What $100 a Month Truly Means
In the ‘Community Taking Action’ section of today’s email (see below), Charity said her reducing $100/month in expenses “was not flashy” but I wanted to point out the immense value of every $100 reduction in life expenses:
For every $100 reduction in monthly expenses, that’s a full $30,000 less in net worth you need to reach Financial Independence.
Yes, $30,000 less! That’s massive.
Here’s the math:
Let’s say your life costs $5,000 per month, which is a total of $60,000 per year.
We know to get your FI Number using the 4% rule of thumb that you simply multiply your annual expenses by 25, so your FI Number would be $1,500,000.
Let’s now cut $100 out of this budget, so it’s $4,900 per month or $58,800 per year in expenses.
$58,800 x 25 = $1,470,000.
This is just simple math, so every $100 you cut out of your life is a reduction of $1,200 of annual expenses which leads to a $30k less you need to reach FI.
Sounds pretty flashy to me!
App That’s Improving My Life
Jonathan told me about the Genius Scan pdf scanner app a few weeks ago, and it is making a huge positive impact on my life.
I’ve been trying to go paperless in my house for a while, so in theory every piece of mail or important document gets scanned, but in practice I’ve found that they just accumulate in a “to be scanned” pile in my office.
With the simplicity of having an app on my phone that allows me to instantly take pictures that easily turn into multi-page pdfs (where necessary), I’m actually doing this as the mail/documents come in and it’s just DONE instead of piling up.
I then save the document to the proper folder in Dropbox and it’s saved forever.
It’s so convenient that I’m now moving on to scanning all my old business invoices so I can truly go paperless!
The Value of a Growth Mindset
Here’s a quote I heard from Chip Conley, the Founder of the Modern Elder Academy, on the Rich Roll podcast’s ‘Longevity Masterclass’ episode:
“There’s growth and fixed mindset. We’re big fans of Carol Dweck’s work at Stanford and a fixed mindset is when you tend to think of life as ‘I’m here to prove myself and I define success as winning.’
The problem, if you have that point of view as you get older, is you stop playing the games you can’t win. And that means your sandbox gets smaller and smaller. And as it gets smaller, you actually get more bored because you’re not trying new things.
So, moving from a fixed to a growth mindset means moving from proving yourself to improving yourself. And instead of focusing on winning, you focus on learning. “
ChooseFI Community Taking Action This Week
- Joanne said, “My 1% better this week was closing on my first rental property. Since I started listening to Choose FI three years ago, I have maxed out my 401k, opened a VTSAX account, started using travel rewards points, and started a side hustle. Each of those steps increased my confidence and here I am, owning an investment property. I was always told I “wasn’t good with money.” Thank for giving me the tools and the courage to learn that I am!”
- Kevin said, “My one percent better this week is starting a Roth IRA for my youngest daughter. I have a small farm and business on the side of my W2 job. One of the many benefits is both of my kids help out in a small capacity and are models for my advertisements. Because of that, I’ve been able to pay them a small salary and establish a Roth IRA for each of them. The compound interest of an annual investment of $1,000 over 70 years is absolutely astounding! My wife and I are excited to get our daughters started on the FI path before they start Kindergarten!”
- Charity said, “This week my 1% was not flashy, but a change of internet and cell phone providers has resulted in a $100/month savings, which can go straight into my investment plan!”
- Jen said, “I’ve been waiting to write this email for a while, but now is the time to let ChooseFI know the value it has added to my life. My husband and I are physicians. We are a few years out of rigorous training programs that took a lot from us. Unfortunately, my husband’s job after residency was not a great fit (long hours, constant working nights/weekends, and bad work culture). Because we live well within our means and save a lot, he was able to leave his job without another one lined up. He was able to say “No” to several offers that did not fit with his values because we had the financial bandwidth to manage. I am exceptionally pleased to say because of all of this, he was able to find his dream job…making more money and working 4 days per week!!”
- Alex said, “I love keyboard shortcuts (I automate a ton of things with Keyboard Maestro for Mac) and learned a new one this week: If you have a date in a Google Sheet cell and double click the cell, it pulls up a calendar. It’s the simple things in life.”
- Benjamin said, “My 1% this week is opening up a brokerage account and funding with $5,000 I had sitting in my checking account. I already max out my 401k and HSA but had extra cash flow that I wanted to get start investing. Was super easy to do since I already have an IRA and Roth IRA at the company. Now I just need to set up monthly automatic transfers to really maximize this extra savings.”
