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148R | FI 101| Expense Ratios and House Hacking

House hacking, takeaways from this week’s episode with Andréa Motenko, and the tenents of FI.

ChooseFI: Your Blueprint To Financial Independence

Our book, ChooseFI: Your Blueprint to Financial Independence, launched this week. The plan has taken all of the information from our podcasts and turned it into a linear path to FI. Overall, the book aims to keep the tenents of FI at its core.

FI 101 Topic Of The Week: Expense Ratios

In addition to the book, we have also created a course that covers the basics of FI. FI 101 is a free course designed to help you achieve FI. Consider enrolling in the free course now.

One of the topics covered in the course is expense ratios. Over a 40 year period, a high expense ratio can decimate your investment returns. Over a long-term investment timeline, the goal shouldn’t be to beat the market. Instead, the goal should be to keep pace with the market. If you choose an actively managed fund, you are essentially hoping to outperform the market. However, the number of people that can outperform the market is very small.

As Brad shared his own strategy, he also shared Warren Buffett’s. Buffet plans for his estate to go into a low-cost S&P 500 index fund. A popular option in the FI community that is similar to this approach is VTSAX which is Vanguard Total Stock Market Index Fund. Instead of the top 500 companies, it includes all companies.

If you are trying to find the best option within your current 401k plan, then take a close look at the expense ratio. Find an index fund that mirrors the S&P 500 or the entire stock market. Avoid actively managed funds with higher expense ratios. By keeping pace with the market, you likely stand to gain as the market continues its growth.

Don’t bet on a losing horse, bet on all of them instead.

The Struggle Of Poverty

This week’s episode was an eye-opening look at the struggle of poverty. Opening ourselves up to each other’s humanity is important.

Everyone has struggled and we can connect. Even if your struggle was very different from my struggle.

Talk to others with compassion and genuine curiosity. You can’t know how someone else lives without being genuinely curious and asking questions.

FI is really for everyone, not just the privileged. However, we all start from a different place. Some start out with advantages. Many waste their advantages. Many capitalize on their opportunities. It is all about making the most of what you have available.

The grind, hustle, and grit learned in poverty can be harnessed to redirect the future. You can take the lessons learned and use them to move forward. Yes, you need some level of financial literacy but you already have the tenacity you need to succeed.

Andréa mentioned that education, skills, and mentorship were keys to success.

All of these have to do with increasing your zone of awareness. All of them have to do with somehow bringing new information into your life.

No matter what your situation is, remember that others are in your situation.

There is someone has it and has had it worse than you have it now. And found a way, found something, found some way to improve their situation to get remarkable results.

Continue to expand your zone of awareness and maximize the power of your strong mindset.

The more information I have, the wider my zone of awareness is, the more likely it is that luck’s gonna strike because I’ve kinda planned for it.

Listen to the full episode with Andrea here.


Let’s celebrate a win!

Tiffany’s Travel Rewards

Tiffany recently took the travel rewards course and was able to book an amazing vacation at a great price. She will be going to Aruba for four nights for a total of $181.10! All thanks to travel rewards points.

If you are interested in replicating her success, then consider taking the free ChooseFI Travel course. The course is designed to help you take your first trip with travel rewards.

House Hacking

Craig Curelop, author of The House Hacking Strategy: How To Use Your Home To Achieve Financial Freedom, came on the show to share his house hacking strategies.

At age 26, he is already almost FI based on his house hacking endeavors. That is after graduating with around $85,000 of student loans at age 22. House hacking came on his radar after deciding that he didn’t like his job and started looking into financial independence.

So, what is house hacking and how does it fuel your FI journey?

You buy a 1 to 4 unit property for low percent down, typically 3 to 5% down. You live in one part. Either a room in a single family or a whole unit in a duplex, triplex, or quadplex and you rent out the other units or rooms such that the rent from the units or rooms fully covers your mortgage. And you are living for free, paying down your mortgage, the house is appreciating, and likely even cash flowing a little bit.

After living in the house for at least a year to ensure a low down payment, you can repeat the process. Over time that builds into a large cash flow. For Craig, it led to FI. He owns three houses that generate around $1,000/month. In total, they generate $36,000 in income for him after all of the expenses.

The book covers everything you need to get started house hacking. Join our house hacking cohort group here.

The Cities Of FI

We want to hear from you! Which domestic cities are most conducive to FI? Please take a minute to send in your favorite FI cities here.

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