Comfortably Numb (And How I Woke Up To Financial Independence)

CHGO FIRE comfortably numb and how I woke up to financial independence

“Hello, is there anybody in there? Just nod if you can hear me. Is there anyone home?” — David Gilmour and Roger Waters, Pink Floyd, 1979

If you're reading this post you have confirmed that, indeed, someone is in there. And together, in so many ways, we are all home in the financial independence community.

Welcome to CHGO FIRE. It's awesome to meet you. I hope to get to know you in the months and years ahead as we blaze a path to financial independence together.

I've wanted to blog about my personal journey to financial independence for some time and just haven't pulled the trigger on it until my new friends, Brad Barrett and Jonathan Mendonsa, the co-hosts of the ChooseFI podcast invited their listeners to become bloggers. So … here we go!

My story is a long and winding road, but here's the short version (there'll be plenty of time to get into the weeds in future posts).

Since the internet was just a wee babe, I've been out of college and cruising the hedonic hamster wheel to try to live the life that American society prescribes.

  • Go to college
  • Get a job
  • Get married
  • Have kids
  • Buy a house
  • Fill it up with crap
  • Get a raise
  • Buy a bigger house
  • Fill up bigger house with more and new crap
  • Hey kid, look at that shiny car! Yeah, I'll take one of those!
  • Get a promotion
  • Buy that second home

It literally. never. ends. The pressure to consume, the pressure to keep up. It's almost as though we are somehow programmed at birth to respond affirmatively.

I had become, as the song goes, comfortably numb. Like a zombie, just commuting to an office every day. With some distant dream of retirement and travel. I had just accepted that this was the way things were and would always be.

Then, an explosion occurred. A personal Big Bang!

I read an article in, of all places, Crain's Chicago Business about a fellow Chicagoan who retired when she was just 34 to travel the world. Sure, I had heard about Mr. Money Mustache, but I'd never so much as scratched the surface. It was that Crain's article that was my gateway to the FIRE community.

I was immediately hooked.

For weeks and weeks, I consumed. Whether it was a blog while waiting for swim lessons to end or a podcast while I was driving an hour to work, I was devouring this stuff like I used to devour Portillo's chocolate cake! (You Chicagoans know what I'm talking about.) I binge listened to every Mad Fientist podcast on a cross-country road trip with my daughter (and my ex-wife!) to look at colleges!

Mr. Money Mustache, ChooseFI, the Mad Fientist, Afford Anything, 1500 Days, the Root of Good, the Frugal Professor, Physician On Fire (and I'm not even a doctor!), Millennial Revolution, Rock Star Finance. That's not even half of the list.

JL Collins! How can I forget JL Collins and the stock series?

I mean, I even stopped listening to music for a few months because I was so completely engrossed!

Finding my tribe

I had found my home. This place, and you all, just made sense. Here I could throw up the proverbial middle finger to the status quo and declare a new path.

And I optimized. I mean, I read Mr. Money Mustache's clown car post and I almost immediately went and sold the ridiculous SUV that I drove (almost always alone) for a teeny little gas sipping used car. Paid in full.

My very own clown car. I seriously drove this thing. Mostly alone! Please, just face punch me now and get it over with.

In the months ahead, I'll share all of the optimizations I've made and the many, many still to come.

CHGO FIRE is my attempt to share this entire journey with you, to forge a path forward together and to have a good time along the way to FI (and eventually even RE). I hope you will tune in regularly and become a member of the crew.

I've chosen to write anonymously at this point because I'm still gainfully employed. It'd be nice to stay that way for the time being. Anonymity gives me the opportunity to be bluntly frank and brutally honest. It gives me the chance to share with reckless abandon and that's what I aim to do.

CHGO FIRE is going to do at least three things …

  1. Share my journey, share all of my royal screw-ups and cover topics that we share an interest in.
    • Things like geoarbitrage. In fact, on this journey forward I'll embark on a little geoarbitrage without even leaving my current hometown. I hope you'll be passenger for all the details.
    • Details on the side hustles I'm building so I don't rely on just a single source of income (and because I'm freaking passionate about them).
    • How it is never too late for FI.
    • How to be frugal with children.
    • One of the many things I've screwed up … divorce and the havoc it wreaks on financial independence.
    • How the pursuit of financial independence lead to a complete overhaul in other areas of life, such as diet.
    • How I survived my first FI Christmas!
    • Helping my kid get into college and my attempt to light a second generation fire.
  2. Share my monthly numbers. I'm always drawn to blogs like 1500 Days and Wealthy Accountant because I'm curious how others are doing. Curious what “their number” is. Curious how they invest their stash. Anonymity affords me the opportunity to share openly and openly I will share.
  3. I'm most excited to do something that I haven't seen any other financial independence blog do. One of the Milestones of FI is that Personal Capital call once you hit $100,000 in assets. Well, because I came late to the FI party, I was lucky enough to get that Personal Capital call within days of signing up for my Personal Capital account. (If you haven't signed up for your own Personal Capital account, it's super easy and so helpful!). I listened to their pitch. I was intrigued. And now we are going to conduct a little experiment together. Here it is …

Personal Capital vs Vanguard VTSAX

  • Personal Capital vs. Vanguard VTSAX! Mano y mano, for all the FI glory!
  • Like the Mad Fientist has said before, I have been sitting on some cash, trying to time the market, thinking this can't continue! Shite's gonna go south any day now! And when it does I'd run out with my wash basin and start scooping up stocks at fire sale prices. And what do you know? All it's done is increase about 15 percent as I've been waiting and watching. JL Collins doesn't even know me (yet!) and he's ashamed.
  • Now it's time to do something about it. So, on the same day, I will invest $10,000 with Personal Capital for them to quasi-actively manage and I'll invest another $10,000 in everyone's favorite, Vanguard's awesome VTSAX fund.
  • Real money. Real results. With an update once a month.
  • Personal Capital knows they start at a disadvantage because they charge .89 basis points to Vanguard's .04. But they're confident little buggers over there at Personal Capital. So we'll see what happens together starting in the coming weeks.

Well, that's the plan. Thanks for reading post numero uno.

So … stay tuned. Join in. Let's Go! (which, coincidentally is a great Matt and Kim song you need to check out).

Until next time …

How CHGO FIRE finally woke up and started pursuing Financial Independence

Hacking College With Zero Debt

College Hacking

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

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

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

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

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

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

These were the numbers I plugged into the calc:

And this is what the calc returned:

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

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

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

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

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

Here is what the University of Virginia costs per year:

Total annual cost of attendance: $30,490.

And here is the breakdown:

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

And here is what the University of Washington costs:

Total annual cost of attendance: $25,948.

This comprises:

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

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

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

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

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

We’ll organize those ideas into five buckets:

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

Dual Enrollment and College Credit Arbitrage

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

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

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

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

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

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

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

Slashing the MSRP of College Tuition

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

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

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

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

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

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

The gap is even higher at the University of Virginia:

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

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

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

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

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

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

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

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

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

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

I learned a ton.

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

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

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

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

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

Hacking Financial Aid

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

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

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

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

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

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

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

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

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

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

DIY Micro Scholarship Hacking

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

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

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

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

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

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

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

Earning (and Keeping) School Money

This is another no-brainer.

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

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

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

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

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

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

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

That seems to have stuck. I hope.

So there you have it.

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

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

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

How my son saved 2 years and $18,258 in college tuition

College Hacking Dual Enrollment

One of the most difficult things that will slow down your path to FIRE is debt.

And one of the most common sources of debt is the student loan.

It sets your financial independence timeline back by years, and even worse, you gotta pay it off using post-tax dollars.

Smarter people than me have figured out ways to optimize for financial aid and scholarships.

Those tips are awesome, and we'll get to those in future posts.

But what my son and I did was a lot more predictable and available, and helped us slash his college tuition by more than $18,000. We also halved the time he’ll need to get a degree.

How? Two words.

Dual Enrollment.

What is dual enrollment?

Dual enrollment is the practice of allowing high school students (typically in their junior and senior years) to also be signed up for college level classes. By doing this they earn credit for both the GED and the college degree.

It is also called concurrent enrollment, and the way it is rolled out varies from state to state.

In some states, students go to community colleges and state universities for college-level classes that earn them credit for their GED and at the tertiary institution they attend.

In others, students take college-level classes at their high school, taught by educators who are certified as required by the state.

One of the key benefits of dual enrollment is the potential to give high school students a head start in college. This might save them up to 1-2 years at the college level.

That is in itself a sweet deal.

But even sweeter is how much money dual enrollment can save you if you are planning to put your kids through college.

How much you can save depends on:

  • whether your state has a dual enrollment policy in the first place.
  • and if so, how many credits it will pay for each student per quarter.
  • Whether you are able to take advantage of arbitrage opportunities in tuition fees.

 

Our Case Study: Washington State’s Running Start Program

When my son was in high school several years ago, it became clear to us that he was headed for a stint as a soldier.

Knowing that his years in uniform was going to put him behind his schoolmates, I looked into ways to help him catch up.

Well, my research opened up the path for him to shave 2 years off college and saved us more than $18,000 in tuition fees.

When he was done with his military service, he was able to slide right into his Junior year at the University of Washington.

Ok, he took a year in-between the army and college to launch his Amazon FBA business, did well, THEN slid right into his Junior year.

The math:

Here’s how the math worked for us:

In 2016, the cost for 180 credits over a four-year program at the University of Washington was $36,516.

This is tuition only, and excludes all other fees and costs associated with pursuing a degree.

What we will end up paying in total when he graduates next year: around $18,258, spread out over 6 quarters.

Financial aid and scholarships will bring that number even further down, but I’ll exclude that at this time to keep things simple.

Washington State’s dual enrollment program is called Running Start, and allows for 11th and 12th grade students to take prescribed courses at community and technical colleges in the state.

As of 2016, Running Start paid for up to 15 credit hours per quarter, per student. There were some expectations that had to be met, such as a 2.0 GPA (yes, it's a very low bar), and courses that had high school equivalency towards a GED.

In our case, those 15 credits were worth $1,283.85 at the community college my son went to, per quarter, or about $7,700 for 90 credits over six quarters.

That’s a nice chuck of change, courtesy of the Washington State legislature!

But wait, there’s more!

If you picked the courses carefully, you could line up a solid curriculum that would count towards an associate degree, which could then be transferred, credit for credit, at the University of Washington.

Research and consultations were essential to successful credit transfers and building a foundation of prerequisite 100 and 200 courses that would be accepted at the University of Washington.

Some courses weren’t actually part of the GED core requirements, but we were able to get them paid for as electives.

Other courses were so desirable that we paid for them out-of-pocket because they were needed for his associate degree and would transfer as an equivalent pre-requisite.

Thanks to the concept of tuition arbitrage, we were able to more than double the value of the $7,700 the state paid for Running Start.

Assuming 20 credits per quarter, here’s what the tuition arbitrage looked like for my son:

  • A credit cost $81.07 at his community college.
  • A similar course would cost $184.45 per credit at UW.
  • The tuition arbitrage was $103.38 per credit, IF those credits were transferable.

It was like getting a great discount on tuition, again PROVIDED the credits from the community college could be transferred.

This meant that if my son could load up on one extra course a quarter (worth 5 credits), we could save $103.38 x 5 = $516.90 a quarter, or $3,101.40 over 6 quarters.

Yes, we had to pay 100% of the 16th-20th credit hours (since the 1st 15 credits were paid for by the state), but a savings of $516.90 or 56% was an excellent deal!

By the time my son shipped out to boot camp, we had check all the boxes he needed to graduate from high school with a GED AND an Associate Degree in Integrated Studies.

We also found an unexpected bonus – since he was transferring with an Associate Degree into UW, he didn’t have to take the SAT. That was neat.

YMMV

Your Miles May Vary

In the travel rewards game, there is an apt expression that we borrow from the automobile industry: Your Miles May Vary.

This is especially true when it comes to dual enrollment and tuition arbitrage.

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

Every state has different policies and funding thresholds, and the local situation may vary between school districts in the same state.

You can see what your school district and state’s stances are on dual enrollment by checking with this national organization.

Is this a good fit for 2nd generation FIRE?

While we appreciated the advantages that our state’s dual enrollment program gave us, there were a few things that we had to consider before signing up:

  • Back when he was 17, we had to make sure our son had the maturity and discipline to handle a tertiary education experience.
  • We knew that not all credits earned might be accepted for transfers by every university, especially private universities and out-of-state institutions. So we had to make some guesses as to which university he would go to.
  • A lot planning, consultations, and research was needed to make sure the ducks were lined up in a row. Thankfully, research and spreadsheets are right up my alley.

One of the unintended consequences of maximizing the benefits of dual enrollment was that we ended up having too much money in my son’s Vanguard 529 Target Date fund.

Since the funds can be transferred to our younger kids, or even used by my wife and I, that’s not a bad problem to have!