Updates & Inspiration for Your Financial Independence Journey

The Incredible Power of Compounding (In Real Life) Two weeks ago, I featured this quote in the newsletter: And last week I said now is the time to track your Q1 2024 net worth (it’s still a great time!) With those 2 items in mind: I rarely talk about my own personal finances, but this was too astonishing not to highlight the ‘in real life’ power of compounding and tracking: Our net worth increased in Q1 2024, just from market growth, more than our entire net worth figure on January 1st, 2013. Think about that! That was two CPAs working and saving for over a decade to get to that January 1st 2013 net worth. And now, from the immense power of compounding, just by sitting around and watching our investments grow for a measly 3 months, our net worth increased by more than that! Truly astonishing. What is Fat FI? I was recently up in NYC recording two live podcasts with Paula Pant for her Afford Anything podcast (Episodes 500 and 501), which was so energizing and fun. I didn’t have “performing to a packed comedy club in Brooklyn” on my life bingo card! I was fortunate to have a few of my lifelong friends make it

It ALL worked. All of it. Connie is a member of our community who responds to these emails frequently and she just sent in the most massive ‘wins’ email. This needed to be featured front and center in the newsletter: It ALL worked. All of it. When my husband passed in 2021, I needed to make some moves – some fast and some slow. I needed to wait until it all proved itself out over these last 3 years before I could write. All moves were aided by different episodes of ChooseFI, and I NEVER would have been aware had it not been for your amazing podcast. SELF-EMPLOYMENT: My business is a single-owner LLC, but I still file as an S corp from when I had employees so that I can pay myself wages as a W-2 employee and take the rest as an owner distribution. What that enabled me to do: 1. We hacked the FAFSA for college. Both daughters (twins) start college in fall of 2024 and both are receiving max benefit from both federal and state aid! College will be debt-free! This will save our family $170,000 over the four years. 2. We hacked the ACA for

Grasping the Power of Compounding I came across this amazing quote that highlights the power of compounding, but also the somewhat odd nature of compounding where it seems glacially slow at the beginning and picks up such steam towards the end of your life (or the compounding period) that is seems impossible to believe: “In the initial years…compounding tests your patience and in later years, your bewilderment.” – Anshul Khare Travel Rewards Search Tools One of the biggest changes in the travel rewards world the past few years has been the number of award search tool websites created to help you find airline frequent flyer availability. I found the article ‘Which award search tool is best?’ on The Frequent Miler site which does a great job listing and comparing these award search tools. I’ve personally used both Point.me and Seats.aero recently to search for availability for potential trips to Japan and Bali, and while neither tool is perfect, they are a massive help over the standard laborious hunting process at individual airline websites. I think this info will be valuable for anyone with points and miles! Note: American Express just partnered with Point.me to offer a FREE “point.me for Membership Rewards® points” where you

New FI Projection Software On Episode 470, Chris Hutchins spoke highly of a new FI Projection software called ProjectionLab, and then my friend Adam talked about it at a ChooseFI Richmond local group meetup, so I had to investigate. Kyle Nolan, the founder of ProjectionLab and longtime member of the ChooseFI community, just put together a video walkthrough of the software and sent it to me. It’s incredibly impressive and you should definitely check it out! The Mad Fientist called ProjectionLab “the most beautiful financial planning tool I’ve ever seen” and in an article on the Mad Fientist’s site, Kyle described what ProjectionLab can do (quoted directly): [Brad note: I’m going to have Kyle on the podcast and would love your feedback and questions on the ProjectionLab software to help inform that conversation, so after you give it a try, hit reply (to this or any FI Weekly newsletter) and let me know what you think.] What I’m Reading, Watching, Playing Reading: As usual, I’m juggling a few books at the moment: Watching: I just started watching the new Hulu series ‘Shōgun’ and it’s no surprise, considering my love of all things Japan, that this one interests me. The series is getting rave reviews from critics

Warren Buffett’s Latest Shareholder Letter One of my favorite annual activities is running to my computer at 8am ET on the last Saturday in February to download Warren Buffett’s latest Berkshire Hathaway Shareholder Letter. If you’re looking for an incredible amount of financial and life wisdom in a short time, check out this page with links to all the letters going back to 1977. His 2013 advice is worth pointing out each year to those of us pursuing FI: “My advice to the trustee [Brad note: trustee of his estate] could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors – whether pension funds, institutions or individuals – who employ high-fee managers.” ​2023’s letter was just posted and, as always, it’s a quality read from Mr. Buffett. I’ll be attending the Berkshire annual meeting this May in Omaha, and it’ll be bittersweet to not see Charlie Munger up there on the stage. Advice-Only Financial Advisors Problem: You’re a DIY investor with specific questions about your financial life, but

0% Long Term Capital Gains Explained Frank wrote in: “I have a question from Episode 471 with Cody Garrett. Cody talked about the three tax rates on long-term capital gains (0%, 15%, 20%). As I understood the conversation, if you have long-term capital gains of LESS than $94,050, you pay NO TAX on that amount. However, let’s say you have taken long-term capital gains of $100,000 over the course of one tax-year. Is the tax 15% on the entire $100,000 since you’re over $94,050, or, do you pay a 15% tax on just the amount that is greater than $94,050? For example……the first $94,050 of my capital gains are taxed 0%, and the difference ($5,950) is taxed at 15%.” Cody responded: Ordinary income and long-term capital gains are taxed using a progressive bracket system. A portion is taxed at 0%, then the next at 15%, etc. With long-term capital gains (LTCG) of $100,000 as your only form of income (married filing jointly under age 65 in 2024): The LTCG tax rates are based on Taxable Income, after Adjusted Gross Income (AGI) has been reduced by the standard/itemized and QBI deductions (if applicable). Taxable Income would be $100,000 – $29,200 standard

Psychology of Money Lessons The ‘Compounding Quality’ account on Twitter is one of my favorites, and they produced a top quality graphic that is worthy of your time and attention: ​18 Timeless Lessons from the book The Psychology of Money​ Morgan Housel’s book has a comfortable place in my “essential 3” personal finance books alongside ‘The Simple Path to Wealth’ by JL Collins and ‘Die with Zero’ by Bill Perkins. If you haven’t read Psychology of Money, grab it from the library and in the meantime, here are my 3 favorite lessons from Compounding Quality’s synopsis: · Never Enough: “The hardest financial skill is getting the goalpost to stop moving. Happiness = Results minus Expectations.” · Save Money: “Building wealth has little to do with your income or investment returns, and lots to do with your savings rate. Savings are the gap between your ego and your income.” · Freedom: “True wealth is having time to do what you want to do, whenever you want to do it.” Memento Mori: Practical Application The Stoic concept of ‘Memento Mori,’ which loosely translates as “remember death,” has been on my mind lately, and even though it sounds morbid at first glance, I think it’s a powerful push to

Deep Dive on Inflation and FI Planning After listening to Episode 471 where Cody Garrett and I discussed FI and inflation, my friend Jesse Cramer wrote to me and Cody and said: “As you chatted about applying inflation in FIRE/retirement, I thought to myself, “Could visuals help here?” …and I started to visualize a little analogy and visual aid to go along with it. Essentially, we can either apply math in “The True World” OR we can build a little math-y construct with no inflation (“The Convenient World”) and do our math there. That sprouted into a longer-than-expected article. It’s a nuanced topic, especially when combining it with the 4% rule.” The article that came out of that brainstorming session was ‘Accounting for Inflation in Retirement and FIRE Planning’ and since I know this is a topic that is both important and baffling to many of us, I wanted to include it here in the FI Weekly so you can dive deep and gain a better understanding. Brainstorming Prompts for Better Ideas I love things that help you look at a problem differently. Or, as Charlie Munger would quote, “Invert, always invert.” This article called, “Extreme brainstorming questions to trigger

Essential Podcast Episodes We’ve started 2024 out with a string of essential ChooseFI podcast episodes that I’m immensely proud of. If you haven’t caught up recently, it would be hard to beat Episodes 470 through 476 for impactful listening. Sean Mullaney blew me away on Ep 475 with completely new information I’d never heard before on how to access your money before 59.5. This knowledge will help the entire FI Community and it should be spread far and wide. Yesterday in Ep 476, Amy shared her incredibly personal story where the title says it all: “Love, Loss, and Money: The Shocking Financial Aftermath of a FI Spouse’s Death.” Everyone can benefit from that episode as it highlights how a few simple steps can prevent a significant amount of additional pain in the event of the death of a loved one. There isn’t enough space to go through all these episodes, but “The Cure for the Boring Middle” in Ep 472 is the best way I’ve found to prepare yourself for what FI will look like, and don’t forget that if you have Social Security questions from Ep 474, we’re going to do a part 2, so please hit reply and

Hard Choices, Easy Life. Easy Choices, Hard Life I saw a post on Instagram from @VisuallyNeeded that reminded me of one of my favorite quotes and it helped me rediscover this section I included in the newsletter 3 years ago: “I’ve often mentioned Jerzy Gregorek’s masterful “Hard choices, easy life. Easy choices, hard life” quote, as I think it is a framework for long-term success in FI and in life. Possibly even more profound is this from Jerzy: “Try to be around people who don’t do three things. They are not sarcastic. They don’t complain and they don’t blame.” If you sit back and listen, you’ll find these ‘three killers of happiness’ make up 80%+ of everyday conversation. I challenge you to personally stop this madness and also cut out the people in your life perpetuating this negativity. Instead, look for people who are interested in others, those who ask questions, those looking for solutions, those who understand there’s nuance and subtlety in the world, and that there’s so much to be positive about, even in tough times.” Cutting Down on Email Clutter For someone who reached FI, I have a lot of self-imposed, unnecessary stress in my life. This is something I’m working on fixing

Why Did Your Habit Not Stick? “It’s one year from now. The habit you were hoping to build during the year didn’t stick. What is the most likely reason it failed?” That is the question James Clear, author of Atomic Habits, recently asked on Twitter. I love this type of thinking where you view the problem from a completely different angle in order to get more clarity. “Invert, always invert” as Charlie Munger would quote. For me, habits often don’t stick when I don’t have enough motivation or clarity. Simply put, I sometimes pick habits because it sounds like something that would be good for someone, but ultimately not for me. Running is a perfect example. I loathe running, but almost invariably it’s on my ‘to do list’ of goals every year. No surprise when that habit doesn’t stick. What is the most likely reason YOUR habit failed? Merit Aid for College If you’re the parent of a ~6th through 11th grader and you haven’t listened to ChooseFI Episode 460 with Brian Eufinger, you need to drop everything and listen to that episode. This was the most eye-opening episode I’ve recorded in years, as I was completely unaware of “merit aid grids” based on

Investments to Keep Out of Your Taxable Accounts Have you ever considered which types of investments you should hold in your taxable brokerage accounts vs. retirement accounts like your 401k, Roth and Traditional IRAs, etc.? The key is if you’re going to have certain investments in your overall portfolio, you want to hold them in a way where income (dividends, etc.) and capital gains distributions won’t significantly raise your tax bill. Christine Benz wrote a great article for Morningstar called “Which Investments to Keep Out of Your Taxable Account” that is well worth diving into if you have any of the following investments which I pasted from Christine’s article: “Here are some of the key categories to keep out of your taxable accounts: Travel Rewards Win and Updates I just had a massive win with travel rewards points: My daughter and I are going to Texas in February to visit 3 amusement parks (she’s a massive roller coaster enthusiast!) and we really wanted to fly into Dallas on one particular Friday night direct flight. The flights were over $500 each, which was a non-starter. They were American Airlines flights but I had no AA miles. What I did have was a