Financial freedom is a lifestyle choice

I know what some of you are thinking. But Mr. Badass Gentleman, isn't everything really a lifestyle choice? Tiger Woods chose a lifestyle that involved taking a lot of golf swings. Warren Buffett evaluated companies. Mozart composed works. They all chose the things they did, every single day, and the accumulation of those countless choices propelled them towards their future selves. So the answer is, yes, you got me on the title. But that same logic can and does apply to financial freedom.

Warren Buffett's lifestyle choice. Respect.

This is a personal look at how my partial financial freedom came to be over the years. Simply put, it was two things: 1) asking yourself if you truly need something, or if it it's just a passing want, and 2) applying a consistent, laser-focus on value. Plenty of extravagance (35 countries visited, 3 two-door convertibles, 2 Burns, and a darn expensive MBA). No lottery required.

Three caveats on this post before starting. First off, I have only achieved partial financial freedom, enough for ~20 years or so. Complete financial freedom, a level of wealth that everyone must decide for themselves, is my next major quest. Secondly, none of what I say here is meant to be some sort of magic money bullet. I'd simply like to share my take on how I got here, and let you, my dear readers, determine what (if anything) you'd like to try for yourselves. Third, this post is more directed towards folks who have a comfortable level of income (again, very subjective). If you're moving from minimum wage to complete financial freedom, there will be more steps involved. But the first step is always the same; deciding that complete financial freedom is of utmost importance to you, and setting out to gain it with single-minded determination.

My first ah-ha moment was in the third grade. I'm not sure how or why this idea came to me, but it laid the groundwork for my value-optimization approach to life. There was some random toy that I wanted, and it occurred to me that the value of that toy for me might change over time. To prove to myself that I really, truly wanted the toy, I decided to wait for one month, after which time if I still wanted the toy with the same intensity, I would proceed to hound my parents for it (hadn't figured out the making money part yet). Not surprisingly, there weren't many toys that passed this test. A month, it turns out, was sufficient time to get over most things.

This toy did not pass

One toy in particular did pass, the magical 8-bit, Nintendo Entertainment System (NES). After much pleading, I received one for Christmas and immediately proceeded to play it as often and as long as I could, so that was obviously good bang-for-the-buck in terms of entertainment value. And hand-eye coordination.

My god did I love this game

My second moment of financial enlightenment, after years of stress-testing purchase desires, came when I started my first job out of university. During that time, I came to the conclusion that there is a thoroughly unnecessary escalation of cost for every item imaginable. Let's say you want to buy a shirt. You could get one for $5, $25, $100, $500, $1000, and so on. But it's still a shirt, and at some point, the value gain of having a materially better shirt, is outpaced by the cost and that intersection usually occurs fairly early in the chain. So I applied this thinking to all of my purchases. The additional stress test was to assess whether the item was "worth it" at its respective price point.

$225,000 bottle of tequila anyone?

There are two points that bear mentioning at this time. One, when I purchase gifts for others, I apply my best judgement in figuring out what's most valuable for the recipient. Obviously, this means I buy gifts that might not pass my own personal stress tests, but I know that my friends and family will enjoy them. Another important point is that I primarily consider cost of ownership rather than initial cost (although that plays a role too). For instance, I had an absolute blast driving two different Mazda Miatas, as well as a Honda S2000. All three cars were sold for within $1000 of purchase price.

Oh how I miss you...

Here's another example.

Stylish egg chair cost of ownership? $0.

And to be fair, there is the cost of time to buy things cheaply, and to sell them when you're done, so that should be factored in as well.

As the years passed, I developed severe allergies to the following things: paying high rents, purchasing rapidly depreciating assets, and buying hyped equities. That meant specifically that I: lived a good deal in shared homes, never bought a new car, and gobbled up equities that got overly hammered on the markets (thanks eBay and Yahoo!).

Don't get me wrong, trying to find the best value for money for everything you buy is time-consuming and tiresome. And shared homes, whilst fine in your 20s, quickly become impractical as you get older and have a family. But no matter if you're looking for a home or a new pair of shoes, the easiest adaptation is to simply scale the amount of time you spend uncovering the best value, to the cost involved. My willingness to spend more time to find value is certainly a cost, and you may very well have a different balance point. A recent example of me going way overboard on this was my recent headphone purchase decision, which turned into a more detailed search on amplifiers and DACs as well. After about 20 hours of research spread over 3 weeks, I finally pulled the trigger. Let's just say that I understand why they say that audio equipment is to men what shoes & handbags are to women. So many to choose from...

Some damn fine headphones...

Despite all this, I still accumulated way more than I needed, as evidenced by the effort it took to reboot life. For all the stuff that works and you haven't used (or even thought about) for more than 6 months, find a way to give it away or sell it. Trust me, it'll feel better afterwards.

Thanks to Yin Yin for pointing out two other large drivers of cost. One is health insurance, which in the US is changing now. My approach to health insurance has always been to protect against catastrophes, but take a very high deductible. Frankly, health care in the US is severely overpriced, so it's part of the reason why we looked at other places to live. To cover my family on my own, with the same plan as I had at eBay, would've cost over $1400 a month for an HMO (Kaiser Permanente). That is simply absurd. I am now paying $370 for my family, for the entire year. And visits/medication/special cost, if anything, cost less over here. For those that are counting, that's an annual, post-tax savings of $16,430, for the same goddamn thing. Granted, the exceptionally low price is due to the fact that I've got zero income at the moment, but the same still applies in an income scenario, just not at 1.5 orders of magnitude.

On to child care, the second rip-off that exists in Silicon Valley. At some point in time, the cost of sending your child to daycare became similar to the cost of sending a kid to most public universities these days (say, $2,500 a month). Heck, it would've pretty much covered PENN tuition back in the day. Multiple children? Good luck. We're dodging this bullet right now, because we carry the brunt of this work, but we have access to an excellent day care in Nagasaki for $30 a day. This is full-on artwork, outdoor play, lunch & snack time, mix of ages (important for development), singing, dancing, and obviously, no TV. Roughly 3:1 kids:caretaker ratio. So we'd pay $600 a month if we wanted to send them the entire day on all workdays. That's an annual, post-tax savings of $22,800, for, you guessed it, the same goddamn thing.

So that means, by living in a Japan instead of the US, we're saving $39,230, post-tax, annually on healthcare and childcare for one kid. To make the numbers even, let's assume roughly 35% marginal tax rate. That comes out to just about $60,000 pre-tax money. To put this into perspective, that means I get to buy a Ferrari 348 Spider, every single year we have this health insurance / child care discrepancy. And since it only costs $38,000 (posted price on Craigslist, non-negotiated), that means I can also take my wonderful wife to the French Laundry, twice (birthday, anniversary). Or better yet, hold a Pizza Chow Down Block Party with 48 large, deep dish, Little Star Pizzas. And of course, this is just a one-child scenario. You do the math with more kids.

One of these every year? Yes please!

**Side note on TVs in daycares, it's saddening to watch kids' eyes glaze over while watching some inane program. Two out of fiave daycares we assessed were doing this to children, and we felt terrible for those parents that had to make that choice. There's got to be a better way.**

So what's the solution? It's not to move to Japan (although you're welcome to come visit us!), but it is to think more broadly about where you live. Wherever you happen to be, there will be pros and cons, but expanding your solution set will almost certainly improve your final outcome. If you're from a different country than the US or Japan, I invite you to share the healthcare and childcare situations in your home country in the comment section for our other readers. I'd be happy to compile them for ease of reading later. To get the ball rolling, I tracked down some comparative statistics on the cost of childcare in OECD countries. The challenge of actually getting permission to live and work in that country is a different matter, which can be addressed separately.