State of the Union: July 2016 Update

Where to begin. I have a number of ideas for blog posts floating around my head, but haven’t found the time to put pen to paper. Given the multitude of things that have happened both personally and professionally over the past few weeks I have decided to do a little journal/blog update. Some of these ideas are topics that I plan on diving into further.

Personal

The biggest news for me personally, beyond recently paying off my student loans earlier in July, is that I went on a short vacation. I ended up staying with my good friend Andrew up in Montreal. Andrew has been bugging me to go up there for years now, and this summer we finally decided to make it happen. I am glad we made it happen because it was an excellent trip and I had an awesome time.

I am not a big traveler. Since starting my law firm in late 2012, I haven’t taken more than 2 business days off (last year I believe I took a Friday and Monday off). This time I did Thursday, Friday AND Monday. I know, holy shit, what a massive amount of time away from the office. In the past it has always felt very stressful to take the time away, and the ensuing shit-tornado of returning was always stressful. This trip I was taking the time off without an assistant to hold down the fort so I was really unsure of how things were gonna go.

Oddly enough this was the most relaxing trip I have gone on. Maybe it was due to the high volumes of exercise, food, and alcohol, or maybe I just got lucky with a short lull in my practice, but I flew home Monday night and got into the office around 10:30 Tuesday morning, and while there were a pile of voicemails to contend with I managed to work through everything quickly and even left the office a little early (around 5 or so?) that evening. Spectacular.

It was a great trip and it has me thinking about a number of things, including travel, and living in a city. Montreal is just a tremendous and beautiful city (at least in the summer) and it was so nice to be somewhere completely different for a few days. What amazed me most was the amount of young people. Here in S.W. Florida everyone is old and limping around, exercising poor situational awareness, and generally getting in the way. To be surrounded by so many young people and the hustle and bustle of a city made me feel as if I were in another world. Just an awesome trip.

Reflecting further on the student loan situation, I was never hit with a wave of euphoria. I don’t think anyone jumps for joy when a debt gets paid off. Instead, I just feel relief really. I am relieved to have that obligation behind me and I look forward to money piling up in my checking account and being diverted to assets, not paying off liabilities. I’m relieved to read a forum post about someone’s student loans and realize I am no longer in that situation. It’s great to own my degree “free and clear”.

Books

I have been reading quite a bit, shooting for my 2 books a month goal that I set for myself at the start of 2016. Over halfway through the year and I have done a good job keeping my nose in a book and have read some cool stuff.

The past few books have mostly been fiction, including 3/4s of Dan Simmons’ “Hyperion” series, a Raymond Chandler Philip Marlowe book (awesome books), and some Charles Bukowski (not the best influence honestly, but always an interesting read).

After stalling out on Dan Simmons’ series after finishing Endymion, I decided to switch over to some non-fiction. I read Anthony Robbin’s “MONEY: Master the Game” book, which is the subject for a stand alone review (it was actually pretty good), and I am currently reading Sapiens by Yuval Harari. I am maybe a quarter of the way through it, but so far Sapiens is proving to be an interesting read. Evolutionary biology has always interested me, especially after reading The Selfish Gene in college. That book really helped provide some perspective and I think Sapiens is a novel that will have a similar effect.

Anyhow, books are being read so that’s good.

The Affiliate Site

My main affiliate site / money making blog is lumbering along. I have published weekly for all of 2016 and while traffic has slowly petered out since the holidays, the site seems to be gaining a regular audience and I have received feedback that people are enjoying the regular content and additional authors that I have brought to the site. In the past I wrote every single article, and probably averaged 1-2 posts a month. Now I post every week.

While I haven’t seen a huge payoff in traffic or earnings yet, I am laying the foundation and think that eventually the site will turn a corner and all of the excellent content I have added will pay good dividends. At the very least, it will sustain the site’s current earnings (around $1,500 a month gross in the off season) with a minimal amount of work on my part.

The Law Firm

The last time I blogged about my firm was in mid March. My assistant of 1.5 years (and my first employee ever) had just left the firm. I immediately hired a new paralegal. She was literally the first person that I could interview. She represented that she could do the job, had decades of experience, and seemed a little quirky, but in a fun way. So I hired her on the spot.

In retrospect that was a huge mistake. From the first day I knew that this lady was not my best hire. But I tried to make it work. After 2 months of trying I had to let her go, and I had no one lined up to replace her. This time around I patiently interviewed candidates for a couple months. I never found that elusive “perfect hire”, but did bring someone on board this past week. She is totally different from my previous 2 paralegals (who were much older), but I am hoping this one will stick.

Otherwise my law practice is chugging along, at least as much as it can chug along with me being my own paralegal. There is a lot of administrative and busy work in the practice of law (especially in litigation), and I was doing all of it. So I felt busy (extremely busy), but wasn’t terribly efficient. But I would rather be in that position than hire the wrong person again, so I slugged it out.

I have a couple cases that are bothering me (there are always a few), but I am trying to get smarter about case selection. Proper case selection has a huge impact on your practice and quality of life.

Investing

After reading Tony Robbins’ book I decided to liquidate some of my U.S. large cap index funds to establish a small position in bonds. Previously the only bond exposure I had was through my position in target funds, and was less than 5% of my portfolio. Plus I was over-weighted in U.S. large cap stocks. So I now have a small (~$2,500) position in Vanguard’s Total Bond Index Fund. My bond holdings are still under 10% of my portfolio, and I’d like to continue to bolster that in the future. I figure at the very least this will give me some ammo to use in the event of a major market turn, plus it should reduce volatility. I am not 100% sure what percentage of my portfolio I want to be in bonds, but somewhere between 10-20%.

This business with Brexit has been interesting, and like everyone else I’ll be very curious to see what happens in the next few weeks. I already have a good chunk of my small portfolio in international index funds, so I don’t know if I necessarily want to buy more, but will continue to contribute to those funds through dollar cost averaging. I’ll be watching the markets closely and may scoop up some additional stock if the markets take a big hit.

My investment in silver has done pretty well, and only appears to be doing better in the face of this market uncertainty. I think it’s a good idea to have some level of exposure to precious metals and I have increased this position slightly via Vanguard’s Precious Metals and Mining Fund.

My investment in Lending Club stock hasn’t tanked yet, but I am considering selling some of that off. If the U.S. markets take a huge dump I’ll hold off on liquidating for the time being.

This Blog

I have tried to post at least once a week, and have been pretty good about that (with the exception of last week while I was on vacation – didn’t have the time or brain cells available to write much). The blog sees virtually no traffic, but I am not surprised. I have done nothing to promote it, and most of the content isn’t terribly valuable or amazing. I haven’t done a particularly good job editing these posts either. Even if I were taking this more seriously, Google has a sandbox that takes months to get out of.

So there are a lot of excuses, but at the end of the day I am not disappointed because I am having fun and taking things at my own place. I have no real expectations beyond the goal of writing at least once a week. I have experience blogging and know how much work is involved to experience any level of success – a ton. This blog is unfocused, rambling, and self absorbed. I haven’t put in the effort and I don’t think I have created much value in the content for readers.

This has been more of a thought experiment, and the very act of writing has been cathartic and doing things like writing out goals, chronicling my progress, and forcing myself to form semi-coherent arguments about financial decisions has been valuable. I enjoy writing these posts, and I am treating this as more of a glorified journal than anything.

Final Thoughts

We are over the halfway mark through 2016. Time is flying. Generally I feel like I am heading in the right direction. Things aren’t perfect (they never are), but one thing I am trying to do a better job of is practicing gratitude. It’s very easy to look at what you don’t have, when the truth is if you are able to read this, then we are all incredibly blessed and fortunate for so many great things in life.

In pursuit of a debt free lifestyle and ultimately financial independence it is very easy to simply focus on the destination. If you only focus on the destination then I think the end result is hollow. You can’t just live for tomorrow, but must learn to appreciate what you have today. You have to be present, and you have to be thankful.

On that note I am going to go to the gym and head into the office to get some work done. Until next time.

Giving Debt the Middle Finger – I Finally Paid Off My Student Loans

I made my final payment on the student loans this past week. The remaining balance was the better part of $7k. After paying all the bills for June, I saw that I had the money in my checking account. And for some reason I have tortured myself with these loans. Despite aggressively paying extra principal each month, and despite refinancing them from 6.8% interest to under 4% interest, I was still never able to compartmentalize the phenomena of being responsible for these loans – every time I looked at the statements I felt compelled to throw more money at the debt, and the closer the balance reached zero the more I wanted to pay the fuckers off.

So after seeing I had the cash to cover this debt in my bank account, I decided to finish it off with one final key stroke.

I am writing this post on a Saturday, and I pulled the trigger earlier on Tuesday. The situation has begun to sink in, although it’s still not entirely “real” to me. It’s great not to have this balance needle at me any more, but I think it will be even greater to see money come into my checking account that is not immediately earmarked to pay off debt. Instead, that money can be used to acquire assets.

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For a moment there I almost felt guilty. In a way, this was a irrational decision. The interest rate was under 4% and I was at the tail end of the loan; the part where most of your payment goes to principal. The prevailing notion is that you can do better by playing interest rate arbitrage and investing in the stock market, real estate, peer to peer lending, etc. And there is also something to be said for liquidity. Cold hard cash to deploy when opportunity strikes or need arises. Once you pay off a loan, you can’t get that cash back if you need it. So there is an opportunity cost to paying off debt early. Aggressive investors play the arbitrage game, find higher returns elsewhere, and keep liquidity in mind if a good opportunity comes along.

That feeling of guilt has largely faded away. The debt was like a splinter under my fingernail, and I’m glad the day has come where I could finally pull it out. No real regrets at this point. I’ll let you know if that ever changes.

I think the exercise with the student loans and my desire, my borderline unnatural urge to pay them off, says a lot about my personality. Ever since I graduated and saw exactly how much I owed my burning desire has been to pay this debt off. As soon as I had the money available to pay more than the minimum payments I was paying extra towards these loans. This was before really exploring the personal finance blogosphere. It’s clear to me that I am not a huge fan of unsecured debt. I don’t plan on taking on any more in my lifetime.

I remember early on I was trying to figure out what was better: to pay off debt early or build up investment accounts. It was the exploration of that topic, the search for a bright line rule, that got me to some of the personal finance blogs that I now read regularly. The decision to use excess cash to pay off debt vs invest is a somewhat deep subject, and one I plan on discussing in further detail in its own stand-alone post. The bottom line is that there is no bright line rule. Everyone’s situation is different. In my case, while I aggressively paid down debt, I still decided to build up investment accounts to the extent that it made sense from a tax perspective.

Debt Paydown Over Time
A fairly accurate graph of my debt paydown path

I am glad that I also contributed to investment accounts during my debt pay down period, and I think there are 3 main benefits for doing so. First of all, I was able to realize some tax benefits by doing this. Secondly, I was able to get my nest egg snowball rolling a little by contributing to investment accounts over the past 3 years or so. Building long term wealth is all about time in the market, not timing the market, and the best time to start investing is 20 years ago. The second best time is 3 years ago. And my final reason is liquidity. Most of my money is locked away in IRAs, but I do have a modest taxable brokerage account, that I could liquidate if needed.

Of course, by contributing to these accounts I delayed the time it took to pay off my loans, but once again I don’t think I will regret the path I have taken. I’m pleased with paying these loans down in under 4 years and it feels great to have that entire ordeal behind me. I feel privileged to even have the choice of whether I make extra payments or contribute to investments. That is a first world problem of the highest order.

And ultimately, the loans served their purpose. It allowed me to finance an education to create a better future for myself. I still think there are problems with our education system and financial forces behind it, but ultimately the decision to go to school and take on debt was a decision I made. No one held a gun to my head. I consider myself lucky to escape with mostly graduate school debt, to have gone to a state school vs. a private one, and to have invested in a valuable degree. In retrospect I am not sure exactly what I would have done differently, but I will think on it and perhaps write further on the subject.

Looking Ahead

So now that my debts are mostly cleared (I still have a small car loan and small mortgage), I have a modest portfolio to build off of. The car loan will get paid off quickly. I have only made minimum payments on that loan (at 2.99% APR), and I’ll likely zap it over the next few months. The portfolio sits right around $75k. It’s a good start, but not near enough to provide any kind of real financial security.

As I look ahead my new goal is to be able to walk away from my day job in 10 years and 20x my portfolio. I’d like to also acquire more cash flowing real assets and build out my online business. The goal is to have my money work for me, rather than the other way around.

The practice of law is hard, and only getting harder. Like most people, I did not go to law school out of love for the law. I went because I was adrift in life, afraid of putting myself into the job market and failing, and thought it was my best shot at making decent money and ultimately finding happiness. I thought hitting the “snooze” button for 3 years and going to grad school would somehow weather the economic shit storm and avoid the pain of finding a good job. I was wrong. My problems were there to greet me the day I graduated, only now they had 70,000+ friends behind them.

The bar association is slowly gutting the legal profession, while technology is also driving many lawyers to obsolescence. I don’t mean to whine; just stating the facts. I have no problem with technology, and certainly there will continue to be a need for highly talented lawyers, but even if you were to not factor in the pressure on the industry, you still have the pressure of being a practicing attorney. It can be extremely stressful, especially if you are a trial lawyer, and the practice of law has chewed up plenty of people.

With all of that said, I have enjoyed practicing law. I think it’s a great privilege to be an attorney and I love being self employed and helping clients solve difficult legal problems. I also love being in Florida. Growing up my family moved around a lot for my Dad’s work, and I’m glad that I can stay in one place if I so choose. I don’t regret my decision to become a lawyer, and I think the entire exercise has made me a better person.

The legal markets will continue to evolve, but I plan on evolving as well. I started at the bottom with little. In fact, I started $120k in the hole. I also had poor self image, I was totally insecure, I had no money, no network, and no clue what I was really doing. I timidly put one foot in front of the other and started walking towards the light. The past 4 years have been an amazing journey of self discovery. Who would have guessed that beneath all the layers of self-loathing and neurosis there was actually something that resembled a spine and pair of balls. There was even a desire to get off my ass and make something happen. To finally face reality and become a man. Who would have known.

This first leg of the journey was all about laying the foundation. The next part is about building the empire.

Wearing Uniforms to Reduce Decision and Wallet Fatigue

We live in a world full of choices. Everything from what we want to do, who we want to do it with, to what brand of toothpaste to buy at the grocery store. And if you are like me, you make dozens (if not hundreds) of choices every single day.

In my case, I like to think they are important choices. As a business owner and lawyer, I have to make critical decisions for my business and clients on a daily basis. Everything from accepting or declining a case, to prioritizing tasks to making important strategic decisions on a client’s matter. Some of these decisions can have a grave impact on my future, and the future of the people who have hired me. And then there are the more mundane choices. What to have for lunch, what exercise to do next at the gym, etc. These choices can be nice luxuries, or in some cases they can become an anxiety laden burden leading to decision fatigue.

Personally, ever since I got out into the working world my goal has been to simplify my existence. That’s what attracts me to paying off debt and pursuing financial independence. That’s what attracts me to trying hard not to focus on acquiring a lot of “stuff”. The end result is cutting out all the bullshit that can consume people. The endless hamster wheel of the rat race. Maybe it’s because deep down, I’m lazy. Keep up with the Jonses? Fuck that, I’d rather stack some cash so I can eventually check out. Regardless, the goal for me is to try and declutter and simplify my existence wherever and however possible. You can argue it’s to free up mental CPUs to make better decisions when it really counts, or a deep desire to avoid bullshit at all costs.

One way I have been able to cut down mundane decisions and to free up mental CPUs is to wear a uniform. If you were to see me at my office on any given day I’ll be wearing dark gray or navy blue slacks, a blue or white long sleeve button down dress shirt, a black leather belt and black leather shoes. I basically rotate through all my clothing and grab whatever is next on the rack. I won’t claim to be the first person to come up with this. Plenty of successful people wear uniforms.

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The trick for me is to buy quality clothing that fits well and is comfortable, and then to stick with what works. I like solid colored shirts because people will notice if you wear the same patterned shirt all the time. I have 4 pairs of the exact same shoes, which extends the life of the shoes dramatically.

Granted, all my work stuff is relatively expensive (Brooks Brothers clothing and Allen Edmonds), but it looks good and holds up well. I also have a tailor by my office, and I make good use of her to mend and alter my clothing as needed. It’s money well spent because clients and other lawyers notice and appreciate the fact that I look like a professional. It sounds a little ridiculous, but in the working world image is important, and it all goes to the bottom line.

So while I am generally pretty cheap, work clothing is one area where I don’t want to be a tightwad.

But even if the clothing is expensive, it all gets used regularly and I get my money out of it. I think this is far better than buying a bunch of clothing that never gets worn. This happens, especially if you buy a lot of trendy or one off pieces. I have cleaned tons of stuff out of my closet that I bought on an impulse and then rarely or never wore. Eventually that stuff gets chucked to Goodwill, and it’s like throwing money in the garbage. I know exactly what dress shirts I like, what pants I like, etc. Everything gets worn and nothing gets wasted. At the end of the day I think it saves money.

I have enjoyed having a work “uniform” so much that I have instituted the same policy for my after work and weekend clothing. On the weekends I’m a lot less formal. It’s shorts and t-shirts for me year round. I used to wear cotton t-shirts when I was younger and assembled an impressive wardrobe of graphic t-shirts. Stuff I thought was cool.

Once I got a little older I was able to step out of my own mind a little and stop trying to be so “cool”. I switched to plain t-shirts and polo shirts. This approach worked well for law school. It was a little more mature than the sweet wolf t-shirts I wore in college, and I began to appreciate the simplicity of having a uniform of sorts.

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I also found some plain cotton shorts at Wal-Mart for under $10 a pair that I really liked. I bought several dozen pairs. They are called Wangler “Timber Creek” shorts. Wal-Mart no longer carries them, instead only selling goofy cargo shorts, but I was happy to see that K-Mart stocks them, and that there is still a K-Mart in my town.

These days I wear a gray quick-dry shirt and plain shorts on the evenings and weekends. These are perfect for working in the yard, going to the grocery store, working out, etc. I pair these with some dark brown Sperry Topsider boat shoes and I’m basically ready for anything.

As an aside, I have had my Sperrys for 5+ years now and they are still going strong. The soles are surprisingly tough, and although the leather has worn and cracked a bit, they are still semi-presentable. I like the fact they are closed toed (a must if you have any common sense), plus there is no need to wear socks with them. They have held up way better than a pair of tennis shoes. I think what I will do is acquire another pair and keep them as my “nice” pair, if I go out to dinner or do something that requires looking sharper. The old pair is still perfect for mowing the lawn or tooling around on my bicycle.

And if you live in the South, then I highly recommend shirts made of “quick dry” material. For whatever reason it took me a while to jump on this bandwagon, but I am never going back to cotton t-shirts for casual wear. I sweat like a pig, and while these quick-dry shirts still take a while to dry out, they are a lot better and a lot cooler than cotton shirts. Just don’t put them in the dryer (they shrink).

While I can never say I spent a ton of money on clothes, if you are looking to shore up your budget, this is one place to look. Some people go on clothes buying bans, or only wear rags. I’m not that extreme (or that rich), and probably spend under $200 a year on clothing (including shoes, underwear, etc.) and I’m comfortable with that level of spending. I have never been a big clothes shopper so if the stuff works I’ll pay for it and get on with my life.

Work clothes I’m probably at $500 a year or so after building up a base line of suits, shoes, etc. This is for 2 or 3 dress shirts and couple pairs of slacks. Throw in a pair of good shoes and I’m probably pushing a grand. It’s a fair amount of money, but in my business you have to look the part. The acquisition of the clothing may be a little painful, but I never wake up worrying about what I am going to wear. I argue that the peace of mind is priceless.