Contrarian Takes on Money, Risk, and Retirement with Tyler Gardner

Summary

All the Hacks: Contrarian Takes on Money, Risk, and Retirement with Tyler Gardner

Podcast: All the Hacks: Money, Points & Life
Host: Chris Hutchins
Guest: Tyler Gardner
Date: September 17, 2025

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Overview

In this episode, Chris Hutchins sits down with Tyler Gardner to unpack Tyler’s data-driven, “contrarian” takes on personal finance. From challenging the gospel of emergency funds and the infamous 4% rule, to rethinking how we define wealth, happiness, and risk, this conversation aims to encourage listeners to question conventional money wisdom, intentionally design their lives, and optimize both their finances and fulfillment. The episode also addresses avoiding fear-driven money habits, exploring what truly brings happiness and “enough,” and reevaluating familiar strategies on budgeting and investing.

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Key Discussion Points & Insights

1. The True Purpose of Wealth

Timestamp: [00:54]-[02:26]

• Tyler reflects on how society pushes acquiring more wealth as the ultimate goal, then working to “buy back time.”
• Story: After achieving both time and money freedom, Tyler felt “potentially more let down than I’ve ever been in my life,” realizing neither were enough by themselves.
• Quote: “Real wealth is not more money or more time. It’s knowing what to do with either.” – Tyler Gardner [00:12]
• Key Insight: The happiest people are those who have purpose with the money or time they have, not merely the most of either.

2. Challenging the Emergency Fund Doctrine

Timestamp: [04:00]-[11:10]

• Tyler critiques the common advice to keep 3–6 months’ expenses in a low-yield savings account.
• Argues opportunity cost is huge; investing that cash would likely cover more emergencies over time.
• “We’re selling a culture of fear first... The contrarian should be: be scared.” – Tyler Gardner [05:19]
• Points out the standard grows without question (3-6 months, then 12, then 18…), fueling a cycle of fear.
• Chris and Tyler agree: some liquidity makes sense, but cash should at least beat inflation and taxes—rare in most U.S. savings accounts.
• Encourages listeners to ask: “Am I starting from fear or practicality?” [09:36]
• Urges: pay down high-interest debt before excessive cash-stashing.

3. Rethinking the 4% Rule for Retirement

Timestamp: [14:47]-[25:43]

• Tyler outlines history: The 4% rule was built for “the absolute worst-case scenario,” yet gets used as universal scripture.
• Quote: “If you started with $1 million and withdrew 4% after 30 years, the median portfolio value was $10 million ... post-inflation.” [16:31]
• Many retirees “10x” their assets, showing the rule is far too conservative.
• Chris: The rule assumes “you never make another dollar again,” which is unlikely—most find work or side income post-retirement.
• Both: Early planners over-optimize for a 1% failure rate, which means “99% of the time you’re so much better off” [18:58]. The difference between 4%, 5%, or 6% withdrawal rates is often many years or decades of extra work/saving.

4. The Psychological Challenge: What Will You Do With Your Time?

Timestamp: [23:31]-[29:22]

• Many retirees are most depressed in year one; loss of work identity and lack of plan causes anxiety.
• Advises: Don’t just “retire from,” but “retire to” something—find meaningful ways to occupy time (paid or unpaid).
• Discusses other cultures (like Iceland) that embrace fluid, seasonal careers and personal reinvention.

5. The Value of Liking Your Work

Timestamp: [27:11]-[29:22]

• Tyler’s “contrarian” hill: “Just find a job you love doing.” That could be any occupation or activity providing structure and meaning.
• Critique of FIRE: “I don’t quite understand how you set up an entire philosophy or playbook around quitting something instead of going to something.” [27:51]
• Being content isn’t about having the most money, but about loving or enjoying how you spend your days.

6. Comparison and Financial “Neighbors”

Timestamp: [35:21]-[39:29]

• We all compare ourselves, but the key is choosing “the right neighbors”—realistic role models who define enough and make choices accordingly.
• Tyler’s ideal neighbor: “I know what money is here to do for me. I know how to make just enough of it to do what I want... then I use the rest of the time to fulfill me.” [36:52]
• Happiness comes not from money alone, but clarity about what you actually want.

7. Defining "Enough"

Timestamp: [38:51]-[41:04]

• The most content people often are those who’ve defined what “enough” is for them, even (or especially) if it’s modest.
• “If you don’t know what you want to do with your minutes in a day, you will feel empty.” – Tyler Gardner [40:16]

8. The Trap of Over-Saving and Learning to Spend

Timestamp: [42:32]-[50:00]

• Many frugal people—including both Tyler and Chris—struggle to spend, even when they’ve saved enough.
• Tyler: It becomes “a challenge to figure out what to spend money on that will bring me joy.”
• Chris: Sometimes the difference between deprivation and enjoyment is a few extra dollars—“just try it” (the analogy of spending on better seats at Monster Jam).
• Tyler: Advocates “path dividends” (a twist on Bill Perkins’ “memory dividends”): experiment with spending as data collection.
• Quote: “Did you enjoy getting that latte? Then go buy a latte every freaking day of your life.” – Tyler Gardner [48:32]

9. Budgets are Tools, Not Rules

Timestamp: [50:00]-[53:23]

• Tyler objects to one-size-fits-all budgets and the shame culture around them (a jab at Dave Ramsey): “If it doesn’t work, it’s your fault—not the budget’s fault.” [50:49]
• If it serves as a liberating or clarifying tool (as in Chris’s household), great—but most find it restricting.

10. Reframing Risk

Timestamp: [54:31]-[57:08]

• Tyler: “We believe there are spaces...with zero risk. But what if the real risk is not doing something else with the time or money?”
• Not investing is itself a risk—opportunity cost is often overlooked.
• Reframes the risk of early retirement: by optimizing for extreme safety (4% rule), most risk missing out on years of desired experiences and freedom.

11. Rethinking Investment Mix: Bonds, Indexes, and Individual Stocks

Timestamp: [64:44]-[73:51]

• Bonds: Sold to us as “safe and stable,” but after inflation and taxes, returns are negligible—sometimes risky.
• Cites: Over every 20-year period, stocks outperform bonds; a 100%-bond portfolio always fails over 30 years.
• Portfolio construction advice: Use a core-satellite approach—70–80% in index funds for boring, long-term growth; 10–20% tactically in individual stocks or concentrated bets for potential short- or medium-term upside.
• Importantly: Don’t rush—opportunity and conviction should drive tactical bets, not FOMO. “If it’s a good idea today...it’ll be a good idea in six months.” – Tyler Gardner [72:41]
• Chris: Uses cash reserves as opportunistic money (blending “emergency fund” flexibility with active opportunity-taking).

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Notable Quotes & Memorable Moments

• “Real wealth is not more money or more time. It’s knowing what to do with either.” – Tyler Gardner [00:12], [20:07]
• “We’re selling a culture of fear first... I don’t want any personal finance voices telling others that you should first and foremost be scared of losing money.” – Tyler Gardner [05:19]
• “If you started with a portfolio of $1 million and you withdrew 4% after 30 years...the median value was $10 million.” – Tyler Gardner [16:31]
• “If you are being of use in retirement, you are probably going to earn some money. And the second you earn enough... the 4% rule goes out the window.” – Tyler Gardner [21:57]
• “The biggest angst that I receive and hear is people doing that digging.” – Tyler Gardner on finding post-retirement purpose [24:35]
• “I just don’t know what it means if I just say I want to get out of this game because—what game am I getting into?” – Tyler Gardner [27:59]
• “The problem isn’t that we compare ourselves. It’s that we need to have good role models.” – Tyler Gardner [36:09]
• “If you don’t know what you want to do with your minutes in a day, you will feel empty.” – Tyler Gardner [40:16]
• “Did you enjoy getting that latte? Then go buy a latte every freaking day of your life.” – Tyler Gardner [48:32]
• “We believe there are spaces...with zero risk. But what if the real risk is not doing something else with the time or the money?” – Tyler Gardner [55:17]
• “If it’s a good idea today, it will most likely be a good idea in six months and even a year. And if it’s not, guess what? It wasn’t that good of an idea.” – Tyler Gardner [72:41]
• “Nobody talks about the fact that, more frequently than not, you didn’t just have the same amount of money, you had millions more than you started with, and you could have withdrawn way more than 4%.” – Tyler Gardner [17:29]

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Timestamps for Important Segments

• [00:54] – Purpose of wealth and definition of real wealth
• [04:39] – Critique of emergency fund dogma
• [14:47] – Debunking the 4% withdrawal rule
• [23:48] – Post-retirement identity crisis and purpose
• [27:11] – Finding joy and occupation in “work”
• [35:39] – Choosing financial role models (“neighbors”)
• [38:51] – Defining “enough” and contentment
• [42:53] – Struggles with being too frugal and learning to spend
• [50:07] – Budgets: helpful tool or restrictive dogma?
• [54:31] – Reframing risk and opportunity cost
• [64:44] – Portfolio strategy: bonds, stocks, and tactical bets

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Summary Takeaways

• Define real wealth for yourself: Focus on what you want to do with your time and money, not just accumulating more.
• Question financial scripture: Emergency funds, the 4% rule, and budgets are tools, not universally perfect rules; their underlying assumptions may not fit your situation.
• Beware culture of fear: Much of conventional advice is fear-driven—don’t let it prevent you from living now.
• Find your “enough”: Contentment is knowing—and acting on—what fulfills you, not chasing arbitrary financial milestones.
• Embrace risk judiciously: Not taking (calculated) risks can be just as dangerous as being reckless.
• Rethink retirement: Plan not just what you’ll leave, but what you will do with your new freedom.
• Build investments for your timeline: Use index funds for stable, long-term growth, but allow for carefully considered tactical bets if you want to accelerate upside within a shorter horizon.
• Let yourself spend—experiment and learn: View spending as data gathering; stretch your comfort zone to discover what truly brings value and happiness.

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Further Engagement

• Tyler Gardner:
  • Podcast: Your Money Guide on the Side
  • Instagram: @Social Cap Official
  • TikTok: @Social Cap

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For anyone overwhelmed by mainstream money advice, this episode presents a measured, thoughtful argument for designing your own blueprint—grounded in self-knowledge, flexibility, and living life to the fullest, both now and in the future.

Transcript

[Chris Hutchins]

We have all been told what to do with money, save more, invest early, and plan for retirement.

[Podcast Host (possibly Chris or co-host)]

But what if those rules don't actually.

[Chris Hutchins]

Lead to the outcomes you want? As my guest Tyler Gardner puts it.

[Tyler Gardner]

Real wealth is not more money or more time. It's knowing what to do with either.

[Chris Hutchins]

So in today's episode, we're going to break down, Tyler's contrarian takes on some of the most accepted ideas in personal finance, from emergency funds and the 4% rule to budgeting, financial independence, and more. These aren't just hot takes for the sake of being different. They are grounded in data, lived experience, and conversations with hundreds of people trying to make smarter choices with their time and money. If you're looking for a fresh perspective that goes beyond the usual financial advice, then you're going to love this one. I'm Chris Hutchins. If you enjoy this episode and you want to keep upgrading your money points and life, click follow or subscribe.

[Podcast Host (possibly Chris or co-host)]

Tyler, what do you think the true purpose of wealth is?

[Tyler Gardner]

Oh, man. If we're going to start off right with the true purpose of anything, I will start by saying that I think that one of the difficulties people have is that we've been brought up in a culture where it's very easy to say first, the true purpose is just to get more wealth. That's one of the easiest things we tell people. It's what we teach. It's what a capitalist society even endorses and condones along the way is just get more money then. And we see this a lot with different writers. People challenge that sometimes and say, well, the reason we want to get more wealth is in order to buy back our time. I will say pretty bluntly that over the last year, I have found a way to buy back a lot of my time, and I have been potentially more let down than I've ever been in my life because, like the great American promise of wealth was that I could buy my time, and once I bought my time, I'd be happy. So I've been thinking a lot about this idea of what actually creates real wealth within a person, within a family. And to me, it's not money and it's not time. It's knowing what to do with either of those things. The happiest people I have found by a long shot, are the people that have a sense of either what to do with their money or somebody who's found a way to buy back their time but also knows what to do with their time, if that makes sense.

[Podcast Host (possibly Chris or co-host)]

No, it makes total sense. And One of the reasons I wanted you to join today is because I feel like you have a lot of contrarian takes on some common thoughts on personal finance, investing, but also ones that are very hard for a lot of people listening to, grapple with. And you come from a similar background. So I think as we go through this conversation, people will say, wow, Tyler has a lot of different thoughts, but I resonate so well with the fact that he's also a pretty frugal guy and grew up just like me, not spending crazy amounts of money and not knowing where he was going.

[Tyler Gardner]

Well, it's interesting you say even the word contrarian is that if you had asked me six months ago what type of content I was producing and what these thoughts were, none of them were contrarian to me. I never thought that any of these were contrarian because to me, they were based on data. They were based on what I hear from, from hundreds of thousands of people over the course of a year, whether it's on social media, through a podcast, through a newsletter. And yet, when you look at the literature, when you look at what people are writing about, they are contrarian for some reason. Some of these things are just missed. And I guess the biggest one, I mean, even just kind of to circle back to this idea, it's just challenging this idea that we want more money for the sake of more money. And I'll be the first to say, like, it's. It's really hard and unfortunately, pretty disappointing to get to a point where you have enough money to buy back some time. And that hasn't solved the major issues. So even though I'm okay now being called contrarian because I see that some of it just hasn't been written about or talked about enough, when I first started producing, I'm like, this is just what I'm hearing from people. And it's what I was hearing from former clients, too.

[Podcast Host (possibly Chris or co-host)]

The data shows that however much money you have, the amount of money you think you'll be good with, and it will be enough, is always like one and a half to two times, you know, 10 times some order of magnitude of what you have. And people aren't good at knowing when enough is. So we'll get to that. As a thread throughout this conversation, I'm just going to run through a few of the things that I think you have a different opinion on, and we can have a conversation about each of them and see where we come out. And the first one I thought I'd start on is something that seems so common across every person's financial advice, which is you need an emergency fund. And I know you have a different take on this, so I thought it's a fun place to start.

[Tyler Gardner]

It's a good place to start because this is absolutely where I get the most crap from everybody. I would say that the more I read about personal finance, the more I worked as a portfolio manager and came across clients, the more I saw that everybody today. And I'll say that pretty boldly, I think it's pretty fair to say almost everybody has taken an emergency fund as a type of scripture gospel that you need to have X amount of cash somewhere in case it hits the fan. My problem is not in the idea of having some short term liquidity for something. My problem is that every financial voice today is selling this idea that the most important step you could ever take is to put your money into an account that also does not keep up with inflation and taxes. And you're inherently saying, I'm at least keeping my money flat or not growing it. Whereas statistically, if you were from day one of your investing journey or your personal finance journey, if you were just to start investing that 50 bucks a week into a low cost S&P 500 fund or a NASDAQ fund, statistically you would be able to pay for far more emergencies over time than you would if you sat with 500 bucks or 1000 bucks in a savings account. But beyond that, what I really have a problem with is that we're selling a culture of fear first. And I don't see how that's contrarian. To me, the contrarian should be be scared. I don't want any personal finance voices telling others that you should first and foremost be scared of losing money. And you need to have this account because I think, as most people know too, it doesn't stop at three to six months, right? Just as we're saying, like, what's enough money to be happy? The three to six months campaign of having an emergency fund soon becomes 12 months, then it becomes 18 months and people begin to feel more and more comfortable when they have more cash. But every dollar that you're putting into this savings account, there's a massive opportunity cost of genuinely experiencing the type of wealth where you wouldn't have to worry as much about a short term cost.

[Podcast Host (possibly Chris or co-host)]

So if the advice were kind of remolded, because I think the advice I often give is keep some amount of cash that you have access to, but definitely don't keep it anywhere that's not earning something right. And in today's interest rate environment, you could probably make a case that you can keep up with inflation with a high yield savings account or Treasuries or something like that. I would never advocate to keep any money honestly in a checking or a savings account that earns no interest, not even my operating account. Like there are enough financial institutions now where every single dollar you have should be earning. I guess on a day like today, let's say three and a half percent, you shouldn't even have a checking account earning less. But if you modify that advice to say keep some money liquid, because yes, you could put your money in the s and P500, I think, yes, this is a fear based approach. But in a world where, let's say you lost your job, I would imagine large amounts of layoffs are probably somewhat historically correlated with market declines. So would it be wise to keep some of that money in a place where if the market crashes and you lose your job, it also isn't down?

[Tyler Gardner]

So even though I appreciate the correlation and I like that correlation that yes, if we were to have mass layoffs, odds are we might be having a larger macroeconomic issue or some global trends that would point to potential market crashes. But even that word is interesting of market crash or market downturns and we don't have these massive extended periods of time. Again, if you're in broad based index funds, I want to clarify that I'm not talking about investing in individual stocks where you could go from 100 to zero overnight, but the very worst downturns of all time. Over 100 years of market conditions have not been more than 40% of, of an index, and that has not lasted throughout any massive extended period of time. So all I'm thinking is that even if it were just 5,000 bucks or 3,000 bucks, you'd have to have some pretty exceptional macro and micro conditions that would all of a sudden make it so you couldn't pay for whatever it was you were looking to pay for before either the market kicked back a little bit or you found an ability to be able to pay this with something other than cash. So do I have any issue with keeping something as long as it's returning 3.5 or 4%? Absolutely not. That's fantastic. If you're going to do it, at the very least offset your 3% historical inflation rate at 3% but also add on another percent for taxes. Right. I do think that's one thing some people don't consider is that you're not earning 4% in a high yield savings Account, on average, you're earning about 3% just because of taxes. Then with inflation, you're keeping it flat. So philosophically, that's great. If you want to keep money flat and it has no concept of growth, as long as you're doing that, that's great. But the national average across savings accounts, including high yield savings accounts as of today is still under 0.5% overall of where people keep money. So if there's one thing to take, yes, it is make sure the money is in the high yield savings account or a money market fund. But I would still encourage someone to say, am I starting from a place of fear or am I starting from a place of practicality? And so three to six months, sure. But as I start getting more scared and say, well, maybe just a couple more bucks in this account, maybe just a couple more bucks, that's where I start to think we have a problem and we're selling this as this culture of you need to have that before anything else. And if you're doing that before paying down high interest credit card debt, you're losing a ton of money per year. But that's another combo.

[Podcast Host (possibly Chris or co-host)]

Yes, I also think the need to put money in savings and how much those emergencies might be. There's the lose your job or the something unexpected comes up. And I think sometimes we conflate the two and think, wow, something might come up and I might need six months of cash right now. And other than losing your job, I wonder if those six months of living expense emergencies come up as often or they really lose your job.

[Tyler Gardner]

Yeah, and I guess that's what I'm saying is there is every single time I put up a piece of social media that nudges people to think more openly about the concept of an emergency fund. Without fail, the first comment in the comment section is always, what if I lose my job and my kidneys fail and a parent gets ill and my dog passes and I need to put them down and the market crashes 40%. I'm sorry, but what game are we playing where that's the world that we want to base our financial decisions on, Right? For me, I'm not saying anybody should be reckless or careless, but basing it on statistically, what is apt to happen, and usually more often than not does happen to me, is a smarter financial move if the goal is to make more money rather than less money.

[Chris Hutchins]

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[Podcast Host (possibly Chris or co-host)]

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[Chris Hutchins]

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[Podcast Host (possibly Chris or co-host)]

Perfect dovetail here is talking about the 4% rule because as I heard you talk about just made me think that even though I agree with everything you're saying, I'm still doing some of it. And so what's your gripe with the 4% rule? Maybe we'll start there.

[Tyler Gardner]

It's the same thing. I'll make this as painless as possible. But the very quick history behind the 4% rule is that William Bangan, Bill Bangan, came up with what was called the Safe Max rule. He called it a rule, and we'll get to the irony of that in a second. He went over a ton of different scenarios and said that basically in history, if you drew out 4% of your assets in retirement, more often than not, you would be okay. In 1998, three professors from Trinity in Texas redid this. It was called the Trinity Experiment, right, the Trinity study. And they too found that over a 30 year period, if you withdrew 4% of your assets, you'd be okay. Starting with Bangan, though, the point of his Safe Max experiment was that this was the absolute worst case scenarios in history, that you'd be okay. So I want to repeat that right, because it was the same in the Trinity study. There were two years throughout the Trinity study where you wouldn't have been okay drawing down 4%. And so the financial world adopted this fear based number. 4% of that's the best we can do without making sure that if we are in a world war and it combines with every other global catastrophe we could imagine, I'll make it to my dying day, which I don't know, and I will have more than $100 left in my account. So from the start of it, 4%, it was fear based. It was quite literally the worst case scenario. The numbers tell a drastically different story. In the Trinity study, if you started with a portfolio of $1 million and you withdrew 4% after 30 years, the median portfolio value was $10 million. If you were 100% in stocks, you 10x'd the amount of money from when you retired to when you died. And again, there aren't too many people that are living 30 years after they choose to retire. So that's another statistical anomaly here. But you would have 10x the money if you were 75% stocks and 25% bonds. You had about $6 million as a median value. These are both post inflation numbers. And no one talks about these two numbers. No one talks about the fact that more frequently than not, you didn't just have the same amount of money, you had millions more than you started with, and you could have withdrawn way more than 4%. So if we're looking at kind of the overlap between the 4% rule and the emergency fund concepts, it's that both of them are rooted in. If it all hits the fan at once, will I have enough money to put dinner on the table tonight? I don't want to downplay that, Chris. I don't. I actually, I really don't want to downplay that there are people for whom that is a very real situation. And I understand that the difference between putting food on the table and not is a big deal for a family. But when we're talking about a retirement strategy or a savings strategy, I would also hope that we would be able to talk optimistically about what the numbers actually suggest are the probability of these bad things happening.

[Podcast Host (possibly Chris or co-host)]

It's interesting. My Criticisms of the 4% rule have often been on the idea that, especially in the financial independence world, that you would never make money again, right? Like, you know, you retire early and you're planning for this scenario where, let's say you retire at 40, right? You never make another dollar again, never rest of your life. So I think that it's very common, and we'll probably get to this in this conversation, that when you have the luxury of not doing anything for work that you don't enjoy, you will probably find something you enjoy doing. And over a period of time, you will probably find a thing that you can also get paid to do that you enjoy. And if you have any kind of income, if you have any kind of inheritance, a lot of times not factoring in Social Security, any of these things happen and you're okay. But I was running the numbers in anticipation of talking about this, and I was like, oh, you know, with the 4% rule, what is that failure rate? And it's like trying to reduce your failure rate to under 1%, which inherently means that if you get your failure rate to 1%, it means 99% of the time you're going to be so much better off. If you optimize for like a 50% failure rate, your withdrawal rate is probably over 6%. And I know saying 4%, 6%, that seems very different, but the difference between an extra 2% compounded over 30 years is just wild. Like you mentioned, grow your million to 10 million. And so I wonder how people can think about this in a way that gets them more comfortable. Because, you know, I have a few friends where we've talked about this. They've been trying to think about early retirement and they're probably like, oh, they've modified their 4% rule. They've said, I kind of like using the 2 1/2% rule, so it's going to take me a long time. And I feel like the answer is maybe you should be using a much, much higher number. Because honestly, if something goes wrong, you probably can find a way to work right even if you get laid off. I think take today, you might be making a six figure salary right now. And if you were to get laid off and had no money, you're not necessarily dropping to zero. And I don't want to speak for everyone and their physical abilities. And you probably could start driving for Uber, doing instacart deliveries. Like there is something you could do that would generate more than $0 of income if you needed to. And so it seems like I'm with you that we should break free from this fear attitude. But I'm not sure I have the answer to how to do it because I feel like we're all so hardwired to think this way.

[Tyler Gardner]

You're spot on. We are. But part of the way we do it is by having these conversations and letting me take all the crap for people yelling at me that I'm somehow blasphemous by challenging these. But this is how we do it is at the very least challenging some of the things that have been inherited as personal finance scripture. And I'm fine taking all the comments and the blowback for that. I am. But what you just said is another type of potential personal finance sacrilege that I love and wanna build on, which is that retirement is also not a one size fits. All. Right? And you started by asking me the question about like, what is real wealth to me. So again, real wealth is not more money or more time. It's knowing what to do with either. And if I'm retired and to an extent, at 42 years old, I went through this a year ago where all of a sudden I had more time and more money than I have had in the past. And I was looking something to occupy my time now, I could have taken a couple years out of the workforce altogether. I didn't want to. I like doing this. And guess what? Some of these Things we can get paid for. So all of a sudden I have an income, a type of fixed income. But what you challenged, which I love that you challenged, is retirement does not necessarily mean I go from a W2 paycheck and now all of a sudden I have zero. For many, including many people I know and talk to on a daily basis. It's just a different type of opt. But that optionality usually still involves people wanting to engage with other people. It usually still involves people wanting to feel important and feel of use. And if you are being of use in retirement, you are probably going to earn some money. And the second you earn enough money even just to cover basic living expenses, again, this 4% rule goes out the window. So the other massive challenge I have to the 4% rule is A. It's called a rule. I hate anything in personal finance where you say, this is a rule, right? Like that to me is absurd because it says that you and I should adhere to the same thing where I might be fine living on 50,000 bucks a year and you might want to live on 200,000 bucks a year. So instantly, we're not even playing in the same park anymore. I might want to work after retirement and say, you know, I'm going to work 70% of the amount that I did when I was working full time. And now all of a sudden, my portfolio strategy is drastically different, as are the odds that I would ever run out of money. And it doesn't mean that you're doing it right or I'm doing it wrong. It means that we have very different understandings of what true wealth is and why that matters. So the 4% rule, I really struggle with that. That's where everyone's talking about, what percentage can I use instead of first asking what do I want to do with my time and my money? Before we answer that, we can't come up with any percentage that would work for all of us.

[Podcast Host (possibly Chris or co-host)]

Yes, you frame the question easily. Someone could say, oh, I know what I need to answer. How do you think the average person answers that question? Because I don't think it's something where you say, oh, what do I want to do with my time and my money? And they're like, oh, I know. No one ever asked me. It seems like something that people might have to do a lot of digging to figure out, oh, well, that.

[Tyler Gardner]

Why do you. Statistically, I think that's why retirees tend to be the most depressed in year one of retirement. It's a really difficult identity shift. And this is something I've been connecting with a ton of people about recently and I've actually found it resonates quite well, is that the first people expect that this is going to be the answer, that either the absence of work or I've reached my number, that either of those equal that's the answer. That's the destination. I'm there. And so it doesn't surprise me at all that the bigger rates of depression and anxiety come in that first year when all of a sudden I don't have my schedule. I don't necessarily have the same identity ties that I did a couple years back because I'm no longer the VP down at the just Carl sitting at home. And all of a sudden I have to figure out how to structure my day. And the biggest angst that I receive and hear is people doing that digging. I don't think there's an immediate answer to that. All I try to help people think through is that before you leave your full time job or whatever kind of lifestyle you're thinking about leaving, make sure that we're not just playing and phrasing this as I'm retiring from something or I'm leaving this. But what am I retiring to? What's the purpose that I'm going to bring with me to the next step? Whether that's being a podcaster or a content creator or I'm going to go work at the local dog shelter.

[Podcast Host (possibly Chris or co-host)]

Right.

[Tyler Gardner]

And I know, you know, some of this sounds completely idyllic, but it is really crucial that you say before I retire, what's the plan? Because it doesn't just present itself and nobody talks about it because it's just viewed as challenging. These personal finance pieces of scripture that of course retirement's our goal. Everybody just wants to retire and sit, do nothing and travel. And it doesn't work like that. We get very lonely very quickly unless we have real structure to guide our days.

[Podcast Host (possibly Chris or co-host)]

I mean, maybe one fun takeaway is the next time you're having dinner with some friends or family, just have a conversation about what you would do if you couldn't do what you did now.

[Tyler Gardner]

Yeah.

[Podcast Host (possibly Chris or co-host)]

When we were in Iceland, I learned a couple interesting stats. So 1 in 10 people, I think in Iceland will write a book. And one of the cultural things that I found so unique about Iceland is that that it's very normal for people to do completely different things and go through these kind of seasons of life but in their careers. So someone might work in a factory and then later write a book and then later go re educate themselves to become a teacher. And it's very fluid in terms of your career. And I remember we went met this woman who owned a letterpress company, then she had a catering company and then she was in business and she. It's just like people felt like they had the freedom to try lots of different things and they weren't locked into one thing for their career. And because the culture supported it, people did it. And I don't think it's something unique to people living in Iceland that throughout their lives they want to do different things, but in other countries nobody ever wants to try new things. I just think they have a culture that supports it. And I wonder if the more we talk about it, the more we might find that that's possible here. And I think one of the reasons so many people I talk to want to retire early is that they just don't actually like what they're doing. And I think you've talked about finding a job you love is like the most valuable thing you could do.

[Tyler Gardner]

Yes, I know this one's contrarian and I know this one gets people, but I'm sorry, this is the hill that I'll die on. Just find a job you love doing. And when I say job, I don't mean some soul sucking corporate structure that you hate. I mean like genuinely your biggest challenge in life. I'll even replace the word job with occupation. Something to occupy your time and your mental bandwidth. If you don't have a structure, if you don't have someone telling you what to do and you need to come here to get your paycheck or we're not gonna give it to you and you're gonna go home and starve, you're still gonna need to find something to occupy your time and your money. This is my gripe with the fire community. And of course they've absolutely come back at me and told me I'm a moron. But I don't quite understand how you set up an entire philosophy or an entire playbook around quitting something instead of going to something. I've heard a lot of people say we want to get out of this game as quickly as possible. And I just don't know what that means. I don't know what it means if I just say I want to get out of this game because what game am I getting into? Let's say I retire at 30, let's say I'm healthy, let's say I have some means, there's a lot of time left, There are a lot of minutes left to occupy my life, my time and my bandwidth and and an emptiness of one occupation just leads me to ask, well now what am I going to do with my time and my resources? And for the most part, again, I would think that the majority of us would want to at least engage other people in meaningful and thoughtful work. Doesn't have to be soul sucking, but what is the thing that you're going to and we can start practicing that now. I love how you bring up this idea of culture supporting this as in anything to me that supports people taking leaps of faith or doing something that say, like look like I'm not talking about like some Hallmark card where I'm telling you to go pursue your passion and your passion will never get paid. I'm convinced that most people's passion you can find a way to get paid and that most of us could absolutely start doing something in the next year that we don't have to love it, but we might like it more than our current occupation and we might be able to find a way to at least make enough to get by. I do think that the cultural conversations are key with all of that.

[Chris Hutchins]

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[Podcast Host (possibly Chris or co-host)]

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[Chris Hutchins]

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[Podcast Host (possibly Chris or co-host)]

I don't know a lot about the US vs Icelandic adult retraining programs, but, you know, nothing is forever, and I think that's something that feels kind of daunting. But if you asked me, like, are there jobs that I think would be really fun to do for a few years? And I think about it from that lens, there's a lot of jobs I'd be excited to do. I was watching someone on YouTube the other day welding. I was like, I've never learned welding. Like, would there be some fun? And maybe that's not the actual vocation I would want, but maybe it's a way to occupy time. But I think we often get caught up in this mindset of whatever we're going to do, we have to do it forever. That's our thing. And that probably makes anything you're doing feel like something you want to leave from. To your point before, it's like, I want to get out of this. Well, if this feels like it's forever, well then it feels more daunting. But if it's not forever, right. I know lots of people who've managed to change their careers, change where they live, all kinds of things about their lives, and it's always ends up feeling way easier after you've done it than it did before. But we just don't talk about it much.

[Tyler Gardner]

One of my colleagues who I looked up to more than I think any other in my life was a librarian. She was a librarian that came to a school where I worked about a decade ago and she came with a very specific set of guidelines and it was that she was going to do a full audit of the library system. She was going to figure out what worked, what didn't work, and she was going to leave our school with a blueprint of what could be better about library services going forward. Her deal was she was only going to be at the school for two years. And after a year and a half, everybody loved her, everybody loved her work ethic, everybody loved her socially. She was fantastic member of the community. And we said, obviously, would you like to stay for year three? And she turned to all of us and said, I told you from day one, no, I'm here for two years. And she did two year stint projects. And she would look at it as she had a skill set that could go from one community to the next and help that community get from point A to point B. And it would keep her excited about going to different communities and letting her skill set shine. So even today it's like we seem to have this big deterrence to people saying, and I know that this is kind of a difference in generation too. Like a lot of the older boomer culture says stay in your job forever, like be completely loyal to your employer. And I know a lot of the Gen Z and younger generation is thinking about how do I stay mobile and flexible and job hopping. But I'd like to encourage that Gen Z mindset, not job hopping necessarily, to make more money quickly and figure out again how to get out of the game, but go experience different things. And this new concept of the portfolio career that I'm seeing more and more frequently I love because it shakes us just enough to keep our skill sets a little more agile, a little more mobile and, and I'll bet that that's the antidote to more depression in retirement because you are frequently being asked to reinvent yourself. You're frequently being asked to come up with a new version of yourself instead of having the 40 year version of one career all of a sudden come to an end. So yes, it's not just cultural conversations. It would be thinking about a world where we are moving from one job to the next and constantly being asked to reinvent who we thought we were in order to say that's life and that's going to happen until it's over.

[Podcast Host (possibly Chris or co-host)]

And I think one of the challenges, we don't have a lot of other people doing These things. And instead, I think you call them neighbors. And how terrible neighbors are like our financial neighbors of the people we look at and we see and we think about or compare ourselves to. Do they make this challenge that you're proposing people do even harder?

[Tyler Gardner]

It's so hard. It's so hard. I do call them neighbors because about probably six months ago, I just kind of dawned on me, I had heard someone say, the problem is that we compare ourselves to others financially. And I'm sure that we've all heard this a million times with Instagram culture and reel culture, is that we're looking on these platforms and we're seeing the best of other people, and we've got. We get this envy that some other people are living this billionaire lifestyle. And I said, well, the problem isn't that we're comparing ourselves, because inherently we compare ourselves. We're always going to compare ourselves to others. And a lot of comparisons are good comparisons. If we have a mentor, we're comparing ourselves to them. If we have a role model, we're comparing ourselves to them. If we have a teacher or a coach in life that we respect, we're comparing ourselves to them. So it's not that we need to stop comparing ourselves to others. It's that we need to have good role models. So I guess what I'm looking for is neighbors who are more realistic, more reasonable, and have a much more clear sense of what they want to do with their time and their money. So not just I want to keep up with the person next door. Not just I want to be completely silent about the wealth that I'm building and be righteous and judge everybody who goes to spend money on a latte. And not, I'm just trying to get out of this game as quickly as possible, but somebody who says, here's what money does for me, and I only need about 60,000 bucks a year to achieve this. That's the neighbor I want to live next to. I want to live next to the person who says, I know what money is here to do for me. I know how to make just enough of it to do what I want to achieve. And then I'm going to go do that, and then I'm going to use the rest of the time in the following ways to fulfill me and make me happy in life. So one of the neighbors that I'm trying to hold up that we've already named in this show is the neighbor who actually likes their vocation. And everyone gives me such a hard time. I think I'm some Government employee trying to get people to stay in their jobs until their 70s. I just think it would be really cool if we created more of a culture. We said, why don't you just like what you do? And why don't we try to help people find ways to like more of what they do in order to make enough money to do what they want to do more of?

[Podcast Host (possibly Chris or co-host)]

Yeah, I have a friend or family member, I'll kind of keep it vague, that has a job, doesn't love his job, but doesn't hate his job, but has kind of come to the conclusion that what he really cares about in life is having his family, being able to go on vacations with them. This job allows that it's not too demanding outside of work. And he's a really smart guy. And I remember earlier in life I would push him. I'd say, you could be, you don't love your job. Like, what about this other job? And you could move here? And he's like, no, it's okay. Because, like, the things he actually cares about, he can do them all. When he wants to go and travel to some event, he could take the time off. He has the money to support his family. Like, he's having a good life. And I know hundreds of people who have more money than he does that don't feel nearly as content as he is. And it seems like what it ultimately comes down to is he's kind of defined that he has enough, even though he doesn't have millions of dollars.

[Tyler Gardner]

You got it. And you just hit upon again, circling back to, if there is one thing to advise anyone in this day and age or forever to be able to do, it's define what enough looks like to you. Because if you're not doing that, you are always putting the cart before the horse. Teachers is a really good example as well. Even though the joke in the US and joke is the wrong word, because I do take seriously that there are many teachers in the United States who feel like they're underpaid and overworked. I've heard that narrative so frequently. I was a teacher for a decade. I never once felt overworked because I loved the work.

[Podcast Host (possibly Chris or co-host)]

Work.

[Tyler Gardner]

I loved that job and we got a lot of vacation time. I don't understand quite how teachers argue with me that we got a lot of vacation time compared to the national average of two to three weeks of vacation a year. In most nine to five jobs, teachers get a lot of vacation time. And on that vacation time, I could recoup, I could go places And I had enough money from the teaching job to do what I wanted to do. I'm a simple Vermonter man. Like, there's not much I really want want to do other than like have a couple weeks to read some good books on a porch. And again, just like you're saying about your friend, like, that's not necessarily what everyone wants to do, but there are several ways that as long as we start by saying what does enough look like for you? Then I can kind of architect my life and build my life around. Now, what would that necessitate? So if it is $200,000 a year, yeah, I'm going to need to figure out a way to make more money. Whether that's risky investing, going to Vegas or getting a high paying corporate job and sacrificing for a little bit. Right? But if it's not, there's a reality, there's this middle zone for so many people of just saying we can find very real levels of wealth, literally and metaphorically, just by starting by saying what do you actually want to do? So I love that you have an example of someone who found this lifestyle where I'm sure they were happier than people with millions who hadn't yet defined what it was they wanted to do. Because then it's always going to feel empty. You could have a billion dollars in the bank account, but if you don't know what you want to do with your minutes in a day, you will feel empty.

[Chris Hutchins]

This episode is brought to you by Superhuman, which is absolutely one of my top apps. It's in my dock, on my phone, it's my first pin tabbed on the computer and I've used it for years because it is, hands down the best way to do email if you like to save time. That's because Superhuman is the best at inbox decluttering and enhanced productivity. It's also the fastest email experience I've used and I am certain I've saved hundreds of hours a year using Superhuman. They have every feature you could want built right into email. Split inboxes for prioritizing, keyboard shortcuts and snippets for everything. AI tools to draft responses, search emails, summarize emails, automated reminders, integrated calendars, and if you're using Superhuman at work like we do, you can share emails and drafts with your team and all comment on them together. It's so great and saves so much time. Best of all, Superhuman works with your existing Gmail or Outlook, so unless you love wasting hours of your day to email, you have to check out Superhuman and every all the hacks listener can get their first month free at allthehacks.com superhuman again that's allthehacks.com superhuman to get back hours of your time each week. Thank you so much for being here today. You can find all the links, promo codes and discounts from our partners at all the hacks.com deals. These are brands I love and use so please consider supporting those who support us.

[Podcast Host (possibly Chris or co-host)]

I also think that if you are saving so much that you don't feel like you can spend, then it's really easy to think you always need more because you're living in this world of deprivation. Now I say this because I happen to know from a lot of the content you've made, you still have some of those problems.

[Tyler Gardner]

Oh, so I've got many problems, Chris. I have all those problems. I'm the worst. I am the worst. The reason some of this, what you were just saying resonates with me so deeply is that Ramit talks about this a little bit and there are some other writers who talk about this is that we inherit money scripts. We all do. We inherit different types of scripts, whether it's from our parents or our grandparents or our culture or our neighbors of how we think about money. And and I was always taught and told save a lot of money, invest it wisely and defer joy. And I am at the point, I wouldn't say that I'm retired by any stretch because I'm still working every day and I enjoy it. But I'm at the point where I am asking some of the bigger questions of when do I start spending money? And my problem is I don't know what to spend money on. That's not to say I've got endless wealth by any stretch. It is to say it's a challenge of mine is figuring out what to spend money on that will actually bring me joy. And I haven't found the answer to that. And I'm hardwired to save money and invest money. So ironically right now, and I think this is the case for many people, it becomes a joy and a type of satisfaction in and of itself to watch your account grow. I think there are many people in financial situations who say I'd rather sit here and watch my money compound and know that I'm doing a good job because society's patting me on the back telling me I'm saving 10% of each paycheck and I'm investing in low cost index funds and I've maxed out my 401k and my Roth IRA and everything's going well. That in and of itself feels responsible. It feels like you're being a fiscally sound member of society and that you're going to eventually do good things. But my challenge, mostly to myself, but obviously to many people who end up retiring with whatever the number is and then have a lot of trouble turning around to spend it. My challenge is, what is it that you actually want to spend the money on? What's the thing you want to do? Back to your idea of defining what enough is. One of the mental exercises that I'm sure many people, including yourself, have heard before and maybe even practiced, is just, just pretend tomorrow you wake up with the billion dollars. Write down what it is you do. If you actually had the amount of money where you said, look, that's not what's going to be the personal driver. I don't have to go to work for the money and I don't have to earn more. What's the thing that I actually want to do to spend my time? That'll tell you a lot about yourself. And then again, you can backwards architect yourself into a way where you hopefully you could actually do 90% of that stuff for a lot of your life.

[Podcast Host (possibly Chris or co-host)]

Life. And by the way, I think some of the things you would do aren't really as expensive as you think.

[Tyler Gardner]

They're not.

[Podcast Host (possibly Chris or co-host)]

Give an example from this weekend. Unfortunately, one of our daughters got so sick we didn't do this, but we were going to go to Monster Jam.

[Tyler Gardner]

Oh, yes.

[Podcast Host (possibly Chris or co-host)]

And I was looking at seats. It sounds so crazy saying this out loud. The difference between the seats we wanted and the seats that I probably would have bought, there were three tiers. There was $51, $62 and $73. That's literally the range for four people. So we're talking about 10 to $20 per person. And I was like, Ah, the $74, like it. Are they really going to be that much better? Do we really need to spend that extra $40? My wife and I probably talked about this for 15 minutes for $40. And I'm not saying that that's not a lot of money, but given where we are financially, we should just spent the money. Now I'm actually. My daughter ended up getting really sick and so I'm so glad we didn't spend the money. Like our frugality prevented us from, from buying tickets we wouldn't have used. But I wonder if the answer is the advice I give one of my daughters all the time, which is there's something on her plate. And I'm like, hey, why don't you just try it? You don't know if you'll like it. Maybe you didn't like it last year, but maybe you'll like it now. Maybe you didn't like it last week. And so my challenge to you is, what if you just try spending some money? Should people force themselves, especially people who kind of struggle to overcome frugality, should we experiment with spending money in a way that probably feels frivolous, but think of it as education or training in learning what it feels like to see if maybe we like it?

[Tyler Gardner]

Yes. Unequivocally. Yes. Unequivocally. Yes. That is my favorite idea ever. And because I have to kick my own butt just to do this daily, I'm writing about that too right now. And I'm calling it this idea. And I'm pretty sure it's exactly what you're getting to is I'm calling it a path dividend. It was inspired by Perkins. So Bill Perkins, in his book Die with Zero, has memory dividends, the dividends that you collect through memories. You get this great dividend expecting an event to come up. You get the dividend from experiencing the actual event, and you get a perpetual right dividend of having that memory now. So I was thinking, okay, that's great, but then there's still the problem of what are the things on which we're spending money that will give me those memories and those positive things? So I'm thinking about this as far as a my spending money. If we're going to do it anyway and some of us aren't very good at it, let's look at it as constant data collection. And this is my version of the budget, right? My version of the budget is not to have a spreadsheet and to track which percent of my paycheck is going to needs versus wants versus discretionary income. Mine is to say, okay, today I went and spent money on three different things. Is there anything I spent money on where I learned something about myself and my future wants and needs for spending money? So first class is a good example on an airline. I flew first class this year for the first time in my life because I finally wanted to try it. I had enough discretionary income to say I'm going to treat myself to a first class flight and I thought this was going to be this great new path forward for me and that that's what I was going to spend money on. And it might have been the worst flying experience I'VE had in a decade. Everything just added up poorly. The flight was delayed. And if a flight's delayed, it doesn't matter where you're flying. The flight's delayed and you're already ticked off. By the time I got on, there was a lot of turbulence. I hate turbulence. I hate flying. I was sitting next to someone who hadn't showered in multiple days. So it didn't matter how big your seat was if you can't smell anything but the person sitting next to you. And again, I know this is not the typical first class experience, but mine taught me very quickly. It's like that wasn't worth the premium and I had thought beforehand that it might be. So I love what you're saying and appreciate this idea that I think many of us, and not for the big expenditures per se, but on a daily basis. Did you enjoy spending money? I'll bring it back to the real scripture of personal finance. Did you enjoy getting that latte down at the local coffee shop? And if the answer is yes, then go buy a latte every freaking day of your life. Because if that brings you joy, I don't care if it costs you $30 a coffee, if that is the thing that money can buy, that occupies your time, that brings you joy, that's real wealth. That is spending money in a real way. And it's very hard to do. So many of us believe we just know what we're going to spend money on. It's very difficult.

[Podcast Host (possibly Chris or co-host)]

You briefly mentioned a budget and I'm curious if you have any takes on the role of budgeting in all of this.

[Tyler Gardner]

I want to qualify all of these statements with if a budget works for you, that's phenomenal. What I don't love about the culture of budgeting is that it is usually somebody selling a type of budget or a type of fix that might have worked for them and so they're putting it out there into the world of here's the thing that works for everybody, the 50, 30, 20, the 60, 30, 10, whatever it is, I feel like it is the equivalent of a one size fits all. But to kind of circle back to the emergency fund concept, where I really have struggled with the budget, is that if it doesn't work, it's your fault. And one of the only creators I'll name today just because he is so big and he doesn't care and doesn't listen any of this. But Dave Ramsey makes people feel like crap if they don't stick to certain plans and he really has developed a personal finance theology around thou shalt do X or you're an idiot. And he calls certain things a stupid tax and criticizes the actual person if they can't stick to a budget. But if this budget was never designed for you in the first place, if this was just this kind of, let's call it a one size fits all, and regardless of what your income is, we're going to say that you should be putting 50% of your money into this. I don't know. Again, I think that's cart before the horse. Because we're assuming we know what someone values. We're assuming we know how much money they make, we're assuming we know that they even want to live towards retirement. That's one of your first cracks in the old budgeting armor, is that if you have any percentage devoted towards deferred joy versus current joy, well, you don't know how much someone wants to defer joy or experience joy now. And so we're already in this world of saying we're positing our values onto somebody, and if you don't make it work, that's your fault, not the budget's fault.

[Podcast Host (possibly Chris or co-host)]

Yeah. And I think it's interesting for someone who maybe has a tendency to spend a lot that they don't have a budget might serve a very different purpose than for someone who has a tendency to not spend. For me, I use budgeting software not to make sure that I'm spending X dollars in Y category, but because it informs a conversation my wife and I have usually probably every six to 12 months, which is, let's look at where we spend money and let's think about where we don't spend money. If we spent 20% more, where would we spend money? And if we spent 20% less, where would we pull it? And how do we compare those two things? And oftentimes the things that we would cut if we took 20% out of our spending are not as interesting as the things that we cut in advance and didn't spend on. So it goes back to we use it as a tool for having the kinds of conversations that we've been talking about today about what we prioritize, where we want to spend our money, what's bringing us joy, but we're not using it on a daily basis to say, can we afford this thing? I think for someone who spends more than they make, that might be a really good use case of here's a tool that will help you decide whether you can buy that thing for us. We kind of come from a Place of we don't spend enough money and we probably should be spending more. Can we use the budget to identify where we should do that?

[Tyler Gardner]

And I love how you're doing that because to me, again, that's now using it as a productive tool that could make you feel very positive about this experience. Right. And so even thinking again about the emergency fund or the 4% rule or budgeting, at the end of the day, if it makes you feel good and if this tool is giving you a potential path forward that works better for you, or if it's making you feel more responsible or informed about your future choices, I love that. I love it, I endorse it, everyone should use it, period. But I just haven't seen that. I have rarely seen the person create the emergency fund or follow the 4% rule or use a budget and feel like it has somehow liberated them versus entrapping them and getting them into these really strict guidelines. And again, if they fail, it's their fault. But you seem to be using it more of, again, a tool to provide you with options going forward instead of limitations. And that's really cool, is thinking about a budget that could provide optionality both in thought and in practice, versus limitations going forward.

[Podcast Host (possibly Chris or co-host)]

I think there's another big area where you've looked at how successful people view this topic of risk, and it's a little bit different. And it feels like it ties into a lot of what we've talked about because a lot of the reason I think people are scared to spend more money or want to keep more money in cash is because they're operating from this fear mentality and they don't want to take risk. But I feel like risk is something that on the risk reward calculation, there is a calculation like taking risk is not always something that has to be scary. And I know you've thought about this a lot.

[Tyler Gardner]

One of the most, I would say, memorable quotes that stuck with me from, I would say a decade ago, and I'm really disappointed that I didn't capture who said this. It was a quick clip that I had seen. It was a professor lecturing a class and it was a finance class. And he said something along the lines of everybody thinks about risk. As if I go out of my house today and I go down to the store, could I potentially be either struck by a car or beaten up or trip over myself when I'm trying to pick up a thing of milk, whatever. But what he said is interesting is that how we. We don't think about risk is. But what if you didn't go to the store, what if you just sat at home? What do you risk missing out on? And that sums up everything for me since I heard that of how I have viewed personal finance, because it wasn't just a lesson in opportunity cost, it was a We believe that there are spaces that we've created that have zero risk. I think it is safe to say that we believe there are these things that are so safe and so wonderful that we now control our outcomes. Everything's going to be okay. You could call it the 4% rule, the three to six months in an emergency fund. But what if the real risk is not doing something else with the time or the money? And on a personal finance level, I find that nobody thinks about risk of not investing. Everybody always says, but investing is risk. Correct. As is not investing. Not investing is risk because no matter what, you are potentially either way missing something or losing something, whether that's future opportunity, whether that's future gain. Right. Whether it's future experience or current experience, it's all risk. And I think we have that one backwards.

[Podcast Host (possibly Chris or co-host)]

I'm going to take this and apply it to the 4% rule in early retirement. And almost everyone I know says, I want to do this because I want the freedom. I want to get to a place where I'm not doing the job. I have, I have all this time. Ultimately, it's a time based calculation. So they're like, I want to get to the point that I have 4%. Well, as we already talked about, you are planning for this 2, 3, 1% failure. And so that's delaying the amount of time until you could hit this moment where you could retire. But if we reframe it for a second, if you're planning for a situation that will work 98% of the time, we've already talked about how in that 98% of the time you're probably going to do better than that situation. And so you are risking having to work for many, many extra years to be 98% sure everything works. And if you're willing to be 80% sure, maybe you could stop working a year earlier, five years earlier. I don't have the full calculation in front of me, but on one risk you're balancing. I want to make sure I have the lowest failure rate possible. And then on the other risk, it's, I need to wait until I have so much more money to achieve this thing I want. And it feels like no one's looking at that. Other side to your example, people using the 4% rule, the median outcome was ending up with $10 million. Well, most of these people were trying to optimize for spending all of their money. So the average or the median person really failed. They worked really too long.

[Tyler Gardner]

Yes, they did not optimize for it. What struck me, I'm sorry, like you said something gold right there, which is, and I had never thought about this before, but all of these scenarios as well, including what's called a Monte Carlo scenario, I'm sure you've heard about this. But just so the listeners have, Monte Carlo scenarios are basically what financial planners will run these days. And now you don't need a financial planner. You can do it yourself. If you put in X amount of variables about your life and your spending habits, it will give you a statistical probability of how likely or unlikely you are to run out of money. But we've phrased it differently, and financial planners will phrase it something along the following lines. They'll say you have a 98% chance that you will be fine. I would challenge that of saying, okay, but you're defining fine as I won't run out of money if all of my choices stay exactly the same. And you said something about the lowest failure rate and we're assuming there that failure is running out of money. But I would say that there's a much bigger failure than the potential to run out of money. And that would be just like you're saying, either running out of time or having to stare time in the face and having no fricking clue what to do with it. That's a bigger failure in life.

[Podcast Host (possibly Chris or co-host)]

Life.

[Tyler Gardner]

I don't care if I run out of money. If I wasn't going to be able to spend it in the first place and have any joy with it again because there are people that have millions of dollars and so on a Monte Carlo scenario, or as far as that failure rate, they didn't fail. But did they get to spend it? Did they get to experience what they really loved? Did they get to spend time with family and friends and drinking the lattes? Or did they spend 70 years of their life trying to optimize for something that wasn't their optimal lifestyle? After all, that wasn't even what they had been looking for. What they had really wanted, and they just didn't know until it passed, was to go travel in their 40s or to have more kids in their 30s or to go back to school in their 50s. But we're optimizing for this era. That might not be what we all want to optimize for. I'm really intrigued by that idea of what it is we're failing at if we haven't optimized our finances.

[Podcast Host (possibly Chris or co-host)]

I literally just pulled up a financial plan we made from my previous role running a financial planning firm, and it had this kind of long term outlook and it said you got an 80% chance of landing in this range. And the very bottom of the 80% was right above zero. So it's like by 2079, you got an 80% chance of not running out of money.

[Tyler Gardner]

Nice.

[Podcast Host (possibly Chris or co-host)]

But on the upper threshold, you have some percentage chance of having $60 million, you know, like some astronomical number. And I need to take this and have it be a second kick in the pants. Right. My conversation with Bill Perkins kind of left me after that episode, which, if you haven't listened, I think is episode 91. And I thought, why am I not trying to use this season of Life to spend more? But now I'm wondering why am I optimizing for my outcome only working 98% of time in the 2% failure? You know, I'd be in a bad spot, but I could probably weather a 10% failure and go work, cut costs. Like, there's so many things we can do to mitigate our failure. And not to mention, we've already talked about things like jobs you didn't expect to have, Social Security, inheritance. There are all these other factors that could make it better as well. And if you factor all that in, I have to imagine that we could get to 5% or 6% or something much higher than 4. And the impact difference of 4, 5 and 6 is really big. Like, it sounds insignificant. I imagine it's like years, if not decades earlier to do some of the things we want. But maybe the answer isn't now I can retire sooner. Maybe it's, I could just spend more in my 30s and 40s and not worry as much about saving. You look at the coastfi movement, which is kind of this concept of, well, I've put enough in savings that by the time I retire I will have enough and I can spend a little bit more now when I'm younger and healthier and have a family and want to go do some of these experiences I won't be able to do later. And the assumption that whole thing is built on is how much will that money grow and how much will I need to take out. And if everything's 1% higher because you're not optimizing for 2% failure, but maybe 20% failure, all of a sudden, that Gives you a lot more you could do and maybe unlocks a lot more experiences that could add so much more value to life and honestly could make the time you're spending while you're working feel better. If you have a job that you don't necessarily hate, but every time outside of work, you're just not spending money, not doing experiences, not doing anything, life feels crappy. You might project that crappy feeling on the job, but maybe if you let yourself do a little bit more in your free time. And obviously not everyone can take this advice. Not everyone's in a situation where this is possible. But maybe all of a sudden it's like, well, that job wasn't actually as bad as I thought. What actually felt bad was that I wasn't letting myself use the money I've earned to do things alongside that job.

[Tyler Gardner]

Yeah, well, and there's the old line too, right? Is that life is always what happens when we're making plans for the future. And one of the most detrimental potential side effects of Financial Planning 101 on a daily basis is just that. It's planning. It's planning for the future. And the future is inherently unknown. So again, we can pretend to put a 98% or a 94%, but like you and I both know, and I expect that all of your listeners know, like that's an arbitrary nonsense number. Like, you don't know if it's 94% because you don't know what's going to happen tomorrow. You don't know what's going to happen to your value tomorrow. You don't know what's going to happen to your health tomorrow or what's going to happen globally and what will even happen with money. That's what Perkins has made a lot of people think about recently, is just making sure that you're not consistently trying to optimize for a life that is 20 to 30 to 40 years down the road. And that we're balancing. What are the things that you can physically and mentally potentially do better now that you wouldn't be able to do later?

[Podcast Host (possibly Chris or co-host)]

So a couple other quick things we didn't touch on when it comes to planning for that future and investing for that future. I know you have a contrarian take on not putting everything in index funds. And also you did a whole episode on why you hate bonds. So let's talk a little bit briefly as we wrap on how you think about constructing your portfolio for your investments and how that might be different from some of the advice I'm sure people.

[Tyler Gardner]

Have gotten sure, we'll do the bonds first because I think the bonds one is easy in that bonds have been sold and packaged to us for a long time as principal protection, safe and stable. And that's great. If you have enough money in your life as a principal to live off of 4 or 5% post tax, put it all in bonds, that's fine. Just understand that there's inflation risk, right? As inflation hits us, we need to take account for that. So if you have a 4% return on a bond, but, but inflation is 3%, you have a 1% real return. And again post tax, we're again back to about 0%. So we're hoping that the principle at least stays the same. So a lot of people put bonds into a portfolio just to have a non correlated asset class with stocks. But as we saw in 2022, even the non corollary effect that fell out the window when stocks and bonds and the indexes both fell dramatically together. So over the long run, and when I say long run, I'm saying 20 year periods of time, over a 20 year window there has not been a 20 where bonds have beaten stocks as far as performance goes overall. And back to the Trinity study, the only portfolio that failed 100% of the time over 30 years was 100% bonds. So I'm not saying don't add bonds to your portfolio if you want to mitigate a little bit of downside risk and you have enough of money where you can sacrifice the growth. But the numbers consistently point to stocks and maybe crypto now being a really great asset class for consistently historically beating inflation. So we've been sold the illusion that bonds are this end all, be all, I'm safe, my money's safe. When in reality, if people aren't thinking about inflation risk and interest rate risk, they at least should learn about the two if they're going to invest heavily in bonds. The other side is when we're thinking about creating our own portfolios again, it's always going to be about how much risk you want to take on. But the, I would say the most common advice right now across the industry is that it's very hard to beat low cost index funds. And the beauty of low cost index funds is A they don't cost a lot of money, B they're set it and forget it. C, you free up a lot of mental bandwidth as far as you never have to think about what the market is doing or isn't doing because you're invested in the entire market. But I want to draw attention to one approach that not only I, but but almost any professional finance person or investor or portfolio manager does with their own money is what's called the core satellite approach. And the core satellite approach basically just Sundays, look, with 70 to 80% of my money, I am going to be incredibly boring, vanilla and safe. And I'm gonna put 70% into an S&P 500 fund or a total index fund, total market fund, and call it a day day. But what professional investors also know is that if you, and this goes back to the risk conversation. If you want real upside in fewer than 40 years, right? If you want it in the next 10 years, you actually do need some individual stocks. And I am not ever going to tell someone to invest in individual stocks if they don't want to, if it's beyond their risk capacity. But if you are actually looking for investing to give you real growth in a shorter period of time, then one way to do it without putting your entire portfolio on the line is again to develop a core of 70 to 80% of something that you know is not going to go to zero, right? It's not going to go to zero. And then 15, 20, 25% of now, what do you like playing with? And I say that both on a probability level of experiencing more upside, but there are a lot of people who love the concept of trying to beat the market market every year. And so for those people, I say, look, just make sure that it's not your entire portfolio and that it is in a minority stake of your portfolio and then have a blast, do whatever you want. You know, go try to beat the market, have a great time. And there will be some times when you can absolutely make a good amount off of a couple single equities. I hate to say this because I know it sounds like I'm encouraging it, but it's how I put a down payment on my house. One stock. One stock did very well. I cashed out and said I'm cutting off the race. But that wouldn't have happened with an index fund. A nice 40 year growth pattern would have happened with an index fund. But I do say that at least 10% of your portfolio, but no more than 2025 should be. If you really are looking for gains in under the 30 to 40 year retirement timeline, then individual equities can be still a very healthy way to go.

[Podcast Host (possibly Chris or co-host)]

I don't disagree. I typically keep it probably closer to 10. But I want to make sure that as people think about building a portfolio, they don't think what you're saying is, okay, 20% in non index funds, so let's sell 20% of my index funds and on day zero go fill that other 20% out 100%. This is something where I kind of like leaving a little bit. And in a way you could kind of bridge this back to where we started on an emergency fund. You can leave some money in cash and treat that cash, of course, three and a half, 4% or more as opportunistic money to use for this thing as opposed to just saying, oh Well, I want 20% in stocks. So tomorrow I'm just going to go pick a bunch of stocks to fill out my 20%. I like to use this money for things I have some conviction or belief in. And I was talking to a friend the other day and he said, oh, you know what? I really had a conviction that we're going to make a change in nuclear. So I bought a uranium etf, etf. So it wasn't even a individual stock, but it was a much more concentrated bet on a hypothesis. I know plenty of people who've done this in crypto or all kinds of different things, but they didn't go do it all at once. They built up an idea or a conviction and invested in that thing. And I did an episode with a guy named Brian Feraldi and he's a big advocate for investing in individual positions. But he created, and we walked through an investing checklist list for what he follows before he does this. So it's not just a wild shot in the dark at an idea or something he saw on Robinhood, right? He's like, I have this idea, let me run through whether it makes sense and make that bet. And like you, as much as I think that in the long run most people aren't going to beat the market, I have also had great returns doing this a handful of times. But it was not forced. It was, oh, I remember I got in the first Tesla ever over, gosh, it's gotta be over a decade ago at this point. And I was like, this is just so cool. I feel like something like this will work. It was convictions like that, or I remember I got my first Apple computer when I went to college and I was like, oh my gosh, like, this is such a better computer than I'd ever had. I feel like something like this will work. I like having some amount of money set aside for the combo of learning upside, kind of keeping your mind focused, not on the other 80% or 90%. And you never know when those opportunities Come. And the idea of treating that as well, I have this money set aside. It could probably supplement my emergency fund while I have it. For round numbers. Say you have a hundred thousand dollar portfolio and you want to set 20,000 aside for this purpose and you decided you need a $10,000 emergency fund. Well, until you've deployed that money, you probably don't need both of them. And so it could probably let you take more risk with your money.

[Tyler Gardner]

Building on that, the best lesson I learned within probably a month of being a professional portfolio manager was calm down. Right? So we would get money and I would say, okay, well, I have these ideas about how to allocate this portfolio. And the senior portfolio managers, AKA the good portfolio managers who had been through this before, would always have to remind me to calm down if it was a good idea today. Let's develop it, let's think about it, and it's going to be a good idea. In six months. I could not tell an investor this or a retail investor this. Enough. You do not need to get in on the metaphorical ground floor of any of this. If it is a good idea today, it will most likely be a good idea in six months and even a year. And if it's not, guess what? It wasn't that good of an idea. You can read all the analyst reports you want and try to make as informed decision as you want. You don't know. Nobody knows. I'll go to my grave with that one too. I don't care how sophisticated and good you are, you don't know. You take guesses. And some people make very good guesses and end up being famous for it.

[Podcast Host (possibly Chris or co-host)]

This has been great. I really think this is a conversation I know I needed to have. So I have a lot of takeaways personally, if people want to dig deeper in some of the takes you've shared, because I know you've probably done a full episode on all of them or written a newsletter. Where can they find you?

[Tyler Gardner]

Sure. So where I'm talking about most of this stuff at length right now is on the podcast, your money guide on the side. And if people want the rage bait, nonsense, no nuance version of any of this, they could just find me on Instagram at Social Cap official or on TikTok at Social Cap.

[Podcast Host (possibly Chris or co-host)]

Awesome. Thank you so much for sharing and thank you so much for being here.

[Tyler Gardner]

Hey, thanks for having me, Chris. No, this was a conversation I needed to have too, because I also need to daily remind myself what the heck I'm actually doing all of this for. And why it matters. So I appreciate these questions in this conversation. I'm looking forward to having another one soon.

[Podcast Host (possibly Chris or co-host)]

Sounds good. I really hope you love this episode as much as I did.

[Chris Hutchins]

Tyler and I quickly became friends after recording and I even joined him on his show, your money guy on the side, so keep an eye out for that. And as always, if you want to get in touch podcastlthehacks.com that's it for this week. I will see you next week. If you're like me, you love learning practical tips and fascinating insights that can make you a little smarter every day. That's why I want to tell you about a podcast you should check out called Something you should Know with Mike Corelli. Others. Every episode delivers information you can actually use in your life, with topics ranging from human behavior to technology to everyday hacks. Some recent episodes covered things like how great innovators think, the psychology of lying, why you owe your life to bugs, which was so interesting. Or I was recently a guest talking about the history of credit card points and how rewards programs came to be, so I know you'll probably love that one one and what makes the show so great is that Mike is always asking the questions you're thinking about, the ones that really get to the heart of the topic. Something you should know is fun, it's entertaining, and it's one of those podcasts where you learn something new and useful in every episode. Just search for something you should know wherever you listen to podcasts and when you see the bright yellow light bulb, start listening.