finance
Jonathan & Brad explore the world of Financial Independence. They discuss reducing expenses, crushing debt, building passive income streams through online businesses and real estate. How to pay off debt, Crush your grocery bill and travel the world for free. No topic is too big or small as long as it speeds up the process of reaching financial independence.
Brian Eufinger discusses how the test-optional era is reversing as major universities reinstate testing requirements for admissions and maximum merit aid. He notes that schools like the Ivies, military academies, and state systems in Georgia, Florida, and Tennessee have brought back tests, increasing the importance of test preparation.
Brian Eufinger explains that epic levels of grade inflation have made unweighted GPAs extremely competitive, citing UCLA's bottom 25% having a 3.95 unweighted GPA. He emphasizes that high school GPA now matters longitudinally from the very first day of ninth grade and that course rigor, such as AP classes, has dramatically increased.
Brian Eufinger highlights that small private and rural colleges have been closing or merging at a clip of roughly one per week over the past year or two. He recommends that families conduct financial due diligence using publications like Forbes to ensure a target college remains solvent.
Brian Eufinger notes a massive shift in high school education as mandatory personal finance and new AP Business and Personal Finance courses expand across 33 states, rising from only eight states in 2019. This allows students to take practical business classes without diluting their weighted GPAs.
Brian Eufinger details how the rise of artificial intelligence has led many universities, such as Georgia Tech, Washington University, and Miami, to drop their supplemental essays. He predicts that this removal will drive a surge in application volume as students face fewer barriers to applying.
Brian Eufinger explains that recent digital revisions to the SAT reduced questions from 154 to 90, while the ACT reduced questions from 215 to 108. Because fewer questions are asked on each test, score volatility has increased, making careful preparation and multiple test sittings more important.
Fritz Gilbert shares his presentation from the Economy conference, outlining a 20-step checklist to prepare for the final three years before retirement. He emphasizes that 75% of the steps are non-financial and focus on building the lifestyle, mindset, and purpose needed for a successful post-career life.
Gilbert recommends tracking an entire year of actual spending three years out from retirement instead of relying on general guidelines or macro estimates. He explains that tracking real expenses captures material one-off items like annual property taxes and insurance bills.
Gilbert discusses Dr. Riley Moynes' four phases of retirement, noting that 85% of retirees experience phase two, known as loss and lost. To avoid this disorienting transition, he argues that pre-retirees must experiment early with side ventures, hobbies, and Dan Halet's four Cs: contribution, creation, curiosity, and connection.
Gilbert explains that transitioning from accumulation to decumulation requires deliberate psychological and financial preparation starting two years before retirement. He suggests building a multi-year cash liquidity bucket ahead of time to help defend against sequence of return risk.
Gilbert shares a tactical exercise he and his wife used called the activity jar, where each partner writes down retirement activities on index cards over the course of a year. They placed 100 total ideas into a cookie jar to pull from once they officially retired.
Financial planning often overlooks the assumption of how long money needs to last in retirement. Many calculators default to age 95 or 90, which may be significantly longer than the average life expectancy. This can lead to over-saving, working longer than necessary, or underspending during prime years.
Dr. Bobby DeBoys highlights that the average life expectancy in the U.S. is around 80 years, with men often living slightly less and women slightly more. However, financial planning tools commonly use 90 or 95 as the planning horizon, creating a significant gap.
Aubrey Williams explains that the common practice of planning retirement to age 95 stems from a fear of running out of money, which is a valid concern. However, this conservatism can lead to unintended consequences like saving too much, working too long, or not enjoying retirement spending when younger and healthier.
The conversation shifts to personalized financial planning, considering individual factors beyond averages. Dr. Bobby DeBoys suggests that lifestyle choices, genetics, and proactive health management can influence an individual's longevity, allowing for more tailored financial strategies.
A hypothetical scenario illustrates the significant financial impact of adjusting longevity assumptions. Planning for a $100,000 annual expense for 30 years (to age 95) requires $3 million, whereas planning for 15 years (to age 80) reduces the need to $1.5 million, a 50% difference.
Aubrey Williams emphasizes that longevity planning should also consider 'healthspan' – the period of healthy, active life. This acknowledges that expenses may not be linear in later years due to potential healthcare and long-term care costs, requiring a nuanced approach.
Dr. Bobby DeBoys discusses how individual factors, including genetic predispositions revealed through testing and proactive lifestyle choices like diet and exercise, can inform a more personalized longevity estimate for financial planning.
Page, a "late starter" to Financial Independence (FI), shares her journey from a negative net worth at age 44 to aiming for FI by 2025, all while living in Los Angeles. She emphasizes that achieving FI is possible even with an "ordinary income" and despite living in a high cost of living area.
Sam, who discovered FI much earlier than Page, advocates for a "retire often" philosophy rather than just retiring early. He emphasizes that true FI allows for intentional purchases that bring value to one's life, rather than excessive spending for its own sake.
Page maintains a 50% savings rate, viewing her past experiences living on less as good training for financial discipline. She utilizes a Roth IRA as a portion of her emergency fund, appreciating the ability to withdraw contributions tax and penalty-free.
Sam highlights his early advantages in pursuing FI, including parents who invested in the stock market on his behalf and his lack of student loans. He notes that not having to pay student loans freed up significant monthly income for investing.
Page emphasizes that the most crucial aspect of her FI journey has been the mindset shift, allowing her to feel freer by earning more but maintaining a lower spending level. This shift moved her focus from desiring material possessions to valuing the freedom and different opportunities FI provides.
Dr. Jasper Lee, a clinical psychologist, discusses the psychological complexities of discussing financial independence (FI) with a significant other. He highlights that money conversations often become emotional because they touch on deeper issues like security, status, and self-worth, rather than just the monetary figures themselves.
Dr. Jasper Lee reiterates his previous point that the journey to financial independence (FI) is primarily psychological, with mechanics playing a smaller role. He notes that changing one's thinking, habits, and behaviors is often the most challenging part for individuals pursuing FI.
Dr. Jasper Lee advises against leading financial independence conversations with spreadsheets or arguments for being right. Instead, he suggests initiating discussions with curiosity and questions to foster better communication and understanding with a partner.
Dr. Jasper Lee, a guest on Choose FI, clarified his professional standing by stating he is a licensed clinical psychologist and an assistant professor at Harvard Medical School. However, he emphasized that his participation and advice are in his personal capacity and separate from his institutional roles, advising listeners that he is not their psychologist.
Dr. Jasper Lee explains that money is not a neutral topic because it is deeply intertwined with fundamental psychological needs and concepts. Discussions about money often invoke feelings related to security, social status, control, and self-worth, making them emotionally charged.