Beginning of a New Era
Episode 285
Episode Guide
Episode Summary:
Episode Timestamps
ChooseFI Episode Show Notes
Episode Summary
Reflecting on the journey to financial independence, Brad and Jonathan share personal stories of progress, highlighting the concept that small, incremental changes can lead to significant results over time. They emphasize the importance of investing simply and effectively without falling prey to complexities that often derail individuals. The discussion dives into practical actions listeners can take, such as optimizing retirement contributions and reevaluating subscription services. The podcast also touches on the challenges posed by rising costs of living, student loan debts, and lack of financial literacy. They encourage adopting an intentional approach to spending and investing.
Key Takeaways
- Incremental Changes Matter: Small changes can lead to substantial financial improvements over time.
- Invest Simply: Keeping investment strategies straightforward and using low-cost index funds can outperform complex strategies in the long run.
- Understanding Financial Concepts: Knowledge of compound interest is crucial for effective wealth accumulation.
- Evaluate Subscriptions: Cutting unnecessary subscriptions can free up funds for more valuable uses.
Timestamps and Topics Discussed
- Introduction to podcast and new year reflections.
- The importance of investing simply and how it can lead to better financial outcomes.
- Community stories and success highlighting small, effective changes towards financial independence.
- Discussion on compound interest and its impact on financial decision-making.
- Actionable takeaways for financial improvement, including increasing retirement contributions and evaluating subscriptions.
Actionable Takeaways
- Increase your 401(k) contribution by 1% to start saving more effectively.
- Re-evaluate your current subscriptions and cut those that you don’t use.
- Consider investing in low-cost index funds for long-term growth.
Key Quotes
- "Financial independence is about enriching your life." -
- "Cutting unnecessary subscriptions can save you money!" -
- "Holding cash isn't enough; invest for your future!" -
- "Understanding compound interest can transform your financial strategy." -
- "Embrace uncertainty; it’s a part of investing." -
Speaker Highlights
- Brad Barrett: Emphasized the community aspect of financial independence and managing expenses.
- Jonathan Mendonsa: Shared insights on compound interest and the gradual path to financial independence.
Related Resources
Discussion Questions
- What small changes can you make in your financial habits to create a significant impact?
- How do you define financial independence for yourself?
- What barriers have you faced in your financial journey?
Conclusion
This episode reminds listeners that financial independence is achievable through small, deliberate steps and a commitment to learning about personal finance. By engaging in community discussions and adopting simple investing strategies, individuals can make significant progress towards their financial goals.
Podcast Intro:
Podcast Extro:
Podcast Extro:
Embracing Financial Independence: Small Steps, Big Changes
Financial independence (FI) is a journey that can transform your life by providing greater freedom, security, and peace of mind. While the path to FI may seem daunting, incorporating small, incremental changes can lead to significant results over time.
Understanding Financial Independence
At its core, financial independence is about living a better life. It’s not simply about accumulating wealth; it’s about having the freedom to choose how you spend your time, whether that means pursuing your passions or enjoying leisure activities without financial stress.
The Power of Incremental Changes
Start Small for Significant Impact
One crucial idea is to start small. You don’t need to overhaul your entire financial plan overnight. Begin by evaluating aspects of your budget that can be optimized. This could include increasing your retirement contributions by just 1%. You’ll hardly feel the difference in your day-to-day life, but it can compound dramatically over time due to the powers of compound interest.
- Action Item: Increase your 401k contributions by 1% today.
Simplifying Your Investment Strategy
Investing Simplistically Yields Results
Keeping your investment strategy simple is another fundamental principle for achieving financial independence. Research shows that simpler investment strategies often outperform complex ones over long periods. Focus on low-cost index funds that provide broad market exposure without high fees.
- Actionable Takeaway: Consider investing in low-cost index funds for long-term growth.
Evaluating Your Subscriptions and Expenses
Cut Unnecessary Expenses
Another area to explore is your monthly expenses, particularly subscription services. Many subscriptions are easy to forget once they are set up, and you may be paying for services you rarely use. Cutting unnecessary subscriptions can free up both money and mental space.
- Key Insight: "Cutting unnecessary subscriptions can save you money!"
Embracing Financial Literacy
Understanding Compound Interest
A solid understanding of financial principles, such as compound interest, is essential. By grasping how your investments earn returns and the impact of reinvesting those returns, you can transform your approach to wealth building.
- Concept to Grasp: "You can either know how it works and earn it, or you can not know how it works and it works against you."
Building a Supportive Community
Engage with Like-Minded Individuals
Being part of a community that shares your goals can be invaluable. Engaging with others who are on a similar journey toward financial independence can provide motivation, insights, and accountability. The FI community inspires and supports each other in making progress.
Overcoming Common Challenges
Addressing Financial Barriers
Pursuing financial independence isn’t without its challenges. Rising costs of living, student debt, and a lack of financial education are prominent hurdles. It’s essential to recognize these challenges and adopt an intentional approach to spending and investing to mitigate their effects.
- Key Takeaway: “Embrace uncertainty; it’s a part of investing.”
Real-Life Success Stories
Learn from the Community
Hearing stories from individuals who have successfully navigated their paths to FI can offer hope and inspiration. Many have started with little and made compelling changes over time that resulted in remarkable financial transformations. Such success stories reinforce the message that financial independence is achievable through diligence and perseverance.
Conclusion: Your FI Journey Begins Now
The journey to financial independence involves making intentional choices and recognizing the power of small changes. As you reflect on your financial habits and strategies, take action today to set yourself on a path toward greater freedom and fulfillment.
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Final Action Items:
- Evaluate your subscriptions and identify which ones to cut.
- Increase your retirement contributions, even if only by a small percentage.
- Engage with the FI community for support and inspiration.
With determination and focus, you can take significant strides toward financial independence. Remember, it's about living a better life while making smart financial decisions. Embrace the journey, and you'll find that the cumulative effects of small, consistent actions will lead you to success.
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What You'll Get Out Of Today's Show
2021 kicks off the fifth year of the ChooseFI podcast. Despite being at different points in their own financial journeys, Brad and Jonathan have experienced the benefit of incremental growth with both their finances and self-improvement. While it may seem simple and even mediocre, they are living amazing lives.
You need to control what you can control, starting from wherever you are. If you can optimize at the margins, you can reclaim decades of your life.
It's not just the ChooseFI podcast trying to share this message and concepts. The entire community is working to share this message.
In a Facebook post from Jessica, she shares that her goal at the age of 19 was to save $5,000 so that she could feel stable. She began finally saving at the age of 26. By spending less and earning more, five years later, she hit the net worth milestone of $100,000.
The concepts ChooseFI presents are not new. The show brings information together to tell a story to motivate and encourage people to take action with it.
Don't just do what people tell you to do. Look at what they are doing. JL Collins' blog series, The Stock Series, started out as a way to document what he wanted to teach his daughter about investing. Warren Buffett plans ate leave 90% of his investments in a low-cost index fund.
What is impressive about index fund investing is that there is ample evidence that over the long-term, this simple plan outperforms other strategies.
Index funds, like total stock market index funds, are self-cleansing. Rather than trying to pick the winners or attempting to build your own index where you need to stay abreast of what's happening in the market, your ownership in companies performing poorly automatically decreases as a percentage with an index fund.
To illustrate this point, of the original companies making up the DOW in the early 1900s, none of them remain within it today. With an index fund, you end up buying the up and coming companies that are replacing those losing value without having to do any research.
It's an odd phenomenon that people do not like to buy stock when the market is down. There are drops of 10% just about every year, 30% every few years, and black swan events like 2020 are more common than we like to believe. Despite of the ups and downs, stay the course and keep investing.
US currency is backed by the confidence of the federal government. As much as a large percentage of the world also has confidence in our government, $100 today is not worth the same as it was a hundred years ago.
Not only has inflation eroded the value, but more money has been printed than 100 years ago. Whenever the government prints more money or injects a stimulus, our money is worth a little bit less.
What is the value of cryptocurrencies, like Bitcoin? They are speculative. You buy now and hope later someone else will pay more for it. Brad has sworn off speculative purchases after a horrible real estate investment years ago, but as a life-long learner, he has a remote interest in it.
Warren Buffett has described Bitcoin as "rat poison squared" because, like gold, it doesn't produce anything. Investing in it is speculative.
Moving money back and forth for 5 billion people in the world is both difficult and expensive. People without real access to the world economy can use Bitcoin to meet their needs.
There are thousands of different cryptocurrencies available and most of them may disappear at some point. Their value is volatile and utility limited. It's also subject to manipulation and is currently unregulated, but we'll keep hearing more about digital currencies.
The future is going to change, so Brad is always willing to learn.
Since it's the first episode of the new year, what can you do to make your life just a little bit better? Increase your contributions to your 401K by 1%. Look for investment options with the lowest fees and think about moving them over. Cut an expense you aren't getting value from. Max out your HSA account. Contribute to your 2021 IRAs and other retirement investment accounts. Use Trim to help you lower your recurring bills.
If you are looking for a new career, train for a new SalesForce position earning $65-80,000 a year with the course Jonathan and Bradley Rice created. The five-day SalesForce Challenge with Talent Stacker is free.
Resources Mentioned In Today's Conversation
Start the year with a smart money move and get up to $3,500 when you transfer to M1 Finance
ChooseFI Episode 072 Should I buy Bitcoin with Myles Wakeham
ChooseFI Episode 099 Generous Giving on the Path to FI with Michael Peterson
ChooseFI Episode 117 Making the Case for Part-Time with Bradley Rice
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