Rule Maker Portfolio
Relaxing Debt-Free

By Rob Landley (TMF Oak)

NEW JERSEY (Sept. 23, 1999) -- I've been out of touch for about three weeks during the long and drawn-out process of moving from Texas to New Jersey. I haven't followed any stock-related news. Nor have I quoted a single one of my holdings. I haven't even read my e-mail. Day traders everywhere are probably recoiling in horror at the sheer apathy I've exhibited towards my portfolio, but right now I'm a lot more worried about my luggage.

I can afford to do this because I've invested my savings in what I believe to be well-run, sustainably profitable companies. My money is in good hands. I did all my fretting and fussing in the research phase, BEFORE I bought my shares. And just recently (April, I think), I checked up on how they were doing and read the various quarterly and annual reports to see what was what. At this point, I can comfortably drop off the face of the earth for a while and do other things.

This is good because I've had a lot to do, including selling my two condominiums in Austin. The one I lived in has already sold, and the one I rented out closes early next month. Landlording was fun, but I doubt I'll do it again any time soon. It's an awful lot of work, and a large chunk of the proceeds from the sale of the first condo has gone into fixing up the second. Despite the skyrocketing prices for Austin real estate and the rental income itself, my money would have done as well or better in stocks, and taken up a lot less of my time.

Despite the inconvenience, closing out my real estate investments has left me with a fairly large pile of cash, and as always, I'm surprised by how easy it is to spend money when you have it. (OK, walking into a science fiction convention carrying $500 in cash wasn't a bright move, but I got some lovely T-shirts out of it.) To avoid spending any more of it, I immediately transferred the excess into a new investment, one I've been meaning to make for a long time. It's the best investment I know how to make: I paid off all my remaining debts.

Being out of debt, with a good chunk of change in a 401(k) plan, means I can afford to take a fairly relaxed attitude toward my other investments. The historical rate of return for money invested in the stock market is a little over 10%, which works out to a doubling time of around seven years. I have around 35 years left until retirement age, meaning my 401(k) money alone should be able to double five times if I just leave it there and history continues on as usual. That would give me 32 times as much money as is in the account now, and that would make me a millionaire. All just by sitting back and staying out of debt from now on.

Of course, being a millionaire in 2035 may not mean quite as much as it does today due to inflation, but it's a comfortable retirement nonetheless. (According to Matt, 2% annual inflation would cause $1 million in 2035 to be the equivalent of $490,223 today -- what a finance nerd.) Right now I can afford to take a few months off from the rat race before deciding what to do next. I don't have monthly interest payments depleting my savings, so I'm no longer losing ground just by sitting still. Any extra money I make from now on, over and above my daily expenses, can go right into my brokerage account.

Once you're out of debt, this whole save-and-invest thing gets a lot easier.

- Oak