What You’ve Done to Create Financial Freedom, Vol. 3

0:00We spend a lot of time thinking about how to grow and protect our money. But one convincing text, email, or fake website can put all of that at risk. Today's scams can look completely legitimate, even like your bank. And by the time an alert arrives, the money may already be gone. CoverOn is built for what happens before and after a scam. It monitors for exposed personal information, suspicious account activity, and changes to your credit. And when prevention isn't enough, CoverOn adds expert recovery support and financial protection for eligible losses. Instead of juggling separate privacy, identity, and security tools, you get a more complete layer of protection in one place.

0:49One scam can cost you everything. Protect yourself now. The first 100 users get 20 % off with code RULE20. That's Rule 20 at CoverOn.com slash Rule 20. As we welcome another Independence Week here in the US, freedom is on our minds. And for this podcast, of course, financial freedom is on my mind, and I hope yours too. For many of us, especially Motley Fool members and Rule Breaker listeners, those two words, financial freedom, echo like a Liberty Bell. And thanks to the full community writing in from many places this week, you're going to hear echoes of that Liberty Bell coming at you from diverse places and diverse viewpoints, all aiming for liberty.

1:37I consider liberty one of America's five core values, and it's on display this week when we share and riff on the dream, and for some, the reality, of the liberty that comes from financial freedom. I can't wait to share and riff on these tales of financial freedom as told by you, my fellow fools, only on this week's Rule Breaker Investing. It's the Rule Breaker Investing Podcast with Motley Fool co-founder David Gardner.

2:10So yes, friends, on this holiday week, I have the privilege of sharing back out your stories, your answers to this prompt question that I provided last week. What have you done in the past year to create financial freedom for yourself and or for others? This unites the work of The Motley Fool Foundation with the work of our parent company, The Motley Fool. And that's a sub-theme I think you'll see running through these stories and insights about financial freedom. When we talk about financial freedom for those presently living paycheck to paycheck, about two-thirds of Americans, I think in particular of The Motley Fool Foundation.

2:49foolfoundation.org is our website and if you're already there with your own financial freedom we'd love to hear from you from the motley fool foundation certainly take a look at our website and at our impact fool fund the if fund also our fredometer now if those phrases mean nothing to you just go to our website visit foolfoundation.org to see what i'm talking about join us we'd love for you to get involved with our work at the Motley Fool Foundation. Now, if you're not there yet, you don't have full financial freedom, well, we've got this other website for you at the Motley Fool. That's called fool.com.

3:26And for 32 years now, it's been a beacon lighting the way toward financial freedom for many. And I trust many more in future. It's been really fun to see all these different notes this week. I will be sharing nine different expressions. And you might think, is this going to be a really long podcast? I say back, not if I'm doing my job right, because what I'm really aiming to do this week is just largely share these voices, not comment too much in between. In fact, for each, I'm going to pull out the one thing I particularly liked most as a word of encouragement. So we're just about to get started.

4:01But first, as I shared at the start of this year, my 2025 book, Rule Breaker Investing, is available for pre-order now. After 30 years of stock picking, this is my magnum opus. It's a lifetime of lessons distilled into one definitive guide. I would say it's my own recent best shot at a financial freedom creating tool. Each week until the book launches on September 16th, I'm sharing a random excerpt. We break open the book to a random page and I read a few sentences. So let's do it. Here's this week's page breaker preview. It's a few sentences from chapter eight on sustainable competitive advantage.

4:43And I quote, Clayton Christensen, one of my academic heroes, formed his theories about disruptive innovation largely by examining competitive advantage. He noticed the irony that the larger companies get, the more vulnerable they become as they focus on sustaining their advantages, while upstarts, I call them rule breakers, quietly revolutionize their industry from the ground up. End quote. That's this week's Page Breaker preview. To pre-order my final word on stock picking shaped by three decades of market crushing success, just type Rule Breaker Investing into amazon.com, barnesandnoble.com, or wherever you shop for great books.

5:28You know, John Mackey, past guest on this podcast, the founder of Whole Foods Market, one of the most avid investors that I've ever met, was kind enough to say this about my book. David Gardner has written one of the very best books on investing that I have ever read. Rule Breaker Investing is sure to become an investing classic comparable to The Intelligent Investor, one up on Wall Street, and stocks for the long run. Well, thank you very much for that, John. And a special thanks to you, dear listener. If you've already pre-ordered, thanks. That means a lot to me. All right, let's strap in nine great notes about financial freedom.

6:10Here's number one. This one's from Kevin McMahon. Hello, David. I'm now 30 years old with a bachelor's degree in electrical engineering. I currently work as a quality manager of continuous improvement. Since starting my first job in 2017, I've nearly doubled my salary through a combination of hard work, promotions, and intentional salary negotiations. What I've learned along the way is that you must always advocate for yourself. No one has a greater stake in your future than you do. Even great bosses may not actively think about advancing your salary or career. So never, Kevin writes, be afraid to ask how you can improve and then hold yourself accountable to deliver.

6:55I also strongly encourage people to politely and professionally advocate for a better salary at their current job. It can make a meaningful difference without needing to jump companies. During the pandemic in 2020, I doubled down on my financial education, largely thanks to The Motley Fool. I dove deep into learning about interest, debt, investments, emergency funds, and the differences between Roth and traditional accounts. And of course, stocks. With my increased income and growing knowledge, Kevin writes, I built a solid emergency fund and went on to handpick over 300 stocks across my 401k, traditional and Roth IRAs and individual brokerage accounts.

7:41Yes, Kevin McMahon writes, I know my Gardner-Cretzman continuum is over 10. Call me crazy with a winky emoji. Kevin concludes, once I felt confident in my own financial foundation, I began helping others. Three moments that stand out to me. A, I recognized that my father had more than enough money to retire and encouraged him to consider part-time work. He made the switch and he absolutely loves it. B, a coworker I mentioned in a previous email wasn't sure she could afford to retire, I suggested she meet with a fee-only fiduciary financial advisor. She did and discovered she could retire whenever she wanted.

8:28C. A friend of mine was overwhelmed with high interest credit card debt. I explained the importance of paying minimums on all debts and then using any extra funds to aggressively pay down the highest interest card first. Thank you, as always, for suffering a fool gladly. Fool on, Kevin McMahon. What a fantastic note. My pleasure to lead off with that one. You know, in baseball, we often put our hitter most likely to get on base up first to lead off the first inning. And Kevin, it was very easy looking over my murderer's row of nine notes this week to make yours the lead off. What a fantastic expression of financial freedom.

9:10There's so much I'd like to speak to in this note, but I would encourage any listeners simply to hit rewind, I don't know, a couple minutes or so and just listen to that note again, because there is so much intelligence and goodness in it. It brims with it. But I particularly, of course, Kevin, love that you have 300 stocks or so at the age of 30, giving you a GKC score over 10. I do not think you're crazy. In fact, I think one of the surest paths to financial freedom is to have a broad, widely diversified portfolio. Yes, I prefer that to be in stocks. I love to own companies directly, of course, as a fellow rule breaker, as opposed to a bunch of funds.

9:49I'm sure you have a lot of mix there anyway, and you have a number of different accounts. At the age of 30, what a phenomenal example you are to us all. And I love how you've connected with those around you, from your father to your coworkers to help them toward financial freedom too. You are a model fool, my friend, and I'm honored that you would call yourself a fool. Kevin McMahon, fool on back to you, sir. You know, before I move on to number two, I wanna call out my brother, the CEO of The Motley Fool, Tom Gardner. Years ago, he advocated for with our people team and they agreed to have a day or a week where each was encouraged to come to us to ask for a raise.

10:28It was ask for a raise day. This is a golden era for the Motley Fool. Not every one of our employees had the guts necessarily or felt the confidence to do so, but all were welcomed, included, and encouraged. And that just shows, again, the generous spirit of my brother, Tom. And yes, many a raise was made that day slash month slash quarter. It doesn't necessarily make sense to do that every year, and it may not make sense for every business. But if that's an idea for you, dear entrepreneur, for you to try in your own company, Just think about the benefits that you get, the trust that you build.

11:01And as Kevin mentioned, some of your employees might be thinking to leave your company because they don't feel adequately paid. And so why not, if you want to keep them, make sure you actively have those conversations. All right, on to number two. This one is from Brian Harris. Brian, thank you. David, I consider myself free, although I'm still working in my businesses. I have a great team, and they are allowing me to focus on the aspects of the business that I truly value and thrive in. As far as the financial freedom part, we are living each month inside or at least close to our monthly budget.

11:37Due to having several income streams, all income flows into one account. Then each month we, he puts this in quotes, we pay ourselves a monthly stipend to live on. This has allowed me the emotional freedom to spend more money than I used to. I know that we're living under our means, putting money into our stock portfolio, continuing to our 401k, building money for down payments to invest in vacation rental properties. This, combined with my recent reading of the book, Die With Zero by Bill Perkins, has allowed me to use my money as a tool and have a healthy relationship with it. I'm currently in Alicante, Spain with my family of five starting a five-week tour of Europe I'm excited to be utilizing the money, tools, learning and strategies to be, at least in my mind financially free and time free with an exceptional team leading exceptional businesses and allowing me to have some time to make lifelong memories with my young family Thank you, David, and all those in the Fool sphere who've contributed to my journey full on, Brian Harris.

12:52Well, so much goodness there. Brian, I love that you took just, I hope, only a moment out before your five-week tour of Europe to script out that note and share it with this Rule Breaker community. I particularly loved and want to call out this line from you as you wrote, this has allowed me the emotional freedom to spend more money than I used to. I think that is very financially healthy as our net worth grows over time. I think it also makes sense, especially with a young family and or businesses that you may be investing in to spend more money than you did before. I realize this could be taken the wrong way.

13:31Some people might start to overspend their means, clearly you're not. And yet I think there are also opposite examples. People who are too stingy for their own good, it holds them back, probably holds those around them back. So I do think it is very emotionally free and healthy to spend more as we make and grow more. To me, that's what a life of abundance is all about. And wow, I kind of wish I was in Alicante, Spain right now. Brian, have a great time and fool on. All right, number three. This from Vicki Huffman writing in from Montello, Wisconsin. Dear David, I've been thinking about writing you for years.

14:13As I notice, Vicki writes, most of your comments come from male fools. I became a member of your community over two decades ago after having success with recommendations from your free articles online. Once I discovered podcasts about seven years ago, I've listened to all The Motley Fool has put out. My grandfather got me investing at age 10, where I was introduced to no-load mutual funds. I dare say not many fifth graders were spouting those words in 1962, and I'm still amazed that today many investors do not know they're being charged sales fees on many mutual funds. I've had the opportunity, Vicki writes, to meet your brother Tom in Minneapolis at a Buffalo Wild Wings and you at a Fool Fest in Washington, D.C.

15:03I, all caps, love TMF events. Well, thank you for loving our Fool events. We love you back, Vicki. We love putting on events and convening our members. Always a highlight for us as fellow Fools. Vicki, you go on. this year I took the step of finding an independent financial planner who would do a review of our holdings and give general advice. I discovered it was quite difficult to find a CFP, a certified financial planner, who did not want to totally manage our assets. But I succeeded after a half dozen phone calls. I found an amazing young woman with whom both my husband and I felt comfortable.

15:46She confirmed my findings that we have enough to continue enjoying our first class scuba diving and saltwater fly fishing adventures, along with whatever else should interest us. Now I have peace of mind at age 73 that if something should happen to me, the investor in the family, my husband has a trusted person to call who will know all about our financial status. This, of course, is after more than 60 years of saving, then investing, and learning from the Motley Fool to let my winners keep winning. Also, we updated our wills this year. Fool on, Vicki Huffman. Well, just like every other note this week, there's so much that I'd like to speak to in that this is not a mailbag.

16:34This is what you've done to create Financial Freedom, Volume 3. So I want to particularly call, there's really two things I want to call. I'm going to cheat my own rules. I was saying I was only going to call out one thing, but the first thing I want to call out here, Vicky, is that you discovered it was quite difficult to find a CFP who didn't want to totally manage your assets, but you succeeded after a half dozen phone calls. So yes and yes, it is true. Much of the financial wealth management world wants to manage your assets. And for me, the person who's always going to be managing my own assets, but still appreciates tax advice, wills and estates kind of stuff.

17:12I'm an odd duck. Maybe you are too. As fellow fools, we are the commanders of our own portfolio. I don't want to give my stocks or investments over to somebody at a big firm who's probably going to swap them out for much more conservative stuff or not let our winners win, which is such an important lesson. Vicky, that you credit learning from us. Thank you. It is, after all, habit number one of the rule breaker investor. rule number one, let your winners run high. You know that? And so I want to call you out for making that sixth phone call. You weren't satisfied after five. You made a half dozen and reached somebody who really does align beautifully with you and your husband.

17:53So I have to praise your industry, your initiative, and your relentlessness. In fact, another of America's core values, to me anyway, I always call it our fourth core value in America is resilience. And I think you demonstrated resilience with that effort. And then, yeah, there's a second thing I have to call out right near the end. Vicki, you wrote, this of course is after more than 60 years of saving, then investing. And what a beautiful statement to be able to make at the age of something like 13, you became a saver and you've been that your whole life long and not just a saver, but an investor.

18:33You've learned how to make your portfolio reflect your best vision for our future, very rule breakery of you. And you've done so well and you're able to enjoy first-class scuba diving and saltwater fly fishing with a peace of mind that your husband is well cared for as well. Congratulations. It's just a delight to be able to find exemplars in this world and through this podcast, share them with you, dear listener, introducing you to people like Vicki Huffman and Kevin McMahon and Brian Harris, and the list goes on. Number four. This one comes to me from one of my all-time favorite fools. Jason Newman has made numerous appearances on mailbags and other such sundry features offered by this podcast, but I first met Jason at a Motley Fool book signing in the 1990s in New York City.

19:21He's been one of my favorite fools ever since. Jason Newman, you are number four. Thank you for this note. You start, I'm tempted to just copy and paste my note from 2023 and say rinse and repeat because we often grow tired of sharing the best advice long before it's ever fully heard. Jason goes on, but for 2025, I'll offer this update. True financial independence is when your kids start to see the light and begin to live out the capital F foolish rule-breakery principles themselves. That's exactly what I'm witnessing this spring. Jason writes with two graduates in the house, one from high school, one from college.

20:07I'm filled with pride. My oldest now shares takeaways from the Rule Breaker Investing podcast with me regularly. That's right, Brady Newman. You're well on your way to financial independence and you might not even realize it yet. Time is your friend, my son. Fool on. And Gabe, while you've shown sparks of interest, with college still ahead of you, it's more than okay if your focus is elsewhere. For now, it's never too late to start in earnest and we'll keep the light on for you. Jason Newman. That was a lot of fun and truly a privilege to be able to share Jason's messages to his sons directly via item number four on this year's What You've Done to Create Financial Freedom.

20:55I love your line, Jason, true financial independence. Are we hearing this, fools? Do you get it, parents? True financial independence is when your kids start to see the light, beginning to live out these foolish rule-breakery principles themselves. What a beautifully other-minded statement of responsibility, care, and commitment coming from a father that he doesn't really think we're financially independent until we see our kids living that out. Nobody's in control, last I saw, of their kids, especially as they age. But if we've done our job well, and by the way, it can start today. It doesn't have to be that you were doing this at the age of 13 or when your child was three.

21:37It can start with them as adults. But true financial independence, underlining this, is when your kids start to see the light. Thank you, Jason. Good on you, Brady and Gabe. Fool on. We spend a lot of time thinking about how to grow and protect our money. But one convincing text, email, or fake website can put all of that at risk. Today's scams can look completely legitimate, even like your bank. And by the time an alert arrives, the money may already be gone. Cover-On is built for what happens before and after a scam. It monitors for exposed personal information, suspicious account activity, and changes to your credit.

22:19And when prevention isn't enough, Cover-On adds expert recovery support and financial protection for eligible losses. Instead of juggling separate privacy, identity, and security tools, you get a more complete layer of protection in one place. One scam can cost you everything. Protect yourself now. The first 100 users get 20 % off with code RULE20. That's RULE20 at coveron.com slash RULE20. On to number five. This one comes from Ed. It's just signed, Ed. Dear Motley Fool team, I wanted to take a moment to thank you for the role you've played in helping me take control of my financial future. I want to pause it for a quick sec there, Ed, and say, thank you, Ed, for calling out the Motley Fool team.

23:12Often on this podcast, I find that I'm the recipient, dear David, of notes, but the real work was not done by me. It was done by our 300 plus employees, people who stand up our website, write articles for it, come on this podcast, answer people's questions. It's a huge team effort here. And I want to make sure everybody hearing me knows that I have an outstanding team, including my new producer, Bart Shannon, a pleasure to work with. We have so many fools who are helping row this boat hard for all of this. And so thank you, Ed, for titling this Dear Motley Fool Team. I'll go on. Ed writes, this year, I finally started managing my own Roth account.

23:50With five to eight years to go before retirement and a pension on the horizon, I'm building a diverse portfolio that includes individual long-term growth stocks, ETFs, and high-yield investments. I'm also taking advantage of this more financially stable time in my life to make additional investments in my Roth and stay committed to long-term growth. Your insights gave me the confidence to take that leap and manage my own investments. Ed closes my advice to new investors. If you're scared, start with ETFs and keep learning. Appreciate everything you do foolishly, Ed. Well, thank you for that, Ed.

24:31And I love that you're speaking to those who might be scared and saying, hey, exchange traded funds, basically the equivalent of index funds, broadly diversified, low cost vehicles that people can plow their money into very confidently and very well over the course of time. Yeah, Ed, you know, I love stocks. I hope you do too. I think you do. But certainly ETFs can be an answer for many people their whole lives long. You don't even have to listen to me if you don't want to be a rule breaker investor in stocks. But I can see, Ed, you've become to be that. You have five to eight years to go. And I love that you're building out that diverse portfolio with those long-term stocks, but also the ETFs and the high yield investments, which are going to help you out a lot as you eventually retire.

25:15Also, that pension sounds pretty good too. So congratulations to Ed for the financial freedom. He's setting himself up to enjoy five to eight years from now. And I love, especially Ed, how you are broadly diversifying and thinking about baskets of different types of investments, especially that high yield portion, which if you're doing your job right, you're getting enough income that you can let those long-term winners among your stocks, you can let them keep growing throughout the rest of your life. Let's go on to number six, longtime fellow fool, Vince Granieri. Thank you for this note, Vince.

25:49Hi, David. I appreciate the opportunity to talk about what I hope to look back on as a pivotal year in achieving financial freedom. I provided a glimpse of it back in the December mailbag when I wrote about reducing my portfolio from over 650 positions to 85 and focusing on adding a dividend strategy to my existing growth strategy. Vince goes on, And all this brought on as I am approaching 70 years old and getting ready to hang up the spikes. Suffer this fool to fill in more details. Well, I will, Vince. Let's go to this. First, let me say that my contributions to the Motley Fool Foundation were at a personal high over the past year.

26:33Helping others achieve financial freedom is a laudable goal. And I am fortunate to be among those who are able to support it. And obviously, I'm going to pause it there and just call you out, Vince. Thank you for your support of the Motley Fool Foundation and our work there. I am honored that you've leaned in with us. Thank you for making it a personal high gift for you just in this past year alone. We really appreciate that. Back to Vince's note. Last July 4th, my portfolio was earning a whopping half a percent annually from dividends. Today, that's 1.25%. With the dividend portfolio, that's 40 % of my invested funds, Vince writes, earning 3.1 % as a dividend yield.

27:15And of course, the growth portfolio earning 0%. So when you take it as a full mix, he now has a 1.25 % yield. That means just over 1 % of all of his investments are coming back to him in the form of regular annual interest payments in the form of dividends. Of course, basically the interest amount you get paid for holding the stocks that you do. some companies pay dividends. Back to Vince's note, this doesn't include any earnings from the cash portfolio, which consists of money market, treasuries, and muni bonds. I didn't really have a cash portfolio a year ago. Another thing I looked at was the nature of my investment accounts, which are a taxable account, a traditional IRA, and a Roth IRA.

27:58I did some basic scenario forecasts and was shocked to discover a time bomb lurking in my traditional IRA in the form of RMDs, that would be required minimum distributions, which would begin in a few more years for my bride and then for me not long after. This is not tax or investment advice for anyone, Vince goes on, but for us, I found it better to convert as many traditional IRA dollars to Roth IRA dollars at marginal rates under 24%, pay the taxes now and avoid bigger tax bills in the future, your mileage may vary. Turning to the nitty gritty of concentrating the portfolio, I found it relatively easy to cut from 191 positions a year ago to 159 just by last August by eliminating very small positions that were unlikely to move the needle.