Mad Fientist

The Best FIRE Software Just Got Even Better

The Mad Fientist — Thu, 14 May 2026 10:36:59 +0000

Three years ago, I introduced you to ProjectionLab and called it the most powerful financial planning tool I’d ever seen.

It was built specifically for people pursuing FIRE, and it’s still the most useful FI planning tool I’ve found.

In the original post, Kyle (the solo developer behind the project) shared his background and walked through how to build a plan.

When I built my first plan, I realized I needed to immediately change my investment strategy (I stopped contributing to my tax-deferred accounts because the software showed me that I already contributed too much to those accounts).

Since then, I’ve watched Kyle quit his day job, grow a team, and turn ProjectionLab into something even more impressive.

The tool has changed a lot recently, and I wanted to invite him back to share what’s new. Because after using the new features, I’ve changed my financial plans yet again! The software showed me that I could potentially leave over $1.5 million more to my kids by making a few small changes to my tax strategy

It’s incredible that one software application has caused me to make such drastic changes to my finances (twice!), but that’s the power of what Kyle and his team have built.

Take it away, Kyle!

– – – – – – – –

Hey everyone, Kyle here. Thanks for having me back.

When I wrote that first post, I still had a corporate day job. ProjectionLab was a side project I worked on every night after work, plus weekends and holidays.

The Mad Fientist community helped change the trajectory of this project and gave me the confidence to bet my career on it.

I had hoped a few people would find the tool useful. But when so many of you tried PL and shared thoughtful feedback on things like tax optimization, Roth conversions, and withdrawal strategies, you helped me realize this could become something real.

Two months later, I dropped to part-time at my day job. Six months after that, I quit entirely to focus on PL.

So thank you. Genuinely. You changed my life.

Today, over 200,000 households have used ProjectionLab to build a plan. We’ve grown from just me into a small team and built a profitable, fully independent company.

No venture capital, no advisory upsells, no selling your data. We build for the people who use it, and we’ve added a lot since 2023.

What’s new?

Two years of full-time development and the help of a team adds up. Here are the most notable changes.

Advanced Strategies

You already know that getting to financial independence is only half the puzzle. The other half is making your money last once you get there. That means strategic Roth conversions, drawing down the right accounts in the right order, harvesting capital gains in low-tax years, and managing income to avoid triggering IRMAA surcharges or losing ACA subsidies.

These are strategies that can save six or even seven figures over a retirement. They’re also complicated, easy to get wrong, or cost thousands of dollars when done with a professional.

ProjectionLab now handles this for you.

Tax Strategy

Set a target tax bracket or income ceiling and PL optimizes your plan around it: federal brackets, IRMAA thresholds, ACA subsidy limits, the NIIT cliff, and even income splitting across spouses for joint filers.

You decide your strategy and the Optimizer does the rest.

Roth Conversions

Automatically convert pre-tax savings to fill your target bracket each year. The engine is IRMAA-aware, so it won’t push you into a Medicare surcharge two years down the road. You can quickly see the projected impact on net worth, lifetime taxes, legacy value, and more.

Drawdown

Draw from accounts in optimal order up to your bracket cap, splitting withdrawals across ordinary income and capital gains sources automatically. No more guessing which accounts to tap first.

Gain Harvesting

Realize capital gains in years where you’ll pay little or nothing on them. This includes filling the 0% long-term capital gains bracket, a powerful and commonly overlooked move available to early retirees.

Flexible Spending

Most calculators assume you spend the same amount every year forever. That’s not how it works in real life. When markets drop, you cut back. When things recover, you loosen up.

Flex Spending lets you set rules like: “If the market drops 30% from its all-time high, reduce discretionary spending by 60%.” Tag expenses as Essential or Discretionary and PL adjusts automatically. This can dramatically improve your chance of success without requiring you to save more.

The Optimizer

Behind all of this is a built-in optimizer that searches across strategies, bracket targets, and timing windows to find what works best for your specific plan.

Tell it what you care about (lower lifetime taxes, higher net worth, more ACA subsidies, reduced IRMAA surcharges) and it evaluates hundreds of combinations to find the best approach. It shows you exactly what the winning strategy gains you, with a full breakdown of the trade-offs: tax liability, net legacy, RMDs, IRMAA, and more. Apply it instantly, or explore alternatives.

This is the kind of analysis that would cost thousands from a financial advisor. It runs inside your plan in seconds.

What If Scenarios

Compare Mode got a major upgrade and became one of the most powerful features in the tool.

Quickly overlay your plan with a “What If” scenario and the impact in real time. What if you retired two years earlier? What if you took a higher-paying job but moved to a higher-tax state? What if you dropped to part-time at 45 and started a side business?

Track how milestones shift between plans. Dig into yearly deltas for income, savings, expenses, and net worth. Plot any metric across scenarios. Instead of guessing at trade-offs, you see them.

If Optimize helps you get the most out of a single plan, Compare Mode helps you decide what life you want to build.

More Depth Where It Matters

Beyond optimization and scenario planning, we’ve also filled in many gaps that used to require other tools or manual work.

Social Security – Enter your Primary Insurance Amount from your SSA statement, pick a claiming age between 62 and 70, and PL computes your benefit automatically with early reduction and delayed retirement credits built in. No more manual calculations or guessing.
Medicare – Now a fully visible expense card showing estimated Part B, Part D, and supplemental premiums with IRMAA surcharges and a 2-year income lookback. The Tax Strategy engine ties into this too, actively avoiding income levels that would trigger surcharges.
Estate Planning – A new Estate tab shows your Net Legacy: what heirs actually receive after taxes, costs, and debt. This connects to Roth conversion analysis, so you can see how today’s decisions affect what you leave behind.

Charitable Giving – QCDs satisfy your RMD while keeping the distribution out of taxable income. Donor-Advised Funds let you contribute appreciated assets, avoid capital gains, and take the full deduction.
Inherited IRAs – Model Traditional and Roth Inherited IRAs with 10-year withdrawal windows, stretch RMDs, or a custom distribution schedule.
Mega Backdoor Roth – Model it directly. Fill remaining after-tax space in a 401(k) or 403(b) and route funds in-plan or to a Roth IRA.
Tax Modeling – State and local taxes are modeled with location-aware scoping. A TCJA sunset toggle shows the impact if those provisions expire. A Tax Analytics heatmap shows how your income falls across brackets by jurisdiction.

Canadian and International Support

ProjectionLab now has dedicated Canadian planning: TFSA and RRSP account types, CPP contributions, OAS and GIS income estimation, Employment Insurance, configurable RRSP-to-RRIF conversion age, and provincial tax presets for Ontario, Alberta, British Columbia, and Quebec.

We’ve also expanded international support for the UK, Australia, Netherlands, Germany, and others. If you’re planning to move abroad or from outside the United States, there’s a good chance we’ve improved support for your situation.

Thank You

I’m grateful to everyone in this community who’s played a role in shaping ProjectionLab over the past few years. And I’m still excited to show up every day to keep making it better for you.

If you’re planning your path to financial independence, or already there and thinking about how to make the most of it, come take another look.

You can sign up, build plans, and save everything for free.

If you want to go deeper with optimization, tax modeling, and scenario analysis, there’s a paid plan (with free trial) that unlocks those features.

ProjectionLab - Beautiful and Powerful Financial-Planning Software for FIRE

ProjectionLab is a powerful and beautifully-designed financial-planning application made specifically for FIRE people!

The post The Best FIRE Software Just Got Even Better appeared first on Mad Fientist.

Learning How to Spend Money (While Enjoying Every Dollar Spent)

The Mad Fientist — Fri, 14 Nov 2025 14:29:43 +0000

After decades of saving/investing, it’s hard to immediately flip a switch and go into spending mode.

Spending is a skill that you should develop on your way to FI, so that you’re better at it when the time comes to do it.

Here’s what worked for me over the last few years:

Listen Now

https://dts.podtrac.com/redirect.mp3/pscrb.fm/rss/p/traffic.libsyn.com/secure/madfientist/how-to-spend-money.mp3

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Highlights

How to reframe expenses and recalibrate how you value money (e.g. College Calculation, 0.01% Rule, etc.)
Why you should expect inefficiencies/waste as your net worth grows
The benefits of splurge accounts and forced annual-spending targets
Balancing the idea that “everything is free” with the benefits of incremental improvements
The importance of prioritizing “now” over “the future”, while still spending/saving for both
How to give more while increasing the personal benefits of that giving

Show Links

Full Transcript

Mad Fientist: Hey, what’s up everybody? Welcome to the Financial Independence Podcast. I know it’s been a while since I’ve been in touch, but as I mentioned in my last post, things have been busy around here with two small kids, but this episode is a long time coming. I know I’ve been promising this for at least a few years now, and it’s a topic that I’ve been actively focused on since 2019, and it’s getting better at spending money.

And I realize that’s a crazy thing for some of you out there to hear that this is a problem. And I completely admit it’s a great problem to have, but I think it’s a very real problem with people that pursue PHI because we’re so good at saving and we’ve saved all our lives and we’ve built an identity around saving, and then all of a sudden you’re just meant to flip a switch and change over to spending and it’s a lot harder than it sounds. So this is something I’ve been working on since 2019 because that’s when I first asked Ramit Sethi from iwillteachyoutoberich.com to come onto the podcast because I figured he was the ideal person to help me become a better spender.

And he was, it was a great episode. I asked him back onto the podcast in 2023 to catch up again and review my progress and answer a few other questions I had with regards to spending. And both of those episodes are great. So if you haven’t heard those, I’ll link to them in the show notes, but this is something that I’ve been focused on since 2019.

And even though I’ve been making gradual progress, it’s not fast enough because I’m 43 now, and your peak spending years are 40 to 60. So I’m already over 15% of the way through my peak spending years, and I’m still talking about getting better at spending, like it’s some future thing that I need to do and actually I need to do it now.

And this really hit home. Over the last few months, because we sent our 3-year-old off to nursery, which I guess in America is preschool. And it was a shock, and I took it way harder than I expected to. I was just like, oh man, this is the first time that our son’s like doing something without us and starting his own life.

Without us in it. And it was, it was a big eye-opener and made me realize, okay, this time is so precious and there’s not that much of it. Because in 10 years, in a decade, he’s gonna be a teenager and maybe be too cool to hang out with us. So that was a big slap in the face to say, okay, you need to get better at this now, and there’s no point having a ton of money when you’re 60 and the kids are outta the house.

It’s time to get better at this now, and it’s time to do it quickly. So this episode is a compilation of everything I’ve learned over those last six years, the things that have worked best for me. So hopefully it’s useful to you no matter where you are on the five Journey because. The money’s gonna be spent eventually.

And if it’s all given away after you die, that seems like a shame. And as Bill Perkins said, in Die With Zero, “When’s the party?” And that’s also a great interview to listen to if you haven’t heard that one yet. I’ll link to that in the show notes. But yeah, when’s the party and there’s gonna be a party, and when is it?

And that’s what I’m starting to think of now, and I definitely wanna be a part of it. So, to kick things off, I’ll start with something that helps to unwind some of those previous habits that were useful for saving towards FI but have now become less useful when I’m post-FI. And that is less specific tracking.

Pre FI, I had a spreadsheet that broke down all of the spending categories, and I was able to tally ’em up every month and see how they changed and all that sort of thing. And that you can still download that spreadsheet at madfientist.com/spreadsheet. And that was the one that served me well to get to FI. But after FI, I don’t need to or want to track all of those individual categories. It’s a waste of time, mental energy, and it’s actually counterproductive because what gets measured gets managed, and I don’t wanna manage it anymore. I don’t wanna see that I spent over budget on restaurants the month before, and then not go out to a restaurant this month because of it.

I don’t care. It shouldn’t matter, and it doesn’t matter. So the first thing that I had to do was just. Streamline my financial tracking and just track the main thing, which is net worth. And that’s really all that matters at this stage. So if you go to madfientist.com/post, you’ll find my post-FIRE spreadsheet that I created, and that’s what I’ve been using instead ever since I left my job because I just don’t care about the details anymore.

And it’s more a big picture thing. And I’ve actually built some custom software that I’ve been also using. So if you wanna become one of the beta testers for that, make sure you’re on the email list. And if you’re not, you can just go to madfientist.com/advice, and you can sign up to the email list there.

But it’s something that I’m gonna hopefully be releasing next year, and it’s been helping me to not only keep track of my spending at a level that I want to, but also makes it more fun to spend that money and save for specific things. So that was the first big change. And then the second one is trying to recalibrate my brain because I don’t know about you, but my brain is trapped at 20.

I still feel like I’m 20. I still feel like I can do the things. I can do it when I was 20, and I am definitely far from 20. So I still sort of feel like I have the net worth I did at 20. So, for instance, back in college, if I had a friend come up to me and say, do you wanna go out for dinner? And they picked a place that was gonna be over 10 bucks, I’d be thinking twice about it. because I’m like, oh, 10 bucks. That’s a lot. I don’t need to blow 10 bucks on dinner tonight. And it’s crazy. But 10 bucks still feels like a lot of money to me because of that. And that was like sort of my like cutoff number of, all right, this is something I should second guess, or I shouldn’t second guess this.

So, to recalibrate my brain. I took $10 and I divided it by my net worth at the time. And then I’ve multiplied that by my current net worth to find out, alright, what is $10 equivalent to now? And that calculation is mind blowing because it was really the first time that I appreciated that random number in the bank that I’ve been looking at for all these years and it’s, it made it seem like, whoa, okay. I am on a whole different level these days, and these small purchases, or even medium purchases, or even what I would consider very large purchases are in fact insignificant in the grand scheme of things. And that was very eye-opening. So that college calculation was probably the biggest thing that was able to change my mindset that I’ve done in the past 10 years of working on this problem.

A similar calculation. I actually just came across in Nick Maggiulli’s new book, The Wealth Ladder, that’s really good is his 0.01% rule, which is very similar and it helps you recontextualize your spending as you climb the wealth ladder. So, looking back on my college days, that made sense that $10 was like, oh, geez, yeah, that’s gonna be, I need to think twice about that.

But 0.01% of my current net worth is way higher than $10. So. It’s a great, easy way to figure out what kind of expenses you really need to be concerned about and what you can pretty much ignore completely, which has made life a lot more enjoyable for someone who used to scrutinize every single penny that came out of his pocket, which leads nicely into another thing that’s been beneficial and that is worrying less about efficiency.

And this was from Ramit’s episode in his interview with me and he described that, you know, as systems get larger, sometimes there’s more waste. So you can’t have a perfectly efficient system as you’re trying to grow and experiment and spend more. So back in the olden days, I would, you know, dwell on any sort of expense that wasn’t necessary, and I would make do with what I had instead of getting what I actually needed because spending money was the last resort. And it was only because I couldn’t find any other solution, and it had that negative connotation. Whereas now I realize that, hey, yeah, I’m not gonna be perfectly efficient with my spending and sometimes I’m gonna buy something that I don’t need or use money in an inefficient way.

And that’s okay because it means I’m pushing the boundaries. I’m trying to expand my comfort zone with spending, and it just comes with the territory of having a larger overall system. And that’s been really helpful. Actually, it sounded crazy when he said it to me way back in 2019, but it’s helped me make some spending decisions where I otherwise wouldn’t have.

Because if I’m on the fence and I’m like, oh, should I really, or do I really need this now? I tend to just go for it. And yes, sometimes that’s the wrong call and I regret it a little bit later, but. I know at the end of the day, it’s not the end of the world and it’s not worth even expending any mental energy on.

So it has been helpful in that sense. So those are some of the ways that I’ve tried to change my thinking around spending. But I’ve also tried to reconceptualize expenses themselves. So the first thing that’s helped me make that purchase decision or, or pull the trigger on something is if it could also be a investment.

So obviously FIRE people love investments and I can hear Ramit’s voice saying, “Why can’t you FIRE guys do anything that’s not an investment”, and I get that. But if you can make it an investment in your head, it does help. So for example, we bought a nicer house than I probably was comfortable with at the time, and I’m very glad I did.

But the way I was able to get over that was like, well, this is an investment, so if this is the wrong call, then I could sell it again for hopefully is what I bought it for maybe more. So I was able to pull the trigger and try it out and I’m, like I said, I’m really glad it did. I love, we love our house and it’s not overly extravagant or amazing, but it’s great and we’re really comfortable here and I’m glad we didn’t go cheaper. because again, money isn’t just meant to sit there in an account. It’s meant to be used. So I’m glad we used it in the way we did.

And another example was like synthesizers for my music project. So there’s oftentimes that I need a certain type of synth. And yes, I could buy the entry level cheap mass produced one from China that’s plastic and it’s probably gonna break in five years. But when I reframe it as an investment, then it makes me get the best that there is because I know that maybe in 10 years it’ll be a classic. And then I could sell it for a lot more in 20 years if I wanted to.

And it’s gonna last for 20 years. So again, thinking of it ass an investment helps me pull the trigger on the top of the line thing, which is great in so many ways because then I get to have this beautiful machine that sounds a lot better than the cheap version. It’s nicer to look at. It’s more likely to not break down or break in general.

And it could be an investment one day and if it is, great, but it’s just as likely that it won’t. Maybe it’s just gonna be a mass produced thing for the next 20 years and it’s gonna be not an investment. But thinking of it in that sense does help me pull the trigger. And again, I’ve been so happy that I’ve bought the things that I’ve bought rather than the cheaper alternatives, which 10 years ago, I would’ve definitely just automatically gone for the cheaper alternative.

Something related to this one is fun business expenses. So if you do have your own business, then. If something you want could also be classified as a business expense, that also helps me get to the purchase decision in the same way that if it also could be considered an investment does.

Another thing I’ve started doing is having a fun/splurge account, and it’s not a separate account or anything, but it’s just an allocation of money that I know every year I’m gonna spend on splurges.

And a splurge to me is just anything that seems ridiculous at the time, but I wanted to try it. For example, we usually go to the States at least once a year. And for the past three years I’ve rented a fancier car than I otherwise would’ve. And that’s come out of my splurge fund. And it’s been a lot of fun.

So, you know, three years ago we rented a Tesla Model Y that was fun. And then we rented a Jeep Wrangler Unlimited for our beach trip and had the top down all the time. And that was fun for that trip. And then this last trip we rented a luxury SUV because I didn’t even know what a luxury SUV would entail.

All three of those examples ended up being a lot of fun. I can look back on those trips and I can remember what we did in those cars. Would I want to spend all that money to buy a luxury SUV, I don’t think so. But it was a lot of fun to try it out for a month when we were in the States.

Some more examples of things that have come outta my splurge fund and it’s been like fancy Airbnbs for. Having friends and family come with us to places. So we went to Stowe for a ski trip and we rented a big fancy house that could fit our friends and their family and, and we had a great time with a weekend out in Stowe.

Same happened in Durham. When we went to visit some friends there, we rented a really central place and invited my parents and my grandma to come and they came up from Florida and it was a really fun trip.

And did the same thing on this last trip. In Savannah, we rented this Victorian house right on Forsyth Park, and it was a great central location and a beautiful house. And again, we invited family to come up and spend a few days with us and it turned into a fantastic trip and loads of great memories.

So the reason, the fun splurge account works for me is because it’s a set amount of money that I know I need to spend every year. So I end up spending it and I find reasons to spend it. And that sort of pushes me beyond my comfortable spending boundaries.

And I’m trying to take that to the next level and sort of having an annual spend amount that I need to spend every year.

I realized this was a good idea when people would give me gift cards for Christmas or something and I’d have so much fun spending it because I knew I couldn’t save it. And I wouldn’t feel guilty about blowing the whole a hundred dollars or whatever it was. And it made it a lot more fun. And I would always find something that I wanted and I would enjoy that thing after I bought it.

And usually I, it was something that I wouldn’t have bought in the first place, but since I had this gift card that needed to be used, I would just use it and it was great. So taking that idea to my actual life and saying, okay, well this is how much we need to spend this year and figure out a way to do it.

Whatever you don’t spend, you can give it away at the end of the year, but no matter what, it’s all gone at the end of the year. So that’s something I’ve been trying to do the past couple years, but if failed, I’ve never actually hit my target. But 2026, I’m determined, so that money is definitely gone. I’ll calculated it in January and then it is gonna be gone by the end of December.

Even if it means giving it away to a good cause. So that’s my goal for 2026 and I am determined to actually do it this year.

In preparation for that, I’ve turned off automated dividend reinvestment in my taxable account. So now I see that cash is piling up there and I know I have to use it. So that’s another structural change tip I guess, that you can make to force you to spend more rather than invest more. Because if you’re like me, investing is just on autopilot, it’s inertia. That’s what I do. It’s the easiest thing to do. It’s I do it naturally. Spending’s the opposite. So turning off dividend reinvestment in your taxable accounts will push you towards the spend rather than the invest.

Which leads me to something else that Ramit said in one of our interviews, and that was “Why pay less when you can pay more?” And at the time I thought he was absolutely insane. I thought that was the craziest thing he said in any of the interviews with him. But now I can appreciate it and it’s when I’m trying to hit these spending targets and I have the option between something that’s cheap and maybe not exactly what I need or expensive, and it’s exactly what I need.

I now go for that expensive thing because I know I’m gonna struggle to hit my spending targets, so I might as well go for the thing that will actually give me exactly what I’m looking for. And it’s been fantastic. It’s the first time in my life where I actually have tools to do the exact thing that I needed to do instead of just making do with whatever’s cheapest or whatever I have on hand.

And this made me enjoy my stuff more because it does work, it’s high quality and it fulfills a purpose, and it’s. Usually a joy to use, so it’s been beneficial all around. But yeah, it made me realize that why spend less when you can spend more? That Ramit said all those years ago that I thought was insane, actually makes a lot of sense when your mindset shifts a little bit.

I was speaking to JL Collins a little while ago about this exact topic, because I think we’re both trying to push ourselves in this area. And he recounted a conversation he had with Mr. Money Mustache way back in the day, and they were, I think in Ecuador for one of the Chautauquas or something, and they were out at the shops and JL was trying to decide whether to buy something or not.

And Mr. Money Mustache was like, well, “Yeah, just go ahead…everything’s free”. And that outlook makes a lot of sense to me now, where if the portfolio is at a certain level and your life is at a certain spending level that you’re very comfortable in, and it’s not like you’re gonna go out and buy a super yacht or something that’s gonna just destroy your finances, pretty much all of these daily purchase decisions you can act like as if everything’s free.

That has been helpful to make these purchasing decisions because even though I’m trying hard not to have money influence my decision making, it’s so ingrained in my brain after 40 years of hardcore savings that if I try to make a decision and act like it was free or if I had unlimited money. Then I sort of make the decision based on whether I really want or need that thing rather than do I really need it?

Could I save that money? Could I just not spend that money? And it takes money outta the equation a little bit mentally. I’m still nowhere near the level that I can pretend everything’s free. But trying to think like that when I’m making a decision has been helpful and pulling the trigger on something more often than not.

But even if I’m trying to think of everything as being free, that doesn’t mean going for the top end immediately. And something I’ve been trying to do is incrementally improve.

So before our daughter arrived and when our son was still free to fly, we experimented a little bit with different airline tickets.

So yes, if everything’s free, we could have just booked first class and that would’ve been that. But instead, we tried out premium economy first, and then we tried our business class. And incrementally improving those experiences led to a lot more happiness and satisfaction than if we had just jumped from economy to first class, because we first got to experience the thrill of premium economy and the extra leg room and all the things that came with booking a premium economy flight. And then the next time we flew, we were able to experience another big bump in excitement with business class and the lounge that came with it and the better food and all of that, and the lie flat seats.

So incrementally improving allowed us to have multiple experiences of leveling up and enjoying that. So that was a good decision to make. And now that our daughter’s here, we’re back in the back of the bus because it’s easier and less stressful just having a row to ourselves. But I’m glad we had those experiences and I’m sure one day we’ll go back up to the front once everyone’s a bit older and traveling better, and it’ll provide those same exciting benefits that it did the first time we tried them.

So another thing we’re not doing is increasing our fixed costs by a lot. Last year I was on the Afford Anything podcast and I was talking to Paula about how we’re trying to increase our spending. And she asked if that just meant that we were just adding a bunch of fixed costs to our lives that we paid every month. And I said, no, actually it’s the opposite. And it’s the opposite by design, because I think adding a bunch of fixed costs would then stress me out a bit because it’s like, okay, these, these costs are here forever.

And if the market tanks, it may be stressful because I won’t be able to unwind those fixed costs. So actually, all of the experimenting we’ve been doing with spending has been just one-off costs, and that’s made it a lot of fun because I know the portfolio is generating money and I know that money is going to regenerate every month.

So. It’s like every month is a new adventure. So after we bought our house, like for a couple months, I just went ape shit on Amazon and I was buying all of these things that I had wanted to buy over the past decade of renting, but I never did because I didn’t want to have all this stuff that we had to move, because we moved like once a year when we were renting. So it was all the time it felt like we were moving and I didn’t want to have any more stuff to move. So I had all this pent up demand and so yeah, after we moved into our house, I just went crazy on Amazon for a couple months and then that died down because I bought everything that I wanted to buy.

So then it was like the next month it’s like, all right, what are we gonna do? So that month we just took a special trip or something, and then that was what? We spent the money on that month, and then the next month maybe I bought a new synthesizer, new piece of music gear, and that’s where the spending went that month.

And I think that’s made it a lot more fun than going out and increasing your fixed costs once and then having to pay that every month. And then sort of wondering if you could unwind that if you needed to. And yeah, every month’s a new adventure.

So something else that I’m not doing and is a big change for how I used to live is, I’m not waiting.

So, for example, old me would think, okay I really want to buy a mountain house one day, so I’m just gonna save, save, save, invest. One day I’ll be able to buy my dream mountain house and ski all the time and do all these other fun winter stuff. And that’s what I would’ve done. I would’ve just buckled down, saved hard for as long as it needed to take, and eventually I would’ve got there.

But now I can still have those long-term dreams of, yeah, maybe having a mountain house one day, but instead of just hardcore saving today’s for this future enjoyment, I can save for something long-term, but I also need to do that thing now and enjoy that experience now in a different way.

So I mentioned some new software that I’ve been building over the years, and that was the key driver of that, was to take these long-term things and realized that the money that I’m saving for those long-term things can generate an annual income that I should use for that thing now.

So. I have a piece of my portfolio set aside for maybe buying a house in the mountains one day, but every year I definitely need to be using 4% of that amount to rent an Airbnb in the mountains for a couple weeks or a month, and as that portfolio chunk grows, then the longer our trips should become. And maybe one day we realize, hey, actually we’re spending a month in an Airbnb in the mountains, and that’s actually enough and I don’t need to buy the mountain house and live there for 12 months of the year.

Maybe a month’s good, or maybe it’s two months. But anyway, it’s not just living for the future anymore. It’s, yes, you can still plan for long-term things and you can invest for the future, but it’s making sure you’re prioritizing now and using the money now and not just saving it for some future date.

So I think those are the main ways we’ve increased our personal consumption, but the other side of the coin is that we’ve also become more generous with our money, which is something I’ve been trying to do over the years and pushing myself to give away more. And there’s been a lot of positive progress in that area as well.

So one of the rules I’ve given myself is that if I’m ever deciding whether to tip two amounts, always go for the high one.

So that’s just a simple rule that’s helped me. Give more and share more, and also relieve a mental burden. because I feel like I’m constantly deciding how much I need to tip. And yeah, it’s just easy to just go with a high number and forget about it. And the same goes for friends’ causes. If somebody’s running a marathon and they’re raising money for charity, or if any friend or family member is supporting a cause and they’re wanting to raise money for it, it’s just, okay, go in and, and absolutely give every single time and give on the upper end of what you feel comfortable with.

And finally, I’ve also had a lot of fun and success with doing one-off things that come to mind. So for example, I know that my parents, it was their bucket list to go to the Ryder Cup, and I figured out a way to get tickets and book them tickets to the Ryder Cup and we made a really fun trip to Rome out of it, and we met them there and then they got to go to the Ryder Cup for a day and took that off their bucket list and it was a great use of money.

Another example was a band that my high school friend and I used to love back in the day. We’re going on tour and we decided to go to it. And I just surprised him by booking front row tickets to the show, and we had such an incredible time. And being that close was even better than I expected, and it made the experience so much more fun.

And again, that was definitely worth the money, and he appreciated it. And we had such a nice time feeling like we were just back in high school again, seeing one of our favorite bands. But yeah, we were way closer than either of us probably expected. So that was another great use of money.

And to be honest, I think all of the experiments we’ve done have been positive, and it makes me excited to do more experiments in the future.

So I’d say. If you’re FI or on your way to FI, I think you should push yourself a little bit more to spend, because it does take a while to get better at it, especially if you’ve saved for your entire life like I have. because I’m nearly a decade into post-FI life, and I am still feeling like I’m only just getting started and trying to figure this out.

And something I realized is my portfolio is growing way faster than my imagination is, and I am running out of things to try. So the earlier you can start figuring this out, the better. And if you have the savers’ mindset, like most people in the FIRE world, I don’t think you have to really worry about getting out of control.

There was only one time that I thought, is this how this happens? Is this how people just spend all their money and never save anything and wind up in debt? And that was after we moved into our house. When I mentioned earlier that I went ape shit for a few months because I just had so much pent up demand and I knew there were so many things that I wanted to buy, and for a while there, there was just like nonstop Amazon boxes arriving. And my wife thought I had just gone crazy. because she’s like, “What are you buying?” “Why are we getting so many packages in mail these days?” And for a minute there I thought, oh geez,, I’ve fallen off the deep end, but, you know, after two months and I got everything that I had wanted to get, and then it just completely dropped off.

So that was the only time I worried about the sustainability of my new newfound love of spending. And yeah, then it’s, it’s dropped off since then. So don’t be afraid to get outside your comfort zone a little bit. And but, you know, don’t get stressed about it. It’s meant to be fun. This is a great problem to have, and it’s a fun problem to address.

So if you are getting stressed or if you’re not sleeping well at night, then obviously back off a little bit, but you need to feel a little uncomfortable to break out of your old habits and try some new things. So hopefully this episode inspires you to spend a little more and to try some stuff out and gave you some new ways to think about things.

And like I said, I’m working on that software to help with this. And if you want to become a beta tester, then get on the email list. because there’s gonna be an email going out within the next month. And to be honest, it may not make it past beta testing. It may not make it into a public release. It may just be one of these things that just lives, and the people that use it, use it. And then I don’t do anything else with it. But we’ll see.

But if you want to try what I do have done, then go to madfientist.com/advice and you can put your email address in there and you’ll hopefully receive an email over the next month to tell you how you can get access to it.

But hope this episode was helpful anyway, and hope you’ve been doing well since I’ve last been in touch, and hopefully it won’t be as long until the next one comes out!

Ramit Sethi - How to Spend (and Actually Enjoy It)

Ramit Sethi from I Will Teach You to Be Rich joins me on the podcast to teach overly-frugal FIRE people how to spend and actually enjoy it!

The post Learning How to Spend Money (While Enjoying Every Dollar Spent) appeared first on Mad Fientist.

Happiness Through Addition

The Mad Fientist — Wed, 25 Jun 2025 09:55:47 +0000

I never wanted kids.

In fact, I’d say I was against the idea.

There was too much I wanted to see/do, and I thought that kids would get in the way.

Plus, I could easily imagine all the stress and worry that kids would bring. I worried enough about my family/friends, so why would I add to that with worry about humans that I was actually responsible for?

Things Change

Things changed, though.

First, I started accomplishing a lot of my long-term goals (see Free Ivy League Degree, Releasing an Album, etc.), thanks in part to the freedom and time that FI provided.

Second, my wife’s sisters started having kids and I got to see how fun/crazy they are.

I eventually came around to the idea, but more for my wife than for me (since I still wasn’t completely sure).

As you know, our son arrived in 2022, and fatherhood has turned out to be the best thing that’s ever happened to me!

Big News

We’ve enjoyed being parents so much that we decided to have another one.

I’m thrilled to tell you that we welcomed our daughter into the world at the end of last year, and she’s just as amazing as her brother is :)

A Big Lesson

This post isn’t to try to convince you to have kids though.

I know how it is to not want kids, or to think you can’t have kids. I’ve been in both of those camps, and we had exciting and fulfilling lives planned in both of those cases.

What I want to share is an important lesson that having kids taught me.

A decade ago, I wrote a post called Happiness Through Subtraction.

In it, I argue that it’s easier to increase your happiness by removing things from your life that make you unhappy, rather than adding things to your life that you hope will make you happier.

Since we’re bad at knowing what will make us happier, you’re likely to have more success increasing happiness by removing the things you know make you unhappier (because those things are more obvious).

I still believe this is the case, but there’s something that I missed…

Look at the Full Equation

All the worries I had about parenthood before having kids were all valid. In fact, the worries are even worse in reality, because I couldn’t imagine the intensity of the love I’d have for my kids before having them.

Even though the negatives are worse than I imagined, there are so many positives that I couldn’t have even dreamt of before.

My son and daughter have added a richness to my life that I didn’t realize was possible.

These incredible positives result in a overwhelming net positive, even considering the higher-than-expected negatives.

The risk of Happiness Through Subtraction is that you could have a net DECREASE in happiness by removing negatives, if those negatives are linked to harder-to-identify positives that you are also removing.

Applying to FI

So before you quit your job when you hit your FI number, think about the positives you may be also giving up alongside all the obvious negatives you’ll be getting rid of. Find replacements/alternatives for those postives before you pull the plug.

And if it’s possible to test the big change beforehand (i.e. by taking a sabbatical), do it. It’ll be easier to identify the positives you’ll miss.

Learn from Others

If it’s not possible to test beforehand, try to learn from others who have done what you plan to do.

I recently took part in a series called The Other Side of Enough, and I highly recommend you check out the entire series.

It’s incredibly well done, and it’s great for figuring out what you could miss once you decide to quit your job.

Here’s another post I came across about this same topic that I also really enjoyed – What Happens When You Leave Your Career (and Identity) Behind

Rethinking My Future

So does this all mean I’m going back to work?

Absolutely not.

Being able to be with my kids all day, while also still working on projects that are important to me, is incredible.

I’ve never appreciated my past financial decisions more than I do now.

But this realization has inspired me to think differently about future plans.

Why be a solopreneur with all these projects I like working on, when I could work with other people? I’ve always avoided partnering up with people on things (or doing anything that could involve the general public), but maybe that’s the wrong call?

It’s easy to imagine all the interpersonal hassles that could come from working with others, but what are the positives that I’m also giving up with this attitude?

Taking Decisions to the Extremes

Sometimes it’s helpful to imagine the extremes when making decisions.

Would I like to be a hermit and interact with nobody, ever?

Or would I like to be friends with the entire world, and occasionally have to put up with an asshole every now and then?

It’s obvious I would choose the latter, but all my decisions until this point have been moving me toward the former (because of my focus on removing negatives and avoiding potential future negatives).

Happiness Through Addition

Having kids has added more happiness to my life than anything else ever has.

So maybe it’s time to start experimenting with more Happiness Through Addition after all?

Why I'm Appreciating FI More Than Ever Now

Thanks to a huge life event, I'm appreciating the benefits of financial independence and early retirement more than ever!

The post Happiness Through Addition appeared first on Mad Fientist.

Valuable Lessons from My Eighth Year of Freedom

The Mad Fientist — Tue, 03 Sep 2024 16:29:38 +0000

In 2021, I decided to stop doing annual updates.

At that time, I thought I had FI figured out and was just living a “normal” life (so no need to talk about it anymore).

Well, a lot has changed since then!

Turns out, I didn’t have everything figured out :/

I explain more in today’s short podcast episode:

Listen Now

https://traffic.libsyn.com/secure/madfientist/eighth-year-of-freedom.mp3

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Highlights

How the pandemic changed my outlook on the future
Why my post-FI life is drastically different from what I imagined it would be
Learning how to use money for the first time
The reason I’m focusing more on other investments (and what those investments are)
Why stock picking isn’t great, even when your stock picks outperform

Show Links

Full Transcript

Mad Fientist: Hey, what’s up, everybody. Welcome to the FInancial Independence Podcast.

So three years ago in 2021, I decided to stop doing my annual updates. And if you’ve followed the podcast for a while, you know every year since I left my job in 2016, I’ve done an annual update talking about what I learned over that last year.

And when it got to 2021, I felt like I was really just living normal life, and I was getting bored making the annual updates because I didn’t really think much had changed. And I didn’t know if I was actually giving any sort of meaningful advice to anybody by just talking about what I had been doing for the past year.

So I decided to stop doing them and it’s amazing how much has changed since then.

So one, I don’t have it all figured out and I’ve learned a lot over the last three years, so I figured I could share what I’ve learned over those last three years and maybe start doing these annual updates again if I continue to learn things, but I’ve also realized that things are going to get really weird with AI over the next decade, and content is going to be able to be created instantaneously by computers.

And really the only thing I have is my human story. And that’s the most important thing. And my unique experiences that I can share and the lessons I learn through actually living this sort of lifestyle.

So both of those things combined made me realize that, Hey, I should maybe do another one of these at least. And then maybe continuing to do these in future years if I have some interesting things to share.

So anyway, so this is my eighth year of freedom post, and I can’t believe it’s been eight years. That’s absolutely insane, and it was actually August 1st that I left my job, but I’m not really on a good schedule these days, and so this is over a month late.

But hey, better late than never.

Anyway, I hope you enjoy it, and this is valuable lessons from my eighth year of freedom.

So the biggest thing since 2021 is really that I feel like I’m actually using money for the first time. My entire life has been saving money, investing money, hoarding money pretty much.

And I don’t think I’ve ever even tried to use it because using it was always the last resort. And if I was using it, that was a mistake because now that money can’t grow anymore. And it’s been a huge mental shift to now try to use it when I’ve just spent my whole life accumulating it. It’s been a lot of fun and I have a article coming out soon, if I can get around to writing it, talking about learning how to spend and actually enjoying it while I’m learning how to do it. And I think that’s been the biggest change. And particularly we bought a house last year. Our last house, I think we sold in 2014 and we’ve just been renting ever since and renting has been great.

But now that we have a son and we want to settle down and we don’t want to have to move every year if we don’t want to. I know my wife never wanted to move every year, but I was always keen to try something new. But now that we have a son in the picture just having a stable place that we can put all our stuff, and as parents out there know you have a ton of stuff when you get a kid, because grandparents just keep buying them stuff.

So we decided to buy a house and that’s been a great purchase. And this is actually the third house we’ve owned. We owned a house in Scotland back in 2005, and then we bought a house in Vermont in 2011. But this is actually the first house that I’ve enjoyed owning.

For anybody on the path to FI out there who is like me and was just like very motivated to get there as quickly as possible, I don’t think I should have owned houses back then, because any unexpected expenses that came up, I would stress about them and yeah, owning a house is nothing but unexpected expenses. So I think yeah, if I was doing it again, I’d probably rent most of the time that I was on the path to FI and then buy after because now I can actually enjoy it and I am enjoying it. It is a luxury. It is a splurge and it’s a great splurge because I’m talking to you from my perfect home studio that I’ve spent months and months designing and building. And I love it so much. And yeah, if I was as tight with money as I was back in my FI days, I wouldn’t have this studio. And I would have been stressing about all the unexpected expenses that have already popped up over the last year and a half.

So homeownership has been amazing. And again, if you would have told me this eight years ago that I’d want to be a homeowner again after the horrors of my previous two homeownership stints, I would have said you’re crazy, but that just shows how much changes as you get older and as your priorities change.

And the other big thing that I would be surprised about back then that I am loving now is stuff. So even though I just was talking about being overwhelmed by too much kid stuff, buying stuff for the house has been a lot of fun. And it adds to my daily joy. So yeah, I didn’t think stuff actually increased my happiness, but it really does.

And I think it’s mainly because I’ve gone so long without any good stuff. So as we were renting, we would always have furnished rentals. And since we moved so often, I hated packing up boxes and moving. So I just limited the amount of stuff I had. So that was, that just meant that we used, all the rental house’s kitchen stuff, and whatever TV was on the wall and sound system was there, we just used that.

But, now that we have our own home, and we know we’re staying here for a while, I bought nice things that I really do enjoy. So anything from, the coffee grinder that I’ve talked about many times on this show and other shows, to just like really nice mugs, to a great sound system for the TV and speakers in every room that make music sound so good and I can just turn it on instantly and just have music following me around the house.

And then obviously the studio is just kitted out with everything that I’ve ever wanted. Speaking of the studio, I’ve set it up so that I can do a video from here now. So if you want these podcasts to be in video form in the future, go to madfientist.com/youtube and follow me there. And if I get enough YouTube followers, I’ll start to make the efforts to do video, which would require me to actually shower before recording these, which today, that did not happen so I’m glad this one’s audio, but. If I get enough followers on YouTube, then I’ll start doing these in video and I’ll give you a little tour of my home studio, which is incredible. So go to madfientist.com/youtube to follow me on there.

So those are two big changes, my love of home ownership and love of stuff.

But going back to the initial point where I’m actually using my money for the first time, I realized that’s a big mistake I made on my journey to FI was just disregarding the fact that actually one day you are going to spend your money and if you’re not really practicing how to spend it you’re not going to be that good at it.

So this has been like a three year journey of trying to get better at spending money and trying to reframe it as something that does get used and you use it to increase the happiness in your life. And the one thing I keep saying to myself is something that I heard in the Die With Zero podcast that I published a few months ago with Chris Hutchins.

And that’s when Bill Perkins said, when’s the party? And I keep saying that to myself in my head, because that’s true. When’s the party? Because even if you don’t spend your money, you’re going to give it away at the end of your life. So there’s a party at some point and somebody who’s going to benefit from it.

So you can either use it during your life and give it away during your life or at the end of your life, it’s all going to be given away and somebody is going to have a party and it may be a charity, it may be your heirs, if you want to be a part of that party, then you need to figure out how to spend it or give it away during your life.

And that’s something I’m really focused on.

So in that same sort of vein as, using money for the first time, I feel like this is the first time I’m appreciating all my past investments. It feels like all my investments are really paying off. So for example, like to buy this house I used my portfolio to do it and that was just eye opening because you’re saving for FI and it’s all just this theoretical thing.

It’s not like you all of a sudden take out all your money, give it to the FI person and they give you all the freedom. It’s not like you’re actually using it to buy freedom. You are obviously, but you’re not clicking a button to do it. It’s just a theoretical thing like, okay, yeah, my bank account says I have this much in it, so now I don’t have to work anymore.

But it doesn’t really feel like you’re utilizing that money. Whereas when I bought the house, I did just do that, which I clicked a button and pretty much bought a house, which is a crazy transaction that I’m going to write an article about in the future as well. Hopefully next year. Cause it was just the most insane amazing financial transaction I’ve ever completed in my life.

So anyway, so that was like the first time I was like, Whoa, okay. So yeah, I did save up a good amount of money and it can be used to buy amazing things like this big stone house in the countryside. But I also feel like, other investments are also paying off. So my focus on health over the last decade and now I’m in my early forties and I still feel like I’m 20 and I’m very thankful for that, especially having a little toddler to chase after and pick up and throw around.

So I feel like, yeah, those past decisions are starting to bear fruit and, like my friendships I get to go home to the States and see some great friends that I’ve had for decades. And we pick up exactly where we left off. And it’s we’ve just never stopped hanging out, which is fantastic.

My 22 year investment in my relationship with Jill has made it possible. greatest human to ever exist in the entire history of humanity. So that investment is paying off in ways I wouldn’t have even imagined. And so it’s making me think of my future investments. And now the money investment is all on autopilot and locked down, and I’m not worried about that, it’s focusing on those future investments.

So again, maintaining health. So that’s a huge focus because I am an older dad, but I don’t want to act like one. So I want to be playing ice hockey and skiing with my son and hopefully doing it for the next 40 years rather than just the next 10 or 20.

So health is a huge focus. And I know that investment pays off, but it’s one of the most important ones, so that’s the one I’m focusing on most.

I’m trying to think about ways to increase the investment in my friendships that I’ve built over the last few decades and figuring out ways that maybe money can help that by maybe, renting an Airbnb where my friends live for a month and just being there rather than just coming into town for a week and seeing everybody quickly, just like actually living there for a little chunk of time every year so that we can just pick up where we left off and continue to build those relationships that I value so much.

And then the biggest investment, investing in my son, which has already paid off in so many ways and has been the biggest gift of FI, being able to be there and spend all this time with him and all this quality time as he’s been growing up and to be there for all the big milestones. So to continue investing in him and enjoying every minute of it along the way.

So again, it’s thinking about ways that money can contribute to that and help that. So rather than focusing solely on the money investment, I’m again, trying to reframe it and think about how I can use money to increase these other investments that are far more important at the end of the day and are the ones that really bring a lot of happiness.

And the other big thing that I’ve been thinking a lot about over the past few years is something I think the pandemic taught me, and that’s, there’s a risk to putting things off. And I think back pre pandemic, I always just thought yeah, I can save all this money and then in a few years I’ll do this.

But the pandemic showed us that, this period of health and peace and free travel, we’ve taken it for granted because it’s all we’ve known and that’s not guaranteed to continue.

So when I think about whether we should take a trip to the States this spring, or if we should just put it off to the summer or fall. I’m less inclined to put things off these days.

And I think, yeah, the pandemic was the thing that really brought that to the forefront of my mind. We were trapped in Scotland for a couple of years and I couldn’t see my family and friends and I couldn’t do the things that I wanted to do and we couldn’t travel freely. So that’s been another motivation to use my money more now, rather than letting it sit there and accumulate more so that I could use more later.

So those are the real big things that have been at the forefront of my mind over the last few years, since my last annual update, and it is a huge mindset shift. But it’s one I needed to have, and I’m glad that I’m having it, and I’m glad I’m in the position that I’m in to enjoy it while it’s happening.

So a lot of the future content I have is going to be based around that. So again, I’m going to have a big article about learning how to spend, because I’ve learned, I think my list is up to 14 things that have really been helpful in that regard. So I’m going to publish that soon, hopefully. I’m also going to do a Perfect Life version 2.0. I have a post called The Perfect Life that I wrote even before I reached FI and I haven’t read it because I want to read it right before I write this new post, but it’s going to be funny to go back to that and see how different I’m living life now than I imagined I would have lived it back when I wrote that article and it’s going to be fun to write a new version of it to see what the future perfect life is going to be looking like now that we can build exactly the life we want. And I feel like we’re doing that and we’re getting very close to our ideal lifestyle, but here we are eight years in and still experimenting a lot and still trying to figure it out. So it’s, yeah, it’s definitely not as easy as you assume it would be.

So the only other minor thing I wanted to chat about is stock picking because, it’s obvious what the downsides to stock picking are when you’re wrong, you lose money or you make less money than you would have if you weren’t trying to pick individual stocks, but I just wanted to touch on two success stories that are still not ideal. So even if you pick the right stock, there’s two examples I have for you. And the first is I bought Nvidia back in 2012. So for anyone out there who knows what Nvidia stock has done since then, that was very early and that money would have grown to an insane amount of money had I held on to it.

But, that’s the problem with picking individual stocks.

Back then I was a software developer and I could see that graphics were going to be more important in future years. And I thought, okay, investing in the best graphic processing unit producer would make a lot of sense.

So I invested and sure enough, I think it went up maybe 20, 25 percent and I sold it and I thought I was a genius and yeah, looking back on it, yeah, it was a good investment, whatever. But had I not sold it, it would be up thousands of percent. So even though it was a success. There’s still a lot of regret there cause I sold way too early.

So that’s one example of stock picking going right, but still feeling like a failure and something that you should have done better.

And the second example is probably around the same time, I think. Apple was trading at around its cash value. So ignoring all the intellectual property it had and all the products and everything, it just was pretty much trading for what the cash it had on hand was.

So I had some money lying around at that time and I was like okay, I don’t see anything else good to invest in, so I’ll just put it into Apple. And so I’ve just left it there and the dividends have just been reinvested up until recently. I turned that off because I was like, this is just getting too big of a chunk of my portfolio.

This was in a taxable account too, which is silly back whenever I did that. So I have this huge unrealized capital gains, so I’d ideally not sell it, because I would pay a lot of tax on it. And yet it’s just becoming an increasingly bigger and bigger part of my portfolio. So even though I want my little fun portfolio size to be 5%, Apple alone is already bigger than that, not even including, Apple’s. Portion of all the index funds I own.

So anyway, so that’s another example of stock picking going right, but then ending up in a sort of difficult situation where a single stock is now a bigger percentage of my portfolio than I want it to be, but if I was to pare it down, then I would be hit with a lot of capital gains taxes.

So there’s just two examples.

Because like I said at the beginning of this, it’s easy to see how stock picking is bad when it goes wrong cause you lose money or you make less money than you could have. But when it goes right, there’s still complications. And that’s why I’m so glad that the majority of my portfolio is index funds that I plan to never sell.

And that just makes life so much easier. You just let it keep compounding. It keeps doing its thing. You’re not switching in and out. You’re not watching it. It’s just growing. And it’s just a much easier way to invest. And it’s no doubt it’s going to be more beneficial than me trying to pick stocks, even if I pick winners, which again, I don’t always, those are two examples of winners, but even then it comes with complications.

So anyway, that’s what’s been happening with me for the past few years.

Expect some more detailed and actionable posts about some of the topics I’ve discussed today coming up. Maybe not this year, maybe early next year. But if you’d prefer these updates to be in video form in the next few years, then just head to madfientist.com/youtube to follow me there. And if I get enough subscribers there, I’ll just start doing them there.

But yeah, I hope you’ve been doing well, and one other thing that I’ve been thinking about over the last few years is just how grateful I am for the Mad Fientist and for you. It’s amazing that I can just go months without publishing anything, and then I send out one email and I get all these lovely replies and suggestions and intelligent people to communicate with. And it’s incredible. It’s just another investment that seems to now be paying off.

So all those past decisions of putting the reader and listener first and not trying to sell some garbage thing that you don’t need or trying to put ads all over the place, i’m happy I made those decisions because now I feel like I’ve built up this relationship with you guys and I’m so thankful for it.

So thank you for listening, thank you for all your feedback and for being kind internet people, because I’m not sure who else out there can send out an email to a hundred thousand plus listeners or readers and then just get all these nice replies and none of the normal internet garbage that I think a lot of people have to deal with.

So thanks for listening. I hope you enjoyed it, and I’ll catch you in the next one.

Valuable Lessons from My Fifth Year of Freedom

It's been five years since I left my full-time job so here's my fifth (and final) annual update on post-FI life!

The post Valuable Lessons from My Eighth Year of Freedom appeared first on Mad Fientist.

Bill Perkins – Memory Dividends, Time Buckets, and Maximizing Net Fulfillment

The Mad Fientist — Thu, 02 May 2024 08:24:55 +0000

Out of all the episodes of the Financial Independence Podcast, this is the one I wish I heard when I was on my journey to financial independence

Bill Perkins, author of Die with Zero, joins Chris Hutchins on the All the Hacks podcast to discuss what money is really for – maximizing net fulfillment.

This interview is incredible, so I reached out to Chris to ask if I could share it with you all, and thankfully he agreed!

Listen Now

https://traffic.libsyn.com/secure/madfientist/bill-perkins-interview.mp3

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Highlights

Why you should maximize for net fulfillment rather than net worth
When is the best time to allocate money to get the most fulfillment
Why you should time bucket your experiences instead of having a bucket list
How to break out of earning-saving-investing autopilot
Why you should fear wasting your life more than running out of money

Show Links

Chris Hutchins - Why You Should "Retire" Before You Hit Your Number

The founder of Grove shares important lessons he's learned as an entrepreneur and explains why you may want to quit your job before you hit your FI number!

The post Bill Perkins – Memory Dividends, Time Buckets, and Maximizing Net Fulfillment appeared first on Mad Fientist.

The Best Advice from JL Collins

The Mad Fientist — Tue, 05 Dec 2023 13:08:48 +0000

To celebrate the release of JL Collins’ new book, Pathfinders, I collected all the best advice from his Financial Independence Podcast interviews!

JL has been on the show three times:

First, back in 2012 (he was my second guest ever!)
Second, when his hit book, The Simple Path to Wealth, was released
Third, during the depths of the Coronavirus crash

That last interview may be my proudest moment as the Mad Fientist (I explain why during the show).

Hope you enjoy this jam-packed episode!

Listen Now

https://traffic.libsyn.com/secure/madfientist/jl-collins-highlights.mp3

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Highlights

The power of FU Money and why it may be less money than you think
JL’s biggest investing mistake and what he learned from it
Why index investing is superior to active investing
Are REITs and international funds necessary
Why your house may not be a good investment
Thoughts on stock picking and actively-managed funds
What makes Vanguard unique and why it’s best for investors
The three keys to becoming wealthy
Lessons learned from Black Monday
How to prepare for the next market crash

Show Links

First Interview: JLCollinsNH – The Importance of F-You Money
Second Interview: JL Collins – The Simple Path to Wealth
Third Interview: Coronavirus Market Crash – Is This Time Different?
JL’s Website – JLCollinsNH.com
The Simple Path to Wealth
How I Lost Money in Real Estate Before it was Fashionable
Pathfinders: Extraordinary Stories of People Like You on the Quest for Financial Independence―And How to Join Them

The Best Advice from Mr. Money Mustache

To celebrate the 10-year anniversary of the Financial Independence Podcast, here are the highlights from my first guest - Mr. Money Mustache!

The post The Best Advice from JL Collins appeared first on Mad Fientist.

Your Money and Your Health

The Mad Fientist — Mon, 06 Nov 2023 16:10:50 +0000

Health is similar to finances in that there are many overly-complex things people say you need to do, but there are just a few simple things that actually matter.

What is the “spend less than you earn, invest in a diversified/low-fee portfolio, and leave it to grow/compound” of the health world?

That’s what today’s post is about!

Parker Hewes wrote a book called Lifelong Youth: The Simple Path to a Long & Youthful Life, and today he shares the eight health behaviors that will do the most for your longterm health and wellbeing.

If you’d prefer to listen to a podcast instead of read the article, he also recorded a short episode that you can listen to on Spotify or Apple Podcasts.

Take it away, Parker!

We fientists are optimizers – endlessly on the hunt for improvement, efficiency, and growth.

We look at every decision with intentionality and a dose of stoicism. This helps us successfully create a life that focuses on what matters most.

And for many of us, health is near the top of that list.

But as people who constantly strive for more information and ideas of how to improve or do things better, diving into the chaos of the health industry can create a fair amount of confusion and overwhelm.

There’s so much information in the health world that it can be difficult to know where to begin or where to focus our valuable energy and time. Like with our finances, we want to get the most bang for our buck when it comes to our decisions about health. But most of the time, the information that we find on the internet is just fluff.

I get it. Humans are attracted to new and novel things. So, when a new diet plan or exercise routine comes around promising bigger and better results, it can be enticing to promote and accept it as Gospel. But when we constantly focus on what’s new and novel, we lose sight of the fundamentals that underpin success. Also, the sad truth is that those new and novel things won’t work very well if you don’t have a foundation of health underlying it all.

So, for those of us who have ever felt lost on our health journey, floundering between various health trends and fads, this article is for you. Because health is not about finding a quick fix in hopes of solving years of problems or inefficiencies…it’s about consistent habits that make healthy behaviors instinctual and natural. And compared to the amount of advice floating around the health universe, the behaviors that truly matter for your life are relatively few.

Thankfully, before I became a financial nerd, I was a health geek. Inspired by my Mom’s struggles with food allergies as well as my education as a doctor of chiropractic, I put thousands of hours into reading research and consuming every health book available (which, in my opinion, are the best places to get your health information).

After roughly 15 years of studying, what resulted was this little book about health that I call Lifelong Youth.

Lifelong Youth means living your life to the fullest. It means you not only live longer, but those years are filled with activity, adventure, and fun.

You don’t just sit on your couch when you reach some arbitrary age, you maintain your youthful exuberance long into the golden years. People admire you as being “the most active 80-year-old they know” because you continue to do the activities you loved in your younger years. You may not have the same spritely pep in your step as your 20-year-old self, but you’re still getting out there and experiencing the world like a 20-something.

To put it in the words of the World Health Organization, you have achieved complete mental, physical, and social well-being, not merely the absence of disease or infirmity.

I define well-being, lifelong youth, and health in the same way. To put it simply, health and well-being mean having more positive life experiences than negative ones. Whether it’s through mental stimulation, social connections, or feeling physically strong and capable, the more positive experiences you can create for yourself, the greater your likelihood of achieving lifelong youth.

With this definition, you have the freedom to choose your path. There is no exact recipe or diet that will get you to a long and happy life. The best plan is the one you will stick to, which means you may decide to focus on different health behaviors at different times. As long as you are thinking about each health behavior throughout your life, recalibrating along the way, and tinkering with new ways to form habits, you will be doing it right.

Thankfully, I have created a simple list of the health behaviors that deserve your attention throughout life. These behaviors have the biggest impact on your health, so developing habits around these behaviors will help you achieve lifelong youth faster and more effectively, without wasting time floundering between the latest dietary trend and exercise fad.

One last thing, before I get into the summary of health behaviors…I want to urge you that it’s never too late to start making progress toward your health.

You can make immeasurable amounts of progress in a short amount of time, which can impact your outlook and quality of life on an exponential scale. And since the organs and tissues in your body are always regenerating, every day is an opportunity to literally grow a new and better body than yesterday.

How you choose to eat, think, move, and act today will provide the resources that your body is using to grow new cells and replace old cells. So, even if you have a history of treating your body less than ideal, you can always get back on track.

Now let’s get to it! Here are eight of the most essential health behaviors that will help you achieve lifelong youth today, tomorrow, and for the rest of your life.

Health Behavior #1: Find Your Sense of Purpose

Why do you wake up in the morning? If you are like most of the longest-living people on Earth, your reason for getting up is to serve a higher purpose in life. And by having a sense of purpose, some estimates say you could lengthen your life by an average of seven years.

People with a strong sense of purpose are happier, too—your attitude about life changes when you feel like you have a reason for living. Just ask a new parent how they felt when they held their baby in their arms for the first time. Or you can ask the happiest cities in the world because a distinct feature of happy cities is that their citizens have a deep sense of purpose.

I have created a workbook to help you get more connected with your sense of purpose. Check it out at lifelongyouthbook.com/resources under the ‘Find Your Sense of Purpose’ workbook, or just download it here.

Health Behavior #2: Eat Food a Caveman Would Recognize as Food

I could go on for days about what kinds of food to eat and why. But, I could also summarize it in a few sentences:

Eat real food, the kind a caveman would recognize as food.
“Process” food in your own kitchen, don’t outsource it to some factory or laboratory.
Only eat when you’re hungry.

I’m not saying you need to eat like a caveman or practice the paleolithic diet, but you should strive to eat food that is just one or two steps away from what it looked like when it was alive (the only exception being some oils and fats). And, in terms of timing, you’re better off eating only when you are actually hungry, not just out of habit, time of day, or boredom.

To further explain, when you go to the grocery store, you should recognize everything in your cart as something that was alive (or came from something alive) very recently. A red pepper, a potato, a ribeye steak, an egg, etc.

You don’t need to get caught up with whether or not a potato is better than a carrot, as long as those are the main foods you’re eating. If you’re doing it right, most of the foods in your home will have a shelf-life of less than a month.

Also, although I believe you can be healthy without feeling like you are making sacrifices, here are a few of the most offensive foods that I think you should limit from your diet:

Corn. Corn has a high inflammatory ratio, and we tend to eat a lot of it since corn is so prevalent in processed foods and animal products (we feed livestock a lot of corn). Corn is the main reason why factory-farmed meats and animal products are more detrimental than beneficial for you. With its high level of inflammatory fats, corn fattens up cattle and makes them more susceptible to illness. Consequently, those unhealthy biomarkers transfer into your body when you eat meat and milk products from those animals
Artificial sweeteners, fructose, and high sugar foods (aka sugary drinks). Don’t drink your sugar!
Wheat flour. Flour tends to be overconsumed, and it creates a large glucose spike in your bloodstream which causes your body to frantically store the sugars as quickly as possible. Most often, your body’s first choice is to create a package of fat for storing the excess glucose. Getting glucose out of your blood is good for your circulatory system and nervous system.
“Sweet” saturated fats. These include sweet fat or junk foods like baked goods, ice cream, and french fries. But also, you get similarly negative effects from a diet that contains lots of processed animal products as well as processed carbs. Animal products contain lots of saturated fat, and processed carbohydrates get converted to become a major source of excess sugar in your body. So, eating a diet high in processed carbs and high in processed meat (the typical American diet) creates more of these detrimental proteins called AGEs. These AGEs literally cause you to age faster. But don’t worry, If most of your carb intake comes from fruits and veggies (which have a lot of protective fiber), you’re in the clear.

Health Behavior #3: Drink Water

Water enables all life to exist. Considering that you, too, are alive, you probably want to put a lot of water in your body.

If we banned sugary drinks from America and everyone only drank water and tea instead, there would not be an obesity epidemic anymore. If you want to lose weight, the single greatest change you can make is to avoid drinking your calories through sodas, sugary liquor, and other sweeteners.

Also, your brain often confuses thirst with hunger. When you feel hungry, you probably need water more than you need food.

However, I admit that some beverages carry incredible benefits, too. For those of you who just can’t drink water all day, every day, try tea (green/mint/oolong/chamomile), organic red wine, or coffee in addition to your daily water requirements. Only 1-2 glasses of wine per day, though. And when I say coffee, I mean brewed coffee. Those frappe mocha cappuccino concoctions are not coffee; they are sugar in a cup. Try not drinking coffee after 12 pm either, or it will mess up your sleep habits.

Here are a few of my favorite habit-forming tips that helped me drink more water and fewer sugary drinks:

Use habit stacking to your advantage. If you already have a routine set of habits that you perform every day, squeeze in your new habit amongst the rest (like a habit sandwich). For example, when you wake up in the morning, after brushing your teeth, drink one full glass of water while your coffee is brewing. Here, you have stacked three habits on top of each other: brushing your teeth, drinking water, and drinking coffee. Plus, this habit uses temptation bundling by pairing a habit you want to do (drink coffee) with a habit you need to do (drink water). These strategies will make your water-drinking habit easier to complete every day. Mad Fientist’s Note: Check out my interview with James Clear for more on habit stacking!
Remove the cues of your bad habit from your environment. For example, seeing a beer in your fridge may be a cue that you “need a beer.” So, take the beers out of the fridge. You can keep drinks in the house for your friends but consider putting them in an obscure location or behind a locked door.
Swap out your alcoholic or sugary beverage with water, red wine, tea, or coffee. Put it in an opaque cup and see if anyone notices. Or be straightforward and see if anyone cares. Besides giving you a bit of a hard time, I doubt you’ll lose any friends over this.

Health Behavior #4: Sleep Like You Mean It

Every animal sleeps. So, for 1/3 of the day, every animal is willing to give up eating, mating, and watching out for predators.

Why do we make such costly sacrifices to sleep? Because quality sleep is like the Swiss Army knife of health behaviors. By getting better sleep, you can improve nearly every system in your body. Conversely, if you struggle with an illness or other ailment, poor sleep is likely a contributor.

We have this culture where we are proud to work long hours and sleep very little. People seem to wear poor sleep as a badge of honor. But really, poor sleep decreases productivity and increases all-cause mortality. So, without proper sleep, you’ll die sooner, get sick more often, and be worthless throughout the day.

Here are some other not-so-fun facts that might wake you up to the fact that you should prioritize sleep:

Men who sleep 5-6 hours per night have the testosterone levels of a man who is ten years older. These underslept men also have smaller testicles, produce fewer sperm, and their sperm have more deformities and less motility. If you want a better sex life, or if you’re trying to have a baby, sleep more.
Poor sleep messes up your hormones to promote weight gain. When you are sleep deprived, you produce more ghrelin and less leptin, making you hungrier and prone to overeating. Sleep deprivation also raises cortisol levels, which stimulates fat production.
Your immune system is most active while you sleep. After one night of inadequate sleep (<4 hours), natural killer cell activity decreases by 70%. One night! Since natural killer cells play an essential role in stopping cancer and tumor growth, we could reasonably assume that lack of sleep increases your risk for cancer and tumors. That is why working the night shift is now considered a carcinogen.

Restful sleep is the single best thing you can do for full body health. Your body heals, repairs, and prepares for the next day while you’re sleeping. So, every time you skimp on sleep, you restrict your body from doing its main job, healing!

Plus, there is scientific proof that the more you sleep, the more attractive you appear, and the better you get at managing stress during the day. Sleep makes you better at regulating your emotions and it is a more effective antidepressant than the best drugs on the market. Sleep also alters muscle memory and increases peak force in muscles, which leads to improved reaction times, reduced injury rates, increased accuracy and speed, and decreased fatigue. In other words, your brain is practicing while you sleep! If you want to be a better athlete, artist, employee, etc., sleep like you mean it.

I am a stickler about this health behavior because it is so easy to accomplish, and few things feel better than waking up well-rested. Therefore, you now have a prescription to sleep more. And here are some tips for getting the kind of sleep you need and deserve:

Regularity is one of the most important factors for quality sleep. Get in the habit of going to bed and waking up at the same time every day, even on weekends. To help form this habit, write down an easy activity that will at least get you started. For example, “At 10:00 pm, I will have my pajamas on, and I will untuck the corner of my bedsheets.” You technically don’t have to go to bed, but you at least form the habit of being ready for bed at the same time every night.
Create a bedtime ritual. Like shooting a free throw, having a consistent routine will prepare your brain for rest so that you will fall asleep easier. Try reading or listening to a book for 10-30 minutes. Maybe pillow-talk with your significant other is a calming routine for you. Choose an activity that is not very “active.” You want to wind down, not get riled up. To help form this habit, choose an activity that is very easy to complete. For example, use the two-minute rule. Read for 2 minutes before going to bed. Seriously, after two minutes, stop reading. If you are enjoying the book, of course, you can continue, but as soon as you hit the point when it feels like work, just stop. Sleep instead.
When the temperature of your room is a couple of degrees colder at night, you sleep better. The optimal sleeping temperature for most people is 65^o. Also, make sure your bedroom is completely dark. Any bit of light can reduce your sleep quality or wake you up unnecessarily.
Shut your screens off at least one hour before bed. Blue light from electronic devices can switch off melatonin production and make it harder to fall asleep. Wind down with a book, meditation, or a creative activity instead. Alternatively, you can wear blue blocker glasses or turn on ‘night-time’ mode on your devices.
No caffeine after noon. Caffeine blocks your production of adenosine (the sleepiness hormone). Adenosine accumulates throughout the day and peaks after 16 hours of wakefulness. If you drink caffeine after noon, your brain won’t generate enough adenosine, and you won’t be very sleepy at night.
Try not to eat within three hours of going to bed. Eating causes blood to rush to your gut instead of your brain. But your brain needs lots of blood to run your glymphatic system (the cerebral power wash). So, at least once a week, prioritize sleep by eating early and getting quality rest.
You don’t sit around the dinner table waiting to get hungry, so don’t sit in your bed waiting to get sleepy. If your mind is racing, spend less time in bed. You want your brain to associate the bed with sleep, not a wandering mind. Instead, sit or lay somewhere else in your house until you start getting sleepy again. Try meditating or taking your mind on a pleasant walk.
Alcohol doesn’t help you sleep better; it just sedates your brain. That’s why people feel so tired after a night of drinking. Their sleep is fragmented and shallow, so they wake up feeling unrefreshed and unrestored, even if they slept over 10 hours.

Health Behavior #5: Move Naturally and Play

Do you ever dread going to the gym? I sometimes do, because working out often feels like work; it’s just not that fun for me.

Thankfully, you don’t have to live at the gym to be healthy. If you are like most people, you aren’t trying to be a pro athlete or an Olympic powerlifter. Your goal is to be generally fit, so you can keep doing the activities you enjoy for the rest of your life. You can achieve this goal and have fun along the way; you don’t have to suffer through the same old workout routine.

Also, being a mover is more important than being an “exerciser.” If you have an active lifestyle that keeps you moving for most of the day, you’ll look and feel better than the desk worker who spends two hours at the gym after work. The longest-living people on Earth rarely go to the gym, but they stay fit and healthy because their lifestyle is a constant expression of movement and exercise.

Granted, weight training is a useful tool — the WHO recommends at least two days of weight training per week. But lifting weights doesn’t have to be a sterile, lifeless routine of sets and reps. If you enjoy weightlifting, be my guest. But if not, there are plenty of other ways to make exercise fun and challenging at the same time.

Besides, being an “adult” and having “responsibilities” does not mean you have to stop playing, imagining, and exploring. These qualities are what make our species successful. In the words of Todd Hargrove, “Play is not about doing things that are immature, frivolous, or trivial. It is about getting absorbed in an activity that is intrinsically motivating.” Play means you practice and fiddle around with different ways of doing things until it falls into place. You tinker and fine-tune until it feels right.

So, whether you are at the gym or out in nature, play around with your movements. By tinkering and fine-tuning, you’ll start to enjoy exercise because your workout routine will look less like work and routine. Pretty soon, you’ll be craving activity, and fitness will just come naturally.

If being creative with your fitness doesn’t come as naturally to you, try these life hacks for integrating more movement into your life:

Change your environment to prioritize movement and play over lounging around. For example, push your couch far away from the TV and put a mat on the ground instead. You are more likely to sit on the floor and practice mobility if you have space for it. While watching TV, you can play around with different positions and stretches, which is great for movement health and long-term mobility. Also, getting up and down off the floor is a great predictor of longevity.
Make sports equipment, exercise equipment, toys, and games easily accessible. When exercise is more convenient, you are more likely to do it. Meanwhile, make sedentary activities less accessible and out of sight. Consider putting your TV behind cabinet doors and hiding the remote. Every extra step you add will make your bad habit more inconvenient, and you’ll be less likely to consume it.
Use gateway habits. Instead of saying, “I will go for a run every day,” say, “I will put on my running shoes at x:xx o’clock every day.” Smaller habits are less ominous, so you are more likely to maintain them.
Use the two-minute rule — downscale your habit into a two-minute time frame. Once the two minutes are up, you are done for the day. If you want to keep going, you are welcome to, but you don’t have to. Never miss twice, though. If you miss one day, make sure you keep the habit alive tomorrow.
Join a club, exercise group, or sports league. Creating a culture around your desired behavior helps you stay motivated.

If you’d like a little more guidance on the type of activities that will help you live your best, most active life, follow these activity guidelines:

Guideline

Description

Examples

5x/wk or 150min/wk

Move and be active (moderate physical activity)

Moderate activities feel like work, but not in an unpleasant way. Your heart rate is elevated to a point where it would be challenging to sing but easy to talk (60-80% of your max heart rate).

Brisk walking/Hiking

Gardening/Yardwork

Household chores

Jogging

Cycling/Mountain biking

Swimming

Playing around (e.g., climb, swing, chase, jump, crawl)

1-2x/wk

Do something heavy

Whether you do these lifts in a gym or outdoors, make sure you expose yourself to all types of movements, not just one or two.

Focus on proper form. Quality and control matter more than sets and reps. And remember, have fun! Play around with different movements and make it a game or competition.

Overhead push (e.g., chest/shoulder press)

Overhead Pull (e.g., pull up, cable pull-down)

Horizontal Push (e.g., push up, bench press)

Horizontal Pull (e.g., rows)

Squats

Hip Hinge (e.g., deadlift)

Lunges

1x/wk

20 minutes

Do something vigorous to max out your heart rate

Vigorous activity feels hard and requires willpower to continue. Your breathing rate is high enough that you cannot have a conversation.

Sprint a hill five times

HIIT Workouts

Sprint Rowing

Sprint biking

Lap swimming for speed

Periodically

Practice coordination, balance, and ROM

Focus on a movement that you are not very good at and do those movements more often. After all, you are only as strong as your weakest link.

Ankle mobility exercises

Walk on an unstable surface (e.g., slackline, 2×4, curb)

Yoga

Play sports

Health Behavior #6: Find Your Tribe

Socializing is one of the most dependable means of improving your health and happiness. The happiest people on Earth socialize at least eight hours a day, and the world’s longest-living cultures spend much of their after-work time in a social setting.

However, when you hang out with your friends, try to do healthy activities. Instead of drinking and sitting around a table, you might choose to do movement-based activities like hiking or playing yard games. Behaviors are contagious, so if you choose to move, play, and socialize all at the same time, everyone will maximize their health and take another step toward Lifelong Youth. If you want some ideas to spark your creativity, check out the ‘Movement Games’ addendum found at lifelongyouthbook.com/resources. Or, download is here.

To help you prioritize social time, consider joining a club that meets regularly. Some people need a little nudge to hang out with friends, and it helps to have a scheduled time in their calendar. And when you greet your friends and family, try approaching them in three ways: touch (e.g., hug), words of affirmation, and eye contact. This practice helps build stronger relationships and establishes a deeper connection.

Finally, if you’re worried, answer these questions to determine the quality of your friendships and their impact on your health.

Do your friends smoke?
Are your friends overweight because of unhealthy behaviors?
Do they drink more than two glasses of alcohol per day?
Do they eat an unhealthy diet?
Are they excited about life, or are they prone to complaints and negativity?
Does their idea of recreation include watching TV and sitting around, or would they prefer to go outside and be active?
Are they curious about the world?
Do they listen as well as talk?
Are they interested in trying new things, or are they tied to a consistent routine?
Do they engage with the community and encourage your engagement?
Do you feel better or happier when you are around them?

Health Behavior #7: Embrace Discomfort

This may be my favorite behavior from a philosophical perspective.

With a mindset that pushes me to embrace discomfort, I believe you can accomplish anything. That’s because embracing discomfort (or said another way, voluntarily exposing yourself to a small amount of stress) increases your adaptability and resiliency as a human. Those two words, adaptability and resiliency, characterize exactly what it takes to live longer, healthier, and happier. And by voluntarily exposing yourself to small doses of a stressor (and doing so in a controlled way), you train your body to overcome any stressor, even the kind that catches you off-guard and occurs at the worst possible time.

With an ‘embrace discomfort’ mindset, you become the master of your stress, not the victim of it. And realizing you have control over outcomes, your emotions, and even your physiology (your body’s internal responses) is a philosophy that will change your life forever.

Now, the trick to embracing discomfort is figuring out the proper dosage. For every bout of stress that you voluntarily impose on yourself, you will need to play the role of Goldilocks and assess whether you are adding too much or too little discomfort onto yourself. Even though I wish I could give you a universal prescription for how to impose just the right amount of stress, I sadly cannot. Everybody has a different stress tolerance, and your tolerance level is always changing depending on your behaviors, your environment, the stages of your life, and the other stressors you were exposed to today. What I can prescribe, though, is an intentional program of stress exposure that focuses on mindfully assessing how you feel and respond to every instance of voluntary stress exposure.

For example, sun-tanning is a method of voluntarily exposing your skin to the stress of the sun. If you’re doing it right, you will stay in the sun for just the right amount of time so that you get a tan without getting burnt. However, to accomplish this, you need to be mindful of how your skin is reacting to the sun as time goes on. We all know that you can’t just sit in the sun all day and expect perfect bronzing. You have to build up your tan incrementally. If you try to do it all in one day, you won’t be very happy tomorrow.

The same idea is true for any stressor. Each time you expose yourself to controlled stress, pay attention to how your mind and body feel afterward. Could you have pushed a little harder in that workout yesterday, or did you go a little too hard, and you are sore for three days instead of one? Did you feel overwhelmed by the number of tasks on your list today? Did it paralyze you from getting things done? Or were you in the zone, cranking through your tasks with focus and efficiency?

For some behaviors, it will be easy to see the results of too much or too little stress. When you get sunburned, it is obvious that you stayed outside for too long. For most stressors, though, this is not the case. Your behaviors won’t always give you immediate feedback. This is why it’s important to lean into discomfort. Embrace it. Do things that are difficult, challenging, and a little bit uncomfortable. Your body likes to be challenged and pushed, and you are capable of more than you think. When you allow your body to adapt and grow, you’ll be surprised how much progress you can make in a short amount of time.

Exposure to hot and cold temperatures are two examples of the way I embrace discomfort. Incrementally embracing the extremes of hot and cold can have widespread effects on your physical and mental health, and these tactics have been utilized for thousands of years. I’m sure you’ve heard of these methods before, they include cold water immersion (aka cold plunge, ice baths, etc.) and sauna (infrared, dry sauna, wet sauna, etc.). I won’t get into the specific benefits of each method, but you can check out my book and really nerd out if you want to. Instead, I’ll just give you some tips on how to integrate these methods into your life.

Do things outside, in all types of weather. The easiest way to embrace discomfort is to step out of your climate-controlled box and experience the real world. Remember, there’s no such thing as bad weather, just bad gear.
View stress from a different perspective. Think of demanding tasks as challenges rather than threats. That way, you will no longer be the victim of stress but the master of it. Instead of just “dealing” with discomfort, you’ll embrace it, welcome it, and seek it out.
Cold tip: At the end of your shower, turn on the cold for 30 seconds. Yes, it will suck at first, but eventually, you may enjoy the cold. It will wake you up better than a cup of coffee, and you’ll feel warmer when coming out of a cold shower (no more shivering under your towel). As an alternative to cold showers, put an ice pack on the back of your neck for 30 minutes every night. In adults, brown fat resides across your shoulders and down the spine. By placing an ice pack at the base of your neck, you will stimulate brown fat production. This strategy will not work as well as cold water immersion, but it is more tolerable for most people.
Hot tip: If you have the luxury, go back and forth between a hot sauna and a cold shower or cold pool. This creates a kind of pumping effect in your blood vessels, which helps clear away toxins and debris.

Health Behavior #8: Practice Spirituality

You don’t need to be religious to practice spirituality. No matter what you believe, the act of sharing your beliefs with others will add to your health and happiness. This is partly because spiritual gatherings help foster social ties. But spirituality also allows for quiet reflection and mindfulness, which relieves stress. Here are some more reasons why practicing spirituality is good for you:

Every time you focus your attention on something, your brain rewires itself by establishing new neural connections. With meditation and mindfulness, you often draw your attention toward positive emotions like kindness, love, and conscientiousness. In doing so, you literally reshape the structure of your brain. So, you aren’t just ‘faking it ‘til you make it,’ you reshape it ‘til you make it!
Meditation also helps deactivate the genes associated with inflammation, which is implicated in almost every chronic disease that affects our aging population.
After a stress-triggering event, meditation, mindfulness, or quiet repose is one of the best ways to calm yourself down again. In other words, mindfulness helps empty your cup of stress so that it is less likely to overflow and cause damage.

I refer to spirituality as meditation and mindfulness above, but any faith system will likely have similar effects. You could substitute meditation and mindfulness with the words ‘prayer’ and ‘reflection’ if that is what makes you happy.

Either way, I urge you to give your brain some downtime. Unplug for a little while every day, and don’t do anything. Your brain’s default mode is still active during this time, and it is working on problem-solving and creating new ideas. So, even if taking a break seems unproductive, you are more productive in the end.

Finally, a quick tip on the practice of spirituality. Whether it’s prayer, meditation, reflection, or whatever you choose to call it, focusing on your breathing will be impactful and beneficial for your mind and body. A standard breathing cadence for relaxation is to breathe in through your nose for five seconds, hold for seven seconds, and exhale for ten seconds through a relaxed jaw. Exhaling with a slow, long breath will stimulate parasympathetic activity and tell your body to rest, protect, and repair itself.

Conclusion

Now, I know it seems like I just added 8 things to your list of to-dos. But, instead of trying to tackle all 8 steps at once, spend some time figuring out which step seems possible to tackle at this point in your life. Similar to knocking out debt with the debt snowball tactic, start with a small, easier win. Then, you can build up steam toward the bigger tasks and behavior changes that may seem a little more daunting right now. Once you get acquainted with the habit formation process, you’ll notice that it becomes easier to accomplish big changes. And as you learned through a few examples in this article, breaking down the behavior change into small, manageable doses will go a long way.

I know you can do this. At the very least, I hope you’re motivated and inspired by the plethora of healthy options you have to choose from. Health does not have to be the suffer-fest you’ve been conditioned to think it is. There is a lifetime of healthy foods and activities that you can explore without ever getting bored. The world is your playground, so get out there, play on it, and stay young along the way.

P.S. There is so much more information in the book about how to form habits, stay motivated, and apply these behaviors more effectively in your life. Plus, I’ve provided a ton of free resources for you on my website: lifelongyouthbook.com/resources. Enjoy!

About the Writer

Parker Hewes is an adventurer, chiropractor, soccer coach, and author. He loves mountain sports like skiing, biking, rock climbing, backpacking, trail running, and obstacle course racing, which is why his home in Jackson Hole, Wyoming is the perfect playground. Most recently, he’s been humbled to have gotten called back to compete on American Ninja Warrior this year! You can watch him on TV when Season 15 airs. Parker also enjoys consuming endless content in the financial independence space. He plans to be financially independent by age 40. He is also in the process of creating an educational platform about health, wealth, and happiness. So be on the lookout for the Getting Gooder podcast, blog, and book series!

The post Your Money and Your Health appeared first on Mad Fientist.

Jillian Johnsrud & Chad Carson – Small and Mighty Real Estate Investing

The Mad Fientist — Wed, 23 Aug 2023 02:59:55 +0000

On today’s episode of the Financial Independence Podcast, I welcome back Chad Carson from CoachCarson.com!

Chad just released a new book called The Small and Mighty Real Estate Investor, and I wanted to get him back on the show to talk about it.

I’m not a real-estate investor though. So rather than interview him myself, my real-estate-investor friend, Jillian Johnsrud, did the interview for me!

You may know Jillian from Montana Money Adventures, or her new podcast – Retire Often.

She did a fantastic job, so I hope you enjoy their conversation as much as I did!

Listen Now

https://traffic.libsyn.com/secure/madfientist/jillian-and-chad-interview.mp3

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Show Links

Coach Carson Website | Twitter
Jillian Johnsrud Website | Instagram
The Small and Mighty Real Estate Investor Amazon | BiggerPockets

Full Transcript

Coming Soon!

Chad Carson - Retire Early with Real Estate

Chad Carson joins me again on the Financial Independence Podcast to talk about the best strategies you can use to retire early with real estate!

The post Jillian Johnsrud & Chad Carson – Small and Mighty Real Estate Investing appeared first on Mad Fientist.

The Problem with the 4% Rule (and Why You Could Retire Even Sooner)

The Mad Fientist — Fri, 26 May 2023 10:26:27 +0000

This post is a collaboration with Nick Maggiulli from Of Dollars and Data.

I read Nick’s book, Just Keep Buying, and the thing I loved most was how he backed up all his arguments with data.

I was chatting to him on Twitter about why I enjoyed his book, and he said, “If you ever want to collaborate on something (or want me to run a simulation of something for you), let me know.”

I had a topic I thought would be perfect to collaborate on, and this article is the result.

I’ve always had a problem with the 4% rule for early retirement.

It’s not because it’s bad or wrong.

It’s because it’s not for early retirement.

The 4% Rule: Why It’s Not Ideal for Early Retirement

My biggest issue is that it doesn’t account for the flexibility of most early-retirees.

It’s for standard retirement, and “traditional” retirees in their 70s or 80s aren’t likely to have as much lifestyle or spending flexibility as someone in their 30s or 40s.

By the time someone has reached the end of their career in their 70s, it’s likely they:

Have settled on a level of spending they want (or need) to maintain
Have no desire (or ability) to get another job, if the shit hits the fan
Are bound to a particular area (or even house)
Have a high percentage of their spending going towards essential expenses, like food and healthcare
Are more sensitive to inflation (due to a high percentage of essential expenses)

Compare that to someone in their 30s or 40s who retires early and has:

A more flexible lifestyle with less fixed expenses
The ability to pick up part-time or full-time work, if necessary
The freedom and/or desire to live in beautiful but cheap places, like Southeast Asia or South America, to reduce expenses without reducing their quality of life
A high percentage of their spending going towards discretionary expenses (e.g. travel, dining, drinks with friends, etc.)

The 4% rule doesn’t account for any of that flexibility.

It assumes you’re going to spend 4% of your portfolio’s value in your first year of retirement, and then increase that spending with inflation every year after.

Speaking of inflation…

What About Fixed Costs?

In a recent Money with Katie episode with the guy who created the 4% rule, William Bengen, Katie brings up the point that 4% is already conservative because of the way it treats inflation.

It assumes you’re going to inflation adjust ALL of your spending every year, whether inflation impacts every expense or not.

If you have a 30-year-fixed mortgage, for example, your biggest expense may not be impacted by inflation at all!

Other Reasons the 4% Rule is Conservative

I recommend you listen to the entire Money With Katie interview, but here are a few other reasons from that episode that 4% may be overly conservative:

The 4% rule was originally the 4.15% rule, but it was rounded down by mainstream media because 4% was easier to say/remember
The 4.15% rule is now actually the 4.8% rule, based on Bill Bengen’s updated analysis (which includes additional asset classes)

But the Money Has to Last Longer?

So the 4% rule is conservative for a 30-year retirement, but don’t we need to pick a lower withdrawal rate for a 40+ year early retirement?

Yes, but not as low as you may think.

We explored this topic in depth during my interview with Michael Kitces (still one of my most-popular episodes of all time).

If you want to add 10 years to a standard retirement, you should decrease your initial withdrawal rate by ~0.6%.

And surprisingly, a portfolio that survives for 40 years is likely to survive for 50 or 60+ years (see my post on Sequence of Returns Risk to learn why).

Are We Back Where We Started?

So if the 4% rule is actually the 4.8% rule, but we need to decrease that by ~0.6%, aren’t we back to roughly where we started (i.e. 4%)?

Yes, but we haven’t accounted for early-retirement flexibility yet!

And that’s what this whole post is about.

Incorporating Flexibility Into Your Withdrawal Strategy

Before Nick started crunching the numbers, we went back and forth to figure out the best way to factor flexibility into the withdrawal rate, and here’s what we came up with…

Discretionary Spending Percentage

First, figure out the percentage of your spending that goes towards discretionary expenses.

Discretionary expenses are any expenses you feel you could do without, if necessary.

Calculate New Withdrawal Rate

Once you have your discretionary spending percentage, find it on the following table and then pick a comfortable success rate in that column to find your withdrawal rate (the table assumes an 80/20 stock/bond portfolio allocation).

Or, if you have a FI Laboratory account, you can use the calculator I created to compute your withdrawal rate using this method.

If you don’t have a FI Laboratory account, you can get one for free here!

Withdrawal Rules

Now, you should have a withdrawal rate that is higher than 4%, so you could retire sooner (because a higher withdrawal rate means you’ll need to save up less money to cover your annual expenses)!

There’s no free lunch though (you can’t just withdraw more every year and expect your portfolio to last as long as it would have with the 4% rule), so there are some simple rules you have to follow for this strategy to work:

While in a bear market (>20% off of highs), withdraw $0 for discretionary spending
When the market is in a correction (>10% below highs), withdraw 50% of your discretionary budget
All other times, withdraw your entire discretionary budget

Let’s see how this would work with an example…

Discretionary Withdrawal Rate Example Scenario

Let’s say a retiree has $1M in an 80/20 portfolio.

Using the 4% rule, that would allow for $40,000 in spending in year one, adjusting for inflation each year thereafter. With this portfolio and withdrawal strategy, there is a 96.55% chance of success (across all 40 year periods from 1926-2022).

But can we keep the same probability of success while withdrawing more with our new withdrawal method?

Yes, if the retiree follows the rules…

If they have 50% of their spending as discretionary spending, they can withdraw 5.5% (instead of 4%) and still have a 98.28% probability of success (across all 40 year periods from 1926-2022)!

Using our $1M portfolio as an example, in year one they would withdraw $27,500 as essential spending (half of the 5.5%) and then withdraw:

$27,500 as discretionary (if the market is <10% from its highs)
$13,750 as discretionary (if the market is >10% off its highs, but <20% off its highs)
$0 as discretionary (if the market is >20% off its highs)

While the essential spending adjusts upwards with inflation every year, the discretionary spending does not move with inflation (research shows that retirement spending tends to decrease over time, so this gradual decrease in real spending power should be manageable, while also ensuring essential expenses are always covered).

So in year two, after a year of 5% inflation, this person would withdraw $28,875 for their essential expenses and then either $27,500, $13,750, or $0 for their discretionary expenses (depending on the past year’s market performance).

Using this method, you’d have roughly the same probability of success over 40 years and, in most years (i.e. good years), you could withdraw more money!

Or, you could use this method to retire years earlier…

In this example, the person would need to wait until they hit $1 million to retire to cover their $40k of annual expenses, using the 4% rule.

If they use this new method instead though, with a 5.5% withdrawal rate, they’d only need to save up $727,273 to withdraw the same $40k for expenses (although, they’d need to cut back on their discretionary spending in down years).

Other Benefits of this Method

This method allows you to spend more and/or retire earlier, which is great, but it also comes with additional benefits…

Buffett’s quote about inheritance applies nicely to early retirement – “A very rich person should leave his kids rich enough to do anything but not enough to do nothing.”

I’ve seen a bunch of early retirees (myself included) race to the FI finish line, only to be left disoriented when confronted with the fact that money is no longer a motivating factor in their lives (and therefore, they could do “nothing”).

Having this discretionary withdrawal strategy seems to solve a lot of the problems I see with full FI:

It encourages you to focus on reducing your fixed costs (i.e. the expenses that really matter) but lets you relax with your fun/discretionary spending.
In down years, you’re forced to reevaluate your discretionary spending (so you don’t just keep mindlessly spending on things that you may not provide value anymore)
It gives you a pot of money specifically for discretionary spending, so you’ll hopefully be more likely to spend on fun things (rather than just keep saving and saving, like I did).
When you reach your number, you have enough to do “anything” but not enough to do “nothing” (unless you’re happy with $0 of discretionary spending during bear markets).
Money is still a motivating factor in your life, because you may want to have some income coming in during down years
Since your spending/lifestyle is changing year-to-year, you’ll hopefully appreciate things more (rather than just get into a routine of spending/doing the same things)

What if my porfolio’s performance differs from the market?

Just because the overall stock market is tanking, that doesn’t mean my portfolio is down 20%…shouldn’t the discretionary budget be calculated based on what my own portfolio is doing?

We thought about this, but we liked the simplicity of using the market as a guide. All the financial headlines will be screaming, “Bear market!!” when the overall market is down 20%, but nobody cares what your portfolio is doing.

Plus, the time to tighten your belt and be more cautious is when there’s fear in the streets. When the overall market is in a big correction, the real economy may also start to falter. That would make it harder to find work, if necessary. So it makes sense to tighten your budget when the overall economy is on shaky ground.

What if I don’t want to cut back so much during down years?

That’s the beauty of the strategy…you get to decide your discretionary percentage.

So if your fixed/essential expenses are 50% of your budget, but you know you want at least 15% to spend on discretionary spending to enjoy life (even in down years), then just treat 65% of your budget as essential and say that 35% is discretionary. You’ll have to work/save longer, but if that results in an early retirement that you enjoy, it’s worth it.

What do you think?

There seem to be a lot of benefits to thinking differently about your essential and discretionary expenses when it comes to early retirement, but what do you think?

Do you like this method, or is it too complicated/risky? Are there any other benefits/downsides I didn’t mention? Let me know in the comments below!

Just Keep Buying

Once again, huge thanks to Nick for taking the time to run all these simulations!

I probably wouldn’t have gotten around to writing about this topic, had it not been for Nick’s kind offer. So if you liked this post, be sure to thank him by checking out his excellent blog (Of Dollars and Data) and book (Just Keep Buying)!

The post The Problem with the 4% Rule (and Why You Could Retire Even Sooner) appeared first on Mad Fientist.

ProjectionLab – Beautiful and Powerful Financial-Planning Software for FIRE

The Mad Fientist — Thu, 30 Mar 2023 14:50:09 +0000

I love beautifully-designed software.

I love powerful/flexible financial software.

It’s been a while since I’ve found an application that’s both, but that’s exactly what I have for you today…

ProjectionLab is the most beautiful financial planning tool I’ve ever seen.

And, it was created specifically for people pursuing FIRE, so it’s also the most-useful planning tool I’ve found for FI!

The indie developer who built it is here today to tell you all about it.

Take it away, Kyle!

Hey everyone, I’m Kyle.

When I finished undergrad back in 2015, I never thought that just 8 years later I would have achieved financial independence by 30… and I was right! I have not

But I have at least started getting my act together. Thanks in large part to blogs, books, and podcasts like The Mad Fientist, The Simple Path to Wealth, A Random Walk Down Wall Street, Psychology of Money, Financial Freedom, and many other favorites.

During my early years in “the real world,” I rarely thought about money. Sure, I knew a few rules of thumb – save some for retirement, don’t spend an exorbitant amount on rent. But mostly, I would daydream about when I’d have enough PTO for another vacation to go scuba diving and make travel videos.

But what accompanied those daydreams was a gnawing feeling that there should be more to life than the classic American pattern of working until you’re too old to enjoy it.

Does sacrificing the best hours of your best days of your best years to meetings, briefings, and bureaucracy really add up to your best life?

Then I discovered FI community thought leaders like Pete Adeney, J.L. Collins, Vicki Robin, and The Mad Fientist. Their message hit me like a freight train. I knew right away that I needed to take more active control of my financial future. And that if I did, someday I might eventually have the freedom to be my best self all the time, not just a few weeks a year.

I dove head-first down the FI rabbit hole. I learned about leanFIRE, fatFIRE, regular FIRE, coastFI, Barista FIRE, and everything in between.

But something was missing. Theory is nice, but I wanted to really see how this was going to work. I wanted a hands-on and visual way to map out all the options and explore the trade-offs between different life plans. So, I went looking for a long-term planning and forecasting tool. Something modern, fluid, nuanced, and actually fun to use.

[ Cut to black.]

So I made a thing

[Camera fades back in. Blur effect. Narrator wakes up in a daze, trying to shake off two years of caffeine-powered nights and weekends.]

After a couple thousand hours of coding, let me introduce ProjectionLab!

I couldn’t find the perfect long-term financial planning tool, so I decided to build one

With ProjectionLab, you can create beautiful financial plans with a level of nuance and flexibility that exceeds the standard online retirement calculators. You can run Monte Carlo simulations, backtest on historical data, review detailed analytics for estimated taxes, and plan how to live life on your terms. And with some luck, reduce anxiety around your finances.

There is a free sandbox, if you just want to hop in and see how it works. It does not ask to link your financial accounts. You do not have to create an account to try it, and it works pretty well for international scenarios.

It respects your data and will not try to upsell you on advisory services. It’s just a thing I made that you might like

Okay, but who am I?

I am a software engineer from Boston. Originally, I grew up in coastal Maine.

I did not expect to one day become a “Masshole” as they are, um, affectionately called back home … but here I am!

And I did turn 30 this year. Ever since I was a kid, I’ve always had a passion for making things. I started coding video games in middle school, and mastered the art of dodging suggestions to “go play baseball instead”. Over the years, I’ve always had a personal project or two on the side.

The way that coding can enable you to take creative ideas and manifest them in the real world will always feel a little like magic to me. And with side projects, it’s refreshing to be free of the constraints that frequently make writing enterprise software a drag. No stand-up meetings, no sprint retrospectives, no changing requirements, and no funding to worry about!

ProjectionLab started as one of these creative outlets. And it has grown into a lot more.

TL;DR. What can you do with this?

Here is a quick summary:

– Build nuanced models of your whole life

– Plan separately or as a couple

– Define what terms like financial independence mean to you

– Model complex decisions based on goals like achieving FI, taking time off for travel, home ownership, or starting a rental empire

– Create multiple plans and compare them

– Visualize projected cash-flow with Sankey diagrams

– Review estimated taxes and effective tax brackets for each kind of income

– Apply granular controls for how you expect accounts/income/expenses/inflation/etc to change over time

– Experiment with Roth Conversions, 72t (SEPP) Distributions, and other advanced strategies

– Model international scenarios

– Backtest on historical data and run Monte Carlo simulations to analyze the spectrum of possible outcomes

– Track your actual progress over time

– Control where your data is saved, with no link to your real financial accounts

What does FI mean to you?

Think about the future you hope for. What are some of the milestones along the way? One of the first touch points when you create a plan in ProjectionLab is the milestone system. It helps to capture the big-picture goals you care about. And since you’re reading The Mad Fientist, chances are that financial independence is one of them.

But what does FI mean when you break it down? People have different definitions, and I wanted the milestone system to accommodate that. For instance, do you only consider yourself FI at a specific multiple of expenses and a certain liquidity-to-debt ratio? No problem: you can create a milestone with additional criteria.

I’ve put some thought into making milestones flexible and customizable. They can be anything from retirement or purchasing a home, to reaching your personal definition of financial independence, having kids, moving to a new state or country, switching careers, going part-time, etc. They can even have tax consequences.

And most importantly: you can use them as a framework to help scaffold the rest of your plan and control when various events should start and end (income streams, expenses, asset purchases, etc.)

Okay. Whatever. Is that just marketing speak, or is this actually useful? How about we build a scenario together and find out!

Let’s build a plan together

Today, we’ll be an early-career married couple with student loans, currently renting, wanting to have kids someday, and we just found out about this thing called “financial independence.”

Let’s see if we can get a sense for where we currently stand, where we are headed, and how to plan a life we’ll love.

Once we cruise through the setup wizard, here is how things are looking within the Current Finances section. I will also take the liberty to point out that there is a dark mode, if you’re into that

Our current net worth is negative, due to the student loans, but we’re going to get things moving in the right direction soon.

To make projections for the future, let’s create a plan and define growth rate and inflation assumptions for the deterministic planning mode. We will add milestones, income streams, expenses, and cash-flow priorities, choose our tax configuration, set a portfolio-level stock/bond allocation over time, and define a drawdown sequence.

In the interest of time, let’s gloss over that setup process.

The baseline scenario

To keep things approachable, this is what a basic version of our plan might look like.

It includes two kids, straightforward career progression, contributions to some employer-sponsored retirement accounts, buying a car every 8 years, medical expenses increasing later in life, and some unexpected emergencies occurring every 15 years (and scaling up a bit each time).

In this case, we will define Financial Independence as a milestone that occurs when net worth reaches 25 times expenses.

And we will configure retirement to occur once we reach it.

Then, we can use these milestones as bindings when we create other events. For instance, here is a W2 income stream configured to end at the retirement milestone.

We can also add milestones for the kids, and bind expenses to those. This way, any tweaks we make later to our milestones will propagate to everything else in the plan automatically.

Cash flow visualization

So, what exactly is happening in one of these simulated years? The sankey chart in the cash flow tab can help with that.

We can see how earned income (less withholding) flows into the plan, along with employer match/contributions to tax-advantaged accounts, and how these inflows are used to pay for expenses, service debt, contribute towards investments, and/or build an emergency fund based on our cash flow priorities.

Tax analytics

We can also use the tax analytics module to drill down on specific years and examine how the various kinds of estimated taxes and their underlying brackets apply to each income type.

Within our plan’s tax settings, we’ve enabled US tax estimation:

And here’s a look at our projected future income and the effective tax brackets that apply to each type.

You can plot marginal and effective tax rates over time, and also see how extra hypothetical dollars of each kind would be taxed.

Monte Carlo simulation

But can we expect the market to provide a consistent return every year? Nope. And our plan shouldn’t either.

So far, we have just been playing around in deterministic mode and assuming a consistent 5.34% real rate of return.

We could choose to explore a specific historical sequence, or create custom return/inflation curves to model a scenario of our own design.

But what if we really want to get a better sense for the full spectrum of possible outcomes? Time to visit the Chance of Success tab and run some Monte Carlo simulations!

Based on 950 trials using historical S&P 500 returns, dividends, and US inflation data, here’s how things are looking so far:

Pretty solid chance of success! And many potential outcomes that actually exceed our future needs by a large margin.

But, is the life we’ve modeled up to this point really the one we want?

Reaching FI in our early to mid 50s after nearly three decades of full-time work is a great accomplishment. But is there any way we could buy our freedom even earlier?

The dream plan

Let’s create a second plan and find some ways to get creative. We’ll start by cloning and renaming the original.

Last time, we allowed some lifestyle inflation to drive up our annual spending over time. Here, let’s keep that under control and build a more granular model for how we think our essential living expenses may evolve.

We will also stop renting and buy a house for $500k around the time Kid #1 is born. Then, we’ll drop down to 50% part-time work at age 40, and we’ll both attempt to fully retire from our W2 jobs at a fixed age of 45.

What does all that do to our chance of success? Okay, so version 1 of the Dream Plan is not looking great.

Hmmm.. but what if one of us works hard over the next couple years to land a job paying 25% more, and we avoid inflating our expenses to match?

That brings us closer to a 50% success rate.

And what about the extra time we’ll have during part-time work and then early retirement? Maybe we have some hobbies or passion projects we have always wanted to try to grow into a side business?

Let’s model one that starts generating some revenue during that period of part-time work.

That extra income smooths out those early years after retirement, and brings the success rate back to a more reasonable level near 75%.

Want to learn more?

At this point, we have just scratched the surface of what you can model in ProjectionLab.

If you feel like taking it for a spin, you may want to dig further into account types and liquidity settings, stock/bond allocation over time, international templates and tax config, patterns of asset purchases + sales, drawdown order, rental properties, progress tracking… Okay, I’ll stop now

Here are a few links with more info:

The tool: ProjectionLab
Podcast appearance on The FI Show: http://thefishow.com/kyle
A video review by Rob Berger

You can run basic simulations for free with the sandbox version, and you can use this coupon code for 10% off the premium version: MADFIENTIST-10

Thanks a lot for sharing, Kyle!

Since I think this is the most-useful (and beautiful) FI planning tool available, I added a permanent link to the sidebar of the FI Laboratory, so that you can easily run projections when you’re updating your FI numbers.

Head over to ProjectionLab now, run a few simulations, and see if you’re as impressed by the software as I am!

The post ProjectionLab – Beautiful and Powerful Financial-Planning Software for FIRE appeared first on Mad Fientist.

Ramit Sethi – How to Spend (and Actually Enjoy It)

The Mad Fientist — Fri, 17 Feb 2023 10:10:56 +0000

On today’s episode of the Financial Independence Podcast, I welcome back Ramit Sethi from I Will Teach You to Be Rich!

I needed someone to come on the show to provide some tough love and Ramit was the only person for the job.

As Ramit mentioned during our last interview, FIRE people are great at knowing what NOT to spend on but we’re not good at knowing what to spend on.

Spending is going to be a big focus on the Mad Fientist this year and I can’t think of a better way to kick off this discussion than by getting yelled at by Ramit so hope you enjoy it!

Listen Now

https://traffic.libsyn.com/secure/madfientist/i-will-teach-you-to-be-rich-interview.mp3

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Highlights

Why we doubled our annual spending (and was it worth it)
What Ramit did to make me get all clammy and uncomfortable
Why pay less when you can pay more
How to imagine your own rich life
Why you should start wasting some money at a certain point

Show Links

Full Transcript

Mad Fientist: Ramit, thank you so much for being here again. I really appreciate it.

Ramit Sethi: Thanks for having me back.

Mad Fientist: So, it’s been over three years since our last interview, which is crazy. It seems like yesterday. And you’ve been really busy with some new stuff since then, which I’m excited to talk to you about. But there’s one particular topic that we touched on back in our first interview that I really want to dive into today because I think it’s a huge problem in the FIRE community and it’s a problem that I know I have, and it is the fact that FIRE people aren’t very good at knowing what to spend on.

We’re great at knowing what not to spend on, as you mentioned in our interview last time, but we’re not good at knowing what to spend on. And since we talked, I’ve been really working hard at this over the last couple of years and I want to talk through that. But you are the perfect man to push me further and hopefully push everyone in the audience further because I’m sure this is not a unique problem to me.

What do you think about that?

Ramit Sethi: I think that’s true. I think that a lot of people have been taught well… I think that the world teaches us to save, but nobody teaches us to spend. And if you take that concept of frugality to the logical extreme, then you start to see saving money as a virtue and spending money as a sin.

And it’s not, that’s not how it is. In fact, the point of living a rich life is not to save money. It’s not. The point of a rich life, in my opinion, is to design a rich life that excites you and then use your money to live as meaningful of a life as you can. So I’m all for a high savings rate and aggressive investments and earning more. I’m totally for that. But there’s another side of the equation that too many people ignore and that’s what I’ve been very excited about.

Mad Fientist: This is interesting because your site is I Will Teach You to Be Rich. Your book is, I Will Teach You to Be Rich. And I’ve always read that as I will teach you to become rich.

But it was only recently as I’m getting into your podcast more and I’m getting into the journal you just released, that I realized that it actually is, I will teach you to be rich and that’s very different than becoming rich.

Ramit Sethi: That’s right.

Mad Fientist: And my question is, was that intentional because obviously you started the site way back in the day.

But were you thinking about that way back then? Or were you thinking of it in the same terms as I was as I would teach you to become rich?

Ramit Sethi: It is about being rich and I think that we should live a rich life today and an even richer life tomorrow. So I don’t like the idea of I have to wait until I’m 75 years old and maybe just, maybe I can go take that Alaskan cruise or treat my family to a nice dinner.

I don’t wanna live that kind of life. And so, yeah, it’s about being rich and being rich can happen even if you have credit card debt, you can still be rich. So the next question that naturally comes up is what is rich? And I think this is where it gets really interesting, this concept of rich for a lot of people, the first images that pop up in their head are you know, being chauffeured around in the back of a limo, wearing some fur coat and eating on some table that holds like 70 people with some butler.

I’m like, guys, that’s Hollywood. That’s Richie Rich. That’s not reality. A rich life is so diverse. It could be buying a beautiful coat. It could be traveling two months a year. It could be having the freedom to pick up your kids from school every afternoon. So a rich life is yours. It’s not mine, it’s yours.

And you define what it is. And if we start from that premise that you decide what your rich life is and suddenly it becomes a lot more exciting to be able to use money to live that life.

Mad Fientist: Absolutely. Okay. And I’m, and that’s why I’m so excited to have you on, and you’re the only person that I could think of to get on for this sort of topic.

So over the past couple of years, you’ve released a couple of things that are actually very helpful for this goal. So if you could, since I’m gonna be referencing them so many times, would you just tell the audience who may not be familiar with your podcast and your new journal, what those both are about?

And then obviously I’ll be using those a lot as we continue this discussion.

Ramit Sethi: Yeah. So initially I wrote my book, I Will Teach You To Be Rich. It came out in 2009. I re-released it the 10 year edition in 2019, and I had added about 80 pages of material. A lot of money psychology new material. Also, things had changed in the world, and things had changed in my life.

I had gotten married and I had become much more interested in money and relationships. As I started to talk about this, I realized that I wanted more material on this, and I wanted to help people get more excited about money. I use that word excited intentionally because when you asked the average person what words come to mind when you think of money, they go stress, overwhelm, guilt, am I too late or restriction.

I know you FIRE guys love the word restriction. Oh, I love it. They actually love it. I love it. It’s like someone who has a little scab on their arm and they go, Ooh, I’m gonna pick at this scab. It’s like, stop it, man. You know? Okay. You can restrict a little bit, but it’s not the point of money.

So, a couple of things that I did. First I created a podcast, and the podcast is called I Will Teach You Be Rich. And on this podcast you can actually hear me talking to real couples. I’ll just share one example of a couple who has $825,000 in debt and they’re worried that they can’t afford to have children.

On the other hand, you have a couple who has over $10 million of net worth and they still agonize over the price of blueberries, and they still, they can’t go on a vacation that they want to, they only go where the points will allow them. And I go, at what point do you get to actually enjoy your money?

$10 million and can’t even choose the country you wanna go visit. So here’s the thing about this podcast. Most of us have never actually heard a couple sharing real numbers and the fights that they’ve had for 25 years. The tears, the joys and actually getting on the same page. You may have seen a blog post, but you’ve never actually heard a real couple doing it.

And so, because of our reach, we can find these people and they trust us enough to know that they’re willing to come on the show and share it. So that’s the podcast along with a new journal that I released.

Mad Fientist: Yeah, before we move on to the journal, I just wanna say the podcast is incredible.

I would say it’s sort of like being in a psychiatrist’s office and the couple are on the couch and you’re there like assessing it and you’re just eavesdropping on this really personal conversation. And yes, some of the higher net worth episodes have been really, really useful to me, which we’re gonna talk about.

But yeah, the entertainment value and just feeling like you’re sort of eavesdropping on this very private conversation because you have a, you have a psych background a little bit, don’t you?

Ramit Sethi: I do, I do. Although this isn’t therapy. But yes. When I talk about the money with these couples, we will often end up at, you know, what were the words that they remember their mom and dad saying about money?

And oh my gosh, there was a recent episode, there was a couple that lives in the Midwest and they make a very good salary. They make $130,000 and they cannot figure out why they are constantly behind and in debt. And at one point the dad tells me about his daughter coming home from school. And her school had given her like one of those baskets of food that you would give a child who doesn’t have enough food at home, who’s food insecure.

And he was like, full of rage. He was angry. How could they give her that we are not poor. We make $130,000 a year. And so I started talking to him. I said, how’d you grow up with money? He tells me, well, when I grew up, we didn’t have a lot and there were the haves and the have nots. The haves we’re on the other side of the park.

They were the doctors, the lawyers, the people with the big house. We didn’t have anything. Now as he’s grown up, he makes a very good income. The way he talks about money, he still believes he doesn’t have enough. He still acts as if he doesn’t have enough. And there’s a lot of peculiar behaviors that people without money carry into their adulthood.

And when his daughter asks him about spending money, he says, we can’t afford it. So it’s no surprise that when his daughter goes to school and the teachers ask, how are things going? She says, we can’t afford it. And finally, this was the most haunting moment. I asked him, would you talk to your daughter about money?

And he looked startled. He essentially said, why would I talk about money with her? Essentially, I am protecting her from money. Just think about that. In his view, money is a bad thing. It’s evil. It causes problems and stress, and therefore I’m gonna protect my innocent daughter from having to deal with it.

But that’s not how wealthy people treat money. That’s not how someone who’s living a rich life treats money. Think about somebody who’s like very good with food. They love to eat healthy food. They’re gonna talk about food with their kids. Oh, come on, let’s cut this garlic together, we eat this because it tastes good and it mixes well with that.

How come we don’t do that with money? And so when I suggested to him that there are a lot of people who talk to their kids about money, he was bewildered. Why would you talk to your kids about money? Because in his view, money is something to protect kids from.

Mad Fientist: Wow. Yeah. You see people acting how they act with money and even, you know, how I act with money and how some other FIRE people act with money and you don’t really think about what had gone into making them act that way with money and what they’re still carrying around. And it seems like most of our money views and how we deal with having money or having no money all stem from how money was when we were children.

Ramit Sethi: Yeah, it definitely does. And it’s a funny wrinkle in human psychology that even if we are acting in a way that is not serving us, our mind will create a narrative where we end up being virtuous.

So take someone who has 10 million, just as an extreme example, and they are driving all over town to compare the price of gas. And I go, Hmm, what do you think of that? And they’ll say something like this, well, you know, I don’t like to waste money. Or, it’s not that I drive around for everything, I’m just selective.

So we come up with these words that make us seem virtuous when in reality, as a third party, I’m going… you’re nuts! You made more in interest by lunchtime than you would save over the course of five months of driving around to save 10 cents on gas. Why are we doing this? And more importantly, what are you not allowing yourself to do by focusing on these $3 questions instead of the $30,000 questions?

And it’s comfortable because you know, all that one gas station on Main Street always has a good deal and it’s comfortable and you have mastery of it. But actually at a certain point, you have won that game. You’ve won it, and maybe it’s time to turn the page and go onto a new chapter in life.

Mad Fientist: And that’s where your journal comes in.

So please talk about that because that is just recently released and it is pretty much the ideal workbook for coming up with that. So if you could just tell the audience, who may not be familiar with it, what you just released with the IWT Journal.

Ramit Sethi: So, believe it or not, FIRE people, some people actually are never gonna buy a book and compare the difference between a Roth IRA and a Traditional IRA.

I know, it’s crazy. I know. But I learned this myself. I’m like, why don’t you guys just buy this book , and in fact, get it from the library. You’ll solve all your money problems. And there are a lot of people that are just like, mm, I’m not gonna do that. I go, all right, I get it. We have to remember that most people are not buying any book, much less a money book.

And it seems a little ironic because by the time people are 40, pretty much their number one worry in life is money. So you go, well, why don’t you just read this book or listen to that podcast, YouTube. And there’s a variety of reasons people don’t, but I don’t want to sit here and berate people. Well, that’s not true. I do a little bit. But what I wanna do is help them start to live their rich life. And so I created this journal, and it’s called a no-numbers journal. So you get it and I want you to imagine giving yourself the gift of 15 minutes, your favorite cup of coffee, a quiet room, and you get to sit down and dream.

You get to dream about how you wanna use your money. It’s not about your savings rate, it’s not about the Trinity study, it’s none of that. It’s about, if I could spend more on something that would make my life easier, what would it be? It’s about pulling a pen out and sketching out what your ideal day would be, or even your ideal house.

And yes, there is parts about what should I not spend on, or how should I navigate money in relationships? It’s tactile. And I wanted people to start connecting their money with their lives. I can tell you that most people don’t get motivated by seeing a higher figure in their checking account. I know some people do.

Personally, I love it. Okay. I like it. So that’s why I don’t hate the FIRE community, but I understand a lot of it because I like a high savings rate. I like seeing compound interest. And I get that, but most people are not like that. Most people are like, I actually wanna go out to this really nice restaurant and know that I can pay for it without worrying.

Okay, great. Well let’s start there. And when people start to engage with this journal, it’s just a much more relatable way of clarifying what a rich life is to you. And then for some people they decide, Hey, I wanna start optimizing my money and make it work for me.

Mad Fientist: Yeah, and I have a copy and we actually got some good weather here in Scotland over the summer and I really enjoyed just sitting out there with a cup of coffee in the sun, going through it with my wife, Jill, and trying to really think about it because it is way harder to figure that out especially when, you know, we’re so lucky we’ve reached financial independence we can spend on these things. But yeah, as a frugal person, naturally frugal just my entire life. It is way more difficult to sort of push myself in those areas, but it has been helpful and that’s why the podcast and the journal have been really helpful so definitely just wanted to set those up because I’m going to be referencing them a lot.

But I think before we dive in, maybe just give you a quick update of what’s changed since 2019?

Ramit Sethi: Tell me.

Mad Fientist: Yeah, so we talked in 2019, and I think for the prior 10 years to 2019, I, we averaged the same amount of annual spend.

And you will be happy to know that over 2021 and 2022, it looks like we’re doubling that value for our annual spend.

So I’ve heard you on other podcasts where you’re like, you know, people who say they want to change and like, get better at spending, they don’t really mean it, but I, I actually do mean it.

And we’ve actually worked pretty hard at doing that. 2021, we traveled a lot more and spent a lot more than we would’ve on that travel. We experimented, like we did Premium Economy to the States, and then we did Business Class on the way home just to try those both out and compared them.

And then 2022, we just moved into a new house and I’ve been kitting it out. And even my wife one day, another Amazon box arrived and Jill was like, what is happening? And I was like, this spending thing is incredible. I don’t know what I’ve been missing for the last 40 years of my life, so I’ve been really enjoying it and I feel like I’ve made a lot of progress but there’s still a ways to go because even though we’ve doubled our annual spend, we’re still not even spending what the portfolio could generate at a very conservative withdrawal rate and it doesn’t account for any sort of income that’s coming in.

So I am still trying to push myself, but I just wanted to let you know that thanks to our conversation in 2019, I have been making progress and it’s been so fun and way way more enjoyable than I expected. So thank you for that.

Ramit Sethi: Wow. Well thank you. And thank you for giving me the update. And what makes me happiest to hear that is that you’re having fun doing it, which is the point money is supposed to be fun and that you’re doing it together with your wife. That is amazing. That is the culmination. You know, when it comes to money, I’ve learned at the very beginning levels, it’s all about the what… I made a little money, what do I get to buy or what do I want to do with it? And that’s totally cool. I have no problem. You wanna buy a beautiful coat or take a trip? Amazing. I love it. But at the highest levels of personal finance, it is always about the who. Who do I get to bring with me? Who do I get to surprise or delight, and to hear that you’re doing it with your family is just the culmination of what a rich life really should be.

So, congratulations.

Mad Fientist: Thanks man. Yeah, it’s been great. And before we dive into some of the, the newer stuff I’ve learned from your podcast and your journal, I want to revisit something you said in our first interview, and it was something that made me think you were a lunatic at the time, but I get it now.

And that was why pay less when you could pay more?

Ramit Sethi: That’s right.

Mad Fientist: And I was like, yeah, you gotta have to explain that. And still didn’t, I don’t think I really got it. And it was only recently that we just moved into this new place and I love pour-over coffee. That’s like my morning ritual. I love making it. I love drinking it. I love buying the beans, I love everything about it. And I’ve been waiting until we moved into a place where I could get a proper grinder, because I thought that was the coffee grounds were the only thing that were holding me back because I couldn’t get a really consistent grind.

So I bought this thing that is probably the nicest you can get without going commercial. And it is amazing. It is the nicest thing to look at, the nicest thing to touch. Like I just love pressing the button. I love pulling out the tray. I love everything about it. And I don’t think I really understood that before. I would’ve just picked the cheapest thing that does the job.

And this has shown me that there’s a whole other level that it’s just like brings you so much joy that doesn’t even relate to the actual functionality of the thing, just the actual beauty of it and the design. And so I get that now and my question to you is, I wanna find more of that, but for me, it’s hard to distinguish between quality and status.

Like, is a Rolex that sort of experience or is it just the status that makes that price so high? So I don’t know if you have any experience with that, but I would like to find more of that, just like pure quality. And something else you said in our last episode was like, focus more on value than cost.

So I do wanna get better at that, but for me, I struggle, I think to sort of distinguish between the two because I couldn’t care less about status, but I do really love that quality. So any insight into that?

Yeah.

Well, first of all, awesome to hear. I love, I just love hearing your voice and I love hearing anyone’s voice when they get excited about their primary money dial in their rich life.

So coffee and the way you talk about it, the ingredients and the tools, you can tell this is a passion of yours. I think first of all, that quote you know, why spend less when you can spend more? That’s a Dan Kennedy quote, and it is profound. All of us intuitively get this. Especially if you’re a parent, there are certain things you are going to spend anything on.

It could be the right type of diapers. It could be a car with certain safety features. We all intuitively get it when it’s about our kids or our dogs. My goal is to normalize spending as much on yourself as you do on your kids and your dogs. Okay? Everyone looking around right now at their little golden retriever at their side, like, yeah you give your dog the best food.

How come you think 10 times about how much you spend on yourself? It doesn’t make any sense.

So the fact that you have tasted that is awesome. Now distinguishing between higher quality. Well, first of all, my fantasy has always been to take one of my friends who made some money and I just go, Hey, come visit me in New York and I’m gonna take you out for three days and show you how to spend your money. I’m literally gonna show you the skill of how to spend money.

You’re not gonna like all of it. Some of it you’re going to be like, okay, that was not worth it for me. But some of it, you’re going to go, oh my God, now I get it. For example, there are certain things that you can only understand once you experience or touch them.

A certain type of sweater, a picture doesn’t do it justice. A certain type of food. When you see it being made in front of you and you understand where the ingredients came from and how it was sourced. Oh my God, I never knew that much work went into this, and how it tastes is incredible.

On the other hand, I’ve eaten certain meals where I go, okay, I mean, that was fine. It’s not my taste. I’m probably not gonna come back here. But anyway, that’s my fantasy. Unfortunately, no one ever takes me up on it, no one. Maybe the key is that I go, well, there’s just one catch. You have to have an unlimited budget and they go, what do you mean unlimited? They get really scared I’m going to like make ’em spend like $500,000 in three days. I’m like, I’m not gonna do that, but it is gonna be more than you thought, and they’re not ready for it, which is totally fine. I’m not gonna force anyone into spending it. Here’s what I would say as a real answer to your question, which is most people have spent decades viewing the world through the money lens of cost.

That is their primary and sole money lens. When they go to eat somewhere, they look at how much it costs. When they go to book a flight, they look to the right of the screen to find the lowest cost. They sort by cost, cost, cost, cost. And so there’s a couple of isolated things in people’s lives where they’ll spend more.

Okay. But it is very difficult to extend that to other parts of their life. But the way you’re doing it is the right way, which is you find something you’re passionate about and you start to explore.

If I were gonna encourage that, what I would do is I would look at your finances with you and I would say, okay, let’s pick a number that you have to spend every single month on this hobby of yours, coffee. And let’s just, what would be the number that you’d spend every month to make this like a serious hobby for you?

I feel like I, I feel like I’m spending it because the beans, I get high quality beans shipped in from around Scotland. And, and that was the last piece of kit. Maybe there’s something I could do where I could actually like go and learn the espresso stuff and the barista stuff that I don’t do. I just do a pour over, a V60.

Ramit Sethi: So how much?

Mad Fientist: Whew. Maybe another a hundred pounds a month. Not even that much, I guess.

Ramit Sethi: Mmm. Try again. Don’t you have a lot of money, like, oh, I’m not even spending what I should be in my model. And we’re debating over a hundred pounds. I don’t think so. Try it again.

Mad Fientist: Geez. I don’t even know what I would spend a hundred pounds on. That was like…

Ramit Sethi: Well, we’re gonna get to that . Okay. Just pick a number.

Mad Fientist: 250 pounds.

Ramit Sethi: Okay, fine. 250 pounds. Okay. Alright. I know you can afford it. Okay. Cuz I saw you send over some numbers before. So, cool. Now we have a number that’s quite aggressive for what you’re currently spending and, and I love your comment, I don’t even know what I would spend on .

Okay. Well let’s take a second to dream. Coffee is one of the things that makes you passionate. You love it and you wanna get more experience with it. So how would you discover how to go deeper into that hobby of yours?

Mad Fientist: So Edinburgh is a really big coffee city actually, and they have great cafes who have lots of people that are passionate and lots of roasters. So I’d maybe go down there and chat to them about potentially learning more from them in some way or if they had any recommendations for what to do for somebody in my situation, I guess.

Ramit Sethi: How would you use money to make what you just said easier and better?

Mad Fientist: Oh boy. I’m not used to using money for anything, so…

Ramit Sethi: Hold on. Everybody in the FIRE community, just listen, I’m not used to using money for anything. Just except to keep me warm at night as I wrap myself in my Excel model. Yeah. Oh, I love my 52% savings rate. So good. All right, well, we’re gonna learn that skill right now.

Okay. So you just said I might talk to some of the baristas and learn from them, get some recommendations. How could you use money to make that easier and better?

Mad Fientist: I guess I hire somebody to do that?

Ramit Sethi: Yes. That’s a, that’s one thing. Mm-hmm. great. What else?

Mad Fientist: The only other, the only other thing after I said the 250 was like maybe just a weekend in Italy with Jill and you know, compare the Italian coffee and then go to France a couple months later and try their coffee.

I don’t know. I’m struggling.

Ramit Sethi: That sounds pretty awesome. . Okay. That’s amazing. So there’s so many things we could do. First of all, yeah, you could hire some researcher to schedule a bunch of meetings with you and baristas. Second, let’s say you met a barista, you really like him, him or her and they’re like, oh yeah, you know, next time you try to make your morning brew, do it this way. Do it that way. Try this, do. And you’re like, oh, that sounds really good. And you don’t really feel that confident about it you could say, you know what, can I hire you for two hours to walk me through how I make my morning coffee?

Mad Fientist: You know what that’s a fantastic idea because sometimes it just doesn’t turn out and I don’t know why. And I’m like, how am I gonna figure this out because it’s not something I can YouTube or something. Because I don’t really know why that’s not as good as it should be.

That’s an incredible idea.

Ramit Sethi: That’s what money’s for! You use it to get help, to do things easier and better and more joyfully. And all of us intuitively understand hiring a personal trainer or whatever or we pay somebody to cook food for us if you go to a restaurant. How come we don’t just take the thing we’re interested in and say, I’m gonna go find somebody who’s pretty good at this, can you come to my house and help me understand this for two hours? Of course. And then your idea to go to Italy with your wife is amazing. And while you’re there, you can do a coffee tour. And you can go behind the scenes and you can do your own brew and all kinds of stuff. That is how you start to use your money to really experience what is important to you.

That’s a rich life.

Mad Fientist: Now, I’ve heard you do this sort of thing with people on your podcast a lot, but I did not expect this sort of like clammy reaction that I just experienced. So this isn’t even a question on my list because I wasn’t expecting this sort of reaction to those pressing questions.

Why do you think that is? Why do some people just like sort of get all weird when they think of spending 250 pounds on coffee when they have absolutely no idea to do it. Like, it was a really physical reaction I just had, which I was not expecting.

Ramit Sethi: I know. I love it. I wish we could be in the same room right now. It’s quite striking when you see how people physically react to conversations about money, they shrink. I’ll see someone who’s extremely confident and the minute we start talking about money, they physically shrink into the couch . It’s quite interesting. But you know what, I have a lot of empathy for that cuz I shrink when we talk about a couple things in my life that I know I need to do and I’m not.

So for you I think that it is fascinating that most of us have lost the ability to dream about money. That’s really the crux of why I wrote the journal because think about it, day-to-day, again, I’m speaking generally about most people, you get a paycheck, you pay your bills, maybe you have a little bit left over and then you repeat for the next 45 years, or if you’re a little bit savvier, you take your money, you read all the FIRE blogs, and you do your investments and you do another Monte Carlo simulation and then you just repeat that.

But there’s a skill that most of us have atrophied at, which is learning how to spend meaningfully. I’m not saying you go out there and just drop money everywhere and stuff you don’t care about. I don’t do that. I have a very old car, my computer, my phone, they’re not particularly new. Those things are not that important to me.

But there are things that are really important to me, and so I actively seek out how to go deeper and make my life easier. And so I’m not surprised that you had that reaction and that you almost kind of seem to go blank when I asked you how would you do it? But that’s okay. It takes a little bit of coaching.

That’s why I started the podcast and the journal. I want people to see that you can be inspired to spend money even if you haven’t really done it meaningfully in a long time.

Mad Fientist: Right. And this sort of made me think about one of your episodes, episode 40. I loved it. It was someone in a similar situation, they just couldn’t spend their money. It didn’t seem real to them. Which actually is something that a couple of your episodes had that sort of same experience where you’re talking to them and you’re saying, what would a rich person do in this situation? And they can easily explain that. And then you’re like, well, that’s you. That’s, you are that rich person.

Why aren’t you doing that? And it’s a disconnect between, what you have in the bank, because that’s just some number on a computer screen. It’s meaningless. It feels meaningless to me. And I was listening to these episodes like dreaming with them and being like, wow, what an amazing position they’re in.

They could just dream and they can do all these things. And then I kept having to snap out of it and be like, I’m in that position too.

Ramit Sethi: That’s me.

Mad Fientist: It was amazing to hear because, it was more than one episode. And they’re able to give advice to a rich person, but they don’t believe it themselves that they have anything in the bank really.

Have you come across that a lot?

Ramit Sethi: It’s frequent in a couple of different ways. First, for people who are not very savvy with money or not connected to money, it, whatever they have anywhere besides their checking account does not feel real. So people who are fairly rudimentary with money or new to money, the way that they define how much money they have is literally how much is in my checking account.

Okay. And one of the things I try to do is dissuade people from thinking like that. There’s a few little beliefs that people who don’t have a lot of money really follow. One of them is however much is in my checking account, tells me if I have enough money. That’s not how you should be thinking about money.

Another way is I should buy something based on the monthly payment. You know, car dealers know this and they prey on people. We don’t want to think like that either. We wanna do tco, total cost of ownership.

So some of the things that I do on the podcast and in my work is simply showing people a different way to think about money, such as that dad who thought money was bad and he should never talk to his daughter about it.

Well, actually, money can be really good. And a simple way to do it would be to sit your daughter down if they’re really young, you say. Daddy’s gonna log in and pay our bills so we can keep the lights on. Would you like to help me? Don’t you like light? Oh, do you wanna push the button with me? Go ahead, push it and make it like, oh, let’s celebrate. That was so cool. And then as you get older, it can be things like you know, we’re gonna stay for one night in this town. Can you help us pick a hotel? Here’s the criteria and here’s the budget. And of course, by the time they’re teenagers, if you’re taking a trip, they should be planning an entire day on that vacation.

Mad Fientist: So we’re going to get into some some of the stuff that’s really been useful from your podcast and journal for helping me and then some of the other things that over the last couple years that have been really helpful.

But before we do, I want to pick out something that’s in your journal. It says your prime spending years are from ages 40 to 60. So this was a big slap in the face in two ways to me, because one, it made me actually realize that I’m 40 because in my brain I’m still 20. And it was only when I read that and thought about it again that I was like, I am 40.

This is my prime spending years. And two, it was like, all right, I really do need to get serious about this because yes, I feel like I’m 20, so I should just keep saving, but this is my prime spending years.

Ramit Sethi: It’s deeply counterintuitive and uncomfortable to acknowledge that you do have prime spending years.

So let’s talk about this concept because I like that it’s uncomfortable. I like that it makes you think about your vision for spending.

So in your twenties, you have a lot of time, probably not as much money.

And so, I remember for example, we took a backpacking trip with two of my college buddies one summer, and we stayed at the cheapest places. And we were about to sleep in the train station and our guidebook said, don’t do that. You’ll be robbed. And I just remember that trip.

It was amazing. It was full of adventure and sure we didn’t have a lot of money, but it was great. Then in your thirties, you know, again, following a general pattern, people start to earn a little bit more. They do start to spend a little bit more. Forties tends to be focused around family, but in forties people start to have higher incomes.

And in fact, their incomes will peak in a few years after that. But we should also acknowledge that it’s not just about money, it’s also about time. And it’s also about ability or mobility. So you may have a lot more money when you’re 75, but it’s unlikely you’re gonna be going to Everest.

It’s even unlikely that you may even be traveling abroad depending on health. And these are the kind of conversations that people don’t really wanna have. We have a deeply puritanical society, but interesting society that says, save, save, save until someday, but no one ever really talks about that someday.

It kind of reminds me of Indian culture, which is don’t date, don’t date, don’t date. Okay. It’s time to get married today.

And everyone kind of rolls their eyes at that in the Indian culture, but how come we do exactly the same thing in America with money? It’s actually preposterous when you think about it.

So 40 to 60, in my opinion, is the prime spending years. You have money, you have health, and you do have time. Now, if you accept that, listen, you could disagree with me. You could say, I don’t believe that. I think it’s gonna be 65, or, I’m really healthy. Okay, fine. First off, I wanna say it’s not just about you.

I know plenty of people who are healthy, but they have a sick parent or a, a partner who can’t travel for whatever reason, or can’t do the things they wanna do. So sometimes life is not just about you. We have to keep that in mind. But second, what I want you to do using the journal is to create a list of things that you want to do now, in the next decade, et cetera.

So when you do that, you can start to actually visualize what’s meaningful to you and you can start to do ’em. I just don’t want people to live a life of, I will do that someday. And then, I mean, what a tragedy to live a smaller life than you have to. What an even greater tragedy to end up 70, 80, 90, with millions of dollars in the bank if you follow the FIRE community, never actually having done the things you want to do.

Mad Fientist: Yeah, I completely agree. And we’re gonna hopefully help all the FIRE people out there that are like me and who are probably really uncomfortable with this conversation already.

Ramit Sethi: They already turned this podcast off, by the way. This is gonna be your worst listen to podcast of all. They see Ramit Sethi, they’re like no thanks

Or the minute I start making a joke about, you know, their Monte Carlo simulation. Yeah, it cuts too, it cuts too close, doesn’t it, FIRE people?

Mad Fientist: Ah, that’s what we needed. I need the tough love today. That’s what I brought you on. I knew you’re the only one that could do this. So yeah, the journal definitely there’s a lot I want to touch on in there, but before we do the podcast, episode 40 was really helpful in the sense that, like you said, we can spend on our kids or spend on our dog or spend on somebody else.

And in this episode, there’s a woman who really struggled to spend any money on herself and she was worth millions and millions, but would really rarely ever spend on herself And she went to New York with her husband, which that was a whole ordeal trying to even get her there because she had to spend $300 one night on a hotel.

And anyway, they wanted to go see a Broadway show. So she went down to the Times Square Broadway Ticket Office for like the last minute tickets or whatever, the half price tickets.

And she went there because she’s just so used to spending money and you flipped it around on her and said, you know what, you’ve taken tickets from a family that really does need to only pay half price and that’s all they can afford.

Ramit Sethi: I love this story.

So Rachel and Jack, episode 40, they’re one of my favorite couples. He had invited her. He was taking a work trip to New York, and he’s like, come along. She goes, cool.

They were gonna stay at the Moxy Hotel in the East Village, which is a pretty affordable hotel. And she looked at the price and it was $297, which is, for Manhattan, fairly reasonable. And she goes, that is outrageous. I’m not coming. She was just gonna cancel the trip. And he goes, no, come on. I want you to come.

And so she made them stay at a different hotel in Chelsea. And then when the price lowered, the next day, they moved all their suitcases back to the Moxy Hotel. Remember, work was paying for part of this anyway. So I asked, Rachel how much are you worth? And she said, $5 million, I said, could you say that a little louder for the mic, please?

$5 million. Okay, now everyone listening goes, oh my gosh. That’s, that’s so weird. Why? Why doesn’t she just enjoy it? But most of us do exactly the same thing. We do the same thing, whether it’s with a restaurant or a hotel. The way that we act with our money is often rooted when we didn’t have any in our childhood, teen years, or early twenties.

In fact, if I ask people like, how do you decide how much to spend on a vacation? And we really get into it, they, the answer really emerges that they basically have a number in mind. That number was born when they were basically 20, because that’s what they remember about how to plan a vacation. And they have not adjusted that number as they have made more money.

So then she tells us about this Time Square thing and she goes, we actually have no problem spending money on restaurants. We ate out, we ate well. We went to see a show. I said, tell me about that show. So she waited in the line for last minute tickets. This is basically way cheaper discount tickets.

And at this point, I’m like, oh my God, Rachel, you have $5 million and you waited in that line. You didn’t just go to the box office and buy the ticket you wanted. And she goes, no, I needed a deal. So then, you know what I realized? I’m a master of Indian mom guilt . Okay? And so I had to bust it out.

Anyone who grew up with a Indian mom, Asian mom, many types of moms or dads, they go, you know what, it’s my time. I’m gonna leverage this. I’m gonna weaponize this. So I, I did it. I was like, I’m about to become a guilt driven Indian mom. So I was like, Rachel, you realize that there was a family in New York for the first and only time with their kids and as they saw you getting that last Lion King ticket, they saw this multimillionaire woman snatch the tickets outta their kids’ hand.

How do you think those kids felt? And she looked like she was gonna cry. And I was just like, I had the biggest grin on my face. Cause I’m like, gotcha.

Mad Fientist: It was absolutely perfect.

Ramit Sethi: So you know, listen, we have a little fun on this podcast, but the point is I told her, Rachel, you make too much money to do that.

And I said, Rachel, you cannot afford to do that anymore. If you have $5 million, you’re not allowed to be shopping or standing in line for the discount tickets and taking away that scarce commodity from someone else. Now people get a little mad when I say, how dare you Ramit this America? We could do whatever we want with our money.

Okay, you can, but first of all, is it right? And second of all, is it actually serving you? At what point do you get to walk up to the box office and pick the ticket you want? At what point?

Or in episode 16 when Amy and Chris are choosing their vacations based on where they have Marriott points, I go, at what point do you get to choose where you wanna go just based on where you wanna go?

Mad Fientist: That was really good because he said, let’s go to Italy. She started looking into everything she wanted to do in Italy. They have $8 million in the bank. And then I guess last minute he realized that his points weren’t gonna work or something. So they ended up going to Greece and the poor wife was like, I just got my heart set on Italy and here we are in Greece. And yeah, just ruined the whole experience. And I feel for her, because I think I’ve, I’m sure I’ve done that to my wife, numerous times.

Ramit Sethi: Should we get your wife on this call? Is this about to turn into my podcast? This is gonna be amazing.

Mad Fientist: Well, we’ve moved hotel rooms mid trip many times and she hates that so much.

Ramit Sethi: Why do you do that?

Mad Fientist: So, yeah. She would be great to chat to because she would be echoing a lot of the same things that have been echoed in episode 40 and 60.

Ramit Sethi: Here’s the thing, I think that sometimes there’s absolutely virtue in using cost as your money lens, right? Like, if I’m going to buy some commodity, I don’t know, nails or something, well, I don’t go to Home Depot, but if I ever did in a like alternate reality, which is my hell, and I walk into Home Depot, yeah, I want the cheapest nails.

What do I care? It’s a commodity. But I think that sometimes there are higher or different money lenses you can use. If you’re going on a trip and it’s something special, maybe the extra 50 bucks or a hundred bucks actually doesn’t make a difference. In fact, maybe it’s not even about not making a difference. Maybe it’s something you can turn into an amazing experience. You could turn to your partner and say, you know what? For this trip, I really wanna do something special. I know that you’ve always wanted to get a massage at a hotel. I wanna arrange it. So the day we arrive after that long trip, I’ll take care of all the bags, and you just go and get that massage. And when you come back, we don’t have anything scheduled for the rest of the night. You just take a nap and we can just relax. Wow. So notice the difference, not only in spending, but in positioning. To yourself and to your partner. I’m not going there and saying, hey it’s, it’s no big deal. Instead I’m saying, this is going to be amazing and I’m gonna do it for you.

And for Rachel, sometimes what I wanted her to do in Times Square was to be generous to herself. Rachel and Jack had done an incredible job saving money. The classic I Will Teach You to be Rich, way, low cost, long-term investments over a long period of time. They had made it.

And so we find it much easier to be generous to other people than to ourselves. But Rachel and Jack won the game. And so they need to take their winnings and in their case, their winnings might be seeing The Lion King or whatever show with better seats, with more ease to walk in and say, we don’t have to spend two hours of our valuable time in New York waiting in line.

And that’s really what I want people to imagine is the possibilities of using money and actually embracing money as a good thing, not an evil thing that we need to minimize and avoid or hoard.

Mad Fientist: No, definitely. And, since listening to that episode… I have this stack of old t-shirts that I’ve been carting around the country for the last, who knows, 20 years. Because I’m like, maybe one day I’ll need a rag and you know what I mean?

And now, after listening to episode 40, I was like, well, you know, somebody could actually wear this shirt and actually provides a lot of utility here I am storing it for the last 20 years because I think I need a rag. And it’s like, I can buy a $2 rag if I need a rag. You know?

So it’s like, I think that’s really helpful for people that aren’t used to focusing on themselves to sort of like get a little gateway into that and be like, well actually, you know, yeah, this will benefit me because that stack of shirts is finally out of my life and I don’t have to keep carting them around. But then also it’s like, okay, somebody else is going to benefit a lot more from these shirts than I will.

Ramit Sethi: Yeah, that’s a great example. It includes so many elements of some of my philosophies, you know, one of them is $3 questions versus $30,000 questions.

You know, a stack of old shirts, what should I do? That’s a $3 question. Just stop. Let’s not deal with these anymore. The next thing is generosity. Could someone else benefit from these more than I could? Yeah. And the third is being decisive. So many times when I talk to people who have money and struggle to spend it, there’s a lack of being decisive.

And in fact, I think much of what guides the frugality world is a sense of fear. There’s this idea that I’m not gonna go eat at that nice restaurant. That’s not the kind of person I am. And anyway, if I did go eat there, deep down now, I’m afraid I would like it so much that I would trip and fall and have to eat at that nice restaurant every night for the rest of my life.

And I don’t believe that. I think you can have a nice experience and you can also trust yourself enough to know what is enough. And that is really important in a rich life. I’m not saying everyone here just twirl around three times, repeat rich life and then go buy a private jet. That’s not how it works. You need to be able to afford it. I talk about the numbers. I’m not just out here doing some woo-woo life-coach BS. But I also think that you can trust yourself enough to experience something amazing and know that I will never let myself spend more than within our margin of safety.

Mad Fientist: Yeah, absolutely. And that leads nicely to the money rules because actually one of my money rules that I developed after going through your journal is to not limit spending on one-off experiments.

Because like I mentioned before, we flew premium economy to the States and then we flew business class home. And now one of my money rules is to fly premium economy on all flights over five hours because that was well worth the double the price of economy. But then business wasn’t really worth it to me for three times the price of premium economy.

Maybe one day it will, and maybe, you know, I’ll do another experiment once we travel with our new son, which that may change everything. But that’s one of my money rules now because yes, I know I’m not gonna go crazy and just start living this lavish lifestyle that then bankrupts me. And those one-off experiments are really important for pushing my boundaries and finding what it is that it is worth spending on.

Ramit Sethi: Yeah. I love that. It is an experiment. I think we shouldn’t be so worried about getting all of our spending decisions right. I had a program where I talked about the psychology of money and I cover this now, we have a new money coaching program. And one of the principles I shared is that it’s okay to waste money.

Let me explain what I mean. I’m not saying just go out and just throw money around. That’s not what I’m saying. But I’m saying that when you’re in your early twenties, you don’t have a lot of money. You have to make sure that you are being extremely careful. So you might be looking at menus before you go out. You might be declining invitations because you just can’t afford it. Okay, great. That makes perfect sense. But as you make more, certainly in your case, as you have made more and you have a handle on how much you can afford, once in a while you’re gonna spend money on something and it’s going to be a waste.

And that might involve, you got some late fee on some account, and as much as I hate late fees, you discover that it might take you like six hours to get that thing reversed. In your twenties, you’re like, yeah, I’m gonna spend it. I have nothing else to do, and I’m gonna make this company pay. At your stage, you might go, you know what? It sucks and it’s not fair, but it’s not worth my time. Or you might try a certain restaurant or a certain product and it’s just not for you. And so instead of letting the tail wag the dog and saying, wow, I spent a hundred dollars on this thing, I’m going to make it work for me. I’m going to, for example, carry those things around with me to every country, you go, you know what, it’s just not for me. I’m done with it. I’m selling it or donating it. So the more money you make, the more money you will waste. That is natural if you are not wasting a little bit of money, that means you’re probably not thinking about the possibilities of how you could actually be spending it.

So again, just to reiterate, I’m not encouraging anyone to go out and waste money. I am saying that at a certain point it is okay if you incidentally waste a little bit of money because you have a bigger purpose than eliminating all waste of your personal finances.

Mad Fientist: That’s a great point. Because efficiency and lack of waste is what drives a lot of people like me, I would imagine. But you’re right, I’ve wasted far too many hours that I can’t get back on things that obviously don’t matter now in the scheme of money at least.

Ramit Sethi: The efficiency thing always gets me because you’re right, there’s a lot of crossover with efficiency and FIRE, and people they’re like, how dare you not be efficient?

And I just go, are you efficient when you give your husband or your wife or mom or dad a hug? Like do you literally measure how long it’s going to produce the maximum happiness? And they’re just like, no, that would be psycho. I’m like, you’re a psycho by looking at everything through the lens of efficiency.

Maybe sometimes it’s actually not meant to be efficient. There are other virtues besides efficiency… safety, security, a lot of things and so I want people to be more adaptable. If you’re playing the game of life with money, you don’t only have one money lens – cost. You have others, and you use them in the right situations. To do that, you need to be well practiced with all of them.

Mad Fientist: That’s fantastic advice. And I can’t believe it, we’re already coming up to an hour that has gone so quickly. So I don’t want to keep you too long.

I can’t thank you enough. Like I knew you were the only person for this chat and I’m so glad we were able to make it happen.

Obviously I’ll link to your new podcast and the journal and iwt.com. Anything else I should put in the show notes just so people can find you?

Ramit Sethi: For anyone who has questions and wants to stay focused on their money. We have a money coaching program as well. We do a coaching call every month and we have this amazing community. We’ll send you the link for that.

Mad Fientist: Nice.

Ramit Sethi: Maybe you can post it. We’d love to welcome more people into that program too.

Mad Fientist: Excellent. Well thank you so much, Ramit. Really appreciate it. And yeah, hopefully I’ll touch base with you in another three or four years and I’ll have made even more progress.

Ramit Sethi: That sounds great. I always love coming on your show. I love talking to you. Thank you for having me back.

Mad Fientist: All right, buddy. Talk to you soon. Thanks, bye.

Ramit Sethi: All right, bye.

Ramit Sethi - I Will Teach You to Be Rich

For the first time, Ramit Sethi from I Will Teach You to Be Rich shares his thoughts on FIRE (Financial Independence, Retire Early)!

The post Ramit Sethi – How to Spend (and Actually Enjoy It) appeared first on Mad Fientist.

My Family – Raising Money-Smart Kids

The Mad Fientist — Wed, 14 Dec 2022 11:50:53 +0000

Over the last few years, I interviewed members of my family to find out two things:

How I became the Mad Fientist (i.e. where did I get my extreme ideas about money)
What advice they’d give to parents hoping to raise money-smart children

This is a short but sweet holiday episode to end the year and I hope you enjoy it!

Listen Now

https://traffic.libsyn.com/secure/madfientist/my-family-interview.mp3

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Full Transcript

Coming soon

My Brother - Using the Power of Money to Pursue Your Passion

Join me for an interview with my little brother that we recorded live in Venice! We talk about growing up, extreme frugality, and how you don't need to wait until FI to use the power money gives you to pursue your passions.

The post My Family – Raising Money-Smart Kids appeared first on Mad Fientist.

Why I’m Appreciating FI More Than Ever Now

The Mad Fientist — Fri, 02 Sep 2022 10:02:25 +0000

I didn’t think I’d ever want kids.

There was so much I wanted to do/see during my life and I felt like having kids would get in the way.

Two things changed when I got to my late 30s though.

First, my wife’s sisters started having kids and I got to see how fun/crazy they are.

Second, I started accomplishing a lot of the things I had wanted to do…

I went back to school and got a graduate degree
We got to travel the world and visit 50+ countries
I built a successful business
I achieved financial independence and was able to stop working
I finally fulfilled my childhood dream of writing and releasing an album

I don’t think I would have been able to achieve a lot of those things without the 5+ years of complete freedom that FI provided. So thanks to FI and my neices/nephews, I finally came around to the idea of having kids.

But the prospect of being a parent is scary (especially to someone like me who is a big planner and a bit of control freak).

Thankfully, FI helped quell some of those concerns as well…

Thoughts of sleepless nights were less worrying knowing that we didn’t have to wake up to go to work
Caring for a new person is less intimidating knowing there’s enough savings in the bank to handle any unplanned expenses
Parenting with both parents at home is a lot less scary than imagining doing it solo while one person’s off working

So not only did FI allow me to get into a state where I actually wanted to have kids, it also made the prospect of kids a lot less intimidating.

Anyway, enough beating around the bush…

I’m ridiculously pleased to tell you that there is now a Mad Fientist Jr. :)

He arrived on July 14th and Jill and I are both over the moon!

A Brand New Appreciation for FI

I wanted to write this post because I feel like lately, I’ve been mainly focused on the downsides of FI whenever I talk about it.

Since the FIRE world exploded in 2018, most FI content feels like this -> “FI IS THE BEST THING EVER AND IT WILL SOLVE ALL YOUR PROBLEMS AND WILL INSTANTLY MAKE YOU HAPPY!!”

That’s obviously not the case but it’s unsurpising most of the online content seems to suggest that. Here’s why…

When a new blog/podcast starts or when a newspaper is trying to get as much traffic as possible, which do you think will get the most clicks:

The 10 Ways FI Improved my Life and How It Can Change Yours!
Money is Not the Reason You’re Not Pursuing Your Dreams :/

Obviously the first heading would, so that’s why most FI content tends to focus on the positives.

But since I’ve been doing this for over a decade and don’t need to get more readers/listeners/clicks, I feel it’s my duty to share the full story. And since the positives are so well covered by other sites, I tend to dwell on the negative aspects whenever I’m interviewed, so that you get a more-balanced picture.

I wanted to write this post though because since having our son, I don’t think I’ve ever appreciated what FI provides more than I do now.

Jill and I can focus fully on our new addition and we can watch him grow without any distractions. My mom and stepdad came to visit for 18 days and we got to enjoy time with them and didn’t have to share our attention with work. We can nap in the middle of the day and stay up all night if we need to.

I can honestly say I haven’t felt this level of contentment, happiness, and gratitude since I left my job in 2016, and I’m so happy we worked hard and made the sacrifices we did to get to this position.

Fully Realizing the Benefits

Over the last two years, I feel like I’m entering a new stage of life where I am finally reaping the benefits of my past investments (rather than just accumulating more investments).

I’m learning how to enjoy spending money (more on this soon) and man, is it fun :)

As we celebrate 20 years of being together in December, investing in my relationship with Jill has yielded a beautiful son and a partnership that’s never been as strong and loving as it is now.

My focus on health and nutrition over the past decade means that even though I’m an older dad, I’ll hopefully feel just as young as the other dads that I’ll be interacting with soon.

And achieving FI has helped me get mentally and financially prepared to have the cutest little kid I could imagine.

Your Investments Will Be Worth It

Apologies for all this self-reflection today but I wanted you to know that your hard work and sacrifices will likely pay off in a bigger way than you ever even imagined (because that’s how I feel now).

Your investments will only be worth it if you actually start cashing them in though so that’s what my future posts/podcasts will be focusing on.

Since my publishing schedule will be even more sporadic now that we have a newborn, click here to join the 100,000+ others on the email list and get updated when new posts get published.

6+ Years of FI

My FI anniversary (Aug 1st) came and went without me even noticing this year.

I can say that this is the best that post-FI life has been though so I’m even more excited for the future.

I didn’t know this is where I wanted to be but now that I’m here, I can’t imagine being anywhere else. And I’m thankful that FI helped me get here.

P.S. Big thanks to Paul H. for the amazing Mad Fientist baby onesie! I promise he likes it a lot more than the picture indicates :)

P.P.S. I released a short podcast episode about this so click here to check it out!

The post Why I’m Appreciating FI More Than Ever Now appeared first on Mad Fientist.

The Best Advice from Mr. Money Mustache

The Mad Fientist — Tue, 31 May 2022 08:00:31 +0000

Exactly 10 years ago, I released the first episode of the Financial Independence Podcast!

To celebrate this big birthday, I’ve collected all the best advice from my interviews with my very first podcast guest – Mr. Money Mustache!

Listen Now

https://traffic.libsyn.com/secure/madfientist/mr-money-mustache-highlights.mp3

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Highlights

Mr. Money Mustache’s investing strategy
Thoughts on real-estate investing vs. stock-market investing
How to invest in a raging bull market
The benefits of hitting FI before having kids
Why you’ll likely make money after retiring early
Mr. Money Mustache’s biggest splurge
How to decide whether to pay off your mortgage early
The best part of financial independence
How to find meaning after early retirement
Most challenging part of post-FI life
The impact of financial independence on personal relationships

Show Links

Mr. Money Mustache - Early Retirement Made Easy

Mr. Money Mustache shares his financial independence and early retirement secrets in an interview for the Financial Independence Podcast!

The post The Best Advice from Mr. Money Mustache appeared first on Mad Fientist.

Aime to Invest – From Bankruptcy to FI in 8 Years

The Mad Fientist — Mon, 25 Apr 2022 09:00:27 +0000

On today’s episode of the Financial Independence Podcast, I speak to Patrick Aime from Aime to Invest!

Patrick’s journey to FI is an incredible one. He…

Moved from his home in Rwanda to attend high school in Europe and college in America
Stayed in America after college and started working in the feast-or-famine world of sales
Started his own company and grew it to $5 million in revenue in four years
Used his success in business to invest in rental properties and live a lavish lifestyle
Lost everything during the 2008 global financial crisis and had to declare bankruptcy
Found FIRE and drastically reduced his expenses and started saving for the long term
Rebuilt a smaller business and started investing in short-term rental properties in Mexico
Utilized geographic arbitrage to lower his expenses even further
Hit FI 8 years after declaring bankruptcy and became a millionaire 2 years after FI

Patrick shares everything he learned during his rollercoaster financial journey so hope you enjoy the interview!

Listen Now

https://traffic.libsyn.com/secure/madfientist/aime-to-invest-interview.mp3

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Show Links

Full Transcript

Mad Fientist: Hey, what’s up, everybody. Welcome to the Financial Independence Podcast, the podcast where I talked to some of the best and brightest in personal finance to find out how they achieved financial independence.

I’m really excited about today’s show. I’m talking to a buddy of mine named Patrick, who I met way back in 2016 at FinCon San Diego, which is a financial conference.

And he was a Mad Fientist listener at the time. And just came up and talked to me and my wife. And I quickly realized one, he’s a really fun guy to talk to, but also he had a really interesting story to tell. So I’m excited to share it with you today. Patrick’s story is a bit of a rags to riches, to rags, to riches story.

And there’s lots of stuff that he learned along the way, and I’m excited to dive into some of it, but a brief summary… he built up a multi-million dollar business over the years, and he was living the multimillion dollar entrepreneur lifestyle a bit. And sadly it all came crashing down during the global financial crisis.

So he had to eventually declare bankruptcy and start from scratch again. And when he was rebuilding up his life and his business, he realized he needed to get his personal finances in order. And that’s how he ended up finding the financial independence world. And that led to him completely changing his outlook on spending.

And he ended up trimming his expenses to less than 50% of before the financial crisis. And he was able to build up his business and his investments, and he was able to reach financial independence in just eight years after declaring bankruptcy. So it’s an incredible story with lots of lessons learned, no doubt. So without further delay, Patrick, thank you so much for being here. I really appreciate it!

Patrick: Thank you for having me on, Mad Fientist. This is an honor to be on your podcast.

Mad Fientist: So we go way back. We met back in 2016 at FinCon San Diego. And I have to say out of my entire decade of being the Mad Fientist, I think when I met you, that was the coolest I ever felt. And it just so happened to be, my wife was there and she got to experience it too. So yeah, if we just go back to 2016 and we were just milling around in some big convention hall and you came up to me and you just said some very kind things in front of my wife, and I could just tell by her face, she’s like, what is going on here?

This guy is like, he looks like a really nice normal guy smart. And he’s saying all these really nice things about, you know, just weird financial writing on the internet. And yeah. So I have to say thank you for that. That was a highlight of being the Mad Fientist.

Patrick: That was crazy. I remember that too. I was talking about how I first met you. I actually was, I met JD Roth first, and then I was like "Do you know the Mad Fientist?" He was like, of course, you know, because I knew I had listened to your podcast when you interviewing him. And I know, is that, can you introduce me to him and was like, Hey yeah, sure.

You know, so, and then when I met you, I was, I was star struck, dude. I remember when I asked you to get to take a picture with you and your wife was looking at us, like what’s going to picture him here.

Mad Fientist: Exactly

Patrick: Yeah, and for me, I I’m the sports marketing industry. So we do a lot of big corporate events or we know the big sporting events. So I get to meet a lot of celebrities you know, Hollywood and sports celebrities. And but I don’t get as star struck as, as well as when I met the Mad Fientist, that was like, I gotta get a picture.

Mad Fientist: That’s what you said that, yeah, that, that reminded me. You said something about like, yeah, like you had met some famous basketball player or something and and yeah, you’re more excited to meet me. And like, I was just as dumbfounded as my wife, because I’ve just been writing some weird financial stuff into the internet and never expected any sort of a response like that.

And and yeah, it was, it was pretty special. So I, I appreciate all the kind words and it was good to meet you all those years ago and hear some of your story, which I’m so excited to get into today, obviously. And so yeah, thanks for taking the time.

Patrick: Being on your show is definitely a highlight of my FI experience because you’re the reason why I started this whole FII journey and to be on your show after all these years is basically a bucket list type of opportunity for me. So thank you again.

Mad Fientist: Oh, no, my pleasure. And yeah, like I meant to do it a long time ago because when we met in 2016, I was like, wow, Patrick has such an interesting story. I need to get them on the podcast, but then completely forgot all about it after that. And then it wasn’t until recently, just a few months ago, you had tagged me on a YouTube video that you had published.

And I watched it and was like, oh yeah, this is why I was to have Patrick on all those years ago. So I’m so excited. We’re getting to do it today. So for my audience who is not familiar with you, could you maybe just tell a little bit about yourself and how this whole FIRE thing came about for you?

Patrick: Definitely. So I’m originally from Africa, east Africa, the small country called Rwanda, and we’re best known for having a mountain gorillas that you can actually visit in the mountains in the wild, which is one of those experience that you have to to do if you have a chance. And so I grew up in Africa, very modest lifestyle, single mom.

And when I was 14, I had a chance to go to high school in Belgium and and I took it. And then so I went to high school in Belgium. I was playing basketball. And then a few buddies of mine, teammates, were playing in the US and so had a chance to go to college in the US.

And of course that took it because being from Africa, having a chance to live in America, it’s too big of a dream. You know, because for us going to Europe is somewhat an achievable dream because it’s not that far and a lot of people have done it. And so for a kid out of Africa, especially my country Rwanda, a lot of people go to Europe or even South Africa, which is a modern African country to really experience I guess the first world living.

And then when I got a chance to come to the US I took it and my plan was to come here do the whole collegiate experience and then go back to Europe and play at a pro level, like a lot of my friends were doing, but I hurt myself my second year. And then it wasn’t the same anymore.

So that dream was was done. And then I decided to stay in the US, which was the best decision of my life. And then got a job, started working in a sports marketing, as we talked about. Saw these ads saying sales make a lot of money as I can do that.

So I got the job. And after four years of like a telemarketing type of a telesales, telemarketing, what you have to call these top CEOs of big companies and pitch them, kind of like that movie, Glengarry Glen Ross, or the boiler room basically, you know, yeah.

You learn quick. I love those kind of movies because they remind me of my start in working, basically hitting the phone, it’s kind of like a stockbroker in a way, where you got to make a hundred calls a day and hope that you talked to 10 people and out of the 10 people, maybe a sign up one person.

Mad Fientist: And this commission- only sales. Is that right? So you didn’t have any sort of base salary and you just earned solely off the commissions of what you sold. Is that right?

Patrick: Yes. So, it was a commission only sales, and that if you sold a package, which is hard to do, but if you sell a package, you make a lot of money, thousands of dollars per package. And so we knew that I was feast or famine basically. You sell something, you make a lot of money, you sell nothing and you’re dead broke for that month, basically.

So it was a high turnover job because it’s not made for everybody because you have to accept rejection every single day. And in the toughest thing with a commission only sales job too, is the fact that you have to reinvent yourself every month because… I have a buddy of mine who was my CPA, and he always tells me how his job, at the beginning of each year, he already knows how many clients he’s going to doing taxes for. So he already has a book of business that he knows, we will come back every year, so he doesn’t have to go fetch a new business. Whereas for me, I can have a huge month. Then the first of the next month, I have to start from scratch.

I don’t know where I’m going to get my next deal. So it’s kind of like you have to reinvent yourself every single month.

Mad Fientist: Wow. So, so you’re, you’re just basically cold calling and hoping for the best. And you’re not really taking any warm leads into the next month.

Is that right?

Patrick: Exactly. I’ve been doing this since 1998. And. It’s still as hard as it was on day one. You know, of course now I have a book of business. Because you can do a great job to a customer who said, once they get their clients to let’s say, super bowl and the super bowl happens to be in your hometown, then it makes sense for you to invite a few of your top accounts and then take them to a super bowl for a nice weekend of a fun and party.

So you can get to meet your clients at a personal level and generate more revenue in the future because now you know… so if there’s a relationship type of packages that we sell, where you get to spend time with your client outside of a boardroom, where you get to really know him at a personal level and that usually helps your bottom line.

Say the Super Bowl was just in LA and you do a big junket and you invited your clients. It doesn’t mean that you’re going to do next year when the super bowl is in Phoenix so that’s why you have to find another client who is in Phoenix, who wants to do the same thing.

So that’s why you have to always, always, always get new leads and new clients .

Mad Fientist: So it sounds like what the job like that you would need some serious money management skills to be able to smooth out those highs and lows so that you can sustain yourself for every month, no matter what’s happening. It sounds like you did that, but it was just because you were so good at sales that you’re able to maintain a really lavish lifestyle. Can you talk about adjusting to that sort of income and then how you actually used that to inflate your lifestyle quite a bit.

Patrick: Yeah. So I get my job and then I become the king of of cold calling and then four years into it, I had learned the sales aspect of it, I learned the the operational sides of it. And then I was like, you know what? I think I can do this for myself. I’d have to work with somebody.

So that was one of my biggest accomplishment in life because four years after college, I just jumped in and started my own company in the same industry.

Mad Fientist: Oh, wow.

Patrick: Yes. So I wasn’t married. I had no kids. So there was nothing to lose really and everything to gain. So I jumped in and then I started my new company and the idea behind that whole thing was like, I was telling my current customers that I was starting a new company and all excited for me. And I thought I was going to get everybody to join me. But then they didn’t really join me as I thought they would.

Because when I did my my business plan, I counted for a certain number of accounts that would come with me. And then nobody showed. So I had to really dig deep and find new accounts to start my company. So it was tough the first six months, I thought I was going to be a bust.

And then after month six, I just blew up and got a bunch of deals. And the Super Bowl was in San Diego that year 2003. And I was basically sold that in a month. I like 200 people going to the Super Bowl. And I was like, wow, this is ridiculous. And then the following year I kept growing the business.

I went from basically $0 to $5 million in four years.

Mad Fientist: Wow.

Patrick: Yes. In revenue. And I had a whole sales team at that point. I had 10 people working for me. I had a whole event planning team on site. I had two event planners. I had an accounting team onsite. So we had a bunch of accounts at that point and everything was rolling.

And of course, with money coming in and I hadn’t seen that much money in my lifetime. So I started spending all the money as well.

Mad Fientist: Let’s just recap real quick. Did you graduate college in 98? Is that right?

Patrick: Yes.

Mad Fientist: And then you worked for somebody else until about 2002 and then 2002, you started your own company and then it took six months to a year to get ramped up. And then 2003 you’re really cooking.

Is that, is that about right?

Patrick: Yes.

Mad Fientist: Nice. Okay. So you got all this money coming in and yeah, talk about how that changed how you spent.

Patrick: I guess rewind a little bit, when I finished college, I started my job. A lot of people in the office talking about investing in stocks and this and that and stocks splits and all of that.

So I started kind of of studying up on that a little bit. And then in 2000, early 2000, I jumped in and invested $5,000 in the tech mutual fund. So it was basically all the .coms were in this fund. And then and you know, what happened that year? The whole .com bubble burst.

And then my $5,000 basically turned into $1,800 in like six months. So at that point, I was like, okay, I don’t believe in the stock market, I’m never going to invest in this thing again. And so I did not touch the stock market. And then in 2003, when when the money started flowing in, for me, I bought a house.

I bought a townhouse in downtown in a really ritzy area. And then of course when you have a new house, you have to get a new car too. At that point, I was driving an infinity FX 35. And at that point my monthly payment was about $400 or $500.

So I just bought a house and then I was like, okay, now just get a nice car to park in front of this house. So I went and bought a Mercedes, like the most expensive Mercedes out there where my monthly payment…I leased it, it was a three-year lease. And I was spending $1,100 a month.

And, Mad Fientist, I got to tell you, one thing about me was, I had a spreadsheet. So I was spending out of control, but it was always on my spreadsheet. So if it made sense of my spreadsheet, I spent it. So the way I did it for the car, as an example, I was like, okay, so I’m paying $500 for this car right here. This one is going to cost me $1,100. So it’s only $600 extra. Do I have $600 extra? Yes, I do. Okay.

So you know, trips, bottle service. I remember one of my birthdays was epic where we had a Cristal, think we had like 10 bottles of Cristal. So I was just spending thousands of dollars in a stupid manner.

Mad Fientist: As someone who has never had Cristal, how is it? Is it really that much better than any other champagnes or… because I want to have had Krug champagne on a business class flight that I booked with miles on Qatar Airlines and that the Krug was amazing. Like I’m not a champagne fan, but I could drink that Krug all day.

Is Cristal the same sort of quality then?

Patrick: Yes, it goes down smooth, like you can tell it’s a little different than the Corbel.

Mad Fientist: Yeah.

Patrick: But it’s not worth the money you’re spending on that one bottle though. You’re trying to get drunk and they all taste the same really.

Mad Fientist: That’s true. We were up in Islay, Scotland, which is where they produce all the peaty whiskies, and this completely wasted guy came up to the bar next to us and ordered a dram of whiskey for 95 pounds. So that’s like pretty much one shot of booze for 95 pounds. And we were sitting there drinking our four pound dram of something good but not 95 pounds.

And it took everything I had not to just swap mine for his cause I was like, there’s no way he’s going to notice. He can’t even stand up. Like, this is all going to taste the same to him and it took everything I had not to just swap that over and see what 95 pound dram actually tasted like.

Patrick: Yeah, exactly.

So basically I was spending out of control, I was not saving anything, but one thing I did that was great though. At that time, I bought a bunch of rental properties in Arizona and I bought four properties in the same month. That was when the real estate was booming in the U S and I remember that time in Arizona and Phoenix area, there were saying, like, finding a house at $200,000 is going to be a thing of the past, you know, like these homes are going to $500,000. So I was like, yeah, let me just go in.

Because, as I said before, I didn’t believe in the stock market. So I was like, okay, this real estate thing. When I bought that townhouse, it appreciated real quick, within a year. And then by ’05, appreciated like a couple of hundred grand on my townhouse in downtown San Diego.

And then I was like, okay, now I’m a believer in real estate. And then of course at that time, everybody was saying real estate never goes down. It only goes up. And when I bought those homes in Arizona as rental properties it was going great too. I hired a property manager in Phoenix and they were doing everything for me and getting an 8% cut on the rent.

So I didn’t have to do anything. I was just collect the checks every month. Yeah, it was just fantastic. And at that point I was like, okay, I have to ramp it up and get more properties because this real estate thing is ridiculous, you know? I’m going to be a multimillonaire in no time.

So as I was spending money, money was still flowing in, you know, we’re growing real fast. And my wife always makes fun of me because I had a personal shopper at Nordstrom. And so she would call me every time they had a new arrival and it put them clothes out for me.

I was really living it up, but I don’t regret it because I really had a great time.

And then in 2008, it all came to a screeching halt when the recession hit. I still remember September 2008, when the Lehman brothers went belly up then everything just stopped in my industry because this is a discretionary spending that really is not necessary for companies, no marketing dollars to spend on their clients.

So when the going gets tough, that’s the first thing they cut.

Mad Fientist: Yeah.

Patrick: So I don’t know if you remember in ’08, they were laying off thousands of people, and my biggest accounts were like AIG and all these other companies that were spending stupid money on these corporate junkets and so everybody now from September until December, they all wanted their money back or canceling events and then not spending anything on corporate events.

So we didn’t sell anything in three months. We actually just reimbursing people. And at that point I knew, okay, this is not going well. And in December of ’08, I I made a decision to basically close shop.

Mad Fientist: Wow. So at that point, you’re used to this lavish lifestyle, I guess you have some fixed expenses that are going to be not changing no matter what’s happening in the market. So you still got that $1,100 a month Benz payment, and then you got your condo that you own in San Diego that you live in, but then you got the four rental properties in Phoenix.

So all those bills are still coming due. Did did you maintain your tenants throughout that time?

Patrick: No, not at all. So all the tenants started not paying and so we’re doing eviction and it was tough to try and get somebody out to get somebody in and were trashing the places. So my monthly expenses at the time were probably like about $12,000-$15,000 on my personal expenses. Company expenses, I was probably spending like $70,000 a month just to break even. So that’s when I was like, there’s no way I can continue because the money’s not flowing anymore.

And I still am paying that $70,000. To pay my team and as well as all the other fixed expenses that I had to pay. So I made a decision to basically close shop and I had to file for bankruptcy. So I really hit rock bottom at that time.

Mad Fientist: Obviously that must’ve been a really trying time personally. Where do you go from that? Especially when you know, the economy wasn’t really picking back up very quickly at that stage.

Patrick: It was really, really rough because I had no plan B, so this was my plan A, B, C, D all of them been combined in one, and then now I just lost it. And the reason why I had to file for bankruptcy was because. I had a bunch of loans that I had personally guaranteed.

And, there was no way I could have survived it. So I let my properties go in Arizona. And filing for bankruptcy is it’s, I’m not saying it’s a great thing, but it gives you a fresh start.

Mad Fientist: Right.

Patrick: Did you know that when you file for bankruptcy, they expunge all your debt, but they don’t expunge your student loans. So those you pay, they don’t expunge those, but if you have money invested in the 401k or any other retirement accounts, they do not touch that.

Mad Fientist: Oh, wow. I had no idea.

Patrick: Yes. So let’s say instead of buying homes in Arizona, I had a SEP IRA or invested in a 401k and I had a few hundred thousand dollars in that, in that account, they would not have touched it.

Mad Fientist: Wow.

Patrick: I’m not saying it’s a good thing, you know, because you had a bunch of debt that you don’t have to pay any more, but at the same time, you know, like if you were invested in the retirement account, you at least have a starting point.

You’re not from zero.

Mad Fientist: Right.

Patrick: So when I hit rock bottom in ’09 and filed for bankruptcy. When you file for bankruptcy, you have to take a little online class, because they don’t want you to come back. Cause a lot of people either you get it or you don’t get it, you know?

And then you’re going to be back 10 years later, as far as filing for bankruptcy. But that hit me really hard because I was like, wow, you know, like, this is ridiculous. I mean, you can’t go any lower than I am right now because I lost everything. And so that class really hit me hard.

And that’s when I started doing some research on personal finance and then I found Dave Ramsey first and you know how he also had a bunch of real estate and went bankrupt also. And then he always preaches cash is king. I mean, I couldn’t finance a pen anywhere at that point.

You know, my credit score was, I think it was like 450 in ’09 and so I was using just cash for everything. And so I was like, okay, I gotta figure out my life and I started listening to him and then doing some research a few years later, then I found the Mad Fientist.

And, and when I find the Mad Fientist podcast that really, really opened up my life and gave me a new lifeline. Because you had Mr. Money Mustache.

Mad Fientist: Yeah, first guest.

Patrick: Yes. First guest. So I listened to what he said, and I was like, wow, that’s possible? I had no idea. This was possible.

And then you had JL Collins and you had JD Roth. And so all of these other FI influencers. So I started just basically just listened to your shows all the time. And then I started investing in the stock market again, because everybody was talking about index fund investing.

And so I started putting some money aside, investing in the stock market. And then I also knew that I had to lower my expenses because everybody was, was was talking about that on your show as well. You know, you have to us to find a way to lower your expenses. So that’s what I did. Also I forgot to tell you, I’ll also start a new company, but in the same industry, but at a smaller scale instead set of having a whole team.

Now, it was just me. And I was outsourcing the event planning. I was outsourcing everything else. So it was just me on the phone and just creating a smaller company in the same industry, which I knew. And this time around, I was like, okay, I have to make sure that I get something out of this industry because the first time around, I got a lot of fun, but I got nothing to show for it after.

So this time round, okay, I have to really now learn how to save. I learn how to invest. So any money that I make now is going towards my savings.

Mad Fientist: Right. And, so talk a little bit about decreasing your expenses. Cause I think in your video you maybe had mentioned that you decreased them by 50% over that period. Was it painful, was there things that you really missed that you’ve since added back to your life?

Just talk about taking such a drastic expense cut.

Patrick: At that time I was paying about about $7,000 a month in all my expenses. And I knew I could do better. And so the first thing that we did was we sold our house and so my wife had a nice condo that we lived in and we sold it and by selling and then started renting, we basically shaved off a thousand dollars from the mortgage to renting.

And then we continued by finding ways to shave off expense that we didn’t really need. And so I went to 6,000, 5,000, 4,000. And and then in 2013, we did something really crazy, Mad Fientist, we had about $250,000 saved up at that point. And and we’re like, okay what are we going to do with this?

And it was in index funds and brokerage accounts. So we decided to take down a whole chunk, which was a hundred percent of our liquid assets. When I think about it, I cringe because we took all that money and bought a condo in Cabo San Lucas, Mexico.

Mad Fientist: Oh, wow.

Patrick: And the thinking behind the whole thing was okay well, if you buy a condo in Mexico, then we can really lower expenses because living in Mexico is basically 50% off of living in San Diego. So if we can go to Mexico, then we can really shave off even more money.

And the fact that my company, I could make calls from anywhere. I don’t have to be in the US. And so the idea behind buying a property in Mexico was okay, let’s rent it out now. And I didn’t even know Airbnb existed in 2013. I knew VRBO, I didn’t know Airbnb. I think they were still at the infancy stage or they were not as big as VRBO for renting your house.

So we’re thinking we’re going to rent it out and then use it as well. And then a few years later, I think we had a five-year plan of actually moving to Mexico and really shaving off, going from like $7,000 to probably go into that $2,000. And when you buy a place in Mexico, I don’t know if you’re familiar with buying a property in Mexico, you cannot get a loan from Mexico, so you have to buy cash. So a lot of Americans who buy homes in Mexico, they have to either use cash or take a an equity loan out of their home and then use that to buy the place in Mexico. So it was really, really risky because Mexico, you know, when you go to Mexico for a weekend, you having a good time.

But it’s not a first world country. So you don’t really know when you buy a place in Mexico, if the place is actually yours, because there’s this thing called, which is a trust. So they don’t want to allow Americans to actually own a property in Mexico. So you have to put it in a trust that you open with a Mexican bank, and then that trust is renewable, every year. It costs like $400 a year. So the title of the house is in that trust, which is under my name and I can gift it to somebody. I can sell that property.

I can do whatever I want, it’s my property, but it has to be in the trust. So a lot of different rules that happen where you don’t really know. So what happened is the bank goes belly up, then what happened? You start to think about all these things,

Mad Fientist: Yeah.

Patrick: But we were like, you know what, let’s just give it a try and see.

So we really put all of our chips in that one basket. And then with Airbnb, the place exploded as far as renting.

And so we were netting probably about $2,000 a month in rental income, after all expenses.

And the following year in 2014, we bought another place in Playa Del Carmen on the east coast, the Caribbean side of Mexico. And the reason why it was we’re trying to hedge kind of saying, okay, instead of buying another place in Cabo, how about we bought another place in a whole different area of Mexico?

So if Cabo goes bust, at least we have another place so we can kind of hedge. And so we bought that one and then it went also unbelievable as far as renting our Airbnb. So now we’re netting over $3,000 a month on just those two properties. In my head I was like, okay, so we net netting $3,000.

So all I need to do now is get below $3000 in expenses and then I’m free.

Mad Fientist: Yeah.

Patrick: So we kept moving every year. It seemed like we were moving just to shave off money from our rental. And our family members were making fun of us because we wouldn’t hire a moving company because I was so cheap at that point.

So I did a lot of moving of a big furniture. And every time we moved, we shaved off $500. That’s why we moved. And so in 2017 we had accumulated enough or we’re making enough money and had lowered our expenses to a level where we actually hit FI and you know how I found out I hit FI? I went on the MadFientist Lab and then I was like, I don’t know what kind of a mumbo-jumbo algorithm you use here, but let me try this. I put all the numbers. Okay. This is just, my expenses is how much I have invested and then click results. And then the Mad Fientist told me, well, you have hit FI, my friend.

Mad Fientist: Oh, that’s great.

Patrick: And at that time, my monthly expenses were about $2,800.

Mad Fientist: Wow.

Patrick: So I had lowered my monthly expenses to $2,800. And this is kind of crazy when you think about it too, because I live in San Diego.

Mad Fientist: Right. Yeah, exactly.

Patrick: San Diego is not a cheap place to live.

So that’s when I knew in 2017 that I had hit FI. And then in 2019 that’s when another huge milestone of mine, I hit that millionaire mark.

Yes. So it was crazy though for, you know, a kid from Africa, who grew up with nothing. Because when you’re in Africa, when you dream about being a millionaire… being a millionaire in Russian rubles, means nothing.

Mad Fientist: Yeah.

Patrick: Or Cuban pesos, or even you know, Rwandan Francs that, okay.

You have a million Rawandan Francs, but being a millionaire in the US is a big deal.

Mad Fientist: Oh, yeah, definitely.

Patrick: And especially because in ’09 I had nothing. It is my best accomplishment ever because especially where I came from, you know, and also my spending habits, pre recession.

Mad Fientist: Yeah, so obviously, I guess during this time you’re building up the smaller business that you had started in 2009. Is that right? Is that what produced the income besides the rental properties?

Patrick: Yes, so every money I was making, I was basically saving it and I became a saving machine at that point. Because in sales, you always think about you always trying to measure yourself with the next sales guy.

Because I remember when I started, you know, I was like, okay, I made a hundred grand. How much did you make? So it’s kind of a competition amongst sales people. But after ’09, I didn’t really care how much I made. The biggest thing that was important for me is how much I saved.

So I don’t care I made 200 grand. If I don’t save anything, it means nothing. But if I save a hundred grand, then that’s a huge accomplishment because not many people can do that.

And it became an obsession of mine, basically, trying to find a way to save as much as I could and invested. And at that point I believed in the index investing, I believed in real estate. So my portfolio is half and half right now. Where it’s half real estate, half index fund.

Mad Fientist: So I’ve had the pleasure of meeting your lovely wife. When in the story, did she come into the picture and was she on board with this crazy FIRE idea slash cutting expenses to 50% of what they were before?

Patrick: My wife is my ride or die because I met her in 2007. So she got to experience the spending Patrick. I always tell her I got you because of my Mercedes. But she she’s frugal by nature. So she, she wasn’t really wowed by all the flash and the bling.

And so when everything hit rock bottom, she was actually my rock because it was still early in our dating life. And if I was her, the way everything was hemorrhaging around me, I would have cut my losses and be like, okay guy’s not worth it. You’re supposed to marry up not married down, right?

So she stood by me and she was all in. Like every time we come up with our crazy ideas she’s always all in and always gave some great advice and when we took that big risk of buying our place in Cabo, she was the driving force.

Mad Fientist: I wanted to quickly go back and ask you about that transition from spending as much as you were pre-2008 to then spending what you spend now or in 2017 when you hit FI. And it’s sort of a selfish question because I’ve always been naturally frugal and now that I don’t need to be as frugal, I’m trying to see what kind of spending actually moves the needle for happiness. Is there anything you miss that you cut out or was there anything that you’ve added back into your life after drastically cutting your expenses or anything interesting that you learned in those two sort of mindsets?

Patrick: You have to change that mindset. And that was the biggest thing for me in ’09 was to change my mindset, I became a saver instead of a spender. And to do that though, you have to have a why, and if you don’t have a why it’s going to be tough.

So me, I spend money on experience.

I love traveling. So my wife and I, we’re trying to take at least two months a year going places. So what we do, we just go eight days at a time, eight days to Hawaii and then come back home.

And then the next month we take eight days, go to Jamaica and then come back home. And we usually do that for about two months every year. And that’s where we spend our money just to go have those memories of going to these festivals and concerts and things like that.

And so it’s personal again though. So I don’t knock anyone for doing what they doing. You know, if you have the money and can buy yourself a new car, go ahead and do it because you have to enjoy life, but enjoying life for me is not buying material stuff anymore.

So that’s why personal finance is personal.

A lot of my friends, they’ll always ask me how come you always on vacation? That’s why I started my YouTube channel, because I was like, maybe I should share how I did it. You know, my journey.

Mad Fientist: That’s awesome. And so speaking of your YouTube channel, where can people find you if they want to learn more about you, your story, or get in touch? Where can people go?

Patrick: So I’m active on Twitter. And my Twitter handle is @frugalsafari.

I have frugalsafari.com as well, where I started blogging after I met you in 2016. But then I realized I’m not a big writer, so there’s a few articles there, but maybe I should go back and write a few more, but also have a YouTube channel now called the Aime to Invest, cause my name is Patrick Aime.

Mad Fientist: A I M E

Patrick: Yes. So my YouTube channel is called Aime to Invest.

Mad Fientist: Nice. Okay, I’ll link to a link to Twitter, I’ll link to the website, and I’ll definitely link to the YouTube channel as well. And you’ve heard this show before, so, you know, I always end every interview with what’s one piece of advice you’d give to somebody on the path to financial independence?

Patrick: The biggest piece of advice I would give is know your expenses. Because a lot of people, I feel like the majority of Americans and everybody in the world, they don’t know how much they spend on things. So if you ask them how much you spend on your expenses every month, they don’t know. And if you don’t know how much you spend, then you’re going to have a hard time controlling your finances, because it’s controlling you at that point.

You have to know how much you spend every month, because once you know that, then you can have a game plan on how to achieve financial independence. So know your expenses. Itemize your expenses on a spreadsheet so you know how bad or how good it is so you can have control of your finances.

Mad Fientist: Couldn’t agree more, Patrick, thank you so much for joining me. And everyone out there go give Patrick some love on YouTube because I accidentally woke him up early on a Sunday. He had to set an alarm for the first time in years because I’m in Scotland, so that’s usually eight hours difference.

But it was even worse because the clocks changed last night in America and they didn’t change year. So we only figured that out today. So he had to wake up super early on a Sunday. So Patrick, thank you for doing that. This has been fantastic. Really enjoyed chatting with you and yeah, you’re welcome back anytime.

Patrick: Mad Fientist, this is definitely a bucket list moment for me. We went from taking that selfie together in 2016 to now being on your show and the fact that I hit financial independence was because of you, because you showed me the way with all your interviews. So thank you so much. And this is definitely a memory that I will not forget.

Mad Fientist: Oh, that’s great to hear, Patrick. And I’ll use that picture of us as the main picture for this episode.

Patrick: And that’s what started the whole journey for me, basically San Diego meeting the Mad Fientist. And now I’m on the Mad Fientist show.

It doesn’t get any better.

This is basically what you call Hollywood ending, man, Hollywood ending.

Mad Fientist: Well, it’s awesome, man. Thank you so much. I enjoyed it and I know the audience will too. So I really appreciate you taking the time and waking up early on a Sunday morning and hopefully I’ll see you somewhere in the world.

Patrick: Let’s do it and say hi to your lovely wife from me.

Mad Fientist: You do the same. Alright. Thanks buddy. Bye.

JD Roth - Get Rich Slowly

J.D. Roth, creator of GetRichSlowly.org, joined me for the Financial Independence Podcast to talk about finding personal and financial freedom!

The post Aime to Invest – From Bankruptcy to FI in 8 Years appeared first on Mad Fientist.

The Escape Artist – FIRE in the UK

The Mad Fientist — Wed, 15 Dec 2021 12:37:13 +0000

I have some big news…

I am now a British citizen!

In honor of finally getting my UK passport, and therefore completing this long journey to citizenship, I am releasing my UK FIRE episode.

Barney, from The Escape Artist, joined me in my Edinburgh apartment (before the pandemic) to discuss all things related to financial independence and early retirement in the UK.

Hope you enjoy it!

Listen Now

https://traffic.libsyn.com/secure/madfientist/escape-artist-interview.mp3

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Highlights

The cultural differences between US/UK that affect pursuing FI
How to escape from the prison we create for ourselves
Translating US investing terminology to the UK (e.g. 401k→pension, IRA→ISA, etc.)
Is it easier to reach FI in the US or UK
Class structure in UK and how pursuing FI forces you to traverse all classes
Why FIRE isn’t bigger in the UK
Difference between the different types of ISAs
Is tax hacking possible in the UK
Real-estate investing in the United Kingdom and the fantastic Rent-a-Room scheme
How to use geographic arbitrage to reach FI sooner

Show Links

The Escape Artist

Full Transcript

Mad Fientist: Hey, what’s up, everybody. Welcome to the Financial Independence Podcast, the podcast where I get inside the brains of some of the best and brightest in personal finance to find out how they achieved financial independence. Today’s episode is a long time coming. I actually interviewed my guest two years ago, which because of the coronavirus pandemic seems like a lifetime ago.

But the reason I haven’t published the episode yet is because I’ve been waiting for something really special to happen…and that just happened last month. I’m excited to tell you that I am now British, which is something I never expected to be in my life, but I’m so happy that I am at this stage because over the last six plus years, I’ve been sending in lots of money and applications and spending lots of time trying to get my British citizenship so that I can just come and go as I please.

And thankfully that finally was successful and now I’m a dual US/UK citizen, and I couldn’t be happier. So to celebrate, I’m finally releasing the UK episode and I’m excited to introduce my guest, who is Barney from The Escape Artist. And those of you in the UK will know Barney cause he’s probably one of the biggest FIRE blogs in the country.

So when Barney was up in Edinburgh for the Edinburgh festival in 2019, he stopped by my flat and we sat down for an hour and just chatted about FIRE in the UK. And we dove into a lot of, you know, UK-specific stuff, but we also compared it to how people in the US pursue FI and the differences between the two countries that make some things easier and some things more difficult.

So without further delay… Barney, thank you so much for being here. I really appreciate it.

Escape Artist: Hey man, it’s great to be here at last.

Mad Fientist: So this is actually a real weird one for me. You are actually sitting in my living room, which I don’t think I’ve ever done one at home before. But you came up from London.

We were going to do it in a pub or somewhere cool, since this is the UK episode, but I realized I don’t have my traveling mic. So you had to come to my apartment and use the one that’s attached to my desk. So welcome to my flat.

Escape Artist: Edinburgh is just beautiful. It’s just such a cool city. And it’s great to be here while the Fringe is on.

Mad Fientist: Yeah, the Fringe is the world’s largest arts festival. Well, it’s part of the world’s largest arts festival and it’s the whole month and it’s just one big party in the city. So you’ve definitely come on the right day. So, so yeah, this is the long awaited UK episode. I’ve gotten so many emails from UK readers asking, you know, what’s the differences between the US and the UK and you know, how do you pursue FI in the UK and all these things, and you’re going to be the man to help with that.

But before we get into all that, can you maybe just give my audience a little bit of details about yourself and give a little background story about how you achieve financial independence?

Escape Artist: Sure. I think that for a lot of people that are financially successful, if you kind of scratch the surface, there’s often a trauma kind of in their earlier life that got them started on that path.

And for me when my parents, when my parents moved house when I was 11 years old back in 1981, they did the classic British thing. They bought the biggest house they could, they took out as much debt as they possibly could. And their timing was awful because this was 1981. And interest rates went to 17% and my parents kind of had this realization that they’d overstretched themselves.

And so they had then to do a kind of period of belt tightening and the newspaper got canceled. My dad stopped buying beers, started brewing his own beer. The holiday got canceled that that year. And I think I took away from that was that debt was a kind of very scary thing. And ultimately the bank could kind of take the house away from you.

And so kind of from that point on, you know, I made choices in my, in my education and in my career that would put me on that path to kind of having money. And so, you know, when I went to college, I studied economics. When I graduated, I chose like a, really a profession where I could earn safe money. So I trained as a chartered accountant and qualified, and then worked in corporate finance for 20 years.

And really for the last 10 of those years, I was very focused on just putting away as much money as I could, because I’d had an experience at one of my jobs where I realized that kind of I was trapped. I had I had a mortgage at that point. We had children on the way. My wife had given up her job and so the whole kind of burden of providing for the family was on my shoulders. And I, I took a job that I hated. And from that point onwards, I saved at least half of my income every month. Fast forward to 2013 and I realized that I had enough.

Mad Fientist: Yeah, you said you were trapped, which maybe leads into the whole theme behind your blog so maybe you do want to tell the story about the escaping from the prison camp.

Escape Artist: Yeah, so the prison camp is my kind of analogy or my metaphor for the situation that a lot of us kind of put ourselves into where we kind of create our own prison. We trap ourselves through our spending choices by taking on debt, by kind of societal expectations.

And that can lead you to a point where you’re no longer happy doing that, you know, doing a job, but you feel you have no choice, but to carry on doing that. And, and I, I certainly felt trapped at that time in my life. And I just couldn’t see a way out of the prison camp other than to kind of slowly dig my way out stone by stone, rock by rock, but by saving money.

And that the prison camp analogy is based on a kind of World War Two story of, you know, The Great Escape, the film, The Great Escape, where the prisoners literally kind of dug their way out to the prison camp in this amazingly kind of painstaking, slow, laborious process. And that, that kind of amused me that analogy.

Mad Fientist: That’s great. And I want to go back to something you said, you mentioned, what was it? 17% interest.

Escape Artist: Yeah, yeah, absolutely. One day there’ll be 17% again. And you kind of wonder what the world will look like at that point.

Mad Fientist: It will look very different. No doubt. Yeah. That’s I just released a post not too long ago about whether you should pay off your mortgage early or something.

And I’m definitely in the camp where I’m just looking to buy a house just so I can lock in some of these low, low interest rates. Cause they may potentially be, you know, once in a lifetime interest rates and yeah, it would feel pretty good to have a 30 year mortgage at 3% or something. If, if interest rates do go up to what they were before.

Escape Artist: Well, everything in finances is cyclical.

The problem is, you know, history never quite repeats itself in the same way. So you kind of know things are going to change, but you don’t know exactly how and you don’t know exactly where.

Mad Fientist: So obviously based on your history and your background in economics and your accent obviously proves that you are a Brit, you’re going to know a lot more about the UK side of things than I am, even though I live here.

A lot of my focus is still on the U S because that’s where most of my money is. So before we dive into some of the nitty gritty details about, you know, pursuing FI in the UK versus the US maybe, could we talk about, are there any like broad cultural differences that sort of change the change of the game in any way?

Escape Artist: Yeah. The first thing to say is that when I was, I mean, I got serious that, that career crisis that I mentioned that really put me on the path to aggressively saving 50 plus percent that happened in 2002, 2003. And so you have to remember at that time in the UK, there was no financial independence movement.

There was no awareness of the U S financial independence movement. So, I mean, the book, Your Money or Your Life, I think came out in 1990, but when I was going through my journey, I had, no, I hadn’t read that book. I had no awareness of all of it. And you just didn’t have the, the tools, the resources, the blogs, the podcasts that we have today. And that, that is just a massive help. And, and the fact now is that, you know, we in the UK benefit from that accumulated body of knowledge that’s been built up, you know, mostly in the US not, not completely, but mostly in the US we benefit from that massively. And it’s pretty easy to convert most of that content over to a, to a UK actionable plan.

You know, the differences in terminology are relatively simple to, to translate, you know, it’s not hard to convert our IRA to workplace pension. It’s not, it’s not that hard to convert VTSAX to VWRL et cetera. So, so, you know, we have this kind of huge advantage of the internet now, and the body of knowledge, you know, in 2013, the thing that kind of triggered the realization that I had enough was stumbling across Mr. Money Mustache’s site. And it, it just kind of blew my mind. And so I guess, you know, since then I’ve been kind of observing the differences between the US blogs and the, the kind of the UK content on financial independence and trying to create some, some UK content on financial independence, on The Escape Artist.

And. What I, you know, what you realize is that you’re doing that in a slightly different historical context and a slightly different cultural context. And I think one of the reasons that the the American movement kind of took off quicker earlier, faster…partly there’s a historical tradition to draw on there that goes all the way back to kind of Henry David Thoreau and Walden, all the way to kind of blogs like Early Retirement Extreme and then Mr. Money Mustache. So there’s that historical strand of frugality and self-reliance and rugged individualism in, in, in American culture and a focus on freedom. And in some ways there’s more of a burning platform in the US because I think the pressure of marketing, advertising, and consumerism is even greater in the US than it is in the UK.

I mean, certainly as a Brit, when I went to America and you kind of, you went from four TV channels of which one or two had adverts to cable to seeing cable TV, and just flicking through 70 channels that were running 24/7, just with this, these infomercials and these adverts kind of beamed at you, you kind of realize that the pressure of commercialism is greater in the U S and so I think one of the things that’s meant we’ve been slower in the UK to stumble across some of the secrets of financial independence is in some ways there was less of a burning platform for us, there was perhaps a greater focus on tradition, culture, community than in some parts of America, which, you know, some parts of America can seem pretty kind of brutally commercial.

Mad Fientist: Yeah. I absolutely agree. Having lived in both places and, you know, having lived in the UK for probably 10 years in total by now, I can definitely see that. And I agree that there’s…obviously, yes, there’s a focus on freedom in the States that may be more pronounced. And also, yeah, you’re just being bombarded with things all the time.

And like, I couldn’t believe it. I went back to my parents’ house for Christmas just last year, I think. And the commercials on TV out lasted the program. So I was going crazy after a while, so I literally timed it and it was six minutes and 20 seconds of advertisements to six minutes in like six seconds of actual program.

People are paying like a hundred dollars a month for this privilege of getting just bombarded with all the stuff that they don’t have.

Escape Artist: Yeah. So just the existence of the BBC, I think is a kind of moderating factor. You know, the, you just don’t have that constant constant stream of adverts. There is this kind of tradition of public sector broadcasting, which, which kind of includes the concept of entertaining, but also educating as well. So we have all these kind of great, we benefit from, you know, from these great nature documentaries on the BBC produced it know great cost, great expense. And so that’s kind of part of the, the upside, I think of the British culture. But it may be one of the reasons why FIRE was kind of slower to take off over here.

The other, the other thing I do think we have to touch on actually is, is the kind of legacy of the class structure in the UK. It’s definitely a relevant part of our history. So if you kind of think back in you know, a couple of hundred years ago, you had this kind of post feudal society where you’ve got the aristocracy at the top of the pile and they’re living off passive income. So, you know, they own the stocks in the stock market. They own that most of the land that they own rental properties. And then you’ve got a you’ve got a middle class that, that the kind of the doctors and the lawyers, et cetera, who have good incomes and are kind of saving steadily.

And then you traditionally had a kind of a working class who live paycheck to paycheck and that class structure, it leaves a legacy because kind of one of the ways I think about getting to financial independence in the UK today is you have to change your mindset. Kind of starting off from a working class mindset where you’re living paycheck to paycheck, and you kind of have to learn those middle-class habits of kind of thrift you know, caution, prudence learning to put aside some money, but even then, that’s not enough. You can’t just have a middle-class mindset if that prevents you from kind of exposing your money to risk and exposing your money to the volatility of you know, owning real assets like the stock market or like rental property. And so in some ways, you know, an individual’s journey from kind of starting out to quitting their job means going from a kind of working class mindset to a middle-class mindset and ultimately throwing that off and becoming your own boss and your own kind of if you like the CEO of your own of your own life which, which means kind of you know, being, being your own Lord of the Manor as it were.

Mad Fientist: And that appears to be a very difficult to do because as you’ve seen, you know, this whole thing has not grown as quickly or or as broadly as it has in the States. And I think that’s probably because it’s such a big identity shift for people in the UK who,ou know, have always considered themselves working class. And just always imagine they would be working class because that’s what their parents were and that’s where their grandparents were. And, you know, obviously in America, like the American dream, everybody is born and think they they’re going to be the richest person in the country. And obviously that doesn’t happen to everyone but I see that difference there too. It’s like people do feel like they can move up and they all think that they will. Now, that’s great because that drives people and gives them, you know, motivation to work hard and do things like that. But also, I worry that that’s sorta some of the discontent and unhappiness in the States, especially these days with social media, where you can see the people that have made it and you haven’t quite made it there yet because you, and you may not because not everybody will. And so in Scotland, at least, like I find that it looks like more people are broadly happier just on day-to-day life and they’re happier with their position and make the best life that they can at that level.

Do you agree with that? And if so, do you think it’s more of a benefit or more of a hinderance?

Escape Artist: That’s a great kind of insight. I mean, I am a great believer in meritocracy. I’m a great believer in social mobility. I’m a great believer in that idea that anyone should be able to kind of rise to be the CEO.

The downside of that is that if you create a truly meritocratic society and then individuals fail, they’ve kind of got no one to blame other than themselves. And it’s, it’s like, It’s like you’ve unleashed a set of expectations there that if people are unable to meet through whatever reason, you know, maybe, maybe it’s there it’s, it’s something that they did wrong, maybe it’s just bad luck. You know, luck plays a huge part in life, in money, and investing, as we all know. And so if you live in a culture that is meritocratic and socially mobile, such as the US that’s great for a mindset of, I can do anything, but that the kind of the flip side of that is failure hurts more.

And you know, you could, you can make a very good argument for, you know, that there’s, there’s, there’s almost this comfort in kind of staying in your, in your world and what you know, and so. You know, meritocracy has a cost. It’s if you look at kind of suicide rates, for example, suicide rates, suicide is not a problem in feudal societies because everyone knows their place and even people at the bottom of the pile, they don’t beat themselves up about that. Cause it’s just, that’s just the hand that they were dealt. So one of the kind of downsides of meritocracy is it just feels harder when you fail.

Mad Fientist: That’s a good time to bring up what we were talking about just before we started the interview and how you were saying how you’re focusing more on, you know, talking about enjoying that journey to financial independence, rather than that end goal.

Can you maybe talk about that focus and what made you shift to that.

Escape Artist: Yeah this is a theme that I’ve been exploring more and more in recent blog posts, because I think that the, the carrot of early retirement is so kind of powerful as a, as an image as a kind of an attention grabber as, as a hook for a lot of people and particularly a lot of media coverage of financial independence just focuses on that.

Here are the people that retired in their thirties or here are the people that retired in their forties, but that crowds out the kind of more subtle benefits of this way of life, of this way of thinking about the world. And so, I’ve been kind of exploring that in recent blog posts.

I wrote a blog post recently called "Here’s what’s in it for you right now".

Just looking at the benefits from pursuing financial independence you know, the benefits, things like, you know, having a mission, having a goal, having a clear idea of where you want to get to, kind of forcing yourself to take action, forcing yourself to exercise your frugality muscle, forcing yourself to exercise your actual muscles and start kind of walking rather than just getting ferried around in cabs.

These are the kind of immediate benefits of pursuing financial independence because ultimately, I think that if the way that you’re thinking about this is I will accept 15 or 20 years of misery and deprivation in order to get to the promised land, that’s a bad trade.

Mad Fientist: Yeah. Couldn’t agree more. And, what you said, highlights that, even if you are uncomfortable with the idea of maybe moving up to another level that you hadn’t even thought about, or if you are very comfortable and happy in the current level that you’re at, which is great, like, this is all at the end of the day about happiness and living a fulfilling life.

So if you’re already there. Yes, that carrot of early retirement is probably not going to be too motivating. But as you said, there are so many other benefits and I will link to that post in the show notes, so anybody can check that out if they want to dive in more. But yeah, I couldn’t agree more.

So we’ve, we’ve covered sort of this cultural, societal differences, but also, you know, the government here is very different. The social nets in place are different. And so surely that plays into it. One on a tax perspective, you’re going to be paying more taxes, but then you also have, you know, less distance to fall if things do go wrong. Could you maybe talk about those differences?

Escape Artist: Yeah, so I think it’s absolutely right that it’s harder to get to financial independence in the UK in the sense that post-tax incomes are typically lower than in the US for two reasons. One is, the tax burden is higher in the UK, and secondly, it’s just not quite as rich an economy.

And so you’re trying to save 50 plus percent of your income out of post-tax income, which is lower in the UK than the US, so that let’s make no bones about it…that makes it harder. No doubt. The counter balance to that is that you hopefully do not have to pay for health insurance from your post tax income.

But again, that’s an interesting one because when I was in my corporate job, I had private health insurance through my job. And so for me to walk away from that, I kind of had to get over the mental hurdle of what if the NHS isn’t there to fix me in a reasonable period of time, because, as we all know, there are waiting lists for a number of operations in the UK.

And so part of the equation is what if I needed one of those operations and I wasn’t prepared to wait one or two years for it. So again, that’s kind of thinking about, am I mentally prepared to self insure? Because the truth is, the NHS is excellent for very urgent conditions.

You know, life-threatening, urgent, acute conditions, but you always have the option to buy in private medical treatment at short notice, if that’s what you want to do. And actually, when I’ve looked at the kind of cost benefit analysis of that, some of the kind of general health insurance premiums are so high, I just think, look, I’ll keep myself healthy and hopefully I won’t need it, but if I just need to buy in an operation at some point, I can afford to do that.

Mad Fientist: That’s really interesting. That’s a good way to think about it. Because I had heard that lots of people had private health insurance, but I didn’t think you could self-insure in that way.

So you’ve been just relying on the NHS since then?

Escape Artist: Yeah. I mean, touch wood. I haven’t had great call to kind of visit the NHS for myself too much since then. But, I take comfort from the fact that having looked at some of the kind of costs of operations, it’s actually not much more to buy it in than it is to pay the annual insurance premium.

So it’s relatively affordable if you have kind of FI levels of net worth.

Mad Fientist: That’s fantastic. As someone who is an American living in the UK the NHS just is, I love it. And we’re a bit spoiled in Scotland because the population is lower and I think there’s more coverage with doctors per person in the population so we don’t have to deal with a lot of the things that you may have to deal with down in England. But I just absolutely love the feeling of going into a doctor’s office and them just asking all these questions, trying to get to the bottom of why you don’t feel well, and then them referring you to anyone that they think could help better without thinking about costs or how much is it going to be to see a specialist or how much is this prescription going to be?

It just boils down to, how do you feel? How can we make you feel better? And we’re going to do all these things because we think those are the things that are gonna make you feel better. And it just, it’s very refreshing for peace of mind and for someone who’s a relatively healthy person, I have really enjoyed just the security of it and just knowing that it’s there. And, as you said, you always have the option to go private to, which is no doubt, a lower cost than going private in the States would be.

And in Scotland, there’s also free education. So free higher education, which is something that people in England may not have the same sort of privilege of having. Is that correct?

Escape Artist: That is absolutely correct. And that’s something that’s changed since I went to university. Back then it was kind of a no brainer in the sense that only perhaps 10% of the population went to university and you got free tuition fees. And that has changed. And this is very fresh in my mind right now because my daughter’s just about to go off to university in the next few weeks. And so I’m very well aware of the cost. The cost has gone up and it’s cost is now born by the by the student. And. In some ways the returns to a college education have decreased because if 50% of the population are going to college education, then ultimately you’ve just got a much broader pool of people competing for the same jobs that you used to have, the 10% of the population competing for.

So, back in the day, university was an absolute no brainer in the UK. Now, I think it’s a more kind of balanced cost benefit decision to be made.

Mad Fientist: So eliminating potentially big student loan debt, if you’re in Scotland or I believe even in England, the costs of higher education are lower and then taking away the burden of paying for your own health insurance or finding a job that provides you health insurance so that you can cover healthcare costs. Those two things seem like a huge leg up on someone’s journey to financial independence. Do you think that those benefits outweigh the lower wages or do you think in general it is still more difficult?

Escape Artist: I think it’s a whole range of factors. And I think the fact that college tuition is free in Scotland or was free in England for me. That’s a huge advantage in the column for the UK. I still think that when you kind of add everything up, it’s somewhat easier to get to financial independence in the US than the UK, but that includes a very broad range of factors.

You know, part of which is behavioral, as well as the kind of pure economics of it.

Mad Fientist: Yeah, based on what I’ve seen, I would agree with you. I think the higher incomes that you can potentially achieve in the States are obviously a big benefit to someone pursuing FI.

To move on to some of the more nitty gritty details.

The first thing I wanted to talk to you about is pensions because I have a pension from my very first job in my career. And it is the most annoying thing because if you have foreign accounts over 10,000 dollars, you have to tell the government that you have them every single year. So I have this pension from, I think it was 2004 was probably when I started the job and I worked there for three or four years so I have exceeded that amount, but not by much. So I have this annoying account that I can’t transfer the money to the States, because all my other money I’ve just transferred to the States, and this thing is locked down and I was even considering like giving it to my wife, Jill, just so it wasn’t mine anymore and I wouldn’t get into trouble with the government if I forgot to tell them about it one year. And I’ve thought about giving it to charity. All these things and I have not found a way to get rid of it.

So maybe just talk about the prevalence of pensions here. If they are similar to a 401k, in some ways, if they’re different. And, is there any way I can get that money out of my name?

Escape Artist: Is that a UK pension?

Mad Fientist: It is, yes.

Escape Artist: Okay, so I divide UK pensions into two, broadly. So there’s the pension scheme that your probably in with your workplace pension, but that relates to your current employment.

And then there’s SIPS, self invested personal pensions and normally the way that your workplace pension works in the UK is that there is some form of matching going on. So maybe you’re asked to put in 5% and if you put in up to 5%, then your employer may put in up to 10%.

So maybe they kind of double what you put in it. If that’s the case, if there’s any sort of matching, then you never leave free money on the table. You always put in the most that you can to get your employer match at a hundred percent. So that’s kind of step one. Step two is people’s current workplace pension.

Most people have no idea what’s going on with it. And so. I say to people just dig out the paperwork. What happens time and time again is people join a job, they get sent a stack of papers to look at, they never kind of get around to reading it all. It’s all very lengthy, boring, confusing. And so people kind of bury their head in the sand. The problem with that is that you will get defaulted into an automatic kind of default fund choice where someone else has made the decision for you and it’s probably a suboptimal asset allocation. So if you don’t make a conscious choice with your workplace pension, you’re probably being put into something like a 60/40, 60% equities, 40% fixed income.

And if you’re 25 that’s a disaster, or if you’re 30, that’s a disaster because 40% of your pot is earning not enough to keep up with inflation and only 60% of it is doing the heavy lifting that equities do over the long term. So the first thing most people need to do is just understand what fund their contributions are going into.

You know, normally you can just make a choice to go 100% equities in a global equity tracker tracker fund. Now often Vanguard is not on the option for a workplace pension, but there’s almost always a kind of Vanguard lookalike. In other words, a low-cost global equity index tracker fund, where that’s a hundred percent equities.

So that’s, that’s the next thing to look at. And then, if you want to get more kind of hands-on and more clever, you have the option of what’s called partial transfers, where you can take money out of your workplace pension and move it across to a self-invested personal pension to benefit potentially from lower fees and the ability to access Vanguard’s product range.

And so you often have to stay in your workplace pension to carry on getting the contributions, but that doesn’t mean you can’t shift money out of it and get control over that money by, by what’s called a partial transfer.

Mad Fientist: That is great to hear because I did not realize that and I think that’s what I’m going to do.

So yeah, exactly as you said, I did all the right things. I was 22 and that was starting my career. And I was like, oh, I know I need to get this match so I’m going to do this. And then I actually looked into the investment, so I’m invested in better things than whatever the default was, that’s for sure.

But now if I can transfer that into my own thing, and have lower fees and then maybe put all my riskiest investments in there. And then that way, if it does get to zero, then at least I don’t have to deal with the account anymore. And if it grows to something even more impressive, then at least then it’s worth the hassle of dealing with it with the IRS every year.

So that could be a potentially really good choice to make.

Escape Artist: You raise a great point about risk there. In your pension, you’ve got time on your side. You’re not going to be able to access that until you’re 55 or 57 or whatever the age may change to be in the future.

So for anyone that’s five or 10 years plus away from that point, you should be taking as much risk as possible in that workplace pension. Why would you not be 100% in a global equities index tracker fund?

Mad Fientist: You said tracker fund. So this is a good time to maybe match up some terminology.

So in the UK, a tracker is an index fund and that’s the common word for it. Could you maybe go through the list of common US terms that I use a lot on my blog and some of the other bloggers use as well, like 401k, IRA, and maybe try to match it up with the UK equivalent?

Escape Artist: So a lot of UK readers read the US blogs and they see people talking about VTSAX and they see people talking about VTI, which are two of the popular Vanguard total market funds in the US.

And I just say to people in the UK, we have great equivalence for that in the Vanguard UK product lineup. So if you convert VTSAX or VTI into VWRL which is the Vanguard all-world equities ETF, or there’s a mutual fund called the Vanguard global all-cap index fund.

Those are great kind of replacements for those popular US funds and VWRL and the Vanguard global all-cap index on are truly global funds. So they include the US at its full weighting. They include the UK, Japan and the whole of the rest of the world. So it’s a kind of easy win just to convert VTSAX to VWRL or and so.

So that’s an easy one. In terms of IRAs, individual retirement accounts, are analogous to self-invested pension plans. 401ks are analogous to our workplace pension schemes.

Other things that people read about on US blogs are, travel hacking and credit card credit card rewards, which there’s less of an opportunity for that in the UK. And so I just say to people, you know, that’s nice if you can get yourself an Amex Platinum card and you might get 1% cash back and like 1 percent is worth having, right. But you’re probably not going to be able to fly around the world on your credit card rewards in the same way that our American friends seem to be able to do.

Mad Fientist: Yeah, my brother-in-law who is Scottish, he just can’t stand the amount of things that I get through credit card points. And he is just always desperate to try to get into the same sort of things. The signup bonusesare usually a quarter or less of what you could get in the States and then the ongoing earning is like you said, max, maybe 1% cash back.

So yeah, the people in the States do have it really good.

Escape Artist: Yeah. And there’s a couple of other kind of aspects in terms of the tax sheltering that are different. So in the UK, money that’s locked up in a pension is locked up in a pension. There is no concept of you can access it, but you pay a discount, which I understand is possible in the US so when you’re thinking in the UK about how much is enough, you can take the great kind of guidance that’s on many of the US blogs and the concept of the safe withdrawal rate and the 25 times rule of thumb.

That is, I would argue as applicable in the UK as it is in the US. Because, you know, we can from the UK, invest globally. So I just don’t buy the argument that says, the safe withdrawal rate, maybe 4% in the US but the UK stock market is less dynamic and has delivered less growth.

You know, we have the ability to invest into the US stock market. We have the ability to invest globally, as I said before, from the UK. So that’s no reason for the safe withdrawal rate to be lower in the UK. But it’s a kind of two-fold calculation. So calculation number one is, do I have 25 times my annual spending in my invested net worth.

And then the second question to ask yourself is, do I have enough to bridge the gap? In other words, do I have enough outside of my pensions to take me from age, let’s say 45 to age 55. You need 10 years outside of your SIPP or outside of your workplace pension to bridge that gap.

Mad Fientist: That’s something I actually calculated when I was on the path to FI, even though I didn’t know that there were ways to get the money out.

And so if you’re interested, you can go to madfientist.com/spreadsheet. And that spreadsheet actually does divide it out and it has an after retirement age, before retirement age calculation, just so you can see, how much of your money is free to use now and how much of it in the States is going to be a little bit harder to use potentially and then in the UK, it’s going to be impossible to use.

You mentioned ISAs which I think is the equivalent to the IRA. I just recently discovered the lifetime ISA, which seems like a pretty sweet account. And I just convinced my wife to set one up for herself because I believe you have to set it up before you’re 40, but then you could keep contributing to it until you’re 50 and it’s an account where every year you can put 4,000 pounds into it and then the government will give you a thousand pounds on top of that for that same contribution. So you’re effectively getting a 25% return instantly. Are there any other sweet accounts like that, that I may not be familiar with? Or what are the types of accounts that you sort of recommend to your readers to take advantage of?

Escape Artist: Okay. So in, in terms of pure tax efficiency, the most tax efficient way to save in the UK is via a pension at your workplace pension or a self invested personal pension. So the way that that works is if, for example, you’re 40% taxpayer, if you put in 60 pounds into your pension, the government groceries that up to 100 within the space of a year. And so you’re getting a 40 pounds return on a 60 pound investment, free of risk, essentially, and guaranteed by HM government. And so there’s not many deals that are better than that available, plus the fact that when you get to access your pension, you can take 25% of it as a tax-free lump sum.

So that’s a great deal. The problem with that though is the loss of liquidity, the loss of access, the lockup until you’re 55 or 57 or whatever that may change to in the future. The beauty though of ISAs, individual savings accounts, is that there’s no lockup. So let’s say you’re kind of in your twenties and you’re going full bore for financial independence.

It would be a mistake for someone like that to use their pension as their sole savings vehicle. They need to they need to use their ISA. You have a 20,000 pounds limit every year, if you’re married, that means you effectively as a couple, you have 40,000 of tax-free savings ability and that is use it or lose it.

So it absolutely makes sense to use it. And so that kind of conventional ISA, I would suggest you use first because that shelters the money effectively from income tax and capital gains tax and there’s no liquidity lock up to it at all. Then in addition to that, you have the lifetime ISA that you mentioned. The problem with the lifetime ISA is that if you don’t use it to buy a house and you want it back before retirement age, you pay a penalty, which essentially means that you’re slightly worse off for having done that.

So lifetime ISAs work for people under 40 who know that they’re going to use the pot to buy a house, or they know that they can wait until retirement age. But if you’re not sure that you’re gonna buy a house and you might want to get your hands on it, then it’s not as advantageous as just a conventional ISA.

Mad Fientist: Yeah. Luckily for my wife, this will be after retirement age. So she’s comfortable with it being locked up. Or she’s not very comfortable with it, but she was able to be convinced that she should do that.

And so the lifetime, I say, you mentioned that you could get that money out early for home purchase. That’s a first time home buyer purchase, is that correct?

Escape Artist: Yes, I think so. Yeah.

Mad Fientist: Okay. So this brings us nicely into real estate. So there’s something I had just learned from a Mad Fientist reader. Actually, it was meeting up with somebody for a beer a couple of weeks ago, and he told me about the fact that you could potentially Airbnb out one of your rooms in your residence and earn up to 7,500 pounds without paying taxes on it.

Is that something that you’ve come across?

Escape Artist: Yeah, the government has a rent-a-room scheme where you can, as you say first 7,500 pounds is free of tax. And I just don’t know why more people don’t do this. To me, if you read the newspapers, which I don’t recommend actually in most cases, you’ll read about the pensions crisis, whereby many people don’t have enough in their pension to sustain them. And you’ll also read about something about the housing crisis. Housing is expensive in the UK, there is a shortage of decent quality rooms to rent that give you kind of a lower cost option than buying your own home or renting a whole house out.

And the rent-a-room scheme is the answer to both. So people with spare rooms and not enough in their pension get income and younger people that want cheap accommodation, they get cheap accommodation. So to me, we have this crazy situation where there’s a housing crisis at a time where I think there’s something like 19 million spare rooms in England not being occupied.

Mad Fientist: Speaking of real estate, how do you feel that plays into somebody’s FIRE journey? Is it as lucrative, potentially, as it is in the States are the differences? What is your take on real estate investing?

Escape Artist: So my take on real estate investing. There’s two traditional classes of assets that have worked for wealth building, wealth accumulation, and getting to financial independence. You know, one is equities/stock market and the other is real estate. And in some ways, if you really want to get there quickly, one way to speed up the journey is to kind of go extreme on the property side. So if I’d wanted to have got to financial independence ,quicker one of the options that we could have done is rather than buying a house and kind of settling down in it, we could have like buy a house, do it up, flip it, and just keep flipping, keep moving up the property ladder because there’s no capital gains tax on your primary principal residence. And so with the stock market outside of a tax sheltered account, there’s income tax and capital gains tax, and the equivalent in property is that for buy-to-let properties, you are subject to capital gains tax, but for your own home you can escape those capital gains. And so it’s a tax efficient way to accumulate wealth and kind of roll up value in your house.

What say to people though, is if you own a house in the UK, you probably have a big chunk of your net worth in UK real estate. Just because housing is so expensive here and therefore I don’t personally think it makes a lot of sense to then add to that exposure to UK real estate in terms of then building up a buy-to-let portfolio, because you’ve kind of got all your eggs in one basket and essentially, Brexit has been a reminder to people who have a lot of money in the property basket that things can happen and the situation can change and that assets that they thought were kind of uncorrelated are in fact correlated.

So the way that I’ve done it is to buy a house, to own that house, to pay the mortgage off, but then to use stock market as my kind of primary source of wealth building for that kind of risk reason.

Also if you look at the data in the UK, if you look at last a hundred years or so, it wa it would seem to indicate that an unleveraged real estate and the stock market perform pretty similarly in terms of total returns, but the beauty of the stock market versus buy-to-let landlording is it’s a truly passive investment. So there’s no boilers breaking. There’s no phone calls late at night from your agent or from the tenants. So the beauty of stock market investing is it can be made essentially free of hassle.

Mad Fientist: So we’re getting to the end of the interview here and there’s possibly questions that I didn’t even know to ask. And there may be things that I don’t even know about in the UK that you would recommend to somebody on the path to FI. Is there anything we haven’t touched on yet that’s worth speaking about or is there anything so different that I just don’t even know?

Escape Artist: So I think it’s worth talking about in the UK context, kind of geographic arbitrage, just in the sense that a lot of people who are on this path to financial independence are based in a high cost of living area, you know, London or the Southeast and they’re living there now and they’re on the property ladder and they have a lot of money tied up in expensive London housing, or expensive Southeast housing and one option to kind of massively accelerate your journey is to sell up in London at some point and just move somewhere much cheaper.

So that the kind of example that I give it’s somewhat of an extreme example, but it does kind of make the point. If you’re slaving away as a professional in London, in a small terrace house, life can feel like a bit of a grind and yet, a short plane ride away in the south of France, the real estate is amazing in the sense that you had modern two bedroom apartments that you could buy on the beach front for 50-60,000 euros. And just imagine how many people there are in London sitting in their half a million or 1 million pound semi-detached house or terraced house who at a stroke could just sell up, go and live on the beach in the south of France.

And look, I’m not suggesting that everyone do that because it’s a really important part of financial independence is working out what you do when you get there and what that looks like and how do you build a kind of meaningful life with a community and you don’t just kind of take yourself off to the beach and live isolated. But it does show you the power of being prepared to be flexible. It does show you that the power kind of thinking outside the box and it does show you how much money we in the UK kind of sink into our houses and that they can end up kind of being an anchor in the sense that they tie you to one place and they kind of trap you in one place.

So I do say to people in the UK, if you don’t know that you’re going to be living somewhere for ideally 10 years, then you’ve really got no business buying there because the costs are so high, not just the kind of purchase price, but the stamp duty, et cetera, you’re better to stay flexible at this point in the cycle.

And you know, at some point, conditions will change and maybe there’ll be a housing bust and some great bargains will be available. I mean, imagine the bargains that would be available if we went back to those 17% interest rates. So the wheel will turn and at some point there will be bargains to be had.

But, but right now, to me, it makes no sense to tie yourself to one place if you don’t know that you’re going to be there long term, when, when housing costs are so high in the UK.

Mad Fientist: And just like with all geographic arbitrage, it doesn’t necessarily have to even be international. You could, move an hour and a half outside of London, still be close to your family and friends and maybe cut that house price in half. Or even move up to Edinburgh… Don’t inflate our house prices, but yeah, somewhere like Edinburgh, that’s beautiful and still a city with all the amenities that you enjoy in London, but maybe a quarter of the cost, which is maybe what property prices are up here.

Escape Artist: Well, I don’t want to give away your personal location, brandon, but we are sat here in a beautiful kind of crescent of Georgian and housing, which in London would just be insanely expensive.

So the quality of life here is amazing.

Mad Fientist: I completely agree. Yeah, this is like a very reasonably priced, flat, fully furnished that we rent and it’s in the center of the city and it’s a capital city in Europe, and yet we pay not much compared to what they pay down in London, which is really good.

We’re we’re getting to the end of the interview and this has been incredible so I really appreciate you taking the time to talk with me. Obviously people can find you at theescapeartist.me. Is there anywhere else I should point them to?

Escape Artist: No, the blog is the place to find me. I am on social media, but you can kind of find that through the blog.

Mad Fientist: Great. Well, I can’t let you go without asking the question that I’ve asked all my guests so what’s one piece of advice you’d give to somebody on the path to financial independence?

Escape Artist: My piece of advice would be to start and to start as early as you can. And just get on with it, right. There are no downsides to getting on this path. It is not binary in the sense that it’s not like you’re having to commit to a path that you can’t change as you go along.

So I often see people kind of procrastinating, kind of agonizing over you know, what’s the best fund or what’s the best strategy. The best thing that you can just do is think 80/20, get started, take some action, and get on the path and you will figure out the rest as you go along, you don’t have to figure it all out upfront.

Mad Fientist: That’s great advice. And this has been an absolute pleasure. So thank you so much for joining me. This is a long time coming. I think sometime last year we were trying to meet up in a pub somewhere because I thought the UK episode should take place in a London pub. But that didn’t happen so this has been a long time coming. So I really appreciate you joining me.

Escape Artist: I just wanted to say thank you, Brandon, because your podcast was one of the things that gave me the confidence to quit my corporate job. In 2013, I’d stumbled across the Mr. Money, Mustache website, and that was just amazing, but it’s one thing to read information kind of cold on the internet that doesn’t necessarily give you enough comfort to kind of change your life.

It’s kind of terrifying to quit a job that is going well, that you’re successful in, and that forms part of your identity. And to make that transition, I just needed to hear other people that had been there, done that, and walked that path and your podcast just brought that to life for me. So I honestly don’t think I would have got up the courage to quit my corporate job if it hadn’t been for your podcast.

Mad Fientist: That’s absolutely incredible to hear and I did not realize that. So congrats for being able to take the leap and it’s amazing that I played a little bit of a part in that.

So thanks for saying those kind words and thanks for joining me. And it’s 2:45 PM now. So I think that’s a late enough to warrant a celebratory pint for all our hard work today. So let’s let’s close this up. Thanks again, Barney. And I’ll hopefully speak to you again soon.

Escape Artist: Thank you. No, we’re late to the pub now.

Mad Fientist: Onward to the pub.

All right. Thanks again.

Money Talks - Live from the UK Chautauqua with Vicki Robin

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Bogleheads – Life After FIRE

The Mad Fientist — Mon, 15 Nov 2021 10:00:04 +0000

Last year, I published a podcast with one of my favorite financial writers, Morgan Housel.

You may remember that the episode was a recording of a Bogleheads meeting and the interview was actually conducted by my buddy, Gouri.

Well, Gouri recently invited me to join the Bogleheads to talk about life after FIRE and today’s podcast episode is a recording of that discussion!

Big thanks to Gouri and the Bogleheads for making this happen and hope you enjoy it!

Listen Now

https://traffic.libsyn.com/secure/madfientist/bogleheads-interview.mp3

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Highlights

How your views on spending change after you retire
Why you should treat FI as a spectrum rather than a finish line
How to plan for all aspects of post-FI life
The unexpected benefits and challenges of early retirement

Show Links

Full Transcript

Mad Fientist: Hey, what’s up, everybody. Welcome to the Financial Independence Podcast, the podcast that gets inside the brains of some of the best and brightest in personal finance to find out how they achieved financial independence. You may remember last year, I had an episode with Morgan Housel, and Morgan’s one of my favorite financial writers, and it was a great episode.

And you may remember that I actually didn’t do the interview. It was my buddy Gouri who interviewed Morgan as part of a Bogleheads meeting. And Gouri’s big is big in the Bogleheads. And he actually invited me to join that same sort of discussion for the Bogleheads group that he was running. So that’s what today’s episode is.

And if you don’t know who the Bogleheads are, they’re a group that are dedicated to Jack Bogle, the founder of Vanguard. All the index fund investing and everything that talked about on the Mad Fientist, that’s a group that really goes in depth in that philosophy of investing. So they have a fantastic and very active forum.

They have these local meetups that, you know, Gouri is part of and it’s a really great organization all around. So if you’re interested, definitely head over to bogleheads.org to check it out. And obviously I’ll put links to that in the show notes. So I sat down with Gouri and a bunch of other Bogleheads on a zoom call and we had a great chat for a couple hours.

What you’re going to hear today is the interview portion of that. And the interview is fantastic because as always Gouri did a ton of research beforehand and asked great questions. So without further ado, this is my chat with Gouri for the Bogleheads.

Gouri: We’ll begin with something that you often end with on your podcasts, which is you ask your guests who, you know, are leaders in the FI space, or often the self-improvement space.

You ask them what’s one piece of financial advice you would give towards financial independence. So I asked you that question.

Mad Fientist: Yeah, that’s a question I love to ask because there’s so many different answers I’ve gotten over the years, but for me, I would say experiment, which, you know, in the Mad Fientist, I probably wouldn’t have said that when I started the Mad Fientist.

So it’s not me just saying that because it fits with my science theme or anything. But it’s really the truth because if I’ve learned anything over the past 10 years of doing this and like really thinking about it hard, it’s that we’re really bad at knowing what we really, really want. And the only way to find out is to try things, hopefully them at a low cost, low commitment sort of situation so that you don’t, you know, get yourself into a situation where you can’t reverse that choice. But it’s really about experimenting because especially like for me I’m naturally frugal guy. Spending has been a big focus of mine recently.

And you know, after post-FI to figure out like, what is the best use of money? And now that it’s not as tight anymore you know what, what’s actually going to make me happier and what’s not really going to move the needle and things like that. So, yeah, experimenting and just realizing that you don’t have to be right, right away, because you are probably pretty bad at actually figuring out what you really want to do or what you want to be here, what you want to spend your money on.

Gouri: Excellent. Yeah, it’s so great to hear. And there’s so much there that I’d like for us to follow up on. One is when, you know, you say experiment, try it out there. There are tons of people that we hear about who, whether they’re planning for financial independence, early retirement, or just retirement in general, they dream about this next phase of life.

They plan, they plan the savings part of it, but then when they get there, they’re kind of absent the social structure or interaction or meaning. How do you, how do you suggest people, you know, building on what you said about experimenting? How do you suggest people fill that void in advance?

Mad Fientist: So like, I’m sure a lot of people out there are probably similar to what I was, where I blamed my job for the reason I wasn’t living the life that I thought would make me happiest and wasn’t doing the things that I thought I really wanted to do with my life. Like it was such an easy scapegoat and only after leaving the job and then trying to do all those things that I thought I wanted to do, I realized it wasn’t my job holding me back. I was very lucky. I was a software developer and the technologies I used allowed me to be very productive, very quickly so I could get my work done in, you know, a quarter of the time that some other teams that I worked amongst were able to do it. So my time scales were never tight and I had plenty of free time. So it was only once that I removed that easy scapegoat did I realize that actually I could have been doing all of these things with the job and, you know, I would have been not had to also try to figure out all these crazy post-FI things that come up that you never even expect because I would have still been working.

So, yeah, I would say one just try to remove the easy scapegoat of your job and start trying to do these things that you really think you’re going to do post-FI, because one, some things aren’t big enough to really get you out of the bed in the morning. Like I remember I thought like, oh, I’ll learn a new language and then that way, when we traveled to wherever in the world, I’ll be able to know this new language…it’s going to be amazing, but you know, like when you don’t have anyone forcing you to get out of bed in the morning to conjugate verbs it’s hard, it’s hard to, to force yourself to do that. And you’re not exactly leaping out of bed to do that either.

So the more you can get started on these things while you’re still in the grind, the daily grind, I think. The way better off, you’re going to be, because one, you’re going to have momentum. You’re going to sorta like come across these challenges that have nothing to do with your job earlier and start to work through them and realize, hey, actually, it’s not my job that’s holding me back. It’s for me, like personally, it was my self doubts and some of the artistic things I wanted to do. And yeah, if you, if you just start early and don’t think of like, I think the other problem is like, it’s like for me back then, it was a finish line. Everything was going to be great after that finish line and everything wasn’t working prior to that finish line.

And I think that was definitely the wrong way to do it. I think the more you can view it as just a spectrum where every dollar you’re saving is adding to that power that you have to, you know, to take more time off or follow that passion project to another level and things like that, I think the better off you’ll be, and then the less crazy FIRE or post-FI life would be after, because it’s not going to be just like flipping a switch. It’s just going to be this gradual progression into, oh, actually now I have the power to have unlimited free time. And now I know how to deal with that and use it properly because I’ve practiced along the way as I’ve incrementally got more free time.

So that’s, that’s how I would view it just as a spectrum, not as a goal line.

Gouri: Excellent. Yeah, that makes a lot of sense. It reminds me of someone interviewed Michael Phelps and in, I think one of the Olympic runs, his goggles failed and water got in his eyes and he had to do the whole thing with eyes closed.

And they interviewed him after and said, how was he able to perform at such a high level? And he said he did that in his head. Over and over again. So it reminds me of how you’re saying prepare. So I’m following up on a few of the things you mentioned. So you mentioned passion project. I think your followers will know that you pursued FI to record and release your own music and you were able to do that.

So huge, congrats again there. And you know, I know. You’re modest. So I’ll let folks know that the release went really well and had success on the charts. Why don’t you tell us a bit more about that, how it was to pursue this lifelong goal and, you know, how’s it been since?

Mad Fientist: Yeah. So you mentioned the charts and I’d love that to be because the music was so amazing and it just got played on radio everywhere.

Actually, it was just the Mad Fientist audience had grown so big over 10 years and I’d never asked them to do anything. And I asked them to buy the album and, and thousands of them did. And yeah, it was ridiculous. A ridiculous one week on the charts. And then it was done. But yeah, that wasn’t the main goal.

That was again, like I’ve, I’ve mentioned a bit earlier. I blame my job for holding me back on that for so long. But it was only once I quit my job and had all the time in the world to pursue it, that I realized it was way more than that. It was, it was really just a ton of self doubt. I never thought I could actually do it.

So I was not even trying to do it because I thought if I tried and then failed, I’d lose the dream forever. And I never wanted to do that. Cause I was like, I really need to write and release an album one day. So I didn’t want to lose the dream, but trying every time I tried it just made it so much more evident that I would never actually be able to do it.

So that’s why I just put off doing it. So I never made progress and it took me till three and a half years after I left my job before, you know, I’ve I finally got fed up and I was like, look, this is the whole reason I was wanting to have all this free time. And in the first years after leaving my job, I filled it with, you know, Mad Fientist stuff. I filled it with fun stuff. I was saying yes to everything. Cause I could have all this time. And I was like, I need to just really get serious about this. And it was brutal. But it was actually Atomic Habits by James Clear…I read his book, got to speak to him on my podcast, which was amazing. And it was that coupled with another book called Ultralearning.

And then there was a music specific one that was just an ebook, but it was actually phenomenal. So if any musicians out there care, Gouri, I’ll send you a link to that. Cause it’s not a very big book, but it was it was very instrumental in me actually making progress. At the end of the day, just boiled down to like putting in the time.

So sitting in the chair and being uncomfortable and just forcing yourself to do that and trying to not focus on what you produce by the end of that day, just focusing on okay…put five hours into the chair and it was all mostly productive. You know, like I would lose confidence, I would lose willpower and by the end of the day, I was like watching YouTube tutorials, which, you know, it was not really productive, but I could sort of make it seem productive for my five hours at least. So anyway, it took all of that and then the pandemic hit and, and then I just locked myself inside for 15 months. Scotland was very locked down.

My wife’s Scottish and we lived in Edinburgh, or we did at that time, and just locked myself inside and never truly believed that I would do it. And until it came out. I still don’t really believe it, but I listened to it and I’m like I’m really proud of it. It was definitely, yeah, the most challenging thing I’ve ever tried to do.

And it meant so much to me. So yeah, you’ll listen to it. It’s not like Grammy award-winning stuff. It’s like my weird it’s like synthesizer like experimental synth-pop stuff that I loved growing up. So it’s a really weird genre of music, but it’s yeah. My only goal line was that I was comfortable enough with it to release it.

And I did. So that it’s that was the whole reason I wanted to pursue FIRE in the first place. And like I said before, I didn’t actually need to be FI to do it, but I sorta did as well, because that took away all my excuses.

Gouri: Well, congrats again on achieving that it’s tremendous and I’m not a typically a synth pop listener, but absolutely enjoyed your music.

So thanks again for getting it out there. So a few things, one is a lot of folks in the FI space. You know, will talk about, of course, saving and investing and reducing your living expenses and increasing your savings rate. And I think folks, you know, interest in pursuing it, having a lot of access to that information more common underlying message that surfaces is a lot of this is about happiness, right?

So. Can you, can you elaborate on what happiness is, you know, like for you or what success means to you and for this audience, the Bogleheads famously are not defined by a fancy house or fancy car, even though many of them could easily afford that sometimes many times over. So yeah. What does, what does success mean to you and, and how, how has it been in early retirement?

Mad Fientist: Yeah, well, so success is to me, those personal wins, like I can think back over the last 10 years and the things I’m most proud of or things that, you know, I haven’t shouted about or told anybody about really. And it’s just those, like knowing how hard I worked on that album and all of the hurdles that I had to overcome.

Like, that’s what I’m super proud of and yeah. Getting on the billboard charts for a week, is funny, and just adds to the ridiculousness of my life in a great way. Like, it’s, it’s so funny to think about every time I think about it, but that, that was, that’s nothing that it’s thinking back at all those things that I had to overcome.

And yeah, happiness is a tricky one because I had a great comment on my last post and. It was sort of talking about happiness and like finding new sources of motivation after FI. Because for people like me, if you think about money since I was a, you know, a kid…my parents were throwing quarters in the deep end of the pool and I would spend all day like finding money and I just loved it.

So for somebody is where money has been so important for so long…for now that to not matter anymore. Cause I don’t want the fancy house or the fancy cars or I don’t want to waste money in any way and things like that. So that’s been, that’s been really interesting to try to come to grips with that and find new sources of motivation because now I don’t have to do anything.

And as I said, in my most recent posts, it’s like a lot of the really fun things have a lot of discomfort upfront. But now that I don’t have…I don’t have money driving me through that initial discomfort, I worry that I’m missing out on some, like longer-term fun in some areas just because, you know, I’m like, well, I don’t want to do that. I don’t have to do that because I don’t need to earn another dollar or whatever. So, so yeah, happiness is a tricky one. And in that, so this goes back to the comment I was going to mention. So it was, I thought was really insightful. The guy had said, I think as humans, we always need something to be uncomfortable with or unhappy about or striving for something better. And he brought up the fact that like, you know, there’s a lot of, maybe I’m not too big in the the rest of the FI community anymore, just cause I’ve been working on the music stuff, but apparently in the FI community, there’s lots of divorces happening and things and people reach FI and then, you know, they need that unhappiness. So they find it in their partner or things like that. And I can see how that I could see how that happens. Cause you, you know, I could, I could throw everything at my job and be like, that’s why my boss is making me mad and my colleagues are making me mad and that’s why I’m unhappy.

But then when you, when you can control everything and do whatever you want. Then you either have to come to accept that. Oh, it’s just you, that’s finding those things to be unhappy about or angry about or. You know, sometimes the, sadly maybe put it on the person closest to you or the people around you.

So, yeah. So it’s still one that I haven’t figured out yet. And I’m like, that’s not to say, like, I feel so lucky and I’m definitely happier now having been able to pursue all these things that I’ve always wanted to, and, you know, not have the stresses of money or worrying about, you know, if the markets are tanking or anything like that.

But yeah, it’s not a golden ticket to a happiness and rainbows, which I think early me when I was pursuing it, I put that on, on FIRE. I was like, well, yeah, I’ll be happy when I’m FI. So I’ll just be miserable now and just grind it out. And again, going back to the advice that I was given earlier is like, yeah, don’t put off happiness until the finish line either.

Don’t put off, you know, pursuing your things that you want to do. Don’t put off, you think you’re thinking about what post-FI, life’s going to look like, because yeah when you cross the finish line, that’s just at the end of the day a slightly higher number on a screen. And it really maybe it was more anticlimactic than you may expect it to be.

Gouri: Got it. Yeah. Very insightful stuff. So two, two particular things. So let’s say a two-part question one building on your comments. One is this concept of enough, right? You and I know people in the FI space in life in general, who had earned a lot, can still learn a lot and really. Adjusted this mindset to just say, you know, any additional money has very little marginal value.

Why, am I needing to work or seeking work? But there are also people who either enjoy what they do, maybe they’re entrepreneurs, or some people are paid really well dislike the rat race. But enjoy accumulating, enjoy watching their portfolios grow and you know, within the FI community, there’s this one more year syndrome, right?

People don’t feel comfortable. Can you elaborate on how you achieve this? I’ll call it a zen-like state of you have enough. Right. We know someone who, who says any additional money he gets, he gives to charity. And I just feel like. That’s such an enlightened state, right? Like we’re socialized, like apart from societal’s influence on the importance of money, there’s a practical importance.

So that’s one. And then the second you spoke about relationships and specifically in the FI community, can you elaborate on yours to the extent you’re comfortable, what it’s like being, because you mentioned publicly, Jill still works. She loves what she does. You guys converged in this journey and what has that been like to be…and I’ll talk about like gender roles or societal pressures or influences to be the spouse who’s not working and to be a guy, you know, not working and in our society.

Mad Fientist: Oh yeah. Ireally don’t feel like I’ve reached a Zen like state sadly, but I’m working towards it.

Like I think the big thing for me was never feeling I needed to impress anyone with money. And I think that just gives you such a huge advantage where like I would rather people think I was poorer than I am, because I just had a, you know, a middle-class upbringing, like like times are always tight. And I, my identity is so tied to that.

So to then either go into the next societal bracket you know, upper class or something would just be a total identity…I don’t think my brain could handle it. So I’m always, so I’m lucky in that sense where I’ve never felt the need to impress people with, with flashy, anything. I wouldn’t say I’m Zen yet because because you mentioned charity, like I still can’t give money away.

I’m not wasting it and that’s why I have such trouble spending it because I don’t want to waste it. And I know one day, I’m going to be at that stage where I can make better use of it. So in this meantime where I still have this psychological hangup. Yeah. I just I’m protecting it so that I don’t waste it away and have some sort of lifestyle inflation that caused me to not to be able to give it away.

But there’s still a part of me that I guess just has this scarcity mindset like, oh, like I gotta keep it all just in case something really bad happens or. I don’t know where that comes from. Like I said, maybe it was because times were so tight growing up and I never felt like we were deprived of anything, but, you know, there was, you know, every penny was accounted for and I still feel that in my mindset hasn’t caught up with the actual situation yet.

So, yeah. So a long way to go in the zen part. To get to the spouse part. Yes. My wife was complete opposite end of the spectrum from me. She wasn’t, she never spent money to like impress other people. So I don’t think it was like that far, but she never, she just didn’t care about money. If it was in her account, she would spend it. And if it wasn’t you, she wouldn’t. Whereas I was like, you know, spreadsheets for everything and go into, you know, knowing what I bought at this store versus the store and all that stuff. So yeah, thankfully we’ve come together and she’s a lot more conscious of spending money and I’m not as crazy about it, which has worked out great.

And as you said, she’s, she loves her job. She’s an optometrist. She can’t think of anything else you’d want to do, but she’s also. Seeing the benefits of having savings. So to go to COVID at the beginning of the pandemic in Scotland. People weren’t taking it as seriously as we felt needed to be, you know, things needed to be taken care of.

So she was able to just say, look, I’m not, I’m just not coming in. And then she, she was off for the first three or four months of the pandemic because she was worried about giving us her elderly patients. And she didn’t think the PPE was all in the right state. And then once that came back, she was able to go back.

And then for the past, like six months, we’ve been traveling to the States since we were finally able to, and we’ve been able to see friends and family. So she’s obviously not worked that time. So she’s seen the benefits of that. And obviously I’ve seen the benefits of not being so crazy with money.

So, thankfully we have met in the middle and I think we both made each other better with our relationships with money. But as far as her working in me, not, like this is going to sound crazy. Cause you know, I’ve been writing about financial independence on the internet since 2012, but I really don’t like talking about to people I know in real life. So I still will just say I’m a software developer that works from home, which is technically true because I write software for the Mad Fientist website. But yeah, I feel really weird talking about that in person. So yeah, I’m at home, but I was at home before, before we provided me the hit FI and again, I don’t think, I don’t think it bothers me that even if, even if that wasn’t the case and that was, if all of our friends that I was just unemployed and she was working yeah, I don’t know how I would feel about that. I don’t think I, I would hope I wouldn’t care that much. Because again, like the things that drive me are the personal things that I accomplished that, you know, I still don’t, I don’t tell anybody anybody about anyway. So I think I had hoped that I would be okay with that. But, you know, like I said, it’s harder to, reality’s often way different than you imagined it would be. So, yeah, but so far I haven’t had any issue because again, I just mostly tell people I’m a I work from home for myself as a software developer.

Gouri: Excellent. Great to hear within the, you know, the actual FI experience, if you could talk more about the highs and lows of it. So what surprised you were you blindsided by anything? Were there some disappointing surprises and then some like phenomenal surprises you didn’t even consider?

Mad Fientist: Yeah. One is losing money as a source of motivation.

That wasn’t what I expected. I always thought. Yeah. I always, always thought, wow, just, yeah, just do fun stuff with it. But as part of that experimentation, I told you about earlier, like we experimented one year and we traveled the whole year and we ate out like four or five nights a week. And we tried all that stuff and realized like, it’s actually way more fun when it’s special and you get to look forward to it over a few months and you plan for it.

And same with eating out. It’s like, well, if it’s a Friday night thing, then you’re looking forward to Friday nights. So we’ve tried a lot of that stuff. So, so I thought, you know, so I guess pre-FI, would’ve thought that, you know, Ooh, if we had extra money, this is going to be great. We could go do even more fun stuff.

But through experimentation, I feel like we’ve got the, got the sweet spot and more’s not necessarily better in a lot of cases. It’s worse. So, so that was a big surprise. And that’s, you know, that’s still something that I’m trying to come to grips with. And I don’t only, I haven’t even talked to you about this story, but like I realized now that my cheapness was the only thing, keeping my eating and check when we’re traveling.

So like when we go somewhere, like sightseeing is just the stuff I do in between eating and drinking and tasting all the foods and trying all the different stuff. And on these, on these past trips ever since we’ve been able to travel since COVID. I’ve just gone crazy. And I realized that the only thing that was keeping that in check was my frugality and my cheapness.

And now that that’s not there, it’s like, well, I need it. I need some self control, I guess, when it comes to food. So yeah, it’s, it’s things like that you don’t really think about. So that was a surprise. I think the, just the peace of mind has been fantastic. Like I still, like I said, I, I still feel like a teenager.

So like the thought of like my car breaking down. Still gives me some stress and anxiety, but you know, having enough and then having more than enough as sort of eased that and been like, okay, we can handle, you know, the car breaking or an unexpected repair and things like that, that I think has really drastically improved my just like baseline, at ease-ness, I guess.

So that’s been fantastic. Those are the big ones. And then, yeah, just realizing that all your excuses before. All the blame I was placing on my job was just totally misplaced and it was more, it was all the internal stuff and stuff that I still had to deal with. Yeah, just the self-doubts and the motivation and the procrastination, all that stuff.

Yeah, it wasn’t my job. So those are the big ones.

Gouri: Got it. So thanks for sharing, especially, you know, some of these vulnerable topics, like. You know what you’re opening up about a lot of it’s personal. So some of the things I think it’s funny, you know, to hear your comments about Ramit for a lot of folks in the space you know, there are diehard mustachians folks who read Mr. Money Mustache, and whose blog changed their lives. And then Ramit, you know, I would joke to myself, I really value his content as well. But in my head, I think of him as somewhat of an anti Mustacian. So I understand that, you know, you felt liberated to some extent I’d love to hear more about what you’ve grown to enjoy spending on.

You mentioned food, and then I’d also love to hear about the evolution of travel. Like it sounds like. You know, we all want to travel. It’s a very common primary goal. And then some people travel a lot. So when it sounds like your, your ambition for travel has kind of perhaps changed. So I’d love to hear more about that.

And then on the topic of travel and living abroad, how did, how has being financially independent living abroad? How did, how do you feel that would differ from living in the States? Like a lot of people in the FI space consider moving abroad and they try to optimize, you know, where they’re going to live either travel around or settle.

So your thoughts on those?

Mad Fientist: Yeah, sure. Yeah. I’ll address the anti-Mustacian Ramit, which I, I thought too. And that’s why I was so excited to get them on my show because I was like, yeah. You are, you are opposite ends of the spectrum. I think they say a lot of the same things and just different ways, but I think having both in your ears is great and that’s I was lucky to talk to both of them and that’s, and again, I I’m going to be going back to Ramit because I feel like I’m naturally like Mr. Money Mustache. Like that’s, that’s my natural inclination, I guess. So having Ramit there challenging all that stuff…listening to MMM is like an echo chamber. But Ramit, challenges me in as far as some of the stuff that has helped me not be so crazy with the spending, it was reframing things.

So one of the things that’s helped is like, $10 to me is just as valuable as it was when I was a college student. In my mind, it’s the same. It’s like that’s 10 bucks. I’m not going to waste 10 bucks or I’m going to save 10 bucks if I can. So the trick that I’ve been doing recently is anytime I’m like freaking out about an expense that I think I really shouldn’t be freaking out about.

I calculate what that expense is like in my college years. Cause that’s what, that’s where my brain, I feels like still is with money. So, you know, taking my net worth back in 2000 and dividing it by my net worth now. And then multiplying it by the expense that I’m worried about. And then it’ll be like, oh, that’s a nickel.

You’re actually stressing out about a nickel in, you know, college times. So that’s been helpful.

And then forcing myself to spend with the portfolio is it should allow me to spend, has been really nice because it’s. It’s made me a lot more generous, which is something I’ve always wanted to be.

But I always was, like I said before, I’m always like, oh, every penny…I need to squeeze it tight in case anything happens. Whereas now, this year, it’s like, you know, going out to dinner with my family, it’s like, hurry up and try to pay before anybody else even has a chance and same with drinks with friends and things like that.

So that’s been really nice because well, I got to spend it this year. I’m forcing myself to spend that much and there’s no way I’m going to do that naturally, because like I said, I feel like we’ve dialed in our spending quite well. So anything more is just going to be, you know maybe not as, maybe not as useful or not bring as much happiness.

So it’s like, so then yeah, doing those things day to day has been really nice. Just. Before I would have maybe stressed about that. Like you got to dinner with friends and like somebody orders the fancy cocktail and your drink of water. And then you’re like, oh, and that’s like, that’s the mindset. I wasn’t when I was a student, I want to get out of that.

And now the times have changed forcing myself to spend that this year. And again, it’s not, I’m not wasting any money. Cause like I said, I don’t want to waste money. I want to protect it in case one day I definitely will be giving it away. And the third thing that’s helped with that is also.

Allowing myself to enjoy investments. So rather than just dump all my money into Vanguard index funds, which is what I’ve done for the last 20 years instead, it’s, I’m thinking about buying a house, for example. So to me that’s an ultimate luxury. It’s not really a great investment, but I think it’s a luxury that I’m really looking forward to right now.

And my wife is as well. So, in my mind, as I think about it as an investment, rather than me spending on myself, which that makes it a lot easier to, to, you know, accept. And so I think that’s something we’re going to do over the next few months is buy a house in Scotland and hopefully, you know, make it really comfortable and nice and all of that.

And then, and then for the music stuff, it’s like, instead of buying the cheapest synthesizer, that’ll let me make the sound. I buy the one that’s going to hold its value the best. And it’s going to maybe be a future classic that is going to maybe even go up in value. So that’s helping me spend a bit more in the near term, but then hopefully getting a lot of enjoyment out of it.

And then, you know, maybe even, you know, making it an investment where if, if not making money, at least not losing money and that’s been, that’s been helpful. And, and, you know, mentally being able to spend on myself a little bit more. And I’m sorry, but I forgot the second question?

Gouri: question. Living abroad versus being FI in the States.

Mad Fientist: Yeah. Well, luckily, so that was one thing I never skimped on when we were in our twenties and I’m thankful for that. We did travel. I was really good at travel hacking and that’s like, I love doing stuff like that. That’s like having spreadsheets and plans and that’s, that’s like how my brain loves to be all the time.

So travel hacking was just right in my wheelhouse. So we got to, we visited, I think, 50 countries over our lifetime so far, and we had great, great trips and it didn’t break the bank. But obviously, yeah, especially since now, COVID has made travel a bit less fun where I’m so glad I didn’t skimp on that when we were younger.

But now I don’t know if it’s because I’m older, I’m turning 40 this year. I don’t know….I feel like I’ve done my fair share. Like I’ve got that out of my system. I feel like it’s out of my system and now we just flip flop back between Scotland and America. Cause my wife’s family is in Scotland and my family’s in America and luckily those are two great, beautiful rich places that have so much to offer that you can, you know, continue to explore for a lifetime and not get bored with them. So we’re always so excited to do that, but now I think our travels more based around people. So it’s not all right, which, which country could we go to to see these things or eat these foods or whatever it’s now like, where to go to see these people and have fun with them. So that’s been a huge shift. So I think travel is going to decrease for us in the future as well. It’s just going to be mainly just bouncing between those two places.

As far as like how that impacts FI, I know travel in my twenties was very impactful and showing me that, you know, what I thought was normal in America was actually extremely extravagant and there’s a lot of really unfortunate situations out there where people are really struggling to get by. And that allowed me to keep my spending in check, I think, and never, you know, feel like I deserved nicer things or anything like that. So that was huge in just giving me the mindset to save so much money over those years.

You know now I just became a British citizen on July 1st, which was really exciting after so long, so many applications trying to get it. So now we don’t have to worry about visas and stuff, but obviously the healthcare thing, that’s a huge weight off my chest now…the National Health Service is fantastic in Scotland.

So there are benefits in places, you know, it’s probably more difficult to pursue FI there just because of the higher taxes and things like that and there’s less loopholes, which is what my whole site was built on back in the earlier days…just finding interesting loopholes for early retirees or future early retirees.

So there’s a lot less of that, but then there’s a bigger social safety net. So, you know, you have a lot more stuff covered as well. So. Yeah. I don’t know if that exactly answers your question, but hopefully it’s helpful.

Gouri: Yeah, that was very helpful. Thanks. So a few things in what you said, one is that you’re considering buying a house.

I’m certain that the Boglehead audience would like to hear more about, especially given how analytical you are and how, you know, you commented, it’s not necessarily a good investment or it’s often not a good investment, but also if you could talk about, on top of that, share your thoughts previously, you mentioned you were considering buying real estate as a part-time investment. So you mentioned, you know like a unit near a ski resort that you could, you could use personally when you in ski season and then you could rent it out when you’re not using it, and then COVID happened. So obviously that changed, but how are your, your thoughts going forward on that?

Does it still interest you? And then can you elaborate on your purchase analysis and how you decide where are you currently leaning?

Mad Fientist: Sure. So that plan is pretty much out the window. And again, that’s always me coming back to my default, which is like, how could I optimize this for the numbers as perfectly as possible?

And that, that whole plan of having two places, one in Scotland, one in America, and the thought was that we buy in places that the peak tourist season was pretty much opposite. So we could live in the non-high-peak tourist place while we rent out the peak tourist place and then use that money to pay for the other one and then vice versa.

And it was all a numbers thing and that’s, again, it’s just old habits die hard. I’m trying to get out of making numbers-only decisions, which is where Ramit comes in, where he’s like, there’s more than a spreadsheets and you have to live outside the spreadsheet.

And you know, sometimes decisions should be more than just optimizing numbers. So I realized like all the stress that could come from renting things out and at least I know myself well enough to know that that would just cause a huge amount of stress. Cause yeah, I’m an introverted guy and I do enjoy interacting with people, but conflict with people that I just know that if I’m a landlord, I’m not going to be too happy. And I’ll probably be a lot more stressed, so it would just add a lot of negative things and yeah, the numbers may be great, but I don’t think would actually benefit. So now the idea is to just buy a base in Scotland finally get to enjoy some of our stuff that has been…we just literally today, Jill and I were in the closet at my dad’s house going through the closet because there’s boxes in there that we haven’t seen since we moved out of Vermont, like six years ago or something. So yeah. Being reunited with all that stuff is going to be nice.

And then we can just store it all in Scotland. And then when we come to the State, if we want to go skiing, we can just rent an Airbnb. Or if we want to come to Pittsburgh and see all of my family here, we can just rent a apartment in the city. I think it’ll allow us to be a lot more flexible in the States.

And then in Scotland, we’ll have a home base to go back to. The idea is, Scotland will be the place where we can get stuff done and see Jill’s family and just really spend time with them and Jill can work if she wants to pick up some shifts and things like that.

And then the States, we can just use that time to see people here and have fun and do things like skiing and visiting friends. So yeah, it’s changed quite a lot.

And then as far as the the analysis for buying a place in Scotland, not really looking at it numbers based, trying not to at least.

We know where we want to be. We know that the type of property we want. Thankfully it hasn’t popped up yet because we’re in the States and we’re not going to be back in Scotland till mid-October. So hopefully we can deal with that when we get back. But yeah, I think it’s hopefully just going to be the property that decides it and not any crazy number analysis from me.

I have some money set aside for that. And yeah, hopefully we just find a property that, that works and then try to be homeowners again after renting for so long

Gouri: That sounds fantastic. It’s another example of optimizing for happiness. You’ve commented that you’re, you’re not in this FI space to be evangelical.

You started the blog to kind of keep yourself accountable, right, with an external motivator and. It helps people who are ready, interested in the journey. So this question is really like for a lot of Bogleheads, they’re the beacon in their community, whether it’s a social circle or family, people come to them for guidance and advice.

What have you seen in the space? Because there’s so much advice out there, right? And certain things resonate with some people more than others. Obviously. What have you seen be most effective for the folks that want to improve. They want to save better. They want to invest better, but they find it so incredibly challenged.

Mad Fientist: Yeah. That’s yeah, that’s, that’s tough. It’s a tough one for me just because it has come so naturally, like I said before, it’s just been such a focus in my life for some reason, for so long, I guess it would have to just go back to tracking. And really, so this is a, this is probably a good actual example.

So I have a, I have another personal spreadsheet where just one column will have like all the things, all the big purchases I made that year. And then another column will have…all the spreadsheet purists are going to be like, “You don’t need a spreadsheet for that!”, but I just love working with cells.

So then I have another column that’s the highlights of the year. And I think like, obviously if I was struggling with that, I think that would be really beneficial to keep those lists, you know, your big purchases and then your highlights and then revisit it in future years and, you know, tracking your spending is obviously huge.

And I think like, yeah, tracking your spending and then tracking these big purchases, I think would be the first step, because I feel like a lot of people maybe are just buying what other people think, or they see other people doing that and they’re buying and it’s certainly not adding to their happiness in any way.

So I think writing those things down and then looking back on it and be like, oh, actually those things weren’t really that important or that trip wasn’t that great or eating out wasn’t that great. So, yeah, but again like I said, I’m so naturally focused on this stuff that it’s a bit harder for me to think about what would be really beneficial.

But I think even now, as I’m trying to come to grips with my new spending patterns, it’s been helpful for me. And it’s something that I still do. So it’s just a recording, all the, all the big purchases, all the highlights, and then trying to figure out, Hmm. What does that mean for what I actually enjoy or get value?

Gouri: Yeah, that’s, it’s definitely helpful to hear. And for folks who, who don’t know the Mad Fientist compiled a PDF of the one piece of advice, answers that he got from his podcast guests. So that’s available at madfientist.com/advice. I believe you go to that, enter your email and you’ll get that.

So in closing, before we turn it over to audience questions, you mentioned James Clear’s Atomic Habits. I think that’s a universal favorite. Everyone. I know that’s read it just kind of swears by it on top of the other habit books out there that proceeded. It very practical. And you mentioned Ultralearning, any other books you recommend or documentaries? Especially for the Boglehead crowd. Doesn’t need to be finance-related could be, you know, spanning life?

Mad Fientist: Yeah. So JL Collins, the author of The Simple Path to Wealth, was my second podcast guests, way back in 2012, way before The Simple Path to Wealth and he had recommended How to Obtain Freedom in an Unfree World by Harry Browne.

And there’s a lot in that book that I definitely don’t agree with…my wife particularly had big issues with some of it. But it did make you think a little bit differently about the boxes you put yourself in and the constraints that are all self-imposed pretty much.

And back then 2012, you know, FIRE wasn’t as big of a thing and definitely wasn’t anywhere near mainstream, like it got to be in 2018. So that helped just with my mindset at like, oh, actually society doesn’t know best. And these other people don’t know best. And the things that I think I’m restricted by are actually your restrictions. They’re just my own mental restrictions and I can actually do anything that I really want. So I would say that was a pretty impactful non-financial book.

Early Retirement Extreme. That was what got me into this in the first place. I saw in 2011, I think it was, that JD Roth at Get Rich Slowly had interviewed or had written a book review of Early Retirement Extreme and that, that reads like a academic book, but there’s a lot of great stuff in there. I’ve read it at least three times and finally got to speak to Jacob just last year, which was it was a big thrill for me cause he was the guy that made the light bulb go off in my head.

So yeah, Early Retirement Extreme is still one of my favorites.

So those two, I would read them with an open mind and yeah, they’re not Bibles, they hopefully get you thinking.

Gouri: Fantastic. Well, thanks again. I meant to mention earlier when we were talking about relationships that your wife, Jill has a guest post on your blog and also a podcast a conversation that if folks haven’t listened to, I highly recommend those…very engaging, very, just warm and enjoyable. So with that Brandon, thanks again.

Mad Fientist: Thanks a lot, Gouri. It’s always a pleasure to chat with you and hopefully we’ll see you back in Edinburgh soon.

Gouri: I’d love that. And likewise.

Morgan Housel - The Psychology of Money

One of my favorite writers, Morgan Housel, shares the investing lessons he's learned from COVID-19, history, and other academic fields!

The post Bogleheads – Life After FIRE appeared first on Mad Fientist.

How to Stack Tax Benefits for Even More Savings

The Mad Fientist — Tue, 19 Oct 2021 10:36:01 +0000

A Mad Fientist reader named Brian reached out to me and said that he increased his savings rate by utilizing some of the tax-avoidance strategies I write about here.

Not only did these strategies help him to save more, they also allowed him to take advantage of other tax benefits that he hadn’t previously been eligible for (which then reduced his costs even more)!

He asked if I’d be interested in a case study (with his actual numbers) and I said yes!

Take it away, Brian…

If you’re frugal and willing to learn a little bit about the nuances in the tax code, you can save a massive percentage of your earnings every year.

This can be done by stacking the benefits of tax-advantaged savings.

By maximizing tax-deferred accounts first, a moderate income earner drives down their adjusted gross income (AGI). This in turn, may drastically reduce or even eliminate some of their largest yearly expenses.

How to Reduce Your Adjusted Gross Income (AGI)

Reduce your AGI by contributing to the following accounts:

Benefits of a Lower AGI

Lowering your AGI opens the possibility for:

Becoming eligible for premium tax credits for health insurance
Reducing or eliminating student loan payments
Claiming additional tax credits (retirement savings credit, etc.)
Receiving stimulus payments or other one-time benefits

My Numbers

Here is the strategy I’ve implemented for the past few years…

My total income was $58,070 for tax year 2020.

After contributing the maximum of $19,500 to my Traditional 401K and $6,000 to my Traditional IRA, my AGI was lowered to $32,570.

Now, here’s the interesting part. I purchased my health insurance through the ACA marketplace*. I’m fortunate to have good health, so I always select a high deductible health plan (HDHP) that is HSA compatible. I then maximized the HSA contribution ($3,550 for tax year 2020). This resulted in a health plan with a monthly premium of about $54 after the ACA Tax Credit (thanks to my lower AGI).

I’ve done this for the past few years and it’s been a great way to obtain low-cost health insurance while building up what the Mad Fientist calls the Ultimate Retirement Account.

Another bonus to accessing an HSA is that you can use it to lower your AGI even further. My already significantly-lowered AGI of $32,500 then became $29,020, which allowed me to claim the Retirement Savings Contributions Credit** for $200 (which in turn lowered my final tax liability).

The end result was a federal tax bill of about $1,607. Not bad!

Additionally, I live in a state where most of my income would fall in the 9% tax rate, so reducing state tax liability is another perk to consider when reducing your AGI. That being said, I’ve excluded state taxes for the sake of simplicity.

Here is an annual breakdown of my numbers compared to a lower savings rate of 5%:

	Low Saver	High Saver
Income	$58,070	$58,070
401k Contribution	$2,904	$19,500
Traditional IRA	$0	$6,000
HSA	$0	$3,550
AGI	$55,166	$29,020

And here are my annual costs:

	Low Saver	High Saver
Health Plan	$5,408	$648
FICA Taxes	$4,365	$4,365
Federal Taxes	$4,944	$1,607
Cost Savings		$8,097

New Tax Changes – ARPA

Due to the American Rescue Plan Act (ARPA passed in March 2021), participants in the ACA marketplace receive additional subsidies on the same level of income for 2021 and 2022.

Also, higher income earners may now qualify for a subsidy. This opens the door to qualify for low- or no-cost health insurance even with a slighter higher AGI. I’m currently exploring the option of keeping my monthly premium the same, while converting some of my traditional IRA to a Roth IRA, which would not have been possible prior to the ARPA.

AGI and Student Loan Payments

For those with federal student loans, reducing your AGI can also significantly reduce or eliminate student loan payments, depending on your repayment plan.

I was fortunate to graduate with a very modest amount of debt, so I was able to pay the balance off in a couple of years. However, I’ve known others with large debts relative to their income that used this strategy to bring their monthly student loan payments down to $0 while building up healthy retirement accounts. Some have even combined this with Public Service Loan Forgiveness to wipe out their loans completely after 10 years!

Conclusion

In summary, it is possible to save a massive amount for retirement while minimizing or eliminating other expenses. I encourage your readers to explore how they can stack the benefits available to them in order to save more for retirement while living a great life during their working years.

I look forward to any responses in the comments on other tax savvy ways to save.

Cheers!

* My employer only offers a low deductible health insurance plan, which normally would exclude me from taking part in the ACA marketplace. However, the premiums are higher than the minimum value standard which allows me to opt into an ACA plan.

** See Retirement Savings Contribution Credit qualification tables in the links below.

Resources

Affordable Coverage definition for ACA
Retirement Savings Contributions Credit qualification tables
Here is a great subsidy calculator from the Kaiser Family Foundation. It’s been updated to reflect the most recent changes to ACA subsidies.

How to Access Retirement Funds Early

Find out how you can access retirement funds early (without paying any penalties) and learn the best withdrawal strategy for early retirees!

The post How to Stack Tax Benefits for Even More Savings appeared first on Mad Fientist.

Valuable Lessons from My Fifth Year of Freedom

The Mad Fientist — Fri, 20 Aug 2021 08:00:35 +0000

If you’ve followed me for a while, you’ll know that I’ve released an annual update every year since I quit my job.

It’s now been five years since I stopped working so this is my fifth (and final) annual update.

Why is it my final one?

I explain in today’s short episode…

Listen Now

https://traffic.libsyn.com/secure/madfientist/fifth-year-of-freedom.mp3

Listen on Spotify or Apple Podcasts
Download MP3 by right-clicking here

Highlights

How the pandemic highlighted the power of having savings
Why FI is the ultimate shock absorber and cheat code
The reasons this annual update will be my last
What to do when money is no longer a source of motivation
Why “Lean FIRE” may be a bad idea
Warren Buffet’s plan for leaving money to his kids (and why it may change your FI target)

Show Links

Full Transcript

Mad Fientist: Hey what’s up everybody, it’s the Mad Fientist. Welcome to the Financial Independence Podcast.

Sorry it’s been a while since my last episode but after being trapped in Scotland for 15 months because of the pandemic, I was finally able to make it back to the States and I just decided to take a few months off so I could focus on spending a lot of quality time with the family that I had been missing over the past year.

So since it’s been a while, I just have a short episode today to get back into the swing of things.

If you’ve listened to the show before you know that every year on my anniversary of leaving work I’ve posted either a podcast or an article about some of the things that I’ve learned over the past year and this is actually my fifth one so that means five years ago, on August 1st, was the last day I went into a normal job and I really can’t believe it’s been five years but it has so this is my five year update and I actually think it’s gonna be my last and I’ll explain more as this episode continues on but yeah, I really don’t feel like I’m gonna do any more of these annual updates so rather than ramble on let’s just dive into everything that I learned over the past year of post-FI life!

So let’s start with the good stuff…so the pandemic has just highlighted how valuable having savings is and yeah, FI savings is obviously great because you don’t have to work at all but even some amount of savings just to give you the power to do other things is so important.

So many times over the last year, it’s been apparent that just how valuable that is…from Jill not having to work when she felt like it was unsafe to do so, to not really having to go inside anywhere for any reason at all and being able to just isolate properly when necessary, to just coming back from our travels to the States and having to quarantine for 10 days in the UK…that would have been extremely stressful if we were juggling full-time jobs or had some places we needed to be but we were able to just roll with it and be like, okay we just have to stay hunkered down for 10 days and it’s not fun but it’s not a huge deal. So this past year, more than any other, just really highlighted how valuable that is and I actually just came across a quote that perfectly sums it up and it was on the Planing our Pennies’ blog, and it was Mrs. PoP’s last article, and in it she said, “There’s no downside to having a high net worth…it acts like a giant shock absorber that smooths over life’s bumps and after a while it feels like life is a game and you’ve discovered the mother of all cheat codes.” That quote to me is just perfect because the giant shock absorber that smooths over life’s bumps, I think is the perfect way to describe that feeling of having a nice chunk of savings in the bank over the last year. As you know, the world has been so uncertain and everything’s a bit weird and scary and just having that financial peace of mind to know that you can roll with the punches and you can get over some of these hurdles that are unexpected and it just takes so much stress and anxiety away that…you know, when I was a teenager, what if my car breaks down? I don’t want to spend $500…that would use up all my money if I had to fix a car problem or if anything else broke that I wasn’t expecting and the more you build up the less stressed you get about these unexpected things that do happen in life and this past year just highlighted how important that is for my mental well-being…just to know that there’s there’s enough there and you can deal with things that happen and life’s bumps are going to be a lot more smoothed out because, as Mrs. PoP said, you have this giant shock absorber that can make any bumps you do face a lot smoother and easier to deal with.

Moving on to the absolute best thing that happened over the past year is that I finally released the album that I had been wanting to write my entire adult life. And this was the whole reason I wanted to achieve FI in the first place, actually. I thought it was my job that was getting in the way of me doing this and I thought I’d have to save up enough so that I would never have to work again in order to devote the proper time to actually achieve this big goal of mine and it turned out that I didn’t actually need to do that because the thing that was holding me back all these years of trying to achieve this is wasn’t my job, because I had plenty of spare time that I could have used towards working towards it. It was actually a lot of mental hang-ups I had about trying to pursue it, because I was worried I’d fail, and so I probably could have actually done it when I had a job, but it did take achieving FI, and then a global pandemic to lock me inside for a year, to do it.

But I actually did it and it is by far the thing that I’m most proud of and if you’ve listened to it, you know it’s not going to win a Grammy or be on the radio or anything like that but it was the thing that I really wanted to accomplish more than any other and it was definitely the most difficult thing that I’ve tried to do so the fact that I was able to actually do it after all these years of not being able to, and not really believing I’d ever be able to was just a huge personal accomplishment for me and is something that i’m really proud of and I look forward to writing the next one because I’ll hopefully be in a completely different mindset than I was leading up to this one and now that I know I can do it, then i’m expecting this next one’s going to be a lot more fun to make. So I’m really looking forward to that but since this was the whole reason I wanted to achieve FI in the first place, that’s why I don’t think I’m going to do any more of these annual updates because every other annual update that I’ve given has sort of been revolving around me trying to get to this goal because that was like the end of my FI journey so now that I’ve done that, it doesn’t make sense to do any more annual updates because now it’s just a case of just living life as anyone is living life. And the money equation is solved, and I was able to accomplish the thing that I wanted FI to lead to so any other future updates…I just don’t see the point of them really because it doesn’t have much to do with achieving FI in my eyes. So it makes sense to just end on this high note and this will be the the final annual update.

Since I’m talking about the album, I just want to thank all of you guys out there who pre-ordered it and made the release week of the album even more exciting and that is because you guys helped me actually get onto the Billboard charts, which is ridiculous, especially considering the type of music it is and has no business being anywhere near the charts, so just want to thank you so much for that because it made it even more exciting than it was to begin with. And even though nothing really came from being on the charts for one week, it just adds to the ridiculousness of my adult life so far. I still smile anytime that I think about it so thank you for the support, it really meant a lot to me. And if you haven’t checked out the album yet then you can go to madfientist.com/album and there’s a Spotify QR code that you can open up Spotify on your phone and do the search-by-image feature and then it’ll just pop up the album or you can just enter your email address and I will send you an email with all the links to the album and also tell you where I did end up on the chart for that amazing week way back in February. And while you’re there in Spotify or Apple Music or wherever you listen to music, if you could follow me there, that would be great because that’s hopefully where a lot more activity is going to be happening over the next couple years.

So those were the really positive things over the last years that are FIRE related.

One of the things that still is a challenge for me that i’m working through is losing money as a motivating factor. I’ve written about this in the past, and I’ve maybe even talked about it on podcast, but for someone like me who has been focused on money for as long as I can remember and has been trying to you know reach FI and do all these saving goals, money has been a huge motivating factor in my decisions. So from studying hard in high school, to what I majored in in college to what jobs I chose and everything. And now, when money isn’t as important or more money isn’t as important…losing that as a source of motivation has been really interesting and I’m still not exactly sure I’ve come to grips with it and it’s almost made me rethink what I recommend for other people because I think being motivated by earning money is a positive thing and…I just came across a quote from Warren Buffett recently and it’s actually a quote about how he intends to leave money to his children and the quote is, he plans to leave them enough money so that they can do anything but not so much that they could do nothing and one I think that’s a great way to think about how much money you leave your kids but it also made me reflect on where I’m at now and, like I said, there’s no really motivation to earn more money and even though I’m incredibly lucky to be in that position, it still comes with complications because technically, yeah I don’t have to do anything but a lot of things in life come when you’re being forced to do something maybe you don’t exactly want to do, like for instance, going into work…yeah, it’s not great but you get this forced socialization that you may not have had and you’re interacting with people that are outside your social circle that may be difficult at times but it is also really rewarding and…to go back to the album, right now I could potentially promote it a lot more, which would then maybe get me signed to an indie label, which would then open up a lot of doors for fun music festivals to perform at, and things like that. But since I don’t have money motivating me to reach out to the labels or get myself out there on social media or do any of these not-fun things in the short term, then I’m potentially missing out on a lot more fun in the long term so so that Buffett quote really made me think about FIRE in a new light and it made me think maybe the ideal savings goal to save enough so that all your essential expenses are covered and then continue working to fund your discretionary expenses. So to go back to the Buffett quote, that would allow you to do anything, because you could technically survive by leaving your job and doing whatever you wanted to at that stage, so you could do anything at that point but it’s not really enough to allow you to do nothing. Because you could get by and survive but there would be absolutely no fun in your life, which you wouldn’t want to continue for very long, so maybe that’s a good sweet spot…to save up enough so that all your essential expenses are covered so you can eat and you can have shelter and you can be warm and all the things that are essential for survival, so that then frees you up to do anything you want with your life but it’s not enough that you get comfortable and you do nothing. And that may be a good sweet spot for motivation but on the flip side, most of the really great benefits that I talked about at the beginning of the episode…feeling like you can handle anything that comes to you and not having the stress and anxiety about future bumps in the road and all those things…those only really started to come into effect when we felt like we had more than enough. So i’m not exactly sure what my conclusion is on this because on one hand, I feel like Fat FIRE is the way to go in in the sense that having more than enough and knowing that you’re gonna be okay no matter what comes around in the next few years or whatever, I think that is really valuable. But then on the other hand, losing money as a motivation is difficult because then you don’t have to do things and I think maybe you miss out on things just because in the short term, they may be a little uncomfortable and since you don’t have to do these uncomfortable things, you don’t but then you’re potentially missing out on some long-term benefits.

So I’m not exactly sure where I fall on this but I think that maybe Lean FIRE is something to avoid because you don’t get either in that sense so you’re you’re not feeling like you have so much extra that you can handle whatever comes at you in the future years but you have enough that you don’t really have that money motivation to continue doing things. So I’d be interested to hear your thoughts on this but at least in my really early days thinking about this topic, I’m thinking maybe Lean FIRE is probably not the way to go and maybe one of those other two bookends is a better goal for your FI savings. But again, this is really early days in my thinking on this so i’d be interested to hear your opinions on it so head to madfientist.com/episode61 and leave a comment because i’d be interested to hear what you think about it.

Continuing on from the having more than enough idea, I’m trying to also think about my spending and trying to deprogram my frugality in a sense, because as I discussed with Ramit Sethi on the podcast interview I had with him, I know that I’m a bit too extreme in that sense. And now that the market has recovered and finances are looking good, I know that I don’t need to be that frugal with things and I know that there’s potentially ways I can increase my spending that are not wasteful, because i’ll never be wasteful with money, but at least I can start thinking about ways to use my money in a positive and beneficial way, so that’s definitely something I plan to either write about more or maybe get Ramit back on the show to talk about more because I i feel like that’s a common problem with people like me, who are naturally frugal or have a frugal upbringing, sort of trying to deprogram some of that when it’s no longer necessary to be that extreme in your frugality. So stay tuned for a deeper dive into that topic and if that’s something that you’re interested in, subscribe to the email list, which is definitely the best way to stay up to date with this stuff now because i’m posting even more sporadically than I used to in the past because i’m obviously working a lot more on the music project. So if you’re wanting to just get updated whenever a new post or podcast comes out, just head to madfientist.com/advice and you can put your email address in there and you’ll get a pdf of all the great advice I’ve received on the Financial Independence Podcast from my guests over the years. And if you want to check out the past four years of my annual updates I will link to all of those in the show notes of this episode so you can go to madfientist.com/episode61 and from there you’ll find all the other episodes and articles about everything that I learned in my previous four years of FI.

So that was a short but sweet one today. I have some other interviews coming up that I’ll be publishing soon but I hope you’re all doing well out there hopefully you’ve been able to meet up with your friends and family that you hadn’t seen for a while. Anyway, thanks a lot for listening and I’ll see in the next one!

Valuable Lessons from My Fourth Year of Freedom

It's been 4 years since I left my job and what a crazy year it's been! Here's what I learned from the last year of post-FI life (and the COVID crisis)

The post Valuable Lessons from My Fifth Year of Freedom appeared first on Mad Fientist.

How to Retire Early with Kids (14 of Them!)

The Mad Fientist — Thu, 15 Apr 2021 11:41:44 +0000

Over seven years ago, a Mad Fientist reader reached out with an amazing story…

He and his wife planned to achieve financial independence with a family but the incredible part was that they had a VERY BIG family…13 kids to be precise!

Not only that, they were planning to do it on a single salary (which at the time, was around $104,000 per year).

For the full story, check out the original guest post here.

Well, seven years on and they reached their goal…six years ahead of schedule!

Rob kindly agreed to provide an update on how they did it…

A lot of things in the first article are still the same, but there have been some significant changes in the past seven years. A few of the major highlights: we now have 14 kids, we have eight grandkids, and I plan on reaching FIRE at the end of this year, instead of 2027 which was mentioned in the original article.

The other big news is we wrote a book A Catholic Guide to Spending Less and Living More: Advice from a Debt-Free Family of 16, being released on Amazon and Ave Maria Press websites on April 23rd. More on these and other things below.

FIRE with an Even Bigger Family

During the summer of 2016 we took in a newborn as a foster baby. He is almost five now and looks to be a permanent addition to the clan.

Our four oldest kids are married (only one was when the original article was written) and between them we have eight grandkids.

The eight oldest kids are out of the house. The six youngest, ages 4-17, are still living at home. I am trying to talk them into moving out (without success).

Spending on Grandkids

I may actually have to keep working because my wife loves shopping for things for the grandkids. Things she would never ever buy for our own kids have suddenly become “necessities” for the grandkids. Yard sale, hand-me-down and thrift store clothes were good enough for our kids but apparently the grandkids need new clothes.

Reaching FI Earlier than Expected

We haven’t hit the lottery or taken up robbing banks, I am too afraid of jail to do that. So, what has changed to allow us to predict an earlier FIRE date?

My income has only gone up a small amount since 2014. Around 2% per year.

Two years ago, my wife, Sam, started working part time at our church. She averages 10 hours a week. It’s not a large sum, but it gets saved, not spent.

Our budget hasn’t changed too much, our food costs are down a moderate amount due to kids moving out.

We have managed to up our savings rate. We are both over 50 so the max we can contribute to our 401k and IRAs has gone up. We max out the 401K, ROTH IRAs and HSA every year and we don’t touch the HSA money (which I learned not to do years ago from the Mad Fientist).

Add in the 401k match from my employer and we are saving around $53,000 each year specifically for retirement. We also put money into an emergency fund each month. We have been building up the emergency fund so that we will have a minimum of a year’s worth of savings. I will feel more comfortable with that level of cash. Our savings rate is around 50% of our gross income.

We are still debt free; our house was paid off in 2012 and we haven’t had any credit card, car or other debt since the late 80’s. We do have an unused home equity line of credit we could tap if everything goes sideways.

Post-Retirement Income

When I retire our gross income will go down, but our net income will be about the same since we will no longer be maxing out various accounts. We will still put money into our Roths since at the least my wife will have income. And we will keep putting money each month into our emergency fund.

We should definitely have the FI (financially independent) part down by year end. What the RE (retire early) part looks like remains to be seen. I am planning to leave my full-time job (shh don’t tell my boss) and the regular paycheck and benefits that go along with that around December 31st. But I will do “something”. Side hustle, sell more on eBay, maybe work part-time. But it will be on my terms. And my wife will still be working at the church.

Family Health Insurance After Retirement

We are excited and nervous for this to happen. The biggest worries are having six kids at home to provide for, including finding new health insurance.

I have created an account on our state’s health marketplace. It looks like we can get a silver level plan at a reasonable rate.

I also looked into health sharing ministries, but we have a few kids with some pre-existing health conditions, which makes these plans not optimal for us.

The Book

Last February (2020 – right before everything went into the toilet) we were approached by Ave Maria Press to write a book on finances from the perspective of a large Catholic family who was debt free. We fit that definition, although we are not writers and have never written a book before. We went back and forth with ideas and potential themes and chapters for a few weeks. We came to an agreement with the publisher and started the book in March, and then you-know-what hit…this actually helped the writing of the book.

With all the kid’s activities, along with everything else, cancelled, we found ourselves with a lot of free time. We spent April and May working on the book in the evenings and the weekends. Our older kids all wrote tips and suggestions that were woven into the text of the book. We ended up writing more than the publisher wanted and had to hack 10,000 words out of the first draft. We turned in that first draft in early June. The summer was spent going over corrections and suggestions from the publisher and by September the final version was set in, if not stone, at least wood.

We are currently learning the ropes of marketing and promoting a book. Doing interviews, podcasts and you know, writing articles like this.

Retiring Early with 14 Kids

I have had a paying job since the fall of 1980 when I was 15 and pumping gas after school at the local gas station. And a fulltime job since 1986. I will be 57 and my wife 53 at the end of the year, it is time. We are looking forward to this new chapter of our lives.

It’s the Mad Fientist again. Huge thanks to Rob for this update and if you want to learn more about their impressive path to FIRE, click here to check out their book!

How to Retire Early with 13 Kids

Find out how a single-income family with 13 kids is able to save over 35% towards early retirement!

The post How to Retire Early with Kids (14 of Them!) appeared first on Mad Fientist.

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