Friday, December 31, 2010

working man

in my previous post i mentioned that i am a hard worker and i make a decent wage. i suppose that's always been true, depending on the characterization of "decent". i've certainly always tried to live below my means, and save as much as i could, which sometimes has made the lower salary that i drew when i started out in IT about 15 years ago seem like more than what i bring in these days. i'm not intending the following to be a "how-to", nor do i mean for it to come across either boastful or deprecating, it just was the way that my career (and some connected parts of my life) turned out, and what is leading me on my journey to early retirement.

i started out my career in 1997, after graduating from the university of houston, working for a large defense contractor in the aerospace industry in clear lake, texas. i was pretty frugal while working there, and lived like a poor college student. in fact, i didn't have a tv or much furniture, probably for the first year there. one summer, i actually split rent with a roommate, on an apartment that we were renting for less than $350 a month. back then, with my low cost of living, i was actually able to save enough my first year to buy a new car (it was a 1997 saturn sc2, with a no-hassle sticker price of somewhere around $15,000, if i recall correctly), pretty much all in cash. i decided to finance about 1/2 the purchase to establish some credit. while i managed to save a decent amount while working there, i didn't have any concept of investment. i just socked my money away in a checking, money market, or savings account. i worked there for about 2 1/2 years, and while there, i met my then-girlfriend (now-wife), which resulted in my spending pretty much all the money i had stashed away. so, i started over with a negative net worth and a bank balance of $0.

after working there, i decided to make a move to be closer to my girlfriend, who was going to school at the university of texas in austin, texas. i found a job with a startup credit card processing company, which came with a decent raise (and some soon to be worthless stock options). i enjoyed working at this early stage company, as it gave me quite a different perspective having come from a huge, well established company. my cost of living jumped up a bit while working here, as my brother was attending the university of texas as well, so we lived together, and i picked up the rent and utilities to help out. i was able to increase my savings while working here, and started putting $1,000 a month aside to invest in stocks while starting the savings machine back up. i actually worked here for only about 6 months before a friend of mine came calling with a bigger, better opportunity.

i moved to a dallas, texas suburb in late 1999 to pursue my next opportunity, which, after having been exposed to startup life, was just too great for me to pass up. a friend of mine came calling with a job opportunity with a brand new company that had a very amorphous idea. i ended up taking the job, as employee #4, and its pay increase which included an annual bonus, and a healthy number of stock options (again, soon-to-be-worthless). the first few months of this job was a lot of brainstorming, a lot of prototyping, a lot of core library development, and what evolved was a video streaming company, along the lines of what does today, just way too early -- at a time when broadband penetration was a fraction of what it is now. i felt sure that i would be the next dot com millionaire, which turned out not to be the case when the company folded in 2001. during my time with this company, i continued to sock away $1,000 a month into the stock market and save pretty aggressively, mostly in an s&p 500 index fund, and was fortunate enough to get out of those holdings prior to the market crash to fund the purchase of my first house.

so, in april of 2001, after my girlfriend (who moved to dallas after graduation) and i took out a mortgage and depleted much of our investment and savings, both of our companies folded up shop. now, those were some financially exciting times. i don't recall exactly how close we were to $0 in our bank account, but we were pretty darn close, though we were able to land on our feet pretty quickly . i ended up finding employment with a dallas based low fare airline, for pretty much the same salary as i was making before, and my wife found a job with a startup company where she was underpaid, but got a lot of responsibility. we were able to resume investing $1,000 per month above our normal savings at this point.

in august of that year, my girlfriend and i got married, and i decided to take another job at about the same wage, as going from startup to a big huge company was too much a shock to my system. i ended up going to a small consulting company, and to be honest, i didn't expect to be there long, i figured it would be a way for me to get out from where i was at and find something else. of course, the economy was terrible at the time and ended up at that firm for about a year and a half before jumping to my next opportunity.

in my next job, i worked as a software contractor for a company that developed software to manage thin clients, and my annualized salary was probably a bit higher than what i had been making previously. at the same time, my wife made a job change that was a good amount more than she had been making. at this point, we decided to refinance our mortgage to a fifteen year. at the same time, we had the opportunity to purchase a rental property in the west campus area of the university of texas. i didn't really have a firm grasp on the numbers when we took the plunge, but we went ahead and put 10% down on a 15 year note. we wouldn't flow cash on this, but the way i looked at it, we would have someone else pretty much paying on our note, and we would be out of pocket a hundred or two hundred a month for that privilege.

though this was at another fairly early stage company, it was without the responsibility that i had enjoyed at my other startup stints. i still enjoyed the work, it was fairly autonomous and i got some decent exposure to different technologies, and i think i made an impression on people that saw my work, but i decided to make a move about a year into that job, after seeing an org chart that did not have my name on it.

in my next stint, i took a slight pay cut to work for a fairly early stage company in the prepaid credit and prepaid long distance space. i enjoyed my work there, but it wouldn't be long lived as i would have thought, as they were an acquisition target. in fact, just before the acquisition closed, the entire development team (about 10 developers) was laid off. that was roughly a year into my tenure there.

after that, i joined a large firm that developed software for securities trading, and it too was too much culture shock. i was able to bear it only about a month or so before i returned to contracting.

i contracted for about six months for one firm before the company that acquired the prepaid card company that i worked for came calling for consulting help. i took that on and charged them quite a bit. at that point, we were able to increase our monthly investment allowance to $2,500 and also build up a proper emergency fund (outside our normal savings and checking accounts), which consisted of 12 $2,500 one year cd's, each maturing in successive months. that firm ended up offering me full-time work, but i elected to go elsewhere when a former colleague looked me up and asked me to come aboard and join his company as employee #3.

that company turned out to be short-lived (about one year) as well, as our one main customer was slow paying and ended up in a heated battle with our ceo over some fine print, and i returned to consulting for a few different firms. while out on the road consulting, another former colleague contacted me about joining an energy company that we was co-founder and cio of, as a software architect. i jumped at the chance, even though it salary was comparable to what i could command as a software contractor.

i am pleased to say, that after 4 years, i am still at that company, now heading up the enterprise architecture group. about a year after joining that firm, my wife and i moved to a new house. we had built up a decent amount of equity in our first place, since we were on a 15 year note, and we took that and some savings (this time we did not touch our investments), and put 20% down on our new house.

recently, my wife has gone part time with her firm, coincident with the birth of our second child. we continue to save aggressively, invest that same $2,500 a month, and have added a monthly contribution of $250 each toward our children's college savings through a 529 plan. we also continue to save $500 a month in a savings account, though i have rolled out of most of our cd's, since the rates are abysmally low. when she went part time, she lost the opportunity to participate in her company's 401k plan, stock purchase plan, and benefits. we have moved the family over to my company's benefits, but it's considerably more expensive than what her larger firm was able to foot.

this same year, we converted our rental property from a 2 bedroom to a 3 bedroom so that we could command a higher rent, and expect it to break even on cash flow, or come out ahead a bit. in a few more (make that 7 or so) years, it will be paid off, and i expect the cash flow to be enough probably to allow us to make a small adjustment to our careers (allow my wife to cut back her hours, etc.). in addition, i found two rental properties that i purchased with a friend, which should flow a few hundred dollars cash per month, and the goal is to add one or two properties a year.

that pretty much sums up my entire working life, and what is the foundation for my journey to retiring my my 40s.

Thursday, December 30, 2010


i've been purposely anonymous (not just by name, but also in not divulging my age, profession, income, etc.) in my writing on this blog from the beginning because i felt that would allow a broader audience to read my posts.

an interesting thing happened the other day that made me rethink this approach, and made me think that i should narrow my focus and write with a very specific and personal audience in mind. you see, i was having lunch with a co-worker and the topic of goals, retirement, and the like came up. now, here's a guy i respect very much, who is about the same age as i am, about the same income level, and for all practical considerations, we could be practically twins on paper.

when the talk moved to retirement, i shared with him that my goal is to retire or semi-retire by the time i am 45 years old. i am currently 36. he was a bit shocked, and floated a big question my way: "what's your secret?"

i was perfectly honest with him. i don't have any secrets. for the most part, i am a pretty normal guy. i have not had any big windfalls occur in my life. i have not made a ton of money in stocks or real estate. i did not come into any family money by birth or inheritance. i am not an entrepreneur. i do not own my own company. i am a hard worker and make a decent wage.

there might be some small things that may separate me from my co-worker. i have never carried any credit card debt. i did not take out any student loans. the only debt that i have ever carried is mortgage and car loans. i have been an aggressive saver most of my working life.

i am married and my wife and i were dual income / no kids for about 7 years. my wife is now part time and we have 2 kids -- a one year old and a three year old. we live in the suburbs some 20 miles north of dallas, texas, in what is for most respects our "dream house".

i used to think that i'd need 2 million dollars to retire, but these days i feel like retirement or semi-retirement can be accomplished with far less. i could be dead wrong. but, this is what i am going to write about.