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What's Stopping You from Reaching FI?
Episode 299

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Episode Guide

This episode features an interactive format where the hosts, Jonathan Mendonsa and Brad Barrett, delve into the audience's barriers to achieving financial independence. They initiate a conversation around common hurdles, emphasizing the importance of community engagement and personalized financial conversation. The hosts highlight strategies for investing savings, the significance of understanding income needs and risk tolerance, and the advantages of utilizing tax-advantaged accounts. They also discuss income negotiation techniques and the impact of financial literacy on personal finance decisions. Both hosts share personal anecdotes to illustrate that financial independence is attainable for everyone, regardless of their current financial status. By empowering listeners to interact and ask questions live, the episode fosters a community-centric approach to financial education.

Episode Timestamps

ChooseFI Podcast Episode Show Notes

Episode Title: Interactive Crowd-Sourced Personal Finance
Hosts: Brad Barrett & Jonathan Mendonsa
Release Date: [Insert Release Date]

Episode Summary

In this interactive episode, the hosts, Brad Barrett and Jonathan Mendonsa, delve into the concept of crowd-sourced personal finance. They engage with listeners, tackling misconceptions about financial independence and discussing steps to achieve it on one's terms. The episode covers investing strategies, risk tolerance, and practical ideas to streamline the financial journey.

Key Takeaways

  • Financial Independence Defined:
    Achieving financial independence means working becomes optional, allowing individuals to focus on their own goals rather than being driven by financial fear.

  • Understanding Time as a Resource:
    Time is your most valuable non-renewable resource; prioritize your life around this reality.

  • Investment Strategies:
    It's crucial to tailor investment strategies based on personal timelines and risk tolerance.

  • The Importance of Staying the Course:
    Staying the course is essential for investment success, even during market fluctuations.

  • Money-Saving Changes Can Lead to Abundance:
    Making small changes in spending often enhances life instead of depriving it.

Timestamps & Chapters

  • Podcast Intro:
    Introduction of the interactive format and the goals of the episode.

  • What is Financial Independence?

  • Listener Questions and Discussions

  • Investment Strategies Overview

  • Podcast Extro:
    Closing thoughts and encouragement to engage with the community.

Actionable Takeaways

  • Determine Risk Tolerance:
    Before investing, assess your risk tolerance to find suitable growth strategies.

  • Start Saving Aggressively:
    Increasing savings contributes significantly to building financial flexibility for the future.

Discussion Questions

  • What is stopping you from pursuing financial independence?
    [Available for listener engagement at the end of the episode.]

  • Early Retirement Now - Safe Withdrawal Rate Series: Link (Timestamp: 00:08:30)

  • Previous Episodes Mentioned:

Final Thoughts

In this engaging episode, Brad and Jonathan emphasize the importance of community in the journey to financial independence. They invite listeners to participate actively and share their challenges, continuing the conversation that can lead to actionable financial strategies.

For more insights, visit chooseFI.com and participate in future live events.

Achieving Financial Independence: Your Path to Freedom

Financial independence (FI) is not just a goal; it's a lifestyle choice that allows you to take control of your finances and live life on your terms. In this article, we will explore practical strategies to help you achieve FI, emphasizing actionable steps that you can implement right away.

Understanding Financial Independence

Achieving financial independence means working becomes optional. It's about reaching a state where your savings and investments generate enough income to cover your living expenses, freeing you to pursue passions, hobbies, or even different career opportunities without the pressure of a paycheck.

The Importance of Time as a Resource

When embarking on your journey to financial independence, it's essential to recognize that time is your most valuable non-renewable resource. To maximize this asset, focus on making the most out of every financial decision and optimizing your spending habits.

Steps to Achieve Financial Independence

1. Set Clear Financial Goals

Define what financial independence means to you. Consider what lifestyle you envision and outline the financial metrics that will guide you there. For many, this includes specific savings targets, desired investment portfolios, and timelines for retirement or job transitions.

2. Assess Your Current Financial Situation

Before moving forward, evaluate your current financial standing. Create a budget that outlines your income, expenses, and debts. This assessment will highlight areas where you can cut back on expenses and save more effectively.

3. Create and Stick to a Comprehensive Budget

Budgeting is a foundational step in achieving financial independence. Save aggressively by tracking your expenses and reducing discretionary spending. Utilize budgeting tools and apps to make this process more manageable and less daunting.

4. Increase Your Income

While cutting expenses is crucial, increasing your income can significantly speed up your journey to FI. Consider these strategies:

  • Negotiate your salary or ask for raises based on your performance.
  • Upskill through certificate programs or online courses that open doors to higher-paying roles.
  • Explore side gigs or freelance opportunities that leverage your skills.

By identifying and pursuing additional revenue streams, you can enhance your savings ability.

5. Invest Wisely

Investing is essential for growing your wealth over time, and it’s key to reaching financial independence. Here’s how to approach investing:

  • Understand your risk tolerance: Grasp how much risk you’re willing to take, which will guide your investment choices.
  • Choose low-cost, diversified index funds: Broad-market index funds, like total stock market funds, can offer significant growth while minimizing investment fees.
  • Stay the course: Market fluctuations can cause uncertainty. Avoid panic selling during market dips, and focus on long-term gains instead.

6. Build an Emergency Fund

Creating a cash cushion can ease financial stress and avoid panic during unforeseen circumstances. Aim for three to six months' worth of living expenses to ensure you remain financially secure even when life throws curveballs.

7. Consider Your Investment Timeline

Your investment strategy should consider your timeline and liquidity needs. The sooner you expect to need access to your funds, the more conservatively you may want to invest. Regularly revisit your timeline and adjust your investment strategy accordingly.

Overcoming Psychological Barriers

Recognize Limiting Beliefs

It's easy to fall into the trap of limiting beliefs about what you can achieve financially. Identify what's stopping you from pursuing financial independence. Common barriers may include fear of the unknown, misconceptions about financial planning, or even societal pressures.

Through education and community support, you can foster a mindset that embraces financial opportunities and challenges.

Embrace the Journey

Financial independence is not just an end goal; it’s a journey filled with learning and personal growth. Understand that saving and investing will lead to an abundant life, even if the process seems slow initially.

Making It Interactive

Engaging with a community focused on financial independence can provide you with ongoing motivation and insights. Participate in live events or online forums where questions about financial independence and investing strategies are discussed.

1. Join Live Discussions

Make your financial learning interactive by participating in live discussions, like those offered through ChooseFI. Engage with hosts and community members, and share your challenges and successes.

2. Share Your Journey

Discussing your experiences with others can create a sense of accountability. Consider keeping a journal or blog to document your financial journey, which can also inspire others.

Staying Informed and Continuing Education

Financial literacy is a lifelong pursuit. Stay informed by following financial podcasts, blogs, and books to expand your knowledge and adapt to changing market dynamics.

  • Early Retirement Now - Safe Withdrawal Rate Series: A valuable resource for strategies to safely withdraw funds during retirement.
  • ChooseFI Episodes with Experts: Featuring guests who share actionable strategies and personal stories on reaching financial independence.

Conclusion: Start Today!

The journey to financial independence is not a race; it’s a personal journey unique to each individual. Start taking action today, even with small changes. Every small action adds up to significant shifts in your financial future! Explore your options, set your goals, and engage with the community around you. The fire is spreading—join in and reclaim your financial freedom.

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What You'll Get Out Of Today's Show

  • It's ChooseFI's first live radio show! Recorded live on Tuesdays at 7:30 pm Eastern using an app called Stereo, the live shows will be replayed as the Friday Roundup episode.
  • The topic of this interactive live show is: "What is stopping you from reaching financial independence?".
  • Lorraine has a question about allocation and investing in one of Vanguard's funds like VTI or VTSAX but the answer is situation-dependent.
  • It's important o know the investing timeline Lorraine is looking at, but hopefully, it's investing for the long-term. Investing for the long-term provides for the highest likelihood of success. However, it's money needed for something critical like an emergency fund, maybe consider keeping what you need in a savings account and investing the rest.
  • Other factors to consider are risk tolerance, net worth, job security, and whether you have an emergency fund. How sacred you were in March is a good indicator of your risk tolerance. The right allocation will allow you to sleep at night, be confident in your plan, and stay the course.
  • The best thing to do is take action and get invested without getting hung up on the details. Keeping your expenses low with low-cost broad-based index funds, like total stock market or S&P 500 index funds, make a significant difference over your investing lifetime.
  • Getting to the point where you can make work optional can often seem like luck. However, the FI community believes we have the power to impact change in our lives and in our communities. Taking small actions to optimize and seeing that you can still live a life without a feeling of deprivation becomes a motivating positive feedback loop.
  • No matter how much you earn, the message of FI can be valuable. If you are living paycheck-to-paycheck, it doesn't matter how much you earn. You need some amount of gap between what you earn and what you spend.
  • Growing the gap by cutting expenses is usually the most effective place to start, but you can widen the gap by earning more as well. It doesn't mean going back to school or taking on a second job delivering pizzas. One way to increase your income is by negotiating your salary.
  • If you research the highest paying professions, the search leads to a list of six-figure careers, however, the return on investment in these career paths is not what it seems. They may require a significant number of years in school and the student loan debt that goes along with it.
  • Today it's possible to skip a degree program in favor of a certificate program and land a high-paying job in less time and at less expense.
  • Matthew has been listening to the show for about six months. One question he's had is how people are retiring early when you cannot withdraw from retirement accounts without a penalty until you reach the age of 59.5.
  • There are strategies for investing in retirement accounts where it goes in tax-free, grows tax-free, and is withdrawn tax-free ahead of the traditional retirement age.
  • Investing in something like a traditional 401K account lowers your taxable income and gives you a current tax deduction. Once you reach FI and decide to not work anymore and are living off savings, you are earning $0. You can at that time pull take money from your 401k and convert it into a Roth IRA, an after-tax account, in a process known as a Roth IRA Conversion Ladder.
  • The conversion is a taxable event, however, your earned income is $0 so the only amount subject to tax is what you convert. Even then, the total amount won't be taxed. You can still take the standard deduction and only be taxed on the remainder at the lowest possible marginal tax rate. The account will then grow tax-free.
  • Another method to access 401K retirement funds a few years earlier is with Rule of 55.
  • One listener wants to know what other podcasters or influencers Brad and Jonathan follow. Brad's long-time favorite is The Tim Ferris Show, Dr. Peter Attia's The Drive, and Naval. Jonathan's podcast listening tends to be focused on what will help build his talent stack. On YouTube, he likes Real Coffee with Scott Adams.
  • The book by Scott Adams, How to Fail at Almost Everything and Still Win Big, had helped Jonathan change his mindset. He went from fearing failure, to understanding there is a process and failure is completely fine.
  • Brad thinks the best podcast that exists is Armchair Expert with Dax Shepard.
  • Listener Josh left a voicemail saying the episode featuring the Millionaire Educator and the mentality of keeping money on your side of the ledger was one of the most impactful shows for him. The Millionaire Educator learned the rules and used them to his advantage to reduce his tax rate to zero.
  • When the question of dream podcast guests came up, Jonathan says he's going to reach out to Scott Adams, while Brad's dream guest would be Mark Cuban for his open-minded and entrepreneurial spirit. Send in your ideas for who you'd like to hear on the show.
  • The next voicemail asked when is the best to move from 100% equities to bonds if you are about halfway to FI. Jonathan projects he'll be at FI within 10 years and currently doesn't have anything in bonds. He thinks he would make the move to become more conservative once he has a clear exit date in mind, such as within five years. The conventional split is 60% stocks and 40% bonds, but it should match your risk tolerance.
  • Brad mentioned that Big Ern discussed how paying off your mortgage is an alternative to holding bonds in your portfolio. Although Brad has reached FI, he doesn't have any bonds either. He thinks a young adult with a long time horizon, equities have the highest likelihood for maximizing net worth.
  • If you can reduce your structural expenses at the point of retirement, it could act as a substitute for having bonds. Passive income is another alternative.
  • Jonathan is currently allowing his equities to continue to grow, but before he retires, he will pay off his mortgage and get rid of that structural expense.

Resources Mentioned In Today's Conversation

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