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Lifestyle

Escape to Portugal

Why one freedom seeker escaped to Portugal

By Steve W

When it comes to escaping the rat race there are worse spots you could end up in than Central Portugal. That was one of the main appeals when Bolton native Owen Lloyd Martin relocated with his then-wife to the beautiful warmth of a country that spawned Port wine, Piri Piri Chicken and Cristiano Ronaldo.

Rising in the morning to capture the floating, etheral mists on the hillside or observe the wildlife moving around freely in its natural habitat, this truly sounds like an idyllic location. Martin lives near a reservoir, in the Pedrogão Pequeno region on Arrochela Farm.

Speaking to Carl Munson on Good Morning Portugal, Martin explained the joys of living near the water: “I was with a friend the other day and she was telling the story of sitting in a pontoon eating sandwiches with the children and the bread fell in. All of a sudden there was a multitude of carp all around her. She decided to get in the lake and swim with the carp,” he said.

Martin’s off grid set-up helps sustain his remote lifestyle. Solar panels add power. A limited quantity of mobile internet data keeps him connected with the outside world, while a homesteading mentality allows for fruit and vegetable growing.

Summer temperature highs hit as much as 42 degrees, although the average is a slightly cooler 36. When the rain falls, it falls, as four seasons often swing by in one day. When the cold weather comes, chimneys around the village can be spotted blazing.

“I chop wood for a fire late in the day,” Owen explains. “I’m nice and warm then. I’m asleep by the time it heats up so why expend the energy chopping wood all day?”

The dry days allow Martin to grab his wellington boots and sow seeds for food supplies. Portuguese weather does not always allow for winter gardening, despite what you might think.

Martin grows lemons, various orange types for freshly squeezed juice in the mornings, pomegranates, limes and grapefruits. Peanut plants are the latest vegetables being tested in the sunny climes.

Martin recalls the first time he realised that a tropical, distant life in Portugal was exactly for him.

“Getting up at 5 o’clock in the morning, walking down to the lake with my fishing rod and my headphones, I cast a line, saw some buzzards and an eagle, watched the carp swimming around.”

The neighbours’ home brew is also a weekly hit for this relocated Englishman. Not proficient in the language, Owen enjoys the hospitality, kindness and generosity of the Portuguese people who appreciate his attempts to communicate in the local dialect.

Sunday is market day, a time for mingling with people of all ages across the community; many engaging in religious practices. Martin concludes by explaining how his decision to leave the UK for Portugal was strongly based around freedom and personal liberation. Two core ideas that can motivate many escapers to follow their own dreams.

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Finance Lifestyle

The F.I.R.E Movement: Too hot to handle?

Written by Monica C

The FIRE Movement: Free Yourself To Secure Your Future

The FIRE movement is a popular mantra among millennials. FIRE is an acronym for either of these two: Financial Independence Retirement Early or Financial Independence Retirement Extreme.

The goal of the movement is to allow an individual to retire early and live the rest of his/her life in financial security. To achieve such goal, the individual must aggressively save money.

Retirement Talks

The best age to retire is 67. That is the time when you can take the full benefits of social security. However, did you know that the average life span of Americans is around 78 years? With that said, the possibility of living your retirement days and pension in only 10 years is high.

Besides, there is no complete guarantee that you will be in good health. By the time you retire, you might be already on your way to a nursing home. Note that most people get admitted to a nursing home at the age of 65 to 67.

On a different note, say that you graduated when you were 23 or 24 years old. If you took a job after you finished college, you have to work for 43 to 44 years before you reach retirement. That’s an awful long time.

You can, however, retire when you are 62 since you can start getting benefits at that time. But still, you only get to slash five years off of that wait time. You also have the option to withdraw from your IRA (Individual Retirement Account) sans the penalty at the age of 59. Even then, the wait is too long.

The traditional image of retirement

Overwork Issues

America is one of the countries in the world with the longest working hours. It is by default that you need to render eight hours a day, forty hours a week. On average, factoring in part-time workers, Americans work 34 hours a week.

You might be surprised to know that Americans work as long as the Japanese, who have been stereotyped as overworked people. On average, the Japanese render 33 hours a week.

However, the Japanese still beat most countries of the world if you add in the unpaid overwork time they do and the time they spend to appease their companies and co-workers — something that’s forced upon them by Japan’s workplace socialization culture.

In contast, the Germans, French, and Swedes only spend 26 to 31 hours a week on work. The Chinese, on the other hand, spend 38 to 42 hours a week. And the Bangladeshis often work for 19 hours a day.

Modern lifestyles can result in burnout

Life Balance

In addition to your work hours, you should include your commute time. Every day, on average, Americans spend 50 to 60 minutes a day commuting. Also, you have an additional 30 minutes to spend in your work for your breaks.

Another time-consuming process you might undergo is unpaid work. Unpaid work consists of things you do that you can pay other people to do for you. Examples of unpaid work are domestic chores such as cleaning, cooking, and laundry. On average, Americans spend 3 hours and 27 minutes doing unpaid work.

If you add the time you spend for work, breaks, commute, and unpaid work, you will get 13 hours. In those 13 hours, you are completely devoting your time to work, both paid and unpaid. Typically, your body requires you to have 8 hours of sleep. Adding those two, you will get 21 hours.

Subtract those 21 hours to a day, and you will have 3 whole hours for yourself. You might even spend those remaining hours eating and socializing. And what’s left? Almost a few minutes to an hour for you to spend on things that you really want to do.

That sounds like a boring life. And the only respite you have is those weekends that seem to quickly come and go. You will be lucky to dodge overtimes and get some holidays off.

With a boring life that comes with work and the uncertainty of how long people will live after they reach retirement (or if they will even make it to retirement age), it’s no wonder that early retirement sounds good to everyone.

This is where the FIRE movement comes in.

How It Works

The FIRE movement encourages people to set their retirement lower than the norm. It could be in your 40s or 30s. At first glance, it seems it’s impossible to retire at that age. Sure, you can, but you will still be swimming in debt.

Remember that student loans are just too unrealistic. The usual loan expects students to pay it off after 10 years. If you graduate when you are 24, you might finish this debt when you are 34. Yet the average student loan amounts to $40,000. Every month for 10 years, you will need to pay $333 (interest not yet included, loan type not considered, and state is not defined).

The average monthly salary for people age 24 to 34 is around $3,100. That means the amount you need to pay your student loan is more than 10% of your income.

If you are single and earning the average annual income of $40,350, you will be immediately under the 22% tax bracket. If you still live in 2017, it should have been 15% only. But since it was updated, the average salary is $2,000 than the 12% margin, which automatically landed you to 22%.

With loan repayment and tax alone, 32% of your income is lost. There are other deductions for sure and other complexities in the tax system, but this is just an overview and this section’s goal is to let you see the big picture.

Living in one of the 15 major cities in the United States can easily make your monthly living expenses range from $2,500 to $5,500. If you add that up to the tax and loan, working your butt off basically means keeping yourself barely alive and accumulating debt. And car loans and mortgage are not yet included in these calculations.

And with these little factoids, retirement in your 30s and 40s has just become a pipe dream. So, how exactly does the FIRE movement allow you to reach that promised early retirement?

F.I.R.E. enthusiasts work the numbers

First Stage: Financial Independence

It seems that the FIRE movement’s goal is pure fantasy. It’s not. And it’s not even that complicated to achieve. It is simple, but not easy, unfortunately.

FIRE is all about creating a gap between your income and expenses. The bigger the gap, the faster you can achieve financial independence. It is all a balancing act.

To widen income and expense gap, one must focus on three elements: expense, time, and income. First, one must lower expenses. Second, time must be spared. And third, income should be raised.

You might be thinking, why is time even included here? Isn’t this all about financial freedom? Yes, that’s true. For now, read through this section and you’ll eventually understand why time is part of the equation.

The difficulty of achieving the goal for the three elements depends on your current situation. The three of them affect each other and, more often than not, you might be forced to tackle each element in a specific order.

The element that you have more control over is your expenses. It is a good starting point to lower it first. Reducing your expenses does not mean that you should live frugally. You can begin by just eliminating unnecessary purchases.

For example, you can kick your fancy coffee drinking habit. If you drink one Venti Starbucks every day, you are adding $133.50 to your expenses every month. Remove that from your system and you instantly have a $133.50 surplus or income/expense gap.

This simple decision can have a butterfly effect in balancing your time, expense, and income.

The second element that you can manage is time. It is easier to manage time once you have lowered your expenses and start having surpluses. And it is easier to generate more income once you have the time.

There are many methods in freeing up time by adding a bit to your expenses. For example, you can hire someone to do your unpaid work, which are household chores. This alone can free up at least three hours of your time.

A weekly cleaner costs $25 to $50 an hour. With the surplus you generated from dropping your Starbucks fix, you get to save at least 2 to 5 hours of your time every month.

Also, not going to Starbucks to get your coffee will save you time by not going to the store to buy it or linger over your coffee there. If it takes you 30 minutes every day to get your caffeine fix in Starbucks, it means you are going to save 15 hours a month.

With that decision alone, you have saved, optimistically, 17 hours.

The third element, income, can be managed if you have done the previous two. Unless you are the ideal employee that can ask your boss give you a raise monthly, you have limited control over your income at the start.

However, once you have dealt with your expenses and time, you will be able to open up opportunities to raise your income. For example, you can use the time you spared to work online. An hour working as a freelance writer can let you earn $25 to $75.

If you have saved 17 hours and use that spare time to work as a freelance writer online, you can add $425 up to $1,275 every month. And that is a huge change in your income/expense gap. To think that you just started with merely dropping your Starbucks habit.

Once you get to this point, you can start looking for other opportunities that can let you tweak your expense, time, and income balance. After that, save all the surplus money you gained; rinse and repeat.

Everything sounds easy, right? But it’s not. Joining the FIRE movement basically means that you will sacrifice a lot.

Do you think you can give up drinking coffee in a snap? Can you give up the small luxuries that you enjoy just to reduce your expenses? Can you utilize the free time you spared and work on another job that easily?

This is just the beginning.

However, take comfort in the fact that it will only be a short and painful journey compared to waiting until you need to start wearing adult diapers.

Second Stage: Retire Early

At some point, you will reach the extremes of your expense, time, and income.

You will be at a point when you are living a simple but a seemingly frugal life. The only things you spend for are things you only need to live and be content. Your income has reached its ceiling point. Your time and schedule are configured to get as much money as you can. Every minute in your life is accounted for in order to maximize income.

You already have spare money in your bank account and it is just there.

You either feel miserable or happy with your lifestyle. If you feel the former, it is truly understandable. You are sacrificing the present for the future after all. Congratulations for reaching this far.

At this point, you should proceed to the second stage.

In the previous section, the importance of time was lightly touched upon. FIRE basically means financial independence and retire early. Managing your expenses and income to the point wherein you receive a surplus and do not have any debt already means that you are financially independent.

The only thing left now is to retire early.

However, you don’t need to be jobless and stop earning money. Early, complete retirement is discouraged by the FIRE movement. You cannot just stop working and earning and then spend all of what you have saved in this day and age.

Decades ago (particularly during the 1990s), that method worked because of the 4% rule of thumb. Unfortunately, the interest rates of bank savings cannot sustain people withdrawing 4% of their money each year anymore unless they put a bit of money back to the account.

Withdrawing 3% of savings every year will work, but that means lesser cash on hand.

So, no, retiring completely is out of the equation. This is especially true if your income ceiling is just average.

Now, the “retire early” part means that you should stop working but continue earning. Retiring early and the second stage are all about freeing up all the time you are using for work.

To accomplish such feat, there is only one way: investment.

Before, retirees could just rely on the bank to invest their savings and pay them back through interests. Now, banks pay less, which means that you should do some of the investing yourself.

You have multiple avenues to take when it comes to investments. Some people have done it through establishing and funding businesses. Some people invest their money on stocks and other financial instruments. And a few invest them on physical commodities.

You can choose where to invest your money. There is no hard and fast rule for this part. The important thing here is that you need to place your money where it will not be lost. To do that, you must know the 4Ms of investing.

1.   Management: Know how the person or entity will use the money you will invest. Also, this is a continuous process. People change. And the people in business entities come and go.

2.   Meaning: You should not just invest in a company or person in an instant. You should at least be interested in them and what they do. You should not find reading news about them a chore.

3.   Moat: This means that the company or entity has the capability to keep competitors at bay and maintain its position on the industry’s top.

4.   Margin of Safety: An entity’s stock or security has two values: market price and intrinsic value. The difference between the two is the margin of safety. If market price is low and intrinsic value is high, invest. If market price is high and intrinsic value is low, let go.

Significant People

For the past few years, the FIRE movement has become popular among millennials. But it is not exactly new. Before its current popularity, people of the previous generation were already doing it — and they were just realizing now that what they were doing has a name. A few of them, on the other hand, have become advocates and are now teaching other people to join the movement.

Here are some notable people you would want to follow to get a more in-depth look at the FIRE movement.

Mr. Money Mustache

Mr. Money Mustache is Peter Adeney’s blogging pseudonym. He is one of the popular advocates of the FIRE movement. He retired from his software engineering job when he was 30. He is now 45 years old.

His common and primary talking points are that people should own as little as possible, leave little to no environmental footprint, and enjoy financial freedom as a result. He has been featured a lot of times in mainstream media.

Here are some of the few things he likes to talk about the FIRE movement.

1.   There are no downsides in FIRE; however, doing everything to the extreme will give it one.

2.   The amount of money you initially earn does not matter much. The goal after all is to raise it eventually.

3.   FIRE is not all about early retirement. It is mostly about being financially independent and securing your future.

4.   The amount you spend does not matter much and you do not need to lead a frugal life. You can be happy as long as you can spend.

5.   The success of FIRE does not depend on a soaring stock market or a booming economy. It depends on how and where you invest your money.

6.   The bills you have to pay are just small obstacles. They will not be a problem anymore when you start raising your income and eliminating unnecessary expenses.

7.   There is nothing to fear except for fear. Again, there is no downside as long as you do it right.

8.   Focus on things where you can have an advantage. Do not put yourself in a more difficult situation. Joining the FIRE movement is hard enough as it is.

Mr Mustache starred in the documentary Playing with Fire.

Barney Whiter

Barney Whiter had a taste of the FIRE movement at an early age. When he was in high school, his parents bought a house and then the recession hit them. The mortgage payments were crippling them financially, so his parents immediately responded to it by doing massive cutbacks on spending.

Those years traumatized Whiter and he realized early how difficult it was to be in debt, especially to a bank.

He took a degree in economics and became a chartered accountant. He worked in the finance industry for two decades. Ever since he started working, he has saved half of his salary every month. All the bonuses he received went directly to his savings, too.

He lived a simple life despite his salary. He commuted to work by cycling. He rarely went out to minimize his “socializing” expenses.

By the age of 43, he decided to call it quits. His savings are now sustaining his retiree days. He never realized that he was with the FIRE movement.

Paula Pant

Her story started with her husband Will. When she was 27, she started saving up by moving to a single-bedroom apartment that cost $400 a month. They shared the room with three other roommates. After a year, they moved out.

They moved to the apartment in front of where they were staying. After a year of saving, they provided a down payment of around $220,000. Paula and her husband did not live alone. They moved again with flatmates.

Their flatmates paid their share of the rent, and since they were the ones who provided the down payment, they did not share and lived in the apartment virtually free of charge. They continued moving until they bought a home for themselves while keeping all the apartments they bought and then leased.

Their properties became a passive source of income.

Moving in and out in a continuous succession in a span of seven years while keeping the old properties cannot be done without major modifications in their finances and lifestyle.

The couple lived frugally. They drove a 15-year-old car and only replaced it just recently. They never subscribed to cable. And Paula never bought new, or rather expensive, clothes.

It was also an advantage that they moved in and out in Atlanta. Mortgage costs in that city are around 10% to 15% lower compared to other areas. Also, they themselves did the repairs to the bargain properties they bought.

Paula Pant transitioned from journalist to financial guru.

Suze Orman

Suze Orman is a renowned financial expert and has been critical of the FIRE movement. Two of her main points against FIRE are:

1.   Disaster happens. You need to make sure that you have enough money to mitigate those events. It is risky to live without a job that provides additional health insurance.

2.   People need a huge amount of savings if they plan to retire early. She estimated that you should at least have $5 million up to $10 million.

Conclusion

Regardless of which path you follow, know that securing your future financially is vital to improving your quality of life. Be frugal with your expenses, be smart with your income and investments, and you’ll have a reliable nest egg in your later years.

Categories
Finance

Who are the Aspirationals?

The Modern-day Aspirationals

The use of symbols to show social position has been with us since the start of civilization. Owning scarce materials and using them are symbols that show class membership. Status symbols separate the actual rich from those who only aspire to be rich; known today as the “aspirationals.”

Time has not changed the desire for status. The social and economic changes in the 21st century altered material consumption, consumer behavior, the meaning of status and how people achieve it.

In trying to imitate the rich, aspirationals focus on the appearance of what they believe is the lifestyle of the actual rich. To make things worse, the media takes advantage of the consumers’ aspiration for a wealthy lifestyle and strong sense of status through advertising.

One can become wealthy through the compulsion to work, but at a price. The overworked and busy lifestyle has become the aspirationals’ status symbol. Unknown to the aspirationals, the increase in wealth does not buy them happiness.

The fact is, the busy life robs them of the freedom of a leisurely lifestyle, which the rich enjoy. Contrary to common belief, the rich are the way they are because they can relax and enjoy everything life has to offer. They do not spend money on material things. Until the aspirationals realize how wrong their lifestyle is, financial freedom will remain a dream to them.

Aspirationals – the New Elite

Before the industrial revolution, the wealthy elite or the leisure class dominated society’s top echelon. It was then easy to distinguish the rich from the less-affluent members of society; the leisure class established their social and economic status through their possession of material goods.

Those at the lower end of the economic class imitated the habit and lifestyle of the rich. The desire to appear rich prompted a disposition towards materialism which was often wasteful, irrational, and beyond their means.

The imitation of the rich through conspicuous consumption manifests the importance attached to social status rather than the value of the object.

The advent of the Industrial Revolution, however, changed consumer behavior and the forms of material consumption. The manufacturing introduced led to the rise of the middle class and the reduced cost of manufactured goods. The middle class who accumulated wealth through meritocracy and cultural capital became the new elite – the aspirationals.

The rise of the new elite introduced an aspirational lifestyle with a new set of values and norms. The aspirationals worked for long hours, changing the dynamics of work. They held a different outlook on leisure, consumer behavior, and material consumption.

The distribution of authentic goods made possible by mechanization and specialization allowed the new elite to acquire property. With the accumulated wealth, they now have available disposable income with which to buy status through the acquisition of conspicuous goods.

A new aspect of the aspirational lifestyle is the appearance of “business.” Aspirationals work long hours, sending the message that time is valuable. This has the effect of reducing leisure time. Being busy and the lack of time for leisure have become the new status symbols.

The hectic way of life is contrary to the time when the Aristocratic elite occupied the top of the social class. The Aristocratic life of taking time off for leisure was indicative of wealth and social position. You could still see the taking of leisure today in TV shows like the Lifestyle of the Rich and the Famous.

Valuing productivity and busyness over leisure changed the aspirational’s lifestyle. The need for efficiency and productivity kept them busy even when on vacation, making the “to-do list” even when they are at rest.

The effect is for people to feel guilty when they take the time off for relaxation. But, in the long run, they regret missing out on leisure activities.

The Media and the Aspirational Lifestyle

The media is another force which contributed to the status consumption of the new elite. The media has a profound influence on consumer tastes and trends. The media spreads images of the lifestyle of the rich as something to emulate, which cultivates a new behavior of the middle-class consumers.

Marketers promote their brand by presenting individuals with the desired qualities their target consumers seek. For instance, strong athletes for the energy drink or beautiful women for the skin care. The purpose of the aspirational advertising is to present reference groups that are glamorous and accessible by buying and using their product.

What is not obvious in the aspirational advertising is its attempt to tap into the aspirationals’ need to appear rich. Further, the advertising presents a social comparison that could put the consumer at a disadvantage. A comparison between the out-group and the aspirational’s in-group imply that the in-group is inferior to the out-group.

Going back to the beautiful models as a reference group, a comparison implies that the consumer’s in-group is not as soft-skinned as the model. Identifying with the inferior in-group could threaten the consumer’s self-esteem. The consumer may not even be aware of the negative effect of the comparison.

Media today is pervasive and sophisticated that it reinforces consumerism, creating needs where there are none and turning luxuries into necessities. The existence of the internet facilitates consumer acceptance of products through blogs and comments expressed on websites.

The influence of media is deep, but people may not be aware of the effect. People think they can escape the advertising trap and that they are free to do what they want. But, the fact is, the media guides the way people appear and dress.

Debunking the misconceptions about millionaires

Many believe that the rich are rich because of connections and heritage. It is a popular belief that the rich are great spenders. It is the belief that the rich are educated with advanced educational degrees. Further, many people has the notion that the rich are business owners.

What is less known is that the rich are rich because of their habit of accumulating assets. The rich have a knack of valuing experiences instead of objects. They also strengthen relationships that could protect and build their wealth.

In Dr. Tomas Stanley’s Millionaire Next Door, seven attributes mark the millionaires:

Millionaires are frugal. Most people think that since millionaires have money, people expect them to spend a lot of it on most anything – from food to big houses. On the contrary, the millionaires are frugal (the opposite being wasteful.) Frugality is the foundation of building wealth.

Allocation of time, energy, and money to contribute to wealth-building. Efficiency is a significant element in accumulating wealth. People who become wealthy know the significance of allocating time, energy, and money to increase their net worth. The rich spend more time on investment planning to increase their wealth.

Financial independence is valued more than high social status. People who become rich work to become secure financially. The aspirationals work to appear rich but do not have the means to live up to the rich.

Rich people did not receive economic outpatient care from parents. Rich people learn how to be frugal, responsible, and self-reliant at an early age, and they show these attributes in their consumption and lifestyle.

Adult children of rich people are economically self-sufficient. Rich parents ensure the self-sufficiency of their children by reducing the size of their estate. Not to do so would subject their children to estate tax liability when they pass away.

They are accomplished in identifying market opportunities. The rich know  what and how to target business opportunities and pursue them. If they need to spend to pursue the opportunities, they do so knowing the return will more than compensate the expenses.

They choose the right occupation. Knowing the right occupation is indicative of a person’s character. The level of wealth of the rich is not determined by the type of business but by his character. Businesses can change, but character is a feature that no one can take away. The same is true with intellect. For instance, a creditor can take away your business, but not your character or intellect.

Money as a means of escaping the rat race

Becoming wealthy is not about luck or getting the right break. The millionaires accumulate wealth because of habits that enable them to increase their net worth. These habits are ambition, integrity, optimism, persistence, resilience, and frugality. There are many more habits that could enhance one’s ability to accumulate wealth.

There is a difference between the rich and the aspirationals. Becoming rich is not about material possessions, it is about the ability to accumulate wealth with ostentatious spending.

In trying to appear rich, the aspirationals fell into the trap of aspirational advertising and succumbed to the “busyness” as an indicator of social status. In the process, they rob themselves of the ability to enjoy life and experience leisure activities, which is the key to accumulating wealth.

In wanting to be rich or to appear rich, people end up in financial ruin, unable to keep up with the lifestyle of the rich. An aspirational will have more chances of success if, instead of living a hectic life and material consumption, they spend their valuable time on planning for investment.

Thank you for reading. Please share this article if you found it useful.