Stop Milking Me! - Cow’s Journey To Financial Freedom

I felt that I have been a cow ever since I graduated from the college. I worked (being milked), worked (being milked), and worked (more milk for the Corporation) until I got crashed and burned a few years ago. Then my employer offered me an easier project to recover from the stressful long hour full time travel job.

Me, the cow was going to take the step to quit the milking situation, but after being thrown on a grassy land and eating the tasty fatty grass under the sun all day, the cow got lazier and thought this grassy land would last forever. Before I knew it, I was put back in the barn and getting milked all day and all night again. Many years have past and the used-to-be-fatty cow was skinny as hell. So, the whole situation started all over again. I was offered with a nice easy work-from-home job by my employer a month ago. And wooohooo! The cow is dancing under the sun in the happy grassy land again!

But this time, I am not forgetting that I have been milked by my employer for 10 long years!! I don’t want to get fatty and thrown back in the barn to be milked again! I want to be able to go to grassy land at anytime I want to and I want to milk myself, not by others!

So here comes my FREE-THE-COW PROJECT!

That is, I want to control my own future. I want to be able to generate multiple income streams so one day I don’t have to work for anyone else. After years of services in Corporate America, I realized that I have no control of my life and every dollar I make ends up in someone else’s pocket. I just can’t picture myself working for a company for 30 years, hoping that my paycheck will still be there tomorrow. Last year after I received our HR announcement about the cancellation of our pension program, I completely lost the trust in our Corporation structure and my own employer.

So here I am, determined to find a way to one day support myself and my family with investment and other projects. So I set up this site to document my ideas, progress, failures and success and hoping one day when I close this project, I will be sitting in a beautiful grassy land of my choice and never need to go back to the barn again.

Keywords: financial freedom, self-employement, early retirement

As I am approaching my next major milestone - buying a home, I have to remind myself the “lavish mistake” I’ve made before. So here is the post I did on my personal site waaaay back when the pain was still fresh because of my extravagant life style.

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When I bought my house in Chicago, I went nuts on stuffing it with the latest and greatest gadgets and furniture. A $2500 TV, $1200 front loader washier, $1100 Onkyo home theatre system, $300 big-mama-ass oil painting, $2500 Jennifer convertible leather sofas, $1200 refrigerator, $1000 formal dining room set, etc … The list goes on and on and on … After a year of stuffing and stacking, I pulled all the receipts together. Holy Cow!! I spent over $20,000!!! When I split from my ex, we got rid of the house and all of my latest and greatest gadgets and accessories went into the storage room.

Now I am staying in a one bedroom apartment in Denver, Colorado. Since I wasn’t sure how long I would stay here so I pretty much went for the cheapest used furniture I could find on craigslist. A $100 27-inch old fashion big tube TV, $25 used breakfast dining set (chairs included), $200 used bedroom sets with mattress and box, etc.. Total price tag? $800. The apartment is comfy with everything I need. Yes, I miss my big screen TV, but my 100 dollar TV and the 10 dollar DVD player work just fine. With fewer rooms to clean and less stuff to worry about, I actually feel much more relaxed.

Do I feel the place is less sophisticated? Yes. Is the difference worth $19200? Absolutely not! And I don’t miss my $2400 Chicago housing bill a bit! Now I have all kinds of left over money to buy the mountaineering equipments, save for retirement, and plan for future big trips to see the world.

I am not saying that everybody should get on craigslist.org and start digging for used stuff and jam your entire family in a one bedroom. However, living simple does give us the power to live freely. Maybe you don’t need 100 candle holders in the house after all? A DLP might just be as good as a Plasma? 3000 sqft house with 18 feet ceiling may be a waste of space?

Too many of us live from paycheck to paycheck. If we can downsize a bit, maybe we don’t have to, right?

When a blogger starts his/her “Financial Freedom” journal, there will always be a number associated with it. Whether it is 2 million net worth or 1 million net worth, there is a final financial goal. But I don’t necessarily think that a simple number can represent the type of “financial freedom” I am going after.

I don’t want to stop working, rather, I want to work on something meaningful that gets me going everyday. I don’t want to work for anybody else and whatever I am doing is not only fulfilling but also generating enough income so I don’t have to go back to the barn to be milked by “employers” again.

Yes, I can achieve this by saving and investing until I reach A Number, whether it is 2 million or 1 million. However, there are two problems associate with this picture:

1. Before I reach the million dollar net worth, I still have to bust my ass for someone else and let that person (or corporation) take a big chunk of what I earned just because I am an employee.
2. Will 2 million dollars really last forever? One can only withdraw 4% - 5% in order to maintain the original asset value, otherwise, the money runs out after certain amount of years. 4% of 2 million dollars is only $80.000. That’s not going to buy me much considering the inflation. I want to do better than just making capital gains from stock funds.

Capital gain is certainly good, but I want to generate profits and income. So one day, I don’t need to depend on any employer. And there are millions of possibilities!

Although I don’t have a goal (a specific number to be exact), but I do have a plan:

Know my bottom line:
After helping my parents to start a kitchenware business and settle a legal case, I don’t have much “flexible money” left. So I have to work around with what I have. As of today, I have $421 in my savings account, $15,343 in my bond funds and $11,043 in my stock funds. Yep! The list is short and sweet…

This year’s projects
I am starting 3 projects this year:

1. “Free-The-Cow Project” Site: mainly to keep a financial journal, collect information, get reader suggestions/feedback and test out online advertising.
2. Open an online store to sell kitchenware. I’d like to help my parents to market their store, also to test the e-commerce route. If the poof chair guy can make 6 figure income a year, I want to give it a shot too
3. Fix –it and Flip-it Project. I believe in real estate investing and certainly wouldn’t leave this option out. I plan on buying a ugly home this fall and learn how to flip a house to make a profit.

The Budget Game
Every business needs money to start with, whether it is an online store or flipping a home. My homework? I need to sit down and figure out how much I need and how much minimum I have to save in order to start the 3 projects this year. Know what budget I will need so I can start budgeting.

Study, Research And Learn
Knowledge is money. It is such a sweet wisdom especially in the real estate business. You gotta know what you are getting yourself into. So my main assignment in the next a few months is to learn and research. Find out what tool I need to use to create online store. Research the local real estate market. Learn the principle of flipping. Talk to people, networking, find the dream team to work with me, etc…. This is going to be exciting!

Just Do It!
Too many of us have great ideas, but few act upon them. And even fewer people succeed after having good ideas and act upon them. Nothing is worse than sitting at home and be a couch potato. I am never a couch potato. But I am a cow who is being milked by others and making money for other people. So my situation isn’t any better than the couch potato. Even if I have 99 failed projects, I only need one star project. So let’s get the projects started!

Answer? The darn house flippers - those who buy houses with below market prices and flip them for profits. Even better, some filppers never have to pick a hammer to flip the home for profits. The secret? Rob people when they are desperate. Check out a Flipper’s tip below:

Seems simple enough doesn’t it? It truly is if you’ll do it right. So how does one “do it right?” Follow these steps and you’ll be on your way to a hefty paycheck: First, you must find homeowners in distress. There are many ways to advertise what you do: Run ads in the paper that state, “I buy houses cash”; place business card size ads in school newsletters; call local churches and charities to let them know that you are a real estate investor who helps folks that are behind on mortgage payments; place “I buy houses” signs on street corners; wear hats and T-shirts stating what you do; call homeowners listed in the public records who have filed for divorce, bankruptcy, or foreclosure, landlords who have recently evicted tenants, folks who have not paid real estate taxes, and people going through probate; place magnetic signs on your car; go door knocking; and much more.

There are many reasons homeowners find themselves in distress: Job loss, illness, downsizing, job relocation, divorce, death, pay cuts, and more. Just searching for foreclosures limits your business. I have bought many houses from people who were transferred, unable to sell the property before the move, and couldn’t afford to make two mortgage payments. Even though the payments were current, the situation was headed for distress. Don’t limit your thinking. Once you find a homeowner willing to work with you, go to contract. Get a real estate sales contract from the local board of realtors or an office supply store. Fill it out making yourself the buyer. Give the homeowners a $10 dollar deposit to bind the contract. Yes, homeowners will accept $10. I have never had anyone tell me no. Once the contract is signed, get busy finding another investor (a rehabber) who will buy the property wholesale.

To find an unlimited supply of rehabbers, run an ad in the local paper that states you have houses in foreclosure. When they call, get their contact information and keep it in a database. Each time you get a property under contract, contact the investors on your list. If the property is priced right, it will sell. Another great source for rehabbers is to attend local REIA (real estate investor association) group meetings. These are monthly meetings attended by real estate investors, mortgage brokers, real estate agents, and others specifically looking to work with real estate investors. Once you find a rehabber, simply assign the sales contract to him or her and this person will close on the transaction in your place. You’ll get paid an assignment fee for putting the deal together. The closing will take place at a title company or an attorney’s office. The rehabber can arrange the entire closing. All you have to do is show up and collect your check.

I can’t seem to agree with this type of money making method. Yes, people are divorcing, losing jobs so that they have to let their homes go. So this is the best time to rip those people off? Hmm.. I simply just don’t agree with the moral side of the deal…

One of the three projects in 2006 is to launch an online store. Since my parents have already setup a kitchenware store back in my hometown, it’s only nature to expand their business venture to the online customers.

I have been an online customer for a long time, however, never a seller. I had some help when I sold a few of my games on eBay, but other than that, I have never made a single penny out of online sales. So, I am really starting from scratch here.

I think the main things that will determine if the store will be successful or not will depend on:
1. Products I sell
2. Site Design
2. Marketing the site
3. Technology that runs the store
4. Shipping and handling
5. Customer Service

Every piece of the puzzle will be crucial and I expect lots of errors and trials before I find the right formula.

First thing first, I will have to define the product group and the target customers. Most of my parent’s customers are commercial restaurant owners. Can I sell some commercialized mechanize to the consumers? The best way to test the water is probably through eBay. So let’s get rolling! I asked my parents to identify 20 products for sale. Once I get the list, I am rolling them on eBay to see the market reaction.

In the meantime, time to study other online retailer stores’ design and how they all sell products successfully.

While I am heads down doing research and education on how to flip a home, run online store and battle with Google’s Adsense, I can’t forget about my bottom line. After all, no matter what we do, I gotta have money saved up to do what I plan to do.

First of all, I believe in saving for the rainy days. You never know what’s gonna happen so having an emergency fund where I can easily withdraw the cash is extremely importantly. Currently, I have no emergency fund. Yikes! The financial advisors usually recommend saving 3 – 6 months of living expenses. I like to go for the higher end so I can last at least half year if bad luck strikes.

Second, in order to buy a house to flip, I still gotta have money no matter how Down Right Ugly the home is going to be. My target is to buy a place in the mid 200’s range with 5% down and 7.5% fix up cost assuming I have a partner to do the project with.

That’s $46000 hard currency I will need to save up. OUCH!!! With my current $26,400 bottom line, I still need to save $20000 in less than a year to achieve the following goals:

1. Close a home by this Aug with $12500 cash.
2. Have $20000 handy during the fix-it-flip-it period (from Sept 2006 to Spring 2007)
3. Emergency fund of $15000 cash set aside by Dec 2006.

It’s challenging, but doable, thanks to my high paycheck and very simply frugal life. After all, planning money is nothing more than creating a project plan. You do the math, create a set of tasks and timeline and just follow it. It’s a very mechanical procedure. The hardest part for most of people is to create the plan and get started.

Anyway, in order to come up with a savings plan, I have to revisit my budget to know exactly how much I can save each month and understand where the money goes… Will I be able to maintain my current life style while saving that much money? If not, what should I cut back on? Should I stop my retirement investment for now? I will have to figure out each question to come up with the best plan and strategy to accommodate all of my short and long term goals… Stay tuned…

I came across an article on USA Today about the rising high yield saving account rates. It looks like my beloved ING Direct isn’t paying the highest interest at all.

While ING Direct pays a handsome 3.8% with no fees, these banks pay far more in interests:
1. HSBC (Savings) : 4.8% www.hsbcdirect.com
2. GMAC Bank (Money Market) : 4.65% www.gmacbank.com
3. UmbrellaBank.com (Money Market) 4.61% www.umbrellabank.com
4. Virtual Bank (Money Market) 4.6% www.virtualbank.com
5. Heritage Bank (Money Market) 4.49% www.heritagebankna.com
6. EmigrantDirect (Savings) 4.25% www.emigrantdirect.com

But be careful of the promotional season. I just checked HSBC and it’s 4.8% only lasts until April 30. If you have some cash right now, it is a great time to lock in the great rates.

Fed is going to raise rates again later this month. It seems that the savings rates and CD rates will keep going up, so will the home equity line or any other loan rates. It’s really a great time to start saving and cut down on the usage of equity line. A lot of us (including my close friends) think that home equity line is a great source for crisis money. When it was 4% not long ago, it wasn’t a bad debt, however, as the rates are shooting through 8%, it gets quite expensive in case you need to borrow.

So, time to take a look at the budget pie and figure out how to save a few valuable dollars for the future.

I am in Boston these days taking a technical class. I noticed a guy sitting in the corner never really paid much attention to the class. Ironically, I was assigned to work on the labs with him. I noticed that he was constantly working on a house floor plan and I ended up doing the lab alone. That just irritated the hell out of me. I had to ask,”David, what are you working on?” “Oh, a house remodeling plan.” He just blurted it out. A few minutes later, we started chatting about remolding home, flipping a house and selling for a profit. After I told him my plan to save up all the money to pay for the remodeling cost, he flat out told me it doesn’t make sense to put my own money into the project.

“Say, you want to spend $35000 on remodeling and $25000 on down payment, and your final profit is .. say $30000. You got a 50% return on your investement. But what if you put down only $25000 towards down payment, get an interest only first mortgage, borrow a construction loan or second loan and use that money to remodel. If you make $30000, your return is about 100%. The worst case scenario is that you can’t sell it 6 months later for a nice profit. Then you can convert two loans into one by refinancing the house with interest only loan and hold it for two years. Although you are stuck with the home, you won’t pay capital gain after 2 years. The bottom line, don’t spend your own money. Cash is king. The less you spend on your business, the better. Just treat the interest as part of the business expenses… “

Turns out, this guy has been investing in raw land and real estate for a long time and ready to walk out of the job at anytime. He and his fiancé just remodeled a half million home and sold it for 1.25 million in North East. Now, they moved to Kentucky and are working on a log home by the river.

That was definitely one valuable lesson I learned since I got here. No wonder he didn’t care for the class. He’s got a much more exciting gig going on on the side which offers him not only wealth but also freedom.

I think I am very convinced about borrowing interest only loan to minimize the out-of-pocket cost. Interest only loan usually carries much lowest rate. Although I won’t have any principle built in, it is perfectly acceptable since I am really aiming at profits. I just have to factor in the loan interest into the total cost. After all, even though I am buying a home, it is a business and should be treated as a business. If my partner approves, it would mean a drastic decrease of the required 2006 project budget. However, I am still going to keep the figure at $46000. You never know what’s gonna happen.

I spent a few hours yesterday to dig into my spending habit and compared it with my budget plan. Surprisingly, I am not too much off from my budget besides the following categories:

1. Travel and Recreation:
I had about $250 budgeted for this category. But I spent a whooping $618 per month on average in 2006. Holy Cow! I guess that’s one bad part of being a travel consultant for this long – it never occurred to me that hopping on an airplane and grabbing a hotel room was a big deal. Whenever I need to go somewhere, I just book the tickets and go. This habbit needs to change!

2. Clothing
I am a young female and I only spent $34.01 on average on Clothe and shoes. What’s wrong with me? I didn’t even use up my $100 budget!

3. Tech and Toys
Gee, I spent $297 a month on BestBuy and Internet services. No wonder I didn’t spend money on clothing. The tech toys got all of my attentions. Hmm, that’s not good for my feminine image, isn’t it?

All other expenses are pretty much in line with my budget plan:
1. I spent $150 eating out a month and $400 on grocery and household goods
2. I spent $44 on average per month on Starbucks coffee, down from $160 comparing with a year and half ago. Whooooohoooo!
3. I spent $60 - $100 a month on gas
4. I spent $41 on books and music per month
Plus the usual rent and utility, it’s a pretty sizable chunk of money I consume each month.
My target is to bring down my travel cost. But with an upcoming wedding and home trips, it’s a bit harder to do… The good thing is that snow season is almost over and hiking, camping trips nearly cost nothing. So hopefully, I can squeeze a bit from there when weather turns a bit warmer. Tech toy is another category I can save on. Just don’t go to BestBuy.

In order to save a few thousand dollars a month to quickly rebuild my “safety nest”, I have to make another decision:
I have to pull either Roth IRA or lower my 401K contribution. Currently, I put max amount into both. I don’t think I can afford doing so this year in order to meet my short term goal. Which one to give up? That will take some thinking…

I am stressed out these days. After working 10 years, I finally hit the moment that I can’t even pay my bills. The last time when I had to worry about making my ends meet was a year after my graduation. I just got a job; I was living in New York and I spent like a princess. I ended up having to receive $250 from my mother every month to cover grocery. Well, obviously, I learned my lesson soon after and never had to worry about finance … until this month.

After cleared up my cash recently, I had about four hundred bucks in my saving’s account. Guess what, if the worst things could happen to you, it would happen. A few unexpected big expenses sent me straight into the negative red zone:

• My new car’s city tax $859
• My new car’s license plate $540 (yep, that’s what you pay in Colorado)
• Lawyer’s legal fee $1600
• My new car’s insurance $787

All require up front cash payments. After paying the first 3 items, I have nothing left. Unless I sell my last bit of stock funds or borrow money, I am screwed. I am 32 and too shamed to ask my parents for money. And all I can do right now is kicking myself for blowing the money on a fancy car.

Just a month ago, I was so confident about my financial situation that I decided to buy a brand new Toyota RAV4. Since my credit issues and large debt (that’s another story), I opted to pay cash for the car and cleared $26000 from my emergency fund. I guess I violated rule #1: Never ever touch your emergency fund unless it is an emergency. Instead, I blew it on a fancy SUV. I could have bought a used Camry for $15000 and still be happy with it.

I guess when they tell ya, “prepare for the unexpected”, you really gotta listen. I do regret that even with all the things happened around me, I could have managed my finance a little smarter so no matter what, I have something to fall back on.

Well, this month is almost over. I just finished my spending report and budget plan. So starting from the next month, I am going to squeeze everything I can squeeze to re-build my “safety basket”.