Living Your Story
Episode 198
Episode Guide
Episode Summary:
Episode Timestamps
ChooseFI Podcast Episode Show Notes
Episode Title: Mailbag Episode: Financial Independence Strategies
Episode Summary: This episode focuses on addressing listener questions in a mailbag format, encouraging engagement with the ChooseFI community. Hosts Jonathan Mendonsa and Brad Barrett share valuable insights on financial strategies, specifically emphasizing financial independence.
Timestamps & Key Topics:
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Podcast Intro: "You're listening to ChooseFI..."
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Discussing the Economy and Optimism:
- Jonathan and Brad express optimism in light of economic recovery.
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Key Insight: Expect a surge in economic activity post-lockdown.
- Quote: "Expect a surge in economic activity as people are eager to return to their normal lives."
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Listener Question: Mortgage Strategies:
- Discussion on whether to pay off a mortgage early or invest extra funds.
- Jonathan emphasizes investing rather than paying off a low-interest mortgage.
- Key Insight: "Pay off your mortgage before going into drawdown."
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Voicemails and Community Insights:
- Sharing experiences from community members about their financial journeys.
- Discussion on negotiating bills and budgets.
- Quote: "Remember, everything is negotiable in life and finances."
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Closing Thoughts:
- Reflecting on personal growth during challenging times.
- Discussion Question: "What story are you writing?"
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Podcast Extro: "You've been listening to ChooseFI Podcast..."
Key Takeaways:
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Evaluate the best strategy for paying off your mortgage:
- Consider whether paying it off early or investing is better based on current interest rates.
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Explore cost-saving strategies on insurance, especially during periods of limited driving:
- Contact your insurance provider for options to reduce payments.
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Leverage community support in your financial independence journey:
- Engage with local groups and share your experiences for learning and encouragement.
Action Items:
- Email questions for next week's mailbag episode.
- Call your car insurance provider to inquire about saving options.
Resources Mentioned:
- M1 Finance — Investing platform discussed by Jonathan.
- ChooseFI Local Groups — Connect with your local FI community.
Discussion Questions:
- What financial strategies are you considering in response to current economic changes?
- How can we leverage community support in our financial journeys?
Key Quotes:
- "Everything is negotiable."
- "What story are you writing during this time?"
SEO Keywords: financial independence, personal finance tips, mailbag episode, mortgage strategies, investing vs paying off mortgage, community insights, financial education, budgeting tips, savings strategies, ChooseFI podcast
Tags: mailbag, financial independence, mortgage, investing, budgeting, community, optimism, savings, personal finance
Categories: Finance, Investing, Personal Development
Join the Community:
If you're seeking to build wealth and achieve financial independence, consider becoming part of the ChooseFI community. Listen regularly for tips, insights, and support on your journey.
Unlocking Financial Independence: Insights from the ChooseFI Community
Achieving financial independence is a goal many aspire to, yet the path can often feel overwhelming. The latest episode of ChooseFI, hosted by Jonathan Mendonsa and Brad Barrett, dives into listener questions and offers actionable insights. This article condenses those teachings for your convenience, providing a structured approach to bolster your journey towards financial independence.
Understanding Your Financial Landscape
Assessing Mortgages and Investment Strategies
One crucial decision many face is whether to pay off their mortgage early or invest extra funds instead. The general advice is rooted in evaluating your interest rates and overall financial health. If you have a low mortgage interest rate, as Jonathan Mendonsa mentioned, it may be more beneficial to invest that extra cash. Pay off your mortgage before you start relying solely on investment income, ensuring a more stable financial situation when you do retire.
Actionable Tip:
Evaluate your current mortgage situation. If your mortgage interest rate is manageable, consider investing additional funds in stocks or index funds instead of paying off your mortgage early.
Take Advantage of Refinancing Opportunities
Given the current economic climate, mortgage refinancing can yield substantial savings. Interest rates might be at historic lows, so if you haven't refinanced since purchasing your home, now could be the time to reassess your options. Refinancing can significantly reduce monthly payments and overall interest paid throughout the life of the loan.
Actionable Tip:
If you purchased your home recently, gather quotes from multiple lenders to explore refinancing options. Even small reductions in your interest rate can lead to long-term savings.
Harnessing Community Insights
Learn from Others' Experiences
Community members frequently share valuable stories and strategies about their paths to financial independence. As highlighted by several callers, sharing experiences fosters a sense of support and helps individuals overcome obstacles. Engaging with a community, whether through social media, local meetups, or online forums, provides motivation and camaraderie.
Actionable Tip:
Join local ChooseFI groups or online communities. This connection can provide unique perspectives and support as you navigate your financial journey.
Smart Savings Strategies
Cutting Unnecessary Expenses
In light of the current situation, many have found that their spending habits have significantly changed. For instance, one listener shared how they reduced their food budget dramatically. Cooking at home while using cost-effective grocery shopping strategies helps maximize financial efficiency. Crunching numbers, they optimized their meal costs to just $1.50 per person, which illustrates that diligent budgeting can lead to extraordinary savings.
Actionable Tip:
Review your monthly expenses and identify areas where you can cut costs. Consider cooking at home more often and shopping strategically for groceries to improve your savings.
Exploring Car Insurance Options
Car insurance is another area where you may uncover savings. With less driving, some insurance providers are offering reduced premiums. Additionally, you may have the option to "put your car insurance on hold" if it's not being used frequently. This offers a great way to save money while still maintaining appropriate coverage as a driver.
Actionable Tip:
Contact your car insurance provider to inquire about potential discounts or options to suspend coverage on vehicles that are not being used.
The Power of Reflection and Planning
What Legacy Are You Creating?
During challenging times, it's essential to consider what legacy you want to leave behind. Engaging in reflection can help solidify your financial goals and clarify what matters most in your life. Questions like "What story are you writing?" encourage individuals to think critically about their choices and the impact they have on their future selves.
Actionable Tip:
Take some time to reflect on your financial goals. Write down what you want to achieve in the next five years, and how your daily choices can align with those goals.
Conclusion: Take Action Today
Attaining financial independence may seem daunting, but taking proactive steps can make a significant difference. With the right strategies in place—whether refining your approach to your mortgage, engaging with your community, or optimizing your savings—you can gradually pave your way to a more secure financial future.
Action Items to Start Your Journey
- Assess your mortgage situation: Decide whether to pay it off early or invest.
- Explore refinancing options: See if you can save on your monthly payments.
- Join a community: Connect with like-minded individuals through ChooseFI local groups or online platforms.
- Cut unnecessary expenses: Review your spending and grocery shopping habits.
- Reflect on your legacy: Regularly ask yourself what story you are crafting with your financial choices.
By incorporating these insights and maintaining a forward-thinking attitude, you're well on your way to achieving your financial independence goals.
A recap of the episode with BigERN, how to save money on your car during the lockdown, and a dive into the mailbag!
[elementor-template id="143609"]Resources
- Have We Seen The Bottom With Big ERN
- Should I Refinance My Mortgage?
- Rebuilding A Life You Love With Christine
- Chase Sapphire Preferred Card
Table Of Contents
Big ERN Recap
Looking back at the episode with Big ERN Brad and Jonathan were pleasantly surprised at how optimistic Big ERN was in regards to the economy.
No businesses planned for income going to zero. Even in the worst case disaster planning businesses don't envision the complete and total loss of income for extended periods of time. Big ERN is optimistic about the economy providing we can get back to business before things go into a "death spiral". The more businesses that go under because they have exceed their reserves the less likely there will be a quick recovery.
People are itching to get out--there is a pent up demand. When things go back to normal the economy will spring back--unless too many businesses went out of business during the shutdown.
Listen to the full episode with Big Ern here.
Mailbag
Hey guys, thanks for all that you do for the FI community. Quick question: Jonathan on a recent pod you mentioned paying off your mortgage early is a current focus for you. I'm curious as to your strategy for doing so. Are you making additional payments each month? Are you putting that extra money in the market to earn a bigger return, similar to the strategy used by one of your guests, Ariel? I think I've run every possible scenario on how to put my extra funds to work and I'm still confused on the best option. Any insight on your chosen path would be helpful. Thanks. -- Jeremy
Answer:
Jonthan is actually not paying his mortgage early. He's investing that money instead. It is part of his investor policy statement that he will pay off his mortgage before he begins drawdown.
He also recently refinanced at 3.25% 30 year fixed mortgage to lower his payment. The monthly amount he saved is being invested with M1 Finance. He's actually thinking about setting up a special pie just for the money he's sending in lieu of paying off his mortgage.
He's looking at his taxable investments this way:
- Short term "might need it at any time" money would be invested in a very conservative pie with M1 Finance.
- Extra money he would have gone to the mortgage--the he would need in about 15 years--would be invested in a moderately conservative pie.
- Long term investments would be invested aggressively.
Brad sees this as the best of both worlds. You are getting the psychological benefit of knowing you can pay off the mortgage at any time but still making the most of market returns--making the fairly safe bet that the market will return more than 3.25%
Listen: Should I Refinance My Mortgage?
If you have a question you'd like answered on the air shoot an email over to [email protected].
Saving Money On Your Car
Christine from episode 137 posted in the Facebook group that she was able to put one of her cars on hold with her car insurance since they don't need two cars right now. You can check out the full thread here.
You can actually put your car insurance for your car on hold if you are not going to be driving it. When your car is on hold you can not drive it. You are still insured as a driver so you can rent a car, or you can borrow a friend's car--but you can not drive the car that has been placed on hold.
You also must be able to commit to not driving the car for at least 30 days. It's also not feasible if you have a loan on your car or if the car is leased.
A lot of insurance companies are automatically giving discounts during this time since their claims are down while everyone stays home. If you're not sure if your insurance company is making allowances for this time give them a call and ask. It might also be a good time to shop around for new car insurance.
This might also be a good time to get a deal on a new car if you are in the market. Reshawn from episode 167 had great tips for buying a new car, check that out here.
Quarantine Story From China
Ally called in with an interesting story of what her life has been like in living in quarantine in China. She said the first few weeks were kinda fun, that it felt like a vacation. But after three or four weeks the vacation feeling wore off and it became quite stressful.
They've struggled to balance working from home and parenting but one good thing has been the unexpected savings. Not leaving the house means spending a lot less money. They were able to save an extra $750 in March and have also pared down their cost per meal to $1.50 per meal per person and would love it get it down to $1.25 per person per meal.
They have also cut their electric bill by 75% by buying some cheap fans and refusing to turn on the AC. They have also been air drying their clothes instead of using the dryer.
They have found the local ChooseFI community, which has helped them stay sane during this time.
Remember that you are writing a story during this time. What will your story be?
Wins!
Jared called in with his recent wins. He's 24 and is graduating from the Air Force in a few weeks. They are going to send him to get a masters degree in Latin American Studies at UC San Diego. This will mean he will have gotten a free undergrad and free graduate degree from the military.
His goal is to be FI at age 32.
He has cut back on impulse purchases by putting them on a 72 wait list. He has also been using his USAA credit card to build his credit, but got approved for the Chase Sapphire Preferred Card recently!