FIRE at 50: The 4-Year Journey That Made Early Retirement a Reality

Summary

BiggerPockets Money Podcast
Episode: FIRE at 50: The 4-Year Journey That Made Early Retirement a Reality
Release Date: November 15, 2024
Host/Authors: Mindy Jensen and Scott Trench
Guest: Eric Reinhold

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Introduction

In this compelling episode of the BiggerPockets Money Podcast, hosts Mindy Jensen and Scott Trench sit down with Eric Reinhold to delve into his remarkable journey toward achieving Financial Independence, Retire Early (FIRE) at the age of 50. Eric, the founder of an architectural design business, shares how he leveraged his business to reach FIRE in just four years, allowing him the freedom to travel the world while maintaining minimal involvement in his company.

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Discovering the FIRE Movement

[01:35] Eric shares the pivotal moment when he discovered the FIRE movement:
"I was catching up with a lifelong high school friend who mentioned he was retiring at 47. My jaw hit the floor. Retirement seemed so far off at 46, it wasn't even on my radar."

This conversation ignited Eric's interest in FIRE, leading him to reassess his financial goals and strategies alongside his wife. They initially targeted a FIRE number of $2.5 million, later adjusting it upwards to align with their vision of "chubby FIRE," a range between $2.5 and $5 million.

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Building the FIRE Portfolio

[03:46] Eric explains how he and his wife approached their financial strategy:
"Once FI became the goal, we focused on fundamentals: keep investing, be mindful of expenses, and increase our income where possible."

Despite facing market downturns, particularly the significant drop in 2022, Eric remained steadfast. He emphasizes the importance of sticking to core investment principles and adjusting strategies as needed. Their disciplined approach paid off when they reached their FIRE number in June 2024.

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Strategic Financial Adjustments

[05:25] Scott inquires about the tangible lifestyle changes Eric made after discovering FIRE. Eric responds:
"We made some aggressive changes once we found the FIRE movement. We set up a taxable brokerage account as a bridge to cover expenses until we could access our pre-tax funds."

Key adjustments included:

1. Establishing a Bridge Account: Creating a taxable brokerage account to cover expenses between early retirement and accessing retirement funds.
2. Utilizing Deferred Compensation: Taking advantage of a 457 plan to optimize their tax bracket.
3. Paying Off the Mortgage: Eliminating their mortgage allowed them to aggressively save from 2020 to 2024, simplifying their FIRE calculations by excluding fixed housing costs.

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Defining "Chubby FIRE"

[07:27] Scott seeks clarification on Eric's "chubby FIRE" range:
"So it's two and a half to five million in assets that are liquid investable assets, not your home equity." – Eric Reinhold

Eric confirms that their FIRE calculation excludes home equity, ensuring they have a place to live without relying on selling their home. This approach focuses solely on liquid investments to sustain their desired lifestyle.

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Investment Strategy

[33:07] When discussing his investment portfolio, Eric outlines a conservative yet balanced approach:
"Our current asset allocation is 80% equities, 15% bonds, and 5% cash. We're using VTI for equities, VGIT and BND for bonds, and a money market fund for cash."

Key Points:

• Equities Dominance: 80% in equities ensures growth potential while maintaining diversification through VTI.
• Bond Allocation: 15% in bonds provides stability, though market timing affected their returns.
• Cash Reserves: Maintaining 5% in cash offers liquidity and flexibility, especially crucial given their business income.

[35:06] Eric discusses their approach to withdrawals:
"As long as the business income supports our lifestyle, we're not drawing from the portfolio. This allows our investments to continue compounding."

This strategy minimizes sequence of return risk and promotes long-term growth of their portfolio.

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Lifestyle During the FIRE Journey

[10:07] Eric paints a picture of their disciplined yet fulfilling lifestyle:
"Our living expenses are between $10 to $12,000 a month. During COVID, my business was making about $50k a month, which significantly boosted our savings."

Despite aggressive savings, Eric and his wife maintained a comfortable lifestyle without drastic sacrifices. They prioritized family experiences over expanding their home or escalating expenditures, ensuring they enjoyed the present while preparing for the future.

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The Role of the Business in FIRE

[18:35] Eric elaborates on the business's role in his FIRE strategy:
"We're transforming the business from an active time investment into a passive income source, aiming to reduce our commitment to 10 hours a week."

By automating and restructuring his business, Eric ensures continued income with minimal effort, providing both financial security and personal freedom.

[24:25] Scott probes the integration of the business with their FIRE assets:
"We never included the business cash flow in our projections. If the business shut down on January 1st, 2025, our FIRE plan still works." – Eric Reinhold

This separation ensures that their FIRE status isn't contingent on the business, providing an extra layer of financial resilience.

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Reflections and Advice

[12:44] Reflecting on his journey, Eric offers valuable insights:
"What was unhealthy was treating every dollar not invested as taking me further from FIRE. It created a toxic mindset focused solely on the number and date."

He advises future FIRE seekers to:

• Balance Saving and Spending: Design a life that allows for both saving towards FIRE and enjoying the present.
• Develop Spending Discipline: Equally prioritize how you plan to spend as you do how you plan to save.
• Avoid the Death March: Focus on sustainable financial habits rather than extreme sacrifice.

[13:08] Mindy concurs:
"That's exactly how we did it. You don't enjoy the journey if you focus too intensely on a number."

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Defining Retirement Post-FIRE

[28:40] Scott asks Eric how he defines retirement while still working part-time:
"Do you consider yourself retired if you're still working 10 hours a week?"

Eric responds thoughtfully:
"Retirement for me is choosing what to work on that excites me and brings joy. Even if it involves some work, it's about autonomy and passion." – [28:40]

He emphasizes that retirement isn't merely ceasing work but redefining it to focus on personal fulfillment.

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Future Plans and Lifestyle Adjustments

[39:36] Looking ahead, Eric shares his plans:
"We have an aggressive travel schedule for the next 12 months. My wife refers to this period as 'the period of hedonism.'" – [39:36]

Upcoming highlights include:

• Traveling the World: Prioritizing memorable experiences and adventures.
• Continued Business Engagement: Maintaining involvement in his business on a minimal basis.
• Creative Endeavors: Exploring new projects without financial pressures.

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Investment Monitoring and Mental Health

[41:34] Eric discusses his evolved approach to investment monitoring:
"I developed some unhealthy habits, checking daily. Now, I resist the urge and do monthly check-ins, focusing on controllable factors like earning and investing." – [41:34]

This shift reduces anxiety and fosters a healthier relationship with his finances.

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Conclusion

Eric Reinhold's journey to FIRE at 50 is a testament to strategic financial planning, disciplined saving, and leveraging business assets. While his path is unique and may not be entirely replicable, the principles of balancing saving with lifestyle enjoyment, maintaining investment discipline, and creating passive income streams offer valuable lessons for anyone aspiring to achieve financial independence.

Notable Quotes:

• "Retirement for me is choosing what to work on that excites me and brings joy." – Eric Reinhold [28:40]
• "What was unhealthy was treating every dollar not invested as taking me further from FIRE." – Eric Reinhold [12:44]
• "We never included the business cash flow in our projections. If the business shut down on January 1st, 2025, our FIRE plan still works." – Eric Reinhold [24:25]

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For More Information:

• Eric Reinhold's Platform: TwoSidesOfFI.com
• BiggerPockets Website: biggerpockets.com

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This summary captures the essence of Eric Reinhold's FIRE journey as discussed in the BiggerPockets Money Podcast. For detailed insights and personal anecdotes, listening to the full episode is recommended.

Transcript

[Mindy Jensen]

Eric Reinhold built an architectural design business over the past 10 years. He's the face of the brand, he built the core products and he makes all the content. His business would be hard for him to sell, but he was able to leverage the business to achieve fire anyway and is now set to travel the world in 2025 at the age of 50. Today we are going to hear his story how he pivoted to achieve fire, built a portfolio that comfortably sustains chubby fire, and now runs his business on 10 hours a week or less. A very nice cherry on top. Hello, hello, hello and welcome to the Biggerpockets Money podcast. My name is Mindy Jensen and with me as always is my Phi. Like Eric and me, but not yet 50 co host Scott Trench.

[Scott Trench]

Thanks Mindy. Great to be here and love the mainstream way that you and I achieve by different than Eric's. All right. Biggerpockets has a goal of creating 1 million millionaires. You are in the right place if you want to get your financial house in order. Because we truly believe financial freedom is attainable for everyone no matter when or where you're starting, including if you want to build a so called lifestyle business to help you dramatically accelerate that path to fire. This episode is brought to you by Connect Invest. Real estate investing simplified and within your reach. Now let's get into the show.

[Mindy Jensen]

Eric Reinhold, welcome to the Biggerpockets Money podcast. I am so excited to talk to you today.

[Eric Reinhold]

Likewise. Thanks, Mindy. It's good to be with you and Scott and I've listened to you guys for years, so it's, it's super fun to be here.

[Mindy Jensen]

I love when we talk to people who have listened to us before, then you know all the jokes and all the questions we're going to ask. So let's jump right into it. Eric, how did you first discover the financial independence movement?

[Eric Reinhold]

So I was, I was on a phone call catching up with a lifelong high school friend of mine and he mentioned we were 46 at the time and he mentioned that he was getting ready to retire in a few months. So when he was 47 and I was like, my jaw hit the floor, I was like, I can't believe this. Because for a 46 year old, retirement seemed like this far off destination. It wasn't even on my radar screen. And so when I learned that fire might actually be an option, I was all in. And my wife can attest to this because it's kind of all I could talk about for the next three or four months. Months and Then I just started kind of running some rough numbers. And I think this is probably similar to you, Mindy, you and Carl, where, you know, we kind of looked at what we had accumulated at the time, which I think was, you know, our liquid net worth at the time was kind of like a little under a million dollars. And we started running some numbers and set like two and a half million as our fine number. And so I thought, okay, well, this isn't like 20 years in the future. Maybe we could pull that in quite a bit. And so over time, like you, we adjusted that number up pretty significantly. Um, so that's not where we landed on. But, you know, I think what we generally agreed on, my wife and I was kind of a number in the chubby fire range, which is kind of like between two and a half and $5 million for our FI number, which kind of sets it in context of, you know, we can do almost anything that we want, but we can't do everything that we want. So once I made up my mind that, like, FI was the goal and retiring early could be an option, I just treated it like you guys did, like death March defy. Here's. Here's the date that I want to reach FI by, and, you know, here's the number that I want. And, you know, if you guys remember that kind of long slide down in the markets in 2022, I was like, I was getting pretty miserable. You know, I could see the date coming, and I could see the portfolio. Even though I was investing religiously, it was just dropping and dropping. And so I finally. I just kind of had to step back and accept the fact that, you know, I really needed to just focus on fundamentals. And that was just keep investing, be mindful of our expenses, and then just try and continue to my income where I could. And eventually we did hit our phi number in June of this year, so 2024. So it actually worked out in spite of all my anxiety and hand wringing.

[Mindy Jensen]

So you just dropped. I love all those FI Community easter eggs that you dropped there. Thank you. I think I got most of them. You seemed to be saving for something before you reached financial. Before you even heard of financial independence, which is, you know, very similar to Carl and I. We were saving for the future. You saving for.

[Eric Reinhold]

I mean, retirement was. Felt important, like, but at some very far future date. And I think, you know, maybe a lot of people can relate to this. You get. You're in the messy middle. You have, you know, we have two boys, and at the time I found The Fire Movement, they were teenagers. So we had just come out of the messy middle where you've just, you're done with the daycare costs, you're done with all the kind of sports things and camps and all that kind of stuff, and you're finally earning more. And we, you know, we saved for retirement and we loaded up our pre tax accounts every year. But beyond that, we were spending, you know, whatever. We were earning more, we were just spending it. We got more spending with vacations. We started, you know, we bought vehicles and like, there was a little bit of lifestyle creep, but we weren't saving with the express intent to retire early. So it was just like, retirement's important, but also, let's have some fun now.

[Scott Trench]

So you used a bunch of fun phrases earlier like death march to fi, which we've covered in previous shows here. But what I want to understand is there's this pivot point in your journey where you discovered the Fire Movement from your friend. And what changed? Like, how did your lifestyle change in a more tangible way that we can understand before and after that? Aha.

[Eric Reinhold]

I think what we were doing, you know, we were smart. We were always saving for retirement. So I think we were pretty good with finances. We're making smart financial decisions. We didn't carry a lot of debt. And, you know, we had been saving since our first jobs out of college. And so I don't want to pretend like I hit our FI number. Like this death march to five didn't happen in like four years necessarily. It did take a lot of time and accumulation over those other years. But, you know, we did make some pretty aggressive changes once we found the FI movement. And, you know, I would say knowing that most of our Net Worth in 2020, when we found it was in pre tax retirement savings. I had a solo 401k through the business. My wife had a 403B, but we weren't saving outside of those. So we made too much to contribute to a Roth directly. So that was kind of a mistake. We didn't know. We weren't savvy enough to know about the backdoor Roth. So that was an option that we weren't taking advantage of. And we didn't even have a taxable brokerage account for savings. We just kind of, like I said, max out our retirement accounts every year and then we just kind of spend the rest on our life. So once FI became the goal, we really started about what it would look like not only to just reach fi, but maybe retire early. That was more my idea than my wife's idea. So the first change we made was just recognizing we need a bridge account to cover expenses between when our early retirement date was and when we could access our pre tax funds. So we just ended up using a taxable brokerage for that because at the time our income just didn't make sense to do Roth conversions. We weren't going to even consider that. Second thing we did was my wife had access to a 457 plan, which is basically deferred compensation plan. And that made sense for us to take advantage of that because of the tax bracket we were in. So we started taking advantage of that. Next thing we did, which a lot of people criticize, is we paid off our mortgage. And I know that wasn't really an optimal financial move necessarily, but for us, it just made it possible for us to be really aggressive savers from 2020 to 2024, which is when we hit our FI number.

[Scott Trench]

Eric, you mentioned a chubby fire range of two and a half to $5 million, which I think is a great definition of chubby FI on there. Do you include your home equity, your PA in that number?

[Eric Reinhold]

No, I don't. No. Because we need a place to live and so we. No, we don't. We do not.

[Scott Trench]

So it's two and a half to five million in assets that are liquid investable assets, not your home equity. Awesome.

[Eric Reinhold]

Yeah. Home is in addition to that. We consider that in our total net worth, just like our vehicles and things like that, you know, assets that we're not going to liquidate our home to fund our lifestyle because we need a place to live.

[Mindy Jensen]

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[Scott Trench]

All right, welcome back to the show. Not a lot of people pull the trigger on fire in a situation like yours. In my experience, without paying off the mortgage, the folks who have the mortgage usually are way beyond what they need for their fire number. So I'm not surprised to hear that. Even though you said it's not a controversial point in the fire community, I think you're going to find that that's very common.

[Eric Reinhold]

Yeah, it's nice not to have to include that fixed expense in your fine number. So that. That's kind of why we did it. And then from there, we looked at the Delta and we just set up some monthly savings goals, like, pretty aggressive savings goals. We spreadsheeted out what it would take to reach our number. We looked at our current expenses, and, you know, that was our investment target each month. And this was, you know, we haven't talked about this, but I started a business back in 2013, and that's really where we took most of the earnings from the business and used that to kind of supercharge our savings. We ended up just kind of living off of my wife's salary because we could do that. But then we just, you know, we had the discipline to say, okay, every year at the beginning of the year, we're going to do our backdoor Roth and then we're going to work through and fully fund our pre Tax accounts, and then everything else we're going to put into a taxable brokerage account and just keep building that bridge so that it'll, you know, last long, you know, longer. And then the last thing that we did, the last kind of aggressive change that we made, was I was sitting on a lot of cash for the business in 2020. And I was doing that because I was just, you know, I was so fearful of having to go back to work for an employer. I didn't want to do that. And so I built this kind of excessively long Runway that just was not serving us. And so, you know, part of this kind of financial awakening and learning about personal finance was like, hey, cash is. If you want to have a 40 or 50 year retirement, cash is not your friend. You really want to be in equities. And so, you know, we started moving cash into the market on a regular cadence and just having a monthly financial check in. My wife and I would say, okay, how are the savings targets this month? And we just have that as a regular part of our discipline.

[Mindy Jensen]

Were your savings targets a percentage of your income or were they a dollar figure?

[Eric Reinhold]

A dollar figure.

[Mindy Jensen]

Okay. And would you say you hit it most months or exceeded it?

[Eric Reinhold]

We did, yeah. But, you know, that long slide down in 2022, and I describe it as a long slide down. It's, you know, in terms of market corrections, it's not, it wasn't that long, obviously. But just looking at those numbers, the further you get away from that number and the closer the time horizon is, the bigger those numbers get. It's a really unhealthy way to do it, I think, because what I ended up doing was the death march to FI aspect was I was probably sacrificing things in service of getting to a FI number. Every dollar that didn't go into an investment account, I looked at, you know, as taking me further and further away from fi. And it's a. It's a pretty toxic mindset. And I think it's easy to fall into when your extreme focus is just on a number and a date. And so I wouldn't recommend doing that.

[Mindy Jensen]

I second that. Not recommending doing that. That's exactly how we did it. And you get there, but you don't enjoy the journey. So you said this was a really unhealthy way to do it. Knowing what you know now, what would you do differently? Starting four years ago, you discover the five movement. What would you do differently? So that somebody who's listening, who isn't quite fi yet can learn from your mistakes.

[Eric Reinhold]

I mean, I like coming up with the aggressive savings target, and I like giving. I think one of the healthy things we did was giving every dollar a job. But I think what was unhealthy was I didn't plan for spending in the same way that I plan for saving. I think a lot of people don't consider that in the fire movement, it's very easy to save. But then you reach this phi number, and now I'm facing this myself. In another couple of months, I'm going to start potentially drawing down the portfolio. And if you haven't built the spending muscle, it puts you at a disadvantage. I would design the kind of life that I want to have between now and the future. And you know that you have to make space for all of those things. There has to be room for saving, but there also has to be room for a life that you're designing that you're excited about and that is, you know, fun for you and your family at the time that you're living it, because you know that that space. And I'll talk about the messy middle again, because I found that hard for myself, was, you know, the space between here and your fine number is. That is your life. It's. It's not just like a. It's not the death march to five that's the most important thing. It's designing a life that you care to live with your friends and family and enjoying the time that you have now, because we're not promised that future fi date necessarily, and that. That's a hard thing to come to grips with if you're someone who's a really aggressive saver and you get into that habit of it. But I would encourage spending as a muscle to flex, too.

[Mindy Jensen]

Absolutely agree with you. So it took you approximately four years from the time you learned about financial independence and were intentional about reaching it till the time you actually reached it. How long do you think it would have taken you if you would have exercised your spending muscle and loosened up a little bit instead of this death march?

[Eric Reinhold]

Oh, man, I haven't thought about that, really. You know, certainly if I could have got. If I could have rewind the clock and started investing more aggressively When I first started my business, you know, back in 2013, even if it was like a quarter of what I was doing between 2020 and 2024, that would have been a much longer lever. So time is really the lever that I wish I could go back and change, but I would probably stretch it out maybe eight years because it got pretty aggressive there for a while. I developed some pretty unhealthy habits. It's hard to go back with hindsight. It's easy to look back and say, oh, yeah, I'd started investing 11 or 12 years earlier, but you just don't get that luxury.

[Scott Trench]

I got two questions on this. This death march to FI concept, this grind. I'm gathering that this coupled a large amount of income that required an intense amount of work to drive and a very modest level of spending in tandem for a very prolonged period of time, which results in tons of work and no enjoyment around this. Can you confirm whether that's true and then give me some details, if so, on what your lifestyle actually looked like during this time period from an expense standpoint and what your business income look like?

[Eric Reinhold]

I would say, yeah, it would probably look like that at the outset to someone on the outside. But my wife was running her own research science lab. She had NIH funding. She was compensated. I would say she's highly compensated. So that bought us freedom to be able to have a lifestyle that we were comfortable with. We agreed. And I think part of her getting bought in on financial independence, retire early as a concept, was that we weren't going to change our lifestyle a lot. We knew we had a limited time with our boys in the house. They were both teens at the time. You know, our oldest was getting ready to go off to college in two years and our youngest in four years. So we knew we had, you know, a limited window of time that we could make memories with them. And prior to that, we had. We had always spent on vacations and experiences. We prioritized that. So that was important to us enough to preserve. But I will say, you know, we didn't at a time when our friends were looking at expanding their house and, you know, going on, even spend your vacations than we were. We didn't do some of those things. And now that we have an empty nest, I'm kind of glad we didn't do those things. But we're still in our same starter home. We still have a lot of the same furniture that we had when we first built it in 2007. So I think to an outsider, our lifestyle doesn't look like we expanded that. But to us, it doesn't feel like we scrimped on a lot. So our living expenses are between 10 to 12,000amonth in terms of just operating a basic lifestyle. And during COVID we haven't talked about me starting my business yet. But during COVID the course side of my business, which ended up kind of really taking off in 2020, was making about 50k a month. So that's a pretty big shovel to be able to save.

[Scott Trench]

That was just one component of your business. You had other components that were generating on top of that too.

[Eric Reinhold]

Yeah, exactly. I had a client services side of the business and I had a whole product side and the bulk of the product side was the course and, and digital products business.

[Scott Trench]

And so we're talking 600,000 to a million dollars at least in income from the business that you. That during this period.

[Eric Reinhold]

Yeah, so it's significant. You know, it's. That's a big shovel. So you can do a lot with that.

[Scott Trench]

Was the business and also creating an asset. Did you sell the business?

[Eric Reinhold]

No, no, we're, we're going to continue to run the business into retirement and that's kind of, that's another kind of controversial thing. You know, we're going to be recreationally employed is the ide. You know, my wife will be stepping away from her job in January of 2025 and we're going to change the way I run the business right now. You know, the business used to take clients and build products and services on top of that client work. And we are no longer taking clients in the business. It's, it's purely a products business. So we're going to change the number of hours. You know, like you said, it does take a huge time investment to build up all the content for the YouTube channel and make the products and courses and also work with clients. And I didn't want that kind of lifestyle heading into a retirement or post fire. At least I wanted to redefine what work was going to look like. And so, you know, all of that investment is going to pay hopefully for many years and we're going to continue to ride on the back of those investments for, you know, at least five years is my hope.

[Mindy Jensen]

So how much time do you spend in the business currently and how much time will you be spending once you like change and pivot?

[Eric Reinhold]

Yeah, the current business I would say I probably can run in 30 hours a week. I've stopped working with clients individually and I've just really. I hired an agency last year to help me kind of reinvent and design marketing and automation systems so that in preparation for us entering early retirement and wanting to be able to travel around the world yet still operate this business, I hired them to say, okay, let's turn this business from an active time investment into something that we can run in. Let's say 10 hours a week. So my wife and I would be combined total working on this, each working 10 hours a week, which feels like such a change from the 50, 60, 70 hours a week that we might have been running it from 2020 to 2023. It's been quite a dial back. So I'm trying to transition, so it's not falling off a cliff here. But 10 hours a week is going to feel. That's definitely going to feel retired to me.

[Scott Trench]

Open the conversation. We're talking about chubby fire, but you also have an asset that you have chubby fire just in your stock portfolio. You've got another asset here that's worth hundreds of thousands or millions or maybe even eight figures. We have no idea because we don't have the income numbers here on top of that. So you're really in this way into this fat fire or obese fire range when you really think about it in that context.

[Eric Reinhold]

It's weird to think about that though, because the business itself is a personal brand. You can't sell a personal brand in the same way. You can certainly value that even on an annuitized basis. Is that what you're talking? If we're thinking this thing is throwing off $600,000 in passive income a year, you put a multiple on that and say this is part of your net worth. Is that what you mean?

[Scott Trench]

I guess there's the component of it's not actually worth a multiple of income if the business is truly valueless without you behind it. That's another component, I think. Like, how do we, how do we define that? Like, like I think most people who are thinking I want to be chubby or fat fi. Like I think most people who are chubby fi are probably like thinking, oh, I'm a higher income earner, I'm going to amass a nice amount of assets, pay off the house, do a lot of the things you talked about. But then there's this kind of fat fire world or obese world that's more around the concept of owning a business like this or selling a very large business, for example. And getting into that, like I would imagine, like let's use a $600,000 market. Sounds like there's a different number there around that. But 600,000 plus a two and a half million dollar portfolio is going to generate $700,000 in ability to spend on an annual basis. And so I just want to think about how do you bridge. You are obviously approaching your spending and your situation from the concept of thinking about Chubby fire and you have this huge other asset at play. So how do you bridge that mentally and think about your position?

[Eric Reinhold]

I think it's important to say that we never included the business cash flow in our projections. So like if this business shut down on January 1st of 2025, our fire plan still works. So we always wanted to design a plan that wasn't contingent on me working in the future or my wife working in the future. And so is it a great buffer to have passive income that is going to help minimize sequence of return risk? Yeah, it's an amazing thing. Can we let the portfolio season more if we are not drawing down on any of those assets and we have some kind of asset which is producing cash flow to fund our lifestyle in the present? Yeah. And to me, I look at the business as a buffer. I never looked at it as an asset that I was going to sell because it's connected to a YouTube channel, channel where I make videos and it's me, it's my name connected to it. So I think that, you know, as an asset, it's not the kind of thing that you look at and say this is an easy thing to sell. But in terms of a cash flow, you know, buffering our cash flow, yes, it's huge. It gives a lot of security and confidence to the number that we set. But it is not reliant on that cash flow. To make the our retirement work, we.

[Scott Trench]

Got to take one final break and then we'll be back with Eric.

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[Mindy Jensen]

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[Eric Reinhold]

Yeah. This is a big on my YouTube channel, Two Sides of Five. When I mentioned that I was going to be making this transition into retirement, or we had hit our five number, but I was not going to be stepping away or closing the business, you know, people gave me a real hard time about it. There's a lot of pushback, you know, oh, I knew he'd never retire. I, you know, and you know, for me, reaching fi is just, it's, I get to decide what retirement looks like for me. And, and if you transition from working 50 hours a week and you have all these demands from clients and outside actors on your time, and then you move into a space where you're making all of the decisions and you have all of the agency for what the next business moves are. And it doesn't have to be about money. That feels a lot like retirement for me. And retirement doesn't just have to be about not working. It's about choosing the things that you want to work on that excite you most and bring you the most joy. And I expect that to change. I don't think anyone is going to step into retirement that has one singular definition. I could see if for certain people who want to get away from a job. And it's a true grind and you just, it's boring and you're not excited by the work. But I don't have that. I built myself, I designed myself a job that I'm pretty happy with. And so I think the challenge for me is just kind of transitioning that away from having to earn into know Other creative endeavors. And yeah, it's hard.

[Mindy Jensen]

Okay. So I asked that on behalf of the Internet retirement police who can stuff a sock in it. But I think you hit that right on the head, like you're not doing things you don't want to do. It is really rewarding to create something that people comment on and say, hey, this was so helpful. This changed my life. This was. I learned something new. Great. And all I did was open up my computer and talk into my computer, my camera. So how hard is that? If you stop making videos, your channel will continue to go on for a long time. You could even release if you decide, I'm going to go travel and I'm not going to do anything for a month. You can re release some of these older videos that your newer viewers haven't seen yet. I've seen it done and it works great. But retirement isn't just about not working. I don't think that the majority of people who get themselves to the point of financial independence can be comfortable. Just their personality can be comfortable not doing anything. And you know, way back in 2018, when we started this podcast, Scott said, when I finally retire, I am going to play video games for six months straight. And I'm like, well, maybe, but I bet he doesn't. And I think he's altered that comment now. I'm sure he'll play video games more than he does now, but I think that Scott Trench would be bored silly sitting in front of a computer and playing video games for six months. And maybe I'm just projecting my own self because that would really be my definition of hell.

[Scott Trench]

I don't know. A lot of good games come out in the last six years, apparently so.

[Mindy Jensen]

Not according to me.

[Scott Trench]

Yeah. Especially if I lived in. Where is it in Maine, Eric, that you live?

[Eric Reinhold]

Mount Desert Island. Yeah.

[Scott Trench]

Yeah. So that, you know, I, I don't know how the. As long as there's good Internet connection there, the four months of winter or six months of winter or whatever.

[Eric Reinhold]

Long, cold winter.

[Mindy Jensen]

Yeah, maybe I would get invested in video games if I had a six month winter. Probably not though. There's other things to do.

[Eric Reinhold]

Yeah. The retirement police is just an interesting discussion because, you know, even when you tell people you're thinking about retiring early, everyone wants to project onto you what their vision of their own retirement is. And you know, it doesn't have to be mine. And I'm, I'm really comfortable with however you want to define it for you. And if that involves a little bit of work and a lot of Play cool and you know it's going to change over time. I don't know. I've seen my co host who retired five years ago. He's changed a lot in what, what he's done and he's been able to just kind of follow the threads of interest that he has that aren't beholden to the work schedule, which is mo what most of us, you know, have to live the majority of our lives doing.

[Mindy Jensen]

So let's talk about what you're investing in. You discovered financial independence in 2020. You were already investing in some things. Did you? What are you investing in? I'm not looking for stock tips, although if you've got a hot.

[Eric Reinhold]

No, we're boring investors here. We had been 100% equities up until about 2021 and then we're just doing our research thinking probably makes sense to get maybe a little bit more conservative. And I know there's lots of differing opinions on that, but for us we just thought that would made sense to dial it back a little bit. Presently it turned out it was the worst time to get into the bond market probably in history. Our current asset allocation is just 80% equities, 15% bonds and 5% cash. And that's just for, you know, the cash is just in a money market fund. The bonds are split between VGIT and BND and the equities are all in vti. So it's just like boring boglehead investing stuff. But you know, having the business here, I can't ignore that in this whole equation because having the business income helps us just manage our cash flow here, allows us to be a little more aggressive with our asset allocation than. And if you read like Kitsis or something, he would say make a bond tent and we didn't make a bond tent. And there's a reason that we didn't do that is because we can use some of the cash flow that's coming out of the business to help mitigate some of this sequence of returns risk that you face in early retirement. So yeah, that's all we have. Like I said, we don't have credit card debt. We had a little bit of student loan debt from my wife and our mortgage which we paid off in 2020. And yeah, we kind of talked about that. I think it's nice not having the mortgage. The additional benefit not having the mortgage in early retirement is if you ever wanted to kind of game, you know, your MAGI for qualifying for ACA premium Tax credit, you could do that. That's going to be hard for us to do, I think, given what the business is earning right now. But that's another advantage to having that taxable account that you can control income that way.

[Scott Trench]

Awesome. And do you, you withdraw anything from the portfolio at this point or is it all just allowed to continue compounding because of a business income?

[Eric Reinhold]

Yeah, that we're just going to. As long as the business income supports our lifestyle, that's kind of how we're going to approach it. And we do have. I don't think I mentioned this, but we have kind of a 6040 split between pre tax and taxable assets. So we do have some flexibility in there. And at some point we'll probably do Roth conversions in the far future, but that won't be for a while.

[Scott Trench]

And nearly all of the after tax position has been built in the last four years, right?

[Eric Reinhold]

Yeah, totally.

[Scott Trench]

What about cash? How do you think about cash in terms of annual or monthly spending?

[Eric Reinhold]

In what way?

[Scott Trench]

How much cash relative to your monthly or annual spending do you keep on hand as part of your portfolio?

[Eric Reinhold]

Yeah, we keep 5% of the total portfolio in cash and we just do that. So it's just kind of dry powder. It's just take care of. We can have some opportunity. If there's an opportunity there, we can do it. But we're not stock picking or anything like that. I'm not big into crypto. We have a small crypto position, but it's not really even an emergency fund. Maybe you'll tell me, Scott, that that's kind of a dumb idea. If the business is my cash position, I should have the rest of that in the market.

[Scott Trench]

There's no dumb or right or wrong answer for cash. I have found that entrepreneurs and folks who own businesses tend to have a large cash position in a relative sense. And often there's this. Yeah. So let me just make sure I hear what you said. 5% of your portfolio is in cash. And how much is in the business in cash?

[Eric Reinhold]

That's, it's, it's one and the same for me because I'm a sole prop. Yeah.

[Scott Trench]

Okay. One and the same. Yeah. So a lot of auto folks seem to like separate the two in their minds. So I'm glad you combine it. That seems like super reasonable. Many entrepreneurs seem to have a lot of cash relative to other investors.

[Eric Reinhold]

If you're buying Facebook ads, for example, or you're paying an agency, you really need that and you've got taxes that you're saving for. So that's just something I've always held.

[Mindy Jensen]

Yeah, Scott, you just said there's no right or wrong answer for cash. And I want to clarify or ask you to clarify. If I consider it cash, then it's not in the market. It's, it can be in a, like a high yield savings account. I might even say, you know, it could be in bonds, but I don't consider money in the stock market to be my cash because let's say that I put money in there and I don't know, it's 20, 22, and every time I put money in the next day it's worth less. That's not, that's not what I'm thinking. Cash is for. Cash is for, I need to pay something now. And it could, you know, be in a, I can't get it for a month account, but I don't think it should be in an account that's like flexible like that. What's your definition of cash?

[Scott Trench]

Cash is for me. Money in a savings account, a checking account, or in a money market account, something like that. That's, that is really intended to be a cash position. And to be clear, a 5% cash position for Eric is a pretty conservative position. Let's use that two and a half to five million dollar range. You're talking 125,000 to $250,000 in cash in this particular portfolio, depending on how that range shakes out. So that's a big cash position, but that's not incongruent with what I've seen from a lot of entrepreneurs here. It's somewhere from one to two years expenses based on his 10 to $12,000 expenses there. That's right on the money for what I would expect for someone based on what we've talked about, based on previous interactions with entrepreneurs like Eric in the past. So, but that, that's what I think. I think that's what you mean by cash, right, Eric?

[Eric Reinhold]

Yeah, I keep that in a money market fund. It's just right in my taxable brokerage. And it's, you know, it's, I have it in one, one or two days and, you know, I'm just. All the spend for the business goes on just a business credit card. So we can get all, we're gaming the points there. But yeah, the cash sits in a federal money market fund.

[Scott Trench]

You don't meet a lot of people who have more than about $250,000 in cash because then you start bumping up against the FDIC limits. So that's another real reason folks start mo that into more high, more illiquid investments at that point, there's kind of a forcing mechanism there because you're like, okay, so Eric, thanks for sharing all this. This has been a really fascinating window into your journey and congratulations on all the success in the retirement. Do you have any kind of, can you give us a preview of some of the things that you're going to be on that journey? What do you think you're going to be doing next? Or what is the next year going to look like for you?

[Eric Reinhold]

Yeah, the next year. My wife and I have, I mean, I was just talking about this with my co host of my show that I've kind of taken work out of my schedule and I've filled it in with travel. So I don't know if that's a good thing or not. But we have a very aggressive travel schedule for the next 12 months. And you know, my wife kind of referred to this as the period of hedonism. So we're gonna just, we're gonna probably blow it out for the next 12 months and see where we land. We have, we have a lot of big trips. We have our 25th wedding anniversary coming up, so we're gonna, we have a big trip to Japan that we're planning and lots of other fun things that, you know, we've been delaying because, I mean, we came back from this trip from Europe in the fall here. And this typically for my wife would have been, I wouldn't have seen her for, for the next four months. And because she's doing the off ramp from her job, I'm able to, you know, spend time with her and we're able to go hiking together and biking and all these things and traveling. And so that's kind of what I'm filling my time with. I'm looking for the next project. I'm probably going to continue, you know, the podcast that I'm doing and continue making some videos for my own business without all the financial strings attached to it and kind of see where it leads me.

[Scott Trench]

There's a high synergy between owning a business and traveling a lot. Given the amount of money that goes through a business on a credit card, for example. Have you found that that is aiding in your Travel plans for 2025 at all?

[Eric Reinhold]

Absolutely, yeah. I mean, it's one of the great things about the government. Government incentivizes running a business. There are all kinds of tax advantages to running a business. And so if we can run this from anywhere in the world, you know, I'm probably not going to choose to stay in Maine for The next six months where it's going to be snowing hard, I'm going to prefer being on a beach in Southeast Asia, so we'll see where that leads us. But, yeah, that's, you know, that's a great benefit to having a business and being able to have your wife be your co pilot there.

[Mindy Jensen]

How frequently are you checking in on your investments and your net worth and your position?

[Eric Reinhold]

A lot less than I used to. So I think I developed, as I said, some unhealthy habits on the death march defy there. And it was like a daily thing. And I think probably a lot of people do that. And it felt like I could control what was happening just by checking more. And what I realized was I have zero control over that. And so what we tried to do was just put a really solid plan in place and just focus on the things that we could control, which was, you know, earning more and investing what we could. And so now I just, I try and resist that urge, honestly. Do I do a monthly check in with my wife? Not as much as we used to. I would do it probably more regularly than she would want to. But as you get to that point where you're going to make the transition and, you know, my wife leaves her job and the health insurance there goes away, and we have some things to figure out. Yeah, I'm probably checking in maybe more than I have for the past year or so, but it's not. It's not a daily occurrence like it used to be.

[Mindy Jensen]

Oh, daily. Gosh, you are just like my husband.

[Eric Reinhold]

I know. I was going to say you can relate to this, right?

[Mindy Jensen]

I can. I mean, he still kind of does, but he also enjoys it. So I think it's. I think it's a little different. If you don't enjoy checking in on it, then don't.

[Eric Reinhold]

I mean, it depends when the market's going up. It's a lot of fun when it's taking a slide. It's. You better just. You're better off just going out for a hike. That's what I found.

[Mindy Jensen]

Yes, that is a true statement, Eric.

[Scott Trench]

Where can people find out more about you?

[Eric Reinhold]

Two sides of fi.com is where I share my journey on the path to financial independence and retiring early. Yeah, it's been great speaking to you guys. You have been part of. You probably didn't know this, but you've been part of my virtual personal finance MBA that I've gotten. So I appreciate all the content over the years. And this can be a real thankless job. And you don't get to hear from people all the time, especially in a positive light. And so I just appreciate, you know, you guys sharing your experiences and all the detail you have and, and the advice over the years, it's. It's helped me get to where I'm at now. So thank you.

[Scott Trench]

Thank you so much for sharing your story. Congratulations on the success. I hope you enjoy the next couple of years and make the most of it. It's an awesome, awesome situation you've put yourself in. And, yeah, I look forward to hearing about your adventures.

[Eric Reinhold]

Cheers. Thanks. Thank you.

[Mindy Jensen]

Thank you so much, Eric. And we'll talk to you soon. Soon.

[Eric Reinhold]

Sounds good. Bye.

[Mindy Jensen]

All right, Scott, that was Eric, and that was a really, really fun story. I wouldn't call his story a repeatable story, but it's definitely worth listening to. I think a lot of us have this idea that we want to create or start our own business, and you have this, this pie in the sky dream that it's going to generate all of this income for you. And Eric actually did it. So he kind of won. Like.

[Scott Trench]

Yeah. I mean, he's got a wonderful business that seems largely automated. He cut back all the pieces he didn't like, you know, a business like that. I, I have a little bit of skepticism that it's as dependent on him as he said it is. And I think that he might have a very big payday coming in a couple of years if he truly is able to automate the business and it keeps growing in this way. So I think that he's going to have a huge cherry on top and that this guy ain't chubby 5. He is way past that into the world of fat fire. And I think that he's going to have a wonderful, wonderful situation bring over the next couple years. And I think that it's just another vote in favor of thinking about that business component, especially if you have. If you have like one. If you can do what he did and have one spouse generated income that you can live off of and the other spouse can focus on building a business. I mean, it's just. It's just a cheat code on the path to wealth. If it works because it's producing income that whole time and it's producing this enormous equity value that can be coming up or an annuity that can be built. So super powerful. There's a whole bunch of other advantages besides the ability to set up your retirement plans. The credit card points only imagine the amount of money that that guy spends on credit cards and the amount of travel miles that racks up to allow him to probably travel the world for free. He's probably going to have money piling up and he's going to be spending nothing because he's got all these credit card points he's racing. So just a wonderful situation. Hopefully it sparks some ideas for folks. Although of course not everyone is going to be able to build a business like that, even if they do go at it for 10 years like Eric. There's a, there's a lot of a little bit of skill, a lot of luck and a really good opportunity that needs to be combined.

[Mindy Jensen]

A little bit of skill, a lot of luck, the opportunity and also the taking action. He could have just sat there, there at his day job and never decided to go out on a limb and see if this online thing works. I know so many people who are making so much money online. There is absolutely a ton of stuff to be, a ton of money to be made online providing information about the stuff you already know. So if you're thinking about starting your online business, this is your money mama Mindy saying do it. And to the Internet retirement police, please email me your thoughts at. Tell someone else at. I don't care.

[Scott Trench]

Well, Mindy, should we get out of here?

[Mindy Jensen]

We should, Scott. That wraps up this episode of the Bigger Pockets Money podcast. Of course, he is the Scott Trench and I am Mindy Jensen saying we can't linger. Humming singer.