I remember the first time I learned the difference between an asset and a liability. Sitting on the couch in the living room as a young teenager, I wanted to share my new-found knowledge with my mother. I explained to her the difference between the two knowing that she would be proud of me. She wanted to make good financial decisions so I didn’t make the same mistakes as her.
My mom introduced me to personal finance at a young age because she wanted me to free myself from the poverty cycle we were in. And I couldn’t do that without making solid financial decisions.
She went through two divorces, bankruptcy, and many other financial challenges that could turn anyone into a victim. My father walked out and later committed suicide for a number of reasons (one being financial obligations). But my mom never became a victim and she found a way to improve her situation. We went from being homeless and broke to living a fulfilled and rich life.
However, after reading many books, I felt like I was learning all there was to know about personal finance. How much is there out there on the topic?
I Was Missing Something
I was missing two things: (1) a community of like-minded people and (2) a way to optimize what I knew. Every book kept telling me that if I just save and invest a small percentage I would be financially free. But financial freedom felt so arbitrary and it didn’t feel like I would ever obtain it.
Then one day, in December of 2017, I was just finishing up college, I came across a podcast of a guy that had just quit his job as a pharmacist. I listened to that episode because I had just joined the Millennial Money Man Facebook group and it was around the time he was on the ChooseFI podcast.
I realized there was a living and breathing community of people interested in the exact same things as me. Two podcast episodes later and decided to start from the very beginning on the ChooseFI podcast. I’m glad that I did because my life will never be the same.
I Found My Tribe
Along with being a book review this post is also an inside look and review of the FI community as a whole.
I’ve since had the chance to meet Brad and Jonathan a few times at FinCon as well as get to know Chris Mamula very well who is a fellow Utahn. (Utah is home even though we currently live in Texas).
I was excited to read the new book they were putting together that gives a great overview of this new movement and what a superpower financial independence can be. This stuff is life-changing.
Before I get into sharing what I love about the ChooseFI book, it’s worth noting that soon after I found the FI community, my mom decided to jump on the bus with me. We’re now currently on this path to financial independence together. She introduced me to personal finance, and I introduced her to financial independence.
Here’s What I Love About the ChooseFI Book
The ChooseFI book gives you a clear framework on how to live a financially independent life. It begins with the “Stages of FI” which can be compared to the Dave Ramsey “Baby Steps.” Except these are far from baby steps. These are big boy steps. In my opinion, they’re way more difficult. It’s not simply a matter of becoming debt-free, it’s becoming debt-free and getting to the point where working is optional. Once you reach financial independence, you’ll never have to work another day in your life if you decide not to.
This is what was missing from the idea of becoming financially free. To me, that meant crushing it and buying an island which is something almost no one can achieve.
After telling one of my friends about this online community of people working toward the same goal, he told me was how he liked the idea because it’s something anyone can do.
Reaching financial independence is driven by what your annual expenses are. It forces you to be frugal. What they mention in the book a “Valuist,” which is someone who spends money on what they value and cuts back ruthlessly on the things they don’t.
One of the biggest advantages of reading this book is the fact that they don’t shy away from the nitty-gritty details. Something most financial books, podcasts, and financial planners stay away from because it doesn’t relate to the masses or they want to hold on to the information themselves.
Advanced Personal Finance Topics
I couldn’t believe the education I was getting from reading and listening to the podcast was free. I was learning more practical and applicable information than in business school or a master’s program in personal financial planning. Things like tax optimization, mega backdoor Roth, sequence of return risk, and different investment strategies. They go into a lot of advanced strategies. But at the same time, they keep it simple and easy for anyone to understand.
I couldn’t get enough of it because it was all geared toward helping me make more money, spend less and enjoy the journey. My wife and I were on a date one night (she was sick of me talking about this), and I told her “I found my tribe, these people get it.”
“I found my tribe, these people get it.”
Even though I’m still getting started in my career and I have faced a lot of challenges in my younger years, I can honestly say I feel very grateful to have learned these things at such a young age because I know what kind of impact it will have on me and my family. These are all principles I want to instill in my son, Everett. Which will hopefully one day become 3rd generation FI.
Get Your Blueprint to Financial Independence Today
If the ChooseFI book is a book you already know you want to purchase, you can go ahead and get it on Amazon by clicking the link below! Plus, the holidays are right around the corner and this could be a great gift for someone you think could benefit from the book.
After people learn about the money jars system, I get a few who say, “I like the idea of dividing my money up into different jars but I hate using cash.
I’m not a big fan of using cash either. To be honest, I don’t.
After the first two years of using cash, I changed my jars to digital jars. I opened up a few bank accounts when I was 18 years old (it was more like six), but it has been extremely effective in helping me reach my goals. The banker was probably like, “what is this 18-year old doing opening up a bunch of bank accounts? This can’t be good.”
Here’s how to get started.
OPEN ONE CHECKING ACCOUNT
I encourage you to first start out using actual jars — even if you don’t like using cash. You can get started dividing up $100 or less. Physically doing the act is very powerful.
I also encourage you to get the jars if you have kids to teach them how to be smart with money. This is such a simple thing to teach your kids that when they understand it, you’ll be doing a great job as a parent raising money-savvy kids.
After you’ve mastered the physical jars go to your bank and open up a checking account. I imagine most of you reading this will already have a checking account so you really don’t need to do anything here.
OPEN FIVE SAVINGS ACCOUNTS
If you don’t like using cash, it’s time to transition everything online. You need at least five savings accounts (not checking accounts). Most people only have one saving account so you’re most likely going to have to speak to your bank about this.
Most people are terrible savers because they try to keep a running tab in their head and then at the end of the month they tell themselves that whatever is leftover they will transfer it to savings. And guess which account never grows? Yep, you guessed it. You have to learn how to pay yourself first!
Think of your checking account like the hub and everything else stems from it. The checking account is like the trunk of a tree and the savings accounts are like branches. Your money comes into your checking account and the first thing you do is divide 10% here and 10% there.
I’ve never run into an issue of having to withdraw money from a savings account more than six times in one month. But it’s worth mentioning.
FIND A BANK THAT DOESN’T CHARGE FEES
This next idea is extremely important. If you have a bank that will let you open five savings accounts with no problems, you’ve got a great bank. But if you’re bank tells you, “sorry, we’re going to have to charge you to open up more than one bank,” I want you to switch banks.
What you might be thinking:
“First Scott tells me to use this budgeting system for the rest of my life, and now he’s telling me I need to change banks, is this guy crazy?” Yes, most of the “BIG” banks, Wells Fargo, Chase, Bank of America may charge you additional fees for having additional savings accounts if you don’t maintain a minimum balance, or set up automatic transfers.
Here’s your script when you go to sit down with your banker and they tell you they have to charge you a fee for more than one savings account:
Mr. Banker: We will have to charge you a fee for more than one savings account.
You: Thank you mister banker, but it’s important that I have five savings accounts and pay no fees. A bank down the road said they would do it so I guess I will have to take my business there.
Mr. Banker: I will see what I can do.
THE BANK WANTS YOUR BUSINESS
The bank wants to keep your business and I’ve heard they will wave the fees in many cases. But, if they say, “sorry we cannot change that,” I promise there are hundreds of other banks that will. I’ve never heard of a credit union not willing to do that for you.
I asked my credit union how many bank accounts I could open without paying fees, and they said, “as many as you would like.” I said, “really?” She said, “we have a customer who has 63 bank accounts with us and that’s totally fine.”
My bank is USAA and I’ve had a great experience paying no fees and having multiple savings accounts. I would highly encourage you to open your accounts with them if you have access to them. Most people don’t unless you or a family member is or has been in the military.
The bottom line is DO NOT PAY FEES.
THIS WORKS IF YOU SPEND LESS
I already know many of you are thinking, “this isn’t possible in my situation because I don’t make enough money.” You can read ways to make more money here. However, the most overlooked way to make this system work is by spending less.
If you’re serious about financial independence, not only do you need to make more money, you need to keep as much of it in your wallet as possible.
We’re constantly bombarded with marketing messages telling us we need to spend money to be happy. This is not true! Live simply and be grateful for what you have and you’ll be amazed how much you can save.
Let’s be honest, there are hundreds of ways to manage your money. But today, I’m going to tell you why the money jars system that I use to manage my money is the most effective.
I tried the cash envelope system (which became messy), I tried saving everything in one savings account (which felt like deprivation), and I even tried not managing my money at all.
None of these things worked for me.
When I Learned About the Money Jars System
We were poor growing up. And I never wanted to be poor again. I knew I needed to change things to make sure I never had money problems.
When I was 16, I learned the importance of managing my money over a long period of time so I could reach financial freedom one day. Luckily, I applied what I learned with a simple money jars system to manage my money.
This set the foundation for the rest of my life. I have successfully used the money jars system to manage my money for over 10 years. I’m well on my way to becoming financially independent by simply using the money jars system I’m about to share with you.
Before we jump in, download the free PDF so you can get started.
What is the Money Jars System?
After learning about the jars money system, I purchased 5 mason jars and used a random popcorn box because Walmart didn’t sell mason jars in packs of 6. To get started you’ll need 6 physical mason jars.
The second money jar is your financial independence jar. 10% of every dollar you make no matter what goes into your financial independence jar. Even if it’s a small amount of money, this will help you build the habit of saving money each time you get paid.
Should you save or pay off debt? The answer depends. I don’t think that you shouldn’t save money until all of your debt is paid off and you have an emergency fund of 3 to 6 months. I think you should be doing both. Saving while paying off debt?
Once you understand compound interest, this will make more sense. The more money you can save early in life the better off you will be. So get started saving 10% of your income no matter what even if you have student loans or a car payment.
Money Jar #3
The third jar of money is long-term savings of 10%. What’s the difference? Financial independence money will be spent when you become financially independent. That money will sustain your lifestyle.
Long-term savings has two functions: save for a down-payment on a house, pay cash for a car or to build up assets like starting a business. The second purpose this money jar serves is it can act as an emergency fund.
I’ve discovered setting money aside in a saving account labeled “emergency fund” doesn’t work. Because guess what happens? An emergency! And the money gets spent.
I building an emergency fund over and over again and the money always gets spent. The only thing that allowed me to actually have money in case of an actual emergency was if the money was going towards something else like a down payment on a house. In case of an actual emergency, the money was there and it meant we had to delay when we would buy a house.
Money Jar #4
The fourth money jar is tithing/give. I believe in paying a 10% tithe to my church. It goes a lot deeper than simply giving 10% to my church. I truly believe that when you have the mentality to give, you’re looking at life with an abundance mentality. This will spill over into other things.
I don’t want you to have a scarcity mindset. That’s no way to live! 10% doesn’t have to go to a church, it could go to your favorite charity or you could even use the money for birthday and Christmas gifts. Either way, when you give, you look at life in a different lens.
Money Jar #5
The 5th money jar is play money to blow. 10% of your income will be set aside and spent on whatever your heart desires. This is non-guilty spending and it will help you to maintain balance in your life.
10% of your money should be going toward things you love to spend money on and if you could choose to spend more, you would totally do it. Things like weekend getaways, expensive date nights, massages, concerts, fairs, whatever you want.
“Life is meant to be enjoyed, not just endured.”
If you’re paying more than 5 – 7% interest on any debt, you should be paying that off and not spending money on play. This is about priorities and you can’t afford to be flushing money down the drain each money on high-interest debt. Pay off that high-interest debt, then you’ll be able to start spending more money on things that you value.
Money Jar #6
The last money jar is for education and is probably the most flexible jar. Invest 10% in yourself and your skills. Pay for college, buy courses, books or anything that will help you increase your skills.
“The best investment with the highest ROI is an investment in yourself.”
Setting aside money for education could do more for you than any other jar. You should be doing this if you’re able to master all of the money jars above.
However, If you’re unable to live off 50% of your income or you’re paying off a lot of high-interest debt, you should be using the money from your education jar to pay for those things.
If you’ve tried managing your money in the past and it didn’t work, what do you have to lose by giving the money jar system a try?
This will help you build a foundation for financial wellness and allow you to live the life you’ve always wanted to live.
Using cash can be difficult for a lot of people and I get the question, “how can I use this money jars system digitally?” And my answer is you absolutely don’t have to use physical jars. I recommend it starting out but you can do the exact same time with your bank accounts.
I will be sharing an article next week about what to do if you don’t like using cash to manage your money.
You can also sign up for the free course on learning how to manage your money with the money jars system where I give you the step-by-step guide you need to get started in 7 days.
My wife Kenzie and I got engaged 5 years ago today! What’s even crazier is we dated for nearly 5 years before we got married. Now, here we are with an 18-month child, a mortgage, and a lot more responsibility.
We started dating in high school. I was going into my senior year and she was going into her junior year. I wasn’t looking for a serious relationship in high school because my focus was on sports. But there was something about Kenzie that I kept coming back to. So we would break up and get back together over and over again. She was a tennis player in high school and I would go watch her matches. I was on the football and basketball teams and she would come to every game. As much as I didn’t want a serious relationship at the time I knew she was perfect girlfriend material.
We Had Our Struggles
Kenzie struggled with health problems growing up which lead her to miss most of high school. Her teachers would excuse her for missing class and the school would send teachers to her so she could finish high school. The doctors couldn’t really pinpoint what was wrong with her. It broke my heart to see her struggle but the nurturing side of me enjoyed being there for her and helping her through her struggles (she no longer thinks I have a nurturing side).
We went through a lot the first few years of dating but we always felt like we were meant to be together (like most teenagers do). The real test was to see if she would wait for me during my two-year church service mission.
She would write me a handwritten letter once a week (just like in the cheesy love stories) and I would respond to her every time. Including emails once a week.
Turns out she ended up waiting for me and when I returned home we were married about 9 months later.
Our Proposal Video
You can check out our proposal video here below. It’s hard to believe it has over 3.5 million views. Big thanks to my brother for putting this together.
Because we dated so long we knew what we were getting ourselves into. And those years leading up to marriage were filled with exciting trips, dates and quality time spent together that never really cost that much money.
The reason I share this with you is to discuss how big of a financial decision it is to get married. Probably the biggest decision you will ever make.
We didn’t have everything figured out financially before we got married but it was a topic of discussion that we had frequently. I hear about people who get married that have never taken the time to understand each other’s finances and that blows my mind!
We Got On The Same Page Financially
We were very much on the same page before we got married. In fact, after I graduated high school and Kenzie started her first job her senior year, I shared with her the money management system that I had been using for about a year or two. She really liked it and started managing her money the same way that I did. That’s when I knew this was the girl I wanted to marry.
Even better, was after I returned home from a church service mission, she still managed her money the same way. When we got married, it was easy to combine our finances and get on the same page financially.
We’ve never really argued about finances (only until recently when I try to get too extreme). But the budgeting system that we use has helped us maintain balance in our saving and spending. Although life gets difficult when you have kids, buy a house, and start businesses, it’s possible to have healthy finances.
We look forward to what the next 5 years will bring!
Imagine taking a trip. You don’t simply get in the car and start driving. You need a destination and Google maps to guide you. Otherwise, how do you know when you’ve arrived? Having clear set financial goals will guide you to your financial destination.
I’m going to walk you through a step by step process of setting clear financial goals. This is one of the first things I do when I meet with a new client.
I talk about financial goals first because they need to know where they’re going. Their knowledge of personal finance is apparent from the beginning because I can tell how much they’ve thought about their finances.
Newbies sit for a minute and struggle to come up with a financial goal. It’s something they’ve never thought about. They may say something like, “I just want to be debt-free or I’d like to travel more.”
Others who’ve given it more thought have goals on their mind that they’ve wanted to accomplish for years. They may say something like, “I have a credit card balance I would like paid off before the end of the year,” or “We’d like to buy a house in two years and need to save more for a down payment.” Better but still somewhat vague.
Financial Goals Are At The Center of Everything
When it comes to financial planning and coaching, goals are at the center of everything we do. Personal finance is PERSONAL. So take the time to set goals specific to your situation.
One client said to me after discussing their goals that no one had ever asked them what their financial goals were and that it was nice to discuss them out loud and have someone listen.
When I ask someone what their goals are, 9 times out of 10 they are very vague. Goals such as, I want to make more money or I’d like to save a down payment for a house lack clarity. These are wants and we all have them.
“A goal without a plan is just a wish” -Antoine de Saint-Exupery
Each Financial Goal Needs Two Things: A Date and A Number
When I help people set goals we spend a few extra minutes making them specific. One way to make sure each goal is specific, it needs two things: a date and a number.
For example, if your goal is to travel more, when do you want to travel and how much do you need to save?
If your goal is to save a down payment on a house. Your goal may look like this: Save $20,000 in my savings account by April 2020.
By being specific and putting the goal in writing you’re 40% more likely to reach your goal.
Limit the number of goals you’re working towards. It’s overwhelming listing 20 financial goals you would like to do this year. Keep the list to three to six top goals and prioritize what’s most important.
Here’s a list of financial goals my clients have set to help you get started.
Pay off $22,000 of credit card debt by December 2020
Save $20,000 for a down payment on a house by April 2020
Get my full match and save $300 a month for retirement starting today
Track all of my spending for three months
Save up $2,000 for a trip to Iceland in the summer of 2020
Build up $5,000 to move out of my parent’s house in May of 2018
Save $400 a month starting this month
Pay off my car loan of $13,000 in one year from today
Build up a net worth of $850,000 in 10 years in order to be financially independent
Max out my Health Savings Account ($6,900) in 2019 in order to have a kid next year
Pay $5,000 in cash for a used car in 6 months
Save $50 a month into my child’s 529 college savings plan
Throw a party for my 50th birthday. Save $2,000
Build up a $1,000 emergency savings in 3 months
Ask for a 20% raise at work this week
Going A Little Deeper
Each goal has an amount they’d like to save or pay off and a time frame to accomplish it.
After goal setting, think about this question. “If money wasn’t an issue, what would you like your life to be like?” When I ask that question, I can see their faces light up. It’s not a question they’re asked often, but it’s something we think about. They describe their ideal life and I can see a different side to what they’re trying to accomplish and why they want to reach their financial goals.
While it’s fresh on their mind, I give them an assignment. Go to futureme.org and write a letter to your future self. Futureme.org will send the letter in an email to you one year from now. When they get their letter, they reach out to me and tell me how their progress is coming and what an experience it is to get that letter because they have forgotten they wrote it.
So much can change in one year. One year from now your goals probably won’t be the same. That’s why you continually scrutinize and change your goals as your life and priorities change.
Your goals don’t have to be perfect and honestly, they will change frequently. Now, I’m going to ask you to do something. 90% of you reading this aren’t going to do anything but I want you to be the one person that does. Promise me you’ll do this?
Your Assignment Is to Set Financial Goals
Write your top three short, medium and long-term financial goals down on a place you can refer back to them and write a letter to yourself with those goals that will be sent to you in one year. Will you do that? In one year you may be way off or realize that you actually accomplished each goal.
Get started by downloading the free PDF I put together to help you set your top financial goals.
I hope this helps you get clear on where you’re trying to go. Otherwise, you’re going to look back 10 years from now and wish you had taken your finances a little more seriously. I want to help you avoid feeling like that at some point in the future. It’s time to take action!
Hi, I’m Scott. Welcome to my website! I’m an Accredited Financial Counselor, husband, and father. I hope you’ll join me on the journey of reaching financial independence through simplifying how you manage your money.