This is a "consensus non-consensus" personal finance book. It contains most of the necessary non-standard financial insights for avoiding today's major money and career traps, and it gives readers good insights on how to hack the modern labor market, how to handle real estate, how to save very, very aggressively, and how to invest while wasting as little as possible on fees. It's useful, and not a bad book.
It also gives you a helpful window into the Millennial investing mind. It's vital to understand how the generations behind and in front of you think about money and investing: their actions and yours occur in the same swimming pool. Boomers seem to struggle with this skill (but since their generation won the asset accumulation game maybe they never needed this skill in the first place), while Xers, a forgotten layer in the demographic sandwich, tend to be more instinctive at it. Millennials and Gen Z will likewise want to become as instinctive at it as they can be: they'll be in the water with all of us for a long time. We all ought to be figuring out how our fellow generations think, what they focus on and why.
The book has some minor air pockets: the author doesn't appear to fully understand inflation and its long term implications, and he never mentions Bitcoin, which is borderline inexcusable for a personal finance book published in 2019 (though note more recently the author has discussed Bitcoin, sparingly, on his Millennial Money website). Another problem: some of the financial advice in this book (see Chapters 10 and 11 for example) is "bull market advice"--it will function well in a low interest rate, low inflation era, with rising stock markets and real estate markets. We are all products of the temporal investing environment we live through: this author has lived through and has written a book based on his experiences during the gloriously bullish post-GFC/pre-COVID decade. If you read this book, just remember that the investment cycle(s) you live through will be different, and probably massively different, from our author's.
Also, as a bonus, here's a short ERE/FIRE reading list of three foundational books (links here are Amazon affiliate links, you'll pay the same price for the book but I'll receive a small commission):
1) Your Money or Your Life by Joe Dominguez and Vicki Robin (also I highly recommend my companion guide to YMOYL that I wrote to help readers over on my food blog)
2) Early Retirement Extreme by Jacob Lund Fisker
3) The Investor's Manifesto by William Bernstein
[As always, no need to read any further--and if you do, only skim the bold parts.]
Notes:
Foreword:
1) The foreward is by Vicki Robin, the co-author of Your Money or Your Life, note also that, unfortunately, the blurb copy on the cover of this book describes her as the sole author, leaving out the late Joe Dominguez, this is disappointing.
2) On having an "alert relationship with making money." On adapting and making the most of modern economic and labor conditions, being efficient economically in order to maximize time.
Chapter 1: Money Is Freedom
3) The author loses his job as a researcher at a newspaper and moves back in with his parents, he gives up even looking for jobs, and his checking account balance dwindles to $2.26. He screenshots this and hangs it as a picture in his closet as a daily reminder/motivator.
4) He walks the reader through his work/spend experience, which contains all the typical "don'ts" of personal finance: he spends half his take-home pay for rent, he runs up his credit card balances, he has anxiety attacks about his money situation but yet takes no action to deal with it, etc.
5) The author sets two "seemingly unrealistic" goals: to save $1 million and retire as quickly as possible; he pulls a Wall Street Playboys/Bowtied Bull maneuver and works his regular job while working on multiple separate side companies; he takes his savings rate up to 80%, investing everything.
6) He boils the plan down to seven steps [this is a basic summary of the book here]:
Step 1: figure out your number
Step 2: calculate where you are today
Step 3: radically shift how you think about money
Step 4: stop budgeting and focus on what has the biggest impact on your savings
Step 5: hack your nine to five
Step 6: start a profitable side hustle and diversify your income streams
Step 7: invest as much money as early and often as you can
Chapter 2: Time Is More Valuable Than Money
7) Standard albeit useful insights on compounding and how it works. The author does not fully understand inflation and there's no mention of Bitcoin at all in this inflation discussion (note that there are articles on bitcoin on his website).
8) Standard criticisms of the standard advice to "save 5-10% of your income"; questioning the traditional retirement narrative.
9) [If you do get stuck working until you're in your 50s or 60s or 70s how do you iterate and adapt to a completely different retirement life at that age and life stage? The author gets into some interesting nuances on this here: one thought is you may want to experiment with retirement before you get old, basically before you lose too much neuroplasticity to adapt to a major life change.]
10) On mindset, scarcity vs abundance mindsets, a discussion of the book Your Money or Your Life and what you're willing to trade for your time; the author wants to make sure his readers don't think too small; on time for money exchanges vs passive income; on not wasting time: "The key to fast-tracking financial freedom is to make and invest as much money as early and frequently as you can."
Chapter 3: What Is Your Number?
11) [This is an extended chapter and it's the most technical of the book.] Your FI number, how it's not realistic to come up with a perfect number today [holy cow is this ever true!] because your dreams/values may change over time; knowing your destination helps you get there so it's still important to estimate this number now.
12) On how once you hit your number your capital will still compound even if you're withdrawing, it as long as you stick to a three or four percent withdrawal rate [this is also a foundational concept].
13) The Trinity study; the 4% rule and withdrawal rates; the author's additional advice from what the Trinity study recommends: save 25-30x your annual expenses, defer taking gains as long as possible, expand your emergency fund to handle market corrections, live on as little of your capital as possible even if the market is way up, etc.
14) Problems with online "retirement calculators": on the idea of saving as much money as possible very early on so that money can compound (massively over time) even if you're taking modest withdrawals out of it.
15) You can work out your number with 6th grade math: withdrawal rate x your number = annual expenses.
16) Recurring expenses are extremely impactful to your number and the author goes through why. Another way to think about recurring/monthly expenses: take a given recurring expense, divide it by your withdrawal rate, and you can see the amount of capital required to "support" that recurring expense. [You'll never look at your stupid cable bill or car payment the same way ever again once you wrap your mind around this idea.]
17) On one time expenses, and the present value formula to figure out what quantity of money today invested at a given return rate will fully fund that future obligation. PV = FV*(1/(1+r)^n). [Note that this formula is extremely sensitive to changes in your return assumption, "r."]
18) On evaluating whether you need to spend what you think to live the life you want; how we are taught "I work hard and I deserve it" to encourage consumerism; various ways to get creative here on cars, on bartering, on free alternatives, etc.; on recognizing that something expensive cost more than the simple price because you lose the opportunity to invest that money for your future self; on the rule of 72. [An important idea here, to me, is once you frame things in terms of having your time to yourself and prioritize your life around that central value, all of a sudden a lot of things you think you "want" stop being things you think you want. Note also that it's much more fulfilling to not have a soul sucking job than it is to fill your life with expensive toys--if you have the creativity and the social confidence to live this way.]
19) Extended discussion here on cost of living indexes for various cities and thinking about where you live, either domestically or internationally.
20) On recurring income and how you can think of it in terms of reducing your number. Also on thinking about side income or recurring income as a hedge against poor investment performance.
21) On breaking down your number into yearly, monthly, weekly and even daily savings goals [this is a useful way to think about it], see the chart on page 71. Adjusting these numbers for compounding, see page 73. [Compounding impacts are always more difficult to grasp than we'd like to think, so it's helpful here to see how a few dollars a day of extra savings can shave years off of a long-term plan to hit a number.]
Chapter 4: Where Are You Now?
22) Calculating your net worth, assets, liabilities; [This is something where if you have command of the book Your Money or Your Life you already know this number and have already gone through this process. If you haven't ever done this be prepared for a lot of mental pushback from your own ego.]; debt paydown advice; thoughts about interest rates and prioritizing debt paydown.
23) On staying cool, on handling your emotions when the stock market goes up and down, on handling implications on and fluctuations in your net worth; On playing the long game; funny blurb here on one of the reasons financial advisors exist is to stop clients from doing dumb things when the stock market crashes, this is a good point actually! [Another way to think about this idea: when the panicked client calls start coming in, this is a tremendous contrarian indicator: it's time to start buying.]
Chapter 5: Next-Level Money
24) Three levers: your income, your savings, your expenses; on maximizing the potential of all three levers, for example growing your income and cutting your expenses, which lets you lever up your savings rate, increasing your income is far more powerful as a lever because expenses can't be cut back below zero whereas income can be uncapped.
25) On measuring your savings rate in both dollars and in percentage terms.
26) On having an entrepreneur's mindset, on looking at money as a fungible tool, they don't waste money or time, on remaining economically efficient
27) Using all the general types of ways to make money: employment, side hustling, entrepreneurial work, investing. Focus on all four modes rather than relying on just one.
28) Understanding the dynamic of a full-time job: on the structural problem of your employer trying to save money and earn a positive spread on your work, on the fact that it's a time for money exchange. At the same time however it's a good foundation, you get paid to learn new skills, you get benefits, you can work remotely, etc. On the idea of designing a career with a mostly remote or fully remote full-time job and then doing other consulting work or side business work as well.
29) Useful thoughts here on thinking about scale with side hustles: having repeat customers or customers who refer others to you so you don't have to spend extra time sourcing new business; doing side hustles that you enjoy doing, or that teach you skills, or that can be outsourced or made into passive income streams; on how knowledge about the market that you're in is scalable, you understand prices and costs, how to do it profitably, how to identify where there's little competition, etc.; finding lateral domains to grow a side hustle business, etc.
30) On the foundational idea that if you have a business you create far more value because it's dependent on not just your time but all your employees's time as well.
Chapter 6: Is It Worth It?
31) This chapter gets you to rethink your spending; it is basically a rehash of one of the key chapters of Your Money or Your Life. On calculating your true hourly rate, and on thinking about the amount of "hours of work time" something costs, not just dollars.
32) On the "true cost" rather than the nominal cost of a purchase. The money you spend is also your time because you need to go into the labor market to earn that money; you're also sacrificing the future potential value of those dollars that you just spent. "Everything you buy, you are trading for freedom." [This is a wonderful quote.]
33) The chapter now goes into 11 questions to identify whether a purchase is worth making:
1: how happy will this purchase make me?
2: how much money do I have to make to afford this? [On the idea of thinking of spending in terms of after tax dollars]
3: how many hours of my life am I trading to afford this? [Using your after-tax true hourly rate]
4: can I afford it?
5: how do prices compare in terms of percentages? [He shares a good example here of eating a steak at a steakhouse that costs 400% more than grilling the same cut of meat at home]
6: can I get it for less or trade for it? [Freecycle, barter, buying used, etc.]
7: how much am I spending on convenience? [The author doesn't talk about this but there's an irony in that many of the things or services we buy are actually less convenient than doing it ourselves]
8: how much would this cost me each year or for the rest of my life?
9: what is the per-use cost of this item? [Also I would add to consider thinking about the utilization rate of something you buy (that is: calculate the percent of time the thing actually being used): cars, boats, swimming pools, a one-use tuxedo or dress, etc. When seen through this lens these types of purchases quickly become not worth it]
10: how much will this money be worth in the future? [Opportunity cost of this money spent]
11: how much time (freedom) is this costing me in the future? [For every x dollar saved you can purchase a certain number of hours or days of future freedom by not needing to work, by retiring that much sooner]
Chapter 7: The Only Budget You'll Ever Need
34) Here the author just says to optimize the top three categories of expenses (for most people it's housing transportation and food) rather than having a budget of minutiae.
35) House-sitting and other house hacks, more on this in Chapter 11.
36) Travel hacking tips: turn off cookies in your browser or shop for flights incognito (otherwise the airlines will show you higher prices when you search again); look at one way tickets, sometimes they're cheaper; if you have a family, buy tickets one or two at a time because buying more than that often bumps you to a higher pricing tier. Also: fare monitor services: AirfareWatchdog, Skyscanner, Hopper.
37) [It's interesting to read this author's "highest level" travel hacks including "I apply for only three to five new cards per year" (this is a dealbreaker for me right there!), but the author claims that the time/money value these hacks "can be insanely high."
Chapter 8: Hack Your 9-to-5
38) "Your short-term career strategy should be focused on increasing your market value and maximizing your salary and benefits... Your longer-term career strategy should be built on taking advantage of the access you have too information and other people by networking, building skills, and learning as much as you can, so you can... apply it to your future full-time jobs, side hustles, and business ventures."
39) Various discussions on how to ask for a raise; useful insight on having coffee or lunch with at least one new colleague per week as part of a long-term strategy at any job, this is a sort of compounding/scaling factor you can use to drive your network that will pay dividends in the future. "Meeting with so many people will also help you see patterns in seemingly unrelated things." [This is also true if you embrace genuine eclecticism in your reading, your activities, etc.]
Chapter 9: More Money In Less Time
40) The author describes his experiences building websites, flipping domain names ("Domains are the real estate of the internet and are still significantly undervalued in my opinion."), digital marketing, SEO, flipping vintage mopeds and Volkswagen campers... this guy is an interesting dude!
41) Insights here on scaleable work vs time-for-money side hustles; on husbanding your time and energy, using it properly, using mornings, reallocating wasted time like TV/entertainment time or drinking time towards working on your financial freedom, etc. [What's unsaid here in all of this discussion of side hustles and secondary income just how truly extractive the modern 9-to-5 labor market plantation really is, but this is the reality we are in, we want to try and operate as best we can within that labor market reality.]
42) Nuances here on digital sharecropping [although the author doesn't use this term]: it's worth remembering that a minor change to Google's algorithm or Facebook's algorithm can literally destroy your online business; also nuances on tax efficiencies, on running certain expenses through your business that you can deduct [thus this means the true cost of that thing you deduct is now 1 - the tax rate.]
43) Long section here of vanilla (yet not incorrect) advice on starting a business, on pricing ("If the client isn't pushing back on the price, then you aren't charging enough."), on assessing the competitive landscape, on the drawbacks of scaling and having employees versus staying solo or running a smaller "lifestyle business" that balances work, time and money, etc.
Chapter 10: The Seven-Step Fast-Track Investment Strategy
44) Five key investing concepts:
1: minimizing risk
2: minimizing fees
3: minimizing taxes on your contributions
4: maximizing returns
5: minimizing taxes on your withdrawals
45) Again, this is mostly vanilla advice here (but it is not incorrect!): thinking about short-term financial needs versus long-term, investing in what you understand, doing a basic asset allocation with periodic rebalancing, keeping fees low, the case for indexing, etc.
46) On asset management fees: he has a good way of thinking about here, in the sense of you have a withdrawal rate of three or four percent but you're paying one to two percent to somebody to run your money--thus you're really getting destroyed in terms of fees.
47) "Pick the right investments" :))) [Comments like these always make me chuckle a little... yes, you have to pick the right investments, but you won't know that they were the right investments until after!]
48) [It is also worth noting the risk of investing in index funds when everyone else does: you get certain distortions that are worth thinking about, the author doesn't get into this, probably because it's far beyond the scope of his book.]
49) [I have to ding the author on his naivete when it comes to social investing: he credulously believes that "it might help you sleep better at night knowing that you are investing only in companies that are doing good in the world." This author has no idea what companies do to game these DEI metrics and greenwash their companies, poor guy.]
50) Discussion of IRAs, 401ks, Roths and various tax advantaged accounts and how to think about the tax benefit.
51) The author makes a sort of category error here by recommending indexing to avoid complexity, but by adding a ton of complexity right back in by recommending so many account types (HSAs, FSAs and 529s too on top of IRAs, Roths, 401ks and standard taxable brokerage accounts). He isn't thinking about the mental bandwidth costs of running all these accounts.
52) [Another category error to think about: the author suggests putting money into taxable accounts only after maxing out tax advantaged accounts. This is fine except if you want to retire early! The entire FIRE approach is predicated on having access to your capital many years before you get access to these tax-advantaged account types. If you want to retire in your 30s or 40s what good does it do to have the bulk of your capital in an IRA that you can't touch until you're 59? It is also worth noting that retirement money is very sticky money, you become a sticky customer for the financial company running your IRA: the investment industry loves it when you put capital into long-lived accounts like this.]
53: [Another important nuance here: it's fascinating how the author made relatively small investments in Amazon, Facebook and Apple (these were his only individual stocks, everything else was indexed). Apple grew to be 1/5 of his net worth (from $5,000 to more than a quarter of a million dollars), and all three of these stocks added together made up more than $400,000 of his $1.25 million net worth. This is something that would be hard to replicate, something very hard to pattern off of. You never know that the stocks that you happen to buy or will be the ones that go up massively. This is one of the reasons I cautioned readers that this book contains quite a lot of bull market advice that might not work quite so well in other market scenarios. That said, however, it is extremely interesting to see how a few decisions can really massively move the needle for your net worth. Obviously you want to do your best to make those decisions well and "pick the right investments."]
Chapter 11: Real Estate Investing
54) This is also a bit of a "bull market" chapter.
55) House hacking where you adjust to your preferences: own a house and rent it all out and sleep in the basement for free; or just rent out a room; or upgrade to the "best" room, etc., as you see fit.
56) Cash out refi money is tax free [like borrowing against your Monet or your Bitcoin I suppose, but note that it doesn't mean that money is "cost free"]; note also other tax benefits of rental properties: depreciation expense, deductions, etc.; also property is a tangible asset that can be used to secure a loan.
57) Interesting anecdote here about "Scott" who waited to save up for a 20% down payment on a home in Los Angeles but the real estate market ran away from him as prices went up faster than he could save up 20% of the value of a home; the author compares this outcome to if Scott had put down 3% for a home in the same neighborhood in the past. [It is worth thinking about inflationary times when asset prices run away faster than you can accumulate capital. What do you do? Is it prudent to lever up and buy a house with just 3% down? These are tough problems]
58) Note also the "1% rule" for real estate properties that are highly likely to generate positive cash flow: look at the monthly rent as a percent of the purchase price, thus a $200,000 property with a $2,000 a month rent price passes the 1% rule. "If you can't get that much then your rental income likely won't cover the mortgage payment and necessary expenses, which are typically less than one percent." The idea here is to generate rental income that covers the mortgage payments plus 10-20% extra to cover expenses and have a maintenance cushion.
59) "Find an amazing realtor who does the hard work for you." [A quote analogous to "Pick the right investments."]
Chapter 12: More Than Enough
60) On making sure your money lasts the rest of your life as you approach early retirement. The author starts by telling the reader to live off of side income and passive income for as long as possible, and then adjust your withdrawal percentage based on your investment performance. [Of course this implies that you have adjustable expenses or some level of baseline expense that you can handle under any circumstance]
61) Superficial discussion here of sequence of returns risk.
62) Recommending to take money from your taxable accounts first and leave money in tax deferred accounts for longer. [Note that on one level this is obvious advice and also "obviously" true, but then again when you focus on taxes you have to remember you don't know the future performance of a portfolio, it might be appropriate diversification to take a little bit out of all these portfolios over time rather than focusing solely on the tax implications. Over-focusing on taxes can often be an example of "the light's better here" fallacy.]
63) [On the Roth IRA conversion ladder technique: this is complicated, although it does optimize taxes in certain ways, but note it also pulls forward tax liabilities too. Also I think it's worth asking: if it's so important to leave money in tax deferred accounts (see above) then why would you convert an IRA to a Roth and pay taxes right away? I tend to think about it this way: if you're trying this hard to optimize taxes you actually need more capital and you shouldn't retire yet. If you really have "more than enough" per this chapter's title, taxes will be a secondary or even a tertiary consideration.]
Chapter 13: The Future-Optimization Framework
64) "Just as it's never been easier to make money, it's also never been easier to waste time." Thoughtful section here on taking agency for your time and directing it to the things you intend, not letting yourself get pulled passively in whatever direction.
65) Good section here on tasks to perform on a daily, weekly, monthly, quarterly and annual basis, all directed toward financial independence as well as setting boundaries and guarding your time well.
Chapter 14: Living a Richer Life
66) The author goes through a textbook description of how different levels of capital completely remove various levels of money stress.
67) Some examples of different people who have achieved FI and some FI blogs worth perhaps looking into:
68) "But remember, money is not the goal, time is."
To Read:
Bonnie Ware: The Top Five Regrets of the Dying