This Year Everything Changes | Ep 580

26:15She's really doing it's a great service. She is a good foil. Thank you, Susie. Thank you, Susie. But seriously, what's so nice about FI, and I think this to me was the very first thing that turned me on to FI, was, wow, I have something to shoot for and I control it. So what it means really simply is when you reach that number, and like Jonathan said, At its essence, it's your annual expenses multiplied by 25. Okay. And this is agnostic for what your expenses are. We're not here to say you need to live on$10 ,000 a year or 40 ,000 or 80 or whatever it is. It's whatever your life costs, you multiply by 25 and that's your fine number.

26:58So really simply, if your life expenses cost$40 ,000, your fine number is a million. If your life costs 80 ,000, your fine number is 2 million. And this just works really simply. And ultimately what we're doing here is we're getting you to a point where work is optional. Okay. Because you have now built up enough of a net worth that you can pull out 4 % of that every single year and live off of that amount. So really simply, this is the 4 % rule of thumb. If you have a$2 million net worth, investable assets net worth, you can pull out 4 % of that each year. So just go back to high school math, right?

27:412 million times 0.04, that equals 80 ,000. So if your life costs 80 ,000 or less, in that case, you are at financial independence. You do not need income in that year because your assets kick off enough that you can sell them and or whatever, the dividends, et cetera. But in essence, you're selling assets from your net worth and that is covering what your life costs. And at that point, work is completely optional. Did you notice that as Brad was pointing that out and he was going through that calculus, that actually income wasn't a factor, right? What you make wasn't a factor. Now, here's what's really interesting to point out.

28:26Go look at every single other non-financial independence calculator, and specifically, go look for retirement calculators on the internet. they're all going to ask you for your income. And it makes it sound, and even Susie in this case makes it sound like unless you have a specific income, you're not going to be able to retire. And expenses do not determine your financial independence number in any way. It's an expense driven calculation. Now, we can go farther and we will, and actually I'm going to hit this really hard. Some individuals will rightly point out, well, how do I account for social security?

29:05Or how do I account for a pension that I'm expecting in the future? Okay. And how do I account for the fact that maybe I'm paying off debt? And so my expenses right now are going to decrease. And I'm going to be talking extensively about a topic that I'm calling effective need, right? And that's borrowed really, I think from like FAFSA out of the calculations. But I think it works for us in that financial independence is a static number that gives us a North Star. Effective need is a true reality in terms of a projection. And that's something we want to move to. But I'm going to say this now, going back, and you're going to hear in a way that we've never done before.

29:39And I'm going to give myself permission. And I hope you understand the reason. The tech stack that I've been working on, the community app that I've been working on is now a core part of this podcast. It is an essential core part because it is the place where you can take the single actions. It is the place where we can build the case studies. It is the place where we can go into the numbers. It is the place where whatever we say on the show, and it's very challenging to make math the story, very challenging and so much easier if we can work with similar tools. And even if those tools need to be tweaked or optimized, so now you can, yes, you can go do that rough financial independence calculation, the very easy one that we said, And you can do it on a calculator too.

30:23So I'm not like blowing your mind with that, but it is on our community app. But even more than that, we have a financial independence plan tool that will start moving you towards this context of effective need. Now it's still in beta, but I say that it's a very strong beta. There's still some tax logic that's happening at the moment that's being wired in, but there's now 20 ,000 users on this app over the last year as we go. And that was our beta year. and now it's ready to kind of, you know, be talked about, be tested. We're going to start doing validation this year, but we're going to start building our financial independence plans together.

30:57All right. Now it's your information. It's your data. That's, that's all fine. It's your stuff, but it has a community aspect right next to it. So when you have a question about something, when you have like, I'm stuck on this or how should I do this? Or what does this mean? the natural questions that come up right next door, right next to it, you're going to have an easy place. You're going to be able to go and get that troubleshooting, that feedback. And while all of that sounds good, what takes us to the next level is the local groups. The local groups is what is going to take all of these ideas and you're going to start hearing people talk about how the fire is spreading in 2026.

31:36So when we say this is the year everything changes, These local groups have happened because people care about helping others start to understand money rules. Not to make money off them, not to profit off them, but we just see that there are people that are struggling whose lives would be easier if they had a little bit of the information that a lot of us have started taking for granted. All right. What does that look like when you started being able to have a way to take friends and family member and without dogma and without controversy, being able to take them to a place where they don't have to worry about being sold something?

32:10There's no agenda. It's just learning the money rules that have underpinned this entire game the whole time. In a nonjudgmental way, you can start going through these phases of discovery to now for the first time awareness. I know my number. If you did that very simple calculation, you're already basically in awareness as long as you kind of understand the why of it. And then now after that, and this would be within two sessions, control. I have a plan. For the first time, I have a plan. It's not saying you're going to be there tomorrow or that you're at financial independence. Some of you might be two years out.

32:45Some of you might be 15 years out. Some of you might be 20 years out, but I, for the first time I have a plan because I know where my North star is and I understand the rules of how to get there. And from there, that's where the community starts. The joy really starts to come in because now you start to have things like F you money, which we can talk about later. You could also just call it optionality. You have options long before you reach financial independence, and you're starting to have the luxury of thinking about things like optimization, right? Do you see how powerful this is that within a matter of weeks, someone goes from discovery to optimization and inevitably to independence?

33:26That's why this changes. Where does it happen? It starts on the podcast, but that goes to the local groups. The local groups is where a movement happens. And how do you, how do you harness that in a way that they get the support they need? It's this community tool. Local groups will now have a consistent platform to be able to have consistent presentations, consistent resources, calculators, and tools that move along with the flow of what we're talking about on the podcast and what's being talked about in the local groups. yeah it's super powerful there's no doubt about it and you and i i've been adamant about creating an event invite system for our local meetups because i i want meetups and we've we've always used that term but this can just become a part of life and we've had in our richmond local group we have people who are taking morning walks together we have people who are getting together for lunch or coffee.

34:28And even me, when I go to a meetup, I went to the last two case studies, which are really just extraordinary. And I hope if you haven't been to a case study, if your local group isn't doing a case study, that again is something we can all share together. We can share the templates for these case studies. We can show you an example of them. And they are remarkable. It's truly powerful to have an entire group of people come together and share ideas and answer questions and work through someone's financial life. And we all learn, we all learn together. But at the most recent one, somebody talked, Hey, we got together for coffee, six of us.

35:06And I'm like, I would love to go. How did I not know about this? And that's something, Jonathan, that is going to be posted in our local events. And we're all going to find out about it. You've created something where we get a weekly digest email that just comes out. It's real simple. It shows you what are the events that are happening in the next couple of weeks in your local group? What are some of the conversations that are going on on this app? What are some new member introductions? Go say hello to somebody. We just had somebody from, where was it, Denmark or Finland that just joined? What a cool thing.

35:39Like, I want to pop in and say hello. And it is really something special where we can now know about these things. We can get emails. I got an email two days ago. I'm going to miss the next local event, unfortunately, because I'm going to be down in Florida, which I'm thrilled about at this Camp Fi, but I got my email a couple of days ago. Oh, yeah, there's a local case study this coming Sunday. That was just really neat. This is what we've envisioned for years and years and years. And you talk about, we've talked for years about taking action. Fi is about taking action. You've done it, but this also becomes very micro, right forget our app forget everything like we said everything changes but everything stays the same FI is about taking action to make your life better and that starts I'm still I'm doing this myself it's December 30th as we're recording this just a handful of days before this episode comes out and I'm putting together my net worth Saban for 2025 like you said not 20 minutes ago one of the important things to do when you get started with FI, but even every step along the way is know your FI number and also know your net worth and know what does your life cost?

36:54I do this. I've had this podcast for nine years. I've been in the FI community for 15, but I still do this every quarter because it's important. And when we can remind ourselves, when we can talk about it on the show, Jonathan, all this stuff perpetuates. And this is why this community is not just for people getting started, certainly. And it's not just for grizzled old veterans. This is for everybody because it's a living, breathing organism where we all learn. And we jotted down a few of these segments that we want to do. And these are things that now everybody's going to be able to contribute in this app.

37:30And just a few of them, I'm going to rattle them off real quick because they're fun. Frugal Winds of the Week, Life Hacks, travel rewards questions, the old hot seat that we used to do, which I just loved, timely news, real people's budgets. I actually, I sent this out on my newsletter a couple of weeks ago, asking for people to send in and I sent them a template of their actual budgets. And we're going to do a couple episodes on that because it's going to be fun or even just a segment here or there, 10 minutes. What does your life actually cost? Because a lot of people don't know. Even going back to your cell phone, what are you spending on your cell phone?

38:03What are you spending on your term life insurance or your umbrella insurance? There are some people who are spending$200 a year. I've seen somebody post on our Facebook group that they're spending$700 a year. And it's like, if we all knew this or we shared it together, it really means something. You actually, you're armed with knowledge, right? Just, and just real quick, we, we have all of, all of our friends and experts who can answer questions. We can have, I think you talked about the Phi yell, right? the old, I've reached five. You could do, we could do something sharing in people's wins, obviously episode feedback and, and just things like this.

38:40There's so many things that we can do and it's not just limited by us, Jonathan. Well, I think what you just described was when we find the most joy recording episodes, it's, those are the things that we're doing. And so when Brad and I, you know, kind of level set at the end of 2025 to say now, all right, you know, what do we want to do? Are we, are we ready? Are we, are we ready for this? If we're going to do it, we're not just doing it to do it. We're doing it because we think we have the pulse of where this needs to go. Right. And that's why maybe it took longer for us to get here than maybe, you know, either of us would have wanted was exactly that.

39:18Yes. We think it's not that we're there. I mean, what's going to happen. And this was the magic of before we're building this in front of you and maybe we will fall flat here and there, but we're going to fall forward, right? So maybe not flat, but we're going to fail forward and we're going to keep building. And so one of the things that I want to do is I want to channel the work. If I'm going to spend this insane amount of time developing, I want to do it for this community with this ultimate goal in mind. And if Brad, you're mentioning my cadence of things, there's no reason that needs to be an isolated thing.

39:55I think one of the first things individuals need to do after having a number is they need, we just said, it's all expense driven. We need to do an expense audit. We need to do an expense audit and we need to do it, you know, once a year. I don't think an expense audit, there are budgets and there are very compelling reasons to have budgets. And there are people that absolutely need budgets. And I would say, you know, I could give you, I'd be happy to give you a recommendation. I think YNAB as a budgeting tool is probably as good as it gets. You could maybe say Monarch Money is another one. I think Dave Ramsey has some other thing that's out there as well.

40:28I'm not sure if you better pay for it with a credit card. But I think if you need a budget, YNAB is your best bet. But often the financial independence community is kind of past that point. They don't, it's not that it don't do not feel guilty if you need to budget. In fact, many of you would probably be helpful. But if you recoil at the word budget, it doesn't excuse you from needing to know where your money is going. Doesn't mean you need to watch it as closely if you're in the control phase and you're in the optimization phase. But I think if our financial independence number, our North star is based on expenses.

41:01We need to make sure that our expenses are aligned with our values, that there's alignment there. And if you're spending on something, if you're spending money on something that doesn't align with the outcome that you want, you should really double check yourself on that. And Brad, I know one of the notes you have on here is just the sheer value or the power of cutting a recurring cost. Should I give you that soapbox? I literally was going there already. That's absolutely hilarious. I don't care what you said. That was about half. Yeah. And I love that expense audit. I think that talk about a call to action for everybody is it doesn't matter how long you've been on the path to five.

41:40This is something that's really important. I think frugality has its place, but it's not frugality for being a miser or depriving yourself. It's for cutting to the essence of what you actually value in your life. And there are plenty of things that I spend money on freely, but there are many things that I've cut ruthlessly. And I'm really happy about that, frankly. I'm good on both sides. I'm good spending money on things that I value. I spend a ton of money on my health. Just flat out, I have no qualms spending on my health. But I drive a Hyundai Elantra. I cook my meals, 21 meals a week in my house.

42:22And I gleefully do that. I don't own practically anything. It's incredible. And I think it's important because really there's two sides of saving money. Okay. So Jonathan, every hundred dollars we cut out of our budget. Okay. A hundred dollars a month out of our recurring expenses is a full$30 ,000 less you need in your five pot of money. All right. So again, isn't that crazy? 30 ,000. But it doesn't stop there. that's the most important thing is you're not just sitting there that money isn't evaporating that money is then being invested and most likely it's being invested in low-cost broad-based index funds something like an s &p 500 or total stock market fund and on average that's going to grow we'll say roughly eight percent okay that's back of the envelope over 20 years which is really i just want to see the back and see what it looks i feel like it has a lot of notes It has a lot of math.

43:23I've got multiple on both. Stupid accountant speak. I can't get rid of it. 10 years after I left my accountant job, I can't get rid of it. So over a 20-year lifetime, really 20 years is a FI lifetime. That's what we think of really for most people can do it quicker, but I think 20 years is a fair summation of a FI investing lifetime. You invest that$100 a month that you just cut out of your budget, then you're sitting after 20 years with$60 ,000. So Jonathan, this is not just, oh, I cut 30 ,000 out of my need. I now have an additional 60 ,000. This is a$90 ,000 swing when you cut$100 out of your monthly budget.

44:08If that doesn't give you chills or realize how powerful that is, I honestly don't know what can, frankly. Wow. Yeah. And what you're highlighting there is it's the aggregation of marginal gains. And we're not just saying, you know, cut the latte to cut the latte, whatever that means. What we're saying is you have a North Star, you have a why you're not running from something, you're moving aggressively towards something, you're moving toward options. And it's not like you have to get to that end mark to realize the benefits of that choice. You get those options all along the way. You're going to find so many awesome detours and unexpected little paths and opportunities.

44:56Brad, I saw somewhere in your notes way back in the day, something about just like luck and surface area. What you create for yourself is just you create opportunity when you do this. When all of your economic output, all of your energy, all of your toil, is locked up in stuff that hasn't been calibrated and aligned around your values, you've limited your ability for luck to strike. You've limited your ability to get an exponential return. You've locked in one path without exploring all the other incredible opportunities that are out there. And you were born to do more than pay bills and die. Oh yeah.

45:37It's so true. And that is what most people do. Sadly, people are, they're sleepwalking through life. They wake up at 60 or 70 and maybe they have a vacation every year to show for it. But that's about it. There was so much stress along the way. I think that is the beauty of FI is we are accruing the power on our side of the ledger. Every dollar we save, we are more powerful. We have more autonomy. We have more freedom. This is about freedom. This is about choice. This is about optionality. We're living the best lives we can live. That's why we're saving money, not to deprive ourselves, not to miss out on a latte or avocado toast or whatever other nonsense people throw our way.

46:25This is about controlling the only thing that matters, which is our time. And it's exceedingly powerful. There's nobody else kings of yore couldn't live the lives that you and I are living, that we are living, all of us listening to this podcast, because we have power and we have time freedom and we have the ability to do what we want with decades of our lives. There is nothing more important than that. We are saving for our freedom. Brad, I just got chills, man. So this is it. That's the show I want to be a part of. I hope if you're listening to a community, you realize with, I'm not saying we've pulled it off yet, but with what the possibility of what could happen this year, you are a part and you're contributing to a show that is unlike anything that has ever existed.

47:18It might become a pattern in the future. I don't know. But this is a show, the idea of which is exciting to me. I want to be around that conversation. That's why I'm like, yep, we got to do this, Brad. Yes, I'll carve out the time. We'll figure it out. We have to have more of these conversations. And the key is you are the conversation. Your path to financial independence has always been the conversation. If we're just limited to my path or to Brad's path, we're done after episode three. It's the community's collective and individual journey to financial independence. because even when it doesn't exactly mirror, every episode doesn't exactly mirror our own life, we can see a shade of it in that individual or collective episode.

48:10We can see the piece of it that we can need. We can start to appreciate the nuance and we need to get as much of that as possible. It has to be collaborative between us and you. That is what we're going to, if you're going to die on a hill, that's the hill we want to die on with the show. That's what we want to do. That's what we want to be a part of. That's why this year everything changes because we're not trying to figure out how to be any other show because that show has never existed. We're creating something that has never existed and we're inviting you and asking and pleading with you to join us to build that.

48:43So what does it look like? How do you even do that? Here's what happens. I need you to create an account on the community app. If you want to be a part of the community, I need you to be a part of the community. So you're going to go to Chooseify, dot com slash local, you're going to set up your account. And then here's the magic of this. We're always going to be running a little bit up behind what we're talking about, right? Almost by definition, we're building this in front of you. So the next thing I'm going to say has just created work for me. Hey, Jonathan, could you find out a way to complicate your life a little more?

49:18Can you sleep less, Jonathan? Can you sleep less? We're talking about something you've already built. No, no, no. As we build this together, it's always going to be the next thing. We're always going to be chasing the next thing because the next thing is going to improve this idea that we're trying to build. And the next thing is, we need your feedback, right? Now, I love the emails. I love the comments. You take the time to send them to us and it's great. We have a radio show. We need your voicemails. So please, you know, I mean, you know, if you're going to either do it or not do it, please just do something.

49:56Send us your feedback. But if you can hear the emphasis, we want to feature your voicemails on this show. We want to converse with you via this asynchronous style and feature your voicemail and be able to talk about those ideas, share your wins with you. And so when you create your account on your dashboard, you are going to now see an option that says contribute to the community or contribute to the show, be a part of the show. I haven't figured out the exact copy yet because after we get off this call, I have to start working on it. But regardless, when you're logging in on your dashboard now, you're going to see an option to contribute to the show.

50:33And once you do that, you're going to start seeing a list of the episodes where Brad and I have put a call to action out to the community. We've taken time to talk about it. And here's why it gets a little bit nuanced. Sometimes we're specifically asking you for your feedback because we want your feedback to be part of an upcoming episode. And obviously, that's a time-sensitive thing. And so we'll be collecting feedback for a window of time. And maybe you're listening to it two years later. But in that context, we will have notes about where you can follow up and get the answers to what it will have the continuity.

51:04And by the way, I know that sounds obvious. We've never had that before. Do you realize how many things have happened three years ago where you get excited about something, you track it through, and it's now a dead link? You know how frustrating it is? I get it. I'm with you. We're going to close the loop. If you take the time to follow through on something and you realize the window's already passed, we're going to go back and we're going to update you so you can track down what happened. But if it's open, leave us a voicemail. Give us the information that you want to share with us so that we have a window to share it on an upcoming show.

51:35And then the second aspect and why I can go in different places is sometimes we're asking you to do something not for us, but for yourself, for you. Document a part of your journey. We are, as a group, going to get into a cadence. It's kind of a tri-prong approach, but here's a really core aspect of it. Individually, we're going to have the opportunity to go through various exercises. So Brad talks about his net worth audit. He does it quarterly. That sounds like a pretty good amount. We don't need to be looking at our numbers every single day. It's probably, Brad would argue, it's actually going to make you suffer, I would say.

52:10You're probably going to not perform as well if you're watching it that closely. But that doesn't mean that we should never look at it. It's a motivating thing. It's an exciting thing. It's something that you can do as you start navigating the boring middle and you start thinking about opportunities to optimize. It's a productive thing. So we'll have exercises like, hey, can we do this together? And another one that I'm very excited about, I hinted at it, was the expense audit. I would like, as a community, we're in various places around the world, we can do an expense audit and we can track, this is not a budget, but this is a cashflow expense audit.

52:46we can track things like our expenses, our food budget. And Brad just asked, he's sending it out to the community as a please do it in Excel. We don't need to do that. We can do it in a way where we can actually track it and we can track our expenses at the individual level year over year. So we now have a way to monitor our personal inflation rates in various categories, right? Does your expense number hold if you've actually just run wild in this category? Well, it's a way for you to kind of safety net check yourself, but at the same point, recalibrate, realign your expenses with your values, not to be confused with a budget.

53:20It's just an expense flow audit. And then on top of that, now for the first time, we'll be able to have the opportunity to talk about aggregate numbers, cost of living in various areas. What is a reasonable amount to spend in food in a family in San Diego, California, or in versus Virginia, or these sorts of things. These are the sorts of numbers that you crave, that I crave, that make an interactive show that allow you to talk about things in a way that you've just never been able to do before, never been able to see before. And we'll have a million variations of that over time. But all of these can help move you towards your goal of financial independence.

54:00Yeah, I love this. This is real time. You're part of the show. You're part of the community. This is helping you. This is helping all of us. We're learning together. We're growing together. And also, like we said, send in your feedback on the episode, send in your questions, send in your wins, your life hacks, your travel rewards questions, and join the local group. Be a part of this. Get involved. Send this in. This episode is coming out January 5th, 2026. Right? So, like I said, my big action for the week is I'm putting down my net worth. You should do that too. Do it along with me. Let me know that you did it.

54:37Jonathan, one of the big things we want, and this is going to be featured on that when people log in, is what are your big goals for the year? What are those goals? What are you shooting towards? What is this? If this year worked out perfectly, what does your fine, and not just money, what does every aspect of your life look like? What are you aiming for? Jonathan, we do the year-end wins episodes and newsletters at the end of every year. And it's so incredibly exciting. It's so motivating. But I think we can motivate each other along the way, not just at the end where we read about what are the wins along the way.

55:12And we root people on. We, the beautiful part of what you built is we can have member blogs. We can have forum threads where people just update. My Mike, who writes into me every single week, back to my newsletter, gives me an update. Bill Powell, who's been on the show, sends me an update on what he's up to in five different areas of his life. We can do this real time. We can all do it together. We can root each other on. We're in this together and we're all sharing, learning, and growing together. So Jonathan, what people are going to see, so January 5th, right? You log in, you're going to see these options to contribute.

55:49You're going to see these options to send in questions. You're going to see this option to send in, what are your big goals? Please send in a voicemail. But like Jonathan said, if you can't. I was being cute. I know, I know. Send us a comment. Send us, yes, yes. Voicemail. We're going to do that. But anyway. So the next week, so next week we actually have Sean Mullaney and Cody Garrett coming on the show to talk a little bit about Roths and that's going to be great. But two weeks from now, so January 19th, Jonathan and I are going to pick up with this new show with you involved. This is the ultimate crowdsourced personal finance show.

56:26And this is our call to ask you to get involved. So Jonathan, I think that's, that's where we leave it for today. This is Brad. This was, this was a joy to create this episode with you, man. This was a lot of fun. Yeah. And what's so much fun is we have been having a ball behind the scenes, just you and I brainstorming and having fun and iterating. And because of the skills that you've built, we can put anything into action. You're extraordinary. You do this in 24 hours, 48 hours, sometimes less. Hey, we have this idea. Let's do it. So to everybody out there, this is not perfect right now. It's not.

57:02We need your feedback. We need you involved. Jonathan can build anything. And this is for us, by us. This is the FI community in real life. Let's build it together. Get involved starting today. To the individuals that have actually already created an account inside the community app over the last year, they have gone through some bugs. our founding members we're just we're starting this year just about 20 000 members and i think i've closed something like 500 some odd tickets out and i just want to say that sounds bad it's actually really good right that's 500 drops in logic frustrated experiences things that weren't quite there you know directionally accurate good ideas but attention to detail and there you know I'd probably have to give a shout out to probably 10 to 20 people, which I won't, but you know who you are inside the community that have put in relentlessly, you know, and at times I'm like, but, but I just want, you know, even when I'm going, Oh, another ticket, I appreciate you.

58:09I appreciate those tickets because we have something, I'm not saying it's perfect yet and it never will be, but it's something that collectively has been built to meet what you have asked for. And what you're asking for has always been very close to what Brad and I wanted for this community. And it's magical. So it's getting there, right? So next year is going to be a year unlike anything that any of us could have ever imagined for this community. And I am so excited to be able to close this episode and say, yeah, you know, the fire is spreading, my friends. We'll see you next time as we continue to go down the road less traveled.

58:50You've been listening to Choose FI Radio Podcast, where we help middle-class America build wealth one life hack at a time.