My Late Journey To FI

He and I are equally free

With some serious career hacking in 2017, I get to start out 2018 debt free! You need to understand the gravity of that first statement–I own my entire income. I get to choose where my paycheck goes and I choose FI!

I have pretty much been in debt from the age of 18, when I bought my first new car, until now, age 45, minus a short stint when I was living in Colorado as a hippie. Financial freedom might be in the air in Colorado.

I want to spend just a little time basking in this new debt-free reality. Pre-sobriety me could not even imagine this possibility as I was always chasing something that would never satiate my appetite. As you can imagine that cost a lot of dough.

Something in me has changed since paying off my debt. As tight as I was with my money in the debt pay off phase, it's even harder to spend my money now that I know the opportunity cost of investing it. I work hard for my money and I want my money to work for me. While this is a great new attitude, I also know my propensity for extremism (ahem, the attraction to FIRE!). Therefore, I need to take time to enjoy this journey. Overall, I am in love with this new relationship with money. 

The plan now is to go full speed ahead towards financial independence. I have been thinking and planning my investment strategy, but things got a bit more complicated after listening to episode 53 with Todd Tresidder. At first I was overwhelmed. Then I listened again. I decided I am grateful. The strategies below will include some tweaks in reaction to a broader understanding of ALL the factors that need to be included in my FI calculations.

I first learned of Mr. Money Mustache and Tim Ferris when my boss shared with me a podcast of Tim Ferris interviewing MMM. I didn't fully get how he was living off his investments, but I did get that he and his family were happily retired and living on ~$25k a year. I remember thinking this guy might really be onto something! Little did I know how big of an influence he was in the finance world.

Shortly thereafter, I was turned onto the ChooseFI podcast and introduced to the concept of financial independence. From there on I started to dig into this stuff and came to understand that saving 25 times my annual spending would potentially allow me to live off my investments without depleting them–also known as the 4% rule.

Through reading The Simple Path to Wealth by JL Collins, I have learned a lot about investing. Here are some overarching themes:

  • If I am going to invest in the market I need to first have faith in the U.S economy.
  • Stocks provide more aggressive growth, while bonds smooth the ride.
  • Pick an asset allocation I am comfortable with, for example, 80% stocks/20% bonds.
  • Rebalance this percentage annually.
  • Know what stage I'm at (wealth accumulation) and adjust the above percentages to be less aggressive as I near the wealth preservation stage.
  • In a bear market, stay the course. Don’t sell and as a matter of fact, buy more at this sale price.

All things considered

In a deflationary market decline, the fed can bail it out by lowering interest rates.

Todd Tresidder from the Financial Mentor got me thinking about the possibility of an inflationary decline, which has not been recorded in a lot of the data. All of the models take into account that stocks and bonds are inversely related, as one goes up the other goes down. That is not the case in an inflationary decline. In an inflationary decline stocks and bonds are correlated, meaning they can both go down at the same time. Ugh!!!

Todd said, “as an investor, you always want to look for the obvious thing that nobody’s looking at.” He went on to say that as of October 2017, that thing is inflation. If/when inflation comes back all rules change. This cautionary advice resonates with me and adds a second layer of complexity.

Am I now going to abandon my initial strategies of low-cost index fund investing? No, but I'm now thinking about how to diversify my portfolio with some other asset classes. Plus I'm still fairly comfortable with the 4% rule because of my age. Discovering financial independence when I was 44 means that I'll be in my 50's when I actually hit FI. The time that I have to live off of my investments is truncated compared to typical FI'rs.

2018 financial goals/investment strategies

Peace of mind

Tax-Advantaged Accounts

I have access to a simple IRA through my job. This will make up my tax-deferred investing. My boss puts in 2% and I will throw in the maximum contribution annually, $12,500. Keep in mind at age 50, the contribution limit goes up to $15,500.

Initially, the fund I chose inside my IRA account was a Target Retirement Fund (TRF). JL Collins gives them his seal of approval and the simplicity of TRFs spoke to me. Pick a retirement date and the funds rebalance itself and become more conservative the closer I get to my retirement date. Plus, I can push out that retirement date if I want to be more aggressive. TRFs do have a slightly higher expense ratio, though.

I will also set up a Roth IRA account and max it out ($5,500). Again, my contribution limit goes up at age 50 ($6,500). Most likely I'll buy Vanguard Total Stock Market ETF (VTI) inside of my Roth. I realize this account will change the percentage of my asset allocation so it turns out, I will be looking at this percentage annually.

As I wrote that last sentence, I realized that I may end up doing some re-balancing after all. That being said, I might as well take advantage of lower expense ratios and so I just called Vanguard and switched my TRF to VTSMX and VBMFX.

You're witnessing my education process in action.

Non-taxed Advantaged Accounts

Depending on my upcoming housing situation, I may have some extra money to invest and I was thinking I'd open up another brokerage account with Vanguard. I may still do that; however, I'm now thinking of a business investment or a beside hustle.

My emergency fund, affectionately named my POM (peace of mind) fund, is enough to cover six months of expenses. It is stored in an online savings account with Ally  The interest is peanuts but it's better than a typical brick and mortar bank. I plan on growing this to include enough money to buy another car when my old Saturn with 176k miles dies.

Other asset classes

So, all of the above strategies are in the paper asset class. Todd Tresidder talks about three classes to invest in:

  1. Paper asset class
  2. Real estate asset class
  3. Business asset class

I'm now thinking about the latter two more seriously. I may consider real estate investing in the next several years but for now, the business class intrigues me the most for two reasons.

  1. I am a late bloomer and entrepreneurship can allow me to achieve FI quicker.
  2. I'm creative and can dabble in this class without investing a lot of capital.

I've been playing around with painting this past year by watching YouTube videos. I found one particular instructor, Angela Anderson, whom I adore. She teaches techniques I would've never dreamed of on my own.

I find painting to be very therapeutic, which is the initial attraction in making this a side hustle. If I can create a side business which provides relaxation, then I have an income stream that can continue during my retirement years, meaning I might not need to live off the full 4%.

Part of my 2018 plan is to produce more paintings and open an Etsy store. I figure the more I paint the better I'll get. It's yet to be determined if this will produce any fruit, but with a low barrier to entry why the heck not!? You'll hear about it when it launches…

I love my new freedom and have peace about my strategies. What could be better?

Click here to read more from Ms FI-ology.

068R | 2 Worlds Collide

ChooseFI 068R 2 Worlds Collide

The next steps after Dave Ramsey’s Peace University, the importance of being present and food budget hacks.

What you’ll hear on today’s show:

  • Review of Monday’s episode
  • Brad’s life improvement thanks to FI
  • How to use Dave Ramsey’s lessons
  • Question from Chris about Dave Ramsey
  • What the next steps after the Peace University look like
  • Why and how credit cards can be useful
  • Jill talks about being nervous going back to credit cards
  • Michelle says the episode 68 is great to send to Dave Ramsey fans
  • The great advantages of working on a budget as a couple
  • Comment from Nick about paying off a mortgage
  • How FI is not about deprivation
  • The importance of being present
  • Voicemail from Louisa on a food budget hack
  • The video series on different food hacks
  • Voicemail from Ashley on her frugal win of the year
  • College hack on graduate assistantships
  • An article on the dangers of robo-advisers
  • Voicemail from Jesse about optimizing cash-back rewards
  • iTunes and book giveaway

Links from the show:

Finding My “Why Of FI”

Finding my why of fi

It's a marathon, not a sprint.

When I passed the distance marker and read, “1 Km”, I knew that I was in trouble. After all of my training doing hills, cross training, long runs, short runs–I was finally taking on my first marathon. But as my knee began to twinge and a recurring back injury started to whisper to me, I knew that this was going to be a long, long 42 km (26.2 miles).

After an unspeakable number of ibuprofens and almost five hours of slogging, I did finally cross the finish line. But boy, did I have to dig deep. It’s in those kind of moments, when I was hobbling along and no one was on the road cheering me on that I really needed to hang onto my ‘Why’:

  • Why am I doing this? (Actually it was more like, “Why the #$% am I doing this!?”)
  • What made me think that I could do this!?
  • What happens if I can actually finish this?

Five hours is a long time to think about this–but for me, the answers ended up being pretty simple:

  • I need to finish what I started
  • If I can do this, I can do anything

I knew that if I could train, prepare, and complete something this big then I could do anything–I just needed to cross the finish line. Now, when I am having a tough go, or I need to persevere and keep plugging, I think about that marathon. In fact, I tell myself  to “Dig deep. Marathon deep.”

Think that this is a great analogy for our journey to financial independence (FI). For some of us it seems like 26.2 miles/42km uphill. For others it might feel a bit shorter with the wind at their backs. But no matter what your journey looks like at the moment you will at some point need to clearly know your “why FI?”

First the why, then the how

Often when folks start toying with the idea of FI they immediately get caught up in the how. How long will it take me to get the money I need? What’s my savings rate? What should I invest my money in? What’s the overall plan? How will I track this? etc. etc.

But before you jump into the how, it’s super important to spend some time on your why. As a start, check out a great podcast discussion where Jonathon and Brad talk about the The Why of FI.

After listening to this podcast and doing my own navel gazing, I thought about some questions that might help me get to the root of my why FI? Perhaps they will be helpful for you too.

What does my current life look like?

For many of us, this can be described as being on the hamster wheel. This tried and true formula might not be so bad except for the fact that it may be missing some key elements for you. It certainly was for me. Let me paint the picture of what my life is like á la hamster wheel:

  • Get up/woken up by one of two screaming children. Usually sometime in the 5am range.
  • Try to get them fed and dressed (note: this includes at least three major kid meltdowns/week).
  • Try to get myself fed and dressed.
  • Get everyone out the door to their respective daycare/school and get myself to work.
  • Work like a maniac with no breaks–working and eating over lunch, back to back meetings–you get the picture.
  • Leave work in a semi-panicked state to get to daycare in time for pick up (note: one is charged by the minute for being late–not to mention I can’t stand leaving my kid there for too long).
  • Get home and scramble to try to get a relatively healthy dinner on the table.
  • Dinner, clean up, some time playing with the kids.
  • Bedtime routine for the kids (note: also usually involving 2-3 meltdowns/week).
  • 45 kid-free minutes. Some of which may be spent food prepping/cleaning/some other random chore. Or worse yet–some work that I had to bring home. Brief adult conversation with significant other.
  • Repeat.

For me, this is not good enough. I need more time. Without more time, there is nothing left in the can for me. No time to workout, to think, to reflect, to rest–and certainly not enough time to nurture relationships in the way that I want to. On top of that, I was horrified to realize that this was only getting worse as I get older.

What would I like to be different? 

So I am claiming that time is the biggest thing that I want. But let’s dig into that a bit more. Time for what? And is it really just time I want? Here are some of the things that come to mind when I think of having infinite amounts of time:

  • Learn to play the drums like a 70’s rock band (think Boston’s More than a Feeling).
  • Go to culinary school/take some courses to learn to be a vegetarian chef.
  • Be that mom who makes the cupcakes with unique icing decorations on them for the school/daycare bake sale.
  • Do yoga and some kind of meditation/quiet time practice every day.
  • Have a weekly lunch date with my main squeeze aka Mr. MoneyPenny.
  • Volunteer at my local community food centre and urban garden.
  • Start a business–be an entrepreneur.
  • Perhaps do another marathon and enjoy it!

Boy, that list was easy to come up with–and I could go on! Needless to say, I would have lots of things I could get into.

Even before getting carried away with this list, having time would allow me to more calmly go through my current daily schedule. I could get the kids off to school and not worry about whether I can make my 8:30 am meeting. I could pick them up at three-something when they finish. The house chores would be finished and dinner well under way by the time everyone gets home. I could even have had time to do a little exercise and nurture my own soul for a wee bit. Sounds glorious.

How would being FI allow me to make things different?

But even more than allowing me to go through my days more calmly and perhaps trying some neat new things, the big thing that time could give me is the opportunity to stretch myself and grow in ways that are just not possible right now.

I am somewhat limited in what I can realistically do for work and still make a decent wage. What I mean by this is that if I want someone to actually pay me for a job, I have to know what I’m doing. For example, I could certainly try to get a job as a florist which would be super cool, but after 10 minutes they would realize that the only thing that I have going for me is that I like flowers.

With more time, I can explore passions and interests that are just not possible now. And I will probably purposely push myself to try things that way outside my current comfort zone. This is not just interesting and cool. Without getting too philosophical, I think that this may allow me to take the next step forward in my own self-actualization.

For me this means that having more time can help me become closer to the person that I'm meant to be. I ended up doing biomedical research and public health as a career, but perhaps there is an artist inside me (sadly, not likely!). But it could mean that I could pursue volunteer work outdoors in nature. I always wondered if I was meant to do something around the environment.

FI also means that I can be more fully what I am now–partner, mom, daughter, friend. I would have the time to invest in these important relationships. More time to spend sharing experiences and stories. More time for me to notice and be present to the other persons’ experience. Time for me to reflect on how I can adapt and grow to best nurture these relationships.

On top of all that, FI will allow me to think beyond myself and my close circle of friends and family. I hope that I will also be able to contribute in a meaningful way to my community around me. Maybe through volunteering or by just being a good neighbor.

Basically, I think FI has the potential to just make me the best version of me.

And so that’s why my friends, I am desperately seeking FI!

Your Why FI Elevator Speech

I have been told in various contexts to have my ‘elevator speech’ ready. Meaning that if I step into the elevator and happen to be there with my boss’s boss’s boss, then I should be ready to either describe what I do in the organization in 2-3 sentences and/or what our current contribution/big issue/ask is. If I’m ready, apparently, I will avoid being tongue-tied and make a good impression.

In the same way, it might be useful for us to have a “Why FI” elevator speech. This could be used when people in our lives get a little curious as to why we are bringing our own thermos of coffee everywhere and get excited about re-using Ziplock freezer bags. When the conversation treads into the area of personal finance you might be able to share this great opportunity to pursue FI.

After some thought, I think that this could be my elevator speech:

For me, financial independence means not having to do anything for money. This will allow me to be better in all my important relationships; pursue interests and passions that I might not even know I have in me; and contribute to my community in meaningful ways. Together, I think that FI can enable me to be the best me that I can be.

Do these questions help you get to your Why FI? Are there others? What’s your elevator speech for FI? 

Want to read more from Ms Money Penny? Check out her article: Reaching Financial Independence Without Index Funds

Finding my why of fi

Social Security Benefits When You’ve Retired Early

Social Security Benefits When You've Retired Early

Does Social Security play any part in your calculations of projected retirement income? If you’ve included social security benefits, have you accurately estimated what those benefits will be, especially if you plan on retiring from work early?

For Americans, social security should probably be included in their calculations, but potentially at a lower amount than the estimates provided by the Social Security Administration (SSA).

Let's look at why that is and how you can more accurately estimate those benefits.

How does social security calculate your benefits?

Social security benefits are based on your highest 35 years of earnings, on a per month basis. The aim of the benefit is to replace your monthly income in the following increments (2018 numbers):

  • 90% of your earnings up to $895
  • 32% of your earnings between $895 and $5,397
  • 15% of your earnings above $5,397 to the monthly maximum of $10,700

Therefore, if you had monthly earnings of $6,000, your projected benefit would be:

  • 90% of $895 = 806
  • 32% of $4,502 (5,397-895) = 1,441
  • 15% of $603 (6,000-5,397) = 90

The grand total of your benefit from this month would be $2,337. 

The SSA uses your highest 420 months to average out your earnings over your working career to calculate your benefit. Of course, these earnings are adjusted for inflation. Your earnings from 10 years ago aren’t worth what your current earnings are.

How does retiring early affect this?

If you retire early you're likely to have a period of time in that 35-year period that you have zero earnings or at least very low earnings. That would mean that your record would have some zeros included in the average.

To accurately estimate what your Social Security benefits would be in early retirement you must take this into consideration when doing your calculations. The statement of projected benefits produced by the SSA assumes that you will continue earning your current salary through retirement age, which likely will not be accurate.

In my case, my social security statement shows expected benefits at age 67 of $2,546. But, given an early expected retirement date (full stop, zero future earnings), my social security benefits are projected to really be $1,161. Big difference huh?!

The SSA has created a retirement benefits estimator which you can access here. Using this calculator, you can enter your entire earnings history plus a projected retirement date. You can't project out a reduced income in the future, but at least you can see what the impact of early retirement is.

Thanks for my number, but will it still be there?

Many people have concerns about the viability of social security, especially for younger folks. Given the changing demographics of the country and the un(der)funded entitlements like Social Security, Welfare etc, there has been quite a bit of press coverage to the potential for Social Security going bankrupt. However, it will be a political nonstarter to stop social security–a more realistic outcome is a reduction of benefits.

How should that affect your calculations? Well, based on the SSA’s own report:

The Trustees project that the combined OASDI Trust Funds will continue growing through 2021 as total annual income exceeds total annual costs. Beginning in 2022, however, they project the OASDI annual cost will exceed total income, so the trust fund reserves will be drawn down until they are depleted in 2034–the same year as estimated in the last two reports. After trust fund reserve depletion, continuing income would be sufficient to pay 77 percent of program cost, declining to 73 percent for 2091.

Given their projections, I would say that reducing your projected benefit from above by 25% would be a reasonable adjustment.

Great! but should I take it early or late?

Retirees have a lot of flexibility around when to claim their social security benefits. For those retiring now, the full retirement age (full benefits) is at age 66. However, you can claim early at age 62. You can also defer your benefit to age 70. Claiming early will significantly reduce your benefit and likewise delaying will dramatically increase your benefit. 

Each year you take benefits early reduces your benefit by approximately 6.66% for a max of three years plus 5% for each year beyond three. For example, claiming at 62 instead of your full retirement age of 66 reduces your benefit by 25%. Delaying your benefit will increase your benefits by 8% per year. Claiming at age 70 instead of 66 would result in a 32% increase in monthly benefits.

Needless to say, social security claiming strategy is a complex topic. To delve further into the other factors, including life expectancy, marital status, sources of income in retirement and investment assumptions, another post is required (and is forthcoming).

In the meantime, let me know if you have any questions or comments about the amount you expect to receive in your social security benefit!

Once again, I have to give a nod to Michael Kitces who discusses these points, but goes further to strategize about continuing to work if your wages are increasing vs decreasing and income replacement rates. 

Social Security Benefits When You've Retired Early

Mindfulness, FI, And The Freedom To Choose

Mindfulness, FI, and the freedom to choose

The psychology behind why we pursue financial independence is most often about having the freedom to choose what we want to focus our time, energy, and money on.

Although the movement began with FIRE, some people observed that many of us don’t necessarily want to RE (retire early), we want the freedom to choose how to spend our time. We understand that our values do not always line up with our 9-5 jobs. We want to spend more time with family, be outdoors, work in an area that we can contribute something to, or we want to leave a legacy.

As the FI Monkey, I try to be disciplined and aware of my values as much as possible so that I can put my money to work, while I do what is important to me.

The monkey mind

What does a monkey have to do with the pursuit of Financial Independence?

There is a metaphor I like to tell about a monkey. It comes from a Zen Buddhism and is used to refer to the undisciplined nature of our minds and our lives. According to Wikipedia, monkey mind means “unsettled; restless; capricious; whimsical; fanciful; inconstant; confused; indecisive; uncontrollable.”

The metaphor goes like this: There is a monkey and it's in a room bouncing around all over the place. The monkey is hyperactive and inattentive. It has little focus and changes from moment to moment. Inside this room, there are six windows, five of which include our senses. The sixth window represents our thoughts and feelings. Whoa, one window to include where most of us spend our lives!? Living in our own minds? The sixth is a big bay window that most of our monkeys spend a lot of time looking through.

Oh, the pull of this window is great! Even when we're doing something that we really enjoy, like eating a delicious ice cream sundae, or checking our personal capital dashboard during a bull market, the unfocused nature of the monkey pulls our attention and suggests:

“Maybe you should check Facebook to see if anyone said anything interesting.”

“Do we have milk for coffee in the morning?”

“I have got to remember to send that email.”

..and on and on.

Within that sixth window, our monkeys jumps from one thought to the next, often moving so quickly that we barely have time to catch up before it is on to the next thing. For example, how often have you driven somewhere and realized you didn't pay attention to the drive at all?

What does the monkey mind have to do with personal finance and FI?

Well, I’m glad you asked. It has a lot to do with it! Just as Cory Muscara said on the Mindfulness episode, the practice of mindfulness is about disciplining the mind. Taming the monkey mind and saving 50% – 70% of your income are both about discipline.

People following the path toward FI have had to ignore the pull for the new car, the bigger house, or even that new shirt from Banana Republic. For those of us who are reluctant frugalists, we've had to be disciplined and choose over and over again to invest when consumerism pulls us in a different direction. We have to resist the pull of immediate gratification and the lure of the new shiny tech toy. We know the feeling of the temporary dopamine hits when the package from Amazon lands on our doorstep. But we resist these feelings for something larger, our common value–freedom.

With the Monkey Mind, comes talk about mindfulness. Here in the Western world and increasingly across the globe, we are bombarded with stimulation about what we don’t have and what will make our lives better. It can be overwhelming and if we’re not clear about our values and intentions, it can be easy to wake up at 65, wondering where our lives went.

Mindfulness is often spoken about in terms of meditation. Media has been telling us for years that we need to meditate. And, if you’re like most people, you’ve tried it once or twice, and gave up. While meditation is wonderful, and I would encourage you to try it again, that is not the intention behind this post.

Meditation is one way that we can practice mindfulness. Mindfulness is paying full attention in the present moment. It is about being aware of what is happening right now. You can be mindful without sitting on a cushion in lotus for an hour a day. You can practice it in your daily life as you wash the dishes, play with your children, or go for a run. Mindfulness is available all the time and if you're living your values, you will truly be able to appreciate the present moment.

I've read some people mention that when they found the FIRE movement, it was liking waking from the Matrix. I had the same experience! The lure of the online sales lost so much of their pull for me. Why? Because I was now awake and aware. I didn't want to spend my money “buying things I don't need to impress people I don't like.”

After understanding the FIRE movement, I'm better able to stay focused. I'm also aware and  mindful of my intention and values: To spend as much time with my husband and kids doing the things we love.

My experience and a small suggestion

I was first exposed to it through my graduate school studies. Mindfulness has been embraced in the field of psychology as a way to help depression, anxiety, and substance abuse. In one class, I was required to read a book by the Ven. Thich Nhat Hanh. Hanh is a Buddhist monk who has written dozens of books for the practice of mindfulness for ‘regular' people. After reading it and learning about its application in my life as well as my clients, I began studying and meditating. I have attended several silent retreats and I currently attend a Soto Zen temple.

So how do you practice without sitting in lotus? Ready for the answer? Drum roll… You just focus your attention on what you're doing in the present moment. That's it. Simple. But not easy.

Mindfulness of the present moment can be practiced all the time. When we are fully present, we can absorb what's happening. If that is not a good fit for those of us who are working on freedom to choose our time, I don't know what is.

Try it and let me know how it is. Just be fully present with one of the senses, one of the windows. Just focus on that one sensation for five minutes. It can be pretty wild. Let me know if you do it. It will be one step in taming the monkey.

Want to read more from FI Monkey? Check out A Valuist: Intentional Living

Mindfulness, FI, and the freedom to choose

Why I Pick Up Pennies

I pick up pennies, and nickels, and dimes, and any sort of currency because it pays well, that’s why!

Okay, there…I gave you the answer to my hook. Why should you read on?

Well…because there is a deeper mindset behind finding money and picking it up. And I’ll also tell you how well it pays!

Where my Pennies Come From

You may know that I work in the automotive field. I contract with dealerships to repair their cars and make them dent free, beautiful and ready to sell.

At every car dealership there are salesmen who patiently wait for their prey like sharks. Apparently while they wait, they like to throw all of their loose change onto the used car lot. I believe it’s a game to see who can roll their change the furthest? Impressive feats of athleticism, I know.

Whatever their goal is with loose change tossing, I make a game out of it as well. As I walk the lot looking for dents that need to be repaired, I find and pick up their change and pocket it.

On more than one occasion I have received the oddball look that seems to say something to the effect of, “Oh that poor dent guy needs the change.” Apparently, there’s a stigma to picking up change? Who knew. It’s definitely uncomfortable, but that’s part of the reason I do it!

Reaching early financial independence goes against the grain of the typical American culture. It requires doing things differently. It requires optimizing where others do not. Hell, it even requires picking up change while others are throwing it away.

Mindset

According to Carol Dweck and her book, Mindset, there are two different mindsets, a fixed mindset and a growth mindset.

A person with a fixed mindset believes that their talents or intelligence are fixed traits. A person with a growth mindset believes that their talents and intelligence can be trained through dedication and hard work.

With small daily positive changes, A.K.A. the aggregation of marginal gains, you can develop a growth mindset. This is the mindset that will make amazing things happen, things that you didn’t think you were capable of achieving.

Growth Mindset

The point of my penny finding story is to highlight the difference in mindset about having every penny count vs. not caring about any penny. A growth mindset vs. a fixed mindset.

Mindset is such an important part of your financial journey. Knowing that anything is possible and that anyone can learn this financial stuff can open up your world to the possibilities of being financially free.

It takes training your mind to relieve yourself from the bonds of “normal” consumerism and learning to be happy with less stuff so you can in turn have more freedom. I feel like a lot of people are stuck in a fixed mindset and don’t think they will ever be able to get out of debt, start saving money or even retire. And retiring early? Forget it!

Even when you have your financial life together and are on your way to FI, you can’t forget the mindset shift that got you there. You can never stop picking up pennies.

Fixed Mindset

The people that are throwing their change onto the car lot are not optimizing their money retention. Someone who takes money from their pocket and throws it into a parking lot has a fixed mindset. They don’t think that the change matters because it’s just a couple of cents.

They may not believe that saving a few bucks a week can turn into a lot more down the road after your savings muscles grow. It’s the small things added together that make the biggest difference.

With a fixed mindset one may believe that they're stuck in their current position in life. When someone believes they are stuck then there is no reason not to toss the coins. This can also contribute to the mentality of this example that we have all heard.

Why not just buy the car that I can barely afford the payments on? I’ll be stuck at this job forever anyway so I might as well enjoy myself.

I know that picking up a couple bucks in change each week isn’t going to make or break my early FI plans, but again, it’s all about the mindset! If I haven’t convinced you yet, let me show you the math.

The Math

Let’s assume that picking up a coin off the ground and putting it in your pocket takes two seconds (it does, I do it all the time!) That means you can pick up 30 coins per minute and 1,800 coins per hour. Here is the simple table showing the hourly rate of picking up coins at two seconds each.

1,800 coins X $.01 = $18/hour

1,800 coins X $.05 = $90/hour

1,800 coins X $.10 = $180/hour

1,800 coins X $.25 = $450/hour

I pick up change because of the mindset behind the action, but I also pick up change because I don’t want to pass by a couple seconds of really high paying wages. Every time you find a penny and pick it up, you can tell yourself that you just made $18/hour. Find a quarter and make $450/hour! Granted, you only worked for two seconds, but who wants to pass up $18 or $450 per hour? No matter how long you can work that gig.

Want more from FI Tradesguy? Check out his article: Why Skilled Trades Can Help You Become Financially Independent

Why I Pick Up Pennies

068 | Financial Peace Graduates | What Next? | Andy Hill

068 andy hill bringing your spouse on board to fi

What comes after the baby steps and Financial Peace University? Bringing your spouse on board with FI, the benefits of paying off your mortgage and the next Dave Ramsey steps

What you’ll hear on today’s show:

  • How Andy brought his wife on board with Dave Ramsey and FI
  • What his life looked like before
  • The importance of finding a balance
  • How he started with talking about the benefits of FI
  • Using a monthly budget party to keep finances in check
  • The benefits of paying off your mortgage
  • How Andy paid it all off
  • The next Dave Ramsey steps
  • Using travel rewards
  • Hotseat questions

Links from the show:

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Thank you for being a part of the ChooseFI community!  ? If you want to support us, here are some easy ways:

1) Leave an iTunes review: http://www.choosefi.com/itunes

2) Use our page to sign up for travel credit cards

Note: We may receive a commission if you are approved for cards on this page

3) Most importantly, find your friends, coworkers, and family members who may be open to this message and tell them about the podcast! (Episode 21 is a great starting place)

As Jonathan would say, “The FIRE is spreading my friends!”

Changing Your Mindset And Embracing FI

Changing your mindset and embracing FI

I’ve believed all kinds of incorrect things about myself ever since I can remember. Here are some examples:

  • I’m not good enough.
  • I don’t know what I’m doing.
  • I don’t deserve to be loved.
  • I need to be perfect.
  • I’m stupid.
  • If you had my life you’d be sorry too.

For many years, I learned to live in spite of my skewed perception of myself. I rebelled, found ways of escape, and used the lies to get what I wanted.

I am a bit of an extremist so when I wasn’t escaping, I was overachieving to make up for my perceived lack. Oh, how the pendulum has swung far in my life.  

When I got sober and did a thorough inventory of myself and my defects, I discovered that self-pity was the biggest thing driving this ship. It’s so easy to be unaware until it isn’t.

Once my eyes were opened to the lies I’d been living off of, I just couldn’t operate the same anymore. I changed. It happened instantly, but I don’t want to mislead you, there was a ton of work leading up to the moment of change.  

This is a common battle

Recently, I was listening to the Tim Ferriss podcast where he interviewed Terry Crews, and I was really struck by Terry's profound self-reflection. Terry Crews is a former NFL player, a successful actor, and a phenomenal artist. Obviously a wildly successful guy. When I heard that even he still struggles with insecurities, it made me realize how common this is.

Terry talked about his first acting gig in a movie with Arnold Schwarzenegger. He shared the thoughts that went through his head after saying his first line:

You don’t deserve to be here, you’re just a dumb football player, you're a farce, these people are going to figure you out, you are a fake, you’re a phony, you fooled everybody, it’s a wrap, they are going to find out and kick you out of here.

Fortunate for him, something was wrong with the camera and so he was given a break. Terry went off to the sidelines and gave himself a serious pep talk. That’s when he learned to always go in, rush in and face his fears. Terry went on to say that there has never been a time where those thoughts don’t try to creep in, they’re always there. Terry said, “if you care, you’re going to always be nervous.”  That is a HUGE statement. As a matter of fact, it is downright refreshing.

Ms. Maxi fought this this same fight. Read her story here

Tools for fighting the battle

I’m still fighting off insecurities, and while today they are just a shadow of what I used to experience, I still need to face them. The contrast today is that I usually recognize them as that, lies. 

I can’t say there was a time when I cowered to fear. I’ve always been brave and willing to rush in, but I spent a lot of time going into situations with some false perceptions about myself and many times this resulted in me getting hurt.  

Today, I have several tactics to deal with the lies. For me, it involves praying and reflecting on my true identity. And then it comes down to taking action and facing my fears, but the contradistinction between then and now is that I take action knowing who I am, where I came from, and who I'm meant to be.

It is all about reframing. Terry Crews shares a great story about this in his Tim Ferris interview.  In a high school basketball game, he intercepted the ball in the final seconds and drove it down to take a shot which would win the game. He missed and was berated for taking the shot by his teammates, coaches, and the newspaper. He was crushed. Some days later he thought about it and realized, “I took the shot.” He was willing to go for it even if it meant failing. The thing he was berated for was the thing of which he became most proud.

FI lies

This whole FI journey has me extremely excited, but I must be honest I have some insecurities that pop up from time to time. I just started on this FI journey in my 40's and when I read or hear about all the people who started early in life, self-doubt creeps in. Here is the stuff inside my bubble that I'm currently cleaning out: 

  • You're way too late
  • You’ll never catch up
  • You’ve wasted so much time & money
  • People are going to figure you out
  • Everyone is going to judge you

FI truth/reframing

Okay, so let’s reframe those statements: 

  • This is just a big lie. When I'm dead, it will be too late, but last time I checked I am not dead.
  • Who am I trying to catch anyway? This is my journey.
  • I am who I am today because of what I went through and my mistakes are some of my greatest teachers.
  • Yeah, people may figure me out, the good, the bad, the ugly, so I might as well be honest about where I came from and how I got here.
  • Perhaps, but does it really matter?

And then I rush in. I move forward with whatever goal I’m trying to accomplish and perhaps I stumble. Perhaps I fail. Perhaps I succeed. Either way, I’ll come out knowing something new and get a little bit better.

Changing your mindset

The book, Mindset, by Carol S. Dweck, Ph.D., is a great resource for learning to reframe. Dr. Dweck is a professor of Psychology at Stanford. Her research focuses on motivation and fostering success.  Dr. Dweck describes two mindsets, fixed and growth. Many of us have can have both mindsets but may lean towards one or the other for different things.

People with fixed mindsets tend to view things with preconceived notions and limit themselves by saying things like, “I could never learn to dance like that” or “I am just not good at math”. A fixed mindset believes that you either have talent or you don’t. I'm either smart at something or I'm not. There is no room for growth in the fixed mindset and blame often takes over when failure presents itself.

People with growth mindsets see everything as a challenge, an opportunity to learn and grow. It's almost as if one with a growth mindset intentionally finds things they don’t know and sets out to learn them. Growth-minded people recognize that hard work brings about fruit. When faced with a failure they will only work harder to get better and learn a new way.

One of my favorite revelations when reading this book was to praise the process rather than the outcome. For example, instead of saying, “wow look what you did, you must be very smart.” Reframe it to say, “wow look what you did, you must have worked very hard.” Dr. Dweck's research has shown that praising intelligence rather than effort can push a child/person further into the fixed mindset. Interesting, huh?

Final thoughts

This life is a process and we can choose to grow or be stagnant. I choose growth! I'm happy to share some of the tools that work for me and am curious what works for you. We've all heard it before but that's because it is worth repeating, it's all about the journey, not the destination.

Want more from Ms. FI-ology? Check out her other articles here.

Changing your mindset and embracing FI

067R | Finding Your Superpower

067R Finding your superpower

Getting comfortable with being uncomfortable, hacks to save money on everyday electronics and using donor advised funds to optimize tax payments.

What you’ll hear on today’s show:

  • Jonathan optimizing his house insurance
  • Comment from Katie on using diamonds on engagement rings
  • Examples of velvet ropes
  • The importance of getting comfortable with being uncomfortable
  • Sara shares a DIY success
  • Voicemail from Daniel about saving money on everyday electronics
  • Jaclyn share’s her success from a salary decrease
  • Voicemail from Steven on using donor advised funds to avoid capital gains tax
  • Alan saves money by timing the cash flows
  • Kevin talks about creating a better version of health insurance
  • iTunes review and book giveaway

Links from the show:

——————-

Thank you for being a part of the ChooseFI community!  ? If you want to support us, here are some easy ways:

1) Leave an iTunes review: http://www.choosefi.com/itunes

2) Use our page to sign up for travel credit cards

Note: We may receive a commission if you are approved for cards on this page

3) Most importantly, find your friends, coworkers, and family members who may be open to this message and tell them about the podcast! (Episode 21 is a great starting place)

As Jonathan would say, “The FIRE is spreading my friends!”

Confessions Of A Diet Coke Addict

I am a recovering Diet Coke addict. You may think Diet Coke addiction is not a real thing, but I can assure you my addiction met all of the medical definitions of an addiction. I started drinking Diet Coke in high school, around the time it was reaching peak popularity. In college and all through medical school, Diet Coke served as my main form of caffeine. By the time I reached medical school I craved, no–NEEDED a Diet Coke to start off my day.

This type of addiction was always viewed by others as no big deal, and we would laugh about it as though it was just one of my quirks. My husband actually bought me a small refrigerator for my closet so I would not have to even go downstairs in the morning to get a cold Diet Coke. While completely enabling me, I do consider this one of his most thoughtful gifts ever. I even had Diet Coke pajamas…a true sign of an addiction.

What is wrong with drinking diet soda?

Other than the ridiculous cost of my Diet Coke habit (I estimate it was costing $1,000 per year, even on sale!) what is the big deal?

Diet Coke, and other diet sodas contain artificial sweeteners or “non-nutritive” sweeteners such as aspartame, sucralose, and stevia. They contain no sugar, and have no calories. Diet Sodas are approved by the American Diabetes Association for diabetics, and the FDA has also approved them as food additives. On the surface, these seem like a great idea to reduce sugar intake and lose weight. This is exactly how I got hooked, I believed they were safe and would help me stay thin. Unfortunately, this is just not the case.

It's all related to Insulin levels

If you have read my prior posts, then you know that weight gain is linked to insulin levels. Insulin is the hormone that puts us in storage mode, and tells the body to store excess calories as fat. When insulin is high, the body does not use stored fat for energy. Non-nutritive sweeteners may not have sugar or calories, but they do cause a huge spike in insulin levels.

Several studies have been done using volunteers who ingested non-nutritive sweeteners and then had their blood levels checked for glucose and insulin at multiple intervals afterwards. After consuming the diet drinks, insulin levels were raised, and stayed elevated longer than with sugar alone. Additionally, they ended up consuming more calories during the day to make up for the calories saved by not drinking the diet soda.

I used to have one-to-three cans of Diet Coke in the afternoon to get through the slump that would inevitably come after lunch. It turns out this was not helping me stay thin at all. My insulin would spike and I would be in fat storage mode all afternoon. I would also get hungry and eventually give in to cravings and start eating snacks.

What does this mean from a healthy lifestyle standpoint? If you are drinking Diet Coke to stay thin and avoid calories, it just doesn’t work. In fact, the insulin spikes are likely causing you to gain slightly more weight than if you just had a regular sugar filled soda.

There's also the issue of potential cancer risks from some of the chemicals that are added. The controversy surrounding the safety of these sweeteners is concerning as well. Best to just avoid the extra chemicals.

The issue with the non-nutritive sweeteners is not just with diet sodas, but also with other “diet” foods as well. You probably think low calorie yogurt is a health food, but it has the same effect on insulin. Sugar free candy, sugar free ice cream, low sugar cookies, “skinny” or sugar free syrups at Starbucks, etc–the list goes on. These will not help you lose weight.

Getting away from diet sodas–its not easy!

Quitting Diet Coke was extremely difficult for me. I had a long slow process of cutting back by one can a week over a period of two months. I had to add in other drinks to replace it, and unfortunately I just don’t love plain water. Here are some alternatives to soda:

  • Green tea (my favorite–shown to have appetite suppressant properties)
  • Herbal tea
  • Infused water with lemon or other fruits
  • Coffee–black or with full fat cream added
  • Bone broth
  • Carbonated plain water (See the Frugalwood’s genius Sodastream hack)

For many people, changing what you're drinking during the day can be one of the hardest challenges. When I counsel patients trying to lose weight, I generally start with looking at what they drink during the day. If there is any sugar or non-nutritive sugar additive in their drinks, we work on changing that first to avoid insulin spikes between meals.

This process may reasonably take a few weeks and trial and error to see which alternatives work best. The good news is that most alternatives are actually cheaper. I saw a definite reduction in my grocery bill once I stopped buying soda–just one more marginal gain on the path to FI and a healthier life.