Official Warren Buffett / Berkshire Hathaway Book Reading List 2019

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At every annual shareholder meeting, Berkshire Hathaway publishes an official reading list and sells discounted copies through a local Omaha bookstore called The Bookworm. Both Warren Buffett and Charlie Munger have consistently attributed a significant part of their success to their constant reading:

“I insist on a lot of time being spent, almost every day, to just sit and think. That is very uncommon in American business. I read and think. So I do more reading and thinking, and make less impulse decisions than most people in business. I do it because I like this kind of life.” – Warren Buffett

“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time—none. Zero. You’d be amazed at how much Warren reads—and how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.” – Charlie Munger

Here is the 2019 annual meeting handout. Since they don’t archive these handouts and books are removed each year, I decided to track the changes here. I just bought a used copy of the Lowenstein biography of Warren Buffett and a copy of the Secret Millionaire’s Club (For Kids) from Amazon and the 50th anniversary book direct from Berkshire.

New additions for 2019

The Moment of Lift: How Empowering Women Changes the World by Melinda Gates. From the Amazon page: For the last twenty years, Melinda Gates has been on a mission to find solutions for people with the most urgent needs, wherever they live. Throughout this journey, one thing has become increasingly clear to her: If you want to lift a society up, you need to stop keeping women down. In this moving and compelling book, Melinda shares lessons she’s learned from the inspiring people she’s met during her work and travels around the world. As she writes in the introduction, “That is why I had to write this book?to share the stories of people who have given focus and urgency to my life. I want all of us to see ways we can lift women up where we live.”

Letters to Doris – One Woman’s Quest to Help Those with Nowhere Else to Turn. From the Amazon page: The Letters Foundation is a foundation of last resort that provides humanitarian grants to people experiencing a crisis when no other options exist. These one-time grants provide a hand-up to individuals as they work to stabilize their lives. Established by siblings Warren and Doris Buffett, the Letters Foundation reads and replies to letters from individuals living within the United States.

The Future Is Asian: Commerce, Conflict, and Culture in the 21st Century by Parag Khanna. (Charlie’s Pick) From the Amazon page: There is no more important region of the world for us to better understand than Asia – and thus we cannot afford to keep getting Asia so wrong. Asia’s complexity has led to common misdiagnoses: Western thinking on Asia conflates the entire region with China, predicts imminent World War III around every corner, and regularly forecasts debt-driven collapse for the region’s major economies. But in reality, the region is experiencing a confident new wave of growth led by younger societies from India to the Philippines, nationalist leaders have put aside territorial disputes in favor of integration, and today’s infrastructure investments are the platform for the next generation of digital innovation.

Saudi America: The Truth about Fracking and How It’s Changing the World by Bethany McLean. (Charlie’s Pick) From the Amazon page: Investigative journalist Bethany McLean digs deep into the cycles of boom and bust that have plagued the American oil industry for the past decade, from the financial wizardry and mysterious death of fracking pioneer Aubrey McClendon, to the investors who are questioning the very economics of shale itself. McLean finds that fracking is a business built on attracting ever-more gigantic amounts of capital investment, while promises of huge returns have yet to bear out. Saudi America tells a remarkable story that will persuade you to think about the power of oil in a new way.

Berkshire 50th Anniversary

About Warren Buffett

About Charlie Munger

On Investing

General Interest

Books from past lists, likely removed due to space constraints.

Here are my own posts related to the books listed above:

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Nomadland Book: What Really Happens When You Don’t Save Enough For Retirement?

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I’m reading Nomadland: Surviving America in the Twenty-First Century by Jessica Bruder. Essentially, it’s the story what happens to a group of people when their plans for retirement fall apart. Here’s the book blurb:

From the beet fields of North Dakota to the campgrounds of California to Amazon’s CamperForce program in Texas, employers have discovered a new, low-cost labor pool, made up largely of transient older adults. These invisible casualties of the Great Recession have taken to the road by the tens of thousands in RVs and modified vans, forming a growing community of nomads.

You’ll probably retire earlier than you expect. Consider this EBRI chart showing the big difference between when workers expect they will retire (dark blue) and when people actually retired (light blue). One-third (34%) of all workers ended up “retired” by the time they reached 60, but the majority didn’t see it coming (which I assume means it was mostly involuntary).

Going through the book, here is a rough breakdown of the stages that the people went through:

Plan A: Ideal retirement. You have plenty of savings and income in retirement. I’m all set with a rock-solid pension, Social Security, and a big pile of investments.

Plan B: Make everything more modest. I don’t have as much as I’d hoped. Maybe I don’t need that beach condo? Maybe I’ll move into a smaller primary house. It’ll be easier to clean. I’ll just have to take less vacations. No problem.

Plan C: Work longer. Hmm, not still enough. That’s okay, I’ll just keep my job a little longer. I have lots of valuable work experience. I’m still healthy.

Plan D: Find any job. I’ve been laid off, and now I’ll have to find something that is full-time and offers benefits. The easiest targets are retail: Walmart, Home Depot, McDonald’s.

Plan E: REALLY cut expenses. My house is going into foreclosure. I have to sell all my other assets, including whatever life insurance policies, 401k plans, jewelry, and anything else of value that I have accumulated.

Plan F: Ask for assistance from extended family or friends. I can’t find any steady work that pays the bills (or may no longer be healthy enough to do so). I need to find cheaper living arrangements, immediately. I might crash with my children or other family/friend.

This corresponds well with this EBRI survey that I found afterward:

What happens if none of this works? That’s the common thread through many of the people profiled in this book. Not only did Plan A fail, but their backup plans also failed. Many had a late divorce. Many lost their high-paying jobs in their 50s, when they were planning to work until 70. Others had medical issues that racked up huge bills. They worked retail for a while, but it never added up to a decent full-time income. There just aren’t as many jobs for someone in their 60s and 70s. They lived with their children for while, but their kids are struggling as well.

One solution that some came up with in this book with is to change “homeless” to simply “houseless”. You buy a big van or small RV for well under $10,000 and you live in it. As long as you can find a place to park it, you’ve just cut your housing cost down drastically. People figure out to live on $500 a month. You can also now travel for temporary work – Amazon warehouse picker, campground manager, agricultural farm worker. As more and more people do this, they have formed communities and annual gatherings to support each other.

The book has me switching between two feelings: empathy for what brought them to this place, and curiosity about the mechanics of their day-to-day life as modern-day nomads. For now, one big takeaway is that people can and do fall through the cracks. The folks in this book are still taking action and working to survive and hopefully once again thrive.

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Book Notes: Year of Yes by Shonda Rhimes

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I’d never heard of Shonda Rhimes before stumbling across Year of Yes: How to Dance It Out, Stand In the Sun and Be Your Own Person. Apparently, she created some huge TV shows (Grey’s Anatomy, Scandal, How to Get Away With Murder). However, the title caught my eye and the preview sounded interesting:

With three children at home and three hit television shows, it was easy for Shonda to say she was simply too busy. But in truth, she was also afraid. And then, over Thanksgiving dinner, her sister muttered something that was both a wake up and a call to arms: You never say yes to anything. Shonda knew she had to embrace the challenge: for one year, she would say YES to everything that scared her.

After finishing the book, I can see why Rhimes is such a successful writer because she skillfully weaves complex human feelings into what feels like a casual conversation. Here are some quotes and my takeaways:

The most important thing is to take action.

I think a lot of people dream. And while they are busy dreaming, the really happy people, the really successful people, the really interesting, powerful, engaged people? Are busy doing.

Maybe you know exactly what you dream of being. Or maybe you’re paralyzed because you have no idea what your passion is. The truth is, it doesn’t matter. You don’t have to know. You just have to keep moving forward. You just have to keep doing something, seizing the next opportunity, staying open to trying something new. It doesn’t have to fit your vision of the perfect job or the perfect life. Perfect is boring, and dreams are not real. Just . . . DO.

You must do the things you think you cannot do. —ELEANOR ROOSEVELT

Things I agree with.

#StopPretendingHashtagsAreTheSameAsDoingSomething

ANYONE WHO TELLS YOU THEY ARE DOING IT ALL PERFECTLY IS A LIAR. […] If I am killing it on a Scandal script for work, I’m probably missing bath and story time at home. If I am at home sewing my kids’ Halloween costumes, I am probably blowing off a script I was supposed to rewrite. If I’m accepting a prestigious award, I’m missing my baby’s first swim lesson. If I am at my daughter’s debut in her school musical, I am missing Sandra Oh’s last scene ever being filmed at Grey’s Anatomy. If I am succeeding at one, I am inevitably failing at the other. That is the trade-off.

Once I said Yes to difficult conversations, once I said Yes to saying No, I made an interesting discovery. That discovery was: happy, whole people are drawn to happy, whole people, but nothing makes a toxic person more miserable and destructive than a happy, whole person. Unhappy people do not like it when a fellow unhappy person becomes happy. I am absolutely sure that this is true.

Happiness.

Happiness comes from living as you need to, as you want to. As your inner voice tells you to. Happiness comes from being who you actually are instead of who you think you are supposed to be. Being traditional is not traditional anymore. It’s funny that we still think of it that way. Normalize your lives, people. You don’t want a baby? Don’t have one. I don’t want to get married? I won’t. You want to live alone? Enjoy it. You want to love someone? Love someone. Don’t apologize.

This is the real goal of financial independence, financial freedom, early retirement, whatever label you want to apply. You can do what you want, even it it doesn’t pay especially well. Most negative coverage of financial independence focuses on the idea of depriving yourself. We live in tiny houses, eat lentils and ketchup packets, and never have any fun. In other words, saying NO. However, I’ve always thought of it as the pursuit of being able to spend your time doing exactly what you want! It’s turning your inner desires from “maybe someday” (AKA never) into YES.

Bottom line. This book is another example that we all have our own hidden struggles, and all we can do is choose to face them and take action. Life isn’t fair. Your struggles are hard. Rhimes lost some toxic friends and made many new ones. I’ll repeat my favorite quote here – “You just have to keep doing something, seizing the next opportunity, staying open to trying something new. It doesn’t have to fit your vision of the perfect job or the perfect life. Perfect is boring, and dreams are not real. Just . . . DO.”

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Spending Diary: The Most Commonly Ignored Personal Finance Advice?

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After finishing The Index Card: Why Personal Finance Doesn’t Have to Be Complicated by Helaine Olen and Harold Pollack, I found it to be a solid all-around personal finance book that joins others like If You Can by William Bernstein and The Richest Man in Babylon by George Clason in the category of “recommended books about money that are short and easily digestible”. All good ideas for gifts for recent graduates.

They don’t shy away from what I think is the most commonly-ignored financial advice: TRACK YOUR SPENDING FOR THREE MONTHS. Even if you don’t track your budget closely after that, this initial spending diary can be eye-opening. Yes, it takes a bit of effort and can be rather uncomfortable psychologically. Here are some book highlights:

Track ALL of your spending…

For three months, keep track of everything you spend money on, no matter how small. That $1.50 bag of Cape Cod Waffle Cut Sea Salt potato chips? It counts, just as much as your four-figure mortgage or health insurance payment.

… for THREE MONTHS.

If you monitor only one month of spending, you won’t gain a full picture of where your money goes. Routine but sporadic expenses such as car repairs, doctor bills, and the emergency trip to the cat’s vet are more likely to occur over a several-month period.

Now, you can pick your “must keep or I’ll wither away” purchases and the things what won’t hurt as much to cut.

You need to determine what day-to-day spending is necessary and unavoidable, what is a luxury but helps you get through the day, and, finally, what is excess. Only then can you avoid falling prey to spending traps.

This allows you to make trade-offs: I’ll take advantage of the office coffee machine, but I’ll use the money I saved to travel to Italy next summer to attend my best friend’s wedding. I’ll drop my landline phone to pay for my gym membership or boost my child’s college savings.

Final tips. You can put everything on a single credit card or debit card, and then go through your purchases line-by-line. If you use cash, take a picture of your receipts and/or purchases on your phone. If you feel comfortable with it, link your account to Mint.com (or similar) and they will help you categorize things automatically. You’ll need to spend a few weeks teaching it (check in every few days), but it gets better over time.

If you can manage to track everything for three months to get an honest (if uncomfortable and scary!) view of your finances, you may find a big gap between what you think you spend vs. what you really spend. Where does your money go every month?

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The Personal Finance Index Card: Book Version Differences

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After rediscovering the young adult versions of fitting personal finance advice on an index card, I decided to go back and read the book The Index Card: Why Personal Finance Doesn’t Have to Be Complicated by Helaine Olen and Harold Pollack. (I was able to find it via library eBook.)

I noticed that the book version of the “index card” was slightly different. The original card had 9 items, but two of them were merged away into each other (401k/IRAs) and (Pay Attention to Fees/Buy Index Funds). I bolded the new additions below. (You can see all chapters on the Amazon page.)

  1. Strive to Save 10 to 20 Percent of Your Income
  2. Pay Your Credit Card Balance in Full Every Month
  3. Max Out Your 401(k) and Other Tax-Advantaged Savings Accounts
  4. Never Buy or Sell Individual Stocks
  5. Buy Inexpensive, Well-Diversified Indexed Mutual Funds and ETFs
  6. Make Your Financial Advisor Commit To a Fiduciary Standard
  7. Buy a Home When You Are Financially Ready
  8. Insurance – Make Sure You’re Protected
  9. Do What You Can To Support the Social Safety Net
  10. Remember The Index Card

Here again is the original:

Here are my notes on the newly-addressed topics of home-buying and insurance.

Home-buying. This will always be a hard topic because it mixes in emotion, personal history, peer pressure, and all that fuzzy stuff. If you want to own a home, you need to make sure the purchase won’t blow up your overall financial picture. Nothing really surprising, but still good advice.

  • Get your debt under control first.
  • Save up as close to a 20% down payment as you can.
  • Stick with a 15 or 30 year fixed-rate mortgage.
  • Prioritize what you really want and need in a home. Stay within your budget.
  • Location, location, location.

Insurance. There are low-probability events that can destroy decades of hard work, and that’s why humans invented insurance to spread the risk. Here are their cut-to-the-chase bullet points:

  • Emergency fund – Maintain one!
  • Life insurance – If you’re young(ish), just buy 30-year level term insurance.
  • Property insurance – Raise your deductible as high as you can handle.
  • Health insurance – Always sure you stay in-network.
  • Liability insurance – Coverage for at least twice your net worth.

I’m glad that this book still retained its “quick-and-dirty” nature. No single rule will cover every scenario, but it’s good to have a clear and concise collection of the big points along with just enough explanation that you understand the basic reasoning behind it.

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Forced Retirement: The Time to Prepare is Now

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Here’s a random thing that happened after becoming financially independent. When I caught this opening scene of people getting fired from the movie “Up in the Air” on TV, I felt sympathy but I remember it used to give me stress and anxiety.

Ever since starting out with a negative net worth due to $30,000 in student loans, I’ve saved money every pay period because I worried about what would happen without a job. I wanted my financial life to be a robust fortress. It was a gradual process and not black-and-white, but one day I realized that I longer had to worry about a boss (or worse, a mercenary consultant that looked like George Clooney) firing me ever again.

Barron’s recently had an article So, You’re Retired but Don’t Have Enough Money to Be Retired. Now What? (possible paywall but it worked for me) which is really an excerpt from the book 55, Underemployed, and Faking Normal by Elizabeth White. Essentially, it is about people who had well-paying jobs for a long time, but hit hard times in their 50s and 60s:

I never thought it would happen to me. All my life—working at the World Bank, getting my M.B.A. at Harvard Business School, starting my own retail company—I thought of retirement as golfing in Florida (not that I really wanted to). Even after my business failed—taking most of my savings with it—I bounced back. I reinvented myself as a consultant and earned a six-figure salary. But in my 50s, the Great Recession hit, and the clients were slower and slower to call back. By age 60, it was crickets.

With nothing to speak of coming in, I was running through what was left of my savings. I started to notice friends in the same boat, trying to keep up appearances. A small group of us began to talk. All were 55 and older, well educated, with a history of career choice and good incomes. And then the bottom fell out. None of us expected to be here: in our 50s and 60s, scrimping and scraping or borrowing money from our adult children or 84-year-old mothers.

What is her advice for surviving forced retirement? Well, it sounds a lot like what you would read in an early retirement article.

The key question is not just how to tighten our belts. The real question is: Can we cut way back and still have good quality of life, still find ways to be connected to who and what we love? I believe that the short answer is yes.

A big first step in securing our futures is adopting a live-low-to-the-ground mind-set, which means that we have to drastically cut our expenses to fit our new income realities. But it also means figuring out what matters to you and what your priorities are and then cutting way back on everything else.

Once I get beyond the basics, it’s really about good health, family, and friends for me. I used to eat out a lot, and that’s something I still miss. But the women friends I rely on for sanity are all still here. It turns out we didn’t need fine dining and $12 glasses of Chardonnay to bond us.

You should happily spend money on your priorities, cut back on everything else, and realize that happiness is not about stuff. Sound familiar?

The key difference is that this is presented as a last-ditch solution after your hand has been forced. If you combine aggressively prioritized, lean spending with a solid six-figure career for a while, you have the basic recipe for financial independence. It may be much harder because of our various human tendencies, but it can be done.

We live in a culture that creates need where none existed before and defines quality of life as a metric of income. When you’re making money, all of that mindless consumption goes unchecked. When funds are tight you have to think about it. What do you really need to feel deeply grounded and content? You’ll discover that you actually need very little. It really does not cost much to be happy. I’m spending a tiny fraction of what I used to spend, and the world hasn’t ended.

What if you realized that at age 25 instead of 55?

Bottom line. Forced retirement may make you realize that you can live on a lot less money than you spend now. However, perhaps this book can help those who still have a solid job right now that they can also streamline their spending and thus be better prepared for whatever may happen in the future. I enjoyed the writing style in this excerpt and find it relatable.

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Wild Book: What Do You Plan To Do With Your One Wild and Precious Life?

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I’ve been catching up on some memoirs and recently finished Wild by Cheryl Strayed. (I haven’t seen the movie.) I mention it here because the author did a “Big Awesome Thing” in hiking the Pacific Crest Trail and I think achieving financial freedom is also a “Big Awesome Thing”. I thought – What makes a person able to accomplish a “Big Awesome Thing”?

First, instead of rehashing another plot summary for the book, I’ll steal the blurb from Amazon:

At twenty-two, Cheryl Strayed thought she had lost everything. In the wake of her mother’s death, her family scattered and her own marriage was soon destroyed. Four years later, with nothing more to lose, she made the most impulsive decision of her life. With no experience or training, driven only by blind will, she would hike more than a thousand miles of the Pacific Crest Trail from the Mojave Desert through California and Oregon to Washington State—and she would do it alone. Told with suspense and style, sparkling with warmth and humor, Wild powerfully captures the terrors and pleasures of one young woman forging ahead against all odds on a journey that maddened, strengthened, and ultimately healed her.

Cheryl Strayed father also left her when she was young. An excerpt from the book:

The father’s job is to teach his children how to be warriors, to give them the confidence to get on the horse and ride into battle when it’s necessary to do so. If you don’t get that from your father, you have to teach yourself.

In my opinion, the lack of a strong father figure and the early death of her mother left her without the support or belief that she had power over her own life. But by pushing herself to do this seemingly random but difficult task and overcoming many obstacles along the way, she discovered that she did have that power inside. Perhaps each person is drawn to a different “Big Awesome Thing” that can be the first stepping stone to a life lived consciously. Hers was being free in the wild:

It had only to do with how it felt to be in the wild. With what it was like to walk for miles for no reason other than to witness the accumulation of trees and meadows, mountains and deserts, streams and rocks, rivers and grasses, sunrises and sunsets. The experience was powerful and fundamental. It seemed to me that it had always felt like this to be a human in the wild, and as long as the wild existed it would always feel this way.

After that, Strayed could attain happiness and fulfillment because she had the belief that she could change her own circumstances. Her actions mattered. It was worth trying, taking that risk to make your life better. I fear that many others have lost that self-belief and thus don’t even try.

I enjoyed the following excerpt from a poem that was included in the book – “The Summer Day” by Mary Oliver.

Tell me, what is it you plan to do
with your one wild and precious life?

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The Quest of the Simple Life: Escaping The Work Grind in 1907 vs. 2018

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The Quest of the Simple Life by William J. Dawson was published over 100 years ago; it’s so old that the copyright has expired, making the book public domain (and thus available as a free Kindle download). Yet, other than the old-fashioned writing style that required regular dictionary usage, much of the contents are perfectly applicable today! Here are some excerpts to help prove my point, and at the end I compare 1907 vs. 2018. (Any bolded parts are my doing.)

On the feeling that your family time is lacking:

Let us take the life of the average business man by way of example. Such a man will rise early, sleep late, and eat the bread of carefulness, if he means to succeed. His children scarcely know him; they are asleep when he goes off in the morning, and asleep when he returns at night; he is to them the strange man who sits at the head of the table once a week and carves the Sunday joint. It is well for them if they have a mother who possesses gifts of government, sympathy, and patient comprehension, for it is clear that they have no father. He gets a living, and perhaps in time an ample living; but does he live?

On the true cost of “Keeping up appearances”:

Money may be bought at too dear a rate. The average citizen, if he did but know it, is always buying money too dear. He earns, let us say, four hundred pounds a year; but the larger proportion of this sum goes in what is called ‘keeping up appearances.’ He must live in a house at a certain rental; by the time that his rates and taxes are paid he finds one-eighth of his income at least has gone to provide a shelter for his head. A cottage, at ten pounds a year, would have served him better, and would have been equally commodious. He must needs send his children to some private ‘academy’ for education, getting only bad education and high charges for his pains; a village board-school at twopence a week would have offered undeniable advantages. He must wear the black coat and top-hat sacred to the clerking tribe; a tweed suit and cap are more comfortable, and half the price. At all points he is the slave of convention, and he pays a price for his convention out of all proportion to its value. At a moderate estimate half the daily expenditure of London is a sacrifice to the convention or imposture of respectability.

On the cost of commuting and eating out:

In all but very fine weather I must needs use some means of public conveyance every day; there was a daily lunch to be provided; and when work kept me late at the office there was tea as well. One can lunch comfortably on a shilling or eighteenpence a day; and I knew places where I could have lunched for much less, but they were in parts of the town which I could not reach in the brief time at my disposal. Moreover, one must needs be the slave of etiquette even though he be a clerk, and if all the staff of an office frequent a certain restaurant, one must perforce fall into line with them under penalty of social ostracism. Thus, whether I liked it or not, for five days in the week I had to spend eighteenpence a day for lunch, and fourpence for teas; and if we add those small gratuities which the poorest men take it as a point of honour to observe, here was an annual expenditure of 25 pounds.

Various quotes about those who feel this certain type of “discontent”:

I saw that it was the artificial needs of life that made me a slave; the real needs of life were few. […]

The debate went on for years, and it was ended only when I applied to it one fixed and reasoned principle. That principle was that my first business as a rational creature was not to get a living but to live; and that I was a fool to sacrifice the power of living in securing the means of life. […]

My chief occupation through these years was to keep my discontent alive. Satisfaction is the death of progress, and I knew well that if I once acquiesced entirely in the conditions of my life, my fate was sealed. […]

To the man who detests the nature of his employment as I detested mine, I would say at once, either conquer your detestation or change your work. Work that is not genuinely loved cannot possibly be done well. […]

On looking back having lived his new simpler life successfully for four years:

After four years’ experiment in Quest of the Simple Life I am in a position to state certain conclusions, which are sufficiently authoritative with me to suggest that they may have some weight with my readers. These conclusions I will briefly recapitulate. The chief discovery which I have made is that man may lead a perfectly honourable, sufficing, and even joyous existence upon a very small income. Money plays a part in human existence much less important than we suppose. The best boon that money can bestow upon us is independence. How much money do we need to secure independence? That must depend on the nature of our wants.

Honestly, after finishing the book I was suspicious that it was written as some sort of strange parody, as some of the themes were so similar to what folks face today. But William James Dawson appears legit and wrote several other books during the same period. Here’s a comparison between Dawson in 1907 vs. a hypothetical person in 2018:

1907: The author worked full-time as a clerk in London, but finds himself dissatisfied with that lifestyle. He worked long hours, didn’t enjoy his desk job, and felt his health suffering in the sooty city air. He calculated that much of his expenses went to simply keeping up everyone else: higher rent, high commuting costs (time and money), paying extra to eat out with coworkers at lunch, maintaining a proper work wardrobe, and so on. He dreamed of a simple rural life. He found a small cottage in the countryside with very low rent. He fished, hunted, and farmed much of his food and paid for the rest with his earnings as a freelance writer for a local newspaper.

2018: A young woman works full-time in a large urban metro, but finds herself dissatisfied with that lifestyle. She worked long hours, didn’t enjoy her desk job, and felt her health suffering due to sitting in front of a computer all day. She calculates that much of her expenses went to simply keeping up everyone else: higher rent, high commuting costs (time and money), paying extra to eat out with coworkers at lunch, maintaining a proper work wardrobe, and so on. She dreamed of a simpler life. A small (tiny?) house or RV on a cheap piece of land. She gained income from her investments, including a rental property (Airbnb?) and stock dividends. The rest was covered with freelance work through Upwork or Elance.

Bottom line. In some ways, life hasn’t changed much in the last 100 years. Some folks will become unsatisfied enough with the commonly chosen path and take the risk of making huge changes. A simpler life with lower costs but more time with friends and family. This doesn’t necessarily mean they have the money for full “financial independence” yet, but perhaps a job more aligned with your true values where you aren’t solely maximizing income.

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Evicted: Low-Income Tenants and Landlord Economics in Milwaukee

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evicted_coverEvicted: Poverty and Profit in the American City by Matthew Desmond follows eight different families who struggled to pay rent in poor areas of Milwaukee, Wisconsin. Around the time of the 2008 financial crisis, the author lived in the same units as the other tenants and rented from the same two landlords, whom he also profiles in vivid detail. Amongst many other major awards, this book won a 2017 Pulitzer Prize.

The eviction cycle. Imagine that you are either in a low-paying job or receive government benefits, but that income isn’t enough to pay for rent, utilities, and food. So in any given month, one of those bills doesn’t get paid. That means eventually you get behind on rent, and eventually you get evicted.

After you are evicted once, your housing options instantly shrink. (Not many landlords want to rent to someone who just got evicted.) Just as payday loans specifically target folks with no other borrowing options, there is a subset of housing units that target folks with evictions. You may be surprised that the units in the poorest neighborhoods can cost just as much as a nicer unit in a better neighborhood (that does background checks). As with payday loans, you could argue lenders need to charge higher interest rates to cover more frequent defaults. You could similarly argue that landlords in low-income areas need to charge higher rents to cover unpaid rent and higher turnover costs.

After some time in shelters or crashing with relatives, you scrape together enough to make first month’s rent and a deposit. But every month, rent again takes up 70% of your income (ex. $500 rent and $700 to $800 income), so eventually you fall behind again. The sink gets clogged. Now, the landlord doesn’t want to pay a plumber $100 an hour when you are already owe them two months of back rent. But if your landlord doesnt’t fix the sink, you’re not going to treat the apartment nicely either. You’re also not going to pay any more rent. Two wrongs don’t make a right, but they do save both sides money (in the short-term). Your next eviction is only a matter of time, and cycle repeats.

Stable housing forms the core of a good community. Forced moves can hurt your employment prospects as you miss work while searching for housing. Forced moves lead to increased student absences or having to move schools entirely. Forced moves cause people to lose valuable property like furniture, appliances, clothing, and other household items.

Landlord economics. I didn’t see that much landlord “profit” when my rough calculations showed they were basically two people working full-time in a highly-leveraged business. Yes, landlords Sherrena and her husband “owned” 36 units and brought in $120,000 in gross rent annually, but that is before paying the mortgage, taxes, maintenance, and the time spent as full-time property managers. There was a constant flow of finding new tenants, fixing up damaged units, collecting partial rent payments when possible, and evicting those who fell too far behind. Every missed rent check was $500 less out of their monthly income. An Amazon reviewer stated that he followed up on the properties and found that by 2016 Sherrena no longer owned any of them (many went into foreclosure). I happened to invest $2,000 into an investor loan backed by an 6-plex in Milwaukee and it also went into foreclosure. I’m sure there are landlords doing fine, but I wouldn’t describe it as “easy profits”.

The mobile home park was a bit different. This seems to be a weird loophole where technically you are only renting a plot of land and a utility connection. The “mobile” home (which never moves) on the concrete pad is simply given free to the tenant, who then assumes the responsibility of maintaining everything inside. The landlord doesn’t have to worry about plumbing, electrical, heat, roofing, and so on. If you get evicted, you can’t afford to move your “free” home, and it gets handed off to the next tenant.

Housing assistance statistics. In 2012, 1 in 9 occupied rental households in Cleveland and 1 in 14 in Chicago were summoned to eviction court. Having an eviction can subsequently disqualify you from future public housing assistance, which led the Pulitzer committee to call this book a “deeply researched exposé that showed how mass evictions after the 2008 economic crash were less a consequence than a cause of poverty.” Here are some statistics from the book:

  • 1% of poor renters live in rent-controlled units.
  • 15% of poor renters live in public housing.
  • 17% of poor renters receive a government subsidy (rent-reducing voucher).
  • 67% of poor renters receive no federal housing assistance.

In addition to the 2/3rd of poor renters with no federal housing assistance, another of the book’s arguments is that existing housing assistance programs simply don’t do enough to help people back on their feet. It’s like if you have a broken leg and you need eyeglasses. You need both fixed to get back to work, but you are only given enough money to solve one of the problems. Even if I give you a cast, you’re still blind. If I only give you eyeglasses, you still can’t walk. Money is being spent right now, but people are still stuck in the same place as before. Perhaps more money upfront would help people get back firmly on their feet.

The author’s proposed solution is to signficiantly expand the existing housing voucher program where every family below a certain income level would be eligible for a housing voucher. The voucher could be used to pay for rent on the open market (but not too luxurious or unsafe), similar to how food stamps work. He proposes a variety of sources for the money, for example getting rid of the mortgage interest deduction.

This book reminded me of Nickel and Dimed by Barbara Ehrenreich from over a decade ago. (Here is her NYT review of this book.) Yes, bad decisions can play a role but however you arrive, it is exceptionally hard to break out of the cycle of poverty. You are sensitive to any small setback (car repair, medical bill, theft). Many things actually end up being more expensive when you are broke. Hard work is necessary but not sufficient. You need either a big dose of help (family, friends) or a long streak of avoiding bad luck.

The storytelling in this book is what stays with you. Out of all the families profiled in the book, the only ones that eventually broke the cycle got help from family. That way, they could get everything together long enough to and either land a stable job or finish education/training. The author’s solution is essentially to have the government do that same thing, but the question is whether fellow Americans (strangers) want to help out in the same way (higher taxes). I don’t know about that.

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How to Retire Happy, Wild, and Free (Book Notes)

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retirehappy

After finishing the book How to Retire Happy, Wild, and Free by Ernie Zelinski, I am surprised at how unique it is. After all these years, this may be the first book I’ve read that directly explores the non-financial aspects of retirement. There are no historical rates of return, compound interest charts, or income strategies. Consider:

  • How will you create meaning in your life?
  • What activities will you keep your mind and body in top shape?
  • Who will you spend your time with?
  • What kind of environment do you want to surround yourself?

I’ve already written about two interesting points inside: Listing 10 activities you’d like to do in retirement, and the differences between a retirement activity and a job. Here are the rest of my book notes.

On going back to some form of paid work after official retirement:

A research study released in 2001 by Cornell University psychologists found that, particularly for men, employment after official retirement is beneficial for their psychological wellbeing. Those who retire from their primary career, but then find some sort of other work, are the happiest and suffer the least depression. Surprisingly, the researchers didn’t find much difference for women who go back to work after retiring versus those who don’t. No reasons were given for this important difference between the sexes.

On separating yourself from your job:

Many professionals miss their personal career space and some have been known to rent office space after they have retired to maintain their routine and sense of importance. They’ll tell their friends “Call me at the office,” just so they have a place to go.

For most of us, who we are, is based on what we do. If we become too dependent on this mind-set and our job ends, we lose our sense of identity. So before, or soon after retirement, we need to redefine who we are in a positive and meaningful way. Recycle yourself.

To help with this separation, try listing your five best traits that have nothing to do with work. Here are some possible examples:

ambitious
well-organized
hard-working
creative
kind
passionate
generous
joyful
loving
spontaneous
connected to others
good sense of humor
peaceful
inner happiness
spiritual

On figuring out how to spend your time instead of work. Ask yourself these questions:

  • What gift do I give naturally to others?
  • What gift do I most enjoy giving to others?
  • What gift have I most often given to others?

Some people don’t need any help in this area. They are ready to sail around the world, then bike around the world in reverse, and so on.

However, many others do need some help creating a fulfilling retirement. This book can help. Perhaps you keep on working because you can’t imagine retirement, or you have already retired but find yourself in a funk. The initial “I’m finally freeeeeeeee!!” has worn off. You might even be a little depressed from the social isolation or lack of structure in your life. This book can help.

qara.info has partnered with CardRatings for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Why Pursue Financial Freedom: Fulfilling Retirement Activity vs. Ideal Job

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retirehappy

How to Retire Happy, Wild, and Free by Ernie Zelinski continues to offer smart observations on retirement. For example, when people are working, their idea of leisure is often passive: watching TV, listening to music, shopping, or eating at restaurants. However, in retirement, they need to replace all the intangibles besides money that working provided.

The Academy of Leisure Sciences has 8 criteria for finding a good leisure activity in retirement:

  1. You have a genuine interest in it.
  2. It is challenging.
  3. There is some sense of accomplishment associated with completing only a portion of it.
  4. It has many aspects to it so that it doesn’t become boring.
  5. It helps you develop some skill.
  6. You can get so immersed in it that you lose the sense of time.
  7. It provides you with a sense of self-development.
  8. It doesn’t cost too much.

Did you know even know the Academy of Leisure Sciences existed? Another new tidbit from this book.

My observation is that these are also same characteristics of a good job. Think of your own job and read it again:

  1. You have a genuine interest in it.
  2. It is challenging.
  3. There is some sense of accomplishment associated with completing only a portion of it.
  4. It has many aspects to it so that it doesn’t become boring.
  5. It helps you develop some skill.
  6. You can get so immersed in it that you lose the sense of time.
  7. It provides you with a sense of self-development.
  8. It pays enough to support your lifestyle.

Of course, this brings you to why saving up money to reach financial freedom is a worthy pursuit. The list of things that satisfies the top 8 leisure criteria should be pretty long. It might take a few tries to find something that fits, but you could play any sport, learn to cook, speak a new language, and so on.

However, adding the criteria that it has to pay you makes the list much shorter, perhaps non-existent. Compare picking up cycling for personal enjoyment vs. getting paid as a professional cyclist. Learning how to smoke some decent backyard BBQ vs. getting paid as a professional caterer. Start to speak a new language vs. becoming an (adequately-paid) French teacher. I’m sure some lucky people out there really do have a perfect job where they are getting paid for something that they would “do for free”. However, most of us don’t, so that’s where financial freedom comes in to remove that money requirement.

qara.info has partnered with CardRatings for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Non-Financial Retirement Planning: List 10 Retired Activities

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retirehappyEver notice that every book on “How to Retire” is really just about how to accumulate a big pile of money? I’m currently in the middle of How to Retire Happy, Wild, and Free by Ernie Zelinski, which contains absolutely nothing about mutual funds, real estate, or safe withdrawal rates. Instead, it deals with the non-financial aspects of retirement. What does that mean? Well, many retirees spend at least some time being quite unhappy. They haven’t solved the other retirement problems:

  • How will you create meaning for yourself?
  • What activities will you keep your mind and body in top shape?
  • Who will you spend your time with?
  • Where is the best environment to live?

A recommended exercise is to write down the 10 favorite interests and activities that you would like to pursue in retirement. At the same time, write down how much time you are presently spending on these activities. If you are not spending any time pursuing these activities before retirement, the experts say that you are unlikely that you will spend much time on these activities after you quit work. Many people are surprised when their retirement is completely different from they imagined. They may become bored, aimless, lonely, and/or depressed. A surprisingly large number go back to work!

You need to develop activities as part of your retirement planning, BEFORE you retire. Here’s my list of favorite activities, along with time currently spent.

  1. Time with kids. Chasing bugs and jumping in muddy puddles. Learning new things with them. (Almost enough)
  2. Cooking at home. Becoming a better cook. Know what I’m eating. (4-6 hours a week)
  3. Time with spouse. Enjoying their company. (Not nearly enough)
  4. Play tennis. Social interaction and physical exercise. (3-6 hours a week)
  5. Keep learning about investing and finance. (Enough)
  6. Entertain friends at house. Cook for them. Socialize. (Very little)
  7. Read books. (2-3 hours a week? A little each day)
  8. Build an off-grid shed. Power from solar PV. Tinker with batteries and wind turbines for fun. Water catchment. Composting toilets? (None)
  9. Raise fish and/or chickens. I like to read about chicken tractors and backyard fish farms. (None)
  10. Travel. So much left to see out there. (Few weeks a year)

Right now, most of our non-work time is spent on toddler childcare, so many of these activities are being neglected. This list is a good reminder that I need to work harder on maintaining good relationships my wife, family, and friends. Once all the kids are in pre/school, we’ll see if I actually get around to the rest. Maybe the experts are right and I’ll never build that self-sustaining tilapia farm…

qara.info has partnered with CardRatings for selected credit cards, and may receive a commission from card issuers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned. MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

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