Wealth & Wonder Vol. 20

Ever wonder why we always think that next week would be a better time to start going to that Pilates class, or give up Diet Coke (lol yeah right)?

Why we’re so certain that while we can’t do it right now, in the future we’ll be better equipped to be disciplined, dedicated, and virtuous?

The excellent book Fixed, by John & Campbell and Tarun Ramadorai, references research that shows that the area of the brain that is active when we think about our future self is the same area that activates when we think of an entirely different person.

Put simply, we think of future us as a stranger.

And this makes sense, right? No wonder I always assume future me will be excited to work out, and pumped to eat just lean proteins and vegetables when right now I want to gobble down a burger and fries like a little gremlin (just me?).

And this is also why it’s so hard to save for our future selves. We don’t even know her.

But the fact is, we will become that future version of ourselves, and we don’t want to wait to get there only to realize we have to keep working until we die.

So how do we figure out how much money we need to retire?

Enter the ✨4% rule.✨

The 4% rule says that, if calculated correctly, you can live safely withdraw 4% of your assets each year for 30 years if you accumulate the right amount of money over the right period of time.

For example, if you know you want to be able to spend $80,000 a year when you retire, you would calculate $80,000 * 25 (the inverse of 4% - just trust me, I don’t understand how it works either. I’m a money nerd, not a math nerd).

You’ll need $2,000,000 by the time you retire to withdraw $80,000 from your portfolio each year for 30 years.

Gulp.

$80,000 might be really high, though. You won’t have commuting costs, you won’t need work clothes and equipment, and work lunches. Maybe you own your home outright by this time, and have no debt payments. Maybe you can live comfortably with $40,000

So $40,000 * 25 = $1,000,000

So we know we need between 1-2 million to retire.

See why it’s important to get started now?

You might be asking, "How will I ever save $1,000,000 by the time I’m 70?"

Answer? You won’t. You’ll save a fraction of that and let the markets and compounding interest do the rest.

Take some time to think through how much you might want to live on in retirement.

A good rule of thumb is to look at how much you spend right now and go up or down from there based on differences you anticipate in your future.

Like maybe you want to travel more, but also you'll own your home, so you won't be paying mortgage payments.

Play around, it can be fun to imagine the future that strange version of you gets to live!

So, how do we make this happen?

Start by investing in a retirement vehicle, like an IRA or Solo 401(k), every year, and allocate that money to a mix of equities and bonds (called diversification).

You will accumulate money at a level far higher than the actual cash you put away.

What are a Roth IRA and a Solo 401(k)? Stay tuned, and we’ll talk about that next week.

If you can’t wait and want to ask me questions now, reply to this email, and we can chat all about it.

In Wealth & Wonder,

Kacy

P.S. I gave up Diet Coke once before, and it had a profound impact... on my will to live. I won't be making that mistake again. What's the vice you just can't quit? Reply and let me know!

Wealth & Wonder Vol. 18

“Hmmm… this area of your gum is really thin. You need surgery.”

I’m sitting in the dentist chair, mouth wide, while the dr. says the words I’ve dreaded hearing.

You need surgery.

The messed-up thing is I’ve already had surgery on this area, but it didn’t really work (thanks for nothing, Doc!)

And because I’ve done it before, I know it’s painful and requires not eating solid foods for Two. Whole. Weeks.

THE HORROR!

Obviously, I’m being dramatic, but it sucks.

And that’s before we get to the finances.

Surgery ain’t cheap, and as a self-employed business owner, my insurance doesn’t extend to the kind of high-quality dental care my shitty gums require, so I have to see my dentist out of pocket. And boy, this one is going to hurt.

We’re talking thousands of dollars.

And here comes ✨The Emergency Fund✨ to the rescue.

She really is that girl. A stash of money, easily accessible (ie, not invested in the markets), that exists specifically for these oh shit! moments.

For some people, gum surgery wouldn’t qualify as an emergency.

But as someone who deeply believes death enters through the mouth (I heard Sarah Silverman say this once, and it’s been embedded in my brain ever since), I don’t screw around with my teeth.

I know the concept of an emergency fund is likely not new to you, but the importance of having a cash cushion cannot be overstated.

Maybe it’s surgery, maybe you get laid off, or your car needs a major repair, or your work dries up for a few months.

The emergency fund's got you.

Standard financial advice suggests that your emergency fund should have enough to cover basic expenses (i.e., not manicures or streaming services) for three months for full-time employees and six months for freelancers.

Six months. Ouch. That’s a lot of money. And while that's a great suggestion and a good goal to work toward, don’t let the hugeness of that number stop you from saving.

Even one month of expenses will come in clutch when you suddenly need new spark plugs, or in my case, a gum graft. You'll be grateful for any amount of money you've got in that account.

So start saving today.

Put aside $50 or $100 a week, whatever you can manage without feeling the pinch (obvi the more the better.)

Ideally, transfer it to a high-yield savings account like this one from Ally, or this one from Amex (not sponsored, but Ally, hit me up, girl, I refer you to everyone).

For bonus points, make the transfer automatic so that you don't even know the money is getting saved!

If you have any questions on how to get this going, or any experience with a gum graft you want to share, reply to this email!

In Wealth & Wonder,

Kacy

P.S. TLDR; An emergency fund is 100% that bitch, and it’s a good idea to start creating one right now by putting aside $50-100 a week (or more if you can handle it) into a High Yield Savings account until you have 3-6 months of basic living expenses.

Wealth & Wonder Vol. 8

On a trip to Maine the other weekend, we got caught in grueling, brutal traffic. A 7-hour drive became 12 HOURS.

The drive was so long that I developed wrist tendonitis from holding the wheel. (Maybe it was tendonitis, maybe something else, I'm not a doctor OKAY)

The point is, the drive was SO LONG there were injuries.

It got worse and worse throughout our (lovely) weekend in Maine, and then we had to drive BACK.

By the time I returned to NY, I was in serious pain. I was dreading the doctor visits, physical therapy, and medications that were likely to follow.

To buy some time, I bought a $15 wrist brace from the pharmacy. I wore it every day for the next 5 days.

And... my injury healed.

I didn't need doctors, or PT, or meds. I just needed to let it be stabilized*.

Most clients come to me in a similar (emotional) state.

They feel overwhelmed and like they're drowning, and they think they'll need to make expensive, fancy changes to their finances or their business to make progress.

But often, the most important thing they need to do is stabilize their finances, ie, pause and evaluate exactly where they are right now.

This is why understanding your cash flow is the most important place to start when you're feeling financially overwhelmed.

Ask yourself:

1) What is my monthly average income? And what is the average of my three lowest months?

2) What are my average monthly expenses?

3) Are my average expenses higher than my lowest 3 months? Higher than my average income?

If yes, now we know where to start (hint: the answer is almost always yes)

If you're feeling overwhelmed with your finances in your business, start with asking yourself these questions.

If you need help, send me an email at kacy@kacyrice.com with your answers (or questions), and we can chat about it! I'm happy to help you get started.

In Wealth & Wonder,

Kacy

P.S. * I'm seriously not a doctor, so don't take my medical advice.