00:00:00
Podcast Intro: You’re listening to ChooseFI. The blueprint for financial independence lives here. If you’re looking to unlock the secrets to financial independence and early retirement, you’re in the right place. Stay tuned and join a community of like-minded people who are getting off the Instagram and taking control of their lives in the pursuit of financial independence. ChooseFI, your home for financial independence online.
00:00:00
Jonathan: Hello everyone, we are back. Welcome to the Ultimate Crowdsource Personal Finance Show. I say that and I celebrate that with you because this is what we are experimenting with is what does it look like to bring that show into reality? And so we are gonna be building on episode 586. So there’s some continuity here. We’ve stepped away for a couple of weeks and now we’re back. We’re continuing with our kind of overview or look at the table of contents for the financial independence community. And if you wanna think about where we are in the table of contents right now, it looks approximately like what maybe a FI 101 might look like, right? We’re starting at the beginning of the table of contents and we’re working our way through and we’re pulling back in content that we started with many, many years ago and we’re presenting what we believe is the best, most up-to-date version of that. And then we’re making it interactive on the ChooseFI community platform as well to give you an opportunity to give us direct feedback which leads directly into this show. As we continue, we’re looking at this idea of the expense audit. We released a challenge or an action step for ourselves and for the community. We decided to collectively take on this idea of doing an expense audit over the window of February to March. Obviously, people have different times that they’re hopping in. You could still hop in right now but we’re kind of opening that window to put our focus on doing an expense audit. You can get more details on that in episode 586 but now, close to 200 of you have actually taken us up on this challenge and have done it. Many of you have already finished it. A few of you are still in the middle of it but consider this almost like a midpoint check-in and we’re going to take some insights, take some feedback that came from this community and we’re going to use that to fine-tune what it is that we’re gonna accomplish and also give you some insight on, okay, well, what do I do with that audit, right? What do I do with the information that came out of that? So we’re gonna explore a little bit farther this idea of the value matrix. This is not financial independence and doing all these things. It is not about deprivation, right? We say that. But it is about inspection and building a life that you value and is filled with things that you value. And I think that’s a pretty good lead-in. So with that, welcome to ChooseFI.
00:02:29
Jonathan: All right, everyone, as you probably have figured out, this is my favorite type of episode and I know it brings Brad and myself both a lot of joy to be able to fully include the community. And this is another one where I think we’re gonna do a really good job presenting new information and weaving in feedback that you’ve given us that’s incredibly timely. And to help me with this, I have my co-host Brad here with me today. How are you doing, buddy?
00:02:48
Brad: Hey, Jonathan, I am doing quite well. Yeah, we got a nice spring day here in Richmond. Spring has sprung. And I actually forgot to tell you that last week, I was asked to speak at the University of Richmond for a couple of classes, which I do every semester, basically. One of our listeners, a guy named Trey, is a professor there. And yeah, this is one of the most interesting things I do. I have to say, this was the first time ever that I really got a little bit of pushback, if you will. But it was actually really insightful questions from the students who are looking at life from a perspective of a 22-year-old who’s getting set to go out into the world. A couple of them were asking me questions about actually spending and how this ties into the expense audit, actually, interestingly, Jonathan, is what if these things add value to our lives? What if we want to work a couple of extra years to afford these fancy things?
00:03:46
Jonathan: No, you’re not allowed to.
00:03:49
Brad: There was Brad, Trey’s a graduate. You know, actually, we found an alternative speaker next year. You’re out, you’re out. Mr. No. But it was interesting looking at life from the perspective of a 22-year-old who, and of course, this is not just limited to college students, but assuming or presupposing that spending is going to, by definition, bring you happiness. And that was how these questions were framed. And it was really quite challenging because sometimes, A, spending does bring great joy. There are things that we value that we spend on. But to try to describe one more year syndrome to a college student is pretty difficult. And when you’ve reached your number, when you have enough, that was my response, is once you have enough, to me, it seems futile to just work a year or two or five extra to afford things that you already can afford. It’s hard to understand the construct, but I do understand, of course, where he was coming from. So I’m curious, what do you think when you hear that, if you were challenged with that?
00:04:55
Jonathan: Well, I would go a little bit farther even and say, what if you could find a job or a career that you would never wanna retire from? What if you would actually wanna design your life around never having to leave? So if it isn’t even about the fact that you leave your job, it’s about options. And here’s the problem. College students at any event, humans in general, is we put the cart before the horse and we lock in our stuff and lock out options all the time. And you don’t get to go back. I mean, you do. We know this. We’re undoing it in real time right now in this show, but we all know it is harder to go back. It was harder to pay off my $165,000 in student loan debt than it would have been to have a fresh slate and make choices with the benefit of hindsight, benefit of 2020. And so that is why this inspection in real time and on a regular cadence has to be or should be a priority or a focus because you don’t want to lock your future self into maybe unevaluated choices that your current self made. That’s what happens.
00:06:01
Jonathan: And so when we’re doing this, all right, play this out. You say that now, 10 years from now, is this thing that you are worth spending a whole year or two extra working for? Do you think your 10 year future self is going to appreciate that? It’s not even that you’re going to have the answer, but if you don’t have the answer, you’re unsure, then you shouldn’t rule this out because you can’t go back. So this is what we’re doing. We’re inspecting our choices through the lens of not just how we’re going to feel tomorrow about the purchase, but how are you going to feel about it five years from now, 10 years from now, and 20 years? So we’re thinking about time horizon and we’re thinking about the idea of value, not just the dopamine rush that comes from pressing the trigger on the purchase.
00:06:49
Brad: Yeah, agreed. And it’s funny because that is exactly what I hit on also was optionality. I think that’s what this is about. It’s about freedom and optionality. I love that frame of the 10 year future self. And you can really play that out to 20 year future self, 30 year future self. What decision will give you the most options? And I think that to me is why financial independence is just so powerful because it gives us options. It gives us freedom. When we have financial space, we can do so many more things. And there’s no prescribed method for what a successful FI life is. I think like you’re saying, what if it’s something you don’t ever want to retire from? That’s great, work until the day you die. That’s fantastic. But do it with eyes wide open. Do it from a position of strength. I think that to me is the critical part.
00:07:33
Brad: And that’s what I always tell my daughters. I basically say, look, you have to work. This is just the reality of your 20s. But what if you reframed it to, all right, before I’ve made any quote unquote mistakes or even just major decisions, they don’t even have to be mistakes, about buying a car or getting a mortgage or whatever it may be, what if you’ve already tethered yourself to a 50% savings rate? If you tether yourself to a 50% savings rate, you can’t help but be successful financially. If you can solve a 50% savings rate, you’re gonna be just fine. And if you start that from day one of your first job, I think you’re in a pretty good trajectory. And if you miss it by 25%, you’re also gonna do just fine.
00:08:17
Jonathan: Exactly. But I think this is the other thing for the 22 year old. Look at how much appeal this concept of options and financial independence has to the 35 to 50 year old crowd and realize that is your 10 year future self. So whether or not you agree or understand or appreciate this idea now, just let me tell you with 100% certainty, 100%, not 99, 100% certainty, at 35, you will appreciate this idea of options, 100% guaranteed certainty. We all want more options, but you have a almost unfair advantage if you appreciate that fully at the age of 22.
00:09:00
Brad: And that really, Jonathan, helps us to kind of talk about this idea. It’s a segment that I’d like to run with, you know, kind of once a month. And that has to do with the FI is spreading.
00:09:05
Jonathan: The FI is spreading around the world, Brad.
00:09:08
Brad: Yeah, it certainly is. It’s been incredible to see you and I keep a constant watch on posts of our local groups who are just crushing it. And there are so many, there are just so many going on right now. I know we mentioned previously St. Louis, but I wanna really dive into that now because they built something really special there. Kristen Knapp is the one who’s revitalized the group. And I know her and Alan recently did a FI 101 course that has really become a launchpad for FI 101 that you and I wanna help create, and also that other groups are using all across the world. And this has been really neat to see not only the success of their group. I know you sent me a screenshot of, oh my goodness, they have 50 RSVPs yeses, and there was something like 30 or 40 maybes. I mean, they were gonna have what looked like a hundred people show up to this. And that’s what’s actually so cool about the platform you built is you can RSVP. You now get email invites and email reminders, which is great. And what’s neat is, again, with sharing, right? We talk about crowdsourcing, this community and this show. Alan and Kristen took their slides and they sent them to us, and we were able to upload them to the new platform. So for all ChooseFI local admins hearing this, log into the platform, log into the app.
00:00:00
Podcast Intro: You’re listening to ChooseFI. The blueprint for financial independence lives here. If you’re looking to unlock the secrets to financial independence and early retirement, you’re in the right place. Stay tuned and join a community of like-minded people who are getting off the Instagram and taking control of their lives in the pursuit of financial independence. ChooseFI, your home for financial independence online.
00:00:00
Jonathan: Hello everyone, we are back. Welcome to the Ultimate Crowdsource Personal Finance Show. I say that and I celebrate that with you because this is what we are experimenting with; what does it look like to bring that show into reality? And so we are going to be building on episode 586. We’ve stepped away for a couple of weeks, and now we’re back. We’re continuing with our overview or look at the table of contents for the financial independence community.
00:02:29
Jonathan: And if you want to think about where we are in the table of contents right now, it looks approximately like what maybe a FI 101 might look like, right? We’re starting at the beginning and working our way through, pulling back in content that we started with many years ago and presenting the best, most updated version. We’re making this interactive on the ChooseFI community platform, giving you an opportunity to provide direct feedback which leads directly into the show. As we continue, we’re looking at this idea of the expense audit. We released a challenge or an action step for ourselves and for the community, deciding to collectively take on the idea of doing an expense audit over the window of February to March. You could still hop in right now, but we’re opening that window to focus on doing an expense audit. You can get more details on that in episode 586, but close to 200 of you have actually taken us up on this challenge and have done it. Many of you have already finished it; a few are still in the middle of it. Consider this almost like a midpoint check-in, using insights and feedback from the community to fine-tune what we’re going to accomplish and also to explore what to do with that audit information.
00:02:29
Jonathan: So, welcome to ChooseFI.
00:02:48
Brad: Hey, Jonathan, I am doing quite well. We got a nice spring day here in Richmond. Spring has sprung. Last week, I was asked to speak at the University of Richmond for a couple of classes, which I do every semester. One of our listeners, a guy named Trey, is a professor there. This was the first time I got a little pushback, insightful questions from students looking at life from the perspective of 22-year-olds preparing to go out into the world. A couple of them asked questions about spending and how this ties into the expense audit.
00:03:46
Jonathan: No, you’re not allowed to.
00:03:49
Brad: On spending bringing happiness. It was challenging to describe one more year syndrome to a college student. Once you have enough, to me, it seems futile to work extra years just to afford things you already can. It’s hard to understand, but I get where they are coming from.
00:04:55
Jonathan: What if you could find a job or a career that you would never want to retire from? If it isn’t about leaving your job, it’s about options. We put the cart before the horse and often lock ourselves into choices that our current selves made, making it harder to go back. This inspection has to be a regular priority because you don’t want to lock your future self into unvalidated choices.
00:06:01
Jonathan: When you say that now, think about your future self in 10 years. Is this worth spending a whole year or two extra working for? You might not have the answer, but if you’re unsure, don’t rule it out because you can’t go back.
00:06:49
Brad: Agreed. It’s about freedom and optionality, and financial independence gives us those options. There’s no prescribed method for what a successful FI life is. But do it from a position of strength.
00:07:33
Brad: What if you tether yourself to a 50% savings rate from day one of your first job? You’re on a pretty good trajectory, and even if you miss it by 25%, you’re still going to do fine.
00:08:17
Jonathan: Exactly. Look at how appealing this concept of financial independence is to the 35 to 50-year-old crowd and realize that is your 10-year future self.
00:09:05
Brad: The FI is spreading.
00:09:08
Jonathan: Yes, it certainly is. We’ve been watching posts from local groups that are just crushing it. Kristen Knapp revitalized the group in St. Louis, and they did a FI 101 course that is becoming a launchpad for other groups. The response was amazing; 50 RSVPs and a big turnout expected.
00:10:28
Brad: There’s a resource vault on the home screen. You can’t miss it; it’s ready-made. Jonathan, you and I are going to update this, and maybe add our own flavor to it. For groups that want to get started, just rock and roll with it.
00:11:02
Brad: When St. Louis did the FI 101 event, the attendance was probably 10X any previous event. If you’re trying to think about what event your community needs, they’re desperate for a FI 101 event.
00:12:02
Jonathan: We saw 2,500 members joined local groups for these events.
00:12:13
Brad: North Shore of Boston doubled its membership size, and communities are rapidly growing in financial independence.
00:13:00
Jonathan: I love what Tanya started with the Taranaki tribe in New Zealand.
00:13:10
Brad: I’m likely going to an event called Tribe FI in Australia next fall. Fire is spreading for sure.
00:13:31
Jonathan: If you’re excited about organizing an FI 101, talk to your local admins about it.
00:14:11
Brad: Case studies have been remarkable. In Richmond, we reliably have 50+ people show up for case studies.
00:15:12
Jonathan: Today, we’re going back to the expense audit idea, aggregating feedback we’ve gotten so far to build on what we did in episode 586.
00:15:44
Brad: Tom writes that last year, he and his wife spent $25,000 more than their next highest spend year. Half of this was for a one-off expense, a new fence.
00:18:13
Brad: The remaining half is unexpected spending leaks.
00:18:29
Jonathan: We’re seeing a lot of people in the FI community with these spending leaks, which shows the essential nature of doing an expense audit.
00:19:10
Brad: Unless you’re actively auditing, you’re leaking your financial future.
00:19:15
Jonathan: It’s important to thank everyone that did the exercise or shared feedback with us.
00:20:17
Jonathan: But again, this is material, that’s absolutely material. 12,500 per year is another 300 plus grand you need to reach FI, and that’s just on leaks. I want to say, at the end of it, like Tom, please don’t let this be the last feedback. We want to know what resolved from this, right? You’ve prompted us, man. You’ve lit the conversation, you’ve given us a springboard for this, but now we need to circle back. After you finish this, really maybe there’s an opportunity, this might be the perfect case for the value matrix here because really the goal might not be to get 12.5K to zero. That even now, we’re not necessarily saying, “Alright, it wasn’t 12.5K, those were all spent.” No, no, no, no. He says there might be. He doesn’t know where it’s going. Doesn’t mean that it’s gonna go to zero. It means that we need to inspect this, and we need to have that answer. That needs to get applied into our value matrix.
00:21:11
Jonathan: Now we’re gonna come back to that, but we want to give a few other community members a chance to kind of give us their feedback. This is why it’s not just an expense audit and done, and then next year, no, no, no. It’s expense audit and then inspection of value via the value matrix. All right? You might recalibrate what your FI number actually is. 55,000 might not be their baseline anymore, and that’s fine, obviously. But as you said, you need to inspect it. You need to understand. You need to have a grasp on what does my life cost? You simply cannot pursue FI and have an FI number without understanding what does my life cost, and that is gonna change. It’s gonna change both to the up and the down in whatever year it may be, but it is gonna fluctuate, and it’s important to have a grasp on this.
00:21:54
Jonathan: Right, and back to that 22-year-old, right, that’s like, “Well, what if I’m willing to work one or two years?” The reality is it’s not the things you value that are probably driving everything into the ground. It’s the spending leaks that accrued over time because you just have put everything in the hole. I’m willing to work a little bit longer for it, so I’m not gonna expect anything. It is very difficult, verging on impossible to out-earn all your financial problems just by saying, “I’ll just make more.” That does not work, and that’s demonstrably provable just by looking at the economics of society. There are very few people that are just out-earning all of their financial issues.
00:22:36
Brad: Speaking of leaks, we got this feedback from Mish Mash saying, “I am a YNAB-er, so I have my data all set. I just completed my year in review and was astonished by my groceries, the bulk food, and the household spending. We decreased our dining out by 50% over two years ago, so I know we can do it. I’m hoping to shave $200 off these three categories.”
00:23:09
Jonathan: Let me say, if you’re using a tool like YNAB or maybe Monarch Money, maybe there are some other ones, but one of these tools that can be hooked into your credit card transactions and your bank accounts, it’s gonna be a lot faster and easier, assuming that you’ve stayed on top of it, to be able to identify leaks quicker. The whole question mark about what it is, that’s really what we want to get to the heart of here.
00:23:30
Brad: So in this case, a YNAB-er, put every dollar to work, that’s going to give you a pretty significant advantage in this task.
00:23:39
Jonathan: Yeah, without a doubt. The data collection’s already done, right? So you’re way, way, way ahead of the game, but sometimes you are astonished by what you see and you just don’t realize it. I think also, frankly, the meal side of things, these categories, so groceries specifically, I think that is both the easiest way to potentially unknowingly have these leaks, but also, interestingly, in my eyes at least, one of the easiest ways to potentially cut from your budget without losing any value in your life.
00:24:03
Brad: I think it’s just intentionality, Jonathan. I think that, to me, is the key when it comes to your groceries. It comes back to the basics. It comes back to meal planning, thinking ahead, buying in bulk, and really preparing meals in bulk. I think that’s one of the best ways to not just needlessly waste.
00:24:31
Jonathan: It’s like a zero-waste mentality. I know somebody spoke on this at the Economy Conference last year, and it was fascinating to me. It just really applies some strategy to when you cook. So if you’re buying something that calls for half of something, well, okay, the obvious thing is to make double that, right? So you don’t waste half of whatever that item is you bought or plan a couple of meals around the ingredients that you bought that week.
00:25:01
Brad: I know you have a sly smile on your face, Jonathan, because I know you live and breathe this, or you’re used to it.
00:25:10
Jonathan: No, I don’t, but I mean, I do at times. This is like one of those things where everyone, we’re on waves, right? And there have been times, but it does inspire me and I get excited about it. I also know our community, various aspects of our community are probably so good at this.
00:25:30
Brad: So, man, I love the talking point and the opportunity to spend a little bit of time here.
00:25:34
Jonathan: Yeah, there’s really something here. And again, I think at its essence, we can talk about all the specific things that we do. For me, it’s just about planning. That’s really at its heart. It’s intentionality and planning, but really the one action step I would say is when you cook, cook for two or three meals, which if let’s say you have two adults, just hypothetically, that’s two-person meals. That’s how I like to talk about it. So make enough for at least four or six-person meals. And that way, okay, I cook one time and I just have to reheat and I’ve got two more dinners. It’s really fantastic.
00:26:18
Jonathan: And almost invariably, that’s gonna save you a lot of time, which is not worth nothing, obviously, and it’s gonna save a decent bit of money. To me, that’s just the quick hit takeaway.
00:26:28
Brad: You know, as I’ve kind of taken on this role of mapping out like a content calendar for when you and I get together, what we wanna do. And I’ve been looking at all the topics that we’ve covered over the last 10 years and I’m trying to think it through. All right, if I were starting over, the benefit of hindsight, which by the way I am, and doing this all over again, what would be the order that I’d wanna hit the topics?
00:26:55
Jonathan: And meal planning, or the statement that you just said around the food and the budget. First of all, why is it hard? Well, it’s hard because you have to make a decision every single time. It’s like eating healthy or losing weight or getting fit or whatever else. There is no set and forget for this. Every single day you wake up, you have to make a decision to be intentional.
00:27:33
Brad: Even if you have a plan, you have to make a decision to follow the plan. And if you don’t have a plan, then you’re planning to fail. So with that in mind, Jonathan nailed it. This is probably disproportionately the biggest black hole that spinning leaks that people have. And at the same point, the biggest opportunity for massive wins.
00:27:50
Jonathan: And so I don’t wanna derail the whole episode to do that, but I’m already saying, as soon as I heard this, I realized we’re not gonna be able to do it justice. We have to do it justice. So I’m going to change my whole content planning guideline and we’re gonna put another challenge or feedback collection for the community. I want you to tell us, preferably with voicemail and notes, et cetera, but just on the platform and we’ll collect feedback over the next month or so, what are your strategies for winning in this area?
00:28:20
Brad: I’ll just put this to you real quick. Do you still feel like for you as an individual, regardless of family, you as an individual, you can still hold on to the $2 per person per meal goal of 2018?
00:28:32
Jonathan: I know a lot of people are thinking this.
00:28:34
Brad: Oh, that’s interesting. That is a challenge. The funny thing is I am practicing what I preach here and really following my expenses. So we have a shared document for how much we spend at grocery stores and such. It gets a little muddled, of course, because sometimes it’s not just Wegmans or Costco. You might buy something from Amazon, but I think I can actually quickly do an audit on this and figure out what it is.
00:29:00
Jonathan: Share that with us on our meal planning one. Don’t do it today because we’re gonna have a whole episode about it, but if you could feel really locked, it’ll be happening within the next 60 days. And when we get all the community’s feedback, you can share the results from what you analyzed on your own personal one. Is that fair?
00:29:25
Brad: That is very fair. I think I’m still under $3 per person per meal. I’m pretty confident, even nine years later.
00:29:35
Jonathan: Give us some context for what’s making the list.
00:29:37
Brad: I’ll tell you, from your and Laura’s old meal planning recipe thing that you had, we’re still seeing a lot of those meals show up on a weekly basis on what we’re seeing in the evening.
00:29:49
Jonathan: In your personal life.
00:29:52
Brad: Yeah, in our personal life. A lot of chicken taco dishes still showing up. There’s a lot of things like that that we still love. So it doesn’t mean deprivation, but let me tell you, it does mean intentionality. You have to have a plan.
00:30:09
Jonathan: So as we proceed, we’re gonna get back and we’re gonna look at this expense audit. Some of you are probably now, you had it on your to-do list, life got in the way, and now you’re like, “Okay, yep, I need to do this.” I see the value. And so I thought this would be a good opportunity. We did get some feedback from some members suggesting how they would fine-tune their own tracking of expenses. Since these are based on individuals in the community that have been doing this for periods of time and have found a way to build a pattern into their life, it’s probably worth just saying out loud or highlighting individual approaches to what needs to be tracked and how to effectively get the most value for the least amount of work.
00:30:52
Brad: We’re not trying to spend two weeks working on this. It hopefully should just be a couple hour exercise once a year, and you can more or less move on. It might be spread out over a couple of days as some more information comes in, but generally this is not something that you’re gonna be spending a massive amount of time on.
00:30:18
Brad: The number of categories is pretty overwhelming for sorting expenses. When I set up my categories initially, I tried to keep things more broad to keep from spending too much time labeling all my expenses. I think this might turn away people due to the time investment. It’s this idea of getting the insight and the data versus getting the simplification. I don’t think we’re going to nail it perfectly until we’ve had the chance to get this sort of feedback and iterate it over a couple of years. I’m curious about what individuals are doing and whether they agree or disagree on the level of detail needed in their personal lives or using the community app version of this.
00:31:03
Brad: Along with that thought about the categories, it would be nice to enter a cost for the upper level expense instead of adding all the lower level expenses together. For instance, one could put a lump sum in for transportation instead of needing to break it into gas, insurance, repairs. I think the option is nice, but the detail might be useful as you look over time at some of these individual things. It could be hard to go back, but it’s relatively easy to capture it as an audit once a year. What are your thoughts on that, Jonathan?
00:31:34
Jonathan: Yeah, it’s tough. I can see it both ways. At its essence, you have to do what you’re actually going to complete. If you’re going to stare at the screen and run away, that’s not ideal. I would love in this particular case for them to break it out; I would like to see how much I spend on gas, insurance, and repairs. That information is accessible because gas, for example, is just looking for whatever it is, BP or Exxon, on my credit card bill, and I can jot that down.
00:32:15
Brad: There are instances where I suspect breaking it out too much would be annoying, but this is not one of them. I could see doing it either way, but I want to glean information from this exercise. I want to be able to look at multiple years and not imagine this as just a one-year exercise. I’d like to know what I spent in 2026 or 2027 versus 2022 or 2023.
00:33:02
Jonathan: For me, it’s about what level of data I’m looking for that would actually drive some change. I don’t need to know exactly what my split was on groceries between Costco and Wegmans because that means nothing to me. However, I think I would like to know how much I spent on car repairs this year.
00:33:22
Brad: The question is if you were wanting to review this data a couple of years later, would it be meaningful to you? Would there be a decision you could make based on that level of insight? In the case of Costco and Wegmans, you’d have to make a case, but arguably not. Total dollar amount spent would probably suffice.
00:34:07
Jonathan: This thought process highlights that individuals regularly solve this decision tree in the absence of what we’re discussing. We’re just emphasizing it as a good practice. Boston FI says, “I thought I would add my categories in case a second use case is helpful. When I started to track my spending, I discovered that I am fairly lazy. Many categories resulted in me never filling out my spreadsheet, so I consolidated into categories I figured would be the most informative to track over time. It now takes me one hour quarterly.”
00:34:34
Brad: That’s a great idea—a quick check audit four times a year. My categories are housing, which includes rent, mortgage, maintenance, and upgrades, utilities, heat, electric, phone, and internet. Food is combined grocery and dining out, transport covers anything regarding getting around, rideshare, taxi, and public transportation—loan payments, gas, and maintenance when I owned a car. Pet expenses include food, insurance, and medical. Travel is medical, including copays, deductibles, and prescriptions. Health insurance and asset insurance for homeowners and autos, income tax is a future category, and for property—auto and excise—then there’s other, which covers shopping, hobbies, subscriptions, haircuts, etc.
00:35:40
Jonathan: What’s really curious is that we’re going to keep iterating what we are doing as well. You end up with something intuitive and easy by using it, identifying friction points, and solving those. We will get something that works well and minimizes time burden. Your feedback, especially for the power users, is helpful for all of us.
00:36:05
Brad: The whole point of this is to take action. That is the essence of ChooseFI – helping you take action. Boston FI spends what seems to be an hour a quarter on this, and that’s a pretty good investment of time. For some, it might be less; for others, it might be more. If you’re spending just four hours a year on this and getting a handle on what your life costs instead of allowing money to slip through the cracks due to laziness or inaction, that is a good use of time, but it requires getting up and doing it.
00:36:45
Jonathan: If you go to chooseFI.com/login, that’s where you can access the platform we’ve been talking about. You can certainly do it on your own; you don’t need to use our platform and can use a spreadsheet. We’re aiming to build something intuitive. Also, we’re going to take anonymous data to look at what people are spending—not directly this topic but generally, to find out what people in the FI community are spending their money on.
00:37:18
Brad: I think that would be really interesting. I discussed this before while trying to get figures on case studies. Knowing what the average spending is could help identify spending leaks. For example, if my average spending on groceries is $1,700 this month but the average FI family of four spends $800, you might see where you can cut costs. Working together as a community can give a sense of average life costs.
00:38:02
Jonathan: When conducting statistical analysis, if we want clarity, we need at least 20 budgets or expense audits. We are now well past a hundred. I’ve started to compile this data and it’s going to be fantastic. You’re going to love it and find clarity. We’ll also partition it by location and household size for valuable insights. We’ll cover that in another episode, but right now, the point is to encourage everyone to conduct these audits and ensure they are getting value from their expenditures.
00:39:14
Brad: Those conducting regular audits are likely closer to financial independence than their peers who don’t track spending. It makes logical sense. So, which cohort do you want to be in?
00:39:28
Jonathan: Moving on from the expense audit and the importance of it, let’s discuss the value matrix to identify action steps. Tom had the $12.5K in spending leaks, and we believe it’s not going to zero. We’re asking Tom to reach back out and let us know what he concludes, but I want to provide a framework we can iterate on together.
00:39:59
Brad: You’ve filled out this expense audit. As you scroll through the categories, not everything needs to get carried over into the value matrix or decision tree. Some things simply are what they are—utilities, insurance—all of that; we know you’re getting optimization there. Lock it in for the year and move on.
00:40:36
Jonathan: Anything that isn’t optimized or might be a potential spending leak needs to be ported over into the value matrix. Brad and I might have debated the semantics of the axes in that matrix—X and Y—but we agree there’s a box with four squares.
00:41:01
Brad: Yes, it’s a box. On one side could be cost, and on the other side, joy.
00:41:17
Jonathan: It’s probably high joy and low joy, which seems like a Y axis.
00:41:20
Brad: Or maybe it is the X axis.
00:41:23
Jonathan: Regardless, the combination of high joy and low cost is the grand slam.
00:41:35
Brad: And then high joy, high cost is another interesting one. Then you have, obviously, the other side of it is the low joy side. Low joy, high cost is the worst of all scenarios. And then low joy, low cost is also not ideal, clearly. So two of the four slam dunks, right? High joy, low cost, low joy, high cost. And then you get into the other ones where I think that’s where people are gonna spend a lot of their time, Jonathan, is this low joy, low cost and high joy, high cost and really dive in from there. Someone can share their images. You could also share your better version of this V1 of the value matrix.
00:42:10
Brad: I’ve been kind of iterating this over time and I was dead set on it until I started talking to Brad and he told me that the one that he drew looked completely different than mine. And I was like, well, how is that even possible? There’s obviously only one way to do this. And then I looked, I was like, oh, that makes sense too. So we’re still not sure. But yeah, to Brad’s point, however you wanna draw it. In fact, if you wanna share with us what your value matrix looks like and maybe it’s slightly different, right? But I think what we have to do here is when things are coming in, there is this difference between cut. It just needs to go away, right? It didn’t make the cut. It’s not gonna stay. We don’t value it versus trim.
00:42:39
Brad: And so if it’s low joy, low cost, it’s probably gonna go into cut pile unless there’s some extenuating circumstances. Low joy, low cost. Not a huge ROI, but it doesn’t bring us any joy. It doesn’t cut just without, you know. But if it’s high joy, high cost, it doesn’t necessarily mean we leave it alone. We might leave it alone, but we might also look to optimize it. And so that’s why I say like we need to, you know, these categories, we can fine-tune them and we can get them all perfect. But I basically wanna point out when you get done with your expense audit results, so Tom and other parties here, when you look back at your category, if you’ve had fixed expenses for years, they’re well-documented, you understand them, just lock them in and move on.
00:43:29
Brad: We wanna take the variable. We wanna take the ones that we’re not really sure what it is, why they’re showing up, whether they should still show up. We wanna take all of those things and we wanna start figuring out where they go on some version of a value matrix. And our community, please send us your pictures. Put your pictures in, you know, put them on the site. We can absolutely get the absolute perfect one. But certainly, as you look at something like food and you see that you have a, I don’t know, a $2,000 a month food budget, or I don’t even know, would you use the word budget at that point or? Or indiscriminate spending? Allotment, black hole, $2,000 black hole, whatever it is. Clearly, we’re not cutting it to zero, but that doesn’t mean that we’re not doing something with it because we wanna get value from the money that we’re spending on this category, right?
00:44:20
Brad: So we need to decide, did we trim it? What is our target, right? So we have, whatever your expense audit is, this is not the place do you write down what it should be. All right, that’s the big thing. This is like, this is stepping on the scale after Christmas, after the holiday. This is just the moment of truth, right? But it’s projection, but it’s still moment of truth. This is what it is. And then when we go into the value matrix, we should have an opportunity to start to think about what it should be. Should it be zero because we’re gonna make a choice here? Should we trim it? And what is our target goal for trimming it, right?
00:45:05
Brad: And those different things, high joy, high cost, high joy, low cost, low joy, low cost. And what was the fourth one, Brad? It’s just process of elimination here. Low joy, high cost. Those give us a way to hopefully make the decision a little bit easier. All of those might just be trimming, but certainly if it’s high cost, low joy, that is ripe for reclaiming value in other places, right? So it makes it a little bit easier, but keep in mind, it’s not binary and it’s not all or nothing. It’s just getting rid of all the stuff that’s fixed. So you don’t need to make decisions on that each time, inspecting the remainder and then having a tool.
00:45:32
Brad: And I’m gonna try to see what it would look like to do that in an interactive way so that you could port over the work that you did in your expense audit. I don’t know if I’ll have that ready by the time this show goes live, but I’m certainly hoping it’s something that I’ll be able to develop for us in the next few weeks. And I think that makes it more fun and a little bit less laborious. And it’s something you’re gonna wanna do every single year as you move forward.
00:45:53
Jonathan: Yeah, I love that, Jonathan. All right, to me, the call to action is literally that, it’s take action. So if you’re listening to this, you now have episode 586, you have 589 as a follow-up, get started on your expense audit. We’ve created an amazing platform for you to do it, chooseFI.com/login, or just do it on your own in a Google Sheet or wherever it may be. But the heart is take action and get started on this. You absolutely have to, it’s critical. Even for those of us who have been in the FI community for years, this really matters. And we are gonna find those spending leaks.
00:46:24
Jonathan: And it’ll be really, I think it’ll be fun for us to see, oh wow, I found that spending leak of $2,700 this year, and it just vanished. Talk about a win, man. Talk about a win that you could share with the community is what did you find that you took action on? I promise you just by taking the time to say it out loud and share it, you’re gonna be more committed to the ongoing decision to preserve the value that you’ve reclaimed.
00:46:52
Brad: Yep, agreed. And you can always leave comments on this episode. So just log into your account at chooseFI.com/login again, and right there at the top, there’s a little banner that says this episode, the episode title, and the episode number. Click it and leave a comment. That’s what we want. We wanna be able to share this. As you know, this is crowdsourced. We’re gonna come back to this episode. We’re gonna talk about these spending leaks. So let us know. Even if you’re listening to this a month or two months or five months later, leave that comment.
00:47:21
Brad: And it’s there forever for all of us to see, hey, I found this spending leak, and I took action, and I plugged that leak. All right, so let’s see here. Fire is spreading. If you are excited about this, and you’d like to be able to do this in a more interactive way, and maybe you’d even like to do it as part of your local group, make sure you let your local admin know that this might be a good exercise for a group to do as an activity.
00:47:43
Brad: Talk about this idea of doing a Financial Independence 101, whether it’s just a one-week kind of overhaul, or whether it’s a multi-week thing, whatever it might look like for your group in your area. I think you could have a lot of fun with it. I think these types of episodes can be good ride-along discussions that require action, and there will be questions, and these sorts of groups can provide the interaction that make that a total lock-in and an awesome experience. Please keep that in mind.
00:48:06
Jonathan: Now, Brad and I have done a little bit of the Wild Wild West in the past with episode planning and release schedule. I talked to Brad about how we would do this going forward, and I wanted to give you a preview of what’s coming up. So Brad and I will be back together in a couple weeks to follow up on this episode, but there’s a couple really cool episodes planned in the meantime.
00:48:25
Brad: Yeah, you bet. Next week, we have a recording of the live event Q&A that we did here the extraordinary weekend with Alan and Katie Donegan. That was a blast. We took questions from the audience, and it really went deep. I think you’re really gonna enjoy that episode. And then the following week, we have Bryce and Christy from Millennial Revolution back. Jonathan, after seven years, that was the last time they were on the show, they have a new book called Parent Like a Millionaire, and I really dove deep into specifically what those in the FI community could take away from their experience, from my own experience, and I love their book because it’s kind of like a Trojan horse on getting people outside the FI community, into the FI community under the guise of parenting, but there’s so much there for the FI community, and I really, really drilled down.
00:49:19
Brad: So yeah, we have those two coming up. You and I are gonna be back. We have a Ginger Book Club episode coming up soon. So we’ve got a lot of fun stuff. This is gonna be exciting. All right, my friends, the fire is spreading. We’ll see you next time as we continue to go down the road less traveled.
[FINAL TIMESTAMP] Podcast Extro: You’ve been listening to ChooseFI Podcast, where we help middle-class America build wealth one life hack at a time.
