BiggerPockets Money Podcast: FI by 34 After Making “Calculated” Bets that 99% of Us Would NOT Take

Release Date: November 22, 2024

In this compelling episode of the BiggerPockets Money Podcast, hosts Mindy Jensen and Scott Trench engage with Andrew, a financial maverick on track to achieve financial independence (FI) by the age of 34. Andrew's journey is a testament to the power of strategic risk-taking, frugality, and intelligent investing—principles that resonate deeply with the podcast's mission to help listeners earn more, keep more, spend smarter, and grow their wealth.

1. Early Financial Struggles and Debt Management

Andrew's financial path began with familiar challenges faced by many middle-class individuals. Growing up in a single-income household, he was acutely aware of how debt can constrain financial flexibility and life choices.

Key Insights:

• Accumulation of Debt: After graduating college in 2013, Andrew found himself burdened with nearly $100,000 in student loans and car debt. Reflecting on this period, he shares:

  “[01:50] Andrew: [...] I decided, screw it, I'm going to buy a brand new truck. You know, I deserve it. I have a good job. So got up to like $100,000 in debt probably there.”

• Debt Snowball Method: Realizing that higher income didn't equate to greater savings, Andrew aggressively paid off his debts using Dave Ramsey's debt snowball approach. He states:

  “[06:01] Andrew: I started to try these little one month things of no restaurants this month or no new hunting gear or camping gear this month and try to figure out, can I, like, suffer through one month of mini deprivation in one category to save another 50 bucks or a hundred bucks?”

Notable Quote:

“[07:03] Scott Trench: How long did it take you to. So you graduated College in what, 2013? 2012, yep.

[07:08] Andrew: 13.”

2. Discovering the FIRE Movement and House Hacking

Andrew's pivotal moment came in 2016 when he observed a coworker's success in real estate investment, which ignited his interest in the Financial Independence, Retire Early (FIRE) movement.

Key Insights:

• Influence of a Coworker: Working at a large refinery in Minnesota, Andrew witnessed a colleague systematically acquiring duplexes, which provided substantial rental income. He recounts:

  “[05:41] Andrew: [...] this gentleman was like, well, if you want, I can put the higher contractors and put it on the company credit card [...] The other option is today is my last day because I don't need this job anymore. It's just to buy me more rentals, and I can live off my rental income just fine.”

• Transition to Real Estate: Motivated by his coworker's example, Andrew began house hacking—purchasing properties that generate rental income to cover mortgage expenses. In 2018, he bought his first duplex, setting the foundation for his FI journey.

Notable Quote:

“[06:01] Andrew: I definitely wanted to pour some gas on the fire there. I don't enjoy being in debt at all.”

3. Strategic Frugality and Saving Techniques

A cornerstone of Andrew's success is his disciplined approach to frugality and incremental saving.

Key Insights:

• Gamifying Savings: Andrew employed creative strategies to save money, such as limiting spending in specific categories for a month to accumulate savings. He explains:

  “[10:39] Mindy Jensen: I want to go back to that Gamifying your savings and trying. Okay, how can I deprive [...] And let me see if I can save an extra 50 or 100 bucks.”

• Debt Snowball and Investment Balance: Initially, Andrew focused on eliminating smaller debts before directing his savings toward real estate investments. This method not only reduced his debt burden but also allowed him to invest in properties that would generate passive income.

Notable Quote:

“[07:17] Scott Trench: And then did your, how. What was your income situation like during this time period?”

“[07:32] Andrew: [...] I was making about 75 to 85,000 at this time.”

4. Calculated Risk-Taking: Investing in a Sixplex

Andrew's decision to purchase a sixplex was a pivotal move that exemplifies his willingness to take calculated risks for greater rewards.

Key Insights:

• Opportunity Identification: In 2019, Andrew's realtor presented an undervalued sixplex. Recognizing the potential, he assessed the financial feasibility, balancing the risks associated with credit card debt against the lucrative prospect of cash-flowing rental properties.

  “[13:03] Andrew: [...] I thought long term I'd be really grateful for buying it. And I thought short term I could handle the risk of my credit card.”

• Execution and Outcome: By choosing to invest in the sixplex, Andrew not only increased his rental income but also significantly boosted his overall equity. He reflects:

  “[24:31] Andrew: Yeah, I have my duplex and sixplex which are both cash flowing well. The rent is probably $50 more than the mortgage.”

Notable Quote:

“[16:57] Mindy Jensen: [...] I have a right physically speaking, I have to, I mean, you could not see everything, but you could have a metric to know if you're, if you're going to have, like, 83% of your net worth, like 90% of it in the 401k. So that would be that would probably be the scenario where you could say, okay, you're doing well.”

5. Balancing Investment and Risk Management

Andrew's approach underscores the importance of balancing aggressive investment strategies with robust risk management.

Key Insights:

• Emergency Funds: Despite his aggressive investment tactics, Andrew maintains a substantial emergency fund, providing a safety net in case of unforeseen circumstances.

  “[26:27] Scott Trench: That really de-risked your situation, Andrew, is how little you spent. [...] That one variable that's ultra conservative that nobody else or very few people will replicate and the options it's going to provide you are just going to be incredible.”

• Diversification: Andrew invests his savings in the S&P 500 alongside real estate, ensuring a diversified portfolio that mitigates risks associated with any single investment class.

Notable Quote:

“[32:05] Scott Trench: [...] but your expenses got so low or can get so low, then you can responsibly take a risk like what you're talking about.”

6. Current Financial Status and Future Aspirations

With two cash-flowing rental properties and a diversified investment portfolio, Andrew is nearing his FI goal but remains focused on further growth and entrepreneurial ventures.

Key Insights:

• Financial Position: Andrew currently generates $6,000 a month from his rentals while maintaining modest living expenses of $4,500, positioning him comfortably towards FI.

  “[24:30] Andrew: [...] So I could maybe do an option to pay off everything and then start a business and save a thousand dollars a month whilst doing that.”

• Entrepreneurial Goals: Beyond real estate, Andrew is passionate about building an online business, exploring avenues like YouTube channels and digital marketing agencies to create scalable income streams.

  “[38:32] Andrew: [...] I want to get a YouTube channel with 5, 10, 15, 20 hours a week, probably less than 40. But right now that, that startup phase is a little more learning.”

Notable Quote:

“[37:05] Andrew: [...] I just don't want to work for someone else anymore, and I want a scalable career.”

7. Insights and Advice from Hosts

Mindy and Scott complement Andrew's narrative with valuable insights, emphasizing the importance of seizing opportunities and maintaining low expenses to enable strategic risk-taking.

Key Insights:

• Taking Action: The hosts highlight that proactive decision-making and willingness to act on opportunities can dramatically accelerate one's path to financial independence.

  “[53:02] Mindy Jensen: [...] when you have an opportunity taking action is what separates people being retired at 34 and being retired at 64.”

• Quality of Bets: Scott underscores the significance of making high-quality investment bets and executing them well, acknowledging the role of timing and operational excellence in Andrew's success.

  “[51:20] Scott Trench: [...] Andrew made good bets, executed them well, and the outcome was great. It was very possible that if you follow that playbook at random intervals over the last 30, 40 years, that you're executing that playbook in 2006 or 2007.”

Notable Quote:

“[52:45] Mindy Jensen: [...] but it's still a calculated risk, but I knew the risk and I thought the math would work out and. Yeah.”

8. Conclusion: The Power of Strategic Risk and Frugality

Andrew's journey encapsulates the essence of intelligent financial planning—balancing frugality with strategic investments and embracing calculated risks. His story serves as an inspiration for listeners aiming to achieve financial independence through disciplined saving, smart investing, and the courage to seize unique opportunities.

Final Thoughts:

• Calculated Risks Pay Off: Andrew's success is a blend of meticulous planning, aggressive debt repayment, and the willingness to invest in undervalued opportunities.
• Sustained Frugality: Maintaining low living expenses has been crucial in enabling Andrew to save and invest a significant portion of his income.
• Continuous Learning and Adaptation: Andrew remains open to new opportunities and is actively seeking ways to diversify his income streams through entrepreneurial ventures.

Closing Quote:

“[49:40] Andrew: [...] I'm just kind of in my mind. I'm like the best day to start a business is today, not five years in the future.”

This episode of the BiggerPockets Money Podcast not only chronicles Andrew's remarkable financial journey but also offers actionable insights and inspiration for anyone striving to transform their financial destiny through strategic decisions and unwavering discipline.