9 Basics of The Simple Path to Wealth
I wanted to pass along two wonderful pieces of foundational content from two close friends of ChooseFI.
We’ll start with JL Collins, and for this we’ll go back to one of his most important posts, “How I Failed My Daughter and a Simple Path to Wealth.”
Here are JL’s 9 basics he described to his daughter to get on The Simple Path to Wealth, directly quoted from the article linked above (all links are to other JL blog posts):
1. Avoid fiscally irresponsible people. Never marry one or otherwise give him access to your money.
2. Avoid money managers. It’s your money and no one will care for it better than you.
3. Avoid debt.
4. Save a portion of every dollar you get.
5. The greater the percent of your income you save and invest, the sooner you’ll have F-You money. Try 50%. With no debt, this perfectly doable.
6. Put this money in the Vanguard Total Stock Market Index Fund (VTSAX). This is the fund you already own, so just keep adding to it.
7. Realize the market and the value of your shares will sometimes drop dramatically. People all around you will panic. They’ll be screaming Sell, Sell, Sell. Ignore this. Even better: Buy more shares.
8. When you can live off the dividends VTSAX provides you are financially free.
9. The less you need, the more free you are.
Positive Investing Philosophy
Brian Feroldi’s recent tweet was a good reminder of a positive investing philosophy that will be successful on the only timeline that matters – a long-term one:
“My core investing beliefs:
1) Invest, don’t trade
2) I can’t time the market
3) No debt, no margin, no options
4) Markets are volatile. Plan accordingly
5) Stocks are long-term safe but short-term risky
6) Permanent capital + a long-term mindset are my biggest advantages”
Hotel Redemptions for Massive Value
As I described in Episode 438, I’m contemplating taking my daughter to a Taylor Swift concert, and in researching potential trips to Pittsburgh and New Jersey, I was reminded again of the immense value you can get from hotel point redemptions.
I’ll focus on Hyatt hotels here as an example, since I think Hyatt redemptions are the most lucrative of all hotel award nights:
My first step is to always Google “Hyatt hotels in city name” to see if there are any options to start with. In this case, I found a Hyatt Place that was literally next to the Pittsburgh stadium and even though the cash price for this popular weekend was about $800 per night, there was a room available to use points, so I speculatively scooped this up, knowing that I could always cancel and get all my points back for no cost or hassle.
In this case it cost me 15,000 Hyatt points for a hotel that would have cost about $800, which is a remarkable value of over 5 cents per point!
I have a lot of potential Hyatt points from Chase Ultimate Rewards transfers and the Hyatt card I’ve held for many years, so I try to maximize my Hyatt bookings as much as possible.
What is great about hotel programs that have award charts is you can book these special event nights (think Super Bowl, Berkshire Hathaway meeting in Omaha, Taylor Swift concerts, etc.) for the same number of points as let’s say the emptiest Tuesday in January.
This is another fun way to with travel rewards on your Path to FI.
ChooseFI Community Taking Action This Week
- Fernanda said, “My 1% better this week was actually deciding to spend money! Our family travels back home to Brazil every summer to visit our parents and extended family. We usually spend about a month and a half there working remotely every year and staying with my parents, in a cramped, small ranch house. Well, this year I got a bonus a bit higher than expected and we decided to build a cabin down there on my parent’s ranch so we can have our own place when visiting family for the summer. We sat down, did the math, and with tightening down on life spending, we can cashflow this build while meeting all of our FI goals set for the year. This is a win for us because in the journey to FI we often feel like we should not spend on anything this big… and invest everything possible. Well, we are so excited to be able to realize a dream while not compromising on our FI goals! This feels like our life and happiness just got a lot more than 1% better!”
- Elaine said, “My 1% better was doing a deep dive into ACA insurance. Learning the different cutoffs to obtain a partial subsidy was key for us. We are a boomer couple with most of our funds in taxable 401K and IRA accounts. We found that we could get a gold plan subsidized insurance for $700 as long as our taxable income stayed under 400% of the poverty level. That is $73,240 for 2 people in 2023. With all debt and cars paid off, we only had the small balance on the house. After running several scenarios we figured if we had no house payment and that set price for insurance, we could retire at 60. We used the 59 1/2 rule to withdraw that amount last year including the amount to pay the taxes. We timed our retirement for December and signed up for open enrollment in November. We are grateful to the FIRE community for the information that allowed us to retire 5 years.”
- Ross said, “My 1% better for the week: Got paid the second half of my 2022 bonus. The full amount immediately went to my brokerage account. The money will do the most good by being there, and growing, for my future happiness and security.”
- Courtney said, “My 1% better is that I’ve started getting my groceries through the Safeway app (the only grocery store in our town). Not only do I have access to all the weekly deals and coupons but I pick up the groceries without having to go into the store which means I’m not buying unnecessary things because I’m hungry. I add to the list throughout the week and pick them up when we need them. It’s a little thing but it’s been a big deal for us.”
- Tom said, “My 1% better is a little lengthy, but the compounding effects are massive. My wife and I finally canceled each of our whole life insurance policies that we opened in 2018. Not only will this save us $400 per month going forward, but also our cash surrender value will go directly against a home equity line that we used for a real estate investment. The line’s original rate of 4% is now 7.75%. With this lump-sum paydown, our interest-only payments will drop by over $100 per month instantly. By the end of the year, using this $500 total monthly excess, we will have the HELOC paid off entirely. Eliminating these 3 monthly payments will make our balance sheets stronger and our lives simpler.”
- Tyler said, “My 1% was locking in a new RV spot to park that is ~1 mile away from the military base I work on as a civilian Physical Therapist. Initially I was 18 miles and 30+ minutes of a commute to work both ways. My gas budget ballooned up. So I checked Craigslist and an RV spot opened up much closer! Best of all this spot costs $250 less per month. So I save ~$100 in gas a week, ~$250 in rent, I can now bike to work (free exercise outdoors) and no traffic to deal with! Triple threat for sure. Thanks Brad for all you do, that savings is going straight to my HSA.”