ChooseFI Logo

FI Weekly – April 13, 2021

Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. Disclosures.

Live Event Tonight

We’re testing recording the ChooseFI podcast in a live format, and the Stereo app I mentioned previously wasn’t quite ready for what we needed. So, the experiment moves on: 

We’re doing a Facebook Live tonight (Tuesday 4/13) at 7:30 pm ET with Frank Vasquez, host of the ‘Risk Parity Radio’ podcast and a prior guest on one of our most popular episodes (Episode 194 about the role of bonds in your portfolio). 

Tonight’s live is about the nuances of investment portfolios, asset allocation, drawdown, and how to build a portfolio with non-correlated investments. 

With this event you can actually join us live (video and audio) on the show, so click the link below and have some technical questions ready for Frank! 

Join the Live Event

1% Better: Impact of Investment Fees

Mary sent in a response to last week’s FI Weekly that I wanted to highlight: 

“Just wanted to update you about our LITERAL 1% better this week was detaching our financial advisor from our accounts. One email later our investments don’t need to change and we dropped her 1% in fees! Thanks as always for your content!” 

Every few months I want to remind you just how detrimental the compounding impact of fees on your investments can be: 

In an older article on my Richmond Savers site I set up a scenario where you start with $100,000 invested, add $1,000 monthly for 40 years and assume a 9% annual return before fees (a bit ambitious on the return, but the example holds): 

Balance at Year 40 with that 9% gross annual return: $7,195,531 

But here are your realistic options, since there are fees on your investments: 

  • Option 1: 8.95% net annual return assuming you’re invested in a low-cost index fund with a 0.05% expense ratio: $7,084,479 balance. $111,052 lost to fees, which is about as good as you can get. 
  • Option 2: 8% net annual return assuming a 1% expense ratio fund (or could be an advisor’s 1% fee): $5,281,130 balance. $1,914,401 lost to fees. 
  • Option 3: 7% net annual return assuming 1% advisor fee and 1% expense ratio on fund: $3,893,067 balance. $3,302,464 lost to fees. That’s almost half of the total net worth! 

Fees matter a great deal. In Mary’s case, her “literal” 1% now will likely mean a 35%+ higher net worth a few decades from now. That’s about as powerful an action as you can take to help your future self! 

Having Money Saved is a Lot of Fun

Ryan wrote in: “I’m a high school personal finance teacher, and I love your podcast content. I’m constantly telling my students, “you know what I just heard on this podcast…” Haha! I even made a poster with a Jean Chatzky quote from Episode 190 for my classroom wall that I love. She said on your show, “Saving money is not fun, but having money saved is a lot of fun.” That really hit home with me and I think that high school students can relate to that one. I knew I had to put it up on my wall as soon as I heard her say it!” 

Having money saved gives you options. Having money saved gives you power. Having money saved truly is a lot of fun. 

It all starts by taking action today. 

ChooseFI Community Taking Action This Week

  • Brandie said, “This week I made life 1% better by giving my notice that I’m leaving work in 2 months. Our FI-oriented financial decisions over the past 2 years (all of the 1 percents I didn’t email about!) have given us the flexibility for me to leave now that I am pregnant with our second child. You have always said that independence can mean different things to different people and for us, this is the next step for our FI plan for now!” 
  • Bonnie said, “1% better…. every Thursday I have a phone reminder to pay an extra $405 towards my student loans. My goal is to be student debt loan free before I turn 40. I have 20 months and $45,000 left. Given that this is my third no spend year in a row, I’m excited to see the light at the end of this debt tunnel.” 
  • Lauren said, “My 1% gain was watching “Playing with Fire” with my husband; it was a great reminder for me, but more importantly it articulated FIRE to him in a relatable manner that I haven’t been able to. He has always been supportive but after watching the documentary he became more invested in the process and started asking questions about where we were at and what we needed to be doing. We received our economic impact payment and his immediate reaction was “Let’s open our brokerage account!” This is the first step we are taking as a couple towards FI and I couldn’t be more excited!” 
  • Lindsay said, “I made the final payment on my last student loan. Between the two of us, my husband and I had approximately $42-45k in student loans and now they are all paid (along with our car loan) and the only debt we have is our primary home mortgage. We graduated in 2005, so these student loans have been part of our lives for a long time. It feels so good to be rid of them!” 
  • Joey said, “I stopped living alone by moving out of my studio and into a townhouse with a roommate. I’m now saving $500/month on rent!” 
  • Rachel said, “I feel that my 1% was actually gained by paying it forward. I was asked to give a lecture to a small group of graduate students in their last month of training. At the end of my talk, I took the opportunity to get on my FIRE soapbox and tell them they are the perfect point in their lives to jump on board with FIRE. I have already had one student reach out for more information, so hopefully the FIRE continues to spread!”

Subscribe To FI Weekly

Action, accountability, inspiration, and community. Join the movement. Get started on your Path to FI

Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. Disclosures.

More To Explore

Rebel Entrepreneur Coaching Series: Advanced YouTube

Let’s get geeky. There is so much more to being a YouTuber than just putting out a new video each week. In this episode we dive into the details of YouTube with two of the best. Strap in, get a pen and paper, and get ready to take notes as Matt Estlea and Rob Harvey give us the most value we have ever had in an hour long episode. We are going to break down YouTube analytics, stats, promotion, thumbnails, and every other detail you need to become a YouTube sensation! The fun thing is that the same principles apply to your business too!

Read More »