Today I wanted to talk a bit more about some topics I haven’t really touched on before but which I find myself thinking a lot about.
First, a little background. At the age of about 22 I decided that I did not want to be working for someone else for the rest of my life. I came to the realisation very early on that I hated being trapped in a routine that required me to go to a job every day of the week, and I certainly couldn’t imagine doing it for the next 43 years until I was old enough to officially ‘retire’. It felt like a slow death and I was determined to get out of that ‘rat race’ as soon as I could. It was about that time that I set my goal to retire at 40.
So at the tender age of 22 I started looking for ways to achieve financial independence within the next 18 years. At that time, the only way I knew how to get to that goal was to invest, and to take some risks in doing so. I had always been a saver and had no debt. At 23 I purchased my first home just before the property boom hit my town. I scrimped and saved, built enough equity in that property for the down payment on the next. I then renovated that second property, set it up as housing for students at the nearby university, built my equity and bought a third house. I repeated this process until at the age of 25, my partner and I had five houses, four of which we had cleaned up and rented to students. It was practically a second job to manage all this work, but the cash flow was good, enough that we could make all the mortgage payments easily; and because we had bought in an area just beginning to gentrify, the property prices doubled in short order.
At that time I had many people call me crazy. At my age I was supposed to be out partying and living life to the fullest, not being so sensible. I was laughed at when I told people I was going to be retired at 40. They either didn’t think it was possible, didn’t think the sacrifice was worth it or couldn’t imagine living life any other way than the prescribed path of running the rat-race until retirement.
Flash forward a few years; I was 30 and on my way to being financially independent. I had leveraged the houses and was heavily invested in the stock market. Everything was going to plan….until it wasn’t. After the crash of ’08 a large portion of my stock holdings were wiped out. Suddenly my old plan wasn’t going to work anymore and I had to rethink everything.
The last 18 months has been a time of learning for me. I see the world in an entirely different way. My goal of independence is still as strong as ever, but the way I’m planning to achieve it has changed dramatically.
A New Plan for Self-Sufficiency and Independence
One of my biggest realisations over the last year is how reliant on the system we’ve all become. This clearly works during the good times, but when things go wrong we have no control over our own lives. This is how I felt after the crash. I was in a lot of debt, I had to find cash at short notice to cover margin calls, I was extremely stressed and couldn’t sleep. I never wanted to feel that out of control again. This is when I started looking into new ways to be more self-reliant, making improvements to my level of self-sufficiency and decreasing my dependence on the system.
I’m going to talk more about this in upcoming posts, but here are some of the important changes I’m making:
- I’ve started making sure I’m more prepared for emergencies, natural disasters and economic turmoil. I want to ensure that if I’m ever affected by one of these situations that I have made preparations as much as possible. There are plenty of easy things I’ve done to make myself more prepared while improving my life even if nothing adverse ever happens.
- I’m reducing debt as quickly as possible. Two years ago my debt to earnings ratio was about 10:1. I was holding huge amounts of debt which in good times allowed me to leverage larger returns on my investments. When things turned bad, my debt became financial cancer! Now I have a plan in place to be debt free within the year.
- I’m stockpiling more food than I need. Food is increasing in cost faster than just about any investment right now and certainly faster than the rate of inflation. When things are on sale, we simply stock up and we buy in bulk every six months or so. An additional benefit is that we never feel like we have to rush to the shop when we run out of food. There is always something on hand. I can’t see how you can lose by storing additional food that you use on a regular basis.
- I’m growing some of my own food. Growing food is for everyone, not just people who want organic fruit and vegetables. Our food system is not at all robust. The ‘Just in Time’ method of delivering food to the stores is extremely efficient, but also prone to disruptions if something occurs along the supply chain. Stores only hold about three days worth of food on their shelves, so you can imagine how quickly they would be stripped bare if there were a local emergency. Producing our own food (even as little as 10%) reduces our dependence on the system. Gardening is also good for emotional and physical health and makes you popular when you bring fresh goodies to your friends.
- I’m undertaking some planning for disasters in the following order of priority – Personal-Local-Regional-State-National-Global. Despite the real possibility of a true economic melt down or catastrophic terrorist attack or some other major global disaster the most probable “disaster” for any individual is personal such as a loss of a job, loss of a family member, a fire or local weather event. I’m planning for those first.
- I’m reducing my dependence on energy. Cheap Energy will not last forever and we are already seeing prices rise on the electricity bill and at the gas pump. Reducing our dependence on these systems is reasonably easy to do by being more efficient in our use of household electricity and minimising our use of the car. This year we are working towards producing more of our own energy, mostly related to Solar.
- I’m working on a plan to own some productive land. Being able to provide for ourselves in terms of our most basic needs is the true definition of wealth. Owning productive land and removing ourselves from the systems of dependence as much as possible is a dream we are working towards.
- We hedge against “disaster”. Pragmatic things like cash emergency funds, good insurance and secondary income streams are good ideas for everyone. These types of protection can make life a lot less miserable when something goes wrong.
- What I now understand is that I am in control of my life and that what I do matters. Our culture tells us that to be successful we have to be rich and beautiful. Somehow, most of us buy into this from a young age and until we challenge the concept and decide on our own path we will never be truly happy.
This last 18 months have been a wake up call for me and in redesigning my life I find myself more in control, more content, happy and stress-free. I’m designing the life I’ve always wanted, but it’s coming about in a way I never expected. Life’s funny like that.
Photo by: alicepopkorn