← So Money with Farnoosh Torabi
So Money with Farnoosh Torabi
1836: Ask Farnoosh: Thoughts on FIRE Movement? Worth the Effort?
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Farnoosh Tarabi
Hey, this is Farnoosh Tarabi from the Sew Money podcast. Running a business means wearing a lot of hats, but ordering supplies shouldn't be one of the ones you don't like. Walmart Business helps organizations like yours save time, money and the headache of managing purchases. From office essentials to bulk break room snacks, it's all in one place, online, in store, or right in their app. Sign up for free@business.walmart.com and get back to what really matters running your business. It's not what you say, it's how you say it. And when you show up in a Range Rover Sport, you don't have to say much at all. This is the vehicle for those who lead with quiet confidence, where power, poise and performance speak louder than words. The Range Rover Sport combines a dynamic sporting personality with refined elegance and agility, delivering an instinctive drive that feels as purposeful as it looks. Its distinctly British design doesn't shout for attention, but it gets it. And when the road changes the terrain, response to system with seven drive modes adapts like a seasoned traveler. Inside luxury is not an add on, it's a standard. Breathe easy with the cabin air purification system, enjoy serenity with active noise cancellation, and explore in comfort, whether you're gliding through city streets or carving through winding country roads. There's even a plug in hybrid engine option with an estimated electric range of 53 miles. Because even raw power can be smart. Explore Range rover sport@range rover.com us that's range rover.com us sport so money Episode 1836 Ask Farnoosh. You're listening to so Money with award winning money guru Farnoosh Karabi. Each day get a 30 minute dose of financial inspiration from the world's top business minds, authors, influencers and from Farnoosh yourself. Looking for ways to save on gas or double your double coupons. Sorry, you're in the wrong place. Seeking profound ways to live a richer, happier life. Welcome to SEW money. Welcome back to so Money everyone. I'm Farnooche and it's Friday, June 6, 2025. Time for AskFarnoosh, our weekly check in where I got answers to your biggest financial questions to date and we're covering quite a bit today. First, I want to break down the Trump backed budget bill that passed the House this week. However you lean politically, this should be on your radar and we'll learn later the show about what this bill could mean for our personal finances, our taxes, our borrowing costs and then of course we have your mailbag questions which came in from all over Instagram, the website somoneypodcast.com you know, you can also leave me a voicemail if you go to somoneypodcast.com I love hearing your voice. First, a question from our audience about fire, financial independence, retire early movement. The question is, do I subscribe to it? Would I ever plan to retire early? I've got some answers to that. You might be surprised. Also, a question about generosity, guilt and how to create a gift giving strategy that feels good and fits your budget. I think this is a great time to answer this question. With so much going on seasonally, we've got graduations, weddings, bachelorette parties, bachelor parties, how to strike the right balance of being generous but also being financially fiscally responsible, and finally, bonds. What role do they play in a portfolio? How do I suggest buying them? Before we get into all of that, let's just recap what you may have missed on SO MONEY this week. On Monday, I welcomed Hannah Cole, a friend of the show, founder of Sunlight Tax and author of the upcoming book Taxes for Humans. She and I discussed smart strategies for freelancers and creatives, smart tax strategies, people who are often left out of traditional financial advice. She's brilliant at translating tax language into something that we can all understand as humans. And in that show, she makes a strong case for why pay your taxes isn't always a burden. It's kind of a form of professional power. That was episode 1834 with Hannah Cole. Then on Wednesday, one of the most powerful conversations, I would say, all year with Elizabeth Cronice McLaughlin. She's a former Wall street attorney turned leadership coach and a single mom. And she was very candid in that episode about rebuilding her finances after divorce, piles of debt, and a pandemic era business freefall. Like many entrepreneurs, she went from making six figures to nothing. Many of her contracts went away in the pandemic. What I admire about Elizabeth is that she didn't just climb out of the hole. She used the experience to completely reframe her relationship with money and models financial literacy for her kids. And so for anyone out there who's struggling, whether it's due to a divorce, tackling debt, her story is very inspirational and a true comeback. All right, we're going to talk about the biggest economic headline of the week, the Trump budget bill. So this week, House Republicans advanced a sweeping budget bill that would extend Trump era tax cuts, reduce spending on social programs, and according to the Congressional Budget Office, which is a nonpartisan entity, it will add $2.4 trillion to the national debt over the next decade. All right, let's zoom out what's actually in this bill. So, firstly, the tax cuts. The bill proposes to make permanent the 2017 tax cuts that were originally set to expire this year. These cuts primarily benefit higher earners and corporations. And critics say they disproportionately reduce federal revenue without significantly boosting wages or middle class economic activity. Secondly, there will be some program cuts on the chopping block, mainly parts of Medicaid, climate programs, affordable housing initiatives, and even funding for the irs. And that last one might seem like a win for people who hate audits. But defunding the IRS can actually hurt tax enforcement, especially for the ultra wealthy, and it can increase the tax gap. Thirdly, immigration and defense. The bill reallocates more money to defense and border security. The Congressional Budget Office, which is again, nonpartisan, reviewed the proposal and found that while it trims some spending, the revenue losses from extended cuts outweigh everything else. So the plan, while it markets itself as fiscally responsible, it would increase the deficit by trillions. Why does this matter to you and I? A few things. One, interest rates. Right? More borrowing by the government puts upward pressure on interest rates, which will affect our mortgage rates, our credit card apr, even those student loan payments that we may be still carrying from college, grad school, the ones with variable rates. The program cuts are also going to impact us, your healthcare, rental assistance, if you're on food support. These program cuts could affect all of these things. And then, of course, taxes. Massive deficits today could lead to higher taxes tomorrow to make up for the shortfall. The bill is called the One Big Beautiful Bill Act. I can't say that too many times. One Big Beautiful Bill Act. Okay. The Democrats call it Trump's Big Ugly Bill. I've got links in our show notes if you'd like to. I've got links in our show notes if you'd like to read more about the bill. Okay, let's move on and answer your financial questions. First up, Lauren on Instagram dmed me. And you can, too. You can go to Farnoosh Tarabi on Instagram. Send me a direct message there with your question. She wants to know my thoughts on the fire movement, if I've ever tried to retire early. So, all right, I love this question because really, it gives me a chance to reflect on how my own mindset around money and work has evolved. I think if you had asked me this question, you know, when I was in my 20s and I was working a job that was very, very Difficult and crazy hours. I'd say, yeah, I'd love to retire early. Maybe because I hadn't really found my groove yet. I wasn't in my flow. And then of course I got, if you know my story, you know, I got laid off and then I became a solopreneur. Since then, that was 2009, and I haven't looked back. And I think I have now arrived some 15 years later to a place where I don't want to retire. And it's a choice that I'm actively making. I want to keep producing, I want to keep making an impact as a financial educator, as a podcast host, as an author, and I'm starting new ventures. I've started a local podcast called the Montclair Pod. And I feel like I'm just getting started and I don't. Nothing against those of us who want to retire early. I've interviewed many of them on this show and one thing that I find is common with nearly everybody I've interviewed who has been through the fire movement is maybe already retired, quote unquote, retired early. Is that to them, retirement does not mean stopping working, right? It just means now you have created a life for yourself where you get to call the shots. You get to choose how you show up for work, how many hours a week, what you make because you've built up enough reserves in savings in your investments that now when it comes to work and that financial exchange of work for money, it's less stressful. It's more again, your choice. And I sort of feel like I'm there. I mean, like I don't think I could just stop working and be fine. I, I, you know, I'm being very honest. Like I got, I got bills, I still have a mortgage, I still have kids who haven't gone to college. And while I've saved a lot of money and I've fasting Since my early 20s, the lifestyle that I've built that I really love, that was very deliberate is not such where I can just stop working, live off of our savings until I die. I think that one again, as I've explained, would not be exciting to me. I like working in the work that I've created for myself, but practically speaking, it's not possible. And I don't know if I could have ever gotten to this place of being able to retire entirely at 45 with having children, having a mortgage, I'd have to have had a completely different plan for how my life would have looked like by this time in my life. And I I don't know of a better life for me. I really don't. I really am happy. That's the truth. I don't think I even knew about the Fire movement in my 20s. I kind of only started to learn about it 10 years ago or so. Right. Because that's when it kind of became hyped up and started to get popular in the way that we understand it today. But I will say that financial independence, not the retire early part, but the financial independence part has always resonated with me. And that's always been my goal since my 20s, since I was 10, in fact. You know, I recognized very early on as a kid that having your own money meant being more in charge of your life. I saw it through many examples in my immediate orbit. My mother, for example, married to my father, who made most, if not all, the money at times in their marriage. And that was a constraint for her, having to feel. Feeling as though she had to always ask for permission to buy something for herself. And even just spending money on the family in the ways that she wanted. There was always friction between her and my father. And I think my father, being the traditional male, would see his financial power as having power over a lot of decisions. And I talk about this a lot. Just because you make more gives you no right to have more voice, more power in the relationship. You're not running a corporation. You are in a relationship, and you want to maintain that relationship, hopefully, so you wouldn't want to wield your power in such awful ways. So as a result, I grew up very much conscious of how financial independence, particularly as a woman, could come in handy in my adult life. And I was always about making the buck in my 20s, and I did a pretty good job of it. I had many hustles. I kind of feel sometimes semi retired, I will say. Like today I'm recording this episode, and I spent all morning at my daughter's school with her. Field day. And then I came home and I had a call. And then recording the podcast. I've been doing work on my time. Not every day is like this, but I do have these days where I feel a little less attached to my work. And I really appreciate that. I really do. And I think that's the takeaway, is that ultimately we wanna get to a place in our lives where we feel like we have flexibility. We can call more of the shots. And I wish that for everybod, some people want to get there quicker than others, more aggressively than others. I think that the fire movement, truly, if you want to retire early, like really 40, and just start traveling the world and start your animal rescue, whatever it is you want to do. Like, it has to align with the lifestyle that you are working towards, right? Like, if you want to retire early, but you also want to buy a home, which means having a mortgage and raising kids through college, I think that's going to require more financial stamina than any sort of savings regimen can afford you in your 20s and 30s, right? Like, it's just you're going to need like 30% returns on those investments every year in order to have that money last you for all those things that you want to accomplish. It's not that simple, right? It takes a certain kind of mindset and a certain person with a certain kind of vision for their life to be able to pursue fire entirely. And that doesn't mean that they're better or that they're more financially responsible or they're doing their money better than you. It's just their choice. This is what they want in life. While on vacation in Paris recently, I visited a friend who lives there full time, and her apartment was stunning. Classic tiled floors, vibrant decor, just full of charm. As we're catching up, she casually mentioned that she hosts it on Airbnb whenever she travels, which is often. And immediately I thought, wow, this is a perfect space for guests. But also, that's a lot to manage on your own. That's where Airbnb's co host network comes in. For hosts who travel often, work full time, or just want some help managing bookings, a co host can step in to take care of the details. From guest communication to check ins to making sure the place is ready for guests, it's a smart way to earn extra income without making hosting a second job. 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Next question is from Becky. She writes Farnoosh I'm trying to budget for gift giving. I love being generous, but I feel conflicted. Sometimes I receive very generous gifts like $100 in cash from an aunt, and then I feel guilty when I can't give back at that same level. I want to teach my kids to be generous too. Any advice for how to budget for this and shift my mindset all right, Becky, great question. Clearly comes from the heart. Here's how I would approach it. First, you want to create a separate budget for gifts. Call it whatever you want. Gift budget, appreciation budget. This is essentially a monthly or quarterly budget category, specifically for celebrations, birthdays, holidays. And then look over the past year to get a sense of how much you typically spend and where it felt too much or just right. I will say that for me, with my kids, for example, and their friends, they get invited to a lot of birthday parties. And when I don't plan ahead and get those gifts, even just a few days before the party, a lot of times it's that morning, I'm rushing to the toy store, I'm overnighting something from Amazon, I'm running to the drugstore or whatever to grab a gift card. That that's when I overspend. And they have actually done studies that those of us who procrastinate on shopping around the holidays especially, we tend to overspend, not just because we don't have a plan and we all go over budget, but because there is actually this underlying emotion of guilt. And whenever you feel guilt when you're shopping, you tend to overspend. You feel guilty because you waited so long, right, to buy something for this person. It sort of, you know, maybe there's a inherently that you feel like you're not prioritizing this person and you feel guilty about it, and so you overcompensate. They don't know how much maybe you spend on that gift, but you do, and it kind of makes you feel better. It's very psychological. So I say do this budget, but I think you got to pair that with being a little bit more proactive with the gifts that you buy and planning those gifts ahead of time. So that's rule number one. Just maybe set a budget aside and that can help you feel like you're staying more on course throughout the year. And then when you know how much you're going to spend, you can plan more appropriately, think about gifts and what would fall under certain ranges, and then rethink the exchange. You know, when someone gives you something big, like your aunt, that's a gift from her to you, it's not a debt. Right? We don't need to match gifts dollar for dollar. We match based on thoughtfulness and effort and, you know, even something like a handwritten note, something that you make with your hands, an offer to do something for them that that is very, very helpful to them, whether it's like childcare or providing meals. You Know, gestures that are very personal, that really immerse you into the gift, carry real value and are often more meaningful. I mean, I don't think your aunt's giving you $100 and expecting you to match that. Right. One of our friends got our son a 100 gift card one day for his birthday. And my husband and I both looked at each other like what it was a last minute purchase and that's how he overcomp and it was very generous and like my son was out of his mind grateful. But, you know, we're not going to go and get them a $100 gift card for their son's birthday. That's not how it works. Right. Like, that's great. Thank you for the gift. But in our family, we spend 25 to $30 on a child's birthday gift. We feel like that's appropriate. And we do that across all the friends. And that's just how we've budgeted it back to rule number one. That's what we budget. And then with your children, I think modeling thoughtful giving can go a very long way. Let them help choose the gifts that are again within the that you set. And when they see that you decline to overspend, talk about why. Say, you know, we give what we can afford and we give with love and we want to give something that's really thoughtful. You know, this gift that you picked out, while it's really fancy, I don't think this is really the right occasion for it. We have set aside a budget which still you can buy a lot of things within this budget. Let's try to stay within these parameters. So great question, Becky. Thank you so much for writing in. Now let's talk about your favorite topic, which is bonds. Shannon writes in with a follow up question. She heard me say on the podcast recently that in order to figure out your breakdown of stocks versus bonds in your retirement portfolio, the rule of thumb sometimes is to take 110, subtract your age and whatever number you're left with, that is equal to the percentage of stocks that you would maybe have in your portfolio and the remainder in bonds. So if you're 30 years old, 110 minus 30, you're down to 80. So 80% stocks and then 20% bonds. The reason we're using 110 minus your age now, 100 minus your age, one part, one reason for that is because we're living a little bit longer. And when it comes to affording risk, your timeline matters. And if you have an extra long timeline, then you can take on more risk, and that's why 110 feels a little bit more appropriate. But this is not investment advice necessarily. Take into account your own risk tolerance. This is just a very general rule of thumb. So this question is really about bonds and why they are important and how to go about purchasing them. This person, Shannon, does not have bonds in her portfolio and wants to get started. So firstly, let's talk a little bit about why bonds matter. I like to call them the seat belt in your investment vehicle. They don't grow as fast as stocks, but they don't crash as hard either, especially in times of volatility or as you approach retirement. Bonds have been very popular with the with investors approaching that stage because they offer more stability and income. How I invest in bonds is mostly through index funds and exchange traded funds or ETFs, similar to how you might buy an index fund that is indexed to a stock market like the S&P 500 or ETFs that track an industry. You can also buy these funds for bonds. And so within these funds you're holding a variety of either government or corporate bonds. For example, the Vanguard Total Bond Market Index Fund. The Vanguard ticker is VBMFX. The iShares Core US Aggregate Bond ETF, that's agg is the ticker there. These are often held inside retirement accounts. For me, I hold these in my SEP ira. The interest from bonds is taxable, so retirement accounts help shelter that income in taxable accounts. If you want tax advantages, look into municipal bonds should you buy individual bonds. Usually people don't unless they're managing a large portfolio or working with an advisor. I like funds because they offer instant diversification. Long story short, long explanation short. If you are just getting started and let's say you're 40 years old, so 110 -40 leaves you at 70% stocks, 30% bonds. Again, just a rule of thumb, but a great place to begin. You can go into your existing portfolio wherever you're investing and adjust the portfolio. If you're 100% in stocks, you could reduce your stake in stocks and then fill it up with bonds and then add bonds into the mix. For me, I use a platform that automatically configures my portfolio based on a survey. We talk about this a lot on the show. I've done investment workshops in the so Many Members club on this. But essentially if you're using a robo advisor, let's say when you go, when you onboard, they ask you a series of questions in their survey, including your Risk tolerance, your goals. And from there they create a portfolio for you that is mostly, if not all, comprised of low fee index funds, ETFs, across a spectrum of funds, stock funds and bond funds. And then a little bit in cash too. They hold some cash in some cases for, for extra. So if you're starting from scratch, you could log on to one of those investment platforms. There's many, many, many of them. Merrell has one, Vanguard has one, Fidelity, Ellevest, Wealthfront, Betterment, and just get started there. Many of these platforms, they charge similar amounts. They have a similar approach to creating a diversified portfolio. I always say when people ask, when people ask, which one should I go with? Varnish. I always say, you, I know what test drive them. Go on their websites, get a feel. Because at the end of the day, a lot of this comes down to the user friendliness of these sites. Some of them come with a robust customer service, some don't. Depending on some of the services that are important to you, the interface, user experience, that is really where I think the platforms differentiate. And good luck to you. I appreciate this question so much. I love that we had a mix of, you know, a straightforward financial question. We had one that was a little bit more nuanced about spending and our emotions and gifts. And then the FIRE movement. I can't say I'm a disciple, but I can appreciate it. And I can also say that at least 50% of that fire acronym I am totally behind, which is financial independence. And I think we all are. Right, I'll see you back here on Monday, everyone. When our guest is Dan Post. He's the great, great, great grandson of Emily Post. And we're talking about financial etiquette. What does it mean to have financial etiquette in today's world when it comes to tipping? Talking about money with your friends, with your partner, talking about money at work, asking for a raise, you don't want to miss that show. And as a reminder, our so Money members club has doors open for you. It's our private community where I host monthly workshops, monthly office hours. This month, June, we're talking about the sandwich generation. Many of our members in the workshop are caring for loved ones and they're stuck in the middle taking care of themselves. And they're feeling a little financially stuck. Stuck supporting both aging parents, growing children, and let's not forget themselves, caregiving costs, maintaining your financial independence. We're going to go deep on that this month, later in June, if you sign up today, you'll be automatically invited to that workshop. Visit somoneymembers.com somoneymembers.com to get started today. Thanks for tuning in, everyone and I'll see you back here on Monday. I hope your weekend is so money. Now at Verizon, we have some big news for your peace of mind for all our customers, existing and new. We're locking in low prices for three years guaranteed on my plan and my home. That's future. You peace of mind and everyone can save on a brand new phone on my plan. When you trade in any phone from one of our top brands, that's new phone peace of mind. Because at Verizon, whether you're already a customer or you're just joining us, we got you. Visit Verizon today. Price guarantee applies to then current base monthly rate. Additional terms and conditions apply for all offers. Ready to order? Yes. We're earning unlimited 3% cash back on dining and entertainment with a Capital One Saver Card. So let's just get one of everything. Everything. Fire everything. 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