Tag: investing

Why Every Lawyer and Professional Should Have an HSA

If you’re reading a personal finance blog geared towards lawyers and professionals, that tells me that you care about your financial future.

If I’m right about that, there is no excuse for not maxing out a Health Savings Account (HSA) every year.

An (HSA) is a tax-advantaged investment account, linked to high-deductible health plans (HDHP), that are designed to help you pay for eligible medical expenses.

With an HSA, you can invest your contributions in a preselected pool of mutual funds and index funds. In this way, investing in an HSA is very much like investing in a 401(k) plan.

HSAs have only been available since the early 2000s. I think it’s because they are still relatively new that a lot of really smart people are not taking advantage of them.

That’s a problem.

Why is that a problem?

Because an HSA is the single most powerful investment account available to supercharge your retirement savings.

What makes HSAs so powerful?

First, HSAs offer triple tax benefits.

Second, HSAs offer the most flexibility when it comes to accessing your money before age 59 1/2 without penalty.

Combined, that means that you can strategically use an HSA to supercharge your retirement savings in a way unlike any other type of investment account.

Today, we’ll look at all the reasons why you should be investing in an HSA if you want to accelerate your path to financial freedom.

Let’s start with those triple tax advantages.

You can invest in an HSA with pre-tax dollars.

When you invest in an HSA, you are contributing pre-tax dollars. This is a great way to lower your taxable income in the year you contribute.

In this way, HSAs are just like 401(k) plans.

For example, if you earn $100,000 per year and choose to contribute $5,000 to your HSA, you have reduced your taxable income to $95,000. That’s an immediate tax savings for you.

At the same time, you can invest that entire $5,000 without having to pay any taxes on that amount in the year you contribute.

That means more money for investments rather than taxes. When you have more money invested, you can obviously earn more in returns. That’s the magic of compound interest.

Your HSA earnings grow tax-free.

In addition to not being taxed on your contributions, you also won’t be taxed on your earnings.

That’s a double tax advantage that acts to magnify the power of compound interest.

Let that marinate for a minute. If you start contributing in your 20s and don’t withdraw from your HSA until your 60s, that’s 40 years of tax-free, compounded growth.

This is a major incentive to invest in an HSA, even more so than the ability to reduce your taxable income in the year you contribute.

If these double tax advantages excite you, just wait.

It gets even better.

Your HSA withdrawals are also tax-free when used for eligible medical expenses.

With an HSA, your withdrawals are also tax-free if you use the money for elegible medical expenses. More on that in a minute.

That means that your contributions, earnings, and withdrawals are all tax-free, if you follow some basic rules.

It’s worth highlight that point again:

HSAs offer triple tax advantages.

No other investment account type offers triple tax breaks (with the exception of minimal state tax benefits sometimes offered for 529 college savings plans)

This is why HSAs are the most powerful investment accounts around.

Compare the triple tax advantages of an HSA to the double tax advantages of a 401(k) or Roth IRA.

With a 401(k) plan, your contributions and earnings are nontaxable, but your withdrawals are taxable.

With a Roth IRA, your earnings and withdrawals are nontaxable, but your contributions are taxable.

HSAs combine the tax benefits of a 401(k) and Roth IRA in a single account. It’s the only type of investment account that offers these triple tax benefits.

The only catch is that to get the triple tax benefits, you need to follow some basic rules.

Let’s take a look at those rules.

Photo by Pavan Trikutam on Unsplash

You can withdraw from an HSA at any time for qualified medical expenses.

Unlike 401(k) and Roth IRA accounts, you don’t have to wait until you are 59 1/2 to withdraw your HSA money without penalty.

This flexibility is another major benefit of HSAs.

You can withdraw your HSA money whenever you need it, without penalty or taxes, if you follow one key rule:

To access your HSA money tax-free and without penalty, you must use your withdrawals for eligible medical expenses.

Don’t worry. It’s easier than you might think to follow this rule.

That’s because “eligible medical expenses” is a very broadly defined term.

In fact, you’d probably be surprised at some of the items that count as qualified medical expenses.

Some examples include Band-Aids, Tylenol, contact lenses, and flu shots.

You can take a look here for a comprehensive list of eligible medical expenses.

You don’t have to use your HSA funds right away.

Not only is the list of qualified medical expenses very broad, you also don’t have to use your HSA funds right away.

This is another major benefit.

As long as you keep your receipts, you can reimburse yourself for eligible medical expenses years, or even decades, later.

In other words, there are no time limits for when you have to use your HSA funds.

That means you can choose to pay out-of-pocket for your current medical expenses, and then reimburse yourself years later from your HSA.

Why would anyone choose to pay out-of-pocket?

Because you get to keep your HSA money invested for the long-term and benefit from compound interest and the triple tax advantages.

In other words, as long as you can pay out-of-pocket for your current medical expenses, you can allow your pre-tax HSA contributions to grow tax free for years.

That means you can take advantage of the magic of compound interest for decades, tax-free.

Then, years later, you can withdraw those funds to reimburse yourself for eligible medical expenses you paid for years prior.

Powerful stuff.

If all these benefits were not enough, here are a few more major advantages to HSAs.

Your HSA can serve as another layer of protection during emergencies.

Because it is so easy to use your HSA for eligible medical expenses, at any time, you can treat your HSA like another form of emergency savings.

Should an unanticipated expense pop up at an inopportune time, you can access your HSA funds without penalty.

You don’t want to make your HSA your only, or even first, line of defense in desperate times. But, the fact that you can withdraw funds without penalty or taxes offers another layer of financial protection.

Consider it another important string on your parachute.

Your HSA contributions are automatic.

Another benefit is that once you enroll in an HSA, your employer will automatically deduct money from your paycheck and invest it directly into your investment selections.

Because the money never hits your checking account, you won’t be tempted to spend it on things you don’t really care about.

You also don’t have to worry about consistently making transfers into your account because it will happen automatically.

It’s like having a forced savings account where you don’t have to do anything at all.

It doesn’t get easier than that.

Your employer will oftentimes contribute to your HSA.

Oftentimes, employers will make an annual contribution to help fund your HSA.

This contribution can be a meaningful sum. It is not uncommon for employers to contribute $1,000 to $2,000 annually to your HSA.

Just like when your employer matches your 401(k) contributions, this is like “free money.”

HSA contribution limits for 2026.

Like 401(k) plans and Roth IRAs, there are annual contribution limits for HSAs.

In 2026, the contribution limit for an individual with self-coverage is $4,400 and $8,750 for family coverage.

Photo by Jakob Owens on Unsplash

The main downside to HSAs are the high deductibles.

The major trade-off to having an HSA is that you’ll need to enroll in a high deductible health plan (HDHP).

To qualify as an HDHP, your plan will have a minimum annual deductible.

For 2026, the minimum deductible for an HDHP is $1,700 for self-only coverage and $3,400 for family coverage.

Additionally, for 2026, the maximum out-of-pocket expenses may not exceed $8,500 for self-only coverage or $17,000 for family coverage.

Keep in mind that a high deductible does not mean worse insurance coverage.

In fact, you will likely have access to whatever premium insurance plans your employer offers to everyone else.

The difference is that while you are still covered by insurance, you’ll pay more out-of-pocket each year for medical treatment. That’s the “high deductible” part.

Don’t let high deductibles dissuade you.

My family has been covered by high deductible plans for years. All three of my kids were born with these plans in place.

Yes, you might end up paying more per year, but only if you have high medical costs. And rest assured that the out-of-pocket maximums will protect you in the event you have a catastrophic injury or illness.

Plus, if you only need your insurance for routine appointments throughout the year, your costs will remain low. That means you get all of the benefits of an HSA without even worrying about the high deductible.

I have maxed out my HSA for years.

HSAs are my personal favorite investment account. I have maxed out my HSA ever since my law firm started offering the plans a handful of years back.

HSAs are so powerful that I prioritize maxing out my HSA over a Roth IRA and even my 401(k) because of the triple tax benefits and ultimate flexibility.

The actual investment part couldn’t be easier. I invest my money in a Vanguard Target Date Retirement Fund, very similar to the types of funds available in a 401(k) plan.

With low fees and consistent, automatic contributions, my account has steadily grown over the years.

My plan is to let this account grow without withdrawals until I retire.

That said, because I’ve kept my receipts, it gives me peace of mind to know that I can withdraw from my HSA without penalty should an emergency arise.

There is no excuse for a lawyer or professional to not invest in an HSA.

If you’re a lawyer or professional and you care about your financial future, there is no excuse for not maxing out an HSA every year.

You earn enough money to handle whatever out-of-pocket medical expenses may pop up without tapping into your HSA funds.

You just need to commit to prioritizing long-term gains over short-term spending.

That might mean making slight adjustments to your budget elsewhere. Or, it might mean fully funding your emergency savings account to help cover your deductible should the need arise.

Whatever it takes, do it.

The HSA is that powerful of an investment account that it’s more than worth it.

The bottom line is that if you want to escape the middle class trap, you need to take advantage of gifts from the IRS, like investment accounts that offer triple tax benefits and maximum flexibility.

You have the income to do it.

It’s up to you to take advantage.

Do you invest in an HSA?

If you are relatively healthy and/or have the means to pay for your present day medical care, you stand to benefit immensely down the road by investing in an HSA.

That’s because you can choose to invest your HSA contributions just like you might invest in a 401(k) plan.

If you do so, your contributions, earnings, and withdrawals are all tax-free if you follow some basic rules.

Plus, you can withdraw your money at any time without penalty.

Because of these triple tax benefits and the flexibility of withdrawals, HSAs are my absolute favorite investment account.

If you haven’t considered HSAs before, I would encourage you to take a look.

Do you have an HSA?

Do you agree with me that HSAs are the most powerful investment account?

Let us know in the comments below.

November 17, 2025
On Track to Max Out Your Retirement Accounts This Year?

Hey, want to hear something exciting?

The IRS just gave us an early gift for 2026: higher maximum contribution limits for retirement accounts, like a 401(k) or Roth IRA!

If that doesn’t excite you… you’re reading the wrong blog.

For those of us who read (and write) personal finance blogs, maxing out our retirement accounts is a top priority.

Remember, our saving rate is the one thing we can truly control when it comes to investing.

Once we’ve committed ourselves to improving our saving rate, the next big question is what we should do with the money we’re saving.

That leads us to today’s refresher on the two most popular types of retirement accounts: the 401(k) and the Roth IRA.

With many lawyers and professionals earning raises and bonuses towards year-end, this is the perfect time to check in on your annual retirement contributions.

The last thing you want to happen is for that extra, hard-earned money to go to waste.

Plus, if you prioritized other financial goals earlier in the year, it’s not too late to increase your contributions in 2025 to the maximum level.

This is exactly what I did recently. Having made good progress on my other 2025 money goals, I adjusted my 401(k) contributions to hit the maximum for 2025.

A 401(k) is likely the first investment account you will have.

401(k) plans are employer-sponsored retirement plans.

Employees can elect to participate in their company’s 401(k) plan and choose from a variety of investment options, usually mutual funds and index funds.

Most of us get our first exposure to the stock market through a 401(k) plan. The main exception is if you had a parent or relative open an investment account for you before you started working full-time.

There are four major reasons to invest in a 401(k) plan.

Let’s take a look at four major reasons to invest in a 401(k) plan.

1. You can invest with pre-tax dollars.

When you invest in a traditional 401(k) plan, you are contributing pre-tax dollars. This is a great way to lower your taxable income in the year you contribute.

For example, if you earn $100,000 per year and choose to contribute $10,000 to your 401(k), you have reduced your taxable income to $90,000. That’s an immediate tax savings for you.

At the same time, you can invest that entire $10,000 without having to pay any taxes on that amount in the year you contribute.

That means more money for investments rather than taxes. When you have more money invested, you can obviously earn more in returns. That’s the magic of compound interest.

2. Your contributions are automatic.

Once enrolled in a 401(k) plan, your employer will automatically deduct money from your paycheck and invest it directly into your investment selections.

Because the money never hits your checking account, you won’t be tempted to spend it on things you don’t really care about.

You also don’t have to worry about consistently making transfers into your account because it will happen automatically.

It’s like having a forced savings account where you don’t have to do anything at all. It doesn’t get easier than that.

Photo by Aaron Burden on Unsplash

3. Your earnings grow tax-free.

In addition to not being taxed on your contributions like we discussed above, you also won’t be taxed on your earnings.

That’s a double tax advantage that acts to magnify the power of compound interest.

Keep in mind that you will be taxed when you make withdrawals later on.

Let that marinate for a minute. If you start contributing in your 20s and don’t withdraw from your 401(k) until your 60s, that’s 40 years of tax-free, compounded growth.

This is a major incentive to invest in a 401(k), even more so than the ability to reduce your taxable income in the year you contribute.

Rest assured, if you’re maxing out your 401(k), you can just roll your eyes the next time you hear someone complaining about taxes.

You shouldn’t worry because you have investments that will grow for decades without any tax liabilities.

4. Your employer may offer a match.

Many employers today offer a match to incentivize employees to contribute to their 401(k) plans.

To qualify for the match, you must be participating in your company’s plan and make contributions yourself. The match is usually a percentage of your overall salary, usually between 3-6%.

For example, if you contribute 5% of your salary, your company may match you with an additional 5% contribution.

If your company offers a match, it’s a no-brainer to take advantage of that match.

This benefit is so good that the employer match is often described as “free money.”

I agree with the sentiment, but I don’t like the term “free money.”

That’s because it implies that you have not earned that money as an employee for your company. If you’re a lawyer or professional, you spend countless hours away from your family to work a hard job. The employer match is compensation for your efforts.

I prefer to think of the company match as a bonus you’ve rightfully earned.

The key is to accept that earned bonus by ensuring you are meeting the minimum requirements to qualify.

401(k) Contribution Limits for 2026

The IRS recently increased the maximum contribution that an individual can make in 2026 to a 401(k) plan. The new limits are $24,500, up from $23,500 this year.

That means people earning $100,000 in 2026 can reduce their taxable income by nearly 25% if they max out the contribution. That’s huge, immediate savings.

People aged 50 and over may be able to contribute even more, up to $8,000 more next year, up from $7,500 this year.

Additionally, people between the ages of 60 and 63 will be allowed catch-up retirement plan contributions of up to $11,250 annually.

A Roth IRA is another key retirement account that offers double tax benefits.

A Roth IRA is another type of retirement account that also provides double tax benefits.

Unlike a 401(k), you make after-tax contributions to your Roth IRA. That means you don’t get any immediate tax breaks.

However, you don’t have to pay any taxes when you withdraw the money (after age 59 1/2). This is the major perk of a Roth IRA.

Additionally, just like a 401(k), your Roth IRA grows tax-free.

As another bonus, you can withdraw your contributions tax-free and penalty-free at any time. Keep in mind there are penalties if you make withdrawals from your earnings before the age of 59 1/2.

Why think about opening a Roth IRA?

For many investors, it’s not a bad idea to consider opening a Roth IRA in addition to your 401(k).

For starters, there are contribution limits to each account. You may need more money in retirement than just what your 401(k) plan will provide. Investing in a Roth IRA at the same time is a way to boost your retirement income.

For another reason, as discussed, 401(k) plans and Roth IRAs are treated differently from a tax perspective.

Many retirees like having a Roth IRA in addition to their 401(k) so they have access to some tax-free money in retirement.

Include me in that camp. I agree that it is beneficial to have some tax-free income in retirement from a Roth IRA to go along with your taxable income from a 401(k).

You can open a Roth IRA with any number of investment companies, like Vanguard, Fidelity, and Charles Schwab.

Photo by Charlotte Noelle on Unsplash

Roth IRA Contribution and Income Limits for 2026

Just like with the 401(k), the IRS also raised the 2026 annual contribution limits for Roth IRAs. The limits in 2026 increased to $7,500, up from $7,000 this year.

The IRA “catch-up” contribution limit also increased to $1,100 in 2026.

There is a catch when it comes to Roth IRAs. Because of the amazing tax advantages, there are income limits associated with who may contribute to a Roth IRA.

As explained by the IRS for 2026:

The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $153,000 and $168,000 for singles and heads of household, up from between $150,000 and $165,000 for 2025.

For married couples filing jointly, the income phase-out range is increased to between $242,000 and $252,000, up from between $236,000 and $246,000 for 2025. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

Are you on track to hit your retirement planning goal for 2025?

There are only so many ways to invest in tax-advantaged accounts. The most savvy investors make sure that they are receiving as many tax benefits as possible.

The 401(k) and Roth IRA are two of the most popular, and two of the only, ways to invest for retirement with incredible tax advantages. That’s why they are so important to fund during your working years.

If you want to max out your accounts, there is still time in 2025, especially if you recently earned a raise or a bonus. Put that hard-earned money to good use. Don’t let the dollars disappear.

Then, as 2026 begins, with the new limits in place, you may want to adjust your contributions so you can continue to hit the max level in your 401(k) and Roth IRA.

Have you checked in on your retirement contributions lately?

Are you planning to increase your contributions to hit the max level in 2025?

What about in 2026?

Let us know in the comments below.

November 14, 2025
Practice Strong Money Fundamentals Before Investment Dreams
When I teach my personal finance seminar to lawyers or law students, I typically reach out ahead of time asking about topics of interest.

The most common response I get is something like, “I want to learn about investing.”

The other common response is, “I want to invest in real estate.”

I totally get it. Investing in the stock market and owning real estate are sexy topics.

Without a doubt, these are both important topics to cover in a personal finance seminar. We spend a lot of time in my course and here in the blog talking about investing and owning real estate.

Of course, the best way to generate wealth is through consistent investments over a long time horizon.

So, my students are asking the right questions when they are concerned about investing and real estate.

But, they’re skipping a few crucial steps.

The thing is, investing is actually the easy part.

The hard part is constantly generating enough money to fuel those investments.

That’s why investing and owning real estate are “Day 2 topics.” On Day 1, we have to build the foundation.

Think about it like this:
- Before we can invest, we need excess money to invest.
- To have excess money to invest, we need a budget that actually works.
- For a budget that actually works, we need clear motivations.
- Clear motivations means a strong money mindset.
Can you spot the issue of investing without a solid foundation?

When my students ask me a question about how to start investing, I tend to respond with a question of my own:

“How much savings does your budget generate each month?”

Yes, I know. It’s so annoying to answer a question with a question.

This particular question usually leads to a double dose of annoyance from my students.

My students are first annoyed that I ignored their question about investing. They didn’t come to me to talk about something boring, like budgeting.

They want to know about the exciting stuff, like earning huge returns in the stock market.

Next, after this initial annoyance fades away, another form of annoyance sets in.

My students get annoyed because they can’t actually answer the question.

They realize they have no idea how much money they’re saving each month because they don’t have a budget.

That’s a problem.

Not having a budget is a problem for anyone who wants to consistently invest.

To be a successful investor, you need to consistently fuel your investments. There will be ups and downs in the markets. That’s to be expected.

Your job is to stay in the game and keep feeding your accounts.

For example, most of us can be successful investors by simply investing in an index fund, like VTSAX.

Once we’ve selected that investment, our job is to constantly add money to your investment account.

That means having a budget that works.

If you skip this part of the process, sure, you may be savvy enough to open and initially fund the account. But, my prediction is you won’t be fueling that account regularly.

Having a budget for your personal finances is even more important when it comes to owning real estate.

Investing in real estate means running a business. Money comes in and money goes out. To be successful, you have to make sure that more money comes in than goes out.

This is obvious stuff, right?

The same logic applies to your personal budget: if you want to get ahead in life, more money needs to come in than goes out.

The problem is most people have a hard enough time managing their personal finances. How are they going to handle managing business finances?

That’s why I ask my students, “If you haven’t mastered this idea with your personal budget, are you sure you want to take on the stress and risk of an investment property?”

It’s usually around this point when my students start nodding in understanding.

Photo by Sebastián León Prado on Unsplash

Before focusing on stocks or real estate, make sure your personal finances are in order.

My goal here is not to dissuade you from investing in stocks or real estate.

We all need to invest if we want to generate wealth.

My goal is to help you avoid the mistakes that so many of us make in the early stages of our careers.

One of the biggest mistakes I see is people wanting to jump to the final steps in the process without starting from a strong foundation.

If you’ve been following along on the blog, you likely noticed the progression in topics we’ve covered. This is the same progression that we follow in my personal finance course.

You’ll see links to each one of these topics featured on the top of the Think and Talk Money homepage:
- Money Mindset
- Budgeting
- Debt
- Credit
- Investing
- Real Estate
We initially covered each of those topics in order from top to bottom. First, we talked extensively about the mental side of money. Without having your money mindset in the right place, nothing else matters.

We then spent a lot of time talking about personal finance fundamentals, like budgeting, saving, and handling credit and debt responsibly.

Only after having our personal finance foundation in place did we talk about more fun concepts like investing and real estate.

There’s a reason we’ve covered these topics in this order.

If your money mindset is not in the right place, you won’t be able to stay on budget.

If you can’t stay on budget, you’ll likely fall into debt.

When you’re falling deeper and deeper into debt, it doesn’t make a lot of sense to prioritize investing.

Why bother with investing if any profits are just going to disappear?

Let’s focus on that last point for a minute.

What sense does it make to invest if you’ve never proven to yourself that you can use those investment gains responsibly?

I never want to see people take on the risks of investing just to have any profits disappear because they don’t have a strong personal finance foundation in place.

For example, imagine someone does the work to find and sustain a good rental property that generates $1,000 per month in cash flow.

It’s not easy to earn that much. It takes time and effort, not to mention the risk involved.

If that same person blows the $1,000 he earned on things he doesn’t care about, what was the point?

Why take on the risk and do the work if the money will all be gone by the end of the month?

Unfortunately, this is how many people go through life. They work hard, make good money, and then have nothing to show for it.

I don’t want that to be your fate. I want you to have a plan for your money before you earn it.

That means sticking to a budget that consistently moves you closer to living freely on your terms.

Most of us don’t know where our next dollar is going.

The reason most people never get ahead with their finances is because they don’t have a plan for where their next dollar is going.

Their income hits their checking account, they spend it on this or that, and pretty soon that money has disappeared. They haven’t used the money to advance any of their priorities.

It’s just gone.

To me, this is one of the most important money mistakes that we need to fix right away. We definitely need to fix it before we start fantasizing about big investment returns.

If not, you’ll just be making the same mistakes, just with more money to lose.

Having a plan for our money, before we earn it, is essential if we want to reach our goals. With a plan, we can eliminate the disappearing dollars with confidence that our money is being used to serve our purposes.

How do you create a plan for your money before you earn it?

You need to have a budget.

If you don’t currently have a budget that results in excess money at the end of each month, I encourage you to start there before thinking bout real estate.

Photo by Peter Fogden on Unsplash

When you have strong fundamentals in place, money becomes fun.

Being good with money doesn’t have to be stressful. Once you have the fundamentals in place, you’ll start to see how each dollar you earn gets you one step closer to financial freedom.

Before you think about investing in stocks or in real estate, make sure that your personal finances are in order.

Otherwise, the effort, stress, and risk of investing is not worth it. Any dollar you earn is likely to disappear as quickly as it comes in.

To prevent that from happening, establish good money habits before you buy real estate.

In the end, you’ll be so happy that you did.

For any investors out there, did you jump in before establishing strong personal money habits first?

Did any benefits you earned from investing simply disappear because you didn’t have a plan for those dollars ahead of time?

What advice do you have for beginners thinking about investing?

Let us know in the comments below.
October 29, 2025

How Does Your Net Worth Compare to People Your Age?

Pop quiz!

What is your net worth?

Kudos to you if you can answer that question quickly and relatively accurately.

Knowing your net worth indicates you are likely making intentional choices with your money. You likely are more concerned with how much money you keep, not how much you make.

It also likely means that you have a plan and are well on your way to financial independence.

Well done!

If you know your net worth, you might be wondering how you measure up to people your age.

That’s what we’re going to look at today.

First, let’s discuss why it’s important for all of us to track our net worth.

Why is it important to track your net worth?

By tracking your net worth, you can quickly see if you are making good money decisions or need to make adjustments.

I recommend everybody, no matter where you are in your financial journey, track your net worth.

By the way, tracking your net worth is not a major time commitment.

It takes me less than 30 minutes each month to track and discuss what I consider to be one of the most important metrics in personal finance.

That’s all the time it takes to know if I am progressing towards my most important financial goals.

If you don’t know your net worth, now is the time to start tracking it.

For a step-by-step guide to tracking your net worth, check out my post here:

Why You Need to Track Your Net Worth Every Month

Just like budgeting with two simple numbers, tracking your net worth is the best, and easiest, way to measure your money progress.

There’s no better way to learn how much money you’re keeping after a month of making money.

Think of tracking your net worth in terms of keeping score during a basketball game.

If you don’t know the score of the game, you don’t know if your strategy is working. You don’t know if you need to make adjustments before time runs out.

The same applies to tracking your next worth. The point is to educate yourself on your current financial situation so you can make adjustments while there is still time.

How do I know if I need to make adjustments based on my net worth?

Speaking of making adjustments, it can sometimes be helpful to look at datasets to see how you measure up to the rest of the population.

So today, we’ll look at two potentially helpfully net worth metrics.

First, we’ll look at the average net worth of Americans by age.

Then, we’ll look at the average net worth by age of the Top 1%.

The goal is to give you some benchmarks so you can assess where you’re currently at. Then, you can decide if you want to make any adjustments.

In other words, the point is to educate yourself so you can make intentional choices for your own situation. The point is not to start comparing yourself to your neighbors.

OK, let’s get to it.

green plant in clear glass cup indicating that net worth grows over time. — Photo by micheile henderson on Unsplash

What is the net worth of Americans by age?

Below is the average and median net worth of Americans by age based on research from Empower.

Keep in mind these studies are not perfect.

It’s not an easy task to track and study net worth across a wide population. Not everyone tracks her net worth, let alone makes it easy for outsiders to track it.

Use these figures as a rough guide to help your own decision-making. Just don’t get too caught up in the exact figures.

Net Worth by Age

Age	Average Net Worth	Median Net Worth
20s	$121,004	$6,609
30s	$307,343	$24,247
40s	$743,456	$75,719
50s	$1,330,746	$191,857
60s	$1,547,378	$290,447
70s	$1,444,413	$233,085
80s	$1,342,656	$233,436
90s	$1,212,583	$205,043

High school math refresher: The average is calculated by adding up all values in a dataset and dividing by the count. The median is the middle value of a dataset with an equal number of values above and below. Averages can be skewed by extreme values, so the median can give you a more accurate picture.

Here are some observations about the average net worth of American by age:

Net worth tends to increase with age. No surprise there, right? As our careers progress, we tend to earn more and invest more money.
Net worth tends to peak in our 60s. This also makes sense. When people reach retirement age, they start to draw down their portfolio. They’ve spent decades accumulating wealth and eventually it’s time to spend that savings.
Notice the effects of compound interest. From the 20s to the 30s, we see that the median net worth nearly quadruples. That’s a 400% increase! However, it equates to a median net worth increase of only $18,000.
Compare that to the change from the 50s to 60s. We see that the median net worth increases by only 50%, but the result is an increase in nearly $100,000.
The takeaway is that when you have more money invested, smaller gains result in higher earnings. You could say, “the rich get richer.”

What is the net worth by age of the top 1%?

Next, let’s take a look at the average net worth by age of the Top 1%, thanks to an analysis of Federal Reserve data by DQYDJ.

Remember, these are only rough figures. Use this data to help you strategize based on your current financial situation.

Net Worth by Age of the Top 1%

Age	Top 1% Net Worth
18-24	$653,224
25-29	$2,121,910
30-34	$2,636,882
35-39	$4,741,320
40-44	$7,835,420
45-49	$8,701,500
50-54	$13,231,940
55-59	$15,371,684
60-64	$17,869,960
65-69	$22,102,660
70-74	$18,761,580
75-79	$19,868,894
80+	$16,229,800

Are these dollar amounts lower or higher than you expected?

If these dollar amounts seem unattainable, remember that 99% of us will never hit these marks. Don’t get discouraged. You’re doing great work if you’re anywhere close to these numbers.

Did you notice that the trends in the Top 1% net worth data are very similar to the average net worth by age data we previously looked at?

We again see the net worth of the Top 1% peaking in the 60s.

We also see the same effects of compound interest.

This data reinforces the point that investing favors people who start early, even if the results do not materialize for decades. It takes time for compound interest to work its magic.

young man and older man standing at bottom of stairs representing the importance of tracking your net worth. — Photo by John Moeses Bauan on Unsplash

Tracking your net worth is the best way to measure your personal financial progress.

By now, you should have an idea of where you stand compared to the rest of the population.

What can you do with this information?

If you’re happy with how you measure up, that might mean you’ve reached a level of financial independence where you have options in life.

Having options in life means that you’ve achieved the ultimate goal: FIPE (Financial Independence, Pivot Early).

When you reach FIPE, you are free to pivot to a new challenge, if that’s what you want.

On the other hand, maybe you looked at this data and learned that you are not as far along on your financial journey as you had hoped.

Don’t panic.

The benefit is that you can now make adjustments.

What kind of adjustments can you make after learning your net worth?

When you track and study your net worth, you can make adjustments while you still have time on your side.

For example, you may decide that it’s finally time to boost your saving rate.

After all, your saving rate is the one thing you can actually control on your way to financial independence.

Or, you might take a fresh look at your Budget After Thinking to find ways to generate more fuel for your investments.

And, it might mean saving and investing that one-time windfall instead of spending it on stuff you don’t really care about.

Whatever decisions you make, knowing the average net worth by age can help point you in the right direction.

It takes me less than 30 minutes per month to track my net worth.

It takes me less than 30 minutes each month to track and study one of the most important numbers in personal finance.

Each month, I’m only looking for progress compared to what my net worth was previously.

If my net worth increases over time, it means I am heading in the right direction.

It means that I am continuing to fuel my Later Money goals. I am paying down debt. I’m letting my investments do their thing.

If my net worth is not increasing, it means I need to figure out why and consider making adjustments.

Sometimes my net worth decreases because the markets are heading down. If that’s the case, I don’t do anything. At this stage in my life, I can afford to wait while markets tick back up.

If the issue is that my debt is increasing, or I didn’t fuel my investments that month, I know I need to make adjustments.

By studying my net worth each month, I can catch these setbacks before they become a continuous problem.

Do you track your net worth?

Are you happy with how you measure up?

If not, are you prepared to make the necessary adjustments?

September 28, 2025

How to Use Two Simple Metrics to Compare Investments

If you had $200,000 saved up, should you invest in the stock market or in a rental property?

In our previous post, we explored why you may want to consider investing in both the stock market and in rental properties.

However, without the proper tools at your disposal, the choice between investing in stocks or investing in real estate can be tricky.

Fortunately, there are a couple of quick and easy ways to analyze the strength of a rental property as compared to investing in the stock market.

Today, we’ll dive into two metrics that investors use to quickly compare investments across asset classes. The two metrics are known as:

Cash-on-Cash Return on Investment (CoCROI)
Return on Investment (ROI)

With just these two metrics, you’ll be able to quickly compare the returns of a potential rental property to the typical returns of the stock market.

You can also quickly compare two different rental properties.

Then, you can decide what’s the best investment for your personal situation.

One note before we begin:

Don’t worry if math is not your thing. There are plenty of online calculators like this one that will do all this math for you.

The key is to understand what the math is telling you. That way you’ll know what to do with the information that the online calculators pump out.

So, before you go running off to one of the online calculators, stick around and see how the math works and what it all means.

Now, let’s think about your options with that $200,000 you’re sitting on.

The S&P 500 historically earns 10% annually.

Before looking at our two real estate metrics, let’s establish a baseline comparison with the stock market.

The S&P 500 has historically earned an average annual return of 10%.

By investing in an index fund that tracks the S&P 500, like I do in my 401(k), I have a pretty good chance of earning consistent returns in the long run.

Sure, there may be ups and downs. And, there are no guarantees the S&P 500 will continue performing at 10%.

But, check this out:

Since 1996, the S&P 500 has ended the year in positive territory 23 times and negative territory only 7 times.

In other words, the S&P 500 has generated positive returns three times more frequently than it generates negative returns.

And even with those 7 negative years, with the exception of 2000-2002, the S&P 500 returned to positive territory the following year.

What this all means is that while the S&P 500 will drop occasionally, the down periods are historically short-lived.

Because of this historical consistency, I feel comfortable using 10% as a baseline to compare other investments with.

Note that predictable returns does not mean guaranteed returns.

There are no guarantees in the stock market or with any other asset class.

To recap: the S&P 500 has historically provided an average annual return of 10%.

While not guaranteed to continue in the future, 10% average annual returns represents a safe projection for our calculations.

That means we can use 10% as a baseline investment return to compare other potential investments to.

With this baseline in mind, we can now move to our two real estate metrics.

a calculator and a pen on top of paper to show you how to use CoCROI and ROI to evaluate different investments. — Photo by Aaron Lefler on Unsplash

Calculate your Cash Flow.

The first step in evaluating any real estate deal is to calculate the expected cash flow.

For a detailed explanation on how to analyze real estate deals and calculate cash flow, check out my post here.

To keep in simple, cash Flow is whatever money you have left over after paying all expenses. Think of it as your monthly profit.

Today, we’ll use an example of a hypothetical property that is listed for $1,000,000.

Here’s a quick snapshot of how you might calculate the cash flow on this property:

Asking Price: $1,000,000

Monthly Rent: $9,000

Mortgage Payment (Principal and Interest)	$4,500
Taxes	$900
Insurance	$300
Utility Bills	$300
Property Upkeep	$200
Preventative Maintenance	$200
Vacancy Rate (5%)	$300
Unexpected Repairs (5%)	$300
Property Improvements (5%)	$300
Total Monthly Cost	$7,300

Cash Flow = Income – Expenses

$1,700 = $9,000 – $7,300

This hypothetical property has a monthly cash flow of $1,700.

That means it has annual cash flow of $20,400, a number that we’ll need for our next calculation.

So, is this property a good deal?

That brings us to our first metric, Cash-on-Cash Return on Investment.

What is Cash-on-Cash Return on Investment (CoCROI)?

Cash-on-Cash Return on Investment (CoCROI) measures how much cash flow a property earns in one year relative to how much money was initially invested.

The formula looks like this:

CoCROI = Annual Cash Flow / Total Cash Invested

With this simple metric, we can compare the return of a potential rental property to the returns of any other investment, like an S&P 500 index fund.

Then, we’ll have some useful information to decide if this is a good deal.

Keep in mind that CoCROI does not factor in appreciation, debt pay-down, or tax benefits. That analysis comes with our next metric.

To continue our example above, we know the annual cash flow on this property is $20,400.

Let’s assume our down payment is 20% of the purchase price, or $200,000.

In addition to the down payment, we paid $10,000 in closing costs and invested another $5,000 to clean up the property before renting it out.

In total, our initial investment is $215,000.

Let’s plug those numbers into the CoCROI equation:

CoCROI = Annual Cash Flow / Total Cash Invested

.095 = $20,400 / $215,000

The CoCROI on this property is .095 or 9.5%.

Does a 9.5% CoCROI automatically mean this is a bad deal?

Back to the important question: is an initial investment of $215,000 to earn $20,400 in annual cash flow a good idea?

What does the math tell us?

We now know that the return on this property in the first year falls just short of the S&P 500’s 10% annual return.

Does a 9.5% CoCROI automatically mean this is a bad deal?

Not at all.

The answer will depend on what your preferences and goals are as an investor.

Keep in mind that CoCROI is a projection tool designed to measure the expected return on this rental property in just the first year.

Because of all of the variables at play, use CoCROI to help you compare investments. But, don’t make your investment choices based solely on the CoCROI.

Also keep in mind that CoCROI is a quick and easy way to compare the initial investment on one rental property to another rental property.

If you’re evaluating a lot of properties, you can quickly see which ones give you the best initial return on your money.

To recap, CoCROI is a great way to quickly compare the returns on different investments in the first year.

However, what if we wanted to evaluate the long-term investment potential on a property?

For example, what if we plan to hold a property for 10 years?

By holding a property for 10 years, we’ll ideally profit through appreciation and debt pay-down, not just through cash flow.

Let’s learn how to factor in those profits by calculating our overall Return on Investment (ROI).

Data reporting dashboard on a laptop screen to show you how to use CoCROI and ROI to evaluate different investments. — Photo by Stephen Dawson on Unsplash

What is Return on Investment (ROI)?

Return on Investment (ROI) factors in cash flow, appreciation, and debt pay-down. It also factors in the sales expenses associated with selling a property after a defined holding period.

Put it all together and ROI is a great way to project the overall returns on an investment over time.

The ROI formula looks like this:

ROI = (Total Profit / Total Investment) / Years

Let’s continue our example to calculate the ROI on this property over a 10-year period.

The first step in calculating ROI is to total up the cash flow.

We already know that this property will earn $20,400 in annual cash flow.

Over 10 years, that means we will earn $204,000 in total cash flow.

Remember, cash flow is only part of our total profits.

Next, we need to calculate the equity we will earn through appreciation and debt pay-down on this property.

Next, figure out the expected appreciation and debt pay-down.

To calculate the rest of our total profits, let’s start with some basic assumptions.

First, let’s assume that this property will appreciate at 3% annually.

Using an online calculator like this one, we learn that our property will be worth $1,343,916 in 10 years.

In other words, since we bought the property for $1,000,000, we have earned $343,916 in appreciation over those 10 years.

Next, we need to calculate how much our loan balance has decreased over those 10 years. This is known as loan amortization.

Recall that our initial loan was for $800,000 because the property cost $1,000,000 and we put 20% down.

Again, we can use a simple amortization calculator like this one to do the math for us.

Assuming a 6.5% interest rate and a 30-year loan, we will have $678,209 remaining on our balance after 10 years.

Since our loan balance started at $800,000, this means that we have earned $121,791 in debt pay-down over those 10 years.

By adding the appreciation and debt pay-down together, we learn that our total equity in this property after 10 years is $465,707.

If we add up our total cash flow, appreciation, and debt pay-down, we see that our total income on this property is $669,707.

Don’t forget to factor in the costs of selling the property.

When we sell this property, we will incur some costs that we don’t want to ignore in our analysis.

Let’s assume that we will pay 6% to real estate agents, 2% in closing costs, and another $15,000 to fix up the property before selling.

In total, that adds up to $107,513 in costs associated with selling this property.

When we subtract the sales expenses from our total income, we see that our total profits on this property after 10 years are $562,194.

Now that we know our total profits, we can calculate the ROI.

How to Calculate ROI.

We now have all of the pieces we need to calculate the ROI on this property.

As we added up above, our total cash flow, appreciation, and debt pay-down, combine for a total income on this property of $669,707.

When we subtract the sales expenses from our total income, we see that our total profits on this property after 10 years are $562,194.

We also saw above that we made a total investment of $215,000 (our down payment plus closing costs) to acquire this property.

Now, we can plug this information into the ROI formula.

ROI = (Total Profit / Total Investment) / Years

.261 = ($562,194 / $215,000) / 10

ROI or Total Return: 26.1%

In the end, this property generates a total annual return of 26.1%.

So, what should you do with your $200,000?

Is this property a good deal?

Would you be better off investing in an S&P 500 index fund and earning 10%?

Using CoCROI and ROI can help you make that decision.

As an investor, you may be thrilled with a 9.5% CoCROI or 26.1% ROI.

On the other hand, you may not be interested in doing the work and taking on the risk involved with owning that rental property.

Remember, we are making projections based on a number of variables. Nobody can predict exactly how an investment will perform.

In the end, only you can answer this question based on your personal preferences.

The point in doing the math is to provide additional data points so you can make the best decision possible.

There’s no right or wrong answer.

August 31, 2025

Coast FIRE Will Help You Realize When Enough is Enough
What are you chasing in life?

Professional accolades?

Tens of millions of dollars?

The ability to retire someday?

Do you even know?

Most lawyers and professionals have a complicated relationship with their careers. That’s a topic for another day. Suffice it to say, the relationship evolves over time.

In the beginning, we’re mostly satisfied to have a decent job. We’re proud of what we’ve accomplished to get this far. We can put our skills to use and start living like adults.

This phase typically lasts until we develop confidence and realize that we’re pretty good at our jobs. We know that we can take on more responsibility and perform more challenging work.

At this point, we begin to work harder than ever. Oftentimes (but not always), we make more money.

We tell ourselves that we’re doing important work. We even start to earn recognition and receive awards from professional groups.

The thing is: we haven’t ever questioned why we’re doing it and what we’re chasing.

Somewhere along the way, our work becomes our identities.

Is your job the most important thing in your life?

How would your spouse or kids answer that question about you?

When your job is the top priority in your life, your health, relationships, and personal interests all take a back seat.

Many of us prioritize our jobs above all else until we get around to retiring in our sixties or seventies.

We never stop to think about whether there’s another way. We’re stuck on autopilot.

Earn a paycheck, buy nice things, save for retirement.

It’s that last part that we oftentimes use as justification for working so much: saving for retirement.

Part of the problem is that we’ve been programmed to think that saving enough for retirement is a never-ending challenge.

We’ve been brainwashed to think that unless you save 10-20% of your paycheck for the rest of your life, you’ll never comfortably retire.

These fears are strong enough to push us to chase more money. To save endlessly for retirement.

Because if you don’t save enough, so we’re told, you’ll never get that lake house in Wisconsin you’ve always dreamed about. Instead, you’ll be living in your kid’s basement.

Now, don’t get me wrong. Saving for retirement is extremely important. It’s one of the bedrocks of personal finance.

But, saving enough for retirement is not an impossible goal. It is most definitely an achievable goal.

For many of us, it’s achievable earlier in life than we ever thought possible.

Once you accept the fact that you actually can save enough for retirement, you give yourself permission to ask, “When is enough is enough?”

This is where Coast FIRE comes in.

With the money mindset hack of Coast FIRE, you can tell yourself, “I have saved enough for retirement. Cross that major goal off of the list.”

Enough is enough.

With retirement taken care of, you can think about what else to do with your time and money.

That might mean staying exactly where you are: same job, same house, same vacations. If it ain’t broke, don’t fix it.

If it is broke, you can pivot.

You can start to dissect exactly what it is that you’re chasing in life.

Photo by Suzi Kim on Unsplash

What is Coast FIRE?

Coast FIRE is a subset of FIRE for people who are not necessarily trying to retire early.

Instead, the idea is to aggressively fund your retirement accounts early on so you have more options as your career progresses.

The reason you’ll have options is because once you hit your projected magic retirement number, you no longer need to fund your retirement accounts.

You can sit back and let compound interest do its thing. Your retirement years are covered.

With retirement covered, you don’t need to earn as much money. You can focus more attention on your present-day self. That might mean working less hours or working the same amount but in a different job.

This is the essence of Coast FIRE: knock out retirement planning early on to create more career flexibility later.

Coast FIRE does not mean complete financial independence.

When you reach Coast FIRE, you are not financially independent because you still need money coming in to fund your current lifestyle.

But, you need less money because you no longer need to save for the important goal of retirement. That means you have earned some financial freedom, but not complete freedom.

That’s OK.

Remember, the part that separates Coast FIRE from traditional FIRE is that early retirement is not the goal.

Instead, Coast FIRE means continuing to work until normal retirement age (like age 65) but having more freedom in what you do for work.

To put a bow on it: the main money mindset benefit of Coast FIRE is that you have options once you’ve already put away enough money for retirement.

With retirement taken care of, you can:
1. Switch to a lower paying job or lower stress job.
2. Become a stay-at-home parent and live off of one spouse’s income.
3. Start a business.
4. Grow your side hustle.
5. Take some time off to think about what you want to do next.
With Coast FIRE, each of these options feels safer because you’ve already fully funded your retirement.

Knowing when enough is enough.

Towards the end of 2024, I had a breakthrough moment thinking about when enough is enough.

Earlier that year, we had moved into our “forever home.” I had traded in my 20-year-old car for a new one. My wife and I were expecting our third child.

As it happens, I was reading an excellent book on real estate investing written by Chad “Coach” Carson.

His book is called Small and Mighty Real Estate Investor: How to Reach Financial Freedom with Fewer Rental Properties.

In his book, Coach Carson makes a compelling argument to think about when enough is enough.

His message was about acquiring more and more real estate, to no end, but also applies to any pursuit in life.

Reading Small and Mighty Real Estate Investor helped my wife and I conclude that at this point in our lives, we have enough.

If anything, we’re closer to having too much on our plates. We self-manage our 10 units in Chicago and work closely with a property manager in Colorado.

With our full-time jobs and kids at home, we’ve bitten off as much as we can chew.

Our portfolio generates enough income to help fuel our current goals. If we were to continue expanding, the headaches could end up outweighing the financial benefits.

We want to build a life full of experiences and memories. That means we need more time, not more money. Acquiring and managing more properties right now would take up a lot of time.

That tradeoff is not currently worth it to us.

Photo by Snappr on Unsplash

What would you do with your time if money was not an obstacle?

Whenever I think of Coast FIRE, I’m reminded of a conversation I had with a friend earlier this year.

We were having lunch at a downtown Chicago lunch spot that’s been serving up epic burgers since the 1970’s. My friend and I are both balancing careers as lawyers in Chicago with young families at home.

In between bites of a massive BBQ-bacon-cheeseburger, I asked him a question I like asking smart people:

“What would you do with your time if money wasn’t an obstacle?”

Without hesitation, he answered that he would work with his hands.

He likes working on projects around the house. He gets immediate satisfaction from completing a repair or making an improvement.

His answer was great and very relatable. My years as a landlord has taught me the same feeling of satisfaction in completing a project.

What stood out to me the most was how quickly he answered the question. He knew exactly what he would do if money was not an obstacle.

This simple question helps illustrate what I mean by Coast FIRE.

When you achieve Coast FIRE, you can afford to take a pay cut. You can choose to work a job that you enjoy for less money.

It’s not an easy goal to accomplish, but I can’t think of a better goal to strive for.

By the way, since having that burger with my friend, he left his old job for one that better fits his life goals. I’m thrilled for him.

Coast FIRE is not about giving up.

Some critics of Coast FIRE argue that it’s just a catch phrase for quitting on your career too early. They say the consequences of having a “bad retirement” are too severe.

The way I see it: having a “bad life” now in hopes of a “good retirement” later is not a worthwhile trade off.

You can certainly prioritize making the most money in life. That might mean continuing to earn and earn so you can invest in the stock market or purchase more rental properties.

But, at some point, you don’t need any more money. At some point, you need to know when enough is enough.

Coast FIRE is about exactly that: knowing when enough is enough.

Have you thought about when enough is enough?

Does Coast FIRE help you visualize that moment?

Let us know in the comments below.
August 26, 2025
How to Gain Confidence by Calculating Your Coast FIRE Number
Have you ever wondered if you really need to keep saving for retirement?

Believe it or not, you may be closer than you think to achieving your retirement goals.

That’s a very powerful realization.

Think about the options you can create for yourself if you no longer need to save a hefty chunk of your paycheck for retirement.

We recently explored some of these options while talking about the money mindset hack known as Coast FIRE.

Today, we’ll look at some specific examples of how to calculate your Coast FIRE number so you can see how you stack up.

By calculating your Coast FIRE number, you may just find that you have more options than you ever thought possible.

Let’s explore.

What is Coast FIRE?

Coast FIRE is a subset of FIRE for people who are not necessarily trying to retire early.

Instead, the idea is to aggressively fund your retirement accounts early on so you have more options as your career progresses.

The reason you’ll have options is because once you hit your projected magic retirement number, you no longer need to fund your retirement accounts.

You can sit back and let compound interest do its thing. Your retirement years are covered.

With retirement covered, you don’t need to earn as much money. You can focus more attention on your present-day self. That might mean working less hours or working the same amount but in a different job.

This is the essence of Coast FIRE: knock out retirement planning early on to create more career flexibility later.

Coast FIRE does not mean complete financial independence.

When you reach Coast FIRE, you are not financially independent because you still need money coming in to fund your current lifestyle.

But, you need less money because you no longer need to save for the important goal of retirement. That means you have earned some financial freedom, but not complete freedom.

That’s OK.

Remember, the part that separates Coast FIRE from traditional FIRE is that early retirement is not the goal.

Instead, Coast FIRE means continuing to work until normal retirement age (like age 65) but having more freedom in what you do for work.

To put a bow on it: the main money mindset benefit of Coast FIRE is that you have options once you’ve already put away enough money for retirement.

With retirement taken care of, you can:
1. Switch to a lower paying job or lower stress job.
2. Become a stay-at-home parent and live off of one spouse’s income.
3. Start a business.
4. Grow your side hustle.
5. Take some time off to think about what you want to do next.
With Coast FIRE, each of these options feels safer because you’ve already fully funded your retirement.

Your Coast FIRE number is not the same as your FI number.

As we’ll explore below, your Coast FIRE number is different from your FI number (what I sometimes refer to as your magic retirement number).

Your Coast FIRE number is the amount you need saved up today to stop saving anymore for a traditional retirement. You still need to earn money to fund your current lifestyle.

Your FI number is the amount you need saved up today to retire and live completely off your investments for the rest of your life.

You’ll see below that your Coast FIRE number is usually significantly lower than your FI number.

This is especially true the further away you are from traditional retirement age. That’s because you have a longer time horizon for compound interest to do its thing.

In fact, the reason Coast FIRE is such a powerful money mindset hack is because the Coast FIRE number seems much more attainable.

This of it like this: have you ever felt that it seems impossible to save millions of dollars for retirement?

The truth is you don’t have to come up with all that money on your own. Your job is to aggressively seed your retirement accounts early on so compound interest can do the heavy lifting.

By funding your retirement accounts early in your career, you don’t need millions of dollars. You actually need way less.

Calculating your Coast FIRE number will drive this point home.

Photo by Courtnie Tosana on Unsplash

How do I calculate my Coast FIRE number?

There are some great online calculators available to figure out your Coast FIRE number.

You simply plug in a few variables, like your current age, desired retirement age, and anticipated spending in retirement. It couldn’t be easier.

The Fioneers and WalletBurst each have easy-to-use calculators that I recommend. There are plenty of others, but these two are simple to use.

What’s nice about each calculator is that you can play around with the inputs to explore various scenarios. You can also see how your Coast FIRE number is significantly lower than your FI number.

The WalletBurst calculator has a helpful graph for visualizing your progress towards Coast FIRE.

The Fioneers calculator has a nice feature where you can input other sources of passive income, like income from a rental property.

As we know, adding just one rental property to your investment portfolio can massively shrink your magic retirement number and accelerate your journey to financial freedom.

If you’re thinking about rental property investing to supplement your retirement income, check out my recent post:

Shrink Your Magic Retirement Number With One Rental Property

Note: The Fioneers’ calculator is a Google Sheet you can download, but you need to enter your email address first. You do not need to enter an email address to use the WalletBurst calculator.

Using these calculators, let’s take a look at a few examples.

Let’s explore three different scenarios where knowing your Coast FIRE number can be very useful:
1. Clarke is 35-years-old and ready for a new job.
2. David is 40-years-old and worried about paying for college.
3. Dorothy is 28-years-old and just paid off her student loans.
In each of these examples, we’ll assume a standard retirement age of 65 and an annual rate of return of 10% (on par with the historical results of the S&P 500).

We’ll also factor in a 3% inflation rate (the historical average in the United States).

Finally, we’ll assume a safe withdrawal rate of 4.7% in light of the updated “4% Rule.”

In case you missed it, 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%.

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

Let’s dive in.

Coast FIRE Example 1: Clarke is 35-years-old and ready for a new job.

Clarke is 35-years-old and is ready for a career change.

His job at a prestigious law firm has taught him a lot and he’s made good money. But, the stress and the hours are starting to take a toll on his personal life and on his health.

He’s ready to pivot.

Because he was making good money, Clarke maxed out his 401(k) retirement plan for the past 8 years. He now has $400,000 saved up. He also currently adds $5,000 to his various retirement accounts each month.

His goal is to have $200,000 annually to spend in retirement.

Based on the above variables, Clarke’s Coast FIRE number is $559,009.

At his current saving rate, he will reach Coast FIRE in three years. That means that at the age of 38, he will no longer need to fund his retirement.

He could then pursue a lower paying, lower stress job without sacrificing his retirement years.

Note: Clarke’s FI number (magic retirement number) is significantly higher: $4,255,319.

That’s a big number and can seem intimidating. His Coast FIRE number is more encouraging to think about.

Yes, he’ll have to keep working to fund his current lifestyle. But, he can choose to work a lot less.

What if three years still seems too far away for Clarke?

Using the Coast FIRE calculator, Clarke learns that if he ups his retirement contributions from $5,000 per month to $8,000 per month, he will achieve Coast FIRE in two years.

That’s powerful information. If he boosts his saving rate even more, he can pivot even faster.

Armed with the knowledge of his Coast FIRE number, Clarke has a newfound motivation to stick it out at his current job for just a bit longer.

Photo by Jan Tielens on Unsplash

Coast FIRE Example 2: David is 40-years-old and worried about paying for college.

David had a kid about a year ago and is freaking out about paying for college. He knows that it’s important to prioritize his own retirement before prioritizing his kid’s college.

David has $300,000 saved for retirement. His goal is to spend $150,000 annually in retirement. He currently has $6,000 available to invest each month, whether that’s for retirement or college.

Let’s help David out by using the Coast FIRE calculator.

Plugging in these variables, we see that David’s Coast FIRE number is $588,029.

Notice how David’s Coast FIRE number is higher than Clarke’s, even though he plans to spend less in retirement. That’s because he has a shorter time horizon and less currently saved.

This is another reminder to start investing early and often.

Even so, David is in great shape for retirement. At his current pace, David is 5 years away from reaching Coast FIRE. His daughter will only be six-years-old at that point.

That means that David will still have 12 years to prioritize saving for his daughter’s college, all while knowing that his retirement is covered.

This knowledge makes David feel much better. He’s no longer worried about paying for his daughter’s college at the expense of saving for retirement.

Coast FIRE Example 3: Dorothy is 28-years-old and just paid off her student loans.

Dorothy is 28-years-old and is in the early stage of her career as a lobbyist in Washington D.C. She lives with 3 roommates outside of town and keeps her expenses very low.

Dorothy has her whole life ahead of her so hasn’t thought too much about the specifics of retirement.

But, she knows enough to think and talk money with her friends and family every once in a while.

In one of these conversations, she learned about Coast FIRE and was interested in calculating what her number is. Dorothy thought about how amazing it would be to pursue a life on her own terms without worrying about retirement.

Dorothy just finished paying off her student loans. Because she was focused on her loans, she currently has only $10,000 saved for retirement.

She now plans to roll the $5,000 per month she had been using for loan payments into her retirement account.

Because she was so far away from retirement, Dorothy thought it was best to error on the side of caution with her annual spending projections.

So, Dorothy estimated that she would need $250,000 annually in retirement, much more than both Clarke and David figured.

Based on the above, Dorothy’s Coast FIRE number is $435,153. She can achieve Coast FIRE by the age of 38!

Dorothy’s Coast FIRE number is significantly lower than Clarke’s and David’s, even though she plans to spend way more in retirement.

Of course, this is because she is getting started so early.

Knowing that she can fund her entire retirement in just 10 years, Dorothy makes it a priority to do so.

By the age of 38, she will be free to pursue any line of work she chooses without needing another dollar to fund her seemingly extravagant retirement.

That makes Dorothy very happy.

Use a Coast FIRE calculator to figure out your own number.

The above examples show how knowing your Coast FIRE number can be so liberating.

When you calculate how much you’ll need to retire, you may be surprised at how close you actually are.

If you’ve been avoiding making big life decisions because of anxiety about retirement, knowing your Coast FIRE number can be a huge help.

Clarke, David and Dorothy calculated their Coast FIRE numbers and were able to come up with manageable plans.

Each person is on track for a desirable retirement, all while creating options for themselves earlier in life.

Having options is a great thing.

Have you calculated your Coast FIRE number?

Were you surprised how close you actually are to achieving your retirement goals?

Let us know in the comments below.
August 24, 2025
Shrink Your Magic Retirement Number With One Rental Property
“Wait- how much do I need to save for retirement!?”

Have you ever felt that way after learning how much money you think you need to retire?

I’ve certainly felt that way in the past.

The prospect of saving millions of dollars in order to retire can seem impossible, especially when you’re just starting out.

You may have even wondered, “How do people even come up with these retirement numbers?”

The most common answer to that question is the “4% Rule.”

Using the 4% Rule, you can calculate your magic retirement number and determine how much money you need to save for retirement to maintain your current lifestyle.

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.

Today, we’ll take it one step further.

Let’s explore how owning even a single rental property can further reduce the amount you need to save for retirement.

The results may shock you- in a good way.

@thinkandtalkmoney
4% rule plus a rental property=chef’s kiss for retirement #thinkandtalkmoney #rentalproperty #retirementplanning #4percentrule
♬ original sound – Thinkandtalkmoney

How to use the 4% Rule to forecast your magic retirement number.

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

In some fun news, Bill Bengen, creator of the 4% Rule, just released a new book showing that it’s safe to increase your withdrawal rate in retirement from 4% to 4.7%.

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.

Bengen’s research is significant because it means you can safely retire with even less money. That’s because the higher your safe withdrawal rate, the less you need squirreled away to maintain your lifestyle.

In light of Bengen’s updated research, we’ll use 4.7% as our safe withdrawal rate.

Let’s say that 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 .047.

Current Spending / 4.7% (.047) = Magic Retirement Number

$120,000 / .047 =$2,553,191.49

Based on the updated 4.7% Rule, you need $2.55 million to maintain your current lifestyle in retirement.

By the way, under the original 4% Rule, you would need $3 million in investments ($120,000 / .04 = $3,000,000.00).

See why people are excited about the updated 4.7% Rule?

Does saving $2.55 million for retirement seem like an impossible task?

Saving $2.55 million for retirement may seem like an impossible task.

If that’s your initial reaction, be sure to check out my ongoing series on investing. We cover everything you need to know to start investing with confidence.

You may be surprised to learn that If you start investing early and often, reaching $2.55 million is actually not that hard.

Even so, there’s another way to massively shrink your magic retirement number: owning rental properties.

Why would anyone want to own rental properties?

There are four main reasons why I invest in rental properties:
When these benefits combine, real estate investors can generate significant wealth over the long run.

Photo by Jay on Unsplash

Before we look at an example of how owning rental properties shrinks your magic retirement number, here’s a quick breakdown of each of the four main benefits.

For a more detailed description of each benefit, you can read my series on investing in real estate here.

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.

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.

3. 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.

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.

4. Real estate investors earn massive taxes benefits.

When you earn rental income, you must report this income on your tax return. Rental income is treated the same as ordinary income.

However, the major difference between rental income and W-2 income is that there are a number of completely legal ways to deduct certain expenses from your rental income.

Common rental property expenses may include mortgage interest, property tax, operating expenses, depreciation, and repairs. We’ll touch on a few of these deductions below.

With all of these available deductions, the end result is that most savvy real estate investors pay little, or nothing, in taxes on their rental income each year.

Yes, you read that right.

I’ll say it again, just to be clear:

Most savvy real estate investors legally pay nothing in taxes on their rental income each year.

With these benefits in mind, let’s see what happens when we add a single rental property to your portfolio.

How owning a single rental property lowers your magic retirement number.

Let’s continue our example from above where your current lifestyle costs $120,000 per year. We learned that means your magic retirement number is $2.55 million based on the 4.7% Rule.

Now, let’s add a single rental property into the mix.

Let’s assume that you own a rental property that cash flows $2,000 per month. That’s a total of $24,000 per year.

Remember, your cash flow is the profit remaining after paying your mortgage, taxes, insurance, and any other costs.

To learn how to properly run the numbers on a potential rental property, click here.

With $24,000 per year generated by your rental property, you don’t need your investment portfolio to fund your entire $120,000 lifestyle.

Instead, your investments only need to generate $96,000 per year ($120,000 – $24,000 =$96,000).

So, let’s plug $96,000 into our magic retirement number formula:

Current Spending / 4.7% (.047) = Magic Retirement Number

$96,000 / (.047)=$2,042,553.19

By adding a single rental property to your portfolio, you’ve lowered your magic retirement number by half a million dollars!

You now only need $2.04 million to maintain your current lifestyle in retirement.

Photo by Mathew Schwartz on Unsplash

What happens to your magic retirement number if you pay off your mortgage?

This example shows how your magic retirement number drastically shrinks with the addition of just a single rental property.

Keep in mind that in this example, we assumed that you have a mortgage on your rental property. That mortgage obviously reduces your cash flow.

But, what if you paid off that mortgage before you retired?

Let’s finish our example by assuming that you have a 30-year fixed rate mortgage and your payment is $3,500 per month. And, you make it a goal to pay off that mortgage before you retire.

Once the mortgage is paid off, you can add that $3,500 to your monthly cash flow.

That increases your monthly cash flow on this property from $2,000 to $5,500. Annually, that’s $66,000 in cash flow.

Continuing our example, you now only need your investment portfolio to generate $54,000 per year ($120,000 – $66,000 =$54,000).

Look what happens when we plug $54,000 into our magic retirement number formula:

Current Spending / 4.7% (.047) = Magic Retirement Number

$54,000 / .047 =$1,148,936.17

By paying off the mortgage on this single property, you’ve now reduced your magic retirement number by $1.4 million dollars!

You now only need $1.15 million to fund your current lifestyle in retirement.

Have you considered adding a rental property to your overall investment portfolio?

The point of this post is to show you how owning even a single rental property can reduce your magic retirement number.

Think about what would happen if you owned two rental properties. Or, what about three rental properties?

If you can handle the job of being a landlord- which I’m betting is easier than your job as a lawyer or consultant or doctor- owning rental properties is a great way to accelerate your journey to financial freedom.

After seeing the math, you may want to consider adding a rental property (or two) to your overall investment portfolio.

Are you intimidated by the thought of saving enough for retirement?

Have you done the math with the 4.7% Rule to see how much you really need?

Have you considered adding a rental property to your portfolio to shrink you magic retirement number?

Let us know in the comments below.
August 19, 2025
Dreaming About Rental Properties but Ignoring Money Mindset?
Do you dream about owning rental properties so you can generate semi-passive income while spending more time with your family?

I want to hear about those dreams. What would you do with that time?

Travel?

Exercise?

Read?

It’s so motivating for me to learn what you would do with that kind of freedom.

At the same time, it’s my job to remind you to not ignore key personal finance fundamentals while you’re dreaming about the future.

When it comes to buying rental properties, this is especially true.

Let me explain.

If you’ve been keeping up with the blog, we’ve now learned how to run the numbers on potential real estate deals.

In fact, I showed you that the analysis is not actually that hard. Your job is simply to account for the fixed costs and make informed predictions for the speculative costs.

Then, we did the math together on an actual property in my target zone. By using a real example in Chicago, my goal was to further convince you that running the numbers should be easy.

Finally, we talked about how to evaluate a rental property when the initial math looks bad. The truth is most rental properties are not going to immediately look like great investments. It’s our job as investors to negotiate and look for potential.

By this point, you may be thinking that buying a rental property sounds great, except for one big problem:

How are you supposed to come up with the money for a downpayment?

Great question.

It’s such a great question that it requires us to take a step back.

Before evaluating rental properties, you need to evaluate your personal finances.

It’s no secret that in order to buy a rental property, you first need available money for the downpayment.

Unless you plan on taking on partners or getting the money from family, coming up with a sufficient downpayment is a major challenge.

Yes, there are loan options available that require a smaller downpayment. We’ll soon talk about some of those options. I’ve used loans like this in the past.

Still, a “smaller downpayment” does not mean “no downpayment.”

So, how can you come up with a downpayment?

For a downpayment, you need to have available money.

To have available money, you need a budget that actually works.

To have a budget that actually works, you need honest, powerful life goals.

Does this sound familiar?

It all comes back to money mindset.

When was the last time you checked in on your money mindset?

If you take a look at the Think and Talk Money homepage, you’ll see six main category tabs across the top of the page:
- Money Mindset
- Budgeting
- Debt
- Credit
- Investing
- Real Estate
Each one of these categories builds upon the previous categories.

It all starts with money mindset.

A strong money mindset is the foundation of the personal finance journey. Maintaining a strong money mindset requires constant and intentional thought.

Photo by Pietro De Grandi on Unsplash

I revisit my money mindset every week by taking a quick look at my Tiara Goals for Financial Freedom.

It may seem overly simplistic, but money mindset is what separates people who reach financial freedom from those who struggle to get ahead in life.

Don’t believe me?

Budgeting is really not that hard. We all understand the basic concept: spend less money than you earn. Still, most of us can’t do it.

The same applies to debt and credit. We all know to avoid debt. We know to use credit responsibly. So, why don’t we do it?

Investing can seem complicated at first. Is it really that hard? Entire books and websites have been created to show you how to create massive wealth through simple index funds.

What about buying rental properties? We did the math together. Analyzing deals is not that hard. The impediment for most people is coming up with the money for a downpayment.

You may be in a similar boat right now. You want to buy a rental property but you’re discouraged because you don’t have the downpayment saved up.

It’s not just about how much money you make.

Buying rental properties is not just about how much money you make. Plenty of lawyers and professionals make a lot of money and struggle to come up with any excess money to invest.

Sadly, the struggles don’t just relate to coming up with money for investments.

Lawyers as a profession have long struggled with mental health issues. I first learned about these challenges during law school orientation. Today, I see it in practice.

Being a lawyer is a hard way to make a living. When you work as a lawyer, the hours are intense and stress levels are consistently high.

In 2023, the Washington Post analyzed data from the U.S. Bureau of Labor to determine what the most stressful jobs are. The study confirmed that lawyers are the most stressed.

Of course, lawyers are not alone in struggling in this regard due to long, stressful hours.

The same study showed that people working in the finance and insurance industries were right up there with lawyers as being highly stressed.

Well, what can we do about it?

How can we address these struggles?

Where can we find money for a downpayment?

I have some thoughts.

How motivated are you to truly get ahead in life?

Are you truly motivated to get ahead in life?

Have you worked on your money mindset and found the motivation to actually create a budget that generates savings?

If you’ve successfully created a budget and still need to generate more fuel, have you thought about a side hustle?

When I mention side hustle, is your initial reaction that you’re too busy or important?

Some lawyers and professionals reading this won’t even allow themselves to consider a side hustle. They automatically think, “I’m way too skilled or busy to even think about another job.”

In my personal finance class, we spend a lot of time challenging that notion.

Very few people- and I mean very few- are too important or too busy to take on a side hustle.

For most of us, it’s an excuse.

You may think you’re one of those “too important” people.

I would challenge you to assess whether you’re confusing “too important” with “too stressed” or “too tired” or “too cool.”

Is continuing to worry about money really better than spending a few hours a week earning extra money doing something you love?

Setting that conversation aside, the ideal side hustle is something you enjoy doing that can earn you extra money at the same time.

Some examples of side hustles my students have come up with in class include:
- Bartending. Entice your friends to come to your bar by offering cheap drinks. You get to hang out with them and get paid at the same time.
- Fitness instructor. Instead of paying $48 for the spin class you love, become the instructor and get paid to lead the class.
- Dog Walker. If you love dogs and don’t currently have one of your own, what better way to fill that void in your life while making money. The same applies to babysitting.
- Home Baker. Make homemade treats with your kids and sell them to parents who don’t have the time.
How about this idea for aspiring real estate investors: part-time property manager?

My wife and I recently needed some help with apartment showings. We reached out to one of our favorite young people in the world to see if she’d be interested.

A chance to make some money on the side and learn a new skill?

She jumped on board without hesitation.

We’ve known her for years and were not the least bit surprised. She’s exactly the type of person who will no doubt be successful in whatever she chooses to do.

There is always a way to make more money.

The point is there are always ways to make more money by doing things you like to do anyways. Even if you’re busy. You just have to exert some mental energy to figure out how.

Then, when you make that extra money, put it to work for you. Make all your hustle worth it.

At that point, we can talk about investing or buying real estate.

Unfortunately, most people don’t want to go through this process.

Photo by Timo Stern on Unsplash

Too many lawyers and professionals come to me and primarily want to talk about investing or buying real estate.

They want to skip the foundation and jump right to the more exciting stuff.

Most of the time, these are people who have never kept a budget. Or, they have massive student loan debt with no real plan to pay it off. Maybe they have a good W-2 job but no other sources of income.

When I start exploring their situations with them, it’s clear they haven’t thought much about the personal finance building blocks.

When they mention how hard it is to save for a downpayment, they haven’t considered looking for a new job that pays more or starting a side hustle.

Before jumping right to owning rental properties, these are the personal finance obstacles that need to be addressed.

If this sounds like the situation you are in, your ongoing mission is to generate more cash to fuel investments.

The fun part is once you’ve discovered your motivations and established strong habits, you will consistently have money available so you can invest month after month for the rest of your life.

My wife and I would not own five properties today if we didn’t first learn personal money wellness.

My wife and I would not own five properties (11 rental units) today if we had not first learned money wellness fundamentals.

I don’t just mean we wouldn’t have had money available to invest, although that is certainly true.

I also mean we wouldn’t have the skills and knowledge to successfully run our real estate business.

If you’ve ever wanted to be a business owner or investor, working on personal finance skills now is critical.

Robert Kiyosaki put it best in Rich Dad Poor Dad, “It’s not how much money you make. It’s how much money you keep.”

If you knew someone that made $1,000,000 per year, and at the end of the year, had only invested $20,000, what would your reaction be?

What if you knew someone who made $100,000 per year and invested $20,000? Did your reaction change?

How often do you think about your money mindset?

Do you tend to think more about the “fun stuff” (investing, real estate) than the fundamentals (money mindset, budgeting, debt, etc.)?

Let us know about your money mindset in the comments below.
August 5, 2025
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.

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:

A mind blowing stat:

Jerry Buss bought the Lakers for $67M in 1979, and just exited for 149 times his money at $10B in 2025

Sounds like a lot, right?

That is somehow less than he would have made simply indexing the S&P 500 over that time period ($13B)
— Ankur Nagpal (@ankurnagpal) June 19, 2025

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.
- Have you read The Simple Path to Wealth?
- Are you convinced that investing can be both simple and effective?
Let us know in the comments below.
June 20, 2025
How to Prioritize Investment Account Types While in Debt
Recently, we’ve been talking about some tricky money questions related to investing.

We first looked at whether it makes sense to invest while you’re in debt.

We then looked at whether to prioritize investing for retirement or for your kid’s college.

These are questions that commonly come up when I’m teaching law students and young lawyers. Of course, these questions are best answered when we consider both the emotions and the math of money.

Today, we’ll look at a third question that comes up regularly:

How should you prioritize certain investment account types, especially if you’re still paying off debt?

@thinkandtalkmoney
Airport walks ✈️💭 401k? Roth IRA? Savings? Debt? Don’t know how to prioritize where to put your money first? I break it down here: https://thinkandtalkmoney.com/how-to-prioritize-investment-account-types-while-in-debt/ #thinkandtalkmoney #401k #rothira #savings #debt #financialfreedom
♬ original sound – Thinkandtalkmoney

This is another great question.

If you’re wondering what I mean by different investment account types, you can read about my four favorite account types here.

Below are my thoughts on how I would choose between different investment account types while paying off debt.

Let me know if you agree or would prioritize a different order in the comments below.

1. Invest just enough to qualify for your employer match.

Your first goal should be to invest enough in your 401(k) plan to qualify for the employer match.

Many employers today offer a match to incentive employees to contribute to their 401(k) plans. To qualify for the match, you must be participating in your company’s plan and make contributions yourself.

The match is usually a percentage of your overall salary, usually between 3% and 6%.

For example, let’s say your salary is $100,000 and your employer offers to match your contributions up to 5% of your salary.

That means if you contribute $5,000 (5% of your salary), your employer will contribute an additional $5,000 (5% match) to your account.

In other words, your $5,000 automatically turns into $10,000.

Think about that for a moment.

That’s a guaranteed 100% return on your contribution. You put in $5,000 and you automatically get another $5,000. You won’t find a guaranteed return like that anywhere else.

That’s why if your company offers a match, it’s a no-brainer to take advantage of that match.

For this reason, an employer match is often described as “free money.”

I don’t like the term “free money” because it implies that you have not earned that money as an employee for your company. I prefer to refer to the company match as a bonus you’ve rightfully earned.

The key is to accept that earned bonus by ensuring you are meeting the minimum requirements to qualify.

Whether you think of it as free money or as a bonus you’ve earned, make sure you contribute enough to your 401(k) plan to qualify for the employer match.

2. Pay off all credit card debt.

After you hit the employer match, and before you think about further investments, you should pay off all credit card debt.

Note that credit card debt is in a category of its own because of the extremely high interest rates that accompany credit cards.

Currently, the average credit card interest rate is 20.12%.

The S&P 500 has historically averaged a 10% annual return.

That gap is so large that it’s a good idea to pay off your credit card debt before turning to further investments.

Think about it like this: with credit card debt, you are guaranteed to pay a penalty of around 20% until you pay off that debt. When investing, you can reasonably hope to earn around 10% interest.

Because the penalty you’re paying is twice the rate you’re hoping to earn, the smart move is to eliminate that penalty.

For help on paying off your credit card debt, check out my top 10 tips here.

Why not pay off your credit card debt entirely before investing in your 401(k)?

You may be wondering why I recommend qualifying for your employer match before paying off credit card.

Even with such high credit card interest rates, there’s a good reason to prioritize qualifying for your employer match. We touched on that reason above.

Let’s revisit our example. With an employer match, if you contribute $5,000, your employer will also contribute $5,000.

As we said, that’s like earning a 100% guaranteed return on your money. A 100% guaranteed return is too good to pass up.

No other reasonable investment option offers a 100% guaranteed rate of return. You can’t even reasonably hope to match the 20% penalty that credit card companies charge.

That’s why eliminating your credit card debt should be your next priority after receiving your employer match.

3. Allocate 75% of available funds to other loans and 25% to investments.

Once you have paid off your credit card debt, I recommend putting 75% of your available funds to loans and 25% to other investments.

When I say loans, I am referring to student loans, personal loans, lines of credit, and HELOCs. Note, I am not referring to primary mortgage debt.

It’s not uncommon for law students to have hundreds of thousands of dollars in debt. The same is true for students in medical school and business school.

It’s not just people with student loan debt who face this question. As one example, perhaps you’ve used a HELOC to buy investment property, like I have.

There’s a reason credit card debt is in a separate category from other loans, like student loans and HELOCs.

Unlike credit card debt, student loan debt and HELOC debt typically come with lower interest rates.

The current lowest federal student loan interest rate is 6.53%.

The current average HELOC interest rate is 8.27%.

Your loans may have even lower interest rates. Regardless, the odds are that your interest rate is below the historical 10% average annual return of the S&P 500.

While it’s never a bad idea to eliminate debt, there are some good reasons why you should invest even though you’re in debt.

We explored these reasons and why I recommend a 75/25 ratio in my recent post on investing while in debt:

A Tricky Money Question: Should You Invest While in Debt?

If you’re on board with investing while paying off debt, the question becomes: where should you invest that money?

That brings us to my next suggestion.

4. Max out your 401(k) plan.

Once you reach this step, you should have no credit card debt. You should also be applying either the 75/25 ratio to invest while you’re in debt, or have no other debt to pay off.

At this point, I suggest maxing out your 401(k) with your remaining available funds.

The reason I suggest maxing out your 401(k) is because these contributions are made with pre-tax dollars. In other words, you get a tax break today by investing in your 401(k).

To put it another way, you will save money on taxes every year you contribute to your 401(k) plan.

Don’t sleep on the impact of taxes on our money decisions. Over the long term, taxes can be hard to predict, but they should not be ignored.

Photo by Ch_pski on Unsplash

Nobody really knows what taxes are going to be like in the future. Yes, it’s a safe assumption that taxes will keep going up.

But, taxes have always been complicated. I’m guessing they will always be complicated. Even if taxes generally go up, there’s no telling the exact impact taxes will have on your personal situation.

That’s why I prefer to take the guaranteed tax savings now. I’m ok with the possibility of paying more in taxes decades from now. That’s especially true because I have plenty of good uses for those tax savings right now.

That’s why I recommend maxing out your 401(k) before moving on to my final suggestion.

5. Max out your HSA, Roth IRA and 529 plan.

Once you reach this step, you’re in great shape. Reaching this point means you have maxed out your 401(k) plan, which means you’re receiving an employer match.

It means you have no credit card debt. On top of that, you are paying down your other loans with a 75/25 ratio or have eliminated those loans entirely.

Now, you have options. You’ve earned the right to choose the best investment account type for your situation.

Besides a 401(k), my other favorite account types are a Roth IRA, a Health Savings Account (HSA), and a 529 account.

You can read all about my favorite investment account types in this recent post:

My 4 Favorite Investment Accounts for Long-term Wealth

Depending on your income, a Roth IRA may be the best account type for additional retirement savings.

If you’re healthy and can cover certain medical expenses, maybe you would benefit from an HSA.

Have kids and worried about paying for college? Maybe a 529 plan is right for you.

The point is you’ve earned the right to pick the best investment accounts for your present situation.

You really can’t go wrong with any of these choices.

What do you think of this plan to prioritize certain investment accounts while in debt?

What do you think about this plan to prioritize certain investment account types, especially if you’re still paying off debt?

Let us know in the comments below.

If you’ve already made it to step 5 and are looking for help with what to do next, the truth is that you have too many options to cover in this post.

To help you start thinking about your choices, you could:
- Invest in a traditional brokerage account;
- Invest in real estate; or
- Pay down your primary mortgage.
If you’ve already made it to step 5, reach out and I’d be happy to help you think and talk about your options.

The best way to reach me is to sign up for my weekly email and reply to any email.
June 5, 2025
How to Think About Investing for Retirement and College
We recently talked about the tricky question of whether you should invest while you’re in debt.

It’s a choice many people struggle with because we know debt can be bad and investing can be good.

The desire to tackle both goals raises the question: should we focus on eliminating the bad thing or doing more of the good thing?

In that post, we explored the four main reasons why I think it’s a good idea to invest while in debt. You can read more here.

Today, we’ll talk about another challenging question that many of us face:

Should we prioritize investing for retirement or investing for our children’s college?

Like the question of whether to invest while in debt, this question presents a difficult choice because two things are true at once:

Investing for retirement is a good thing.

Helping our kids is a good thing.

So, what should we do?

This is a question I think about a lot now that I have three young kids.

There are powerful emotional reasons on both sides of the question. And while money decisions are certainly emotional, using simple math can help you choose the right balance between retirement and college.

Let’s start by looking at some of the emotional reasons and then explore how simple math can help us with this difficult choice.

As a parent, I want to help my kids as much as I can.

On the one hand, as a parent, I want to help my kids as much as I can. College is expensive and is only getting more expensive.

I have personally felt the heavy burden of debt. It’s not a good feeling. If I can help my children avoid that feeling by paying for college, I will.

I want to be free to retire on my terms.

On the other hand, I want to be free to retire on my terms. To do so, I know that I need to start investing early and often. Just like college is expensive, retirement can also be very expensive.

I don’t want to be in a position where I’m forced to work longer than I otherwise would because I don’t have enough saved up.

If I skip out on investing for retirement to pay for college, I may end up in that situation.

With powerful emotions on both sides of the question, is it possible to come up with a plan that helps accomplish both goals?

Yes, I think we can. In this instance, it helps to remember that money decisions are both emotional and mathematical.

Let’s revisit some of the math we’ve previously looked at to help us get closer to a decision.

What does the math say about paying for college?

We took a deep dive into saving for college in my post on using 529 plans for sky high college costs.

While nobody can say for certain how much college will cost or how your investments will perform, you can make reasonable estimates and use an online calculator to help form your strategy.

I like the calculator available on Illinois Bright Start 529 website. What’s nice about this website is you can look up the future estimated cost of attending specific schools around the country.

I also like using calculator.net. They have a College Cost Calculator where you can see how much college costs on average today and how much it is estimated to cost when your child starts college.

Whatever online calculator you use, you’ll have to make some assumptions when you start plugging in numbers, like an investment return rate.

The S&P 500 has historically provided a 10% average annual return. So, 10% seems like a reasonable return rate to me for your estimations.

Besides the estimated return rate, you’ll also need to account for the rising costs of college. Most of the online calculators recommend you assume the cost of college will increase by 5% each year. That also sounds reasonable to me.

Photo by MD Duran on Unsplash

With these assumptions in mind, let’s look at an example using a current kindergarten student.

Since I live in the Chicago-area, we’ll assume in this example that the kindergarten student is going to the largest in-state college, the University of Illinois Urbana-Champaign (U of I).

Illinois’ Bright Start 529 calculator estimates that the cost of a current kindergarten student attending U of I will be $264,735.

Assuming you don’t have any current savings and you estimate a 10% annual rate of return, the Bright Start 529 calculator indicates you should save $10,796 per year.

That comes out to $900 per month.

By doing the math, you now have a reasonable estimate as to how much you should be saving for college.

You do not have to rely exclusively on long-term savings to pay for college.

If $900 per month seems like a lot of money, keep in mind that you don’t have to depend exclusively on these savings to pay for college.

There are two key reasons for that:

1. Your child can take out student loans.

While it may not be your plan right now, don’t forget that your child always has the option of using student loans to help pay for college. Your child may also earn scholarships or qualify for other financial assistance.

On top of that, there are hundreds of good colleges at varying price points around the globe. It is not the end of the world if your child ends up going to a lower-ranked but less expensive school.

The bottom line is that there are options when it comes to paying for college. It is not exclusively up to your savings to ensure your child gets a good college education.

In other words, don’t convince yourself that your student will be prohibited from attending college if you don’t save enough right now.

2. You will likely still be earning income when your child starts school.

Besides the availability of other options to pay for college, also keep in mind that you will likely still be working when your child starts school. There is no reason that you can’t use some of that income to help pay for school.

If you continue to make intentional, solid money decisions, you should have extra funds available in your budget when your kid starts college.

One way make sure that happens is to keep your expenses constant as your career progresses and you make more money. As an example, let’s say you bought a home while your kids were young. Of course, this is a common path for a lot of professionals who are starting a family.

If you stay in that home long-term, your housing costs should be relatively fixed. As you earn more money, instead of upgrading your home, you can use that excess money to help pay for college.

Once again, the point is that there are options to help your children pay for college even when your investments fall short.

Now, let’s look at the math to figure out how much we should be saving for retirement.

Just like we can use an online calculator to estimate the cost of college, we can also use a calculator to estimate how much we need to save for retirement.

We took a detailed look at how to do this in my post on figuring out your magic retirement number.

The key is to start with the 4% Rule,

The 4% Rule suggests that you can safely withdraw 4% of your investments each year and 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.

For simplicity, let’s say you have $1 million in your portfolio. According to the 4% Rule, you can safely withdraw $40,000 per year (4% of your portfolio) and not run out of money for 30 years.

Current Savings x 4% (.04) = Annual Retirement Spending

$1,000,000 x .04 =$40,000.00

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.

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.

Current Spending / 4% (.04) = Magic Retirement Number

$120,000 / .04 =$3,000,000.00.

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.

Now that you know you will need $3 million in retirement, you can figure out how much you need to be investing today to hit that number.

I like the calculator available on investor.gov for this part.

With this calculator, you can plug in your investment goal, initial investment, years until retirement, and interest rate to figure out how much you need to save each month.

Let’s continue our example assuming your magic retirement number is $3 million.

We will also assume that you currently have $100,000 saved for retirement and you plan to retire in 30 years. We’ll also use the same 10% annual rate of return we used before.

Based on these assumptions, you would need to save $635.82 each month to hit your magic retirement number of $3 million.

With this information, you can now plan accordingly to make sure you are saving enough for retirement each month before you start worrying about college.

Photo by Zach Betten on Unsplash

Aim to hit your monthly retirement target before saving for college.

By using these simple online calculators, you can estimate exactly how much you need to save for college and to save for retirement.

I recommend that you aim to hit your monthly retirement target first before funding your college savings accounts.

As we mentioned above, you and your child will have other options to help pay for college, like loans, scholarships, and concurrent income.

By contrast, these options are not readily available to fund your retirement. You’re more-or-less on your own to sustain yourself.

Think about it: by definition, retirement means ceasing to work. That means no income coming in besides your retirement savings. There are not any loans (at least reasonable ones) or scholarships to bail you out in retirement.

Sure, you could try to work part-time during retirement. But, that means you’re really only partially retired. Plus, it would be nice to have the choice to work in retirement because you want to work instead of being forced to do so.

It’s for these reasons why you should prioritize saving for retirement over saving for college.

In an ideal world, you can do both. If you control your expenses as your income grows, you give yourself the best chance to do both.

How are you balancing investing for retirement with investing for college?

While money decisions are certainly emotional, using simple math can help you choose the right balance between retirement and college.

My recommendation is to prioritize retirement over college because of the additional options available to help pay for college. You’re essentially on your own when it comes to retirement.

Once you’ve calculated your magic retirement number, you can then calculate exactly how much to save each month.

When you can comfortably hit that number, you can then figure out how much to be saving for college.
- Are you currently saving for retirement and for college?
- How do you balance doing both?
- Have you thought about other ways to help pay for college besides the options we discussed?
Let us know in the comments below.
June 3, 2025
Money on My Mind: Bears, Net Worth and Exercise
On my journey to financial freedom, I’m consistently striving to learn as much as I can from others who have done it before me.

This week, I read a few great blog posts from some of my favorite authors and bloggers.

Let’s take a look and see what we can learn together.

What to do in a bear market.

JL Collins recently posted about the big mistake that people make during bear markets. A bear market is when the stock market drops by 20%.

Collins is one of my favorite authors on investing. He just released the new edition to his best-selling book, The Simple Path to Wealth.

I highly recommend you pick up a copy if you are interested in learning the easy way to invest and grow your net worth.

You can read my full review of The Simple Path to Wealth in my post here.

Back to the question at hand:

As an investor, what should you do during a bear market?

Nothing!

Easier said than done, right?

Human instinct is to act. Our natural instinct tells us to do something when confronted with danger. We’ve all heard the saying, “fight or flight.” It’s our body’s way of protecting us from potential harm.

For example, if you encounter a bear in the woods, despite what survival experts may tell you, I’m betting you’re running for your life in the opposite direction.

That’s exactly what my wife and I did when we saw a black bear in Colorado a couple summers ago.

Even though we were at least 100 yards away when we saw the bear, and the bear was walking away from us, we ran in the opposite direction as fast as we could.

Survival experts, we are not.

If you zoom in (and squint), you can see the ferocious beast in this picture.

When it comes to investing, the saying should be modified to include a third option: “fight or flight or do nothing.”

And as JL points out, doing nothing is usually the best decision.

When the market drops, you have the chance to buy stocks at a discount. Whenever the market bounces back, you will benefit from all those discounted stocks you purchased.

Of course, nobody knows when the market will bounce back. For that matter, nobody knows when it’s going to drop, either. However, history has shown us that the market has always recovered.

What if the market doesn’t recover?

Then, we all have bigger problems to worry about than our money.

It may take a long time for the market to recover. That’s OK. When you invest early and often, time is on your side.

By combining time and the courage to do nothing, you will benefit immensely in the long run.

The Rise of Middle Class Multi-Millionaires

Another one of my favorite authors and bloggers, Financial Samurai, recently posted about the rise of middle class, multi-millionaires.

If you haven’t picked up a copy of his new book, Millionaire Milestones, I highly recommend it. I recently ranked it as one of my favorite money mindset books.

You can read my full review of Millionaire Milestones here.

In his post on middle class multi-millionaires, Financial Samurai raises a great point:

How come people are so enthralled by high incomes instead of high net worths?

Like me, have you wondered why people tend to be more interested in someone’s salary rather than his net worth?

I have one theory for why society continues to value income more than net worth: income can be more easily measured and more easily used for marketing purposes.

To put it another way: income is sexier than net worth.

One example I thought of: remember when you applied to college, grad school, law school, etc.?

Did you notice how schools commonly advertise the average or median income of their graduates. Schools love to show off that if you go to their school, you’ll make a certain amount of money upon graduating.

However, you’ll never see data on the net worth of its graduates.

Why is that?

Because an impressive net worths can take decades of discipline to manifest. That type of slow progress doesn’t make for sexy marketing for schools.

Plus, a top flight education may help you earn a high income but doesn’t guarantee a high net worth. Many high earners are also high spenders. You’d be surprised how many people are good at making money but not keeping it.

It’s up to each of us to turn that income into a high net worth. Again, that’s harder for schools to market.

If you are a personal finance enthusiast, you know to value net worth more than income. In fact, the most impressive feat of all is when you have a high net worth on just a standard income.

For my kids, I’d be way more impressed to see what schools crank out students with high net worths 20-30 years after graduation instead of the median income upon graduation.

To learn how and why to track your net worth, you can read my post here.

Does early retirement negatively impact your life expectancy?

I read a fascinating post on Early Retirement Now that looked at the potential consequences of someone’s life expectancy based on when that person retires.

There has been a lot of academic research done on the topic. Somewhat surprisingly, there are studies that indicate retiring early may negatively impact your life expectancy.

Check out the post on Early Retirement Now for a closer look at some of these studies.

I’m not too worried about the conclusions about life expectancy based on when someone retires. At best, there are conflicting studies on that question.

Rather, what I found most interesting about the post was that I’ve rarely thought about the potential health consequences about retiring early.

I regularly think about the mental side of retiring early. Specifically, how does someone keep his mind sharp in early retirement?

This is one of the main reasons I believe in FIPE not FIRE.

However, I’ve never really thought about the physical effects of retiring early.

Does retiring early negatively impact your physical health?

I may have mistakenly assumed that someone’s physical health would automatically peak in early retirement. I’ve based that assumption on the idea that you’ll have so much time to exercise and eat right when you don’t have to worry about a job.

In other words, if you’re not spending 50+ hours per week sitting at a desk, there would be no excuse to skip out on exercising regularly and preparing healthy meals at home.

This post has me thinking about other factors I’ve failed to consider.

For one, your body may trend towards lethargy if you’re not forced to wake up, get dressed and work 50+ hours per week. Plus, as much as people may not like commuting, at least it gets you out of the house and moving around.

My takeaway is that if you’re considering retiring early, be sure to plan ahead for physical activity as much as mental activity.

Your body may not want to exercise every day. You may need a motivational boost from group exercise classes or clubs. Maybe you’ll need a personal trainer or coach.

If you don’t currently have any hobbies tied to physical activity, I would suggest exploring different options before you leave full-time employment. It may take some time to find your groove with an activity or two that interests you.

Let us know what you think about these posts.

What do you think about these posts from popular personal finance writers?
- Are you brave enough to do nothing in the face of a bear?
- Have you been tricked into thinking a high income is more impressive than a high net worth?
- What are your thoughts about the physical side of retiring early?
Let us know in the comments below.
May 30, 2025
How to Think About Investing While in Debt
One of the most difficult money decisions people have to make is whether to invest while in debt. That’s because it can be challenging to plan for the future while worrying about past debts.

It’s also a tough decision because we know two things to be true at once:

Debt can be bad.

Investing can be good.

So, should we focus on eliminating the bad thing or doing more of the good thing?

You can see why it’s a tricky question.

The way I see it?

You don’t have to choose only one door to walk through.

You can invest while in debt.

I regularly get questions like this from law students who take my personal finance class. People just starting out in their careers are rightfully thinking about whether they should invest while paying off student loan debt.

It’s not uncommon for law students to have hundreds of thousands of dollars in debt. The same is true for students in medical school and business school. The question about investing or paying off debt makes perfect sense.

It’s not just people with student loan debt who face this question. Perhaps you’ve used a HELOC to buy investment property like I have. Maybe you have mortgage debt, medical debt, or consumer debt.

The choice to pay down debt or invest for the future is tricky.

Whatever the case may be, the choice to pay down debt faster or invest for the future is tricky.

For people feeling the heavy burden of debt, the idea of investing for some future goal can seem a little bit comical. I completely understand.

If you’re facing monthly debt payments for the next 10 years, you may not be ready to think about retirement 50 years from now.

Trust me, I get it.

I know firsthand how heavy debt can feel.

In my 20s, I had both student loan debt and credit card debt. It was not fun to carry that debt burden. I’ll never forget the incredible feeling of accomplishment when I paid off those debts. I felt so much lighter.

I now have HELOC debt that I’m focused on paying off. That HELOC debt stems from buying five properties in seven years. My real estate portfolio is now exactly where I want it to be, so I’ve shifted from acquisition mode to debt-reduction mode.

Just about every day, I think about how good it’s going to feel to have that HELOC debt paid off.

The point is: you don’t have to convince me why you may want to focus on paying off debt. I understand completely.

However, I think it’s worth considering the advantages of investing at the same time you’re paying off debt. You don’t have to go all-in on paying off debt or all-in on investing. You can strike a balance.

In today’s post, I’ll share my perspective to help you think about the right balance between debt reduction and investing.

Four main reasons to invest while in debt.

There are four main reasons to consider when thinking about whether you should invest even though you’re in debt. If you’re not investing at all because you’re focused on debt, these four reasons should give you something to think about.

Photo by Caleb Jones on Unsplash

1. Invest while in debt because of the emotions of money.

It feels good to see your investment accounts grow. This is especially true when you are accustomed to looking at huge debt balances on your laptop or phone screen.

Yes, it feels good to see those debt balances shrink. It also feels really good to see your investment accounts grow.

As a professional, you work hard for your money. You spend a lot of hours away from home so you can work and make a living. You deserve to experience the fruits of your labor.

When your career is stressing you out, it can be very uplifting to observe a growing investment account balance month-to-month.

2. Invest while in debt to develop the habit.

It’s important to get in the habit of investing as early as possible in your careers. Once you start investing, even if it’s only $25 per month, you are creating a habit. This is the type of habit that will pay off immensely in the long run.

Humans have a tendency to resist change. That’s why it’s difficult to break bad habits. This tendency also works in our favor when we have established good habits, like investing. We tend to just keep doing what we’ve always done.

When you’ve established the good habit of investing, it’s easy to increase your contributions as you earn more money. The same is true when you’ve eliminated all your debt. You can easily use the money you had been putting towards debt for your already-established investments.

That’s because your accounts will already be set up. All you need to do is increase your monthly investment contributions.

This makes it easier to solidify and benefit from the good habit you’ve cultivated.

3. Invest while in debt because of compound interest.

Compound interest is the most powerful force in all of personal finance. The earlier you start investing, the more benefit you’ll get from compound interest.

You can check out more about the power of compound interest in my post on investing early and often.

Even investing a small amount of money while paying off debt will lead to massive gains over the long term because of compound interest.

4. Invest while in debt because of the math.

Even though money decisions are closely connected to our emotions, the math of investing can be hard to ignore. If you prefer to make money decisions primarily based on the math, here’s what you can do.

We’ve talked before about how the S&P 500 has historically earned an average annual return of 10%. Of course, there’s no guarantee that you will earn 10% if you invest. You may earn less or you may earn more. Still, based on the historical data, it’s a reasonable estimate.

You can then compare that 10% return to the amount you’re paying in debt interest.

Photo by Towfiqu barbhuiya on Unsplash

For example, let’s say you have student loan debt. In this example, let’s also assume you’ve created an extra $200 in your monthly budget to allocate towards either debt or retirement.

You’ll next want to look up your current student loan interest rates. For illustration purposes, the current interest rate for undergraduate federal loans is 6.53%. The current interest rate for graduate and professional students is 8.08%.

Then, you can use an online calculator to help make your decision about whether to invest the $200 or put that money to debt.

If you put the money to debt, you’ll obviously pay off that debt faster. You can read more about how to easily do these calculations in my post on Debt Snowball vs. Avalanche.

Likewise, you can use an investment calculator to see how much that $200 will grow in an investment account over the long run. You can see how to do these calculations in my post on risk as the cost to invest.

Armed with the math, you can then make a decision that makes the most sense to you.

You may value getting out of debt faster. Or, you may be motivated by the larger balance in your retirement account.

It may come down to how high the interest rate is on your student loans. The higher your interest rate is, the more sense it makes to prioritize paying off that loan.

The point is that there are mathematical reasons to start investing even while paying off debt.

One final note about the math: your student loan interest rate is effectively locked in (unless you have a variable rate). On the other hand, your investment return rate is only a projection. That makes a difference.

It means that when you are in debt, you are guaranteed to be charged interest every month. In contrast, there are no guarantees you will make money when you invest. As you make your decisions, don’t ignore this key difference.

I prefer to allocate 75% to debt and 25% to investments.

When you consider these four main reasons, you may be convinced that it makes sense to invest even while paying off debt.

So, the obvious next question becomes: how much money should you put towards debt and how much should you invest?

The ratio that works for me is 75% towards debt and 25% towards investment goals. In other words, if I had $1,000 to allocate in my budget for debt and investments, I would use $750 for debt and $250 for investments.

I used this ratio when I had student loan debt and continue to use it to eliminate my HELOC debt.

You can read more about my primary goal of paying off HELOC debt in 2025 in my post on money and cheeseburgers:

Great Talk: Money and Cheeseburgers

This 75-25 ratio gives me the dual benefit of paying off my debt faster while also seeing my investment accounts grow over time. Once my debts are paid off, I will have already established the good habit of investing. In the meantime, I’m currently benefitting from compound interest and the math of investment returns.

The reason I lean more towards debt is because I don’t like the feeling of being weighed down by debt. It’s hard to feel completely free when you are carrying the burden of debt. That’s why I am currently prioritizing paying off HELOC debt.

That said, I’m not willing to entirely delay investing for the future. The 75-25 ratio is a good balance for me and helps me accomplish multiple goals.

75-25 has worked well for me. Having reached my 40s, I’m very happy that I did not neglect my investments entirely while dealing with debt.

Don’t agonize about finding the perfect ratio between debt and investments.

Whatever balance works for you, keep one important tip in mind:

Don’t agonize about finding the perfect balance between debt reduction and investing for the future.

Take a step back and think about it for a moment:

Paying off debt is great.

Investing for the future is also great.

If you’re doing both of these things in some fashion, you’re already making great money choices!

If you’re able to pay off debt and invest at the same time, you most likely have already created a successful Budget After Thinking. You have proven that you can stay disciplined enough to allocate funds to your Later Money goals each month.

You have already done the hardest part.

I consider this whole conversation of putting money towards debt or investments a win-win decision. There’s no reason to stress yourself out in search of the perfect balance. You’re already winning.

Find a balance between debt and investments that works for you and stick to it. You really can’t go wrong. Either way, you are making progress on your money goals.

Some day in the future your debt will be paid off.

The bottom line is, one way or the other, you are going to pay off your debt. That’s assuming you are a reasonably responsible person on a typical career trajectory.

If you have student loans, it might feel like you will never get out of debt. I assure you that you will.

To put it in perspective, if you are on a standard repayment plan, you’ll be debt-free in 10 years. For most students, that equates to being debt-free sometime in your 30s.

My guess is that by the time you retire, you won’t even remember how much debt you had or exactly when you paid it off. The only reason I remember when I paid off my debt is because I’ve been keeping a money journal since 2011.

On the other hand, towards the end of your career, you will very much be aware of how much money you have saved for retirement. You will be counting on that money to allow you to step away from full-time employment.

If you’ve figured out your magic retirement number, you’ll know how long you can sustain yourself on your retirement savings.

As hard as it is to do when you’re in debt, try and picture that older version of yourself who is nearing retirement. That older version of yourself will be very grateful that you had the discipline to start investing even while paying off debt.

That’s why I allocate 75% of my available funds to debt and 25% to investments. When my debt is gone, I’ll put the full 100% to investments.
- So, what do you think?
- Are you currently investing while paying off debt?
- What other factors went into your decision besides the four main reasons discussed above?
Let us know in the comments below.
May 29, 2025
Why Target Date Funds: The Easy Way to Invest
Don’t be fooled. The easiest option can also be the best option.

You already know I’m a big fan of making things easy, especially investing.

And, there is no better example of making things easy than investing in target date funds.

Maybe we’ve been brainwashed into thinking that the harder something is, the better it is. Of course, there’s that often-repeated phrase, “If it were easy, everybody would do it.”

We’ve been programmed into thinking that “hard work” automatically means “better results.”

I certainly agree that hard work pays off when it comes to things like career and exercise.

As another example, baking cinnamon rolls comes to mind. With cinnamon rolls, the harder way is probably also the better way.

My daughter and I bake pre-made cinnamon rolls every week. We have fun with it and it’s quick and easy.

She loves how they taste, so that’s all that really matters. But, they don’t come close to tasting as good as homemade cinnamon rolls, which are certainly harder to make.

So in the context of cinnamon rolls, I think “harder” does mean “better.”

On the other hand, I don’t agree that investing has to be hard. I don’t believe that just because something is easy, it must not be that good.

And, that brings us to target date funds.

There’s nothing easier than investing in target date funds.

My wife and I have been investing in target date funds for years. Target date funds have been both easy and effective for us.

That’s important because we’re also at the stage in our lives where we are trying to make things easier, not harder.

The idea behind target date funds is that your portfolio automatically rebalances as you move closer to your predetermined life event, like retirement or your kid’s college start date.

That means over time, your target date fund will gradually become more conservative to protect all the money you had saved and earned over the years. It typically does so by reducing exposure to stocks and increasing exposure to safer assets, like bonds.

You do not have to do a thing.

It simply cannot get any easier than this.

Today, we’ll take a closer look at how target date funds work. The goal is to help you make an informed decision on whether they are the best option for your situation.

Before we jump in, if you need a refresher on some key investment terminology, check out my post on the language of investing:

Learn the Language to Make Investing Easier

What are target date funds?

Target date funds are a form of mutual fund. When you invest in target date funds, you are essentially getting a complete portfolio in a single fund.

Target date funds are typically comprised of broad stock index funds and bond index funds.

That is one of the keys to remember about target date funds. They automatically provide investors with strong diversification and optimal asset allocation based on their chosen time horizon.

Target date funds are ideal for long-term investment goals. They are designed to help you manage risk as you move closer to your pre-determined goal.

Typically, target date funds invest more heavily in stocks in the early years in an effort to earn greater returns. As you move closer to your pre-determined goal, the fund will automatically shift to buying safer assets, like bonds.

What types of investments are typically in target date funds?

Most target date funds are made up of index funds. That means that when you buy a target date fund, you are getting exposure to a wide variety of stocks and bonds through index funds.

An index fund is a type of mutual fund that seeks to track the returns of a market index, like the S&P 500 Index.

As explained by Vanguard:

An index mutual fund or ETF (exchange-traded fund) tracks the performance of a specific market benchmark—or “index,” like the popular S&P 500 Index—as closely as possible. That’s why you may hear people refer to indexing as a “passive” investment strategy.

Instead of hand-selecting which stocks or bonds the fund will hold, the fund’s manager buys all (or a representative sample) of the stocks or bonds in the index it tracks.

It’s very hard, even for professionals, to beat the returns of the S&P 500. Historically, the S&P 500 has averaged an annual return of 10%.

Photo by Artur Matosyan on Unsplash

I Invest in target date funds because they give me a great chance to match those historical average returns without any effort on my part.

What are the advantages of investing in target date funds?

Target date funds share the same benefits as investing in index funds. That’s because, as we just discussed, most target date funds are comprised of index funds.

In addition to the benefits of index funds, target date funds offer one additional major benefit we’ll discuss below.

By the way, you already know 7 things I love about index funds:
1. Anybody can do it
2. No wasted mental energy
3. Low fees
4. Automatic diversification
5. The closest thing to predictability
6. I don’t have stock FOMO
7. Good enough for Buffett, good enough for me
For a more in depth look, check out my post here:

7 Things I Love About Index Funds

Target date funds automatically rebalance

In addition to sharing the 7 benefits of index funds, target date funds offer one additional, major benefit:

automatic rebalancing

Importantly, target date funds automatically rebalance to continuously maintain your optimal mix of stocks and bonds.

That means as time goes on, you don’t have to worry about rebalancing on your own. That’s one less stressor on your plate.

What do I mean by rebalancing?

Let’s say an investor’s optimal asset allocation is 50% stocks and 50% bonds. After a year of impressive stock market growth, this investor’s portfolio now consists of 60% stocks and 40% bonds. That’s because his stocks increased in value at a greater rate than his bonds.

As a result, he’s now weighted more heavily in stocks than his optimal asset allocation. To rebalance his portfolio, he could take a variety of steps. He could sell some stocks or purchase more bonds to get back to where he wants to be.

With target date funds, he would not have to worry about this situation. That’s because target date funds automatically rebalance for you.

That’s a big load off an investor’s plate. It’s the main reason why I like investing in target date funds.

Target date fund or build your own?

After you open an investment account, you can select a combination of index funds on your own or choose a target date fund.

There’s nothing wrong with buying index funds on your own instead of through a target date fund.

You will actually save money on fees if you go that route, but not very much.

For example, the popular Vanguard Total Stock Market Index Fund (VTSAX) charges a fee of .04%.

Vanguard’s Target Retirement 2065 Fund presently charges a fee of .08%.

Just remember to rebalance your portfolio from time-to-time to stay within your preferred asset allocation.

If you don’t want that added responsibility, you can invest in a target date fund that automatically chooses the index funds for you.

Then, the target date fund will automatically rebalance your portfolio over time to maintain an optimal balance of stocks and bonds.

As you saw above, you will pay slightly more in fees for the added convenience. To me, that extra .04% in fees is absolutely worth it.

In the end, both options are good ones.

Investing with target date funds is the easiest choice.

How can you invest in a target date fund?

Most employer-sponsored retirement plans, like 401(k) plans, now offer target date funds. In fact, target date funds are usually the default investment option for new plan participants.

You can also invest in a target date fund outside of your employer-sponsored plan. Most major investment companies offer target date funds in a variety of account types.

In addition to retirement accounts and traditional brokerage accounts, 529 college savings plan providers usually offer target date funds based on when your child will start college.

If you’re curious about my favorite investment account types, you can read more here:

My 4 Favorite Investment Accounts

Regardless of the account type, the process for selecting the right target date fund is the same.

Generally, you’ll see various target date fund options based on your personal time horizon.

For example, if you are currently 25-years-old and plan to retire in 40 years, you would select the target date fund corresponding to 2065. This fund will automatically rebalance as your career progresses towards that retirement date.

Typically, there are target date funds offered in 5-year intervals. Choose the one closest to your preferred retirement year, even if there isn’t one that matches your exact year.

The same concept applies to a 529 college savings plan. If you have a newborn, like I do, you would select the plan that corresponds with your child starting college around 2043.

After you make this one decision, there’s nothing more to do it.

Your focus should be on adding as much money to that account as possible without worrying about things like rebalancing.

I personally invest in target date funds.

My wife and I invest in multiple target date funds. We have various target date funds for our retirement savings and for our kids’ college education.

At this stage in our lives, we’ve placed a premium on doing things the easy way.

We have full-time jobs as attorneys, manage our own rental properties, and have three kids at home. The last thing we need is to add more complication to our lives.

Our personal accounts are with Vanguard, which has long been known as an investor-friendly company that prioritizes low fees.

Why target date funds?

Just because something is easy doesn’t make it wrong.

Investing in target date funds is as easy as it gets. By taking the easy option, you can have exposure to a broad range of index funds that automatically rebalances over time.

Are you doing things the easy way?

If you’re a busy professional like I am, don’t sleep on target date funds.

You’ll always have people that look down upon target date funds as too basic. Ignore them. Let them stress about picking the next hot stock, rebalancing, and timing the market.
- So, are you doing things the easy way? Are you a target date fund investor?
- Do you agree that target date funds are an easy and effective way to invest for the long term?
- Has anyone ever looked down on you for investing in target date funds?
Let us know in the comments below.
May 23, 2025
7 Things I Love About Index Funds
For my money, there’s no beating index funds.

More important, than my money, for my sanity, there’s no beating index funds.

In today’s post, I want to highlight 7 things I love about index funds.

My 7 reasons range from the low costs and automatic diversification to the minimal mental effort required for long-term wealth.

If you’ve been a consistent reader of the blog, you know that money is as much emotional as it is rational. I don’t want to be worried about my money any more than you do.

That’s why the reasons I love index funds take into account both the numbers and the emotions of investing.

Let’s dive in.

7 Things I Love About Index Funds
1. Anybody can do it
2. No wasted mental energy
3. Low fees
4. Automatic diversification
5. The closest thing to predictability
6. I don’t have stock FOMO
7. Good enough for Buffett, good enough for me
1. Anybody can do it

I’ve said it before, and I’ll say it again:

Investing is actually the easy part.

And, when I say investing is actually the easy part, I’m talking mostly about investing in index funds.

You don’t need an MBA or a financial background. You don’t need to read the Wall Street Journal.

All you need to do is consistently fuel your investment account and to let compound interest work its magic.

Oh wait, one more thing:

You also need to read Think and Talk Money. I post three times every week.

Oh, and tell your friends about Think and Talk Money!

2. No wasted mental energy

It goes without saying that most professionals are busy people. On top of working our day jobs, we’re also doing our best to stay healthy, be good family members, and have some semblance of a social life.

Some of us even have side hustles that occupy our time and mental energy.

Photo by Robson Hatsukami Morgan on Unsplash

The last thing we need is another stressor in our lives, like actively trading stocks.

I invest in index funds to take this stressor out of my life.

Yes, I could pay someone a lot of money to manage my money for me.

Or, I could invest in index funds and rest comfortably knowing that I’m going to be in great financial shape down the road.

Why am I confident I’m going to be in great financial shape?

For three main reasons, discussed next.

3. Low fees

Because index fund are passively managed, the fees are significantly lower than actively managed mutual funds.

My favorite index fund is Vanguard’s popular fund called the Vanguard Total Stock Market Index Fund (VTSAX). This fund currently charges .04%, which is just about the lowest fee you will ever see.

Compare that to the 1% fee commonly charged by investment advisors. Also, don’t forget it’s very difficult for even the professionals to beat the returns consistently generated by the S&P 500.

If you don’t think that difference in fees matters, check out my post on what a 1% fee really costs you:

How Much Money a 1% Advisor Fee Really Costs

While I can’t control what returns I may earn, I can control the fees I pay.

I’d rather pay .04% than 1%.

That’s especially true when there’s no guarantee that an advisor can perform better than the returns I earn through index funds.

4. Automatic diversification

By investing in an index fund, like an S&P 500 index fund or a total stock market index fund, my stock portfolio is by definition diversified.

For example, when I invest in an S&P 500 index fund, I essentially own a piece of 500 large companies.

Some companies may go up in value, others may go down. I’ll never know which ones are going to make money or lose money. By investing in an S&P 500 index fund, it doesn’t matter. I’m covered either way.

That’s the point of diversification: smooth out the ride so I’m less susceptible to the fortunes of one particular company.

Photo by Artem Beliaikin on Unsplash

As another example, I also invest in Vanguard’s total stock market index fund (VTSAX). This fund offers exposure to nearly the entire U.S. stock market, which consists of 3,598 companies.

Now, that’s really good diversification.

5. The closest thing to predictability

The S&P 500 has historically earned an average annual return of 10%.

By investing in an index fund that tracks the S&P 500, like I do in my 401(k), I have a pretty good chance of earning consistent returns in the long run.

Sure, there may be ups and downs.

But, check this out:

Since 1996, the S&P 500 has ended the year in positive territory 23 times and negative territory only 7 times.

In other words, the S&P 500 has generated positive returns three times more frequently than it generates negative returns.

And even with those 7 negative years, with the exception of 2000-2002, the S&P 500 returned to positive territory the following year.

What this all means is that while the S&P 500 will drop occasionally, the down periods are historically short-lived.

Because of this historical consistency, index funds give me the best shot at predictability.

Note that predictable returns does not mean guaranteed returns. There are no guarantees in the stock market. That’s why my preference is predictability.

I’m very happy with consistent returns and a smoother ride.

6. I don’t have stock FOMO

Depending on the index fund you choose, you may own pieces of a handful of companies or as many as 3,598 companies.

I invest in S&P 500 index funds and total stock market funds. That means I own pieces of lots of companies.

It also means I never have stock FOMO.

You know what stock FOMO is, right?

Stock FOMO is when you find yourself in a conversation talking about something fun like your favorite new show. Then out of nowhere, someone volunteers the hot stock he bought that’s up 20%.

If you have stock FOMO, you feel like you’re missing out by not owning that stock. You think to yourself, “Oh man, that guy’s going to be so rich and I missed the boat!”

You might even run back to your desk so you can buy that hot stock, not realizing that you’ve probably already missed the train.

Stock FOMO can cause a lot of stress. I don’t want that stress.

So, I invest in index funds.

When a stock jumps 20%, I feel good because I already own every company in the U.S. stock market.

No stock FOMO here.

7. Good enough for Buffett, good enough for me

In 2013, Buffett famously instructed that after he dies, his wife’s cash should be split 10% in short-term government bonds and “90% in a very low-cost S&P 500 index fund.”

Good enough for Buffett, good enough for me.

It’s not just Buffett, though. One of my favorite authors on investing, J.L. Collins, wrote about the advantages of investing in a total stock market index fund in his seminal book, The Simple Path to Wealth.

In fact, Collins makes a compelling argument that the Vanguard Total Stock Market Index Fund (VTSAX) we discussed above may be the only stock fund that you’ll ever need.

Buffett and Collins are smart guys. Taking advice from smart guys seems like a good idea to me.

I highly encourage you read The Simple Path to Wealth.

You can read my full review of The Simple Path to Wealth in my post here.

What do you think of the 7 things I love about index funds?

To recap, I love index funds for these 7 reasons:
1. Anybody can do it
2. No wasted mental energy
3. Low fees
4. Automatic diversification
5. The closest thing to predictability
6. I don’t have stock FOMO
7. Good enough for Buffett, good enough for me
My reasoning combines the emotional side and the rational side of investing.

Like you, I want to earn a nice investment return. At the same time, I don’t want to be worried about my investments 24-7.

Index funds give me the best of both worlds.

What am I missing?

Help me grow my list of 7 into a list of 10 by leaving a comment below on why you invest in index funds.
May 21, 2025
My 4 Favorite Investment Accounts for Long-term Wealth
We recently talked about that to start investing, there are really only two main steps:
- Step 1: Open an account.
- Step 2: Pick the investments for inside that account.
Today, we’ll discuss my four favorite investment accounts. These accounts are all tax-advantaged and match my evolving priorities, like saving for retirement and paying for college.

To help explain why you may want different investment accounts, I’ll show you how I went from a single account in my 20s to 14 investment accounts today.

Even if you’re just starting out in your career or new to investing, it’s likely that you’ll eventually have multiple types of investment accounts.

You’ll almost certainly have different goals and priorities as life moves on.

Before you do anything else, you’ll need to decide what type of investment account matches your investment goals. As we’ll see, investing is about more than just saving for retirement.

By understanding the type of accounts to use that match your evolving priorities, you’ll have a better chance of reaching your goals.

Let’s begin by looking at how my investment accounts have changed from the time I started investing in my 20s to the present day.

My investment accounts in my 20s.

When I started working in my 20s, I had one investment account:
1. My 401(k).
In my 20s, I was just starting my career and was proud to be investing in a 401(k). Back then, tracking my net worth was pretty easy.

Part of the reason I only had one investment account was because I didn’t really know there were other types of accounts.

It wasn’t until I prioritized learning about personal finance that I realized what else was out there.

Quick side note: during law school, I did have a traditional brokerage account with a financial advisor. But, I closed that account when I learned we had set $93,000 on fire.

There were two other main reasons I only had one investment account back then.

First, I had student loan debt to pay off. I didn’t exactly have the means to invest in other accounts.

If you’re in a similar boat and have student loan debt, be sure to check out my post:

10 Student Loan Tips for Lawyers and Professionals

Second, in addition to student loan debt, I also had credit card debt.

It was only after a year of working and seeing my credit card debt grow each month that I decided to do something about it. In a lot of ways, my experience with credit card debt is what led me to start Think and Talk Money.

If you’re likewise dealing with credit card debt, check out my post:

10 Credit Card Tips for Lawyers and Professionals

As time went on, a few things happened that led me to opening more investment accounts.

First, I educated myself and learned that there were other investment accounts I could take advantage of.

Then, as my career progressed, I started making more money. Because I had paid off my student loan debt and credit card debt, I had money leftover to invest.

Finally, I got married and had kids. That meant my investment goals evolved.

To match my evolving goals, it was beneficial to open different types of investment accounts.

My investment accounts at age 40.

Fast forward about 15 years, and my family’s balance sheet looks a little bit different than it did in my 20s.

Between my wife, our three kids, and me, we now have 14 investment accounts:
1. My 401(k)
2. Wife’s 457(b)
3. Wife’s Roth IRA
4. My Roth IRA
5. Wife’s Traditional IRA
6. Wife’s Pension
7. Daughter’s UTMA
8. Son’s UTMA
9. Baby’s UTMA
10. Daughter’s 529
11. Son’s 529
12. Baby’s 529
13. HSA
14. Traditional Brokerage Account
Photo by MIGUEL GASCOJ on Unsplash

The point in sharing my various account types with you is to give you an idea of how your investment priorities will change over time.

The most savvy investors know how to match their investment accounts to those changing priorities.

With this context in mind, let’s now take a closer look at my four favorite investment account types that help me maximize tax benefits.

With these tax-advantaged accounts, I have a better chance of reaching financial freedom.

Favorite Account No. 1: 401(k)

A 401(k) is likely the first investment account most people will have.

401(k) plans are employer-sponsored retirement plans. Employees can elect to participate in their company’s 401(k) plan and choose from a variety of investment options, usually mutual funds and index funds.

There are four major reasons to invest in a 401(k) plan.

1. You can invest with pre-tax dollars.

That means more of your money gets invested rather than going towards your taxes. When you have more money invested, you can earn more in returns.

2. Your contributions are automatic.

Once enrolled, your employer will automatically deduct money from your paycheck and invest it directly into your investment selections.

Because the money never hits your checking account, you won’t be tempted to spend it on things you don’t really care about. You’ll be used to living without this money because it never hits your account.

You also don’t have to worry about consistently making transfers into your account because it will happen automatically.

3. Your earnings grow tax-free.

In addition to not being taxed on your contributions, you also won’t be taxed on your earnings. That’s a double tax advantage that acts to magnify the power of compound interest. You will be taxed when you make withdrawals.

4. Your employer may offer a match.

Many employers today offer a match to incentive employees to contribute to their 401(k) plans. To qualify for the match, you must be participating in your company’s plan and make contributions yourself. The match is usually a percentage of your overall salary, usually between 3-6%.

For example, if you contribute 5% of your salary, your company may match you with an additional 5% contribution.

If your company offers a match, it’s a no-brainer to take advantage of that match. It’s often described as “free money.”

I don’t like the term “free money” because it implies that you have not earned that money as an employee for your company. I prefer to refer to the company match as a bonus you’ve rightfully earned.

The key is to accept that earned bonus by ensuring you are meeting the minimum requirements to qualify.

401(k) Contribution Limits and Penalties

Keep in mind there are annual limits to how much you can contribute to your 401(k) plan. The IRS regularly increases the contribution limits. In 2025, you may contribute up to $23,500.

If you are between the ages of 50 and 59, or 64 or older, you may contribute an extra $7,500 per year. If you are between the ages of 60 and 63, you may be eligible to contribute up to $11,250.

Also, remember that 401(k) plans are intended for retirement savings. To discourage early withdrawals, a 10% penalty on top of regular income taxes apply to people under the age of 59 ½.

Because of these contribution limits, early withdrawal penalties, or other strategic reasons, you may benefit from another type of investment account.

Let’s look at our next popular type of investment account called a Roth IRA.

Favorite Account No. 2: Roth IRA.

A Roth IRA is another type of retirement investment account that also provides double tax benefits.

Unlike a 401(k), you make after-tax contributions to your Roth IRA. Your earnings then grow-tax free, and your withdrawals are tax-free.

Another major advantage is that you can withdraw your contributions tax-free and penalty-free at any time.

There are penalties if you make withdrawals from your earnings before the age of 59 1/2.

Roth IRA Contribution and Income Limits.

Because of the amazing tax advantages associated with Roth IRAs, there are income limits that apply. In 2025, individuals must have a Modified Adjusted Gross Income (MAGI) of less than $150,000, and joint filers less than $236,000.

On top of the income limits, there are annual contribution limits, as well. In 2025, the contribution limits are $7,000 if you’re under age 50, and $8,000 if you’re over age 50.

Why think about opening a Roth IRA?

For many investors, it’s not a bad idea to consider opening a Roth IRA in addition to your 401(k).

For starters, we mentioned the contribution limits to each account. You may need more money in retirement than just what your 401(k) plan will provide.

For another reason, 401(k) plans and Roth IRAs are treated differently from a tax perspective. It may be wise to have some tax-free income in retirement from a Roth IRA to go along with your taxable income from a 401(k).

You can open a Roth IRA with any number of investment companies, like Vanguard, Fidelity, and Charles Schwab.

Favorite Account No. 3: Health Savings Account (HSA)

A Health Savings Account (HSA) is another tax-advantaged account that you can use to pay for eligible medical expenses.

HSAs are linked to employer-sponsored health insurance plans. Oftentimes, employers will make an annual contribution to help fund your HSA.

Photo by Derek Finch on Unsplash

One of the trade-offs to having an HSA is that you’ll need to enroll in a high deductible insurance plan. You are still covered by insurance, but you’ll pay more out-of-pocket each year for medical treatment.

But, if you’re relatively healthy and/or have the means to pay for your present day medical care, you stand to benefit immensely down the road.

That’s because you can choose to invest your HSA contributions just like you might invest in a 401(k) plan.

If you do so, your contributions, earnings, and withdrawals are all tax-free if you follow some basic rules.

Because of these triple tax benefits, HSAs are my absolute favorite investment account.

Remember, 401(k) plans and Roth IRAs only offer double tax benefits. HSAs are even better because they offer triple tax benefits.

What are the key rules to follow with HSAs?

To get the triple tax benefits, you need to follow some basic rules.

One of the key rules is that you must use your withdrawals for eligible medical expenses. The good news is that “eligible medical expenses” is a very broadly defined term.

You can take a look here for a comprehensive list of eligible medical expenses. Some examples include prescriptions, contact lenses, and flu shots.

Another key rule to know is that there are no time limits for when you have to use your HSA funds. As long as you keep your receipts, you can reimburse yourself for eligible medical expenses years, or even decades, later.

If you put these two rules together, you’ll see why HSAs are so beneficial.

As long as you have the means to pay out-of-pocket for your current medical expenses, you can allow your pre-tax HSA investments to grow tax free for years.

That means you can take advantage of the magic of compound interest for decades, tax-free.

Then, years later, you can withdraw those funds to reimburse yourself for eligible medical expenses you paid for years prior.

HSA contribution limits.

Like 401(k) plans and Roth IRAs, there are annual contribution limits for HSAs.

In 2025, the contribution limit for an individual with self-coverage is $4,300 and $8,550 for family coverage.

Favorite Account No. 4: 529 College Savings Plan

529 college savings plans are state-sponsored, tax-advantaged investment accounts.

While there are certainly other ways to save for college, 529 plans are hard to beat because they typically offer triple tax benefits.

To read more, check out my in-depth post on 529 Plans for Sky High College Costs:

529 Plans for Sky High College Costs

What do you think of my 4 favorite investment accounts?

There are certainly others, but these are my 4 favorite investment account types. Each comes with tax advantages that will help me reach financial freedom sooner.

As your life and priorities change, you may also benefit from opening multiple investment account types.

So, what do you think of my four favorite investment accounts?

Did I miss any?

Let us know in the comments below.
May 19, 2025
What is Your Magic Retirement Number?
Have you thought about your number recently?

According to a recent study by Northwestern Mutual, Americans expect they will need $1.26 million to retire comfortably.

When you first hear that retirement number of $1.26M, does that sound impossibly high? Does it sound way too low?

Or, maybe your reaction was like what my five-year-old says when questioned about who made the mess:

“No clue.”

I think it’s safe to say that, at some point, most professionals accept that they need to save for retirement. Hopefully, you are in that group and have been investing early and often.

However, I suspect most people have never thought about how much they’ll actually need to retire comfortably. That’s understandable since retirement can seem like such a far-off goal.

Still, it’s a good idea to start thinking about how much you’ll need to retire comfortably. We’ll refer to that amount as your magic retirement number.

That way, you can start taking the necessary steps today to reach that magic retirement number.

Today, we’ll learn how to calculate your magic retirement number.

So, how do I figure out my magic retirement number?

To answer that question, let’s turn to the “4% Rule.”

The 4% Rule is one of the most popular ways in the personal finance community to ballpark how much money you’ll need in retirement.

Of course, your personal answer depends on a variety of factors, like when you want to retire and how much you expect to spend in retirement.

You can imagine how someone hoping to achieve FIPE (Financial Independence Pivot Early) may require a different amount than some retiring in his 70s.

Your answer may also change after reading a book like Die with Zero, where author Bill Perkins brilliantly argues that most of us are actually saving too much for retirement.

In any event, the 4% Rule can give you a good idea of where you currently are. Then, you can decide what changes you may want to make to ensure you hit your magic number.

Let’s dive in.

What is the 4% Rule?

The 4% Rule suggests that you can safely withdraw 4% of your investments each year, adjusted for inflation, and 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.

For simplicity, let’s say you have $1 million in your portfolio. According to the 4% Rule, you can safely withdraw $40,000 per year (4% of your portfolio) and not run out of money for 30 years.

Using the magic retirement number of $1.26 million, you could safely withdraw $50,400 and not run out of money for 30 years.

These simple examples show how you can take your current retirement savings and project how much you can safely spend so your money lasts 30 years.

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.

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

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.

Regardless, the 4% Rule is a great way to start thinking about how much you’ll need in retirement.

So, let’s practice using the 4% Rule.

Our goal is to help you project a magic retirement number based on your current spending habits.

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.

Current Savings x 4% (.04) = Annual Retirement Spending

$1,000,000 x .04 =$40,000.00

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

Photo by Hugo Delauney on Unsplash

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.

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.

Current Spending / 4% (.04) = Magic Retirement Number

One note related to your Budget After Thinking: for this exercise, ignore your Later Money (with one caveat). Only use your Now Money and Life Money totals.

The reason is that since you’re retiring, you likely won’t be focused on saving for future goals anymore. Presumably, you’ve already reached your goals. If you include your Later Money in your monthly spending, you’re magic retirement number will be artificially inflated.

The caveat is for those people pursuing FIPE. In that case, you should include your Later Money in your calculations. That way, you have a buffer in place to cover you over a longer retirement period.

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.

Current Spending / 4% (.04) = Magic Retirement Number

$120,000 / .04 =$3,000,000.00.

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.

If that number seems impossibly high to you, you now know to make some adjustments to your current spending.

Let’s look at how your magic number changes with some tweaks to your spending habits.

Assume you’re open to cutting some expenses in retirement to reduce your magic number. That might mean spending less money on transportation, meals out, your wardrobe, and whatever else.

Let’s assume that by making those cuts, you shaved $1,000 off your Now Money expenses.

As a result, you only need $9,000 to cover your retirement lifestyle each month. That’s $108,000 per year.

Using the 4% Rule, your magic retirement number has now shrunk to $2.7 million.

$108,000 / .04 =$2,700,000.00.

That means that by reducing your spending by $1,000 per month, you have reduced your magic retirement number by $300,000.

It also means you have just sped up your timeline to retirement by reducing your lifestyle expenses.

A surprising note about people’s magic retirement number in 2025.

At the beginning of this post, we learned that according to a recent study by Northwestern Mutual, Americans expect they will need $1.26 million to retire comfortably.

What’s most interesting to me is that this year’s magic retirement number dropped from $1.46 million reported in the same study just last year.

Think about that for a minute.

Because of inflation (and now tariffs), things are only getting more expensive year over year. If anything, you would think that people would say they need more money to retire comfortably in today’s enviornment.

Except, the study found the opposite happened. Instead of wanting more money to pay for all these more expensive things, people think they can retire comfortably on nearly 14% less money.

How does that make any sense?

For starters, I doubt many of these respondents used the 4% Rule to project their magic retirement number based on their current spending habits.

If they had, they would have seen that their spending has likely gone up this year, unless they’ve made big cutbacks. Then, they would have seen that their magic retirement number also went up to account for those higher expenses.

Besides ignoring the 4% Rule, my other takeaway relates to one of our major themes at Think and Talk Money:

Money is emotional.

If our money thoughts were strictly rational, there would be no way that someone could say he needs less money to survive when everything is more expensive.

The reality is that our decisions don’t always make rational sense.

And, that’s OK.

Recognizing that our money decisions are not always rational, what can we do about it?

We can think and talk about money.

Talking to our people about our money decisions, like we would anything else, is the best way to find a balance between our emotional side and our rational side.

So, what is your magic retirement number?

Now you know how to use the 4% Rule to calculate your magic retirement number.

Be sure to use the 4% Rule as a tool to help you think about making adjustments to your current spending or savings habits.

Knowing how to use the 4% Rule, does a magic number of $1.26 million seem too high, too low, or maybe just right?

Let us know in the comments.
May 16, 2025
2 Easy Steps to Start Investing for Long-Term Wealth
By now, I hope I’ve begun to convince you that investing is actually the easy part. The more challenging part is consistently coming up with money for your investments.

If you’ve been worried about the risks associated with investing, we covered that, too. At the end of the day, reasonable risk is the cost to invest.

Because of inflation, the reality is that it’s more risky to not invest than it is to invest. Take a look at what happened to our pretend friend Terry who chose to play it safe.

At a bare minimum, investing is a way to play offense and defense. Investing to do fun things later on is playing offense. Investing to counteract inflation is playing defense.

We’ve also previously covered three great ways to minimize investment risk:
1. Invest early and often. Take advantage of the power of compound interest by starting early and being consistent. Over time, compound interest will lead to wealth.
2. Minimize fees. One of the few things we can control when we invest is what we choose to pay in fees. Keep fees to a minimum to maximize your long term gains. Even a fee of only 1% can do significant damage to your future prosperity.
3. Learn the language. Investing can seem intimidating when you hear phrases like “asset allocation” and “diversification.” Once you learn the language, you’ll realize that practicing asset allocation and diversification is actually not that hard.
With this backdrop in mind, there should be no more excuses for why you can’t start investing.

So today, we’re going to talk about the two main steps to get started investing.

How to start investing in 2 steps.

If you’ve never invested before, are you nervous about how complicated the process is going to be?

Don’t be.

To start investing, there are really only two main steps involved.
- Step 1: Open an account.
- Step 2: Pick the investments for inside that account.
There really isn’t much more to it.

But, don’t forget to complete both steps.

Step 1: Open an account.

The first step to investing is simply to open an account.

There are endless investment companies available where you can easily open an account online. Some of the more popular companies are Vanguard, Fidelity, and Charles Schwab.

I personally use Vanguard.

Once you’ve chosen an investment company, you’ll next select the type of investment account to open.

There are two main types of investment accounts and some other popular accounts I’ll highlight below.

Before you do anything else, you’ll need to decide what type of account matches your investment goals. Once you know the type of account that best suits you, you will need to open that account before moving on to step 2.

It really is that easy to start investing.

Photo by Jay Clark on Unsplash

You don’t need a financial advisor or a broker to open an account. Like most things these days, as I mentioned above, you can easily open an account on-line by yourself.

In fact, most of us begin investing in employer-sponsored retirement accounts, like 401(k) plans. When you start a new job, your HR department will provide you detailed instructions on how to enroll.

So, what are the main types of investment accounts to choose from?

Tax-advantaged retirement accounts.

The most common tax-advantaged retirement accounts include 401(k) plans, Roth IRAs, and traditional IRAs. “IRA” stands for Individual Retirement Account.

We’ll soon take a deep dive into the advantages and disadvantages of each type of account.

As a whole, the primary difference between tax-advantaged retirement accounts and traditional brokerage accounts relates to taxes.

The government wants us to save for retirement. To encourage us to do so, retirement accounts come with major tax advantages. That’s why most investors begin investing in these types of retirement accounts.

Traditional brokerage accounts do not have the same tax advantages.

In addition, tax-advantaged retirement accounts, like a 401(k) plan, are commonly offered by employers. That makes it easy for employees to invest.

You may be wondering: with these great tax advantages, why would someone open a traditional brokerage account?

Let’s take a look.

Traditional brokerage (non-retirement) accounts.

There are two main reasons to open a traditional brokerage account.

First, tax-advantaged retirement accounts have caps in place for how much someone can invest per year.

While the government is happy to encourage investing for retirement, its generosity only goes so far. Uncle Sam still depends on tax revenue and can’t afford to give us an unlimited free pass.

Once you reach those caps, and still have money that you want to invest, you’ll need to open a traditional brokerage account.

Most investors try to max out their retirement accounts to receive the full tax advantages before moving on to investing in traditional brokerage accounts.

The second reason is that tax-advantaged retirement accounts are intended for long-term retirement planning.

If you withdraw from your account before reaching a certain age, typically 59 1/2, you’ll be subject to penalties and taxes.

Of course, Think and Talk Money readers know that there are other reasons to save and invest besides retirement.

You may be investing to buy a home in 10 years. Maybe you have reached financial independence and rely on your investment income to fund your life.

Whatever the case, traditional brokerage accounts provide flexibility for people to withdraw their money when they want to.

Other types of investment accounts.

Besides tax-advantaged retirement accounts and traditional brokerage accounts, there are two other popular investment accounts to highlight.

529 Savings Plans for College: 529 college savings plans are state-sponsored, tax-advantaged investment accounts. While there are certainly other ways to save for college, 529 plans are hard to beat because they typically offer triple tax benefits.

To read more, check out my in-depth post on 529 Plans for Sky High College Costs.

Health Savings Accounts (HSA): An HSA is a tax-advantaged account that you can use to pay for eligible medical expenses.

These accounts are typically linked to employer-sponsored health insurance plans. You can choose to invest your HSA contributions, similar to how you might invest in a 401(k) plan.

Like with 529 plans, the reason to invest in an HSA is to receive triple tax benefits that are hard to beat. Your contributions, earnings, and withdrawals are all tax-free if you follow some basic rules.

We’ll explore this further in a future post.

You are not limited to just one type of account.

To recap, the first step to investing is simply to open an account.

There are two main types of investment accounts to consider: tax-advantaged retirement accounts and traditional brokerage accounts.

There are also other investment accounts intended to help with specific goals, like saving for college or medical expenses.

For almost all investors, it makes sense to first open a tax-advantaged retirement account before considering the other types of accounts. For many of us, that means participating in our employer-sponsored 401(k) plan.

Keep in mind, you are not limited to just one investment account. Many investors have various accounts for different goals. My wife and I have multiple retirement accounts, 529 plans for each of our kids, an HSA, and others.

Once you’ve opened an account, you’re ready to move onto step 2. The next step is choose what investments you want inside that account.

Step 2: Pick the investments for inside that account.

Now that you have an account opened up, the next step is to pick what investments you want inside that account. By that, I mean selecting what mutual funds, index funds, individual stocks, or bonds you want to buy.

Each major investment company offers a variety of investments to choose from, including target retirement date funds that are as easy as it gets.

Picture the account you just opened as a bucket. Now, you need to fill that bucket with something.

What you fill that bucket with are your investments.

This second step is crucial. It’s also easily overlooked.

More often than you might think, when people new to investing complete step 1 by opening an account, they mistakenly believe that their job is done. That’s not the case.

When you first open an account (other than employer-sponsored plans), you will need to fund that account with a minimum required deposit.

The key to remember is that once you make that transfer, your money will sit in your new investment account, not earning much or any interest, until you choose how to invest it.

Until you complete this second step, your money sits in your account and you don’t reap the benefits of investing.

As a side note, you’ll likely need to complete this second step every time you make a transfer into your investment account. You can link your checking account to your new investment account to make transfers easier.

One other side note, I mentioned that employer-sponsored plans, like 401(k) plans, operate a little differently. That’s because when you first enroll in your 401(k) plan, you will make your investment selections right then and there.

Because your contributions are automatically deducted from your paycheck, they will automatically be invested in your preselected investment choices.

Don’t laugh about people forgetting to choose their investments.

When I first taught my financial wellness course to law students, I thoughtlessly made a joke about people who forget to complete this second step. At the time, it seemed obvious to me that once an account was opened, the next step was to select the investments.

Boy, was I wrong.

In that first class, a student raised her hand and said she had made that mistake before. Her money sat in her investment account, without earning any interest, for more than a year before she realized her mistake.

She was not laughing at my joke.

Nor was she the only person in my class who had made that mistake. It turned out nobody was really laughing.

Since that first class, I’ve realized that it’s actually a common mistake.

That’s why I now emphasize there are two steps to start investing. The first step is to open an account. The second step is to pick investments for that account.

Photo by Kenny Eliason on Unsplash

And, guess what?

I recently made the exact same mistake.

My HSA had been with one provider for years before that provider changed. My money was automatically transferred over to the new provider.

However, somehow I missed the announcement that my money would not be invested until I chose the investments for that new account.

It took me about six months of earning no interest to realize what was going on.

That’s what I get for making a joke about step 2!

How do I pick the right investments to fill my account?

We recently discussed the importance of learning the language of investing. In that post, we talked about stocks, bonds, mutual funds, and index funds. When you’re selecting investments, you’re choosing between these types of options.

We also talked about the importance of asset allocation and diversification. These terms make investing seem more complicated than it really is.

Ultimately, you’ll need to do your homework or pay an advisor to do it for you. Before you make your decision, be sure to check out my previous posts on investing so you have a good understanding of your options.

Personally, I invest in index funds to keep my costs down and to ensure a certain level of diversification. If I don’t have the option to invest in a total stock market index fund, I invest in an S&P 500 index fund.

I also invest in target date retirement funds since these funds automatically rebalance for me as time goes on. It doesn’t get any easier than this.

Now you know how easy it is to start investing.

If you were ever hesitant to start investing in the past, now you should be feeling more confident in how to get the process started.

There are really only two steps:
1. Open an account.
2. Pick investments for that account.
It doesn’t have to be any more complicated than that.

As always, leave a comment below if I can answer any questions as you get started.
May 14, 2025
How Much Money a 1% Advisor Fee Really Costs
I recently attended a “financial empowerment” workshop hosted by a financial advisor.

The financial adviser was smart and very passionate about helping people plan for retirement. She shared a lot of valuable information, such as investing early and often.

She also shared good examples on how compound interest works and how inflation eats away at our purchasing power.

I liked just about everything she was sharing with the audience. It was solid advice, and her presentation included many informative charts and examples.

I was not even bothered that she was frequently pitching her services in hopes that audience members would hire her to manage their money. It was her presentation and she earned the right to promote herself.

The thing is, and I was not surprised by this in the least, the topic of fees hardly came up at all.

In fact, the first mention of fees did not come up until the very last slide. In total, fees were addressed for maybe 30 seconds in an hour-long presentation.

I don’t necessarily blame the advisor for not discussing fees until the very end. She’s trying to make a living and doesn’t want to scare people off before hearing what she had to say.

I think most people in her situation would have structured the presentation the same way.

That said, in my opinion, fees should be one of the first things discussed when it comes to investing. It should not be a throw-in at the end of a presentation.

The amount we pay in fees is one of the main things we as in investors can control.

There is not much we can control as stock investors. Markets are unpredictable. One of the only things we can control is the amount we pay in fees.

There are two primary types of fees: transaction fees and ongoing fees.
- Transaction fees are charged each time you make a transaction, like buying a stock.
- Ongoing fees are charged regularly, like account maintenance fees.
Whenever you are choosing how to invest your money, pay close attention to the fees associated with that investment option.

You cannot avoid fees completely, but you can minimize the amount you pay depending on the investments you choose.

Below, we will take a look at how even a seemingly small fee of 1% can have a huge negative impact on your account balance over time.

As a general rule, passively managed investments like index funds, charge lower fees. Actively managed investments charge higher fees.

If you choose to work with an investment advisor, be sure to understand all of the fees charged for those services. Pay particular attention to the ongoing fees, which can have a big impact on your investment portfolio.

I am not on a crusade against financial advisors.

Before all the financial advisors out there bite my head off, let it be known that I am not on a crusade against you.

Believe it or not, I’m not here to tell anybody whether he should work with a financial advisor or not. That’s not for me to decide.

I believe that advisors can offer significant benefits to a lot of people, including benefits that are difficult to quantify. For example, an advisor may help someone stay calm during market dips so that person stays invested for the long term.

I view my role in the personal finance food chain as that of an educator. I am not a financial advisor, and I won’t be giving personal investment advice.

My purpose in writing this post is to help you decide whether the cost of hiring an advisor is worth it to you.

Photo by Benjamin R. on Unsplash

I do the same thing when I teach personal finance to law students. I try my best to present options and information so they can make the best decisions.

When it comes to investment fees, it’s hard to know exactly what we’re paying. What does a 1% fee even mean?

By looking at the examples below, you should get a better idea of what a 1% fee looks like over the long term. Then, you can be better equipped to make a thoughtful decision on whether to work with an advisor.

In the end, I’ve done my job if I’ve helped you acquire enough personal finance knowledge to make educated choices with your money.

So today, we’re going to talk about fees.

Remember, none of us can control the market, and that includes financial advisors. The best any of us can do is project what may happen in the future based on what has happened in the past.

Since we can’t control the market, let’s focus on what we can control, like fees.

To help us understand how fees can be a drain on our investment returns, let’s revisit our friend Sally.

Sally earns 10% a year and pays no advisor fees.

Remember our friend, Sally?

While in her 20s, Sally funded her retirement account with an initial contribution of $2,500. She then made contributions of $250 every month for 40 years.

She was comfortable with reasonable risk and invested in the S&P 500, which has historically earned an average annual rate of return of 10%.

After 40 years, Sally had contributed a total of $122,500.00. Her retirement account grew to $1,440,925.81.

Sally set herself up to have a lot of choices come retirement.

Now, let’s make one slight adjustment to our hypothetical to account for a fee of “only 1%.”

Sally earns 10% a year and pays a 1% advisor fee.

Let’s assume that Sally decided to work with a financial advisor that charges a 1% fee. That means every year, Sally pays her advisor 1% of her account balance.

We’ll assume that her advisor also averaged a 10% annual rate of return for Sally. However, because Sally pays her advisor a 1% fee, Sally’s actual earnings rate drops from 10% to 9%.

Let’s see how that 1% fee changes Sally’s performance over 40 years.

After 40 years of earning 9% after paying a 1% fee to her advisor, Sally will have $1,092,170.89.

The 1% fee resulted in Sally’s account dropping by $348,754.92.

That’s 24% less money than she had in our example when she earned 10%.

The impact of even a 1% fee is monumental.

Through this example, you should be able to see that even a seemingly small fee can have major consequences on your long term gains.

When people start investing, the 1% fee does not seem like a bad deal. In my experience, whenever a financial advisor has explained fees to me, he uses words like “just 1%” or “only 1%”.

I think that language is misleading and deceiving. Sally would probably agree that words like “only 1%” do not accurately express a cost of $350,000.

If you look at the very beginning of Sally’s investment profile, it’s true that the 1% fee seems to have little impact.

In Sally’s case, the difference in her account in the two scenarios after 1 year is only $25.
- Sally’s account after 1 year at 10% interest: $5,750.
- Sally’s account after 1 year at 9% interest:$5,725.
That’s a pretty marginal difference. However, it takes time for the impact of fees to materialize.

The reason is because it takes time for the magic of compound interest to set in. That’s why we need to invest early and often.

Let’s look at the difference in Sally’s account over time:

10% Return
9% Return
After 1 year $5,750 $5,725
After 10 years $54,296.63 $51,497.20
After 20 years $188,643.75 $167,491.39
After 30 years $537,105.57 $442,091.81
After 40 years $1,440,925.81 $1,092,170.89

Looking at these numbers, it becomes clear how much a 1% fee can impact your overall investments.

One other consideration: the fee also typically gets taken straight out of your account. That can make it feel like the fee is relatively small or doesn’t exist at all.

It would feel much different if each month you had to go through the process of writing a check to your advisor. Maybe feeling that pain would impact your decision to pay the fee.

Decide for yourself if the real cost of an advisor is worth it to you.

You can play with these numbers to match your personal situation. Maybe you have an advisor charing less. Maybe yours charges more.

If you want to tweak the annual rate of return you expect to earn by working with an advisor, please do.

Or, maybe you just want to ask your advisor or potential advisor about fees and how they may impact your portfolio over the long term.

Hopefully, looking at these numbers gives you something to think and talk about.

I personally do not work with a financial advisor.

Let’s circle back to the financial empowerment workshop I attended the other day.

At its conclusion, the advisor’s husband came by to collect the sign-up sheet. I happened to be the last person to receive the clipboard.

Seeing that I had not signed up for a free consultation, he looked at me and said, “Oh, you forgot to sign up!”

I chuckled.

Uhh, no I didn’t “forget”.

I respectfully declined to be added to the list. I’ve chosen not to work with an advisor.

I shared my story about how I set $93,000 on fire when my former advisor pulled me out of the markets in 2008.

In that post, I also shared that it wasn’t her fault. It was my fault for not being educated.

Since then, I’ve been convinced by endless reports, such as this from Yahoo! Finance, that I’m better off without an advisor when considering the cost:

Making matters worse is that the professionals, who the average investor might turn to for guidance, have poor track records. In the past decade, an alarming 85% of U.S.-based active fund managers underperformed the broader S&P 500. Those who invest in these funds are essentially paying for unsatisfactory results.

How much does 1% matter to you?

I recently calculated how much I would have paid an advisor by this point in my life. I determined that If I had been working with an advisor, I would have paid more than $100,000 in fees so far.

When I think about all the things I could do with more than $100,000, I’m very happy that I chose to educate myself and keep that money instead of paying it to an advisor.

Maybe I would have earned more if I worked with an advisor. Maybe that $100,000 would have been a worthwhile price to pay. Then again, maybe not.

If you choose to work with an advisor, I won’t blame you. Hopefully your advisor consistently beats the returns of the S&P 500 or provides value to you in other ways.

Whatever the case may be, you now should have a better understanding of what you’re paying when you hear the phrase “only 1%.”
- Do you work with an advisor?
- What fee does your advisor charge?
- What are the top benefits you receive in exchange for the cost?
Let us know in the comments below.
May 5, 2025
Why Successful Investing is Playing Offense and Defense

When you hear the word “inflation,” what’s the first thing that jumps to mind?

Is it the price of eggs?

Eggs really have it bad right now. If it’s not being the poster child for inflation, it’s the bird flu causing eggs problems.

Eggs are even getting blamed for ruining Easter! Just look at this headline from AP News:

“US egg prices increase to record high, dashing hopes of cheap eggs by Easter”

Yeesh. I feel bad for eggs.

I’ve certainly noticed the elevated price of eggs at the grocery store.

But, eggs are not the first thing that comes to mind when I think of inflation.

When I think of rising prices, my mind immediately goes to lunch downtown during the work day.

Now, please indulge me for a minute. I know I’m about to sound like the old man who yells at clouds.

I try to bring my lunch most days. It’s partly trying to eat healthier. The other part is that I have a hard time justifying the cost and have decided that lunch is really not something I care about.

Ever since I was a really lost boy in my 20s and started budgeting to create fuel for my investments, lunch was an easy thing to cut.

Even so, there are days when I run out of time in the morning to get a lunch packed before I’m out the door. On those days, I’m usually looking for something relatively quick and healthy.

I’ve noticed that no matter where I go near my office, it seems like the cost of a fast-casual lunch is between $15-$20. That’s true whether it’s a sandwich or a salad or a burrito.

$20 for a lunch that is not even the least bit exciting! That’s hard for me to swallow (sorry, couldn’t help myself…)

Am I yelling at the clouds alone here?

Why does it matter that everything is getting more expensive?

There’s no single explanation for why things are getting more expensive. For example, restaurants are facing higher costs for ingredients, labor, and even online reservation sites.

Setting aside isolated explanations, the reality is that all things tend to get more expensive over time.

The word for that reality is “inflation.”

Specifically, inflation is defined as “ongoing increases in the overall level of prices.”

If you were accustomed to paying $10 for lunch, and now that same lunch costs $20, that’s what inflation looks like.

Photo by Nick Scheerbart on Unsplash

Why do we care about inflation?

We care about inflation because inflation reduces the buying power of our hard-earned money. We can’t control or stop inflation. It’s going to happen.

Ask your parents how much they paid for their first car.

Or, you can ask my high school basketball coach. When we would complain, he would respond “That and $1.25 will get you a ride on the bus!”

Don’t worry, none of us knew what it meant either. Although, I wonder if he’s updated his quip to “That and $5.50…”

The point is, In order to counteract the drain of inflation, we need to invest our money.

Investing to do fun things later on is playing offense.

We’ve spent a lot of time in the blog talking about all the amazing things you can do with your money if you develop strong personal finance habits.

Strong personal finance habits include budgeting, paying off debt, and saving. We do these things so we have fuel to invest.

When you invest, your money grows without much effort on your part. You can then do those amazing things in the future.

That’s playing offense.

Look back at our friends Terry and Sally.

Terry took no risk and kept his money in a savings account. Terry did not play offense.

Sally took on reasonable risk and invested in the S&P 500. Sally played offense.

What happened after 40 years in our hypothetical scenario?

Terry, at a 3% interest rate from his savings account, had a total of $234,358.87.

Sally, at 10% annual returns from the S&P 500, had a total of $1,440,925.81.

As a result, Sally will have $1,200,000 more than Terry to do fun things with in retirement.

Sally clearly played offense. Terry clearly did not.

Investing to counteract inflation is playing defense.

You may be thinking that at least Terry’s “safe” approach meant that he played good defense.

Nope.

Terry’s approach was bad defense just like it was bad offense.

All because of inflation.

Investing to counteract inflation is playing defense. It’s protecting your hard-earned purchasing power.

Over the long term, it’s critical to invest your money and earn a return that exceeds the rate of inflation.

Otherwise, you risk not being able to afford the same items you’re accustomed to buying today because those items will be more expensive.

In our earlier examples of eggs and workday lunches, we’ve seen how things feel like they’re getting more expensive over time.

It’s not just eggs and lunches that get more expensive. Everything does.

Let’s plug some numbers into US Inflation Calculator to illustrate how things really are getting more expensive.

Let’s say you bought something in 2000 for $100. Based on the actual inflation rates between 2000 and 2025, that same $100 item would could $185.71 today.

That’s an increase of 85.7%!

So, by keeping his money in a savings account earning 3% interest, Terry may have thought he was doing the right thing because his balance was getting bigger.

The problem is that while his bank balance was increasing, so was the cost of everything he might want to buy. So, he had more money, but he could buy less things with that money.

That’s what inflation does.

The only way to get ahead of inflation is by investing and earning a higher rate of return.

So to return to our question: was Terry really playing good defense by keeping his money in savings?

No, because his actual purchasing power diminished even though his balance grew.

Investing is about playing offense and playing defense.

By now, you should hopefully be motivated to invest as a way to play offense and play defense.

It’s fun to think about what you can do with your money when it grows with very little effort on your part.

It’s just as important to think about investing as a way to protect your ability to buy the very same things in the future that you buy today.

Instead of being the man who yells at the clouds, you can be the one buying as many eggs and lunches as you want.

May 2, 2025
Risk is the Cost to Invest
Two young coworkers, Terry and Sally, start the same job at the same time making the same amount of money.

While still many years away, Terry and Sally both know that they should invest early and often for retirement.

They each decide to fund a retirement account with an initial contribution of $2,500. They are also dedicated to making contributions of $250 every month until they retire.

Both plan to retire in 40 years while they’re in their 60s.

There’s one major difference between Terry and Sally.

They view risk differently.

Photo by Eric Ward on Unsplash

Terry doesn’t like risk.

Terry doesn’t like risk. He wants to be able to sleep at night knowing that his hard-earned money is safe and sound in the bank. He can’t stand the idea of potentially losing money from one month to the next.

When Terry wakes up in the morning, he likes to check his bank accounts while he drinks his coffee. He gets a jolt out of opening up his mobile banking app and seeing exactly how much money he has.

In fact, at any given moment, Terry can tell you within a few hundred dollars what his net worth is.

Because Terry doesn’t want to take any chances, he decides to stash all of his retirement savings in a savings account that earns an average annual return of 3%.

Terry is lucky because this is a pretty generous return for a savings account based on historical savings account interest rates.

Sally is more comfortable with reasonable risk.

Sally is more comfortable with reasonable risk. Upon starting her career, Sally was aware that she had never learned basic personal finance skills. She was determined to put in a little bit of effort early on to set herself up for a prosperous future.

She was a frequent reader of popular personal finance websites like Financial Samurai and Think and Talk Money.

Sally even read JL Collins’ book on investing, The Simple Path to Wealth.

Through the process of educating herself about personal finance, Sally started thinking about what she really wanted out of life. Since she was young and had just started her career, it wasn’t easy to come up with a good answer.

Still, Sally knew that whatever she wanted to do in life, investing was an important part of her financial journey. If she wanted to create more time for herself down the road, she would need passive income from investments to sustain her.

So, after doing her homework, Sally decided to invest her money in a low cost S&P 500 index fund.

While she appreciated that there are no guarantees when it comes to investing, Sally knew that the S&P 500 has historically earned an average annual return of 10%.

Unlike Terry, Sally only checked her accounts once per month when she tracked her net worth and savings rate. Sally slept fine at night because she knew time was on her side.

Let’s see how Terry and Sally turned out 40 years later.

Using a simple online calculator like the one at investor.gov, let’s see how much money Terry and Sally will have in their retirement accounts after 40 years.

Photo by Immo Wegmann on Unsplash

Terry’s retirement savings total $234,358.87.

After 40 years, Terry will have contributed a total of $122,500.00 to his retirement savings account.

At a 3% interest rate, Terry will have a total of $234,358.87 after 40 years.

In other words, Terry has just about doubled the value of his total contributions in his account.

Not bad, Terry.

Now, let’s check out Sally’s account.

Sally’s retirement savings total $1,440,925.81.

Sally likewise contributed $122,500.00. After 40 years, at a 10% interest rate, Sally’s retirement account will have a total of $1,440,925.81.

Wow, Sally!

Sally’s retirement account is worth 10 times more than what she personally contributed. Terry failed to even double his account.

Recall in our little hypothetical, Sally did the exact same things as Terry, with one key difference. Sally was more comfortable taking on reasonable risk.

Because Sally was comfortable taking on some risk, her retirement savings were worth more than six times as much as Terry’s savings. She has over a million dollars more than what Terry has!

Look at compound interest in action.

One last thing: take a look at the pictures of Terry and Sally’s investments over time. Notice the gaps between each of their red and blue lines.

While they each benefited from compound interest, Sally benefited exponentially more.

Look at how Terry’s red line stayed much closer to his blue line. Because he wasn’t earning as much overall interest, he didn’t have as much money to multiply from compound interest.

Sally’s red line mirrored her blue line closely for the first 12-15 years. Then, the gap widened before the red line skyrocketed over the final decade or so.

That’s the power of compound interest kicking in.

So, what can we learn from Terry and Sally?

The point of this hypothetical is to introduce the concept of risk when it comes to investing.

We’ve all heard the saying, “You don’t get something for nothing.”

That motto applies to investing as much as anything else. There is always risk involved in investing.

The question is how do you react to that risk.

Some people are so fearful of that risk that they don’t invest at all, like our friend, Terry.

Other people are so desperate to get rich quickly that they take wild risks.

The people that tend to reach and sustain financial independence are the ones who educate themselves and become comfortable with taking on reasonable risk. This is what Sally did.

In future posts, we’ll dive into the various ways you can reduce investment risk.

At this point, knowing why you’re investing and taking on risk is a powerful first step. I was recently reminded of my Money Why when my baby girl was born.

Think of risk as the cost to invest.

If you want to reach true financial independence or any other financial goal, it’s going to cost you something.

Think of risk as the cost to invest.

Sure, there may be some people out there who are able to reach financial independence on a massive salary.

For the rest of us, we’re going to have to get comfortable with investing.

There’s a reason we spend so much time talking about our ultimate life goals. It’s important to embrace the reasons why you’re investing and why you’re opening yourself up to risk.

It never hurts to remind yourself what you are hoping to achieve in the future.

When you know what that thing is, it’s much easier to pay the cost of risk.

When you look at Sally and Terry’s future outlook, who would you rather be?

It’s not really a hard question, right?

It’s not that Sally has a bigger bank account. What matters is that she has created options for herself.

Sally should be in position to do whatever she wants.

Terry probably can’t.
- Are you naturally more inclined to act like Terry or Sally?
- If you’re more like Terry, have you thought about what outcome in life would be worth taking on some reasonable risk?
Let us know in the comments below.
April 28, 2025
Invest Early and Often for the Magic of Compound Interest
There’s an infamous slogan in Chicago politics, “Vote early and often.” My professional advice: don’t do that. Instead, I prefer: “Invest early and often.”

We’ll call it the new Chicago way.

When you invest early and often, you can take advantage of the power of compound interest.

There’s very little we can control when it comes to investing. One of the main things we can control is how early we prioritize investing.

In today’s post, we’ll learn what compound interest is and why it’s so powerful in generating long-term wealth.

Invest early and often to benefit from the magic of compound interest.

Compound interest is the interest you earn on interest.

How’s that for a confusing definition?

Fortunately, the idea of compound interest makes a lot more sense with a simple example.

Let’s say you make an initial investment contribution of $1,000. Let’s assume that you earn 10% interest each year on that investment. We will also assume that you re-invest your investment gains.

After the first year, your initial contribution of $1,000 earns $100 in interest (10% of $1,000). That means after one year, you have $1,100 in your investment account.

Because we are re-investing our gains, that means that at the start of year two, yo have $1,100 to invest: $1,000 from your initial contribution plus the $100 earned in interest.

If you earn the same 10% interest on that $1,100 investment, you will have $1,210 at the end of year two.

Notice that in year two, you earned $110 in interest, whereas in year one you earned $100 in interest. That’s because in year 2, you earned interest on the interest your previously earned.

This is the key point about compound interest: you earned more money in year two, even though the interest rate remained the same and you did not contribute any additional money.

That’s how compound interest works. Compound interest is earning interest on interest you’ve previously earned.

So, why is compound interest so powerful?

Earning an additional $10 in interest year two may not seem like a lot.

Over the long run, those additional earnings add up.

Let’s look at an illustration from investor.gov of what happens to that initial $1,000 contribution over a 30-year period:

In 30 years, you will have a total of $17,449.40. That’s a pretty good result from total contributions of only $1,000.

However, for this example, that total is not the important part. The important part is to visualize how compound interest worked its magic to get that result.

Look closely as the two lines on the graph. The blue line that doesn’t change represents your initial $1,000 contribution.

The red line represents the amount of money you have over time.

Notice how in the first 10 years or so, the red line and blue line mirror each other pretty closely. Around year 12, you start to see some separation between the two lines.

While the blue line stays flat, the red line begins to arc upwards. That’s because all that interest you earned during the previous decade has been earning interest. Your investment begins to accelerate upwards without any additional contributions from you.

By the end of year 30, look at how steep the red line is jetting upwards.

We can look at the specific amount of money you’d earn each year in this hypothetical to really drive this point home.

As we mentioned earlier, you earned $100 in interest during year 1. Then, you earned $110 in interest during year 2. That’s a good, but modest, increase.

During year 12, you earned $285.31 in interest. That’s significantly more than you earned in the early years, all without any additional contributions on your part.

During year 30, you earned $1,586.31 in interest!

The more time that you stay invested, the more money you’ll earn as compound interest works its magic.

That’s the power of compound interest.

Invest early and often to be a millionaire with very little effort on your part.

Compound interest is so powerful that it can make you a millionaire with very little effort on your part. All it takes is time and consistency.

In other words, invest early and often.

Let’s look at another example to see how you can easily become a millionaire if you invest early and often.

Let’s say you begin your career after going to law school or grad school at age 25. During your first year working, you saved up $3,000 and decided to invest in a low cost index fund.

You also make a plan to contribute an additional $300 per month to your investment account for the next 40 years, setting yourself up to retire at age 65.

We’ll also assume you earn the same 10% interest from our prior example, and you don’t make any withdrawals from your account.

By the time you reach retirement age, you’ll have $1,729,110.97 in your retirement account!

That’s after contributing only $3,000 initially and $300 per month after that.

Put another way, your total contributions of only $147,000 turns into $1,729.110.97 by the end of your career.

Let’s look at the graph corresponding with these figures to once again visualize compound interest at work.

You’ll notice this graph looks almost identical to our prior example, even with the additional contributions that you make over time.

You can once again see that the blue and red lines mirror each other closely for the first 10-15 years.

Then, the blue line stays relatively flat while the red line gradually arcs up before skyrocketing towards the end.

Your personal investment picture should look similar in the long run.

Now, there’s no way to predict exactly when you’ll start to notice the magic of compound interest. There are too many variables at play.

The point is that given enough time, your personal investment trajectory should look similar because of compound interest.

You can play with the numbers in an investment calculator like the one available at investor.gov to match your personal situation.

If you’ve created a Budget After Thinking, you may be able to invest much more than $300 per month.

No matter what initial contribution you make and what interest rate you assume, you should notice a similar investment picture over the long run.

When I say investing is the easy part, this is what I mean.

I just showed you how an early contribution of $3,000 and regular contributions of $300 can turn into more than $1.7 million.

You don’t have to understand the math behind compound interest.

You just have to trust that it works.

Then, invest early and often.

Given enough time, assuming normal, historical market conditions, your investments will gradually increase before shooting up in the later years.

Read that sentence again. “Given enough time” is the key phrase.

The magic behind compound interest is time.

The earlier you can start investing, the better off you will be.

Since we can’t control investment returns, I prefer to focus on what we can control when it comes to investing.

We can control when we start investing and how long we invest for.

By making regular contributions over a long period of time, compound interest ensures that your wealth will grow.

Invest early and often.

$3,000,000 today or a penny that doubles each day for the next 30 days?

Let’s look at one more fun example to demonstrate the power of compound interest.

At the start of each personal finance class I teach, I ask my students this question:

“Would you rather have $3,000,000 today or one penny that doubles each day for the next 30 days?”

Photo by Roman Manshin on Unsplash

Maybe the fact that I’m asking the question in the first place gives away the answer. Still, some students refuse to believe that the penny could grow to more than $3,000,000 in 30 days.

The real lesson in asking this question is not that the penny ends up being worth more. The lesson is that it’s not until the very end of the time period that the penny takes the lead.

Check out this graphic from TraderLion:

If you chose the penny, for the first 20 days, you’d be feeling pretty foolish. Even after 29 days, the penny still hasn’t outpaced the guaranteed $3,000,000.

Then, by day 30, you realize the full power of compound interest. The penny ends up being worth $5,368,709.12!

Just like we saw with our prior examples, it takes time for the magic of compound interest to do its thing.

When it comes to investing, time is the most important factor that we can control. The more time you spend in the markets, the better chance you have of significantly increasing your wealth.

People smarter than you and me preach the power of compound interest.

Warren Buffett, the world’s greatest investor, fully appreciates the power of compound interest. He’s famous for saying that his favorite holding period for an asset is “forever”.

Buffet’s not literally saying that there’s never a time or reason to sell an asset, like a a stock. He’s simply making the point that compound interest benefits people who stay invested over the long term.

Photo by Jorge Alejandro Rodríguez Aldana on Unsplash

If the world’s greatest investor isn’t impressive enough for you, how about the world’s greatest thinker?

Albert Einstein is often credited with this famous quote about compound interest:

Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.

You don’t have to be as smart as Buffet or Einstein to benefit from compound interest.

You just have to invest early and often.

The Chicago Way: Invest early and often.

Let’s recap:
- Voting early and often = bad idea.
- Investing early and often = good idea.
Whether you are new to investing or have been investing for some time, never underestimate the power of compound interest.

It will take time before you see results. But, the only way you’re going to get those results is by staying patient and staying invested.

When you’re tempted to pull out of the market, remind yourself that investing is a long-term game.

Picture the graphs that show how your money can skyrocket with enough time. Remember the question about the penny doubling for 30 days. Don’t ignore the words of Buffett and Einstein.

Let compound interest do its thing.

Invest early and often. It’s the new Chicago way.
April 25, 2025
Investing is Actually the Easy Part

Investing is a major part of leading a healthy financial life.

It also should be the easiest part.

Despite all the attention, news, and marketing, investing doesn’t have to be complicated.

Investing simply means committing money now to earn a financial return later. This is why I refer to money I invest as Later Money.

To be honest, the most difficult part of investing is continuously generating money to invest in the first place.

The actual investing part is pretty easy.

That’s because when you invest the right way, your money should earn more money without much additional effort from you.

This is the best part about investing. Your money can (and should) grow over time without your active participation. This is why investment gains are often referred to as “passive income.”

If you are on a journey towards financial independence, you know how important passive income is. The best way to get your time back is to earn money passively through investments while you’re off doing something else.

We’ll soon learn why investing does not have to be complicated. If you can drown out the noise, all you’ll really need to do is regularly fund your investment accounts and watch your net worth slowly grow.

This is when personal finance starts to get really fun.

Investing is when personal finance starts getting really fun.

When you’ve invested the right way, your wealth will slowly multiply. You won’t notice it at first. Trust me, give it time.

You’ll soon see that all the effort you put into educating yourself about money was more than worth it.

No, you won’t be immune from market swings like the one we’re in right now.

But, you’ll be educated enough to not panic. You’ll know that time is on your side.

Have you noticed that we’re now 50 posts in and have hardly talked about investing?

There’s a reason we’ve hardly talked about investing in the first 50 posts of Think and Talk Money.

In order to get the benefits of investing, you need to have the right money mindset. That means knowing why you’re investing in the first place. Without the right motivation, you will struggle to consistently fund your accounts.

After all, when you invest, you are sacrificing money you could spend right now for the opportunity to spend even more later on. Without the right motivation, too many people put off, or give up on, investing altogether.

When they do that, they have a little more money to spend today. But, years from now, they will wonder why they’re still working so hard and don’t see an end it sight.

Photo by Jared Rice on Unsplash

What is your motivation to invest?

Your motivation may be to reach financial independence so you can pivot directions in life. This is known as FIPE (Financial Independence, Pivot Early).

Your goal may be to pay for your kids’ college. One way to do that is to take advantage of 529 college savings plans.

You may not know exactly what you want down the road. That’s OK, too. Whatever it is, investing now will make it easier to pursue whatever that thing ends up being.

Once your mindset is in the right place, you’ll be more determined to craft a budget that consistently creates money to invest.

Think about it: would you rather be someone who invests $1,000 one time or someone who invests $1,000 every month?

If you practice solid personal finance fundamentals, you can be the person consistently investing to accomplish your ultimate life goals.

Too many people think personal finance is only about investing.

Too many people skip over the part where we learn strong personal finance habits. These people think that personal finance is only about investing.

Let’s play a game. Walk down the hall at your office and ask the first person you see what they know about personal finance.

I’m guessing you’re going to get a response like:

“Personal finance? Oh, yes. I need to learn that. I don’t know anything about the stock market.”

If I’m right, leave a comment below. This should be fun.

By the way, people that assume personal finance is only about investing are not bad people. They just haven’t been properly educated. Just like me when I set $93,000 on fire.

By now, you know that personal finance is about so much more than investing. You know that you need to develop strong habits so you constantly have money to invest in the first place.

And, you’ll soon learn that investing is really the easy part.

When you learn basic investing principles, like minimizing fees and playing the long game, your money can slowly grow over time.

As that happens, you move closer and closer to financial independence without much effort at all.

It’s actually pretty easy.

We’ll cover these basic principles in upcoming posts.

One thing we won’t discuss at Think and Talk Money is the latest hot stock tip.

If you want to study P/E ratios and company balance sheets in a quest for the best individual stocks, I won’t stop you.

I just won’t be joining you.

That’s because it’s very hard to pick winning stocks. Even the “experts” have a very hard time doing it consistently.

You don’t believe me, do you?

What if I told you that the vast majority of investment pros underperform the S&P 500?

Check this out from Yahoo! Finance:

Making matters worse is that the professionals, who the average investor might turn to for guidance, have poor track records. In the past decade, an alarming 85% of U.S.-based active fund managers underperformed the broader S&P 500. Those who invest in these funds are essentially paying for unsatisfactory results.

If the “pros” can’t beat typical market returns that are available on the cheap for all of us… why even play that game?

Why overcomplicate things?

Sure, maybe you’ll get lucky and your investment pro is one of the few who can beat the market. Odds are that if your pro beat the market one year, he probably won’t the next year.

If that’s your game, I wish you nothing but good fortune.

Personally, I’d rather do things the easy way. I’d rather focus on what I can control, like how much money I’m contributing to my investment accounts each month.

And, that brings us to an interesting point.

Even if you are working with a professional, you are not excused from participating in your investment journey. You still need to understand the basics.

Plus, while you may not be watching your portfolio closely, your job is always to make sure there is consistent money to be invested.

My guess (or is it hope?) is that your advisor has told you as much.

Investing is a major component of financial independence.

Whether you are striving for financial independence, or hoping to maintain it, investing is a major component.

To be a successful investor, you first need to practice strong financial habits.

Don’t worry. If your mind is in the right place, the investing part is actually pretty easy.

April 23, 2025
How to Set $93,000 on Fire

My first experience investing did not go well.

You could say I set $93,000 on fire.

Here’s what happened.

Matthew Adair, founder of Think and Talk Money

Back in 2008, I was a third-year law student. My entire life savings at that point was about $10,000. A lot of this money came from savings bonds gifted to me by my grandma for my birthday since the year I was born.

I mentioned the year was 2008, otherwise known as the beginning of The Great Recession. As detailed in Forbes Advisor:

The Great Recession of 2008 to 2009 was the worst economic downturn in the U.S. since the Great Depression. Domestic product declined 4.3%, the unemployment rate doubled to more than 10%, home prices fell roughly 30% and at its worst point, the S&P 500 was down 57% from its highs.

Suffice it to say, 2008 was not a great time to be graduating or looking for jobs.

Those of my friends fortunate enough to have secured a job offer soon learned that their offers were being rescinded. Such were the times.

But, I digress.

Back to how I set $93,000 on fire.

As I mentioned, my life savings at the time totaled about $10,000. I had previously decided to use a financial advisor to invest my money for me.

I had been working with this financial advisor for a few years prior to The Great Recession.

All these years later, I couldn’t tell you what she had me invested in prior to the markets imploding. I’m assuming that she took into account my age and risk tolerance and designed a suitable portfolio for me.

What I can tell you is that my portfolio suffered the same fate as just about everyone else towards the end of 2008. My $10,000 balance was shrinking.

At that point, my advisor took me out of the markets and stashed the remainder of my money in a savings account earning close to 0% interest.

I didn’t notice this maneuver right away. In fact, it wasn’t until 2010 that I noticed that my money was sitting in a savings account.

When I finally caught on that my account balance had not changed for a couple years, I called my advisor. She explained that she had pulled me out of my investments when things weren’t looking too good.

She didn’t have a good explanation for why I was still in the savings account in 2010. To be honest, it seemed like maybe she forgot about me.

By that point, the markets were improving. I had already missed all of the upswing from 2009. Since I had felt neglected, I withdrew my money and closed my account.

I wish I could tell you that I started investing on my own at that point.

Nope, that’s not how you set $93,000 on fire.

Instead of investing, I let the money sit in my checking account until it just kind of disappeared. I had no plan for the money. All these years later, I have no clue what I spent it on. I just know that it disappeared.

Photo by frank mckenna on Unsplash

But Matt, you said you only invested $10,000. How did you end up setting $93,000 on fire?

I’m glad you asked.

If I had known then what I know now, I would have invested that $10,000 in a low-cost S&P 500 index fund.

I also would not have taken my money out of that S&P 500 index fund when the markets dropped.

Time was on my side. The smart thing would have been to do nothing at all.

Between the start of 2009 and the end of 2024, the S&P 500 earned an average annual return of 14.98%.

That means my $10,000 invested in a low-cost S&P 500 index fund at the start of 2009 would have been worth $93,265.90 by the end of 2024.

That, my friends, is how I set $93,000 on fire.

And, I have nobody to blame but myself.

Let me make one point perfectly clear:

It’s nobody’s fault but my own that I missed out on those earnings.

It was my fault for not taking a more interested, and educated, approach to my personal finances.

In a way, I’m glad I learned that lesson with only $10,000 at stake instead of later in life when I had more to lose.

It’s not my financial adviser’s fault. She did what she thought was best. For some people, her strategy was probably successful.

My problem was I blindly trusted my adviser without educating myself first. I didn’t know the right questions to ask. I didn’t understand the plan.Worst of all, I didn’t pay attention when my account statements arrived in the mail each month.

In my mind, once I transferred my money over to my advisor, I was excused from taking any responsibility for my future.

That was a mistake I’ll never make it again. When things didn’t go well, I had no one to blame but myself.

We all need to understand the basics of investing.

Whether you choose to work with an advisor or not, it’s up to each of us take accountability for our own future.

We need to educate ourselves enough to be part of the planning process. We need to know why we’re taking certain steps and be savvy enough to ask the right questions.

You may be more comfortable working with a financial advisor. That’s perfectly fine. You still need to understand the basics of investing.

My problem in 2008 and 2009 was that I hadn’t educated myself. I like to share this little story to illustrate how important it is to pay attention to our finances.

These days, I manage my own investments. I’ve determined that paying fees for someone else to manage my money is not worth it to me.

By the way, we’re going to spend a lot of time talking about fees so you can decide for yourself if you want to pay them.

Whether you manage your own investments or you use an adviser, it’s critical to understand the basics about investing in the stock market. The good news is the basic principles of investing are relatively straightforward.

Always remember: there are some things we can control and a lot of things we can’t control.

We’re going to focus on what we can control.

That means focusing on how much fuel you’re generating each month to invest in the first place.

Then, it means minimizing fees and maximizing your time in the market.

If you can successfully implement just those ideas, you will wake up years from now with major gains to your net worth due to the power of compound interest.

There are other strategies we’ll cover, as well. You’ve likely heard fancy terms like “diversification” and “asset allocation.” We’ll talk about what those phrases mean with the goal of convincing you that investing does not have to be complicated.

That’s right. Investing does not have to be complicated.

You don’t have to read the Wall Street Journal. You don’t have to study financial statements. Even people who do that for a living struggle to predict what’s going to happen next.

So, let’s not waste our time. We’ve got better things to do on our way to financial independence than studying corporate balance sheets.

With even just a little bit of knowledge, you can feel comfortable and confident investing in the stock market. Then, all you’ll need to stay on track is the occasional reminder to think and talk about money with your loved ones.

You won’t even have to set $93,000 on fire first.

April 21, 2025
Money Questions: Markets in Free Fall
A reader reached out late last week and asked, “What do you do when the markets are in free fall?”

It’s a question that really captures the intersection between money and emotions.

I’m not an investment advisor, but I’m happy to share what I’m currently doing as the markets drop. Your personal situation may be different than mine so be sure to check with your investment advisor.

Before we jump in, here’s a recap from Yahoo! Finance about how significant the drop was last week:

US stocks cratered on Friday with the Dow Jones Industrial Average (^DJI) plunging more than 2,200 points after China stoked trade-war fears and Fed Chair Jerome Powell warned of higher inflation and slower growth stemming from tariffs.

The Dow pulled back 5.5% to enter into correction territory. Meanwhile, the S&P 500 (^GSPC) sank nearly 6%, as the broad-based benchmark capped its worst week since 2020. The tech-heavy Nasdaq Composite (^IXIC) dropped 5.8% to close in bear market territory.

The major averages added to Thursday’s $2.5 trillion wipeout after China said it will impose additional tariffs of 34% on all US products from April 10 — matching the extra 34% duties imposed by Trump on Wednesday.

My hyper-technical analysis: that’s not good.

Read on to see how I’m handling the market drop, how The Simple Path to Wealth helped shape my personal investing strategy, and how Die with Zero changed my perspective on how much to save for retirement.

Let’s dive in.

So, what am I doing with my portfolio right now while markets are falling?

Despite how bad it seems, this is not a difficult question for me to answer.

I’m not doing anything.

I invest in the stock market to help achieve my long-term goals. My two main long-term goals are to save for college and to save for retirement.

Each objective is so far away that time is on my side.

My oldest child is five-years-old. I have 13-14 years until she even begins college. We make regular contributions to a 529 college savings plan to pay for her education. We fully anticipate that the market is going to go up and down over these next 13-14 years.

As for retirement, I’ve still got decades in front of me. Same as what we just talked about with saving for college, I fully expect the market is going to go up and down many times before I retire.

Make no mistake, I don’t enjoy seeing my portfolio drop so suddenly.

Like everyone else, I don’t enjoy seeing my portfolio drop suddenly.

It’s not fun to read the headlines right now. My brain seems to jump to the worst case scenario. Maybe you do the same thing. It’s nice to have someone to talk to about it. Misery loves company, right?

This is one of the reasons why I only look at my portfolio once per month when I track my net worth.

To remind myself to hold steady during the down times, I think of a study that examined what would happen if an investor missed the 10 best days for the market in each decade since 1930.

As summed up by CNBC:

Looking at data going back to 1930, the firm found that if an investor missed the S&P 500′s 10 best days each decade, the total return would stand at 28%. If, on the other hand, the investor held steady through the ups and downs, the return would have been 17,715%.

These results illustrate how risky it would be for me to try to time the market. The last thing I want to do is miss the upswing. I have no idea when it’s coming.

But, time is on my side.

I’m going to do my best to be in the market when that upswing eventually comes.

And, I am confident that upswing will come. It may not be until years from now. That works for me and my investment horizon.

One other mental hack that’s helping me right now:

I’m telling myself that the market is on sale right now. How so? I can buy the exact same stocks today for less money than they would have cost even a few days ago. I do love a good sale.

In the end, no matter how bad things seem right now, I plan to continue making regular contributions to each of my investment accounts.

Since I’m investing for the long run, I’ll let the market do its thing while I’m off doing my own things.

Disclaimer: Your situation may be different. I am not an investment advisor. Do your homework and make the best decisions for your personal situation.

What is my personal investing strategy?

My personal investing strategy is largely based off of J.L. Collins’ exceptional book The Simple Path to Wealth. If you want a complete and easy to understand guide on all things investing, check out The Simple Path to Wealth.

You can read my full review of The Simple Path to Wealth in my post here.

If nothing else, it’s crucial to educate yourself so you can make informed decisions, especially in times of economic uncertainty like we’re in right now.

The Simple Path to Wealth is a great place to start when it comes to investing in the markets.

As Collins explains, benign neglect of your finances is never the solution. ReadThe Simple Path to Wealth and check out Collins’ website for a gold mine of information when it comes to personal finances and investments.

So, what is my personal investing strategy?

When it comes to investing in the markets, I’m about as boring as can be.

My wife and I invest primarily in index funds.

What is an index fund?

As explained by Vanguard:

An index mutual fund or ETF (exchange-traded fund) tracks the performance of a specific market benchmark—or “index,” like the popular S&P 500 Index—as closely as possible. That’s why you may hear people refer to indexing as a “passive” investment strategy.

Instead of hand-selecting which stocks or bonds the fund will hold, the fund’s manager buys all (or a representative sample) of the stocks or bonds in the index it tracks.

Why index funds?

The simplest way to answer that one is to direct you to the single greatest investor of our lifetimes, if not ever: Warren Buffett.

In 2013, Buffett famously instructed that after he dies, his wife’s cash should be split 10% in short-term government bonds and “90% in a very low-cost S&P 500 index fund.”

Good enough for Buffett, good enough for me.

For more on index fund investing, check out our full series on investing or read The Simple Path to Wealth.

To sum it all up, my wife and I are not active traders. We don’t seek out the newest, hottest stocks.

We’re pretty boring, actually.

We simply make regular contributions to our various investment accounts and let the markets take care of the rest.

As an example, for my daughter’s 529 plan, we chose a passive investment option that’s a mix of stock index funds and bond index funds.

Our portfolio automatically rebalances over time based on my daughter’s projected first year of college. Essentially, the closer we get to her first year in school, the more conservative our portfolio becomes.

We chose a similar option for our son’s 529 plan.

One other note for context: Keep in mind that my wife and I are real estate investors. We own five properties and 11 total rental units. Our real estate investments comprise a major part of our overall net worth.

How much money do I put towards each of your financial goals?

Between saving for emergencies, saving for college, and saving for retirement, there are a lot of options. In addition, you may have other short term goals, like paying for a wedding or a house. Or, you may want to invest in real estate.

So, how do you determine how much to allocate to each goal?

There’s no perfect answer here.

The first thing you can do is to spend some quality time formulating your version of Tiara Goals for financial freedom.

Then, let those goals inspire conversations with your people to help you make the best decisions. This is exactly how my wife and I came up with our financial goals for this year.

It also helps to attach specific targets to your financial goals, like we did when we estimated how much you should be saving to pay for college.

I went through a similar exercise with my retirement savings after reading Die with Zero by Bill Perkins.

As crazy as it sounds, are you saving too much for retirement?

In Die with Zero, Perkins suggests that many of us are saving too much for retirement at the expense of using that money to live our best lives now.

It’s one of the most compelling personal finance books I’ve read in a long time, and I highly recommend it. You can also learn more about Perkins and his journey on his socials.

Perkins is not suggesting that saving for retirement isn’t important. He’s saying that the hard data shows that most of us are over-saving.

When I read Die with Zero, I used an online calculator to estimate my projected retirement savings. As Perkins would have expected, at our then savings rate, my wife and I risked over-saving for retirement.

With that realization, I made some adjustments and am now paying down HELOC debt at a faster rate.

How much should you save for retirement?

There’s no way to fairly answer this question. Spend enough time on the internet, and you’ll get many different answers. There are just too many variables in play, like what kind of retirement you want and when you want to retire.

Perkins points out in Die with Zero that most of the advice out there encourages people to save too much money. You might agree or you might not.

I encourage you to read Die with Zero and make that determination for yourself.

At the end of the day, whether it’s saving for retirement or other major life goals, the most important thing is that you are consistently generating money fuel for your life.

Don’t stress yourself out by worrying about the perfect amount to save towards each goal.

Are you talking about your money mindset these days?

It’s never been more important to talk to your friends and family about your money mindset. You don’t have to talk numbers to help each other during uncertain times.
- Are you talking to your people about your money mindset?
- What types of conversations are you having to help get through these times of uncertainty?
- Would you recommend any books or articles that have helped you in the past?
Let us know in the comments below.
April 7, 2025
Better at Making or Keeping Money?
When people learn that I’ve been teaching money wellness to law students, I usually get a reaction like, “I need that class! I know nothing about investments and the stock market.”

It’s a fair reaction. Investing in the stock market can be complicated. Most of us never learn basic stock market principles, let alone how to manage an investment portfolio.

It’s also a reaction that has always fascinated me. Yes, wanting to learn about investing is important. But, it’s not where money wellness begins.

I often wonder, why do people automatically assume that money wellness means investing? There are so many things that we need to get right before we can focus on investing.

Learning about the stock market wasn’t going to help me when I was struggling with debt. I needed to first figure out how to make better spending choices and get out of debt. I needed to play defense before I could go on offense.

Yes, investing is important.

No, it shouldn’t be the first thing we think of when we hear money wellness.

We’ve hardly mentioned investing so far in this blog.

Have you noticed that so far in the Think and Talk Money blog we have hardly even mentioned the word “invest”?

That’s because in order to invest, we first need available money.

To have available money, we need a budget that actually works.

To have a budget that actually works, we need honest, powerful life goals.

Are you starting to see why we first talk about money mindset? Then we moved on to budgeting?

We will talk about investing once we have a plan to continuously generate money to invest.

We will soon talk about investing. A lot. Don’t worry. In my money wellness class, we discuss in depth the importance of investing to create wealth.

Here at Think and Talk Money, we will also talk extensively about investing, including in the stock market and in my preferred asset class, real estate.

Investing is not as hard as generating money to invest.

For now, our goal is to establish sound habits so we have real money to consistently invest over time. It doesn’t make sense to learn how to invest until we have a strong foundation in place.

I think you’ll also find that investing is really not that hard. If learning how to do it on your own doesn’t sound like something you want to do, there are professionals that can do it for you. Whether it’s a good idea to go that route is something we’ll discuss so you can make an informed decision.

If you do hire a professional to invest your money, you still need to know enough so you can talk to this person.

Plus, this person will likely tell you that your ongoing mission is to generate more cash to fuel investments. That’s what we’re focusing on now.

The fun part is once you’ve discovered your motivations and established strong habits, you will consistently have money available so you can invest month after month for the rest of your life.

You could be a terrific investor. If you only have $1,000 to invest a single time, your upside will be limited. If you continuously generate $1,000/month of Later Money to invest, your options (and your wealth) will grow exponentially.

My wife and I would not own five properties today if we didn’t first learn personal money wellness.

My wife and I would not own five properties (11 rental units) today if we had not first learned money wellness fundamentals. I don’t just mean we wouldn’t have had money available to invest, although that is certainly true.

I also mean we wouldn’t have the skills and knowledge to successfully run our real estate business. If you’ve ever wanted to be a business owner or investor, working on personal finance skills now is critical.

Maybe that’s not your path. Still, these skills are critical whether you are a consultant, a writer, or a teacher. Would you agree that having money issues and stress at home can distract you from performing your job at the highest level?

How many hours per year do you work to make money?

Lately, when people ask me why I’m so passionate about money wellness, I respond with a question of my own that goes something like this:

“Let’s say we work 2,000 hours per year to make money (40 hours per week, 50 weeks per year).

We won’t even count all the hours we spend getting dressed and commuting to our jobs.

We also will pretend we’re not looking at our emails in the evening and on weekends.

We definitely won’t count the hours we’re staring at the ceiling fan because we can’t sleep.

OK, so that’s 2,000 hours (plus) per year, to make money.

How many hours per year do we think about what to do with that money?”

Let that sink in for a moment.

How many hours do you work every year to make money? 2,000? 3,000? I’m guessing a lot of those hours are stressful.

Now, how many hours do you think about what to do with that money?

Do you spend any hours at all talking about what to do with that money?

This is why I am passionate about money wellness. Most people spend the vast majority of their lives worried about making money and practically no time at all thinking about what to do with that money.

No, I’m not suggesting that you need to think about money for 2,000 hours per year.

What I am suggesting is that even that little bit of time each week spent thinking and talking about money is just as important as the time you spent earning it.

Think and Talk Money is about encouraging each other to make purposeful money choices.

Robert Kiyosaki put it best in Rich Dad Poor Dad, “It’s not how much money you make. It’s how much money you keep.”

If you knew someone that made $1,000,000 per year, and at the end of the year, had only invested $20,000, what would your reaction be?

What if you knew someone who made $100,000 per year and invested $20,000? Did your reaction change?

Think and Talk Money is all about actively thinking and talking about money so we can help each other make informed choices with our hard earned money.

Whether you make a lot of money or a little money, it doesn’t matter. What you choose to do with that money is up to. It’s your life.

All I want is for you to make those choices from a position of informed confidence.
One response to “Better at Making or Keeping Money?”
1. Kevin
  
  January 22, 2025
  
  Great insight! The foundation is so important!
  
  Reply
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January 22, 2025
Why Personal Finance for Lawyers is so Important
I founded Think and Talk Money after years of teaching personal finance for lawyers and law students.

My purpose is to share these principles of personal finance for lawyers with all professionals striving for financial freedom.

I like to think and talk about money. To help us achieve financial freedom, we can’t be embarrassed or afraid to talk about money with our friends and family.

That’s why I’m on a mission to convince people that talking money is not taboo.

I like thinking and talking about life and money.

“If you want to get Matt talking, bring up life and money.”

My wife knows me better than anyone.

I like thinking and talking about life and money. That’s why I started teaching financial wellness to law students in 2021 and started this blog in 2024.

But, I wasn’t always like that.

When I graduated law school in 2009, I never thought about money. Within a year, I had racked up $20,000 in credit card debt ($30,000 in today’s dollars), on top of my student loan debt.

My salary at the time was $62,000. This was a problem.

How did that happen?

Well, I wasn’t thinking about money. I certainly wasn’t talking about money.

Of course, I later learned that I had made every money mistake in the book.

Rented a fancy apartment I didn’t need?

Paid for Cubs season tickets I couldn’t afford?

Traveled coast-to-coast? Traveled overseas? Put it all on credit cards?

Check… check.. and check.

It’s not that I intentionally decided to get into debt. I generally wanted to make good choices. I am a relatively smart human. You are, too. You’re reading a blog about financial wellness with the entire internet at your fingertips.

Maybe you’re like me, and it hadn’t occurred to you that money was a thing you needed to think about. And to talk about. Preferably with people impacted by your money choices.

I dedicated myself to learning about money.

Since 2010, I’ve dedicated myself to learning about money and its role in crafting a healthy life.

First, I read all the personal finance books and listened to podcasts.

Along the way, I kept a money journal. Plus, I talked to people I trusted.

In the end, I started to make choices with my money that matched my values.

Years into my own money journey, and now teaching personal finance for lawyers and professionals, here are a few things to know about me:

I work for clients with mesothelioma, a cancer caused by asbestos.

Since 2011, I’ve represented hundreds of people suffering from mesothelioma, a rare cancer caused by asbestos.

Most of my clients are in their seventies and eighties. A significant part of my job since I’ve been in my twenties has been meeting with individuals in their homes after they had just found out they have incurable cancer.

Before we ever get around to talking about the case, we inevitably end up talking about life.

I do most of the listening. You can imagine what I’ve learned about life in these moments. Many of my core money beliefs have been shaped by these powerful experiences.

I am a real estate investor and own rental properties in Chicago and Colorado.

In 2018, my wife and I bought our first rental property in Chicago, a 4-flat in an up-and-coming neighborhood. We lived in one unit and rented out the other three.

I’ll never forget riding my bike with my wife and a buddy, heading from the fancy part of the city where I had been living to my new home. I could tell my buddy was skeptical about my new neighborhood.

Finally, he saw something he recognized and said, “Hey, nice! A spin studio!” He saw a sign that read “Cycle Spin.”

It was a laundromat.

He wasn’t the only one who was probably thinking, “what is Matt doing?”

Well, that 4-flat allowed my wife and I (and eventually two kids) to live for free for six years.

See, the rent we collected covered our mortgage, insurance, taxes, maintenance, and then some.

With the money we saved, we bought our second rental property in 2019, a nearby 3-flat.

In 2022, we purchased another Chicago 3-flat, where my family lived for about two years before moving to our permanent home.

My tenants are doctors, lawyers, engineers, TV personalities, pilots, and other young professionals.

In 2021, we bought a rental condo in Colorado ski country. This had been a dream of mine hatched at The 1800 Club in Evanston during college.

Back then, I amused my friends on many a ski trip by cartwheeling down the mountain as I learned to snowboard.

To pay for flights and lift tickets, I took a couple part-time jobs in local offices. I told myself one day I would “Get that Mountain.”

While my wife and I were contemplating life during the height of the pandemic, we determined that a ski condo fit perfectly with our desire to be with family, to be active, and to be outdoors as much as possible.

So, we delayed buying our “forever home” for another investment property, this time one in Colorado that we could rent out and use a little bit ourselves.

I started a money journal in 2010.

I started a money journal in 2010. It has been a lot of fun to look at as I launched my financial wellness course and as I’m writing this blog.

I’ll refer back to these entries as I share my lessons about personal finance for lawyers and professionals.

Some entries are just scribbles while I worked through that month’s money question.

Some entries go deep.

My favorite: I wrote in 2011 that someday I was going to marry the girl I had been dating at that time for the past few months.

That girl became my wife in 2017.

I encourage everyone to keep some sort of money journal. It doesn’t have to be a daily log or a detailed memoir. Use to help you think. It will also reinforce the idea that we all need to think about money continuously.

Some of the same challenges I had in my 20’s, are resurfacing today, like paying off debt. Then, it was student loans. Now, it’s mortgages.

I am more confident today because I can look back at how I handled those obstacles back then.

I have taught personal finance for lawyers since 2021.

Since 2011, I’ve taught law students how to research, write, and communicate in the courtroom. We work on finding answers to difficult questions.

Oftentimes, there are many possible answers, and we have to think and analyze which is the best for our situation.

I regularly have coffee with students who want to talk about what comes next after finishing school. I learned that, just like me in 2009, my students didn’t typically think or talk about money and life. They never really thought about learning personal finance for lawyers.

I wanted to help them avoid the money struggles that I had experienced at the beginning of my career.

That’s why in 2021, I designed and launched a course focused on personal finance for lawyers.

My goal with that course, and this website, is to help us all think about using money as a tool to build a life that conforms to our personal values.

The point is not to get rich. Though, you will if that’s your goal and you follow along. The point is to live your life on purpose where you actively think and choose what happens next.

Think about why money matters.

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.

We can choose to spend our working hours doing what is meaningful to us.

We can choose to spend more time with the people that are meaningful to us.

And it all starts with using money as a tool to do what we want with our lives.

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. It is inspiring to hear what our friends want from their money and their lives.

If nothing else, I want you to think and talk about money.

As a lawyer, I’ve been trained to build upon the work of those who have come before us.

Think and Talk Money is my contribution to this essential field of personal finance, building upon what I was so grateful to learn. Not just from authors, but from all the people in my life who talk with me about life and money.

In teaching personal finance for lawyers, I’ve learned that most of us are facing the same challenges. Maybe my voice and my experiences will resonate with you. Maybe not. And that’s ok.

I will be honest about the mistakes I’ve made and the lessons I’ve learned. We’ll talk about motivation, habits, and fundamentals. We’ll talk about careers and goals. Of course, we’ll talk about investing in real estate and managing rental properties.

I’ll share my thoughts on key news and developments. I don’t expect you to agree with everything I say. Not every post will be immediately helpful for you. That’s not my goal or even realistic.

Think 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, this website will be a success.

Maybe your goal is also financial independence, or the power to choose. The power 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 day.

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 than at the beginning?

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.

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

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.

Here we go.
12 responses to “Why Personal Finance for Lawyers is so Important”
1. Bill Molander
  
  December 31, 2024
  
  Well written, Matt! Best wishes to you in future endeavors.
  
  Reply
  
  Matthew Adair
  
  January 1, 2025
  
  Thank you, Bill!
  
  Reply
2. Clarke Nobiletti
  
  December 31, 2024
  
  Excited for the valuable advice!
  
  Reply
  
  Matthew Adair
  
  January 1, 2025
  
  Thank you, Clarke!
  
  Reply
3. Laurie
  
  December 31, 2024
  
  Hey, I think your ideas are very interesting. Thanks for your thoughts. Maybe keeping money journal is a good idea for me too. A fresh outlook and clean slate for starting out the new year makes sense too.
  
  Reply
  
  Matthew Adair
  
  January 1, 2025
  
  Great attitude, Laurie! Keep me posted on your money journal!
  
  Reply
4. Jeffrey Tallis
  
  January 1, 2025
  
  Smart young man! He listens to people! He takes what he hears and learns from it! Great stuff here! Your law students are lucky to have you as a money mentor!
  
  Reply
  
  Matthew Adair
  
  January 1, 2025
  
  Thank you, Jeff! Glad you enjoyed the first post!
  
  Reply
5. Diana
  
  January 1, 2025
  
  This was a great read — thanks for sharing!
  
  Reply
  
  Matthew Adair
  
  January 1, 2025
  
  Thank you, Diana!
  
  Reply
6. Nicholas Faklis
  
  January 1, 2025
  
  Matt What are your thoughts on index funds vs individual stocks ?
  
  Reply
  
  Matthew Adair
  
  January 1, 2025
  
  Great question! I invest in index funds and think that’s the best choice for many of us. We’ll have to revisit this topic in a future post. Stay tuned!
  
  Reply
December 31, 2024

	10% Return	9% Return
After 1 year	$5,750	$5,725
After 10 years	$54,296.63	$51,497.20
After 20 years	$188,643.75	$167,491.39
After 30 years	$537,105.57	$442,091.81
After 40 years	$1,440,925.81	$1,092,170.89

Tag: investing

Because an HSA is the single most powerful investment account available to supercharge your retirement savings.

First, HSAs offer triple tax benefits.

Second, HSAs offer the most flexibility when it comes to accessing your money before age 59 1/2 without penalty.

You can invest in an HSA with pre-tax dollars.

Your HSA earnings grow tax-free.

Your HSA withdrawals are also tax-free when used for eligible medical expenses.

HSAs offer triple tax advantages.

You can withdraw from an HSA at any time for qualified medical expenses.

To access your HSA money tax-free and without penalty, you must use your withdrawals for eligible medical expenses.

You don’t have to use your HSA funds right away.

Your HSA can serve as another layer of protection during emergencies.

Your HSA contributions are automatic.

Your employer will oftentimes contribute to your HSA.

HSA contribution limits for 2026.

The main downside to HSAs are the high deductibles.

Keep in mind that a high deductible does not mean worse insurance coverage.

I have maxed out my HSA for years.

There is no excuse for a lawyer or professional to not invest in an HSA.

Do you invest in an HSA?

A 401(k) is likely the first investment account you will have.

There are four major reasons to invest in a 401(k) plan.

1. You can invest with pre-tax dollars.

2. Your contributions are automatic.

3. Your earnings grow tax-free.

4. Your employer may offer a match.

401(k) Contribution Limits for 2026

A Roth IRA is another key retirement account that offers double tax benefits.

Why think about opening a Roth IRA?

Roth IRA Contribution and Income Limits for 2026

Are you on track to hit your retirement planning goal for 2025?

Can you spot the issue of investing without a solid foundation?

Not having a budget is a problem for anyone who wants to consistently invest.

Having a budget for your personal finances is even more important when it comes to owning real estate.

Before focusing on stocks or real estate, make sure your personal finances are in order.

Why bother with investing if any profits are just going to disappear?

Most of us don’t know where our next dollar is going.

When you have strong fundamentals in place, money becomes fun.

Why is it important to track your net worth?

How do I know if I need to make adjustments based on my net worth?

What is the net worth of Americans by age?

Net Worth by Age

What is the net worth by age of the top 1%?

Net Worth by Age of the Top 1%

Tracking your net worth is the best way to measure your personal financial progress.

What kind of adjustments can you make after learning your net worth?

It takes me less than 30 minutes per month to track my net worth.

The S&P 500 historically earns 10% annually.

Because of this historical consistency, I feel comfortable using 10% as a baseline to compare other investments with.

Asking Price: $1,000,000

What is Cash-on-Cash Return on Investment (CoCROI)?

Does a 9.5% CoCROI automatically mean this is a bad deal?

To recap, CoCROI is a great way to quickly compare the returns on different investments in the first year.

What is Return on Investment (ROI)?

The first step in calculating ROI is to total up the cash flow.

Over 10 years, that means we will earn $204,000 in total cash flow.

Next, figure out the expected appreciation and debt pay-down.

If we add up our total cash flow, appreciation, and debt pay-down, we see that our total income on this property is $669,707.

Don’t forget to factor in the costs of selling the property.

How to Calculate ROI.

So, what should you do with your $200,000?

Is your job the most important thing in your life?

This is where Coast FIRE comes in.

Coast FIRE does not mean complete financial independence.

Knowing when enough is enough.

What would you do with your time if money was not an obstacle?

Coast FIRE is not about giving up.

Coast FIRE does not mean complete financial independence.

Your Coast FIRE number is not the same as your FI number.

How do I calculate my Coast FIRE number?

Using these calculators, let’s take a look at a few examples.

Coast FIRE Example 1: Clarke is 35-years-old and ready for a new job.

Based on the above variables, Clarke’s Coast FIRE number is $559,009.

What if three years still seems too far away for Clarke?

Coast FIRE Example 2: David is 40-years-old and worried about paying for college.

Plugging in these variables, we see that David’s Coast FIRE number is $588,029.

Coast FIRE Example 3: Dorothy is 28-years-old and just paid off her student loans.

Based on the above, Dorothy’s Coast FIRE number is $435,153. She can achieve Coast FIRE by the age of 38!

Use a Coast FIRE calculator to figure out your own number.

Let’s explore how owning even a single rental property can further reduce the amount you need to save for retirement.