Millionaire Librarian

At the time of writing this I have an interview scheduled for a federal position in a culture rich and historical location in Europe. One of the primary reasons I decided to pursue federal employment was for the opportunity to live in Europe and have that experience. That was over 10 years ago.

The position I am being considered for is at a lower grade. I should be able to retain my current pay for a couple of years through a progam colloquially called save pay and then possibly apply for the director position when that is vacated. However all of this isn’t guaranteed, but I think it is likely.

I’ve been told that spouse positions at the location are somewhat rare. My wife is leaning towards not seeking employment and watching our daughter while we are there. All of these complexities mean that our income might dip temporarily or stay depressed for years. I am not worried.

I think if I am offered the position then this is too big of an oppurtunity to miss despite it not being financially optimal. We are coast fire. If we never add another dime to our retirement accounts and work until full retirement age then we will have more than enough. If we draw down on our non-retirement accounts to travel more then we will still be fine.

By pursuing financial independence I gave myself more options. By prioritizing finances early I can pay less attention to them now.

Update: I had my interview today. I think it went well and for better or worse I provided insight to my own stream of thought. I expounded on my professional military librarian philosophy, and gratefulness for the security that the military provides us. I have pride that we are at a point where I am able to choose lifestyle optimization over financial optimization regarding our family. I think we will find ourselves in Europe within the year.

Spend less than you make and invest the remainder. Simple but hard. It sounds easy but its not. It takes getting a lot of things right to get this one thing right.

You need to understand the power of investing. Without a good reason to artificially limit your lifestyle then you won’t. Without study and a lot of reflection on money and investing you will not see the need. Without tinkering with an investment calculator and seeing the power of investing then lifestyle inflation will eat any remainder until you get used to that.

You will need a philosophy of frugality, You need some philosophy and a mindset to not get wrapped up in consumerism. You need the knowledge that your freedom and financial independence is what you are purchasing by not purchasing other stuff. You need to be able to see others who make less than you living seemingly better than you. You will need to derive happiness from non-material things. This all takes philosophy.

It helps to have a strong locus of control and flexibiity. You have to be able to steer your life. If something is terrible then you have to make changes to change it. Move if you need to move. Change employers if you need to change employers. Get more education if you need it. Embrace change. If you act like a victim then the world will take advantage of your refusal to change.

You need to figure out these things early. If you wait too long, then you will miss the oppurtunity. Investing doubles money. Saving a little early beats saving a lot more later. Every 7.2 years your money will double if making the market return of 10%. This means you would have to invest twice as much 7 years later to get as far today.

A less important concept to understand than the above is understanding how to optimize your tax efficiency. The simplest way to optimize is to use retirement vehicles. One of the simplest and best is the Roth IRA. Exercise the muscle of investing. You don’t need to know everything about investing or a Roth IRA to do it. Make sure you are below the income requirements and you contribute less than the max. Once the money is in the Roth IRA then invest it in something simple like the S&P 500 or a total market fund. At the beginning always take advantage of tax benefited retirement accounts like your 401k or Roth IRA. Work the muscle until it strengthens and you begin enjoying making money with your money.

I like to brief young military on finances and the part I try to overstate is how important it is getting started. Young people are abundant in time and less abundant in income and financial knowledge. I try to help in increasing their financial knowledge and though they have little income it may be a time when they have the highest disposable income due to no children, a small rent, and a small car payment.

Over and over when playin with financial calculators you realize how important starting earlier and more definitively how those early dollars are extremely important. They are so important that after 10-15 years you can take your foot off the gas and coast the rest of the way in.

The dollars matter but the early dollars and the time invested REALLY matter.

Often when budgets and finances are talked about then the room becomes quiet and eyes divert from the source. Budgeting can be restraining, but the truth of is that it is liberating in the end.

A famous personality who I often disagree with promotes the idea of intentionality. This is the idea of telling your finances and resources what you want to do with them. I deliberately use the word resources because many of us spend 40 of our waking hours trying to accumalate them. The “I’m not a finance person” is absolutely effected by their finances. However, they probably do not know how to personalize them.

Make a concious effort to make sure that your finances are personalized for what you want in your future.

The military is very hierarchical, but until we are in positions of power then we don’t know how we will handle them. Often the people who struggle internally the most and are unsure of themselves make the best leaders. Situations are pondered by second guessing when a stronger personality may force through their instinct or first impression .

I read a book titled A First-Rate Madness: Uncovering the Links Between Leadership and Mental Illness around a decade ago and I remember one section discussing the Civil War. Lincoln suffered greatly from depression, but on many presidential ranking he comes at or near the top. The book argues that his madness was an asset rather than a liability. I think he could sympathize with far more people, even slaves, because of his mental frailty rather than be irrevocably hindered by it.

A similar occurrence happened with his Generals. George McClellan went to West Point, served with distinction in the Mexican-American War, and served as the Commanding General of the United States Army. This is the resume of a perfect Soldier and General. The right academy and experience rolled into one person. He was also ineffectual and removed from his position once they were on the battlefields. Lincoln said he was too timid and wouldn’t engage with the enemy. I think he is a good example of where he was a great General for training during peacetime when things required order, but was too sane and predictable during war time when managing chaos was required. A touch of madness makes you unpredictable and we have all read some of the “The Art of War” regarding the importance of being unpredictable.

William T. Sherman was well known to have mental illness. He broke the Confederate’s economic back and burned Atlanta. He accomplished these feats by going entirely against conventional wisdom and leaving his supply lines and having his troops live off the southern land and confederate populations. This was a radical strategy at a time when war had more rules. Armies stood at distance apart from each other in lines and fired in an orderly fashion. Naive citizens would pack picnics and watch battles from nearby hills without knowing the potential danger they were in.  Of course, there were ambushes and flanking attacks, but burning a major city to the ground was an extreme measure.  Even today, Sherman is vilified for his actions in Georgia by much of its population.

Would the orderly, perfectly sane, conventionally trained, timid, and professional McClellan have done the same? Would he have drawn the Civil War out for many more years due to his conservatism?

If the war was won or shortened by Sherman’s unconventional, ungentlemanly war against the South’s economy, then is that an acceptable tactic?

Do you know of anyone who is an excellent leader during safe, orderly situations but struggles during uncertain or chaotic ones, or vice versa?

North Carolina adopted Esse Quam Videri as their state motto in 1871. It is a Latin phrase translated as ‘to be, rather than to seem.’ The earliest iteration of a similar phrase was from the playwright Aeschylus making the idea almost as old as western society. Unfortunately, it is a very foreign idea in American culture where status is for sell for the top dollar. However, in a Morgan Housel article ‘Respect and Admiration,’ he argues that “there are cases when people’s desire to show off fancy stuff is because it’s their only, desperate, way to gain some sense of respect and admiration.’ Later he says, “Shouldn’t gaining respect and admiration through what you do instead of what you own be the goal?”

Almost on queue, Ryan Holiday inadvertently, I think, wrote an excellent few paragraphs about General Grant and the topic at hand:

If we shape ourselves into doers by studying the great leaders of history, then we can gain the skill-sets and ethics required to be a great leader. What would be worse than rising to a level beyond your competence and failing?

I would rather fail in the lower and middle ranks and learn the proper way to handle a problem than when the circumstances are more dire in the upper ranks.

Esse Quam Videri.

To be a great leader, then you must be patient with yourself and work towards greatness everyday.

To be great with money you need to have the knowledge, but more importantly the right behaviors.

To be great with money, then you need to be getting several things right; frugality is the most important, but hard work, intelligence, and some stoicism to contain your ego and expectations.

To seem; this can be bought with debt and impatience, and is paper thin.

Seneca was the richest person in the Roman Empire when he wrote this quote. Salaries fit into a bell curve with tails extending into the stratosphere on the positive side. The majority of americans can expect to fit firmly in the middle. You may receive promotions but you can be waiting decades in some sectors if you are unwilling to uproot and move which may mean less expendable income in higher cost of living areas.

I think for most people there is a limit for how much income they can expect. There are also much more important parts of your life than income like spending time with your family. We tend to try to trick ourselves that the 60 hour sacrificial work weeks are for our family, when they would much prefer you spend more time with them and live more simply.

This brings me to my next point. It is much easier to live simpler than to depend on the next pay increase. In my experience there is 1 or 2 potential positions you could fit into locally with your experience and noone really knows when those positions will be open. At some point, if I wanted more later then I had to live simpler now. I also had to invest the difference. The majority of americans are borrowing heavily from their future to live larger now by going into debt.

A historical perspective help us appreciate our modern day conveniences and luxuries. Kings and queens a century ago couldn’t imagine the technology and health care available to almost everyone today. Stoic Ryan Holiday says, the difference between what we earn and save is often due to ego. If we cared little about what others think then we would get what we really need which is financial stability and independence.

Pensions have become less and less prevalent over the decades and are solidly outnumbered by their defined contribution (401k, TSP, 529, etc.) cousins. Many people view this change as just another sign the world is getting harder for the average worker. However, if you plan to retire early, then defined contribution plans I think are the better deal.

The problem with pensions is that like social security they generally require you reach a certain age before you can begin drawing them. This makes sense for the company because someone drawing from a plan for thirty years will be paid much more than someone who starts drawing at an older age for less time. However, for those of us who plan to retire early then likely the only possible option with your pension is to delay taking it by deferring it until later. This doesn’t help much if you are retiring early. Sure it will help later, but only a few calculators and tools I have used have the complexity to model deferred pensions correctly. Also as a federal employee, the federal government is putting a huge amount of money to fund my pension. I would appreciate the option of being forced to put in my part and the government put in their part into a defined contribution instead.

Many pensions are extremely complex and the best book I have found helping to dissect and explain them is Grumpus Maximus’ “The Golden Albatross.” However, to paraphrase him, all pensions are unique and you need to dig into the documents to fully understand them.

Most of the federal pensions I have looked at are a formula which consist as a coefficient X years worked X some sort of average of your income. This means that increasing the numbers you work or your income will directly impact the size of your pension.

Another common attribute of pensions include either increasing based on some sort cost of living adjustment or not. This may include during the deferred years or not.

Some pensions allow you to retire as long as you have the required number of worked years, disability benefits, or a combination of years worked and age.

As you can see the complexities of pensions really require for you to dig in and read and probably reread the documentation. Even among Federal pensions they are vastly different. Army NAF, Air Force NAF, Marine NAF, Navy NAF, Appropriated Fund, Active Duty Legacy Retirement, Active Duty BRS, Wage Grade, etc. may all work similar jobs or in the same squadron, but have entirely different pensions. Making it more confusing is moving between the systems and how certain things will move or port with you, while some other you fully adopt of the other system.

In conclusion, pensions are extremely complex and a bit antiquated, but are a form of forced saving for retirement that is needed in many fields. The majority of pensions today can be found working in government and in especially dangerous or jobs that require youth like military, police, or fire department. Though some pension attributes might be similar or rhyme it is rare to find an exactly same pension in two different systems. Therefore, find or request your plan documents and spend time becoming familiar with them. In my experience, even human resources barely understands much of the pension system and its just best for you to do your own research.

Something I have learned is that talking about money can be very off putting to most people. i can think of few other topics that while not lewd or violent can evoke such a strong reaction. There are a plethora of reasons for this and acknowledging some of those reasons may help us be able to discuss it easier.

Money is measurable in numbers which makes it feel competitive. It is hard to measure soft skills like how honest someone is or how hard they work, but money can be seen in where someone lives, what they drive, or a number in a bank account. It is interesting that where you live and what you drive greatly influences negatively how much you have in your account, but that is another topic for another day.

Some people feel that if they have little money then people will think of them negatively. Additionally, some people are very judgmental of people who they view have too much money or that they view unfairly came into wealth.

Your ideas of money are not entirely your own. Siblings, coworkers, family, friends, and anyone else you may come in contact with you may influence your views of money negatively or positively. Your education on personal finance, economics, and how the world works greatly change your perceptions on money. Politics can influence you greatly. If you believe that all money is created through exploitation then you will think differently than someone who believes creating something of value provides benefits for members of that society.

Also some advice that is correct for the poor would be bad advice for those richer. Cutting coupons to save a few dollars may be a good use of time those with little income, while working more doing something more specialized might be better for those with higher incomes.

Generational values and world events have a huge effect on how you view money. If you have every met someone who lived through the depression then you will quickly realize that they waste very little because they have survived with almost nothing. They have seen hunger, mile long lines for free soup, and things we would normally throw away reused until in tatters. Some other view things to consider are sex or gender, nationality, religion, and culture.

In short, there are a plethora of reasons not to talk about money and reasons why it is weird to discuss. Knowing where you are and not knowing the good and bad consequences of your actions should push us out of our comfort zone to read more, reflect more, and talk more. Knowing the consequence of saving an extra $100/month in your retirement, waiting to start investing, or whether to buy the new car instead vs the slightly used one. There are reasons to do and not do all of the previous examples given your circumstances.

I was listening to a podcast a couple of weeks ago and the gentlemen being interviewed said that the common person thinks personal finance is 90% math and 10% everything else. After spending a lot of time reflecting on personal finance, I think it more appropriate to say personal finance is 10% math, 20% rules and tax laws, and 70% psychology. Don’t misunderstand me; compounding interest is a an extremely important concept to constantly reflect on. Every time I delve into the compounding of numbers I come out the other side with a sense of awe of how powerful and absolutely life changing it can be. However, if you have a psychological hangup with money, then no increase in salary or magic windfall will save you. Look at all the lottery winners who end up in a worse financial place a few years later than before they won the big prize.

This brings me to one of the more interesting and important psychological concepts to understand and it is deeply seated in everyone’s psychology; the scarcity mindset. In Kristy Shen’s Book, Quit Like a Millionaire, she calls her scarcity mindset her super power for building wealth. Shen grew up in China in extreme poverty. She explains how the national average wage in china was $327 per person. This is a less than $1 a day. For fun she scavenged medical waste heaps for things she could turn into toys because there was no chance her family could buy her any real toys. When her family relocated to Canada her previous forced scarcity allowed her to remove any shred of “invisible waste” from her life and be able to reach an extreme amount of frugality. She and her husband became millionaires in their early thirties and retired in large part due to her scarcity mindset and frugality, and now constantly travel the world.

This is the type of scarcity mindset I best understand. I have always understood the importance of saving and later learned how to invest, but I have also had medical issues which rendered me unable to work for close to half a year and left me with medical collections calling and my emergency fund depleted. That experience will probably make me save and keep more than others in my emergency fund and brokerage.

Another response to scarcity is to go in the extreme opposite direction; constant buying and hoarding objects. As humans we are working on hundreds of thousands year old mental framework and the early hominid who stored resources and hoarded them might survive a drought or winter that others would not. Today this feature of humans can lead to constantly buying trinkets to get dopamine hits on Amazon and leaving us wondering why we never have any money or financial security.

If scarcity mindset is Shen’s superpower, then I think being content with what I have is mine. Epictetus says “Contentment comes not so much from great wealth as from few wants.“ What I think should also be said is that the only way to become wealthy is to be content with living on less than you earn and investing what we don’t spend. Wealth is also what you do not see. It is the luxury car not purchased and living in the smaller house than you can afford.

However, let us reflect back on scarcity and how it can change our psychology. A central component of scarcity mindset can be decision fatigue. Decision fatigue is the degradation of the quality of your decisions because you simply have too many decisions to make. Jeff Bezos said while he was nearing his retirement that he was really only needed to provide input on a couple of big decisions a week. If you compare that with the lower paying positions in his warehouses who have extreme quotas to meet and thousand of small decisions to make a day, then you can see the extreme contrast. In addition, Bezos has all the paid help in the world to help with his house, family, cars, etc, while the warehouse worker does not.

Due to decision exhaustion of the warehouse worker we can see how they can develop some negative habits which might manifest itself as drinking too much alcohol, retail therapy, eating too much unhealthy food, or smoking. I have been guilty of all those things listed, and I have entirely eliminated most of them from my life or limited them with a better work life balance, lower stress, or medical assistance.

Unfortunately, there is not a simple or easy fix for decision fatigue. Getting a better job whether that is more money, better supervisors, office culture, or a better work life balance has helped me the most. Professional help like therapy can also help you work through complex problems that you haven’t been able to tackle in your life by yourself. Also being humble enough to seek guidance from someone successful or that you respect can point you in a direction you may not see yourself. Lastly, we need to understand that the skills and mentality that saved us through a harsh winter or survive poverty will not necessarily best prepare us and lead us into the next part of our lives. This is also true that worrying constantly about $3 questions when we are past that point financially might lead to decision fatigue and might negatively influence our ability to deal with other $10k questions.

One thing I want to add is that any google search of scarcity mindset or abundance mindset may lead you down a rabbit hole of trying to manifest wealth through some sort of spiritual belief. I don’t agree with this and listening to Jen Sincero, who is one of the proponents of this idea in her book, “You are a Badass at Making Money” was the most frustrating listening experience of my life. If I remember correctly, she spent tens of thousands of dollars to listen to a guru of some sort without knowing where the money was going to come from. I recommend getting your information from books because it is much cheaper or free from the library and vetted by a publisher and editor rather than a self proclaimed guru. Luckily she had forgotten about a 401k (this alone is frustrating) that she was able to cash out (even more frustrating) and pay her bill. She of course felt like it was divine intervention.

Unfortunately, scarcity mindset is caused by scarcity and poverty, and to be blunt it is impossible to manifest a chicken sandwich no matter how hungry you are or need it if it doesn’t exist. The better and more practical option is to devise a plan and follow it.