Why do we pay a massive amount of loot for things that are free?


“Life is a dream for the wise, a game for the fool, a comedy for the rich, a tragedy for the poor”

Sholom Aleichem

 

It occurred to me recently that everything in my life that I pay a lot for is actually a free resource sold to me at an outrageous price under an oligarchic system.

Start with energy. Energy is abundant and completely free. It falls from the sky everyday completely free. It warms our face and jostles our hair. There is abundant free renewable energy in the sun, the wind and the oceans but the very fact that it is free ensures we will never have the opportunity to enjoy completely free energy. Instead we are sold expensive utilities that burn dirty fuels or require massive thermal or hydro electricity infrastructure which we are charged royally for the privilege of using.

Think water. Clean water is an abundant free resource covering the majority of the planet. It falls from the sky. Instead of keeping our natural aquifers and streams clean we allow companies to tip toxins in and pollute our waterways to hell. Then we buy expensive chemicalized soup sold to us as clean water, but it really harbours all manner of toxic ingredients like flurorides, nitrates, arsenic, heavy metals… and again we pay royally for the privilege of drinking this crap.

Next food. It grows in the ground in abundance in most soils given access to a little clean water. In small communities we can easily produce the sparse number of calories we need to thrive on a plant based diet. Instead we buy all of our food from unethical mega markets that destroy environments for profit. This is compounded with the environmental devastation of animal agriculture. Yet again we pay an absolute fortune for something that is essentially free if you a prepared to put in a little effort and get a few of your fingernails dirty.

Now transport. Walking is good for your health, enjoyable and free. Instead of designing cities around walking we have built environments where we need signs that read ‘watch out for pedestrians’ like humans outside of a motor vehicle are some alien race that shouldn’t even exist. Once again we’ve been fooled into a lifestyle where we live miles from anything useful and have to spend hours of our lives and hundreds of our dollars in transit.

It perplexes me why we put up with this structural larceny. Mostly we have an eye for a deal and in the main enough courage to stand up to ripoff merchants and ask for our money back when a product or service fails to deliver fair value. Yet when it comes to the big stuff in our lives, the free stuff that we are charged through the teeth for, we whine about our utilities or expenses, but mostly we never question the validity of these gigantic lifestyle transactions. The reason for our apathy is that we are carefully programmed little robots. We are inculcated in cultist behaviour from birth. We are set upon at a very young age to expect to have to work to pay dearly for our lives. We are programmed to focus on hard work and increasing our income to pay for ever more exorbitant living costs. Quietly and meekly we go. We do as others do. We’re scared to stand out. Squeak. Squeak.

If your family is currently struggling to pay for the costs of life you need to seriously consider why you must rob your family for these resources that are free and should be shared freely. There are any number of possible actions, from protest to social reform to collective refusal to pay to attaining these resources much cheaper or completely for free. Any of these actions are positive and significantly better than paying your bills mindlessly.

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Rent or buy? Is owning your own home a financial mistake?


“I figure if I have my health, can pay the rent and I have my friends,
I call it ‘content'”

Lauren Bacall

 

The shared narrative goes something like this.
Grow up.
Study.
Get a good job.
Find your soulmate.
Buy a house together.
Have kids.
Retire.

That’s a cool dream, but a reality check on that path is one must understand that the numbers rarely support buying your own home as a good financial decision. Basically, it’s almost always better to rent.

Why?

Let’s imagine you own a nice 3 bedroom house, in a good neighbourhood, in a good market. You plan on paying off that mortgage of $350,000 over 25 years. On 6% floating you will pay $676,124 for that place that is only worth $350k. Contrast that with renting the same house for 25 years. If you rented the same home for 25 years you will likely pay between $17,500 pa ($437,500 over 25 years) to $24,500 pa ($612,500 over 25 years). That is a straight up saving of at least an extra $100,000 in your account and we haven’t even factored in property tax or maintenance costs yet. Property tax is included in your rent, but we need to add it on top of the $676k you will gift to the bank to own that $350k house. Property tax where I live is around $3800 per year increasing annually faster than inflation. Ignoring inflation this expense will add another $100,000 to the bottom line bringing the total up to a whopping $771,124 over 25 years.

Now lets talk maintenance and renewal. Both are included in your rent. When the roof leaks in a rental it’s your landlord that has to fix it before you move somewhere better. When you own the home you have pay for the upkeep. We put aside around $4000 pa for each of our properties. $3000 is spend every year on basic day to day maintenance. This is simple do it yourself stuff like painting, replacing the odd bit of decking timber, fixing spouting and so on. The other $1000 we save for heavy maintenance and renewal. Over 10 years this allows a budget of around $10,000. It’s not quite sufficient if you need a new roof or a major structural replacement like repiling or reinstating a rotted wall cavity, but it covers most things and its generally enough of a cushion to softens the impact of the really big bills.

Unfortunately this $4000 per year adds another $100,000 to the bottom line so that house just cost you $871,000 compared to say $500,000 in rent over the same period.

About now you are probably thinking that once you have paid off your home it becomes a good financial decision.

Nope sorry it doesn’t.

Now you have $350,000 of your cash tied up in an illiquid expense. Notice I didn’t say asset. An asset makes money. If your home was a rental giving you income then that’s a different deal, but its not. Your home is still going to cost you $8000 every year you own it. Maintenance and property tax. The money tied up in it is also an opportunity cost. If you saved $350,000 and had it in a investment making a paltry 6% you could draw a living cost at a safe withdrawal rate (5%) which works out to an income of $17,500 per year. Put another way that is about what you’d be paying in renting a house. Now all you’d need to earn each week is a little living and fun money. Probably so little that you don’t need the office anymore. If you have managed your life around simple living principles then chances are you could nab this loot working part-time, in a casual gig like singing in a pub band or from a small hobby business.

Hello freedom. Bonjour laziness!

Key takeaway message: It will take you 25 years of work to pay $800k for a house only slightly over a quarter of that value, but you could have saved $350,000 in 1/3 of the time. That’s 8 years or less to leave the office permanently. Just by making one lifestyle choice. Level up points if you are already thinking that perhaps you don’t need to live somewhere that rent is expensive if you didn’t need to go to the office everyday.

I hope this article helped. Let me know your thoughts by leaving a comment.

If you’ve read this far you may also enjoy:
A nifty way to buy that house
Right size your residence: How to build a thermonuclear money bomb
Critical Advice for anyone buying a house

How to start a profitable business without a good idea


 

“If you have one good idea, people will lend you twenty”
Marie von Ebner-Eschenbach

 

Sitting in a bland corporate office, usually bored beyond belief, I often daydreamed about starting my own business. Work is almost always boring so I fantasized about this a lot.  Sometimes when work was completely soul destroying I’d get more serious about finding a start-up venture so I’d spend entire weekends hunkered over a battered notebook racking my brain for that 1 good idea.  Over a long period I scribbled enough ideas in dog eared pages to fully fill the journal. For all that effort I still wasn’t in business. I didn’t come up with a single idea that I could actively pursue to completely change my life.

I want to warn you not to waste your time trying to find a great idea. Truthfully your ideas probably aren’t all that good (how’s that for honesty?). The good news is that you don’t even need a good idea to be in business. I discovered that there really was only 1 thing I needed  to be in business and it wasn’t a great idea.

The only thing we need to be in business is 1 paying customer. If you have a customer paying you then you are in business. It’s really that simple. Focus on finding just one paying customer and you will discover that great idea quite simply.

The great idea comes out of addressing a need of a potential customer. That’s where the best ideas come from and the bonus is that you will have some certainty that this is an idea you can really make some money off of. If you are stuck in the great idea loop try shifting your focus from that 1 great idea to finding that 1 paying customer. For me it was the difference between getting into business for myself and forever being stuck on the sidelines waiting for a revelation to bowl me over.

 

A holey moan about the stuff that sucks


“The junk merchant doesn’t sell his product to the consumer, he sells the consumer to his product. He does not improve and simplify his merchandise. He degrades and simplifies the client”
William S. Borroughs



My shoes have holes in them again. It’s a bit annoying but it’s summer now so it’s not as bad as when it’s raining in the winter and the sidewalks, footpaths, byways and tracks are all soaked.

I always wear my shoes out directly under the ball of my foot. It’s the result of teaching myself to learn to walk as an adult. Before that I used to wear these high heeled men’s business shoes all day and over time my body forgot how to walk properly. I’d strike the ground on my heel when I walked. Maybe you do that too. If you’re so messed up you think this is natural take off your shoes and walk on a hard floor. What hits the ground first? Try to deliberately heel strike. How does that feel?

If you want lots of fatigue and body pain put shoes on and bash your heels on the ground. If not relearn to walk like I did. Anyway that’s all off topic. I’m having another moan about shoes. I need good-quality shoes, but most of the shoes around are short life junk or durable, but clunky. Too many are from the skin of an animal which seems weird to me to want to put your foot inside part of the carcass of a dead thing. Probably the main objection I have to another pair of new shoes is that they are so overpriced for the short life junk that they are. I get a few months and then I’m throwing them to the Dustman. So until I find something better I’ll just go on happy to walk with holes in my shoes and money in my pocket. Sometimes when I have problems like these I consider starting a company because I feel there isn’t any good competition, but then I remember why I don’t.
There is no money in making things that last. Only money in things that suck.

It’s a sad situation we’re in. Everything is made poorly when we have all the resources, intelligence, technology and materials to make amazing stuff that could easily be passed down within family lines.

That job of yours isn’t paying you anything like you think

“I was going to live on my salary or go down swinging”
Gene Tierney

For every dollar you spend you’ll need to earn two back. That is why saving and investing every dollar you can is so critical.

You have to earn two dollars because that dollar saved comes with expenses, but most of us have never really looked at the expenses of work. We think of work mostly in terms of our theoretical income.

There are expenses though. Lots of them. Your travel to work, the tax on that income, the property tax, your costume tax (suit and tie or the nice shoes and blouse), some food and the other things.

Most people don’t understand their real income per hour is nothing like what they see printed on their weekly pay check.

For starters say you earn $45 per hour. That sounds pretty good and works out to around $1800 per week gross. That’s based on a 40 hour week.

First deduct the tax and look at your net income. Let’s use a rate of 30% which is common (but may not be what you pay in tax). That drops your after tax take home pay to $1260. If you were still working the 40 hour week then your real rate of return for your work falls like a stone to $31 p/hr. Problem is that if you work in the western world you probably don’t work 40 hours. Turns out you work 55 and each day includes an hour commute to work in peak that’s 65 hours.

You are straight down from theoretical $45 p/hr to a little under $20 p/hr. Starting to sound a bit pathetic isn’t it?

Now deduct the MBA you are studying for at night to get a better qualification. Say you spend 2 hours on that 4 weekdays and 6 hours on the weekend you just dropped your rate to less than $16 bucks p/hr.

Now things are looking grim, but we haven’t even begun to consider the costs of working. You may buy your lunch for $10 per day and buy about $100 of new work clothes every week to keep your corporate wardrobe looking neat. You need a tank of gas for $70 or a train or bus ticket and we’re hitting $13 p/hr.

There are some costs we haven’t even considered. What about the time and money you spend to decompress. Say you sit watching TV for an hour after work in a semi vegetative state drinking a whiskey. Add those costs in. What about those costs of that MBA you are studying. Maybe you’re job requires you to pay some professional registration expenses. What about all those cell phone calls to home to sort out issues in your lunch break?

The reason I call it a McJob is that you think you are earning a hefty swag, but when you think about it you aren’t earning much more than you could get in some low ball menial job where you can walk from home, go home for lunch and wear track pants all day.

Do the calculation yourself and share in the comments below. It really puts that job of yours into perspective.

Casting a better lens over the pursuit of freedom


Freedom is just another word for nothing left to lose
Anon

 


I’ve found the concept of freedom splits logically into one of two camps. The freedom from something and the freedom to do something. From or to.

Sure you want freedom from not have to limp to work in high heels at 6am on a howling mid-winter morning. Or the from having to sit in a grey office, breathing stale air, with people you hate being slowly suffocated by a button hiding piece of cloth tied around your jugular. What’s so fucking embarrassing about buttons that in order to hide them we are prepared to be choked all day?

I get what you want freedom from and having shared your experience for a part of my life I fully understand why most people want freedom from their work.

The other way to flip the coin is to think about freedom to…

Freedom to:
play with your kids
master the guitar
start a catering business
go kite surfing
sleep in
ride a mountain bike for 8 hours any Tuesday you feel like it
surf till noon everyday in summer

I’ve always advocated life design. Figuring out what you want and then chasing it both barrels blazing.

When you focus on freedom from its a negative trip that leads to stress. It’s the flight response. The running away to hide feeling creates a spiral of negative emotions, broken helpless thinking and unbelievable sadness and stress. However, if you flip it and look at freedom to do things you can created a completely different type of energy. ‘Freedom to’ leads to a new type of stress called eustress. This is a positive motivating energy that pulls you towards your goals. It’s night and day. The exact opposite of a stress reaction. You wake up inspired, energised and ready to get what you want out of life. Eustress wakes you up early. Time disappears. You get in the flow state where work is play and nothing can stop you from achieving the result you’ve targeted.

There’s no time to lose this is your life we are talking about. Do some visioning of what you’d like. How you would live your life post working. Make it exciting and compelling. Now figure out how to get there and take some action or are you going to just sit there ironing your neck ties.

How boring.

Set your laser to stun and find that escape hatch


“Lottery tickets are a surtax on desperation”
Douglas Coupland

“Forget the lottery. Bet on yourself instead”
Brian Koslow

 


There are only a handful of options for idle anarchists that have seen through the thin veneer of soulless monotonous corporate work.

The options are:

Rely on luck, magic and fortune. Marry a rich person. Win the lottery. Strike a gold seam in the backyard.

Play for pay. Find work you love. Do it passionately and full heartedly. Accept that you may never pay all of your bills, but you will enjoy your work and be more fulfilled in your life. This is the path of the artist, the musician, the writer, the hobbyist.

Massively reduce your cost of living. Live frugally and simply. By reducing the costs of life and enhancing your skills you can limit or eliminate the need to work.

Build a business and farm it for income or sell it for profit and live off that nest egg.

Of course you can combine all of these options and fast track your freedom from the corporation. Even though you might not have the same income as you would if you continued working chances are you will relish in the challenges of a self determined life and enjoy many more of the minutes of your work experience.

[If you have a better way please share it by clicking the speech bubble under the title and leaving a comment].