I remember loving snow days as a kid. This was long before I’d started doing archaeology and started hating snow. Every time it snowed for a few hours, I’d start getting giddy– thinking about the action-packed day of Nintendo and sledding that awaited me the next morning. I’d lay in my bed dreaming of the softly falling snow that was building up snowflake by snowflake all night long. Every snow didn’t turn into a snow day, but the biggest ones did and every child in Boise rejoiced. We loved snow days, but we were still happy any time the snow accumulated enough to build a snowman, snow fort, or have a snowball fight.
This weekend I was a panelist in the CRM Archaeology Podcast Episode 35 Money and Gold. The first part of the episode focuses on financial planning for field techs, crew chiefs, and other seasonal CRM archaeologists. While the focus was on preparing for winter layoffs, I feel like the advice is also great for anyone that works in the “feast or famine” CRM industry.
The podcast conversation also made me think about the financial strategies I’ve used since starting in cultural resource management. My employment has been tenuous at times and I’ve had to get used to being prepared for unemployment. In my experience, financial planning is similar to the snowstorm I mentioned earlier. Small flakes accumulating over time can result in so much snow that a town’s transportation network is shut down. Saving and investing for the future is the same. Small amounts saved and invested over time will undoubtedly result in a stable financial future.
I’m not an investment adviser, but here’s the strategy I’ve followed for the last 14+ years. It’s how I bought a house, started a business, kept my kids fed, and paid my bills even when I was furloughed/laid off and went back to graduate school. I also mention the books/websites where I got this information and will show the monthly and yearly savings (assuming you work for 9 months of the year).
Here’s what you do:
1) Put 5% in a pre-tax investment instrument– IRAs are best because you can bring them with you wherever you go and can dump 401ks into them when you leave a company. 401ks are OK too. This lowers your overall taxable income — “The Complete Idiot’s Guide to Personal Finance in your 20s and 30s” by Sarah Young Fisher and Susan Shelley; Ramit Sethi of www.iwillteachyoutoberich.com
ex. If your monthly pre-tax income is $2600, which is what you’d get at $15/hr x 40hrs/week, you should shuck away $130/month ($1170/year). Your after tax income will vary because of the vagaries of taxes and what you just did with your savings, but for the sake of argument lets say you have $2100/month after this investment deduction and paying your taxes.
2) Save 10% of your gross income until you hit a 3-6 month nest egg (about $3000-6000)– “The Richest Man in Babylon” by George Clason.
ex. 10% of $2100= $210/month ($1890/year). Now you’ve got $1890 of your monthly check left.
3) Use 5% to pay off credit cards and other debt like a car payment. Once you’ve paid off this debt, you can use this $ for additional investments like a house or more stocks– Ramit Sethi of www.iwillteachyoutoberich.com
ex. 5% of $1890 is about $95/month ($855/yr), which leaves you with $1795.
4) Use 5-8% for guilt-free spending– It’s important to stay on budget, but it’s also totally important to make sure you have some fun money so you don’t feel like your life is all work and no play. Ramit Sethi of www.iwillteachyoutoberich.com
ex. 8% of $1795 is about $145/month ($1305/year). Now you have $1650/month ($14850/year) to pay the rest of your bills/save/invest.
Let’s say you had an apartment you shared with a roommate, had some student loan payments, and your utilities to pay. Your share of the rent was $400/month, your monthly loan payment was $150, and utilities/groceries/cell phone/internet were $475 coming to $1025/month. This means you’d have about $625/month ($5625/year) to meet other expenses and raise your QOL. If you saved %20 of this extra ($125/month; $1125/year) you’d still have about $500/month to just drink and eat away if you really wanted to. Or, you could have a car with a higher car payment. Or, you could get a new computer each year.
None of this takes perdiem into account. Lets say you got $50/day for half of that 9-month CRM arch employment period. $250/week for 13 weeks is $3250 for the field season. Of course, you could make even more if you worked in the field for the entire time or worked in locations that had higher perdiem. You’d get a whopping $9000 if you got $50/week perdiem for the whole 9 months.
As you can see, you’re going to have to save your 10% AND most of your perdiem if you want to live off your savings during the winter ($3250+1890=$5140). You’ll do even better if you get a winter job, reduce your expenses (i.e. don’t have a lease, car payment, or consumer debt), live in a cheap place for the winter (like Costa Rica) or have to save more of your paycheck. You’d be well into investment territory if you save 20% of your after tax wages and all of the perdiem ($3250+3780=$7030; or, $3780+9000=$12,780 if you got perdiem all year and saved 20%).
Invest Some of that Dough
Again, I’m not a financial adviser, but I’m still going to give some advice for entertainment purposes only. Most of us dream of owning a home or living off of our investments. Here’s how it can be done on seasonal CRM wages. This will work better if you have a roommate/spouse/significant other and live in a cheap place like Tucson where the median home price is about $150,000.
To get a good mortgage rate and keep from having to pay Private Mortgage Insurance (PMI) you’re going to want to put 20% down. Here’s where you’re frugality comes in handy. Lets say you want to buy a place that costs $160k. You’re going to need $32000 to put down. That’s about 4-6 years of shovel bumming for 9 months/ year assuming you got a seasonal job to cover the spread in the winter and your investments didn’t make you any money, which is unlikely if you take a few minutes to learn how to invest. You’d need a mortgage of $128,000 to get this house and your payments (30yr with 5% interest, 1.25% property tax, and no PMI) would be about $854/month. If you were buying this place by yourself, you’d be taking a pretty big hit to your monthly expenses. Your finances would be tight, but you’d still be stowing away 10-15% for investments/savings AND would still have a few hundred dollars each month to spare. Your expenses would be staying essentially the same if you had a roommate/significant other. This scenario also assumes you never get a raise beyond $15/hr, never get a permanent position, and never go beyond field tech. It also assumes you work for at least 9 months each year.
But not everyone wants to buy a house. Some folks just want cold, hard cash because they don’t know what they’re going to do in the future. Personally, I feel like real estate is the best investment vehicle but it can tie you down a little and will force you to keep working. What if you don’t want to keep working? What if you don’t want to be tied to a single location?
In that case, stock investments are a pretty good option. However, you’ve got to be willing to take some risk. Stocks go up and down, just like real estate does, but stocks are much more volatile. In order to make it in the stock market, you’ve got to be willing to keep putting money in, especially when your portfolio is in the garbage.
I recommend using both long-term and short-term strategies for stock investing. In the long-term, you want to find a IRA or 401k that you can keep shoveling small amounts of money into on a regular basis. There are tons of ways to do this so find a good financial planner that will help you out.
For big, short-term gains, I recommend following the “Dogs of the Dow” strategy explained by Michael O’Higgins in his book “Beating the Dow”. Basically, you take a reasonably large chunk of money and dump it into the 5 or 10 companies in the Dow Jones Industrial Average (DJIA) that took the biggest losses in the previous year. Spread your money equally among the stocks. This is explained in detail in both of those books.
For example, take $5k and put $1k each on the five DJIA companies that took the biggest losses in the last year; or, take $10k and put $1k on the 10 biggest DJIA losers. I usually do this in the beginning of January. The key is: put the money in and just leave it. Don’t touch it. Just sit back for a year and watch what happens. You are extremely likely to make some dough because the blue chip stocks that just took a beating in the last year need to appease their investors (including you), so they’ll do what it takes to increase profits. Not every Dow Dog stock will make money, but most of them will. You don’t need all 5 or 10 stocks to make $, you just need the combined increase of your portfolio to make money.
This is a pretty good strategy that I know from personal experience works well. At the start of the economic collapse, when my CRM job in Seattle was on the rocks, I put $10k on the Dogs of the Dow and walked away with $17k after 12 months. I rolled that money into the house I currently live in. The stock profits allowed my wife and I to put more than 20% down on our home. I also grabbed the $8k new home buyer rebate (thanks Obama) and turned a 2br home with a shop into a 4br home with an office. I made a great deal even better and my wife and I will have a fair amount of equity when we sell because of the market rebound and the hefty down payment we initially made.
Through all of that, I’ve also kept a 3-6 month nest egg just in case something happens (like when I got laid off and had to find a new job).
Using the Dogs of the Dow technique, at the end of the year, if you don’t need the stock money, reallocate it evenly to the new Dow Dogs. If you put in $5k on 5 companies in January 2014 and made $2k, reallocate the $6650 on January, 2015 (you’re going to have to pay brokerage fees when you cash it out) to the biggest losers of 2014. Keep doing this for as long as you like. For more info, read “Dogs of the Dow” or “Beating the Dow”.
Multiple Streams of Income
Here’s where I’m currently at. I’m trying to diversify my income by starting a business and growing a side-hustle. There are more ways to build multiple streams than I can mention here, so I’ll just direct you to a few resources. Rosetta Thurman of http://happyblackwoman.com/ and Chris Guillebeau of the Art of Non-Conformity http://chrisguillebeau.com/ are my favorite writers that discuss side hustles. You should also check out the books “Multiple Streams of Income” and “Creating Wealth” by Robert G. Allen if you’re interested in growing your investments into streams of income.
The beauty of this is seeing the cumulative effect of your hard work and diligence. Archaeology gets a bad wrap because many of us have zero financial skills or experience. Fortunately, there is a wide universe of individuals that can help us get the experience we need to pursue our dreams.
If you want to hear the full conversation, listen to Episode 35 of the CRM Archaeology Podcast. Please, tell me how you plan on surviving a layoff or the winter. What’s your savings and investment strategy? Write a comment below or send me an email.
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