How to Reach Financial Independence Without Putting Your Life on Hold with Justin Peters

The Personal Finance Podcast

Host Andrew and guest Justin Peters discuss the psychological transition from extreme frugality to intentional spending on the path to finan

Key takeaways

• Justin Peters utilizes a 'Fun Fund' where 10% of monthly surplus is dedicated solely to enjoyment.
• The 'Moments that Matter' list helps prioritize high-value events like weddings and visiting aging parents regardless of cost.

Main topics

• Financial Independence Mindset
• Intentional Spending Frameworks

Notable quotes

I would trim off the last 10 % of the optimization and I'd probably get 100 % life satisfaction back from it.

Conclusion

True financial independence is achieved when wealth building is balanc

Transcript preview

Speaker 2 (0:00) First of all, tomorrow's not guaranteed. So you should be enjoying today just as much as you're setting your future self up. And then second, I do think financial independence, especially for most people, it's got to take some time. You know, we're talking about decades that you're going to be spending. So if you're not enjoying that time, ultimately, you're either going to burn out and probably take two steps back and or you're going to resent the whole process, the whole journey when you get to the finish line. So I'm a big proponent and enjoying the moments while also, like I said, taking care of your future self. I was being prudent. with financial decisions, but I think I took it just a little bit too far. And honestly, looking back and reflecting on that period of my life, I realized I would trim off the last 10 % of the optimization and I'd probably get 100 % life satisfaction back from it. Speaker 3 (0:45) On this episode of the Personal Finance Podcast, how to pursue financial independence and still enjoy your life. Speaker 3 (1:00) What's up, everybody, and welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of MasterMoney.co, and today on the Personal Finance Podcast, we're going to be talking about how to pursue financial independence and still. Enjoy your life. If you guys have any questions, make sure you join the Master Money newsletter by going to mastermoney.co slash newsletter. And don't forget to follow us on Apple Podcasts, Spotify, YouTube, or whatever your favorite podcast player is. And if you want to help out the show, consider leaving a five-star rating and review on Apple Podcasts, Spotify, or your favorite. podcast player. Now on today's episode, I'm going to be talking with Justin Peters. Now, Justin is the host of the Fiey-Minded podcast, a podcast all about how to achieve financial independence without going to extremes. And if you've ever felt as though being on the path to financial independence means that you have to feel deprivation or you have to be deprived, this episode is for you. Now, Justin has spent years talking to people who have reached financial independence, but the one thing that he noticed that a lot of people went through was that they didn't know how to spend their money. So he developed a framework that helps you spend intentionally. And I think this is such a cool way to think about how to make sure you're spending your dollars on your values. And so today, we're going to be talking about how Justin thinks about spending money, some of the mistakes he made in the past when it comes to financial independence. And we're going to be talking through how he manages his money, how he thinks about spending money, and some of the things that he does in his relationship as well to help him and his wife get on the same page. This is one of those episodes that is definitely less about the math and more about the mindset, which is what I absolutely love about this. And you're going to really, really enjoy this one. So I am so excited to introduce Justin Peters back to the Personal Finance Podcast. So Justin, welcome back to the Personal Finance Podcast. Andrew, Speaker 2 (2:58) it's a pleasure, man. I'm excited for round two. Speaker 3 (2:59) Me too. We're going to have some fun conversations here about financial independence. And I know for all the listeners right now, your favorite topic that we talk about on this show is financial independence. Every single time we talk about, you know, trying to pursue financial independence, kind of the messy middle that a lot of people fall into, or just kind of thinking about this process. Those are some of our most popular, popular episodes. So I'm really, really excited for this and excited to dive deeper into this. Now, I want to kind of talk through this with you because I think you're a master at this, is kind of figuring out how to enjoy your life while you're on the path to financial independence. And you've developed these systems that I think are just... awesome when it comes to figuring out what your values are and figuring out, you know, how you want to approach financial independence, but also be able to, you know, have some funds, do some things that are actually enjoyable. So can you talk about why it's so important when you're on the path to financial independence to Speaker 2 (3:50) actually enjoy your life a little bit here? Well, I appreciate you calling me a master at this because I didn't feel like a master while I was going through the front half of this journey. But a couple of things come to mind when you ask me that question. First of all, tomorrow's not guaranteed. So you should be enjoying today just as much as you're setting your future self up. And then second, I do think financial independence, especially for most people, it's got to take some time. You know, we're talking about decades that you're going to be spending. So if you're not enjoying that time, ultimately, you're either going to burn out and probably take two steps. back and or you're going to resent the whole process, the whole journey when you get to the finish line. So I'm a big proponent and enjoying the moment while also, like I said, taking care of your future self. For Speaker 3 (4:33) sure. And I think, you know, I think about my 20s, for example, and in my 20s, I was just super frugal. And it was this time frame where I was just getting my money together. I was trying to dig myself out of a paycheck to paycheck situation. And all of a sudden, I went from someone who was spending some money to having this scarcity mindset where I just. did not know, you know, what to do with my next dollar. And every single time I started to think about spending money, I even remember feeling as though like, just stress me out, it would cause me to stress and anxiety. And I did not know what my values were whatsoever. And, and so early on in my financial independence journey, and even all the way to my late 20s, I just remember like, forgoing things that I wish I would not have done. And this was a learning experience for me. I know now, like for a lot of people, I get to help a lot of people in these situations, try to figure out, you know, how to find what their values are. But do you feel as though, you know, early on in your financial independence journey, you kind of struggled with something similar to that? And was this, you know, was your relationship with money broken? Or was this something that you felt as though you had to kind of work on over time? Speaker 2 (5:35) It's such an interesting question that you asked that because on one hand, like I don't feel like my relationship with money was broken. You know, I actually loved learning about money. I liked making money. I liked saving and investing. But then on the other hand, there were pieces of my relationship with money that were totally broken. Spending probably being the most obvious. It sounds like similar to you as well. I mean, I grew up in a household where saving, investing, earning money was praised, but then spending money, even spending money on things that. were meaningful and valuable was not something that was praised. So I do think I had a little bit of a broken relationship, especially with spending money. But come on, what personal finance content creator did not have some kind of broken relationship with money at some point in time? So yes, I had to go through all the same trials and tribulations that you're illustrating in your response as well. Speaker 3 (6:24) Did you ever go through like the Mr. Money Mustache phase where you kind of, you know, so for me specifically, like what I call that is like I read Mr. Money Mustache, this blog, and I would go through every single article and I'd be like, OK, I'm going to bike to work. And I was so excited to like do this. My wife's like, well, there's a you know, this is an eight lane highway that you're gonna be biking to work. I don't think you're going to be biking to work while you're going to work. And so like there's just all these different things that I was thinking through. I was like, OK, I want to just make sure I'm spinning, you know. Less than $30,000 per year. I want to make sure that I'm just not, there's no waste whatsoever. I'm optimizing everything. I'm doing my own work and, you know, working on my own house, even though I'm a terrible handy person. And just all these different things that I was kind of trying to figure out. Did you ever kind of go through that early on or were you just kind of, hey, I got this set up, but I just didn't have my values or spending set up correctly? Speaker 2 (7:10) No, I were. the badge of honor of how little I could spend. You know, I was always proud to be the frugalest of my friend group. And to some degree, that was helpful. And, you know, it's nice to be cutting out some of the things that honestly didn't really bring me a lot of joy, but so many places, it was a struggle. I remember a little bit because of circumstances. I was living in San Diego, and I was just so strapped for cash. I was like... I switched jobs that I took a pay cut. I was living off like $50,000 in San Diego. You know, my house was like eating up like half of that. So yeah, I found myself doing like really dumb things like walking pretty much everywhere I could really like. oh man, grocery shopping would take three times as long as it needed to be because I'd have to like price check the per ounce for like everything that I bought. I'm like, why am I doing this? I like that I was being prudent with financial decisions, but I think I took it just a little bit too far. And honestly, looking back and reflecting on that period of my life, I realized I would trim off the last 10 % of the optimization and I'd probably get 100 % life satisfaction back from it. Speaker 3 (8:15) I love that. I think thinking through this and kind of figuring out some of the decisions that you make, because it did for me create decision fatigue. The same exact thing, like when you went to the grocery store, you're just trying to optimize for every single purchase, even if it's 25 cents. And I'm sitting here like. trying to think through this. And I remember getting to the end of the day and I was just like mentally exhausted from my own doing. I was just going over like every single purchase and every single price change and every single thing. And it would take me forever to even buy anything, which in some circumstances is awesome. But then in some circumstances, it was just one of those things that I was just overly frugal. It didn't make sense. You know, get your mental capacity back so you can actually put it towards things that actually bring more value. You developed this kind of system or these four spending principles that kind of helped you when it came to, you know, being able to spend on things that you actually value. And so can you kind of talk about these spending principles, how they came about and some of the things that you did to put Speaker 2 (9:07) them into place? Yeah, you teed this up great because the exact situation that you were talking about with that decision fatigue was the exact situation I was in. I was in this crux where I was about halfway through my financial independence journey, and I still wanted to be prudent and financially responsible, but I wanted to... loosen the reins a little bit. And I just couldn't allow myself to do that. Like this decision fatigue on every spending decision was exhausting me. So one day I, you know, it was the end of the year, I think probably four or five years ago, it was the end of a year. And I was thinking through, okay, this next year. what do I want to spend on? What can I do here? And I came up with a list of four rules. I didn't have names for them at the time, but I slapped names on them just to help articulate them a little bit better. And then eventually the rules turned into principles, like kind of guiding light instead of hard and fast rules. So I have four that I really love to follow and I still practice today. One is a fun fund. This is just taking a portion of the money, taking a portion of my money, and it has one job, and that is just enjoyment. I have to spend this portion of money. on something that would just bring me a lot of joy. So how I did this was if I made $5,000 that month and I spent $4,000, I'd have $1,000 at the end of the month left in my checking account. What I'd normally do is just take that $1,000 and invest it in an IRA or a brokerage account or whatever, wherever I was going. And I implemented the Fun Fund that year, and I had to take 10 % of that $1,000 now and set it into a different account. And that account could only be spent on, like I said, fun things. So that was the Fun Fund, and that helped a lot. It just like alleviated a lot of like, oh, I kind of want that, but I shouldn't be buying that. Well, how much money do I have in my Fun Fund? Oh, cool. I have some money in there. I'll go ahead and buy it. So that was principle number one. Principle number two is the oops budget. This is like a no questions asked buffer so that when something unplanned, unexpected, that was money related happened, I had some money set aside that I could just go ahead and deploy that to that situation because it was often like an already stressful moment. And what was happening with my money was I would run it. I'd have an accident. you know, maybe I cracked my phone and I got to buy a new phone. And you know what happens when you break your phone. Like that is a problem they have to deal with right then and there. And I would layer on top of this like financial stress too. Like, oh my gosh, now I just wasted like a thousand dollars and I got to go buy a new phone. What are you doing, Justin? So I came up with this. oops budget. It was a thousand dollar sinking fund that I set up. Now it's a little bit more fictitious. I just know in the back of my head that I have a thousand dollars for no questions asked type situations. And when a situation comes like this, I'll be like, ugh. That's a bummer, but I got my oops budget. Go ahead, take care of the situation and move on. So that's been great. Spending principle number three is the guilt-free spending categories. A lot of people have similar ideas to this too. Ramit Sethi was the one I really stole this from. I love the How to Money guys too, and they talk about their craft beer equivalent. Very similar. Like every year I pick one or two categories in my budget that gives me like an outsized happiness to spend on. And the goal isn't to underspend in that category. Actually, I think underspending would be a signal that I failed at this. I should be spending more than I really set out to spend on some of these categories. So for me this year, I have two things. That's relationship and health. If it's a friend to ask if I want to go grab dinner and it's kind of a no questions thing, I want to go grab dinner with them or it's health related. I just ran a really big trail race about a month ago. It cost me. way too much money to buy the ticket, the entrance fee, the hotel for all of that. It was like $1,500 for me to go and run. And I'm like, you know what, Justin, that was an investment in my health. So this year, those are my two categories, and I'm not feeling guilty about spending on those categories. And then the very last one was one that I think has really got to get at the heart of this conversation today. And that's my moments that matter list. You were talking about some regrets on spending. And I don't... Looking back at my 20s, I was hyper frugal, but I don't regret most of that frugality. But there was one moment that I really regret. A friend invited me to his wedding, and it was an out-of-state wedding. It was in a high-cost-of-living city. And I remember going back and forth about attending, and I ended up declining. And the reason I declined was it was going to cost me like $1,000 to $1,500 to go there. I regretted it almost immediately as soon as I decided, as soon as I put in that no on the RSVP. And people ask me this question, like, do you ever regret not spending on things? And that is the