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FI Weekly – February 16, 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. American Express is a ChooseFI advertiser. Disclosures.

PSA: Tax Season is Here

The IRS started accepting the filing of 2020 tax returns on February 12th, so tax season is officially here. Most major brokerages such as Vanguard and Fidelity provided consolidated 1099 tax forms this week. That means 95% of us can gather all our forms and start filing this week. 

Two things to watch out for: 

1) If you have a form K-1 coming from a partnership or S-corp, those can come in up until 3/15 

2) If you’ve received amended 1099s in prior years, it might be worth holding off a few weeks before filing. 

Based on some backlogs at the IRS, e-filing your return is strongly recommended. 

Mental Math: Estimating

I’m constantly looking for useful strategies and mental models that will help us all lead better lives. One came up this week that was interesting enough to share: The critical importance of estimating. 

My daughter was trying to figure out exactly how long she was in virtual school each day after subtracting for recess and lunch. 

I estimated she was in school from 8 am through 1 pm (5 hours) and had about an hour total for recess and lunch subtracted. So, I knew her answer should come out around 4 hours. 

After doing the calculations in her head, she mixed something up and came up with about 5 hours, which presented a great opportunity to show how critical estimating is. I was able to explain that the entire school day is just over 5 hours, so if she started with a high-level estimate, she would have known the answer had to be less than that, and she could have guessed it would be about 4 hours. If she wanted to be precise, she could have gotten it down to the minute, but at least she would have known when she was close. 

Most of us have forgotten the calculus and trigonometry we learned in high school, but I think we can get 90% of the benefits of being “good at math” just by practicing estimating: 

Next time you’re at the grocery store or a restaurant, estimate what your total bill will be, including tax. Or take a 5-digit number and estimate what 75% of that number is (Example: What’s 75% of 53,276?). 

The goal is not precision, but training yourself to be better at real-world math.

Instant Classic Book

It’s a rare treat when you read a book so profound that the only way to describe it is as an instant classic and a true masterpiece. My wife heard about ‘The Boy, the Mole, the Fox and the Horse’ by Charlie Mackesy and bought it on Amazon. 

I’m not sure how to describe it other than as a mix between a children’s book and a life-changing philosophy text. It is truly profound, and as much as I love getting books from the library, this is one I’m glad we own. I can’t possibly do this book justice, but some examples from the text: 

  • “Asking for help isn’t giving up,” said the horse. “It’s refusing to give up.” 
  • “What do you think success is?” asked the boy. “To love,” said the mole 
  • “What do you think is the biggest waste of time?” “Comparing yourself to others,” said the mole. 

ChooseFI Community Taking Action This Week

  • Josue said, “Over the last week I made several moves: I transferred an old IRA I had been ignoring for 15 years, that was invested in a fund laden with fees (Front-End Load of 5.5%, and a 1.13% Expense Ratio) into VTSAX in an IRA at Vanguard. I cancelled an expensive Whole Life Insurance Policy in favor of a Term Life Policy that is half the price with ten times the coverage. My wife and I sold our leased vehicle to Carmax and walked out with a check equivalent to 7 months’ worth of payments. We no longer have a car payment which will save us about $3700/year and we are now a one car household! My wife and I will each be opening a Roth IRA and contributing the maximum for 2020 and 2021. We also started trying to keep our meals to $2 per person per meal which will make a tremendous difference in our monthly food cost. In my estimation, we will be saving roughly 56% of our income this year on modest salaries with just these few intentional choices. I can’t thank you guys enough for opening my eyes and showing me that Choosing FI is as simple as having the knowledge and motivation to do things a little smarter than those on the standard path through life. By taking action and accumulating small wins, you can create the life you want far faster than most believe is possible.” I was drifting through life on the standard path but now I am Choosing FI.” 
  • Shannon said, “I am really hard on myself as a single mother, 100% financially responsible for my two elementary age kids. I did a financial check in today and found I had hit a lot of my 2021 financial goals already! I now have 6 months savings in cash; maxing out my HSA and 401k; contributing to 529’s for both kids and no debt other than my mortgage with a low interest rate a 401k loan that I will have paid off this year. Most of the time I feel so far behind for my age but today I felt pretty darn good!” 
  • Shayne & Heather said, “Our 1% this week was finally crunching the numbers and realizing that we have decreased our fees by 84% after breaking up with our financial advisors and moving most of our investments to Vanguard. This move alone has saved us $250,000 over the next 20 years! We have also both fully funded our 2020 Roth IRAs, and have already partially funded them for 2021. On the debt side, we are in striking distance of polishing off the $225,000 worth of school loans that we had, all within 2 years. And if that wasn’t enough, we are working those credit card reward points, have moved over to a high yield savings account and I am putting together a side hustle/passion project. Thanks to you and the rest of the community for lighting the fuse for us…BOOM!” 
  • Marlys said, “We just refinanced my fiancé’s truck loan from 11% to 6%. His payment went from $399 to $260 a month but we will keep paying the $399! We also met our Jan goal of paying $3000 a month towards debt! Starting the year off right! Listening to your podcast every day has kept motivation high to change our finances!” 
  • Joe said, “Easy #FWOTW for you to share to our community…by owning just one share of BRK.B (Warren Buffett’s Berkshire Hathaway Class B shares currently around $240/share), you can get an immediate and perpetual 8% discount on your Geico insurance products. Not bad huh?!” 

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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. American Express is a ChooseFI advertiser. Disclosures.
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