featured image for podcast episodeBack to basics

Back to basics
Episode 253

Choose
Posted by Choose FI

Episode Guide

Episode Summary:

The discussion emphasizes the importance of community and simplifying the path to financial independence. Jonathan and Brad share insights on creating a supportive environment for individuals seeking financial growth, highlighting the significance of early decisions in structuring expenses. They encourage listeners to engage with various resources, including success stories from the community and actionable strategies like house hacking, which can significantly impact saving rates. The episode reinforces that financial independence is not merely a number, but rather a lifestyle approach that prioritizes choices and opportunities, urging listeners to take proactive steps toward financial clarity and improved quality of life.

Episode Timestamps

ChooseFI Podcast Episode Show Notes

Episode Summary: This episode emphasizes the importance of community engagement in personal finance and financial independence. Hosts Brad Barrett and Jonathan Mendonsa share insights on their podcast's evolution, crowdsourcing ideas from listeners, and revisiting foundational concepts for both new and seasoned listeners. They discuss practical strategies for achieving financial freedom, including house hacking and reducing expenses, while stressing that financial independence is a continuous journey. The hosts encourage actionable advice and support within the community.

Key Topics Discussed:

  • Introduction and Community Update
  • Households of FI Insights
  • Back to the Basics
  • Financial Independence: Definitions
  • Practical Advice for New Graduates
  • House Hacking as a Strategy
  • Outro and Call to Action

Key Takeaways:

  • Community Matters: The hosts emphasize that ChooseFI thrives on community engagement, promoting a platform where individuals share experiences and support each other in the pursuit of financial independence.
  • Back to Basics: Revisiting foundational concepts in financial independence can benefit both new and veteran listeners, reinforcing these principles as core to the journey.
  • Actionable Advice: Financial independence isn't a destination but a continual journey of improvement. Listeners are encouraged to take actionable steps in their financial lives.
  • House Hacking: This strategy significantly reduces living expenses by renting out extra space, allowing individuals to save more and accelerate their path to FI.

Actionable Insights:

  • Consider House Hacking: Explore the possibility of renting out part of your home to cover mortgage costs and enhance your savings rate. [Timestamp: 00:36:15]
  • Join the Community: Sign up for the ChooseFI email list to access weekly insights and community-generated ideas. [Timestamp: 00:55:20]

Notable Quotes:

  • "The essence of our show: it's not about us, it’s about sharing vital financial information."
  • "Welcome to our community where actionable insights await to guide your financial journey."
  • "This is not about hitting a number. It's not about a certain net worth. It's about optimizing your life."

Discussion Questions:

  • What does financial independence mean to you? [Timestamp: 00:14:10]
  • How can you apply house hacking in your current living situation? [Timestamp: 00:36:15]
  • The Simple Path to Wealth by JL Collins: Visit here [Timestamp: 00:49:02]

Further Listening:

  • Episode 16: House Hacking with Chad Carson [Timestamp: 00:47:32]
  • Episode 23: The True Cost of Car Ownership [Timestamp: 00:47:54]

Subscribe and Connect:

To receive weekly insights and become a part of the ChooseFI community, visit choosefi.com/start.

Podcast Description: ChooseFI is the ultimate podcast for financial independence enthusiasts. Join Brad and Jonathan as they explore crowd-sourced financial strategies and real-life success stories to help you build wealth and optimize your life.

Listener Engagement: Don’t forget to connect with other listeners by sharing your stories and tips within the community. Your experiences could be featured in future episodes!

Embracing Financial Independence: Your Pathway to a More Optimized Life

The Power of Community in Financial Independence

In today's journey towards financial independence, the importance of community engagement cannot be overstated. It’s fundamental to have a supportive network that shares insights, advice, and experiences. Joining financial communities like ChooseFI not only connects you with like-minded individuals but also enriches your understanding of personal finance.

Back to Basics: Revisit Foundational Concepts

As you embark on your financial journey, it’s essential to revisit foundational concepts. Financial independence isn’t just a destination; it's a continuous journey of improvement and learning. Understanding the basics of savings rates, budgeting, and investment principles can set you on the right path.

What Does Financial Independence Mean?

Financial independence varies for each individual, but often it symbolizes the freedom to choose how you spend your time. For some, this means the ability to retire early, while for others, it might signify the capacity to pursue passions without monetary constraint. Reflect on what financial independence means to you personally, and let this guide your journey.

Take Action with Practical Advice

The essence of achieving financial independence lies in taking actionable steps. Below are practical strategies to enhance your financial situation.

House Hacking: A Smart Strategy for Reduced Expenses

One effective way to increase your savings rate is through house hacking. This involves renting out part of your home to cover mortgage costs. By minimizing your housing expenses, you free up more resources for savings and investments. Here’s how to approach house hacking:

  1. Evaluate Your Current Living Situation: If you own a home, consider whether you can rent out a room or the entire property while you downsize.

  2. Research Rental Markets: Understand local rental prices and demand to ensure that you can find suitable tenants.

  3. Stay Organized and Professional: Treat your rental endeavor like a business; maintain clear communication and professional relationships with your tenants.

Optimizing Your Savings Rate

Your savings rate is critical for reaching financial independence. To increase it, identify and reduce structural expenses in your life:

  • Housing Expenses: Aim to keep your mortgage or rent at 25% or less of your income.
  • Transportation Costs: Consider biking or using public transport instead of financing a new car, which can eat significantly into your budget.
  • Food Expenses: Adopt meal planning strategies that allow you to prepare affordable and healthy meals at home, easily aiming for $2 per person per meal.

Leveraging Budgeting Techniques

Understanding where your money goes each month is vital. Tracking your expenses can reveal patterns and help you identify areas for improvement. Utilize budgeting tools or apps that facilitate this process. Regularly review your budget to adapt to any changes in your financial situation.

Emphasizing Continuous Learning

In the quest for financial independence, never underestimate the power of education. Join groups, attend workshops, and engage with comprehensive resources that teach you about:

  • Investment Strategies: Focus on long-term, low-cost index funds.
  • Money Management: Learn about debt repayment strategies and tools to manage cash flow.
  • Career Hacking: Understand how to negotiate your salary and seek progress in your career.

The Journey is Personal: Find What Works for You

Recognize that financial independence is a personal journey. Everyone's circumstances and challenges differ. Tailor strategies that resonate with your own lifestyle and goals. Whether you are a recent graduate, a parent, or someone seeking a mid-career change, it's crucial to leverage resources available to you.

Reflect on Your Progress

Take time to assess your achievements. Celebrate small victories, whether it's a debt-free milestone or achieving a higher savings rate. Keeping track of your progress not only motivates you but also offers critical insights into what’s working or needs adjustment.

Conclusion: The Ongoing Adventure of Financial Independence

The road to financial independence is filled with opportunities for growth and learning. Embrace community support, revisit foundational principles, and implement actionable strategies to optimize your financial life. Remember, financial independence isn't solely about a specific number; it's about crafting a life that allows you the freedom to pursue what truly matters to you.

By joining the ChooseFI community, accessing vital resources, and engaging actively with others, you’ll empower yourself to make informed decisions and embark on an exciting path toward financial independence. Now is the time to take action, reflect on your habits, and cultivate a life that aligns with your financial goals.

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What You'll Get Out Of Today's Show

  • Going back to the basics of ChooseFI being a crowdsourced show, Brad and Jonathan address what's going on in the FI community with a wild card Friday episode.
  • Why revisit content that's already been discussed? After several years of introducing new ideas, the ChooseFI audience may be in a different place financially and ready for a refresher on some of the more advanced concepts presented earlier in the show's history. And newer listeners may not have combed through the archives and missed out on topics relevant to their situation. This episode back to basics provides an orientation of what ChooseFI hopes to deliver.
  • Goals for the podcast are to introduce a new idea or story during the Monday episode. But not every strategy or tactic works for everyone. Friday's Roundup episode looks at that idea from different perspectives, incorporates audience feedback, and seeks to answer additional questions.
  • The FI Weekly is the email Brad sends out every Tuesday where he provides subscribers with ideas to ponder, inspire, and motivate people on their own journey and shares what actions he is taking to make his life a little bit better. Opt in to receive Brad's email, The FI Weekly, at ChooseFI.com/start.
  • Financial independence means different things to different people. For Jonathan, it means he has options allowing him to choose what he does during the best years of his life. For Brad, it means freedom, giving him the ability to live life on his terms, spending time with his family.
  • Pursuing financial independence doesn't mean living a life of deprivation. It's about choice. No one should tell you how to spend your time, your freedom, or what to spend your money on. You have the freedom to spend money on an expensive car if you choose, as long as you understand the impact of that decision.
  • It's not even about being at financial independence or not. Simply being on the path to FI gives you options. Whether you're in a toxic situation at work or want to pursue a passion project, just working toward FI gives you options those on the standard path cannot afford to take.
  • Sharing stories from the community and discussing the decisions they have made broadens and brings to light the scope of options available to the variety of personal challenges you may have.
  • The pursuit of financial independence is not necessarily about hitting that FI number. It's a life optimization strategy.
  • If you are working in a low-wage job and don't see the path, you can be trained in a new industry and be making $60-80K within six months. Check out the Talent Stacker podcast.
  • Shane recently posted in the ChooseFI Facebook Group, "I'm a recent college graduate, 23 years old. What advice would you give yourself when you were my age regarding investments, retirement/401K, and student loans? I want to invest, but I also have about $30,000 worth of student debt, but I'm only making around $41,000 a year."
  • Brad notes that a lot of people like Shane are looking for tips or special advice that will get them to financial success, but that there's nothing complex about it. It comes down to savings rate and time.
  • Increasing savings rate is easier when you reduce your structural expenses. If your life doesn't cost much, you can increase your savings.
  • When first starting out, Brad and Laura weren't making high salaries, but they set themselves up for success by moving to a city with a lower cost of living, purchased a home with a reasonable mortgage, and have driven the same car since 2003. These choices allowed them to have a 50% savings rate and meant if Laura decided to stop working once they had kids, they would be fine.
  • Brad and Laura became wealthy because they didn't care about looking wealthy.
  • With some quick math, Jonathan calculates for Shane to have a 50% savings rate, his monthly expenses will need to be $1,700 a month. With a mortgage and expensive car payment, that may be difficult. He might do well trying something like house hacking.
  • Shane could purchase 4 bedroom house, rent out rooms to friends and cut his housing expenses down to $300 a month.
  • 40% of most people's expenses go to housing and transportation. Optimizing in just those two high-cost areas can make a huge difference in your savings rate.
  • Anchoring yourself to a food budget of $2 per person per meal per day in another way to reduce a major expense category. Laura sits down once a week to plan out several meals for the week, making enough to have as leftovers on a second night. The meals she cooks average that $2 per person per meal goal which helps them save over $1,000 on eating out and picking up convenience foods at the grocery store.
  • A rough target for housing expenses is 25% of your take home pay.
  • For investing, Brad recommends Shane begin with low-cost index fund investing and JL Collins' book The Simple Path to Wealth.

Resources Mentioned In Today's Conversation

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