The Airbnb Aftermath

I think the title of the post is wrong.  It sounds very foreboding, but I kind of like it, so I think I’ll keep it!

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As I already wrote, in my Side Gigs & Risk post, compared to our salaries, and the overall decreasing income we actually received from doing Airbnb with the rising costs of utilities and taxes, it’s simply not financially worth it for us to continue.  I think it’s nice to know that we could use the experience we gained by doing this to run an Airbnb again in the future if we ever wanted to.  With this in mind, I wanted to reflect on the experience since it was such a big part of our life for several years.

ECA and I started hosting on Airbnb in May of 2015 and it was immediately a runaway success.  We had been using Airbnb when we traveled for a few years and we had an empty bedroom we weren’t going to do anything with.  We had owned our home for a little more than a year at the time and we had no intention of getting a long-term roommate.  Our reasoning was that it could make good money, and if we wanted to stop, we could at any time.  We don’t have to share the kitchen, and the relationship is really clear.  We’d be doing all the cleaning and the guests would be here to enjoy themselves and rest, no fighting over chores (something that has caused a lot of strife with roommates in the past).

Once we listed our place, we immediately we began to be booked up.  In 2015, we had 204 nights booked considering we started in May, that means we were full nearly every possible day.  2016, the trend continued with 339 nights booked, 2017 was right on track with 338, and 2018 we had 303 days booked, mostly thanks to a big drop in November and December.  Our revenues were quite good too, we made around $65 per night booked on average (before any taxes and expenses).

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Not only were we successful financially, I think we were legitimately good.

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About half of our guests elected to review us and out of that group, about 84% gave us a perfect 5-star score.  Initially, we actively encouraged guests to leave a good review, but over time, we would only do that to those we felt really had a great time, and eventually, we stopped asking for reviews since we had so many.  The worst review we got was one note1complaining about planes flying overhead, but the majority of our reviews were full-hearted, shining recommendations.  When hosting, I often felt like we weren’t doing enough, that we could have provided a better stay, but I guess we did plenty, I think we made most of our guests really happy and they seemed to have a great time.  My style was pretty hands-on.  I always gave some time to talk with the guests each day they were around, although there were occasions our times didn’t quite work out for whatever reason.  And besides a few rare mistakes, I think guests pretty much always had everything they needed.

One thing I think I will miss is that our guests usually did have great times when staying with us.  It was a pretty common occurrence for the guests to come back and we’d ask how the day went and what they ended up doing.  They would often ask us the same, and our answer was usually, “Uh, you know… work.”  It was always kind of funny since they were in a very different mindset, they were in touristy vacation mode while we were just working, but it did raise our spirits from time to time.  It wnote2as also a lot of fun for us to talk to guests who had traveled a lot, or those who were coming from overseas.

I won’t miss having to clean the room between guests.  It was almost every other day that I was going in and cleaning the room, changing sheets, vacuuming, etc.  The room stayed pretty clean, so it wasn’t very hard work, but it was about a half hour every day on average that was being eaten up by this (a very fair exchange of time when considering the compensation we received).  One thing good about this is that we have developed a habit of cleaning, which hopefully we will stick to.

I also won’t miss the constant worry that I would have when we weren’t home for a night while we had guests, or if the guests were late coming in for check-in.  We had a key box for self-check in, but I still lost a lot of sleep worrying about these things, although it very rarely actually caused problems.  And of course, I definitely won’t miss the complications added at tax time!

But, my favorite thing we have from hosting is our guest book, (which is what these notes note3are coming from).  I guess I should say “guest books” since the first booked was filled up and we had to start a second one.  We initially started the guest book as a novelty, but we had no idea it would become an improvised guide book of Seattle with wonderful artwork from some very talented people.  It was also filled with kind words of gratitude from guests who, unfortunately, I can barely remember amongst the sea of faces we hosted.  We hosted about 1000 people in our home over the years we hosted on Airbnb, and despite my pessimism, most of the people we hosted were great.  I didn’t make any long-term friends myself like ECA did (including at least one who moved to the Seattle area), but I did have a lot of genuine and deep conversations and that’s something I will probably miss.

All-in-all this was a highly successful, somewhat eccentric, occasionally frustrating, sporadically exhausting, but often touching chapter in our lives and I’m really glad we did it.

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2018 Savings & Growth

Despite a rocky time for our investments, 2018 has turned out to be a very large jump in our wealth.  We finished off the mortgage and managed to save more money than I would have ever dreamed possible.

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A Marked Increased in Savings

Last year, I made a prediction that we would not be able to substantially increase our saving rate again this year.  Boy, was I wrong!  In 2017, we saved about $233k which was up from the $170k we saved in 2016.  In 2018, we managed to save right around $305k.  We somehow managed to further increase our saving rate by a $70,000.  My former self should have foreseen that this would happen…  We held our expenses constant (as more or less expected), we had some slight raises, our tax rate was lowered and the marriage penalty eliminated (perhaps the only things I can thank the Republican party for), and the biggest impact that I should have saw coming was ECA’s stock bonuses being vested and payed out to her.  It still feels remarkable that this has happened.  Every day I feel extremely fortunate, unbelievably lucky, and extremely surprised even though last year I felt the exact same way.

 Losses in the Markets

Unfortunately, 2018 was not a good year for us for our investments.  Practically all of our gains in 2017 have evaporated and overall in 2018, we had losses in all of our investments.

One solace is that although I had previously lamented paying off my mortgage early, thanks to the disappointing performance of the markets, we are actually now better off having paid it off than investing.  That 3.375% ROI on paying the mortgage suddenly looks pretty good!  Regardless, since we haven’t retired yet, none of the losses need to be realized, and our positions are good for moving forward (fingers crossed things will settle down).  If the markets drop further, it shouldn’t affect our retirement goals or plans, but it can be depressing to see it drop.

If anything, this is a good warning to us to ease our optimism, fully accept lower, but safer returns, and going forward we plan to continue to further diversify and protect our looming retirement.  We’re nearing the point where we have enough to support ourselves indefinitely.  I think that going forward we need to curb our greedy optimism that we can have more if we just gamble a bit more.  Looking back, yes, we did well and looking forward, we can do really well again, but I think we need to really ask ourselves, why risk it?

Prediction for 2019

For next year, I think we will save between $275,000 and $325,000 in 2019.  We’re not doing Airbnb anymore, so no extra income there.  I think the loss of this income will be made up for by increases in our salaries.  I expect our expenses to hold pretty steady.  The biggest wildcard to our exact amount of savings will be the value of ECA’s stock options when they become vested.  Considering the volatility we’ve had over the last few months, predicting this is very difficult.

I think the results of 2018 lead me to a more guarded, but still very optimistic outlook for this upcoming year.  I guess, we’ll just see if my foresight is 2020, or if that’s just limited to my hindsight in… well… 2020!

2018 Expense Review

2018 has come to a close and the results are in:  Another excellently frugal year!

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In addition to being able to compare the last 5 years of expenses to this year, last year, I made estimates on how much we would spend and now I get to compare them to our actual expenditures.

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Bills & Utilities:  $5,668

We saw a marked reduction in our cost of bills from last year spending about $5,700.  Still not sure what happened in 2017, but at least 2018 bucked the terrible trend we had been seeing of ever-increasing costs.  We still spent much more than the average, but one big portion of our cost for this category is that our Airbnb guests do use electric and water.  Since we no longer plan to do Airbnb in the coming year, I expect to see a reduction in costs, hopefully going back to around 2014 levels.  Optimistically, we’ll see this go back to around $4,500, but due to increasing costs in general, I would expect this to most realistically land around $5,500.  This is primarly thanks to our increasing HOA dues which are going from about $180 per month up to about $300 per month.  The reason for the increase is acceptable, but it stings just the same to have that cost.

Food:  $4,614

We spent about $4,600 in food and groceries this year.  I had guesstimated that we would spend $4,359.  So, I was a little short, but not too far off.  I’m still pretty happy with our food costs as they stand.  We eat well, and I feel we eat out as often as we would like.  The average is still hovering around $4,100, but I expect that we will spend somewhere around $4,500 again next year, for my estimate, I’ll set it at $4,600.

Shopping & Entertainment:  $2,836

ECA got the iPhoneX this year and I got a Nintendo Switch!  Oh, luxury…  Still, we did well in our discretionary spending.  We ended up spending about $650 less than what I had guessed we would last year at $3,500.  I don’t think we will have any big purchases this upcoming year…  So, I’m going to guess that we hit somewhere in the ballpark of $2,000.  This is still well below our average, but pretty much all our gadgets are doing what we want them to, so I’m not sure that we are lacking, if anything in this category.  ECA has also decided to cut back more in her clothes budget.  She’s been active on our neighborhood’s “Buy Nothing” Facebook group and has found several neighbors that share her style and can wear the same clothes.  It’s worked out very well.

Vacation:  $3,641

We spent a bit over $3,600 in vacations this year, but we did a ton of stuff!  We went to San Fransisco, saw the sights, and then drove down highway 1.  We went to Glacier National Park, to camp in the mountains and hiking.  We went to Universal Studios in Orlando and spent 3 great days playing there!  Some of these were a bit impromptu, busting my guesstimate by about $650, which is balanced pretty well by the over-estimate I had of our shopping & entertainment spending.  With these together, I think we were right on-track for our discretionary spending.  And for all intents and purposes, entertainment and vacations are very closely related.  If we spent more on entertainment, I think we could spend less on vacation (our spending history begs to differ with me though!).  For next year, we’ve got a couple of vacations planned (or payed for), I expect to stay at about the same level of $3,500.

Transportation:  $1,167

I’m awestruck by how little we spent this year for transportation.  I had guess we would spend $2,100, but we spent about half of that.  This does not include the depreciation of the car, which is starting to show its age a bit.  The Spark is an excellent commuter car and it’s still one of my best recommendations for anyone who is buying a car and living in the city.  It can fit in many places other cars can’t, so finding parking is much easier, it handles well, it gets great gas mileage, and it’s low-maintenance.  But, like all things, it has wear and tear, I’m sure I’ll need new tires before the end of the year, and I’ll need to do some more repairs and maintenance.  Gas prices have been holding pretty steady, and hopefully that will continue, so I’m going to keep last year’s Guesstimate at $2,100.

Housing:  $4,676

Our housing cost has stayed very steady over the last 2 years.  This is kind of misleading though, we payed off the mortgage, so we had less than $100 in interest.  This was off-set by the massive increases to our property tax (which will likely go up yet again).  This was more than I had guessed by about $700, making our housing cost the most unexpected hit to our budget.  Unfortunately, we expect that this cost will increase even further with the years and with Seattle’s housing market as it is, we’re strongly considering getting out of it.  For next year, this might throw chaos into the mix of prediction of costs, but housing is a big wild card right now.  If we don’t change our living situation, it think it will likely be somewhere around $5,250.

Summary:  $22,602 spent in 2018!

I had guessed we would spend almost $24,000, but to my surprise, we undershot that by about $1,400!  This is also well below the average of about $26,000 we’ve been spending over the last 6 years.  This is neglecting the cost of the depreciation of the car still, which will bring those costs up a bit.  Still, even if spread that out over 3 years, that would put this year’s cost up to right around $25,500 (and an average annual expenditure over the last 6 years of $27,750).

Using the 4% rule, we’d only theoretically need $693,750 of investments to maintain this standard of living (excluding medical costs and some uncertainties which surely brings up the amount we need to about double that).  Overall, I’m highly satisfied with our spending and our progress towards financial independence.  Lifestyle inflation has not been a factor in our journey and I think we really got things figured out.

Trends

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I can’t really say too much regarding the trends we’re seeing.  There doesn’t really seem to be much of a rhyme or reason to a lot of the movement from year-to-year for our expenses.  Overall, they all make sense when examined in detail, but I don’t think we can really use this to make any sensible predictions.  It looks cool though!

Prediction for next year?

Assuming I’ve got a good handle on all the categories, my estimation for next year is…  $22,950!
Well, that seems right in the ballpark of the last 3 years, so we’ll just have to see what 2019 brings!

How FI has changed my life?

Post from ECA

For as long as I can remember, I have always been an optimizer optimizing for the best return on investment. Yes I have always been a big fan of the Pareto principle (known as the 80/20 rule). When in school, I studied 80% of content that’s most important to the course with only 20% of effort. This allows me to graduate with an engineering degree and a minor in 6 semesters while doing research, TA and having lots of fun. When working, I focus my efforts on the visible projects allowing me to shine and differentiate from peers. This (together with lots of luck) allows me to climb the corporate ladder relatively fast and quadruple my salary within 6 years of graduation.

While my fundamental belief of optimizing for ROI hasn’t changed, FI has changed my way of evaluating the returns and my approach to life, ie what matters to me has changed.

Like most people pursuing/achieving FI, the old me tends to live more in the future. The trait of living in the future allows us to set up a goal, plan and follow through to achieve the results. With the future in promise, delaying gratification which is crucial to traditional successes becomes pretty easy. However, it can be detrimental when in extreme. One example is eating rice and beans every day to get to FIRE in supersonic speed. The other end of the spectrum is living in the present. Being present gives us great satisfaction and contentment which is the key to happiness. It can be detrimental when in extreme as well. The splurge today (or every day)/ YOLO attitude can get us into deep debts and digs us into holes our future self may never able to climb out. Truth is somewhere in the middle, moderation is gold!

The new me post-FI is slowing moving into the spectrum of living more in the present. One examples, earlier in my career, I was willing to take on 2 people’s responsibilities for 5 months so I can get promoted. Granted, I was not that busy anyway even with 2 people’s responsibilities. I still actively made my choice to “sacrifice” for 5 months, so I can harvest the return of higher pay in the long run. The same example, recently I had an opportunity to decide between 2 job opportunities. One was foreseeably harder than the other but with the promise to be promoted within 1 year. I did not even blink and picked the easier one that allows me to work from home but with no direct route to a promotion. Maybe this is the result of diminishing marginal returns. Maybe this is because over the years, ER uncle and I slowly influence each other. As I feel pretty comfortable with our net worth and the potential to quit working as a whole, getting promoted is no longer as important to me as before. I become more chill and more genuinely interested in learning new things vs learning to gain a skill to be promoted (which is exactly why I got my MBA. I did not get an MBA because I am passionate about business. I got it because I was able to make more money). With this new role, I am getting into a new field I am always curious about but don’t have any experience in. So I am grateful to stay in the same company and move to this role. Also, as I considered what to do after we reach our fat FI number, am I really going to quit? Or if I am working from home comfortably doing things I am fine with, should I even quit?

Do I regret the old me? Absolutely not. It is the future oriented thinking that set the foundation for today. If anything, the new me today is very thankful for the old me for the past 10 years. The motivation, persistence, effort, skill (and of course luck, lots of it) of the old me builds the landscape today I get to enjoy. Now, the new me is going to enjoy the fruit of labor and live a happier and more chill life, so hopefully the EC in 10 years can age gracefully and becomes a woman full of adventure, happy memories and passion for life. The future me will thank the present me as well for an amazing next 10 years to come.

Side Gigs and Risk

I guess blogging is a side gig, but I don’t know if I will ever make this blog into anything remotely profitable, I am not deluded to think that this will ever generate a passive income by which I can live off of.  Mainly, I write when I’m feeling inspired or when some ideas I have been thinking about need to be solidified in writing.  I write for myself and, to some extent, for ECA.  But for our retirement, ECA and I plan to disburse our investments to pay for our expenses.  I don’t know if I’ll give up side gigs, and I do have a bit of an entrepreneurial bent, but something has nagging me lately and that is risk.  I know that I just went on a tirade about how “peace of mind” is bad, but this risk is a bit different, it’s the risk that comes with doing something unnecessary that won’t further our goals, but could compromise them.

I’ve mentioned before that I host on Airbnb and had been doing so for quite a long time.  This has made owning a home very lucrative.  We could nearly live off what we made through our Airbnb.  However, I’ve come to the conclusion that it’s not worth continuing.  Firstly, the costs to run it are increasing due to some changes in local laws, lowering our potential earnings.  But, more importantly, I’ve become worried about the potential risk that we face.  Yes, there are protections offered by Airbnb and our insurance, but those protections are ultimately limited.  We already have a lot of house rules limiting what guests can do while staying which lowers the chance of damage, but there’s always the chance that a guest could get injured while on the property, or something we haven’t considered yet could happen.

When we started doing Airbnb, we didn’t really have a lot to lose, but had a lot to gain.  Now that we have begun to exceed our financial independence goals, we now have not a lot to gain and very much to lose.  I think we’ve also run the course with hosting, it was fun to manage and meet so many people from all around the world, but the only thing left for us to  get out of this endeavor is more money, and I think we’re doing fine there.  ECA and I plan to continue hosting until the end of the year, but the new year, we’ll be done and our home will be slightly more empty and we’ll have slightly more free time.

Another side gig I’ve been doing lately is dog-walking and house sitting.  I grew up with pets, but I have been putting off getting my own because I want to travel and having a pet adds a lot of complication to this.  Dog-walking is a way for me to spend some quality time with a dog, but not own one and also provides a financial incentive to do so.  So, I signed up with Rover and became a sitter/walker and completed a few walks and stays.  It was fun, I had a really good time, but again, there’s a risk.  If something were to happen to the dogs while they were in my care, I could be responsible.  And while I like to consider myself a responsible person, the dogs can be very unpredictable (especially when they grab and eat stuff you can’t see in the grass)!  Nothing bad has happened while taking care of other people’s pets so far to me, but I do worry, so I don’t think I will continue doing it.  It’s also not very lucrative, well at least with Rover.  For a half-hour walk, you get about $12, around $18 for an hour long walk.  Which sounds good, but when you factor in the time to get to the owner’s place, time messing with tracking on the app, finding walks, etc. it’s simply not very much compensation for the time put in.  Fortunately, if I want to get some quality time in, I can do so by volunteering at a shelter, or even fostering pets, so I think I will resolve to follow my heart and not the money and volunteer (I just need to get ECA up to the point where she’s not scared of the dogs so she can do it with me).

I don’t think that we’re losing much by giving these gigs up, but I am worried that the risk of losses may hold us back in future endeavors.  I hope that if and when we have a great idea to create something, we won’t let our fear of loss hold us back too much.  I also hope that we can find a balance between doing things and living well.  Gigs like this are tempting because the financial incentive, but now that we have enough, I hope to be more driven by things that we really want to do, things we can find meaning in.  A big part of financial freedom to me is this.  It’s not pursuing the largest possible number in our bank accounts, it’s having the freedom to do that which fulfills us the most.  And this is something I’m not willing to risk losing for a few more bucks.

Suffering Well

I tend to be a bit of an evangelist about financial independence.  I like to help people and I like to talk about money since it’s something that’s often on my mind.  Often, I receive a lot of push-back in the ideas that I espouse, although I think that they’re very well-reasoned.  A recent example was a colleague of mine was buying a seasonal ski pass and was trying to figure out whether he should spend the extra amount to buy insurance that would refund him a pro-rated portion of his ticket if he were to be injured and not able to continue skiing for the season.  I told him, of course he shouldn’t be wasting his money on something like this, his chance for injury is low and the amount he would receive is low.  The cost wasn’t high though, so he bought it “for peace of mind”.

“Peace of mind” can be a killer of frugality.  It’s a deviation of rationality, whereupon we sacrifice our hard-earned assets to avoid a potential, although unlikely, bad outcome.  I’m not immune to it either, for “peace of mind”, I have missed out on thousands of dollars of growth by making the sure bet of paying off a mortgage instead of wisely investing.  I’ve been thinking a lot about my relationship to money lately, and this is one of the ones that I want to work on, I want to eliminate my neurotic fears, and “what-ifs” that I have with money, I want to approach money in a more sound, more rational manner instead of an emotional one, and I think this is the way for everyone to go.  Something I want to continue to work on is “How I Learned to Stop Worrying and to Love Rationality”.

Another issue I’ve noticed when talking to others is not something that restrains me, but I think it might be the primary reason why it’s so rare to find others who are seeking to  retiring early.  Most people I talk to are simply not willing to make sacrifices to their lives.  They’re not willing to do the work to track their expenditures.  They’re not willing to downsize, or suffer in any way.  It stuns me that these very same people complain about how hard their financial situation is, that they have high debts from student loans to pay off, that they cannot afford to live where they want to, that they don’t have enough money to do anything fun, but they’re not even trying to make their money work for them.  To them, money comes, money goes, it never stays, and there’s never enough.  Oddly, I feel that I almost never have anything to complain about when it comes to money, and even though I may earn more than many of these individuals, I spend less.  Sure, some things are very expensive and therefore not worth buying, even some things that I would like to buy.  There are some things I am forced to pay for (I mean holy crap, ECA and I pay more than double in taxes than we do on our expenses combined)!  But, I don’t feel like anything is unfair about money in my life.  I feel that I could, if I wanted to, cut back more in my spending.  ECA and I could easily live happily based on our expenditures if we had a minimum wage salaries (of course, we don’t have kids).

When talking with and listening to those pursuing financial independence, I’ve notice quite the opposite than the non-financial independence seekers.  I’ve seen people who go much further than I, they truly put themselves through hell to reach this elusive goal of early retirement.  I’ve talked to people who have given up their car and commute and do groceries by bike (up and down hills in Seattle in the rain).  Some people have given up renting or owning a home and elect to live in a van.  I’m not willing to even go that far, but I think I could, if I had to.

I don’t usually read other bloggers.  I like to think that I come up with most of my ideas independently of others (but I am surely influenced through osmosis since ECA does and then permeates the knowledge to me), however we sometimes listen to some FI podcasts together when driving.  I don’t feel like I learn much most of the time, it’s usually just entertaining to hear other peoples’ stories, but one person’s words recently struck me because it was a succinct way that captured this thought I had been having for quite a long time.  Jillian from Montana Money Adventures (who has a very interesting story and obviously a huge heart) said she had learned to “suffer well”.

This was a bit of an “aha!” moment.  To me, it’s obvious, you suffer a little now, so you can be comfortable forever, but something interesting happens when you live this way.  You find that you get comfortable in what you once thought was suffering.  You begin to suffer well.  Your life may not be as comfortable as what it could be, but you are not trapped.  The daily stresses of the hedonistic treadmill are eliminated when you live far below your means and you find your center, what really matters.

I hope that I can figure out how to get people to take the chance on suffering well.  I think that it would help  a lot of people be much more satisfied with their lives.

The Double Comma Club – One Year After

About one year ago, we broke into the double comma club.  It was a strange feeling then and I still feel strange about it now.  Although we have reached a large net worth, I often feel that it’s not real, or like we didn’t really earn it.  Yet, there it is and still it continues to grow.

When ECA and I first started to discuss out our early retirement plans, we set a goal of $1,000,000 and our house (with a paid-off mortgage).  We figured (assuming a 4% rule) that $40,000 a year and having a home would mean we would be set for life.  When we bought our home, we paid $301,000 for it, so basically, we were shooting for a net worth of $1.3 Million.  At the time, we figured we would be able to retire in 10-15 years or so.

Of course, we had no idea what the housing market or our jobs had in store for us.  Our home price doubled, we got much larger raises than expected (especially ECA).  So now, we’ve surpassed the net worth we were originally shooting for, $1.3 Million, and we did it 4 years earlier than we ever expected.

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Over the past year, our net worth has increased by about $326,000 from where I calculated it was last year. A few notable things about this.  First and foremost, we paid off the mortgage!  We are for all intents and purposes, debt free, although we are carrying some credit card debt on cards that have 0% APR.  The car is depreciating in value, but it’s still worth a little bit.  I moved over some money from my old 401k and into a new IRA.  I also didn’t change the value of the house over the past year, ECA and I figure this is what we will pocket if we sold today based on sales of our neighbors’ homes, so it’s probably about where it should be.

We’re not done though!

Although we *could* retire now, we’re going to persevere a bit longer, for a few reasons.  Firstly, ECA has a very good deal with her employer.  She received a stock bonus which will vest over the next year and a half, basically, there’s too much money to leave on the table at this point.  Secondly, we really don’t know what our true costs will be once we retire.  $40,000 seems reasonable, and is much higher than what we have been spending, but we may have been reducing our costs severely due to benefits we receive from working (looking at you, healthcare).  Thirdly, raising our net worth will allow us more luxury.  We can easily afford more vacations, more experiences, more toys if we so desire.  And as far as money can buy happiness goes, waiting the next year and a half, I expect that we will retire with about $2 Million, which would put us just over the threshold where people are happiest making around $75,000 per year.

So, that’s our plan.  Shoot for a fat-fire style retirement.  Never worry about money ever again and live happily ever after.

The Dead Pledge is Dead

Through fear of and obsession with paying interest on debt, ECA and I finally paid off our mortgage and we are the sole owners of our home.  I guess “finally” does really have as much impact to us as it does to most people as we only held the mortgage for a little under 5 years, but it was clear that it would be done within the year and could have been done even earlier thanks to our extremely, unnecessarily accelerated pay-off plan.  I’ve already scrutinized why we should not have paid it off so quickly, but something can be said for owning a home out-right.

I guess the weirdest part for me was going in to pay it off in person.  I was greeted at the door by a teller who I told I was there to pay off the mortgage and would need to speak to a banker.  She got the manager since this is pretty rare.  The manager was great though, super helpful and friendly.  I think she was more excited than I was.  I guess I didn’t really have the excitement since I knew it was coming for months and could have paid it off at any time.  If anything, I was slightly annoyed at the inconvenience of paying off the mortgage!  You see, when paying off a mortgage, you can’t simply make a payment for the remaining amount owed online like you do for normal payments.  I had to go in, get a pay-off statement sent from some other branch, and get either a wire-transfer or send a cashier’s check to them with overnight mail (both options had fees involved).  Additionally, there was a fee for paying it off to cover the legal documentation of the loan.

Well anyway, it took a while for me to get the statement back, and once I did, I ended up doing a wire transfer to pay for so it would be done that day.  The manager forgot to tell me about the fee for the wire transfer at the time, which I ended up getting billed for later, after I left (it wasn’t on the receipt or anything, so I didn’t know until I got the charge in my checking account).  Fortunately, she was honorable to refund me that cost after a quick call.  Very excellent customer service there, that’s rare!

A few weeks later, we got a check in the mail for the outstanding amount left in the escrow balance and a nice statement of Paid in Full now appears on the log-in portal for the bank.  We got lucky too with the timing since they had just paid the first half of the year’s taxes, so I don’t have to worry about that for a few months.

Unfortunately, all-in-all, paying off the mortgage feels like a hollow victory.  We had a good rate of 3.375% and that cash could have been better invested.  Now, that equity is locked up in our home and while we could do a line of credit or something, we won’t ever be able to get the rate that we had before.  Oh well, first world problems, huh?  My advice to others remains though, as long as you don’t otherwise blow your money, paying off the mortgage is a bad deal.

What I Want to be When I Grow Up

For myself, the goal of financial independence is so that I am not beholden to an employer for my survival, not so that I don’t have to work.  I actually like working quite a bit and I have a hard time imagining a life without doing something at least part-time.  I also cannot see myself traveling full time indefinitely, that sounds very exhausting and potentially boring to me (ECA may disagree with this sentiment).  There’s also no way that I would simply play games and watch TV all day either.  I feel like my ideal life is one that is just a bit more balanced.  I want to be able to work enough that I feel that I have a meaningful, creative impact on the world, but not so much that it ever becomes frustrating or tiring.  Sometimes, that’s not an issue of the work itself, but simply how long I’m spending doing that work day in and day out.  I want to look forward to the next time I get to go to work, rather than dread it.  I want a lot of variety with what I’m doing.  The problem is, I just don’t know how to do that with the way companies are set up.  If I could work half the time at half the pay, I would do it in a heartbeat.  Heck, I might even take 1/4 the pay if it truly meant half the time.  And although I love being an engineer, I don’t foresee it allowing me to live this kind of life.  So, this got me thinking about other jobs out there that I could do.  Basically, what I want to be when I grow up!

Haunted House / Escape Room Designer / Actor

I don’t go very often because they’re a bit expensive and I don’t have very many friends who share my enthusiasm, but I’ve always loved these types of experiences.  Even in high school, some friends and I had constructed our own small haunted house experience one for Halloween one year.  The haunted house is the easier version, just walk through an area while people try to scare you, but escape room games generally are more about solving puzzles and collaborating to get through a series of trials.  When I’ve done them, it’s been extremely fun just seeing how the puzzles were constructed and I often feel inspired by their design.  I would love to design and build my own, but even if that’s not easy to achieve, when I have more time, I would love to at least be an actor in one.

Professional Dungeon Master (DM)

I’ve mentioned that I love playing video games, but I also love playing pen and paper RPGs.  Being a player is always fun, but DMing is a rewarding experience (and I’ve been told I’m pretty OK at it).  The main problem with Dungeons and Dragons and games in that style is finding people who are willing to take on this role and to me, this means that there is likely a niche market out there waiting for people to step up into.  This is actually quite similar to the escape room experience except there’s nothing physically constructed.  Instead, everything is in a book, or in the DM’s mind.  If I were to go this route, I would host players and run the game.  There’s a lot of prep time involved for the DM and the sessions themselves can be long, but if you get the right group, it can be awesome.  I’m only a bit weary of doing something like this with a bunch of strangers since it’s such a fun thing to do with friends, but it’s been done before, so maybe this is up my alley.

Teacher / Tutor

I don’t plan to have children of my own, but it’s not that I don’t enjoy children.  For me, other than being an uncle, the next best thing to do is to give some of my time as a teacher or tutor.  Becoming a full-time teacher (with summers off) might work well for me, but there’s also opportunities to each after-school classes.  This would be a great way to better the world and hopefully inspire kids to seek out fields in engineer, science, or math which I’m also pretty passionate about getting kids involved in.

Personal Financial Adviser

I’m generally a bit of an evangelist when it comes to how to manage money.  I’m very open about it with friends and family and genuinely enjoy talking about personal finance because I think it’s important and can improve their lives greatly if I talk about it.  I feel that doing this on a more professional level would fill the desire I have to legitimately help people and would be a great way to share my experience.

Zoo / Aquarium / Museum Volunteer

Well, maybe volunteer, maybe for gain.  I’m a huge nerd in many subjects and one thing I always love when visiting a museum or zoo is running into someone working there who is knowledgeable and passionate about what I’m looking at.  Unless I work at a museum dedicated to space, it’s a little outside of my expertise, but this seems to be an extremely fun job.  Working at a zoo or an aquarium seems even more fun since you get to interact and care for animals.

Campground Host

I grew up camping quite a bit and it’s always a pretty enjoyable experience.  One thing I’ve noticed in a lot of campgrounds we’ve visited around Seattle is that they have campground hosts who stay in an RV on-site.  They take care of the grounds, enforce rules, collect payments, just generally run the campground.  This could also be a ton of fun, I think.

Charter Boat Captain

ECA and I went to a boating event recently and had a great time.  A lot of boat owners had their live-aboards open to the public and were just showing off their homes and businesses, which really struck me as something that would be a lot of fun to do.  They live aboard their boats and charter trips aboard.  They will take you around and to places you want to go see, maybe share meals, things like that.  It’s really not that much different than hosting on Airbnb in my mind which is something I already do and generally enjoy and could make owning a large vessel a reasonable thing to do.  The only problem, ECA and I both get seasick easily…

Who knows what I’ll end up doing.  Maybe I’ll just keep working as an engineer, but there’s a lot of other things out there that interest me and I want to try to explore some of them.  I think our plan is to take a 6 month sabbatical within the next 2 years and do some soul searching to see what we both really want to do.  Maybe then I’ll narrow this down a little more!

Credit Card Churning Conclusions

It’s been a little over a year since I really got into my now favorite side-hustle of credit card churning. I thought it was time to sit down and hammer out my thoughts and lessons learned from my experiences.

Cash-back Rates vs. Rewards

Most all cards these days have some cash-back rate. It used to be that 1% cash back was awesome. Now, 1.5% seems standard for all purchases. Chase Freedom and a few others have rotating 5% cash back categories, and many cards have 2% or 3% cash back in permanent categories such as restaurants or gas stations. We usually only churn one card at a time, so I’ve ran into a dilemma often. Do I use my card that gets 5% cash back, or do I use the card I’m churning? The more I think about this, the more I think the cash back doesn’t matter when compared to the rewards rate.

Most cards I’ve been seeing the past few years have been offering $150 in rewards after spending $500. That’s a 30% cash-back rate! On top of that, you still almost always get 1% cash back. Even if you’re a bit inefficient, say you overspend on the card by $50, you will get $150 in intro rewards and 1% of the $550. This results in $155.50 in cash-back and rewards a rate of 28.27%. In fact, you get so much of a better rate with the intro rewards that you would need to spend eight times the intro amount to hit a cash-back rate of 5%, sorry Freedom!

Of course, if you’re not actively churning (or churning multiple cards) you should definitely use the card with the best cash-back rate! But, if you are committed to churning, cash-back rates are simply a red herring.

Churning Efficiency:

ECA and I have opened 15 cards since September 2016, a little more than one every other month. Considering most cards have a requirement of spending $500 in 90 days (with a few that require more), this results in an expenditure rate of about $315 per month, or $3,750 a year. Adding back in the higher limit cards like the Sapphires and the Bank of America (BoA) Travel Rewards and removing the cards that don’t require spending such as the Amazon Prime store card, that expenditure goes up to around $7,000 per year. Between two people, this rate is fairly easy to hit with groceries, gas, travel, and utilities. We top out at about $10k-$12k in expenditures per year that we can actually put on credit cards, so we’re being pretty efficient in our churning.

And Inefficiencies:

We almost always run over the limit by at least $50-$60. The worst run-over was my most recent churn with the BoA Travel Rewards card which I didn’t realize how the rewards worked. I ended up spending $250 more using it than intended. There’s also been a few times where we came up a little short of the limit with our normal spending. We haven’t lost any rewards, but to ensure we made it, we pre-paid our bills in advance, basically spending money earlier than we had to which could have been put in the market, still a better return though. The last bit of inefficiency is that we sometimes wait longer than necessary to open a new card, either because we’re afraid our spending won’t be high enough to meet the reward amount, negligence, or inability to get approval, which is rare, but has happened. Overall, I think we’ve got a mean churning machine, but there’s still a tiny bit of room for improvement!

Side perks:

Most cards don’t offer much, but there are a few notable ones. Rental car insurance, no foreign transaction fees, access to your credit scores, and trip insurance, are pretty commonly offered, sometimes on cards without annual fees. The best was the Chase Sapphire Reserve which provided TSA pre and access to airport lounges in addition to other perks. Getting the Sapphire also improves the rate of return of all Chase cards when you redeem the points for travel as you get 1.5x the normal rate and you can transfer points from all the other Chase cards.

Annual fees:

The only card we’ve paid an annual fee on is the Chase Sapphire Reserve, but we actually broke even thanks to a weird trick. The annual fee for that card is $450, but Chase also offers a $300 annual travel credit when you use the car to pay for travel expenses. The trick is that the credit is on an standard calendar, but the fee is based on your start date. Since I opened my card in late February of 2017, we paid the annual fee and got the credit shortly after. Once 2018 rolled around, we got the travel credit again and I down-graded the card to a no annual fee account before the annual fee hit. So we managed to get $600 in credits for a $450 cost, netting $150! Unfortunately, we didn’t realize this was possible and the timing didn’t work as well for ECA’s card, so we ended up paying the $150. Oh well, we broke even on fees.

It is crucial to downgrade to a no annual fee account.

Down-grading or doing what they call a “product change” is the better way to avoid the fees since closing the accounts can negatively affect your credit score. It’s also a good idea to merge accounts when possible if you have multiple cards with the same bank since you often will not be eligible to open the same card again until you do so and wait quite a long time.

Leveraging free loans:

Although ECA and I have nearly crippling anxiety regarding loans, we’ve been taking advantage of the 0% APR period many cards offer. This has allowed us to put slightly more into brokerage account, thus reaping rewards in the growth of the market. Although this year had a rocky start, I estimate we’ve made about $100-$150 doing this. Not much in the grand-scheme of things, especially when compared to the rewards.

This did bite me once! Watch out that some cards offer 0% APR on balance transfers and some change their offer sometimes between purchases and transfers. I had one card which I thought was 0% APR on purchases. Ended up costing me 8 bucks before I realized my error!

Credit Score:

If anything, churning has had only positive or no effect at all on my credit score. TransUnion has been hovering consistently in the range between 800-815 and FICO between 795-805 over the past two years.

Risks:

I think the biggest feared risk is the increased exposure to identity theft, but that may not be a legitimate concern as the companies that have approved us for cards seem to have cracked down quite a bit. It’s actually rare now for us to apply for a card and be approved right away. We usually get a phone call, or need to call them, or even go to the bank in-person to get approved.

The second biggest risk is forgetting to pay off those 0% APR cards. The interest rate is high and missing that pay-off time would instantly lose all the gains for leveraging those. That’s not necessary for normal churning though, so I don’t think this is a universal risk with churning for rewards.

We also have a lot of cards we’re not using, I’m not always carrying around 10 cards, so those are at home, so there is some risk that a burglar could get to them. I don’t think this is likely and we’d be able to quite quickly stop the cards, but it’s still within the realm of possibility.

Overall, I think there’s very little risk to churning. As long as you’re a responsible person who will not buy things you can’t afford and will pay off the balance to avoid the APR, you should do it.

The Bottom Line

Over two years we have made nearly $5000 in reward bonuses! That is nothing to sneeze at. This is effectively tax-free income. We’ve also received a lot of side perks, making our trips more fun with lounge access and TSA pre.  Stay tuned for my picks for favorite and least-favorite cards which I’ll do next time.