The Financial Independence Show

12 Money Lessons (Christmas Special)

Dec 25, 2024

This festive special dives into 12 crucial money lessons inspired by the holiday season. Key insights include the idea that retirement is about numbers, not age, and the power of compound interest when investing early. Listeners learn that focusing on major expenses can yield greater savings than minor ones. Emphasizing action over mere information, the hosts encourage investing in personal growth and starting now for better future returns. It's all about balancing financial goals with meaningful experiences!

34:52

Creator website

AI Summary

AI Chapters

Episode notes

Podcast summary created with Snipd AI

Quick takeaways

Retirement should be perceived as a financial milestone achieved through savings or passive income rather than solely defined by age.

Investing in personal development and education can yield greater financial returns and accelerate the journey toward financial independence.

Deep dives

Retirement as a Financial Metric

Retirement should be viewed as a financial metric rather than a specific age, emphasizing that individuals can retire once they possess sufficient savings or passive income. Various methods, like the 4% rule or generating passive income through real estate or digital products, allow people to establish financial independence. The 4% rule suggests that saving 25 times one's annual expenses can provide secure retirement savings. Achieving a comfortable retirement is about calculating the necessary financial cushion, regardless of age.

Intro

4min

Balancing Financial Independence with Meaningful Experiences

5min

Understanding Retirement Costs and the Power of Compound Interest

5min

Investing Wisely: The Power of Time and Discipline

18min

Smart Financial Insights and Holiday Traditions

3min

Today we bring you a Christmas special of sorts.

The 12 money lessons as a play on the 12 days of Christmas.

These are some of the most foundational takeaways we’ve realized during our financial journey.

We truly believe if you master these lessons, you’ll have a clear path to hitting your money goals.

12 Money Lessons We Cover:

Retirement is a number, not an age
- 4% rule or cash flow method

Your first investment should be in yourself
- $10K toward self-betterment will likely go a lot further than it will in the S&P or RE at the beginning of your journey

Compound interest is insane
- Investing $500 a month from 25 – 45 and then stopping will give you ~$1M in retirement at 65. Investing $1,000 a month from 45-65 will give you only $500,000. Start Early.

The 80/20 of spending
- Focusing on the “big 3” (housing, transportation, food) will do way more for you than penny-pinching in other categories

There’s no “right way” to reach financial independence
- If someone tells you the X is the only way, they’re lying or trying to sell you something. Can be done via index funds, RE, corporate job, digital products, etc.

Action > Information
- You will learn way more by actually doing the thing, than reading books, listening to podcasts, or watching YouTube videos about it.
- Now is not a bad time to start
  - Almost anytime you look back 4 years at investing you’ll wish you would have bought even more which is just a sure sign that if you feel like you need to wait to invest, you’re probably wrong

Do the experience
- You’ll probably never regret the money spent on a memorable activity with friends and family

It’s not about the money
- Yes, you’ll need to focus on money for a while and build up a nest egg but it the end the money is just a tool to give you the freedom to focus on the things you really care about, it’s not about lavishness or material obsession. Saving up a ton of money doesn’t make you a greedy person

Don’t make a plan, make a contract
- Investing will have turbulence and that’s when people are most likely to make bad decisions. This happens when we let our emotions get involved. Instead of making a general plan, make some hard contractual-type promises with yourself so that when times get tough, you don’t even consider making rash decisions

You’ll adjust to anything
- This can be an advantage or disadvantage. The advantage is that you can live a lifestyle very different to others and find that you can still reach a very high level of happiness. The disadvantage comes when we have lifestyle inflation and our spending keeps increasing but the novelty wears off and we don’t feel any different but our spending has increased dramatically

You can’t know where to go, if you don’t know where you are
- Getting an accurate state of your finances and spending is critical. You don’t have to fixate on creating a budget right away but definitely track your spending with extreme accuracy for a few months so you have real data to work with
- It’s not about how much you make, it’s about how much you keep (there are people making $200k living paycheck to paycheck, and people making $50k saving 50%)

Be informed
- I try not to tell people what they can and can’t spend money on, just do the math to understand what the decision you’re making now means for your future self. Get comfortable with some basic spreadsheet math and project out things, compare options, just take a pause and do some calculations

We hope you enjoyed this special episode and these lessons for your financial journey.

If you found value in the episode, please share it with a friend!

Join the Community

We’d love to hear your comments and questions about this week’s episode. Here are some of the best ways to stay in touch and get involved in The FI Show community!