Tag Archives: Financial Independence

How moving to a Lower Cost-of-Living Area can Accelerate your FI Timeline

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Image courtesy Pexels

By Dan Parks

Special to Financial Independence Hub

The modern worker faces rapid inflation in housing and consumer prices. This results in reduced savings and financial insecurity. As a result, the Financial Independence/Retire Early (FIRE) movement has garnered many loyal followers. Individuals are saving aggressively and investing wisely to retire early and have enough money to cover living expenses.

Understanding Financial Independence

Financial Independence is achieved when an individual can cover daily expenses without having to work. One of the biggest ones is renting or owning a home. In 2023, more than 21 million renters spent over 30% of their income on housing.

Since housing consumes a large share of income, people are looking to move to areas with lower rents. This salary-to-housing ratio is even more skewed in high-cost urban areas, where rent prices are sky-high, such as in New York, Los Angeles and Chicago. There are plenty of other cities that provide the same energy while having a more affordable cost of living.

Moving to a Lower Cost-of-Living Area

There are plenty of things to consider before moving to cities with a lower cost of living:

Benefits

Geographic locations also directly impact living costs such as rent, food, utilities, transportation and healthcare. With lower expenses, individuals can afford more luxuries like dining out compared to when residing in high-cost cities. Individuals can lead more relaxed lives due to less financial stress. Other factors to improve one’s quality of life include access to nature, community amenities and smaller populations.

Reduced expenses due to a lower cost of living can accelerate savings over time, especially when directed to diverse investment accounts, retirement accounts and income-generating assets, helping individuals gain Financial Independence earlier.

Moving Tasks

Before deciding on new locations, people can create structured plans regarding moving expenses, new living costs and potential earnings. Employment rates, average salaries and cultural opportunities need to be researched and compared with their current lifestyles.

Housing and job searches should also be handled before the move. After moving, local communities, online forums and professional networks can help ease the transition into the new city. Financial goals should also be reassessed to reflect changes in income and expenses to maintain progress toward FIRE.

Sacrifices and Trade-offs

Since 2017, home purchases rose by 81%, while rent prices rose by 54% compared to a 43% increase in earnings. To further increase savings, people can downsize their living spaces or sacrifice proximity to major urban areas.

They might experience an initial discomfort with the change in lifestyle, but that will be outweighed by the potential long-term financial benefits. By assessing what to give up, professionals can gain more control over their finances and way of life. They can be more prepared for emergencies or other future situations.

5 Affordable U.S. Cities to Accelerate the Financial Independence Journey

1. Grand Rapids, Michigan

Grand Rapids, Michigan, can help individuals significantly reduce expenses due to the city’s growing economy and consistent job opportunities. They also don’t have to sacrifice lifestyle quality, as the Grand Rapids area is known for its wide range of outdoor activities, emerging art scene and friendly communities.

2. Austin, Texas

Austin, Texas, is a burgeoning tech hub with more affordable rents than in Silicon Valley and Seattle. Tech presence in Austin includes Apple, Tesla, Dell, AMD, Amazon, Google, IBM, Meta, Microsoft and Samsung, among others. Besides its tech scene, Austin has a vibrant music community and plenty of outdoor activities at Lady Bird Lake, Mount Bonnell and Barton Creek Greenbelt. The city also offers a distinct food scene, especially Texas barbecue and tacos.

3. Boise, Idaho

Boise is an ideal city to relocate to for individuals looking to save on living costs. The city offers stunning landscapes without breaking the bank on rent, making it perfect for families and young professionals alike. Residents have plenty of activities to explore in the city, including hiking, biking and skiing. It has a solid job market, a stable economy and plenty of amenities for different lifestyles. Boise also has top-rated schools with relatively lower utility and transportation costs.

4. Charlotte, North Carolina

Charlotte is growing as a major financial, healthcare and tech center, making it a great option for many young professionals. The city also has plenty of welcoming communities with diverse interests and backgrounds. The cost of living here is lower than in other ultra-urban cities, which makes day-to-day living and saving significantly more hassle-free. Residents can drive to the Blue Ridge Parkway for a relaxing weekend trip in the Great Smoky Mountains.

5. Richmond, Virginia

Richmond, Virginia, is great for those who are inspired by a place’s historical significance. It also offers significant modern growth, cost-of-living affordability and culture. The city has plenty of galleries, theaters and music venues for any art-loving individual. Community events and volunteer opportunities are plentiful.

Embracing a Strategic Move for Financial Freedom

The Financial Independence Retire Early movement is widely known. It encourages individuals to save more, invest in income-generating assets and retirement accounts to be able to retire earlier than the rest of the workforce.

Relocating to lower-cost cities is one of the most viable paths toward increased savings. There are plenty of cities with a vibrant energy, welcoming communities and plenty of activities. In the right locations, individuals can increase savings without sacrificing quality of life, but proper planning before moving is essential to achieving a fulfilling lifestyle.

Dan Parks is a senior writer at Modded.com. Based in Washington, D.C., Dan has a proven track record of distilling complex subjects into accessible narratives across various fields. His expertise in clear communication and meticulous research makes him a valuable contributor to discussions on personal finance and investment strategy, helping readers navigate intricate topics with ease. Dan is dedicated to providing readers with well-researched insights to foster financial literacy and independence.

Keeping the spark: Pursuing FIRE and staying aligned on money

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Image courtesy Tawcan/unsplash

By Bob Lai, Tawcan

Special to Financial Independence Hub

On paper, Financial Independence Retire Early (FIRE) is a simple concept: spend less than you earn, grow your savings gap, optimize your taxes, invest your savings, and wait for your money to compound over time.

But one thing that doesn’t get covered enough with the FIRE movement is the relationship side of money.

To be more specific, if you’re on the FIRE journey with a partner, how do you make sure the two of you are aligned? After all, if you and your partner aren’t on the same page, none of it matters.

For us, Mrs. T and I have been on the FI journey since 2011. This year marks the 15th year of our journey. That’s 15 years of saving, budgeting, investing, making difficult financial decisions, and occasionally having disagreements on money-related decisions.

I figure it’s worthwhile to spend some time discussing how we stay aligned on money and some of the relationship challenges we have faced since we started our FI journey.

How it all started: The financial epiphany

Although both of us came from frugal backgrounds and we both learned in our youth to spend less than we earn, we didn’t really focus on optimizing our finances or investing intentionally when we started dating and when we started living together.

It wasn’t until we read the Secret of Millionaire Mindset that we started having deeper and more detailed conversations about money and how we want our financial future to be. Around the same time, we were also considering getting married, so it was important to make sure we were both aligned on our future financial plans. We both recognized that building wealth through saving and investing could give us more options and freedom in the future.

But just because we talked about money didn’t mean we always agreed on every financial decision we made.

Far from that!

How we are different due to our money personalities 

Mrs. T and I don’t think about money the same way.

Deep down, I’m an “extreme” saver and optimizer. I’d always find ways to optimize things and try to save as much money as possible. Even if I could save 50% on something, I would try to find more ways to save another 20%.

Mrs. T, on the other hand, is a more balanced saver. She doesn’t like spending money unnecessarily, but typically won’t climb the mountain to see if she could save even more.

Another way we are different is that I’m a self-proclaimed spreadsheet nerd. I am a numbers person and I love spreadsheets. I have many different spreadsheets tracking different things and data, charting our historical trends and projecting future ones. Whenever I see data in spreadsheets, I see data and optimization opportunities.

Mrs. T likes spreadsheets too but not nearly to the extent that I do.. She’s more practical and intuitive. She cares whether we have enough and whether we can enjoy life now without sacrificing our future. She likes to see things from the 30,000-foot view rather than getting into the nitty-gritty details, as I do.

Our different money personalities created some disagreements and discontent when we first started our FI journey. For example, Mrs. T enjoyed going to a cafe to have great conversations while having a good cup of coffee and delicious pastries (i.e. having hygge). Meanwhile, I would calculate in my mind how much money we could have saved and invested if we hadn’t spent the money.

Realizing what we needed to keep us aligned 

Over time, I realized my save-save-save-then-save-more default mentality wasn’t healthy. I learned that I need to relax and spend money to enjoy the present moment. On the flip side, Mrs. T began to understand my worries and my insecurity with not having enough money and started to cut back slightly on the “nice to have” expenses.

We found our “balance” by meeting each other in the middle. We both learned that it’s vital for us to stay aligned financially. These are some systems and habits that have helped us:

Regular money conversations 

We talk about money regularly but we try to keep it natural and relaxed rather than turning these chats into formal meetings. We’ll talk about money over meals, over coffee hygge, or while driving. Quite often, we involve both kids and explain to them why we are talking about these topics. In our household, we don’t shy away from money talks, we encourage them.

These money conversations happen regularly, sometimes multiple times a day. We keep them very casual and relaxed. Although we have regular money conversations, we don’t discuss our investment portfolio and net worth daily. We want to ignore the noise and focus on the long term. I’m in charge of the details and I provide Mrs. T the big picture updates without overwhelming her with all the details. So when it comes to investment portfolio and net worth, we typically discuss them in detail every quarter.

Reviewing our expenses: focusing on the trends rather than amount spent

When we first started tracking our expenses and using our budget system, I was very much focused on how much we spent on the different categories every month. I wasn’t looking at the big picture and certainly wasn’t focusing on the spending trend.

As our net worth grew larger and we had a few years of spending data on our hands, we finally developed a system that works for us. Every 6 months, Mrs. T and I will sit down for about 10 to 15 minutes to look at our spending spreadsheet. We look at the trends and see if there are categories we are overspending or underspending. If we are overspending in a certain category, we try to find out why. For example, if we were spending more than usual on dining out, perhaps it was because we had friends or family visiting.

Making the financial big decisions together 

For the most part, I manage our investment portfolio and make the buying and selling decisions. Sometimes I would consult with Mrs. T if I were to make drastic decisions like adding a new position or closing a position. Mrs. T trusts my judgment on the day-to-day investment decisions, but I found it is always a good idea to talk to her about my investment thesis and get an agreement on big portfolio moves.< Continue Reading…

5 keys to a great Retirement

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By Fritz Gilbert, RetirementManifesto.com

Special to the Financial Independence Hub

Can you imagine having the opportunity to study two decades worth of retirement research, and gleaning the keys to a great retirement from the experts?  I recently had that opportunity when I took the time to read a 90-page study titled “The Experience Of The Transition To Retirement,” a study that filtered through 1,800 research papers!

Today, I’m summarizing the results from that study and presenting to you 5 Keys To A Great Retirement, along with additional findings from this extensive research.

Using Research To Improve Retirement

The goal of this research project was to understand what led to successful retirement transitions and to “better understand how best to help individuals navigate this transition”, as well as “how to improve the quality of post-retirement life”.   Valuable information from which you, the reader, can benefit.

Before I present The 5 Keys To A Great Retirement, there are some findings in the study which I found interesting.  For the sake of brevity, below is a list in bullet form.  Note that the study did focus on gender/socioeconomic/ethnic/cultural differences, so it’s best to read the findings with that in mind:

  • 25% of retirees experience difficulties in the transition to retirement.
  • Men tend to have more positive attitudes toward retirement and be more engaged in planning for retirement than women.
  • Based on the studies, women appear to have greater difficulty in adjusting to retirement than men.
  • Those in higher Socioeconomic positions tend to work longer than those in lower positions.
  • Being married is associated with greater preparedness and a more proactive approach to planning for retirement.
  • Where work is important to an individual’s identity, retirement causes more conflict and anxiety.
  • Nearly half of those aged 50 and over said that they expect to retire later than they had thought they would.
  • Governments from around the world have enacted policies that seek to reverse an ‘early exit culture’ and extend the length of people’s working lives, maintaining economic productivity and reducing social spending.

Yes, there was a lot of interesting information in those 90 pages (trust me, I read every page). Boiling it all down, below are my takeaways on what comprises the 5 Keys To A Great Retirement.

1.) Control Your Destiny

The first finding was that those who felt they had the most control over their retirement decision were also those who most enjoyed their transition into retirement.  To quote the study:

“One of the most consistent and convincing findings in this review is that a sense of control is associated with positive retirement outcomes.”

While you may feel that you don’t control your retirement as much as you’d like, the reality is that there are a lot of areas in your retirement planning where you can influence the results.  Simply taking the time to prepare for your transition into retirement (See Key #2) is, in itself, exerting some control over your destiny.

Don’t leave your retirement to chance.

Given that you’re reading a blog on retirement, you’re likely ahead of your peers in tackling the first of these Keys To A Great Retirement.  You’re taking control of your retirement, and your retirement will be better as a result.

2.) Imagine What Your Retirement Will Be

The second of the 5 Keys To A Great Retirement was the finding that those who took time before retirement to imagine what their retirement would be were also those most likely to have a good retirement.  Think beyond finances. Finances play a small role post-retirement, and yet most folks think most about the financial implications of retirement when preparing for the transition.

Broaden your scope, and spend time thinking about what you want your retirement to be.  Dedicate some time, while you’re still working, to take a Test Run At Retirement, like my wife and I did.  Take some time to think about:

  • What will your life look like when work is no longer mandatory?
  • How will you spend your time?
  • What will give you Purpose?
  • Where will you live?

The research indicates that retirement planning “has potentially important consequences,” not just for financial security in retirement, but also ” in promoting satisfaction with, and adjustment to, the retirement lifestyle.”

It’s been proven by the research that planning for retirement while you’re still working is one of the best things you can do to ensure that you’ll have a great retirement.  Make it a priority, it’s one of the keys to a great retirement.

3.) Develop Retirement Goals

Retirement is a luxury.

For the first time since you started school, you’re free to do whatever you want with your life.  It’s also the first time that you’re 100% responsible for deciding how you’re going to spend your time.

Are you going to Die While You’re Living, Or Live While You’re Dead?  Decide what retirement means to you, and develop some goals to help you prioritize the things which are most important to you.  Focus on what matters to you, and create a plan to do the things you want to do, and avoid doing the things you don’t.

Create an action plan to move your retirement From Good To Great.  Create your own 10 Commandments of Retirement, and outline what really matters for your life in retirement.  Recognize that your role and identity will change from when you were a worker with employer-defined goals.  You’re now Independent, and you should define your own identity, supported by your own goals. Continue Reading…

Mini Retirements: Why Waiting until 65 is a Mistake

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Gemini-generated image courtesy AlainGuillot.com

 

by Alain Guillot

Special to Financial Independence Hub

Mini retirements challenge one of society’s most accepted ideas: work nonstop for 40 years, then finally start living at age 65.

But there’s one major flaw in that plan.

Your money may still be there at 65, but your body may not.

You probably won’t be surfing in Portugal, climbing mountains in Peru, scuba diving in the Caribbean, or salsa dancing until 2:00 a.m. in Iceland with the same energy and physical capacity you had in your 30s or 40s.

Life experiences have an expiration date.

That’s why more people are embracing the idea of mini retirements: taking intentional breaks throughout life to travel, recharge, learn, and experience the world while they are still physically capable of fully enjoying it.

What are Mini Retirements?

Mini retirements are extended breaks from work taken throughout your career instead of postponing all freedom until old age.

They can last:

  • Three months
  • Six months
  • One year
  • Even several years

Unlike traditional retirement, mini retirements are not about stopping work forever.

They are about redistributing leisure and adventure across your lifetime.

Instead of saving all your freedom for the end, you enjoy pieces of it along the way.

Why Mini Retirements make sense

Your Health Is Temporary

Money compounds over time.

But physical ability declines over time.

There are experiences that simply feel different when you are young enough to fully enjoy them.

Walking through the steep hills of Lisbon at age 35 is not the same experience at age 75.

Sleeping in hostels, hiking volcanoes, learning to scuba dive, backpacking through Southeast Asia, or dancing all night requires energy, mobility, and stamina.

Those things are not guaranteed forever.

The Compounding of Life

Financial advisors often talk about the compounding of money.

But there is another kind of compounding that matters just as much: the compounding of experiences.

In his book Die with Zero, Bill Perkins introduces the idea of “memory dividends.”

When you have an incredible experience while you are young, you continue receiving emotional returns from that memory for decades.

A six-month adventure at age 30 may give you:

  • Stories you tell forever
  • Friendships that last decades
  • Confidence and personal growth
  • Memories that enrich your entire life

That experience continues paying dividends emotionally long after it ends.

An incredible trip at age 65 may still be meaningful, but it produces fewer years of memory dividends.

A Career Break is not Career Suicide

For decades, workers feared gaps in their résumés.

Today, that mindset is changing.

Modern work is increasingly digital and sedentary. Millions of people now earn income from laptops, consulting, remote work, freelancing, or flexible schedules.

Many people in their 60s and 70s can continue working comfortably from home long after physically demanding jobs would have forced retirement in previous generations.

That changes the equation completely.

A mini retirement in your 30s or 40s is no longer necessarily a setback.

It can be:

  • A strategic reset
  • A mental health investment
  • A creative recharge
  • A period for reinvention
  • A chance to reconnect with life

Ironically, many people return from mini retirements more energized, focused, and productive than before.

Is it Okay to use Retirement Savings?

For many people, the answer is yes: within reason.

Of course, withdrawing money early means sacrificing some financial compounding.

But life is not only about maximizing spreadsheets.

Time is a non-renewable resource.

Money can be earned back. Continue Reading…

Can Millennials become Financially Independent?

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Image Pixabay/iStock

By Billy and Akaisha Kaderli

Special to Financial Independence Hub

Millennials, those born roughly between 1980 and the year 2000, face a different future than Baby Boomers did at their same age. In terms of Wealth Building and saving for Retirement their challenges are wage stagnation, unemployment, underemployment and a seeming sense of entitlement. Because they came of age during the Great Recession, their faith in brokerage firms, Wall Street and global banks has been bruised.

Being optimists, we believe the financial future of this generation can still be bright, but with loads of student debt and lack of investment understanding they need to get started learning about finances and money management now.

Time is on your side and is your greatest asset

One thing Millennials have today that Boomers don’t is great stretches of time before Retirement. It is their greatest resource and this fact needs to be made clear to them. Time cannot be replaced, and if you are a Millennial, then knowing about the power of compounding will change your financial life. $10,000 – the cost of a used car – invested today in the S&P 500 Index and based on market historical returns from 1950 to March 2023 could grow to US$1,000,000 or more throughout your career, thereby building a solid foundation for your retirement needs. This return is without adding another dollar to your investment.

S&P Market Return Chart

If you do nothing else for your retirement, scrape and scrap to make this investment into SPY (S&P 500 Index ETF) or VTI (Vanguard Total Stock Market ETF) and you will be handsomely rewarded, since you have this time on your side.

Just get Started

A new investor with limited funds can utilize an online, no-frills brokerage account and — depending on which brokerage you pick —  you can open an account with less than $1,000. Not every house requires initial investments of more than $2,500, and as of this writing, Fidelity is offering a no minimum for opening an account. Continue Reading…