Today I have the this week’s installment of our segment: Interviews with money experts. I talked with Shawn from The Smart FI.
Without further ado, here’s the interview.
Could you give the readers a little backstory as to who you are and why you started The Smart FI?
I am a husband, father of two boys, and a Registered Nurse by trade. I have always been a saver from a very young age, by necessity almost. I remember my mother telling me when I was young, that she had made $18,000 a year. At the time that seemed like so much money but as an adult, I realize we were poor.
My first job was at the age of 13, at a small hamburger stand. It was from that point on, that I was responsible for most of my own expenses. I started saving for a car, auto insurance, and school clothes. I finished out my K-12 education with a clear plan to go to college.
I graduated from Nursing School with no student loans by utilizing scholarships and low-income federal Pell Grants. I moved to the city and was quickly hired to work in an inner-city emergency department. This was quite a culture shock for a country boy.
Gangs, drugs, and alcohol kept our ER humming along, patching up gunshots and stab wounds. It was so busy some days but, man, was it exciting. Something like the scenes from a movie. Early on I knew I couldn’t do that job forever though. So I started maxing out my 403(b).
In 2006 my wife and I had our first child and in 2008 we had our second child. My wife, who is also a Registered Nurse, quit her job to stay at home and raise our children. Losing 50% of our income put the brakes on the retirement savings.
As our children grew older my wife slowly returned to work and just last year started a part-time job. It was really having children that forced our family to live on one income. As my wife has begun to work more we saved/invested the extra money.
Currently, we are saving 40% of our income.
The reason I started The Smart FI blog was out of a desire to do a greater good. I am informally the go-to guy at work for financial questions. I have taken the time to thoroughly understand my employers 403b, HSA, and health insurance.
I wanted to create a resource for my peers to learn about IRA’s, saving and investing. Now, when I get a finance question at work I say, “have you checked the blog?”
(Editor’s Note: A 403(b) is an employer-sponsored retirement account usually offered to public/government employees. It’s very similar to a 401(k)).
How did you come up with the name for your website?
I have been interested in financial independence my whole life, so when I stumbled upon the FI movement I knew I had met my people and I wanted to join the party. Several of the first FI blogs I read early on seemed to be written by young males, with high paying tech salaries and no kids.
I, on the other hand, was a 40-year-old married father with two children. My wife doesn’t necessarily subscribe to the idea of frugality and my kids sure as hell don’t. So I thought there would be an audience of people in my demographic that would be interested in getting rich slowly.
The Smart FI is my attempt to help those in my situation reach FI, through a smarter more measured approach. Thus, TheSmartFi was born.
How do you get to save 40% of your income? Strict budgeting? Envelope system?
Let me tell you a little secret, our family is horrible at budgeting. The truth is my wife and I seldom agree on our personal finance goals. We have tried using fin-tech software like Mint. We have tried cash. What I finally settled on is paying ourselves first.
If savings comes from our pay before ever hitting our checking account then we don’t really miss it. So over the last two years, I have ratcheted up our 403b accounts and Roth IRA accounts to the point where we both max-out those accounts.
What allows us to max-out all of these accounts is that we have two paid off cars. In a typical family, two financed vehicles account for up to 20% of take-home pay. That really erodes your ability to save.
My formula for calculating our savings percentage is:
Taxable and nontaxable savings + yearly mortgage principal paydown ÷ Gross income
Are there any lessons that you’ve learned from working in an inner-city ER?
My three lessons learned from working 15 years in an inner-city ER. First life is fickle and through no fault of your own, tragedy can strike at any moment. Second, take care of yourself. Daily, I see regret on the faces of patients who have abused their bodies for years. Third and most importantly, above all else be kind. Often a kind word or gentle touch to a worried parent of an ill child can make all the difference.
What are some financial tips for a family that has moved or is thinking about moving to one income?
To really be able to go to one income, I really believe you have to attack the top three budget busters in America, housing, car, and food.
Almost everyone in America falls for the same script. Graduate college and buy a new car, then find a partner and buy a “more expensive than you can afford” house that you will grow into. My wife and I actually made both of these mistakes.
Fortunately, through planning, we were able to eliminate the car loans and cut down on groceries and eating out to be able to live off of one income when our children were young.
Although our two boys still don’t recognize the value, it was a real blessing for my wife and me to have those early years to spend with the children at home instead of daycare. I wouldn’t have traded it for anything.
And let’s be honest you need a career or trade that makes a good wage. None of this works at the poverty level.
Were there any money lessons you were taught growing up that you appreciate now?
I attribute my savings genes to my father who was eternally frugal. He has since retired, but he worked in a warehouse managing inventory. He never made more than $10 per hour his whole life.
My mother, on the other hand, taught me how to stretch money by cooking at home, driving used cars and avoiding eating out. I learned from both my mother and father that you have to improve both ends of the net worth equation.
It’s not enough to just be frugal, you need to grow your income also. You have to always grow the gap between what you make and you spend.
Where did you turn to gain your knowledge of finance and what did you learn?
I have always had a passion for saving money and making it grow. I did not have any mentors in my childhood who took time to show me what it meant to make your money work for you. I read books and had a subscription to money magazine at age 18. Nerdy, I know. I have made my mistakes along the way.
I learned the hard way. I was 20-years-old during the dot-com bubble. All over the media and in the papers there were rags to riches stories of people day trading there way to fortunes. I wanted in.
So I took all the money I had to my name, $2,000. I went down to the local bank where I met with a “broker” who told me he was going to sell me a hot stock.
I left the bank with a piece of paper saying I owned Dell Stock. I never saw that money again. A year or two later I rode Dell down to almost nothing.
I could be mad at the broker, but I figure I paid $2,000 to learn a very important lesson.
What are some investing lessons you’ve learned since your dot-com days?
Everyone repeat after me. I am not smarter than the market. I am not trying to beat the market. I just want to match the market.
Seriously, I used to watch CNBC’s Jim Cramer years ago and try to buy all of the hot-tip stocks. I only lost money. At work, I get asked frequently what is my favorite stock to buy. They always seem bummed out when I tell them it’s the Total Stock Market Index ETF.
I love Warren Buffet’s quote, “Why try to find the needle in the haystack when you can just buy the whole haystack.”
The last thing I learned is the trading fees and high expense ratios will eat your gains up.
I was just explaining to a nurse the other day that if you buy a $100 stock and pay a $7 trading commission it just cost you 7% and that one share has to appreciate to $107 before you break even.
She had not ever thought about the fees associated with purchasing stock.
What is your plan when you reach FI?
As previously mentioned my wife and I struggle with finding a balance between saving and spending. If left to my own devices I would save almost all of my pay because I just don’t spend money on things I don’t value. My wife does bring balance to the table and she helps me to meet in the middle.
Our current FI plan is to continue maxing out our 403b and Roth IRA. Next is paying off our mortgage. You can read about that plan here. After our mortgage is paid off it will be about time to start paying for college. I plan to finance college with the old mortgage payment.
I really do like my job in a pediatric emergency department. I would like it a lot more if I worked less. At some point, after the mortgage is paid off I will decrease the hours I work. Truthfully, I will probably never retire in the traditional sense. I will just transition to fewer hours of work per week. I’ll work because I want to, not because I have to.
What’s some advice you hope to pass onto your kids and the next generation?
I really haven’t tried to teach my children about personal finance yet. I have explained stocks and investing but I try to allow them to be kids. At ages 9 and 12, I know they are capable of understanding but they are more concerned about what they are going to spend their birthday money on and I’m okay with that.
As they grow older I hope to mentor them on starting a Roth IRA or signing up for their first 401(k). I figure they won’t really listen until they want the knowledge.
Robert Kiyosaki says in his book Rich Dad Poor Dad, “buy assets, not liabilities.” This is something I will really try to impress upon my children as they near their earning years.
Any other important financial lessons you picked up from Rich Dad Poor Dad.
It took me a long time to finally pick up Rich Dad Poor Dad and read it. I was initially turned off by the book’s premise that formal education teaches you to fail. Once I started reading the book I realized there was much to learn from the other messages the book teaches.
A couple quick financial lessons I learned were:
- Buy “luxuries” last and use cash flow from your assets to buy those luxuries. Everyone wants that shiny new car or the big house to impress people they don’t know or don’t care about. These two luxuries are usually purchased early in a career when peoples’ earning power had not yet grown.
- Next, make your money work for you by reinvesting income from your assets back into more assets. This triggers the power of compound interest. Once your assets reach critical mass and your assets provide enough income to live off of, you are now financially free. Congratulations!
What’s an app, a book, and a podcast you’d recommend to someone who wants to improve their financial situation?
App- I love Mint. I love how it aggregates all of my accounts. I know in almost real time what I have in my checking accounts and what my upcoming credit card balances will be.
Book- My favorite nonfiction book has been, Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not!
. My favorite takeaway from that book is, “buy assets, not liabilities.” It is a simple yet powerful lesson.
Podcast- I love, love, love podcasts. I listen to podcasts while I’m running and also on my way to work. I feel like I learn more from podcasts than any other place. It is like free college. My current favorite podcasts are:
Is there anything else you could add that would benefit the readers?
This is something I will tell my kids when they are about to enter the workforce. Spend less than you make and you will be just fine. It really is that simple! The more that you are able to grow the gap between earnings and spendings, determines how long it will take you to be financially free.
Where can people go to learn more about you and your work?
I write for my own blog, TheSmartFi.com. I am active on Twitter and on Instagram under the handle thesmartfi for both platforms.
I just want to add a plug for Twitter. I honestly thought Twitter was a dying platform before I started to blog, but now this is where I spend most of my time with FI personalities that are incredibly intelligent. I have learned so much just from networking with these other great FI bloggers.
That concludes my interview with Shawn. I hope you gained some new insights into how to improve your Financial Health and grow your Wealth. Come back next week for my interview with J Money from Budgets are Sexy.
So readers, what was your favorite point made here? Anything you want me to follow up with Shawn about?