025 | The Wealthy Accountant

Keith from The Wealthy Accountant makes an appearance on the show to discuss tax optimization for individuals and small businesses with plenty of tax tips for your FI tool chest.

In Today’s Podcast we cover:

  • Keith from the Wealthy Accountant presents his tax optimization strategies for individuals and small business owners
  • Keith is the most knowledgeable accountant we have ever met. We met him in Florida at Camp Mustache and his exuberance for tax optimization was infectious
  • Keith became the official accountant of Mr. Money Mustache after a presentation at Camp Mustache in Seattle
  • A discussion of how to save FICA taxes by being taxed as an S-Corporation instead of as a pass through entity such as an LLC
  • Keith’s discussion of potential tax law change based on the President’s proposal
  • For people starting a business, where would Keith start? Business structure, getting kids and spouses involved, etc.
  • Keith believes when you have business income over $50,000 that you should be an LLC taxed as an S-Corp
  • Is there value for someone over the FICA cap in their ‘day job’ for their business to be treated as an S-Corp?
  • Home office deductions vs. renting part of your home to your business entity and how to make it official with a formal contract
  • What Keith recommends for retirement savings and the rules you need to understand whether you are an employee or if you own a business
  • Keith’s recommendation to speak with your HR department to max out your 401k if they only seemingly offer a certain percentage of your income
  • Tax optimization strategies for real estate investors including the tangible property rules and how to benefit from expensing items that would have otherwise needed to be depreciated
  • Cost segregation studies and how that can save you money on depreciations
  • Healthcare for small business owners and the lack of options
  • Discussion of Keith’s writing at The Wealthy Accountant. The goal was for people to “think like an accountant” and to live your life ‘right.’
  • He believes in saving half your income and investing in broad-based index funds. If you do those 2 things you’ll be successful
  • Hot Seat Questions
  • Keith believes the mega backdoor Roth and the Roth IRA conversion ladder will go away with tax reform
  • Favorite Blogs and Blog Posts of all time
  • Favorite life hack: Credit Card travel rewards
  • Biggest financial mistake: Trying to get into the stockbroker business
  • Advice you’d give your younger self: Don’t worry so much about money and enjoy yourself

Links from the show:

024R | The Friday Roundup | How to Hack Your ESPP

In today's Friday Roundup we discuss Episode 24 with Joel and Alexis from FI180 as well as some expert voicemails from Chad Carson about real estate plus Ken talking about ESPP options.

In Today’s Podcast we cover:

  • Friday Roundup after Episode 24 with Joel and Alexis from FI 180
  • Camp Mustache tickets for January 2018 are available for sale, so come and join us!
  • The letter Joel wrote to his younger self and the emotional value of it
  • The sacrifice for living an opulent lifestyle is too great in our opinion as you have finite resources and have to make the best choices
  • Joel and Alexis had a true choice and inflection point where they chose Financial Independence
  • They looked at FI as a game and had fun trying to gain a quicker path to FI. It made them happier and brought them closer together
  • The 72 hour no buying rule that Liz from Frugalwoods informed us about
  • Brad’s new favorite card game: Monopoly Deal
  • Feedback from the audience: Austin’s email about his path to FI with a career that didn’t require a Bachelor’s Degree. He is now earning 6-figures at 25 years of age
  • Itunes review from Derek who is teaching his 5th grade students how to look at money, index fund investing and much more.
  • Geri’s question about reinvesting dividends when you invest in mutual funds. You generally want to reinvest the dividends
  • Question from John about investing in VTSAX in a “taxable” investment and what bucket to put it in? Our advice is to open a standard brokerage account and invest in VTSAX
  • Index fund investing is the most tax efficient investing since there is low turnover and thus lower capital gains that would be taxed in the current year
  • Email from Matt describing how he’s thinking more deeply by listening to our show and reading FI blogs
  • ChooseFI mentions on other blogs
  • FI hack from Ken on ESPPs and Jonathan’s response since he can benefit from it at his job and purchase his company stock at a 10% discount
  • Follow up from our in-house expert on real estate: Chad Carson who gives us a background on how to evaluate the financials behind a rental real estate purchase
  • Travel rewards question about how to review flight and alliance award options. Our  thought is to look at traveling differently and build in flexibility and find saver award availability
  • Travel rewards question about combining Chase Ultimate Rewards points
  • Hot Seat intro music update
  • Itunes reviews and The Simple Path to Wealth book giveaway

Links from the show:

Hacking College With Zero Debt

College Hacking

A recent opinion-piece in the New York Times caught my eye.

The column was applauding a college cost calculator published by several top-ranked private universities.

I gave it a shot and liked the calculator well enough.

It was simple, needing only 7 sets of information, required no personal information, and gave enough information to be useful.

Here’s the link if you want to check it out.

While several universities participated in the project, I picked the University of Virginia as an example, since both Brad and Jonathan live there.

These were the numbers I plugged into the calc:

And this is what the calc returned:

I punched in some numbers for an affluent middle-income family, and got a $30,000 a year sticker price, comprising $22,600 student and parent contribution, a $4,500 student loan, and $2,900 of scholarship money.

That threw me off, because my son is in the University of Washington now, and we will not spend more than $26,000 when he graduates. In TOTAL.

With no student loan, and excluding any scholarship money or financial aid.

Something was off, and I just had to get to the bottom of it.

My immediate thought was that the UW cost less than UV, and that was true.

Here is what the University of Virginia costs per year:

Total annual cost of attendance: $30,490.

And here is the breakdown:

  • Tuition and fees: $15,714
  • Room and board: $10,726
  • Books and supplies: $1,296
  • Other expenses: $2,754

And here is what the University of Washington costs:

Total annual cost of attendance: $25,948.

This comprises:

  • Tuition and fees: $10,753
  • Room and board: $11,691
  • Books and supplies: $825
  • Other expenses: $2,679

So ok, there is a $5,000 difference between the tuition and fees of the two universities.

Short of taking up residency in a state with cheaper college tuition (hmm, now that’s another rabbit hole to get lost in), this revelation didn’t answer my bigger question.

Which was, how my son will be getting his degree for the same amount of money as what his peers will be blowing through in just one year.

Digging into my records uncovered the missing pieces, which were the things we did to whittle down that price tag with some college hacking tactics.

We’ll organize those ideas into five buckets:

  1. Dual enrollment and College Credit Arbitrage
  2. Slashing the MSRP of College Tuition
  3. Hacking Financial Aid
  4. DIY Micro-Scholarship Hacking
  5. Earning (and Keeping) School Money

Dual Enrollment and College Credit Arbitrage

When my oldest was a sophomore in high school, I coached him to start looking at dual enrollment (not available in every state).

With dual enrollment, high school students get to earn college credits paid for by the state.

Next, and related to dual enrollment, we used college credit arbitrage techniques to save a bit more money. This is nothing more than paying for credits at a community or technical college, where the cost per credit is often lower, and transferring those credits to the university of choice.

The difference between dual enrollment and college credit arbitrage is that for the former, the school district sets the boundaries on what it will pay for. With the latter, your student chooses the courses since the credits are paid for out of pocket.

Caution: lots of research required! You don’t want your student picking a course only to find that the credits can’t be transferred later.

Done well, dual enrollment and college credit arbitrage helped my son graduate high school with a GED AND an associates degree. It also let him transfer directly into his Junior year at the university level and skip the dreaded SAT altogether.

This saved him 2 years in tuition and associated fees, or about $18,000. For more details on his dual enrollment experience, check out an article I wrote here.

Slashing the MSRP of College Tuition

I’m not going to get into a discussion about what a person should major in, what the best school would be for that field of study, or even whether college is needed. That’s a personal decision and none of my business.

What I will do is highlight two obvious things from a FI perspective.

The first is to pick an in-state college, versus one out of state, even if the latter is a more prestigious institution.

This is especially true if going out of state forces your student to sign up for a student loan.

At the University of Washington, the estimated cost of tuition (excluding other costs) is as follows:

  • In-State Tuition and fees: $10,753.
  • Out of state tuition and fees: $34,791.
  • Difference: $23,948.

The gap is even higher at the University of Virginia:

  • In-State Tuition and fees: $15,714
  • Out of state tuition and fees: $45,058.
  • Difference: $29,344.

That’s a big chunk of change right there! From a purely financial perspective, an out-of-state college should be out-of-bounds for most people.

Somewhat linked to the decision to stay in-state is the cost of room and board.

The estimate for room and board at the UW is $11,691, which is even pricier than the UV, at $10,726 a year. That’s not surprising, given how heated the Seattle real estate market is.

So, one option is for your student to stay home and commute if feasible (if they can put up with you).

Or, if that’s not practical, your family might want to explore house hacking, which is the practice of:

  • buying a home and renting it out to other students
  • using the rent money to pay the mortgage
  • and staying for free.

House-hacking is more than just saving on living expenses though.

It has the potential to teach some concrete life skills, and help a person get started on the path to financial independence much sooner.

When I was in college in the 1990s (yes I am that old), I persuaded my mom and sister to buy an apartment near campus. We rented 3 out the 4 bedrooms out, and I managed the tenants, leases and the property.

I learned a ton.

Such as, I was a terrible handyman. Once, I tried to hammer a screw.

But I also learned that I had a decent brain for property management, real estate, and business in general.

By house hacking, I covered the mortgage for my mom and sister, invested the profits, and earned a small sum. I also learned a lot about human nature and why screening tenants is so important, but that is another story for another day.

After I graduated two years later, we sold the apartment for about a 10% appreciation, which was an added bonus for my mom and sister.

Coach Carson, who was a guest on one of the podcasts, has a great series that you can look into if this is something that you want to do.

Hacking Financial Aid

I am no expert on financial aid, but my buddy SeonWoo is. He’s published a nerd’s eye-view of how to get the most free college money your student can get. You can check out his article on how to hack the FAFSA here

What I will say is that every college-bound person MUST apply for it using the Free Application for Federal Student Aid (FAFSA).

Not just for the chance to score a Pell grant or some funds from the college of choice, although those are important reasons to apply.

The reason every student should fill out the FAFSA is that many private-sector scholarships also require this as part of their application process.

I would also say that while I discourage student loans in general, there is one kind that I like – the ones that are interest-free until 6 months after graduation.

If your student is a responsible and financially-savvy hustler, that’s a loan worth considering. Maybe use the money as a deposit for house-hacking?

In general, the lower you can get your taxable income, and the less assets you have in taxable accounts, the more likely you are to get more aid. If you are at or close to financial independence, this gives your student the advantage, as you have more options on how to structure your finances to optimize for this.

Thanks to SeonWoo, I have my plans lined up for my two younger kids. It was a little more complicated for me since I own a few businesses that bring in a fair amount of passive income, which also meant I was excluded from filing what was called an IRS Form 1040A – one of many conditions to getting the biggest amount of aid.

Working with my awesome CPA, we were able to figure out a plan. It would take work and lots of paper shuffling, and needs to be completed 2 years before my younger son is in college.

But unless the rules change (and they may), we are on track to qualifying for what’s called an automatic zero EFC (Expected Family Contribution).

DIY Micro Scholarship Hacking

Another thing that your student should be doing is to assemble his or her own scholarship plan.

While this wasn’t something my son did because he was away in the army, it’s something we’re looking at now for his siblings.

It doesn’t matter that your student is not a major achiever in academics or athletics. Yup, you heard me right. What matters is a can-do attitude that demonstrates initiative and drive.

There are thousands of small little scholarships that are offered to high school students every year for college. These usually range between $500-2,000, which doesn’t sound like a lot.

But the funds can add up quickly, so it’s something that I encourage my kids do, especially my youngest, who is the most focused and driven of my brood.

We’re hoping to score about $8,000 a year for college, for about 80 hours of work. That’ll be about $100 an hour, which is nothing to sneeze at.

You can read how I am helping her with her DIY scholarship goals when I am done with the post.

Earning (and Keeping) School Money

This is another no-brainer.

Now that your student is in college, they should be doing what they can to earn an income. Maybe it’s finding work in the university or a gig off campus.

There are also several rideshare side hustles that are more flexible, such as delivering people, food, or packages. I experimented with DoorDash, GrubHub, and Peach as side hustles, just to get a sense of what that was like. My oldest does this between classes now.

If your student has already hacked her own micro-scholarship package, make sure she keeps going back to that spreadsheet and keep mining the opportunities.

This next, and final, part sounds both preachy and hypocritical, because, erm, I enjoyed my time in college.

But it’s crucial that your second-generation FI student stays frugal and lightens up on the partying. After all the hard work, the last thing he needs is to literally piss away all the money they’ve saved!

If they’ve picked up the same FI values you’ve lived by, that shouldn’t be a problem.

In our family, the rules of thumb are, don’t spend money like an idiot, sure, but more so, don’t spend money to impress idiots.

That seems to have stuck. I hope.

So there you have it.

Some simple steps that second generation FI can score that college degree without being weighed down by debt!

Related: Applying to Colleges? Why You Should Consider Small Private Schools

To continue this  series on college hacking check out Part 1 | Duel Enrollment

024 | FI180 | Make a U-Turn and Choose FI


Today we have Joel and Alexis from FI180.com on the podcast.  They changed their financial lives dramatically, going from spending over $100,000 per year to having an 85% savings rate and on the path to FI in just a few short years.

In Today’s Podcast we cover:

  • Joel and Alexis from FI180.com tell their story of how they went from spending over $100,000 per year to having an 85% savings rate
  • FI can only be a few steps away and this story is the perfect example
  • They bought new cars, a new house and didn’t track their spending at all
  • In 2014 Alexis was in a terrible car accident and that led to the awakening that changed their financial lives. They took the $10,000 they received from the car and invested it in Vanguard
  • The costs (financial and health) and opportunity costs of a long commute
  • Every month they tried to make one change to improve their finances
  • Their savings rate was only 7% at their lowest and last year it went up to 85% (since lowered to about 75%-80% to add happiness)
  • Joel’s brother is also on a path to FI now and is “racing” them to FI
  • It isn’t a race though – it’s about enjoying the journey and finding happiness
  • Their happiness has increased after finding this path to FI. “Happiness is the goal”
  • “We were using our spending as a way to try to numb the effects of a workday”
  • They have learned how to cook at home and save money and eat better. Previously were going out to eat twice per day!
  • Line items from their ‘Our Savings Snowball’ article on what they were previously spending and what they are spending now
  • The awakening when they chose to pursue FI after the car accident in 2014
  • There are certain things that are in your control and others that aren’t. Focus on what is in your control
  • Hot Seat Questions
  • Favorite blogs: Mr. Money Mustache and The Wealthy Accountant
  • Favorite life hack: Alexis was not allowed to go shopping without a list and couldn’t buy anything not on the list. As well as not using a shopping cart or basket
  • Food shopping game called the “$3 rule” where they tried to see how many “luxury items” they had over $3 at Aldi each week
  • How to save big at Aldi on your food bill
  • Biggest financial mistake: The house they bought originally in Florida at the height of the housing bubble which almost immediately went down 60% in value
  • Their thoughts on investing in real estate
  • Is Alexis leaving her job next year or just Joel?
  • Joel’s advice to his younger self: Reading his post to his 22 year old self

Links from the show:

Books Mentioned in the Show:

023R | Friday Roundup | Paul Case Study Part 3

Big ERN Debut

In today's Friday Roundup we discuss career hacking with ESI Money, Big ERN's analysis of Paul's case study, plus hear our answers to an interesting question posed by audience member Jason about the value of frugality.

In Today’s Podcast we cover:

  • Friday Roundup after Episode 23 with ESI from ESI Money
  • Looking at compound interest on the earnings side of a career instead of just on the savings side
  • ESI is now an author on Business Insider. Our question of how he made that connection
  • What jumped out to us from the episode with ESI? Starting at a higher salary, managing the boss, etc.
  • Commonalities of career paths for people pursuing FI and for Second Generation FIRE?
  • Options for seasonal work (such as tax preparation) while pursuing FI
  • Managing the boss: Telling your boss you want to be a high performer and how to quantify it
  • How this sets you up to ‘win’ either in this current job or to land a better job elsewhere
  • The power of networking for Choose FI and our growth
  • Personal relationships matter, even in a digital and connected world
  • Itunes review about us “mainlining the secret truth of the universe”
  • Our definition of FI being 25x your annual expenses. There is also the conversation of ‘safe withdrawal rates’
  • Big ERN’s feedback on Paul’s case study and his in-depth analysis of Paul’s early retirement plan
  • ERN’s calculations plus his look at the real-world implication of social security on Paul’s plan
  • Paul’s response to our question about his $70,000 per year of expenses. A full $23,000 is based on travel they took last year
  • With “slow travel” and intentionality they can reduce the cost of their travel while actually traveling more
  • Excluding travel their post-FI expenses are actually only $37,000
  • Many expenses are reduced once you reach financial independence and Paul has actually identified many of those reductions
  • Feedback from the community: Jason posed a question to us about what we’re “missing out on” by pursuing FI and if the finer things in life are something we should pursue
  • Brad thinks that pursuing FI is a ‘superpower’ that enables him to live a life he enjoys. And if that means “sacrificing” BMWs and Maine Lobster to get there, it is a trade he’s more than willing to make
  • If money is no longer an issue, what changes then? That is the real question
  • Responses from the community on Jason’s question and how they would spend their money
  • College hacking article coming from Edmund Tee on Choose FI
  • Frugal wins of the week from the community
  • Life hack from Steve on life insurance
  • Itunes reviews and winners of The Simple Path to Wealth

Links from the show:

023 | Career Hacking with ESI Money

023.CAREER HACKINGP.S. If you have time to leave a review for the podcast it would be a BIG help to us -) http---www.choosefi.com-itunes

ESI from ESI Money is on the podcast today talking about Career Hacking and how you can set yourself up to earn millions more over a working career with seven simple steps.

In Today's Podcast We Cover:

  • ESI from ESIMoney.com is here to discuss ways you can increase your earnings through Career Hacking
  • ESI retired at 52 and reaching “financial independence” in his early 40s. He lives in Colorado, which is where many FI bloggers live
  • Your career is a multi-million dollar asset and it is important to focus on maximizing your earnings
  • There are steps you can take to increase your lifetime earnings while in the same job
  • Start with a higher beginning pay and how to get there
  • Start with a career that has a higher opening pay; negotiate your starting salary; increase your pay through education/degrees
  • How we can use this knowledge and apply it to our kids for ‘second generation fire’
  • How to get higher than 3% raises per year and how that can lead to millions of dollars of extra income through a career
  • Seven actionable steps to earn more money on yearly raises and grow your career
  • Step 1: Perform as well as possible in your job
  • Sit down with your boss and discuss expectations and make them quantifiable
  • Document your success and keep your boss informed, which helps “manage your boss”
  • Step 2: Be likeable or ‘more likeable’
  • People like to reward and promote people they like, so be nice and considerate
  • Step 3: Networking is essential
  • You need to help others as much as possible so they will be willing to help you in the future
  • ESI’s actionable tips on how to use LinkedIn to create and foster a network of valuable connections
  • How ESI reached out to his network when he was looking for a new job and he landed a job in Colorado through the network
  • Step 4: Be more attractive
  • Dress a little bit nicer and pay a little more attention to your appearance; “date your career”
  • Step 5: Continue learning and developing your skills
  • How Warren Buffett believes public speaking increases your career value 50%
  • Scott Adams’ ‘talent stack’ to create a valuable set of skills for your life and career
  • Trying to get better at life skills a little bit at a time every day
  • Step 6: Manage Yourself
  • Life skills you need to navigate life and your company politics, etc.
  • Create a system to getting things done in life for personal motivation and drive
  • Find yourself a mentor to guide you
  • How ESI uses a system he learned early on in his career to manage himself
  • How Brad and ESI both use ToDoIst to manage their lives
  • Step 7: Market Yourself
  • How you can get huge pay increases when you move to a new job and how to find new options
  • Hot Seat Questions
  • Favorite life hack: living in low cost cities and communities
  • Biggest financial mistake: Waited to start investing until after he got married.  Lost 5-7 years of compounded returns
  • Advice for your younger self: Start saving and investing earlier and more significantly

Links from the show:

Books Mentioned in the Show:

022R | Friday Roundup | Huge Announcement

Friday Roundup 022R

In today's Friday Roundup we discuss the True Cost of Car Ownership, how to maximize your travel rewards points plus a big announcement on a new in-house ‘expert' for ChooseFI!

In Today’s Podcast we cover:

  • Episode review of our podcast Episode 22 on The True Cost of Car Ownership
  • Your best-case scenario is buying a 5 to 10 year old gas sipping car
  • Even a low cost car is going to cost you at least $2,000 per year
  • Your fixed structural expenses move the needle significantly on your path to FI, and the car is the easiest one to change.
  • Comment from Matt on how he introduced this to his algebra class on why buying a new car is a bad decision and what it amounts to when compounded
  • Second generation Fire: Starting out right and not buying an expensive car (plus house hacking) will set people up for Financial Independence by 35
  • Question on Saverocity about living close or far from work and how that impacts your path to Financial Independence
  • Is bicycling a pillar of FI or is it unrealistic for the vast majority of people and might even turn people off from pursuing FI?
  • In a post-FI lifestyle, does bicycling make more sense?
  • Comment from the audience on Cargo Bikes
  • Voicemail from Rebecca on what to do with her car situation
  • Our thought is that it makes sense for Rebecca’s life and financial situation to move towards the Honda Fit
  • Our final thought on cars: Don’t buy a new car; buy a used car and drive it into the ground
  • Choose FI is bringing on in-house experts on real estate, taxes, business building and all things number crunching
  • Alan’s brainstorming ideas for helping the community build businesses
  • Should building a side hustle be a Pillar of FI?
  • Travel Rewards question from Noah: Should he cash in his miles & points and invest them in VTSAX or save them for future travel?
  • Brad’s advice is to save them for future value where the value can be 2x-4x or more
  • How the Millionaire Educator takes his rewards points to invest in an ESA fund
  • Travel rewards question from Satya on travel to India using Chase Ultimate Rewards points
  • Feedback from the audience: Kevin’s follow up to Friday Roundup 18. He spoke with his wife and she just wants to spend more time with him where she gets his full attention
  • Human connection is the most important aspect of happiness
  • FI in the news: Our upcoming guest ESI from ESI Money was featured on the Washington Post
  • FI in the News: Article that Brittinni sent in about net worth being the key to wealth, not income
  • Frugal Wins of the week from the audience
  • Aaron’s feedback about the true cost of car ownership and he teased us with how he sells boats for a profit
  • Final word on Jonathan’s pullups
  • Itunes reviews and book giveaways

Links from the show:

Books Mentioned in the Show:

022 | The True Cost of Car Ownership

022 - The True Cost of Car Ownership

Do you know what your car is actually costing you each year? What about over an investing lifetime? In this episode of the ChooseFI Radio Podcast we cover the True Cost of Car Ownership and you'll be absolutely amazed at the numbers.

In Today’s Podcast we cover:

  • ChooseFI: The Ultimate Guide to the True Cost of Car Ownership
  • Your car payment is a terrible way to spend your hard earned money
  • We’ll present two different perspectives: Brad will show the long-term compounded cost of buying/leasing new cars continually versus holding a car for 15 years while Jonathan is going to present the yearly cost of your car
  • Brad wanted to see what it was costing someone to constantly “manage their car payments” at a set number forever by buying/leasing new cars
  • This example is too conservative so a FI person would actually save even more money!
  • In Brad’s example the FI person is buying a new car every 15 years. They have payments for the first 5 years and $0 car payments the final 10 years.  Person B is constantly paying $300 per month.  This is a 45 year study, so Person A bought 3 new cars in the 45 year period
  • At the end of the 45 year period, Person A’s savings compounded to be worth $742,000 versus Person B who was constantly paying $300 per month.
  • Takeaways: Don’t buy new cars and continue to drive your car as long as possible with no car payment!
  • Most people can’t truly afford an expensive car and house even on a large salary. This is a true key to FI
  • Astounding that $300 per month for 30 out of 45 years are ending up with $742,000 while most people don’t have anywhere near that much money after a lifetime of working and “saving.” That also shows how little money most people are saving
  • Jonathan’s bad track record with buying cars in his life

The True Cost of Car Ownership Calculator

  • Jonathan’s example for yearly car cost compared a new car for $30,000, a 5 year old car for $15,000, and a 10 year old car for $5,000
  • Went through yearly depreciation calculation for Jonathan’s three examples
  • Went through a calculation of annual opportunity cost of the year-by-year amount lost at 8% annual return if you would have invested based on these 3 examples
  • Calculation of maintenance, insurance, taxes, inspections, etc.
  • Also calculate the cost of gas each year depending on the type of car
  • The 20 year difference from having a used car versus a new car is almost $250,000
  • Jonathan’s determination is you should buy a ‘gas sipper’ that’s at least 5 or 10 years old

True Cost of Home Ownership

Links from the show:

Click here for the excel sheet download for Jonathan's car ownership example
Download Now

Books Mentioned in the Show:

021R | Our First Ever Crowd-Sourced Case Study | Paul

Friday Roundup 021R

In today's episode of the Friday Roundup we review our discussion of the Pillars of Financial Independence, take questions and comments from the community and go in-depth on Paul's live case study.

In Today’s Podcast we cover:

  • Review of Episode 21, the Pillars of Financial Independence
  • What areas of financial independence did we leave out of the episode?
  • Might have under-discussed savings rate as a pillar of FI
  • Choose FI as one of the ‘5 people you spend the most time with’
  • The value of $100 savings per month after 20 years or 40 years
  • Can Jonathan really do 50 pullups?
  • Comment from the audience: Charlotte mentioned Geographic Arbitrage as a pillar of financial independence
  • Comment from the audience: Mary suggests that taxes are the largest line item in your budget, not housing like we mentioned
  • Comment from Frank: He thinks we can do an entire episode on how to educate your children on money
  • Comment from Matt: The expense ratio on Vanguard’s VTSAX fund was just lowered to 0.04%
  • FIRE in the News: Anti-frugal event that Isaac showed us and Financial Panther’s list of best new podcasts
  • The value of travel rewards for people in the FI community
  • Frugal wins of the week from the audience: Andrew starting his own Gracie Garage, Tom’s list of incredible life changes, Cassie’s reduction in car insurance, Neal maximizing gift cards that were lying around the house, Tanner saving on free and used items, Heidi cutting cable
  • Live case study from Paul – his responses to our questions from last week’s episode
  • Paul’s response to “how much do your expenses cost you each year”
  • Paul’s response to the question, “do you want to quit your job?”
  • Paul’s response to “what does your post-FI life really look like?”
  • Brad’s thought that the pursuit of FI is not about money – it’s what you value in life and finding happiness both in the journey and post-FI
  • Frank’s question to Paul about what they have planned for his daughter’s college education
  • Will $43,000 of savings be enough to fully fund a four year college education?
  • Thoughts on college education and the value of that education
  • Question to Paul about what is psychologically holding him back
  • Question to Paul about his plans to include Social Security into his FI plan
  • Question to Paul about the breakdown of his investment accounts between different ‘buckets’
  • Paul’s plan for a Roth-IRA conversion ladder
  • Paige’s comment about the ‘Age of 55’ rule for distributions from your 401k if you are 55 or older after your separation from service
  • Our follow up questions for Paul based on his case study
  • Itunes reviews and book giveaways

Links from the show:


021 | The Pillars of FI

021 - The Pillars of FI

In this episode of the Choose FI Radio Podcast we focus on the essential Pillars of Financial Independence including index investing, affordable housing, the psychology of FI, tax optimization and more.

Not a good time for a podcast? You can read the article inspired by this episode here.

In Today’s Podcast we cover:

  • ChooseFI Episode 21: The Pillars of Financial Independence
  • While we intend to focus on the roughly 10 pillars of FI, we assuredly have missed some so we hope the audience sends us the ones we’ve missed
  • Low-cost index fund investing is the way to go with investing in the stock market over decades and the best way to grow your wealth
  • We love Vanguard and VTSAX but Schwab and Fidelity have similar funds with similar expense ratios
  • Even the Mad Fientist realized that he couldn’t out-research the market and stuck with index funds while he pursued tax optimization strategies to grow his wealth even faster
  • Another sub-pillar is to not try to time the stock market. You will screw it up since you need to be right on the buying and selling side
  • Affordable housing as a pillar of Financial Independence, since this is the largest line item in your budget
  • Even if you live in a high cost of living area, you can still pursue FI. You just might need to think a little bit differently
  • Sometimes pursuing FI requires tough decisions
  • Car ownership as a pillar of Financial Independence
  • We do not believe in buying new cars – let someone else pay for the depreciation the first few years
  • Look for fuel efficient cars that are inexpensive to repair
  • Your food budget as a pillar of Financial Independence
  • You should focus on $2 per person per meal as a guideline for home cooked dinners
  • Most pillars of FI come down to thinking a little bit differently and being a little bit smarter
  • Jonathan lost 25 pounds during his 3 month challenge to lose weight before his son’s birth
  • Tax Optimization as a pillar of Financial Independence
  • Max out your tax-deferred accounts is the advice for the FI community since you theoretically can take it out without paying taxes on it if you use the strategies we’ve previously described
  • Hacking your college education as a pillar of Financial Independence
  • Ways to save a significant amount of money on a college education
  • Travel Rewards maximization as a pillar of Financial Independence
  • Use rewards points to help travel the world for nearly free. You must pay your cards off on time and in full every single month
  • Cutting the cord on your cable subscription as a pillar of Financial Independence
  • Intentionality and how you choose to spend your money is important when assessing FI
  • Reducing your cell phone bill as a pillar of Financial Independence
  • Making a small ‘hard choice’ to save big money and have an ‘easy life’
  • The 4% Safe Withdrawal Rate explained
  • Philosophy as a pillar of Financial Independence
  • Unconventional thinking – looking at a problem differently that can help you live the same lifestyle as everyone else while getting wealthy instead of living paycheck-to-paycheck
  • Maximizing the rules: Knowing the rules of the game and planning in advance
  • Planning and creating a framework for life makes everything easier
  • Patience is what makes FI “incredibly difficult.” This is the simplest concept but it takes many years
  • For every $100 you can cut from your budget each month, if you invest that money and earn an 8% return over 20 years it is worth $60,000.
  • Understand the math behind the decisions and know that even small decisions can earn you large results

Links from the show:The Perfect Introduction to the concept of Financial Independence. Crush the Hamster Wheel and Reclaim your Life