Emergency Fund

Rags to riches

Write Your Rags to Riches Story Now!

Money Maroon

We have all heard a rags to riches story. It is now time to have your own story. While we all day dream of winning the lottery, or inheriting riches, most rags to riches stories are not a result of a quick transfer of wealth. The fact is, most rags to riches stories are a result of making difficult, wise and consistent financial decisions over time. 

The Money Game

No matter how much or how little money you may have today, to build sustained wealth, you must spend less than you earn. This is the only way that you will save. Saving is important because it allows you to build up an emergency fund, it allows you to become prepared for the unpredictable. An emergency fund makes financial emergencies routine life events.

Further, by saving, you are able to have money/funds/assets available such that you are able to take advantage of financial opportunities. 

For example, if the stock market falls, do you have enough money in reservers to ride out the downturn? Are you able to buy stocks at the bottom of the market? In such a situation (financial down turn), many do not have enough in reserves to ride out a market downturn and therefore sell at the bottom of the market and realize financial losses.

If home prices fall, are you able to take advantage by purchasing real estate? When interest rates are low, are you well positioned to borrow at the lower interest rates?

Saving, and having money/funds/assets to take advantage of financial opportunities is necessary to write your own rags to riches story.

Invest In Yourself And Journey From Rags To Riches

With your savings, not only are you prepared to take advantage of financial opportunities, you are also able to invest. You may invest in any vehicle that brings value, for example real estate, the stock market, and yourself. Saving alone will not allow you to complete your rags to riches story, you will need to invest such that your money/assets make money on their own. You will need to invest such that your money works for you instead of you working for money.

On a basic level, any investment that you make after doing your due diligence is an investment in yourself. However, making an active and purposeful decision to invest in your education is a must. Your investment may be in education to increase your knowledge in your field of study/profession or in financial literacy. 

As your money/assets grow, so must your financial knowledge.  If not, you risk regressing and losing what you have worked for. Do not forget, there are equally many riches to rags stories as there are rags to riches stories. You must purposefully manage your money/assets and understand how money works to maintain and grow your wealth. Your financial literacy is important.

The Element Of Luck In Your Rags To Riches Story

Luck is essential but hardly recognized
Luck is essential, but hardly recognized

Luck is essential, but one of the least recognized component of a rags to riches story. Let’s face it, many hate to admit that luck played a role in getting from rags to riches. Most want to attribute all their riches to their own hard work and dedication. This is false. Many toil their entire lives and remain in poverty. While hard work plays a role, luck and the people around you also contribute to your success.

Luck is a matter of being in the right place at the right time. Luck is the convergence of resources and opportunity. What you will notice as a constant theme throughout life is that the harder and smarter you work, the luckier you will be. The harder and smarter you work, the more opportunities will be open to you; the luckier you will be; the more you will find that you are in the right place at the most opportune time. 

Luck requires preparation. You must be ready when the opportunity presents itself, otherwise, your luck will turn into a life changing missed opportunity.

Write your own rags to riches story by playing the money game, investing in yourself and being ready to act when an opportunity presents itself.

Conclusion

We have all heard a rags to riches story. It is now time to have your own story. While we all day dream about winning the lottery, or inheriting riches, most rags to riches stories are not a result of a quick transfer of wealth. The fact is, most rags to riches stories are a result of making difficult, wise and consistent financial decisions over time. Journey to financial independence and write your own rags to riches story.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Video Summary

Write your rags to riches story!
Money Beyond

Saving The Next $50,000, You Can Do It Now

Money Maroon

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating funds over time. Once you have accumulated your first $50,000, it is time to think about saving the next $50,000 and beyond.  The biggest step on your journey to financial independence is the step you take today. Take the next step.

The Plan – Saving The Next $50,000

Just like enacting any plan that requires a change in habits or direct action, implementation of your plan to financial independence can be difficult. If you choose to save by cutting back on eating out, this will no doubt affect your social life. If you decide to work a side hustle, this will take time from other activities. To journey to financial independence, you will make sacrifices. 

However, by the time you begin saving the next $50,000, you have already made changes and can now use the momentum that you have build up saving your first $50,000 and further optimize your strategy. Because of the habits formed saving your first $50,000, saving the next $50,000 will be easier to achieve.

Your Emergency Fund

By the time you are on the path to saving the next $50,000, based on your lifestyle, your emergency fund may now be fully funded or very close to being fully funded. This is a huge step and should provide comfort for you and your family. Saving 3 months, 6 months, or one year of expenses in your emergency fund is a huge step and you should feel very proud of yourself for achieving this milestone. Further, you should be motivated by the fact that you can do it. You can do this. The steps taken to financial independence is paying off.

You got this
You Got This!

Once you have achieved a fully funded emergency fund, do not stop saving. Continue the same habits. Do your homework, research and optimize your plan. Achieving financial independence takes time and consistency.

Once you have fund your emergency fund, instead of putting money into an emergency fund, you are now able to contribute that money to another area of your plan. Will you be contributing more to retirement, paying down debt if you still have debt, or invest?

Contributing To Retirement

Once you begin to save, you should attend to your retirement fund, especially if your employer is providing a match. No matter how little you may contribute, contribute to your retirement. 

Now that you are saving the next $50,000, begin to increase your retirement contributions, especially if you have already paid down debt. In the year 2020, your contribution limits for a 401k is $19,500 (catch-up contribution limit for employees aged 50 and over is $6,500). The contribution limits for an IRA is $6,000 ($7,000 if you’re age 50 or older). As such, you are able to put away $25,500 ($33,000 if you are aged 50 or older).

On the path to financial independence, by consistently contributing to tax advantaged retirement accounts, it is possible to join the 401k millionaire club.

Paying Down Debt

Once you begin to save, you will  also need to attend to debts. You will definitely want to keep your accounts current by paying at least the minimum. Once your emergency fund is fully funded, it will be time to pay more than your minimum. 

Remember, the best way to obtain a 16-18% return (the average interest charge on a credit card), is to pay off your credit card debt.

It is advisable to pay down debts having the highest interest rate. This will lower your interest payments as you pay down the debt. Another approach is to pay down the smallest debt first, such that you have a snow ball effect of paying the least balance to highest balance. The method used here is up to you. Which method will motivate you to pay down your debts faster?

Paying down debt in the early stages of your journey to financial independence typically provides the greatest early return. Paying down debt yields exponential benefits as it frees up funds for contributing to retirement and investment accounts such that you are able to take advantage of the power of compounding.

Ride The Wave – Saving The Next $50,000

As you are able to fund your emergency fund, pay off your debts, and contribute to your retirement, you will begin to have more funds available to further your race to financial independence. The funds that went to your emergency fund can be used to pay down debt, contribute to retirement fund, and/or invest.

Do not feel the need to “reward your self.” You do not want to fall into the trap of lifestyle creep/lifestyle inflation. You do not want to raise your standard to living as you earn more/have more disposable income. There are lots of folks who save the same amount when making $100,000 as they did when they were making $50,00. If you follow this path, this will be a detriment to your ultimate goal of financial independence. 

As your income/disposable income increases, the amount you save/invest should be increase as well. Live below your means, and journey to financial independence.

Conclusion

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating funds over time. Once you have accumulated your first $50,000, it is time to think about saving the next $50,000 and beyond.  The biggest step on your journey to financial independence is the step you take today. Take the next step.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

The first $50,000

Saving The First $50,000 Now

Money Maroon

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating your first dollar milestone over time. For many, saving the first $50,000 is at the top of the list. Of all the incremental $50,000 gains that  you will achieve, saving the first $50,000 is the most difficult. Saving the first $50,000 is the most difficult because it  includes taking the biggest step on your journey to financial independence — taking the first step.

Begin Now – Saving The First $50,000

If you are like most, once you decide to begin the journey to financial independence, you likely do not yet have an emergency fund or an active retirement account. If you do have such accounts, it is likely that they are underfunded. As such, the path to accumulating your first $50,000 will be the most difficult because it represents the beginning of a new journey. 

Accumulating your first $50,000 will require a change in mindset and the implementation of new and at times, foreign concepts. To take your net worth from zero or negative to $50,000 will take time and effort. Time and effort makes any task difficult.

Below is a basic review of the difficulties that will be faced.

Your Financial Situation

Begin saving the first $50,000 by taking stock of your financial situation. What is your revenue and expenses over a period of time, for example a month? Are you saving? Can you increase revenue and decrease expenses? What is your debt load and how will you reduce it?  

Based on the answer to these questions, devise a plan to journey to financial independence. Devising an appropriate plan that gives you a high likelihood of success will take time. The more time that goes into your planning, the higher the likelihood that you will succeed on your journey. 

After designing your plan, you will need to implement the plan over the long term to achieve your goals.

The Plan – Saving The First $50,000

Just like enacting any plan that requires a change in habits or direct action, implementation of your plan to financial independence can be difficult. If you choose to save by cutting back on eating out, this will no doubt affect your social life. If you decide to work a side hustle, this will take time from other activities. To journey to financial independence, you will make sacrifices.

Think of a diet and how difficult it is to stick to such a plan over time. At times, it may take multiple attempts before breaking through and having success. To achieve success, you must start.

Your Emergency Fund

Now that you have a plan, how will you begin to bulk up your emergency fund. To obtain additional funds to support your journey to financial independence, will you be increasing your revenue, reducing your expenses or both? 

Saving more is always more difficult than it sounds. This task is never straight forward. When contributing to your emergency fund, you will also need to consider your retirement fund and also paying down debt. 

First, how will you increase income (Revenue minus expenses)? Will you increase revenues, decrease expenses or both? Will you first build your emergency fund or will you do all three (fund your emergency fund, pay down debt and contribute to retirement) together? This decision is situationally dependent, but very important to consider. For example, if you are receiving a 401k match from your employer, there is no reason to loose this free money. As such, you should contribute to your retirement account at least to the amount matched. Further, to ensure that your credit is not destroyed, it is best to keep your debts current by paying at least the minimum.

With regard to your emergency fund, how many months of expenses will you keep in your emergency fund. Will you contribute 3 months, 6 months or a year or more? This is dependent on your situation. Do you have a family or are you single? For your emergency fund, it is important to place your money where it is easily accessible, however, you must also consider where you will be able to obtain a reasonable interest rate. In effect, stay away from brick and mortar banks if possible, as online banks provide high yield saving accounts that will provide, while low, a significantly higher interest rate as compared to brick and mortar banks.

Contributing To Retirement

As noted above, once you begin to save, you should attend to your retirement fund, especially if your employer is providing a match. No matter how little you may contribute, contribute to your retirement. 

Paying Down Debt

Once you begin to save, you will  also need to attend to debts. You will definitely want to keep your accounts current by paying at least the minimum. Once your emergency fund is fully funded, it will be time to pay more than your minimum. 

It is advisable to pay down debts having the highest interest rate. This will infact lower your interest payments as you pay down the debt. Another approach is to pay down the smallest debt first, such that you have a snow ball effect of, least balance to highest balance. 

Essentially, by beginning this journey, you are increasing your net worth by incrementally reducing your debts while increasing your assets.

As you can see, because you are not only accumulating funds, but you are also paying off debt, accumulating your first $50,000 will take some time. Even if we simplify and include all savings and investments (including retirement) apart of your first $50,000, saving the first $50,000 will take some time and be the most difficult. Nonetheless, by consistency implementing your financial plan over time, you will achieve your goal.

Congratulations – Saving The First $50,000

While the journey will be long, you will achieve your goal of $50,000. But keep in mind that this is only the begining of the journey. Because of the plans, strategy and patterns that you now have in place, of the series of $50,000 that you will save, this will be the most difficult. As you move to save $100,000, you will arrive at that point a lot faster.

Consider that less of your funds will go toward debt payments and debt interest payments, you will potentially have a higher revenue (raises as you become more experience), your investments will grow over time and you will be comfortable and more knowledgeable about money generally. This all adds up to a snow ball effect with regard to your financial growth and accumulation over time.

Conclusion

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating your first dollar milestone over time. For many, saving the first $50,000 is at the top of the list. Of all the incremental $50,000 gains that  you will achieve, the first is the most difficult. Saving the first $50,000 is the most difficult because it includes taking the biggest step on your journey to financial independence — taking the first step. Take your first step today.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Covid19

Pandemic And Financial Stability

Money Maroon

If Covid-19 has brought anything to the forefront, it is the fact that life is short and can end at any moment. Further, you may spend your last weeks, days, hours and minutes alone and without family. As we grapple with our new reality during this pandemic (Covid-19), the importance of financial stability has never been clearer. The pandemic’s effect on financial stability is unimaginable.

Pandemic And Financial Stability: Job Losses

The most obvious effect of the pandemic relates to job loses. As we have shut down economies to contain the virus, close to over 50 million Americans have filed for unemployment. This is in the United States alone. 

It has been reported that about 39 percent of households earning $40,000 or less has reported job loses. Over time, it has become very clear that the poorest households are being impacted the most by the pandemic, not only with regard to job losses, but also in contracting the virus. 

The pandemic’s impact on the poorest families is predictable. Think of those who are delivering your food, working the register at your favorite stores, bags your grocery and perform occupations that cannot be accomplished via a web based service at home. These individuals tend to be at the lower end of the economic scale, most likely to have health issues and limited access to health care. Together, this leaves a situation where low-income communities are more likely to be exposed to the virus, have higher mortality rates, and suffer more economically.

To look more globally, beyond the United States, the world bank estimates that Covid-19 could push about 49 million people into extreme poverty in 2020. Therefore, for those who were in the worst financial position, the pandemic has only made it worst, a lot worst. Simply put, the pandemic’s effect on financial stability has been devastating for the most vulnerable.

Pandemic And Financial Stability: Who Stays At Home

Mom at home during pandemic
Who stays at home during the pandemic?

An additional impact of the pandemic is on the family, specifically in view of child care. Yes, the pandemic’s effect on financial stability, is an impact on the family! As we have watched many members of families spend their final moments alone, or hear repeated stories of the virus wiping out multiple members within a family, the family generally is a major topic with regard to the pandemic and financial stability. Especially as the school year approaches.

As the pandemic rages on, many families have been forced to make a difficult choice, especially if they have school age children. Who will stay home/watch the kids? Do you and/or your spouse continue to work long hours and neglect your children that is now out of school or do one or both of you cut back?  

These are some of the most pressing questions at the kitchen table for those with children in elementary school and younger because of the attention required. But even for those older than elementary school age, if your kids are home, you still need to direct your attention to them to ensure that they are doing what they should. For example, your children attending on-line classes, paying attention during their video classes and staying on track.

For single parents, matters are even worst. Do you quit your job to stay home with your children when your employer requires your physical presence? With bills to pay, including mortgage or rent, how do you decide?

If you are without kids, how are you mentally coping with working from home without human contact? Generally, how are you separating work life from home life? Are you currently experiencing burn out?

Pandemic And Financial Stability: Money To Be Made

Not everyone has been detrimentally affected by the pandemic. There are some who were prepared and are trying to take events in stride. Many expected a dip in stock prices and took advantage. Others had an emergency fund and were able to better handle a job loss and transition to another. Still, there are others who have actually profited from the pandemic. Think of Jeff Bezos, Netflix, and entrepreneurs who are pushing forward services that are needed in today’s Covid-19 economy.

Pandemic And Financial Stability: Increased Saving Rates

An interesting effect of Covid-19 is the converging circumstances and their effects on the savings rate. With the government paying certain benefits, the United States have increased its general savings rate. Basically, with economies shut down and no where to eat out or spend discretionary funds, many individuals are socking away an increase percentage of their paycheck (if they are able to keep their jobs).

Bifurcation

In view of the above, what we are seeing is a bifurcation in societal finances. In one case we have individuals who are profiting from today’s current situation  and becoming more financially secure. On the other hand, others are struggling with the basic necessities. In every downturn or national event, this is always the case.

It is incumbent on each and every one of us to prepare ourselves for unforeseen hardships that may lay ahead. While no one could have predicted Covid-19 and its effects, we know this will not be the last time we have such a financial shock. Make the sacrifices now to be able to better whether financial shocks. The pandemic’s effect on financial stability is profound, but we can protect ourselves if we plan ahead.

Pandemic and our choices
We are at crossroads

Conclusion

If Covid-19 has brought anything to the forefront, it is the fact that life is short and can end at any moment. Further, you may spend your last weeks, days, hours and minutes alone and without family. As we grapple with our new reality during this pandemic (Covid-19), the importance of financial stability has never been clearer. The pandemic’s effect on financial stability is unimaginable. However, we can protect ourselves if we plan ahead. Journey to financial independence.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Fire Movement

Fire Movement: What Is F.I.R.E?

Money Maroon

What is F.I.R.E? Financial Independence Retire Early (F.I.R.E) is a movement (Fire Movement) that is dedicated to saving and investing over time to achieve financial independence such that you can retire. The goal of the Fire Movement is financial independence, but also the ability to retire far earlier than typical. What is F.I.R.E? It is not a millennial fad. It is not only for those having a high income and no children. Financial Independence Retire Early is for everyone who wants to achieve financial independence.

Fire Movement – F.I.R.E Is Not A Millennial Fad

While F.I.R.E itself is generally new to the lexicon, the concept is not. For hundreds of years, many have saved, invested, and have experience financial freedom such they can do what they desire. Let us think about it, is this not a version of what you tell your kids, and for that matter, what your parents told you? Save, such that you can have more for a rainy day. In the case of F.I.R.E, that rainy day is early retirement.

The earliest version of the modern Financial Independence Retire Early approach is said to be borne out of the 1992 best-selling book “Your Money or Your Life” by Vicki Robin and Joe Dominguez. This concept has further evolved into what we see today. Today’s movement applies the tools currently available.  For example, many achieve financial independence via use of online savings accounts which have higher interest rates, the use of Roth IRAs and traditional IRAs, maxing out 401K or related accounts, investing in low cost index funds, paying down credit card debt, and developing a side hustle in the gig economy. 

Fire Movement – F.I.R.E Is For Everyone No Matter The Income Level

F.I.R.E is not just for those with high incomes. Don’t get me wrong, I do understand that some with high incomes may have an easier time saving and investing. However, that may not be a logical reality. As noted previously, higher incomes may at times result in high debt.

It is not atypical for high earners to live pay check to pay check. Simply put, those nice cars carry a nice car payment and a nice cost for insurance coverage. Those nice homes comes with a nice mortgage and nice costs of up keep (insurance, heating, cooling, landscaping, house keeping). Further, high incomes typically comes following longer educational requirements, longer educational requirements comes with high student loans.

The simple fact is, no matter if you are taking home a high income, low income or something in between, F.I.R.E is for you. No matter the income level, achieving financial independence will take discipline and sacrifice. While popular stories show the extreme (those having a six figure incomes who are able to save greater than 70% of their incomes over a number of years or those who live in their cars in the middle of nowhere such that they are able to save 90% of their income), there are also many others who make less than six figures, have children and were able to achieved financial independence.  No matter who you are, live below your means, save, invest and you can achieve financial independence.

Retire Early

The “Retire Early” portion of F.I.R.E is typically triggered once savings/investments reach approximately 30 times yearly expenses (F.I.R.E Number). The aim is to have savings/investments such that they are able to cover living expenses by withdrawing 3% to 4% of saving/investments yearly. The total savings/investments needed to achieve financial independence is dependent on your lifestyle and the lifestyle you want to have going forward. There are different categories of F.I.R.E.  For example, there are (1) Fat, (2) Lean , (3) Barista, and (4) Coast.

  • Fat F.I.R.E: Living and planing to retire with a traditional to above average lifestyle. Fat generally requires having a higher F.I.R.E number. With fat F.I.R.E, you are more prepared for most unforeseen financial bumps in retirement.
  • Lean F.I.R.E: Living and planning to retire with a more minimalist lifestyle. Lean F.I.R.E generally requires extreme minimalist living and extreme savings. Thus, a lower F.I.R.E number. With lean F.I.R.E, you may be more sensitive to unforeseen final bumps during retirement
  • Barista F.I.R.E: Those on the journey to financial independence who have quit their traditional employment but still do some part-time work to cover current expenses that would otherwise erode their savings/investments.
    • Withdrawing money from your savings/investments, but supplementing it with income
  • Coast F.I.R.E: Those who have enough in their savings/investments and are doing some part time/full-time work to pay for their living expenses.
    • Keeping employment to cover living expenses and not withdrawing from your savings/investments

Which of the above fits what you and your family are trying to achieve?

Critics

The general angst of F.I.R.E is Retire Early (R.E). Many who are critical of the Fire Movement focuses in on the early retirement component. What happens if you hit a financial bump following retirement? Note that many who are committed to early retirement have no intention of retiring at 35, 40 or 45 years of age to sit at home. F.I.R.E enthusiasts typically have no desire to retire and do nothing. F.I.R.E enthusiasts generally do not desire to stop contributing to society. 

To F.I.R.E enthusiasts, Retire Early generally means you can retire, if you want to. Retire Early means you can leave a terrible career and do what you want, whether that is starting your own business, volunteering, or spending more time with your family. Retire Early means doing what makes you happy, pursing your passion. As a reality check, if someone is discipline enough to save, invest and achieve early retirement, do you think that individual will sit at home and twiddle their thumbs once financial independence is achieve? The answer is a resounding no.

Further, there are countless benefits to starting the journey to financial independence or achieving financial independence. Having money in the bank lowers financial stress, allows you to take advantage of opportunities and improves confidence. The confidence to take active steps in life to better yourself and financial position. These benefits will affect all aspects of your life, including your personal relationships and your mental health. 

F.I.R.E Financial Independence and freedom
F.I.R.E means freedom

Conclusion

What is F.I.R.E? Financial Independence Retire Early (F.I.R.E) is a movement (Fire Movement) that is dedicated to saving and investing over time to achieve financial independence such that you can retire. The goal of the Fire Movement is financial independence, but also the ability to retire far earlier than typical. What is F.I.R.E? It is not a millennial fad. It is not only for those having a high income and no children. Financial Independence Retire Early is for everyone who wants to achieve financial independence.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Video Summary

What Is F.I.R.E?

Think outside the box

Financial Independence: Think Differently

Money Maroon

Money is emotional. The environment you are in can have a significant effect on how you approach and use money. One of the many actions that will continue to keep you from achieving your financial goals is the desire to show others that you have made it. It is only human nature to have this desire. However, if this innate desire is not controlled, it will create roadblocks to achieving financial independence. Think independently.

Think outside the box and achieve financial independence
Think outside the box to achieve financial independence

Be An Independent Thinker And Achieve Your Financial Goals

It is important to remember that financial independence, includes “independence”. To achieve financial independence, you must be an independent thinker. Further, you must also be able to act independently. Following the herd will not lead to financial freedom. Running with the herd will get you to the average:

  • Working until you are 65 with an underfunded retirement;
  • Keeping up with the Jones and having thousands in credit card debt;
  • Having a 30 year mortgage that is refinanced repeatedly; and 
  • Having new vehicles every four to five years financed over a five to eight year term.

Following the herd is not a path to financial freedom. It is the path to a life of being financially dependent on your employer and being at the mercy of your creditors. Being apart of the herd is a sure-fire way to working for the rest of your life.

Financial Independence Requires Time And Consistency

To achieve financial freedom, adapt an independent mindset and take the road less traveled to achieve your financial goals. Living beneath your means, saving, and investing over time is the tried and proven way of achieving financial independence. The process is simple and straight forward. But, to achieve financial independence requires sacrifice, time and consistency. Achieving financial freedom requires discipline to live within your means without being affected by the actions of those around you. 

Are You Willing To Make The Sacrifices Required To Achieve Financial Independence?

Think about things differently and achieve financial independence
Think differently

Look around, now focus on those who are truly financial independent. Very few are. If you take a close look at those around you, it will become very clear that being rich does not equate to financial freedom. Achieving financial independence requires not only earning money, but also being able to keep a high percentage of that money. Keeping a high proportion of money earned takes making sacrifices.

By thinking differently, it will be easy to understand that:

  • It is ok to have a paid off five year old car when your neighbor has a current year luxury vehicle;
  • Living in a small home and wearing the same set of clothing in an effort to payoff debts are ok; and
  • While it may be difficult, it is ok to forgo certain events/pleasures to stay within a predefined budget. 

The above are all ok because building towards having several months of living expenses in the bank to fully fund an emergency fund and having investments, that are working while you are sleeping, are part of the journey of not being beholden to anyone financially.

Get Started On Your Journey To Financial Independence

As the saying goes, getting off the ground takes 80% of the energy while maintaining orbit takes 20%. To begin on the journey to financial independence takes 80% of the effort while maintaining your set route to achieve financial independence takes 20%. Get the figurative ball rolling Now!

Conclusion

Money is emotional, and the environment you are in can have a significant effect on how you approach and use money. One of the many actions that will continue to keep you from achieving your financial goals is the desire to show others that you have made it. It is only human nature to have this desire. However, if this innate desire is not controlled, it will create roadblocks to achieving financial independence. Think independently and achieve financial independence.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Video Summary

Peppers

Growing Your Own Produce And Financial Independence Pt:2

Money Maroon

Growing your own produce is similar to growing wealth, it takes time and consistency.  Both gardening and building wealth requires that initial thought to take action, and then acting to begin the process. Saving that first dollar is akin to purchasing that first seed. Planting the seed is like depositing that dollar into a bank/an investment account. Watering the seed is similar to adding funds to your accounts. With consistent watering and sunlight over time, a delicious fruit/vegetable/herb will grow for harvesting. Like the fruit/vegetable/herb, with consistent deposits and rebalancing over time, your bank/investment account will grow for your harvesting at the time of retirement.

As I grow my fruit/vegetable/herb garden, I cannot help but to think of the parallels between growing your own produce and building wealth. 

Peppers
Return on investment

The Idea

My family had the idea to begin growing our own vegetable and herbs for some time now.  At the very least, we had the romanticized thought of waking up and picking our own tomatoes and peppers as needed. Further, have you seen the prices for produce in the supermarket lately? We also knew that by growing our own vegetables and herbs, we would  begin to use the greenhouse that we have in our backyard. We would initially grow the fruit/vegetable/herb outside and as they grow, bring them into the greenhouse. Our thought was to prevent the birds and other animals from snacking on our vegetables.

On the journey to financial independence, we all begin with an initial thought of waking up and having our F.I.R.E number in the bank. We next turn to the why. We want to retire early to spend more time with family, travel the world or to be able to spend more time doing what we believe to be important. Freedom!!

And then there is the hard part, the how.

Taking The First Step

Once the thought of financial independence is solidified, how long did/will it take you to act? It is very likely that you did/will not act that day, or that month. While we all know that it is important to save and invest as early  as possible to take advantage of compounding, we tend to delay. We use excuses such as: we do not have the money. This fallacy was discussed in The Journey To Financial Independence Is A Marathon, Not A Sprint. Further, because we know that it will take some time to achieve the end goal, we have difficulty starting on the journey  to financial independence. We have difficulty with delayed gratification.

Like beginning the journey to financial independence, we did not begin gardening immediately, we delayed until we shamed ourselves into beginning.  We got to the point of discussing each week, “we should purchase the seeds and plant them.” The next week “next week we will buy the seeds.” The next month, “we should really get this done.” The final straw, “if we do not plant now, we will miss the growing season.” Our prompt to act was the reality that we may miss the growing season. As such, we ventured out to get our seeds and growing pots and later ordered our greenhouse racks.

Like any great plan, the most difficulty part is beginning. Do not wait for a so call right time to begin, begin on the journey to financial independence now. The fact is, there is no better time than now. If you believe you do not have enough to save, finding a way to save $5, $10, or $100 now. Saving on a tight budget will teach you the discipline required to save $1,000, $10,000, or $100,000 later. Set up your saving account now. Build your emergency fund. Open a brokerage account now. Implement a plan to pay down debt now. Do it!

Growth

In growing your own produce, once we planted the seeds in our pots, to achieve the end goal of mature plants with fruit/vegetable/herb, we needed to consistently water our seedlings and expose them to enough sunlight. Every other day, we would water the seedlings in the morning. Over time, we began to see growth. Then peppers and tomatoes appeared as we continued to water and expose to sunlight.

Tomatos
Return on investment

Like our fruit/vegetable/herb, once we began the process of saving and investing, we had to perform consistent maintenance. We set up automatic contributions to both our saving and investment accounts. We actively paid down our debts and at times paid more than the minimum. Like the peppers and tomatoes, our money began to grow. Over time, our debt began to decrease and our wealth increased. While we are closer to financial independence, we have a long way to go. However, we have noticed a number of benefits.

Tangential Benefits

Gardening provides a number of tangential benefits. Growing your own produce can be a great family event. If you have little kids, this is the perfect way to introduce your kids to how fruits and herbs are grown and how they get to the supermarket. Further, this is one activity where little kids can participate in almost all activities. For example, planting seeds, watering the seeds, transferring the plants, harvesting the produce and eating the produce. It is also a great way to get your kids to eat vegetables. They are eating the vegetables that they themselves grew. Gardening is also a great exercise, it gets you off the couch, out of the house, and doing physical and mentally soothing activities outside.

Like gardening, there are real world benefits to beginning the journey to financial independence. The benefit of starting the journey to financial independence is the knowledge that you have an emergency fund and that the fund and your wealth are growing. Having money in the bank lowers financial stress, allows you to take advantage of opportunities and improves confidence. The confidence to take active steps in life to better yourself and financial position. These benefits will affect all aspects of your life, including your personal relationships and your mental health.

Conclusion

Growing your own produce is similar to growing wealth, it takes time and consistency.  Both gardening and building wealth requires that initial thought to take action, and then acting to begin the process. Saving that first dollar is akin to purchasing that first seed. Planting the seed is like depositing that dollar in the bank/an investment account. Watering the seed is similar to adding funds to your accounts. With consistent watering and sunlight over time, a delicious fruit/vegetable/herb will grow for harvesting. Like the fruit/vegetable/herb, with consistent deposits and rebalancing over time, your bank/investment account will grow for your harvesting at the time of retirement.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Growth

The Journey To Financial Independence Is A Marathon, Not A Sprint

Money Maroon

It is best to begin saving and investing as early as possible. The earlier you begin to save and invest, the more time you have to take advantage of compounding. It only makes sense, so while we can all appreciate this simple concept, why do we ignore our financial future until retirement? The journey to financial independence is a marathon, not a sprint. Begin the race today.

The reason we do not begin saving early is often because (1) we think we cannot begin saving because of lack of funds, (2) instant gratification or a combination of (1) and (2).

The Belief That You Do Not Have Enough To Save

Let us dispose of point 1. The thought that we cannot all begin to save “now” is often a fallacy. If you are without an income stream point (1) may be valid, however, this is usually not the case. No matter how little you earn, I can guarantee that if you look back over the past month, you have wasted more than $5. Whether it be on an event, food, dinks, or a random purchase that was not necessary. Saving can start small. Start small. Pay yourself first.

Instant Gratification

The issue we all tend to have with regard delaying saving, is one of instant gratification. Saving is boring, it is slow. If you are beginning at $0, growth will be incremental and slow. For example, if you are beginning the process of fully funding your emergency fund, then process can be a slow and painful process. Painful because to contribute to your emergency fund if you have not been doing so previously, you will now need to change your habits, make a sacrifice and deliberately save. If your aim is to save a year of income, let’s say $65,000, beginning to save will be painfully slow. 

For example, If you begin by saving $500 per month, in 3 months, it is only $1500 without interest. In your mind, you are so far away from your total that it is inevitable that you will become discouraged. In 5 months you will have only saved $2500 without interest, still over $60,000 to go. At this point you may begin to think, what is the point? You may begin to believe that the sacrifices that you are making is too great. This is the point where many quit saving and revert to their old ways.

If you quit your savings plan, what you and many others fail to realize is that the math is simple and true. If you are saving $500 a month, that is $6,000 a year, that is $60,000 in 10 years, that is $120,000 in 20 years. None of the above includes the added compounding interest or the prospect of you getting a raise as you progress in your career, or investing a portion of your savings.

Because the math is so simple, if we are able to find easy ways to take our minds off the slow process, we will be able to make progress.

Set It And Forget It

To keep our minds off the slow process of accumulating wealth at the initial stages, it may be best to set it and forget it. For example, automatically deposit a portion of your income into a savings account. As this is an automatic process, this means that you will at times forget the process. When you remember this process, you will be surprised by the amount that have accumulated. The gratification of seeing this progress working will  no doubt encourage you to continue the process. A feed forward cycle will emerge. 

Dream big
Keep your eyes on the future and your goals

Further, money begets more money. This may be in the form of investing a portion of your savings or the general power of compounding. Your greatest asset in wealth building is time. Keep your eyes on the future and your goals. Think long term.

Take the first step today and begin saving for your future. Set up an automatic deposit of $5. If you are able to contribute more, do so and increase your contribution over time. 

Conclusion

It is best to begin saving and investing as early as possible. The earlier you begin to save and invest, the more time you have to take advantage of compounding. It only makes sense, so while we can all appreciate this simple concept, why do we ignore our financial future until retirement? The journey to financial independence is a marathon, not a sprint. Begin the race today.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Video Summary

Losing Job

Learn Lessons From Recessions

Money Maroon

Changes

Learn lessons from recessions. Following the great recession, many Americans made a conscious decision that it was time to prepare for the next financial downturn. Many of these individuals actively or passively joined the Financially Independence Retire Early (“F.I.R.E”) movement. During the pursuit of F.I.R.E, these individuals cut back significantly on spending, saved an increased amount of their salary and invested.  

Those Unprepared For Recessions

While many individuals made a conscious decision to change their life, others did not. Many framed the great recession as a once in a life time event and quickly began spending as they did previously. The prices and sizes of homes increased and the length of car loans approached five to seven years. We were riding the high of a decades long bull market. Each year the prediction of a market downturn came and past with new record highs in the stock market and record lows in unemployment.

However, this all came to a screeching halt. We now have a Covid-19 pandemic. Predictably, those who made financial  changes are in a better position than those who did not.

F.I.R.E in a market downturn

F.I.R.E And Recessions

Over the last decade, as F.I.R.E came to the main stream, many in the media came out asking why? Others have announced that it was a futile fad. Some just did not understand why those in the prime of their careers would want to retire. Many further asserted that it would be dangerous to quit your job early. However, let me tell you a secret. Many in the F.I.R.E movement have no plan to retire in the traditional sense. Many plan to retire from their current jobs and instead focus on a passion. In many instances, these passions provide a sustainable income.

Being Prepared

Whether or not you have achieved F.I.R.E, on the path to F.I.R.E, or thinking about F.I.R.E, the Covid-19 pandemic has shown us why you should plan ahead and have a financial buffer. In times like these, those who have embraced the F.I.R.E movement are leaps and bounds ahead of the rest.

Those Who Have Hit Their F.I.R.E Number

Let us look at those who have hit their F.I.R.E number and have retired. With regard to investments, these individuals have investments that have no doubt reduced in value. For some, the drop is higher than that of 20%. However, as understood by many in the F.I.R.E movement, the stock market operates in cycle. Therefore, these individuals are concerned, however, they understand that the market will return. 

A tenant of F.I.R.E is the emergency fund. Those who have hit their F.I.R.E number no doubt have at least six to twelve months of expense saved in liquid accounts. This is their safety net until the market rebounds.

Those On The Path To F.I.R.E

For those on the path to F.I.R.E, these individuals are still working, has been laid-off or furloughed. Like those who have hit their F.I.R.E number, those on the path to F.I.R.E commonly have investments. There is no doubt that their investment portfolio have taken a hit. These individuals also understand that the market operates in cycles. While they are alarmed by the investment portfolio losses, they understand that the stock market will recover. Further, the losses are locked in only if you sell your investments.

Importantly, these individuals have already build up their  emergency fund or on the path to building this fund. Again, the emergency fund provides an advantage over the general public who generally cannot afford a $500 emergency expense.

Lesson

The lesson from the great recession and this current pandemic is simply, plan ahead. This pandemic will have a similar effect as the great recession. Some will begin to implement contingency plans to protect their families. They will live or continue to live below their means, save and invest. On the other hand, many will not learn a lesson, believe this will not happen again and return to living above their means and keeping up with the Jones.

Conclusion

Learn lessons from recessions such as the great recession and the Covid-19 pandemic. See financial downturns as an opportunity to begin the process or continue the process of building wealth and financial security. Journey to financial independence.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Video Summary

Covid-19

Financially Survive A Pandemic

Money Maroon

As the Covid-19 pandemic expands, starting in the East and now devastating the West, governments are taking actions to limit and contain both the health and financial fallout. The effects of the Covid-19 pandemic are unimaginable. However, a pandemic should not change how you approach your financial future. These same principles apply during the coronavirus pandemic: live below your means, save and fund your emergency fund. By following these principles, you should be able to financially survive a pandemic.

Social Distancing

As countries and states practice social distancing, they are economically shutting down. As residences are forced to shelter in place, multiple parts of the economy shuts down. For example, the transportation industry (including airlines and taxies), the restaurant industry, and the hotel industry to name a few. As these industries shuts down, revenues are down while employees must be paid. In such a situation, unless there is some intervention, layoffs will follow. 

Sorry we are closed

Layoff Concerns

In the current environment, the prospects of layoffs should be on every employee’s mind. For these employees, next are the thoughts of providing for their families, servicing mortgages, student loans and other debts. These thoughts breed anxiety and stress. More concerning, anxiety and stress lowers the ability of the immune system to fight diseases. This in turn leaves individuals more susceptible to diseases.

But not everyone is having financial anxiety.

Financial Independence

Over the past ten years, many have tried and have achieved financial independence. Many have exited the daily grind of working for others and have become their own bosses. For many, even with the current fall of the stock market, their financial future is stable no matter the out come of the pandemic and the related financial effects. These individuals are truly financially independent. 

How did these individuals achieve this peace of mind? They followed these basic money principles: live below your means, save and fund your emergency fund.   If you have followed and are following these principles, congratulations, during this economic crisis you will be ok at least in the short term. Simply put, by following these principles, you should be able to financially survive a pandemic.

You Can Achieve Peace Of Mind

Whether you own your own business or you are a salaried employee, there is a possibility of financial hardship in the future. As such, it is prudent that we all plan ahead for a rainy day. Living below your means, saving and funding your emergency fund takes planning. But also, taking these steps means sacrificing and delaying gratification.

By living below your means, you are able to limit debts, for example, lower mortgage payments and lower car payments. By not keeping up with the Jones, you are better able to weather the financial storm when it comes. Living below your means further frees up money for you to save and fund your emergency fund. 

By saving and funding your emergency fund, you are able to have a greater runway to act during a financial crisis. In times of crisis, cash is king. By having a fully funded emergency fund of six to twelve months, any gaps in income can be made up at least temporarily. As such, you are able to maintain your standard of living while having time to search and potentially find a new job.

By planning ahead and putting away money, you are effectively buying time to maintain your family during retirement or a financial crisis. If you are not practicing these basic principles discussed, begin today. Saving $100 a month is $1,200 in a year, and $12,000 in ten years without added interest. If this amount is invested, your total following 10 years will likely be higher.

The Future

As the number of those infected by the coronavirus increases, pay particular attention to the programs available to financially help individuals and businesses. Federal student loan payments are being delayed for 60 days, while foreclosures, evictions and mortgage are being temporarily suspended. As these programs are outlined and implemented, plan ahead and take the steps necessary to keep your family secure and financially healthy.

Conclusion

As the Covid-19 pandemic expands, starting in the East and now devastating the West, governments are taking actions to limit and contain both the health and financial fallout. The effects of the Covid-19 pandemic are unimaginable. However, a pandemic should not change how you approach your financial future. These same principle apply during the coronavirus pandemic: live below your means, save and fund your emergency fund. By following these principles, you should be able to financially survive a pandemic.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com