EduCounting

Episode 168: Stupid Simple Rules

Simple rules to becoming financially free from someone who made it look easy.

SHOW NOTES

In this episode, we look at 13 simple rules that a young couple put into action to save their first million dollars, get out of the rat race, and achieve financial freedom. 

 

Lots of people dream of financial freedom, never having to work another day in their life and living off of their investments. 

 

But how do you get there? What do you need to do to achieve financial freedom? And what are some common mistakes that stop people from becoming financially free?

 

In this episode, we give you another example of how a young couple made it happen.

 

“You have to make more than you spend, so your earning potential needs to be solid.” – Ben Jones


Time Stamps:

00:58 – Switching from private school to public school.

01:20 – The financial difference between private and public schools.

02:25 – The stupid simple money rules to retire quickly.

03:32 – Why you shouldn’t follow your passions when making business decisions.

04:46 – Lessons you can learn from successful people.

05:55 – The importance of choosing who you spend time with.

06:27 – The negative effects alcohol has on financial targets.

07:01 – How to take advantage of your company’s benefits.

07:42 – The power of automation at improving your saving.

08:30 – Why comparing yourself to others is the greatest financial trap.

09:40 – The importance of being honest with your partner about your finances.

10:34 – The danger of credit card debt.

11:00 – Switching companies to increase your wage.

11:20 – The power of saying yes to everything.

 

Resources:

13 ‘stupid simple’ money rules that helped him save $1 million

 

Connect with Ben Jones:

 

TRANSCRIPT

DADWelcome back to Money with Mak & G.  Thanks for being here.  Don’t forget to LIKE, SUBSCRIBE and COMMENT on the podcast, or check out the EduCounting YouTube channel. 

The last three weeks were a bit insane. I finally got cleared of my shoulder injury, and Pickle Ball, yes Pickle Ball sent me to urgent care for a broken bone in my foot.  We were playing with the neighbors who are slightly more mature than I, so I was the youngster, who was a bit overzealous.  They are simply wonderful people with a great view on life But, accidents happen.  I’m  quite grateful to see them around the neighborhood with a positive attitude and energy for life.  They know who they are.  

Anyway, the kids have been prepping for their return to school.  But, not a return to any school, a massive change in every sense of the word.  They were going to a private school of about 60 per class in 8th grade to the largest high school in the state which has about 1,400 per class.  But, the school is ranked very high in graduation rates, SAT/ACT scores, and more.  Exposure to a diverse group of individuals is also positive because that’s the world we live in.  As we stop paying tuition due to the move to a public school, there are lots of financial changes.  We don’t have to personally drive the kids to school, because there is a bus.  School books, fees, this charge, that charge, and more opens up a lot of options. YEAH!!

It was a choice we made for private schools, just like others make choices financially. Interestingly enough research shows when the economy weakens, those who have more financial resources double down on education, and those who don’t will cut.  Some people choose to not have kids. Cha-ching.  Some choose to only cook at home, or go to Goodwill to buy their clothes when they don’t need to.  I had an aunt who did that. She took the brunt of a number of jokes, but I have a feeling she laughed all the way to the bank.

The point is that everyone leads their life differently and those decisions take us in a direction. Sometimes those decisions are hard to unwind, other times pretty easy.  So, I had a close friend send me an article from CNBC about a couple’s  “Stupid Simple” money rules to retire quickly.  And, as they mention in the title they weren’t born rich.  I could definitely relate to some of their advice, so I thought I’d share.

Hey, I spent decades learning about money, but I’ll admit I don’t know everything.  So, I love to continue to learn from those who made it happen. A rule or two may not work for me, but there are common themes, and there are bits of wisdom and truth.

So, this couple starts off by mentioning that in they were able to retire in their early to mid-’30s because they were able to save over $1 million with the help of some appreciation from the market.  We’ve talked about owning a business, and how this is one of the best-known ways of building true wealth.  But they wanted to retire and get out of the rat race.  So, no inheritance, no business, and no rich parents. As they put it, they did it the old-fashioned way by working hard and making strategic financial moves.

Ok, I’m not sure if these are listed in priority, but let’s jump in.  The first was a statement that they ignored the advice we commonly give about following your passion.  If the quote is right, Mark Twain said “Find a job you enjoy doing, and you’ll never have to work a day in your life”.  What a fantastic quote.  I’ve read many books about how the motivation that comes from doing something you love gets you out of bed each morning.  You can’t deny that would be pretty cool. It may not be as common as we like, but their advice is to build on your strengths when making a career decision and not on your passion..

If you read our website, you’ll know my mother said you can be anything you wanted as long as it’s one of 5 things: 1) a doctor, 2) lawyer, 3) engineer, 4) nurse, or 5) accountant.  She believed her job was to give  us the tools to get a job we could earn a credential and so we could feed yourself.  Solid stuff, I was good at numbers, started in engineering, needed money, so I started a t-shirt company, and ended up in accounting because business seemed more interesting.  But for our authors of this article, they took computer science-their strength and leverage that to doubled their salary in a little over a decade.  

Rule #1 is to make more than you spend. So, your earning potential needs to be solid. That’s something we can all relate to.  So, I’d say we got some truth in this one for sure.  My parents always said to feed yourself first, then you can pay for your passion or hobby.  My job did pay for travel that included scuba diving the Great Barrier Reef, baguettes and cheese in Paris, safari in Africa and many other experiences. 

How about learning from people who made it big, like other millionaires?  This couple learned from them instead of being jealous and found that friends who were successful at work arrived early, drove 6-year-old hondas, wore cheap Casio watches, and skipped the designer clothes.  Part of the reason for doing the podcast is to share, as having a mentor is a huge deal. Or at least someone who can help you learn even by watching them.  If you can put your ego aside, pick up a pen or pencil and take notes.

If you’re going to make it, you have to be around other successful people, and as they say in this article it’s time to cut the losers from your life.  I don’t think anyone in professional baseball, football, basketball, or other sport made it because they always hung out with people who were at a much lower level of accomplishment.  They had to be pushed to be better, or they had to be shown what it took to be playing at that higher level.  What do you think elite athletes talk about?  They’re always talking about how they get better.  Workouts, food, drills, health, and more.  So, cut the losers. It also means cutting down on the alcohol, because it slows you down and makes you spend more. It’s fun to go to a bar.  I get it. It’s a social outlet. However, bars are super expensive, so they recommend just cutting it out of your life. I KNOW we’ve all looked at our credit card charges from a great night out and said “Holy cow did I really spend that much”.  You can replace “cow” for whatever word you’re thinking.  But, you have to make trade-offs, and realize the financial ramifications.

Ok, you’ve heard this in the podcast, blogs, and videos before.  Take advantage of your company’s benefits.  If you get a match on your 401k…TAKE IT!!!  Don’t let the free money be wasted.  If you have an HSA or FSA, use those as well.  How about extra educational benefits?  Try to take all of them. Hey, I did my MBA at the University of Chicago and got my company to pay for it.  That was a grand slam for me.  I’m always shocked by how little attention people give to their benefits, which can literally add 10, 20, 30% or more to their salary depending on their package.  Don’t let it slip away.

Automating things is another good piece of advice, but not earth shatter. Have you ever missed a credit card payment, electric bill, or mortgage payment?  You have a much bigger chance if you aren’t automated.  Yes, for some of us we can’t give up control.  But, I prefer doing that, then losing control when I get it with fees. Your 401k should always be automated.  If you start your payroll having it removed from the start you won’t even notice it.  If you get a raise, automatically increase it. At one company I worked at, you had to opt-in to the 401k, and they maybe had a 15% participation rate. When they changed it to automatic enrollment, and you had to opt-out to stop it, they had more than 75% of people participating.  Start it, automate it, and do yourself a favor and grow your nest egg.

We have to combine the next two in my opinion.  Ignore the haters and the Joneses.  My friend from the gym is very focused on paying off her home and retiring early.  Those choices stand out a bit, and people will have comments about your choices.  I think they’re jealous. They’re not hurting anyone, and they have great control of their spending.  I couldn’t be happier for her, and she is making great progress.  Big STAR for her.  You also have to ignore the Joneses too.  Stay focused on your goals, and talk about that often with your spouse.  When you don’t have much, you think things make you happy.  I get it, I went through the Harley V-Rod, the Rolex watches, the BMW convertible, and the occasional Fratelli Rossetti shoes.  I even test-drove a convertible Ferrari when I lived in London.  Convertible in London?  Who really needs to buy a Ferrari in London?  The average speed due to traffic is only about 14 miles per hour.  The point is we all make stupid financial decisions, but please learn from them for your own good. You’ll be happy you did.

Communication with your spouse on a regular basis about spending is a good thing. It keeps you both on track and aligned so there are no hard feelings.  Remember the number one reason for divorce has been shown to be money issues, so it’s important.  And, to be honest not always easy.

This couple decided to prioritize their health and spent a solid amount of money for a workout area in their home. They got a handle on their eating and I think the husband lost 70 pounds.  I always have to ask the question, if you’re saving your money for a good retirement, don’t you think taking care of body is a REALLY big deal?  What happens if you retire, and you have all kinds of health problems?  The money can help pay for healthcare, but if you’ve wrecked your body, and now you’re spending your money to cure your health issues, does that make sense?  Is that really the idea you had when starting your savings plan?

Here’s a really easy one, cut the credit card debt. We’re pushing a trillion dollars  in the US, and the rates are crazy.  Paying them off monthly, or working them down is huge. If you can’t control yourself, move to the cash method. There are plenty of cards that can help.  But, interest on credit cards for bad debt is bad. 

This one is a little harder for me to digest, but I completely understand.  The husband switched companies 5 times in 14 years, always getting a pay increase.  I get it.  For me, starting over was harder with a new company, you had to build a name, meet people and climb the ranks.  But, if you can get paid more, and it makes sense for you, I’d say go for it.

I found this last one, particularly interesting.  It’s labeled as “I always said “yes””. I found that interesting, as I too always liked a new challenge.  Whenever a boss asked me to do something new, I’d simply jump at the chance.  I got asked to go to Spain to help run our company over there and had two weeks to decide. I was asked to take over the United Kingdom and was asked on a Thursday, and I was packed up and moved on Monday.  Four days.  Yep, Four days.  I know that’s insane. But true.

On one occasion I was asked to take a job in Switzerland and spoke to the head of the region, Marc. Always liked that guy.  Smart, straightforward, honest, and just a great guy to work with. He offered me the job for 100,000. Yes, 100,000.  I was going to be rich.  I was in.  Holy crap, the company is going to more than double my salary. Heck yea, that’s AWESOME.  Small misunderstanding. When the offer came it was 100,000 Swissie, or Swiss Francs.  That was 65,000 US dollars.  With a 30% increase, it was a win, and I was excited.  I loved the opportunity, and said “yes” immediately.  But, are you ready for the kicker?  About 2 months after I took the job, I was moved to something called an Ex-pat. That’s an American working in a foreign country who essentially gets a ton of additional benefits, like being paid in US dollars, money for living, paid travel back home, someone to do your taxes, and MUCH more.  So instead of a 30% increase in salary, it literally got tripled.  Think about that.  Say “yes” if you can to opportunities, it could make all the difference.

So, the path seems to me be perseverance, being smart and luck clearly helps. It helped me.  Have you looked around at what you could do better or something you could take advantage of? If not, it might be time to do just that.

Thanks for being here, and we’ll see you next time for more Money With Mak & G!!!  BYE!!!

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