275 | Board games and War Games

It's no secret that Brad and Jonathan's families are board game fans. One way they can typically save 20-60% on the cost of board games is by watching for price drops on Amazon using CamelCamelCamel. Brad was able to save a substantial amount on the purchase of a squat rack simply by being able to stand by and wait for the price to drop. Listener Liz heard about CamelCamelCamel on the podcast and added a list of board games to her watchlist. She was eventually able to purchase all of them at roughly half the list price. Life may be the ultimate board game where your finances are a piece of it. When you know the rules, it makes it easy to win. Just like there are strategies for winning at Monopoly, there is an unwritten and unspoken framework for living a better life. Now that 2020 is getting back to a more steady-state, it may be time to start wargaming your finances and look at your risk tolerance. This year that stress-tested our investor policy statements and mindset. Perhaps you don't have the risk tolerance you thought you did. Times of stress and uncertainty are not the time to make changes. Adjustments should be made when times are calm. There are different variables to consider and one of the questions to ask is “How much does your life actually cost?”. This can change over time and affect your risk tolerance. A couple of years ago, Brad intentionally increased his costs by moving to a more expensive home. Though it increased costs by 40-50%, they felt the life benefits would outweigh the additional costs. The only debt Jonathan has is his mortgage, reducing his structural expenses to housing, food, utilities, and insurance. He thinks even some of that could be cut down to support a survival budget if required. If this year has shown us anything, it's that your income source may not be a stable as you might have previously thought. You shouldn't be dependent upon anyone. There's a mindset of positivity that takes a terrible situation and figures out how to pivot. With your wargaming plans set, you can find a way out of it. Brad lived through a financial calamity at 22 years old when he worked for Arthur Anderson. After the Enron scandal, his company went out of business. He witnessed others who were living on the financial edge, but because Brad lived at home and had very little debt, he was fine. Jonathan says he doesn't mind spending a lot of money on an item, but he doesn't want to spend a lot of money on something that locks him into structural, recurring payments that make his life more expensive. If something were to happen to his business, Jonathan is confident that with the skill set he's acquired and one year of financial runway he's saved, he would have a very soft landing. The events of the last year have him reevaluating his investor policy statement, possibly driving changes to his investment allocation to a more conservative approach now that the market is at record highs. Jonathan is considering making these changes after riding the roller coaster of the last year and holding firm. Now that things are back to relative calm, he can make decisions based on knowing himself better, not based on fear. In the episode with Paul Merriman, he made the case for a portfolio that weights all of the asset classes evenly. Total stock market funds are cap-weighted, meaning the top companies make up a disproportionate percentage of the total market cap. Therefore, a disproportionate amount of your money is invested in these top companies and you aren't invested as diversely as you think. Jonathan has had half his money invested in a total stock market fund and half in a portfolio more similar to what Paul Merriman recommends through M1 Finance. Paul Merriman's method has gotten crushed in the last year, but over a 40 year window, it should bring higher returns. Jonathan is trying to figure out a mix that he is comfortable with. Another expense area to look at are investment fees. It used to be expensive to invest, but investment costs have become much more competitive. You don't need to spend 1% on commissions and another in expense ratios. Fees have gone to near zero if you look for them. Don't let people “help” by trading on your fear. War game your finances out. Think about the variables unique to you, analyze your risk tolerance, your income, your expenses, and what you have control over. This year's Year-End Wins episode will be a live podcast on Dec 8th at 7:30 pm Eastern time. RSVP for the live event at ChooseFI.com/2020wins. If you want to share your 2020 win, send an email to feedback@choosefi.com. This week's book winner is Abbey. She turned 22 this year, is almost finished paying off $17,000 student loans and maxed out her Roth IRAs for 2019 and 2020, as well as her 403b, 457, and HSA, and broke the $100,000 mark in her first year of nursing. Congratulations, Abbey!

 

Resources Mentioned In Today's Conversation Register for The Simple Startup Winter Challenge and save 15% with promo code “podcast” Track prices on Amazon with CamelCamelCamel Make sure your payment systems are optimized and get more out of every transaction with Checkout.com ChooseFI Episode 194 The Role of Bonds in a Portfolio with Frank Vasquez ChooseFI Episode 097 The White Coat Investor ChooseFI Episode 091 The Stock Series Part 1 with JL Collins ChooseFI Episode 052 FIRE State of the Union with Todd Tresidder ChooseFI Episode 130 Paul Merriman Introduces the Ultimate Buy and Hold Portfolio The Simple Path to Wealth by JL Collins If You Want To Support ChooseFI: Earn $1,000 in cashback with ChooseFI's 3-card credit card strategy.  Share FI by sending a friend ChooseFI: Your Blueprint to Financial Independence.