First off, I want to thank everyone for all the feedback regarding my recent post about expat finances and my subsequent follow up that explained why perhaps finances weren’t something I should include in future posts. Understanding my readers a little better now, most feedback was positive and I learned that many folks regard the financial posts as positive input while they contemplate their own experimental expat early retirement. Others felt the blog should only be about travel adventures and that nobody cares about the world’s current political situation and its effect on expat life or our own personal finances. So here’s my take on where the blog goes from here.
As I’ve alluded to many times, the blog isn’t a travel blog about wanderlust or all how early retirement is all about fulfilling our travel fantasies. With thousands of travel blogs, some good, some bad, I’m not here to compete with those folks. Nor is early retirement just about travel, at least not for people like us that joined the ranks of the non-working with much less than we’d need to be globetrotters. Having been laid off about five years before I would’ve preferred, traveling is an added benefit but needs to be carefully planned and isn’t the main focus of why we chose early retirement. Granted we’ve had some great adventures and those are often what folks want to read about most but every day isn’t vacation nor is retirement always great so I like to also discuss the ironic, comical and often cynical parts that convey a more realistic idea of what you might expect should you take the plunge. Usually receiving comments that I “tell it likeit is”, I think sugar-coated stories of a fantasy retirement are a dime a dozen.
Despite the obvious importance of financial matters in the success of an overseas early retirement experiment like ours, you may have noticed I generally avoid personal finance posts like the plague. First and foremost, while I did work in the financial services industry for 31 years, I’m not a licensed professional therefore I’d be remiss if I doled out advice about your money. But of course, that never stopped anyone in a social media generation where everyone’s an expert and every month or two brings a new Trump Slump where it seems like the sky is falling. Along with a strong coffee, my morning ritual involves perusing the more reliable financial websites to see what happened in the markets while I slept. And like me, you may have woken up to a stressful email like the one below announcing a reduction of your interest rate thanks to a now fully politicized Federal Reserve Bank compliments of President Shitbrain.
Starting 08/06/2019, your Online Savings Account will earn 1.90% Annual Percentage Yield (APY) on all balance tiers.Your APY is more than 20x the national average — so you can rest assured that your money is working hard in your savings.
With financial journalism now mostly reduced to large websites like Marketwatch and Yahoo Finance hiring millenials that scour other people’s blogs for reposted content, it’s tough to weed your way through the sensationalistic nonsense like this guy who claims the next three months are “the edge of a cliff” or this genius who claims “The Fed should have an emergency meeting and slash interest rates 50 basis points“. Without needing Macroeconomics courses, all you need to know is that the last thing a Central Bank should ever do is cut interest rates while unemployment is at a 40 year low. Despite coming from Barron’s, the first guy supposedly called the 2008 Financial Crisis which means we’re supposed to think he’s got a crystal ball. (He doesn’t, and past performance is NEVER an indicator of future results. Just like the disclaimers on TV and radio say.) As for the second guy, he supports the “policies” of the Stable Genius which automatically nullifies anything he says as pure ignorance.
Throughout my 31 years of cubicle life, I’ve always stayed aware, but ignored the fluff and continuously invested through about five “major” financial crisis’ from The Asian Financial Crisis in 1997 to the 2008 “Great Recession”. As I pointed out in Eight Percent Of Zero, my most comprehensive post on money matters, retiring early without being wealthy comes down to understanding asset allocation, developing a plan that’s right for you, and sticking with it. Period. Having said that, Orangeman causes almost daily shocks to the world’s financial system so including something about money matters in an expat blog about early retirement seems necessary now.
With Chiang Mai’s beautiful but very short “winter” now behind us, it means temperatures begin climbing, skies get hazy due to inversion layers that occur during the hot and dry season and many expats begin their annual bitchfest known as “The Burning Season” all over social media. For us it means the end of day tripping and a short break before a one week beach vacation at a moderately priced Koh Lantaresort. After that we return home for a week and then hit the road for four weeks for a month-long escape from the bad air. Given Thailand’s low-cost of living, we’re running about $3,500 under our annual fiscal year budget so it’s affordable to overlap monthly rent if we stay away from the more popular Andaman Sea beach destinations where everyone else goes. Searching for a more low-key area still far enough south to escape the haze, we found a three bedroom house for rent on Airbnb at a ridiculously low rate of about $21 USD per day in a sleepy beach community half way between Hua HIn and the gateway town of Chumphon. Planning on driving, we’ll be able to cart more stuff than flying and see a bit of the country as well.
So for now, let’s talk finances. Depending on your situation, some of you may have noticed the one and only positive aspect of the Trump Disaster is a rather fast rise of the stock market. Simply put, Wall Street loves billionaires and while very few of his moron supporters will ever see one penny since they’re mostly financially ignorant, underemployed and too stupid to understand why trickle down economics always fails miserably, those of us in the “sweet spot” (invested properly but not wealthy) are doing well. Finally seeing an enormous albeit very short correction that brought the markets down to earth last week, I thought I’d post a follow-up to my recent financial comments.
Having received an unexpected amount of positive feedback when I briefly touched onasset allocation and diversification, let’s get the disclaimers out-of-the-way. Most importantly, I am not a licensed professional and nothing I say should be taken as a solicitation or endorsement of any financial products. But I did spend 32 years working in various administrative and support roles for some very well-respected financial institutions in New York City and San Francisco. Not intending to make this an economics lesson or online college class, I’ll keep the teaching down and include an educational link when I use financial terminology. With lots of great blogs focusing on how to retire early, not that many focus on what to do once you’re there so I’ll give it a shot. While never wanting to manage anyone else’s money, I’ve been a “self-directed investor” for over 20 years and that’s enough time to analyze all the graphs and after almost three years of early retirement, I can say we’re ahead of the curve so if you don’t mind some boring graphs to make my points, read on. Please also note that since we’re both American citizens, some strategies I discuss only apply to U.S. residents but the concepts are universal and can be applied from almost anywhere.
Late last year, Diane and I took some basic Thai lessons form a private tutor. Unlike an actual classroom environment with anyone resembling a real teacher, we paid 400 Baht per session and sat with three others at a table in a crowded mall once a week for a series of 20 lessons. Providing us with syllabus binders and a small supplemental quiz book, she titled it “Conversational Thai” and each chapter contained some vocabulary in no particular order, a dialog that was anything but conversational in a real life setting and a few sentence examples with basic phrases. Rarely mastered even by long-term expats that spend time and money on real educational endeavors, Thai is a highly untranslatable tonal language and making it worse, the Chiang Mai region has its own rural version of phrases that sophisticated city people wouldn’t understand if their lives depended on it.
While pleasant enough, our teacher’s patience clearly ran thin towards the end due to my overly inquisitive questions about sentence structure, grammar and even cultural questions. Never one for straight forward memorization, learning foreign languages doesn’t t rank high on my list of strengths and I’m terrible at reciting back what was just taught to me. Often trying to keep it light, our group tried joking with the teacher but almost every humorous comment we made was so culturally unknown to her it literally went in one ear and out the other. Concentrating on a chapter about stuff unique to developing nations like ordering gas (as common here as using online shopping services back home) and dozens of phrases for obsolete post office services, I came across a word that translated into “city water”. Assuming this meant “tap water”, we wasted ten minutes looking for synonyms or other English expressions the teacher might understand but in the end, we left it unsolved. Which brings me to the point. Clearly one of the most important decisions you’ll make as a western expat in the developing world is figuring out what to do when stumbling onto the most common piece of advice in every tourism book; “Don’t drink the water”.
Waking up at my usual pre-dawn hour, twelve time zones ahead of New York, I clicked the financial software update button to assess day two’s catastrophic results thanks to the world’s stupidest voters. Honestly, there’s no words that express how I feel after a two-day portfolio decline equal to nine months living expenses. Frustration, anger and disappointment seem like obvious but useless reactions so instead I offer this piece of moronic wisdom written from the lead story about Monday’s market plunge on the Yahoo Finance webpage:
The momentum has continued downward because there continues to be a lot of uncertainty,” said Eric Kuby, chief investment officer at North Star Investment Management; “It’s important to note that it’s orderly. It doesn’t feel panic-inspired.”
Almost making me sympathetic to the wave of populism sweeping the world’s developed nations, I pondered how much this might affect the chief investment officer of any financial company. Or any governor, senator and congressional member. In case you live in a cave and don’t know the answer, try Goggling how many Wall Street bankers responsible for the last round of “paper-loss” poverty are reading this from a jail cell.
Threatening our Experimental Early Retirement,another unexpected financial shock unleashed its ugly head thanks to xenophobic voters happy with being poor as long as there’s no non-white immigration in their country. Serving up a dose of reality to the populist movement, the Brexit vote serves as a wake up call. Thankfully, we’re not in dire straits because of a debt-ridden young couple working in the Bay Area tech industry that paid us 12% over asking price for our modest suburban home last year. (All of our house proceeds are in cash or fixed deposits). But let’s realistically glance at the future. While younger readers have their entire working lives to sack away income, those of us who entered the workforce at the beginning of “The Great Decline” are the real losers. Having done everything the way the pundits told us to, we prepaid our mortgage diligently, maxed out our tax sheltered retirement plans, sacrificed weekend outings in favor of nights at home with DVD’s, and invested diligently. Designing a carefully structured asset allocation plan designed to shelter losses during unforeseen events like the 2008 Financial Crisis, adding another huge setback only eight years later almost makes me mad enough to pull the lever for Trump. But that would mean buying some aprons for my inevitable Wal-Mart greeter job.
One of our most important considerations when researching expat retirement destinations was the host country’s policies on residency. Some places , like Thailand, offer ease of convenience, with relatively few requirements. However, it’s only valid for one year and its liberal policies mean you share the country with almost anybody short of escaped criminals (and there’s probably some of those).
Other countries, like Panama and Ecuador, offer slightly more stringent rules but there are many barriers which include language, shysters looking to scam expats, and most recently the ridiculous new U.S. government tax act known as the Foreign Account Tax Compliance Act (FATCA) which makes it exponentially harder for honest middle class Americans to open foreign bank accounts. Continue reading →