142R | Envelope Overwhelm

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142R | Envelope Overwhelm
ChooseFI has partnered with CardRatings for our coverage of credit card products. ChooseFI 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.  See our disclosures for more info.

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Chase Sapphire Preferred Card​

ChooseFI’s top pick for travel rewards! The Chase Sapphire Preferred Card has a 60,000 point sign-up bonus (after spending $4,000 in the first 3 months). The points are ultra-flexible and transfer to 13 airlines and hotels. $95 annual fee.

ChooseFI Favorite: top rewards card for beginners

Chase Sapphire Preferred Card​

ChooseFI’s top pick for travel rewards! The Chase Sapphire Preferred Card has a 60,000 point sign-up bonus (after spending $4,000 in the first 3 months). The points are ultra-flexible and transfer to 13 airlines and hotels. $95 annual fee.

A discussion about simplifying personal finances as well as this week’s episode with Paula Pant’s take on real estate.

Personal Finance Made Simple

Although many spend hours each month dealing with bills, Brad has set up his personal finances on autopilot. With that, he only has to devote a total of 10 minutes a month to personal finance problems such as writing a check to pay a bill.

Personal finances does not have to be difficult.

Jonathan just bought a new home, so he recently went through the tedious process of setting up home-related bills on autopilot. It took a few hours to set up but now he doesn’t have to devote hours each month to pay the bills.

This time saved is one more benefit of FI. Without having to worry about cash flow, you can set your personal finances on autopilot to free up time for other things. Many people don’t have the luxury of not worrying when certain bills will hit their accounts. Brad and Jonathan both have a cushion in their savings account that allows them to never worry about whether or not the account has enough money for the bills.

Jonathan’s Budget Evolution

Back at 18 years old, Jonathan was introduced to the envelope system. Basically, you take out a cash budget each month and divide it into these envelopes. For example, you might have a ‘food’ envelope that you could only use to purchase food.

After two weeks, he couldn’t deal with the paper system anymore so he went digital. He opened eight free checking accounts through USAA and created a digital envelope system in this way. This led to too many debit cards to keep track of.

A few iterations later, he no longer uses the envelope system at all. Instead, he has embraced using credit cards responsibly.

Used properly, a credit card is an amazing financial tool. Used improperly, it can destroy your financial life.

Instead, he has one USAA checking account that pays off his credit card balances in full each month. He also has a CIT savings account that is earning 2.2% interest. Anyone can earn that interest rate through a CIT Savings Account if they contribute at least $100 a month or have $25,000 in the account. Check out our full review of CIT Bank here.

YNAB handles the budgeting of all of this spending easily. Finally, he manages his investments through M1 Finance. Check out our full review of M1 Finance here.

Avoid Fees

Brad and Jonathan both agree that paying fees for personal finance tasks is overrated.

If you’re paying fees for anything, something has gone horribly awry.

Brad only pays annual fees for certain credit cards based on a very intentional analysis. If you are charged a fee for something, then dispute it. More often than not, if you call about a fee then the company will reverse it.

Related Article: Should You Pay An Annual Fee On A Credit Card?

Set up everything on autopay as a way to safeguard against late fees. If you bank with Wells Fargo, you may be able to avoid an overdraft fee by linking your checking account to your savings account.

Take the time and initiative to avoid fees and ask what you can do to prevent any future fees. Life doesn’t need to be more expensive. Each time you take action on an idea, it’s to simplify your life.

How ChooseFI Makes Money

Since the beginning, Brad and Jonathan decided to provide the best listening experience possible. With that, they’ve decided to avoid putting ads on the air.

Instead of ads, the show earns money through affiliates that Brad and Jonathan use in their personal lives. For example, Jonathan mentioned in today’s episode that he uses M1 Finance and CIT bank to handle his finances. ChooseFI is an affiliate for both of these.

If you wanted to support the show, then you could sign up for either of those through our links for M1 Finance and CIT Bank. When you click through our link, you’ll receive at least the best public deal available. Anytime you click through a link or type it into your browser, you are supporting the show. Your support allows us to continue creating content for you.

If you think about what the framework for that looks like, our guiding light is ‘How can we help our audience earn more, spend less, enjoy the journey?’ If you hear us represent or promote something on this podcast, it is because we feel, like personally, it has benefitted our lives. It’s been helpful for us. And we think it will help you with one of those tenets, of effectively, our mission statement.

If you hear us represent something on the podcast, it is because we think it will help you because it has helped us.

Reading Goals

Jonathan has the goal of reading ten books this year. So far, he is on number four. He’s read Mindset Full Disclosure: We earn a commission if you click this link and make a purchase, at no additional cost to you. , Quit Like a Millionaire Full Disclosure: We earn a commission if you click this link and make a purchase, at no additional cost to you. , and RESET Full Disclosure: We earn a commission if you click this link and make a purchase, at no additional cost to you.One book Jonathan is excitedly waiting to read is Atomic Habits by James Clear Full Disclosure: We earn a commission if you click this link and make a purchase, at no additional cost to you. , once it is returned from Brad’s household.

On the other hand, Brad has read many books so far this year. Audiobooks are a great way to “read” while you’re on the move.

If left to my own devices, what I would do with my free time is read.

ChooseFI: Your Blueprint To Financial Independence is coming out soon. The release date is October 1, 2019. It will be released as a print book and an audiobook. If you haven’t preordered, then consider doing that now. If you don’t buy books, then perhaps request it at your local library.

Paula’s Insights On Real Estate

Paula offered some great tips of anyone diving into real estate. We’ve recorded a second episode where Paula will share about turn-key rental programs, so look for that in the near future. Jonathan found the cap rate equation most useful for his current predicament of selling or keeping his old home. The cap rate offered a way to evaluate the asset without financing fogging up the picture.

Since the episode was recorded, Brad has bought two single-family homes as an investment. He is taking on the role of long-distance landlord. These properties will serve as a test to see whether or not real estate makes sense for Brad. He will report back in a future episode about how the test goes!

Listen to the full episode with Paula Pant here.

Community Feedback

The ChooseFI Facebook group hit 50,000 members! Let’s see what they had to say.

Win From Scott

Scott paid off $165,000 in student loans. Congrats!

PMI Update From Wren

Wren, a mortgage industry insider, wrote to let us know more about PMI.

PMI is paid to the agency that backs the loan, not the mortgage bank or servicer. Since the servicer of the loan has nothing to gain from PMI, they are usually helpful in removing it.

If you have an FHA loan from 2013 or later, then you cannot remove PMI.

If you have a conventional Fannie or Freddy loan or an FHA loan taken out before 2013, then you’ll need to show that your loan to value ratio (LTV) is now 78% or lower.

The first option is to call the bank you are making payments to. If you have been paying down the principal for a while, you can have the lender check the balance against the value of the property from the time when the loan was written. This value will be either the appraised value or purchase price for a purchase. For a refinance, this value will either be the appraised value or automated value.

If you have a loan but the property has significantly increased in value so that you are below 78% LTV, then you can submit an appraisal to the bank showing the current value of the property in order to have the LTV calculated. Make sure to talk to the bank before the appraisal, you’ll want to use one of their selected providers.

If the LTV is 78% or less, then you can ask them to remove the PMI. The servicer will send it to the agency backing the loan for approval. It takes a few days but is usually approved.

If you do not call, then PMI will not automatically disappear.

Shout Out To Amon And Christina

This family reached FI on two civil servant incomes, congrats! As creators of Our Rich Journey, they will be on the podcast in the coming months.

Check out their Facebook post here.

ChooseFI International Foundation Celebration

We will be hosting a launch party for the foundation on September 6, 2019, at FinCon. You do not need to be attending FinCon to join in. Show your support for the foundation while hanging out with Brad, Jonathan, and Paula Pant. Click here to get your tickets.

Related Articles

New to FI? Be sure to check out Episode 100: Welcome To The FI Community!

ChooseFI has partnered with CardRatings for our coverage of credit card products. ChooseFI and CardRatings may receive a commission from card issuers.
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Comment Disclaimer: Responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

5 thoughts on “142R | Envelope Overwhelm”

  1. The fact that Dave Ramsey sells envelopes drives me nuts–I guess if people want to buy them whatever but it seems like taking advantage of folks to me. I did the many accounts thing too–it is so nice to have the cashflow that enables automation. I appreciate the talk about monetizing ChooseFI. “I love a simple life”. I’m looking forward to Brad’s updates about the real estate purchases, I think I feel similar about that investment option.

    • I think you mean YNAB (You Need A Budget)! It’s an amazing system for budgeting (but truly more than that and it can help you save for that wine, lol!), and I can’t say enough positive things about it. Saved.My.Life. If there really was an awesome “wine app” that was discussed too, I’m all ears, ha ha!! 😉

  2. The opportunity cost in that MD/PHD scenario is Huge.

    You would be at least 31 years old prior to starting residency after 9 total years of post grad education.

    Then 5-8 years of residency/fellowship making ~55k.

    Finally….you are almost 40 years old before you start making $300k+.

    Skip the PHD, and you get to start making the huge salary 5 years sooner. Even if you own $300k, you will absolutely make out ahead as opposed to paying the HUGE opportunity cost of staying in school for 5 extra years.

  3. I love that you guys made the correlation between Dave Ramsey’s envelope system and YNAB.

    When in my mid-30s I suddenly came to the realization that we couldn’t spend all the money we were taking in. I read Dave Ramsey’s book and tried to convince my wife to use the envelope budgeting system. She (hopefully jokingly) threatened to divorce me if I made us start carrying around envelopes with cash instead of credit cards.

    Now we use YNAB to accomplish the same thing the envelopes would have. We have a budget date once a month where we each pour a glass of wine and get to decide where our money goes.

    The point is to be INTENTIONAL with your money, and I think YNAB is a great tool to help that intentionality.

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