General

Grow Your Own Produce & Financial Independence

Grow Your Own Produce & Financial Independence

Money Maroon

A key component of financial independence is the act of living below your means. Living below your means results from taking stock of your expenditures and cutting back on unnecessary spending. Two of the largest expenditures on a monthly basis is food and mortgage/rent. We often look at lowering our mortgage/rent, but what about what we spend on food? If you are able to reduce your expenditures at the supermarket, would you be closer to a lifestyle that accelerates your journey to financial independence? Consider adapting a farming to F.I.R.E approach, and grow your own produce.

Fresh Produce Is Expensive

Purchasing healthy and fresh foods are typically the most expensive portion of your supermarket expenditure. Typically, a mango will cost at least $1 per mango. What about green peppers ($1.30 each), cucumbers ($1 each), chives ($7 a bottle), orange ($1.50 each), grapes ($5/lb), pineapple ($3 each), water melon, ($6 each) avocados ($2.50 each), apples ($5/lb) and tomatoes ($5)? If you are practicing a healthily lifestyle, by the time you exit the produce section, you have spent over half your budget. Have you thought to grow your own produce or at least a portion?

Grow Your Own Produce

Grow your own produce: Peas, Pepper, Thyme

Based on where you are living, you may not have access to a large backyard, however, anyone can begin growing their own mint, watermelon, basil, chives, peppers or tomatoes inside. Your investment is the purchase of the seeds or small plants and water. If you have the room to do so, investigate growing mangos, avocados or oranges if you live in an area that does not freeze. Or invest in a greenhouse that may keep your plants warm year round.

For those who have fruit trees or have family members who have fruit trees, the cost of these fruits are the cost of walking outside to pick the fruit or the cost of postage (family members posting the fruits). Once mango/avocado/orange/certain peppers/mints are established, they reliably bear new fruits yearly with very little maintenance required. A little investment upfront, yields generational benefits.

The Benefits: Grow Your Own Produce

Imagine the savings if you invest a little time in beginning to grow a portion of your own foods, growing your own produce. While saving $5 here, $2 there and $10 over there on fruits, vegetables, and herbs may not seem like a lot, the small totals do add up. Consider how much you could save each visit to the supermarket. Then, multiply your total by months and years. 

Do not only consider the savings that would be achieved, imagine the satisfaction. Imagine the access to fresh foods if you currently live in a food desert. Imagine the effects on your health.

While we are not encouraging you to quit your day job and become a farmer, we are encouraging you to take a step towards growing a fruit, vegetable or herb. If you like it, grow something else.

Grow your own produce: Basil

Conclusion

A key component of financial independence is the act of living below your means. Living below your means results from taking stock of your expenditures and cutting back on unnecessary spending. Two of the largest expenditures on a monthly basis is food and mortgage/rent. We often look at lowering our mortgage/rent, but what about what we spend on food? If you are able to reduce your expenditures at the supermarket, would you be closer to a lifestyle that accelerates your journey to financial independence? Consider adapting a farming to F.I.R.E approach and grow your own produce. 

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

Probability

Dramatically Increase Your Financial Success Now

Money Maroon

Probability and financial success intertwines. In a mathematical sense, life is a probability function. The probability of an outcome increases or decreases base on your actions. As such, when you see someone achieving success, it is important to understand that luck had little to nothing to do with it. It is all a probability function and that individual may have taken requisite action to increase their probability of achieving  that success. There is also a very low chance, but a chance nonetheless, that such an individual did absolutely nothing and achieved this success. 

This reality does not take away from the fact that others may have helped this individual to achieve his goals. Those who aided the individual played a role in increasing the individual’s probability of achieving their goals. In the same vain, the individual achieving the success may have taken action to be around those individuals who aided him in achieving the success achieved. Again, this could be summed up as taking action to increase the chances of success – putting yourself in position to take advantage of opportunities.

The Lottery

Let us look at the example of winning the lottery. We all have a chance of winning the lottery. There is a probability of winning even if we do not actively go out and purchase a lottery ticket. The probability is very low of course. But, you can theoretically win the lottery without buying a lottery ticket. Consider the fact that you may find a lottery ticket on the side of the street that happens to be the lucky numbers. You may also be gifted a winning ticket.

Note, the probability of any of the above two scenarios happening is very low. We must accept the fact that the odds that you will win the lottery without purchasing a lottery ticket is infinitesimally small, however, you still have a chance.

Now, suppose you buy 1 lottery ticket, the probability of you winning the lottery will now increase substantially. Your odds of winning will be 1 in 292,201,338. If you would like to increase these odds further, you can purchase a second ticket to now have an odds of 2 in 292,201,338.

The Financial Game

The financial game is the same. We are all born with a probability of having financial independence. If you born into a wealthy family, you may have a higher probability of this result than someone born in poverty.  However, there is a probability that those born wealthy may end in poverty and those born in poverty may end in wealth. Every action you take increases or decreases your probability of getting a result.

What Can You Do To Increase Your Probability?

To increase your probability of financial independence, I have a secret. Ready, it is the same boring list that you have heard before, live below your means, save, invest, and repeat. 

Your probability of living below your means is increased by having a higher salary, maximizing your time and spending less. How do you increase your probability of having a higher salary? You gain an education, you start a business, you invest. How do you spend less? You cut unnecessary expensive and limit debt.

The same two factors (living below your means and spending less) will also increase your probability of saving and investing. The more you save, the more you will have to invest. It is a feedforward cycle. This is also the reason the rich gets richer.

The second you begin to take action in this regard, your probability of financial independence increases. On the other hand, the opposite is true. Earning less and spending more will undoubtably decrease your odds of living below your means, saving and investing. These actions will undoubtably decrease your odds of financial independence and stability.

Action Plan

If you want to have a financially secured life, there are steps you can take to increase your probability of achieving that result. Live below your means, save, invest, and repeat. Take steps to increase your chance of financial independence. 

Conclusion

Probability and financial success intertwines. In a mathematical sense, life is a probability function. The probability of an outcome increases or decreases base on your actions. As such, when you see someone achieving success, it is important to understand that luck had little to nothing to do with it. It is all a probability function and that individual may have taken requisite action to increase their probability of achieving  that success. Journey to financial independence by taking simple steps that increases your probability of financial success.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Fear of money

Fear Of Money

Money Maroon

Money is a difficult topic to talk about. Not because money is inherently bad, but because money is an instant mark by which we compare ourselves to others. To the few, money is viewed as a tool to get what they desire. To the masses, money is a scarce resource that must be guarded. Most have a fear of money, consciously or unconsciously.

The Have And The Have Nots

When addressing money, there are major differences between the wealthy and those without wealth. The wealthy sees money as a tool that is to be used. The more money they have access to, the more they can bend the world to their desires. 

Consequences Of Having A Fear Of Money

While the wealthy view money as a tool, those without wealth fear money. Yes, they fear money. Many believe in the concept of “more money more problem.” Further, the masses have an unhealthy fear of not having money.  

More Money More Problems

Why is there a belief in “more money more problems.” Have you ever heard the statement: “money is the root of all evil.” Now, think about who you have heard this from. Was the statement made by someone with wealth or from someone without wealth or new to wealth? I can guarantee that you have not heard the above statement from a wealthy individual.

Let’s dig in. Note that 1 Timothy 6:10 actually reads, “For the love of money is the root of all kinds of evil.”  Even without historical context, it is clear that the bible is not saying that money is the root of all evil. Instead, it is saying that a love of money and not money it self, is the root of  all kinds of evil. This one misquoted phrase and other similar phrases have consciously and unconsciously ruined our relationship with money.

With this miss quoted text, many view money as not being good and subconsciously very bad. How can you make and grow your money when you believe that money is the root of all evil? 

Change your relationship with money. Money is a tool that can be used, in some cases for good and in other cases for evil. As such, remove the above and similar phrases from your vocabulary and build wealth.

The Fear Of Not Having Money

While a healthy fear of not having money is a good motivator, an unhealthy fear of not having money is a problem. Why is this a problem? The fear of not having money can lead to a scarcity mindset. The belief that money is a limited resource, it is not. 

Further, acting out of an unhealthy fear of not having money can lead to not allowing yourself to take risk to grow yourself or your business. An unhealthy fear of not having money can lead to lack of confidence and not standing up for yourself personally and/or professionally. 

In this regard, the fear of not having money leads to an employee mindset. A mindset of working for someone else for a secure salary and not rocking the boat. This mindset is a danger to financial independence. 

Let’s dig into the above statement with regard to the security of a salary position. A salary position is not a secure income source. With a salary position, you are giving your boss complete control over your financial life. The classical, putting all your eggs in one basket. Further, most employees are at-will employees and as such your company can fire you for any reason. Does that sound secure to you?

Embrace money and use money as a tool. Instead of  having one salary position, invest in yourself and secure multiple income streams. Stop fearing not having money and take back control of your financial life from your boss.

Conclusion

Money is a difficult topic to talk about. Not because money is inherently bad, but because money is an instant mark by which we compare ourselves to others. To the few, money is viewed as a tool to get what they desire. To the masses, money is a scarce resource that must be guarded. Most have a conscious or unconscious fear of money. Get over the fear of money, have confidence in yourself and take calculated risk and journey to financial independence.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Family and money

Family Finance: Talking To Your Family About Money

Money Maroon

Money is a difficult subject to discuss. Some would rather discuss their weight instead of talking about money. When you have to share financial information with family members, the money talk is taken to another level of pain. When you are discussing money with your parents, the money talk may be excruciating. While painful, family finance discussions are important. Do not avoid or delay talking to your family about money. Talking to your family about money may alter not only their financial future, but also yours.

History Of Retirement

Retirement, generally, was not made for the masses. German Chancellor Otto von Bismarck invented the idea of retirement in 1889. At the time, retirement was essentially to force older workers out of the work force and make way for younger workers. However, in Chancellor Otto von Bismarck’s 1889 Germany, the retirement age was 70, but most importantly, the average life span was 70 years of age. 

As health care and medicines improved and we began to live longer, retirement and our understanding of retirement has evolved. Now, retirement is not only for those close to death, but for anyone who have achieved financial independence and want to escape the rat race.

The Three Legs

Generally, in the United States, with the advent of social security, previous generations were somewhat secure in retirement. Previous generations had the now acclaimed three legs to their retirement stool: (1) personal savings, (2) social security and (3) a company pension. However, the three legs have been significantly weakened or are completely non existent for many.

The baby boomer generation will be the first generation since world war II to enter retirement without all three legs. 

First, many have very little to no personal savings; second, as it currently stands, the social security program is teetering on the edge of insolvency; and  third, for the most part, company pensions are a thing of the past. Taken together, the baby boomer generation have little saved for retirement, no pension plan and are dependent on social security.

Are your family members, prepared? A more direct question, is your mother and father prepared? If they are prepared, lucky you. If they are not, who will be taking care of your parents in retirement? Look into a mirror and the answer will be looking at you.

How will this impact your financial future? With this in mind, have you had the talk? This is the reason family finance discussions are so important.

Family Finance: Talking To Your Family About Money

– The First Talk

I have personally tried to have the talk with my parents, the first attempt did not go very well. However, I understood that family finance discussions were important, so I tried again.

Imagine your child asking you personal details about your financial situation and questions with regard to end of life planing? Imagine your child then critiquing your choices and then showing you that you have not saved enough, imploring you to cut back on spending and put more money away? Your child then warning of the dangers of running out of money in retirement, the high costs of healthcare as you get older, and the importance of being debt free prior to retirement?

Would you be defensive, would you hide information? Of course you would. 

– The Problem

First, this represents a huge roll reversal that not many parents can handle. Your child is now being the parent. If your parents are from the camp where they speak and the child listens, such questions will evoke anger and a feeling of being disrespected.

Second, based on answers or lack thereof to the questions asked, both parent and child now know that in the finance department, the parent is not as all knowing as they may have represented to be over the years. These questions will expose financial mistakes and missteps. Acknowledging these errors of judgement and missteps to a child can be very difficult for some parents to handle.

The above are only two of the many reasons why it is so difficult to talk to your family about money.

– Perseverance Is The Key

Did I stop talking to my parents about their finances when I was rebuffed? No. Did we have yelling matches when points were not getting across, yes.

To ensure that your relationship is not destroyed because of your discussions, spread out your discussions. Continue to ask questions that were not previously answered. Over time, a funny thing will happen. Instead of having to ask questions, your parents will begin providing updates on their financial progress.  I am not saying that you will have a miraculous breakthough and your parents will become the most responsible with their money and make all the right financial choices. Instead, they will become more aware of their financial situation and start thinking more about their financial futures.

We cannot control what another person does, especially our parents. However, if we can make them aware of potential issues that may be on the horizon, maybe they can and will take action to change course. 

The fact is, you as the child may be responsible for your parents during retirement. Begin taking steps to mitigate the impact on your financial future by talking to your family about money. Have the family finance discussions.

Conclusion

Money is a difficult subject to discuss. Some would rather discuss their weight instead of talking about money. When you have to share financial information with family, the money talk can lead to an unbearable amount of pain. When you are discussing money with your parents, the money talk may be excruciating. While painful, family finance discussions are important. Do not avoid or delay talking to your family about money. Talking to your family about money may alter not only their financial future, but also yours.

Talking to your family about money is one of many stops on your journey to financial independence. Have the talk.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Stay motivated

How To Stay Motivated

Money Maroon

With anything in life worth having, there tends to be some pain associated, physical or physiological. The journey to financial independence is no different. While many hope to be financially independent, few take the steps necessary to be financially independent and fewer still are able to achieve financial independence. If you are serious about achieving financial independence and have taken steps to begin the journey, stay on the path. But how to stay motivated?

The Wish

We all would like to max out our retirement accounts, save and pay off debts. However, are you willing to make the required scarifies? For many, the answer is no. Just as many have started diets and have not attain weight lost, many have started to save, pay off debts and save for retirement but never attain their goals. 

Many will save for a week, a month or a few months, but few are able to consistently save the same or more for a period of years. To find the motivation to deprive yourself of certain activities or joy is difficult. Delayed gratification is not fun for most and downright painful for others. When we begin the process of attaining a long term goal (financial independence), we are naturally working against ourselves. We are built for instant gratification. 

Turning The Wish Into A Goal, How To Stay Motivated

To achieve your goals, you must engineer an environment where you are more likely to succeed. The below represents only a few steps that can be taken to build this environment.

A goal without a plan is a wish

Short Term, Intermediate And Long Term Goals

We are more likely to succeed on our journey to financial independence if we have a long term goal (financial independence), intermediate goals, but also short term goals.

The short term, intermediate and long term goals allow for short term, intermediate and long term rewards. This offsets and/or lessens the pain of delayed gratification. Thus increasing the chances of you staying on course and attaining your goals.

Visualize Each Goal In Detail

Visualize each short term, intermediate and long term goal. Have a plan with details. By visualizing your goals you are able to focus. Further, attaining each detail or checking off a detail in the plan is a mini reward. This mini reward offsets and/or lessens the pain of delayed gratification. As someone previously stated, “A goal without a plan is a wish.” We have a lot of dreamers/wishers out there, don’t be one. 

Be Flexible

“There is more than one way to skin a cat.” Meaning, there are many ways to achieve a goal. Even with detailed plans, life happens, things change. Bend with the winds of life while keeping your goals in focus. 

Continuously Check Your Progress

Hold yourself accountable by continuously checking your progress. Consider creating a spreadsheet or an equivalent to track your progress.

Surround Yourself With Like-Minded People

The fact is, the people you surround yourself with has a direct influence on how you behave. “Show me your friends and I’ll show you your future.” Be around those who will encourage you to achieve your goals. If your goals are viewed negatively by those around you, it is highly unlikely that you will achieve your goals. This also ties in nicely with not being the smartest person in the room. Surround yourself with those you can learn from.

Reward Yourself

It is only human nature to avoid pain and move toward instant gratification. As such, it is important to consciously realize our default actions and change our mindset and actions. Small rewards will enhance your chances of attaining your goals. Let’s face it, every now and then, we need a moment to enjoy the fruits of our labor, no matter how small. Understand who you are and take the necessary steps to work with your innate impulses to attain your goals.

Make It Fun

Enjoy the journey and the destination if you can.

Conclusion

While many hope to be financially independent, few take the steps necessary to be financially independent and fewer still are able to achieve financial independence. If you are serious about achieving financial independence and have taken steps to begin the journey, stay on the path. But how to stay motivated? Engineer an environment where you are more likely to succeed. 

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Money Mindset

Money Mindset

Money Maroon

Money & Human Nature

When we have painful decisions, it is only normal to delay. It is human nature. For you to journey to financial independence, you must change your money mindset. You must be aware of your default reaction and consciously make a change. Change how money decisions are made.

Think of your last painful or difficult decision. Whether it was a decision that would have resulted in conflict or one that would have caused you to make a sacrifice, it is only natural for you to delay. Our first reflexive action is to avoid making difficult decisions. This reflexive action typically results in employing a delay tactic where other decisions are made but not the ultimate decision. We make difficult decisions only when we must make the decision.

With money decisions, the same occurs. The science behind it all is undeniable. Let us use the example of shopping vs saving. 

Shopping

The neurotransmitter dopamine surges when you are considering buying something new. This dopamine surge is a result of purchasing the new item and the anticipation of getting that new item immediately. With online shopping, the dopamine surge is on another level. For online shoppers, there is the joy of making the purchase, the anticipation of getting the new item, the built up anticipation of receiving that item and receiving that item in the mail. Shoppers are therefore more excited when their online purchases arrive in the mail than when they buy things in store. As such, online shopping can be as exciting or more exciting as in store shopping.

As you can guess, the retail industry is acutely aware of this effect and take the necessary steps to exploit our biology.

Saving

When saving for a long term goal or financial independence, we do have some dopamine release related to attaining that financial target. However, saving falls into the category of delayed gratification. For delayed gratification,  dopamine signaling declines as the delay to the large reward increases. As such, the thought and planing related to having financial independence is gratifying. However, because of the long time period  between the thought of financial independence and having actual finical independence, we typically do not carry through on our plans. 

This is why we spend so easily but find it so difficult to save. We all know that we should save and invest for the future, but very few do.

Saving for the long term is counter to our biology.

Remedy

Change Your Money Mindset

In view of our natural reaction to delayed gratification, to achieve financial independence, we must consciously realize our default actions and change our mindset.

Based on the science of our reward system, we are more likely to succeed on our journey to financial independence if we have a long term goal (financial independence), intermediate goals, but also short term goals. The short term, intermediate and long term goals allow for short term, intermediate and long term dopamine fueled rewards.

Conclusion

When we have painful decisions, it is only normal to delay. It is human nature.

For you to journey to financial independence, you must change your money mindset. For a more successful financial journey, create and achieve your short term and intermediate goals on your journey to financial independence.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Video Summary

Stacking Money JoToFi.com

High Earners And High Debt

Money Maroon

When we see someone driving a nice car or living in a big house in the nicest of neighborhoods, we often assume that these individuals are for better or worst higher earners living the dream, living the easy life. But are they?

Stressed

Many high earners spent years in school to get where they are. Most high earners work in high pressured professions and live in broken homes as a result of the long hours required to advance their careers. No wonder high earners tend to have high rates of suicides and elicit drug use.

Pay Check To Pay Check

This may be surprising to many, 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).

What about the family? Private schools for the little ones, those lavish family vacations and those social expenditures. You must keep your social status if you want to be in certain social circles.

 But with those high salaries, they can afford it, right? As we tend to do at JoToFI.com, let us use examples. 

Doctor And Lawyer

University

Let us look at the financials of a doctor and a lawyer. At about the age of 22, both our future lawyer and doctor will graduate college. 

For all costs, let us use 2019 numbers for a rough estimate. Again for simplicity, we will use the average costs of public and private education. We will also assume only public or only private education from university to professional school for our estimates.

  • Average public university cost per year: $10,116 
    • Average public university cost to graduation: 4 x $10,116 = $40,464
  • Average private university cost per year: $36,801
    • Average private university cost to graduation: 4 x $36,801 = $147, 204

Interest

Let us assume that our doctor and lawyer took out loans for school, for simplicity we will use the cost to graduation as their debt. For simplicity, we will not include interest charges. However, keep in mind that typically, interest accrues from the day the loan  is disbursed. Interest continues to accrue until the loan is paid off. Further, this interest is capitalized. Currently, the interest rate is about 5% annually.

Professional School

After obtaining top grades and racking up debt at university, our future doctor and lawyer must now attend professional school. 

For our lawyer, that is three additional years of law school education:

  • Average private law school cost: $49,095
    • Average private law school cost to graduation: 3 x $49,095 = $147,285
  • Average public law school out-of-State cost: $40,725
    • Average public law school out-of-State cost to graduation: 3 x $40,725 = $122,175
  • Average public law school in-State cost: $27,591
    • Average public law school in-State cost to graduation: 3 x $27,591 = $82,773

Our doctor on the other hand has four additional years of medical school:

  • Average private medical school cost: $52,515
    • Average private medical school cost to graduation: 4 x $52,515 = $210,060
  • Average public medical school cost: $32,495
    • Average public medical school cost to graduation: 4 x $32,495 = $129,980

Now, keep in mind that this debt accrues interest at about 5%-8%

Employment – Lawyer

For most lawyers this is it, at the age of about 25, they must now find a job. If you are aware of this profession, you will understand that the legal profession is bimodal. Meaning, at the top, a select number of law school graduates from top schools can earn a starting salary of $190,000 per year. Whereas at the bottom, the vast majority of lawyers earn a starting salary of less than $50,000 per year. In fact, the average salary for law school graduates is $72,500.

We will assume that our lawyer had amazing test scores, attended one of the top law schools in the country and was able to obtain a position with a starting salary of $72,500.

Employment – Doctor

For our doctor, residency follows medical school. Residency is a minimum of 3 years (based on your speciality) and an average salary of about $57,000 is paid.  During residency, our future doctor will toil day and night. For many residents, the salary provided during residency is simply not enough. As such, our doctor’s loans will continue to accrue interest during this period

Following residency, let us imagine that our doctor foregoes a fellowship, it is time to find a job at about 30 years of age. With an average salary in the range of $160,000 – $200,000, absent the present debt load, our doctor has a bright financial future.

The Math

For our lawyer, with a starting salary of $72,500, without counting the accrued interest, if he attended: 

  • Private schools, he owes about: $147, 204 (University) + $147,285 (Law School) = 294,489
  • Public schools, he owes about: $40,464 (University) + $122,175 (Law School – in State) = $162,639
  • Public schools, he owes about: $40,464 (University) + $82,773 (Law School – out of State) = $123,237

For our doctor, with a starting salary of between $160,000 and $200,000, without counting the accrued interest, if he attended:

  • Private schools, he owes about: $147, 204 (University) + $210,060 (Medical School) = $357,264
  • Public schools, he owes about: $40,464 (University) + $129,980 (Medical School) = $170,444

With the accrued interest added, these numbers would be significantly inflated. This is especially true for our doctor due to the added year of medical school and added years of residency.

Now, is our doctor and lawyer living the dream, living the easy life? If anything, they have loan payments added to the lifestyle that they are expected to lead. Professional Stress + Financial Stress.

High Earners, High Debt

For high earners starting their careers, the debt loads are high. As high earners navigate their way through their careers, in addition to student loans, add the added cost of purchasing a home, getting married, having a family, life style inflation, and our consumerism culture. It should now be clear why so many high earners live pay check to pay check.

We are not telling you to feel sorry for high earners, especially those who live above their means to maintain social status. Our aim with this article is to give you an insight into the life of those who we typically view as “rich.”

Conclusion

Whether you are a high earner or not, your journey to financial independence includes living below your means, saving and investing. Journey on.

In this article, the use of “he” is intended to be gender neutral.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Video Summary

Surprised Santa

Holiday Sales Are Here

Money Maroon

Holiday Season

It is that time of the year again, where we spend money for the sake of spending money. Yes, it is that period between halloween and the new year, the holiday season with the requisite holiday sales.

Some may disagree with the time span, and argue that the holiday season begins after Thanksgiving. For those individuals, Christmas carols and decorations are on display before Thanksgiving. But the time span is not the point.

Holiday Spending

During the 2018 holiday season, Americans spent over $717 billion. Americans spent over $3.5 billion online on Thanksgiving day. On Black Friday, over $6 billion online. On Cyber Monday, over $8 billion and over $18 billon on Small Business Saturday. In total, in 2018, over 174 million individuals shopped over the Thanksgiving weekend from Thanksgiving through Cyber Monday. Many of these individuals were motivated by holiday sales. However, do you really need that new phone, TV, computer or gadget? In the time of covid-19 and related variants, should you be so focus on material things?

Sales?

If you are motivated to spend based on the holiday sales, those big signs with percentages off, I have some sober news. Retailers have figured out that those big signs can lead to sales. Lots of sales. As such, instead of actually lowering the sales prices, many may instead  increase the listed price. Therefore, there is a larger gap between the sale price and the list price.

That big sale may not be as big as you think.

Holiday Spending And Your Financial Future

Now that your euphoria of large savings have been normalized, have you considered how spending in the holiday season will impact your financial bottom line. Of the 174 million Americans who spent over $717 billion during the 2018 holiday season, how many are financially independent? How many are on track to retire early or living pay check to pay check? How many could have contributed to their savings, 401K, IRA or personal investment account? What about paying down debts  from the previous year’s holiday spending?

Extravagant spending during the holiday season occurs yearly. Let us assume that the retirement age is about 65, and conservatively, careers begin after college at age 22. Based on this estimate, about 43 years of spending occurs during your working years. How could saving during the holiday season have impacted the average American’s bank accounts? How many could have retired early or at least struggle less financial?

Stay On Your Journey To Financial Independence

While the holiday season is branded as the season for spending, take stock of your financial situation and how your holiday spending will impact your journey to financial independence. 

Collect moments not things

Conclusion

Your family is important and we are certain that they would rather you be in a better financial situation than purchasing gifts that will put your financial future in jeopardy. If you are planning on making small or large purchases this holiday season, keep in mind your financial goals. Stay on your journey to financial independence.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com

Lessons of a Pandemic

Upward Mobility

Money Maroon

For some, no matter how hard they try, they cannot escape their financial orbit. This is the concept of upward mobility. For most countries or groups, upward mobility has remained stagnant. In this department, the United States lags behind other developed nations.

Have you ever wondered why is it so difficult to move up the socioeconomic ladder. It does not matter the class that you are currently in, to break into the next class is difficult. 

Let us take a look at why it is so difficult to move from a lower financial orbit to a higher financial orbit. For simplicity, we will break the different financial orbits into lower class, middle class and upper class. Let us use moving from the lower class to the middle class as an example.

At Birth

When a child is born, many in the middle and upper class receive monetary gifts, parents/grandparents open 529 accounts, and the child is enrolled in a reputable daycare. On the other hand, the average child that is born into the lower class remains at home with family and rarely do the parents begin saving for college in the early years. Before these children enter elementary school, they are on completely different arcs. 

Elementary To High School

By the time these two children enter elementary school, the middle class child has had years of daycare and pre-kindergarten training. On the other hand, the child from the lower class  family has had some home schooling but not to the level of the child in the middle class. Further, based on where they are living, the child in the middle class will attend a higher ranked elementary school, middle school and high school, if not a private school. Now, look not only at the quality of education but also the type of connections that are being made and the circle of friends. There is no comparison.

Post Secondary Education

Let us assume that the child from the lower class family overcomes the barriers and attends the same university as the child from the middle class family. The child from the lower class family, on average, will take out more student loans and will almost always work during school. This inevitably means that students from the middle class and upper class are able to spend more time studying and participate in activities that potentially enhances their resume. Recall the students who are able to participate in unpaid internships. 

Although some middle class and upper class students work while in college, the type of work tends to be different. These jobs tend to offer more connections and access. Recall the friends working in the cushy white collar jobs that give access to upper level management.

Even if students of middle class families do not spend their times studying and instead attend parties while in college, these social events are more than simply drinking. College parties are social events where relationships are being build. Bonds are being formed with like peers (other middle and upper class families).

Professional Life

Based on their background and experiences, realistically, who do you think will on average get the higher paying job? Recall those friends from high school, those parties where social relationship were being build, and those internships? Who will on average will have a more secure financial future? 

The answer is clear. On average, the child from the middle class will be able to maintain their financial orbit and unfortunately, so will the child from the lower class family.

Why Is Economic Mobility Stagnant

Let us assume that the child from the lower class family overcomes all the barriers and manages to be in a high paying profession. Let us assume that he does everything correct (according to societal norms) and enters middle class orbit. Even with this great achievement and entrance into the middle class, individuals born into lower class families are less likely to build on this platform and exit the lower class permanently. Here, family and community plays a huge roll.

Family And Community

Consider the following factors:

  • How does the child from the lower class family handles and interacts with family and friends who are not as well off? 
  • Are they seen as a sellout when they move to a better neighborhood or speak with a different vernacular? 
  • Are they at risk of being robbed when they return to the neighborhood? 
  • How about the envy and jealousy of their closest family members and friends?
  • Do they succumb to the constant request for money or help?
  • Do others in a lower financial orbit influences their activities and decision making?

If you are able to move into a new financial orbit, the above are all factors that individually you may be able to handle. However, these factors cause financial death by a million cuts. Over time,  these different factors can have a detrimental effect on your financial future.

Have you ever wondered:

  • Why do some professional athletes make the decisions they do? 
  • How do some individuals earn so much money and fall back into poverty?
  • Why do some individuals who achieve success get involve with unscrupulous individuals?

If you have asked these questions and have yet to find an answer, you must look back to the community where these individuals were grown. Who were their friends? What influence does this community or members of this community have on them? And if this is still not clear, does Aaron Hernandez come to mind?

Escape Your Birth Financial Orbit

For most, to escape your birth financial orbit, you must first overcome all the odds and push on into the next financial orbit. Second, you must move away from your community. Moving away allows you to escape the potential negative influences and the mindset of your birth financial orbit.

Are you willing to take these steps? Are you serious about attaining financial independence and maintaining this status? Only you can take the steps necessary to achieve and maintain financial independence.

Upward Mobility

For some, no matter how hard they try, they cannot escape their financial orbit. Escape your birth financial orbit and continue on your journey to financial independence.

Follow me on Twitter @JoToFI_com

Follow me on Instagram @JoToFI_com