020R | The Friday Roundup | Introducing our First CrowdSourced Case Study & FI plan

In today's Friday Roundup we introduce our first crowd sourced case study from a listener and we have a challenge to you:  Implement one life hack this week that will make your life easier and less stressful and send it to us at [email protected] (or leave a voicemail on our homepage!) and we'll read it on next week's Friday roundup.

In Today’s Podcast we cover:

  • Our first Friday roundup after a non-guest episode which leaves lots of time for audience input, questions and voicemails
  • We want the podcast to be ‘By FIRE for FIRE’ and make it truly crowdsourced
  • Jonathan and Brad are living a normal middle class lifestyle, just smarter. We aren’t doing anything especially different – just optimizing
  • Brad and his wife Laura had a conversation about what makes their spending different than their friends and neighbors
  • While the fixed expenses are essential (home, cars, cell phones, cable, etc.) the discretionary expenses also make the difference between a non-FI mindset and one pursuing FI
  • How Brad’s kids are not constantly ‘wanting’ new toys, to redecorate their rooms, etc. It wasn’t intentional on the parent’s part, so the thought is that they saw the lack of wanting modeled in the house
  • Jonathan’s frugal win of the week: He superglued a broken lamp in his house and it is still working 1.5 years later!

 

  • Upgrading your house not only wastes money, but it wastes a ton of valuable time searching for these items and getting it “perfect”
  • Stressed lives and an ask of the audience: Implement one life hack this week that will make your life easier and let us know about it!
  • It’s so easy to get bogged down in the details of life, business, etc. that you miss the truly essential items that could move the needle and make a difference
  • Brad focuses on things he can get better at over a period of many years such as Brazilian jiu-jitsu and stretching/mobility
  • “You are going to be the average of the 5 people you spend the most time with” and discussion surrounding it
  • Feedback from Deidra: She recommended SBLI for life insurance after hearing our Episode 20 show
  • Brad had a conversation with a friend of his this past weekend on FI and on his plan to retire in 16 years with a pension, fully paid off rental homes and his primary residence paid off, plus 401k and 457 balances
  • Voicemail from Harrison: Info on an alternative to Vanguard and VTSAX. He recommends SWTSX which has  a lower expense ratio and no minimum balance
  • Voicemail from Paul: Part 1 of 3 as a live case study with his life
  • Our questions for Paul for Part 2 of the case study
  • Voicemail from Isaac with a question on travel rewards and how to deal with Chase’s 5/24 strategy
  • Feedback from Nia – international perspective and info for UK listeners
  • Itunes reviews and the 2 winners of The Simple Path to Wealth
  • Where ChooseFI is going: Ideas from the audience and future episodes

Links from the show:

Books Mentioned in the Show:

020 | Entry Level Middle Class Lifestyle | Intro to Insurance

020-Entry Level Middle Class

The Entry Level Middle Class Lifestyle is a tool that you can use to supercharge your path to FI. Jonathan and Brad go through their expenses one line item at a time. Then they start the conversation about a FI approach to insurance, with an emphasis on life insurance


In Today’s Podcast we cover:

  • What Jonathan and Brad’s lifestyle and budget look like. We go in-depth into our actual spending and budget line items
  • What have we talked about previously? How to crush your food budget, how to get fit while being frugal, basics of investing, how to save 75% of your income, tax loss and tax gain harvesting, travel rewards and the unfair advantage for teachers.
  • Housing prices and mortgages for Brad and Jonathan
  • Jonathan was looking for an older neighborhood with a generational shift going on with kids coming in
  • Brad’s net cost per month is under $800 per month on his house in a great school district in the Richmond-metro area
  • How to maximize insurance: be sure to shop around and get quotes and don’t be complacent. Also determine realistically how much coverage you need and don’t just follow the advice of your agent.  Increase your deductible as much as possible to save money.
  • Life insurance: Get term life insurance until you don’t need the insurance any longer (when you’re at Financial Independence). Policygenius is a terrific way to make sure you are getting the best price on term life insurance.
  • The insurance agent will always attempt you to buy whole life insurance; in the vast majority of cases term life is the best possible option.
  • Once you’re at FI, you can self-insure since you don’t need the lump sum
  • Car expenses: Jonathan mentioned the forthcoming ‘true cost of car ownership’ article
  • Jonathan does currently have a car payment
  • Brad has not had a car payment on either car for well over 5 years
  • Cell phones: Jonathan has Project FI and Brad has Republic Wireless
  • By being smart about your cell phone you should easily be able to save $100 per month
  • “Easy choices, hard life; hard choices, easy life”
  • Cable bills and internet packages from Comcast and Verizon
  • Jonathan buys an internet-only package from Verizon
  • What happens when you give up screen time entirely? Talk, play board games, etc.
  • Gym memberships: Brad pays $20 a month for Crunch fitness. Jonathan does not have a membership any longer.  He paid $1,000 to build a top-notch home gym for a one-time cost
  • Brad now does Brazilian Jiu Jitsu through Gracie University and the free Gracie Garages
  • Take a step back and see what you can work on long-term to get better at life?
  • Keep track of your food and alcohol budget and it will help you cut down
  • Where do we spend that might be “frivolous” but where we get a lot of value?
  • Financial independence is not deprivation. It is about being intentional

Links from the show:

019R | Index Investing | How to buy VTSAX

VTSAX

In our Friday roundup Jonathan and Brad discuss the highlights and takeaways from the Monday episode with JL Collins. Then the podcast is opened up and crowd sourced to the community. Find out the specific travel reward perks that are available for active duty military and how to get started with VTSAX if you don't have $10,000 to invest

Review of podcast with Jim Collins

  • Jonathan’s baby was born! And he’s here recording the Friday Roundup two days later2nd Generation Fire
  • 2nd Generation FIRE and the impact on Jonathan with his new son
  • The value of starting a child on the path to FIRE from the very beginning
  • Index investing as one of the main ‘pillars of Financial Independence’
  • Jim’s Stock Series changed the trajectory of Brad’s investing life and will benefit him to the tune of millions of dollars in his lifetime
  • There are no investing gurus out there who will help you outperform the market over decades when including fees into the calculation
  • Jim is such a fantastic storyteller
  • Fidelity study of the classes of investors who do the best: dead people and those who forgot they had accounts
  • The best thing that can happen to someone who is young is for the market to drop while they are pumping money into the market.
  • Index investing: Losers can only go down 100%, but winners can go up indefinitely. The index is self-cleansing
  • Why stock picking contests promote the wrong behavior
  • The stock market always go up over decades.
  • You only lose money in the market when you try to “dance in and out of the market”
  • Warren Buffett will invest in a Vanguard S&P 500 index fund
  • Vanguard is growing faster than all of its 4,000 competitors combined (to the tune of 8.5x)

Feedback

  • Stitcher reviews – thank you for leaving them and letting us know they exist!
  • Sharing ChooseFI with friends and family
  • Feedback from Steve and Amy on the action they’ve taken since first listening to ChooseFI
  • How police officers and firefighters can access their 401K’s without penalty

Travel Rewards and Investing Questions

  • Travel rewards question about travel in Europe for hotels and Ryanair from Anthony and Abby
  • Question from Alyssa about different retirement account options and different investing options and how to get started for younger listeners who don’t have $10,000 to invest in VTSAX in one lump sum
  • The standard advice doesn’t apply for people on the path to FI, so they should max out traditional IRAs and 401k instead of Roth-IRAs

Links from the show:

Books Mentioned in the Show:

019 | JL Collins from jlcollinsnh | The Stock Series | Part 1

JL Collins The stock series

In Today’s Podcast JL collins from jlcollinsnh joins Jonathan & Brad on the podcast to bring the Stock Series to life. The Power of Index Investing is one of life's greatest secrets & JL Collins is the ultimate travel guide. This multi part series turns the stock series into an interactive audio companion and this first part is sure to compel you to stick around for each additional entry

The Stock Series | Part 1

  • Our guest: Jim Collins from JLCollinsNH.com
  • The Stock Series Part 1: “There’s a Major Market Crash Coming!!!! And Dr. Lo Can’t Save You”
  • Lo claimed that “buy and hold investing doesn’t work anymore” and that raised Jim’s ire quite a bit which led to the Stock Series
  • An overview of the Stock Series and how Jim would explain it
  • Jim’s eight rules that you need to understand in order to succeed with long-term stock market investing
  • “The Market Always Goes Up” which is very counterintuitive to people, but over the long-term it invariably does
  • The market is always going to stumble or have corrections and you can’t predict when they are going to happen and you have to accept them.
  • Nobody can possibly predict or time the market
  • The stock series came out of a series of letters to his daughters on financial education
  • When it comes to investing (once you get the basics down correct) the less you pay attention, the better off you’ll be.
  • Fidelity study of the best classes of investors based on performers: Dead people and those who lost their accounts!
  • You can’t panic when the stock market goes down significantly. You must “know yourself.”
  • If the market is already down 50% would you still be able to hold the course and not sell if you still thought it was going to do down an additional 2/3’s?
  • Quotes from Warren Buffett about not being fearful and buying when others are selling
  • For a new investor who is investing significant money each month, the best thing that can happen is a huge plunge in the market because they get to purchase new shares on a huge sale
  • In a wealth-preservation state, you should consider buying a percentage of your portfolio in bonds
  • Jim has a 25% bond allocation, which is actually considered very aggressive for his age
  • Warren Buffett quotes about investing in low-cost mutual funds from Vanguard
  • How does index investing deal with winners and losers in the index?
  • Downside of each company is limited to them losing 100%, but the upside is unlimited
  • The Dow Jones is not the “market.” Just an index with 30 large companies
  • Stock picking contests in schools in the US are fundamentally looking at it the wrong way and are incentivizing short-term thinking

Hot Seat Questions

  • Favorite blogs: Mad Fientist, Go Curry Cracker, Millenial Revolution, The Wealthy Accountant
  • Favorite life hack: Public Libraries and geographic arbitrage
  • Biggest financial mistake/advice you’d give your younger self: Understand the power and value of index fund investing much earlier
  • Favorite purchase on Amazon.com this past year: new rechargeable electric razor
  • Jim’s experiment in hotel living

Links from the show:

Books Mentioned in the Show:

018R | Capital Gains Harvesting | Never Pay Taxes Again

Harvest long term capital gains tax free

In Today’s Podcast we cover how to harvest long term capital gains tax free.

  • Friday Roundup 7
  • Review of Monday’s episode with Jeremy from Go Curry Cracker
  • Brad and his family just visited Washington DC for the weekend and used Chase Ultimate Rewards points to stay at the Hyatt Place National Mall
  • Brad’s trip to Walt Disney World with his family, parents and in-laws
  • Jonathan now understands harvesting capital gains and losses after the episode with Jeremy
  • Unconventional choices: Jeremy and Winnie haggling at the farmer’s market near the close of business. Brad going to Disney World before Molly turned 3 so they could get her park ticket for free. Jeremy taking his son on a flight the day before he turned 2 so he could be a lap child on a business class flight
  • Quick hit takeaways from the Jeremy episode: He told his mom he had a ’60 year emergency fund’; he opened a Roth-IRA for his son for earned income on the website.
  • The power of having money and financial independence enabled Jeremy to walk out of his job instead of doing something that he didn’t want to do.
  • Brad’s story of when he left his job and taking the power back from corporate America
  • Investing philosophy and the importance of taking your brain out of financial decisions
  • His financial freedom clock started when he ‘got to broke’ and paid off his student loans

Capital Gains Harvesting | Avoiding long term capital gains tax

  • Case study: Married couple with one child. 30 years old.  $120,000 of income and maxing their 401k ($36k in total)
  • Qualified dividends and long-term capital gains are taxed at 0% if you’re in the 10% or 15% marginal tax bracket
  • Understanding how marginal tax rates work for income taxes
  • The definition of FI: having 25 times your annual expenses saved up and invested

The long term capital gains tax

  • The long term capital gains tax  defined & explained
  • How the Roth-IRA conversion ladder would work for this couple and how they can harvest long term capital gains tax free by using advanced FI techniques

Itunes reviews and questions from the community

  • Reader case study from Kevin: How to work with a spouse from an ultra-wealthy lifestyle and bring them over to the FI lifestyle
  • Find what makes you happy in life and what you value and spend accordingly
  • Kevin’s scenario is almost exactly like our case study on this episode
  • Travel Rewards question: How to maximize hotel points with Hyatt and Starwood hotels
  • What’s coming up on ChooseFI: JL Collins talks about the Stock Series, the Stapes of FI, JD Roth and Kristy from Millennial Revolution, the true cost of car ownership

Links from the show:

Recommended Content

018 | Go Curry Cracker | Capital Gains, Losses and The Roth Conversion Ladder

Capital Gains & Losses

Introducing Capital Gains Harvesting

In Today’s Podcast we cover:

  • Our guest: Jeremey from Go Curry Cracker
  • Jeremy and Winnie are living the geo-arbitrage life: currently in Taipei, Taiwan and then on to a four month trip to Europe
  • They are using travel rewards points to get nearly free business class flights from Taipei to Europe. Using Alaska Airlines miles on Cathay Pacific they got nearly 20 cents per point in value!
  • “Retiring in your 30s is simple but not necessarily easy”
  • The biggest contributing factor is saving a high percentage of your income
  • It’s easier to save a high percentage of your income when you have a larger income
  • Make unconventional choices to save a high percentage
  • 2nd Generation FIRE and how college costs can be lowered
  • Jeremy had $40,000 in debt when he came out of college
  • They have already opened a Roth-IRA for their son and used the income he earned from ‘modeling services’ for Go Curry Cracker
  • He used the 80/20 rule to look at where 80% of their spending was going
  • Sold his car and rode a bicycle
  • Winnie made it so her cooking was the best food in town and they never wanted to go out to eat
  • They spend approximately $2 per person per meal for delicious gourmet home cooked meals
  • Most of their entertainment was community based with friends where they weren’t spending money
  • How did he get started on his FI journey? He took the first 6 years to pay down his $40,000 in debt.  Didn’t take vacation, worked overtime to earn more money.
  • On his first vacation he realized he didn’t want to work forever and started formulating his plan
  • He set a 10 year plan and retired in 10 years plus 1 day from when he started!
  • What was it like when he actually quit his job?
  • The power of FU money and not needing to work plus how much more power it gives you while you are actually working
  • How is he investing his money? 100% of his money is in 2 index funds
  • Wait for compound interest to take hold so you can benefit over decades
  • Unpacking his article ‘Never Pay Taxes Again’
  • Harvesting Capital Gains and how it enables you to get up to $90,000 in tax free income each year and increase the basis in those funds so you are never paying taxes on the gains
  • Wash sale rules aren’t relevant to harvesting capital gains, only capital losses
  • Harvesting capital gains actually makes it easier to harvest capital losses in the future
  • They also do the Roth-IRA conversion ladder to effectively make their regular 401k tax free
  • Harvesting capital losses to offset other income
  • Avoiding the wash sale rules: Need to buy back another fund (example: Sell Total Stock Market Index fund and buy S&P 500 Index fund)
  • Hot Seat questions
  • Favorite blog: JLCollinsNH.com
  • Favorite life hack: credit card rewards points

Links from the show:

Books Mentioned in the Show:

017R | The Roth IRA Conversion Ladder | A Case Study

The Roth Conversion Ladder… Let's talk about what it looks like in a real world example


In Today’s Podcast we cover:

  • This is our 23rd episode and providing a home for the FIRE community
  • Thank you for our 50th review on Itunes (from Chad Carson!) – we plan to implement the voicemail feature on the website so we can use your input on the show
  • Episode with Brandon from the Mad Fientist
  • This podcast humanized Brandon and you got to hear his story
  • “Early retirees are such a different breed…I’m looking at this through the very focused lens of early retirement.”

The built-in benefits of financial independence aside from just the dollars and cents: College, health care, taxes

The Roth IRA Conversion Ladder

  • The Roth IRA conversion ladder is the key to early retirement and accessing your 401k/retirement funds and pay little to no taxes on the money
  • It was amazing how open and honest Brandon was: depression, ‘quarter-life crisis’, deprivation period
  • Brad went to a retreat over the past weekend for “designing the life you want to live into”
  • Quote from Keith: “I never dreamed past here.” Dream bigger and find what brings you joy and happiness in life
  • Money is not the end goal. It is a tool to let you live a better life
  • How Brandon tested the upper limits on their spending and how it impacted their happiness (and only a couple of thousand dollars per year)
  • Brad thinking differently: How could he spend a little more money to bring more joy to his life

Roth IRA conversion ladder step-by-step scenario:

  • 20 year old guy earns $60,000 per year, has $30,000 of expenses per year and is on a 20 year plan for FI. How does he take advantage of the Roth IRA conversion ladder to pay little to no tax and still fund his early retirement. The Key for the Roth IRA Conversion is to max out the 401K
  • Itunes reviews – thanks to the audience!
  • Question from the audience: Heather about what to do with her 401k after leaving her job. Should she leave it in her company’s 401k or roll it out to Vanguard and her own IRA?
  • Question from Bryan: How the 4% rule works on pulling out money from Roth, 401k, IRA, etc. and how to manage your tax liability in early retirement
  • When you reach FI, you aren’t going to sit back and do nothing when “retired”
  • Where ChooseFI is going: college hacking from Edmund Tee and Seonwoo Lee
  • Tax hack from an audience member: if you can’t itemize every year, consider putting all deductions (donations, state taxes, etc.) into every other tax year so you can itemize every other year and in the off year you get the standard deduction
  • Frugal hack of the week: Jonathan created a standing desk for his treadmill

 

 

For More Tax Related Content

Links from the show:

017 | Mad Fientist an Origin Story

Introducing the Roth Conversion Ladder


In Today’s Podcast we cover:

  • Today’s guest: Brandon from MadFientist.com and the origin story of the Mad Fientist
  • How did the Mad Fientist website come about? He first stumbled on the Early Retirement Extreme website
  • He thought there’d be investing strategies to get him to financial independence more quickly, but he realized index funds were the best way to go about it
  • Then he stumbled upon tax optimization and tax avoidance strategies
  • Finding Get Rich Slowly and other personal finance blogs got him interested, but he looked at it through the eyes of an early retiree and realized the standard advice didn’t necessarily apply
  • “Early retirees are such a different breed” and optimizations can be had when looking at the problems differently for FIRE
  • He took a core tax strategy and pivoted it to the best way to optimize for early retirees
  • He uses his audience feedback to help come up with ideas for new posts or as ways to update and augment posts
  • The Roth IRA conversion ladder changed the entire game for him and made him max out as many pre-tax accounts as possible
  • How to get retirement money out earlier than the traditional 59.5 age without a penalty?
  • Building a 5-year conversion ladder with traditional savings to cut your effective tax rate down to almost 0% on your traditional IRA and 401k
  • Brandon’s college choice and how it impacted his financial life with minimal student loan debt
  • Brandon took a software developer’s position at an Ivy League University and worked towards a free Ivy League master’s degree
  • Did Brandon max out his 401k his very first year?
  • What’s the most expensive car Brandon every bought? He leased a Toyota RAV4 but other than that every car he has ever owned is at least 10 years old
  • What financial mistakes has Brandon made or where does he not follow his own advice? Timing the market and sitting with too much cash
  • Take your brain out of your investing decisions once your plan is set
  • What type of investing does Brandon do? All index funds from Vanguard and cash
  • How has Brandon evolved psychologically as he has approached Financial Independence?
  • Reaching your FI number doesn’t by definition make you happier. You have to find your passion in life
  • They actually loosened up their spending for a year to enjoy life as much as possible. Total tally: $35,000 of yearly spending. As compared to their normal $30,000 – $33,000 spending.  An insignificant increase in money spent for such a large increase in satisfaction
  • What is the most surprisingly positive aspect of post-FI life?
  • What does his life look like 5 years from now/what does he want to do with his life?
  • Hot Seat Questions
  • Favorite life hack: Find out what makes you happy
  • Advice to your younger self: Just get started today

Links from the show:

Books Mentioned in the Show: