Tag: financial independence

  • Is the 4% Rule Actually More Like the 4.7% Rule?

    Is the 4% Rule Actually More Like the 4.7% Rule?

    Bill Bengen, creator of the 4% Rule, just released a new book with some fun news for all of us saving for retirement.

    Bengen’s updated research shows that it’s safe to increase your withdrawal rate in retirement from 4% to 4.7%.

    If you are retiring today, it gets even better. Bengen’s research shows that you can safely withdraw around 5.25%.

    Bengen’s new book is called A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More.

    If you’re at all interested in FIPE (Financial Independence Pivot Early), Bengen’s book is a must read.

    What is the significance of raising the safe withdrawal rate from 4% to 4.7%?

    If you are years away from retirement, you may be wondering, “Why does it matter if you withdraw 4% or 4.7% in retirement?”

    There are two ways to answer that question.

    Number 1: the higher the safe withdrawal rate, the more you can safely spend in retirement without running out of money.

    That sounds fun.

    You know what’s even more fun?

    Number 2: the higher the safe withdrawal rate, the less money you need to save before you can retire.

    That means you may be even closer to retirement than you previously thought.

    That sounds like even more fun, right?

    We’ll take a look at the math in a moment.

    The title of Bengen’s book says it all: “spend more and enjoy more.”

    Here at Think and Talk Money, enjoying our money is one of our primary objectives.

    We are not interested in building the biggest bank accounts just so we look good on a spreadsheet. We are interested in building a life where we are in control.

    That means spending money on what is important to us. It means spending more time with the people who are important to us.

    So, how does a higher safe withdrawal rate help us?

    Let’s explore that by first reviewing the 4% Rule

    What is the 4% Rule?

    The 4% Rule suggests that you can safely withdraw 4% of your investments in year one of retirement. Then, you can safely withdraw 4% plus an adjustment for inflation in subsequent years.

    If you do so, you can expect your money to last for 30 years.

    Without getting too technical, the 4% Rule is based off of research looking at historical investment gains, inflation, and other variables.

    As an example, let’s say you have $1 million in your portfolio.

    According to the 4% Rule, you can safely withdraw $40,000 in year one (4% of your portfolio), then 4% adjusted for inflation in each subsequent year, and not run out of money for 30 years.

    Using the updated “4.7% Rule”, you can safely withdraw $47,000 in year one.

    This simple example shows how you can take your current retirement savings and project the amount you can safely spend so your money lasts 30 years.

    El portero de San Juan FC, Tienes que crear tu propia suerte.-Fabien Barthez, illustrating the importance of having a target like the 4.7% Rule.
    Photo by ÁLVARO MENDOZA on Unsplash

    The 4% Rule also works in reverse. 

    By that I mean you can use the 4% Rule to ballpark how much money you’ll need in retirement to maintain your current lifestyle.

    We’ll look at exactly how to do that below.

    In either case, the 4% Rule is an effective and easy way to start thinking about a magic retirement number.

    How to use the 4% Rule based on your current savings.

    We mentioned above that the 4% Rule works two ways. 

    First, you can take your current retirement savings and calculate how much you can safely spend so your money lasts 30 years.

    If you have $1 million invested, the 4% Rule says you can safely spend $40,000 annually and expect your money to last 30 years.

    Here’s how the math works:

    Using the 4.7% Rule, the math looks like this:

    That’s a useful calculation, especially if you’re nearing retirement age and just want to know how much you can spend each year.

    But, what if you don’t exactly know when you want to retire? 

    Your main priority may not be to retire by a certain age. Instead, your aim may be to retire with enough money to maintain your current lifestyle. You’re determined to continue working for as long as it takes.

    To calculate that magic retirement number, you can once again use the 4% Rule. This time, in reverse.

    How to use the 4% Rule based on your current spending habits.

    The second way to use the 4% Rule is to start with your current spending habits to project how much money you’ll need to maintain that level of spending in retirement. 

    This may seem obvious, but to do so, you’ll first need to know your current spending habits. 

    If you don’t know how much you’re currently spending on a monthly basis, take a look at our budgeting series here.

    The good news is that once you’ve created a Budget After Thinking, this next part is easy.

    To calculate your magic retirement number based on current spending, simply follow these steps:

    1. Add up the amount your’re spending each month in Now Money and Life Money.
    2. Take that number and multiply it by 12 to see how much your lifestyle costs per year. 
    3. Divide that yearly spending by .04

    That’s your magic retirement number.

    Now, let’s use some real numbers to help illustrate how to use the 4% Rule to project your magic retirement number.

    Here’s how to use the 4% Rule to forecast your magic retirement number.

    Let’s look at an example using the 4% Rule to forecast your magic retirement number.

    Let’s say that you reviewed your Budget After Thinking and learned that you spend $6,000 per month in Now Money and $4,000 per month in Life Money. 

    Combined, that means your lifestyle costs you $10,000 per month, or $120,000 per year.

    To figure out how much you would need in investments to cover your current lifestyle for 30 years, divide $120,000 by .04.

    Under the original 4% Rule, that means to maintain your current lifestyle of spending $120,000 per year for 30 years, you would need $3 million in investments.

    In other words, your magic retirement number is $3 million.

    a chalkboard with the word possible written on it showing what's possible with the 4.7% Rule.
    Photo by Towfiqu barbhuiya on Unsplash

    If that number seems impossibly high to you, the updated 4.7% Rule should make you feel a little better:

    Based on the updated 4.7% Rule, you now only need $2.5 million instead of $3 million to maintain your current lifestyle in retirement.

    That’s fun news.

    Use the 4% Rule as an easy projection tool, not an actual withdrawal rate.

    Whether you want to use the 4% Rule or the updated 4.7% Rule, keep in mind that these are projection tools.

    I view the 4% Rule as a tool to ballpark your magic number, as opposed to a strict withdrawal rate once you actually retire. 

    I point that out because there’s some debate in the personal finance community as to whether 4% is still a safe withdrawal rate in today’s economic environment. 

    For our purposes, I’m not too concerned about that debate.

    Once you get to retirement, your actual withdrawal rate may be higher or lower than 4% depending on a variety of factors. Put another way, you will need to adjust how much you withdraw each year based on factors outside your control.

    Regardless, the 4% Rule is a great way to start thinking about how much you’ll need to save for retirement. Attaching an actual number to your retirement goals is extremely helpful.

    Like Bengen argues in A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More, the point of saving money now is to spend it and enjoy it later.

    For people who are used to saving aggressively during their working years, it can be hard to switch to a spending mindset.

    Whether you’re nearing retirement or still have years to go, A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More will help you find that balance.

    Have you read A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More? What did you think?

    Will you update your retirement planning based on the new 4.7% Rule?

    Let us know in the comments below.

  • Capital One Settlement: A Reminder to Evaluate Your Bank

    Capital One Settlement: A Reminder to Evaluate Your Bank

    How long have you been with your current bank?

    Do you even remember why you opened an account with that bank in the first place?

    For many of us, we opened our first “adult” bank accounts in our 20s. We probably just picked the closest bank to our apartment. I doubt many of us (myself included) put much thought into who we banked with.

    Because it’s human nature to resist change, I’m guessing many of us have never thought about whether that bank is still a good fit at the current stage of our lives.

    In light of Capital One’s massive class action settlement based on allegations that it deceived its customers, now seems like as good a time as ever to revaluate who we bank with.

    More on the settlement below.

    First, a little personal context about why I’m thrilled that Capital One is not getting away with its deceptive scheme.

    I banked with Capital One for many years.

    For a long time, I used Capital One for all my savings accounts. When I started law school in 2006, there was a Capital One cafe right next to my school.

    You could get a cup of coffee for $.75 and talk to a banker at the same time. It was a cool concept and convinced me to bank with Capital One.

    I told everyone about how great Capital One was. I had Capital One savings accounts and a Capital One credit card. You could say I was a huge Capital One fan.

    Key word: was.

    In November 2023, I had been a loyal Capital one customer for 17 years. This was during the time period when interest rates on savings accounts were rising dramatically

    Many banks were advertising rates as high as 4% or 5%, which were higher than most of us had ever seen.

    One day that November, for whatever reason, I logged into my Capital One account to see what rate I was earning.

    I was sure it would be in the 4% range, and probably closer to 5%, since Capital One was a leader in online banking.

    When my statement loaded, I was shocked.

    0.30%!

    Shocked probably isn’t the right word. I was disgusted. 

    0.30% in 2023 might as well have been 0.0%.

    I refused to believe that a bank that I had banked with for 17 years could do this to a loyal customer.

    What the heck happened?

    Well, Capital One, unbeknownst to me, switched my savings from its high interest platform into an account with the much lower interest rate.

    At the same time, Capital One was still advertising and offering top rates to new customers.

    When I discovered the sneaky switch, I immediately closed all of my accounts and transferred my money to a new bank. I no longer have a Capital One credit card, either.

    It wasn’t the amount of interest I lost out on that bothered me. 

    This all happened during that time when my wife and I were aggressively acquiring properties, so we never had a lot of money sitting in savings for an extended period.

    So, my anger wasn’t just about the interest.

    For me, it was about the principle. I don’t want to have any relationship with a bank that would do that to its customers, especially long-term customers like me.

    I did a quick search in my inbox and found a Capital One statement from December 2022 showing a 0.30% interest rate. That means Capital One had deceived me for at least a year before I caught on. 

    I have to admit that writing this post is reopening old wounds. Although, learning about the settlement definitely helps.

    a bank sign lit up in the dark as a reminder to always evaluate your banking relationships.
    Photo by POURIA 🦋 on Unsplash

    I am happy to report that Capital One did not get away with it.

    It wasn’t just me who was getting ripped off by Capital One.

    I am one of the many people that Capital One switched out of high interest rate savings accounts into inferior products.

    These deceptive practices were subject of a federal lawsuit brought by the Consumer Federal Protection Bureau.

    Additionally, disgruntled customers filed a class action lawsuit to recoup the interest that people like me missed out on.

    All is well that ends well, right?

    I am pleased to share that Capital One agreed to a $425 million class action settlement for its deceptive practices.

    A court hearing for final approval of the settlement has been scheduled for November 6, 2025.

    If you are, or were, a Capital One 360 Savings account holder at any time from September 18, 2019, through June 16, 2025, you are automatically eligible for benefits. You do not need to fill out a claim form.

    Note: if you’d like to update your mailing address or receive an electronic payment, you can do so here.

    What are the terms of the settlement?

    According to the Notice of Settlement:

    Capital One shall pay $300 million, to be used to make pro rata payments to settlement class members relative to the approximate amount of interest each settlement class member would have earned if their 360 Savings account(s) had paid the interest rate then applicable to the 360 Performance Savings account.

    Translation: if you had a Capital One 360 account, you are going to be paid “some” of the interest you were owed.

    The reason I say “some” is because of the word “relative” in the above paragraph from the notice.

    Capital One allegedly cheated customers out of $2 billion in interest. The settlement is for $425 million. Based on that discrepancy, it does not appear we will get all of the interest we are owed.

    Hopefully, I’m wrong about that and we all receive the full interest we are owed.

    Disclaimer: I am not involved in the settlement negotiations and this is not legal advice.

    If you remained a customer, you will receive an additional settlement amount:

    The second component consists of $125 million, which will be paid by Capital One as additional interest payments to settlement class members who continue to maintain 360 Savings accounts (presently approximately 3/4 of the settlement class). In order to accomplish such additional interest payments, Capital One shall maintain an interest rate on the 360 Savings account of at least two times the national average rate for savings deposit accounts as calculated by the FDIC.

    Translation: If you continue to bank with Capital One, you will receive some additional money. How much you’ll get is complicated.

    By the way, I am happy to learn that customers who stayed with Capital One despite its deceptive practices will earn some additional money.

    In the end, regardless of how much we receive, this news makes me very happy.

    I don’t really care about the payment at this point. I’m happy that Capital One isn’t getting away with its deceptive practices.

    And, I’m happy that news of the settlement serves as a good reminder for all of us to evaluate our current banking arrangements.

    Even with the settlement, I still won’t bank with Capital One again. I cancelled my accounts as soon as I learned that the bank was ripping me off.

    Maybe I’m being childish, but I still refuse to give my business to a company that blatantly deceives its long-time customers.

    ATM showing the importance of always evaluating your banking relationship.
    Photo by Johnyvino on Unsplash

    Why do stories like Capital One’s deceptive practices matter?

    The lesson here is that we all need to regularly evaluate our banking relationships. There is no such thing as “set it and forget it” when it comes to our money.

    You could say stories like this are good reminders to regularly think and talk about money.

    The last thing any of us needs is to be tricked by our own banks. The more we talk about what’s going on, the better chance we will catch these schemes before it’s too late.

    The point is: no matter how much you trust your bank, keep an eye on your accounts.

    No, I am not so cynical that I think all banks are out there intentionally ripping us off.

    However, massive scandals like this are not the only red flags to look out for. Banks notoriously have hidden fees and confusing rules.

    If you are not paying attention to your money, you may be unknowingly paying fees or missing out on better opportunities. It’s up to each of us to regularly evaluate whether our bank is continually providing us with the services we need.

    Are you a current or former Capital One customer?

    If this is the first you’re hearing about Capital One’s deceptive practices, will you continue to bank with them?

    Let us know in the comments below.

  • How to Easily Evaluate a Rental Property with Real Numbers

    How to Easily Evaluate a Rental Property with Real Numbers

    For beginners, running the numbers on a potential real estate deal can seem complicated. 

    It doesn’t have to be.

    If you’ve been practicing good budgeting habits with your personal finances, this part should actually be easy. 

    The key is simple: more needs to come in than goes out.

    When you have more coming in than going out, that means you have positive cash flow.

    For lawyers and professionals acquiring rental properties to accelerate our journeys to financial freedom, we don’t need to overcomplicate things.

    What we need to know is whether a property is going to put more money in our pockets than it takes out.

    Today, we’ll look at a real example of how I quickly and easily evaluate potential deals in my primary market.

    If you haven’t already, check out my previous post on evaluating real estate deals for a detailed explanation on why I focus on the below elements.

    As a quick refresher, let’s first look at the fixed costs and speculative costs involved in evaluating rental properties.

    There are fixed costs and speculative costs involved in evaluating a rental property.

    Whenever you evaluate a rental property, there are some fixed costs and some speculative costs involved. This holds true whether you are a beginner or an experienced investor.

    It’s helpful to differentiate between the fixed costs and the speculative costs. In a lot of ways, we can control the fixed costs, but we cannot control the speculative costs.

    Fixed costs generally include reoccurring monthly bills that are relatively constant.

    The main fixed costs you’ll want to know when evaluating a rental property include:

    • Mortgage payment (Principal and Interest)
    • Taxes
    • Insurance
    • Utility Bills
    • Property Upkeep
    • Preventive Maintenance

    Speculative costs include those unpredictable, irregular costs that do not occur every month and maybe don’t even occur every year. 

    I separate the speculative costs into three main categories:

    • Vacancy Rate
    • Unexpected Repairs
    • Property Improvements

    Vacancy rate refers to the percentage of available units that are unoccupied at a particular time. When running the numbers on a prospective rental property, I recommend adding in the cost of 5% vacancy.

    When you own rental properties, things are going to break and require money to fix. If you target properties in decent condition, I recommend saving 5% of the monthly rent for unexpected maintenance. 

    If you don’t improve your property over time, you risk your unit becoming unattractive. Again, if you target decent properties to begin with, I recommend saving another 5% per month for property improvements. 

    With these costs in mind, we can now quickly and effectively run the numbers on any available property.

    Let’s take a look at a property that recently became available in my target market of Chicago.

    I regularly check available properties in my target area in Chicago.

    I have a searched saved on the Redfin app for multifamily properties within a certain price range in my target areas of Chicago.

    That makes it easy to scroll through the listings a few times every week to keep myself educated on my local market.

    I do this for a few reasons, regardless of whether I’m actively shopping for a property.

    white ceramic sink near brown wooden table indicating a nice rental property but do the numbers check out.
    Photo by Huy Nguyen on Unsplash

    First, I want to know what new properties come on the market. I’m interested to see if developers and rehabbers are still drawn to my area.

    I also check to see how much properties have sold for recently so I can stay on top of market conditions. For example, I’m curious if sellers are accepting below-asking-price offers and how long properties are staying on the market.

    I’m also looking to see if there have been any price reductions on properties that previously caught my eye.

    All of this simple research helps me move quickly when an attractive property becomes available.

    This research has also helped me develop a list of basic requirements I look for in a rental property.

    Before running the numbers, a property has to match my initial requirements.

    Before I run the numbers on any property, it has to satisfy some basic requirements. This is not an exhaustive list, but here are some of the most important factors my wife and I evaluate when considering rental properties in Chicago:

    1. Location, location, location. In Chicago, proximity to the L and social life (coffee shops, restaurants, bars, etc.) are crucial. Most of the young professionals we rent to are still in the “going out” phase of life. They want to live in fun neighborhoods so they can enjoy themselves when they’re not working. They typically stay in our apartments for 2-3 years, oftentimes before buying a place of their own and “settling down.”
    2. Taxes. Property taxes can eat away your cash flow. We have high property taxes in Chicago across the board, but taxes vary widely from neighborhood to neighborhood. I look for properties in areas that have more attractive taxes.
    3. Big bedrooms. One of the most common questions I get when I do apartment showings is, “Can I fit a king size bed in here?” People love big beds these days. This can be a challenge considering Chicago’s standard 25-foot wide lot. I look for properties with a minimum bedroom size of 10 x 10.
    4. Outdoor space. Young professionals want to have outdoor space, even if they never use it. When I was a renter, I always wanted an apartment with a balcony for my grill. It didn’t matter to me that I only used it a handful of times each year. Maybe having outdoor space made me feel more grown up?
    5. Parking. Even though Chicago is a very public transit-friendly city, people still like having cars. Because most young professionals aren’t using their cars every day, they want to keep it safe in a dedicated parking space.

    If a property becomes available that meets these requirements, I’ll then run the numbers.

    Only after confirming that a potential property meets these requirements do I actually run the numbers.

    There’s no reason to waste time on a property that may project well in a spreadsheet but will cause me nothing but headaches as a landlord.

    The other day, a new property popped up that caught my eye: 2501 N. Sacramento Ave.

    It’s a five-unit apartment building listed for $1,800,000 and located directly in my target zone.

    Here’s the listing description from Redfin:

    Fully Gut Renovated 5-unit building, a prime turnkey investment opportunity in the best Logan Square Location Possible. Double Vanities, Fully built out walk in closets, in unit W/D, tankless hot water heaters, thin shaker kitchens and full height quartz backsplashes are just a few of the features that make this building feel more like condo living. Perfectly situated just steps from the Logan Square Farmers’ Market, residents can enjoy an eclectic mix of trendy bars, restaurants, cafes, and shops right at their doorstep. Renovation done with full plans and permits, include a new roof, windows, insulation, drain tile system with sump pump, back deck, and still warrantied appliances!

    It’s not always the case, but in this instance, the pictures seemingly match the description of a beautifully renovated property. Of course, we can confirm the quality of the work when we tour the property.

    So, this property passed my initial screening. Now, I can run the numbers to see if it would be a good investment.

    By the way, I target gut-renovated properties because I have a full-time job as a lawyer and don’t have the time to dedicate to a major renovation project.

    Let’s plug in the numbers to see if this would potentially be a good investment property.

    Just because a property looks nice and is in a great location does not mean it’s a great investment. As investors, it’s our job to make sure the numbers work out so more money comes in than goes out.

    Using the cost categories above, we can pull most of the information we need directly from the listing.

    For example, Redfin (like most sites) provides a useful payment calculator where you can adjust the downpayment, interest rate, taxes, etc. for any property based on your personal situation.

    Home office vibes perfect for running the numbers on a rental property.
    Photo by Paul Calescu on Unsplash

    Here are some tips before you get started:

    • It’s a good idea to talk to your mortgage broker ahead of time to learn what mortgage rate you will likely qualify for and what downpayment you’ll need.
    • Remember, this is an initial evaluation. Before you make your final decision on a property, you’ll need to confirm these numbers with your real estate team during the due diligence period.
    • Try to be conservative with your projections. When you otherwise like a property, the temptation is real to modify the numbers so it looks better on paper.
    • You’ll notice listing agents may try to enhance a property’s value by suggesting “potential rent” or “market rent” instead of the actual rent. Don’t fall into this trap and end up with a nice-looking property that makes no money.

    OK, let’s look at the numbers on this property for educational purposes only. You are responsible for running your own numbers on any potential deal.

    2501 N Sacramento Asking Price: $1,800,000

    Monthly Rent: $13,840

    Mortgage Payment (Principal and Interest)$8,982
    Taxes$1,429
    Insurance$400
    Utility Bills$350
    Property Upkeep$200
    Preventative Maintenance$200
    Vacancy Rate (5%)$692
    Unexpected Repairs (5%)$692
    Property Improvements (5%)$692
    Total Monthly Cost$13,637

    Monthly Cash Flow (Rent – Costs): $203

    It took me less than five minutes to do this initial evaluation.

    I can see that based on these numbers, the monthly cash flow is $203. We’ll talk about what that means in a moment.

    A few notes on the above numbers:

    • For the mortgage payment, I estimated a 25% downpayment, which is common for investment property loans, and a 7% interest rate.
    • Taxes are a major cost that can make or break any deal. Make sure you are familiar with how taxes are assessed in your market. For example, in Chicago, property taxes are reassessed every three years. That means taxes go up every three years.
    • Many property listings will indicate the prior year’s taxes because they are lower. This particular listing has the prior year’s taxes, which I know are soon going to change for the worse. For now, I’ll run the numbers with the current taxes but would definitely account for higher taxes before moving forward with this deal.
    • Property insurance is a real wildcard these days. Insurance costs are going up everywhere. You’ll need to talk to a good insurance broker for an accurate estimate. I used my experience in the neighborhood with similar properties to make a reasonable estimate.

    So, what have I learned from running the numbers on this property?

    First, this is a beautiful property in a great location. If I made my decision based only on the pictures and the location, this would be a winner.

    Unfortunately, the numbers tell a different story.

    This property would not be a good investment for me. I invest for cash flow. For me, this property is way too expensive for only a couple hundred dollars of monthly cash flow.

    At a price point of $1.8 million, I would only be interested if this property had a monthly cash flow of at least $4,000 per month.

    Now, your preferences and goals may be different. Maybe you’re more focused on the other benefits of investing in real estate, like appreciation and debt pay-down. In that case, you may view this deal differently.

    So, is that it?

    Cross this property off the list and move on for good?

    Not necessarily.

    In our next post, we’ll explore ways to make this property a more attractive investment.

    We’ll take a look at how the numbers change if we can successfully negotiate the purchase price, find a better loan option, and improve the monthly rent.

    Real estate investors: let us know what you think of this property as a potential investment.

    Would you be interested in moving forward at these numbers?

  • Does Being Good with Money Make You a Greedy Dragon?

    Does Being Good with Money Make You a Greedy Dragon?

    Have you ever been called a “greedy dragon” before?

    I hadn’t either before this week.

    I recently posted a video on socials talking about how lawyers and professionals should not let leaky toilets prevent them from investing in rental properties.

    Apparently, this video struck a nerve with the trolls.

    I was called a “bottom dweller”, a “demon”, and my personal favorite, a “greedy dragon.”

    I like dragons. So, that last one actually felt like a compliment.

    Why does being good with money wake up the trolls?

    There’s no shortage of internet trolls out there. And, there’s nothing special about me that caught the attention of the trolls this week.

    Haters are going to hate. Trolls are going to troll.

    But, there’s an important money lesson to be learned here thanks to the trolls.

    You see, these are the types of comments you get from people with limiting money beliefs. They’ve never thought about how money can be used as a tool to build a life of purpose.

    Instead, they only think of money as a dangerous weapon to be wielded for evil purposes. They automatically think that people with money are greedy.

    The saddest part is that these people would rather exert their energy attacking people than improving their own situations. These are the type of people who are likely to always be controlled by money, instead of the other way around.

    Now, I’ll give credit to the internet trolls where credit is due. At least these trolls are not hiding their limiting money beliefs.

    That’s a good first step that many of us can benefit from.

    You don’t need to stoop to the level of internet troll to have limiting money beliefs. These kinds of attitudes towards money are way more common than you think.

    One of my main goals in starting Think and Talk Money is for all of us to confront our limiting money beliefs so we can take control of our lives.

    If your relationship with money up to this point has held you back, you’re in the right place by reading this blog.

    Another good idea is to read a good money mindset book.

    A good money mindset book with help you think of your Money Why.

    Money mindset books can help you because they explore the emotional side of money. They will force you to think about money in a way you never have before.

    The best money mindset books don’t just talk about the numbers and math of personal finance. That not only makes the books more interesting to read, it also makes them so much more practical in the real world.

    Personally, I am striving to build the best life possible for my family. To do that, I need to learn more than just the numbers.

    That means I need to be good at not only making money, but also using that money to build a life on my terms. That requires finding a balance, which can be tricky.

    To help strike that balance, I’ve studied how others have done it. Then, I can take what I learn and implement those lessons into my own life. 

    Here are my favorite money mindset books, in no particular order:

    Being on vacation with family gives you plenty of chances to think about your Money Why.

    I highly doubt the average internet troll spends much time thinking about his Money Why.

    I’ve been on vacation recently and have had a lot of reminders of my Money Why. Of course, I’ve known my Money Why since I wrote down my Tiara Goals for Financial Freedom on a beach in 2017.

    Mission Bay Resort pool representing why I want to be good with money to build experiences with my family.
    Photo by Cory Bjork on Unsplash

    My number one goal is to be with my wife and kids as much as I want. The weird part is I wrote down that goal before I was even married or had kids.

    Yes, I want to provide for my family financially. But my Money Why is more than that. I don’t want to just provide money, I want to provide time. I want to be present and share experiences.

    To accomplish that goal, I need to be good with money

    If I’m good with my money, I can achieve financial freedom.

    With financial freedom, I can choose how to spend my time. That means I can choose who to spend my time with.

    To the Internet trolls, these goals make you a greedy dragon.

    What do you think?

    Is traveling with three young kids a vacation or just “parenting in a new location?”

    Anyone who’s vacationed with young kids knows that it comes with all sorts of challenges. I’ve heard vacationing with young kids described before as “just parenting in a new location.”

    There’s some truth to that. Figuring out sleeping arrangements, meals, and activities to keep the kids entertained can be a headache. It’s hard not to think that it would have been easier to just stay at home.

    Between the occasional meltdown and the tears, it’s fair to wonder why go through the hassle?

    I’ve had these thoughts creep into my head recently while on vacation with my family.

    Then, I realized why us parents do it.

    It’s to see your five-year-old try over and over again before finally reaching the Little Mermaid diving toy on the bottom of the pool for the first time.

    The pure joy on her face when she popped out of the water with the toy in hand is an image I hope I never forget.

    It’s to watch your three-year-old play with grandma and grandpa and hearing, “Grandpa, close your eyes!” as he completes his next prank to earn an eruption of laughter.

    It’s observing your wife at the playground as she manages a baby in a stroller while simultaneously encouraging her daughter on the swings and helping her son as he climbs too high.

    How she does it, and keeps a smile on her face, I’ll never know.

    It’s the little moments like this that make it all worth it.

    Is being good with money a requirement for these types of memories?

    Nah. But, if being good with money gets me more of these memories, I’m all in.

    It’s important to think about your Money Why regularly.

    Saying that I want to be good with money is not the same thing as saying that I want to be rich.

    Funny enough, people who are good with money oftentimes feel rich regardless of what their net worth is.

    A nice quote I saw at an ice cream shop saying you can't buy me love but you can buy me ice cream meaning you can buy experiences with money.
    Photo by Zoshua Colah on Unsplash

    On the flip side, people who make a lot of money but are not good with money often feel like they’re struggling to get by. As CNBC explained after talking with financial psychologists:

    Whether you’re aiming to save more cash or boost your overall earnings, it’s important to ask yourself what you hope to achieve by obtaining more money, Chaffin says. Otherwise, if you don’t change your internal money beliefs, you may still feel anxious about money even if you hit millionaire status.

    The takeaway is that it is pointless to make money without stopping to think why you want that money and what you’re going to do with it. 

    If you’ve never thought about money that way before, here are three powerful reasons to get you started: 

    1. Money can give you choices.
    2. Money can give you personal power.
    3. Most importantly, money can give you time.

    Money is nothing but a tool that you can manipulate to get what you truly want out of life. The thing is, you have to actually think about what you want if you are going to use that tool effectively.

    Being good with money does not make you greedy.

    Being good with money does not make you a greedy dragon.

    Money is nothing but a tool. You can use that tool to build a life on your terms for you and your family.

    For my money, there’s no better pursuit than that.

    Do you want to be good with money?

    What kind of life are you hoping to build?

    Let us know in the comments below.

  • Being Good with Money is About Consistent Choices

    Being Good with Money is About Consistent Choices

    Having taught personal finance to law students and young lawyers since 2021, I’ve picked up on a common theme.

    At the conclusion of class, my students tend to be motivated and excited to get good with money.

    This makes sense because we spend a lot of time thinking and talking about what our ideal lives look like. Then, we learn how to use money as a tool to build those lives.

    In the weeks following class, I usually hear from several students who want to follow-up about topics we cover in class, like side hustles or investing in real estate.

    I’ll meet each student for coffee downtown and give them some feedback on their ideas. I love these money talks over coffee.

    My students’ excitement to take control of their money and their lives is contagious.

    Their excitement rubs off on me. I leave these conversations motivated to check in on my own money strategies and goals.

    When our chat is wrapping up, I always encourage my students to keep me posted on their journeys. I invite them to check-in every few months so I can help keep them accountable and to adjust any plans we’ve put in place.

    Unfortunately, less than 10% of my students ever follow-up after these initial meetings.

    After a while, I figured out what was going on.

    See, every now and then, I’ll run into one of these former students at a lawyer event or hanging around the courthouse. I’ll ask them about work and life and eventually about the money plan we talked about.

    That’s when I usually hear something like, “I’m still thinking about that side hustle. I just put it on the back burner for now. I’m going to do it someday.”

    Do you see the problem?

    As a wise man once taught me, “someday” means “no day.”

    a sign that says today is a goo day meaning that someday is no day.
    Photo by Yuliia Martsynkevych on Unsplash

    Financial freedom is about consistent, intentional choices.

    Ask anyone who has reached true financial freedom how they did it, and you’ll pick up on something right away.

    You’ll quickly realize that people who reach financial freedom got there by making consistent, intentional choices with their money.

    They came up with a plan and they stuck with it.

    They didn’t say “some day.”

    Achieving financial freedom is not about being the highest earner or the best investor.

    It’s about consistency.

    There are endless ways to make money. The same goes for investing that money.

    You can reach financial freedom as a lawyer who invests in index funds.

    Just the same, you can be a consultant who owns rental properties.

    Or, an engineer who buys laundromats.

    The point is the avenue you choose to build wealth is less important than the consistency of your choices.

    For example, if you commit yourself to investing 20% of your salary in index funds, you will be well on your way to financial freedom.

    But, if you can’t follow through on your plan for more than a few months, you’re never going to get there.

    Of course, we’ve all experienced this tendency in various areas of life. The easiest examples to think of relate to fitness and healthy eating.

    How many of us have said we’re going to commit to working out five days a week or eating vegetables every meal, only to give up after a couple months?

    It’s not that we want to give up, just that the rest of life gets in the way. We tell ourselves that we’ll return to healthy living someday, which actually means no day.

    When it comes to your money choices, don’t let the rest of life get in the way. Money is such a powerful tool when wielded properly and consistently.

    Don’t waste this powerful tool.

    To help make consistent choices, think about why money matters.

    To help you make consistent money choices, the first step is to think about a simple and powerful question: why does money matter?

    For me and many others, money is about financial independence, which translates to the power to choose.

    When we have the power to choose, we have the power to live a life that conforms to our personal values. That means we can live on purpose, not on auto-pilot.

    What does it mean to live on purpose?

    It means that we can choose to spend our working hours doing what is meaningful to us. It means we can choose to spend more time with the people who are meaningful to us.

    My favorite part during my personal finance for lawyers class is when my students share their motivations with each other. We all learn so much from these honest conversations.

    It’s why I believe talking about money is so important. We all benefit from knowing that we’re not alone in our money worries. We can be inspired by hearing what our friends want from their money and their lives.

    The more you think and talk about why you want to be good with money, the clearer your motivations will become.

    To help you get started, here are three powerful reasons why I want to be good with money:

    1. Money can give you choices.

    This may seem obvious, but when you have money, you have choices.

    You can choose where to live. You can choose who you work for or can work for yourself. On a daily level, you can choose how you eat, exercise, relax, and travel.

    This holds true whether you make $50,000 or $250,000. Of course, your options may be different. The point is that when you’ve made good money choices, you’ll at least have options.

    2. Money can give you personal power.

    This is another way to say that money gives you control of your life situation.

    If you are in a bad relationship, a bad job, or just need a change, money gives you the personal power to do something about it. When you don’t have money, you may be stuck.

    3. Money can give you time.

    When you have enough money to be truly financially independent, you have earned the freedom to do whatever you want with your time.

    As I mentioned earlier, you can spend your working hours at a job that is meaningful to you. And, you can spend more time with people who are meaningful to you.

    It’s been said many times, “time is our most precious resource.”

    When you have money, you can buy your time back.

    woman in white long sleeve shirt reading book on beach during daytime because she is financially free and bought her time back.
    Photo by Constantin Panagopoulos on Unsplash

    What would you do with financial freedom?

    Years ago, I asked myself this important question. I wrote down my answer and called it my Tiara Goals.

    If you haven’t ever actively thought about what you would do with financial freedom, now’s the time to do so. It is extremely motivating.

    Even when you feel like financial freedom is only a distant dream for you, it’s important to actively think about what you want out of life.

    I’d even suggest that the further away you feel from financial freedom, the more important it is to think about what it would mean for you.

    When you’re at your lowest point, visualizing what you would do with financial freedom is a helpful escape.

    Don’t forget to write down whatever you come up with.

    Here are my 7 Tiara Goals for Financial Freedom:

    1. Be with my wife and kids as much as I want. Dad never missed a game. Mom never missed a game. Nana never missed a game.
    2. Not be forced to commute to work on Friday or Tuesday or whatever day, if I need that day for myself.
    3. Choose how to spend my working hours (representing clients, teaching, volunteering, building a business, etc.).
    4. Continue to study and learn constantly.
    5. Take at least one big trip every year.
    6. Never turn down an exciting or smart opportunity because I can’t afford it.
    7. Work alongside people that value my contributions. 

    Keep in mind that I wrote these goals before I had kids and before I was even married. This was also years before the pandemic when working from home was a foreign concept to most of us. 

    I think it says a lot that I was thinking about these things way back then.

    Being consistent means thinking just a little bit about money every week.

    My goal is to help you think even a little bit about your money choices every week. That way, your money life remains in balance with the rest of your life, and you can continually evolve and adapt your choices as your life changes.

    I want to encourage you to think, and to talk, and to choose. If all I do is help you and your loved ones think more purposefully about your money, Think and Talk Money will be a success. 

    Maybe your goal is also financial independence, or the power to choose and to live on purpose.

    Maybe it’s something else entirely. Whatever it is, discovering your motivation is the crucial first step. 

    It’s so important that I’ll encourage you to think about that motivation every week.

    I’ve learned that money is something that we all need to think about as a regular part of our lives. Not that we should only think about money. Or that we need to obsess over money. Simply that we can’t ignore money. 

    How sad is it when we realize our hard earned money has just vanished? That at the end of each month, we have less money?

    If this sounds familiar, you’re not alone. There are a lot of smart people who need somewhere to turn learn about money. Or, maybe just a reminder to actively think about their money

    You don’t have to struggle with making continuous money choices alone.

    Most of us could use someone to talk to or something to read to help us learn about personal finance.

    I hope Think and Talk Money can be that place for you.

    I can’t, and won’t, tell you what to do with your money. It’s your life, after all. But, I will strive to help you think and talk with purpose about your money.

    The basic money concepts are easy enough to understand. Consistently making good choices is hard. 

    Most of us could ace a quiz that asked, “Is it a good idea to spend more money than you earn every month and plummet deeper and deeper into debt?”

    Knowing what to do is not the same as actually doing it. Remember, someday is no day.

    That’s why it helps to not be afraid to talk about money. For some reason, most of us choose to deal with money on our own. I’d like to change that.

    There’s a stigma that we shouldn’t talk about money. I’d like to change that, too.

    That way, we all have a better chance of making intentional, consistent choices with our money.

    Have you been excited about money in the past only to lose that excitement not long after?

    Have you tried talking about money with your friends and family to help you stay motivated? If not, what is holding you back?

    Let us know in the comments below.

  • Invest in Real Estate and Other People Pay Your Debt

    Invest in Real Estate and Other People Pay Your Debt

    Imagine that you have the chance to own something that might be worth a lot of money down the road.

    To buy this thing, you will need to pay 25% of the purchase price. The other 75% of the price will be paid by someone else.

    Your job is to take care of that thing and keep it for a long time. It won’t be easy, but if you can handle it, you’ll wake up years from now owning something outright that is very valuable.

    So far, this sounds pretty good, right?

    Of course, there’s a catch. That person paying for 75% of the item will want to be paid back. He’ll want to earn interest, too.

    You might be thinking that this opportunity doesn’t sound so promising anymore. Having to pay off that debt might be enough to convince you not to move forward with buying this thing.

    You’re smart to be thinking about the debt. I could understand if the prospect of paying back a debt like this didn’t appeal to you. Who really wants to use their own hard-earned money to pay off debt anyways?

    Fair enough.

    But, what if I told you that other people are going to pay back that 75% (plus interest) on your behalf?

    Even more, while those other people are paying back the debt, you still get to benefit from owning the item.

    Does that change how you’re viewing this opportunity?

    Maybe now you’re thinking that this is too good to be true?

    Nope.

    This is exactly how real estate investors generate long-term wealth. They buy a property using a loan and then pay back that loan using other people’s money.

    This example leads us to the next main reason I invest in real estate:

    Other people pay off my debt.

    When you acquire the right rental properties, your tenants will pay monthly rent and that rent can be used to pay off your loan.

    That means you can pay off that loan without using any of your own money.

    As your loan balance shrinks, your net worth increases. As your net worth increases, you are creating wealth for you and your family.

    Along the way, you can reap the benefits of monthly cash flow and appreciation. That means your net worth increases even more.

    That’s a powerful combination to generate long-term wealth.

    If this concept sounds like something you may be interested in, read on.

    Before we talk more about debt pay-down, let’s review two of the other main reasons I invest in real estate.

    1. Rental property cash flow is king.

    With cash flow, you can cover your immediate life expenses. For anybody hoping to reach financial freedom, it is essential to have income to pay for your present day life expenses. 

    For my money, cash flow from rental properties is the best way to pay for those immediate expenses.

    One of the hottest destinations in Spain is Costa Blanca, these luxury homes are situated in Villamartin, Campoamor, Torrevieja, Orihuela, located near to the coast, golf course, and shopping center, an example of other people paying my debt through rent.
    Photo by Frames For Your Heart on Unsplash

    If your present day expenses are already covered, you can use your cash flow to fund additional investments.

    That might mean buying another rental property or investing in another asset class, like stocks.

    2. Long-term wealth through appreciation.

    Appreciation simply refers to the gradual increase in a property’s value over time. 

    While cash flow can provide for my immediate expenses, appreciation is all about the long-term benefits.

    Like investing in stocks over the long run, real estate tends to go up in value. The key is to hold a property long enough to benefit from that appreciation.

    To benefit from appreciation, all I really need to do is make my monthly mortgage payments, keep my property in decent condition, and let the market do the rest.

    Now that we’ve reviewed how cash flow and appreciation work together to generate long-term wealth, we can look at the additional benefits of debt pay-down.

    With rental properties, other people pay off my debt.

    When I buy a rental property, I take out a mortgage and agree to pay the bank each month until that mortgage is paid off. At all times, I remain responsible for paying back that debt.

    However, I do not pay that debt back with my own money.

    Instead, I rent out the property to tenants. I do my best to provide my tenants with a nice place to live in exchange for monthly rent payments.

    I then use those rent payments to pay back the loan.

    Each time I make a mortgage payment, part of the payment goes to interest on the loan and part of the payment goes toward the principal. This concept is known as amortization.

    By the way, this is how real estate investors use Good Debt, also know as leverage, to generate wealth.

    You may be totally against debt of all kind. That’s OK. Debt certainly carries risk. I’m not here to convince you that debt is a good thing or a bad thing. I’m just showing you how it works.

    For more on the difference between good debt and bad debt, check out my post here.

    What is loan amortization?

    Amortization is the process of paying back a loan over time in predetermined installments. While your payment amount remains the same, the composition of that payment changes over time.

    In the early years of paying off a mortgage, the vast majority of your payment goes to the interest. With each additional payment, more of the money goes towards the principal.

    When you take out a mortgage, your lender will give you an amortization table that shows you exactly how much of your monthly payment goes towards interest and principal for the duration of the loan.

    For example, if you take out a 30-year mortgage, you’ll receive a chart that shows 360 payments (12 monthly payments for 30 years). You can then look at any month in that 30-year period to see how much of your payment goes to interest vs. principal in that month.

    We hung that art piece by Tekuma artist Lulu Zheng, and I particularly loved how Lulu combines architecture and organic forms. Even if it is in the background, her 3D elephant brings the focus of the viewer towards her work, representing how renters can make a home feel like their own while they pay off my real estate debt.
    Photo by Naomi Hébert on Unsplash

    If you’re so inclined, you can also use an online calculator, like this one at calculator.net, to create an amortization chart for any loan you have.

    I’ll admit, looking at the amortization chart is the least fun part of any real estate closing.

    Seeing debt payments as far out as 30 years is a bit scary. It’s hard not to think of all the things that can go wrong during such a long time period. That’s why I prefer to think of amortization in general terms instead of specifics.

    Generally speaking, I know that some of my monthly payment goes to interest and some goes to principal. The longer I pay back the loan, the more of my payment goes to principal. That’s good enough for me.

    With a fixed-rate loan, your monthly payment remains the same.

    When you have a fixed-rate mortgage, your payment remains the same for the duration of the loan.

    At the same time, because of inflation, rents tend to go up over the long run. Rents may also go up if market conditions improve or if you have forced appreciation through enhancements to your property.

    When your rental income goes up, and your debt obligation remains constant, that means more cash flow for you.

    For example, say your monthly mortgage payment is $2,500 each month for the next 30 years. And, let’s say you currently earn $3,000 in monthly rent payments.

    Over time, your rental income should gradually increase. Some years in the future, you may be earning $4,000 or $5,000 per month in rental income. All the while, your monthly mortgage payment remains $2,500.

    You can use that extra income, after covering all other expenses, to pay for your immediate life expenses, pay off your loan faster, or invest in other assets.

    It’s for these reasons that having a fixed debt payment over a long time horizon is one of the biggest advantages to investing in real estate.

    Think of it this way. Just like with your personal Budget After Thinking, you can make significant strides towards financial freedom when your income increases and your expenses remain fixed.

    What do you think of investing in real estate so other people can pay off your debt?

    Now, you know three of my main reasons for investing in real estate: cash flow, appreciation, and debt pay-down.

    Regarding debt pay-down, each month my tenants pay rent, I can use that income to shrink my loan balance.

    As my loan balance shrinks, my equity in the property increases. Equity is just another way of saying ownership interest.

    When my equity in a property increases, my net worth increases.

    So, on top of monthly cash flow and appreciation, debt pay-down is another way to generate wealth through real estate over the long run.

    That’s three ways to make money off of a single investment.

    Not bad, huh?

    If you’re a real estate investor, let us know how you’ve used debt to increase your net worth.

  • Money on My Mind: Read The Simple Path to Wealth

    Money on My Mind: Read The Simple Path to Wealth

    The Simple Path to Wealth by JL Collins is the best book on investing I’ve ever read.

    It is a must-read for anyone trying to figure out why and how to invest in the stock market.

    If you’re a new investor and don’t understand how to invest in the stock market, Collins will set you on your way.

    If you’re a seasoned investor unsure what to do in times of economic uncertainty, Collins is here to help.

    Maybe you just need a bit of motivation or a reminder of how simple it is to build long-term wealth. There’s no one better than Collins to provide that pep talk.

    Who is JL Collins?

    JL Collins is sometimes described as “the Godfather of Financial Independence” in the personal finance community. He has a popular blog where you can read more about his story.

    The short version is that he wrote a series of letters to his then teenage daughter about money, investing, and life. He wanted to impart the wisdom he had accumulated during his lifetime and help her avoid the mistakes he had made.

    Those letters eventually led to his blog, which then led to his bestselling book, The Simple Path to Wealth, first released in 2015.

    Since then, Collins has been a thought-leaders in the financial independence community. He has inspired thousands, if not millions, of people around the world to accumulate massive wealth by following a few simple rules.

    What makes Collins so transformative is his ability to make seemingly complex topics (like investing) into easily digestible and actionable information.

    If you have any intention of becoming financially independent and haven’t read The Simple Path to Wealth, now is the time to do so.

    I’ve read his book cover-to-cover twice and constantly refer back to his lessons.

    purple flower filed during daytime illustrating how beautiful the simple path to wealth should be.
    Photo by Jack Skinner on Unsplash

    Each time I read his book, I’m reminded how simple it is to reach financial independence if I can just follow a few simple tips.

    I’ll share those simple rules with you at the bottom of the post. Before I do, here is a bit of context about each time I read his book, first in 2019, then again in 2025.

    Seeing those dates, you may already be wondering if world events between 2019 and 2025 changed his philosophies.

    Let’s find out.

    I first read The Simple Path to Wealth in 2019 as a DINK.

    I first read The Simple Path to Wealth in 2019 and just finished the updated version. Even if you’ve read the original version, I highly recommend you read new edition released in 2025.

    Here’s why.

    When I read the original version in 2019, market conditions and the world economy were in very different places than they are in 2025.

    Back in 2019, the stock market had been closing out one of the best decades in history. As reported by US News:

    From a market’s perspective, the 2010s will forever be remembered as an era of slow but steady gains on Wall Street, and a period of sustained growth for investors and their retirement accounts.

    By the end of the 2010s, the market had been on the longest bull run in history. It was such an epic run that it was fairly common for most people to see big gains in their portfolios without much effort or knowledge.

    On a personal level, my life was also very different in 2019. My wife and I were enjoying married life before having kids. We had just purchased our first rental property in a trendy Chicago neighborhood.

    On top of that, we were DINKs (“Dual Income No Kids) and able to save aggressively for our next investment.

    We were considering another rental property, but I first wanted to learn more about the power of investing in the stock market.

    This is what led me to read The Simple Path to Wealth the first time.

    Side note: If you are currently a DINK, or will soon be a DINK, please pay extra attention here.

    Don’t waste this powerful opportunity to supercharge your investments.

    When you’re in a relationship where you have two incomes coming in and are sharing financial responsibilities, you have the opportunity to supercharge your Later Money goals.

    This is what my wife and I were able to do, even if we didn’t know what a DINK was. We each had good incomes coming in and our monthly expenses were low.

    Also, we didn’t have to worry about childcare. We were young so the odds of unexpected medical care were lower. All things considered, it was pretty easy to keep our Now Money to a minimum with plenty to spare for Life Money.

    This allowed us to fuel our Later Money goals. We had money in the bank and seemingly endless choices.

    And, I didn’t want to screw it up.

    Reading The Simple Path to Wealth was a way to educate myself in hopes of not screwing it up.

    I read the new version of The Simple Path to Wealth in 2025.

    Fast forward to 2025. I read the new version o The Simple Path to Wealth because I was curious if Collins’ viewpoint had changed due to major world events, like the Covid-19 pandemic.

    I was also curious to see whether his advice would still resonate with me now that I’m a seasoned real-estate investor and have a personal finance blog.

    Well, I’m happy to report that Collins’ message hit me stronger today than it did in 2019.

    If anything, Collins’ lessons are even more applicable today than they were in the 2010s when markets were soaring.

    In the new edition, Collins discusses how recent world-changing events, like the Covid-19 pandemic and international wars, actually strengthen his long-time recommendations.

    This was very refreshing to learn because I have been following his advice and recommending his book for years.

    In times of economic uncertainty, Collins explains, it’s even more important to have a plan for your money.

    Once you have that plan, you need to stick to it, no matter what.

    Collins provides the motivation and tools to stick to the plan.

    Why is The Simple Path to Wealth such an important book?

    When I teach my personal finance class to law students, I ask at the beginning of class what my students hope to learn.

    One of the most common responses I hear every year is, “I want to learn how to invest in the stock market.”

    OK, fair enough.

    The truth is I’ve yet to find any resource better than The Simple Path to Wealth to teach us how and why to invest in the stock market.

    What makes Collins such a good teacher?

    In The Simple Path to Wealth, Collins uses basic, every day, language that we can all understand. This is his greatest gift.

    Too many books on investing are so dense that they are useless to the average person.

    Collins is different. He successfully blends his life experiences with the historical data, in easy to understand terms, to show us that investing is not hard.

    For many people, especially people at the beginning of their careers, investing can seem intimidating.

    As Collins explains, that’s because it’s big business for investment companies and banks to make investing seem hard and scary.

    These companies spend billions of dollars marketing every year to convince us that investing is complicated. Their goal is to convince us to pay them lots of money to manage our money.

    You don’t have to believe them. You certainly don’t have to pay them tons of money to invest in the stock market.

    Collins will not only show you how invest on your own, he’ll also give you the tools to outperform the financial professionals.

    What are Collins’ simple rules to live by?

    Collins’ main message is that investing should not be complicated. When done the right way, it’s simple and effective. Hence, the title of his book.

    Collins explains that each of us can achieve long-term wealth by following a few simple rules:

    1. Spend less than you earn.
    2. Invest the surplus.
    3. Avoid debt.

    Sound advice, indeed.

    If you can live by these simple rules, the next question is what to do with your surplus money earmarked for investments.

    Collins has a simple and effective plan for you that he details in his book.

    What is Collins’ simple and effective plan for investing?

    Collins’ plan is both simple and effective. He doesn’t expect you to just take his word for it, either. He has the research and historical data to back it up.

    Make no mistake: just because something is simple does not mean it is ineffective.

    So, what is Collins’ simple and effective plan to invest for long-term wealth?

    1. Invest in low-cost, broad-based index funds. His favorite investment has always been Vanguard’s total stock market index fund, VTSAX.
    2. Ignore the noise. Be mentally tough. Stay the course.

    That’s it.

    You don’t need fancy investments. You don’t need a financial advisor. All you need to do is commit to the plan.

    If you’re thinking that this is too good to be true, you need to read The Simple Path to Wealth.

    How can it really be that simple?

    You might be thinking, how can it really be that simple? If all people had to do was invest in index funds, everyone would be rich.

    That’s exactly Collins’ point!

    Everyone could be rich if they follow these simple rules.

    The problem is most people allow their emotions to get in the way and steer them off the path.

    Collins does his best to help you deal with those emotions.

    If you don’t believe that index fund investing will make you wealthy, look at this stat about the recently announced sale of the NBA’s Los Angeles Lakers:

    That’s right. The Buss family would have an extra $3 billion today if they had invested in the S&P 500 instead of purchasing the Lakers in 1979!

    Many thanks to blog reader, DJ, for passing this one along!

    I know, I know. Owning the Lakers was probably a ton of fun. They also surely made money on the team along the way.

    The point remains: investing in an S&P 500 index fund also would have generated massive wealth. And, that wealth would have come without the effort and the headaches of running a major professional sports organization.

    I can picture Collins having a good laugh about stats like this.

    Read The Simple Path to Wealth.

    I recommend The Simple Path to Wealth to all of my students and friends who ask me about investing.

    There is not a better book out there to make the concept of investing seem approachable for all of us.

    Collins is clear and humorous. He’s also stern when he needs to be.

    If you read this book, you’ll realize that becoming wealthy through the stock market does not have to be complicated.

    It can be wonderfully simple.

    Let us know in the comments below.

  • Invest in Real Estate for Wealth Through Appreciation

    Invest in Real Estate for Wealth Through Appreciation

    We previously looked at the main reason I invest in real estate:

    Rental property cash flow is king.

    With cash flow, you can cover your immediate life expenses. For anybody hoping to reach financial freedom, it is essential to have income to pay for your present day life expenses.

    For my money, cash flow from rental properties is the best way to pay for those immediate expenses.

    What if you don’t need your cash flow to cover your immediate life expenses? Maybe you have a full-time job that provides more than enough.

    That’s even better. There’s no rule that says you have to spend your cash flow.

    If your present day expenses are already covered, you can use your cash flow to fund additional investments. That might mean buying another rental property or investing in another asset class, like stocks.

    The point is cash flow gives you options. Having options is never a bad thing, right?

    That’s why cash flow is the number one reason I invest in real estate.

    However, cash flow is not the only reason.

    I also invest in real estate to generate long-term wealth for me and my family.

    I am a buy-and-hold real estate investor.

    That means when I buy a property, I intend on keeping it for many years. Circumstances may change, of course, but my intention is to hold property for a minimum of ten years.

    The reason I buy-and-hold for the long term leads us to the next major reason I invest in real estate:

    Appreciation.

    While cash flow can provide for my immediate expenses, appreciation is all about the long-term benefits. Appreciation is how I will generate long-term wealth for my family through real estate.

    Today, I want to talk about what appreciation is and how it can significantly improve your net worth over time.

    Let’s dive in.

    What is appreciation in real estate?

    Appreciation simply refers to the gradual increase in a property’s value over time. 

    For example, if you buy a property for $500,000, and some years later it’s valued at $750,000, your property has appreciated by $250,000.

    That means through appreciation, your net worth has increased by $250,000.

    Except for when you’ve forced appreciation (we’ll discuss below), you have earned that money through appreciation by doing very little. All you have to do is make your monthly mortgage payments, and let the market do the rest.

    This is exactly how many Americans generate significant wealth over time.

    Mini house and key illustrating how to generate long-term wealth through real estate with appreciation.
    Photo by Tierra Mallorca on Unsplash

    How to target properties with a strong likelihood of appreciating is beyond the scope of this post. I’ll soon share with you my criteria, but there’s no one way to do it. 

    Entire websites and books have explored this topic. If I were just starting out, I would spend a lot of time on BiggerPockets.com.

    For that matter, even as an experienced investor, I still spend a lot of time on BiggerPockets.

    For now, remember one main point when it comes to appreciation:

    Appreciation takes time.

    Successful real estate investors know that appreciation takes time.

    I’m not talking about speculators or gamblers. I’m talking about people who are interested in building long-term wealth for their families.

    To build long-term wealth through real estate, you need to remember this main rule about appreciation.

    It’s so important, it’s worth repeating:

    If you can hold a property for years or even decades, you have a really good chance of that asset being worth significantly more than when you paid for it.

    Your property may not appreciate at the same rate every year. Some years, your property may even lose value. That’s OK because you’re in it for the long run.

    The hard part is just holding on long enough to realize the benefit of appreciation.

    In this way, investing in real estate is like investing in stocks.

    How is investing in real estate like investing in stocks?

    Many of the same fundamentals apply to investing in real estate as to the stock market.

    We just mentioned one of the biggest keys with either asset: the longer you hold that asset, the more that asset should eventually be worth. 

    With stocks, we’ve already spent a lot of time in the blog discussing why you need to invest early and often.

    For more information on investing in stocks, you can read a variety of posts here.

    When you invest in stocks early and often, you can benefit from compound interest and safely ride out down market cycles. The stock market does not always go up every year, but given enough time, it does always go up.

    In large part, the same is true when you invest in real estate.

    If you buy good properties in good markets, given enough time, your property should appreciate in value. Like with stocks, the key is your ability to hold on and ride out down market cycles. 

    Want to know the secret to riding out down markets?

    Cash flow.

    You saw that one coming, didn’t you?

    Cash flow will help you ride out market cycles and benefit from appreciation.

    When you own strong, cash flowing rental properties, the cash flow covers all the expenses.

    That means you can stay patient in down markets because holding that property is not costing you any money.

    To take it a step further, as long as your property is cash flowing, you can hold it for decades and generate massive wealth through appreciation.

    Cash flow and appreciation working together is a powerful force. You can see why real estate investors get so excited about their investments.

    When a property is performing, the cash flow allows an investor to hold that property indefinitely. During that time, the property becomes more valuable through appreciation.

    It’s a beautiful partnership.

    What is forced appreciation?

    I mentioned earlier that there is one other form of appreciation worth talking about here: forced appreciation.

    Forced appreciation is when you improve your property in such a way that it increases in value. 

    Common examples may include remodeling the kitchen or bathrooms or adding another bedroom. When you make these enhancements to your property, your property should increase in value.

    This is what house flippers do. They buy a property in need of some work, do the improvements, and then aim to sell that property for a profit.

    It’s not a strategy that I personally use, but it has worked for many people for many years.

    The thing is, forced appreciation is not just for house flippers or investors hoping to realize a quick profit.

    When done correctly, forced appreciation is another way to make money over the long-term for buy and hold investors, like me.

    For example, in one of our rental buildings, we added in-unit washers and dryers. By doing so, our units now command a higher monthly rent, which in turn increases the value of the property.

    As a final point, forced appreciation is one way investing in real estate is different from investing in stocks.

    When you buy real estate, you are in control. You decide what improvements to make and not to make. Many real estate investors love having this type of control over their assets.  

    By contrast, when you own stock in a company, there is very little (if anything) you can do to impact how that company is run. Unless you have boatloads of stock in a particular company, you’re essentially just along for the ride until you sell your stock.

    What do you think about generating long-term wealth through appreciation?

    Now you know two of my favorite reasons for investing in real estate: cash flow and appreciation.

    Have you invested in real estate and benefited from appreciation?

    Did you force appreciation or hang tight and let the market do it’s thing?

    Let us know in the comments below!

  • Money Question: What Would I do with $10 Million?

    Money Question: What Would I do with $10 Million?

    In a recent post, I asked: If you woke up tomorrow with $10 million in your bank account, would you do anything differently?

    I ask a version of this question whenever I teach my personal finance course to law students.

    Asking what you would do with $10 million is just another way to ask what you would do with financial freedom.

    Attaching a specific dollar amount to the question helps make financial freedom seem real. It turns the aspirational concept of financial freedom into actual numbers.

    Many thanks to one of our blog followers, Ian, for turning the question around and asking me what I would do with $10 million!

    It’s been some time since I put some real thought into this question. I’m happy to have gone through the thought process in crafting this post.

    If you haven’t already, I encourage you to do the same and think about exactly what you would do if you woke up with $10 million.

    Before I share my answer, I want to highlight some other reader responses to the question, which should shed some light on my decisions.

    Let’s get to it.

    Disappearing on a beach.

    The most common response to what people would do with $10 million involved some version of:

    Invest the money and then disappear on a faraway beach.

    In a way, the “disappear on a beach” response illustrates what many of us are striving for with financial independence. By that, I mean the goal of having enough money to then not have to work if we don’t want to.

    palm tree near sea shore illustrating that life on a beach may get lonely after a while, which is why I would not disappear with $10 million.
    Photo by Maarten van den Heuvel on Unsplash

    Personally, I share the goal of becoming financially free, but I’m not looking to retire early and disappear. After all, I believe in FIPE not FIRE.

    I think jetting off to the beach would be nice at first but then get old pretty fast. That said, I can certainly appreciate the desire to take some time away from life’s daily stressors.

    Invest and then buy a shotgun.

    One reader, Sean, shared a pretty sensible plan:

    Put $9 million in the S&P 500, pay off debt with the rest and buy a nice shot gun.

    It’s hard to argue with this plan. Of course, it’s never a bad idea to pay off debt or invest in the S&P 500.

    I think it’s also important to treat yourself, within reason. I’m not in favor of earning financial freedom if it means being afraid to spend money on the things that make you happy.

    While I don’t know the first thing about shotguns, I’m guessing they represent a hobby of Sean’s. I’m certainly in favor of spending on hobbies, experiences, and activities that bring you joy.

    Well done, Sean.

    The struggle between “should” and “want.”

    Finally, Zach shared a sentiment that many of us struggle with when it comes to money decisions:

    I know what the answer should be but I’d really like to buy a house and a couple of the cool cars I’d always ogled over growing up.

    Zach’s comment stood out to me in the way he phrased it. He knows what he should do, which in his mind is different from what he wants to do.

    Zach’s one sentence comment sums up a money struggle that many of us have.

    We know what we should do, but we’re constantly fighting what we want to do.

    I would challenge Zach, and anyone else feeling this way, to take some time thinking about what you truly want out of life. I did this when I wrote down my Tiara Goals for Financial Freedom while on a beach in Florida.

    If you put some real thought into it, you might find that material possessions are actually not that important to you. Rather, buying your freedom is so much more valuable.

    I would want to know more about Zach’s desire to buy a couple of cool cars. Maybe, like our previous reader wanting a shotgun, having cool cars is a hobby for him that brings much joy.

    However, I have my doubts that’s what Zach meant. The way he phrased it (“cars I’d always ogled over growing up”) leads me to believe he wants these cars to show off.

    Here’s the problem with that type of spending.

    Buying a couple of cool cars would likely only give you a short-lived burst of happiness. Sure, it would be fun to drive them around at first. Maybe it’d also be fun to have your friends over and show off what you just bought.

    But, studies routinely show that the burst of happiness from material possessions like cars only lasts for so long.

    When that initial burst fades away, you’re stuck with the hassle of owning multiple cars that you probably wouldn’t even drive much. Your friends would stop caring before too long.

    Add in the cost of insurance, maintenance, and garage space, and these cool cars will be a major drag on your financial freedom.

    By the way, there’s nothing at all wrong with buying a house. You need to live somewhere. Just keep it reasonable.

    Otherwise, you’ll end up working long hours for a lot of years just to keep the house. That might not be a trade off you want to make.

    What I would do with $10 million.

    Without further ado, here’s exactly what I would do if I woke up with $10 million tomorrow.

    1. $50,000 to go on an African safari with my wife.

    My wife and I have three kids at home ages five and under. With a newborn, even date night can feel like an epic adventure. My wife does so much for all of us, that this is the easiest decision I’ve ever made.

    With the first $50,000, she and I are packing our bags for Africa and leaving the kids with Grandma. Since this would be our first big trip in six years, we’re balling out without worrying about the cost.

    I am a big advocate of using money as a tool to build memories. How could I do better than taking a dream vacation with my wife?

    2. Pay off my house.

    My goal is to be financially free. A big part of that is not having any debt. That’s why the next chunk of the $10 million is going to pay off my house.

    I could certainly make more money long-term by investing in the stock market or purchasing more rental properties. But, with $10 million at my disposal, I don’t need any more money. I know when enough is enough.

    I love my house and my community and would rather know that I can stay here with my family for the long run.

    3. Pay off my rental ski condo.

    In 2021, my wife and I bought a ski condo in Colorado. We currently rent it out for most of the year.

    If I had $10 million, I would pay off the mortgage on the ski condo, stop renting it out, and spend a lot more time out west with my family.

    Hiker on a log illustrating what I would do with $10 million, like hiking with my family.
    Photo by Jon Flobrant on Unsplash

    As I mentioned, one of my main goals in life is to create as many experiences and memories as possible with my family.

    Paying off my condo would allow all of us to spend more time together doing the things we love, like skiing, hiking, biking, and swimming.

    Best of all, we could do these things while sharing our condo with our extended family members.

    4. $250,000 in a high yield savings account.

    Everyone should have an emergency savings account. I would put $250,000 into a high yield savings account and turn to this money as my first line of defense in case of emergencies.

    After eliminating my mortgage debt on my primary home and my ski condo, $250,000 would be enough to fund my life for about 2 years. That’s a lot of runway and provides peace of mind.

    5. $300,000 total in my kids’ 529 college savings accounts.

    Besides eliminating debt, my other major financial goal right now is to save enough to pay for my three kids’ college. To cross this goal off my list once and for all, I would put a combined $300,000 into their 529 accounts.

    I landed on $300,000 by playing around with an online calculator, like this one. $300,000 should be enough to reach my goal for each kid.

    6. 70% of the rest in a total stock market index fund.

    I am an index fund investor, through and through. I have no interest in trying to beat the market or time the market.

    I’m perfectly happy with earning around 10% per year, which is the historical annual average return of the S&P 500.

    So, I would put 70% of the rest of my money in a total stock market index fund. I prefer Vanguard’s popular offering, VTSAX.

    If you’re wondering why I’m not putting all my money in “safer” asset categories, like cash or bonds, it’s because I still have a long investment horizon in front of me.

    I plan on investing for decades to come. I’m OK riding out the market swings that come with investing in stocks. I also want to keep up with inflation so my purchasing power remains strong in the future.

    7. 30% in a total bond market index fund.

    While I would mostly be invested in stocks, I would be highly motivated to preserve more of my wealth. Like I mentioned before, enough is enough.

    Investing in bonds is a good way to de-risk your portfolio, even if it means earning less each year.

    For that reason, I would allocate the remaining 30% of my money to a total bond market index fund. I would choose Vanguard’s VBTLX.

    I would not pay off my rental properties or quit my job.

    You may have noticed I did not mention paying off my rental properties or quitting my job.

    My rental properties are all on very low-rate mortgages and generate strong monthly cash flow. These properties are performing beautifully as is.

    I don’t see any good reason to mess with a good thing. I could always re-visit if circumstances changed.

    With $10 million, why am I not quitting my job and jetting off to a beach?

    The truth is I really like my life right now. I don’t see any good reason to make sudden, major life changes.

    I like the people I work with and the work that we do for our mesothelioma clients.

    On top of that, I like where I live and am not really craving any major purchases. I would probably get some new furniture for the house. Maybe I’d plant another tree or two in the backyard.

    Plus, because I’m still earning an income in this scenario, I can continue to use my income to fund my life. That’s why I didn’t account for daily spending in my plan for $10 million.

    In fact, I’d have more income available because the $10 million is more than enough for my long-term savings and investment goals.

    I could use the money I had been saving for these goals for more present day spending. I’m not sure I would, but I could spend more freely, if I wanted to.

    So, there you have it. That’s exactly what I would do with $10 million right now.

    What do you think of my plan?

    Would you do anything differently?

    Let us know in the comments below.

  • Real Estate has Accelerated my Journey to Financial Freedom

    Real Estate has Accelerated my Journey to Financial Freedom

    I invest in real estate for one reason and one reason only:

    To accelerate my journey to financial freedom.

    Through monthly cash flow, debt pay-down, appreciation, and tax benefits, I’m convinced that owning rental properties is the fastest way to reach financial freedom.

    We’ll soon discuss each of these advantages in more detail. For now, here’s a quick overview:

    • Cash Flow: After paying all the bills each month, whatever is left is considered cash flow. You can use this cash flow however you want.
    • Appreciation: Real estate tends to increase in value over the long-term. If you hold real estate long enough, you should benefit from appreciation. This also means that your net worth grows.
    • Debt Pay-down: If you have a mortgage on a rental property, your tenants are the ones paying down that mortgage each month. That means your net worth grows because your debt is shrinking.
    • Tax Benefits: The tax code favors real estate investors. Whereas W-2 income is heavily taxed, many real estate investors pay little in taxes (and sometimes nothing in taxes). Some of the biggest reasons for this are depreciation and lower tax rates for capital gains.

    With these four major advantages in mind, you can hopefully start to see how investing in real estate will accelerate your journey to financial independence.

    Additionally, you may have noticed that investing in real estate provides both immediate and long-term financial benefits. 

    Let’s focus on that point for a moment.

    Investing in real estate offers immediate and long-term financial benefits.

    To be truly financially free, you need to cover immediate life expenses and prepare for future life expenses.

    In terms of your Budget After Thinking, your Now Money and Life Money are considered immediate life expenses. Your Later Money is for future expenses.

    Rental properties can help you in each budget category. The monthly cash flow and tax benefits will cover your Now Money and Life Money needs. Debt pay-down and appreciation offer significant upside for your Later Money.

    I’ve been hard-pressed to find any other asset class that provides as many benefits for both for the here-and-now and the future.

    There’s another major reason I believe in the power of investing in real estate.

    It has to do with one of my ultimate life goals: to create more time to spend with my family. This is one of my major life goals, in part, because of what I’ve learned in my career as an attorney.

    What I’ve learned about time and family as an attorney.

    I graduated law school at age 24 and spent the first couple of years of my career clerking for an appellate court judge.

    To this day, I tell my students that clerking for a judge is the best job for recent graduates. I recommend that all my students apply for judicial clerkships.

    When my clerkship ended, I joined my current law firm where I continue to represent people with mesothelioma, a rare and terminal cancer caused by asbestos.

    If it wasn’t for what I’ve learned from my mesothelioma clients, I would have never started investing in real estate.

    Let me explain what I mean.

    I’ve learned invaluable life lessons from my clients with mesothelioma.

    Most of my clients are in their 70s and 80s. That’s because mesothelioma is a disease that takes decades to manifest. A person can be exposed to asbestos in his 30s and not get sick until his 70s.

    A significant part of my job has been meeting with my clients in their homes after they have just found out they have incurable cancer. Before we ever get around to talking about the case, we inevitably end up talking about life.

    During these conversations, I do most of the listening. You can imagine what I’ve learned about life in these moments. It is not a stretch to say that many of my core beliefs have been shaped by these powerful experiences.

    When I listen to my clients talk about life, certain themes continue to surface.

    One major theme I hear from my clients is the importance of family. They’ve taught me the importance of creating experiences and memories with loved ones, usually involving family vacations or time spent with friends.

    Summer in Paphos representing creating more experiences with family.
    Photo by Natalya Zaritskaya on Unsplash

    Like my clients, I want to create as much time as possible with my family and friends. When I look back on my life, I want to look back on all the experiences and memories I’ve created.

    With rental properties, I can earn money without being physically present. And while investing in real estate is not completely passive, it provides tremendous upside without requiring all of my time.

    That means I can spend more time with my wife and three kids while still making money.

    Because of what I’ve learned from my clients, there’s nothing more important to me.

    I started investing in real estate in my mid-30s.

    By the time I reached my mid-30s, I had paid off my student loan debt. I had successfully saved up for an engagement ring and a wedding. Newly married, my focus shifted to saving up for a downpayment on a home.

    At the time I started saving up for a home, I had no idea that I could use my savings to invest in real estate.

    It wasn’t until I went to a Cubs game with a good friend of mine, The Professor, that I learned about real estate investing. This is when my journey to financial freedom really accelerated.

    See, The Professor had a beautiful condo with an incredible rooftop deck near Wrigley Field. During the game, he told me he was selling the condo and moving into a 4-flat with his fiancee in an up-and-coming part of town.

    Huh?

    Why on earth would you give up your amazing condo? And move to a random neighborhood I’d maybe been to one time in my life?

    I thought The Professor had lost his mind. Back then, I had no idea what a 4-flat even was. I couldn’t even point to his new neighborhood on a map of Chicago.

    The Professor set me straight.

    door key symbolizing how investing in real estate can accelerate your journey to financial freedom.
    Photo by Maria Ziegler on Unsplash

    He walked me through the numbers. He explained that he was going from paying $3,000 per month for his condo to receiving $700 per month on top of living for free in the 4-flat. That’s a $3,700 difference per month!

    I immediately thought about the experiences and memories that I could create with my wife if we had an extra $3,700 per month to spend.

    I already knew what my clients would say about the opportunity to create such memories.

    It almost sounded too good to be true.

    I did my homework and bought my first investment property less than a year later.

    During my talk with The Professor, he introduced me to BiggerPockets.

    If you haven’t heard of BiggerPockets, it is a treasure trove of online resources to help real estate investors of all levels.

    At BiggerPockets, you can listen to podcasts, read blog posts, and ask questions on the forums. You can also choose from a wide selection of incredible books on real estate investing.

    One of my favorite BiggerPockets books is Chad “Coach” Carson’s book, Small and Mighty Real Estate Investor: How to Reach Financial Freedom with Fewer Rental Properties.

    Coach Carson’s message is right there in the title: you can use real estate to efficiently reach financial freedom. He makes a compelling argument to use real estate to build a life, not the biggest bank account.

    Being introduced to BiggerPockets was a game changer for me. I believe in the motto, “Trust but verify.” With BiggerPockets, I could do my own research and decide for myself if real estate investing was for me.

    Over the next few weeks, I read everything I could about investing in real estate. When I wasn’t reading about real estate, I listened to podcasts.

    It didn’t take long before I was convinced that I wanted a 4-flat of my own.

    I am using real estate to accelerate my journey to financial freedom.

    To me, investing in real estate is all about fast-tracking my journey to financial freedom. It has not always been easy, but it’s definitely been worth it.

    I’m fortunate that my career has introduced me to so many wonderful people.

    I am convinced that I would not have been as motivated to act if it weren’t for my conversations with my mesothelioma clients. If nothing else, I know that talk with The Professor about real estate would not have resonated with me the same way.

    Fast forward to the present day, I now own 10 apartments in Chicago and a rental ski condo in Colorado.

    Coming up in the blog, I’ll share with you everything I’ve learned about investing in real estate along the way.

    As always, reach out if you have any questions or leave a comment below.