There's an old joke among outdoors types, some variant of, "If you're lost in the woods alone, how do you get something to eat? Step one: Take out the food you brought with. Step two: Eat some of it." A hearty laugh is had by all, and valuable lessons about preparation are learnt. Good times.

Like most humans beings, I'm getting older. The older I get, the more I think about, well, not quite "retirement" but some way I can avoid working until the very last minute before I drop dead. My job's decent as far as jobs go, but let's face it. Nobody wants to see any more of the inside of an office than they have to. I have had a comfortable life but do not come from any sort of Wealth. That is to say, even though the members of my family are all doing alright individually, we're all dependent on a paycheck. Without that, there's nothing to fall back on (or, what there is to fall back on wouldn't last long). Professors aren't paid poorly, objectively, but even without a spouse and kids I struggle to save a meaningful amount of money. Sure, I save. But I can't save a really meaningful amount of money. Not a "How do I pay my bills if I'm out of work for a year" money.

So, lately I've thought a lot about making some investments in the future. I've done a good bit of research on buying rental properties, which would allow me to bring in some small but consistent additional income that would continue even if, god forbid, I couldn't work for an extended period of time. They say property's the best investment anyway, as long as we black out and forget a few years here and there. And the more research I do, the more it becomes apparent that there are a good number of ways (not guaranteed, of course) to make money in the world of real estate. In fact, any reasonably creative person can think of a number of ways potentially to make money.

The thing is, of course, that I can't afford to actually do any of them. It turns out that the easiest way to make money is to start with a lot of money and use it to make more. It wouldn't be difficult at all to collect rent checks on nice new apartment blocks in popular neighborhoods in Chicago. As long as, you know, I had a million dollars to start with to get the process moving.

When people say things like our current Republican presidential nominee say – Oh, I got started by borrowing a little money from my parents, just $9 million, no big deal – or people less toxic and spoiled than him say similar things on a smaller scale ("Oh, my parents 'helped me' with the down payment on this house") it underscores everything that gives the lie to the meritocracy we insist we live in. It's not impossible to get ahead without starting halfway there, but…let's put it this way: people who start closer to the finish line are represented disproportionately among those who reach it. It turns out that if you already have food with you, finding something to eat isn't much of a challenge.

Again, this isn't a Horatio Alger pulp story. I didn't grow up as a wretch in Victorian London. I afford housing and clothing and feeding myself much more easily than the majority of Americans, and I feel fortunate that this is the case. It's alarming, though, to think about our lives and how quickly everything would go to shit – even for most of us who are comfortable – were the paychecks to stop coming. It's frustrating to be able to conceive of ways to get oneself off the paycheck to paycheck treadmill but not be able to make any of them a reality. While there may be a great range of incomes and levels of comfort among "The 99%" (to abuse an already abused cliche) but at least we all have this one thing in common – come up with all the bright ideas you want, unless you're sitting on a winning Lotto ticket it isn't going to matter.

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43 thoughts on “STEP ONE: TAKE OUT YOUR FOOD”

  • Ed, don't buy rental properties or try to make money in real estate. Get a low cost passive index mutual fund (Vanguard, etc.) and invest that way. The upfront costs are much less and with regular contributions and reinvested interest you can make a lot more with much less of a headache. The only way to make money renting properties is if you're a slumlord or if you have a large enough operation to make the economies of scale work.

  • Or, you could pull a Michael Franzese (get in, get out, enjoy). Quick cons are the sine qua non in our "gig" economy and "pop-up" culture. But seriously, Khaled is basically right. Try FUSEX, in addition to Vanguard, and let it marinate. Day trading, however, is not recommended.

  • Back in the 70s, my artist wife and I were looking for studio as well as living space in New York City (living/working spaces known as "artists' lofts") and kept running into co-op schemes we couldn't afford, largely because someone was skimming a lot off the top. We landed in a deal for a four-story building with a freakishly low down payment, bought it not with a bank loan (the amount we needed was too small for them to bother with, maybe, or they were allergic to anything with "artist" attached) but one from a relative. Today we are worth north of 7 million and, more important, have been living off the rents without the teaching gigs.
    We occupied two of the stories and rented out the rest, which paid the mortgage. Leading to my only piece of advice: whatever you can buy with whatever you scrape together, let it be near where you live, or even better, buy something to both live in and rent, like an apartment complex. If it makes economic and social sense, you can have an outside management company "front" for you and you can be a stealth owner. Or you can collect rents but claim to be "working for" the owner, if you don't think you'll be a too-convenient source for tenant complaints. Or you can carefully vet tenants unlikely to be chronic complainers—which is what we did.
    In retrospect we owe everything not just to serendipity but to the crucial loan from my wife's brother, a doctor. We paid him back easily. I assume Ed's father (a judge, wasn't he?) is gone and thus can't advance anything, but your teaching job should be worth something as collateral.

  • I know a couple who are doing really well, and it all started with their parents (who are actually millionaires) helping them buy their first house. Once you have that, it seems there is almost no way to fuck it up.

    The first house doubled in value in 4 years because this is Los Angeles, and they then bought a 6-bedroom thing for $1 million, which they could not afford, but so what? They defaulted on that mortgage in 2009 — and the bank then let them live there for 4 more years without paying a cent.

    I think sometimes what I could do with my money if I didn't have to write a rent check for 4 years. That'd be nice, right? They used all that money to found a business. Good for them. And when they were finally evicted, they lived illegally in the business location for 3 years. Which was a block from the beach.

    How's this story end? The bank just recently approved them for another house, this one only 4 bedrooms with a yard (they have a dog, so they need 4 bedrooms I guess). And me, with a perfect "rent paid on time" record, nothing close to that. So yeah, the moral to the story is, just ask your millionaire parents for 100 grand when you think you might be ready to take that big adult step! If you play your cards right, you will become motherfucking bulletproof, and there is almost no way to play those cards wrong.

  • Knox Harrington says:

    Don't do rental. I have experience in this. Checks will be late. When the ac goes out you're on the hook immediately for it. Periodically you'll need to gut it because people are animals. Property taxes are hard to predict. Renters leave without emptying the house and what do you do with a half ton of clothes and food?

    Don't do it. Put the money in an index fund.

  • A lot of this seems to depend on living in a "hot" housing market.

    I live in Columbus Ohio. The condo I bought in 1994 for $89K would probably sell for $135K now. I'm definitely not going to retire off of that.

    (my wife and I have 3 pensions between the two of us plus 401Ks so we'll be fine)

  • My retirement plan is to start lobbying now for legal assisted suicide, and hope that it is available in about 30-40 years.

  • I own a small 4 unit apartment building in a capitol city. I bought it With no money down @5% for 15 years from a guy in his 90s. So effectively, I won the lottery there. I "Borrowed" a chunk of change from my pops to fix it up and get everything in working order.

    I did almost all of the work myself with youtube and the library as an instructor. And it also passed inspection by the city. When the AC units started to break down I went to the career center for 6 months of night school (for 1,500 bucks) and got a refrigerant handlers license and the knowledge to keep them running and install new systems when I had to.

    I'm not getting rich, or even really getting very far ahead right now with it, but Its sitting there gaining equity every month.

    There have been nightmares with being a landlord, but like you I didn't know what else I could do to prepare for my future.

  • I worked for the Federal civil service for twenty four years. It was going to be thirty three, and I would have retired with a pension*. My health collapsed and I took medical retirement with SSDI. I consider it my Blighty wound; I'm too disabled to work, but I can still cook and clean for my family. My dad was career USPS, and had disability payments from getting shot through the chest during WWII. So socialism been berra berra good to me. Now my husband is building up his small business while I am the stay at home dad. It's working so far.

    Carrstone will be here any minute to explain how all you need to do is work swing shift at the jute mill, go to night school for Something Real (not a liberal arts degree), and run your shoeshine stand the rest of the time. Eventually you will either become a Success or die like a dog in the gutter, because Just World hypothesis.

    Incidentally, the Horatio Alger stories were not 'rags to riches' ; the usual arc was 'rags to a clean shirt', as the ragamuffin went from lumpenproletariat to petty bourgeois. These days, that WOULD be a happy ending.

    *For the younger readers – a pension was a promise that, if you lived long enough, you would get to live without working. Some of the usual suspects have been trying to make this Oldthink.

  • Unless you can predict where the housing market is going to appreciate in value enough to offset the costs of being a landlord (see above), I don't recommend this approach, particularly if you'll have to go into debt to get off the ground.

    Incidentally, my landlady is pissed that the house she bought ~12 years ago hasn't really appreciated in value enough to suit her, which is to say, it has appreciated enough to about cover the (minimal) repairs and renovations she's done on it, but not enough to make whatever her expectation of profit is. My housemate said, "Well, that's what happens when you buy a fixer-upper and don't fix it up."

    Incidentally, I have a liberal arts degree and work in IT. Unfortunately, where I live, the sector is so volatile I'm often unemployed or under-employed for months at a time. Money's good when I am working, though.

  • Don't do real estate. Do do (hehe) a side hustle and save all that money. And listen to all stupid ideas that come your way — you'll be surprised what people will pay for.

  • Oh and for the love of god people, stop buying shit you don't need and learn to pack your lunch. Anyone can make a goddamn PB&J. Seems stupid, but the little things add up.

  • Amen to Fred and Sarah. If you want to invest in stocks, read the JL Collins web series on simple retirement investments (and especially his column on the need for F-You Money). Also, start reading the Mr. Money Mustache blog. It has given me a great perspective on things. I started out with nothing and have given my parents more than they have given me over the years. These websites and columns gave me a sense of control over my destiny.

  • Sentient AI from the Future says:

    This post comes at a time when my disdain for rentiers is at something of an all-time high. The synchronicity is how I'm justifying the following rant.

    I've been living on student loans for much of my adult life. I was homeless for a few years in my late teens and twenties and it took me a while to put together a life for myself. A lot of it has been based on the kindness of strangers. I have had relatives able to send me a couple hundred bucks as long as it was something aspirational and middle class-ish. I always avail myself of whatever public assistance I qualify for, too, because there have been nights I've tested my tolerance for eating dishwasher detergent put on edible garbage to discourage drifters, and I would much rather heat up some totinos party pizza in a 7-11

  • Sentient AI from the Future says:

    …, and I would much rather heat up some totinos party pizza in a convenience store microwave.

    Long story short, I'm old enough to start needing statins and in med school because I have con vinced myself that at some point my desire to help other people will outrun the cost of my education. I am not 100% convinced that hoodwinking myself about this, vis a vis what i know of human nature and cultural trends, will turn out well for me.

    I, my partner, and our 3y old have just had our month to month lease terminated after 5y without cause by a rental company that bought the underlying small multi-apt complex.
    The previous landlord was an OK guy. He is the sort of person who I think has similar motivations to yourself. He expressed to us that he was nearing retirement. He recognized that the property was increasing in value and wanted to just get back to the place he considered his home, a few hours away. He told us, as did the developers, that we'd be able to stay there. I understood this as an expression of concern, but also one that was not insisted on via force of law.

    We moved into a new place just recently. It's a lot more money and a lot farther away from school. I may have to try and make time go to small claims court to recover our deposit, because policies.

    I've sort of lost the plot. I'm angry at the developers but I'm also pretty angry at the otherwise nice-ish guy who sold my family out to those developers

  • richard nixon says:

    I was in the same boat in the 1980's –a fair job but one that precluded saving large amounts of money. We bought our first house on an FHA loan–which requires a good credit rating and 3.5% down. You pay for mortgage insurance and the rates are not the best, but it puts one in an ownership position for a few thousand dollars. I refinanced later.

    I think FHA loans for first-time buyers are still available. You wouldn't need a million dollar daddy to get one, either.

  • I used my state's first-time home buyers program to get an FHA loan to buy a cute little house with all of 1% down and a below-market interest rate, as well as down payment and closing cost assistance added at 0% interest, payable at sale, refinance, or loan term end. There was even monthly payment assistance for a year. That was 14 years ago, and even though the payments have been tough sometimes on my single, pink collar, less than the metro median income, I've never missed one and never regretted it.

  • I'm early-40s GenX and of all my friends who are comfortably well-off the common denominator is "my parents helped me buy my first house".

    Get first house with parents help, sit back, let it appreciate for a few years, borrow against it, get second house, put tenants in it, let tenants pay House 2's mortgage, let it appreciate, borrow against it, get third house, lather rinse repeat.

    The key bit is access to Baby Boomer Money. If you don't have that, you're fucked.

  • Dan: Mr. Money Mustache made a fuck-ton of money in IT, which is how he and his wife can now kick back and smugly tell other people how to live simply and not spend money. I just say fuck you to the mustache because his advice has little basis in the reality most of us live in.

    And for the rest of you, I am guessing Ed has checked out his options for buying income rental property and has found it isn't feasible. So quit telling him to buy rental property!

  • I agree with Sarah. I also submit that you need a fair bit of luck to fall on you if you don't have Baby Boomer parents willing to finance something.

    My Boomer parents said to high-school me, "You want to go to college? Our parents didn't pay for ours, so we're not helping you pay for yours" (caveat–when they went to college, there was zero tuition for in-state residents and a semester's worth of books ran you around $60). Through a combination of small academic scholarships and a bunch of minimum-wage jobs running concurrently, I managed to squeak through school and graduate with less than $10 in the bank, but I graduated during St. Ronnie Raygun's recession and even with a computer science degree, I ended up living in my 10-year-old, 2-door hatchback car for a month until I got an overseas job–and THAT made all the difference. Living overseas let me earn enough to come back and put a downpayment on a crappy townhouse in a questionable area–but it was MY crappy townhouse.

  • Bessemer Mucho says:

    Readers might be interested in checking out Granola Shotgun. One of the blogger's recent posts details his experiences as the owner of a rental property, & his general theme is urban housing problems.

  • My experience, having been a landlord for a short time is that you have to a) live in the building, b) be in your tenant's face all the time to make sure that they aren't trashing your place and that they pay on time and c) you need to be able to do the repairs. If you can't do the repairs you aren't going to make any money.

    When I tried this I was self employed and was never around the house and couldn't do the repairs anyway.

    Self employment lasted 29 years. Landlording lasted about a year and a half before I gave it up.

    I like the no load index fund investment idea. Throw a set amount into the fund every month whether it goes up or down.

    I don't think that the stock market works like it used to and I wouldn't be surprised if the big boys figure out a way to screw us out of our investments but what else is there?

  • Well, I WAS going to say something about pensions, but, oh yeah, ILLINOIS.

    Mutual funds? Really? The stock market is currently at all-time highs (WHY?), and I seem to recall not one but TWO pretty big "corrections" (aka crashes) since 2000. With interest rates at approx. 0%, savings will be eaten up by inflation faster than they'll grow.

    If you bought a home during the height of the last housing bubble, and don't live in a "hot" market (NY/LA/SF/SEA) you might have lost your shirt, or you may just have an overpriced place to live. (My own house was probably never worth what we paid for it; white flight tanked whatever value was left.)

    In short, I'm long heroin.

  • Two rules:

    1. Be frugal, don't spend everything you make. You're already doing that.

    2. Be very lucky: Have good parents (even if they don't have money to give you), be born at a time that leads to a period that your 401(k) appreciates like mad, don't get sick, etc.

    Of course, if your principal objective in life is wealth, you can add a rule that tells you to cheat other people out of their money, in ways that don't lead to jail (you can even do illegal things and get away with them if you're white and work in the finance industry).

    Easy peasy, right?

  • My experience is somewhat different. My father was in aerospace and we always had 3 year jobs followed by arid deserts of unemployment while the industry landed new contracts.

    I now have a reasonable S/W job. I make above middle but not upper. (According to this website,, I'm in the upper 28% for my state. Not bad but not outstanding.)

    What I did do was the following:
    1) Bought our house in the middle of a housing crash. Not the most recent one but the one before that.
    2) Paid off said house.
    3) Didn't spend a lot of goods such as playstation, etc. We didn't have a big television for most of that time.
    4) Socked the legal maximum into my retirement every year.

    We made the downpayment on inheritance my wife received from a relative. That was our leg up. From then on we were on our own.

    We're not worth a lot in real terms– we have about 500k in retirement and we own the house, which has appreciated. But we don't have a big runline. We have no mortgage. We had a little extra and invested in solar when it came around so we don't have a big electric bill. We heat with wood and gas and I'm trying to figure out how to cut down on gas. So far we've been able to keep up with wood on our own.

    My point is that a modest independence is probably the best we can hope for but it is better than having to live paycheck to paycheck. I retire in about three years and, provided I don't keel over and die, should be able to stay afloat for some time after that.

    Of course, every one of us is likely one uninsured medical event away from disaster and I dread going on medicare. But what can you do?

  • I dread going on medicare.
    Why? It works well for most folks….
    Much cheaper than private insurance…

    Nice post, Ed, and representative of a lot of folks. Hard working, educated, reasonably frugal, and still on the edge. Tale of the times….

  • GunstarGreen says:

    I was lucky in that I was able to start at near-zero, rather than "cripplingly in-debt". Between state and federal aid, I was able to graduate from a four-year public university with only about 11K in student loan debt.

    I then got a job, lived at home with my mother for the next year devoting almost all of my income to paying off my student loans and covering my share of the groceries, and acquiring some very basic furnishings for the move-out (a simple couch, a couple of lamps and a small coffee table).

    I then picked up a not-terribly-priced studio-style apartment (it wasn't a true studio as it had walls, but the square footage and amenities were similar) rent contract. Between being single, childless, having a single relatively inexpensive hobby (video games) and loving IT work, I managed to save up a nice down-payment over the next five years, and was able to put down about 35 grand towards an at-the-time 108K house. This enabled me to mortgage the place for substantially less than I was paying in rent previously.

    Three years later and I'm just about ready to pay off the house and be almost debt-free — I'm still paying about 70 a month on the gutters I had to install, but once I'm out from under the mortage payments those should be done with in a couple of months.

    So yeah, it's doable. All it takes is a deep personal interest in and love for a highly-sought-after field of work and a willingness to live like a hermit, up to and including being the only person under 60 within three miles.

  • @oiojos

    I'm hoping for a similar plan when/if? I get my own place. Zero out debt as much as I can and dabble with a garden and chickens, so I won't starve (although, technically, I would still be working until 5 seconds before I die).

    For the group, my plan now is to grow my TSP, take out a loan against it, and use that to Kill With Fire my 6.9% student loan. I could do the same for a house downpayment, but since the mortgage rate would be half or less of the loan I figure I'd do better staking the loan first.

  • Keeping the 99% insecure is a major part of the plan.

    I do wonder though, at some point do we actually reach a tipping point? Will the tumbrels return? It doesn't seem to be that you can keep a population at this level of insecurity with the free flow of information we have these days. What the hell do I know?

  • Skepticalist says:

    As appealing as it may have been, one cannot govern 300 million people with libertarian or other bootstrap forms of government. Maybe it was never possible.

    Something will be coming down the pike.

  • Annnd…..that's why I'm in China. When I retire I should have about 200k plus SS which should keep me in a nice hut on a beach in some equatorial location until I croak.

  • I never had a job that paid much, but I worked at Verizon for about eight years and pUT about 100k into the bank, my 401k and my tiny lumpsum retirement. Since 2006 I have earned, maybe, 6k.

    I bought a house that was 3/4 gutted and finished that, then spent most of the last 8 or 9 years trying to get it ready for the "Town & Country" photo shoot. Nahgunahapin.

    I manage to feed myself and the dog pretty well, keep a few bottles of cheap wine and some beer at the house and get out four to five nights a week during the summer (less when it's cold and wet) to photograph bands or do other pro bono work. I don' t think that I'll be going to Provence for ANY summer, but I can read books about it.

    Being happy is not, or shouldn't be, about how much crop you accumulate or where you store it; it should be about satisfaction with your life. Well, that, and fucking with smug nitwits like Carpstunned.

  • @gunstar As someone who has been playing videogames since 1986, I would not consider it to be an inexpensive hobby. BTW Gunstar Heroes is an incredible game, as most Treasure games are. :D

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  • OMG DON'T INVEST IN RENTAL PROPERTY!!11!!! Been there, done that. Unless you live in the other half of the duplex and don't mind being woke up at 4 AM by the idiot tenants whose ADHD kid just BROKE THE TOILET (LITERALLY – DON'T ASK) AND IT'S FLOODING THE BATHROOM AND THEY ARE TOO STUPID TO TURN OFF THE WATER LINE (true story I swear) or other sundry events too numerous to recount, it ain't worth the hassle. Never made a dime on the deal either. Costs always ended up being more than the rent brought in, and tenants can disappear in the night.
    Buy some dividend-paying DRIPS stocks (no broker necessary) and forget them. They will make you more money than any rental property. ( And NO REITS EITHER!!)..

  • Sarah, the "make your own lunch" practice has benefits other than keeping cash in your pocket or on hand. At mid-2015 I really needed to lose about 100 lbs. One of the strategies that has worked is making sure I make ALL my food, particularly my lunch, which keeps me away from expensive, "fast" alternatives. One trip to Denny's while traveling, and I'my three days farther away from my goal. Have lost 60 so far and did it with my own cooking and food prep.

    When my kid got out of college, she had three student loans administered by Sallie Mae. We took one look at the payoff schedule and how they'd been applying the accumulated interest. Bullshit. We figured out how to loan her the money to cash them out, and she's paying us off at much less cost. I guess you could say she got her boost from parents as it allowed her to save money for other things she needed. We all realize how fortunate we are to be able to loan her the money or take advantage of something most of her classmates cannot. The first dump I ever bought back in the Late Cretaceous Era required a $1,400 grubstake from in-laws which we paid off quick as hell. We got our boost, too, recognizing that most of our peers had no such resources or backing. Meanwhile, in a nod toward socialism, I had the GI Bill as a back-up plan for getting a house.

    More recently, I was forced to retire at age 60. Funny how beneficial defined benefit pension plans have helped us out, as arrayed against neoliberal attempts to kill them all off.

  • Jeebus, Gino, nice syntax: "Funny how beneficial defined benefit pension plans have helped us out, as arrayed against neoliberal attempts to kill them all off." Strike "beneficial" there. Makes it a bit more intelligible.

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