In this episode of ChooseFI, we focus on the essential Pillars of Financial Independence including index fund investing, affordable housing, the psychology of FI, tax optimization, and more.
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Podcast Episode Summary
- ChooseFI Episode 21: The Pillars of Financial Independence
- While we intend to focus on the roughly 10 pillars of FI, we assuredly have missed some so we hope the audience sends us the ones we’ve missed
- Low-cost index fund investing is the way to go with investing in the stock market over decades and the best way to grow your wealth
- We love Vanguard and VTSAX but Schwab and Fidelity have similar funds with similar expense ratios
- Even the Mad Fientist realized that he couldn’t out-research the market and stuck with index funds while he pursued tax optimization strategies to grow his wealth even faster
- Another sub-pillar is to not try to time the stock market. You will screw it up since you need to be right on the buying and selling side
- Affordable housing as a pillar of Financial Independence, since this is the largest line item in your budget
- Even if you live in a high cost of living area, you can still pursue FI. You just might need to think a little bit differently
- Sometimes pursuing FI requires tough decisions
- Car ownership as a pillar of Financial Independence
- We do not believe in buying new cars – let someone else pay for the depreciation the first few years
- Look for fuel efficient cars that are inexpensive to repair
- Your food budget as a pillar of Financial Independence
- You should focus on $2 per person per meal as a guideline for home cooked dinners
- Most pillars of FI come down to thinking a little bit differently and being a little bit smarter
- Jonathan lost 25 pounds during his 3 month challenge to lose weight before his son’s birth
- Tax Optimization as a pillar of Financial Independence
- Max out your tax-deferred accounts is the advice for the FI community since you theoretically can take it out without paying taxes on it if you use the strategies we’ve previously described
- Hacking your college education as a pillar of Financial Independence
- Ways to save a significant amount of money on a college education
- Travel Rewards maximization as a pillar of Financial Independence
- Use rewards points to help travel the world for nearly free. You must pay your cards off on time and in full every single month
- Cutting the cord on your cable subscription as a pillar of Financial Independence
- Intentionality and how you choose to spend your money is important when assessing FI
- Reducing your cell phone bill as a pillar of Financial Independence
- Making a small ‘hard choice’ to save big money and have an ‘easy life’
- The 4% Safe Withdrawal Rate explained
- Philosophy as a pillar of Financial Independence
- Unconventional thinking – looking at a problem differently that can help you live the same lifestyle as everyone else while getting wealthy instead of living paycheck-to-paycheck
- Maximizing the rules: Knowing the rules of the game and planning in advance
- Planning and creating a framework for life makes everything easier
- Patience is what makes FI “incredibly difficult.” This is the simplest concept but it takes many years
- For every $100 you can cut from your budget each month, if you invest that money and earn an 8% return over 20 years it is worth $60,000.
- Understand the math behind the decisions and know that even small decisions can earn you large results
Choose FI: Your Blueprint to Financial Independence
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