How And Why To Set Up A Roth IRA Conversion Ladder

How And Why To Set Up A Roth IRA Conversion Ladder

A lot of people would love nothing better than to be able to retire early. But saving for it, and actually doing it, are two entirely different endeavors. The basic problem is the way most people save, and that’s through tax-sheltered retirement plans.

But that creates an early retirement dilemma: if most of your money is sitting in retirement plans, you won’t be able to access them early without incurring a 10% early withdrawal penalty, as well as ordinary income tax.

Now you could get around this issue by making sure you have plenty of non-tax-sheltered investments. You’d be able to tap those in the early years of retirement, without having to pay either income tax or a penalty.

But that’s not as easy as it sounds, since taxable investments don’t get the benefit of tax-deductible contributions, nor of tax-deferred investment income. Many people who have huge tax-sheltered retirement portfolios, have comparatively little in the way of taxable savings and investments.

But there is another solution…

The Roth IRA Conversion Ladder

Roth IRAs have become increasingly popular in recent years. As retirement plans go, they’re unconventional. You don’t get the benefit of tax-deductible contributions. But you will get tax deferral on your investment income.

The upshot is that once you reach age 59 ½, and you have been in the plan for at least five years, you can begin making withdrawals of both contributions and investment income fully tax-free. Got that? Tax-free income in retirement–not tax-deferred.

Not surprisingly, this has led to a massive wave of Roth IRA conversions. That’s where investors move money from regular retirement accounts–401(k), 403(b), and traditional IRA plans–into Roth IRAs.

This is referred to as a Roth IRA conversion. Unlike simple rollovers of funds from one retirement plan to another, Roth IRA conversions generally have tax consequences. You will have to pay ordinary income tax–but not an early withdrawal penalty–on any retirement savings transferred into a Roth IRA in the year of conversion.

For example, if you move $40,000 from an old 401(k) plan into a Roth IRA, and you’re in the 12% tax bracket, you’ll have to pay $4,800 in federal income tax on the amount converted–$40,000 X 12%. (Non-tax deductible contributions to the 401(k) plan would not be taxable, but that’s a complicated topic we don’t have time to discuss here.)

On the surface, that may seem scary. But if you’re looking to create a stream of tax-free income in retirement, that benefit usually outweighs the current year tax liability.

Because of the tax liability, it’s most common for people to do a Roth IRA conversion over several years. That will minimize both your tax bracket and your taxes in the years of conversion.

Creating a Roth IRA Conversion “Ladder”

Since withdrawals from a Roth IRA can be taken tax-free, this creates a potential source of tax-free income even in early retirement.

There’s a loophole with Roth IRAs that pertains only to Roth IRAs, and no other retirement plans. It’s a loophole that’s made to order for early retirement.

Since Roth IRA contributions are not tax deductible, they can be withdrawn tax-free at any time. That means even before you turn 59 ½ and are in the plan for at least five years.

This has to do with IRS Ordering Rules, that allows the first withdrawals taken from your Roth IRA to be regular contributions. You can withdraw those at any time without ordinary income tax or an early withdrawal penalty.

Now the situation is a bit different with Roth IRA conversions. The IRS requires that there is a five-year waiting period after each conversion. If you withdraw the converted balance before five years, you won’t have to pay ordinary income tax, but you will have to pay the 10% early withdrawal penalty.

This is where the Roth IRA conversion ladder enters the picture.

Why a Roth IRA Conversion and Not Annual Roth IRA Contributions>

Just in case you’re wondering why it’s necessary to do a conversion, and not simply make annual Roth IRA contributions, it has to do with dollar amounts.

Roth IRA contributions are limited to just $5,500 per year, or $6,500 if you’re 50 or older. It would take a very long time to accumulate a large Roth IRA account with such small contributions. As well, if you plan to use your Roth IRA for early retirement, there may not be enough years between the time you begin making contributions and you plan to retire.

Still a third factor is that a lot of people still don’t participate in a Roth IRA plan. The lack of tax deductibility of the contributions can be an obstacle.

A Roth IRA conversion makes more sense as a source of the kind of funds that would be needed for early retirement. Since it can be potentially several hundred thousand dollars–depending upon when you want to retire–it’s more likely you have that kind of money saved in other retirement plans. This is particularly true of employer-sponsored plans, like 401(k)s, where you have both higher contribution amounts and a potential employer match.

Creating Your Own Roth IRA Conversion Ladder for Early Retirement

Can you see where were going with this? If you start doing Roth IRA conversions at least five years before your planned early retirement, you’ll be able to begin withdrawing those contribution balances tax-free and penalty free by the time you early retire.

As an example, let’s say you plan to retire at 50. You decide that you need at least $40,000 in tax-free income at that age. At 45, you begin making annual Roth IRA conversions of $40,000. In each year you make the conversion, you pay the applicable tax on the amount converted.

By the time you turn 50–and your initial conversion is five years old–you’ll be able to withdraw the $40,000 conversion balance you made at age 45. If you do this for 10 years, beginning at age 45, you’ll have a steady tax-free, penalty free income of $40,000 per year through age 59.

At age 59 ½, you can begin tapping any and all other retirement plans you have available, penalty free, and subject only to ordinary income tax. And of course, any amounts you have remaining in your Roth IRA account can continue to be withdrawn on a tax-free basis.

We’re throwing out a lot of numbers, so let’s see how this works in the table below.

YearAge At The Time Of The ActionRoth IRA Conversion AmountRoth IRA Withdrawal AmountSource Of Funds Withdrawn
201845$40,000N/AN/A
20194640,000N/AN/A
20204740,000N/AN/A
20214840,000N/AN/A
20224940,000N/AN/A
20235040,000$40,0002018 Conversion
20245140,00040,0002019 Conversion
20255240,00040,0002020Conversion
20265340,00040,0002021 Conversion
20275440,00040,0002022 Conversion
20285540,00040,0002023 Conversion
20295640,00040,0002024 Conversion
20305740,00040,0002025 Conversion
20315840,00040,0002026 Conversion
20325940,00040,0002027 Conversion
Totals15 Years$400,000 Converted$400,000 Withdrawn

An Important Caveat on the Roth IRA Conversion Ladder

As you can see from the table above, a Roth IRA conversion ladder can do an outstanding job of providing you with tax-free, penalty free retirement withdrawals well before age 59 ½.

But there’s a Part B to this strategy that’s equally important. If you’re going to use a Roth IRA conversion ladder to fund your early retirement years, you have to make sure there’ll be plenty of retirement assets left by the time you reach 59 ½.

In the example above, the total amount of retirement capital used for the Roth IRA conversion ladder is $400,000. That’s a lot of capital to burn through before you even reach 60.

In order for the strategy to work, you’ll have to have enough other retirement savings to provide you with an income for the rest of your life. Exactly how much that will be will depend upon how much income you’ll need during the traditional retirement years.

Complicating this issue is the fact that you won’t be eligible for Social Security until age 62 at the earliest. And if you begin taking benefits then, it will be at a greatly reduced level. Full retirement age for Social Security purposes–the age at which you’re entitled to your full retirement benefit–doesn’t begin until age 67 for most people today.

That means you may continue to be entirely dependent on your retirement savings between the time you reach 59 ½ and you begin collecting Social Security benefits. That would take a very large retirement portfolio.

Lowering the Amount of Retirement Savings You’ll Devote to the Conversion Ladder

Two alternatives to consider include:

  1. Utilize SEPP withdrawals to avoid penalties.
  2. Expect less income from the Roth IRA conversion ladder, and rely on additional sources of income in early retirement.

The Roth IRA conversion ladder is an excellent strategy to provide income during the early retirement years. But it only makes sense if you have the kind of retirement savings that will also provide a generous income when traditional retirement arrives.

How And Why To Set Up A Roth IRA Conversion Ladder

Our Homesteading Journey Begins!

Our Homesteading Journey Begins!

My wife and I would like to move out of the DC area at some point. We have dreams of leaving the hustle and bustle of the city and homesteading. I've been on the lookout for properties that will meet our needs.

Well a few weeks ago I found one that seemed perfect and we made an offer! We are still waiting for the closing date, since our contract is contingent on the land passing a percolation test (meaning we can build a house there with a septic system). That hasn’t stopped me from dreaming and thinking of everything I would like to do with the property. I want to build a home, have an enormous garden, build hiking trails through the woods, erect a barn and setup infrastructure to raise animals such as goats, sheep or chickens.

The House

I have been spending the last month researching everything I can about building a home on the property. We wouldn’t do it for a few years, when we are financially independent and can move our family down there. In my dreams, I would love to build the house myself, with help from a family friend who has built houses for years. While a regular floor plan would be the most economical, because I want to integrate some eco-friendly designs and our plan over the very long term is to stay in the house, we may try to customize the home somewhat. 

I would like to integrate grey-water catchment to use our shower and sink drainage to water our plants outside. Additionally, I’m thinking to use radiant floor heating for the winter, but would need to use ductless air conditioning units to cool the house. I’ve researched masonry heaters which more efficiently burn wood to heat the house for long stretches of time. Roofing would be standing-seam metal to facilitate rainwater catchment for drinking or irrigation purposes. These roofs would also make adding solar cells or solar water heating much more feasible.

With a custom built from scratch home, integrating these ideas from the start should be much easier than trying to retrofit a home. Plus, I’ll feel more like I own the place since I’ve framed every wall and laid every brick. The downside there is time.

The Acreage

Aside from the house, we should have about three acres of cleared land to do with what we wish. I plan to use this as a large garden area along with fruit trees, pastures and a patch of lawn to play on. All in all, there are a couple of parcels sold together which add up to almost 27 acres!

For now, since we don’t plan to move or build any time soon, I am thinking of how to repair the land after years of conventional farming use. Tilling, disking, and applying pesticides and herbicides harms the land, but not irreparably. I have been reading up on permaculture and the ways to add nutrients back to the soil naturally over time. I plan to plant cover crops over the next few years so that the property is rejuvenated and the soil structure is rebuilt. My only problem now is to figure out how to plan four acres of field without any equipment. I don’t think I will be able to figure it out by this planting season so I may allow the farmer to farm it one more year while I get my ducks in a row for handling the planting and soil amendment myself.

 

The Barn

I have been looking at building a pole barn on the property as the first order of business. It would be cheap, allow me to store items on the property when I am away, and offer a place for me to spend the night if necessary. Since it will be about an hour from any family, visiting to do work is a little bit hard given the location. I have read articles saying a pole barn can be built for about $10,000 in supplies. 

Before I build the pole barn however, I will need to plan out the rest of the property so the location of the barn is correct. Therefore, the barn will probably be a few years in the future.

The Woods

In the woods, we probably won't do very much at all. There is a stream that meanders through the property, but we aren't sure yet whether this stream has water year round. We found one spot which would make a perfect spot for a picnic table since it is close to the field and right next to the stream where you can hear the gurgle of the water as it passes over some rocks. I can't wait to have a quiet lunch there and enjoy the sounds of nature!

Aside from a path to this spot, we will probably establish some other walking paths around the woods. I don't want to impact the land too much, but I'd like to be able to take my daughter out for a walk and not have to fight through briers or wonder which way we should turn to get back home.

Related: Why This Homesteading Property is Perfect for Us

As you can tell, I am pretty excited about this whole thing. Please wish us luck as we wait for the Perc test and that everything goes smoothly to closing!

Want to read more from FI-nancial Planner? Check out his other articles here.

Our Homesteading Journey Begins!

How A Beginner Went To Paris Using Travel Rewards

How A Beginner Went To Paris Using Travel Rewards

This article was written by a member of our Facebook group, Shannyn Allan. Here's her story of how she used travel rewards take a dream trip to Paris.

The ChooseFI community is a vibrant space that’s full of really smart people who are thinking about their goals differently than most of the mainstream. When I discovered this community, I was inspired by the general attitude that you can approach any challenges with creativity to get to your desired outcome without needing a lot of cash to get you there.

Curiosity and creativity is precisely what brings most people to FI and what leads most of them to try using travel rewards. The idea that one must sacrifice travel in order to get that savings rate to the blessed 50% simply won’t do for many–so using travel rewards are the natural alternative to not traveling at all.

One other commonality about the FI community is that there seemingly is a plethora of people who sincerely enjoy spreadsheets and thrive off of the idea of optimization. There’s just a certain type of FI’ers. I’m apparently not one of those people. I just got back from a two week trip to Paris and Barcelona that was made possible by a less-than-optimal, not-so-perfect approach to using travel rewards with credit card rewards that was pulled together with just one haphazard spreadsheet on Google Drive. (gasp!)

If you’re like me, the idea of tracking details, running projections, and being perfectly optimal about everything can be so overwhelming. You might never even get started for fear that there’s no way anything can be just right. If that’s you- read on. My approach to credit card rewards is crazy simple and may get you inspired that you can make your bucket list trips a reality. Is it perfect? No. Is it just enough to be dangerous? Yes. Hopefully this will take the sting out of starting and get you inspired to take action.

How Did I Make Paris a Reality on a Limited Budget?

Long story short–I did two things: I saved $2 a day to a savings account to cover food and gifts for folks back home. In under two years, I saved over $1220 in cash to cover anything my rewards points couldn’t cover, or, if I saw fit–to pay for a plane ticket and use my points for hotels and excursions. Second thing–I utilized three Chase cards: the Chase Sapphire Preferred Card, the Chase Sapphire Reserve, and Ink Business Preferred Credit Card.

If you want to keep using travel rewards and not spend hours researching all the options out there, start with Chase. Chase is notoriously easy to use and if you’re stuck in analysis paralysis, just start here.

Click here to compare travel rewards cards and find one that's best for you.

How Did Two Credit Cards Fund My Trip To Paris?

For those cards, I earned a total of more than 180,000 points. Since I just bought a home, I had a lot of really fun (sarcasm!) purchases in my first year that also helped me rack up points. In six months, I had several HVAC repairs, trips to Home Depot, and various contractors to pay for. I also used my Chase Business Preferred Ink card for several large purchases for my business, about $5,000–but even if you don’t have a business with large purchases throughout the year, you’ll be okay! While you can get 2-3x the points with the Reserve and Preferred by using your card on travel and restaurants, that doesn’t make up the bulk of my spending, but I tried to maximize those bonus points over the course of a year for weddings and trips home. Just think ahead to any spending you might be doing in the next year, and see what points you could rack up for them.

What Did I Use My Points On?

So, with around 195,000+ points in hand stemming from sign up bonuses, a little business spending, and home repairs, I knew it would soon be time to cash in. I kept an eye on good deals for airfare, but alas, coming from San Antonio, my pickin's were slim. I set up Kayak alerts to get an idea of what to expect in terms of fares and travel time, and when I saw a nearly direct flight from San Antonio to Paris for just $660 round trip, I knew I had to pounce. I couldn’t replicate the fast flight time and relative cost (in points) to what I saw in the Chase Ultimate Rewards Portal (and in this case, transferring points was not going to work quickly) so I just booked it with cash.

I used my Chase Sapphire Reserve to get 3x points on booking airfare for myself and my partner, so that added an additional 4,000 points to my arsenal. Long story short, with three credit cards opened through the year, I was able to book two weeks of hotels in Paris and Barcelona. By booking with the Chase Ultimate Rewards, I could consolidate my points to the portal with the best redemption rate (Chase Sapphire Reserve) to make my points go even further.

Total points: 195,235
Total redemptions for hotels: 6 nights hotel stay in Barcelona, 7 nights in Paris.
Total redemptions for activities: Champagne Tasting, Crepe Making Class for Two, 2 tickets to Disneyland Paris, “Skip The Line” Versailles Pass…and a few other fun things!

Click here to compare travel rewards cards and find one that's best for you.

So, What Did I Learn?

A few key takeaways about using travel rewards for those who don’t want to spend hours analyzing (or ahem, agonizing) programs, here’s what I’d recommend:

  • You can sufficiently fund a trip with just 2-3 cards, I recommend Chase due to simplicity in both tracking your points and being able to pay your cards in one place.
  • If you use Chase points to book your travel, be sure you consolidate your points to the card with the best redemption rate. In my case, the best card was the Chase Sapphire Reserve, which redeemed at 1.5 cents apiece through the Chase Ultimate Rewards travel portal, better than the Preferred. 
  • You can use your rewards points to book most things, but not all things. We used up my points on hotels, excursions (like a day pass to Versailles outside Paris and visiting La Sagrada Familia in Barcelona).  We still had to pay for trains, hotel fees/taxes and the plethora of meats and cheeses I insisted on consuming daily.

Related: Extreme Stacking and Optimizing Hotels.com

There are far more sophisticated articles out there that deal with travel rewards, I recommend you read them, but I hope this gets you started! The goal is to first dream big (I told myself Paris was too expensive for too long), then creatively find ways to fund your trip. I did it with travel rewards and by saving $2 a day. Ask questions along the way and know that everything is figure-outable, but don’t let the “I don’t knows” or “it’s not 100% optimal” keep you from starting! I also recommend that you check out the Choose FI Facebook group if you have questions or want to hear other success stories, it will help you get started!

Shannyn has been a frugality writer at FrugalBeautiful.com since 2011 and recently launched TheWonderLuster.com to help tackle her bucket list and talk about financial independence for millennial women. She lives in San Antonio, Texas with her two rescue dogs.

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Why You Should Pursue FI Even If You Can’t Retire Early

Why You Should Pursue FI Even If You Can't Retire Early

After pursuing FI for a couple of years, I find myself in a place where I may not actually reach FI any earlier than the traditional age, 65. Life has led me down a road where my savings rate isn't quite what it used to be. But, I'm okay with it! And, I've found so many benefits of Choosing FI along the way. If I had to do it again knowing that I'd never actually retire early, I'd still be right on the path that I'm on. And, I believe that anyone should Choose FI, even if they can't retire early. Here's why…

You'll know that you can at least retire at the traditional age of 65.

I believe many who start the path to early retirement may have been on a path that didn't even lead to traditional retirement. It's so easy to get caught up in life and spend all that hard-earned money without even thinking, but we've only really got about 40 or so years in our careers. Once marriage and kids come along, it may or may not be as easy to save money and plan for the future. For me, I was decent at saving, but it didn't have a purpose. It usually went to buying a new car or filling up my apartment with stuff I'd later replace.

In pursuing FI, it makes us more aware of our finances. In tracking what it would take to retire early, it makes us aware of what it would at least take to retire traditionally, and not just trust what the advisor tells me. I've found that even though I may or may not retire any earlier than 65, I know that my path at least will let me retire at 65. Sure, I'd much rather be out earlier! But, at least I know I'll be able to take it easy a bit when I'm older.

You might find a job you like and not need to retire early.

In pursuing FI, it's only natural to strive for living on the lowest budget possible. I found that once I knew I could live on this lower budget, it opened up more doors for me as far as work. I was offered a lower paying job about two years into our marriage. This is probably why my FI path slowed down a bit. After a lot of talking and considering with my wife, she encouraged me to go for it and it's been great. While I may not retire as early, I'm okay with it because I've found work where I'm fulfilling a purpose and doing something great with my life.

If you're pursuing FI, don't get too narrow of a vision and stay stuck in a job you hate! If you know what you can live on, and have a good nest egg started, feel free to take a more meaningful job. Don't be reckless and ruin your chances of traditional retirement. But, why work for 10 years in a job you hate so you can retire early, when you can work 20-30 years in a job you love?

You have freedom to fail at a side hustle or passion project.

My wife hated her job even more than I did. Not only was it terrible, but she spent three hours a day on the Seoul subway system during rush hour each day. It really wasn't a good time for her. But, now knowing what we can live on, it's given her freedom to fail at a side-hustle that she's been wanting to do! She went to school for art, but never got to pursue it after graduating because she got pulled into the rat race. Once we were at a place where she could quit, she did. Then, she started an Etsy shop with her spare time! She still works part time to help with our monthly expenses, but her passion is in her art. It may or may not produce enough income to support us, but it doesn't matter. She has that freedom because it's above and beyond what we need to do.
If you've got a passion project or something you want to pursue, do it! Do it in your spare time after work. If your spouse is working, talk to them about living on one income so you can pursue it. It may take off and end up supporting you both. Or, maybe it won't, but you'll learn a ton from it in the process that will maybe help for your next side-hustle. Your savings rate might suffer a bit, but isn't it all about pursuing happiness anyway?

You'll find more value in the places you do spend money.

We set a rule in our house. We don't buy it unless we love it. Especially when we're shopping for clothing or things for the house. We question each other, “Do you love it?” If the answer isn't “yes”, then we don't buy it. Sometimes we even hold that we both need to love it. If I buy a pair of shoes that she turns her nose at, is it really money well spent?
Just being aware of your budget, you'll spend more intentionally. You'll probably find value in spending money in certain areas, like experiences rather than stuff. Perhaps you'll spend time with friends and family rather than drinking or eating away your retirement. You might find less value in spending where it doesn't add value to your life. It makes you aware of the opportunity cost in your budget.

It will (hopefully) bring you closer to your spouse.

There's nothing like a common dream to bring two people together. If your spouse isn't on board yet, slow down and figure that out first. Because when you share that dream, and work together towards the goal, you're unstoppable. That first budget may be frustrating. The second and third ones might only be slightly better. But, if you can find a dream and a goal to strive for, it will continually get easier and easier.

Take some time to dream together with your spouse. Why are you pursuing FI? What will you do once you reach FI? What are some ways that you can enjoy the journey together while still reaching your FI goals? Once you reach FI, you'll have a lot more time with your spouse. So, take time now to build that relationship so you can enjoy all that time together!

What if you could never retire?

Joshua Sheets of Radical Personal Finance asks two great questions. What would you be doing if you knew you could never retire? And, what would you be doing if you reached financial independence today? Somewhere between those two questions is a great place to be. You may or may not get there as early as your calculations are showing. So, make sure you're enjoying the ride.

Want to read more from SeoulOnFire? Check out his other articles here.

Why You Should Pursue FI Even If You Can't Retire Early

077 | Travel Rewards | Marla Taner

077-Travel Rewards

Experienced travel hacker and world traveler Marla Taner shares story of reaching financial independence, and her best tips for getting to Hawaii, Costa Rica and the Caribbean with minimal expenses, using credit cards points and air miles.

What you'll get in this episode:

  • How Brad and Jonathan come to know Marla
  • What does it mean for Marla to be 3rd generation FI?
  • What lessons did she learn from her parents and grandparents in regards to managing finances?
  • How did Marla learn to budget as a teenager?
  • How did Marla reach financial independence?
  • Why is Marla committed to being fully retired in her 40s, without any side jobs?
  • As an early retiree, with lots of time for self-reflection, what activities and aspirations has Marla come to embrace?
  • How did the Vancouver Olympics jump start Marla’s habit of travel hacking?
  • Airfare Tip: redeeming British Airways miles through Alaska or American Air allows you to travel to Hawaii from the West Coast for just 25,000 air miles.
    • Most popular ways to get British Airways miles are through their credit card, or through Chase Sapphire and Amex credit cards.
  • Hotel Tip: Sign up for hotel credit card to get free points or free nights.
    • Hyatt Credit Card
    • Sheraton / Starwood Hotel Credit Cards
  • What is a “sweet spot” in regard to travel rewards?
  • How does the flight booking process work with the British Airways travel rewards?
  • Getting to Hawaii from elsewhere in the US: points through Korean Air, which is partnered with Delta.
    • Points available from Korean Air credit card, Chase rewards, or Citibank rewards
  • How would someone determine if they’re getting a good deal on travel rewards?
  • Marriott Rewards Premier Credit Card and IHG Rewards Club Select Credit Card have a yearly fee, but offer anniversary points.
  • What is Marla excited about in travel rewards this year?
  • Southwest Companion Pass: earn 110,000 miles, then bring a companion for free
  • Marriott Nights and Flights: redeem 200,000 or more Marriott points for Southwest Rapid Rewards, and a 7-night stay at any Marriott
  • Vacation Tip: Stack your Southwest Companion Pass with Marriott Nights and Flights for a family vacation.
  • Costa Rica Tips: Fly Southwest from Houston or Fort Lauderdale, redeem points for the Hyatt.
  • Navigating between Chase Sapphire Preferred and Chase Sapphire Reserve opens some nice travel options.
  • Do travel rewards actually end up costing more money?

Other links mentioned in this episode:

Mr. Money Mustache

The Military Guide: “The Fog of Work”

 

——————-

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!”

 

 

077 | Travel Rewards | Marla Taner

076R | Race or Journey

076R Race or Journey?

Brad and Jonathan brainstorm ways to implement local adventure into their own lives and the lives of the ChooseFI community, chat about high school reunions and local libraries, and offer a few clarifications about 401k contributions.

  • Jonathan's 26-year-old sister just hit an 85% savings rate.
  • Living at home can be super helpful to the recent college graduate, or young person entering the workforce.
  • Getting to $100k net worth is the hardest part: after that, compounded interest starts working for you.
  • Brad signed up his daughter for www.code.org, a website that teaches coding paired with Minecraft.
  • Review of Monday’s episode with Mrs. Adventure Rich.
  • Getting the right mindset is the most important part of getting on the path to financial independence.
  • How does Brad feel about not having a FI number or date?
  • Is the pursuit of financial independence a race or a journey?
  • What was positive about the way Mrs. Adventure Rich’s coworker introduced her to FI.
  • How has Mrs. AR lowered the barrier of entry for local adventures?
  • How can local ChooseFI groups apply these ideas to exploring their own cities?
  • How does the idea of exploring your own city connect with the idea of intentionally creating memorable moments, as introduced by Chris in ChooseFI episode 71.
  • Adventure is anything that makes you feel like, “Hey, this is really living.”
  • Have we traded adventure for convenience?
  • How can someone plan for those things that truly bring value to their life?
  • Check out ChooseFI episode 37, with Scott, talking about rolling out the red carpet for the valuable things in your life.
  • Follow up from Robert, from The College Investor: how much student loan debt has the ChooseFI community paid off?
  • Voicemail from Suzanne: in addition to physical books, her local library often provides access to online newspapers, to online language programs, STEM programs for students, as well as actual after-school programs for students from the public schools.
  • Voicemail from the Peerless Money Mentor : the local library in Baton Rouge, LA, provides some access to Treehouse coding courses.
  • How would Brad or Jonathan describe their lives at a high school reunion?
  • Once you have all your financial needs taken care of, what do you want to do? What's your purpose?
  • Email from Danny: how do employer contributions impact a 401k?
  • Employer matched contributions do not count toward the $18,500 yearly limit for your 401k.
  • There are some additional ways to maximize full contributions to your 401k, up to $55k a year.

Additional links:

The Reluctant Frugalist

House of FI Podcast

How Stopping Drinking Will Make Me $500,000 Richer

How Stopping Drinking Will Make Me $500,000 Richer

At the beginning of my FI journey, I basically reviewed each element of my life. I sorted these elements into two distinct buckets–things that added value to my life and things that didn’t. The things that added value to my life were things such as family, friends, health, exercise and financial security. The things that didn’t add value to my life were things such as excess spending, trying to keep up with the Joneses, wasting time, and recreational drinking.

Drinking alcohol for me was never really a problem, there was certainly no dependence and it wasn’t really impacting our family or home life in a negative way, however I had to ask, was it adding value to my life?

Drinking was a tool I used to de-stress after a busy day, however was that necessarily the best tool to use for this purpose? Drinking was a tool I used to assist in a social setting, to loosen up, however over time was this becoming a crutch rather than a useful tool? Drinking was a tool I used to pass the time, however was this activity the best use of my time? These were the questions I asked myself and after a quick assessment, the answer each time was a big fat NO!

I will be honest here and say I was a medium-scale drinker (depending on the scale), I would consume on average around 12 – 15 alcoholic drinks per week. This obviously varied wildly depending on whether we attended social gatherings or not. However the process of drinking became a habit–it’s Friday afternoon, so I deserve a drink; it’s a sunny Saturday afternoon, I better grab a beer; I am so stressed, I know what I need…you get the picture.

Drinking in Australia is almost a national sport. It is highly ingrained in our culture and stems from its core. It is a social norm that seems to flow from one generation to the next. This was another reason I wanted to stop drinking, to break this generational cycle in my home at least. I especially didn’t want my son to grow up in an environment where drinking was a on display as a regular past time or a normal facet of life.

In essence, I came to the conclusion that this habit was not adding value to my life, in fact it was actually a major cost to my life. I must say it was shocking to work out how what the actual costs was.

Firstly, there was the cost of the alcohol itself, which in Australia is quite expensive due to excessive government taxes. The cost per beer ranges from around $2 if purchased in a 24-pack carton form to upwards of $10 for a beer in a fancy bar or restaurant. Plus, there is the cost of buying rounds of drinks for your mates, which somehow never seem to come back around! For this experiment I averaged the cost of each drink to $3.

There are also related costs to consider such as reckless food spending, gambling, and taxi’s/uber’s home. These may seem frivolous at the time, but they amount to a considerable cost when added up.

So here is summary of what drinking was costing me, based on 15 drinks per week:

CategoryCost per item (average)Number per month Cost per monthCost per year
Drinks $365 $195$2,340
Food $104 $40 $480
Gambling$202$40$480
Taxi/Ubers$202$40$480
Total$3,780

In fact, time was another large factor in this decision for me, as time is the ultimate currency and it is precious and finite. We are all on this earth for such a short time frame, I had to ask myself was this the best use of my time? Think of all the other things I could be doing, such as starting a side hustle, working on a blog, focusing on my FI plan and obviously spending more time with my family. All far more meaningful and fulfilling and all of which I implemented within weeks of giving up drinking.Wow, $3,780 per year…this is a massive number! If this is not enough incentive to quit, there are also other non-monetary costs that are not factored into this such as your health, time drinking, and your time with a hangover

I hear you ask, this is all well and good but where is my offer of becoming a millionaire? Well this all comes down to calculating the opportunity cost over time. If you work on the $3,780 annual saving by not drinking and include an 8% rate of return on your savings/investment, you get to a whopping $462,000 saved after 30 years. If you extended this calculation out to 45 years, the sum would be over $1.57 million!

So, there is your incentive to look at each element of your life and ask yourself the questions: Is it worth it? Does it add value to your life? What is it actually costing you? Once you do this, the path ahead will become clear. It was an easy decision for me and one that I know was correct.

Finally, I just wanted to end by stating that everyone’s value tree is different, if you value drinking then that is fine. You need to live your life however you choose, and keep doing whatever adds value to your life and brings you joy. Only you are in control of your life and only you can choose your life’s path. All I recommend is that you step back and take some time to assess each element of your life and keep only those elements which give you the most value.

On reflection this is the best choice I could have possibly made for my life. It was a decision that is already paying big dividends. Not only are my savings growing more rapidly, this decision has also given me the time and motivation to create a side hustle and to also create a blog to hopefully inspire others. I have also freed up some precious family time in my life and I have also never felt so healthy and clear minded.

Hopefully this shows that making a few seemingly small but positive life changes can have a huge impact on your life and your FI journey. So, what positive changes can you make in your life on your path to FI?

This is a guest post from Mr. 3000 who writes over at Financial Independence in 3,000 days.

How Stopping Drinking Will Make Me $500,000 Richer

 

Get The BEST Price On Life Insurance With Policygenius

Get The Best Price On Life Insurance with Policygenius

One of the things that you'll hear us talk about is the simplification and optimization of each line item in your budget. I have very optimistic outlook on life, but I still plan for different possibilities and I want to assure my family is safe even if something goes wrong. A critical piece of that planning–especially if you have people who depend on your income–is term life insurance. And if you are pursuing FI, you'll want the best price on life insurance you can find. 

I do not think that you need life insurance for your entire life, but you need it until you reach the point where your assets or the income from those assets are enough to support your family's life without you in the picture.

There are different terms for these policies, often in the 10-30 year range, and where you are on your FI journey will determine the term length that’s right for your family. My general assumption is that someone just starting out on their FI journey would likely need a 20-year policy.

How Much Term Life Insurance Do I Need?

First Calculate your FI number

If your family's living expenses are $40,000 a year, multiply that times 25 (the inverse of the 4% rule) and you would need one million dollars in investments to replace your income. The next step is to subtract your current net worth (your investments) from this calculated FI number and your life insurance will ideally replace all or most of this gap.

So if you have $400,000 of net worth and a FI number of $1,000,000, it would be reasonable to consider a policy in the $600,000 range.

Once you determine how much you need, how can you get the best rate?

I've heard about a program that gave special rates to vegans marathoners and other people who are in incredible shape. I was looking into whether or not that would be the best bet for me. Then I heard about Policygenius. It shops hundreds of term life insurance providers to get you the best deal. It also doesn’t have any restrictions on who can use it. Brad hadn’t checked his quotes in a while so we decided to run a horse race between Policygenius and this special vegan marathoner program. Not only did Policygenius match this other company, it actually ended up beating them. That's when we knew this was the one. Brad ended up saving close to $700 in premiums and you could as well.

Get your custom rates from Policygenius now. 

Enter Policygenius

Policygenius gives you the perfect blend of flexibility and free market competition. That ensures you get the lowest price for your family. You can pick your coverage rate and it's very simple to come up with an estimate of how much you might need.

With that basic construct in mind, let’s take a look at Policygenius:

Policy Genius

When you start on their homepage you’ll see a very simple intuitive interface where you’re prompted to select whatever number you decide for your coverage level and the term that you desire. You can see I chose a $500,000 policy with a 20 year term.

You do this is select the orange button. “Get quotes” and they start finding carriers for you. They only asked for a little bit information

Specify gender male or female put in your date of birth and put in your zip code specify whether or not you are a U.S. citizen and then go to the next screen.

Policy Genius

The next screen is going to ask you for just some basic health details. Questions like your height, weight, and tobacco use. 

Policy Genius

They will also ask you if you're on any medications. Just answer the questions there. It will gather information about any chronic health conditions and your family history.

Policy Genius

Term Life Insurance basically a bet. The bet is whether or not you are likely to die over the next 20 years; while that sounds kind of morbid, one of the reasons that term life insurance is so cheap is it is rather unlikely that you will ever need this. But it's such a low cost to you and not having coverage can be so financially damaging to your family if you are the income provider that it it absolutely worth it.

The final question they ask is have you had your license suspended, revoked, or had more than one ticket or accident and the fast five years. Obviously if you're a reckless driver that moves the needle a little bit on the life expectancy charts so they want to know about that. Then once you've given them that little bit information just click “Get my quotes”

Policygenius takes about 10-15 seconds to get you a full list of quotes. It will ask for your e-mail address to save the results.

Get your custom rates from Policygenius now.

Policy Genius

While you will get quotes from 10-20 companies they will separate out the top three most competitive quotes that came back for your convenience.

Policy Genius

If you are willing to pay on an annual basis you can get an additional discount on your pricing and this may change the top three choices.

Policy Genius

In this example, paying annually changed the numbers a little bit. AIG came in at two hundred thirty nine dollars a year. Quick, simple math on that shows you get it for 19.91 a month. That's amazing! 

Welcome to the future. This is the way to go about getting your life insurance. I hope this helps hope it saves you some money and gives your family the financial security they need until you get closer to your FI number.

It's just a financial backstop for your family. This isn't necessarily something you're going to need for 20 years. They are committing to you that they're not going to raise their price on you for this period of time.

They're not allowed to change the policy on you as you get older or if your health changes. So if you reach FI in 10 years or five years or whatever it may be you can always cancel the policy. You're not locked in but they are. And that is why I love this as just a back stop.

A nice feature I noted is that after you select the company you are interested, they will share their aggregated user ratings for this company. This is crowd sourced feedback. It’s is nice to have those ratings right there on the dashboard before committing to an in-person call. Once you have made your decision based on your specific options it's going going to ask you for your phone number so you can get on a call with a representative from the selected company and you can lock down the policy.

Get your custom rates from Policygenius now.

Policy Genius

Input your first name, last name and best contact number and talk with an agent. Take action. Life insurance prices only go up as you age. This is the cheapest you will ever receive it. And you don't know what the future holds. If you discover you have a major health issue before you buy life insurance, that will significantly impact your rates or even your ability to receive coverage at all. 

Ask yourself if I were to die tomorrow or next year it would ruin my family's financial future? In my case, it would be very difficult for them to thrive if I were not around. That may not be the case in five or seven years, but term life insurance covers us for now. We can always reassess later.

Why term?

I don't like the idea of doing very complex insurance or bundling insurance with investments. I'm not a fan of whole life insurance, universal life insurance, or cash value insurance. I think the implied complexity, is lining the agent’s pocket with marginal benefit for the end user. But I think that a great low cost term policy absolutely makes sense for the individual that is aggressively pursuing financial independence.

I hope you find Policygenius as useful as I did.

Get your custom rates from Policygenius now.

 

Get The Best Price On Life Insurance with Policygenius

Why You Should Never Buy A New Car

Why You Should Never Buy A New Car

This article was written by Jon, a member of the ChooseFI community, in response to the podcast episode 29R.

Episode 29R: The Reluctant Frugalist vs. the Aspiring Minimalist deals with a host of issues. But, the one I'll discuss today is the age old question: Which will save me the most money, buying a new or used car?

I can understand the fear and frustration of having a car that breaks down. But to rationalize buying a brand-new car because your used car needed some repairs is silly.

I think this stems from ignorance many of us have about the inner workings of vehicles. Yes, it’s more probable that a used car will break more than a new car, but you need to weigh that against the cost of depreciation. Over the long-term, depreciation costs significantly more than the costs to repair your vehicle, even expensive repairs.

The Toyota Yaris and Scion xB, or any other cheap and reliable car that holds its value are almost the exception to the rule. Even then, I’ve modeled out buying used vs. new and the used comes out ahead by $250,000 over 40 years assuming you invest the difference at 10%. Isn’t this what FI is all about? Hacking every last penny to get to our dream faster?

I have no problem with buying a cheap new car such as the Honda Fit or the Toyota Yaris, but you can’t rationalize that it makes financial sense. The numbers don’t work (at least not with my set of reasonable assumptions). You must acknowledge that you’re buying a new car based on other intangibles.

If your goal is FI, then buying new will likely hold you back. (By the way, I was able to find several used Yaris’ for less than $10,000). A trick dealerships play is marking up the late model used cars so people rationalize buying new. You should easily be able to talk them down on the used car.

Want to get to FI sooner? Here are some tips.

Learn to work on your own car

DIY items on most cars include oil changes, air filter replacement, and battery replacement. As you get more comfortable with those items you can attempt more complex repairs. You will gain a new skill that you can use for a lifetime and you will save money on labor and parts.

Generally, when you get your car serviced by a mechanic, the parts are marked up. Rockauto.com is a great website that you can use to save a tremendous amount of money on auto parts. Another benefit is that you become more aware of the squeaks and rattles your car makes, so you can address them before they become a problem.

When you do take your car to a mechanic, you’ll be more knowledgeable and know whether a service they're pushing is necessary.

Never take a car to the dealership

I understand that for some people, it’s not feasible to work on their own cars. If your car needs repaired, DO NOT take it to the dealership (unless it’s under warranty) as they often have the highest prices. Find a reputable mechanic in your area by asking your friends, family, and coworkers for references.

In response to Marilyn, who believes it can be a smarter decision to buy a less expensive new car that you plan to keep for a long timenot knowing all the details about the Nissan Altima, it’s hard to determine whether the engine was completely ruined or if it was just a very expensive repair.

Was the $1,500 used to fix the damage from the broken chain or was that related to other repairs and the chain remained unrepaired? I’m assuming she was referring to the timing chain. Those are expected to last the life of the engine and for one to break is not a normal occurrence. Depending on the type of engine, it could be a relatively inexpensive fix. When a car reaches 100,000 miles, things start to fail. That’s normal and many times manufacturers recommend replacing those parts before they cause you trouble.

At 135,000 miles when she bought it, it’s possible the previous owner did not replace those parts and sold the car before they had to spend money on those repairs. But that’s okay. Even after the repairs, Marilyn paid significantly less than buying a new car. The replacement parts are likely brand-new and will last another 135,000 miles without issue.

By learning how cars work and knowing the lifespan of the parts on your car, you can have confidence in the reliability of your vehicle. People often sell a high mileage car after a series of expensive repair bills because they extrapolate the problems into the future. Little do they know, the vehicle would likely go another 100,000 miles without any major issues.

Depreciation matters

I’m a guinea pig for this scenario.

I bought a brand-new 2014 Toyota Camry (before starting my FI journey) and have had no issues with it. It has lost $8,000 in value over the past three years. My wife bought a 2007 Toyota Camry with 100,000 miles on it. I replaced the alternator, spark plugs, brakes, and tires. Total cost of repairs was about $1,200. Depreciation over the past three years has been around $3,000. It now has 167,000 miles on it and I trust it just as much as I trust the brand-new car.

Financially, the 2007 is winning and it will continue to pull ahead as the 2014 is depreciating at a faster rate. The 2014 has less paint blemishes, but that’s an intangible that I paid for that has cost me at least a year of early retirement.

To answer the question in the podcast, is the six years of useful life worth a couple thousand dollars? No, not financially if FI is the goal. Depreciation is generally too powerful.

Don’t let your ultimate goal of FI get tainted by new shiny things.

Don't just look at the numbers

I highly recommend you listen to episode 467 on the Radical Personal Finance podcast. He goes deep into the problem of only looking at the numbers.

I listened to Dave Ramsey nonstop for two years. While I don’t agree with him on everything, I think his viewpoint on debt holds a lot of validity.

Why do people pay off their low rate mortgages knowing they can do better in the market and have zero regrets about doing so? It’s not only about the numbers. If anyone has hope of achieving FI, they can’t take the risks of maintaining debt in their lives.

When you pay $14,000 for a car, it’s easier to stomach $233 per month than it is to write a check for $14,000. If you’re not willing to write the check to pay for it on the spot, it’s your brain telling you it’s beyond your risk tolerance!

Why You Should Never Buy A New Car

Guest Post: What I’ve Learned From ChooseFI

What I've Learned From ChooseFI

This is a guest post from a listener of the podcast. He'd like to remain anonymous for now, so he's going by the name MrSeabiscuitman. To further protect his identity some of the details in his story have been changed. We've used an asterisk (*) to point out when we have changed a detail.

My background

I'm currently 29yrs old, and up until the age of 23 had grown up and lived in Durham, New Hampshire*–a small town of about 20k people. Durham is a place where very few people leave. Some stay out of necessity, but most likely stay out of fear of the unknown.

With the exception of one of my 50+ extended family members, all of them still live within a 10-mile radius of where they grew up. I don't mean to portray this as a bad thing, but I would like to make the point that due to this upbringing, I was not educated on, or exposed to, different varieties of monetary philosophies. In fact, most of my relatives all consist of the same background–lots of debt in the form of upside down mortgages, car payments, credit cards, etc. with minimal education and hardly any retirement savings.

Seeing these struggles made me realize that my education was my ticket to a comfortable life. Comfort became my goal. I couldn't even assign a monetary value to it–I just knew that I wanted to live a life where money problems didn't exist. As a result, I put a big emphasis on school. I went on to graduate top five in my class with other achievements including Basketball* Team Captain, Most Dedicated Award, Senior Science Award, National Honor Society Member and lots of volunteer work, along with working multiple part-time jobs.

I had, what many believed to be, the perfect resume for a college applicant. Being from low income with good grades, typically results in plentiful financial aid, which I did receive but initially did not take advantage of. You see, I somehow thought it would be a great idea to go to the same school as some of my friends. To make a long story short, the college we went to happened to be the worst financial option for me out of the seven schools I applied to. The school didn't even have an engineering program, which is what I wanted to go to school for. After just one year, I decided to transfer to the University of New Hampshire*. I could commute, it was very affordable, and had the degree I wanted. Three and a half years later I graduated with approximately $26k in college debt, $18k of which was from my first year at the first school that didn't really count for squat seeing as how I switched majors.

After graduating, I got a job with Company X* in April 2012, which required my wife and I to move from New Hampshire* to Missouri*. Our families thought we were crazy! But, I saw Company X's decent starting salary of $60k in a very low cost of living area with good benefits including an employer 401k match of 10% as a very good starting point on my journey to becoming “comfortable”.

Over the last six years we've moved four times while I've held five different jobs with increasing responsibilities within the company. We're actually about to move for the fifth time for my sixth job this June 2018. Along the way, we found Dave Ramsey.

We went on to eliminate our total college debt of $52k ($26k mine and $26k hers), max out my 401k and, accumulate a pretty good emergency fund. Life was good and I saw us as living “comfortably”. In fact, I even believed that with some disciplined savings and investing, I could probably retire early–maybe age 55ish.

But then a few amazing things happened. First and foremost, my wife and I had a baby girl in October 2017. She is amazing to say the least, and I started to think about life a little differently. With that said, I didn't have a lot of time to think as you know kids can consume most of your attention, but luckily I was able to take advantage of something I saw as dumb and cumbersome–my current one-hour commute (two hours roundtrip).

This is where I found the FI community, and specifically ChooseFI. I've only been listening since February, but boy oh boy did the cylinders and pistons fire up in parts of my mind that I didn't even know existed. Light bulb after light bulb came on and I quickly ran some numbers and realized that we could achieve FI in likely 5-7 years.

We have no debt, except for a house that we owe $151k on that our realtor is valuing at $210k. Our cars are nearly paid off (one is fully paid for and the other we owe $2,500 on at 0.89% interest–we could easily pay it off but I choose to invest) and we have about $215k invested between retirement and taxable accounts. This does not include our emergency fund of $20k. After we sell our house and move, we plan to rent for a while and invest any profits made from selling the house.

So, now that I've explained my background and current information, I'd like to elaborate on how ChooseFI has helped me.

Pre-tax retirement account advantages

Through work, I can either contribute after tax or before tax dollars to my 401k. After finding ChooseFI, I switched my contribution type to pre-tax and I'm now able to invest even more into taxable accounts after maxing out 401k!

Tax withholding changes

Now that I know a lot more about taxes, I realized that my wife and I were essentially providing the U.S. Government with a loan each year and would then receive a substantial tax refund check in the thousands of dollars' area–I'll ball park it at $5k to $6k. With the recent addition of the little one, this amount will get even higher with no changes.

So, I basically did some digging, got even deeper into rabbit poop, and made changes to my payroll deductions. Now we are looking to break even with the Government on an annual basis. This will allow us to receive and invest our hard-earned dollars on a monthly basis rather than waiting until the end of the year to throw it on a big purchase that we don't need. This has equated to about $600 monthly that we are investing vs. waiting to blow in the form of a big check!

Index fund investing

Luckily, my company is already linked with Vanguard so that's where my 401k dollars are held; however, I never had the courage to investigate and look into opening taxable accounts as I saw it as a difficult task. However, after listening to ChooseFI, as well as other FI podcasts, I opened up a taxable account and am now contributing to it monthly after maxing out 401k.

Understanding expense ratios and making changes

Like I said before, my 401k dollars are all invested through Vanguard funds. But after listening to ChooseFI discuss expense ratios, I went ahead and looked at my 401k funds and realized that my expense ratios were high for three (0.45, 0.60 and 0.84) of the six funds I was invested in. I have since removed the high expense funds and now just have the three index funds with low expense ratios of 0.035, 0.05 and 0.05.

Credit card Rewards

We've had one credit card for a while–A Chase Marriott card because I was doing a lot of traveling for work and was able to rack up a lot of points.

We got a new card with 55,000 bonus points (annual fee waived first year) after meeting requirements and also switched banking from Wells Fargo to Chase. By making this switch we will receive $200 from Chase for switching our checking to them and another $300 for holding our savings with them, so in total we saved $95, will receive 55,000 bonus points and $500 cash!

Click Here To Compare Travel Rewards Cards And Find One That's Best For You.

Calculating/tracking net worth and savings rates

We weren't doing this before, but with a little push from ChooseFI, and by reading some MMM articles, I now track a spreadsheet where I calculate these items. Since starting this FI journey in February, we are averaging a 59% Savings Rate!

Grocery savings

Using the $2/person/meal has been helpful and looking for different ways to cut grocery expenses has been sort of a game and fun at the same time. My wife and I bucket restaurant/eating out separate from groceries. With that said, we were still spending about $1,100 per month for both of us on just groceries!

We are extremely healthy eaters, and we still are, but last month (March) was the first time we took a hard stab at it and got our spending down to $749. For April, we hit $604. I think we're still figuring out ways to get lower. We already had a Costco membership, but we also switched from Kroger to Walmart for many small items–you just can't beat the prices.

If we remain at $600/month in groceries, it's still an annual savings of $6,000 (Spending $600 vs. $1,100).

Investigating monthly fixed costs

I called our car insurance provider, Geico, and was able to reduce our monthly payment by about $35 by making some changes. For TV, I would prefer to eliminate cable altogether and just go with Netflix/Amazon Prime, but my wife, who stays at home with the baby, gets a lot of happiness from having cable. With that said, we will be switching from Direct TV to Sling.

Sling will only be $35/month vs. $95/month we were paying. Although I found we were stuck with Direct TV until May, after I investigated in February I did realize we still had HBO at $20/month on our account, which was free the first three months but was never deleted (fell into that trap), so we did go down from $95 to $75/month.

Also, since we are switching, I will no longer be purchasing Sunday NFL Ticket that I was stupidly paying about $400 annually for. I also found we were renting movies from Direct TV for an average rate of $14/month–this has stopped as well. So, from what I've mentioned on this bullet point alone we've saved on a monthly basis $35 (Geico), $20 (HBO), $40 (future Sling), $14 (Movie Renting) totaling $109 monthly or $1,308 annually. If you tack on $400 from Sunday NFL Ticket, that's a total annual savings of $1,708!

Grooming

I started cutting my own hair. Heard this from one of the ChooseFI guests (Frugalwoods in Vermont) and also there's an awesome MMM article out there pertaining to this. This results in $33 monthly haircut savings. Plus, $50 annually in hair gel that I no longer use now that I can cut my own hair and keep it really short. Total annual savings: $446.

MSRP rule

Basically, this is a rule I made up where I will never pay “full price” for most things moving forward. Prime example–my wife has been craving a night out/break from the little one. We don't go out to eat often. My wife loves Macaroni Grill, which means I love Macaroni Grill, so I did a little research, signed up with Couponcabin.com, and used Coupon Cabin to buy a $75 Macaroni Grill gift card for $56.

By using Coupon Cabin's site, I got 20% back ($11) from Coupon Cabin. I know this is a small example, but the “old me” would've just paid $75 at dinner. The “new me” only paid $56 for a $75 dinner and will get an additional $11 back.

My wife and I are getting on the same page

We've always had a solid relationship, but over the past six years my wife has made it known that at some point she wants to move back home. I was never able to get on board with that, but I've always known that I will eventually give in. Now we have a FI goal and I now see the value in being near loved ones, especially when I can devote 100% of my time to my friends and family if I choose.

Episode 068 with Andy Hill, has also shown me where I've gone down the rabbit hole in some ways where my wife hasn't. This prompted me to call my wife yesterday to apologize about that. The podcast provided some really good perspective on how I can better include my wife in our decisions.

Other items

Career hacking with ESI

Like Mr. ESI, I have also maintained an average annual pay increase of just over 8%! I love his steps about results, being likeable, etc. Definitely made me think a little more about how I approach work. Specifically, how I'm seen in meetings.

The side hustle

I would love blogging to become my side hustle; however, earning additional income from this is not my top priority. I'd rather focus on inspiring others, but side income could be an additional benefit.

The power of the Roth Conversion Ladder

I plan to use this and had no idea it existed prior to listening to your podcast. There's a really great Root of Good article out there that masterfully explains this.

What FI means to me

I can now see myself retiring at 35 easily and focusing on the things that truly bring me happiness. I'm currently 29 and I've never been happier as a result of this information.

Spend money on things that bring you happiness

There are still grocery items my wife wants to buy as organic. Plus, there are other larger expenses, such as our two new dogs. The big takeaway here is understanding what brings you happiness. ChooseFI has talked about this many time–thanks for putting it in perspective!

What I've Learned From ChooseFI