Financial Independence

Does the 4% Rule Work for Early Retirement?

The 4% Rule is a very common topic when it comes to Early Retirement. I would even say that most in the Financial Independence/Retire Early community use it as the basis of determining their “FI Number”. For those not familiar with the term FI Number, this is the number that an individual would need to save to support their lifestyle in retirement. Usually this number is calculated by determining their annual monetary needs and then multiplying that number by 25 (or dividing by 4%). 4% Rule History The 4% Rule is based on a study by financial advisor William Bengen in 1994. The study reviewed market (stocks and bonds) returns over a 50 year period from 1926 to 1976. The goal of the study was…
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How to Become a Millionaire

This post will walk through the ridiculously simple math behind becoming a millionaire. Let me start off by saying that a million dollars isn’t what it used to be (sorry no yachts or private jets). However, having a million dollars is the bank still puts you in elite status when it comes to retirement savings. Savings Stats The median retirement age American (65-74), has $126,000 saved for retirement. The average retirement age American is doing better, but they still only have $358,000 saved. So having a million dollars in the bank would give you 8x the amount the median has saved and almost 3x the amount the average has saved. From a cash flow standpoint, a million dollars can generate $40,000 per year using the…
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Working Parent Guilt

Over the last few years being a parent has brought me more joy than anything else in my life. It’s been such a wonderful experience that has caused me to look at the world in different ways. It has also been a catalyst for many areas of personal growth the most obvious of which is Patience. However, I have experienced one negative emotion about being a parent that most people don’t warn you about. That feeling is Working Parent Guilt. WHY GUILT The feeling of guilt can crop up in many ways as a parent. These situations almost always boil down to one of two themes: Lack of Time or Lack of Money. For me the guilt has been more centered on the Lack of…
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Time Now or Time Later

Recently I have been struggling with what I call the “Time Now or Time Later” paradox. I find that the Time Now or Time Later paradox is applicable to most people who are using a W2 job to pursue Financial Independence. This especially holds true for those that work in Manufacturing like I do. However, I have also heard similar experiences from friends in Sales, Healthcare and Finance roles as well. TIME NOW The Time Now portion of the paradox is based on the fact that higher paying/higher level jobs typically require more work hours per week. This is true both as you put in extra effort in the beginning to excel and gain promotions, and when you reach the higher level jobs with more…
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ROTH IRAs: The Best Emergency Fund

One pillar of the Financial Independence mindset is the Emergency Fund. I agree with the principal of having an Emergency Fund, but I have a special way of creating an Emergency Fund within my financial plan. I came up with my process for an Emergency Fund by trying to maintain the benefits while removing the drawbacks of a typical Emergency Fund. Before we get into my Emergency Fund method let’s review the basics of an Emergency Fund. DEFINITION An Emergency Fund is an account for funds set aside in case of the event of an unexpected significant financial need, such as the loss of a job, a chronic and/or debilitating illness or a major repair to your home or vehicle. The purpose of the fund…
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Phases of Reducing Spending

I believe that there are 3 Phases to the journey of reducing spending on lifestyle costs: Waste Elimination, Optimization and Misery. Today we will walk through each of these Phases and discuss why I personally am not a big fan of a long term (> 5 year) focus on spending. PHASE 1: WASTE ELIMINATION The first phase in spending reduction is Waste Elimination. This is by far the easiest and least difficult phase of reducing spending. This is why people who have recently discovered the concepts of Financial Independence start with this phase. During this step you identify and remove things in your life that you spend money on and don’t use (gym membership, magazine subscription, etc.). Most people who have not considered their spending…
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Use a Savings Stack to Hack Your Current Spending

Today I will discuss how to use a Savings Stack.  As I have discussed in Save More of Make More I typically only focus on saving money on Cars and Housing and leave the rest for others.  However, I have stumbled upon ways to hack your existing spending in other categories that are too good not to share. The method that I employ is to couple credit card savings with other savings programs to multiply the savings. This can be done with most retailers, but my favorite is to utilize this with my normal grocery chain. Since I cook most of my meals at home (another way to save big money), I buy groceries every week. This means there is always an opportunity to employ this strategy….
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Financial Independence Debate: Save More or Make More

Today I would like to discuss my personal opinion/strategy on whether focusing on saving money and optimizing lifestyle costs or making more money through active and/or passive income is the better route to achieving Financial Independence. To anyone who is active in the FI community the natural answer is that both sides of the ledger are important. It is impossible to achieve a high savings rate which is the nucleus of any early retirement strategy if you only focus on saving or earning with disregard for the other. While I concede that this widely held belief is true, I do believe that from an effort (time, energy, etc.) standpoint there are optimal and sub optimal approaches. The remainder of this post will discuss my tactics…
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Saving on Kid’s College Costs by Retiring Early

As a parent of 2 small children I consider helping to cover their college expenses as one of the largest barriers to being able to retire early and achieve financial independence. I started my career saddled with roughly $70,000 of student loan debt so I fully understand the stress that being in that position creates. I also appreciate that being responsible for your own education and the costs associated with the choices you make on what school to attend, can be a good springboard into being a responsible and accountable adult. Based on both of these points, I’ve decided to strive for a compromise which is to help minimize the college cost liability for my children and then make them accountable for managing these reduced…
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