Midlife Reset (Part II) – Money

In part I shared several of the changes that had a high impact on my mid-life reset in 2011 after my wife passed. Ten years later I am even more confident that those were were worthwhile. In this post I am going to reflect on several decisions I made ten years ago. This is a description, not a perscription. My views have evolved over the last ten years. My next post will share how I would approach similar decisions today.

TL;DR

  • Value financial independent
  • Financial security and freedom is more important that total freedom regarding time
  • Find a job that pays well and that can have a positive impact on the world.

As the first year of my sabbatical was drawing to a close I asked the question, “What’s next?”  I knew I wanted my life to have meaning and significance. I had really benefitted from having time to care for myself. I was really enjoying working with people at church especially the young adults, and having time to walk along side people who were struggling with difficult circumstances. I would love to continue doing exactly what I had been doing. I wondered, would it be possible. Given a limited amount of time, this would only work if I didn’t have to work full time to pay my living expenses.

Financially Independent!

I was inspired by Your Money or Your Life focus on life energy and Mr Money Mustache example of financial freedom. My first thought was to figure out how to be financially independent. Could I lower my expenses and reinvest my assets into something that would produce enough income to live on?

Historically a 4% withdraw from the market is sustainable factoring in market growth and inflation, but I like more certainty and like to plan for the likely worst case. I built a model using  numbers from the worst contingous 30 year period of time (1969-1998). General inflation was 5%. Stock market returns were 7%.  Housing in USA didn’t appreciate significantly, in the bay area appreciation was 4% (didn’t find hard numbers, this is an approximation).  On top of this I assumed social security wouldn’t pay out, I would receive no inheritance from family, and  medical costs would raise faster than the general inflation rate.

I wanted to be sure that I could stop working for a paycheck, and  that I would never have to work. My thinking was if I run out of money in the future, I would have to go for a minimum wage job because my technical skills would be too far out of date to be relevant. I would rather work a few years with a high salary than work many years at a low salary at the end of my life.

I looked  at my spending over the previous years. My spent was significantly higher than the typical FIRE advocate. I knew that any budget which had me spending less money was just a theory. Until I lowered my spend for a couple of years I couldn’t be certain what my burn rate would be. My saving had not hit my “number”, so I was going to have to find a source of income to close the gap.  I  wanted to figure out a strategy to be financially secure.

I did discover that if I extracted the money in my house, moved to a low cost area, and lived in a minimalist home I could hit my number. I told myself that I couldn’t move for several years. I rationalized this decision saying that I didn’t want to disrupt my son’s life after losing his mother. While true, it’s also true that I didn’t want to move out of the bay area for several of my own reasons: I love how accessible the outdoors are, having Stanford next door, my community, and I didn’t want to lose the freedom that I thought money provided me (described below). I decided that I would make moderate attempts to lower my spend, but not make  changes which impacted my “freedom”.  I wouldn’t become ultra-frugal.  Once I went back to work my saving would grow quickly and/or I could revisit leaving the bay area once my son had launched into life and had make himself a home.

Enjoy the Freedom and Security that Money can Provide

Ten years ago I would have said I am not too concerned  about money, I am just a responsible planner. I don’t drive a Porsche, vacation at exclusive resorts, or have multiple homes.  I am a Toyota Corolla person. Getting the Prius with the leather seats and a sunroof was an almost sinful splurge justified by it being the last car Libby would drive. Vacations were primarily camping at national parks or visiting friends and/or family. We purchased a house 20 years ago in a decent neighborhood that had been built to provide affordable starter homes in the 1950s. The neighborhood demographic reflected this when we moved in with  a mix of people in the “trades”,  working professionals, and very few executive types. Now most of the original owners seem to have moved to Oregon where retired life is cheaper, and the new owners are primarily high tech engineers.

I couldn’t have told you at the time, but money was still a dominate factor in my thinking. My luxury was freedom from financial worry (though I still worried about the future) or constraint. I didn’t need to budget because income normally exceeded spending and we had a good size buffer. We had enough money to care for ourselves, give generously, and save for a future retirement. I couldn’t go out and purchase a luxury sports car, boat, are vacation cabin, but I had no desire to do that. We  regularly support charities, and could also give a large gift that would put some fundraiser over the top. If there was something we thought was important we could just fund it. For example, the not-for-profit medical facility that Libby work for would really benefit from a rather expensive piece of equipment, but there was no  budget for it. We donated money to the practice so they could purchase the equipment. 

When Libby considered going back to school to get an AuD money wasn’t a consideration. She didn’t need the degree and it wasn’t likely to increase her pay or job opportunities, but she wanted to continue her mastery of the field. When I wanted to improve my fitness through cycling I learned that the gold standard for guiding  training would be to use a power meter. At the time power meters  + bike computer  cost around $1800.  Using heart rate and time  is almost as  effective as training with power.  The equipment to measure and track heart rate could be acquired for less than $100. I went with the power meter since that was the “best” approach.

Bottom line: I  valued the freedom not having a budget more than the freedom to spend my time on exactly what I wanted to be doing. Hmm.. I said I was inspired by Your Money or Your Life, but it didn’t seem to impact now. My future self was inspired, but my current path was going in a different direction.

Work on Something That Pays Well and Has Impact

It seemed like the responsible course of action was to re-enter the working world and earn a salary. The open question was what sort of work. Timothy Keller’s book Every Good Endeavor was particularly encouraging. I was very touched by his observation that excluding immoral / criminal “work”, no work is more honorable than any other. The humble cleaner contributes to humankind’s thriving just as a surgeon does. That said, I wanted to maximize my impact. Brian McLean’s Everything Must Change helped me consider the different areas / issues I could work on that would Make a Difference. After much thought, conversations, and prayer I found myself planning to once again work on large scale computing.

Why did I return to working on computing infrastructure? Part of the reason is that I have developed significant mastery. I am  proud of the teams and services I have built over the years. I  cherish  feedback from a former coworker that he trusted me as much as anyone he has ever worked with to design, build and operated complex computing infrastructure. This was significant since he has worked with some of the top leaders in at places like Apple and Google. I also felt that working in high tech gave me a large amount of leverage. Being ability to touch millions (if not billions) of people’s lives. Other options might have allow me to personally impact another persons life, but I told myself that total impact was better from my high tech world.

Another factor was that all the other paths I considered would require significant time back in school which would cost money and then “reward” me with a significantly lower salary when I started a new career.  I wasn’t prepared to admit it at the time, but I really didn’t want to take such a large step “backwards”. There is the popular saying “Do what you love and the money will follow”. My guiding principle over the years has been slightly different

if there are multiple worthwhile things you can do, choice what will pay well.

I first made this decision in college. I was interested in psychology and  computer science. Clinical psychologists need years of school and then would receive a modest salary. I could work as a computer scientist with little additional school for good pay with the possibility of large payouts due to stock options. I could pursue psychology as a hobby for little money: read books, attend seminars. Pursuing computer science as a hobby would have required me to buy expensive hardware. The decision seemed obvious at the time.

So as a middle aged person I decided I would return to the world of high tech startups where I would receive high compensate enabling me to maintain my lifestyle and save enough  to be able to retired in my 60s.  As always I wanted to work on something that had high impact and encouraged thriving. I won’t work on a product I think is junk or that I think hurts society. For example, I won’t work for a company that promotes porn or gambling. I have no interest in working for Facebook. In the previous couple of years I found  improving health and fitness really made a difference in the quality of my life. Working on a product which was targeted at improving health seemed like an excellent way to have a high impact on a large scale.  My job search target:

  • location: short commute from home. I didn’t want to waste time in a commute and I had come to really enjoy a mostly carless existence
  • product: something that would positively impact people’s health
  • role: something that would leverage my experience
  • size: somewhere between 20-200 people

I found several companies that seemed to fit this profile. The first company I found had a role open that was a bit different from what I had done in the past. They took me on conditionally, a bit like an internship. After around 6 months it was clear it wasn’t a good match. I quit and renewed my search. A few weeks later I stumbled across an opening at 23andMe. They were close enough that I could jog to work, had a role that matched my skills, and had a long term strategy which could really make a difference in health care. I was back to the world of work.

Did the Plan Work?

It’s ten years later. What I set out to do has been accomplished

  • My son has “launched” and seemed to be doing well in Washington state.
  • My savings and investments continued to grow. By my old standard (even in light of current inflation and the stock market dip) I have saved enough to retire out of the bay area while retaining my freedom from budgeting. With my new perspective (will be in my next post), I can afford to “retire” and stay in the bay area if I chose to. If/when the 23andMe stock starts to be evaluated like a drug discovery company (or just recovers to the IPO price) I can afford to retired in the Bay Area using my original formula.
  • I have been able to enjoy  financial freedom for the last ten years. The only complication is that my  wife Jackie loves to radically improve houses. We don’t have money to buy all the houses she wants to work on.

If I had decided to switch to a field like clinical psychology I would  be just starting my second career.  It would be several more years for me to reach  mastery.  I would need for work for at least ten years before I would be financially independent.  So it seems like I chose well.  Or did I? In the last ten years there are several core values which degraded while I was working. I will concern these things in the last post of this series. Around the time I was making the decisions I have written about here, I posted Money Advice.

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