Monday Night Finance- Volume 108

Monday Night Finace Featured Image

How to Calculate Your LeanFI Number

Financial Independence (FI) has been a hot topic in financial media. There have been so many articles on the topic in fact that a whole vocabulary has popped-up to describe different aspects of the financial independence journey. These words typically end in FI or FIRE (financial independence, retire early) such as fatFIRE, leanFIRE, barristaFIRE, or coastFI. If this alpahabet soup is making your head swim, then this article is a great place to start.

I’m still years away from reaching full financial independence (FI). To me, that means having enough invested to cover all of my expenses to live. Being FI is different from being leanFI. The latter means having enough invested to cover all of my expenses to survive

~Darcy, We Want Guac

In this article, Darcy of WeWantGuac shares her own personal realization that she hit “leanFI” as a way to introduce the concept of leanFI and how thinking about leanFI can motivate you to reach your own financial goals. Darcy defines leanFI as having a portfolio large enough that it can sustain continuous withdrawals to cover just enough expenses for her to live off of with no extras. In her case, this was a surprisingly modest portfolio of $450,000 and included a move to a cheaper cost-of-living area. Through her narrative, Darcy demystifies the leanFI concept, provides a practical framework for calculating one’s leanFI number, and illustrates the profound impact of geographic arbitrage. Her tone is both enlightening and relatable, making the prospect of leanFI accessible and encouraging. Even if you think you’d never want to live a leanFI lifestyle, calculating your own numbers can help you feel more confident in your ability to weather an economic downturn if something unexpectedly happens to you.

Why Telling Folks To Move Someplace Cheaper is Unrealistic Bad Advice

n the last article, one of Darcy’s keys to realizing she had reached leanFI was that she could slash her cost of living if she needed to by moving to a less expensive part of the country (or even a less expensive part of the world).  While this approach sounds great on paper- who wouldn’t want to pay less rent, in reality it may not be feasible for many people. In this article, Melanie Allen of Partners in Fire looks at the flip side of geographic arbitrage and argues that you can’t just move somewhere cheaper.

The people who say you should just move if you can’t afford to live obviously never paid for a move. If someone can’t afford rent, how will they afford a moving truck, a down payment on a new apartment, or take time off to move?

~Melanie Allen, Partners in Fire 

Allen’s article delves into the complexities and often overlooked challenges of relocating to more affordable areas, critiquing the common advice given to combat high living costs. Allen presents a grounded perspective, highlighting that moving involves significant financial, professional, and personal sacrifices that aren’t feasible for everyone. Key points include the high costs associated with moving, the potential mismatch between job markets, the necessity of family support, political climates, and the adjustment to new social environments. Furthermore, she points out that lower-cost areas might lack essential infrastructure, adequate medical care, and the vibrancy of cultural and social activities found in bigger cities. Through a conversational tone, Allen empathizes with those struggling with high living costs, arguing that the solution isn’t as simple as relocating to a cheaper place. Her article suggests a deeper understanding and consideration of individual circumstances in the discourse on managing living expenses.

Do You Need Interval Funds?

In 2024 there are many ways to invest your money. There is a seemingly endless number of mutual funds and exchange traded funds (ETFs) you can invest in. Furthermore, there are even ways to invest in blue-chip artwork or farmland through companies that aggregate investor funds. One type of fund that is not often talked about is an “interval fund”. If you’ve never heard of an interval fund before, this article explains what they are and who might benefit from investing in one.

If you look at the original poster from Bogleheads, his advisor put at least a million bucks (that’s the minimum for NICHX) into this fund, and he wasn’t even sure why. That’s a bad sign. If you don’t understand, you have to keep asking questions until you do. They work for you, and if they can’t explain it, they aren’t good enough.

~Jim Wang, WalletHacks

Jim Wang’s article on interval funds unpacks the complexities and niche appeal of these less conventional investment vehicles, primarily targeting those who seek alternatives to standard index funds. He discusses how interval funds, which operate on a closed-end basis with set redemption periods, offer an intriguing option for those interested in less liquid investments like litigation finance or royalties. Wang’s tone is informative and cautious, stressing the importance of understanding the substantial commitment these funds entail, such as higher fees and inflexible withdrawal terms. He contrasts these with more familiar investments and emphasizes the need for thorough comprehension before diving in, reflecting a pragmatic approach to personal finance that values clarity over novelty. His exploration into interval funds, complete with personal anecdotes and a detailed breakdown of potential costs and operational mechanisms, serves as a critical primer for anyone considering this investment path but also underscores its suitability for only a select few.