Badass vs Dumbass
Master your Financial Kung Fu to be one and not the other.
Go to Sifu’s Notebook for FIRE with Kids: Top 15 Strategies for Families to Retire Rich
Primer: Who are Sifu & Ronin
Episode 22: Jimbo Wants In
Ronin: Sifu, thank you for seeing my work buddy this morning. Jimbo is a brand new dad – so I don’t think he’s been getting his nightly 8 hours beauty sleep, am I right, bro?
Jimbo: Half that, if lucky! I feel like a dead man walking right now – tired AF, guys. Diapers don’t change themselves and nightly feedings fall on me, evidently! WTH man, who knew? I appreciate you taking time to see me, master.
Sifu: Welcome Jimbo. I see you were super-prepared for your new circumstances, eh? Hahaha. No more all night clubbing with Ronin?
Jimbo: Sifu, I miss those nights already. But that’s not on my mind these days.
Sifu: Why are you here then, brother? I was thinking Ronin must have told you about my new espresso machine – and you wanted some excellent joe to wake you up. No?
Jimbo: Oh yeah – I’ll def have one of those, thank you very much! Ronin raved about it and told me Starbucks better watch out. The competition is here!
Sifu: Ha! Not likely, but you’re welcome to it.
Jimbo: The real reason is because I need some serious help from you, Wise One. You see, I was pumped when Ronin told me about his journey to FIRE. I was about to hop on his coattails and join that party train to early retirement – it sounds epic! Then this kid happened, and now I’m worried I just murdered those dreams.
Sifu: Ah! Do you really think FIRE is only for folks with no children?
Jimbo: Dunno, chief. Thinking about our new responsibilities with this plus one, I thought for sure – we’re done like dinner.
Sifu: Yes Jimbo. The added responsibilities of children do pose new challenges to the FIRE equation, but it is def still possible for you.
Jimbo: Really? Oh man! You just made my day, Sifu.
Sifu: Before you get too excited, you need to understand there will be additional planning and strategies you need to employ as new parents, if your FIRE goal is to be kept.
Jimbo: Ai-ya!
Sifu: You’re not climbing Everest, pal. Relax. Totally doable, if you’re up to it. You ready to join Ronin and put on your big boy pants, and get to work?
Ronin: I’ll def set you up with a pair of these savage baggie pants, Jimbo.
Jimbo: Always looking out for the little guy, eh Ronin? You da man.
Ronin: Sifu always said “Remember to pay it forward”. Happy to do it, bro. No disrespect, but your hand-me-down acid wash jeans need to go anyways. You feel me, lil bro?
Jimbo: Whaaat? These are my favorite old school pants, brother! They go hand-in-hand with my love for all things 80’s: my cool Swatch watch, Sony Walkman, vinyl records, and mix-tapes. At least I cut my big hair last year…
Ronin: That mullet was total dumbass, Jimbo! You would have kept it if your wife didn’t force you to get lose it. I’m afraid she’s way smarter than you, my man.
Jimbo: Hey, can we agree that I am the genius. Didn’t I get her to marry me, this dumbass mofo? Hahaha!
Ronin: Fact! I still need to take you shopping, Jimbo. I’ll pay for your new pants if necessary. You are killing my vibe with those, man. I can’t hang with you like this – you’re scaring aware the honeys.
Jimbo: Ok ok. I give in…
Sifu: Enough big pants talk, boys. Jimbo, if you’re serious about getting on the FIRE path with a family, listen up.
Jimbo: Fire it up, boss. All ears.
Sifu: Alright. Let’s start with the basics.
1. Create a Detailed Budget
Sifu: A well-structured budget is your foundation. With kids, expenses are ever-changing, so your budget must be dynamic.
Ronin: I’ll do the Google translation for you: you’re about to become best friends with Excel.
Jimbo: You mean Excel gum? You trying to tell me my breath smells like gym socks, dude?
Ronin: Dumbass! No man – Microsoft Excel! You know, that software you use, like everyday at work.
Jimbo: Oh. Yeah yeah! Of course.
Sifu: Ah, my #1 student is not wrong. Track your expenses, Jimbo. Every penny. Adjust monthly, especially as new costs—like child care and school supplies—pop up. Set financial goals that align with your FIRE objectives.
Jimbo: Track it all. Roger that, chief.
2. Maximize Income
Sifu: Now, about your income. You’ll need to maximize it to boost your savings and investment potential.
Ronin: Me thinks you better enjoy your 4 hours a night, because your side hustle is calling!
Jimbo: I might have to invest in one of these cool espresso machines. My energy is going to be wiped with regular work, side hustle work, and the kid!
Sifu: You got this, Jimbo – you are still young and full of spark. Yes, side gigs, dual incomes, and career advancement are your friends. Remember, the more you earn, the faster you can invest.
Jimbo: Dang! Does “surviving parenthood” count as a side hustle?
3. Invest Wisely
Sifu: Speaking of investing, that’s your next step. Diversify with index funds, real estate, and tax-advantaged accounts.
Ronin: Before you ask Sifu if putting all your money on red at the casino is a good strategy, I already asked him that. For some reason, the answer was “Fuck, no dude”.
Sifu: Ahem. Ronin, I’m so glad your dumbassery level has subsided from DEFCON 1 to maybe DEFCON 3 today. We still have much work to do, but yes, any talk of casinos here, better be accompanied by, “I don’t bet against the house. I am the house.” Feel that boys?
Ronin and Jimbo (in unison): Yes sir!
Sifu: Jimbo, wise investments will generate the passive income you need to support your family and your FIRE goals.
Jimbo: Copy that – loud and clear!
4. Reduce Housing Costs
Sifu: Now, housing is one of the largest expenses. Consider downsizing, refinancing, or even moving to a more affordable area.
Jimbo: Hey, that might be a good idea. Smaller house, smaller headaches, eh?
Sifu: Exactly. And if possible, try house hacking—renting out part of your home for extra income.
Ronin: Dude! If you trick out your extra room into a man cave, maybe I’ll rent from you. Win-win bro!
Jimbo: I like the possibilities!
5. Cut Transportation Costs
Sifu: Next, let’s talk transportation. Avoid buying new cars; the depreciation alone is like burning money.
Ronin: Sifu just gave me a huge lesson on this. I can fill you on the details, bro. We got this one! Hey, maybe you can save even more by giving up driving cars altogether. Don’t you still have your tricked out tricycle from back in the day?
Jimbo: Hey man! No need to make fun of the trike – it’s not a 3 wheeler from preschool. My Mission Triad Chopper has cruiser written all over it.
Ronin: Just playin’ with you, big boy. It is super cool. Could you give up driving now that you have a kid?
Jimbo: Hmmm, will need some thought. Could always give it up and use Uber when necessary? Will do the math and see what the numbers tell me.
Sifu: Nice, Jimbo. Glad you’re thinking about options. Ronin, you could learn a thing or two from you, little brother.
Ronin: Easy there boss. I teach him good shit too, right bro?
Jimbo: Yeah yeah. All good. We swap good ideas all the time. He’s like the big brother I never had. Always grateful to him.
Ronin: Here for you, man.
6. Minimize Childcare Expenses
Sifu: Next is childcare. It can be a significant expense, but there are ways to minimize it. Consider family help, flexible work arrangements, or even nanny-sharing.
Jimbo: Def will be exploring the options. Some friends are broke just from their childcare fees.
Ronin: Just found another side hustle, boss. I can take care of Jimbo’s kid when I’m free and charge them less than the normal rate. Win-win, am I right boys?
Sifu: #1, can you even take care of yourself?
Ronin: Ouch! C’mon boss – I’m way less retarded than I used to be. No?
Sifu: Well, if Jimbo and his lady trust you, then why not?
Jimbo: Yeah, def a possibility. Ronin is only retarded about stupid shit like his love of extremely large pants, big enough to shoplift refrigerators with.
Ronin: Easy, brother man! Once you go biggie pants, you never go back! Trust.
Jimbo: Ha! If you says so, big man.
7. Embrace Frugality as a Family Value
Sifu: Now, frugality is a key component of FIRE, especially with a family. Involve everyone in cost-saving measures.
Ronin: Family that pinches pennies together, stays together. Isn’t that a saying? Just don’t let the kids know they’re eating “budget ramen”.
Jimbo: My recipe using dollar store ramen rules! Done and done!
8. Teach Kids Financial Literacy
Sifu: Teaching kids about money is critical. An allowance system, saving goals, and basic financial concepts should be part of their education.
Ronin: Don’t forget to start with rule number one! Say it with me: “No, we’re not getting that toy. I’m investing the money instead”.
Jimbo: Ha! I’ll start the kid with piggy banks and work my way up to stock portfolios.
9. Optimize Tax Strategies
Sifu: Optimize your tax strategies by using tax-advantaged accounts, child tax credits, and tax-efficient investing.
Jimbo: Hmmm. Taxes – my favorite topic!
10. Plan for Education Costs
Sifu: I know, no fun but you’ll save tons, if you do some tax planning. Now prioritize education savings early with 529 plans. You need a plan to prepare your kids as best you can for the world; that starts with top notch education.
Jimbo: I’ll start those savings now. Maybe my kid will thank me later.
11. Prioritize Health and Wellness & Plan for Healthcare Costs
Sifu: 100% they will because they’ll benefit and go far. Now, healthcare is a major consideration. Invest in HSAs, maintain a healthy lifestyle, and plan for unexpected expenses. If you stay healthy now, you’ll avoid big bills later.
Ronin: I’m totally down with staying healthy, so I’ll help you there, bro. Get ready to hit the gym!
Jimbo: You gonna tell me the secret to building those guns of yours, Ronin? If getting ripped is part of the “keep healthy” plan, I’m down!
Ronin: Yeah man. I got you covered.
12. Leverage Community Resources
Sifu: Now, use public libraries, community events, and support networks. These resources are often free or low-cost.
Ronin: Plus, the library is a great place to hide when you need a break from diaper duty and chaos at home. LOL.
Jimbo: Free books and peace? I’m in. Don’t you tell my wife. Hee-hee.
13. Automate Savings and Investments
Sifu: Automation ensures that you consistently save and invest, regardless of what life throws at you.
Ronin: Set it and forget it. Just like your Roomba, bro!
Jimbo: Hey! Clean house tech rocks man. As a bonus, it drives the pussycats mad! Endless entertainment every day.
Sifu: Ha! Use new technology to automate your savings and you’ll be entertaining yourself with Ronin on the beach through FIRE.
Jimbo: Sign me up, Sifu!
14. Minimize Lifestyle Inflation
Sifu: OK, here’s a big one – you must avoid lifestyle creep. As your income increases, resist the urge to spend more. The Creep is real!
Ronin: Sorry bro – no upgrades to your tricked-out audiophile system at home. I know you’ve been eyeballing some cool hi-fi gear to buy with your upcoming bonus.
Jimbo: No new state-of-the-art turntable to play my old school vinyl … sheeeit. Don’t really need it, but I wanted it, so bad!
15. Stay Flexible and Adaptable
Sifu: You can do this, Jimbo. Stay strong. Last is: stay flexible. Life with kids is unpredictable, so be ready to adapt your plan as needed.
Jimbo: I am determined, master, and I’ll stay on my toes. No matter what, I’m seeing this FIRE journey through. Ronin will keep me on the straight and narrow – right, my man? And, I can come back to visit you, Sifu?
Sifu: Any time. Like you, I too am a huge fan of the 80s and vinyl, so you’re always welcome here. You boys are young – I lived through the best decade. Well, that’s my opinion anyways …
Jimbo: You could be right, Sifu. So many cool things came out of that era. You can be young and still appreciate the classics!
Sifu: Amen to that. I’m only young at heart. Hee-hee.
Ronin: Welcome to the club, bro. Which means you need official club big-ass pants – let’s go shopping!
Sifu: Oh brother …
Sifu’s Notebook
FIRE with Kids: Top 15 Strategies for Families to Retire Rich AF
Achieving Financial Independence and Retiring Early (FIRE) is a challenging task, and it becomes even more complex when you add children to the mix. However, with the right strategies and a focused approach, families can navigate the challenges and still reach their financial goals. Here are the top 16 strategies to help families retire early while raising kids:
1. Create a Detailed Budget
- Key Reason: A dynamic budget helps manage the ever-changing expenses that come with raising children.
- Action: Track and review expenses. Adjust your budget monthly to account for new expenses like school supplies, extracurricular activities, and healthcare.
- Identify Savings Opportunities: Cut unnecessary expenses.
- Set Financial Goals: Align your budget with your FIRE objectives.
2. Maximize Income
- Dual Incomes: Both parents working can significantly boost savings.
- Side Hustles: Explore additional income streams like freelancing, gig work, tutoring or selling handmade goods.
- Career Advancement: Seek promotions or higher-paying job opportunities.
3. Invest Wisely
- Stock Market: Invest in diversified index funds or ETFs.
- Real Estate: Consider rental properties for passive income.
- Retirement Accounts: Max out contributions to 401(k)s, IRAs, and other tax-advantaged accounts.
4. Reduce Housing Costs
- Downsize: Move to a smaller home or a more affordable area.
- House Hacking: Rent out part of your home to generate income.
- Refinance Mortgage: Lower your interest rate to reduce monthly payments.
- Consider Geo-Arbitrage: Moving to a lower-cost area while earning the same income increases the savings rate.
5. Cut Transportation Costs
- Buy Used Cars: Avoid the depreciation hit of new cars.
- Public Transportation: Use buses, trains, or bikes to save on gas and maintenance.
- Carpooling: Share rides with neighbors or colleagues.
6. Minimize Childcare Expenses
- Family Help: Rely on grandparents or relatives for childcare.
- Flexible Work Arrangements: Work from home or adjust schedules to reduce daycare needs.
- Co-op Childcare: Share childcare responsibilities with other families. Also check into nanny sharing.
7. Embrace Frugality as a Family Value
- Key Reason: A frugal lifestyle supports high savings rates without sacrificing family happiness.
- Action: Involve the whole family in cost-saving measures, like cooking at home, loving hand-me-downs and embracing second-hand shopping, DIY projects (like home repairs and maintenance), and free activities.
- Outcome: A unified family approach to saving helps sustain long-term financial goals.
8. Teach Kids Financial Literacy
- Key Reason: Financially literate kids are more likely to understand the value of money, reducing financial strain.
- Allowance System: Give kids an allowance to teach budgeting.
- Savings Goals: Encourage kids to save for their own purchases.
- Action: Start with basics like budgeting, saving, and the concept of compound interest.
- Outcome: Kids who are financially savvy may be less likely to ask for expensive, unnecessary items.
9. Optimize Tax Strategies
- Tax-Advantaged Accounts: Use HSAs, FSAs, and 529 plans. *** Canadians: use FHSA, RESP ***
- Tax Deductions: Take advantage of child tax credits and other deductions.
- Tax-Efficient Investing: Choose investments that minimize tax liability.
10. Plan for Education Costs
- Key Reason: Prioritizing education savings early reduces the need for large cash outflows later.
- 529 Plans: Save for college with tax-advantaged accounts. (RESP’s in Canada). Open the plans and contribute regularly.
- Scholarships and Grants: Encourage kids to apply for financial aid.
- Community College: Consider starting at a community college to save on tuition.
11. Prioritize Health and Wellness & Plan for Healthcare Costs
- Key Reason: Healthcare is a major financial consideration, especially with kids.
- Action: Invest in a Health Savings Account (HSA) if available, or budget for unexpected medical expenses.
- Preventive Care: Regular check-ups to avoid costly medical bills.
- Healthy Lifestyle: Encourage exercise and healthy eating to reduce healthcare costs.
- Health Insurance: Choose plans that balance premiums and out-of-pocket costs.
12. Leverage Community Resources
- Public Libraries: Free access to books, movies, and educational programs.
- Community Events: Enjoy free or low-cost local activities.
- Support Networks: Connect with other FIRE-minded families for advice and support.
13. Automate Savings and Investments
- Automatic Transfers: Set up regular transfers to savings and investment accounts.
- Employer Contributions: Maximize employer 401(k) matches.
- Consistency: Ensure regular contributions without manual intervention.
14. Minimize Lifestyle Inflation
- Key Reason: Avoiding lifestyle inflation ensures that raises and bonuses go towards savings rather than increased spending.
- Action: Resist the urge to upgrade your lifestyle when your income increases.
- Outcome: More of your income is channeled towards investments, accelerating the journey to FIRE.
15. Stay Flexible and Adaptable
- Key Reason: Life with kids is unpredictable, so it’s essential to adapt your plan as circumstances change.
- Adjust Plans: Schedule regular family meetings to review the budget, savings, and investment goals. Stay flexible and be ready to change strategies as circumstances evolve.
- Continuous Learning: Stay informed about financial trends and opportunities.
- Resilience: Maintain a positive mindset and adapt to challenges.
