New FI Math (an Update)
Two weeks ago, I talked about the value of cutting $100 from your monthly expenses which leads to an astonishing $30,000 reduction in your FI Number.
But that’s not even half of the benefit of cutting $100 per month as the actual value is:
**$90,000 ** You are $90,000 closer to FI when you cut $100 per month from your budget.
The missing link is this:
You’ll invest that $100 per month into the stock market (most likely a low-cost index fund) and you’ll expect to earn an 8% annual return on that newly invested money.
I opened up a compound interest calculator assuming and assumed three things: a 20 year path to FI, 8% annual return and $100 monthly investment.
After 20 years, this $100 per month is worth nearly $60,000.
Add the $30,000 reduction in your FI Number for cutting that $1,200 per year expense out of your life and the total value over your 20-year FI journey is $90,000 for every $100 you cut from your monthly budget.
Here’s a Real-World Example:
Pre-FI let’s say you were earning and spending $5,000 every month or $60,000 in annual expenses. Since we said you spent every dollar, your savings rate was 0%.
Your FI Number on $60,000 in annual expenses would have been $1,500,000.
Since your savings rate is 0% you’ll never reach FI, so you know you need to make some changes ASAP.
Let’s say you look at Mr. Money Mustache’s ‘Shockingly Simple Math’ article and see that you need to have a savings rate of about 40% to reach FI in 20 years, so you set out to do just that.
After a series of changes in your budget, your annual expenses are now $36,000 and your new FI Number is $900,000 (always 25x your annual expenses).
Crucially, you are now **saving $2,000 per month **(40% of the $5,000 monthly budget you started with) and investing that money with an anticipated 8% annual return.
After 20 years, your investable assets from that $2k/month savings is nearly $1,200,000.
In this example you made the equivalent of twenty $100 per month cuts to your budget ($2,000 per month cut)..
Your net worth increased by $1,200,000 and your FI Number decreased by $600,000 for a total swing of $1.8 million.
You cut $2,000 per month which is the equivalent of twenty $100 monthly cuts, so we just proved out that each of those cuts really was worth a $90,000 swing in your journey to FI ($1,800,000 / 20 = $90,000).
Note: In this example, since your FI Number was now only $900,000, you actually overshot by quite a bit with a $1.2 million net worth, so your timeline to FI would have looked much more like 17.5 years instead of 20. A good problem to have!
Is the 1% Rule Still Relevant?
Last week in the newsletter I went through the math of real estate investing’s ‘1% Rule.’
As a reminder, if you get 1% of the purchase price in monthly rent ($1500 per month for a $150k property for instance), that’s a 12% gross return and there’s a similar ‘50% rule’ where you expect to spend roughly 50% of your gross rent in expenses, so that brings you down to a 6% net return (my examples are unleveraged and exclude appreciation).
There was some pushback in our forums, especially from people in HCOL areas, asking whether the 1% rule was still relevant.
The subtext was simply, “I can’t find anything like this in my area, so how could it still be relevant today?”
My pushback was this:
The math is the math and you’re asking the wrong question.
It’s agnostic as to where you live or where you want to invest.
If a 1% rule rental property, which IS hard to find, only gets you a 6% return on operations, then the real question you need to ask yourself isn’t if the 1% rule still holds, but whether it’s even remotely plausible to buy rental real estate in most areas and expect to get something even approximately a worthwhile return.
Again, for all the real estate purists, I’m talking about unleveraged property and not considering appreciation, which is impossible to forecast, but realistically in an environment where a HYSA gets you 4% interest, rental real estate in much of the country looks increasingly unattractive.
The further subtext to my argument is this:
Maybe the rent vs. buy calculus changes for your own living situation when you identify you’re in a market where landlords reliably only get ~0.3% - 0.5% of the purchase price per month in rent as many in our forums reported.
ChooseFI Community Taking Action This Week
Been meaning to share multiple 1% moves that I’ve been sticking to in 2025. Looked into Dean Turner’s training materials, and now working out utilizing Dean’s concepts and really experiencing body changing gains – filling out my t-shirts quite nicely! – But, I don’t skip leg day either – ha ha ha Taking to heart the concepts of “what does your ideal life look like?” and “don’t wait until you are retired to live out your dreams / best life” – back in the day you had Jacques Hopkins from Piano in 21 Days on the show. I played when I was a kid; however, I gave it up. I purchased a keyboard in 2003 as a newly minted CPA at PwC, learned to play Fur Elise again, but dropped piano (a 2nd time because life got busy, shocker). Well, I’m doing Jacques’ course, I’m sticking to it daily (min. of 15 minutes) and loving it. For one more blast from the past for you – my spouse and I visited Nashville for the first time and we utilized the services of the small business you had on the show called A Little Local Flavor (Brad Note: This business is owned by my good friend Christine and it's a wonderful tour if you're ever visiting Nashville!) - we visited in late Feb’25 and everyone else on the tour canceled / did not show. As a result, it ended up being my spouse, the guide and myself! How lucky were we! Anyway, it was a super experience, and we really enjoyed going to all the locally owned small businesses and getting to know the history of Nashville. I’ve been following Dr. Bobby since you had him on the show and really taking care of my sleep. Consistent bedtime, minimum 7 hours, etc. Back in the Fall of 2024 I built out a Finnish “Dry Sauna” in my basement. Stones, 220v heater – room for 6, the whole 9-yards. I reside in the Chicago area and want to be able to use the Sauna year around. I’ve been using the Sauna often – before bed – and that helps with the sleep (for sure). Oddly, it’s a hit with my two sons and occasionally my spouse joins as well. I’m current with Chris Hutchins’ All the Hacks Podcast, which you also introduced me to… And one of Chris’ guests was discussing mindfulness, meditation, etc. – I practiced mindfulness regularly back in 2019/2020 but kind of dropped it. Chris’ guest – Light Watkins turned me back on to it with his “simple” approach. I’ve been devoting 2 sessions (between 10-20 minutes) daily to my practice since April 24, 2025 and – so far so good – supposed to really gain the benefits after a solid 90 days. — Jim
I finally bought a water-saving shower head. I live in Germany, but I imagine the following is true for all countries: Warm water is one of the main utilities and common housing costs. Using less warm water reduces the gas bill for heating (if central heating is used to heat the water), reduces the overall cold water consumption costs, and reduces the additional fees that have to be paid for wastewater treatment. Having tried out the new water-saving shower head, I can't feel any difference, and enough water is coming out. — Uta
My 1% better is that, because of ChooseFI principles, I was able to opt-out of a large corporate reorg two years ago and instead, I happily took a voluntary severance package. I was asked by two of my colleagues what was my secret power that allowed me to walk away from the corporate world, which led to amazing conversations about FI. I have made many small financial mistakes over the years (like chasing fast stocks), but those mistakes were trumped many times over by doing the "big things" right: maxing out retirement accounts, living below our means, saving and investing a little extra over a long time period, minimizing taxes, and not taking on debt. The freedom of the ChooseFI principles allowed me to spend the last two years working at a non-profit organization without needing a paycheck. ChooseFI is the choice to be free. — Mark
I have always kept a pretty significant “peace of mind” buffer in my checking account where it earned basically nothing. I recently transitioned to a Fidelity Cash Management account where my buffer now earns 4% and all my atm fees (even foreign) are reimbursed. And in an effort to simplify my life, I teamed this up with the Fidelity 2% cash back card where the cash back gets invested directly into my brokerage account. Yes, I could potentially get more value from optimizing travel cards but as I get older I am finding value in simplifying my life. It’s not all about the $$$. — Kathy
Learned how to use inter-library loan at my library this week and found a book I was considering purchasing. Also, I was able to read "Outside" magazine through my library which I was considering subscribing to read. — Gavin
My 1% win is we are using the app Cooklist and are saving $200-$300 a month on groceries/restuarants by leverging what we have and being more intentional with our grocery shopping! The app is AMAZING!!! — Morgan