The FI(ner) Things

Financial Independence is not a new idea, but as the world rapidly changes, the ways in which one can reach financial independence can and have changed. I’d argue the wall of possibilities has extended in all directions. For example, the internet has thrust open a door of limitless opportunity. Not only can the internet be used to source inventory of all kinds, from real estate, to vehicles, to tangible goods of all kinds, it also provides a multitudinous marketplace in which to sell your merchandise. That alone is a marvel, but not even the half of it. We have access to a breadth of ideas, wisdom, and practical application like never before. Think blogs, podcasts, and books, and it truly is an upward spiral as a good podcast or blog can connect you to a (gravy) train of stellar book recommendations, other bloggers you’d have never heard of, and yet more podcasts. The virtuous cycle goes forth in happy triumph.

The information age can readily lead to information overload, but thankfully, within financial independence spheres, the ideas collect themselves into broad categories and within them, FIner (ridiculous pun most certainly intended) sub-categories. For example, “real estate” is one such broad category, and within this, the FI levers someone might look to pull are “house hacking” (further divided into say renting part of your house, buying a duplex/triplex and living in one unit while renting out the others, renting out your garage/attic space, etc), “house flipping”, “geo-arbitrage” (moving to lower cost of living area) and so on. Another main category is “food”. Sub-categories could look like “changing where you grocery shop”, “reduced or eliminated restaurant meals”, “setting a per person/per meal dollar amount budget” and so on. Oh, and like I could run a clothing resale business and not include that as one of my favorite levers! The main category would be “clothing” and sub-categories could look like “a clothing ban”… HA.HA.HA! Yeah right, not on your life. Sorry to the folks who swear by it, but I’m convinced I’ve found a more excellent way:) But in all seriousness, a clothing ban could work for some people, for me, I prefer: “selling your own closet excess” (and maybe even offering your services to other people with bulging closets if you develop proficiency), “retail arbitrage”, “clothing flipping” and so on. Not everyone pursuing financial independence is interested in pulling all the same levers, nor do we need to be. You may also have seasons where some levers make more sense than others, so allow space for your levers to change over time. Keep in mind that as you gain more control over your time by saving at gloriously high percentages, you will have more time to think through and understand levers that previously seemed overwhelming. A perfect example for us is the HSA (Health Savings Account), which I will provide more explanation of below. So with that, allow me to set the stage.

Imagine you and I are in a moss-covered clearing in the woods. The ground is cool and damp beneath our bare feet. Before us is a great and looming wall made of dark, deeply ridged wood. The wall is replete with vintage metal levers. There are engravings of the various categories that can carry you towards financial freedom – real estate, transportation, careers, education, side hustles, and such a great quantity of other options. You reach out your hand to pull the closest one – but wait. Stop and give this decision some thought. What will it feel like to pull these levers? Will they all feel about the same, or will some feel stiff and unyielding? Will all these levers work at the same time or should they be pulled in a specific order? Are some levers so high as to be completely out of reach, and if so, will they always be out of reach or will pulling lower levers allow access to higher levers later on? The thinking could go on indefinitely, but it’s not a waste of time. My advise to you? Start with the ones that already feel familiar. Have you ever had or do you currently have a credit card? Well friend, stretch out your hand. The time has come to pull a lever.

  1. Open a rewards credit card. I started with Chase Sapphire Preferred which had a yearly expense of 95$ and offered 3% back on travel/dining and 1% on everything else. We eventually dropped that card in favor of a Chase Freedom card as it has no yearly fee and pays out 1.5% on all purchases – we are not big on travel or dining out so 1.5% on all purchases works out far better for us. The card we used before this? NO REWARDS AT ALL. Is that what you are currently using? In this day it is not hard to find a perfectly fitting reward credit card that fits your shopping patterns. A note of caution: you must pay the card off in full every month, no oopsies allowed, be responsible or don’t do it at all. The lever went down like a sharp knife through warm butter, didn’t it? You’re just getting started. Doesn’t it feel amazing knowing the money you previously spent with no kickback is now spitting off a percentage right back at ya?!
  2. Reduce your cell phone bill. Switch to the lowest data plan. Use a thing called “safety mode” to not incur overage charges. Switch to an MVNO. Call and see if a better plan exists since you signed up for your current plan, the provider is not really in the business of keeping you up-to-date on these kind of changes. How did that lever feel? Still pretty smooth? How does that extra money feel in your bank account? Let’s go for round three.
  3. Put yourself on a budget – I saved this one until now because a credit card and cell phone bills are much more common and familiar. A budget? That may feel like murky water. Read my post BOUNTIFUL BOUNDARIES (HOW TO START AND LOVE A BUDGET) if you haven’t, that should add clarity to the subject. Why is that on the wall of FI levers? I’m overjoyed you asked. Is actually one of the most essential starting points. You must know where your money is going and be the supreme ruler over all its’ dispersings. I know that lever won’t go down easy if you are new to the discipline of budgeting, but you will struggle with all future levers if you leave this one in the “up” position. Don’t be afraid, pull it down, and use some oompfh.
  4. Increase your life insurance. Say what? That seems like an increase in expense, not a decrease. Yes, it is, but pursuing Financial Independence will help you see if perhaps you are underinsured. For once, you will see what your yearly budget actually is and that your needs are more than you have coverage for. Great pull, and by now, you may be seeing a bigger picture beginning to come into focus, a picture indicating there is intense inter-connectivity in personal finance and that no lofty goal is achieved by accident.
  5. Build an Emergency Fund. Maybe you don’t have one at all, or maybe you are significantly underfunded. Common practice here is 3-6 months of living expenses. It helps to know what your monthly expenses are so your emergency fund isn’t ‘underproved’, hence lever four/budgeting coming before lever five. There is a ton of banter around this topic in the FI community, which you can research if you want to hear the arguments for and against an emergency fund. I have a low risk tolerance so I’m a fan, but a good compromise is to put this money into a high-yield savings account so it’s not suffering from inflation-related deflation.
  6. Start contributing to an employer 401-k. You read that right. Start. I had it set to zero before discovering Financial Independence. I wasn’t even taking advantage of the employer match program for a number of years. Don’t feel bad if this is you, but don’t wait another moment to pull that lever. It’s a rather quick correction – and now you know what your budget has room for (or doesn’t, in which case there is a need to carve things away to make room for this very important savings vehicle.) Now your yearly tax burden has shrunk while your investments are growing (read The Simple Path to Wealth by J.L. Collins for beautifully sound investing advise.) If you are self-employed, Open a SOLO 401-K. You can also give yourself an employer match in addition to employee contributions, so go for it!
  7. Reduce your food budget. Do you live near Aldi and/or Lidl, or a similar value-focused grocery store? That will make all the difference in being able to eat well on a budget. Seriously reduce your dining out addiction. This will be hard at first, but the pain will gradually lessen. This one requires a good deal more pre-planning and also some creativity. Have you ever thought of “eating out” at a grocery store? Not the expensive, fancy grocery stores where you spend more than a restaurant meal. I’m talking about your go-to value grocery store: get all the fixings for sandwiches and a bag of fruit for a side, throw in some bottled water and voila, you have dined out on the very cheap. It really works, and you avoid less healthy/more costly dining out. Pull the food lever in as many ways as you can.
  8. Take a hard look at your vehicle inventory. It is time to trade in a less gas-efficient vehicle? Downgrade to an older model? Think about how your budget will be reshaped by a lower or non-existent car payment, by reduced gasoline cost, by reduced property tax, lower car insurance. Might you lose some status in this transaction? Yes. Might you press further towards actual financial well-being and freedom? Absolutely. Pull the lever. Don’t let status hold you hostage. While we’re on the transportation category, call around to find the best car insurance rates available to you.
  9. Reduce your housing expense. This can be a huge win, depending on your tolerance for difficulty and/or sacrifice. Do you have a big house with extra space to rent? It might be easier than you think to rent a room. If you can’t stand that idea, what about renting space for storage, such as your garage? There are numerous possibilities here, don’t let what I’m saying limit your thinking, brainstorm away. What if you live somewhere exceedingly expensive, have you ever thought of moving to a lower cost area (geo-arbitrage)? Classic downsizing is an option. Once you feel your rent/mortgage is at an acceptable amount, tackle the smaller things like what you pay for internet (again, call to see if a lower rate can be arrived at, or switch providers). Look up ways to save on water/electric. Down the road you may want to look into solar options (it may seem unrealistic now, like one of those high up levers on the wall, but as hinted at, I assert that pulling lower levers will indeed help you reach the higher ones.) Tack on to this category calling around to get the lowest homeowners insurance available to you. I realize the levers are getting increasingly hard to pull, requiring more time and energy. But hopefully you see that there are easier ones to start with, and that you are building momentum and achieving great things along the way.
  10. Resell your clothing. And your kids, and anyone else who will trust you to sell their clothes for a share of the profit. You have to focus on what you pay up front so there is room to sell at a break-even minimum, and better yet, for a profit. Imagine being paid to wear your clothes. I’ve written many posts about this so I won’t say more than go read them:)
  11. Open an IRA. Now that you have saved on everything from food to housing, it’s time to put that money to work in an IRA. Not a hard lever to pull once you have worked at forcing down a good variety of other levers.
  12. (Finally!) Set up a will/estate plan. Thanks to proper budgeting, you have been able to put your money into growth vehicles like 401Ks and IRAs. Now you need to make time to put comprehensive plans in place for all these funds so if anything happens to you, it goes where you want it to, rather than where a court system decides it should go.
  13. Dig deep into a side-hustle or two. If you determine that you want things to go faster in your quest for financial independence, look no further than the trusty side hustle. There are countless books/posts/podcasts available on the subject so avail yourself of all that is out there. My favorite, undeniably, is clothing resale (not just selling what’s in my closet, but sourcing underpriced inventory and flipping for profit, just as others do with house flipping/car flipping). Pull this lever and the next one will be a breeze.
  14. Open a taxable investment account. With all your side hustle income, what to do?? You already maxed a 401K and an IRA. Hmmm. There is such a thing as a taxable account, also commonly called a brokerage account. Deposits are post-tax and withdrawals are not tax free. What is the advantage then? It is yours to take any time without penalty (other than ordinary taxes), and if invested wisely and left alone, this account is growing at far better rates than any savings account.
  15. Read a ton of books from the library. The more you know the more you want to know. It creates many-a virtuous cycle: improved work flow, optimized organization, and enhanced motivated to learn that breaks down the fear barrier to pulling new levers, including ones you thought were of no use to you or too far above your IQ level;)
  16. Open an HSA. This is my most recent lever, and one I felt too overwhelmed by a few years ago. Now that I have all the other above levers pulled (I am writing from experience as to be as helpful and accurate as possible), I felt ready to tackle something new. And you will, too. Don’t fear the journey, fear never getting started.

How do you feel at this point? I truly hope you are not overwhelmed by the magnitude of the lever wall (especially knowing the examples I provided are by no means an exhaustive list). Instead, I want you to feel exhilarated that so much positive change is available to you. There is no rush to pull every lever on the same day or week. It has taken me years to get to some of them, but these “higher” levers often provide a greater sense of reward and accomplishment. Keep pressing into new territory. One day you will find yourself making a new home in the land of the free.

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