Retirement

Chasing

Chase Solutions Not Money

Money Maroon

Who wants to be poor? I have never heard a single person seriously state that they want to be poor. At some level, we all want to achieve a standard of living where we and our families have our needs covered without financial stress. Another portion of us wants more. Achieving financial stability such that wants and needs are easily achieved is a dream most of us  have. To achieve financial dreams, especially if you are entrepreneurial, chase solutions not money.

Chasing Money

With regard to your current profession, is your work your passion? Does your job make you happy? Do you continue to work at your current job for financial reasons only? If money was not a concern, would you continue on your current professional path?

Many of us choose careers not because of the difference that we will make, but for the traditional high standard of living and potential wealth associated. Many of us stay in positions for this same reason, even when we hate our jobs. We are not here to judge why anyone is on the professional path that they are on, but if wealth is your objective, it is best to stop chasing money. 

Chasing money will keep you in a 9-5, salaried position. Chasing money will keep you working until your late 60s or longer. In some instances, chasing money will generate wealth, but you will be miserable. Think of the lawyers and doctors who are wealthy but absolutely hate their jobs, are alienated from their families and are struggling to cope. Chasing money will keep you from your potential of being both happy and wealthy.

Chasing Solutions Not Money – Profession

By chasing solutions, we mean finding a problem and driving towards a solution. In a professional scope, the underlying purpose of solving a problem is the fire that will burn to get you through the difficult times. The difficult times may be years of schooling, personal issues or unexpected disasters that occur in life. With a purpose, your drive will be maintained irrespective of the financial reward. Whether your drive is servicing a specific community or a specific cause, finding a problem and presenting a solution will greatly increase your rewards, financial and otherwise.

Chasing Solutions Not Money – Entrepreneurial

If you are an entrepreneur and you are aiming to build wealth, it will all fall into place once you identify a problem that is worth solving. There are many issues that we all collectively encounter on a daily basis. Identify these problems and present your solution. Once you identify the problem and a possible solution, ask yourself if the identified problem is worth solving. If it is worth solving, this is a business idea.

Is The problem Worth solving

In determining if a problem is worth solving, from a business standpoint, you need to determine if you can earn from solving the problem. Does the problem rise to such a level of needing to be solved? Will someone pay you to solve this problem? If someone will pay you to solve the problem, how much and is it worth your time? If you have identified a solution to a problem, but someone will only pay you a dollar to solve the problem, this venture may not be worth it. Whether or not the venture is worth your time will depend on scalability.

Is Your Solution Scalable

Is the venture of solving the identified problem scalable? Let’s face it, if I solve a problem that is of low value to others and non-scalable, then I will either loose money or get stuck in a job that will not grow over time.  None of these options are good.

Now, if the venture is scalable, you have a business. For example, our example above where we are paid a dollar by each customer to solve a problem. If this business is scalable, if you are able to build your business to reach one million customers, that is one million dollars. If the problem being solved is one that is reoccurring, you have the potential for a million repeat customers. When you chase solutions, not money, your wealth will seamlessly grow.

Conclusion

No one wants to be poor. At some level, we all want to achieve a standard of living where we and our families have our needs covered without financial stress. To achieve financial dreams, chase solutions not money. On the journey to financial independence, stop chasing money, chase solutions to problems and watch your wealth grow.

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Video Summary

Build wealth by chasing solutions

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.

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Video Summary

What Is F.I.R.E?

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.

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Time of your life

Time Of Your Life: Time Is Your Greatest Asset

Money Maroon

Your time is your greatest asset, so use it wisely. As the old saying goes, nothing can be said to be certain, except death and taxes. So each second that you waste is a second that you will never get back, but also, you are a second closer to not being here. While this is a morbid outlook on life, it can be used to inspire your actions and financial decisions. Life your best life and have the time of your life.

Questions To Answer

Ask yourself:

  • How am I spending my time on this planet?
  • How am I managing my most valuable asset?
  • Am I maximizing my time?

Once you ask yourself these questions, do you feel a need to change:

  • Your actions?
  • How you spend your free time?
  • Your career?
  • How you interact with your family?

Ask yourself these questions now, such that you can make necessary changes, because you will not get back the time lost.

Maximizing Your Time – Have The Time Of Your Life

I was somewhat of a late bloomer when it came to maximizing my time. It took until college for me to realize how much time I had wasted. 

To help pay for my college costs, I did work study. My first work study position was terrible. While simple, it demanded total concentration as it was in the administration office and included filing documents. The major issue here, I had to focus on tasks for a defined period of time, I would thereafter have classes, then I had to study for those classes. There had to be a more efficient way.

My mind was blown after discussing my work study position with a friend who was managing a computer lab. In college, managing a computer lab meant watching over a computer lab and helping students troubleshoot issues that may occur at the computer lab. This was a perfect college position because it allowed for maximization of time. Why?

As a computer lab manager, you were able to watch over the computer lab and perform your own personal studies. As this was college, rarely did any student need help on how to log on or how to use the Microsoft applications that were loaded thereon. If there was a powerpoint presentation, it was only a matter of setting up the equipment, simple!

Now, because students rarely asked questions, with this work study position, you are able to study for classes, review notes and do homework while getting paid. I was quickly able to transfer to this new position with the recommendation of my friend.

I loved the job, and I would work hours that others would not because I understood what I was gaining. By having this position, I was able to get paid to study and do homework. That is what I call maximizing your time.

What About You?

What about you? How can you maximize your time? How about learning a new language or subject matter while at the gym or running. To give some context. While many are listening to music on their headphones while working out, why not try to learn a new language or listen to an ebook? In your down time, why not get into a new hobby to expand your mind or physical abilities? What can you do to maximize your time on this planet?

Note that maximizing your time can bring many financial rewards. By expanding your mind and physical abilities you may become more qualified for position. You may become more well rounded. You may be able to accelerate your career progress and outlook. Such career advancement may lead to (1) a higher salary, (2) you starting a new business, (3) you spending more time with family, and (4) you achieving financial independence. By taking simple steps, you can have the time of your life while developing spiritually and professionally.

No Need To Maximize Everything

While I encourage you to maximize your time, not everything should be rushed. For example, time with your love ones.

Let us look at the F.I.R.E movement. Many have developed working and spending habits such that they can retire early (As I have noted previously, many in the F.I.R.E movement have no intention of retiring). By maximizing your time, you may be able to  advance your career, save more, and invest more. With these actions, you may be able to hit your F.I.R.E number and become financially independent. This may allow you to spend more time with your family and/or do tasks that you prefer. 

Now, with more time with your family (if you like spending time with your family), when asked the below questions, you may think differently:

When asked: 

  • How are you spending your time on this planet? 
  • How are you managing your most valuable asset? 
  • Are you maximizing your time? 

The only change in your actions may be the thought that you should have done this sooner. Here, the journey to financial independence can be a journey to happiness.

Conclusion

Your time is your greatest asset, as such, you should use it wisely. As the old saying goes, nothing can be said to be certain, except death and taxes. So each second that you waste is a second that you will never get back, but also, you are a second closer to not being here. While this is a morbid outlook on life, it can be used to inspire your actions and financial decisions. Journey to financial independence. Life your best life and have the time of your life.

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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.

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Video Summary

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.

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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. 

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Child wealth

How To Make Your Kid A Millionaire

Money Maroon

One of the biggest regrets for most adults is not starting to save for retirement earlier. If this is your biggest regret or a regret that is high on your list of regrets, why not take the steps necessary to prevent this regret from being a generational regret. Have you ever wondered how to make your kid a millionaire? Why not give your children an advantage in the game of financial independence and wealth? Contribute to your child’s future early, often and consistently.

Savings

Many strive to save for their children, but few do. If you are able to put away $10 per month for your child, you are a head of the game. On the journey to financial independence, time is your child’s biggest asset. Imagine saving $10 per month, that is $120 per year. Over 18 years, that is $2160, not including interest. If you are in a better financial situation and is able to put away $100 instead of $10, that is $21,600 over 18 years, not including interest.

While interest earned on your savings account at an average bank is very low, high yield savings accounts can offer more than 20 times the interest rate of your average bank. A high yield savings account can turbo charge your child’s savings account.

How to make your kid a millionaire – contribute to your child’s savings account early and often.

Stock Market

While minor’s cannot invest in the stock market, you can do so for them. You may open a Guardian Account or a Custodial Account for your child.

Guardian Account

  • You are able to retain ownership of the account
  • Gains are taxed at your tax rate

Custodial Account: 

  • The child owns the account although you are in control of the account
  • Gains are taxed at the child’s tax rate
  • Note that once the child reaches 18 or 21, the assets in the account come under the child’s control

Roth IRA

You may also open a Roth IRA for your child. We are proponents of Roth IRAs because of the many advantages. For Roth IRAs for kids, the only barrier is income. Once the child has taxable income, an account can be opened. However, the same contribution limits applies for the account as any other Roth IRA.

How to make your kid a millionaire – invest early and often.

529 Plans

The third rung in your child’s wealth building chest is a 529 plan. Let’s face it, college is expensive and seems to be getting more expensive.

  • Average public university cost per year: $10,116 
    • Public university cost to graduation (average): 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

By contributing to a 529 plan, you are able to offset some or all costs associated with a college education. In many States, two 529 plans are available, an investment plan or a prepaid plan.

  • The investment plan allows you to contribute by buying and selling shares offered by the State or the State’s agent (similar to investing in the stock market).
  • The prepaid plan is based on the cost of attending a college. Here, you are prepaying the cost of attendance.

While 529 plans are not deductible on your federal tax filings, many States allow you to deduct a set portion of your 529 contribution from your State tax filings. As such, contributing to your child’s future and also receiving a State benefit. A win-win of sorts.

How to make your kid a millionaire – Reduce their college cost burden.

Conclusion

On your journey to financial independence, it is only natural to wonder what can be done to give your child an advantage on their journey. Time is your child’s greatest asset. As such, contributing to your child’s future early, often and consistently will greatly increase their chances of financial success. Saving, investing and funding a 529 plan are instrumental financial tools that you can use to jump start your child’s journey to financial independence. Make your kid rich.

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Video Summary

Do the math

HSA and FSA

Money Maroon

As we come to the end of the year, based on your health insurance, some are rushing to the doctor to use their use it or lose it funds, while others are making appointments for the next year. The group that you are in depends on your health insurance coverage. Do you have a Health Savings Account (HSA) or a Flexible Spending Account (FSA). While similar in some aspects, FSAs and HSAs are very different. However, both HSAs and FSAs are tools for your financial independence toolkit. Take advantage of these plans if you can. 

HSA

HSAs are savings accounts that are available to those covered by a high-deductible health plan. A high-deductible health plan is defined by the government, but is typically an insurance plan that only covers preventive services before a deductible is charge.

Minimum Deductible For HSA Account
Year Single Family
2019 $1,350 $2,700
2020 $1,400 $2,800

For 2019, the minimum deductible for a high-deductible health plan is $1,350 for an individual and $2,700 for a family. For 2020, the minimum deductible for a high-deductible health plan is $1,400 for an individual and $2,800 for a family. If your health insurance plan meets the minimum deductible noted above, you qualify for a HSA account.

In view of the deductibles associated with HSAs, outside of preventive services, the amount you pay for covered health care services before your health insurance plan kicks in is high when compared to other plans. However, HSAs allow those eligible to save on a pre-tax basis to pay for qualified medical expenses, for example deductibles, copayments, coinsurance, and other expenses.

Contributions
Year Single Family
2019 $3,500 $7,000
2020 $3,550 $7,100

With an HSA account, both you and your employer will contribute to the account.  In 2019, you can contribute up to $3,500 for self-only coverage and up to $7,000 for family coverage into a HSA. For 2020, you can contribute up to $3,550 for self-only coverage and up to $7,100 for family coverage into a HSA. Importantly, HSA funds roll over year to year if it is not spent. Further, an HSA may earn interest or other earnings, and can be invested. As such, a HSA account can be used to grow  your money tax free. As an additional benefit, after age 65, your contributions can be used for non medical expenses without penalty.

HSA is said to provide a triple tax advantage:

  • Contributions are tax-deductible;
  • Withdrawals are tax-free if used to pay for qualifying expenses; and
  • Once you reach age 65, non-medical withdrawals are taxed at your current tax rate

FSA

FSAs come as part of a benefits package from an employer and can be used to cover medical expenses. FSAs allow you to set aside money, on a pre-tax basis, for certain health care and dependent care expenses.

Contribution Limits

Like HSAs, the government determines the limits of FSAs. For 2019, FSAs are limited to $2,650 per year per employer. Your spouse can also contribute up to $2,650 in an FSA with their employer as well.

Once you have elected to contribute a certain amount into a FSA, the amount is incrementally taken out of your paycheck. Interestingly, the amount you elect to contribute in a FSA account is available following enrollment for use. As such, if you elect to contribute $2,650, and have $2,500 in qualified expenses, that expense will be covered immediately. However, if you leave your employer in the middle of the year, you will likely need to pay back the funds that you have spent that was not yet taken out of your pay check.

Further, unlike HSAs, contributions to a FSA are typically use it or lose it. Meaning, if your contributions are not spent in that  coverage year, that amount does not roll over. However, employers are allowed to:

  • provide for a roll over of at most, $500; or
  • provide an additional two and a half months to use the money.

Therefore, if you have a FSA, it is important to select a correct contribution limit.

Conclusion

While similar in some aspects, FSAs and HSAs are very different. However, both HSAs and FSAs are tools for your financial independence toolkit. Take advantage of these plans if you can.


HSA FSA
EligibilityHigh deductible health planEmployee benefit package
Minimum Deductible2019 Single: $1,350
2019 Family: $2,700
2020 Single: $1,400
2020 Family: $2,800
Use It Or Lose ItUnused balance rolls over to the next yearUse it or lose it, unless Employer allows at most 500 to roll over to the next year
Taxes & Contributions Contributions are Tax deductible and Pre-Tax when taken out of payContributions are Pre-Tax
Taxes & Disbursements Disbursements and growth are untaxedDisbursements are untaxed
Contribution Limits2019 Single: $3,500
2019 Family: $7,000
2020 Single: $3,550
2020 Family: $7,100		2019 Single: $2,650
2019 Family: $2,650 per account
Determine Contribution AmountYou can change amount to contribute within the contribution limits at anytimeYou can change amount to contribute at open enrollment, a change in employment, or a change in family status

Use the tools available to your advantage on your journey to financial independence.

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