10 Financial Rules You Need to Know
You may remember my good friend Clint Murphy from ChooseFI Episode 438; simply put, he’s creating world-class content at the intersection of psychology and Financial Independence and he’s one of my favorite follows on Twitter.
His recent post on the 10 Financial Rules You Need to Know is a perfect example and a great refresher for the FI Community.
Here are my favorites:
- Rule of 72: how long it’ll take your money to double taking compounding into account
- The 50-30-20 Rule: To be a millionaire, where to direct your money: 50% – savings/investment, 30% – needs, 20% – wants
- The Automation Rule: You make 35,000 decisions a day. This leads to decision fatigue and bad decisions. Automate good decisions to prevent mistakes.
Clint writes a weekly newsletter called The Growth Guide – it’s one of the few newsletters I drop everything to read and I highly recommend it. Here’s a one-click way to sign up for The Growth Guide newsletter.
32 Things to Know about Following The Simple Path to Wealth
The incomparable JL Collins put out a post this weekend on his website called the 32 things to know about following The Simple Path to Wealth and after reading it I knew it had to be included in this week’s newsletter.
I can’t really do it justice here, so please click through and read it! Here are a few of my favorites:
- Investing, done well, is the soul of simplicity.
- Investing is playing the long game: Think decades.
- Nobody knows what the market will do in the short term. As investors, we don’t care.
- You cannot outperform the market over time. Trying will only cost you time, effort and money.
- Low-cost, broad based index funds are the answer.
- Market corrections, bears and crashes are all a perfectly normal part of the process; and the market always recovers.
This is the perfect time to announce that JL’s new book, Pathfinders: Extraordinary Stories of People Like You on the Quest for Financial Independence―And How to Join Them is set to release October 31st and is available for presale now.
The Power of the FI Community
Lauren is a teacher and listened to our Ep 279 with Dan Otter of 403bwise and immediately set to work seeing if she could effect change in her own school district. This is her story:
“Several months ago, I heard the 403bwise episode about 403b & 457b plans. My best friend and I are teachers, and I basically ran into her classroom that morning when I arrived at work. We had been patting ourselves on the back for having 403b’s, but were disappointed to find out that 457s exist and no one had told us! (Also that our 403b option kind of stinks).
We started digging and found it didn’t seem there was a 457 offered by our district. That did not stop us! I downloaded the letter from 403bwise that was mentioned on the podcast episode and immediately sent it to my best friend. We sent them to HR with our fingers crossed. We quickly found out that even the people in HR didn’t know what this magical plan was. We explained it to them and they were able to dig up a very outdated (probably 10+ year old) document for a 457b that had a different company name on the top than it did in the rest of the page and said 403b on it, though they insisted it was for a 457. We told them to look into fixing it because we would not sign something with that many errors. They told us they would look into it, but we didn’t feel very hopeful after that and thought we’d hit a dead end.
Well, today we received an email announcing that we now have a 457b plan as well as a new 403b option! We text each other immediately, overjoyed! We can’t wait to open up our 457b’s soon and look into the new 403b to see how it compares to the current plan we hold.
Thank you so much for what you do with this podcast and for the ways you have changed our lives and future with the amazing information you continue to put out.”
Episode 458 Recap: A Healthy State of Panic
Farnoosh Torabi joined me on the podcast this week to discuss her new book A Healthy State of Panic, which I truly enjoyed.
In the book she discusses the nine of the most common fears that hold us back in life, and really makes a case for why each can be a superpower to move you forward.
Some highlights from the episode:
- “When we fear money, we’re really fearing the relationship we have with money, all the associations we place on this thing called money, the interpretations…of what having money means, what not having money means.”
- “In our efforts to avoid rejection, we live out a self-fulfilling prophecy”
- “In that loneliness, I got strong.” The gift of the fear of loneliness is the “strength it takes to reach out.”
- “Endings are a part of life and the sooner you can anticipate it, maybe that is even a gift because you have the time to prepare and decide actually how you want it to end more on your terms.”
ChooseFI Community Taking Action This Week
- Shelly said, “This past year I set a reminder on my phone to look at my finances once a week. I call it ” Financial Friday”. On my Financial Friday I try to find one thing that I can improve in my personal life and one in my business that I own. By looking at it every week I come up with new small ideas that happen throughout the year. A little at a time helps me feel less overwhelmed. This week happened to be insurance. I analyzed each policy. Business policies can be lengthy and expensive. I found several areas to trim so that I can reach my goal of 1% better. Finally, as part of tracking my 1% better, I keep a note on my phone to track my progress throughout the year. It helps me feel a sense of accomplishment to see my list of improvements.
- Nate said, “My 1 percent better is literally raising my 401k 1%. I plan to do it 1% per quarter until I max it out. I am at 11% now.
- Ben said, “My 1% better is starting the ‘75 Hard Challenge.’ I’ve met all of my financial goals for the year but wanted something else to challenge me. I’ve heard you talk about your own fitness journey but fitness is something that I’ve never really prioritized. I have a ways to go before reaching FI and don’t want physical things to limit my ability to enjoy life. A lot of this challenge is mental but having this program and outline has really helped me stay focused. Just like how the Dave Ramsey baby steps are not 100% ideal for everyone, this is a great framework for getting me kickstarted in my own fitness journey.
- Carrie said, “My 1% better was getting a $500 Energy Network Incentive applied to my power bill. Last month I had to replace my two water heaters (thank goodness for my emergency fund since homeowner’s insurance didn’t cover the replacement, only the damage to my home when they failed) to the tune of $4200. I looked for incentives for buying energy efficient appliances on my utility company’s website and lo and behold there was a generous one. All I had to do was upload the receipt of the completed work! It helped take the sting out of the plumber’s bill.
- Kim said, “My 1% better is frugalizing my fitness addiction by becoming certified as a group spin instructor. Starting in November, I’ll be teaching two group spinning classes per week at my local YMCA. Now I’m getting a little bit of pay to do something that I love and was going to spend my time doing anyways. I also receive a free club membership, and I’m talent stacking soft skills like public speaking that will translate to my 9 – 5 career.
- Lauren said, “I’m so excited about my new 1%! I got the Chase Sapphire Preferred card last year to start using credit card points for travel. I’ve been nervous about my first redemption, but I did it for our upcoming trip to Ireland! Instead of booking directly with Chase, which would have cost us 90,000 points, I transferred UR points to Aer Lingus (a transfer partner for Chase). In total, we used 52,000 points (13,000 each way) and paid only $550 for the 2 roundtrip, direct flights. This saved us over $1500 in cash! And it was super easy We’ll look at using points for hotels too! Thanks so much ChooseFI for opening my eyes at the possibilities to travel for less!