ChooseFI

By The Unstuck Network

Listen to a podcast, please open Podcast Republic app. Available on Google Play Store.


Category: Careers

Open in Apple Podcasts

Open RSS feed

Open Website
Rate for this podcast
Subscribers: 2492
Reviews: 8

Smith
 May 2, 2021
Every episode seems like a mix of the same. Lots of nothing. Mostly ads now it seems. Then theres the Facebook group. seen clear racist posts and they allowed them. Even after Brad was messaged & message reported. Racist supporters. 0/5

Joe Greene
 Nov 2, 2020
Here's every episode: Guest says anything and both hosts cheerlead mindlessly. Next episode: listener push back leads to hosts claiming they challenged ideas. Throw in a toxic Facebook group and it's a good idea gone really bad.

marius
 Feb 4, 2020
awesome podcast a lot of very useful information I got from it

John
 Oct 9, 2019
Monday episodes: 4. Friday episodes: 2. I usually skip after the third time I hear the word 'community'. Too many rah-rah life stories from other bloggers/podcasters in the FI echo chamber, not enough actionable tips.

Chuck S
 May 10, 2019
This is one of two podcasts (the other being The Jordan Harbinger Show) that I tell everyone they should be listening to on a regular basis. Take a break from music and get the knowledge you need to level up your life.

Description

How would your life change if you reached Financial Independence and got to the point where working is optional? What actions can you take today to make that not just possible but probable. Jonathan & Brad explore the tactics that the FI community uses to reclaim decades of their lives. They discuss reducing expenses, crushing debt, tax optimization, building passive income streams through online businesses and real estate and how to travel the world for free. Every episode is packed with actionable tips and no topic is too big or small as long as it speeds up the process of reaching financial independence.

Episode Date
384 | Functionality with Numbers
44:04

In this episode: functionality with numbers, the rule of 74, decision making, free roles, and tilting the odds in your favor!

Setting yourself up for success is one of the FI community's main ideals, but what is the best way to go about doing that? Well, to put it simply, math. While the mention of math may be enough to put some people off entirely, what if we told you basic math could be enough to prime yourself up for success? Simple addition, subtraction, multiplication, and division when applied right can have a huge impact on your personal finances! Listen along and see if there are any ways you could apply basic math into your own decision making going forward!

Timestamps

  • 1:00 - Introduction and Functional Numbers
  • 2:47 - Rule of 72
  • 7:44 - Math is Rad!
  • 11:27 - Math and Opportunity Costs
  • 18:38 - Decision Making
  • 26:03 - Free Roles
  • 33:54 - Credit Card Costs
  • 39:52 - Hunting for Win-Wins
  • 44:39 - Conclusion

Resources Mentioned In Today’s Episode

If You Want To Support ChooseFI:

 Jul 04, 2022
383 | What Do You Want to be When You Grow Up? | The Fioneers
48:23

Topics in this episode: lifestyle design, coast fi, slow fi, identity, career, and creating the life you want.

Sometimes it can be hard to separate what you do for a living from who you are as a person. Also, financial situations and limited resources can make you feel stuck living a life that doesn't align with your interests and values. But fear not for this is a cycle that can be broken! Listen along as Lauren from "The Fioneers" joins the show and walks through steps you can take to potentially unlock some more freedom in your life!

Jessica From The Fioneers

Timestamps

  • 1:04 - Introductions
  • 1:56 - Jessica Update
  • 5:23 - What Do You Want To Be When You Grow Up?
  • 12:03 - Identity and Career
  • 18:35 - Slow FI and Coast FI
  • 27:12 - It's Not Set In Stone
  • 32:44 - Fear and Creating The Life You Want
  • 41:38 - From Passion to Career
  • 45:05 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 Jun 27, 2022
382 | Name Your Fear, Control Your Risk
01:04:21

In the week's episode, Brad and Jonathan examine the current state of the housing market and discuss different ways in which risk can be controlled.

It seems like we are currently living in some of the most interesting financial times ever to have occurred. Crypto currencies are seemingly disappearing overnight, interest rates are shooting up, and the inflation rate continues to climb! While all of these examples can cause one to be fearful, preparation and attention to detail are two traits that allow those in the FI community to stay calm! Identify your fears, control situations where you are taking on risk, and continue crushing your journey down the path to FI!

Timestamps

  • 0:58 - Introduction
  • 2:01 - The Tail End
  • 5:58 - The Most Interesting Financial Times
  • 13:26 - Housing
  • 18:22 - Conversation With A Friend
  • 26:06 - Components of The Monthly Payment
  • 34:40 - 40 Year Mortgage and Renting
  • 45:20 - 10% Intrest Rates
  • 53:05 - Crypto Sidecar
  • 57:15 - Crypto Security
  • 61:39 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Jun 20, 2022
381 | Common Sense Spending Guidelines | Housing
01:09:31

In this week's episode, Brad and Jonathan discuss different guidelines that can help ensure your mortgage won't infringe on your FI goals!

Becoming an home-owner doesn't have to mean the collapse of your own financial stability! By planning ahead and working within your personal limitations, your journey to a happy, healthy, and simple life can continue unabated! Listen along to see if the common sense guidelines mentioned can be beneficial to your situation!

Timestamps

  • 1:02 - Introductions
  • 3:01 - Insufficient Funds
  • 11:55 - Tackling Overdraws
  • 19:21 - What Can You Really Afford?
  • 26:36 - The Bracket Breakdown
  • 31:13 - FI-ifying Your Budget
  • 35:13 - The Payment Breakdown
  • 45:53 - Working The Table
  • 53:46 - Mortgage Factors
  • 57:30 - Make The Best Decision For YOU
  • 68:43 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

🌏 Exclusive! Grab the NordVPN deal ➼ https://nordvpn.com/choosefi Try it risk-free now with a 30-day money-back guarantee! ✌


 Jun 13, 2022
380 | Optionality: Making Choices with Finite Resources
55:28

In this week's episode, Brad and Jonathan discuss different routes you can take in order to create options for yourself with limited resources.

Everyone has a finite amount of financial resources at their disposal and everyone is always questioning what they should be doing with what they have. While nothing is guaranteed, thankfully there are steps you can take to protect your resources and make informed decisions. Listen along as the guys discuss creating options for yourself and hopefully the information can be helpful towards dealing with uncertainty!

Timestamps

  • 0:56 - Introduction
  • 1:59 - The Rule of 72
  • 8:51 - Bitcoin Purchase and Computer Safety
  • 16:57 - Crypto Crashes
  • 21:42 - Intrinsic Value
  • 28:04 - Guaranteed Returns
  • 34:40 - Protecting Yourself
  • 45:27 - Finding Options in Uncertainty
  • 52:54 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 Jun 06, 2022
379 | The Hidden Job Market
01:08:43

In this week's episode, Brad and Jonathan welcome back Bradley Rice and Anita from Talent Stacker to discuss the hidden job market and how you can break into it!

Many consider the best path to a successful career getting an education, claiming a certification or degree, and working your way up the corporate ladder. But what if there could be an alternative? Utilizing your current skills, developing some new skills, and successfully networking could be your key to unlocking the hidden job market and leveling up your career! Listen along to learn how Bradley and Anita took this path less traveled and see if it can be applicable to your life and career!

Bradley Rice and Anita

Timestamps

  • 1:29 - Introduction
  • 4:06 - Unorthodox Choices, Radical Results
  • 13:52 - No Degree Needed and Developing Skills
  • 23:35 - Overcoming Traditional Objections
  • 29:04 - Finding Communities
  • 32:03 - Personal Branding
  • 37:22 - The Hidden Job Market
  • 43:30 - Volunteer Experience and Interviews
  • 55:10 - Compounding The Positives
  • 59:10 - The Salesforce For Everyone Podcast
  • 66:15 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 May 30, 2022
378 | Earning Power: The Best Protection Against Inflation
59:15

In this week's episode, Brad and Jonathan dissect the idea of earning power being used as a weapon to combat inflation, and strategies you can implement to level up your income!

One of the best ways to reduce the impact inflation has on your life is to out-earn the inflation rate. While that solution can easily fall under the umbrella phrase of, "easier said than done," there are actions you can take to make that process easier for yourself! Listen along as the guys discuss different strategies to approach raising your income and see if any of them can apply to you and your FI journey!

Timestamps

  • 0:55 - Introductions and Season's Change
  • 5:37 - Times is a Resource
  • 9:10 - Start With Spending
  • 14:07 - College Cynicism
  • 21:53 - The Career Freedom of FI
  • 25:04 - Income Combatting Inflation
  • 28:10 - Performance Reviews and Standing Out
  • 36:15 - The Art of Salary Negotiation
  • 43:00 - Influence
  • 45:03 - The Script
  • 51:31 - How Can I Improve This?
  • 53:42 - Opportunity and Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 May 23, 2022
377 | Glide Path to Retirement During Financial Uncertainty
54:24
In this week's episode, Brad and Jonathan discuss different ways to retain a sense of control along the path to retirement during times of uncertainty. While low points in the economy tend to cause worry, focusing on steps that can be taken to continue forward progress is what helps set the FI community apart! Join the guys as they discuss information that could help you navigate the murky waters ahead and continue along with your FI journey!

Timestamps

  • 1:02 - Disney and Travel Rewards
  • 9:52 - Age of Uncertainty
  • 17:41 - Controlling What You Can
  • 20:35 - Returns and Inflation
  • 26:09 - The Glide Path
  • 27:49 - Series I Bonds
  • 39:18 - Controlling Income and Expenses
  • 48:10 - When The Market Turns...
  • 52:47 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 May 16, 2022
376 | The Four Backstops to the Four Percent Rule | Sean Mullaney
51:14

In this week's episode, Brad and Jonathan welcome Sean Mullaney back onto the podcast to discuss the four backstops of the Four Percent Rule! While many in the FI community consider the Four Percent Rule to be a pillar for retirement planning, these relatively unknown backstops could save or enhance your retirement as you continue along the path less traveled! Listen along to see if any of these backstops could apply to you and your own future planning!

As always, the discussion is general and educational in nature and does not constitute tax, investment, legal, or financial advice with respect to any particular individual or taxpayer. Please consult your own advisors regarding your own unique situation. Sean Mullaney and ChooseFI Publishing are currently under contract to publish a book authored by Sean Mullaney.

Sean Mullaney

Timestamps

  • 0:59 - Introductions
  • 1:37 - The Four Percent Rule and Inflation
  • 12:20 - Annual Expenses
  • 14:19 - Decline in Energy and Expenses
  • 22:14 - Social Security
  • 30:53 - Downsizing and The Reverse Mortgage
  • 38:53 - Later Years Backstops
  • 43:21 - Mortality
  • 48:48 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 May 09, 2022
375 | What is Savings Rate and How to Calculate It?
48:50

In this week's episode, Brad and Jonathan continue along their, "Financial Independence A to Z," journey by examining savings rate and the many different ways it can be calculated! One of the pillars that sets the FI community apart is the emphasis on saving money in order to unlock more in your life. So, by having the right tools needed to calculate your savings rate, you can begin to make adjustments and hopefully start the process of taking back your time!

Timestamps

  • 0:59 - Introductions
  • 4:30 - Ben's Question
  • 7:41 - How Do You Calculate Your Savings Rate?
  • 12:00 - Why Savings Rate Is Important
  • 18:25 - Nuances In Saving
  • 21:55 - Calculation Example
  • 28:15 - Scenario Three
  • 37:57 - Looking At The Nuances
  • 46:56 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 May 02, 2022
374 | Tools to Simplify Budgeting and Tracking Finances
53:20

In this week's episode, Brad and Jonathan discuss a variety of tools that can help you stay on-top of your budget. Whether you create your own tracking systems or don't have any expense tracking systems in place yet, there likely is a tool mentioned in this episode that can help you get one step closer to your financial goals! Remember, keeping your expenses organized can help you take drastic steps forward in your FI journey!

Timestamps

  • 0:56 - Introductions
  • 3:57 - Identity Statements and Failure
  • 9:55 - The Post Tax Season Check-Up
  • 13:33 - The Large Tax Return
  • 17:34 - Simplifying Your Financial Life
  • 22:34 - Loading Your Financial Tool-belt
  • 26:25 - Tracking The Cost Of Your Life
  • 34:53 - Tracking Softwares
  • 42:17 - Envelope Systems
  • 46:44 - Should You Use A Budgeting Template
  • 51:56 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Apr 25, 2022
373 | Natural Remedies, Startup Economics & Financial Literacy A to Z
55:24
In this weeks episode, Brad and Jonathan discuss some natural remedies your may find useful in your life, the economics behind the modern startup scene, and most importantly the basics pillars of financial literacy! Join the guys as they share their philosophy towards tackling financial literacy and why it is such an important topic to study. By knowing the rules of the game, maybe you can start to widen that gap between income and expenses!

Timestamps

  • 0:56 - Introductions
  • 1:52 - Fulfilling Remedy Responsibilities
  • 6:22 - WeWork and Startup Economics
  • 12:47 - Increasing The Gap
  • 17:11 - Picking a Career
  • 20:20 - Financial Literacy A to Z
  • 24:33 - Budgeting and Optimizing Expenses
  • 32:42 - Automating Your Finances
  • 36:06 - The Longterm Mindset
  • 44:40 - Borrow and Protect
  • 52:17 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Apr 18, 2022
372 | Can I Get an Extension, Please?
39:40

It's officially tax season! In this week's episode, Brad and Jonathan discuss tax extensions and share some of their experiences paying taxes in the past. No matter what walk of life you are in, at the end of the day we all have to pay taxes. As members of the FI community, we should do our best to stay calm and tackle the task!

Timestamps

  • 1:10 - Introductions
  • 1:55 - Daylight Savings
  • 5:18 - Viral Nightmare Tax Scenario
  • 11:36 - Putting Aside Taxes
  • 20:39 - Extensions
  • 26:32 - The Not Genius Move
  • 31:17 - Larger Than Expected Tax Bills
  • 34:30 - Small Business and Side Hustles
  • 37:53 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Apr 11, 2022
371 | Why Does the Stock Market Go Up? | Brian Feroldi
45:56

In this week's episode, Brad and Jonathan are joined by author and friend of the show Brian Feroldi. After spending two years writing the book, Why Does The Stock Market Go Up? Brian is returning to the show once again to share with you the valuable lessons he has along the way! Join the trio as they discuss why the stock market goes up, down, and everything in-between!

Brian Feroldi

Timestamps

  • 1:33 - Introductions
  • 2:40 - Understanding The Market
  • 7:07 - History Of The Dow Jones
  • 13:19 - The NASDAQ
  • 16:35 - Valuation
  • 23:22 - The Future Is Inevitable
  • 24:45 - Stock Splits
  • 33:14 - What Are You Buying?
  • 44:10 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Apr 04, 2022
370 | Timeline Your Goals | Stacked with Joe Saul-Sehy
54:42

In this week's episode, Brad and Jonathan sit down with Joe Saul-Sehy, co-author of the book "Stacked" and co-host of the "Stacking Benjamins" podcast. Together, the trio discuss how to properly set goals for yourself and ways you can continue to move that needle along! If you stick to your timeline and ask the right questions, before you know it you could be on the right track!

Joe Saul-Sely

Timestamps

  • 0:51 - Introductions
  • 5:20 - Goal Setting And The Timeline
  • 10:41 - Bad Questions And False Rabbit Holes
  • 15:25 - Talking Family Finance
  • 20:24 - Budgeting And Tracking
  • 28:25 - Comparison Is The Thief Of Joy
  • 32:21 - Financial Advisors
  • 45:30 - Assets Under Management
  • 51:51 - About "Stacked" And Where You Can Find It!
  • 54:02 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Mar 28, 2022
369 | The Unstoppable Force Vs Immovable Object: Clarity and Goal Setting Part 2
47:30
What happens when an unstoppable force meets an immovable object? In this week's episode, Brad and Jonathan continue their discussion from last week about clarity and goal setting, but this time they focus on ways to circumnavigate the seemingly immovable objects in our lives. Overcoming objections that prevent us from the futures we want can actually be surprisingly easy if you adopt the right mindset. Become the unstoppable force that shatters those barriers holding you back!

Timestamps

  • 1:00 - Introductions
  • 1:53 - Goals & The Aggregation of Marginal Gains
  • 6:58 - Manifestation
  • 14:55 - Clarity & What YOU Want
  • 24:27 - Becoming The Unstoppable Force
  • 30:10 - Controlling Monthly Expenses
  • 35:12 - Car Payments
  • 37:46 - Accounting For Your Mindset
  • 42:43 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Mar 21, 2022
368 | Declutter, De-noise & De-stress : Clarity and Goal Setting Part 1
42:42
In this week's episode, Brad and Jonathan kick off part one of a two episode series focussed on decluttering, de-noising, and de-stressing your life! What makes the FI lifestyle so special is it's ability to block out social norms allowing for us to build our own healthy, happy, and free lives! By decluttering your life, you can surround yourself with uplifting material that will help you continue your trek down the path less traveled.

Timestamps

  • 1:00 - Spring is Coming!
  • 3:36 - Long-Term Thinking
  • 7: 19 - Decluttering
  • 15:15 - Tackling Social Prisons
  • 23:10 - The Oasis
  • 29:22 - Junk Mail and Saying No
  • 37:30 - The Red X
  • 40:50 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Mar 14, 2022
367 | FI Number Adjustments
43:41

In this week's episode, Brad and Jonathan unpack the problems that lie within modern retirement calculations and provide examples of how you can work around these flaws. As opposed to focusing on income, maybe it is better to learn how much our lives cost us. Expenses appear and disappear as life goes on, it is important to factor that in to your FI number!

Timestamps

  • 1:01 - Introductions
  • 2:00 - Listener Feedback, Permaculture, and Libraries
  • 6:55 - Annual Expenses
  • 14:08 - The Retirement Smile
  • 16:53 - Addressing That FI Number
  • 22:21 - The Pile of Cash
  • 30:45 - Upcoming Events!
  • 32:07 - Major Purchases For Those Entering The Workforce
  • 41:40- Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Mar 07, 2022
366 | Day 0 Self
43:43

In this week's episode, Brad and Jonathan discuss the importance behind moment you decide it is time to make a change in your life. While making the decision to alter your life for the better is often easy, actually consistently carrying out that goal can be tough to do. We all hit road blocks, we all stray from our goals, but being able to correct your path is vital to actually changing for the better! Keep track of your progress and set yourself up to success!

Timestamps

  • 0:00 - Introductions
  • 1:09 - Favorite Two Days of the Year/Berkshire Hathaway
  • 6:18 - Bumming On The Couch Story
  • 12:36 - What Are You Pivoting Towards?
  • 16:07 - Making The FI Choice
  • 19:43 - Journaling Thoughts
  • 24:54 - What Compels Change?
  • 29:50 - Accountability
  • 33:10 - Subconscious Guard Rails
  • 38:10 - 1% Changes Add Up
  • 40:45 - The Goal of Paying Off Credit Card Debt
  • 43:10 - Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Feb 28, 2022
365 | What If You Didn't Need to Escape?
41:37

In this week's episode, Brad and Jonathan question the notion of needing to escape from your life. While we all get tired of the mundane nuances that life throws at us, we often escape these constrictions by frivolously spending money during the hours in which we own our time. Taking a break isn't the worst thing on earth obviously, but reclaiming our time and spending it with who or what we love can help erase the feeling of needing to escape from the world! Take a look outside, it doesn't look too bad right?

Timestamps

  • 1:26- 8:28 | Introductions and Super Bowl Commercial Discussion
  • 8:28- 10:13 | Facebook Discussion
  • 10:13- 11:47 | What If You Didn't Need To Escape?
  • 11:47-14:26 | The Look Outside Test
  • 14:26- 23:20 | How We Escape
  • 23:20-32:05 | Compounding Healthy Hobbies
  • 32:05-41:55 | A Life Without The Need For Escaping
  • 41:55-43:43 | Conclusion

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Feb 21, 2022
364 | What's All the Hoopla About?
49:10

In this week's episode, Brad and Jonathan fixate on many different areas in life where improvements can be made and ways you could go about doing it! Whether it's your own cybersecurity, managing anxiety, or physical health, it is important for us to take care of ourselves in order to fully enjoy the life we are setting out to live. There are easy ways to make changes that could snowball into a brighter future for you!

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Feb 14, 2022
363 | First to a Million
58:39
Jonathan and Brad talk with Dan Sheeks about exactly what a 17-year-old should know when getting started on their financial journey. A detailed synthesis of this information can be found in Dan's book First to a Million.

 

https://www.sheeksfreaks.com

 Feb 07, 2022
362 | Blockchain, Smart Contracts, and NFT's | Part 2
52:21
In this week's episode, Brad and Jonathan continue their discussion from last week about digital asset investment! This time, they are taking a deeper look into decentralized finance and different ways that you can get involved in the digital asset realm if that is something you wish to do on your FI journey!

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Jan 31, 2022
361 | Blockchain, Smart Contracts, and NFT's | Part 1
55:42
In this week's episode, Brad and Jonathan take a look at the blockchain and try to find where the actual value is within cryptocurrencies and digital asset investing. Join the guys as they define what certain digital assets are, discuss strategies for navigating the murky waters that is blockchain investing, and the importance behind not getting caught up in speculation! Remember to keep a long term mindset while working towards FI!

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Jan 24, 2022
360 | A Primer for Success
01:05:00

In this week's episode, Brad and Jonathan discuss different ways in which you can position yourself to experience as many positive outcomes in your life as possible. Whether it's building credit, saving, investing, education, understanding the true meaning behind the word "compounding," or really any other aspect of your life, by knowing the rules and planning accordingly you can experience success in a manner that feels automatic at times. Carefully consider the ROI that comes with the decisions you make!

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Jan 17, 2022
359 | SWOT Analysis for Financial Independence
50:10

Now that you've done your beginning of the year audit, it's time to look at your finances through the lens of a SWOT analysis! In this week's episode, Brad and Jonathan examine the strengths, weaknesses, opportunities, and threats that may arise as you continue along your FI journey. By getting a strong grasp on the current state of your finances, hopefully you can begin to work towards turning your weaknesses into strengths, and your threats into opportunities!

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Jan 10, 2022
358 | Getting Started Audit
47:36

Welcome to 2022! In this week’s episode, Jonathan and Brad discuss starting your year by doing an audit of your current financial situation to highlight areas in which you can improve! It is critical to know how much you’re taking home in income and what your expenses over the coming year will look like. That way you can start molding your journey to FI over the course of 2022!

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Jan 03, 2022
357 | 2021 Year End Wins | Part 2
49:38

In our final episode of 2021, Brad and Jonathan pick up where they left off last week as they continue to listen to your end of year wins! It is truly amazing to hear about all the accomplishments our listeners met in 2021, and we hope you continue to ride that momentum into 2022! Thank you for an amazing year, and we hope the future is full of many more wins within our amazing community!

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Dec 27, 2021
356 | 2021 Year End Wins | Part 1
39:31

Happy Holidays! However, the holidays are not the only reason we are festive around this time of the year. Join Brad and Jonathan as they celebrate your end of the year wins! This episode is dedicated to all the amazing steps our community members have made throughout 2021, and we hope you continue to make strides on your FI journey as we move into 2022! Congratulations to everybody who has made progress this year and stick around for part two coming out next Monday!

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Dec 20, 2021
355 | Making Bold Moves
50:13

In this week's episode, Brad and Jonathan are joined by Dominick Quartuccio from "The Great Man Within" to discuss making bold moves while on the path to bettering yourself. Although it may be inconvenient, making one bold move can snowball into a life full of adventure, self-development, and unexpected happiness! Join the trio as they discuss what can dictate a bold move, signs that you may be ready to level up an area of your life, generating ideas for bold moves, and so much more!

Dominick Quartuccio

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Dec 13, 2021
354 | Navigating the Possible Vs Probable of Personal Finance
57:32

In this week’s episode, Brad and Jonathan discuss planning your short and longterm FI goals in a manner that is realistic to your current situation. By taking an approach that favors longterm success as opposed to rapid growth, you can position yourself in a manner that will allow for luck to strike as you continue your FI journey! Be sure to plan for the probable and possible outcomes in your life!

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Dec 06, 2021
353 | Families Fly Free
49:11

In this week's episode, Brad and Jonathan are joined by Lyn Mettler from "Families Fly Free" to discuss optimizing your travel rewards when traveling with family! Join the trio as they discuss different ways to utilize travel rewards programs so you can be one step closer to finally taking the vacations of your dreams!

Lyn Mettler

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Nov 29, 2021
352 | The DIY Financial Plan
01:08:49

In this week's episode, Brad and Jonathan are joined by Measure Twice Money's founder Cody Garrett! Together, they discuss important details about DIY financial planning, such as identifying where you do and don't need help with your financial planning, exercising the rational and reasonable approach when financial planning, and ways you can properly prioritize your spending! Also, the trio shares important information you should know before selecting a financial planner.

Cody Garrett

Resources Mentioned In Today’s Conversation

Measure Twice Money's Data Gathering Checklist

If You Want To Support ChooseFI:

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Nov 22, 2021
351 | Year End Tax Planning 2021
59:24

In this week's episode, Brad and Jonathan are joined by Sean Mullaney to get a jump start on 2021's tax planning season. Together, they discuss managing Backdoor Roth IRAs before the 12/31 deadline, changes to the relevant tax regulations, amended returns, solo 401k's for contractors and entrepreneurs, and so much more! Listen along to see if any of the information shared can be applicable to your own tax planning this season!

Sean Mullaney

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

As always, the discussion is general and educational in nature and does not constitute tax, investment, legal, or financial advice with respect to any particular individual or taxpayer. Please consult your own advisors regarding your own unique situation. Sean Mullaney and ChooseFI Publishing are currently under contract to publish a book authored by Sean Mullaney.

 Nov 15, 2021
350 | Runaway Winners and the Balanced Portfolio
41:49

With volatile assets like Tesla stock, Ethereum, and Bitcoin, how do you keep a level head while investing? In this week’s episode, Brad and Jonathan are joined by friend of the show Brian Feroldi to discuss managing your runaway winner investments and balancing your portfolio! Listen along as Brian shares his strategies for evaluating stocks, creating guidelines for yourself as an investor, and mentally preparing yourself for the highs and lows of investing!

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Nov 08, 2021
349 | Paper Returns Vs. Real Returns
47:51

this week's episode, Brad and Jonathan discuss the importance of knowing the difference between paper returns and real returns. If an asset has a certain value in the market, it does not mean that said value will exist once an attempt to liquidate the asset is made! Later in the episode, they dip into the mailbag and answer listener questions about episode 332 and tax planning!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Nov 01, 2021
348 | The Rules of the Game
53:11

In this week's episode, Brad and Jonathan discuss the rules that financially dictate how we all play the game of life. Together, they point out that knowing the rules can allow you to experience the beneficial side of tax planning, maximizing your benefits, and utilizing your travel rewards! The rules may seem complicated on the surface, but once you understand them, you can start absolutely crushing your path to FI!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Oct 25, 2021
347 | How Did You Calculate That Return?
49:13

In this week’s episode, Brad and Jonathan discuss how critical it is to fully understand what the statistics and numeric values describing your investment returns actually represent. They do so by describing what compound annual growth rate is, explaining the logic behind the 4 percent rule, and by referencing helpful insights gained in previous episodes of ChooseFI! Later in the show, the guys are joined by Rob Phelan from “The Simple Startup” to discuss second generation FI, the benefits of teaching children and teenagers about entrepreneurship, and Rob’s new children’s book M is for Money!

Rob Phelan

Resources Mentioned In Today’s Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Oct 18, 2021
346 | How Do I Figure Out the Taxes on This?
56:21

In this week's episode, Brad and Jonathan examine the concept of assets and where they fit in your general tax strategy. Together, they discuss the different factors that effect how and when you pay your taxes, compare the differences between Roth IRA's and 401k's, and explore potentially beneficial ways in which after-tax investments and 401k's overlap!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Oct 11, 2021
345 | The Art of the Career Pivot
50:02

In this week's episode, Brad and Jonathan talk about the benefits behind creating the space needed in life for you to challenge yourself. While it may be tempting to relax in place with your new-found free time, you should be using it as an opportunity for growth! Who knows, you could even find yourself in a career you never thought you'd be in, making more than you ever thought you could earn! Listen along as the guys tell you the steps needed to execute a masterful career pivot!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Oct 04, 2021
344 | Risk Avoidance and Deworsification
43:35

In this week's episode, Brad and Jonathan discuss how risk avoidance can weigh down your returns in the form of opportunity costs. While your savings may be safe, you could be missing out on opportunities for your money to work on your behalf! Join the guys as they discuss the rule of 72, inflation, and diversifying as opposed to "deworsifying!"

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Sep 27, 2021
343 | Firing the Haters
47:34

In this week's episode, Brad and Jonathan are joined for the "many-ith" time by Jillian Johnsrud to discuss her new book, "Fire The Haters." Together, they dissect some of the themes from Jillian's book, which leads to discussions about overcoming imposter syndrome, taking action, acknowledging valid feedback, and identifying the difference between procrastination and preparation!

Jillian Johnsrud

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Sep 20, 2021
342 | Don't Let Good Be the Enemy of Great
39:33

When things are good, is it the right move to settle in place? In this week's episode, Brad and Jonathan discuss the nature of good, and how things being good is often the biggest obstacle standing in the way of things being great. After all, there is no opportunity for growth if you linger in a state of complacency!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Sep 13, 2021
341 | Worthwhile Splurges
55:28

In this week's episode, Brad and Jonathan discuss the benefits of slightly diverting from the FI mindset and spending more on meaningful purchases. While splurging can be a slippery slope, calculated splurging can yield large returns in terms of enjoyment, opportunity, and time!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Sep 06, 2021
340 | Diamonds in the Rough
42:28

In this week's episode, Brad and Jonathan reopen the mailbag which prompts a discussion examining the true monetary value behind collectable items, and why finding that diamond in the rough could inherently be more valuable than actual diamonds! We also hear about some fantastic wins the community has experienced, plus some insight on how to operate a high-earning lemonade stand with your kids!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Aug 30, 2021
339 | Close the Loop
44:02

In this week's episode, Brad and Jonathan dive into the mailbag and respond to listener emails! Throughout the episode, you'll hear about some of the wins those in our community have experienced, ranging from having the power to take back and optimize personal time, to 2nd graders discussing the FI movement with their teacher!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Aug 23, 2021
338 | 10 Ways to Increase Your Income
01:09:29

While slashing your expenses can certainly accelerate your path to financial independence, what if it also begins to slash at your own happiness and wellbeing? In this week’s episode, Brad and Jonathan are joined by Alan Donegan from the Rebel Entrepreneur podcast, who attempts to solve this dilemma by discussing 10 ways in which you can increase your income. This way, you can still enjoy the smaller luxuries in your life while maintaining a strong roadmap to financial independence!

Alan Donegan

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Aug 16, 2021
337 | Ordinary Sherpa
01:01:35

Does settling down and starting a family really mean that your days of adventuring are over? In this week's episode, Brad and Jonathan are joined by Heidi Dusek from the Ordinary Sherpa Podcast, who firmly believes that having a family doesn't mean that your ability to adventure disappears! Heidi shares with the guys strategies that you can implement with your family to ensure you continue to exercise your "adventure muscle!"

Heidi Dusek

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Aug 09, 2021
336 | $1K 100 Ways
49:36

In this week's episode, Brad and Jonathan are joined by author, podcaster, and entrepreneur Nick Loper from Side Hustle Nation. In their conversation, Nick emphasizes that thinking creatively when looking to start an entrepreneurial journey can lead to a surprisingly successful endeavor. Nick also cited examples he has came across after starting his "1k, 100 ways" project, and how the right idea for a side-hustle could evolve into a full time business!

Nick Loper

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Aug 02, 2021
335 | In a World Where You Can Do Anything, Why Do We Always Do the Same Thing?
52:03

In this week's episode, Brad and Jonathan get introspective and examine the choices that everybody has laid out for them in their lifetimes. Together, they ponder why so many choose only the cookie-cutter options in life, and how taking the path less traveled can lead to happiness you never even knew was possible.

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Jul 26, 2021
334 | Experiments in FI: Inflation, Gardening, and Revocable Living Trusts
56:22

In this week's two-part episode, Brad and Jonathan provide personal examples and insight on relatively safe ways to experiment with your FI investment plan! Later in the show, Sean Mullaney joins the guys to discuss revocable living trusts and how they can fit in with the, "hard to think about," side of future tax planning!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Jul 19, 2021
333 | Unlocking Your First Mini-Retirement
01:01:55

In this week's episode, Brad and Jonathan are joined by Jillian Johnsrud, the host of the Everyday Courage podcast and fellow FI guru. Jillian shares with the guys the concept behind a mini-retirement, or in other words taking an extended period of time off outside of the so called "golden years." Together, the trio discussed the benefits of mini-retirements, strategies for optimizing your time while mini-retired, and how to properly prepare for a mini-retirement!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Jul 12, 2021
332 | Transform Your Tax Return Into a Springboard for Financial Planning
01:00:56

In this week's episode, Brad and Jonathan are joined by none other than the "FI Tax Guy" himself, Sean Mullaney. Together, they highlight reasons why your tax return may not be such a great thing, and the different ways you can leverage your tax planning to your own advantage!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Jul 05, 2021
331 | What Does Inflation Mean for Investors?
01:02:16

Big ERN (a.k.a. Karsten) from "Early Retirement Now" makes his return to the podcast in this week's episode! With Brad and Jonathan, Big ERN gives us the lowdown on what inflation is, the role inflation plays in the world economy, and the effect inflation can have on a variety of investments!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Jun 28, 2021
330 | Is there a Housing Market Bubble?
01:14:46

In this episode, Brad and Jonathan sit down with Paula Pant, author of the ebook Escape and creator of the blog and podcast Afford Anything. As a group, the trio discuss the current landscape of the housing market, whats different between it now and 14 years ago, some tips and ticks for buyers, and whether or not the current housing market is in a bubble!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Jun 21, 2021
329 | The Investing Horserace
55:25

In this episode, Brad and Jonathan take a look at popular portfolios in the financial independence community and lay down a structure of comparison for them in a fashion similar to that of a horse race! Join us during the longitudinal study to find out which of these various investment strategies is the right fit for you!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 

 Jun 14, 2021
328 | Watch the Business Not the Stock
49:49

In this episode, Brad and Jonathan discuss investment strategies with Brian Feroldi, a seasoned veteran of the stock market and author for The Motley Fool. Brian shares with Brad and Jonathan some insight into the current landscape of the market, why some stocks perform the way they do, and why it is important to take a look at the business behind the stock and not just the value of that company's shares.

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Jun 07, 2021
327 | Where Does Entrepreneurship Fit on Your Path to FI?
01:03:19

In this episode, Brad and Jonathan are joined by Alan Donegan, an entrepreneurial guru and host of the "Rebel Entrepreneur" podcast. Together, the trio discuss their own entrepreneurial journeys, tips and strategies for up and coming entrepreneurs, and where entrepreneurship could fit within your FI journey!

Resources Mentioned In Today's Conversation

Want to start your own journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!

 Jun 04, 2021
326 | Learn to Market Yourself and Your Skills in 2021 and Beyond
49:13
In this episode, Brad and Jonathan take a look at the ways in which people aren't properly marketing themselves. By running through a thought experiment, Brad and Jonathan uncover skills, abilities, and valuable traits that may be absent from your resume. They also discuss imposter syndrome and how it can lead to selling yourself short.
 
Resource from the episode:
 
 May 31, 2021
325 | Credibility and Boundaries for Winning at Life
48:23

In this episode, Brad and Jonathan reexamine the stages and checkpoints of Financial Independence. In our community, many people are just trying to figure out where they are on this path to FI. While every individual’s journey will be unique, when you can gamify the process, the journey can be more rewarding and enjoyable.

Resources Mentioned In Today's Conversation

Want to start your own Journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!  

 May 28, 2021
324 | The Stages and Checkpoints of FI
01:05:11

In this episode, Brad and Jonathan reexamine the stages and checkpoints of Financial Independence. In our community, a lot of people are just trying to figure out where they are on this path to FI, and while every individual's journey is going to be unique, when you can gamify the process, the journey can be more rewarding and enjoyable.

Want to start your own Journey to Financial Independence? Sign up for the free 5-Day FI Challenge here!  

 May 24, 2021
323 | Pump and Dump
01:04:55
  • Curious about cryptocurrencies? Is it investing or is it gambling? It’s a topic the community has a lot of questions on, so in this episode we create. framework for the conversation and explore the nuances.
  • In the US, we generally want for nothing and true scarcity is something we haven’t recently experienced until this year and suddenly being presented with it creates some interesting psychological reactions.
  • It’s good to position yourself to be ahead of the game and be prepared when you hear reports of activities that might affect the supply chain. You don’t want to be doing something at the exact same time as everybody else. See trends, think outside the box, and make your moves ahead of time.
  • Colonial Pipeline paid to resolve their ransomware attack with a cryptocurrency, specifically, Bitcoin. Gas pumps on the east coast may be getting back to normal soon, but there’s an ongoing pump and dump issue with crypto.
  • The stories of insanely high levels of return from crypto are all over the news and social media, creating a sense of missing out for those who aren’t in the game. So should crypto have a role in your plan for financial independence?
  • For Brad, cryptocurrencies have always felt like pure speculation, which is the hope that you can buy it and then sell it later to someone else for more money. Although he is leery of all cryptocurrencies in general, he is interested in learning about the entire sphere of crypto because of all the innovation with decentralized finance and potential for smart contracts and NFTs.
  • Although Brad believes there could be work-changing potential, he knows he’s not knowledgeable enough to know what it will look like or pick a particular company or cryptocurrency.
  • Bitcoin was the first cryptocurrency to experience mass adoption and the most valuable on a per coin basis. Its value has increased ten times in the last year alone and yet it isn’t the crypto with the highest rate of return.
  • At its core, Bitcoin is code. While only 21 million of the coins will ever exist, because it is code, it can be cloned or forked to add new features. There’s nothing magical about it that makes it worth $40,000 or $60,000 per coin.
  • There are close to 10,000 different cryptocurrencies all with unique features and various values. Some have done well and some have done insane, but without the benefit of hindsight, you don’t know which are yours.
  • It’s important to understand the different parameters that drive the value of a coin, what a pump is, and how they can run in parallel to affect the price.
  • In contrast, investing is when you buy an asset of known value and it produces a return of some regular amount over a period of time.
  • There are some who state Bitcoin is digital gold. When asked his thoughts on gold, Warren Buffet said that he had no idea where it would be in five years but he knows it won’t do anything between now and then except look at you while Coca-Cola and Wells Fargo will be making money. He would rather invest in something that can produce.
  • Jonathan notes that while we are all on the same path directionally, we aren’t always going to agree. Though it’s true gold doesn’t produce anything, he sees it as an excellent store of value and has been more open to gambling on the Doge cryptocurrency.
  • Gold has increased in value over the years, not because it produced anything but because the dollar has lost value to inflation while gold has held its value. The same argument could be made for crypto due to the limits on the number of coins.
  • Unlike physical gold, crypto is a lot easier to store, liquidate, transfer, and transport.
  • Cryptocurrencies have value because we say it has value. Although Brad believes the use cases are still small, he’s open to learning new information.
  • In Episode 099 of the podcast, Michael Peterson discussed his non-profit in El Salvador. The use of Bitcoin there has cut down on friction and the fees for sending money from the US to El Salvador.
  • Crypto is different from gold though because it is code and we don’t know what it will look like a few years from now. For instance, there are six different versions of Bitcoin.
  • Bitcoin takes a lot of energy because of its mining concept for its transactions. All of the Bitcoin mining around the world takes up more energy than the country of Argentina. Other coins use no energy, so Elon Musk has said Tesla will look for cryptos that use less than 1% of the energy of Bitcoin.
  • Crypto as a store of value use case has not been proven out yet. Gold, unlike cryptos, has a long history as a store of value and is less like to disappear from our memories like Blockbuster.
  • DogeCoin started out as a joke and has grown to a total value of $54 million whose value can move up or down dramatically just based on a Tweet from Elon Musk.
  • Last November, Jonathan put $150 into DogeCoin when it was $0.009 a coin. When he looked at it again recently, the price was in the neighborhood of $0.40 a coin.
  • There are 130 billion DogeCoin and unlike Bitcoin, they can make more. since it uses less than the 1% of the energy Bitcoin does, Elon Mush began Tweeting about it and pumping the price of DogeCoin.
  • Because he didn’t see a use case for it or think the value of DogeCoin would increase dramatically again, Jonathan sold it before it lost value to an Elon Musk Tweet.
  • Brad thinks that Jonathan looked at it the right way because he viewed his DogeCoin purchase as gambling. Unlike owning shares of an actual company that can be used to calculate a company’s market cap, crypto is just code. DogeCoin can and does just make more.
  • After selling his DogeCoin, Jonathan took $1,500 of the money to invest in another energy-efficient coin with similar features, running on a secure network, with a 10 billion coin lifetime limit. That coin skyrocketed and he sold it before it later came back down.
  • Cryptocurrencies are susceptible to pump and dump. Jonathan felt a need to do this show not because he’s a genius with crypto, but because others are potentially losing massively, like whoever bought his coin.
  • Anyone can create a cryptocurrency and begin selling a smaller portion of it on social media, building the hype around the coin and pumping up the price. The value increases dramatically, the creators and the early adopters begin to sell and deleveraging their position and let the coin die. As they dump their coin, those who bought to the top lose their shirts.
  • Some of these pump and dump scenarios are scams from the creation, but sometimes good coins get pulled in and pumped by a group trying to control the market.
  • Jonathan sold his coin when he found out 80% of the coin was held by just two addresses and the rug could be pulled out from under him at any time. Although he made money, his success is not replicable.
  • There is a case to be made for gambling as entertainment. You just need to go in knowing that there is a high likelihood that you are walking out with nothing left.
  • Brad believes in the decades to follow a couple of winners will emerge and their technology will change the world dramatically. You can prepare for it by educating yourself.
  • Speculation can be a continuum. It can be high-risk with varying levels of confidence and potentially high levels of return.
  • For cryptocurrencies, Jonathan likes those with a pre-mined amount, are energy-efficient, have liquidity and a lot of partnerships, have utility, play nice with banks and adhere to anti-laundering and anti-terrorism laws. He also believes that while these were created to exist outside of regulation, regulations are coming.
  • When taking everything he’s learned about cryptocurrencies into consideration, Jonathan can decide on what cryptocurrencies to purchase that is more calculated than pure speculation.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 
 
 May 21, 2021
322 | Financially Bulletproof in a Pandemic
43:48

Dennison, a member of the FI community and recent Salesforce success story, joined the guys today for a special interview. He expressed to us that being adaptable and willing to change your world viewpoints on the fly (especially in the face of the COVID pandemic) has allowed him to achieve great financial and personal success.

Resources Mentioned In Today’s Conversation

 May 17, 2021
321 | Discovering the Power of FU Money
58:25

What You’ll Get Out Of Today’s Show

  • Picking back up with our ChooseFI Households of FI family, Zach and Marilyn to hear about all of the incredible progress they’ve made since their last episode.
  • Like most people, the last year has turned Zach and Marilyn’s life upside down, only their’s has been positive. Following their conversation with Paula Pant in Episode 247, they were felt encouraged to move forward with a real estate investment when the numbers made sense rather than waiting for a property that met all the specific criteria.
  • Within two months of their conversation with Paula, they purchased the home they are currently living in. Since then, they have put money in renovations and just rented out the basement apartment.
  • Although the original plan was to do a live-in flip, they are now house hacking after taking out a mortgage with a 2% interest rate thanks to their excellent credit, making their new mortgage the same as the mortgage on their previous home that was half the size. Plus, the basement apartment rent is covering the entire mortgage and then some.
  • Zach finished school in 2020 and began working in his field earning a good raise. Rather than let the raise inflate their lifestyle, Zach put the entire raise into his 457 plan.
  • Between saving more than $1,000 a month on a mortgage and putting $1,000 a month into a 457, Zach and Marilyn have created more than $24,000 of space in their financial lives.
  • Although five years ago, they never would have dreamed of being in their current position, they attribute frugality and long-term planning for their success.
  • Being on the path to FI feels so good that it’s something Zach talks to people in his everyday life about. He thinks if you adopt the long-term mindset and stick it out during the first five or six years, seeing the end from the beginning becomes less overwhelming.
  • Marilyn says that not having debt hanging over their heads has improved their quality of life a hundredfold. While it did take them six or seven years to get there, it wouldn’t have happened at all if they hadn’t taken that first step.
  • In looking toward the future, they have created FU money, which they’ve already reaped the rewards of. When Marilyn’s employer told her to come back to work 100% after successfully working from home during the last year, she decided to quit rather than put her kids back into daycare.
  • Jonathan appreciates the power of no and says sometimes when you can say no to your employer, it puts you in a position of power where they might be willing to negotiate.
  • Zach and Marilyn’s have no mortgage payment, drive paid-off cars, and have an abundance mindset that allows them to live off around $30,000 and want for nothing. In fact, Marilyn uses a hack from Brad and uses an Old Navy credit card for their spending, and earns points to buy clothes for his kids.
  • In comparison, most other American families spend $30,000 on just shelter and car payments.
  • When leaving previous jobs, Marilyn always felt a bit of panic, wondering how they would make things work, but with living expenses taken care of, they were in a different place. She felt none of that panic.
  • Zach grew up without a lot of money and a scarcity mindset. When interacting with people who were well off, he often felt if that person was wealthy that he couldn’t be. The path to FI has been a mind shift to understanding that everybody can win and to a level of empathy.
  • What’s next for Zach and Marilyn? Since they are saving more money than ever before, they are interested in optimizing what they do with it. They have considered more rental properties, but prices are high and inventory is low. Index fund investing is another option.
  • Prices are high in their area and they looked into renting out their current home, but it doesn’t meet the 1% rule. They would need to geo-arbitrage a second rental.
  • If they were to purchase another property, the downpayment would likely come from an old 401k of Marilyn’s. Zach has looked at rolling it into a self-directed IRA for real estate.
  • Since Marilyn left that employer her 401k is with, it should have triggered the option to roll it over to an IRA without creating a taxable event as long as she follows her plan’s rules.
  • They also have an interest in diversification, but with the real estate market so high, they want to have cash on hand to make a move if it dips. And if the stock market does something crazy, Zach and Marilyn want to be prepared for it.
  • They want to invest, just with a shorter time horizon, so they need to invest somewhere with less risk.
  • Jonathan says they need to invest like a 55 or 60-year-old. They can achieve that with investments that provide either income stability or a negative correlation.
  • They would love to be able to pay for their next property with cash, but they don’t know when the next deal that makes sense will pop up. It could be anytime in the next five years and ideally, they would like to have at least $75,000 saved up for it.
  • Although Zach and Marilyn want to do what’s the most optimal with their money, Brad says it really should be what they are comfortable with. Investing in real estate isn’t for everyone and may provide comparable returns to the stock market. They should keep communicating and figuring out what works for them at the moment as it’s impossible to predict where they will be in five years.
  • Jonathan thinks it won’t take long to reach financial independence. With annual expenses of just $30,000, they will need $875,000 to hit FI. With $80,000 in investments and adding $1,500 to it each month, they will have $229,000 in 5 years. In ten years, they will have $451,000, and in 15 years, it will reach $783,000 if nothing else changes.
  • Future raises, additional rental properties, or Marilyn returning to work can only speed their path to FI. Both Brad and Jonathan believe they can achieve FI in 10-12 years.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 May 14, 2021
320 | How Many Days a Month Do You Experience Stress Related to Work?
43:37
  • The nature of work has drastically changed over the last year. Has its impact on you been negative or positive? And does that impact your choices on the path to financial independence?
  • As a result of these changes, how we do work is something we can now question and work to make it align with how we want our weeks and months to look like.
  • The concept of a Red X month is something first introduced to us by Vincent Pugliese and one that has been sacred to the Barrett Family. Brad puts a big red X through the month of August each year so they can spend the month doing whatever they want. The ability to do that is a benefit of FI.
  • In order to spend more time with family, this summer, the show will move from its standard two shows a week format, to just once a week.
  • What is your why? Brad says the words “enough” and “balance” pop into his head. We are driven to get to the point of financial independence but it can sometimes be difficult to find balance or understand when it’s enough.
  • Success isn’t how much money you have in your bank account or how high your savings rate is. It’s having balance and living a life by design.
  • Jonathan is reminded of a phrase, “What got you here, won’t get you there.” All of the work that goes into earning more, spending less, and optimizing the difference puts you at risk of losing sight of your why. At some point, you need to wind it down and step away.
  • The one-more-year syndrome where you worry you might not have enough comes from a scarcity mindset. It can be easier and less scary to keep doing what you are doing. The hard work is psychological and needs to be contemplated years before leaving work.
  • You can start doing the work ahead of time by starting small and experimenting. Jonathan doesn’t know that he would be good at vacations. He’s always thinking about something related to this community or Talent Stacker. He realizes that comes at the cost of missing out on spending quality time with his family and his life may be out of balance. He thinks Brad is probably better at handling the contentment side of things.
  • Many of us feel like if we aren’t actively trying to advance that we are failing. When you are in a position of strength and know what you value and where you can provide value, you can design a work life that works for you.
  • A lot of employers are looking at how they can save money with less physical real estate. You have the chance to be a squeaky wheel and present your employer with a work proposal and provides them with an ROI they are looking for.
  • Work is not always going to be stress-free. Where does it cross the line from reasonable to toxic?
  • Brad thinks he feels stressed more than he should for his overall level of stress, but that it’s because he is out of balance. He suspects it’s due to a feeling of only being half there and a constant feeling of guilt.
  • Life isn’t perfect and neither are we. We need to have some self-compassion, realize our issues, and try to get a little bit better every day.
  • If you conduct a root cause analysis on your stress, you can figure out a way to solve it.
  • Jonathan says that his pharmacy job was a former source of stress because it didn’t meet his needs for autonomy, mastery, purpose, identity, and connection. Having FU money enabled him to leave it behind to pursue ChooseFI instead.
  • Knowing what your options are is one way of dealing with a toxic work situation. You can start by testing small and doing things to make your life a little bit better.
  • You don’t need anyone else’s stamp of approval anymore. It’s not necessary to go into debt to start a business and there’s never been a better time to start learning for free.
  • Balance has characteristics that are identifiable. It feels like you are in control of your time and you are able to allocate it where you want. If you have autonomy, mastery, purpose, identity, and connection, you should be able to control your time.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 
 
 May 10, 2021
319 | Make Your Kid a Millionaire
42:03

What You’ll Get Out Of Today’s Show

  • Do you want to give your children the tools they need to guarantee their path to financial independence? If you give them the right skills, becoming a millionaire can be a mathematical certainty.
  • Achieving the objective of becoming a millionaire isn’t nearly as important as the process of getting there. Success is in the journey.
  • For many of us, we made a lot of mistakes before finding the right information and learning that there is a better way.
  • When you understand the power of compounding, you know how plausible it is to become a millionaire, and what you need to put away each month to get there.
  • Much of the journey comes down to mindset, empowerment, and believing that you can make changes to better your life. It starts with the little changes that make your life 1% better.
  • It’s time to stretch the tactics we use and apply them to a different age bracket. We generally talk about investing timelines starting around the age of 20. But how early could you really get started and why would you want to get started at an earlier age?
  • For Brad, the reason is dual-pronged. He thinks the concept of saving for retirement is misdirected and he would frame it differently. Retirement is so far in the future, it’s harder to get behind during your younger years. However, the concept of financial independence is something people are more willing to take action on.
  • Financial independence means you can control your time and have the autonomy to make decisions and you can take advantage of retirement vehicles such as 401Ks and Roth IRAs to reach FI.
  • Financial independence is a better framework for talking about and planning what it is you want to do with your life as well as giving yourself options.
  • The Make Your Kid a Millionaire article emphasizes Roth IRAs. Bradd says there has never been a great explanation of how people can take advantage of a Roth IRA for children who have earned income.
  • Most children don’t have jobs that allow them to contribute to a 401K, 403b, or 457. A source of earned income does allow them to make after-tax contributions to a Roth IRA where that money can grow tax-free forever.
  • A 12-year-old will have 47 years of compound growth before making withdrawals. All of the growth, dividends, and capital gains distributions will be tax-free compared to an investment account where they would be taxed.
  • The current limit for Roth IRAs is $6,000, but you may only put as much of that limit in as you have earned. A child earning $5,000 in a year would only be able to contribute $5,000, not the $6,000 limit.
  • Although ChooseFI doesn’t generally suggest the Roth IRA as the first investment vehicle to use, the strategy is different for children.
  • For adults, some financial independence strategies help to control your marginal tax rate using specific pre-tax retirement accounts.
  • When adults are in a low marginal tax bracket, an argument can be made for locking in the low tax rate with Roth contributions.
  • However, children with much lower incomes, already have low marginal tax rates. Since they can generally only choose from traditional or Roth IRAs, it’s likely in their best interest to pay the small amount of tax and then shelter that income from taxes for the rest of their lives.
  • Although allowance and pay for chores around the house don’t count for earned income, there are some categories of work kids may do that do count but you’ll want to be careful documenting, such as newspaper routes, babysitting, mowing lawns at other people’s homes, acting, photography, acting, modeling, or working for a parental-owned business.
  • Regular jobs at private or public companies that comply with your state’s child labor laws definitely count as earned income.
  • In the article, an example used discusses a child who mows lawns and earns $4,000. His parents decide to contribute $3,000 to a Roth IRA. The contribution does not need to be made with the exact same money the child earns. Parents or grandparents could make the contribution as long as it does not exceed the earned income or IRA contribution limits.
  • Matching programs are a great way to teach financial lessons. Similar to a company 401K match, parents or grandparents could incentivize a child to contribute to their Roth IRA by agreeing to match contributions dollar for dollar, or two dollars for every one.
  • If a 9-year-old were to put $3,000 into a Roth IRA once, never contribute again, and not touch it until the traditional retirement age of 64, that child would have almost $124,000.
  • With the power of compounding, a child needs to contribute just $1,500 each year of their lives to ensure a million dollars at a retirement age of 64.
  • In contrast, someone waiting until the age of 31 to begin investing and maxes out their Roth IRA with $6,000 each year until age 64 will only have $764,000. The difference between the two net worths is the result of the powers of compounding and time.
  • The Rule of 72 is a way to predict how many years will take your money to double based on an interest rate. You take the number 72 and divide it by your interest rate. 72 divided by an interest rate of 7% results in money doubling roughly every 10 years. Compounding on a big number adds up quickly.
  • A child could theoretically put in a large amount for just a few years, never contribute again, and end up with a higher net worth than with the $1,500 each example.
  • The article contains different scenarios to help foster the conversations parents can have with their children about the impact time can have.
  • Break through the initial resistance to get started and set up a system to reinforce good financial habits so that your child can build their own trust fund.
  • It’s hard to put a price tag on the psychology of teaching your kids about investing early. They will have a better foundation and desire to learn and get even better. It’s good to teach them the time value of money while they aren’t relying on it to pay for their survival needs.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 
 
 May 07, 2021
318 | 100 Ways to Get 1% Better
57:52
  • After four years of talking about the aggregation of marginal gains and the idea of getting 1% better, ChooseFI has accumulated quite a lengthy list you can stack together.
  • If you can invest a little bit of time to fix something, you’ll never have to invest that time again. Brad recently decided to move away from paper files and bills to join the digital age, while Jonathan has been using a subscription service to stop the paper junk mail sent to him.
  • Chris Hutchins shared a final hack with Brad after the end of the last episode that didn’t make it into the recording. Chris uses a browser extension to view book availability at his local library and borrow or place a hold on it.
  • Brad and Jonathan selectively pick from the list of 100 ways to get 1% better with your finances, starting with #3, Reading (or Listening) to One New Finance or Investing Book Each Month. Jonathan thinks this tip could be expanded to include non-fiction books that improve you in some way.
  • #4 on the list is to learn a new skill. It could be for obtaining background knowledge, gaining a marketable skill, or simply for interest’s sake. Although complacency can be seen as a bad thing, don’t mistake complacency for contentment.
  • Other tips include getting outside to exercise or try a new hiking or biking trail every week. Mix things up. There is a never-ending stream of free YouTube exercise classes to choose from.
  • Are you aware of your local FI group? While COVID has kept us physically apart, we are coming to the other end. You can invest in your local community.
  • As for dealing with debt, Brad says you need to sit down and be honest with yourself. Understand what you owe, who you owe it to, how much you make each month, and how much you spend. If you spend more than you make, you need to stop right now, and at least get to the point where you aren’t adding more debt.
  • Once you get to that place, Jonathan says you can look for ways to optimize your debt payoff, such as zero balance transfers. And then work to improve your credit score by putting a system in place, like autopay, to ensure you never miss a payment.
  • If you do not have $1,000, you don’t need an emergency fund, you need a crisis fund. You need $1,000 that doesn’t have a bill attached to it that you could draw on in a crisis. Once you have that, then you can think about building an emergency fund. Use your tax refund to establish your crisis fund.
  • Next, don’t give the government an interest-free loan and work it so that you don’t get a tax refund. The opportunity cost of having the government hold your money for a year is potentially big. When financially responsible and on the path to FI, you don’t want a big refund. You want to be saving and investing it all year long.
  • You can learn to do just about anything on YouTube, especially do-it-yourself home repair tutorials that will save you money. Even replacing your incandescent bulbs with LED is easy to do and saves on energy costs.
  • While lowering your hot water heater temperatures and adjusting the thermostat won’t make you wealthy overnight, stacking these tips with others is the whole point of getting 1% better.
  • Declutter your home and donate or sell items to simplify your life.
  • Owning a car costs a lot. Trying to manage the payment for a new car every 5 years versus buying a car and driving it for 15 years can have a dramatic impact on your path to FI. The one decision to drive a new car for 15 years, made just three times over an adult’s lifetime can result in a $742,000 difference.
  • If you can stack car ownership savings with other money savings hacks on food, or housing, it can mean a difference of multiple millions.
  • It doesn’t need to be about deprivation but just doing a little better than average to end up with millions more than your counterpart who is drifting through their financial life.
  • #33 on the list is to shop your car insurance every year, which Brad extends as something to be done with all your insurance policies. Make it a yearly “to do” task.
  • Unfortunately, companies don’t incentivize customers to stay, they incentivize customers to leave other companies to come to them. Even if you don’t want to switch, at least try and negotiate a better price. There are even companies who will do this for you.
  • There are a few ways to optimize healthcare, such as using a high-deductible health care plan with an HSA, prescription discount tools, and locking in medical service prices with websites, such as MDSave.
  • The health benefits of focusing on exercise and healthy food choices can not be overstated. 80-90% of the treatment modalities would go so much further if stacked with a healthy diet and lifestyle.
  • To keep food costs in check, Brad and his wife, Laura, try to anchor themselves to a $2 per person per meal goal. Laura has even curated a series of healthy recipes that fall within that cost.
  • Everything is negotiable. When Brad had a recent medical procedure, he simply asked if there was a pay-in-full discount and received a 30% discount.
  • Saving puts money in your pocket, and so does earning more money. There’s never been a better time for a side hustle.
  • CampFI’s are back! Brad will be attending the mid-Atlantic CampFI over Memorial Day weekend.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 
 
 May 03, 2021
317 | All the Hacks | Chris Hutchins
01:14:59
  • Life gets busy when you have a new baby, so Chris Hutchins is on a quest to learn all the hacks, optimize his life, and share what he’s learned with you in his new podcast, All the Hacks.
  • The goal of the podcast is to help listeners upgrade their lives by living more exciting, fulfilling lives without spending a lot more money and optimizing it all along the way.
  • Life hacks tend to fall into one of three camps. It clicks with and becomes second nature, you find a way to automate it so you don’t even have to think about it, or it’s too much work and you never do it again.
  • If you can find where optimization and excitement intersect, it’s a huge win for you and your family.
  • When Chris thinks about life hacks, he thinks about different aspects of his life and what the important parts are, such as family, work, finances, shopping, travel, and self. Categories may also be broken down into multiple subcategories.
  • Jonathan says the idea of life hacks and living his life in a slightly more optimized way is what led him to financial independence which he says is the ultimate life hack as it helps us reclaim our most precious non-renewable resource, our time.
  • Coming out of a year of lockdown, it seems like everyone is planning to travel somewhere. Chris recommends using Google Flights to get quick insight into flight prices with flexibility on airports and dates.
  • For hotel planning, Chris says it’s often a choice between a better price or a better experience. Trip Advisor recently launched Trip Advisor Plus, a paid membership service that allows them to offer hotel rates around 7-8% off because the rates are not available to the general public. However, booking directly with the hotel will likely get you a better experience.
  • In addition to booking directly, reaching out to someone on the sales team or the general manager will often get you an upgrade or some sort of amenity. You may be able to find the names of individuals by seeing who is responding to reviews on Trip Advisor. Having status with the hotel can help as well.
  • A family life hack Jonathan and his wife began doing is creating a shared family photo library and build a slideshow of their favorites from the year.
  • Brad believes another life hack is just being a good person and making personal connections because it makes others want to go to bat for you. A lot of customer service reps have the discretion to do things for you that they wouldn’t if you get angry with them.
  • Website account hacks are becoming more commonplace and passwords are frequently stolen so using the same password for everything can be trouble. Check to see if your account has been part of a data breach at Haveibeenpwned.
  • A password manager makes it easier to use unique passwords for all your accounts. Increasing security with two-factor authentication helps make your accounts even more secure.
  • Chris has a fireproof box in his home where he keeps important documents and the one password he uses with his password manager 1Password.
  • In the event of death or incapacitation, a legacy binder has all the information loved ones need to manage your affairs.
  • As mentioned on the show previously, Brad uses ToDoist to track all his tasks. Chris says that you can’t use any software system like ToDoist for an hour and see the magic. Commit to it.
  • When it comes to renting cars, Chris rents with Avis using a Costco discount. He says to make sure if you’re a member of something, you find out if they have deals for you. Autoslash and Turo are additional ways to possibly save money on rental cars.
  • Chase and American Express credit cards have offers to save many when using their cards.
  • Listener Jessica asked about life hacks for type A career women and mothers on the path to FI. Chris thinks there is power in being incredibly passionate about a company you want to work for. He also says you can negotiate your salary all of the time especially if you present data that you are being underpaid.
  • Before having their baby. Chris was able to find almost half of the items on their baby register in the second-hand marketplace, which allowed them to have everything they wanted and not skimp out on their savings rate. Similarly, Brad’s wife Laura is able to plan ahead for the future and buy seasonal clothing for their daughters at tremendous discounts.
  • Another life hack, meal planning, is something that Chris and his wife just purchased for introducing their baby to solid foods. He says there is a bare minimum of what your time is worth. While they could have done it for free, buying the meal plan freed up a lot of their time making the cost worth it.
  • Jonathan says for baby clothes, his wife was able to make out like a bandit using local buy nothing groups. Plus, she has been able to arrange a neighbor exchange to keep kids in clothing as they grow. And within their home, they rotate toys to keep them interesting.
  • Another resource Jonathan has for Jessica is Dour and Carol’s book, Raising Your Money-Savvy Family, while Chris recommends moms’ groups, who share information and recommendations with each other
  • Chris says meal planning is his biggest hack when it comes to cooking. He uses Paprika to save recipes, meal plan, and grocery shop.
  • Steven Boyer from CampFI recommends if you cook something often, keep all of the items you use physically together. Brad used a little hack like that to remove the pain points he was experiencing make his morning smoothie prep go more smoothly.
  • Holly says if you have a separate freezer, you can buy meat in bulk when they are on sale and then have them whenever you need them.
  • Although Jonathan and his wife tried once a month meal prep, they have moved to cooking two to three meals a week and eating leftovers. Chris says he intentionally scales his meal sin Paprika up so that they have leftovers.
  • Brad likes to reduce the paradox of choice by eating the exact same meal every day for breakfast and needs a system for lunch.
  • To reduce her paradox of choice and frustration, Leslie created a capsule wardrobe for her closet by pretending she was packing for a three-week trip.
  • Chris has been culling his wardrobe by separating the clothing he has worn and washed from what stays in his drawers. The things that have remained in the drawers he can get rid of.
  • Karen’s daughter hates the idea of college and has an entrepreneurial mindset. Chris says there are so many opportunities to learn these days but the hardest thing is to tangibly identify something you can do.
  • Get experience. Starting something doesn’t mean it has to be your full-time job. You can explore the entrepreneurial side while doing something else. Learning new skills is valuable. Try a bunch and see what lights you up.
  • You don’t need to go to college anymore to earn an above-median income which is something he discusses in the Talent Stacker podcast. Jonathan and Bradley Rice built a job placement program around Salesforce which might be something Karen’s daughter would be interested in.
  • Chris says automation is magical and one of the things that drew him to work at Wealthfront was financial automation where he works on automation that directs your money where you want it to go automatically.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 Apr 30, 2021
316 | Is Your Pension Healthy? | Grumpus Maximus
50:58
  • Back in another installment of ChooseFI’s Households of FI series are Troy and Lindsay.
  • In episode 241, Brad helped them calculate their FI number, but Lindsay is a teacher with the potential to earn a pension. In this episode, they touch base with Grumpus Maximus to discuss the health of their pension.
  • While the conversation is geared toward the health of the Virginia Retirement system, others who are eligible for pensions will learn where to access data about their own pensions and interpret it to assess its health.
  • Linsday is 32 and in her seventh year of teaching under the Virginia Retirement System. Troy is 34 and an IT professional working on government contracts and does not have access to a pension. Troy and Linsday have a young son.
  • Grumpus Maximus is a retired military officer who lives in New Zealand with his wife and two kids. Grumpus experienced a post-traumatic breakdown around year 16 of his military career that had him calculating whether or not it was worth staying in the military for the additional years required to earn his pension.
  • Many defined benefit plans these days have different levels because they are so expensive. The Virginia Retirement System (VRS) has 3 options, 1, 2, and a hybrid plan. Linsday is on option 2.
  • Both COVID and having their son have had Troy and Lindsay thinking about the future of their careers. The possibility of working from home or retiring early were things they began to consider, but the VRS’s calculators would allow Lindsay to play with numbers to look at retirement before the age of 58.
  • After some investigation, Grumpus found that 30 years is the standard full vestment period, but partial vesting is reached at just five years, although it wouldn’t pay out until also reaching the minimum retirement age.
  • Option 2 appears to be tied to the social security retirement age, so taking it earlier likely results in a reduced benefit.
  • Lindsay wants to understand how to calculate what her pension would be. Grumpus says there is a way to calculate it but warns that doing it this far in advance will require a lot of assumptions.
  • The retirement budget Troy and Lindsay are shooting for is around $4,000 per month. They can go online to calculate the pension amount and then see how big the gap is. The smaller the gap is, the more valuable the pension is.
  • Lindsay’s pension has a COLA which hopefully negates inflation and makes her pension more valuable and allows her pension’s purchasing power to remain the same.
  • The VRS pension also does not replace social security, so she will have social security income coming in as well.
  • Her pension also has other earned pension benefits (OEPB), like life insurance, health insurance, and the option of survivorship.
  • The Grumpmatic method of calculating a pension’s worth includes a pros and cons list, which includes pension benefits, but also personal issues. It takes into account the non-mathematical considerations, such as happiness, job satisfaction, and potential changes to the pension system.
  • He encourages everyone to write the list down on paper to create a physical record of why the decision is being made because it shouldn’t be purely a numbers-based decision.
  • When asked about how Grumpus and his wife came to the decision that they did, he said several factors played into the decision. It was a transition for his wife to go from career to full-time parent wasn’t easy. They even had marriage counseling.
  • Troy had trouble even finding information on Lindsay’s pension. Grumpus says because he’s been looking t pensions for so long, he knows what to look for. In addition, Boston College runs The Center for Retirement Research and has a public plan database with most of the major state and city plans in it.
  • With Public Plan Database, you can get an overall view of what the pension plan looks like. It also compares the plans to national averages which can give you an idea of the overall health of your plan.
  • Virginia’s plan is not fully funded for all current and future obligations, which is pretty much average. Very few public plans are fully funded. An accounting change in the late 90s also changed many pensions from 100% funded to underfunded and then the market crash from the .com bubble didn’t help. Most plans have steadied since then at around 75%.
  • The American Academy of Accuraties came out with a paper stating that there is a myth claiming anything funded at 80% is well off and won’t have issues in the future. It’s better to look at the trend lines for the last five years. If they have been going down, there is cause for concern.
  • Grumpus warns that all the funding spent on COVID this year may impact pension funding. If states skip paying into plans, it will need to be rolled into future payments. That is shown in the database as ARC payments.
  • In Lindsay’s pension plan, she is accruing cash that she could roll over with the interest into an IRA after five years of service. Grumpus says that goes in the pro column for leaving since she could take what she’s earned with her, but he says there are very few cons to her system overall.
  • The VRS pension uses a formula based on age, the number of years worked, and average annual salary. There is a multiplier for every year worked of 1.7%. Payments will start right away if she works to full-retirement age.
  • Concerning health insurance under VRS, credits are accrued for the length you stay that contribute to a subsidy. If you leave, you won’t keep that.
  • Because of the COLA, it makes for an easier pension calculation, but there’s no magic equation to spit out a yes or no answer. The goal should be to have a fully-formed decision.
  • While she is enjoying teaching from home, Troy and Lindsay are considering a second child which could change how she feels. Grumpus says the advantage is that they don’t have too much time invested into the pension yet.
  • Teachers have other ways to invest money, such as 403bs and 457s. Lindsay could be doing those in the meantime to give herself flexibility.
  • People who have pensions need to make some real in-depth considerations from both a financial and psychological perspective. Not every decision comes down to money. You have to decide what works best for you.

Grumpus Maximus

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 
 
 Apr 26, 2021
315 | Is This the Golden Age of Investing?
01:10:35
  • In last week’s Facebook Live episode with Frank Vasquez, he pointed out that we are in the Golden Age of Investing. In this episode, we explore what that means and if we appreciate how good we have it.
  • In an ideal world, we would all like to maximize investment returns while reducing volatility. Holding uncorrelated assets helps to prevent catastrophe.
  • But what is the goal of investing? Although it’s a broad question, Brad believes the ultimate goal is to accumulate wealth. Investing itself is a very broad term, but it is essentially when the money you have saved is working to produce additional income for you.
  • Financial independence is getting to the point when you have saved and invested enough to get to the point where working can become optional.
  • In the last 20-30 years, investing has become fundamentally easier. Even Brad’s first investing experience 20 years ago under the old system was a negative one, where he and his lack of knowledge were taken advantage of by an unscrupulous advisor. Back then, you needed an expert to help you invest money and paid dearly for it in the form of fees.
  • When many of us think about saving money today, it is through a savings account or certificate of deposit where the bank holds your money and pays you an agreed-upon interested rate in exchange for being able to loan out your money at a higher interest rate. Based on current interest rates, it would take a very long time to make a meaningful return on money invested in this way.
  • A more aggressive form of investing would be owning shares of a company’s stock and the value increases as the company become more profitable.
  • Bonds are where a company, the government, or other entity raises capital by selling debt. You buy the debt and are paid back with interest.
  • Mutual funds are yet another investment that first came about in the 1920s, but mutual funds really rose to fame in 1975 thanks to Jack Bogle when he created the Vanguard First Investment Trust. It was game-changing for modern-day investing.
  • With mutual funds, you own a little piece of many different companies with one investment. In the case of an S&P 500 index fund, you would own a little bit of the top 500 largest companies, although it is cap-weighted, meaning you own disproportionally more of the largest companies and less of the smaller.
  • The index funds approximate the market and so you don’t need to pick individual stocks to invest in, which is good since we tend to do so poorly at stock picking both on the information and behavioral side.
  • Owning a single stock is a risky position. If something goes wrong, the investment can become worthless and your money is gone. You can mitigate that risk by diversifying your investment across multiple companies.
  • Jack Bogle changed the game in 1975 when he decided you didn’t need to pay for experts to put together and manage mutual funds comprised of hundreds or thousands of companies. Computers could use an algorithm to manage a fund designed to track a particular index. He predicted you could get a better return from owning all the winners and all the losers and keeping the fees rock-bottom low than with an expert team picking stocks.
  • Although the entire investing industry laughed at Jack Bogle, after 25+ years of data, the results show Bogle was right. The process dominates over one of actively picking stocks, especially with a timeline of several decades.
  • Today, in the index fund space, there has been a continual race to the bottom when it comes to lowering index fund fees and the expense ratio today has been cut by a factor of 10 or more.
  • Something ChooseFI has discussed over and over again is how much of an impact fees can have on your investments. An extra 1% fee can lower your net worth by as much as 30-50%.
  • It’s because index funds with expense ratios of 0.04% or lower that say this is the Golden Age of Investing. It’s no longer necessary to pay 0.75-1.5% expense ratios or 5% front-load fees.
  • In addition, changes to the tax code have made it possible to control our tax rate. In 1974IRAs became available, followed by 401Ks in 1978, Roth IRAs in 1997, HSAs in 2003, and 457bs in 2010.
  • These investment vehicles allow us to control our tax rate and save for financial independence. With the exception of Roth IRAs, all of the other accounts are pre-tax, so that every dollar going in reduces your taxable income.
  • Some couples may even be able to reduce their taxable investments by $78,000 if they have access to both 401Ks and 457bs and max out their investments, possibly reducing their taxes to 0%.
  • Investing on your own today could not be easier. It can be done on your own, online, in about 15-20 minutes. Even better, you can automate your investing and send over an extra you have when you have it.
  • The barriers to entry are also lower than ever before. You don’t need to have your money sitting on the sitting lines until you have accumulated enough to invest. You can start with $10 or $20 and invest in Exchange Traded Funds (ETF) if you don’t have enough to meet the minimum investment for a mutual fund or even buy fractional shares.
  • Brad has his finances on autopilot even if it is suboptimal. He suspects many of these new companies are moving toward a system where everything is connected, will be able to optimize everything, allowing customers to keep anything extra invested.
  • Jonathan believes making investing seamless is magical. Using dollar-cost averaging as an example, it guarantees a mathematically favorable average price for your investment.
  • Brad thinks the most obvious benefit is behavioral. You don’t need to think about when to buy or what the market is going to do. Our brains screw us up with investing more than anything.
  • There are a few other forms of investments, outside of stocks and bonds. Real Estate Investment Trusts (REITs) are basically mutual funds for different types of real estate, or ETFs made up of stocks in different types of commodities. Investing in a business, crypto, collectibles, NFTs, art, or single commodities are all other options.
  • Speculation and investing can be conflated terms, but they are different. Speculation is not based on the fundamentals of a company or asset.
  • Last Fall, Jonathan bought $200 worth of DOGE and just sold it for $5,000. While the gain is real, his purchase was entirely speculative.
  • He remains skeptical of cryptos in general but sees where there may be value in cases where a problem is being solved, such as XRP and Swift.
  • With any investment, you don’t want to be the one left holding the bag. Know what your risk tolerance is, what your timeline is, and what your goals are.
  • With buy and hold investing in large swaths of the market, you don’t have to worry about whether or not you have the winners or the losers. The market is self-cleansing.
  • As long as you keep living below your means and investing the difference between income and expenses, you’re going to be successful.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 Apr 23, 2021
314 | Is My Company's Stock Overpriced? | P.E. Ratio Explained
28:14
  • The Households of FI series continues! In this episode, we touch base with Kristi, the single mom from Minnesota who. New to FI, Kristi is working to get on the path but has questions about her company’s Price-to-Earnings (P/E) Ratio and the Employee Stock Purchase Plan (ESPP).
  • How to evaluate what a company’s stock is worth is not something many of us index fund investors know a lot about, but it’s good to be familiar with it. Individual stock selection is something that Brian Feroldi gets excited about, making him the perfect mentor for Kristi and her ESPP questions.
  • The only individual stock Kristi owns is her company’s stock. She is able to buy her company’s stock for a 15% discount with up to 10% of her income.
  • She has been buying this stock since beginning her career six years ago and has accumulated a lot of it. Because she didn’t know anything about investing prior to finding the FI community, she nows calls this her biggest financial mistake and has finally started selling a bit of it.
  • She originally thought that sell the stock with the lowest cost basis to realize the largest gain would be the best strategy, but now questions if that is the best move.
  • Brian says a lot of publicly-traded companies offer ESPP, like Kristi’s. Company plans vary somewhat, and it sounds like her company purchases lots of the stock on a monthly basis at the end of the month.
  • As long as Kristi holds the stock for two years, the 15% discount is taxed as ordinary income, and capital gains are taxed as long-term capital gains.
  • Discounted stock sounds like a great deal, but Kristi has a lot of risk tied to her company. Her salary, bonus, retirement plan, benefits, and career capital all rely on the company. Purchasing employee stock increases the risk even more.
  • When Brian started his career, his company offered an ESPP, and although he was bullish on the company, he chose not to participate as a risk management strategy. He already had too much riding on the companies success to risk adding to it.
  • Although the company did well and he would have increased his wealth, he is happy with the choices he made because he was maximizing his potential net worth, while assuming as little risk as possible.
  • Although her company is a blue-chip business and low-risk company. Kristi will need to ask herself how much risk she wants to be tied to it.
  • Brian says ESPPs are great, but you’ll want to make sure you are taking care of everything else first, such as an emergency fund, 401K, debt, and IRAs.
  • Although her company is the only individual stock she owns, she is somewhat interested in owning other individual stocks. She can add that in over the top of the bulk of investments in index funds, while remaining diversified, and still feel good about her long-term compounding chances.
  • Kristi would like to know how to evaluate an individual company’s stock for investing in the short-term and long-term. She knows the P/E ratio is something to look at and her company’s P/E ratio is 18.66.
  • Brian says a P/E ratio is a tool you can use to evaluate stocks, but it’s important to know when it is appropriate to use and when it is not.
  • First, Brian says he never invests in a company short-term, or less than three years because it’s impossible to know what a stock is going to do in the short-term. Long-term stock prices are driven by earnings power and earnings growth which is the company’s profitability.
  • In P/E ratio, the P stands for price or the price of one share. E stands for earnings, the net income or profits per share. The difference between those two numbers is the price investors are willing to pay for $1 profit in the company.
  • With Kristi’s company, for every $1 in earnings power generated, the market is willing to pay 18.66 times that number.
  • Brian says it’s helpful to flip that number around and think about it as an interest rate. Take 100 and divide it by 18.66, to get 5.35% on the company’s earnings power. But is that good or bad? Context is key.
  • When looking at over the last decade, Kristi’s very stable company’s P/E ratio varied from 30 to 12. Since the current P/E ratio of 18.66 is on the lower half of that range, Brian says the stock is more likely to be in bargain territory than it is to be overly expensive.
  • Next, Brian pulls up the company’s net income over the last decade, which has been mostly stable with a few spikes and other periods when it has fallen. This needs to be compared to the P/E ratio as the highs and lows may be artificial.
  • Another metric Brain says to look at is the price-to-sales ratio, which is the price of the business divided by the sales, or revenue per share. This ratio eliminates the one-time swings and tends to be much more stable. Over the last decade, her company’s ratio varied from 5 to 2 and is currently at 3, again leading Brian to believe the stock is in buy territory.
  • If you have an ESPP, you want to look at the minimum holding period, know when you are outside the short-term capital gains, and the other details of your company plans. Consider rolling it over to an investment outside your company once the plan requirements have been met and it meets long-term capital gains requirements.
  • Long-term capital gains have preferential tax rates. The line of delineation between short and long is one year.
  • Investment gains are not subject to tax until they are realized. If selling an investment held less than a year, the gain will be taxed as if it was ordinary income, or whatever your top marginal tax rate is, which for most is 20-24%.
  • Gains from investments held longer than one year are as taxed as long-term gains, which for most people is 15%.
  • For those who have access to an ESPP, it is part of your compensation but will require a bit of research because there is some risk in tying up so much of your wealth into one company.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 
 
 Apr 19, 2021
313 | Are You as Diversified as You Think You Are?
01:07:21
  • The goal of diversification is to ensure access to a lot of upside without being exposed to an unacceptable downside. But are you as diversified as you think you are?
  • Long-time community member, Frank Vasquez says there are three roles bonds have in your portfolio, income, stability, and diversification.
  • The Holy Grail Principle focuses on what the concept of diversification really means. It doesn’t mean different, it means uncorrelated.
  • Investors can use online websites to calculate the correlation of two assets that results in a number ranging from 1 to -1.
  • The closer the number is to 1, the more highly correlated they are. A number close to 0 indicates the assets are uncorrelated and move randomly with respect to each other. A negative result means the assets are negatively correlated and typically go in opposite directions.
  • Why would an investor want assets that are negatively correlated if that means while one is doing well, the other is not? In the accumulation phase when an investor is trying to build wealth, they probably would want negatively correlated assets. Upon reaching FI, they may be helpful when attempting to ensure the highest safe withdrawal rate.
  • Safe withdrawal rates for each portfolio will vary slightly and range from 3-5.5%. There are websites online to help calculate the rate for different portfolios.
  • Frank has three adult children who he advises to max out their retirement accounts in basic index funds. The next bucket to fill is an emergency fund, followed by a taxable brokerage fund to used toward a down payment on a house.
  • His son’s brokerage account used a risk parity-style portfolio, which is good for intermediate-term savings.
  • When first starting out, money invested is a big pile of future cash. You invest a little each year and should get it into risky, growth-oriented, and reliable investments, which are stock index funds.
  • Until you have $100,000 in your account, being invested in one fund is perfectly fine. It’s about earning and saving at that point. After the first $100,000, earnings begin to mean a little more and you can embrace a little more complexity.
  • In the four phases of investing for retirement, the first two are earning and saving and are the most important to get automated saving going. Phase three is investing and the fourth is managing the investments to ensure they don’t blow up or go away.
  • Long-term accumulation comes first in a portfolio, and Frank’s son is extremely frugal, making the risk parity portfolio possible. But what considerations are there if you are looking to transition index funds into a risk parity portfolio?
  • The first step is to figure out where you are going and where the goal is. Next, look at what you have and what needs to be transitioned. Start the process when you hit your FI number or about five years out from when you think you are going to need it. You don’t want to be 100% equities and have the stock market crash two years before you retire.
  • A risk parity portfolio does not stop earning money. The return is approximately between 6-8% after inflation, but the tradeoff is you are also only getting half the volatility of the stock market.
  • You can’t optimize the performance of your portfolio in the future, but you can control your expenses, modify them, and take less in one year if you need to.
  • Treat all of your assets as one big portfolio. You don’t want to incur unnecessary capital gains in your taxable accounts, so moving funds in retirement accounts is appropriate. The least movement possible is best and anything taxed as ordinary income should be put into retirement accounts.
  • Risky parity is a style of investing that has become more accessible to everyone with no-fee trading. It is finding uncorrelated or negatively correlated assets and combining them to reduce the risk of the overall portfolio.
  • The main driver of the portfolio is going to be stocks at 4-60%. The most diverse thing from stocks are Treasury bonds, like long-term Treasury bonds, at 20%. Gold may be an alternative.
  • Bonds are not good income generators anymore. The go-to places for income sources are REITs and Preferred Shares.
  • If you want to invest in something like Bitcoin, make sure you have a volatility match to it.
  • Listener Andy asked about what percentage of a stock portfolio should be in international stocks. Frank says the issue with international funds is that they are highly correlated with US funds so they aren’t very useful.
  • When Frank is deciding on investing in something, he looks at how useful it will be in his portfolio. He looks at its correlation with the rest of his portfolio and its volatility. You don’t want to put very much of something with high volatility in your portfolio.
  • Listener Luke asked about Frank’s views on factor investing and if has or plans to have small-cap value funds in his portfolio. Franks says he does have small-cap value in his portfolio because they are less correlated with the overall stock market than an international fund.
  • Franks says you want a basic and diversified two-fund portfolio that covers the whole market would consist of large-cap growth and small-cap value funds.
  • The correlation between a total stock market fund and an S&P 500 fund is extremely high and a kind of false diversification.
  • Although index funds are cap-weighted and gaining more and more of the larger companies over time, they are also self-cleansing in that companies doing worse fall down or fall off. Small-cap value funds do the reverse. When a company gets too big, it gets kicked out. Holding both types captures each end of the spectrum.
  • According to the Macro Allocation Principle, what matters most in investing are the macro allocations between stocks and bonds. According to Jack Bogle, any 60-40 stocks to bonds portfolio is going to perform 94% the same way as any other 60-40 portfolio.
  • Listener Claudia asks what a bond tent would do to her sequence of return risk. Franks says a bond tent is an old-fashioned way of dealing with sequence of return risk, but he says it’s not functionally different than buying a short-term or intermediate bond fund.
  • Bonds should move opposite of the market, but lately, they have moved with the market. Franks says different bonds behave differently. Some do not provide much diversification. Focus on Treasury bonds for diversification.
  • The hallmark of a very diversified portfolio is when you see different things moving in different directions at different times.
  • Rental real estate and stocks have a low correlation, so it can be a good way to diversify, although sometimes they can move together as in 2008.
  • In Frank’s mind, diversification should mean uncorrelated, it doesn’t mean having lots of stuff.
  • Frank’s podcast is focused on risk parity and he has created six sample portfolios at Fidelity that he discusses each week. While Frank likes to nerd out on this stuff, you don’t need to to become a successful investor.

Frank Vasquez

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 
 
 Apr 16, 2021
312 | First-Time Home Buyer | Bigger Pockets
56:54
  • In 2008-2009, the American dream of a home with a white picket fence turned into a financial nightmare, sending many families underwater for a decade. After looking at the numbers, there’s an ongoing debate over homeownership. Owning may not be the right decision for everyone.
  • Scott Trench and Mindy Jensen from BiggerPockets join the show to discuss home buying and their new book, First-Time Home Buyer: The Complete Playbook to Avoiding Rookie Mistakes.
  • Even if you’ve already purchased a home, Scott and Mindy’s book is a masterclass to help you rework the process during your next home buy.
  • According to their book, “…a smart home purchase will not only give you a place to live, but also offer flexibility, financial stability, and the chance to recognize and increase in that home’s value over time”.
  • Is purchasing a home a good investment? Mindy says, “Maybe”. Housing is an expense whether buying or renting. The more you buy, the more you are spending, and the less wealth you will have.
  • Don’t ask how much can you afford. How little can you spend to meet your lifestyle needs and what’s the best financial decision to meet those needs? There’s a lot of math behind a buying vs. renting decision.
  • As a real estate agent, Mindy tries to stop herself from asking clients how much they can afford. Instead, she asks about the price range, what kind of home they are looking for, and what condition it should be in.
  • Mindy’s home is an investment, but that’s because she buys dumpy homes, fixes them up, and forces the appreciation. However, she says the average person shouldn’t consider their home an investment.
  • For the average buyer, appreciation will generally occur over the course of the ownership time period, but it is the product of the housing market around you. It tends to appreciate 3-8% year over year. Selling after just a few years of ownership won’t make much when you sell, in fact, you may lose money to closing costs.
  • For regular buyers, a home is a place to live, not an investment. Roughly 10% of a property’s purchase price is out the door in closing costs the moment you buy it. If you don’t improve the property and force the appreciation, you have to allow appreciation to carry you back over time.
  • Over a long period of time, the returns on your home are low compared to investment alternatives like the stock market.
  • When deciding to buy or rent, what’s the breakeven point? Scott and Mindy assume a 3.5% appreciation rate, which comes from the Case-Shiller Home Price Index. At that rate, the breakeven point comes in 5-7 years. The higher the appreciation rate, the faster you reach the breakeven point.
  • You don’t need to live in the property for the 5 to 7 years to reach the breakeven point, you only need to own it for that time to make it work. You could rent it after you move out as an exit strategy and increase the desirability of buying.
  • If you rely on a lending calculator to answer the question, “How much house can I afford?”, you’ll end up being house-poor.
  • Median incomes and home prices around the country differ more than other categories, such as food. All the disposable income over what is needed for day-to-day life can go to your scarcest asset, which is housing in many high-cost-of-living areas.
  • There is no rule of thumb for what percentage of income you can spend. It’s about how little house you can buy and eliminate all of the waste.
  • When making the rent vs buy decision, Scott says the biggest variable to consider should be time, then what your appreciation is going to be, what you can do to force the appreciation, and then exit strategies.
  • There can be a dramatic difference between a home you would want to live in and one you could potentially rent. First-time home buyers tend to live in the property, but it’s likely they won’t live there forever and should make the smartest choice by thinking outside their own needs.
  • Mindy suggests using the internet to research what you need versus how can you rent it out.
  • It’s not a smart financial maneuver to decide you want to buy a house today and put an offer in tomorrow. Do some research and figure out what exactly you want.
  • Most people go in with the framework of buying the house they like and pray that it goes up in value so they can sell at a profit. But when you buy a home, there are three eventual outcomes. You live in it, rent it, or sell it for a profit. Keep all three of those in mind when buying.
  • If the chances of you moving are almost zero, it’s a great idea for a first-time homebuyer to begin looking for their forever home, but Mindy thinks the whole idea of a forever home is garbage.
  • It’s not realistic for a 20-year-old to be able to afford the 3000 square foot home and stay there for 30 years.
  • Lenders, real estate agents, and contractors are all incentivized to have you buy the biggest home you can afford because they make the most money that way.
  • If you don’t focus on the first home being your forever home, you can have more assets available for when you are in a place to get what you want.
  • The first step is to be clear where you fall on the “live in it forever, rent it out, or sell for profit” spectrum. Next, figure out the price range for what you want. Don’t look at the active listings, look at what has sold in the last 180 days. Finally, narrow that search down to the 10 properties you would have purchased yourself. That gives you a realistic idea of your market.
  • Mindy says the exercise can be a great way to screen agents as well. If they are unwilling to do this for you, cross them off the list. You should interview the agent before deciding to work with them, keeping in mind that their incentives are not necessarily aligned with yours. Find someone considerate of what you want.
  • The home seller is usually paying the commissions of both agents involved in the sale of a home, though for it’s usually very practical for a first-time homebuyer to have an agent represent them.
  • The next step in getting a good deal is waiting for the home you want to come on the market. Be pre-approved or pre-qualified for a loan and be ready to view the property as soon as it comes available and make an offer that night or the next day. It’s not a rush decision because you already pre-determined what you wanted to buy.
  • If you think through the exit strategies before buying your first home, you won’t feel trapped by your decision if something like a job opportunity in another city comes up.
  • In a hot real estate market, the fear of mission out can be real for first-time homebuyers. It’s a hot market right now, but it’s not going to continue forever. Make offers based on the numbers, not out of emotion.
  • Scott is currently renting because it’s a cheaper way to fund his lifestyle right now and there’s too much risk for him to assume with buying.
  • Other than student loan debt, a first home purchase may be the biggest financial decision you make. It’s worth spending a little time thinking about it.

Scott and Mindy from BiggerPockets

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 
 
 Apr 12, 2021
311 | How to Travel for Free | Stereo Live Q&A
01:16:26
Apr 09, 2021
310 | Get Good with Money | Tiffany Aliche, The Budgetnista
43:56
  • “When you are financially whole in the way I’ll teach you to be, you won’t have to live in fear. You’ll have a plan for each area of your finances so that they are constantly working on your behalf“. — Tiffany Aliche
  • America’s favorite budget expert, Tiffany Aliche joins us to discuss her new book, Get Good With Money.
  • Financial fear can come from financial trauma and drama. When you know that the money you are making isn’t quite enough for the things that you absolutely need, or you can foresee a future when your finances will not be okay, most of us carry that fear secretly and with a sense of shame.
  • Tiffany wants her community of more than 500,000 Dreamcatchers to release that shame, focus on solutions, and create plans that actually work.
  • According to Tiffany, wealth is more than just money in the bank. It’s really a mindset, which is the building block of personal finance.
  • People often chase an end goal without a foundation to ensure they will still be okay if something were to happen.
  • Tiffany’s teachings are foundational. The goal is to give you the foundation that you need to go on greatness, such as investing at a high level, buying the home you want, or starting a business.
  • For many of us, fear comes from a lack of knowledge and it takes an external, traumatizing incident to awaken us. Tiffany wants to reach people before they get to that point by normalizing financial education early on.
  • Tiffany’s approach is three-pronged: knowledge, access, and community. She delivers knowledge through her blog, The Budgetnista, and podcast, Brown Ambition. For access, she showcases other financial educators, like the ChooseFI Foundation, to those who want a financial education for the children and community. And finally, she built Dreamcatchers for the third prong, community, so that people know they are not alone.
  • The 10 components that constitute financial wholeness are budgeting, savings, debt, credit, and learning how to earn for the first tier. In the second tier, she includes investing for retirement and wealth, insurance, net worth, your professional money team, and estate planning.
  • This foundation of financial wholeness is what you build the rest of your goals, hopes, and dreams on.
  • While writing her book, Tiffany decided to Google, Jake the Thief, a man from her past who had caused her financial trauma. She discovered that he had escalated his thieving behavior from poor 20-something-year-old women to defrauding the United States Government and he is currently sitting in federal prison.
  • Jake’s story is a cautionary tale. Sometimes the wrong thing or risky behavior works for a short period of time. But it’s important to learn how to manage your money from the ground up versus from the top down because you can lose it all if you don’t know how you really built what you built.
  • Tiffany ended up with credit card and student loan debt and a mortgage she could no longer pay for, In total, it was around $300,000 in debt.
  • That experience taught her that her father was right, slow and steady wins the race. She now takes her time and is very methodical with her decisions. Even it means taking a loss, she’ll take a short-term loss if it means a long-term win.
  • Once she built her foundation, she was able to build wealth much more quickly. She wants others to have the opportunity to build the life that they want.
  • After reading her book and matching one of her workshops, Jonathan says he likes how good Tiffany is at organizational structure and categorizing things.
  • With budgeting, Tiffany assigns control categories to expenses. First, she lists all of the expenses and then assigns them to categories.
  • The first category is B, or bills, like a mortage. Some of those bills are usage bills that fluctuate depending on usage, such as water or electricity. She puts a U in front of those Bs.
  • Everything else is a C, meaning cash or choice expenses, because these are expenses you have choices over, like haircuts or gas for the car.
  • Categorizing in this way can help determine if you have a spending-too-much issue, or a not-earning-enough issue, when there isn’t enough at the end of the month. If most of your money is going to Cs, you are spending too much because of your choices. If most is going to Bs and UBs, you aren’t making enough to take care of your financial responsibilities.
  • When things are temporarily tight, you know you can look at your Cs and make some cuts there first. If it’s not enough, move to the second level, UBs. If that’s still not enough, move up to the Bs.
  • Tiffany’s father taught her in an age-appropriate way about the financial consequences of her actions and says it’s a lesson we could learn as adults.
  • A budget isn’t deprivation, Tiffany says it’s your “say yes plan”. Budgets are like your mom. She wants to say yes, but there is an “if” button. You can do the things you want, but only if you’ve lined yourself up in a way that makes it sustainable and safe.
  • If you can master your budget and look at it differently, it is there to accommodate your goals, hopes, and dreams. But it might require you to give something up.
  • Jonathan thinks Tiffany’s book speaks well to those who are broke. When writing it at the height of the pandemic when people were losing jobs and scared, she didn’t want to leave behind those starting in negative territory.
  • She wanted to give them permission to focus just on their sleep, health, and safety. It’s okay to focus on expenses related to health and safety and tell everyone else that you don’t have it right now. You will get to them when you get to a safer place financially.
  • 30% Whole is the chapter Jonathan thinks is worth the book’s price all on its own and you really need to know these tips if you are in debt, such as dealing with debt collectors or mortgage lenders during foreclosure. You can insist on a debt verification letter to verify that they have the right to inquire about it.
  • Debt freedom is a goal, but it’s not the goal. You can be debt-free and still broke. Financial freedom is an incomplete picture. There may still be holes in areas like insurance and estate planning.
  • The FIRE movement is great, but Tiffany believes there is a holistic view that is missing. Not matter how high or low your income, financial wholeness is available and accessible to everyone.

Tiffany Aliche

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Apr 05, 2021
309 | College Hacking : The Comprehensive Guide | Stereo Live Q&A
01:15:09
  • Winter is over, spring is here, and Brad and Jonathan have hosted their fifth live event on Stereo!
  • With the new season and sense of hope, people are beginning to think more about traveling and travel rewards points. Start thinking about a trip you want to take and join us on Stereo next week for a live group travel rewards coaching call with Brad.
  • The focus of this episode is college. How can you do college for less or do you even need to go to college at all? After more than 400 episodes, optimization tactics related to college have popped up frequently. What has changed for 2021, what are the best practices, and what should you be thinking about?
  • In the FI community, we take a step back, see the world for what it truly is, and look at a problem a little bit differently. Society tells us that college is on the path to success, but knowing what we know now, there may be another way or a way to improve the ROI of going to college.
  • Back a generation or so ago, it wasn’t uncommon for a college student to be the first in their family to attend college. College was seen as a way to make it into the middle class. It may have been true then, can still be true in some ways today, but the difference is the cost of college has risen dramatically while the earning potential did not rise at the same rate.
  • We have to be looking at college through the lens of ROI and understand what we are trying to get out of it. College signals that you can follow the rules, but an undergraduate degree doesn’t necessarily mean you have skills or mastery over something and it’s skills that matter today.
  • No one can afford to go to college for one hundred thousand dollars and come out earning $50,000. It will create financial chaos for a decade or more of your life.
  • Most people’s incentives to go to college fall into one or more of these three areas: wanting to have the college experience, access to higher-income jobs, or a love of learning.
  • The college experience was not high on Jonathan’s list of priorities, nor was attending a prestigious university, so he did two years of community college before transferring to Virginia Tech.
  • Brad’s goal for college was to get a job upon graduation. Though he was accepted to Ivy League schools, he chose not to go to them as they were too expensive and opted for the University of Richmond instead.
  • If having the college experience or getting into the right school are top priorities for you, listen to ChooseFI episodes 114 and 154 to learn more about how to discount the cost of college using test scores and the FAFSA.
  • In episode 083, Cody Berman talked about how he approached applying for scholarships as if it was a part-time job and thought about it systematically.
  • Rob, from The Simple StartUp, called in to say that his parents used geo-arbitrage and moved back to Ireland so that Rob and his siblings could go to college for much less. For graduate school, Rob coached women’s soccer in a graduate assistantship so that he was able to get his Master’s for free and earn a stipend.
  • In episode 138, Anthony Gary discussed how he hacking his college room and board costs by becoming a Resident Assistant. Other past guests have talked about utilizing niche scholarships, like ones for golf caddies.
  • One listener left a voicemail asking how to incentivized kids to apply for scholarships. Jonathan would like to try and gamify it for the kids and Brad believes that there are a lot of merit scholarships available if which college your child attends isn’t concerned with attending the most prestigious schools. He and Laura have made it clear with their daughters that they don’t care about prestige when it comes to college.
  • Choosing where to go to college may mean saddling yourself with student loan debt for decades. We are having 17-year-olds make these decisions that can negatively affect their lives for decades without thought or counsel.
  • Jonathan suggests slowing down and providing kids with a better option.
  • In 202, the average cost of college was $110-120,000 and the average annual income for a graduate was $50,000. It’s a lot of debt for a young adult to get out from under. A little bit of optimization can make it so much easier.
  • If looking to improve test scores, considering investing and paying the fee for test preparation services from companies like Edison Prep.
  • Chase called in to talk about the ROI of college in the military. He is in the National guard and gets reimbursed from both the military and his employer for going to school.
  • When you chose to put the time in to serve our country, it’s possible to optimize the compensation package and never have to work again. Options to pay for college and serve include ROTC and the US military service academies.
  • Marjorie called in about geo-arbitraging college. She attended college in Puerto Rico for a fraction of the cost in the US mainland.
  • Many states have a guaranteed admissions program where you can attend community college for two years and then are guaranteed acceptance to a four-year-school, saving two years of higher-priced tuition, but make sure you know what credits will transfer over to the university.
  • How can you test out a college? In addition to getting college credit for AP courses, dual enrollment while in high school can be an option.
  • CLEP testing is a little-known secret as discussed in episode 238 with Millionaire Educator.
  • Another listener called in to mention Scholarship For Service, where you can get tuition and fees paid along with a $25,000 academic stipend with a requirement to later work for a federal agency. This program is similar to the Department of Defense Smart scholarship mentioned by Sunny Burns in episode 139.
  • If your desire to go to college is for the love of learning, do you really need to go to college? Jonathan says that they have proven there is a replicable path to earning six figures a year without going to college.
  • The son of ChooseFI’s CEO, Edmund Tee, is earning his associate’s degree while in high school thanks to dual enrollment then plans on taking a gap year to pursue Salesforce through Talent Stacker.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 
 
 Apr 02, 2021
308 | 102 Business Ideas for Kids |Simple Startup with Arianna and Sheila
45:54
  • Do you have a budding entrepreneur at home? Help them bring their business ideas to life, learn the value of money, and gain future-proof skills.
  • About a year ago, Rob Phelan, launched The Simple StartUp workbook and live coaching series aimed at helping kids aged 10-18 develop their first business idea. This episode will highlight lessons learned from his program.
  • The Simple StartUp has given Brad a language to talk with his own girls about business and entrepreneurship. His daughter, Molly, has grasped the concept of affiliate marketing and how it might help her Gardening Gals business.
  • Molly and her friend are now making slime and thinking about the costs of each component in the slime like little businesswomen. Rob says even if she doesn’t become an entrepreneur, she is learning personal finance skills, problem-solving, how to break down costs, and return on investment.
  • These are conversations every parent can be having with their child as we are all customers of different businesses.
  • Rob has put together a document that parents and kids can use as a launch board. Access it for free at ChooseFI.com/idea.
  • At the core of any business idea is something that will solve a problem for someone else. The Simple StartUp tries to help kids get past the idea that they need to come up with the perfect idea before they can start a business. In reality, you’re going to go through multiple businesses or many iterations with your business. It does not need to be super creative or innovative to get started and learn about the process.
  • In his document, Rob came up with 102 ideas that kids ages 10-18 can start at home right now if they have some skills and equipment available.
  • The kids taking Rob’s course usually start with assets they already have by thinking about their skills, hobbies, and interests. They go through a thought exercise of thinking about complaints people have and what solutions they propose for solving them. Can they solve it in such a way that people are willing to pay for it?
  • Parents can prompt their children to go through the thought exercise themselves when they have a complaint about something.
  • Everyone has something that they are marginally better at than the people around them.
  • Annalise messaged Jonathan to let him know that her Easter cards have been released. In The Simple StartUp, she has learned what a powerful selling tool word-of-mouth marketing can be and is working to create super fans by reaching back out to previous customers like Jonathan.
  • What Analiese is doing is core to business development. Like Kevin Kelly states, you can make a living forever if you have 1000 true fans. Recommendations from someone people trust are better than any PR you can pay for.
  • Rob has made some changes to the course since last Summer and Fall. Parents have been requesting to have immediate access to the course to feed existing passion and excitement rather than wait for the next cohort to begin.
  • Not every kid needs the structure of a group course. As an alternative, Rob has created a self-paced, on-demand course that any entrepreneur can start right now. It includes video lessons and an online community of course alumni.
  • The next cohort course will be The Simple StartUp Summer Challenge, beginning at the end of June and running for six weeks.
  • How can parents foster these conversations with their children and help them start? Use the 102 Business Ideas document as a starting point and ask them to come up with other ideas for solving the problem and then how it could make money.
  • The Simple StartUp student, Arianna, started a finger puppet business after talking through the business idea with Rob. She began using free tools create awareness for her product and after receiving positive feedback, switched to Etsy which would direct customers to her. She has learned a ton in the process and had fun doing it.
  • Arianna’s mother, Shelia, began listing to ChooseFI to learn how to take care of her debt but when she heard about The Simple StartUp, she thought it would be perfect for her teen.
  • Initially, Arianna wasn’t thrilled about doing a program over the summer, but she reluctantly agreed. Nervous at first, she liked the videos and found everyone in the chat to be friendly.
  • When coming up with her idea, Arianna knew she liked crafting, plus her grandmother had taught her how to sew.
  • Outside of class, Sheila helped Arianna understand terms like profit and to use coupons when purchasing supplies.
  • Arianna’s lightbulb moment came from selling items in the video game Animal Crossing. She realized she could incentivize people to buy more with quantity discounts.
  • Her business name is Plushet, a mash-up of plushie and puppet, and its mission is to bring the family together through imagination and puppets.
  • Arianna discovered that she’s pretty good at making logos after making one for a fellow classmate.
  • Not only does Arianna encourage other kids to take the course, but says it’s better than video games and she would also even like to do it again. Sheila believes the course opens the door to learning new skillsets.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 
 
 Mar 29, 2021
307 | How to Factor My Mortgage Into My FI Number| Live Stereo Q&A
01:15:21
  • After four weeks of hosting the live weekly show via Stereo, Brad and Jonathan continue to refine the format and come up with ideas for improving the experience.
  • Jonathan needs some specialized dental work performed and the dentist he found is out-of-network. Insurance isn’t going to cover much in this situation, but thankfully, it doesn’t put him in financial straits.
  • As they reminisce about being children of the 80s, Brad and Jonathan come to the conclusion that time moves on and the rulebook changes. If you are stuck in a world that doesn’t exist, you aren’t going to be successful. Be aware that things change and be open-minded.
  • Google is coming out with its own certificate programs in project management, data analytics, and user experience design through Coursera what will cost most around $250. Google is partnering with 130 other companies to partner with them to hire the graduates of these programs.
  • In past decades, a college degree may have mattered, but in 2020, employers are looking for what can you do or what have you done, not necessarily the degree.
  • Listener Colin called in to say that he started a side hustle last year teaching people computer programming and asked about how to go about finding new clients. Jonathan says that as a business owner, Colin has a product he has created and needs to figure out how to deliver that product, ensure a great experience, find new customers, and finally scale and grow the business.
  • For Colin’s business, is there an awareness problem or is there a problem converting awareness into sales? Brad says something that has worked for him is making connections within his niche and be authentic. Jonathan suggests establishing yourself as a subject matter expert using LinkedIn and Quora and a blog or podcast to begin attracting people interested in the subject.
  • Another thing Colin should do is demonstrate his course has value, get testimonials, and constantly test and iterate.
  • Marjorie called in because she knows how much Jonathan loves the Paprika app, but recommends a similar app called Whisk. It can download recipes from the internet, but you can also take pictures of recipes to upload to the app. Plus, it organizes recipes really well, has a weekly meal planner, and can create a shopping list.
  • The next caller said she loved the coaching call that Jonathan did with Corrine and would love to hear more of those kinds of episodes. Jonathan worked with Households of FI member, Corrine to map out her FI number. Jonathan recommends watching the video for that episode because he shared a lot of screenshots while working with Corrine.
  • Similar to the recipe app Whisk, Brad said that he could have saved money on his recent CT scan using MDSave. Instead of being charged $2,093 for his scan, a provider found through MDSave would have cost him just $289. He was eventually able to negotiate the bill down to around $1,300, but that is still much higher than he needed to pay.
  • The next caller from LA is a side hustle addict. He has been self-employed his whole life and realizes that his nest egg is very small. He wants to know where he should focus his investments for retirement.
  • The caller has a choice between a SEP IRA, a Simple IRA, and a solo 401K. There may be some advantages to using one over the other depending on the size of the business. Brad has set up a SEP IRA and thinks that a solo 401K would have allowed him to defer more money by contributing as the employee and employer. A SEP IRA only allows for employer contributions.
  • If he still meets the income thresholds, the option for a Roth IRA may also be available. There is little downside to contributing to a Roth IRS since contributions can be withdrawn tax and penalty-free.
  • The next caller shared what they would do if looking for a career move. For their technology and financial services company, they would focus on people and find out everything they could about them so that they could engage in relevant small talk. This advice follows nicely with the points Chris Hutchins made in episode 121R.
  • A weak point for a lot of is how can you build a system around building authentic relationships over time? This was something discussed with Jordan Harbinger in episode 233.
  • The next caller wants to know how to account for a mortgage that you expect to pay off during retirement when calculating your FI number. Jonathan plans to pay his mortgage off before beginning to drawdown his investments, however, he calculates his FI number based on what his life costs with a mortgage. It gives him a bit of a fudge factor.
  • Your FI number is calculated by taking your annual expenses and multiplying it by 25. If you plan on paying your mortgage off before retiring, remove the payment from your annual expenses. While principal and interest can be eliminated, taxes and insurance will not be and should be included in your annual expenses. A multi-phased approach will need to be employed to calculate your FI number if planning on paying off the mortgage during retirement.
  • Listener Phil called and left a voicemail asking about tax tips for those with side hustle income and how to balance work-life, side work, and life in general.
  • Jonathan thinks turning a hobby into a business is a great way to explore something within the confines of a business entity. Brad’s tax tip is good record keeping and keeping things separate from your personal accounts.
  • Jonathan also likes the thought of putting advertising expenses on a business card that earns travel rewards, like the Chase Ink Business Preferred, since advertising is a legitimate deductible business expense.
  • A work-life balance can be tough. Jonathan says the biggest misconception is that you’re always going to be balanced all of the time but there will be sprints and tilts. It’s how it averages out over time.
  • Experiment and test a bunch of different things, but don’t put a massive amount of time into something with no ROI or thought to the balance and other areas of our life.
  • If you aren’t going to be in balance and there are other people relying on you, have a conversation about it. Communication will always buy you more room.
  • Map out the cadence to your life and realize where you have control of your time. You might have a boss that needs to sign off on it, but if you work for yourself, you don’t need to ask for permission to make time.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 Mar 26, 2021
306 | Myths and Misconceptions |Diania Merriam
45:22
  • Diania Merriam is the Chief Economeist behind the EconoMe conference, a two-day event at the University of Cincinnati whose roots are in the FIRE movement.
  • In 2019, Diania was preparing for the launch of EconoMe in the spring of 2020. She could not have anticipated the risk of a global pandemic impacting her conference, but it was successfully held on March 7, 2020, just before the event location’s shut down. The 2020 event hosted 250 attendees and nine expert speakers.
  • After putting 20 months of work into the conference, Diania was gratified to hear that 90% of participants loved the event and would recommend it to a friend.
  • Getting together as a community is something that has been missed in the financial independence community over the last year. While some may label the movement as a cult, that is s misconception.
  • Like many others in the financial independence community, Diania felt the need to share content to make it accessible and help those receptive to the message get their financial houses in order, much like Mr. Money Mustache did for her.
  • She finds that many people have preconceived notions and assumptions, thinking that it won’t work for their personal situations, but Diania believes putting more content out there will help others it’s a mindset and there are no hard and fast rules.
  • Although some may believe you have to be a white 3o-something male with a tech career to be in the FIRE movement, Brad points out that is far from the reality ChooseFI sees in its Facebook and local groups. Brad says that 90% of the responses to his weekly email are from women.
  • Financial literacy is for everyone and FIRE is merely an aggressive and enthusiastic brand of it.
  • Though there seems to be an assumption that those in the FIRE movement earn high incomes while eating rice and beans, Diania says in truth, it is rather agnostic when it comes to income. It might be easier for those with high incomes, but those with lower incomes can also improve their finances.
  • The way to improve your finances is to increase income, decrease spending, and invest the gap. What is most important is the gap.
  • The loudest voices in the space tend to talk about frugality because it’s the easiest thing you can do when first starting out, however, ideally, you should be doing both.
  • Jonathan gets angry at the assumption that there’s little to nothing you can do to increase your income. You aren’t stuck at your current salary level.
  • A lot of personal finance content revolves around sacrifice and struggle, but there is a sense of optimism in the FIRE community. You have control over reducing your expenses and increasing your income.
  • Coming across FIRE content helped Diania realize how much privilege she had and enabled her to be honest about how wasteful her spending really was.
  • For Brad, the heart of financial independence is optimism and an internal locus of control. You can affect change on your life with tiny actions that compound, resulting in success.
  • For awhile, Diania wanted to be the female Mr. Money Mustache. It took her a while to realize she needed to be herself and figure out her own flavor of FI that was based on her own goals.
  • Diania’s original plan looked a lot like other bloggers, where she would reach a net worth of 25 times her annual expenses and then retire at 40-years-old. However, life presented other options and she began to ask what she wanted out of life and what she wanted to create. Now she feels like slowing down instead of just racing to meet her FI number.
  • Jonathan likes to think about life in terms of five and ten-year timelines. Ten years ago, did you have any idea you’d be where you are today?
  • Brad notes that just being on the path to FI gives you the space to explore what you want your life to look like and what you want to focus on. The nuts and bolts of money is pretty easy to figure out. Figuring out how you want to spend the next 60 years of life is harder.
  • Like Diania, because Jonathan was on the path to FI, he was to explore interest-led learning, turn it into an income stream, and eventually leave his career as a pharmacist.
  • One of the lessons Diania has learned is that your money is only as valuable as your clarity on how you are going to use it. When her work situation started to degrade and become toxic, she realized she was already at Coast FI and had enough FU money where she could take some educated risks and look at self-employment.
  • Being at Cost FI meant that Diania had already saved up enough money that would grow enough to support her in retirement. In the meantime, she only needed to cover her annual expenses without adding to retirement. Her life right now looks a lot like how she would want it to look if she was at FI and retired.
  • Retirement has a branding problem. Another misconception about FI is that if you are retired, you aren’t working. Regardless of your age, if you are retired, you shouldn’t be sitting around doing nothing.
  • EconoMe was born out of Diania asking herself what she would do if she no longer had to work for money. She wanted to create a party about money.
  • Why wait for retirement? Is there a way to change your life around and do it now?
  • Greed is another misconception associated with the FI community, but Diania believes FI puts you in a position to be really generous. She has experienced the generosity of those in the community who have been generous with their time to help her with her conference dream.
  • When you have figured out money for yourself, there’s nothing left to do but help other people. For example, 20% of the EconoMe conference attendees were over 50 or had already achieved FI, but there were there to share knowledge and cheer others on.
  • Diania thinks the benefit of having money is to be able to share it in some capacity through what you create and the gifts that you give.
  • Brad agrees with the generosity of the community. FI allows you to rethink how you relate to people and gives you an abundance mindset.
  • A quote Dinia loves is, “If you look at your inner circle and you aren’t inspired, you don’t have an inner circle. You have a cage“. She is incredibly inspired by all the people she has met in the community.
  • The three most important resources that have a huge effect on your life are time, money, and energy. The people you surround yourself with have a huge effect on your energy.
  • Is FI a fad that everyone will move on from in exchange for the next big thing? Diania doesn’t think so. Like time and energy, money is a resource and we’ll always be fascinated in optimizing our resources.
  • FIRE is an identification with something to build habits and meet goals. There has been an identity and support system created around it.
  • Rather than thinking of FI as a fad, Brad thinks we are normalizing the conversation and there are more and more people to talk to about it without feeling like a weirdo.
  • The EconoMe conference will be held this year on November 13-14 at the University of Cincinnati. Some of the speakers and activities have already been announced and can be found on the website. There will also be more breakout sessions to facilitate learning from each other.
  • Tickets are on sale now. However, if large groups are not allowed to gather by November, EconoMe will not pivot to virtual. Instead, they have backup dates of March 19-20, 2022. The decision and notification will be made by September 1, 2021.
  • Earlybird tickets are available until April 10th. 200 tickets are available at $149, and then the price jumps to $199.

Diania Merriam

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 
 
 Mar 22, 2021
305 | Finding Your Locus of Control | Stereo Live Q&A
01:13:27
  • It’s the third edition of ChooseFI’s live and interactive show via Stereo. You can submit a question, feedback, or comment, and find out how to join us for the live event by visiting ChooseFI.com/live.
  • Brad and Jonathan are getting high on life. Not only have Brad’s daughters started back at in-person school, but he and Laura were also able to attend a Crossfit class together. Meanwhile, Jonathan is successfully combating fatigue by getting the right amount of sleep, cutting out caffeine, and maintaining high hydration levels with juices.
  • In an ongoing effort to get 1% better, Brad recently reviewed his credit card bills. He found a $50 recurring charge for his daughter’s saxophone rental and decided to buy it for $500 rather than continue incurring the rental fee. He suggests doing this twice a year and asking if those recurring charges are continuing to serve you.
  • Jonathan recently canceled his Netflix subscription and wonders if there is a way to the effort of it and streamline our finances.
  • In a hypothetical example of a $2,000 car loan with a 2-3% interest rate, Jonathan asks if Brad would just pay the balance off versus keeping a monthly payment. At that low of an interest rate, Brad would not, but because of the intersection between math and psychology, there are others so debt adverse that they would pay it off.
  • For higher interest debt or 8-12% or more, Brad believes that is more of a hair-on-fire scenario in which paying the debt off as quickly as possible would be best.
  • Regardless of which side of the scenario you fall on, there is nuance and stigma. Rather than allow others to tell you what you can and can’t do, it’s important to know yourself and why you make the choice you do.
  • Understanding the why behind the car payment is a better thought exercise. If it’s because it gives you the cash flow to finance even more stuff, it can grow to become a difficult position is dig yourself out of. Financing allows you to trade your most precious non-renewable resource, time, for more stuff.
  • With every dollar you are saving, are you using it to invest, or are you buying more stuff? If you are continuing to buy more stuff, then you are still in the trap and aren’t looking at money as a tool.
  • Because Jonathan is a spender, he wants to keep things simple and doesn’t like having structural payments. In the hypothetical scenario, he would feel the need to pay off even a low-interest rate car loan.
  • The first listener voicemail wants to know how much in retirement is enough to adequately cover long-term care. His original goal was $10 million at age 65. According to the 4% rule, that would give the listener $400,000 a year to live off of, which is a big number.
  • It comes down to what does your life cost? Traditional retirement calculators all start from the point of “what do you earn today”, rather than “what does your life cost”. Your income is irrelevant. In retirement, you need to cover what your life will cost.
  • Health care insurance is based on actuarial tables put into place to ensure the provider doesn’t, in aggregate, lose money on you. The same is true for long-term care insurance. It’s priced so that providers don’t lose money on you. What is the effort to reach a $10 million balance to cover the cost of long-term care costing you in terms of time and health now? You can focus on putting systems into place now that give you the best chance to reclaim decades of quality life.
  • Rob Phelan, fromThe Simple StartUp, called in with a question about being open to new technologies and investments.
  • Brad isn’t a first-mover on anything. However, he has a diverse set of interests and prides himself on knowing when the tipping point is to jump in earlier than the average person. He’s done some reading on non-fungible tokens (NFTs) and believes they could be transformative 10-20 years from now.
  • Jonathan’s process is curation and synthesis. When he reads, he skims everything and sees the point when something new becomes real. He’ll do a deep five if it fits into one of the buckets he’s interested in. He’s been doing that deep dive into crypto and blockchain, but not NFTs.
  • While neither Brad nor Jonathan can get behind spending $2.5 million for Jack Dorsey’s first Tweet, they do agree digital ownership is interesting because of all the unique ways the concept could be implemented.
  • Next up is a seven-year-old who says they want to learn about investing. It starts with saving. What Brad tells his own kids is that life gets so much easier if you can save money. If you spend every cent you earn, it takes away a lot of choices in life and gives them fewer options. The higher you can make your savings rate, the more freedom you’ll have.
  • As for investing, think long-term, like many decades of investing. With a long investing horizon, the best chance at being really wealthy is with low-cost broad-based index funds or ETFs.
  • When Jonathan’s kids are older, he thinks he will try and attach a real company to the discussion and carve out a portion to invest in it. It would be one they know and has products they get excited about to help make the feeling of ownership real.
  • Natalie called in to say that she just opened an M1 Finance account for her traditional IRA contributions as well as a savings account so she can earn 1% on it. However, she’s never done a portfolio rebalance.
  • Rebalancing can be scary and easy to avoid. It comes back to having a plan and an investor policy statement and not letting your brain get in the way. M1 can do this automatically and there may be some tax consequences if it is done in a taxable account.
  • Rebalance in your portfolio totality, not within individual accounts. If you don’t have a plan, go and figure out what your goals are and have the plan match them. Rebalancing can also be done by making weighted contributions.
  • James, who is in Jonathan’s podcasting course, asks about speeding up his path to FI by purchasing multi-family real estate by withdrawing from a 401K and obtaining a HELOC.
  • While there are likely both success and horror stories of others who have gone that route, Jonathan would look for ways to avoid 401K withdrawals or taking a line of credit against your home.
  • Brad would only go into his 401K as a last resort. 401K withdrawals are subject to a 10% penalty and would be taxed as ordinary income.
  • Rather than a 401K withdrawal, Jonathan says that if the deal is good enough, the money will come. Bringing on additional investors may be an alternative. Network, be creative, and try to cap the downside.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 Mar 19, 2021
304 | Mapping Out Your FI Number
51:39
  • Jonathan checks back in with Corinne from the Households of FI series to look at her numbers, goals, and map out a FI plan.
  • Financial independence is not about having the most money. In the pursuit of FI, the math is simple, but the math will change depending on your goals. It’s important to start with understanding what you want your ideal day to look like.
  • Following Corinne’s last coaching session with Jillian, she learned how to build good habits and strategies to get closer to the goals she wants.
  • One of the strategies she’s using is her phone to set reminders for the goals she wants to achieve. The reminders hold her accountable without her having to remember everything.
  • Jonathan pointed out one of the great pieces of advice from the episode with Jillian was her advice to explore the goals you find yourself resisting giving even two minutes to. What is it in your subconscious that is sabotaging your goals?
  • Corinne is on track to become a partner at her firm but that comes with a lot of expectations. In an exercise with Jillian, she was asked to write down what her ideal day would look like. to start, she’s been writing down which activities are energizing and which are draining. It has helped her to manufacture her day to be the kind of day that makes her want to get up and go to work in the morning.
  • She discovering that she doesn’t have to work as many hours as everyone one else. She can balance it out, earning a little less money while being happier.
  • We can make time to make each week more memorable and enjoyable when we spend less time on meanless activities.
  • When you take what earn and subtract what you spend, what you are left with is the gap. When you live paycheck to paycheck, there is no gap.
  • Corinne earns $120,000 a year as an accountant. She was in a five-year program where she got her Bachelor’s and Master’s degree that gave her enough requirements to take the CPA exam. Due to a scholarship, she graduated without any student loan debt.
  • A similar recent graduate starting out now would make around $50,000 a year. She was able to double her salary and excel by narrowing her focus and becoming an expert in that space.
  • In her industry, there are clearly defined roles with specific salary ranges. Increasing income requires the desire to progress and take on more responsibility. Becoming a partner wasn’t always on her radar, but she liked the idea of having ownership in the business.
  • Corinne hasn’t researched the details of the retirement payout for partners at her firm, but there is some form of payout in retirement. Since she is on the trajectory to becoming partner, being able to project the retirement payout will help to calculate her FI number.
  • One of Jonathan’s favorite income tax calculators is at Smartasset.com because it will incorporate state and local taxes. Using Corinne’s salary, he calculates her federal tax plus FICA and Social Security is $29,227. Since she maxes out her 401K, it reduces her tax to $23,000 and saves her more than $6,000 in income tax. The income she brings home is then $77,445, or around $6,500 per month.
  • Now looking at Corinne’s expenses, her mortgage is approximately $1,000 and she spends $500-550 a month on food. She does not have a car payment but between gas and other expenses, it’s around $100 a month. Utilities run $400 per month. Additional budget categories include dining out and shopping for $500, charitable giving at $200, housekeeping is $100, and her HOA bill is $150. Though travel is on hold at the moment, she’s like to budget $250 a month for vacations. And finally, an additional $200 was included to cover odds and ends.
  • Corinne’s total monthly cost-of-living is $3,375. To find out her gap, Jonathan takes her net monthly pay of $6,500 and subtracts her monthly expenses of $3,375 to calculate a gap of $3,125 each month.
  • Jonathan suggests putting the gap to work for her as quickly as possible and sending it to her investment strategy. Before doing this exercise, Corinne had no idea what her gap was and grabbed a random number to move to savings.
  • To start working on a plan for financial independence, Jonathan uses net worth and age. Corrine’s 401K balance is about $150K and her taxable account has another $100K making her invested net worth $250,000. She is 32 years old.
  • Using ChooseFI’s simple Retirement Projection calculator, Jonathan plugged in Corinne’s numbers. Her FI number is $1,012,500.
  • Next, Jonathan uses ChooseFI’s Future Value of Investments calculator to project how many years it will take Corinne to reach her FI number through both the growth of her current invested balance and her monthly contributions. Using an 8% rate of return, in 10 years Corinne will have $1.4 million far exceeding her FI number. Sometime between 7 and 8 years is when she will reach financial independence.
  • The exercise is energizing for Corinne who previously thought she would need to eat rice and beans to reach financial independence in 10 years. She was nervous to see the numbers but now finds it motivating. Her next step will be to ensure she’s taking that extra money every month and putting it to work for her.
  • Once you’ve got what you earn, what you spend, identify the gap, and decide what you’re going to do with the gap, you’ve got your FI plan in place.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 Mar 15, 2021
303 | Structuring Your Emergency Fund | Stereo Live Q&A
01:05:52
  • In the second episode in the series of taking the show live online via the Stereo app, listeners ask questions and interact during a replay of this live podcast from Tuesday evening.
  • Experimenting with this new show format, Brad and Jonathan are adding to their talents stack and themselves getting better through the often mentioned concept of the aggregation of marginal gains.
  • Unfortunately, just because you make progress in an area, it doesn’t always mean you hold on to those gains. While your finances can be put on autopilot, physical and mental health are areas prone to backsliding. Take a little time for self-care.
  • While reaching financial independence isn’t as simple as packing your lunch every day, it can be symbolic of the transformation to a mindset to take care of all the small things. It’s that effort, in the aggregate, that gives you the space to increase your savings rate, optimize investments, and earn market gains.
  • Brad has been trying to apply the concept to his health, which has also required that he overcome several limiting beliefs. All of the changes he’s been making are small, like stretching, doing pushups, or yoga in the evening while watching TV with his family. And after hearing about how important vitamin D is to metabolic health, he tested his levels and found out they were dangerously low.
  • In his attempt to live a more examined life, Brad has noticed certain foods lead to inflammation, and that his energy level fluctuates with the seasons.
  • Likewise, Jonathan has been examining his use of caffeine and trying to decide if he is better off with it or without it. He would prefer to have a natural, steady energy state. He’s noticed that by decreasing processed sugars, he has more energy and wakes up fresher.
  • Brad has been using a 10-minute nidra yoga YouTube video as a guided sleep meditation and says it’s like getting a two-hour nap.
  • Listener Jackie left a voicemail asking about taking a little risk by putting emergency funds into the bond market. Jonathan says there’s no one answer, but he thinks we need to look at what we’re protecting ourselves against and the opportunity cost that comes with having a lot of money on hand to handle emergencies.
  • Most of us will benefit from having $1,000 in the bank to start, and then moving to one or two months of expenses in cash. As your net worth grows, Jonathan would prefer to have the money in a fully-funded emergency fund grow.
  • Since recording episode 066 with Big ERN, Brad has been trying to come up with a true financial emergency scenario. He’s been unable to think of a scenario when he might need cash in a hurry that couldn’t be covered immediately with a credit card. In a true emergency, he has invested assets he could sell and transfer to his checking account to then pay the credit card bill.
  • When you keep an emergency fund in a savings account, the opportunity costs are the potential gains that could have been made by having those funds invested.
  • Jonathan keeps a couple of months of cash flow. In addition to retirement investments, he also has a taxable brokerage account with M1 Finance. His investment pies in M1 have been allocated for different timelines. For his shorter timeline fund, he thinks about it more like a retiree would and wants it stable. Therefore, he keeps it in a fund that is negatively correlated to the stock market, such as bonds and precious metals.
  • For emergencies, one of the benefits of M1 Borrow is access to a low-interest margin loan against your invested non-retirement assets.
  • The second listener voicemail asks about the ability to convert and access 401K investments after a five-year waiting period for someone who retires early. Brad believes the listener has a Roth 401K, in which contributions are made with after-tax dollars and may be withdrawn tax-free. The five-year waiting requirement applies to Roth IRA Conversion where traditional 401K contributions are converted to a Roth IRA and it is a taxable event. When rolling over money from a Roth 401K to a Roth IRA, it is not taxable and there’s no wait to access contributions. At 59 and a half, all of the money may be accessed penalty-free.
  • A listener in the Netherlands wanted to know if Brad and Jonathan would consider having a guest from another country on the podcast. Since the FI movement is worldwide, ChooseFI has listeners from all over. Exploring non-American guests is definitely something to be examined for general FI topics, as it would be difficult to speak about other countries’ tax codes. The ChooseFI local groups in international locations would be a great option and resource.
  • Listener Gavin asks about how best to decide post-FI plans. Jonathan stresses that FI is a number and not an action. It does not mean you have to leave your job. FI gives you options, time, and resources and allows you to explore what you want to do with those. Having some space financially allows you to make choices from a position of power. You can make small-scale tests before wholesale life choices. The money is the easy part. Figuring out what lights you up is the difficult part.
  • Listener Natalie has connected with the idea of maximizing her savings but is sitting a significant amount of cash while she decides between renting and buying. She wants to know how easy it is to put money in the market if she might need it in three to five years. Of the big traditional brokerages, Jonathan thinks Fidelity is the easiest to learn from a user interface perspective.
  • Of the software-based institutions, he likes M1. Brad says from purely a conceptual-level, it’s easy to get money in and out of the market as they aren’t subject to the same rules retirement accounts are. However, it’s good to note that the stock markets have business hours and may be closed when you want to make a transaction and that some companies like M1 limit when transactions can take place.
  • In live feedback of the 401K discussion, a listener pointed out that there is a phantom five-year clock on in-plan Roth conversions.
  • Marjorie left a voicemail that she is trying to get her family back in Puerto Rico on board and is looking for Spanish language FI resources. Jonathan has been helping Lorena start a Spanish language personal finance podcast, De Peso a Peso.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 Mar 12, 2021
302| Navigating a Multigenerational Household | The Financial Tortoise
51:28
  • We are checking back in with Vivan from our Households of FI series who has been paired with mentor, Tae from Financial Tortoise, to go over strategies, best practices, and considerations for multiple generations living under one roof.
  • In many Asian cultures, adult children are responsible for taking care of and being financially responsible for aging parents while also raising their own children, often referred to as the Sandwich Generation.
  • Whether or not being financially responsible for parents is part of your culture, caring for or assisting them to make decisions as they age may be in your future.
  • Tae writes from the perspective of the Sandwich Generation on his blog, Financial Tortoise. Living with him and his wife are his two kids and both of his parents. During the last 10 years in this living arrangement, he’s paid off $105,000 in student loans and is pursuing financial independence.
  • Vivian has been fighting breast cancer while dealing with a separation and child custody battle. She also has her mom living with her, who is helping out with her child, but she finds that there are generational differences leading to misunderstandings. She has questions about what kind of disability or long-term care insurance she would be getting for them.
  • At 61, Vivian’s mom doesn’t yet qualify for Medicare and hasn’t applied for Social Security, but she does have a small pension from working for the Los Angeles School District. Tae thinks there may be healthcare gap insurance available if her mom qualifies.
  • Her mom retired from work last year. If she applies for Social Security early at 62, she’ll earn 20-30% less. If she waits until age 700, she’ll earn 20-30% more. As long as she has paid into Social Security for at least 10 years, she is eligible. If she hasn’t been receiving paper summary statements, she can check online and see what her estimated benefits will be.
  • Tae’s parents moved in with him right when they began collecting Social Security. They didn’t understand retirement accounts, but they did have real estate and rolled over equity into the down payment for a new home they could all live in and Tae took over the mortgage.
  • Since Vivian’s mom lives with her, she shouldn’t have major expenses and her pension and Social Security should be enough to live one, but she would like to travel so Tae suggests looking into travel hacking.
  • As for healthcare, Vivian’s mom retired because of health issues and is no longer able to work. She currently pays for private insurance, but at 61, there isn’t an ideal solution until age 65 when she becomes eligible for Medicare. She will need to enroll 3 months before she turns 65. Basic Medicare is covered, but if she wants things like hospital visits covered, she will pay a premium that is taken directly from Social Security if she is collecting it.
  • Tae does not have long-term care insurance for his parents because it is hard to find affordable long-term care insurance now, but skilled nursing and assisted living may be alternatives. The best thing you can do is to take care of yourself. He thinks people in the FI community have the advantage of having more time to spend figuring out a care solution when the time comes.
  • Vivian asked if Tae his FI plan included healthcare spending for his parents. He does not, but he does plan for them to age in place, which means maintaining the larger home.
  • Living through the Vietnam war has created conflicts in some areas, like hoarding food and water. Her mother helps out with cooking, child care, and food costs, but Vivian pays for everything else.
  • One of the reasons why Tae decided to try co-habiting with his parents was for help with childcare. It helped them fully commit to their careers. While there can be a huge cultural chasm when living with your parents as adults, Tae has learned empathy and takes time to try and understand where they are coming from.
  • Rather than try to control what his parents are doing with their money, Tae tries to ensure his own expenses are as strong as possible. If something were to happen with his parents, if his own finances are strong, he’ll be able to figure out how to deal with it.
  • Vivian is trying to save 50% of her income as a pharmacist and her parents think she is being stingy, which runs counter to many Asian cultures where you wear your wealth.
  • She was excited when she found ChooseFI because she previously believed you needed to have your own business to become financially independent. She’s now following the advice in The Simple Path to Wealth.
  • Saving for college is another question Vivian has. Tae’s children are 4 and 6 but he’s started 529 accounts for them since there is some flexibility with them. However, he believes the future of work could look different. He thinks about how he can help his children become productive adults rather than blindly save for college.
  • Tae thinks it’s good to start thinking about estate planning with her parents. He and his wife just did their own, setting up a trust and power of attorney which motivated his parents to do the same.
  • There is a cost for everything and there are both positives and negatives when putting families together under one roof. You have to be aware of it going in.
  • The major takeaways from Tae and Vivian’s conversation are the need for managing the gap before Medicare kicks in, navigating Social Security, and feed estate planning.

Tae

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 Mar 08, 2021
301| Money and Relationships | Part 2
50:35
  • What are you getting hung up on with relationships and money? We continue the conversation in Part 2 of the Relationships and Money series with Jillian Johnsrud.
  • Although March is finally here and the sunshine is motivating Jonathan to push away the processed carbs in favor of broccoli and hummus, Richmond’s recent ice storms had Brad using his stash of travel rewards for the first time in over a year.
  • Travel rewards come in handy at home too. After losing power from the storm, Brad called up a local Hyatt to see if they had power and was able to use 5,000 with Hyatt to book a room, and quickly move his family out of a cold home for the night. If he had been short on Hyatt points, he could have quickly transferred Chase Ultimate Rewards points over to cover the rate.
  • Even if you aren’t ready to travel now, plan ahead and start stockpiling travel rewards points now so you have them once you do want to travel again. Take the travel course at ChooseFI.com/travel to learn how.
  • The next roundup episodes will feature Alan Donegan and focus on building a business in 2021. Submit a voicemail with the questions and concerns you would like to have addressed at ChooseFI.com/voicemail.
  • Have a question on a different topic? Submit your voicemail and join the live radio shows held on Stereo, Tuesdays at 7:30 pm Eastern.
  • In Episode 300 with Jillian, she discussed how your past money story motivates you and creates fear as it pertains to money and relationships. Part 2 of the series examines being financially independent while still dependent.
  • Listener Asia is engaged and works full-time while her partner is still going to school and works part-time. They each have vastly different money stories and have started combining finances. Her partner is still receiving some financial support from her parents. While her partner wants to begin become more independent, Asia wonders if it would be smarter to continue as things are.
  • Jonathan sees three issues with Asia and her partner’s situation: attachment, boundaries, and economics. For Jillian, one of the elements was what habits and practices Asia’s fiance can take to feel like a financial grown-up and equal partner in the relationship. She also considered what it might mean for the fiance to receive from her parents, as well as what it might mean to the fiance’s parent to give.
  • Jonathan sees nothing wrong with accepting help so long as there are no boundary or communication issues or strings attached. Brad thinks it sounds like a positive situation but is also concerned about ulterior motives.
  • After graduating college, Brad lived at home with his parents while saving 90% of his income which gave him a huge jumpstart on his path to FI.
  • Jonathan noted that there could potentially be some tax-filing issues that could be related to the child tax credit and paying for dependent healthcare that could be important to figure out.
  • Jillian says society’s rules don’t matter, you can write your own rules of what it means to be a financial grown-up without there being a contradiction. Help can be a sweet thing family can do, but even she had issues with family members trying to control her with financial assistance while she went to school.
  • There are other things you can do to feel like a financial grown-up, like tracking expenses or coming up with a debt repayment plan. You can be a financial grown-up, take advantage of opportunities without taking advantage of relatives as long as your goals are aligned and they want to see you succeed.
  • Brad wants to be able to help his kids out when they are older. He respects parents who charge their children rent and teach them to be financially responsible, but he hopes to instill those lessons throughout childhood.
  • Listener Precious will be getting married soon. So far they have been sending money back and forth to each other, but she wants to be more efficient and is wondering what the best way to begin combining finances is.
  • While Jillian wants to believe all love will last forever, she advises against opening up a credit card together in the first few years of marriage due to the bills being divided up in a painful divorce process. However, opening up a joint checking account is a good baby step since at worst only the money in the account can be spent without going into debt. How much each person contributes and what bills get paid from it opens up the lines of communication.
  • When you are young and your finances are simple, combining all of your finances makes a lot of sense. In contrast, Jillian’s financial life is much more complicated and if she had to remarry, she isn’t sure she would combine her finances with anyone else.
  • Credit card and car debt can be kept separate, but it’s usually better to have both names on a home loan since real estate is an asset being grown together. But also so that it doesn’t become a painful process to untether if necessary in the future.
  • In a new marriage, Jonathan says he wouldn’t feel comfortable being a co-signer on a credit card since he would be legally responsible but have no insight into what was going on until it crashes into a wall. On the other hand, adding an authorized user gives you more control and insight into how the card is being used and it can be revoked.
  • Brad and Jonathan have their own bobblehead figure! It was given to them by All-Star Money for being creators of content who inspire readers to improve their financial situations and helped develop an engaged personal finance community.

Jillian Johnsrud

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 Mar 05, 2021
300 | Relationships and Money | Jillian Johnsrud
43:48
  • Money is one of the top three things people struggle to communicate with, falling right below sex and above our reasons and motivations for work.
  • In her coaching practice, Jillian finds clients will be very open in one-on-one sessions, but when working with couples, it becomes much more uncomfortable.
  • Jillian believes this discomfort is because discussions of things like sex and money happened behind closed doors and weren’t modeled for us growing up.
  • In response to a call put out for questions in Brad’s FI Weekly newsletter, listeners submitted their questions for Jillian about relationships and money.
  • The first comes from Jonesy who had a question about keeping the lines of communication open about money with a significant other when they are at different stages. He is working and beginning to build his portfolio and savings, while his significant other is still in school and struggling to make ends meet.
  • Jillian suggests first trying to find common ground to discuss money. You can start with telling your own money stories, like how your parents spent money or what you wish they had spent money on. It’s important to feel seen and heard. Sharing childhood stories are opportunities to start having conversations to begin learning about each other financially.
  • Help make the conversation not feel like a trap by being genuinely curious about your partner’s life and experience. You can approach discussions about money much in the same way couples talk about the parenting they witnessed and experienced.
  • Pick one or two questions to open up the conversation and put your partner in a relaxed state. Ensure they feel seen and heard before transitioning into conversations on budgets or debt payoff.
  • Taking the small step of sharing money stories can help the couple come away with positive feelings, feel closer, and know just a little bit more about each other.
  • Jillian and her husband did not communicate about money well during the first few years of their marriage. They had very different money stories and didn’t know how to explain why they were reacting or felt the way they were.
  • Breaking the big scary stuff down into bite-sized non-intimidating questions is something Jillian guides users through in her latest workbook, part of which asks us to examine our parents’ patterns, whether or not we have copied or rebelled against them, if what was inherited is serving you well, and do you want to take it forward.
  • Because Jonesy and his partner aren’t married, Jillian says it’s okay to skip the specifics in the middle, like savings rates and budgets, and discuss the outcome, like a common goal to work toward together.
  • If you work on learning to talk about money, understanding each other financially, and can work toward a common goal, by the time you are on the same page, the middle stuff will be easier.
  • Listener Sam wants to know if it can work when one half of a couple is excited about being on the FI path but the other half says FI is not for them. Sam has been on her journey for three years and has a 50% savings rate and plans to retire early, but recently married and her husband’s savings rate is far from the same and he plans on working until 60. They currently keep their finances separate.
  • Jillian thinks Sam and her husband could benefit from having conversations about work, its role, and how it ties to identity. It’s feasible for one person to retire while the other works, but it can create a rift unless they understand each other’s stories and mindsets.
  • Brad wonders how Sam and her husband keeping their finances separate could work logically in the long-term. Jillian thinks on the surface it cold work so long as they work on everything below the surface and sure each is truly comfortable with the situation.
  • Listener Titan wants to know how to make the monthly chart tracking their progress toward FI more fun and exciting for his significant other. Unfortunately, Jillian thinks Titan’s partner will never be excited about it. In any relationship, it seems like there’s one who likes worksheets and graphs and one who prefers to talk about things. She suggests not focusing on the numbers on the graph and instead make it about the amazing life they are creating or whatever is exciting for them.
  • Jonathan can sympathize with Titan’s situation but says what were are looking for is trust that you are building an awesome life together and moving forward in the same direction.
  • Jillian’s course, One Hour Millionaire, is a 21-day program with the premise that it should only take you one hour a month to set your trajectory to a million-dollar net worth.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 Mar 01, 2021
299 | What's Stopping You from Reaching FI?
01:16:10
  • It's ChooseFI's first live radio show! Recorded live on Tuesdays at 7:30 pm Eastern using an app called Stereo, the live shows will be replayed for the Friday Roundup episode.
  • The topic of this interactive live show is: “What is stopping you from reaching financial independence?”.
  • Lorraine has a question about allocation and investing in one of Vanguard’s funds like VTI or VTSAX but the answer is situation-dependent.
  • It’s important o know the investing timeline Lorraine is looking at, but hopefully, it’s investing for the long-term. Investing for the long-term provides for the highest likelihood of success. However, it’s money needed for something critical like an emergency fund, maybe consider keeping what you need in a savings account and investing the rest.
  • Other factors to consider are risk tolerance, net worth, job security, and whether you have an emergency fund. How sacred you were in March is a good indicator of your risk tolerance. The right allocation will allow you to sleep at night, be confident in your plan, and stay the course.
  • The best thing to do is take action and get invested without getting hung up on the details. Keeping your expenses low with low-cost broad-based index funds, like total stock market or S&P 500 index funds, make a significant difference over your investing lifetime.
  • Getting to the point where you can make work optional can often seem like luck. However, the FI community believes we have the power to impact change in our lives and in our communities. Taking small actions to optimize and seeing that you can still live a life without a feeling of deprivation becomes a motivating positive feedback loop.
  • No matter how much you earn, the message of FI can be valuable. If you are living paycheck-to-paycheck, it doesn’t matter how much you earn. You need some amount of gap between what you earn and what you spend.
  • Growing the gap by cutting expenses is usually the most effective place to start, but you can widen the gap by earning more as well. It doesn’t mean going back to school or taking on a second job delivering pizzas. One way to increase your income is by negotiating your salary.
  • If you research the highest paying professions, the search leads to a list of six-figure careers, however, the return on investment in these career paths is not what it seems. They may require a significant number of years in school and the student loan debt that goes along with it.
  • Today it’s possible to skip a degree program in favor of a certificate program and land a high-paying job in less time and at less expense.
  • Matthew has been listening to the show for about six months. One question he’s had is how people are retiring early when you cannot withdraw from retirement accounts without a penalty until you reach the age of 59.5.
  • There are strategies for investing in retirement accounts where it goes in tax-free, grows tax-free, and is withdrawn tax-free ahead of the traditional retirement age.
  • Investing in something like a traditional 401K account lowers your taxable income and gives you a current tax deduction. Once you reach FI and decide to not work anymore and are living off savings, you are earning $0. You can at that time pull take money from your 401k and convert it into a Roth IRA, an after-tax account, in a process known as a Roth IRA Conversion Ladder.
  • The conversion is a taxable event, however, your earned income is $0 so the only amount subject to tax is what you convert. Even then, the total amount won’t be taxed. You can still take the standard deduction and only be taxed on the remainder at the lowest possible marginal tax rate. The account will then grow tax-free.
  • Another method to access 401K retirement funds a few years earlier is with Rule of 55.
  • One listener wants to know what other podcasters or influencers Brad and Jonathan follow. Brad’s long-time favorite is The Tim Ferris Show, Dr. Peter Attia’s The Drive, and Naval. Jonathan’s podcast listening tends to be focused on what will help build his talent stack. On YouTube, he likes Real Coffee with Scott Adams.
  • The book by Scott Adams, How to Fail at Almost Everything and Still Win Big, had helped Jonathan change his mindset. He went from fearing failure, to understanding there is a process and failure is completely fine.
  • Brad thinks the best podcast that exists is Armchair Expert with Dax Shepard.
  • Listener Josh left a voicemail saying the episode featuring the Millionaire Educator and the mentality of keeping money on your side of the ledger was one of the most impactful shows for him. The Millionaire Educator learned the rules and used them to his advantage to reduce his tax rate to zero.
  • When the question of dream podcast guests came up, Jonathan says he’s going to reach out to Scott Adams, while Brad’s dream guest would be Mark Cuban for his open-minded and entrepreneurial spirit. Send in your ideas for who you’d like to hear on the show.
  • The next voicemail asked when is the best to move from 100% equities to bonds if you are about halfway to FI. Jonathan projects he’ll be at FI within 10 years and currently doesn’t have anything in bonds. He thinks he would make the move to become more conservative once he has a clear exit date in mind, such as within five years. The conventional split is 60% stocks and 40% bonds, but it should match your risk tolerance.
  • Brad mentioned that Big Ern discussed how paying off your mortgage is an alternative to holding bonds in your portfolio. Although Brad has reached FI, he doesn’t have any bonds either. He thinks a young adult with a long time horizon, equities have the highest likelihood for maximizing net worth.
  • If you can reduce your structural expenses at the point of retirement, it could act as a substitute for having bonds. Passive income is another alternative.
  • Jonathan is currently allowing his equities to continue to grow, but before he retires, he will pay off his mortgage and get rid of that structural expense.

Resources Mentioned In Today’s Conversation

If You Want To Support ChooseFI:

 

 
 
 Feb 26, 2021
298 | Habits For Wealth Building | Rich and Regular
01:29:11
  • We are checking back in with our Households of FI family, Martin and Ayesha, who have been paired with mentors, Julien and Kiersten of Rich and Regular.
  • Kiersten and Julien live in Atlanta and started working toward FIRE before they married five to six years ago and have paid off $200,o00 in debt, including their mortgage. They now share their journey on their blog rich & REGULAR.
  • Ayesha and Martin live in Chicago and found ChooseFI in January 2020 and jumped in with both feet. Martin is a natural saver and had been a positive financial influence on Ayesha before finding FI so they had done a decent job managing their money.
  • Martin was researching dividend investing after it was recommended by Ayesha's uncle who retired at 55. Ayesha felt like her aunt and uncle had the most fabulous retirement life she'd ever seen. Thanks to his example over the last 25 years, their goal is to get to where he is.
  • Julien had a similar retirement role model in his life. A close family friend was a Registered Nurse who retried early and showed him that there is a lot of life left after 40.
  • Since finding FI, and partly thanks to Covid, Martin and Ayesha's savings rate has increased. It has made them aware of all the frivolous, non-essential ways they spent money before.
  • Ayesha hates budgets and doesn't want to track every penny of her spending. She was out of work for four months during Covid and they found that they didn't miss her income and it showed them that they could save a good amount of money without feeling constrained or deprived.
  • Having a quantifiable goal and a clear target has helped provide clarity in what they are trying to accomplish.
  • Martin enjoys trying to optimize their spending and counting the dollars they save. When they decided to get a new television, he used Offer Up to do his research and purchased a flat-screen plasma HDTV for $40.
  • Julien used to track every single expense and look for new savings opportunities each quarter. But now, optimizing their spending has become such a deeply ingrained habit that he no longer feels the need to look at their budget. He says it becomes like muscle memory once you sort out your own system.
  • Ayesha feels like when you can simplify your life and have good habits, your life can smoothly and asked what Julien and Kiersten's top habits are.
  • Kiersten says doing laundry regularly keeps them from having a ton of extra clothes. She and their son have a capsule wardrobe with 20-30 pieces of matching items. She also keeps the kitchen sink clear of dishes to cut down on kitchen accessories.
  • Julien says they have just the right amount of things they need and notes that there is stress associated with the quantity and clutter in our lives.
  • Having too many things adds to decision anxiety and analysis paralysis. Instead, whether it is life or a financial strategy, find a handful of things you can nail every single time and ignore everything else.
  • Julien also says that he has never made an investment in himself that hasn't paid off handsomely, no matter if it is exercise equipment, a book, or a course. Don't allow frugality to prevent you from paying to learn new learning opportunities. New skills can improve your ability to earn more income or make you more marketable.
  • Kiersten likes to save receipts. if the item she purchased sits for several days, she didn't need it and will return it. She also purges the house of items regularly.
  • As far as community goes, Ayesha and Martin are doing okay. In addition to family, they have a group of friends who meet to share ideas on investing and becoming financially free. However, they aren't as familiar with the concept of FI so Ayesha feels like they don't have a like-minded community
  • Julien notes that, especially for black people, the pursuit of financial independence can be a very lonely experience. Telling people about FI doesn't work. You have to show them, like when you get to the point where you can take a two-week vacation or a month off from work.
  • Kiersten and Julien suggest focusing on influencing the next generation. They use their freedom to step up and help out and pick up the slack with their friends' children.
  • When it comes to building community, stay open-minded. It takes time to find your best friends and others whose values closely align with yours, but you don't need to divorce yourself from your social circle.
  • Like their budget, Julien doesn't check his investment portfolio very often because they won't be touching that money for 10-20 years. His attention is better spent on building the business and maintaining a healthy lifestyle. They make decisions on where to invest income every quarter.
  • You can see the crash coming on other people's lives despite the advice you may have given. Still, Julien says to leave the gate open and don't be judgemental. You may not have been the right messenger for that message.
  • Before starting rich and REGULAR, Julien was working for a company he loved but was underpaid. When his company paid an influencer $10,000 for posting a photo on Instagram, it motivated him to start earning income in other ways.
  • Since they already had rental real estate, he was confident he could earn more outside of work. He was eventual led into the world of digital entrepreneurship.
  • When Kiersten was finally comfortable enough to leave her job, they were not yet at FI, but a year's worth of runway that enabled her to quit and devote that time to building the blog.
  • The FI community often talks about what number is needed to hit FI, but that number is arbitrary. A single dip in the stock market can impact the number. Julien and Kiersten ask if you were counting on drawing down that money, what would you do for money now?
  • Most people only earn income one way, through earned income. They don't know enjoy the quality of that income over any other.
  • Kiersten and Julien attend FI meetups in Atlanta and other places and encourage Martin and Ayesha to do the same when they are able.
  • Julien had challenges at the beginning of his journey. He grew up poor and was judgemental about his beliefs on spending. He found virtue in saving and said hurtful things to Kiersten because he felt she was spoiled. He's since learned leading with shame creates barriers.
  • Whether a natural saver or a natural spender, everybody is spending. Spending today can be rewarding and motivating.
  • Kiersten was also judgemental in a different way. She thought she knew how her life was going to be and was closed-minded. She struggled with seeing a different version of herself. She had to be open and let go of her ideas of what certain aspects of her life would look like.
  • If they came into a windfall of money and weren't allowed to invest in themselves or their business, they would invest the money in low-cost index funds and then let it grow and forget about it.
  • Discipline equals freedom. When you set up a framework for life by setting up non-negotiable things, it allows you the freedom to spend time doing the things you'd rather be doing.
  • Brad agreed with Julien's sentiment about investing in yourself and that the spirit of frugality can get in the way of that. Watch out for it.
  • The local groups are the heartbeat of the FI community. They aren't made up of podcasters and bloggers. They are regular people who are getting together and trying to live better lives.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Feb 22, 2021
297 | From Pandemic Layoff to $100k+ | A Salesforce Success Story |Anita Smith and Bradley Rice
57:14

What You'll Get Out Of Today's Show

  • If you are willing to look outside your comfort zone, grab good information, and take action on it, you can change your life in a matter of weeks or months.
  • One of the hardest-hit industries during the pandemic has been hospitality. Working in that industry, Anita was looking down a long dark tunnel before stumbling upon the FI community.
  • When Anita found ChooseFI in August, she jumped right in, taking action and interacting with Brad through the FI Weekly and submitting her frugal wins of the week.
  • By listening to the podcast, Anita heard about Jonathan starting up the Talent Stacker podcast and the program he put together with Bradley Rice on Salesforce career development. Anita gave it a shot and her results blew Jonathan and Bradley's mind.
  • The results Anita has had are not an outlier. It's what others are also seeing every single week.
  • Back in the spring of 2019, Bradley was on the show to talk about Salesforce and living a life by design. After Bradley discussed earning $200K a year working 15-20 hours a week, the listening audience really responded.
  • Based on that interest, a Salesforce group was started for the community and people began landing Salesforce jobs. In just two years, the group grew to 5,000 members learning from each other.
  • A year ago, Anita was working as a revenue manager for a hotel connected to a convention center. At that time, the pandemic was accelerating and group after group began canceling their events. As a result, she was furloughed in March.
  • Understanding that hospitality wasn't going to recover anytime soon, Anita decided to be proactive, began learning, and figuring out what her next move would be.
  • In addition to taking classes online, Anita researched Fortune's top places to work. The first time she heard of Salesforce was from that list but was turned off at the thought of sales. After a little research, she discovered sales isn't what they do.
  • She signed up for Trailhead, Salesforces's online learning account, and did it for one day before concluding it was awesome. But she wondered it was real and if was as easy as it seemed.
  • After receiving more bad news from her employer, Anita was motivated to learn more. She found ChooseFI and binge listened to over a hundred episodes when she heard about Talent Stacker, Salesforce (again), and the free 5-Day Challenge.
  • She ended up in the paid program and because she had been laid off, she used her time to learn everything she could like it was her full-time job.
  • One month after starting the program, she took the first admin certification program and passed. After that, she used all of the tips from the program and landed a good-paying job in January.
  • Prior to the pandemic, Anita was in a financially stable place. She had no debt other than a car payment, although after being laid off she was forced to move in with her boyfriend.
  • She says in her previous hospitality job, she was on a path to get o the kind of pay she is earning now, it just would have taken a lot longer.
  • Bradley says what Anita has done is possible because cloud-based technology is less-impacted by things like the pandemic because they are skilled positions, are able to be done remotely, and without a lot of change management.
  • There aren't enough skilled Salesforce professionals to fill all the available positions. To help fill the gaps, Salesforce developed Trailhead, a free online training app, which removed some of the barriers to entry.
  • Being able to study inline for a few months and then land a $60-80K per year job sounded too good to be true. This is one of those occasions when something that sounds too good to be true really is true.
  • If you don't have basic computer skills, a Salesforce career may not be for you. However, if you like the thought of helping companies generate new leads and support new customers, it might be a good fit.
  • There's so much information on Salesforce that it can seem overwhelming. Anita explains that she is reorganizing the business to help companies become more efficient.
  • A Salesforce professional helps a company use the software to find more customers, sell to those customers, retain the customers, and secure the customer's data.
  • The majority of individuals can come away from training earning $60-80K a year. Anita surpassed that when her first offer was six figures and she doubled her previous salary.
  • Bradley says the career trajectory quickly increases from there. Even someone who isn't leaning in will likely reach six figures after three years and top out around $130K with $20-30K bonuses.
  • The more entrepreneurial-minded can strike out and become independent consultants and earn even more. Bradley makes $200K a year working just 20 hours a week.
  • Based on his return on investment, Jonathan wouldn't go to college if this program was available to him. He spent eight years in school and came away with $168K in debt, rather than six months of training for a couple of thousand dollars. His net worth would be two to three times higher if he had.
  • That doesn't imply ChooseFI is anti-college. Rather, the takeaway is to think differently, look at the world for how it is, and see opportunities. The traditional path may not be for you.
  • Taking a hybrid approach can be a benefit. Go ahead and go to college, but spend a summer in a Salesforce career development program. It helps you understand what Salesforce is, gets you halfway through a program, and helps you to decide if it's right for you.
  • You can do this for free. Fraining is available on Trailhead. What the free Salesforce 5-Day Challenge does is show you how to get started in Trailhead and show you a clear path, and help you decide if Salesforce is for you in just 30 minutes a day.
  • Anita chose to go through the paid portion of the course because of the clear path it offered.
  • Announcing the introduction of a new live interactive component to the show! In an experiment over the next ten weeks, we'll be testing it every Tuesday night at 7:30 Eastern, starting February 23rd.
  • Using an app called Stereo, we'll go live with voicemails and questions every Tuesday. Access the event at ChooseFI.com/live.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Feb 19, 2021
296 | Transition Planning from a Military Career on the Path to FI |Doug Nordman
01:41:41
  • We are circling back to check in with our Households of FI families. First up are Matt and Megan, our international, dual military couple.
  • Having a military pension is like having multiple lottery tickets. You have both healthcare and an inflation-fighting pension, but how many of these lottery tickets do you need to really crush this game?
  • Naval service is Doug Nordman's family business. In addition to his own 20 years of service in the Navy, his wife almost had 20 years of active duty service in the Navy before finishing her career in the Reserves. And then their daughter joined the Navy on an ROTC scholarship and married a Naval Officer.
  • While dual-military couples are a small demographic that hasn't been extensively studied, Doug says even if they earn just one pension, they will likely have more money than they need for the rest of their lives just because of the pension and healthcare.
  • Matt says the US military pension system is much more simple than for the UK's Royal Navy. He and Megan are working toward FI with their investments alone and consider the pensions to be an additional comfort.
  • Matt has served for 11 years so far and the Royal Navy's systems provide a pension based on each year of service. Megan has been in the US Navy for 15 years after doing her first 10 years enlisted. She needs to fulfill 22 years before being eligible for retirement as a Naval Officer.
  • Doug says when you're in the military with the opportunity to earn an active duty or Reserve pension, you have four lottery tickets and you only need to have one of them to pay off because you solve the healthcare problem and have an inflation-fighting life annuity with just one.
  • If serving in the military is still challenging and fulfilling, stay in as long as you want, but when the fun stops, don't be afraid to leave.
  • Don't fall for the military inferiority complex. Coming from the military you already have human capital. Employers can train you on the basic skills for a job, but they can't train a new employee on those soft skills earned in a military career.
  • Co-locating as an international dual military couple has its challenges. Matt may soon be getting a medical discharge from the Royal Navy which will help solve that issue for him and Megan.
  • Matt notes the US military provides spouses with opportunities for increasing human capital, like free courses or paying for college. Doug thinks obtaining certifications and licenses is going the help Matt find a job in the US more than an advanced degree because he's already proven that he can do things.
  • Networking will be key. After having conversations with others about how he can fit in, what he can help them with, and what he knows how to do, he will make a shift to an abundance mindset.
  • Megan notes that Doug lives in a high cost of living area. He says having a high savings rate on the path to FI, as well as frugality are what enables it. In most high cost of living cities, it's housing that is the biggest expense. After you figure that out, everything else falls into place.
  • Doug and his wife bought crappy houses and put sweat equity into them before renting them out. They also eat local, optimize spending, and slow travel. Spending in the areas that provide the most value gives you margin.
  • People who have been in the military have an appreciation for the line between frugality and deprivation. Frugality is optimizing your spending.
  • The transition is scary and stressful, but statistics show that within two years of getting out and starting a civilian career, half of all veterans change jobs. It's not because they can't hack it, it's because they have figured out how to get more money, get a better job, or move to a better location. They've cracked the code in a corporate environment.
  • Megan is torn with her TSP. She doesn't know if she should go traditional or Roth. Doug says that, anecdotally, in the military where a third of your compensation is not taxed, you are probably in the lowest tax bracket of your life so all investments now should probably be Roth TSP or Roth IRA.
  • If doing all Roth contributions doesn't sit well with you, split the difference and do half and half.
  • Roth's weren't available when Doug was active duty and he spent time doing Roth conversions for his and his wife's accounts.
  • In the first full year after retirement, your income probably goes down a little bit and would be a good time to look at converting a little bit and then chipping away at each year.
  • Doug believes the job offers will come following military retirement. He had offers but for him, it was always about the drawbacks to the offer than the good things they offered. If he were looking today, he would look for remote work where he could dictate his schedule to remove all the drawbacks.
  • He advises Matt and Megan to go build their own career, to their own quality of life, and not to feel constrained to themselves into anyone else's idea of how their working years should be.
  • While Doug gutted out his 20 years of service, his wife gave up 20 years' worth of pension for quality of life. Even so, he says he overshot the finish line by about $1 million. If he could buy back eight years of active duty with that extra money, he would.
  • Megan wondered if Tricare covers military retirees who live abroad. Doug confirms that it does, noting that it's called Tricare Overseas on the Tricare website. He and his wife get all of their dental care done when they travel overseas and in Bangkok, they get their routine physicals. He thinks the healthcare advantages are much more valuable than the pension boost from an additional year or two of working.
  • In addition to questions about how to teach kids about financial independence, Doug is often asked about the sustainability of financial independence. After living it for 18 years, he can confirm assure people that the money will last.
  • It's a good idea to stay flexible. Chances are after retirement you won't be doing one thing for the next four or five decades. Instead consider it a series of five to ten, or even three to five-year increments.
  • Having the security of an inflation-adjusted life annuity takes the stress out of economic downturns. Doug and his wife went through the internet recession in 2002, the great recession of 2008, and watched their wealth compound over the last 18 years. During the coronavirus downturn, they made a large donation to the Hawaii foodbank and put money into their granddaughter's 529 account.
  • Megan has heard that a high VA Disability rating can negatively impact the military pension. Doug says to make sure every medical problem is documented in your medical record.
  • Once you leave active duty or reserves, the VA is going to do an assessment of your disability and award compensation. However, the law states that you can't have dual compensation. With a VA rating less than 50%, you give up some pension in exchange for VA disability compensation but the VA compensation is free from income tax.
  • With a VA disability rating of 50% or higher, you are under a system of Concurrent Retirement and Disability Pay (CRDP). With it, you get both the pension and VA disability compensation. With respect to the inflation-adjusted pension, Doug says that in 18 years, and with three years where the inflation rate was 0%, his pension has risen just over 40% while his spending has not gone up 40%.
  • The certificates and licenses Doug talked about being more valuable than a degree are right in line with the Salesforce challenge discussed on Talent Stacker and ChoodeFI.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 

 Feb 15, 2021
295 | Emergency Fund for the Zombie Apocalypse
55:39
  • This Friday's episode continues with the theme of looking back at how our perspective has changed since the show began. What has changed, have we pivoted, and what do we feel more confident about now than we did then?
  • Last Friday Brad shared the saga of trying to find out how much a CT scan was going to cost him. In response to the story, members of the community reached out with their ideas for saving on the cost.
  • One listener shared a link for MDsave.com, a company that contracts with different healthcare providers to provide very specific pricing for a number of healthcare-related services and procedures that you pay in advance for.
  • Using the CPT code for his procedure, Brad discovered there were no providers in his area, but there was a good number in Charlottesville about an hour away. Had he used this website, he could have paid under $300 for his CT scan. Without using it, his insurance company was billed $2,083.
  • For prescription drug needs, there is a similar website called GoodRX.com
  • The healthcare system is broken. Price transparency in healthcare, like both of these websites offer, cuts the middleman out and lowers costs.
  • Jonathan suspects that anytime you are using these apps you are sacrificing some privacy.
  • If you have a high-deductible plan and rarely if ever reach it, you may be better with the discount as you cannot double-dip and need to choose whether you go through the app/discount card or your insurance company. However, prescriptions do qualify as HSA reimbursable expenses.
  • Emergency funds are a part of every financial plan, with most stating a fully funded fund contains three to six months' worth of expenses.
  • ChooseFI has pushed back a little on the standard emergency fund concept, asking if you really need one, what does it need to look like, and what are we protecting ourselves from?
  • Both Brad and Jonathan's perspective on the emergency fund has changed over the years. Most personal finance experts conceptualize it as money sitting around doing nothing waiting for an emergency to occur.
  • The further down the path to FI you travel, the role of the emergency fund begins to change. At what point should you stop allowing your emergency fund to lose value from inflation and invest it instead?
  • When first starting out, a fully-funded emergency benefit provides psychological benefits. But 1o-15 years down the path to FI, there are very few true emergencies. There is an opportunity cost to your money sitting on the sidelines. Could you have that money invested, earning and growing for you?
  • Brad can't think of a scenario where he would need thousands of dollars in cash in a hurry. Even if the unthinkable were to happen, he could pay with a credit card or a check. Worst case scenario is that he would need to access money by selling funds in an investment account and he would have it two to three days later.
  • For individuals just starting out and moving away from living paycheck to paycheck, having $1,000 available in cash as a crisis fund makes a lot of sense.
  • Brad keeps a couple thousand dollars extra in his checking account just so that he never needs to worry. There is an opportunity cost, but he finds it worth the peace of mind.
  • Jonathan tries to keep as little in cash around as possible. He has one or two months' worth of expenses in cash. Because he knows his monthly expenses, when he gets paid, he's able to save first, get it invested, and live off the remainder.
  • Interest rates on bank accounts are so low that there's no incentive to keep it there. Inflation alone erodes the value of money by an average of 3% per year. Is there a way to hedge against inflation while still meeting a need for liquidity?
  • Beginners may need to keep their money sitting in a savings account to feel comfortable. Once you get to the point where you can put money away and realize you aren't going to touch it for 30-50 years no matter how the market fluctuates, start investing.
  • March 2020 was without a doubt, a black swan event. Was an emergency fund a factor for you? Did you think about its value more at that time than previously?
  • Brad certainly felt better knowing he could rely on the cash from his net worth if it was needed.
  • Events of the last year had Jonathan thinking more about his net worth acting as a store of value. In a changing landscape, he wants to use the assets at his disposal to make sure he is more valuable.
  • He doesn't see cash as a great store of value. Due to inflation, cash is depreciating. When it is invested in the market, it produces value and increases with inflation.
  • As a store of value, bonds can provide stability, a regular income, and a negative correlation.
  • Cryptocurrencies, such as Bitcoin, are another store of value, although due to its volatility, it feels very speculative.
  • Precious metals, like gold and silver, are yet another store of value that can be owned physically or as paper assets through ETFs. However, with precious metal ETFs, not all are structured where every share is backed with the precious metal.
  • For Jonathan, the ideal store of value is a conservative emergency fund that beats inflation and if the worst happens, there's an upshot for him where he hasn't lost his store of value, and finally that it has liquidity.
  • A margin loan from M1 Finance gives Jonathan access to a very low-interest loan with stability, liquidity, and plenty of upshot.
  • Brad's ideal store of value is a business that is producing some type of income, like a diversified rental real estate portfolio.
  • For your emergency fund, you want to preserve its value, but its store of value all comes down to what you are comfortable with. It's worth analyzing the role of your emergency fund at its particular point on your path to financial independence.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Feb 12, 2021
294 | From Corporate Muzzle to Invested Development | Amanda Holden The Dumpster Doggy
35:44
  • Amanda Holden's approach to educating others includes laughter and shenanigans to democratize information and get it to stick.
  • Amanda worked in corporate America at an investment management firm, but helping rich men get richer wasn't her calling. She hated the job and decided to establish a set of rules that we allow her to quit in six months and go travel.
  • She chose to supplement her bare-bones spending by living off the excess of others. That including asking for leftover uneaten lunches which earned her the nickname, Dumpster Dog.
  • Pulling burritos out of the trash and drastically cutting her spending worked. Amanda's savings enabled her to leave the job she hated and travel for a year.
  • Dumpster Doggy has now become her identity, showing others how they can make it work even if they don't have a lot.
  • Being privileged enough to live in one of the wealthiest countries in the world also means that we take it for granted and are surrounded by vast amounts of waste. Are we throwing so much away that we are sabotaging our chance to get what we really want?
  • While each day she felt like she was trying just keep putting one foot in front of the other, at the time, she didn't think of it the changes she was making to leave a toxic work environment as a metamorphosis.
  • She hated the job so much that she felt like the only option was to quit and start over from zero. Hating it that much allowed her to take a risk on doing something that aligned better with who she wanted to be and what she wanted to do.
  • Her advice to anyone who doesn't dislike what they are doing quite as much as she did is to start saving and doing what they want to do on the side. Then assess once there is momentum to decide if you want to take it further.
  • Amanda acknowledges that she was privileged with a level of comfort and security when taking her leap as she had a family to fall back on for help if needed.
  • She isn't trying to sell entrepreneurship to everyone. It makes sense for some people but there are aspects of it that she doesn't love. It won't be the right fit for everybody.
  • What worked for Amanda was starting by giving her service away for free and collecting as much feedback as she could. While she has the blog, For her business, she started out cold calling on sororities. She asked to come in to teach them about investing and then collecting their feedback.
  • After building this foundation, she began to explore what the sticking points were for people and how she could begin to charge for her services.
  • Amanda says it's all about connections, so utilize your network to get your information into the hands of whoever can help get you in the door.
  • Amanda wants women to be in the conversation because when they have a seat at the table, they have wealth and the world is a better place.
  • To reach women and make the material accessible, Amanda avoids jargon and uses comedy as an educational tool. For instance, she leads with equating a 401K or a Roth IRA with a Caboodle, which is just a fancy place for you to store your treasures.
  • Amanda also uses a shame-free approach to money. Women are constantly feeling shamed about money, whether it's for making too much or too little, or for how they choose to spend it. She trusts you to be grown up enough to make spending decisions for yourself.
  • Everyone deserves to be able to spend a little bit of money on themselves and have some fun. Living paycheck to paycheck might be a problem of spending too much or it might be not earning enough. Saving and investing can be automated if spending is the problem, while a conversation about earning might be warranted if income is the problem.
  • In addition to removing the shame associated with money, Amanda says you don't have to be perfect. She uses her own mistake stories to help bring people in.
  • While building her business, Amanda worked as a bartender and freelance writer. She still freelances for the regular income but she also puts on personal events that are more fun than the corporate speaking events where she feels muzzled.
  • Amanda was teaching investing courses on Zoom well before Zoom became a thing. She's been able to scale the course by putting it on video.
  • The first thing she tells people is that investing is absolutely in their capacity and that if you take a set it and forget it approach, you'll probably do better than the investing experts.
  • Course information can be found on her Instagram page. If interested in contacting her for a speaking event, reach out to her on Instagram or by email.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Feb 08, 2021
293 | Gamestop Squeezed to the Max | Brian Feroldi
01:06:08
  • Wondering what happened with GameStop and confused about what a short squeeze is? The complexity of this kind of trading is far from the simple strategy of buy and hold investing.
  • Even for those who have no plans to jump on bandwagon, it's good to understand exactly what is going on. We can learn what's happening, how it works, and move intelligently forward.
  • In an effort to understand systems, Brad has been having a maddening healthcare experience. He needs a CT scan but hasn't been able to find out what the base cost will be. The negotiated cost won't be known until after the procedure so Brad won't know how much it will cost him until then.
  • At a macro level, the stock market has had a fairly smooth move up and to the right for the past 10 years or so. For investors, it's been somewhat predictable, at least until this last week when GameStop stock began to skyrocket.
  • There are aspects of the stock market the average investor doesn't see. Hedge funds are participating with huge amounts of money in layers that are essentially hidden to the masses, until it wasn't, and they got caught unaware.
  • Brian Feroldi says the last few weeks have been some of the weirdest in the investing world that he's ever seen. The story has infiltrated mainstream culture and he's been getting questions from all over about what is going on. Even his mom sent a text asking about GameStop.
  • First, GameStop is a physical seller of video games. As video games became popular, GameStop was a great investment, however, once people began downloading video games, its business prospects declined. As a result, GameStop stock prices have also been declining for many years and it is believed they will cease to exist as a business in a couple of years.
  • Investors or many managers can make money when a stock declines in what's called shorting the stock. A short sale stock is the opposite of becoming a buy and hold investor in a stock.
  • A short sale works by going to your broker predicting a stock's decline and state you want to short that stock at a particular price. The broker goes and borrows shares of the stock from another investor for the price you stated and you collect the proceeds from the sale. Your goal is to then buy those shares back at a later date for a lower price and return them to the original investor.
  • The original owner of the stock makes money by receiving a small fee from the person borrowing their stock, almost like being charged an interest rate. The more demand there is to short a stock, the higher the fees.
  • There is no set timeframe when shorting a stock. I can be shorted indefinitely. However, if the owner of the stock wants to sell it, the broker who borrowed the stock would have to go and find another short for you to borrow from. If they cannot find other shares to short, the transaction would need to be undone on the short side at current market rates.
  • Most of us take long positions on stocks, believing the stock is going to increase in value. Allowing someone else to borrow your stock in a short position is another way to make money on owning it.
  • Some brokers like Brian's are interactive and sent him an email asking if he would be interested in allowing his stock to be borrowed or shorted. since he's interested in holding the stocks for a long period of time, he said yes.
  • Shorting a stock does put downward pressure on the share price. Individual investors don't have much influence, but a hedge fund taking a significant position to short a stock can drive prices down.
  • The market price of a stock at any given time is simultaneously the lowest price buyers are willing to pay and the highest price sellers are willing to sell at.
  • Shorts are happening all of the time, so how did GameStop land on the radar of the subreddit group, Wallstreetbets? In the case of GameStop, there were more shares sold short than there were publicly traded, which is something that very rarely happens.
  • Wallstreetbets took the opposite position, stating that GameStop's fundamentals were different from companies like Blockbuster, and its stock price was actually undervalued.
  • An article by Andrew Left from Citron Research predicting GameStop stock going down hard caught the attention of Wallstreetbets. Its members rallied together to buy GameStop stock.
  • It was then that GameStop stock began to rise. Someone with a short position on a stock does not want to see the price rise. Rising GameStop prices kicked off what's called a short squeeze.
  • There's no logical argument for saying that GameStop stock was worth $4 in December and $400 just three weeks later. What shifted was who was controlling the mechanics of the system.
  • The members of Wallstreetbets understood that due to the large number of short positions on GameStop, if enough of them got together to buy it, they could force those in short positions to buy back into it.
  • GameStop was priced for bankruptcy. While there's no limit to how high a stock can go, the lowest it can go is $0. In that case, the short seller earns a 100% return on their money. However, when a stock rises, being short on a stock can cost significantly more than you put into the stock.
  • To get out of a short means you have to buy the stock. The buying demand placed on the stock increases the share price. When all of the short sellers saw GameStop's stock price rise, they had to try and get out by undoing the trade by buying the stock themselves, putting more upward pressure on the stock price and on other short-sellers who wanted to undo the trade. That's why GameStop stock prices rose so dramatically in such a short period of time.
  • Short squeezes are not a new phenomenon. In the past, other heavily shorted companies have come out with good news and saw their stock prices skyrocket. What makes the GameStop situation unique is that it resulted from a coordinated group of buyers banded together to make it happen.
  • In this short squeeze, there was additional controversy surrounding Robinhood, the zero-commission broker. Because Robinhood doesn't make money on trades, they make money by selling your trading information to high-frequency traders who can make money with micro-transactions. It's those traders who are the real customers of Robinhood.
  • When GameStop and other heavily shorted stock prices began to rise, Robinhood's hedge fund customers began to lose a lot of money so Robinhood decided to stop trading with these stocks to give the hedge funds time to undo their trades. Meanwhile, Robinhood's small investors were not allowed to buy and sell.
  • Robinhood aggregates and sells client trade information to the high-frequency traders who can buy the stocks then turn around and sell it to the Robinhood client seconds later for a little extra money.
  • Robinhood's business model probably works out for a buy and hold investor at the micro-level, but the GameStop situation highlights what can go wrong when each other's incentives are not aligned.
  • What this demonstrates is that the game is stacked against an individual investor trying to enter and exit the markets with precision. But for the buy and hold investor, this has been mostly noise.
  • To summarize what happened this week, Brian quoted Morgan Housel who recently tweeted, “The GameStop thing is a reminder that investing is not the study of finance. It's the study of how people behave with money. And sometimes those behaviors are incredible.“
  • Brian says there has been a huge rise in demand for Environmental, Social, and Government (ESG) funds. The exact definition of what ESG investing means varies from person to person so read through the fund to ensure it meets your definition. There are a lot of ESG funds to choose from now and fees have gone down, especially since Vanguard now has an ESG fund.
  • If you listened to Monday's episode on M1 Finance, M1 does not sell mutual funds, they sell ETFs. The ETF version of VTSAX is VTI.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 

 
 
 Feb 05, 2021
292 | The Complexity in Simplicity at M1 | Brian Barnes
01:04:21
  • M1 Finance transformed Jonathan's ideas about how simple complexity could be and has quickly become his favorite investing platform, especially for taxable accounts.
  • Brian Barnes investing story begins at the age of 10 when his parents exposed him to trading stock in a brokerage account with Ameritrade. He was captivated by the notion of investing and the intellectual puzzle of how a company was doing.
  • His parents laid a general foundation of financial independence and security. Once basics were covered, they placed value on putting money someplace where it could accrue value, compound, and become ownership is something valuable.
  • Getting started at the tail end of the Dot Com bust, it was a great time to be buying when prices were low and companies were valued cheaply.
  • Brian says there is a big difference between traders and investors. Traders speculate on price and try to make money on short-term movements. Investors buy ownership in companies, asset classes, or industries to accrue value over long periods of time.
  • When you aren't making frequent investment decisions, it becomes more about viewing your portfolio in totality and making a decision on what to do with the extra money you have leftover from your paycheck.
  • In the trading world, you have to go in and make the same decisions to buy the same securities over and over again, but with M1, you can make the decision once and let the software automate the process.
  • With day trading, you can't just be right once, you need to be right over and over and over again, constantly timing the market perfectly. It's difficult to predict costs even when commissions are free and it's tax-inefficient.
  • With an investing mindset, you want to own over long periods to accrue value and generate cash flows.
  • At the age of 25, Brian realized investing platforms hadn't changed in 15 years. He looked at consumer applications work that sought to make things simpler, more intuitive, and automated wondering why there hadn't been progress in the financial services world.
  • He thought it would be nice if he could tell a software platform the portfolio he wanted to own, and anytime he had money, he could throw it into the platform and it just went to work. He wanted to deploy all of the money by purchasing fractional shares so there wasn't any cash drag. And finally, incredibly low fees with no commissions.
  • As M1 has expanded, it's grown from his “wouldn't it be nice” idea to other areas like borrowing and spending, allowing users to have one financial institution instead of needing to use multiple apps.
  • M1's philosophy is that a great product allows you to do complex things simply. What they allow customers to do is determine what share of their portfolio they want in any given investment and then the software handles the complex and mundane administrative work.
  • It used to be that you had to buy lots of 100 shares. It was a big step forward to be able to purchase odd lots of shares.
  • Being able to purchase fractional shares with M1 is transformational. They do this by purchasing in whole shares and adding the leftover fractions to their own inventory account. It makes it easier for the customer to deploy more money consistently and have a diversified portfolio.
  • M1 is a commission-free platform. Traditional brokerages made 10-35% of their money from commissions. Through technology development, the cost to trade is only an electronic message. Though not free, on a per-transaction basis, it can be no-cost to the user.
  • M1 can make money monetizing the assets held on their platform so by being efficient, they don't need to charge transaction fees, making it a win-win arrangement.
  • M1 is not good for day traders. It's suited for systematic investing in the portfolio of your choosing. Their trade windows occur twice a day and aggregate all orders on behalf of their customers once in the morning and once in the afternoon.
  • While you can invest money every day through M1, a good financial habit to establish is to invest the extra cash you have leftover from your paycheck every two weeks. M1 allows for that to be automated.
  • Portfolio management in M1 orients itself around a pie concept. At the highest level, the pie is 100% of your portfolio. You can then begin to divide up the pie into slices based on what percentage of your portfolio you want in specific investments. The slices can then become their own pies. It allows for a diversified portfolio, controlling risk exposure, without the risk of becoming overconcentrated.
  • In M1 you can rebalance your portfolio in the next trading window with the one-click button although that method is tax-inefficient. Instead, additional contributions will automatically work to rebalance your portfolio with your pies without causing taxable events.
  • With investing, taxes are going to be your biggest fees. Minimizing taxes controls costs and maximizes long-term success. With M1's dynamic rebalancing, it tries to minimize the sale of securities with tax consequences to push taxes out as far as possible and let your money have more time to compound.
  • Brian is a fan of Vanguard and what they have to prioritize the individual investor. The difference between M1 and Vanguard is that you can buy Vanguard ETFs with M1, but Vanguard has a mediocre brokerage to buy other securities.
  • Compared to Vanguard, M1 offers a more robust and comprehensive personal financial platform, such as a line of credit against your securities with rates as low as 2%. M1 also has a high-yield checking account earning 1% plus 1% on debit card purchases. The smart transfer tool allows you to set parameters and have money automatically move in and out of accounts accordingly.
  • M1 wants to be a personal finance platform where you can manage your money holistically.
  • They just launched custodial accounts which are available with the M1 Plus membership for $125 a year which has additional benefits across Invest, Borrow, and Spend. M1 is offering a promotion to get one year of M1 Plus for free.
  • In the last few weeks, ChooseFI CEO Ed has been migrating assets from other platforms to M1. While Brad already has an M1 account, this conversation with Brian has helped him realize what he has been missing out on.
  • Jonathan wanted to note that with the smart transfer rules, the decumulation phase can now be as easy as the accumulation phase.
  • Previously, Jonathan was going to get a HELOC. When he stumbled upon M1 Borrow, he realized that it was a margin loan much in the same way that a HELOC is a loan against your home. Borrow can be a liquidity tool, giving you access to 30% of your investments as an emergency fund. It gives you an incentive to build an emergency fund and keep it invested.
  • Brian says you should be able to have a line of credit against a liquid investment portfolio at really low-interest rates.
  • The goal for M1 Finance as the finance super app is for people to come to M1 to manage their finances, not a component of their money, as well as provide the same level of capability that a high-price team optimizing every aspect of your finances could in a self-serve product.
  • You won't find VTSAX on M1. VTSAX is a mutual fund and M1 does not have mutual funds. What it does have are ETFs which are identical versions of mutual funds. VTI is the ETF version of VTSAX on the M1 platform. M1 also has Paul Merriman pies for anyone interested in his ultimate buy and hold portfolio.
  • For those in the decumulation phase, M1 has IRAs, taxable accounts, and 401Ks that may be rollover into IRAs which can be set up as smart accounts using dynamic rebalancing and withdraw money in the most tax-efficient manner possible.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Feb 01, 2021
291 | If I Could Turn Back Time
59:34
  • After four years of working on the ChooseFI podcast, Brad and Jonathan want to share their lessons learned, the list of things they might do differently, and highlight a few episodes to re-listen to.
  • Brad is back in the studio after missing out on Episode 290 with Paul Merriman. He's doing fine and appreciates everyone's concern.
  • With Paul Merriman's Ultimate Buy and Hold Portfolio strategy, the thesis is that diversity is great, but own equal amounts of all asset classes versus a cap-weighted index fund to capture the growth potential of small companies. Unfortunately, for the last 12 years, the majority of growth has come from large companies.
  • Brad says Paul's book reads like a FI manual with a high-level overview of small steps that could be million-dollar decisions.
  • The decisions are not little. As discussed in Brad's The FI Weekly email this week, the Rule of 72 states how long it will take you money to double at a given rate of return. 72 divided by the rate of return is how many years before the money doubles. For example, 72 divided by 8% equals 9 years to double your money.
  • The impact of that last double can be worth millions, that's why getting started early is critical. If your new and haven't already, today is the day to start.
  • Jonathan agrees Paul's book is a great FI primer and was surprised by how much he enjoyed reading it. He says it would make a great gift.
  • ChooseFI often talks about the aggregation of marginal gains. It can be quantified as each half a percent improvement means we can make an extra million dollars. Come up with 10 and that's an extra $10 million over your investing lifetime. If you can't do all 10, pick three or four and implement early, aggressively, and consistently.
  • If they could turn back time and look at how their own understanding has grown and developed over the last four years, what would the conversation look like from both micro and macro views?
  • Starting with investing, in the beginning, the most powerful concept inspired by JL Collins was to avoid the fees, a sentiment echoed by Paul Merriman as well. Diversity and time in the market are also key.
  • You will lose approximately 40% of your total net worth when invested with a financial advisor at 1% in a mutual fund with a 1% expense ratio. The dramatic loss happens when your gross 8% market return is reduced to just 6% after fees.
  • In Episode 052 with Todd Tresidder, he highlighted that there are three asset classes you could invest in, paper, like the stock market, entrepreneurship, such as starting your own business, or real estate.
  • Inside of paper assets like the stock market, Todd says complexity can be valuable, but others like Big Ern and Rick Ferry say most people will do far betting sticking with something simple they understand.
  • It's important to talk about the things that will increase the likelihood of success then discuss nuance. While Brad craves simplicity, Jonathan enjoys learning more. There's no one right answer, only what works for you.
  • Jonathan always conflated individual stock purchases with day trading, but episodes with Brian Feroldi helped him realize they are not the same.
  • For Brad, individual stocks always seemed like gambling. While he doesn't advocate having a huge percentage of your net worth in individual stocks, it's no longer the 0% he would have advocated for years ago.
  • The software available through M1 Finance allows Jonathan to implement the complexity associated with some of these strategies and maintain them simply.
  • As for investing in entrepreneurship, it has become something Jonathan loves doing. It's an investment he has total control over, as discussed in episodes with Alan Donegan after he pointed out entrepreneurship was left off the Pillars of FI list.
  • After a disastrous real estate failure in his 20s, Brad learned real estate investing can be a significant part of his portfolio if you are investing and not merely speculating. He now owns two single-family rental properties which have been successful so far.
  • When you decide to start adding complexity, the price that's paid is usually time.
  • Jonathan believes we are all stuck in a system, but the FI community is working to break out of the system in the best possible way to bring control back over their lives.
  • Following the path to FI by saving money gives you options, power, and agency.
  • In every aspect of life, look at the rules of the game, survey the field, and make the best decision that's going to work for you.
  • Skills are more valuable than degrees. Upcoming in a future episode is Anita, who recently graduated from the Talent Stacker program. Coming from the hospitality industry, she had a four-year degree that left her with massive debt. After two to three months of training in a new industry for just a couple thousand dollars, she's now making multiples of what she was before.
  • The best way to learn something is to do it. If we can build a system around that, we can eliminate the need to wait four to eight years and go into debt. That's what Jonathan and Bradley Rice did with their course.
  • An 18-year-old who skips college, takes the course, and comes out making 60-80 thousand dollars a year can be Coast FI at age 25. with Coast FI where you have enough saved and invested and will never need to save another dollar again and have a net worth more than other at traditional retirement age.
  • M1 Finance's Plus feature normally costs $125/year, but right now you can get the first year for free. With M1 Plus you get a 1% yield on online checking and they will reduce your M1 borrow rate. Jonathan doesn't have a HELOC because a margin loan from his M1 investments is so powerful.
  • M1 introduced a new feature called a smart transfer. ChooseFI's CEO, Ed, has been testing it out. The current borrowing rate is 1.5% less for someone with M1 Plus.
  • Because Ed is retired, he hasn't been able to refinance his home at the historic low rates. Instead, he did hi sown refi with M1 Borrow.
  • Although Ed came to M1 to hack his mortgage, he decided to stay for the checking yield. Then he found the smart transfer tool.
  • Similar to Zapier, smart transfer allows you to create rules to manage your finances. With simple rules-based drag and drop programming, you can always have enough in your M1 Spend account to earn the most yield, pay all your bills, and be optimally invested in the market.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 

 
 
 Jan 29, 2021
290 | We're Talking Millions | Paul Merriman
01:02:16
  • Does your portfolio own enough of the companies that carry a lot of the growth over extended periods of time? When you buy index funds, you aren't as diversified as you think you are.
  • Cap weighted index funds mean you are buying a lot of the companies that are doing really well. But there are two asset classes Paul Merriman is a fan of that he thinks don't get enough attention, small cap and value.
  • Although many people claim to believe in a buy and hold strategy with investing, their behavior says otherwise. They like to buy when things are hot because they believe it's going to keep going up.
  • If you look back as far as 1928, a lot of the time the S&P 500 is walloping small cap value returns, yet at the end of this 92 year period, small cap value made 24 times the amount of money the S&P 500 did.
  • Even though there are long periods of underperformance, when small cap value does take off, there is outstanding performance. Then when it reverts back to the mean, there is a higher compound rate of return.
  • Owning a large cap fund means each holding in that portfolio, and how much of the portfolio it represents is based on how large that company is. The big companies represent 80-85% of the corporate public value in our economy.
  • However, history shows that the smaller companies and the value companies produce a better rate of return because they are more risky.
  • It doesn't have to be a lot to make a big difference. If you were put 10% in a small cap value fund, it would give you a legitimate shot at having 20-30% more money when you retire.
  • The top 20 companies probably make up 20-30% of the money you have invested. Investing in an S&P 500 or total stock market fund provides an illusion of diversity. As companies get to be bigger in size, it becomes increasingly more difficult to double or triple in size.
  • Companies are valued by the number of shares times the price in the market.
  • Large cap index fund companies average a market capitalization value from $50 billion to $150 billion.
  • Small cap companies are roughly 1/50th the size of the big companies with values averaging $2 billion. They are legitimate companies, but many of them will fail.
  • Since 1928, the S&P 500 or total stock market compound rate of return has averaged 10%. However, research has shown that only 4% of those public companies made virtually all of that 10%, while 96% of companies averaged just 3%.
  • As an aggregate, small companies are much more likely to double or triple in size.
  • Value companies can be seen as companies that are out of favor and years later, they may still be out of favor. Academics don't advise buying value companies one at a time.
  • People come into value companies to make them more meaningful, profitable, and efficient turning those companies around.
  • The problem with great companies with a great future is that when something happens to pop the ballon, those companies can fall 25% in a day, similar to what happened with the Dot-com bubble in 2000.
  • Telsa, for instance, is a car company on the verge of bankruptcy several years ago and now it's up 400% even though it is barely turning a profit. With a current share price of $800, it's going to take a lot to double your money, yet people still believe in Tesla.
  • Paul wants to help people figure out how to invest in an unemotional way and don't get caught up believing in something that isn't likely to happen.
  • Last year, growth companies were up 35-40%, however, looking back at 90 years of evidence, growth produced a lower rate of return than value by 2% a year.
  • Paul's latest book, We're Talking Millions!, is all about the extra half of 1%. For every half of 1% you can make on your portfolio over a lifetime, you add a million dollars. Finding more of those half of 1% and adding them up is a lot sexier than finding the hottest thing in the market.
  • In his book, Paul lays out 12 simple ways to capture those half 1% that the market is ignoring.
  • Paul's been hearing complaints for years that his work has been too complex. It's was something his firm did for his clients, but most individuals do not want to make it that complex.
  • Someone in their twenties, investing just $5,000 a year for 40 years, can use these strategies to make millions over an investing lifetime.
  • It's not all because you took more risk, it's also how you protect your money from others getting their hands on it, like money managers.
  • Choosing to save can be a million decision, and choosing to save early can be another million.
  • In one mind-blowing statistic, Paul says 25% of millennials will not put money in the stock market.
  • The ultimate buy and hold portfolio might be difficult to replicate inside a 401K. To make things more simplified, Chris Pedersen developed a system to implement the philosophy with roughly 98% of the benefits.
  • The goal is to keep it as simple as possible so that anyone can do it and won't need to manage it other than for a few minutes a year.
  • One way to buy a target date fund. But because they don't have enough value or small cap companies represented, have 90% of contributions go to the target date fund and 10% to a small cap value fund. The target date fund is broadly diversified and automatically adjusts to become more conservative as you age.
  • Chris said the problem is young people should have more invested in small cap value and came up with a formula for calculating just how much, which is 1.5 times your age into a target fund and the remainder in small cap value.
  • For example, a 30-year-old should multiply 30 years x 1.5 to get 45% in a target date fund and 55% in small cap value.
  • Paul and Chris encourage continuing to hold 10% in small cap value at the age of 60 and beyond which is good during the 30 or more years in retirement.
  • Not all target date funds are created equal. Look for one that is low cost and contains total stock market funds.
  • Jonathan doesn't like having bonds in his portfolio and notes that target date funds have bonds in them. Paul agrees and said he spoke with John Bogle about it once. He was told that bonds are defensive and do good when the rest of the portfolio is down 50%.
  • You can reduce your exposure to bonds in target date funds by adding equities to your portfolio.
  • With target date funds, the year indicates how aggressive it is.
  • As with a traditional portfolio, rebalancing your portfolio is a part of the small cap value strategy. If you want to be true to your strategy, you need to sell some winners and buy some of the losers.
  • Jonathan has modeled one of the Ultimate Buy and Hold Portfolio pies Paul has on his website in his taxable brokerage account with M1.
  • Paul says it's never been easier or efficient to invest. Even if the market does return as much as in the past, you can probably make the same return because it used to cost so much to do before.
  • They are coming out with all new recommendations for best-in-class ETFs. Paul has all his buy and hold funds in DFA dimensional funds and now anyone will be able to buy DFA funds through DFA or Avantis without paying a commission. Since it's an ETF, you can buy commission-free with M1.
  • Pauls' book is free for teachers and students, just email Paul at Paul@paulmerriman.com to get the PDF by email. The book is also available on Amazon. If you can't afford the $14.95 price tag, email Paul for the PDF.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Jan 25, 2021
289 | The Roth 401K and Meal Planning Made Easy
58:43
  • For almost 12 months, we've all been trying to do the best that we can. As frequently discussed on the show, we try to do things slightly different, optimize in the ways that we can, and make the best of the situation.
  • Jonathan's wife Dani has been coming up with all kinds of creative little activities for the kids. Even Jonathan was recruited for a rock painting project.
  • Brad has been listening to a new podcast, Ordinary Sherpa, created by Heidi, a member of Jonathan's Talent Stacker podcast. The podcast is about creating little adventures in life with your family.
  • At the same time, in the mastermind group Brad takes part in, he was inspired by a discussion related to dads really showing up to be a part of their kids' lives.
  • The podcast theme and mastermind group discussion converged for Brad when his daughter, Molly, asked him to go explore the creek with her. Rather than playing along for a minimally acceptable amount of time, Brad showed up like he really wanted to be there and they had hours of fun exploring together.
  • What if you started to show up for everything in your life with the attitude that you really wanted to be there?
  • It's difficult to be focused on growth in all areas of your life at the same time. There are different seasons when you will be able to lean into one over another but it's good to figure out a baseline you're comfortable with and recognize when it's time to rebalance.
  • Since Brad's financial life is on autopilot, it's not something he spends much time focusing on. However, sometimes things do backslide and he needs to return a little focus to it. Such as, he recently canceled two recurring charges for streaming services, not because their costs were going to have a significant impact, but because he was no longer getting value from them.
  • Relationships is an area Brad believes he could spend more time focusing on. If he were to ask himself, “Am I showing up as the best version of myself for my wife and kids every day?” his answer would be “no”.
  • Who should be leaning into and leveraging their Roth 401K? Sean Mullaney, The FI Tax Guy, says the Roth 401K works similar to a 401K except the funds going in are taxable today and come out later tax and penalty-free.
  • Those currently in a high tax bracket looking to retire early are probably better off contributing to a traditional 401K. But someone just out of college in a 10% federal tax bracket may benefit from paying 10% in taxes today rather than 20-30% later on. Even someone who may have substantial taxable income in retirement may benefit from a Roth 401K.
  • A Roth 401K can also be a hedge against future tax rates for anyone who prefers to lock in their tax rate today.
  • If your 401K plan offers it, you don't have to do all Roth 401K or traditional 401K. You can split the difference.
  • For example, a 60-year-old new retiree with a large 401K will be taxed on every dollar withdrawn. We don't know what future tax rates will be.
  • Roth 401K withdrawals don't work the same way as traditional 401K withdrawals. You can structure it in a way that you can recover tax-free contributions, From a Roth 401K, you may need to rollover into a Roth IRA.
  • For the early retirees who don't plan to retire at a super early age or anyone with artificially low income for a few years, the Roth 401K is a strategy to consider.
  • If you aren't 59 1/2 yet, Roth 401K withdrawals are subject to the cream in the coffee rule where 2/3 of the withdrawal is tax and penalty-free but 1/3 is subject to ordinary income tax and a penalty. This is different than a Roth IRA where contributions may be withdrawn at any age tax and penalty-free.
  • When you roll over a Roth 401K to a Roth IRA, the Roth 401K contributions go in as Roth IRA contributions, and earnings become Roth IRA earnings. You could then take out the full amount of contributions tax and penalty-free before touching the earnings.
  • If you aren't 59 1/2 and need to access your Roth 401 contributions, it makes sense to roll them over to a Roth IRA first.
  • If you have employer stock in your 401K, there may be net unrealized appreciation. You do not want to roll it over from a traditional 401K to a traditional IRA without considering a tax planning strategy. This requires assistance from a tax professional.
  • If you want to do a backdoor Roth IRA, rolling over 401K to a traditional IRA isn't a good idea.
  • The fees associated with 401K plans have gotten better over the last 10-15 years. The investment choices are better with lower fees. It may not make sense to do a rollover.
  • As a general rule, retirement accounts have required minimum distributions (RMDs) once you turn age 72. The exception is the Roth IRA. While RMDs from a Roth 401K are not taxable, you want to keep that money growing tax-free as long as possible for you and your heirs. If you're 72, Sean would recommend you roll your Roth 401K to a Roth IRA for that reason.
  • Generally, you need a separation of service to do rollovers from a Roth 401K to a Roth IRA. Look for your plan's Summary Plan Description (SPD) which details withdrawals.
  • 401K plans are subject to the ERISA law, where creditors cannot access the funds, except for ex-spouses and the IRS. IRA creditor protection varies from state to state. Something to consider before a rollover.
  • Dani and the ChooseFI Foundation are using meal planning as a financial literacy tool. Always looking for ways to get children interested and thinking bout decision-making and personal finance, they have put together Meal Planning Made Easy.
  • The meal planning project helps kids put financial literacy concepts into a real-world contest. The goal is to make financial literacy concepts more than just habits but to have kids take ownership and have fun doing it.
  • In the 3rd through 5th-grade video series, Dani talks them through meal planning. They are tasked with going into a grocery store, either in-person or virtually, and planning all three meals for one day.
  • The meal planning project is adaptable to fit every socioeconomic setting.
  • The tasks grow as children develop. High school students may plan meals for an entire week, searching the pantry first, and finding recipes to help on the budgeting side of things, just like parents have to do.
  • Sign up for Meal Planning Made Easy at Choosefi.com/mealplan.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Jan 22, 2021
288 | Mad Fientist
01:07:14
  • Should you rush to reach FI? Or use it as a map in a lifelong pursuit to master your relationship with time, money, and happiness? Brandon, from the Mad Fientist, wishes he would have found more free time to work on other goals while on his journey to FI.
  • When Brandon was first on the show four years ago, he had just reached FI and discussed the psychological hurdles he had to overcome. What's changed for him since then, and with the benefit of hindsight, what would he do differently?
  • Brandon's dream as a child was to write music and put it out in the world. However, his musical tastes are not mainstream, so becoming a pop star was never one of his ambitions.
  • He did not want to just be a consumer, he wanted to be a creator and always felt that it was his job that was holding him back.
  • It wasn't until after reaching FI that he realized it wasn't was what holding him back at all. He had been spending his free time on things like television on travel instead of his music project.
  • His problem was psychological. As a math and science guy, he didn't believe he could do it. Trying meant the risk of failure, and if he failed, the dream would be gone. It took Brandon two years to come to grips with and get over that hurdle.
  • During his pursuit of financial independence, Brandon has tunnel vision, with all his time and effort devoted to making and saving more so that he could reach FI more quickly. The result was a decrease in his overall happiness.
  • He admits that he did it wrong. The whole point is to master the relationship between money, time, and happiness. Mastery is probably better to focus on over goals.
  • Goals delay your happiness because you are always looking to the future instead of enjoying the present or the journey.
  • Reaching FI for Brandon didn't have an impact on his life other than making him more confident that he could step away from his job.
  • Motivating yourself to do something is hard when you don't have any sort of external motivation to do it.
  • In 2017, Brandon wanted to do two things: get better at songwriting and get fit.
  • The personal trainer he was working with asked him how much he wanted to bench press or how much muscle mass he wanted to put on. Those were goals Brandon didn't care about. With his mastery mindset, he only wanted to get healthy and stay healthy.
  • In contrast to getting fit, his specific goal for songwriting was to write a song and share it with his brother. When he finished it, not only was it awful, but the whole process was awful and it caused him to quit pursuing any additional songwriting until he summoned up the courage again in 2019.
  • Pursuing mastery may be summed up by asking, “Am I better today than I was yesterday?” Continuing to answer yes is pursuing mastery.
  • Brandon found it to be true that doing something consistently changes who you are. He never felt like a musician until he was doing it for 25 hours a week.
  • He still feels like his triangle is skewed toward money at the expense of time and happiness so he has been trying to figure out how to use money to get more time or increase happiness.
  • For example, he wrote eight songs and wanted to get them to sound as great as possible, so he hired a Grammy award-winning sound mixing engineer to help mix his album. He was able to both learn and make a better final product.
  • He doesn't want to waste money but does want to figure out how to use it efficiently and maximize the triangle of money, time, and happiness.
  • There's a lot of unconscious spending in society that doesn't really bring happiness either. Getting on the path to FI helps you sort out the equation a bit more.
  • We're terrible at knowing what will make us happy. That's where experimenting comes in. Experiment with your spending and your activities. What still feels good a week later versus ended up being meaningless.
  • It's okay to spend money sometimes as long as you do it from a place of value. If you are in a deprivation zone, one thing that helped Brandon was to relax for two years with respect to his spending. If it was something he and his wife wanted to do, they did it. At the end of the year, although it felt like they had lived an extravagant life, they spend just $3,000 more than normal.
  • In the deprivation zone, you are testing the lower limits. You can test the upper limits and then hopefully find the sweet spot. It's difficult to find where the sweet spot is for you without testing the limits.
  • Once you have the bigs things taken care of, the little ones don't seem to matter. Brandon had already limited his large structural recurring expenses. What he had given himself latitude with were the everyday one-off decisions that in aggregate, turn out to barely move the needle of his finances.
  • Brad and his family have anchored themselves to a $2 per person per meal per day rule. It helps them to apply intentionality to their meal planning. He thinks it's better to try and optimize and then dial it back if gets to be a little too much than continue to go through life being unaware.
  • Brandon is an introvert, so announcing publicly that he is releasing his first album is a big deal.
  • Back when he wasn't making progress because he wasn't putting the time in, he talked his brother into going to a park and playing a show. The thought of doing it was scary, but he already knew what it was like not to it. He wanted to know what the world would be like if he did do it.
  • While playing in the park, a man slipped Brandon his email address. It turned out he source talent for a music festival in Scotland and asked if they wanted to play at it.
  • Brandon taking that chance in the park reminded Brad of a quote by Scott Young, “Your deepest moments of happiness don't come from doing easy things. They come from realizing your potential and overcoming your limiting beliefs about yourself”.
  • Both financial independence and the pursuit of financial independence allow you to begin building armor. Failure is good. You have to be bad at something before you are good at it.
  • FI definitely helped Brandon build his armor. He didn't have anyone to answer to or worry about stumbling across what he was doing.
  • He also uses an alter ego for his work in the financial space, as well as another for his music.
  • Something that Brand did to progress with his music was conduct an ultralearning experiment. He took three months where he blocked out all other activities competing for this attention to do the thing that he wanted to do, which was write songs.
  • He committed to devoting 25 hours a week and built spreadsheets of prioritized tasks. He says it is the only reason he succeeded. He focused on the hours and the effort and then by-product comes out of it.
  • For others just trying to get started learning, Brandon thinks copying what you love is a great place to start. Your unique set of influences is enough to make what you do unique.
  • The unique skills each of them possess is what lead to this very podcast. Brad being a CPA with a travel rewards website is what got him a guest spot on Brandon's podcast. Then Jonathan heard the podcast and discovered both Brad and he lived in Richmond, which lead him to first contact Brad.
  • Every good idea comes out of a bad idea, or an okay idea, or even a mediocre idea. You do not need to get it right the first time. The fact that you are willing to try gives you the opportunity to get feedback and iterate into something amazing.
  • Brandon's album is available for just $5! You can pre-order your copy at ChooseFI.com/album.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Jan 18, 2021
287 | The Examined Life
50:47
  • Are you the kind of person who sets New Year's resolutions? Like many Americans, Jonathan used to set weight loss goals for the new year, but not this year. Instead, he and his accountability partner, JD Roth, spent the previous nine months working on it and began the year, at or very close to their goal weight.
  • Not having to work on big weight loss goals is allowing Jonathan to be aware and focus on testing smaller adjustments that will make him feel better and have more energy.
  • Brad once had an experience while on vacation that made him realize how his normal diet was causing him joint pain. He wasn't even aware he had joint pain until one day it was gone. It was only then that he understood he had a problem that needed to be worked on.
  • When you live an examined life, you don't have to accept the things that are reducing your capacity to function as normal.
  • Brad thought his morning smoothies were a healthy choice, but it turns out the negative impact was a sugar crash necessitating an afternoon nap. It wasn't something he noticed until he stopped the daily smoothie routine.
  • The examined life concept can be applied to your personal finance life as well. It's not as much a goal as it is a mastery of process.
  • Brad embraces James Clear's concept of setting up systems that work in his life versus setting goals. He has set up eight different things he wants to accomplish as a part of a system with checkpoints along the way.
  • In an attempt to develop two new habits, Brad is habit stacking. With habit stacking, you take one habit you have and combine it with another you want to create. Brad has combined his desire to become more fluent in Japanese with moving more during the day by taking walks around the neighborhood while listening to the Pimsleur language learning app. It's not perfect, but it's a system that is working for him.
  • Brad is also following the advice of Chris Guillebeau and conducting his own annual review. This annual review sets the big picture, the intentions, the purpose, and outcomes. It then breaks life down into different areas where concrete goals may be set, such as self, health, family, community, travel, and others.
  • While neither has large plots of land in suburban Richmond, VA, Jonathan and Brad have both contemplated starting some sort of micro garden.
  • Listener James wrote in to say that he's been able to cut down on his grocery bill by going a whole year eating only vegetables he's grown himself.
  • James says knowledge isn't needed. Just try growing things. You'll learn as you go. Also, grow what you are actually going to eat. Kale is great, but not if you won't eat it. And finally, squash is king as it produces pounds and pounds of food.
  • Start with a 4'x4′ or 6'x6′ plot of land and plant 2 summer squashes and 2 winter squashes two feet apart. Water the roots, not the leaves.
  • If you don't have a yard, get creative like a friend with a yard, a community garden, or a local farm.
  • In your own garden, build up your soil health with compost.
  • When you are genuinely interested in learning, finding mentors willing to help can be easy. Jonathan's brother, Andrew who edits the podcast, has been interested in sustainable homesteading. Through the ChooseFI Facebook groups, he has found a community to learn from and is getting free room and board in exchange for work.
  • You get so much power and understanding in your own life just by understanding the concepts of FI. You don't need to be at your FI number to achieve power and autonomy in your life. It starts the moment you decide to make small changes to make your life better.
  • Neither Jonathan nor Andrew have reached FI, yet for all intents and purposes, they are living a financially independent lifestyle.
  • The goal isn't to have the most money, it's to be post-money, which is beyond the point where money matters. What do you want your life to look like, and what do you need to pull that off?
  • Suzanne sent in a question about expense ratios. She didn't know where to look to find out how much she is paying across their various investments.
  • First, there may be a fee attached to the fund for it being executed the way it is, known as the expense ratio. Second, if access to the fund is through a financial manager, there could be an assets under management fee.
  • The impact these fees can have on your investments is enormous. They can cost an investor millions of dollars over a 40-year time frame.
  • Brad suggested Suzanne google the funds' names or ticker symbol and expense ratio, such as “VTSAX expense ratio”. The result should be just one or two clicks away.
  • To reduce costs, long-term investors should use a commission fee platform to purchase funds, such as M1 Finance when investing outside of your employer.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Jan 15, 2021
286 | I Like to Dabble
39:05
  • Many industries we once believed were recession-proof have proven otherwise. What can we do to build multiple streams of income and the resilience needed so that we're not reliant on anyone else for financial security? Side hustles and passive income are key strategies.
  • Daniella worked for an IT company for four years when they laid her the weekend before her wedding. Luckily, she quickly found a remote job working as a contractor but was laid off from it as well.
  • The layoffs ruined Daniella's confidence and self-esteem. Before the first layoff, she was living paycheck to paycheck and carrying debt. Occasionally, she needed to sell things for gas money until the next paycheck arrived. It was a financial low.
  • Daniella still had the severance from her first job in an emergency fund and was encouraged to freelance to keep stable while looking for a new job.
  • Freelancing was something Daniella had some experience with and reached out to an old client.
  • The talent stack Daniella developed was not simply technical. She had a strong artistic and design background which was mostly self-taught.
  • She says when going for a job interview, be upfront about all of the experience you have. Think about it and write it all down so you don't leave anything out.
  • Not all jobs require the employee to be a world-class expert. Sometimes having a wide variety of experience and being able to synthesize different pieces of information is what employers need.
  • The freelancing came out of panic. In addition to the debt, she had not been aggressively investing for retirement and believed the only way to go forward was a job.
  • After finally landing a new job with a FinTech company, Daniella began reading about personal finance for her blog about the journey she and her wife were on to get their finances together.
  • Dabbling is something Daniella has done since high school but it was never something she believed could be used to build wealth. Reading the stories of others changed her mind. The future became clear on what they had to do versus what they wanted to do.
  • While her original side hustles only fueled her spending behaviors, they eventually morphed into doing fun things. Her wife is an expert in reselling guitars, and in addition to freelancing, Daniella also did thrift store flips, repaired items for resale, and sold her own paintings of live concert events.
  • Daniella is in a much different financial position now. They have one year's worth of an emergency fund saved up, and all of their debt is paid off. They still have their side hustles, and her blog makes a third of what she makes in her full-time job.
  • If she were to lose her job again, she would be able to reach out to the huge online network she's built over the last three and a half years.
  • Facebook, Instagram, Reddit, and Twitter and great for networking. Daniella started by searching for different hashtags on Twitter.
  • Jonathan loves Facebook groups. When there is something he wants to learn, he leans into Facebook groups to benefit his talent stack.
  • Daniella believes Twitter is especially good for freelance gigs, while Instagram is good for anything since people expect others to slide into their DMs and comments on that platform.
  • Since she can work remotely from anywhere and they have multiple side hustles, Daniella and her wife are working on a move from Missouri to Washington State.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Jan 11, 2021
285 | Beginning of a New Era
50:54

What You'll Get Out Of Today's Show

  • 2021 kicks off the fifth year of the ChooseFI podcast. Despite being at different points in their own financial journeys, Brad and Jonathan have experienced the benefit of incremental growth with both their finances and self-improvement. While it may seem simple and even mediocre, they are living amazing lives.
  • You need to control what you can control, starting from wherever you are. If you can optimize at the margins, you can reclaim decades of your life.
  • It's not just the ChooseFI podcast trying to share this message and concepts. The entire community is working to share this message.
  • In a Facebook post from Jessica, she shares that her goal at the age of 19 was to save $5,000 so that she could feel stable. She began finally saving at the age of 26. By spending less and earning more, five years later, she hit the net worth milestone of $100,000.
  • The concepts ChooseFI presents are not new. The show brings information together to tell a story to motivate and encourage people to take action with it.
  • Don't just do what people tell you to do. Look at what they are doing. JL Collins' blog series, The Stock Series, started out as a way to document what he wanted to teach his daughter about investing. Warren Buffett plans ate leave 90% of his investments in a low-cost index fund.
  • What is impressive about index fund investing is that there is ample evidence that over the long-term, this simple plan outperforms other strategies.
  • Index funds, like total stock market index funds, are self-cleansing. Rather than trying to pick the winners or attempting to build your own index where you need to stay abreast of what's happening in the market, your ownership in companies performing poorly automatically decreases as a percentage with an index fund.
  • To illustrate this point, of the original companies making up the DOW in the early 1900s, none of them remain within it today. With an index fund, you end up buying the up and coming companies that are replacing those losing value without having to do any research.
  • It's an odd phenomenon that people do not like to buy stock when the market is down. There are drops of 10% just about every year, 30% every few years, and black swan events like 2020 are more common than we like to believe. Despite of the ups and downs, stay the course and keep investing.
  • US currency is backed by the confidence of the federal government. As much as a large percentage of the world also has confidence in our government, $100 today is not worth the same as it was a hundred years ago.
  • Not only has inflation eroded the value, but more money has been printed than 100 years ago. Whenever the government prints more money or injects a stimulus, our money is worth a little bit less.
  • What is the value of cryptocurrencies, like Bitcoin? They are speculative. You buy now and hope later someone else will pay more for it. Brad has sworn off speculative purchases after a horrible real estate investment years ago, but as a life-long learner, he has a remote interest in it.
  • Warren Buffett has described Bitcoin as “rat poison squared” because, like gold, it doesn't produce anything. Investing in it is speculative.
  • Moving money back and forth for 5 billion people in the world is both difficult and expensive. People without real access to the world economy can use Bitcoin to meet their needs.
  • There are thousands of different cryptocurrencies available and most of them may disappear at some point. Their value is volatile and utility limited. It's also subject to manipulation and is currently unregulated, but we'll keep hearing more about digital currencies.
  • The future is going to change, so Brad is always willing to learn.
  • Since it's the first episode of the new year, what can you do to make your life just a little bit better? Increase your contributions to your 401K by 1%. Look for investment options with the lowest fees and think about moving them over. Cut an expense you aren't getting value from. Max out your HSA account. Contribute to your 2021 IRAs and other retirement investment accounts. Use Trim to help you lower your recurring bills.
  • If you are looking for a new career, train for a new SalesForce position earning $65-80,000 a year with the course Jonathan and Bradley Rice created. The five-day SalesForce Challenge with Talent Stacker is free.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Jan 08, 2021
284 | JL Collins Returns
01:11:46
  • When it comes to investing strategies, one of the most influential books available claims that if you keep it simple, you'll actually do better.
  • Here to talk about the philosophy behind his investment strategy is one ofChooseFI's most requested guests, JL Collins, author of The Simple Path to Wealth, and popular blog series, The Stock Series.
  • The influence of JL Collins cannot be overstated. The content he produced changed the trajectory of Brad's life and made him feel comfortable investing.
  • In 2011, JL's daughter was in college but was turned off of all things financial after he pushed too hard. Because he wanted her to know how to invest and handle money, he decided that he needed to write it down for when she was ready.
  • It was suggested that he archive the advice in a blog and share with friends and family. Much to his surprise, strangers began to find it and he quickly had an international audience.
  • The book came out of the growth of his blog. Always having the ambition to write a book, The Simple Path to Wealth became a more organized and concise compilation of his blog articles. Four years later, 2020 has been its best selling year and the success has greatly exceeded expectations.
  • Readers have responded positively to the authenticity of his writing, which he believes is because he was writing for his daughter. Now that she is a young adult, she's been receptive to the information and is now on board with the strategy presented.
  • For Brad, investing always seemed like something that required thousands of hours of understanding and special insight until he began reading The Stock Series on JL's website. It gave him hope that he had a chance at long-term success for wealth that would last for many decades.
  • JL acknowledges the method in the book is the last and best method he came to after going through other iterations involving picking stocks and actively managed funds. The other methods work, but they are harder and a lot less powerful than a low-cost index fund.
  • JL says this method isn't just for beginners, it's the best way to invest for everybody. The most powerful way to invest is the simplest and the easiest.
  • He realized that not everyone wants to think about investing the way he like thinking about it. Most people know it's important, but have more important things they want to do with their lives. His approach allows them to set it and forget it.
  • The investing world is complex by design because the more difficult it is to understand, the more Wall Street can charge in fees.
  • Jack Bogle, the founder of Vanguard, was the first one to invent index funds and talk about index fund investing. Because outperforming the market as a whole is extraordinarily difficult, only 20% of fund managers in any one year can do it. After 30 years, the percentage of fund managers that can do it is less than 1%.
  • Even Warren Buffet wrote in his 2013 Berkshire Hathaway shareholder letter that he would advise the trustee of his estate to invest 10% in government bonds and 90% in a very low-cost S&P 500 index fund.
  • A mutual fund, or similarly, an Exchange Traded Fund (ETF), takes money from a lot of investors and lumps it together to invest it in something.
  • The S&P 500 index invests in the 500 largest US companies that make up the S&P index, while an actively managed mutual fund may focus on a different parameter, such as energy or technology.
  • An actively managed fund attempts to pick stocks that over time will outperform the index which is an expensive route and reflected in what the investor pays for the fund, called the expense ratio.
  • Every fund has an expense ratio, but what matters is how high it is. Because index funds don't have those expensive fund managers, the fees are very low. JL's most recommended Vanguard fund, VTSAX, has a 0.04% expense ratio. Actively managed funds average 1%.
  • The impact 1% has compounded over time is dramatic. On a $1M portfolio, you may be withdrawing 4%, or $40,000, each year, while 1%, or $10,000, goes into the pockets of those managing your portfolio. That's money not going to you or working for you by growing over time.
  • In an article Brad wrote several years ago, he looked at the impact fees had on an investment portfolio. With a 1% expense ratio and/or a 1% fee for assets under management, the fees over a 40-year period cost millions of dollars.
  • Owning index funds means you own all of the companies within that index, both the winners and the losers. VTSAX is Vanguard's total stock market index fund which invests in virtually every publicly-traded US company.
  • There is very little difference between VTSAX and the S&P 500 index fund since VTSAX is capweighted, meaning it owns more of the largest companies. Only 15-20% are small or mid-cap companies.
  • JL loves index funds because they are self-cleansing, meaning that you benefit from the winners while the losers drift away. The worst you can lose is 100% on a company, but you can gain 200% or even 1000% with the winners. Tesla is a great example of the upside.
  • An S&P 500 index or total stock market index fund is essentially the same regardless of which brokerage firm it is purchased from. JL prefers Vanguard because it is structured where its interests are identical with the investors. The investors own the Vanguard funds which helps to continually drive down costs.
  • The impact of changing from a fund with a 0.04% fee to 0.02% or even 0% isn't tremendous. JL prefers to stick with a company like Vanguard that favors the investor over the owner.
  • Another thing Vanguard is trying to do is make investing more accessible. They have lowered the minimum investment for VTSAX from $10,000 to $3,000. Those without an initial $3,000 to invest can opt for VTI, the Exchange Traded Fund version of VTSAX.
  • VTI is primarily a trading vehicle that any amount of money may be invested in. Like a stock, buy and sell orders are executed immediately, while index funds prices are set at the close of the business day.
  • Traditionally, investors have needed to purchase whole shares of ETFs. Companies like M1 Finance have made it possible to buy fractional shares.
  • It would be wonderful if we could time the market, but it's more important to have time in the market. The best way to lose money is to try and dance in and out of the market. Trying to time the market does not work.
  • When the market began to drop during the beginning of the COVID pandemic, JL held strong in his conviction that no one knew what the market was going to do. The important thing to do is to stay the course.
  • You have to expect market drops during your investing lifetime. JL says no one should follow his advice unless they are absolutely clear that they will not sell when the market drops. Selling is not an option. Market drops are temporary.
  • After Black Monday in October 1987, JL, despite knowing better, lost his resolve and sold near the very bottom of the market. He didn't buy back in until the market had completely recovered. Now, market fluctuations don't bother him.
  • Roughly 20 companies make up 30% of your holdings in an S&P 500 index fund. Any company or sector that rises to the top means you'll own more of it. When those companies fade away, the individual who owned them in an index fund will fare better than an investor who owned them as a single stock.
  • The most powerful companies today will not be the most powerful companies decades from now. Of the original companies making up the DOW, not a single one remains in the DOW. With an index fund, you never have to worry about what's fading out or what's rising. You will always be there.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 

 Jan 04, 2021
283 | End of Year Wins | Part 3
01:02:50
  • It's Part 3 of ChooseFI's end-of-year wins where we hear directly from our community members. During this live event, listeners shared the actions they've taken during the past year that have helped them to spend less, earn more, and enjoy the journey.
  • This year, the year-end-win episode took place in a three hour live Facebook and YouTube event featuring around 20 members of the community.
  • Are you building an amazing life or are you a cog stuck in a very depressing wheel? It could be either or it could be both. The community members featured in this end-of-year wins episode have had the wake-up call.
  • We can't control everything, but there probably are some things we can control that we haven't yet considered. Hopefully, these wins from the community will provide inspiration and imagination to find improvement with at least one thing.
  • Our first win comes from Sara, who teaches high school science. She began listening to the podcast in December of 2018 and after binge listening to half of the available episodes, she opened a Vanguard account with all of the money she had saved. This year, she put money into 457s, maxed out Roth accounts, and put some money in a 403b.
  • And finally, Sara also just made her last mortgage payment, paying it off in just 11 years. With the mortgage paid off, Sara is now debt-free.
  • A special shout out to MK who recently gave birth to a brand new tax-deduction, otherwise known as a baby girl. MK and her husband, Jason, hit FI in their late twenties, and in addition to working for ChooseFI, MK has written a handful of science fiction books and teaches others how to self-publish with her YouTube channel, Author Your Ambition.
  • The next end-of-year win comes from Whitney who fired her financial planner this year. While her financial planner had set Whitney and her husband up fairly well, they were finally ready to fly on their own. Now that she understood what she was doing, she was able to get out of some of the actively-managed funds and do some tax-loss harvesting.
  • After an unfortunate incident with a supervisor, Whitney was motivated to figure out how she could not work if she didn't want to. Previously, she had no extra time to figure things out, but being at home due to COVID allowed her to explore hobbies, take care of health issues, and do more activities with her son.
  • Although making even the 1% better changes aren't always easy, it is a positive feedback loop where it becomes easier and easier.
  • Whitney plans is to retire in the next couple of years.
  • Next is Carlos, who welcomed a new baby this year. His wife took some photography classes and after seeing that her photos were pretty good, set up a new business as a photographer.
  • Jonathan says he's noticed a pattern when trying to learn a new skill. The first is that it's something that interests you. Next is finding a community, getting some training, and finally doing it.
  • Although Carlos‘ wife had to hit pause with the business a few times during the pandemic, she's still managed to have success even in this challenging year.
  • Carlos started a blog this year. As an immigrant from Brazil, he had issues with the IRS and decided to share his experiences so that he could help prevent others from making some of the same mistakes. He's is writing the first article and will soon be launching Alien Moolah.
  • Citlali and Jose have spent the last year adapting and keeping good habits. They moved to California three years ago and needed to get a budget together and manage cash flow after encountering high rent prices.
  • They found ChooseFI early when just six episodes had been released. Living on a single income, they were open to the messages presented.
  • Since then, they have tried house hacking, Citlali earned a degree through Udacity, got a job working on autonomous vehicles, and they moved to Texas, which decreased their cost of living.
  • Jose says the aggregation of marginal gains has helped them to save. Meal prepping has cut their meal costs and allowed them more free time during the week for other things.
  • Because the pandemic has them driving less and they've built up a good emergency fund, they've reduced their auto insurance coverage and cut the cost in half.
  • They also frequently use the library for ebooks and more unusual things like museum passes.
  • Citlali‘s big win this year for a 50% salary increase following her performance review which is helping to increase their gap.
  • But Jose and Citlali are reaping the benefits of FI before reaching it. With family in Mexico that has been hit hard by the pandemic, they have been able to provide financial assistance to buy food and pay off medical debt.
  • Shannon's year has been one of adaptation. She works at a college where her responsibilities have increased and transitioned. As a result, her boss was able to negotiate approval for her position to be full-time. The increase in Shannon's gap allowed her to pay off her car loan.
  • Shannon also started a unique side hustle creating videos combining World of Warcraft and making cocktails, under the title TipsiGaming, which can be found on YouTube and Twitch.
  • With no debt and this year's salary increase, Shannon hopes to buy a home and house hack the payment.
  • Finding ChooseFI a little over a year ago, Shannon has one month in emergency savings and now she has seven months saved up.
  • Wrapping up the series are Rob and Joni who are preparing to hit the road for RV life. They discovered the FI community about two and a half years ago. Starting from essentially zero, their net worth is up to $250,000 and their investments are at $150,000.
  • They quickly got used to living in 200 square feet, enjoyed get rid of stuff, decluttering their life, and being able to quickly clean up their home.
  • They both work from home, making them location independent.
  • When they married in 2016, they followed a more traditional contribution of 10% into a 401K. Though they were debt-free when they found the FI community, they didn't start to crush the income side until about two years ago when Joni combined her skillsets, switched careers, and doubled her income.
  • Rob and Joni's expenses are fairly low. The RV is paid off but they bought some land to put it on. when on the road, their base expenses should be roughly $2,000 a month.
  • For more information on the free Five Day Challenge or to sign up for the newsletter, go to ChooseFI.com/start.
  • Next week JL Collins joins the podcast again to revisit the Stock Series concepts and share his perspective on some of the nuances discussed with other guests of the show.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Jan 01, 2021
282 | End of Year Wins | Part 2
56:45
  • It's Part 2 of ChooseFI's end-of-year wins where we hear directly from our community members. During this live event, listeners shared the actions they've taken during the past year that have helped them to spend less, earn more, and enjoy the journey.
  • This year, the year-end-win episode took place in a three hour live Facebook and YouTube event featuring around 20 members of the community.
  • After listening to the podcast for months or years, how did individual members of the community take in information and take action leading to success in a very challenging year? Success isn't just the nuts and bolts of money. Ultimately, it's a life optimization strategy.
  • In response to Brad sharing in an earlier episode that he was joining Alan Donegan in his burpee challenge, Christine wrote in to share that she was inspired to step up her run by throwing in burpees along the way even if she couldn't complete the pushups.
  • Being perfect isn't realistic. Challenge and struggling are important, as is trying to get to the point of mastery. You grow during times of discomfort and failure.
  • The first end-of-year win comes from Eric. Introduced to FI by his best friends over a year ago, Eric binged listened to the podcast. In January of 2020, Eric and his wife re-scripted their financial life.
  • Eric is an architect and started creating YouTube content as a side hustle on his channel 30X40 Design Workshop.
  • Re-scripting their financial life started with paying down all their debt, including mortgage, with the cash they had saved that wasn't doing very much for them and built a six-month emergency fund.
  • Having that headspace allowed them to take more risks during the year. They don't have a specific monthly budget, but as long as his wife keeps her job as a research scientist, they are good. Everything he makes is going toward FI, including a post-tax brokerage account and 529s.
  • The FI literacy they've picked up from the podcast has shown they are a lot closer to their FI number than they thought.
  • The friend who introduced Eric to FI was Jason, who also had end-of-year wins to share. Jason figured out early in his career that he didn't want to persist working for other people until retirement age.
  • Five years ago, Jason learned about the FIRE community and began to buckle down, working toward a strategy.
  • Jason says they've always been good savers and put salary increases and bonuses toward retirement savings. In 2019, he realized 2020 was the year they could hit FI. He actually achieved it in May 2019 and stayed at his job until June 2020 because he had some things he wanted to see through.
  • In June, they moved from a high-cost-of-living area to a more moderately priced location. He began blogging on his website, The Next Phase is Now, to help work through the tornado of feelings he was experiencing.
  • Before retiring, they lived on their FI budget for a full year to give them confidence. Currently, Jason is drawing from his cash reserves, which he moves from a Fidelity account to his checking account once a month like a paycheck.
  • Next up is a question from Rebecca, who wants to know how to calculate her FI number when both she and her husband have pensions. Jonathan says the difference between your monthly expenses and your pension is what your FI number will need to cover.
  • The book by Grumpus Maximus, The Golden Albatross: How to Determine if Your Pension is Worth It, as well as episodes 057 and 227 with Grumpus are good to check out if you have a pension.
  • The next listener sharing her wins is Sara. Sara sold her care and began investing in VTSAX this year after graduating in 2019.
  • As a new investor, the market fluctuations this year were intimidating, but after reading The Simple Path to Wealth, she felt like she was getting in during a low period.
  • Sara's only debt is $78,000 in student loans which she hopes to pay off by age 30. During this 0% interest period, she has deferred making payments and has saved $20,000. It's a safety net that she's trying to decide what to do with.
  • Her employer offers a .5% match up to 6% in her retirement plan. Sara has increased her contribution since deferring her student loan payments and is looking to roll over an account from a previous employer.
  • Sara is trying to keep her expenses low and estimates her savings rate to be 30-40%.
  • Listener Jake has made a lot of big moves this year, which means undoing all of the American dream ideas that had been drilled into him, like the fancy apartment, car, and clothes. They weren't making him happy.
  • After listening to the podcast, Jake took action and moved into a place that cost him half as much, traded in the fancy car for a used Prius he paid cash for, and slashed his spending.
  • Another big move Jake made was to refinance his private student loans with a 10% interest rate to 4%. He's putting every extra dollar toward student loans and will 100% debt-free by the end of January.
  • The Talent Stacker podcast has lit a fire under him and Jake's goal for the end of 2021 is to hit $100,000 net worth.
  • Being able to work remotely, Jake has moved back in with his parents and reduced his rent to zero. Bradsays he credits living with his parents after graduation as the springboard for everything that came after.
  • Zach says it's been a great year figuring out his why of FI and taking actionable steps. He thinks whether we realize it or not, we're all chasing time and health.
  • He wants to travel the world in business class and loves his 2006 Hyundai Sonata. For Zach, finding happiness wherever he is at is the FI goal. It's all about what you personally value.
  • His investments are set up to meet his passive income goal. At the beginning of COVID, Zach started two businesses. While a pandemic doesn't sound like a good time to start a business, Zach says any time of strife and change creates opportunity.
  • Next up is Kosta who says despite the tough year, his path to FI has accelerated and COVID hammered home the need to do it.
  • Three years ago, Kosta and his fiance thought they had made it with their lucrative careers. But when he learned about FI in 2018, he was hooked. They worked together as a team to pay down student loan debt and put a 20% downpayment on the house they bought at the beginning of this year.
  • Health issues that may take both of them out of work motivated them to ensure their later years were easier. And a by-product of FI, Kosta has lost 84 funds this year!

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Dec 28, 2020
281 | End of Year Wins | Part 1
41:37
  • It's the ChooseFI Christmas Edition where we hear end-of-year wins direct from our community members. During this live event, listeners shared the actions they've taken during the past year that have helped them to spend less, earn more, and enjoy the journey.
  • This year, the year-end-win episode took place in a three hour live Facebook and YouTube event featuring around 20 members of the community.
  • Despite how tough this year has been, many people were able to implement some of the strategies and tactics discussed on the show into practice and find more margin in their lives.
  • The first featured win comes from Valerie. She purchased a condo a couple of years ago and has been working on renovating it. While not a financial win, Valerie says putting it behind her is her biggest personal win.
  • Finally closing out the permits allowed her to refinance her mortgage, saving her $466 a month. She was also able to pay off her credit card renovation debt, saving her an additional $600 a month. In total, Valerie paid off $34,000 of debt.
  • Besides the debt, Valerie also maxed out contributions to her HSA and because she now has an additional $1,000 a month, she increased her 401k contributions from 8% to 11%.
  • Valerie opened her first taxable investment account and rebalanced her portfolio, while her side hustles earned her $4,000, mostly from participating in focus groups.
  • Due to COVID, Valerie wasn't spending as much money and it allowed her to focus on things she might not have had the time to do and she's now one-third of the way to her FI number and hoping to retire by 2030.
  • Brad comments that cutting $1,000 in monthly expenses is $300,000 less Valerie needs in retirement when using the 4% rule.
  • Valerie has been sharing her copy of ChooseFI: Your Blueprint to Financial Independence with family members.
  • The second end-0f-year-win comes from Michelle who learned about ChooseFI after Googling financial independence while attending a conference. To convert her husband, she had him read ChooseFI's book and then scheduled a date night to discuss it.
  • Michelle‘s husband, Greg, never thought he could retire early. They didn't have a lot of debt but bought into the concept of getting 1% better and things began to snowball.
  • During the last year, Michelle and Greg joined their finances, maxed out their 401k, sold a rental home, bought a short-term rental, and broke up with their financial advisor.
  • They opened a Vanguard account and moved their accounts over after discovering their financial advisor was making a lot more in fees than the $50 per month to come up with an investment plan.
  • Because Michelle and Greg met later in life, they had maintained separate accounts. After joining finances and being transparent, they found making small 1% better changes each week didn't hurt at all.
  • All of the extra money that came in from COVID refunds or bonuses went toward paying off the debt from new windows. They also started travel hacking.
  • Michelle says when breaking up with your finical advisor, chances are they won't understand FI, so state that it's you not them and feel free to contact her for help breaking up with your advisor.
  • Up next is Chris, who has been a member of the FI community for about three years. He got started by reading The Simple Path to Wealth and Your Money or Your Life.
  • For Chris, the pandemic has been an opportunity allowing him to save $15,000. He's been able to max out his HSA and Simple IRA.
  • Chris also has two adult children to who he has introduced the concept of FI, as well as his nieces and nephews who have been very receptive to the information Chris has provided. He says to reach out and if they are interested they will let you know.
  • One of the actions Chris took this year was to switch to Policygenius, which saved him 50% on policy premiums.
  • The next end-of-year-win comes from Lauren. Lauren found ChooseFI in late-August and is on Episode 61R.
  • Lauren got a side gig in August being a census worker which enabled her to pay off all $7,000 she had in consumer debt. With all of the premium pay she earned, it ended up being $1,300 a week. She says she wouldn't have taken on the side hustle if it wasn't for the podcast.
  • After learning about 403b's, she switched from stocks and bonds to VTSAX. She and her husband also opened up a joint VTSAX account and reduced all of their monthly recurring bills to as low as they could possibly be. She's currently looking for hacks for satellite service.
  • In July, they moved into a home that they are caretakers for, which is an upgrade that eliminated $1,100 in rent. They found the caretaker job through her mother but says other caretaker or home sitting positions can be found online.
  • Since August, Lauren has earned or save roughly $9,000 since finding ChooseFI and taking action. They are now trying to pump as much money as possible into retirement accounts.
  • When an old job asked her to come back to work for them, she opted to focus on what things were important, like the baby she and her husband are expecting and how they can raise it frugally.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Dec 25, 2020
280 | The Debt Free Guys
52:04
  • Is it possible to live fabulously without being fabulously broke? The Debt Free Guys say you can.
  • After a year and a half of dating, John and David finally came out of the closet to each other regarding their finances. Between the two of them, they had $51,000 in credit card debt even though they had 15 years of experience in financial services helping others with managing their money.
  • Starting with the first credit card his parents gave him for emergencies, David began a 17-year run carrying credit card debt. Instead of reserving for emergencies, he viewed it as a source of side money and never understood the value of paying it off.
  • Despite never paying the balance off, his credit card limits kept increasing. After accumulating a significant amount of credit card, he began having trouble making even the minimum payments. Once, when his parents wired him money, it was immediately garnished from his bank account because he had failed to make payments. And yet he still didn't learn his lesson.
  • Both John and David came from a time when it wasn't okay to be gay. As a result of being a part of a marginalized community, many parts of society sent the message that they couldn't be who they were. The baggage they carried, as a result, manifested itself in various ways, one of which can be financial challenges.
  • Prudential conducted a study that showed there is a sexual orientation and gender identity pay gap. A university study has also shown that simply being gender non-conforming can limit you from getting a job or being promoted.
  • As a result, gay men sometimes seek validation through their clothing, bodies, cars, houses, and vacations even if they have to finance it.
  • The LGBT community hasn't traditionally fit the image of retired couples financial services companies market to. The community hasn't been encouraged through representation to think about their finances.
  • The premise of the Queer Money Podcast is the get the finance conversation started which is what any community needs to start moving toward financial security. They challenge the community to think about what it is they truly want in life despite how they are told they should look, act, and want.
  • It was the trap they had been living in. Although they were making decent salaries and experts in money, John and David weren't living according to their values.
  • After having the discussion, they decided what they wanted was to be able to retire comfortably, travel without accumulating credit card debt, and give back to the LGBT community in a way that didn't penalize them.
  • David says that even in the financial services industry there is a facade and although the experts know what they should do, they are hiding the truth about who they really are. Even for those who know the tricks to save, it can be hard to put it into practice.
  • When you don't tell the truth about who you really are, you don't seek assistance or help to become the person you are pretending to be.
  • While their credit card debt was at $51,000, John and David were spending $10,000 a year in interest payments. They believe that like them, most people who have similarly high credit card debts have a spending problem, not an income problem.
  • The first step is to sit down and have the conversation with yourself, your partner, or your family about what it is you want your life to look like.
  • The second step was eye-opening. John and David performed a spending analysis tracking when every penny spent had gone in the previous year. They had been living like rock stars, spending money on dining out, happy hours, designer clothing, and travel yet they didn't think their quality of life had been that great.
  • They finally realized they were financial messes when walking into their dark, basement apartment right after considering buying land to build a vacation home on in the Colorado mountains. They questioned where their life was going and confessed their debts to each other.
  • Figuring out what they wanted took three to four months, the spending analysis took a weekend, and it was two and a half years to pay off the credit card debt.
  • Unfortunately, after paying it off, they reverted to old habits and racked up $6,000 on reedit cards again. Realizing they were on the wrong path again, they corrected course and paid that off in several more months.
  • The spending analysis showed that with several small tweaks, they could recoup a lot of their spending. Grocery and dining out costs were cut and when going out with friends, they tried to do it without spending much money so they could maintain the social aspect of their lives.
  • John and David knew that if they could not have fun during the process of paying off debt, it would not last.
  • When confessing why they couldn't spend on activities like before, they found the friends they told were completely fine with it. For some friends, it created an opportunity to have their own money conversation, while other friends did drift away.
  • One of the strategies John and David used was to look for free or inexpensive actives they could do on the days they wanted to be social with others. They were blown away by the number of free and fun activities they found in the city of Denver. Learning that you don't have to spend a ton of money to have a good time changed the way they thought about having a good time. They called it the NSE for Not So Expensive.
  • John and David believe that when you put it out that you are saving for your financial goals, you begin to attract other people who want to have that goal in their life too and build a community of people supporting the lifestyle you want to create.
  • Another tactic John and David used were Milestone Rewards. They would stash away a small mouth of money to have some fun with as a reward when they had met a goal, such as paying off a certain amount of debt.
  • After completing the spending analysis, they realized it would take four to six years to pay off their debt using the snowball or avalanche methods. They knew they needed to do it quickly or they would get bored.
  • It was the high-interest credit card debt preventing them from paying it off quickly, so they came up with the debt lasso method.
  • With the debt lasso method, they lowered their interest rate to as low as possible and consolidated the credit card debt to as few locations as possible.
  • The debt lasso method has several pieces to it. You have to commit to not adding more to your card balances and commit to paying a specific amount every single month toward the balances.
  • Next, similar to the snowball method, if you can pay one off in full in a month or two, do it and get the quick win.
  • Then use the lasso process to pull all of the balances into as few locations as possible at as low-interest rates as possible.
  • Then everything should be automated. When monthly payments are automated, you'll never miss a payment which is when interest rates will be raised.
  • And finally, monitor your accounts so you know when a card is paid off and move payments to the next account or make extra payments when you can.
  • The snowball method works on emotion and has you pay off cards with the lowest balances, one after the other. In contrast, the avalanche process has you pay off the cards with the highest interest rates first.
  • Using the debt lasso method, they did have to pay approximately 3% in balance transfer fees, but they shaved years off the repayment plan saving more in interest payments.
  • Because John and David each had good credit, they were able to consolidate the debt from two to three high-interest cards each to 0% interest for 12-18 months cards and continued to roll the debt to 0% interest cards as needed while paying down their debt.
  • On the Debt Free Guys website, they have created a calculator to estimate how long it will take to pay credit card debt off using different payoff methods. They encourage folks to pay the most money toward cards with the highest interest rates.
  • John and David say that while 0% credit cards may not be plentiful right now, they've found that credit card companies will often send out 0% offers when a credit card's debt has been paid off because they know you likely have other credit card debt. Just be sure to understand the fine print to avoid any unpleasant surprises.
  • It is incredibly helpful for partners to be in the same state of mind when it comes to paying off debt. It's also useful to find a tribe of people who are doing it or an accountability partner.
  • The Debt Free Guys have a weekly call named Money Therapy included with their credit card payoff course.
  • To join the community and get the debt lasso calculator, go to debtfreeguys.com/choosefi.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 
 
 Dec 21, 2020
279 | Be Wise, Your Financial Future is at Stake | Dan Otter
39:47
  • Teachers have been getting taken advantage of when it comes to their investment options. Thankfully, the internet and technology have made it easier to get the word out and help teachers wanting to do better.
  • During his first year of teaching, Dan Otter was asked if he cared about his financial future. He politely listened to a hardball sales pitch about an investment scheme he didn't fully understand.
  • Rather than blindly following other teachers at his school who had invested in it, Dan began to educate himself by learning about John Bogle, Vanguard, and low-cost investing.
  • He learned the salesperson who had approached him was trying to sell him a high-cost annuity inside a 403b and that it was a terrible product.
  • Unfortunately, most of his colleagues had signed up for these poor investment products despite having more than 100 options available to them, including Vanguard.
  • Dan began to speak up and asked pointed questions when other teachers began to talk about their sales agent in the teacher's lounge. Though he had never done it before, he started looking at their statements and showing them how much the fees were.
  • Appreciating Dan‘s insight and help, it was suggested that he put on workshops. After thinking about it, he bought the domain 403bWise, and with help from a friend, they built and launched the website in March 2000.
  • The mission of the website was education and advocacy, where teachers and school employees could come and learn about the 403b in a non-sales environment and also advocate for low-cost options like Vanguard.
  • Although this was 20 years ago, Dan says the problem with 403b persists today. Teachers usually find 403bWise after they have been sold one of these expensive products.
  • Dan says that not all 403b's are created equal. After working in different environments where 403b's are available. They were largely terrible in the public school systems with many vendors. Private schools generally have just one vendor, as do universities, like Fidelity, TIAA-CREF, or Vanguard.
  • 403b's fall outside of federal oversight, specifically Arista regulation, so the employer does not have the same kind of fiduciary duty. Just being on the list signifies tacit endorsement, however, the vendors are not vetted by the school districts.
  • Just because you aren't paying money out of pocket, doesn't mean there are no fees. Vendors make the fees hard to find.
  • Teachers all over the country can get fee information on the website, 403bcompare.com.
  • Dan says to look for costs in two places; mortality and expense, and then look at the mutual funds that are part of the annuity. If you find out that you are in a bad product, you may also have to pay 7% of your balance just to get out of it.
  • Using the hypothetical example of a relatively new teacher earning $50,000 per year who expects to retire after 30 years, the difference between investing in one of these terrible annuity products versus one found after learning more from 403bWise can be $200,000.
  • Over 35 years, a teacher contributing $250 a month earning 6% will earn $185,391 when investing with one of the lunchroom sales agents, while the teacher investing the same $250 a month earning 6% interest with a low-cost company will have $343,000 at the end of 35 years.
  • Dan was able to visit the Vanguard campus as a guest of their 403b unit and says they are very focused on this market and getting on vendor lists.
  • A good fee for a 403b is 0.5, or 50 basis points, or less. Companies like Fidelity, Vanguard, and Aspire Financial Services are good. In California, CalSTERS, the state pension agency, created their own 403b after and is on most vendor lists.
  • Do not confuse Fidelity with American Fidelity Assurance, which is a high-cost company.
  • A 457 may be an even better plan than the 403b. Reputable 457 plan companies include TIAA-CREF, T. Rowe Price, and Vanguard.
  • The National Tax Deferred Savings Association is a well-funded lobby with an interest in maintaining a high cost, multi-vendor 403b environment.
  • Montgomery Country schools in Maryland is one of the few school districts to put their 403b plan out for bid. They reduced the number of vendors down to just one, Fidelity, and plan participation and contribution have increased.
  • Dan would like to see every district do what Montgomery County did, but it needs to start with the teachers from the ground up.
  • The 403Wise website has three main sections, education, advocacy, and community. Under the Quick Start Guide, the tool, Find a Good Vendor, on the home page allows teachers to search within their own school district.
  • 403b compliance is often outsourced to third-party administrators who bring in vendors who yield them revenue.
  • Even one of the big national unions, the NEA, has an endorsement deal with a financial company called Security Benefit, which offers a product called the NEA Value Builder with load fees of 5%. After being sued, they offer a fantastic and unadvertised product called NEA Direct Investment.
  • Anyone who would like to try and make a difference in their school district should reach out to 403bWise because they are building a network of advocates.
  • In addition to joining the Facebook group, reviewing the website, and learning about the 403b vendors available to you, check to see if a 457b plan is also available.
  • A 457b works similarly to a 403b but has a few more amazing benefits. If you separate from service, you can access the money in a 457b tax and penalty-free. Also, when just three years before retirement age, you may double contributions. And finally, 457b's requires more fiduciary oversight.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Dec 18, 2020
278 |Retire Early...For You | Amy Blacklock
45:31
  • Don't fall for the misconception that financial independence is just for 20 and 30-year-olds. It is for everyone at any age and it's not too late to get started.
  • Amy had a wake-up call in her early 40s. Starting with no net worth, through flexibility and adaptability, she got started and reclaimed decades of her life.
  • Amy describes herself as a trier of many things. She used to wonder how other people do it. How do other people drive new SUVs, live in a large home, dine out, and save for their kids' education and their own retirement? She says most people don't do it all.
  • You have to select for yourself what's important and save wisely to spend on it.
  • Previously, Amy was trying to keep up with everybody else, thinking that she needed it all to be happy. She was buying all the stuff but wasn't saving for the future.
  • She heard something on the radio one day about needing to save a million dollars for retirement and thought it didn't seem possible to get there. She and her husband were in their 40s and she knew something had to change.
  • Amy began looking at what other people were doing but what she didn't know if that everybody was just like her, trying to keep up and not saving for the future.
  • She had grown up with a single mom who had a lower-middle-class income. She always wanted more because she felt like she was always lacking. When she got a job and was earning money, she worked hard and thought she deserved all those things everyone else had.
  • She had fallen into the trap of thinking money equals happiness and once in, it was hard to get out of that trap. While she had a mortgage and car loans, she didn't have much other debt. However, she was spending almost everything coming in and her net worth wasn't moving forward much.
  • After a divorce a the age of 43, Amy's net worth was approximately $150,000. The desire to get out of a job she hated and start her own business lead her to examine her spending.
  • She began researching methods and ideas for saving money where she found Mr. Money Mustache and many other personal finance blogs and websites.
  • Though Amy realized she and her new husband were older, she thought that they could make significant changes and create the financial space they needed to retire early for them.
  • Trying to keep up with everybody else wasn't getting them anywhere, but she might be able to learn and try to keep up with the people saving money and retiring early even if they were far younger.
  • Originally, they had been thinking they would don't retire until 67, so retiring in 10 years in their 50s sounded much better.
  • Trying to convince her husband to get on board with the changes that needed to be made meant that his habits had to change. They had to reframe their thinking. Amy says the Dave Ramsey quote sums it up, “Live like no one else now, so you can live like no one else later.“
  • They realized that despite chasing happiness by going out to dinner and buying things wasn't actually making them happy. Cutting back didn't feel like deprivation because they weren't things that weren't meaningful or lighting them up.
  • Amy and her husband reevaluated where their money was being spent. She thinks making communication a foundation of their marriage was essential. It was hard to talk about what they wanted their lives to look like 10 and 20 years down the road and how they were living five years ago wasn't going to get them there.
  • Using the 25 times expenses rule, Amy guessed they would need a million dollars to retire and targeted 2024 for retirement.
  • To do it, they cut expenses, got rid of their newer vehicles, and refinanced to a 15-year mortgage. To increase their incomes, they both changed jobs twice.
  • With all of the changes they made and a phenomenal stock market, they have been able to cut their timeline to financial independence down. They considered themselves FI in 2019, just six years from when they started.
  • Amy was able to increase her income during those six years by finally completing her degree after going to school part-time while also working. It gave her the confidence to try and find a better paying position.
  • Because she was a hard-worker and stayed in touch with people on LinkedIn, she was approached about a new position. She then negated the significant salary increases.
  • To prepare for salary negotiations, Amy used Glassdoor and LinkedIn premium to see what other positions were paying.
  • Amy says you have to believe it's possible never too late to start. You have to be flexible, willing to embrace fear and go for it. Give up the ego and be willing to learn, even from a 25-year-old. Stop worrying about what other people think.
  • Stuff isn't going to make you happy, but having your family safe and secure and being able to retire will. The changes Amy made were sacrifices, they were changes that gave her options later.
  • If you're in your 40s and you've never questioned drift, there's probably 30% you can cut without missing it.
  • Initially, Amy and her husband cut too far, but then they added some things back in. Now they mindfully choose when to go out and enjoy craft beer or eating out.
  • Amy says happiness ebbs and flows. Her happiest moments are with her grandkids. She works a lot on her passion projects which brings her a lot of joy.
  • Her blog, LifeZemplified.com shares a little about her story, what she is doing, and how important it is for others to take action.
  • WomenWhoMoney.com was started as a safe space for women to learn about personal finance from a female perspective, though 40% of their audience is now male.
  • The content on Women Who Money was leveled for Beginner, Intermediate, and Advances personal finance knowledge with over 400 articles.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 
 
 Dec 14, 2020
277 | Gauging the Weight of your Portfolio
01:00:30
  • Setting up your financial life includes updating your investor policy statement and examining the rationale for equal weighting inside your index funds.
  • Brad is giving his physical fitness a boost in December with a month-long burpee challenge. A full-body exercise that can be done quickly at home without any equipment, Jonathan asks what would change about your life if you took the challenge of doing 10 burpees every day for the next year?
  • Brad was inspired to take on the burpee challenge after watching Alan Donegan and his wife, Katie, in a video they posted of themselves doing burpees. They weren't holding anything back and completing each rep with a high degree of difficulty. He wondered what it would look like to give everything your all in life, like Alan and Katie were with their burpees?
  • Jonathan reflected on how he is often more focused on getting to the end result than he is in the quality of the movement, which he likens to the old saying about losing sight of the forest for the trees. We should focus on systems, processes, and workflow, over results.
  • Get up off the couch and do something that will make your life better in some small way. Cancel a subscription, get rid of convenience, meal plan, do something that makes your life 1% better. And if you start doing burpees as a result of this episode, send in an email to let Brad and Jonathan know.
  • Although we often talk about and identify the massive actions people can take to make their financial lives better, the community has been very receptive to the idea of aggregation of marginal gains.
  • This year, Jonathan has been having conversations with his wife about their investor policy statement and what changes they might make to it since they feel like they are in a place of calm and unemotional decisions can be made.
  • Brad and Laura believe in thinking long-term, lowering their expenses, continuing to invest, and having things on autopilot. Their investments are almost entirely in low-cost brand-based index funds, like total stock market and S&P 500 funds. they also do have some bonds, international stock funds, and rental real estate.
  • Jonathan and Dani have similar investing strategies. They invest for the long-term and diversify in low-cost funds to avoid fees.
  • Recently, Brad and Jonathan discussed the difference between a total stock market index fund and an S&P 500 index fund and how with a cap-weighted fund you a disproportionate amount of the largest companies. A lot of investors believe you should try to have small and mid-cap companies equally weighted in your portfolio.
  • It used to be difficult to set your portfolio this way. Recently, online investment firms have come online, such as M1 Finance, Betterment, and Wealth Front, whose interfaces have made this significantly easier to do.
  • Jonathan recently conducted an experiment with his own investments following one of Paul Merriman's portfolios that can be found on M1 Finance. Fifty percent went into a total stock market index fund, and the other 50% went into an equally weighted fund. With the impact COVID had on small businesses this year, the equally-weighted portfolio was crushed.
  • However, when pursuing FI, we are interested in performance over the long-term and Jonathan notes that the smaller companies that have been crushed this year, might actually be on sale.
  • Because Jonathan doesn't like sitting on a bunch of cash, even in an emergency fund, the idea of negative correlation is appealing to him. He wants his emergency fund to hold steady or go up when the market is down and is willing to sacrifice a little bit of return to achieve that.
  • Your options to equally weight index funds may be more limited at large institutional firms, but with M1 Finance, Jonathan was able to set up a Negative Correlation pie, a Can I Pick pie, and an Equities pie.
  • Jonathan's M1 Finance account acts like an emergency fund but is also a growth machine. It is more conservative than his 401Ks. He views these taxable investments as another form of savings.
  • Some of Paul Merriman's recommended ticker symbols are VIOO, the Small Cap 600, IJS, the Small Cap 600 value, VOV, the 1000 Value index fund, VOO, the S&P 500, and others like VEA and VWO.
  • While many of us want to keep things simple and do not want to be stock picking, when investing in something like an S&P 500 Index fund, we are essentially stock picking. Understanding that, Brad still chooses to invest mainly in total stock market index funds.
  • In episode 194, Frank Vasquez talked about after taking a hammering in 2008, he wanted something in his portfolio that would go up when others were fleeing the market. He discussed corporate bonds, precious metals, and US treasuries were some of the types of investments people flee to.
  • Jonathan and Dani decided to invest in precious metals, which will hopefully be more effective than a savings account
  • While Brad doesn't believe in investing gold, Jonathan notes that if there is ever a loss in confidence in government, people will flee fiat currencies.
  • It's good to understand that these different tools are out there and react to market conditions differently.
  • A year-end review is an excellent time to decide what to invest in rationally and from a point of understanding your own psychology.
  • The first week's community win winner is Chris, who recently became debt-free, max out his 401K and HSA, as well as he and his wife's IRAs. They also began investing in a taxable account and contributing to their son's 529 accounts.
  • The second winner is Khang, who negotiated faster internet for less money using online chat. It never hurts to ask, but if you never ask, it's always a no.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 
 
 Dec 11, 2020
276 | How to Set up Your Financial Life | Investing and Banking
52:23
  • Continuing the conversation discussing financial basics, today's episode covers how to get started investing, banking, and setting up your financial life.
  • As a recent college graduate, Brad had the motivation to get his financial life together but didn't really know how to go about doing it. During his first job, he wanted to open up a Roth IRA after learning about the power of compound interest.
  • Unfortunately, the investment advisor who helped get him set up invested in a fund with a 5% upfront load. That means 5% of his investment automatically went to pay the advisor's commission. Brad'sinvestment was treated like a quick payday for the advisor.
  • Not all financial advisors are bad, but you can learn how to get set up with a low-fee or no-fee investment without feeling confused or overwhelmed by the process.
  • It's important to understand all of the possible fees that can impact the return on your investment. In addition to load fees, there are other fees to watch for, such as assets under management fees where you pay a percentage for the advisor to manage your account, or expense ratios which pay the team who actively manage the activity of buying and selling within the fund account, and with a surrender charge, you may pay fees to get your money out of the investment.
  • If Jonathan was giving a family member financial advice on how to get started, it would begin with banking. Do they have a banking system set up and understand the differences between checking and savings accounts? What other variables should be considered?
  • Getting a checking account set up is first and becomes the repository for income coming in and money going out, such as paying bills. Brad uses autopay to have many bills automatically draft from his checking account.
  • Brad likes simplicity. Because he knows which days money will be coming in, he sets up his bill autopay dates around that. He also ensures he has a couple extra thousand dollars in his checking account to cover anything unexpected with him having to track the balance every day.
  • Jonathan does something similar in that he uses the pay from last month to pay this month's bills, which means there is always around a month's worth of pay in his account giving him plenty of margin.
  • Try to minimize fees in every aspect of your life. Select a bank account option that requires the lowest minimum account balance to avoid a monthly fee. Avoid overdraft fees by asking the bank to remove that option or connect to a credit card. Don't pay ATM fees by trying not to use cash or plan ahead and withdraw cash from your own bank fee-free. Some online banks will reimburse ATM fees.
  • Brad doesn't keep all of his financial assets in a checking account. He used to use a saving account at the same bank that was connected to his checking account. However, it earned very little in interest. Online savings accounts, like those at CIT Bank, frequently offer a much higher interest rate on their savings accounts and still allow access to the money within 2-3 business days.
  • Your investing goals are determined by two items: your cashflow and what sort of safety net you need. Money that might be needed in the short-term and accessible within days, such as for emergencies, should be kept in cash in a savings account. Money that isn't needed for 10 years or more, should be invested because money can lose value over time due to inflation. Instead, that money can be making money and beating inflation. To maintain value, your money needs to make 1-3% per year just to keep pace with inflation.
  • Knowing how much to keep in savings and when to move to investing depends on your risk tolerance.
  • Make sure your bank is FDIC insured, which means it's backed by the United States Government and covers depositors in the event of bank failure.
  • Once you have a checking account set up and you are putting away something each month into savings, getting started investing would be the next step.
  • Brad says the best place to get started is with your company's 401K. Find out what the 401K match is and invest at least up to the match. The match is free money from your employer and technically part of your overall benefits package.
  • It may be something like a 100% match on the first 3% of your salary you invest. If you make $100,000, 3% equals $3,000, it means you invest $3,000 of your salary and your company also puts in $3,000. It's a guaranteed return.
  • If there's an option to check a box and automatically increase your contribution by 1% each year, do it.
  • Instead of a 401K, teachers may have a 403b or 457 which are essentially the same type of investment vehicle.
  • The maximum amount an employee may contribute in 2020 is $19,500. The total limit for employee and employer contributions combined in 2020 is $57,000.
  • Each person needs to figure out what works best for them in terms of funding an emergency fund, paying off debt, investing in their 401K, or Roth IRA. Since contributions may be withdrawn from a Roth IRA tax and penalty-free, it could be used like an emergency fund.
  • A 401K is funded with pre-tax dollars, meaning it was invested before that portion of your income was taxed. When it is withdrawn at the age of 59 1/2 or later, it gets taxed at your marginal tax bracket.
  • When picking a fund within a 401K, Jonathan's strategy has been to look for index funds or anything with the index beside it.
  • Brad notes that the list of funds may also show the funds' expense ratios. Look for the ones with the lowest expense ratios which will be the most similar to total stock market or S&P index funds. Go to Google and type in the ticker symbol to find out more about the specific fund.
  • Actively managed funds are run by teams of well-compensated people whose goal is to beat the market. Their fees are incorporated into the expense ratios. Index funds do not try to beat the market, they try to track their market index. Their expense ratios are dramatically smaller since they are managed by a computer algorithm not a team of managers.
  • ChooseFI is anti-debt, but not anti-credit card. Credit cards a financial tool when used responsibly and paid off on-time and in-full each and every month.
  • Brad tries to use his credit card as much as possible for the safety and security credit card purchases provide, as well as for the travel rewards points that allow his family to travel the world for free or almost free.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Dec 07, 2020
275 | Board games and War Games
51:34
  • It's no secret that Brad and Jonathan's families are board game fans. One way they can typically save 20-60% on the cost of board games is by watching for price drops on Amazon using CamelCamelCamel.
  • Brad was able to save a substantial amount on the purchase of a squat rack simply by being able to stand by and wait for the price to drop.
  • Listener Liz heard about CamelCamelCamel on the podcast and added a list of board games to her watchlist. She was eventually able to purchase all of them at roughly half the list price.
  • Life may be the ultimate board game where your finances are a piece of it. When you know the rules, it makes it easy to win. Just like there are strategies for winning at Monopoly, there is an unwritten and unspoken framework for living a better life.
  • Now that 2020 is getting back to a more steady-state, it may be time to start wargaming your finances and look at your risk tolerance.
  • This year that stress-tested our investor policy statements and mindset. Perhaps you don't have the risk tolerance you thought you did. Times of stress and uncertainty are not the time to make changes. Adjustments should be made when times are calm.
  • There are different variables to consider and one of the questions to ask is “How much does your life actually cost?”. This can change over time and affect your risk tolerance.
  • A couple of years ago, Brad intentionally increased his costs by moving to a more expensive home. Though it increased costs by 40-50%, they felt the life benefits would outweigh the additional costs.
  • The only debt Jonathan has is his mortgage, reducing his structural expenses to housing, food, utilities, and insurance. He thinks even some of that could be cut down to support a survival budget if required.
  • If this year has shown us anything, it's that your income source may not be a stable as you might have previously thought. You shouldn't be dependent upon anyone.
  • There's a mindset of positivity that takes a terrible situation and figures out how to pivot. With your wargaming plans set, you can find a way out of it.
  • Brad lived through a financial calamity at 22 years old when he worked for Arthur Anderson. After the Enron scandal, his company went out of business. He witnessed others who were living on the financial edge, but because Brad lived at home and had very little debt, he was fine.
  • Jonathan says he doesn't mind spending a lot of money on an item, but he doesn't want to spend a lot of money on something that locks him into structural, recurring payments that make his life more expensive.
  • If something were to happen to his business, Jonathan is confident that with the skill set he's acquired and one year of financial runway he's saved, he would have a very soft landing. The events of the last year have him reevaluating his investor policy statement, possibly driving changes to his investment allocation to a more conservative approach now that the market is at record highs.
  • Jonathan is considering making these changes after riding the roller coaster of the last year and holding firm. Now that things are back to relative calm, he can make decisions based on knowing himself better, not based on fear.
  • In the episode with Paul Merriman, he made the case for a portfolio that weights all of the asset classes evenly. Total stock market funds are cap-weighted, meaning the top companies make up a disproportionate percentage of the total market cap. Therefore, a disproportionate amount of your money is invested in these top companies and you aren't invested as diversely as you think.
  • Jonathan has had half his money invested in a total stock market fund and half in a portfolio more similar to what Paul Merriman recommends through M1 Finance. Paul Merriman's method has gotten crushed in the last year, but over a 40 year window, it should bring higher returns. Jonathan is trying to figure out a mix that he is comfortable with.
  • Another expense area to look at are investment fees. It used to be expensive to invest, but investment costs have become much more competitive. You don't need to spend 1% on commissions and another in expense ratios. Fees have gone to near zero if you look for them. Don't let people “help” by trading on your fear.
  • War game your finances out. Think about the variables unique to you, analyze your risk tolerance, your income, your expenses, and what you have control over.
  • This year's Year-End Wins episode will be a live podcast on Dec 8th at 7:30 pm Eastern time. RSVP for the live event at ChooseFI.com/2020wins.
  • If you want to share your 2020 win, send an email to feedback@choosefi.com.
  • This week's book winner is Abbey. She turned 22 this year, is almost finished paying off $17,000 student loans and maxed out her Roth IRAs for 2019 and 2020, as well as her 403b, 457, and HSA, and broke the $100,000 mark in her first year of nursing. Congratulations, Abbey!

 

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 
 
 Dec 04, 2020
274 | Tax Planning 2020 | Sean Mullaney
53:59
  • It's end-of-year tax planning time. As you get further along in your financial independence journey, there are likely more end-of-year tax planning items you'll need to be aware of. Having a checklist to review annually is useful.
  • It's been an unusual year and December is that time to begin making end-of-year tax considerations. In addition to the normal checklist, there may be additional items to consider in this remarkably different year.
  • Sean Mullaney says unique to 2020 are Roth conversions. While Roth conversions should be on the checklist every year, this year there was a much greater chance of diminished income which may provide the opportunity to make Roth conversions in a lower marginal income tax bracket.
  • In any year when income is much lower than it normally is, Roth conversions would be at the top of your mind. The deadline is December 31 and there are no extensions.
  • While complex situations may benefit from professional consultations, anyone with mostly W2 income can find their tax brackets online. If your income has dropped from 22-24% to 10-12%, locking in a Roth conversation at that lower rate is effective tax planning.
  • A Roth conversion is when you go into a traditional IRA account and convert it to a Roth IRA. This is a taxable event, but you are intentionally choosing it because you are in a lower tax bracket for the year rather than convert or withdraw funds in a letter year when your income is higher and the taxes will be higher.
  • How much money should be converted to a Roth IRA? Sean says he has never encountered a client who has had too much money in a Roth IRA. While the action is irrevocable, there is no penalty for converting too much. If a portion of the conversation is taxed at 22%, it is not the most efficient conversion, but your future self will likely still be quite happy that you did it.
  • Some employers allow for Roth conversions within their 401K plans.
  • The deadlines for completing some of these end-of-year tax planning checklist times vary. Solo 401Ks and qualified business income tax deductions should be completed as soon as possible.
  • In addition to Roth conversions, another item with a Dec 31 deadline is charitable contributions.
  • Checklist items with an April 15 deadline are traditional IRA, Roth IRA, and health savings account contributions.
  • A good rule of thumb is individual tax accounts have a tax return deadline, not an end-of-year deadline.
  • The reason solo 401Ks have an “as soon as possible” deadline is that unlike IRAs, solo 401Ks require more time and paperwork to do. It may not be necessary to have it funded by Dec 31, but you'll want it set up and have a well-documented game plan. S-corps do have to fund the employee-side by the end of the year.
  • The first item on Sean‘s checklist is charitable contributions. With that category are two options to consider, a donor-advised fund if you plan to itemize deductions this year, or regular year-end charitable contributions.
  • If you don't plan on itemizing, in 2020 up to $300 per tax return make be taken as a charitable contribution against your adjusted gross income.
  • Another checklist item to be completed by the year's end are small business expenses since they are deducted when paid for, not when accrued. Businesses who have had a good 2020 may want to accelerate these payments to get the deduction this year. While businesses that have struggled in 2020 may want to hold off making payments until 2021.
  • In response to a question from Brad regarding credit cards, Sean confirmed that credit cards work on a cash basis so the deduction takes place in the same in which the credit card was used, not when the credit card bill was paid.
  • Paying bills with a check becomes a little trickier as you may need to prove to the IRS that the check was written and mailed on a business day prior to Dec 31 even if the vendor does not deposit the check until January of the following year.
  • A backdoor Roth IRA applies when your income is too high to contribute to a regular Roth IRA. If you've done a backdoor Roth IRA in 2020, don't roll over any 401Ks, 403Bs, or 457s into tractional IRAs before Dec 31, wait until Jan 1 so it's not complicated by the pro-rata rule.
  • To clean your investments up before leveraging the backdoor Roth technique, try and roll traditional IRA accounts into a new employer's 401K plan. Then implement the backdoor Roth IRA which may be done by April 15.
  • Sean has a blog post describing the process to get clean with traditional IRAs before doing a backdoor Roth IRA.
  • Tax-gain and tax-loss harvesting are also both Dec 31 deadlines. The stocks need to be sold by the end of the year. With tax-loss harvesting, you may not repurchase those securities within 30 days before or after the sale to comply with the wash sale rule.
  • If you're in the 12% marginal federal income tax rate or lower, the capital gains rate today is 0%. You may want to sell stocks to diversify your portfolio or sell and rebuy the same stock to realize the large capital gain and reset your basis without paying federal income tax. Unlike tax-loss harvesting, there are no timing considerations to make when repurchasing the same stock with tax-gain harvesting.
  • State income taxes may not favor capital gains in the same way the federal tax does.
  • Keeping all of the rules and impacts of buying and selling straight can be confusing and time-consuming. It is helpful to keep your tax records as clean as possible by doing everything in a specific account for this purpose. Sean states that tax-loss harvesting should be a tactic and not a goal occurring only in years where you are down.
  • State tax considerations to be mindful of are fourth quarter estimated tax payments and deduction planning. In California for example, it may be beneficial to take the standard federal deduction and itemize to take advantage of the state property deduction, possibly even pre-paying on property taxes.
  • A FI framework allows you to play from a position of strength. The financial independence community can take advantage of timing their payments for certain things and make strategic decisions because they don't have the same issues with cashflow that people on a traditional path might have.
  • While many in the financial independence community may be too young to think about required minimum distributions (RMD), it's good information to review for future planning.
  • RMDs apply to all retirement accounts except Roth IRAs. Starting at age 72, minimum distributions will be required by Dec 31 or there is a penalty. However, in 2020, they have been canceled and you may want to convert it into a Roth.
  • When you inherit an IRA, it doesn't matter how old you are. You are subject to an RMD or a 10-year rule. It would be wise to consult a tax professional when inheriting a sizable IRA.
  • With an inherited Roth IRA, the account will have to be emptied within 10 years following the death of the original owner. Different rules may apply to eligible designated beneficiaries who may have RMDs instead.
  • An adult who inherits a traditional IRA has a tax issue and probably will need professional assistance wit
  • The year-end is a good time to update beneficiary designation forms. Financial institution accounts are governed by the beneficiary designation forms, not wills or trusts, so it's important to ensure these are up-t0-date.
  • Year-end tax planning is great, but Sean likes long-term strategic tax planning to minimize your total tax over your lifetime. January is a great time to start long-term planning.

As always, the discussion is general and educational in nature and does not constitute tax, investment, legal, or financial advice with respect to any particular taxpayer. Please consult your own advisors regarding your own unique situation. 

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 
 
 Nov 30, 2020
273 | What's an Emergency?
48:32
  • We're going back to basics and taking a deep dive into the Roth IRA and the levers, tools, and investing strategies available to investors.
  • Although ChooseFI offers the free FI101 course, taking small actions are important. Get up to speed and start taking action with the free five-day challenge by going to ChooseFI/start.
  • ChooseFI has presented basic investing strategies over the years and will revisit in the coming months to distill and hash out all of the different methods to understand the fundamentals.
  • Many of the strategies have a lot of overlap starting with low-cost broad-based index funds. What they all share is a common-sense approach and simple investing strategy which is that time in the market is better than timing the market.
  • Most traditional index funds are cap-weighted resulting in a higher percentage of money being invested in a few top companies. Rather than take a dogmatic approach to low-cost broad-based fund investing, it may require the application of scrutiny, being open-minded, intellectual honesty, and consideration.
  • JL Collins helped open up Jonathan's eyes to the power of simplicity and helped give him the confidence to start doing better with his finances. But as the terms and concepts have become more familiar, other perspectives become visible, along with the pros and the cons, and the questions he's been able to ask have gotten better.
  • The questions you have as you learn more are worth exploring to help build confidence in your plan.
  • When investing, minimize fees as much as possible. Fees for buying and selling, expense ratios, and advisory fees are all negatively impact your long-term returns.
  • We can learn new things and get rid of limiting beliefs. After a speculative real estate investment went poorly, Brad was afraid of real estate investing. However with some security, knowledge, and looking at it as a business, he has now invested in two single-family rentals which are doing well.
  • Financial independence is not finances. It's not money, health, or time. It's all of it. It's making objective, fair-minded judgments about societal norms, seeking the truth, and making decisions in our best interests.
  • Sean Mullaney is a big proponent of the Roth IRA and the possibility of using a Roth IRA as an emergency fund.
  • Sean says that I all his years of practice, not one of his clients has ever had too much in Roth accounts. The advantage of the Roth IRA is flexibility.
  • With a workplace 401k, your employer does not have to allow distributions and if they do, it is probably subject to penalties and taxes. In contrast, contributions may be withdrawn from a Roth IRA at any time, tax and penalty-free.
  • In a world of uncertainty, you never know when you'll need access to these accounts, whether in an emergency or for early retirement. A Roth IRA can do double duty as an emergency fund and as retirement investing until a separate emergency fund can be established.
  • Sean recommends reading the article on FItaxguy.com explaining Roth IRA Withdrawl and microlayers.
  • Backdoor Roth IRAs are for high-income earners who do not qualify for regular Roth IRAs. Roth IRAs are funded with earned income up to an established limit outside of workplace retirement accounts.
  • Roth IRA limitations for 2021 are a modified adjusted gross income of $198,000-208,000 for married couples and $125,00-140,000 for singles.
  • For an emergency fund, only contributions that may be withdrawn from a Roth IRA. Over the course of contributing for many years, the balance should have grown, but only the contribution amount may be withdrawn tax and penalty-free.
  • Roth IRA earnings may be withdrawn tax and penalty-free only if held in the Roth IRA for five years and you are 59 1/2.
  • Contributions should really only be withdrawn for early retirement or in the event of an extreme emergency, not for minor emergency expenses as the money cannot be put back in.
  • Sean says the same rule applies to health savings accounts. Leave the money in to grow tax and penalty-free because when you take it out, you stop the growth. Pay out-of-pocket instead and document the expenses to claim in the future when you really need the money. Brad and Jonathan scan their invoices into a Google drive.
  • For those on the path to FI, unexpected expenses like a stained ankle are unfortunate events, not emergencies because FI puts you in a position of strength with additional options.
  • This week's book winner is John, who negotiated a $100 per month rent discount by prepaying six months in advance using money saved for a future home down payment. The new location also allows John to bike to work saving on transportation costs.
  • With this year being so tough for people, Jonathan thought back to an episode with Bradley, who made over $1 million in ten years with Salesforce. Intrigued by the conversation, he contacted Bradley again to see if his success was replicable. As a result, they built a training and job placement program and launched the Talent Stacker podcast.
  • One of the students in the course was able to land a new job making $70,000 within 42 days of starting the program after being laid off from COVID.
  • If interested in learning more about the program, visit talent stacker.com/salesforce.

As always, the discussion is general and educational in nature and does not constitute tax, investment, legal, or financial advice with respect to any particular taxpayer. Please consult your own advisors regarding your own unique situation. 

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Nov 27, 2020
272 | Understanding Compound Interest & Investing for Beginners
39:11
  • As the ChooseFI community continues to grow, it's necessary to discuss some fundamental basics that serve the audience who are just getting started, as well as provide a refresher for those who have been on the path for a long time. In this episode, we revisit the magic of compound interest and investing for beginners.
  • Getting to financial independence where work becomes optional and your investments are producing enough income to live off of for the rest of your life is easier when you understand why saving and investing now is important.
  • Kimberly asked a question in the ChooseFI Facebook group requesting help understanding compound interest and the basic principles of a compound interest account.
  • Investopedia states that interest may either be simple or compounded. Simple interest is based on the principal amount. In contrast, compound interest is based on the principal amount plus the interest that accumulates on it every period.
  • For example, in a simple interest calculation, a deposit of $1,000 earning 10% interest each year would earn $100 in the first year, resulting in a balance of $1,100 in year one, $1,200 in year two, and $1,300 in year three. In a simple interest calculation, the interest percentage is not applied to the interest earned beyond the initial principal.
  • The real world, however, works on compound interest, which is based on the principal amount and the interest that has accumulated.
  • Using the same example of $1,000 in principal and 10% interest, after the first year, the balance is the same at $1,100, but in year two, interest is calculated on the new balance, resulting in $110 of interest and a new balance of $1,210 going into year 3. It starts small in the early years but really ramps up later on.
  • Using simple interest, a $1,000 investment at 10% will have earned $4,500 (45 years x $100), for a total of $5,500.
  • To illustrate why compound interest is often called the 8th wonder of the world, when using compound interest, that $1,000 investment at 10% grows to $72,890.
  • The difference becomes even more apparent when using the example of $1,000,000 earning 10% simple interest versus $500,000 earning 10% compound interest. After 45 years, the simple interest balance grows to $5,500,000, while the smaller $500,000 principal grows to $36,500,000 with compound interest.
  • When you don't spend everything you make and invest in compound interest vehicles, you can be well on your way to becoming a millionaire or multimillionaire.
  • Einstein has been attributed with saying, “Compound interest is the 8th wonder of the world. He who understands it, earns it…he who doesn't…pays it”.
  • The benefits of saving and investing are not limited to the end of the 45 year period. There are benefits all along the way. Compounding returns are always working in your favor, creating income that you don't need to work for anymore.
  • It's rare to earn a high enough income to become wealthy, but saving reasonable amounts of money and investing it can bring wealth in an intermediate amount of time.
  • Where does a beginner go to start investing and earning compound interest? There's usually no one there to hold our hands and walk us through the process.
  • Based on a video Brad recorded for The Simple Startup discussion how credit cards aid him while other pay interest on them, one of the students asked how Brad figured out how banking works and not pay interest on his credit cards.
  • Using a credit card is frictionless for Brad. Not only are there excellent fraud and theft protections when using a credit card, he very rarely has to pay any fees to use it and he also has until the end of the statement close, followed by the statement due date to pay it off, which can be weeks after the purchase was made.
  • As long as you pay in-time and in-full each month, there are no fees or interest when using a credit card. It is effectively an interest-free loan from the credit card company making it a great tool for those who have their financial life in order.
  • You don't need to be afraid of credit cards, you just need to understand how they work. Do not get one if you cannot pay your balance on-time and in-full. You can reduce the friction and schedule it to autopay on-time in-full each month.
  • There are studies that show people who use credit cards tend to spend 12% more on average. That may be true, but it's likely not the same people who understand the power of compound interest. The FI community is focused on increasing our savings rate, paying ourselves first, and buying back our own time.
  • If you value something spend lavishly on it. If you don't care about something, why are you going to spend your money on

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 
 
 Nov 23, 2020
271 | Future Proof
01:07:16
  • In a world of uncertainty, how can we future-proof our skillset and also create an environment to help our kids thrive as adults?
  • Growing up, Brad never thought about entrepreneurship, but as he has gotten more into this FI mindset, the concept has shifted for him and how he is a model and mentor for his girls.
  • While Brad initially thought virtual learning might not be good, he has reframed it and now believes his daughters will look back on this year as a time when they were living their best life.
  • Both girls have gone through The Simple Startup workbook, but Molly seemed especially taken to it. After spending a day last week cleaning out one of Brad‘s garden beds in her free time at home, his daughter Molly and her friend have decided they would like to start up a landscaping business.
  • It may be that you just need to see the framework and behavior model for entrepreneurship. The business idea may not be as important as understanding the framework for building a business as quickly as possible.
  • Brad sat down with Molly to help her think her way through what it is she is capable of and really wants to offer with her business. Whether or not her gardening endeavor ever takes off is less important than the thought process they worked through which can help her out the next time she has a business idea. Having these conversations with your kids is a great way to connect and future-proof their lives.
  • While the majority of people in the world will never become entrepreneurs, it's good to start thinking like an entrepreneur and have evidence of what you have skills you have built.
  • The Simple Startup still has openings for the Winter Challenge. One student from a previous course is 9-year-old Analise, who while hesitant at first, ended up crushing it with her business, Creative Card Designs.
  • The concept behind Creative Card Designs are fun personalized cards you would want to send to someone to say hello, thank you, or for occasions like birthdays. Analise hand draws each card. She has some designs that can be personalized but also takes design requests. Her business mission statement is: To connect people by making quality, personalized cards for different occasions.
  • Keeping her business under control, so far Analise has sold two cards. She wants to make it bigger, but sometimes she messes up and burns through her materials just making one card. So she's trying to scale her business by going digital. This will allow the cards to still be personalized, but make it easier on her.
  • After coming up with the idea, starting the business, and creating different designs, Analise has set up a website for online ordering which goes directly to her Gmail account.
  • Currently, she's charging about $5 a card and making a $2 profit, but by going digital, it will be easier to make the cards and allow her to possibly drop her prices.
  • Brad thinks Analise will be able to test out the price for her cards and find the perfect per card price.
  • Analise's motivation for starting the business was to make money, but also thinks it's good to learn how to take control of your own things and not always have to work for someone else.
  • Andrea, Analise's mother, says the business has been going well and that her daughter has enjoyed learning and adding to her knowledge base. Andrea appreciates that someone is providing support and guidance when they have these ideas.
  • Analise didn't go into the class with the card idea in mind. she had several ideas she was torn between and sought feedback from Rob and her classmates before settling on the personalized card business.
  • Her advice to other budding entrepreneurs is that you have to come up with an idea for something people actually want, as well as something that will be profitable. She says that if you have a business, don't give up too quickly, and you have to work hard at it if you want to be successful.
  • Analise isn't too afraid of failure. After drawing designs and spending all her money on materials, she realized she needed to just figure out another way.
  • Andrea says that she's seen her daughter develop a sense of enablement, that she can come up with an idea and watch it grow, and also learning to persist when things aren't always simple or easy.
  • The Simple Startup instructor, Rob, modeled coming up with solutions to get past obstacles the students encountered. Learning isn't about reciting facts, but learning how to flex your creative muscle and problem-solve to get things done.
  • Andrea says The Simple Startup Camp was much more of a value proposition than she had expected. Being virtual, it was low-pressure, but also comprehensive and detailed with all the aspects of what's required to run a business. Analise even went through a mind-mapping exercise to assess her strengths, resources, and likes to come with a business idea.
  • Although some lessons were virtual, Analise was always an active participant. Students in the camp had Rob and each other to reach out to if they were stuck. It was like her very own mastermind group.
  • Anyone interested in purchasing a card from Creative Card Designs may visit creativecarddesigns.wordpress.com, fill out the Google form, and Analise will get back to you. Payment will be made with Venmo.
  • Analise is laying the groundwork for success, whether with this business of one in the future. Brad himself started several businesses before reaching some degree of success with Richmond Savers, Travel Miles 101, and finally ChooseFI. He picked up skills and knowledge all along the way.
  • Since recording the podcast segment with Brad and Jonathan, Analise has gone digital, contacts more people, and doubled her orders.
  • There's no fear of failure. It's iterative and failing forward. Once put into practice, all of the skills learned along the way while building a business become demonstrated skills for college and job applications.
  • Adding skill to your talent stack and thinking like an entrepreneur is something that the FI community does well. Brad loves being able to read listener emails, like the one from Laura who found ChooseFI episode 265 Talent Stacker, really resonated with her. Because of Jonathan‘s story, she now realizes that she isn't stuck working as a veterinarian forever and can find something else that lights her fire.
  • Many professionals like Jonathan and Laura took out six figures of student loan debt only to find that it wasn't a fair exchange. Getting rid of the student loan debt is tough, but it's the right choice. It will give you options.
  • While Jonathan can point to a lost decade in his life that he spent in pharmacy school, it's an intellectual exercise. There was an opportunity cost, but there are no sunk costs anymore.
  • Jonathan recently found a website and associated app called Supercook which allows you to save money by shopping your cabinets. After completing an inventory of your cabinets, the website will find recipes you can make by only adding a few ingredients. How much money could you save using up what you already have on hand? Reach out to feedback@choosefi.com and let us know the results.
  • It's been a tough year for the ChooseFI local groups, but some are still meeting virtually or for socially distanced activities, like hikes. David wrote in saying Brisbane, Australia just has its first meetup.
  • 2021 is bringing better things and we are coming back. ChooseFI is looking to do a grand meet up at a conference next Fall called The Unstuck Project. The date is still to be determined.
  • This week's FI Weekly winners are Josh, Sheena, and Hayden. After finding the podcast this summer. since April, they have turned their garage into a guest house and listed it on Airbnb, bought an investment property, contributed all of his wife's income to her 401K, began contributing to an IRA, opened an M1 Finance account, opened a Roth IRA for their son, are closing on a second investment property soon, and opened a Chase Sapphire Preferred card.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Nov 20, 2020
270 | Designing your Year for 2021 | Dominick Quartuccio
52:33
  • One of ChooseFI's most popular guests is back! Dominick Quartuccio returns to talk about after the shock of 2020, how to bounce back and what it looks like to design your life for next year.
  • Brad's relationship with Dominick goes back to when they were in college together. After reconnecting several years ago, Dominick has become a source of inspiration and a mentor to Brad.
  • In previous episodes, conversations with Dominick have centered around the idea of drift. It's the state of existence where we think we're making intentional decisions with our lives, but in reality, it is habits, patterns, unconscious beliefs, expectations, societal pressures, etc. that are really driving decisions.
  • It's only when an outside force, normally a quite dramatic one, forces itself upon us that we wake up from that state of drift.
  • For the first time in human history, the entire world is going through an experience together. It's caused everyone some sort of pain, whether it was losing a loved one, a financial loss, or anxiety.
  • Most of us have gone through periods of suffering in the past that when we look back on them, those were the moments that made us into the person we are today, and given the choice, we wouldn't change them today.
  • Instead of wishing to speed up 2020 and get it over with, Dominick encourages us to pause and look at the past year to see where you've been and highlight the standout moments. The purpose of this exercise is so that we can envision a 2021 that has the potential to be the most meaningful, fulfilling, and prosperous year of our lives.
  • In his role as a leaser, Dominick has seen behind the curtain of people's personal lives and noticed a distinct difference between those who have an inner foundation of work leading up to the pandemic and those who have never done the work. Fortifying your inner foundation allows you to be strong and thrive if there are tougher times in the year ahead.
  • There are two parts to the exercise of designing the next year of your life: looking back at the year you just had and looking forward to creating the year that you want.
  • Dominick places inner work underneath the umbrella of personal development. Where personal development could be an external skill to better yourself, such as reading a book to learn a new skill that can be applied in the real world, inner work is oriented inward, like examining what lights you up.
  • When the conditions of the outside world change, when you've done the inner work, you don't feel shaken and you are standing on something stable.
  • We've experienced more emotional turmoil in the last year than any other, making it worthy of introspection.
  • In the last year, what were some of the standout moments, both the highs and the lows, beginnings and endings, new and lost relationships or jobs, and the trials and tribulations?
  • Start with going back and looking at your calendar. Looking at it will trigger memories of travel or meetings. Next, go through the photos you've taken. There may be some real standout moments you've forgotten recorded on your phone. Finally, review your journal or scroll through any notes you've taken to see what you were thinking, seeing, and what your attitude was.
  • After looking back, begin looking for themes. Was it bringing your life back into balance, loss, finding love?
  • This year Jonathan and his wife got on the same page of their work-life relationship and she's embraced the idea of building her talent stack which has helped them have a common direction in their marriage. COVID has allowed Jonathan to watch his kids as they grow and evolve into different people every week. He has also lost 20-30 pounds, winning a bet he made with himself on Healthy Wage. He embraced the idea of community and is doing weekly calls with his father and JD Roth. He watched the income for his business take a nosedive and then recover from working to build new lines of revenue. He also built two new businesses using skills acquired in the last four years. He says it was his best year ever.
  • Dominick posed the question to Jonathan about how he would've handled the same downturn to his business if it had occurred three years ago. Jonathan said he's a completely different person now and doesn't know how he would have interacted with who he was three years ago. This year has proven he has grit, determination, and gets stronger during times of trouble.
  • For Brad, he and his family did CrossFit together five days a week for months. His theme is togetherness and it wasn't limited to his immediate family. The mastermind group he belongs to with Dominick was part of it. He's also been able to see his parents more this year and had the time to spend talking with his daughter who was experiencing anxiety and trying to work her way through it.
  • Brad thinks what was important about this year was being able to see the hard work of parenting come to fruition. Dominick mentions that during a normal year, these moments speed by. The pandemic has forced us to slow down and meet these moments. But when things start to speed back up again, are we going to fall back into these old habits, or are we going to pause and be there for these moments?
  • Our brains are hardwired to keep us safe, but many times the anxiety and creation of negative hypotheticals are not serving us. Realizing them helped both Brad and his daughter.
  • The pandemic has shined a light on mental health. What did you learn about your own mental health this year?
  • Additional questions to ponder are these. What milestones of FI did you experience this year? What relationship emerged as the most important this year? What did you discover about your physical well-being?
  • One last question to consider is what is something you would like to leave behind in this year? An emotion, a belief system, a recurring complaint?
  • Jonathan would like to leave behind the hours he spends that aren't helping to move him forward or bring him joy, like watching Netflix and scrolling through social media, but the thinks being productive 16 hours a day isn't the goal. Moderation may be his goal for 2021.
  • Next, what are some things you want to carry forward with you into the next year? A sense of inner peace, togetherness, clarity? Give yourself space to think about it.
  • What is an area of your life that is ready for the next big level up? Start by writing down many of the areas ready for a level up. after coming up with a list of 5-15, look for the one that really jumps out at you. Use this terrible year to springboard into the best year of your life.
  • Courage is Dominick‘s theme for the next year as he works to figure out how to get out there and help more men live their fullest potential.
  • This goal for next year does not need to world-changing, just meaningful, and something that inspires you to see what you are capable of.
  • Brad knows that being present is an area he could work on and he could put separation in place to make that easier and make his life better.
  • Napoleon Hill states in his work that the number one step in creating any meaningful change is to build a burning desire.
  • What's the one decision that you could make that would allow you to be focused 365 days a year on that burning desire?
  • Dominick will be holding a The Great Man Within 90 minute interactive webinar on Dec 16th for designing the next year of your life and in January, a free 30 day men's mental health challenge. To register for either, visit The Great Man Within.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 
 
 Nov 16, 2020
269 | Let's make Lemonade with a Twist
52:33
  • ChooseFI Facebook Community Manager recently posted a meme that hit home with Brad. It said, “Plot twist: 2020 has actually been the best year of your life. You faced challenge after challenge, you've adapted, and you've overcome. 2020 has forced you to grow exponentially. Don't take that for granted.“
  • 2020 had been Jonathan's best year ever. Instead of giving in to fear, doubt, and insecurity, he decided to lean in. By being more intentional with the things that were important to him, like his health, Jonathan has lost 20 to 30 pounds and is in the best shape of his life.
  • Jonathan also sought to build his personal talent stack and built two new businesses. He is feeling more agency and is more fulfilled than at any other point in his life.
  • Previously, Jonathan‘s beliefs about himself were all based on external validation. But as he began to get more freedom and autonomy in his life, he began to question those beliefs and reclaim his identity statement.
  • Learning that things such as student loan debt is good debt and you'll have to work until retirement age, just aren't true allowed him the space to challenge the status quo in other areas of his life.
  • Initially, he even questioned whether the success of ChooseFI was the result of a random lightning strike of luck. However, he's taken his interest-led learning and skills he's learned, applied them to two new business models, and achieved success with them.
  • The interest-led learning Brad and Jonathan frequently discuss on the show helped Jonathan lean in March, and it also lead Brad‘s eight-year-old daughter, Molly, to learn how to cook a perfect pan-seared chicken breast just like Gordon Ramsay.
  • The things you believe about yourself become part of your identity statement. But you can turn the limiting beliefs around and say that you're the type of person who can learn anything. It may be just a Google or YouTube search away.
  • You can reframe your identity by asking yourself what you want it to be.
  • Though she isn't running now at nine months pregnant, part of MK's identity is that she is a runner. However, in high school, she was the slowest person on the team. She thought she couldn't do what the other's on the team were doing, but her coach didn't have the word “can't” in his vocabulary. His mindset is something she has carried through to other areas of her life.
  • MK challenges you to take the word “can't” out of your vocabulary too because once you aren't allowed to use it, your mindset will shift and you can begin to redefine who you are.
  • A case in point for the power of working to get 1% better was in the news last weekend when Chris Nikic became the first person with Down Syndrome to complete a grueling Ironman triathlon. Emblazoned across his shirt was his training mantra, “1% Better”.
  • You can make a choice every day to live your life a little bit better and when your finances are in orders, everything else gets a little bit easier. You make the choice not to deprive yourself by saving money, to empower yourself, and put yourself in a position where you have the freedom to think about all the other things that truly matter, like health, relationships, and spending time how you see fit.
  • While it's about making a choice, if you don't get up off the couch and take action, nothing is going to get better.
  • If you have a question you'd like to have answered on the show, submit them by going to ChooseFI.com/voicemail. Or reply to Brad's weekly email, The FI Weekly. Get on the list by going to ChooseFI.com/start.
  • The first mailbag question this week comes from Sara who wants to know how to master financial independence when you don't have a 401K. Sara has been working through the podcasts and read, ChooseFI: Your Blueprint for Financial Independence, but her husband is a bartender and doesn't have a 401K.
  • W-2 employees without access to a 401K could consider being an advocate and talking with their employer about getting a 401K like Waffles on Wednesday talked about when they were on the show. Just giving employees access to a 401K does not have to be cost-prohibitive and can be a win for both owners and employees of small businesses.
  • It's important to remember there are no rules to FI. Just because others are talking about maxing out their 401K and then doing a Roth conversion ladder, doesn't mean that's what you have to do. Brad admits it wasn't until the last two years at his job before he maxed out his 401K contributions.
  • The path to financial independence does not depend on a 401K. It's predicated on savings rate. The goal is to save that in the most-advantaged way possible. Between marginal tax brackets and child tax credits, it may be fie just putting money into a Roth IRA, which has a $6,000 limit this year.
  • If you have your own side hustle, you have options for retirement accounts, like a SEP IRA or solo 401K. A SEP IRA is easy to set up through any major online brokerage firm and put in roughly 20% of your income. There are potentially even higher thresholds for solo 401Ks when contributing as the employee and employer.
  • The next question is from Conner who wants to know how best to allocate his 25% savings rate between a 410K, Roth, IRA, and savings account.
  • The purpose of saving money isn't only for retirement. Save for life and having options.
  • Brad thinks Conner is doing a fantastic job saving and while it would be easy to say “put it in the 401K”, having all of his net worth in tax-deferred vehicles may not be the best physiologically. Rather than stick it in a savings account, he could invest in the stock market with a brokerage outside of a retirement account.
  • As much as Jonathan loves Vanguard, it's not the easiest brokerage to open an account with. In comparison, Fidelity is much easier and still provides access to low-cost broad-based index funds.
  • An upcoming episode will feature Sean Mullaney to review in-depth 401Ks and Roth IRAs. One of the major differences between the two is that contributions to a Roth IRA may be withdrawn tax and penalty-free, which can act like an emergency fund.
  • Join us and share your wins! This year ChooseFI will be holding a LIVE year-end wins episode on December 8th at 7:30 pm Eastern simulcast on Facebook and YouTube. It will be replayed as the final podcast episode of the year. Subscribe to get a reminder at ChooseFI.com/2020wins.
  • For a chance to win a book from ChooseFI Publishing, share your wins by replying to Brad's weekly newsletter. This week's first winner is Cory, who as of last week caught up on all episodes of the podcast after two and a half years of listening. After implementing many of the actionable tips and set Cory is set up for financial success and went from a negative net worth to hitting over $100,000 at the beginning of October.
  • The second winner this week is Jo. Jo and her husband found ChooseFI while she was on maternity leave earlier this year. During that time they refinanced their mortgage, getting a better rate and eliminating PMI, canceled subscriptions, lowered their cell phone and car insurance bills, enrolled in Sofia.org course for Jo's remaining college electives, was promoted at work and negotiated a substantial raise, will max out 403bs, and opened a non-retirement brokerage account. Also, while focusing on their health, Jo lost 70 pounds and her husband lost 40.
  • Jonathan won his weight loss challenge with Healthywage.com and received a check for $2,419.67! Set a bet for yourself by going to ChooseFI.com/healthywage.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 
 
 Nov 13, 2020
268 | We Want Guac | Financial Independence for Gen Z
48:34
  • Optimize your finances during your 20s, no matter what your income is, and build significant wealth. But what are your options when working an entry-level job when you have a large amount of student loan debt?
  • Amy's first job out of college was an entry-level position earning $30,000. By the age of 25 had a $100,000 net worth and has tripled her salary in the last few years by learning how to market herself.
  • The average cost of a four-year college degree in 2019 is $122,000. Amy was fortunate that her parents paid for college and she graduated with degrees in Communications and International Relations without any student loan debt.
  • She graduated without any job offers and her only source of income came from waitressing which wasn't enough to live in Boston on. After a couple of months, she contacted a temp agency and got a job earning $15 an hour.
  • Nearing the end of college, she saw that recent graduates weren't getting the jobs they had hoped to get. She calls that time her “Year of Fear” because she didn't have much in savings and terrified of what was going to happen. For the rest of the year, she continued to work full time at her temp job and waitressing on the weekends.
  • With the benefit of hindsight, she realizes she has an average amount of skills as anyone else coming out of college, which is inadequate for the realities of today.
  • The ultimate goal of going to college is to graduate and get a well-paying job. But the focus is on grades and prerequisites, not how to find mentors, write a resume that resonates with people, or navigate the application process to get the jobs you actually want. The way the job application process works now is broken
  • While there may not have been any skill Amy believes would have initially made landing a job easier, it would have helped to find people who agreed to meet and interview her in the first place.
  • After submitting resume after resume to company websites and since times out of ten hearing nothing, Amy emphasizes flipping the script and having the companies and recruiters come to you.
  • Amy was able to go from $30,000 to $93,000 a year by learning how to market herself on LinkedIn so that people found her.
  • What makes you stand out and how can you improve your chances?
  • The first step is to decide what it is that you want. If you are marketing to everybody, then you are marketing to nobody.
  • Next, start looking at the job positions and titles that you want, study the job applications for those positions, the job requirements, descriptions, and language used.
  • Using that verbiage in your resume or LinkedIn profile allows hiring managers to see that you are perfect for the role and HR departments who use algorithms to narrow down the prospects, which relies on keywords that your resume or profile will likely also have.
  • It can be difficult to figure out what you want at the age of 20. Amy chose a degree in Communications because it could apply to almost anything she wanted. Though she says to figure out what it is you want, figuring out what you want for just the next couple of years is fine. You can always pivot, but you just need a direction for your resume.
  • Employers don't generally look for someone well-rounded, instead, they are looking to fill a specific need. Show you can fill that need and you're more likely to be hired.
  • The salary increase she received for her second job out of college was pushed by the recruiter Amy was working with who found her on LinkedIn.
  • Amy continued to use the same tactics with her next move but added in extras that may not have been relevant, like her HTML skills. That one change opened the door with recruiters looking for marketers who also understood coding. Landing that job bumped her salary up to $86,000.
  • Answering the question, “What do you do?”, always results in a simple answer, like Marketing, not what you actually do or what skills you possess.
  • When helping out a friend earlier this year with his resume, Amy noticed that the skills section of his resume didn't speak directly to his particular skill set for the jobs he wanted.
  • You don't have to be world-class at anything, but with the right variety of skills, you can stand out because there are fewer people who have that intersection of skills.
  • Earlier this year, Amy started her blog, We Want Guac, after looking at different finance blogs while trying to figure out what to do with her new and higher salary. Building the blog has continued to add to her talent stack.
  • Amy says that in 2016 she was the ultimate cheapskate, attending events to take advantage of the free food, and ordering small items when eating out with friends. The salary increases enabled a shift in mindset from deprivation to one of abundance.
  • Part of her mindset shift came out of creating a budget. Her budget didn't mean restricting herself from spending. Instead, the numbers showed her the limits could be more than she expected and it would be okay if she did spend more. It gave her permission to spend more on herself, leave more in tips, and give to charity.
  • Like the saying by Jocko Willink, discipline equals freedom. Amy's budget was the discipline that gave her the freedom to see her limits could be bigger and move beyond the mindset of scarcity.
  • The goal of We Want Guac is to help people better understand how to manage their money.
  • When doing the math, Amy calculated that a 25-year-old with $65,000 invested in an index fund can retire with $1,000,000 at the age of 65 without ever investing another penny. With a net worth of $100,000, she figured she could retire at 50, and if she continued to save, she could retire in her 40s or even her 30s.
  • Amys says having $100,000 saved in your 20s makes an incredible difference. It is five figures of investment growth during bull markets and it is security in downturns.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 
 
 Nov 09, 2020
267 | Timing the Market
47:07
  • Following US Election Day results, it's important to remember the alligators and kittens, a concept to approach overall mental wellbeing. The negative influences in life are alligators and all of the things that make life better are kittens. Focus on getting rid of the alligators.
  • It's a human bias to focus on the negative. How do you focus time and attention on the things that make life better? For Brad, he cut watching the news out of his life which has helped him to achieve a better mental framework for life.
  • The business model of the new is to keep you watching through the next commercial break. They cause anxiety. You can stay informed without being a part of that model.
  • Control what you can control and you will be in a better financial position four years from now regardless of the election outcome. There is so much outside of our control right now and worrying about it isn't productive.
  • Despite the number of people who are confident they know what will happen to the stock market as a result of the election, the fact is that we just don't know.
  • Market uncertainty is one of the reasons to have a plan for your money regardless of what is going on and automate it. Not only is it difficult to try and time the market, but you need to get it right twice, both when you buy and when you sell.
  • The FI community is about long-term thinking. It's not about quarterly earnings or even five-year trends, but performance over multiple decades and the decisions that will help get you to the wealthiest point over that time period.
  • With that long-term thinking in mind and in a time of calm, it's a great time to write down your investor policy statement. Having a plan for your investments, written down in an investor policy statement helps you to avoid being reactionary or make rash decisions.
  • In February, the Dow hit a high of 29,500. By March 20th, it had dropped 20-30% and many predicted it would go even lower. Defying the dire predictions, the Dow recovered 30-40% of its gains within a few months.
  • The problem with making market predictions is that there are far too many variables for you to account for and again, you have to get it right twice. Even the professions are wrong 50% of the time. What chance do you have of making your investment decisions around emotion enough to stay solvent or long-term or outperform the market over the long-term? Essentially no chance.
  • The highest likelihood of long-term financial success is to control the expenses on your investments. Low-cost index funds are going to be your best bet.
  • Following your investor policy statement and injecting new money when you can benefits you with dollar-cost averaging. Time in the market is much more powerful than timing the market.
  • ChooseFI listeners are creating space and making progress in their lives. Patty commuted to paying off debt within five years and just made her last payment, including more than $40,000 in credit card debt.
  • Joe replied to Brad's email, The FI Weekly, Joe shared that he and his wife transferred his 403(b) from a high-fee broker to Vanguard and also started on their journey to earning travel rewards by opening a Chase Sapphire Preferred card.
  • November 8th is the LAST CALL to apply for the Chase Sapphire Preferred card with its highest-ever bonus of 80,000 Ultimate Rewards points after spending $4,000 in the first three months. For more info, go to ChooseFI.com/CSP.
  • Teachers are primarily the ones using 403(b)s, most of which are laden with really high fees and very few options. ChooseFI plans to have an episode in the coming months with Dan Otter discussing doing better with your 403(b).
  • Crystal sent in a message saying that she had no idea about fees and was investing with Edward Jones. Her investments hadn't done much over the last five years and now she's educating herself, but the fees appear to be hidden.
  • Since the market has done so well over that last five years, the reasons why Crystal hasn't made money are because she wasn't invested in a strategy that allowed her to keep up with the market or she was getting crushed by the fees.
  • Brad says finding the expenses for his old company's 401k options was relatively easy. Included in the table of investment options, one of the columns listed expenses. Other titles may be expense ratio or expense percentage. The numbers may range from 1.50 to 0.03.
  • Without a nicely organized table, you may need to look up the expense ratio by looking up the ticker symbol.
  • A low-cost index fund investment strategy is simple and not complex enough to require help from a professional. In contrast, a complex investment plan is probably costing you a lot of money.
  • With an actively-managed fund, a person, or team of people, are making decisions on what to buy and when to sell. Through the fees, you end up paying them for their time. And then the data shows that they aren't even keeping up with the market.
  • The difference between expense ratios of 0.1% and 1.0% is tens of thousands to millions of dollars over time after compounding.
  • Brad ran through a scenario originally published to RichmondSavers.com reviewing the impact fees have on an investment portfolio over a 40-year timeframe. The result was that a high expense ratio and advisor fees cut the potential net worth in half.
  • Even target-date funds may not get the returns you expect because they are too conservative for you.
  • It's good to think about what you are invested in and how much it is costing you.
  • ChooseFI's new website is now live! Check it out at ChooseFI.com or ChooseFI.com/start. There are still some issues to be fixed, but if you are having trouble finding anything let us know and send us your feedback to feedback@choosefi.com.
  • The feedback on The Simple Startup classes has been overwhelmingly positive. Kids aged 10-18 have been getting off the video games and acquiring new skillsets to future-proof their lives.
  • Rob Phelan has figured out how to offer the course year-round and the next session starting January 18th is open for enrollment. Registration will be open until January 8th or until it sells out. Previous sessions have always sold out.
  • Register at ChooseFI/startup for The Simple Startup between now and November 15th and save $10. Use promo code “podcast” and save another 15%.
  • Share what you are doing and how your life has changed by replying to Brad's email newsletter, The FI Weekly, and have the chance to win one of the books from ChooseFI Publishing. Sign up at ChooseFI.com/start.
  • Christian Choosefi'd his view of the pandemic. He's focused on the positive things, like spending more time with his family, time to exercise, eating healthier, and saving $4,500 this year.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Nov 06, 2020
266 | Breaking the Cycle of Poverty | Yanely Espinal
53:29
  • Yanely grew up in a low-income household in Brooklyn and then attended Brown University. But by the time she graduated, she had accumulated a bunch of credit card debt that she was hiding from her family.
  • She tried to figure out dealing with her debt on her own by reading books, listening to podcasts, and watching YouTube videos. After paying it off, she thought it was ridiculous she had never learned it in school and started her own YouTube channel to share her story. That eventually led to her landing the perfect job and a solid career path.
  • Growing up, there wasn't a lot of money in Yanely's household, so there weren't many conversations about money either. When there was talk about money, it was always negative and caused tension.
  • One thing that her father did teach her was to never have a loan or owe debt to a friend or family member and that she needed to always pay them back. Interestingly, that sense of obligation did not transfer over to institutional borrowing which she believes is a common mindset in neighborhoods like the one where she grew up.
  • When Yanely was accepted to Brown University, she had no idea how expensive it was going to be. Although she received a full scholarship, she discovered she still need to purchase things such as textbooks, a laptop, and other supplies. Because her father taught her not to borrow money from anyone, she wanted to figure it out on her own and applied for her first credit card.
  • She attributes her attempt to be resourceful using credit cards to a lack of financial literacy. She thought she was doing the right thing and on the right path at the time.
  • Her payment history was good since always made the minimum payment and never missed a payment on her credit cards, but her credit utilization was high as she was always close to maxing out her card limits.
  • With each credit card application, banks continued to give her credit cards with higher and higher credit card limits. Trying to keep up with the rich kid lifestyles of her classmates ended up getting her $15,000 in debt.
  • Moving from a neighborhood filled with Caribbean immigrants to an elite university was a culture shock. Yanely felt like she didn't fit in because she didn't talk or act like her fellow students. Not understanding expressions and phrases others used made her feel dumb.
  • Going from a top performing student in high school to feeling like being in the wrong pack may be part of the reason why it's physiologically difficult for low-income who attend prestigious universities.
  • Yanely says the biggest thing a low-income student can do is expose themselves to the rigorous language and vocabulary that is going to be expected of you. Students are often not prepared for how much harder they will need to work, it ends up being a shock, and they go home.
  • Approximately 2/3 of her credit card debt came from spending on just trying to keep up with her fellow students. Although there was no overt peer pressure, it was unspoken.
  • Straight A's and scholarships are not enough. Students like Yanely need to have both academic and social grit to survive in an environment that is not in their comfort zone.
  • Reading The Millionaire Nextdoor to help her figure out how to pay off the debt, she noticed the descriptions of poverty and generational poverty were describing the life she was living. She decided she was going to be the one to shift the trajectory of her family in terms of wealth.
  • Yanely had a choice to make between continuing a pursuit to fit in and look good while racking up debt, or the alternate route of smashing her debt aggressively and begin to build wealth, breaking he cycle of poverty.
  • The interviews of people who didn't come from wealth surprised her, opened her eyes, and completely shifted her mindset. She realized she was going to need to completely wipe her mental slate clean and start with new and fresh beliefs about money and how it works.
  • Thomas J. Stanley and William D. Danko, authors of The Millionaire Nextdoor devised a formula for determining if you are as wealthy as you should be. That formula is: Your Age multiplied by Your Annual Income (from all sources except inheritance) divided by 10 = Your Expected Net Worth
  • Growing up in a neighborhood where spending to reflect success and social status was prevalent, Yanely understands the pressure and had never imagined there was a different route.
  • Her beliefs were shaken to the core listening to interviews of self-made millionaires answer questions and discuss the strategic money decisions they made with a clear goal in mind. It opened her mind and made Yanely want to explore more.
  • Despite FI not even being in her purview a handful of years ago, Yanely just hit Coast FI after beginning to maximize everything she was doing with her investments and prioritizing tax-efficient investments before even paying her rent.
  • Yanely paid herself first. After learning more about 403bs, she determined her priority should be a Roth IRA. She then invested as much as she could to qualify for the company 401k match. Whatever was left after the investments was used to pay for living expenses like rent and food, and has cut down on her fun money budget.
  • Being obsessed and hungry for knowledge helped Yanely pick up personal finance lessons so quickly and go from being in credit card debt to maximizing her investments. Her goal was to learn everything she could and begin producing a result in 90 days.
  • She feels that there is an injustice that these things were never taught in her community, her family, or even at her Ivy League school.
  • Previously, she would have asked an expert or others for advice and take it. she no longer believes that is a good strategy for solving her problems. She thinks you need to question the experts' motivations and do your own research. This is especially true with investing.
  • Her goal with Coast FI was to invest enough that she's be a millionaire by the age of 65 even if she had never invested another dollar again. that meant she needed to hit $250,000.
  • Initially, Yanely's goal was to be an agent of change for herself. Now she wants to be an agent of change for others through her YouTube channel where she cold share her story.
  • As a teacher, she realized that teachers were also never taught about personal finance in school. Teachers teach students about all kinds of topics, but not about money. Financial literacy is lacking and being passed down from generation to generation.
  • An organization reached out to her to come on their podcast where they talk with teachers about money and personal finance to help give them the knowledge and skills to teach it in the classroom. She is know on staff doing educational outreach.
  • She says her impact through coaching or her YouTube Channel is limited, but seating change in the education system and reforming the way students are learning in school is the kind of change she is after.

Resources Mentioned In Today's Conversation

If You Want To Support ChooseFI:

 Nov 02, 2020
265 | Talent Stacker
51:21
  • What's in your talent stack? Inspired by content discovered over the last four years while producing ChooseFI, Jonathan has spent the last couple of months hard at work on the side on a new passion project.
  • As said many times here on the show, financial independence isn't about doing less, like sitting on a beach sipping cocktails. It's about aligning your what you value with your life and having the freedom to pursue what you are passionate about.
  • ChooseFI has given Jonathan the opportunity to look at and do better with his personal finances, but it's also helped him realize that he loves to work hard, but not necessarily for a paycheck. He'll work twice as hard when it aligns with his interests, passions, autonomy, mastery, and purpose.
  • While Jonathan has not reached FI, he does have all the benefits of it. FI is not binary because the benefits of FI start accruing from Day one.
  • Time is your precious non-retable resource. You can stick your head in the sand and gut things out until reaching FI, or look around and see what other options we can create for ourselves that bring more joy, autonomy, mastery, and purpose.
  • When you find that your ladder is leaning up against the wrong wall, you don't need to stick it to that commitment and grind it out for another 20 years. You don't need to wait for anyone to give you permission. You can pivot.
  • One of the better messages to come out of the FI movement is that no matter what has happened, huge student loans, disastrous real estate deals drug addiction, or divorce, you can always move forward and make your life better.
  • A life optimization strategy begins with financial security and gives you space for mastery and exploring new things.
  • You don't need to be in the top 1% of anything. Just being better than average at a bunch of different things will open up opportunities. What does a high value, high return on investment, talent stack look like?
  • Students coming out of college are ill-prepared for the way the world really works. The world wants to know what have you done and what can you do for it. What if you were to focus on the skills the world wants and is willing to pay a high salary for? And then very economically earn certificates stating that you can do this work? You can retain and earn these skills in a year or less.
  • There are very few jobs that actually require a college degree. Through certificate programs, you can get jobs earning between $60,000 and $160,000 a year. Jonathan says if he were starting over, knowing what he knows now, this is what he would do.
  • Jonathan has started another podcast, the Talent Stacker podcast. It's not for those set on going to college. It's for people looking to see what other choices are out there or who are unhappy with the choices they previously made and are looking for something different and don't have another four years to earn a degree.
  • The Talent Stacker podcast does not just regurgitate information learned on previous ChooseFI podcast episodes. It helps you recreate what these other people have done step-by-step.
  • The framework of the Talent Stacker podcast is based on a handful of different categories. The first is a time for money or a service role where you trade an hour of work doing something for a set hourly rate.
  • The second category is sales, where you help make it easier for a current audience or customer base to make a purchase.
  • Category three is marketing or expanding the current customer base.
  • The fourth category is team development or leadership or bringing a team together to focus on target goals.
  • The fifth category is systems, process, and workflow, helping teams to work more efficiently.
  • In reality, many of these categories have overlap. If you can do a little bit of several of these, you can become what is called a Rainmaker.
  • Jonathan recognizes how each of these skills has been used and added to his talent stack through the ChooseFI podcast.
  • Building a talent stack is not just limited to business owners. It's a mindset about learning new things and how they can help make you a better person.
  • Brad used his skills as a travel rewards enthusiast, along with his business-building skills and CPA degree to build a travel rewards coaching service.
  • MK found success in her corporate career through choices like learning basic HTML to build her talent stack, which helped her to climb the ranks, and then eventually launch her own business. Her pregnancy has caused her to look at streamlining things and becoming more efficient to keep her passive income stream growing.
  • Your real education doesn't start until you get the job. College merely proves to an employer that you know how to learn.
  • Jonathan worked with Bradley Rice from Episode 117 to create an actual career development program in Customer Relationship Management (CRM) that you can replicate in six months and make $60,000-80,000 a year, with a path to making $200,000 in 3-5 years.
  • With four years of starting ChooseFI, Jonathan has become one of the top independent podcasters and now he teaches podcasting to others.
  • With ChooseFI, the goal is to compel you to take action toward reaching financial independence. with Talent Stacker, Jonathan wants to see you develop skills and maybe earn more.
  • This week's FI Wins of the Week include Karen. She and her husband decided to invest in camping gear and enjoy camping in Florida before they reach FI and can move to Washington State.
  • The second winner is Emma who is 20 and just fully funder her Roth IRA for 2020 and is ready to fully fund 2021 in January.

RESOURCES MENTIONED IN TODAY'S CONVERSATION

IF YOU WANT TO SUPPORT CHOOSEFI:

 Oct 30, 2020
264 | Recognizing Scarcity and Uncertainty | Leisa Peterson
39:18
  • Your money story informs so much of your life even if you're not aware of it. For 30 years, Leisa Peterson has been researching and studying how trauma in early life contributes to the money challenges faced later in life.
  • Growing up with a scarcity mindset, money became an escape that gave her motivation. Leisa decided in her mid-twenties that she was going to have money in her life and not have any stresses about it as her parents did. Earning money became an all-consuming response to the trauma she had experienced.
  • There's a very broad spectrum of trauma from mild to quite serious and not everyone reacts to it in the same way. Some people like Leisa may end up wanting a lot of money, while others are lead to feeling like they have no control over money.
  • An adverse childhood study from Kaiser was intended to understand how childhood trauma affected health. In Leisa's reading of the study, she found one of the findings included financial problems and realized this was something not a lot of people were talking about.
  • These childhood experiences become very disruptive, brings an uncertainty to how life is viewed and crushed the sense of self.
  • The concept of scarcity and uncertainty go together. This leads to struggling with either an extreme need to control or feeling out of control with money.
  • Because kids are absorbing everything we say, it's important to change the language we use around money.
  • When people become more familiar with their trauma backstory, they are better able to talk with their partner about their money challenges.
  • Disconnects in communication can occur when each other's backstories are quite different. We can only know what we know from our own perspective. The job in relationships is not just to understand ourselves, but to see the other person and how they are approaching money differently because of their backstory.
  • When people think of something as being scare in supply, they are going to buy more of it. Toilet paper is a relevant example of this for 2020. Someone coming from a home without enough money may have strange buying behaviors. Their idea of scarcity or uncertainty may be showing up in their daily behaviors with money.
  • For spouses or partners who have different money stories, Leisa encourages them to just start somewhere. Think about how money was treated at home growing up and have a conversation about it.
  • Questions to consider asking are: Did mom and dad talk about money? Did mom and dad fight about money? What is your first memory of money? When did you make your first money? How did that make you feel? Were you afraid?
  • It can be difficult to have these conversations for the first time with another person. Journaling is a way to privately have them with yourself first. The first person you share these feelings with should be someone you trust and it may be someone other than your partner.
  • Throughout her career, Leisa has found that people react to money very differently. The majority either hold it tightly or avoid control of it altogether, with a minority viewing it as a tool and are at peace with it.
  • Having one strong fire in your life influences the way you think about money in life. The earlier the influence in life, the better.
  • Parents sometimes joke or convey the wrong message about money. Leisa says it's important to go back and close the loop with children.
  • In the FI community, we want our children to have the skills to take care of themselves and be financially independent, but is it possible for them to have too much abundance? Leisa says she wants to be very open about what goes on in their home, discuss their failures, and teach them the value of money and hard work.
  • After reaching her goal of becoming a millionaire, Leisa made a massive change in her life. She and her husband sold it all and took a year off to travel with their son. The trip changed their entire approach to life.
  • Previously, Leisa's family had been consumers of their money. After the trip, they took their nest egg, created investments where their money began working for them.
  • A result of Leisa's drive to become a millionaire was that once achieved, people began to treat her differently. The outward display of wealth began to affect her friendships. It was then that Leisa realized the money was not all that important to her.
  • Leisa's book, The Mindful Millionaire, tells these stories about our money experiences, our relationships with money, and how we can transform them into thinking about money as a tool.
  • The key takeaway from this conversation is that words matter. It's important to think about the unintended consequences of the conversations we are having with our spouses, partners, and kids. Have humility in these conversations and be honest.

RESOURCES MENTIONED IN TODAY'S CONVERSATION

IF YOU WANT TO SUPPORT CHOOSEFI:

 Oct 26, 2020
263 | Pick Your Five: Accountability & Decision-Making
46:46
  • Jonathan draws a parallel between the episode on Monday with professional poker player Annie Duke and hitting his weight loss goals. Finding himself well over his desired weight, Jonathan took a health challenge and has kept the weight off for six months making him a weightloss statistical abnormality.
  • Where most people diet and get to a goal weight, because the effort was a diet, they end up regaining the weight. What Jonathan did was make a lifestyle change.
  • Tying to the discussion with Annie Duke, Jonathan recognized that he couldn't control everything, made better decisions, and set himself up for more opportunities. All of it helped to increase the opportunity for luck to strike.
  • Jonathan isn't alone in his endeavor. Through weekly accountability phone calls with his father and FI community member, JD Roth, they check in to ask if each has followed through with their goals for the week
  • Their goals aren't all that strict but they are trying to be 1% more intentional with their decisions and look at their decision-making framework, watching for triggers, giving into them less often, and coming up with solutions to not be tempted.
  • Brad notes the discipline equals freedom and that the framework Jonathan has created for himself makes everything easier and no longer requires willpower.
  • The accountability and decision-making strategies Jonathan applied to his weightless journey can be used for virtually anything you want to achieve in life. Taking action and trying to be just 1% better what ChooseFI is all about. All of the small wins begin to add up, creating nothing but good, grows your gap, and continuous the virtuous circle.
  • When we upgrade the quality of our decisions, the impact of them begins to compound and increases our probability of success.
  • Brad discusses how 70-80% of the contestations he hears involve one of the three killers of happiness: sarcasm, complaining, and blaming. We can change our mindset and the locus of control to impact our future. He believes putting space between stimulus and control can have positive and compounding effects.
  • As often mentioned on the show, you are the average of the five people you spend the most time with. Those five have the greatest influence on your life and you don't want them to have those happiness killer characteristics. Be intentional with your five picks.
  • Choose people who give you a path forward and will hold you accountable to the things you said were important to you.
  • Brad and Jonathan discussed how the concept of resulting, pro and con lists, and infecting others with our opinions before asking for advice is not helpful when trying to make better decisions.
  • As mentioned during Monday's episode, making better decisions requires depth and an understanding of probability and magnitude.
  • A challenge for listeners is to write down the five people you spend the most time with and who have the most influence on you. Then write down that their characteristics are that make them a good fit for your top five. And finally, what are the ideal characteristics for people who would be influencing your decisions and where can you find them?
  • The second exercise is to approach someone and ask for their opinion on something without prejudicing it first. Don't lead with what it is that you really want to do. Ask your question in a way that gets you additional information you maybe hadn't considered yet.
  • The first win from the community comes from Jodie, a self-professed broke chick who found FI in 2016. Since then, she's doubled her salary, gotten out a debt, flipped a live-in property, paid off her card, got married, formed two business with her husband, quit her job, and hit $100,000 in investments. Congratulations on taking action and changing your life, Jodie!
  • In response to Brad's weekly email, Evan writes about not shooting for FI with reckless urgency, but a thoughtful understanding of the use of money and how it can improve his life after breaking his finger required surgery. FI isn't about deprivation, but buying the things you value.
  • While the world is slowly getting back to normal during the pandemic, John calls in sharing how his wife was able to pivot her events business, Escape Room Races. The pandemic killed her in-person events, but she was able to rebrand, and pivot to a virtual format which is bringing in tons of new virtual events and they just had their biggest month ever.
  • Speaking of live events, previous ChooseFI guest, Christine, from episode 137, sent in a letter saying that at least 50 ChooseFI listeners have come to Nashville and taken her tour. Last Fall, one guest from New Zealand Brough five friends from all over the world after hearing about Christine's tour, A Little Local Flavor, on ChooseFI. She also has converted her friends into ChooseFI listeners.
  • When you respond to Brad's weekly email and we read your win on the air, you will get one of the ChooseFI Publishing books.
  • The first winner is Ahmed who wrote in to say he recently graduated college and was due to move to a high cost of living city. Because they moved to working remotely, Ahmad is saving on rent by staying at home with his parents in a low-cost of living city and investing the savings.
  • The second winner is Tommy who received an email from his state's 529 program that he was receiving a $500 Maryland state contribution.

RESOURCES MENTIONED IN TODAY'S CONVERSATION

IF YOU WANT TO SUPPORT CHOOSEFI:

 Oct 23, 2020
262 | How to Decide | Annie Duke
01:07:19
  • Annie Duke is a world champion poker player and author of Thinking in Bets, a book which makes the case for embracing uncertainty in our decision-making framework. In Annie's latest book, How to Decide: Simple Tools for Making Better Choices, she answers the question, what does a good decision-making process look like and how to incorporate that into your own life.
  • The only way we can become better at making decisions is from our own experience, and our experience is going to be the outcomes of past decisions we've made. We need to understand the way in which knowing how something turned out can mess with our ability to figure out why.
  • In a thought experiment concerning the 2015 Super Bowl between the Seahawks and the Patriots, Annie reviews a play called by Pete Carroll in the last seconds of the game. Though widely panned as the worst play called in Super Bowl history, Annie states that it's hard to evaluate the quality of the play called when we already know the outcome.
  • Had the outcome of Pete Carroll's play been a touchdown, the reaction would have been the opposite. This phenomenon is called Resulting, where the quality of the result is attributed the quality of the decision.
  • Reviewing the actual odds of the result of that specific play, Annie determines that Pete Carroll's decision was far from the worst play called of all time as there was only a 25 likelihood of that specific result.
  • Annie applies what she's learned playing poker, specifically realizing that what you see happen doesn't change the decision that you make, to other aspects of life.
  • The paradox of experience is that while we know we need all of these experiences to learn, we see how things unfold and we take our lessons for individual experiences, not in the aggregate.
  • Poker has some surprising similarities to real life in that your outcome is a combination of luck and the quality of your decisions.
  • The definition of luck is what you don't have control over. You cannot control your own luck. You can control the quality of the decisions you make and reduce the chance that luck has an influence that will turn out poorly for you. While we are all under the influence of luck, we are also very much under the influence of our own decisions.
  • In our decision making, we should see the luck clearly and make the decisions that are more likely to advance our goals. Brad ties that to ChooseFI's philosophy of the aggravation of marginal gains and striving to do 1% better.
  • We have a lot of cognitive bias that delude us into believing things are much more stable than they really are. COVID has torn that away from us. We are also feeling the effect of imperfect information. COVID is not a special case, it's just something we can't hide from the uncertainty.
  • COVID does give us an opportunity to think about how to navigate uncertainty which will improve all decisions we make.
  • A pro and con list has no dimensions to it, specifically missing are the magnitude of the payoff or how much will it advance or take away from your goal, and what is the probability of each con. These lists also amply biases you already have and can be gamed to reach a predetermined decision.
  • With inside view thinking, our personal models create cognitive trenches. When new information comes in, we mold it into a model we already have rather than be objective.
  • An outside view is what is true of the world.
  • To try and avoid inside view thinking, we need to expose ourselves to different perspectives of corrective information.
  • The foundation we base our decisions on is flimsy and full of inaccuracies. We should increase the probability that we collide with perspectives and information we don't know.
  • It's okay to say you don't know very much and decide to get more information to become a better decision-maker.
  • Making a good decision with one stock doesn't necessarily make you a good investor, you would have to look at all the decisions made with your portfolio.
  • When getting to your outside view, it helps to get yourself into the future because it helps us look back on ourselves. We also need to realize that we tend to believe we are more likely to be successful than we actually are. It's helpful to think about all the ways in which you might fail.
  • A pre-mortem is the idea that time travel and negative thinking will result in an outside view and lead to better decision making.
  • A backcast is the opposite of a pre-mortem where you look at the luck and skills that lead to a positive outcome.
  • To find groups of people to get the best opinions from, find people who are interested in finding what is true in the world, but by putting the framework in place, you can turn anybody into an amazing true-seeking pod.
  • When seeking other's opinions, it's best not to divulge your own opinion beforehand. It results in one of three ways: it might show the other person's opinion is right, the truth may lie in the middle somewhere, or it may show your opinion is right and help you to understand it better.
  • Annie believes that mostly we should be making decisions faster than we do. The decision-making process is a skill and it takes time to understand which we should be taking our time we should take our time with and which could be faster.
  • The speed of our decisions should be made by the impact of the decision and optionality available.

RESOURCES MENTIONED IN TODAY'S CONVERSATION

IF YOU WANT TO SUPPORT CHOOSEFI:

 Oct 19, 2020
261 |"Nothing Gold Can Stay" | What is a HELOC?
49:27
  • After 18 years of ownership, Brad says goodbye to his beloved Honda Civic, Golden Boy.
  • When it comes to car ownership, ChooseFI often talks about only buying a new car every 15 years. Over a 45 year adult lifetime, the savings, when invested, can amount to almost $750,000 when compared to someone who leases or just manages a constant car payment.
  • Although Brad wanted to keep the car, it had been having some mechanical issues and his family was no longer comfortable riding in it anymore. The impact it was having on Brad's family was not worth it.
  • For his next vehicle, Brad opted for a 2013 Honda Civic rather than a brand new car. He purchased his new Civic through Caravana, the car vending machine business, who was selling Civics for roughly $3,000 less than CarMax.
  • The buying process through Caravan was quick and streamlined. The car was delivered to his home and he spent approximately one-hour signing paperwork and finalizing documents.
  • There are sweet spots when purchasing used vehicles. Although Brad's car is seven years old, after five years, cars have generally already depreciated at the fastest rate. If you are going to buy new, keep it forever. If you buy used, target 5-7 years old.
  • Listener Oscar wrote into the show asking about Home Equity Line of Credit (HELOC) which hasn't been something that ChooseFI has discussed much in previous episodes.
  • A HELOC is a revolving line of credit on your home where the equity you have in your home is used to secure it. For instance, a home worth $300,000 with a mortgage balance of $100,000 has $200,000 worth of equity. A HELOC allows homeowners to tap into the equity locked up in their homes.
  • An advantage of using a home equity loan over other options for access to cash, like credit cards, is that the interest rate is often much lower, although it is a variable rate and can change. The interest rate on a HELOC may be in the 3-5% range versus 15-30% with credit cards.
  • For homeowners who placed a sizable down payment on their home, whose home has appreciated, made extra payments, etc., a HELOC becomes a potential source of low-interest revolving credit.
  • A HELOC is different from a home equity loan in that with a loan, the loan amount is deposited into your bank account and interest begins accruing immediately. A HELOC provides you with the ability to tap into the equity at any time, such as in the case of an emergency. No interest accrues until you decide to access the money. It gives you options if ever needed.
  • Occasionally, HELOCs can be had for no closing costs. Considering that the process to apply and be approved for a HELOC can take weeks, it can be useful to have one in place so that it is already available if and when it is needed.
  • Frequent guest and friend of ChooseFI, Big ERN, does not have an emergency fund. He believes that there is an opportunity cost to keeping 6 months of expenses in a liquid account that is likely earning every little in interest. In a thought experiment, he tried to envision a true emergency that he could not cover with credit cards or a HELOC.
  • Those working to build an emergency fund before beginning to invest are potentially missing out on higher interest rates earned from investments. They might be better off investing their savings and using money from a HELOC to cover monthly expenses in an emergency rather than selling off investments or using high-interest credit cards.
  • Jonathan mentioned that there are schemes to paying off a mortgage early using HELOCs and credit cards that people can learn about for a fee. Brad doesn't doubt that these might work, but it's too complex. There's no insider knowledge worth paying for. He doesn't believe these methods are any more beneficial than making additional principal payments to a traditional mortgage.
  • Rather than a HELOC, Jonathan uses a margin loan through M1 Finance for a line of credit. He can borrow up to 40% of his invested assets with an interest rate of 2.75-3.5% and have the money in his account in minutes. Margin loans on investment accounts are lines of credit options for renters.
  • Listener Alex wrote in with his win with a High Deductible Health Plan (HDHP) and Health Savings Account (HSA).
  • Listener Rachel wrote in saying that she has reached FI and didn't even know it. As a result, she was able to leave a toxic work environment in the middle of a pandemic and spend more time with her nice and nephew.
  • FI wins read on the show win their choice of one of ChooseFI's books so keep them coming!
  • Listeners Brian and Deb maxed out their 401Ks this week before their contracts ended to take full advantage of the company's match and on Oct 23 will officially be financially independent.

RESOURCES MENTIONED IN TODAY'S CONVERSATION

IF YOU WANT TO SUPPORT CHOOSEFI:

 

 

 Oct 16, 2020
260 | What's your Survival Number? | Jully-Alma Taveras
44:13
  • Immigrating to the United States as a child, by early adulthood, Jully found herself caught up in our consumer culture and had acquired five figures worth of debt. After working to dig her way out and starting on her path to finical independence, she's become an advocate. Drawing from her experience, she now help Latinas become financial powerful through investing.
  • At the age of four, Jully moved from the Dominican Republic to New York. Her extended family all began making the move as well, but as many immigrants to, they continued to send money and invest in their socioeconomic systems back home.
  • For immigrants, investing in their home countries has multiple purposes. There is often an expectation that money will be sent home to support the family.
  • Jully's father supported her grandmother by building her a new home and making sure she was taken care of. However, when the grandmother also immigrated to the US, the house back in the Dominican Republic was rented out and became the first property in a real estate portfolio.
  • Immigrants have struggles that a typical American doesn't go through. Investing in real estate in their home countries helps connect them to their communities. However, Jully says immigrants tend to invest more in real estate than in the stock market. She shares the message that it is important to diversify their investments.
  • When she started working for a non-profit at the age of 19, Jully began investing a 403b for the free money. That decision was criticized by her mother who felt retirement was a long way off and that it wasn't necessary because Americans receive Social Security.
  • When her family first arrived in the US, they didn't speak the language. It was a lesson in how to figure things out in the moment and just survive.
  • It took a couple of years before her father began thinking in an entrepreneurial way and on a bigger scale. He went from driving a taxi to starting a bodega business.
  • The bodega enabled Jully to see both her parents work in that environment, build their business, send money home, and contribute to the community.
  • The money lessons she learned from her parents were to be generous and give. But the reality was her father worked a lot to build their life and they didn't see him much. Had he invested more, perhaps they would have been able to see him more.
  • Jully went to school for fashion merchandising and economics. When she got her first job, lifestyle inflation kicked in. Working in the fashion industry required looking good with the latest trends.
  • After accumulating the debt, Jully realized that she was channeling her emotions with her shopping. She was both celebrating and consoling herself with shopping to the point where it became unhealthy.
  • Thankfully she had continued to invest even when the debt was bringing her down. It wasn't until her father became ill that she realized the safety net she had in her parents won't always be there. At that point, she began working to pay off all her debt. Once debt-free, Jully increased her 401K investments to around 20%.
  • Jully notes that when first entering the workforce, you feel that nothing can go wrong, or if it does, you'll just figure it out. But you have to start with the basics. You have to start with the foundation of an emergency fund.
  • Credit card debt is subject to incredibly high-interest rates of 12-30%. With five figures of debt, the compound interest is working against you and it's hard to fig yourself out from under it.
  • To get out from under her credit card debt, Jully had to make significant payments toward it. The key was knowing her survival number.
  • She created a simple chart with eight categories of things you need to come up with a survival number. The categories include housing, food, transportation, and even entertainment. Jully's survival number is $581. The items in her $581 figure are the absolute minimum things she needs to survive and keep her life sane.
  • The reason she can keep her number so low is by house hacking her four-bedroom apartment. With master leasing, she is responsible for the rent each month, but she then uses sub-leases to rent out rooms.
  • She uses Craigslist to market the rooms for lease in her apartment and thinks it is important to find people with similar lifestyles and working schedules which creates a good co-habiting space for everyone.
  • After paying off her debt in 2016, Jully felt an incredible sense of freedom, quit her corporate job, and went to work for herself.
  • She has been inspired and motivated by the financial independence community to use her platform, Investing Latina, to provide resources and stories, to inspire others to do more, increase financial stability, and reach financial independence.
  • Given the struggles that her family faced when they first arrived in this country, Jully speak about building credit and establishing yourself.
  • Jully's conversations with new immigrants start her three pillars, building credit, investing in the stock market, and real estate. The first step is to open a debit account to start establishing relationships with banks.
  • While there is still something of a stigma to talking about money and investing in the stock market in her family and community, Jully is hopeful that it will normalize and influence others. Even having small conversations like, “What are you saving for?” is a little way to get started.
  • As someone who works in fashion, Jully's transition to her survival number she realized her shopping was an addiction. Using Marie Kondo's methods for embracing minimalism, she cleared out her closets to create a capsule wardrobe, focusing on the items that fit well, looked good on her, and were comfortable.

RESOURCES MENTIONED IN TODAY'S CONVERSATION

IF YOU WANT TO SUPPORT CHOOSEFI:

 

 

 Oct 12, 2020
259 | Kristi & Big ERN
01:08:27
  • In our eighth Households of FI touchpoint episodes, Kristi was successfully following the standard path with a six-figure job and keeping up with the Joneses but waiting to take a breath and enjoy life. After finding FI, she realized the money was no longer the goal but simply a tool.
  • Kristi has been connected with Big ERN, from Early Retirement Now, and over several conversations, they discuss Employee Stock Purchase Plans, 401K contribution strategies, the phase of retirement, and more.
  • While wealth accumulation is simple math, decumulation is more complicated so Big ERN created the ultimate safe withdrawal rate series.
  • Some recent changes Kristi has made to her investments since starting her path to FI are moving from a Roth 401K to a traditional 401K and maxing her contributions out. She also moved her current balance and future contributions out of target retirement date fund and into an S&P 500 fund.
  • While Kristi has the option to self-manage her 401K in a Schwab account which would give her access to a total stock market fund, Big ERN doesn't believe that the difference between it and an S&P 500 fund is minor. Expense ratios are a more important consideration. Moving from a 0.2% expense ratio to a 0.02% might be worthwhile, but leaving the money where it is fine when the difference is 0.01% unless it is an in-kind transfer or a quick process. Human Resources may know how long the process is likely to take.
  • Kristi approached her HR department about making after-tax contributions so that she could do a mega-backdoor Roth conversion, but the HR department was not clear on how much she would be allowed to contribute. She found the ChooseFI community to be quite helpful for bouncing ideas off of.
  • She's also interested in her company's Employee Stock Purchase Plan (ESPP). The advantage of it is that she can purchase stock at a 15% discount, but she will pay taxes on the discount and be required to hold the stock for two years.
  • Such a purchase gives her investment a 5% per year boost, however, there's no diversification in purchasing company stock. Kristi's income, bonuses, and employment are all already tied to her company. That being said, Being ERN says he would probably still do the ESPP, although he would only keep two year's worth of money in the plan and then pull it out. After taking it out, it will be subject to long-term capital gains.
  • The ESPP may have contribution limits, in which case she should make the additional contributions to her 401K and then do the backdoor Roth conversions.
  • Big ERN likes to say don't let the tail wag the dog, meaning that asset allocation and expected returns should be the primary concern before tax considerations.
  • Kristi has a difficult time determining exactly how much to contribute as her company does it by percentage and how bonuses are paid out. If she overshoots it, she could miss out on the company match in the last month of two of the year. Big ERN says some companies will do a true-up, or another HR term, where they will still contribute the match.
  • Some who have access to a true-up prefer to contribute the maximum to their 401K at the beginning of the year so that their money is in the market longer.
  • Those without a true-up need to be careful. Big ERN suggested Kristi could look at the minimum and maximum of her salary and bonuses to come up with a range. $19,500 divided by her maximum would give her a rough percentage to start the year with. Toward the end of the year, she will need to look at it again and make adjustments.
  • Kristi also asked about Big ERN's thoughts on the stages of retirement, but she is most interested in the early retirement phase.
  • Retirement is an uneven path. Health expenses may be higher before Medicare kicks in and there will be a boost of income once Social Security is received. How do you structure your withdrawals? What are the tax aspects? Which accounts do you tap into first? And what should the assist allocation be?
  • Big ERN doesn't recommend 100% equities for people in retirement. 75% stocks and 25% bonds is a better allocation.
  • Kristi will likely have to rely on more than just her taxable accounts during the early retirement phase. She could tap into her Roth IRA accounts as well which may get her to 59 1/2 when she could then begin withdrawals from her 401K tax and penalty-free.
  • It's best to spread the tax liability as equally as you can due to our progressive tax system. Although trying to optimize taxes is important, safe withdrawal rate and asset allocation are significantly more so. Not all of the withdrawals in retirement are taxable. Some of the withdraw money is principal, which taxes were already paid on.
  • Good tax planning versus alright tax planning in retirement probably doesn't make a significant difference.
  • Kristi was also curious about when contributing to taxable accounts might be advantageous over continuing to fund retirement accounts for those who want to retire early. Big ERN thinks what there are cases when it might make sense, but for most people who can assume they will be in a lower tax bracket in retirement, it's better to fund retirement accounts.
  • Previously, Big ERN had provided Kristi with a spreadsheet to use for determining cash flow issues before she turns 59 1/2 and model Roth 401K conversions.
  • Kristi says that she has been participating in her company ESPP but hadn't sold any of the company stock until recently. She debated how much to sell and still has a lot remaining. Big ERN suggests that she could sell over a period of time to avoid any regret that might occur with a large price increase. However, there could be commissions associated with selling. As long as she's held it for more than two years, it's all subjective to long-term capital gains or will help with tax-loss harvesting. Low-cost shares with the highest capital gains should be deferred as long as possible.
  • A little tax-arbitrage is the sell the investments with the highest cost-basis and lowest tax bill.
  • Big ERN mentions that a lot of people have loss aversion but sometimes it's best to cut your losses, let it go, and take the tax benefit.
  • Kristi has concerns about HSA rules changing after she's stashed all that money away and paying out-of-pocket for medical expenses. HSAs, however, have a triple tax benefit. there are no taxes paid on contributions, the money grows tax-free and comes out tax-free as long as it's used toward qualified medical expenses.
  • HSA participants can save their receipts and allow the money to grow. Current or previous years' health expenses may be submitted for reimbursement.
  • In the United States, rules tend to be backdated, so that if HSA rules do change in the future, the old rules will likely still apply to the contributions. Still, Big ERN suggests not letting the HSA grow to more than 15% of total net worth.
  • It's important to note that not all target-date funds are the same. The closer the retirement date, the more conservative the fund is going to be. For most people, a total stock market or S&P 500 fund with a low expense ratio is good enough.
  • Taxes shouldn't drive decision making. Make the best moves that impact you over the long-term. Buying a house for the mortgage interest deduction makes no sense for most people with the new higher standard deduction.
  • When it comes to tax deductions, the point isn't o get a deduction just to get a deduction, it's to bring home more income

RESOURCES MENTIONED IN TODAY'S CONVERSATION

IF YOU WANT TO SUPPORT CHOOSEFI:

 

 

 Oct 09, 2020
258 | Back to Basics Part 2: The Income Side of the Equation
40:19
  • Brad has been taking part in a mastermind group and teaching its members about financial independence. While they understood the “Why of FI”, how to get started wasn't as clear. The Back to Basics series of episodes covers just that, how to get started on the path to FI.
  • The journey to financial independence is not about deprivation. It is about a life of personal choice and abundance. Its starts with understanding your “why” and then setting goals for the next 5, 10, or 15 years.
  • There's a difference between the money you need to pay bills and meet basic needs and discretionary spending. Understanding how much your lifestyle costs is the first step.
  • It can be psychologically difficult to do this first step. It may reveal mistakes, but it's important to be honest with yourself and not beat yourself up over them. We all make mistakes.
  • After knowing what your life costs, what comes next? To calculate your FI number based on your current lifestyle, multiply your monthly expenses by 12 to get your annual expenses. This is how much money you will need each and every year in retirement to cover your expenses.
  • The 4% Rule of Thumb suggests that you can withdraw 4% from your total assets each year to live on and reasonably expect the money to last for the remainder of your life. For example, if you have $1 million in assets, 4% of it is $40,000 that you could withdraw each year. The 4% withdraw rate is adjusted for inflation.
  • To get to your FI number, multiply your annual expenses by 25. $40,000 multiplied by 25 is $1 million. $80,000 in annual expenses, multiplied by 25, results in a FI number of $2 million.
  • Whether starting with a net worth of zero or with some assets, the next step would be determining your current path to your FI number.
  • The point of saving money is not for it to be finally used for a retirement far off in the future. Save to reclaim decades of your life when you can spend time as you see fit. Reframing the goal of saving allows you to reorient and see that saving money is investing in your time.
  • One of the reasons Brad and Jonathan enjoy board games so much may have parallels with financial independence. Both involve iteration and getting better and better at making smarter decisions through gamification.
  • People who win games the most have an intermediate mindset. They understand the limitations balanced with longterm thinking.
  • When looking at income, what is the bare minimum needed to cover your expenses? For a married couple living in Virginia spending $80,000 a year on expenses, they will need to earn an income of $102,000 before taxes and without contributing to savings or retirement. They would pay $9,000 in federal taxes, $5,000 in state taxes, and roughly $8,000 in FICA (social security and medicare taxes), for a total of $22,000 in taxes.
  • When income and expenses are exactly the same, you can never afford to retire. How do you create some space between the two?
  • Expenses are not always fixed. Cars loans come to the end of their terms and student loans are paid off. Add in some cuts to a few other line items in your budget and you might find an extra $1,000. How might that change things?
  • Cutting $1,000 from your monthly expenses reduces your annual expenses and subsequently your FI number by a whopping $300,000.
  • What should you do with that extra $1,000 a month? Putting that savings into a 401K allows that money to begin working for you.
  • In addition, the $1,000 a month going into a 401K becomes a tax deduction and reduces your federal income tax. For the couple in the previous example earning $102,000 per year and bringing home $80,000 after taxes, contributing $12,000 to a 401K doesn't mean they have $12,000 less to spend. With the tax advantages of contributing to a 401K, they will bring home $70,000, only reducing their take-home pay by $10,000. They saved $2,000 in taxes. Since they already have enough money to meet their expenses, that extra $2,000 saved in taxes could go toward a Roth IRA.
  • Part 3 in the Back to Basics series will talk about optimization on both the income and expenses side of things.
  • Our hypothetical couple, starting with a zero net worth, after investing $1,167 a month (totaling $14,000 per year) at an average 8% rate of return, will hit their FI number of $1.7 million in 30 years.

RESOURCES MENTIONED IN TODAY'S CONVERSATION

IF YOU WANT TO SUPPORT CHOOSEFI:

 

 

 Oct 05, 2020
257 | Back to Basics: Getting Started with FI
52:43
  • In this ChooseFI Back to Basics episode, we review Health Savings Accounts (HSA). What happens when you need to finally pull money out after funding it year after year?
  • ChooseFI Chief Content Officer, MK, is just weeks away from having her baby. For years, she and her husband, Jason, have been funding separate HSA accounts without making any withdrawals.
  • They now contribute to a family plan HSA and decided it was a good time to test out how complicated the process was to withdraw HSA funds.
  • They discovered some plans are easier than others. The process of withdrawing funds from the fund MK had rolled over to Fidelity was super easy. Jason's was a bit more tricky due to the Health Insurance Portability Accountability Act (HIPPA) compliance laws and auto-reinvest settings. Now that they tested it out, they feel confident they will know what to do in the future.
  • An HSA is a type of investment vehicle that gives you a tax deduction in the current year and helps pay for healthcare-related expenses.
  • Only those participating in qualified in high-deductible healthcare plans are eligible for HSAs. For 2020, the IRS defines a high-deductible plan as one with a deductible of $1,400 for an individual, or $2,800 for a family. the maximum a family may contribute in 2020 is $7,100, and half of that for an individual.
  • The money going into the account isn't subject to income tax and sits in the HSA account until you submit for reimbursement of healthcare expenses. HSA withdrawals for healthcare expenses are also tax-free.The benefit of an HSA is that the money can build and grow over time. Healthcare expenses do not need to be submitted for reimbursement as they are incurred. HSA participants can pay out-of-pocket and wait for years before requesting reimbursement if they choose to.
  • The IRS criteria dos state that the high-deductible plan must be a qualified plan. Check with your company's human resources department to determine if your plan is a qualified one.
  • HSA participants should also understand who their plan is with, what investment options they have, and what the fees are. Based on fees, Fidelity and Lively are two good providers who offer low-cost, board-based investment fund options.
  • The goal is to cash flow medical expenses in your younger years when they are generally lower, funding the HSA with pre-tax dollars and allow them to grow until later in life when healthcare costs begin to increase.
  • There may be additional tax benefits from using your employer's HSA provider rather than Fidelity or Lively.
  • Because you can submit for reimbursement years after the expense was incurred, save your receipts. Brad has a Google doc that lists all of the healthcare expenses he pays out-of-pocket and saves a pdf of the receipt in his Google Drive account.
  • Even if your provider offers a way to upload receipts, you should always maintain your own records and only use the provider's system as a secondary backup. If you change HSA, you could lose your receipts.
  • It is your responsibility to verify to the IRS that you've been using the funds in the HSA appropriately. It makes it easier if you have all of that information maintained in your own cloud-based account.
  • After several years or decades of cash-flowing healthcare, it may be possible to have tens of thousands of dollars of reimbursable expenses that are accessible anytime, tax, and penalty-free whenever it is needed.
  • The final episode in round one of the Households of FI series airs next week. Throughout this series, ChooseFI follows eight diverse households at different points on their path to FI.
  • More exciting news for ChooseFi is the website redesign, expected to launch in the coming weeks. The new website format was designed with your experience and journey to financial independence in mind. The content on the site has been curated so that people looking for specific content can easily find what they are looking for.
  • If you would like to receive a notification when the new website has been launched, go to ChooseFI.com/subscribe and an email will be sent to you when it's ready.
  • Brad recently gave a presentation to Dominick Quartuccio's Do Inner Work mastermind group on the Why of FI. Though people seemed to understand the why of FI, there were questions regarding how to get to FI.
  • How does someone go about getting started? It starts with visualizing where you want to be in 10-15 years, what your goals, and what kind of options you'd like to have.
  • If Brad were to go back to when he began his journey, he would have said that there's got to be more to life than what he's experiencing. Life was comfortable, but it felt like Groundhog Day. He could see himself doing it for the rest of his life.
  • The second task when starting on the path to FI is to take an assessment of what your life actually costs. What you earn minus what you spend, equals the gap, or the amount of money you have left to work with.
  • Adding up your structural expenses, recurring monthly bills, unplanned expenses, and then looking at all the little discretionary expenses can be a difficult task. No one should beat themselves up over it.
  • Once added all together, you have a realistic estimate of what your life actually costs. It's not complicated math.
  • ChooseFI Episode 258 airing on Monday will tackle the other side of the equation, the gap, and discover how to affect the outcome.
  • It's the first anniversary of the release of ChooseFI's book! To celebrate, we're giving away the first chapter for free when you go to ChooseFI.com/book.
  • The weekly book giveaways are back! Winners will be selected from response to Brad's newsletter call for FI wins. This week's winner is Belinda. After tracking her spending for three months, she made a budget and reduced her family's food budget by $900 a month. She's also funding her Vanguard account $500 a month, refinanced her car loan, her husband maxed out his 401K, and she hopes to max out her SEP IRA. She says having control of their money is giving them power back over their lives.

RESOURCES MENTIONED IN TODAY'S CONVERSATION

IF YOU WANT TO SUPPORT CHOOSEFI:

 

 

 Oct 02, 2020
256 | Double Your Income by Flipping the Second-Hand Market | Flea Market Flippers
37:46
  • How can you recognize the value in the secondhand market, begin optimizing a strategy, and turn it into income? Today's guests, Rob and Melissa Stephenson, the Flea Market Flippers, have built a six-figure business flipping the bargains they find.
  • Rob spent weekends as a child with his parents visiting yard sales. They bought items and then listed them for sale to a bigger market using the newspaper classified section. Rob followed in their footsteps, flipping items as another side job without realizing the full potential of it.
  • Selling used items is no longer a local market. With the launch sites like eBay with 181 million users, the whole world becomes the market.
  • Rob and Melissa's business model capitalizes on larger items, such as commercial exercise equipment or restaurant equipment. They find the items locally from establishments going out of business. They look for the higher retail items which will make them a lot of money. It helps them to work less and make more profit. From their 89 sales last year, they made $80,000.
  • For example, over the summer, they found a 40-inch range that retailed for $4,500. They bought it for $200, brought it home, then sold on eBay for $2,800.
  • Over the last five years, Rob and Melissa have honed their freight skills and can ship very large and heavy items for reasonable prices.
  • While they have become comfortable shipping large items, Rob and Melissa want people to start where they are at. Start with the items in your house, learn the system, how to take photos, how to sell on eBay to slowly build your confidence.
  • The majority of the time, they research an item before buying it. Some things do sell quickly, but other items need time for the right buyer to find them before they sell.
  • There are skill sets involved that make flipping items work: finding the deals, researching prices, making offers, marketing, taking good photos, and shipping. However, Melissa says it's actually a really simple business.
  • There are lots of options for finding items, but Rob's favorite apps are Facebook Marketplace and OfferUp. He will scroll through them for ten minutes while sitting in his LazyBoy at night.
  • There are fewer risks than there were several years ago. Smartphones have made it possible to jump onto eBay to check everything for the last 30-60 days that has sold. It's similar to the MLS with the housing market and looking for comparable properties that recently sold.
  • If you can't find it on eBay, a good rule of thumb for items in good condition is 50% off retail.
  • They no longer do many actions on eBay, opting for Buy It Now and listing for the price they want.
  • Since you can see what an item has sold for the in past, if you want to sell it quickly you can just price it a little bit lower than that.
  • Rob and Melissa sell 85% of their items on eBay and the rest on Facebook Marketplace. They usually cross-post items but eBay is consistently a winner.
  • Fees on eBay are 13%. PayPal processing is 3% and 10% goes to eBay. They believe the opportunity to sell to a larger audience is worth the fee.
  • Taking good pictures is important, with clean photos and nothing in the background. Fancy photography equipment isn't required. They still use their iPhones for everything. Since eBay allows up to 12 photos, you should use all 12 photos.
  • The title for the item is the most important since eBay is essentially a search engine and the searches will come up on Google too.
  • Descriptions are less important and Rob likes to underpromise and overdeliver so people have realistic expectations.
  • Since they already have a good idea of how much it going to cost, they build it into the item cost and offer free shipping. It helps items to sell more quickly and reduce emailing back and forth with the buyer.
  • Rob and Melissa love what they do and already feel like they are retired even if they haven't hit their FI number. Rob spend about 20-25 hours a week on their flipping business.
  • They both like to travel and have a goal of being able to pay for the trip by flipping while on the road.
  • Flipping is something Rob and Melissa are so passionate about that they teach a course. They have two groups they've been teaching, one with no experience flipping, and another group of experienced flippers looking to go freight.
  • Rob and Melissa offer a webinar, which can be found at ChooseFI.com/flip, and a paid course.

RESOURCES MENTIONED IN TODAY'S CONVERSATION

IF YOU WANT TO SUPPORT CHOOSEFI:

 

 

 Sep 28, 2020
255 | If People Can Do it Then I Can Do it Too | Leslie Tayne Connects with Vivian
57:57
  • Picking back up with the Household of FI series, Vivian is a single mom who found FI in the last year, but initially, it seemed impossible. It wasn't until she was introduced to the ChooseFI podcast and saw real people reaching financial independence that she believed she could do it too.
  • Vivian has been dealing with a number of challenges: a cancer diagnosis, a child custody battle, and caring for parents who have no savings of their own.
  • As a pharmacist, she earns a significant income. She's already managed to pay off $300,000 in student loans in six years and believes she can save $60,000 a year.
  • Vivian has been paired with mentor, Leslie Tayne, also a single mom and attorney who helps people with debt relief.
  • Leslie acknowledges that what Vivian is going through with her separation is one the most challenging times in her life and it is a very emotional experience along with being financially damaging. However, there is a light on the other side and she will come out with more freedom and more control.
  • Because her significant other's mom used to watch her child while she was a work, childcare is a challenge right now. Childcare is expensive and not something you can find discounts on.
  • As an attorney, Leslie helps her clients to fix their financial messes without judgment. She doesn't believe in a debt-free life since life has its ups and downs. Instead, it's okay if being debt-free is not realistic. We should learn to embrace our debt but what is important is how you manage the debt.
  • Due to the separation, Vivian will be selling the house that is entirely in her name. If she makes a profit, she should talk to her tax preparer about qualifying for a capital gains exemption.
  • Vivian is also interested in ways to save for her child's college education to which Leslie offers several options: contributing to a 529 plan, a state pre-pay program, or a regular savings account.
  • There are tax advantages to contributing to a 529 plan over a savings account and should Vivian's child decide to not go to school, the money in the 529 plan may be used for grandchildren or withdrawn with earnings taxed at regular income tax rates.
  • The Texas pre-pay option would allow Vivian to lock in current undergraduate tuition rates and required fees.
  • When it comes to budgeting for groceries, Leslie says that her family mostly eats at home and orders out just once a week. One trick to not overspending at the grocery store is not to take the children with you, shop with a list, don't allow yourself to get distracted, and buy non-perishables in bulk.
  • When you have no choice but to bring your child with you, you can allow them to pick one item so that they can pick something they want without filling your cart with everything they want. It limits your financial exposure when shopping.
  • While eating out, rather than order a kid's meal, share bites of your own meal, and develop a taste for adult foods.
  • Vivian's daughter is not yet attending pre-K schooling, due to the virus but may be able to find reasonably-priced options that give her the option to socialize.
  • Because her significant other has not been cooperative during their separation, all of the attorney costs and other fees have gotten be very expensive. Vivian needs to be as cooperative as possible to limit her financial exposure.
  • Leslie says a good piece of advice is don't marry or get involved with anyone you don't want to be divorced from.
  • It's often advisable to keep finances separate in a relationship and protect any assets with a prenup or postnup because it is very tricky to untangle them should the relationship end.
  • Everyone should look at what deciding to combine finances in a relationship really means and how it impacts things.
  • Brad reviewed the capital gains tax question and said because Vivian has lived there for at least two of the last five years, she would be eligible for up to $250,000 in capital gains tax exclusion.
  • The decisions being made should be ones that will make life better over the long-term. Brad's goal is to set the groundwork for a successful life.
  • Jonathan notes that Vivian doesn't appear to have an issue with her savings rate, instead, she may be at risk of slipping into a deprivation state. To fight this urge, Brad believes we need to have a better idea of what the path looks like for her.
  • As ChooseFI follows Vivian during this study, she will need to better understand her expenses and her FI number. She needs to have a sense of where she is to know where she is going.
  • ChooseFI recognizes that some audience members are just finding and joining us now. ChooseFI is building out a curated path to help you figure out where you are and what information will serve you best. Sign up to receive this information and more at ChooseFI.com/start.

RESOURCES MENTIONED IN TODAY'S CONVERSATION