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Frugal Tip
Set up your IRA or 401K deductions on an automated schedule when you get paid, so you don’t have to think about it and the money is gone from your paycheck before you can spend it elsewhere.
It’s Our Money Giveaway!
Remember how we said we’re giving away $100?
*Drumroll*
Travis Taylor, you’re our winner! We’ll contact you via email to transfer your winnings. Thanks for listening!
Financial Peace University: Hope
A lot of the focus in Financial Peace University is about hope. It’s about keeping hope and looking ahead with the “this too shall pass” mentality. The last video in the FPU series talks about hope and how your life will be different when you achieve financial independence.
Financial independence isn’t about living in a mansion and driving a Tesla– it’s about living without debt and being happy with your life. It’s important to think about what life could be like to find hope to keep moving forward during difficult times.
How People Get in Debt
There’s a common misconception that “poor” people are the ones who get in debt. Sean can attest to the opposite. In his past, he had a lot of material goods: a big home, a fancy pool, etc. Upon discovering the financial independence community, he realized that his lifestyle would eventually be his downfall. This resulted in some major course correction that led here.
In Kevin’s past, he and his wife both had student loans and car payments, but not a massive amount of debt. They started looking at the bills they had to pay and the interest attached to those loans and started to figure out how they could pay off those debts to save on interest. This became a goal before starting a family. It took 13 months to completely eliminate the debt.
For Kevin, Dave Ramsey was the gateway to financial independence. Both he and his wife got involved in Financial Peace University and excited about the impacts it could have on their future family.
How to Create a Budget
Looking at a budget on Mint.com was the first step for Sean to get a better understanding of where his money was going. The results were startling, as they usually are for people who are just getting started. For Sean, it highlighted the psychological detachment that people experience when swiping a credit card.
Kevin started his first budget on Excel, which captured the various bills throughout the month. His goal was to do zero balance budgets– finding a place for every dollar. He calculated their tithe, rent, electric, telephone, gas, student loans, and car payments. Kevin realized that there was no money left for fun things, yet somehow they were spending it on fun activities anyway.
The best way to start creating a budget is to understand where your money is going every month and make decisions from there.
Debt Calculators and FIRE Age Calculators
Sean looked at various calculators online to find out when he could retire, then ended up creating the FIRE Age Calculator to figure out when he could retire. Seeing that he could retire before forty if he made the right decisions was his glimmer of hope for financial independence.
What doesn’t instill hope is debt calculators. Debt calculators often show an absolute worst case scenario. They assume that you’ll always pay the bare minimum, have the same income, have the same expenses, etc. This can be detrimental for someone who wants to get out of debt as they might see these numbers and give up before they start.
Sit down and plan up to four months ahead, directing your money where it needs to go. Focus on the one with the highest interest, paying the minimum on the others, and go from there. Keep making incremental steps forward, starting a side hustle and trimming the fat.
Career Change for Financial Independence
Fear holds a lot of people back from achieving financial independence. Starting a business on the side or making the decision to find a new job can be a risk, but you have to weigh the risks with rewards.
You are responsible for your life. Rather than waiting for an opportunity, create one.
Financial Independence & Philanthropy
The best part of getting out of debt is that it gives you more opportunity to be philanthropic and pay it forward. However, you shouldn’t let debt stop you from giving. Every little bit counts; scale as needed.
What the Future Holds
Both Kevin and Sean have made the shift from having financially related goals to living a financially independent lifestyle. As they learn and grow they’ll evolve accordingly, embracing life outside the 9-5 and spending time with family.
Where Our Money Went
Kevin’s money went toward maxing out his IRA for the year, so let’s have a round of applause! This is great, as he started with the goal of setting aside 15% per paycheck this year and was unable to commit to this earlier in the year. Also, IRA maximum limits are going up as are 401Ks!
Sean is getting ready to head on vacation in Virginia Beach for the holidays before moving to Gulf Shores, Alabama. This is all a part of Sean’s FIRE plan, which means that his wife gets to retire now! She’ll be spending the next year homeschooling their two children, which will be a very rewarding form of unpaid work. This means that Sean needs to move around some investments.
Show Links & Related Episodes
Music: https://www.bensound.com/royalty-free-music
Disclaimer: Kevin and Sean are not professional financial advisors. Do not take any advice they give without first speaking with a professional and performing your own due diligence.