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Intentional Spending

Your spending is an important factor in your financial independence journey. It effects the rate at which you can save and invest while in the accumulation phase and is also a critical factor in calculating your Target FI Number. When accumulating wealth, the amount you can save and invest is a simple calculation: what you make minus what you spend. Like many of the levers we talk about, your spending has a non-liner effect on your FI journey. Spending slightly less also means saving slightly more and both of those quantities are found in the formula for Stash Rate , leading to a multiplied effect. $$ Stash Rate = {Annual\ Savings \over Annual\ Expenses} $$ As we saw in the Stash Rate article, decreasing expenses leads to an exponentially increasing rate of wealth building. On the other side of financial independence, the level of spending in your drawdown phase directly determines your Target FI Number. $$ Target\ ...

Thrifty Thursday - Hack your Housing

Housing is an expense we all must deal with which can add up to a large portion of our income. The US the Bureau of Labor Statistics last survey on Consumer Expenditure found housing to be the largest category for the average American at 33% of their spending. The Pareto Principle would tell us this is an area ripe for action. What are some ways we can reduce the amount we spend on housing? Live at home for as long as you can. Living with your parents is becoming a frequent stepping stone for college graduates. Outside of America, multigenerational households are already much more common. Not only is it more efficient to combine more family members under one roof, but younger generations living rent free is a great tax-free wealth transfer tool! Don’t forget about grandparents or close aunts and uncles living in areas you would like to work. Chose a low cost of living area. Include the cost of living in your calculat...

Thrifty Thursday - Upgrade to LED Bulbs

Here’s a hack with a high percentage return. If you pay your own electricity bill, chances are your use is metered and charged by the Kilowatt hour (kWh) . A Watt (W) is measure of power, or energy per second, so a Kilowatt hour is just using 1,000 Watts of power for one hour. For example, a common household incandescent light bulb uses 60W of power. If you left this light bulb on for 3 hours a day for a year, it would use 65.7 Kilowatt hours: $$Total\ Energy = Power * Time$$ $$Total\ Energy = 60 W * {3\ h \over day} * {365\ days \over year}$$ $$Total\ Energy = {65,700\ Wh \over year} = {65.7 kWh \over year}$$ Since Thomas Edison invented the incandescent bulb in 1879, however, there have been some improvements to the technology. The latest is the LED Light Emitting Diode bulb. An LED bulb can create the same amount of light Typically measured in lumens. as an old incandescent light bulb using much less power. For example, an L...

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