12 Thoughts on Incentives, 2nd Gen FI Resources, What Are You Trying to Master? plus Community Wins
12 Thoughts on Incentives
George Mack is one of my favorite writers and I came across his article “12 Thoughts on Incentives” and thought it was brilliant.
One of the lessons I consistently teach my daughters is that understanding incentives is one of the best ways to understand human behavior.
As the great Charlie Munger said, “Show me the incentives, and I'll show you the outcome."
George Mack’s article is worth reading in its entirety, but here are three he highlighted that jumped out to me:
“How to waste your time: Try to defy the laws of physics -- or try to get a man to understand something when his salary depends on his not understanding it.”
“If a person tells you why their thing is great (city, relationship, or job) - take it with a pinch of salt. If they tell you why it's terrible - take it like a handful of gold. If someone swims upstream against their identity and incentives, it probably holds some deep truth.”
“33% of British criminals were dying en route to Australia in the 1700s. Britain switched from paying sea captains for every passenger who walked on the ship to paying them for every passenger who walked off. Immediately, the survival rate shot up to 99%.”
2nd Generation FI Resources
Devon was my guest in Episode 504 and he’s one of the most impressive young men I’ve ever met. He recently started a blog and created a wonderful resource he titled:
‘25 College Tips for Success: From Freshman to Future-Proof.’
This is a quick 5-minute read that I think is valuable for any young person setting off to college. Pass it along!
Three other resources I wanted to quickly mention for 2nd Generation Financial Independence:
'Raising Your Money-Savvy Family For Next Generation Financial Independence’ by Doug Nordman and Carol Pittner (they were on ChooseFI episode 232 to discuss). The book recently celebrated its 4th anniversary of publication and it remains my go-to resource for 2nd Generation FI.
‘Adulting 101’ by Pete Hardesty and Josh Burnette. I had the pleasure of spending a day with Pete and Josh recently at a NASCAR race and after hanging with them, I went out and immediately bought their book to give to my daughters (and wow, I’m just realizing it has nearly 2,000 ratings on Amazon – super popular book!).
‘First to a Million: A Teenager’s Guide to Achieving Early Financial Independence’ by Dan Sheeks. Dan was on Episode 363 and I’ve spoken to his ‘Sheeks Freaks’ group and they were incredibly impressive and dialed in. This book is the foundation of that knowledge.
What Are You Trying to Master?
With the help of author Daniel Pink’s framework, we’ve identified five main motivating factors that drive much of human behavior:
Autonomy
Mastery
Purpose
Identity
Connection.
I want to focus today on ‘Mastery,’ as I think it is an easy one to overlook.
Sure, many students and those early in their careers are consciously pursuing knowledge and mastery, but honestly, how many of us are truly trying to “master” any new skill?
I think the answer is just about nobody.
Routines turn into ruts and we just do not have the energy, time or motivation to even attempt to learn something new.
I know I was guilty of this for a solid decade of my adult life.
But something shifted mentally and I now relish the “white belt beginner’s mindset” which amounts to being terrible at something but soaking up all the knowledge I can with a long-term goal of attaining some level of mastery.
I’ve dabbled in some potential long-term pursuits over the past few years including Brazilian jiu-jitsu and the Japanese language, but I’m still working on finding the thing that I pursue for the next few decades.
And that’s okay.
Life is an experiment and we don’t just hit on the thing the first time out. We have to test and iterate.
My challenge to you if you’re in the same rut I was stuck in for so many years is this:
Find something really difficult you would enjoy working towards that is completely out of your comfort zone and take one step today to get started down that path.
ChooseFI Community Taking Action This Week
My 1 % better is calling USAA to get the 10 % discount on my car insurance by downloading the safe pilot app on my phone. As long as I keep my: speed, braking, and phone handling in check while driving I could get up to a 30% discount on my premiums. I also negotiated with my sailing instructor for a lesson to pay him directly $50 instead of $80 to the sailing center (he'd only get $20 of that).
- Sheila
Our 1% better has been a journey of a number of days focusing on showing up in a number of ways 1% better each day that has shifted my perspective and mindset in many ways. It started with a financial journey, leading to a health mindset shift, leading to a personal excellence and leadership shift.
Many stories and learnings in all of it but the one that I wanted to highlight now is culminating with supporting my wife in an endeavor to publish a children's book that she wrote. It is based on a story of our oldest daughter who was in kindergarten at the time and an act of kindness that she took the initiative and courage to perform. Within supporting this project I've leveraged my perspective change in all the areas mentioned above.
This journey may not have happened if I hadn't started listening to ChooseFI in 2016 which led me to a number of other podcasts that have shaped my mindset over the years.
- Nathan
Our 1% this week has been signing our kids up as authorized users on our three main credit cards [Brad note: This is to get their credit history started at an early age]. I had forgotten this tip to help set the kids up on the right foot! They're young (7, 4, and 3) but we love speaking openly with them about money.
- Kelsea
My 1% has been bubbling in the back of my head for a long time. It's accepting that we're not going to be financially independent while the kids are young, so I may as well take my foot off the gas some and enjoy the present.
I'm 32 and I have 2 kids under 10. With our current savings rate, the earliest I'd be able to retire is sometime in my mid 40s, which is still very early. However, by then, my oldest will be in her 20s and my other in high school if not graduated as well.
I'll never regret having kids young, but it has certainly changed the trajectory of my career. I'm simply not willing to work the kind of hours and workload that'd shave off my time to FI and sacrifice time with the kids while they're young.
This realization hasn't depressed me. We're still incredibly fortunate, and a high savings rate gives us enormous flexibility and peace of mind. I may be able to pursue some mini retirements or take summers off with the kids one day.
But accepting the fact that I won't be retiring in my 30s like Mr. Money Moustache has been clarifying to our financial goals. I'm early in my career, the money will come, and I'll likely work more once the kiddos are grown and don't need us as much. Barring catastrophe, we're going to be fine money wise.
I'm trying to let loose a little bit, go on another trip, have another dinner out, maybe even buy that guitar I don't need that I've had my eye on. But that's easier said than done for a frugally disposed person like me. My first test comes up soon: I'm getting a raise and am planning to not increase my 457 contribution for the first time.
- Tanner
My 1% better was moving out of my parents house! Typically this is not the best thing to do financially at 18, but it was much needed for my emotional well-being. I am so happy I have found this community that has taught me to only put money towards things that I value! I am renting a small house in the city with 3 roommates ($400 a month utilities included). I am so excited for my financial future and my new found freedom!
- Symantha
I wanted to send you this email as a thank you for all you do, but also give you some "wins" that my wife and I have had since finding your podcast. My wife and I are 28 and 29 years old, living in Alabama.
My wife and I are both natural savers, so that was a great start, but neither of us grew up in a financially savvy household. I first found your podcast in 2021, which led me to max out my Roth IRA for the first time, but it also got me interested in travel rewards. I opened up my first travel rewards credit card to purchase my wife's engagement ring (which I paid off immediately) and started looking into how we could use points to pay for our honeymoon.
We quickly started two player mode shortly after. A credit card was fortunately doing the 100,000 point sign up bonus at the time that we both got. From this, we were able to purchase our flights, 5 nights at the Hyatt Regency in Maui, and our rental car all with points, saving us over $6000 (WOW!).
Since then, we have opened other credit cards, earned the a companion pass twice, and started referring friends and family that have also benefited from travel rewards. We've earned somewhere around 900K points, we have traveled more than I ever imagined we could. From May 2022 to the end of 2024 (so roughly 2.5 years) we will have taken 14 round trip "vacations" using points, while redeeming points at hotels for a total of 40 nights!
Those nights ranged from 3,500 to 25,000 points. These trips were mostly long weekend trips to Phoenix / Sedona, St. Louis, Philadelphia, Portland, MA, Boston, San Francisco, Minneapolis, Pittsburgh, Orlando, Washington DC, Jamaica, and Chicago. I never dreamed I would be able to travel so freely being a frugal spender. I wish I had recorded the cash value at the time of these trip, but I have to imagine it would be $20,000+ in total savings.
In addition to travel rewards, my wife and I have paid off her student loans, paid off our cars, maxed out both of our Roth IRAs since 2021, optimized our tax bill by contributing as much as we can to our traditional 401Ks, and generally learning more and more about FI, tax strategies, and optimizing our finances and life.
- Austin