046R - Selectively Hardcore

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0 - 10 Jonathan Mendonsa Hey guys congratulations you have made it to the weekend and this is your Friday round up we're going to be discussing this past week's episode with our next life and to help me with this I have my co-host Brad here with me today. How you doing buddy.
10 - 12 Brad Barrett I'm doing well Jonathan. Yeah what's going on with you.
12 - 38 Jonathan Mendonsa I am doing pretty well as you know. We're kind of batch processing this a little bit ahead of time. of Even when we would normally do it because we're actually on our way as a recording this we're going to be leaving and getting on off to fincon So it's a very exciting week. But it's also a very busy week. And it will be really cool to be able to share with our audience once this is all in the past exactly what happened because there's potentially a lot of cool things that could happen over this trip. So more details to follow but very exciting week generally speaking.
38 - 59 Brad Barrett Yeah I can't wait. Fin Con is definitely been a highlight of my year the last four years. And this should be as good if not better than any of them now. Jonathan you and I know all these people that we've interviewed on the podcast Plus Scott Ricans and his crew will be there and we have a lot of fun things planned as far as the documentary goes so yeah I mean it should just be a really really good time.
59 - 92 Jonathan Mendonsa It is interesting how when you start off on a podcast when you first talk to someone I mean you are strangers right. You don't you don't know each other but by the time you've shared a microphone for two hours you're best friends. And it's it is really cool to then get to see these people that you've had this communication with back and forth get a chance just to meet them in real life so I can tell you this is this is my first fincon And I remember when I met Brad last year him talking about Fincon generally as the highlight of his year and to be honest as an outsider looking in. I didn't really get it. And now I can say I do get it and I'm thrilled to get a chance to participate.
92 - 140 Brad Barrett Yeah it should be fun. And also to go back to what you're saying about this being a busy time like we have been absolutely going like crazy to get all these episodes recorded because you're actually going on your big trip to South Africa soon. So which is awesome. I know we talked about that on a prior episode about how you are able to get the tickets for the three of you just using chase ultimate rewards points so that trip is finally here but as the audience can imagine we've had to record our Monday and Friday episodes in advance so yeah we've been working like crazy I think. Jonathan you told me a couple of days ago you had 66 hours of editing and other miscellaneous stuff to do I know my head almost exploded. I mean it's we're really working hard to get this all done but it's been fun we've had a lot of recent interviews with new guests and it's been a it's been a busy but a good time.
140 - 147 Jonathan Mendonsa Absolutely right. You know it's so cool and those travel rewards Brad do you know that our travel rewards episode has been listened to over 40000 times.
147 - 149 Brad Barrett Wow that's a big number jeeze.
149 - 177 Jonathan Mendonsa I mean it's amazing and potentially in many cases these are people that have never heard of travel rewards and are soaking that information up and is really cool and this is the practical application of what that looks like from the age of birth to I don't know 25 years old. My idea of travel was going to Florida for a week or two weeks and we're going to Cape Town South Africa. I mean this is this would have been a bucket list item that's now a revisit item because it's something that I can do on a somewhat regular basis and it doesn't have to break the bank.
travel, travelrewards
177 - 202 Brad Barrett Yeah that's amazing. That's the beauty of travel rewards. It's really just this mechanical process to accumulate points and then you can travel wherever your imagination takes you. And that's that's a really really neat thing. And in your case your wife Danny gets to visit her family on a much more regular basis and that is truly wonderful especially with your young son. I mean I'm getting to see him more often. It's it's just a wonderful thing for the entire extended family.
families, travel, travelrewards
202 - 261 Jonathan Mendonsa It's been a big deal has been a big deal for me a big deal for my wife our son and for our relatives. I know they are thrilled to know that family travel is going to be built into our year and that it's it's not breaking the bank. There's no guilt attached to these trips anymore because this is we've just designed our life in a lifestyle that allows us to do this while hitting our financial goals. It really is a very cool very cool thing. And I think it ties so well because you know this is our next life. And appropriately speaking this past Monday's episode was with our next life and what was so fun about getting a chance to do this with Tanya was that this was her big reveal. I mean this is something that not just our fi community was it was interested in but honestly the mainstream media was interested in this her reveal that we talked about on the Monday episode she actually did a post that same day that was released. And that article was linked to by Market Watch CNN Money magazine. So this is a story that even the mainstream media knew was a big deal and it was really cool that she shared it with us.
261 - 309 Brad Barrett Yeah. So this actually marks two weeks in a row that we kind of got to break big news first with J.D. Roth buying back Get Rich Slowly and then Tanya coming out from behind that veil of anonymity here on our next life which has just really become one of the biggest sites in the whole financial independence space. And and for good reason she's a marvelous writer. As you heard on the podcast she's brilliant she's eloquent. It's no surprise that her site has become extraordinarily popular. And yeah it's neat to see how it's going to pivot from here. Right because part of the whole thing a gimmick if you will has been this anonymity and now it's gone. So I'm I'm curious to see how her writing will shift how her her life may shift as more people in her real life know about this so it's kind of a neat perspective. But it will be different certainly for the site in general.
309 - 335 Jonathan Mendonsa And I talked to Tanya and she was telling me just talking about small world. She was saying I don't know if you remember but a couple of weeks ago we featured a voicemail from a guy named Dave in Tahoe who does real estate photos as a side hustle. Do you remember that voicemail. Yeah of course. He actually lives across the street from them and he doesn't know their plans so he's going to be finding this out on Monday as well. And she says I'm super excited for him to hear the episode. How how crazy is that. What a small world right.
335 - 344 Brad Barrett Wow that almost doesn't seem possible so she actually has FI people living on her block and she has well she has a clue. But Dave has no idea right.
344 - 350 Jonathan Mendonsa Not yet. But I mean as of Friday he should be glued on the couch.
350 - 364 Brad Barrett I almost wish she could wait. You should send her a message and tell her to wait and let Dave hear it on the podcast. Like how cool would that be if he runs across the street and knocks on her door and says What the heck you're Miss so and so like how cool would that be.
364 - 400 Jonathan Mendonsa I'm going to message her right now. Pause. All right. Done. That will happen. So why don't we just take a few minutes Brad and just talk generally speaking about that episode. There's nothing that we can say that's going to be better than what Tanya had to say about that particular topic. I mean she is like you said so eloquent and it was just so much fun to get a chance to hear her backstory and really just get her take on a slew of topics everything from health care specifically to really just the framework that you need to work through when you're contemplating early retirement and I thought she presented a great point to you specifically about why people fail at early retirement.
backstory, healthcare
400 - 485 Brad Barrett Yeah I think this was in reference to when I was saying like how could you be bored in early retirement. And she's saying it's about identity and figuring out that transition and also figuring out what you want out of life. And it'll be interesting to see what her transition is like since Tanya and Mark have been in meshed in their jobs so significantly for 15 plus years. And luckily she's been planning for this transition. But a lot of people really don't sit back and think about what they want out of life. And like she said quote The math is really the easy part and the hard part is figuring out what you want out of your life and what will make you happy and I think these are the crucial things we all need to sit back and really put the time in to it's not just like this. Oh I'll think about it when I retire. Because then you pull that trigger and what do you have. You've been focusing on FI for so long and that's all well and good. But really again the math is the easy part. It's what is my life going to look like on the day I pull that trigger. I used to maybe get some satisfaction out of my job or even relationships or the normal day to day routine and when that's gone what is left. And that's not to say there's nothing. Because obviously you then have the whole world at your fingertips your resources and your time but you need to figure out what makes you happy and what will your life look like going forward and I think that's really important.
485 - 544 Jonathan Mendonsa You know I think we've spent a lot of time not talking about early retirement. I mean if you think about our show how much focus heavily put on FI and how much focus have we actually put on the word retirement. We've gone out of our way to avoid embracing the word retirement. And I think in my mind my problem I have a problem with it I don't really like the word. And so if we're going to use it I want to redefine it and if I put any emphasis on that word retirement in the episode we talked about it's not what are you retiring from it's what are you retiring to. And I reject the fact that if I decide to exit the workforce at 35 or 40 years old I'm not allowed to earn income. I'm not allowed to pursue a passion project. I'm not allowed to start a side hustle or a business because I have labeled myself as retired. And I completely reject that. And I think it's important for us to reclaim that word and redefine it for the generation of people that are willing to pursue this concept of early retirement.
544 - 593 Brad Barrett And just to be clear when you're saying not allowed quote that that's just from these trolls on the Internet that people affectionately or not so affectionately really call the Internet retirement police and these are these people who really do come out in droves with negative comments and things like that when someone like Mr. Money Mustache has the audacity to make some money from his website that gets millions of visitors. I mean as if that calls into question his entire being. It's so preposterous because people are financially independent because they made the right decision. They focused on the right things and what life looks like on the opposite side of financial independence or early retirement if you want to call it that is their business. And the fact that they're making money. OK well that's all well and good. They don't need to make money. And that's the crucial distinction and that's what Jonathan is getting at there.
593 - 631 Jonathan Mendonsa Yes. Retirement for me defines the freedom to fail. It defines the fact that you no longer have to work for money. And in many cases I think that you find that you have the option to make more money because you're able to take risks that you wouldn't have considered in your more conservative 9 to 5, Addicted to W-2 income era of your life. This is a multi-dimensional game. And ultimately once you work through the transitions that Tanya was talking about you now have the option to pursue what gets you excited in the morning and it goes back Brad. Honestly it goes back to our first episode where we talked about doing the work that you love and if and if you love what you do you never have to work again.
631 - 701 Brad Barrett Yeah I completely hear you and the quote that Tanya said that I was so impressed by was we are some of the luckiest people in human history because we get to do the things we're excited about that get us out of bed in the morning like you were alluding to there. That's just such a neat outlook on life that when you really think about it we generally and we specifically in the fi community truly are some of the luckiest people ever in the history of the world. I mean we are reclaiming decades of our lives. We are intentionally living with a focus on happiness and what we want to get out of life. We're focusing on community we're focusing on all the right things and that puts us in the top one millionth of a percent of luckiest people in the history of the world. And you talk about gratitude as a way to frame mentally how you approach life. I know that one quote from Tania has really stuck with me since we recorded with her and I plan to keep that with me forever. We are some of the luckiest people in human history. I want you out there in the audience to really ruminate on that. It's so important. And just being part of this FI community is helping revolutionize so many of our lives. And I think that's something you need to think about as often as possible.
701 - 725 Jonathan Mendonsa I don't know if you picked up on this and they don't share their numbers so we can't pin it down exactly on what their withdrawal rate is but did you get the feeling they almost hit by twice like you know they're saying they're trying to get to this specific number but based on what I heard they were basically at the point where for the next 18 years so for 18 x at least they had their living expenses covered in their taxable account and then they basically had that again in their pretax savings.
725 - 761 Brad Barrett Yeah I definitely took note of how they have as you would say backup plans for their backup plans and I think Tanya's quote was We can fail at early retirement and still have regular retirement which is they don't intend to touch any of their 401Ks or any of that until 59 and a half. And as you said their income from their rental property and plus all their normal taxable savings will get them there. That is as safe of a retirement plan as I've ever seen. And I know Tanya said she is very conservative when it comes to these items and always has backup plans and it sounds like they are as set it can be.
401k, savings, tax
761 - 843 Jonathan Mendonsa It expands the FI universe to talk about that because when we start out when you think initially about FI I think we do think about the 4 percent rule. We talk about having massive savings rate but we also talk about some of these really cool tax optimization strategies like the Roth conversion ladder like capital gains harvesting. But I think it's very interesting to note that while those are amazing and awesome and I love them they're not strictly necessary in order to achieve a ridiculously awesome retirement just using. I mean if you just latch onto the fact that the 4 percent rule of thumb gives you a place to start and then you tack onto that an epic savings rate. Those two are enough to just use the traditional rules as they stand in order to crush this game. I love the fact that we can add additional creativity to this in order to just completely blow the game up but it's not strictly required. And Brad they have these different segments in their life and right now they're calling it basically their dirt bag millionair year so they're retired but they're in this phase where they're going to just live off their taxable accounts so they can spend whatever they want. But they can afford their current lifestyle which is kind of cool it's kind of a game in and of itself but that is plenty to last them until they get to 59 and a half and then once they're at 59 and a half they get access to the secret reservoir of cash and then they get to go into their Bawler year. So it's almost like they've created a game in the world of personal finance and obviously you know how I feel about gamification. This really appealed to me.
gainharvesting, roth, rothladder, savings, tax
843 - 927 Brad Barrett Yeah I love that. I also love hearing people's different stories and different plans like that's what's so fascinating about meeting all these different guests because everyone has a different plan. Everyone has something that lets them go to sleep at night like that is the crucial part. Like it's easy to say oh there's a normal path to FI it's the 4 percent rule of thumb and you just kind of ride off into the sunset. But like that doesn't work for everybody. Some people want their mortgages paid off. Some people have rental income streams. People like Tanya and Mark have their regular 401Ks they don't plan to touch for 20 years almost like that is really really neat. And also Jonathan you talked about like the frother a conversion ladder just in passing there. And I also thought it was fascinating how Tanya mentioned that they don't plan to take any of those advanced fi strategies because it might impact the health care subsidies that they're fully anticipating they're going to get in early retirement. So it's just that extra level of thought behind OK if I do X Y happens it's easy to say oh I have all this free money space and I can do this Roth IRA conversion and pay no tax on it. OK but that might impact on a second level of your health care subsidy. So this is not a further conversation about that but it's just interesting to think about there are always repercussions potentially and you need to really think through all of them.
401k, healthcare, ira, rothladder
927 - 974 Jonathan Mendonsa I don't know if you picked up on this but I love the fact that they were selectively hard core and I think there's such value there to our overarching audience to think about where in life they are selectively hard core So for them it was the heating bill right. They were like the place we were going to take our stand. It's not going to be on the thousand dollar dinners. We've done some crazy stuff in the past but we have decided that consistently for us we're going to be hard core on our heating bill. We're going to keep our house at 50 degrees. And I just thought that was fascinating because to me I can't even imagine doing that although I can't imagine them in their Snuggies and their fingerless gloves typing out these epic 3000 word articles but it just it's interesting that different people have these different things that they latch on to that to them. They're totally cool with it. But to someone else they're like nah nah I can't I can't handle that.
974 - 1026 Brad Barrett And that yet again comes back to being a valueist. like what do you value what comes up in that cost benefit analysis of I want to spend my time and resources on this. Right. So for them they've drawn this line in the sand with the heat and it's a hilarious mental picture seeing them with their hats. And as you said Snuggies and gloves and whatnot especially considering they're financially independent. Probably multiple times over by any classical definition but they've decided they don't want to do that. They can keep their house at a balmy 80 degrees if they want to and it's not going to destroy them financially obviously. But this is something they've decided they don't place value on and they have alternative ways to stay warm. Right. It's like your mother always said like throw a sweater on. Right. OK. They've done that. That's what they decided. Yeah it's just really neat to see how different people live. And like what the place value on.
1026 - 1062 Jonathan Mendonsa And selectively hard core isn't unique to the FI community. It just popped up on my feed that LeBron James is selectively hardcore about his cell phone bill and you'll be proud of him for this Brad. He refuses to use data he only uses Wi-Fi on his cell phones and he won't pay for Pandora a premium he only uses the commercial Pandora version that has ads like this is a guy that will pay $25000 for you know for a yacht for the week. And he is selectively hardcore on his cell phone bill. So I just think that there are these idiosyncrasies in life that they put a smile on my face. And both of those examples did that.
1062 - 1063 Brad Barrett That's awesome.
1063 - 1263 Jonathan Mendonsa Alright guys we'd like to take just a couple minutes and point out I guess the corrections or maybe adenomas to a past episode so an episode 43 we talked about a little bit about the mega backdoor Roth and then in the following episode 43 R we really broke that down in detail and we have two points of feedback one of feedback and one correction that we wanted to go ahead and address today let's go ahead and talk about the feedback first and that is on the mega backdoor Roth. And after we published that episode it came to our attention that practically speaking there's actually two ways to do that mega back to a Roth and I thought this was very interesting because until we published this episode it was more or less just taken at face value that there was just one way and different people talked about the one way that they never put them side by side. And I think it's worth mentioning and highlighting this potential second avenue depending on which one you had already heard of. So this this feedback is from William and I should point out that we had a couple of other people messages about this alternative route as well so. But I think William did a great job piecing it together and I'm just going to read this. Read this e-mail. He said this is my third year of doing the mega Roth and it's the second year of mmaxing it out 2 important addendums about who all can benefit from the strategy first. Not only will inservice distribution's get money into a Roth structure but if your 401k plan supports a Roth 401k option it's become increasingly common for the 401K plan to support a feature known as the Roth 401k conversion. Much like the Roth IRA conversion process the 401k Roth conversion takes some money out of one sub account and deposits the money into a Roth 401k and come tax time. You'll owe taxes on that converted amount and similar to the standard back to a Roth IRA if you do a conversion of the after tax contributions to the Roth 401k the tax liability will be strictly against the growth or earnings from the after tax 401k contributions. You'll end up with Roth 401k funds which will eventually be able to be rolled into a Roth IRA. Secondly the mega Roth can actually be used and be beneficial even if you can't immediately do an in service rollover or an unplanned Roth 401k conversion. Basically the whole conversion to Roth funds can occur even with an out service. For example after employment has been terminated rollover the benefit of this is that you get up to thirty six thousand dollars of additional Roth funds per year eventually even if you work for a company for five years or so the growth from those funds that you'll owe the taxes on will be far out dwarfed by the size of the contributions. So my takeaways here just for those of you that are listening. Many of you may have access to a Roth 401k as well as a 401k and you have the choice between the two. And what I came away with is that for people to have that plan option instead of having after tax contributions in their 401k in many cases the provider of those accounts will often just take any amount that would be considered after tax contributions and just put that into the Roth 401k. And then this process might follow a more predictable path from there. So just for the record what we said on the show talking about the mega backdoor Roth in episode 43 R is accurate but there are nuances that may be specific to your situation and just wanted to let you know that if you have access to a 401k or a Roth 401k you may have a play there as well. That wasn't strictly laid out with the path that we talked about in that previous episode.
401k, megaroth, roth, rothbackdoor, tax
1263 - 1434 Brad Barrett And I think the fundamental takeaway is you should always get in touch with your H.R. department at your specific company and find out what the plan allows and what the rules are. Of course we could talk about this on the podcast ad nauseum and keep coming up with different addendums but it ultimately matters what your 401K plan says. So we've armed you with a bunch of information here of potential different options and go out and figure out what works for you. So it's very exciting to have these different options. And Jonathan One other thing I wanted to touch on and I know Keith from the wealthy does listen to the podcast so I'm curious to hear his take on this but one thing that's always stuck in my mind since we've had him on and we've actually had a bunch of people kind of write in to us about this specifically was we were talking about the backdoor Roth and he used that as I think that was his quote the back door Roth. And he said that he thought that that was going to go away imminently and now I think this was also a scenario where it was we were potentially conflating the Roth IRA conversion with this mega backdoor Roth. And I don't want to put words in Keith's mouth certainly but I agree with him if he's saying the mega backdoor Roth is going to go away like that seems like such an absolute ridiculous gimmick and I can't believe that it exists at all. Now less should exist going forward. So I believe that's what Keith was talking about when he was talking about the back door. But I think in the context of the conversation with Keith we were talking about the Roth IRA conversion and I think the implication was that that was going to go away. And that seems less clear to me just from like a public policy standpoint because the Roth IRA conversion. Now for most people outside the fi community obviously who are trying to do this only when their tax rate is very low or they can do this at a 0 percent tax rate. But for most people if they're making a Roth IRA conversion that is a taxable event. And again it goes on people's tax returns as income and it's tax revenue to the government in the current year. So from like a policy perspective I don't see that like being something that Congress or the IRS is going to try to get rid of immediately. And I know Keith kind of quoted something like it's costing the Treasury billions of dollars. But like that didn't square up so that that's actually why I'm bringing this up now like it didn't square with what the reality of that Roth IRA conversion once which is again a taxable event in the current year which brings tax revenue to the government in the current year. So I can't believe that there are enough people in the FI community who are making these conversions. At like a zero percent tax rate that is costing the Treasury billions of dollars like he mentioned so I believe he was talking about the mega backdoor Roth which again is a total gimmick and probably will and should go away. So I did want to clarify that and that's based on my own understanding of how this works. But just applying some logic to the situation so I did want to clarify them.
401k, ira, megaroth, rothbackdoor, rothladder
1434 - 1496 Jonathan Mendonsa Now the second half of that in this comes more down to the correction is when we did the breakdown in the analysis on whether or not the Roth or the traditional IRA would be a better fit for somebody and the 15 percent marginal tax bracket. And what I loved about that conversation and the reason I'm still happy that we did it was that it showed the dilemma of choice that people face and kind of walk through how we would land on that specific scenario. But it came to our attention that in the case of Zach where he was in the unique situation of having four kids there was another element to his specific situation and that was the fact that because he has these extra dependents he might be eligible for the Earned Income Tax Credit or the EITC. And that does change the calculation a little bit. So Brad could probably just tease out exactly what that looks like for you. I hope he won't go too far in depth with that because we actually have frugal professor coming on within the next month to actually walk us through how to hack the Earned Income Tax Credit. I think that's going to be a very valuable conversation and I want to save that for there. But did you have anything you wanted to add to that now Brad.
ira, roth, tax
1496 - 1556 Brad Barrett Jonathan So yeah this is well outside of my area expertise. But the frugal professor who we're going to have on shortly is really going to go through this in depth but I think the contention is that there are additional factors that we have to consider with the Earned Income Tax Credit that there is potentially a refundable credit. I guess in this case on the order of potentially thousands of dollars. So to exclude that from the calculation is really silly. And it was just something that you and I were going through and just looking at the marginal tax brackets really we're just trying to make an illustration of largely the actual tax brackets like that's how I was approaching the situation and I realize that in hindsight that was foolish. Like if we're going to do an example we really should follow it through and and take everything into consideration. And luckily the frugal Professor reached out to us and mention how hacking the EITC can be a significant significant amount of money. And yeah I look forward to learning about that and sharing it with the audience.
1557 - 1614 Jonathan Mendonsa So guys we'll just we'll save more on that. We're going to get the earned income tax credit a full episode. We'll have that coming up at the end of November I think there is a play there especially for people in our community that have large families several children I mean knowing how the Earned Income Tax Credit works could be the difference in thousands and thousands of dollars so this is a very valuable conversation. I think we've talked about it over and over again that the information that personal finance bloggers tend to write about tends to be very selfish and I don't mean that in a bad way but I mean we tend to research the things that serve us where we are now. I do not have five kids. And so I haven't spent a ton of time you know researching how to implement this but the value of having a crowdsource show is that we don't need to rely on the things that I have research or the things that Brad have research. But we get to take the best ideas of our community and really highlight them and learn from them. So I'm very excited to bring Frugal professor on so he can share the intricacies of how this earned income tax credit works and how it could really be used to benefit people in our community.
blogger, families, tax
1614 - 1638 Brad Barrett And just as a last little addendum to that I know people in our community are definitely pursuing this exact strategy because Katie just sent us an e-mail a couple of days ago saying how the IRS sent her a check for seventy six hundred dollars for basically were these refundable tax credits and she said her mind was blown. So yeah we're definitely going to explore this further with the frugal professor.
1638 - 1725 Jonathan Mendonsa So we got an e-mail from Gezelle and she says Hey guys thanks for the podcast. I've been binge listening on my commute to work. I'm almost caught up. And I think your podcast is relatable and practical. I wanted to share a few details and stories followed by some questions for you guys. I'm in a unique position. I just purchased my first home and I've started a new job. Thankfully I have the opportunity to put money into a 457 B my grandmother is quite wealthy potentially a multimillionaire. She helped pay for my college education and I was able to come out debt free. However she is frugal to the extreme. I remember her furniture having duct tape and her wearing worn out clothes. She doesn't travel or really seemed to enjoy her money in any way her view on money and her use of it as a means to control people has created conflict with her daughter in law my mother. So how do you balance spending enjoyment in the here and now vs. in the future. I don't want to be like my grandmother who has no joy. It seems like live so tightly and I am single I don't have a husband and kids to spend time with as a goal. What are your thoughts on how to balance frugality versus enjoying the now. So I was I was getting ready to respond back to in email and I thought to myself There's actually several other parts to this e-mail. I figured this is just a conversation. This doesn't have a one line short answer. There's not. There's nothing obvious that she's doing wrong that she can fix. It goes to the idea of balance. And what do you value in life. And I think it's it's a conversation that all of us need to have like why are you saving money. What is the purpose and what is the value of spending money now. I think it just comes down to intentionality right.
457, college, debt, frugality, savings, valuist
1725 - 1910 Brad Barrett Yeah without question. And I think just obviously is talking about her grandmother who has no joy. I think this is almost like a backlash in a sense which she clearly doesn't want to become that. So whereas her grandmother's is just focusing on accumulating money. Like I don't think that's what we talk about here in the FI community at all. It's just I use money as a as a means to an end to have the life that I want and it doesn't have to be like Gezelle said she doesn't have a spouse or kids now and I mean that doesn't matter. Like there's this whole world out there of things that you can explore and enjoy. And by pursuing Fi by being smart I mean we all have to work. I think that's. And that's one thing we don't talk about that often. This is the best path that I've ever found to navigate this life. Right because everybody else who's navigating life they're just kind of going through the motions and working for 40 or 50 years and waking up and oh no I'm 70 years old like those years and those decades don't come back. Whereas like I realized I have to work and my best path to shorten that time was to pursue FI. So it was never this scarcity mindset it was never. I'm depriving myself. It was I'm trying to save up for this ultimate luxury. And then beyond that then and hopefully along the path I was trying to figure out what I enjoy out of life what I want my life to look like. But once you have time then you can explore everything that the world has to offer. I mean it's almost I can't even put it into words because there are so many different options and you just need to see like what what does that entail. There's no way that I can say right now like Gezelle you're going to do X Y and Z it's just explore meet new people be open to new experiences. It's not about depriving yourself it's not about being a tightwad with money and not spending on any entertainment or doing anything. It's just being intentional. And I think it's it's just these these like unconventional choices whereas like we've heard multiple people we've had Liz from frugal woods and Paige who lives in Los Angeles. They lived in big cities and they talk about all these endless entertainment options that are available for free whereas most of us who live in cities or live near metropolitan areas we just kind of reflexively go with what society says which is oh it's expensive to live in a city everything costs so much. No it doesn't have to. There has endless opportunity for free things and you just have to be open to it so I guess like what I would say to Gezelle or anyone out there is just be open to new experiences. But it doesn't have to cost a lot of money. Some things might like you might want to go skydiving and that might cost you 150 bucks or something like. So go do it. You know like if that's something that's always been on your mind don't say oh I'm on the path to FI I can't spend money until I'm at Fi. That's silly. We're not about depriving ourselves. It's just about being smart it's about being that valueist. Like I talk about which is just finding what you value in life and spending your resources your time and your money in a way that is in accordance with that. So I mean I guess that's my big takeaway Jonathan I'd love to hear what you think.
mindset, valuist
1910 - 2077 Jonathan Mendonsa Yeah I think it's all about balance. There was definitely a negative connotation attached with that grandmother and it sounded like there was almost that control piece really I latched onto that because you do see that I don't really feel like I see that as much in the Fi community for whatever reason and I have a feeling it goes this idea of having control over your life and not being paycheck to paycheck. And we're trying to live lives that allow us to claw back that control which means that it's harder for other people too that may have money whatever life choices they've made it's harder for them to control us because we don't need them. To some degree we are self-sufficient we've created a perpetual money making machine. And so it doesn't matter what they want to control we can reject that and we can put a firm line in the sand and say you do you I'll do me it's all good it's all good which allows us generally to have better relationships with people. I also think in the FI community although on our podcast which is obviously about personal finance and on our Facebook group we're obviously sharing our wins and losses and we're trying to share these these hacks in our general life. We tend to be somewhat private people. Very few people in the FI community are wearing their money on the sleeve. You don't see the 70000 square foot Shaquille O'Neal type house. We're not ostentatious with the possessions. So I think there is a fine line but I think we strive for balance which hopefully allows us to interact with people in a very real level and not one that's based on if you do what I want then you get a piece of the pie. The other part of her e-mail she says I have several empty rooms and no washing machine and dryer. The obvious way to save money is to buy things used via Craigslist Facebook. However I would like a nice washing machine that's going to last me years. I would like to max out my 457 and my 403 B idealy but I would not have leftover money to buy much of anything. Also I don't know what my utilities are going to be like so I'm reluctant to give myself no wriggle room in my budget. How would you recommend going about balancing saving and spending. So Brad I want to take a stab at this first. Actually I think this is really well-timed if you think back to just the round up from last week 45 R I was just sharing how I was able to get that brand new oven for essentially 70 percent off just by taking a look at my local scratch and dent store. And so Gezelle you know definitely go check out that episode where I shared what I did but I think that's a viable option. I think ultimately it comes down to in my case just trying to get a good deal I don't I have nothing against getting something nice or new. In fact I'm partial to it. I just want to try to get a good deal on it are a good value. And frankly if you're maxing out one of those vehicles the 457 and this is going to prevent you from putting the last thousand dollars in your 403B I don't see the problem with that. If you want the washer and dryer get the washer and dryer. The point is you're not paycheck to paycheck. You may be sacrificing a small amount to do that but if you feel like that's going to add a significant amount of value. This isn't the show where we tell you that you can't have nice stuff. This is the show we have to tell you that you're going to need to figure out what you value and to steal Paula's line. You can have anything but you cant have everything right.
403b, 457, relationships, savings, valuist
2077 - 2169 Brad Barrett Yeah there's no question and like Gezelle saying like she'd like to max out her 457 and 403 B but that's a lot of money. I mean that's $36000 a year. I know personally like I did not max out my four K every year I was working. And that's something that I look back on and that was a mistake in theory but at the time it was I had choices to maek and I did the best job that I could and I think that's what we all need to do. There's no single prescribed path to this. Sure it would be ideal if she could max out she has an opportunity and a max of both of these things. Sure that would be amazing. But if she doesn't if she's so worried about doing that and then buying a washing machine and then not having leftover money well that doesn't sound like a path to like this happy life right. And like a stress free life. If she's worried about every nickel because she did this amazing thing quote unquote of maxing out these two accounts. But then she doesn't have anything else and she's worried about spending a couple hundred dollars extra on a nice washing machine. But I mean that doesn't sound like a balanced life. So for her I mean I can't tell her what to do but would I be OK if she came and said Hey guys I didn't max out both these accounts. Of course you have to do what works for your life like there's no one path here. So that's really really important. But like what Jonathan said I know Sears has like an outlet near us where I think they have similar stuff to that you know slightly I guess scratched up or maybe somebody return something or it was a floor of like scratch and dent that was like Sears or what.
2169 - 2203 Jonathan Mendonsa Yeah it was the it was the Sears outlet in fact you can just Google Sears outlet and their Web site a pop up you can put in your zip code and see if there is one near you. I mean you don't always have to do it that way. A lot of times you can just go into your J.C. Penney's and Sears and see if they have any that are just on the floor that have been returned. Sometimes you can get a good deal that way but the Sears outlet you can get some ridiculous deals if you have one in your area. So definitely check that out. I know a lot of contractors use those when they're doing staging on houses or fixing flips. Just a great place to pick up a really nice appliance after it's already taken the depreciation hit and basically gone to used status.
2203 - 2263 Brad Barrett And if you can get it for a fraction of what the original cost was but it's still in perfect working order. And I assume they give you a decent warranty on that though I don't know. But that sounds like a win to me. Like you get the function of this quote nice washing machine without the price of a nice washing machine. So like just find ways to save money in an intelligent manner that's not going to give up what the actual value is. Because I mean I I assume she's not getting value like telling her friends she has an expensive washing machine. I mean who the heck cares. But like maybe she wants a larger washing machine or something that's more efficient or works quicker or something like OK maybe those are features that actually add some value and it would be worth spending some money for in Gezelle's life. So go for it. But like Jonathan did do it in a smart manner. So like there's always a way to just be a little bit smarter the next person and just do things a little more optimized. So just try to find them. I think that's the real thing here. Focus on just finding what you value but maybe finding a little bit smarter way to do it.
2263 - 2277 Jonathan Mendonsa She says I'm thinking of waiting to start opening cards for travel rewards. Since I haven't accumulated very much vacation time yet. How many cards or points do you think it would take to do a two week trip to Europe. Does it make sense to wait. Or should I start getting the points now. What are your thoughts on that Brad.
2277 - 2479 Brad Barrett Wow that's yeah that's a good one. So two week trip to Europe I guess. I think in many or most cases it makes sense to just get started because then you can go in a measured manner and you don't have to rush rush rush to accumulate points at the last minute and hope that the award availability on the flight you found to Europe is still there and like you can act from a position of strength which is OK. I know. To fly round trip to Europe. Probably going to cost me about 60000 airline miles. All right. So if you have them well in advance and then the the calendar opens up for flights the next year 11 months out is generally when you can book flights and you find a flight in the heart of the summer which would be awesome and it's there. What position would you rather be in. Would you rather be scrambling to get points and then just hoping and praying that the availability is still there. Or would you rather just have the points in your account. So to me like you always want to plan in advance you always want to operate from a position of strength and life. So I think it makes sense to accumulate these points in advance. Now naturally then sometimes you have to deal with the expiration issue. Which points do expire if they're unused. But there are a ton of ways to reset the clock if you will on the expiration. So for instance like any account activity and like your United account your United Airlines account let's say you were going to fly round trip to Europe. You needed 60000 United miles according to the most recent rules that I looked up United's miles expire after 18 months. But now again any account activity whatsoever will reset that clock. So if you had 1000 chase ultimate rewards points let's say you subsequently opened a chase old timer words card and you transferred over just 1000 points which is the minimum amount you can transfer over. Well then it would reset the clock entirely and then you'd have another 18 months to use your United miles if you made one purchase on a United credit card. United has a dining program like there are a ton of way it's like you really really have to go out of your way to have your Miles expire on you. So I think like that would be the only reason to not get started early if you were worried about expiration. But realistically if you can just google ways to keep United miles from expiring are ways to keep American Airlines miles from expiring like you're going to find 20 different articles or 200 different articles on precisely how to do that in a really easy manner. So I think it makes sense to get started. And yeah I mean for one person if you wanted to do a trip two week trip to Europe again you need roughly 60000 airline miles which should be pretty easy to come by and then you can go for different upscale hotels. You can go and get the Hyatt card you could get Marriott cards you can get IHG like all Starwood certainly is one that we love the Starwood Amex. There are tons of ways to start getting points or Also you could use air B and B you could get a card like that. Capital One venture. And use that to offset the travel expense. That would be air B and B. So like that's a neat way to do it as well. So long story short it definitely makes sense to start accumulating these points in advance and then you can just use them when when you're ready when you find the availability and when you know you have some vacation time. So yeah. Get started today would be would be my succinct advice.
2479 - 2482 Jonathan Mendonsa All right guys this next voicemail they're going to play for you is from Joel.
2482 - 2706 Joel - FI180 Hey guys. I'm a 30 year old electrical engineer and I like many F-I newbies came out of the Dave Ramsey school of financial gain which I had listened to since high school. And so that kept me from taking out a lot of school loans. And so after school I paid off my wife and I we paid off our student loans in one year. We saved up bought a home and started saving aggressively about 25 percent of our engineering and nursing incomes. With the idea that when we had two years my wife would stay home and then we wouldn't be able to save as much. So I thought we would save a huge amount of 25 percent and it would be like front loading our career savings. So recently my wife quit her nursing job after six years as a nurse and we took in two foster kids to maintain a similar lifestyle to what we had. I cut my savings rate from 25 percent down to just 15 percent thinking I could rely on that front loading of savings we had accumulated in six years. I realized that my plan didn't suck. First of all it was way ahead of my most. I was certainly on pace to work until 65 and even if I stopped saving retire with around five million dollars. But since I wanted to have more options I was putting a bunch of money in a taxable account in case I wanted to retire early like 55 or 50. I didn't really consider going rogue and retiring in 10 years. But since listening to your podcast I know this is a real possibility. I want to let you know that the changes I've made since listening to your podcast first I increased my savings rate from 15 percent to 35 percent. Now after after being on the podcast for a while I realize that's not huge but step in the right direction. So how did I do this. I cancelled Netflix and the HBO channel I had on Amazon Prime and Pandora won. I also went through my messy garage and started to sell everything that I haven't used in 12 months. I sold a lot of things and put cash straight into VTSAX. One thing I didn't sell my Olympic weight set. I did however cancel my family's $82 month gym membership and now that the garage is clean I can actually do a full work out there. I also cut my grocery bill in half which was $700 a month and removed the $100 a month restaurant budget which I always went over on anyway. I'm also found a bread machine on goodwill for $9.99. I changed my 14:00 Starbucks walk to a 2 p.m. walk past Starbucks everyday. Every time I walk past it strengthens my resolve. I changed my savings to 30 percent pretax and 5 percent taxable from the 5 percent pretax and 10 percent taxable rap and I was on and that's going to allow me to put a lot of my taxes into savings. So in the future I look on putting my entire raise which starts next month into increasing my savings rate. We also go on about $3000 in travel every one to two years with the travel rewards info you guys have shared that will be changing. We may even be able to travel more as a result and bring our kids. I regret not maxing out my wife's 403 B and 457 plans when she was a nurse. Maybe when the kids are in grade school she will get a full time nursing job again or a part time one and we can have a redo on that decision. You guys have connected me to the frugal woods uber frugal challenge which highly recommend and Mr. Money Mustache you have lit a fire. Thanks a million maybe more Joe.
457, career, college-loans, indexfunds, ramsey, savings, travel
2706 - 2715 Jonathan Mendonsa Brad how cool is that just to see like once she wants the idea get sparked in your mind. How many different places it can take you and how radically it can transform your savings rate.
2715 - 2761 Brad Barrett Yeah I love that and I love all the different options and different decisions Joel and his family have made and that's it just neat to see. And that's what you're constantly talking about here. Like there are all these different levers to pull. And it's just what you decide to value and what you decide to save money on. Like he talked about saving his Olympic weight set which he probably could have sold. But he got rid of the gym membership like that is a great decision because it's still focused on fitness and you're not spending nearly a hundred dollars a month and you can probably still get the same benefit out of just having the Olympic weights. So still like something as small as that. Like that's going to add up to significant money over time and I'm sure Joel is going to pull many of these levers and it's it's just a fun journey and I'm glad he's on the path now.
2761 - 2893 Jonathan Mendonsa And two things really stood out to me in that voicemail the first one was when he said I'm going rogue. That's just that's just awesome. And the second one was the daily stop at Starbucks turned into the daily 2 p.m. walk by Starbucks which was just hilarious but it strikes me how similar are the choices that he's made are to the ones that both I made and you made I mean these are just this is commonsense low hanging fruit. Once you realize it. And what I love about that is that that means that this is replicable. I mean this is like common sense stuff that you just don't think about. A lot of people are bleeding money to subscriptions and they just don't know where it's going. Part of this is just simplification. And I've made a lot of the same choices that Joel made and in particular you know he's embracing travel rewards. This is a guy that's from the Dave Ramsey camp grew up in that same school of thought like I did and realized that while a lot of the stuff that he talks about is really good. There's other stuff that just doesn't serve you and you need to take what works for you and travel rewards works for me. I mean you know we're going on this trip to South Africa Cape Town South Africa. That doesn't happen. In another you know in another community that's something that I can do because I understand how it works and to understand how to use travel rewards for my family's benefit. We get to travel more and spend less and we get to bring our kids with us. By the way for those of you that are interested in learning how travel rewards work definitely go check out our pinocle episode on that which is Episode 9 which will teach you the basics of traveling the world for free. We followed that up with teaching you how to travel and take your family to Disney World for free and episode 31. And we also have an entire body of resources dedicated to that. Just go to choose if I dot com slash travel. So all of that is right there for you. All right guys. Well that's going to bring this episode to a close. As you know we finish every episode by doing a drawing for a copy of a book that we have found useful. We do two books. We do JL Collins book the simple path to wealth and Dominic Quartuccio's book design your future. If you're interested in that drawing and you want to enter it all you have to do just go to choose F-I dot com slash iTunes. Follow the instructions there and leave us a short written review and then just send us an email to feedback. Choose FI dot com just letting us know that you left a review and what name you left it under. We do one book for every five written reviews that we get. We announce the winners on the Friday round up. Brad how many winners do we have today.
families, familytravel, ramsey, travel, travelrewards
2893 - 2915 Brad Barrett All right Jonathan today we have one winner and the winner is Brogan and he called us the best personal finance podcast out there. I listen to a number of finance podcasts but I find myself picking and choosing a lot of episodes that is not the case with choose FI. I can't wait to download each episode as soon as it comes out each week. I really enjoy how easy it is to relate to both Jonathan and Brad. Keep it up.
2915 - 2923 Jonathan Mendonsa Awesome. Thank you so much for sending the feedback and the fire spreading. My friends we'll see you next time as we continue to go down the road less traveled.

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