Author Archives: Robert M. Brown


What I am going to be talking about here is freedom. Not in the sense of Preserving Our Liberties and Fighting The Great Government Conspiracies, but the things that really impact our personal lives.

Not that government encroachment on our traditional liberty isn’t a worrying trend, and I may touch on it now and then, but for the most part family, careers, and our personal decisions have a much greater impact on what we can and can’t do. Not even the most repressive totalitarian government is going to lock down your life like a new baby will. It’s not unusual now for people to spend more hours working than sleeping, which doesn’t leave much time for anything but work, getting ready for work, getting to and from work, and sleeping. And if you’re working and have a new baby, may God have mercy on your soul.

How do you balance the obligations of friends, family, and work, and still find time for yourself? Have you ever seen a year go by and realized at the end of it that you didn’t reach any of the goals you had set yourself? These are important questions to me, and I think to other people as well. For over a year now I’ve been trying to balance the demands of my consulting business with my own desire to spend as much time as possible with my son, not always with great success. I don’t claim to have any special wisdom, but I’ve learned a few things in that time and I hope to learn more in the future.

This blog is something of an experiment. I’m going to ramble here as I have time and something to say, and I hope that some people may find what I have to say useful. I don’t have comments enabled here, for various reasons, but anyone is free to email me at I may quote you in a future post, so if you don’t want that be sure to say so in your email. I hope to hear from someone other than spammers.

That light you see….

I think I have the site looking more or less how I want, so it’s time to start working on some content.


See, we’ve got this little 14-month old ninja tornado rampaging about the house right now, teething like a whole pack of beavers on amphetamines (he’s getting in eight–eight–teeth all at once), and that doesn’t leave much time for anything else. Even with cutting my sleep back to about four hours a night I don’t have lot of time for such luxuries as reading, writing, or eating.

I’ll have more to say about this later, but right now I think I’m going to go take a nap, before he wakes up again.

Why Freedom?

Freedom and happiness seem to be intertwined, at least in the Western world. How much freedom a person needs to be happy varies from person to person (and frequently doesn’t correlate with how much freedom they say they need) but with certain exceptions we all want choices in our life.

Sometimes the freedom is only an illusion, a feeling of freedom without the substance. Driving a convertible, for example, or riding a motorcycle. Does riding in the wind really make you more free than riding in a cage? Does it matter if the illusion makes you happy?

Sometimes the appearance is more important than the reality.

What is it about the feeling of freedom that makes us happy (or is a requirement for happiness)? Freedom is, at its heart, the ability to chose. To exercise the free will that makes us human. Without the ability to say, “No, damn it, I’m not going to have French Toast this morning. I’m going to have pancakes,” we begin to feel like caged animals, driven only by instinct or, even worse, someone else’s will. Prisoners and people in an abusive relationship experience this on a regular basis. When you constrain a person’s free will you take away some portion of their humanity.

But people are social creatures and living in human society requires each of us to give up a portion of our freedom. It is an economic transaction; you trade a portion of your freedom for the company of people who you hope will bring you more happiness than would the freedom you have sold. Most of the time it’s a good trade. If the person who has lost his or her free will is in a sad state, so too is the person with absolute freedom, but no lasting human contact.

For most of us, perpetual loneliness is too high a price to pay for absolute freedom. We try to strike a balance between the human needs for social ties and freedom from too many ties. Unfortunately, we only do so consciously when the ties begin to strangle and by then it is often too late for a simple solution.

So, I have been thinking.

Independence Day

The best way to maximize your freedom, to give yourself the most choice in how you live your life, is to be financially independent. That’s not quite the same as being rich and it’s a long way from having a high income, though a high income can certainly help you achieve financial independence if you use it wisely.

Financial independence, to put it in the most simple terms, means that you can support yourself through your own resources. You don’t need a paycheck to live, in other words. Most rich people are financially independent, but not all financially independent people are rich. The key is to carefully manage your income and expenses. If you don’t think you can strike it rich (and if you were unwise enough to not select rich parents it’s going to take luck and hard work to strike it rich as an adult) but want to be financially independent, you must be willing to settle for a modest lifestyle. To look at it a different way, if you want to be able to buy anything you want, it helps if you only want things that are moderately priced.

I have been facing a stark example of that lately. Fourteen months after the birth of our son I’m still driving an old two-seater sports car. I will eventually have to buy something with a back seat, as my wife keeps reminding me, but I am holding off as long as possible; hopefully at least until her Honda is paid off. One car payment isn’t as good as none, but it’s better than two. The problem isn’t going to go away, though, so I’ve been considering what I’m going to replace my trusty old Miata with.

Once upon a time, not too many years ago, I would have liked to get a Porsche. Not a top-end one, but a humble Boxster. Now, spending a lot of money on a car seems wasteful to me. Oh, I wouldn’t mind having an expensive sports car, but it’s not worth the money to me. I don’t consider a car to be an asset, or even a status symbol. It’s a tool, transportation. I enjoy driving and would like a car that makes the time behind the wheel fun, but you don’t have to spend a raft of cash to get that. Right now I would no more spend $45,000 on a car than I would spend $250 on a pair of boots. In fact, I’d be more likely to spend the money on the boots; I’d get more use out of them and they’d last longer.

It takes less money to support a modest lifestyle than an extravagant one, and the less money you need to support your lifestyle, the easier it is to become financially independent. We all want nice things, and living a Spartan, miserly lifestyle is no one’s idea of fun, but you have to sell a piece of your life for every expensive toy you buy. Make sure you get a good deal.

The Things You Own Own You.

The other day I talked about how a modest lifestyle eases the road to financial independence, and how I was reluctant to spending a lot of money on a new car. That’s because of my nemesis, Fixed Monthly Expenses.

All of us have this monkey…or gorilla…or King Kong…on our backs. Your fixed monthly expenses define how much money you have to make each month to avoid going into debt. (Or taking money out of savings, which is the same thing.) The lower that bar, the easier it is to support yourself, and put money back for retirement, your kids’ college, and luxuries. Fixed Monthly Expenses, and their evil cousin Debt, are two of the biggest things that keep us chained to that paycheck.

To a certain extent, there’s no getting around fixed expenses. Most of us have to pay for housing (at least property taxes, even if you own your house free and clear), utilities, phone (landline or cell, or both), food, and various car-related expenses (gas, maintenance, and insurance at a minimum). You may also have bills for TV, Internet, medication, etc. There is a wide variation in most of those categories, though. Housing could be a few hundred dollars a month for a tiny apartment in a humble neighborhood or several thousand a month for something more impressive in size, location, or both. Likewise, food could account for a few dollars a week for rice, beans, and potatoes, or a few hundred for dining out every night. One person’s car payment might easily be higher than another person’s house payment.

Enjoyable as these material possessions are, the things you own weigh you down. The things you’re still paying for in particular, but all of them add their fractional burden. Your furniture may be payed for, but you still need a place to put it and if you move, it has to be moved with you or disposed of.

The real killers, though, are the toys that bring monthly payments with them. Your house and car. You need them, and they bring you pleasure, but they’re also your boss. You’re working for them.

I mean that literally. Let’s say you have a car payment of $500 a month, and you make $25 an hour. You probably only take home about $20 of that $25 so you have to work 25 hours a month just to pay for that car. Add another $150 for insurance and $100 for gas (I’m not even going to get into maintenance costs) and you’re up to 37.5 hours that you’re working for that car. Nearly a full work week. Every month.

Try running those numbers on your mortgage for an even grimmer picture.

There is something you can do to ease the pain, though.

With nearly any product you can plot cost and functionality on a graph, if you’re the sort of person who likes to graph things. If you do, you will often notice that at a certain point you start paying a lot more for very small improvements in functionality. A computer, for example, might give you a 5% boost in performance, but at a 30% price premium over the next cheapest model. It’s the same with cars, houses, etc. At the cheap end of the scale relatively small amounts of money will buy you a lot more function. At the expensive end of the scale, the opposite is typically true.

The key to managing these expenses without your quality of life suffering, is to find the sweet spot where you are getting the most of what matters to you for the least amount of money.

To illustrate, I’ll go back to my looming new car purchase. My requirements are a reliable vehicle with a back seat, fuel efficient, and reasonably fun to drive. It would be nice if it were not horribly ugly. A compact four-door sedan from a quality maker is the target I have selected to meet these criteria.

The most economical (on the surface, at least) way of obtaining this vehicle would be to trade the old Miata straight across for a sedan of similar vintage. That would get me into the right type of vehicle with no significant outlay of cash. It would also, most likely, set me up for a lot of downtime and maintenance expenses. My car is my livelihood; if I can’t go out on service calls, I don’t make money and my kid doesn’t eat. My car has to run.

By sliding the scale up to later model used cars you increase the reliability, but also the price. Many people advocate buying a very recent model used car as a way to get a reliable vehicle without eating the depreciation of buying new. I am unconvinced by these arguments. A solid late-model used car is going to cost nearly as much as a new one. If you are financing (and most of us are) remember that you will be paying a higher interest rate on a used car, which reduces the difference even more. Add in the two or three years of probably hard use and unknown maintenance the used car has had and buying new looks even better.

(My personal take on it is that you’ll do pretty well either buying a late-model used car, or buying new, if you keep the car a long time. It’s the people who are constantly buying, and never getting out from under that car payment, who are taking it up the ass.)

So, barring finding an exceptional deal on a suitable used car, I’m looking at something new. Pure financial sense would have me looking at the low end of the market; sedans in the $10,000 range. The problem with this is that, in my entirely biased opinion, they all suck. Oh, some of them are serviceable enough vehicles and even the more dubious ones will probably give at least a few years of good service. But I like to keep my cars a long time. The Miata is nearly 10 years old and I’d probably keep it at least a couple more if it weren’t for this whole ‘backseat/baby carseat’ thing. Cars in that market segment are built and marketed as ‘entry level’ cars. The manufacturers expect that whoever buys them will fairly quickly trade up to something nicer. They aren’t designed for anyone to live with them for a long time. So, upmarket I go.

Looking over what’s out on the market, I decided that $25,000 is the upper limit of what I’m willing to spend on a new car. You can buy a helluva good car for that much money, and for me, at this time, anything more would be wretched excess.

Now, here’s the tricky part. Having settled on my upper limit, I didn’t start looking at $25k cars. That’s the most I can stand to spend. $15k would be better, so that’s where I started looking, trying to find the cheapest car that I thought I could live with for eight or ten years. What I found is that there’s a pretty good selection of reliable, fun to drive, and fairly well equipped cars right around $18,000. Okay, they’re not as nice as a 3-Series BMW, but the Bummer isn’t twice as good. Mostly what the BMW gives you for your thirty four thousand George Washingtons is the right to say you don’t drive a Civic. There are real advantages in performance, of course (though not in reliability) but mostly what a car over $25,000 is buying these days is bragging rights.

I’ve got a wife and kid to support; bragging rights are an expensive option that I can’t afford. Not that I really give a damn about impressing the neighbors anyway.

Not everyone can afford a new car, of course–there was certainly a time in my life when the best I could do was scrape together some cash and see what I could get–but if that’s the case then how you spend your money is even more important. The same process works for houses, computers, TVs; pretty much any significant purchase. You’re probably not going to be happy with the low end for very long, and the high end is probably overkill. Set your budget before you start looking, and look from the bottom up. Don’t go looking at the most expensive TVs on the shelf first; they’re going to look great and you’ll want one. Start with the cheapest ones and work your way up till you find something you can live with. If the cheapest item you can live with is still over your budget, well, learn to live without for a while.

I’ve spent a lot of time on this decision making process because it is an important part of living within your means, and if you don’t live within your means you’re never going to save any money, and if you don’t save you’re never going to be financially independent (and you’re going to have various other problems as well, but that’s another subject). One of the most common ways people get into financial trouble is by buying too much. Too much house, too much car, too much stuff and then their income takes a hit and all of a sudden they can’t pay for it anymore.

Buy to fit your budget, and your happiness, not to fit what other people are going to say about it. If you’re happy driving a Civic, why should you care if your BMW-driving friend isn’t impressed? Your car hauls you around just as well, and you’ve now got $20,000 that he doesn’t. And let me tell you, a pile of cash is very soothing.

Keep those monthly payments down, keep your debt down, and you may be amazed at how much money you can put in the bank. Soon we will talk about what to do with that money.

The Incredible Shrinking Wage

I’m going to be referring now and then to how much time you have to work in order to pay for this or that. When looking at your rate of pay for the purpose of these calculations (or any similar figuring you might be doing on your own) don’t simply use your official rate of pay (or if you’re salaried don’t just convert it to an hourly wage based on a 40 hour week).

To find out how much you’re really making for each hour you work, first you want to look at what you’re actually taking home. Look at the net salary on your paycheck. The amount that actually gets deposited into the bank. Add any 401k deductions. That’s how much you’re really making. (If you’re really picky you can figure in the value of your benefits package, if any, but we’re trying to keep things simple here. This is a rule of thumb, not an income tax filing.)

Now, count up how many hours you actually spent working, or at work, or on your way to and from work, in that pay period. If you’re a full time employee that number is almost certainly going to be much more than a 40 hour week. You might be surprised how many hours it is.

Now, divide your real take-home pay by the real number of hours. That’s your real wage per hour, and the number you should use when calculating how many hours you’ll have to work to pay for something.

Home Sweet Home

News stories about the collapse–or at least contraction–of the mortgage banking industry are once again in season. Foreclosures are up and foreclosures are bad for everyone. Families lose their homes and banks get stuck owning houses they don’t want. My sympathies would be with the families, except that it’s partly their fault.

The housing boom that has been driving much of the nation’s economy for the past few years has been based on tapping a new market; people without enough money to buy a house. I saw this firsthand a couple years ago, when we sold our old house. We got numerous offers on it, almost all of which were identical. People offered more than our asking price, but with no money down and on the condition that we paid their closing costs. Basically they were financing 100% of the cost of the house, plus closing costs and fees. This lets them get into a house, at the cost of a savage monthly payment. They have no margin in their payments (if they had any margin in their monthly budget, they’d have some money for a down payment) and any financial instability–being laid off, a major expense or two–is likely to cause missed payments, and quite possibly a foreclosure. Not to mention lacking the money to do any work on the house before moving in, the inevitable repairs, etc.

The mortgage industry calls these ‘sub-prime’ loans. Basically that means loans that the borrower is likely to default on, and as such they carry a heavy interest rate. That made the lenders a lot of money for a while, but now too many of the loans are going into foreclosure and the money is drying up.

(I started writing this yesterday, and what should pop up on the news today, but a story about a major sub-prime lender about to go bankrupt because too many of their borrowers aren’t paying them back. Expect to see more of that.)

I find it hard to work up much sympathy for the mortgage banking industry, though, after they’ve sucked the financial life out of so many families. The families should have known better than to sign on, of course, but it’s hard to blame them too harshly. They just wanted to buy a house and saw a way that appeared to let them do so. Few people who have never owned a house understand how expensive it can be, and how important it is to have a healthy cash reserve to cover emergencies and unexpected expenses.

It used to be that the need to save up a hearty pile of cash for a down payment acted as a filter on prospective home-owners. People without the financial means or discipline to save up that down payment would very likely run into trouble trying to keep up a house and mortgage. Only after proving your worth with this rite of passage could you join the ranks of the land-owning class.

For the past few years, pretty much all you’ve needed is the ability to fog a mirror.

Everyone has heard the line, “A man’s got to know his limitations.” It applies to finances too. If you exceed your limits, eventually a big, pissed-off bill is going to come along and kick your ass. Specifically, in this case, buying a house you can’t pay for is going to end badly for you.

If you’re smart, and lucky, you can expand those limits. But first, you have to know what they are.


Well. I didn’t mean for this to happen.

The Things You Own Own You, Pt.2

Fixed expenses are only one of the things crushing your financial independence. The other big weight is, as you might guess, variable monthly expenses.

Some of what I call fixed expenses can actually vary quite a bit from month to month (mainly utility bills), but you know that bill is going to be there every month, and you probably have a pretty good idea what it’s going to be. Variable expenses aren’t necessarily there every month. You’re always going to have an electric bill, but you aren’t going to buy a big screen TV every month (at least I hope not).

Some variable expenses are unavoidable, like home or car repairs, or medical bills. They certainly need to be taken care of when they come up, but you can’t really budget for them. The other variable expenses are entirely under your control. These are the things you buy every month, because you want, or need, or ‘need’ them. Video games, DVDs, books, electronic gadgets (guys), that cool looking pair of shoes (ladies), a spontaneous weekend out of town, and so on and so forth. These things won’t usually break your finances as badly as a poorly chosen mortgage or car payment, but they add up, and they add up in a particularly nasty way.

Most of these random expenses end up on your credit card, which is a very, very bad place for them to be. There are two problems with credit cards. First, when you use a credit card you tend to spend more. It hurts more if you have to pull cash out of your pocket to buy something, and once you run out of cash you can’t buy anymore. Credit card purchases are harder to keep track of while you’re making them (Quick, how much have you charged on your card in the last four weeks?) and you can easily charge beyond your ability to pay.

Second, credit cards are designed to keep on paying. The interest rates are brutal and the minimum payment is negligible. If you only pay the minimum it will take you a long time, and a lot of interest payments, before you get that card payed off…if you’re not charging anything on it anymore. If you’re only making the minimum payments and still charging on the card, may God have mercy on your soul, because the credit card company will have none.

I’ll use one of my own bills as an example. A couple months ago my statement showed a $1696.11 balance. That was a bit more than usual because of some Christmas purchases, but not excessively so. That card has an 18.24% interest rate and the minimum payment was $25.

If I only made the minimum payment, I would be charged about $25.40 interest. You can see that it would take a very long time to pay off this balance by making only the minimum payments.

In this case, I paid off the balance immediately, as I nearly always do, and instead of being perpetually in debt, losing another twenty five bucks a month in interest payments, the bank sent me $32.49 for that month.

There is a subtle poison at work with credit cards too. People sometimes begin to think of their available credit as an asset, like a savings account. “I’ve got $2000 left on my card!” It’s not; it’s a measure of how deeply you can get yourself into debt. If the credit card were a lake, think of the credit limit as the depth. How far do you want to sink?

Credit cards can be useful. The ability to spend over what you can actually pay can be useful sometimes in an emergency. You can consolidate many small bills into one big one (rather than writing five checks for groceries, put the groceries on the credit card and write one check). A record of your purchases can be handy. But it is a very dangerous tool that ends up hurting most people. The average American family carries something like $9000 in credit card debt. That works out to about $135 a month just in interest. Over $32,000 in twenty years, assuming the balance stays steady. That’s a very significant drain on anyone’s finances.

There is a very simple way to keep all these expenses under control, though. There’s no need to live like a monk, never spending your money, pinching every penny. Buy the things you want; enjoy yourself. That’s what life is all about. Just do one thing.

Pay off your credit card every month. Never carry a balance into a new billing cycle. If you can do that, you might end up spending more than you should on comic books and porn every month, but the expenses won’t turn into debt that becomes a major burden on your finances.

If you’re clever you will also get a rebate card, which gives you a trickle of cash back to help offset some of your spending. You might also, after having to grit your teeth and write a smacking great check to the bank, decide to rein in your spending a little.

Your credit cards are an enemy that must be slain every month. But if you don’t slay them, they will grow stronger each month and eventually strangle you. Kill them early and often.

Just a Reminder

Your bank cannot be trusted. They will steal money from you by any means available, at any time, and call it a ‘fee.’ You can often call and yell at them and get the fee waived, but it’s a pain in the ass and they count on most people not doing it.

But what can you do? You have to use them. Bastards.