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In last week's Facebook Live episode with Frank Vasquez, he pointed out that we are in the Golden Age of Investing. In this episode, we explore what that means and if we appreciate how good we have it. In an ideal world, we would all like to maximize investment returns while reducing volatility. Holding uncorrelated assets helps to prevent catastrophe. But what is the goal of investing? Although it's a broad question, Brad believes the ultimate goal is to accumulate wealth. Investing itself is a very broad term, but it is essentially when the money you have saved is working to produce additional income for you. Financial independence is getting to the point when you have saved and invested enough to get to the point where working can become optional. In the last 20-30 years, investing has become fundamentally easier. Even Brad's first investing experience 20 years ago under the old system was a negative one, where he and his lack of knowledge were taken advantage of by an unscrupulous advisor. Back then, you needed an expert to help you invest money and paid dearly for it in the form of fees. When many of us think about saving money today, it is through a savings account or certificate of deposit where the bank holds your money and pays you an agreed-upon interested rate in exchange for being able to loan out your money at a higher interest rate. Based on current interest rates, it would take a very long time to make a meaningful return on money invested in this way. A more aggressive form of investing would be owning shares of a company's stock and the value increases as the company become more profitable. Bonds are where a company, the government, or other entity raises capital by selling debt. You buy the debt and are paid back with interest. Mutual funds are yet another investment that first came about in the 1920s, but mutual funds really rose to fame in 1975 thanks to Jack Bogle when he created the Vanguard First Investment Trust. It was game-changing for modern-day investing. With mutual funds, you own a little piece of many different companies with one investment. In the case of an S&P 500 index fund, you would own a little bit of the top 500 largest companies, although it is cap-weighted, meaning you own disproportionally more of the largest companies and less of the smaller. The index funds approximate the market and so you don't need to pick individual stocks to invest in, which is good since we tend to do so poorly at stock picking both on the information and behavioral side. Owning a single stock is a risky position. If something goes wrong, the investment can become worthless and your money is gone. You can mitigate that risk by diversifying your investment across multiple companies. Jack Bogle changed the game in 1975 when he decided you didn't need to pay for experts to put together and manage mutual funds comprised of hundreds or thousands of companies. Computers could use an algorithm to manage a fund designed to track a particular index. He predicted you could get a better return from owning all the winners and all the losers and keeping the fees rock-bottom low than with an expert team picking stocks. Although the entire investing industry laughed at Jack Bogle, after 25+ years of data, the results show Bogle was right. The process dominates over one of actively picking stocks, especially with a timeline of several decades. Today, in the index fund space, there has been a continual race to the bottom when it comes to lowering index fund fees and the expense ratio today has been cut by a factor of 10 or more. Something ChooseFI has discussed over and over again is how much of an impact fees can have on your investments. An extra 1% fee can lower your net worth by as much as 30-50%. It's because index funds with expense ratios of 0.04% or lower that say this is the Golden Age of Investing. It's no longer necessary to pay 0.75-1.5% expense ratios or 5% front-load fees. In addition, changes to the tax code have made it possible to control our tax rate. In 1974IRAs became available, followed by 401Ks in 1978, Roth IRAs in 1997, HSAs in 2003, and 457bs in 2010. These investment vehicles allow us to control our tax rate and save for financial independence. With the exception of Roth IRAs, all of the other accounts are pre-tax, so that every dollar going in reduces your taxable income. Some couples may even be able to reduce their taxable investments by $78,000 if they have access to both 401Ks and 457bs and max out their investments, possibly reducing their taxes to 0%. Investing on your own today could not be easier. It can be done on your own, online, in about 15-20 minutes. Even better, you can automate your investing and send over an extra you have when you have it. The barriers to entry are also lower than ever before. You don't need to have your money sitting on the sitting lines until you have accumulated enough to invest. You can start with $10 or $20 and invest in Exchange Traded Funds (ETF) if you don't have enough to meet the minimum investment for a mutual fund or even buy fractional shares. Brad has his finances on autopilot even if it is suboptimal. He suspects many of these new companies are moving toward a system where everything is connected, will be able to optimize everything, allowing customers to keep anything extra invested. Jonathan believes making investing seamless is magical. Using dollar-cost averaging as an example, it guarantees a mathematically favorable average price for your investment. Brad thinks the most obvious benefit is behavioral. You don't need to think about when to buy or what the market is going to do. Our brains screw us up with investing more than anything. There are a few other forms of investments, outside of stocks and bonds. Real Estate Investment Trusts (REITs) are basically mutual funds for different types of real estate, or ETFs made up of stocks in different types of commodities. Investing in a business, crypto, collectibles, NFTs, art, or single commodities are all other options. Speculation and investing can be conflated terms, but they are different. Speculation is not based on the fundamentals of a company or asset. Last Fall, Jonathan bought $200 worth of DOGE and just sold it for $5,000. While the gain is real, his purchase was entirely speculative. He remains skeptical of cryptos in general but sees where there may be value in cases where a problem is being solved, such as XRP and Swift. With any investment, you don't want to be the one left holding the bag. Know what your risk tolerance is, what your timeline is, and what your goals are. With buy and hold investing in large swaths of the market, you don't have to worry about whether or not you have the winners or the losers. The market is self-cleansing. As long as you keep living below your means and investing the difference between income and expenses, you're going to be successful. Resources Mentioned In Today's Conversation ChooseFI Episode 313 Are you as Diversified as You Think You Are? With Frank Vasquez Register to receive a copy of Brad's weekly email, The FI Weekly, right to your mailbox! ChooseFI Episode 013 The Unfair (FI) Advantage of Teachers | 457b Motley Fool article: Dollar Cost Averaging: What Investors Need to Know If You Want To Support ChooseFI: Earn $1,000 in cashback with ChooseFI's 3-card credit card strategy. Share FI by sending a friend ChooseFI: Your Blueprint to Financial Independence.

The Households of FI series continues! In this episode, we touch base with Kristi, the single mom from Minnesota who. New to FI, Kristi is working to get on the path but has questions about her company's Price-to-Earnings (P/E) Ratio and the Employee Stock Purchase Plan (ESPP). How to evaluate what a company's stock is worth is not something many of us index fund investors know a lot about, but it's good to be familiar with it. Individual stock selection is something that Brian Feroldi gets excited about, making him the perfect mentor for Kristi and her ESPP questions. The only individual stock Kristi owns is her company's stock. She is able to buy her company's stock for a 15% discount with up to 10% of her income. She has been buying this stock since beginning her career six years ago and has accumulated a lot of it. Because she didn't know anything about investing prior to finding the FI community, she nows calls this her biggest financial mistake and has finally started selling a bit of it. She originally thought that sell the stock with the lowest cost basis to realize the largest gain would be the best strategy, but now questions if that is the best move. Brian says a lot of publicly-traded companies offer ESPP, like Kristi's. Company plans vary somewhat, and it sounds like her company purchases lots of the stock on a monthly basis at the end of the month. As long as Kristi holds the stock for two years, the 15% discount is taxed as ordinary income, and capital gains are taxed as long-term capital gains. Discounted stock sounds like a great deal, but Kristi has a lot of risk tied to her company. Her salary, bonus, retirement plan, benefits, and career capital all rely on the company. Purchasing employee stock increases the risk even more. When Brian started his career, his company offered an ESPP, and although he was bullish on the company, he chose not to participate as a risk management strategy. He already had too much riding on the companies success to risk adding to it. Although the company did well and he would have increased his wealth, he is happy with the choices he made because he was maximizing his potential net worth, while assuming as little risk as possible. Although her company is a blue-chip business and low-risk company. Kristi will need to ask herself how much risk she wants to be tied to it. Brian says ESPPs are great, but you'll want to make sure you are taking care of everything else first, such as an emergency fund, 401K, debt, and IRAs. Although her company is the only individual stock she owns, she is somewhat interested in owning other individual stocks. She can add that in over the top of the bulk of investments in index funds, while remaining diversified, and still feel good about her long-term compounding chances. Kristi would like to know how to evaluate an individual company's stock for investing in the short-term and long-term. She knows the P/E ratio is something to look at and her company's P/E ratio is 18.66. Brian says a P/E ratio is a tool you can use to evaluate stocks, but it's important to know when it is appropriate to use and when it is not. First, Brian says he never invests in a company short-term, or less than three years because it's impossible to know what a stock is going to do in the short-term. Long-term stock prices are driven by earnings power and earnings growth which is the company's profitability. In P/E ratio, the P stands for price or the price of one share. E stands for earnings, the net income or profits per share. The difference between those two numbers is the price investors are willing to pay for $1 profit in the company. With Kristi's company, for every $1 in earnings power generated, the market is willing to pay 18.66 times that number. Brian says it's helpful to flip that number around and think about it as an interest rate. Take 100 and divide it by 18.66, to get 5.35% on the company's earnings power. But is that good or bad? Context is key. When looking at over the last decade, Kristi's very stable company's P/E ratio varied from 30 to 12. Since the current P/E ratio of 18.66 is on the lower half of that range, Brian says the stock is more likely to be in bargain territory than it is to be overly expensive. Next, Brian pulls up the company's net income over the last decade, which has been mostly stable with a few spikes and other periods when it has fallen. This needs to be compared to the P/E ratio as the highs and lows may be artificial. Another metric Brain says to look at is the price-to-sales ratio, which is the price of the business divided by the sales, or revenue per share. This ratio eliminates the one-time swings and tends to be much more stable. Over the last decade, her company's ratio varied from 5 to 2 and is currently at 3, again leading Brian to believe the stock is in buy territory. If you have an ESPP, you want to look at the minimum holding period, know when you are outside the short-term capital gains, and the other details of your company plans. Consider rolling it over to an investment outside your company once the plan requirements have been met and it meets long-term capital gains requirements. Long-term capital gains have preferential tax rates. The line of delineation between short and long is one year. Investment gains are not subject to tax until they are realized. If selling an investment held less than a year, the gain will be taxed as if it was ordinary income, or whatever your top marginal tax rate is, which for most is 20-24%. Gains from investments held longer than one year are as taxed as long-term gains, which for most people is 15%. For those who have access to an ESPP, it is part of your compensation but will require a bit of research because there is some risk in tying up so much of your wealth into one company. Resources Mentioned In Today's Conversation ChooseFI Episode 224 Introducing Our Households of FI!! Part 2 ChooseFI Episode 259 Kristi and Big ERN YCharts Stockrow Is an Employee Stock Purchase Plan Worth the Risk? ChooseFI Episode 024R The Friday Roundup | How to Hack Your ESPP ChooseFI Episode 200 Stock Fundamentals With Brian Feroldi Get started on your own path to financial independence and take the 5-day challenge! If You Want To Support ChooseFI: Earn $1,000 in cashback with ChooseFI's 3-card credit card strategy. Share FI by sending a friend ChooseFI: Your Blueprint to Financial Independence.

The goal of diversification is to ensure access to a lot of upside without being exposed to an unacceptable downside. But are you as diversified as you think you are? Long-time community member, Frank Vasquez says there are three roles bonds have in your portfolio, income, stability, and diversification. The Holy Grail Principle focuses on what the concept of diversification really means. It doesn't mean different, it means uncorrelated. Investors can use online websites to calculate the correlation of two assets that results in a number ranging from 1 to -1. The closer the number is to 1, the more highly correlated they are. A number close to 0 indicates the assets are uncorrelated and move randomly with respect to each other. A negative result means the assets are negatively correlated and typically go in opposite directions. Why would an investor want assets that are negatively correlated if that means while one is doing well, the other is not? In the accumulation phase when an investor is trying to build wealth, they probably would want negatively correlated assets. Upon reaching FI, they may be helpful when attempting to ensure the highest safe withdrawal rate. Safe withdrawal rates for each portfolio will vary slightly and range from 3-5.5%. There are websites online to help calculate the rate for different portfolios. Frank has three adult children who he advises to max out their retirement accounts in basic index funds. The next bucket to fill is an emergency fund, followed by a taxable brokerage fund to used toward a down payment on a house. His son's brokerage account used a risk parity-style portfolio, which is good for intermediate-term savings. When first starting out, money invested is a big pile of future cash. You invest a little each year and should get it into risky, growth-oriented, and reliable investments, which are stock index funds. Until you have $100,000 in your account, being invested in one fund is perfectly fine. It's about earning and saving at that point. After the first $100,000, earnings begin to mean a little more and you can embrace a little more complexity. In the four phases of investing for retirement, the first two are earning and saving and are the most important to get automated saving going. Phase three is investing and the fourth is managing the investments to ensure they don't blow up or go away. Long-term accumulation comes first in a portfolio, and Frank's son is extremely frugal, making the risk parity portfolio possible. But what considerations are there if you are looking to transition index funds into a risk parity portfolio? The first step is to figure out where you are going and where the goal is. Next, look at what you have and what needs to be transitioned. Start the process when you hit your FI number or about five years out from when you think you are going to need it. You don't want to be 100% equities and have the stock market crash two years before you retire. A risk parity portfolio does not stop earning money. The return is approximately between 6-8% after inflation, but the tradeoff is you are also only getting half the volatility of the stock market. You can't optimize the performance of your portfolio in the future, but you can control your expenses, modify them, and take less in one year if you need to. Treat all of your assets as one big portfolio. You don't want to incur unnecessary capital gains in your taxable accounts, so moving funds in retirement accounts is appropriate. The least movement possible is best and anything taxed as ordinary income should be put into retirement accounts. Risky parity is a style of investing that has become more accessible to everyone with no-fee trading. It is finding uncorrelated or negatively correlated assets and combining them to reduce the risk of the overall portfolio. The main driver of the portfolio is going to be stocks at 4-60%. The most diverse thing from stocks are Treasury bonds, like long-term Treasury bonds, at 20%. Gold may be an alternative. Bonds are not good income generators anymore. The go-to places for income sources are REITs and Preferred Shares. If you want to invest in something like Bitcoin, make sure you have a volatility match to it. Listener Andy asked about what percentage of a stock portfolio should be in international stocks. Frank says the issue with international funds is that they are highly correlated with US funds so they aren't very useful. When Frank is deciding on investing in something, he looks at how useful it will be in his portfolio. He looks at its correlation with the rest of his portfolio and its volatility. You don't want to put very much of something with high volatility in your portfolio. Listener Luke asked about Frank's views on factor investing and if has or plans to have small-cap value funds in his portfolio. Franks says he does have small-cap value in his portfolio because they are less correlated with the overall stock market than an international fund. Franks says you want a basic and diversified two-fund portfolio that covers the whole market would consist of large-cap growth and small-cap value funds. The correlation between a total stock market fund and an S&P 500 fund is extremely high and a kind of false diversification. Although index funds are cap-weighted and gaining more and more of the larger companies over time, they are also self-cleansing in that companies doing worse fall down or fall off. Small-cap value funds do the reverse. When a company gets too big, it gets kicked out. Holding both types captures each end of the spectrum. According to the Macro Allocation Principle, what matters most in investing are the macro allocations between stocks and bonds. According to Jack Bogle, any 60-40 stocks to bonds portfolio is going to perform 94% the same way as any other 60-40 portfolio. Listener Claudia asks what a bond tent would do to her sequence of return risk. Franks says a bond tent is an old-fashioned way of dealing with sequence of return risk, but he says it's not functionally different than buying a short-term or intermediate bond fund. Bonds should move opposite of the market, but lately, they have moved with the market. Franks says different bonds behave differently. Some do not provide much diversification. Focus on Treasury bonds for diversification. The hallmark of a very diversified portfolio is when you see different things moving in different directions at different times. Rental real estate and stocks have a low correlation, so it can be a good way to diversify, although sometimes they can move together as in 2008. In Frank's mind, diversification should mean uncorrelated, it doesn't mean having lots of stuff. Frank's podcast is focused on risk parity and he has created six sample portfolios at Fidelity that he discusses each week. While Frank likes to nerd out on this stuff, you don't need to to become a successful investor. Frank Vasquez Website: Risk Parity Radio Podcast: Risk Parity Radio Podcast Resources Mentioned In Today's Conversation ChooseFI Episode 194 The Role of Bonds in a Portfolio Portfolio Visualizer Portfolio Charts The Four Phases of Saving and Investing For Retirement ChooseFI Episode 176 Flexible Spending Rules for Early Retirees Using Gold as a Hedge Against Sequence Risk – SWR Series Part 34 The Little Book of Common Sense Investing by Jack Bogle Money for the Rest of Us Podcast Money for the Rest of Us by J. David Stein If You Want To Support ChooseFI: Earn $1,000 in cashback with ChooseFI's 3-card credit card strategy. Share FI by sending a friend ChooseFI: Your Blueprint to Financial Independence.

Debate over homeownership; home buying as an investment; analyzing the nuances and closing costs; opportunity costs and break-even point; misaligned incentives for first-time buyers; finding realistic and affordable properties; optimizing decision making; psychology and logic of buying a home

"When you are financially whole in the way I'll teach you to be, you won't have to live in fear. You'll have a plan for each area of your finances so that they are constantly working on your behalf". — Tiffany Aliche America's favorite budget expert, Tiffany Aliche joins us to discuss her new book, Get Good With Money. Financial fear can come from financial trauma and drama. When you know that the money you are making isn't quite enough for the things that you absolutely need, or you can foresee a future when your finances will not be okay, most of us carry that fear secretly and with a sense of shame. Tiffany wants her community of more than 500,000 Dreamcatchers to release that shame, focus on solutions, and create plans that actually work. According to Tiffany, wealth is more than just money in the bank. It's really a mindset, which is the building block of personal finance. People often chase an end goal without a foundation to ensure they will still be okay if something were to happen. Tiffany's teachings are foundational. The goal is to give you the foundation that you need to go on greatness, such as investing at a high level, buying the home you want, or starting a business. For many of us, fear comes from a lack of knowledge and it takes an external, traumatizing incident to awaken us. Tiffany wants to reach people before they get to that point by normalizing financial education early on. Tiffany's approach is three-pronged: knowledge, access, and community. She delivers knowledge through her blog, The Budgetnista, and podcast, Brown Ambition. For access, she showcases other financial educators, like the ChooseFI Foundation, to those who want a financial education for the children and community. And finally, she built Dreamcatchers for the third prong, community, so that people know they are not alone. The 10 components that constitute financial wholeness are budgeting, savings, debt, credit, and learning how to earn for the first tier. In the second tier, she includes investing for retirement and wealth, insurance, net worth, your professional money team, and estate planning. This foundation of financial wholeness is what you build the rest of your goals, hopes, and dreams on. While writing her book, Tiffany decided to Google, Jake the Thief, a man from her past who had caused her financial trauma. She discovered that he had escalated his thieving behavior from poor 20-something-year-old women to defrauding the United States Government and he is currently sitting in federal prison. Jake's story is a cautionary tale. Sometimes the wrong thing or risky behavior works for a short period of time. But it's important to learn how to manage your money from the ground up versus from the top down because you can lose it all if you don't know how you really built what you built. Tiffany ended up with credit card and student loan debt and a mortgage she could no longer pay for, In total, it was around $300,000 in debt. That experience taught her that her father was right, slow and steady wins the race. She now takes her time and is very methodical with her decisions. Even it means taking a loss, she'll take a short-term loss if it means a long-term win. Once she built her foundation, she was able to build wealth much more quickly. She wants others to have the opportunity to build the life that they want. After reading her book and matching one of her workshops, Jonathan says he likes how good Tiffany is at organizational structure and categorizing things. With budgeting, Tiffany assigns control categories to expenses. First, she lists all of the expenses and then assigns them to categories. The first category is B, or bills, like a mortage. Some of those bills are usage bills that fluctuate depending on usage, such as water or electricity. She puts a U in front of those Bs. Everything else is a C, meaning cash or choice expenses, because these are expenses you have choices over, like haircuts or gas for the car. Categorizing in this way can help determine if you have a spending-too-much issue, or a not-earning-enough issue, when there isn't enough at the end of the month. If most of your money is going to Cs, you are spending too much because of your choices. If most is going to Bs and UBs, you aren't making enough to take care of your financial responsibilities. When things are temporarily tight, you know you can look at your Cs and make some cuts there first. If it's not enough, move to the second level, UBs. If that's still not enough, move up to the Bs. Tiffany's father taught her in an age-appropriate way about the financial consequences of her actions and says it's a lesson we could learn as adults. A budget isn't deprivation, Tiffany says it's your "say yes plan". Budgets are like your mom. She wants to say yes, but there is an "if" button. You can do the things you want, but only if you've lined yourself up in a way that makes it sustainable and safe. If you can master your budget and look at it differently, it is there to accommodate your goals, hopes, and dreams. But it might require you to give something up. Jonathan thinks Tiffany's book speaks well to those who are broke. When writing it at the height of the pandemic when people were losing jobs and scared, she didn't want to leave behind those starting in negative territory. She wanted to give them permission to focus just on their sleep, health, and safety. It's okay to focus on expenses related to health and safety and tell everyone else that you don't have it right now. You will get to them when you get to a safer place financially. 30% Whole is the chapter Jonathan thinks is worth the book's price all on its own and you really need to know these tips if you are in debt, such as dealing with debt collectors or mortgage lenders during foreclosure. You can insist on a debt verification letter to verify that they have the right to inquire about it. Debt freedom is a goal, but it's not the goal. You can be debt-free and still broke. Financial freedom is an incomplete picture. There may still be holes in areas like insurance and estate planning. The FIRE movement is great, but Tiffany believes there is a holistic view that is missing. Not matter how high or low your income, financial wholeness is available and accessible to everyone. Tiffany Aliche Website: The Budgetnista Podcast: Brown Ambition Resources Mentioned In Today's Conversation ChooseFI Episode 240 From Financial Imperfection to America's Favorite Budget Expert | Tiffany Aliche Get a copy of Tiffany Aliche's book at getgoodwithmoney.com. If You Want To Support ChooseFI: Earn $1,000 in cashback with ChooseFI's 3-card credit card strategy. Share FI by sending a friend ChooseFI: Your Blueprint to Financial Independence.

This podcast explores college hacking, including optimizing financial aid, prioritizing college decisions, and exploring non-college paths for job opportunities. The hosts reflect on their journey, interact with the audience, and discuss the impact of student loan debt. They also provide resources for online courses, military benefits, and alternative paths to achieving a high income without a college degree.

Rob Phelan, creator of The Simple StartUp workbook and live coaching series, talks about teaching kids aged 10-18 how to develop their own business ideas. They discuss concepts like affiliate marketing, personal finance skills, problem-solving, and return on investment. Rob emphasizes that the key to starting a business is to solve a problem for someone else. The episode also covers the value of building super fans, changes to the Simple Startup course, a finger puppet business, entrepreneurial summer camps, and how teaching kids entrepreneurship can future-proof their lives.

After four weeks of hosting the live weekly show via Stereo, Brad and Jonathan continue to refine the format and come up with ideas for improving the experience. Jonathan needs some specialized dental work performed and the dentist he found is out-of-network. Insurance isn't going to cover much in this situation, but thankfully, it doesn't put him in financial straits. As they reminisce about being children of the 80s, Brad and Jonathan come to the conclusion that time moves on and the rulebook changes. If you are stuck in a world that doesn't exist, you aren't going to be successful. Be aware that things change and be open-minded. Google is coming out with its own certificate programs in project management, data analytics, and user experience design through Coursera what will cost most around $250. Google is partnering with 130 other companies to partner with them to hire the graduates of these programs. In past decades, a college degree may have mattered, but in 2020, employers are looking for what can you do or what have you done, not necessarily the degree. Listener Colin called in to say that he started a side hustle last year teaching people computer programming and asked about how to go about finding new clients. Jonathan says that as a business owner, Colin has a product he has created and needs to figure out how to deliver that product, ensure a great experience, find new customers, and finally scale and grow the business. For Colin's business, is there an awareness problem or is there a problem converting awareness into sales? Brad says something that has worked for him is making connections within his niche and be authentic. Jonathan suggests establishing yourself as a subject matter expert using LinkedIn and Quora and a blog or podcast to begin attracting people interested in the subject. Another thing Colin should do is demonstrate his course has value, get testimonials, and constantly test and iterate. Marjorie called in because she knows how much Jonathan loves the Paprika app, but recommends a similar app called Whisk. It can download recipes from the internet, but you can also take pictures of recipes to upload to the app. Plus, it organizes recipes really well, has a weekly meal planner, and can create a shopping list. The next caller said she loved the coaching call that Jonathan did with Corrine and would love to hear more of those kinds of episodes. Jonathan worked with Households of FI member, Corrine to map out her FI number. Jonathan recommends watching the video for that episode because he shared a lot of screenshots while working with Corrine. Similar to the recipe app Whisk, Brad said that he could have saved money on his recent CT scan using MDSave. Instead of being charged $2,093 for his scan, a provider found through MDSave would have cost him just $289. He was eventually able to negotiate the bill down to around $1,300, but that is still much higher than he needed to pay. The next caller from LA is a side hustle addict. He has been self-employed his whole life and realizes that his nest egg is very small. He wants to know where he should focus his investments for retirement. The caller has a choice between a SEP IRA, a Simple IRA, and a solo 401K. There may be some advantages to using one over the other depending on the size of the business. Brad has set up a SEP IRA and thinks that a solo 401K would have allowed him to defer more money by contributing as the employee and employer. A SEP IRA only allows for employer contributions. If he still meets the income thresholds, the option for a Roth IRA may also be available. There is little downside to contributing to a Roth IRS since contributions can be withdrawn tax and penalty-free. The next caller shared what they would do if looking for a career move. For their technology and financial services company, they would focus on people and find out everything they could about them so that they could engage in relevant small talk. This advice follows nicely with the points Chris Hutchins made in episode 121R. A weak point for a lot of is how can you build a system around building authentic relationships over time? This was something discussed with Jordan Harbinger in episode 233. The next caller wants to know how to account for a mortgage that you expect to pay off during retirement when calculating your FI number. Jonathan plans to pay his mortgage off before beginning to drawdown his investments, however, he calculates his FI number based on what his life costs with a mortgage. It gives him a bit of a fudge factor. Your FI number is calculated by taking your annual expenses and multiplying it by 25. If you plan on paying your mortgage off before retiring, remove the payment from your annual expenses. While principal and interest can be eliminated, taxes and insurance will not be and should be included in your annual expenses. A multi-phased approach will need to be employed to calculate your FI number if planning on paying off the mortgage during retirement. Listener Phil called and left a voicemail asking about tax tips for those with side hustle income and how to balance work-life, side work, and life in general. Jonathan thinks turning a hobby into a business is a great way to explore something within the confines of a business entity. Brad's tax tip is good record keeping and keeping things separate from your personal accounts. Jonathan also likes the thought of putting advertising expenses on a business card that earns travel rewards, like the Chase Ink Business Preferred, since advertising is a legitimate deductible business expense. A work-life balance can be tough. Jonathan says the biggest misconception is that you're always going to be balanced all of the time but there will be sprints and tilts. It's how it averages out over time. Experiment and test a bunch of different things, but don't put a massive amount of time into something with no ROI or thought to the balance and other areas of our life. If you aren't going to be in balance and there are other people relying on you, have a conversation about it. Communication will always buy you more room. Map out the cadence to your life and realize where you have control of your time. You might have a boss that needs to sign off on it, but if you work for yourself, you don't need to ask for permission to make time. Resources Mentioned In Today's Conversation ChooseFI Episode 121R How to Get Any Job ChooseFI Episode 304 Mapping Out Your FI Number | Households of FI with Corrine MDSave ChooseFI Episode 274 Tax Planning 2020 ChooseFI Episode 289 The Roth 401K ChooseFI Episode 233 Networking with Jordan Harbinger Join us for the next live show at ChooseFI.com/live. ChooseFI.com/cards ChooseFI Episode 168 Make Time Learn why the Chase Sapphire Preferred is one of our favorite cards. If You Want To Support ChooseFI: Earn $1,000 in cashback with ChooseFI's 3-card credit card strategy. Share FI by sending a friend ChooseFI: Your Blueprint to Financial Independence.

Diania Merriam is the Chief Economeist behind the EconoMe conference, a two-day event at the University of Cincinnati whose roots are in the FIRE movement. In 2019, Diania was preparing for the launch of EconoMe in the spring of 2020. She could not have anticipated the risk of a global pandemic impacting her conference, but it was successfully held on March 7, 2020, just before the event location's shut down. The 2020 event hosted 250 attendees and nine expert speakers. After putting 20 months of work into the conference, Diania was gratified to hear that 90% of participants loved the event and would recommend it to a friend. Getting together as a community is something that has been missed in the financial independence community over the last year. While some may label the movement as a cult, that is s misconception. Like many others in the financial independence community, Diania felt the need to share content to make it accessible and help those receptive to the message get their financial houses in order, much like Mr. Money Mustache did for her. She finds that many people have preconceived notions and assumptions, thinking that it won't work for their personal situations, but Diania believes putting more content out there will help others it's a mindset and there are no hard and fast rules. Although some may believe you have to be a white 3o-something male with a tech career to be in the FIRE movement, Brad points out that is far from the reality ChooseFI sees in its Facebook and local groups. Brad says that 90% of the responses to his weekly email are from women. Financial literacy is for everyone and FIRE is merely an aggressive and enthusiastic brand of it. Though there seems to be an assumption that those in the FIRE movement earn high incomes while eating rice and beans, Diania says in truth, it is rather agnostic when it comes to income. It might be easier for those with high incomes, but those with lower incomes can also improve their finances. The way to improve your finances is to increase income, decrease spending, and invest the gap. What is most important is the gap. The loudest voices in the space tend to talk about frugality because it's the easiest thing you can do when first starting out, however, ideally, you should be doing both. Jonathan gets angry at the assumption that there's little to nothing you can do to increase your income. You aren't stuck at your current salary level. A lot of personal finance content revolves around sacrifice and struggle, but there is a sense of optimism in the FIRE community. You have control over reducing your expenses and increasing your income. Coming across FIRE content helped Diania realize how much privilege she had and enabled her to be honest about how wasteful her spending really was. For Brad, the heart of financial independence is optimism and an internal locus of control. You can affect change on your life with tiny actions that compound, resulting in success. For awhile, Diania wanted to be the female Mr. Money Mustache. It took her a while to realize she needed to be herself and figure out her own flavor of FI that was based on her own goals. Diania's original plan looked a lot like other bloggers, where she would reach a net worth of 25 times her annual expenses and then retire at 40-years-old. However, life presented other options and she began to ask what she wanted out of life and what she wanted to create. Now she feels like slowing down instead of just racing to meet her FI number. Jonathan likes to think about life in terms of five and ten-year timelines. Ten years ago, did you have any idea you'd be where you are today? Brad notes that just being on the path to FI gives you the space to explore what you want your life to look like and what you want to focus on. The nuts and bolts of money is pretty easy to figure out. Figuring out how you want to spend the next 60 years of life is harder. Like Diania, because Jonathan was on the path to FI, he was to explore interest-led learning, turn it into an income stream, and eventually leave his career as a pharmacist. One of the lessons Diania has learned is that your money is only as valuable as your clarity on how you are going to use it. When her work situation started to degrade and become toxic, she realized she was already at Coast FI and had enough FU money where she could take some educated risks and look at self-employment. Being at Cost FI meant that Diania had already saved up enough money that would grow enough to support her in retirement. In the meantime, she only needed to cover her annual expenses without adding to retirement. Her life right now looks a lot like how she would want it to look if she was at FI and retired. Retirement has a branding problem. Another misconception about FI is that if you are retired, you aren't working. Regardless of your age, if you are retired, you shouldn't be sitting around doing nothing. EconoMe was born out of Diania asking herself what she would do if she no longer had to work for money. She wanted to create a party about money. Why wait for retirement? Is there a way to change your life around and do it now? Greed is another misconception associated with the FI community, but Diania believes FI puts you in a position to be really generous. She has experienced the generosity of those in the community who have been generous with their time to help her with her conference dream. When you have figured out money for yourself, there's nothing left to do but help other people. For example, 20% of the EconoMe conference attendees were over 50 or had already achieved FI, but there were there to share knowledge and cheer others on. Diania thinks the benefit of having money is to be able to share it in some capacity through what you create and the gifts that you give. Brad agrees with the generosity of the community. FI allows you to rethink how you relate to people and gives you an abundance mindset. A quote Dinia loves is, "If you look at your inner circle and you aren't inspired, you don't have an inner circle. You have a cage". She is incredibly inspired by all the people she has met in the community. The three most important resources that have a huge effect on your life are time, money, and energy. The people you surround yourself with have a huge effect on your energy. Is FI a fad that everyone will move on from in exchange for the next big thing? Diania doesn't think so. Like time and energy, money is a resource and we'll always be fascinated in optimizing our resources. FIRE is an identification with something to build habits and meet goals. There has been an identity and support system created around it. Rather than thinking of FI as a fad, Brad thinks we are normalizing the conversation and there are more and more people to talk to about it without feeling like a weirdo. The EconoMe conference will be held this year on November 13-14 at the University of Cincinnati. Some of the speakers and activities have already been announced and can be found on the website. There will also be more breakout sessions to facilitate learning from each other. Tickets are on sale now. However, if large groups are not allowed to gather by November, EconoMe will not pivot to virtual. Instead, they have backup dates of March 19-20, 2022. The decision and notification will be made by September 1, 2021. Earlybird tickets are available until April 10th. 200 tickets are available at $149, and then the price jumps to $199. Diania Merriam Website: EconoMe Conference Podcast: Optimal Finance Daily Resources Mentioned In Today's Conversation ChooseFI Episode 150 Accountability | Diania Merriam EconoMe Conference Get started on your own path to financial independence at ChooseFI.com/start. If You Want To Support ChooseFI: Earn $1,000 in cashback with ChooseFI's 3-card credit card strategy. Share FI by sending a friend ChooseFI: Your Blueprint to Financial Independence.