Updates & Inspiration for Your Financial Independence Journey

Buy Nothing Project My brother and sister-in-law are expecting their first baby and one of the most interesting parts of watching them prepare for the arrival is how much success they’ve had using their local Buy Nothing Project group. They’ve essentially sourced everything they’ll need for the baby through the Buy Nothing group for their local community. And I mention that community because that’s what I’ve been most impressed by; there are true community ethos as each group represents a precise location, and it’s amazing how community members look out for each other (they’ve made friends in the group who message them when new baby items appear, etc.) and how members want to pay it forward. We hosted a baby shower for them this weekend and when we were cleaning up, I asked if they wanted the decorations or if we should throw them out. Scott responded that he knew someone in the Buy Nothing group who would want them, so he’d definitely take them home.  I was so impressed how this community spirit was a part of them after such a short time. This community spirit is what we envisioned for the ChooseFI Local groups when we founded them almost 5 years

Optionality My family went to Busch Gardens, an amusement park here in Virginia, this past weekend and buying tickets was interesting because there were so many options for memberships and season-long passes. We found that the season-long pass was only $10 more expensive per person than a one-day pass, so this seemed to be a clear winner since it provided options for a tiny price premium. If we loved the park (which we did!), then we could go back as many times as we want this summer essentially for free. I’m a big fan of paying small, nearly insignificant premiums for optionality down the road and another perfect example of this type of thinking is with our mortgage term. I gladly paid the extra interest premium (1/8 of a point in our case) to get a 30-year mortgage term instead of a 15-year mortgage.  Because it gave me options for a small price. If I decide to pay it off in 15 years, which one can always do with extra monthly principal payments, then great.  If not, I will have that interest rate locked in for 30 years and the much smaller required monthly payment that goes along with it. I love

Twenty Investing Lessons Learned Michael Batnick, co-host of ‘Animal Spirits,’ one of my favorite investing podcasts, released an article I enjoyed called ‘Twenty Lessons Learned’ in response to the recent downturn in the stock market.  Here are some of my favorites, but I suggest you click to the article and read all 20: Survival is the most important thing. Your portfolio must be able to weather euphoria, panic, and malaise. Nothing is risk-free. The S&P 500 is down 16% year-to-date. Intermediate-term “risk-free” government bonds are down 20%. Past performance is not indicative of future performance. Past behavior is. You didn’t know this was going to happen. You don’t know what’s going to happen next. Investing is hard. More Language Learning Tips In last week’s email I included a Twitter thread on ‘how to actually learn a foreign language’ and a few of you wrote in with great follow-ups: Mary said, “I found a free app called Tandem and it is a gold mine. You talk to real people who speak the language you want to learn. Everyone is so nice! You can just text with them or opt for audio or video calls. They are just regular people living all over the world

Tax Loss Harvesting Andrew wrote in, “Hey Brad – I love the newsletter! My 1% this week was doing some tax-loss harvesting with the market being down. I hadn’t ever done it before, so I read up on it a bunch and traded my VTI losses of $2.6K and then bought VOO. At my 20% effective tax rate, that saves me about $500 at tax time. After a painful tax year, I am happy to find $500 in tax savings!” I can’t give financial or tax advice here in the newsletter, but tax loss harvesting is something I’m considering with the market down substantially.  I found this ‘Complete Guide to Tax-Loss Harvesting with ETFs’ on Investopedia that gives a great overview of the concept. I know Vanguard makes it quite easy to do ‘specific identification’ when I go to sell mutual funds, and I strongly suspect all the major platforms make it easy to do this with funds and ETFs. You can sell and lock in the tax loss but the key is that you can’t immediately turn around and buy the same security right away.  As the article states: “The wash-sale rule dictates when a tax loss can be harvested.

Capital Gains Tax on Primary Residence Many of us have seen our homes increase in value significantly over the past few years, which for homeowners is obviously a great thing. I have a friend who is selling their home and they asked me how this appreciation would be taxed, and I realized this would be perfect for the FI Weekly: As always, this is not tax advice as I can’t give you specific info for your life, but in general the US government gives us significant tax advantages for appreciated primary residences. First, the gain is taxed as a “capital gain.” If you’ve owned your home for less than a year, this is taxed as ordinary income, since it is a short term gain.  If a capital asset has been owned for more than a year it’s taxed at special long-term capital gains tax rates. For most taxpayers that’s a 15% Federal tax rate. That’s beneficial, but where the magic comes in is with the ‘exclusion’ on cap gains tax for your primary residence. For single filers, $250,000 of your appreciated gain is completely excluded (non-taxable) and for married filing joint that doubles to $500,000. Critical note:  This must have been your

Berkshire Annual Meeting: Best Quotes The Berkshire Hathaway annual meeting  was held this past weekend in Omaha, and Warren Buffett and Charlie Munger were both in top form dishing out wisdom on life, the economy and everything in between. Here are a few of my favorites (quotes from Business Insider): “Take away the management fees and I’d bet on the monkeys.” (Buffett suggested that most financial advisors are no better at investing than a bunch of monkeys picking stocks by throwing darts at a dartboard.) “We’ve got people who know nothing about stocks being advised by stockbrokers who know even less.” – Munger “The best protection against inflation is still your own personal earnings power. The best investment by far is anything that develops yourself.” – Buffett “Sometimes the stock market is quite investment-oriented, and other times it’s almost totally a casino, a gambling parlor — and that existed to an extraordinary degree in the last couple of years, encouraged by Wall Street.” – Buffett Interest Rate Increase on ‘I Bonds’ I mentioned in December that Laura and I were each putting $10,000 into the US Government issued ‘I Bonds’ for 2021 and that we’d most likely put in another

Are You on the Right Path? Codie Sanchez from Contrarian Thinking is someone I enjoy following via her newsletter and numerous podcast guest appearances.  She generally talks about building and especially buying “boring” cash flowing businesses that I think would greatly appeal to the FI Community. I’m highlighting her here for a Twitter thread she recently posted on checking in weekly to determine if she’s on the right path in life, as I think it can be useful for you. From Codie: “Every Sunday I have a little ritual where I check in to make sure I’m on the right path. I use a framework called the 1 in 60 rule. It means that for every 1 degree a plane veers off its course, it misses its target destination by 1 mile for every 60 miles you fly. Further you go, further away from your goal you get. I think this is true in life too. So how do you make sure you’re even on the right path? You grab yourself a nice big glass of red. You sit down to some music (I like instrumental). You open your computer. And you ask yourself some questions. Then throw all those answers and questions in Evernote

Travel Rewards Updates Our team worked hard to update and streamline the free travel rewards course on the ChooseFI website and now it’s available as a series of 6 blog posts (instead of a 20-part email series) you can digest quickly and easily to get started maximizing travel rewards.  Get started with Part 1 now and there’s a link at the bottom where you can navigate to Part 2 and beyond… Two FI Resources Our good friend Cody Garrett, an advice-only financial advisor at Measure Twice Financial, continues to add tons of value to the ChooseFI Facebook group.  Here are two posts that I think will add value to your life: Capital Gains Tax Rate income thresholds for 2022. It’s incredible to see the taxable income levels where you qualify for 0% for long-term capital gains. Cody’s charts make it simple to digest. The ‘Rule of 72’ is an “easy way to conceptualize how quickly money doubles when invested.” Cody’s chart shows your annualized return from 1% to 12% and how long it’ll take your money to 2x, 3x, 4x and 5x.  Never seen it presented like that! Teach Me Something Interesting Tim Urban, from ‘Wait But Why’ (I’ve mentioned his article ‘The Tail End’ numerous times, but

Put Your Finances on Autopilot The entire reason this newsletter exists is to compel you to take action to make your life better. Today my ask of you is this: Find at least one thing in your financial life that you do on a recurring basis where if you invest a few minutes today you could put it on autopilot for the rest of time. I call this “frontloading the sacrifice” though that’s overplaying the difficultly level calling it a ‘sacrifice,’ but hopefully you get the picture: What can you spend a few minutes on today to eliminate that decision or time investment every month in the future? Some examples could include: Put your credit card payments on autopay Find any bills you still are paying by check or logging into an account to manually pay and see if they have an autopay option Setup automatic investments each month into a mutual fund or ETF of your choice. Financial Literacy Month: Favorite Reads April is financial literacy month and if you’re just finding the world of Financial Independence, I’d highly suggest you start with our free FI 101 Course, check out Episode 100 of the ChooseFI podcast and read JL Collins’ ‘The Simple

Brian Feroldi’s Book Releases Today We’ve been excited for months about the preorder for Brian Feroldi’s book, “Why Does The Stock Market Go Up?: Everything You Should Have Been Taught About Investing In School, But Weren’t.” Well, good news is, as of today, this is a preorder no more because today is the official release of the book and it’s available everywhere books are sold! Simply put, this book is incredible. I think it vaults instantly into the top tier of essential personal finance books, and is a must-read for anyone who wants to, among other things, understand the stock market, what it means to invest in stocks, how to consider how stocks are valued and why the stock market goes up (and down). Here is a link to purchase ‘Why Does the Stock Market Go Up?” on Amazon. Impact of Rising Interest Rates One of the more unusual thoughts I hold about personal finance is this:Our homes don’t have a specific inherent value. What I mean by that is this:  Since most people finance 80% to 99% of their home purchase price through a mortgage, the actual market value of the home isn’t the only, or even the major, determining factor in

What is a Share of Stock? Brian Feroldi’s book, “Why Does the Stock Market Go Up?” releases next week and while recording our episode with him, I brought up a sentiment I’ve heard distressingly often in the FI Community: “I just don’t believe in investing in the stock market. It all seems like gambling.” My response is usually something like this: Owning a share of stock means you are a part owner of that company. A company like Ford broke ownership of their company into 4 billion little pieces, each piece represented as one share of their stock. If you don’t ‘believe’ in stock market investing at all, that means there is literally no publicly traded company in the United States that you want to be an owner of. That’s impossible. So, let’s be clear, investing in the stock market isn’t gambling and it isn’t some nebulous unknown.  You are buying small ownership stakes in companies. In the case of a total stock market index fund, you are buying an ownership stake in over 4,000 companies. This is not gambling, it’s investing. Maximizing Cash Back Credit Cards If maximizing cash back on your credit cards is more your thing than travel

Community Feedback and Tips 1) Paul wrote in and I wanted to share since the quotes he posts daily to Instagram are really profound. I’ve bookmarked his account and I suggest you do as well: “Brad, Love reading these emails. It’s a gentle reminder to keep motivated. The luck surface area note (from last week’s FI Weekly newsletter) is great. I haven’t heard that term before. But the sentiment is true. You have to be ready. A way to keep myself personally on track, I’ve been posting a quote every day on an Instagram account I created. I post myself every morning. Helps keep me grounded. I’ve been saving quotes for years and planning to give them to my daughters when they get older. But figured, I’d post them and share the account with them and anyone else who happens to come across them. I tell you this because I think the quote I posted today lined up with the luck surface area. “The unprepared mind cannot see the outstretched hand of opportunity.” – Sir Alexander Fleming 2) Russell then wrote in with info on a program I hadn’t previously heard about: “I’ve been meaning to write with my ‘1 percent better’ for a while