365 Days Better, Greedy When Others are Fearful, Don’t Over-Optimize plus Community Wins
365 Days Better
Tricia wrote in with an incredible email that I wanted to include in its entirety:
You ask for people's 1% better in the newsletter and I figured I'd share, but with a slight variation.
August 20, 2024 is my "365 days better" anniversary. On that date last year, I was at the cabin, enjoying a morning bloody mary and soaking up the Minnesota summer sun with my best friend. She had left an incredibly toxic work environment a few months before and was living her best life that summer, paying attention to expenses, but not letting fear dictate her life.
I was impressed, for sure, and a bit jealous. But I was also curious. How was she able to leave her job, benefits, retirements, etc, and leap into the void without a long term plan? And what really got me was that she didn't feel pressured to hurry up and find her next job. (Note: She left in May 2023 and as of Aug 2024 still hasn't gone back to work. This woman is #lifegoals!)
She mentioned this podcast she had been listening to called Choose FI. She mentioned VTSAX (quickly typed in as "BTee Sax?" in my phone), books by JL Collins and Bill Perkins, and basically, that she put herself on a budget.
This last part was a bit wild to me. We're both successful women, not married, no kids, cars paid off, each living within our means, no debt. Why would she put herself on a budget?
The girls weekend at the cabin ended and I flew home, inspired to learn more. Could I do this too? And thus began my Choose FI journey. In the past year:
I subscribed to the Choose FI podcast and newsletter, and joined the FB group. I made this my source of truth from where to start my learning and would branch off to research other topics from there.
I transferred 90% of my savings (aka emergency fund, aka "I don't know what to do with this money just yet" fund) into a HYSA.
These funds are earmarked for a down payment on a house. I also transferred the proceeds from the sale of my house here. I've also started to think about what it could look like if we bought smaller or in a LCOL area and I used some of these funds to take a hiatus from climbing the corporate ladder...
My partner and I started talking about our finances. We're not 100% of the way there yet but we're better than we were at this point last year, which is forward progress in my book. He and I both grew up in families that didn't talk about money and we both believed we'd done it wrong for so long that we were too old to fix it. These conversations have been good in the sense that we've both learned we're actually doing okay, but there's just a lot of shame we both carry around finances. Together, we're trying to see that retirement isn't something impossible, but rather, achievable with a plan.
I also stopped randomly tossing extra money from my paycheck into my "fun account" at Fidelity (this is no knock to Fidelity--it just happens to be where my brokerage acct sits). I set up the $3k entry for VTSAX and then set up an automatic purchase every other week. Set it and forget it. This puts ~ 40% of my take home pay into an account that I don't even see or think about. My goal is to bump this to ~45% by the end of the year.
I started tracking our overall net worth and monthly expenses, found our FI number, and have accepted things as they are. For example, we're currently renting so our monthly budget is higher than I'd like, but until we buy, this is just the state of things. Our cars are paid off and while we'd like to get a new one, we both know it's not needed.
I still have so much to learn. I have a FA that I should probably get rid of but am afraid to. I also need to better understand tax loss harvesting and the Roth conversion ladder (the recent podcast is excellent timing!). I need to find a way to clean up the investing mess I think I made when I didn't know what I was doing.
But that will all come. For now, I'm 365 days smarter. I have small-but-attainable goals to reach and plenty to think about. I'm reading The Simple Path to Wealth, educating myself on my options, and just trying to take the fear out of my future.
Thanks for all the work you do for the Choose FI community.
Here's to the next 365 days...
Tricia
Be Greedy When Others are Fearful
Lee wrote in:
I wanted to suggest inclusion of one of those famous Warren Buffett quotes you love in the newsletter tomorrow:
"Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it's imperative that we rush outdoors carrying washtubs, not teaspoons."
I know it's helped my thinking in those days when everyone is scared about the stock market. Thought others might benefit from a refresher.
Brad Note: This washtubs quote is similar in spirit to another famous Buffett quote:
“Be Fearful When Others Are Greedy And Greedy When Others Are Fearful.”
Reminder to Not Over-Optimize
Nick Maggiulli posted a good reminder for all of us in the FI Community:
“Money mistake I see people make: over-optimization
You obsess over whether it's better to contribute to an IRA earlier in the year vs. later instead of spending that time to focus on raising your income.
Don't chase cents to lose dollars.”
So many of us over-optimize, when at its essence, personal finance it quite simple:
Spend less than you earn
Invest in broad-based index funds of ETFs (S&P 500 or Total Stock Market)
Automate your financial life
Sit back and enjoy the journey
ChooseFI Community Taking Action This Week
My 1% better is recasting my mortgage. I recently bought a new primary residence for $200k, which is pretty inexpensive for our area but of course it needed some love. The original house was built in 1917 but had been bricked and added onto in the 1950s. It had some settling, it needed a new roof, insulation, updating of plumbing (was cast-iron), has a bright orange kitchen in the middle of the house, I can go on. While we are still going through the renovation process, new roof going in right now as I type this, we did have a few wins and a few setbacks (including having the insurance canceled).
My most transformable win is recasting my mortgage from the sell of my old primary. We took $100k from the profit and made a principle pay down that will take my monthly mortgage payment from $1,280.07 to $600.28, and will save approx. $241,923 in interest, was able to cancel the PMI and after the paperwork is finalized I will work to get an escrow waiver (to stop escrow and just pay out of pocket for taxes and insurance.)
We are into the house about $35k so far with at least another $30k to go but we are collecting those credit card points along the way. With some of those points we are going to Grand Teton and Yellowstone this Fall. It's not a good redemption per point but we don't care. It's a paid for trip and a personal bucket list destination that will pay dividends.
I encourage readers/listeners to look into recasting your mortgage if you've ever paid $10k extra on the mortgage or even small payment that might have made up $10k over the years. Recasting doesn't change your Rate or Length of the Term but might save you in interest and monthly mortgage amounts.
- Katie
This week, I helped my friend review his investment allocations at his company's financial institution. As a 31 yr old, he was fully invested in the 2060 life-cycle fund with an expense ratio of over 1.4%, and we helped rebalance his portfolio for slightly more risk and at a 0.04% expense ratio VTSAX account.
My 1% better came in the culmination of a 3-month chaos scenario simulation. Starting April 1st, I vowed to simulate losing my job - this consisted of direct depositing all my income into a separate HYSA and living off of my emergency fund. For 3 months, I cut off all subscriptions, limited my spending adopting a no-buy clause, and biked to work when I could.
In the military, we learn to prepare for disasters using training scenarios, and I figured this could be a great way to check if the flood gates will actually stop the floods! At the end of the experiment, I re-funded my emergency savings account and invested the rest into more shares. I learned that I could live with a lot less if I really needed to!
- Ledimir
Our 1% better: Our niece graduated kindergarten a few weeks ago and we got approval from her parents to open a Roth IRA for her. Our plan is to pay her when she helps with my fiance's small business. We calculated that even with just $500 a year from age 6 until 25 she'll have close to $30,000 to get started with her life!
However, we hope that she will start working sooner and be able to add even more (when her and her parents are ready to start doing her taxes). We plan to do the same with our 4yr old nephew when he graduates kindergarten!
- Sara
My 1% better this month.
Being polite while dealing with Airline employees: My family and I stopped at Dubai for couple of days on our way back to Dallas from India.
We reached airport on time for our Emirates flight. To our shock, we were denied boarding because the flight was full. Emirates gave me the following option: They would put us on the same flight but next day. Hotel stay and taxi to and from hotel to airport and meal vouchers.
I requested them to put us on the flight as scheduled. They thought for some time and asked me to comeback after 90 minutes (100 minutes before departure).
When we came back after 90 minutes. They were able to put us on the same flight as scheduled. I thanked them. The emirates staff mentioned that my family and I were respectful all the time despite long waiting hours. He said he had a surprise for me. Round trip ticket coupons for 4 of us to DFW from Dubai free. Have to be used within a year. It's over $5600 in value.
- Rakesh
This week I realized that becoming FI is only one part of a healthy, balanced life. Reflecting on what would make a big, positive change in our family, I removed the TV, Xbox, Switch and all the other screens from our field of view. Surprisingly, no one fought me. Our 12 yo especially was in need of a detox from video games, which had messed with the dopamine levels in his brain (thank you Dr. Huberman for the lesson on brain chemistry).
Despite being wary of new expenses (because they are both proud graduates of your terrific financial literacy course), they immediately started embracing life in ways I didn't even realize we'd lost. In one week, we replaced our bloated amounts of screen time with classic games, pizza party with friends, neighborhood karate, frisbee, library visits and read alouds. Never going back!!
Slowly approaching FI has given me the mental space to discover ways in which to enhance our fleeting time together.
- Katie
I've been profoundly burnt out at my current job and decided several weeks ago it was time to go, despite being there for only a few months. This week, I signed a contract for my next position and put in my notice.
The new position is a 24% wage increase, operates in normal business hours (my previous position was T-Sa, including evenings), and provides me management experience I've been seeking. They will also be covering licensing/education expenses my current employer doesn't cover. And since EVERYTHING is negotiable, I asked if my provided computer could be a MacBook and my desk be a sit/stand desk and they said yes! I was actually most excited about these last two, which shows me how much my values are shifting toward my experience/environment versus income alone.
I'll be taking a 6-week mini-sabbatical prior to starting AND this position will be part-time for the first year. I'm just so THANKFUL to be in a position to be able to take time to recover and to take advantage of this opportunity.
- McKenna