with just a few changes in mindset and habits.

Damn the man. Start investing.

When you hear the word “investing”, what comes to mind? Do you think about old, rich, white guys talking about mysterious (and possibly shady) things involving acronyms? Or does it start to sound like the grownups on Charlie Brown are droning on again? Hold that thought.

Now, what happens when you think about socially aware, even radical, ideas and causes? Does an image of the noble, penniless activist pop into your head? The idealistic dreamer who has far loftier things to think about than something as unpleasant as money?

Money occupies an uneasy place in our culture. The oft-cited cliché that money isn’t the most important thing is, of course, true. But it’s still a major factor in how our lives play out. It dictates, to a large extent, the amount of time we have to dedicate to the areas that truly are the most important things to each of us. Things like family, travel, community service, political activism, art, creativity, and personal development. All of these are best served when we have the bandwidth to focus on them, both financially and in terms of our most valuable resource: our time.

Money is something we all grapple with; it flows around us and weaves its way through our lives. And I’m going to make the case that one of the most radical, woke things you can do, dear reader, is more than just get your finances together. And no, it’s not only to get out of debt and start saving, which everyone (correctly) advises we all do. But instead, it’s to start investing, doggedly and with determination, both for your freedom and to advance the freedom of others. And in dedication of your loftiest ideals. Here’s why.

Breaking down mental barriers:

To many people, perhaps especially millennials, investing can seem not only out of reach, but somehow perhaps even incongruent with our values and beliefs. But the image we may have of being broke as some kind of noble condition is unnecessary and outdated. A more accurate picture would be to conceptualize that the forces that many of us oppose want us to stay broke, stay in debt, stay mindlessly consuming. And that our act of educating ourselves and taking control of our financial future is an act of rebellion against the status quo.

Getting rid of the taboos and breaking down our limiting beliefs about money is a necessary first step. Not talking about money doesn’t serve us. And buying into the false belief that investing is for the elite and the privileged, doesn’t make us any freer. Depending on the backgrounds we come from, we’re all carrying around different inherited and received ideas about money. And for those of us coming from less economically privileged backgrounds, the very idea of increasing our wealth can make us feel like class traitors. We need to validate and acknowledge that feeling as normal, and then systematically dismantle it.

Self-education:

Historically, one of the biggest barriers to financial literacy would have been access to information. But we no longer need to belong to a wealthy family in order to learn about investing, nor do we need an expensive financial advisor to get us started. There’s more and better information online, and a plethora of low-cost options out there. The barriers to entry have become all but nonexistent, with the exception of our own (totally normal and understandable) fear of getting started.

I’m not a financial advisor, but low-cost index funds seem like a reasonable place to start, for example. We should all do our due diligence and read about why they’re a good option, and then actually take the steps to open the account and contribute to it. Once you do, you’ll be doing the same thing Warren Buffett has instructed be done with his own estate. What could be more democratic than your money sitting there alongside the money of one of the richest men in the world?

If you are living within your means and building up a surplus, you’ll eventually need to put it somewhere. Interest rates on savings accounts are essentially zero, and that’s no way to build real, life-changing wealth. To do that we need to invest, and whether that takes the form of simple index investing, real estate, or otherwise, we need to do more with our money to allow it the chance to really grow. Investing is for everyone. You deserve to benefit from economic growth as much as anyone else. Don’t shortchange yourself.

The benefits of financial freedom:

Once we’ve tackled our limiting beliefs, and taken the steps to educate ourselves and take action, how is investing going to impact us in a way that really matters? We all care about more than the bottom line, or on numbers on a spreadsheet. I think there are three ways that increased financial freedom benefits us as individuals, in ways that we can align with our values and beliefs.

Firstly, when we choose to save and invest our money, we are necessarily making a choice that involves less reliance on consumer culture. Every dollar we earn has potential and possibilities. It could be spent on consumer goods, and with that the attending questionable labour practices, environmental waste, and dodgy ad campaigns we may not subscribe to. Or it could be invested in our future wellbeing, and that of our loved ones and communities.

Secondly, increased financial freedom means less reliance on jobs that may not align with our beliefs, or at the very least take our time away from the things we truly value. If we’re going to be trading our time for money, as the vast majority of us do, we should demand a better return on investment. If we don’t invest a portion of our earnings, we’re not getting any closer to free with each passing year. No matter how much you may like your job, think about what an impact buying an extra year of your freedom could have.

Finally, when we are financially secure, we have increased ability to make a positive impact on our communities and spheres of influence. Similar to putting on your own air-mask first on a plane, the idea is to get ourselves right so we can more effectively help others. That doesn’t mean we should stop thinking about, talking about, and organising around the systemic issues contributing to inequality and injustice. Far from it. But as individuals, taking concrete, deliberate action towards our own financial freedom is powerful. Think about the positive impact it can have on generations when the first person in a family goes to college. I think the same can be true of opening the first investment account.

The knowledge and ability to invest no longer needs to be shrouded in mystery, or the province of elites. It can and should be for everyone, and is a powerful way to better serve our communities and our goals. We now have unprecedented access to information that allows us to democratize and de-mystify investing, to normalize it so it’s no longer solely the inherited, protected knowledge of the wealthy and privileged. So if you’re progressive and pissed off, take the radical, counter-cultural step towards freedom. Damn the man, start investing.

Taking the leap into self employment: 5 things I won’t miss about my 9-5

One of my goals is to transition away from my current 9-5, salaried employment into freelancing and self-employment.

It’s something I’ve wanted to do for a long time, but had been stuck in the feeling of uncertainty. Much of that fear is understandable, such as wanting to ensure a steady income, and concerns about taxes, retirement savings, and health insurance. And, last but certainly not least, being an immigrant as I currently am: where in the world I’d be doing all this if (when) I’m no longer on an employer-sponsored work visa.

I can’t say that I’ve got all of those areas 100% figured out and optimised to my liking, but I’m working on it, and will write more about each area as I go. What I can say, however, is that when I allowed my focus to shift from what I’d be losing, to what I’d be gaining, I started to get really excited, instead of just scared. And for most of us, the amazing side benefit that comes with being excited about moving towards something, is that it inspires action. Fear breeds inaction, and it shuts down our minds to possibility and growth.

To laugh in the face of fear, here are 5 things I won’t miss about traditional, salaried employment:

 

  1. Asking for permission: This is far and away my number one reason for becoming a freelancer. I can no longer tolerate having to ask permission to go visit my family, or having a limited quota of days in which to fit travel to see family as well as travel to the rest of the world. There simply isn’t enough time, people!

  2. Silly rules: It’s the seemingly small things, so small they almost seem petty to complain about. And yet. For example, my current office doesn’t allow use of headphones at work. “Even if music really, really, honestly helps me focus and makes me more efficient on tough tasks?” I asked naively. Even then. I hate to say it, but failure to adapt to the needs of individuals is going to cause big companies to lose out on talent, especially in the millennial generation and those coming after us. The same is true of picky dress codes, and companies being unnecessarily inflexible on working hours and working locations. As it is, I look forward to optimising my efficiency by listening to music when I need to, once I’m working for myself.

  3. Interruptions: Now, I know interruptions will still happen once I’m working for myself. And I’ll have to be vigilant about my own productivity. But something I won’t miss is being in the middle of something requiring deep focus, and being interrupted by something less important, that will cause me to have to essentially start over. I’m really looking forward to seeing what I can accomplish when I can focus on and prioritise the work that truly adds value.

  4. Unhealthy habits: Health is one of the things I value and prioritise above most things. And I’m aware that it can sound ungrateful and tone-deaf to complain about the modern office environment, as compared to working conditions in much of the world and in most of human history. However, the fact remains that many offices today are not designed with health in mind. There’s too much sitting, and too much easy access to unhealthy convenience foods. I’ve gotten into a good habit of making my own lunches, but the hours of sitting are something I haven’t been able to successfully optimise my way out of in my current environment. When I am working for myself, I look forward to setting up a standing work area, or seeking one out if I’m working outside my home base.

  5. Limited income: When you’re on a salary, your level of work doesn’t really directly correlate to your income. Salaries are typically reviewed once a year, and individual employees might have relatively little say in their pay rises. In the face of that, many smart career ladder-climbers will of course job-hop. That’s never really appealed to me for some reason, even though I completely understand the benefits. But for now, after years of feeling like I had relatively little control over my income, I’m really excited about the fact that working more hours will equal more income. It all comes back to having a greater measure of freedom and control.

    Challenges and opportunities

I think in the near future, going freelance will be easier and smoother. I’m hopeful that the powers that be, on a global scale, will recognise that the gig economy is real, and will shift away from designing systems, from taxes to immigration to (most notably for Americans!) health insurance, solely with traditional employees in mind. The more of us that are out here, just doing it, will eventually have to shift the conversation.

Recently, a great piece on Levels.io made the all-too timely call for digital nomad work permits. Early retirement bloggers like Our Next Life write about the health care challenges for early retirees living in the US, and the exact same concerns are true for freelancers. Anecdotally, I have American friends who have specifically decided not to go into freelancing/self employment because of the difficulty and cost of finding non-employer provided health insurance. For now, the world simply isn’t set up for the solo-preneurs out there, and it certainly isn’t set up for digital nomads.

This is all to acknowledge that the challenges and uncertainties we face when choosing a path less travelled are real. But ultimately I’m optimistic about the possibilities and the freedom that will come with being self-employed. And I’m ready to take the leap of faith that I’ll be able to meet the challenges that come with it.

…and taxes

Given that taxes are one half of the oft-cited only two certainties in life, you might expect my humble profession to have a more glamorous, or at least dramatic, reputation. And yet, despite having a profound influence on every aspect of our financial lives, some people (inexplicably!) find the topic less than scintillating. Shocking, I know.

I found myself in this field somewhat by accident, but after nearly a decade working with expats and taxes, I can tell you it’s far from dull. Especially working with individuals, and never more so than in the context of international moves. Helping people sort their taxes out can be incredibly gratifying at the best of times, when I ideally help set someone’s mind at ease, or provide insight into complex areas that can be rife with misinformation. Then there are the other times, when someone perhaps wishes they’d thought about taxes a bit sooner. Those conversations can be a tad more dramatic, albeit not the kind any of us hopes for.

But at the end of the day, dealing with tax means dealing with people and their lives, in all their beautiful, messy complexity. The intermingling of their pasts and their futures. 

International moves can be overwhelming. And for busy professionals, often their taxes could be one of the last things they want to devote their valuable time to thinking about. So I always count it a personal, as well as professional, win when someone tells me how glad they were they spoke with me, even at that most hectic time in their life. And even in those, shall we say, ‘dramatic’ times, it’s always better to get a plan in place sooner rather than later.

When I say I found myself here by accident, I will admit I didn’t set out to be a tax professional when I grew up. I sometimes joke that it doesn’t tend to be what little girls dream of. (For the record, I believe my top professional aspiration at age 8 would’ve been “princess.” Still waiting on that one…)

When I signed up for the on-campus interview through my university, I was drawn in by the “international” aspect of the job description. I later found out that the job entailed diving deep into this very specialised area of US tax that many people never think about. But it has expanded my own global mindset in every way possible, and now I count myself truly fortunate to be able to work in a profession that so closely aligns with my values.

I deeply believe that global mobility is an incredibly powerful tool for personal and professional growth and fulfilment. I also deeply believe that the freer people are to move around the planet, the better our world becomes. In that sense, I consider it an honour to play a part in facilitating that freedom, one person at a time.

The other side of the equation is helping people sort out a major area of their finances. To the extent that I can help people feel more empowered, and less in the dark, about the financial impact of their relocation, to me that’s absolutely worthwhile, values-driven work. To take something that can feel overwhelming and undecipherable, and make it relatable and actionable to individuals, given their own individual facts and circumstances, is really rewarding.

So, despite a somewhat mild-mannered reputation, I see my work as furthering two of the things I value the most: empowering individuals in both location freedom and financial freedom.

I try to keep that in mind even when I delve into the denser or nerdier aspects of expat tax, which I may even do on this blog. And if it inspires or reassures anyone to take the leap into the expat or globally mobile lifestyle, it will be well worth it!

Do you have any areas of confusion on expat tax issues?

Particularly from a US perspective, either people moving to the US, or US people moving abroad? I’d love to hear from you and plan some posts to help bring some clarity to any areas of confusion! There are absolutely no silly questions in this complex area, and remember, smart people ask.

The Perks of Being an Outlier

I’ve recently started using Twitter. Re-started, rather. I was an early adopter but eventually found it a strange combination of information overload and dull, and gave it up. What I’ve come to realise is I just hadn’t found my tribe. I’ve partially done that now, by following a bunch of really smart, inspiring people in the financial independence community, as well as the expat community. It’s become one of the top sources of new content for me. I love reading content by, and interacting with, people who are so immersed in the subjects I care about.

On the financial independence side, one of the things I value is the diversity of the stories there, how people are all taking their own unique paths in pursuit of their goals, and how many of us share a common goal of greater freedom over our lives and our time. One recent post that spoke to that was this guest post on Millennial Money Man’s excellent blog.

I was delighted to read it, as it echoes many of my own thoughts on the subject of financial independence. It was so gratifying. Here was someone else who valued freedom as highly as I do, and was taking steps to get there! I wasn’t the only one!

Before I started following blogs like that, I didn’t know there was this big, supportive community of weirdos like me. What I did know was that the unspoken rule in our culture is: you don’t talk about money.  And I picked up on the fact that, understandably, many people wouldn’t want to talk about early retirement when they could be uncertain whether they’ll ever be able to retire at all, full stop. And so I added financial independence to the list of things that I was interested in, that most people just wouldn’t relate to. I was used to having such a list, was used to being a bit of an outlier.

I suspect that most of us in the FIRE community learn to pick our audience carefully, around the sensitive topic of personal finance. Probably there are other aspects of our lives that we selectively share, not out of secrecy but more out of a desire not to bore (or worse, alienate) people with our sometimes nerdy pursuits. I suppose I’ve always been an outlier of sorts, even though I try to “pass” for normal in polite society… with varying degrees of success ;). But I think there are some perks to being an outlier, even if you sometimes feel as though you live a double life of sorts.

There are a few different, but overlapping and, I think, complementary, aspects to being an outlier that work in our favour.

Here are some things that make us weird, in a good way, and how I think that ultimately gets us closer to our goals, financial or otherwise.

 

Immigrant mindset – Put yourself in a place where you are the different one

One thing that will definitely make you aware of being different is being a foreigner. You’re weird by definition, and it’s so freeing. It’s a great, eye-opening experience that I have come to love. I recently watched a great TEDx talk by Tayo Rockson, who is a seriously inspiring thinker on the subject of global mindset (he also runs one of my favourite podcasts). His talk included the above line which really resonated with me. It’s what we as immigrants, expats, and digital nomads do regularly, and it’s so beneficial. We’re in places where we’re the different ones, in one way or another.

Having an immigrant mindset changes the way you look at the world and you ultimately become culturally bilingual, which is a huge asset. If you can understand not just the culture you grew up in, but another one as well, you’re at a massive advantage. That’s two (or more) sets of wisdom and “common sense” for you to draw from (and question, as we’ll see below). Part of what’s so powerful about this is you learn that conventional wisdom isn’t universal, and that there are diverse ways of knowing and being.

You also learn to code-switch, much in the same way those of us in the FIRE community learn how and when to talk about our goals for financial independence. There’s no better, faster, or harsher, lesson in the importance of picking your audience. Immigrants get this. Immigrants also hustle hard.

 

Self-experimentation – The Tim Ferriss Effect

It seems like there’s a significant overlap between the FIRE community and what I’ve come to think of as the “Tim Ferriss Effect.” I think Tim brought a lot of new ideas into the collective consciousness in a way that hadn’t been done before, or at least not as effectively. For those of us who had always been prone to being outliers, reading his work lit a spark and made us aware that self-experimentation, and thinking differently, wasn’t something to be ashamed of, but celebrated. And that it could be beneficial, even profitable. As I continue to learn from others in this space, I see his name pop up over and over as an early inspiration for a lot of people. I’d count myself in that group, in my own small way.

Looking back, it was kettlebells that proved to be my gateway drug. See, I’d believed the gospel of women’s magazines that long hours of steady-state cardio was the One True Path to the body I wanted, and yet strangely enough, all that time on the treadmill wasn’t getting me the results I sought. I genuinely hadn’t considered that there might be a better way, until I read Tim’s book, the 4 Hour Body.

Then, when I began to see results from trying something different, from doing a little independent research, from going against the conventional wisdom, it’s like it gave me permission to start questioning everything. I started reading up on lifestyle design, and while it took a few years for me to really action any of what I was reading so voraciously, that first step of shifting my mindset was crucial. The mindset shift that acknowledges it’s ok to do something different, even if it’s different from what the “experts” recommend.

If we can challenge the conventional wisdom of the literal treadmill, we can challenge the conventional wisdom of the figurative treadmill of high-spending/low-savings/40 year working life. We can challenge the idea that the place you were born is the place you should stay. We can demand something more, something better, something different.

 

Question everythingNot following the herd

Once you feel you have “permission” to question everything, and a good many badass people don’t require even that, you have the keys to the kingdom. From self-experimentation, the natural progression is self-education. We learn we don’t need to rely on authorities, we learn that conventional wisdom is often plain wrong. And we learn how to find the information we need. Or if it’s not out there, to create it ourselves.

The blogging community does this so incredibly well. There’s detailed information available now that simply didn’t exist a few years ago. One great example is the now-classic and oft-cited FIRE tax strategy known as the Roth Conversion Ladder. Thanks to outliers like the MadFIentist, it’s now out there for anyone to discover.

The way I see it, the future belongs to the outliers, to those who embrace being the different one, who get out in front of the herd. And I think we can all do this, not just in the realms of personal finance or global mobility, but in whatever areas we’re passionate about. And by doing so, we not only reach our goals faster, we bring others along on the journey.

Something something The Dow!!!

I’m embarrassed to say that I only recently learned what the Dow Jones Industrial Average actually is.  A few weeks ago, on a podcast (Jim Collins on ChooseFI, eagerly anticipating the next conversation in that series, by the way!) it was finally explained in simple, plain language. And, like so many other Sphinx-like mysteries, once it was demystified, I couldn’t believe I’d once found it so utterly unknowable.

On a recent long-haul flight, availing myself of the expanse of hours and selection of films (cheers, Virgin Atlantic), and on the recommendation of my boyfriend, I started watching the movie Arrival. It wouldn’t have been something that would’ve jumped out at me, but his recommendations are generally sound, so I gave it a go. Early on in the film, in a completely throwaway line, a TV news announcer mentions something like: “the Dow Jones Industrial Average fell 2000 points.” Nothing noteworthy, but I heard it in a new light after listening to that podcast. We all know what the screenwriter wanted to convey was: the stock market is taking a nosedive! And the generally accepted standard fill-in-the-blank words to use are “something something the Dow!!!”

I started thinking about the whole chain of people who, in all likelihood, hadn’t the slightest clue what “the Dow” is, much less why anyone should care. The screenwriter, the actor delivering the line, the majority of the audience. And I remembered hearing that term as a kid, and getting this weird sense that it was something, along with a lot of other financial stuff, that the grownups didn’t know about any more than I did. Like everyone was kind of fudging their way along. Kids can smell bullshit a mile away, and that was definitely some bullshit.

Something something, ouroboros

But somewhere along the way, we stop feeling comfortable asking questions, I guess. Which is a pretty lame excuse for how I went 32 years, including nearly 10 years in a finance-adjacent profession, without ever really knowing what the Dow was, exactly. I know from experience that even other smart people have similar shrouds of mystery over things like how various tax advantaged retirement schemes work, what even are dividends, and what to do with their W-4’s (US-specific, so don’t panic, non-US friends). And the reason that some of these topics seem so mysterious is that even the people who are supposed to understand them, don’t. Not really, anyways. Not such that they could explain it to aliens (sorry, I’ve just seen Arrival).

This is just one more small way that people are disenfranchised when it comes to their money. We’re made to feel as if we’re the only ones thick enough not to know what the newscaster is on about when he’s talking about “the Dow” like it was his best friend. If you asked him what it was, he mightn’t be able to tell you. But he probably feels too intimidated to ask, too.

It’s incredibly off-putting, and it’s why a lot of people just steer clear of the whole area. For me, I’ve only ever been content with my level of understanding of something if I feel comfortable explaining it to someone else. Years of providing US tax consultations to a population of highly analytical newcomers to the US will entrench that belief. You’d want to be really clear on your pre-tax vs. your after-tax vs. your Roth 401k’s, for example. Because the guys I was giving these consultations to would grill you on it, and have you explain it 5 different ways, with examples. They were taking full advantage of a little-known, and rarely exploited privilege afforded to anyone who’s new to a topic and not afraid to ask questions until they’re satisfied they get it. I learned to respect and emulate this approach as yet more #immigranthustle magic.

And that’s how we should all approach this stuff. Ask loads of questions, and don’t rely on advice from anyone who can’t explain something in clear, simple language. And never feel stupid for asking. Smart people ask.

A leafy path... to freedom

Financial independence as a radical act

I am continually inspired and impressed by the quality of the content that is produced by the personal finance bloggers and podcasts I follow. It’s especially cool seeing so many women in this space, as historically the world of finance and investing hasn’t been particularly female-friendly. That’s changing now, because badass women are making that change. No one invited us to the party, but we’re showing up anyways, and we’re bringing our friends.

Thankfully, we live in the age of almost unlimited access to information, and therefore to self-education. We can decide we’re going to become financially literate, regardless of where we come from or how “the industry” or the education system or anyone else may perceive us. To me, that’s incredibly empowering. I love that no one can close those doors on us. The information is available, and where it used to suck, and be unnecessarily (and perhaps even intentionally) confusing and exclusionary, we’re out there making it increasingly accessible for anyone who wants it. I aspirationally include myself in that “we,” but really it’s rockstars like Frugalwoods and Broke Millennial, as evidenced by this recent post, regarding Broke Millennial’s new book (which looks awesome). 

Empowerment over despair

I found the above post incredibly inspiring, and it also happened to be a stark contrast to something else I came across this week. I stumbled upon a podcast that sounded like it would be a fun, fresh take on personal finance. The tone of it, unfortunately, was one of repeated despair and helplessness. As though the fact that we exist in an imperfect, unequal system is a valid reason to give up and stop trying. That’s crazy! The fact that the system sucks, and that it extra-sucks for women, people of colour, marginalised communities, etc, makes it extra important for us to arm ourselves with knowledge, and resist by lifting each other up instead of reinforcing the status quo.

I’m aware that I exist in a space filled with all kinds of privilege, but it just so happens that I do not come from a wealthy background at all. No one taught me about how to manage money (and in particular, no one teaches you how to handle money in a new country! I’m working on that…), and for a long time I was too intimidated to try to learn how for myself. But now that I do have a modicum of knowledge, I echo Mrs. Frugalwoods’ sentiment that we as women need to declare our financial independence. We owe it to ourselves, and we owe it to others still stuck in despair.

I feel that as women, we especially benefit from having our “fuck-you” money sorted. This can take many forms. It doesn’t have to amount to full financial independence (but it will be oh so sweet when it does), to be incredibly impactful on our lives.

When one of my beloved younger sisters was planning a big, bold move last year, that was my one bit of serious older-sister advice to her, and it’s my advice to all women:

Make sure you have your fuck-you money ready.

At a base level, to me that means money that allows you to say goodbye to any immediate situation that you’re uncomfortable with. From there, you can build on that. But having that baseline of self-sufficiency is powerful. We women need that irrespective of our marital or relationship status, age, orientation, geographic location, employment status or lack thereof. And we shouldn’t compromise it for anyone.

No matter where you’re at, commit to do better, and to lift others up along your way. Here are some things you can action, now, today, to get freer. Make it an act of joyful rebellion. (Points if you were like, was that a reference to a great mid-00’s hip hop album from Canadian artist K-os? Because yes.)

  1. Beginner: Get your baseline fuck-you money together, be it only a few hundred dollars/euros to start. You do that by reducing unnecessary spending and treating that money as sacred. It will grow, but you have to start!
  2.  Intermediate: Amp up your savings rate. If you’re currently saving 10%, that’s something. But what would it take to save 20%? 30%? Look at your spending line by line, and say a big, happy “fuck-you” to the forces that work to keep us down with every additional percentage point you take back.
  3. Advanced: Work on your side hustle and/or spread the knowledge. One of the ways the system works against us is by keeping us silent, under the taboo that you don’t talk about money. So get after it, and talk about it. Share something on your social media. And keep hustling. As passionate as many of us millennials are about injustice, we are also steady on our side hustles. I see these two as working perfectly in sync. Get free and help others get free.

Just because the gender, racial, or generational deck may be stacked against us, doesn’t mean we need to admit defeat. As for me, I unsubscribed to the whiny podcast of woe, and will continue to follow those who provide a more uplifting example. And hope to pay it forward myself in some small way.

Little expat wins: my €0.02 on car ownership

 

I recently listened to a great podcast by the amazingly informative and thorough lads over at www.ChooseFI.com. I’ve enjoyed all their podcasts so far, but the topic of their most recent episode was interesting to me mainly because it didn’t apply to me at all. Let me explain.

The True Cost of Car Ownership

Jonathan and Brad do a terrific job of breaking down the cost of car ownership, and their comprehensive and satisfyingly math-y approach will serve as a really useful resource for a lot of people. They come at the issue from the entirely reasonable assumption that most Americans can’t or won’t give up car ownership altogether. That cars are an expensive, necessary evil. And for the most part, they’re right. But it made me appreciate how my particular life journey has allowed me to bypass car ownership altogether. And it made me wonder how much that choice has saved me over the years.

I have lived without a car for most of my adult life. I couldn’t afford one in high school or university, and then didn’t want the hassle of paying for parking when I lived in a city. I grew up in a remote, rural area and spent many, many boring hours in cars as a child. I think that experience influenced my decision to live car-free once I had the choice to do so.

I haven’t always been naturally inclined towards what might be called Mustachian lifestyle choices, but one thing that’s always been a priority for me has been living close to where I work. That made me something of an outlier in the US (even in dense, walkable Seattle most people I knew had cars), but I was perfectly content with that. When I was ready to leave Seattle and pondering my next move, one of my top criteria was that my next city had to be walkable or otherwise conducive to a car-free lifestyle. I first cast a glance around the US and didn’t find many places that seemed to fit the bill.

Rather than take it as a given that owning a particular item, or even living in a particular country, was non-negotiable, I decided to think outside those perceived constraints:

 What would happen if I resolved to find a location that suited my preferred lifestyle, instead of adjusting my lifestyle to fit into a particular location?

Most cities in Europe are extremely supportive of a car-free lifestyle, and since moving to Dublin, I haven’t given any thought to getting a car here. I walk everywhere 95% of the time, and take public transit otherwise (and that’s mostly just to and from the airport!). It’s such a natural fit for me that, until I listened to the excellent podcast from the ChooseFI gents, I had genuinely forgotten that so many people consider a car an essential possession.

It occurred to me that it’s a good example of how thinking just a little differently can align with FI principles in so many ways. In my case, being willing to eschew car ownership supports not only a form of minimalism, but also health, geo-arbitrage, participating in the sharing economy, concern for the environment, and just generally living in a way that supports my values. The fact that it’s saved me many thousands of dollars(/euros) over the years is really just icing on the cake. I’d choose to live this way regardless of the cost.

But, just for fun, let’s break down the theoretical savings, using the ChooseFI guys’ methodology:

Based on their assumption that the true annual cost of owning a 10 year old fuel efficient vehicle was $2,605, and using their example of compounding annually (calculator is from MoneyChimp) at an average return of 8% over 20 years, my decision will have made me more than $140,000 richer than if I’d owned even the most efficient and least silly car possible.

And if I’d somehow undergone a personality transplant and bought a brand new SUV, I’d be $420,000 poorer than I’m going to be.

There aren’t always clear wins when it comes to expat life and finances, but this seems like one of them. When we are willing to look outside the bounds of both conventional wisdom and geography, we can find ways to live that align with our goals, values, and beliefs. For me personally, I don’t foresee a time when I will want to live in a place where I’d need a car. Fortunately, there are so many exciting places around the world that aren’t car-dependent that I’m confident I’ll be able to find locations and ways to live that work for me.

Ultimately, that’s the goal of becoming location independent with intention, no matter one’s personal transportation or other lifestyle preferences. As millennials in particular, we don’t want to be tied down by rules we didn’t choose, or values we don’t subscribe to. And I see the amazing and inspiring diversity of the FI community, the minimalism movement, and the location independent/expat community as being a sumptuous array of experiments in lifestyle design. The more that we all think critically about our choices, and think for ourselves, the richer (in every sense of the word) all of our lives will be.

freedom is a cheap ryanair flight

Location independent vs. financially independent

I have two internet obsessions. One is the roaming, globe-trotting nomads of Instagram (some of my favourites are Divergent Travelers,  How Far From Home, Goats on the Road). I love gawking at their adventures and planning more of my own. Being free to explore the world has always been one of my main goals and passions. And I’ve never been satisfied with the idea of doing so in traditional “vacations”, the frequency and length of which being limited by virtue of being an employee. This yearning for freedom by way of being location independent seems fairly common amongst my fellow millennials.

However, my second obsession is far nerdier and perhaps less glamorous, at least on its face. It’s the world not of the location independent, but of the financially independent. A small (but growing), weird and wonderful corner of the internet where acronyms like FIRE (Financially Independent, Retire Early, of course) need no explanation, and heated discussions about savings rates and the 4% rule and low cost index funds abound. These amazing and dedicated individuals save early and save often, so they can be free to leave full-time employment and live life on their own terms. The “retire early” part of FIRE is something of a misnomer, as most people I follow stay very active and in many cases even in income-generating activities. The key is they’re free to do so, or not, as and when they like. And perhaps most importantly of all, they’re free to spend their most valuable resource, namely their time, as they see fit.

I find inspiration from both camps, but not always as much overlap. It makes sense. The people that are dedicated to achieving financial independence aren’t spending all their money gallivanting around the world. They’re steady on the grind, paying off their mortgages and accumulating wealth in their various countries’ tax-deferred savings vehicles. And the people who are most mobile might struggle to find consistent ways to save. But it’s left me wondering if there isn’t a third way.

I got clued into the financial independence concept later than I might have liked. In 2015 I first got hooked on minimalism and downsizing my personal possessions. From there, one thing lead to another, I devoured Mr. Money Mustache’s entire oeuvre, and decided to see where I might land if I were just a little bit more badass.

I was a good few years into my career so it was long past time. I was also living in the US where a lot of the relevant literature is from and tailored to. So it was easy to follow the formula others had laid out. Max 401k, max IRA, throw the rest into Vanguard index funds, rinse, repeat. And I had that routine pretty well down. Salaries are decent in much of the US, including Seattle, and living even moderately sensibly (I could hardly call myself frugal!) allowed for all of this to happen pretty painlessly.

There was one problem. I wasn’t happy living in the US and I had known for a long time that I wanted out. But could I walk away from a path that seemed to be all but guaranteed to lead to financial independence in a reasonable time frame? Fear of the unknown could’ve kept me stagnant, but I chose something different. Ultimately, money wasn’t and isn’t the most important thing, and I chose a new adventure here in Ireland instead, accepting the pay cut and higher taxes that came along with it. I knew I was taking a fork in the road to FI, but I did so with eyes open.

But now I’m living in Europe, travelling as much as I can on the weekends, and finally taking stock of how my two duelling obsessions might intersect. I don’t want to give up the freedom of movement, but I do want to feel like I’m moving towards my financial goals as well. I think it’s possible, even if it’s not easy.

I’m still exploring how best to optimise this particular fork in the road, and I’m open to the possibility of taking a few more unconventional turns along the way. A few things are working in my favour, that many others could avail of, if they chose to. As I see it, here are the secret (totally not secret) tips to buoy your financial confidence and embolden you to take your own adventurous fork in the road:

  1. Be debt free. Easier said than done? Perhaps. But if you’re not currently debt-free, make every effort you can to move in that direction. It gives me a lot of confidence to take (calculated, considered) risks, knowing that I have no fixed monthly debt payments to factor in. Essentially, if I can cover my monthly living expenses, and sock a little extra away, I won’t feel like I’ve moved backwards, at least. I can move around the world without any debt following me around, and it’s incredibly freeing.
  2. Keep your monthly expenses low. Again, it’s not rocket science. But when you know you can live comfortably on a relatively modest sum, you keep your options far more open. And when you’re more location independent, you can make choices to live in lower cost locations when you need or want to. But the first step towards making this work for you is being flexible. If you aren’t too picky about having the shiniest, fanciest stuff, and if you’re willing to do the harder, better things like walking instead of taking taxis, and cooking for yourself, you free yourself doubly. Firstly, and immediately, you stop wasting so much money right now. Secondly, and forever, you stop being dependent on paying other people to meet your basic needs. I have a lot more to say about this, but as a basic principle, it’s essential. It underpins the concept of being independent in every sense of the word, and makes you a better, more useful, more interesting person.
  3. Pay attention to taxes. People don’t like doing this, but they should suck it up and learn. If your money can keep growing tax-deferred while you are off taking a few adventurous detours, or if you can maintain a few longer-term tax strategies, like the oft-cited Roth IRA ladder, or carefully managing your tax residency status (more on this to come), you can make strides towards financial goals even in times of potentially reduced income. I’m still exploring the tax efficient options available in Europe, but as a tax person, it’s something that is always factored into my analysis, and I’d like to help others do the same. 
  4. Remember that money isn’t the most important thing. I love personal finance and financial independence bloggers, but if you read enough of them you risk tunnel vision. Don’t feel bad if you haven’t got it all figured out by a particular age or life milestone. Don’t measure your worth by your net worth. But do get educated and empowered, because making your money work for you is a great way to get to focus on the really important things.

I certainly don’t have it all figured out yet, and that’s OK. The more of us that are out there, exploring unique and unconventional paths, the better.