featured image for podcast episodeHouseholds of FI-Troy & Lindsay and Brad Calculate Their FI Number

Households of FI-Troy & Lindsay and Brad Calculate Their FI Number
Episode 241

Choose
Posted by Choose FI

Episode Guide

Episode Summary:

Troy and Lindsey share their journey into financial independence (FI), detailing how they were initially overwhelmed by debt with student loans and credit card bills. Their introduction to FI came from Lindsey\u2019s mother recommending the ChooseFI podcast, which sparked a journey of learning and discovery. They emphasize the importance of budgeting, tracking expenses, and the surprising realization of where their money was going, particularly in food and unnecessary subscriptions. Their discussions highlight the challenge of maintaining quality of life while cutting expenses and planning for a future without financial burdens. They have successfully paid off a significant amount of debt and are focused on optimizing their remaining expenses to align with their FI goals. The conversational tone and personal anecdotes underline the emotional rollercoaster that comes with pursuing financial independence, particularly the significance of open communication between partners in planning their financial futures.

Episode Timestamps

ChooseFI Episode Show Notes

Episode Summary

In this episode, Troy and Lindsey share their transformative journey toward financial independence (FI). They detail how they eliminated $88,000 in debt within three years through effective budgeting techniques and the importance of tracking expenses. The couple discusses their emotional growth as they learn to prioritize experiences over material goods while navigating the intricacies of planning for FI, making this a rich discussion for anyone on a similar path.

Key Topics Discussed

  • Journey to Financial Independence

    • The early financial struggles of Troy and Lindsey, leading to their commitment to eliminating debt.

  • Budgeting Techniques

    • Introduction of budgeting tools, such as Mint, to enhance their tracking of monthly expenses and savings.

  • Spending Awareness

    • Insights into how subscriptions and food expenses significantly impacted their budget and the changes they made to manage costs.

  • Understanding True Expenses

    • Discussion on the importance of discerning true expenses to make informed financial decisions, particularly regarding mortgage and retirement planning.

  • Financial Planning Outlook

    • Exploration of their future financial goals, including their mortgage situation and long-term retirement strategies.

Actionable Takeaways

  • Implement a budget to track spending and identify areas for savings.
  • Prioritize value-based spending to maximize enjoyment from your finances.
  • Consider refinancing your mortgage to save on interest payments, as demonstrated by Troy and Lindsey's experience.

Timestamps

  • Podcast Intro
  • Debt Payoff Journey
  • Implementing a Budget
  • Finding Value in Life Choices
  • Understanding True Expenses
  • Financial Planning Outlook
  • Podcast Extro

Key Quotes

  • "What a powerful question that is. I think a lot of people don't have any sense of where their money's going."
  • "Subscriptions can quietly drain our finances; awareness is key."
  • "Focus on understanding true expenses to make informed financial decisions."
  • "Finding value in small savings can greatly impact our budget."
  • "Adapting to life changes is essential in pursuing FI."

Discussion Questions

  • What budgeting methods can help individuals prioritize cleaning up their finances?
  • How can tracking expenses lead to better financial decisions?
  • In what ways can one balance enjoying life while pursuing financial independence?

FAQs

  • How did Troy and Lindsey begin their journey toward financial independence?

    • They started by eliminating debt and creating a budget to understand their expenses, saving approximately $88,000 in three years.

  • What budgeting tool do they recommend?

    • They used Mint as a budgeting tool to track their expenses more effectively.

  • What is their current financial goal regarding their mortgage?

    • They are exploring options for paying off their mortgage and understanding its impact on their overall FI calculations.

Conclusion

Troy and Lindsey's journey serves as an inspiring example of how commitment to understanding personal finance can lead to significant debt elimination and the pursuit of financial independence. Join the conversation and gain valuable insights into adapting financial strategies to fit your life.

Achieving Financial Independence: The Journey of Troy and Lindsey

Embarking on the path to financial independence (FI) can seem overwhelming, but as Troy and Lindsey demonstrate, it is entirely achievable with the right strategies and mindset. Their journey showcases effective budgeting techniques, debt elimination, and the prioritization of experiences over material goods. This article outlines actionable insights and recommendations derived from their experience, guiding you towards your own financial independence.

Understanding Your Financial Landscape

To set yourself up for success, the first step is understanding where your money goes. Many individuals are unaware of their spending patterns, particularly in areas like food and entertainment. Troy and Lindsey realized that tracking their expenses was pivotal. They utilized budgeting tools such as Mint to gain clarity.

Action Steps:

  • Start Tracking: Deploy budgeting tools or apps to monitor your spending. Aim for comprehensive insights into where your money is allocated.
  • Awareness of Subscriptions: Review recurring subscriptions regularly, as these can accumulate silently yet significantly affect your finances.

Implementing Effective Budgeting Techniques

Creating a budget is essential for tracking your spending and identifying areas for savings. Troy and Lindsey began by categorizing their fixed and discretionary expenses, which helped them see where they could cut back without sacrificing their quality of life.

Key Tips:

  • Break Down Your Expenses: Start with fixed expenses such as mortgage or rent, and then categorize variable expenses like food and entertainment.
  • Flexible Budget: Stay adaptable; adjust your budget as needed to reflect changing priorities or unexpected expenses.

Strategies for Debt Elimination

Troy and Lindsey tackled an impressive amount of debt—$88,000 in just three years. They adopted the debt snowball method, thoughtfully paying down smaller debts first to maintain motivation.

Recommendations:

  • Choose a Method: Decide between strategies like the debt snowball or debt avalanche, both of which cater to different psychological aspects of debt repayment.
  • Set Clear Milestones: Establish small, achievable goals to maintain momentum in your debt repayment journey.

Prioritizing Value-Based Spending

Understanding the true value of your expenditures can lead to better financial decisions. Troy's insight into finding joy in simple pleasures—like a $3 drink instead of a $7 drink—exemplifies this principle. The couple prioritized meaningful experiences over unnecessary spending.

Implement This Concept:

  • Spend on What Matters: Determine what brings you genuine joy and fulfillment in life and focus your spending there. For everything else, consider if the expenditure truly adds value.
  • Meal Planning: Efficient meal planning can drastically reduce grocery bills and encourages healthier eating habits.

Financial Planning for the Future

Troy and Lindsey's financial planning included not just reducing expenses but also exploring their mortgage situation and potential retirement contributions. Their insights serve as a guide for future considerations as you navigate your path to FI.

Suggestions:

  • Mortgage Refinancing: If you’re paying a high interest rate, consider refinancing to reduce monthly payments significantly. This can free up funds for investments or savings.
  • Retirement Savings: Maximize contributions to retirement accounts like 401(k)s or IRAs to enhance long-term financial security.

Adapting to Life Changes

As you pursue your financial goals, recognize that life is fluid. The priorities of today may differ tomorrow. Troy and Lindsey emphasized the importance of adapting their strategies to align with evolving desires and circumstances.

To Maintain Flexibility:

  • Regular Check-ins: Schedule periodic discussions about your financial goals, values, and lifestyle choices. Adjust your approach as necessary.
  • Embrace Change: Don’t fear altering your course if it aligns better with your current life stage or ambitions.

Conclusion: Your Next Steps Towards Financial Independence

Troy and Lindsey's journey to financial independence illustrates the power of budgeting, debt management, and value-based spending. By implementing the strategies discussed above, you can carve your own path to financial freedom.

Action Items:

  • Create a detailed budget to track your spending and identify savings opportunities.
  • Explore debt repayment methods and start tackling your debts systematically.
  • Prioritize value in your spending habits and consider the impact of your financial choices on your lifestyle.
  • Stay adaptable and open to change as you progress on your journey to financial independence.

Your journey to financial independence starts today. Focus on the steps you can take right now to transform your financial landscape and secure your future.

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Households of FI-Troy and Lindsay

What You'll Get Out Of Today's Show

  • Troy and Lindsay are new on their journey, finding FI several months ago after making a budget and realizing they had no money left over at the end of the month. Compared to other systematic approaches to becoming debt-free, they felt FI was creative and adaptable to a variety of lifestyles.
  • The first step Troy and Lindsay took was to determine where all their money was going using a budget tracker, which enabled them to cut monthly expenses and continue to do the things they enjoyed doing, like going to happy hours.
  • Except for their mortgage, they have paid off all of their debt, contribute to a 401k, and have an $80,000 net worth, including a $15,000 emergency fund.
  • Though they both enjoy their jobs now, Lindsay is a teacher, so Brad suggests considering her pension's "worth vs worth it" as Grumpus Maximus has discussed on the podcast and in his book, The Golden Albatross.
  • Use the 4% rule of thumb to determine what your net worth should be to reach FI. Using the 4% rule, you can withdraw 4% of the balance each year to live off of and reasonably expect it to last for the rest of your life. To calculate your FI number, multiply your annual expenses by 25. For every $100 cut from your monthly expenses, is $30,000 less you need to save to reach FI.
  • Troy and Lindsay recently refinanced their mortgage from 4.75% to 3.25% and are investing the $500 a monthly savings into 401ks and Roth IRAs.
  • When wondering about paying off their mortgage, Brad acknowledges that there is a real psychological satisfaction the goes along with it, but he looks at it in this way. The interest portion the payment is the true expense, while the principal payment is a reallocation of net worth going from your checking account into home equity.
  • Brad suggests taking the time to document a year's worth of expenses and look at different scenarios for what life may be like in retirement to come up with a range of possible annual expenses.
  • When calculating their FI number, Troy realized the number was double if he included a mortgage payment. Brad suggests looking at the mortgage amortization schedule for prepayment options.
  • Food expenses have been cut with a goal of $500 a month. Lindsay checks to see what's in the pantry before shopping and meal preps one day a week to avoid eating out, but she isn't penny-pinching when it comes to quality.
  • Removing mortgage and childcare from their expenses, Troy and Lindsay's monthly expenses are about $3,500 per month, which puts their FI number at just around 1 million dollars.
  • They are currently saving roughly $50,000 per year to add to the $80,000 net worth but are wondering where they go from here.
  • Brad acknowledges there can be a lot of initial excitement upon finding FI and making changes, but then there can be a lull. He challenges Troy and Lindsay to figure out what they want their lives to look like rather than compare their FI journey to anyone else's.
  • It's important to understand that life is fluid and wants may change over time. Test small before making big decisions or changes. Flexibility and communication with your partner are critically important pieces of the process.
  • The next steps Troy and Lindsay will be taking are to build a spreadsheet with different retirement expenses scenarios and talk about what they really want their lives to look like.
  • Anyone interested in FI should understand that you don't need to be perfect, but you do need to get started.

Resources Mentioned In Today's Conversation

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