If financial independence is one of your life goals, we want to help.
Whether you want to retire early or not, and financial independence while you work can be one of the most liberating feelings ever, setting yourself up for success with the right tools is critical.
There are many approaches to financial independence. For some, they like the “lean FIRE” approach where you try to spend as little as possible, being frugal, so you can build up your nest egg so it can support you in your early retirement aspirations. For others, they prefer the “fat FIRE” approach where you don’t necessarily cut everything but try to make it as efficient as possible.
Whatever approach you prefer, the key is understanding the financials. You need the tools to help you build that nest egg, whether through fat or lean techniques, and those tools can make your life so much easier. The easier it is, the more likely you’ll finish it.
Table of Contents
- 1. Personal Capital: Build and Track Your Plan
- 2. Vanguard: Investment (Manual)
- 3. Betterment: Investment (Automated)
- 4. Fundrise: Investment (Real Estate, Non-Accredited)
- 5. Mint: Passive Budgeting
- 6. You Need a Budget: Active Budgeting
- 7. Ally Bank: High-Interest Savings
- ★ Best Cards for Hotels, Travel Bonuses
1. Personal Capital: Build and Track Your Plan
If you want to retire early, you’ll need to plan your escape from the cubicle.
Personal Capital is a free financial tool that helps you track your net worth, analyze your investment portfolio, and plan your future retirement given a set of assumptions and an understanding of your needs. Relatively recently, they added a budgeting tool as well but the strength of Personal Capital lies in its rich investment and analysis package. (our full review)
Personal Capital is a powerful tool recommended by almost all FIRE bloggers because it helps you plan your escape. The dashboard lets you see your progress all in one place and it only costs money if you have Personal Capital manage your wealth, a completely optional service. I use it strictly for the dashboard and analysis, leaving my investments at Vanguard.
2. Vanguard: Investment (Manual)
Vanguard is beloved by so many for one simple reason – they’re frugal. They are frugal and they pass along those savings to you, the investor customer.
When you can invest in the best Vanguard funds, like the Total Stock Market ETF (VTI) with an expense ratio of just 0.04%, for mere pennies – that’s true love.
Vanguard does mutual funds better than nearly every other company (you could argue some are at the same level, but no one does it better) because they offer their index funds with minimal tracking error and minimal costs. 0.04% expense ratio on the VTI means that if you invest $10,000 in that fund, you pay Vanguard just $4 a year. FOUR DOLLARS!
That’s why people love Vanguard. You get exactly what you want and you pay practically nothing for it. That’s why they manage 4.5 trillion dollars in assets (as of September 2017).
3. Betterment: Investment (Automated)
If you are a little skittish about picking your own funds, consider a robo-advisor that will do it for you.
Betterment is one of the oldest robo-advisors and they will, after learning more about you, recommend a mix of investments that will help you reach your financial goals. They do this using a mix of low-cost funds, many of which are from Vanguard while charging you a small advisory fee on top of it.
Betterment is the low-cost version of an investment advisor or planner. They will help you with asset rebalancing as well as lowering your tax burden, using tactics like tax-loss harvesting. The cost starts at just 0.25% a year with no minimum balance.
4. Fundrise: Investment (Real Estate, Non-Accredited)
If you are not an accredited investor but still want to invest in real estate with just $500, Fundrise is a better option. Fundrise is different because it’s more like an eREIT than it is direct real estate investing. By that I mean you don’t invest in specific properties but put your money in a fund that invests in a portfolio of property.
This way, it is similar to traditional real estate investment trusts, which you can trade on the market. The benefit of Fundrise is a more targeted approach, lower transaction costs, and a lower barrier to entry. Fundrise is also free to join and look around.
5. Mint: Passive Budgeting
Mint is a free tool that will help you build and track a budget. I call it “passive” budgeting because the Mint tool offers all the data integration capabilities of a budgeting tool but doesn’t do a lot to help you plan, project, and transition your budget from where it is now to where you want it to be. If this seems a little unclear, check out the feature set Mint offers versus You Need a Budget.
6. You Need a Budget: Active Budgeting
You Need a Budget, often written as YNAB, is an active budget management tool that will help you save more money by being better at planning for the future.
YNAB is a software tool but it is built off a methodology that makes a lot of sense.
The framework has just four rules:
- Give Every Dollar a Job – Whether it’s rent, food, or savings, every dollar is allocated to something.
- Embrace Your True Expenses – Large, infrequent expenses (like a semi-annual car insurance payment, holiday gifts) are broken up into monthly “bills” so they don’t bust your budget.
- Roll With The Punches – Adjust your budget categories whenever you go over, less guilt and more active planning.
- Age Your Money – The gold is in thise rule, you get to the point where you are spending money earned over 30 days ago – so you get ahead. Getting ahead is the key to financial freedom.
7. Ally Bank: High-Interest Savings
Ally Bank is the bank used by so many because they do a great job – high-interest rates, no minimum balances, and they recently acquired TradeKing so you can even invest in the stock market for $4.95 a trade if you want to scratch that itch. They will even reimburse other banks’ ATM fees up to $10 each statement cycle (they do not charge ATM fees).
We recommend them because I use them. Financially, they’re slightly better on CD rates and early withdrawal penalty schedules, but they’re on par otherwise with most other online banks.
When it comes to online savings accounts, there are a lot of options and they’re all similar. We like Ally Bank but here’s a list of some other great online banks and you can pick whichever one appeals to you the most.
★ Best Cards for Hotels, Travel Bonuses
Finally, and this isn’t technically a tool… but if you want to get ahead financially, you need to work the system.
When the times comes to retire, and hopefully it won’t be too long, you’ll want to take advantage of your new-found freedom. If travel is in the cards, then you’ll want to get some bonus promotions so you won’t overpay for flights and stays.