Financial Independence Is a Choice

Money For the Rest of Us

J. David Stein

Investing, Investing Podcast, Business, Economics, Economy

4.5 • 1.4K Ratings

🗓️ 2 October 2019

⏱️ 32 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

Why true financial independence means eliminating financial vulnerability including not being overly reliant on stock market appreciation.

Topics covered in this episode include:

What does it mean to be financially vulnerable.
What are the two paths to financial independence.
Why we shouldn’t stake our financial independence and early retirement on the historical performance of stocks and bonds.
What are the rules of thumb we can use to develop reasonable assumptions for stocks and bonds and how those assumptions will lead to lower portfolio balances compared to using historical returns.
What has historical earnings growth been for U.S. stocks.
Why stock buybacks will be less in the future due to high debt balances unless companies grow their revenues and overall earnings.
How are actions lead to financial independence even when it is difficult.

Thanks to Vistaprint and WIX for sponsoring the episode.

For show notes and more information on this episode click here.

[0:17] Being financially independent begins with a decision.
[2:33] Protecting yourself against financial vulnerability.
[4:14] Should you solely rely on investment returns for financial stability?
[7:52] Estimating the returns of asset classes.
[13:40] Earnings per share drives the returns of the stock market.
[17:31] Build an active and flexible strategy for financial stability.
[22:49] Uncertainty doesn’t negate the positive effect of small actions.

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Transcript

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0:00.0	Welcome to Money for the rest of us. This is a personal finance show on money
0:05.3	how it works how to invest it and how to live without worrying about it. I'm your
0:10.0	host David Stein today's episode 271. It's titled Financial Independence is a choice.
0:17.0	Two friends of mine recently released books on the path to achieving financial independence.
0:22.0	Rob Berger published Retire Before Mommy to achieving financial independence.
0:23.0	Rob Berger published Retire Before Mom and Dad,
0:25.8	The Simple Numbers Behind A Lifetime of Financial Freedom.
0:29.3	Chris Mamula, along with his co-authors Brad Barrett and Jonathan Mendoza published Choose F.I.
0:35.3	Your Blueprint to Financial Independence.
0:38.4	The books describe the different choices, paths, numbers, and stories behind achieving financial freedom.
0:45.0	They're very well done.
0:47.0	Mamula Road in Choose FI, this book is called Choose FI.
0:52.0	It would be easy to focus on FI financial independence and
0:56.4	classify this as a personal finance book. But don't overlook the word choose. This is a book about making choices. Financial
1:06.8	independence is a choice. I chose eight years ago just about this week to quit my job and declare myself
1:15.4	financially independent. But I realized I made that choice many years earlier
1:21.9	when I first joined my investment advisory firm, we were in a, might have been a 30 story building in downtown Cincinnati. We were probably on the 18th or 19th floor and much of
1:37.0	the building was occupied by individuals who worked for banks.
1:43.2	As I rode the elevator with these workers, many of them complained about their jobs.
1:50.2	And a number of them were in their 40s or 50s and just were frustrated and couldn't get out of their situation.
1:58.0	I made that choice just observing them and at the time I was 30 that I didn't want to be in that situation 20
2:04.9	years down the road where I felt stuck that I was so dependent on the income from my
	...

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